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Lurking Unfairness At Heart Of Economy: Facebook Co-Founder · Bloomberg Intelligence

• 0:05
  Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
• 0:13
  Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,
• 0:18
  Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
• 0:23
  Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. You
• 0:33
  Speaker 1: might recall just over a month ago Ray Daio of
• 0:36
  Speaker 1: Bridgewater was it a month ago around about that he
• 0:39
  Speaker 1: came out and he talked to Bloomberg from Davos, Switzerland
• 0:42
  Speaker 1: and mentioned that maybe investors might be feeling stupid about
• 0:46
  Speaker 1: owning cash. Well, I can tell you they feel less
• 0:48
  Speaker 1: stupid now because investors are piling in to an all
• 0:51
  Speaker 1: cash e t F. The Bloomberg Barclays one to three
• 0:54
  Speaker 1: month T bill exchange traded fund taking in five hundred
• 0:58
  Speaker 1: and eighty million dollars just last week among some of
• 1:02
  Speaker 1: the top US fixed income products. So it's the dash
• 1:05
  Speaker 1: for cash back on and it's the yield going to
• 1:07
  Speaker 1: compete for capital elsewhere. I'm ready pleased we can have
• 1:10
  Speaker 1: this conversation with Kate more blank Rocks, chief Equity Strategistics.
• 1:15
  Speaker 1: She joins us in our studio here in New York
• 1:16
  Speaker 1: and morning Kate good morning, So help me out. Does
• 1:19
  Speaker 1: it compete for capital out swear? I don't think so. Look,
• 1:21
  Speaker 1: maybe some of those flows are relatively impressive, but I'm
• 1:24
  Speaker 1: also thinking back to the e p f R data
• 1:27
  Speaker 1: that I look at in terms of fund flows a
• 1:28
  Speaker 1: year to date. In January, there was over a hundred
• 1:31
  Speaker 1: billion dollars of net new money put into global equity funds.
• 1:34
  Speaker 1: That's come down a little bit as there were some redemptions,
• 1:36
  Speaker 1: but it's about you know, almost close to eighty billion
• 1:38
  Speaker 1: dollars of net new money into global equity funds this year.
• 1:40
  Speaker 1: That's phenomenal when you consider in all of two thousand
• 1:43
  Speaker 1: and sixteen, a record breaking year, there were three billion
• 1:46
  Speaker 1: dollars of money put in. You know, we went from
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  Speaker 1: a year last year where people were worried about the
• 1:51
  Speaker 1: length of the bullmarket, about valuations, about you know, a
• 1:55
  Speaker 1: myriad of different you know, political and geopolitical risks, to
• 1:59
  Speaker 1: putting money back to work in equities this year, and
• 2:02
  Speaker 1: then now I think we're in a bit of a
• 2:03
  Speaker 1: pause as they assess the new volatility and rate environment.
• 2:06
  Speaker 1: Are you surprised that there's still this narrative out there,
• 2:09
  Speaker 1: a narrative which basically says the following. When the yields
• 2:11
  Speaker 1: go higher, equities will be challenged when some of the
• 2:14
  Speaker 1: data doesn't really back up that narrative, but it's still
• 2:17
  Speaker 1: out there, it still exists. You're surprised by that. Yeah,
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  Speaker 1: there are a lot of narratives out there that don't
• 2:21
  Speaker 1: are not frankly, really based in fundamentals. Um. What I
• 2:24
  Speaker 1: would also say is, you know, everyone is looking for
• 2:27
  Speaker 1: historical comparisons or periods as their guide to the future,
• 2:30
  Speaker 1: and we think that needs to inform perhaps the way
• 2:32
  Speaker 1: you look at things, but can't be your soul dictate. Um,
• 2:36
  Speaker 1: we are still in a very low rate environment, even
• 2:39
  Speaker 1: if rates are moving higher, and we think that companies
• 2:42
  Speaker 1: are very well insulated against a significant uh, you know,
• 2:46
  Speaker 1: higher rates because they've done such a good job as
• 2:48
  Speaker 1: we were just talking about about refinancing themselves. But we'll
• 2:51
  Speaker 1: have to watch very closely as as companies talk about
• 2:54
  Speaker 1: their spending in investment plans. How are they going to
• 2:56
  Speaker 1: be financing that, Will they do it with equity? Will
• 2:59
  Speaker 1: they do it with and does that end up having
• 3:01
  Speaker 1: an impact? Um. On two thousand nineteen and onwards, Good
• 3:04
  Speaker 1: morning everyone, Bloomberg Surveillance, Jenferrow and Tom Keene to John's
• 3:08
  Speaker 1: good question, it is about investment. Do you see tangible
• 3:13
  Speaker 1: increases in corporate enthusiasm to invest in America? There seems
• 3:19
  Speaker 1: to be a little bit of a disconnect, Tom, between
• 3:21
  Speaker 1: what companies tell us they would like to do in
• 3:23
  Speaker 1: terms of investments and what they're doing in terms of
• 3:26
  Speaker 1: putting their money to work. And I think this is
• 3:27
  Speaker 1: going to be a real tell me and show us
• 3:30
  Speaker 1: kind of moment over the next two quarters. Do companies
• 3:34
  Speaker 1: use tax windfall to actually invest? And is that investment
• 3:38
  Speaker 1: new investment or was it stuff that just got delayed
• 3:40
  Speaker 1: from last year because they thought there was gonna be
• 3:42
  Speaker 1: a tax cut coming they were just waiting for it,
• 3:45
  Speaker 1: delayed maintenance and sustainable sustainability cap facts. This will be
• 3:50
  Speaker 1: on a case by case basis. K I don't expect
• 3:53
  Speaker 1: you to make really sweeping generalizations, but I might ask
• 3:56
  Speaker 1: you to make just one exception right now. Do you
• 3:59
  Speaker 1: want them to invest the money or would you like
• 4:01
  Speaker 1: to just see big capital return plans throughout? I want
• 4:05
  Speaker 1: companies to make growth generative investments, not investments just to
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  Speaker 1: appease outsiders. And I think this is what we've we've
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  Speaker 1: come really used to a corporate management sort of. You know,
• 4:17
  Speaker 1: our set of behaviors over the last ten years, where
• 4:19
  Speaker 1: companies have been conservative, they were really cautious about spending,
• 4:23
  Speaker 1: they were cautious about hiring. They did a lot of jobs,
• 4:25
  Speaker 1: the great job of controlling their costs for a long time.
