WEBVTT - Puerto Rico Creditors Seek Restructuring Amid Disaster 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.199 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Like 0:00:32.320 --> 0:00:35.280 we always do at this time of the day on Fridays, 0:00:35.280 --> 0:00:37.680 we are very lucky to have with us Joe Maisak, 0:00:37.840 --> 0:00:40.400 editor of the Bloomberg Brief that focuses on the municipop 0:00:40.440 --> 0:00:43.479 blom market uh and he is of course here in 0:00:43.520 --> 0:00:46.479 our Bloomberg eleven three oh studios. Joe, we have to 0:00:46.560 --> 0:00:49.560 start with Puerto Rico for a lot of reasons. First 0:00:49.560 --> 0:00:53.360 of all, the disaster that is the aftermath of Hurricane 0:00:53.400 --> 0:00:55.760 Maria is ongoing, and there are still a lot of 0:00:55.840 --> 0:00:58.000 questions about how the island will get the aid it 0:00:58.120 --> 0:01:02.200 needs to even begin to get people potable water and 0:01:02.280 --> 0:01:05.360 the electricity. On little loan rebuild, I want to start 0:01:05.360 --> 0:01:09.360 the bondholders took this week as an opportunity to an 0:01:09.520 --> 0:01:13.600 extent or offer a one billion dollar dip loan right 0:01:13.600 --> 0:01:15.560 This is basically a debtors and possession. It's basically a 0:01:15.560 --> 0:01:19.840 bankruptcy tool, financing tool. They offered to give Puerto Rico 0:01:19.920 --> 0:01:24.320 a one billion dollar loan in return for a deal 0:01:24.360 --> 0:01:26.760 that they had proposed previously. Basically, they're going to be 0:01:26.840 --> 0:01:29.760 first in line to get repaid. Can you give us 0:01:29.760 --> 0:01:32.280 a sense of what your take on this offer was, Well, 0:01:32.319 --> 0:01:37.480 you gotta hand it to him. Uh, this is what 0:01:38.600 --> 0:01:43.679 some creditors do. They have a very sharp elbowed bunch 0:01:44.240 --> 0:01:47.880 and they want to get everybody out of the way. Um. 0:01:47.920 --> 0:01:50.000 But I'll tell you what we're looking at now. You know, 0:01:50.360 --> 0:01:54.160 before this, we were looking at the at the best bonds, 0:01:54.200 --> 0:01:59.080 the most highly secured bonds, at recoveries of between and 0:02:00.000 --> 0:02:01.920 it's in the dollar you're talking about these, the Puerto 0:02:01.960 --> 0:02:05.240 Rico Electric Power Authority bonds, right Rico Guos, Puerto Rico 0:02:05.320 --> 0:02:10.000 Electric Power Authority bonds, Cofina's sales tax the best of 0:02:10.040 --> 0:02:13.840 the bunch we were talking about, you know, pretty those 0:02:13.919 --> 0:02:19.080 kind of of recoveries. And with the storm. Uh. Ted 0:02:19.120 --> 0:02:22.560 Hampton did a report this week of Moody's and uh, 0:02:22.600 --> 0:02:24.280 you know, he said, well, it could very well be 0:02:24.400 --> 0:02:28.400 that you're gonna the storm's impact will have an impact 0:02:28.480 --> 0:02:31.120 on those recoveries even less. So you're not going to 0:02:31.200 --> 0:02:36.080 have fifteen cent uh haircuts like the this this Loan 0:02:36.200 --> 0:02:40.840 programs was positing, you know. I just want to mention 0:02:40.880 --> 0:02:42.919 also to all of our listeners that we are awaiting 0:02:42.960 --> 0:02:46.000 comments from President Donald Trump. He will be pushing for 0:02:46.080 --> 0:02:49.280 his tax reform proposal in giving a speech in front 0:02:49.280 --> 0:02:52.239 of the National Association of Manufacturers in Washington, d C. 0:02:52.440 --> 0:02:55.440 We will bring you, of course, the important highlights. Uh. 0:02:55.600 --> 0:02:56.960 You know, Joe, one of the things I want to 0:02:56.960 --> 0:02:59.320 ask you about has to do with the bankruptcy because 0:02:59.360 --> 0:03:02.960 I understand that the Title three bankruptcy case, there's an 0:03:02.960 --> 0:03:06.760 omnibus hearing that was originally scheduled, and it was scheduled, 0:03:06.800 --> 0:03:12.160 I believe for like yesterday, but uh, District U S. 0:03:12.200 --> 0:03:15.360 District Court judge in the Southern District of New York, 0:03:15.440 --> 0:03:21.480 Laura Taylor swain Um indefinitely postponed the hearing. Is that 