1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl podcast on Paul Swing You. 2 00:00:05,360 --> 00:00:07,760 Speaker 1: Along with my co host Lisa Brahmas, each day we 3 00:00:07,880 --> 00:00:10,399 Speaker 1: bring you the most noteworthy and useful interviews for you 4 00:00:10,520 --> 00:00:12,600 Speaker 1: and your money, whether at the grocery store or the 5 00:00:12,640 --> 00:00:15,920 Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast 6 00:00:16,120 --> 00:00:18,000 Speaker 1: or wherever you listen to podcasts, as well as that 7 00:00:18,040 --> 00:00:22,320 Speaker 1: Bloomberg dot com. The conundrum baked into today's markets. You're 8 00:00:22,320 --> 00:00:24,439 Speaker 1: seeing that sell off deepen in the face of the 9 00:00:24,520 --> 00:00:26,960 Speaker 1: spreading coronavirus, and yet a lot of people saying the 10 00:00:27,080 --> 00:00:31,360 Speaker 1: US will remain intact, will remain immune or relatively so, 11 00:00:31,800 --> 00:00:35,440 Speaker 1: to the deepening a health crisis across Asia. Joining us 12 00:00:35,479 --> 00:00:38,400 Speaker 1: now to talk about exactly how to play the US 13 00:00:38,560 --> 00:00:42,880 Speaker 1: market amid the increasing macroeconomics uncertainty. David Deats, president and 14 00:00:42,920 --> 00:00:46,400 Speaker 1: chief investment strategist at Point View Wealth Management that has 15 00:00:46,560 --> 00:00:49,600 Speaker 1: more than seven billion dollars under management, joining us on 16 00:00:49,640 --> 00:00:52,360 Speaker 1: the phone from Summit, New Jersey. I'm wondering, David, considering 17 00:00:52,360 --> 00:00:56,560 Speaker 1: the fact that you have studied through the eras classical literature, 18 00:00:56,640 --> 00:00:58,760 Speaker 1: You've studied law, You've studied a whole host of things 19 00:00:58,920 --> 00:01:00,720 Speaker 1: at a variety of degree easy worked with a lot 20 00:01:00,720 --> 00:01:03,480 Speaker 1: of different people who are trying to figure out how 21 00:01:03,480 --> 00:01:07,880 Speaker 1: to navigate this incredibly complicated market. What do you buy 22 00:01:07,959 --> 00:01:13,400 Speaker 1: on a daylight today when fear is the prevailing sentiment? Well, so, 23 00:01:13,520 --> 00:01:17,640 Speaker 1: I think it all goes down to your time horizon. Um. Clearly, 24 00:01:17,680 --> 00:01:20,360 Speaker 1: one of the big drivers today is the spread of 25 00:01:20,400 --> 00:01:23,759 Speaker 1: the corona virus. And the best way to figure out 26 00:01:24,000 --> 00:01:26,160 Speaker 1: where that may be taking us is to look at 27 00:01:26,200 --> 00:01:30,880 Speaker 1: these epidemics that we've had in the past, mayors, stars, hiv, 28 00:01:31,080 --> 00:01:34,399 Speaker 1: et cetera, over the last let's say, uh forty years, 29 00:01:34,920 --> 00:01:38,959 Speaker 1: and we have done that study here. And what's interesting is, 30 00:01:39,319 --> 00:01:43,240 Speaker 1: other than the HIV age situation the early eighties, the 31 00:01:43,360 --> 00:01:50,440 Speaker 1: market has invariably up significantly after the first onset of 32 00:01:50,480 --> 00:01:56,000 Speaker 1: these epidemics. Um. Why is that? Well, typically what happens, 33 00:01:56,000 --> 00:01:59,440 Speaker 1: of course, is the vaccine makers get on the bandwagon, 34 00:01:59,480 --> 00:02:01,560 Speaker 1: and we've seen the stocks and some of these vaccine 35 00:02:01,840 --> 00:02:06,440 Speaker 1: makers double and even triple because there is an opportunity here. Um. 36 00:02:06,760 --> 00:02:10,680 Speaker 1: And and typically the tipping point is when the World 37 00:02:10,720 --> 00:02:14,280 Speaker 1: Health Organization declares an emergency, because at that point is 38 00:02:14,360 --> 00:02:17,800 Speaker 1: fully discounted in the market. Now we could be wrong here, 39 00:02:18,280 --> 00:02:21,760 Speaker 1: but UM, and certainly that's this is not advice to 40 00:02:21,800 --> 00:02:23,959 Speaker 1: day trade it today or even next week or even 41 00:02:24,400 --> 00:02:27,040 Speaker 1: in February. But if you have a longer term horizon, 42 00:02:27,280 --> 00:02:30,040 Speaker 1: there are some discounts for something that I don't think 43 00:02:30,080 --> 00:02:32,680 Speaker 1: it's going to go on forever here. So, David, some 44 00:02:32,680 --> 00:02:35,080 Speaker 1: folks are looking for value in this market. One of 45 00:02:35,080 --> 00:02:38,040 Speaker 1: the places they look for is the energy space. We 46 00:02:38,080 --> 00:02:40,840 Speaker 1: have some disappointing numbers out of Exxon and Chevron today. 47 00:02:40,960 --> 00:02:45,480 Speaker 1: What's your view of the energy space? Well, so, UM, 48 00:02:46,400 --> 00:02:49,160 Speaker 1: you know, I think most of the experts say that 49 00:02:49,240 --> 00:02:54,200 Speaker 1: we are undergoing a shift at transition to cleaner fuels 50 00:02:54,240 --> 00:02:57,360 Speaker 1: and renewable energy and so forth. But most of the 51 00:02:57,400 --> 00:03:01,880 Speaker 1: experts say that's going to take decade to UM come 52 00:03:01,880 --> 00:03:06,400 Speaker 1: into fruition. What we've seen recently energy prices back in 53 00:03:06,400 --> 00:03:09,160 Speaker 1: two thousand and fourteen where hundreds of barrel, now they're 54 00:03:09,160 --> 00:03:12,840 Speaker 1: coming down to about fifty UM. The best cure, quite frankly, 55 00:03:12,880 --> 00:03:16,320 Speaker 1: for low commodity prices is low commodity prices, because who 56 00:03:16,360 --> 00:03:19,840 Speaker 1: in the right mind would explore for further fuel UM 57 00:03:20,040 --> 00:03:23,120 Speaker 1: given where the situation is. So, if you're a believer 58 00:03:23,280 --> 00:03:27,679 Speaker 1: that things are cyclical and that sometimes a tough environment 59 00:03:27,720 --> 00:03:31,160 Speaker 1: for an industry actually favors the biggest players on the 60 00:03:31,200 --> 00:03:33,799 Speaker 1: block because they have can attract the best people, they 61 00:03:33,840 --> 00:03:37,640 Speaker 1: have the lowest borrowing costs, most diversified operations. Then maybe 62 00:03:37,680 --> 00:03:41,000 Speaker 1: this is the time to dip your toe into the 63 00:03:41,040 --> 00:03:43,280 Speaker 1: water of some of the biggest players who which you 64 00:03:43,360 --> 00:03:47,160 Speaker 1: have outstanding track records in our integrated across all phases 65 00:03:47,160 --> 00:03:50,600 Speaker 1: of the industry, plus geographically well diversified. David, I know 66 00:03:50,640 --> 00:03:52,600 Speaker 1: that one of your stock picks is Exxon, which would 67 00:03:52,600 --> 00:03:54,760 Speaker 1: fall into that category. And I'm looking right now at 68 00:03:54,840 --> 00:03:58,400 Speaker 1: Xson shares that are really underperformed. But at this point, 69 00:03:58,760 --> 00:04:01,440 Speaker 1: and this Dave Wilson are Brick Socks editor pointed out 70 00:04:01,640 --> 00:04:05,040 Speaker 1: that the dividend yield being paid out on Exxon shares 71 00:04:05,160 --> 00:04:09,040 Speaker 1: now exceeds what you can get on US junk bonds. 