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Speaker 2: Well, the bets preferred measure of underlining US inflation core PCE,
Speaker 2: rose at a modest pace in a June. Consumer spending
Speaker 2: also remained healthy, encouraging signs for officials who are looking
Speaker 2: to cool inflation without breaking the economy. As far as
Speaker 2: the numbers look, core PCE, of course, it strips out
Speaker 2: volatile food and energy rose two tenths of one percent
Speaker 2: from May. From a year ago, it rose two point
Speaker 2: six percent. That's according to Bureau of Economic Analysis data
Speaker 2: that came out this morning. Wall Street certainly happy about
Speaker 2: the data. We see stocks hire, we see yields lower.
Speaker 2: For more, we turn to Bloomberg News International and Policy
Speaker 2: correspondent Michael McKee, who joins us here in the studio. Mike,
Speaker 2: is this exactly what Jay Powell wants to see?
Speaker 1: Yeah?
Speaker 3: Basically I was going to say not quite, but I
Speaker 3: think he'll settle for this.
Speaker 2: He wanted to see it even lower.
Speaker 3: Well, they wanted to get back to two percent. But
Speaker 3: they did say that they were going to start cutting
Speaker 3: interest rates before they got to two percent, and he
Speaker 3: had said a little while ago that the range of
Speaker 3: two and a half percent, as long as they got
Speaker 3: into that range, they'd be gone.
Speaker 2: So any change for next week based on this data.
Speaker 3: No, because they didn't set the markets up for that.
Speaker 3: They don't like to surprise the markets. Now. I suppose
Speaker 3: there could always be a leak to the Wall Street Journal.
Speaker 3: That's only happened once in the last fifteen years or so,
Speaker 3: but people do think of it as a realistic possibility occasionally.
Speaker 3: But in this case, I think they will be satisfied
Speaker 3: to wait, because what ends up happening is that bond
Speaker 3: yields go down if they signal that they're going to
Speaker 3: cut rates in September, and so they get the effect
Speaker 3: of a rate cut even without doing it.
Speaker 4: So square the data that we got today with the
Speaker 4: GDP data that we had earlier this week, are we
Speaker 4: in a goldilocks scenario now with inflation moving in the
Speaker 4: right direction and the economy still strong.
Speaker 3: Well, i'll see your cliche and raise you one and
Speaker 3: say soft landing. I think either one is probably a
Speaker 3: good description, but only as to where we are right now,
Speaker 3: because we don't know what's coming around the corner, and
Speaker 3: there are certainly analysts who think that we could be
Speaker 3: closer to an economic contraction than anything else. But right
Speaker 3: now it looks pretty good. The GDP numbers were strong
Speaker 3: and led mostly by consumption, business and consumer spending, which
Speaker 3: is what you want to see. You want to see
Speaker 3: the demand remain It wasn't too bad. Personal spending rows
Speaker 3: just three tenths in the month of June. May and
Speaker 3: April had been revised higher, which help the GDP numbers.
Speaker 3: So overall it's exactly kind of what the Fed wants
Speaker 3: to see. Sustainable growth two point eight percent is a
Speaker 3: little high, but they anticipate it coming down. But sustainable
Speaker 3: growth with continually falling inflation.
Speaker 2: Okay. So separately, US consumer sentiment eased in July to
Speaker 2: an eight month low, showed that consumers see prices remaining
Speaker 2: high and that cooling inflation rate has not yet helped
Speaker 2: improve their mood. Why do consumers remain so unhappy in
Speaker 2: this environment?
Speaker 3: Well, there are a couple of reasons. One is you've
Speaker 3: heard this before that it's the price level, not the
Speaker 3: price change that bothers people. And another is the overhang
Speaker 3: of bad news that we have had in so many
Speaker 3: areas in the last six months or so. The wars
Speaker 3: and the violence and that sort of thing, and the
Speaker 3: attempted assassination of Donald Trump occurred when they were surveying. Now,
Speaker 3: what probably did not get picked up was the change
Speaker 3: in the head at the head of the Democratic ticket
Speaker 3: when you look under the hood. And the University of
Speaker 3: Michigan has been surveying this for a long time, but
Speaker 3: they ask people, if you're a Democrat, Republican or an independent,
Speaker 3: are you more confident or less confident? And Democrats were
Speaker 3: less confident, Republicans only slightly more confident, and independence less confident.
Speaker 3: And given the reaction that we have seen anecdotally and
Speaker 3: in some polls already, you would expect Democrats to be
Speaker 3: feeling a little bit better right now. So maybe we
Speaker 3: get that next month.
Speaker 2: Yeah, maybe we'll have to wait and see. Mike, what
Speaker 2: about the idea that generationally inflation hasn't been around in
Speaker 2: many lifetimes of consumers, perhaps consumers who are completing these surveys.
Speaker 2: Does that have to do with this too?
Speaker 3: It probably does, because you get used to a certain
Speaker 3: price level and you get used to inflation being so
Speaker 3: Alan Greenspan's goal always was that people could make decisions
Speaker 3: without factoring inflation into it, and that was the case
Speaker 3: for so long, and now people had to cut back
Speaker 3: on spending because prices were going up so much, so rapidly.
Speaker 3: It's also true that it hits the lower income people
Speaker 3: much worse than upper income people, because they spend most
Speaker 3: of what they earn and inflation's been tough on them.
Speaker 3: But I think the generational aspect is also true, because,
Speaker 3: of course, there are those of us who remember the twelve, thirteen,
Speaker 3: fourteen percent mortgage rates that we once had in the
Speaker 3: olden days.
Speaker 2: Yeah, Will I do not remember that. Thank you Emily
Speaker 2: for bringing that up, But it is something we hear
Speaker 2: a lot when people do complain about seven percent mortgages.
Speaker 2: But there are a lot of differences between that environment
Speaker 2: in the early nineteen eighties and the environment today. Here's
Speaker 2: what the team at Bloomberg Economics said about some of
Speaker 2: the data that we got today, Mike, Those spending continued
Speaker 2: to grow at a healthy, albeit slower clip. Income growth
Speaker 2: slowed more rapidly, and with the labor market cooling, we
Speaker 2: think consumption growth will ease further in the second half
Speaker 2: of the year. Is there concern that it will slow
Speaker 2: to the extent that we could start to see negative payrolls,
Speaker 2: We could start to see a recession.
Speaker 3: That would be a kind of far left tail risk.
Speaker 3: It's not what most people are anticipating. Slowing is what
Speaker 3: we should be getting. With the FED interest rates where
Speaker 3: they are, and even if they cut in September twenty
Speaker 3: five basis points isn't going to spur a lot of
Speaker 3: people six seven five mortgages just a bad almost as
Speaker 3: a seven percent. But it's going to be the process
Speaker 3: that starts sending it down that will make people feel better.
Speaker 2: Okay, before we let you go, we talked a little
Speaker 2: bit about the FED meeting coming next week. The payrolls
Speaker 2: report coming on Friday, one hundred and seventy five thousand.
Speaker 2: Is what I saw last look for jobs gained during
Speaker 2: the current month that we're in. What do we need
Speaker 2: to be on the lookout for a week from today.
Speaker 3: Well, two things we'll be looking to see. The last
Speaker 3: two or three months we have had forecasts in the
Speaker 3: range of one seventy five one eight, and they've come
Speaker 3: in significantly above that. So we'll have to see if
Speaker 3: that trend continues, and if the trend of the previous
Speaker 3: months being revised down continues. But the biggest thing is
Speaker 3: going to be the unemployment rate. This time, we're at
Speaker 3: four point one percent. Now that's the forecast for another month.
