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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 2: Let's switch gears here, give a little bit more time

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Speaker 2: on this US Steel deer a deal. That's the stock

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Speaker 2: tickers X, which I thought it would have been Xerox,

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Speaker 2: but it's X for US steal. There you go, President

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Speaker 2: Biden blocking that deal. The stock is trading down today.

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Speaker 2: Let's get some more news on that. Michael Shepherd, Bloomberg

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Speaker 2: Senior editor in Washington, DC, DC. Hey, Michael, why is

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Speaker 2: President Biden blocking this deal?

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Speaker 3: Is this simply a political move here?

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Speaker 4: Well, it is certainly political. He is also invoking national

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Speaker 4: security concerns and considerations in the world Order that he

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Speaker 4: released and signed today. It was also part of the

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Speaker 4: statement that he issued to the public saying that he

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Speaker 4: thought it was in the US national security interest to

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Speaker 4: keep US Steel domestically owned and headquartered. And this was

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Speaker 4: one of the key justifications he had been making for

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Speaker 4: months since the deal was announced back in December twenty

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Speaker 4: twenty three. This is something he had expressed opposition to

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Speaker 4: throughout the past year, but he had never come out

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Speaker 4: outright saying that I will block this. President ele like

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Speaker 4: Donald Trump of course, has done so, and he said

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Speaker 4: that if the deal had ended up on his desk

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Speaker 4: in some fashion or had not been completed by the

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Speaker 4: time he takes office later this month, he also would

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Speaker 4: work to block the transaction, of course, as sending the

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Speaker 4: companies back to the drawing board. And we're seeing what

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Speaker 4: it's doing to shares of US Steel today, which are

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Speaker 4: down seven percent at last.

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Speaker 5: Check from last night check. Though, wasn't Japan like an

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Speaker 5: ally of ours? So why would an ally present national

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Speaker 5: security risk?

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Speaker 4: Well, that's a great question, Alex because usually the committee

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Speaker 4: that oversees reviews of big transactions like this on national

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Speaker 4: security grounds, it's called the Committee on Foreign Investment in

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Speaker 4: the US.

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Speaker 3: It's secretive.

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Speaker 4: It also tends to focus on any transaction that could

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Speaker 4: deal more with an adversary rather than a very close

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Speaker 4: ally like Japan.

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Speaker 3: But the US is.

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Speaker 4: Looking at this is perhaps more question of will the

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Speaker 4: company's priorities it once merged, diverge from the US national

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Speaker 4: interest it's a little bit more subtle, but there is

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Speaker 4: a more basic question here at hand, and of course

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Speaker 4: that is the political one that Paul raised at the top,

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Speaker 4: and that is part of the key argument. Biden also

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Speaker 4: said that he is concerned about manufacturing jobs in the US,

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Speaker 4: and this is part of another step that he wants

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Speaker 4: to take to ensure that they are not jeopardized somehow.

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Speaker 2: Is there any sense of what happens next? I mean,

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Speaker 2: what does US Steel do do we? I mean, I

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Speaker 2: guess they just sit around to wait for another buyer.

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Speaker 3: Maybe.

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Speaker 4: Well, there are a couple of things that are on

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Speaker 4: the table for them. One is going to court, you know,

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Speaker 4: a time honored tradition now in the US where we

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Speaker 4: see companies taking the government and regulators to court to

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Speaker 4: see if they can overturn a government action. We are

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Speaker 4: seeing TikTok do this right now, trying to get this

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Speaker 4: divestor ban law voided before it takes effect on January nineteenth,

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Speaker 4: and we see arguments in that case next week. But

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Speaker 4: for US Steel and Nippon Steel, they have signaled that

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Speaker 4: they may try to go to court. US Steel if

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Speaker 4: a court move somehow fails, they will then be forced

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Speaker 4: to reconsider their options.

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Speaker 3: Will they look for another buyer.

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Speaker 4: Will they have to maybe shed some assets, some plants,

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Speaker 4: some production someplace. Will it end up costing jobs in

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Speaker 4: some locations. Those are all questions that they're going to

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Speaker 4: have to consider.

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Speaker 3: Now.

