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Speaker 2: Happy Thursday, Everybody, I'm Alex ste alongside normal Linda Paulsweeni
Speaker 2: is off today.
Speaker 3: This is Bloomberg Intelligence Radio.
Speaker 2: We bring you all the top news and business, economics
Speaker 2: and finance through our lens of our Bloomberg Intelligence folks.
Speaker 2: They cover two thousand companies and one hundred and thirty
Speaker 2: industries all around the world. We also keep our pulse
Speaker 2: on the market in all different forms, and today it
Speaker 2: is about the IPO market. Sale point is ipoing today
Speaker 2: we're waiting for that first trade. They received orders for
Speaker 2: more than twenty times shares available. This is according to
Speaker 2: people familiar with the matter, and they also upped their
Speaker 2: IPO range as well, raising about one point three to
Speaker 2: eight billion dollars shares. Are looking to open about twenty
Speaker 2: five dollars to share, so hire them that twenty three.
Speaker 2: So we we're lucky that we have the CEO of
Speaker 2: sale point Technologies with us Mark McLain, he joins us.
Speaker 3: Now walk me through. First of all, congrats.
Speaker 2: IPOs are always a really big day and a ton
Speaker 2: of work, so nice job getting that over the finish line.
Speaker 2: But how does this IPO mesh with your long term
Speaker 2: vision for the company?
Speaker 4: Well, I think in general, we've tried to stay focused
Speaker 4: as a business on building great business with our customers
Speaker 4: and winning.
Speaker 5: In the market.
Speaker 4: In some ways, what happens in the financial ownership of
Speaker 4: the business matters a lot, but it doesn't actually affect
Speaker 4: our day to day lives, if you will, and finding
Speaker 4: and securing customers and making them successful, that's certainly always
Speaker 4: our focus. We do think though, that the IPO gets
Speaker 4: us back out in the public eye a little more.
Speaker 4: The importance of what we do and what's called identity
Speaker 4: security is raising an awareness and importance to the large
Speaker 4: companies all around the world that we typically serve, and
Speaker 4: this will help with our visibility.
Speaker 5: It'll give us future fuel to grow the business.
Speaker 4: We've had a great run as a private company with
Speaker 4: Toma Bravo.
Speaker 5: Some folks know this.
Speaker 4: We were public before and before that we were runed
Speaker 4: by Toma Bravo.
Speaker 5: It's a little bit of an interesting.
Speaker 4: Story of a PE backed IPO, same PE backed IPO again.
Speaker 4: But all the while, our focus continues to be on
Speaker 4: doing great things for our customers and helping them secure
Speaker 4: their enterprises with identity well.
Speaker 6: Cyber threats have continued to increase. How does sale points
Speaker 6: stay ahead in identity security?
Speaker 4: Yeah, what's happened in the world of cybersecurity. There's a
Speaker 4: lot of shifting things in the landscape. A simple metaphor
Speaker 4: that sometimes helps folks is that the bad actors are
Speaker 4: the attackers. Not so long ago, their metaphor was to
Speaker 4: break the glass and grab the jewels and run. Quite
Speaker 4: often now, and we've seen this in breach reports, they'll
Speaker 4: try to sneak in the back of the jewelry store,
Speaker 4: poses an employee and eventually try to quote clean out
Speaker 4: the jewelry store. And that's because they've been able to impersonate,
Speaker 4: so to speak, an employee, and that's a compromised identity.
Speaker 5: What we do is help businesses.
Speaker 4: Typically mid to large enterprises around the world, focus on
Speaker 4: understanding all the identities they have, both human and non human,
Speaker 4: all the data they care about protecting, and making sure
Speaker 4: that at any point in time, all of those connections
Speaker 4: are secure. It's a pretty complex problem at scale.
Speaker 2: Who are your competitors right now and how can you
Speaker 2: help differentiate?
