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Big Take: Cathie Wood Bad Spring Only A Blip · Bloomberg Intelligence

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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day, we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast. Well in financial markets,
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Speaker 1: the rise of Kathy Wood and her ARC Funds has
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Speaker 1: just been extraordinary, and it's been predicated in large part
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Speaker 1: upon the cool new technologies that are out there that
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Speaker 1: they've really embraced in terms of investments, think no further
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Speaker 1: uh than Tesla. But the recent months have been a
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Speaker 1: little bit challenging. Let's dig into it. We can do
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Speaker 1: that with Ben Stepherman. He's a pronounce personal finance editor
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Speaker 1: for Bloomberg News. Ben, thanks so much for joining us here.
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Speaker 1: The big take story here's Kathy Wood's bad spring is
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Speaker 1: a blip when the future is so magnificent. Tell us
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Speaker 1: what you found about Kathy Wood and the ARC Funds. Yeah,
0:56
Speaker 1: so this story looks at She's been such a phenomenon
1:00
Speaker 1: over the last year. You know, she's sort of perfectly
1:03
Speaker 1: captured the mood of the market last year UM, when
1:07
Speaker 1: you know, we were also a lot of people were
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Speaker 1: stuck inside and UM people wanted nothing more to than
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Speaker 1: to look forward to the future, to this too, in
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Speaker 1: this beautiful future that Kathy Would is talking about, which
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Speaker 1: is one of rapid technological change and UM one where
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Speaker 1: investors can make a lot of money by betting on
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Speaker 1: innovative companies. So those companies just really soared through up
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Speaker 1: until about February and then they kind of turned over
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Speaker 1: and she's had a really rough spring. So so the
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Speaker 1: story looks at her, and it really looks at her
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Speaker 1: vision of the world and and how she sees she
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Speaker 1: what basically what what the vision that she's selling to
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Speaker 1: investors than the one that she thinks she can make
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Speaker 1: money on if you're patient. I always think UM the
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Speaker 1: timing is perfect for Kathy Would and E T S
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Speaker 1: as well, right, because I've been following UM these exchange
2:00
Speaker 1: traded funds for a good decade. I always try and
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Speaker 1: get Eric Balcunas on the show. He's like our resident
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Speaker 1: UM genius on E T F. There's never been a
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Speaker 1: breakout manager with the kind of fame that Cathy Wood
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Speaker 1: has in this sector of finance. And it's like the
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Speaker 1: generational um timing is perfect, right because the kids are
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Speaker 1: now investing and they're doing it through E t S
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Speaker 1: and this is an e t F that speaks to
2:29
Speaker 1: them because they hear about it on their social media platforms.
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Speaker 1: She's such a throwback in some ways, not just an
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Speaker 1: E t S but just in investing generally. Like who
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Speaker 1: is the last person who really appealed to read? Who's
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Speaker 1: the last manager that really appealed to the retail investor?
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Speaker 1: You have to go back to, like you know, like
2:49
Speaker 1: you guess Warren Buffett is is some in some ways
2:52
Speaker 1: or around the two thousand's, but we've had this long
2:55
Speaker 1: period where people have been really really all about the
2:57
Speaker 1: index funds and passive past of investment, and we haven't
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Speaker 1: had a big star come along and capture retail investors imagination.
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Speaker 1: And and here she comes along and she's UM. Not
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Speaker 1: only not in the mutual fund world, she's in the
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Speaker 1: E t F world. That she's a woman, you know,
3:14
Speaker 1: is very male dominated UM industry. UM. I think she's
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Speaker 1: That's that's just a fascinating phenomenon. Ben, Is there anyone
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Speaker 1: else in E T S? Is there any other a
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Speaker 1: t S manager that we all know. No, I don't
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Speaker 1: think so, otherwise Ben would have written a story on them. Um, yeah, Ben,
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Speaker 1: what is uh what is the thinking here? I mean,
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Speaker 1: what is Cathy Wood saying now about her her strategies here,
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Speaker 1: given that her performance has lagged over the last uh
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Speaker 1: you know quarter or so. What she says is you
3:47
Speaker 1: gotta gotta keep the faith. That's what she says. And
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Speaker 1: she's a religious person and I really think that that
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Speaker 1: her views about technology and in religion and kind of
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Speaker 1: they kind of aligned a little bit. But but she
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Speaker 1: say to people is, um, we were like, the this
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Speaker 1: sell off and the innovative stocks just means that we
4:07
Speaker 1: have we're going to make more money over the long term.