0:03:21.520 --> 0:03:26.040 going to affect any of the reconstruction or indeed any 0:03:26.040 --> 0:03:29.120 of the financial issues that Puerto Rico is facing. I 0:03:29.160 --> 0:03:33.440 think that was a a sort of postponement out of 0:03:33.840 --> 0:03:37.920 almost good taste, you know, with such devastation on the 0:03:37.960 --> 0:03:41.120 island and the rescue taking place a few weeks here 0:03:41.160 --> 0:03:44.240 and there are really going to that's not going to 0:03:44.320 --> 0:03:47.600 have much of an impact, Joe. My sense is, given 0:03:47.640 --> 0:03:50.000 the fact that there are so many problems even distributing 0:03:50.120 --> 0:03:54.720 goods to people in Puerto Rico from the ports, my 0:03:54.800 --> 0:03:57.160 sense is that the government is kind of a disarray, 0:03:57.240 --> 0:03:59.720 just trying to get their handle around the problem. When 0:03:59.720 --> 0:04:02.240 do you think that they will be more together and 0:04:02.360 --> 0:04:06.720 able to tackle both the island's financial issues as well 0:04:06.760 --> 0:04:12.320 as the debt negotiations once again, well, the debt negotiations 0:04:12.720 --> 0:04:16.440 were probably talking, you know, well into October before we 0:04:16.480 --> 0:04:21.799 sit down again and start, you know, hashing that out. Um. 0:04:21.800 --> 0:04:25.719 But as far as the reconstruction of the island is going, 0:04:26.640 --> 0:04:29.360 there are a lot of people who have been sent 0:04:29.520 --> 0:04:34.560 to the island. There's a lot of material already there 0:04:34.800 --> 0:04:38.400 that hasn't been unloaded. And I thought, gosh, there was 0:04:38.440 --> 0:04:41.400 a story this week and it said they were having 0:04:41.800 --> 0:04:45.760 difficulties delivering a lot of the material it's been sent 0:04:46.240 --> 0:04:50.239 because there was a lack of drivers. And I haven't 0:04:50.680 --> 0:04:55.200 heard or seen any estimates of how many people left 0:04:55.279 --> 0:04:59.239 the island before the storm or with the storm, and 0:04:59.839 --> 0:05:02.800 I I would suspect it's quite a lot, because they said, 0:05:03.000 --> 0:05:05.440 you know, if we were having a problem just finding 0:05:05.520 --> 0:05:10.000 drivers to you know, deliver the stuff. Joe, can I 0:05:10.040 --> 0:05:12.240 just follow up though on this the legal proceedings for 0:05:12.279 --> 0:05:15.880 just a second, because the President of the Puerto Rico 0:05:16.000 --> 0:05:20.640 House asked the Oversight Board to suspend all legal proceedings 0:05:20.720 --> 0:05:22.919 against the Puerto Rican government. And there's even been a 0:05:22.960 --> 0:05:27.000 proposal that maybe they should just stop enforcing the plans 0:05:27.120 --> 0:05:29.760 measures for at least a year, maybe even over the 0:05:29.800 --> 0:05:33.440 next five years. Is that likely? I would find that 0:05:33.560 --> 0:05:39.479 extremely unlikely. Uh. The the the road to recovery is going 0:05:40.040 --> 0:05:45.760 um is going to um uh be paved, if you will, 0:05:46.120 --> 0:05:51.680 with the financial plan. And yeah, but why wouldn't they 0:05:51.680 --> 0:05:54.120 Why wouldn't they grant them? Why wouldn't they grant them 0:05:54.120 --> 0:05:57.160 a postponement? You've got a situation whereas you just described, 0:05:57.440 --> 0:06:00.000 no one even really knows the extent of the damage, 0:06:00.040 --> 0:06:03.719 accept that it is catastrophic. Why wouldn't there be a 0:06:03.800 --> 0:06:07.440 sympathetic ear to the postponement of an austerity plan at 0:06:07.440 --> 0:06:11.080 a time when the island Commonwealth is trying to rebuild. Well, 0:06:11.480 --> 0:06:16.480 you know, they the Island is getting assistance right now. 0:06:16.800 --> 0:06:21.400 So it's not as though getting a recovery plan in place, 0:06:21.480 --> 0:06:24.240 which is what the board is trying to do, is 0:06:24.240 --> 0:06:40.000 going to somehow handicap them. All Right, let's turn our 0:06:40.000 --> 0:06:43.800 attention now to education. Everyone wants it and particularly in 0:06:43.880 --> 0:06:46.560 developing nations and in China. And here to help us 0:06:46.600 --> 0:06:48.920 understand more about it. As Pingway, he is the chief 0:06:48.920 --> 0:06:53.880 financial officer of r y B Education and he's going 0:06:53.920 --> 0:06:55.640 to tell us a little bit about the company's initial 0:06:55.640 --> 0:07:00.960 public offering. It The priced the on September seventh, on yesterday, Uh, 0:07:01.000 --> 0:07:03.400 I beg your pardon on Wednesday paying thank you very 0:07:03.440 --> 0:07:07.080 much for being with us, Thanks for having me great. 