1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,600 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,800 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,920 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:28,639 Speaker 1: Podcast on Apple Podcasts, SoundCloud and Bloomberg dot com. You're 7 00:00:28,680 --> 00:00:32,080 Speaker 1: listening to Bloomberg Markets with Bim Fox and Lisa A. 8 00:00:32,200 --> 00:00:37,080 Speaker 1: Bramowitz on Bloomberg Radio. If you're looking for international exposure 9 00:00:37,080 --> 00:00:39,600 Speaker 1: when it comes to your bond portfolio, you want to 10 00:00:39,640 --> 00:00:42,560 Speaker 1: ask Eric Stein. He is portfolio manager and co director 11 00:00:42,600 --> 00:00:46,120 Speaker 1: of Global Fixed Income for eating Vance, the whole company 12 00:00:46,120 --> 00:00:48,360 Speaker 1: helping to manage more than four hundred and thirty billion 13 00:00:48,400 --> 00:00:52,680 Speaker 1: dollars of company of of customer assets, and they're of 14 00:00:52,720 --> 00:00:55,000 Speaker 1: course based in Boston, home to Bloomberg one O six 15 00:00:55,000 --> 00:00:58,200 Speaker 1: one Boston, Newburyport and thirty in Metro West and the 16 00:00:58,200 --> 00:01:01,520 Speaker 1: South Shore. We welcome all of our listeners in Boston 17 00:01:01,680 --> 00:01:04,320 Speaker 1: and around the world. And Uh, Eric, well, maybe just 18 00:01:04,360 --> 00:01:06,960 Speaker 1: talk a little bit about this new fund. This is 19 00:01:07,000 --> 00:01:12,600 Speaker 1: the Eaton Vance International Emerging Markets Local Income Fund and 20 00:01:12,720 --> 00:01:18,199 Speaker 1: it is UH focused not only on on a quorum 21 00:01:18,280 --> 00:01:20,160 Speaker 1: bonds that are outside the United States. What I'm getting 22 00:01:20,160 --> 00:01:23,560 Speaker 1: at is it's in local currency, correct, correct. So you know, 23 00:01:23,600 --> 00:01:26,600 Speaker 1: we've been running a local currency strategy for for US 24 00:01:26,640 --> 00:01:29,520 Speaker 1: investors dating back actually the June of two thousand seven. 25 00:01:29,560 --> 00:01:32,600 Speaker 1: We just launched a version of that for overseas investors, 26 00:01:32,640 --> 00:01:36,120 Speaker 1: but it's dominated um it's denominated, i should say, in 27 00:01:36,240 --> 00:01:39,240 Speaker 1: local currency. So there's two different types of emerging market debt. 28 00:01:39,319 --> 00:01:42,800 Speaker 1: There's dollar debt, which trades that has spread to treasuries 29 00:01:42,800 --> 00:01:45,440 Speaker 1: like US HIEL bonds or US corporates, and then there's 30 00:01:45,560 --> 00:01:48,800 Speaker 1: locally denominated emerging market debt. And so that's debt issued 31 00:01:48,880 --> 00:01:51,480 Speaker 1: let's say, by the government of Brazil, but not issued 32 00:01:51,480 --> 00:01:54,400 Speaker 1: in US dollars, issued in Brazilian ray ice. And it's 33 00:01:54,400 --> 00:01:57,640 Speaker 1: certainly a more volatile part of the emerging market debtast class, 34 00:01:57,640 --> 00:02:00,600 Speaker 1: but I also think it's one where return potentials also greater. 35 00:02:00,880 --> 00:02:04,800 Speaker 1: It's also one that relies heavily on emerging market currency 36 00:02:04,880 --> 00:02:08,360 Speaker 1: performance against the dollar. And I'm wondering, you know this, 37 00:02:08,360 --> 00:02:10,760 Speaker 1: this implies to me that you see a weaker dollar 38 00:02:10,880 --> 00:02:14,120 Speaker 1: going forward against these emerging markets currencies. What's giving you 39 00:02:14,120 --> 00:02:17,400 Speaker 1: that confidence so you're exactly right. It's certainly based on 40 00:02:17,480 --> 00:02:20,639 Speaker 1: emerging market currency strength or emerging market currencies just being 41 00:02:20,639 --> 00:02:22,519 Speaker 1: flat and you're earning a higher rate of interest. And 42 00:02:22,560 --> 00:02:24,880 Speaker 1: if you go back to two thousand, thirteen, fourteen or fifteen, 43 00:02:24,880 --> 00:02:27,400 Speaker 1: when emerging market currencies were weak and the dollar was strong, 44 00:02:27,919 --> 00:02:29,760 Speaker 1: that would be a headwind for a strategy like this. 45 00:02:29,800 --> 00:02:32,240 Speaker 1: So I always tell people, you know, it's it's certainly 46 00:02:32,240 --> 00:02:34,079 Speaker 1: one of my favorite parts of the fixed income markets, 47 00:02:34,080 --> 00:02:35,720 Speaker 1: but I caution people that if you can't have a 48 00:02:35,800 --> 00:02:38,120 Speaker 1: draw down in your fixed income, this probably isn't the 49 00:02:38,200 --> 00:02:40,239 Speaker 1: right sector for you. I always caution you because of 50 00:02:40,280 --> 00:02:42,560 Speaker 1: the currency component. As you mentioned. The other thing we 51 00:02:42,639 --> 00:02:46,320 Speaker 1: had Bloomberg Intelligence is Damien Sassauer on yesterday and he 52 00:02:46,400 --> 00:02:49,000 Speaker 1: was talking about liquidity and emerging markets credit and he 53 00:02:49,080 --> 00:02:52,919 Speaker 1: was saying he's watching the bid asks spreads widen out. 54 00:02:53,000 --> 00:02:55,560 Speaker 1: This is sort of a measure of the difference between 55 00:02:55,560 --> 00:02:57,720 Speaker 1: what the prices that people are asking for on bonds 56 00:02:57,760 --> 00:03:00,280 Speaker 1: and what they're actually able to get. Um are you 57 00:03:00,320 --> 00:03:02,280 Speaker 1: concerned about that? And how do you sort of plan 58 00:03:02,360 --> 00:03:04,160 Speaker 1: around that in a fun like this? So I think 59 00:03:04,200 --> 00:03:06,040 Speaker 1: when you know, when you talk about a bit offer spreads. 60 00:03:06,080 --> 00:03:07,919 Speaker 1: I think in em credit, I think of that more 61 00:03:07,919 --> 00:03:10,600 Speaker 1: a sovereign credit. You know, certainly all fixed income markets 62 00:03:10,600 --> 00:03:12,680 Speaker 1: have their liquidity challenges. I think you know, on our 63 00:03:12,720 --> 00:03:16,079 Speaker 1: Advanced Global Income team, we put a big focus on trading. 