4:09
Speaker 1: They think that that their portfolio can triple over the
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Speaker 1: next five years. They have these very bullish um estimates
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Speaker 1: for what's going to happen to say, electric vehicles or
4:19
Speaker 1: DNA sequencing or artificial intelligence, and a lot of the
4:23
Speaker 1: traditional analysts on the street are just like, think, these
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Speaker 1: these things are completely crazy and a little delusional. But um,
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Speaker 1: she has been proved and right, I mean in terms
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Speaker 1: of at least Bitcoin and Tesla when she made targets,
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Speaker 1: price targets for them a couple few years ago. Um,
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Speaker 1: they eventually were hit, um and what they were huge.
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Speaker 1: There was a huge amount of skepticism at the time.
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Speaker 1: But but you know, basically, for for her to be
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Speaker 1: proven right, technological change really has to accelerate coming out
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Speaker 1: of this pandemic and and you know it may but
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Speaker 1: we'll see if that actually makes our money. It's so
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Speaker 1: weird that that that um, you know, the read it
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Speaker 1: uh phenomenon has boosted her along with these really um,
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Speaker 1: I mean bitcoin is in some ways I read it
5:07
Speaker 1: phenomenon as well. Now it's kind of moved to Twitter.
5:10
Speaker 1: But um, she's got this millennial draw even though, as
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Speaker 1: you point out, her mentor is Art Laugher, who is
5:19
Speaker 1: like a psion of the eighties. And right now as
5:22
Speaker 1: we're going through this real shift from reagan Omics over
5:26
Speaker 1: the last forty years too, now the era of six
5:30
Speaker 1: trillion dollar big government budgets, um from President Biden. She
5:35
Speaker 1: still she's she's now coming on and reigning Supreme Yeah,
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Speaker 1: she's a really contradiction. I mean, she's sixty five years old.
5:43
Speaker 1: I guess she's capturing the attention of all these young
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Speaker 1: investors and she's politically conservative, but yet she's also huge
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Speaker 1: investor in green investments and she doesn't use the word
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Speaker 1: climate change a lot, but she's she's been a champion
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Speaker 1: of Tesla and other kind of and the investors are
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Speaker 1: sticking with our aren't they been? I mean there, I
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Speaker 1: mean there's just been some redemptions, but not that much. No,
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Speaker 1: like fairly a billion dollars has come out of the
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Speaker 1: funds um since February. And she's she's really people are
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Speaker 1: really sticking with her, and she does a good she
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Speaker 1: goes on she she really wouldn't have an in depth
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Speaker 1: interview with us for this long profile, but she's been
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Speaker 1: on the on the records so much, so many times
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Speaker 1: she comes on TV. She does conferences once a week
6:26
Speaker 1: she's on Yeah, and and that really helped that communication strategy.
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Speaker 1: She really gets out there and tells a story to
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Speaker 1: people about about what they can get. They just a
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Speaker 1: patient and stick with her. I mean, in some ways,
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Speaker 1: she's really going to benefit from this new era of
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Speaker 1: big spending as well, right because um, as we build
6:45
Speaker 1: out the infrastructure and invest in this in that country,
6:49
Speaker 1: this country is well. Here in Germany, we're helping out
6:53
Speaker 1: Tesla and you know the electronic vehicles. Yeah, her vision
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Speaker 1: for where the economy is headed is is pretty interesting.
