Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: listen to our radio show weekdays at two pm Eastern
Speaker 1: only on Bloomberg Radio. All right, well, as you just
Speaker 1: heard it, Doug describe Walmart certainly catching attention because well
Speaker 1: it's Walmart, and we pay attention to what they say
Speaker 1: about the health of the consumer, the health of the world,
Speaker 1: and some of those geo economic, geo political concerns as well.
Speaker 1: Let's get into it with Matthew Boyle, us retail reporter
Speaker 1: for Bloomberg. Key's here with me in the Bloomberg Interactive
Speaker 1: Broker studio. And Jennifer Bartashes, she is senior US retail,
Speaker 1: staple and restaurant analysts for Bloomberg Intelligence. She's on the
Speaker 1: phone from BI headquarters down in Princeton. Matt, let me
Speaker 1: start with you. We got the numbers from Doug. But
Speaker 1: what jumped out at you as you were synthesizing this
Speaker 1: You know this company so well give us the nuance here. Well,
Speaker 1: that's the thing. It's a synthesis that matters here. I mean,
Speaker 1: we first saw the top line numbers, the sales beat,
Speaker 1: they raised guidance for like, Okay, this is gonna be
Speaker 1: another good quarter for Walmart. But as the day war on,
Speaker 1: as you can see now, the shares are down, and
Speaker 1: it's a combination of some old concerns and some new ones.
Speaker 1: The old ones, of course, are gross margins. All these
Speaker 1: wonderful things Walmart's doing online, next day delivery, sending groceries
Speaker 1: even into your house, you know, being delivered in your
Speaker 1: fridge while you're at work. These are all great, but
Speaker 1: they're very expensive, so profitability gross margins were down again
Speaker 1: this quarter. But then there's some new concerns. You've got
Speaker 1: a management reshuffle. You have no leader right now at
Speaker 1: their Sam's Club warehouse division, their cost Co copycat and
Speaker 1: Sam's Club had a really poor quarter. Sales missed, profit
Speaker 1: was down, So you've got some new concerns as well.
Speaker 1: We're heading into the holiday season. You know, everybody needs
Speaker 1: to be at the top of their game, so people
Speaker 1: were looking to poke some holes, and it looks like
Speaker 1: they found some well, Jennifer, while investors might be poking
Speaker 1: some holes, your smart note says that Walmart continues to
Speaker 1: invest in the long run at the expensive near term earnings,
Speaker 1: and this is the right approach in your view. Why yes, so,
Speaker 1: so you know, long term Walmart is is if they
Speaker 1: want to be competitive long term, especially against um rising
Speaker 1: competitors and the Amazon dot Coms of the world, then
Speaker 1: the investment in the structure, in the infrastructure and the
Speaker 1: business to build an e commerce business is a necessary evil. UM.
Speaker 1: And that is weighing down on short term earnings, and
Speaker 1: everybody sort of expected that. Um. You know, Matt makes
Speaker 1: a great point that gross margin, you know, is still
Speaker 1: remains a concern, but it's not a new concern, um.
Speaker 1: And instead, you know, I think one of the other
Speaker 1: things that is coming out of today's earnings is just
Speaker 1: the idea that the e commerce growth at Walmart is
Speaker 1: seeing is right now heavily skewed to food UM, and investors,
Speaker 1: you know, over time would like to see a greater
Speaker 1: dependence on merchandise, which is higher margin, to help make
Speaker 1: that business a little bit less of a drug on
Speaker 1: the rest of the entity. And so, Matt, as you
Speaker 1: look ahead, especially to the next few months, what does
Speaker 1: Walmart need to do? What are the proof points that
Speaker 1: may get investors a little bit more on side. Well,
Speaker 1: it's not just what they need to do, it's what
Speaker 1: they need to stop doing. Um, they've stopped making these
Speaker 1: acquisitions of small, you know, digitally native sites, things like
Speaker 1: Bonobo's Modcloth, moose Jaw that was a key element of
Speaker 1: sound made up some like dystopian science fiction retail. Well,
Speaker 1: the jobs that some of them are seem to be
Speaker 1: made up these days because they're selling They've already sold
Speaker 1: Modcloth jet Black, which was a very expensive experiment in
Speaker 1: uh sort of text based commerce. Um, we've told, we've