64 00:03:16,120 --> 00:03:18,120 Speaker 1: We have a twenty four hour trading desk based not 65 00:03:18,160 --> 00:03:20,680 Speaker 1: only out of Boston, but London and Singapore, and we're 66 00:03:20,680 --> 00:03:23,320 Speaker 1: always looking for different liquidity sources. So the interesting thing 67 00:03:23,360 --> 00:03:26,560 Speaker 1: about local markets is it's not only trading with large banks. 68 00:03:26,600 --> 00:03:29,480 Speaker 1: There's also local players on shore UH and some of 69 00:03:29,480 --> 00:03:32,160 Speaker 1: these countries that we invest in, So liquidity is just 70 00:03:32,400 --> 00:03:34,720 Speaker 1: different than I'd say it would be in US high 71 00:03:34,760 --> 00:03:37,400 Speaker 1: yel bonds or even emerging market dollar bonds. What are 72 00:03:37,440 --> 00:03:39,760 Speaker 1: some of the characteristics of the bonds that would go 73 00:03:39,760 --> 00:03:44,120 Speaker 1: into this portfolio. So they would be issued by governments 74 00:03:44,120 --> 00:03:46,760 Speaker 1: of emerging market countries, so you know countries and let's 75 00:03:46,760 --> 00:03:50,040 Speaker 1: say Latin America, Eastern Europe, Africa, Asia, UH, and they'd 76 00:03:50,080 --> 00:03:53,680 Speaker 1: be issued in local currency, so Brazilian RAI ICE, Turkish lyra, 77 00:03:53,760 --> 00:03:55,760 Speaker 1: Indonesian RUPEA, And we think of them as having two 78 00:03:55,800 --> 00:03:59,040 Speaker 1: main risks. You have local interest rate or local duration risk, 79 00:03:59,320 --> 00:04:01,760 Speaker 1: and you also have currency risk as well. Okay, But 80 00:04:01,840 --> 00:04:05,040 Speaker 1: in that in that context of risk, what do you 81 00:04:05,360 --> 00:04:09,560 Speaker 1: susset as parameters? Are you looking at shorter duration longer duration? 82 00:04:10,160 --> 00:04:12,840 Speaker 1: I mean in debt can be funded in a variety 83 00:04:12,880 --> 00:04:15,080 Speaker 1: of different ways and secured in different ways. Yes, so 84 00:04:15,160 --> 00:04:18,360 Speaker 1: certainly there is duration. There's local duration to these assets. 85 00:04:18,360 --> 00:04:20,560 Speaker 1: So it's okay, how do Brazilian interest rates move or 86 00:04:20,560 --> 00:04:23,520 Speaker 1: Indonesian interest rates move? And sometimes there can be correlations 87 00:04:23,520 --> 00:04:25,480 Speaker 1: with US interest rates. We have seen that in the past. 88 00:04:25,520 --> 00:04:27,720 Speaker 1: We saw that in two thousand thirteen. I actually think 89 00:04:27,760 --> 00:04:29,880 Speaker 1: what's interesting is this year here, in two thousand eighteen, 90 00:04:29,920 --> 00:04:33,440 Speaker 1: despite all the volatility we've seen in US treasuries, higher 91 00:04:33,520 --> 00:04:36,960 Speaker 1: US yields, negative return, let's say on the Barkley's agg 92 00:04:37,480 --> 00:04:39,599 Speaker 1: you know, yield in some of these emerging market countries 93 00:04:39,600 --> 00:04:42,680 Speaker 1: continue to come down. They sold off a bunch and thirteen. 94 00:04:42,680 --> 00:04:44,919 Speaker 1: Their central banks have the high rates of defend currencies 95 00:04:44,960 --> 00:04:46,280 Speaker 1: and now they've been able to cut rates for the 96 00:04:46,279 --> 00:04:49,840 Speaker 1: past couple of years. What's your most recent high conviction 97 00:04:49,960 --> 00:04:52,800 Speaker 1: bet so, So maybe one I can talk about is India. 98 00:04:52,920 --> 00:04:56,039 Speaker 1: So India as a country, you know, not without risk. 99 00:04:56,120 --> 00:04:58,200 Speaker 1: There's always things that that that go on sometimes that 100 00:04:58,279 --> 00:05:00,240 Speaker 1: are frustrating to those of us that that's send a 101 00:05:00,240 --> 00:05:02,200 Speaker 1: lot of time following India. But you know, you get 102 00:05:02,200 --> 00:05:04,240 Speaker 1: seven and a half or seven points six percent on 103 00:05:04,360 --> 00:05:06,760 Speaker 1: government bond yield, it's not in the index. So I 104 00:05:06,760 --> 00:05:09,680 Speaker 1: think that's kind of a specialty of our whole team 105 00:05:09,800 --> 00:05:12,680 Speaker 1: is looking for bonds that are not necessarily in the index. 106 00:05:12,680 --> 00:05:15,560 Speaker 1: In India, despite being a really large country, isn't in 107 00:05:15,600 --> 00:05:18,360 Speaker 1: the index. And real quick, what's your biggest contrarian bet 108 00:05:18,920 --> 00:05:22,000 Speaker 1: biggest contrarian bet? Um? You know, we're starting to like 109 00:05:22,400 --> 00:05:25,279 Speaker 1: the Philippines paso. It's actually one of the currencies in 110 00:05:25,360 --> 00:05:28,280 Speaker 1: Asia that people like to short a lot, and there 111 00:05:28,279 --> 00:05:30,360 Speaker 1: are certainly issues. They used to have a current account 112 00:05:30,360 --> 00:05:32,560 Speaker 1: surplus and then it went to deficit. We think their 113 00:05:32,560 --> 00:05:34,560 Speaker 1: important number is actually gonna be very high in the 114 00:05:34,600 --> 00:05:37,320 Speaker 1: fourth quarter because of a new tax regime and people 115 00:05:37,320 --> 00:05:39,320 Speaker 1: are gonna get all flustered about that and the currency 116 00:05:39,360 --> 00:05:42,000 Speaker 1: is selling off, but ultimately there's some inflation there. We 117 00:05:42,040 --> 00:05:44,200 Speaker 1: think the central bank, the BSP is what they call 118 00:05:44,240 --> 00:05:46,880 Speaker 1: the central bank in Philippines, they'll have to raise rates 119 00:05:47,400 --> 00:05:49,800 Speaker 1: that should lead the currency strength. Thank you so much 120 00:05:49,839 --> 00:05:52,039 Speaker 1: for being with us. Truly a pleasure speaking with you. 121 00:05:52,160 --> 00:05:55,080 Speaker 1: Eric Stein, portfolio manager and codirector of Global fixed Income 122 00:05:55,360 --> 00:05:58,080 Speaker 1: at Eaton a Vance, which manages about four hundred and 123 00:05:58,120 --> 00:06:01,520 Speaker 1: thirty billion dollars and is based in Boston, but he 124 00:06:01,600 --> 00:06:05,320 Speaker 1: joins us here in our Bloomberg eleven three oh studios. 