72 00:04:09,560 --> 00:04:11,760 Speaker 1: How much of this is a dividend play and how 73 00:04:11,840 --> 00:04:15,080 Speaker 1: much is this an appreciation play? Well, I think it 74 00:04:15,160 --> 00:04:19,120 Speaker 1: ultimately could be both, because obviously there are players in 75 00:04:19,160 --> 00:04:22,000 Speaker 1: the market they're saying this dividend won't grow. In fact, 76 00:04:22,040 --> 00:04:25,919 Speaker 1: it might be uh cut um. But I think that 77 00:04:26,240 --> 00:04:30,240 Speaker 1: historically buying some of the biggest dividend players in the 78 00:04:30,320 --> 00:04:32,760 Speaker 1: Dow has worked out well, that would be the dogs 79 00:04:32,760 --> 00:04:35,320 Speaker 1: of the Dow theory. Plus, of course, we do know 80 00:04:35,400 --> 00:04:38,880 Speaker 1: that Exxon is an industry giant, I think third largest 81 00:04:38,920 --> 00:04:42,120 Speaker 1: revenues in the sp so you know there's a lot 82 00:04:42,160 --> 00:04:44,920 Speaker 1: of way ways for them to cut costs. They announced 83 00:04:44,920 --> 00:04:49,080 Speaker 1: earnings this morning, this stock is down significantly. Nevertheless, they 84 00:04:49,160 --> 00:04:52,200 Speaker 1: did beat expectations in terms of the top line, and 85 00:04:52,240 --> 00:04:56,880 Speaker 1: the bottom line relates to what animals were projecting. So again, 86 00:04:57,520 --> 00:04:59,480 Speaker 1: the other thing, of course, is is it an exon 87 00:04:59,560 --> 00:05:03,039 Speaker 1: specific problems in an industry problem where we've given that 88 00:05:03,240 --> 00:05:06,560 Speaker 1: energy prices down this month alone, I think you'd give 89 00:05:06,600 --> 00:05:09,000 Speaker 1: a pass to x on management and look at global 90 00:05:09,040 --> 00:05:12,320 Speaker 1: macro economic conditions. David, thanks so much for joining us. 91 00:05:12,560 --> 00:05:15,599 Speaker 1: We appreciate you stepping on the phone with us and 92 00:05:15,600 --> 00:05:17,720 Speaker 1: give us your thoughts on the market. Here David Deet's 93 00:05:17,720 --> 00:05:21,200 Speaker 1: president and chief investment strategists at Point View Wealth Management, 94 00:05:21,440 --> 00:05:24,840 Speaker 1: calling on the phone from Lovely Downtown Summit, New Jersey. 95 00:05:24,960 --> 00:05:26,880 Speaker 1: We appreciate a s thoughts. Looking at the SMP right here, 96 00:05:26,920 --> 00:05:29,160 Speaker 1: hitting the lows of the day down forty nine points. 97 00:05:29,200 --> 00:05:31,400 Speaker 1: I'll be one point five percent on the SMP that 98 00:05:31,440 --> 00:05:34,359 Speaker 1: down down fourner and sixty six points, that's one point 99 00:05:34,440 --> 00:05:37,680 Speaker 1: six percent decline and NASDAC down a hundred twenty two 100 00:05:37,760 --> 00:05:41,040 Speaker 1: points one point three percent decline. So seeing some accelerating 101 00:05:41,080 --> 00:05:43,400 Speaker 1: selling here as we close up the morning, David dates 102 00:05:43,440 --> 00:05:46,160 Speaker 1: with some kind of a non consensus view here that 103 00:05:46,240 --> 00:05:49,400 Speaker 1: with the w h o uh sounds the alarm, that's 104 00:05:49,480 --> 00:05:51,720 Speaker 1: usually the trough for that's usually when you can start 105 00:05:51,760 --> 00:05:54,080 Speaker 1: thinking about getting back in. Not what other people are saying. 106 00:05:54,080 --> 00:05:57,479 Speaker 1: They're looking for some sort of halt in this exponential 107 00:05:57,520 --> 00:06:00,040 Speaker 1: expansion of the coronavirus, which we really haven't seen it. 108 00:06:03,120 --> 00:06:06,560 Speaker 1: Boil has been falling out of bed steadily as the 109 00:06:06,560 --> 00:06:10,960 Speaker 1: coronavirus spreads throughout Asia and frankly throughout the world. Right now, 110 00:06:11,000 --> 00:06:13,680 Speaker 1: looking at Crew traded on the night mix, trading at 111 00:06:13,680 --> 00:06:18,720 Speaker 1: fifty since a barrel, the lowest in August two nineteen, 112 00:06:19,000 --> 00:06:21,839 Speaker 1: what will it take for the prices to rise and 113 00:06:21,960 --> 00:06:24,599 Speaker 1: for the fate of some of the weaker oil companies 114 00:06:24,880 --> 00:06:27,320 Speaker 1: to improve? Joining us now, Regina may Our Global Energy 115 00:06:27,320 --> 00:06:29,800 Speaker 1: had at KPMG Regina, can you just give us a 116 00:06:29,960 --> 00:06:33,400 Speaker 1: first your your broad sense of the main driver behind 117 00:06:33,440 --> 00:06:37,280 Speaker 1: the latest weakness in oil. So I think we're experiencing 118 00:06:37,279 --> 00:06:42,280 Speaker 1: a really significant demand destruction event that's had a major impact, 119 00:06:42,279 --> 00:06:45,159 Speaker 1: not just what you said. That's the lowest point since August. 120 00:06:45,680 --> 00:06:50,359 Speaker 1: It's down almost twelve dollars from January six. The coronavirus 121 00:06:50,520 --> 00:06:54,000 Speaker 1: was announced on January and we've seen almost half of 122 00:06:54,080 --> 00:06:58,120 Speaker 1: that destruction since the virus was announced. So I think 123 00:06:58,160 --> 00:07:01,440 Speaker 1: this is going to be very significant, and it's only escalating. 