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The State Of Small Business And A Look At The Markets · 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. We think about the pandemic.
• 0:22
  Speaker 1: The economic disruption was broad, it was deep, but perhaps
• 0:28
  Speaker 1: it was felt even more uh poignantly by some of
• 0:32
  Speaker 1: the small businesses out there. Let's get some color on
• 0:35
  Speaker 1: that story. Carol Lee Mitchell, head of Small Business Strategy
• 0:38
  Speaker 1: for Bank of America, joins us caardly. Thanks so much
• 0:41
  Speaker 1: for taking the time here. Just give us us you know,
• 0:44
  Speaker 1: we've all seen the vacant stores, the businesses that have
• 0:47
  Speaker 1: gone out of business. Give us a just kind of
• 0:49
  Speaker 1: a sense that we have a little bit of a
• 0:51
  Speaker 1: perspective now on how small businesses have been dealing with
• 0:55
  Speaker 1: the economic fallout of the pandemic. Sure, happy, delighted to
• 0:59
  Speaker 1: be here. So small business owners going into We're quite
• 1:04
  Speaker 1: optimistic vaccine rollout consumer demand and spend with high and
• 1:09
  Speaker 1: quite frankly, the small business owners were just ready to
• 1:12
  Speaker 1: get back at it. As we started to settle into
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  Speaker 1: twenty one, started to suddenly experience labor shortages, operation challenges,
• 1:20
  Speaker 1: you know, supply chain issues, and started to temper optimism
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  Speaker 1: just a hair. And I say just a hair because
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  Speaker 1: while that was all happening, consumer spend was still remaining.
• 1:32
  Speaker 1: And as we go into the holiday season, UM, I
• 1:34
  Speaker 1: would I would say that our business owners are telling
• 1:37
  Speaker 1: us that they're still quite optimistic. Why many of them
• 1:41
  Speaker 1: expect revenue and sales to increase, UM. Many of them
• 1:45
  Speaker 1: have made operation changes, and I think this is an
• 1:47
  Speaker 1: important thing to note. One of the gifts of the
• 1:50
  Speaker 1: pandemic that occurred is that the enablement of digital technologies
• 1:55
  Speaker 1: and solutions to drive commerce electronically. So this is just
• 1:59
  Speaker 1: being able to pay for your cupcake with a debit
• 2:02
  Speaker 1: card or credit card and or Dell is something that
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  Speaker 1: didn't exist prior to the pandemic. So enabling business owners
• 2:10
  Speaker 1: to drive commerce virtually hybrid situation, and or in person
• 2:16
  Speaker 1: is something that's going to give them the flexibility to
• 2:18
  Speaker 1: maintain and so we're very optimistic. It's also supported by
• 2:22
  Speaker 1: internal data. Deposit volume is at a record high. Small
• 2:27
  Speaker 1: business owners are coming to us saying I believe in
• 2:30
  Speaker 1: my future, I want to expand, I want to take
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  Speaker 1: a loan. I'm gonna invest in my business. Growth numbers
• 2:36
  Speaker 1: are pre pandemic levels prior to nine. It's really been
• 2:40
  Speaker 1: a nice thing to see, Carol. The loan story is
• 2:43
  Speaker 1: a fascinating one because we've heard big bank CEOs complain
• 2:47
  Speaker 1: about a lack of loan growth. Are smaller businesses going
• 2:52
  Speaker 1: to go out and borrow and invest? Our data is
• 2:56
  Speaker 1: suggesting that our our small business owners are currently borrowing
• 3:00
  Speaker 1: and investing, in fact at record levels prior to UM
• 3:06
  Speaker 1: and so from our perspective at Bank of America, this
• 3:09
  Speaker 1: has been a really positive sign UM. Again, this is
• 3:12
  Speaker 1: also coupled with the fact that deposit balances are stars
• 3:15
  Speaker 1: of cash. Position is strong, optimism is great. Sales and
• 3:20
  Speaker 1: revenue again, we can see the sales and revenue coming
• 3:22
  Speaker 1: in stronger, stronger than where we were clearly but definitely
• 3:27
  Speaker 1: in some cases even prior to and so the data
• 3:32
  Speaker 1: points to suggest that we're in a pretty pretty decent
• 3:34
  Speaker 1: place currently. I know you guys have done work looking
• 3:39
  Speaker 1: at women owners of small businesses. How have they fared?
