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Markets Expect Mid-Year Snapback From Coronavirus · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl podcast on Paul Swing You.
• 0:05
  Speaker 1: Along with my co host Lisa Brahmas, each day we
• 0:07
  Speaker 1: bring you the most noteworthy and useful interviews for you
• 0:10
  Speaker 1: and your money. Whether at the grocery store or the
• 0:12
  Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast
• 0:16
  Speaker 1: or wherever you listen to podcasts, as well as at
• 0:18
  Speaker 1: Bloomberg dot com. We still don't have a sense of
• 0:21
  Speaker 1: whether the coronavirus is contained or can be contained. There's
• 0:24
  Speaker 1: still are questions being raised about the numbers coming out
• 0:27
  Speaker 1: of China, Apple saying that they will not meet their
• 0:30
  Speaker 1: revenue forecasts for the first quarter in light of some
• 0:33
  Speaker 1: of the sales disruptions in China, and yet markets incredibly
• 0:38
  Speaker 1: resilient in the United States. Joining us down to find
• 0:40
  Speaker 1: out exactly how much longer markets can remain this resilient.
• 0:44
  Speaker 1: Fill Orlando, chief equity market strategist and head of client
• 0:46
  Speaker 1: portfolio Management at Federated her Mays joining us by phone. Phil,
• 0:51
  Speaker 1: You've been a bowl, You've gotten it right for a
• 0:53
  Speaker 1: long time. You've been heavy into the big tech giants.
• 0:57
  Speaker 1: I'm wondering from your perspective, at what point do you
• 0:59
  Speaker 1: throw in your cards and say, you know what, this
• 1:02
  Speaker 1: is going to be a longer term issue for the
• 1:05
  Speaker 1: tech giants what's going on in China. So thank you
• 1:09
  Speaker 1: again for having me on UM. I'm not sure that
• 1:13
  Speaker 1: we're going to throw the towel in. UM. I will
• 1:16
  Speaker 1: absolutely concede that the market, except for you know, a
• 1:22
  Speaker 1: three percent correction over about six trading days at the
• 1:26
  Speaker 1: end of January, has largely ignored the coronavirus and and UH.
• 1:33
  Speaker 1: In my humble opinion, I think this situation is going
• 1:37
  Speaker 1: to be potentially bigger than than people think. And we're
• 1:40
  Speaker 1: just today getting the first snippets of economically related news
• 1:47
  Speaker 1: investment related news on coronavirus witness UH, you know, Apple
• 1:52
  Speaker 1: talking about having some supply issues and and Walmart talking about,
• 1:58
  Speaker 1: you know, having missed on on Christmas, particularly January, maybe
• 2:04
  Speaker 1: some in December. I'm not sure exactly where the details
• 2:07
  Speaker 1: are in part based upon UH coronavirus and and we
• 2:11
  Speaker 1: also know that a couple of the other retailers, Calls
• 2:15
  Speaker 1: and Target had disappointing numbers. So I think there's gonna
• 2:19
  Speaker 1: be more of this going forward. UM. As we looked
• 2:24
  Speaker 1: at the retail sales numbers that were related to the
• 2:27
  Speaker 1: street for the Commerce department on Friday, UM, Christmas was
• 2:32
  Speaker 1: pretty good. And and as we define Christmas, because of
• 2:36
  Speaker 1: the the the extraordinarily early Thanksgiving and the way the
• 2:41
  Speaker 1: Black Friday weekend was sort of split up half in
• 2:44
  Speaker 1: November half in December, companies were making a concerted effort
• 2:48
  Speaker 1: to start to advertise and move Christmas product in the
• 2:51
  Speaker 1: month of October. So our view was, Okay, let's just
• 2:54
  Speaker 1: define Christmas as October, November, December, and January because you've
• 3:00
  Speaker 1: got gift card redemptions. So as we looked at the
• 3:03
  Speaker 1: data for those four months on a year of a
• 3:05
  Speaker 1: year basis, retail sales are up four That was a
• 3:10
  Speaker 1: pretty good Christmas. So I'm fine with Christmas having been good.
• 3:14
  Speaker 1: Coronavirus UM really didn't start to become part of our
• 3:19
  Speaker 1: nomenclature here in the States until about the third week
• 3:23
  Speaker 1: in in January, and has now really started to you know,
• 3:27
  Speaker 1: catch some some some traction here looking at coronavirus versus stars.
