Latest / Bloomberg Intelligence / Biden Tax Hike Puts Capital Gains In The Crosshairs

Transcript

Biden Tax Hike Puts Capital Gains In The Crosshairs · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
Speaker 1: my co host Matt Miller. Every business day we bring
0:06
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. Well, if you want
0:22
Speaker 1: to get a your story widely read on the Bloomberg
0:25
Speaker 1: terminal rights stories about Wall Street, bonus pools right, stories
0:29
Speaker 1: about big investment banks, or write stories about taxes, and
0:33
Speaker 1: that's exactly what we have today. Most read story matters
0:37
Speaker 1: you've been calling out today Biden eyes first major tach
0:40
Speaker 1: hikes since and next economic plan. We have one of
0:44
Speaker 1: the co authors of that story with us, Lara Davison,
0:47
Speaker 1: congressional reporter for Bloomberg News, joining us on the phone
0:50
Speaker 1: from Washington, d C. Laura, thanks so much for joining
0:53
Speaker 1: us here. Give us a sense of what the strategy
0:56
Speaker 1: is for the Biden administration here with their tax policy.
1:00
Speaker 1: Are they simply looking to roll back some of President
1:03
Speaker 1: Trump's tax changes or there something new fundamentally here? Yes,
1:10
Speaker 1: and basically they are looking at rolling back the corporate
1:14
Speaker 1: tax cut, raising that rate to raising the top individual
1:18
Speaker 1: rate for for wealthy taxpayers. But kind of looking to
1:21
Speaker 1: a whole lot more so. Kind of the big notable
1:24
Speaker 1: thing here that will be a huge that would be
1:26
Speaker 1: a huge change is this capital gains tax increase for
1:28
Speaker 1: people making more than a million dollars. They would raise
1:31
Speaker 1: that rate to almost right now, you know, it's around
1:34
Speaker 1: in the low twenties. So that would be a huge,
1:37
Speaker 1: huge deal for lots of investors. They're also looking at
1:40
Speaker 1: a whole host of other things, the state tax changes,
1:42
Speaker 1: how offshore corporations are taxed. Uh. You know that this
1:46
Speaker 1: this whole infrastructure plan could cost somewhere between two to
1:48
Speaker 1: four trillion dollars uh, and they're looking to offset a
1:51
Speaker 1: significant chunk of that with some tax increases. Now, it's
1:54
Speaker 1: not going to be easy, right, I mean, obviously Americans
1:57
Speaker 1: don't like to pay taxes, and um, a lot of
2:01
Speaker 1: people feel like they already paid too much in taxes. Um,
2:06
Speaker 1: that's why it hasn't happened. A major tax increase hasn't
2:09
Speaker 1: happened since yes, And if you look, you know, Republicans
2:14
Speaker 1: basically across the board are universally opposed to any of
2:17
Speaker 1: these ideas laid out, So that means that Democrats will
2:19
Speaker 1: have to do it by themselves, which is tricky from
2:22
Speaker 1: a from a legislative process and also politically. You know,
2:24
Speaker 1: you look at some of the moderates in the Senate,
2:26
Speaker 1: you know, Joe Mansion of West Virginia, Cinema of Arizona,
2:30
Speaker 1: who might be resistant to some of these larger scale changes.
2:32
Speaker 1: They might agree, you know, it's just been tweaking around
2:34
Speaker 1: the edges. But something that's going to raise you know,
2:36
Speaker 1: a couple hundred billion dollars or you know several killion
2:38
Speaker 1: dollars might be a reach here for the Democratic Party. So, Laura,
2:42
Speaker 1: you know we've heard time and time again, administration to
2:45
Speaker 1: administration that all we really have to do is close
2:48
Speaker 1: some of these loopholes. I mean, how many times do
2:50
Speaker 1: you have to read about big corporations and wealthy individuals
2:54
Speaker 1: playing you know, effectively a zero percent tax rate while
2:58
Speaker 1: the rest of us loves, you know, pay you know,
3:00
Speaker 1: kind of a much higher rate. Is there any teeth
3:04
Speaker 1: to that? Is there any appetite for pursuing that type
3:06
Speaker 1: of strategy? There's a little bit so one thing that
3:09
Speaker 1: does have a film. Bipartisan support is giving more money
3:12
Speaker 1: to the I R S to really clamp down on audits.