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  Speaker 1: If they all of a sudden throw that out the
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  Speaker 1: window in two thousand eight, that would make me anxious
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  Speaker 1: as an equity investor. So yes, I want them to spend.
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  Speaker 1: I want them to do stuff that's going to lead
• 4:35
  Speaker 1: to better growth longer term. But I don't want it
• 4:39
  Speaker 1: to be spending for the sake of spending. Well, let's
• 4:41
  Speaker 1: just think about it. They are continually rewarded to introduce
• 4:44
  Speaker 1: a buy back plan or increase the dividend. And I'm
• 4:46
  Speaker 1: not taking a position on this and saying it's right
• 4:48
  Speaker 1: or wrong. I'm just saying, look at Barclays as an example,
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  Speaker 1: this morning, the stock searching not because anything terrific is
• 4:54
  Speaker 1: in the numbers this morning. It's because just Stady, the CEO,
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  Speaker 1: is increased the dividend one and two. He's talked about
• 4:59
  Speaker 1: the prospect of buybacks at some point in the future.
• 5:02
  Speaker 1: Maybe that's the stuff that the investment community wants to
• 5:05
  Speaker 1: hear is the CEO you know that? How difficult is
• 5:07
  Speaker 1: it to put that to one side and say we're
• 5:09
  Speaker 1: all about the future, We're all about multi decade strategies.
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  Speaker 1: I think we also have to remember companies haven't had
• 5:14
  Speaker 1: that heart of a time access in capital the last
• 5:16
  Speaker 1: couple of years. I mean rates have been low. You know,
• 5:20
  Speaker 1: if you're a high quality company with a strong plan,
• 5:22
  Speaker 1: it should have no trouble access in the market. So
• 5:25
  Speaker 1: if there's this meaningful shift this year, that would make
• 5:27
  Speaker 1: me a little bit of gy What a big picture
• 5:29
  Speaker 1: to you know, not only your institutional clients, but mostly
• 5:32
  Speaker 1: to our listeners who are just worried about keeping the
• 5:35
  Speaker 1: four oh one kid going. The great mistake of this
• 5:38
  Speaker 1: bull market has been the rationalization of an actual aerial
• 5:41
  Speaker 1: assumption is seven percent. You get into that mindset, you
• 5:45
  Speaker 1: do certain things. The people that have one day, what
• 5:48
  Speaker 1: happened yesterday with David Einhorn, John Ferrell, do we have
• 5:51
  Speaker 1: those numbers? And just maybe I don't think green Light
• 5:54
  Speaker 1: had yet. Yeah, they don't have a great year. And
• 5:56
  Speaker 1: and my answer is is the actual aerial assumption has
• 6:01
  Speaker 1: not proven correct? Do you invest now believing with more optimism, inequities,
• 6:08
  Speaker 1: or do you hunker down in the land of Kate
• 6:10
  Speaker 1: Moore towards an actual real assumption. You know, I think
• 6:14
  Speaker 1: this is a great question. We spend a lot of
• 6:15
  Speaker 1: times thinking thinking about our near term expectations as well
• 6:18
  Speaker 1: as our medium term and longer term capital markets assumptions
• 6:21
  Speaker 1: and looking at the gaps between them. It's really hard,
• 6:24
  Speaker 1: as you know, tom to time the market. It's really
• 6:26
  Speaker 1: really difficult to say, I know the perfect entry or
• 6:29
  Speaker 1: exit point. But we feel in general that investors have
• 6:32
  Speaker 1: been sitting on too much cash given the strength of
• 6:35
  Speaker 1: this cycle. And this is a message we've given to you,
• 6:38
  Speaker 1: our institutional and individual clients, and said, look, you can't
• 6:42
  Speaker 1: time the market. All you can do is focus on
• 6:45
  Speaker 1: the longer term trend. And we think we're gonna have
• 6:48
  Speaker 1: less volatility, both in terms of the macro and continued
• 6:51
  Speaker 1: corporate health. So as in not a lot of math
• 6:54
  Speaker 1: mix of fifty, you're willing to say we're still going
• 6:56
  Speaker 1: to have less volatility, we don't expect we're going to
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  Speaker 1: be at a sustained fixed big fifty. I mean, as
• 7:01
  Speaker 1: we were talking about two thousand seventeen was a really
• 7:04
  Speaker 1: weird year in terms of low ball, which should be
• 7:07
  Speaker 1: a little bit higher than that. It would be an
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  Speaker 1: even Can you image the ratings with the sustained average
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  Speaker 1: fifty vis Yeah, I can. I think things have got
• 7:20
  Speaker 1: a little bit berserk. Your point about David Ironhorne of
• 7:23
  Speaker 1: green Light the under performance the worst since the year
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  Speaker 1: two thousand and One of the things that comes up
• 7:29
  Speaker 1: is this expectation that at some point value stocks are
• 7:31
  Speaker 1: going to start out performing growth stocks. Yeah, we're going
• 7:34
  Speaker 1: to see that this year, Kate. We need to think
• 7:36
  Speaker 1: about what is value. So we think we talked about
• 7:38
  Speaker 1: value to different ways, value the investment style, and then
• 7:41
  Speaker 1: value the factor. And you remember, value the factors often
• 7:43
  Speaker 1: sector neutralized, so you're just looking at the cheapest companies
• 7:46
  Speaker 1: within each sector as opposed to taking big sector concentrations,
• 7:50
  Speaker 1: oftentimes with a value value the style. And so there
• 7:53
  Speaker 1: are certainly companies that are cheaper than they have been historically.