Speaker 3: But if it goes to four point two, we're going
Speaker 3: to trigger the som rule and.
Speaker 2: Claudia's phone will be ringing.
Speaker 3: Claudia's phone will be ringing, and it will, as I said,
Speaker 3: scare the market, scare the horses, and we'll see what
Speaker 3: kind of reaction we get. There will be people in
Speaker 3: that case who are saying it got cut right away,
Speaker 3: got cut right away, because it already means we're going
Speaker 3: into recession. FED doesn't think so, because they think it's
Speaker 3: not that people are getting laid off, but just more
Speaker 3: people coming into the labor force that is pushing up unemployment,
Speaker 3: and that in the long run is a good thing.
Speaker 2: Yeah, labor force participation. You want to see that go
Speaker 2: in the right direction. I thanks to Bloomberg News International
Speaker 2: Economics and Policy correspondent Michael McKee staying late for us
Speaker 2: on this Friday because he was in really really early
Speaker 2: this morning, so we appreciate that. Well. The opening ceremony
Speaker 2: is continuing as normal in Paris for the Olympics after
Speaker 2: a quote massive attack on the country's super fast rail
Speaker 2: network disrupted trains and cast a shadow over the event.
Speaker 2: It's not just the trains that the organizers are concerned about, though,
Speaker 2: The Olympics cyber team is bracing for an onslaught from hackers,
Speaker 2: so writes Jamie Terabey, Bloomberg News cybersecurity reporter. She joins
Speaker 2: us from our Washington, DC bureau. Jamie, good to see
Speaker 2: you on this afternoon. I want to start with the
Speaker 2: trains because lots of us in the US here waking
Speaker 2: up to the news that French Transport Minister patrese Vergray said,
Speaker 2: we're quote coordinated malicious acts that targeted several TGV lines
Speaker 2: and will seriously disrupt traffic until this weekend. What's the latest.
Speaker 2: Do we know who's behind the attacks, do we know
Speaker 2: the motives behind the attacks? And do we know when
Speaker 2: these trains will be up and running again.
Speaker 5: Look, right now, there has been no claim of responsibility,
Speaker 5: but it could frankly, be any number of groups that
Speaker 5: are seeking to destabilize these games. They are in the
Speaker 5: heart of Paris. The entire world is watching, and whether
Speaker 5: it's home grown, you know, disenfranchised actors. We've seen France
Speaker 5: go through a very particularly tumultuous period recently, and of
Speaker 5: course we have external forces as well. The physical security
Speaker 5: aspect of the games has been something that has been
Speaker 5: a really big concern amongst the French authorities. They've brought
Speaker 5: on tens of thousands of shot soldiers and police force
Speaker 5: and even private security guards to be part of that effort.
Speaker 5: They've had anti drone exercises happening within the city. Because
Speaker 5: the games are happening in the heart of town along landmarks,
Speaker 5: there is an even greater exposure to possible weaknesses in
Speaker 5: the system. And this wasn't this wasn't a coordinated arson attack.
Speaker 5: And I understand that they're still in the process of
Speaker 5: getting everything back on track, but you know, it's a
Speaker 5: it's a big glaring target for a lot of different
Speaker 5: people with a lot of different motives to destabilize and
Speaker 5: ruin this for France and for the international sporting community.
Speaker 4: Jimmy talk a little bit more about the extent of
Speaker 4: the damage that a cyber attack like this one has caused.
Speaker 4: We know that rail traffic was disrupted and that there
Speaker 4: were fires. Explain a little bit more what actually happens
Speaker 4: when there is a cyber attack at this scale.
Speaker 5: So we know that this was this was an arson attack,
Speaker 5: So this sounds like it was a deliberately set fire
Speaker 5: at each of these signal stations. A cyber attack would
Speaker 5: come in from the systems itself and cause a breakdown
Speaker 5: or a shutdown of an electric grid, of a network
Speaker 5: of computers. It could reboot, it could cause all kinds
Speaker 5: of chaos. We could see hackers try to get malware
Speaker 5: into a system to lock it up and paralyze it.
Speaker 5: We've seen that happen in past Olympic Games. In the
Speaker 5: Pyeongchang Winter Olympics, on opening day, on the opening ceremony,
Speaker 5: in fact, there was a very disruptive cyber attack which
Speaker 5: was later attributed to Russian actors. There are so many
Speaker 5: different points along the critical infrastructure that make up the Games.
Speaker 5: The French cybersecurity agency ante has TARGET has named five
Speaker 5: hundred different entities that they say are critical to the
Speaker 5: smooth operation of the games. They've been working with these
Speaker 5: groups for months, if not years, to show them up,
Speaker 5: to audit their systems and look at how they can
Speaker 5: be as strong and as muscular as possible when it
Speaker 5: comes to anticipating and expecting these attacks and being able
Speaker 5: to respond if and when they do see them.
Speaker 2: Jimmy, talk a little bit about the Russia element here,
Speaker 2: because as they have in Olympics past for other reasons,
Speaker 2: they are not necessarily present as they have been in
Speaker 2: the past at the Olympics this year, shut out in
Speaker 2: a sense, give us an understanding of where Russia is
Speaker 2: when it comes to potential cyber attacks and what the
Speaker 2: French and its allies are prepared for.
Speaker 5: This is It's been explained to me in a lot
Speaker 5: of different ways. Is that almost the perfect storm for
Speaker 5: Vladimir Prutin he has He and the Kremlin affiliated hackers
Speaker 5: have been attacking France for a very long time through
Speaker 5: the cyber landscape. They have had people, you know, particularly
Speaker 5: with President Marquin and his attitude towards Ukraine and his
Speaker 5: support for Ukraine and he's part in beefing up NATO,
Speaker 5: has been a particular target for Russia. With the Olympics
Speaker 5: happening it is a moment of international prestige. The opportunity
Speaker 5: for the Russians to disrupt this moment for the French
Speaker 5: and for the French leader in particular, is essentially just
Speaker 5: an irresistible moment for him. In the As you've said,
Speaker 5: we've had Russian hackers erase data sets or really disrupt
Speaker 5: past uh, you know, organize the roles of organizations like
Speaker 5: the Anti Doping Agency because right there the athlete, Russian
Speaker 5: athletes doping results were uh, somehow erased from the national
Speaker 5: data set or from particular data sets. We've seen disruptions
Speaker 5: from the the Olympic destroyer event during the peong Chang
Speaker 5: Winter Games. Right now, we're seeing a lot of disinformation
Speaker 5: campaigns that have been happening in the lead up to
Speaker 5: and are currently happening at at at present that began
Speaker 5: on Russian language social media platforms that are spilling over
Speaker 5: into the media, into mainstream social media platforms, really disseminating
Speaker 5: messaging like there's too much terrorism risks in Paris. Uh,
Speaker 5: there's the Frances on the verge of civil war. Paris
Speaker 5: is not clean, Paris Is is not particularly friendly. It's
Speaker 5: a terrible place to go as a tourist and all
Speaker 5: sorts of disinformation opportunities that are being attributed to Kremlin
Speaker 5: associated hackers. We're also seeing brute force attacks on websites.