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  Speaker 1: Maybe better, worse than maybe the average small business. Sure
• 3:47
  Speaker 1: important to note that in of all of the new
• 3:50
  Speaker 1: businesses that were started, over half were started by women
• 3:53
  Speaker 1: business owners. So this is something that we have been
• 3:56
  Speaker 1: watching and monitoring. Over of women business owners are telling
• 4:02
  Speaker 1: us that stress and mental health and wellness are at
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  Speaker 1: the top of the list of concerns to them, and
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  Speaker 1: it is really something that he's been kind of looming
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  Speaker 1: even prior to the pandemic, but this is now the
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  Speaker 1: number one concerned and also feeding operation change, like how
• 4:19
  Speaker 1: they work with their employees, how they provide benefits. Many
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  Speaker 1: of our women business owners, in fact, over forty eight
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  Speaker 1: percent took a pay cut to enable and keep their
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  Speaker 1: employees on on the book and also happy, giving them
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  Speaker 1: wellness benefits, more flexibility and time. And so I think
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  Speaker 1: there's this recognition that yes, it's it's far more stressful
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  Speaker 1: than it was pre pandemic. But what's been a gift
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  Speaker 1: is that there's this recognition that there's there's issues to
• 4:52
  Speaker 1: be addressed, and their solutions being designed and developed to
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  Speaker 1: help sort of the people. You know, they're working long
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  Speaker 1: hours and enabling and opening up their businesses so that
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  Speaker 1: we can drive commerce forward. I think it's interesting I
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  Speaker 1: wonder if um women do better at opening businesses if
• 5:10
  Speaker 1: they have more longevity in this kind of situation, because
• 5:14
  Speaker 1: I imagine men have a lower pain threshold. Is that
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  Speaker 1: is that just my mom talking through me? Or is
• 5:24
  Speaker 1: that that's probably true? Right? Well, the there there are
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  Speaker 1: a couple of things. I think women tend to start
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  Speaker 1: businesses that are just addressing needs of people in the community.
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  Speaker 1: And sixty percent of our local economy, our local economy
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  Speaker 1: of our community is driven by business owners or one,
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  Speaker 1: you know, building something that serves a purpose in need
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  Speaker 1: in that local environment is a good thing. And number two,
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  Speaker 1: we see that the vast majority of our women business
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  Speaker 1: owners north of feel more connected to the community than
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  Speaker 1: their male counterparts. And it's sort of a sin theodic relationship.
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  Speaker 1: They feel more connected to them. They also give back
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  Speaker 1: to them and this relationship gives them a little bit
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  Speaker 1: of a platform to say, you, regardless of what happens
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  Speaker 1: in the macro environment landscape, I know that, you know,
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  Speaker 1: I feel pretty safe in my community to kind of
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  Speaker 1: do what we need to do, you know, build a business,
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  Speaker 1: drive commerce and drive sales. And you know, we've seen
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  Speaker 1: that it's been really um a positive thing, especially during
• 6:28
  Speaker 1: such challenging times. You know, Caroly, when you walk by
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  Speaker 1: any small business on any main street USA, they all
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  Speaker 1: have one sign in the window help wanted. What is
• 6:40
  Speaker 1: your survey data kind of? And your respondence? What are
• 6:43
  Speaker 1: they tell you about how they're trying to manage through
• 6:45
  Speaker 1: this challenge. It's a it's a difficult one. UM. Many
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  Speaker 1: of our women business owners in fact north of are
• 6:55
  Speaker 1: saying that they plan to hire. That's up from nine percent,
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  Speaker 1: uh just last year. But I think that you can't
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  Speaker 1: have a conversation about hiring without sort of retaining. And
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  Speaker 1: I think many of our business owners are focusing more
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  Speaker 1: on retaining employees and that's where some of the wellness benefits.
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  Speaker 1: And that's where some of the conversations around hey, how
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  Speaker 1: are you doing, how can we make this less stressful
• 7:17
  Speaker 1: coming into play? Um. Our business owners are mindful of that,
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  Speaker 1: and so while they're in the same pool sort of
• 7:24
  Speaker 1: competing to hire great talent. Um, what I'm finding is
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  Speaker 1: that our business owners are so thoughtful about maintaining their
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  Speaker 1: existing employees and making sure that the ones that they
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  Speaker 1: have are taken taken care of. Currently, I we've seen
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  Speaker 1: consumer confidence drop and the last reading was better but um,
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  Speaker 1: there had been a lull I guess in the numbers,
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  Speaker 1: And I wonder what you make of that, what small
• 7:51
  Speaker 1: businesses should make of that, because it does seem like
• 7:54
  Speaker 1: consumers have money saved up and you know, we're slowly
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  Speaker 1: opening up, we're getting back to business as usual, and
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  Speaker 1: there's so much demand for products. That's weird to see
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  Speaker 1: confidence drop like that. I guess it's inflation. Well, I think,
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  Speaker 1: I mean the confidence the confidencing is interesting because confidence
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  Speaker 1: since spent. I think one of the things that we're
• 8:16
  Speaker 1: seeing is that, yes, while we're monitoring confidence in taking
• 8:20
  Speaker 1: down just just a hair, what we do see is
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  Speaker 1: the corresponding spend volume shifting to things that are more
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  Speaker 1: sort of essentials, you know, things that are enabling um,
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  Speaker 1: you know, our our consumers and our small business owners
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  Speaker 1: to kind of, you know, feel better about their current situation.
