1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you. 2 00:00:05,360 --> 00:00:07,680 Speaker 1: Along with my co host Lisa Brahma Waits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:22,919 Speaker 1: at Bloomberg dot com. Well, the death of US retail 8 00:00:23,239 --> 00:00:27,319 Speaker 1: was grossly exaggerated. Coal shares that climbing more than seven 9 00:00:27,320 --> 00:00:31,040 Speaker 1: percent almost eight percent now after reporting better than expected earnings. 10 00:00:31,040 --> 00:00:33,760 Speaker 1: Target also rallying. Joining us here to talk about that 11 00:00:33,760 --> 00:00:36,520 Speaker 1: in your Bloomberg Interactive Broker Studios is Burt Flickinger, Managing 12 00:00:36,560 --> 00:00:40,519 Speaker 1: director for Strategic Resource Group, So Bird. It seems like 13 00:00:40,880 --> 00:00:43,000 Speaker 1: certainly Target and Coals and a number of others have 14 00:00:43,080 --> 00:00:45,840 Speaker 1: surprised to the upside. Is this a sign that US 15 00:00:45,920 --> 00:00:48,720 Speaker 1: consumers are in good shape and that retail is coming 16 00:00:48,760 --> 00:00:51,479 Speaker 1: back in brick and mortar form? Or is this a 17 00:00:51,520 --> 00:00:54,800 Speaker 1: case of good management in a select number of cases? Lisa, 18 00:00:54,840 --> 00:00:58,400 Speaker 1: to your point, good management always always wins, particularly for 19 00:00:58,440 --> 00:01:02,720 Speaker 1: the well capitalized companies that investing in technology, digital, retail 20 00:01:03,200 --> 00:01:07,039 Speaker 1: and really having what consumers want at the best possible prices. 21 00:01:07,040 --> 00:01:10,119 Speaker 1: So iss you and Paul have reported off prices winning, 22 00:01:10,400 --> 00:01:13,600 Speaker 1: UH targets winning, Walmart's winning, while a lot of the 23 00:01:13,600 --> 00:01:16,880 Speaker 1: rest of the retails losing. So looking through the Coals 24 00:01:17,120 --> 00:01:18,680 Speaker 1: earning statement, one of the things that was interesting is 25 00:01:18,760 --> 00:01:21,200 Speaker 1: they they called out there, I guess the partnership with 26 00:01:21,560 --> 00:01:25,679 Speaker 1: Amazon as being you know, a contributor to growth. What 27 00:01:25,680 --> 00:01:27,560 Speaker 1: what actually are they doing with Jim? What does that 28 00:01:27,640 --> 00:01:30,880 Speaker 1: joint venture or that partnership it's a joint venture. Interestingly, 29 00:01:30,959 --> 00:01:35,600 Speaker 1: Paul's something that Target dot Com tried with Amazon for 30 00:01:35,640 --> 00:01:39,319 Speaker 1: seven years and it didn't work out, but for because 31 00:01:39,360 --> 00:01:43,839 Speaker 1: Amazon essentially got the Target Target quote unquote guest database, 32 00:01:43,920 --> 00:01:47,039 Speaker 1: and UH they migrated a lot of those shoppers over 33 00:01:47,040 --> 00:01:52,480 Speaker 1: to Amazon. But with Coal's not have invested significantly sufficiently 34 00:01:52,520 --> 00:01:56,400 Speaker 1: in digital. UH. The Amazon partnership in terms of cross 35 00:01:56,480 --> 00:02:00,120 Speaker 1: platform similar to what Richard Baker's doing with Huts and 36 00:02:00,400 --> 00:02:04,680 Speaker 1: Hudson Bay, Sacks and the operating companies to UH. It 37 00:02:04,800 --> 00:02:08,360 Speaker 1: provides a customer base from combined companies and helps both 38 00:02:09,720 --> 00:02:14,120 Speaker 1: increase units customer counts, sell through whether it's digital as 39 00:02:14,120 --> 00:02:15,960 Speaker 1: well as fulfillment and so so if if I have 40 00:02:16,000 --> 00:02:18,640 Speaker 1: a return from an Amazon, I can bring it to 41 00:02:18,680 --> 00:02:21,320 Speaker 1: a coal store. You can bring it to a coal store. 42 00:02:21,480 --> 00:02:26,320 Speaker 1: And his Bran Cornell pointed out with Bloomberg earlier this morning, 43 00:02:26,680 --> 00:02:31,360 Speaker 1: seventy five cent of all UM targets digital sales are 44 00:02:31,400 --> 00:02:34,880 Speaker 1: fulfilled in store. So UH to your point, advantage Coals 45 00:02:34,919 --> 00:02:38,519 Speaker 1: and advantage Target to how much is the rally that 46 00:02:38,560 --> 00:02:42,520 Speaker 1: we're seeing in the positive forecasts for the year from 47 00:02:42,520 --> 00:02:44,680 Speaker 1: Coals and Target? How much is that a result of 48 00:02:44,720 --> 00:02:47,440 Speaker 1: the bankruptcies of a number of retailers that we've seen 49 00:02:47,480 --> 00:02:51,800 Speaker 1: from Jim Boree, etcetera. Lisa important point in in targets 50 00:02:51,800 --> 00:02:55,560 Speaker 1: home markets, everything from her Burger's and Carson's division of 51 00:02:55,600 --> 00:02:59,760 Speaker 1: the Bontan Company, pay Less on Deck, UH and with 52 00:03:00,000 --> 00:03:03,240 Speaker 1: Boys are us in a number of other key retailers 53 00:03:02,720 --> 00:03:08,040 Speaker 1: of affecting UH shifting shoppers. The bankruptcies have have been 54 00:03:08,360 --> 00:03:12,840 Speaker 1: half of targets increase in our estimation, and that makes 55 00:03:12,880 --> 00:03:17,960 Speaker 1: Cole's one percent same store comparison sales okay, but not 56 00:03:17,960 --> 00:03:20,760 Speaker 1: not really that good. This is really fascinating to me. This, 57 00:03:20,919 --> 00:03:24,040 Speaker 1: to me is a really important story. We're finally slowly 58 00:03:24,120 --> 00:03:26,600 Speaker 1: starting to see the denue mall of some of these 59 00:03:26,600 --> 00:03:29,840 Speaker 1: struggling retailers going out of business, and this is helping 60 00:03:30,320 --> 00:03:34,600 Speaker 1: the healthier retailers survive and thrive. Where are we in 61 00:03:34,639 --> 00:03:37,520 Speaker 1: the cycle of bankruptcies for retailers? Can we finally see 62 00:03:37,560 --> 00:03:41,320 Speaker 1: the regrowth of this industry? Lisa, We're about three fifths 63 00:03:41,360 --> 00:03:44,320 Speaker 1: of the way through. So Target will benefit the most 64 00:03:44,680 --> 00:03:46,800 Speaker 1: from the bankruptcies of a lot of food and drug 65 00:03:46,840 --> 00:03:49,560 Speaker 1: retailers were hoping for the best, fearing for the worst. 