1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,480 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Right now. 5 00:00:27,600 --> 00:00:31,200 Speaker 1: Truly one of America's authorities on this one of the 6 00:00:31,280 --> 00:00:34,120 Speaker 1: world's authorities out imposing with his public service at the 7 00:00:34,159 --> 00:00:36,760 Speaker 1: Bank of England is now of course running the shop 8 00:00:36,800 --> 00:00:40,080 Speaker 1: at the Peterson Institute as well. Adam, I'm gonna cut 9 00:00:40,120 --> 00:00:44,279 Speaker 1: to the chase. This is a massive victory lap for 10 00:00:44,360 --> 00:00:49,120 Speaker 1: Olivier Blanchard. He was half a decade, if not more, 11 00:00:49,760 --> 00:00:54,400 Speaker 1: out front on this concept. What does Olivier Blanchard said 12 00:00:54,800 --> 00:00:59,840 Speaker 1: of this historic moment. I don't have anything public from 13 00:00:59,880 --> 00:01:01,480 Speaker 1: the Vier to say. I hope you'll have him on 14 00:01:01,600 --> 00:01:03,920 Speaker 1: to speak for himself, Tom, But I think all of 15 00:01:04,000 --> 00:01:06,360 Speaker 1: us said Peterson, and all of us have been engaging 16 00:01:06,800 --> 00:01:10,400 Speaker 1: in monetary policy. View this as a victory that since 17 00:01:11,400 --> 00:01:16,480 Speaker 1: maybe a decade ago, certainly since we've been asking the 18 00:01:16,520 --> 00:01:19,000 Speaker 1: FED and the other major central banks to recognize the 19 00:01:19,080 --> 00:01:24,160 Speaker 1: reality that the inflation response to unemployment is much lower. 20 00:01:24,640 --> 00:01:27,360 Speaker 1: It's meaning a flatter Phillips curven than. I thought that 21 00:01:27,440 --> 00:01:32,319 Speaker 1: there is reason in distributional terms for equity as well 22 00:01:32,360 --> 00:01:36,200 Speaker 1: as economic efficiency to push the economy hot, that the 23 00:01:36,280 --> 00:01:41,000 Speaker 1: NEHRU was being too precisely incorrectly estimated and relied on 24 00:01:41,080 --> 00:01:44,000 Speaker 1: too much. And we've seen in a series of steps 25 00:01:44,040 --> 00:01:47,520 Speaker 1: from chair Pal, Vice Chair Clarata, lit Brainerd and others 26 00:01:48,080 --> 00:01:52,200 Speaker 1: them moving towards this more reality based monitor. I think 27 00:01:52,200 --> 00:01:55,120 Speaker 1: it's a huge step. The Latin phrases here are ex 28 00:01:55,200 --> 00:01:58,680 Speaker 1: ante an ex post let's translated on a Monday morning, 29 00:01:59,120 --> 00:02:02,520 Speaker 1: which is I think of a Georgia school. Richard Timberlake, 30 00:02:02,640 --> 00:02:05,080 Speaker 1: Robert McTier and others saying, look, you've got to wait 31 00:02:05,120 --> 00:02:08,560 Speaker 1: to see the evidence before you move. Is this a 32 00:02:08,560 --> 00:02:11,680 Speaker 1: fed that can actually get out front of events or 33 00:02:11,680 --> 00:02:16,440 Speaker 1: do they completely capitulate to an after the fact policy. 34 00:02:16,960 --> 00:02:21,440 Speaker 1: I think they are rationally deciding that being ex anti 35 00:02:21,560 --> 00:02:24,880 Speaker 1: oriented wasn't working. And the biggest thing you can take 36 00:02:24,880 --> 00:02:29,000 Speaker 1: away from chair Pal's remarks is this sense of pragmatism, 37 00:02:29,040 --> 00:02:33,040 Speaker 1: and the only reason not to be pragmatic is fear 38 00:02:33,080 --> 00:02:35,600 Speaker 1: of instability, which doesn't seem to be in the car. 39 00:02:36,040 --> 00:02:38,800 Speaker 1: I mean remember, Thomas, you've said, as everyone is said 40 00:02:39,160 --> 00:02:41,520 Speaker 1: the Fed, as the quotes from the federals are bank 41 00:02:41,560 --> 00:02:44,679 Speaker 1: presidents you had on the clips, the FED is undershot 42 00:02:44,720 --> 00:02:49,200 Speaker 1: its inflation target, undershot its forecast for years. So the 43 00:02:49,280 --> 00:02:53,760 Speaker 1: idea that somehow this ex anti preemptive approach is working 44 00:02:54,200 --> 00:02:56,680 Speaker 1: was a mistake. And I think there were others, including 45 00:02:57,040 --> 00:03:01,720 Speaker 1: Charlie Evans of at Chicago, Larry Summers, myself, Olivier who 46 00:03:01,720 --> 00:03:04,280 Speaker 1: you mentioned, who we're talking about things like wait till 47 00:03:04,360 --> 00:03:07,800 Speaker 1: inflation appears. And as I cited in a recent blog post, 48 00:03:07,880 --> 00:03:11,720 Speaker 1: the Nobel Laureate Bob Solo was debating that favor of 49 00:03:11,800 --> 00:03:18,600 Speaker 1: experimenting on lower unemployment against John Taylor's rules back and 50 00:03:18,639 --> 00:03:21,080 Speaker 1: they're running. This argument has been there, and I really 51 00:03:21,080 --> 00:03:24,320 Speaker 1: want to emphasize here Mr Evans of Chicago Folks, who's 52 00:03:24,360 --> 00:03:28,760 Speaker 1: been extremely articulate and laying this out as a public official, 53 00:03:29,320 --> 00:03:33,520 Speaker 1: obviously president of Chicago Fed, ad imposing to me what's 54 00:03:33,520 --> 00:03:36,680 Speaker 1: so important here is not so much the theory of 55 00:03:36,760 --> 00:03:41,160 Speaker 1: John B. Taylor of Stanford, but the granularity and data 56 00:03:41,240 --> 00:03:46,960 Speaker 1: dependence of Alan Greenspan and the idea of a measured approach. 57 00:03:47,640 --> 00:03:53,400 Speaker 1: Should we fear being less measured. No. I think, if anything, 58 00:03:53,560 --> 00:03:56,000 Speaker 1: this is a move back towards the green span of 59 00:03:56,040 --> 00:03:59,640 Speaker 1: the mid nineties, that you are increasing discretion at the 60 00:03:59,680 --> 00:04:04,040 Speaker 1: same time you're increasing a commitment to what you're calling granularity, 61 00:04:04,160 --> 00:04:08,080 Speaker 1: which is real world, real time data. You can't do 62 00:04:08,160 --> 00:04:11,040 Speaker 1: it totally without there, you can't do it totally without 63 00:04:11,080 --> 00:04:14,840 Speaker 1: some discipline. But the whole point of inflation targeting, which Bernankee, 64 00:04:14,920 --> 00:04:18,719 Speaker 1: Louboch Michigan, and I argued now twenty years ago, was 65 00:04:18,760 --> 00:04:22,440 Speaker 1: that it's trying to calibrate a right balance between discretion 66 00:04:22,520 --> 00:04:27,520 Speaker 1: and rules and anchor your expectations through transparency, through a 67 00:04:27,600 --> 00:04:31,080 Speaker 1: discourse with the public and markets about what's really going on. 68 00:04:31,720 --> 00:04:34,919 Speaker 1: And that's Greenspan wasn't great on the discourse part, but 69 00:04:34,960 --> 00:04:38,800 Speaker 1: he was good on the rest of it. We've been sorry. Well, 70 00:04:38,839 --> 00:04:41,800 Speaker 1: we're writing for Robert Samuelson to publish a course at 71 00:04:41,800 --> 00:04:44,880 Speaker 1: the Washington Post and his great one volume, a nice, 72 00:04:45,040 --> 00:04:47,880 Speaker 1: good read on Walter Heller in the time of the sixties, 73 00:04:48,240 --> 00:04:51,120 Speaker 1: and it goes to this phrase stop go policy, where yeah, 74 00:04:51,160 --> 00:04:54,680 Speaker 1: you're more you're more ad hoc, you're more looser in 75 00:04:54,720 --> 00:04:59,400 Speaker 1: your policy. But do we risk the stop go volatility 76 00:04:59,520 --> 00:05:02,039 Speaker 1: of pol let's see that we witnessed in the late 77 00:05:02,120 --> 00:05:07,000 Speaker 1: sixties into the seventies. We risk it slightly, but I 78 00:05:07,040 --> 00:05:10,080 Speaker 1: don't think it's a realistic risk, and especially compared to 79 00:05:10,120 --> 00:05:12,560 Speaker 1: what we've already seen, not a risk, which is the 80 00:05:12,640 --> 00:05:16,400 Speaker 1: kind of secular stagnation and the lack of traction of 81 00:05:16,440 --> 00:05:19,400 Speaker 1: monetary policy, and most of all, as chair Poal I 82 00:05:19,400 --> 00:05:22,919 Speaker 1: think has rightly put it, or I rephrase chair Pal, 83 00:05:23,279 --> 00:05:27,600 Speaker 1: they left potential employment gains on the table for years 84 00:05:27,880 --> 00:05:30,920 Speaker 1: for no good purpose. And again ex anti ex post 85 00:05:31,040 --> 00:05:33,800 Speaker 1: x anti. You can understand why they were changed, why 86 00:05:33,880 --> 00:05:36,440 Speaker 1: those decisions were made, even though some of us aregued 87 00:05:36,480 --> 00:05:39,960 Speaker 1: against them, but the ex post is clear that they 88 00:05:40,000 --> 00:05:45,000 Speaker 1: were leaving output employment opportunities, convergence in real wages across 89 00:05:45,120 --> 00:05:48,520 Speaker 1: racial groups on the table out of fear for inflation. 