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Speaker 1: I mean, do you think that inflation is not going
7:03
Speaker 1: to be a problem because he's an innovation these because
7:06
Speaker 1: these technologies really are guys. The cost of a lot
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Speaker 1: of these technologies is going to fall as they become
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Speaker 1: more popular. And all right, he's not worried about the
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Speaker 1: economy overheating at all. Ben, congratulations to you and Annie
7:18
Speaker 1: and Claire on this Bloomberg Business We cover story as well.
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Speaker 1: It's an awesome cover. I recommend our listeners check it out.
7:25
Speaker 1: If you have a Bloomberg terminal sitting in front of you,
7:27
Speaker 1: just type NI big take go to see this story.
7:31
Speaker 1: Cathy Wood's bad spring is a blip when the future
7:34
Speaker 1: is so magnificent. This is Bloomberg. Well. One of the
7:41
Speaker 1: areas of the economy that really got a boost during
7:45
Speaker 1: the pandemic was sports betting online and gaming. People were
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Speaker 1: stuck at home, and the more and more states are
7:52
Speaker 1: allowing sports betting off site, electronic sports betting, it's been
7:55
Speaker 1: a big growth driver. Mike Tavarrella, he's Chamber of the
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Speaker 1: Board of LLIS Game Technolo logies. He joins us to
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Speaker 1: talk about this business pre pandemic, post pandemic. Mike, thanks
8:05
Speaker 1: so much for joining us here. I love for you
8:06
Speaker 1: to just talk to us a little bit, just give
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Speaker 1: us a brief description of what LS game Technology is.
8:11
Speaker 1: What do you guys do? Sure? Well, great, good good morning, gentlemen.
8:16
Speaker 1: Um So just l L Game Technology has been in
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Speaker 1: the leisure sports betting business for about twenty years, primarily
8:23
Speaker 1: in the Italian market, which is a hugely competitive market
8:26
Speaker 1: in Europe. In Italy were UH we're customer facing, would
8:29
Speaker 1: beat the sea licenses, both online and land based. And
8:32
Speaker 1: we own our own technology stack and that text stack
8:35
Speaker 1: that we own we developed it only a few years ago,
8:38
Speaker 1: so it's considered one of the newest betting platforms in
8:41
Speaker 1: the world. And if I got put an analogy to
8:44
Speaker 1: building buildings and real estate, it's kind of like a
8:47
Speaker 1: design build where we, you know, took time to understand
8:50
Speaker 1: the behavior of betters, what our clients were driving for.
8:54
Speaker 1: And we uniquely designed this platform to specifically work in
8:58
Speaker 1: the sports betting UH world, and that's our current business
9:02
Speaker 1: and and in one we're looking at coming into the
9:05
Speaker 1: US and capitalize them on the brilliant growth opportunity here,
9:09
Speaker 1: since possible is repealing. So what how does this work? Then?
9:14
Speaker 1: Can I bet on Buckeyes football? Do I bet on
9:17
Speaker 1: um Paul Sweeney's knicks in the NBA? UM? Can I
9:21
Speaker 1: bet on no hitters in in Major League Baseball? What? What? What? What?
9:25
Speaker 1: Betting goes? Sure? So so I guess the first point
9:29
Speaker 1: about that is that sport, any any h sports bet
9:32
Speaker 1: that you are permitted to do in any regional jurisdiction,
9:35
Speaker 1: if you will, is always dependent upon the regulation in
9:39
Speaker 1: the area. So for example, in Italy, we're our our
9:42
Speaker 1: clients are able to bet on just about anything under
9:44
Speaker 1: the sun, as you would imagine, and we as an
9:46
Speaker 1: operator get a full feed from our data providers and
9:50
Speaker 1: we use a variety of them UH and and then
9:53
Speaker 1: we distribute it. And of course the primary UH products
9:56
Speaker 1: like say in Europe and saw in Italy it'll be
9:59
Speaker 1: soccer right song in US like that will differ on
10:04
Speaker 1: state to state basis. And obviously, but if you want
10:07
Speaker 1: to bet on the Buckeyes, UH, certainly, if our feed
10:11
Speaker 1: provides it, then we'll be able to allow you to
10:14
Speaker 1: bet on it, depending on the area that you're in.
