1 00:00:02,960 --> 00:00:08,560 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:09,960 --> 00:00:13,840 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 3 00:00:13,920 --> 00:00:17,000 Speaker 2: weekdays at ten am Eastern on Apple Card playing Android 4 00:00:17,040 --> 00:00:20,120 Speaker 2: otto with the Bloomberg Business App. Listen on demand wherever 5 00:00:20,200 --> 00:00:24,480 Speaker 2: you get your podcasts, or watch us live on YouTube. 6 00:00:25,079 --> 00:00:27,680 Speaker 3: Berkshire Hathaway people talking about this scene getting close to 7 00:00:27,680 --> 00:00:29,120 Speaker 3: a one trillion dollar valuation. 8 00:00:29,240 --> 00:00:30,680 Speaker 4: Find all I care about it? 9 00:00:30,720 --> 00:00:33,040 Speaker 3: What are they gonna do with their cash? Matthew Palozola, 10 00:00:33,360 --> 00:00:36,280 Speaker 3: he joins us here. He's from Bloomberg Intelligence. He covers 11 00:00:36,320 --> 00:00:40,279 Speaker 3: all the insurance comes, including Berkshire. So, Matthew, how much 12 00:00:40,320 --> 00:00:42,760 Speaker 3: cash do they really have on their balance sheet? And 13 00:00:43,720 --> 00:00:46,080 Speaker 3: we've been asking the same question for years? What do 14 00:00:46,159 --> 00:00:49,199 Speaker 3: they do with it? Anything new coming out of Omaha? 15 00:00:49,800 --> 00:00:54,520 Speaker 5: No, So about one hundred and sixty eight billion of cash. 16 00:00:54,840 --> 00:00:56,920 Speaker 5: We've been talking about this for a long time. They 17 00:00:56,920 --> 00:00:59,240 Speaker 5: haven't had a ton to do with the cash. Buffett 18 00:00:59,280 --> 00:01:03,880 Speaker 5: had said there's almost no targets outside of the US 19 00:01:03,880 --> 00:01:06,319 Speaker 5: that he would be interested in, and the ones inside 20 00:01:06,360 --> 00:01:09,000 Speaker 5: the US, the prices are getting driven up on competition. 21 00:01:09,200 --> 00:01:11,600 Speaker 5: So it was it was a real I thought a 22 00:01:12,200 --> 00:01:15,160 Speaker 5: kind of negative tone in the letter not only on 23 00:01:15,200 --> 00:01:16,840 Speaker 5: that but on some of their operations as well. 24 00:01:17,240 --> 00:01:19,840 Speaker 6: So a walkers through that, like, what were raised concerns 25 00:01:19,840 --> 00:01:20,039 Speaker 6: for you? 26 00:01:20,160 --> 00:01:23,119 Speaker 5: Yeah, So the beginning of last year at the annual meeting, 27 00:01:23,160 --> 00:01:25,080 Speaker 5: Buffett had said, we think the energy business, in the 28 00:01:25,160 --> 00:01:28,559 Speaker 5: railroad business, they're going to be he's gonna be lower 29 00:01:28,880 --> 00:01:32,400 Speaker 5: in twenty twenty three versus twenty two. What happened was 30 00:01:32,480 --> 00:01:34,280 Speaker 5: they were lower, but there was actually a couple of 31 00:01:34,319 --> 00:01:37,560 Speaker 5: externalities as well that made them even worse and their 32 00:01:37,640 --> 00:01:41,640 Speaker 5: their go forward concerns. The first one was labor costs 33 00:01:41,680 --> 00:01:44,680 Speaker 5: in the railroad that they were having a labor shortage 34 00:01:45,160 --> 00:01:47,720 Speaker 5: and they were paying their people more so the margins 35 00:01:47,760 --> 00:01:50,760 Speaker 5: in that Burlington Northern Santa Fe seemed to be like 36 00:01:50,800 --> 00:01:54,240 Speaker 5: they're going to underperform peers on a go forward basis. 37 00:01:54,480 --> 00:01:58,000 Speaker 5: The second was in energy in the West Coast. There's 38 00:01:58,040 --> 00:02:01,440 Speaker 5: a lot of litigation on wildfire, there's a lot of 39 00:02:01,800 --> 00:02:04,560 Speaker 5: regulation on their profits, and the outlook there didn't look 40 00:02:04,560 --> 00:02:04,960 Speaker 5: at you either. 41 00:02:05,640 --> 00:02:07,800 Speaker 7: So but to that point, what I find interesting is 42 00:02:07,800 --> 00:02:10,880 Speaker 7: that for the railroad, for example, that's why there's the 43 00:02:10,880 --> 00:02:13,760 Speaker 7: cash pile, right because you make the argument that I 44 00:02:13,760 --> 00:02:16,040 Speaker 7: have one hundred and sixty seven billion dollars in cash 45 00:02:16,080 --> 00:02:17,920 Speaker 7: because when things don't go well, I don't have to 46 00:02:17,919 --> 00:02:18,440 Speaker 7: go to a bank. 47 00:02:18,480 --> 00:02:20,240 Speaker 6: I don't have to get a loan. I can manage that. 48 00:02:20,720 --> 00:02:24,000 Speaker 5: So their cash pile is far in excess of what 49 00:02:24,040 --> 00:02:26,440 Speaker 5: they would need, right, So they they want to keep 50 00:02:26,480 --> 00:02:28,760 Speaker 5: a buffer of like twenty billion, and they have one 51 00:02:28,840 --> 00:02:33,520 Speaker 5: hundred and sixty seven right, So they're not keeping it 52 00:02:34,480 --> 00:02:37,680 Speaker 5: to support the businesses. They're keeping it because there's just 53 00:02:37,680 --> 00:02:39,079 Speaker 5: nothing good to do with it. 54 00:02:39,280 --> 00:02:43,919 Speaker 3: Historically, what is warrant said about dividends or lack their own? 55 00:02:44,200 --> 00:02:47,080 Speaker 5: So he likes getting them, and he will and he'll 56 00:02:47,080 --> 00:02:50,600 Speaker 5: never pay them, right, So I think in a post 57 00:02:50,600 --> 00:02:54,040 Speaker 5: buffet Berkshire, maybe that's something that happens with greg Abel. 58 00:02:54,080 --> 00:02:57,440 Speaker 5: I'm not one hundred percent sure, but it's never going 59 00:02:57,520 --> 00:02:59,600 Speaker 5: to happen when he's in charge. 60 00:03:00,320 --> 00:03:02,280 Speaker 4: That's just a philosophical thing with him. 61 00:03:02,360 --> 00:03:06,000 Speaker 5: Yeah, he thinks we can do better with the cash 62 00:03:06,080 --> 00:03:08,119 Speaker 5: than giving it back to you and letting you take 63 00:03:08,160 --> 00:03:08,720 Speaker 5: the alternative. 64 00:03:08,800 --> 00:03:11,000 Speaker 6: Ask a really down question, where is that cash? 65 00:03:11,000 --> 00:03:11,080 Speaker 8: Like? 66 00:03:11,240 --> 00:03:12,400 Speaker 6: Is it in a money market fund? 67 00:03:12,560 --> 00:03:12,680 Speaker 4: Like? 68 00:03:12,800 --> 00:03:13,480 Speaker 6: Is it in bomb? 69 00:03:13,800 --> 00:03:16,480 Speaker 5: It's in money markets, bonds, short term securities? And what 70 00:03:16,560 --> 00:03:20,079 Speaker 5: happened last year was the short term rates went up 71 00:03:20,120 --> 00:03:22,520 Speaker 5: so much that they were earning a ton of money 72 00:03:22,560 --> 00:03:24,640 Speaker 5: on it. I think that actually took they were they 73 00:03:24,680 --> 00:03:27,600 Speaker 5: went from something earning like fifty million to like five 74 00:03:27,639 --> 00:03:30,600 Speaker 5: billion or something just just on the cash. And I 75 00:03:30,639 --> 00:03:33,360 Speaker 5: actually think that took a lot of pressure off, even 76 00:03:33,400 --> 00:03:34,920 Speaker 5: them investing in equities. 77 00:03:35,720 --> 00:03:38,400 Speaker 3: So how do people I mean, you're an insurance sannel, 78 00:03:38,440 --> 00:03:39,840 Speaker 3: so you're an odd duct to begin with. 79 00:03:39,880 --> 00:03:43,480 Speaker 4: Right, No, it's crazy accounting. You don't know what's going on. 80 00:03:43,960 --> 00:03:46,840 Speaker 3: How do you how do you and other analysts really 81 00:03:46,920 --> 00:03:49,720 Speaker 3: analyze this conglomerate or do you just say, hey, it's 82 00:03:49,720 --> 00:03:51,640 Speaker 3: a GDP growth company and that's it a slap a 83 00:03:51,680 --> 00:03:52,400 Speaker 3: GDP mop. 84 00:03:52,240 --> 00:03:54,560 Speaker 5: But on it, I mean, I wouldn't say that it's tough. 85 00:03:55,560 --> 00:03:57,080 Speaker 5: We try to look at it, you know, some of 86 00:03:57,120 --> 00:04:00,280 Speaker 5: the parts you can value the company looking at the float. 87 00:04:00,280 --> 00:04:02,440 Speaker 5: In the insurance business, there's there's a couple of different 88 00:04:02,800 --> 00:04:05,840 Speaker 5: methods to do it, you know, even just on a 89 00:04:05,880 --> 00:04:09,280 Speaker 5: simple pe right and what they're earning. It seems like 90 00:04:09,520 --> 00:04:13,400 Speaker 5: generally the values of the businesses kind of fall in 91 00:04:13,480 --> 00:04:15,800 Speaker 5: line with with peers. Like, I don't think there's a 92 00:04:15,840 --> 00:04:21,240 Speaker 5: conglomerate discount me anymore. I would consistently argue that it's 93 00:04:21,320 --> 00:04:24,680 Speaker 5: not a GDP company, that it's got best in class businesses, 94 00:04:25,400 --> 00:04:28,880 Speaker 5: pricing power businesses. So you're not going to just see 95 00:04:28,880 --> 00:04:30,960 Speaker 5: them growing, you know, two to three percent a year. 96 00:04:31,640 --> 00:04:35,080 Speaker 5: But you know a ton of the the emphasis goes 97 00:04:35,080 --> 00:04:37,640 Speaker 5: on their investments and you know what they can buy. 98 00:04:38,120 --> 00:04:39,960 Speaker 6: What do you think they should buy? 99 00:04:40,080 --> 00:04:42,640 Speaker 5: You know, something I was thinking of over the weekend. 100 00:04:42,800 --> 00:04:44,760 Speaker 5: I was thinking they were gonna buy Occidental, right, and 101 00:04:44,920 --> 00:04:47,520 Speaker 5: they threw cold water on that last year. He said 102 00:04:47,520 --> 00:04:50,800 Speaker 5: it again in the letter this year they wasn't gonna 103 00:04:50,800 --> 00:04:55,440 Speaker 5: buy it. But something I thought find fits into his 104 00:04:55,600 --> 00:04:59,240 Speaker 5: niche would be maybe entertainment. Right, So if you think 105 00:04:59,240 --> 00:05:02,880 Speaker 5: about the thing lot, you know, maybe you're. 106 00:05:03,000 --> 00:05:04,200 Speaker 6: You're not looking at right now. 107 00:05:04,880 --> 00:05:07,719 Speaker 5: I think that because look what does he look at. 108 00:05:07,920 --> 00:05:10,279 Speaker 5: He looks at stuff that there's going to be consistent 109 00:05:10,320 --> 00:05:10,960 Speaker 5: demand for. 110 00:05:11,120 --> 00:05:11,320 Speaker 9: Right. 111 00:05:11,720 --> 00:05:15,240 Speaker 5: Maybe it's a little old school like he still thinks that. 112 00:05:15,240 --> 00:05:17,960 Speaker 5: He says Cole's not going anywhere anytime soon. You know, 113 00:05:18,560 --> 00:05:22,640 Speaker 5: it's not He bought these Japanese trading houses, right. The 114 00:05:23,200 --> 00:05:26,520 Speaker 5: investment there is around nineteen billion dollars in value, and 115 00:05:26,600 --> 00:05:28,960 Speaker 5: if you look at them, they're not AYI they're not flashy, 116 00:05:29,000 --> 00:05:32,880 Speaker 5: they're not tech, but they are steeply involved in these 117 00:05:32,880 --> 00:05:35,400 Speaker 5: things that are just not going away. And I think that, 118 00:05:35,920 --> 00:05:38,400 Speaker 5: you know, I don't cover entertainment, but I think you know, 119 00:05:38,600 --> 00:05:40,760 Speaker 5: there you go, Paul, Maybe you have an idea going up, 120 00:05:41,640 --> 00:05:44,279 Speaker 5: but the whole town's for sale. There's always going to 121 00:05:44,279 --> 00:05:45,239 Speaker 5: be a market for entertainment. 122 00:05:45,240 --> 00:05:46,440 Speaker 9: We always need to be entertained. 123 00:05:46,520 --> 00:05:48,360 Speaker 5: So I don't know, maybe there's something in there. 124 00:05:48,400 --> 00:05:50,840 Speaker 7: Well, I mean to your Oxy point, I mean it's 125 00:05:50,839 --> 00:05:53,479 Speaker 7: not that he was he was offered a really good deal, 126 00:05:53,839 --> 00:05:56,040 Speaker 7: Like he got a really good deal on some shares 127 00:05:56,080 --> 00:05:57,880 Speaker 7: when Oxy was looking to buy In and Darko and 128 00:05:57,880 --> 00:06:00,160 Speaker 7: they needed cash. They needed cash quickly because Chevron was 129 00:06:00,200 --> 00:06:03,400 Speaker 7: also making a bid. So like, will things get dramatic 130 00:06:03,480 --> 00:06:05,520 Speaker 7: enough or distressed enough for there to be a really 131 00:06:05,520 --> 00:06:07,800 Speaker 7: good deal? Might not be buy the whole company, but 132 00:06:07,839 --> 00:06:08,520 Speaker 7: get that good deal. 133 00:06:08,560 --> 00:06:09,040 Speaker 6: What do you think? 