WEBVTT - Breaking Down The AT&T-Discovery Merger 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 --> 0:00:22.560 at Bloomberg dot com slash podcast. Well. As Tom Keane 0:00:22.600 --> 0:00:25.160 would say, this is the discussion of the morning. In 0:00:25.239 --> 0:00:27.920 his merger Monday, A T T spinning off its media 0:00:27.920 --> 0:00:30.680 assets and discovery, you're gonna merge with those, creating a 0:00:30.760 --> 0:00:34.680 pretty pretty big media company. Uh. Fortunately, we have two 0:00:34.760 --> 0:00:38.120 of the absolute top analysts on Wall Street to chat 0:00:38.159 --> 0:00:39.839 about this, and fortunate for us, they work at the 0:00:39.880 --> 0:00:41.839 same firm, so it's easy to get them on together, 0:00:42.120 --> 0:00:45.040 Michael Nathanson and Craig Moffat. They are founding partners at 0:00:45.080 --> 0:00:48.960 Moffatt Nathanson. Craig, let me start with you, boy, what 0:00:49.040 --> 0:00:51.320 does this say about A T and T strategy over 0:00:51.320 --> 0:00:54.560 the last several years to transform itself into I guess 0:00:54.560 --> 0:00:58.160 a media company. It's a big about face, isn't it? Boy? 0:00:58.160 --> 0:01:00.400 It sure is. Um. This is a thank you for 0:01:00.440 --> 0:01:06.520 having us on this is this is a complete capitulation strategically. Um. 0:01:06.560 --> 0:01:08.280 But but in some ways you have to give them 0:01:08.360 --> 0:01:11.840 some credit. It is rare that a management team is 0:01:11.880 --> 0:01:14.440 willing to admit so openly that they made a mistake 0:01:14.480 --> 0:01:18.400 and they've got to retrench. Usually, you you require a 0:01:18.480 --> 0:01:21.400 changeover in the management team. And while it was Randall 0:01:21.440 --> 0:01:24.119 Stevenson that that was at the helm when these deals 0:01:24.120 --> 0:01:27.840 were made, John Stanky was very much in the co 0:01:28.000 --> 0:01:31.039 pilot seat and advocated for both of these deals, and 0:01:31.080 --> 0:01:35.200 so to see him changing his mind, it's an enormous 0:01:35.520 --> 0:01:37.679 loss of value for a T and T shareholders, to 0:01:37.680 --> 0:01:40.600 the tune of more than a hundred billion dollars low. Um. 0:01:40.680 --> 0:01:42.920 But but I guess you do have to give them 0:01:42.959 --> 0:01:45.800 some credit for at least acknowledging they made a mistake 0:01:45.800 --> 0:01:50.680 in reversing. So how are I mean, that's amazing. Let's 0:01:50.720 --> 0:01:53.640 just go through those deals if we could. Michael, can 0:01:53.680 --> 0:01:55.560 you can you sound it up for us? What did 0:01:55.560 --> 0:02:00.520 Stanky and Stevenson by and um, what are they able 0:02:00.560 --> 0:02:04.360 to salvage? Now? Well, well, they bought and thanks for 0:02:04.360 --> 0:02:07.680 having us on and they bought was Turner Cable Networks 0:02:07.960 --> 0:02:09.640 and Craig and I would always say to you the 0:02:09.720 --> 0:02:13.000 businesses at Turner with TVs and t N T, well, 0:02:13.000 --> 0:02:16.040 the well the most at risks from Netflix, right, those 0:02:16.040 --> 0:02:20.240 are entertainment networks, a lot of repeat content that was 0:02:20.400 --> 0:02:24.679 easily replaced by on demand spot. So Turner got a 0:02:24.760 --> 0:02:28.760 lot worse more quickly. And then HBO. You know, I 0:02:28.800 --> 0:02:31.040 don't blame them on HBO. They've done the right thing, 0:02:31.080 --> 0:02:36.240 but HBO really never aggressively expanded into the engine non 0:02:36.320 --> 0:02:39.480 US markets. So the guys that A T T had 0:02:39.480 --> 0:02:44.240 to basically reinvestigate in HBO change the way the company 0:02:44.639 --> 0:02:47.680 went to market. UM. So to me, it really comes 0:02:47.720 --> 0:02:52.760 down to the basic cable bundle and also time warners. Really, 0:02:52.840 --> 0:02:56.160 I would say starving of HBO to get the to 0:02:56.200 --> 0:02:59.000 get the asset in the competitive position. And now that's 0:02:59.000 --> 0:03:02.160 what they're doing, but it's gonna be expensive, by the way, 0:03:02.200 --> 0:03:06.080 I was including Direct TV and that as well. Exactly 