90 00:05:48,600 --> 00:05:52,320 Speaker 1: That didn't come that. This issue is if this flips 91 00:05:52,400 --> 00:05:55,040 Speaker 1: us into a high inflation world of say the Phillips 92 00:05:55,080 --> 00:05:58,600 Speaker 1: curved king, like my colleague Joe Gannon and Kristin Forbes are, 93 00:05:59,240 --> 00:06:01,680 Speaker 1: it's pretty easy for the Fed to go back and 94 00:06:01,760 --> 00:06:05,760 Speaker 1: raise right. So I don't view this as that risky path. 95 00:06:06,000 --> 00:06:08,680 Speaker 1: People will say that the next post they're going to 96 00:06:08,760 --> 00:06:12,440 Speaker 1: find out it's not imposing. Right now history is being 97 00:06:12,480 --> 00:06:15,680 Speaker 1: made with an American delegation and Mr Kusher on board. 98 00:06:15,960 --> 00:06:21,240 Speaker 1: L all One is well out over the southern southeastern 99 00:06:21,279 --> 00:06:25,880 Speaker 1: Saudi Peninsula, making the bank turn into Abu Dhabi. This 100 00:06:25,960 --> 00:06:31,279 Speaker 1: is the politics of a fractious region hinged together by 101 00:06:31,360 --> 00:06:36,200 Speaker 1: central banking and finance. Tell us about not the integrity, 102 00:06:36,240 --> 00:06:40,039 Speaker 1: but tell us about the solidity of the central banks 103 00:06:40,040 --> 00:06:44,039 Speaker 1: of the United Arab Emirates. I'm not an expert on 104 00:06:44,120 --> 00:06:47,040 Speaker 1: that region, but I do know that they together with 105 00:06:47,080 --> 00:06:49,960 Speaker 1: the central banks and BRAIN and Saudi, they they are 106 00:06:50,040 --> 00:06:53,640 Speaker 1: professionally run, they are part of the central banking community, 107 00:06:53,920 --> 00:06:56,680 Speaker 1: and they of course have been running this coordinated peg 108 00:06:56,760 --> 00:07:00,000 Speaker 1: on the doll and this is where it all comes together. 109 00:07:00,000 --> 00:07:04,680 Speaker 1: Other because you have the FED continuing to anchor worldwide 110 00:07:04,760 --> 00:07:07,760 Speaker 1: use of the dollar. The other way this Middle Eastern 111 00:07:07,800 --> 00:07:12,600 Speaker 1: issue comes in those um is the US government, increasingly 112 00:07:12,680 --> 00:07:16,560 Speaker 1: under Trump but also with democratic use and encouragement, keeps 113 00:07:16,640 --> 00:07:21,000 Speaker 1: overusing unilateral financial sanctions. And if they keep doing that, 114 00:07:21,720 --> 00:07:25,760 Speaker 1: you you you overuse it. Then you incentivize places like Foudy, 115 00:07:25,880 --> 00:07:29,160 Speaker 1: like the UA about to mention China and Russia to 116 00:07:29,280 --> 00:07:31,800 Speaker 1: get out from under the dollar and out from under 117 00:07:31,840 --> 00:07:34,480 Speaker 1: the US financial system, and that's going to be something 118 00:07:34,520 --> 00:07:36,760 Speaker 1: to watch and coming years. The FED can make it 119 00:07:37,200 --> 00:07:40,200 Speaker 1: attractive to being the dollar, but the U. S Government 120 00:07:40,360 --> 00:07:43,800 Speaker 1: of using the role of the dollar and overusing sanctions 121 00:07:44,080 --> 00:07:46,520 Speaker 1: can make it very unattractive. And that's when you start 122 00:07:46,560 --> 00:07:50,679 Speaker 1: getting alternatives being put forward. Go back to Carney's speech 123 00:07:51,120 --> 00:07:53,960 Speaker 1: at Jackson Hole a year ago. Dr Posen, thank you 124 00:07:54,000 --> 00:08:00,160 Speaker 1: so much, always informative adam posing of the Peterson Institute. 125 00:08:01,320 --> 00:08:04,320 Speaker 1: Right now we migrate to a discussion here in an 126 00:08:04,360 --> 00:08:08,680 Speaker 1: important discussion of the view forward given equity valuations. We 127 00:08:08,720 --> 00:08:12,000 Speaker 1: do that with Sebastian page of t ro Price. Sebastian, 128 00:08:12,040 --> 00:08:14,440 Speaker 1: I've got to rip up the script here and go 129 00:08:14,680 --> 00:08:18,920 Speaker 1: to your hugely anticipated book out in November. Beyond diversification. 130 00:08:19,400 --> 00:08:22,600 Speaker 1: This has been a huge theme of my work here recently. 131 00:08:23,080 --> 00:08:27,000 Speaker 1: Are we over diversified? Just simply, Sebastian, to the heart 132 00:08:27,000 --> 00:08:30,480 Speaker 1: of your book. Are we too diversified and too diffuse 133 00:08:30,920 --> 00:08:36,640 Speaker 1: in our potential return? I don't think we are. In fact, 134 00:08:36,800 --> 00:08:42,440 Speaker 1: to me, it's very simple. Diversification fails exactly when we 135 00:08:42,520 --> 00:08:46,480 Speaker 1: needed the most, and we've just lived through this during 136 00:08:46,600 --> 00:08:51,240 Speaker 1: COVID now you know this, most investors know this, But 137 00:08:52,080 --> 00:08:54,840 Speaker 1: in the book I argue that the magnitude and the 138 00:08:54,880 --> 00:08:59,600 Speaker 1: prevalence of the failure of diversification is very much underestimated 139 00:09:00,040 --> 00:09:03,319 Speaker 1: and buy investment pros. And you know, every time we 140 00:09:03,400 --> 00:09:05,400 Speaker 1: get crisis like the one we just had in a 141 00:09:05,440 --> 00:09:09,480 Speaker 1: big market sell off, people seem surprised that correlations that 142 00:09:09,520 --> 00:09:13,200 Speaker 1: are normally in the zero to fift range jump to 143 00:09:13,320 --> 00:09:18,600 Speaker 1: the nine plus percent range. There are huge investment implications 144 00:09:18,679 --> 00:09:21,920 Speaker 1: to that. Tom, your question is about are we over diversified? 145 00:09:22,520 --> 00:09:24,559 Speaker 1: I would say I don't think so, but I don't 146 00:09:24,880 --> 00:09:28,840 Speaker 1: think that we are well diversified either. With a focus 147 00:09:28,960 --> 00:09:33,240 Speaker 1: on those market sell offs, those tail risks, if you will. 148 00:09:33,840 --> 00:09:39,640 Speaker 1: Is Mr Buffett buying into diversification with his five trading companies. 149 00:09:39,679 --> 00:09:44,080 Speaker 1: These are the historic companies of Japan with an absolutely unique, 150 00:09:44,160 --> 00:09:49,880 Speaker 1: some would say over diversified, hyper risk managed industrial structure. 