0:07:07.520 --> 0:07:09.800 You know, could you just describe for us to demand 0:07:09.840 --> 0:07:13.120 because people may not understand the demand and the perceived 0:07:13.160 --> 0:07:17.200 necessity of getting a great education and scoring well on 0:07:17.400 --> 0:07:23.200 tests in China? Will Chinese traditionally really emphasis a lot 0:07:23.240 --> 0:07:26.360 of education and thanks to that, I think that, you know, 0:07:26.480 --> 0:07:30.840 we as long as we can get the high quality education, 0:07:30.880 --> 0:07:36.239 we grab those and our IB Education is an early 0:07:36.280 --> 0:07:40.960 chryhood education company based in China. We provide actually training 0:07:41.560 --> 0:07:44.960 for children aging six months to six years old through 0:07:45.000 --> 0:07:49.200 our pennor centers, and then we provide kindergarten and preschool 0:07:49.320 --> 0:07:52.280 services to children from two years to six years old. 0:07:52.840 --> 0:07:57.680 And uh, you know, kindergarten in preschool is a neceaturday worldwide, 0:07:57.760 --> 0:08:01.280 not just in China, but China particularly so for private 0:08:01.320 --> 0:08:05.680 sector because we don't have a sufficient public infrastructure unlike 0:08:05.680 --> 0:08:09.080 that in the US. So in China about half of 0:08:09.160 --> 0:08:13.320 all kindergarten and preschool services are actually private owned. Um 0:08:13.400 --> 0:08:16.120 Our I b A is the largest or largest well 0:08:16.120 --> 0:08:19.760 in terms of revenue both on our PLC business to 0:08:19.800 --> 0:08:25.240 Plan Learn Center business and our kindergarten side. Um so 0:08:25.800 --> 0:08:28.640 in terms of why it's a necessity our guests and 0:08:29.760 --> 0:08:34.400 the infrastructure aside, and the demand for high quality education side. 0:08:34.480 --> 0:08:37.040 I think there's another thing that is, you know, with 0:08:37.120 --> 0:08:40.240 the abolition of their one child policy in China, the 0:08:40.360 --> 0:08:44.840 birth rate has increased quite significantly. Give you some numbers. 0:08:44.960 --> 0:08:48.320 In twenty fifteen, there were about the sixteen point six 0:08:48.360 --> 0:08:52.640 million kids born in China. By twenty sixteen, the first 0:08:52.720 --> 0:08:56.920 year after the two children policy was adopted, the birthday 0:08:57.040 --> 0:09:00.600 went up to seventeen point nine million kids in the year. 0:09:01.000 --> 0:09:04.320 And there's another number that points to an even higher 0:09:04.400 --> 0:09:06.720 number of eighteen points six men, and with so many 0:09:06.800 --> 0:09:10.840 children born, the need for childhoods for early childhood education 0:09:10.960 --> 0:09:14.839 also increased quite dramatically. Yeah, um, you know, pain, it 0:09:14.960 --> 0:09:17.840 strucks me. It strikes me as interesting that you chose 0:09:17.880 --> 0:09:20.600 to do initial public offering in the United States. There's 0:09:20.640 --> 0:09:23.520 been a lot of questions about why there haven't been 0:09:23.640 --> 0:09:26.480 more I p O s in the US. What drew 0:09:26.520 --> 0:09:30.840 you to this market to raise money? Yeah, Well, in fact, 0:09:31.080 --> 0:09:33.200 if you look to the U S side, there are 0:09:33.200 --> 0:09:37.280 a few pretty good Chinese names here, New Oriental Tel 0:09:37.520 --> 0:09:41.720 Education both are sort of really high quality education companies 0:09:42.200 --> 0:09:45.080 from China. We really like the US market in a 0:09:45.120 --> 0:09:49.199 few reasons. One, it's the the US market investors are 0:09:49.520 --> 0:09:52.600 so always sophisticated and well educated. Too, is the U 0:09:52.720 --> 0:09:55.880 S market has very um sort of a clear and 0:09:55.960 --> 0:10:00.840 transparent rules and which creates a sort of a level 0:10:01.040 --> 0:10:04.120 place there for all companies, so companies only need to 0:10:04.160 --> 0:10:07.040 focus on doing the right things for shareholders in creating 0:10:07.080 --> 0:10:10.000 value and not having to worry too much about other things. 