125 00:06:07,560 --> 00:06:11,600 Speaker 1: This is Bloomberg Markets with Pim Fox and Lisa Abramowitz 126 00:06:11,720 --> 00:06:17,320 Speaker 1: on Bloomberg Radio. Obamacare is getting a pretty profound test 127 00:06:17,520 --> 00:06:21,200 Speaker 1: with a move by an Idaho based ensure. Here to 128 00:06:21,240 --> 00:06:25,120 Speaker 1: talk about that is Max Neeson, who covers the pharmaceutical 129 00:06:25,160 --> 00:06:28,680 Speaker 1: industry and all things healthcare for Bloomberg gad Fly, and 130 00:06:28,680 --> 00:06:31,679 Speaker 1: he joins us here in our Bloomberg eleven three oh studios. Max, 131 00:06:31,680 --> 00:06:34,839 Speaker 1: this is a fascinating story because it really goes to 132 00:06:34,920 --> 00:06:38,200 Speaker 1: the heart of the issue that UH insurers are looking 133 00:06:38,240 --> 00:06:41,240 Speaker 1: at whether they will be able to offer people lower 134 00:06:41,320 --> 00:06:47,040 Speaker 1: cost UH insurance plans if they're healthier and they'll get 135 00:06:47,120 --> 00:06:50,679 Speaker 1: less coverage, but that means higher premiums for sicker people. 136 00:06:50,720 --> 00:06:54,839 Speaker 1: Tell us about this place. Yeah, absolutely so. Um, what 137 00:06:54,839 --> 00:06:58,440 Speaker 1: what Blue Cross in Idaho is doing is is pretty 138 00:06:59,320 --> 00:07:03,480 Speaker 1: clearly in blatantly in violation of a number of of 139 00:07:03,600 --> 00:07:07,159 Speaker 1: statutes in the Affordable Care Act, namely UH no, no 140 00:07:07,320 --> 00:07:10,880 Speaker 1: limits on spending UM having to provide the same variety 141 00:07:10,880 --> 00:07:13,400 Speaker 1: of coverage people not denying coverage for sick people for 142 00:07:13,520 --> 00:07:16,880 Speaker 1: plans UM. And the issue is that if you offer 143 00:07:16,960 --> 00:07:20,400 Speaker 1: that kind of insurance and a c A compliant insurance 144 00:07:20,440 --> 00:07:23,559 Speaker 1: at the same time, inevitably healthy people are gonna flock 145 00:07:23,640 --> 00:07:26,680 Speaker 1: to those cheaper plans, leaving sicker people in the a 146 00:07:26,800 --> 00:07:30,880 Speaker 1: c A compliant plans skyrocketing premiums. So you can't really 147 00:07:30,920 --> 00:07:33,640 Speaker 1: have it both ways, and and that seems to be 148 00:07:33,800 --> 00:07:36,880 Speaker 1: what they're trying to do an Idaho. The question is 149 00:07:36,920 --> 00:07:40,720 Speaker 1: whether it will actually happen UM, you know, due to 150 00:07:40,920 --> 00:07:44,280 Speaker 1: legal threat or or action by the government. Max, could 151 00:07:44,280 --> 00:07:48,080 Speaker 1: you outline what this plan would look like for someone 152 00:07:48,200 --> 00:07:52,800 Speaker 1: that is shopping for health insurance. Yeah, so I think 153 00:07:52,800 --> 00:07:55,960 Speaker 1: they're gonna offer UM a bunch of different plans, But 154 00:07:56,360 --> 00:07:59,280 Speaker 1: the general idea basically is that you know, if you're 155 00:07:59,320 --> 00:08:02,400 Speaker 1: someone who's young and healthy, you might pick a plan 156 00:08:02,800 --> 00:08:06,679 Speaker 1: UM that, for example, doesn't cover certain types of drug, 157 00:08:06,760 --> 00:08:10,760 Speaker 1: doesn't cover certain types of care. UM offers more kind 158 00:08:10,760 --> 00:08:14,640 Speaker 1: of limited in basic skeletal care as opposed to the 159 00:08:14,720 --> 00:08:17,640 Speaker 1: sort of comprehensive benefits the under the C A Okay, 160 00:08:17,640 --> 00:08:19,560 Speaker 1: but but what I mean I'm looking here. For example, 161 00:08:19,560 --> 00:08:22,160 Speaker 1: it says the proposed plans have a one million dollar 162 00:08:22,360 --> 00:08:26,000 Speaker 1: annual per person limit to how much care the ensurer 163 00:08:26,160 --> 00:08:28,400 Speaker 1: will pay for. So if you're not gonna get any, 164 00:08:28,480 --> 00:08:30,120 Speaker 1: if you're not going to be ill, or you think 165 00:08:30,120 --> 00:08:31,680 Speaker 1: you're not going to be ill or need more than 166 00:08:31,720 --> 00:08:35,200 Speaker 1: a million dollars, what do we know what the premium is, 167 00:08:35,200 --> 00:08:38,280 Speaker 1: for example, on a monthly basis um. I don't know yet, 168 00:08:38,280 --> 00:08:41,040 Speaker 1: but I imagine that it would be substantially lower than 169 00:08:41,160 --> 00:08:44,720 Speaker 1: something on the c A because those plans literally, you know, 170 00:08:44,720 --> 00:08:46,679 Speaker 1: they have a set of ten essential health benefits that 171 00:08:46,679 --> 00:08:49,880 Speaker 1: they're required to cover um things like you know, for example, 172 00:08:49,960 --> 00:08:53,280 Speaker 1: maternity care. Um. Someone who doesn't want that, doesn't plan 173 00:08:53,320 --> 00:08:55,640 Speaker 1: on having a kid, um, they won't be paying for that. 174 00:08:55,720 --> 00:08:59,240 Speaker 1: So that's the appeal theoretically. But the problem is, you know, 175 00:08:59,320 --> 00:09:01,280 Speaker 1: the idea upon a C is that you make everyone 176 00:09:01,320 --> 00:09:03,400 Speaker 1: pay for that. I understand that. I mean, that's the 177 00:09:03,520 --> 00:09:05,480 Speaker 1: that's the whole idea of insurance, right, I mean, you've 178 00:09:05,520 --> 00:09:07,160 Speaker 1: got this bigger pool. But I'm just trying to look 179 00:09:07,160 --> 00:09:09,600 Speaker 1: at it from the consumer's point of view that someone 180 00:09:09,800 --> 00:09:12,160 Speaker 1: is currently faced let's say with you know, paying six 181 00:09:12,640 --> 00:09:15,800 Speaker 1: or seven a month for a plan when they have 182 00:09:15,880 --> 00:09:18,800 Speaker 1: a high deductible, they kind