151 00:09:50,360 --> 00:09:55,440 Speaker 1: Is that a constructive diversification? I think he is because 152 00:09:55,440 --> 00:10:00,280 Speaker 1: he's getting international diversification and it's not hear what he's 153 00:10:00,280 --> 00:10:03,760 Speaker 1: doing with the current series, but he's also potentially getting 154 00:10:03,800 --> 00:10:08,319 Speaker 1: exposure to that factor, and he also remains quite diversified 155 00:10:08,360 --> 00:10:11,679 Speaker 1: if you think about it, with his cash buffer, and 156 00:10:12,000 --> 00:10:16,200 Speaker 1: the whole idea is that when Marcus sell off, the 157 00:10:16,280 --> 00:10:20,600 Speaker 1: way you think you're diversified really doesn't play out. And 158 00:10:20,840 --> 00:10:24,800 Speaker 1: I keep coming back to this idea of of downside 159 00:10:25,040 --> 00:10:30,080 Speaker 1: versus upside diversifications. On Buffett's case, I think here he's 160 00:10:30,120 --> 00:10:34,240 Speaker 1: increasing what I would call it good aspect of diversification, 161 00:10:34,280 --> 00:10:38,199 Speaker 1: which is global diversification. There's also a question of whether 162 00:10:38,240 --> 00:10:42,440 Speaker 1: bonds provide the same sort of diversification. Just crossing the Bloomberg, 163 00:10:42,480 --> 00:10:45,760 Speaker 1: I should mention that German the German inflation rate fell 164 00:10:46,080 --> 00:10:49,800 Speaker 1: to negative zero point one percent versus the expectation for 165 00:10:49,840 --> 00:10:53,040 Speaker 1: a rise of zero point one percent, giving an ongoing 166 00:10:53,120 --> 00:10:57,120 Speaker 1: bid to German debt US treasuries. This idea of no 167 00:10:57,200 --> 00:11:02,920 Speaker 1: inflation going forward is the sixty four any portfolio dead, Lisa, 168 00:11:03,000 --> 00:11:07,880 Speaker 1: We've been debating the role of treasuries in particular as 169 00:11:07,960 --> 00:11:12,959 Speaker 1: diversifiers and investors portfolios. We all know that when markets 170 00:11:13,080 --> 00:11:17,520 Speaker 1: sell off, risk assets sell off together, even if in 171 00:11:17,679 --> 00:11:22,200 Speaker 1: normal times they have different fundamental That leaves you with 172 00:11:22,400 --> 00:11:27,280 Speaker 1: the duration factor. The role of treasuries and portfolios. When 173 00:11:27,320 --> 00:11:30,960 Speaker 1: we hit the zero bound, treasuries are not as good 174 00:11:31,160 --> 00:11:35,280 Speaker 1: a diversifier as they as you would expect or as 175 00:11:35,320 --> 00:11:37,880 Speaker 1: you would need them to be. I looked at the 176 00:11:38,040 --> 00:11:41,400 Speaker 1: nominal yield on the Barclays Global aggregate this morning, and 177 00:11:41,400 --> 00:11:42,839 Speaker 1: I know on the show you like to talk about 178 00:11:42,880 --> 00:11:46,720 Speaker 1: nominal versus real yield, but let's just stick the nomenal 179 00:11:46,840 --> 00:11:51,000 Speaker 1: yield ninety one basis points on my Bloomberg this morning, right, 180 00:11:51,160 --> 00:11:54,640 Speaker 1: nine one basis points on the Barclays Global aggregate. So 181 00:11:55,040 --> 00:11:58,600 Speaker 1: if we get a sell off, there's high valuations, markets 182 00:11:58,600 --> 00:12:01,440 Speaker 1: are fragile, we're going through on certain recovery. If we 183 00:12:01,480 --> 00:12:03,679 Speaker 1: get a sell off, what kind of rally can we 184 00:12:03,720 --> 00:12:07,160 Speaker 1: get in bonds when the starting yield is ninety one 185 00:12:07,160 --> 00:12:09,800 Speaker 1: basis points? Well, and that goes to the Warren buffet beat, 186 00:12:09,800 --> 00:12:13,840 Speaker 1: the basic diversification as the place to look for income. 187 00:12:14,040 --> 00:12:17,360 Speaker 1: How much is the currency play the main play here, 188 00:12:17,400 --> 00:12:19,800 Speaker 1: the look for some sort of haven and the yen 189 00:12:20,240 --> 00:12:24,640 Speaker 1: being that Sowart versus U S bonds. Yeah, I think 190 00:12:24,640 --> 00:12:27,800 Speaker 1: you have to begin to look through asset classes to 191 00:12:27,880 --> 00:12:32,839 Speaker 1: the underlying factors. So currencies can play a role in diversification, 192 00:12:32,920 --> 00:12:37,200 Speaker 1: but you also have to begin to think about hedging strategies. 193 00:12:37,559 --> 00:12:40,800 Speaker 1: You have to begin to think about more dynamics strategies 194 00:12:40,840 --> 00:12:45,800 Speaker 1: like directly managing your volatility. All these different approaches, including 195 00:12:45,880 --> 00:12:50,719 Speaker 1: active management and the long short investing, become more important 196 00:12:50,760 --> 00:12:53,360 Speaker 1: in the portfolio in a world where you don't get 197 00:12:53,440 --> 00:12:57,480 Speaker 1: much diversification from your trashuries. Semester too short of visit 198 00:12:57,520 --> 00:12:59,079 Speaker 1: will have to do this again, and of course this 199 00:12:59,240 --> 00:13:02,640 Speaker 1: autumn will have a celebration of his book Beyond Diversification 200 00:13:02,720 --> 00:13:09,400 Speaker 1: Sebastian page with tro Price. Right now, this is a 201 00:13:09,480 --> 00:13:14,360 Speaker 1: really important interview, she writes in fancy medical journals. Mercedes 202 00:13:14,400 --> 00:13:18,280 Speaker 1: Karnathon is a Northwestern University professor of medicine. There with 203 00:13:18,360 --> 00:13:21,440 Speaker 1: the workout of Stanford and North Carolina over the years, 204 00:13:21,440 --> 00:13:23,439 Speaker 1: and we're thrilled she could join us. And I don't 205 00:13:23,480 --> 00:13:27,560 Speaker 1: want to talk fancy medicine professor, I want to talk 206 00:13:27,720 --> 00:13:32,280 Speaker 1: your glorious interview with w L S in Chicago back 207 00:13:32,280 --> 00:13:37,160 Speaker 1: in June, where someone is knowledgeable as you worried about 208 00:13:37,240 --> 00:13:40,360 Speaker 1: the sweat of what you do with your kids in 209 00:13:40,400 --> 00:13:44,800 Speaker 1: this pandemic to get them to socially interact. We are 210 00:13:44,880 --> 00:13:49,120 Speaker 1: back to school now, who's doing back to school best? 211 00:13:50,440 --> 00:13:53,600 Speaker 1: You know? Those questions are really critical and I find 212 00:13:53,600 --> 00:13:56,640 Speaker 1: it to be critical across our society and medicine, as 213 00:13:56,679 --> 00:14:00,880 Speaker 1: well as how it contributes to our economy. So the 214 00:14:01,000 --> 00:14:04,280 Speaker 1: places that are going to do the best with returning 215 00:14:04,360 --> 00:14:08,200 Speaker 1: to school safely are going to be those locations where 216 00:14:08,200 --> 00:14:12,520 Speaker 1: the community spread is fairly low. And that's because what 217 00:14:12,559 --> 00:14:15,880 Speaker 1: we can expect to see within a school is a 218 00:14:15,920 --> 00:14:20,600 Speaker 1: reflection of what's currently circulating in the community. And so 219 00:14:20,760 --> 00:14:25,120 Speaker 1: in places such as Florida and Georgia and Texas, which 220 00:14:25,160 --> 00:14:31,200 Speaker 1: coincidentally open schools the earliest and try to open schools 221 00:14:31,240 --> 00:14:35,360 Speaker 1: amidst high case rates in the community, we see a 222 00:14:35,400 --> 00:14:39,320 Speaker 1: lot of reports of outbreaks. I'm very hopeful that places 223 00:14:39,360 --> 00:14:43,040 Speaker 1: such as the Northeast that are opening up early in September, 224 00:14:43,040 --> 00:14:46,560 Speaker 1: we'll have a different experience because their community burden is lower. 