• 7:57
  Speaker 1: Some of them are more structurally impaired, and some of
• 8:00
  Speaker 1: the stuff, like let's say we're looking in Europe that
• 8:03
  Speaker 1: is cheaper, is more domestically oriented, doesn't have the strong
• 8:06
  Speaker 1: global growth um you know, tilt, and perhaps deserves a
• 8:10
  Speaker 1: lower valuation than some of the multinationals that have multiple
• 8:13
  Speaker 1: earning streams. Were you guys long ice cream? Yesterday? The
• 8:17
  Speaker 1: weather in Manhattan was so good that anybody within forty
• 8:20
  Speaker 1: two ft of me demanded ice cream. You need a
• 8:23
  Speaker 1: time arizon of about five minutes if you were, because
• 8:26
  Speaker 1: it's freezing again. Went back down into the fourties. There's
• 8:31
  Speaker 1: the most position and open up the trading book on
• 8:33
  Speaker 1: ice cream. Do you want to understand the cost of
• 8:36
  Speaker 1: ice cream? That's not Howard Johnson's Columbus Circle. There's an
• 8:40
  Speaker 1: ice cream place it dance the wallet. I don't have
• 8:44
  Speaker 1: kids like you, and I'm actually it's really expensive. Tompkin.
• 8:47
  Speaker 1: It was gorgeous yesterday. What do we get up to?
• 8:49
  Speaker 1: Seventies and seventy seventies? Ate? Thank you with black Rocket.
• 8:54
  Speaker 1: This is Bloomberg. We're talking with Hans Hume before about
• 9:08
  Speaker 1: his interest in Venezuela. We think all in Venezuela for watching,
• 9:12
  Speaker 1: as we've heard from a number of voices today. Speak
• 9:16
  Speaker 1: to the Venezuela people and Hans Hume, as you mentioned earlier,
• 9:20
  Speaker 1: the Venezuela elite about almost as nostalgia to get back
• 9:25
  Speaker 1: to a Venezuela of another time. Is that possible. You know,
• 9:30
  Speaker 1: I don't think anybody wants to go back to the
• 9:33
  Speaker 1: Venezuela another time. I mean, certainly in the nineteen seventies,
• 9:36
  Speaker 1: I mean that was probably the dream scenario. Oil prices high,
• 9:39
  Speaker 1: um education funded for any anybody in Venezuela, that a
• 9:44
  Speaker 1: lot of people stuttering studying internationally, and I mean Venezuela
• 9:48
  Speaker 1: was the strongest economy in Latin America. All prices go down,
• 9:53
  Speaker 1: you start getting social divisions. The elite was very entrenched,
• 9:56
  Speaker 1: and Chaves took a message that really resonated with the
• 9:59
  Speaker 1: majority of the popula Asian. The problem is that Javis
• 10:02
  Speaker 1: was hardly an economist. I mean, if you take a
• 10:03
  Speaker 1: look of Venezuela and compared to Equador, for example, Raphael
• 10:07
  Speaker 1: Correa came in with the same kind of message, but
• 10:09
  Speaker 1: he actually implemented some economic policies that were was able
• 10:13
  Speaker 1: to broaden the economy and opportunities for the majority of
• 10:17
  Speaker 1: the population. Um. So there's been a real change in
• 10:19
  Speaker 1: the infrastructure Equador, Venezuela. It's all been ripped apart, and
• 10:23
  Speaker 1: I think that the recovery is going to have to
• 10:25
  Speaker 1: be something along those lines. Eventually, were more people of
• 10:29
  Speaker 1: access to you know, the economic power than you saw
• 10:33
  Speaker 1: prior to the Javis Revolution. This is a total economic tragedy.
• 10:38
  Speaker 1: There is a seriously powerful story on the Bloomberg Today
• 10:42
  Speaker 1: written by our colleague Fabiol Zerpa who's basically rights that
• 10:47
  Speaker 1: PETERSA Cruz the National Old Company a skipping work to
• 10:50
  Speaker 1: hunt for food. Just think about that, skipping work to
• 10:54
  Speaker 1: hunt for food. And the individual in the story says,
• 10:55
  Speaker 1: I haven't eaten meat for two months. The last time
• 10:57
  Speaker 1: I did, I spent my whole week's salary on chicken meal.
• 11:01
  Speaker 1: That's how tragic things are right now, Hans. And as
• 11:03
  Speaker 1: you look at other situations you've been involved in the past,
• 11:06
  Speaker 1: and we can talk about your experience with Grace Venezuela,
• 11:10
  Speaker 1: is that a really really unique situation right now versus
• 11:14
  Speaker 1: everything else you've ever experienced. You know, it's kind of
• 11:17
  Speaker 1: interesting because I remember in another interview Um making the
• 11:21
  Speaker 1: point that if you're looking long term returns, you know,
• 11:25
  Speaker 1: investing in men as well, you're not expecting it to
• 11:27
  Speaker 1: become Switzerland. You just don't want it to become Zimbabwe. Absolutely.
• 11:31
  Speaker 1: The next day you had the coup and Zimbabwe and
• 11:35
  Speaker 1: Gabe got kicked out. And now Zimbabwe is like sort
• 11:39
  Speaker 1: of the darling at Davos um Venezuel. It is a tragedy,
• 11:43
  Speaker 1: uh the um you know, if you look at the
• 11:46
  Speaker 1: amount of hunger, not just among the you know, the
• 11:49
  Speaker 1: oil industry workers, but across you know, you look at
• 11:52
  Speaker 1: deaths of you know, babies in hospitals. I mean, the
• 11:56
  Speaker 1: entire support network for the society has been ripped apart um.
