WEBVTT - Target Will Benefit Most From Retailer Bankruptcies (Podcast) 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:22.919 at Bloomberg dot com. Well, the death of US retail 0:00:23.239 --> 0:00:27.319 was grossly exaggerated. Coal shares that climbing more than seven 0:00:27.320 --> 0:00:31.040 percent almost eight percent now after reporting better than expected earnings. 0:00:31.040 --> 0:00:33.760 Target also rallying. Joining us here to talk about that 0:00:33.760 --> 0:00:36.520 in your Bloomberg Interactive Broker Studios is Burt Flickinger, Managing 0:00:36.560 --> 0:00:40.519 director for Strategic Resource Group, So Bird. It seems like 0:00:40.880 --> 0:00:43.000 certainly Target and Coals and a number of others have 0:00:43.080 --> 0:00:45.840 surprised to the upside. Is this a sign that US 0:00:45.920 --> 0:00:48.720 consumers are in good shape and that retail is coming 0:00:48.760 --> 0:00:51.479 back in brick and mortar form? Or is this a 0:00:51.520 --> 0:00:54.800 case of good management in a select number of cases? Lisa, 0:00:54.840 --> 0:00:58.400 to your point, good management always always wins, particularly for 0:00:58.440 --> 0:01:02.720 the well capitalized companies that investing in technology, digital, retail 0:01:03.200 --> 0:01:07.039 and really having what consumers want at the best possible prices. 0:01:07.040 --> 0:01:10.119 So iss you and Paul have reported off prices winning, 0:01:10.400 --> 0:01:13.600 UH targets winning, Walmart's winning, while a lot of the 0:01:13.600 --> 0:01:16.880 rest of the retails losing. So looking through the Coals 0:01:17.120 --> 0:01:18.680 earning statement, one of the things that was interesting is 0:01:18.760 --> 0:01:21.200 they they called out there, I guess the partnership with 0:01:21.560 --> 0:01:25.679 Amazon as being you know, a contributor to growth. What 0:01:25.680 --> 0:01:27.560 what actually are they doing with Jim? What does that 0:01:27.640 --> 0:01:30.880 joint venture or that partnership it's a joint venture. Interestingly, 0:01:30.959 --> 0:01:35.600 Paul's something that Target dot Com tried with Amazon for 0:01:35.640 --> 0:01:39.319 seven years and it didn't work out, but for because 0:01:39.360 --> 0:01:43.839 Amazon essentially got the Target Target quote unquote guest database, 0:01:43.920 --> 0:01:47.039 and UH they migrated a lot of those shoppers over 0:01:47.040 --> 0:01:52.480 to Amazon. But with Coal's not have invested significantly sufficiently 0:01:52.520 --> 0:01:56.400 in digital. UH. The Amazon partnership in terms of cross 0:01:56.480 --> 0:02:00.120 platform similar to what Richard Baker's doing with Huts and 0:02:00.400 --> 0:02:04.680 Hudson Bay, Sacks and the operating companies to UH. It 0:02:04.800 --> 0:02:08.360 provides a customer base from combined companies and helps both 0:02:09.720 --> 0:02:14.120 increase units customer counts, sell through whether it's digital as 0:02:14.120 --> 0:02:15.960 well as fulfillment and so so if if I have 0:02:16.000 --> 0:02:18.640 a return from an Amazon, I can bring it to 0:02:18.680 --> 0:02:21.320 a coal store. You can bring it to a coal store. 0:02:21.480 --> 0:02:26.320 And his Bran Cornell pointed out with Bloomberg earlier this morning, 0:02:26.680 --> 0:02:31.360 seventy five cent of all UM targets digital sales are 0:02:31.400 --> 0:02:34.880 fulfilled in store. So UH to your point, advantage Coals 0:02:34.919 --> 0:02:38.519 and advantage Target to how much is the rally that 0:02:38.560 --> 0:02:42.520 we're seeing in the positive forecasts for the year from 0:02:42.520 --> 0:02:44.680 Coals and Target? How much is that a result of 0:02:44.720 --> 0:02:47.440 the bankruptcies of a number of retailers that we've seen 0:02:47.480 --> 0:02:51.800 from Jim Boree, etcetera. Lisa important point in in targets 0:02:51.800 --> 0:02:55.560 home markets, everything from her Burger's and Carson's division of 0:02:55.600 --> 0:02:59.760 the Bontan Company, pay Less on Deck, UH and with 0:03:00.000 --> 0:03:03.240 Boys are us in a number of other key retailers 0:03:02.720 --> 0:03:08.040 of affecting UH shifting shoppers. The