3:14
Speaker 1: Audits have hit record low levels in recent years, you know,
3:17
Speaker 1: less than one percent for even you know, really wealthy taxpayers.
3:21
Speaker 1: So that's one area that that they they generally agree
3:24
Speaker 1: something needs to be done. And you look at you know,
3:26
Speaker 1: you give the I R S a dollar more for audits,
3:28
Speaker 1: they can usually collect between three and five additional dollars.
3:31
Speaker 1: So it's a pretty good way to get some revenue, uh,
3:34
Speaker 1: you know, without actually having to raise rates. However, you
3:36
Speaker 1: know that's not unlimited. You can't give the I R
3:38
Speaker 1: S one trillion dollars and expect them to get five
3:40
Speaker 1: trillion back. There's just not that much in in unpaid
3:42
Speaker 1: taxes out there. It's um, it's interesting, I've I've wondered
3:49
Speaker 1: this for so long, and maybe since you write about
3:51
Speaker 1: taxes only you can answer why does everyone think it's
3:54
Speaker 1: fair to have a corporate tax when we're already taxing
3:57
Speaker 1: the owners of those corporations on dividends in capital games.
4:02
Speaker 1: So there, this is kind of the system that the
4:04
Speaker 1: US has decided is the way they want to go.
4:06
Speaker 1: Other countries have you know, if they either have no
4:08
Speaker 1: corporate tax or a very low corporate tax, but instead
4:10
Speaker 1: they have a value added tax, which to spare every
4:13
Speaker 1: one of the super walkinesses of taxation. It's basically a
4:16
Speaker 1: sort of an incremental tax and every step of the process.
4:19
Speaker 1: H Republicans really don't want to go there, but they,
4:22
Speaker 1: you know, kind of there's a lot of uh, you know,
4:23
Speaker 1: economist would say that the corporate tax is a very
4:25
Speaker 1: ineffective way to go. Is there any possibility of getting
4:28
Speaker 1: a flat tax rate, like everybody pays his or her share,
4:34
Speaker 1: regardless of what kind of tricks you play, Like everyone
4:37
Speaker 1: pays done. If we got rid of all the lobbyists,
4:42
Speaker 1: that might happen. But until then, I think we're going
4:44
Speaker 1: to have a very complicated tax crowd with lots of
4:46
Speaker 1: carve ups for various different lawyers. That's always a lawyer's fault,
4:50
Speaker 1: all right. So Laura Janet Yellen recently said that the
4:54
Speaker 1: government has not yet decided whether to pursue a wealth tax.
4:57
Speaker 1: That's been urged by the likes of Elizabeth Warren and
5:00
Speaker 1: Bernie Sanders. What's the latest. What do you think the
5:02
Speaker 1: administration will do as it is to a wealth tax?
5:05
Speaker 1: The administration has been rather cool to the idea of
5:08
Speaker 1: a wealth tax. That Warrant has pursued. You this idea
5:10
Speaker 1: of you know that whether if you're a really wealthy person,
5:13
Speaker 1: you know, Jeff Bezos, that you would pay a percentage
5:15
Speaker 1: of your total accumulated wealth each year to the I
5:17
Speaker 1: R S whether or not you you know, your fortune
5:19
Speaker 1: gained money or lost money, um. But the Biden administration
5:22
Speaker 1: is not totally closed the door there. But they Biden
5:24
Speaker 1: didn't run on that. I would think it highly unlikely
5:26
Speaker 1: that that becomes a favored policy. However, they're looking at
5:29
Speaker 1: all sorts of other ways to tax the wealthy if
5:32
Speaker 1: not a wealth tax, So looking at you know, raising
5:34
Speaker 1: income rates, raising the estate tax, um, doing things like
5:37
Speaker 1: this capital gains tax, which will hit that same group
5:40
Speaker 1: of people just in a different way. If they figure
5:43
Speaker 1: out a way to tax the rich, will they lower
5:46
Speaker 1: rates for the rest of us? Well, that is one
5:50
Speaker 1: thing we saw in this stimulus package sort of effectively,
5:52
Speaker 1: you know, with the child tax credit that we saw
5:54
Speaker 1: that is kind of the other side of the scale.