Speaker 5: So what that is is when there's so much traffic
Speaker 5: directed at websites that it cripples their traffic and their
Speaker 5: ability to operate. We've seen that recently on targets including
Speaker 5: the French Film Festival and also the Grand Palais, which
Speaker 5: is going to be one of the Olympic venues for
Speaker 5: taekwondo and I believe fencing. So they're not going to stop.
Speaker 5: They're going to do everything they can from here going
Speaker 5: forward to amplify, to disrupt, to create as much chaos
Speaker 5: as they can, because the ultimate aim here is to
Speaker 5: not give the French their moment in the international spotlight
Speaker 5: without some kind of disruption.
Speaker 4: Jamie, we only have about a minute left. But what
Speaker 4: do we know about the US's involvement keeping the Olympics
Speaker 4: safe and the participants safe as well.
Speaker 5: We understand that representatives and employees from SISA, the US
Speaker 5: government's cybersecurity agency, are on the ground in Paris, operating
Speaker 5: out of a joint operation center. We understand that there
Speaker 5: are also other American observers who are going to be
Speaker 5: there throughout the entire event. You've also got to remember
Speaker 5: that the next Summer Games will be in Los Angeles
Speaker 5: in twenty twenty eight. So there is a real opportunity
Speaker 5: here for lessons learned from for the Americans to be
Speaker 5: watching what's going on in Paris, how they anticipate and
Speaker 5: deal and encounter all of these challenges, and how they
Speaker 5: can apply them in four years time. So there's definitely
Speaker 5: an international effort. The French are lot alone in this.
Speaker 5: Everyone is supporting them on the Allied Western side, and
Speaker 5: they're certainly seeing that in the private sector as well
Speaker 5: as in the public sector.
Speaker 2: Jamie Terabe, Bloomberg News, a cybersecurity reporter, joining us from
Speaker 2: our Washington, DC bureau.
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Speaker 2: You guys are all familiar with Joe Logan. He's widely
Speaker 2: believed to be the most popular podcaster on Earth. He's
Speaker 2: got a huge Spotify contract. We're talking hundreds of millions
Speaker 2: of dollars on message boards. People sometimes describe him as
Speaker 2: Oprah Winfrey for men.
Speaker 4: Well.
Speaker 2: About four years ago, during the pandemic, he decamped from
Speaker 2: Los Angeles and relocated he and his wife and three
Speaker 2: daughters to Austin, Texas, and since then he's cultivated a
Speaker 2: lifestyle tailor made for the new age of the comedy profession.
Speaker 2: It's ruled by podcasts instead of Hollywood movies and sitcoms.
Speaker 2: He's got a new podcast studio, He's got a sauna,
Speaker 2: bow hunting range, and most important, a new club, the
Speaker 2: Comedy Mothership for doing stand up, all of it engineered
Speaker 2: to share with his friends. The past two years, a
Speaker 2: growing group of comedians and podcasters have followed Joe Rogan
Speaker 2: to set up shop in Austin. Felix Jelied and Ashley
Speaker 2: Carmen write about Joe Rogan for Bloomberg BusinessWeek. Check out
Speaker 2: their story. It's on the Bloomberg terminal and at Bloomberg
Speaker 2: dot Com slash BusinessWeek. Felix is Bloomberg BusinessWeek Media Entertainment
Speaker 2: and Telecom editor. He's also the author of the book
Speaker 2: It's Not TV. The Spectacular Rise, Revolution and Future of HBO.
Speaker 2: He joins us here in the studio, Felix, how much
Speaker 2: Joe Rogan did you listen to when writing this story?
Speaker 6: A lot, a lot of.
Speaker 7: Joe Rogan, months of jo really months.
Speaker 6: Yeah, because he wouldn't talk to us.
Speaker 7: He doesn't really do interviews, and he loves to talk
Speaker 7: about the comedy stuff, the comedy club.
Speaker 6: On his show.
Speaker 7: So it's mixed in with you know, moon landing conspiracies
Speaker 7: and a lot of mma, you know, minutia that I
Speaker 7: don't really need to know, but it was interesting. You
Speaker 7: get his whole perspective on the comedy world.
Speaker 2: So just not just recent podcast episodes, but episodes going
Speaker 2: back a few years.
Speaker 7: Yeah, for years he's been talking about this. I mean
Speaker 7: he moved from la to Austin about four years ago
Speaker 7: and yeah he got down there and he just like
Speaker 7: everyone who moves to Austin, they just can't shut up
Speaker 7: about it.
Speaker 6: Yeah. It's the greatest down ever.
Speaker 7: You know, we got the best barbecue, you know, like
Speaker 7: it's incredible.
Speaker 6: The customer.
Speaker 7: Yeah, it is hot in the summer. But the one
Speaker 7: thing he didn't have is he missed having a place
Speaker 7: to perform because he was a regular at the Comedy
Speaker 7: Store in La Austin had a stand up comedy scene
Speaker 7: over the years, but it was always pretty minor, especially
Speaker 7: compared to the you know, live music scene there. And
Speaker 7: so he was like, you know what, like, I'm just
Speaker 7: gonna build a comedy club for myself and my friends,
Speaker 7: and I'm gonna spare no expense. He said on his
Speaker 7: show that you know, it's not to make money. He
Speaker 7: just doesn't want to lose money on it. But he
Speaker 7: basically just puts all the money back into the comedians
Speaker 7: and it's.
Speaker 6: A really nice club.
Speaker 7: And because Joe Rogan is Joe Rogan and he has,
Speaker 7: you know, this huge platform that anybody who goes on
Speaker 7: Joe Rogan's show is going to get a bus, you know,
Speaker 7: bump for their their comedy show, their podcast, their book,
Speaker 7: whatever it is.
Speaker 6: So his ability to recruit people is amazing.
Speaker 7: And every time he has someone on the show, he
Speaker 7: gives them the sales pitch come to us that you know,
Speaker 7: come hang out with me, you can perform at the club,
Speaker 7: you can come on my show, you can have your show.
Speaker 7: You don't have to be you know, tethered to the
Speaker 7: studios of LA.
Speaker 6: And New York anymore.
Speaker 7: Just move here and you know, some people resist, but
Speaker 7: a lot of people have heard that pitch been like yeah, okay,
Speaker 7: And you know, Shane Gillis, Brian Simpson, Tony Hinchcliff, some
Speaker 7: pretty big name comics have moved down there, and you know,
Speaker 7: they all are headliners at the club and hang out
Speaker 7: with Rogan outside the club. There's like this whole scene
Speaker 7: around the bar at the Comedy Mothership. It's kind of
Speaker 7: fascinating when you're there because you have this feeling that
Speaker 7: anyone that's kind of in that world, Elon Musk, Johnny Manzell,
Speaker 7: anyone that's been on Rogan's podcast recently could pop in
Speaker 7: at any time. That's kind of like their clubhouse. And
Speaker 7: it's been this very and then that's the top end.
Speaker 7: And then there's been this whole trickle down effect in
Speaker 7: Austin where since Rogan opened the Comedy Mothership, there's now
Speaker 7: maybe a dozen other comedy clubs that have also opened
Speaker 7: up in the Vicinity in downtown Austin. And now if
Speaker 7: you talk to like young aspiring stand up comedians, which
Speaker 7: we did for the article, you know, instead of moving
Speaker 7: to New York or LA to try and make it,
Speaker 7: a lot of them are now like you know what,
Speaker 7: I'm going to Austin. So there's all these group houses
Speaker 7: popping up in Austin, where you have you know, ten
Speaker 7: you know, up and coming stand up comedians all packed
Speaker 7: into a house doing the open mic nights around town
Speaker 7: and desperately trying to get a spot in the comedy Mothership.
