Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moving news. Find
Speaker 2: the Bloomberg Markets podcast called Apple Podcasts or wherever you
Speaker 2: listen to podcasts, and at Bloomberg dot com slash podcast.
Speaker 3: What's the cybersecurity outlook? Let's see. Wendy Whitmore is head
Speaker 3: of Unit forty two at Palo Alto Networks. Our next
Speaker 3: guest in studio with us. Thanks for starting. Why would
Speaker 3: you leave Palo Alto to come to New York. It's
Speaker 3: like twenty below here.
Speaker 4: It is cold here, There's no doubt about that.
Speaker 3: Annie, tell us what is what is the unit? Unit?
Speaker 3: Do I have that right? Unit forty two.
Speaker 4: Yeah, Unit forty two is really Paloouto Network special forces
Speaker 4: on the ground if you will, so we consult. We
Speaker 4: solve our clients crises, so incident response and breach investigations,
Speaker 4: threat intelligence and threat hunting throughout the world.
Speaker 5: And tell us a little bit about your clients. Who
Speaker 5: are they, what kind of work do they do?
Speaker 4: Our clients really do a bit of everything, right, they
Speaker 4: are global two thousand companies or smaller organizations or governments
Speaker 4: throughout the world. We partner with a tremendous amount of
Speaker 4: intelligence organizations to share information throughout the world as well
Speaker 4: related to cyber threats and attacks.
Speaker 3: Okay, what's the landscape right now in terms of cyber security?
Speaker 3: I mean it's just like I also get at least
Speaker 3: once a month, it seems now, a letter from whatever organization.
Speaker 3: Last month it was from Robert Wood Johnson University Hospital
Speaker 3: system saying they had a breach of their security, their
Speaker 3: their computer systems and some data patient data was leaked out.
Speaker 3: And oh you know, here's a consolation prize. We're going
Speaker 3: to give you a year free of cyber security threat
Speaker 3: detection or credit monitoring, whatever it is, credit monitoring. What's
Speaker 3: the landscape right now? Things seem to have gotten a
Speaker 3: lot worse.
Speaker 4: The landscape is a bit chaotic, especially going into twenty
Speaker 4: twenty four. We're going to have over sixty major elections
Speaker 4: throughout the world happening in this year alone. Right, this
Speaker 4: will be the largest voting that's ever occurred. So I
Speaker 4: think an easy way to remember it is the three
Speaker 4: s's speed scale and sophistication. We're seeing attacks happen faster
Speaker 4: than they have been before. So when an attacker gets
Speaker 4: in an environment, they are stealing data within a matter
Speaker 4: of hours in some cases. From a scale perspective, you mentioned,
Speaker 4: you know, maybe on a weekly basis that you're getting
Speaker 4: a letter write about another breach that's occurred. This scale
Speaker 4: attackers for the first time in history, they're no longer
Speaker 4: doing only spear phishing, which is sending an email to
Speaker 4: an employee right and they click on a link and
Speaker 4: they get infected that way. They're actually exploiting vulnerabilities at scale,
Speaker 4: So within hours there could be hundreds of thousands of
Speaker 4: systems affected by a three CX and Microsoft Exchange for example.
Speaker 4: And then sophistication. It's long been certainly that nation state
Speaker 4: actors are highly sophisticated, but now we're looking at cyber
Speaker 4: criminals who have a deeper understanding of business to business
Speaker 4: interactions and processes than we've ever seen before, and they're
Speaker 4: using that to their advantage.
Speaker 5: Wow, So a few things I'm scared. A few things
Speaker 5: you just mentioned there that definitely made me scared. You're
Speaker 5: mentioning cybersecurity elections and nation states of course makes me
Speaker 5: think twenty sixteen, you know, we are heading toward another
Speaker 5: election here in the US, very likely could have Trump
Speaker 5: on the ballot again. I don't know, do we start
Speaker 5: thinking again about potential Russian interference in the US election?
Speaker 5: I mean, where is your mind at right now in
Speaker 5: terms of threats with this election coming up?
Speaker 4: I think that's a great question. But I think the
Speaker 4: reality is we have to be thinking about nation state
Speaker 4: interference from countries throughout the world. Right, we have now
Speaker 4: with the onset and advent of generative AI, we have
Speaker 4: the ability to speed up written and verbal communications and
Speaker 4: make them sound more polished and genuine than we've ever
Speaker 4: seen before. So I would imagine from a disinformation campaig,
Speaker 4: we're going to see more of those emanating from throughout
Speaker 4: the world, and we really need to be concerned about
Speaker 4: where information is coming from.
Speaker 3: From a business perspective, and particularly one of the areas
Speaker 3: that uncovered with the small businesses, and they are especially
Speaker 3: vulnerable because they just don't have the resources I would
Speaker 3: imagine to combat this on a regular basis. They're liable
Speaker 3: when that information when a client's information is stolen, right,
Speaker 3: I mean from a legal perspective, they have to keep
Speaker 3: that in mind certainly.
Speaker 4: You know, cybersecurity is really a team sport at this point.
Speaker 4: And you hit on a key factor of that, which
Speaker 4: is small businesses are not only responsible for their own information,
Speaker 4: but for those of their clients, and they may have
Speaker 4: a chain where they're part of a big supply chain
Speaker 4: for a large organization that does have more resources. So
Speaker 4: that is a huge challenge for executives throughout the world
Speaker 4: today is to make sure that not only they're securing
Speaker 4: their own communications, but their clients are consumers and everyone
Speaker 4: they're doing business with.
Speaker 5: Yeah, you know, this was actually even like a really
Speaker 5: big top heading into Davos this week that the survey
Speaker 5: that some of these diplomats were conducted on were heading
Speaker 5: into the World Economic Forum, that they ranked misinformation and
Speaker 5: disinformation as the one as the top risk out of
Speaker 5: ten for the short term and the long term. So
Speaker 5: I thought that or sorry, the short term risk being
Speaker 5: being this misinformation. So it is really interesting, I mean,
Speaker 5: how does that then affect like the work that you do.
Speaker 5: Do you feel like this is even more like under
Speaker 5: a microscope and being scrutinized right now?
Speaker 4: Well, I think the challenge with disinformation for example, is
Speaker 4: it's not like a traditional cyber attack where you're necessarily
Speaker 4: stealing data from an organization and there's some piece of
Speaker 4: evidence to prove right. It really relies on the reader,
Speaker 4: the viewer, the consumer of that information to be discerning
Speaker 4: and to understand and do their fact checking to really,
Speaker 4: you know, get to the degree of is this information
Speaker 4: legitimate or not to the degree that it has impact
Speaker 4: on a business and the economy. I think that's a
Speaker 4: you know, true factor. So twenty twenty four we're likely
Speaker 4: to see more of that than we've seen before.
Speaker 3: So with computing capacity you know, growing exponentially, et cetera,
Speaker 3: so forth, I would imagine it's not a question of when,
Speaker 3: but if, not a question of if, but when you're
Speaker 3: going to suffer a cyber attack, a devastating cyber attack,
Speaker 3: how do you protect yourself?