0:03:06.880 --> 0:03:09.920 they bought direct TV for sixty seven billion dollars two 0:03:10.000 --> 0:03:12.760 years earlier, UM, and they just sold that for about 0:03:12.840 --> 0:03:16.600 fifteen or eighteen. Yeah, just an extraordinary you know, the 0:03:16.680 --> 0:03:20.799 value destruction there from this management team. Uh, Michael, can 0:03:20.840 --> 0:03:24.280 the new company really compete against Netflix and Disney. Can 0:03:24.320 --> 0:03:29.799 they be a global leader? You know, I think they can. Um, 0:03:29.840 --> 0:03:33.160 I think they'll be three or four global companies. HBO's 0:03:33.240 --> 0:03:37.320 content is as good as anyone's. UM. The weakness they've 0:03:37.360 --> 0:03:41.200 had is is not being able to move into international markets. 0:03:41.240 --> 0:03:44.160 That's going to change. Who they've had is the under 0:03:44.320 --> 0:03:47.440 the inability to invest in. Now they're investing. So I 0:03:47.480 --> 0:03:49.720 don't think it's crazy. I don't think it's crazy. They 0:03:49.760 --> 0:03:52.160 could be a top three global aspot powerhouse. I really 0:03:52.200 --> 0:03:56.920 do believe that. And then what about the telecom Yeah? Sorry, 0:03:57.760 --> 0:03:59.880 question is is that a good business or not? Like 0:04:00.400 --> 0:04:03.280 you know, our debates with us over the years have been, well, 0:04:03.440 --> 0:04:05.120 they could be a top three company, but what's the 0:04:05.200 --> 0:04:09.280 cash flow profile in that spot? It's a lower cast 0:04:09.320 --> 0:04:11.800 sharing business, right, just not as attractive as a business 0:04:11.840 --> 0:04:14.800 as they want had. So that was gonna be my 0:04:14.840 --> 0:04:18.000 second part of the answer. The media business they once had, 0:04:18.040 --> 0:04:22.240 you mean, yeah, like where they're moving from is not 0:04:22.279 --> 0:04:23.960 going to be you know, where they're going is not 0:04:24.040 --> 0:04:26.640 as good as where they start. Their problem. I wonder 0:04:26.640 --> 0:04:29.280 about the telecom business because investors are voting the shares 0:04:29.320 --> 0:04:32.839 up today, and I guess that's because what they're going 0:04:32.920 --> 0:04:35.599 to have more money to spend. In the five G rollout, 0:04:35.640 --> 0:04:37.560 they're gonna be able to pay down some of their 0:04:37.760 --> 0:04:41.120 monstrous pile of debt. Um. You know, why, why do 0:04:41.160 --> 0:04:45.080 you think the market likes this? You know? UM? I 0:04:45.120 --> 0:04:47.640 think partly the market likes because it likes it because 0:04:47.640 --> 0:04:52.000 they're getting back a sexy asset, assuming that the shareholders 0:04:52.040 --> 0:04:55.680 directly get back shares in the new CO or the 0:04:55.720 --> 0:04:58.240 new discovery. But you do have to scratch your head 0:04:58.279 --> 0:05:02.000 a little bit because you know, remember before this, a 0:05:02.120 --> 0:05:06.000 T and T was a company that paid a six 0:05:06.040 --> 0:05:09.119 point seven percent dividend yield and had a growth kicker 0:05:09.160 --> 0:05:12.839 in HBO or HBO Max. Now it's going to be 0:05:12.880 --> 0:05:14.640 a company that has about a four and a half 0:05:14.680 --> 0:05:17.240 percent dividend yield and doesn't have a growth kicker. The 0:05:17.760 --> 0:05:20.960 business stub that's left behind in wireless and wire line. 0:05:21.720 --> 0:05:24.159 Let's remember that that is a business with negative service 0:05:24.240 --> 0:05:27.320 revenue growth and falling IBADA. So it's not exactly like 0:05:27.320 --> 0:05:29.680 you're getting a growth company. You're just getting a declining 0:05:29.720 --> 0:05:32.680 company that now has a much lower dividend yield. I'm 0:05:32.680 --> 0:05:35.520 not sure that's going to work for investors as they 0:05:35.600 --> 0:05:38.039 sort of go through all the mad Craig, do you 0:05:38.080 --> 0:05:40.520 expect a T and T. I mean it's got to 0:05:40.560 --> 0:05:43.440 be really gunshot here, given what's happened over the last 0:05:43.480 --> 0:05:45.919 several years. Is their strategy just to hunker down with 0:05:45.960 --> 0:05:48.320 the assets that they have? Do you think they don't 0:05:48.360 --> 0:05:51.919 have any choice? Um? They they have no money, right, 0:05:51.960 --> 0:05:55.159 I mean they're levered at four times IBADA and and 0:05:55.279 --> 0:05:58.839 the rating agencies have said the downgrade threshold is three seven. 