5:56
Speaker 1: You know, for most people kind of under a hundred
5:58
Speaker 1: and fifty thousand dollars if you have kids or under
6:00
Speaker 1: fifty income, if you have kids, you've got an effective
6:03
Speaker 1: tax decrease in this in this bill. On the other side,
6:06
Speaker 1: I don't know that there are more tax rates tax
6:08
Speaker 1: cuts coming. However, is there a sense of timing, Laura
6:13
Speaker 1: about when the administration really wants to push this tax
6:16
Speaker 1: plan so they've really kind of hit the ground running
6:19
Speaker 1: here that they're looking you know, it's it's it's beyond
6:21
Speaker 1: just the tax pieces. That are looking at the transportation pieces.
6:23
Speaker 1: They're looking at help, they're looking at energy, they're looking
6:26
Speaker 1: at all this stuff. And that's the work that's happening
6:27
Speaker 1: in Congress right now to kind of figure out what
6:29
Speaker 1: does this school bill encompass. You know, throughout the spring,
6:32
Speaker 1: I think we'll see some movement there, probably in May
6:35
Speaker 1: start seeing proposals come out. Uh, you know, there's some
6:37
Speaker 1: deadlines later in the fall, kind of in in September
6:40
Speaker 1: and in August that we could see them some action
6:42
Speaker 1: forcing deadlines there. Laura, Thanks very much. Laura Davis in
6:45
Speaker 1: their rights for Bloomberg News on tax policy. Paul, is
6:48
Speaker 1: there have you thought about is there a specific portion
6:52
Speaker 1: of your earnings that you feel like it would be
6:54
Speaker 1: fair to pay for the to the government like in
6:58
Speaker 1: some way, you know, intrinsically fair. I don't know about
7:01
Speaker 1: it intrinsically fair, but they've got to come up with
7:03
Speaker 1: something that is fair er. Matt, do you use cash
7:08
Speaker 1: at all? Are you pretty much a car tap kind
7:12
Speaker 1: of person? Just just my phone? Everything with my phone. Yeah.
7:16
Speaker 1: I used to be pre pandemic, pretty big cash guy,
7:20
Speaker 1: much to the seed of my kids who don't even
7:22
Speaker 1: know what it is. But uh, I say, the pandemic
7:24
Speaker 1: has changed that and now my you know, my card
7:26
Speaker 1: usages up and the cash utu its is down, and
7:29
Speaker 1: fintech is all the rage. Here, let's get essentially I know,
7:34
Speaker 1: I know, but I don't know. It's just it's my
7:37
Speaker 1: behaviors definitely changed. But let's get a look you'll see
7:39
Speaker 1: what's going on in the world of payments. We can
7:42
Speaker 1: do that today with Jeff Sloan. He's the CEO of
7:44
Speaker 1: Global Payments. Global Payments is a publicly traded company n
7:48
Speaker 1: y s E g p N is a simple market
7:51
Speaker 1: cap about sixty three billion dollars and over the trailing
7:54
Speaker 1: twelve months it talks up about Jeff, thanks so much
7:57
Speaker 1: for joining us here. Give us a sense of how
8:00
Speaker 1: your business was impact and it continues to be impacted
8:04
Speaker 1: by the pandemic, and I guess the changing concerned behavior. Well,
8:08
Speaker 1: thank you guys very much for for having me this morning.