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Speaker 4: Both Nippon Steele and US Steel had insisted that this

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Speaker 4: transaction was necessary to preserve jobs and to maintain production

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Speaker 4: capacity here in the US with some investment coming from Japan.

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Speaker 5: So and this also raised the question in Cleveland Cliffs

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Speaker 5: if you guys remember, actually tried to make.

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Speaker 6: A bid for it. They lost out to Nippon Steel.

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Speaker 5: For a moment, there might be a merger possibility there,

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Speaker 5: but in the meantime Cleveland Cliffs bought a Canadian producer.

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Speaker 5: So now they're waffling back on US steal real quick

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Speaker 5: before we let you go do this. The union workers

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Speaker 5: steel workers want the deal or not the deal.

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Speaker 4: You know, the union leadership was very much against this.

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Speaker 4: This is very off brand for them. And in fact,

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Speaker 4: there are clips of Biden from back in April standing

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Speaker 4: with steel workers in Pittsburgh saying that he was adamantly

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Speaker 4: opposed to the transaction. But some in the rank and

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Speaker 4: file actually took a more nuanced view, and that was that, Hey,

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Speaker 4: if Nippon Steel buys US steel, maybe this will actually

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Speaker 4: help us get the kind of investment that we need

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Speaker 4: to add jobs or at least preserve the ones that

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Speaker 4: we have.

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Speaker 2: All Right, so much for the markets deciding what happens

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Speaker 2: out there that the government involved. Michael Shepherd, thanks so

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Speaker 2: much for joining us, Senior editor, Bloomberg News, joining us

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Speaker 2: from Washington, DC.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch the program

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Speaker 1: live weekdays at ten am Eastern on Applecarplay and Android

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Speaker 1: Auto with the Bloomberg Business app. You can also listen

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Speaker 6: This is Bloomberg Intelligence Radio.

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Speaker 5: We are broadcasting to live from our interactive broker studio

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Speaker 5: right here in midtown Manhattan.

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Speaker 6: I want to go back to that ism.

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Speaker 5: So hitting a nine month high new orders the highest

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Speaker 5: since January. Employment though did fall, production though jumped, it

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Speaker 5: looks all in all to be a relatively solid number.

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Speaker 5: So I want to get more on this with Walter Todd, President,

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Speaker 5: chief investment officer and managing director at Greenwood Capital. So

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Speaker 5: the second I wind up seeing this number. I thought

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Speaker 5: back to something that Torres and Slock of Apollo had

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Speaker 5: written about, saying that the Fed cuts and the financial

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Speaker 5: markets will actually boost GDP over the coming quarters by

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Speaker 5: one percentage point and boost inflation by half a percentage point.

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Speaker 6: Would you be prepping for that at all?

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Speaker 7: Well, Alex, good morning, Happy New year, Thanks for having me. Yeah, so,

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Speaker 7: I think this is the dynamic of the market and

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Speaker 7: the balancing act here. Going back to that report, you

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Speaker 7: just reference the prices paid component of that was higher,

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Speaker 7: So we had new orders higher, the top line number higher,

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Speaker 7: prices paid higher, but employment lower. That's not a good

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Speaker 7: combination of seemingly a slower employment market but yet higher

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Speaker 7: inflation and potentially higher GDP. When you look at the

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Speaker 7: GDP now forecast for the fourth quarter, it's about two

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Speaker 7: and a half to three percent. So the economy seems

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Speaker 7: fairly solid on the surface, but the labor market is key,

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Speaker 7: and the report we get next Friday is going to

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Speaker 7: be a big one for the market.

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Speaker 2: So, Walter, how are you guys thinking about this federal

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Speaker 2: reserve here in twenty twenty five, It looks like the

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Speaker 2: market's kind of discounting maybe two rate hikes.

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Speaker 3: Does that seem reasonable to you? What are you guys

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Speaker 3: thinking about?

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Speaker 7: Yeah, So that's in the fourth quarter of twenty twenty four.