124 00:07:01,520 --> 00:07:03,400 Speaker 1: So I think it's going to get worse before it 125 00:07:03,480 --> 00:07:07,560 Speaker 1: even stabilizes, because we're going to see even more consumer 126 00:07:07,680 --> 00:07:11,160 Speaker 1: and business activity both inside of China and inbound into 127 00:07:11,240 --> 00:07:15,920 Speaker 1: China that all continue to have destructive effects on oil demand. So, Regina, 128 00:07:15,960 --> 00:07:19,280 Speaker 1: when you talk to your clients, your energy clients, how 129 00:07:19,320 --> 00:07:21,640 Speaker 1: are they kind of thinking about this as you again 130 00:07:21,680 --> 00:07:24,800 Speaker 1: as you talked about demand from a demand equation? Are 131 00:07:24,840 --> 00:07:30,840 Speaker 1: they taking this seriously, very seriously? But you know they're 132 00:07:30,880 --> 00:07:33,400 Speaker 1: in it for the long term, so they can't overreact 133 00:07:33,520 --> 00:07:37,880 Speaker 1: to these these uh, these weaker signals right now. We 134 00:07:38,000 --> 00:07:41,200 Speaker 1: have seen in corporate results though that downstreaming chemicals earnings 135 00:07:41,200 --> 00:07:44,840 Speaker 1: are significantly down and for Q one will have an 136 00:07:44,840 --> 00:07:48,320 Speaker 1: even bigger impact. Those that have extensive ties to Asia 137 00:07:48,400 --> 00:07:52,520 Speaker 1: will see even more demand destruction. Or or revenue decreases 138 00:07:52,560 --> 00:07:56,160 Speaker 1: from what's happening in Asia. So definitely taking it seriously, 139 00:07:56,480 --> 00:08:00,240 Speaker 1: but can't change their strategy given the long term nture 140 00:08:00,280 --> 00:08:04,120 Speaker 1: of the overall process. So, given your incredible experience talking 141 00:08:04,320 --> 00:08:07,080 Speaker 1: with companies of all sizes within the energy sector for 142 00:08:07,160 --> 00:08:10,840 Speaker 1: decades and trying to figure out the next part of 143 00:08:11,160 --> 00:08:13,160 Speaker 1: disruption and sort of how to get ahead of that, 144 00:08:13,760 --> 00:08:18,200 Speaker 1: what's your main conversation today with some of these corporate executives. Well, 145 00:08:18,200 --> 00:08:19,840 Speaker 1: this one, I would say, Lesa is a bit of 146 00:08:19,840 --> 00:08:22,520 Speaker 1: a black swan. I mean, I don't think that. I 147 00:08:22,560 --> 00:08:27,120 Speaker 1: think we were experiencing almost a mini renaissance in Houston 148 00:08:27,320 --> 00:08:31,600 Speaker 1: for Q four when we saw independent producer stock prices 149 00:08:31,680 --> 00:08:34,160 Speaker 1: go up um, and I think because the industry and 150 00:08:34,200 --> 00:08:36,680 Speaker 1: the investor community felt like Number one, they were quite 151 00:08:36,679 --> 00:08:39,199 Speaker 1: a good bargain. Number two, we felt like we'd reached 152 00:08:39,240 --> 00:08:41,880 Speaker 1: a bit of a floor and commodity price right was 153 00:08:42,320 --> 00:08:45,360 Speaker 1: w T I and the mid to high fifties and 154 00:08:45,400 --> 00:08:47,880 Speaker 1: Brent in the mid sixties. And now look at where 155 00:08:47,920 --> 00:08:51,840 Speaker 1: we are, literally three weeks after the January six high 156 00:08:51,840 --> 00:08:55,880 Speaker 1: that we experienced. So I think it's um, this one 157 00:08:56,360 --> 00:08:59,560 Speaker 1: wasn't foreseen, And I think We're going to have to 158 00:08:59,559 --> 00:09:02,440 Speaker 1: figure out out what that is going to mean. Capital 159 00:09:02,480 --> 00:09:05,640 Speaker 1: spending levels we're going up. You'll have seen permian production 160 00:09:05,720 --> 00:09:08,559 Speaker 1: surged from some of the announcements that are coming out 161 00:09:08,600 --> 00:09:11,920 Speaker 1: this weekend next and that excitement I think will die 162 00:09:11,960 --> 00:09:14,600 Speaker 1: down given given what's happening, and it's a crisis for 163 00:09:14,960 --> 00:09:17,320 Speaker 1: you know, overall the markets as well as the oil 164 00:09:17,360 --> 00:09:20,840 Speaker 1: industry Regina. You raise a really interesting question implicit in 165 00:09:20,840 --> 00:09:22,920 Speaker 1: your in your statement that this is a black swan, 166 00:09:23,240 --> 00:09:27,440 Speaker 1: how resilient are the weakest players in the energy space 167 00:09:27,840 --> 00:09:30,040 Speaker 1: to something like this black swan? In other words, are 168 00:09:30,040 --> 00:09:32,400 Speaker 1: we going to see a rash of bankruptcies that are 169 00:09:32,440 --> 00:09:35,079 Speaker 1: accelerated as a result of this. I think you're right. 170 00:09:35,120 --> 00:09:39,040 Speaker 1: I don't think they're incredibly resilient, particularly the players that 171 00:09:39,080 --> 00:09:43,600 Speaker 1: were hanging on by their fingernails. We've seen the smaller 172 00:09:43,640 --> 00:09:47,839 Speaker 1: players are already being very challenged, and I do think 173 00:09:48,160 --> 00:09:53,400 Speaker 1: we'll see more bankruptcies, restructuring calls on debt for the 174 00:09:53,640 --> 00:09:56,559 Speaker 1: for the much much smaller marginal players. You've seen the 175 00:09:56,679 --> 00:09:59,880 Speaker 1: larger players make pretty big announcements on significant write downs 176 00:10:00,040 --> 00:10:03,120 Speaker 1: with gas positions. So if you're an investor and you're 177 00:10:03,160 --> 00:10:06,000 Speaker 1: looking at the sector and you see a small player 178 00:10:06,240 --> 00:10:09,679 Speaker 1: that's predominantly gas portfolio that would not be where I 179 00:10:09,720 --> 00:10:12,880 Speaker 1: would place the pet in this market. So, Regina, that 180 00:10:12,920 --> 00:10:15,040 Speaker 1: kind of calls into question, do you think we'll see 181 00:10:15,040 --> 00:10:18,719 Speaker 1: some more consolidation in the oil patch? Um? You know 182 00:10:18,760 --> 00:10:21,240 Speaker 1: a lot of your you have big clients, medium sized, 183 00:10:21,280 --> 00:10:24,280 Speaker 1: smaller clients. Is the expectation that if it gets even 184 00:10:24,440 --> 00:10:26,840 Speaker 1: tougher in the oil patch, that maybe some of the 185 00:10:26,880 --> 00:10:29,360 Speaker 1: bigger companies will look to scoop up some of the 186 00:10:29,480 --> 00:10:33,120 Speaker 1: weaker ones, the ones that maybe have a challenging capital structure. 