134 00:06:09,480 --> 00:06:09,680 Speaker 8: You know? 135 00:06:09,800 --> 00:06:12,400 Speaker 5: He always says he buys he would love to own 136 00:06:12,640 --> 00:06:14,680 Speaker 5: all of the companies he owns, like he would love 137 00:06:14,720 --> 00:06:17,320 Speaker 5: to own Apple, right, but he can own the whole company. 138 00:06:18,200 --> 00:06:22,280 Speaker 5: I mean, just say, we're not interested in necessarily running Occidental, right, 139 00:06:22,320 --> 00:06:24,800 Speaker 5: So I could see them buying up more of it. 140 00:06:24,920 --> 00:06:27,560 Speaker 5: I mean, they have the warrants that will increase their 141 00:06:27,600 --> 00:06:32,080 Speaker 5: ownership given the strike price. But I don't again like 142 00:06:32,120 --> 00:06:33,880 Speaker 5: they're not going they don't want to run it, but 143 00:06:33,920 --> 00:06:35,240 Speaker 5: I think they would own as much. 144 00:06:35,120 --> 00:06:35,839 Speaker 9: Of it as they could. 145 00:06:36,400 --> 00:06:36,840 Speaker 4: Step back. 146 00:06:36,880 --> 00:06:40,160 Speaker 3: Your P and C property and Casualty's what's the call here? 147 00:06:40,160 --> 00:06:41,280 Speaker 4: Do we like it? Do we not like them? 148 00:06:41,440 --> 00:06:47,839 Speaker 5: So for Berkshire's businesses specifically, they leaned into the Florida 149 00:06:47,880 --> 00:06:52,640 Speaker 5: reinsurance market heavily last year. Okay, and that worked out well. 150 00:06:52,800 --> 00:06:55,000 Speaker 5: And you know, I've been guilty of saying this, and 151 00:06:55,040 --> 00:06:56,680 Speaker 5: you see it sometimes in the press that they quote 152 00:06:56,720 --> 00:06:59,840 Speaker 5: bet on the market, right. They didn't bet on it. 153 00:07:00,000 --> 00:07:02,559 Speaker 5: They didn't like place their chips on black and hope 154 00:07:02,560 --> 00:07:06,480 Speaker 5: that it worked out right. It was a risk adjusted play. 155 00:07:06,760 --> 00:07:09,920 Speaker 5: They said, if we have an average hurricane season in Florida, 156 00:07:10,320 --> 00:07:13,080 Speaker 5: we'll still make a nice return. What happened is we 157 00:07:13,120 --> 00:07:15,040 Speaker 5: had a far below average, so they made a lot 158 00:07:15,080 --> 00:07:18,320 Speaker 5: of money. The other business for them that's kind of 159 00:07:18,320 --> 00:07:21,400 Speaker 5: turning around is Geico. So if anyone here drives a car, 160 00:07:21,520 --> 00:07:24,560 Speaker 5: has a car, you've probably seen auto insurance costs going 161 00:07:24,640 --> 00:07:28,600 Speaker 5: up dramatically. You've probably also seen a lot less advertising, 162 00:07:29,040 --> 00:07:31,320 Speaker 5: so they spent it. Did some back of the envelope 163 00:07:31,360 --> 00:07:36,200 Speaker 5: calculations about one point five billion dollars less on advertising 164 00:07:36,280 --> 00:07:40,400 Speaker 5: this year just in Geico. Then they wouldn't on a 165 00:07:40,480 --> 00:07:41,960 Speaker 5: run rate basis, And why was it. They did that 166 00:07:41,960 --> 00:07:45,360 Speaker 5: to protect the profitability of the business. So the combined 167 00:07:45,440 --> 00:07:47,520 Speaker 5: ratio of the business is kind of the inverse of 168 00:07:47,560 --> 00:07:50,880 Speaker 5: their profit margin. Right, they hoped to make about a 169 00:07:50,880 --> 00:07:55,080 Speaker 5: four percent profit margin underwriting insurance. They were probably gonna 170 00:07:55,080 --> 00:07:57,960 Speaker 5: make zero if they didn't cut their ads spend dramatically. 171 00:07:58,040 --> 00:08:00,560 Speaker 5: So they cut the ad spend. They've cut policies to 172 00:08:00,800 --> 00:08:04,880 Speaker 5: specifically on the West Coast, to kind of pair that down. 173 00:08:05,360 --> 00:08:08,160 Speaker 5: So that business was actually a nice performer this year, 174 00:08:08,200 --> 00:08:10,720 Speaker 5: but because they spend a lot less money on advertising. 175 00:08:11,200 --> 00:08:13,440 Speaker 4: Really interesting, that's money on my companies. 176 00:08:13,600 --> 00:08:15,520 Speaker 6: Yeah, that's dope. Sorry about that. 177 00:08:16,080 --> 00:08:19,320 Speaker 7: Matt Halizoa, We appreciate it. Thank you very much. Joining 178 00:08:19,400 --> 00:08:22,480 Speaker 7: us from Bloomberg Intelligence. He's the P and C Insurance 179 00:08:22,560 --> 00:08:26,480 Speaker 7: senior analyst there and also covers all things of Berkshire Hathaway. 180 00:08:28,320 --> 00:08:32,199 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 181 00:08:32,280 --> 00:08:34,120 Speaker 2: weekdays at ten am Eastern on. 182 00:08:34,160 --> 00:08:36,320 Speaker 9: Applecar Play and Android Auto with. 183 00:08:36,360 --> 00:08:39,200 Speaker 2: The Bloomberg Business at You can also listen live on 184 00:08:39,280 --> 00:08:42,560 Speaker 2: Amazon Alexa from our flagship New York station. Just say 185 00:08:42,640 --> 00:08:44,959 Speaker 2: Alexa play Bloomberg eleven thirty. 186 00:08:46,320 --> 00:08:49,720 Speaker 7: Stocks are definitely still going up. Everyone's really confused about 187 00:08:49,760 --> 00:08:53,160 Speaker 7: it and scratching their head. Yet no one's actually selling necessarily, 188 00:08:53,160 --> 00:08:56,040 Speaker 7: like you cannot get a sell off in this rally. 189 00:08:56,559 --> 00:08:59,360 Speaker 7: Kathy and Whistle is managing director at Morgan Stanley Private 190 00:08:59,400 --> 00:09:02,920 Speaker 7: Wealth Management, and she joins us, Now, Kathy, why won't 191 00:09:02,920 --> 00:09:03,760 Speaker 7: markets go down? 192 00:09:05,400 --> 00:09:07,760 Speaker 10: That's a great question, Alex, You're always throwing those tricky 193 00:09:07,760 --> 00:09:11,280 Speaker 10: ones at me. I would say basically that everyone is 194 00:09:11,360 --> 00:09:16,520 Speaker 10: still enthusiastic about the opportunity of interest rates coming down eventually. 195 00:09:16,800 --> 00:09:20,120 Speaker 10: So there was a little bit of a pullback a 196 00:09:20,160 --> 00:09:23,200 Speaker 10: couple of weeks ago when we all realized that the 197 00:09:23,240 --> 00:09:25,200 Speaker 10: Fed was not going to start cutting rates as soon 198 00:09:25,240 --> 00:09:28,680 Speaker 10: as they had originally thought. But now we know they're 199 00:09:28,720 --> 00:09:30,440 Speaker 10: going to cut eventually, so we want to get our 200 00:09:30,480 --> 00:09:33,080 Speaker 10: money in and have a long term view and get 201 00:09:33,080 --> 00:09:34,640 Speaker 10: some of the growth that's been going on. A little 202 00:09:34,640 --> 00:09:36,160 Speaker 10: bit of its FOMO, a little bit of it is 203 00:09:36,240 --> 00:09:37,040 Speaker 10: long term thinking. 204 00:09:37,720 --> 00:09:40,920 Speaker 3: So Kathy, we're pretty much through the earning season here. 205 00:09:41,600 --> 00:09:43,880 Speaker 3: I'm not sure I've seen earnings rise as much as 206 00:09:43,880 --> 00:09:46,080 Speaker 3: the market has. So what did you take away from 207 00:09:46,160 --> 00:09:47,680 Speaker 3: this earnings cycle here? 208 00:09:48,920 --> 00:09:53,560 Speaker 10: Yeah, we were expecting earnings to get hit somewhat because 209 00:09:53,679 --> 00:09:57,120 Speaker 10: over the last year or so, companies have been still 210 00:09:57,559 --> 00:10:01,080 Speaker 10: very positive with their expectation, and at some point they 211 00:10:01,360 --> 00:10:03,800 Speaker 10: we're going to have to pull in because there are 212 00:10:03,880 --> 00:10:06,320 Speaker 10: sales that are going down, the cost of goods is 213 00:10:06,360 --> 00:10:09,760 Speaker 10: getting more expensive, and it's harder and harder to get 214 00:10:09,760 --> 00:10:12,800 Speaker 10: that earnings number that they want in order to impress 215 00:10:12,880 --> 00:10:15,719 Speaker 10: their shareholders. At the end of the day, there's only 216 00:10:15,800 --> 00:10:18,680 Speaker 10: two ways to get the earnings to look good, and 217 00:10:18,720 --> 00:10:22,320 Speaker 10: that's either to increase your sales and your revenue or 218 00:10:22,360 --> 00:10:26,319 Speaker 10: to decrease your expenses. And a lot of companies are 219 00:10:26,320 --> 00:10:29,160 Speaker 10: starting to decrease expenses. We're seeing that with the layoffs, 220 00:10:29,880 --> 00:10:33,280 Speaker 10: and this is what we're thinking about of why companies 221 00:10:33,280 --> 00:10:35,960 Speaker 10: are trying to reach those numbers by making those cuts 222 00:10:35,960 --> 00:10:38,200 Speaker 10: and laying people off. And it's not necessarily the most 223 00:10:38,200 --> 00:10:39,439 Speaker 10: healthy way to meet numbers. 224 00:10:40,160 --> 00:10:44,320 Speaker 6: So, Kathy, what do you do? Then? Golden Sachs had 225 00:10:44,320 --> 00:10:44,640 Speaker 6: a noubt. 226 00:10:44,640 --> 00:10:47,200 Speaker 7: They talked about how hedge funds are selling tech last 227 00:10:47,240 --> 00:10:49,600 Speaker 7: week and they're buying consumer staples for example. 228 00:10:50,200 --> 00:10:51,640 Speaker 6: What do you do in this environment. 229 00:10:52,760 --> 00:10:55,000 Speaker 10: Yeah, one of the things that I'm doing with clients 230 00:10:55,080 --> 00:10:58,720 Speaker 10: actually is a very simple basic concept of asset allocation, right, 231 00:10:58,760 --> 00:11:01,480 Speaker 10: which where you're starting with how much is the percentage 232 00:11:01,520 --> 00:11:05,480 Speaker 10: you have in equities versus fixed income versus alternative investing, 233 00:11:06,080 --> 00:11:08,640 Speaker 10: And I'm peeling back a little bit. For those clients 234 00:11:08,679 --> 00:11:10,800 Speaker 10: that have stayed in the markets and have you done 235 00:11:10,880 --> 00:11:13,240 Speaker 10: quite well, you can peel back a little bit from 236 00:11:13,280 --> 00:11:15,400 Speaker 10: those names that have had a big run up and 237 00:11:15,520 --> 00:11:18,360 Speaker 10: start going more into that whole fixed income arena because 238 00:11:18,520 --> 00:11:21,280 Speaker 10: you are getting paid now for fixed income, which we 239 00:11:21,400 --> 00:11:23,640 Speaker 10: haven't gotten paid in years for fixed income. So there's 240 00:11:23,640 --> 00:11:27,320 Speaker 10: opportunities there. If the FED does go ahead and reduce 241 00:11:27,440 --> 00:11:29,280 Speaker 10: rates at some point in the future, there's a chance 242 00:11:29,320 --> 00:11:31,079 Speaker 10: for a little bit of a pop up too. So 243 00:11:31,240 --> 00:11:33,520 Speaker 10: I think just looking at allocation is the first step, 244 00:11:34,200 --> 00:11:36,360 Speaker 10: and the second step is looking at different areas of 245 00:11:36,400 --> 00:11:39,000 Speaker 10: the market that we think will do well. We've liked 246 00:11:39,160 --> 00:11:42,560 Speaker 10: consumer staples, We've liked you know, everyone has to buy toothpaste, right, 247 00:11:42,640 --> 00:11:46,240 Speaker 10: everybody's got to buy the basic products. So you can 248 00:11:46,320 --> 00:11:50,440 Speaker 10: still go there. You can go healthcare. Healthcare should do well. 249 00:11:50,559 --> 00:11:53,880 Speaker 10: We've seen some good numbers over this last earning season 250 00:11:53,960 --> 00:11:55,760 Speaker 10: two with healthcare, and we think we'll do, you know, 251 00:11:55,840 --> 00:11:58,439 Speaker 10: continue to do well there. And I think the financials 252 00:11:58,520 --> 00:12:02,199 Speaker 10: still have a nice opportunity to recover in this market 253 00:12:02,240 --> 00:12:04,079 Speaker 10: as well. So those are some of the areas that 254 00:12:04,120 --> 00:12:04,720 Speaker 10: we're looking at. 255 00:12:05,120 --> 00:12:05,400 Speaker 4: Kathy. 