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Sun Valley, Regulations, And Markets (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. Shnani bask joins is
0:23
Speaker 1: she's usually in the Bloomberg Interactive Broker Studio. I think
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Speaker 1: she's somewhere out in like Sun Valley, Ido, hiding in
0:29
Speaker 1: a bush waiting to, you know, just pounce on interviewing.
0:32
Speaker 1: Summer Camp for Billionaires, Summer Camp for billionaires, Media moguls,
0:36
Speaker 1: tech moguls, they're all out in Sun Valley. They get
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Speaker 1: together every year. Um, and that's where a lot of
0:42
Speaker 1: M and A deals in that TMT space actually originate.
0:45
Speaker 1: Many of the big, big deals that we come to
0:49
Speaker 1: know and love. Shanali, thanks so much for joining us.
0:51
Speaker 1: How Sun Valley, Yeah, it's pretty interesting so far. It
0:55
Speaker 1: is like summer calm. Do you see a lot of
0:57
Speaker 1: people in T shirts and vans and Adida speakers the
1:00
Speaker 1: occasional Valencia Ada and and Valentinos, but it is a
1:04
Speaker 1: pretty chill vibe. You see a lot of people. Remember
1:06
Speaker 1: it's a very small area, but a very restricted area,
1:10
Speaker 1: so you don't have a lot of access here of course,
1:12
Speaker 1: just a few reporters. But really it's a very secretive conference.
1:17
Speaker 1: A lot of people sitting at the coffee shop and
1:19
Speaker 1: you wonder what they're talking about. You you expect a
1:22
Speaker 1: lot of deals to come out of this, a lot
1:24
Speaker 1: of partnership. It's a lot of media moguls, you know.
1:26
Speaker 1: David daslov Um of Warner Brothers had come out talked
1:30
Speaker 1: to reporters a couple of times. Yesterday. Bob Iger has
1:34
Speaker 1: been walking around as well. We asked what he's up to.
1:37
Speaker 1: Um he reiterated that he's retired. However, he has certainly
1:41
Speaker 1: been holding a lot of meetings here as well. There's
1:44
Speaker 1: a lot. You know, if you're retired, shouldn't you be
1:47
Speaker 1: like golfing or fishing something. That's what they do. They
1:49
Speaker 1: golf and fish and Sun Valley and then they go
1:52
Speaker 1: to some they go to some meetings during the day
1:54
Speaker 1: and they just see and be seen. And Um channally,
1:58
Speaker 1: as a reporter who has bidden there before, I recommend highly.
2:02
Speaker 1: You have to go out to the bars at night.
2:03
Speaker 1: That's where you find them, and that's where you can
2:06
Speaker 1: get some good stuff. So, um, you're gonna have to
2:08
Speaker 1: just you know, buck up and and you know, stay
2:10
Speaker 1: out late and have fun with some of these moguls.
2:13
Speaker 1: I think she'll be able to do. Yeah, yeah, you're
2:15
Speaker 1: in earlier here late. We were here at four thirty
2:17
Speaker 1: in the morning. The executive going for runs. You know,
2:20
Speaker 1: Alex Carp's coming in of talent here very early, just
2:23
Speaker 1: this morning. So there is no sleep in Sun Valley.
2:26
Speaker 1: But there's definitely a lot of uh, there's definitely a
2:29
Speaker 1: lot of you know, smoozing on the side. So what
2:31
Speaker 1: did we hear from Zaslov yesterday? What did he have
2:33
Speaker 1: to say? I thought he had addressed like a range
2:36
Speaker 1: of topics from CNN to HBO. Yeah he did. He
2:40
Speaker 1: talked about how, you know, the advertising market is not
2:42
Speaker 1: in a terrible place right now. You know, it's these
2:44
Speaker 1: copecutives they recognize that, Yeah, the economics times are hard,
2:48
Speaker 1: but they're trying to strike a note of confidence regardless,
2:51
Speaker 1: they have to resume business. When he was asked about
2:54
Speaker 1: any future deal, the comment he really made was that
2:57
Speaker 1: we feel good about our strategic footprint, our eat, which means,
3:01
Speaker 1: you know, don't expect us to spend all that much
3:03
Speaker 1: money after a transformative deal already. So there are trying
3:07
Speaker 1: to check a lot of confidence out here and and
3:09
Speaker 1: kind of reaffirm their strategies as they kind of look
3:12
Speaker 1: to their peers and see what else is going on
3:15
Speaker 1: out there, how their peers are are shifting their businesses
3:18
Speaker 1: in the wake of major, major, major descruption, both in
3:21
Speaker 1: the news business as well as the content business. Remember, um,
3:26
Speaker 1: Jeffer Kastenberg is already here. A lot of these people
3:29
Speaker 1: are well aware and familiar of the trials and tribulations
3:33
Speaker 1: of the streaming business, which has gone through major upheavals. Um.
