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Zero Tariffs Would Benefit EU Automakers More Than · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim
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  Speaker 1: Fox along with my co host Lisa Abramowitz. Each day
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• 0:32
  Speaker 1: Trade talks and updates to NAFTA. President Donald Trump saying
• 0:36
  Speaker 1: that there are signs of optimism. He said that we're
• 0:40
  Speaker 1: really doing well. He talked to reporters at the White
• 0:43
  Speaker 1: House talking about Canada. He says they want to be
• 0:46
  Speaker 1: part of the deal we've gotten until Friday, and he says,
• 0:49
  Speaker 1: the President says, I think we're probably on track. Well,
• 0:54
  Speaker 1: let's find out if we're really on track. We've got
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  Speaker 1: Michael Dean, our senior analyst European Automotive for Bloomberg Intelligence.
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  Speaker 1: Plus we've got Josh wind Grove. He's our Canadian government
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  Speaker 1: reporter for Bloomberg and he just happens to be in
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  Speaker 1: our nation's capital in Washington, d C. Josh wind Grove.
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  Speaker 1: We got just a small comment from Christopher Freeland, the
• 1:15
  Speaker 1: Foreign Minister of Canada talking about intense negotiations with Robert Leitheiser.
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  Speaker 1: Any update on what exactly is going on in those negotiations. Yeah,
• 1:26
  Speaker 1: you're getting a good window into the glamour of trade
• 1:29
  Speaker 1: reporting here, and I'm just calling from the streets of
• 1:32
  Speaker 1: Washington where we're loitering and hanging on every word that
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  Speaker 1: Christie Freeland has to throw our way on the way
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  Speaker 1: in and out of these meetings, to sort of swinging
• 1:40
  Speaker 1: in and out as they bringing the political figures and
• 1:43
  Speaker 1: bring sort of the technical experts who you might lovingly
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  Speaker 1: call the true nerds, the nerds with three cred to
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  Speaker 1: commast on these issues. But you know, there isn't a
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  Speaker 1: sense of panic in the air. It's hard to finger
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  Speaker 1: on the even there were twenty four hours or so
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  Speaker 1: from this sort of quadline self imposed political deadline, which
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  Speaker 1: is frankly all that not that real the deadline. Uh,
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  Speaker 1: you know, there's there's not really uh back against the
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  Speaker 1: wall field to it. Also, I think that's reflected in
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  Speaker 1: the views you're hearing from Trump and Trudeau that maybe
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  Speaker 1: they're untracked to get something. What's interesting is that it
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  Speaker 1: a day where it does seem like there is progress
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  Speaker 1: being made towards some kind of North American free trade agreement,
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  Speaker 1: albeit not by that name. There does seem to be
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  Speaker 1: a softening between the European Union and the US as well,
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  Speaker 1: with the European Union proposing reportedly anyway, uh, that they
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  Speaker 1: are willing to strip away all tariffs if the US
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  Speaker 1: is willing to do the same. And Michael, I'd love
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  Speaker 1: you to come on in here, how significant, how surious
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  Speaker 1: is this, How seriously should we take this? And how
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  Speaker 1: significant would it be for the auto industry in particular? Hi? There? Yes, So,
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  Speaker 1: the German automakers set about one point two million cars
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  Speaker 1: in the US. About half of these are imported from
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  Speaker 1: the EU. So this would remove a two and a
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  Speaker 1: half percent tariff, which isn't massive in the scheme of things.
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  Speaker 1: But what I think the bigger issue here is if
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  Speaker 1: it removes the threat that Donald Trump proposed in import tariff.
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  Speaker 1: I think that's the bigger positive here for the European carmakers. Michael,
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  Speaker 1: who would benefit more if all tariffs were done away
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  Speaker 1: between the EU and the US. Would it be the
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  Speaker 1: US automakers or the European automakers? Almost certainly the EU
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  Speaker 1: given the numbers. I just talked about over half a
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  Speaker 1: million vehicles being exported to the US each year. Michael,
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  Speaker 1: does the United States really have an export strategy when
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  Speaker 1: it comes to automobiles targeting the European Union? Well, they
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  Speaker 1: have brands in Europe. They have fought which which still
• 3:50
  Speaker 1: does very well. UM as you know, GM sold Opal recently,
• 3:54
  Speaker 1: which wasn't such a success. So there hasn't really been
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  Speaker 1: a major sort of export mark kids for the US
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  Speaker 1: manufacturers into the EU EU, and I don't think that
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  Speaker 1: will change all right, So we have that softening of
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  Speaker 1: the European Union in the US. It seems like there
• 4:10
  Speaker 1: is a good rapport or at least not a bad
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  Speaker 1: report between Canada and the US and Mexico. So Josh,
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  Speaker 1: what are we looking for to determine whether or not
• 4:19
  Speaker 1: this is going to be a done deal, They're going
• 4:21
  Speaker 1: to meet the deadline, and whether or not this is
• 4:24
  Speaker 1: just basically nap to two point over a few tweaks. Yeah.
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  Speaker 1: I think the parallel here is that it's less about
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  Speaker 1: what can be achieved by deal and the threat that
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  Speaker 1: comes off the table. It's the same thing with THEU
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  Speaker 1: cars less about two and a half percent in the
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  Speaker 1: shread and the same with NAFTA, because whatever they deal
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  Speaker 1: get a deal on this Friday, will be a deal
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  Speaker 1: in principle at best, subject a month of for the talks,
• 4:52
  Speaker 1: legal haggling, you know, in trade like single words in
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  Speaker 1: a trade agreement can mean all the difference in the world.