• 12:01
  Speaker 1: And I think the real tragedy is I mean, there
• 12:03
  Speaker 1: was the initial elite that consolidated a lot of the
• 12:06
  Speaker 1: wealth and we're taking quite a bit of off shore.
• 12:08
  Speaker 1: But in the last ten fifteen years, the people in
• 12:13
  Speaker 1: the current administration that had people in the oil companies
• 12:17
  Speaker 1: in you know, the senior people in the government have
• 12:20
  Speaker 1: probably swept you know, between billion and trillion dollars offshore.
• 12:26
  Speaker 1: So you know what the tragedy really isn't I mean,
• 12:29
  Speaker 1: people has been discussion about hunger bonds, but it's really
• 12:32
  Speaker 1: that there's it's a kleptocracy at this point and so
• 12:36
  Speaker 1: much money has been swept off shore that there's nothing there,
• 12:41
  Speaker 1: you know, two left in the country. So I worked
• 12:43
  Speaker 1: this question carefully because I think it's the best way
• 12:46
  Speaker 1: of wording this as an investor. You want to finance
• 12:48
  Speaker 1: the economic recovery of what is right now an absolute tragedy.
• 12:52
  Speaker 1: But as you look at the situation, what are the
• 12:53
  Speaker 1: opportunities to do that? I mean, clearly, anything you know
• 12:57
  Speaker 1: that you look at to invest on the ground is
• 13:00
  Speaker 1: that the people are giving it away. Um. On the
• 13:02
  Speaker 1: fixed income side, both Petavesa and Venezuelan sovereign bonds are
• 13:06
  Speaker 1: trading very cheap. But I think the first step, uh
• 13:10
  Speaker 1: is to get you know, assuming there'll be a transition
• 13:14
  Speaker 1: of the government at some point, um. I mean, I
• 13:18
  Speaker 1: think that the idea that Caracas will become Havana and
• 13:22
  Speaker 1: will stay off in outside the international community for more
• 13:26
  Speaker 1: than five years is is far fetched, but it is.
• 13:29
  Speaker 1: You know, when the recovery happens, you're going to have
• 13:32
  Speaker 1: to cooperate with the international community to bring the stolen
• 13:36
  Speaker 1: money back into the domestic economy, and then you'll have
• 13:39
  Speaker 1: to start rebuilding the rule of law, um, you know,
• 13:43
  Speaker 1: and try to bring the country back to where it was.
• 13:45
  Speaker 1: Thank you for the briefing. Hans Hume, who looks at
• 13:48
  Speaker 1: distressed things like Greece at a certain point, like maybe
• 13:52
  Speaker 1: Portugal at a certain point. In this case, Venezuela. He
• 13:56
  Speaker 1: is with Gray Lucky. Should we now speak with Dennis Gartman,
• 14:10
  Speaker 1: which is always a good and beautiful thing. We talked
• 14:12
  Speaker 1: to him about rising rates, about equities, about the joy
• 14:16
  Speaker 1: that in his newsletter he writes in the back end
• 14:18
  Speaker 1: of it, the winning and often the losing in trades.
• 14:23
  Speaker 1: Capital risk management always from the center from Mr Gartman.
• 14:27
  Speaker 1: But first a modest uproar. Let me brief you on this, folks. Uh.
• 14:31
  Speaker 1: Mr Gartman went all bitcoin, he went down in flames,
• 14:37
  Speaker 1: and there was a course within the volatility. The last
• 14:39
  Speaker 1: couple of weeks, different reports, and we at Bloomberg wrote
• 14:42
  Speaker 1: up the story. And you know, I must admit, Dennis,
• 14:45
  Speaker 1: the headline was a little of cerbics, saying, you blew
• 14:47
  Speaker 1: up your retirement account? Did you jump into the James River? What? What?
• 14:51
  Speaker 1: What happened with your retirement? I lost a little over um,
• 14:57
  Speaker 1: which to me is really quite disturbing. Yeah, um, I
• 15:01
  Speaker 1: suspected a loss of one percent or one and a
• 15:03
  Speaker 1: half percent or so. It's probably not going to cause
• 15:06
  Speaker 1: me to lose a great good deal of sleep, nor
• 15:08
  Speaker 1: has it blown up my retirement funds, nor shall I
• 15:11
  Speaker 1: have to go into work longer day longer weeks and
• 15:15
  Speaker 1: years to recover. I had a excuse me. I had
• 15:19
  Speaker 1: a bad trade. Yeah, I got out, but the headlines
• 15:23
  Speaker 1: that Bloomberg had written made it look like I had
• 15:26
  Speaker 1: and had been debilitated, and that's simply not to come.
• 15:29
  Speaker 1: I talked to our David Litkar, editor on this, and
• 15:31
  Speaker 1: he made clear we made some tweaks to that. But
• 15:33
  Speaker 1: the idea of Dennis, whether you were done one percent
• 15:36
  Speaker 1: or five percent, or you've got closet in a bitcoin
• 15:39
  Speaker 1: trade in the heat of down a thousand points in
• 15:43
  Speaker 1: the heat yesterday of a swing of five hundred points,
• 15:47
  Speaker 1: in two cups of gartment cup of coffee, what should
• 15:51
  Speaker 1: people do? You're in a dog trade, you said in
• 15:55
  Speaker 1: your newsletter, you were in some bitcoin riot coin thing,
• 15:58
  Speaker 1: whatever it was, you were in this a thing. What
• 16:01
  Speaker 1: should people do when they're going down in flames on
• 16:05
  Speaker 1: an individual trade. Get to the sidelines as fast as
• 16:09
  Speaker 1: you possibly can, take your loss and miss admit that
• 16:12
  Speaker 1: you had made a mistake for whatever reason, and and
• 16:17
  Speaker 1: do the best that you can. But going to the
• 16:18
  Speaker 1: sidelines is always the best course of action. And as
• 16:21
  Speaker 1: I've always said, there's never just one cockroach. Usually when
• 16:25
  Speaker 1: a problem occurs, is followed by others, and the stock
• 16:28
  Speaker 1: has continued to fall since then. With with within this,
• 16:31
  Speaker 1: Dennis is risk management? Do stop losses work when you're
• 16:37
  Speaker 1: going down in riot coin or whatever? It was that quick?