Speaker 4: And no doubt organizations are aware this is happening at
Speaker 4: a faster pace, right than we've ever seen before. So
Speaker 4: I think the keys there are really being able to
Speaker 4: understand what visibility into your environment, so understanding what are
Speaker 4: legitimate communications and interactions what are not, And then what
Speaker 4: something that everyone can do is practice in advance, right
Speaker 4: practice these plans make sure you know how to get
Speaker 4: a hold of your employees and your team members, and
Speaker 4: in the event that you don't have access to your
Speaker 4: primary email and other types of communications, that you can
Speaker 4: really respond quickly. On a personal note, I cannot stress
Speaker 4: enough do not reuse the same passwords for every single account,
Speaker 4: for every application, and for every application you can make
Speaker 4: sure you have multi factor authentication enabled so that you
Speaker 4: make yourself less of a target.
Speaker 5: And don't click those emails. John say alert, Oh.
Speaker 3: Wendy, do you have like just anecdotally, like, what's give
Speaker 3: us some horror stories that you've dealt with.
Speaker 4: Well, So, for example, just last week, we're working for
Speaker 4: an incident response, meaning a breach investigation for a healthcare organization,
Speaker 4: and in this case it's a ransomware actor. Not only
Speaker 4: do they reach out to try to extort the healthcare organization,
Speaker 4: they're reaching out individually to patients and in this case
Speaker 4: it's cancer patients, and they're saying, hey, for three dollars,
Speaker 4: you can preview the information that we've stolen about you,
Speaker 4: and for fifty dollars you can pay us to make
Speaker 4: sure that we don't expose this further on the internet.
Speaker 4: This is horrific behavior. We're likely to see more of
Speaker 4: this as these ransomware actors continue to monetize their attacks.
Speaker 3: They ever caught the ransomware actors or they rush or
Speaker 3: some far off place where you're never going to you
Speaker 3: just reach them.
Speaker 4: Well, the great news I think is there's a lot
Speaker 4: more information now, So multiple governments throughout the world are
Speaker 4: collaborating on these attacks. We have law enforcement actually going
Speaker 4: after disrupting these ransomware actors their infrastructure, so the tools
Speaker 4: that they're using to host and wage these attacks. And
Speaker 4: then certainly we're moving to the point where we're now
Speaker 4: disrupting from an actual arrest standpoint too. So good news,
Speaker 4: but still slow going in that aspect.
Speaker 5: So one more here for you, Wendy. We had some
Speaker 5: news out of JP Morgan this morning. They're saying that
Speaker 5: they've seen an increase in hackers that are trying to
Speaker 5: infiltrate their systems and JP Morgan spends about fifteen billion
Speaker 5: dollars a year on technology as part of its attempts
Speaker 5: to bolster its cyber defenses. Obviously we're not all JP Morgan,
Speaker 5: but this could get very expensive.
Speaker 4: Oh, no doubt. I mean, this has a true economic impact, right.
Speaker 4: But I think the good news there and the silver
Speaker 4: lining is we're seeing so many more organizations really effectively
Speaker 4: prepare to detect these attacks. So in JP Morgan's case,
Speaker 4: they're detecting them, they're preventing them, they're gathering data that
Speaker 4: they're sharing with the community so that more and more
Speaker 4: others can also protect and defend themselves as well. So
Speaker 4: I think there's a good story there as well.
Speaker 3: Okay, I'm changing my passer from JBT one two three four.
Speaker 5: It's not password one two three Oh no, that was
Speaker 5: my old one.
Speaker 3: Okay, Wendy, thanks so much. Wendy Whitmore is senior vice president,
Speaker 3: head of Unit forty two at Pallo Outdo Networks in
Speaker 3: the studio, so she gets a goals start today.
Speaker 6: You're listening to the team, can't her live program Bloomberg
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot Com,
Speaker 6: the iHeartRadio app and the Bloomberg Business App, or listen
Speaker 6: on demand wherever you get your podcasts.
Speaker 3: Is twenty twenty four, the year for a rebound. Our
Speaker 3: next guest has some thoughts on that. Thomas Smell is
Speaker 3: CEO of f E International. Before we get to the deals.
Speaker 3: What do you guys do? What is the company you
Speaker 3: have all about?
Speaker 1: So f International we focus on middle market tech, M
Speaker 1: and A too, work with buys and sellers of companies
Speaker 1: up to generally three hundred million in evaluation. In total,
Speaker 1: we've closed over fifteen hundred transactions.
Speaker 3: So you're in an advisory capacity exactly where an advisor. Yeah, okay,
Speaker 3: twenty twenty three is a year year. I would imagine
Speaker 3: you want to forget what's the outlook?
Speaker 1: Yeah, So I mean twenty twenty three I think finished
Speaker 1: on a reasonable high. So if we look at our
Speaker 1: deal volume second half of twenty twenty three versus second
Speaker 1: half of twenty twenty two, we're up fifty six percent.
Speaker 1: So deals are still happening, particularly in the middle market.
Speaker 1: Lower middle market, I think where a lot of people
Speaker 1: see deal volumes slow down as really those much larger transactions,
Speaker 1: So it's much less those billion dollar and above deal's happening,
Speaker 1: but the still activity lower down.
Speaker 5: Yeah, and it sounds like this year obviously, if interest
Speaker 5: rates are going to come down, that should probably help
Speaker 5: give a boost to the outlook.
Speaker 1: This year, right, Yeah, for sure, I think last year
Speaker 1: there was a lot of uncertainty about what's going to
Speaker 1: happen to interest rates, and they kept getting pushed upwards,
Speaker 1: so a lot of buyers were kind of sitting on
Speaker 1: the sidelines waiting to see what would happen. Now, I
Speaker 1: think most analysts are predicting maybe two or three interest
Speaker 1: rate cuts this year, so buyers are definitely getting more active,
Speaker 1: particularly those who are using debt. But on the flip side,
Speaker 1: there's still four trillion dollars of dry powder with private
Speaker 1: equity firms that they need to deploy, which is sitting
Speaker 1: there in cash, so there's still the ability to do
Speaker 1: deals even if they don't use debt.
Speaker 3: How does it work. Do they come to you mostly
Speaker 3: or you see the opportunity, are like, hey, this is
Speaker 3: something that might make sense in terms of M and A,
Speaker 3: and you approach those companies.
Speaker 1: So generally they will come to us. We've been in
Speaker 1: business like fourteen years now, so we get a lot
Speaker 1: of word of mouth. Founders will come directly to us
Speaker 1: wanting us to help sell their business. Maybe they're ready
Speaker 1: to move on, maybe they've had an approach and they
Speaker 1: want someone to help advise them. And then we'll work
Speaker 1: through the process of reaching out to suitable buyers and
Speaker 1: negotiating from that.
Speaker 3: How do they reach that decision? Give me a specific
Speaker 3: like when they know it's time to do something.