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  Speaker 1: Our business owners, UM would suggest that because again they
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  Speaker 1: operate within their local community. The support and the rallying
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  Speaker 1: that they're feeling from consumers has been tremendous. And so
• 8:51
  Speaker 1: you know, your your listener's decision to not buy that
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  Speaker 1: cupcake from a big box but walking over to that
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  Speaker 1: local bakery, that's happening more and more and more, and
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  Speaker 1: so you know, our business owners feel like even though
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  Speaker 1: confidence maybe down, just the hair um, the local community
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  Speaker 1: support has been tremendous. And I think that's gonna continue
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  Speaker 1: on into two UM and again the unknown variables of
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  Speaker 1: things that could potentially happen. Not being prepared, I think
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  Speaker 1: is one contributing factor. I think going into two you're
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  Speaker 1: going to see that a lot more people are prepared
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  Speaker 1: for the unknown. And and I think that that level
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  Speaker 1: of preparation will help us, you know, think about stending
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  Speaker 1: and engaging in ways that we used to in the
• 9:37
  Speaker 1: past a bit more freely. Carly, thank you so much
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  Speaker 1: for joining us. We really appreciate you joining us and
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  Speaker 1: sharing the results of your survey. Carl Lee Mitchell, head
• 9:46
  Speaker 1: of Small Business Strategy at Bank of America. There all right,
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  Speaker 1: Now let's get back to the markets. Tom Plumb, President
• 9:57
  Speaker 1: chief investment officer at Plumb Funds, joins us on the
• 10:00
  Speaker 1: phone from Madison, Wisconsin. What a great town, Um, and
• 10:05
  Speaker 1: he's portfolio manager there. The Plumb balanced fun Tom, Um,
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  Speaker 1: we are today is not the UH I guess, the
• 10:16
  Speaker 1: worst day to be an equity investor. We're up again
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  Speaker 1: to five right now, so hovering near record high on
• 10:23
  Speaker 1: the SMP five hundred. Even though um, we're all worried
• 10:27
  Speaker 1: about supply chains and labor shortages and inflation, what gives well,
• 10:33
  Speaker 1: you know, Uh, it is interesting because the earnings are
• 10:37
  Speaker 1: coming up and right now we've had basically over half
• 10:41
  Speaker 1: of the market cap of the SNP has reported. There
• 10:45
  Speaker 1: are three things that are really emerging as trend with
• 10:50
  Speaker 1: of the companies beating their projections. Growth stocks have been
• 10:55
  Speaker 1: beating on revenue of about eighteen verses twelve so far,
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  Speaker 1: but value stocks have been beating on earnings growth possibly
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  Speaker 1: compared about low twenties for typical growth stock. So, in
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  Speaker 1: other words, of the cyclical economy, cyclical growth is being
• 11:16
  Speaker 1: beating secular growth in terms of earning growth and in
• 11:19
  Speaker 1: stock performance. So, um, we're seeing this despite these issues
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  Speaker 1: that you just mentioned as really a tale of which
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  Speaker 1: companies are dealing with the supply chain disruptions and the
• 11:33
  Speaker 1: cost inflation. If they're beating and doing well, uh, they're
• 11:37
  Speaker 1: getting rewarded. But if they do a bad job, man,
• 11:39
  Speaker 1: they're getting punished. Tom. How long does this cyclical play work?
• 11:44
  Speaker 1: I mean, I think a lot of investors it's been
• 11:46
  Speaker 1: a long time since value has been a good performances,
• 11:48
  Speaker 1: been a long time since small cap and a lot
• 11:50
  Speaker 1: of investors are just unsure how long this cycle lasts.
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  Speaker 1: How do you think about that this is there's a
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  Speaker 1: very strong possible oliting that this is just a blip,
• 12:02
  Speaker 1: because we have had in the last twelve years different
• 12:05
  Speaker 1: periods of time when the value stocks have outperformed. I
• 12:09
  Speaker 1: think once we start to get to tougher comparisons, once
• 12:13
  Speaker 1: we overlap the pandemic, we're going to start to look
• 12:17
  Speaker 1: again at which companies are true leaders and are combining
• 12:22
  Speaker 1: both cyclical growth with these really powerful digital growth trends
• 12:27
  Speaker 1: that we've been seeing for the last dozen years. So
• 12:32
  Speaker 1: in terms of uh, if I have new money to
• 12:36
  Speaker 1: put to work, um, is it is now a time
• 12:39
  Speaker 1: to still put it in equities? Is there any other
• 12:42
  Speaker 1: game in town? It is very difficult, you know, managing
• 12:47
  Speaker 1: a balanced phone. We look at the bonds also, and
• 12:50
  Speaker 1: of course with interest rates at these levels and the
• 12:53
  Speaker 1: talk that the Fed is going to start to their
• 12:57
  Speaker 1: and their tape rings, so we'll start to see um
• 13:02
  Speaker 1: pressure on interest rates. It makes you a little bit
• 13:04
  Speaker 1: cautious about what types of fixed income items to own.
• 13:09
  Speaker 1: You've had an incredible spike in some commodity prices, but
• 13:12
  Speaker 1: we've also seen those show some signs of topping. So
• 13:16
  Speaker 1: for us, it looks like good quality common stocks. They're
• 13:21
  Speaker 1: still they're they're hitting new records. Makes people anxious, but
• 13:25
  Speaker 1: I started out when the SNP was about seventy UM,
• 13:29
  Speaker 1: so that it's times higher. We've hit lots of new hides. Tom,
• 13:36
  Speaker 1: how about energy mentioned commodities, and we've got a w
• 13:39
  Speaker 1: t A crewed a north of eighty two dollars to share.
• 13:42
  Speaker 1: How do you think about energy stocks here? They you know,
• 13:47
  Speaker 1: they were so depressed. I mean again, back in the
• 13:50
  Speaker 1: early eighties they were thirty s and p. Now they're
• 13:53
  Speaker 1: the last year they bottomed out at about three UM,
• 13:57
  Speaker 1: so there's a possibility they could still run for a while.