187 00:10:33,720 --> 00:10:36,360 Speaker 1: I believe. So, I do think there are going to 188 00:10:36,400 --> 00:10:40,640 Speaker 1: be some bargains available. There are larger players the same 189 00:10:40,640 --> 00:10:44,800 Speaker 1: midsize players that have really nice acreage portfolios UH and 190 00:10:44,920 --> 00:10:48,600 Speaker 1: decent assets that are not operating as effectively as they 191 00:10:48,640 --> 00:10:52,480 Speaker 1: can be. The market, the overall sector would be so 192 00:10:52,559 --> 00:10:55,680 Speaker 1: much more improved if we could consolidate like a big 193 00:10:55,679 --> 00:10:57,680 Speaker 1: one that we saw last year, and I think the 194 00:10:57,720 --> 00:11:00,880 Speaker 1: market would benefit, The sector would benefit. Whether or not 195 00:11:01,080 --> 00:11:04,079 Speaker 1: the bid ask spreads UM come together. That's been the 196 00:11:04,120 --> 00:11:06,480 Speaker 1: big that's been the big hurdle. But if we were 197 00:11:06,480 --> 00:11:10,160 Speaker 1: faced with bankruptcy and restructuring, then you don't have the 198 00:11:10,200 --> 00:11:12,640 Speaker 1: sellers being in such a strong position to try to 199 00:11:12,679 --> 00:11:15,480 Speaker 1: demand a higher price. Regina, what would it take when 200 00:11:15,480 --> 00:11:18,600 Speaker 1: it comes to the spread of the coronavirus for oil 201 00:11:18,640 --> 00:11:20,840 Speaker 1: prices to get a bottom or get a sense of 202 00:11:20,880 --> 00:11:25,000 Speaker 1: the potential economic fallout. We have to be at a 203 00:11:25,120 --> 00:11:28,760 Speaker 1: stage where we believe we've reached the tipping point. Right now, 204 00:11:28,840 --> 00:11:32,840 Speaker 1: it feels like an exponential upward curve with cases and 205 00:11:32,960 --> 00:11:37,440 Speaker 1: spread and fear until we feel like the world and 206 00:11:37,640 --> 00:11:40,720 Speaker 1: China has got its arms around the virus is stemming 207 00:11:40,760 --> 00:11:43,600 Speaker 1: the tide. People are going back to work, people are 208 00:11:43,640 --> 00:11:46,520 Speaker 1: flying in and out again. That's when we'll see the 209 00:11:46,600 --> 00:11:49,720 Speaker 1: floor and have it stabilized. That doesn't feel like it's 210 00:11:49,800 --> 00:11:53,400 Speaker 1: close right now to me, but obviously I'm speculating, so 211 00:11:53,559 --> 00:11:55,280 Speaker 1: I think that's what's causing a lot more of the 212 00:11:55,320 --> 00:11:58,400 Speaker 1: fear is we don't know when that tipping point it 213 00:11:58,400 --> 00:12:01,120 Speaker 1: would be achieved. You thank you so much for joining us. 214 00:12:01,160 --> 00:12:04,280 Speaker 1: We really appreciate your commentary. Regina Mayor, Global Energy head 215 00:12:04,320 --> 00:12:11,199 Speaker 1: for KPMG. And everyone's talking about the coronavirus and the 216 00:12:11,320 --> 00:12:13,480 Speaker 1: risk off field that we're having in markets today in 217 00:12:13,520 --> 00:12:15,760 Speaker 1: the US. But I want to go to another place, 218 00:12:15,800 --> 00:12:18,920 Speaker 1: which is Amazon and the incredible surge that we've seen there. 219 00:12:19,000 --> 00:12:21,880 Speaker 1: Apple's earnings came out, incredible earnings, even though the shares 220 00:12:21,920 --> 00:12:24,439 Speaker 1: are down today a little bit on the coronavirus, leaving 221 00:12:24,440 --> 00:12:26,880 Speaker 1: a question that Tom Keene raised this morning. I thought 222 00:12:26,920 --> 00:12:29,480 Speaker 1: it was really salient, which is an investor who has 223 00:12:29,520 --> 00:12:32,000 Speaker 1: been underweight some of these big tech names, what do 224 00:12:32,080 --> 00:12:34,480 Speaker 1: they do now given the fact that you're getting earnings 225 00:12:34,840 --> 00:12:38,400 Speaker 1: that beat so dramatically. And Chris Christopher Wolf joins US 226 00:12:38,400 --> 00:12:41,480 Speaker 1: now chief investment Officer at First Republic Private Wealth Management 227 00:12:41,679 --> 00:12:44,200 Speaker 1: with seventy four billion dollars of assets under management, normally 228 00:12:44,200 --> 00:12:45,920 Speaker 1: based in San Francisco, but here with us in our 229 00:12:45,960 --> 00:12:49,800 Speaker 1: interactive broker studios. And we'll get to the coronavirus issues, 230 00:12:49,840 --> 00:12:52,320 Speaker 1: and we'll get to macro concerns. But when it comes 231 00:12:52,320 --> 00:12:54,840 Speaker 1: to big tech, which has been really the driving force 232 00:12:54,880 --> 00:12:56,640 Speaker 1: of a lot of the gains in the SMP and 233 00:12:56,760 --> 00:13:00,400 Speaker 1: NASDAC over the past decade, where do people go now 234 00:13:00,520 --> 00:13:03,360 Speaker 1: when they see that these earnings just keep coming. So 235 00:13:03,400 --> 00:13:05,240 Speaker 1: I think there's three things. I do think you have 236 00:13:05,280 --> 00:13:07,720 Speaker 1: to go there, meaning towards the technology space for a 237 00:13:07,720 --> 00:13:10,880 Speaker 1: couple of reasons, one, we're in an age of hyper aggregation. 238 00:13:11,000 --> 00:13:14,360 Speaker 1: Technology enables that kind of the reach that the Internet has, etcetera. 239 00:13:14,520 --> 00:13:16,840 Speaker 1: You can buy I think anything you want almost on 240 00:13:16,920 --> 00:13:19,880 Speaker 1: Amazon at this point. I mean you're basically stealing share. 241 00:13:19,880 --> 00:13:24,119 Speaker 1: And that hyper aggregation function, driven by instantaneous everywhere communication, 242 00:13:24,240 --> 00:13:26,960 Speaker 1: is one key piece of what technology provides and kind 243 00:13:26,960 --> 00:13:30,360 Speaker 1: of why it's very hard to stop. Number two, you're 244 00:13:30,360 --> 00:13:32,200 Speaker 1: in an era where kind of the public markets have 245 00:13:32,320 --> 00:13:35,600 Speaker 1: been increasingly dominated by machines machine trading. They kind of 246 00:13:35,640 --> 00:13:38,520 Speaker 1: simply follow rules. I'm greatly simplifying it, but if it 247 00:13:38,600 --> 00:13:41,280 Speaker 1: was up yesterday or earnings beat or whatever, just by 248 00:13:41,360 --> 00:13:43,760 Speaker 1: and I think you get that kind of rule following mentality, 249 00:13:43,800 --> 00:13:46,640 Speaker 1: particularly is the market is starting to separate by signals 250 00:13:46,679 --> 00:13:49,959 Speaker 1: with this sectors, with this big external influence called coronavirus, 251 00:13:49,960 --> 00:13:51,760 Speaker 1: which I hope we get to. I think the last 252 00:13:51,760 --> 00:13:54,760 Speaker 1: piece of the puzzle. I just want to throw a 253 00:13:54,800 --> 00:13:56,800 Speaker 1: curveball because it's a question. It's on my mind, so 