0:05:58.920 --> 0:06:02.440 So um, so they're hanging on for dear life. And 0:06:02.440 --> 0:06:04.800 and while this will help them pay down forty three 0:06:04.839 --> 0:06:09.240 billion dollars of debt, um, it will also offload cash 0:06:09.279 --> 0:06:12.080 flows that supported more than forty three billion dollars of debt. 0:06:12.200 --> 0:06:17.200 So this doesn't help them delever at all. What about 0:06:17.200 --> 0:06:24.520 the discovery Uh, the discovery side discovery? What's right? That's right? Yeah? 0:06:24.600 --> 0:06:26.279 What are they going to be able to do? I 0:06:26.279 --> 0:06:28.880 mean they they to me, it looks like they come 0:06:28.920 --> 0:06:31.520 here with an inferior like who cares about Home and 0:06:31.520 --> 0:06:35.800 Garden TV? You're getting hbo Um, what is thats not 0:06:35.920 --> 0:06:39.039 going to be able to do with this business? Well, 0:06:39.320 --> 0:06:42.000 it's funny you say that because that is a point 0:06:42.040 --> 0:06:44.680 of view of h G, t V and food of 0:06:44.720 --> 0:06:47.520 a coastal, a coastal elite. You know. I've always had 0:06:47.560 --> 0:06:50.600 that point of view too. It's like, who's watching those networks, 0:06:50.640 --> 0:06:54.240 But they're watched by a ton of young women or 0:06:54.760 --> 0:06:56.960 women in this country. So what Jobs is going to 0:06:57.040 --> 0:07:01.159 try to do is protect his basic cable network businesses 0:07:01.800 --> 0:07:05.560 and create, you know, an alternative bundle with TBS, T 0:07:05.640 --> 0:07:08.000 and T CNN or all those discovery channels. Right, So 0:07:08.600 --> 0:07:10.680 that's one thing, and he's gonna try to create an 0:07:10.720 --> 0:07:14.000 add on bundle with Hrio Max. Think what Disney has 0:07:14.040 --> 0:07:18.440 done with Hulu, ESPN and Disney plus, same kind of idea. 0:07:19.360 --> 0:07:21.679 Assets are not the same, but I think the idea 0:07:21.720 --> 0:07:24.360 is like we can replicate parts of the bundle with 0:07:24.400 --> 0:07:27.600 our own mini bundles. Here. Very interesting and I'm I'm 0:07:27.640 --> 0:07:30.080 so glad that Paul got you guys to come in 0:07:30.120 --> 0:07:33.320 today because it's a come on today, I should say, 0:07:33.400 --> 0:07:36.840 not in obviously, but because it's such a fascinating discussion, 0:07:36.920 --> 0:07:40.560 because you are the experts from whom we really can 0:07:40.680 --> 0:07:44.040 learn all of this um stuff. Pleasure having you on 0:07:44.080 --> 0:07:47.760 the program. Thanks very much, Michael Nathanson and Craig Moffatt 0:07:47.760 --> 0:07:50.720 founding partners at Moffatt Nathanson on the A T and 0:07:50.800 --> 0:07:55.720 T Discovery merger. Hate the word merger. It's always one 0:07:55.800 --> 0:08:03.000 buying the other. This is Bloomberg. Let's get over to 0:08:03.040 --> 0:08:06.920 Aaron Callenberg right now, CEO of the Wild Alaskan Company, 0:08:06.960 --> 0:08:10.240 as we talk about E. S G and UM. As 0:08:10.320 --> 0:08:13.680 so many people have seen the Netscape movie documentary c 0:08:13.920 --> 0:08:19.760 spirc Um. You gotta wonder about um wild caught fish. 0:08:19.880 --> 0:08:24.480 It's delicious, it's the best obviously, but um is it sustainable? 