• 3:34
  Speaker 1: Back in the two thousand and two thousand and three neighborhood,
• 3:37
  Speaker 1: the total confirmed number of cases for STARS was We're
• 3:41
  Speaker 1: we're already north of seventy three thousand with with the
• 3:45
  Speaker 1: coronavirus with no real end in sight here, and our
• 3:49
  Speaker 1: best guess is that this is going to continue for
• 3:51
  Speaker 1: at least another couple of months. And that's got to
• 3:54
  Speaker 1: take into account um retail sales numbers being sloppy in February.
• 4:00
  Speaker 1: Maybe that spills into the easter season. And I think
• 4:03
  Speaker 1: we're going to get more guidance down from companies who
• 4:06
  Speaker 1: are going to use coronavirus as a justification for why
• 4:10
  Speaker 1: their numbers are coming in, you know, software than expect it.
• 4:14
  Speaker 1: And I'm not sure that any of that is yet
• 4:17
  Speaker 1: in the market, with the market having done as well
• 4:19
  Speaker 1: as it's been doing. So, Phil, are you in the
• 4:21
  Speaker 1: camp that I think is gating some more members every day?
• 4:25
  Speaker 1: And that camp is if the coronavirus does have a
• 4:29
  Speaker 1: meaningful economic impact on global economies, the central banks are
• 4:33
  Speaker 1: they're waiting to respond in lower rates and be you know, supportive.
• 4:38
  Speaker 1: We're absolutely there, But I don't think our Federal Reserve
• 4:42
  Speaker 1: is going to cut interest rates because I don't think
• 4:45
  Speaker 1: the coronavirus situation is going to be uh from a
• 4:49
  Speaker 1: time standpoint. Um, we think it's going to have a
• 4:52
  Speaker 1: significant first quarter impact, and I think as we get
• 4:55
  Speaker 1: into the second quarter, the middle of the year, I
• 4:58
  Speaker 1: think we're gonna have our hand around this. Um. We
• 5:01
  Speaker 1: are doing much better looking at coronavirus compared to Stars.
• 5:06
  Speaker 1: One of the things we're focusing on is what's known
• 5:08
  Speaker 1: as the mortality rate, the percentage of people who died
• 5:11
  Speaker 1: from this with With Stars, that mortality rate was just
• 5:14
  Speaker 1: under ten percent. With the coronavirus. The mortality rate right
• 5:18
  Speaker 1: now is running about two and a half percent. The
• 5:21
  Speaker 1: Chinese government as as as much as as we think
• 5:25
  Speaker 1: they're being irresponsible here in terms of transparency and letting
• 5:29
  Speaker 1: the world know what's going on, etcetera. When we look
• 5:32
  Speaker 1: at COVID nineteen versus Stars, they have been much more
• 5:37
  Speaker 1: aggressive by you know, a period of about a month
• 5:41
  Speaker 1: of six weeks in terms of letting the world know
• 5:43
  Speaker 1: what's going on, giving us the sequencing. US global pharmaceutical
• 5:49
  Speaker 1: and biotechnology companies are actively working on some some compounds
• 5:54
  Speaker 1: that that might have some promise in terms of vaccines
• 5:57
  Speaker 1: or you know, medicinal purposes or whatever. So I truly
• 6:01
  Speaker 1: believe in my heart of hearts that that as we
• 6:04
  Speaker 1: get into the second quarter of working towards the middle
• 6:06
  Speaker 1: of the year, we're gonna have our hands around this
• 6:09
  Speaker 1: and we're gonna see these numbers start to receive. So
• 6:12
  Speaker 1: so it's ugly right now. Um, we're gonna see a
• 6:16
  Speaker 1: hit to GDP growth, We're going to see a hit
• 6:18
  Speaker 1: to corporate earnings. But as as we look at the
• 6:21
  Speaker 1: balance of the year, I think we're we're looking at
• 6:24
  Speaker 1: a snapback as we get into the middle of the
• 6:27
  Speaker 1: year and in a strong second half of the year,
• 6:29
  Speaker 1: and I think that's why we're seeing a limited market response. Now.
• 6:33
  Speaker 1: I think investors some degree you're sharing that view and
• 6:36
  Speaker 1: perhaps looking through the ugliness of what's going on right now.
• 6:41
  Speaker 1: Right well, that's exactly where I was going to go,
• 6:43
  Speaker 1: which is you said that you don't think markets have
• 6:45
  Speaker 1: been pricing in the real potential implications of the coronavirus.
• 6:48
  Speaker 1: It sounds like they're not because they're expecting a V
• 6:51
  Speaker 1: shape recovery and the economy and there therefore there isn't
• 6:54
  Speaker 1: gonna be a longer lasting effect. Are you in that
• 6:56
  Speaker 1: camp where you're not going to change any of your
• 6:58
  Speaker 1: positioning in response to what we're seeing over in China,
• 7:01
  Speaker 1: just with the expectation of this V shaped recovery, we
• 7:04
  Speaker 1: we have not made any changes in terms of positioning.
