WEBVTT - Paramount, Apple, and Rally 0:00:00.120 --> 0:00:04.360 Bloomberg is now on your dashboard with Apple CarPlay and 0:00:04.360 --> 0:00:08.160 Android Auto. It gives you access to every Bloomberg podcast, 0:00:08.280 --> 0:00:11.560 live audio feeds from Bloomberg Radio, print stories from Bloomberg 0:00:11.640 --> 0:00:14.920 News in audio form, and the latest headlines of the 0:00:14.920 --> 0:00:18.640 click of a button with Bloomberg News. Now it's free 0:00:18.680 --> 0:00:21.439 with the latest version of the Bloomberg Business App. That's 0:00:21.680 --> 0:00:24.400 the Bloomberg Business App. Get it on your phone in 0:00:24.440 --> 0:00:27.760 the Apple App Store or on Google Play. Just download 0:00:27.800 --> 0:00:30.560 the app, connect your phone to your car and get started. 0:00:30.960 --> 0:00:34.400 And it's all presented by our sponsor, Interactive Brokers. 0:00:35.400 --> 0:00:38.600 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:38.640 --> 0:00:39.800 my co host Matt Miller. 0:00:40.200 --> 0:00:44.279 Every business day we bring you interviews from CEOs, market pros, 0:00:44.320 --> 0:00:48.160 and Bloomberg experts, along with essential market Moven News. 0:00:48.720 --> 0:00:51.839 I'm the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:51.960 --> 0:00:55.080 you listen to podcasts, and at Bloomberg dot Com Slash podcast. 0:00:55.920 --> 0:01:00.240 Here's a deal. Emily and my Wheelhouse both potentially you know. 0:01:00.240 --> 0:01:03.280 Look at Paramount Global that's the old Viacom, CBS and 0:01:03.800 --> 0:01:07.000 Warner Brothers Discovery again the old time Warner stuff plus 0:01:07.280 --> 0:01:10.880 the Discovery that merger David zaslov as the CEO. Maybe 0:01:10.920 --> 0:01:14.800 those two companies getting together, which would be really interesting. 0:01:14.920 --> 0:01:17.840 Robert Fishman, he's a senior equity analyst at Moffatt Nathanson 0:01:18.440 --> 0:01:22.440 and Robert's longtime street analyst. Maffatt Nathanson pound for pound 0:01:22.520 --> 0:01:25.720 the best TMT research on the street in my opinion, 0:01:25.880 --> 0:01:27.399 that's why we like to talk to those guys when 0:01:27.400 --> 0:01:29.400 we can. Robert, thanks so much for taking the time 0:01:29.560 --> 0:01:32.520 to chat with us here. Give us the rational for 0:01:32.600 --> 0:01:38.240 a potential hookup between Discovery, Warner Brothers, Discovery and Paramount. 0:01:39.680 --> 0:01:43.520 Sure, thanks for having me. Well again, this is all 0:01:43.560 --> 0:01:46.800 speculation at this point. I mean that the reports suggest 0:01:46.840 --> 0:01:49.840 that they clearly met this week. In terms of the 0:01:49.880 --> 0:01:52.920 logic behind it, I think it really just comes back 0:01:52.960 --> 0:01:57.160 to the fact that traditional media is really starting to 0:01:57.280 --> 0:02:00.960 get more desperate. And why I say that is that 0:02:01.040 --> 0:02:04.840 the realities of the fundamental business at hand, with linear 0:02:05.040 --> 0:02:10.200 advertising falling off a cliff and cord cutting continuing to accelerate, 0:02:10.600 --> 0:02:15.079 and the costs of switching and pivoting over to streaming, 0:02:15.560 --> 0:02:18.800 has really challenged a lot of these companies. So now 0:02:18.919 --> 0:02:21.600 they're all looking to figure out how can we try 0:02:21.639 --> 0:02:25.239 to get stronger And the way that it seems most 0:02:25.280 --> 0:02:27.240 of these companies are trying to do that right now, 0:02:28.000 --> 0:02:31.280 at the very least, is trying to have conversations to 0:02:31.400 --> 0:02:33.000 figure out who they can combine with. 0:02:34.639 --> 0:02:37.200 Robert, how do you see this deal going down, this 0:02:37.240 --> 0:02:41.079 potential deal in Washington, It doesn't seem like the antrust 0:02:41.160 --> 0:02:46.800 regulation would be very welcome to a potential deal this large. 