Speaker 4: Yeah, the truth is we've got more I like to
Speaker 4: call them PowerPoint competitors than real competitors. I mean, there's
Speaker 4: folks that are talking about this space quite a bit,
Speaker 4: but if you look at what happens day to day
Speaker 4: when we're out in the market, there's very few companies
Speaker 4: that are capable of delivering the success at scale that
Speaker 4: we have. We're fortunate to be in almost half of
Speaker 4: the Fortune five hundred, about a quarter of the Fortune
Speaker 4: two thousand, and they're generally throwing out older legacy products
Speaker 4: like from Oracle and IBM. There really hasn't been a
Speaker 4: strong challenger to us in this key space, and that's
Speaker 4: part of what I think has gotten investors excited about
Speaker 4: our potential for long term, durable growth.
Speaker 6: So another thing that's been in conversation, I'm curious, how
Speaker 6: are you all planning to address your debt load?
Speaker 4: Well, you know, one of the key use of proceeds
Speaker 4: will be to pay down a lot of the debt.
Speaker 4: We actually had a little more debt about six months ago.
Speaker 4: Our backers home a Bravo chose to take some of
Speaker 4: that debt out with equity before the IPO, and we'll
Speaker 4: use the bulk of the proceeds from the IPO to
Speaker 4: pay that debt down significantly, putting ourselves in what they
Speaker 4: call a debt zero, meaning we'll have as as much
Speaker 4: more cash as we have debt, which from a financial
Speaker 4: profile standpoint makes investors really happy.
Speaker 2: Why do you guys decide to do the IPO? Now,
Speaker 2: we were just talking about IPOs in general, and I
Speaker 2: was talking about an LNG export that went public at
Speaker 2: seemingly a great time and it didn't go so well.
Speaker 2: So I wonder why strategically you guys chose right now.
Speaker 4: Well, we've been watching markets as everyone has, and I
Speaker 4: think we were really pleased with the progress of the business.
Speaker 4: We went private about two and a half years ago.
Speaker 4: As part of our S one filing, we talked about
Speaker 4: the fact that as of our third quarter last year,
Speaker 4: we'd grown the business at thirty percent, We've been able
Speaker 4: to deliver non gap margins of about fourteen percent and
Speaker 4: had a strong sense that durable growth would continue. And
Speaker 4: that was at scale.
Speaker 5: We're over an eight.
Speaker 4: Hundred million dollar revenue business now and investors don't see
Speaker 4: a lot of profiles of growth at scale with profit,
Speaker 4: And I think.
Speaker 5: Our sense was that the markets were kind of.
Speaker 4: Hungry, so to speak, for new issuances, particularly I think
Speaker 4: in technology security has been considered a really good market
Speaker 4: for a long time.
Speaker 5: I think we looked like a company.
Speaker 4: That would fit many of their requests, so to speak,
Speaker 4: for a durable growth company in the security space.
Speaker 6: How are regulatory shifts driving demand for identity security solutions
Speaker 6: as enterprises continue shifting to the cloud? How a sale
Speaker 6: point evolving its offerings?
Speaker 4: Well, it's interesting you mentioned that regulatory is indeed part
Speaker 4: of the landscape we're addressing. Sometimes, you know, audits or
Speaker 4: the threat of failed audits or not being able to
Speaker 4: comply with regulations is a driver. But increasingly our space
Speaker 4: is less about that. Not it hasn't moved away from that,
Speaker 4: but it's less about that than truly securing their data. Again,
Speaker 4: what's happened is this concern that data can be compromised
Speaker 4: through this lens of identity. If a bad actor can somehow,
Speaker 4: you know, get in, break in, steal an identity, or
Speaker 4: in some way get access to data through those identities,
Speaker 4: they can do a lot of damage, so that focus
Speaker 4: on truly protecting the data is really more of an
Speaker 4: issue today than just regulatory compliance.
Speaker 2: Before we let you go, what's it like attracting talent
Speaker 2: right now in the market.
Speaker 4: Well, I'd say attracting talent is never easy in a
Speaker 4: very competitive technology market. I think we're very fortunate at
Speaker 4: sale Point. One of the things that we pay a
Speaker 4: lot of attention to is our culture and our values and.
Speaker 5: How that shows up.
Speaker 4: And as you probably are familiar, a glass Door runs
Speaker 4: around and surveys the world and tries to understand how
Speaker 4: companies are doing. We're super pleased they released those results recently.