Speaker 1: heard is you know on the block. Um, so they're
Speaker 1: going to be stopping making those acquisitions. What they need
Speaker 1: to start doing is selling more apparel, selling more home goods,
Speaker 1: things that target their rival is very very good at
Speaker 1: and it's done for years. Walmart is trying to get
Speaker 1: deeper into those two categories. But it's just but it's
Speaker 1: a stretch. You know, when you think of sheep, you know,
Speaker 1: cheap chek, you think of Target, not Walmart, you know, Jennifer,
Speaker 1: I understand that investors don't like the lower margin E
Speaker 1: grocery business, except this appears to be the one area
Speaker 1: where Walmart is leading Amazon. Amazon has to play catch
Speaker 1: up in the grocery space. They're going out there trying
Speaker 1: to build a brick and mortar grocery store because that
Speaker 1: curbside pickup feels like it's starting to become more popular
Speaker 1: than the grocery delivery that Amazon is known for. Why
Speaker 1: not double down, in Walmart's case, on that e grocery
Speaker 1: delivery because it feels like they're such a leader in
Speaker 1: that space. I will say, I don't think Walmart's really
Speaker 1: slowing down on grocery or e grocery, and they're continuing
Speaker 1: to expand the number of stores where you can do
Speaker 1: click and collect or the number of locations that will
Speaker 1: deliver to people's homes. But you're right, it is a
Speaker 1: competitive advantage that I think they want to be defensive
Speaker 1: about um. And so it's it's great that it's it's
Speaker 1: it's booming so much for them, and when you look
Speaker 1: at Walmart versus Amazon in terms of like geographic distribution.
Speaker 1: The Amazon does does well enough when you're talking about
Speaker 1: urban areas where lots of people don't own cars and
Speaker 1: they wouldn't have things delivered to their house, including groceries.
Speaker 1: But the power of clicking collect is that it really
Speaker 1: uses the store base to really get to mainstream, non
Speaker 1: urban America, and those consumers are responding as well. It's
Speaker 1: just that over time, you'd like to see the the
Speaker 1: overall e commerce balance um pick up a little bit
Speaker 1: more in the non food side as well. All Right,
Speaker 1: we're gonna leave it. There are lots more to look
Speaker 1: at with Walmart. Never an easy heart, straightforward story in
Speaker 1: many ways, owing to its size, scope and importance around
Speaker 1: the world, certainly here in the United States. Jennifer Bartashes
Speaker 1: is senior US retail Staples and Restaurants analysts for b I.
Speaker 1: She joined us on the phone from Bloomberg Intelligence headquarters
Speaker 1: in Princeton, and Matthew Boyle. Matt Boyle, US retail reporter
Speaker 1: for Bloomberg here with me in New York City. All right,
Speaker 1: let's head down to Baltimore. Dr Josh Sharfstein joins us.
Speaker 1: He is weis Stein for Public Health Practice and Community
Speaker 1: Engagement and the director of the Bloomberg American Health Initiative
Speaker 1: at Johns Hopkins University. And as you can probably tell
Speaker 1: by the name of the Bloomberg School of Public Health
Speaker 1: is supported by Michael R. Bloomberg, of course, the founder
Speaker 1: of BLOOMBERGALP and Bloomberg Philanthropies, Bloomberg ALP being the parent
Speaker 1: of Bloomberg News and Bloomberg Radio. Dr Scharstein, thank you
Speaker 1: so much for joining us. Thanks for having me. All right,
Speaker 1: So we talk a lot about the opioid crisis from
Speaker 1: many different angles. It's an economic story, it's obviously a
Speaker 1: very important social and really human story. Give us a
Speaker 1: sense of where we are right now, and as you
Speaker 1: look back, maybe we start there. What could we have
Speaker 1: done to essentially prevent this? In some cases? What's the
Speaker 1: lesson that we learned here? Well, I think there there
Speaker 1: are a few lessons. This is the greatest that is
Speaker 1: now largely responsible for the reduction in life expectancy over
Speaker 1: the last three years, which is the first time that's
Speaker 1: happened since World War One and the Great Influenza, and
Speaker 1: so it's having this enormous impact in communities of all
Speaker 1: kinds across the country. Um, there's probably a few different
Speaker 1: points in time where intervention would have made a difference.