0:10:10.080 --> 0:10:13.960 And thirdly, it's actually a good branding and good sort 0:10:14.000 --> 0:10:18.960 of an uh self governance per se for Chinese companies. 0:10:19.600 --> 0:10:23.360 UH like. First of all branding side being able to 0:10:23.480 --> 0:10:26.760 listen in the US and sort of also a good 0:10:27.000 --> 0:10:32.760 US public market or capital market sort of uh, citizens 0:10:33.400 --> 0:10:36.280 is uh sort of endorsement of the quality of the 0:10:36.280 --> 0:10:41.160 company itself. And secondly, the sun stocks they act, you know, 0:10:41.240 --> 0:10:45.240 while it's a kind of cumbersome and then uh sort 0:10:45.280 --> 0:10:47.680 of a lot of work, it's actually a good way 0:10:47.720 --> 0:10:51.320 to force company to have good governance, and those good 0:10:51.360 --> 0:10:54.400 governors actually help company avoid a lot of sort of 0:10:54.440 --> 0:10:58.000 system risk operation wide. Every company has this opting ups 0:10:58.080 --> 0:11:01.640 and downs. But the good God and is actually steals 0:11:01.640 --> 0:11:05.199 a company in right direction. That's what we believe. Pingwait, 0:11:05.280 --> 0:11:07.440 thank you so much for joining us. Pingway is a 0:11:07.520 --> 0:11:13.199 chief financial officer for r y B Education based in Beijing. Uh. 0:11:13.240 --> 0:11:16.760 This week, it priced an initial public offering in the 0:11:16.840 --> 0:11:19.960 US New York Stock Exchange, raising a hundred and forty 0:11:20.040 --> 0:11:37.160 four point three million dollars. We are awaiting President Donald Trump. 0:11:37.200 --> 0:11:39.880 He is going to be speaking before the National Association 0:11:39.880 --> 0:11:42.960 and Manufacturers in Washington, d C. Of course, his topic 0:11:43.040 --> 0:11:46.160 is going to be his tax reform proposal. We'll, of 0:11:46.200 --> 0:11:49.040 course bring that to you as soon as it begins. 0:11:49.480 --> 0:11:54.120 Let's turn our attention now to combining two distinct groups billionaires, 0:11:54.120 --> 0:11:57.240 people with lots of money of course, and uh, there 0:11:57.280 --> 0:12:02.480 are companies as well as how to initiate strategic relationships 0:12:02.600 --> 0:12:06.080 with other businesses with startups for example. And here to 0:12:06.120 --> 0:12:10.760 help us understand this particular situation is Dmitri our Geropolis. 0:12:10.760 --> 0:12:13.360 He is the founder and the chief executive of event 0:12:13.559 --> 0:12:16.800 Global and he joins us in our eleven three oh studios. Dmitri, 0:12:16.840 --> 0:12:18.840 thank you very much for being here. Tell people about 0:12:18.920 --> 0:12:22.000 event Global what what is its purpose? You know, we 0:12:22.080 --> 0:12:28.280 take we take the best opportunities, uh, and we marry 0:12:28.320 --> 0:12:32.240 them with the best network that we have the you know, 0:12:32.280 --> 0:12:35.760 whether it's a startup or a very established company, our 0:12:35.800 --> 0:12:38.640 goal is really singular. We know how to put the 0:12:38.720 --> 0:12:41.280 right people together. What's the criteria? I mean because frankly, 0:12:41.320 --> 0:12:43.280 I mean everybody says we're only going to give you 0:12:43.320 --> 0:12:45.040 the best investments, and we're only going to get you 0:12:45.080 --> 0:12:47.360 the best investors. I mean, no one wants second place. 0:12:47.840 --> 0:12:49.640 How do you do this? Can you give us an example? 0:12:49.679 --> 0:12:55.840 People don't understand how to build relationships, Uh that often 0:12:56.160 --> 0:12:58.080 as well as we do. That's all we've done for 0:12:58.120 --> 0:13:03.320 twenty years. We really we we build tremendous value by 0:13:03.400 --> 0:13:09.360 under identifying the inefficiencies in business and marrying the right people. 