bankruptcies have have been 0:03:08.360 --> 0:03:12.840 half of targets increase in our estimation, and that makes 0:03:12.880 --> 0:03:17.960 Cole's one percent same store comparison sales okay, but not 0:03:17.960 --> 0:03:20.760 not really that good. This is really fascinating to me. This, 0:03:20.919 --> 0:03:24.040 to me is a really important story. We're finally slowly 0:03:24.120 --> 0:03:26.600 starting to see the denue mall of some of these 0:03:26.600 --> 0:03:29.840 struggling retailers going out of business, and this is helping 0:03:30.320 --> 0:03:34.600 the healthier retailers survive and thrive. Where are we in 0:03:34.639 --> 0:03:37.520 the cycle of bankruptcies for retailers? Can we finally see 0:03:37.560 --> 0:03:41.320 the regrowth of this industry? Lisa, We're about three fifths 0:03:41.360 --> 0:03:44.320 of the way through. So Target will benefit the most 0:03:44.680 --> 0:03:46.800 from the bankruptcies of a lot of food and drug 0:03:46.840 --> 0:03:49.560 retailers were hoping for the best, fearing for the worst. 0:03:49.880 --> 0:03:52.360 With right aid, obviously, Target is going to be the 0:03:52.400 --> 0:03:55.680 big beneficiary there, and from the mid tier to moderate 0:03:56.040 --> 0:04:01.160 department stores and sears Kmart which actually had fairly good 0:04:01.200 --> 0:04:04.920 soft soft goods, uh, Targets still the big beneficiary. So 0:04:05.800 --> 0:04:10.160 Targets still a little bit further than halftime and benefiting, 0:04:10.200 --> 0:04:15.400 But targets biggest benefit is really marketing, merchandizing value, branding, 0:04:15.440 --> 0:04:20.200 own label, and with the political elections taking media costs 0:04:20.240 --> 0:04:25.040 to unprecedented proportions in nineteen and the year twenty twenty, 0:04:25.160 --> 0:04:32.719 Target has some of the most effective ads, digital, connective, social, outdoor, radio, TV, 0:04:33.120 --> 0:04:36.480 as as does Walmart. And the effectiveness and the great 0:04:36.520 --> 0:04:40.040 copy and the creative with Target as well as Walmart's 0:04:40.080 --> 0:04:42.279 really helping both win. And it gets to what you 0:04:42.279 --> 0:04:46.240 guys were saying, management leadership wins every time. Essentially, I 0:04:46.320 --> 0:04:48.960 like that the concept that three fists of the way 0:04:49.000 --> 0:04:51.599 through kind of dealing with this consolidation of the industry. 0:04:51.640 --> 0:04:54.719 Does that also relate to the number of stores the 0:04:54.720 --> 0:04:58.240 global the US footprint stores? Are we three fists the 0:04:58.240 --> 0:05:01.000 way through rationalizing just the number of stores and in 0:05:01.040 --> 0:05:03.760 the footprint we're probably only two fists of the way through, 0:05:04.880 --> 0:05:11.359 right from about overstored to about But Paul, what you 0:05:11.440 --> 0:05:14.440 and Tom Keane and Arthur Levitt we're talking about on 0:05:14.520 --> 0:05:18.839 surveillance and you, Lisa and Carol masser Uh and Jason 0:05:18.880 --> 0:05:23.039 Sweeney we're talking about later for retail with medical marijuana. 0:05:23.320 --> 0:05:26.159 Arthur Levitt was saying, the sales tax in Denver was 0:05:26.200 --> 0:05:28.880 thirty two million, so obviously the sales are a huge 0:05:28.960 --> 0:05:32.880 multiple of that. So medical marijuana may actually drive customer 0:05:32.960 --> 0:05:37.560 counts into the pharmacies of the target CVS. Insular pharmacies 0:05:38.240 --> 0:05:42.480 won't help coals help time. Paul, just can't help yourself 0:05:42.680 --> 0:05:45.080 when they legalize marijuana. That's just gonna make right age 0:05:45.120 --> 0:05:49.960 shares surge. Right might not say soon enough. Well, I 0:05:50.240 --> 0:05:52.920 guess that, you know. I'm just wondering what's taking so long? 0:05:53.360 --> 0:05:55.920 What will what will hurry the cycle up and allow 0:05:56.040 --> 0:05:58.919 retail to kind of get its bearings and grow again. 0:05:59.600 --> 0:06:02.600 The for them to really grow, they have to do 0:06:02.680 --> 0:06:06.400 what targets doing. Target, to the company's credit, has the 0:06:06.480 --> 0:06:12.960 greatest gender UH social social diversity across its management groups, 0:06:13.000 --> 0:06:17.280 so arguably one of the best leadership teams in retail worldwide. 