66 00:03:49,880 --> 00:03:52,360 Speaker 1: With right aid, obviously, Target is going to be the 67 00:03:52,400 --> 00:03:55,680 Speaker 1: big beneficiary there, and from the mid tier to moderate 68 00:03:56,040 --> 00:04:01,160 Speaker 1: department stores and sears Kmart which actually had fairly good 69 00:04:01,200 --> 00:04:04,920 Speaker 1: soft soft goods, uh, Targets still the big beneficiary. So 70 00:04:05,800 --> 00:04:10,160 Speaker 1: Targets still a little bit further than halftime and benefiting, 71 00:04:10,200 --> 00:04:15,400 Speaker 1: But targets biggest benefit is really marketing, merchandizing value, branding, 72 00:04:15,440 --> 00:04:20,200 Speaker 1: own label, and with the political elections taking media costs 73 00:04:20,240 --> 00:04:25,040 Speaker 1: to unprecedented proportions in nineteen and the year twenty twenty, 74 00:04:25,160 --> 00:04:32,719 Speaker 1: Target has some of the most effective ads, digital, connective, social, outdoor, radio, TV, 75 00:04:33,120 --> 00:04:36,480 Speaker 1: as as does Walmart. And the effectiveness and the great 76 00:04:36,520 --> 00:04:40,040 Speaker 1: copy and the creative with Target as well as Walmart's 77 00:04:40,080 --> 00:04:42,279 Speaker 1: really helping both win. And it gets to what you 78 00:04:42,279 --> 00:04:46,240 Speaker 1: guys were saying, management leadership wins every time. Essentially, I 79 00:04:46,320 --> 00:04:48,960 Speaker 1: like that the concept that three fists of the way 80 00:04:49,000 --> 00:04:51,599 Speaker 1: through kind of dealing with this consolidation of the industry. 81 00:04:51,640 --> 00:04:54,719 Speaker 1: Does that also relate to the number of stores the 82 00:04:54,720 --> 00:04:58,240 Speaker 1: global the US footprint stores? Are we three fists the 83 00:04:58,240 --> 00:05:01,000 Speaker 1: way through rationalizing just the number of stores and in 84 00:05:01,040 --> 00:05:03,760 Speaker 1: the footprint we're probably only two fists of the way through, 85 00:05:04,880 --> 00:05:11,359 Speaker 1: right from about overstored to about But Paul, what you 86 00:05:11,440 --> 00:05:14,440 Speaker 1: and Tom Keane and Arthur Levitt we're talking about on 87 00:05:14,520 --> 00:05:18,839 Speaker 1: surveillance and you, Lisa and Carol masser Uh and Jason 88 00:05:18,880 --> 00:05:23,039 Speaker 1: Sweeney we're talking about later for retail with medical marijuana. 89 00:05:23,320 --> 00:05:26,159 Speaker 1: Arthur Levitt was saying, the sales tax in Denver was 90 00:05:26,200 --> 00:05:28,880 Speaker 1: thirty two million, so obviously the sales are a huge 91 00:05:28,960 --> 00:05:32,880 Speaker 1: multiple of that. So medical marijuana may actually drive customer 92 00:05:32,960 --> 00:05:37,560 Speaker 1: counts into the pharmacies of the target CVS. Insular pharmacies 93 00:05:38,240 --> 00:05:42,480 Speaker 1: won't help coals help time. Paul, just can't help yourself 94 00:05:42,680 --> 00:05:45,080 Speaker 1: when they legalize marijuana. That's just gonna make right age 95 00:05:45,120 --> 00:05:49,960 Speaker 1: shares surge. Right might not say soon enough. Well, I 96 00:05:50,240 --> 00:05:52,920 Speaker 1: guess that, you know. I'm just wondering what's taking so long? 97 00:05:53,360 --> 00:05:55,920 Speaker 1: What will what will hurry the cycle up and allow 98 00:05:56,040 --> 00:05:58,919 Speaker 1: retail to kind of get its bearings and grow again. 99 00:05:59,600 --> 00:06:02,600 Speaker 1: The for them to really grow, they have to do 100 00:06:02,680 --> 00:06:06,400 Speaker 1: what targets doing. Target, to the company's credit, has the 101 00:06:06,480 --> 00:06:12,960 Speaker 1: greatest gender UH social social diversity across its management groups, 102 00:06:13,000 --> 00:06:17,280 Speaker 1: so arguably one of the best leadership teams in retail worldwide. 103 00:06:17,400 --> 00:06:21,880 Speaker 1: And in a declining birth rate, declining family formation, targets 104 00:06:21,920 --> 00:06:25,760 Speaker 1: getting more of the parents with young children and with 105 00:06:25,800 --> 00:06:29,600 Speaker 1: a pet population with dogs and cat adoptions growing four 106 00:06:29,640 --> 00:06:34,560 Speaker 1: times faster than the birth rate for people. Targets getting babies, pets, 107 00:06:34,880 --> 00:06:38,720 Speaker 1: and lifetime loyalty from consumers of all languages and all 108 00:06:39,000 --> 00:06:42,200 Speaker 1: United Nations of consumer constituency. I gotta be honest with 109 00:06:42,200 --> 00:06:44,599 Speaker 1: that with you, Paul. I mean, when I was dealing 110 00:06:44,640 --> 00:06:47,960 Speaker 1: with babies, Target was amazing because you could get the diapers, 111 00:06:48,000 --> 00:06:49,800 Speaker 1: you could get clothes that weren't going to cost you 112 00:06:49,839 --> 00:06:52,520 Speaker 1: a crazy amount, all in the same place, and you 113 00:06:52,520 --> 00:06:55,920 Speaker 1: could get shampooon conditioner. That was actually a very very 114 00:06:55,960 --> 00:06:59,040 Speaker 1: positive development. I think Purchase gave us the stat of 115 00:06:59,080 --> 00:07:01,680 Speaker 1: the day with the pets four times the growth rate 116 00:07:01,720 --> 00:07:04,960 Speaker 1: of the human population. I didn't know that. Really. Yeah, 117 00:07:04,960 --> 00:07:08,120 Speaker 1: the people actually are adopting more pets now than than 118 00:07:08,200 --> 00:07:11,240 Speaker 1: having children year. Well, there's gotta be an investment play there. 119 00:07:11,840 --> 00:07:13,280 Speaker 1: So you go to the stores that have the biggest 120 00:07:13,320 --> 00:07:16,200 Speaker 1: pet departments. I guess yeah, And it gets to your 121 00:07:16,400 --> 00:07:20,720 Speaker 1: your leadership point. Paul is pet Smart is on Moody's 122 00:07:20,800 --> 00:07:23,560 Speaker 1: list of seventeen retailers that could go bankrupt this year. 123 00:07:24,200 --> 00:07:29,920 Speaker 1: Uh less capable, undercapitalized, where Target Walmart. Even though they're 124 00:07:29,960 --> 00:07:34,320 Speaker 1: not category dominant and pet is a soul source destination, 125 00:07:34,680 --> 00:07:37,720 Speaker 1: they're still winning with pets more than pet smart. Is 126 00:07:38,520 --> 00:07:42,200 Speaker 1: really interesting to you have a pet uh son, Nick 127 00:07:42,280 --> 00:07:46,240 Speaker 1: and wife actually have to rescue pets Reggie and Bow. 128 00:07:46,400 --> 00:07:49,200 Speaker 1: And look at Popper west Siders dot com for Dick's 129 00:07:49,240 --> 00:07:53,480 Speaker 1: pet blog on rescue pets. I didn't know this was 130 00:07:53,520 --> 00:07:55,960 Speaker 1: gonna turn into a discussion of pets, but you never know. 131 00:07:56,000 --> 00:07:59,240 Speaker 1: We're retails, retail retail increasingly. This is actually a sign 132 00:07:59,280 --> 