Speaker 1: Most recently, for this current version, the huge increase in
Speaker 1: prescribing of opioids for pain was a major factor, and
Speaker 1: the fact that it took a long time for the
Speaker 1: medical community to wake up to the fact that the
Speaker 1: culture of medicine in a way changed and doctors were
Speaker 1: prescribing four or five times what they've been prescribing before,
Speaker 1: and a lot of patients got trouble. So dr I'm
Speaker 1: out here in San Francisco and we talk about big
Speaker 1: data and data privacy, and it sounds great, but it
Speaker 1: does bring up a lot of concerns. What is your
Speaker 1: solution to fold data into the conversation about how now
Speaker 1: to help the problem? Well, I think there have been
Speaker 1: a couple of great examples of states that are using
Speaker 1: data to identify the risk factors for overdose and more importantly,
Speaker 1: in my mind, the opportunities intervened and help people. So
Speaker 1: I call out Massachusetts and Maryland. Massachusetts did a great
Speaker 1: big data project where they merged in their data from
Speaker 1: corrections with the data from the healthcare as well as
Speaker 1: um data from fatalities from the Corner Medical Examiner, and
Speaker 1: what they found, for example, was that people who have
Speaker 1: been incarcerated were at over a hundred times the risk
Speaker 1: of dying of an overdose when they got out compared
Speaker 1: to the general population. But when those same people were
Speaker 1: given treatment with medications, there was a dramatic drop in
Speaker 1: their risk of death. The Maryland data has found that
Speaker 1: the highest risk individuals for overdose death are people who
Speaker 1: have actually been in the emergency room and the hospital,
Speaker 1: as well as had contact with the criminal justice system.
Speaker 1: And what I think makes both of those findings very
Speaker 1: interesting is that by and large, hospitals, the medical community,
Speaker 1: and jails have failed to provide lifesaving treatment. They often
Speaker 1: don't operate to people who need it. And I think
Speaker 1: big data analyses are sort of a wake up call
Speaker 1: to the medical community and to criminal justice that every
Speaker 1: contact with someone who is an opportunity actually to to
Speaker 1: get people into effective care. Doctor Scharstein, It's interesting, you know,
Speaker 1: as we think about the solutions here. I spent yesterday
Speaker 1: at the nine eleven Memorial and Museum on a security
Speaker 1: and a security summit, and you know, one of the
Speaker 1: continuous themes there was this cooperation between the public side
Speaker 1: and the private sector, and a lot of what it
Speaker 1: sounds like you're talking about does rely on a public
Speaker 1: sector solution in many ways, but also private industry coming in.
Speaker 1: How does that work? How does it happen in your estimation?
Speaker 1: So the Massachusetts analysis I mentioned was actually done with
Speaker 1: in a consortium, a public private consortium. Dr Monica Brell's
Speaker 1: Commissioner of Health in Massachusetts and UM she brought in
Speaker 1: with the governor number of tech companies to help them
Speaker 1: really do the right analysis. I'll be honest with you,
Speaker 1: there are some clouds on the horizon in this big
Speaker 1: data world. There's you know, sometimes I think companies will
Speaker 1: take data and they'll show up and say, you know,
Speaker 1: let's tell the doctor the percentage chance that the person
Speaker 1: right in front of them is going to overdose, and
Speaker 1: maybe they won't prescribe something. Those things I think might
Speaker 1: be a little bit fraught. I'd like to see the
Speaker 1: public private partnership where the public sector can actually pause
Speaker 1: and say, like, is this a good idea? You know,
Speaker 1: will this make the care better or worse? And you
Speaker 1: have sort of the the technology and the skills from
Speaker 1: the private sector, but the judgment in the sense of
Speaker 1: the overall problem that's the public sector brings. What about
Speaker 1: hip of violations and data privacy rules, Well, um, most
Speaker 1: of these analyzes are done at an aggregate level, so
Speaker 1: you're not using the individual's names. Um, there are There
Speaker 1: is the risk though, um, of course, that data systems
Speaker 1: can be compromised, and it's very important that when analyzes
Speaker 1: are being done that you know, there are a lot
Speaker 1: of data security standards. For me, the core question is
Speaker 1: is the analysis that's going to be done, you know,
Speaker 1: conceived of correctly, and is it going to be helpful
Speaker 1: to people? You know? For example, I'm aware of some
Speaker 1: you know ideas where people say like, well, if somebody
Speaker 1: has had a problem, you know with being arrested years
Speaker 1: in the past, then we won't ever give them an opioid. Again, Well,
Speaker 1: that could backfire in a lot of different ways. The
Speaker 1: person may really be in pain and needs treatment or
Speaker 1: and if they don't get it, they may go out
Speaker 1: and how to use you know, drugs on the street
Speaker 1: and be a much greater risk of death. So I
Speaker 1: really think the key is, um, you know, not just
Speaker 1: following the law, but having a really good idea. And
Speaker 1: I think it's a public private partnership there that that
Speaker 1: can make sure that we steer away from the bad idea.