10:17
Speaker 1: So it just seems Mike that sports betting. I live
10:21
Speaker 1: in New Jersey where it's been legal for some time. Um,
10:24
Speaker 1: it's just all over the place. It's all over sports
10:26
Speaker 1: or radio. In terms of the ads for you know,
10:29
Speaker 1: as this economy reopens, one of the key areas is
10:32
Speaker 1: kind of restaurants and entertainment venues. Do you expect sports
10:36
Speaker 1: betting to be integrated into that kind of experience? Well,
10:40
Speaker 1: let me just say this way. UM. You know, the
10:43
Speaker 1: European market is more or less a leading indicator. And
10:47
Speaker 1: when you look at, um, at what where people are
10:50
Speaker 1: able to uh to bet in those jurisdictions, Like they
10:53
Speaker 1: can go to a local coffee shop or a sports
10:56
Speaker 1: betting Uh, you know outfit so easy ag when you
11:00
Speaker 1: walk into like an agency where you can bet on
11:03
Speaker 1: on anything. Um. That model there has been active in
11:07
Speaker 1: Europe for the better part of twenty years. And we
11:10
Speaker 1: see that ultimately in the United States, after the repeal
11:13
Speaker 1: have passed a couple of years ago, a lot of
11:15
Speaker 1: the states sort of took out the opportunity and get started. Uh.
11:19
Speaker 1: I see that they tethered certain licenses. The large casinos
11:23
Speaker 1: are single operators. However, I think that that dynamic is
11:26
Speaker 1: going to change over time simply because um, you know,
11:31
Speaker 1: the sports betting is a is a product that needs
11:36
Speaker 1: to be uh well actually should not be monopolized because
11:39
Speaker 1: sports vetters need the variety, They need the variation at
11:43
Speaker 1: odds because the ultimate outcome of the game, uh is
11:46
Speaker 1: the same. They're regardless of what what who's playing and
11:50
Speaker 1: who the who the athletes is like in a golf tournament,
11:53
Speaker 1: so the outcome is the same. So sports vetters need
11:56
Speaker 1: a variety of operators to be able to compete because
11:58
Speaker 1: the secret sauce between operators is the odds, and you,
12:02
Speaker 1: as a sports vettor are shopping odds. And if there's
12:05
Speaker 1: a monopoly in the area, then obviously uh sports vettors
12:09
Speaker 1: will go offshore and keep it in the dark. And
12:11
Speaker 1: that's not the purpose of being regulated. So what what
12:16
Speaker 1: our model does is it takes aim at the entrepreneurial
12:19
Speaker 1: engine of economy in America and if you could think
12:22
Speaker 1: about it the restaurant economy in places like New York
12:26
Speaker 1: or Washington. You have millions of people that visit these
12:29
Speaker 1: places throughout the year, like if there's a Super Bowl
12:32
Speaker 1: or a NBA finals, santy cop and you know March madness.
12:36
Speaker 1: You know, these establishments are flocked by LSU fantas during
12:40
Speaker 1: championship games, so it really becomes a supercharge and social
12:44
Speaker 1: environment where sports and sports betting is already consumed the most.
12:47
Speaker 1: So our model even though we're able to do everything
12:51
Speaker 1: that say, for example, New Jersey requires like requires from
12:54
Speaker 1: a licensing perspective, be it online or land base. Our
12:58
Speaker 1: technology because of the this a bit a model that
13:00
Speaker 1: we use in the Italian market and all these small shops,
13:03
Speaker 1: it is able to scale down as opposed to just
13:06
Speaker 1: only scale up. It's able to scale right down to
13:09
Speaker 1: the smallest denominator and we're able to service these restaurants
13:13
Speaker 1: and bars and allow them the opportunity to do that.