Speaker 4: We were number seventeen in the world, and if you
Speaker 4: want to cut it by an interesting factor, we were
Speaker 4: the highest ranked tech company with under five thousand employees
Speaker 4: on glass Door. I think that speaks a lot about
Speaker 4: the kind of culture and the values that we live
Speaker 4: out in our company. It attracts and retains very good talent,
Speaker 4: and we're very fortunate.
Speaker 3: Hey, Mark, we appreciate your time today.
Speaker 2: We look forward to catching up with you again once
Speaker 2: you've had some time to be public. Mark McLain, CEO
Speaker 2: of sale Point Technologies, ipming today on the Nasdaq. Prices
Speaker 2: look to indicate to open it round twenty five at
Speaker 2: iPod about twenty three, so we will keep you updated
Speaker 2: when that stock officially starts trading.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 6: We're going to move to a conversation with Christopher Chillino.
Speaker 6: He's Bloomberg Intelligence senior US machinery analysts, and he's here
Speaker 6: to talk about Deer earnings. We've got shares of Deer
Speaker 6: down about one point seven percent right now in trading,
Speaker 6: and this is after a report that it is having
Speaker 6: some issues with tough farms economics in focus, Christopher, what
Speaker 6: has really been the broad strokes of what you got
Speaker 6: and gleaned from this earnings report today?
Speaker 7: Yeah, we knew going into the quarter that was going
Speaker 7: to be a pretty ugly print, but these results were really,
Speaker 7: you know, well below even some of the most bearish expectations.
Speaker 7: The company really continues to underproduce retail them and across
Speaker 7: the board to bring down some of the excess inventories
Speaker 7: that the industry has been plagued with. We also sounds
Speaker 7: like some products there were some timing issues, so products
Speaker 7: got pushed out to subsequent quarters, which weighed on the
Speaker 7: one Q performance. Now, Deer did reaffirm its twenty twenty
Speaker 7: five net income outlook, and it certainly seems that we
Speaker 7: are approaching a cyclical trough this year. But just our
Speaker 7: concern lies that you know, earnings may not be fully
Speaker 7: de risked here. You continue to see further softness on
Speaker 7: the LARGEAG side. Used equipment inventories remain somewhat of an overhang.
Speaker 7: Currency headwinds are going to be more pronounced in the
Speaker 7: back half, and really we still have this uncertainty around
Speaker 7: what the US trade policy is going to be and
Speaker 7: and what those retaliatory actions are going to be as well.
Speaker 2: Well, I was going to say they sound relatively confident
Speaker 2: they'll be a trough, but then you add on tariffs.
Speaker 3: How well does that confidence hold up?
Speaker 7: Yeah, I mean that's the million dollar question, right. I mean,
Speaker 7: I would say that AG historically has had a tremendous
Speaker 7: amount of pricing power, and Deer in particular, this is
Speaker 7: a company in a market that even gets positive price
Speaker 7: in down markets. You know, this quarterly sales were down
Speaker 7: over thirty five percent, earnings down significantly, and we were
Speaker 7: still up on pricing. It will add costs, but they
Speaker 7: have a history and the track record of being able
Speaker 7: to pass those through.
Speaker 6: What has really been the concern for investors out of
Speaker 6: this report as they're looking forward?
Speaker 7: Yeah, I think there's two big concerns here. One is,
Speaker 7: you know, the expectation is that, yes, twenty five is
Speaker 7: trough and that we should start to see this recovery
Speaker 7: build into twenty six. But I still think there's a
Speaker 7: lot of uncertainty out there as to what the recovery
Speaker 7: trajectory looks like, just given the uncertainty around trade and tariffs.
Speaker 7: You know, I think we're probably looking at a lower
Speaker 7: for longer type cycle, So maybe we don't get that
Speaker 7: typical acceleration in the first year after a cyclical trough.
Speaker 7: So I think investors are still trying to digest that.
Speaker 7: And then too, you know, the cost side of the equation.
Speaker 7: It certainly seems that costs are going to go up.
Speaker 7: How are they going to mitigate that through some of
Speaker 7: their you know, internal initiatives or even from shifting some
Speaker 7: production around with their footprint.