Speaker 1: All right, well, it's a great overview, and we appreciate
Speaker 1: the context so much. Thank you. Dr Josh Sharfstein he
Speaker 1: is weis Stein for Public Health Practice and Community Engagement
Speaker 1: and the director of the Bloomberg American Health Initiative at
Speaker 1: Johns Hopkins University. He joined us on the phone from
Speaker 1: Baltimore to set all right, well, let's talk a little
Speaker 1: bit about the market from a macro level, and then
Speaker 1: we're gonna go down a level with George Schulty. He
Speaker 1: is the founder of Shalty Asset Management. He's based up
Speaker 1: in Rye Brook, New York, just up the New Haven Line,
Speaker 1: I believe, from us here in New York City. He
Speaker 1: joins Taylor Riggs and myself. So, George, great to see you,
Speaker 1: Great to be here again. Thank you. All right, So,
Speaker 1: this market, you know, I feel like we're trying to
Speaker 1: now make some sense of it as we get closer
Speaker 1: to the end of the year. As you sort of
Speaker 1: look back over nineteen, what's your takeaway so far? Well,
Speaker 1: it's been quite a quite a phenomenal amount of growth.
Speaker 1: I mean, this has been going on for eleven years now,
Speaker 1: and so you have, you know, kind of an uncertain situation,
Speaker 1: though I think Powell struggling with it. With extremely low
Speaker 1: interest rates, stubbornly low inflation UM. But there's still quite
Speaker 1: the amount of monetary accommodation going on in the US.
Speaker 1: There's a lot of fiscal policy accommodation as well. UM.
Speaker 1: You have the unemployment rate close to a fifty year
Speaker 1: or low UM at about three point six percent. You
Speaker 1: have growth in the US at about one I guess,
Speaker 1: a little bit soft in the last quarter due to
Speaker 1: the GM strike and some weakness and business investment UM.
Speaker 1: But but again an inflation stubbornly low, still below two
Speaker 1: percent at one point seven percent UM. And I think
Speaker 1: that's why Powell, you know, is continuing to put his
Speaker 1: foot down on the accelerator. You know, George, it's Tailor Riggs.
Speaker 1: I'm out here in San Francisco covering all things technology.
Speaker 1: So what I'm doing is I'm going around and asking
Speaker 1: everyone I know in New York the same pole question
Speaker 1: to try to get my head wrapped around the real
Speaker 1: story I've been covering tech. Let's pretend I've been ignoring
Speaker 1: everything else. Tell me what is driving the markets right now?
Speaker 1: Is it Powell impeachment, earnings? What have I missed? So
Speaker 1: I think one of the big things that's driving tech
Speaker 1: is is just you know, money inflows into the massive
Speaker 1: e t f s that that are forced to buy
Speaker 1: the largest growing companies. UM. I think there's also a
Speaker 1: you know, a wave of new cash still flooding into
Speaker 1: the fixed income market, and I think that is probably
Speaker 1: creating some risks because I think companies are probably borrowing
Speaker 1: a little bit more than they should be at this
Speaker 1: point in the cycle. I think it's a function of
Speaker 1: interest rates being so low and investors desperate for fixed
Speaker 1: income yield. And I think because of that, you're seeing
Speaker 1: some some interesting things in the tech space, Like with
Speaker 1: we Work. I mean, that company probably shouldn't be borrowing money,
Speaker 1: but you know, it's able to, or was able to
Speaker 1: borrow money up until now, even though by all means
Speaker 1: it looks like it's probably an insolvent enterprise. UM. So
Speaker 1: there there's some very unique things happening in the market
Speaker 1: because interest rates are really so low there, as low
Speaker 1: as they've been in the history of the planet. UM.
Speaker 1: And this past summer, of course, we saw negative yielding
Speaker 1: debt reach seventeen trillion dollars. That's never been that's never
Speaker 1: happened before in the history of the world. So I
Speaker 1: think what it's generating is the risk of asset bubbles,
Speaker 1: and hopefully as some of those unwind, you won't have
Speaker 1: systemic risk or systemic you know, fallout that could cause
Speaker 1: a real shock. So I know part of your background
Speaker 1: and you never fully leave this world is special situations. Distress. Uh,
Speaker 1: not a lot of distress, it feels like in the
Speaker 1: world at the moment, but they're always special situations. And
Speaker 1: one of them that I believe you looked at is
Speaker 1: actually right there in Taylor's backyard, which is p g
Speaker 1: n A. Right, how do you look at a name
Speaker 1: like that? So a lot of people say, by the way,
Speaker 1: with regard to distress, that there's not much going on,
Speaker 1: But I think that's a bit of a misnomer because
Speaker 1: if you look at the default rate, which a lot
Speaker 1: of the major investment banks that like to sell high
Speaker 1: yield bonds um it really just measures junk raded debt
Speaker 1: default rates, and that's that's it's below three. But here
Speaker 1: you have pg N E, which is one of the
Speaker 1: ten largest bankruptcies of all time, and it's active right now. UM.