• 7:07
  Speaker 1: We made some changes in positioning at the end of
• 7:10
  Speaker 1: last calendar year in terms of taking domestic large cap
• 7:16
  Speaker 1: growth from overweight back to neutral and upgrading domestic large
• 7:21
  Speaker 1: cap value from neutral to overweight. We've got overweights and
• 7:25
  Speaker 1: domestic small cap um and we also added an overweight
• 7:30
  Speaker 1: to emerging markets, which, in light of what we now
• 7:33
  Speaker 1: know with coronavirus, maybe that was a little premature, but
• 7:37
  Speaker 1: we're gonna stick with it again because we think of
• 7:40
  Speaker 1: the relatively short live nature of what we think we're
• 7:43
  Speaker 1: dealing with right now. Hey, Phil, thanks so much for
• 7:46
  Speaker 1: joining us to really appreciate your thoughts. As always, Phil Orlando,
• 7:50
  Speaker 1: chief equity market strategists and head of client portfolio Management
• 7:53
  Speaker 1: at Federated our mays joining us on the phone. Uh.
• 7:57
  Speaker 1: Phil has remained, as you noted, at least a consistent
• 8:00
  Speaker 1: lee bullish. He's been consistently right. I think I appreciate
• 8:04
  Speaker 1: his thoughts on the coronavirus how, you know, kind of
• 8:06
  Speaker 1: putting a timeframe on it, kind of bleeding into uh
• 8:09
  Speaker 1: the second quarter, but then becoming less of an issue
• 8:12
  Speaker 1: in the second half of the year. That's I think
• 8:14
  Speaker 1: how they are discounting the coronavirus there at Federated WELLO.
• 8:23
  Speaker 1: Good friends at Walmart reported earnings this morning kind of
• 8:26
  Speaker 1: mixed bag. The fourth quarter of the all important holiday
• 8:29
  Speaker 1: quarter a little bit uh weaker than expected, but the
• 8:31
  Speaker 1: four year guidance for pretty much in line with what
• 8:35
  Speaker 1: the street was looking for. So the net net on
• 8:37
  Speaker 1: the stock is it's up about eight tenths of one
• 8:39
  Speaker 1: percent today. For Walmart. To get a sense of what's
• 8:42
  Speaker 1: going on at Walmart and all things retail, we turned
• 8:45
  Speaker 1: to our good friend Bert Flickinger, Managing Director Strategic Resource Group.
• 8:49
  Speaker 1: He joins us here in our Bloomberg Interactor Broker Studio.
• 8:51
  Speaker 1: So Bert, a little bit of a mixed bag out
• 8:53
  Speaker 1: of Walmart. What's your key takeaway going forward with these
• 8:56
  Speaker 1: folks too? A couple of things, Paul and Lisa. One,
• 9:00
  Speaker 1: Walmart's insulated because they sell more fresh food, refrigerated, frozen
• 9:05
  Speaker 1: and fresh than anyone else, so it's about two thirds
• 9:07
  Speaker 1: of their business. So Walmart, like Costco, which hit a
• 9:11
  Speaker 1: fifty two week high in the Bloomberg terminal today, to
• 9:15
  Speaker 1: uh forward looking, they've both invested tremendously in technology for
• 9:20
  Speaker 1: the last thirty years. So the markets looking at Walmart's
• 9:24
  Speaker 1: capex being a little bit less in technology compared to
• 9:28
  Speaker 1: competitive peers. And secondly that Walmart and Costco strategically invested
• 9:34
  Speaker 1: in distribution centers and inventory. So despite tariffs, coronavirus, and
• 9:39
  Speaker 1: sourcing more locally within the continental US, Walmart has some
• 9:45
  Speaker 1: longer term advantages for the next couple of quarters that
• 9:47
  Speaker 1: most of their competitors don't come close on. All. Right,
• 9:50
  Speaker 1: let's put the coronavirus aside, because they basically have not
• 9:53
  Speaker 1: put that into their assumptions in any way, it's unclear
• 9:57
  Speaker 1: how they're going to be dealing with that, and just
• 9:58
  Speaker 1: talk about the fact that they missed expectations when it
• 10:00
  Speaker 1: came to revenues in EPs forecast. This has been completely
• 10:06
  Speaker 1: shrugged off by markets. Yet this comes after Target also disappointed.