Speaker 4: So Joe Rogan embraced Austin. But in your reporting and
Speaker 4: Ashley's reporting, did Austin embrace Joe Rogan?
Speaker 7: Yeah, I mean I think they have to a certain degree.
Speaker 7: I mean, Austin has been such a boomtown. You know,
Speaker 7: it's been like the growing city, you know, every year
Speaker 7: for like twelve years. I think they lost the title
Speaker 7: this year. But there's been a ton of people moving there,
Speaker 7: including a lot of people from California. And you know,
Speaker 7: there's this expression in Austin politics now, which is, you know,
Speaker 7: don't California my Texas, which initially people thought, oh, all
Speaker 7: these you know, California immigrants are going to make our
Speaker 7: you know, the state bluer. And actually, in the end
Speaker 7: what's happened is it hasn't been like the liberals who
Speaker 7: have moved out of California. It's the more libertarians tech
Speaker 7: folks that want low taxes that move to Austin, Elon Musk,
Speaker 7: all these tech companies.
Speaker 6: So actually Austin has gotten a.
Speaker 7: Little bit less liberal over time. And you know, I
Speaker 7: was talking to Evan Smith, who's the co founder of
Speaker 7: the Texas Tribune.
Speaker 6: He's a longtime Austin.
Speaker 7: Journalist, and he was saying, you know, there was a
Speaker 7: time where if Joe Rogan had moved to Austin, there
Speaker 7: would have been like an outcry, you know, but.
Speaker 6: Those days are basically over.
Speaker 7: Like there was a little resistance at the beginning, but
Speaker 7: then they're like, well, he's put all this money into
Speaker 7: downtown Austin, he's revamping this part of town that really
Speaker 7: suffered during the COVID and yeah, the town has embraced him.
Speaker 2: Can you talk a little bit about how podcasting has
Speaker 2: disrupted the traditional comedy route, because back in the day,
Speaker 2: the whole idea of becoming a successful comedian, you know,
Speaker 2: you go and do some really good sets, you get
Speaker 2: on one of the late shows, right, you do really
Speaker 2: well on the late shows, and then you're given a
Speaker 2: sitcom and that's that was like gold. Yeah, that was
Speaker 2: the way to get to the top. Yeah, it's not
Speaker 2: like that at all anymore.
Speaker 7: No, I mean, the whole profession has really shifted, and
Speaker 7: it's fascinating to think.
Speaker 6: I mean, in the nineteen seventies, you.
Speaker 7: Know, the big upheaval and comedy was when Johnny Carson
Speaker 7: moved The Tonight Show from New York to LA and
Speaker 7: you know, that was the biggest thing, like getting in
Speaker 7: to do your show, you know, your act on Tonight
Speaker 7: Show and that could just catapult you. You get a sitcom,
Speaker 7: you get a you know, movie, whatever. And all the
Speaker 7: producers on Tonight's Show would recruit and they used to
Speaker 7: recruit at you know, the comedy clubs in New York.
Speaker 7: When the show moved to LA, that all moved to
Speaker 7: the Comedy Store and so the Comedy Store was like
Speaker 7: the place to be back in the day, and that was,
Speaker 7: you know, eventually, decades later, that's where Rogan hung out.
Speaker 7: A lot of his friends are like comedy store cup medians,
Speaker 7: and I think they also saw that connection that existed
Speaker 7: back in the day between the Tonight Show and the
Speaker 7: Comedy Store.
Speaker 6: You know.
Speaker 7: Yeah, late night television no longer what it once was,
Speaker 7: but it is fascinating that now, like the big thing
Speaker 7: is Rogan's podcast, And similarly, the comedy club that he
Speaker 7: runs is now kind of like a gateway, and that's
Speaker 7: where talent is like, you know, pulled to with the
Speaker 7: hopes of like, well maybe if I kill it, maybe
Speaker 7: if I just absolutely make a name for myself at
Speaker 7: Rogan's club, maybe then I get on his podcast. And
Speaker 7: that scene is like, you know, the big place to be,
Speaker 7: and even people that are out there, you know, promoting
Speaker 7: and whatever it is they want to promote, especially to
Speaker 7: the demographic that listens to Joe Rogan, which is like
Speaker 7: young men presume, you know, primarily like you know, if
Speaker 7: you if you're selling something to that demographic. Yeah, like
Speaker 7: you want to get on his podcast, You want to
Speaker 7: get on the podcasts of all of his friends who
Speaker 7: were also in Austin this whole little universe, the Rogan
Speaker 7: verse as we like to call it, you know, And
Speaker 7: we talked to like Tucker Carlson who's trying to launch
Speaker 7: his own streaming network, independent streaming network. Yeah, he goes
Speaker 7: down there, has dinner with Joe Rogan, does the podcast,
Speaker 7: goes to the club, does another podcast in the club,
Speaker 7: you know, and just goes hang out in the mid sies,
Speaker 7: Like that's the new place to be and it is
Speaker 7: a huge shift for the industry.
Speaker 4: So what's the comedy like at the club? Is it
Speaker 4: all branded with the Joe Rogan, you know, carnivore diet.
Speaker 6: Yeah, I mean you would.
Speaker 7: Think like and when it first opened, people were like, oh,
Speaker 7: it's an anti woke club, you know, it's all going
Speaker 7: to be Rogan style of humor. In truth, it's not
Speaker 7: really like that. It's much more just like a anything
Speaker 7: goes comedy club. I mean, it's like, whatever people are doing,
Speaker 7: that's funny. You can get up there. Some of the
Speaker 7: humor is you know, political, but most of it's not.
Speaker 6: So is it.
Speaker 2: How's the club different than other comedy clubs that people
Speaker 2: would go to.
Speaker 7: I mean, first of all, it's very hard to get
Speaker 7: into these days. I mean that's part of why, you know,
Speaker 7: another dozen clubs have opened up in Austin because it's
Speaker 7: just really hard to get.
Speaker 6: A ticket just to get in there. Additionally, you know.
Speaker 7: It's kind of like Rogan's guys who are the headliners.
Speaker 7: There's a smaller room and there's a whole system, a
Speaker 7: hierarchy in the club. You know, if you get a
Speaker 7: job as a door guy, then you work at the club.
Speaker 7: Then you can do the staff shows in the smaller room.
Speaker 7: If you really are successful there, maybe you'll.
Speaker 6: Get up to the top room.
Speaker 7: But it's kind of like, you know, there are definitely,
Speaker 7: like plenty of big performers comedians around the country that
Speaker 7: will never go to the Comedy Mothership. It really is
Speaker 7: kind of like a place for Rogan, the people that
Speaker 7: are already in his inner circle and the people that
Speaker 7: are death to get into his in or so just.
Speaker 2: Very briefly, you're not allowed to bring a phone or
Speaker 2: cameras or anything in, but they have cameras set up
Speaker 2: for a very special reason.
Speaker 7: Yeah, because they you know, you're gonna start seeing more
Speaker 7: and more live shows on Netflix.
Speaker 6: Netflix.
Speaker 7: Just at their first live show, Brian Simpson did a
Speaker 7: live from the Mothership. You'll see more of that. The
Speaker 7: whole place is wired so that they can do specials.