0:02:48.360 --> 0:02:52.639 Yeah, we were surprised by the timing of these conversations, 0:02:52.800 --> 0:02:57.359 and really comes back to two key points. Number one, 0:02:58.760 --> 0:03:01.320 there's a two year lock up right now for Warner 0:03:01.320 --> 0:03:05.960 Brothers Discovery as part of its last deal with WarnerMedia 0:03:06.080 --> 0:03:09.760 and AT and T to come through on the other 0:03:09.800 --> 0:03:12.040 side of the reverse Morris Trust. So that leads you 0:03:12.080 --> 0:03:15.560 to April twenty four. But then coming back to your question, 0:03:17.080 --> 0:03:20.760 given the regulatory landscape right now, it's hard for us 0:03:20.800 --> 0:03:23.040 to see how any deal would be approved in the 0:03:23.120 --> 0:03:26.960 current administration, or at the very least what would have 0:03:27.720 --> 0:03:31.560 significant review. And we pointed out in our report this 0:03:31.639 --> 0:03:37.240 morning the overlap between the linear cable networks and broadcasts, 0:03:37.280 --> 0:03:41.840 just from a viewership standpoint, would be something that clearly 0:03:42.040 --> 0:03:45.400 would be looked at a little bit more closely, I 0:03:45.440 --> 0:03:47.680 think given the potential combination. 0:03:48.440 --> 0:03:51.440 Hey, Robert, you know, nothing gets done here unless Sherry 0:03:51.480 --> 0:03:55.280 Redstone gives the green light. Sherry Redstone the chairperson of 0:03:55.520 --> 0:03:59.200 National Amusements, which is the control shareholder of Paramount. Do 0:03:59.240 --> 0:04:01.360 we have any reason to believe I mean, she could 0:04:01.360 --> 0:04:04.360 have sold these assets at any time over the last six, seven, 0:04:04.440 --> 0:04:07.680 eight years at a drop of a hat. Why now 0:04:07.720 --> 0:04:09.960 do you think she might be open to a transaction. 0:04:11.000 --> 0:04:12.080 It's a really great question. 0:04:13.160 --> 0:04:16.919 What we think is leading to all of this now 0:04:17.520 --> 0:04:21.159 is again like the realization as far as what the 0:04:21.200 --> 0:04:24.400 trajectory of the business is going forward. And I alluded 0:04:24.440 --> 0:04:26.640 to it to a couple of the headwinds facing the 0:04:26.680 --> 0:04:30.960 traditional business already in terms of advertising and cord cutting. 0:04:31.120 --> 0:04:35.520 But another big piece coming up is the renegotiations with 0:04:35.600 --> 0:04:40.520 a few of their affiliate distribution partners, and namely Charter, 0:04:40.839 --> 0:04:44.120 and if we all remember what happened with Disney just 0:04:44.200 --> 0:04:47.279 only a couple months ago, we do think that this 0:04:47.560 --> 0:04:50.200 is going to be the template that at the very 0:04:50.279 --> 0:04:54.000 least Charter and more likely other distributors are going to 0:04:54.040 --> 0:04:58.000 look to take going forward in future negotiations. So that 0:04:58.080 --> 0:05:02.400 will put an additional pressure on companies like Paramount, which 0:05:02.480 --> 0:05:06.680 we've essentially labeled them as one of these cheaters of 0:05:06.680 --> 0:05:10.159 the ecosystem because they're double dipping in terms of putting 0:05:10.160 --> 0:05:14.760 their premium content, namely NFL and other sports rights over 0:05:14.800 --> 0:05:17.680 the top on Paramount Plus. So we think Charter and 0:05:17.720 --> 0:05:21.200 others are going to look to right size that type 0:05:21.200 --> 0:05:22.240 of economics. 0:05:22.839 --> 0:05:26.440 He you know, Robert, you and your partners over there, 0:05:26.440 --> 0:05:28.960 Moufett the agency and again the top of the top 0:05:29.000 --> 0:05:31.360 of the top of TMT research. But quite frankly, I'm 0:05:31.360 --> 0:05:32.920 not picking up the phone call when you guys call. 0:05:33.320 --> 0:05:37.080 I mean, I just don't have any reason to believe, Like, 0:05:37.120 --> 0:05:39.000 I can't figure out how any of those any of 0:05:39.040 --> 0:05:41.919 you guys make money at Paramount or Warner Brothers, Discovery 0:05:42.120 --> 0:05:44.839 or maybe even Disney for that matter. This whole pivot 0:05:44.880 --> 0:05:47.400 to streaming. Do you guys have a view as to 0:05:47.520 --> 0:05:50.760 whether anybody can do this? I mean, Netflix has done 0:05:50.760 --> 0:05:54.160 it successfully, but that's a different model and different legacy. 