Speaker 2: I alsom wondering where we are in terms of the
Speaker 2: cyclicality of equipment, Like are our farmers operating on older
Speaker 2: stuff that they're going to have to replace or did
Speaker 2: they already do that, say during the pandemic. So they're
Speaker 2: good for a while, and it's going to take like
Speaker 2: really new high tech products to get them to fork
Speaker 2: over that kind of cash.
Speaker 7: I think we're good for a little bit, a little
Speaker 7: bit of time here. I mean, you have to remember,
Speaker 7: we had you know, three four strong years of growth
Speaker 7: up to the twenty twenty three peak. Yes, twenty four
Speaker 7: was a down year. We were down, you know, fifteen
Speaker 7: sixteen percent in terms of units on high horsepower equipment.
Speaker 7: We're looking at somewhere of a twenty five to thirty
Speaker 7: percent decline in volumes this year. So that's going to
Speaker 7: put us you know, at at low's of you know,
Speaker 7: over the last two decades where we haven't seen before.
Speaker 7: So from these levels, we think there's probably limited downside risk.
Speaker 7: But you know, farmers still have the ability to you know,
Speaker 7: push out some of these replacement purchases at least for
Speaker 7: another few years.
Speaker 6: We think, what do investors really need to see from
Speaker 6: this company to have a bit of a more positive
Speaker 6: outlook and to see them actually bypass their competitors.
Speaker 7: I think you need to see you know, inventories greater
Speaker 7: confidence that we've you know, are starting to see some
Speaker 7: downward movement on inventories. We've seen inventory's peak just these
Speaker 7: past few months. We're just coming down off that peak.
Speaker 7: So I think we need to see more progress on
Speaker 7: the inventory reduction front, not only in the new new equipment,
Speaker 7: but used equipment as well. And then certainly, you know,
Speaker 7: higher crop prices are going to help their customers and
Speaker 7: ultimately drive equipment purchases. So we've seen a little bit
Speaker 7: of a rebound in crop prices here over the last
Speaker 7: three plus months. I think that has you know, spurred
Speaker 7: some op and ism in the space that you know,
Speaker 7: maybe we do return to a growth in twenty twenty six,
Speaker 7: but I think if we continue to see that progress,
Speaker 7: that would certainly, you know, bode well for the company.
Speaker 2: All Right, Chris really appreciated Christopher Cillino, Bloomberg Intelligence Senior
Speaker 2: US machinery analyst, joining us on Deer.
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Speaker 3: All right, one of their asset class that's moving.
Speaker 2: Yes, it's definitely a tariff story, but it's also a
Speaker 2: potential end of war in Ukraine.
Speaker 3: Story is oil.
Speaker 2: So oil prices are down by about half a percent,
Speaker 2: but yesterday they got really kicked down the road, down
Speaker 2: by about two and a half percent on a potential
Speaker 2: resolution to the conflict in Ukraine. So I wanted to
Speaker 2: dig more into this with Dan Pickering, chief investment officer
Speaker 2: at Pickering Energy Partners, joining us here. Dan, it's just
Speaker 2: the main question, like how are you guys looking at
Speaker 2: the oil price right now?
Speaker 3: Alex That was a very pregnant pod there, Yeah.
Speaker 8: It was because there are so many things happening. I know,
Speaker 8: so many variables, whether they're political, geopolitical, supply demand. We
Speaker 8: got news today that the IEA International Energy Agency thinks
Speaker 8: that supply and demand is tightening. We have the risk
Speaker 8: of Iranian sanctions, We have a Russia conflict that if
Speaker 8: it concludes, everyone's nervous that well price goes lower because
Speaker 8: Russian production goes higher.
Speaker 5: So many variables.
Speaker 8: The way I think about it, supply and demand is
Speaker 8: generally generally sloppy, not particularly tight. The geopolitical stuff is
Speaker 8: keeping it a little bit tighter. And so I would
Speaker 8: take the current seventy one dollars WTI number for twenty
Speaker 8: five I'd put in the bank if I could get
Speaker 8: it today.
Speaker 3: So, so many things moving right now.
Speaker 6: Where would you say is the best outlook for energy
Speaker 6: investments this year? Gas oil?
Speaker 3: Services?
Speaker 5: Great question?