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Speaker 7: The biggest shift, obviously was the FED expectations September when

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Speaker 7: they cut half a point. We had seven to eight

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Speaker 7: cuts baked into twenty twenty five. Now we have, you know,

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Speaker 7: less than two baked in, the first one coming in June. Again,

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Speaker 7: it goes back to the labor market. If inflation can

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Speaker 7: kind of stay where it is to moderate and the

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Speaker 7: labor markets stay solid, I think two is probably the

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Speaker 7: right number. My guess is that the labor market continues

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Speaker 7: to weaken a bit as we move through the course

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Speaker 7: of twenty twenty five, and that's going to force the

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Speaker 7: FED to maybe shift again their narrative as they did

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Speaker 7: in December, and we saw that pretty violent market reaction

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Speaker 7: over a twenty four hour period with the S and

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Speaker 7: P down four percent. So I think that's one of

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Speaker 7: the many unknowns for twenty twenty five is you can

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Speaker 7: the FED stick with that that two cut outlook or

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Speaker 7: a they going to have to shift again if the

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Speaker 7: labor market and the economy weekends as they moved.

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Speaker 5: Through in some ways that feels really binary. So how

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Speaker 5: do you position for that?

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Speaker 7: Well, I think it goes back to a couple of things. Diversification,

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Speaker 7: which has been a dirty word for the past two years.

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Speaker 7: You wanted to be concentrated in five to ten names

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Speaker 7: to outperform the market, but I think having diversification among

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Speaker 7: different sectors, different industries, even different geographies again x US

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Speaker 7: another dirty word for the past number of years, looking

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Speaker 7: outside the US where evaluations are much cheaper as the

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Speaker 7: potential opportunity there. I think also rebalancing, being disciplined with

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Speaker 7: acid allocation. If you've been fortunate enough to be overweight

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Speaker 7: stocks for the past two years, you're more overweight than

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Speaker 7: you were two years ago significantly, So using this opportunity

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Speaker 7: and strength to rebalance a portfolio and pick up some

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Speaker 7: still very attractive fixed income yields, whether you look at

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Speaker 7: treasuries or corporate bonds.

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Speaker 3: All right, let's go there, Walter.

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Speaker 2: I love to get your thoughts on kind of the

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Speaker 2: fixed income opportunities again, because an investor can buy a

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Speaker 2: two year treasure and get four and a quarter percent,

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Speaker 2: it seems like an honest way to make a living.

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Speaker 2: Do we take some credit risk above and beyond that,

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Speaker 2: how do you think about credit risk?

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Speaker 7: Yeah, it's an interesting question because spreads on the surface

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Speaker 7: are extremely tight, and the tightest they've almost historically been,

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Speaker 7: whether you look at high yield or investment grade bonds.

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Speaker 7: At the same time, the argument could be made that

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Speaker 7: the balance sheet of Apple or Johnson and Johnson might

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Speaker 7: be better than the balanchiet of the US government. So

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Speaker 7: I think having a blend, having a blend of high

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Speaker 7: grade corporate bonds as well as some treasuries. But I

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Speaker 7: think the temptation to stay on that front end, particularly

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Speaker 7: with the shift and the Fed narrative, is a big one.

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Speaker 7: But we would use the opportunity of the backup in

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Speaker 7: rates to extend duration a little bit, and I go crazy,

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Speaker 7: not go certainly nothing beyond ten years, but look at

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Speaker 7: that three, five and seven year part of the curve

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Speaker 7: as an opportunity to lock in some of these yields

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Speaker 7: as they backed up almost one hundred basis points since

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Speaker 7: the low's in September.

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Speaker 5: I'm going to ask the question that I stole from

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Speaker 5: Paul yesterday because it was a good one.

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Speaker 6: Do you stick with what got you here?

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Speaker 2: So?

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Speaker 5: Is this going to be another year that you got

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Speaker 5: to own big tech.

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Speaker 7: Yeah, So I think for us, our opinion is we

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Speaker 7: think it's a balance. Right, we will think you abandoned.

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Speaker 7: We don't think it's binary. You don't think We don't

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Speaker 7: think you abandoned big tech. But at the same time,

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Speaker 7: if you've been really concentrated in that area, fortunately for

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Speaker 7: the for the past two years, take this opportunity to

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Speaker 7: rebalance a bit and look for opportunities outside of those areas.

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Speaker 7: Very expensive valuations in those in that part of the market.