8:11
Speaker 1: So I would say in short that COVID nineteen really
8:14
Speaker 1: drove three to five years of technology innovation in the
8:18
Speaker 1: span of one year. So many the trains transpall that
8:22
Speaker 1: you would just you would just mentioned, which is to say,
8:24
Speaker 1: a shift toward digitization and away from cash were occurring
8:28
Speaker 1: over very very many years, in decades here in the
8:30
Speaker 1: United States, but really globally. But what the pandemic did
8:33
Speaker 1: is it took that gradual shift, uh and really moved
8:36
Speaker 1: it um three to five years ahead. A great example
8:39
Speaker 1: that is one of our biggest businesses, which is really
8:41
Speaker 1: e commerce an omni channel sales, which last year grew
8:46
Speaker 1: for US about in revenue despite the pandemic year over year,
8:51
Speaker 1: excluding travel entertainment, of course, because people weren't traveling much
8:54
Speaker 1: for business, but for those areas that growth UM accelerated
8:59
Speaker 1: from fifth percent pre pandemic. And the estimates we've seen
9:03
Speaker 1: as recently as this morning are predicting that that economy
9:06
Speaker 1: in the United States will be a trillion dollars to
9:08
Speaker 1: spend as soon as next year. In Jeff, one of
9:11
Speaker 1: the things that UM German business owners and especially German
9:15
Speaker 1: taxi drivers love to do is pretend that their machine
9:19
Speaker 1: isn't working so that you have to pay cash right,
9:21
Speaker 1: and they're always always lying. But UM the reason they
9:26
Speaker 1: do it, of course is because UM they feel like
9:29
Speaker 1: it's too expensive to take well, I used to say plastic,
9:33
Speaker 1: but now it's like, I guess to take bits right. UM.
9:38
Speaker 1: Is it still expensive for business owners or or you know,
9:43
Speaker 1: gig economy workers to accept payment via phone, et cetera.
9:49
Speaker 1: It depends on the type of payment that you're that
9:52
Speaker 1: you're taking. So we have a very large business in
9:54
Speaker 1: UH in Asia and you probably have seen UH the
9:57
Speaker 1: advent even pre pandemic, which is accelerated. You're of what
10:00
Speaker 1: we call QR codes. So there's those funny looking computer
10:03
Speaker 1: things that you can scan on your phone and it
10:05
Speaker 1: throws up either a menu or some kind of payments.
10:08
Speaker 1: So those are actually the same as a check. So
10:10
Speaker 1: that's actually a facilitation. So the cost of some of
10:14
Speaker 1: the payments, particularly in UM safer commerce channels where you
10:18
Speaker 1: don't want to touch anything to use your example, like
10:20
Speaker 1: the back of a cab if you pay with a
10:22
Speaker 1: QR code, it's the same as you really paying with
10:24
Speaker 1: a checker with cash, which is to say, really minimal
10:27
Speaker 1: frictional cost. And the global payments be of the largest
10:30
Speaker 1: footprint um of that type of technology really in the world.
10:34
Speaker 1: So that kind of trend actually benefits us, by the way, Jeff.
10:36
Speaker 1: You know, here in Europe people have been paying each
10:39
Speaker 1: other back and forth with digital checks for decades, really,
10:43
Speaker 1: you know, I mean we just wire each other money. Um.
10:47
Speaker 1: Since I was a kid in Germany. In the US,
10:50
Speaker 1: I still don't know how to just shoot my mom,
10:54
Speaker 1: you know, if she needs twenty dollars for a down
10:58
Speaker 1: payment on something. You know, it's it's it's a it's
11:00
Speaker 1: a hassle. Is that getting easier in America? Yeah, the
11:04
Speaker 1: answer is absolutely so. Account to account, which is what
11:06
Speaker 1: you're describing. Account to account technologies have really been predominant
11:09
Speaker 1: in Europe for very many years. And there's also something
11:12
Speaker 1: called faster payments which we have in Europe, which means
11:16
Speaker 1: it settles the same day or settles overnight. As you
11:18
Speaker 1: rightly said, the United States, it takes a bit longer.
11:21
Speaker 1: But the answer is part of the shift in technology
11:23
Speaker 1: innovation coming at a COVID nineteen, we're seeing faster payments
11:27
Speaker 1: come to the United States. So a move toward debit acceptance,
11:30
Speaker 1: which is a means of the account to account transfers
11:33
Speaker 1: that you described. A great example that is Venmo. So
11:36
Speaker 1: take a look at paypals, Vemo, take a look at zell,
11:39
Speaker 1: which is the bank's equivalent to Vemo here in the
11:42
Speaker 1: United States. Those are person a person and really ultimately
11:45
Speaker 1: account to account transfers. So all that's getting easier here
11:48
Speaker 1: in the United States, and all that is good news
11:50
Speaker 1: for us, because really for us, the enemy for us
11:52
Speaker 1: is is cash. As long as we're doing something that
11:55
Speaker 1: is digitized on electronic basis, we're gonna be involved in
11:58
Speaker 1: the transaction. So things like person of person, things like
12:02
Speaker 1: contenttless commerce, safer commerce, QR codes all good news for
12:05
Speaker 1: global payments. All right, I say, real quick, Jeff, are
12:09
Speaker 1: we gonna go back, just real quickly twenty seconds after
12:12
Speaker 1: the pandemic? Are some of these habits going to go away?