0:08:24.680 --> 0:08:27.800 Aaron Callenberg, as I said, joins us, Um, how do 0:08:27.920 --> 0:08:31.520 you make that sustainable? Aaron? You know, wherever we see UM, 0:08:31.760 --> 0:08:35.479 big industrial fishing it it always just seems to decimate 0:08:35.559 --> 0:08:41.199 the ecosystem. Yeah, happy day everybody. This is Aaron. Um. 0:08:41.400 --> 0:08:43.240 Just a little background wild last and you know we 0:08:43.280 --> 0:08:47.000 are a monthly seafood membership service. We should curated box 0:08:47.040 --> 0:08:51.959 of wildcot seafood, sustainable seafood to members across the country. Um, 0:08:52.000 --> 0:08:57.280 you know, and the sustainability UM topic, you know, especially 0:08:57.320 --> 0:09:00.319 around you know, the documentary you mentioned is one that's 0:09:00.360 --> 0:09:05.240 near and dear to my heart and the Callenberg family. UM, 0:09:05.280 --> 0:09:07.120 you know you how do you do? How do you 0:09:07.200 --> 0:09:09.880 do it air and sustainably. I mean, um, you know, 0:09:10.840 --> 0:09:13.640 you know it's obviously it's it's the best for eating 0:09:13.720 --> 0:09:18.560 and I want fish, crabs, prawn, that's wild caught salmon especially, 0:09:18.600 --> 0:09:22.960 but I'm worried about the ecosystem. Yeah. The way you 0:09:23.000 --> 0:09:24.400 do it is you do it the way Alaska has 0:09:24.440 --> 0:09:28.080 done it with a constitutional mandate that was written into 0:09:28.080 --> 0:09:32.040 the state constitution that mandates the sustainable yield. You do 0:09:32.120 --> 0:09:36.160 that with the subsequent enforcement of that mandate across the 0:09:36.320 --> 0:09:40.880 entire industry. Um. The thing about Alaska, it's the largest 0:09:41.240 --> 0:09:46.400 um sustainably managed fishery in the world. It's quite different 0:09:46.480 --> 0:09:49.040 than the rest of the world. And in fact, um 0:09:49.120 --> 0:09:52.200 notably absent from the documentary that you mentioned, there was 0:09:52.280 --> 0:09:56.400 any mention of Alaska or sustainable management practices, the governance, 0:09:56.800 --> 0:10:00.280 the enforcement, and the culture. Um. The re in the 0:10:00.360 --> 0:10:04.800 Alaska wrote that into their constitution is prior to statehood, 0:10:05.200 --> 0:10:08.559 the fisheries were essentially being mismanaged, um, you know, by 0:10:08.559 --> 0:10:12.360 the federal management and the state of Alaska understood that 0:10:12.440 --> 0:10:16.520 in order to maintain or increase the economic viabilities of 0:10:16.559 --> 0:10:18.480 the fisheries, they needed to protect the fish. If you 0:10:18.520 --> 0:10:21.720 take care of the fish official take care of you economically. 0:10:21.760 --> 0:10:26.000 So they put in the strongest standards for sustainable fisheries 0:10:26.040 --> 0:10:29.280 management and they're now are what considered the global gold 0:10:29.320 --> 0:10:33.000 standard for sustainable fisheries management. UM. And so, you know, 0:10:33.040 --> 0:10:36.679 contrary to popular belief, Alaska is not estimating the environment 0:10:36.760 --> 0:10:39.960 or the fish populations. And there's plenty of evidence to 0:10:40.120 --> 0:10:43.400 suggest that if global fisheries were to adopt these practices, 0:10:43.440 --> 0:10:45.599 which are codified into law in Alaska, you have a 0:10:45.679 --> 0:10:49.680 quite different global fishery. Aaron talked to us about how 0:10:49.800 --> 0:10:52.720 your business changed during the pandemic. It seems like we 0:10:52.760 --> 0:10:56.240 hear from a lot of retailers that their online sales 0:10:56.280 --> 0:10:59.439 went through the roof and we're seeing boxes on everybody's doorstep. 0:10:59.559 --> 0:11:03.000 How did you impact your business? Yeah, there's no doubt, 0:11:03.040 --> 0:11:05.600 you know, as a pandemic has been a global tragedy, 0:11:05.640 --> 0:11:09.320 but for a while to lask and um, you know, specifically, 0:11:09.320 --> 0:11:12.000 there's no doubt. You know, our business has increased by 0:11:12.080 --> 0:11:15.280 five acts. You know. UM, we're seeing it on two fronts. 