0:13:09.440 --> 0:13:13.520 But can you give us an example. So so for example, 0:13:13.760 --> 0:13:19.120 we you know, we recently identified a very UM unique 0:13:19.440 --> 0:13:23.880 UM consumer product in the Mediterranean and we locked up 0:13:23.920 --> 0:13:30.240 that UM that agreement. We we got exclusivity on the product. 0:13:30.320 --> 0:13:32.840 We partnered up with the right distiller, We partnered up 0:13:32.840 --> 0:13:36.080 with the right distributor, and then we got the you know, 0:13:36.120 --> 0:13:38.480 one of the biggest spirits families in the world to 0:13:38.640 --> 0:13:41.599 back the deal. And we created a tremendous amount of 0:13:41.640 --> 0:13:44.400 value by by putting all those pieces together. We did 0:13:44.400 --> 0:13:48.199 it with the largest UM cookie company in Germany and 0:13:48.280 --> 0:13:51.120 partnered with the largest co packer on the West Coast 0:13:51.400 --> 0:13:54.920 and created an organic cookie brand UM you know in 0:13:55.720 --> 0:14:01.000 one evening that's now launching UM with mass of distribution 0:14:01.080 --> 0:14:05.760 because the co packer has distribution in every major supermarket 0:14:05.760 --> 0:14:09.920 in America and the manufacturer doesn't have access to it, 0:14:09.960 --> 0:14:12.800 but he has one of the biggest factories in Europe 0:14:13.160 --> 0:14:15.319 and has created a very unique product that the market 0:14:15.360 --> 0:14:18.600 hasn't seen. Dmitri, it sounds like you're a sorcerer. It's 0:14:18.600 --> 0:14:21.400 sort of the job of that used to be in 0:14:21.480 --> 0:14:24.000 banks and has moved increasingly to private equity firms and 0:14:24.080 --> 0:14:27.080 hedge funds of going out and finding opportunities that are 0:14:27.120 --> 0:14:30.200 off the grid and that may be smaller than the 0:14:30.240 --> 0:14:33.440 ones that are financed in public markets. Is that correct? Correct? 0:14:33.720 --> 0:14:36.320 So what how do you go about? What's your process 0:14:36.440 --> 0:14:40.640 of trying to identify these opportunities other than just you know, 0:14:40.720 --> 0:14:43.800 hanging out and what people say. I think it's it's 0:14:43.840 --> 0:14:46.240 so important. You have to have value propositions that are 0:14:46.240 --> 0:14:49.120 equal or greater on both sides. If if if the 0:14:49.160 --> 0:14:52.600 person like the cookie guy the cookie factory didn't have 0:14:52.720 --> 0:14:55.160 access to the US, the guy in the US didn't 0:14:55.200 --> 0:14:58.480 have access to those unique ingredients and those qualities that 0:14:58.480 --> 0:15:01.800 that that cookie company had, they needed each other and 0:15:01.840 --> 0:15:04.520 therefore you created something. You find the inefficiencies of what 0:15:04.600 --> 0:15:08.160 people don't have, and if you understand people's platforms, you 0:15:08.240 --> 0:15:11.920 bring in the biggest people were principal investors in the 0:15:12.000 --> 0:15:13.920 deals we do, and we do a lot of things 0:15:13.960 --> 0:15:16.040 in technology, and we do a lot of things in 0:15:16.040 --> 0:15:18.960 the consumer space. Those are really our areas, but we 0:15:19.000 --> 0:15:21.120 have done things in a lot of different areas. For example, 0:15:21.240 --> 0:15:23.440 we did a deal with the Boon Pickens, and we 0:15:23.520 --> 0:15:26.760 brought a billionaire from Asia who wanted to have access 0:15:26.800 --> 0:15:29.920 to the energy industry. We helped t Boon divest of 0:15:30.000 --> 0:15:33.680 some assets, build a great international relationship which ended up 0:15:33.960 --> 0:15:37.640 being a massive transaction, and subsequently he was involved in 0:15:37.640 --> 0:15:39.880 a number of other deals with the Boon. Can you 0:15:39.920 --> 0:15:43.040 give us an idea of what is your participation in this? 0:15:43.160 --> 0:15:45.520 Do you take an equity stake? How do you make money? 0:15:45.560 --> 0:15:48.480 Were principal investors in all the deals that we do 0:15:49.000 --> 0:15:52.200 and we are we own a piece of the business. 