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Puerto Rico Creditors Seek Restructuring Amid Disaster · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
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• 0:32
  Speaker 1: we always do at this time of the day on Fridays,
• 0:35
  Speaker 1: we are very lucky to have with us Joe Maisak,
• 0:37
  Speaker 1: editor of the Bloomberg Brief that focuses on the municipop
• 0:40
  Speaker 1: blom market uh and he is of course here in
• 0:43
  Speaker 1: our Bloomberg eleven three oh studios. Joe, we have to
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  Speaker 1: start with Puerto Rico for a lot of reasons. First
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  Speaker 1: of all, the disaster that is the aftermath of Hurricane
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  Speaker 1: Maria is ongoing, and there are still a lot of
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  Speaker 1: questions about how the island will get the aid it
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  Speaker 1: needs to even begin to get people potable water and
• 1:02
  Speaker 1: the electricity. On little loan rebuild, I want to start
• 1:05
  Speaker 1: the bondholders took this week as an opportunity to an
• 1:09
  Speaker 1: extent or offer a one billion dollar dip loan right
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  Speaker 1: This is basically a debtors and possession. It's basically a
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  Speaker 1: bankruptcy tool, financing tool. They offered to give Puerto Rico
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  Speaker 1: a one billion dollar loan in return for a deal
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  Speaker 1: that they had proposed previously. Basically, they're going to be
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  Speaker 1: first in line to get repaid. Can you give us
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  Speaker 1: a sense of what your take on this offer was, Well,
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  Speaker 1: you gotta hand it to him. Uh, this is what
• 1:38
  Speaker 1: some creditors do. They have a very sharp elbowed bunch
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  Speaker 1: and they want to get everybody out of the way. Um.
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  Speaker 1: But I'll tell you what we're looking at now. You know,
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  Speaker 1: before this, we were looking at the at the best bonds,
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  Speaker 1: the most highly secured bonds, at recoveries of between and
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  Speaker 1: it's in the dollar you're talking about these, the Puerto
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  Speaker 1: Rico Electric Power Authority bonds, right Rico Guos, Puerto Rico
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  Speaker 1: Electric Power Authority bonds, Cofina's sales tax the best of
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  Speaker 1: the bunch we were talking about, you know, pretty those
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  Speaker 1: kind of of recoveries. And with the storm. Uh. Ted
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  Speaker 1: Hampton did a report this week of Moody's and uh,
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  Speaker 1: you know, he said, well, it could very well be
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  Speaker 1: that you're gonna the storm's impact will have an impact
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  Speaker 1: on those recoveries even less. So you're not going to
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  Speaker 1: have fifteen cent uh haircuts like the this this Loan
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  Speaker 1: programs was positing, you know. I just want to mention
• 2:40
  Speaker 1: also to all of our listeners that we are awaiting
• 2:42
  Speaker 1: comments from President Donald Trump. He will be pushing for
• 2:46
  Speaker 1: his tax reform proposal in giving a speech in front
• 2:49
  Speaker 1: of the National Association of Manufacturers in Washington, d C.
• 2:52
  Speaker 1: We will bring you, of course, the important highlights. Uh.
• 2:55
  Speaker 1: You know, Joe, one of the things I want to
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  Speaker 1: ask you about has to do with the bankruptcy because
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  Speaker 1: I understand that the Title three bankruptcy case, there's an
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  Speaker 1: omnibus hearing that was originally scheduled, and it was scheduled,
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  Speaker 1: I believe for like yesterday, but uh, District U S.