254 00:13:56,800 --> 00:13:58,120 Speaker 1: I think you gotta go there. Anyway. Last piece of 255 00:13:58,120 --> 00:13:59,680 Speaker 1: puzzle on the tech side is that it is the 256 00:13:59,720 --> 00:14:01,840 Speaker 1: one place where there is growth. The thing that's scarce 257 00:14:01,880 --> 00:14:04,200 Speaker 1: in this world is growth. So there's an old maximum 258 00:14:04,200 --> 00:14:06,520 Speaker 1: in the equities and kind of more broadly markets as 259 00:14:06,520 --> 00:14:08,840 Speaker 1: you buy what scarce growth is the scarce thing. There's 260 00:14:08,880 --> 00:14:10,480 Speaker 1: a lot of cheap stuff as we can see, and 261 00:14:10,600 --> 00:14:13,160 Speaker 1: energy and other parts of the market, but it's really 262 00:14:13,160 --> 00:14:15,120 Speaker 1: hard to find true growth these days. And it's still 263 00:14:15,120 --> 00:14:18,480 Speaker 1: in tech all right. So we're seeing a so often 264 00:14:18,600 --> 00:14:21,600 Speaker 1: the SMP of a little more than one percent today, 265 00:14:21,680 --> 00:14:25,480 Speaker 1: the Dow off one point three today, presumably on growing 266 00:14:25,520 --> 00:14:30,680 Speaker 1: concerns about the coronavirus. Even given the today's so off, 267 00:14:30,800 --> 00:14:32,640 Speaker 1: are you concerned at all that the markets maybe been 268 00:14:32,640 --> 00:14:36,480 Speaker 1: a little too sanguine about the potential risk to economic 269 00:14:36,520 --> 00:14:39,840 Speaker 1: growth coming from this virus coming out of China. I 270 00:14:40,120 --> 00:14:42,760 Speaker 1: think the level of uncertainty around the policy response. So 271 00:14:42,800 --> 00:14:45,520 Speaker 1: we've seen some of it, so water closings, for example, 272 00:14:45,720 --> 00:14:48,840 Speaker 1: shutdown of flights. You've just seen some recent announcements about 273 00:14:48,840 --> 00:14:51,360 Speaker 1: the airlines in the US cutting the flights. You know, 274 00:14:51,400 --> 00:14:53,040 Speaker 1: the challenge error is two fold. It's not just the 275 00:14:53,040 --> 00:14:55,320 Speaker 1: people traveling, it's the goods that move in the bellies 276 00:14:55,320 --> 00:14:58,080 Speaker 1: of the plans, for example, and including when they're talking 277 00:14:58,120 --> 00:15:00,560 Speaker 1: about shutting ports, moving lots of goods back and forth. 278 00:15:00,600 --> 00:15:03,080 Speaker 1: So we haven't seen a lot of that just yet. Um, 279 00:15:03,120 --> 00:15:05,640 Speaker 1: there's some good data, or at least some data historically 280 00:15:05,680 --> 00:15:08,840 Speaker 1: that suggests that markets kind of tumble until we see 281 00:15:08,840 --> 00:15:10,720 Speaker 1: a peak in the number of cases and the policy 282 00:15:10,800 --> 00:15:14,280 Speaker 1: response gets really strong. At that point, there's some confidence 283 00:15:14,320 --> 00:15:17,360 Speaker 1: that this is under control or in contained in some way. 284 00:15:17,520 --> 00:15:19,160 Speaker 1: And I don't mean to be glib, but that's how 285 00:15:19,240 --> 00:15:22,280 Speaker 1: financial markets tend to respond to things. So am I worried, 286 00:15:22,520 --> 00:15:25,000 Speaker 1: not just yet. Number one, Yes, economy is a giant place. 287 00:15:25,040 --> 00:15:27,520 Speaker 1: It's really hard to damage the battleship. Number two, we're 288 00:15:27,520 --> 00:15:30,240 Speaker 1: pretty closed, you know, more or less we trade with ourselves. 289 00:15:30,240 --> 00:15:33,760 Speaker 1: Only about six percent seven percent GDP is net basis 290 00:15:33,840 --> 00:15:37,200 Speaker 1: at export import, and I'm greatly simplifying the numbers. I think. 291 00:15:37,280 --> 00:15:39,600 Speaker 1: Number three, you know, we're in a place where, um, 292 00:15:39,680 --> 00:15:42,400 Speaker 1: this has started in China, and some immediate actions have 293 00:15:42,440 --> 00:15:46,000 Speaker 1: taken place. The World Health Organization actually praised China's efforts 294 00:15:46,000 --> 00:15:48,880 Speaker 1: immediately and in some ways, uh, that may help limit 295 00:15:48,960 --> 00:15:51,800 Speaker 1: the spread. So I think the overreaction here. Now back 296 00:15:51,800 --> 00:15:54,040 Speaker 1: to my point and I'll stop on this has something 297 00:15:54,080 --> 00:15:56,160 Speaker 1: to do with the machines. Things have been down a 298 00:15:56,160 --> 00:15:58,560 Speaker 1: couple of days. You have an outside event a coronavirus, 299 00:15:58,600 --> 00:16:01,000 Speaker 1: and hey, if it's down yester day, why not sell today? 300 00:16:01,080 --> 00:16:04,240 Speaker 1: All right? Blame the machines that said I got to start. 301 00:16:04,280 --> 00:16:06,840 Speaker 1: There's other things, but but you could say, you know, 302 00:16:06,880 --> 00:16:09,720 Speaker 1: that's that's sort of what's driving the action here. If 303 00:16:09,720 --> 00:16:12,280 Speaker 1: your thesis is right, though, and the US is an 304 00:16:12,280 --> 00:16:15,240 Speaker 1: economy that can keep chugging along and is relatively immune 305 00:16:15,240 --> 00:16:17,880 Speaker 1: to the scare that's weakening growth and expected to continue 306 00:16:17,880 --> 00:16:20,480 Speaker 1: to weaken grow throughout Asia and beyond. Why is the 307 00:16:20,520 --> 00:16:23,520 Speaker 1: Russell two thousand underperforming large caps? Why are we seeing 308 00:16:23,560 --> 00:16:26,080 Speaker 1: a loss of two point four percent on the companies 309 00:16:26,120 --> 00:16:28,600 Speaker 1: that are most leveraged to the U S economy while 310 00:16:28,800 --> 00:16:32,600 Speaker 1: large multinational companies are outperforming. So I think there's two 311 00:16:32,680 --> 00:16:35,320 Speaker 1: reasons for that. Um And and look, there's remains to 312 00:16:35,320 --> 00:16:37,800 Speaker 1: be seen a lot about the coronavirus, and it's spread 313 00:16:37,880 --> 00:16:40,600 Speaker 1: is not understood yet, and if it follows other patterns, 314 00:16:40,640 --> 00:16:42,080 Speaker 1: it is coming here in the U S. And we 315 00:16:42,120 --> 00:16:44,000 Speaker 1: do have to be thoughtful about it. But at least 316 00:16:44,000 --> 00:16:46,680 Speaker 1: with respect to markets, two things matter a lot. One liquidity. 