Speaker 1: Yeah, So for a lot of people, that's very much
Speaker 1: the personal decision. So like everyone has, I think in
Speaker 1: the entrepreneurial world has their number. The number might be
Speaker 1: ten million, fifty million, one hundred million, two hundred million.
Speaker 1: Personally they want to walk away with when they get
Speaker 1: to that level in terms of where they can sell
Speaker 1: their company, they might just decide to walk away. Then
Speaker 1: some people walk away when they have a change of
Speaker 1: personal circumstances. Maybe they've got kids going to college and
Speaker 1: they want to kind of spend more time with them,
Speaker 1: or maybe they want to spend less time with them
Speaker 1: and where they want to take time away from from work.
Speaker 1: It can work in even directions. A lot of the time,
Speaker 1: founders just get an approach, So they get an approach
Speaker 1: from a buyer that gets them excited about the idea
Speaker 1: of selling and they just want someone to help kind
Speaker 1: of work through the process with them. Other times, I think,
Speaker 1: particularly in kind of the current world of tech, it
Speaker 1: moves so quickly, founders will have new ideas that they're like, well,
Speaker 1: I've got a new business idea. How about I sell
Speaker 1: my current company. I'm going to go work on this instead,
Speaker 1: and I'll get some liquidity in the meantime.
Speaker 5: So you'd mentioned private equity. Are you working in transactions
Speaker 5: a lot that in which case that is buyer or
Speaker 5: is this mostly you know, one business acquiring another.
Speaker 1: Yeah, so privacy probably makes up about fifty percent of
Speaker 1: the deals we work on. We work with a lot
Speaker 1: of public companies as well, who are trying to make
Speaker 1: acquisitions at all levels. I think a lot of people
Speaker 1: think public companies only buy billion dollar businesses, but the
Speaker 1: reality is, if there's a strategic fit, they might look
Speaker 1: at a five million dollar business, a ten million dollar business,
Speaker 1: fifty million dollar market cap business. And then a lot
Speaker 1: of individuals are like very small funds. You might not
Speaker 1: necessarily call them private equity, but they're kind of successful
Speaker 1: individuals or partnerships have raised a small amount of money
Speaker 1: to buy a business as well. Particularly in the US,
Speaker 1: that's a very active demographic of buyer.
Speaker 3: Okay, So looking forward to twenty twenty four, are there
Speaker 3: any particular sectors that you deal with that look better
Speaker 3: than others? Where is the deal activity in terms of that.
Speaker 1: So I think that the big trend at the moment
Speaker 1: is anything related to AI. And I think the interesting
Speaker 1: thing about AI is, even if you don't necessarily understand it,
Speaker 1: every single business out there has a way they can
Speaker 1: improve with the use of AI. Lots of other kind
Speaker 1: of sub industries that have come up over the years
Speaker 1: have not necessarily had that kind of ability to be
Speaker 1: applied in literally every business. So lots of companies we're
Speaker 1: working with or acquiers that come to us and say, hey,
Speaker 1: we're looking to buy a business interest in AI, either
Speaker 1: to augment what they already have, so maybe they can
Speaker 1: add some tools or even like a team to their
Speaker 1: existing kind of business or whatever they might have, so
Speaker 1: you can augment that by adding AI, or maybe if
Speaker 1: you're building a business in the AI space, it's a
Speaker 1: great time to sell because it's such a hot market.
Speaker 1: So at the moment, we have a nine figure transaction
Speaker 1: we're representing. They've built the business in three years to
Speaker 1: over twenty million in revenue, no outside funding, currently actively
Speaker 1: looking for a buyer, and it's so far extremely interesting
Speaker 1: with buyers just because of the amount of kind of
Speaker 1: AI focus it has.
Speaker 5: Last one here a few of Thomas, And we've been
Speaker 5: talking a bit about earlier in the show about the
Speaker 5: regulatory outlook for M and A, especially with the Jeb
Speaker 5: Blue and Spirit deal that didn't come through. So tell
Speaker 5: us a little bit about that from your perspective, and
Speaker 5: especially if we're heading into an election year and maybe
Speaker 5: that administration could change.
Speaker 1: Yeah, So I think buyers are always aware of political changes,
Speaker 1: and that's not just necessarily in the US. That's geopolitically.
Speaker 1: There's things all over the world that could affect effect deals.
Speaker 1: So from that perspective, buyers will always be thinking about it.
Speaker 1: Regulatory risk is very much specific to the industry you
Speaker 1: might be working within. So recently we worked on a
Speaker 1: business in the CBD space, which we successfully sold, but
Speaker 1: there's constant regulatory changes with CBD. So if you're an
Speaker 1: acquirer looking to buy businesses in that space, either you're
Speaker 1: going to be extremely confident and knowledgeable of that industry,
Speaker 1: or you're going to do a lot of extra research
Speaker 1: into what might necessarily change or what could potentially change
Speaker 1: in future, or maybe you'll even risk adjust your offer
Speaker 1: and say, well, there's regulatory risk in this market, we're
Speaker 1: going to pay less for that business.
Speaker 3: Thomas A pleasure and thanks for stopping by in the
Speaker 3: in studio guest A gold star for Thomas Smoe, CEO
Speaker 3: of FI International Advising on.
Speaker 7: M and A.
Speaker 6: You're listening to the tape Cansur live program Bloomberg Markets
Speaker 6: weekdays at ten am Eastern on Bloomberg Radio, the tune
Speaker 6: in app, Bloomberg dot Com.
Speaker 7: And the Bloomberg Business App.
Speaker 6: You can also listen live on Amazon Alexa from our
Speaker 6: flagship New York station, Just Say Alexa play Bloomberg eleven.
Speaker 3: Thirty Joining us now Robert Stein, Managing director partner at
Speaker 3: Blankie Shine Wealth Management. How does an investor play this?
Speaker 3: Back and forth? Fed going to cut March Now it's later,
Speaker 3: fewer cuts maybe what how do you view all this?
Speaker 8: Well, good morning, John and Molly, And I think if
Speaker 8: we go back a month ago, when I was in
Speaker 8: the Bloomberg Radio studios, I did say that, you know,
Speaker 8: the markets were anticipating and asking for in twenty twenty
Speaker 8: four a rate cut. In fact, obviously you saw equity markets,
Speaker 8: risk assets price that in super aggressively. We were in
Speaker 8: the camp of as I said then, and I still
Speaker 8: believe that it's going to be higher for longer, and
Speaker 8: the federers are going to have to walk that tightrope
Speaker 8: simply because if you look at the sort of trajectory
Speaker 8: of inflation through history, you get two humps of inflation,
Speaker 8: and the FED can't pull down sort of the interest
Speaker 8: rate to re ignite some of the inflationary pressures. They
Speaker 8: have to ensure that inflation is anchored before they go ahead.
Speaker 8: I mean about seventy eight percent of the time historically speaking,
Speaker 8: inflation comes in two waves. So you know what the
Speaker 8: FED basically is done now is that for twenty twenty four,
Speaker 8: it's not a no on rate hikes. It's no for
Speaker 8: right now.