• 16:40
  Speaker 1: I mean, I'm sorry, John Ferrell. Technical analysis doesn't work
• 16:44
  Speaker 1: when the line is we keep referring to this is
• 16:47
  Speaker 1: riot chain? What is this riot blockchain? It was a
• 16:49
  Speaker 1: block check company that went all crypto. And I want
• 16:52
  Speaker 1: to try and understand why someone like you, Dennis exactly
• 16:55
  Speaker 1: was anywhere near this company. Why did you hold this stock?
• 16:59
  Speaker 1: I was looking at the chart. I saw something that
• 17:02
  Speaker 1: that was pleasing. It had an out of what I
• 17:04
  Speaker 1: call an outside reversal two weeks per or. Prior to that,
• 17:07
  Speaker 1: uh and UH, I understand that a couple of friends
• 17:10
  Speaker 1: of mine from years past were becoming involved. That changed
• 17:13
  Speaker 1: my opinion. I thought I could see a decent reward
• 17:16
  Speaker 1: and a reasonable risk, and for a while the trade
• 17:19
  Speaker 1: was doing really quite well. I think I bought it
• 17:21
  Speaker 1: at fifteen and a half. Sixteen sixteen and a half
• 17:24
  Speaker 1: added to a winning trade. I think it was up
• 17:27
  Speaker 1: to seventeen twenty the night before, and then out came
• 17:30
  Speaker 1: that expose a tennis. We talked about technicles here, would
• 17:33
  Speaker 1: you seriously exclusively a d put a position on by
• 17:36
  Speaker 1: a equity by a stock on technacles alone, without doing
• 17:39
  Speaker 1: any fundamental analysis of what this company's up to. It's
• 17:42
  Speaker 1: not the first time I've done that. It won't be
• 17:44
  Speaker 1: the last time I've done that. There there are a
• 17:45
  Speaker 1: number of reasons why I did it, and it was
• 17:48
  Speaker 1: a very small amount of money compared to the size
• 17:50
  Speaker 1: of my my retirement funds, So yeah, clearly I there
• 17:54
  Speaker 1: There have been times in the past when a when
• 17:56
  Speaker 1: a simple technical circumstance has has a list has has
• 18:01
  Speaker 1: caught my attention, and I have acted. I'm not the
• 18:03
  Speaker 1: only things that's ever done that. I won't be the last.
• 18:05
  Speaker 1: This is very honest discussion, folks, Dennis Garment, what's so
• 18:08
  Speaker 1: poor important? Here is a struggle of partitioning investment from speculation?
• 18:15
  Speaker 1: How do you partition gold hedged in euro or a
• 18:20
  Speaker 1: long term long bet on the United States of America
• 18:24
  Speaker 1: from what's it called? John on his speculation on Riot?
• 18:27
  Speaker 1: What riot block chain? How do you can we change
• 18:31
  Speaker 1: is the Bloomberg block chain? That would be good for
• 18:33
  Speaker 1: the show? Dennis? How do you partition? We would wait,
• 18:37
  Speaker 1: we only got forty two listeners. Now, Dennis, how do
• 18:40
  Speaker 1: you partition investment from speculation? That's the heart of this discussion.
• 18:45
  Speaker 1: I don't think there is a different differentiation between investment
• 18:49
  Speaker 1: and speculation. I I learned long ago when I worked
• 18:52
  Speaker 1: at the bank as a as a fort ex change
• 18:53
  Speaker 1: trader and watched one of the major one of the
• 18:56
  Speaker 1: major traders in the bank put positions on for the
• 18:58
  Speaker 1: bank's portfolio. When they win against him, they became part
• 19:01
  Speaker 1: of the portfolio and became an investment. When he made
• 19:04
  Speaker 1: a quick profit, they became a speculation. All trading, all investment,
• 19:09
  Speaker 1: begins as a speculation. And usually what I have seen
• 19:12
  Speaker 1: over the course of years is that people who allow
• 19:14
  Speaker 1: a trade to go against them say that the fundamentals
• 19:17
  Speaker 1: have not changed. Something else has changed. You're losing money.
• 19:21
  Speaker 1: And that's what separates I think pros from amateurs in
• 19:23
  Speaker 1: the business. His pros will lose money more often than
• 19:27
  Speaker 1: amateurs will. But pros will lose will make so much
• 19:30
  Speaker 1: more on the one or two or three or four
• 19:31
  Speaker 1: trades out of the fifteen that they have. And that's
• 19:34
  Speaker 1: what's important, and that's what differentiates Dennis Gallman to really
• 19:50
  Speaker 1: link in UH science and technology in a way that
• 19:55
  Speaker 1: the great response we got yesterday from those older that
• 19:59
  Speaker 1: remember where you stopped for space launches, and a lot
• 20:03
  Speaker 1: of younger people are saying, well, that's odd, and I'm like, no,
• 20:06
  Speaker 1: it's not odd. It's what we used to do and
• 20:08
  Speaker 1: through the sixties and even well into the seventies and
• 20:11
  Speaker 1: of course up to a grim day with a Challenger
• 20:13
  Speaker 1: accident of years ago. But um, we're gonna do that.
• 20:17
  Speaker 1: SpaceX scrubbed yesterday the reports our official surveillance aerospace engineer,
• 20:23
  Speaker 1: our worst span, David worst Span doesn't when you get
• 20:27
  Speaker 1: that much engineering, you don't use your first name. It's
• 20:30
  Speaker 1: just surveillance aerospace expert. Our worst span tells us that
• 20:35
  Speaker 1: down wind, it looks good today for SpaceX. How does
• 20:38
  Speaker 1: it look for Rubber Made. I have discovered that offspring
• 20:43
  Speaker 1: like rubber made airtight cartons to keep their slim in.
