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This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
So let's go to a company that has often looked to Tim Ford's various businesses that can tell us a lot too about the macro business environment and just the macro environment overall.
Yeah, we're talking none other than Berkshire Hathaway. Berkshire's earnings always closely watched as a proxy for US economic health because the expansive nature of Warren Buffett's businesses, ranging from Railroad, BNSF, Geico, Carol and Dairy Queen.
So much going on and stock has been it was moving closer to that tillion dollar mark, but not going to make it. It looks like today let's get more though on the quarterly update. What we heard from Warren Buffett with US is Bloomberg Intelligence, Property and Casualty Insurance Senior analyst Matthew Palazola. He's here in studio, Matt. Good to have you here, stock was up, we were closer to the trillion dollar mark, although we still had a ways
to go. What was important about the quarter for this company.
So I'm not surprised that it's didn't reach there today. I actually thought it would be down on the open.
Yeah, it was that three percent.
Yeah, I was.
Surprised to see that the quarter was fine. It wasn't It wasn't really great positive, It wasn't really all that negative. I thought the insurance learnings were actually gonna be a little better. They did carry the whole company, but I thought they were going.
To be a little bit better.
If you peel back the onion on Geico, their expenses were a lot lower intentionally, which which helped them out a lot or officially, what.
Do you mean intentionally?
So the auto insurance loss costs, meaning the cost of accidents, has risen dramatically since COVID, Right, We've talked about it.
We talked about this a lot, but the context of how much it cost us in premiums, right, And.
So they're raising those premiums because their costs are going up more using money. So even no matter how much more you're paying the once treans, companies are still losing money the past couple of years. So what Geico did was they actually reduced a lot of staff, they reduced a lot of advertising. We looked at the run rate for the year and they spent about one point five billion dollars less than their run rate normal expenses just in Geico, So that that propped them up a little
bit too. I would say this though, I think the negatives were in the letter actually, So you've got the typical Witten wisdom of Buffett in there, which was great. He had a little homage to Charlie Munger, you know, got a little dusty in my home office. But he talks to kind of negatively about the railroad outlook and the energy outlook. So labor costs and energy and the
regulatory environment. I'm sorry, labor costs were in the railroad and then the regulatory environment in energy, and those are go forward issues which will impact next year. So I think that's probably partially why the stock selling off.
Okay, so let's talk a little bit about the balance sheet because a big part of the story to emerge after Saturday's letter is the record pile of cash. I mean, we're talking one hundred and sixty seven point six billion dollars. The problem and Warren Buffets talked about this in the past. There's nowhere to put that money.
There's no where they can UN's saying that for years.
I say that for a long time, and it's been true. So what has been the newer thing? I would say in the past may five years, as we're talking about private equity bidding up a lot of the companies that they're looking at, and they hadn't seen this level of competition in years. Besides the fact that you just need something gigantic to move the needle for them anyway. I
mean they bought Allegheny was twelve billion dollars. Their investments in these Japanese trading houses are now around twenty billion dollars adjusted for currency, and that still doesn't move the needle. So I don't think we're going to see anything huge anytime soon.
But what about Oh sorry, Carol, No, no, no, officially because I want to go back to actually the railroads and energy.
I was going to say, yeah, what about increasing Steaks and Occidental for example, because they have the option to do that, or increasing stakes other companies they have.
So he talks about I always thought they would buy Occidental, right, and now that was I think very very widely speculated. They threw cold water on that last year at the annual meeting. He actually reiterated it in the letter that we're not going to buy the entire company. We love it, but we're not going to buy the entire company. I think they can. They probably will increase the stake in it as much as they can. He also called it a forever investment, so that one and the Japan trading houses.
So I think you'll see stuff like that on the margin. Thirteen F came out a couple of days ago before there weren't any you know, dramatic new positions in there. So it's a great a little bit. Yeah, I mean it's a good problem to have, but you know, a problem.
Nonethelesson not bind Nvidia, like it's not his new Apple or anything. Right, No, it's not happening.
No, I don't think.
So go back to I mean, what we love about this company is that Warren Buffett Berkshire outh we tend to really invest in just kind of these core industries that often are tell us a lot about the economy, So energy, railroad, you said, higher labor costs and energy specifically.
Energy specifically, so there's the regulatory environment specifically on the West coast, so there's a lot of there's wildfires, right, and if the utilities end up causing these, they have to shoulder a lot of the cost for them. So two things. One, Pacific Corp. Which they own, is involved in a bunch of litigation they're settling. It's not hugely material for the company as a whole, right, It's a couple of billion here there. It's not good for Pacific Court,
but it's not going to hurt Berkshire's financial strength. But what Buffett had said was depending on how those fire costs end up may determine if we want to make further investments. So it was kind of if we get banged on this, we may not invest much more.
Well, that's what I think is interesting. He's not necessarily pulling the plug on it, right or backing out. But it doesn't necessarily going to pony up more money to it.