00:08:02,040 Speaker 1: of the times. Take this too heart. This has been 133 00:08:02,200 --> 00:08:04,600 Speaker 1: the transformation. People would rather have a dog than a kid. 134 00:08:05,040 --> 00:08:08,200 Speaker 1: Three point four million pet adoptions every year. Oh that's 135 00:08:08,320 --> 00:08:10,960 Speaker 1: all right, another Saturday, Bert flicking sure, thank you so much. 136 00:08:11,000 --> 00:08:14,680 Speaker 1: Bert is the managing director Strategic Resource Resource Group. He 137 00:08:14,800 --> 00:08:32,800 Speaker 1: joined us here in our Bloomberg Interactive Broker Studio. This 138 00:08:33,080 --> 00:08:36,439 Speaker 1: maybe the year of Unicorn initial public offerings. We are 139 00:08:36,480 --> 00:08:40,160 Speaker 1: expecting Lift to start their road show and get their 140 00:08:40,160 --> 00:08:44,280 Speaker 1: initial public offering off, the off off off, and get 141 00:08:44,280 --> 00:08:47,600 Speaker 1: this on track. A question here is how active will 142 00:08:47,640 --> 00:08:50,080 Speaker 1: this year be and how much will these companies be 143 00:08:50,160 --> 00:08:51,839 Speaker 1: valued at? Joining us now to answer some of those 144 00:08:51,920 --> 00:08:56,560 Speaker 1: questions at Data, chief executive officer of equity Zen based 145 00:08:56,640 --> 00:08:59,600 Speaker 1: in New York. Equity Zen is a fascinating company that 146 00:08:59,640 --> 00:09:04,320 Speaker 1: basicly enables from getting this right, enables individuals to transact 147 00:09:04,360 --> 00:09:07,240 Speaker 1: in private shares ahead of these i p o s. 148 00:09:07,320 --> 00:09:09,880 Speaker 1: Is that correct? Yeah, that's that's right. Look, we're not 149 00:09:10,720 --> 00:09:13,640 Speaker 1: inventing anything that didn't exist a hundred years ago. Effectively, 150 00:09:13,640 --> 00:09:17,040 Speaker 1: what we're doing is taking something that was only available 151 00:09:17,080 --> 00:09:19,080 Speaker 1: for people that could write a ten million dollar check. 152 00:09:19,200 --> 00:09:21,400 Speaker 1: It's a private company. I know the company. I wanna 153 00:09:21,559 --> 00:09:23,920 Speaker 1: you know everyone. I know us as this company. I'd 154 00:09:23,920 --> 00:09:26,840 Speaker 1: like to invest before the I p o. Uh. If 155 00:09:26,880 --> 00:09:28,840 Speaker 1: you don't have ten million bucks, it's really hard for 156 00:09:28,840 --> 00:09:31,120 Speaker 1: you to get a seat at the table. Uh. Through 157 00:09:31,160 --> 00:09:35,160 Speaker 1: Equisence platform, qualified investors can purchase the shares before the 158 00:09:35,200 --> 00:09:38,959 Speaker 1: company goes public. So is this basically a price discovery 159 00:09:39,040 --> 00:09:42,760 Speaker 1: mechanism whereby companies can figure out, huh, now might be 160 00:09:42,800 --> 00:09:45,960 Speaker 1: the time to go public. That's definitely a very you know, 161 00:09:46,080 --> 00:09:48,600 Speaker 1: big value offering that companies get. The other thing that 162 00:09:49,200 --> 00:09:51,360 Speaker 1: a lot of companies benefit from by using a platform 163 00:09:51,360 --> 00:09:53,880 Speaker 1: like equities and is Hey, look, you know, we thought 164 00:09:54,320 --> 00:09:56,480 Speaker 1: Q four was going to be a great time to 165 00:09:56,520 --> 00:09:58,880 Speaker 1: go public, but guess what, the markets turn volatile, So 166 00:09:58,920 --> 00:10:01,880 Speaker 1: we're gonna wait another or six twelve months to go public. 167 00:10:02,559 --> 00:10:04,360 Speaker 1: But I told all my employees that we're gonna go 168 00:10:04,440 --> 00:10:07,280 Speaker 1: public in twenty eighteen. So let me allow the secondary 169 00:10:07,320 --> 00:10:09,600 Speaker 1: platform to give them a little bit of liquidity and 170 00:10:09,679 --> 00:10:12,120 Speaker 1: basically fine tune exactly when I'm going to go public, 171 00:10:12,280 --> 00:10:17,240 Speaker 1: keep the employees happy, get outside shareholder shareholders excited. Uh, 172 00:10:17,280 --> 00:10:18,840 Speaker 1: and me as a company, I didn't have to take 173 00:10:18,840 --> 00:10:22,240 Speaker 1: any delusion in order to conduct a secondary Trains is 174 00:10:22,240 --> 00:10:24,960 Speaker 1: going to be presumably a huge year for tech I 175 00:10:25,080 --> 00:10:28,079 Speaker 1: p O S and for you know your company as well. 176 00:10:28,120 --> 00:10:31,240 Speaker 1: We've got Lift, We've got Uber, we've got Airbnb. Presumably, 177 00:10:31,400 --> 00:10:34,400 Speaker 1: let's focus on Lift. You know, we saw the prospectives 178 00:10:34,400 --> 00:10:36,200 Speaker 1: come out last week. I think they had trailing revs 179 00:10:36,200 --> 00:10:38,760 Speaker 1: of about two point two billion. Yet they want to 180 00:10:38,800 --> 00:10:42,160 Speaker 1: raise twenty to twenty five billion dollars. Is that kind 181 00:10:42,160 --> 00:10:45,000 Speaker 1: of evaluation? Ten times revenue or twelve times revenue? Is 182 00:10:45,000 --> 00:10:47,480 Speaker 1: that reasonable in this market? Well, you know, if you 183 00:10:47,559 --> 00:10:50,080 Speaker 1: take a look at lifts only competitor, which is a 184 00:10:50,080 --> 00:10:54,280 Speaker 1: private company Uber, Uh, It's it's not even uh you know, 185 00:10:54,320 --> 00:10:56,960 Speaker 1: a fair comparison. Uber is this goliath, you know, eleven 186 00:10:56,960 --> 00:10:59,959 Speaker 1: billion dollars in revenue, It's in over half the country 187 00:11:00,120 --> 00:11:02,320 Speaker 1: is out there, It's it's got Uber Eats, It's got 188 00:11:02,320 --> 00:11:05,320 Speaker 1: five other business lines. Lift is a pure play ride 189 00:11:05,360 --> 00:11:09,240 Speaker 1: hill company focused on US and Canada. There's got a 190 00:11:09,240 --> 00:11:11,560 Speaker 1: lot of growth that Lift is able to demonstrate a 191 00:11:12,120 --> 00:11:15,360 Speaker 1: year every year. Uh. It's got shrinking net lost margins, 192 00:11:15,360 --> 00:11:17,439 Speaker 1: which is always nice to see for tech company to 193 00:11:17,480 --> 00:11:20,119 Speaker 1: go public. I think it's got a pretty exciting valuation 194 00:11:20,200 --> 00:11:22,840 Speaker 1: for a company that many of us, especially here in 195 00:11:22,840 --> 00:11:26,120 Speaker 1: the US and Canada, um have on our phones, if 196 00:11:26,160 --> 00:11:29,360 Speaker 1: not of at least seen friends use it teach. There 197 00:11:29,400 --> 00:11:32,760 Speaker 1: has been an argument