Speaker 8: Or I think the natural gas is the area that's
Speaker 8: getting better. If you look, particularly in the US, we
Speaker 8: have LNG exports that will rise about five percent of
Speaker 8: total US demand between now and the end of next
Speaker 8: year early twenty twenty seven, and so the market's very
Speaker 8: optimistic that we'll see tightening supply and demand. Natural gas
Speaker 8: prices we're in the twos for most of twenty twenty four,
Speaker 8: they're in the high threes right now. They're forecasts to
Speaker 8: be in the fours next year, could be fives. And
Speaker 8: so natural gas is the hottest area. I would say
Speaker 8: services is probably rig count is probably the weakest because drill,
Speaker 8: baby drill is.
Speaker 5: Not on the table.
Speaker 2: Just to jump in here more headlines coming out. This
Speaker 2: is also from CNBC saying that President Trump's reciprocal tariffs
Speaker 2: I will take effect some months later. So this is
Speaker 2: not a Today's story, just an announcement story today.
Speaker 3: Want we to oh?
Speaker 2: Also another head red headline here, Blue Origin is set
Speaker 2: to cut about ten percent of its work for This
Speaker 2: is Jeff Bezos's back to Blue Origin. That's quite interesting.
Speaker 2: It said to cut about ten percent of its workforce. Okay, Dan,
Speaker 2: there's a lot like you said to unpack, I do
Speaker 2: want to go so Okay. Last year at Sarah Week,
Speaker 2: and for those of you who don't know, Sarah Week
Speaker 2: is when all the energy nerds can mean on Houston
Speaker 2: and they talk about energy for five days and it's
Speaker 2: super awesome. The conversation was, look, you can only own
Speaker 2: one energy stock in your portfolio now maybe two max,
Speaker 2: So like you really got to pick the best of
Speaker 2: the best. And that led to some m and a.
Speaker 2: It also led to really the Kreme de la Crem
Speaker 2: stocks doing better than everybody else. Is that narrative still
Speaker 2: intact or can you own more?
Speaker 8: Now?
Speaker 3: Is it a different world?
Speaker 8: Well, it's definitely a different world. I think that last year,
Speaker 8: the last couple of years, energy has been a bad word,
Speaker 8: and there's been a headwind just kind of around the
Speaker 8: whole space. That headwind's probably turning into a tailwind. Doesn't
Speaker 8: necessarily mean the commodities improve, but I think sentiments clearly improving.
Speaker 8: Not clear to me that money flow toward the energy
Speaker 8: sector is picking up much, and so I think it's
Speaker 8: still a very selective market. I kind of think about
Speaker 8: it as an alpha market, not a beta market right now,
Speaker 8: and I think it will expand over time. But we've
Speaker 8: got this opec oversupply that we've got to deal with
Speaker 8: three million barrels today and all of this geopolitical uncertainty.
Speaker 8: So the winds are better, I don't know that it's
Speaker 8: pulling in investors quite yet.
Speaker 6: So, Dan, you mentioned natural gas as being one of
Speaker 6: the potential best outlooks for the energy investments this year.
Speaker 6: What's the upside case here the commodity or additional exports.
Speaker 8: Yeah, so the exports take a long time to put
Speaker 8: in place, big multi billion dollar projects that take a
Speaker 8: long time to put in place, and so the export pipeline,
Speaker 8: if you will, is pretty set from now until the
Speaker 8: later part of the decade. So the tightness in the
Speaker 8: market comes from those projects. Turning on the fact that
Speaker 8: we haven't been drilling aggressively for either oil or natural gas.
Speaker 8: So the supply sides constrain the demand sides improving. So
Speaker 8: it feels like price is the reaction function here. So
Speaker 8: I'd say that higher price is not more exports, at
Speaker 8: least not in.
Speaker 2: The short room going to oil in the drill baby
Speaker 2: drill scenario. Is it possible for President Trump to lower
Speaker 2: the cost curve enough through deregulation less, say methane tax,
Speaker 2: easing of federal land tax, et cetera, to incentivize more
Speaker 2: drilling even at say seventy or sixty five oil.
Speaker 5: Yeah.