Speaker 1: I think, by the way, just parenthetically, you know, some
Speaker 1: of the other California utilities might be at risk too
Speaker 1: because of you know, the terrible wildfires we've had out there.
Speaker 1: But yeah, the way we look at that is, just
Speaker 1: like any other distress credit, we look at the company's
Speaker 1: capital structure. In this case, because it has so much
Speaker 1: litigation liability, you can throw in about twenty five maybe
Speaker 1: even as highest thirty billion of additional claims into the
Speaker 1: capital structure and then try to value the business on
Speaker 1: an unlevered basis, and and try to figure out where
Speaker 1: air in the pecking order, uh, you know, the lenders
Speaker 1: or maybe even the equity owners would get a recovery
Speaker 1: in this case. We think that ultimately there have been
Speaker 1: you know, a number of plans of reorganizations proposed. Um.
Speaker 1: There's been a lot of litigation back and forth about
Speaker 1: who has control over the case. Recently, the judge gave
Speaker 1: the bond holders approval to file a plan, and their
Speaker 1: plan looks like it dilutes the equity holders down to
Speaker 1: nearly nothing, which is actually typically what happens with bankrupt companies.
Speaker 1: So so we think short selling the PGNI stock just
Speaker 1: under seven dollars a share makes a lot of sense
Speaker 1: for a potential return. That's probably the lowest risk way
Speaker 1: to play this um and and and separately, of course,
Speaker 1: you know the situation in California with forest fires and
Speaker 1: new fires, even after the bankruptcy, it's it's really terrible,
Speaker 1: and you know, we hope they figured it out out there. George,
Speaker 1: reading through your recommendations, you talk about stock buy backs
Speaker 1: and special dividends and or M and A. I'm taking
Speaker 1: a look at a chart here, and it's the invest
Speaker 1: Go buy Back et F. So the investing companies that
Speaker 1: have bought back at least five percent of their shares
Speaker 1: in the last few years, and that's outperforming the dividend
Speaker 1: et F, which invest in companies that have consistently raised
Speaker 1: their dividend over the last ten years. Why are companies
Speaker 1: that are doing share buy backs outperforming companies that are
Speaker 1: raising their dividends. That's a good question, and that's interesting
Speaker 1: observation about it outperforming. I think that that makes sense
Speaker 1: in my view because essentially, you know, companies are making
Speaker 1: the decision to buy back in their own stock when
Speaker 1: they think it's cheap. And the result for remaining shareholders
Speaker 1: who do not sell into that buy back, whether it's
Speaker 1: sort of a program or a special one time buy back,
Speaker 1: is that you reduce the float outstanding and the and
Speaker 1: the smaller universe of shareholders can share the same cash
Speaker 1: flow that you had before, all other things equal. Um.
Speaker 1: So it also happens to you know, it tends to
Speaker 1: put a sort of a bottom on on a on
Speaker 1: the stock that might be volatile. And so I think
Speaker 1: management teams and boards that are deciding to do that
Speaker 1: in many cases it's the right thing because of reducing
Speaker 1: float that uh you know that that really they don't need.
Speaker 1: It's a it's a higher form of or a higher
Speaker 1: cost of capital certainly than you can get in the
Speaker 1: fixed income market these days. And if you're under levered,
Speaker 1: meaning you know, you're not even investment like you have
Speaker 1: hardly any debt at all, this might be a great
Speaker 1: way to use your capital. Right, all right, Always good
Speaker 1: to catch up with you, Thank you so much for
Speaker 1: coming in. George Chelty is founder of Shelty Asset Management,
Speaker 1: based up in Rye Brook, New York. Here with us
Speaker 1: in our Bloomberg Interactive Broker's studio. All right, So the
Speaker 1: cover story this week in Bloomberg Business Week. It's a
Speaker 1: must read and once you read it, I guarantee you're
Speaker 1: going to be talking about it. Ashley Vance wrote it.
Speaker 1: He is a writer, a host, and author so many
Speaker 1: things here at Bloomberg. He joins us on the phone
Speaker 1: from Palo Alto Joel Weber, the editor of Bloomberg Business Week.