256 00:12:05,480 --> 00:12:07,719 Speaker 3: On the fixed income side, how much credit risk are 257 00:12:07,760 --> 00:12:09,599 Speaker 3: you suggesting your clients take. Do they stick with the 258 00:12:09,640 --> 00:12:12,360 Speaker 3: treasures where you can still get very nice yields or 259 00:12:12,800 --> 00:12:15,120 Speaker 3: do you go out into the credit space and maybe 260 00:12:15,160 --> 00:12:16,480 Speaker 3: take a little bit more risk for a little bit 261 00:12:16,480 --> 00:12:16,920 Speaker 3: more return. 262 00:12:17,640 --> 00:12:19,400 Speaker 10: Well, that's a great question, and it's something I've been 263 00:12:19,440 --> 00:12:22,800 Speaker 10: having a conversation with my clients about. I don't think 264 00:12:23,080 --> 00:12:26,320 Speaker 10: if we're going to have, you know, the Fed raise 265 00:12:26,400 --> 00:12:29,880 Speaker 10: rates sometime this year, these higher short term rates are 266 00:12:29,920 --> 00:12:32,559 Speaker 10: going to eventually go away and then it's going to 267 00:12:32,600 --> 00:12:35,079 Speaker 10: be too late to lock into the longer higher rates. 268 00:12:35,559 --> 00:12:38,120 Speaker 10: So I've been slowly legging clients out of these short 269 00:12:38,200 --> 00:12:40,559 Speaker 10: term rates the Treasury bills and things like that, and 270 00:12:40,679 --> 00:12:43,360 Speaker 10: going a little bit longer. If it's a taxable account 271 00:12:43,400 --> 00:12:45,480 Speaker 10: and they're in a higher tax bracket. We're looking at 272 00:12:45,559 --> 00:12:48,840 Speaker 10: municipal bonds. I really like municipal bonds for those clients, 273 00:12:48,960 --> 00:12:54,040 Speaker 10: so does Paul. Great, Thanks Alex. So the second piece 274 00:12:54,120 --> 00:12:57,440 Speaker 10: of that is where are taxes going? They are definitely 275 00:12:57,520 --> 00:12:59,640 Speaker 10: not going down. I don't know if they'll go up, 276 00:12:59,760 --> 00:13:01,800 Speaker 10: maybe they'll stay the same, but they are definitely not 277 00:13:01,920 --> 00:13:05,439 Speaker 10: going down. The chances with a deficit and different things 278 00:13:05,440 --> 00:13:07,880 Speaker 10: that are going on, we may see taxes at some 279 00:13:07,960 --> 00:13:08,640 Speaker 10: point go up. 280 00:13:09,080 --> 00:13:09,200 Speaker 8: There. 281 00:13:09,679 --> 00:13:12,480 Speaker 10: It wasn't that many years ago or decades ago that 282 00:13:12,640 --> 00:13:15,240 Speaker 10: we were in a much higher tax bracket in this 283 00:13:15,400 --> 00:13:18,800 Speaker 10: country for the highest earners. And if that happens, municipals 284 00:13:18,840 --> 00:13:21,360 Speaker 10: will be extremely valuable in your portfolio as well. 285 00:13:22,440 --> 00:13:24,880 Speaker 7: This is also sort of a basic but yet silly question. 286 00:13:25,320 --> 00:13:27,080 Speaker 7: So when you're taking a look at your asset allocation, 287 00:13:27,320 --> 00:13:29,679 Speaker 7: your barbells and all of that, what do you pay 288 00:13:29,679 --> 00:13:32,439 Speaker 7: attention to, Like, is it when the earnings cross the tape? 289 00:13:32,559 --> 00:13:35,079 Speaker 6: Is it going to be the PCE on Thursday? Is 290 00:13:35,120 --> 00:13:35,920 Speaker 6: it going to be the Fed? 291 00:13:36,000 --> 00:13:36,040 Speaker 8: Like? 292 00:13:36,080 --> 00:13:38,160 Speaker 7: We all know where this is going, right, So do 293 00:13:38,160 --> 00:13:39,840 Speaker 7: you just kind of like do your thing and check 294 00:13:39,880 --> 00:13:40,880 Speaker 7: back in six months later? 295 00:13:42,240 --> 00:13:45,040 Speaker 10: I try, you know, I do look at the different 296 00:13:45,160 --> 00:13:47,959 Speaker 10: data that comes across, you know, whether it's you know, 297 00:13:48,120 --> 00:13:51,840 Speaker 10: PMI or housing starts or things like that. I think 298 00:13:51,880 --> 00:13:54,079 Speaker 10: it's interesting that we're starting to see the numbers look 299 00:13:54,080 --> 00:13:57,800 Speaker 10: a little bit more positive for home buyers, right And 300 00:13:58,080 --> 00:14:01,480 Speaker 10: it's probably because sometimes when when people are waiting too long, 301 00:14:01,559 --> 00:14:04,760 Speaker 10: it kind of compresses that demand up, so then eventually 302 00:14:04,840 --> 00:14:08,720 Speaker 10: they have to start I know a lot of investors 303 00:14:08,880 --> 00:14:11,120 Speaker 10: are starting to think about purchasing because they just can't 304 00:14:11,160 --> 00:14:13,480 Speaker 10: wait any longer. And there's also the idea that you 305 00:14:13,559 --> 00:14:16,079 Speaker 10: can always refinance in a few years if rates to 306 00:14:16,240 --> 00:14:18,679 Speaker 10: go down. So I think that you have to look 307 00:14:18,679 --> 00:14:20,480 Speaker 10: at what your priorities are when it comes to your 308 00:14:20,560 --> 00:14:22,360 Speaker 10: values and goals and how you want to live your life, 309 00:14:22,480 --> 00:14:24,680 Speaker 10: and then try to find the best way possible to 310 00:14:24,840 --> 00:14:27,920 Speaker 10: do that. In terms of looking at all these different numbers. 311 00:14:27,960 --> 00:14:30,440 Speaker 10: When I think about clients, it's a little bit easier 312 00:14:30,480 --> 00:14:31,920 Speaker 10: for me in the sense that we have a longer 313 00:14:32,040 --> 00:14:33,760 Speaker 10: term view. We don't have a day to day We're 314 00:14:33,800 --> 00:14:37,480 Speaker 10: not traders, you know. I don't have institutional clients. I 315 00:14:37,600 --> 00:14:42,560 Speaker 10: have private wealth clients, individual clients, business owners, entrepreneurs, c 316 00:14:42,720 --> 00:14:44,720 Speaker 10: SPIT executives that are trying to figure out what to 317 00:14:44,800 --> 00:14:46,880 Speaker 10: do with their money and how to make it, you know, 318 00:14:47,000 --> 00:14:49,520 Speaker 10: build and last. I've had conversations with a lot of 319 00:14:49,640 --> 00:14:52,800 Speaker 10: clients in their late fifties. Their whole life, they've been 320 00:14:52,800 --> 00:14:55,680 Speaker 10: in the accumulation phase, right, They're growing, they're adding money 321 00:14:55,720 --> 00:14:59,720 Speaker 10: to their portfolio, and it's pretty you know, pretty low key. 322 00:15:00,320 --> 00:15:02,600 Speaker 10: Now they're starting to think about retirement, and I can 323 00:15:02,720 --> 00:15:05,440 Speaker 10: tell you people get stressed when they start thinking about, oh, 324 00:15:05,520 --> 00:15:07,320 Speaker 10: now I have to take this money and put put 325 00:15:07,400 --> 00:15:09,800 Speaker 10: you know, I'm in the distribution phase, like how am 326 00:15:09,840 --> 00:15:11,880 Speaker 10: I going to start using that money for the rest 327 00:15:11,920 --> 00:15:14,000 Speaker 10: of my life? And it's a little scary, which is 328 00:15:14,000 --> 00:15:15,920 Speaker 10: why I also think, you know, clients can do a 329 00:15:16,000 --> 00:15:19,120 Speaker 10: financial plan which gives you a really great roadmap year 330 00:15:19,160 --> 00:15:21,120 Speaker 10: to year about what kind of money you'll come in 331 00:15:21,520 --> 00:15:24,560 Speaker 10: into your portfolio and how to you know, spend it 332 00:15:24,600 --> 00:15:26,120 Speaker 10: throughout each year so that you have it for the 333 00:15:26,200 --> 00:15:28,640 Speaker 10: rest of your life. So these are like the longer 334 00:15:28,720 --> 00:15:30,960 Speaker 10: term themes and topics I'm thinking about when I think 335 00:15:31,000 --> 00:15:34,920 Speaker 10: about clients, and I'm also looking for you know, earlier 336 00:15:34,920 --> 00:15:37,840 Speaker 10: people were talking about how you know, there's a strategy. 337 00:15:37,960 --> 00:15:39,880 Speaker 10: You know, Buffett takes the strategy of trying to find 338 00:15:39,920 --> 00:15:42,960 Speaker 10: dislocations in the market. I've always thought that that is 339 00:15:43,080 --> 00:15:48,320 Speaker 10: the best way to think about clients' portfolios, their individual portfolios, 340 00:15:48,440 --> 00:15:51,000 Speaker 10: like when is there a dislocation in the market, and 341 00:15:51,200 --> 00:15:55,400 Speaker 10: can we take advantage of that. So when we see 342 00:15:55,560 --> 00:15:59,560 Speaker 10: the interest rates change favorably for individual investors and their 343 00:15:59,680 --> 00:16:01,840 Speaker 10: yields are getting higher, that's a great time to say that, 344 00:16:01,880 --> 00:16:03,320 Speaker 10: you know, we have a little money on the sidelines, 345 00:16:03,360 --> 00:16:04,600 Speaker 10: let's start putting that to work. 346 00:16:05,440 --> 00:16:08,200 Speaker 3: Kathy, to what extent do you guide your clients into 347 00:16:08,240 --> 00:16:13,120 Speaker 3: alternative investments, whether that's private equity, private credit, hedge funds. 348 00:16:13,240 --> 00:16:13,880 Speaker 4: How does that work? 349 00:16:14,560 --> 00:16:14,760 Speaker 8: Yeah? 350 00:16:14,840 --> 00:16:18,360 Speaker 10: Absolutely so. Of course alternative investments, you know, you need 351 00:16:18,440 --> 00:16:19,680 Speaker 10: to qualify for it, so you have to be like 352 00:16:19,720 --> 00:16:23,600 Speaker 10: a certain level of investor. However, they're becoming more and 353 00:16:23,680 --> 00:16:29,120 Speaker 10: more democratized and becoming more available to more investors than 354 00:16:29,160 --> 00:16:30,960 Speaker 10: in the past. So the way I think about it 355 00:16:31,120 --> 00:16:34,240 Speaker 10: is this equities they've had a run. We had like 356 00:16:34,520 --> 00:16:37,680 Speaker 10: a ten year you know, double digit return. I think 357 00:16:37,720 --> 00:16:39,840 Speaker 10: it was like, what was it, twenty ten or so 358 00:16:40,000 --> 00:16:44,040 Speaker 10: to twenty twenty, something like that. We think alternatives are 359 00:16:44,040 --> 00:16:46,200 Speaker 10: an area where we can see double returns for the 360 00:16:46,280 --> 00:16:48,320 Speaker 10: next ten years, so we definitely want our clients in there. 361 00:16:48,680 --> 00:16:51,040 Speaker 10: And so I'm looking at an asset allocation of anywhere 362 00:16:51,040 --> 00:16:53,760 Speaker 10: on equities from like fifty to sixty. Now that fixed 363 00:16:53,800 --> 00:16:56,040 Speaker 10: income is back in the game, we can peel back 364 00:16:56,080 --> 00:16:58,480 Speaker 10: from the equities and add more to fixed InCom because 365 00:16:58,480 --> 00:17:00,720 Speaker 10: we were kind of avoiding a fixed income for a 366 00:17:00,840 --> 00:17:03,080 Speaker 10: larger portion of the portfolio in the last So you know, 367 00:17:03,080 --> 00:17:05,520 Speaker 10: a few years, so you've got like fifty to sixty 368 00:17:05,520 --> 00:17:08,200 Speaker 10: percent equities, maybe you've got like twenty to thirty percent 369 00:17:08,280 --> 00:17:11,560 Speaker 10: fixed income, and fifteen to twenty. You know, you can 370 00:17:11,640 --> 00:17:13,640 Speaker 10: go depending on the size of the clients net worth. 371 00:17:13,680 --> 00:17:16,600 Speaker 10: He goes high as thirty percent and alternatives, but fifteen 372 00:17:16,640 --> 00:17:19,800 Speaker 10: to twenty is really like a good number, and when 373 00:17:19,800 --> 00:17:22,560 Speaker 10: we're looking at it, we're looking at trying to level up, 374 00:17:22,880 --> 00:17:24,520 Speaker 10: you know, sort of what the client is looking for 375 00:17:24,840 --> 00:17:28,880 Speaker 10: versus their time frame, the liquidity needs and all those 376 00:17:28,960 --> 00:17:30,320 Speaker 10: things that need to be considered. 377 00:17:31,119 --> 00:17:33,720 Speaker 6: Really interesting. Yep, that's a lot though. Fifteen to twenty. 378 00:17:33,920 --> 00:17:35,760 Speaker 4: Yeah, that's what I hear. I mean, we I hear 379 00:17:35,800 --> 00:17:37,280 Speaker 4: that from the retail it's very typical. 380 00:17:37,400 --> 00:17:40,399 Speaker 10: Now it's like I would say, that's what's typical for 381 00:17:40,760 --> 00:17:42,680 Speaker 10: the you know, the high networth investor. 