• 14:00
  Speaker 1: But obviously there's some real alternatives and the political pressure
• 14:05
  Speaker 1: on them. So we've been cautious. We haven't been playing
• 14:08
  Speaker 1: that because we think that there's a fair possibility that
• 14:12
  Speaker 1: once supply and demand get a little bit more aligned,
• 14:15
  Speaker 1: that there's still going to be those political pressures on
• 14:18
  Speaker 1: energy stocks. Is supply and demand starting to get more
• 14:21
  Speaker 1: aligned now, I talked to Herbert d c O Volkswagen.
• 14:24
  Speaker 1: This morning he said, month after month, it's finally starting
• 14:28
  Speaker 1: to get better with chips. We heard the same from
• 14:29
  Speaker 1: Stilantis and Mary Bara is that um is there an
• 14:33
  Speaker 1: end in sight to these problems. Well, it's gonna be
• 14:38
  Speaker 1: like the pandemic. It's gonna be something that's going to
• 14:41
  Speaker 1: be valid or it will move both both ways. But yes,
• 14:44
  Speaker 1: it is. The trend is going to speed towards getting
• 14:47
  Speaker 1: an alignment between supplying demand and that will reduce some
• 14:51
  Speaker 1: of these price pressures it. Tom, thanks so much for
• 14:54
  Speaker 1: joining us. We always appreciate. Can you a few minutes
• 14:57
  Speaker 1: of your time? Tom Plumb, President and chief investment officer
• 15:01
  Speaker 1: of the Plump Funds, joining us on the phone from Madison, Wisconsin,
• 15:04
  Speaker 1: and again a strong, strong move here to the market.
• 15:08
  Speaker 1: We have the SMP up about eight tens of one percent,
• 15:10
  Speaker 1: NASDAK up up almost one full percentage point. Yeah, what's up?
• 15:15
  Speaker 1: Have you ever been to Madison? I have great town,
• 15:18
  Speaker 1: great town, what a town. Loved every minute of my
• 15:21
  Speaker 1: time there. Big big there's actually a big big money
• 15:24
  Speaker 1: uh institutional investor money in Madison Strong Funds, which is
• 15:27
  Speaker 1: now part of it. I guess wells Fargo, the Wisconsin
• 15:31
  Speaker 1: Investment Board. Lots of reasons ago uh to Madison was
• 15:34
  Speaker 1: just hanging out with college kids that was in college.
• 15:37
  Speaker 1: All business for me going into the Midwest. Now, I
• 15:42
  Speaker 1: want to get to the global CEO of Lincoln International
• 15:46
  Speaker 1: to give us the his outlook for the landscape of
• 15:50
  Speaker 1: M and A in markets right now. Rob Brown joins
• 15:54
  Speaker 1: us to talk about this amazing amount of activity that
• 15:58
  Speaker 1: we've seen, not just in the US but globally. And Rob,
• 16:03
  Speaker 1: we haven't seen well, there have been a number of
• 16:06
  Speaker 1: giant deals um we've talked about that haven't really gone through.
• 16:11
  Speaker 1: It seems like there's so many smaller and medium sized
• 16:15
  Speaker 1: deals that we're gonna hit another record in one. What
• 16:19
  Speaker 1: do you think? Yeah, I I totally agree with that.
• 16:22
  Speaker 1: The engine really of the M and A market is
• 16:25
  Speaker 1: um what you would call the middle market or the
• 16:27
  Speaker 1: private capital markets and driven in large park by private
• 16:32
  Speaker 1: equity venture funds, all the institutional capital that has been
• 16:35
  Speaker 1: raised and put to work really over the last decade UM,
• 16:39
  Speaker 1: and I think this year in particular, there's uh, you
• 16:43
  Speaker 1: you had this backrupt for a few years where there's
• 16:46
  Speaker 1: more capital rays that wants to be put to work
• 16:48
  Speaker 1: in buying companies or sitting on the balance sheet of
• 16:50
  Speaker 1: large corporates than there are high quality companies to buy.
• 16:53
  Speaker 1: So this capital and balance has been around for a
• 16:55
  Speaker 1: while and I think we'll continue for several years. This
• 16:58
  Speaker 1: year it's been intensified because as there were several deals
• 17:01
  Speaker 1: in several sectors, many deals that were COVID affected last
• 17:05
  Speaker 1: year that likely would have got done last year, that
• 17:07
  Speaker 1: are getting done this year. And then in the US
• 17:10
  Speaker 1: UM the fear over increases in capital gains rates has
• 17:14
  Speaker 1: pulled deals that may be left to their normal gestation,
• 17:17
  Speaker 1: would have gotten done next year the following year being
• 17:19
  Speaker 1: pulled into this year. So, by the way, you, by
• 17:23
  Speaker 1: the way, you recently have been named global CEO, and
• 17:28
  Speaker 1: you know, on the one hand, congratulations. On the other hand, wow,
• 17:32
  Speaker 1: there's a lot to deal with right now. I mean,
• 17:36
  Speaker 1: when you when you move into a new position like that,
• 17:37
  Speaker 1: I guess you've gotta take stock and look at what's
• 17:39
  Speaker 1: going on UM. And there's so many it seems like
• 17:43
  Speaker 1: question marks. There's so much UM foggy visibility because of
• 17:48
  Speaker 1: the end of the pandemic. Are we in a new world?