• 20:49
  Speaker 1: So is this the slime report with Newell rubber Made. Well,
• 20:53
  Speaker 1: that's just the focus on Newell Brands, which owns rubber
• 20:57
  Speaker 1: Made all along with a lot of other UH consumer products.
• 21:02
  Speaker 1: It's up two and a half percent in early trading.
• 21:06
  Speaker 1: The household product maker appointed too independent directors to its
• 21:09
  Speaker 1: board instead of would nominate a third for election this year.
• 21:12
  Speaker 1: All this change coming as activist investors Starboard Value wages
• 21:18
  Speaker 1: a proxy fight to take over a newle's board. So
• 21:22
  Speaker 1: change is coming. It's just a question of how it
• 21:24
  Speaker 1: gets there and what it looks like when it's all over.
• 21:27
  Speaker 1: You've got a couple of earnings reports out of the
• 21:30
  Speaker 1: energy business which are being well received, one of them
• 21:32
  Speaker 1: from Apache. It's up one and a half percent. The
• 21:35
  Speaker 1: oil and gas producer's fourth quarter earnings and sales beat
• 21:38
  Speaker 1: analysts average estimates in Bloomberg Survey and Technic f m C.
• 21:43
  Speaker 1: The All Services company up six percent. Earnings before interest, taxes,
• 21:47
  Speaker 1: depreciation and amortization for the fourth quarter beat estimates. Ut
• 21:51
  Speaker 1: of the technique. FMC also raised this year's forecast for
• 21:54
  Speaker 1: EBA don margin a profitability gauge. Hormel Foods, though down
• 21:59
  Speaker 1: three percent, anty maker of spam, canned meat and other
• 22:02
  Speaker 1: food items, posted earnings and sales for the fiscal first
• 22:05
  Speaker 1: quarter that were lower than projections. Hormouse side at higher
• 22:08
  Speaker 1: freight costs along with weakness and its Genio turkey business. Uh,
• 22:13
  Speaker 1: you've got wayfair lower by fourteen percent, but I don't
• 22:18
  Speaker 1: online seller of home furnishings like I kind of absolutely.
• 22:24
  Speaker 1: They had a fourth quarter of loss that was wider
• 22:25
  Speaker 1: than estimates. Even those sales beat projections. Bigger disappointment at Roku,
• 22:30
  Speaker 1: that stock down eighteen percent. The maker of video streaming
• 22:34
  Speaker 1: devices gave a first quarter revenue forecast of trailed estimates.
• 22:37
  Speaker 1: Bearing my Rokus share price had more than triple since
• 22:40
  Speaker 1: the company went public in September. And then you have
• 22:44
  Speaker 1: McQuary Infrastructure down almost twenty eight percent. Company owns power, energy,
• 22:49
  Speaker 1: and airport services businesses. They're cutting this year's dividend by
• 22:54
  Speaker 1: thirty two of fund investments. McQuary had increased its pay
• 22:58
  Speaker 1: out every quarter for the past four years, relatively unusual.
• 23:03
  Speaker 1: Companies intend only do it once a year. One more. Here,
• 23:05
  Speaker 1: we've gotta get to a record. I'll give you a pair.
• 23:07
  Speaker 1: Avis Budget Group up ten a half percent the car
• 23:10
  Speaker 1: rental Company's fourth quarter earnings, the revenue seed pick up
• 23:14
  Speaker 1: in business worldwide and higher rates in the America's and
• 23:18
  Speaker 1: rival Hurts Global Holdings is up in the David Wilson,
• 23:22
  Speaker 1: thank you so much on the car rental front. Uh
• 23:25
  Speaker 1: today this is a joy. Here's we're gonna do, folks
• 23:27
  Speaker 1: for the next hour. We've spent a lot of time
• 23:30
  Speaker 1: on technology manufacturing, on the oddities, the true oddities of
• 23:37
  Speaker 1: well hearkens back to the sixties, even the fifties, but
• 23:40
  Speaker 1: the sixties and into the seventies, which is throwing things
• 23:43
  Speaker 1: into space. We begin our coverage now of a scrub
• 23:46
  Speaker 1: mission yesterday. George Ferguson will join us from Bloomberg with
• 23:50
  Speaker 1: really smart discussion of the defense contractors and um, the
• 23:55
  Speaker 1: flight industry, if you will. But we are thrilled down
• 23:58
  Speaker 1: to bring in Gene mon Stir. He's a loup ventures
• 24:01
  Speaker 1: of course, you know him for years of Piper Jeffrey
• 24:03
  Speaker 1: Gina got two Apple questions quickly here before we move
• 24:06
  Speaker 1: over to Tesla and SpaceX and all that. Um. The
• 24:11
  Speaker 1: update on Apple seems to be, first of all, the
• 24:14
  Speaker 1: mystery of their use of cash. If you noted a
• 24:19
  Speaker 1: change in the executive leadership of Apple in what they
• 24:24
  Speaker 1: feel about cash. Unfortunately, I wish I could report a change,
• 24:31
  Speaker 1: but it's the majority called seventy of the cash is
• 24:35
  Speaker 1: going to go back to shareholders in the form of
• 24:38
  Speaker 1: a likely a much bigger share buy back. There's probably
• 24:40
  Speaker 1: a one time dividend that's coming, but the majority is
• 24:44
  Speaker 1: going to come back. As a somebody who's been following tech,
• 24:47
  Speaker 1: we would love to see Apple go and make some
• 24:50
  Speaker 1: big M and A deals and buy something like Tesla.