382 00:17:43,280 --> 00:17:44,879 Speaker 4: All Right, Kathy, thank you so much for joining us. 383 00:17:44,920 --> 00:17:47,760 Speaker 3: Really appreciate that as always, Kathy at and Twistle Managing 384 00:17:47,800 --> 00:17:51,000 Speaker 3: Director Morgan Stanley Private Wealth and Management joining us on 385 00:17:51,080 --> 00:17:52,679 Speaker 3: a zoom calf from lovely. 386 00:17:52,480 --> 00:17:54,840 Speaker 4: Ridgewood to New Jersey. They love me and Ridgewood. That's 387 00:17:54,880 --> 00:17:55,360 Speaker 4: a great tent. 388 00:17:55,480 --> 00:17:56,560 Speaker 6: They love you, Eymer in Jersey. 389 00:17:57,520 --> 00:17:58,640 Speaker 1: They let you go to Ridgewood. 390 00:17:58,800 --> 00:17:59,520 Speaker 4: Yeah, I know exactly. 391 00:18:00,880 --> 00:18:03,040 Speaker 3: I slipped in there the country club. You know, I 392 00:18:03,160 --> 00:18:05,720 Speaker 3: made it once a Ridgewood country club. Lost many golf 393 00:18:05,760 --> 00:18:07,800 Speaker 3: balls there. It's a great, great old course. 394 00:18:08,200 --> 00:18:09,280 Speaker 4: I love it there, you know. 395 00:18:09,359 --> 00:18:11,840 Speaker 3: But we were at a remote for one of our 396 00:18:13,000 --> 00:18:16,680 Speaker 3: ria folks, retro investment advisors, And that's what the advisors 397 00:18:16,680 --> 00:18:18,800 Speaker 3: are saying. They have a ton of demand from their 398 00:18:18,800 --> 00:18:20,120 Speaker 3: clients for alternative investments. 399 00:18:20,359 --> 00:18:21,280 Speaker 4: Is much harder than I thought. 400 00:18:21,600 --> 00:18:23,640 Speaker 7: Yeah, it's like with bitcoin, it's like is it gonna 401 00:18:23,640 --> 00:18:25,520 Speaker 7: be ten percent or one percent? And that really makes 402 00:18:26,000 --> 00:18:26,879 Speaker 7: quite a big difference. 403 00:18:28,560 --> 00:18:32,400 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 404 00:18:32,520 --> 00:18:34,360 Speaker 2: weekdays at ten am Eastern. 405 00:18:34,119 --> 00:18:36,080 Speaker 9: On Apple car Play and then broud Otto with the 406 00:18:36,119 --> 00:18:37,320 Speaker 9: Bloomberg Business app. 407 00:18:37,400 --> 00:18:40,560 Speaker 2: Listen on demand wherever you get your podcasts or watch 408 00:18:40,680 --> 00:18:41,920 Speaker 2: us live on YouTube. 409 00:18:43,320 --> 00:18:46,520 Speaker 3: Amazon, that's another big name now that is now in 410 00:18:46,640 --> 00:18:48,040 Speaker 3: the dal Jones industrials. 411 00:18:48,600 --> 00:18:50,639 Speaker 4: Good for them, it's a big day for them. But 412 00:18:50,760 --> 00:18:52,879 Speaker 4: the question is kind of where do we go from here? 413 00:18:52,920 --> 00:18:56,320 Speaker 3: What are the drivers here for our good friends at Amazon, 414 00:18:56,800 --> 00:19:00,600 Speaker 3: because they are the biggest play on retail, but they're 415 00:19:00,600 --> 00:19:02,280 Speaker 3: also one of the big plays on the cloud and 416 00:19:02,280 --> 00:19:03,800 Speaker 3: all that kind of stuff. So put them Goile It's 417 00:19:03,800 --> 00:19:05,680 Speaker 3: her job to figure all that stuff out. She's a 418 00:19:05,720 --> 00:19:08,600 Speaker 3: senior anos covering all the retail stuff for Bloomberg Intelligence. 419 00:19:08,960 --> 00:19:11,239 Speaker 3: Put them what's the if you go talk to your 420 00:19:11,320 --> 00:19:13,720 Speaker 3: clients out there, your institutional investor clients. What's kind of 421 00:19:14,000 --> 00:19:16,600 Speaker 3: the play on Amazon? Is it just shut up, I 422 00:19:16,640 --> 00:19:18,920 Speaker 3: got to own it, or I own it only for 423 00:19:19,040 --> 00:19:22,200 Speaker 3: the cloud? Or what's kind of the story behind the 424 00:19:22,200 --> 00:19:23,280 Speaker 3: Amazon play right now? 425 00:19:24,000 --> 00:19:26,560 Speaker 8: Yeah, I think it's all about profits. For a long time, 426 00:19:26,720 --> 00:19:29,840 Speaker 8: Amazon was all about marketshare, and today the story is 427 00:19:29,920 --> 00:19:33,119 Speaker 8: really a profit story. It's the profitability that's about to 428 00:19:33,280 --> 00:19:36,640 Speaker 8: unfold at Amazon that's really getting people excited and interested. 429 00:19:37,119 --> 00:19:39,040 Speaker 8: We wrote about this a few months ago, where you know, 430 00:19:39,480 --> 00:19:43,240 Speaker 8: if you look at their most lucrative businesses. And everyone 431 00:19:43,359 --> 00:19:46,640 Speaker 8: knows of the cloud, which generates thirty percent EBIT margins, 432 00:19:46,880 --> 00:19:49,480 Speaker 8: which we think can go to forty percent. That could 433 00:19:49,480 --> 00:19:51,840 Speaker 8: be a two hundred billion dollar business. So you're looking 434 00:19:51,920 --> 00:19:54,800 Speaker 8: at sixty to eighty billion dollars in profits in the 435 00:19:54,880 --> 00:19:58,480 Speaker 8: coming years. But then if you add advertising to then, Paul, 436 00:19:58,520 --> 00:20:02,200 Speaker 8: you know the space, well, they have fifty percent EBIT margins, 437 00:20:02,280 --> 00:20:05,000 Speaker 8: and we can see advertising growing to one hundred billion 438 00:20:05,080 --> 00:20:07,760 Speaker 8: dollars in just a few years. So you're talking about 439 00:20:07,800 --> 00:20:11,720 Speaker 8: fifty billion in advertising, plus if you add another sixty 440 00:20:11,840 --> 00:20:16,280 Speaker 8: seventy of cloud, you're talking a big profit number here, 441 00:20:16,720 --> 00:20:20,159 Speaker 8: and I think that's what's getting people excited. Aside from that, 442 00:20:20,320 --> 00:20:23,440 Speaker 8: retail is growing. And part of the reason that advertising 443 00:20:23,560 --> 00:20:26,240 Speaker 8: is doing so well is because you talked about search 444 00:20:26,280 --> 00:20:28,719 Speaker 8: a little earlier. You know, people go into Amazon as 445 00:20:28,720 --> 00:20:30,560 Speaker 8: if it was a search engine. Right, You go in 446 00:20:30,680 --> 00:20:33,640 Speaker 8: and you search for something. But the difference with Amazon 447 00:20:33,800 --> 00:20:36,280 Speaker 8: versus a search engine is you go with the purchase intent. 448 00:20:37,119 --> 00:20:39,440 Speaker 8: People go into Amazon looking for something and to colleck 449 00:20:39,520 --> 00:20:41,679 Speaker 8: that buyba and they already know they want it. They 450 00:20:41,760 --> 00:20:43,080 Speaker 8: just want to find it and get it there in 451 00:20:43,119 --> 00:20:43,920 Speaker 8: two days or less. 452 00:20:44,119 --> 00:20:45,639 Speaker 7: That is such a good point. And this is a 453 00:20:45,680 --> 00:20:48,920 Speaker 7: great example of this story of Amazon replacing Walgreen. So 454 00:20:48,920 --> 00:20:50,920 Speaker 7: I was talking to an anchor who's been struggling with 455 00:20:51,000 --> 00:20:53,119 Speaker 7: feeling sick and feels like that winter, like you're just 456 00:20:53,160 --> 00:20:55,520 Speaker 7: sick all the time. And I was telling about airborne, 457 00:20:55,840 --> 00:20:58,000 Speaker 7: which you take if you feel a coming on of 458 00:20:58,040 --> 00:20:59,280 Speaker 7: a cold. She's like, oh, where do I buy it? 459 00:20:59,280 --> 00:20:59,720 Speaker 6: Amazon? 460 00:21:00,000 --> 00:21:01,959 Speaker 7: I'm like, no, go to your local drug store. It's 461 00:21:01,960 --> 00:21:04,640 Speaker 7: two blocks away. But that idea, right, like walking those 462 00:21:04,640 --> 00:21:06,200 Speaker 7: two blocks isn't going to happen. And I have to 463 00:21:06,280 --> 00:21:08,520 Speaker 7: go to Amazon to buy the thing because it'll come 464 00:21:08,560 --> 00:21:10,080 Speaker 7: in two days. And I'm not even worried about it. 465 00:21:11,080 --> 00:21:12,200 Speaker 7: Where is the downside? 466 00:21:12,200 --> 00:21:12,360 Speaker 9: Though? 467 00:21:12,440 --> 00:21:12,720 Speaker 6: Who know? 468 00:21:12,920 --> 00:21:15,280 Speaker 7: I mean, you laid out a pretty convincing case, So 469 00:21:15,480 --> 00:21:17,879 Speaker 7: how do I I don't know what do I worry about? 470 00:21:18,480 --> 00:21:20,840 Speaker 8: So I think you know the downside? If we enter 471 00:21:21,200 --> 00:21:24,639 Speaker 8: a consumer recession, clearly Amazon will be impacted, right, so 472 00:21:24,720 --> 00:21:27,320 Speaker 8: we'll the rest of retail. But I think that's near term, 473 00:21:27,480 --> 00:21:30,320 Speaker 8: and as we've seen in past cycles, what goes down 474 00:21:30,440 --> 00:21:32,920 Speaker 8: comes up eventually. Amazon is one of those places where 475 00:21:32,960 --> 00:21:35,160 Speaker 8: we think if you view it for the longer term, 476 00:21:35,240 --> 00:21:38,280 Speaker 8: there's just a lot of opportunity across all its businesses. 477 00:21:38,840 --> 00:21:42,360 Speaker 8: We can't control the macro, but with the logistics platform 478 00:21:42,560 --> 00:21:45,720 Speaker 8: in place, and even this example that you gave. You know, 479 00:21:46,119 --> 00:21:48,720 Speaker 8: you need cold medicine, or you need anything and you 480 00:21:48,880 --> 00:21:51,240 Speaker 8: have to go to CBS or somewhere else because you 481 00:21:51,320 --> 00:21:53,960 Speaker 8: need it. Now you can't wait six hours, twelve hours, 482 00:21:54,040 --> 00:21:56,359 Speaker 8: twenty four hours for it. But I'll tell you that 483 00:21:56,440 --> 00:22:00,240 Speaker 8: Amazon's delivery has gotten much faster. I mean, I'm seeing 484 00:22:00,280 --> 00:22:03,160 Speaker 8: stuff at my door that I ordered today in less 485 00:22:03,280 --> 00:22:06,359 Speaker 8: than twenty four hours, sometimes eight to twelve hours. And 486 00:22:06,480 --> 00:22:09,240 Speaker 8: that's pretty incredible. And that's really a part due to 487 00:22:09,320 --> 00:22:12,480 Speaker 8: their realignment of their distribution centers, which they were able 488 00:22:12,600 --> 00:22:14,880 Speaker 8: to infuse and even faster delivery. 489 00:22:15,240 --> 00:22:17,240 Speaker 3: See it now, I have a general idea where Punham 490 00:22:17,400 --> 00:22:20,560 Speaker 3: and her family live. It's literally amongst or very close 491 00:22:20,640 --> 00:22:23,960 Speaker 3: to like I think all these distribution centers in Central Jersey. 492 00:22:24,119 --> 00:22:25,080 Speaker 4: It's unbelievable. 493 00:22:25,080 --> 00:22:27,440 Speaker 3: I think we've got to be like the Central we 494 00:22:27,560 --> 00:22:30,520 Speaker 3: have to be like the distribution hub of the East Coast. 495 00:22:30,560 --> 00:22:32,879 Speaker 6: It seems like I feel like a Jersey primo. 496 00:22:33,080 --> 00:22:35,720 Speaker 3: Oh yeah, why yeah, I am so. When I see 497 00:22:35,760 --> 00:22:39,239 Speaker 3: the Gove, I tell them you know, so put them. 498 00:22:39,280 --> 00:22:41,200 Speaker 3: Let's let's back away from Amazon. Talk to us about 499 00:22:41,280 --> 00:22:43,320 Speaker 3: just retail in general. Here. 500 00:22:43,720 --> 00:22:45,879 Speaker 4: How's the consumer doing out there? How do you what 501 00:22:46,000 --> 00:22:47,360 Speaker 4: are you hearing from your companies? 502 00:22:48,320 --> 00:22:50,920 Speaker 8: I think the consumer is very focused on value today. 503 00:22:51,000 --> 00:22:53,520 Speaker 8: If you're seeing the retailers that are actually being able 504 00:22:53,560 --> 00:22:56,359 Speaker 8: to drive the share gains, you'll see that they offer 505 00:22:56,520 --> 00:22:59,040 Speaker 8: some sort of value in their proposition. Whether it was 506 00:22:59,119 --> 00:23:01,760 Speaker 8: from Walmart that you heard from earlier, you know, that's 507 00:23:01,840 --> 00:23:04,080 Speaker 8: doing well. But then we hear from the other retailers, 508 00:23:04,119 --> 00:23:07,960 Speaker 8: the more discretionary ones, and they're struggling. Even the at 509 00:23:08,080 --> 00:23:11,080 Speaker 8: leisure companies. We heard, you know, from Puma and Adidas. 