of look at it and a, 183 00:09:18,920 --> 00:09:21,560 Speaker 1: g Why am I paying six seven hundred bucks a 184 00:09:21,600 --> 00:09:24,160 Speaker 1: month when I've got this really high deductible. So I'll 185 00:09:24,160 --> 00:09:28,480 Speaker 1: never really end up using the unless unless something well. 186 00:09:28,480 --> 00:09:31,360 Speaker 1: But but of course you don't know that in the future, right, 187 00:09:31,360 --> 00:09:32,680 Speaker 1: you don't know whether you're going to be ill or 188 00:09:32,720 --> 00:09:35,080 Speaker 1: not well. I think that there's a big question, Max. 189 00:09:35,120 --> 00:09:39,400 Speaker 1: You're talking about the legal challenge to this, and to me, 190 00:09:39,480 --> 00:09:42,280 Speaker 1: that's the most interesting part because, as you said, this 191 00:09:42,400 --> 00:09:48,720 Speaker 1: is im blatant violation of the Obamacare plan. Who which 192 00:09:48,920 --> 00:09:51,760 Speaker 1: legal agency would be the one to go after them? 193 00:09:51,840 --> 00:09:56,040 Speaker 1: And since President Trump has voiced support for this type 194 00:09:56,080 --> 00:10:00,160 Speaker 1: of structure of a plan, will they go after them? 195 00:10:00,200 --> 00:10:03,200 Speaker 1: So that that's really the question. Um. So, alexas are 196 00:10:03,320 --> 00:10:06,600 Speaker 1: the new Secretary of Health and Human Services had said that, 197 00:10:06,640 --> 00:10:08,680 Speaker 1: you know, you have to enforce the rule of law. 198 00:10:09,280 --> 00:10:11,760 Speaker 1: The question is what exactly that means from him whether 199 00:10:11,800 --> 00:10:14,679 Speaker 1: they'll do it because HHS, you know, is the regulatory 200 00:10:14,720 --> 00:10:18,000 Speaker 1: agency that oversees this. It's their job to enforce the 201 00:10:18,080 --> 00:10:21,120 Speaker 1: law of the land. Um. But you know, as we've 202 00:10:21,160 --> 00:10:25,040 Speaker 1: seen in other areas, they have a certain amount of latitude, 203 00:10:25,280 --> 00:10:27,640 Speaker 1: but the amount of legal risk he is really acute. 204 00:10:27,679 --> 00:10:30,200 Speaker 1: You know, the insurer is likely to get suited if 205 00:10:30,240 --> 00:10:33,600 Speaker 1: they offer plans that UM sick people are inteligible before 206 00:10:33,679 --> 00:10:37,160 Speaker 1: they impose this lifetime limit. Idaho is likely to get 207 00:10:37,200 --> 00:10:39,000 Speaker 1: sued for allowing them to do it. And then if 208 00:10:39,120 --> 00:10:43,120 Speaker 1: HHS isn't informing in enforcing the law, there's legal risk 209 00:10:43,120 --> 00:10:45,680 Speaker 1: of the Trump administration as well. Okay, well, let's say 210 00:10:45,880 --> 00:10:49,800 Speaker 1: they don't enforce it. Do you expect other health insurance 211 00:10:49,800 --> 00:10:54,120 Speaker 1: companies to follow suit? UM at a minimum? You know, 212 00:10:54,280 --> 00:10:58,280 Speaker 1: just about every insurer on the exchanges in Idaho is 213 00:10:58,360 --> 00:11:01,439 Speaker 1: likely to to jump in as well, because if they 214 00:11:01,440 --> 00:11:04,719 Speaker 1: don't and they only offer a c A compliant insurance UM, 215 00:11:04,760 --> 00:11:08,440 Speaker 1: basically everyone's gonna get siphoned off into this third party UM, 216 00:11:08,440 --> 00:11:10,880 Speaker 1: into the blue Cross plane at this point that's offering 217 00:11:10,880 --> 00:11:13,839 Speaker 1: this type of insurance. So that's just a losing situation 218 00:11:13,880 --> 00:11:16,720 Speaker 1: for them. They'll have to balance basically the legal risk 219 00:11:16,760 --> 00:11:20,360 Speaker 1: of offering those plans against the possibility that they'll only 220 00:11:20,400 --> 00:11:23,160 Speaker 1: have UM, you know, a very sick and expensive to 221 00:11:23,160 --> 00:11:25,880 Speaker 1: cover population left for them. UM and be forced to 222 00:11:25,960 --> 00:11:27,840 Speaker 1: jack up premiums, but maybe not be able to keep 223 00:11:27,920 --> 00:11:30,079 Speaker 1: up anyway because they have no idea how to price 224 00:11:30,160 --> 00:11:32,920 Speaker 1: this market because you've never seen anything like it before. 225 00:11:33,480 --> 00:11:35,520 Speaker 1: Thanks very much for bringing this to our attention and 226 00:11:35,760 --> 00:11:39,800 Speaker 1: giving us this detail very interesting. Max Neeson is our biotechnology, 227 00:11:39,800 --> 00:11:44,200 Speaker 1: pharmaceutical and healthcare columnist for Bloomberg Gadfly, and you can 228 00:11:44,280 --> 00:11:48,560 Speaker 1: follow Max on Twitter at Max Neeson and I S 229 00:11:48,920 --> 00:11:52,200 Speaker 1: E and much appreciative. Coming up on a Bloomberg Markets, 230 00:11:52,200 --> 00:11:54,439 Speaker 1: we're gonna be speaking with Oxo Murky as the president 231 00:11:54,440 --> 00:11:57,760 Speaker 1: and the chief investment officer of Murk Investments, talk about 232 00:11:57,800 --> 00:12:00,480 Speaker 1: the volatility in the value of the US dollar and 233 00:12:00,600 --> 00:12:04,280 Speaker 1: whether gold would be something to buy for your portfolio. 