3:37
Speaker 1: But remember the ad business has a lot of ramifications
3:40
Speaker 1: for a lot of people. Coin based The CEO is
3:42
Speaker 1: also here. Um. You know that's a company that used
3:45
Speaker 1: to spend a lot of money on marketing. I'm surprised
3:49
Speaker 1: they spent the money to even send him there. You know,
3:52
Speaker 1: they're not even hiring anybody. They're firing like they decimated
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Speaker 1: their employees. Uh. And um, you know cryptos and free fall.
4:01
Speaker 1: That guy should be like saving money somewhere. Yeah, you know,
4:07
Speaker 1: it's interesting. There's some other fintech bolks out here too.
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Speaker 1: I'm speaking with Anthony Nodo a little bit later they
4:11
Speaker 1: so bydo I ran into Max Levchin, this firm CEO
4:15
Speaker 1: as well. Um I might be eating a little bit
4:17
Speaker 1: later with san Druck and Miller as well. I mean,
4:20
Speaker 1: these are folks that you know, are are you know
4:22
Speaker 1: much more Um blunt about the pains we're seeing in
4:26
Speaker 1: the market, because these are people who feel it every
4:28
Speaker 1: day when they wake up in the morning, unlike the
4:31
Speaker 1: media dos where you know, the first thing David Does
4:33
Speaker 1: once said was I'm not an economist right about the economy.
4:39
Speaker 1: So so how's the like, just the feel the attendance there.
4:43
Speaker 1: I mean, you know, a couple of years they had
4:45
Speaker 1: to uh not have the conference due to COVID, and
4:48
Speaker 1: I think they had They had it last year maybe
4:50
Speaker 1: with some restrictions. How's the vibe, how's the feel out there? Yeah,
4:54
Speaker 1: it's so interesting because you come here and last year
4:56
Speaker 1: there are no kids allowed, but we hear people can
4:59
Speaker 1: bring their it's in their families, so you do see
5:01
Speaker 1: people running bikes and kind of biking around and it's
5:04
Speaker 1: a very different feel. You're talking about David zaslav and
5:07
Speaker 1: at CNN. Some of the TNN talent is here, Like
5:09
Speaker 1: Aaron Vernett saw him talking to her asking about her
5:12
Speaker 1: kids yesterday. So people are meeting families where they're they
5:17
Speaker 1: do have the COVID test. There are a lot of maths,
5:20
Speaker 1: you know, at this level, executives are still anxious. Nobody
5:23
Speaker 1: wants to go back with COVID and and not be
5:25
Speaker 1: able to resume their plans next week. It's a short
5:28
Speaker 1: week this week because it's right after the holidays. So
5:30
Speaker 1: you did you feel the rush of people getting in
5:33
Speaker 1: late last night and early this morning. Uh, they didn't
5:36
Speaker 1: have that kind of you know weekend as they normally would, right. So, um,
5:42
Speaker 1: you know it's interesting this kind of destination conference. You know,
5:45
Speaker 1: it's something similar Anthony Scaramucci and FTX to do this
5:48
Speaker 1: now in Bahamas, also bringing more families and kids around
5:52
Speaker 1: so that it's a place you can go enjoy as
5:54
Speaker 1: well as network and make new contacts and feels on
5:58
Speaker 1: the side, great stuff. Enjoy your time out there, Good
6:01
Speaker 1: luck getting snagging some interviews. Uh, it's very competitive out there,
6:05
Speaker 1: but I know you and Ed Ludlow will get your
6:08
Speaker 1: fair share of Shiney Bassk Wall Street reporter for Bloomberg
6:11
Speaker 1: knew she's at its sun Valley, Idaho, the Allen and
6:14
Speaker 1: Company media conference retreat where all the media models hang
6:18
Speaker 1: out in this summer. It's good stuff the discussion of
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Speaker 1: the morning for me at least UH Roger Roger Rottenham,
6:29
Speaker 1: former head fund manager Global, UH co founder and former
6:34
Speaker 1: managing general partner of the Galilean Group and author of
6:37
Speaker 1: Uneven Justice, joins us, and of course, in October two
6:40
Speaker 1: thousand nine, Raj was arrested by the FBI for insider trading.
6:43
Speaker 1: Found guilty in May of fourteen counts of conspiracy and
6:46
Speaker 1: securities fraud sends to eleven years in prison, released a
6:50
Speaker 1: home and confinement in the summer of twenty nine, Team Matt,
6:52
Speaker 1: but rog back in the day was the absolute pinnacle
6:56
Speaker 1: of the hedge fund business. So big Matt that he
6:58
Speaker 1: would not even take my phone call as a subside analyst.