Speaker 8: Well.
Speaker 2: It's a great story by Felix, Jeled Nashley Carmen. They
Speaker 2: write about Joe Rogan for Bloomberg Business Week. Do check
Speaker 2: it out. You can read the story on the Bloomberg
Speaker 2: terminal and at Bloomberg dot com Slash BusinessWeek. Felix also
Speaker 2: the author of It's not TV, the Spectacular, Rise, Revolution
Speaker 2: and future of HBO. Joining us here in New York.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 2: Well, you may have heard of the last month or
Speaker 2: so quite a bit of DEI news, at least on
Speaker 2: the corporate side. So just last week, deer End company,
Speaker 2: it's the world's largest top farm machinery maker, said that
Speaker 2: it was pulling back from diversity measures in the face
Speaker 2: of conservative criticism. It was the second agg related company
Speaker 2: in less than a month to bend to such pressure.
Speaker 2: At the end of June, Tractor Supply, you might recall,
Speaker 2: said it was eliminating DEI roles and retiring DEI goals
Speaker 2: quote while still ensuring a respectful environment. So some companies
Speaker 2: are pulling back when it comes to DEI and others
Speaker 2: are leaning into it, like the investment firm Illumin Capital.
Speaker 2: Darren Dodson is managing partner at Allumin Capital. It's a
Speaker 2: fund of funds that's working to achieve racial engender equity
Speaker 2: across investing. Darren joins us from Oakland once again. Darren,
Speaker 2: good to have you back on the program with us.
Speaker 2: Good to see you. Illumin just received its annual report,
Speaker 2: or released its annual report. We're gonna get to that
Speaker 2: in just a minute, but first I got to get
Speaker 2: you to weigh on what's happening on the corporate side,
Speaker 2: because at least at some companies when it comes to DEI,
Speaker 2: we've seen the environment shift quite a bit over the
Speaker 2: last couple of years. How are you watching this well?
Speaker 9: Of course, our strategy at a luming capital is to
Speaker 9: address biases as a methodology for unlocking economic value. So
Speaker 9: those that are pulling away from DEI have to be
Speaker 9: really careful that they're not pulling away from returns, because
Speaker 9: that's exactly what our research and partnership with Stanford Spark
Speaker 9: shows that as we address biases, we are able to
Speaker 9: see underlying returns. Sometimes we miss if we don't address them,
Speaker 9: particularly racial biases, which we've found that systematically black fund
Speaker 9: managers that are outperforming or overlooked by asset allocators when
Speaker 9: they're trying to achieve the highest return, they basically go
Speaker 9: against their own training and selecting high performing managers when
Speaker 9: race is present. So I think there's a lot of
Speaker 9: work for those that are moving away from DEI at
Speaker 9: that intersection of DEI and bias.
Speaker 2: Do you think it's a mistake for companies And I'm
Speaker 2: not talking about investment firms or firms that are making investments,
Speaker 2: but companies like Deer and like Tractor supplies a mistake
Speaker 2: for them to distance themselves from DEI after getting criticism
Speaker 2: from customers.
Speaker 9: Well, what we've found is that our investors that represent
Speaker 9: a number of the largest institutions and foundation endowments, pensions,
Speaker 9: others in the country are really excited to do the
Speaker 9: work to address these biases because they believe that there's
Speaker 9: tremendous economic value on the other side of that. And
Speaker 9: that's also what our research in partnership with Stanford Sparks shows.
Speaker 9: So I think that leaders of corporations would do well
Speaker 9: to also look at their biases and resource allocations. Of course,
Speaker 9: Danielkahneman won the Nobel Prize in this area and looking
Speaker 9: at systematic bias and resource allocation and firms and when
Speaker 9: we look at the intersection of bias and way that
Speaker 9: shows up with women and people of color as they outperform. Yes,
Speaker 9: there's some important work for leaders of companies to do
Speaker 9: in that area as well.
Speaker 4: So tell us more about why you founded illumin Capital
Speaker 4: and what are you looking for if you're running a
Speaker 4: fund of funds, when you're selecting different portfolio managers and
Speaker 4: different funds to invest in.
Speaker 9: Well, we're looking for fund managers that much of the
Speaker 9: market is overlooking. So our research showed that as black
Speaker 9: fund managers outperform, many missed that outperformance and basically fall
Speaker 9: back on their own biases. So when we tested leaders
Speaker 9: of university endowments that allocate large pools of capital, when
Speaker 9: we talked to sovereign wealth funds managers and when we
Speaker 9: tested them for bias, we found systematically they went against
Speaker 9: their years and years of training and didn't select the
Speaker 9: highest performing managers even money on the table. So, in short,
Speaker 9: what we look for is high performing managers that others
Speaker 9: in the market overlook, and that's part of the reason
Speaker 9: why with our recent impact report that was referenced at
Speaker 9: the top of the program, we've found that our managers
Speaker 9: are about double the industry averages in terms of women partners,
Speaker 9: and also four times the industry average in terms of
Speaker 9: underrepresented people of color. Where we believe that interrupting these
Speaker 9: biases and finding these overlooked and underestimated managers will result
Speaker 9: in continuing to create economic value for our investors.
Speaker 2: Darren, do you think that because you're investing in what
Speaker 2: you call overlooked fund managers, you're able to invest at
Speaker 2: some sort of discount because the market's not actually taking
Speaker 2: into account what their performance is and what their performance
Speaker 2: could be.
Speaker 9: I think that it's very similar to the way that
Speaker 9: Charlie Munger invests when there's latent value in the market
Speaker 9: because others are overlooking it, and you partner with people
Speaker 9: to deliver on that latent value. That's a partnership. So
Speaker 9: we partner with our managers. We also have a unique program,
Speaker 9: the Aluminiq Proprietary Training Program, where we help them to
Speaker 9: identify companies and their underlying strategies that are also overlooked
Speaker 9: and underestimated. So we do a tremendous amount of work
Speaker 9: alongside of the funds that we select to ensure that
Speaker 9: they are also beating their biases and choosing the best
Speaker 9: companies in the marketplace as.
Speaker 4: Well, What kind of evidence and research do you have
Speaker 4: that kind of shows a real connection between meaningful returns
Speaker 4: and portfolio outperformance and this DEI factor we could call it.
Speaker 9: I think the most substantial research there's probably about forty
Speaker 9: years showing the outperformance of managers of color and women
Speaker 9: led firms done by the National Association of Investment Companies.
Speaker 9: And was really unique about our research and collaboration with
Speaker 9: Stanford Spark and a number of the leading professors in
Speaker 9: the world in this particular area is that what we
Speaker 9: found is that not only was there years and years
Speaker 9: of outperformance, but there wasn't asset allocations to follow that
Speaker 9: outperformance of women and people of color managers. So we
Speaker 9: had to ask the question why, And what we found
Speaker 9: in our research is that likely biases are interrupting people's
Speaker 9: ability to see high performing black lead funds, as we
Speaker 9: published in the Proceedings of the National Academy of Sciences
Speaker 9: in a pure reviewed paper, and that is really important
Speaker 9: information for those that are looking to make money in
Speaker 9: financial markets, is that if they're looking at their investment
Speaker 9: strategies and they're finding that they don't have women and
Speaker 9: people of within their portfolio construction. They have more work
Speaker 9: to do to address their biases to ensure that they're
Speaker 9: not interrupting their opportunities for more returns over time.