234 00:12:06,920 --> 00:12:10,520 Speaker 1: You're listening to Bloomberg Markets with Pim Fox and Lisa 235 00:12:10,559 --> 00:12:14,480 Speaker 1: Abramowitz on Bloomberg Radio. Bloomberg Markets is brought to by 236 00:12:14,520 --> 00:12:17,600 Speaker 1: Commonwealth Financial Network, the broker dealer r i A who 237 00:12:17,640 --> 00:12:20,920 Speaker 1: has been putting relationships first since nineteen seventy nine. Find 238 00:12:20,920 --> 00:12:24,080 Speaker 1: out why the industry's most satisfied advisors are head over 239 00:12:24,160 --> 00:12:29,160 Speaker 1: heels about them. Visit Commonwealth dot com. We'll just taking 240 00:12:29,200 --> 00:12:31,720 Speaker 1: a look at the value of gold since the beginning 241 00:12:31,760 --> 00:12:34,400 Speaker 1: of the year, it has increased about four percent. Is 242 00:12:34,440 --> 00:12:37,959 Speaker 1: that really a way to diversify your portfolio away from 243 00:12:37,960 --> 00:12:40,600 Speaker 1: the risk of stocks and bonds. Here to help us 244 00:12:40,640 --> 00:12:43,240 Speaker 1: answer this and many other questions is Axill Murky as 245 00:12:43,280 --> 00:12:47,080 Speaker 1: the president and the chief investment Officer of MRK Investments, 246 00:12:47,360 --> 00:12:50,400 Speaker 1: and he can be followed on Twitter at axel Mark 247 00:12:50,480 --> 00:12:52,840 Speaker 1: based in San Francisco. Oxell, thanks very much for being 248 00:12:52,840 --> 00:12:55,600 Speaker 1: with us. Talk a little bit about diversification and when 249 00:12:55,600 --> 00:12:59,200 Speaker 1: people diversify, but really they're not doing a good job 250 00:12:59,240 --> 00:13:02,040 Speaker 1: at it. Yeah, great to be with you. Well, let's 251 00:13:02,040 --> 00:13:05,000 Speaker 1: answer the second part of your question. First, the markets 252 00:13:05,000 --> 00:13:08,839 Speaker 1: have moved relentlessly higher, and obviously if you've done anything 253 00:13:08,840 --> 00:13:12,280 Speaker 1: other than by buying the SMP, you underperformed. And so 254 00:13:12,440 --> 00:13:16,040 Speaker 1: some people say they diversified to bonds, but in truth, 255 00:13:16,200 --> 00:13:18,600 Speaker 1: many of them have been grabbing yield and when you 256 00:13:18,720 --> 00:13:21,160 Speaker 1: when you buy junk bonds as a more extreme example 257 00:13:21,200 --> 00:13:24,160 Speaker 1: of that, they tend to be highly correlated with risk assets. 258 00:13:24,200 --> 00:13:27,599 Speaker 1: So it's been very, very difficult to get proper diversification. 259 00:13:27,840 --> 00:13:30,560 Speaker 1: And of course why should you diversified? And volatility is low? 260 00:13:30,840 --> 00:13:33,120 Speaker 1: The problem with that of causes at some point and 261 00:13:33,160 --> 00:13:36,160 Speaker 1: we saw it in recent weeks. Volatility edges higher, and 262 00:13:36,280 --> 00:13:40,079 Speaker 1: as that happens, people realize their misallocated and that sets 263 00:13:40,160 --> 00:13:44,400 Speaker 1: in motion this grinding process that they're struggling to find diversification. 264 00:13:44,559 --> 00:13:47,400 Speaker 1: And as people are realizing in recent weeks that's not 265 00:13:47,520 --> 00:13:50,360 Speaker 1: so easy. Um, And you mentioned gold in the beginning. 266 00:13:50,800 --> 00:13:53,520 Speaker 1: Gold has historically had a correlation of zero to the 267 00:13:53,640 --> 00:13:57,360 Speaker 1: SMP in the long run. Um. And in the context 268 00:13:57,360 --> 00:14:00,520 Speaker 1: of volatility, if I can continue here, um, gold doesn't 269 00:14:00,520 --> 00:14:03,240 Speaker 1: have cash flow, and that's a good thing because when 270 00:14:03,280 --> 00:14:07,880 Speaker 1: volatility rises, cash flows get discounted. More so all risk 271 00:14:07,920 --> 00:14:11,880 Speaker 1: assets tend to get banged on the head. Everything else 272 00:14:11,920 --> 00:14:16,320 Speaker 1: equal anyway, whereas gold in comparison does well because it 273 00:14:16,360 --> 00:14:18,720 Speaker 1: doesn't have the cash flow. So when risk premier rise, 274 00:14:19,040 --> 00:14:21,320 Speaker 1: gold does well. And that is the reason why every 275 00:14:21,320 --> 00:14:23,440 Speaker 1: baire market since the early seventies gold has done well, 276 00:14:23,480 --> 00:14:25,760 Speaker 1: with the big exception, of course, of the early eighties 277 00:14:25,880 --> 00:14:29,320 Speaker 1: where real interest rates when they very high. Okay axel 278 00:14:29,520 --> 00:14:33,560 Speaker 1: uh full disclosure. Gold I find incredibly confusing and I 279 00:14:33,600 --> 00:14:37,200 Speaker 1: always thought of it as an inflation hedge, and exactly 280 00:14:37,200 --> 00:14:40,880 Speaker 1: as you're saying, you know it should do well in 281 00:14:41,400 --> 00:14:46,600 Speaker 1: times of inflation and growth, possibly even better than say 282 00:14:46,640 --> 00:14:49,600 Speaker 1: a fixed income instrument, especially tied to risk your credit. 283 00:14:49,800 --> 00:14:52,040 Speaker 1: And yet you really haven't seen that substantial of a 284 00:14:52,120 --> 00:14:54,720 Speaker 1: rally in gold on the heels of the sell off. 285 00:14:55,000 --> 00:14:57,320 Speaker 1: And yesterday we had a guest on who is saying 286 00:14:57,360 --> 00:15:00,200 Speaker 1: this is because interest rates are rising in the u US, 287 00:15:00,400 --> 00:15:03,960 Speaker 1: people are able to actually get more income. Uh so 288 00:15:04,080 --> 00:15:07,440 Speaker 1: because it's not interest producing security. Uh, it's sort of 289 00:15:07,480 --> 00:15:11,560 Speaker 1: being punished. Make make this make sense for me, please? Well, 290 00:15:11,680 --> 00:15:14,400 Speaker 1: is that incredible? This this this brick, this piece shiny 291 00:15:14,440 --> 00:15:18,200 Speaker 1: piece of metal that doesn't do anything, doesn't ever change. 292 00:15:18,360 --> 00:15:20,800 Speaker 1: Is so confusing because it's the one thing that's constant. 293 00:15:20,800 --> 00:15:23,600 Speaker 1: It's the world around it that's so confusing. And and 294 00:15:23,920 --> 00:15:26,880 Speaker 1: so um and and obviously the price of gold is 295 00:15:26,880 --> 00:15:30,000 Speaker 1: determined just like everything else by supply and demand, and 296 00:15:30,040 --> 00:15:32,960 Speaker 1: so the question is is there reason to to have 297 00:15:33,040 --> 00:15:35,720 Speaker 1: more of gold than this or that? And and clearly 298 00:15:35,760 --> 00:15:38,160 Speaker 1: the other things that are also quote unquote inflation hedges, 299 00:15:38,240 --> 00:15:41,480 Speaker 1: but neither of those perfect heades. People have historically said, right, 300 00:15:41,560 --> 00:15:45,640 Speaker 1: buying um real estate, buying equities might be inflation hedges. 