Speaker 8: The one word answer there is no. The industry is
Speaker 8: on a path of capital discipline that says they are
Speaker 8: not going to spend above their cash flows. In fact,
Speaker 8: they're returning capital shareolders aggressively, and so at seventy or
Speaker 8: sixty five dollars a barrel, nobody in the US is
Speaker 8: drilling more alex. What I think that means is we
Speaker 8: have to look to the geopolitical piece of this. Maybe
Speaker 8: price comes down or energy in the US gets cheaper
Speaker 8: because of things that happened in Saudi Arabia, Iran, Russia,
Speaker 8: not the.
Speaker 3: End of like a Ukraine war kind of exactly.
Speaker 8: So there's a big The US government has more flexibility
Speaker 8: on energy policy than has ever had before because we
Speaker 8: are running at record levels of production. We are a
Speaker 8: net exporter, not a net importer, and so the actions
Speaker 8: that happen internationally around oil markets like the Middle East,
Speaker 8: for instance, we've got more flexibility than we've had in
Speaker 8: fifty years.
Speaker 6: Quickly, just off of that whole conversation about President Trump
Speaker 6: wanting drill, baby drill, is that what energy investors want.
Speaker 8: No drill, baby drill turned into oversupplied situation, what we
Speaker 8: call the shale bus that went from twenty fourteen to.
Speaker 3: Baby Yeah, exactly, it was.
Speaker 8: It was quite awful, and so energy investors have pushed
Speaker 8: aggressively for companies to stop drilling, stop growing, stop over
Speaker 8: supplying the market, and instead get more profitable and return
Speaker 8: those profits to CHERYLD. So it will take more than
Speaker 8: a request from the Trump administration for US to see
Speaker 8: an increase in activity.
Speaker 2: All right, Dan, it's really good to see you in person.
Speaker 2: I'll see you in Houston a couple of weeks. That's great,
Speaker 2: all right, Dan Pickering, Chief investment Officer Pickering Energy Partners,
Speaker 2: truly one of the best in the industry in terms
Speaker 2: of energy trends, sector trends, etc. So I'll be catching
Speaker 2: up with him in Houston for Sarah week.
Speaker 3: All right, com up.
Speaker 2: Ellen Hayzen will be joining us, chief market strategist and
Speaker 2: portfolio manager at f L.
Speaker 3: Putnam Investment Management.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 6: Well, welcome back to Bloomberg Intelligence Radio. I'm Nora Melnda
Speaker 6: here with Alex Steel. I'm filling in for Paul Sweeny.
Speaker 3: Today. We are looking at a market that's in the green.
Speaker 6: As John was just noting, we have the S and
Speaker 6: P five hundred up six tens of a percent and
Speaker 6: the NASDAG up over one percent. We've really got the
Speaker 6: market that's digests saying jobs data, also PPI data. But
Speaker 6: really what we're looking forward to is what will bring
Speaker 6: more clarity in terms of the tariff conversation. Today we're
Speaker 6: joined by Ellen Hazen, chief market strategist and portfolio manager
Speaker 6: at f Outputnam Investment Management. She's here to discuss her
Speaker 6: outlook on the markets today. Ellen, While the tariff's conversation
Speaker 6: may be an ongoing negotiation tactic for President Trump, it's
Speaker 6: obviously putting many investors on edge. How are you currently
Speaker 6: advising your clients in this uncertain climate?
Speaker 9: Thanks for having me. I think that the tariffs are
Speaker 9: a big question mark right now. Our prediction for the
Speaker 9: year is that expect the unexpected, expect the unpredictable. So
Speaker 9: we expect that tariffs and some of the other things
Speaker 9: that the administration is talking about will lead to higher volatility.
Speaker 9: So what that means is you want to be extra selective,
Speaker 9: extra careful about finding companies to invest in and areas
Speaker 9: of the market to invest in that are not going
Speaker 9: to be overly impacted one way or the other. So
Speaker 9: go a little bit more toward quality, a little bit
Speaker 9: more towards safety, and don't take any bets that are
Speaker 9: too big because that can come back to bite you
Speaker 9: when the unexpected happens.
Speaker 2: Which is funny because consumer staples are near an all
Speaker 2: time high, so it seems like you're not alone in
Speaker 2: this view, is that where that safety is.