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Speaker 7: When you go look at energy or healthcare again, nobody

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Speaker 7: wanted those in twenty twenty four, very inexpensive valuations. You

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Speaker 7: could find good quality companies with good growth prospects that

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Speaker 7: are much cheaper than some of those big names. So

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Speaker 7: we would advocate for diversifying beyond the top of five

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Speaker 7: to ten names.

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Speaker 3: Do you what's kind of a model portfolio for you guys?

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Speaker 2: I don't know if you have a model portfolio, but

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Speaker 2: like stocks, bonds, alternatives, where do you kind of start

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Speaker 2: from as ground.

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Speaker 3: Zero for maybe your accounts?

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Speaker 7: Yeah, So to say, obvious, every investors unique in terms

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Speaker 7: of what they're looking for in their allocation. But we

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Speaker 7: do like to have a blend of stocks, both large

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Speaker 7: cap as well as maybe MidCap and xus allocations there.

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Speaker 7: Fixed income, both intermediate and shorter duration fixed income, and

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Speaker 7: also alternatives. We're starting to blend alternatives into that. We've

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Speaker 7: got two opportunities to do that. We partner with a

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Speaker 7: company called First Trust as an alternative suite, but we

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Speaker 7: also have ETF based portfolios that we have built that

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Speaker 7: utilize alternative asset classes to structure that and incorporate that

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Speaker 7: in portfolios. And I think that's another opportunity as we

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Speaker 7: look forward again, not looking back at what's worked over

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Speaker 7: the past two years, but looking forward, there's an opportunity

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Speaker 7: there to incorporate those in two portfolios.

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Speaker 2: All Right, Walter, thank you so much for joining us.

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Speaker 2: Appreciate getting a few minutes of your time. As Walter Todd, President,

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Speaker 2: chief investment Officer, and managing director of Greenwood Capital based

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Speaker 2: in Greenwood, South Carolina, which is kind of like great

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Speaker 2: smacking in the middle of the state. Looks like a

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Speaker 2: nice town there.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple Coarclay, and Android

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Speaker 5: So again, US seargeon general calling for cancer warnings on

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Speaker 5: an alcohol label. Duncan Fox's Bloomberg Intelligence senior consumer staples analyst.

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Speaker 5: We're clearly seeing alcohol stocks, Brown Foreman, molten Core's consolation

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Speaker 5: brands get hit. What would be the real impact here

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Speaker 5: if a label came.

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Speaker 8: On, Well, if it came on, I maschreming, it would

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Speaker 8: become't similar to what happened in tobacco, where you'd just

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Speaker 8: see volume come under a little bit of pressure in

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Speaker 8: the short term. Tobacco volume generally is to have about

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Speaker 8: sort of three to four percent. It's been a bit

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Speaker 8: worse in the US recently, but I would assume that's

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Speaker 8: the sort of thing that you would go to if

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Speaker 8: it was done globally. At the moment, this seems to

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Speaker 8: be something coming out of the US, and I'm assuming

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Speaker 8: it would probably just stay in the US at this moment,

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Speaker 8: but who knows. I have no idea how long it

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Speaker 8: will take to get any regulation through.

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Speaker 2: Do I'm going to have the companies talked about this

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Speaker 2: at all, or this risk highlighted it? What do the

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Speaker 2: companies say about something like this?

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Speaker 8: I think there are shocked, as I was when I

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Speaker 8: saw it at the screen. I don't think anybody had

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Speaker 8: any clue this is going to come from anywhere. Frankly,

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Speaker 8: I think I heard your previous person on the radio

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Speaker 8: there and they're saying, we all know alcohol is bad

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Speaker 8: for you. That God all sorts of warnings already on there,

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Speaker 8: but obviously not the one that would say cancer, which

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Speaker 8: would be certainly worries on people. So they have drink

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Speaker 8: responsibly on there and all those sort of things. So

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Speaker 8: this one's come out of nowhere, and I think, to

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Speaker 8: be fair, the industry has been trying to do sensible

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Speaker 8: things for years, essentially trying to get us to drink

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Speaker 8: better quality product and drink less of it. So yeah,

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Speaker 8: this one's a bit of a surprise.