12:14
Speaker 1: Are we gonna go back to the old habits? You know,
12:16
Speaker 1: I don't think. So let me give you a great example.
12:18
Speaker 1: So we have a very large fast food we call
12:20
Speaker 1: a quick service restaurant business. Last year during the pandemic,
12:24
Speaker 1: we did one point five billion dollars of fast food
12:26
Speaker 1: orders on your phone, as you were describing in the intro,
12:29
Speaker 1: So you kind of pay with your phone. Uh, either
12:32
Speaker 1: look at your phone and gets authenticated or pay with
12:34
Speaker 1: your thumb print and then we facilitate the delivery to
12:37
Speaker 1: you via door dash or something like that, or pull
12:39
Speaker 1: up in a drive through and we'll just handed to you.
12:41
Speaker 1: I don't think consumers are going to go backwards because
12:43
Speaker 1: that stuff is just so convenient and so easy. Who's
12:46
Speaker 1: going to say after the pandemic, do you I really
12:48
Speaker 1: prefer to weight line? I mean, I just don't hear
12:50
Speaker 1: that coming. In fact, our forecast for those types of
12:53
Speaker 1: channels is for accelerating growth. The other thing we did
12:56
Speaker 1: last year was teledoct visits. So in the first couple
12:58
Speaker 1: of months pre pandemic, we did probably ten thousand teledov
13:02
Speaker 1: visits in generating February. By the end of twenty we've
13:05
Speaker 1: done over a million work. Guess the world is changing
13:09
Speaker 1: and it's going to stay that way. Jeff Sloone, CEO
13:11
Speaker 1: Global Payments Sex so much for joining us now the
13:17
Speaker 1: c S I three hundred. The Chinese benchmark has had
13:21
Speaker 1: a pretty astounding drop over the past few weeks, losing
13:25
Speaker 1: over a trillion dollars in market cap. Part of that
13:29
Speaker 1: is because of China's crackdown on fintech and even broader
13:35
Speaker 1: technology companies in general. We want to talk right now
13:39
Speaker 1: about that in depth with Brendan Ahern, chief investment officer
13:44
Speaker 1: at Crane Shares. Brendan let's focus in UH on ten Cent,
13:51
Speaker 1: for example, those shares down for a second day as
13:54
Speaker 1: regulators turn their sites to pony Mas business empire. UH
13:58
Speaker 1: sixty two billion dollar are wipe out in those shares.
14:02
Speaker 1: That UM is really is really mirroring what we're seeing
14:07
Speaker 1: across the broader UM technology and fintech UH industry in China. Yeah,
14:14
Speaker 1: I mean, you have dollar fine and a sixty billion
14:18
Speaker 1: dollar plus loss in market cap, but it's it's the
14:22
Speaker 1: one you have the uncertainty of. We know that some
14:24
Speaker 1: of these U Chinese internet companies don't play nice in
14:28
Speaker 1: the sandbox with one another. UH. These anti competitive practices
14:33
Speaker 1: are going away. And then in the case of ten Cents,
14:36
Speaker 1: they do have a healthy fintech operation. You know, they
14:40
Speaker 1: really have a do Woppoli and mobile payments with ant Group,
14:44
Speaker 1: and then I think we do we are seeing a
14:46
Speaker 1: bit of a cyclical value rally and that's that's led
14:49
Speaker 1: to a little bit of a pretty pretty severe correction here.
14:53
Speaker 1: Uh Though I think in the long run, you know,
14:55
Speaker 1: medium long term run, uh, these growth gear companies are
15:00
Speaker 1: where investors are going to be focused, but clearly facing
15:02
Speaker 1: a little bit of a hail wind in this nasty
15:05
Speaker 1: correction and market rotation. So Brendan I I followed Ali Baba,
15:10
Speaker 1: the company and the stock really closely since its inception,
15:13
Speaker 1: and one of the things I've always been amazed about
15:15
Speaker 1: is Jack Ma's ability to quote unquote manage the Chinese
15:20
Speaker 1: government and the regulatory oversight in such a way that
15:23
Speaker 1: he could grow his business to the extent that he has.