• 4:57
  Speaker 1: So you know, it's just sort of looking for a
• 4:59
  Speaker 1: political wing to get Trump satisfied, I guess. And it's
• 5:02
  Speaker 1: gonna come down to dairy and dispute Panels. US wants
• 5:06
  Speaker 1: to basically do away with media dairy system and the Panels,
• 5:11
  Speaker 1: and I guess they're looking for a way to save
• 5:13
  Speaker 1: a little bit of both. Josh, is there any way
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  Speaker 1: to disentangle US automobile production from what happens in Canada,
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  Speaker 1: specifically in Ontario? Uh? Not painlessly? Um. You know, Canada
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  Speaker 1: is a huge ex border of autos to the US
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  Speaker 1: to supply chains or deeply integrated some parts across the
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  Speaker 1: border six times before they actually end up in a car.
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  Speaker 1: So if you started tariffing it, it would be US
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  Speaker 1: automakers who would have would be certainly among those feeling
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  Speaker 1: the pain. In US consumers would be among most paying
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  Speaker 1: the price. Because I feel like this gets lost. It's
• 5:50
  Speaker 1: so timble, but it's like it gets lost in the
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  Speaker 1: tariffs are paid by the country that applies book right,
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  Speaker 1: So US tarrap is paid by the US people buying
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  Speaker 1: the goods. John swing Grove, We're gonna let you go.
• 6:01
  Speaker 1: A lot of trade reporting to be down. Josh wyn
• 6:03
  Speaker 1: Grove is Canada government reporter for Bloomberg News. Michael stick
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  Speaker 1: with US. I want to talk about the auto industry,
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  Speaker 1: and I want to talk about the news that we
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  Speaker 1: got out earlier today with the European Union. How credible
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  Speaker 1: is what we learned today that the European Union would
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  Speaker 1: be European Union will be willing to drop all tariffs
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  Speaker 1: if the US were to do the same. Is that likely?
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  Speaker 1: Is that realistic? I think it's possible. Given the magnitude
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  Speaker 1: of the exports from the EU and how important the
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  Speaker 1: German auto industry is to the EU, I think this
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  Speaker 1: definitely is credible. How big is the auto industry for
• 6:36
  Speaker 1: the German economy? Can you give us some perspective? What
• 6:39
  Speaker 1: German auto makers have about a hundred billion dollars of
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  Speaker 1: revenues from the US. About of that is directly for
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  Speaker 1: exports to the US. So yes, it's it's very significant.
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  Speaker 1: And what about hundred and twenty thousand Americans actually work
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  Speaker 1: for European Union car companies in the United States and
• 7:03
  Speaker 1: states such as South Carolina, Alabama, Mississippi, and Tennessee. Right,
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  Speaker 1: that's correct. So both BMW and Mercedes have made the
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  Speaker 1: US their suv hub production base um globally, and therefore
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  Speaker 1: they produce over six hundred thousand vehicles annually in the US.
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  Speaker 1: Plus Folkswagon produces about two hundred thousand units, so it's
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  Speaker 1: very significant. Thank you so much. Michael Dean senior analyst
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  Speaker 1: covering the European automative automotive sector for Bloomberg Intelligence, coming
• 7:32
  Speaker 1: to us from London. Michael, thank you. He's an investor
• 7:49
  Speaker 1: who follows Warren Buffett. David Deets is the founder and
• 7:53
  Speaker 1: the chief investment strategist for Point View Wealth Management, helping
• 7:56
  Speaker 1: to manage more than three hundred million dollars of stomer
• 8:00
  Speaker 1: assets based in Summit, New Jersey. David diet is always
• 8:03
  Speaker 1: a pleasure. When did you first invest alongside Warren Buffett
• 8:09
  Speaker 1: and Berkshire Hathaway. Well, I've been a long term Berkshire
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  Speaker 1: halfway holder. Uh, that goes back into the nineties. Part
• 8:19
  Speaker 1: of it is just so that I get tickets to
• 8:21
  Speaker 1: go out to Omaha um and see him in person.
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  Speaker 1: And I was lucky enough to be in Omaha just
• 8:28
  Speaker 1: this past May. And uh, he's still as witty and
• 8:32
  Speaker 1: instructive and insightful as he's ever been. And of course
• 8:36
  Speaker 1: his sidekick there um Charles munger Is, is doing the
• 8:41
  Speaker 1: same thing. And over the years, I'd have to credit
• 8:44
  Speaker 1: him as being so informative to our investing strategy here
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  Speaker 1: at Point View. All right, so let's talk about how
• 8:50
  Speaker 1: he has informed your strategy. In particular recently, he was
• 8:54
  Speaker 1: on earlier a couple of competing networks talking about how
• 8:58
  Speaker 1: he likes airlines, he prefers stocks over bonds. What's been
• 9:02
  Speaker 1: your biggest takeaway so far today? Well, you know, I
• 9:05
  Speaker 1: think the number one question everyone's mind here we are
• 9:07
  Speaker 1: in the longest bold market ever by some metrics, is
• 9:11
  Speaker 1: does he still like stocks today? And you know, I
• 9:15
  Speaker 1: felt he answered the question with yes for the long term. Um,
• 9:19
  Speaker 1: you know, he always wishes to buy things cheaper, but
• 9:22
  Speaker 1: he offered one comparison. He said, look, if you had
• 9:24
  Speaker 1: a chance to buy a thirty year treasury bond or
• 9:27
  Speaker 1: invest in a well diversified basia stocks. The stock choice
• 9:31
  Speaker 1: is a no brainer. So over the long haul, he
• 9:34
  Speaker 1: likes stocks, particularly relative to where interest rate start today.
