WEBVTT - Single Best Idea with Tom Keene: Jim Bianco & Craig Sterling

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>focused on Apple podcasts. It's great, great distribution system, and

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<v Speaker 2>This is an incredibly nuanced Friday. I can't say enough

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<v Speaker 2>about almost what I call micro tensions on the Bloomberg screen,

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<v Speaker 2>the launch pad screen, between equities, bonds, currencies, commodities, and

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<v Speaker 2>that micro tension on an inflation basis is this raging

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<v Speaker 2>debate about a stable inflation, some saying even higher inflation,

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<v Speaker 2>many many remodeling in a new disinflation to come Jim

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<v Speaker 2>Bianco has seized the high ground here. He's out of

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<v Speaker 2>Chicago and Bianco Research. Eighteen months ago he was a

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<v Speaker 2>lonely voice saying, don't be so certain about disinflation. We

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<v Speaker 2>get an update from Jim Bianco.

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<v Speaker 3>If you go to what the economists call the base effect,

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<v Speaker 3>the numbers from last year are very low, and we're

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<v Speaker 3>going to stay there. And that's going to be problematic

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<v Speaker 3>for a FED that is looking for confidence to cut rates.

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<v Speaker 3>They're going to continue to say, see sticky inflation. I

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<v Speaker 3>think the probability is above zero that we're going to

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<v Speaker 3>have a rate increase, but I don't think it's quite

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<v Speaker 3>at that fifty percent level that you would expect one.

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<v Speaker 3>But we are probably closer to that than a cut

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<v Speaker 3>right now. The data is just not there for a cut.

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<v Speaker 3>I mean, one payroll report that came in below expectations,

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<v Speaker 3>it was still one hundred and seventy six thousand jobs,

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<v Speaker 3>and that's nothing that you would look at and say,

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<v Speaker 3>this economy needs more stimulus.

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<v Speaker 4>Who to read this weekend to dovetail off Jim Bianco

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<v Speaker 4>without question. Lindsay Piegg's at Stifel, also out in the Midwest.

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<v Speaker 4>His adamant about the rationalizing I should say of a

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<v Speaker 4>rate increase. I can't say enough how lonely Bianco and

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<v Speaker 4>Piegsa are versus the zeitgeist of a new disinflation off

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<v Speaker 4>of oh, declining real estate prices and this, that and

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<v Speaker 4>the other thing. Taylor Swift tickets in Paris. They're not

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<v Speaker 4>declining and they're not part of the disinflationary trend. I

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<v Speaker 4>want to take some time here. I can't say enough

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<v Speaker 4>about how you have a theory or a belief and

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<v Speaker 4>there's a jump condition changed. There's a whole thing called

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<v Speaker 4>economic epistemology that talks about this. George Soros has been

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<v Speaker 4>very eloquent on it, out of Popper at LC in

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<v Speaker 4>the early fifties and onward. And don't want to go

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<v Speaker 4>into that right now, but you can have a jump

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<v Speaker 4>condition in thought. Decades ago, there was a company called

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<v Speaker 4>stern Stewart in a one volume book on economic value,

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<v Speaker 4>added that it didn't so much change the dialogue, but

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<v Speaker 4>began a dialogue over the silliness of what business media

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<v Speaker 4>does every day, which earnings, what a revenue is going

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<v Speaker 4>to do? What's gross to marts? Oh my god, ebit

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<v Speaker 4>dah I can't believe it. And basically what EVA said

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<v Speaker 4>economic value added was it's all hot air. You need

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<v Speaker 4>to look at the net operating profits after Texas, figure

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<v Speaker 4>out your own individual capital analysis and capital deployed and

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<v Speaker 4>capital allocation of a company. And there's a number of

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<v Speaker 4>different ratios here. And it's worth the subscription to a

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<v Speaker 4>Bloomberg terminal to go say Apple AAPL equity WACC the

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<v Speaker 4>way that average cost of capital screen WACC of the

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<v Speaker 4>Bloomberg is literally worth Why you buy a Bloomberg. It's

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<v Speaker 4>just that good. And the answer is this is a

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<v Speaker 4>whole science onto its own. And Craig Sterling was at

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<v Speaker 4>the advent of this with EVA Dimensions working at Credit

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<v Speaker 4>Suitees and now to Monday. This is one of the

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<v Speaker 4>highlights of what we've been doing on single best idea,

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<v Speaker 4>Craig Sterling here on if you don't allocate capital in

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<v Speaker 4>a good and constructive way, you are toast.

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<v Speaker 5>Most companies are being run very capital efficient. You know,

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<v Speaker 5>investors are not le letting them do things in the

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<v Speaker 5>past that may have destroyed returns on capital and hurt

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<v Speaker 5>future growth and ultimately their save price. Companies are being

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<v Speaker 5>well run. Not all, but the ones that aren't. We

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<v Speaker 5>see activists come in and I think you're seeing these

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<v Speaker 5>companies well run in analog semis. You know, this is

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<v Speaker 5>an industry that is generally well run. It's gotten more

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<v Speaker 5>concentrated in recent decade or so. So you've got the

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<v Speaker 5>winners that have done a good job. And you know,

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<v Speaker 5>you look at a company or an industry like chemicals

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<v Speaker 5>or energy, which have not been great stewards of capital

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<v Speaker 5>over time, but these companies are competing way more rationally,

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<v Speaker 5>not spending just to spend and grow, and the investors

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<v Speaker 5>are going to start rewarding.

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<v Speaker 4>This just a superb conversation, just what we love to do.

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<v Speaker 4>We've had a phenomenal week at Bloomberg Surveillance. I can't

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<v Speaker 4>I don't even know where to begin to describe on

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<v Speaker 4>the conversations because one of the highlights was Jess Meanton

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<v Speaker 4>where their definitive analysis of sweet greens. She is the

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<v Speaker 4>chief Surveillance SALID correspondent. No idea you could pay eighteen

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<v Speaker 4>dollars for eleven hundred calorie salad with a name I

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<v Speaker 4>can't pronounce. But the kids are lineup, Eric and the rest,

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<v Speaker 4>they're all lined up out the door. Fifteen feet deep

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<v Speaker 4>for a sweet green salad. That's my goal this week,

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<v Speaker 4>and I'm gonna try to take a sweet green salad.

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<v Speaker 4>We'll see if I get in the door and am

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<v Speaker 4>able to make the order. Paul Sweeney says, you need

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<v Speaker 4>to take a course to make an order from New York.

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<v Speaker 2>This is single best idea