0:06:17.400 --> 0:06:21.880 And in a declining birth rate, declining family formation, targets 0:06:21.920 --> 0:06:25.760 getting more of the parents with young children and with 0:06:25.800 --> 0:06:29.600 a pet population with dogs and cat adoptions growing four 0:06:29.640 --> 0:06:34.560 times faster than the birth rate for people. Targets getting babies, pets, 0:06:34.880 --> 0:06:38.720 and lifetime loyalty from consumers of all languages and all 0:06:39.000 --> 0:06:42.200 United Nations of consumer constituency. I gotta be honest with 0:06:42.200 --> 0:06:44.599 that with you, Paul. I mean, when I was dealing 0:06:44.640 --> 0:06:47.960 with babies, Target was amazing because you could get the diapers, 0:06:48.000 --> 0:06:49.800 you could get clothes that weren't going to cost you 0:06:49.839 --> 0:06:52.520 a crazy amount, all in the same place, and you 0:06:52.520 --> 0:06:55.920 could get shampooon conditioner. That was actually a very very 0:06:55.960 --> 0:06:59.040 positive development. I think Purchase gave us the stat of 0:06:59.080 --> 0:07:01.680 the day with the pets four times the growth rate 0:07:01.720 --> 0:07:04.960 of the human population. I didn't know that. Really. Yeah, 0:07:04.960 --> 0:07:08.120 the people actually are adopting more pets now than than 0:07:08.200 --> 0:07:11.240 having children year. Well, there's gotta be an investment play there. 0:07:11.840 --> 0:07:13.280 So you go to the stores that have the biggest 0:07:13.320 --> 0:07:16.200 pet departments. I guess yeah, And it gets to your 0:07:16.400 --> 0:07:20.720 your leadership point. Paul is pet Smart is on Moody's 0:07:20.800 --> 0:07:23.560 list of seventeen retailers that could go bankrupt this year. 0:07:24.200 --> 0:07:29.920 Uh less capable, undercapitalized, where Target Walmart. Even though they're 0:07:29.960 --> 0:07:34.320 not category dominant and pet is a soul source destination, 0:07:34.680 --> 0:07:37.720 they're still winning with pets more than pet smart. Is 0:07:38.520 --> 0:07:42.200 really interesting to you have a pet uh son, Nick 0:07:42.280 --> 0:07:46.240 and wife actually have to rescue pets Reggie and Bow. 0:07:46.400 --> 0:07:49.200 And look at Popper west Siders dot com for Dick's 0:07:49.240 --> 0:07:53.480 pet blog on rescue pets. I didn't know this was 0:07:53.520 --> 0:07:55.960 gonna turn into a discussion of pets, but you never know. 0:07:56.000 --> 0:07:59.240 We're retails, retail retail increasingly. This is actually a sign 0:07:59.280 --> 0:08:02.040 of the times. Take this too heart. This has been 0:08:02.200 --> 0:08:04.600 the transformation. People would rather have a dog than a kid. 0:08:05.040 --> 0:08:08.200 Three point four million pet adoptions every year. Oh that's 0:08:08.320 --> 0:08:10.960 all right, another Saturday, Bert flicking sure, thank you so much. 0:08:11.000 --> 0:08:14.680 Bert is the managing director Strategic Resource Resource Group. He 0:08:14.800 --> 0:08:32.800 joined us here in our Bloomberg Interactive Broker Studio. This 0:08:33.080 --> 0:08:36.439 maybe the year of Unicorn initial public offerings. We are 0:08:36.480 --> 0:08:40.160 expecting Lift to start their road show and get their 0:08:40.160 --> 0:08:44.280 initial public offering off, the off off off, and get 0:08:44.280 --> 0:08:47.600 this on track. A question here is how active will 0:08:47.640 --> 0:08:50.080 this year be and how much will these companies be 0:08:50.160 --> 0:08:51.839 valued at? Joining us now to answer some of those 0:08:51.920 --> 0:08:56.560 questions at Data, chief executive officer of equity Zen based 0:08:56.640 --> 0:08:59.600 in New York. Equity Zen is a fascinating company that 0:08:59.640 --> 0:09:04.320 basicly enables from getting this right, enables individuals to transact 0:09:04.360 --> 0:09:07.240 in private shares ahead of these i p o s. 0:09:07.320 --> 0:09:09.880 Is that correct? Yeah, that's that's right. Look, we're not 0:09:10.720 --> 0:09:13.640 inventing anything that didn't exist a hundred years ago. Effectively, 0:09:13.640 --> 0:09:17.040 what we're doing is taking something that was only available 0:09:17.080 --> 0:09:19.080 for people that could write a ten million dollar check. 