301 00:15:46,040 --> 00:15:48,640 Speaker 1: And so um I tried to put it into this 302 00:15:48,960 --> 00:15:53,440 Speaker 1: is volatility framework, because that one I think makes perfect sense. 303 00:15:53,520 --> 00:15:56,000 Speaker 1: It doesn't have cash flow, and therefore the discounting works 304 00:15:56,000 --> 00:15:59,800 Speaker 1: differently now um in the context of higher inflation. First 305 00:15:59,800 --> 00:16:02,480 Speaker 1: of all, inflation is still very low and and so 306 00:16:02,640 --> 00:16:05,160 Speaker 1: there's fear of it ticking up um And we're not 307 00:16:05,200 --> 00:16:07,360 Speaker 1: talking about hyper inflation here, we're talking about the Federal 308 00:16:07,360 --> 00:16:11,840 Speaker 1: reserve potentially being attacked more assertive. And if there's one 309 00:16:12,000 --> 00:16:15,680 Speaker 1: big competition to gold, it is higher real interest rates. 310 00:16:15,720 --> 00:16:18,360 Speaker 1: And so if you get compensated for holding cash while 311 00:16:18,400 --> 00:16:20,720 Speaker 1: you don't need to hold something that doesn't throw off cash. 312 00:16:21,080 --> 00:16:24,120 Speaker 1: And the reason why gold has held up very well anyway, 313 00:16:24,360 --> 00:16:26,880 Speaker 1: in my view any way, is because people think that 314 00:16:26,920 --> 00:16:29,440 Speaker 1: there's a limit to how much tightening the Federal Reserve 315 00:16:29,520 --> 00:16:32,200 Speaker 1: can do, and so and when it was also seen 316 00:16:32,240 --> 00:16:35,440 Speaker 1: the dollar has been weakening despite higher rates, and of 317 00:16:35,480 --> 00:16:36,840 Speaker 1: course a lot of that has to do with how 318 00:16:36,920 --> 00:16:39,120 Speaker 1: much has been priced in. But just for the kind 319 00:16:39,120 --> 00:16:42,400 Speaker 1: of in the context of the reason about a volatility 320 00:16:42,440 --> 00:16:45,680 Speaker 1: and tandem we had in the market, I take something 321 00:16:45,680 --> 00:16:48,680 Speaker 1: that's kind of boring any time over something that moves 322 00:16:48,680 --> 00:16:51,760 Speaker 1: a thousand points in in in a few minutes, and 323 00:16:51,840 --> 00:16:54,840 Speaker 1: so it does play its role as a diversifier. But 324 00:16:55,560 --> 00:16:58,160 Speaker 1: but this is an environment I think where everybody, no 325 00:16:58,200 --> 00:17:00,320 Speaker 1: matter what your hold you're going to be tested. Um. 326 00:17:00,480 --> 00:17:03,960 Speaker 1: Correlations are breaking down, have been breaking down, and so 327 00:17:04,200 --> 00:17:06,000 Speaker 1: you're going to be tested with whatever view you have 328 00:17:06,119 --> 00:17:08,520 Speaker 1: on whatever I as said. You've got to have a 329 00:17:08,560 --> 00:17:10,760 Speaker 1: long term framework to think about what you want to do, 330 00:17:10,960 --> 00:17:13,639 Speaker 1: how much allocate the stocks, bonds, gold, or whatever it 331 00:17:13,720 --> 00:17:16,560 Speaker 1: might be. Because if you just look at any one 332 00:17:16,600 --> 00:17:19,520 Speaker 1: data point, any one day, UM, I think people will 333 00:17:19,560 --> 00:17:23,000 Speaker 1: be rightfully confused. Oxville. If you go back about five 334 00:17:23,080 --> 00:17:25,840 Speaker 1: years and you look at the value of gold, it 335 00:17:25,920 --> 00:17:29,240 Speaker 1: was trading it around sixteen hundred and five dollars four 336 00:17:29,240 --> 00:17:34,320 Speaker 1: an ounce. Right now we're hundred and fifty two. What 337 00:17:34,359 --> 00:17:38,000 Speaker 1: do you say to people that maybe bought gold then 338 00:17:39,000 --> 00:17:42,080 Speaker 1: and now look at their holdings and say, gee, I 339 00:17:42,119 --> 00:17:45,960 Speaker 1: can't buy the same amount in dollar terms that I 340 00:17:46,080 --> 00:17:49,800 Speaker 1: bought back then, And the value of the US dollar 341 00:17:49,880 --> 00:17:52,600 Speaker 1: may have even declined since then, so as a result, 342 00:17:52,960 --> 00:17:56,439 Speaker 1: I even have less money. Is gold a means to 343 00:17:56,560 --> 00:18:00,359 Speaker 1: an end or is it an end in itself? Actually 344 00:18:00,440 --> 00:18:02,240 Speaker 1: just got a message from somebody who said, oh, I 345 00:18:02,280 --> 00:18:04,960 Speaker 1: loaded up on too much gold and got burned during 346 00:18:04,960 --> 00:18:06,960 Speaker 1: those days that you're just a reference. And so even 347 00:18:06,960 --> 00:18:09,240 Speaker 1: when the price of gold goes higher, they might have 348 00:18:09,359 --> 00:18:12,440 Speaker 1: to sell some of it, and uh and and you 349 00:18:12,440 --> 00:18:15,200 Speaker 1: you get that from time to time. It comes down 350 00:18:15,240 --> 00:18:18,960 Speaker 1: to investment process. Right. If you take take if you 351 00:18:19,080 --> 00:18:21,440 Speaker 1: bought stocks in two thousand seven and two thousand eight 352 00:18:21,480 --> 00:18:24,960 Speaker 1: and and and and had were fully loaded in the stocks, 353 00:18:25,240 --> 00:18:27,160 Speaker 1: well you lose a lot of money, and then people 354 00:18:27,200 --> 00:18:29,480 Speaker 1: tell you to double down at the bottom. That is 355 00:18:29,520 --> 00:18:32,480 Speaker 1: completely irresponsible because you lost half of your net worth 356 00:18:32,560 --> 00:18:34,760 Speaker 1: and you lost more than you could afford to lease do. 357 00:18:34,840 --> 00:18:37,240 Speaker 1: So you've got to pay down your risk profile. So similarly, 358 00:18:37,320 --> 00:18:39,480 Speaker 1: if you loaded up on too much of anything, including 359 00:18:39,520 --> 00:18:44,280 Speaker 1: gold on the top and haven't diversified as as prices 360 00:18:44,320 --> 00:18:47,080 Speaker 1: were moving, well, odds are that you lost more than 361 00:18:47,119 --> 00:18:49,840 Speaker 1: you could afford to lose. But that doesn't make the 362 00:18:49,880 --> 00:18:52,320 Speaker 1: investment in bad investment. It means that you don't have 363 00:18:52,359 --> 00:18:55,520 Speaker 1: a discipline to rebalance your portfolio and and to to 364 00:18:55,840 --> 00:18:58,399 Speaker 1: understand the risks and and what happened in gold at 365 00:18:58,400 --> 00:19:01,480 Speaker 1: the time, volatility was too low and people weren't the 366 00:19:01,520 --> 00:19:04,200 Speaker 1: way of the risk. While anybody who buys anything, including gold, 367 00:19:04,200 --> 00:19:06,520 Speaker 1: should be aware these things can be very volatile and 368 00:19:06,600 --> 00:19:09,320 Speaker 1: people only realize that on the way down when volatility 369 00:19:09,359 --> 00:19:12,400 Speaker 1: spikes and doesn't make the investment worth But it does 370 00:19:12,600 --> 00:19:15,640 Speaker 1: remind people that the human and I'm not following the process. 