Speaker 2: Hey, Darren, just thirty seconds left. What's the fundraising environment
Speaker 2: like right now?
Speaker 9: Well, this is one of the really interesting things, and
Speaker 9: thank you for asking the question. The fundraising environment is
Speaker 9: impacted by the increasing polarization, do the upcoming election, high
Speaker 9: inflation as we know, and everyone's awaiting the feds new words.
Speaker 9: But what we find is that at periods where there's
Speaker 9: a lot of market volatility and uncertainty like there is
Speaker 9: right now, that people increase their biases substantially, and those
Speaker 9: very things that led them to overlook and underestimate fund
Speaker 9: managers and entrepreneurs get exacerbated during periods of stress like
Speaker 9: the period that we're in right now. So I guess
Speaker 9: what I would say is that it's even more important
Speaker 9: now to do the work to interrupt biases for those
Speaker 9: that are looking to meet their fiduciary duty and achieve
Speaker 9: higher returns than ever before.
Speaker 2: Darren, we love it when you join us. Darren Dodson,
Speaker 2: Managing partner at a Luman Capital. It's a fund of
Speaker 2: funds that's working to achieve racial and gender equity across investing.
Speaker 2: Darren joins us from Oakland to California.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: Well Block and Michelle Obama endorsed Kamala Harris as bid
Speaker 2: to become the Democratic nominee this morning. The former president
Speaker 2: and first Lady offered their support for Harris to follow
Speaker 2: in Obama's footsteps as only the second black president in
Speaker 2: US history. Here's a video which Barack Obama tweeted out
Speaker 2: this morning at five am.
Speaker 6: Kamala, Hi, Hey there, ah, Hi, you're both together. Oh
Speaker 6: it's good to hear you.
Speaker 1: Bout.
Speaker 10: I can't have this phone call without saying to my girl, Kamala,
Speaker 10: I am proud of you.
Speaker 1: This is going to be historic. We called to say,
Speaker 1: Michelle and I couldn't be prouder to endorse you and
Speaker 1: to do everything we can to get you through this
Speaker 1: election and into the Oval office.
Speaker 5: Oh my goodness, Michelle Bractice means so much to me.
Speaker 2: That announcement from the Obamas follows a whirlwind two days
Speaker 2: during which Harris secured enough pledged delegates to secure the nominees,
Speaker 2: raised over one hundred and thirty million dollars, and met
Speaker 2: with Israeli Prime Minister Benjamin Nett and Yahoo. Adrian Shropshire
Speaker 2: is executive director of Black Pack. It's a democratic political
Speaker 2: action committee that's focused on mobilizing and engaging with African
Speaker 2: American voter. She joins US now from Los Angeles. Adrian,
Speaker 2: I'm wondering, in your view, how big of a deal
Speaker 2: the Obama's endorsement is to Vice President Harris.
Speaker 10: I imagine that it's a it's a pretty big deal,
Speaker 10: I think, both to to the vice president just having
Speaker 10: that support in in you know, addition to the support
Speaker 10: from Democratic leaders you know, across the spectrum. But I
Speaker 10: also think it's a really big deal for voters. You know,
Speaker 10: obviously President Obama and Michelle Obama, you know, have really
Speaker 10: high favorability, as we say, among among voters. They're very popular,
Speaker 10: and I think that we're Black voters in particular, you know,
Speaker 10: who showed up for President Obama and historic numbers.
Speaker 11: For his campaigns.
Speaker 10: It means a lot in terms of just having that
Speaker 10: sort of final endorsement in place and people really feeling like, now,
Speaker 10: you know, uh, they can get ready to go.
Speaker 4: So what did the next few months look like, Adrian,
Speaker 4: Because we really don't have a lot of time left
Speaker 4: until the election, what kind of challenges do you anticipate
Speaker 4: in terms of getting voters to now mobilize around a
Speaker 4: candidate that just very recently came, you know, into this race.
Speaker 10: Yeah, I think that the good news, right, it is
Speaker 10: that Vice President Harris is not unknown. I mean, I
Speaker 10: think part of the challenge with what we were hearing,
Speaker 10: you know, from inside circles and the Democratic Party about
Speaker 10: you know, the potential of going to an open primary
Speaker 10: and to you know, sort of extending the internal debate
Speaker 10: and frankly chaos, that would have been more challenging. Right,
Speaker 10: The vice president is not unknown. She's been vetted not
Speaker 10: only from her own presidential campaign, but through the twenty
Speaker 10: twenty election, through the last four years of the administration.
Speaker 10: So she's not unknown. And in fact, you know, we've
Speaker 10: seen in our polling and even in the door knocking
Speaker 10: that we've been doing over the last few days, we
Speaker 10: made the sort of pivot. You know, folks are are
Speaker 10: you know, very much aware of who she is, and
Speaker 10: we're seeing lots of excitement. I don't think that the challenges,
Speaker 10: you know, are very different than the challenges that we
Speaker 10: were facing three weeks ago, which is, you know, voters,
Speaker 10: a lot of voters, particularly black voters that we're talking to,
Speaker 10: need to know because they don't have a real sense
Speaker 10: of the accomplishments of the administration. They need to understand
Speaker 10: the accomplishments that the Biden Harris administration had that the
Speaker 10: Vice president was directly involved with. We hear from folks
Speaker 10: that they don't know a lot about what she's done
Speaker 10: over the last four years. So she will need to
Speaker 10: tell that story. The campaign will need to tell that story.
Speaker 10: We will need to tell that story. But I think
Speaker 10: that that is, you know, not different right from what
Speaker 10: we're facing before getting the information out there telling her story.
Speaker 10: I think a lot of voters still don't know about
Speaker 10: her her biography and want to know about her her backstory.
Speaker 10: So I think that they they need to tell that story.
Speaker 10: They also just need to continue with the contrast that
Speaker 10: they've been doing and making mistakes of the election very
Speaker 10: clear about where where we have the potential to go
Speaker 10: as as America as a democracy, that is, you know,
Speaker 10: toward that more perfect union or towards you know, an
Speaker 10: America that you know is continues to sort of push
Speaker 10: you know, divisiveness and uh and and rhetoric that is,
Speaker 10: you know, not taking us to the future, but taking
Speaker 10: us back.
Speaker 3: Adrian.
Speaker 2: One thing that we've seen in polls in recent months,
Speaker 2: and this is before Kamala Harris was at the top
Speaker 2: of the ticket, it became becoming the presumptive nominee, is
Speaker 2: that although we can't really say that former President Trump
Speaker 2: is popular with black voters, he has picked up black
Speaker 2: voters since at least according to some polls, since leaving office,
Speaker 2: becoming more popular with them. I'm wondering what your polling
Speaker 2: shows in terms of how that could shift now that
Speaker 2: Kamala Harris is in the race.
Speaker 10: So, I mean, I'd say a couple of things about
Speaker 10: about those those polls. I mean, one is it really
Speaker 10: is unfortunate that when we see national polls that that
Speaker 10: you know, really captured the head lines, particularly about black voters.