Speaker 5: How much do you think of the disinflation we've seen
Speaker 5: that the FED can really take credit for. This is
Speaker 5: something I've been wondering and I feel like so much
Speaker 5: of it has just been like the supply side normalizing,
Speaker 5: you know, since from those big COVID disruptions and a
Speaker 5: lot of those supply chains getting back in order. Do
Speaker 5: you really think, though, Rob, that these at the FED
Speaker 5: can take credit for a lot of what we've seen.
Speaker 8: Yeah, I think we've been We're in a territory including
Speaker 8: the FED, that no one has ever seen before. So
Speaker 8: you know, retail is working through that, services are working
Speaker 8: through that, Federal reserve, businesses are working through that. You know,
Speaker 8: one thing's good is this supply chain got tighter and
Speaker 8: then I got sort of a lot more efficient, if
Speaker 8: you will, And I think a lot of businesses became
Speaker 8: a lot more efficient even moving forward. So that's going
Speaker 8: to be leading to greater profitability for a lot of
Speaker 8: businesses that learn through COVID. But if you look at
Speaker 8: the shift in consumption, and two thirds of the economy
Speaker 8: is consumption, it's basically the services sector that's still seeing
Speaker 8: that spike up. Look at airline prices, look at all
Speaker 8: the inflationary prices where people are like shifting their spending.
Speaker 8: We just got retail sales goods. You know, American consumer
Speaker 8: will always find a way, whether it's the credit card
Speaker 8: or whether it's the savings that they had saved up to.
Speaker 8: You know, make certain that Christmas is still Christmas at home.
Speaker 8: But it's going to take some time to see we're
Speaker 8: going to see a lot more pressure build on the consumer.
Speaker 8: But the shift in spending is quite clear. It's still
Speaker 8: services for this year.
Speaker 3: Okay, we can definitely say there is something of a
Speaker 3: pivot the degree to which you can argue about and
Speaker 3: we're definitely headed towards that two percent, although with maybe
Speaker 3: fits and starts, so a disinflationary environment or outright deflation
Speaker 3: in some sectors. I asked this of all our equity guests,
Speaker 3: what does that mean for earnings, especially the top line
Speaker 3: sales growth.
Speaker 7: Earnings?
Speaker 8: If you look at you know again, that's going to
Speaker 8: be at the forefront. We just had the two biggest
Speaker 8: points you know, a year to date. As it relates
Speaker 8: to CPI information as well as market it's not exactly
Speaker 8: going in the right direction in terms of as much
Speaker 8: movement as the FED needs to see, but the earnings
Speaker 8: is on the forefront. And corporations. If you look at
Speaker 8: tech two years ago, tech literally started laying off in
Speaker 8: anticipation of a recession. We're looking at banks right now.
Speaker 8: At the end of last year they started laying off.
Speaker 8: So it's basically a rolling sector recession. You know, pick
Speaker 8: your company, but a lot of companies are basically being
Speaker 8: a lot more conservative now that job's number is basically
Speaker 8: the you know, not going in the direction that the
Speaker 8: FED needs it as quickly as as at least the
Speaker 8: markets would like it.
Speaker 7: So interest rates could come down quicker.
Speaker 5: So a rolling sector recession, does that mean we're in
Speaker 5: some an actual economic recession or heading toward one.
Speaker 8: I don't know if that'll actually transpire. If you look
Speaker 8: at the last two years, different sectors have had recessions
Speaker 8: at different times. That's why I think this time is
Speaker 8: different from a quote unquote recession standpoint. I know we've
Speaker 8: been waiting for about a year and a half holding
Speaker 8: our breath for the official data to come out. But
Speaker 8: if you look at the different sectors and the performance
Speaker 8: of the different sectors, outperformance in some and underperformance in others,
Speaker 8: I think sectors, that's where you have to sort of
Speaker 8: be tactical in your performance of your acid allocation. As
Speaker 8: you look into the market for twenty twenty four, the
Speaker 8: sectors that perform the best on a relative basis, let's
Speaker 8: say technology are still going to perform well this year,
Speaker 8: but relatively other sectors will sort of come back, let's
Speaker 8: call it healthcare, energy. I think those are times to
Speaker 8: start looking at overwaiting those sectors for twenty twenty four.
Speaker 3: Okay, so I put all that into the blender, turn
Speaker 3: it on high. What do I come up with? Where
Speaker 3: do where am I going to put my money.
Speaker 8: Again, the sixty forty sort of acid allocation is where
Speaker 8: we're at. We like about a ten percent allocation within
Speaker 8: that forty within alternative investments. But I really like energy
Speaker 8: for the first six months. I think obviously the geopolitical
Speaker 8: tensions that we're seeing earnings growth in that sector alone
Speaker 8: as up forty percent in the last four years. And
Speaker 8: then you also have buybacks. I mean, their dividend rich
Speaker 8: right now, and so where they're gonna basically have that
Speaker 8: free cash flow is how they're going to allocate that.
Speaker 8: And we believe there's a lot of value there plus
Speaker 8: a lot of m and a activity that we saw
Speaker 8: is going to be a creative So we like the
Speaker 8: energy sector moving forward. And then healthcare. Healthcare again just
Speaker 8: like energy is going to prevent a present a lot
Speaker 8: of value plus dividends you get paid while you eight.
Speaker 5: So Robert, just on our last thirty seconds or so,
Speaker 5: here just have to confirm you you're coming to us
Speaker 5: from Palm Desert, California today? Is that right? Okay?
Speaker 3: Tell me is that the t is that a TV
Speaker 3: screen or your window in the background, to be honest,
Speaker 3: but if you.
Speaker 8: Look right through us We've got basically a Palm Desert
Speaker 8: chamber of commerce. You know, snow cap mountains out here.
Speaker 8: It's seventy degrees, so come on out.
Speaker 5: And also nearby is a beautiful tennis center, which I
Speaker 5: got to ask, are you going to be at Indian
Speaker 5: Wells in March.
Speaker 8: We love the Indian Wells tennis event. It's the first
Speaker 8: class event, and it's international and it's growing every year,
Speaker 8: so it's a perfect time to hear.
Speaker 5: Yeah, that's big on my list for next year. This
Speaker 5: year going to Miami Open.
Speaker 3: Now back to tennis for you.
Speaker 5: It has to We haven't even talked about the Australian
Speaker 5: Open yet. It's really just a huge oversight on our part.
Speaker 5: We will be getting that to you everyone. Don't worry, Bob.
Speaker 3: Thanks a lot. I appreciate it. Robert Scheine, Managing director
Speaker 3: and partner at Blankie Shine Wealth Management.
Speaker 6: You're listening to the tape Cat's are live program Bloomberg
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 6: tune in app, Bloomberg dot Com, and.
Speaker 7: The Bloomberg Business App.
Speaker 6: You can also listen live on Amazon Alexa from our
Speaker 6: flagship New York station. Just say Alexa playing Bloomberg eleven thirty.