510 00:23:11,520 --> 00:23:13,959 Speaker 8: We heard from some of the other companies where they 511 00:23:14,040 --> 00:23:16,480 Speaker 8: may have done well in four Q because holiday was 512 00:23:16,560 --> 00:23:19,680 Speaker 8: really strong last year, but when they look out for 513 00:23:19,800 --> 00:23:22,720 Speaker 8: their guidance, it's been conservative for the most part from 514 00:23:22,960 --> 00:23:25,159 Speaker 8: most of the retailers that I've heard from, And I 515 00:23:25,200 --> 00:23:27,639 Speaker 8: think that just goes to show you that you have 516 00:23:27,840 --> 00:23:29,680 Speaker 8: to have what the consumer wants, and you have to 517 00:23:29,760 --> 00:23:31,680 Speaker 8: have it at the price that the consumer wants it 518 00:23:31,760 --> 00:23:34,480 Speaker 8: at for you to actually succeed in today's environment. 519 00:23:35,280 --> 00:23:37,040 Speaker 7: Macy's comes out tomorrow, we have to wait for next 520 00:23:37,080 --> 00:23:39,120 Speaker 7: week for like Colds and Target and all those guys. 521 00:23:39,160 --> 00:23:43,399 Speaker 7: But Macy's comes out tomorrow. I mean, that's a fine 522 00:23:43,440 --> 00:23:44,600 Speaker 7: line to walk for Macy's. 523 00:23:44,640 --> 00:23:45,480 Speaker 6: What are you expecting? 524 00:23:46,440 --> 00:23:48,920 Speaker 8: Yeah, I think I think holiday was really really strong 525 00:23:49,119 --> 00:23:51,560 Speaker 8: last year. So I think when these companies report four 526 00:23:51,640 --> 00:23:54,440 Speaker 8: Q results, you will see some reflection of that even 527 00:23:54,480 --> 00:23:57,600 Speaker 8: across the department stores. But the question is really once 528 00:23:57,640 --> 00:24:00,680 Speaker 8: again on the longer term, right where they stand in 529 00:24:00,720 --> 00:24:03,480 Speaker 8: the longer term is the surviable business model? How many 530 00:24:03,520 --> 00:24:07,720 Speaker 8: stores should they have? How oh do we lose? You 531 00:24:07,880 --> 00:24:10,879 Speaker 8: kind of grappling with right now. And we are in 532 00:24:10,960 --> 00:24:14,199 Speaker 8: an environment where the consumer is spending on needs over 533 00:24:14,359 --> 00:24:17,120 Speaker 8: once and if it is un once they're traveling, that's 534 00:24:17,160 --> 00:24:17,760 Speaker 8: where they're going. 535 00:24:18,080 --> 00:24:20,800 Speaker 4: Yep, So we're you know, we talk about inflation. 536 00:24:20,880 --> 00:24:25,440 Speaker 3: Putum prices buy and large in the supermarket don't come 537 00:24:25,520 --> 00:24:28,600 Speaker 3: down after they shot up. However, many percent here that's 538 00:24:28,640 --> 00:24:31,760 Speaker 3: just the inflation rate of growth is slowing. How about 539 00:24:31,880 --> 00:24:35,600 Speaker 3: for like Adidas, do they ever cut the price of 540 00:24:35,680 --> 00:24:39,360 Speaker 3: a shoe because inflation's declining? 541 00:24:39,400 --> 00:24:40,080 Speaker 4: Does that wrappen? 542 00:24:40,680 --> 00:24:42,800 Speaker 8: No, they had discounts, right, So if you want to 543 00:24:42,800 --> 00:24:45,840 Speaker 8: bring prices down, retailers use discounts as a medium to 544 00:24:45,960 --> 00:24:49,600 Speaker 8: do that. But once prices go up, they don't come down. 545 00:24:49,920 --> 00:24:53,200 Speaker 3: See that's that's a problem with inflation. That's why inflation 546 00:24:53,400 --> 00:24:54,040 Speaker 3: is insidious. 547 00:24:54,200 --> 00:24:54,400 Speaker 6: Yeah. 548 00:24:54,920 --> 00:24:57,480 Speaker 7: But so to kind of Paul's question, but really to 549 00:24:57,560 --> 00:24:59,920 Speaker 7: my question, are we going to see a lot of 550 00:25:00,080 --> 00:25:01,320 Speaker 7: discounting from retailers? 551 00:25:01,359 --> 00:25:01,399 Speaker 9: So? 552 00:25:01,600 --> 00:25:02,560 Speaker 6: I don't know if you guys know this. 553 00:25:02,680 --> 00:25:04,520 Speaker 7: Have we talked about Alex's a counter indicator? 554 00:25:04,840 --> 00:25:04,879 Speaker 8: No? 555 00:25:05,400 --> 00:25:08,080 Speaker 7: I only shop on sale, Okay, so where I'm shopping, 556 00:25:08,240 --> 00:25:10,240 Speaker 7: you should be shorting the stocks. So this is a 557 00:25:10,320 --> 00:25:12,879 Speaker 7: joke that winds up happening because I'm shopping there because 558 00:25:12,920 --> 00:25:15,600 Speaker 7: their inventory is bloated and because the sales are so good. 559 00:25:16,080 --> 00:25:18,320 Speaker 7: So am I going to be going to Bluemi's in 560 00:25:18,359 --> 00:25:20,720 Speaker 7: the next couple weeks or they finally have their pricing 561 00:25:20,800 --> 00:25:22,000 Speaker 7: power in inventory in check? 562 00:25:23,119 --> 00:25:26,040 Speaker 8: I think inventory is getting more in check as we 563 00:25:26,160 --> 00:25:28,840 Speaker 8: move into the spring. So I was in stores actually 564 00:25:28,920 --> 00:25:32,080 Speaker 8: on Friday, and the discounts were pretty reasonable. They weren't 565 00:25:32,119 --> 00:25:34,879 Speaker 8: too aggressive. There were some clearance wracks across them all, 566 00:25:35,119 --> 00:25:37,639 Speaker 8: but I can tell you the stores were quiet. There 567 00:25:37,760 --> 00:25:39,920 Speaker 8: was no one in there on a Friday afternoon. It 568 00:25:40,040 --> 00:25:44,159 Speaker 8: was very, very quiet. So It's interesting because there's new 569 00:25:44,280 --> 00:25:47,720 Speaker 8: inventory that's flown in for the spring, and as stores 570 00:25:48,119 --> 00:25:50,119 Speaker 8: put this new inventory out, they're going to be a 571 00:25:50,160 --> 00:25:52,959 Speaker 8: little careful with their discounting, and we could see more 572 00:25:53,040 --> 00:25:56,080 Speaker 8: discounts come in in April on the spring inventory before 573 00:25:56,200 --> 00:25:58,120 Speaker 8: now they're being steady and careful with them. 574 00:25:58,520 --> 00:26:00,639 Speaker 3: I bought a new sport code over the weekend and 575 00:26:01,000 --> 00:26:03,120 Speaker 3: maybe i'll break it out for you guys on Friday. 576 00:26:03,359 --> 00:26:05,560 Speaker 4: Something looking forward to. Oh I can't wait. 577 00:26:07,160 --> 00:26:09,200 Speaker 6: This is the long cell. This is this is sort 578 00:26:09,240 --> 00:26:09,679 Speaker 6: of a. 579 00:26:12,880 --> 00:26:16,119 Speaker 4: Actually walked into a local retailer. Shopping local. 580 00:26:16,960 --> 00:26:20,159 Speaker 3: That's how you go because guess what the Brooks Brothers 581 00:26:20,200 --> 00:26:21,720 Speaker 3: and the Shrewsbury Mall done. 582 00:26:21,880 --> 00:26:25,359 Speaker 4: Close kidding, Yes, actually I've been there any number of times. 583 00:26:25,600 --> 00:26:27,680 Speaker 4: It's just a crushing blow, crushing blow. 584 00:26:28,040 --> 00:26:31,520 Speaker 3: Uh so put them what's the Is there a fashion 585 00:26:31,880 --> 00:26:34,960 Speaker 3: thing out there that that's moving the market, moving the needle, 586 00:26:35,040 --> 00:26:37,879 Speaker 3: that's maybe getting one of your names kind of outperforming 587 00:26:37,920 --> 00:26:38,320 Speaker 3: the others. 588 00:26:39,400 --> 00:26:41,720 Speaker 8: I think across fashion it's the same trend that we've 589 00:26:41,760 --> 00:26:45,000 Speaker 8: been seeing. You know, denim is still in in terms 590 00:26:45,040 --> 00:26:49,040 Speaker 8: of at leisure. People are dressing down still, but there 591 00:26:49,040 --> 00:26:51,160 Speaker 8: are more drops, are more balanced I think we're seeing 592 00:26:51,160 --> 00:26:53,320 Speaker 8: a little bit more of the work attire come back 593 00:26:53,359 --> 00:26:56,359 Speaker 8: into play since people are returning to work in a 594 00:26:56,440 --> 00:26:59,760 Speaker 8: more normal fashion, so we will start to see the 595 00:27:00,080 --> 00:27:03,280 Speaker 8: career part of the business is probably outperformed this year. 596 00:27:03,560 --> 00:27:06,119 Speaker 6: That's really interesting. Who said to benefit from something like that? 597 00:27:07,680 --> 00:27:12,480 Speaker 8: I say the Department stories, really any Amazon, any of 598 00:27:12,520 --> 00:27:16,840 Speaker 8: the retailers that have a more formal offering, and not 599 00:27:16,960 --> 00:27:18,640 Speaker 8: to say suits, right, you don't need to be wearing 600 00:27:18,680 --> 00:27:21,920 Speaker 8: suits to work anymore, but you do need to come 601 00:27:22,000 --> 00:27:25,240 Speaker 8: out of your comfort where whether it's joggers or leggings, 602 00:27:25,320 --> 00:27:29,399 Speaker 8: and really put on some dresses or some slacks to 603 00:27:29,440 --> 00:27:30,080 Speaker 8: get it to the work. 604 00:27:30,359 --> 00:27:32,639 Speaker 6: But John, take off those at leisure pants. 605 00:27:34,920 --> 00:27:37,959 Speaker 7: The fashion police Paul of yelling at some guy who 606 00:27:38,080 --> 00:27:40,240 Speaker 7: was like wearing jim shorts in the office. 607 00:27:40,240 --> 00:27:44,879 Speaker 3: Well, the one the sandals is almost a change that 608 00:27:44,960 --> 00:27:47,160 Speaker 3: could have been I'm taking your lanyard and your. 609 00:27:47,080 --> 00:27:48,840 Speaker 6: Badge and keep your toes in your shoes. 610 00:27:49,000 --> 00:27:50,760 Speaker 4: Yes exactly, I mean I'll go. 611 00:27:50,880 --> 00:27:52,560 Speaker 3: I'll sit there on the sixth floor on some of 612 00:27:52,600 --> 00:27:55,880 Speaker 3: these days and check people, give them some advice. Put 613 00:27:55,920 --> 00:27:57,800 Speaker 3: them goil thanks so much for joining us. Put them 614 00:27:57,800 --> 00:28:02,160 Speaker 3: Goyle Senior retail analyst for Bluemberg Intelligence. She was joining 615 00:28:02,240 --> 00:28:04,840 Speaker 3: us to via zoom from the Princeton, New Jersey headquarters 616 00:28:05,320 --> 00:28:07,800 Speaker 3: of a Bloomberg Intelligence, even though we fought for years 617 00:28:07,840 --> 00:28:08,720 Speaker 3: to get to New York. 618 00:28:10,200 --> 00:28:14,080 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 619 00:28:14,200 --> 00:28:17,119 Speaker 2: weekdays at ten am Eastern on applecar. 620 00:28:16,720 --> 00:28:19,200 Speaker 9: Play and Android Auto with the Bloomberg Business. 621 00:28:19,600 --> 00:28:22,439 Speaker 2: You can also listen live on Amazon Alexa from our 622 00:28:22,480 --> 00:28:26,840 Speaker 2: flagship New York station, Just Say Alexa playing Bloomberg eleven thirty. 623 00:28:28,080 --> 00:28:31,000 Speaker 7: We just had a headline crossing this is according to Semaphore, 624 00:28:31,119 --> 00:28:33,080 Speaker 7: that the FTC is going to sue a block the 625 00:28:33,200 --> 00:28:36,920 Speaker 7: Kroger Albertson's merger today. And this comes across as a 626 00:28:37,080 --> 00:28:39,280 Speaker 7: ton of M and A has taken place in many 627 00:28:39,320 --> 00:28:41,600 Speaker 7: different industries, and a lot of them going up against 628 00:28:41,600 --> 00:28:44,720 Speaker 7: the DOJ. Capital One Discover last week. There's been a 629 00:28:44,800 --> 00:28:46,920 Speaker 7: ton of oil mergers as well. So there's literally no 630 00:28:46,960 --> 00:28:48,960 Speaker 7: one else to talk to but Jennifer Ree. She's a 631 00:28:48,960 --> 00:28:52,200 Speaker 7: senior litigation analyst at Bloomberg Intelligence. In my mind, the 632 00:28:52,320 --> 00:28:54,520 Speaker 7: best person on this topic pretty much out there on 633 00:28:54,560 --> 00:28:57,520 Speaker 7: the street. Oh yeah, for sure, Hey, Jen, there's a 634 00:28:57,560 --> 00:28:59,440 Speaker 7: lot to kind of get through right now, but in 635 00:28:59,560 --> 00:29:02,600 Speaker 7: terms of capital one and discover what's your prediction here? 636 00:29:04,320 --> 00:29:05,720 Speaker 1: This one is such a tough one. 637 00:29:05,920 --> 00:29:06,080 Speaker 3: You know. 638 00:29:06,360 --> 00:29:09,200 Speaker 1: I think that the Department of Justice is kind of 639 00:29:09,240 --> 00:29:11,560 Speaker 1: in a conundrum with this one, right because they're under 640 00:29:11,600 --> 00:29:14,400 Speaker 1: a directive to get tougher on deals, and in particular 641 00:29:14,480 --> 00:29:16,840 Speaker 1: get tougher on bank deals. I mean, this has come 642 00:29:16,880 --> 00:29:20,040 Speaker 1: from back in twenty twenty one when President Biden issued 643 00:29:20,040 --> 00:29:22,280 Speaker 1: an executive order saying, look, you know, we can't just 644 00:29:22,400 --> 00:29:24,920 Speaker 1: rubber stamp these bank deals. We've got these huge banks, 645 00:29:24,920 --> 00:29:27,040 Speaker 1: We've had problems with banking, and we need to get 646 00:29:27,080 --> 00:29:30,080 Speaker 1: more aggressive. And the Department of Justice is on board 647 00:29:30,200 --> 00:29:32,160 Speaker 1: with that, you know, we've heard their statements saying that 648 00:29:32,200 --> 00:29:35,320 Speaker 1: they're on board with that. But you also have a 649 00:29:35,400 --> 00:29:39,000 Speaker 1: market that simply hasn't been competitive for many, many, many years, 650 00:29:39,040 --> 00:29:40,600 Speaker 1: and that's in credit card processing. 