• 10:10
  Speaker 1: I'm wondering how much we can read into this as
• 10:13
  Speaker 1: a trend. Does I say something about the consumer just
• 10:15
  Speaker 1: to say something about Amazon dot Com, you know, rolling
• 10:18
  Speaker 1: up all of the market share away from the Walmarts
• 10:21
  Speaker 1: and the targets of the world. Lisa, It says yes
• 10:24
  Speaker 1: to all of the above. It says the Amazon roll up. Uh.
• 10:28
  Speaker 1: It also also says uh, despite targets miss in our
• 10:33
  Speaker 1: pricing studies. Targets still a little bit premium priced in
• 10:39
  Speaker 1: our pricing studies with Walmart. For the first time UH
• 10:43
  Speaker 1: in five years, Walmart's line price with the low price
• 10:48
  Speaker 1: leader leaders Windco in the West, UH Costco nationally and internationally.
• 10:53
  Speaker 1: So you and Tom Kane talk about very well frequently
• 10:58
  Speaker 1: is while Walmart's investing more in lower prices, Walmart's units
• 11:03
  Speaker 1: are up. At the same time, as you're presently pointing out,
• 11:06
  Speaker 1: the consumers are facing higher monthly budget expenses in ten
• 11:11
  Speaker 1: out of the top eleven expenditures everything except gasoline, so
• 11:16
  Speaker 1: UH rent, tuition, UH insurance, it's taxes, etcetera, etcetera. So
• 11:21
  Speaker 1: the consumers more cash constrained. And as people look at
• 11:25
  Speaker 1: where the consumers going Ross stores on the Bloomberg terminal
• 11:29
  Speaker 1: fifty two week high today, Bloomberg Burlington on the Bloomberg
• 11:33
  Speaker 1: had a fifty two week high today, UH lows and
• 11:36
  Speaker 1: home Depot in terms of category dominant earlier today UH
• 11:40
  Speaker 1: fifty two week high. So the consumers are going where
• 11:42
  Speaker 1: the best prices are, and the best prices are with
• 11:46
  Speaker 1: the big retailers that are off price price impact or
• 11:50
  Speaker 1: destination that have procurement power. But also I want to
• 11:54
  Speaker 1: make sure to catch key point you referenced, is is
• 11:58
  Speaker 1: this sustainable? It might be sustainable for a quarter or
• 12:01
  Speaker 1: two of the fifty two week highs within retail. Fresh
• 12:05
  Speaker 1: Pet hit of fifty two week high today, that's sustainable.
• 12:09
  Speaker 1: Not sure chain retail is sustainable. Not sure Amazon sustainable.
• 12:13
  Speaker 1: So let's talk. I know Walmart's having an investor day
• 12:16
  Speaker 1: UH today, so we'll get some more news out of
• 12:19
  Speaker 1: that throughout the day. But one of the places I
• 12:21
  Speaker 1: always look for Amazon and Target and Target and Walmart
• 12:25
  Speaker 1: to see how the compete against Amazon is their digital sales.
• 12:28
  Speaker 1: So another thirty growth in the digital sales for Walmart.
• 12:32
  Speaker 1: That's good, but it's slowing a little bit, but still
• 12:34
  Speaker 1: pretty solid digital sales. And can consumers who historically might
• 12:40
  Speaker 1: have only been able to to get to a Walmart
• 12:44
  Speaker 1: once or twice a month. Mark Lori x X of
• 12:48
  Speaker 1: Amazon and acquisition by Walmart of Jet will be able
• 12:52
  Speaker 1: to deliver from Walmart supercenters to of US homes within
• 12:59
  Speaker 1: the Continental U lass and Walmart's brilliantly put FedEx UH
• 13:04
  Speaker 1: depots within its store so people can buy at Walmart
• 13:07
  Speaker 1: and ship either within the US or outside the US.