Speaker 1: He is here with me in our Bloomberg Interactive Broker's studio.
Speaker 1: And I have to say, Ashley, when I first read
Speaker 1: this story, I did, to quote my co host Carol Masser,
Speaker 1: A wait, what sort of moment? How did this even
Speaker 1: come onto your radar screen? Well, you know, I've been
Speaker 1: covering open source for about twenty years, and uh, and
Speaker 1: I got a call from kid hub, which is is
Speaker 1: kind of the biggest platform to where open source code
Speaker 1: gets me these days, and they told me they have
Speaker 1: this crazy idea to go baring the world's source code
Speaker 1: in in small bud and and I managed to talk
Speaker 1: my way into seeing it. So, Ashley, what was it like?
Speaker 1: I think you told me yesterday was literally like a
Speaker 1: storage shed? Is that right? Yeah? I did. They had
Speaker 1: put us some photos beforehand of artist mock ups and
Speaker 1: what this big would look like. Was there sci fi
Speaker 1: and and fantastic And when I got there now, I mean,
Speaker 1: you know, weird town and abandoned coal mine. They used
Speaker 1: to be owned by a Norwegian company. It was covered
Speaker 1: in preno frost and hid our way. So there are
Speaker 1: then there's this tool sheds that are there um with
Speaker 1: these fancy reels of film and storage. So so actually, uh,
Speaker 1: they're not the only ones who have stashed something in
Speaker 1: in a cave nearby. There's also this followed by a
Speaker 1: global seed vault, where in the event of an apocalypse, hey,
Speaker 1: I'll go there and find some seeds. But the thinking
Speaker 1: here is that, you know, this is a place that
Speaker 1: should anything really really go wrong in the world, we
Speaker 1: can stash things. And why open source? Why why would
Speaker 1: that be the we have seeds and open source, why
Speaker 1: would open source code be the second thing we need
Speaker 1: to stash. Yeah, I mean it's kind of funny, you know,
Speaker 1: like twenty years ago, open source was sort of a
Speaker 1: fringe idea of software, was dominated by companies like Microsoft
Speaker 1: and IBM M. But you know, in the interviewing twenty
Speaker 1: years it's it's the dominant way now that that code
Speaker 1: gets developed. It's open sources behind pretty much everything you
Speaker 1: use in your day to day life, whether it's a
Speaker 1: smartphone and your computer, your television, your car. You know,
Speaker 1: every piece of our infrastructure UM is developed by partly
Speaker 1: paid codas that do work for big companies, but also
Speaker 1: all these volunteers. And so the idea here is look, um,
Speaker 1: say something just crazy happens in the modern infrastructure is
Speaker 1: brought to its needs, you would actually have kind of
Speaker 1: the backup of how these things work well. And it
Speaker 1: is so interesting and Ashley, when you think about and
Speaker 1: I'm glad you mentioned the the idea of sort of
Speaker 1: covering open source for two decades, because two decades ago
Speaker 1: I was like, all right, cool, like, yeah, you guys
Speaker 1: are kind of out there on the fringes, but maybe
Speaker 1: you don't get the joke about how software is written
Speaker 1: and who controls it. But now this is I think
Speaker 1: accept it, not just accepted, but heavily endorsed and has
Speaker 1: really changed the way the world works in many ways. Yeah.
Speaker 1: And the funny you think about it, just reflecting that
Speaker 1: wrote this story, was you know, like twenty years ago,
Speaker 1: Microsoft was the enemy. It was all about making an
Speaker 1: open source version of an operating system to compete against
Speaker 1: Windows and computing against Office and things like that. Um,
Speaker 1: the sort of like strange thing happened, which is none
Speaker 1: of that worked, like the Linux stefftop never became mainstream,
Speaker 1: but all these open source coders who were fighting his
Speaker 1: fight made these incredible tools for sharing software on the Internet,
Speaker 1: developing it. And you know, the knock on effect was
Speaker 1: that the open source became the backbone of the Internet
Speaker 1: of smartphones, and so they sort of won these two
Speaker 1: other wars um, which is really where the technology was
Speaker 1: heading rather than where it had been. And so you
Speaker 1: know today, if it's Google, if it's Netflix, if it's Uber, Amazon, whoever,
Speaker 1: you know their infrastructure runs on open source code. So
Speaker 1: here's the irony. Actually, you've been doing this for twenty years.
Speaker 1: You show up at this vault with the CEO of
Speaker 1: get hub, now owned by Microsoft, one of the very
Speaker 1: companies that was like, never will we touch open source?