317 00:16:46,760 --> 00:16:48,400 Speaker 1: There's a lot more in the big stocks than there 318 00:16:48,480 --> 00:16:51,680 Speaker 1: isn't a little stocks. Um And to the financial position 319 00:16:51,720 --> 00:16:53,320 Speaker 1: of many of these companies. So if you watch a 320 00:16:53,360 --> 00:16:55,120 Speaker 1: lot of the data on the Russell two thousand, you 321 00:16:55,160 --> 00:16:57,240 Speaker 1: know that the debt to eb DOT numbers are out 322 00:16:57,240 --> 00:17:00,640 Speaker 1: of control. The debt burden and small company these days 323 00:17:00,760 --> 00:17:04,000 Speaker 1: is four times what it is in the large companies. Financially, 324 00:17:04,000 --> 00:17:06,840 Speaker 1: they are way more susceptible to just tiny changes in 325 00:17:06,880 --> 00:17:09,760 Speaker 1: the revenue line. So even if we get you know, 326 00:17:10,040 --> 00:17:12,479 Speaker 1: small effects in the US, they could be exaggerated by 327 00:17:12,480 --> 00:17:15,640 Speaker 1: how much leverage is into the small cap space these days. 328 00:17:15,680 --> 00:17:18,320 Speaker 1: So if I were thinking about the fundamentals and wanted quality, 329 00:17:18,359 --> 00:17:20,760 Speaker 1: I'd want a better balance sheet, I'd want some way 330 00:17:20,800 --> 00:17:23,760 Speaker 1: to manage um kind of subsidize the cost associated with 331 00:17:23,800 --> 00:17:25,800 Speaker 1: all this. And I wouldn't want to have all that 332 00:17:25,880 --> 00:17:28,240 Speaker 1: leverage if there were some risk to my top line. 333 00:17:28,280 --> 00:17:30,400 Speaker 1: So I think that can tie back to why there's 334 00:17:30,400 --> 00:17:33,119 Speaker 1: another performance. So what are your clients saying to you 335 00:17:33,200 --> 00:17:35,439 Speaker 1: right now? Are they bringing up the coronavirus and what 336 00:17:35,480 --> 00:17:38,200 Speaker 1: it means for global economic growth? Are they just saying, 337 00:17:39,080 --> 00:17:40,560 Speaker 1: you know, I need to I need to be in 338 00:17:40,560 --> 00:17:42,959 Speaker 1: this market. You know, we published a piece earlier this 339 00:17:43,000 --> 00:17:45,399 Speaker 1: week and it's kind of tied to something we wrote 340 00:17:45,840 --> 00:17:48,239 Speaker 1: the end of two thousand eighteen and carried through two 341 00:17:48,280 --> 00:17:50,199 Speaker 1: thousand nineteen. It didn't look all that great because two 342 00:17:50,200 --> 00:17:52,600 Speaker 1: thousand nineteen was up so much, but it said we're 343 00:17:52,720 --> 00:17:55,199 Speaker 1: entering an era where it's time, given kind of all 344 00:17:55,200 --> 00:17:57,640 Speaker 1: the dynamics that we've just talked about, to be more 345 00:17:57,640 --> 00:18:00,800 Speaker 1: thoughtful about managing risk, diversify the portfolio is more, we're 346 00:18:00,800 --> 00:18:03,399 Speaker 1: comfortable hold a little bit more cash um And what 347 00:18:03,480 --> 00:18:05,159 Speaker 1: we tried to key off on our recent piece for 348 00:18:05,160 --> 00:18:07,800 Speaker 1: this coronavirus is there's a lot of unknowns at this point. 349 00:18:08,000 --> 00:18:09,760 Speaker 1: There may be a treating dip that we get out 350 00:18:09,760 --> 00:18:12,080 Speaker 1: of this, but I think our view is that there's 351 00:18:12,119 --> 00:18:14,560 Speaker 1: a lot of things related to the growth story that 352 00:18:14,840 --> 00:18:17,040 Speaker 1: not only could coronavirus hit, but other things could hit 353 00:18:17,119 --> 00:18:18,760 Speaker 1: that we want to be a little bit more cautious 354 00:18:18,760 --> 00:18:22,120 Speaker 1: in this low, slow, central bank free money dominated world. 355 00:18:22,280 --> 00:18:25,040 Speaker 1: What's your time frame of for investments? Typically we look 356 00:18:25,040 --> 00:18:26,879 Speaker 1: at a minimum of two years. We're not really a 357 00:18:26,880 --> 00:18:29,480 Speaker 1: trading house, you know. Most private clients, that's the folks 358 00:18:29,480 --> 00:18:32,560 Speaker 1: that we manage money for, look over a longer time frame, 359 00:18:32,560 --> 00:18:34,400 Speaker 1: although they are sensitive to the news of the day. 360 00:18:34,440 --> 00:18:36,440 Speaker 1: All right, So if it's a two year time horizon, 361 00:18:36,520 --> 00:18:40,200 Speaker 1: When does the coronavirus disruption end up becoming a trading 362 00:18:40,200 --> 00:18:43,760 Speaker 1: opportunity on some level with that longer term horizon in mind. 363 00:18:44,240 --> 00:18:47,080 Speaker 1: So I really hate to refer to old maximums, but 364 00:18:47,200 --> 00:18:50,360 Speaker 1: sometimes they're very valuable to anchor the context. And um 365 00:18:50,680 --> 00:18:53,919 Speaker 1: market stop panicking when policymakers start panicking is one that 366 00:18:54,240 --> 00:18:56,080 Speaker 1: kind of goes around. And I don't know that we've 367 00:18:56,119 --> 00:19:00,439 Speaker 1: seen full blown policy panic, like shut everything down, getting mad. 368 00:19:01,840 --> 00:19:03,719 Speaker 1: I think you're gonna go right back to the places 369 00:19:03,760 --> 00:19:05,240 Speaker 1: that are scarce, So you're gonna go right back to 370 00:19:05,280 --> 00:19:07,880 Speaker 1: the technology, right back to the growth stories that I've 371 00:19:07,880 --> 00:19:09,600 Speaker 1: come under pressure with this, And I think you know, 372 00:19:09,720 --> 00:19:11,520 Speaker 1: tech is actually held up pretty well here today. If 373 00:19:11,560 --> 00:19:14,080 Speaker 1: you look at the numbers, the growth stories that were 374 00:19:14,119 --> 00:19:18,080 Speaker 1: requiring China, Japan and basically Asia to grow strongly are 375 00:19:18,119 --> 00:19:20,200 Speaker 1: all under the most arrest. They probably have the most 376 00:19:20,240 --> 00:19:23,119 Speaker 1: rebound potential all the longer term. I don't think we're 377 00:19:23,160 --> 00:19:26,439 Speaker 1: as as positive on the hyper aggregation stories, I mean 378 00:19:26,440 --> 00:19:28,600 Speaker 1: on those as we are in hyper aggregation. Christopher Wolf, 379 00:19:28,640 --> 00:19:30,359 Speaker 1: thank you so much for joining us to really appreciate 380 00:19:30,440 --> 00:19:34,480 Speaker 1: your commentary. Christ Wolf is chief Investment officer for First 381 00:19:34,480 --> 00:19:37,760 Speaker 1: Republic Private Wealth Management based in San Francisco, but