• 13:11
  Speaker 1: At what point do we have to start worrying about
• 13:13
  Speaker 1: the consumer and how much momentum there is if where
• 13:17
  Speaker 1: they're going is ross stores as the discounters we have, Lisa,
• 13:21
  Speaker 1: we have to start worrying about the consumer. Now. The
• 13:24
  Speaker 1: telling period is going to be Memorial Data Labor Day
• 13:28
  Speaker 1: where the consumer uh, it's Bloomberg reports has We've been
• 13:32
  Speaker 1: traveling in record numbers, spending in record numbers, but looking
• 13:36
  Speaker 1: on the Bloomberg even before Ryan Newman's tragic death and
• 13:41
  Speaker 1: NASCAR yesterday, NASCAR attendance is way down and that's he's
• 13:46
  Speaker 1: still he's alive. He's in serious condition. Thank you serious
• 13:50
  Speaker 1: parts and prayers and appreciate the uh timely correction. Yeah,
• 13:54
  Speaker 1: and it's actually as injuries are not life threatening after
• 13:58
  Speaker 1: that horrible crash. Um but he it seems like is
• 14:02
  Speaker 1: going to emerge. But really interesting and thank you so
• 14:05
  Speaker 1: much for being with us, Bird, because this is I
• 14:08
  Speaker 1: think one of the big questions when I came in
• 14:10
  Speaker 1: Walmart disappointing after target disappointing. You know, a knee jerk
• 14:14
  Speaker 1: response might be to say, is this concerning you? Look
• 14:17
  Speaker 1: under the hood, A lot of factors at play, but
• 14:19
  Speaker 1: certainly heading into this period of the year, important to
• 14:22
  Speaker 1: watch to see if it makes a trend. Uh, and
• 14:25
  Speaker 1: we will have you back to discuss that. Bird Flickinger,
• 14:27
  Speaker 1: Managing director at Strategic Resource Group, joining us here in
• 14:30
  Speaker 1: our interactive broker studios. And interesting to see how Walmart
• 14:33
  Speaker 1: shairs really resilient after missing estimates on a whole variety,
• 14:38
  Speaker 1: actually gaining today. Uh, They're up eight tenths of a percent.
• 14:41
  Speaker 1: Not a massive gain, but given the fact that the
• 14:43
  Speaker 1: broader market move is lower and that they missed expectations
• 14:47
  Speaker 1: and that they still are gaining, it's somewhat notable. The
• 15:02
  Speaker 1: big news one of the many big news items of
• 15:04
  Speaker 1: the day. There actually are a lot that are sort
• 15:06
  Speaker 1: of done the corporate front. On the corporate front is
• 15:08
  Speaker 1: the tie up of Franklin Resources agreeing to buy leg
• 15:12
  Speaker 1: Mason to create a one and a half trillion dollar giant.
• 15:15
  Speaker 1: This comes amid a slew of consolidation among asset managers.
• 15:18
  Speaker 1: Any massa covering it all, investing reporter for Bloomberg News,
• 15:22
  Speaker 1: joining us here in our interactive broker studios. Can you
• 15:24
  Speaker 1: just take a step back and look at how significant
• 15:28
  Speaker 1: the wave of consolidation has been in the past, say,
• 15:31
  Speaker 1: five to ten years within the asset management space. Sure,
• 15:35
  Speaker 1: as you mentioned, I mean you can really just rattle
• 15:37
  Speaker 1: off these big UM episodes of mergers and acquisitions in
• 15:42
  Speaker 1: the asset management industry. You saw Investco by Oppenheimer Funds,
• 15:45
  Speaker 1: you saw Janice Henderson, Standard Life Aberdeen, and this is
• 15:49
  Speaker 1: just the latest in that wave of consolidation that we're seeing.
• 15:53
  Speaker 1: As active managers are trying to, you know, figure out
• 15:55
  Speaker 1: how to navigate um and increasingly passive investing world. You
• 16:00
  Speaker 1: just kind of need scale to be able to compete.
• 16:03
  Speaker 1: So give us the Again, the rationale is scale. So
• 16:07
  Speaker 1: are we simply are these companies simply saying I can
• 16:10
  Speaker 1: see the pressure on my revenue line. I don't think
• 16:12
  Speaker 1: that's going away anytime soon, So I just got to
• 16:15
  Speaker 1: get scale and try to rationalize my costs. Is that
• 16:17
  Speaker 1: kind of the play here. Yeah. If you look back
• 16:19
  Speaker 1: over the past ten or fifteen years, both leg Mason
• 16:22
  Speaker 1: and Franklin Templeton have seen their assets under management UM
• 16:26
  Speaker 1: kind of come down from their highs. So now, as
• 16:29
  Speaker 1: you mentioned, you have UM a one point five trillion
• 16:32
  Speaker 1: dollars in assets in these combined firms. It also fills
• 16:36
  Speaker 1: in some gaps for Franklin UM, particularly on the fixed
• 16:39
  Speaker 1: income and alternatives side. What's the price tag being viewed
• 16:44
  Speaker 1: as in the market UM the deal is valued at
• 16:46
  Speaker 1: about four point five billion dollars, and is that viewed
• 16:48
  Speaker 1: is too much too little? UM? I think it's valued
• 16:52
  Speaker 1: about as about in line. So how about when I
• 16:56
  Speaker 1: think of big neutro funds, obviously I start with Fidelity.