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  Speaker 1: District Court judge in the Southern District of New York,
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  Speaker 1: Laura Taylor swain Um indefinitely postponed the hearing. Is that
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  Speaker 1: going to affect any of the reconstruction or indeed any
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  Speaker 1: of the financial issues that Puerto Rico is facing. I
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  Speaker 1: think that was a a sort of postponement out of
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  Speaker 1: almost good taste, you know, with such devastation on the
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  Speaker 1: island and the rescue taking place a few weeks here
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  Speaker 1: and there are really going to that's not going to
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  Speaker 1: have much of an impact, Joe. My sense is, given
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  Speaker 1: the fact that there are so many problems even distributing
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  Speaker 1: goods to people in Puerto Rico from the ports, my
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  Speaker 1: sense is that the government is kind of a disarray,
• 3:57
  Speaker 1: just trying to get their handle around the problem. When
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  Speaker 1: do you think that they will be more together and
• 4:02
  Speaker 1: able to tackle both the island's financial issues as well
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  Speaker 1: as the debt negotiations once again, well, the debt negotiations
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  Speaker 1: were probably talking, you know, well into October before we
• 4:16
  Speaker 1: sit down again and start, you know, hashing that out. Um.
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  Speaker 1: But as far as the reconstruction of the island is going,
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  Speaker 1: there are a lot of people who have been sent
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  Speaker 1: to the island. There's a lot of material already there
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  Speaker 1: that hasn't been unloaded. And I thought, gosh, there was
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  Speaker 1: a story this week and it said they were having
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  Speaker 1: difficulties delivering a lot of the material it's been sent
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  Speaker 1: because there was a lack of drivers. And I haven't
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  Speaker 1: heard or seen any estimates of how many people left
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  Speaker 1: the island before the storm or with the storm, and
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  Speaker 1: I I would suspect it's quite a lot, because they said,
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  Speaker 1: you know, if we were having a problem just finding
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  Speaker 1: drivers to you know, deliver the stuff. Joe, can I
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  Speaker 1: just follow up though on this the legal proceedings for
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  Speaker 1: just a second, because the President of the Puerto Rico
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  Speaker 1: House asked the Oversight Board to suspend all legal proceedings
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  Speaker 1: against the Puerto Rican government. And there's even been a
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  Speaker 1: proposal that maybe they should just stop enforcing the plans
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  Speaker 1: measures for at least a year, maybe even over the
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  Speaker 1: next five years. Is that likely? I would find that
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  Speaker 1: extremely unlikely. Uh. The the the road to recovery is going
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  Speaker 1: um is going to um uh be paved, if you will,
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  Speaker 1: with the financial plan. And yeah, but why wouldn't they
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  Speaker 1: Why wouldn't they grant them? Why wouldn't they grant them
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  Speaker 1: a postponement? You've got a situation whereas you just described,
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  Speaker 1: no one even really knows the extent of the damage,
• 6:00
  Speaker 1: accept that it is catastrophic. Why wouldn't there be a
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  Speaker 1: sympathetic ear to the postponement of an austerity plan at
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  Speaker 1: a time when the island Commonwealth is trying to rebuild. Well,
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  Speaker 1: you know, they the Island is getting assistance right now.
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  Speaker 1: So it's not as though getting a recovery plan in place,
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  Speaker 1: which is what the board is trying to do, is
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  Speaker 1: going to somehow handicap them. All Right, let's turn our
• 6:40
  Speaker 1: attention now to education. Everyone wants it and particularly in
• 6:43
  Speaker 1: developing nations and in China. And here to help us
• 6:46
  Speaker 1: understand more about it. As Pingway, he is the chief
• 6:48
  Speaker 1: financial officer of r y B Education and he's going
• 6:53
  Speaker 1: to tell us a little bit about the company's initial
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  Speaker 1: public offering. It The priced the on September seventh, on yesterday, Uh,
• 7:01
  Speaker 1: I beg your pardon on Wednesday paying thank you very
• 7:03
  Speaker 1: much for being with us, Thanks for having me great.
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  Speaker 1: You know, could you just describe for us to demand
• 7:09
  Speaker 1: because people may not understand the demand and the perceived
• 7:13
  Speaker 1: necessity of getting a great education and scoring well on
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  Speaker 1: tests in China? Will Chinese traditionally really emphasis a lot
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  Speaker 1: of education and thanks to that, I think that, you know,
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  Speaker 1: we as long as we can get the high quality education,
• 7:30
  Speaker 1: we grab those and our IB Education is an early
• 7:36
  Speaker 1: chryhood education company based in China. We provide actually training
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  Speaker 1: for children aging six months to six years old through
• 7:45
  Speaker 1: our pennor centers, and then we provide kindergarten and preschool
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  Speaker 1: services to children from two years to six years old.