7:01
Speaker 1: That's how big is. Roger. Thanks so much for joining
7:04
Speaker 1: us here. You know, it's a fascinating conversation. You know,
7:08
Speaker 1: I'd love to get your perspective, maybe one key takeaway
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Speaker 1: that you have given that now you have some perspective
7:14
Speaker 1: of time of the last dozen years with your legal issues,
7:19
Speaker 1: I'd love to get your sense of just maybe one
7:21
Speaker 1: key takeaway if you have one. Well, the key takeaway
7:29
Speaker 1: is the communal justice system today in the United States.
7:34
Speaker 1: It has a lot leaves a lot to be desired.
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Speaker 1: It's not a fair system. The prosecutorial power is unchecked,
7:43
Speaker 1: and there's a nine seven percent convich rate. Um wow,
7:51
Speaker 1: that bears repeating. There's a nineties seven percent conviction rate
7:55
Speaker 1: in America. That's the kind of thing you hear about
7:58
Speaker 1: like Japan and you think something's not right. Yeah, it's
8:02
Speaker 1: similar to China or Russia. Right. And if you lose
8:08
Speaker 1: a trial, you get a trial penalty, which is twice
8:12
Speaker 1: what you would get if you didn't go to trial.
8:18
Speaker 1: But Roger and Real for you specifically, you had the
8:23
Speaker 1: absolute best legal representation anyone could ever have. Did you
8:28
Speaker 1: not get a fair shake? No? The The uphill battle
8:33
Speaker 1: is the government uses cooperating witnesses who they train and
8:41
Speaker 1: cous into a narrative that they want to give out.
8:45
Speaker 1: And in my case, the chief witness retracted his testimony.
8:52
Speaker 1: In another case in the same circuit the same stocks
8:57
Speaker 1: and the jury found the and then in that case
9:01
Speaker 1: not guilty. So so I would argue, and I know
9:06
Speaker 1: you want to talk about the markets, I would argue
9:09
Speaker 1: that causing witnesses and threatening them with long sentences unless
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Speaker 1: they co operate is really the underbellue of the American
9:21
Speaker 1: justice system. I mean, I also want to hear about
9:24
Speaker 1: your book. You've got um a book out, Uneven Justice,
9:29
Speaker 1: And I assume this is what it's about. What are
9:31
Speaker 1: your what are the solutions that you propose? And do
9:34
Speaker 1: you think you can get anything done on this? Because
9:37
Speaker 1: from from from what we're hearing from you, um, and
9:41
Speaker 1: I guess what we see on TV and what we
9:43
Speaker 1: all know happens, you know, make a deal, uh and
9:46
Speaker 1: testify this way or you're going to go to trial
9:48
Speaker 1: and lose. Um. What can be done about it? Well?
9:54
Speaker 1: Number one, I think you should hold the prosecutors to
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Speaker 1: the same standards as a defense lawyer. If a difference
10:01
Speaker 1: lawyer lies in court, he can be convicted of perjury
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Speaker 1: and his license would be terminated. Number Two, if you're
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Speaker 1: going to use cooperating witnesses, sentenced them for their crime
10:16
Speaker 1: prior to the testimony, so they have no incentive to lie. Ah.
10:24
Speaker 1: So Roger's just just to put a point on is
10:26
Speaker 1: your contention today, again, given the benefit of hindsight and perspective,
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Speaker 1: that you were unfairly convicted? Uh? My contention is that
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Speaker 1: I you know, I'm an American citizen. I respect the
10:43
Speaker 1: verdict of the jury. But when you have government cooperating
10:48
Speaker 1: witnesses who like to save their skin and then later
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Speaker 1: on retracted in another isle under oath, then only one
11:02
Speaker 1: of the two is correct. And so I'm saying that
11:06
Speaker 1: the cooperating witnesses, um, who are lying that testing my
11:12
Speaker 1: nie should not be admitted. And you know, in my opinion,
11:17
Speaker 1: it's not a fair trial. This is why I wrote
11:20
Speaker 1: the book. I'm not trying to read try the case.
11:23
Speaker 1: The entire peaks of the book go to justice the phone.
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Speaker 1: And I've spent a fair amount of my time talking
11:30
Speaker 1: to law students at Stanford and other universities two, you know,
11:36
Speaker 1: to create awareness of the comminal justice system. I'm just
11:41
Speaker 1: wondering if you think something can really change now. I mean,
11:44
Speaker 1: we've got a new head of the sec Gary Gensler, right,
11:48
Speaker 1: We've got a Supreme Court that is looking very activist. Um,
11:54
Speaker 1: do you think now is the time where you can
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Speaker 1: actually achieve change. Well, in the last several years, there's
12:02
Speaker 1: been bipartisan support for criminal justice to phone. Unfortunately it's
12:07
Speaker 1: mainly focused on police brutality on the street against minorities.