0:09:19.200 --> 0:09:21.400 It's a private company. I know the company. I wanna 0:09:21.559 --> 0:09:23.920 you know everyone. I know us as this company. I'd 0:09:23.920 --> 0:09:26.840 like to invest before the I p o. Uh. If 0:09:26.880 --> 0:09:28.840 you don't have ten million bucks, it's really hard for 0:09:28.840 --> 0:09:31.120 you to get a seat at the table. Uh. Through 0:09:31.160 --> 0:09:35.160 Equisence platform, qualified investors can purchase the shares before the 0:09:35.200 --> 0:09:38.959 company goes public. So is this basically a price discovery 0:09:39.040 --> 0:09:42.760 mechanism whereby companies can figure out, huh, now might be 0:09:42.800 --> 0:09:45.960 the time to go public. That's definitely a very you know, 0:09:46.080 --> 0:09:48.600 big value offering that companies get. The other thing that 0:09:49.200 --> 0:09:51.360 a lot of companies benefit from by using a platform 0:09:51.360 --> 0:09:53.880 like equities and is Hey, look, you know, we thought 0:09:54.320 --> 0:09:56.480 Q four was going to be a great time to 0:09:56.520 --> 0:09:58.880 go public, but guess what, the markets turn volatile, So 0:09:58.920 --> 0:10:01.880 we're gonna wait another or six twelve months to go public. 0:10:02.559 --> 0:10:04.360 But I told all my employees that we're gonna go 0:10:04.440 --> 0:10:07.280 public in twenty eighteen. So let me allow the secondary 0:10:07.320 --> 0:10:09.600 platform to give them a little bit of liquidity and 0:10:09.679 --> 0:10:12.120 basically fine tune exactly when I'm going to go public, 0:10:12.280 --> 0:10:17.240 keep the employees happy, get outside shareholder shareholders excited. Uh, 0:10:17.280 --> 0:10:18.840 and me as a company, I didn't have to take 0:10:18.840 --> 0:10:22.240 any delusion in order to conduct a secondary Trains is 0:10:22.240 --> 0:10:24.960 going to be presumably a huge year for tech I 0:10:25.080 --> 0:10:28.079 p O S and for you know your company as well. 0:10:28.120 --> 0:10:31.240 We've got Lift, We've got Uber, we've got Airbnb. Presumably, 0:10:31.400 --> 0:10:34.400 let's focus on Lift. You know, we saw the prospectives 0:10:34.400 --> 0:10:36.200 come out last week. I think they had trailing revs 0:10:36.200 --> 0:10:38.760 of about two point two billion. Yet they want to 0:10:38.800 --> 0:10:42.160 raise twenty to twenty five billion dollars. Is that kind 0:10:42.160 --> 0:10:45.000 of evaluation? Ten times revenue or twelve times revenue? Is 0:10:45.000 --> 0:10:47.480 that reasonable in this market? Well, you know, if you 0:10:47.559 --> 0:10:50.080 take a look at lifts only competitor, which is a 0:10:50.080 --> 0:10:54.280 private company Uber, Uh, It's it's not even uh you know, 0:10:54.320 --> 0:10:56.960 a fair comparison. Uber is this goliath, you know, eleven 0:10:56.960 --> 0:10:59.959 billion dollars in revenue, It's in over half the country 0:11:00.120 --> 0:11:02.320 is out there, It's it's got Uber Eats, It's got 0:11:02.320 --> 0:11:05.320 five other business lines. Lift is a pure play ride 0:11:05.360 --> 0:11:09.240 hill company focused on US and Canada. There's got a 0:11:09.240 --> 0:11:11.560 lot of growth that Lift is able to demonstrate a 0:11:12.120 --> 0:11:15.360 year every year. Uh. It's got shrinking net lost margins, 0:11:15.360 --> 0:11:17.439 which is always nice to see for tech company to 0:11:17.480 --> 0:11:20.119 go public. I think it's got a pretty exciting valuation 0:11:20.200 --> 0:11:22.840 for a company that many of us, especially here in 0:11:22.840 --> 0:11:26.120 the US and Canada, um have on our phones, if 0:11:26.160 --> 0:11:29.360 not of at least seen friends use it teach. There 0:11:29.400 --> 0:11:32.760 has been an argument made that fewer companies in the 0:11:32.880 --> 0:11:37.199 US are filing for initial public offerings. They're waiting longer 0:11:37.320 --> 0:11:40.480 to do so. That's sort of the