• 7:52
  Speaker 1: And uh, you know, kindergarten in preschool is a neceaturday worldwide,
• 7:57
  Speaker 1: not just in China, but China particularly so for private
• 8:01
  Speaker 1: sector because we don't have a sufficient public infrastructure unlike
• 8:05
  Speaker 1: that in the US. So in China about half of
• 8:09
  Speaker 1: all kindergarten and preschool services are actually private owned. Um
• 8:13
  Speaker 1: Our I b A is the largest or largest well
• 8:16
  Speaker 1: in terms of revenue both on our PLC business to
• 8:19
  Speaker 1: Plan Learn Center business and our kindergarten side. Um so
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  Speaker 1: in terms of why it's a necessity our guests and
• 8:29
  Speaker 1: the infrastructure aside, and the demand for high quality education side.
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  Speaker 1: I think there's another thing that is, you know, with
• 8:37
  Speaker 1: the abolition of their one child policy in China, the
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  Speaker 1: birth rate has increased quite significantly. Give you some numbers.
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  Speaker 1: In twenty fifteen, there were about the sixteen point six
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  Speaker 1: million kids born in China. By twenty sixteen, the first
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  Speaker 1: year after the two children policy was adopted, the birthday
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  Speaker 1: went up to seventeen point nine million kids in the year.
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  Speaker 1: And there's another number that points to an even higher
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  Speaker 1: number of eighteen points six men, and with so many
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  Speaker 1: children born, the need for childhoods for early childhood education
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  Speaker 1: also increased quite dramatically. Yeah, um, you know, pain, it
• 9:14
  Speaker 1: strucks me. It strikes me as interesting that you chose
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  Speaker 1: to do initial public offering in the United States. There's
• 9:20
  Speaker 1: been a lot of questions about why there haven't been
• 9:23
  Speaker 1: more I p O s in the US. What drew
• 9:26
  Speaker 1: you to this market to raise money? Yeah, Well, in fact,
• 9:31
  Speaker 1: if you look to the U S side, there are
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  Speaker 1: a few pretty good Chinese names here, New Oriental Tel
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  Speaker 1: Education both are sort of really high quality education companies
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  Speaker 1: from China. We really like the US market in a
• 9:45
  Speaker 1: few reasons. One, it's the the US market investors are
• 9:49
  Speaker 1: so always sophisticated and well educated. Too, is the U
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  Speaker 1: S market has very um sort of a clear and
• 9:55
  Speaker 1: transparent rules and which creates a sort of a level
• 10:01
  Speaker 1: place there for all companies, so companies only need to
• 10:04
  Speaker 1: focus on doing the right things for shareholders in creating
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  Speaker 1: value and not having to worry too much about other things.
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  Speaker 1: And thirdly, it's actually a good branding and good sort
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  Speaker 1: of an uh self governance per se for Chinese companies.
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  Speaker 1: UH like. First of all branding side being able to
• 10:23
  Speaker 1: listen in the US and sort of also a good
• 10:27
  Speaker 1: US public market or capital market sort of uh, citizens
• 10:33
  Speaker 1: is uh sort of endorsement of the quality of the
• 10:36
  Speaker 1: company itself. And secondly, the sun stocks they act, you know,
• 10:41
  Speaker 1: while it's a kind of cumbersome and then uh sort
• 10:45
  Speaker 1: of a lot of work, it's actually a good way
• 10:47
  Speaker 1: to force company to have good governance, and those good
• 10:51
  Speaker 1: governors actually help company avoid a lot of sort of
• 10:54
  Speaker 1: system risk operation wide. Every company has this opting ups
• 10:58
  Speaker 1: and downs. But the good God and is actually steals
• 11:01
  Speaker 1: a company in right direction. That's what we believe. Pingwait,
• 11:05
  Speaker 1: thank you so much for joining us. Pingway is a
• 11:07
  Speaker 1: chief financial officer for r y B Education based in Beijing. Uh.