joining 382 00:19:37,840 --> 00:19:40,880 Speaker 1: us here in our Bloomberg Interactive Broker Studio, would mention 383 00:19:40,920 --> 00:19:42,439 Speaker 1: to seek, I mean we're off, you know, more than 384 00:19:42,480 --> 00:19:44,600 Speaker 1: one percent here on the SMP. Is this a buy 385 00:19:44,720 --> 00:19:47,600 Speaker 1: on the dip? Again, Lisa, this isn't a dip, Okay, 386 00:19:47,680 --> 00:19:49,840 Speaker 1: I mean this is not this is not this is 387 00:19:49,840 --> 00:19:51,720 Speaker 1: not a dip. This is this is this is normal 388 00:19:51,760 --> 00:19:54,560 Speaker 1: market action, right. I mean this is not, uh, something 389 00:19:54,600 --> 00:19:56,520 Speaker 1: where you can look at it and say, wow, this 390 00:19:56,640 --> 00:19:58,600 Speaker 1: is just absolute fear. I mean the doubt you're seeing 391 00:19:59,320 --> 00:20:01,640 Speaker 1: more of declare line and the SMP. Sure it's down 392 00:20:01,640 --> 00:20:04,080 Speaker 1: more than so we'll bring that up with Da Wilson coming. 393 00:20:04,359 --> 00:20:06,720 Speaker 1: You better believe we're gonna bring up with no But 394 00:20:06,720 --> 00:20:09,280 Speaker 1: but to me it raises it raises a really interesting 395 00:20:09,359 --> 00:20:11,199 Speaker 1: question I think Tom Keene raises this morning, and I 396 00:20:11,200 --> 00:20:14,399 Speaker 1: thought it was really important, which is how money, how 397 00:20:14,480 --> 00:20:16,600 Speaker 1: much of the gains are gone right, and how much 398 00:20:16,600 --> 00:20:18,719 Speaker 1: can you sort of believe in the growth stories if 399 00:20:18,760 --> 00:20:20,600 Speaker 1: the global growth isn't going to happen. And I think 400 00:20:20,600 --> 00:20:22,560 Speaker 1: that that's sort of a bigger question that remains to 401 00:20:22,600 --> 00:20:25,359 Speaker 1: be seen as the coronavirus plays itself out and people 402 00:20:25,400 --> 00:20:30,720 Speaker 1: look at the fundamentals. My other favorite person always speak 403 00:20:30,760 --> 00:20:32,440 Speaker 1: with his Karen Eveil Heart, and she joins us here 404 00:20:32,600 --> 00:20:35,960 Speaker 1: in our interactive Broger Studios, a senior industrials analysts, love 405 00:20:36,040 --> 00:20:41,000 Speaker 1: having her perspective with respect to Caterpillar, in particular coming 406 00:20:41,040 --> 00:20:45,160 Speaker 1: out today with weaker than expected projections that shares now 407 00:20:45,240 --> 00:20:48,800 Speaker 1: down nine point two per cent on the year, including 408 00:20:48,800 --> 00:20:52,360 Speaker 1: reinvested dividends. Karen, how much of the weakness that they 409 00:20:52,359 --> 00:20:55,560 Speaker 1: are for telling has to do with the coronavirus versus 410 00:20:55,560 --> 00:20:57,920 Speaker 1: just a general slowdown that we're seeing in the industrial 411 00:20:57,960 --> 00:21:01,960 Speaker 1: sector that continues. I think was just another shoe. Um 412 00:21:02,080 --> 00:21:06,120 Speaker 1: Cat has about three to sales in China, so that 413 00:21:06,200 --> 00:21:08,840 Speaker 1: will that's actually doing okay now, but they're they're concerned 414 00:21:08,880 --> 00:21:12,600 Speaker 1: about that. Uh, it's just global growth is slow everywhere 415 00:21:12,640 --> 00:21:15,359 Speaker 1: and it's not coming back. And I think it's really 416 00:21:15,359 --> 00:21:19,119 Speaker 1: interesting a that they came out so below consensus in 417 00:21:19,200 --> 00:21:22,920 Speaker 1: EPs outlook, and also the range is so wide they 418 00:21:22,960 --> 00:21:25,679 Speaker 1: don't know. They said it's reflecting uncertainty. They had a 419 00:21:25,720 --> 00:21:28,240 Speaker 1: hundred dollar fifty range from top end to low end 420 00:21:28,240 --> 00:21:31,320 Speaker 1: of of estimate, and that's really that's wide. So they 421 00:21:31,400 --> 00:21:34,080 Speaker 1: got exposure to the energy businesses, right, So how's that 422 00:21:34,400 --> 00:21:36,800 Speaker 1: that's got to be challenged? Um, well, their energy and 423 00:21:36,840 --> 00:21:40,000 Speaker 1: t businesses, Energy and transportation, the piece of it that 424 00:21:40,119 --> 00:21:42,600 Speaker 1: is oil service is doing poorly, but they have other 425 00:21:42,800 --> 00:21:45,840 Speaker 1: stuff that's downstream and midstream that's holding up okay, And 426 00:21:45,840 --> 00:21:49,520 Speaker 1: and the transportation business is okay, So that's only moderately down. 427 00:21:49,800 --> 00:21:53,680 Speaker 1: Mining is falling apart because industrial commodities and that had 428 00:21:53,720 --> 00:21:55,800 Speaker 1: had a mini recovery and now that's backed down. And 429 00:21:55,840 --> 00:21:59,160 Speaker 1: construction is the incremental worst there, the North American construction, 430 00:21:59,160 --> 00:22:02,439 Speaker 1: they're much more worth were concerned about. I want to 431 00:22:02,480 --> 00:22:04,199 Speaker 1: pick up on that though, And this is sort of 432 00:22:04,200 --> 00:22:05,800 Speaker 1: one of the fundamental questions that I think a lot 433 00:22:05,840 --> 00:22:07,920 Speaker 1: of people will be passing through. How much the weakness 434 00:22:07,960 --> 00:22:10,840 Speaker 1: that we're seeing, particularly in industrials and I'm looking at industrials, 435 00:22:10,840 --> 00:22:14,760 Speaker 1: medals absolutely getting pummeled over on the London Medals Exchange. 436 00:22:15,000 --> 00:22:17,479 Speaker 1: How much of this is due to the coronavirus. How 437 00:22:17,560 --> 00:22:19,240 Speaker 1: much is due to what we've seen, which is just 438 00:22:19,320 --> 00:22:22,440 Speaker 1: a broader slowdown, particularly with this with this sector, I think, 439 00:22:22,520 --> 00:22:24,879 Speaker 1: but happening at least this week. I think there is 440 00:22:25,000 --> 00:22:27,240 Speaker 1: panic about the virus. I mean, because if you sit back, 441 00:22:27,280 --> 00:22:29,439 Speaker 1: you can get yourself pretty worked up. I mean, if 442 00:22:29,520 --> 00:22:32,119 Speaker 1: China stops production just because that people can't go to 443 00:22:32,160 --> 00:22:34,359 Speaker 1: the plant, that could be a big number for a 444 00:22:34,359 --> 00:22:36,560 Speaker 1: lot of these a lot of these companies, I mean 445 00:22:36,600 --> 00:22:39,480 Speaker 1: the ext I mean, and and then they're all lowering expectations. 