12:14
Speaker 1: I would submit that the brutality in the courtrooms, where
12:19
Speaker 1: prosecutors are more interested in winning than getting the truth,
12:24
Speaker 1: should be also addressed. And you know it's not going
12:27
Speaker 1: to be easy, it's going to be slow, but you know,
12:29
Speaker 1: we have to take one step at a time. If
12:33
Speaker 1: if people like me, who my resume includes being arrested,
12:38
Speaker 1: fighting it all the way, going to jail and coming out,
12:42
Speaker 1: and I believe I have firsthand or front seat. Hey,
12:49
Speaker 1: rocher Love, I would love to get the benefit of
12:51
Speaker 1: your experience here on the markets here, you know, crazy
12:55
Speaker 1: times we live in. What's your market? Call here? What
12:57
Speaker 1: are you thinking about these markets? Okay? So I've been
13:00
Speaker 1: in the markets for thirty or forty years and I've
13:03
Speaker 1: never seen a market as turbulent as this, and I
13:08
Speaker 1: think it's time to be cautious. Let me explain one
13:11
Speaker 1: last year, I mean, this year, you've seen the unminding
13:15
Speaker 1: of several bubbles, the spack market, the crypto market, and
13:24
Speaker 1: um the meme stock bubble. So you have the unlinding
13:30
Speaker 1: of a bubble together with the fat tightening. So I
13:35
Speaker 1: would be very cautious. It's like, you know, if you
13:38
Speaker 1: know the roads are slippery, you're not going to take
13:40
Speaker 1: a motorcycle and driving it right. You're gonna stay at home.
13:45
Speaker 1: So we have you know, so I run a family office,
13:50
Speaker 1: market is treacherous, and what we have done is we've
13:54
Speaker 1: reduced our portfolio from sixty five stocks to twenty five stocks.
13:59
Speaker 1: At the time you were on the street, Raj Paul
14:01
Speaker 1: was working on the street as well as investment banker,
14:03
Speaker 1: and he tells me that the Galleon model was that
14:06
Speaker 1: you picked a small number of stocks around rich you
14:09
Speaker 1: had high conviction, and you would just trade around them. Um.
14:13
Speaker 1: Is that still the model in your family office? And uh,
14:17
Speaker 1: you know, how have you been doing in the first
14:20
Speaker 1: half because it was difficult for everyone else. Yeah, So
14:25
Speaker 1: we focus on companies that disrupt the way we live. Um,
14:29
Speaker 1: so companies in cybersecurity, clout computing, m e commerce, electric vehicles.
14:37
Speaker 1: The point is these are high beta stocks. They move
14:40
Speaker 1: a lot. So if you're able to trade the volatility
14:43
Speaker 1: pretty well, you can make extra returns rather than you know,
14:49
Speaker 1: by a stock at ten and make five dollars. If
14:51
Speaker 1: it goes to fifteen, if you're able to trade around
14:54
Speaker 1: the volatility, you could probably make seven dollars eight dollars.
14:58
Speaker 1: So that's a model. We have ten analysts each sectors specialists,
15:05
Speaker 1: and we've changed our strategy in the last six months
15:09
Speaker 1: in the sense that the entire portfolio is focused on
15:12
Speaker 1: companies that generate cash, profitable and grow in excess of
15:21
Speaker 1: so that leads us to sectors were long like cybersecurity,
15:25
Speaker 1: where we have tail winds almost every day. The bad
15:29
Speaker 1: guys are hacking companies for ransomware, cloud computing, the digital
15:36
Speaker 1: transformation of enterprises, and electric vehicles. But how how have
15:41
Speaker 1: you done? Because you know the first half UM retail
15:45
Speaker 1: investors got Clauber, the sixty forty portfolio, which clearly isn't
15:49
Speaker 1: your model, UM got smashed, and all the big hedge
15:52
Speaker 1: fund you know, you're former colleagues from you know, the
15:57
Speaker 1: Tiger Globals of the world got destroyed as well. Oh,
16:00
Speaker 1: how did you do you want a single number? Seven
16:05
Speaker 1: point down? So Roger, So you know you think about
16:15
Speaker 1: these markets here, I mean, you know there's been so
16:19
Speaker 1: much volatility here, what do you make of some of
16:21
Speaker 1: like these crazy tradings that we've seen in meme stocks
16:25
Speaker 1: for example, or I guess more to the point, in
16:27
Speaker 1: crypto crypto. How do you think about this whole crypto space.
16:31
Speaker 1: That's something new for you since you were running galleon. Yeah,
16:35
Speaker 1: I mean, you know, I don't know how you value
16:38
Speaker 1: a bit, right, it's what somebody else is going to
16:41
Speaker 1: pay for it. Um. What we've learned in the last
16:45
Speaker 1: couple of months, it's a huge leverage that's been taking place.