idea of US 0:11:40.559 --> 0:11:44.200 public equities is being a way to access the dynamism 0:11:44.240 --> 0:11:46.880 of the U S economy is sort of fading as 0:11:46.920 --> 0:11:49.920 a promise. And I'm just wondering if these if these 0:11:50.040 --> 0:11:53.760 unicorns can access private capital and can even offer their 0:11:53.800 --> 0:11:57.559 employees liquidity on a secondary market for their shares before 0:11:57.559 --> 0:12:00.640 an I p O. Why go public? Why public? That's 0:12:00.640 --> 0:12:04.080 a great question. Look, I think there's still the vast 0:12:04.120 --> 0:12:07.760 majority of the world that cannot access these private markets. 0:12:07.800 --> 0:12:09.720 You know, you have to be an accredited investor, the 0:12:09.840 --> 0:12:12.360 secs some guidelines. These are risky investments at the end 0:12:12.400 --> 0:12:14.760 of the day. So still the vast majority of the 0:12:14.800 --> 0:12:18.280 world can access it. And LIFT and many other consumer companies. 0:12:18.280 --> 0:12:20.520 Spotify is a great example last year where you know 0:12:20.559 --> 0:12:22.640 it's got tens of millions of people using it, but 0:12:22.760 --> 0:12:24.839 if the vast majority of its client base can't even 0:12:24.880 --> 0:12:27.080 buy its own stock, well, then there's a little bit 0:12:27.120 --> 0:12:29.360 of a disconnect, right And a lot of these companies, 0:12:29.400 --> 0:12:32.920 LIFT included our mission driven companies, decent amount of its s. 0:12:32.960 --> 0:12:35.679 One is talking about how the founder's letter and the 0:12:35.679 --> 0:12:38.760 founders mission. Uh, they really want to be able to 0:12:38.840 --> 0:12:41.240 maintain that brand image. Not only is it a rite 0:12:41.240 --> 0:12:44.079 of passage to go public these days, but guess what 0:12:44.160 --> 0:12:46.839 you as a public company can qualify for a lot 0:12:46.840 --> 0:12:49.959 of these institutional long term investors, these pension funds and 0:12:50.040 --> 0:12:53.480 mutual funds, anchor investors that look at ten year horizons, 0:12:53.559 --> 0:12:57.280 not you know, Monday through Thursday. Well, the big issue 0:12:57.320 --> 0:13:00.400 I think that both right hailing companies might have love 0:13:00.400 --> 0:13:03.200 to get your opinion, is they're not even remotely close 0:13:03.240 --> 0:13:05.560 to profitable. List I mean, Lift lost almost I guess 0:13:05.600 --> 0:13:08.199 nine million dollars on two point to million of revenues. 0:13:08.360 --> 0:13:10.280 Uber is not profitable. And I think one of the 0:13:10.280 --> 0:13:12.920 big issues that investors have not had to deal with before, 0:13:12.920 --> 0:13:16.600 whether it's Facebook or Google, is the subsidies that they're 0:13:16.640 --> 0:13:18.679 paying to these drivers for market share. Do you have 0:13:18.760 --> 0:13:21.360 a sense of when when these companies think they will 0:13:21.559 --> 0:13:25.600 be a profit, Well, they are driving closer and closer 0:13:25.640 --> 0:13:28.400 towards profitability. I think in this day and age, a 0:13:28.440 --> 0:13:33.240 lot of folks are almost accepting of high growth companies 0:13:33.480 --> 0:13:35.640 who are willing to lose capital in order to grow 0:13:35.720 --> 0:13:38.360 market share um. What they're going to have to continue 0:13:38.400 --> 0:13:42.240 showing these companies is a path to sustainable profitability. Like 0:13:42.440 --> 0:13:46.680 Lift had a two income margin two years ago, senetic 0:13:46.800 --> 0:13:49.400 margin with the negative sixty last year, it's down to 0:13:49.480 --> 0:13:53.480 forty and change forty three percent this year, uh uber 0:13:53.520 --> 0:13:56.000 has gone down to thirty. So I think they are 0:13:56.200 --> 0:14:00.640 moving towards profitability. But look, there's only one you know, 0:14:00.679 --> 0:14:03.040 I think the Lifts Perspectives said only one percent of 0:14:03.080 --> 0:14:06.000 all miles driven in the US are actually using one 0:14:06.000 --> 0:14:08.760 of these ride hill services, So there's clearly a long 0:14:08.840 --> 0:14:10.480 way to go, and I think there are no