371 00:19:15,640 --> 00:19:18,040 Speaker 1: And notably they didn't take chips off the table now 372 00:19:18,040 --> 00:19:20,719 Speaker 1: either um during the the bull market and hopefully they 373 00:19:20,800 --> 00:19:22,560 Speaker 1: got the wake up call of Laton in the market. 374 00:19:22,600 --> 00:19:24,919 Speaker 1: Shield axell Mark, thank you so much for joining us. 375 00:19:24,960 --> 00:19:27,480 Speaker 1: A pleasure having you on. Axel Mark is President, chief 376 00:19:27,560 --> 00:19:32,560 Speaker 1: investment officer of Mark Investments in San Francisco, California. It's 377 00:19:32,600 --> 00:19:39,480 Speaker 1: not gold that's confusing, it's the world around it. Let's 378 00:19:39,520 --> 00:19:43,840 Speaker 1: turn to farming equipment Deer and Company, which focuses on 379 00:19:43,920 --> 00:19:48,639 Speaker 1: supplying farmers and their infrastructure. Their shares are up nearly 380 00:19:48,680 --> 00:19:52,760 Speaker 1: four percent after beating estimates with their earnings. Karen yubile 381 00:19:52,800 --> 00:19:56,560 Speaker 1: Heart joins us now our industrials analysts for Bloomberg Intelligence. 382 00:19:56,600 --> 00:19:58,679 Speaker 1: Always full of insight. Karen, We're so happy to have 383 00:19:58,760 --> 00:20:01,280 Speaker 1: you here. So what's going on here? I just sort 384 00:20:01,320 --> 00:20:05,000 Speaker 1: of set the stage for why why the outlook in 385 00:20:05,080 --> 00:20:08,200 Speaker 1: general for farming is turning up? Uh, you know, it's 386 00:20:08,320 --> 00:20:12,240 Speaker 1: it's largely replacement demand. Um. They are in both construction 387 00:20:12,480 --> 00:20:16,040 Speaker 1: and agg and medals are surging um so and the 388 00:20:16,080 --> 00:20:19,719 Speaker 1: construction business is surging. But you know, grain commodity prices 389 00:20:19,720 --> 00:20:23,119 Speaker 1: have not really done anything. But the farmers have not bought, 390 00:20:23,200 --> 00:20:26,640 Speaker 1: particularly the large farmers for about three years, and they 391 00:20:26,720 --> 00:20:30,080 Speaker 1: there's the technology has changed a lot. Um. You know, 392 00:20:30,119 --> 00:20:32,360 Speaker 1: their equipment is getting a little old, and I think 393 00:20:32,400 --> 00:20:34,560 Speaker 1: they've just and they have enough confidence to get out 394 00:20:34,600 --> 00:20:37,919 Speaker 1: there and start buying. Well, the company already said, what 395 00:20:38,000 --> 00:20:41,679 Speaker 1: sales are up like the quarter? Yeah, yeah, um, And 396 00:20:41,720 --> 00:20:43,920 Speaker 1: well there's two things happening there. The end markets are 397 00:20:43,960 --> 00:20:47,119 Speaker 1: not up that much, but deer underproduced for three years, 398 00:20:47,320 --> 00:20:50,280 Speaker 1: so they get a kick, uh, an extra kick from 399 00:20:50,480 --> 00:20:53,760 Speaker 1: ramping back up to uh, you know, retail demand. So 400 00:20:54,040 --> 00:20:55,840 Speaker 1: internally they're going to do a lot better than the 401 00:20:55,920 --> 00:20:58,600 Speaker 1: end market this year. So what's the breakdown for deer 402 00:20:58,680 --> 00:21:00,520 Speaker 1: as far as where they get their rev new if 403 00:21:00,560 --> 00:21:04,760 Speaker 1: you look at construction versus farming, and which is the 404 00:21:04,800 --> 00:21:07,320 Speaker 1: brighter spot heading into the rest of the year. Uh, 405 00:21:07,359 --> 00:21:10,439 Speaker 1: you know, from a margin perspective, you want dear, you 406 00:21:10,480 --> 00:21:14,399 Speaker 1: want add to grow and because that's eight percent of 407 00:21:14,520 --> 00:21:17,479 Speaker 1: deer um right now on a sales basis. Well, it's 408 00:21:17,480 --> 00:21:21,240 Speaker 1: actually seventy after Vertican and it's still um, you know, 409 00:21:21,280 --> 00:21:25,199 Speaker 1: about sixty of earnings. And the one thing they did 410 00:21:25,280 --> 00:21:28,240 Speaker 1: say is large equipment is doing much better than they expected, 411 00:21:28,320 --> 00:21:31,320 Speaker 1: and that's margin they don't they you know, they'll make 412 00:21:31,359 --> 00:21:33,560 Speaker 1: a ten percent margin this year and at in um 413 00:21:33,840 --> 00:21:38,520 Speaker 1: construction and they'll do you know of fourteen percent margin 414 00:21:38,640 --> 00:21:41,360 Speaker 1: in agg so you know, because of the big stuff. Well, 415 00:21:41,400 --> 00:21:44,280 Speaker 1: they talked about agriculture and turf equipment sales. I think 416 00:21:44,280 --> 00:21:47,600 Speaker 1: they were up something like eighteen to but then even 417 00:21:47,640 --> 00:21:52,119 Speaker 1: more so construction and forestry equipment posting increase of nearly 418 00:21:52,280 --> 00:21:57,480 Speaker 1: sixty that's the that's the merger um. But it's still up. 419 00:21:57,520 --> 00:22:00,480 Speaker 1: If you take out Vertican, it's still about twenty percent. 