0:15:52.280 --> 0:15:57.880 So by bringing people together and creating the value from scratch, uh, 0:15:58.120 --> 0:16:01.440 we are. We we form a neukoe typically and that 0:16:01.560 --> 0:16:04.400 new code, we become a shareholder in that. And so 0:16:04.440 --> 0:16:06.880 we're long term. We have a long term view whatever 0:16:06.960 --> 0:16:09.760 we do because we believe in the people we were 0:16:10.280 --> 0:16:13.920 we're putting together. We're not we're not brokering introductions for 0:16:14.080 --> 0:16:18.560 five minutes of fees. We're doing it for the long term. 0:16:18.920 --> 0:16:21.680 We've been doing it almost twenty years. So Dmitri, how 0:16:21.720 --> 0:16:26.400 have you established such a network of billionaires and business owners? 0:16:27.280 --> 0:16:30.160 That's a great question. I think part of it stems from, 0:16:30.320 --> 0:16:33.280 you know, just very early in my career, I was 0:16:33.320 --> 0:16:37.280 fortunate enough to intern for and volunteer for UM you know, 0:16:37.320 --> 0:16:42.920 the former President Clinton. I you know, UM, I was 0:16:42.960 --> 0:16:45.680 able to you know, I just it's just in my blood. 0:16:45.880 --> 0:16:48.000 Networking was something I've always done since I was a 0:16:48.000 --> 0:16:51.120 young guy, and I had some great mentors from you know, 0:16:51.160 --> 0:16:54.640 the guy that helps start Motel six uh to you 0:16:54.680 --> 0:16:59.480 know certain well known business mavens in in California, to 0:17:00.080 --> 0:17:03.160 you know, being influenced by people like the former president 0:17:03.440 --> 0:17:07.080 and other global leaders uh, and really just learning how 0:17:07.119 --> 0:17:09.800 to build relationships and trust and not being in a 0:17:09.880 --> 0:17:14.040 rush to create something. Um. People that are so successful 0:17:14.119 --> 0:17:19.080 have a low um uh tolerance for people that are 0:17:19.160 --> 0:17:21.360 quick to do stuff. If you have a long term 0:17:21.359 --> 0:17:25.199 approach and you can create real value and you demonstrate 0:17:25.240 --> 0:17:27.720 that time and time again, you build a great amount 0:17:27.720 --> 0:17:30.680 of trust with someone like that, which is something that 0:17:30.720 --> 0:17:33.440 they have a hard time believing with believing in people, 0:17:33.480 --> 0:17:35.159 because there's a lot of people that it's hard to 0:17:35.160 --> 0:17:38.480 trust people. When you have everything, people always want something 0:17:38.520 --> 0:17:42.040 from your Well, I'm wondering, in as part as part 0:17:42.119 --> 0:17:46.280 of the act of building that relationship, have you found 0:17:46.520 --> 0:17:50.119 that you really only want to bring consumer deals to 0:17:51.040 --> 0:17:54.119 organizations or people that have a consumer background. You have 0:17:54.200 --> 0:17:56.399 people that are interested in perhaps in real estate, and 0:17:56.440 --> 0:17:59.160 they only have a real estate background, and is does 0:17:59.200 --> 0:18:02.920 that characterize it? They stick to what they know, right, 0:18:02.960 --> 0:18:05.879 I mean, I I know a little bit about a 0:18:05.920 --> 0:18:09.280 lot of things, and as long as I understand how 0:18:10.320 --> 0:18:12.800 to put the value together and who to put together, 0:18:13.160 --> 0:18:17.439 it becomes very natural at doing almost doing this for 0:18:17.440 --> 0:18:18.879 twenty years. So right, but do they have but do 0:18:18.960 --> 0:18:22.359 they have to have expertise in that specific subject matter? 