16:49
Speaker 1: Now whenever somebody promises you an eight percent returned to
16:53
Speaker 1: for you to lend your bitcoin to them, you know
16:57
Speaker 1: that's not regather right. So there's too much money running
17:03
Speaker 1: around because of the fuddle reserve, you know, in an
17:08
Speaker 1: accommodative phase. Um. And you've seen you know, when I
17:15
Speaker 1: was managing money, the retail investor was not a big
17:19
Speaker 1: not a big factor. Today they account for about of
17:23
Speaker 1: the trading volume, and computer algorithmic based trading account for
17:30
Speaker 1: about So you have this money running around the casino
17:35
Speaker 1: not really understanding the risks. And because we've been in
17:39
Speaker 1: a bull market, you know, everybody was parting like crazy.
17:43
Speaker 1: Now they have to pay the piper, right, things are
17:46
Speaker 1: not as easy as it seemed last year. And this
17:50
Speaker 1: is why I tell I, I say to you that
17:52
Speaker 1: I've never seen a market this treacherous and this turbulence.
17:56
Speaker 1: If I was an investor, I would wait for three months.
18:01
Speaker 1: We would by then we wouldn't know what the Fed's
18:04
Speaker 1: going to do. The consensus is seventi five basis points.
18:08
Speaker 1: Race number two will come through the earning season and
18:12
Speaker 1: we will see what management is saying about their business
18:17
Speaker 1: and the mac and the environment they operate in. And
18:21
Speaker 1: we'll also probably have some charity on how the Russian
18:25
Speaker 1: Ukraine war is UH evolved. Me these are mostly things
18:31
Speaker 1: that you cannot know right. These are big macro issues.
18:34
Speaker 1: But the retail investor, especially the sort of Wall Street
18:38
Speaker 1: bets crowd um is confirmed concerned about a narrative that
18:43
Speaker 1: you know, the game is fixed, the casino is rigged,
18:46
Speaker 1: and you know your case, maybe one your former case,
18:50
Speaker 1: maybe one that they site as evidence. Do you think
18:53
Speaker 1: that's the case? Um? These days? Are are are big
18:56
Speaker 1: hedge fund managers? Do they need an edge, possibly a
18:59
Speaker 1: gray area or even illegal edge. Well, you know, it's
19:06
Speaker 1: difficult to compare the retail investors to the professional investor
19:09
Speaker 1: who spends ten hours a day reading quarterly's, listening to
19:16
Speaker 1: conference calls, ten case meeting with management. And in the
19:21
Speaker 1: good old days, if you wanted to invest in the market,
19:25
Speaker 1: you would give it to Fidelity or Morgan Stanley or
19:28
Speaker 1: Dray first professional money managers to manage. What has happened
19:33
Speaker 1: more recently some of these approprictions that allowed retail investors
19:37
Speaker 1: to buy partial chess so you can buy one share
19:41
Speaker 1: of Amazon. And while retail parties participation is good for everybody,
19:48
Speaker 1: I think you need to do your homework. Yeah, absolutely,
19:54
Speaker 1: I mean it needs Volato markets, no question about it. Roger.
19:57
Speaker 1: I just want to thank you for your time. Appreciate
19:59
Speaker 1: you taken the time. Roger Roger Rottenham former He is
20:03
Speaker 1: the former managing general partner and co founder of Galleon
20:06
Speaker 1: Management Group, a hedge fund, also author of Uneven Justice.
20:11
Speaker 1: Appreciate getting his perspective because Matt back again, back in
20:14
Speaker 1: the day, the nineties to two thousand's, he was as
20:16
Speaker 1: big as they come in terms of the hedge fund
20:19
Speaker 1: business on the Wall Street. Absolutely, so it will be
20:21
Speaker 1: interesting to see how um his book has received. Uneven
20:25
Speaker 1: Justice is the name of the book and he takes uh.
20:28
Speaker 1: He has a real problem with um uh, with prosecution
20:32
Speaker 1: and prosecutors and and and the advantages he thinks they enjoy,
20:36
Speaker 1: and and the tactics that they use. It will also
20:39
Speaker 1: be interesting to see how his advice to investors plays out.
20:43
Speaker 1: He says, wait, wait for wait for earnings, and wait
20:46
Speaker 1: for this federal reserve. Let's keep it moving. Matt Winkler,
20:51
Speaker 1: editor in Chief emeritus from Bloomberg News. He's the founder
20:53
Speaker 1: of Bloomberg News. For for goodness sake, he's in our
20:56
Speaker 1: Bloomberg Interactor Broker Studio. Matt, thanks so much for joining us.
20:59
Speaker 1: Forgot some stuff talk about one of my favorite cities, Boston.
21:02
Speaker 1: But first I want to just get your thoughts on
21:04
Speaker 1: our discussion the mat and I just had with Roger.
21:06
Speaker 1: Roger Rottenham, former managing general partner co found of Galleon Management,
21:10
Speaker 1: a unbelievable story that I know Bloomberg News covered extensively
21:16
Speaker 1: back in the day and we were television and over
21:19
Speaker 1: it when he got us to covering the trial extensively.