420 00:22:00,840 --> 00:22:03,400 Speaker 1: But if you look at CATS numbers, which come out monthly, 421 00:22:03,480 --> 00:22:07,600 Speaker 1: they're up thirty percent in in overall in every region 422 00:22:07,720 --> 00:22:12,160 Speaker 1: is up at least um and both construction of mining 423 00:22:12,200 --> 00:22:15,320 Speaker 1: construction matters more to deer is up, are both surging 424 00:22:15,480 --> 00:22:18,480 Speaker 1: so um. You could see it in CATS numbers a 425 00:22:18,520 --> 00:22:21,120 Speaker 1: couple of weeks ago, and it's flowing through deer seeing 426 00:22:21,240 --> 00:22:24,160 Speaker 1: in construction as well, so expert and it's still up 427 00:22:24,280 --> 00:22:26,960 Speaker 1: a lot so with construction. I mean, we just got 428 00:22:27,359 --> 00:22:32,000 Speaker 1: housing starts that were the strongest in several years. Um. 429 00:22:32,119 --> 00:22:36,439 Speaker 1: What's driving the sort of optimism on that side? You know, 430 00:22:36,720 --> 00:22:39,359 Speaker 1: housing has been pretty good for a while. Um, and 431 00:22:39,400 --> 00:22:42,840 Speaker 1: I do you know jobs, um, a little bit more money, um, 432 00:22:43,080 --> 00:22:46,600 Speaker 1: you know, and just an overall more optimistic outlook about 433 00:22:46,760 --> 00:22:49,960 Speaker 1: the US economic growth I think is helping. And Deer 434 00:22:50,080 --> 00:22:53,119 Speaker 1: is very sensitive to housing, um, even more so than 435 00:22:53,200 --> 00:22:55,639 Speaker 1: Cat so and I just want to mention you keep 436 00:22:55,680 --> 00:22:59,560 Speaker 1: talking about the Verton acquisition. This was the German company, right, 437 00:22:59,600 --> 00:23:04,679 Speaker 1: and about a four point six billion dollar yes, and 438 00:23:04,720 --> 00:23:06,920 Speaker 1: they and they have very high margins and the road 439 00:23:06,960 --> 00:23:09,159 Speaker 1: machinery and Deer wasn't really in that business and they 440 00:23:09,200 --> 00:23:11,800 Speaker 1: have like a fourteen fifteen percent operating margin. Deer doesn't 441 00:23:11,840 --> 00:23:14,679 Speaker 1: break ten in their construction, So good from an end 442 00:23:14,680 --> 00:23:18,480 Speaker 1: market perspective, a regional perspective, as well as margins for 443 00:23:18,560 --> 00:23:21,280 Speaker 1: that business. What's the for for dear, what's the breakdown 444 00:23:21,280 --> 00:23:26,240 Speaker 1: with international sales versus domestic sales and how much of 445 00:23:26,280 --> 00:23:28,719 Speaker 1: a boost are they getting from sort of the I 446 00:23:28,800 --> 00:23:31,720 Speaker 1: hate saying this because it's such cliche synchronized global growth, 447 00:23:31,720 --> 00:23:37,440 Speaker 1: but that's what everybody says, well, it's true, So what's 448 00:23:37,480 --> 00:23:40,760 Speaker 1: going on? Um, they get about two thirds UM of 449 00:23:40,800 --> 00:23:43,720 Speaker 1: their sales in North America now pro forma with Vertkin, 450 00:23:43,840 --> 00:23:46,879 Speaker 1: that's gonna that's gonna go down, you know some because 451 00:23:46,960 --> 00:23:50,040 Speaker 1: you know, Verkan has much larger exposure outside, so we'll 452 00:23:50,080 --> 00:23:53,320 Speaker 1: probably be more like fifty five UM north America. So 453 00:23:53,359 --> 00:23:56,640 Speaker 1: they actually have a pretty high North American exposure, which 454 00:23:56,680 --> 00:23:59,280 Speaker 1: is good tax rate wise, right, so they'll get a benefit. 455 00:23:59,520 --> 00:24:02,119 Speaker 1: Do we hear it? A thing about dividend changes? Well, 456 00:24:02,160 --> 00:24:05,960 Speaker 1: that came up because they're relative to their sixty cents 457 00:24:05,960 --> 00:24:08,880 Speaker 1: to share right now. It's it's about um, it's under 458 00:24:08,920 --> 00:24:13,440 Speaker 1: their payout goal based on consensus, and the CFO basically said, oh, 459 00:24:13,480 --> 00:24:15,800 Speaker 1: we're talking about it, we're reviewing it because it's one, 460 00:24:15,800 --> 00:24:17,960 Speaker 1: I mean one one point four percent. That's not going 461 00:24:18,000 --> 00:24:20,320 Speaker 1: to get anybody interested. And with the cash flow, they 462 00:24:20,400 --> 00:24:23,080 Speaker 1: raised their cash flow expectations because things are doing, you know, 463 00:24:23,160 --> 00:24:25,640 Speaker 1: doing better than they expected. So I would expect they'll 464 00:24:25,680 --> 00:24:27,760 Speaker 1: do something with the dividend this year. All right, we'll 465 00:24:27,760 --> 00:24:29,399 Speaker 1: have to look for that because they haven't raised it 466 00:24:29,400 --> 00:24:30,960 Speaker 1: in a while. I think it was like fifty one 467 00:24:31,000 --> 00:24:33,919 Speaker 1: cents to share for quite a long period and sixty 468 00:24:33,920 --> 00:24:35,680 Speaker 1: cents to share, so right now, as I said, one 469 00:24:35,680 --> 00:24:38,119 Speaker 1: point four, and then they went into the downturn and 470 00:24:38,160 --> 00:24:41,000 Speaker 1: they were conserving cash. Right now, they can let it fly. 471 00:24:41,760 --> 00:24:43,720 Speaker 1: Let it fly. There you go. I like that all right, 472 00:24:43,760 --> 00:24:47,439 Speaker 1: thanks very much, Like Karen, let him fly along with 473 00:24:47,480 --> 00:24:50,120 Speaker 1: the synchronized global growth that's g G and let it fly. 474 00:24:50,280 --> 00:24:54,600 Speaker 1: Karen Jubile heard are industrials analysts for Bloomberg Intelligence. Shares 475 00:24:54,680 --> 00:24:57,040 Speaker 1: of Deer and Company. They are higher right now by 476 00:24:57,119 --> 00:25:02,919 Speaker 1: more than four percent. Thanks for listening to the Bloomberg 477 00:25:02,920 --> 00:25:05,600 Speaker 1: P and L podcast. You can subscribe and listen to 478 00:25:05,600 --> 00:25:10,159 Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. 479 00:25:10,560 --> 00:25:14,120 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 480 00:25:14,160 --> 00:25:17,560 Speaker 1: on Twitter at Lisa Abramowits one before the podcast. You 481 00:25:17,560 --> 00:25:20,119 Speaker 1: can always catch us worldwide on Bloomberg Radio.