made that fewer companies in the 198 00:11:32,880 --> 00:11:37,199 Speaker 1: US are filing for initial public offerings. They're waiting longer 199 00:11:37,320 --> 00:11:40,480 Speaker 1: to do so. That's sort of the idea of US 200 00:11:40,559 --> 00:11:44,200 Speaker 1: public equities is being a way to access the dynamism 201 00:11:44,240 --> 00:11:46,880 Speaker 1: of the U S economy is sort of fading as 202 00:11:46,920 --> 00:11:49,920 Speaker 1: a promise. And I'm just wondering if these if these 203 00:11:50,040 --> 00:11:53,760 Speaker 1: unicorns can access private capital and can even offer their 204 00:11:53,800 --> 00:11:57,559 Speaker 1: employees liquidity on a secondary market for their shares before 205 00:11:57,559 --> 00:12:00,640 Speaker 1: an I p O. Why go public? Why public? That's 206 00:12:00,640 --> 00:12:04,080 Speaker 1: a great question. Look, I think there's still the vast 207 00:12:04,120 --> 00:12:07,760 Speaker 1: majority of the world that cannot access these private markets. 208 00:12:07,800 --> 00:12:09,720 Speaker 1: You know, you have to be an accredited investor, the 209 00:12:09,840 --> 00:12:12,360 Speaker 1: secs some guidelines. These are risky investments at the end 210 00:12:12,400 --> 00:12:14,760 Speaker 1: of the day. So still the vast majority of the 211 00:12:14,800 --> 00:12:18,280 Speaker 1: world can access it. And LIFT and many other consumer companies. 212 00:12:18,280 --> 00:12:20,520 Speaker 1: Spotify is a great example last year where you know 213 00:12:20,559 --> 00:12:22,640 Speaker 1: it's got tens of millions of people using it, but 214 00:12:22,760 --> 00:12:24,839 Speaker 1: if the vast majority of its client base can't even 215 00:12:24,880 --> 00:12:27,080 Speaker 1: buy its own stock, well, then there's a little bit 216 00:12:27,120 --> 00:12:29,360 Speaker 1: of a disconnect, right And a lot of these companies, 217 00:12:29,400 --> 00:12:32,920 Speaker 1: LIFT included our mission driven companies, decent amount of its s. 218 00:12:32,960 --> 00:12:35,679 Speaker 1: One is talking about how the founder's letter and the 219 00:12:35,679 --> 00:12:38,760 Speaker 1: founders mission. Uh, they really want to be able to 220 00:12:38,840 --> 00:12:41,240 Speaker 1: maintain that brand image. Not only is it a rite 221 00:12:41,240 --> 00:12:44,079 Speaker 1: of passage to go public these days, but guess what 222 00:12:44,160 --> 00:12:46,839 Speaker 1: you as a public company can qualify for a lot 223 00:12:46,840 --> 00:12:49,959 Speaker 1: of these institutional long term investors, these pension funds and 224 00:12:50,040 --> 00:12:53,480 Speaker 1: mutual funds, anchor investors that look at ten year horizons, 225 00:12:53,559 --> 00:12:57,280 Speaker 1: not you know, Monday through Thursday. Well, the big issue 226 00:12:57,320 --> 00:13:00,400 Speaker 1: I think that both right hailing companies might have love 227 00:13:00,400 --> 00:13:03,200 Speaker 1: to get your opinion, is they're not even remotely close 228 00:13:03,240 --> 00:13:05,560 Speaker 1: to profitable. List I mean, Lift lost almost I guess 229 00:13:05,600 --> 00:13:08,199 Speaker 1: nine million dollars on two point to million of revenues. 230 00:13:08,360 --> 00:13:10,280 Speaker 1: Uber is not profitable. And I think one of the 231 00:13:10,280 --> 00:13:12,920 Speaker 1: big issues that investors have not had to deal with before, 232 00:13:12,920 --> 00:13:16,600 Speaker 1: whether it's Facebook or Google, is the subsidies that they're 233 00:13:16,640 --> 00:13:18,679 Speaker 1: paying to these drivers for market share. Do you have 234 00:13:18,760 --> 00:13:21,360 Speaker 1: a sense of when when these companies think they will 235 00:13:21,559 --> 00:13:25,600 Speaker 1: be a profit, Well, they are driving closer and closer 236 00:13:25,640 --> 00:13:28,400 Speaker 1: towards profitability. I think in this day and age, a 237 00:13:28,440 --> 00:13:33,240 Speaker 1: lot of folks are almost accepting of high growth companies 238 00:13:33,480 --> 00:13:35,640 Speaker 1: who are willing to lose capital in order to grow 239 00:13:35,720 --> 00:13:38,360 Speaker 1: market share um. What they're going to have to continue 240 00:13:38,400 --> 00:13:42,240 Speaker 1: showing these companies is a path to sustainable profitability. Like 241 00:13:42,440 --> 00:13:46,680 Speaker 1: Lift had a two income margin two years ago, senetic 242 00:13:46,800 --> 00:13:49,400 Speaker 1: margin with the negative sixty last year, it's down to 243 00:13:49,480 --> 00:13:53,480 Speaker 1: forty and change forty three percent this year, uh uber 244 00:13:53,520 --> 00:13:56,000 Speaker 1: has gone down to thirty. So I think they are 245 00:13:56,200 --> 00:14:00,640 Speaker 1: moving towards profitability. But look, there's only one you know, 246 00:14:00,679 --> 00:14:03,040 Speaker 1: I think the Lifts Perspectives said only one percent of 247 00:14:03,080 --> 00:14:06,000 Speaker 1: all miles driven in the US are actually using one 248 00:14:06,000 --> 00:14:08,760 Speaker 1: of these ride hill services, So there's clearly a long 249 00:14:08,840 --> 00:14:10,480 Speaker 1: way to go, and I think there are no hurry 250 00:14:10,559 --> 00:14:13,080 Speaker 1: to try and capture the share. Twenty seconds, what's your 251 00:14:13,160 --> 00:14:15,800 Speaker 1: estimate for I p o s this year? We think 252 00:14:15,880 --> 00:14:19,640 Speaker 1: there's going to be uh five blockbuster I p o 253 00:14:19,760 --> 00:14:22,920 Speaker 1: s and they're all available on you know, equities and 254 00:14:22,960 --> 00:14:25,880 Speaker 1: I p oh outlook, but we're not going to see 255 00:14:26,080 --> 00:14:28,320 Speaker 1: the record number of I p o s. They're gonna 256 00:14:28,320 --> 00:14:30,480 Speaker 1: be the names that everyone's been waiting for for the 257 00:14:30,520 --> 00:14:32,640 Speaker 1: last ten years and they're gonna be huge. They're gonna 258 00:14:32,640 --> 00:14:34,360 Speaker 1: be this It's gonna be a great year I think 259 00:14:34,400 --> 00:14:37,840 Speaker 1: for I p O. Bankers on Wall Street, a Dove 260 00:14:37,920 --> 00:14:40,280 Speaker 1: dot chief executive officer of Equities and joining us in 261 00:14:40,280 --> 00:14:42,360 Speaker 1: our Bloomberg eleven three O studios. Thank you so much 262 00:14:42,400 --> 00:14:45,080 Speaker 1: for joining us again. You know, I think it's uh 263 00:14:45,200 --> 00:14:47,160 Speaker 1: this lift. The deal is going to be very important 