hurry 0:14:10.559 --> 0:14:13.080 to try and capture the share. Twenty seconds, what's your 0:14:13.160 --> 0:14:15.800 estimate for I p o s this year? We think 0:14:15.880 --> 0:14:19.640 there's going to be uh five blockbuster I p o 0:14:19.760 --> 0:14:22.920 s and they're all available on you know, equities and 0:14:22.960 --> 0:14:25.880 I p oh outlook, but we're not going to see 0:14:26.080 --> 0:14:28.320 the record number of I p o s. They're gonna 0:14:28.320 --> 0:14:30.480 be the names that everyone's been waiting for for the 0:14:30.520 --> 0:14:32.640 last ten years and they're gonna be huge. They're gonna 0:14:32.640 --> 0:14:34.360 be this It's gonna be a great year I think 0:14:34.400 --> 0:14:37.840 for I p O. Bankers on Wall Street, a Dove 0:14:37.920 --> 0:14:40.280 dot chief executive officer of Equities and joining us in 0:14:40.280 --> 0:14:42.360 our Bloomberg eleven three O studios. Thank you so much 0:14:42.400 --> 0:14:45.080 for joining us again. You know, I think it's uh 0:14:45.200 --> 0:14:47.160 this lift. The deal is going to be very important 0:14:47.280 --> 0:14:49.760 um for the tech markets to start off the year 0:14:49.920 --> 0:14:52.960 right and to get a good trade going. So we'll 0:14:52.960 --> 0:14:54.360 have to see how it goes, and then of course 0:14:54.440 --> 0:14:56.480 Uber will follow it up, and then Airbnb and some 0:14:56.560 --> 0:15:15.880 others well equity investors, what to do? We've had about 0:15:15.880 --> 0:15:19.840 a thirty seven percent round trip from that December decline 0:15:19.880 --> 0:15:21.840 back up to the our performance we've had here in 0:15:22.240 --> 0:15:25.680 nineteen with the SMP up about eleven year to date. 0:15:26.280 --> 0:15:28.000 The question is what to do. So to help us 0:15:28.040 --> 0:15:30.720 answer some of those questions is Sean Matthews, chief executive 0:15:30.760 --> 0:15:33.880 officer from Hondia's Capital Management. Sean is also the former 0:15:33.960 --> 0:15:36.680 CEO of Cantor Fitzgerald. Shawn, thanks for being in our 0:15:36.720 --> 0:15:38.960 studios once again. He's in our Bloomberg eleven three O 0:15:39.040 --> 0:15:40.960 studios here in New York with us. So is it 0:15:41.080 --> 0:15:45.960 time to take money off the table? So, okay, okay, 0:15:46.640 --> 0:15:49.800 if you're if you have a shorter term view, so 0:15:49.920 --> 0:15:52.160 if you've got a twenty year view stocks make sense, 0:15:52.160 --> 0:15:54.040 and it's perfectly fine. But if you have a year 0:15:54.080 --> 0:15:56.720 or less view, certainly taking trips off the table make 0:15:56.760 --> 0:15:58.600 a lot of sense. Here right now. We came into 0:15:58.640 --> 0:16:00.560 the year long risk ass us and thought it was 0:16:00.600 --> 0:16:04.840 a great opportunity. But once you got to a deal 0:16:05.080 --> 0:16:08.920 or a quasideal that's coming out right now with China, 0:16:09.280 --> 0:16:12.400 it makes sense just a de risk. Sean, can we 0:16:12.440 --> 0:16:15.560 talk about Hondia's capital management because I've known you for years, 0:16:15.760 --> 0:16:18.720 um really as the CEO of Cancer to fitz Geralds, 0:16:18.720 --> 0:16:20.520 and you've been at brokerages for years and then you 0:16:20.560 --> 0:16:24.440 went off in last year to start your own hedge 0:16:24.480 --> 0:16:28.400 fund has been going, it's going well. Look, the markets 0:16:28.400 --> 0:16:31.360 are interesting opportunities. So if you look at the opportunity 0:16:31.360 --> 0:16:34.480 sets for the typical hedge fund with zero interest rates 0:16:34.520 --> 0:16:37.640 and correlated assets, they were very low. And going forward 0:16:37.680 --> 0:16:40.280 the next five years, you're going to see the coupling 0:16:40.320 --> 0:16:43.240 of assets. You're gonna see central banks changing their stances 0:16:43.280 --> 0:16:46.560 certainly going back and forth, which creates interesting opportunity. So 0:16:46.720 --> 0:16:48.800 you're going from two opportunities a year to kind of 0:16:48.840 --> 0:16:50.880 six or seven or eight opportunities a year. But we 0:16:50.880 --> 0:16:53.480 were listening to Bill Gross who was speaking on Bloomberg 0:16:53.520 --> 0:16:56.600 Television earlier. He was retiring, of course from Janice and 0:16:56.680 --> 0:16:59.840 the famed bond investor for Pimco. He was saying he 0:17:00.040 --> 0:17:04.040 thinks that the era of generating alpha, true alpha is 0:17:04.119 --> 0:17:07.120 kind of coming to an end, which I think that's 0:17:07.119 --> 0:17:09.920 a misnomer. So there's always gonna be alpha out there. 