• 17:50
  Speaker 1: How do you see it? Yeah, it's a really good question. Uh.
• 17:54
  Speaker 1: You know, I will say from a global standpoint, and
• 17:57
  Speaker 1: you touched upon this in your opening remarks. Um, this,
• 18:00
  Speaker 1: this really um explosion in the M and A market
• 18:04
  Speaker 1: is not just a US phenomenon. It's global. H As
• 18:07
  Speaker 1: I think about, I think we're moving into a new paradigm.
• 18:10
  Speaker 1: I don't think so. I think as we go into
• 18:13
  Speaker 1: next year, we're still gonna be UM. You'll see a
• 18:16
  Speaker 1: bit of a pullback in the markets. As I said,
• 18:17
  Speaker 1: there'll be less COVID recovery deals, and you won't have
• 18:21
  Speaker 1: I think you won't have who knows with what goes
• 18:23
  Speaker 1: on in Washington, but you won't have this tax driven
• 18:26
  Speaker 1: pressure in the US. You will still have a market
• 18:28
  Speaker 1: where there's more capital rays and there are companies to buy.
• 18:31
  Speaker 1: I think there are a few um clouds on the
• 18:34
  Speaker 1: horizon right now. Whether those clouds dissipate or become storms,
• 18:37
  Speaker 1: time will tell. I think one of those clouds is inflation. Um.
• 18:41
  Speaker 1: You know, you have many people, There's people that have
• 18:44
  Speaker 1: been there twenty thirty years in their career. They were
• 18:46
  Speaker 1: never really dealt with inflation. So if we do see
• 18:49
  Speaker 1: inflation in a way we haven't seen it before, there
• 18:52
  Speaker 1: may be a plause, um my senses that will be
• 18:54
  Speaker 1: transitory and then they'll be Here's how this is gonna
• 18:56
  Speaker 1: affect my business, Here's how this is affecting the capital markets.
• 18:59
  Speaker 1: I think the other um cloud on the horizon is
• 19:02
  Speaker 1: China right there. There is a slowing of growth in China.
• 19:06
  Speaker 1: It's a massive market. It's having effects on supply chains
• 19:09
  Speaker 1: here we're seeing that is that going to dissipate or
• 19:12
  Speaker 1: is that going to get worse? So again, I I'm
• 19:14
  Speaker 1: not overly concerned about those things right now, but I
• 19:16
  Speaker 1: think those are things that have to be monitored as
• 19:18
  Speaker 1: you think about how much longer can this M and
• 19:21
  Speaker 1: A boom continue. That's Kinna where I want to go,
• 19:23
  Speaker 1: rob It's it seems to me one of the risk
• 19:26
  Speaker 1: in this M and A marketplace is too much capital
• 19:29
  Speaker 1: chasing too few deals. And I'm thinking, particularly from the
• 19:31
  Speaker 1: private equity side, given all the dry powder they have
• 19:33
  Speaker 1: their how do you think about some of the valuations
• 19:36
  Speaker 1: that are being paid potentially the risk of overpaying for
• 19:40
  Speaker 1: assets in the name of getting capital deployed. Yeah, I
• 19:45
  Speaker 1: think interestingly, I think that sentiment has been around for
• 19:48
  Speaker 1: probably the last three or four years because there was
• 19:50
  Speaker 1: this step function in valuations UM driven. I agree with you,
• 19:55
  Speaker 1: driven by capital availability, but it's not just capital availability
• 19:58
  Speaker 1: in the private equity side of it. If you look
• 20:00
  Speaker 1: at all the private debt funds that have been raised, right,
• 20:02
  Speaker 1: so the lenders willing to lend at high multiples gives
• 20:06
  Speaker 1: comfort for the equity holders to put equity higher equity
• 20:10
  Speaker 1: checks in it. And so to me, I think, I
• 20:13
  Speaker 1: think most deals are priced for perfection. They're not priced
• 20:15
  Speaker 1: for something going wrong or not hitting the forecast in
• 20:17
  Speaker 1: almost every sector, So there is risk when things are
• 20:21
  Speaker 1: priced to perfection because it's very rarely that the future
• 20:24
  Speaker 1: plays out perfect. The question, though, is going to be
• 20:27
  Speaker 1: how are the lenders going to react if things pull back?
• 20:30
  Speaker 1: And interestingly, in COVID, when COVID hit, and this may
• 20:33
  Speaker 1: or may not portend what's going to happen in the future,
• 20:37
  Speaker 1: there was a belief when business is pulled back, when
• 20:39
  Speaker 1: the capital markets tightened up for a quarter, that the
• 20:41
  Speaker 1: lenders were going to get aggressive and they were gonna
• 20:43
  Speaker 1: start forcing things. The lenders actually showed a high level
• 20:47
  Speaker 1: of patients. Now that may be that they were so
• 20:49
  Speaker 1: overwhelmed by the entire economy stopping on a dime so
• 20:52
  Speaker 1: to me, the question of what does that mean for
• 20:54
  Speaker 1: the future, it's going to be are the lenders gonna
• 20:57
  Speaker 1: work with private equity groups. Are these private acreups going
• 20:59
  Speaker 1: to support companies that maybe need help if there is
• 21:02
  Speaker 1: a recession and things pull back. But but the risk
• 21:05
  Speaker 1: of things being priced perfection, it's there. And the risk
• 21:10
  Speaker 1: of a pullback, you know, obviously not um total stoppage
• 21:14
  Speaker 1: like we saw during the lockdowns initially, but the risk
• 21:18
  Speaker 1: of a pullback in China is real that markets are
• 21:21
  Speaker 1: increasingly worried about it, even though we don't really see
• 21:23
  Speaker 1: it in equities. I totally agree with you, I and
• 21:26
  Speaker 1: and and there's just not as much transparency in that market.