264 00:14:47,280 --> 00:14:49,760 Speaker 1: um for the tech markets to start off the year 265 00:14:49,920 --> 00:14:52,960 Speaker 1: right and to get a good trade going. So we'll 266 00:14:52,960 --> 00:14:54,360 Speaker 1: have to see how it goes, and then of course 267 00:14:54,440 --> 00:14:56,480 Speaker 1: Uber will follow it up, and then Airbnb and some 268 00:14:56,560 --> 00:15:15,880 Speaker 1: others well equity investors, what to do? We've had about 269 00:15:15,880 --> 00:15:19,840 Speaker 1: a thirty seven percent round trip from that December decline 270 00:15:19,880 --> 00:15:21,840 Speaker 1: back up to the our performance we've had here in 271 00:15:22,240 --> 00:15:25,680 Speaker 1: nineteen with the SMP up about eleven year to date. 272 00:15:26,280 --> 00:15:28,000 Speaker 1: The question is what to do. So to help us 273 00:15:28,040 --> 00:15:30,720 Speaker 1: answer some of those questions is Sean Matthews, chief executive 274 00:15:30,760 --> 00:15:33,880 Speaker 1: officer from Hondia's Capital Management. Sean is also the former 275 00:15:33,960 --> 00:15:36,680 Speaker 1: CEO of Cantor Fitzgerald. Shawn, thanks for being in our 276 00:15:36,720 --> 00:15:38,960 Speaker 1: studios once again. He's in our Bloomberg eleven three O 277 00:15:39,040 --> 00:15:40,960 Speaker 1: studios here in New York with us. So is it 278 00:15:41,080 --> 00:15:45,960 Speaker 1: time to take money off the table? So, okay, okay, 279 00:15:46,640 --> 00:15:49,800 Speaker 1: if you're if you have a shorter term view, so 280 00:15:49,920 --> 00:15:52,160 Speaker 1: if you've got a twenty year view stocks make sense, 281 00:15:52,160 --> 00:15:54,040 Speaker 1: and it's perfectly fine. But if you have a year 282 00:15:54,080 --> 00:15:56,720 Speaker 1: or less view, certainly taking trips off the table make 283 00:15:56,760 --> 00:15:58,600 Speaker 1: a lot of sense. Here right now. We came into 284 00:15:58,640 --> 00:16:00,560 Speaker 1: the year long risk ass us and thought it was 285 00:16:00,600 --> 00:16:04,840 Speaker 1: a great opportunity. But once you got to a deal 286 00:16:05,080 --> 00:16:08,920 Speaker 1: or a quasideal that's coming out right now with China, 287 00:16:09,280 --> 00:16:12,400 Speaker 1: it makes sense just a de risk. Sean, can we 288 00:16:12,440 --> 00:16:15,560 Speaker 1: talk about Hondia's capital management because I've known you for years, 289 00:16:15,760 --> 00:16:18,720 Speaker 1: um really as the CEO of Cancer to fitz Geralds, 290 00:16:18,720 --> 00:16:20,520 Speaker 1: and you've been at brokerages for years and then you 291 00:16:20,560 --> 00:16:24,440 Speaker 1: went off in last year to start your own hedge 292 00:16:24,480 --> 00:16:28,400 Speaker 1: fund has been going, it's going well. Look, the markets 293 00:16:28,400 --> 00:16:31,360 Speaker 1: are interesting opportunities. So if you look at the opportunity 294 00:16:31,360 --> 00:16:34,480 Speaker 1: sets for the typical hedge fund with zero interest rates 295 00:16:34,520 --> 00:16:37,640 Speaker 1: and correlated assets, they were very low. And going forward 296 00:16:37,680 --> 00:16:40,280 Speaker 1: the next five years, you're going to see the coupling 297 00:16:40,320 --> 00:16:43,240 Speaker 1: of assets. You're gonna see central banks changing their stances 298 00:16:43,280 --> 00:16:46,560 Speaker 1: certainly going back and forth, which creates interesting opportunity. So 299 00:16:46,720 --> 00:16:48,800 Speaker 1: you're going from two opportunities a year to kind of 300 00:16:48,840 --> 00:16:50,880 Speaker 1: six or seven or eight opportunities a year. But we 301 00:16:50,880 --> 00:16:53,480 Speaker 1: were listening to Bill Gross who was speaking on Bloomberg 302 00:16:53,520 --> 00:16:56,600 Speaker 1: Television earlier. He was retiring, of course from Janice and 303 00:16:56,680 --> 00:16:59,840 Speaker 1: the famed bond investor for Pimco. He was saying he 304 00:17:00,040 --> 00:17:04,040 Speaker 1: thinks that the era of generating alpha, true alpha is 305 00:17:04,119 --> 00:17:07,120 Speaker 1: kind of coming to an end, which I think that's 306 00:17:07,119 --> 00:17:09,920 Speaker 1: a misnomer. So there's always gonna be alpha out there. 307 00:17:10,240 --> 00:17:13,080 Speaker 1: The machines have taken some of that away, but you 308 00:17:13,119 --> 00:17:15,200 Speaker 1: have to understand how to trade against the machines as well, 309 00:17:15,520 --> 00:17:18,720 Speaker 1: so there will be interesting opportunities. So the last five 310 00:17:18,800 --> 00:17:22,000 Speaker 1: years there was no alpha. Certainly next five years, I 311 00:17:22,040 --> 00:17:24,680 Speaker 1: think there's gonna be interesting opportunity in real alpha that's 312 00:17:24,680 --> 00:17:28,640 Speaker 1: out there. That's gonna be generated because pricing, and look 313 00:17:28,720 --> 00:17:32,080 Speaker 1: we look at typical assets. Pricing has been very benigns 314 00:17:32,080 --> 00:17:35,280 Speaker 1: because volatility has been low. As volatility picks up, you're 315 00:17:35,280 --> 00:17:38,640 Speaker 1: gonna have large discrepancies in pricing. You don't have enough 316 00:17:38,680 --> 00:17:41,240 Speaker 1: capital sitting in the middle. So the typical Wall Street 317 00:17:41,280 --> 00:17:44,240 Speaker 1: firms had plenty of capital to be a true middleman 318 00:17:44,920 --> 00:17:48,680 Speaker 1: and create orderly markets. That's gone. So there's gonna be 319 00:17:48,720 --> 00:17:51,040 Speaker 1: less capital there because the return of equity for those 320 00:17:51,440 --> 00:17:54,320 Speaker 1: firms has gone down substantially over the last five to 321 00:17:54,359 --> 00:17:56,600 Speaker 1: ten years, So someone's gonna have to step in and 322 00:17:56,600 --> 00:17:58,240 Speaker 1: take advantage. So where do you think you're gonna be 323 00:17:58,240 --> 00:18:00,200 Speaker 1: playing in the next two or three years in terms 324 00:18:00,240 --> 00:18:02,359 Speaker 1: of the fixing coming equity markets? Maybe pushing out on 325 00:18:02,400 --> 00:18:04,680 Speaker 1: the risk curve to e M or something like that. Yeah, 326 00:18:04,680 --> 00:18:07,159 Speaker 1: I think you have to be opportunistic. And if we 327 00:18:07,200 --> 00:18:10,879 Speaker 1: look at the global macro picture, you're starting to see 328 00:18:10,960 --> 00:18:13,920 Speaker 1: some clear delineation of what's going on out there. So 329 00:18:14,280 --> 00:18:16,840 Speaker 1: Europe's in a funk. I think the next thirty years 330 00:18:16,840 --> 00:18:18,720 Speaker 1: that it's gonna be in a funk that's got real problems. 