15:26
Speaker 1: It seems like he's lost his touch. What do you
15:29
Speaker 1: think is going on there as relates to the relationship
15:31
Speaker 1: between Ali Baba and and tense sentence some many other
15:33
Speaker 1: big companies and the Chinese government. Well, I think these
15:36
Speaker 1: tombanies have become too big to fail and the fintech
15:40
Speaker 1: part of their businesses have really skirted the regulatory of
15:46
Speaker 1: from the banking side, even though they do a lot
15:48
Speaker 1: of things that banks do, and so I think because
15:52
Speaker 1: they've done so well, uh, they're receiving a little bit
15:55
Speaker 1: more regulatory oversight, which which is not not not necessarily
15:59
Speaker 1: a bad thing, because you know, the policy makers need
16:03
Speaker 1: these companies as much as the companies maybe need this
16:07
Speaker 1: operating environment. So so I think they well get along
16:11
Speaker 1: in the medium the long term run, though we this
16:15
Speaker 1: uncertainty on exactly what this regulation is gonna look like.
16:18
Speaker 1: You know, um, you know, markets kind of shoot first,
16:20
Speaker 1: asked questions later, people like, uh, by the way, if
16:25
Speaker 1: I lose my touch, I wanted to be after I've
16:27
Speaker 1: amassed fifty billion dollars because because I'll be cool with
16:31
Speaker 1: it at that point. No, I'm sure he's not cool
16:33
Speaker 1: with it, Jack ma um ponym A. These um tech
16:38
Speaker 1: billionaires are also hugely innovative forces for this country, and
16:43
Speaker 1: China still wants to be on top of the game
16:46
Speaker 1: when it comes to tech, right, so they can't completely
16:48
Speaker 1: corral these people. I mean, the latest the fourteenth five
16:53
Speaker 1: year planned domestic consumption, domestic consumption, domestic consumption, where's that
16:58
Speaker 1: going to happen? These internet companies, right, the e commerce companies,
17:02
Speaker 1: so so I think, I think, you know, it's it's
17:05
Speaker 1: like what we saw with AUNT groups I p O
17:07
Speaker 1: getting pulled. Um. There's a rationale for this, that these
17:11
Speaker 1: companies have become too big to fail. Getting in front
17:15
Speaker 1: of problems is something that's done proactively from a regulatory
17:19
Speaker 1: perspective in China. But but again the country, the policymakers
17:23
Speaker 1: need these companies as well. And Brendan, if if you're
17:27
Speaker 1: a U S investor looking at the Ali babasher hold
17:29
Speaker 1: a list in a ten cent and it's all the
17:31
Speaker 1: big investment funds, Western investment funds, I think is it
17:35
Speaker 1: fair to say they went into these investments knowing that
17:38
Speaker 1: the quote unquote China risk is always there and it's
17:42
Speaker 1: just something you have to deal with. It's certainly, I mean,
17:45
Speaker 1: the companies do trade at a valuation discounts to their
17:49
Speaker 1: US counterparts for that reason. At the same time, you know,
17:53
Speaker 1: next Wednesday, after the Hong Kong close, we have ten
17:56
Speaker 1: cents of earnings release for Q four other players to
18:01
Speaker 1: four results have been simply outstanding. You know, where where
18:04
Speaker 1: do you find these rates of growth in these very
18:06
Speaker 1: large companies. It's it's in China. So so I do
18:10
Speaker 1: think you know, this crowded There was a little bit
18:12
Speaker 1: of a crowded trade from both a retail as well
18:15
Speaker 1: as professional investor in these names. This reopening, cyclical value comeback.