13:16
Speaker 1: But again it's always predicated on regulations. So in New Jersey,
13:19
Speaker 1: for example, they would need to permit restaurants and bars
13:23
Speaker 1: or small entities to be able to get a license
13:26
Speaker 1: to process a sports bet as an axillary product to
13:31
Speaker 1: their core business, and that really has to happen. We
13:34
Speaker 1: hope to see that, we see that that trend is occurring,
13:37
Speaker 1: and it started in d C and and that really
13:39
Speaker 1: would be a cool trend. And I think that that's
13:41
Speaker 1: uh that's gonna be a differentiator in the US as
13:43
Speaker 1: we brought alright, Mike, Well, we hope to get you
13:45
Speaker 1: back on as we learn more. As you know, this
13:49
Speaker 1: progresses post um legislation, post regulation. Mike Chavarella is the
13:54
Speaker 1: chairman of the board at l S Game Technology, talking
13:58
Speaker 1: to us about sports betting and um how it could
14:02
Speaker 1: look as the economy reopens and as these businesses start
14:06
Speaker 1: to really get going. He's betting on l s U.
14:09
Speaker 1: I'm betting on the buck Eyes. This is Bloomberg Now.
14:15
Speaker 1: I want to bring in Kim Bussing. He is a
14:18
Speaker 1: US luxury reporter for Bloomberg News. He's got a news
14:21
Speaker 1: story on the terminal. Macy's needs another miracle on thirty
14:24
Speaker 1: fourth Street to secure its future. But Kim, I gotta
14:27
Speaker 1: start out with some props. Man. I first started following
14:31
Speaker 1: you after I saw that two sixty million dollar park
14:34
Speaker 1: that you posted about in New York, and then I
14:36
Speaker 1: started reading through your stories, and I think you have
14:38
Speaker 1: an incredible unique eye and picking out some trends in
14:44
Speaker 1: some social trends that are really carrying through to the markets.
14:48
Speaker 1: I read your story on Another Lane that the sneaker
14:52
Speaker 1: seller that I thought was great, UM about the the
14:56
Speaker 1: pot users that are spending eight hundred dollars on bong
15:00
Speaker 1: say stigmas fade here in Canada's becomes more mainstream, and
15:03
Speaker 1: I just think it's so cool that you're able to
15:05
Speaker 1: piece these things together that are are kind of trendy
15:09
Speaker 1: among a new generation UM that is now getting more
15:13
Speaker 1: and more money to spend, but also tie in so
15:16
Speaker 1: well to to markets and the growth areas that we're seeing. Well,
15:20
Speaker 1: thank you. I really appreciate that. It's really important to
15:23
Speaker 1: look at at cultural things and how they're influencing companies
15:27
Speaker 1: and what they do and and the products they sell
15:29
Speaker 1: it and what people buy. Alright, So Macy's, you talk
15:33
Speaker 1: about a pillar of New York City and New York
15:36
Speaker 1: City retail sits smack there that in the middle of
15:39
Speaker 1: Manhattan at thirty fourth Street and sixth Avenue. But it's
15:43
Speaker 1: a department store and that's a tough business. Talk to
15:46
Speaker 1: us about how they're boring. Is looking to reinvigorate the company. Yeah,
15:51
Speaker 1: Macy's wants to build a skyscraper on top of the
15:55
Speaker 1: biggest department store in America. So this would be an
15:59
Speaker 1: office tower, UM at somewhere around nine feet, which is
16:03
Speaker 1: a bit shorter than the Empire State Building nearby, uh,
16:06
Speaker 1: just a couple blocks away, and Macy's Herald Square. That
16:08
Speaker 1: store is their flagship. It's their most important store in
16:12
Speaker 1: the country. It's their most valuable real estate. Their headquarters
16:15
Speaker 1: are there. UH, it's their most productive store. It's the
16:19
Speaker 1: overwhelming center of gravity for this business. So it makes
16:24
Speaker 1: sense that they would want to double down on that.