651 00:29:40,880 --> 00:29:41,000 Speaker 11: Right. 652 00:29:41,080 --> 00:29:43,880 Speaker 1: We really have just two biggies, Visa and MasterCard, and 653 00:29:44,120 --> 00:29:48,560 Speaker 1: this deal provides an opportunity to really bolster competition in 654 00:29:48,600 --> 00:29:51,680 Speaker 1: an area that's been problematic ever since. I can remember. 655 00:29:52,000 --> 00:29:54,720 Speaker 1: When I started Anti trust, the very first lawsuit I 656 00:29:54,800 --> 00:29:57,120 Speaker 1: worked on was the Department of Justice versus Visa and 657 00:29:57,200 --> 00:30:00,440 Speaker 1: MasterCard alleging that they were engaging in con that was 658 00:30:00,480 --> 00:30:04,680 Speaker 1: blocking out Discover and American Express. And ever since then, right, 659 00:30:04,800 --> 00:30:09,120 Speaker 1: we've had allegations of or private litigation public litigation against 660 00:30:09,120 --> 00:30:12,320 Speaker 1: those two companies for antitrust violations, and we've had regulation. 661 00:30:13,400 --> 00:30:16,520 Speaker 1: So this is an oper This deal does have these 662 00:30:16,560 --> 00:30:20,320 Speaker 1: strong pro competitive benefits, but you've also seen massive political 663 00:30:20,400 --> 00:30:24,280 Speaker 1: reaction against it. So you really have two very strong 664 00:30:24,320 --> 00:30:27,280 Speaker 1: opposing sides. And I think it's just going to come 665 00:30:27,320 --> 00:30:30,760 Speaker 1: down to the investigation and how the Department of Justice 666 00:30:30,920 --> 00:30:33,920 Speaker 1: views the credit card issuing market and the overlaps in 667 00:30:33,960 --> 00:30:36,720 Speaker 1: the credit card issuing market between these two companies, and 668 00:30:36,840 --> 00:30:39,719 Speaker 1: how it weighs out any potential for harm it might 669 00:30:39,800 --> 00:30:42,760 Speaker 1: find against this pro competitive aspect. 670 00:30:43,280 --> 00:30:46,080 Speaker 3: So, but it seems like a reasonable argument that putting 671 00:30:46,120 --> 00:30:49,600 Speaker 3: Capital One and Discovered together does in fact create a 672 00:30:49,760 --> 00:30:52,160 Speaker 3: viable competitor to Visa master Card. 673 00:30:52,200 --> 00:30:55,640 Speaker 4: Otherwise there will never be a viable competitor. 674 00:30:55,720 --> 00:30:59,160 Speaker 1: Actly Yeah, No, that's exactly right. And that's why this 675 00:30:59,280 --> 00:31:02,080 Speaker 1: is an unusual deal, because you know, all companies with 676 00:31:02,200 --> 00:31:03,800 Speaker 1: deals come in and say, oh, they're all sorts of 677 00:31:03,880 --> 00:31:06,719 Speaker 1: pro competitive benefits that are going to benefit consumers and innovation, 678 00:31:06,840 --> 00:31:10,520 Speaker 1: et cetera. And usually, you know, sometimes they're kind of 679 00:31:10,920 --> 00:31:14,800 Speaker 1: lawyer created, sometimes they're really you know, it's unclear whether 680 00:31:14,840 --> 00:31:16,920 Speaker 1: they're going to come to fruition. And most of the 681 00:31:17,000 --> 00:31:19,440 Speaker 1: time the Department of Justice or Federal Trade Comission are 682 00:31:19,440 --> 00:31:22,080 Speaker 1: going to be very skeptical about those claims. They say 683 00:31:22,160 --> 00:31:25,240 Speaker 1: they don't really ever bear fruit. But in this case, 684 00:31:25,560 --> 00:31:28,600 Speaker 1: it's much it's a much stronger claim, and it is 685 00:31:28,800 --> 00:31:31,760 Speaker 1: kind of obvious to see how there really truly could 686 00:31:31,840 --> 00:31:35,240 Speaker 1: be a very significant pro competitive benefit here, and so 687 00:31:35,400 --> 00:31:37,560 Speaker 1: it could be one of these unique deals where that 688 00:31:37,800 --> 00:31:41,000 Speaker 1: aspect is given more weight than usual by the Department 689 00:31:41,040 --> 00:31:45,360 Speaker 1: of Justice and possibly be considered important enough to allow 690 00:31:45,440 --> 00:31:47,080 Speaker 1: the deal to go through even if there might be 691 00:31:47,200 --> 00:31:48,000 Speaker 1: some other issues. 692 00:31:48,480 --> 00:31:50,440 Speaker 7: Jen couldn't I have made the same argument with say 693 00:31:50,440 --> 00:31:53,200 Speaker 7: Spirit and Jet Blue, and that definitely didn't work out. 694 00:31:54,200 --> 00:31:56,000 Speaker 1: You know, it's so interesting you bring that up, because 695 00:31:56,000 --> 00:31:58,600 Speaker 1: I see so many parallels between that case and this case, 696 00:31:58,680 --> 00:32:01,760 Speaker 1: even though completely different intries. Because there was a very 697 00:32:01,800 --> 00:32:05,640 Speaker 1: strong argument that those two combined could have bolstered competition 698 00:32:05,680 --> 00:32:09,120 Speaker 1: against the legacy airlines Delta United, et cetera. But the 699 00:32:09,200 --> 00:32:11,240 Speaker 1: problem there was that there was a small set of 700 00:32:11,320 --> 00:32:15,000 Speaker 1: consumers that really depended on the unbundled low fares that 701 00:32:15,080 --> 00:32:17,000 Speaker 1: were offered by Spirit, and we're going to lose out 702 00:32:17,040 --> 00:32:19,640 Speaker 1: where Jet Blue took over those routes and retrofitted the 703 00:32:19,680 --> 00:32:23,120 Speaker 1: planes and created more space but raised fares and a 704 00:32:23,200 --> 00:32:25,320 Speaker 1: weird way, you kind of have the same dynamic here. 705 00:32:25,720 --> 00:32:29,040 Speaker 1: You can create a lot more competition as against the incumbents, 706 00:32:29,240 --> 00:32:33,080 Speaker 1: the big legacies Visa and MasterCard, but you might have 707 00:32:33,280 --> 00:32:37,360 Speaker 1: some sort of a negative effect on underserved consumers because 708 00:32:37,600 --> 00:32:40,640 Speaker 1: Capital wanted to discover when they issue credit, they tend 709 00:32:40,720 --> 00:32:43,800 Speaker 1: to focus more on underserved populations than do some of 710 00:32:43,880 --> 00:32:46,680 Speaker 1: the other big issuers of credit. So people who are 711 00:32:46,760 --> 00:32:51,719 Speaker 1: new to credit, people who carry a revolving balance, subprime borrowers. 712 00:32:52,200 --> 00:32:54,480 Speaker 1: And it may be that there's a view that this 713 00:32:54,680 --> 00:32:57,840 Speaker 1: impacts that a smaller group of subprime borrowers, and in 714 00:32:57,960 --> 00:33:01,360 Speaker 1: Jet Blue and Spirit, at the end of the day, 715 00:33:01,480 --> 00:33:04,160 Speaker 1: that one out the doj one because of that harmful 716 00:33:04,200 --> 00:33:07,720 Speaker 1: impact on a small set of particular consumers. You have 717 00:33:07,880 --> 00:33:10,440 Speaker 1: the same thing here, But what you might have here 718 00:33:10,720 --> 00:33:13,560 Speaker 1: is a stronger argument on the pro competitive side than 719 00:33:13,600 --> 00:33:14,560 Speaker 1: you had in that case. 720 00:33:15,080 --> 00:33:17,560 Speaker 3: Well, how about as Alex was just reporting here the 721 00:33:17,720 --> 00:33:21,720 Speaker 3: FTC to sue to block Kroeger Albertson's merger today it's 722 00:33:21,720 --> 00:33:24,880 Speaker 3: according to summerfor Ken, Isn't that an easy fix? 723 00:33:25,000 --> 00:33:28,040 Speaker 4: We just sell some stores where they overlap, You know. 724 00:33:28,160 --> 00:33:30,400 Speaker 1: That part of it is the easy fix. But remedies 725 00:33:30,440 --> 00:33:32,120 Speaker 1: have two pieces. It's what are you going to sell? 726 00:33:32,200 --> 00:33:33,680 Speaker 1: And who are you going to sell it to? And 727 00:33:33,800 --> 00:33:36,240 Speaker 1: both of those pieces have to pass muster. So I 728 00:33:36,320 --> 00:33:38,120 Speaker 1: think on the what are you going to sell? That's 729 00:33:38,200 --> 00:33:41,280 Speaker 1: probably an easy fix because ultimately the companies that they 730 00:33:41,320 --> 00:33:44,000 Speaker 1: can squabble over twenty stores or so, but if they 731 00:33:44,040 --> 00:33:45,960 Speaker 1: can sell them, if they have to sell them, The 732 00:33:46,080 --> 00:33:48,000 Speaker 1: issue here, I think is going to be all about 733 00:33:48,040 --> 00:33:50,320 Speaker 1: the buyer. This is CNS full sale, that is the 734 00:33:50,400 --> 00:33:53,400 Speaker 1: proposed divestiture buyer of all the stores the companies plan 735 00:33:53,560 --> 00:33:56,360 Speaker 1: to divest in order to get clearance, and it's just 736 00:33:56,560 --> 00:33:58,480 Speaker 1: not really clear whether they're going to be able to 737 00:33:58,560 --> 00:34:01,360 Speaker 1: take up to six hundred and fifty stores and actually 738 00:34:01,520 --> 00:34:04,360 Speaker 1: compete with those stores viably and keep those stores open 739 00:34:04,680 --> 00:34:07,360 Speaker 1: and maintain competition in each of these regions where there's 740 00:34:07,400 --> 00:34:11,360 Speaker 1: too much concentration by virtue of this deal. So I 741 00:34:11,480 --> 00:34:13,480 Speaker 1: think in court, what This is really going to come 742 00:34:13,560 --> 00:34:16,799 Speaker 1: down to is vetting that buyer and the companies are 743 00:34:16,840 --> 00:34:18,600 Speaker 1: going to have to produce a lot of evidence that 744 00:34:18,719 --> 00:34:21,920 Speaker 1: that's a good buyer that's motivated, motivated to compete, and 745 00:34:22,040 --> 00:34:25,239 Speaker 1: motivated to keep these stores open. And it's they're going 746 00:34:25,280 --> 00:34:26,880 Speaker 1: to have to convince the judge. And if they can 747 00:34:26,960 --> 00:34:29,160 Speaker 1: convince the judge of that on the buyer side, I 748 00:34:29,239 --> 00:34:32,520 Speaker 1: think the deal will get cleared. If they can't, then 749 00:34:32,600 --> 00:34:33,799 Speaker 1: I think the FTC will win. 750 00:34:33,880 --> 00:34:37,160 Speaker 7: There is there an argument you made for some of 751 00:34:37,239 --> 00:34:40,040 Speaker 7: these potential deals that are getting a hard time from 752 00:34:40,080 --> 00:34:43,560 Speaker 7: the DOJ or FTC to kind of bide time till No. 753 00:34:43,640 --> 00:34:44,759 Speaker 6: Number Six of this year. 754 00:34:46,120 --> 00:34:48,520 Speaker 1: Absolutely, like we're off the clock. 755 00:34:48,680 --> 00:34:50,160 Speaker 6: Like is this part of a strategy? 