225 00:14:46,760 --> 00:14:50,000 Speaker 1: But do your very emotional article for w l S 226 00:14:50,040 --> 00:14:52,440 Speaker 1: and Chicago, folks. It was really something about the sweat 227 00:14:52,480 --> 00:14:55,680 Speaker 1: of parents with young children, like, actually, what do you 228 00:14:55,760 --> 00:15:00,200 Speaker 1: do in London? They are begging for people to them 229 00:15:00,200 --> 00:15:03,680 Speaker 1: back to the office. People up there, Dr Carnathon are 230 00:15:03,800 --> 00:15:06,160 Speaker 1: afraid to go to work. And I want to say, folks, 231 00:15:06,160 --> 00:15:09,760 Speaker 1: Bloomberg has been phenomenal with me and Lisa about getting 232 00:15:09,840 --> 00:15:12,320 Speaker 1: us safely to work every day Pharaoh, they don't give 233 00:15:12,360 --> 00:15:14,880 Speaker 1: a damn about but me and Lisa, they'd be really 234 00:15:14,920 --> 00:15:19,000 Speaker 1: really good about. Dr Carnathon, Are we over doing this? 235 00:15:19,120 --> 00:15:21,520 Speaker 1: Should we get back to work? And get back to work? 236 00:15:21,560 --> 00:15:24,720 Speaker 1: Now you have the challenge of getting back to work 237 00:15:24,840 --> 00:15:27,360 Speaker 1: is whether or not we can actually find somewhere for 238 00:15:27,440 --> 00:15:30,240 Speaker 1: young children to go. I have a five and seven 239 00:15:30,280 --> 00:15:32,880 Speaker 1: year old who will be home all day with me today, 240 00:15:32,960 --> 00:15:35,800 Speaker 1: So what I get done is very questionable. And I 241 00:15:35,840 --> 00:15:38,960 Speaker 1: think businesses feel this, and they see this, and they 242 00:15:39,000 --> 00:15:43,200 Speaker 1: walk their employees back and rightly so. However, for the 243 00:15:43,520 --> 00:15:47,320 Speaker 1: millions of working parents who've got extremely young children who 244 00:15:47,400 --> 00:15:50,560 Speaker 1: can't stay alone, that's not going to be feasible without 245 00:15:50,640 --> 00:15:54,480 Speaker 1: some sort of notable intervention, Dr Carnathon. At the heart 246 00:15:54,520 --> 00:15:57,600 Speaker 1: of this question is how much we know about the 247 00:15:57,680 --> 00:16:01,960 Speaker 1: transmission of COVID nineteen. Do we have a sense of 248 00:16:02,000 --> 00:16:06,560 Speaker 1: just how contagious it is whether you're outside or inside. Yes. 249 00:16:06,680 --> 00:16:10,120 Speaker 1: What we know so far, and it's certainly emerging, is 250 00:16:10,160 --> 00:16:13,800 Speaker 1: that rates of transmission are lower when you're outside because 251 00:16:13,880 --> 00:16:17,920 Speaker 1: the air droplets they get dispersed a little more. We 252 00:16:18,040 --> 00:16:22,040 Speaker 1: know that protecting ourselves wearing masks can prevent the spread 253 00:16:22,120 --> 00:16:25,320 Speaker 1: in cases where we can't socially distance, and some of 254 00:16:25,320 --> 00:16:27,920 Speaker 1: those cases are going to be workplaces, and they're going 255 00:16:27,960 --> 00:16:31,440 Speaker 1: to be schools and as well as hospitals. You think 256 00:16:31,440 --> 00:16:36,280 Speaker 1: about workers within a hospital setting. We haven't seen the 257 00:16:36,960 --> 00:16:41,680 Speaker 1: extremely high numbers of infected medical personnel as of late 258 00:16:41,760 --> 00:16:43,960 Speaker 1: that we saw back in early March. So we know 259 00:16:44,080 --> 00:16:47,280 Speaker 1: that protective equipment does work, and that's what we're going 260 00:16:47,320 --> 00:16:49,360 Speaker 1: to need to be able to get people back to 261 00:16:49,440 --> 00:16:52,920 Speaker 1: work in inside settings. You know, Tom, The reason why 262 00:16:52,960 --> 00:16:54,920 Speaker 1: I asked this is because I was out and about 263 00:16:54,960 --> 00:16:57,480 Speaker 1: in the city over the weekend and there are tons 264 00:16:57,480 --> 00:17:00,320 Speaker 1: of people outside and they're eating at restaurants and they're 265 00:17:00,320 --> 00:17:04,040 Speaker 1: not exactly socially distanced, And yet we haven't really seen 266 00:17:04,200 --> 00:17:07,520 Speaker 1: the upsurge in cases, and some people are questioning whether 267 00:17:07,560 --> 00:17:09,840 Speaker 1: this is herd immunity. Some people are saying, well, there 268 00:17:09,880 --> 00:17:12,560 Speaker 1: just isn't the same sort of transmissionary outside. Still a 269 00:17:12,640 --> 00:17:15,199 Speaker 1: question tomes Lisa. But to your point in folks, I 270 00:17:15,280 --> 00:17:17,080 Speaker 1: was a guest of the New York Islanders this weekend, 271 00:17:17,119 --> 00:17:19,399 Speaker 1: so so sort of the social life that Lisa lives 272 00:17:19,560 --> 00:17:22,760 Speaker 1: that I don't live in my sequestion. Then, But Lisa, 273 00:17:22,800 --> 00:17:24,680 Speaker 1: what's so important. I want you to go to Dr 274 00:17:24,760 --> 00:17:28,439 Speaker 1: Carnathon on this, Lisa. What is so important here is 275 00:17:28,480 --> 00:17:32,240 Speaker 1: if we're socializing like that on the street, why can't 276 00:17:32,240 --> 00:17:34,919 Speaker 1: we socialize like that at the office? Well? And and 277 00:17:35,040 --> 00:17:38,000 Speaker 1: Dr Carnathon have we seen I mean to Tom's point, 278 00:17:38,600 --> 00:17:41,639 Speaker 1: is it's safe to be less than six ft apart 279 00:17:41,680 --> 00:17:45,480 Speaker 1: without a mask when you're outside? And is it possible 280 00:17:45,480 --> 00:17:48,280 Speaker 1: that if you are six feet in the office you're fine? 281 00:17:49,240 --> 00:17:53,520 Speaker 1: Me six feet was a number that was generated based 282 00:17:53,560 --> 00:17:57,840 Speaker 1: on a few experiments and based on evidence suggesting an 283 00:17:58,000 --> 00:18:02,360 Speaker 1: appropriate distance. We know for sure that these respiratory droplets 284 00:18:02,359 --> 00:18:04,879 Speaker 1: can travel further than six ft. You know, when we 285 00:18:04,920 --> 00:18:07,879 Speaker 1: think about setting such as the choir, the outbreaks that 286 00:18:07,960 --> 00:18:11,760 Speaker 1: happened in Washington State around a choir practice, or when 287 00:18:11,800 --> 00:18:16,160 Speaker 1: you're shouting or exercising and breathing heavily, six ft isn't 288 00:18:16,200 --> 00:18:19,159 Speaker 1: going to be sufficient. Whether it's going to be sufficient 289 00:18:19,240 --> 00:18:23,679 Speaker 1: for eating indoors, that's not entirely clear. I know that 290 00:18:23,800 --> 00:18:26,840 Speaker 1: I wouldn't roll the dice on that in an indoor setting. 291 00:18:27,280 --> 00:18:30,440 Speaker 1: And similarly, workplaces are very different. It's very different if 292 00:18:30,440 --> 00:18:33,040 Speaker 1: you have a private office than if you're working in 293 00:18:33,080 --> 00:18:36,760 Speaker 1: a cubicle or other shared space. Dr Karne thought, I 294 00:18:36,760 --> 00:18:39,280 Speaker 1: want to switch gears here. We do this on Bloomberg Surveillance. 295 00:18:39,280 --> 00:18:40,600 Speaker 1: Stay with us. And I'm not going to ask you 296 00:18:40,680 --> 00:18:44,760 Speaker 1: cubs white socks. That would be too stressful, but because 297 00:18:45,000 --> 00:18:49,359 Speaker 1: maybe okay, but not that stressful, not that stressful. But 298 00:18:49,480 --> 00:18:52,800 Speaker 1: I do want to talk about what you have been doing. 299 00:18:52,880 --> 00:18:56,479 Speaker 1: You have been a leader in the framework, the mental 300 00:18:56,600 --> 00:19:01,080 Speaker 1: framework of women to have a vision of a champion. 301 00:19:01,160 --> 00:19:03,800 Speaker 1: That's a title from another book that you didn't write. 