16:27
Speaker 1: But of course there's questions here right whether it's something
16:29
Speaker 1: like that would work, what's the business situation with Macy's,
16:34
Speaker 1: because you know, I'd prefer to go to Bloomingdale's, which
16:37
Speaker 1: is also there's up across street from our les headquarters.
16:41
Speaker 1: I'd rather go to Birdworf Goodman UM to look around
16:44
Speaker 1: stuff that I probably can't afford. Um. You know, there's
16:48
Speaker 1: so many other choices UM in London, in New York,
16:54
Speaker 1: around the world. Macy's just seems kind of like Sears
16:57
Speaker 1: in terms of how exciting it is to walk through.
17:00
Speaker 1: Macy's had just embarked on a their latest turnaround plan
17:04
Speaker 1: in February twenties. Line that up with the pandemic, and
17:08
Speaker 1: a whole lot of that was derailed and they went
17:10
Speaker 1: into emergency mode, just like just like everyone else out there, um,
17:15
Speaker 1: and they're there, everyone's still in it. So the department
17:18
Speaker 1: stores have been on the decline for for so very long,
17:22
Speaker 1: but that there have been glimmers of hope. You know.
17:23
Speaker 1: Macy's has been closing stores to to have less square
17:28
Speaker 1: footage out there, and while investing in digital commerce, e commerce,
17:34
Speaker 1: online sales and all of that, and so they've been
17:36
Speaker 1: making those steps, but it's still just seems like an
17:40
Speaker 1: eternal struggle for for department stores. Can they get New
17:42
Speaker 1: York City approval to build a skyscraper on top of Macy's. Yeah,
17:47
Speaker 1: so where that that's at right now? Is the latest
17:49
Speaker 1: thing they've done is submit a proposal to invest two
17:53
Speaker 1: thirty five million dollars in the area surrounding the Macy's
17:57
Speaker 1: store that's Harold Square itself. That means pumping money into
17:59
Speaker 1: the neighborhood and order to secure those rights to build
18:02
Speaker 1: the skyscraper. Um. These plans will turn that plaza, the
18:06
Speaker 1: Herald Square Plaza, into a more pedestrian friendly area with
18:11
Speaker 1: a bunch of new transit entrances because it's on top
18:14
Speaker 1: of a subway station that nobody likes. I use every day,
18:19
Speaker 1: by the way, every single day, and that proposals now
18:22
Speaker 1: public and will will be set to go through the
18:25
Speaker 1: city's review procedure that involves the community Board, local leaders,
18:30
Speaker 1: city council and everything. Alright, just real quick, Kim, any
18:33
Speaker 1: sense of timing and whether we're gonna get some clarity
18:34
Speaker 1: here whether they can do this. Uh, We're just gonna
18:38
Speaker 1: have to see what they think about about these plans. Uh,
18:40
Speaker 1: something like this will take many years anyway, and they're
18:43
Speaker 1: currently in preliminary talks with developers to try to find
18:46
Speaker 1: some some partners for it. All right, that's an aggressive
18:48
Speaker 1: move by Macy's to try to add some value to
18:52
Speaker 1: a company that's really in a challenging space up in
18:54
Speaker 1: the department store of business, Kim, to see maybe it
18:57
Speaker 1: plays in though, you know, to the way the city
18:59
Speaker 1: is gonna change post pandemic. It's gonna be really interesting.
19:02
Speaker 1: And Kempstone some reporting on like the new look of
19:05
Speaker 1: New York and with the impetus of massive spending that
19:09
Speaker 1: we're gonna get across the country, maybe we do see
19:11
Speaker 1: a change. Yeah, maybe it's it's really interesting, but it
19:13
Speaker 1: would be great for that area as I walk past
19:16
Speaker 1: it every day, can passing us luxury reporter for Bloomberg News.