• 9:37
  Speaker 1: Interestingly enough, he also opined in real estate, and he
• 9:40
  Speaker 1: thought stocks are cheaper than real estate. I know we
• 9:42
  Speaker 1: have lots of clients, a lot of people out there
• 9:44
  Speaker 1: are looking as an alternative to the stock market real estate.
• 9:47
  Speaker 1: He would inject a note of caution into that. What
• 9:50
  Speaker 1: about acquisitions. Do you believe that Warren Buffett is searching
• 9:53
  Speaker 1: for large acquisitions or is he going to be spending
• 9:56
  Speaker 1: time looking on bolt on acquisition small earth. Well, he's
• 10:02
  Speaker 1: looking at everything. You know. His problem is he's just
• 10:05
  Speaker 1: got this huge, massive cash hoard too, as he put it,
• 10:09
  Speaker 1: would put it move the needle. He needs to make
• 10:12
  Speaker 1: a big acquisition fifty billion or more, almost an S ANDP.
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  Speaker 1: Having said that, of course, they're still opportunistic in areas
• 10:21
  Speaker 1: where they see a lot of growth. So for example,
• 10:23
  Speaker 1: we just learned that he, along with other tech giants,
• 10:26
  Speaker 1: have invested in an Indian company which focuses on mobile payments.
• 10:30
  Speaker 1: So I think he's he's open to everything, but he
• 10:33
  Speaker 1: really needs the big one. Okay, But David Diets in
• 10:35
  Speaker 1: his annual letter to investors. He talked about paying a
• 10:39
  Speaker 1: sensible purchase price for an acquisition, and he said that
• 10:44
  Speaker 1: this has been a barrier to virtually all the deals
• 10:47
  Speaker 1: that they reviewed. In he said, prices for decent companies,
• 10:52
  Speaker 1: far from spectacular have hit an all time high. You
• 10:55
  Speaker 1: think that still exists, Well, yeah, I do. I mean,
• 10:59
  Speaker 1: we haven't heard of any big acquisitions from him, and
• 11:02
  Speaker 1: that's why, um, you know, I think he made the
• 11:05
  Speaker 1: easy uh comparison in terms of where the stock markets
• 11:08
  Speaker 1: today by just comparing it against you know, these super
• 11:11
  Speaker 1: low interest rate bonds. Um. What has been as biggest
• 11:15
  Speaker 1: acquisition this year and recently is buying shares of Apple.
• 11:18
  Speaker 1: But with Apple now the largest company on the planet,
• 11:22
  Speaker 1: well over a trillion dollar market cap and hitting all
• 11:24
  Speaker 1: time highs as we speak, it's hard to argue that
• 11:28
  Speaker 1: that is a great value today. And even he has
• 11:31
  Speaker 1: said that when he's first started buying very heavily in
• 11:34
  Speaker 1: Q one, the stock price got away from him. He
• 11:37
  Speaker 1: didn't admit to buying a few shares this quarter. But certainly,
• 11:41
  Speaker 1: although he loves the business, I don't think that you'd, uh,
• 11:45
  Speaker 1: you know, you'd walk away and say he loves the
• 11:47
  Speaker 1: stock price right now? So over the years that you've
• 11:50
  Speaker 1: been following Warren Buffett, what's been the most valuable advice
• 11:54
  Speaker 1: that you've taken from him? You know, I think it's
• 11:58
  Speaker 1: it's two things. Really. One is to think long term.
• 12:02
  Speaker 1: You know, so many people on Wall Street they're they're
• 12:04
  Speaker 1: looking at a chart and looking at it. You know,
• 12:07
  Speaker 1: what can the stock market do for me? And the
• 12:09
  Speaker 1: next day, the next week, the next month, He argues,
• 12:12
  Speaker 1: you know, think about holding if think about holding companies
• 12:15
  Speaker 1: for a lifetime. And I think that gives him a
• 12:19
  Speaker 1: staying power um, which really works to his benefit when
• 12:23
  Speaker 1: the rest of us are so short term oriented. I
• 12:26
  Speaker 1: think the second thing, of course, is don't look at
• 12:28
  Speaker 1: stocks this pieces of paper, he says, Look underneath him,
• 12:31
  Speaker 1: look under the hood. They are operating businesses. You know,
• 12:35
  Speaker 1: if you wouldn't buy the stock if the stock market
• 12:38
  Speaker 1: was closed for the next six months, don't even consider
• 12:42
  Speaker 1: your purchase. These are operating businesses. Understand what makes them tick,
• 12:45
  Speaker 1: how the cash flows work. Only then can you make
• 12:48
  Speaker 1: an intelligent acquisition. David Deets. One of the quotes from
• 12:53
  Speaker 1: his annual letter is that Charlie Munger and warm Buffett
• 12:57
  Speaker 1: that he says they both sleep well, and they leave.