• 24:52
  Speaker 1: That would make the most amount of sense. But even
• 24:55
  Speaker 1: though things have changed a lot under Tim Cook, the
• 24:57
  Speaker 1: company is much more transparent. This need for cash, this
• 25:02
  Speaker 1: uh near death experience that the company had almost twenty
• 25:06
  Speaker 1: years ago, hasn't changed the fundamentals of what they're gonna Well,
• 25:10
  Speaker 1: you know, I know people would say, well they should
• 25:12
  Speaker 1: go by this, or that I'm not informed. I guess
• 25:14
  Speaker 1: some would say Twitter as well. I should point out
• 25:17
  Speaker 1: right now, folks were just getting images here from the
• 25:20
  Speaker 1: Vandenburg Air Force Base in California, and of course at
• 25:25
  Speaker 1: nine oh six am let mean work back eight seven
• 25:28
  Speaker 1: six or six am in California and the black sky
• 25:32
  Speaker 1: the early morning, and really an image out of the
• 25:35
  Speaker 1: sixties with the liquid oxygen, the gaseous oxygen streaming off
• 25:40
  Speaker 1: with a very slight wind to the left of the
• 25:43
  Speaker 1: Falcon rocket in the unmanned module at the top with
• 25:46
  Speaker 1: three satellites in it. And that's really the first image
• 25:49
  Speaker 1: we have again from another time and place in American
• 25:53
  Speaker 1: science history. Gene, let's rip up the script. Then why
• 25:57
  Speaker 1: would Apple by Tesla. They're very good, it's selling six
• 26:01
  Speaker 1: hundred dollars seven hundred dollar units called iPhones and other things.
• 26:06
  Speaker 1: Why would they want the headaches of moving an automobile.
• 26:11
  Speaker 1: The simple answer is that it's a massive market and
• 26:14
  Speaker 1: big companies, and Apple is gonna do about two hundred
• 26:17
  Speaker 1: and seventy billion revenue this year, one of the biggest
• 26:20
  Speaker 1: companies in the world. They need to find massive markets
• 26:23
  Speaker 1: to grow into. I want to emphasize I think that
• 26:26
  Speaker 1: an Apple Tesla combination makes a ton of sense, but
• 26:29
  Speaker 1: it's a fairy tale that that's ever going to happen.
• 26:31
  Speaker 1: And the reason why you're looking at it with just
• 26:34
  Speaker 1: these images of the Falcon launch getting ready, is that
• 26:37
  Speaker 1: Elon Musk would never sell. He's very passionate about say,
• 26:42
  Speaker 1: he has kind of four endeavors going on in all
• 26:45
  Speaker 1: of them, but he's most passionate auto, so he simply
• 26:48
  Speaker 1: won't sell. So the answer to your question, Tom is
• 26:50
  Speaker 1: otto is gonna be just this massive upheaval. We all
• 26:54
  Speaker 1: know it's coming. When you see a car on the
• 26:57
  Speaker 1: road today, think of a horse and buggy because that's
• 27:00
  Speaker 1: going to be the difference between the cars we're driving
• 27:03
  Speaker 1: today and the ones we're gonna drive in ten years
• 27:05
  Speaker 1: and Apple season opportunity, so they will play in this
• 27:08
  Speaker 1: autonomous transportation space. Who is probably some sort of autonomous shuttle,
• 27:13
  Speaker 1: but not a position within your wonderful note on the
• 27:17
  Speaker 1: future of my horse and buggy and no gene, I
• 27:20
  Speaker 1: do not remember the horse and buggy is the manufacturing process.
• 27:26
  Speaker 1: Apple invented a manufacturing process for constructing their Miracle phones.
• 27:33
  Speaker 1: Elon Musk is reinventing a manufacturing process at Tesla slash SpaceX.
• 27:39
  Speaker 1: How do the two dovetail well? When you think about
• 27:44
  Speaker 1: the future of manufacturing and cars, um, I think a
• 27:47
  Speaker 1: lot of people just think about putting wheels on an
• 27:49
  Speaker 1: axle and a chassis. But the real guts of this
• 27:53
  Speaker 1: is a computer. When you talk to people at Tesla,
• 27:56
  Speaker 1: they say they're not a car manufacturer, they're a computer
• 27:58
  Speaker 1: on wheels manufacturers. And so a computer has CPUs has
• 28:03
  Speaker 1: computer vision uh Tesla and not Tesla's case lider, but
• 28:07
  Speaker 1: also this critical piece of the battery. And when you
• 28:11
  Speaker 1: think about how this whole transition plays out around electric
• 28:14
  Speaker 1: vehicles and autonomous vehicles, you speaking of tear up the script,
• 28:19
  Speaker 1: you really need to do that in terms of how
• 28:22
  Speaker 1: these cars are produced, and so uh Elon Musk describes
• 28:26
  Speaker 1: it as a manufacturing hell that they're going through with
• 28:29
  Speaker 1: ramping the Model three production. Unfortunately, the other automakers, despite
• 28:34
  Speaker 1: their hundred years of knowledge of building cars, are going
• 28:37
  Speaker 1: to have to go through a similar path to get
• 28:39
  Speaker 1: to the other side because the importance of battery computers
• 28:43
  Speaker 1: and that interesting g Munster with us. Right now we're
• 28:47
  Speaker 1: looking at the image of the space X. Of course,
• 28:49
  Speaker 1: it is a brilliant white rocket. It is not the
• 28:52
  Speaker 1: Falcon Heavy some of you may have known the launch
• 28:56
  Speaker 1: of a few uh weeks ago with three E tubes
• 29:01
  Speaker 1: is the main stage and the two side stages of
• 29:04
  Speaker 1: the Falcon Heavy. This is not the Falcon Heavy. This
• 29:07
  Speaker 1: is really harketing back almost Atlas in the programs well
• 29:10
  Speaker 1: before Mercury, almost Explorer of of of of a very
• 29:15
  Speaker 1: thin i should say, Jupiter, excuse me, of a very
• 29:18
  Speaker 1: thin rocket, and on top top of it a huge payload.