0:17:10.240 --> 0:17:13.080 The machines have taken some of that away, but you 0:17:13.119 --> 0:17:15.200 have to understand how to trade against the machines as well, 0:17:15.520 --> 0:17:18.720 so there will be interesting opportunities. So the last five 0:17:18.800 --> 0:17:22.000 years there was no alpha. Certainly next five years, I 0:17:22.040 --> 0:17:24.680 think there's gonna be interesting opportunity in real alpha that's 0:17:24.680 --> 0:17:28.640 out there. That's gonna be generated because pricing, and look 0:17:28.720 --> 0:17:32.080 we look at typical assets. Pricing has been very benigns 0:17:32.080 --> 0:17:35.280 because volatility has been low. As volatility picks up, you're 0:17:35.280 --> 0:17:38.640 gonna have large discrepancies in pricing. You don't have enough 0:17:38.680 --> 0:17:41.240 capital sitting in the middle. So the typical Wall Street 0:17:41.280 --> 0:17:44.240 firms had plenty of capital to be a true middleman 0:17:44.920 --> 0:17:48.680 and create orderly markets. That's gone. So there's gonna be 0:17:48.720 --> 0:17:51.040 less capital there because the return of equity for those 0:17:51.440 --> 0:17:54.320 firms has gone down substantially over the last five to 0:17:54.359 --> 0:17:56.600 ten years, So someone's gonna have to step in and 0:17:56.600 --> 0:17:58.240 take advantage. So where do you think you're gonna be 0:17:58.240 --> 0:18:00.200 playing in the next two or three years in terms 0:18:00.240 --> 0:18:02.359 of the fixing coming equity markets? Maybe pushing out on 0:18:02.400 --> 0:18:04.680 the risk curve to e M or something like that. Yeah, 0:18:04.680 --> 0:18:07.159 I think you have to be opportunistic. And if we 0:18:07.200 --> 0:18:10.879 look at the global macro picture, you're starting to see 0:18:10.960 --> 0:18:13.920 some clear delineation of what's going on out there. So 0:18:14.280 --> 0:18:16.840 Europe's in a funk. I think the next thirty years 0:18:16.840 --> 0:18:18.720 that it's gonna be in a funk that's got real problems. 0:18:18.960 --> 0:18:21.040 But you start to look at Asia, especially after the 0:18:21.040 --> 0:18:23.800 tariff deal, is gonna be interesting opportunities there. You look 0:18:23.800 --> 0:18:26.560 at the US as well. I mean, I think if 0:18:26.800 --> 0:18:28.920 as a trader you look at the marketplace right now, 0:18:29.080 --> 0:18:31.439 you'd probably want to be short equities here at some 0:18:31.480 --> 0:18:33.520 point in time for a short term trade, not a 0:18:33.560 --> 0:18:35.600 long term trade, but short term. Okay, So if you 0:18:35.640 --> 0:18:38.359 go short equities, are you going short individual names? Are 0:18:38.359 --> 0:18:41.159 you're going short broad indexes? So you look at broad INDEXUS, right, 0:18:41.200 --> 0:18:43.960 because you know, getting down to that level of each 0:18:43.960 --> 0:18:48.240 individual stock. That takes a lot of analysis and understanding. 0:18:48.480 --> 0:18:52.000 You really understand what are liquidity going on thirty feet, 0:18:52.040 --> 0:18:54.160 what's going on in the marketplace from a high level, 0:18:54.480 --> 0:18:57.400 and then working your way down. All right, So Sean Matthews, 0:18:57.480 --> 0:18:59.919 what are you looking for as the sort of the 0:19:00.119 --> 0:19:03.600 trigger time to short stocks here? And then what are 0:19:03.600 --> 0:19:06.480 you looking for to say, okay, there we go again? 