• 13:00
  Speaker 1: It is insane to risk what you have a need
• 13:03
  Speaker 1: in order to obtain what you don't need. Do you
• 13:07
  Speaker 1: believe that those words describe many of the acquisitions that
• 13:12
  Speaker 1: have been reported so far this year? Well, you know
• 13:17
  Speaker 1: that that's uh, there's been a lot of acquisitions out there.
• 13:20
  Speaker 1: But certainly, just in his comments this morning, you know,
• 13:23
  Speaker 1: he talked about debt and so forth, and and uh,
• 13:28
  Speaker 1: certainly the idea that you should leverage yourself deeply in
• 13:32
  Speaker 1: order to make an acquisition. UM. I think he's very
• 13:35
  Speaker 1: negative on if the company won't stand as own merits
• 13:39
  Speaker 1: and only makes sense if you leverage it to the hill,
• 13:42
  Speaker 1: he'd be very leery about UM. And so I think
• 13:47
  Speaker 1: that that's one great takeaway for for Wall Street investors.
• 13:51
  Speaker 1: Don't operate on margin. Don't use you know, next month's
• 13:54
  Speaker 1: rent money, only use money that you can afford to
• 13:57
  Speaker 1: ride with for a long period of time. David DIDs
• 13:59
  Speaker 1: stick with David DIDs is founder and chief investment strategistic
• 14:02
  Speaker 1: Point View Wealth Management, based in Summit, New Jersey. We
• 14:06
  Speaker 1: are about to head over and here from the Oracle
• 14:09
  Speaker 1: of Omaha himself, I personally am very interested to hear
• 14:12
  Speaker 1: what he might be saying about is more than one
• 14:14
  Speaker 1: hundred billion dollar cash pile where he is going to
• 14:17
  Speaker 1: put it. Also, he has made news to this year
• 14:20
  Speaker 1: talking about starting his own healthcare initiative with a number
• 14:24
  Speaker 1: of other companies. Perhaps he will give some insight into that.
• 14:27
  Speaker 1: He is sitting down with Bloomberg television anchor David Weston
• 14:31
  Speaker 1: at his annual charity lunch at Smith and Malensky in
• 14:34
  Speaker 1: New York City. Berkshire Hathaway chief executive Warren Buffett to
• 14:39
  Speaker 1: be speaking about everything from stocks, two bonds to what
• 14:44
  Speaker 1: he will do with this massive cash pile. Right, and
• 14:47
  Speaker 1: just to put it into context, the shares of Berkshire
• 14:49
  Speaker 1: Hathaway they are hired by about six percent so far
• 14:52
  Speaker 1: this year. And uh, Warren Buffett holds a thirty six
• 14:56
  Speaker 1: and a half percent stake in the company. Yeah, so
• 15:00
  Speaker 1: definitely really an interesting time. Also interesting will be whether
• 15:04
  Speaker 1: or not the good times are over, whether the opportunities
• 15:08
  Speaker 1: that Warren Buffett has experienced over his decades of a
• 15:12
  Speaker 1: track record, whether those have passed, Whether this is a
• 15:15
  Speaker 1: different time and that just cannot happen given where valuations are. Yeah,
• 15:20
  Speaker 1: and and to wonder whether the valuations are better here
• 15:23
  Speaker 1: in the United States or whether they're better overseas. Yeah,
• 15:26
  Speaker 1: I thought that it was really interesting. Without Indian acquisition,
• 15:29
  Speaker 1: I thought that that was compelling, especially at a time
• 15:31
  Speaker 1: when there's a lot of money going to startups in India.
• 15:34
  Speaker 1: But this sort of growing recognition that that is a
• 15:37
  Speaker 1: huge market that will surpass China in population in the
• 15:41
  Speaker 1: upcoming decade, not to mention it's sort of technological developments
• 15:44
  Speaker 1: and and the other advances in its economy. So it's
• 15:47
  Speaker 1: sort of interesting to see whether there is value to
• 15:49
  Speaker 1: be found there um and if so, where and how
• 15:52
  Speaker 1: as a foreign investor it is to get into that. Yes,
• 15:56
  Speaker 1: and also it will be interested to hear if he
• 15:59
  Speaker 1: has anything to say about tariffs and how tariffs supplied
• 16:03
  Speaker 1: by the United States will affect the prices that consumers
• 16:08
  Speaker 1: have to pay based on those pass along costs. David
• 16:13
  Speaker 1: David Deeds come back on in here, David Deed's founder
• 16:16
  Speaker 1: in chief investment strategist at Point View Wealth Management. Do
• 16:19
  Speaker 1: you expect, to Pim's point, do you expect Warren Buffett
• 16:23
  Speaker 1: to be political in any way? Um? Well, already in
• 16:27
  Speaker 1: some comments earlier today, quite frankly, he was asked the
• 16:30
  Speaker 1: question about the economy, and the issue of tariffs did
• 16:33
  Speaker 1: come up, and of course he's a long term holder
• 16:36
  Speaker 1: of Sherwin Williams, the famous paint company, and he did
• 16:39
  Speaker 1: allude to tariffs by talking about hey either having to
• 16:41
  Speaker 1: pay a lot more for their pails and so um uh.