Speaker 3: Goldman Sachs recently raised six hundred and fifty million dollars
Speaker 3: for investing in life sciences startups. Is this an area
Speaker 3: for you? Let's say asker next Kuss Zoe penn in
Speaker 3: the partner at Lenanda Impact Ventures. She's joining us from
Speaker 3: all these guests in locations like I want to be
Speaker 3: Harry True you go to Antarctica then? And where do
Speaker 3: you then? Mexico.
Speaker 5: I'm telling you the bachelorette parties are killer. But Zoe
Speaker 5: Patten joined us from Spain today.
Speaker 3: Nice when us.
Speaker 5: Star day, Zoey, what's up?
Speaker 9: I'm doing well here? Thank you very warm.
Speaker 3: So let's ask you on the on the risk spectrum,
Speaker 3: where do startups in health, nature and biotech? Where do
Speaker 3: they lie.
Speaker 9: Risk? So when a Hernanda we invest in very early
Speaker 9: stage impact ventures across all those areas, and it is
Speaker 9: it is we are very early stage. So it is
Speaker 9: high risk. I mean that's bench capital for you.
Speaker 5: How much is it?
Speaker 3: But high reward If if you get a home run
Speaker 3: up one of these, how many home runs do you get? Typically?
Speaker 9: So in VC, you're looking in a portfolio of twenty
Speaker 9: five to thirty maybe two max. But that's the name
Speaker 9: of the game, and everybody who works in this industry
Speaker 9: knows that the.
Speaker 5: Past the numbers game. Yes, that's right. Well, I mean
Speaker 5: tell us about some of the home runs you've had
Speaker 5: and like to what extent you can tell us about them.
Speaker 9: So some of the areas that we've investing in. In
Speaker 9: terms of the life sciences that you were asking about,
Speaker 9: We've got a company called Closed Loop Medicine, and this
Speaker 9: one deals with dosage. So when you take a pill,
Speaker 9: everybody's taking the same dosage, get an adult dosage and
Speaker 9: a child dosage. But we're not all made of the
Speaker 9: same things. Our biology is very unique to each of
Speaker 9: us and as a result, many of us get side effects.
Speaker 9: And you know, if you go back to how drugs
Speaker 9: are designed back in the seventies and eighties, there were
Speaker 9: not many women involved in those clinical trials, so many
Speaker 9: of the drugs that we take have much more exaggerated
Speaker 9: impact on female bodies too. So Closely Medicine works with
Speaker 9: pharmaceutical companies to do personalized digital dosage, so that's using
Speaker 9: artificial intelligence and tracking lots of data. So that's that's
Speaker 9: one of the ones. And then another one called resistant Map.
Speaker 9: It's a very recent investment that we've done so very
Speaker 9: very early. But you know, with the recent pandemic, everybody's
Speaker 9: become much more aware of beneath for biosecurity and how
Speaker 9: pathogens can be used as a weapon. You know, quite
Speaker 9: worrying really, And one of the next pandemic that nobody
Speaker 9: really talks about is antibiotic resistance. So what resistant map
Speaker 9: does is it's able to map all the different strains
Speaker 9: and say where all over the world where you've got
Speaker 9: the worst antibiotic resistance. To make people aware of this.
Speaker 3: Yeah, we you know, especially with my kids, it's like
Speaker 3: every time they went to the doctors, they get a
Speaker 3: Marxist cylind or some antibiotic and you had to start
Speaker 3: wondering about like the resistance levels and what the ultimate
Speaker 3: result of that is. Hey, as an average joke, can
Speaker 3: I get in on the ground floor?
Speaker 9: Can you get in the ground floor in impact investing
Speaker 9: or life science?
Speaker 3: Well, any of the companies that you're talking about.
Speaker 7: This is like.
Speaker 3: I want to get rich too, incredible.
Speaker 9: Yeah, I'm sure, I'm sure, I think we all but no,
Speaker 9: it's important not just getting rich. It's about having impact
Speaker 9: as well, and making things at a better place, better
Speaker 9: healthcare for everybody, more accessible, and yeah, better lives for everyone.
Speaker 9: That's what impact investing is all about.
Speaker 5: I've got to think that there's got to be some
Speaker 5: kind of AI application here, So tell us a little
Speaker 5: bit how that's coming into your space, and if that's
Speaker 5: all the.
Speaker 3: Intersection of AI and life sciences, et cetera.
Speaker 5: I don't know that SEMs right got my attention. All right, Well,
Speaker 5: all right, well John wants to know about it, So
Speaker 5: tell John what's going on there?
Speaker 9: Okay? So, I mean, we've just seen this money all
Speaker 9: going into from gold and Sacks, and I must say
Speaker 9: it's not the only big fund that they've got. They've
Speaker 9: also got a climate fund as well. So Goldman Sachs
Speaker 9: are making some interesting moves just generally and not just
Speaker 9: in the life sciences. But we've seen lots of people
Speaker 9: go into the life sciences twenty years ago similarly as
Speaker 9: they did with clean tech, and get quite bruised. So
Speaker 9: the question is why are we seeing this again? So yeah,
Speaker 9: that's where the AI comes in, making it cheaper quicker
Speaker 9: to build models using existing data and synthetic data. And
Speaker 9: then your previous person that you had in the studio
Speaker 9: talking about compute power too, So in relevance to life sciences,
Speaker 9: you've got the ability to build new biological and chemical
Speaker 9: models as well having this extra compute power. But what's
Speaker 9: also interesting, and I think this is where Goldman Sachs
Speaker 9: are picking up, is as market forces as well. We're
Speaker 9: seeing this trickle down effect and from the big tech players,
Speaker 9: there's Magnificent seven that we're calling them now investing heavily
Speaker 9: into this space. So you've got six out of those
Speaker 9: seven from the Minnixent seven investing in healthcare and AI
Speaker 9: and life sciences. Just to give you one example which
Speaker 9: I'm sure people are hearing about on the news, so Google,
Speaker 9: Google D nine spinout isomorphic Labs, so they're reducing the
Speaker 9: time for drug discovery, fining two large deals worth nearly
Speaker 9: three billion dollars with Eli Lilly and the artists. So
Speaker 9: that's really interesting. Revenue apparently coming in quite early on,
Speaker 9: which we didn't see with that first trend twenty years ago.
Speaker 9: In the early two thousands, they were mostly developing single assets,
Speaker 9: single drugs. So if it doesn't work out, you spend
Speaker 9: an awful lot of money at the beginning stage to
Speaker 9: then lose a lot, so extremely high risk. So what
Speaker 9: we're seeing is we're reducing that risk by being able
Speaker 9: to discover more potential drugs using artificial intelligence, increase data,
Speaker 9: to reduce the risk at every single stage of a
Speaker 9: life science business. And I think that's why you're seeing
Speaker 9: now Goldman Sachs and many other people forging back into
Speaker 9: life sciences, which is a very very impactful area. So
Speaker 9: the more money that goes into this and the more
Speaker 9: chances we have success, this is a very good thing
Speaker 9: for everyone.