331 00:18:18,960 --> 00:18:21,040 Speaker 1: But you start to look at Asia, especially after the 332 00:18:21,040 --> 00:18:23,800 Speaker 1: tariff deal, is gonna be interesting opportunities there. You look 333 00:18:23,800 --> 00:18:26,560 Speaker 1: at the US as well. I mean, I think if 334 00:18:26,800 --> 00:18:28,920 Speaker 1: as a trader you look at the marketplace right now, 335 00:18:29,080 --> 00:18:31,439 Speaker 1: you'd probably want to be short equities here at some 336 00:18:31,480 --> 00:18:33,520 Speaker 1: point in time for a short term trade, not a 337 00:18:33,560 --> 00:18:35,600 Speaker 1: long term trade, but short term. Okay, So if you 338 00:18:35,640 --> 00:18:38,359 Speaker 1: go short equities, are you going short individual names? Are 339 00:18:38,359 --> 00:18:41,159 Speaker 1: you're going short broad indexes? So you look at broad INDEXUS, right, 340 00:18:41,200 --> 00:18:43,960 Speaker 1: because you know, getting down to that level of each 341 00:18:43,960 --> 00:18:48,240 Speaker 1: individual stock. That takes a lot of analysis and understanding. 342 00:18:48,480 --> 00:18:52,000 Speaker 1: You really understand what are liquidity going on thirty feet, 343 00:18:52,040 --> 00:18:54,160 Speaker 1: what's going on in the marketplace from a high level, 344 00:18:54,480 --> 00:18:57,400 Speaker 1: and then working your way down. All right, So Sean Matthews, 345 00:18:57,480 --> 00:18:59,919 Speaker 1: what are you looking for as the sort of the 346 00:19:00,119 --> 00:19:03,600 Speaker 1: trigger time to short stocks here? And then what are 347 00:19:03,600 --> 00:19:06,480 Speaker 1: you looking for to say, okay, there we go again? 348 00:19:07,200 --> 00:19:11,560 Speaker 1: I think the market is right now going to look 349 00:19:11,600 --> 00:19:14,520 Speaker 1: at earnings going forward and look at global growth. And 350 00:19:14,920 --> 00:19:17,720 Speaker 1: right now no one knows really what's going on. So earnings, 351 00:19:17,760 --> 00:19:20,120 Speaker 1: if you talk to any particular person, you can range 352 00:19:20,119 --> 00:19:23,239 Speaker 1: from zero to ten percent this year. Right, That's an 353 00:19:23,240 --> 00:19:25,800 Speaker 1: amazing number if you think about it. How why the 354 00:19:25,840 --> 00:19:29,399 Speaker 1: distribution is of that? So I think you have to 355 00:19:29,400 --> 00:19:32,160 Speaker 1: get to a point of looking at where the market is, 356 00:19:32,440 --> 00:19:34,600 Speaker 1: where global growth is going to be, and then make 357 00:19:34,680 --> 00:19:37,879 Speaker 1: that determination. Right now, we've run up twelve percent in 358 00:19:37,920 --> 00:19:40,360 Speaker 1: the SMP so far this year. I mean you look 359 00:19:40,359 --> 00:19:44,400 Speaker 1: at European stocks, they're up huge. Why so going into 360 00:19:44,440 --> 00:19:46,359 Speaker 1: they're going to in a recession. Half of Europe is 361 00:19:46,400 --> 00:19:48,040 Speaker 1: going to be in a recession, you know in two 362 00:19:48,040 --> 00:19:50,639 Speaker 1: thousand twenty. So what happened in December was that just 363 00:19:50,720 --> 00:19:54,040 Speaker 1: a bad dream for the marketplaces or there's should we 364 00:19:54,080 --> 00:19:56,320 Speaker 1: be pulling out some nuggets of real truth out of that? 365 00:19:56,400 --> 00:20:00,560 Speaker 1: December Swim, I think you have the algorithms actually, kid right. 366 00:20:00,680 --> 00:20:05,080 Speaker 1: So again, when we look at liquidity characteristics of the market, 367 00:20:05,119 --> 00:20:08,000 Speaker 1: they have changed because the market is not going to 368 00:20:08,040 --> 00:20:10,119 Speaker 1: be as orderly as it has been in the past. 369 00:20:10,720 --> 00:20:13,480 Speaker 1: And when there's zero interest rates and everyone is looking 370 00:20:13,480 --> 00:20:15,560 Speaker 1: at it saying, okay, we can stay long risk assets 371 00:20:15,600 --> 00:20:17,679 Speaker 1: for as long as possible, it makes a lot of 372 00:20:17,680 --> 00:20:20,080 Speaker 1: sense to continue to stay long. Once you get to 373 00:20:20,160 --> 00:20:22,320 Speaker 1: a point where there's fear in the marketplace, you're going 374 00:20:22,359 --> 00:20:26,159 Speaker 1: to see large price discrepancies. And Wall Street used to 375 00:20:26,200 --> 00:20:29,800 Speaker 1: be great as a as a middleman and really an 376 00:20:29,920 --> 00:20:35,320 Speaker 1: orderly market participant. And once that leaves, the whole marketplace 377 00:20:35,359 --> 00:20:37,280 Speaker 1: starts to look very different. And I think the next 378 00:20:37,280 --> 00:20:39,280 Speaker 1: five years will look very different than the last five. 379 00:20:39,800 --> 00:20:43,120 Speaker 1: How how has fundraising ben for you? We can't talk 380 00:20:43,160 --> 00:20:45,280 Speaker 1: about that, no, no no, no, But in terms of when 381 00:20:45,320 --> 00:20:48,000 Speaker 1: you go to clients, are they looking for alternatives? Are 382 00:20:48,000 --> 00:20:50,840 Speaker 1: they're looking for you know, what are they looking for 383 00:20:51,400 --> 00:20:53,680 Speaker 1: from hedge funds? I think they're looking for people who 384 00:20:53,760 --> 00:20:56,639 Speaker 1: are going to drive alpha, right, So there's been so 385 00:20:56,720 --> 00:21:01,040 Speaker 1: little alpha out there that they're now looking at opportunities 386 00:21:01,080 --> 00:21:04,679 Speaker 1: to not just be a market participant. And let's face it, 387 00:21:04,720 --> 00:21:07,119 Speaker 1: if you look at the hedge fund community, they've probably 388 00:21:07,200 --> 00:21:09,800 Speaker 1: steered more towards trying to keep their management fee in 389 00:21:09,840 --> 00:21:13,800 Speaker 1: place then actually drive alpha. So that that change, I 390 00:21:13,800 --> 00:21:15,399 Speaker 1: think it's going to happen as well. The reason why 391 00:21:15,440 --> 00:21:18,199 Speaker 1: I ask is because we're actually getting some indications that 392 00:21:18,280 --> 00:21:21,800 Speaker 1: flows have stabilized after years of outflows from hedge funds, 393 00:21:22,000 --> 00:21:24,160 Speaker 1: and that you're actually starting to see some inflows again 394 00:21:24,320 --> 00:21:26,639 Speaker 1: and certainly redemptions have stopped, and that was sort of 395 00:21:26,680 --> 00:21:28,760 