0:05:54.520 --> 0:05:56.800 Can any of these traditional media companies make that pivot 0:05:56.839 --> 0:06:00.200 from you know, the you know, the cable model to 0:06:00.240 --> 0:06:00.960 the streaming model. 0:06:02.160 --> 0:06:04.400 Yeah, I mean we as you probably know what we've 0:06:04.440 --> 0:06:07.360 long had our doubts in terms of whether streaming is 0:06:07.640 --> 0:06:10.680 actually a good business. And it's clear that streaming is 0:06:10.720 --> 0:06:13.599 not as good of a business as the old traditional 0:06:14.240 --> 0:06:18.520 PATV business for these companies. And so as these companies 0:06:18.520 --> 0:06:21.240 are working through this pivot and now that they don't 0:06:21.279 --> 0:06:26.720 have the full leeway that Wall Street has initially gave them, 0:06:26.839 --> 0:06:29.919 you know, coming out of COVID, we're at the point 0:06:29.920 --> 0:06:31.760 now where they have to focus on cash flow and 0:06:31.800 --> 0:06:36.560 figure out how quickly these streaming services can really be profitable. 0:06:37.040 --> 0:06:41.680 And we do agree that that Netflix has clearly won 0:06:41.720 --> 0:06:44.599 that fight in terms of the streaming wars. We still 0:06:44.640 --> 0:06:49.880 do expect Disney to be a strong number two player 0:06:50.120 --> 0:06:53.159 essentially given the assets that they have, but we think 0:06:53.360 --> 0:06:55.240 it's going to be more challenging for a lot of 0:06:55.279 --> 0:06:58.560 these other traditional media companies to figure that out. 0:06:59.120 --> 0:07:02.640 What would be some of the implications for the viewers 0:07:02.760 --> 0:07:06.000 if this deal we're actually going to go through on 0:07:06.560 --> 0:07:08.320 content and viewership. 0:07:09.720 --> 0:07:12.520 Well, what we're going through now, just back to the 0:07:12.600 --> 0:07:17.560 last point, is essentially like this content rationalization period where 0:07:17.720 --> 0:07:20.120 I think we've been all living in this world that 0:07:20.160 --> 0:07:24.360 we've enjoyed endless content essentially, and there's almost too much 0:07:24.360 --> 0:07:27.600 out there that you can't even watch everything, and I'm 0:07:27.600 --> 0:07:30.600 sure everyone has their own playlists that that they haven't 0:07:30.640 --> 0:07:34.200 been able to get through. But I think to your question, 0:07:35.000 --> 0:07:37.480 going forward, we're going to see a pullback in the 0:07:37.520 --> 0:07:40.400 amount of content that's being spent at these companies again 0:07:40.560 --> 0:07:43.520 because they need to focus on their cash flows and 0:07:43.880 --> 0:07:49.280 generating real profits and that's a more challenging environment. Given 0:07:49.400 --> 0:07:52.880 that that backdrop that I keep talking about, and how 0:07:52.920 --> 0:07:56.520 they figure that out and how they pivot clearly content spending, 0:07:56.560 --> 0:07:59.440 what will be a central piece to that, to that. 0:07:59.360 --> 0:08:01.800 Puzzle, Robert, what's your top pick for twenty four? 0:08:03.680 --> 0:08:08.840 We actually cover sports betting too, so we're in favor 0:08:08.880 --> 0:08:11.680 of DraftKings and clearly that they've had a tremendous year 0:08:11.720 --> 0:08:15.400 that this past year, but we think the momentum for 0:08:15.480 --> 0:08:18.000 DraftKings and sports betting overall is going to continue into 0:08:18.000 --> 0:08:18.440 twenty four. 0:08:18.600 --> 0:08:21.400 I mean, what's the is or what's the bear case 0:08:21.440 --> 0:08:23.880 for sports betting? Because I can't really think of one. 0:08:23.960 --> 0:08:27.520 I mean, this is just ridiculous, the appetite for this stuff. 0:08:29.040 --> 0:08:32.720 Yeah. Again, DraftKings has taken a tremendous amount of share 0:08:33.000 --> 0:08:37.600 over twenty three and they're set up nicely into twenty 0:08:37.640 --> 0:08:40.560 four and what we really saw and was probably the 0:08:40.600 --> 0:08:44.520 most surprised about this past year was just how quickly 0:08:45.040 --> 0:08:50.640 and how efficiently expenses have been rained in, but not 0:08:50.720 --> 0:08:53.480 to any detriment to that top line to your point, 0:08:53.520 --> 0:08:55.520 because the market just keeps growing really quickly. 