1 00:00:00,120 --> 00:00:04,360 Speaker 1: Bloomberg is now on your dashboard with Apple CarPlay and 2 00:00:04,360 --> 00:00:08,160 Speaker 1: Android Auto. It gives you access to every Bloomberg podcast, 3 00:00:08,280 --> 00:00:11,560 Speaker 1: live audio feeds from Bloomberg Radio, print stories from Bloomberg 4 00:00:11,640 --> 00:00:14,920 Speaker 1: News in audio form, and the latest headlines of the 5 00:00:14,920 --> 00:00:18,640 Speaker 1: click of a button with Bloomberg News. Now it's free 6 00:00:18,680 --> 00:00:21,439 Speaker 1: with the latest version of the Bloomberg Business App. That's 7 00:00:21,680 --> 00:00:24,400 Speaker 1: the Bloomberg Business App. Get it on your phone in 8 00:00:24,440 --> 00:00:27,760 Speaker 1: the Apple App Store or on Google Play. Just download 9 00:00:27,800 --> 00:00:30,560 Speaker 1: the app, connect your phone to your car and get started. 10 00:00:30,960 --> 00:00:34,400 Speaker 1: And it's all presented by our sponsor, Interactive Brokers. 11 00:00:35,400 --> 00:00:38,600 Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 12 00:00:38,640 --> 00:00:39,800 Speaker 2: my co host Matt Miller. 13 00:00:40,200 --> 00:00:44,279 Speaker 1: Every business day we bring you interviews from CEOs, market pros, 14 00:00:44,320 --> 00:00:48,160 Speaker 1: and Bloomberg experts, along with essential market Moven News. 15 00:00:48,720 --> 00:00:51,839 Speaker 2: I'm the Bloomberg Markets podcast called Apple Podcasts or wherever 16 00:00:51,960 --> 00:00:55,080 Speaker 2: you listen to podcasts, and at Bloomberg dot Com Slash podcast. 17 00:00:55,920 --> 00:01:00,240 Speaker 2: Here's a deal. Emily and my Wheelhouse both potentially you know. 18 00:01:00,240 --> 00:01:03,280 Speaker 2: Look at Paramount Global that's the old Viacom, CBS and 19 00:01:03,800 --> 00:01:07,000 Speaker 2: Warner Brothers Discovery again the old time Warner stuff plus 20 00:01:07,280 --> 00:01:10,880 Speaker 2: the Discovery that merger David zaslov as the CEO. Maybe 21 00:01:10,920 --> 00:01:14,800 Speaker 2: those two companies getting together, which would be really interesting. 22 00:01:14,920 --> 00:01:17,840 Speaker 2: Robert Fishman, he's a senior equity analyst at Moffatt Nathanson 23 00:01:18,440 --> 00:01:22,440 Speaker 2: and Robert's longtime street analyst. Maffatt Nathanson pound for pound 24 00:01:22,520 --> 00:01:25,720 Speaker 2: the best TMT research on the street in my opinion, 25 00:01:25,880 --> 00:01:27,399 Speaker 2: that's why we like to talk to those guys when 26 00:01:27,400 --> 00:01:29,400 Speaker 2: we can. Robert, thanks so much for taking the time 27 00:01:29,560 --> 00:01:32,520 Speaker 2: to chat with us here. Give us the rational for 28 00:01:32,600 --> 00:01:38,240 Speaker 2: a potential hookup between Discovery, Warner Brothers, Discovery and Paramount. 29 00:01:39,680 --> 00:01:43,520 Speaker 3: Sure, thanks for having me. Well again, this is all 30 00:01:43,560 --> 00:01:46,800 Speaker 3: speculation at this point. I mean that the reports suggest 31 00:01:46,840 --> 00:01:49,840 Speaker 3: that they clearly met this week. In terms of the 32 00:01:49,880 --> 00:01:52,920 Speaker 3: logic behind it, I think it really just comes back 33 00:01:52,960 --> 00:01:57,160 Speaker 3: to the fact that traditional media is really starting to 34 00:01:57,280 --> 00:02:00,960 Speaker 3: get more desperate. And why I say that is that 35 00:02:01,040 --> 00:02:04,840 Speaker 3: the realities of the fundamental business at hand, with linear 36 00:02:05,040 --> 00:02:10,200 Speaker 3: advertising falling off a cliff and cord cutting continuing to accelerate, 37 00:02:10,600 --> 00:02:15,079 Speaker 3: and the costs of switching and pivoting over to streaming, 38 00:02:15,560 --> 00:02:18,800 Speaker 3: has really challenged a lot of these companies. So now 39 00:02:18,919 --> 00:02:21,600 Speaker 3: they're all looking to figure out how can we try 40 00:02:21,639 --> 00:02:25,239 Speaker 3: to get stronger And the way that it seems most 41 00:02:25,280 --> 00:02:27,240 Speaker 3: of these companies are trying to do that right now, 42 00:02:28,000 --> 00:02:31,280 Speaker 3: at the very least, is trying to have conversations to 43 00:02:31,400 --> 00:02:33,000 Speaker 3: figure out who they can combine with. 44 00:02:34,639 --> 00:02:37,200 Speaker 4: Robert, how do you see this deal going down, this 45 00:02:37,240 --> 00:02:41,079 Speaker 4: potential deal in Washington, It doesn't seem like the antrust 46 00:02:41,160 --> 00:02:46,800 Speaker 4: regulation would be very welcome to a potential deal this large. 47 00:02:48,360 --> 00:02:52,639 Speaker 3: Yeah, we were surprised by the timing of these conversations, 48 00:02:52,800 --> 00:02:57,359 Speaker 3: and really comes back to two key points. Number one, 49 00:02:58,760 --> 00:03:01,320 Speaker 3: there's a two year lock up right now for Warner 50 00:03:01,320 --> 00:03:05,960 Speaker 3: Brothers Discovery as part of its last deal with WarnerMedia 51 00:03:06,080 --> 00:03:09,760 Speaker 3: and AT and T to come through on the other 52 00:03:09,800 --> 00:03:12,040 Speaker 3: side of the reverse Morris Trust. So that leads you 53 00:03:12,080 --> 00:03:15,560 Speaker 3: to April twenty four. But then coming back to your question, 54 00:03:17,080 --> 00:03:20,760 Speaker 3: given the regulatory landscape right now, it's hard for us 55 00:03:20,800 --> 00:03:23,040 Speaker 3: to see how any deal would be approved in the 56 00:03:23,120 --> 00:03:26,960 Speaker 3: current administration, or at the very least what would have 57 00:03:27,720 --> 00:03:31,560 Speaker 3: significant review. And we pointed out in our report this 58 00:03:31,639 --> 00:03:37,240 Speaker 3: morning the overlap between the linear cable networks and broadcasts, 59 00:03:37,280 --> 00:03:41,840 Speaker 3: just from a viewership standpoint, would be something that clearly 60 00:03:42,040 --> 00:03:45,400 Speaker 3: would be looked at a little bit more closely, I 61 00:03:45,440 --> 00:03:47,680 Speaker 3: think given the potential combination. 62 00:03:48,440 --> 00:03:51,440 Speaker 2: Hey, Robert, you know, nothing gets done here unless Sherry 63 00:03:51,480 --> 00:03:55,280 Speaker 2: Redstone gives the green light. Sherry Redstone the chairperson of 64 00:03:55,520 --> 00:03:59,200 Speaker 2: National Amusements, which is the control shareholder of Paramount. Do 65 00:03:59,240 --> 00:04:01,360 Speaker 2: we have any reason to believe I mean, she could 66 00:04:01,360 --> 00:04:04,360 Speaker 2: have sold these assets at any time over the last six, seven, 67 00:04:04,440 --> 00:04:07,680 Speaker 2: eight years at a drop of a hat. Why now 68 00:04:07,720 --> 00:04:09,960 Speaker 2: do you think she might be open to a transaction. 69 00:04:11,000 --> 00:04:12,080 Speaker 5: It's a really great question. 70 00:04:13,160 --> 00:04:16,919 Speaker 3: What we think is leading to all of this now 71 00:04:17,520 --> 00:04:21,159 Speaker 3: is again like the realization as far as what the 72 00:04:21,200 --> 00:04:24,400 Speaker 3: trajectory of the business is going forward. And I alluded 73 00:04:24,440 --> 00:04:26,640 Speaker 3: to it to a couple of the headwinds facing the 74 00:04:26,680 --> 00:04:30,960 Speaker 3: traditional business already in terms of advertising and cord cutting. 75 00:04:31,120 --> 00:04:35,520 Speaker 3: But another big piece coming up is the renegotiations with 76 00:04:35,600 --> 00:04:40,520 Speaker 3: a few of their affiliate distribution partners, and namely Charter, 77 00:04:40,839 --> 00:04:44,120 Speaker 3: and if we all remember what happened with Disney just 78 00:04:44,200 --> 00:04:47,279 Speaker 3: only a couple months ago, we do think that this 79 00:04:47,560 --> 00:04:50,200 Speaker 3: is going to be the template that at the very 80 00:04:50,279 --> 00:04:54,000 Speaker 3: least Charter and more likely other distributors are going to 81 00:04:54,040 --> 00:04:58,000 Speaker 3: look to take going forward in future negotiations. So that 82 00:04:58,080 --> 00:05:02,400 Speaker 3: will put an additional pressure on companies like Paramount, which 83 00:05:02,480 --> 00:05:06,680 Speaker 3: we've essentially labeled them as one of these cheaters of 84 00:05:06,680 --> 00:05:10,159 Speaker 3: the ecosystem because they're double dipping in terms of putting 85 00:05:10,160 --> 00:05:14,760 Speaker 3: their premium content, namely NFL and other sports rights over 86 00:05:14,800 --> 00:05:17,680 Speaker 3: the top on Paramount Plus. So we think Charter and 87 00:05:17,720 --> 00:05:21,200 Speaker 3: others are going to look to right size that type 88 00:05:21,200 --> 00:05:22,240 Speaker 3: of economics. 