Speaker 10: It's unfortunate that the sample size of those polls are
Speaker 10: so small, and I think that that does a disservice
Speaker 10: not only to people's understanding of the race, but the
Speaker 10: electorate and how it is moving when in our research
Speaker 10: and in our polling, which are much larger, much more
Speaker 10: robust bus sample sizes, we do not see that kind
Speaker 10: of shift and support among black voters, and that is
Speaker 10: across demographic When the Black electorate, I mean, you know,
Speaker 10: regardless of gender, regardless of age, we see the same
Speaker 10: level of support for Trump that we saw on the
Speaker 10: election day in twenty twenty and on election day in
Speaker 10: twenty sixteen, which is under ten percent. So we have
Speaker 10: not seen those kinds of shifts. We haven't seen them
Speaker 10: in our polling, we haven't seen them in our focus groups,
Speaker 10: and we definitely haven't seen them in the conversations that
Speaker 10: we've had on the doors. I don't think that that
Speaker 10: means though, that, you know, this is sort of an easy,
Speaker 10: you know, sort of chewing in terms of mobilizing and
Speaker 10: citing the black electorate for the vice president. I think
Speaker 10: that there's a lot of work to be done, that
Speaker 10: there's a lot of conversations that they need to have
Speaker 10: with black voters, both to help black voters understand her
Speaker 10: vision for the future house problems, that sort of intractable
Speaker 10: problems that people are feeling very deeply. Whether it's the
Speaker 10: cost of living or it's crime, those sorts of issues
Speaker 10: that are really burdening people. They need to tell the
Speaker 10: story about how they're going to address those issues. But
Speaker 10: I don't see any I have not seen in any
Speaker 10: of our research the kinds of dramatic shifts that I
Speaker 10: know that we've seen in headlines and papers over the
Speaker 10: last few months.
Speaker 4: What have you seen in terms of what the Harris
Speaker 4: campaign can talk about. What has been a strong policy
Speaker 4: that has resonated with the black voters that you interact with.
Speaker 10: There's a lot I would say that that, you know,
Speaker 10: black voters have a lot of issue ext There's a
Speaker 10: lot of issues that people are concerned about, and I
Speaker 10: just named some of them, you know, whether it's crime
Speaker 10: or the cost of living, healthcare, education, you know, rights
Speaker 10: and the erosion of rights. So there's there's a lot
Speaker 10: of issues that folks are concerned about, and those issues
Speaker 10: that those top issues are generally the same across the
Speaker 10: battleground states where we're operating. You know, the top issue
Speaker 10: might be different in Philadelphia than it is in Wilmington,
Speaker 10: North Carolina. But the top issues are generally the same.
Speaker 10: When we ask people what issues are going to motivate
Speaker 10: them to the polls, the issues that they say, I'm
Speaker 10: going to go and vote because this issue matters so
Speaker 10: much to me. Those are things that are really tied
Speaker 10: to people feeling like our rights are being taken away,
Speaker 10: that they're deeply concerned about the Supreme Court decisions, whether
Speaker 10: it's you know, decisions on voting rights, whether it's reproductive rights,
Speaker 10: whether it is affirmative action. Those are issues that people
Speaker 10: are very concerned about. People are concerned about the rise
Speaker 10: in white supremacy, They're concerned about hate crimes, people feeling
Speaker 10: very uh, you know, personally like they have the you know,
Speaker 10: might be a victim of a hate crime. So people
Speaker 10: are worried about the divisiveness and the divisive rhetoric in
Speaker 10: the country. And so I think it's those issues. There's
Speaker 10: a set of issues that people are are deeply concerned about.
Speaker 10: People do not want to lose more rights, They're worried
Speaker 10: about the direction of the country, and those are the
Speaker 10: things that are going to motivate people to show up
Speaker 10: to the polls.
Speaker 2: Adrian, thanks so much. For joining us. Do appreciate. Adrian
Speaker 2: Shropshire is executive director of Black Pack, a democratic political
Speaker 2: action committee. It's focused on mobilizing and engaging with African
Speaker 2: American voters. Joining us from Los Angeles this afternoon.
Speaker 1: Brom A Journal, you let me drive, Oh.
Speaker 6: No, no, no, no, please, I'll do these.
Speaker 1: I want to try.
Speaker 8: It's a good question.
Speaker 1: This is good drive to the globe.
Speaker 3: Pong communing well by up to Jada.
Speaker 1: Don on Bloomberg Radio.
Speaker 2: Well, look at that less than twenty two minutes to
Speaker 2: go until the No, less than eighteen minutes to go? Yea,
Speaker 2: we got to look at the clock more le's than
Speaker 2: eighteen minutes to go to the end of trading on
Speaker 2: this Friday afternoon. We just heard the numbers from Charlie,
Speaker 2: but they're worth repeating. We're seeing a rally underway with
Speaker 2: the Nasdaq. Can posit up close to one percent? Yes,
Speaker 2: and people have hundred up just over one percent. Will
Speaker 2: the Dow is up one point six percent. Let's see
Speaker 2: what Lance Cannon has to say about all this. He's
Speaker 2: portfolio manager at Hood River Capital Management. Joining us from
Speaker 2: Palm Beach, guards Florida. Lance, you manage the Hood River
Speaker 2: International Opportunity Fund, which this year is up close to
Speaker 2: fourteen percent. It puts it in the ninety fourth percentile
Speaker 2: of its piers. Good to have you with us. How
Speaker 2: are you. I'm doing well.
Speaker 8: Thanks God be back.
Speaker 2: Good to have you with us. Hey, we had a
Speaker 2: pretty big sell off this week, and we're actually likely
Speaker 2: going to see, depending on how things close, another down
Speaker 2: week for the Nasdaq one hundred and the S and
Speaker 2: P five hundred. The rotation continues into small caps. How
Speaker 2: are you looking at the environment right now?
Speaker 8: So we're very constructive on small cap as you might
Speaker 8: imagine being a small cap manager, but we actually see
Speaker 8: a lot of data points that would give us reason
Speaker 8: to be excited about the opportunities over the next twelve months,
Speaker 8: particularly given the fact that look at your small cap
Speaker 8: indexes relative to the large cap indexes or their equivalent peers.
Speaker 8: They historically have traded at premiums relative to the larger indexes.
Speaker 8: But right now that these small cap indexes, whether it's
Speaker 8: international or domestic, or trading at equivalent or even below,
Speaker 8: and we think that rotation you mentioned earlier is going
Speaker 8: to continue to happen as we continue to see these
Speaker 8: opportunities and large reason why that's happening is because you've
Speaker 8: got high quality companies are going to be delivering earnings,
Speaker 8: Revisions are gonna be positive, and people are going to
Speaker 8: see those opportunities and see that these are undervalued opportunities.
Speaker 8: I want to rotate into those type of situations.
Speaker 4: So what exactly has to happen in the macro environment
Speaker 4: to keep the small cap rally sustainable? That hasn't happened
Speaker 4: already because I always think of, you know, small caps,
Speaker 4: when economic growth is doing well, small caps will rally.
Speaker 4: But the economy is doing pretty well, and it has
Speaker 4: been for the last several months. So like what happens
Speaker 4: now that propels the rally further and keeps it.
Speaker 8: It's a great question. I don't know if there's anything
Speaker 8: necessarily that's going to happen that's very unique or specific,
Speaker 8: as much as it's just the consistency that you will
Speaker 8: continue to see out of small caps.
Speaker 9: Right.
Speaker 8: So again we're talking about we look for high quality
Speaker 8: companies we want to be invested in over a period
Speaker 8: of time. They're being run by phenomenal management teams. These
Speaker 8: guys have been doing the same thing that you know,
Speaker 8: you've been talking about during this economic period where they've
Speaker 8: been delivering, but they've been overshadowed by these larger players.