0:08:55.640 --> 0:08:57.480 All right, Robert, thanks so much for joining us. Really 0:08:57.520 --> 0:09:00.040 appreciate it. Robert Fishman, he's a senior equity analyst that 0:09:00.160 --> 0:09:05.120 Maffatt Nathanson talking about the potential tie up between Paramount 0:09:05.120 --> 0:09:08.320 Global that's the old ViacomCBS, big big media company, and 0:09:08.400 --> 0:09:11.480 Warner Brothers Discovery another big media company. 0:09:11.520 --> 0:09:11.600 EI. 0:09:11.600 --> 0:09:15.280 They're both big, a lot bigger than they were five 0:09:15.360 --> 0:09:18.080 years ago, but guess what, in this new world order, 0:09:18.200 --> 0:09:21.400 they're not big enough. And so it's that whole argument 0:09:21.440 --> 0:09:25.560 we've seen in many other industries scale and that's kind 0:09:25.559 --> 0:09:27.840 of that's certainly the play in the media space as well. 0:09:27.920 --> 0:09:29.800 So we'll stay on top of that, and the folks 0:09:29.800 --> 0:09:32.480 at Moffat Nathanson are some of the absolute best research 0:09:32.559 --> 0:09:33.600 voices on the street. 0:09:35.120 --> 0:09:38.520 You're listening to the team. Ken's are Live program Bloomberg 0:09:38.559 --> 0:09:41.920 Markets weekdays at ten am Eastern on Bloomberg dot Com, 0:09:42.000 --> 0:09:45.160 the iHeartRadio app, and the Bloomberg Business app, or listen 0:09:45.240 --> 0:09:49.360 on demand wherever you get your podcasts. 0:09:49.360 --> 0:09:52.480 One of my all time favorites is here, Emily. You 0:09:52.520 --> 0:09:54.760 don't know this, but a Maletti, a head of active 0:09:55.360 --> 0:09:58.280 equity at Allspring Global Investments. It joins us here for 0:09:58.760 --> 0:10:02.680 get this liken how money falls Wisconsin or something. I 0:10:02.679 --> 0:10:04.680 don't know, but I went out there one time about 0:10:04.720 --> 0:10:06.280 twenty five years ago. When I keep going back, so 0:10:06.720 --> 0:10:09.200 and thanks so much for joining us here. Boy, this 0:10:09.400 --> 0:10:12.600 last I don't know, six seven eight weeks, it's been 0:10:12.679 --> 0:10:15.440 such a move in the equity markets, in the treasury market. 0:10:15.880 --> 0:10:18.120 You know you've seen this come and go a million times. 0:10:18.160 --> 0:10:20.520 What do you make of the last six seven eight weeks? 0:10:20.960 --> 0:10:24.320 It's been a wild ride, Paul, And thanks for having 0:10:24.360 --> 0:10:26.959 me on. It was really nice to be on this week. 0:10:27.000 --> 0:10:29.600 And wish you all a merry Christmas and happy holidays. 0:10:29.640 --> 0:10:33.480 So thanks for having me back. Look, it's been a 0:10:33.520 --> 0:10:36.200 really wild ride. And you know we are getting that 0:10:36.280 --> 0:10:40.720 Santa Claus rally, certainly a little bit even early, but 0:10:41.200 --> 0:10:44.360 there's a lot now with the rally that we have 0:10:44.679 --> 0:10:47.600 that maybe took a little bit away from what we 0:10:47.679 --> 0:10:50.480 thought might happen in twenty twenty four. So I think 0:10:50.920 --> 0:10:51.880 now is the time. 0:10:51.720 --> 0:10:55.680 To be a little bit more disciplined about the way 0:10:55.720 --> 0:10:56.480 we enter the year. 0:10:57.400 --> 0:11:00.480 And I had the wonderful opportunity to actually meet you 0:11:00.559 --> 0:11:04.120 at your outlook event a few weeks ago, and I'm 0:11:04.160 --> 0:11:08.640 wondering if after that fed Duvish pivot you had to 0:11:08.760 --> 0:11:12.160 change anything from your twenty twenty four outlook. 