89 00:05:22,839 --> 00:05:26,440 Speaker 2: He you know, Robert, you and your partners over there, 90 00:05:26,440 --> 00:05:28,960 Speaker 2: Moufett the agency and again the top of the top 91 00:05:29,000 --> 00:05:31,360 Speaker 2: of the top of TMT research. But quite frankly, I'm 92 00:05:31,360 --> 00:05:32,920 Speaker 2: not picking up the phone call when you guys call. 93 00:05:33,320 --> 00:05:37,080 Speaker 2: I mean, I just don't have any reason to believe, Like, 94 00:05:37,120 --> 00:05:39,000 Speaker 2: I can't figure out how any of those any of 95 00:05:39,040 --> 00:05:41,919 Speaker 2: you guys make money at Paramount or Warner Brothers, Discovery 96 00:05:42,120 --> 00:05:44,839 Speaker 2: or maybe even Disney for that matter. This whole pivot 97 00:05:44,880 --> 00:05:47,400 Speaker 2: to streaming. Do you guys have a view as to 98 00:05:47,520 --> 00:05:50,760 Speaker 2: whether anybody can do this? I mean, Netflix has done 99 00:05:50,760 --> 00:05:54,160 Speaker 2: it successfully, but that's a different model and different legacy. 100 00:05:54,520 --> 00:05:56,800 Speaker 2: Can any of these traditional media companies make that pivot 101 00:05:56,839 --> 00:06:00,200 Speaker 2: from you know, the you know, the cable model to 102 00:06:00,240 --> 00:06:00,960 Speaker 2: the streaming model. 103 00:06:02,160 --> 00:06:04,400 Speaker 3: Yeah, I mean we as you probably know what we've 104 00:06:04,440 --> 00:06:07,360 Speaker 3: long had our doubts in terms of whether streaming is 105 00:06:07,640 --> 00:06:10,680 Speaker 3: actually a good business. And it's clear that streaming is 106 00:06:10,720 --> 00:06:13,599 Speaker 3: not as good of a business as the old traditional 107 00:06:14,240 --> 00:06:18,520 Speaker 3: PATV business for these companies. And so as these companies 108 00:06:18,520 --> 00:06:21,240 Speaker 3: are working through this pivot and now that they don't 109 00:06:21,279 --> 00:06:26,720 Speaker 3: have the full leeway that Wall Street has initially gave them, 110 00:06:26,839 --> 00:06:29,919 Speaker 3: you know, coming out of COVID, we're at the point 111 00:06:29,920 --> 00:06:31,760 Speaker 3: now where they have to focus on cash flow and 112 00:06:31,800 --> 00:06:36,560 Speaker 3: figure out how quickly these streaming services can really be profitable. 113 00:06:37,040 --> 00:06:41,680 Speaker 3: And we do agree that that Netflix has clearly won 114 00:06:41,720 --> 00:06:44,599 Speaker 3: that fight in terms of the streaming wars. We still 115 00:06:44,640 --> 00:06:49,880 Speaker 3: do expect Disney to be a strong number two player 116 00:06:50,120 --> 00:06:53,159 Speaker 3: essentially given the assets that they have, but we think 117 00:06:53,360 --> 00:06:55,240 Speaker 3: it's going to be more challenging for a lot of 118 00:06:55,279 --> 00:06:58,560 Speaker 3: these other traditional media companies to figure that out. 119 00:06:59,120 --> 00:07:02,640 Speaker 4: What would be some of the implications for the viewers 120 00:07:02,760 --> 00:07:06,000 Speaker 4: if this deal we're actually going to go through on 121 00:07:06,560 --> 00:07:08,320 Speaker 4: content and viewership. 122 00:07:09,720 --> 00:07:12,520 Speaker 3: Well, what we're going through now, just back to the 123 00:07:12,600 --> 00:07:17,560 Speaker 3: last point, is essentially like this content rationalization period where 124 00:07:17,720 --> 00:07:20,120 Speaker 3: I think we've been all living in this world that 125 00:07:20,160 --> 00:07:24,360 Speaker 3: we've enjoyed endless content essentially, and there's almost too much 126 00:07:24,360 --> 00:07:27,600 Speaker 3: out there that you can't even watch everything, and I'm 127 00:07:27,600 --> 00:07:30,600 Speaker 3: sure everyone has their own playlists that that they haven't 128 00:07:30,640 --> 00:07:34,200 Speaker 3: been able to get through. But I think to your question, 129 00:07:35,000 --> 00:07:37,480 Speaker 3: going forward, we're going to see a pullback in the 130 00:07:37,520 --> 00:07:40,400 Speaker 3: amount of content that's being spent at these companies again 131 00:07:40,560 --> 00:07:43,520 Speaker 3: because they need to focus on their cash flows and 132 00:07:43,880 --> 00:07:49,280 Speaker 3: generating real profits and that's a more challenging environment. Given 133 00:07:49,400 --> 00:07:52,880 Speaker 3: that that backdrop that I keep talking about, and how 134 00:07:52,920 --> 00:07:56,520 Speaker 3: they figure that out and how they pivot clearly content spending, 135 00:07:56,560 --> 00:07:59,440 Speaker 3: what will be a central piece to that, to that. 136 00:07:59,360 --> 00:08:01,800 Speaker 2: Puzzle, Robert, what's your top pick for twenty four? 137 00:08:03,680 --> 00:08:08,840 Speaker 3: We actually cover sports betting too, so we're in favor 138 00:08:08,880 --> 00:08:11,680 Speaker 3: of DraftKings and clearly that they've had a tremendous year 139 00:08:11,720 --> 00:08:15,400 Speaker 3: that this past year, but we think the momentum for 140 00:08:15,480 --> 00:08:18,000 Speaker 3: DraftKings and sports betting overall is going to continue into 141 00:08:18,000 --> 00:08:18,440 Speaker 3: twenty four. 142 00:08:18,600 --> 00:08:21,400 Speaker 2: I mean, what's the is or what's the bear case 143 00:08:21,440 --> 00:08:23,880 Speaker 2: for sports betting? Because I can't really think of one. 144 00:08:23,960 --> 00:08:27,520 Speaker 2: I mean, this is just ridiculous, the appetite for this stuff. 145 00:08:29,040 --> 00:08:32,720 Speaker 3: Yeah. Again, DraftKings has taken a tremendous amount of share 146 00:08:33,000 --> 00:08:37,600 Speaker 3: over twenty three and they're set up nicely into twenty 147 00:08:37,640 --> 00:08:40,560 Speaker 3: four and what we really saw and was probably the 148 00:08:40,600 --> 00:08:44,520 Speaker 3: most surprised about this past year was just how quickly 149 00:08:45,040 --> 00:08:50,640 Speaker 3: and how efficiently expenses have been rained in, but not 150 00:08:50,720 --> 00:08:53,480 Speaker 3: to any detriment to that top line to your point, 151 00:08:53,520 --> 00:08:55,520 Speaker 3: because the market just keeps growing really quickly. 152 00:08:55,640 --> 00:08:57,480 Speaker 2: All right, Robert, thanks so much for joining us. Really 153 00:08:57,520 --> 00:09:00,040 Speaker 2: appreciate it. Robert Fishman, he's a senior equity analyst that 154 00:09:00,160 --> 00:09:05,120 Speaker 2: Maffatt Nathanson talking about the potential tie up between Paramount 155 00:09:05,120 --> 00:09:08,320 Speaker 2: Global that's the old ViacomCBS, big big media company, and 156 00:09:08,400 --> 00:09:11,480 Speaker 2: Warner Brothers Discovery another big media company. 157 00:09:11,520 --> 00:09:11,600 Speaker 3: EI. 158 00:09:11,600 --> 00:09:15,280 Speaker 2: They're both big, a lot bigger than they were five 159 00:09:15,360 --> 00:09:18,080 Speaker 2: years ago, but guess what, in this new world order, 160 00:09:18,200 --> 00:09:21,400 Speaker 2: they're not big enough. And so it's that whole argument 161 00:09:21,440 --> 00:09:25,560 Speaker 2: we've seen in many other industries scale and that's kind 162 00:09:25,559 --> 00:09:27,840 Speaker 2: of that's certainly the play in the media space as well. 163 00:09:27,920 --> 00:09:29,800 Speaker 2: So we'll stay on top of that, and the folks 164 00:09:29,800 --> 00:09:32,480 Speaker 2: at Moffat Nathanson are some of the absolute best research 165 00:09:32,559 --> 00:09:33,600 Speaker 2: voices on the street. 166 00:09:35,120 --> 00:09:38,520 Speaker 6: You're listening to the team. Ken's are Live program Bloomberg 167 00:09:38,559 --> 00:09:41,920 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot Com, 168 00:09:42,000 --> 00:09:45,160 Speaker 6: the iHeartRadio app, and the Bloomberg Business app, or listen 169 00:09:45,240 --> 00:09:49,360 Speaker 6: on demand wherever you get your podcasts. 170 00:09:49,360 --> 00:09:52,480 Speaker 2: One of my all time favorites is here, Emily. You 171 00:09:52,520 --> 00:09:54,760 Speaker 2: don't know this, but a Maletti, a head of active 172 00:09:55,360 --> 00:09:58,280 Speaker 2: equity at Allspring Global Investments. It joins us here for 173 00:09:58,760 --> 00:10:02,680 Speaker 2: get this liken how money falls Wisconsin or something. I 174 00:10:02,679 --> 00:10:04,680 Speaker 2: don't know, but I went out there one time about 175 00:10:04,720 --> 00:10:06,280 Speaker 2: twenty five years ago. When I keep going back, so 176 00:10:06,720 --> 00:10:09,200 Speaker 2: and thanks so much for joining us here. Boy, this 177 00:10:09,400 --> 00:10:12,600 Speaker 2: last I don't know, six seven eight weeks, it's been 178 00:10:12,679 --> 00:10:15,440 Speaker 2: such a move in the equity markets, in the treasury market. 179 00:10:15,880 --> 00:10:18,120 Speaker 2: You know you've seen this come and go a million times. 180 00:10:18,160 --> 00:10:20,520 Speaker 2: What do you make of the last six seven eight weeks? 