Speaker 3: Zoe, Do these companies come to you or do you
Speaker 3: go scout these companies out? How does that work?
Speaker 9: Oh, it's always a bit of both. Actually, what we
Speaker 9: like to do with Hernandez we have certain megatrends that
Speaker 9: we go for, So we've got certain fields and different
Speaker 9: areas of impact that we feel are the hot areas
Speaker 9: over the next five to ten years. And for instance,
Speaker 9: we've started to focus a lot of time now into
Speaker 9: tech bio companies. So this is does come under life
Speaker 9: sciences in its one particular area, which is more about
Speaker 9: computational biology, so using AI with biology so that it's
Speaker 9: the less capital intensive end of the life science is
Speaker 9: just let's say that, and that's where we're expanding our field,
Speaker 9: and we will often go out and look to the universities,
Speaker 9: work with the angel investors who have a background in
Speaker 9: this area, and go out and find as much as
Speaker 9: we do they come to us. So it's a pretty
Speaker 9: much a half and half sourcing strategy.
Speaker 5: So, Zoe, you started out by telling us that, you know,
Speaker 5: for every twenty five or so strikes, maybe two or
Speaker 5: three of them hit. So it's obviously a lot of
Speaker 5: them that don't work out. I know, we don't like
Speaker 5: to harp on our you know, misfortunes, but can you
Speaker 5: tell us about maybe some of these that haven't worked
Speaker 5: out for you guys?
Speaker 9: Difficult to name names right now, but what will tend
Speaker 9: to happen is just it's kind of they've gone for
Speaker 9: a single asset strategy. If you're talking about life sciences,
Speaker 9: you spend a lot of money up front, and if
Speaker 9: that one doesn't turn out to have the product market fits,
Speaker 9: so people are not willing to pay at that point.
Speaker 9: But you've had to spend a lot of money and
Speaker 9: you run out of money. But it's as simple as
Speaker 9: that with the life sciences. So that's why many of
Speaker 9: them haven't worked out in the past. But like I
Speaker 9: was saying, with everything that's happening now, you get more
Speaker 9: bites at the cherry with artificial intelligence in these companies.
Speaker 9: So it's reducing that risk and being able to spot
Speaker 9: what's not going to make it. Just saying, you know,
Speaker 9: time is the most precious thing for these entrepreneurs as
Speaker 9: well as investors. If you're not going to work out,
Speaker 9: let them go again. Let them build on the failures
Speaker 9: of that one, because you know, all science is built
Speaker 9: on the the you know, on the shoulders of many
Speaker 9: of those that have gone before. Let them roll again
Speaker 9: into another one. So failure is not the disaster as
Speaker 9: many see it would be painted. It's just the next stage.
Speaker 3: So we have pleasure to talk to you, appreciate you
Speaker 3: start in buying. So we our partner ed Ata Impact Ventures,
Speaker 3: joining us from some jealous Spain.
Speaker 6: You're listening to the Team Cancer Live program Bloomberg Markets
Speaker 6: weekdays at ten am Eastern on Bloomberg, the iHeartRadio app
Speaker 6: and the Bloomberg Business app, or listen on demand wherever
Speaker 6: you get your podcast.
Speaker 3: Can I say jaw dropping data this morning on retail sales?
Speaker 9: Yeah?
Speaker 5: Why not?
Speaker 3: I mean it was just like, way off expectations.
Speaker 5: We look, the consumer, you know, loves to surprise. Isn't
Speaker 5: that no recession? That's been the story, John.
Speaker 3: Or I think, as I put it, the consumers not
Speaker 3: falling off a cliff.
Speaker 5: Yeah, that was your crystal ball this morning. You nailed it,
Speaker 5: and I said we had to hold tight just to
Speaker 5: make sure.
Speaker 3: A US retail sales. As Molly wrote in the Bloomberg
Speaker 3: story that you can read on top Go rising at
Speaker 3: the strongest place in three months. In December, treasury yields
Speaker 3: popped on the news. So how does this all gel
Speaker 3: with the current investment climate? Let's put that to our
Speaker 3: next guest, Geetu Sharma, founder and investment manager at Alpha's Future,
Speaker 3: joining us from I'm going to guess the coldest place
Speaker 3: on a planet Earth right now? Minneapolis? How bad is it.
Speaker 9: Hi there?
Speaker 10: Yeah, it's pretty cold here. I think with the wind
Speaker 10: chills it's about minus twenty.
Speaker 5: We're in Antarctica.
Speaker 3: Molly's just back from Antarctica. She says, it's colder here
Speaker 3: in New York than it.
Speaker 5: Wasn't a serious Antarctica. It's summer right now. It's beautiful
Speaker 5: down there.
Speaker 3: All right, well, anyway, you know, every time I count
Speaker 3: out the American consumer, I'm dead wrong. What do you
Speaker 3: make of the data that we got today, and more importantly,
Speaker 3: what does it imply for FED policy and just markets overall?
Speaker 10: Yeah, I think like you were talking earlier, the consumer
Speaker 10: remains very strong and is consuming, is willing to spend,
Speaker 10: and we're not seeing any kind of slow down in
Speaker 10: demand right now. Besides the strong retail sales data, we
Speaker 10: also read about positive humban the sentiment, the mortgage demand
Speaker 10: going up as well. And last week we saw unemployment
Speaker 10: rate at about three point seven percent, which is you know,
Speaker 10: one of the lowest or fifty sixty years. So we're
Speaker 10: really not seeing any kind of shop significant slowdown that
Speaker 10: would imply that a recession is coming. In fact, we're
Speaker 10: seeing a consumer and an economy that continues to be
Speaker 10: very strong, very resilient in the pace of high interest rates,
Speaker 10: and you know, and inflation has come down, so that
Speaker 10: of course is giving a positive post to the consumer
Speaker 10: as well.
Speaker 5: Of course, and you know you had mentioned in your
Speaker 5: notes just just before the show gets you that the
Speaker 5: outlook for disinflation remains uncertain, and obviously we did see
Speaker 5: that CPI report. I believe that was last week. The
Speaker 5: time is fine, but it was, as you said, you know,
Speaker 5: it's a bit bumpy. So how are you parsing through
Speaker 5: these different reports? And I'm really, you know, sticking to
Speaker 5: your guns that inflation is on a firm downward trajectory.
Speaker 10: I think it's at this point point of time, it's
Speaker 10: really hard to say how far inflation will go down further.
Speaker 10: We've seen some really sharp declines in twenty twenty three
Speaker 10: and that has brought inflation down from nine person from
Speaker 10: a higher nine person in June twenty two to about
Speaker 10: two to three person right now. But it's often said
Speaker 10: that the last leg is the most difficult, and we
Speaker 10: did see the recent CPI data slightly nudge up. And
Speaker 10: one of the biggest challenges I think for the FED
Speaker 10: is that we just continue to be very sticky and
Speaker 10: that's trending around four person right now, and that can
Speaker 10: keep inflation at the current levels of two to three person,
Speaker 10: which is still about pet's target. And as long as
Speaker 10: they're can be staying strong and the inflation is stable
Speaker 10: at this higher number, I don't see how the FED
Speaker 10: woul't want to cut so rapidly as the market is
Speaker 10: expecting S and p FI.