0:11:13.320 --> 0:11:16.280 Well, Emily, you know, as we talk then it was 0:11:16.360 --> 0:11:18.559 interesting because a lot of the things that we were 0:11:18.600 --> 0:11:22.160 pointing out is where fundamentals were pointing us for twenty 0:11:22.200 --> 0:11:27.559 twenty four. And as soon as Powell kind of said 0:11:27.040 --> 0:11:31.240 the FED put is back on, those things really started 0:11:31.280 --> 0:11:34.800 to ramp up. Areas like small cap, right. You know, 0:11:35.240 --> 0:11:38.080 it's an area that we've been looking at really closely 0:11:38.559 --> 0:11:41.320 for the last couple of quarters. At least the market 0:11:41.360 --> 0:11:44.560 really hasn't been paying that much attention, but that's where 0:11:44.600 --> 0:11:48.120 our investment teams saw a lot of value. And as 0:11:48.160 --> 0:11:52.640 soon as it became clear from Powell that you know, look, 0:11:52.840 --> 0:11:57.400 rates are going lower, those that area of the market 0:11:57.520 --> 0:12:00.400 really really lit up. What I would say, though, Emily, 0:12:00.559 --> 0:12:03.320 is where we probably want to be a little bit 0:12:03.320 --> 0:12:06.320 more cautious is the type of small cap stocks that 0:12:06.559 --> 0:12:10.760 you know, investors enter into. There still are a lot 0:12:10.800 --> 0:12:13.520 of small cap names that don't have the best balance sheets. 0:12:13.679 --> 0:12:17.680 We're more interested in quality and looking at small cap 0:12:17.720 --> 0:12:22.280 stocks that have free cash flow, that have better balance sheets, 0:12:22.480 --> 0:12:27.319 those names and margins obviously to maybe the margins above 0:12:27.360 --> 0:12:30.000 twenty percent. Those were the names specifically that we were 0:12:30.000 --> 0:12:33.719 calling out that are durable and can last whatever we 0:12:33.800 --> 0:12:35.480 do see in twenty twenty four. 0:12:36.400 --> 0:12:38.080 Hey, and you know, one of the things that had 0:12:38.200 --> 0:12:41.560 I think concerned investors certainly for the first maybe nine 0:12:41.600 --> 0:12:44.360 months of this year was the lack of breath in 0:12:44.400 --> 0:12:47.120 this market, the Magnificent seven driving most of the performance. 0:12:47.760 --> 0:12:49.840 But that seems to have improved a little bit. We've 0:12:49.840 --> 0:12:53.040 had the Russell two thousand really outperforming over the last 0:12:53.200 --> 0:12:54.800 couple of months. How do you think that's going to 0:12:55.600 --> 0:12:58.280 play into twenty twenty four? Should you think you'll see 0:12:58.280 --> 0:13:01.600 some continued improvement in the bread out there? Or should 0:13:01.600 --> 0:13:04.000 I just jump on the Magnificent seven for next year? 0:13:05.320 --> 0:13:08.520 You know, Paul, it's so interesting because you know, as 0:13:08.600 --> 0:13:12.160 you and I both have been trained over time, fundamentals 0:13:12.200 --> 0:13:15.880 really do matter, and you know, it was as we 0:13:16.000 --> 0:13:17.920 really dug in and I did a lot of work 0:13:17.960 --> 0:13:24.160 on this. The Meg seven really did generate good returns 0:13:24.160 --> 0:13:28.080 in twenty twenty three because they had really good earnings 0:13:28.120 --> 0:13:31.240 relative to the rest of the market. And so, okay, 0:13:31.440 --> 0:13:34.440 i'll give them that, But when you look at the 0:13:34.559 --> 0:13:38.040 thirty percent plus earnings growth that many of the Meg 0:13:38.080 --> 0:13:40.800 stocks seven, or the many of the Meg seven had 0:13:41.400 --> 0:13:44.079 at least five names out of Megs seven grew earnings 0:13:44.160 --> 0:13:47.800 over thirty percent, many over forty percent in the third quarter, 0:13:48.679 --> 0:13:51.680 it's going to be really hard for them to top those. 