302 00:19:03,880 --> 00:19:07,200 Speaker 1: Give us an update right now. And what you see 303 00:19:07,240 --> 00:19:13,720 Speaker 1: in women's sports in framing women to be more intrinsically competitive. Yeah, 304 00:19:13,800 --> 00:19:17,000 Speaker 1: you know, that's another favorite of mine as a former 305 00:19:17,119 --> 00:19:20,760 Speaker 1: athlete and raising young children, one of whom as a girl. Um, 306 00:19:20,800 --> 00:19:24,680 Speaker 1: I think it's really critically important that we emphasize to 307 00:19:24,800 --> 00:19:28,920 Speaker 1: women the importance of learning to compete, of not being 308 00:19:28,960 --> 00:19:32,680 Speaker 1: afraid to beat someone else and being unapologetic about it. 309 00:19:33,040 --> 00:19:35,239 Speaker 1: You know, the last thing you'd want would be a 310 00:19:35,280 --> 00:19:40,080 Speaker 1: world leader or a CFO who feels shy or hesitant 311 00:19:40,080 --> 00:19:42,120 Speaker 1: about beating someone. And I think a lot of those 312 00:19:42,240 --> 00:19:45,720 Speaker 1: lessons about competition are learned through sports, So I think 313 00:19:45,720 --> 00:19:48,960 Speaker 1: it's critically important that girls get out there, they get 314 00:19:49,000 --> 00:19:51,479 Speaker 1: on the field and they learn to compete. And for 315 00:19:51,560 --> 00:19:54,479 Speaker 1: everyone sports isn't going to be their thing. But there 316 00:19:54,520 --> 00:19:58,359 Speaker 1: are other competitive venues. Yeah, there's a debate, not a sport, 317 00:19:58,560 --> 00:20:02,000 Speaker 1: but certainly competitive. They're the arts where you need to 318 00:20:02,080 --> 00:20:04,480 Speaker 1: be your best and quite often you're going to be 319 00:20:04,560 --> 00:20:10,080 Speaker 1: ranked by subjective criteria. So having the competition, the competitive spirit, 320 00:20:10,440 --> 00:20:13,199 Speaker 1: having the focus to be able to practice to be 321 00:20:13,280 --> 00:20:16,160 Speaker 1: your best, I think that's critically important, especially for women. 322 00:20:16,480 --> 00:20:18,960 Speaker 1: Dr Knne from Thank You so much, greatly appreciated. She 323 00:20:19,119 --> 00:20:22,159 Speaker 1: is a professor at Northwestern University on the pandemic and 324 00:20:22,200 --> 00:20:26,600 Speaker 1: on some of the social aspects of our path forward 325 00:20:33,080 --> 00:20:34,920 Speaker 1: right now and this is gonna be a lot of fun. 326 00:20:35,080 --> 00:20:38,480 Speaker 1: Is Michael Dows, who's iconic at Wilson, And all you 327 00:20:38,520 --> 00:20:41,160 Speaker 1: need to know is if it's a grass court, there's 328 00:20:41,160 --> 00:20:44,480 Speaker 1: a certain ball, or a clay court like the French Open, 329 00:20:44,600 --> 00:20:48,000 Speaker 1: a certain ball, and then there's hard court tennis and 330 00:20:48,080 --> 00:20:51,520 Speaker 1: Wilson and Michael does have on that for over four decades. 331 00:20:51,720 --> 00:20:54,960 Speaker 1: You use Wilson tennis balls, you do nothing else, and 332 00:20:55,000 --> 00:20:57,879 Speaker 1: you believe in innovation. He was so good out at 333 00:20:57,880 --> 00:21:02,120 Speaker 1: the United States Tennis Association dragged him pe pre pandemic 334 00:21:02,600 --> 00:21:06,439 Speaker 1: over into their combine to keep tennis magic going, and 335 00:21:06,480 --> 00:21:09,359 Speaker 1: he's been given a pandemic. We're thrilled that Mr Dallas 336 00:21:09,400 --> 00:21:12,320 Speaker 1: could join us with Miss Azararenka in the background screaming 337 00:21:12,600 --> 00:21:17,560 Speaker 1: every third hit as well. Michael, congratulations on keeping it going. 338 00:21:17,880 --> 00:21:21,840 Speaker 1: What have you learned from the other sports about what 339 00:21:22,200 --> 00:21:26,240 Speaker 1: not to do if this us open? Well, not to 340 00:21:26,280 --> 00:21:28,680 Speaker 1: take it lightly and Tom les and thanks for having 341 00:21:28,720 --> 00:21:31,560 Speaker 1: me on the show today. And it is true. Victoria's 342 00:21:31,600 --> 00:21:34,000 Speaker 1: back here hitting the way, so hopefully it's not too noisy. 343 00:21:34,040 --> 00:21:37,800 Speaker 1: But what we learned is we've got to take this 344 00:21:37,880 --> 00:21:40,800 Speaker 1: serious and and never take anything for granted, and have 345 00:21:40,920 --> 00:21:43,760 Speaker 1: great partnership and teamwork with the pro Tours, but more 346 00:21:43,760 --> 00:21:46,760 Speaker 1: importantly the government right the federal government, the City of 347 00:21:46,800 --> 00:21:48,439 Speaker 1: New York, in the State of government. There was a 348 00:21:48,440 --> 00:21:50,000 Speaker 1: lot of moving parts and we had to pull all 349 00:21:50,040 --> 00:21:52,920 Speaker 1: this together to assure a safe and healthy tournament. There 350 00:21:52,920 --> 00:21:56,160 Speaker 1: are jump conditions for tennis. It's always been that kind 351 00:21:56,200 --> 00:21:59,000 Speaker 1: of sport. There was a guy named James Connors who 352 00:21:59,000 --> 00:22:01,760 Speaker 1: had a Wilson to two thousand racket a few years 353 00:22:01,760 --> 00:22:05,320 Speaker 1: ago and level the way the sport was played. Are 354 00:22:05,359 --> 00:22:08,639 Speaker 1: you at a point of innovation now? Is tennis ready 355 00:22:08,680 --> 00:22:12,800 Speaker 1: for a new jump condition of skill and speed? Oh? 356 00:22:12,840 --> 00:22:15,520 Speaker 1: I think the game is completely evolved over the years. 357 00:22:15,320 --> 00:22:18,800 Speaker 1: The amount of athleticism is incredible. But having said that, 358 00:22:18,880 --> 00:22:20,560 Speaker 1: it's a sport for all. If you think about it, 359 00:22:20,640 --> 00:22:22,640 Speaker 1: tennis is one of the few sports you can start 360 00:22:22,640 --> 00:22:24,520 Speaker 1: when you're five or six years old and you can 361 00:22:24,560 --> 00:22:26,680 Speaker 1: play all the way into your eighties. We host tournaments 362 00:22:26,680 --> 00:22:29,280 Speaker 1: from tenna nunners to eighty and over, so it's not 363 00:22:29,359 --> 00:22:31,280 Speaker 1: only the greatest athletes in the world, but it's all 364 00:22:31,320 --> 00:22:34,199 Speaker 1: people can play our sport. Micah, It's interesting when you 365 00:22:34,200 --> 00:22:36,320 Speaker 1: think about tennis. You think of two people at opposite 366 00:22:36,320 --> 00:22:39,119 Speaker 1: sides of the court, They're going to be naturally socially distanced. 367 00:22:39,400 --> 00:22:41,760 Speaker 1: What have some of the challenge has been for you 368 00:22:41,840 --> 00:22:44,760 Speaker 1: to bring some of these tennis professionals, the legends of 369 00:22:44,800 --> 00:22:48,000 Speaker 1: the world together at a time of the raging pandemic 370 00:22:48,080 --> 00:22:51,240 Speaker 1: that you really hadn't thought about before. Yeah, it was 371 00:22:51,280 --> 00:22:54,359 Speaker 1: a real lot of international cooperation and working with the 372 00:22:54,400 --> 00:22:56,280 Speaker 1: pro Tour. Did you think about it. We have players 373 00:22:56,280 --> 00:22:59,320 Speaker 1: from over sixty countries, so the dynamics we had to 374 00:22:59,320 --> 00:23:01,240 Speaker 1: work with are quite a bit different than the professional 375 00:23:01,280 --> 00:23:03,400 Speaker 1: leagues here in the US, so we had to get 376 00:23:03,440 --> 00:23:06,439 Speaker 1: collaboration from several governments in Europe not just get the 377 00:23:06,480 --> 00:23:08,680 Speaker 1: athletes in, but to assure we can get him back 378 00:23:08,680 --> 00:23:10,879 Speaker 1: to Europe after the tournament. And again we had to 379 00:23:10,880 --> 00:23:12,480 Speaker 1: work with the City of New York and the State 380 00:23:12,520 --> 00:23:14,560 Speaker 1: of New York to make sure our health protocols were 381 00:23:14,560 --> 00:23:18,040 Speaker 1: buttoned down and perfect to run this tournament. So, Mike, 382 00:23:18,080 --> 00:23:20,960 Speaker 1: there's been a lot of controversy over crowd noise. Tom 383 00:23:21,040 --> 00:23:25,480 Speaker 1: Keane has demonstrated his own version of crowd noise and 384 00:23:25,640 --> 00:23:28,920 Speaker 1: in tennis it's polite clapping and things like that. Are 385 00:23:28,920 --> 00:23:31,160 Speaker 1: you just gonna