0:11:15.280 --> 0:11:19.120 We're seeing consumer demand for uh, you know, healthy eating, 0:11:19.200 --> 0:11:22.320 you know, especially in the post pandemic increase. But in addition, 0:11:22.360 --> 0:11:24.679 you know, so many other e commerce companies actually had 0:11:24.720 --> 0:11:29.400 supplied to chain disruptions, you know, importing um, you know, 0:11:29.520 --> 0:11:31.760 food from outside the United States. One of the great 0:11:31.760 --> 0:11:34.360 things about Wild Alaskan is we're a fully US based 0:11:34.400 --> 0:11:36.679 supply chain, so we didn't have those disruptions, so we 0:11:36.679 --> 0:11:41.040 were able to actually continue disservice the domestic market. UM. 0:11:41.120 --> 0:11:43.079 And you know that in addition to that, the man 0:11:43.120 --> 0:11:46.360 allowed us to really pull ahead. Aaron, thanks so much 0:11:46.400 --> 0:11:51.439 for joining us. UM, super cool business idea there. I 0:11:51.480 --> 0:11:53.360 think it's like a hundred and thirty hours a month 0:11:53.400 --> 0:11:57.440 and then you get fresh caught, sustainably caught probably the 0:11:57.480 --> 0:12:00.600 most important part, but I'm sure also incredibly juicy and 0:12:00.640 --> 0:12:04.840 delicious fish, crabs, prawn, et cetera. And Wild Alaskan company. 0:12:04.840 --> 0:12:08.200 Aaron Callenberg is the CEO and talking to us about 0:12:08.720 --> 0:12:11.760 you know why how they do it in Alaska, Paul 0:12:11.960 --> 0:12:15.880 is different from um, how you see it in other 0:12:15.920 --> 0:12:17.680 parts of the world. Yeah, I didn't know that that 0:12:17.720 --> 0:12:20.400 it was, you know, codified into that state law. But 0:12:20.840 --> 0:12:23.920 you know that's a really interesting aspect to their business. 0:12:24.400 --> 0:12:27.240 Absolutely and and important, right because especially if you spend 0:12:27.280 --> 0:12:31.200 any time on the see UM, you want these cultures 0:12:31.240 --> 0:12:37.800 to thrive. This is Bloomberg. Now let's bring in Greg Han. 0:12:37.920 --> 0:12:41.840 He is president and chief investment officer Winthrop Capital Management. 0:12:41.880 --> 0:12:46.800 They have almost three billion dollars in assets under management, 0:12:46.800 --> 0:12:50.520 and Greg, I want to first get your um, your 0:12:50.679 --> 0:12:53.840 your concerns for this market. I mean, we have heard 0:12:53.840 --> 0:12:56.640 a lot of inflation concerns over the last few days. 0:12:56.960 --> 0:12:59.440 Then we saw this you know, bitcoin thing blow up again. 0:12:59.640 --> 0:13:03.880 It looks like maybe deflation concerns, at least deflation of 0:13:03.920 --> 0:13:09.320 the speculative bubble. UM maybe first, first and foremost, front 0:13:09.320 --> 0:13:12.520 and center here. How do you look at it? So 0:13:12.600 --> 0:13:15.800 our base case for the economy right now is that 0:13:15.920 --> 0:13:18.240 the vaccine will be effective in controlling the spread of 0:13:18.240 --> 0:13:22.720 the virus, the economy will reopen, we'll see the accelerated growth. 0:13:22.960 --> 0:13:24.960 We still believe that that's the case. It's not a 0:13:24.960 --> 0:13:28.199 straight line up, UM, and we're seeing that the labor 0:13:28.240 --> 0:13:32.480 markets causing a little bit of UM anxiousness. UM. Cp 0:13:32.559 --> 0:13:35.839 I obviously is the is headline news. With inflation picking up. 0:13:36.320 --> 0:13:39.160 This actually is a scenario that the FED wants. The 0:13:39.240 --> 0:13:43.400 FED was looking for accelerated growth and increased inflation. So 0:13:43.440 --> 0:13:45.320 now we've got it. The question is whether it's going 0:13:45.320 --> 0:13:47.520 to be sustained inflation or whether this is just a 0:13:47.520 --> 0:13:49.880 short term hiccup. But right now, I think the real 0:13:49.920 --> 0:13:52.880 concern is navigating the structural issues that we're dealing with 0:13:52.920 --> 0:13:56.800 in the capital markets. All right, Greg, So assuming that 0:13:56.880 --> 0:14:01.160 this inflation is more transitory than perhaps more longer term 0:14:01.160 --> 0:14:04.080 and problematic, what are some of the sectors that you 0:14:04.120 --> 0:14:10.120 guys are looking at right now? So the dance dance 0:14:10.200 --> 0:14:11.880 with the girl that brought you right to the to 0:14:11.960 --> 0:14:15.079 the dance, and that's the tech stuff. The large cap 0:14:15.120 --> 0:14:20.040 tech is Microsoft, Alphabet. Um we we still like those, 0:14:20.080 --> 0:14:22.640 and I think there's a catalyst behind it is there's 0:14:22.720 --> 0:14:25.800 these are heavy cash and so there's catalysts for stock 0:14:25.840 --> 0:14:30.680 buy backs and increased dividends. UM