0:13:52.040 --> 0:13:56.320 You know, compares now become very difficult in twenty twenty four. 0:13:56.840 --> 0:14:01.840 So I think we were also saying our compares are easier, 0:14:02.400 --> 0:14:04.960 and again that showed us where the breath of the 0:14:04.960 --> 0:14:08.000 market could be in twenty twenty four. That pointed to 0:14:08.960 --> 0:14:12.840 areas like small cap, but also areas like healthcare, where 0:14:13.120 --> 0:14:16.920 earning's growth appears to be the best almost of any 0:14:16.960 --> 0:14:19.440 other sector. As I look to twenty twenty four to 0:14:19.480 --> 0:14:24.040 twenty percent or more, earning's growth, No, look, it wasn't 0:14:24.080 --> 0:14:27.600 great in twenty twenty three, but we think the prospects 0:14:27.600 --> 0:14:31.000 there are pretty good in twenty twenty four, So driven 0:14:31.040 --> 0:14:35.240 by fundamentals, we think the breath is going to be 0:14:35.440 --> 0:14:39.400 much broader in twenty twenty four. And you know, not 0:14:39.560 --> 0:14:42.440 that the Meg seven are bad, it's just that the 0:14:43.000 --> 0:14:46.360 chances for them to top that growth rate is going 0:14:46.400 --> 0:14:48.120 to be a little bit more difficult. 0:14:48.360 --> 0:14:50.400 So then what does it tell you about the market 0:14:50.520 --> 0:14:53.720 that we're in that people are still buying the mag seven. 0:14:53.760 --> 0:14:58.280 You look at ETF flows. We saw a record inflow 0:14:58.400 --> 0:15:01.000 into spy s and P five hundre ETF last week, 0:15:01.040 --> 0:15:04.120 twenty billion dollars in. It looks like stocks more broadly, 0:15:04.160 --> 0:15:05.840 and a lot of this is coming from large cap 0:15:06.200 --> 0:15:10.800 sixty nine billion dollars into equity ETFs in December, that's 0:15:10.840 --> 0:15:14.040 the best month since twenty twenty one. What do you 0:15:14.120 --> 0:15:17.600 make of that? I guess euphoria just piling into these 0:15:17.840 --> 0:15:21.440 large cap stocks, or should people be pivoting into other areas? 0:15:21.480 --> 0:15:25.600 Then well, we personally think they should, Emily, and I 0:15:25.680 --> 0:15:30.080 think you know sometimes and look, I think investors generally 0:15:30.120 --> 0:15:33.960 speaking are very very smart. But one of the things 0:15:33.960 --> 0:15:39.680 that has gotten disjointed is this heavy overweight in these 0:15:39.760 --> 0:15:42.640 Meg seven stocks. And so you know, when you're buying 0:15:42.720 --> 0:15:46.160 an index, when you're buying the Russell three thousand growth 0:15:46.200 --> 0:15:49.600 when you're buying and all just the Russell three thousand. 0:15:49.640 --> 0:15:53.000 When you're buying the S and P, you're buying the 0:15:53.040 --> 0:15:57.200 most expensive names, and you're buying thirty forty percent of 0:15:57.240 --> 0:16:01.280 those names and much less of any And so while 0:16:01.320 --> 0:16:06.160 you might think you're diversified, you're buying, you know, very 0:16:06.280 --> 0:16:11.160 chunky portions of a few names and very few of 0:16:11.200 --> 0:16:14.640 the others. And so, you know, we think taking a 0:16:14.760 --> 0:16:20.520 much more active approach and having fewer names, but owning 0:16:20.560 --> 0:16:24.200 a broader portfolio makes sense at this point in the market, 0:16:24.480 --> 0:16:27.200 and we think returns can be better. Now. It's not 0:16:27.240 --> 0:16:30.520 surprising to me that those ETF flows are going there 0:16:30.560 --> 0:16:33.040 just because of the structure of the indexes. But we 0:16:33.120 --> 0:16:35.120 think it should change, and we think it will change 0:16:35.120 --> 0:16:38.320 when the performance of the other names starts to show 0:16:38.360 --> 0:16:41.480 that they can produce the fundamentals that I talked about earlier. 0:16:42.000 --> 0:16:44.000 Hey, and how about valuation here in the market. We've 0:16:44.000 --> 0:16:46.080 had a big, big move higher. I don't I'm not 0:16:46.120 --> 0:16:49.680 sure we've necessarily had a commensurate increase in earnings here. 0:16:50.360 --> 0:16:52.240 How do you guys think about evaluation here? 0:16:53.080 --> 0:16:55.040 Yeah, that's what makes me a little bit nervous, Paul, 0:16:55.280 --> 0:16:58.240 You know it. You know, certainly I can point to 0:16:58.680 --> 0:17:01.400 the four hundred and ninety three names that aren't as 0:17:01.480 --> 0:17:05.200 highly valued as the overall market. But I do think 0:17:05.320 --> 0:17:07.239 we do need to see some catchup, and we do 0:17:07.320 --> 0:17:10.439 need to see the fundamentals play out. And so, you know, 0:17:10.520 --> 0:17:12.720 I don't love the fact that we've had this really 0:17:12.760 --> 0:17:16.160 strong rally here, and I do think we're entering twenty 0:17:16.240 --> 0:17:21.360 twenty four with a much foggier environment. Yes, inflation has 0:17:21.400 --> 0:17:25.120 come down, but you know, we have problems with the 0:17:25.160 --> 0:17:28.640 Red Sea right now. The geopolitical risks as we enter 0:17:28.680 --> 0:17:31.080 twenty twenty four, you could say, are much higher than 0:17:31.119 --> 0:17:34.600 when we enter twenty twenty three. It's a political year, 0:17:35.400 --> 0:17:40.280 an election year. Now, typically those end up being up markets, 0:17:40.320 --> 0:17:44.000 but typically also pretty about little and so I think, 0:17:44.280 --> 0:17:47.600 you know, it's going to be much more challenging than 0:17:47.640 --> 0:17:52.280 investors believe today. That being said, we think will end 0:17:52.359 --> 0:17:55.399 up having an up year, but it's not going to 0:17:55.400 --> 0:17:58.480 be up, you know, double digit. We think it's going 0:17:58.560 --> 0:18:01.480 to be kind of up single digit, maybe high single digit, 0:18:01.520 --> 0:18:03.760 but expected to be a rocky one. 0:18:04.040 --> 0:18:07.439 What's the biggest macro risk for next year? That you 0:18:07.440 --> 0:18:09.000 don't think enough people are talking about. 0:18:09.960 --> 0:18:14.040 Yeah, I still think it's geopolitical, right, We're definitely focused 0:18:14.040 --> 0:18:17.160 on interest rates right now and whether the FED gets 0:18:17.160 --> 0:18:19.399 it right or wrong than you know, whether we have 0:18:19.440 --> 0:18:24.600 a softer hard landing. But it's always, you know, you know, 0:18:24.800 --> 0:18:27.960 Paul probably would also agree with this. It's never the 0:18:28.000 --> 0:18:30.440 things we spend the most time worrying about. It's the 0:18:30.480 --> 0:18:33.680 big surprises that come out of nowhere that really have 0:18:33.880 --> 0:18:37.800 the most dramatic impact of the market. And so you know, 0:18:37.920 --> 0:18:41.240 it seems to be that probably a geopolitical risk, but 0:18:41.359 --> 0:18:43.600 maybe one that we're not evening considering today. 0:18:44.320 --> 0:18:46.640 And as always, thank you so much for joining us. 0:18:46.720 --> 0:18:49.600 That is the great and malady head of active equities 0:18:49.640 --> 0:18:51.760 at all Spring Global Advisors. And I've said it before 0:18:51.880 --> 0:18:54.720 many times and I'll say it again pound for pound, 0:18:54.840 --> 0:18:56.960 I think some of the best investors I've ever come 0:18:57.000 --> 0:19:00.440 in contact with over my career. Or in Milwaukee. Why 0:19:00.600 --> 0:19:04.560 maybe it's the great University of Wisconsin, but boy, there's 0:19:04.600 --> 0:19:08.320 just so many firms large and small in Milwaukee that 0:19:08.720 --> 0:19:12.320 have some really smart investors and have really good track 0:19:12.359 --> 0:19:14.359 records over a long period of time. So you wouldn't 0:19:14.359 --> 0:19:16.000 necessarily think it. I'm telling you. 0:19:15.880 --> 0:19:17.680 Many maybe I have to take a reporting trip there. 0:19:17.720 --> 0:19:19.840 Absolutely, you're listening to the tape. 0:19:20.000 --> 0:19:23.359 Cat's are live program Bloomberg Markets weekdays at ten am 0:19:23.400 --> 0:19:27.200 Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, 0:19:27.240 --> 0:19:29.960 and the Bloomberg Business App. You can also listen live 0:19:30.040 --> 0:19:33.240 on Amazon Alexa from our flagship New York station. Just 0:19:33.280 --> 0:19:36.640 say Alexa play Bloomberg eleven thirty. 0:19:37.480 --> 0:19:40.639 Let's talk Apple here, I mean here we are the 0:19:40.680 --> 0:19:44.600 holiday selling season. It's kind of important for people that 0:19:44.840 --> 0:19:48.040 sell stuff, and Apple is certainly a company that sells stuff. 