have it silent or are you going 386 00:23:31,200 --> 00:23:37,879 Speaker 1: to engage in some sort of crowd environment that's manufactured. Personally, 387 00:23:37,960 --> 00:23:39,920 Speaker 1: I'm a fan of crowd noise, so the more crowd 388 00:23:39,960 --> 00:23:42,200 Speaker 1: noise we have, the better. But for this year, obviously 389 00:23:42,240 --> 00:23:46,560 Speaker 1: without fans on site, we've partnered with one of our partners, IBM, 390 00:23:46,640 --> 00:23:49,160 Speaker 1: to come up with taking crowd noise from last year. 391 00:23:49,520 --> 00:23:52,240 Speaker 1: They they run their AI magic to it and this 392 00:23:52,320 --> 00:23:54,640 Speaker 1: year it's going to simulate the crowd noise from last year. 393 00:23:54,960 --> 00:23:57,000 Speaker 1: So we think it's gonna be pretty unique versus some 394 00:23:57,119 --> 00:23:58,919 Speaker 1: of what some of the other sports have done. At 395 00:23:58,920 --> 00:24:01,760 Speaker 1: this point, Mike, how are you going to get America 396 00:24:01,840 --> 00:24:05,640 Speaker 1: back into tennis? You've got ms Azarenka of Belarus batting 397 00:24:05,640 --> 00:24:08,880 Speaker 1: the ball around behind you, making a horrific racket, her 398 00:24:08,920 --> 00:24:13,640 Speaker 1: hero Stefe, her hero Steffie Graph, etcetera, etcetera. But there's 399 00:24:13,680 --> 00:24:16,800 Speaker 1: this crying need to get America re engaged in what 400 00:24:16,960 --> 00:24:19,919 Speaker 1: is now an international sport. How do you do it? 401 00:24:20,880 --> 00:24:25,159 Speaker 1: Butn't completely agree. More tennis is so important to us 402 00:24:25,520 --> 00:24:27,520 Speaker 1: through to US tennis, we have to get it going. 403 00:24:27,520 --> 00:24:30,080 Speaker 1: But what I'm excited about, in a strange way, the 404 00:24:30,119 --> 00:24:33,080 Speaker 1: pandemic could be what Billy Jean King and Body Riggs 405 00:24:33,119 --> 00:24:36,040 Speaker 1: were for tennis in the seventies. The pandemic could be 406 00:24:36,080 --> 00:24:39,720 Speaker 1: got and what. So we just got some statistics fact 407 00:24:39,800 --> 00:24:42,800 Speaker 1: that tennis participation in the US for entry level players 408 00:24:43,040 --> 00:24:45,359 Speaker 1: has doubled in the last three months. So if you 409 00:24:45,359 --> 00:24:47,560 Speaker 1: think about it, when you were in quarantine, you didn't 410 00:24:47,560 --> 00:24:50,879 Speaker 1: get any exercise, you didn't socialize with anyone, and you 411 00:24:50,920 --> 00:24:53,480 Speaker 1: didn't have really a lot of intellecttion stimulation. As you 412 00:24:53,520 --> 00:24:56,480 Speaker 1: go out to tennis courts, you can have all those benefits. 413 00:24:56,960 --> 00:24:59,520 Speaker 1: We saw mass merchant tennis racket sales for entry level 414 00:24:59,560 --> 00:25:01,920 Speaker 1: tennis rack it's nearly double in the last three months, 415 00:25:02,240 --> 00:25:04,639 Speaker 1: So we see tennis coming out of this potentially with 416 00:25:04,680 --> 00:25:07,320 Speaker 1: a big boom again. Well, Mike, to that point, have 417 00:25:07,440 --> 00:25:10,240 Speaker 1: you seen a pretty big financial hit from the lack 418 00:25:10,440 --> 00:25:13,560 Speaker 1: of live games and in games that could be broadcast. 419 00:25:13,560 --> 00:25:16,000 Speaker 1: Are you seeing actually a boom on the other side 420 00:25:16,240 --> 00:25:18,760 Speaker 1: because of the ability to do this sport with some 421 00:25:18,800 --> 00:25:22,240 Speaker 1: social distancing. Yeah. I mean as far as the industry, 422 00:25:22,240 --> 00:25:24,639 Speaker 1: it's coming back strong after being shut down for about 423 00:25:24,640 --> 00:25:27,320 Speaker 1: sixty days, and as I mentioned, entry level tennis is 424 00:25:27,359 --> 00:25:30,520 Speaker 1: where it's really taking up. Specific to the USC, it 425 00:25:30,600 --> 00:25:33,480 Speaker 1: is a challenge this year without fans, our revenue or 426 00:25:33,560 --> 00:25:35,560 Speaker 1: net income, I should say, it will be down about 427 00:25:36,440 --> 00:25:38,320 Speaker 1: so it's it's a big hit for us this year. 428 00:25:38,760 --> 00:25:41,399 Speaker 1: But even with that, we've had some reserves. Fortunately in 429 00:25:41,440 --> 00:25:43,840 Speaker 1: our lines of credit, we're able to continue and still 430 00:25:43,880 --> 00:25:47,120 Speaker 1: offer pretty equivalent prize money to last year and keep 431 00:25:47,160 --> 00:25:49,920 Speaker 1: the operation going. Michael, the only way we're gonna keep 432 00:25:49,920 --> 00:25:52,000 Speaker 1: this going is next time instead of as a renk, 433 00:25:52,119 --> 00:25:55,199 Speaker 1: I want John mckin rowing the background warming up and 434 00:25:55,240 --> 00:25:57,240 Speaker 1: that will make it good. Mr Dallas is with the 435 00:25:57,359 --> 00:26:02,840 Speaker 1: United States Tennis Association. Our chief executive officer and executive director, Michael, 436 00:26:02,880 --> 00:26:09,160 Speaker 1: thank you so much. Our next guests with a little 437 00:26:09,200 --> 00:26:15,720 Speaker 1: shop that has been investing in tech media telecom names 438 00:26:15,720 --> 00:26:21,520 Speaker 1: successfully for decades. Chris Maranghi, Gabelly Funds CO Chief investment Officer, 439 00:26:22,080 --> 00:26:23,919 Speaker 1: joins us here. Chris, thanks so much for joining us 440 00:26:23,960 --> 00:26:26,960 Speaker 1: once again. Let's start with some of those high flying 441 00:26:27,560 --> 00:26:31,440 Speaker 1: tech names that have experienced something that we don't talk 442 00:26:31,480 --> 00:26:34,800 Speaker 1: about too often, which is stock splits. We've had Apple, 443 00:26:34,920 --> 00:26:40,000 Speaker 1: We've had Tesla split their stocks. You're a grizzled veteran 444 00:26:40,080 --> 00:26:42,840 Speaker 1: on the institutional money management side. Do you care about 445 00:26:42,840 --> 00:26:46,239 Speaker 1: this stuff? Well, first of all, thank you for having me. 446 00:26:46,280 --> 00:26:49,520 Speaker 1: That's great to be here. UM, so of course we care. Um. 447 00:26:49,760 --> 00:26:53,960 Speaker 1: You know, stock splits don't impact the value of the company. 448 00:26:54,280 --> 00:26:57,680 Speaker 1: They shouldn't impact the price of a company, but as 449 00:26:57,720 --> 00:27:01,840 Speaker 1: we're seeing with Apple this morning, they probably do. Behavioral economics, 450 00:27:01,880 --> 00:27:05,280 Speaker 1: behavioral finance has been a very powerful force for as 451 00:27:05,320 --> 00:27:08,040 Speaker 1: long as the markets have been trading, and um, for 452 00:27:08,080 --> 00:27:11,159 Speaker 1: whatever reason, investors are putting a higher price on on 453 00:27:11,200 --> 00:27:13,480 Speaker 1: Apple this morning, even though the fundamentals really haven't changed. 