• 11:13
  Speaker 1: This week, it priced an initial public offering in the
• 11:16
  Speaker 1: US New York Stock Exchange, raising a hundred and forty
• 11:20
  Speaker 1: four point three million dollars. We are awaiting President Donald Trump.
• 11:37
  Speaker 1: He is going to be speaking before the National Association
• 11:39
  Speaker 1: and Manufacturers in Washington, d C. Of course, his topic
• 11:43
  Speaker 1: is going to be his tax reform proposal. We'll, of
• 11:46
  Speaker 1: course bring that to you as soon as it begins.
• 11:49
  Speaker 1: Let's turn our attention now to combining two distinct groups billionaires,
• 11:54
  Speaker 1: people with lots of money of course, and uh, there
• 11:57
  Speaker 1: are companies as well as how to initiate strategic relationships
• 12:02
  Speaker 1: with other businesses with startups for example. And here to
• 12:06
  Speaker 1: help us understand this particular situation is Dmitri our Geropolis.
• 12:10
  Speaker 1: He is the founder and the chief executive of event
• 12:13
  Speaker 1: Global and he joins us in our eleven three oh studios. Dmitri,
• 12:16
  Speaker 1: thank you very much for being here. Tell people about
• 12:18
  Speaker 1: event Global what what is its purpose? You know, we
• 12:22
  Speaker 1: take we take the best opportunities, uh, and we marry
• 12:28
  Speaker 1: them with the best network that we have the you know,
• 12:32
  Speaker 1: whether it's a startup or a very established company, our
• 12:35
  Speaker 1: goal is really singular. We know how to put the
• 12:38
  Speaker 1: right people together. What's the criteria? I mean because frankly,
• 12:41
  Speaker 1: I mean everybody says we're only going to give you
• 12:43
  Speaker 1: the best investments, and we're only going to get you
• 12:45
  Speaker 1: the best investors. I mean, no one wants second place.
• 12:47
  Speaker 1: How do you do this? Can you give us an example?
• 12:49
  Speaker 1: People don't understand how to build relationships, Uh that often
• 12:56
  Speaker 1: as well as we do. That's all we've done for
• 12:58
  Speaker 1: twenty years. We really we we build tremendous value by
• 13:03
  Speaker 1: under identifying the inefficiencies in business and marrying the right people.
• 13:09
  Speaker 1: But can you give us an example. So so for example,
• 13:13
  Speaker 1: we you know, we recently identified a very UM unique
• 13:19
  Speaker 1: UM consumer product in the Mediterranean and we locked up
• 13:23
  Speaker 1: that UM that agreement. We we got exclusivity on the product.
• 13:30
  Speaker 1: We partnered up with the right distiller, We partnered up
• 13:32
  Speaker 1: with the right distributor, and then we got the you know,
• 13:36
  Speaker 1: one of the biggest spirits families in the world to
• 13:38
  Speaker 1: back the deal. And we created a tremendous amount of
• 13:41
  Speaker 1: value by by putting all those pieces together. We did
• 13:44
  Speaker 1: it with the largest UM cookie company in Germany and
• 13:48
  Speaker 1: partnered with the largest co packer on the West Coast
• 13:51
  Speaker 1: and created an organic cookie brand UM you know in
• 13:55
  Speaker 1: one evening that's now launching UM with mass of distribution
• 14:01
  Speaker 1: because the co packer has distribution in every major supermarket
• 14:05
  Speaker 1: in America and the manufacturer doesn't have access to it,
• 14:09
  Speaker 1: but he has one of the biggest factories in Europe
• 14:13
  Speaker 1: and has created a very unique product that the market
• 14:15
  Speaker 1: hasn't seen. Dmitri, it sounds like you're a sorcerer. It's
• 14:18
  Speaker 1: sort of the job of that used to be in
• 14:21
  Speaker 1: banks and has moved increasingly to private equity firms and
• 14:24
  Speaker 1: hedge funds of going out and finding opportunities that are
• 14:27
  Speaker 1: off the grid and that may be smaller than the
• 14:30
  Speaker 1: ones that are financed in public markets. Is that correct? Correct?