0:19:48.240 --> 0:19:50.360 One of the things they sell are those watches. I'm 0:19:50.359 --> 0:19:52.280 not an Apple watch? Where or either of you an 0:19:52.280 --> 0:19:55.600 Apple watchwhear? Nope, right now there Nora's got it? Okay, 0:19:55.640 --> 0:19:58.040 great now, I like I'll watch it tells time. So, 0:19:59.320 --> 0:20:01.240 but apparently they have a little bit of an issue here. 0:20:01.359 --> 0:20:04.679 Mark German joins us here, a chief technology correspondent for 0:20:04.720 --> 0:20:08.960 Bloomberg News. Mark put into context a tell us what's 0:20:08.960 --> 0:20:11.200 happening with Apple, and b kind of put it into 0:20:11.200 --> 0:20:12.960 context like doesn't matter. 0:20:14.600 --> 0:20:17.600 Yes, it certainly matters. And to tell you what's happening here, 0:20:17.640 --> 0:20:19.440 it's an unprecedented situation. 0:20:20.000 --> 0:20:20.520 This is the. 0:20:20.480 --> 0:20:23.320 First time in the modern era, or probably in the 0:20:23.440 --> 0:20:26.600 entirety of Apple's forty plus year history, where the company 0:20:26.680 --> 0:20:29.280 is being forced to stop sales of one of its 0:20:29.320 --> 0:20:32.359 core products in the United States. That core product being 0:20:32.800 --> 0:20:36.120 the Apple Watch Series nine and the Apple Watch Ultra two. 0:20:36.400 --> 0:20:39.560 Those make up probably eighty plus percent of all Apple 0:20:39.600 --> 0:20:43.159 Watch sales, the two newest models. They only sell three models, 0:20:43.200 --> 0:20:45.399 so two of the three models are impacted. Here. There 0:20:45.520 --> 0:20:47.960 was a patent dispute with the company in southern California 0:20:48.000 --> 0:20:51.600 called Massimo, and the International Trade Commission of the US 0:20:51.960 --> 0:20:56.480 ruled that Apple is violating two of Mosamo's patents related 0:20:56.520 --> 0:20:58.400 to blood oxygen saturation. 0:20:58.680 --> 0:20:58.880 Right. 0:20:58.960 --> 0:21:01.440 That's the app on the Apple Watch. You click it, 0:21:01.440 --> 0:21:04.119 it'll tell you your blood oxygen. Most people are looking 0:21:04.119 --> 0:21:07.000 for a percentage between ninety five percent and one hundred percent. 0:21:07.440 --> 0:21:11.480 That's in violation. Two things happening a season to sist 0:21:11.800 --> 0:21:14.359 on Apple being able to sell the watch in the US, 0:21:14.640 --> 0:21:18.200 as well as an import band and injunction so they 0:21:18.200 --> 0:21:21.960 can no longer import Apple watches manufactured outside of the US. 0:21:22.400 --> 0:21:24.560 All Apple watches are built outside of the US. For 0:21:24.600 --> 0:21:28.600 those watching at home. So that's the fundamental issue there, right. 0:21:28.920 --> 0:21:31.720 So starting on Christmas Day, the end of the day, 0:21:31.760 --> 0:21:34.440 December twenty fifth, the Apple Watch sales in the US 0:21:34.720 --> 0:21:36.480 are no more when it comes to the Ultra two 0:21:36.480 --> 0:21:39.520 in the series nine. Now, given that we're talking now 0:21:39.560 --> 0:21:43.000 and it's Thursday morning, starting at three pm Eastern time, 0:21:43.080 --> 0:21:45.199 the Apple Watch will no longer be sold on Apple's 0:21:45.280 --> 0:21:48.600 online store. Apple retail stores in the US they have 0:21:48.640 --> 0:21:51.720 about two hundred and seventy of them. They're closed Christmas Day. 0:21:51.920 --> 0:21:54.520 So December twenty fourth, Christmas Eve is going to be 0:21:54.560 --> 0:21:57.600 the last day of in store retail sales. Now for 0:21:57.680 --> 0:21:59.680 those who still want to buy an Apple Watch before 0:21:59.680 --> 0:22:01.439 the end of the year, maybe for themselves or a 0:22:01.480 --> 0:22:03.960 gift and what have you. Apple's not allowed to tell 0:22:03.960 --> 0:22:06.560 you this for legal reasons, but I can tell you 0:22:06.680 --> 0:22:09.760 can still get one at Best Buy, Target, wherever they're 0:22:09.800 --> 0:22:11.560 sold other than Apple retail stores. 0:22:12.320 --> 0:22:16.320 What's the history between Apple and Massimo. I'm so curious 0:22:16.400 --> 0:22:21.320 how Apple got involved in a patent dispute. I mean, 0:22:21.359 --> 0:22:24.280 you think of Apple, one of the largest, most important companies. 0:22:24.720 --> 0:22:27.560 How could something like this happen to Apple? 0:22:28.520 --> 0:22:32.560