Speaker 8: As those shadows tend to fade, we think that they're
Speaker 8: going to start to shine and be able to be
Speaker 8: seen and think be more managers to rotate down that direction,
Speaker 8: just kind of given the opportunity that they see where
Speaker 8: these are undervalues that situations relative to their larger piers.
Speaker 8: I think Viking Holdings would be a great example of
Speaker 8: something like that that were kind of already seen here
Speaker 8: more recently. This is a cruise operator that has historically
Speaker 8: been doing a lot of stuff in the rivers and
Speaker 8: mostly in Europe, put has made a shift here to
Speaker 8: the US.
Speaker 2: I think a lot of people are familiar with the
Speaker 2: marketing Viking River Cruises, right.
Speaker 8: Yeah, if you haven't seen it yet, you probably will
Speaker 8: now exactly. But they've been doing a lot. They've do
Speaker 8: really great in the river side on the river kind
Speaker 8: of cruises type thing. They're making a push now into
Speaker 8: ocean as well, and people are gravitating towards US because
Speaker 8: they have the great experiences there. We think they're going
Speaker 8: to grow at twice the three of what the industry
Speaker 8: are going to be growing, so you can imagine they're
Speaker 8: either taking share or they're creating share in the marketplace,
Speaker 8: but then they're also expanding their margins. We think they're
Speaker 8: going to do this set a rate that's much higher
Speaker 8: than what expectations are out there, and that will lead
Speaker 8: to a stock that will continue to appreciate going forward.
Speaker 2: Alenz, how long do you think we'll see small caps
Speaker 2: outperform in your view, because it's been a lot of
Speaker 2: years where they haven't.
Speaker 8: I wish I had a crystal ball to tell you
Speaker 8: how long that will be, but I again, I'm pretty
Speaker 8: positive on it. I think that the market is starting
Speaker 8: to recognize that these things have been undervalued for quite
Speaker 8: a while now, that these are not just junk companies
Speaker 8: that are down here in small Collemba. They are high
Speaker 8: quality businesses to be had opportunities to take advantage of.
Speaker 8: I think that one of the things that sets us
Speaker 8: apart to is just the ability to identify those high
Speaker 8: quality businesses and so you don't get necessarily all the
Speaker 8: riff raft down here when you're investing in a Hood
Speaker 8: River type fund, just because you're looking at high quality
Speaker 8: businesses being run by high quality individuals and that will
Speaker 8: lead you to see hopefully longer term returns that are
Speaker 8: better than what the indexes putting out there.
Speaker 11: What about on a sector level, what is interesting to
Speaker 11: you right now?
Speaker 8: I think obviously there's a lot of stuff happening out
Speaker 8: in the AI world. Small cap has a lot of
Speaker 8: opportunities in which you can participate in the development of
Speaker 8: our official intelligence and the things that are happening in
Speaker 8: that space, whether it's in the data center side, you
Speaker 8: can even do stuff on the semi conductor aspect of
Speaker 8: things as well. And then in another area that I
Speaker 8: think it's pretty interesting too. It's just this idea of
Speaker 8: moving things online. So one of the companies that we
Speaker 8: would like an international fund is this company by the
Speaker 8: name of red Care Pharmacy out of Germany. This is
Speaker 8: an online pharmacy dealer ow an online pharmacy stores excuse me,
Speaker 8: throughout Europe. But Germany just made it a case where
Speaker 8: they're now allowing you to actually order your prescription drugs
Speaker 8: online that it was not allowed before. You had to
Speaker 8: go to a doctor and get it signed, It had
Speaker 8: to be handwritten, had to be taken to the pharmacy
Speaker 8: delivered by hand. So now you can actually go online.
Speaker 8: You can order it and do it all electronically, right,
Speaker 8: so you can have an e visite thing in theory
Speaker 8: i've heard of. The doctor could then prescribe you. Yeah
Speaker 8: you have, maybe you've done one.
Speaker 2: Yeah, I don't know, if you're interesting. They have the
Speaker 2: you know, the fast trains.
Speaker 11: But but they do you have to get medicine by hand.
Speaker 11: In twenty twenty.
Speaker 8: Four you did. Yeah. So as of May it all
Speaker 8: kind of shifted, right, and so we got our first
Speaker 8: look into in the Q two results as to what
Speaker 8: happened there, and they saw a thirty five percent subfluential
Speaker 8: growth rate in the e subscription business, and we think
Speaker 8: that's going to continue and be the real driver of
Speaker 8: the growth. Meanwhile, all their other all the other stuff
Speaker 8: in a pharmacy now you can buy online as well.
Speaker 8: Over the that they're seeing that part of the business
Speaker 8: continue to grow a twenty percent clip the streets, looking
Speaker 8: for twenty percent total growth for next year. We think
Speaker 8: this is going to continue to be a main driver
Speaker 8: just kind of given the size of the prescription business
Speaker 8: in Germany sixty five billion, and less than one percent
Speaker 8: of that is penetrated today. Most countries in Europe that
Speaker 8: have moved this way where they are allowing e prescriptions.
Speaker 8: They're doing seeing a twenty five percent penetration rate, So
Speaker 8: to go from one to twenty five percent, that's a
Speaker 8: big chunk of cash that is to be had by
Speaker 8: these guys.
Speaker 11: Lance, we have a FED meeting coming up.
Speaker 2: Oh we do yeah, next Tuesday Wednesday.
Speaker 11: Next Tuesday Wednesday. So I'd love to get your thoughts.
Speaker 4: Well, it felt like this week we heard a lot
Speaker 4: of people say that the FED needs to be cutting
Speaker 4: sooner rather than.
Speaker 2: You did have a couple of prominent voices come out
Speaker 2: and say that.
Speaker 11: Bill Dudley saying let's do a cut right now in July.
Speaker 11: What are your thoughts? What are you expecting Powell to
Speaker 11: come out and talk about.
Speaker 8: I think there's a lot of people that would love
Speaker 8: to see that happen. We are not necessarily planning on
Speaker 8: that in nor do we position the portfolio to take
Speaker 8: advantage meent type of macro type of environment. We're bottom
Speaker 8: up fundamentalists. At the end of the day, We're looking
Speaker 8: for long term opportunities that we believe the fundamentals are there,
Speaker 8: regardless of what's happening from a macro standpoint. So I'd
Speaker 8: like to say we're macro aware, but we're not macro driven.
Speaker 8: So in terms of like what happens next week with
Speaker 8: the FED, you know, hopefully, you know, they're seeing some
Speaker 8: of the same stuff that I think others are starting
Speaker 8: to see, and maybe that is voiced in a certain
Speaker 8: way that gives us some confidence. But it's not necessarily
Speaker 8: something that I'm spending a lot of time trying to,
Speaker 8: you know, position the portfolio around at this juncture.
Speaker 11: I'm spending a lot of time thinking about it.
Speaker 2: I'm spending a lot of time thinking about that view
Speaker 2: that Lance has out of his backyard. Looks like he's
Speaker 2: red on the water.
Speaker 8: I wish this was my backyard.
Speaker 2: This is yeah, oh okay, Well, wherever you are, that's
Speaker 2: where we want to be. Lance Can, Portfolio Manager, River
Speaker 2: Capital Management, joining us from Palm Beach Gardens, Florida on
Speaker 2: this Friday afternoon.
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