21:22
Speaker 1: What are your thoughts? And Kenny, I know you were
21:24
Speaker 1: listening to our conversation, so we're all concerned about what
21:29
Speaker 1: comes next. And I think relevant to the discussion you
21:33
Speaker 1: just had is that if you read carefully recent Supreme
21:39
Speaker 1: Court decisions, both the Dodd decision which related to abortion,
21:44
Speaker 1: and UH the decision that essentially UH negates much of
21:50
Speaker 1: what the e p A under the Biden administration has
21:54
Speaker 1: set out to do to deal with climate change. That's
21:56
Speaker 1: about a much bigger issue, which is against regulation per se,
22:02
Speaker 1: and that includes, by the way, securities regulation. If you
22:05
Speaker 1: look at the say, the six justices on the Supreme
22:09
Speaker 1: Court who were in agreement, UM, where they're going at
22:13
Speaker 1: this point is to you know, eviscerate government regulation, maybe
22:19
Speaker 1: take us back before the New Deal. Really, and we
22:22
Speaker 1: all know what happened before the New Deal. There was
22:25
Speaker 1: the Great Depression and crash before that, and out of
22:31
Speaker 1: that came UH securities regulation. Really for the first time,
22:36
Speaker 1: the sec was born, if you like, out of the
22:40
Speaker 1: ashes of the stock market crash and the Great Depression.
22:44
Speaker 1: So UH, there is clearly an ideological bent um at
22:49
Speaker 1: this point, and it's coming from the court. There's a
22:53
Speaker 1: couple of an I code that all type on the Bloomberg.
22:57
Speaker 1: I always look at an I l are and I
22:58
Speaker 1: look at an I authors uh now and I Gilbert had.
23:02
Speaker 1: I've looked at it ever since Mark taught me about
23:04
Speaker 1: the bond market. And I Winkler, of course is uh
23:07
Speaker 1: my mainstay. As Matt hired me. Um, you've got a
23:11
Speaker 1: piece on uh, not only on your on the opinion side,
23:17
Speaker 1: but on your your columns. Here about Michelle wou the
23:21
Speaker 1: new mayor of Boston and how she's going to change
23:23
Speaker 1: it with the help of a big boost of stimulus.
23:27
Speaker 1: Tell us about it. Well, she's, as we say, a
23:30
Speaker 1: mayor of many first because she's the first woman and
23:33
Speaker 1: first person of color elected as mayor uh Boston, and
23:38
Speaker 1: that was in November, and she inherited about three and
23:42
Speaker 1: fifty million dollars in one time federal funds that came
23:45
Speaker 1: out of COVID nineteen relief money. And she immediately set
23:50
Speaker 1: about using that money. Uh. She puts it to make
23:53
Speaker 1: Boston the greenest city in America. But what really is, um,
24:01
Speaker 1: if you like, the secret sauce of Boston is, and
24:04
Speaker 1: maybe not so secret anymore, is that it's exceptional really
24:08
Speaker 1: in the world as a center for biotechnology. And we
24:12
Speaker 1: can say that at Bloomberg because we have data that
24:16
Speaker 1: shows that there's no city in the world. There's no
24:19
Speaker 1: country in the world, there's no state in the United
24:21
Speaker 1: States where you have the convergence of biotechnology and three
24:26
Speaker 1: companies in particular what you've heard of. Of course, Maderna
24:30
Speaker 1: and Biogen are probably the best well known, but there
24:33
Speaker 1: are actually many UM companies that you haven't heard of.
24:38
Speaker 1: And uh, this is really about the twenty one century.
24:42
Speaker 1: And this is where Boston benefits more probably than any
24:46
Speaker 1: other city. Do they have a corruption problem because I
24:49
Speaker 1: obviously think about M I T and Harvard and Vertex
24:52
Speaker 1: and Maldierna, and but I also think about the Big
24:55
Speaker 1: Dig when I think about Boston. Well, it's not so
24:59
Speaker 1: much that the Big Dig was UH corruption. It was
25:04
Speaker 1: a very long term government project. Having said that, if
25:07
Speaker 1: you ask anyone in Boston today how they feel about
25:11
Speaker 1: what was achieved by the Big Dig, the answer I
25:14
Speaker 1: think is unanimous, which is Boston is a beautiful city
25:17
Speaker 1: because of the Big Dig. It's a cleaner, more vibrant, UH,
25:21
Speaker 1: more connected city than it ever was. And so the
25:24
Speaker 1: Big Dig was in fact a far sided UH decision
25:28
Speaker 1: and only benefited Boston. You know, as a former sell
25:32
Speaker 1: side analysts, Boston was after New York, my top top market.
25:37
Speaker 1: I'd go up there at least once a quarter, big
25:39
Speaker 1: financial services, big mutual fun industry. If there's that's still
25:43
Speaker 1: the case, well sure, I mean if you think about
25:45
Speaker 1: Fidelity for example alone, Uh, Fidelity is such a huge
25:49
Speaker 1: generator of revenue. Uh, you know, it's gargantuan and uh.