181 00:10:20,960 --> 00:10:24,320 Speaker 7: It's been a wild ride, Paul, And thanks for having 182 00:10:24,360 --> 00:10:26,959 Speaker 7: me on. It was really nice to be on this week. 183 00:10:27,000 --> 00:10:29,600 Speaker 7: And wish you all a merry Christmas and happy holidays. 184 00:10:29,640 --> 00:10:33,480 Speaker 7: So thanks for having me back. Look, it's been a 185 00:10:33,520 --> 00:10:36,200 Speaker 7: really wild ride. And you know we are getting that 186 00:10:36,280 --> 00:10:40,720 Speaker 7: Santa Claus rally, certainly a little bit even early, but 187 00:10:41,200 --> 00:10:44,360 Speaker 7: there's a lot now with the rally that we have 188 00:10:44,679 --> 00:10:47,600 Speaker 7: that maybe took a little bit away from what we 189 00:10:47,679 --> 00:10:50,480 Speaker 7: thought might happen in twenty twenty four. So I think 190 00:10:50,920 --> 00:10:51,880 Speaker 7: now is the time. 191 00:10:51,720 --> 00:10:55,680 Speaker 8: To be a little bit more disciplined about the way 192 00:10:55,720 --> 00:10:56,480 Speaker 8: we enter the year. 193 00:10:57,400 --> 00:11:00,480 Speaker 4: And I had the wonderful opportunity to actually meet you 194 00:11:00,559 --> 00:11:04,120 Speaker 4: at your outlook event a few weeks ago, and I'm 195 00:11:04,160 --> 00:11:08,640 Speaker 4: wondering if after that fed Duvish pivot you had to 196 00:11:08,760 --> 00:11:12,160 Speaker 4: change anything from your twenty twenty four outlook. 197 00:11:13,320 --> 00:11:16,280 Speaker 8: Well, Emily, you know, as we talk then it was 198 00:11:16,360 --> 00:11:18,559 Speaker 8: interesting because a lot of the things that we were 199 00:11:18,600 --> 00:11:22,160 Speaker 8: pointing out is where fundamentals were pointing us for twenty 200 00:11:22,200 --> 00:11:27,559 Speaker 8: twenty four. And as soon as Powell kind of said 201 00:11:27,040 --> 00:11:31,240 Speaker 8: the FED put is back on, those things really started 202 00:11:31,280 --> 00:11:34,800 Speaker 8: to ramp up. Areas like small cap, right. You know, 203 00:11:35,240 --> 00:11:38,080 Speaker 8: it's an area that we've been looking at really closely 204 00:11:38,559 --> 00:11:41,320 Speaker 8: for the last couple of quarters. At least the market 205 00:11:41,360 --> 00:11:44,560 Speaker 8: really hasn't been paying that much attention, but that's where 206 00:11:44,600 --> 00:11:48,120 Speaker 8: our investment teams saw a lot of value. And as 207 00:11:48,160 --> 00:11:52,640 Speaker 8: soon as it became clear from Powell that you know, look, 208 00:11:52,840 --> 00:11:57,400 Speaker 8: rates are going lower, those that area of the market 209 00:11:57,520 --> 00:12:00,400 Speaker 8: really really lit up. What I would say, though, Emily, 210 00:12:00,559 --> 00:12:03,320 Speaker 8: is where we probably want to be a little bit 211 00:12:03,320 --> 00:12:06,320 Speaker 8: more cautious is the type of small cap stocks that 212 00:12:06,559 --> 00:12:10,760 Speaker 8: you know, investors enter into. There still are a lot 213 00:12:10,800 --> 00:12:13,520 Speaker 8: of small cap names that don't have the best balance sheets. 214 00:12:13,679 --> 00:12:17,680 Speaker 8: We're more interested in quality and looking at small cap 215 00:12:17,720 --> 00:12:22,280 Speaker 8: stocks that have free cash flow, that have better balance sheets, 216 00:12:22,480 --> 00:12:27,319 Speaker 8: those names and margins obviously to maybe the margins above 217 00:12:27,360 --> 00:12:30,000 Speaker 8: twenty percent. Those were the names specifically that we were 218 00:12:30,000 --> 00:12:33,719 Speaker 8: calling out that are durable and can last whatever we 219 00:12:33,800 --> 00:12:35,480 Speaker 8: do see in twenty twenty four. 220 00:12:36,400 --> 00:12:38,080 Speaker 2: Hey, and you know, one of the things that had 221 00:12:38,200 --> 00:12:41,560 Speaker 2: I think concerned investors certainly for the first maybe nine 222 00:12:41,600 --> 00:12:44,360 Speaker 2: months of this year was the lack of breath in 223 00:12:44,400 --> 00:12:47,120 Speaker 2: this market, the Magnificent seven driving most of the performance. 224 00:12:47,760 --> 00:12:49,840 Speaker 2: But that seems to have improved a little bit. We've 225 00:12:49,840 --> 00:12:53,040 Speaker 2: had the Russell two thousand really outperforming over the last 226 00:12:53,200 --> 00:12:54,800 Speaker 2: couple of months. How do you think that's going to 227 00:12:55,600 --> 00:12:58,280 Speaker 2: play into twenty twenty four? Should you think you'll see 228 00:12:58,280 --> 00:13:01,600 Speaker 2: some continued improvement in the bread out there? Or should 229 00:13:01,600 --> 00:13:04,000 Speaker 2: I just jump on the Magnificent seven for next year? 230 00:13:05,320 --> 00:13:08,520 Speaker 8: You know, Paul, it's so interesting because you know, as 231 00:13:08,600 --> 00:13:12,160 Speaker 8: you and I both have been trained over time, fundamentals 232 00:13:12,200 --> 00:13:15,880 Speaker 8: really do matter, and you know, it was as we 233 00:13:16,000 --> 00:13:17,920 Speaker 8: really dug in and I did a lot of work 234 00:13:17,960 --> 00:13:24,160 Speaker 8: on this. The Meg seven really did generate good returns 235 00:13:24,160 --> 00:13:28,080 Speaker 8: in twenty twenty three because they had really good earnings 236 00:13:28,120 --> 00:13:31,240 Speaker 8: relative to the rest of the market. And so, okay, 237 00:13:31,440 --> 00:13:34,440 Speaker 8: i'll give them that, But when you look at the 238 00:13:34,559 --> 00:13:38,040 Speaker 8: thirty percent plus earnings growth that many of the Meg 239 00:13:38,080 --> 00:13:40,800 Speaker 8: stocks seven, or the many of the Meg seven had 240 00:13:41,400 --> 00:13:44,079 Speaker 8: at least five names out of Megs seven grew earnings 241 00:13:44,160 --> 00:13:47,800 Speaker 8: over thirty percent, many over forty percent in the third quarter, 242 00:13:48,679 --> 00:13:51,680 Speaker 8: it's going to be really hard for them to top those. 243 00:13:52,040 --> 00:13:56,320 Speaker 8: You know, compares now become very difficult in twenty twenty four. 244 00:13:56,840 --> 00:14:01,840 Speaker 8: So I think we were also saying our compares are easier, 245 00:14:02,400 --> 00:14:04,960 Speaker 8: and again that showed us where the breath of the 246 00:14:04,960 --> 00:14:08,000 Speaker 8: market could be in twenty twenty four. That pointed to 247 00:14:08,960 --> 00:14:12,840 Speaker 8: areas like small cap, but also areas like healthcare, where 248 00:14:13,120 --> 00:14:16,920 Speaker 8: earning's growth appears to be the best almost of any 249 00:14:16,960 --> 00:14:19,440 Speaker 8: other sector. As I look to twenty twenty four to 250 00:14:19,480 --> 00:14:24,040 Speaker 8: twenty percent or more, earning's growth, No, look, it wasn't 251 00:14:24,080 --> 00:14:27,600 Speaker 8: great in twenty twenty three, but we think the prospects 252 00:14:27,600 --> 00:14:31,000 Speaker 8: there are pretty good in twenty twenty four, So driven 253 00:14:31,040 --> 00:14:35,240 Speaker 8: by fundamentals, we think the breath is going to be 254 00:14:35,440 --> 00:14:39,400 Speaker 8: much broader in twenty twenty four. And you know, not 255 00:14:39,560 --> 00:14:42,440 Speaker 8: that the Meg seven are bad, it's just that the 256 00:14:43,000 --> 00:14:46,360 Speaker 8: chances for them to top that growth rate is going 257 00:14:46,400 --> 00:14:48,120 Speaker 8: to be a little bit more difficult. 258 00:14:48,360 --> 00:14:50,400 Speaker 4: So then what does it tell you about the market 259 00:14:50,520 --> 00:14:53,720 Speaker 4: that we're in that people are still buying the mag seven. 260 00:14:53,760 --> 00:14:58,280 Speaker 4: You look at ETF flows. We saw a record inflow 261 00:14:58,400 --> 00:15:01,000 Speaker 4: into spy s and P five hundre ETF last week, 262 00:15:01,040 --> 00:15:04,120 Speaker 4: twenty billion dollars in. It looks like stocks more broadly, 263 00:15:04,160 --> 00:15:05,840 Speaker 4: and a lot of this is coming from large cap 264 00:15:06,200 --> 00:15:10,800 Speaker 4: sixty nine billion dollars into equity ETFs in December, that's 265 00:15:10,840 --> 00:15:14,040 Speaker 4: the best month since twenty twenty one. What do you 266 00:15:14,120 --> 00:15:17,600 Speaker 4: make of that? I guess euphoria just piling into these 267 00:15:17,840 --> 00:15:21,440 Speaker 4: large cap stocks, or should people be pivoting into other areas? 268 00:15:21,480 --> 00:15:25,600 Speaker 8: Then well, we personally think they should, Emily, and I 269 00:15:25,680 --> 00:15:30,080 Speaker 8: think you know sometimes and look, I think investors generally 270 00:15:30,120 --> 00:15:33,960 Speaker 8: speaking are very very smart. But one of the things 271 00:15:33,960 --> 00:15:39,680 Speaker 8: that has gotten disjointed is this heavy overweight in these 272 00:15:39,760 --> 00:15:42,640 Speaker 8: Meg seven stocks. And so you know, when you're buying 273 00:15:42,720 --> 00:15:46,160 Speaker 8: an index, when you're buying the Russell three thousand growth 274 00:15:46,200 --> 00:15:49,600 Speaker 8: when you're buying and all just the Russell three thousand. 