• 14:33
  Speaker 1: So what how do you go about? What's your process
• 14:36
  Speaker 1: of trying to identify these opportunities other than just you know,
• 14:40
  Speaker 1: hanging out and what people say. I think it's it's
• 14:43
  Speaker 1: so important. You have to have value propositions that are
• 14:46
  Speaker 1: equal or greater on both sides. If if if the
• 14:49
  Speaker 1: person like the cookie guy the cookie factory didn't have
• 14:52
  Speaker 1: access to the US, the guy in the US didn't
• 14:55
  Speaker 1: have access to those unique ingredients and those qualities that
• 14:58
  Speaker 1: that that cookie company had, they needed each other and
• 15:01
  Speaker 1: therefore you created something. You find the inefficiencies of what
• 15:04
  Speaker 1: people don't have, and if you understand people's platforms, you
• 15:08
  Speaker 1: bring in the biggest people were principal investors in the
• 15:12
  Speaker 1: deals we do, and we do a lot of things
• 15:13
  Speaker 1: in technology, and we do a lot of things in
• 15:16
  Speaker 1: the consumer space. Those are really our areas, but we
• 15:19
  Speaker 1: have done things in a lot of different areas. For example,
• 15:21
  Speaker 1: we did a deal with the Boon Pickens, and we
• 15:23
  Speaker 1: brought a billionaire from Asia who wanted to have access
• 15:26
  Speaker 1: to the energy industry. We helped t Boon divest of
• 15:30
  Speaker 1: some assets, build a great international relationship which ended up
• 15:33
  Speaker 1: being a massive transaction, and subsequently he was involved in
• 15:37
  Speaker 1: a number of other deals with the Boon. Can you
• 15:39
  Speaker 1: give us an idea of what is your participation in this?
• 15:43
  Speaker 1: Do you take an equity stake? How do you make money?
• 15:45
  Speaker 1: Were principal investors in all the deals that we do
• 15:49
  Speaker 1: and we are we own a piece of the business.
• 15:52
  Speaker 1: So by bringing people together and creating the value from scratch, uh,
• 15:58
  Speaker 1: we are. We we form a neukoe typically and that
• 16:01
  Speaker 1: new code, we become a shareholder in that. And so
• 16:04
  Speaker 1: we're long term. We have a long term view whatever
• 16:06
  Speaker 1: we do because we believe in the people we were
• 16:10
  Speaker 1: we're putting together. We're not we're not brokering introductions for
• 16:14
  Speaker 1: five minutes of fees. We're doing it for the long term.
• 16:18
  Speaker 1: We've been doing it almost twenty years. So Dmitri, how
• 16:21
  Speaker 1: have you established such a network of billionaires and business owners?
• 16:27
  Speaker 1: That's a great question. I think part of it stems from,
• 16:30
  Speaker 1: you know, just very early in my career, I was
• 16:33
  Speaker 1: fortunate enough to intern for and volunteer for UM you know,
• 16:37
  Speaker 1: the former President Clinton. I you know, UM, I was
• 16:42
  Speaker 1: able to you know, I just it's just in my blood.