plus we like the fundamentals. UM. 0:14:30.720 --> 0:14:33.040 On the Chinese side, we still like ten Cent in 0:14:33.080 --> 0:14:35.440 Ali Baba. Ten Cent we think is just a hidden 0:14:36.000 --> 0:14:39.280 gem in this market. And UM we still like the financials, 0:14:39.280 --> 0:14:41.040 but I'm hesitating a little bit. We have a steep 0:14:41.040 --> 0:14:43.880 Pheel curve. You're gonna see stock buybacks on the financials 0:14:43.960 --> 0:14:48.560 including JP, Morgan, Bank America, and Goldman UM. But that 0:14:49.120 --> 0:14:50.680 that has some legs to it. It's not the same 0:14:50.760 --> 0:14:51.880 kind of growth that we're going to see in the 0:14:51.960 --> 0:14:55.120 large cap tech though, So you really see large cap 0:14:55.120 --> 0:14:58.440 tech then coming back with a vengeance from the lull 0:14:58.440 --> 0:15:02.400 that we've seen in the end of the second half. Yeah, 0:15:02.480 --> 0:15:05.560 these are great and the first half sorry. These are 0:15:05.560 --> 0:15:09.240 great business models, these huge margins, and these they have 0:15:09.320 --> 0:15:12.640 global reach. So all the noise around antitrust and and that, 0:15:12.720 --> 0:15:16.240 I mean, it's it's legitimate, but it's noise. These we 0:15:16.400 --> 0:15:19.960 we we think that these are companies are sophisticated enough 0:15:20.000 --> 0:15:22.800 to move through it. Um and some of the products 0:15:22.840 --> 0:15:25.840 that are coming out Microsoft Products Suite is amazing. Um, 0:15:25.840 --> 0:15:29.680 there's there's there's still room for growth here. Alright, Greg, 0:15:29.760 --> 0:15:32.280 we saw on some of those tech names. Um, you know, 0:15:32.280 --> 0:15:36.120 the companies report generally really really strong numbers. Get the 0:15:36.160 --> 0:15:38.800 stock didn't react and you know, cause a lot of 0:15:38.840 --> 0:15:41.880 investors to say, oh, is this tech trade? Is this 0:15:41.920 --> 0:15:44.880 growth story trade over? Is Is it really a cyclical 0:15:45.120 --> 0:15:47.800 driven maybe even a small cap market? How did you 0:15:47.880 --> 0:15:52.360 view earnings in the stocks responses? So we separate we 0:15:52.440 --> 0:15:54.920 kind of have to separate the text based into two 0:15:55.000 --> 0:15:57.640 different categories. There's large cap and then there's small cap, 0:15:58.000 --> 0:16:00.400 and that whole small cap tech space has got I 0:16:00.400 --> 0:16:02.920 mean it's it's over valued, it's there's valuation is the 0:16:02.920 --> 0:16:05.800 biggest issue in this this whole space. And then when 0:16:05.840 --> 0:16:07.960 you when you kind of sort through what's going on 0:16:08.000 --> 0:16:09.640 in the I p O market, you look at what's 0:16:09.680 --> 0:16:13.720 happening in the recovery basket as as UM COVID affected 0:16:13.760 --> 0:16:17.160 industries recover there as an alternative, and that's part of 0:16:17.200 --> 0:16:19.760 what we saw was a shift moving into some of 0:16:19.760 --> 0:16:22.560 the cyclicals or value oriented parts of the market in 0:16:22.600 --> 0:16:26.000 away from tech. That the place we're focused. We're not 0:16:26.040 --> 0:16:28.960 focused in that small cap tech space. We're focused really 0:16:29.000 --> 0:16:32.120 in in the large cap where you've got sustained business models, 0:16:33.280 --> 0:16:36.280 and you don't think that the valuations are too high. 0:16:36.320 --> 0:16:38.320 I mean they're not off the charts. If I look 0:16:38.360 --> 0:16:41.720 at the NYC Fang Index, but I do see forty 0:16:41.760 --> 0:16:46.960 five you know UM times earnings look there, there's no 0:16:47.040 --> 0:16:51.200 question by historic standards they're high. UM. However, studies show 0:16:51.280 --> 0:16:55.320 that in periods of aggressive monetary and fiscal stimulus we 0:16:55.360 --> 0:16:59.880 will see extended valuations. Multiples were hanging our ad on 0:17:00.000 --> 0:17:02.360 at I think there's no other way to look at 0:17:02.360 --> 0:17:04.560 it other than to say, is is Okay, we've got 0:17:04.560 --> 0:17:07.920 the stimulus in the market. It's going to support