275 00:15:49,640 --> 00:15:53,000 Speaker 8: When you're buying the S and P, you're buying the 276 00:15:53,040 --> 00:15:57,200 Speaker 8: most expensive names, and you're buying thirty forty percent of 277 00:15:57,240 --> 00:16:01,280 Speaker 8: those names and much less of any And so while 278 00:16:01,320 --> 00:16:06,160 Speaker 8: you might think you're diversified, you're buying, you know, very 279 00:16:06,280 --> 00:16:11,160 Speaker 8: chunky portions of a few names and very few of 280 00:16:11,200 --> 00:16:14,640 Speaker 8: the others. And so, you know, we think taking a 281 00:16:14,760 --> 00:16:20,520 Speaker 8: much more active approach and having fewer names, but owning 282 00:16:20,560 --> 00:16:24,200 Speaker 8: a broader portfolio makes sense at this point in the market, 283 00:16:24,480 --> 00:16:27,200 Speaker 8: and we think returns can be better. Now. It's not 284 00:16:27,240 --> 00:16:30,520 Speaker 8: surprising to me that those ETF flows are going there 285 00:16:30,560 --> 00:16:33,040 Speaker 8: just because of the structure of the indexes. But we 286 00:16:33,120 --> 00:16:35,120 Speaker 8: think it should change, and we think it will change 287 00:16:35,120 --> 00:16:38,320 Speaker 8: when the performance of the other names starts to show 288 00:16:38,360 --> 00:16:41,480 Speaker 8: that they can produce the fundamentals that I talked about earlier. 289 00:16:42,000 --> 00:16:44,000 Speaker 2: Hey, and how about valuation here in the market. We've 290 00:16:44,000 --> 00:16:46,080 Speaker 2: had a big, big move higher. I don't I'm not 291 00:16:46,120 --> 00:16:49,680 Speaker 2: sure we've necessarily had a commensurate increase in earnings here. 292 00:16:50,360 --> 00:16:52,240 Speaker 2: How do you guys think about evaluation here? 293 00:16:53,080 --> 00:16:55,040 Speaker 8: Yeah, that's what makes me a little bit nervous, Paul, 294 00:16:55,280 --> 00:16:58,240 Speaker 8: You know it. You know, certainly I can point to 295 00:16:58,680 --> 00:17:01,400 Speaker 8: the four hundred and ninety three names that aren't as 296 00:17:01,480 --> 00:17:05,200 Speaker 8: highly valued as the overall market. But I do think 297 00:17:05,320 --> 00:17:07,239 Speaker 8: we do need to see some catchup, and we do 298 00:17:07,320 --> 00:17:10,439 Speaker 8: need to see the fundamentals play out. And so, you know, 299 00:17:10,520 --> 00:17:12,720 Speaker 8: I don't love the fact that we've had this really 300 00:17:12,760 --> 00:17:16,160 Speaker 8: strong rally here, and I do think we're entering twenty 301 00:17:16,240 --> 00:17:21,360 Speaker 8: twenty four with a much foggier environment. Yes, inflation has 302 00:17:21,400 --> 00:17:25,120 Speaker 8: come down, but you know, we have problems with the 303 00:17:25,160 --> 00:17:28,640 Speaker 8: Red Sea right now. The geopolitical risks as we enter 304 00:17:28,680 --> 00:17:31,080 Speaker 8: twenty twenty four, you could say, are much higher than 305 00:17:31,119 --> 00:17:34,600 Speaker 8: when we enter twenty twenty three. It's a political year, 306 00:17:35,400 --> 00:17:40,280 Speaker 8: an election year. Now, typically those end up being up markets, 307 00:17:40,320 --> 00:17:44,000 Speaker 8: but typically also pretty about little and so I think, 308 00:17:44,280 --> 00:17:47,600 Speaker 8: you know, it's going to be much more challenging than 309 00:17:47,640 --> 00:17:52,280 Speaker 8: investors believe today. That being said, we think will end 310 00:17:52,359 --> 00:17:55,399 Speaker 8: up having an up year, but it's not going to 311 00:17:55,400 --> 00:17:58,480 Speaker 8: be up, you know, double digit. We think it's going 312 00:17:58,560 --> 00:18:01,480 Speaker 8: to be kind of up single digit, maybe high single digit, 313 00:18:01,520 --> 00:18:03,760 Speaker 8: but expected to be a rocky one. 314 00:18:04,040 --> 00:18:07,439 Speaker 4: What's the biggest macro risk for next year? That you 315 00:18:07,440 --> 00:18:09,000 Speaker 4: don't think enough people are talking about. 316 00:18:09,960 --> 00:18:14,040 Speaker 8: Yeah, I still think it's geopolitical, right, We're definitely focused 317 00:18:14,040 --> 00:18:17,160 Speaker 8: on interest rates right now and whether the FED gets 318 00:18:17,160 --> 00:18:19,399 Speaker 8: it right or wrong than you know, whether we have 319 00:18:19,440 --> 00:18:24,600 Speaker 8: a softer hard landing. But it's always, you know, you know, 320 00:18:24,800 --> 00:18:27,960 Speaker 8: Paul probably would also agree with this. It's never the 321 00:18:28,000 --> 00:18:30,440 Speaker 8: things we spend the most time worrying about. It's the 322 00:18:30,480 --> 00:18:33,680 Speaker 8: big surprises that come out of nowhere that really have 323 00:18:33,880 --> 00:18:37,800 Speaker 8: the most dramatic impact of the market. And so you know, 324 00:18:37,920 --> 00:18:41,240 Speaker 8: it seems to be that probably a geopolitical risk, but 325 00:18:41,359 --> 00:18:43,600 Speaker 8: maybe one that we're not evening considering today. 326 00:18:44,320 --> 00:18:46,640 Speaker 2: And as always, thank you so much for joining us. 327 00:18:46,720 --> 00:18:49,600 Speaker 2: That is the great and malady head of active equities 328 00:18:49,640 --> 00:18:51,760 Speaker 2: at all Spring Global Advisors. And I've said it before 329 00:18:51,880 --> 00:18:54,720 Speaker 2: many times and I'll say it again pound for pound, 330 00:18:54,840 --> 00:18:56,960 Speaker 2: I think some of the best investors I've ever come 331 00:18:57,000 --> 00:19:00,440 Speaker 2: in contact with over my career. Or in Milwaukee. Why 332 00:19:00,600 --> 00:19:04,560 Speaker 2: maybe it's the great University of Wisconsin, but boy, there's 333 00:19:04,600 --> 00:19:08,320 Speaker 2: just so many firms large and small in Milwaukee that 334 00:19:08,720 --> 00:19:12,320 Speaker 2: have some really smart investors and have really good track 335 00:19:12,359 --> 00:19:14,359 Speaker 2: records over a long period of time. So you wouldn't 336 00:19:14,359 --> 00:19:16,000 Speaker 2: necessarily think it. I'm telling you. 337 00:19:15,880 --> 00:19:17,680 Speaker 4: Many maybe I have to take a reporting trip there. 338 00:19:17,720 --> 00:19:19,840 Speaker 2: Absolutely, you're listening to the tape. 339 00:19:20,000 --> 00:19:23,359 Speaker 6: Cat's are live program Bloomberg Markets weekdays at ten am 340 00:19:23,400 --> 00:19:27,200 Speaker 6: Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, 341 00:19:27,240 --> 00:19:29,960 Speaker 6: and the Bloomberg Business App. You can also listen live 342 00:19:30,040 --> 00:19:33,240 Speaker 6: on Amazon Alexa from our flagship New York station. Just 343 00:19:33,280 --> 00:19:36,640 Speaker 6: say Alexa play Bloomberg eleven thirty. 344 00:19:37,480 --> 00:19:40,639 Speaker 2: Let's talk Apple here, I mean here we are the 345 00:19:40,680 --> 00:19:44,600 Speaker 2: holiday selling season. It's kind of important for people that 346 00:19:44,840 --> 00:19:48,040 Speaker 2: sell stuff, and Apple is certainly a company that sells stuff. 347 00:19:48,240 --> 00:19:50,360 Speaker 2: One of the things they sell are those watches. I'm 348 00:19:50,359 --> 00:19:52,280 Speaker 2: not an Apple watch? Where or either of you an 349 00:19:52,280 --> 00:19:55,600 Speaker 2: Apple watchwhear? Nope, right now there Nora's got it? Okay, 350 00:19:55,640 --> 00:19:58,040 Speaker 2: great now, I like I'll watch it tells time. So, 351 00:19:59,320 --> 00:20:01,240 Speaker 2: but apparently they have a little bit of an issue here. 352 00:20:01,359 --> 00:20:04,679 Speaker 2: Mark German joins us here, a chief technology correspondent for 353 00:20:04,720 --> 00:20:08,960 Speaker 2: Bloomberg News. Mark put into context a tell us what's 354 00:20:08,960 --> 00:20:11,200 Speaker 2: happening with Apple, and b kind of put it into 355 00:20:11,200 --> 00:20:12,960 Speaker 2: context like doesn't matter. 356 00:20:14,600 --> 00:20:17,600 Speaker 5: Yes, it certainly matters. And to tell you what's happening here, 357 00:20:17,640 --> 00:20:19,440 Speaker 5: it's an unprecedented situation. 