446 00:22:39,680 --> 00:22:42,680 Speaker 1: Honeywell did very wide range on their EPs two. They 447 00:22:42,760 --> 00:22:45,520 Speaker 1: never do that. People are concerned about. That's like the 448 00:22:45,560 --> 00:22:48,440 Speaker 1: incremental thing that they can't put their arms around yet, 449 00:22:48,440 --> 00:22:50,359 Speaker 1: So they got to make a big wide range. How 450 00:22:50,359 --> 00:22:54,160 Speaker 1: about trade? We got the Phase one deal. Are the 451 00:22:54,200 --> 00:22:56,680 Speaker 1: c e O s and that you talked to in 452 00:22:56,680 --> 00:22:58,919 Speaker 1: Industrial America are they still saying this is still an 453 00:22:58,960 --> 00:23:00,800 Speaker 1: issue for us? Yeah? I mean they I don't think 454 00:23:00,840 --> 00:23:03,480 Speaker 1: they make much of that. They're happy that it's a 455 00:23:03,520 --> 00:23:06,520 Speaker 1: step forward, that it's not really going to change the 456 00:23:06,600 --> 00:23:09,360 Speaker 1: trend line in any big way. Um, and I think 457 00:23:09,359 --> 00:23:12,600 Speaker 1: they're more concerned about the just the global growth outlook. 458 00:23:13,240 --> 00:23:17,720 Speaker 1: Any bright spots, uh Well, aviation was the bright spot 459 00:23:17,880 --> 00:23:21,040 Speaker 1: and now and you know we had Max Okay, nobody 460 00:23:21,040 --> 00:23:23,399 Speaker 1: people weren't completely worried about that because that's going to 461 00:23:23,480 --> 00:23:25,959 Speaker 1: come back. But now you've got the virus, you know, 462 00:23:26,119 --> 00:23:28,800 Speaker 1: and honey Well said they're already seeing it in aftermarket 463 00:23:28,840 --> 00:23:32,560 Speaker 1: parts that, um, the volume of travel is slowing, and 464 00:23:32,600 --> 00:23:35,160 Speaker 1: that's how they make money. That's how they make money. UM, 465 00:23:35,240 --> 00:23:38,280 Speaker 1: airline airline traffic slows, they sell as parts. You know. 466 00:23:38,320 --> 00:23:41,400 Speaker 1: It's so interesting. Paul I was looking at how Chinese 467 00:23:41,440 --> 00:23:46,120 Speaker 1: travelers really account for such a huge proportion of overall travel, 468 00:23:46,480 --> 00:23:49,639 Speaker 1: of overhaul luxury spending, and just how much of a 469 00:23:49,720 --> 00:23:53,359 Speaker 1: disproportionate hit to these sectors. Uh, there has been because 470 00:23:53,400 --> 00:23:55,560 Speaker 1: of what's been going on. Just dramatic. Yeah, I mean 471 00:23:55,600 --> 00:23:58,719 Speaker 1: they move the needle on everything and you know, just 472 00:23:59,119 --> 00:24:01,520 Speaker 1: you know, incremental. A few stay home and but it's 473 00:24:01,520 --> 00:24:04,240 Speaker 1: the flights are already slowing so dramatically that you know. 474 00:24:04,280 --> 00:24:06,359 Speaker 1: The good news about the max slowing was, oh, we 475 00:24:06,800 --> 00:24:09,480 Speaker 1: we're flying older plains. That's good for parts right. Well 476 00:24:09,520 --> 00:24:12,240 Speaker 1: now if that one's gone, so the bright spot is hard. 477 00:24:12,520 --> 00:24:17,240 Speaker 1: Here's the bright spot there. They're they're managed, managing, they're 478 00:24:17,240 --> 00:24:20,520 Speaker 1: executing very well, like like you know, in a very 479 00:24:20,560 --> 00:24:24,440 Speaker 1: bad situation, cats in decremental margins were very good. Um, 480 00:24:24,480 --> 00:24:27,199 Speaker 1: you know, cut back on the expense and they have 481 00:24:27,359 --> 00:24:29,119 Speaker 1: and they didn't bring the costs back and they have 482 00:24:29,200 --> 00:24:32,240 Speaker 1: more flexible cost structures. That's the good news. How's how's 483 00:24:32,240 --> 00:24:36,480 Speaker 1: the American farmer doing? Uh? Not not well at all, um, 484 00:24:36,520 --> 00:24:38,800 Speaker 1: But they're gonna China. One thing China is going to do, 485 00:24:38,800 --> 00:24:40,879 Speaker 1: when they can do it rather quickly, is buy more soybeans. 486 00:24:40,880 --> 00:24:42,879 Speaker 1: So it'll go from a bad, bad situation to just 487 00:24:42,960 --> 00:24:48,639 Speaker 1: a crappy situation. But it's not term okay. Karen Uberhart, 488 00:24:48,680 --> 00:24:50,719 Speaker 1: thanks so much for joining us. We always like chatting 489 00:24:50,720 --> 00:24:52,479 Speaker 1: with you to get a sense of what's going on 490 00:24:52,600 --> 00:24:57,120 Speaker 1: in industrial America. Karen's the senior Industrials analyst for Bloomberg Intelligence, 491 00:24:57,200 --> 00:25:00,600 Speaker 1: joining us here in our Bloomberg Interactive Broker Studio. Disappointing 492 00:25:00,680 --> 00:25:03,760 Speaker 1: numbers again out of Caterpillar today. The stock down one 493 00:25:03,760 --> 00:25:06,720 Speaker 1: point five percent today and is Lisa mentioned that about 494 00:25:06,760 --> 00:25:09,359 Speaker 1: nine point eight percent for the year up just slate 495 00:25:09,400 --> 00:25:11,080 Speaker 1: if you look at it on a trailing twelve months 496 00:25:11,160 --> 00:25:15,080 Speaker 1: up about three percent, really trailing the market. Here's concerns 497 00:25:15,080 --> 00:25:18,600 Speaker 1: about end user demand and the company was forecasting in 498 00:25:18,640 --> 00:25:21,560 Speaker 1: their press released end user demands seen to be down 499 00:25:21,760 --> 00:25:24,720 Speaker 1: four to nine percent this year for Caterpillar. So that 500 00:25:24,880 --> 00:25:27,639 Speaker 1: gives you a sense of some of the demand or 501 00:25:27,680 --> 00:25:31,720 Speaker 1: the lack of demand from industrials across the world, and 502 00:25:31,760 --> 00:25:35,879 Speaker 1: that is clearly a global company is Caterpillar. Thanks for 503 00:25:35,920 --> 00:25:38,119 Speaker 1: listening to the Bloomberg P and L podcast. You can 504 00:25:38,119 --> 00:25:40,960 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 505 00:25:41,000 --> 00:25:44,199 Speaker 1: podcast platform you prefer. Paul Sweeney, I'm on Twitter at 506 00:25:44,240 --> 00:25:46,920 Speaker 1: pt Sweeney. I'm Lisa abramoy It's I'm on Twitter at 507 00:25:46,960 --> 00:25:49,399 Speaker 1: Lisa A. Bram woyds one. Before the podcast, you can 508 00:25:49,400 --> 00:25:51,840 Speaker 1: always catch us worldwide on Bloomberg Radio.