0:18:22.520 --> 0:18:24.840 So for example, you know people who have a lot 0:18:24.840 --> 0:18:26.480 of money, let's say a family office that has a 0:18:26.560 --> 0:18:28.439 lot of money, they're not even though it might be 0:18:28.480 --> 0:18:32.040 a great deal, if they don't understand the business or 0:18:32.119 --> 0:18:35.080 they're not have you know, historical experience either with their 0:18:35.119 --> 0:18:38.640 family or what made them wealthy. If they don't have 0:18:38.720 --> 0:18:41.760 that connection, do you kind of say that's not really 0:18:41.760 --> 0:18:43.680 gonna work, because you know, just because they have a 0:18:43.720 --> 0:18:47.000 lot of money doesn't really gonna you You want them 0:18:47.040 --> 0:18:50.760 to be strategic, of course, but sometimes you want also 0:18:50.800 --> 0:18:53.800 family officers to participate and if they believe in the 0:18:53.840 --> 0:18:56.600 track record of the people were putting together, they're they're 0:18:56.720 --> 0:19:00.600 they're investing or co investing with us because they believe 0:19:00.800 --> 0:19:04.119 in the in that in that strategy, in their in 0:19:04.160 --> 0:19:07.800 their track record. Yeah, is there any anecdote that you 0:19:07.840 --> 0:19:11.720 could share that you can describe how long a deal 0:19:11.800 --> 0:19:13.679 takes to make? Because you talk about this idea of 0:19:13.680 --> 0:19:16.640 you know, not wanting to do a quick turnaround. How 0:19:16.680 --> 0:19:18.480 long can it take to see it the deal to 0:19:18.560 --> 0:19:21.000 make it happen. You mentioned one that happened overnight, but 0:19:21.040 --> 0:19:22.639 I mean it's got to be something that took it 0:19:22.880 --> 0:19:25.680 a long time to you know, come pruition. I mean, 0:19:26.200 --> 0:19:29.960 you know, building trust is is something you have to 0:19:30.000 --> 0:19:32.280 have a long term view on and as long as 0:19:32.280 --> 0:19:34.400 you have a long term view on it, it will 0:19:35.160 --> 0:19:37.400 there's a very good chance that it will materialize over 0:19:37.480 --> 0:19:40.239 time if you continue to bring value. But I do 0:19:40.320 --> 0:19:43.960 not see, um, you know, deals that just happened like 0:19:44.080 --> 0:19:48.200 that unless the opportunity is there. And since you've built 0:19:48.200 --> 0:19:51.200 the trust though, and you've deposited that trust over time, 0:19:51.440 --> 0:19:55.320 when something ripe happens, it happens very quickly. So I 0:19:55.359 --> 0:19:58.000 think my suggestion is have a long term view, be patient, 0:19:58.200 --> 0:20:01.919 don't be opportunistic, be because if you create value for people, 0:20:02.480 --> 0:20:06.159 it will naturally happen. Dmitriopolis thank you so much for 0:20:06.240 --> 0:20:10.280 joining us. Dmitri Janopolis is founder and chief executive officer 0:20:10.320 --> 0:20:26.960 of Avant Global, which is based in Santa Barbara. All right, now, 0:20:27.080 --> 0:20:30.080 what do CVS, Harley Davidson, Wells Fargo, and Bank of 0:20:30.119 --> 0:20:33.160 America all have in common? Well, David Cats, the chief 0:20:33.160 --> 0:20:36.880 investment officer of Matrix Asset Advisors with more than seven 0:20:37.359 --> 0:20:40.840 fifty million under management, thinks that these companies will do 0:20:40.880 --> 0:20:43.879 pretty well regardless of whatever happens with tax reform. David, 0:20:43.880 --> 0:20:46.479 thanks for being with us. Nice to be here. So 0:20:46.560 --> 0:20:51.240 give us the thesis. Why are these companies CVS, pharmaceuticals, 0:20:51.560 --> 0:20:56.320 pharmacy benefits, Harley Davidson, of course, motorcycles, and the banking industry, 0:20:56.359 --> 0:20:59.439 Wells Fargo, Bank of America? What makes them appear on 0:20:59.480 --> 0:21:01.119 your list of stocks that you think are going to 0:21:01.200 --> 0:21:05.760 do well? So we like these companies based upon favorable 0:21:05.800 --> 0:21:09.720 long term prospects, but most importantly based on their valuation. 0:21:09.800 --> 0:21:12.800 So they're good businesses, good outlooks, and they're all selling 0:21:13.440 --> 0:21:15.800 for well under our market multiple. But what makes them 0:21:15.840 --> 0:21:19.200 particularly interesting is if you're an investor and you're looking 0:21:19.240 --> 0:21:21.520 for things that are going to benefit by the new 0:21:21.600 --> 0:21:24.840 tax plan. If it were to ultimately go through, all 0:21:24.880 --> 0:21:27.600 of them pay pretty high tax rates. They would get 0:21:27.640 --> 0:21:31.760 a lot of release relief from a new tax plan, uh, 0:21:31.800 --> 0:21:34.359 and it would be a significant kick to their earning. 