358 00:20:20,000 --> 00:20:20,520 Speaker 2: This is the. 359 00:20:20,480 --> 00:20:23,320 Speaker 5: First time in the modern era, or probably in the 360 00:20:23,440 --> 00:20:26,600 Speaker 5: entirety of Apple's forty plus year history, where the company 361 00:20:26,680 --> 00:20:29,280 Speaker 5: is being forced to stop sales of one of its 362 00:20:29,320 --> 00:20:32,359 Speaker 5: core products in the United States. That core product being 363 00:20:32,800 --> 00:20:36,120 Speaker 5: the Apple Watch Series nine and the Apple Watch Ultra two. 364 00:20:36,400 --> 00:20:39,560 Speaker 5: Those make up probably eighty plus percent of all Apple 365 00:20:39,600 --> 00:20:43,159 Speaker 5: Watch sales, the two newest models. They only sell three models, 366 00:20:43,200 --> 00:20:45,399 Speaker 5: so two of the three models are impacted. Here. There 367 00:20:45,520 --> 00:20:47,960 Speaker 5: was a patent dispute with the company in southern California 368 00:20:48,000 --> 00:20:51,600 Speaker 5: called Massimo, and the International Trade Commission of the US 369 00:20:51,960 --> 00:20:56,480 Speaker 5: ruled that Apple is violating two of Mosamo's patents related 370 00:20:56,520 --> 00:20:58,400 Speaker 5: to blood oxygen saturation. 371 00:20:58,680 --> 00:20:58,880 Speaker 7: Right. 372 00:20:58,960 --> 00:21:01,440 Speaker 5: That's the app on the Apple Watch. You click it, 373 00:21:01,440 --> 00:21:04,119 Speaker 5: it'll tell you your blood oxygen. Most people are looking 374 00:21:04,119 --> 00:21:07,000 Speaker 5: for a percentage between ninety five percent and one hundred percent. 375 00:21:07,440 --> 00:21:11,480 Speaker 5: That's in violation. Two things happening a season to sist 376 00:21:11,800 --> 00:21:14,359 Speaker 5: on Apple being able to sell the watch in the US, 377 00:21:14,640 --> 00:21:18,200 Speaker 5: as well as an import band and injunction so they 378 00:21:18,200 --> 00:21:21,960 Speaker 5: can no longer import Apple watches manufactured outside of the US. 379 00:21:22,400 --> 00:21:24,560 Speaker 5: All Apple watches are built outside of the US. For 380 00:21:24,600 --> 00:21:28,600 Speaker 5: those watching at home. So that's the fundamental issue there, right. 381 00:21:28,920 --> 00:21:31,720 Speaker 5: So starting on Christmas Day, the end of the day, 382 00:21:31,760 --> 00:21:34,440 Speaker 5: December twenty fifth, the Apple Watch sales in the US 383 00:21:34,720 --> 00:21:36,480 Speaker 5: are no more when it comes to the Ultra two 384 00:21:36,480 --> 00:21:39,520 Speaker 5: in the series nine. Now, given that we're talking now 385 00:21:39,560 --> 00:21:43,000 Speaker 5: and it's Thursday morning, starting at three pm Eastern time, 386 00:21:43,080 --> 00:21:45,199 Speaker 5: the Apple Watch will no longer be sold on Apple's 387 00:21:45,280 --> 00:21:48,600 Speaker 5: online store. Apple retail stores in the US they have 388 00:21:48,640 --> 00:21:51,720 Speaker 5: about two hundred and seventy of them. They're closed Christmas Day. 389 00:21:51,920 --> 00:21:54,520 Speaker 5: So December twenty fourth, Christmas Eve is going to be 390 00:21:54,560 --> 00:21:57,600 Speaker 5: the last day of in store retail sales. Now for 391 00:21:57,680 --> 00:21:59,680 Speaker 5: those who still want to buy an Apple Watch before 392 00:21:59,680 --> 00:22:01,439 Speaker 5: the end of the year, maybe for themselves or a 393 00:22:01,480 --> 00:22:03,960 Speaker 5: gift and what have you. Apple's not allowed to tell 394 00:22:03,960 --> 00:22:06,560 Speaker 5: you this for legal reasons, but I can tell you 395 00:22:06,680 --> 00:22:09,760 Speaker 5: can still get one at Best Buy, Target, wherever they're 396 00:22:09,800 --> 00:22:11,560 Speaker 5: sold other than Apple retail stores. 397 00:22:12,320 --> 00:22:16,320 Speaker 4: What's the history between Apple and Massimo. I'm so curious 398 00:22:16,400 --> 00:22:21,320 Speaker 4: how Apple got involved in a patent dispute. I mean, 399 00:22:21,359 --> 00:22:24,280 Speaker 4: you think of Apple, one of the largest, most important companies. 400 00:22:24,720 --> 00:22:27,560 Speaker 4: How could something like this happen to Apple? 401 00:22:28,520 --> 00:22:32,560 Speaker 5: Yeah, so Massumo actually sued Apple in twenty twenty. In 402 00:22:32,640 --> 00:22:37,679 Speaker 5: January twenty twenty related to ten patents on health sensing technology. 403 00:22:38,000 --> 00:22:41,200 Speaker 5: Right then in September twenty twenty, Apple introduced the Apple 404 00:22:41,200 --> 00:22:43,720 Speaker 5: Watch Series six. That was the first Apple Watch that 405 00:22:43,760 --> 00:22:48,720 Speaker 5: includes the blood oxygen feature. Now, Massimo, they're known for 406 00:22:48,800 --> 00:22:52,560 Speaker 5: their contributions and patents related to blood oxygen, so they 407 00:22:52,560 --> 00:22:55,640 Speaker 5: preemptively sued Apple in anticipation of this watch coming out. 408 00:22:56,000 --> 00:22:58,760 Speaker 5: Then once the watch came out, they filed an injunction 409 00:22:58,880 --> 00:23:02,920 Speaker 5: claim with the International Trade Commission of the US asking 410 00:23:02,960 --> 00:23:04,760 Speaker 5: for the watch sales to be banned. Now that was 411 00:23:04,800 --> 00:23:07,560 Speaker 5: filed in twenty twenty one. That is not actually going 412 00:23:07,560 --> 00:23:09,200 Speaker 5: into effect until, like I said, the end of the 413 00:23:09,280 --> 00:23:11,880 Speaker 5: day Christmas Day, so it took two years in change 414 00:23:11,920 --> 00:23:14,800 Speaker 5: for it actually to go into effect. Masimo says they 415 00:23:14,840 --> 00:23:17,479 Speaker 5: met with Apple ten years ago, back in twenty thirteen, 416 00:23:17,600 --> 00:23:21,520 Speaker 5: before the first Apple Watch was introduced. Apple promised them 417 00:23:21,600 --> 00:23:25,639 Speaker 5: some sort of partnership or discussed hiring them or licensing 418 00:23:25,680 --> 00:23:27,800 Speaker 5: from them. In the end, what Apple did as they 419 00:23:27,880 --> 00:23:30,600 Speaker 5: ended up hiring about twenty to twenty five of their 420 00:23:30,640 --> 00:23:34,520 Speaker 5: individual engineers and executives, hired them to come work at Apple, 421 00:23:34,760 --> 00:23:38,119 Speaker 5: offered them more significant salaries and they worked on the 422 00:23:38,119 --> 00:23:41,639 Speaker 5: Apple Watch without Apple needing to partner with Masimo. So 423 00:23:41,760 --> 00:23:45,440 Speaker 5: Masimo considered this a trade secret violation, so they sued 424 00:23:45,480 --> 00:23:49,359 Speaker 5: Apple over that. In addition to this, these hiring concerns 425 00:23:49,480 --> 00:23:52,800 Speaker 5: plus the patent concerns that have been ongoing. Now the 426 00:23:52,800 --> 00:23:55,240 Speaker 5: first lawsuit, like I said in the beginning of twenty twenty, 427 00:23:55,480 --> 00:23:58,960 Speaker 5: and now this is the ultimate pushback against Apple, this 428 00:23:59,200 --> 00:24:02,160 Speaker 5: injunction and the season desist. Now, what I will tell 429 00:24:02,200 --> 00:24:04,960 Speaker 5: you is the lawsuit related to the trade secret situation 430 00:24:05,200 --> 00:24:07,000 Speaker 5: that actually ended a few months ago and ended in 431 00:24:07,000 --> 00:24:09,919 Speaker 5: a hung jury. So these two things well related the 432 00:24:09,960 --> 00:24:14,800 Speaker 5: same companies. This ITC ruling was able to happen exclusive 433 00:24:14,840 --> 00:24:15,800 Speaker 5: away from the lawsuit. 434 00:24:16,760 --> 00:24:19,400 Speaker 2: Mark. What is Apple saying in response here? 435 00:24:20,560 --> 00:24:22,560 Speaker 5: Yeah, Apple is saying that they're going to take every 436 00:24:22,640 --> 00:24:25,160 Speaker 5: legal method possible to get the Apple Watch background sale. 437 00:24:25,160 --> 00:24:27,920 Speaker 5: They're complying with the order. They believe it wouldn't be 438 00:24:28,000 --> 00:24:30,800 Speaker 5: so hot if they didn't comply. What I'm hearing is 439 00:24:30,800 --> 00:24:33,200 Speaker 5: that Apple's trying to fix this via a software update. 440 00:24:33,240 --> 00:24:35,960 Speaker 5: So that software update has been in development now for 441 00:24:36,000 --> 00:24:38,760 Speaker 5: several weeks. What needs to be done is they need 442 00:24:38,800 --> 00:24:40,679 Speaker 5: to test it. They need to get some sort of 443 00:24:41,240 --> 00:24:44,399 Speaker 5: testing done related to regulatory given that the Apple Watch 444 00:24:44,480 --> 00:24:47,919 Speaker 5: is in some cases used for health purposes, right, so 445 00:24:47,960 --> 00:24:49,919 Speaker 5: there's an extra layer of testing that needs to be 446 00:24:49,960 --> 00:24:53,240 Speaker 5: done internally. That blood oxygen feature is not regulated, so 447 00:24:53,280 --> 00:24:55,359 Speaker 5: they don't have to deal with the healthcare regulators or 448 00:24:55,400 --> 00:24:57,520 Speaker 5: the FDA, But what they need to do is get 449 00:24:57,520 --> 00:25:00,840 Speaker 5: approval from the US Customs Agency. Need to submit that 450 00:25:00,880 --> 00:25:03,679 Speaker 5: software update to the agency. The agency has to review it, 451 00:25:03,960 --> 00:25:07,240 Speaker 5: and then they make the final determination if the season 452 00:25:07,280 --> 00:25:10,080 Speaker 5: desists and the import band should be lifted or not. 453 00:25:10,960 --> 00:25:16,520 Speaker 4: When do you expect to see this actually hit Apple's earnings, 454 00:25:16,680 --> 00:25:19,760 Speaker 4: Apple's stock price? I mean, I'm looking at the HCP 455 00:25:19,880 --> 00:25:21,879 Speaker 4: function on the Bloomberg terminal right now. I see that 456 00:25:22,160 --> 00:25:24,920 Speaker 4: this week is looking to be its first down week 457 00:25:25,080 --> 00:25:28,239 Speaker 4: in over seven weeks seven week win streak. This will 458 00:25:28,280 --> 00:25:30,400 Speaker 4: be the first down week, down about one point five 459 00:25:30,400 --> 00:25:32,520 Speaker 4: percent right now. But when do we actually see this 460 00:25:32,600 --> 00:25:34,280 Speaker 4: come up in the price action? 