Speaker 1: I'm just wondering if that drives with your experience that 396 00:21:28,800 --> 00:21:31,879 Speaker 1: the people who are still looking for alternatives, uh, you 397 00:21:32,000 --> 00:21:35,320 Speaker 1: know what what the ups and downs are absolutely Uh, 398 00:21:36,400 --> 00:21:39,760 Speaker 1: everyone is right now trying to figure out we probably 399 00:21:39,800 --> 00:21:43,120 Speaker 1: live in a mid single digit equity world going forward 400 00:21:43,160 --> 00:21:45,719 Speaker 1: the next five or ten years. That's drastically different than 401 00:21:45,760 --> 00:21:49,399 Speaker 1: the last ten. So in a low return environment, everyone 402 00:21:49,480 --> 00:21:53,040 Speaker 1: is looking for ways to drive higher returns. So I 403 00:21:53,080 --> 00:21:55,040 Speaker 1: know Bill Gross was mentioning that he thinks, you know, 404 00:21:55,040 --> 00:21:56,879 Speaker 1: the hedge funds will have to really be creative in 405 00:21:56,960 --> 00:22:02,000 Speaker 1: terms of maybe infrastructure infrastructure, investing hard commodities, buying timber, 406 00:22:02,080 --> 00:22:04,439 Speaker 1: for example. Do you share the view that you're gonna 407 00:22:04,640 --> 00:22:06,720 Speaker 1: need more tools in a toolbox for the average hedge 408 00:22:06,760 --> 00:22:10,840 Speaker 1: fund manager, I think, depending on what your mission is, 409 00:22:11,000 --> 00:22:14,320 Speaker 1: certainly more tools are better than less. Um. I think 410 00:22:14,359 --> 00:22:17,160 Speaker 1: the markets have always looked for opportunities, and hedge funds 411 00:22:17,200 --> 00:22:19,760 Speaker 1: have always looked for opportunities. You know, they may come 412 00:22:19,760 --> 00:22:23,240 Speaker 1: in different forms, but it's not just about buying queue 413 00:22:23,240 --> 00:22:25,160 Speaker 1: SIPs at some point in time. It's also about looking 414 00:22:25,200 --> 00:22:27,760 Speaker 1: for other things. Sean twenty seconds, what's the next move 415 00:22:27,800 --> 00:22:30,639 Speaker 1: for a treasury yields? Up or down? Big move? I 416 00:22:30,640 --> 00:22:32,560 Speaker 1: think the long end of the curve actually goes up 417 00:22:33,080 --> 00:22:35,919 Speaker 1: um not not big. I mean it's probably fifty basis points. 418 00:22:36,119 --> 00:22:39,280 Speaker 1: Uh So you can see a three sixty seventy long 419 00:22:39,320 --> 00:22:42,320 Speaker 1: bond um, which in the grand scheme of things isn't 420 00:22:42,320 --> 00:22:45,320 Speaker 1: a big move at all. And and I think the 421 00:22:45,359 --> 00:22:49,160 Speaker 1: fixed income market, and certainly the guvy space, has been 422 00:22:49,200 --> 00:22:51,280 Speaker 1: really cautious about what's going on in the world and 423 00:22:51,320 --> 00:22:54,240 Speaker 1: looking at global growth and saying this is a tough environment. 424 00:22:54,440 --> 00:22:57,080 Speaker 1: So I think you'll start to see steeping the yolkurbs interesting. 425 00:22:57,119 --> 00:22:59,720 Speaker 1: Sean Matthews, Thank you so much for being here. Sean Matthews, 426 00:22:59,720 --> 00:23:03,480 Speaker 1: see Yo of Hondya's Capital Management, former chief executive officer 427 00:23:03,560 --> 00:23:06,800 Speaker 1: of Cantor Fitzgerald joining us here in our Bloomberg Interactive 428 00:23:06,840 --> 00:23:24,720 Speaker 1: Broker's studios. Well trying to remains aggressive in trying to 429 00:23:24,760 --> 00:23:28,360 Speaker 1: support its economy via fiscal stimulus, while at the same 430 00:23:28,400 --> 00:23:32,680 Speaker 1: time also lowering its outlook for growth to six six 431 00:23:32,760 --> 00:23:34,919 Speaker 1: to six and a half percent range. The question is 432 00:23:34,960 --> 00:23:37,440 Speaker 1: can they do both? To answer that question, we bring 433 00:23:37,440 --> 00:23:41,720 Speaker 1: in Brendan Ahearn, chief investment officer for Crane Shares based 434 00:23:41,720 --> 00:23:44,040 Speaker 1: in New York City, joins us on the phone. Brendan, 435 00:23:44,080 --> 00:23:47,040 Speaker 1: thanks so much for joining us. So China clearly is 436 00:23:47,080 --> 00:23:51,399 Speaker 1: remaining aggressive using the fiscal fiscal stimulus tool in its toolbox. 437 00:23:51,760 --> 00:23:55,160 Speaker 1: How successful do you think they will be? Well point 438 00:23:55,200 --> 00:23:57,640 Speaker 1: I did you believe that things are thus far as 439 00:23:57,640 --> 00:24:01,399 Speaker 1: showing we're seeing those green shoots. We're seeing the stimulus 440 00:24:01,400 --> 00:24:04,600 Speaker 1: solely trickled down into some of the economic releases. We've 441 00:24:04,640 --> 00:24:08,200 Speaker 1: probably not completely bottomed on from an economic or corporate 442 00:24:08,200 --> 00:24:11,720 Speaker 1: earnings perspective. At the same time, equity markets are forward 443 00:24:11,720 --> 00:24:16,280 Speaker 1: looking and I think the market is anticipating that the 444 00:24:16,400 --> 00:24:20,000 Speaker 1: positive effect is stimulus, both fiscal and monetary, will be 445 00:24:20,040 --> 00:24:22,600 Speaker 1: a good thing for the economy over for the for 446 00:24:22,640 --> 00:24:25,080 Speaker 1: the economy over the course of this year, and markets 447 00:24:25,119 --> 00:24:28,200 Speaker 1: are rallying on that news. Brendon, does no one care 448 00:24:28,200 --> 00:24:32,199 Speaker 1: about leverage anymore? I think they still do care about leverage. 449 00:24:32,200 --> 00:24:35,359 Speaker 1: I think the Chinese, particularly you know, had pivoted to 450 00:24:36,200 --> 00:24:42,679 Speaker 1: a domestic agenda in seventeen that was focused on deleveraging. However, 451 00:24:42,720 --> 00:24:46,919 Speaker 1: the trade war they've had to backburner that effort. Going forward, 452 00:24:46,920 --> 00:24:50,560 Speaker 1: we're going to see more targeted credit growth, trying to 453 00:24:50,600 --> 00:24:55,200 Speaker 1: get credit to small medium enterprises, private companies as opposed 454 00:24:55,200 --> 00:24:58,080 Speaker 1: to the big est state owned enterprises. So how important, 455 00:24:58,119 --> 00:25:01,800 Speaker 1: Brendan are success full trade negotiations with the US to 456 00:25:02,320 --> 00:25:06,199 Speaker 1: supporting what the Chinese government wants for its economy. I 457 00:25:06,240 --> 00:25:09,840 Speaker 1: think for from an economic perspective, you know, China, there's 458 00:25:09,880 --> 00:25:12,720 Speaker 1: parts of China