0:19:07.200 --> 0:19:11.560 I think the market is right now going to look 0:19:11.600 --> 0:19:14.520 at earnings going forward and look at global growth. And 0:19:14.920 --> 0:19:17.720 right now no one knows really what's going on. So earnings, 0:19:17.760 --> 0:19:20.120 if you talk to any particular person, you can range 0:19:20.119 --> 0:19:23.239 from zero to ten percent this year. Right, That's an 0:19:23.240 --> 0:19:25.800 amazing number if you think about it. How why the 0:19:25.840 --> 0:19:29.399 distribution is of that? So I think you have to 0:19:29.400 --> 0:19:32.160 get to a point of looking at where the market is, 0:19:32.440 --> 0:19:34.600 where global growth is going to be, and then make 0:19:34.680 --> 0:19:37.879 that determination. Right now, we've run up twelve percent in 0:19:37.920 --> 0:19:40.360 the SMP so far this year. I mean you look 0:19:40.359 --> 0:19:44.400 at European stocks, they're up huge. Why so going into 0:19:44.440 --> 0:19:46.359 they're going to in a recession. Half of Europe is 0:19:46.400 --> 0:19:48.040 going to be in a recession, you know in two 0:19:48.040 --> 0:19:50.639 thousand twenty. So what happened in December was that just 0:19:50.720 --> 0:19:54.040 a bad dream for the marketplaces or there's should we 0:19:54.080 --> 0:19:56.320 be pulling out some nuggets of real truth out of that? 0:19:56.400 --> 0:20:00.560 December Swim, I think you have the algorithms actually, kid right. 0:20:00.680 --> 0:20:05.080 So again, when we look at liquidity characteristics of the market, 0:20:05.119 --> 0:20:08.000 they have changed because the market is not going to 0:20:08.040 --> 0:20:10.119 be as orderly as it has been in the past. 0:20:10.720 --> 0:20:13.480 And when there's zero interest rates and everyone is looking 0:20:13.480 --> 0:20:15.560 at it saying, okay, we can stay long risk assets 0:20:15.600 --> 0:20:17.679 for as long as possible, it makes a lot of 0:20:17.680 --> 0:20:20.080 sense to continue to stay long. Once you get to 0:20:20.160 --> 0:20:22.320 a point where there's fear in the marketplace, you're going 0:20:22.359 --> 0:20:26.159 to see large price discrepancies. And Wall Street used to 0:20:26.200 --> 0:20:29.800 be great as a as a middleman and really an 0:20:29.920 --> 0:20:35.320 orderly market participant. And once that leaves, the whole marketplace 0:20:35.359 --> 0:20:37.280 starts to look very different. And I think the next 0:20:37.280 --> 0:20:39.280 five years will look very different than the last five. 0:20:39.800 --> 0:20:43.120 How how has fundraising ben for you? We can't talk 0:20:43.160 --> 0:20:45.280 about that, no, no no, no, But in terms of when 0:20:45.320 --> 0:20:48.000 you go to clients, are they looking for alternatives? Are 0:20:48.000 --> 0:20:50.840 they're looking for you know, what are they looking for 0:20:51.400 --> 0:20:53.680 from hedge funds? I think they're looking for people who 0:20:53.760 --> 0:20:56.639 are going to drive alpha, right, So there's been so 0:20:56.720 --> 0:21:01.040 little alpha out there that they're now looking at opportunities 0:21:01.080 --> 0:21:04.679 to not just be a market participant. And let's face it, 0:21:04.720 --> 0:21:07.119 if you look at the hedge fund community, they've probably 0:21:07.200 --> 0:21:09.800 steered more towards trying to keep their management fee in 0:21:09.840 --> 0:21:13.800 place then actually drive alpha. So that that change, I 0:21:13.800 --> 0:21:15.399 think it's going to happen as well. The reason why 0:21:15.440 --> 0:21:18.199 I ask is because we're actually getting some indications that 0:21:18.280 --> 0:21:21.800 flows have stabilized after years of outflows from hedge funds, 0:21:22.000 --> 0:21:24.160 and that you're actually starting to see some inflows again 0:21:24.320 --> 0:21:26.639 and certainly redemptions have stopped, and that was sort of 0:21:26.680 --> 0:21:28.760 I'm just wondering if that drives with your experience that 0:21:28.800 --> 0:21:31.879 the people who are still looking for alternatives, uh, you 0:21:32.000 --> 0:21:35.320 know what what the ups and downs are absolutely Uh, 0:21:36.400 --> 0:21:39.760 everyone is right now trying to figure out we probably 0:21:39.800 --> 0:21:43.120 live in a mid single digit equity world going forward 0:21:43.160 --> 0:21:45.719 the next five or ten years. That's drastically different than 0:21:45.760 --> 0:21:49.399