25:56
Speaker 1: Then you think of healthcare. Health care amounts to about
26:00
Speaker 1: corporate Massachusetts, and of that business is biotech and pharmaceuticals.
26:05
Speaker 1: So there's a reason why you would beat a path
26:07
Speaker 1: there because, uh, for example, they're fifty seven Massachusetts based
26:12
Speaker 1: biotech firms in the Russell three thousand. They produced a
26:15
Speaker 1: total return of thirty seven uh and two during the
26:20
Speaker 1: past two and three years. That substantially outperforms California and
26:25
Speaker 1: New York, New Jersey with comparable healthcare and pharmaceutical in
26:30
Speaker 1: biotech companies. So you get some sense from this data
26:34
Speaker 1: of just what a juggernaut this industry is for Boston.
26:38
Speaker 1: Can I just ask you one thing I haven't seen
26:40
Speaker 1: mentioned in these columns. You did one on Atlanta before Boston.
26:44
Speaker 1: I've just moved from Berlin, and I've noticed that we
26:46
Speaker 1: have a real problem when it comes to childcare. Why
26:49
Speaker 1: why isn't their pre K childcare right again. I mean
26:54
Speaker 1: it's a political decision in this country, not a moral
26:58
Speaker 1: decision or an economic decision. It's a political decision, all right.
27:01
Speaker 1: Matt Winkler, thanks so much for joining us. Always appreciate it.
27:03
Speaker 1: Matt Winkler, Editor in Chief Emeritus, Bloomberg News. Joining us here.
27:10
Speaker 1: Phil Taps, CEO of TAPS Asset Management film more importantly
27:15
Speaker 1: of your assets in cash talk to us about that. Yeah.
27:19
Speaker 1: So our strategies, we have funds and ETFs and s
27:23
Speaker 1: m a s and we have been managing this way since.
27:27
Speaker 1: So it's not something that we came up with last week.
27:29
Speaker 1: But we use trend following algorithms, and our trend following
27:33
Speaker 1: algorithms attempt to get us out of the way of
27:36
Speaker 1: market train wrecks in the very early phase of decline.
27:39
Speaker 1: So we moved for the first time out of US
27:42
Speaker 1: equities in and international equities on January thirteenth of this year. Um,
27:48
Speaker 1: we've been in. We've been in a couple of times
27:52
Speaker 1: and out very briefly, but we've been defensive now for
27:57
Speaker 1: at least the last month and a half. So the
28:00
Speaker 1: idea is that when market chaos happens, sometimes it's just
28:05
Speaker 1: best to be on the sidelines and wait for better
28:07
Speaker 1: value to come along. We just heard this from Raj Rajaratnam.
28:11
Speaker 1: Actually we spoke to the former hedge fund manager and
28:15
Speaker 1: convicted insider trader. I guess I should say that legally,
28:19
Speaker 1: um And he he said, he advises investors to wait
28:22
Speaker 1: like three months until we see get a better picture
28:25
Speaker 1: of what the Fed is doing, of what the economy
28:29
Speaker 1: is doing versus inflation, and what's happening in the Russian
28:32
Speaker 1: war against Ukraine. What do you think about that? Well,
28:36
Speaker 1: so it's it's really hard to put a time frame
28:39
Speaker 1: on it because you don't know whether it's going to uh,
28:42
Speaker 1: you know, become escalated and bottom out in the next
28:45
Speaker 1: week or two months or three months. So if you
28:48
Speaker 1: just have a period of time like three months, it
28:51
Speaker 1: could take six months or nine months. So instead of
28:54
Speaker 1: doing that, I think someone needs to come to this
28:56
Speaker 1: idea with a well thought out system. And what that
29:00
Speaker 1: might look like is a trend following algorithm that then
29:03
Speaker 1: detects when trends turn higher and attempts to come back in.
29:07
Speaker 1: Just as we got out in the early phase of
29:09
Speaker 1: this decline. What you want to try to do is
29:11
Speaker 1: come back in in the early phase of a rise
29:14
Speaker 1: in the markets, and so you know, for for this
29:18
Speaker 1: to end, we'd expect for volatility to be way higher
29:21
Speaker 1: than where it is, you know, vix it in the
29:23
Speaker 1: range of isn't full capitulation. So once that finally happens
29:28
Speaker 1: and trends move higher than there cans to be some
29:30
Speaker 1: very big gains ahead. I mean three months would put
29:33
Speaker 1: us about where an average recession would end, sometime in
29:35
Speaker 1: October of this year, but I'd hate to put a
29:37
Speaker 1: specific time period on it, like that. Is this the
29:39
Speaker 1: kaboomer thing, because you're not a dooomer or a gloomer,
29:43
Speaker 1: but a kaboomer. What a boomer? Yeah? Yeah, So some
29:46
Speaker 1: people sometimes say that I'm a doom and gloomer, but
29:50
Speaker 1: I came out this year out of the closet as
29:52
Speaker 1: a boom boom kaboomer. Because if you're a duman gloomer,
29:55
Speaker 1: it's like being at a cocktail party and tell it,
29:57
Speaker 1: reminding everyone of the hangover that's going to happen eventually.