• 21:28
  Speaker 1: But as you as you start hearing things peel back
• 21:31
  Speaker 1: even on what's going on in China evergrant right, and
• 21:34
  Speaker 1: they could have their own many housing bubble over there
• 21:36
  Speaker 1: that will have reverberations around the globe. And and so
• 21:40
  Speaker 1: there's two elements of that. A lot there's been a
• 21:41
  Speaker 1: lot of growth in the economy, and and that that
• 21:44
  Speaker 1: growth has helped businesses around the world that are serving
• 21:46
  Speaker 1: that um. But there are also a major supplier here.
• 21:49
  Speaker 1: So China is something maybe it dissipates, maybe the government
• 21:54
  Speaker 1: steps in. I don't know, but I agree with you
• 21:57
  Speaker 1: that and I said it earlier. That is one of
• 21:58
  Speaker 1: the clouds on the horizon out there, Rob going forward.
• 22:02
  Speaker 1: What are some of the sectors that you envision being
• 22:04
  Speaker 1: quite active from an M and A perspective, Yeah, I think,
• 22:08
  Speaker 1: you know, I think the sectors that maybe have more
• 22:10
  Speaker 1: secular growth and cyclical growth are going to continue to
• 22:13
  Speaker 1: see high levels of activity. And I think the two
• 22:16
  Speaker 1: in our business that we see probably the most secular
• 22:19
  Speaker 1: growth in our technology and healthcare UM. And I think
• 22:22
  Speaker 1: there's certain aspects of the business service UM economy that
• 22:26
  Speaker 1: also support those areas that are also going to see
• 22:28
  Speaker 1: a lot of growth. But I think if I think
• 22:30
  Speaker 1: of the two highest growth groups we're going to see
• 22:32
  Speaker 1: this year, UM, it's technology and healthcare and then certain
• 22:35
  Speaker 1: sectors of services. Yeah, I mean healthcare seems to be
• 22:39
  Speaker 1: changing so rapidly, just just the idea that we developed
• 22:44
  Speaker 1: a vaccine within a year, and then UM that's had
• 22:48
  Speaker 1: reverberations for other medicines that we now expect to be
• 22:51
  Speaker 1: able to UM come out with the question is UM
• 22:54
  Speaker 1: one of paying for it right? And inflation? Is that
• 22:58
  Speaker 1: I mean, clearly that's a cloud for for investors. But
• 23:01
  Speaker 1: is that UM Does that tie in at also the
• 23:04
  Speaker 1: way you look at global m and a inflation. Yeah,
• 23:07
  Speaker 1: I think it does. And I and again I think
• 23:09
  Speaker 1: it's a hard one to predict because, as I said,
• 23:11
  Speaker 1: I you have executives throughout the world, and I look
• 23:15
  Speaker 1: at myself, right, I've been doing this for thirty years.
• 23:17
  Speaker 1: I've never really had to deal with how does inflation
• 23:20
  Speaker 1: affect our clients? How does it affect our business? So
• 23:23
  Speaker 1: I think if we see a spike in inflation that
• 23:25
  Speaker 1: we haven't seen before, I think what you're going to
• 23:27
  Speaker 1: see as a pause, and that plause is going to
• 23:29
  Speaker 1: first be driven by business performance, right because if if
• 23:32
  Speaker 1: it's affecting inputs and people can't pass it on to
• 23:34
  Speaker 1: customers or clients, what does that mean for profitability or
• 23:37
  Speaker 1: or vice versa? Right? If there if they're seeing inflation
• 23:40
  Speaker 1: in their prices and yet their inputs aren't and they're
• 23:43
  Speaker 1: having and they're having what maybe views unsustainable UM profits,
• 23:47
  Speaker 1: how does that affect it? So I think I think
• 23:48
  Speaker 1: how inflation is ultimately to affect business performance, UH is
• 23:53
  Speaker 1: going to drive how to investors think about it? But
• 23:55
  Speaker 1: and to be clear, we're not We're not there yet, Rob, Right,
• 23:58
  Speaker 1: But but this is the kind of the visibility issue
• 24:01
  Speaker 1: that I was touching on before. It's just it's a
• 24:04
  Speaker 1: little bit foggy right now, it is. And interestingly, you know,
• 24:08
  Speaker 1: I think what ultimately make what lpimly drive this inflation
• 24:10
  Speaker 1: is you know, the central governments have pumped you know,
• 24:12
  Speaker 1: twenty plus trillion dollars in the global economy. So there's
• 24:15
  Speaker 1: a wash of capital, consumers of money in their pockets,
• 24:18
  Speaker 1: businesses of money in their pockets. And so we're in
• 24:20
  Speaker 1: an economy where where in a lot of area it's
• 24:23
  Speaker 1: not a demandage to supply, right, and when demand exceeds supply,
• 24:26
  Speaker 1: you see inflation. And so um. The flip side of
• 24:30
  Speaker 1: that is, I think a lot of the really strong
• 24:31
  Speaker 1: performance of businesses coming out of of of the pandemic
• 24:36
  Speaker 1: has been a result of a lot of money being
• 24:39
  Speaker 1: pumped into the economy. So there's been a benefit of it.