• 16:45
  Speaker 1: Networking was something I've always done since I was a
• 16:48
  Speaker 1: young guy, and I had some great mentors from you know,
• 16:51
  Speaker 1: the guy that helps start Motel six uh to you
• 16:54
  Speaker 1: know certain well known business mavens in in California, to
• 17:00
  Speaker 1: you know, being influenced by people like the former president
• 17:03
  Speaker 1: and other global leaders uh, and really just learning how
• 17:07
  Speaker 1: to build relationships and trust and not being in a
• 17:09
  Speaker 1: rush to create something. Um. People that are so successful
• 17:14
  Speaker 1: have a low um uh tolerance for people that are
• 17:19
  Speaker 1: quick to do stuff. If you have a long term
• 17:21
  Speaker 1: approach and you can create real value and you demonstrate
• 17:25
  Speaker 1: that time and time again, you build a great amount
• 17:27
  Speaker 1: of trust with someone like that, which is something that
• 17:30
  Speaker 1: they have a hard time believing with believing in people,
• 17:33
  Speaker 1: because there's a lot of people that it's hard to
• 17:35
  Speaker 1: trust people. When you have everything, people always want something
• 17:38
  Speaker 1: from your Well, I'm wondering, in as part as part
• 17:42
  Speaker 1: of the act of building that relationship, have you found
• 17:46
  Speaker 1: that you really only want to bring consumer deals to
• 17:51
  Speaker 1: organizations or people that have a consumer background. You have
• 17:54
  Speaker 1: people that are interested in perhaps in real estate, and
• 17:56
  Speaker 1: they only have a real estate background, and is does
• 17:59
  Speaker 1: that characterize it? They stick to what they know, right,
• 18:02
  Speaker 1: I mean, I I know a little bit about a
• 18:05
  Speaker 1: lot of things, and as long as I understand how
• 18:10
  Speaker 1: to put the value together and who to put together,
• 18:13
  Speaker 1: it becomes very natural at doing almost doing this for
• 18:17
  Speaker 1: twenty years. So right, but do they have but do
• 18:18
  Speaker 1: they have to have expertise in that specific subject matter?
• 18:22
  Speaker 1: So for example, you know people who have a lot
• 18:24
  Speaker 1: of money, let's say a family office that has a
• 18:26
  Speaker 1: lot of money, they're not even though it might be
• 18:28
  Speaker 1: a great deal, if they don't understand the business or
• 18:32
  Speaker 1: they're not have you know, historical experience either with their
• 18:35
  Speaker 1: family or what made them wealthy. If they don't have
• 18:38
  Speaker 1: that connection, do you kind of say that's not really
• 18:41
  Speaker 1: gonna work, because you know, just because they have a
• 18:43
  Speaker 1: lot of money doesn't really gonna you You want them
• 18:47
  Speaker 1: to be strategic, of course, but sometimes you want also
• 18:50
  Speaker 1: family officers to participate and if they believe in the
• 18:53
  Speaker 1: track record of the people were putting together, they're they're
• 18:56
  Speaker 1: they're investing or co investing with us because they believe
• 19:00
  Speaker 1: in the in that in that strategy, in their in
• 19:04
  Speaker 1: their track record. Yeah, is there any anecdote that you
• 19:07
  Speaker 1: could share that you can describe how long a deal
• 19:11
  Speaker 1: takes to make? Because you talk about this idea of
• 19:13
  Speaker 1: you know, not wanting to do a quick turnaround. How
• 19:16
  Speaker 1: long can it take to see it the deal to
• 19:18
  Speaker 1: make it happen. You mentioned one that happened overnight, but
• 19:21
  Speaker 1: I mean it's got to be something that took it
• 19:22
  Speaker 1: a long time to you know, come pruition. I mean,
• 19:26
  Speaker 1: you know, building trust is is something you have to
• 19:30
  Speaker 1: have a long term view on and as long as
• 19:32
  Speaker 1: you have a long term view on it, it will
• 19:35
  Speaker 1: there's a very good chance that it will materialize over
• 19:37