Speaker 1: How ironic is that? I mean, it's it's the crazy
Speaker 1: It's one of the crazy starts of the crazy story.
Speaker 1: You know, if you had asked me twenty years ago,
Speaker 1: this was ever gonna happen? I would have said it's impossible.
Speaker 1: I remember Steve Baumber on stage Callegue open Source Software
Speaker 1: Cancer and and you know, giving away your code was
Speaker 1: just seeing it's sort of almost a criminal act by Microsoft.
Speaker 1: And you know last year they bought get hub for
Speaker 1: seven point five billion dollars and obviously through through their
Speaker 1: lot in with the open source crowd and um, you know,
Speaker 1: it's just it's it's an incredible happening. I think a
Speaker 1: lot of it has to do with sat Nilla coming
Speaker 1: on the CEO and sort of thinking definitely about these things.
Speaker 1: What a different a couple of decades. Yeah, the last
Speaker 1: question actually, if I need to get there, how do
Speaker 1: I get there? Well, the easiest way you gotta take
Speaker 1: a couple of homes, but you can there are there's
Speaker 1: like one of two flights per day from Norway, and
Speaker 1: I think it's about a two hour flights. Um, and
Speaker 1: there's there's like two thousand people that live in small
Speaker 1: But I hope you left bread crumbs for me. Yeah,
Speaker 1: there you go. All right. Actually it's a great story.
Speaker 1: It's the cover of this week's new issue of Bloomberg
Speaker 1: Business Week. Ashley Vance wrote it. He went there and
Speaker 1: wrote all about it. He joined us from Palo Alto.
Speaker 1: Joel Webber here with me in New York City a journal.
Speaker 1: But you let me drive? Oh no, no, no no, no, honey, please,
Speaker 1: I'll do the right drivel. I want to drive, Just drive, baby,
Speaker 1: good questions, drying. This is the drive to the globe communings.
Speaker 1: We'll drive us to Dawn Bloomberg Radio. All right, it
Speaker 1: is time for the drive to the closed Run Carson
Speaker 1: back with this CEO of the Carson Group, looking after
Speaker 1: about eleven and a half billion dollars, who joins us
Speaker 1: on the phone from Omaha, Nebraska. Run. Great to have
Speaker 1: you with Taylor and myself. Hey, it's great to be here.
Speaker 1: All right, all right, So I'm gonna ask you a
Speaker 1: variation of a very good question that Taylor asked earlier,
Speaker 1: which is, as you look across the landscape here, how
Speaker 1: do you sort of rank the things to either worry
Speaker 1: about or pay the most attention to? You know, you
Speaker 1: sort of think about geopolitics, you think about trade, you
Speaker 1: think about the FED, you think about earnings. Like, what's
Speaker 1: your sort of list of priorities here? Well, I think
Speaker 1: you nailed them all. I mean the thing that I's
Speaker 1: going to drive them all. I was just with a
Speaker 1: I'm actually in Sarasota, Florida right now, is just with
Speaker 1: one of our clients, and he said, hey, what's gonna
Speaker 1: happen next year? As a no idea, And so he
Speaker 1: pushed me and said, well, what are the things you're
Speaker 1: gonna worry about? And said, well, you know, right now,
Speaker 1: I think the bigger the market is going to start
Speaker 1: to focus start handicapping the election. And you know, one extreme,
Speaker 1: you know, President Trump gets re elected, I think it's
Speaker 1: gonna be pretty good for the market. Um, but I
Speaker 1: don't think he's gonna get re elected unless we get
Speaker 1: you know, a real a trade deal. On the other hand,
Speaker 1: Elizabeth Barren, we'll become our next president, is gonna be
Speaker 1: really bad for the markets. I think, really we look
Speaker 1: into the future here, the market is going to start
Speaker 1: to handicap those things. Of course, we've got Brexit, and
Speaker 1: we've got you know, the Fed out there, and we've
Speaker 1: got China trade which seems to be you know, moving
Speaker 1: the markets every day. Um. But I would I would
Speaker 1: really really start thinking about who's gonna be in office, um,
Speaker 1: with the next election cycle. So we talked about handicapping
Speaker 1: the next election and yet equities are near their all
Speaker 1: time highs. What gives Well, I think the markets are
Speaker 1: telling you that they think, um, Trump's gonna be be reelected.