• 24:41
  Speaker 1: But you know, as you know that people want that
• 24:43
  Speaker 1: goldilocks not to not to overheated, not too cold, and
• 24:47
  Speaker 1: there's some signs that we could be moving towards overheated. Hey, Rob,
• 24:51
  Speaker 1: you know, when I think about m and A. I
• 24:53
  Speaker 1: think it is reflection of confidence, confidence on the board,
• 24:57
  Speaker 1: on the part of board of directors and on uh
• 25:00
  Speaker 1: you know, the CEOs of the world, and you know
• 25:03
  Speaker 1: so when I hear about these incredible M and A
• 25:05
  Speaker 1: results from the big investment banks over the last really
• 25:08
  Speaker 1: eighteen months, I'm like, how can they have confidence given
• 25:11
  Speaker 1: what's going on in the world here? Do you think
• 25:13
  Speaker 1: this M and A boom has just been primarily driven
• 25:16
  Speaker 1: by liquidity as you were talking about. I think liquidity
• 25:20
  Speaker 1: is a big, big chunk of it um. But I
• 25:23
  Speaker 1: also think you're right. I mean, I'm gonna you have
• 25:25
  Speaker 1: to have confidence. You have to have confidence in your
• 25:27
  Speaker 1: own business first before you're going to go out and
• 25:29
  Speaker 1: pay and buy another business, if you think of a
• 25:31
  Speaker 1: corporate CEO. So I agree with you, But I think
• 25:34
  Speaker 1: there's also as you look at where the stock market
• 25:37
  Speaker 1: is and the expectations for growth and a lot of
• 25:39
  Speaker 1: these big companies they're looking at their businesses and saying,
• 25:43
  Speaker 1: I can't meet those growth expectations organically I have to
• 25:46
  Speaker 1: go by So part of its confidence, part of it
• 25:48
  Speaker 1: is is growth expectations and the need to supplement organic
• 25:53
  Speaker 1: growth with acquisition growth to meet the expectation of public
• 25:56
  Speaker 1: company investors. All right, Rob, thank you so much for
• 25:59
  Speaker 1: joining us. Really appreciate getting your thoughts and perspective on
• 26:03
  Speaker 1: the red hot m n A market boy putting out
• 26:06
  Speaker 1: some major numbers across Wall Street. Rob Brown, Global CEO
• 26:10
  Speaker 1: for Lincoln International. Wow, the markets continue to rip here,
• 26:17
  Speaker 1: we have green on the screen. Let's get some color
• 26:20
  Speaker 1: and what's going on out there. We welcome Bloomberg Markets reporter, Cretti, Gupta,
• 26:23
  Speaker 1: Cretty what you got for us? You know, I think
• 26:25
  Speaker 1: all the action is in the bond market. It's really
• 26:28
  Speaker 1: going to be about those break evens, about really what
• 26:31
  Speaker 1: you're seeing boons. I mean, you've seen the markets so overheated.
• 26:36
  Speaker 1: I mean, if you're really looking at any asset class,
• 26:38
  Speaker 1: everyone says, you know, the bond market is really the
• 26:40
  Speaker 1: place to look at for what comes next. And that's
• 26:42
  Speaker 1: what you saw really this month, inflation expectations soaring until today,
• 26:46
  Speaker 1: a little bit of a pullback and break evens. And
• 26:48
  Speaker 1: then on top of that you've got a completely separate issue,
• 26:52
  Speaker 1: which is what's going on overseas at the ECB with
• 26:55
  Speaker 1: the Euro spiking, and a lot of this has to
• 26:56
  Speaker 1: do with simply the market being super short on euros,
• 27:00
  Speaker 1: and then Madame Leguard, President Legard of the e c
• 27:02
  Speaker 1: B not really pushing back hunt pricing. So, by the way, Coretty,
• 27:05
  Speaker 1: I've been I've been pointing this out with my I
• 27:07
  Speaker 1: have a chart um that I've been watching for the
• 27:10
  Speaker 1: last few days comparing the move index to the VIX
• 27:13
  Speaker 1: and all the action is in bonds. All of the
• 27:16
  Speaker 1: action is in bonds. As our colleague Vince Cignarella puts it,
• 27:19
  Speaker 1: it is all over the place and no one can
• 27:21
  Speaker 1: follow it, because that's really what's happening. You're trying to
• 27:23
  Speaker 1: price in something you're forcing in a narrative here that
• 27:26
  Speaker 1: the FED and the b O E and the e
• 27:28
  Speaker 1: c B E they're ready to hike on top of
• 27:31
  Speaker 1: the fact that weight they're not actually hiking because they're
• 27:33
  Speaker 1: still sticking to that transitory narrative. So there's a lot
• 27:36
  Speaker 1: going on, a lot of push and pull, and ultimately,
• 27:39
  Speaker 1: I hate to say this because this is like the
• 27:40
  Speaker 1: ultimate cliche, but you do start to see a little
• 27:43
  Speaker 1: bit of technicals come in because when you have these
• 27:45
  Speaker 1: extreme moves, at some point you have to pull back
• 27:48
  Speaker 1: a little bit, and that's where you're seeing the break
• 27:49
  Speaker 1: events do exactly that. Is there the risk that the
• 27:52
  Speaker 1: FED is falling behind a little bit. Here's be seen
• 27:56
  Speaker 1: some other central banks, um most recently, I guess Canada
• 27:59
  Speaker 1: raise rates. There's is that coming into the marketplace. Yeah,
• 28:02
  Speaker 1: I mean I would agree with that. It does seem
• 28:04
  Speaker 1: like the FED. I mean, this is where you have
• 28:06
  Speaker 1: to kind of take the bond market with a little
• 28:09
  Speaker 1: bit of a grain of salt, because there is so
• 28:12
  Speaker 1: many different factors going on right now. You have the
• 28:14
  Speaker 1: tips market, which is you know, very FED involved, but
• 28:17
  Speaker 1: you also have this huge sell off in the tips market.