18:21
Speaker 1: You've got to fund that trade somewhere. It's coming out
18:24
Speaker 1: of some of these growth companies. At the same time. Um,
18:28
Speaker 1: you just can't find growth rates like like what we
18:31
Speaker 1: see in these companies. And I think the market is
18:34
Speaker 1: indiscriminately uh basically taken all of these names to the
18:38
Speaker 1: wood shed. But but the you know, the ten cents, Baba's,
18:42
Speaker 1: j D s, et cetera. These are real companies, not
18:45
Speaker 1: not just revenue, net income, cash flow. And and I
18:49
Speaker 1: think for long term investors, you've got a great entry point. Hey, Brendan,
18:53
Speaker 1: thank you so much. We appreciate it. Brendan to Hearn,
18:55
Speaker 1: chief investment officer for Crane Chairs based in New York City.
18:59
Speaker 1: We always go and we talk about some of these
19:01
Speaker 1: big Chinese names and again the quote unquote China risk
19:04
Speaker 1: where at any given time, the Chinese government can come
19:07
Speaker 1: in and uh, you know, make material change to the
19:09
Speaker 1: regulatory framework, maybe the competitive landscape. UM. And there's not
19:14
Speaker 1: much that these companies can do other than try to adapt,
19:17
Speaker 1: and that's kind of what we're seeing here, I think
19:20
Speaker 1: for some of these Chinese companies, as we hear from
19:22
Speaker 1: Ali Baba, as we hear from ten Cent, that they
19:25
Speaker 1: will adapt uh, and they will be good citizens of
19:29
Speaker 1: their countries. And so we'll have to see how these
19:31
Speaker 1: companies do adapt. This is Bloomberg. One of the most
19:36
Speaker 1: read stories, has Matt pointed out earlier on the Bloomberg today,
19:39
Speaker 1: is about Goldman Sachs. No surprise there. The stock price
19:42
Speaker 1: it's ripping. Profits are ripping despite the pandemic. But there's
19:45
Speaker 1: been some turnover in senior management. There's been some griping
19:49
Speaker 1: about the CEO and I guess the corporate jet which
19:51
Speaker 1: they didn't used to have. Let's get to the this
19:54
Speaker 1: story Street and not Rogen finance reporter for Bloomberg News
19:57
Speaker 1: joins us on the phone street. Thanks so much for
19:59
Speaker 1: joining us here at great right piece of reporting about
20:01
Speaker 1: you and the team here. What are your key takeaways
20:03
Speaker 1: as we take a look at Goldman Sacks again, stock
20:06
Speaker 1: price up, profits up, but some turnover and the senior
20:09
Speaker 1: ranks no. Thanks, so thanks for having me and that
20:13
Speaker 1: that is the real tension here and the question we
20:15
Speaker 1: need to ask here is is the stock price a
20:18
Speaker 1: leading indicator or lagging indicator? That is to say, should
20:21
Speaker 1: we be focused on the stock price, which is rightfully so,
20:24
Speaker 1: sitting at an all time high seeing the kind of
20:27
Speaker 1: year that the big investment banks have had, the pandemic
20:30
Speaker 1: is obviously proved to be a source of great windfall
20:34
Speaker 1: for all of them, and Goldman Sacks momentani even a
20:36
Speaker 1: smaller bank like Jeffries have done really well. Or is
20:39
Speaker 1: it a lagging indicator? And the one that we need
20:41
Speaker 1: to worry about our are the people departures? Are Are
20:44
Speaker 1: they a much more serious than an indicator? Or wants
20:48
Speaker 1: to come ahead with with with the type of senior
20:51
Speaker 1: management names that have left a lot of partners around
20:54
Speaker 1: them that I've never also several valuable ends who seem
20:57
Speaker 1: to be leaving Goldman Sacks as they chase more lucrative
21:01
Speaker 1: opportunities elsewhere, And that is at the heart of the
21:05
Speaker 1: tension that is inside Goldman Sax. Now well, hopefully, I
21:08
Speaker 1: guess if markets are efficient, the stock price should be
21:11
Speaker 1: a leading indicator, right, I mean, it's supposed to be,
21:15
Speaker 1: as we earlier discounting mechanism um. But the thing is
21:20
Speaker 1: three one of the interesting things that I found in
21:23
Speaker 1: your story, which I think pretty much everybody read over
21:27
Speaker 1: the weekend. It's still among the most read stories a
21:30
Speaker 1: day later, is that the culture of Goldman Sachs is changing.