Speaker 1: And you know, as as a market has handicapped at
Speaker 1: right now, this market has been really resilient, um. And
Speaker 1: I think the market loves the fact that, um, we've
Speaker 1: got you know, pal out there saying, hey, you know,
Speaker 1: we really don't have anything that we're too worried about
Speaker 1: right now. This is sustainable. On that note, I will
Speaker 1: share with you not the last FED meeting, but the
Speaker 1: FED meeting before. I just so happened that the same
Speaker 1: evening after they voted, had dinner with one of the
Speaker 1: voting members, and UM, My concern was then that hey,
Speaker 1: are we do we really understand all the variables and
Speaker 1: all the things that that could trim us up. And
Speaker 1: he made a great uh point, and that you know,
Speaker 1: we really are on top of all of this. And
Speaker 1: you know, I saw it also on a different article today.
Speaker 1: The US is still the reserve currency of the world.
Speaker 1: You know, we have twenty three trillion dollars. A lot
Speaker 1: of people got to own, um, the dollar, they got
Speaker 1: to participate here, and I think that also is going
Speaker 1: to provide a floor, you know, for the market for
Speaker 1: a while. So Ron very much top of mind for
Speaker 1: us today. We did a whole segment on it earlier
Speaker 1: in the show. Was Walmart. You know, we saw those
Speaker 1: numbers come out. Obviously, Walmart a bell weather in some
Speaker 1: ways across retail, across uh you know, e commerce as
Speaker 1: well as as Taylor rightly pointed out earlier in the show,
Speaker 1: a sign of consumer demand, a sign of trade tensions
Speaker 1: being there or not there. How do you read it
Speaker 1: and how does that maybe affect your outlook, especially when
Speaker 1: it comes to the consumer and retail. Yeah, the consumer
Speaker 1: is strong and the consumer continues to be strong. You know,
Speaker 1: we had the employment report was better. The next fact
Speaker 1: that I noticed claims for a little higher UM today
Speaker 1: than the market thought. But you know, companies like Walmart
Speaker 1: UM I think tells us just how how how strong
Speaker 1: the consumer is. And we love Walmart. Art I mean
Speaker 1: attractive offering in here continues to pressure you the tier
Speaker 1: two and tiers three retailers, and it is making significant
Speaker 1: strides into the e commerce business. And this is a
Speaker 1: good exam pays a nice dividend. You you know, you're
Speaker 1: getting a one eight maybe a hair less than a
Speaker 1: one eighty yield, which in today's environment is pretty good.
Speaker 1: And so I think being a surgical is going to
Speaker 1: be really key here, you know, really understanding why you're
Speaker 1: owning what you're owning. And as Buffets says, from my
Speaker 1: very own old want to browska, you know, we're buying
Speaker 1: companies or businesses that an intrinsic value to their to
Speaker 1: what to what we believe their value is. And I
Speaker 1: think just buying the whole market is probably not the approach.
Speaker 1: Most investors should take care but be more surgical. So
Speaker 1: if you are becoming more of a stock picker, being
Speaker 1: more surgical, really knowing what you're buying. Let's say you
Speaker 1: want to get a little bit defensive here. I was
Speaker 1: reading a report by U B. S. And they said,
Speaker 1: just on a pure valuation basis, at this point, when
Speaker 1: they're going within the defensive sectors, they're looking at healthcare
Speaker 1: over utility. If you were to go defensive, where do
Speaker 1: you like companies within that space? Yeah? No, healthcare, I
Speaker 1: mean we like a lot and healthcare I mean, just
Speaker 1: look at the demographics, right and how old we're getting.
Speaker 1: Um Cell Gene was a great example of that. You know,
Speaker 1: we had a health celgene our port Foster or sometime
Speaker 1: um and of course we're gonna be taken out by
Speaker 1: Brusta Myers. But I think that your companies that are
Speaker 1: doing um that. Another one that got hit really hard
Speaker 1: on was a Myriad Genetics m y g N. We
Speaker 1: think this is a really attractive entry point into into
Speaker 1: a company like that as well. But anything that's going
Speaker 1: to um uh provide, for example, with Myriad, you can
Speaker 1: get some testing done, get out ahead of you whatever
Speaker 1: your issues are, UM or providing like a cell gene
Speaker 1: um in their cancer therapy, something that's really going to
Speaker 1: enhance quality of life. So we we would be we
Speaker 1: we like Healthcaren here all right. Ron Carson is the
Speaker 1: CEO of Carson Group, overseeing about eleven and a half
Speaker 1: billion dollars. He joined us on the phone from Omaha, Nebraska.
Speaker 1: Thanks for listening to Bloomberg Business Week. You can subscribe
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