19:18
Speaker 1: He joins us here in the Bloomberg Interactive Broker studio.
19:21
Speaker 1: Is so good to have folks coming in live. I
19:26
Speaker 1: want to bring in Dave King right now. He's senior
19:28
Speaker 1: portfolio manager and head of Income and Growth Strategies over
19:32
Speaker 1: at Columbia thread Needle Investments. They have five hundred sixty
19:36
Speaker 1: four billion dollars in assets under management. Dave um, we're
19:41
Speaker 1: seeing today more growth for I noticed this morning cyclicals
19:46
Speaker 1: again are rising Ford and General Motors. We got games
19:50
Speaker 1: in General Electric and Boeing, and there's some clear catalyst
19:53
Speaker 1: there um as our stocks. Thattor told us earlier with
19:57
Speaker 1: you know, airbuses announcement yesterday and GM's plant openings forwards investments.
20:02
Speaker 1: But it seems like this whole reopening m reflation respending
20:08
Speaker 1: trade is really getting back on track. Is it something
20:11
Speaker 1: you're betting on as well? Well? I think that that's true.
20:16
Speaker 1: But I also think the reason to bet on it
20:18
Speaker 1: is last year's market favored quality bonds and disruptive growth stocks.
20:25
Speaker 1: So not only are you benefiting from the strength in
20:29
Speaker 1: the economy, which at some point was predictable, but also
20:33
Speaker 1: good starting valuations on the kind of companies that you're
20:38
Speaker 1: you're referencing um Ford Motors having a great day, but
20:42
Speaker 1: the stock price is lower than when I joined Columbio
20:45
Speaker 1: eleven years ago for Examp. So you're you're, you're really
20:49
Speaker 1: have that combination and um, as I've said too many
20:54
Speaker 1: people for several months now, I think the play is
20:58
Speaker 1: the dogs of the Dadao or revenge of the nerds,
21:01
Speaker 1: you know, by the by the big companies that people
21:03
Speaker 1: thought were boring. And as the economy recovers and perhaps
21:07
Speaker 1: you see some price inflation, make money. All right, give
21:12
Speaker 1: us some name some of those dogs, would you. Well,
21:16
Speaker 1: the dogs of the Tao for people that don't know
21:19
Speaker 1: the procedure, are simply the ten highest yielding stocks in
21:23
Speaker 1: the Dow, and at the moment that's Chevron, IBM, Verizon,
21:28
Speaker 1: Dow Chemical, no relation, um Walgreens, Merk, Coca Cola, am
21:34
Speaker 1: Gen three M, and Ciscose do no. I know. I
21:39
Speaker 1: try try getting through a day without using the products
21:42
Speaker 1: and services with those companies, and you know, imagine that
21:46
Speaker 1: those stocks were woefully out of favor last year, and
21:49
Speaker 1: I think you get the investment opportunity. It's it's not
21:53
Speaker 1: something you need a master's degree to figure out. But
21:55
Speaker 1: it's not on Reddit, and it's not you know, um,
21:58
Speaker 1: Cathy Wood isn't investing in these companies. Well, you know,
22:02
Speaker 1: I don't know the second point for a fact. The
22:04
Speaker 1: first point, I'm sure you're right. Um, it's it's really
22:08
Speaker 1: old fashioned. You know, I'm just sitting here staring at
22:11
Speaker 1: one monitor with my sleeves rolled up and buying stocks
22:14
Speaker 1: like this. And I'm clearly not in vogue. But we're
22:19
Speaker 1: up between fifteen and and Dividend Opportunity Fund this year,
22:22
Speaker 1: so it's it's not crazy. There's something going on here, David.
22:26
Speaker 1: You know, I think investors, certainly since the financial crisis,
22:29
Speaker 1: they've been pretty comfortable with some of the big tech,
22:32
Speaker 1: big cap tech names, you know, an Apple or Amazon.