454 00:27:14,600 --> 00:27:17,680 Speaker 1: All Right, so you at the good folks at Gabelly, 455 00:27:17,720 --> 00:27:19,800 Speaker 1: you've been in these tech names, these media names, these 456 00:27:19,800 --> 00:27:23,320 Speaker 1: telecom names for since the beginning here, and they've been 457 00:27:23,600 --> 00:27:27,000 Speaker 1: the real drivers of the market here. How do you 458 00:27:27,040 --> 00:27:30,240 Speaker 1: feel about some of these names, the fag plus names here. 459 00:27:30,240 --> 00:27:33,679 Speaker 1: Had they gotten out over their skis or are the 460 00:27:33,720 --> 00:27:37,520 Speaker 1: fundamentals still they're supporting these names? Well, these were unquestionally 461 00:27:37,720 --> 00:27:40,880 Speaker 1: great companies, strong cash flow, wide modes, all the kind 462 00:27:40,880 --> 00:27:44,119 Speaker 1: of things that we as value investors and people seeking 463 00:27:44,160 --> 00:27:47,119 Speaker 1: quality would look for. But yes, the prices obviously have 464 00:27:47,160 --> 00:27:50,800 Speaker 1: gone parabolic um in some cases um over the last 465 00:27:50,840 --> 00:27:54,000 Speaker 1: several months, and they probably have gotten out under their skis. 466 00:27:53,880 --> 00:27:57,560 Speaker 1: Apple at a mirror one trillion dollar valuation, you could 467 00:27:57,560 --> 00:28:01,720 Speaker 1: probably justify kind of twenty times twelve times free cash 468 00:28:01,760 --> 00:28:04,960 Speaker 1: flow UM. At two trillion, I think it's harder to do. 469 00:28:05,200 --> 00:28:08,360 Speaker 1: It's still a wonderful company, but I think investors are 470 00:28:08,400 --> 00:28:11,040 Speaker 1: discounting most of the upside that's left in that stock 471 00:28:11,080 --> 00:28:13,360 Speaker 1: at this point. Are we going to see more stock splits? 472 00:28:13,440 --> 00:28:15,800 Speaker 1: I mean, as like lemons off a cliff, somebody goes, hey, 473 00:28:15,800 --> 00:28:17,440 Speaker 1: they did it, we gotta do it? Is that how 474 00:28:17,480 --> 00:28:20,840 Speaker 1: it works? It generally does, although you know you're probably 475 00:28:20,840 --> 00:28:23,920 Speaker 1: not going to see them from something you like Brokeshire Hathaway. 476 00:28:24,040 --> 00:28:25,760 Speaker 1: I think what you're going to see, potentially depending on 477 00:28:25,760 --> 00:28:28,159 Speaker 1: what happens with the election, are more special dividends. I 478 00:28:28,160 --> 00:28:30,000 Speaker 1: think that's something that you'll see this wall. We saw 479 00:28:30,040 --> 00:28:32,840 Speaker 1: that in the last Well describe that to it. That's 480 00:28:32,880 --> 00:28:35,359 Speaker 1: that's that's a mass. I mean, good Belly wouldn't say that. Maringue, 481 00:28:35,359 --> 00:28:38,360 Speaker 1: he would say that, Paul. But what's a special dividend? 482 00:28:38,480 --> 00:28:42,200 Speaker 1: Is it special? It is? And we've seen a few 483 00:28:42,200 --> 00:28:45,560 Speaker 1: of them. Um, Liberty is Liberty Media, John Malone's company. 484 00:28:45,640 --> 00:28:48,160 Speaker 1: John is a very tax sufficient investor, perhaps the most 485 00:28:48,200 --> 00:28:52,360 Speaker 1: taxes sensitive other than Warren Buffett. And you know this 486 00:28:52,400 --> 00:28:54,880 Speaker 1: would be an effort to distribute cash to shareholders at 487 00:28:54,960 --> 00:28:58,680 Speaker 1: more favorable rates. Um, with the assumption that all kinds 488 00:28:58,680 --> 00:29:02,040 Speaker 1: of tax rates are going up next year. Chris, how 489 00:29:02,040 --> 00:29:04,360 Speaker 1: what do you guys? How are you guys thinking about 490 00:29:04,400 --> 00:29:07,280 Speaker 1: the markets right here? Where do you see value here? 491 00:29:07,320 --> 00:29:10,000 Speaker 1: We've had again that the dramatic pullback in March and 492 00:29:10,040 --> 00:29:13,840 Speaker 1: April of the markets as a pandemic really shocked the market. 493 00:29:13,920 --> 00:29:16,640 Speaker 1: And then thanks to the Federal Reserve and some other moves. 494 00:29:16,640 --> 00:29:19,720 Speaker 1: We've had a sharp, sharp rebound of the market back 495 00:29:19,760 --> 00:29:22,480 Speaker 1: to or near all time highs. Where do you guys 496 00:29:23,120 --> 00:29:26,080 Speaker 1: see value right now? Yeah, so we're seeing value really 497 00:29:26,080 --> 00:29:28,640 Speaker 1: in the in the smaller end of the market. Um, 498 00:29:28,640 --> 00:29:32,520 Speaker 1: it's where we tend to concentrate, have concentrated over many decades. 499 00:29:33,000 --> 00:29:36,719 Speaker 1: And you know, you've got the Russell two thousand value 500 00:29:36,760 --> 00:29:41,320 Speaker 1: which reflects the smaller stocks still down fift and the 501 00:29:41,400 --> 00:29:44,920 Speaker 1: quarter of the stocks are down. So you know, a 502 00:29:44,920 --> 00:29:48,520 Speaker 1: lot of the stocks and that index is not rebounded, um. 503 00:29:48,680 --> 00:29:54,920 Speaker 1: And you know, depending on the trajectory of economic recovery. Um, 504 00:29:54,960 --> 00:29:58,920 Speaker 1: they're bargains. Their bargains today, they're based on our outlook. 505 00:30:00,160 --> 00:30:02,560 Speaker 1: You know, I look, Chris at what Mr Buffet has 506 00:30:02,600 --> 00:30:06,160 Speaker 1: done here, and it hearkens back without even a legitimate 507 00:30:06,200 --> 00:30:09,360 Speaker 1: comparison to the huge conglomerates of another time in place. 508 00:30:09,400 --> 00:30:12,600 Speaker 1: And maybe that was American companies trying to be like 509 00:30:12,640 --> 00:30:16,760 Speaker 1: the Japanese. You look on the surface, dollar converted, the 510 00:30:16,840 --> 00:30:20,600 Speaker 1: dividends are ample, The dividend growth is certainly there for 511 00:30:20,720 --> 00:30:24,920 Speaker 1: some of these Japanese companies, and they've got remarkable free 512 00:30:24,920 --> 00:30:27,320 Speaker 1: cash flow. Because I was thunderstruck at how low the 513 00:30:27,400 --> 00:30:33,680 Speaker 1: capex was of these hugely established things. Does that attract 514 00:30:33,680 --> 00:30:38,400 Speaker 1: a vailue guy like you? It certainly has. Japan unfortunately 515 00:30:38,440 --> 00:30:42,320 Speaker 1: has been a bit of a value trap exactly. Um. 516 00:30:42,560 --> 00:30:46,480 Speaker 1: And you know, we thought ebonomics would change things, and 517 00:30:46,680 --> 00:30:49,320 Speaker 1: it has gradually changed things, although at a Japanese pace 518 00:30:49,480 --> 00:30:51,640 Speaker 1: which sends to be very slow. So yeah, I think 519 00:30:51,640 --> 00:30:53,760 Speaker 1: this is a This is this investment by perture Hathaway 520 00:30:53,760 --> 00:30:56,360 Speaker 1: in these Japanese training companies is a significant event for 521 00:30:56,400 --> 00:30:59,240 Speaker 1: a number of reasons, including perhaps it's a signal that 522 00:31:00,040 --> 00:31:02,800 Speaker 1: and perhaps a catalyst itself that things might change in 523 00:31:02,840 --> 00:31:05,880 Speaker 1: the Japanese corporate market. I mean, Paul, I am I'm 524 00:31:05,880 --> 00:31:08,600 Speaker 1: looking at about to fall off my chair. How about 525 00:31:08,600 --> 00:31:12,280 Speaker 1: a five point three three percent yield? Let me go, 526 00:31:12,440 --> 00:31:14,160 Speaker 1: let am I in? Yeah, I guess I'm in dollar 527 00:31:14,240 --> 00:31:18,960 Speaker 1: equivalency five point three three percent yield, five year, thirteen 528 00:31:19,000 --> 00:31:24,120 Speaker 1: percent dividend growth in playing eighties, six thousand people. And 529 00:31:24,160 --> 00:31:27,920 Speaker 1: the pe is when Marangue was in his ute. I mean, 530 00:31:28,840 --> 00:31:32,720 Speaker 1: the it's a nine and based off I guess some 531 00:31:32,920 --> 00:31:36,360 Speaker 1: ugly growth, it's a sixteen. That's an outrageous valuation, Paul, 532 00:31:36,800 --> 00:31:38,720 Speaker 1: it is, and I think that's rich the things that 533 00:31:38,720 --> 00:31:42,040 Speaker 1: attracted Mr Buffett as a value investor. So, Chris, I 534 00:31:42,080 --> 00:31:45,160 Speaker 1: know you and and and Mary have been uh invested 535 00:31:45,200 --> 00:31:48,720 Speaker 1: all across the media space for decades. What's your view 536 00:31:49,640 --> 00:31:53,800 Speaker 1: of media today? Um? Is there a It just seems 537 00:31:53,840 --> 00:31:56,840 Speaker 1: like it's never been more uncertain given the last four 538 