• 16:46
  Speaker 1: You know, having been at the annual meeting in in
• 16:49
  Speaker 1: May and and and knowing how he feels about tariffs,
• 16:51
  Speaker 1: he is very much a free trader, and so that
• 16:55
  Speaker 1: was kind of availed backhand negative comment on the whole
• 16:58
  Speaker 1: concept of tariffs. Um. The other thing that I thought
• 17:01
  Speaker 1: was most interesting that the issue of Jerome Powell came up.
• 17:04
  Speaker 1: Of course, he's the chair of the Federal Reserve. Um,
• 17:08
  Speaker 1: we're in a period of slightly rising interest rates. But
• 17:11
  Speaker 1: what I really liked, I think boats well for the
• 17:13
  Speaker 1: Marcus as he expressed the most confidence in Mr Powell.
• 17:18
  Speaker 1: He said he's not perfect, but he's going to focus
• 17:20
  Speaker 1: on the job and he's well equipped to do the job.
• 17:23
  Speaker 1: And I thought that was a real plus for investors
• 17:25
  Speaker 1: going forward. Here David Deed's quick question to you, when
• 17:27
  Speaker 1: you are in Omaha attending the annual meeting of Berkshire Hathaway,
• 17:32
  Speaker 1: are you aficionado of dairy Queen. Well, you know, I
• 17:38
  Speaker 1: do smile, and I do like dairy Queen, to be
• 17:41
  Speaker 1: honest with you, and I do smile every time I
• 17:43
  Speaker 1: go there, knowing that in a very very small way,
• 17:45
  Speaker 1: I'm kind of benefiting from my purchase as a very
• 17:48
  Speaker 1: indirectly as a holder of Berkshire Hathway Stock. Hey, David
• 17:52
  Speaker 1: Dean's Point View Wealth Management and stick with us also
• 17:55
  Speaker 1: not only dairy Queen, but also Diet Coke, right, because
• 17:57
  Speaker 1: he's a very aficionado at the Oracle of Amaha of
• 18:00
  Speaker 1: Diet Coke. We seem to be having some technical difficulties
• 18:03
  Speaker 1: with respect to the interview, but a lot of really
• 18:06
  Speaker 1: interesting things. Pim uh that, Warren Buffett said there, and
• 18:10
  Speaker 1: just sort of digest some of these things. Let's bring
• 18:12
  Speaker 1: in David Deet's President, chief investment strategist at Point View
• 18:15
  Speaker 1: Wealth Management. Um, he sounded really bullish. What was your takeaway? Yeah,
• 18:22
  Speaker 1: I thought there's a couple of great things for investors
• 18:25
  Speaker 1: that we just heard. One is, don't time that market?
• 18:30
  Speaker 1: Is this a perfect time to invest? No, he said,
• 18:32
  Speaker 1: you know, it's not two thousand eight, nineteen seventy, it's
• 18:35
  Speaker 1: not nineteen seventy four, when was the cheapest period in
• 18:37
  Speaker 1: his lifetime. But still stocks look better than bonds. And
• 18:42
  Speaker 1: if you, you know, invest in a diverse array of stocks,
• 18:45
  Speaker 1: you're going to do well over the long haul. I
• 18:48
  Speaker 1: thought that was a great message. The second one is
• 18:49
  Speaker 1: always by quality. He talked about return on equities being
• 18:55
  Speaker 1: look for companies which are making good money, um, the Apple,
• 19:00
  Speaker 1: they are deploying to have a sensible business plans and
• 19:03
  Speaker 1: tremendous some defensible brands, and buy them and hold them.
• 19:08
  Speaker 1: I thought that was just a great message. But David,
• 19:10
  Speaker 1: hang on just a second. I mean, it's hardly likely
• 19:13
  Speaker 1: that he would say anything that would be contrary to that, right.
• 19:17
  Speaker 1: I mean, that would be the news if Warren Buffett
• 19:19
  Speaker 1: came out and said I want to spend money on
• 19:21
  Speaker 1: companies that deploy capital needlessly and heedlessly and spend it
• 19:26
  Speaker 1: on ridiculous things. I mean, that would be the headline.
• 19:28
  Speaker 1: I mean, it's not exactly Warren Buffett's forte to be
• 19:32
  Speaker 1: sort of tossing money around. I mean he's a kind
• 19:35
  Speaker 1: of parsimonious when it comes to his investment philosophy. Well,
• 19:40
  Speaker 1: I think you're exactly right, And if you read his
• 19:42
  Speaker 1: annual reports over the years and look at his latest activity. Obviously,
• 19:46
  Speaker 1: as he says, he's not out there with a shovel
• 19:48
  Speaker 1: putting money into the market. You know. Having said that,
• 19:52
  Speaker 1: of course, when you look at all the great investors
• 19:54
  Speaker 1: around the world and look at their track records, your
• 19:57
  Speaker 1: heart pressed to identify somemon who has better. So even
• 20:01
  Speaker 1: though you could say he's talking his book a little bit, nevertheless,
• 20:05
  Speaker 1: I think you have to give him the benefit of
• 20:07
  Speaker 1: adapt because of how well he has done. Yeah. One
• 20:11
  Speaker 1: thing that I thought was really interesting was when David
• 20:13
  Speaker 1: West of Liver Television asked him about a tool Goande,
• 20:17
  Speaker 1: the New Yorker writer and physician who Warren Buffett is
• 20:22
  Speaker 1: taped to head his healthcare initiative, and David West asked,
• 20:25
  Speaker 1: what's he doing? And Warren Buffett responded, he's thinking, what
• 20:29
  Speaker 1: did you make of that? Well, I mean, you know,
• 20:32
  Speaker 1: the healthcare issues are so far proved almost to be intractable. Um.