29:59
Speaker 1: But so we have to do is embrace the boom
30:01
Speaker 1: and realize that markets are advancing of the time. But
30:05
Speaker 1: the thing that almost no one is prepared for in
30:07
Speaker 1: the markets is when the market when they go completely
30:10
Speaker 1: off the rails, and so you can look to the
30:12
Speaker 1: financial crisis of client, but it could be worse and
30:15
Speaker 1: the Great Depression stocks went down, So some combination of
30:19
Speaker 1: both decreasing earnings and compressing valuations, it could be even
30:25
Speaker 1: worse than what we saw in the financial crisis. So
30:28
Speaker 1: acknowledge it and build contingencies around what would happen to
30:32
Speaker 1: your portfolio if we see that kind of a huge
30:35
Speaker 1: that's a great general perspective we've seen now specifically the
30:39
Speaker 1: valuation compression. What kind of earnings drop or collapse do
30:46
Speaker 1: you expect. So if you look at the last to
30:50
Speaker 1: bear markets, the both the Internet double burst and the
30:52
Speaker 1: financial crisis, what happened is the economy was fine going
30:57
Speaker 1: into it and the stock markets fell. And after the
31:00
Speaker 1: stock market fall, that's felt that's when you saw a
31:02
Speaker 1: recession and a decrease in earnings. That appears to be
31:05
Speaker 1: what's happening this time as well, because coming into the
31:08
Speaker 1: end of last year, you know, still the unemployment number
31:12
Speaker 1: looks looks quite good. There are more jobs available than
31:16
Speaker 1: our people to fill them. But I think it depends
31:19
Speaker 1: on how serious the stock market fall gets. I think
31:22
Speaker 1: it depends on how bad inflation and how long it persists,
31:27
Speaker 1: and that will help determine how bad earnings go. But
31:29
Speaker 1: I don't think we've seen a lot of compression and
31:31
Speaker 1: valuations yet. I mean, if you're still bumping up around
31:34
Speaker 1: twenty times trailing on the SMP five hundred, that doesn't
31:37
Speaker 1: even look like average, much less low multiples. So really,
31:42
Speaker 1: you know, looking back at the history of the fact
31:44
Speaker 1: that we've been at that five and a half times
31:47
Speaker 1: earnings on the SMP five hundred, we're nowhere near that
31:50
Speaker 1: kind of a low. I'm not saying we'll get there,
31:52
Speaker 1: but that's the kind of risk that we're talking about.
31:55
Speaker 1: Still thirty seconds here, Um, if you had to buy
31:59
Speaker 1: something today, would you what would you buy? Well, frankly,
32:04
Speaker 1: I mean, I know that the energy complex has come
32:05
Speaker 1: out under come under pressure recently. But if I was
32:08
Speaker 1: going to put a small allocation into something that I
32:10
Speaker 1: thought might have a prayer of advancing in the next
32:12
Speaker 1: two to three months, it would be in the energy sector,
32:15
Speaker 1: and that that trade could go wrong if we see
32:17
Speaker 1: us come into our recession. But I think there's a
32:19
Speaker 1: possibility still we all know of Russia doing some things
32:23
Speaker 1: with oil that could cause oil prices to spike, so
32:26
Speaker 1: I would I'd look to that, and then for broader
32:29
Speaker 1: portfolios if you're not going to be in hedge equity
32:31
Speaker 1: funds like we manage, or things that can be fully
32:33
Speaker 1: on the sidelines. I looked at things like low ball
32:36
Speaker 1: stocks and and think they're going to be less volatible
32:38
Speaker 1: and moved down less than the broad markets. So people
32:41
Speaker 1: accuse him of doom and gloom. I just don't see it.
32:43
Speaker 1: Phil Taves, thanks so much. We appreciate Phil Taves, ce
32:46
Speaker 1: CEO of Taves Asset Management. And that's how you pronounce it, right, Yeah, Taves,
32:51
Speaker 1: I'm going with that. Thanks for listening to the Bloomberg
32:55
Speaker 1: Markets podcast. You can subscribe and listen to interviews with
32:58
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Mat Miller.
33:03
Speaker 1: I'm on Twitter at Matt Miller nineteen seventy three and
33:07
Speaker 1: on false Sweeney I'm on Twitter at p T Sweeney.
33:09
Speaker 1: Before the podcast, you can always catch us worldwide at
33:12
Speaker 1: Bloomberg Radio