• 17:00
  Speaker 1: Do we see Fidelity on the M and a trail? Often?
• 17:03
  Speaker 1: I can't think of some I can't think of any
• 17:05
  Speaker 1: big deals. That's a good question. Fidelity has often been
• 17:07
  Speaker 1: one to really go it alone. But Fidelity also has
• 17:10
  Speaker 1: the advantage of being just one like a giant already.
• 17:15
  Speaker 1: It's really for the slightly like middle size. Can't really
• 17:20
  Speaker 1: pass a trillion dollars in assets where you're seeing this
• 17:23
  Speaker 1: kind of consolidation. Neither leg Or or Franklin was really
• 17:26
  Speaker 1: able to get there on its own. So now tying
• 17:29
  Speaker 1: them up, they can finally get past that trillion dollars
• 17:31
  Speaker 1: in assets kind of mark. It helps because UM technology
• 17:36
  Speaker 1: is increasingly costly for these asset managers, and and if
• 17:40
  Speaker 1: you can spread out some of those costs across all
• 17:42
  Speaker 1: these different assets and then also offer different product lines.
• 17:46
  Speaker 1: It really does help to be more of a big supermarket.
• 17:49
  Speaker 1: Do you have a sense when you speak to analysts
• 17:52
  Speaker 1: who've been watching the space for a while of who
• 17:54
  Speaker 1: some of the next potential contenders are for for potential
• 17:58
  Speaker 1: murder activity. Yeah, that's a good question. Basically, UM, what
• 18:02
  Speaker 1: what we're looking at here is some of these acquisitions
• 18:06
  Speaker 1: that we've really seen in the space have faltered a
• 18:09
  Speaker 1: little bit or not been as successful as they were
• 18:12
  Speaker 1: otherwise thought to be. So I think that that's leading
• 18:15
  Speaker 1: to some questions about whether these deals actually pan out
• 18:18
  Speaker 1: and work. UM. In some cases, like the Janice merger,
• 18:22
  Speaker 1: you actually saw client outflows in the wake of those
• 18:24
  Speaker 1: um in the wake of those tie ups, so it's
• 18:26
  Speaker 1: not always UM a very beneficial thing in the aftermath.
• 18:32
  Speaker 1: One thing that they mentioned on the conference call is
• 18:34
  Speaker 1: that like Mason will kind of maintain the independence of
• 18:38
  Speaker 1: all these different affiliate asset managers that it works with,
• 18:40
  Speaker 1: and they're hoping to UM hang onto those client assets
• 18:44
  Speaker 1: and stem some of those client outflow potential client outflows
• 18:47
  Speaker 1: that way. You know, when I think about the pressure
• 18:49
  Speaker 1: on the fees and doing large part to this move
• 18:51
  Speaker 1: from active to passive Is that a global phenomenon or
• 18:54
  Speaker 1: is that more in the the US. It is a
• 18:56
  Speaker 1: global phenomenon. I think you're really seeing a lot of
• 18:59
  Speaker 1: this happening in the US because that's where the largest
• 19:02
  Speaker 1: asset managers are based, and that's both on the active
• 19:05
  Speaker 1: side and the passive side. What about the alternative side,
• 19:09
  Speaker 1: I mean, how much are that? Is that the area
• 19:12
  Speaker 1: that people are looking to for the fees and just
• 19:14
  Speaker 1: trying to get scope with respect to passive and then
• 19:17
  Speaker 1: go into you know, the more liquid securities type of
• 19:21
  Speaker 1: type of trade. It's a really good question. Alternatives are
• 19:24
  Speaker 1: becoming so important for pretty much all asset managers. And
• 19:27
  Speaker 1: we saw UM even last week with vanguards foray into
• 19:31
  Speaker 1: private equity, and and Blackrock did didn't made a similar
• 19:35
  Speaker 1: pushtion to alternatives as well. Even the giants of index
• 19:39
  Speaker 1: investing can't ignore alts. So especially on the active side,
• 19:43
  Speaker 1: UM firm like Franklin wants to bulk up in alternatives.
• 19:46
  Speaker 1: Are we the early stages of late stages this consolidation?
• 19:48
  Speaker 1: Do you think? I think that we're still gonna continue
• 19:52
  Speaker 1: to see consolidation in this industry. There's so much pressure
• 19:54
  Speaker 1: on fees for both active and pressive products. Um and
• 19:58
  Speaker 1: scale has become so important. It's this barbell where you
• 20:01
  Speaker 1: have to either be a behemoth that offers everything or
• 20:04
  Speaker 1: just so niche and in between you're going to struggle.