00:31:56,920 --> 00:31:59,200 Speaker 1: or five six months as consumer behaviors change. How do 539 00:31:59,240 --> 00:32:03,640 Speaker 1: you kind of view some of the traditional media verticals. Yeah, so, 540 00:32:03,760 --> 00:32:05,719 Speaker 1: you know, we split the market as many due between 541 00:32:05,720 --> 00:32:09,880 Speaker 1: distribution and content, and obviously the distribution side has done 542 00:32:09,960 --> 00:32:13,200 Speaker 1: quite well. Those are the cable companies erstwhile cable companies 543 00:32:13,240 --> 00:32:15,880 Speaker 1: now known as broadband infrastructure companies, and their future I 544 00:32:15,920 --> 00:32:18,479 Speaker 1: think is as bright as ever. We've proven how important 545 00:32:18,520 --> 00:32:22,440 Speaker 1: broadband is to the household, and they have enormous pricing power. Uh. 546 00:32:22,480 --> 00:32:25,400 Speaker 1: In that, the question comes in on the content companies 547 00:32:25,440 --> 00:32:28,280 Speaker 1: and um, you know, obviously the old way of doing business, 548 00:32:28,280 --> 00:32:33,560 Speaker 1: the old Hollywood machine is changed and probably changed forever. UM. 549 00:32:33,600 --> 00:32:37,200 Speaker 1: A lot of the content companies that grew around the 550 00:32:37,280 --> 00:32:41,160 Speaker 1: growth of cable distribution, the viacoms and A M C 551 00:32:41,440 --> 00:32:45,360 Speaker 1: s UH and Discoveries of the world, have some significant 552 00:32:45,400 --> 00:32:50,200 Speaker 1: challenges that have gotten worse during this crisis, secular challenges, 553 00:32:50,240 --> 00:32:52,840 Speaker 1: cord cutting popular than known, and that's not going to change. 554 00:32:52,840 --> 00:32:55,200 Speaker 1: But they're trying to change themselves and they're they're going 555 00:32:55,280 --> 00:32:56,800 Speaker 1: to get there. The question is what do you want 556 00:32:56,840 --> 00:32:59,520 Speaker 1: to pay for that on a risk adjusted basis? And 557 00:33:00,200 --> 00:33:03,080 Speaker 1: some of those companies I think remain attractive given given 558 00:33:03,120 --> 00:33:06,760 Speaker 1: where they trade. Christy, you, I mean, this is a 559 00:33:06,840 --> 00:33:08,760 Speaker 1: question I asked Paul, but instead I'm gonna ask you, 560 00:33:08,840 --> 00:33:12,440 Speaker 1: Chris Marangy. If you bring in a dollar of streaming 561 00:33:12,520 --> 00:33:18,160 Speaker 1: monthly income, what are the income statement margins on that? Like? 562 00:33:18,400 --> 00:33:24,000 Speaker 1: Do they do they bring down to the middle line? 563 00:33:24,400 --> 00:33:28,080 Speaker 1: I mean, is it that profitable? Well, at the moment, 564 00:33:28,160 --> 00:33:32,760 Speaker 1: it's not. It's not. These are generally subscale businesses. The 565 00:33:32,760 --> 00:33:36,520 Speaker 1: way the old media model was probably the profit maximizing model. 566 00:33:36,560 --> 00:33:39,360 Speaker 1: That is, you've got monthly recurring revenue, it's paid to 567 00:33:39,400 --> 00:33:41,160 Speaker 1: you by the cable company, and then you've got money 568 00:33:41,200 --> 00:33:46,120 Speaker 1: from advertising. Um In most of the streaming models, not all. Peacock, 569 00:33:46,200 --> 00:33:48,800 Speaker 1: which is contast model, is an advertising base model, but 570 00:33:48,840 --> 00:33:52,120 Speaker 1: most of them are to exclude advertising. So you've excluded 571 00:33:52,120 --> 00:33:54,800 Speaker 1: somebody very revenue stream and you're expecting consumers to pay 572 00:33:54,800 --> 00:34:00,480 Speaker 1: a premium in effect for at content and at the 573 00:34:00,520 --> 00:34:03,479 Speaker 1: moment um, you know, at six at six seven dollars, 574 00:34:03,800 --> 00:34:07,680 Speaker 1: things like Disney Plus are not are not particularly profitable, 575 00:34:07,760 --> 00:34:10,840 Speaker 1: and the question is can they raise prices Netflix did 576 00:34:11,080 --> 00:34:13,480 Speaker 1: and become more profitable over time, and they probably can, 577 00:34:13,520 --> 00:34:16,120 Speaker 1: but again that is a there's a multi year process. 578 00:34:16,360 --> 00:34:18,080 Speaker 1: I mean, Paul, I just don't get it. I mean, 579 00:34:18,080 --> 00:34:20,040 Speaker 1: I'm looking at my TV and folks, I'm like the 580 00:34:20,040 --> 00:34:23,600 Speaker 1: biggest amateur of this anybody out there, I mean, you know, 581 00:34:24,120 --> 00:34:27,080 Speaker 1: I you know, you're paying everybody, you know. I just 582 00:34:27,080 --> 00:34:29,880 Speaker 1: thought it was like talking about Mandalorian, which is old news. 583 00:34:29,920 --> 00:34:34,120 Speaker 1: I guess I didn't even know about Baby Yoda, you know. 584 00:34:34,239 --> 00:34:37,480 Speaker 1: But but does anybody make money at this Paul Sweeney, Well, 585 00:34:37,520 --> 00:34:39,000 Speaker 1: I think we're starting to see in the US, and 586 00:34:39,080 --> 00:34:42,719 Speaker 1: Chris knows, well, Uh, the US for Netflix is profitable 587 00:34:42,840 --> 00:34:44,759 Speaker 1: and uh, you know, but the problem for a lot 588 00:34:44,760 --> 00:34:48,480 Speaker 1: of these other issues is, as Chris mentioned, their subscale. Uh, 589 00:34:48,520 --> 00:34:50,120 Speaker 1: and so the revenue is not there to pay for 590 00:34:50,160 --> 00:34:53,200 Speaker 1: this huge programming bill that they have, so right now 591 00:34:53,200 --> 00:34:55,279 Speaker 1: the answer is no. Hopefully they can scale into it. 592 00:34:55,480 --> 00:34:58,120 Speaker 1: And Chris Tom asked me a question just just a 593 00:34:58,120 --> 00:35:01,160 Speaker 1: few minutes ago about the few ture of movie theaters. 594 00:35:01,680 --> 00:35:03,359 Speaker 1: Are we ever going to go back to the movie theaters? 595 00:35:03,360 --> 00:35:05,920 Speaker 1: Were starting to see some states open up their movie theaters, 596 00:35:06,520 --> 00:35:08,680 Speaker 1: and I'm just not sure about the future of people 597 00:35:08,880 --> 00:35:11,480 Speaker 1: going back to the theaters now that they've spent five, six, 598 00:35:11,520 --> 00:35:14,040 Speaker 1: seven months in their homes and they've got all these 599 00:35:14,040 --> 00:35:19,120 Speaker 1: streaming services. Yeah, for somebody like me with a big family, UM, 600 00:35:19,120 --> 00:35:21,479 Speaker 1: it's certainly a lot more cost effective to stay home 601 00:35:21,880 --> 00:35:26,120 Speaker 1: and Netflix. Um. But yeah, you know the experience of 602 00:35:26,120 --> 00:35:28,799 Speaker 1: going out to a theater, going to dinner, and that 603 00:35:29,800 --> 00:35:32,120 Speaker 1: I think it's still valuable and people are gonna go 604 00:35:32,160 --> 00:35:34,919 Speaker 1: back to the theaters when this is over, but it's 605 00:35:34,920 --> 00:35:39,279 Speaker 1: certainly probably a lower um, lower attendance. And obviously the 606 00:35:39,320 --> 00:35:41,520 Speaker 1: exhibition companies have a lot of debt themselves, so they've 607 00:35:41,520 --> 00:35:43,400 Speaker 1: got to work through some of their issues as we 608 00:35:43,400 --> 00:35:46,480 Speaker 1: go along. Very good, uh, Christopher, and thank you so much, 609 00:35:46,520 --> 00:35:50,720 Speaker 1: greatly appreciate that their optimism from Cabelly looking at the markets. 610 00:35:51,760 --> 00:35:55,920 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 611 00:35:56,000 --> 00:36:01,320 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 612 00:36:01,360 --> 00:36:05,600 Speaker 1: platform you prefer. I'm on Twitter, at Tom Keane before 613 00:36:05,640 --> 00:36:09,840 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.