that are a going through a boom 459 00:25:12,800 --> 00:25:17,119 Speaker 1: time right now. Um, you know, like shen Zen. Um, 460 00:25:17,119 --> 00:25:18,800 Speaker 1: no different than you know, I was just out in 461 00:25:18,840 --> 00:25:21,720 Speaker 1: San Francisco last week. Uh, there's parts of China that 462 00:25:21,720 --> 00:25:25,240 Speaker 1: are are doing poorly. Uh, No different than here in 463 00:25:25,240 --> 00:25:29,120 Speaker 1: the United States. So so, I think export driven manufacturers 464 00:25:29,119 --> 00:25:33,399 Speaker 1: are facing a very very difficult, challenging environment. UM. So 465 00:25:33,440 --> 00:25:37,800 Speaker 1: they need to do support that really addresses the big, 466 00:25:38,160 --> 00:25:41,879 Speaker 1: big geography, big economy that they have. Well, how about that, 467 00:25:41,880 --> 00:25:43,240 Speaker 1: you know one of the things when you I was 468 00:25:43,280 --> 00:25:46,520 Speaker 1: just looking at the Ali Baba's recent results and boy, 469 00:25:46,560 --> 00:25:50,040 Speaker 1: the consumer, the Chinese consumer seems quite strong, and it's 470 00:25:50,080 --> 00:25:52,560 Speaker 1: maybe stronger than one would expect. What is your sense 471 00:25:52,560 --> 00:25:55,680 Speaker 1: about the Chinese consumer and consumer buying power? I think 472 00:25:55,680 --> 00:25:58,440 Speaker 1: the rumors on the death of the Chinese consumer have 473 00:25:58,480 --> 00:26:03,000 Speaker 1: been greatly exaggerated. Um. If one looks at the say 474 00:26:03,240 --> 00:26:06,840 Speaker 1: service p M I UM, we see it's an expansion. 475 00:26:06,960 --> 00:26:10,640 Speaker 1: We see this from the company themselves. Ce Trip reported 476 00:26:11,240 --> 00:26:14,360 Speaker 1: um after the market closes, having a very very large 477 00:26:14,440 --> 00:26:18,280 Speaker 1: rally today. Right this is uh Um online travel company 478 00:26:18,280 --> 00:26:21,679 Speaker 1: in China. So so, I think where where where we 479 00:26:21,760 --> 00:26:25,199 Speaker 1: want as investors be focused on this domestic consumption. That's 480 00:26:25,200 --> 00:26:27,480 Speaker 1: where a lot of the stimulus and support for the 481 00:26:27,520 --> 00:26:30,320 Speaker 1: economy has taken place. They want to raise domestic consumption, 482 00:26:30,640 --> 00:26:33,040 Speaker 1: push on that gas pedal. At the same time, if 483 00:26:33,040 --> 00:26:36,200 Speaker 1: you look at multinationals such as like a Caterpillar that's 484 00:26:36,280 --> 00:26:39,280 Speaker 1: geared to the element of China's economy that's slowing, and 485 00:26:39,280 --> 00:26:42,480 Speaker 1: I think investors want to avoid that aspect. How much 486 00:26:42,680 --> 00:26:46,800 Speaker 1: has the trade skirmish or trade disagreement, trade war, whatever 487 00:26:46,800 --> 00:26:48,680 Speaker 1: you wanna call it, how much has that affected the 488 00:26:48,760 --> 00:26:54,520 Speaker 1: Chinese economy. So it's certainly affected an element of China's economy. 489 00:26:54,520 --> 00:27:00,760 Speaker 1: Remember China's economy UHI is the service sector today about 490 00:27:00,800 --> 00:27:03,520 Speaker 1: ten agriculture. So you do have a big element of 491 00:27:03,760 --> 00:27:08,960 Speaker 1: China that is geared to export driven manufacturing UM. Aggregate 492 00:27:09,000 --> 00:27:11,520 Speaker 1: exports the United States is less than twenty percent of 493 00:27:11,640 --> 00:27:14,920 Speaker 1: China's overall exports, but obviously that that's a very big 494 00:27:14,960 --> 00:27:18,840 Speaker 1: percentage and that has been very much hampered. At the 495 00:27:18,840 --> 00:27:23,119 Speaker 1: same time, China is trying to support domestic consumption to 496 00:27:23,400 --> 00:27:26,719 Speaker 1: offset the weakness in one element of the economy, and 497 00:27:26,800 --> 00:27:31,480 Speaker 1: so it has had an effect on specific geographic areas 498 00:27:31,880 --> 00:27:35,359 Speaker 1: an element of China's economy UM, but not not the 499 00:27:35,480 --> 00:27:38,280 Speaker 1: whole economy. And that's what something investors missed. So I'm 500 00:27:38,320 --> 00:27:41,320 Speaker 1: just wondering from the p m I perspective and manufacturing data, 501 00:27:41,359 --> 00:27:44,360 Speaker 1: the slowdown that we've seen there, which has been disproportionate uh, 502 00:27:44,480 --> 00:27:47,199 Speaker 1: for well, hasn't been disproportionate because of the trade issues. 503 00:27:47,920 --> 00:27:51,560 Speaker 1: So so, certainly manufacturing p m I s are um 504 00:27:51,680 --> 00:27:54,320 Speaker 1: Both the you know, the the official as well as 505 00:27:54,359 --> 00:27:56,960 Speaker 1: the cash in a are are in negative terror territory 506 00:27:56,960 --> 00:28:00,480 Speaker 1: there below fifty, which is the acceleration. At the same time, 507 00:28:00,560 --> 00:28:02,840 Speaker 1: the non manufacturing or the service p m I s 508 00:28:02,920 --> 00:28:08,440 Speaker 1: are still in expansion territory. What's interesting, Lisa's using Google trends. 509 00:28:08,560 --> 00:28:11,720 Speaker 1: If you type China manufacturing p m I, you get 510 00:28:11,760 --> 00:28:15,000 Speaker 1: a whole slew of results. You type China service p 511 00:28:15,200 --> 00:28:18,040 Speaker 1: m I no results. That literally it says there's no 512 00:28:18,280 --> 00:28:21,399 Speaker 1: data to input that. So I think in general investors 513 00:28:21,400 --> 00:28:25,200 Speaker 1: still view China's this export driven manufacturing engine. That's not 514 00:28:25,320 --> 00:28:30,040 Speaker 1: that's not necessarily the reality today. Brenden Ahern, thank you 515 00:28:30,040 --> 00:28:32,640 Speaker 1: so much for being with us. Brennan is chief investment 516 00:28:32,640 --> 00:28:35,600 Speaker 1: officer at Crane Shares in New York talking to us 517 00:28:35,640 --> 00:28:39,520 Speaker 1: about China. Thanks for listening to the Bloomberg pm L podcast. 518 00:28:39,680 --> 00:28:42,280 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts 519 00:28:42,360 --> 00:28:45,320 Speaker 1: or whatever podcast platform you prefer. I'm Paul Sweeney, I'm 520 00:28:45,360 --> 00:28:48,080 Speaker 1: on Twitter at pt Sweeney. I'm Lisa Bramwo. It's I'm 521 00:28:48,080 --> 00:28:51,040 Speaker 1: on Twitter at Lisa Bramwoit's one before the podcast. You 522 00:28:51,040 --> 00:28:53,600 Speaker 1: can always catch us worldwide on Bloomberg Radio