• 20:07
  Speaker 1: Any Massa, thanks so much for joining us. Annie Massa,
• 20:10
  Speaker 1: investoring investing reporter for Bloomberg News, joining us here in
• 20:13
  Speaker 1: a Bloomberg Interactor broker studio. Jeff Bezos, who is of
• 20:21
  Speaker 1: course the founder of Amazon, announced that he is committing
• 20:24
  Speaker 1: ten billion dollars of his own wealth to fighting climate change.
• 20:28
  Speaker 1: Who was biggest philanthropic effort so far, and it comes
• 20:31
  Speaker 1: after a substantial pressure from within the company from workers
• 20:34
  Speaker 1: saying that the company is not doing enough to fight
• 20:37
  Speaker 1: climate change. But it really raises a question, what can
• 20:40
  Speaker 1: the biggest companies do? What kind of meaningful changes could
• 20:43
  Speaker 1: they make to reduce their carbon emissions and fight the
• 20:47
  Speaker 1: rising climate. Jelly Bergstein joins us now the chief executive
• 20:50
  Speaker 1: officer of Seventh Generation, which is based in Burlington, Vermont.
• 20:53
  Speaker 1: It was acquired by Unilever, but it really has been
• 20:57
  Speaker 1: one of the biggest speakers out of terms of corporate
• 21:00
  Speaker 1: responsibility in this area. Joey, I'm really glad you're joining us. Today,
• 21:04
  Speaker 1: I want to get your perspective on this ten billion
• 21:07
  Speaker 1: dollar commitment that Jeff Bezos made. Where do you see
• 21:10
  Speaker 1: the greatest need for that kind of money to actually
• 21:13
  Speaker 1: combat uh, some of what we're seeing with respect to omissions.
• 21:19
  Speaker 1: Thank you very much for having me on, Lisa. It's
• 21:22
  Speaker 1: it's great to be with you and really applaud the
• 21:24
  Speaker 1: commitment that Bezos is made to addressing what is the
• 21:29
  Speaker 1: biggest crisis of our time. And UM, it's really important
• 21:34
  Speaker 1: from our perspective that companies do take real and meaningful
• 21:37
  Speaker 1: action to address climate As we look at what's going
• 21:41
  Speaker 1: on in the world around us. We're really focused in
• 21:44
  Speaker 1: three different areas. One is the products that we make
• 21:48
  Speaker 1: and ensuring that we're creating products that actually have the
• 21:50
  Speaker 1: low carbon footprint. Great example of that is an ultra
• 21:54
  Speaker 1: concentrated launcher to Jurgen that we launched over a year
• 21:56
  Speaker 1: ago UM that we sell on Amazon, and UM the
• 22:00
  Speaker 1: shape the support that we get from the Amazon team
• 22:02
  Speaker 1: on on that part of our business. We tax ourselves
• 22:05
  Speaker 1: in internal carbon tax that we can then invest to
• 22:08
  Speaker 1: address our own carbon footprint. And then I would say
• 22:11
  Speaker 1: the third thing is that we're really looking at how
• 22:14
  Speaker 1: do we clean up the energy grid in this country
• 22:16
  Speaker 1: and would love to see investments being made much more
• 22:19
  Speaker 1: broadly by companies across the US to really clean up
• 22:23
  Speaker 1: our own energy grid. What we've discovered is that when
• 22:27
  Speaker 1: you look at our full carbon footprint from making this stuff,
• 22:31
  Speaker 1: for growing the ingredients on a farm, through to the
• 22:34
  Speaker 1: production process and getting it into the hands of people
• 22:37
  Speaker 1: to use, actually nine of our carbon footprint comes when
• 22:42
  Speaker 1: you and are Washington drying our clothes at home and
• 22:45
  Speaker 1: as clean as we can make our own operations. The
• 22:48
  Speaker 1: only way to truly address the impact of business is
• 22:52
  Speaker 1: to clean up the energy energy sorry, energy grid, and
• 22:56
  Speaker 1: that for me is the top priority for us in
• 22:59
  Speaker 1: UH in this kind tree. So, Joey, how do you
• 23:01
  Speaker 1: do that with a company? Just take your company, how
• 23:04
  Speaker 1: do you think about and try to address the energy grid?