Speaker 3: I've found it, as you mentioned, it ain't cheap at
Speaker 3: this point, but I look a little broader small mid caps.
Speaker 3: Not only do they seem to be massively under owned
Speaker 3: my investors at this point and by institutions, they're about
Speaker 3: thirteen to fourteen times earnings. You can own these? Is
Speaker 3: that an alternative?
Speaker 10: I think it's a very difficult situation in terms up
Speaker 10: investing right now, because what we've seen is a large
Speaker 10: part of last year's value was driven by tech and
Speaker 10: AI and secular trends around AI, and the rally was
Speaker 10: not only in the large cap tech but also in
Speaker 10: the small and MidCap tech. So there is this segment
Speaker 10: of the market which has high growth, strong cash flows,
Speaker 10: profitable and continues to do well and has expensive valuations.
Speaker 10: On the other hand, you have everything else in the economy,
Speaker 10: whether it's industrials or describtionary or even the defensive sectors
Speaker 10: that have not participated in the rally, have underperformed last
Speaker 10: year and are at especially the industrials and the financial
Speaker 10: energy sectors. They remain exposed to recession risks, so they're
Speaker 10: most cyclical and have downside risks. If we do head
Speaker 10: into a recession. So the question is do you, uh,
Speaker 10: do you continue to invest in tech which has this
Speaker 10: positive profitability, demand growth trends but is expensive, or do
Speaker 10: you how much of your portfolio do you weigh in
Speaker 10: towards some of these value sectors which have not performed
Speaker 10: so far?
Speaker 3: Is there like, is there like a magnificent magnificent seven
Speaker 3: in like small and mid caps?
Speaker 10: I don't think so.
Speaker 5: They're all magnificent across the board there, you two. So
Speaker 5: if we're talking about the possibility of recession, I feel
Speaker 5: like we've got to talk about these FED wagers here
Speaker 5: and looking at investors that are pricing in as many
Speaker 5: as six rate cuts next year. Obviously the FEDS dot
Speaker 5: plot indicating just three. Where do you stand in that debate?
Speaker 5: Because that's a that's a pretty big discrepancy between three
Speaker 5: and six. And also why do you investors just not
Speaker 5: believe the Fed time and time again?
Speaker 10: So I think the market tends to swing from one
Speaker 10: end to the other. We you know, and and a
Speaker 10: lot of the market projections as well as the FED
Speaker 10: projections have not come through for a while. We you know,
Speaker 10: the market expected with session in twenty three that didn't
Speaker 10: come through. We were expecting one more rate high towards
Speaker 10: the end of the year that didn't come through. So
Speaker 10: there's been you know, data has been shifting, and it's
Speaker 10: really you know, hard to predict what's going to happen.
Speaker 10: But clearly the difference between what the Fed is stop
Speaker 10: is anticipating, which is a soft planning scenario stable growth
Speaker 10: INFISH going to two by twenty twenty five. The Fed
Speaker 10: is looking at normalizing interest rates to about four four
Speaker 10: and a half person this year, whereas the market is
Speaker 10: forecasting a more dire situation that ultimately leads to a
Speaker 10: recession and the BED has to cut a lot more.
Speaker 10: I think it remains this remains a big debate in
Speaker 10: the market right now, and every day we are seeing
Speaker 10: moves that are reflecting, you know, a ship from one
Speaker 10: side of this debate to the other. Not really direction.
Speaker 3: We're going to have to leave it there at Gitu Sharma,
Speaker 3: the founder investment manager at Alpha's Future, thanks for being
Speaker 3: with us date, I really appreciate it. From what'd you
Speaker 3: say twenty below Windshield Minneapolis will not be signing me
Speaker 3: up for that.
Speaker 6: You're listening to the tape. Cat's are live program Bloomberg
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, tune
Speaker 6: in app, Bloomberg Dot.
Speaker 7: And the Bloomberg Business App.
Speaker 6: You can also listen live on Amazon Alexa from our
Speaker 6: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 3: Investor's question the timing of FED rate cuts, among other things.
Speaker 3: And with that context, let's bring in our next guest,
Speaker 3: Molly Ron Sanchez, the chief investment officer at Fiduciary Trust International. Hi,
Speaker 3: thanks for stupping.
Speaker 11: By, great, Thank you, thanks for having me.
Speaker 3: So what's in the driver's seat?
Speaker 11: Well, from a market standpoint, I think markets are sort
Speaker 11: of languishing a little bit here because there isn't a
Speaker 11: catalyst we had. As you well know, markets ended the
Speaker 11: year on a strong note. We already have seen the
Speaker 11: most too important economic data for January that was the
Speaker 11: labor report and CPI.
Speaker 7: So at this.
Speaker 11: Point I think the focus turns to earnings. We've seen
Speaker 11: a couple of bank earnings, but we will see earnings
Speaker 11: over the next two to three weeks. That'll give us
Speaker 11: an idea about how the macro is filtering into the
Speaker 11: micro and perhaps more importantly, CEO's expectations for twenty four.
Speaker 5: Give us a little some of what we saw from
Speaker 5: the bank earnings and what your biggest takeaway was from that.
Speaker 11: Yeah, so almost that is quote as we expected, nothing alarming,
Speaker 11: and economic activity and the banking system remain in good shape.
Speaker 11: And I'm not sure that sort of bank earnings signal
Speaker 11: much on the on the macro, we have to wait
Speaker 11: for other companies.
Speaker 3: For sure. We're maybe the last mile is going to
Speaker 3: be real difficult to get to the Fed's target of
Speaker 3: two percent. But we are in a disinflationary or in
Speaker 3: some sectors outright deflationary environment. What does that do to earnings.
Speaker 11: Well, it creates two things. I think it's going to
Speaker 11: be much more challenging to pass on, and so revenue
Speaker 11: and profit margins are going to be needed.
Speaker 3: To sort of oporates for it.
Speaker 11: Doesn't it does. Indeed, I think there's after two years
Speaker 11: of where not only did you pass on rising input cost,
Speaker 11: but a little more, and I think that environment is
Speaker 11: clearly behind us. I think it's much more challenging and
Speaker 11: if you do raise prices, you could see it manifest
Speaker 11: itself in lower volume. So there's that trade off between
Speaker 11: sales volume and sales revenue.
Speaker 5: But prices are still going up. No, I mean, yes,
Speaker 5: at a slower rate, but I mean there still is
Speaker 5: some pricing power there, maybe.
Speaker 11: Just not as much there is, And I think as
Speaker 11: we move on it'll be it'll be less and less
Speaker 11: and so at least as we sit here today, the
Speaker 11: moderation I think is evident and well, especially sort of
Speaker 11: in the goods market, it definitely.