461 00:25:35,560 --> 00:25:40,840 Speaker 5: Yeah, so the sales and the revenue for the first quarter, 462 00:25:41,040 --> 00:25:44,080 Speaker 5: right that runs through the end of December, so December 463 00:25:45,280 --> 00:25:48,720 Speaker 5: thirtieth or thirty first, So I don't anticipate an impact 464 00:25:48,760 --> 00:25:51,320 Speaker 5: on Apple's revenue that they're going to announce for Q one. 465 00:25:51,359 --> 00:25:54,200 Speaker 5: They'll announce those numbers at the tail end of January 466 00:25:54,560 --> 00:25:57,600 Speaker 5: or at the beginning of February. But what I could 467 00:25:57,640 --> 00:26:00,600 Speaker 5: tell you is that they're going to probably get impacted 468 00:26:00,680 --> 00:26:03,199 Speaker 5: on their Q two or Q three, depending on how 469 00:26:03,280 --> 00:26:05,600 Speaker 5: long this roll is for I would anticipate a several 470 00:26:05,720 --> 00:26:10,120 Speaker 5: hundred million dollars head wind year, which is not extraordinarily 471 00:26:10,119 --> 00:26:13,199 Speaker 5: material to Apple, but certainly is worth discussing. And it 472 00:26:13,320 --> 00:26:15,760 Speaker 5: is the difference between a growth quarter and a non 473 00:26:15,760 --> 00:26:16,320 Speaker 5: growth quarter. 474 00:26:16,440 --> 00:26:16,680 Speaker 1: Right. 475 00:26:16,960 --> 00:26:19,280 Speaker 5: All you have to do to grow is generate one 476 00:26:19,280 --> 00:26:20,800 Speaker 5: dollar more than you did in the quarter of the 477 00:26:20,840 --> 00:26:23,560 Speaker 5: year prior, Right, So if you're down several hundred million 478 00:26:23,640 --> 00:26:26,119 Speaker 5: or a couple of billion, you're not going to get 479 00:26:26,200 --> 00:26:28,200 Speaker 5: that flexibility, and you might have a down quarter when 480 00:26:28,200 --> 00:26:30,199 Speaker 5: you otherwise would have had an up quarter. But the 481 00:26:30,200 --> 00:26:32,080 Speaker 5: big question is how long this is going to take. 482 00:26:32,600 --> 00:26:34,960 Speaker 5: My guess is probably around three months, unless we have 483 00:26:35,040 --> 00:26:38,000 Speaker 5: some surprising stay order from the federal government or some 484 00:26:38,000 --> 00:26:40,480 Speaker 5: sort of last minute detO. But I don't really expect 485 00:26:40,560 --> 00:26:41,120 Speaker 5: either of those. 486 00:26:41,600 --> 00:26:44,240 Speaker 2: Mark, what's the for What are you looking for out 487 00:26:44,240 --> 00:26:46,600 Speaker 2: of Apple in twenty twenty fours? Are there any products 488 00:26:46,600 --> 00:26:49,720 Speaker 2: that we need to be on the lookout for any 489 00:26:49,960 --> 00:26:52,199 Speaker 2: new services that you think they might try to pursue, 490 00:26:52,240 --> 00:26:55,160 Speaker 2: any any anything else that's on your horizon. 491 00:26:56,000 --> 00:26:58,200 Speaker 5: Well, the Vision Pro right, that's all anyone in the 492 00:26:58,240 --> 00:27:00,280 Speaker 5: Apple world is talking about right now. That's the first 493 00:27:00,320 --> 00:27:02,520 Speaker 5: mixed reality headset. I don't think it's going to be 494 00:27:02,520 --> 00:27:04,800 Speaker 5: a big revenue driver, but it's certainly going to be awesome. 495 00:27:05,359 --> 00:27:06,520 Speaker 5: The other big thing is out. 496 00:27:06,359 --> 00:27:09,640 Speaker 2: When do we know? And that's going to happen, the Vision. 497 00:27:09,320 --> 00:27:12,399 Speaker 5: Pro that's going to come out by February, so probably 498 00:27:12,440 --> 00:27:13,680 Speaker 5: at the tail end of January or. 499 00:27:13,640 --> 00:27:15,240 Speaker 2: Now are you going to be one of those techniques 500 00:27:15,240 --> 00:27:16,240 Speaker 2: that's going to get one of these? 501 00:27:17,800 --> 00:27:18,040 Speaker 6: Yes? 502 00:27:18,200 --> 00:27:22,280 Speaker 4: Yes, it will be the whole paycheck on a Vision pro. 503 00:27:22,280 --> 00:27:24,320 Speaker 2: Se an expensive who's kidding who? All right, So that's 504 00:27:24,359 --> 00:27:27,280 Speaker 2: coming up in February. That's interesting. Now, how's a company 505 00:27:27,280 --> 00:27:28,080 Speaker 2: positioning that thing? 506 00:27:29,200 --> 00:27:31,400 Speaker 5: Well, they're not. They haven't talked much about it since 507 00:27:31,440 --> 00:27:34,680 Speaker 5: the introduction in June. It's pretty nascent. Like you said, 508 00:27:34,720 --> 00:27:35,680 Speaker 5: it's pretty expensive. 509 00:27:36,400 --> 00:27:37,040 Speaker 6: With tax. 510 00:27:37,080 --> 00:27:40,560 Speaker 5: It's probably coming up against four thousand dollars throws for 511 00:27:40,600 --> 00:27:43,960 Speaker 5: most people, and so it is pretty pricey. I think 512 00:27:44,040 --> 00:27:46,439 Speaker 5: the big marketing. Push is going to start sort of 513 00:27:46,440 --> 00:27:48,320 Speaker 5: more in the middle of the year, obviously, when they 514 00:27:48,359 --> 00:27:50,800 Speaker 5: release cheaper models. That's going to be a significant development. 515 00:27:51,160 --> 00:27:53,560 Speaker 5: You asked about services. I think you're going to see 516 00:27:54,160 --> 00:27:57,000 Speaker 5: Apple walk into the generative AI space this year. You'll 517 00:27:57,040 --> 00:28:00,600 Speaker 5: see introductions in June around jen Ai integrating large language 518 00:28:00,600 --> 00:28:02,240 Speaker 5: models into the iPhone. So that's going to be a 519 00:28:02,280 --> 00:28:04,960 Speaker 5: quite significant initiative for the company too, even though they're 520 00:28:04,960 --> 00:28:06,240 Speaker 5: going to be about a year and a half behind 521 00:28:06,240 --> 00:28:06,800 Speaker 5: everyone else. 522 00:28:07,160 --> 00:28:09,280 Speaker 2: Mark, I don't know if you know it, but Michigan's 523 00:28:09,280 --> 00:28:12,119 Speaker 2: playing in the Rose Bowl. You're in southern California. Are 524 00:28:12,119 --> 00:28:12,879 Speaker 2: you going to the game? 525 00:28:13,800 --> 00:28:15,560 Speaker 5: I will not, but I'll do well. 526 00:28:15,800 --> 00:28:18,160 Speaker 2: Aren't you a good Michigan man, A. 527 00:28:18,119 --> 00:28:20,679 Speaker 5: Good Michigan man. But I'm pretty focused on the Lakers 528 00:28:20,720 --> 00:28:21,120 Speaker 5: these days. 529 00:28:21,560 --> 00:28:25,080 Speaker 2: I see the jersey Kobe in the background, So good 530 00:28:25,119 --> 00:28:25,440 Speaker 2: for you. 531 00:28:26,400 --> 00:28:29,520 Speaker 6: You're listening to the tape. Can's are live program Bloomberg 532 00:28:29,600 --> 00:28:33,199 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the 533 00:28:33,240 --> 00:28:36,480 Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business app. 534 00:28:36,520 --> 00:28:39,320 Speaker 6: You can also listen live on Amazon Alexa from our 535 00:28:39,360 --> 00:28:44,440 Speaker 6: flagship New York station Just Say Alexa playing Bloomberg eleven thirty. 536 00:28:45,160 --> 00:28:47,520 Speaker 2: A lot of folks as you think about twenty twenty four, 537 00:28:48,680 --> 00:28:51,640 Speaker 2: as MS was just mentioning the sentiment seems so changed 538 00:28:52,040 --> 00:28:55,760 Speaker 2: to really leaning towards that soft landing, but there's still 539 00:28:55,800 --> 00:28:58,640 Speaker 2: some concern out there. Semashad joins us. She's a senior 540 00:28:58,720 --> 00:29:03,480 Speaker 2: global investment strategist Principal Global Investors, joining us via zoom. Sima, 541 00:29:03,480 --> 00:29:05,160 Speaker 2: thanks so much for taking the time here. I know 542 00:29:05,200 --> 00:29:07,320 Speaker 2: you guys have your twenty twenty four outlook aut and 543 00:29:07,320 --> 00:29:11,160 Speaker 2: I'm just seeing kind of the focus here on pivot, pivot, pivot. 