• 28:19
  Speaker 1: Then you have this idea that well maybe you start
• 28:22
  Speaker 1: to see Chairman Powell even Madam Leguards say well, we're
• 28:24
  Speaker 1: aware of these inflationary pressures. We might see them stick around,
• 28:28
  Speaker 1: but we're still not changing our policy framework just yet.
• 28:30
  Speaker 1: So there there is that sentiment. Paul check out. Do
• 28:33
  Speaker 1: you have a terminal in front of you, Critty, I
• 28:35
  Speaker 1: have a terminal hashtag b t V one to eight
• 28:41
  Speaker 1: seven G hashtag b t V one to eight seven,
• 28:45
  Speaker 1: and you can see the one year implied policy rates.
• 28:48
  Speaker 1: You've got the b O E in white, the FED
• 28:51
  Speaker 1: in yellow, and the E C B in blue. Fun
• 28:55
  Speaker 1: fact I made this chart, you did, I did, I
• 28:59
  Speaker 1: did orefer to but using it, well, I've been using
• 29:03
  Speaker 1: it today, looking at it today because um, we had
• 29:06
  Speaker 1: a viewer right in I think early this morning or
• 29:09
  Speaker 1: maybe yesterday, I can never remember what day it is.
• 29:11
  Speaker 1: But uh, saying, look, if we see Chinese growth really
• 29:16
  Speaker 1: disappointing below five percent next year, can you really be
• 29:19
  Speaker 1: in a situation where the FED or any major central
• 29:22
  Speaker 1: bank starts to raise rates like that? I think it's
• 29:25
  Speaker 1: a great question because at the ultimate, at the end
• 29:27
  Speaker 1: of the day, Uh, that's really where all the where
• 29:30
  Speaker 1: the growth that's happening, where the extreme growth is happening,
• 29:33
  Speaker 1: where a lot of the commodity demand is coming from.
• 29:35
  Speaker 1: So I think that's a great question to ask. I
• 29:37
  Speaker 1: don't have the answer to that, sadly, but I think
• 29:39
  Speaker 1: there's Uh. There used to be a phrase, and forgive
• 29:42
  Speaker 1: the reference to to help issues given that we're in
• 29:46
  Speaker 1: the middle of a pandemic at the moment, but there
• 29:47
  Speaker 1: used to be a phrase that when the US sneezes,
• 29:50
  Speaker 1: the rest of the world catches a cold. Um. And
• 29:53
  Speaker 1: if you really replace that idea with China in the
• 29:56
  Speaker 1: regard that what happens in China start to affect the
• 29:58
  Speaker 1: rest of the world. I think they're really kind of
• 30:00
  Speaker 1: replacing it, because I mean, I like to look at
• 30:03
  Speaker 1: history in these examples. But in two thousand nine, it
• 30:05
  Speaker 1: was actually China and their massive fiscal package that helped
• 30:09
  Speaker 1: create the commodity demand and inflation. And right now they
• 30:12
  Speaker 1: don't have that same, right, they don't have that. You could,
• 30:15
  Speaker 1: you could go so many places with that phrase, now, right,
• 30:18
  Speaker 1: you gotta be careful with how you phrase it, but
• 30:20
  Speaker 1: I mean, it's it's an important When there's a security
• 30:22
  Speaker 1: league at a lab, the rest of the world shuts
• 30:25
  Speaker 1: down their economy. Exactly true. All right, Critty, thank you
• 30:29
  Speaker 1: so much for joining us. We appreciate critic to our
• 30:31
  Speaker 1: Markets Reporter. Thanks for listening to the Bloomberg Markets podcast.
• 30:35
  Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
• 30:38
  Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
• 30:42
  Speaker 1: on Twitter at Matt Miller three. Put on false Swhey,
• 30:46
  Speaker 1: I'm on Twitter at pt Sweeney Before the podcast. You
• 30:49
  Speaker 1: can always catch us worldwide at Bloomberg Radio.