these 0:17:08.040 --> 0:17:12.240 valuations for the time being. Can these valuations now handle 0:17:12.359 --> 0:17:14.840 an increase in interest rates? That's I think that's really 0:17:14.840 --> 0:17:17.800 going to be the question if if we see accelerated inflation, 0:17:18.400 --> 0:17:20.359 what will happen to the market. You know that this 0:17:20.560 --> 0:17:24.359 that all makes sense to me. Greg. The The interesting 0:17:24.440 --> 0:17:28.760 call I think is large cap Chinese tech because it's 0:17:28.800 --> 0:17:32.959 such an opaque uh yeah, you know universe, right. I mean, 0:17:33.000 --> 0:17:35.600 you can't see in you don't know what the Communist 0:17:35.640 --> 0:17:38.320 Party is going to do, and that's a little bit riskier. 0:17:39.440 --> 0:17:43.080 It is there's authoritarian capitalism against Western capitalism. And this 0:17:43.119 --> 0:17:46.040 is a much longer conversation. I won't weigh it down here, 0:17:46.080 --> 0:17:50.720 but these are companies that do have um audited financial statements. 0:17:50.760 --> 0:17:54.600 They do comply with international standards for audits. The issue though, 0:17:54.640 --> 0:17:58.080 is they won't let auditors in to actually examine the books. 0:17:58.119 --> 0:18:00.760 That's really what I think. The The issue for the 0:18:00.800 --> 0:18:03.680 exchanges are for Chinese stocks trade in the United States. 0:18:03.680 --> 0:18:05.720 But that's why Hong Kong is so important to China 0:18:05.840 --> 0:18:09.640 in our opinion, and we see um the big banks 0:18:09.640 --> 0:18:12.000 still acted their golden sacks. Overnight there was a story 0:18:12.160 --> 0:18:15.959 hiring three people in China and Hong Kong, the biggest 0:18:15.960 --> 0:18:20.280 ever hiring spree for the big investment bank there. Um. Greg, 0:18:20.280 --> 0:18:22.720 thanks so much for joining us. Really fascinating to get 0:18:22.760 --> 0:18:25.679 your insight, and especially as we see these these markets 0:18:25.720 --> 0:18:28.720 bounce around like this. Greg Han as President and Chief 0:18:28.800 --> 0:18:32.240 investment officer at Winthrop Capital Management talking to us about 0:18:32.320 --> 0:18:37.760 their um sticking with a large cap tech stocks, the 0:18:38.080 --> 0:18:41.280 fang stock, so to speak, but also interested um still 0:18:41.320 --> 0:18:44.359 in large cap Chinese tech holdings including ten Cent and 0:18:44.600 --> 0:18:48.240 Ali Baba, as well as the financials as the yield curve, 0:18:48.280 --> 0:18:53.000 steep yield curve is helpful to them. This is Bloomberg. 0:18:56.520 --> 0:18:58.439 Now let's get over too marked outing. I told you 0:18:58.440 --> 0:19:00.000 we're gonna have the CEE i Oh at Blue Bay 0:19:00.040 --> 0:19:03.960 Asset Management join us. He is here to talk about 0:19:04.000 --> 0:19:09.240 his outlook for I guess mark. Inflation is probably the 0:19:09.680 --> 0:19:13.359 biggest front and center concern for investors right now, whether 0:19:13.400 --> 0:19:15.240 you're worried that it's going to come on quickly or 0:19:15.240 --> 0:19:21.720 whether you're worried about a popping of the speculative speculative bubble. Um, 0:19:23.080 --> 0:19:27.760 where do you stand on the inflation concern. Well, good morning, 0:19:28.080 --> 0:19:31.280 so thanks for the question. I guess I'd firmly be 0:19:31.320 --> 0:19:34.560 in the camp that markets are being rather complacent around 0:19:35.000 --> 0:19:38.760 the nature of inflation here. Obviously, the narrative from the 0:19:38.760 --> 0:19:42.400 FED has been that inflation is going to be transitory, 0:19:42.600 --> 0:19:46.119 but the reality is the next month's cp I is 0:19:46.200 --> 0:19:49.040 likely to be up again as further base effects flop out. 0:19:49.119 --> 0:19:52.760 We've got a negative from May twenty that will drop out. 0:19:52.760 --> 0:19:55.199 The data to here is so inflation will go up 0:19:55.200 --> 0:19:57.960 again next month, and so I think the inflation signals 0:19:58.000 --> 0:20:01.360 will continue to flash red for a WHI wouldn't surprise 0:20:01.440 --> 0:20:06.800 me if the