544 00:29:11,200 --> 00:29:12,560 Speaker 2: What do you mean by that in twenty four. 545 00:29:13,360 --> 00:29:18,200 Speaker 9: Yeah, it's a play on that friend's line. Well, look, 546 00:29:18,600 --> 00:29:20,640 Speaker 9: I think you know we published that a few weeks 547 00:29:20,680 --> 00:29:22,560 Speaker 9: before the FED spoke. I don't think any of us 548 00:29:22,600 --> 00:29:26,360 Speaker 9: anticipated that the FED would shift in such a manner 549 00:29:26,400 --> 00:29:30,120 Speaker 9: and so quickly, but clearly, I think the inflation data 550 00:29:30,160 --> 00:29:32,920 Speaker 9: is certainly backing up that idea that twenty twenty four 551 00:29:33,200 --> 00:29:36,040 Speaker 9: is no longer just the year of the pause, but 552 00:29:36,120 --> 00:29:38,480 Speaker 9: it's actually mainly going to be about the pivot, and 553 00:29:38,560 --> 00:29:40,640 Speaker 9: for a risk acid it's almost whichever way you look 554 00:29:40,680 --> 00:29:43,320 Speaker 9: at it, there's going to be nuances, But overall, this 555 00:29:43,400 --> 00:29:46,200 Speaker 9: should be a fairly good year for risk acids simply 556 00:29:46,240 --> 00:29:48,880 Speaker 9: because those central banks are going to be are going 557 00:29:48,920 --> 00:29:50,920 Speaker 9: to be pivoting, and importantly, it's not going to be 558 00:29:51,240 --> 00:29:54,200 Speaker 9: you know, it's going to be supported by a not 559 00:29:54,320 --> 00:29:55,920 Speaker 9: too unhealthy backdrop as well. 560 00:29:56,960 --> 00:30:01,280 Speaker 4: You've you've seen a lot of year end markets. How 561 00:30:01,720 --> 00:30:05,160 Speaker 4: crazy has the buying frenzy inequities been for this year 562 00:30:05,200 --> 00:30:07,880 Speaker 4: and just compared to the rest of your. 563 00:30:07,800 --> 00:30:12,480 Speaker 9: Career, it's certainly very aggressive, you know, I think that 564 00:30:12,800 --> 00:30:16,640 Speaker 9: it's aggressive, but it's also not entirely unexpected, because as 565 00:30:16,680 --> 00:30:18,440 Speaker 9: we've been going through this year, every time we've been 566 00:30:18,480 --> 00:30:21,560 Speaker 9: talking to investors, declines and this is anywhere around the world, 567 00:30:21,560 --> 00:30:23,840 Speaker 9: in Asia, Europe, the US, it's pretty much the same thing. 568 00:30:24,280 --> 00:30:26,720 Speaker 9: The questions that we've been getting are generally along the 569 00:30:26,800 --> 00:30:29,000 Speaker 9: lines of, you know, when are we going to know 570 00:30:29,040 --> 00:30:31,560 Speaker 9: what the Fed is doing? When will they peak? They're 571 00:30:31,600 --> 00:30:33,920 Speaker 9: kind of just waiting to put their money to work, 572 00:30:34,760 --> 00:30:37,960 Speaker 9: So the uncertainty has been clouding a lot of investors' minds, 573 00:30:38,600 --> 00:30:40,680 Speaker 9: but they haven't had any concerns that this is going 574 00:30:40,720 --> 00:30:43,400 Speaker 9: to be a downturn or there would be a downturn 575 00:30:43,400 --> 00:30:46,320 Speaker 9: that would be very destructive that would see any kind 576 00:30:46,360 --> 00:30:48,720 Speaker 9: of permanent disruption to the underlying economy. And if you 577 00:30:48,760 --> 00:30:51,960 Speaker 9: don't think there's going to be permanent underlying damage, then 578 00:30:52,080 --> 00:30:53,840 Speaker 9: essentially what you're doing is you're just trying to time 579 00:30:53,880 --> 00:30:56,760 Speaker 9: the market so when you know things are clearly going 580 00:30:56,760 --> 00:30:58,640 Speaker 9: to be an upward move. So as soon as we 581 00:30:58,720 --> 00:31:01,680 Speaker 9: saw any indication actually at the Bank at the end 582 00:31:01,680 --> 00:31:05,040 Speaker 9: of October that Chair Powell was having a slight shifting stance. 583 00:31:05,520 --> 00:31:09,320 Speaker 9: That was, you know, opening the airwaves, opening the doors 584 00:31:09,440 --> 00:31:13,440 Speaker 9: to a huge flood into that equity space. Now, I 585 00:31:13,880 --> 00:31:15,400 Speaker 9: do actually think that Q one is going to be 586 00:31:15,400 --> 00:31:17,720 Speaker 9: a little bit more volatile, and you're going to have 587 00:31:17,720 --> 00:31:21,160 Speaker 9: to see investors be strong in the face of that volatility. 588 00:31:21,480 --> 00:31:23,600 Speaker 9: But overall, as I look out over twenty twenty four, 589 00:31:23,640 --> 00:31:26,040 Speaker 9: I think investors are right to be taking on this 590 00:31:26,240 --> 00:31:28,880 Speaker 9: lightly more optimistic perspective semas. 591 00:31:28,920 --> 00:31:31,840 Speaker 2: So the FED, I guess, was clear, maybe clearer than 592 00:31:31,840 --> 00:31:34,880 Speaker 2: they wanted to be about their you know, being open 593 00:31:34,920 --> 00:31:36,560 Speaker 2: to being a little bit more dubbish here. How about 594 00:31:36,600 --> 00:31:41,280 Speaker 2: the the Bank of England, the European Central Bank? What 595 00:31:41,520 --> 00:31:43,160 Speaker 2: are we hearing out of those institutions. 596 00:31:44,000 --> 00:31:46,640 Speaker 9: So again it's a very very similar sentiment and again 597 00:31:46,720 --> 00:31:50,680 Speaker 9: backed up similar to the US, by a clear decline 598 00:31:50,680 --> 00:31:53,560 Speaker 9: in inflation. Actually in Europe and your area, it's been 599 00:31:53,880 --> 00:31:58,600 Speaker 9: extra interesting because the inflation has been inflation has actually 600 00:31:58,600 --> 00:32:01,280 Speaker 9: come down faster than it went which is unusual. You know, 601 00:32:01,480 --> 00:32:05,000 Speaker 9: you kind of hear the analogies of inflation takes the 602 00:32:05,120 --> 00:32:07,920 Speaker 9: escalator up and stares down. It's the opposite way for Europe. 603 00:32:07,920 --> 00:32:11,080 Speaker 9: So inevitably the ECB has had to acknowledge that, and 604 00:32:11,120 --> 00:32:13,880 Speaker 9: they have also taken on dubbish stance, same thing with 605 00:32:13,880 --> 00:32:16,080 Speaker 9: the Bank of England. But I think the key difference 606 00:32:16,120 --> 00:32:18,440 Speaker 9: that you're seeing is that they are retaining an element 607 00:32:18,480 --> 00:32:21,160 Speaker 9: of caution. They are still worried that if they were 608 00:32:21,200 --> 00:32:23,880 Speaker 9: to cut rates too early, you would see that renewed 609 00:32:23,960 --> 00:32:26,760 Speaker 9: drive up in inflation. So whereas they're acknowledging that there's 610 00:32:26,880 --> 00:32:29,440 Speaker 9: likely to be a pivot in twenty twenty four, they 611 00:32:29,480 --> 00:32:31,560 Speaker 9: have pushed back a lot harder at the idea that 612 00:32:31,600 --> 00:32:33,320 Speaker 9: you could see rate cuts as soon as March. 613 00:32:35,280 --> 00:32:39,360 Speaker 4: If you were working at the FED, what would stop 614 00:32:39,440 --> 00:32:45,240 Speaker 4: you from declaring victory right now? Is it the labor market. 615 00:32:47,680 --> 00:32:50,959 Speaker 9: So it's a couple of things. I you know, I, 616 00:32:51,120 --> 00:32:53,920 Speaker 9: like everyone else, has probably poured over wall of speech, 617 00:32:54,240 --> 00:32:56,200 Speaker 9: the two different speeches that he gave a couple of 618 00:32:56,240 --> 00:32:59,240 Speaker 9: weeks apart, and he had said at that point that 619 00:32:59,280 --> 00:33:01,360 Speaker 9: he needed to see a couple of months of clear 620 00:33:01,440 --> 00:33:04,040 Speaker 9: inflation evidence, and it was disinflation to that three month 621 00:33:04,080 --> 00:33:07,360 Speaker 9: from three month rate was moving down sufficiently, and in 622 00:33:07,400 --> 00:33:08,880 Speaker 9: the end he only saw one month of that, and 623 00:33:08,920 --> 00:33:11,160 Speaker 9: he had enough evidence to me I would be a 624 00:33:11,200 --> 00:33:13,560 Speaker 9: little bit more cautious. I'd say, well, look, let's get 625 00:33:13,600 --> 00:33:16,080 Speaker 9: a series of those numbers to know for sure, because 626 00:33:16,120 --> 00:33:19,200 Speaker 9: if you look back to the seventies eighties period when 627 00:33:19,240 --> 00:33:21,560 Speaker 9: you did have very high inflation, the FED made the 628 00:33:21,600 --> 00:33:24,360 Speaker 9: mistake of cutting rates too early and then that drove 629 00:33:24,400 --> 00:33:27,440 Speaker 9: inflation to a new high. So I would certainly be 630 00:33:27,520 --> 00:33:32,000 Speaker 9: a little bit more concerned, especially knowing that, as you know, 631 00:33:32,040 --> 00:33:36,200 Speaker 9: an unemployment rate of three point seven percent is extraordinarily low. 632 00:33:36,240 --> 00:33:38,200 Speaker 9: It's a very very tight labor market, and so I 633 00:33:38,240 --> 00:33:40,000 Speaker 9: would need to see some more evidence of a slight 634 00:33:40,040 --> 00:33:43,840 Speaker 9: economic slow down. Obviously I need a recession, but sending 635 00:33:43,920 --> 00:33:47,760 Speaker 9: it more evidence of slowing economic activity and unwinding labor 636 00:33:47,760 --> 00:33:52,800 Speaker 9: market before I felt sufficiently confident to start cutting interest rates. 