756 00:34:51,320 --> 00:34:53,560 Speaker 1: I mean absolutely, And look at capital want and discover 757 00:34:53,719 --> 00:34:55,840 Speaker 1: they very well are probably going to bleed into the 758 00:34:55,920 --> 00:34:59,840 Speaker 1: next administration, whether it's Democrat or Republican. There is no 759 00:35:00,000 --> 00:35:04,160 Speaker 1: no doubt, Alex. I mean historically Republican administrations have the 760 00:35:04,239 --> 00:35:07,080 Speaker 1: reputation in the merger world of being more business friendly 761 00:35:07,440 --> 00:35:10,360 Speaker 1: and also being far less skeptical of claims of efficiencies, 762 00:35:10,440 --> 00:35:12,440 Speaker 1: giving them a lot more weight. And that's going to 763 00:35:12,480 --> 00:35:15,480 Speaker 1: be important, as I mentioned in this deal. Right now, 764 00:35:15,719 --> 00:35:18,320 Speaker 1: it's a little bit of a wildcard. It used to 765 00:35:18,400 --> 00:35:21,200 Speaker 1: be ten years ago that whoever came in to run 766 00:35:21,239 --> 00:35:25,239 Speaker 1: the FTC, if we had a Republican president, whoever got 767 00:35:25,280 --> 00:35:28,680 Speaker 1: appointed as chair, the Republican majority there, and whoever came 768 00:35:28,719 --> 00:35:31,920 Speaker 1: in on the DOJ side, we're likely to be more 769 00:35:31,960 --> 00:35:34,759 Speaker 1: business friendly or likely to look at efficiencies in a 770 00:35:34,840 --> 00:35:38,200 Speaker 1: more friendly manner. Right now, though, we have kind of 771 00:35:38,239 --> 00:35:40,239 Speaker 1: two different kinds of Republicans. You have sort of a 772 00:35:40,320 --> 00:35:42,359 Speaker 1: Josh Holly type and that you guys may have seen 773 00:35:42,400 --> 00:35:44,200 Speaker 1: in the news that he's already come out and complained 774 00:35:44,200 --> 00:35:47,000 Speaker 1: about this deal, said the Department of Justice should block it. 775 00:35:47,400 --> 00:35:49,520 Speaker 1: And then you kind of have the Joe Simon's type, 776 00:35:49,560 --> 00:35:52,120 Speaker 1: who was the chair of the FTC in the previous 777 00:35:52,160 --> 00:35:55,480 Speaker 1: Trump administration, a little bit more traditional in the way 778 00:35:55,520 --> 00:35:58,120 Speaker 1: we think of Republicans in the anti trust world. And 779 00:35:58,239 --> 00:36:00,320 Speaker 1: so I think to some extent it might depend on 780 00:36:00,400 --> 00:36:03,239 Speaker 1: who you get at the DOJ, but I would still 781 00:36:03,360 --> 00:36:06,640 Speaker 1: say that it ticks higher. The chances of getting cleared 782 00:36:07,120 --> 00:36:10,560 Speaker 1: probably tick higher. We have a change of administrations next year. 783 00:36:11,320 --> 00:36:15,839 Speaker 3: So Jen, do you think this current administration, the fact 784 00:36:15,840 --> 00:36:18,719 Speaker 3: that it is tougher on consolidation on deals. Has that 785 00:36:18,840 --> 00:36:20,520 Speaker 3: had an impact on M and A activity or a 786 00:36:20,560 --> 00:36:22,360 Speaker 3: lot of companies just saying that it's not worth it. 787 00:36:23,840 --> 00:36:25,760 Speaker 1: You know, Paul, It's been a really strange cycle. 788 00:36:25,880 --> 00:36:26,399 Speaker 8: In my mind. 789 00:36:26,520 --> 00:36:30,000 Speaker 1: I think in the beginning, when deals started getting a 790 00:36:30,080 --> 00:36:32,960 Speaker 1: lot of pushback and a lot of more lawsuits than 791 00:36:32,960 --> 00:36:36,080 Speaker 1: were expected, it sort of slowed things down, right. I 792 00:36:36,160 --> 00:36:38,080 Speaker 1: feel like there was a period last year where in 793 00:36:38,160 --> 00:36:40,200 Speaker 1: the M and A slowed down, and now I feel 794 00:36:40,200 --> 00:36:42,120 Speaker 1: like it's really picking back up again. And so I 795 00:36:42,160 --> 00:36:44,359 Speaker 1: think there might be two reasons that it's picking back 796 00:36:44,400 --> 00:36:46,719 Speaker 1: up again a lot, at least from the antitrust side. 797 00:36:47,080 --> 00:36:50,600 Speaker 1: One is Alex mentioned maybe at this point, if you file, 798 00:36:50,719 --> 00:36:53,200 Speaker 1: you're going to bleed into the next administration. There might 799 00:36:53,239 --> 00:36:56,000 Speaker 1: be some expectation it's going to change, it'll be easier 800 00:36:56,040 --> 00:36:57,759 Speaker 1: to get a closed. But Paul, the other thing is 801 00:36:58,239 --> 00:37:01,200 Speaker 1: that the agencies haven't been that success court. So I 802 00:37:01,280 --> 00:37:03,200 Speaker 1: think there is sort of a feeling, Hey, if you're 803 00:37:03,200 --> 00:37:04,920 Speaker 1: willing to put in the time and the money and 804 00:37:05,000 --> 00:37:07,319 Speaker 1: you're willing to litigate, you have a really solid chance 805 00:37:07,400 --> 00:37:09,719 Speaker 1: of winning at court, even if you face this really 806 00:37:09,800 --> 00:37:12,799 Speaker 1: hostile aggressive FDC or DOJ and I think that could 807 00:37:12,840 --> 00:37:15,279 Speaker 1: also be contributing to more of these deals getting. 808 00:37:15,080 --> 00:37:18,080 Speaker 7: Signed now as well, Jenmy have like maybe a minute left, 809 00:37:18,120 --> 00:37:21,319 Speaker 7: but what about energy? All the energy deals, any one 810 00:37:21,400 --> 00:37:22,440 Speaker 7: of them not going to happen. 811 00:37:23,600 --> 00:37:26,040 Speaker 1: Yeah, you know what I think. My feeling and I 812 00:37:26,160 --> 00:37:29,560 Speaker 1: know it's surprising, my feeling on those is that they're 813 00:37:29,560 --> 00:37:31,799 Speaker 1: all going to get done. I think that there are 814 00:37:31,880 --> 00:37:34,640 Speaker 1: just reasons where if you look at those markets, and 815 00:37:34,719 --> 00:37:36,440 Speaker 1: you look at the permium basin, and you look at 816 00:37:36,440 --> 00:37:38,399 Speaker 1: the number of producers that are in the permium basin, 817 00:37:38,440 --> 00:37:39,879 Speaker 1: which I think is going to be the area that's 818 00:37:39,920 --> 00:37:42,399 Speaker 1: going to be of most concern, I think all those 819 00:37:42,440 --> 00:37:45,040 Speaker 1: deals get done. And mostly Alex. I'm saying that because 820 00:37:45,280 --> 00:37:48,920 Speaker 1: when I looked at the history of FTC action against 821 00:37:48,960 --> 00:37:51,960 Speaker 1: these kinds of deals, I didn't see anything that far upstream. 822 00:37:52,440 --> 00:37:56,200 Speaker 1: All of the divestitures, consent orders, attempts to block deals 823 00:37:56,239 --> 00:37:59,480 Speaker 1: were all downstream and not upstream. And so that's the 824 00:37:59,520 --> 00:38:01,000 Speaker 1: reason I think these deals get done. 825 00:38:01,360 --> 00:38:03,360 Speaker 7: This is our water cooler talk, by the way, Like 826 00:38:03,360 --> 00:38:05,719 Speaker 7: when I see jennif stare at the coffee, we're like, hey, man, 827 00:38:05,800 --> 00:38:06,440 Speaker 7: let's talk about that. 828 00:38:06,600 --> 00:38:08,040 Speaker 6: Oil deals just don't work clear? 829 00:38:08,280 --> 00:38:10,320 Speaker 4: Are they going to get? Jenry, thanks so much for 830 00:38:10,400 --> 00:38:11,240 Speaker 4: joining us. Jenniferree. 831 00:38:11,320 --> 00:38:14,840 Speaker 3: She is a senior litigation analyst for Bloomberg Intelligence, joining 832 00:38:14,920 --> 00:38:18,040 Speaker 3: us via zoom And she is the go to person 833 00:38:18,160 --> 00:38:20,480 Speaker 3: on antitrust and I'll tell you institutional investors. 834 00:38:20,680 --> 00:38:21,520 Speaker 4: Her phone rings off the. 835 00:38:21,520 --> 00:38:24,279 Speaker 3: Hook when there's a big deal being litigated because she 836 00:38:25,000 --> 00:38:25,800 Speaker 3: has the goods. 837 00:38:25,840 --> 00:38:31,880 Speaker 2: Here, you're listening to the Bloomberg Intelligence Podcast. Catch us 838 00:38:31,960 --> 00:38:35,239 Speaker 2: live weekdays at ten am Eastern on applecar. 839 00:38:34,840 --> 00:38:37,320 Speaker 9: Play and Android Auto with the Bloomberg Business. 840 00:38:37,719 --> 00:38:40,560 Speaker 2: You can also listen live on Amazon Alexa from our 841 00:38:40,600 --> 00:38:44,960 Speaker 2: flagship New York station just say Alexa playing Bloomberg eleven thirty. 842 00:38:46,160 --> 00:38:49,080 Speaker 4: Love talking ETFs because that's where all the money's going. 843 00:38:49,200 --> 00:38:51,600 Speaker 4: It's just an amazing, amazing development. 844 00:38:51,200 --> 00:38:53,800 Speaker 3: In financial services over the last ten years or so 845 00:38:53,920 --> 00:38:56,879 Speaker 3: to see how the funds have just really just gone 846 00:38:56,920 --> 00:39:00,400 Speaker 3: into the ETFs, both passive and active. So it's why 847 00:39:00,440 --> 00:39:02,280 Speaker 3: we like to check in with our next guest, Sean O'Hara, 848 00:39:02,400 --> 00:39:05,840 Speaker 3: President of Pacer et FS. Sean, thanks so much for 849 00:39:05,960 --> 00:39:08,719 Speaker 3: joining us here. Talk to us about kind of where 850 00:39:08,800 --> 00:39:11,880 Speaker 3: you're seeing the flows these days. Is everybody trying to 851 00:39:12,000 --> 00:39:16,040 Speaker 3: chase the AI trade. Is it folks looking at tech? 852 00:39:16,160 --> 00:39:17,839 Speaker 3: Where are you seeing kind of the flows these days? 853 00:39:18,680 --> 00:39:20,680 Speaker 11: Yeah, good morning, Thanks guys for having me. I think, 854 00:39:20,719 --> 00:39:22,560 Speaker 11: you know, it's still the same, you know, as it 855 00:39:22,840 --> 00:39:27,080 Speaker 11: was last year. I think that there's real diverse spreading around. 856 00:39:27,160 --> 00:39:29,560 Speaker 11: If you will have the assets. Obviously there's people, you know, 857 00:39:29,880 --> 00:39:32,759 Speaker 11: chasing tech. I don't think you necessarily need to chase tech. 858 00:39:33,320 --> 00:39:35,200 Speaker 11: You could buy a broad market etip like the S 859 00:39:35,280 --> 00:39:37,520 Speaker 11: and P five hundred and still get pretty good tech exploriture, 860 00:39:37,560 --> 00:39:39,880 Speaker 11: but not have all your eggs in that basket. Our 861 00:39:40,000 --> 00:39:43,640 Speaker 11: flows continue to be leaning towards value. Small cap has 862 00:39:43,680 --> 00:39:46,200 Speaker 11: been a real being surprised for us here lately. We 863 00:39:46,360 --> 00:39:48,320 Speaker 11: do have the tech side of things. We've got a 864 00:39:48,640 --> 00:39:51,560 Speaker 11: data and infrastructure product. So I think we're sort of 865 00:39:51,600 --> 00:39:54,319 Speaker 11: where we were last year, which is a little bit 866 00:39:54,840 --> 00:39:57,040 Speaker 11: puzzling to me because last year, at least we were 867 00:39:57,080 --> 00:39:59,839 Speaker 11: coming off of really an obliteration in the tech name. 868 00:40:00,040 --> 00:40:02,640 Speaker 11: We're still stuck in the same place where we're looking 869 00:40:02,680 --> 00:40:04,520 Speaker 11: at interest rates and what the Fed's going to do. 870 00:40:04,600 --> 00:40:06,520 Speaker 11: We're trying to figure out whether they've actually done their 871 00:40:06,600 --> 00:40:09,480 Speaker 11: job and destroyed the US economy. I'm sorry, not destroyed. 