Speaker 9: Actually, I think consumer staples is pretty uninteresting right now.
Speaker 9: It's very expensive, the growth isn't there, and as you've
Speaker 9: seen with the inflation numbers, you aren't seeing the staples
Speaker 9: companies able to pass through that cost inflation that they
Speaker 9: have had on the input cost side. You saw that
Speaker 9: with Mondolis, You're seeing that with a lot of staples companies.
Speaker 9: So I want quality and I want predictability. But in
Speaker 9: my mind that does not actually mean consumer staples. It
Speaker 9: means growth areas where the growth is not going to
Speaker 9: be subject to cost changes or inflation, where the growth
Speaker 9: is being driven by underlying forces.
Speaker 6: So where is this quality, Where is this safety?
Speaker 3: Is that an equities?
Speaker 6: Bonds?
Speaker 9: Maybe FX, So we like equities more than bonds. We
Speaker 9: think rates are going to stay higher for longer, which
Speaker 9: makes us cautious on bonds in general, and then in particular,
Speaker 9: corporate spreads are very tight, as you know, in terms
Speaker 9: of FX. We still think the dollar will remain strong,
Speaker 9: so we're sticking with US, and we think that equities
Speaker 9: are actually the best hedge against inflation, So we would
Speaker 9: want to stay in US equities, and particularly those that
Speaker 9: have increasing earnings estimates that are writing growth curves, whether
Speaker 9: that's artificial intelligence, not just in the chip and hardware space,
Speaker 9: but also in the software space, whether that's healthcare and
Speaker 9: new drugs getting approved, whether that's some areas of consumer discretionary.
Speaker 9: But we want to own companies that are growing, that
Speaker 9: are seeing their earnings inflect positively.
Speaker 2: What if how do you manage Okay, let me just
Speaker 2: retrack that. What if tariffs kind of go away, as
Speaker 2: if like we're all prepping to avoid the drug But
Speaker 2: if this is just going to be, you know, some
Speaker 2: negotiating tactic and the drama is avoided, what then becomes interesting.
Speaker 9: I think it's really difficult to make a bet based
Speaker 9: on tariffs or no tariffs. Yeah, I would seek to
Speaker 9: look for those companies that are going to be somewhat
Speaker 9: immune to tariffs. Either way, I don't know that they
Speaker 9: do go away instantly. I think that this is a
Speaker 9: tool in the toolkit that the administration is probably going
Speaker 9: to pull out more than once. So even if they
Speaker 9: go away in the short term, as they have for
Speaker 9: Mexico and Canada, they might not go away in the
Speaker 9: long term. So I think I would have trouble expecting
Speaker 9: that tariffs are going to be something that's absent for
Speaker 9: the longer time horizon if they do go away. I
Speaker 9: think the obvious areas are things like automobiles and other
Speaker 9: areas that are imported from China and so forth. But
Speaker 9: I'm not sure that that's the wisest way to invest
Speaker 9: at the moment, just because I think this is going
Speaker 9: to continue to be on predicted.
Speaker 6: Well, there's been lots of different conversations about what could
Speaker 6: be going on in the government and what changes to
Speaker 6: expect moving forward. How are you thinking about the potential
Speaker 6: impact of DOGE and how it may affect different parts
Speaker 6: of the economy, and of course how that changes your
Speaker 6: investment decisions, if at all.
Speaker 9: I would love to see a lot more transparencies with
Speaker 9: respect to DOUGH so that we under so that we
Speaker 9: understand exactly what's going to happen there. I think the
Speaker 9: biggest issue, or the biggest negative impact of DOGE is
Speaker 9: going to be if many millions or hundreds of thousands
Speaker 9: of government employees are lego, that's going to be a
Speaker 9: significant negative hit to the economy. So I think we
Speaker 9: want to understand how many people are going to be
Speaker 9: let go, what areas of the economy those are in
Speaker 9: and whether or not that means that the consumer and
Speaker 9: those households impacted is going to really take take a hit.
Speaker 2: All right, thanks so much, Ellen, really appreciate it. Ellen
Speaker 2: Hazen joining us. She is chief Arches Strategists and portfolio
Speaker 2: manager at fl Putnam Investments.
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