0:21:34.480 --> 0:21:37.960 So you'd get an additional catalyst. David, how much can 0:21:37.960 --> 0:21:40.880 you really trade around a tax plan that is currently 0:21:41.160 --> 0:21:45.359 still in sketch form. That is a great question. We 0:21:45.440 --> 0:21:48.560 absolutely would not trade around the tax plan because there's 0:21:48.600 --> 0:21:50.719 going to be a tremendous amount of changes. There's no 0:21:50.800 --> 0:21:53.879 assurance that it's going to ultimately happen, So we would 0:21:53.920 --> 0:21:57.200 not be using that as an ultimate driver for buying 0:21:57.320 --> 0:22:00.159 or selling stocks. We would not make any change to 0:22:00.200 --> 0:22:03.359 a portfolio. So when we recommend that these stocks, were 0:22:03.359 --> 0:22:05.399 saying we like these companies. We think they're going to 0:22:05.480 --> 0:22:08.600 do very well over the next six to twelve months regardless. 0:22:08.760 --> 0:22:12.360 But if you're looking at buying something and a tax play, 0:22:12.440 --> 0:22:15.879 if the tax plan ultimately goes through, um, you get 0:22:16.040 --> 0:22:18.640 the icing on the cake. David, how much are you 0:22:18.920 --> 0:22:22.320 confident that the tax plan I'll be at a sketch 0:22:22.359 --> 0:22:25.600 of one at this point, could generate the kind of 0:22:25.760 --> 0:22:31.120 growth that Secretary Treasury Treasury Secretary Steve Nuchin and President 0:22:31.119 --> 0:22:35.600 Trump I been saying, well, realistically, we don't think that 0:22:35.600 --> 0:22:37.280 that's going to be the case. We think it's a 0:22:37.320 --> 0:22:39.399 good thing for the economy. It provides a little bit 0:22:39.400 --> 0:22:43.920 of a tailwind, UH puts more money in consumers pocketbooks hopefully, 0:22:43.920 --> 0:22:46.160 although we don't have any clue about how that's gonna look. 0:22:46.720 --> 0:22:49.600 One thing that is clear, however, is it will lower 0:22:49.720 --> 0:22:52.920 corporate taxes. And if you lower corporate taxes, what that 0:22:52.960 --> 0:22:55.399 means is more goes to the bottom line, so you 0:22:55.400 --> 0:22:57.399 have a pickup and earnings, and then from a stock 0:22:57.480 --> 0:23:01.840 market perspective, higher earnings generally a lead to higher stock prices. 0:23:01.880 --> 0:23:05.320 So we think it's ultimately good for the economy, but 0:23:05.400 --> 0:23:08.880 we don't have any confidence that the lower taxes are 0:23:08.880 --> 0:23:11.359 going to accelerate growth to appointment that it becomes tax 0:23:11.400 --> 0:23:14.840 neutral or revenue neutral. But we do think ultimately it's 0:23:14.880 --> 0:23:17.720 good for the overall economy if they can get something through. 0:23:18.400 --> 0:23:20.960 David tell us about the j C, I want to 0:23:20.960 --> 0:23:23.240 know what you think you think about specific stocks like 0:23:23.359 --> 0:23:28.040 Johnson Controls. So, Johnson Controls is an industrial company. They've 0:23:28.080 --> 0:23:31.520 remade themselves in the last year with acquisitions. UH. The 0:23:31.560 --> 0:23:34.040 new management of the combined company has not done a 0:23:34.040 --> 0:23:37.159 particularly good job. So actually they disappointed this year that 0:23:37.280 --> 0:23:39.679 one of the few industrials that did, and one of 0:23:39.680 --> 0:23:42.399 their disappointments was they did a particularly poor job in 0:23:42.480 --> 0:23:46.040 terms of cash flow. Since then, they've changed the CEO. 0:23:46.280 --> 0:23:50.000 We think the new CEO is very motivated, very competent, 0:23:50.080 --> 0:23:51.679 and we think that their focus is going to be 0:23:51.800 --> 0:23:54.920 on synergies from the combination that they made last year 0:23:55.400 --> 0:23:58.399 uh and making sure that the cash flow approximates or 0:23:58.440 --> 0:24:01.000 gets much closer to what they're earning stream is. And 0:24:01.040 --> 0:24:03.480 if that's the case, we think the stock easily has 0:24:03.560 --> 0:24:06.880 twenty five to thirty five percent upside over the next 0:24:06.880 --> 0:24:09.640 twelve months. David real quick, is there anything that you've 0:24:09.680 --> 0:24:14.399