I don't think so. I mean the other thing in the railroad you mentioned railroad is constantly consuming capital. It wasn't necessarily negative or that things were going poorly there. It was just specific two railroads they were having labor shortages one and two. He kind of railed against the government getting too involved in the labor negotiations and saying those keep coming up and those will hurt the margin of Burlington Northern, which has trailed Peers historically.
Just very briefly twenty seconds May fourth, twenty twenty four, that's when the annual meeting.
Is local point next.
Yeah, well, I want to hear more from g Jane and greg Abel.
They'll be there.
They were there briefly for the past two years, but it would be nice to hear a lot more from greg You.
Do wonder how he pulls those guys in. They obviously right are key now to the future of the company. But with Charlie Munger and what's happened and his passing, how he kind of relies on these guys whether they become part of kind of the show if you will, Yeah.
I mean I hope they will. Honestly, Munger didn't even really talk much last time anyway, all.
Right, gonna leave with them, Matt, Thanks so much. Matt Palizola. He's property in casual to insurance Senior Alyss covers Berkshire for our Bloomberg Intelligence team right here in studio. This is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brought auto with a Bloomberg Business act or want us live on YouTube.
Tim Elon Muskin ebies check Elon Muskin satellites and space exploration via SpaceX ad check. Then there's the brain Elon's neuralleak project.
Okay, some news there recently too, so we can go ahead and say check I think at this point, but don't sign me up for it.
What we haven't earn much about in a while is Elon's tunneling venture the Boring Company, That is, until.
I think it's fair to say uncheck on this one.
Exactly well, which is why our Bloomberg BusinessWeek team had to take do some digging around no pun intended. They found out that the Boring Company's tiny Las Vegas loop is all that's come of Musk's promise and his promises overall to build super fast mass transit hyperloops. Workers say it's tunnels, meantime, are packed with chemical slut. Judge this is a story by Max Chafkin and Sarah McBride of our Bloomberg News team.
Max is Bloomberg Business We columnists also contributor to the Elon Inc. Podcast, a new episode dropping tomorrow onto the Bloomberg Terminal and on Bloomberg dot com slash elon Ing. Maxis here in our.
Called the Studge episode.
It's yeah, it's a sludge special.
Since we talked about the sledge, we got to start with the sludge because it's it's actually kind of serious, pretty serious laughing but causes some pretty bad health effects.
Yeah.
So, I mean, the genes of this story are these documents that we obtained that Sarah McBride and I obtained from the state OSHA, that's the Occupational Health and Safety Administration, and it basically shows lots of complaints from workers about unsafe conditions, including this issue of like these toxic muck, which the workers say they've had to wade through. The reason it's toxic, it's not it's not necessarily like they're
doing something that's totally outside the norms of tunneling. These chemicals are are sort of standard chemicals that are used, but the allegation from the workers is that corners are being cut, they're trying to move too fast, they're doing
it on the cheap, you know. And the funny thing about this, or it's not really funny, but these are the things that Elon Musk has set out to do to some extent, Like the whole point of the Boring Company, like many of Musk's companies, has been to cut unnecessary costs. The thing that we're hearing with this story, however, and I think you see echoes of this elsewhere in Elon Musk's empire, actually is that they're not necessarily finding lots
of innovations there. They're ultimately ending up with a normal tunneling company essentially that happens to have a safety record that some would say is troubling.
Okay, So here's what's a little puzzling to me, Max Elon Musk is a guy who's literally putting chips in people's heads. He's doing something that only until SpaceX did it, governments taking a whole of government approach could do. We've been able to dig tunnels for transportation purposes for over a century. Why is he running into so much trouble here?
So?
I think I wrote one of the first stories about this back in early twenty seventeen. Talked to Elon Musk at the time about this, and just to put a slightly different spin on what you just said and which relates to this, which is that SpaceX is not the first company, not the first private company to build rockets, right, the shuttle, all the things that NASA done were built by government contractors.
I guess what I'm saying is that he's doing it in a way that is really innovative. Ay, well, yeah, very much reusable stuff is that was a really.
Innovative contracting process.
They used contracts, they sold them directly the government at a fixed price, which was new. But one of the core things that SpaceX did was like go out and look for existing technology and find a way to improve on it and do it cost effectively.
Now, there are a lot of.
Potential inefficiencies in the world of aerospace, and.
Musk has had a much harder time in some.
Other fields finding similar sort of levels of inefficiency, just sort of low hanging fruit. And I think the tunneling example is one you know he talked about back in twenty seventeen. He talked, you know, it costs a billion dollars a year, and it like it takes a mile, It takes a year to dig a mile, and it costs like a billion dollars a mile or some some
very large figure like that. And now Boring is doing maybe a little better on cost, although it's hard to know, but when you look at the actual pace that they're going, it's basically a mile a year. It's it's not that much faster than existing tunneling projects. And when you look at the end result, we're not talking about mass transit.
We're not talking about you know, big subway cars full of people, which is actually what many people in Las Vegas, you know, would have hoped for, because traffic there is really bad. We're talking about are Tesla's just normal cars that can take three people and a driver. They're not even driverless, and they're limited to forty miles an hour. So we're so far away from the kind of grand visions.