• 20:38
  Speaker 1: You know, the share of DDP in America keeps going
• 20:40
  Speaker 1: up this allocane net direction, and no one seems to
• 20:43
  Speaker 1: have the silver bullet as to how the rain cost
• 20:46
  Speaker 1: he had still provide Americans for the best healthcare possible.
• 20:49
  Speaker 1: That's why Warren and Jamie Diamond Uh and a couple
• 20:52
  Speaker 1: of others have teamed together to try and come up
• 20:54
  Speaker 1: with a solution. But from everything I heard this morning here,
• 20:58
  Speaker 1: no magic solution has been developed, but at least they're
• 21:01
  Speaker 1: working on it, and and that's where we are now
• 21:04
  Speaker 1: with the Warren's project there. Thanks very much for being
• 21:07
  Speaker 1: with us. David Diets is the founder and the chief
• 21:10
  Speaker 1: investment strategist for Point View Wealth Management, helping to manage
• 21:15
  Speaker 1: more than three million dollars of customer assets based in Summit,
• 21:18
  Speaker 1: New Jersey. This was the year that oil was going
• 21:38
  Speaker 1: to climb, possibly back to its prior highs, and yet
• 21:43
  Speaker 1: that was not to be. Joining us now to find
• 21:46
  Speaker 1: out what to expect in the months ahead for the
• 21:49
  Speaker 1: price of Crewed is Rob Hayworth, senior investment strategist at
• 21:52
  Speaker 1: us Bank Wealth Management, helping to oversee it more than
• 21:54
  Speaker 1: a hundred and fifty billion dollars of assets. Rob, thank
• 21:57
  Speaker 1: you so much for being with us. I'm looking right
• 21:59
  Speaker 1: now out crude just under seventy barrel, and I'm wondering,
• 22:04
  Speaker 1: from your perspective, are we going to break out significantly
• 22:07
  Speaker 1: to the upside of the downside, because frankly, it's been
• 22:10
  Speaker 1: split among the people we've spoken to, with people making
• 22:13
  Speaker 1: arguments on either side. Yeah, our point of view is
• 22:17
  Speaker 1: for the rest of this year, you're probably actually range
• 22:19
  Speaker 1: bound on oil at this point in time. There is
• 22:22
  Speaker 1: a tremendous amount of bullish sentiment in the in the
• 22:25
  Speaker 1: futures market, but you're starting to turn the calendar from
• 22:29
  Speaker 1: from peak demand summer season in into the softer demand
• 22:33
  Speaker 1: fall season, so that's going to limit the upside. But
• 22:36
  Speaker 1: there's a bit of a floor in here when you
• 22:38
  Speaker 1: think about the Iran sanctions, the cuts in production that
• 22:41
  Speaker 1: are going on in Iran. So we think right now
• 22:44
  Speaker 1: this market is kind of caught between these two factors. Uh,
• 22:48
  Speaker 1: and we're probably going to stay in this in this
• 22:51
  Speaker 1: price range for through the rest of the year. Well.
• 22:54
  Speaker 1: Obviously worth investing in domestic oil production, either in the
• 22:58
  Speaker 1: midstream or up stream. Yeah. A couple of months ago
• 23:02
  Speaker 1: we actually published a quick paper on an opportunity of
• 23:05
  Speaker 1: midstream energy infrastructure companies, and we think that opportunity still exists.
• 23:10
  Speaker 1: You've got oil prices hovering at this reasonable price range
• 23:14
  Speaker 1: as we can you know, see even in the Permian
• 23:17
  Speaker 1: infrastructure is fairly tight, meaning there's not enough storage, there's
• 23:22
  Speaker 1: not enough transportation UM and and so demand for these
• 23:26
  Speaker 1: UH for these services is fairly high. And you're coming
• 23:29
  Speaker 1: off a fairly rough patch for these midstream energy companies.
• 23:33
  Speaker 1: So valuations are fairly cheap, yields are attractive relative to
• 23:38
  Speaker 1: other things like high yield bonds UH and and now
• 23:42
  Speaker 1: with some of this recapitalization in the in the industry
• 23:45
  Speaker 1: and the change in structure from master limited partnership to
• 23:48
  Speaker 1: more seed corporations, we think that catalyst is there to
• 23:52
  Speaker 1: start to unlock that value. You know, one thing that
• 23:54
  Speaker 1: I'm curious about. If you think that oil prices are
• 23:57
  Speaker 1: going to remain range bound, what's the big risk to
• 24:00
  Speaker 1: your thesis. Yeah, that's a that's a great question. I
• 24:05
  Speaker 1: think there'll probably be two. One is US production deteriorates
• 24:09
  Speaker 1: a little faster than than we expect UM. That would
• 24:13
  Speaker 1: be a key problem I think for UH for oil prices.