• 23:07
  Speaker 1: That just seems like a huge issue that might be
• 23:10
  Speaker 1: outside of your natural kind of day to day business. Yeah,
• 23:14
  Speaker 1: it's monumental, actually, um, and it is outside of our
• 23:17
  Speaker 1: day to day business. So a lot of the work
• 23:19
  Speaker 1: we're doing in that space has been around advocacy and
• 23:22
  Speaker 1: working with grassroots organizations across the country to try to
• 23:26
  Speaker 1: move cities and states to make commitments to clean energy
• 23:29
  Speaker 1: by we think with those commitments in place, that these
• 23:33
  Speaker 1: cities and states will actually take the action needed to
• 23:37
  Speaker 1: address the energy grid. In two thousand and eighteen, we
• 23:41
  Speaker 1: set out, working with Serra Club and other grassroots organizations
• 23:44
  Speaker 1: to try to get a hundred cities to make such commitments.
• 23:47
  Speaker 1: By the end of the year, hundred eight cities and
• 23:49
  Speaker 1: made commitments um and I think we're up to over
• 23:52
  Speaker 1: a hundred and fifty cities and over seven states making
• 23:55
  Speaker 1: these kinds of commitments, and so that's really the role
• 23:58
  Speaker 1: of our advocacy work too, to try to address the situation.
• 24:02
  Speaker 1: It's a big question and a big concern for a
• 24:04
  Speaker 1: lot of investors who are trying to follow E s
• 24:06
  Speaker 1: T requirements, And there's a question that gets raised, especially
• 24:10
  Speaker 1: with this sort of ten million dollar commitment that sort
• 24:13
  Speaker 1: of thrust this whole effort into focus today. How much
• 24:17
  Speaker 1: can we tell whether a company is just paying lip
• 24:21
  Speaker 1: service to the idea versus actually doing something meaningful with
• 24:25
  Speaker 1: reducing their footprint. That's a great question. I think it
• 24:30
  Speaker 1: really starts with making big, bold commitments, because addressing a
• 24:33
  Speaker 1: crisis of this magnitude doesn't happen just by business as
• 24:37
  Speaker 1: usual kinds of action, so I applaud companies that meant UH.
• 24:41
  Speaker 1: It's also really important to consistently report on what actions
• 24:45
  Speaker 1: companies are taking. So we publish an annual sustainability report.
• 24:49
  Speaker 1: We track ourselves single that we make and how we
• 24:52
  Speaker 1: make progress year after year, and I would expect that
• 24:56
  Speaker 1: other companies are doing the same things. It's it's really
• 24:58
  Speaker 1: not enough just to make the commitment by to also
• 25:00
  Speaker 1: be very transparent about what actions are are actually being
• 25:03
  Speaker 1: put in place. Hey, Joey, thank you so much for
• 25:05
  Speaker 1: joining us. Really appreciate your thoughts on this important topic
• 25:09
  Speaker 1: and on a topic that's growing in influence. Joey Bergstein,
• 25:12
  Speaker 1: CEO of Seventh Generation based in Burlington, Vermont, joining us
• 25:16
  Speaker 1: on the phone. It's interesting to think about, you know,
• 25:20
  Speaker 1: environmental social governance. It's becoming a bigger part of UH
• 25:24
  Speaker 1: investors view of companies and industries, and there's a lot
• 25:28
  Speaker 1: of data out there. There's a lot of data on
• 25:29
  Speaker 1: the Bloomberg terminal that tracks UH some of the metrics
• 25:32
  Speaker 1: as it relates to E s G. And we're hearing
• 25:34
  Speaker 1: more and more UH investors, whether it's hedge funds, portfolio UH,
• 25:39
  Speaker 1: you know, mutual funds and institutional investors really focusing on
• 25:42
  Speaker 1: E s G. Yeah. I mean, I do think though
• 25:44
  Speaker 1: we've moved past the point of just saying, Okay, what
• 25:47
  Speaker 1: have you put out there that you're doing to fight
• 25:49
  Speaker 1: climate change into okay, well, how effective are some of
• 25:53
  Speaker 1: these measures? And I think you know, when you look
• 25:55
  Speaker 1: at Amazon, for example, there's been a lot of pressure
• 25:58
  Speaker 1: internally about changing of the practices of the company, and
• 26:02
  Speaker 1: then there's a question of how Jeff Bezos is even
• 26:04
  Speaker 1: going to deploy ten billion dollars because a lot of
• 26:06
  Speaker 1: these upstart organizations are small. Yeah, exactly right, but that
• 26:10
  Speaker 1: ten billion dollars is a big number. It gets everyone's attention.
• 26:14
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 26:16
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 26:19
  Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on
• 26:22
  Speaker 1: Twitter at pt Sweeney. I'm Lisa Abram Woyds. I'm on
• 26:25
  Speaker 1: Twitter at Lisa Abram wits one. Before the podcast, you
• 26:28
  Speaker 1: can always catch us worldwide on Bloomberg Radio.