Speaker 3: Is Okay, So what do you like at this point?
Speaker 11: So I think the market looks, broadly speaking, looks you know,
Speaker 11: compelling to us. I do think the first half of
Speaker 11: the year is going to be choppy for risk assets
Speaker 11: i e.
Speaker 6: Equities.
Speaker 11: I think we pulled forward a fair amount of return
Speaker 11: to the fourth quarter, the soft landing that became evident
Speaker 11: by year end. Again, twenty three was about the hard landing,
Speaker 11: the no landing, but ultimately we've landed on the soft
Speaker 11: landing and I think that's the high consensus or conviction trade.
Speaker 11: And so the first half of the year I think
Speaker 11: for risk assets is about a choppy market as you
Speaker 11: look to validate that meaning, I need to see economic
Speaker 11: data decelerate, not too much come in to around a
Speaker 11: trend or slightly inside of two percent, and I need
Speaker 11: to continue to see labor markets soften and the same
Speaker 11: for inflation. In that environment, I think it sets up
Speaker 11: better for the second half. And that's one of the
Speaker 11: reasons why fixed incomes attractive for us, because I get
Speaker 11: paid to eight.
Speaker 5: Probably more attractive on a day like today as well.
Speaker 5: When you see what was the two years up to say,
Speaker 5: thirteen BIPs before John, you have four.
Speaker 3: To thirty five of the yield right now thirteen basis
Speaker 3: points enter the ten op six four to twelve. We
Speaker 3: both Mully and I both missed five percent. Speak oh okay, sorry,
Speaker 3: that's why she's going to Antarctica in Mexico. But we
Speaker 3: missed the boat. I missed the boat on five four twelve.
Speaker 3: Still a screaming buy.
Speaker 11: I don't know about a screaming by, but it's it's attractive.
Speaker 11: Two fronts want to carry trade and so looking at
Speaker 11: sort of risk free return four to four and a
Speaker 11: quarter is appealing, and it gives you a hedge in
Speaker 11: case the economy does decelerate faster than we think. It'll
Speaker 11: be a hedge against risk assets that'll that'll come under
Speaker 11: some pressure. And I think you could see if we
Speaker 11: do have an economic recession. Again, that's not our view.
Speaker 11: Interstrates will will come down inside of four and you'll
Speaker 11: have a total raid return.
Speaker 3: That again is reasonable application. You're sixty forty.
Speaker 11: That's right, and so we are neutral on US equity,
Speaker 11: slight underweight in Europe and a slide overweight and fixed income.
Speaker 5: So you're saying we're looking for a catalyst right now,
Speaker 5: earnings being one of them. But I guess on the
Speaker 5: ECO calendar, you know, we do have a FED meeting
Speaker 5: in two weeks. I guess maybe not expecting to be
Speaker 5: particularly exciting from a policy standpoint, but any early thoughts
Speaker 5: ahead of that, and what new clues we might be
Speaker 5: hearing from the FED, and just maybe the timing of
Speaker 5: cuts this year.
Speaker 11: Sure, I don't think we're going to sort of hear much.
Speaker 11: They are coalescing around the hold. I don't think they
Speaker 11: want to pre sell a cut, and I think they
Speaker 11: want to have some patients here. I know the market
Speaker 11: things differently. It's building in a first cut in March,
Speaker 11: and for us it's just too premature. March is not
Speaker 11: a line in the sand. I think the way investors
Speaker 11: need to be looking at this is that I am
Speaker 11: going to see the Federal Reserve move from a fighting
Speaker 11: inflation campaign in twenty three to managing the economic cycle
Speaker 11: in twenty four. And if the economy moderates as we expect,
Speaker 11: they'll be latitude and scope to lower rates. Five and
Speaker 11: a half's not the right number, so I think it's
Speaker 11: more of a second half development. And again under the
Speaker 11: heading of watch what you wish for? If they were
Speaker 11: to move in March, given the fact there's only two
Speaker 11: more labor reports, you would need to see more of
Speaker 11: a rollover of economic data for them to move, and
Speaker 11: I prefer to see the economy moderate than rollover.
Speaker 5: I think we all would prefer that.
Speaker 3: Yes, let's throw politics into the mix. I'm hearing the
Speaker 3: word tariff pop up again again by a certain candidate.
Speaker 3: What sort of risk does that bring it into the
Speaker 3: equity space?
Speaker 11: Well, it just adds to a fair amount of uncertainty
Speaker 11: from a geopolitical and here in the US as well.
Speaker 11: Obviously we're early, it's an election year. I think in
Speaker 11: the first half of the year though, it will be
Speaker 11: more about the economy and about the FED and inflation.
Speaker 11: In the second half a year, I think you could
Speaker 11: see market volatility attributed to political develop.
Speaker 3: And the conventional wisdom is that FED policy makers aren't
Speaker 3: going to act close to an election. Do you believe
Speaker 3: that and how does that sort of change the timing
Speaker 3: of the expectation of rate cuts.
Speaker 11: Yeah, I do not believe that. I think they're in
Speaker 11: an environment where they have been very aggressive needed to
Speaker 11: be to fight inflation. I think their job is complete
Speaker 11: on that front, and they are in a restrictive posture,
Speaker 11: and as we move closer to election, there's a lot
Speaker 11: of economic data to see where we end up and
Speaker 11: whether it truly is a soft landing and where inflation
Speaker 11: ends up, and I think in that regard, the FED
Speaker 11: would like to moderate its stance and move from restrictive
Speaker 11: to neutral.
Speaker 5: I think they're also, you know, pretty decisively and you know,
Speaker 5: a pivot right now toward lower interest rates. So I
Speaker 5: don't think that it would really be as controversial if
Speaker 5: they were to, you know, cut interest rates sometime around
Speaker 5: the election. If that's obviously so pre calibrated at this.
Speaker 11: Point, I'd agree with that, all right, they can't afford
Speaker 11: to pass They kind of put.
Speaker 3: You on the spot with my unfair questions, But how
Speaker 3: many cuts this year from the Fed.
Speaker 11: Did you say the Fed thinks three, the market thinks six,
Speaker 11: and I think it's between three and six. It's at
Speaker 11: least three, all right, And I'd say.
Speaker 3: Four S and P five year in target.
Speaker 11: So a modest return of five to seven percent for
Speaker 11: the S and P five.
Speaker 3: Hundred, all right, So five, that's okay, all right.
Speaker 5: That sounds like a good number also for that round.
Speaker 3: Yeah, okay, thanks, good to see it. Ron Bron Sanchez,
Speaker 3: the chief investment Officer at Fiduciary Trust International, coming in
Speaker 3: from the Islands, Long Island.
Speaker 5: Best to the Island of Manhattan.
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 2: at Matt Miller nineteen seven twenty three.
Speaker 11: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
Speaker 11: Before the podcast, you can always catch us worldwide at
Speaker 11: Bloomberg Radio.