• 24:18
  Speaker 1: And then and then the second is really to the
• 24:21
  Speaker 1: extent of this global trade war starts to impair global
• 24:24
  Speaker 1: economic activity UM. Right now, expectations in the market are
• 24:28
  Speaker 1: for demand to continue to grow and absorb this supply
• 24:33
  Speaker 1: coming online, particularly as as OPEC, especially Saudi Arabia and
• 24:37
  Speaker 1: and they're non OPEC partner Russia ramp up their production. Um,
• 24:40
  Speaker 1: you need that demand to continue to expand. And I
• 24:43
  Speaker 1: think if if we get a a surprise softening from
• 24:47
  Speaker 1: some you know, unforeseen escalation in the trade tip, um,
• 24:52
  Speaker 1: that would be that would be kind of problematic for
• 24:55
  Speaker 1: the for the global oil markets. Rob. I just want
• 24:57
  Speaker 1: you to look ahead a little bit, maybe you know,
• 24:59
  Speaker 1: two years, three years or so, because of new rules
• 25:02
  Speaker 1: that are going into effect in terms of shipping oil, uh,
• 25:07
  Speaker 1: you know on the nation on the world's oceans. Do
• 25:10
  Speaker 1: you believe that it's going to get more expensive to
• 25:11
  Speaker 1: actually transport oil and as a result, that's going to
• 25:14
  Speaker 1: filter into the price. Uh? Yeah, in general, we think
• 25:21
  Speaker 1: we would see that that is true, right, I mean
• 25:24
  Speaker 1: that that's one of the bottlenecks we still really have
• 25:27
  Speaker 1: in in this industry, is is this infrastructure. So ultimately
• 25:33
  Speaker 1: prices could take higher over time, but it's but we've
• 25:37
  Speaker 1: still you know that that's Uh, it's tough to price
• 25:41
  Speaker 1: at this point in time because oil is always priced
• 25:43
  Speaker 1: on what's going on right now, what is going on
• 25:45
  Speaker 1: with supply demand right now. But there's certainly that opportunity
• 25:48
  Speaker 1: in the future. Are there any places within the energy
• 25:52
  Speaker 1: complex where you think that there are securities that are
• 25:54
  Speaker 1: overvalued right now? Um, we're generally, you know, we we
• 26:00
  Speaker 1: have a pretty selective process around around security selection. We're
• 26:05
  Speaker 1: not heavy into the integrated space. We're not heavy um
• 26:10
  Speaker 1: into into a broad swath of of exploration and production.
• 26:15
  Speaker 1: We're probably more interested in domestic at this point than
• 26:18
  Speaker 1: we are everything else. So so we've been pretty selective
• 26:21
  Speaker 1: in terms of this midstream opportunity some exploration and production, uh,
• 26:26
  Speaker 1: but but avoiding many of the other segments for now.
• 26:29
  Speaker 1: Rob has investment in goal changed. Yes, I think sentiment
• 26:36
  Speaker 1: has finally rolled over. It's been such a rough road
• 26:39
  Speaker 1: for gold since it you know, touched touched its peak
• 26:42
  Speaker 1: a few years ago. And and as you've been breaking down,
• 26:45
  Speaker 1: we've finally seen futures market sentiment moved from that long
• 26:49
  Speaker 1: to net short uh. And I well, I think you've
• 26:53
  Speaker 1: seen a bounce in the last uh, the last couple
• 26:56
  Speaker 1: of weeks. Um. The struggle is the fundamental headwinds for
• 27:00
  Speaker 1: golden now against you, And I think the sentiment in
• 27:02
  Speaker 1: the market has rolled over and it's going to be
• 27:05
  Speaker 1: tough for it. To regain that bullish for until until
• 27:08
  Speaker 1: you you, you know, until prices are finally washed out.
• 27:12
  Speaker 1: So a higher interest rates from the Fed, a stronger
• 27:15
  Speaker 1: US dollar due to somewhat better US economic growth than
• 27:19
  Speaker 1: rest of world UM is going to keep providing that headwind,
• 27:23
  Speaker 1: and I think a sentiment probably remains negative for tom
• 27:26
  Speaker 1: sometime and keeps pressure on gold prices. Many thanks, Rob Hayworth,
• 27:32
  Speaker 1: Senior investment strategist, US Bank Wealth Management based in Seattle,
• 27:36
  Speaker 1: helping to manage more than a hundred and fifty billion
• 27:39
  Speaker 1: dollars of customer assets. Well, we marked ten years since
• 27:59
  Speaker 1: the financial crisis of two thousand and eight. Many people
• 28:04
  Speaker 1: remember it as the time when bear Stearns, Lehman Brothers disappeared,
• 28:09
  Speaker 1: But there were some winners in that two thousand eight crisis.
• 28:14
  Speaker 1: Any Massa is here now. She's our investing reporter for
• 28:17
  Speaker 1: Bloomberg News to tell us all about how one company
• 28:21
  Speaker 1: managed to transform itself taking advantage of some problems in
• 28:26
  Speaker 1: well other companies. And this has to do with black
• 28:28
  Speaker 1: Rock and Barkley start off. And he's great to have
• 28:32
  Speaker 1: you here. Maybe just talk a little bit about what
• 28:35
  Speaker 1: happened at Barkley's that ended up benefiting black Rock. Sure well,
• 28:41
  Speaker 1: So Barclay's did not accept UK government bail out money
• 28:45
  Speaker 1: and they were looking to shore up their capital reserves,
• 28:47
  Speaker 1: so they ended up putting up for sale their I
• 28:50
  Speaker 1: shares business and that was their e t F business.