• 29:21
  Speaker 1: The payload on top um is forty three ft by
• 29:25
  Speaker 1: seventeen feet, which is not Apollo like, but it is
• 29:28
  Speaker 1: certainly genormous. Uh and and can put a lot of
• 29:31
  Speaker 1: weight into space, which if you're in commercial is what
• 29:35
  Speaker 1: you want to do. So we're waiting there with the oxygen,
• 29:39
  Speaker 1: the feathery oxygen steaming off the gas to the left
• 29:42
  Speaker 1: of our image of SpaceX at Vandenburgh, I mean Alitsa O.
• 29:45
  Speaker 1: Bramo would Center Studios not to talk on bonds or
• 29:48
  Speaker 1: the dynamics of the market, but we get ready for
• 29:51
  Speaker 1: a SpaceX launch with this gene monster of Loop Ventures,
• 29:55
  Speaker 1: of course, with his acute focus on Tesla and their
• 29:58
  Speaker 1: manufacturing process, and now joining us George Ferguson from Bloomberg Intelligence,
• 30:03
  Speaker 1: head of all of our aerospace and defense coverage. George Ferguson,
• 30:07
  Speaker 1: When I look at space EX and I look at
• 30:10
  Speaker 1: tech Tesla, is this an all Elon Musk venture or
• 30:14
  Speaker 1: are there subcontractors the world of lockeed Martin. Are they
• 30:18
  Speaker 1: involved in this at all? Uh in in Elon Musk SpaceX. No, right,
• 30:24
  Speaker 1: they have a competitor, United Launch Alliance a turn with Boeing,
• 30:29
  Speaker 1: so they are competitive, but they're not involved in station.
• 30:32
  Speaker 1: Is this anything to do with the defense industry or
• 30:34
  Speaker 1: is Elon Musk inventing this out of thin Elon Muski
• 30:37
  Speaker 1: and Air. You know, when you look at the manifest
• 30:41
  Speaker 1: for satellites that are going to go up and have
• 30:43
  Speaker 1: gone up, he's taken a fair amount of market share
• 30:46
  Speaker 1: because he's providing lift into orbit much cheaper. He's definitely
• 30:50
  Speaker 1: doing it for defense, uh you know, at the defense
• 30:53
  Speaker 1: contractor for for the Defense Department. So he's in there
• 30:56
  Speaker 1: as well as in the commercial business as well. When
• 30:58
  Speaker 1: you look at the shot folks in thanks to Gizmoto
• 31:01
  Speaker 1: for a great photograph of the launch site, George, it's
• 31:05
  Speaker 1: not Cape Canaveral like. It's asconced beautifully on the shores
• 31:08
  Speaker 1: of the Pacific Ocean, and it's small, and there's a
• 31:12
  Speaker 1: couple of trailers and a couple of buildings and some lights,
• 31:15
  Speaker 1: and you know, it's just sort of like a commercial venture.
• 31:19
  Speaker 1: When will this be commercially successful or is it? Is
• 31:23
  Speaker 1: it now? Well? I mean, I guess I would say
• 31:27
  Speaker 1: that the United Launch Alliance, which is the Boeing and
• 31:30
  Speaker 1: Lockey adventure, is commercially viable. It's it creates a profit.
• 31:34
  Speaker 1: We we can't see profits inside SpaceX, and he's providing
• 31:38
  Speaker 1: much cheaper lift. My sense is that he's got much less,
• 31:41
  Speaker 1: much less profitability in here, but he clearly wants to
• 31:45
  Speaker 1: take it much further. I think the United Launch Alliance
• 31:47
  Speaker 1: would want to take it, the Sense contractors want to
• 31:50
  Speaker 1: take it. And he's building actually a spaceport down in
• 31:53
  Speaker 1: Texas that would be entirely commercial. So well, I'm just wondering,
• 31:58
  Speaker 1: how does Elon usk managed to have a launch so
• 32:02
  Speaker 1: much cheaper than the Defense Department? Well, you know, and
• 32:07
  Speaker 1: I think a good portion of that is going to
• 32:09
  Speaker 1: be about the reusable market very rocket, uh, and that's
• 32:14
  Speaker 1: why you know, it's key when he's sort of launching
• 32:16
  Speaker 1: these things and bringing back the components, bringing back the
• 32:18
  Speaker 1: boosters that he can reuse though that that's a big portion,
• 32:22
  Speaker 1: you know, Plussy, he really doesn't suffer from the large
• 32:26
  Speaker 1: bureaucracy that you'd have inside of bowing a a a
• 32:29
  Speaker 1: locky part, right, So, George Ferguson with us and uh,
• 32:32
  Speaker 1: Gene Munster as well. You've seen the gantry pull back
• 32:36
  Speaker 1: from the Falcon rocket with a payload up top. Again,
• 32:39
  Speaker 1: this is a Spanish satellite and the huge buzz of
• 32:42
  Speaker 1: two smaller satellites which are very much having to do
• 32:45
  Speaker 1: with the future of Internet. It is least a gorgeous
• 32:48
  Speaker 1: site is an all white rocket with the I'm going
• 32:51
  Speaker 1: to suggest gaseous oxygen UH drifting off into space and
• 32:56
  Speaker 1: with the UH gantry pulled away, we're gonna bring up
• 32:59
  Speaker 1: the audio. Ken ing up the audio if you can
• 33:01
  Speaker 1: on this SpaceX launch. We're about twenty seconds I'm told
• 33:05
  Speaker 1: away here from the count town again the larger fairings
• 33:10
  Speaker 1: up top. Here he is the launch of SpaceX twenty
• 33:24
  Speaker 1: fift Falcon eyes can figure for play ten nine eight
• 33:31
  Speaker 1: seven six five four three two one Eagle of Penchy
• 33:51
  Speaker 1: Downer age to stay over posted nominal. Yeah. Thanks for
• 34:09
  Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
• 34:13
  Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.
• 34:19
  Speaker 1: I'm on Twitter at Tom Keene before the podcast. You
• 34:23
  Speaker 1: can always catch us worldwide. I'm Bloomberg Radio