  Speaker 1: time if you continue to bring value. But I do
• 19:40
  Speaker 1: not see, um, you know, deals that just happened like
• 19:44
  Speaker 1: that unless the opportunity is there. And since you've built
• 19:48
  Speaker 1: the trust though, and you've deposited that trust over time,
• 19:51
  Speaker 1: when something ripe happens, it happens very quickly. So I
• 19:55
  Speaker 1: think my suggestion is have a long term view, be patient,
• 19:58
  Speaker 1: don't be opportunistic, be because if you create value for people,
• 20:02
  Speaker 1: it will naturally happen. Dmitriopolis thank you so much for
• 20:06
  Speaker 1: joining us. Dmitri Janopolis is founder and chief executive officer
• 20:10
  Speaker 1: of Avant Global, which is based in Santa Barbara. All right, now,
• 20:27
  Speaker 1: what do CVS, Harley Davidson, Wells Fargo, and Bank of
• 20:30
  Speaker 1: America all have in common? Well, David Cats, the chief
• 20:33
  Speaker 1: investment officer of Matrix Asset Advisors with more than seven
• 20:37
  Speaker 1: fifty million under management, thinks that these companies will do
• 20:40
  Speaker 1: pretty well regardless of whatever happens with tax reform. David,
• 20:43
  Speaker 1: thanks for being with us. Nice to be here. So
• 20:46
  Speaker 1: give us the thesis. Why are these companies CVS, pharmaceuticals,
• 20:51
  Speaker 1: pharmacy benefits, Harley Davidson, of course, motorcycles, and the banking industry,
• 20:56
  Speaker 1: Wells Fargo, Bank of America? What makes them appear on
• 20:59
  Speaker 1: your list of stocks that you think are going to
• 21:01
  Speaker 1: do well? So we like these companies based upon favorable
• 21:05
  Speaker 1: long term prospects, but most importantly based on their valuation.
• 21:09
  Speaker 1: So they're good businesses, good outlooks, and they're all selling
• 21:13
  Speaker 1: for well under our market multiple. But what makes them
• 21:15
  Speaker 1: particularly interesting is if you're an investor and you're looking
• 21:19
  Speaker 1: for things that are going to benefit by the new
• 21:21
  Speaker 1: tax plan. If it were to ultimately go through, all
• 21:24
  Speaker 1: of them pay pretty high tax rates. They would get
• 21:27
  Speaker 1: a lot of release relief from a new tax plan, uh,
• 21:31
  Speaker 1: and it would be a significant kick to their earning.
• 21:34
  Speaker 1: So you'd get an additional catalyst. David, how much can
• 21:37
  Speaker 1: you really trade around a tax plan that is currently
• 21:41
  Speaker 1: still in sketch form. That is a great question. We
• 21:45
  Speaker 1: absolutely would not trade around the tax plan because there's
• 21:48
  Speaker 1: going to be a tremendous amount of changes. There's no
• 21:50
  Speaker 1: assurance that it's going to ultimately happen, So we would
• 21:53
  Speaker 1: not be using that as an ultimate driver for buying
• 21:57
  Speaker 1: or selling stocks. We would not make any change to
• 22:00
  Speaker 1: a portfolio. So when we recommend that these stocks, were
• 22:03
  Speaker 1: saying we like these companies. We think they're going to
• 22:05
  Speaker 1: do very well over the next six to twelve months regardless.
• 22:08
  Speaker 1: But if you're looking at buying something and a tax play,
• 22:12
  Speaker 1: if the tax plan ultimately goes through, um, you get
• 22:16
  Speaker 1: the icing on the cake. David, how much are you
• 22:18
  Speaker 1: confident that the tax plan I'll be at a sketch
• 22:22
  Speaker 1: of one at this point, could generate the kind of
• 22:25
  Speaker 1: growth that Secretary Treasury Treasury Secretary Steve Nuchin and President
• 22:31
  Speaker 1: Trump I been saying, well, realistically, we don't think that
• 22:35
  Speaker 1: that's going to be the case. We think it's a
• 22:37
  Speaker 1: good thing for the economy. It provides a little bit
• 22:39
  Speaker 1: of a tailwind, UH puts more money in consumers pocketbooks hopefully,
• 22:43
  Speaker 1: although we don't have any clue about how that's gonna look.