• 28:54
  Speaker 1: And what ended up happening is that was a unit
• 28:57
  Speaker 1: of a bigger business called b g I, and black
• 28:59
  Speaker 1: Ock swept in with this thirteen point five billion dollar
• 29:02
  Speaker 1: deal to buy all of b g I and in
• 29:05
  Speaker 1: that acquisition it got into the e t F space
• 29:08
  Speaker 1: and now we think of it as such a huge player,
• 29:10
  Speaker 1: in fact, the world's largest player in e t F.
• 29:14
  Speaker 1: And this was the transformative moment. And you know when
• 29:17
  Speaker 1: they did this deal back in the throws of the crisis,
• 29:20
  Speaker 1: when that happened. It's so interesting, Annie, because this clearly
• 29:23
  Speaker 1: was a huge boom for black Rock when it comes
• 29:26
  Speaker 1: to how many assets they have with more than six
• 29:28
  Speaker 1: trillion dollars under management. What about profitability though, sure so
• 29:33
  Speaker 1: um obviously they are a highly profitable business and they
• 29:38
  Speaker 1: have basically paved the way in a couple of different
• 29:41
  Speaker 1: ways for that UM through e t S and various
• 29:45
  Speaker 1: other products. Et F are about a third of their
• 29:48
  Speaker 1: business now, but it's pretty stark if you consider that
• 29:51
  Speaker 1: they weren't in that space at all. In fact, they
• 29:53
  Speaker 1: had determined that they wouldn't be able to build it
• 29:56
  Speaker 1: from scratch in their own internal uh you a review,
• 30:00
  Speaker 1: and then once this came up for sale, they said, Hey,
• 30:03
  Speaker 1: we have a chance to get into this business that
• 30:06
  Speaker 1: that we want to be in, and that's how that
• 30:09
  Speaker 1: acquisition happened, and that piece of their business grew and
• 30:12
  Speaker 1: grew over the past decade. Financial risk software? What is it?
• 30:18
  Speaker 1: And what did black Rock do in order to capitalize
• 30:24
  Speaker 1: on everybody's fear. It's like, you know, after a hurricane,
• 30:27
  Speaker 1: everyone says, I got to go out and buy hurricane insurance.
• 30:30
  Speaker 1: After two th eight, people were worried about risk to
• 30:34
  Speaker 1: their financial assets exactly. So another way that this the
• 30:39
  Speaker 1: past ten years have been tied to their growth is
• 30:42
  Speaker 1: after the crisis and the crash, firms were looking for
• 30:46
  Speaker 1: ways to better assess their financial risk and and better
• 30:50
  Speaker 1: evaluate uh those types of risks. So black Rock already
• 30:55
  Speaker 1: had this Aladdin product that they sell which does just that,
• 31:00
  Speaker 1: helps helps you analyze all the risks in your portfolio,
• 31:03
  Speaker 1: and that business has uh really shown some growth over
• 31:09
  Speaker 1: the past decade, and they were able in a changing
• 31:11
  Speaker 1: regulatory environment to to i think, find some new customers
• 31:16
  Speaker 1: for that software, you know, just sort of taking a
• 31:19
  Speaker 1: step back. Black Rock certainly did benefit a lot in
• 31:22
  Speaker 1: the wake of the crisis from these specific businesses, but
• 31:25
  Speaker 1: in general, asset managers were big winners. I mean, yes,
• 31:29
  Speaker 1: there's a certainly consolidation now, but if you think about
• 31:32
  Speaker 1: it in general, because of some of the stimulus packages,
• 31:35
  Speaker 1: people flooded into asset managers and there was more business
• 31:39
  Speaker 1: that kind of went to the buy side from the
• 31:42
  Speaker 1: cell side as a result of this, right, I mean,
• 31:44
  Speaker 1: as black Rock kind of a sort of a lens
• 31:47
  Speaker 1: to view this shift through, that's exactly right. And one
• 31:51
  Speaker 1: other way that you might look at it is these
• 31:54
  Speaker 1: asset managers have not been given the too big to
• 31:57
  Speaker 1: fail stamp that the big banks have. Oh. I mean
• 32:00
  Speaker 1: that includes black Rock, but it also includes peers like Fidelity. Um.
• 32:05
  Speaker 1: You know, the asset management community has been able to
• 32:08
  Speaker 1: avoid being labeled too big to fail, even though they
• 32:10
  Speaker 1: did for a while they were a little bit in
• 32:13
  Speaker 1: limbo over whether that would happen. And ultimately that you know,
• 32:17
  Speaker 1: it seems like that scrutiny has tapered fifteen seconds on
• 32:21
  Speaker 1: Larry Fink and how important he has been to this success. Sure, well,
• 32:25
  Speaker 1: he's obviously the face of the company, and he's only
• 32:29
  Speaker 1: become more I think powerful and visible uh in in
• 32:34
  Speaker 1: these in the past decades. Thanks very much for being
• 32:37
  Speaker 1: with us. Annie massa investing reporter for Bloomberg. We encourage
• 32:42
  Speaker 1: you to read her story about Black Rocks decade, how
• 32:46
  Speaker 1: the crash helped forge a six point three trillion dollar giant.
• 32:51
  Speaker 1: Much appreciate it. Thanks for listening to the Bloomberg P
• 32:57
  Speaker 1: and L podcast. You can subscribe and listen to interviews
• 33:00
  Speaker 1: at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 33:04
  Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm
• 33:08
  Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast,
• 33:11
  Speaker 1: you can always catch us worldwide on Bloomberg Radio.