22:35
Speaker 1: I can buy those things, put them in my four
22:37
Speaker 1: one K and really not have to think about them
22:39
Speaker 1: for a long time. Now. This rotation play has been
22:42
Speaker 1: working so well for you know, value investors and in
22:47
Speaker 1: and even small cap investors. Give us a sense of
22:50
Speaker 1: how long you think this thing can work? Is this
22:52
Speaker 1: something I can just put away? It will be a
22:53
Speaker 1: multi year trade. Well, there there's variants in in the
22:59
Speaker 1: value sector with that, and it's a great question. Um.
23:02
Speaker 1: You know, among the dogs that I've mentioned here, I
23:06
Speaker 1: have a feeling that that would be fine to do
23:09
Speaker 1: with Merk. I already mentioned an auto company that was
23:13
Speaker 1: highly cyclical, So I don't know that you would necessarily
23:17
Speaker 1: take that approach with every one of these stocks. But
23:20
Speaker 1: you know that being said, the investments that Berkshire Hathaway
23:25
Speaker 1: made last year and they have special dispensation to not
23:28
Speaker 1: reveal them for six months. We're in Chevron and Um
23:34
Speaker 1: as well in Verizon, two of these dogs, and UM,
23:39
Speaker 1: I think people were like sort of shrugging their shoulders
23:41
Speaker 1: when they heard that, and then all of a sudden,
23:43
Speaker 1: oil prices went back to normal levels, and Buffett's probably
23:48
Speaker 1: up thirty percent in the Chevron already. Verizon hasn't done
23:52
Speaker 1: much yet, but you know, he's got time. We've got time.
23:55
Speaker 1: So UM. There is, in other words, a need to
23:58
Speaker 1: sell some of these stuff box at some point. But
24:01
Speaker 1: given people's predilection to trading so rapidly these days, I'm
24:06
Speaker 1: talking about, you know, take a look at it in
24:08
Speaker 1: a year or two, and if it's doubled or tripled
24:10
Speaker 1: and doesn't have a good yield and isn't a dog
24:13
Speaker 1: of the doo, maybe you should, you know, take a
24:15
Speaker 1: big profit then. I mean, I absolutely love that UM
24:19
Speaker 1: the idea, and obviously you've made a ton of money
24:21
Speaker 1: on it. What are your biggest worries though, What are
24:24
Speaker 1: the headwinds that you watch out for. Well, I do
24:27
Speaker 1: think there's a huge question whether the inflation we're seeing
24:31
Speaker 1: today is temporary dislocation coming out of one of the
24:36
Speaker 1: strangest recessions ever UM, or whether it's going to prevail
24:42
Speaker 1: to that. I'd say if we have prevalent inflation for
24:46
Speaker 1: a while, it'll be bad for all financial assets, but
24:50
Speaker 1: for income seekers. Twenty of the thirty stocks in the
24:54
Speaker 1: TAO yield more than the tenure treasury, and if we
24:57
Speaker 1: have inflation, you won't get more coupon from the government,
25:00
Speaker 1: and you'll only get a hundred dollars back, whereas the
25:03
Speaker 1: nominal dividend in most of those twenty companies will grow
25:07
Speaker 1: over time. So I really still see it as a
25:11
Speaker 1: clear alternative for an income oriented investor. They were gonna
25:15
Speaker 1: have to leave it there just because of time, but
25:17
Speaker 1: we really appreciate your time. Dave King, Senior portfolio manager
25:20
Speaker 1: and Head of Income and Growth Strategies at Columbia thread
25:22
Speaker 1: Needle Investments. Thanks for listening to the Bloomberg Markets podcast.
25:26
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
25:29
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
25:33
Speaker 1: on Twitter at Matt Miller three. Pet Ball Sweeney I'm
25:37
Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can
25:40
Speaker 1: always catch us worldwide at Bloomberg Radio