• 22:46
  Speaker 1: One thing that is clear, however, is it will lower
• 22:49
  Speaker 1: corporate taxes. And if you lower corporate taxes, what that
• 22:52
  Speaker 1: means is more goes to the bottom line, so you
• 22:55
  Speaker 1: have a pickup and earnings, and then from a stock
• 22:57
  Speaker 1: market perspective, higher earnings generally a lead to higher stock prices.
• 23:01
  Speaker 1: So we think it's ultimately good for the economy, but
• 23:05
  Speaker 1: we don't have any confidence that the lower taxes are
• 23:08
  Speaker 1: going to accelerate growth to appointment that it becomes tax
• 23:11
  Speaker 1: neutral or revenue neutral. But we do think ultimately it's
• 23:14
  Speaker 1: good for the overall economy if they can get something through.
• 23:18
  Speaker 1: David tell us about the j C, I want to
• 23:20
  Speaker 1: know what you think you think about specific stocks like
• 23:23
  Speaker 1: Johnson Controls. So, Johnson Controls is an industrial company. They've
• 23:28
  Speaker 1: remade themselves in the last year with acquisitions. UH. The
• 23:31
  Speaker 1: new management of the combined company has not done a
• 23:34
  Speaker 1: particularly good job. So actually they disappointed this year that
• 23:37
  Speaker 1: one of the few industrials that did, and one of
• 23:39
  Speaker 1: their disappointments was they did a particularly poor job in
• 23:42
  Speaker 1: terms of cash flow. Since then, they've changed the CEO.
• 23:46
  Speaker 1: We think the new CEO is very motivated, very competent,
• 23:50
  Speaker 1: and we think that their focus is going to be
• 23:51
  Speaker 1: on synergies from the combination that they made last year
• 23:55
  Speaker 1: uh and making sure that the cash flow approximates or
• 23:58
  Speaker 1: gets much closer to what they're earning stream is. And
• 24:01
  Speaker 1: if that's the case, we think the stock easily has
• 24:03
  Speaker 1: twenty five to thirty five percent upside over the next
• 24:06
  Speaker 1: twelve months. David real quick, is there anything that you've
• 24:09
  Speaker 1: recently soured on as a potential stock? Well, not so
• 24:14
  Speaker 1: much soured on, but one thing that we would strongly
• 24:16
  Speaker 1: advise investors against is putting new money into utilities. Investors
• 24:21
  Speaker 1: have been seeking yield, uh so utilities are interesting on
• 24:24
  Speaker 1: that basis, But if you look at them on a
• 24:26
  Speaker 1: valuation basis, many utilities are selling between eighteen and twenty
• 24:30
  Speaker 1: one times earnings. They normally sell at fifteen times earnings.
• 24:34
  Speaker 1: So if you've been fortunate, you've owned utilities we would
• 24:37
  Speaker 1: declare victory. Take some of that money off the table,
• 24:40
  Speaker 1: and we'd prefer the baby are the telecom companies like
• 24:43
  Speaker 1: a Verizon Um or a A T and T, which
• 24:47
  Speaker 1: have a little bit higher yields but tell at twelve
• 24:49
  Speaker 1: and thirteen times earnings rather than twenty times earnings. And
• 24:52
  Speaker 1: even some consumer product companies where their yields are pretty competitive.
• 24:56
  Speaker 1: You're paying a little bit more, but we think the
• 24:57
  Speaker 1: prospects are pretty good for them. At Cats, thank you
• 25:00
  Speaker 1: so much for joining us. David Cats as chief investment
• 25:02
  Speaker 1: Officer at Matrix Acid Advisors, which is based in New
• 25:06
  Speaker 1: York City. Thanks for listening to the Bloomberg P and
• 25:12
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 25:15
  Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm
• 25:19
  Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on
• 25:23
  Speaker 1: Twitter at Lisa abramoids one. Before the podcast, you can
• 25:26
  Speaker 1: always catch us worldwide on Bloomberg Radio.