872 00:40:09,480 --> 00:40:13,160 Speaker 11: The US economy but cooled things down inflation wise, and 873 00:40:13,239 --> 00:40:14,800 Speaker 11: then you know, earnings are always going to be the 874 00:40:14,880 --> 00:40:17,920 Speaker 11: issue going forward. You know, I'm not as impressed with 875 00:40:18,000 --> 00:40:20,080 Speaker 11: people beating their earnings as I am and what they're 876 00:40:20,160 --> 00:40:22,759 Speaker 11: forecasting is going to happen. And when you have these 877 00:40:22,840 --> 00:40:25,080 Speaker 11: reports like you got out of Palo Alto last week 878 00:40:25,120 --> 00:40:27,400 Speaker 11: where they sort of tamper things down, I think we're 879 00:40:27,440 --> 00:40:29,840 Speaker 11: at a level right now where the market's priced overall 880 00:40:29,840 --> 00:40:32,160 Speaker 11: a little bit on the high end, and so you know, 881 00:40:32,239 --> 00:40:34,239 Speaker 11: we have to be very very careful about bad use. 882 00:40:34,760 --> 00:40:36,800 Speaker 7: I mean, you made the joke about destroying the economy, 883 00:40:36,840 --> 00:40:39,160 Speaker 7: but man, that data continues to hold up really really well. 884 00:40:39,360 --> 00:40:43,439 Speaker 7: Is there a reactive sense to ETF flows like big 885 00:40:43,520 --> 00:40:45,719 Speaker 7: reversals that are happening? And I guess I'm just trying 886 00:40:45,760 --> 00:40:49,120 Speaker 7: to understand where the biggest miss price is. If inflation 887 00:40:49,360 --> 00:40:52,040 Speaker 7: kind of eventually keeps coming down and the data still 888 00:40:52,360 --> 00:40:53,320 Speaker 7: stays okay. 889 00:40:54,480 --> 00:40:56,680 Speaker 11: You know that could be what happens, Alex. You could 890 00:40:56,719 --> 00:40:59,600 Speaker 11: actually you know, they might not actually destroy the US economy, 891 00:40:59,760 --> 00:41:02,040 Speaker 11: might do up perfectly right. They may have gotten inflation 892 00:41:02,200 --> 00:41:05,640 Speaker 11: under control without you know, having unemployment spike and without 893 00:41:05,719 --> 00:41:08,680 Speaker 11: having a major impact on you know, everybody's earnings. I 894 00:41:08,760 --> 00:41:11,440 Speaker 11: think the interesting thing that's happening right now is that, 895 00:41:11,600 --> 00:41:13,120 Speaker 11: and I think you need to keep an eye on that, 896 00:41:13,360 --> 00:41:15,799 Speaker 11: is look at layoffs. I mean, we're starting to see 897 00:41:15,840 --> 00:41:18,640 Speaker 11: somewhat of an acceleration. So I think companies are starting 898 00:41:18,680 --> 00:41:20,760 Speaker 11: to think to themselves going forward, how do I increase 899 00:41:20,840 --> 00:41:22,960 Speaker 11: my earnings. Well, one way to do that would be 900 00:41:23,040 --> 00:41:26,040 Speaker 11: on the cost side of the ledger. And so as 901 00:41:26,120 --> 00:41:28,560 Speaker 11: we came out of COVID, you know, that was the 902 00:41:28,640 --> 00:41:31,320 Speaker 11: big spurt that got the big tech names going. Is 903 00:41:31,320 --> 00:41:34,000 Speaker 11: they were over you know, waight if you will employees 904 00:41:34,080 --> 00:41:35,759 Speaker 11: and they started to cut back and that's sort of 905 00:41:35,800 --> 00:41:38,040 Speaker 11: what juice their returns. And I think you're starting to 906 00:41:38,040 --> 00:41:40,440 Speaker 11: see that go sort of a little bit more broadly 907 00:41:40,480 --> 00:41:41,240 Speaker 11: across the board. 908 00:41:41,920 --> 00:41:44,200 Speaker 3: Hey, Sean, you say maybe one of the ways to 909 00:41:44,280 --> 00:41:47,759 Speaker 3: play AI is through the picks and shovels strategy. 910 00:41:48,000 --> 00:41:49,719 Speaker 4: Talk to us about how you'd get exposure that way. 911 00:41:50,960 --> 00:41:53,200 Speaker 11: Well, we have two strategies there. We own the data 912 00:41:53,239 --> 00:41:55,319 Speaker 11: centers and the cell phone towers, and so you can't 913 00:41:55,360 --> 00:41:59,320 Speaker 11: have AI streaming our Internet of things, e commerce and 914 00:41:59,400 --> 00:42:02,400 Speaker 11: online ge mean, you can't have that without the buildings 915 00:42:02,480 --> 00:42:05,799 Speaker 11: that essentially allow for all of the transmission of the data. 916 00:42:05,880 --> 00:42:07,400 Speaker 11: So that's one way to play it would be to 917 00:42:07,440 --> 00:42:09,600 Speaker 11: buy data centers and cell phone towers. We have an 918 00:42:09,640 --> 00:42:12,439 Speaker 11: ETF that does that the tickers sr V of our server. 919 00:42:13,040 --> 00:42:14,799 Speaker 11: And then the other way to do it is to play, 920 00:42:15,200 --> 00:42:18,360 Speaker 11: if you will, the software names and the chip makers 921 00:42:19,320 --> 00:42:22,200 Speaker 11: and those names are you know, basically in videos in 922 00:42:22,320 --> 00:42:24,440 Speaker 11: that mix. But it's not all about Nvidia. There are 923 00:42:24,480 --> 00:42:26,480 Speaker 11: a lot of companies in that space. So we have 924 00:42:26,520 --> 00:42:30,200 Speaker 11: an ETF that uh t r FK traffic that basically 925 00:42:30,320 --> 00:42:32,560 Speaker 11: takes everything out of the data centers and says that's 926 00:42:32,600 --> 00:42:33,080 Speaker 11: what we own. 927 00:42:34,200 --> 00:42:35,840 Speaker 7: When you talk about alternatives, we were talking to a 928 00:42:35,960 --> 00:42:39,120 Speaker 7: cat the entwhistle in the last hour about alternatives and stuff. 929 00:42:40,040 --> 00:42:42,040 Speaker 7: I'll throw bitcoin in there. Let's are some reads in 930 00:42:42,080 --> 00:42:45,319 Speaker 7: there too. What other kind of alternative ETF flows are 931 00:42:45,320 --> 00:42:45,680 Speaker 7: you seeing? 932 00:42:47,120 --> 00:42:49,839 Speaker 11: Well, we have an income story that we like that's 933 00:42:49,840 --> 00:42:52,719 Speaker 11: starting to pick up some steam. Essentially, its target is 934 00:42:52,800 --> 00:42:54,640 Speaker 11: to get four times to dividend of the S and 935 00:42:54,719 --> 00:42:59,240 Speaker 11: P five hundred. We do four times. Yes, the tickers 936 00:42:59,320 --> 00:43:04,040 Speaker 11: QDPO get it quadruple. Anyway we do that. The way 937 00:43:04,080 --> 00:43:06,000 Speaker 11: we do that is about eighty six percent of the 938 00:43:06,040 --> 00:43:08,120 Speaker 11: money is basically in the S and P five hundred 939 00:43:08,120 --> 00:43:10,560 Speaker 11: and fourteen percent of it's in T bills, and those 940 00:43:10,640 --> 00:43:12,960 Speaker 11: te bells are used to enter into futures contracts on 941 00:43:13,040 --> 00:43:15,719 Speaker 11: the dividends, and so we're able to pull forward three 942 00:43:15,840 --> 00:43:17,440 Speaker 11: times or a little bit more than three point one 943 00:43:17,560 --> 00:43:20,759 Speaker 11: four times this year's dividend by using those futures. And 944 00:43:20,880 --> 00:43:23,840 Speaker 11: so it's really done exactly what we've expected it to do. 945 00:43:24,360 --> 00:43:27,240 Speaker 11: And with all the emphasis, for example, on covered calls, 946 00:43:27,320 --> 00:43:28,960 Speaker 11: you know, with the success of some of the big 947 00:43:29,000 --> 00:43:31,880 Speaker 11: players in that space, we think the limitation on covered 948 00:43:31,920 --> 00:43:33,880 Speaker 11: calls is that you're selling away your upside, and with 949 00:43:33,960 --> 00:43:36,319 Speaker 11: the strategy like this, you don't sell your upside away. 950 00:43:36,680 --> 00:43:38,640 Speaker 11: So we're starting to see some interesting flows in that 951 00:43:38,760 --> 00:43:39,359 Speaker 11: area as well. 952 00:43:40,200 --> 00:43:42,759 Speaker 3: Sean, how do you compete in this market that's so 953 00:43:42,920 --> 00:43:45,879 Speaker 3: dominated by just literally a couple of three or four 954 00:43:46,040 --> 00:43:48,960 Speaker 3: kind of ETF providers here? How do you kind of 955 00:43:50,120 --> 00:43:51,439 Speaker 3: compete and set yourself apart? 956 00:43:52,680 --> 00:43:55,279 Speaker 11: We like to say innovative, disruptive, and unique. That's what 957 00:43:55,400 --> 00:43:58,759 Speaker 11: we build. So our neighbor at home in Malvern, Pennsylvania standguards. 958 00:43:58,880 --> 00:44:00,440 Speaker 11: You know who they are, we know what they do, 959 00:44:00,560 --> 00:44:02,719 Speaker 11: and we know that we're not ready to stand toe 960 00:44:02,800 --> 00:44:04,359 Speaker 11: to toe with them if you will invit it out 961 00:44:04,400 --> 00:44:07,040 Speaker 11: on costs or let State Street do that. So we 962 00:44:07,120 --> 00:44:10,239 Speaker 11: build strategies. We built an end user in mind or 963 00:44:10,280 --> 00:44:13,000 Speaker 11: an outcome in mind. Maybe that's extras return, or maybe 964 00:44:13,040 --> 00:44:15,799 Speaker 11: that's risk management, or maybe it's something like the count 965 00:44:15,880 --> 00:44:18,279 Speaker 11: series that just takes a completely different look at the 966 00:44:18,320 --> 00:44:21,319 Speaker 11: way you define value in this world. Instead of using 967 00:44:21,360 --> 00:44:23,719 Speaker 11: traditional price to book, we use free cash flow yield 968 00:44:24,000 --> 00:44:28,120 Speaker 11: because the stock market is primarily intangible assets today, and 969 00:44:28,239 --> 00:44:30,919 Speaker 11: so that's what we do. And so we've been able 970 00:44:31,000 --> 00:44:33,800 Speaker 11: to accumulate I think our reasonable amount of assets around 971 00:44:33,840 --> 00:44:36,200 Speaker 11: forty billion right now. I think there's a lot of 972 00:44:36,280 --> 00:44:38,600 Speaker 11: room for us to grow. And you know, if you're 973 00:44:38,680 --> 00:44:41,480 Speaker 11: innovative and you're disruptive and unique, and you have a 974 00:44:41,640 --> 00:44:44,880 Speaker 11: salesforce like we do that focuses on the financial advisors, 975 00:44:45,360 --> 00:44:47,319 Speaker 11: you can continue to build a nice business. I don't 976 00:44:47,360 --> 00:44:49,880 Speaker 11: have to have a five trillion dollar business. I just 977 00:44:50,239 --> 00:44:52,720 Speaker 11: keep growing it like we have it, and we'll continue 978 00:44:52,760 --> 00:44:53,719 Speaker 11: to do that without I. 979 00:44:53,760 --> 00:44:55,040 Speaker 7: Really want to have the job where you get to 980 00:44:55,080 --> 00:44:56,719 Speaker 7: come up with the names for these things, like the 981 00:44:56,760 --> 00:44:57,400 Speaker 7: tickers for us. 982 00:44:57,480 --> 00:44:58,040 Speaker 6: I want to do that. 983 00:44:58,200 --> 00:45:00,160 Speaker 7: That sounds like a good time before we let you go. 984 00:45:01,120 --> 00:45:03,279 Speaker 7: It's not just us that have been doing really well, right. 985 00:45:03,640 --> 00:45:06,120 Speaker 7: Japanese equity is ni K record high, the CAC, the 986 00:45:06,200 --> 00:45:09,080 Speaker 7: Dacks record highs. What opportunities are you seeing internationally? 987 00:45:10,480 --> 00:45:12,440 Speaker 11: Well, we missed Japan. We probably should have had a 988 00:45:12,480 --> 00:45:15,600 Speaker 11: product there because whenever Lauren Buffett starts to move in 989 00:45:15,640 --> 00:45:17,560 Speaker 11: an area, it's probably good to pay attention, and so 990 00:45:17,640 --> 00:45:20,879 Speaker 11: he's increasing his exposure there. So he's probably right. We've 991 00:45:20,960 --> 00:45:24,160 Speaker 11: seen a pretty big increase in our global and international. 992 00:45:25,040 --> 00:45:27,759 Speaker 11: My favorite story, and it may take patients. I'll just 993 00:45:28,000 --> 00:45:31,400 Speaker 11: warn all the viewers and listeners is emerging markets. I mean, 994 00:45:31,560 --> 00:45:33,759 Speaker 11: you know, we have an emerging market product that has 995 00:45:33,840 --> 00:45:37,080 Speaker 11: like a nine percent current dividend and it's one hundred 996 00:45:37,560 --> 00:45:40,520 Speaker 11: profitable emerging market names. And I think that cycle has 997 00:45:40,600 --> 00:45:42,879 Speaker 11: gone on too long. It could continue for a while, 998 00:45:43,440 --> 00:45:46,040 Speaker 11: but sooner or later, the emerging market cycle will change. 999 00:45:46,040 --> 00:45:48,320 Speaker 11: And if you think about historically how they do reletive 1000 00:45:48,320 --> 00:45:50,680 Speaker 11: to us, over time they do better. It's just been 1001 00:45:50,719 --> 00:45:54,080 Speaker 11: a currency problem here lately, and so for long term investors, 1002 00:45:54,120 --> 00:45:56,240 Speaker 11: maybe you talk a little bit of money in emerging markets. 1003 00:45:57,640 --> 00:45:59,120 Speaker 6: All right, Sean, great stuff. 1004 00:45:59,200 --> 00:46:03,120 Speaker 7: Really appreciate O'Hara, President of Pacer ETFs, joins us really 1005 00:46:03,160 --> 00:46:06,040 Speaker 7: appreciate that on the ETF inflows, outflows and where all 1006 00:46:06,080 --> 00:46:06,560 Speaker 7: the action is. 1007 00:46:07,000 --> 00:46:11,480 Speaker 2: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify, 1008 00:46:11,680 --> 00:46:15,320 Speaker 2: and anywhere else you'll get your podcasts. Listen live each weekday, 1009 00:46:15,480 --> 00:46:18,440 Speaker 2: ten am to noon Eastern on Bloomberg dot com, the 1010 00:46:18,560 --> 00:46:21,960 Speaker 2: iHeartRadio app tune In, and the Bloomberg Business app. You 1011 00:46:22,040 --> 00:46:25,160 Speaker 2: can also watch us live every weekday on YouTube and 1012 00:46:25,360 --> 00:46:26,920 Speaker 2: always on the Bloomberg terminal