637 00:33:52,920 --> 00:33:55,840 Speaker 2: So similar where the good folks are principal global investors, 638 00:33:56,480 --> 00:33:59,000 Speaker 2: Where do you guys see the opportunity in twenty twenty four. 639 00:33:59,000 --> 00:34:01,480 Speaker 2: We've had such a move here in as last six, seven, 640 00:34:01,520 --> 00:34:04,840 Speaker 2: eight weeks. I think people are very happy with the performance, 641 00:34:04,880 --> 00:34:07,040 Speaker 2: but they're saying, oh boy, now what do I do 642 00:34:07,120 --> 00:34:07,960 Speaker 2: in twenty twenty four? 643 00:34:09,200 --> 00:34:09,399 Speaker 8: Right? 644 00:34:09,440 --> 00:34:11,680 Speaker 9: And this is a time where you know, we have 645 00:34:11,719 --> 00:34:14,920 Speaker 9: to start thinking about valuations. What are the valuations, what 646 00:34:14,960 --> 00:34:17,840 Speaker 9: are the signals coming to us? So from the equity space, 647 00:34:18,680 --> 00:34:20,840 Speaker 9: you know, we know that the Magnificent seven have driven 648 00:34:21,320 --> 00:34:23,279 Speaker 9: you know, most of the games this year, but their 649 00:34:23,320 --> 00:34:25,960 Speaker 9: valuations are very, very expensive. And although we are long 650 00:34:26,080 --> 00:34:29,040 Speaker 9: term holders of some of those really big tech stocks, 651 00:34:29,360 --> 00:34:30,799 Speaker 9: there is something to be said for some of that 652 00:34:30,840 --> 00:34:33,840 Speaker 9: small cap universe. There's valuations attractive. If you believe that 653 00:34:33,840 --> 00:34:36,000 Speaker 9: there's going to be a cyclical recovery around the second 654 00:34:36,000 --> 00:34:37,960 Speaker 9: half of the year, then to me, this is a 655 00:34:37,960 --> 00:34:39,560 Speaker 9: good time to be ready to write some of the 656 00:34:39,600 --> 00:34:43,480 Speaker 9: volatility down in the first quart or so, but knowing 657 00:34:44,080 --> 00:34:46,200 Speaker 9: that you will be well positioned for the upside. So 658 00:34:46,239 --> 00:34:49,680 Speaker 9: I think that that valuation set level is important. From 659 00:34:49,680 --> 00:34:53,440 Speaker 9: a credit perspective, credit spreads are extremely tight historic tights. 660 00:34:54,280 --> 00:34:55,719 Speaker 9: Knowing that there's going to be a little bit of 661 00:34:55,760 --> 00:34:59,960 Speaker 9: a slowdown in around Q two Q three, I worry 662 00:35:00,120 --> 00:35:02,759 Speaker 9: a little bit about, certainly the lower quality aspects of 663 00:35:02,800 --> 00:35:05,239 Speaker 9: the credit spectrum. So I'd be entirely focused on that 664 00:35:05,320 --> 00:35:07,799 Speaker 9: core fixed income space. And the other part of this 665 00:35:07,920 --> 00:35:10,520 Speaker 9: is is as much as we know or feel that 666 00:35:10,520 --> 00:35:12,640 Speaker 9: there is going to be a central bank pivot, there 667 00:35:12,680 --> 00:35:16,640 Speaker 9: is still a lingering inflation risk. You know, economic theory 668 00:35:16,640 --> 00:35:18,439 Speaker 9: tells you as long as growth there's above target, there's 669 00:35:18,440 --> 00:35:21,120 Speaker 9: always going to be the risk that inflation researches, and 670 00:35:21,200 --> 00:35:23,319 Speaker 9: we know that bonds have not done very well in 671 00:35:23,400 --> 00:35:26,480 Speaker 9: protecting when inflation is moving up. So I still think 672 00:35:26,520 --> 00:35:28,560 Speaker 9: that there means you need to have some kind of 673 00:35:28,600 --> 00:35:31,000 Speaker 9: exposure to relasi it's in your portfolio. It doesn't need 674 00:35:31,040 --> 00:35:33,120 Speaker 9: to be too much, but at least that broad diversification, 675 00:35:33,480 --> 00:35:36,360 Speaker 9: so you'll protect against a couple of scenarios, which to 676 00:35:36,400 --> 00:35:39,319 Speaker 9: our minds they're not entirely throwaway. You still have to 677 00:35:39,400 --> 00:35:40,320 Speaker 9: consider them. 678 00:35:40,920 --> 00:35:43,960 Speaker 4: What about outside the US is that an area to 679 00:35:44,000 --> 00:35:45,319 Speaker 4: invest in for twenty twenty four? 680 00:35:46,640 --> 00:35:48,880 Speaker 9: I think there are certain opportunities. The main area that 681 00:35:48,880 --> 00:35:52,240 Speaker 9: we're looking at the moment is it's still in emerging markets, 682 00:35:52,360 --> 00:35:55,320 Speaker 9: but at ex China. The beauty at the moment is 683 00:35:55,360 --> 00:35:58,080 Speaker 9: that you can actually think about emerging markets without having 684 00:35:58,160 --> 00:36:01,280 Speaker 9: to consider some of the downturn that's going well in China. 685 00:36:01,440 --> 00:36:04,520 Speaker 9: So the areas that we're looking at are Latin America primarily. 686 00:36:04,920 --> 00:36:07,680 Speaker 9: Again we're looking at very very cheap valuations. You've got 687 00:36:07,680 --> 00:36:10,960 Speaker 9: central banks which are already cutting interest rates, and also 688 00:36:11,000 --> 00:36:13,399 Speaker 9: you have the ability to ride onto a secular theme 689 00:36:13,520 --> 00:36:17,880 Speaker 9: of deglobalizations, so kind of the regionalization of supply chains, 690 00:36:18,080 --> 00:36:20,760 Speaker 9: as well as the fact that some of the natural 691 00:36:20,800 --> 00:36:23,239 Speaker 9: resources that would be coming into play as you think 692 00:36:23,280 --> 00:36:26,160 Speaker 9: about the energy transition, are actually coming from Latin America. 693 00:36:26,680 --> 00:36:29,040 Speaker 9: So you can have a number of cecular plays by 694 00:36:29,239 --> 00:36:32,080 Speaker 9: positioning in Latin America at a time where valuations are 695 00:36:32,160 --> 00:36:34,680 Speaker 9: extraordinarily attractive at this point. 696 00:36:35,160 --> 00:36:38,680 Speaker 2: So China, it's such a big part of the MSCI. 697 00:36:38,880 --> 00:36:42,200 Speaker 2: But I guess from your perspective, the risk is not 698 00:36:42,640 --> 00:36:43,959 Speaker 2: the reward is not worth that risk. 699 00:36:45,760 --> 00:36:48,440 Speaker 9: We do have yeah, we do have concerns about China 700 00:36:48,480 --> 00:36:52,520 Speaker 9: still lingering. You know, we've seen from the recent conference 701 00:36:53,120 --> 00:36:55,840 Speaker 9: that the policymakers are not planning to move in with 702 00:36:56,200 --> 00:36:59,239 Speaker 9: big stimulus. They're still thinking about quality growth, which of 703 00:36:59,239 --> 00:37:02,279 Speaker 9: course from a long term perspective is positive. But as 704 00:37:02,320 --> 00:37:05,359 Speaker 9: long as you're not seeing the property market respond in 705 00:37:05,400 --> 00:37:09,200 Speaker 9: a way that would improve confidence, then the Chinese economy 706 00:37:09,239 --> 00:37:10,560 Speaker 9: is going to be struggling. And the one thing I 707 00:37:10,600 --> 00:37:12,680 Speaker 9: come back to is if you do a quick comparison 708 00:37:12,760 --> 00:37:15,320 Speaker 9: of the US property market and the Chinese property market, 709 00:37:15,360 --> 00:37:17,680 Speaker 9: just to give you an idea. In the US, the 710 00:37:17,719 --> 00:37:22,040 Speaker 9: property market accounts for about thirty percent of US household Well, 711 00:37:22,080 --> 00:37:23,760 Speaker 9: in China that number is sixty percent. 712 00:37:23,920 --> 00:37:24,200 Speaker 2: Wow. 713 00:37:24,400 --> 00:37:26,520 Speaker 9: So as long as a property market is struggling in China, 714 00:37:26,640 --> 00:37:29,200 Speaker 9: then it's very difficult to see in meaningful economic recovery. 715 00:37:29,480 --> 00:37:33,280 Speaker 9: And without that recovery, I think investors stay very, very cautious, 716 00:37:33,280 --> 00:37:36,000 Speaker 9: and you just don't see those flows back into Chinese equities. 717 00:37:36,280 --> 00:37:38,400 Speaker 2: It's great analysis. I's always loved that data point. I'm 718 00:37:38,400 --> 00:37:41,000 Speaker 2: going to use that. I will credit Seema, but I 719 00:37:41,040 --> 00:37:44,759 Speaker 2: would definitely use that Simasha, senior global investment strategists over 720 00:37:44,800 --> 00:37:48,719 Speaker 2: their principal global investments in London. One would street great 721 00:37:48,719 --> 00:37:50,240 Speaker 2: part of town just outside of the city. 722 00:37:51,400 --> 00:37:54,520 Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can 723 00:37:54,560 --> 00:37:58,320 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 724 00:37:58,400 --> 00:38:02,120 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 725 00:38:02,320 --> 00:38:04,239 Speaker 1: at Matt Miller nineteen seventy three. 726 00:38:04,680 --> 00:38:07,160 Speaker 2: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. 727 00:38:07,200 --> 00:38:09,880 Speaker 2: Before the podcast, you can always catch us worldwide at 728 00:38:09,880 --> 00:38:11,320 Speaker 2: Bloomberg Radio