market's complacency around the transitory narrative ends 0:20:06.880 --> 0:20:09.960 up being tested, and certainly from my perspective, I reckon 0:20:10.040 --> 0:20:13.119 that you'll end up seeing inflation and this year closer 0:20:13.160 --> 0:20:16.520 to three more than two percent, which is considerably more 0:20:16.560 --> 0:20:20.360 than the Fed is callegi discounting. All right, Mark, let's 0:20:20.359 --> 0:20:23.640 look within the fixed income markets. One of the areas 0:20:23.720 --> 0:20:25.439 or just investing in general. One of the areas of 0:20:25.480 --> 0:20:29.040 real growth is e s G investing environmental social governance, 0:20:29.080 --> 0:20:31.359 and I've heard that term a lot. We hear it 0:20:31.400 --> 0:20:33.959 a lot in the equity markets. On the fixed income markets, 0:20:34.040 --> 0:20:36.600 I guess we're starting to hear more about green bonds. 0:20:36.680 --> 0:20:41.240 Is that something that factors into your portfolio? Yeah, so, 0:20:41.600 --> 0:20:43.399 I think we're all hearing a lot more about E 0:20:43.560 --> 0:20:45.840 s G. And the reason for that, frankly, is our 0:20:45.840 --> 0:20:49.679 clients really care. They care about E s G outcomes 0:20:49.960 --> 0:20:55.000 as stewards of financial assets um and ultimately, I think 0:20:55.080 --> 0:20:58.800 we're seeing increasingly that those issues that deliver better E 0:20:58.960 --> 0:21:03.240 s G performance do end up delivering better investment performance. 0:21:03.760 --> 0:21:06.520 Certainly in the credit world, if you're a better E 0:21:06.680 --> 0:21:09.200 s G performer, you end up being a bit more 0:21:09.240 --> 0:21:12.960 credit worthy ultimately. Speaking that said, on the on the 0:21:13.040 --> 0:21:16.200 question of green bonds, I think the the this is 0:21:16.240 --> 0:21:18.239 a bit of a double edged sword actually when we 0:21:18.280 --> 0:21:21.400 speak about green bonds, because green bonds certainly have got 0:21:21.400 --> 0:21:25.639 a place where the issuance which occurs wouldn't otherwise have 0:21:25.720 --> 0:21:28.879 come about if those green bonds weren't issued. But a 0:21:28.920 --> 0:21:31.120 lot of the time, what we're actually starting to see 0:21:31.280 --> 0:21:33.320 is a lot of issuers just cashing in on a 0:21:33.359 --> 0:21:38.159 trend by tapping into an area where there's hot demand 0:21:38.240 --> 0:21:41.639 to get a cheaper financing cost, where actually the bonds 0:21:41.640 --> 0:21:46.480 that they're issuing aren't necessarily changing the actions of the issuers. 0:21:46.760 --> 0:21:50.120 A lot of the the projects that are being sort 0:21:50.119 --> 0:21:53.399 of finance would have gone ahead anyway, So actually the 0:21:53.440 --> 0:21:56.679 green bond issuant isn't making such a difference. So I 0:21:56.720 --> 0:21:59.439 think for us at Blue Bay, we we would be 0:21:59.480 --> 0:22:02.440 saying that the reality of E s G is a 0:22:02.520 --> 0:22:05.480 fixed income invest It's not really about green bombs. It's 0:22:05.520 --> 0:22:09.680 really about taking an active approach to E s G analysis, 0:22:09.800 --> 0:22:15.080 integrating s G considerations into your portfolios, and actually engaging 0:22:15.160 --> 0:22:19.120 with issuers to try and really drive s G outcomes 0:22:19.119 --> 0:22:22.359 and the bend issue of behavior. You know, speaking of 0:22:22.400 --> 0:22:25.680 game changers, you've got the E s G theme over 0:22:25.680 --> 0:22:28.959 the last few years that has been so prevalent. I 0:22:28.960 --> 0:22:33.520 think the other one has to be cryptocurrency, digital finance. 0:22:34.119 --> 0:22:36.840 Of course it's seen in a darker light. How do 0:22:36.880 --> 0:22:40.000 you look at um, you know, we just had the 0:22:40.080 --> 0:22:43.720 European Investment Bank issuing digital bonds on a theoryum. I 0:22:43.760 --> 0:22:46.600 mean that's going to tell you that it's pretty mainstream now, 0:22:46.720 --> 0:22:50.000 but people still are concerned in a risk from a 0:22:50.080 --> 0:22:54.120 risk perspective when they look at it. Yeah, look, look 0:22:54.119 --> 0:22:56.040