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Speaker 5: It's also interesting because I wonder what the direct impact

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Speaker 5: would be in terms of timelines. Like I mean, clearly,

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Speaker 5: there was a world where women drank when they were pregnant,

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Speaker 5: and then everyone figured out that wasn't good for them,

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Speaker 5: and then it would harm the fetus, and then therefore

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Speaker 5: then there was a warning label now on the alcohol bottle,

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Speaker 5: which then prevented eventually women from not drinking mostly when

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Speaker 5: they're pregnant. So what's like a time lag for stuff

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Speaker 5: like this, Like if a label gets slapped on today,

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Speaker 5: when do people start paying attention.

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Speaker 8: Well, the only thing I can talk about here is

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Speaker 8: what happened on tobacco and they started saying it was

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Speaker 8: cans in nineteen fifty six, I think somewhere around then

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Speaker 8: that it was nineteen sixty four when the US Surgeon

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Speaker 8: General put in the saying it actually does cause can

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Speaker 8: So then it was nineteen sixty six before you actually

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Speaker 8: got the label onto the tobacco packet. It was even

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Speaker 8: later in Europe. It was about nineteen seventy one in

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Speaker 8: the UK. I think it was two thousand sixteen in Europe,

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Speaker 8: so it could take some time. Now people stopped smoking,

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Speaker 8: or certainly smoking incident fell from about fifty percent around

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Speaker 8: about nineteen sixty and has come down sort of consistently

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Speaker 8: ever since. So I guess the talker that would mean

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Speaker 8: people would consider switching to soft drinks or to lower

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Speaker 8: alcohol stuff, although I'm assuring lower alcohol stuff maybe have

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Speaker 8: a similar block on it because it's got some alcohol

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Speaker 8: in there, and I couldn't tell you whether the amount

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Speaker 8: and whether spirits are worse than beer or not. I

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Speaker 8: have absolutely no idea I'm not seeing. The medical data on.

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Speaker 2: That alcohol links to cancer have been known since the

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Speaker 2: nineteen eighties in clings to Bloomberg's reporting, and the substances

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Speaker 2: ranked US a third leading preventable cause of the disease.

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Speaker 2: So alcohol causes about one hundred thousand cases of cancer

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Speaker 2: in twenty thousand related deaths.

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Speaker 3: Each year in the US.

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Speaker 2: And that's according to the f the Surgeon General, far

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Speaker 2: more than the thirteenty five hundred alcohol related fatalities from

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Speaker 2: traffic rashes, just to give you some numbers here. So

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Speaker 2: we're seeing a little bit of a sell off in

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Speaker 2: the stocks here. Is this kind of in line with

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Speaker 2: what you would expect because it doesn't seem like it's

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Speaker 2: too traumatic to the stocks at this point.

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Speaker 8: Well, I mean the moment it's shock, I think that

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Speaker 8: that's sending them down because we just don't know all

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Speaker 8: this will get carried on through the rest of the world.

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Speaker 8: We have no idea when it will be put on

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Speaker 8: or if it will be put on in the US.

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Speaker 8: The data, no doubt, the alcohol companies will say some

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Speaker 8: of that data may be skewed because there can be

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Speaker 8: other things that will be related, you know, showing a

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Speaker 8: bad diet and obesity as number two. I think in

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Speaker 8: certain generals less hind Tobacca in terms of giving counsel.

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Speaker 8: But I'm not hearing anything about them putting counters from

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Speaker 8: food packaging, So I mean, I think there could be

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Speaker 8: a long way to go before we see anything actually

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Speaker 8: happen on the label. But you're right the discussions now,

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Speaker 8: so people will start talking about it. I'm sure it'll

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Speaker 8: get into the into newspapers and online, and it may

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Speaker 8: affect people's consumption habits. I have absolutely no idea. I've

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Speaker 8: got nothing to basis on at the moment, so I'm

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Speaker 8: just sort of assuming the volume will probably come under

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Speaker 8: a little bit of pressure. But my guess is for

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Speaker 8: the company's the beverage will probably push prices up a

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Speaker 8: little bit more to like tobacco, cop this hat and

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Speaker 8: try and not set some of that that.

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Speaker 6: Hit well, Duncan, We appreciate the insight.

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Speaker 5: Thank you very much, Duncan Fox, Bloomberg Intelligence, Senior Consumer

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Speaker 5: Staples Analysts.

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