21:34
Speaker 1: I mean, we knew it wasn't the partnership that it
21:37
Speaker 1: once was, obviously since this share sale UM, you know,
21:43
Speaker 1: a couple of decades ago, but it seems to be
21:46
Speaker 1: changing even more under Solomon, and that he doesn't really
21:49
Speaker 1: cared that much. And correct me if I'm getting this
21:52
Speaker 1: totally wrong about the partnership UM culture. That absolutely seems
22:00
Speaker 1: to be the sense, and you're right. Ever since this
22:03
Speaker 1: old school partnership that went you know, the company was
22:06
Speaker 1: founded in eighteen sixty United it has a long history
22:08
Speaker 1: behind it, so when the I p O came around,
22:12
Speaker 1: it didn't mean that it would flip a switch and
22:14
Speaker 1: turned from a partnership to to south to a very
22:17
Speaker 1: different entity in a day. But twenty years in you're
22:20
Speaker 1: certainly getting the sense that's happening. You also get a
22:23
Speaker 1: sense that David Solomon, who's who's not it was different
22:27
Speaker 1: from other senior Goldman leaders, and that he's that rare
22:31
Speaker 1: top executive inside that from who's not a lifelong Goldman
22:35
Speaker 1: Zacts person who's not made his name at Goldman Zacts.
22:38
Speaker 1: If he made his career to groot at uh Mike
22:42
Speaker 1: Milkin's Drexel in the ninety eighties, took flight at bear
22:46
Speaker 1: Stons after that, and he actually joined Goldman as a partner,
22:50
Speaker 1: a lateral partner higher at Goldman Tacts is very rare,
22:53
Speaker 1: and I think that is what makes people. I think
22:57
Speaker 1: to some extent that he doesn't have that sort of
22:59
Speaker 1: the same lens through which he looks at Goldman slacks
23:02
Speaker 1: as as some of the other leaders in the past
23:05
Speaker 1: um to be fair and to look at it as
23:07
Speaker 1: an outsider and instead aside some of the grumbling and
23:10
Speaker 1: the griping and the rankles. Inside the film, you could
23:13
Speaker 1: argue that what he's trying to do is trying to
23:17
Speaker 1: run Goldman TACs less as as as sort of a
23:19
Speaker 1: group of business week you could feast, and more as
23:22
Speaker 1: an operating company, one that requires great operating leverages. How
23:25
Speaker 1: do you do that? How do you make it much
23:27
Speaker 1: more attractive to your shareholder? Is to make sure that
23:30
Speaker 1: you cut costs to everything that needs to be done.
23:32
Speaker 1: In the process, you will change the old ways you
23:35
Speaker 1: will upset a lot of the people. UH stock could
23:39
Speaker 1: very well outperform in the short run. But one of
23:41
Speaker 1: Goldman's strongest and most memorable catchphrases always has been long
23:46
Speaker 1: term greedy. And the question is the changing Have changes
23:50
Speaker 1: happening so fast that you are giving the stock a
23:53
Speaker 1: good short term boost, But is it going to be sustainable?
23:57
Speaker 1: Is it going to make sure that the name has
23:59
Speaker 1: the same grand value twenty years down the line, and
24:02
Speaker 1: and and and That's sort of the kind of conversations
24:06
Speaker 1: that are ricocheing around the sub right now. All right, three,
24:09
Speaker 1: thanks very much for joining us. Shrinaderage on there, who
24:12
Speaker 1: wrote the Goldman Sachs story about the new CEO, David Solomon,
24:16
Speaker 1: who's clearly um doing great when it comes to costs
24:21
Speaker 1: and hit a home run last year, helped partially by
24:26
Speaker 1: chance when it comes to revenue, but on the other hand,
24:30
Speaker 1: is rankling um. I guess that the ties at Goldman
24:35
Speaker 1: sacks when it comes to his use of the corporate
24:38
Speaker 1: jet and work from home. Thanks for listening to the
24:41
Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews
24:45
Speaker 1: of Apple Podcasts or whatever podcast platform you prefer. I'm
24:50
Speaker 1: Matt Miller, I'm on Twitter at Matt Miller three. Pet
24:54
Speaker 1: On Fall Sweeney, I'm on Twitter at pt Sweeney. Before
24:57
Speaker 1: the podcast, you can always catch us worldwide at Bloomberg
25:00
Speaker 1: Radio