And just to remind people what Elon Musk originally promised here was New York to DC in twenty nine minutes San Francisco, Los Angeles.
Yeah, in thirty five. Sounds awesome.
You could commute from you know, you could like commute halfway across the country, and and you know, it just.
Hasn't gone that way. And I think, you know, in all sorts of.
Different ways across Elon Musk's empire, you're seeing maybe fissures, cracks, ways in which the promises are not necessarily matching up. You know, we saw this ruling with pay in Delaware. You know, of course, lots of problems documented at x slash Twitter. And here you just have like a very visceral way where you have these grand promises and the end what you have is basically a glorified shuttle bus system. It doesn't take you, you know, from one end of
the country to the other. It takes you from one end to the Las Vegas Convention Center to the other.
Is it just a case of that's all I can do so far the plan?
Yeah, I mean to some extent, yes, I mean the thing that if you squint, and I think the reason that.
This was approved, it's partly that was approved.
Because Las Vegas is a low regulation city.
These are mostly on private property.
There isn't a ton of oversight from the government as there might be in other places. But also you know, they're talking about opening these stations throughout the city. But you know, when we talk to people on the ground there, it is a long way from happening. It's also hard to see how this is going to make a huge impact on traffic. Again, when you're talking about, you know, moving people three at a time, very very slowly, A lot of things would have to happen, and there are
lots of reasons for skepticism. I mean, you know, digging underground is hard. There's a reason it costs so much money. It costs so much money because there's stuff you can run into, complicated property rights, and of course.
So the company's not going to create a trillion jobs.
Well yeah, which is what Elon Musk told me back in twenty seventeen. They were going to create a trillion jobs. I'd say, it's a long way from that.
To put it.
To put it mildly, I mean, there was sort of flirtations or talk of various projects. There was one in Maryland, one in Los Angeles, one Chicago, and in all these cases, you know, he was bringing along some of the most
famous politicians in the United States. So it was Larry Hogan, you know, governor of Maryland, who former governor of Maryland, who was, you know, at the time, a big star of the Republican Party, you know, Rama Manuel, you know, former chief of staff to President Obama, Mayor of Chicago, Eric Garcetti, star mayor of Los Angeles. Like, a lot of people went for this and they just you know, they haven't been able to deliver. And I think there's
probably some element of distraction. Obviously Musk has a lot going on. And also I think just tunneling this is hard. You're dealing with dirt and putting.
People up in space and stuff in space is really hard. Tapping into the auto way industry. I mean, this is like going back to Tim's point, right, how many times were like, you know, you count out elon Musk or whatever, and then he's like, whoa, look what he did. And I understand there's a lot on his plate right now and that's got to be distracting. But should we not rule him out? Has he not found the right boring tool?
Is?
What is it? Max?
Well, I would say, I mean, I think it's there's probably a bunch of different factors going on.
I mean, one thing that was different.
With SpaceX is you had a very interested buyer, which was NASA. You had the US government wanting to finance this thing, right, looking for somebody just like Elon Musk, and Elon Musk sort of finding a way to fit himself, you know, to sort of make himself look like the thing that the US government want.
Elon Musk is really good at this.
We're seeing this with Starlink as well, where like, you know, he's this what would seem like a civilian technology, these these internet services for as Musk I told it to Walter Isaacson, I think he said, you know, it's to Netflix and chill. Increasingly, this looks like a potential military tool. This is gonna this is gonna lead to government contracts and and and could be a big line of business for SpaceX. You know, I think what happened is in twenty sixteen and twenty seventeen.
Donald Trump becomes president.
There's a lot of talk about infrastructure and in general, there's been a lot of talk about wanting to spend public money on infrastructure, but there hasn't been a ton of delivery, right, And and I think a big part of this was predicated on this you know, trillion dollar the thing that Trump was saying, which was like a trillion dollar infrastructure plan. And you know, ultimately infrastructure, whether it's Elon Musk or any one.
Else, is very expensive.
It's politically dicey because you have land rights and so on, and it it just hasn't come together with the speed that SpaceX came together.
Max.
I want to dig into something that you said, that you mentioned a little earlier, which is the idea that back in twenty seventeen twenty eighteen, a lot of politicians were kind of jumping up and down with the idea of collaborating with Elon Musk. What I noticed in your piece is that that tone has totally shifted and they are now local politicians who are saying hey, thanks, but no thanks.
Yeah, including the mayor of Las Vegas, who is you know, Las Vegas is an interesting place because the city of Las Vegas actually doesn't contain most of the Strip, so it's not like she has oversight overall this. As I said, a lot of it is on public property. But with Caroline Goodman, the mayor, longtime mayor, her husband was a long time Mariage. She's like one of the probably the most famous politician in Las Vegas, is essentially criticizing it
and criticizing it on the grounds that it's unpractical. She, you know, from the start, has raised these safety concerns, which I think looks prescient when you look at this, oh shut thing and yeah, and she's essentially saying, you know, this would be great if it could actually happen, but I don't see it. And that again, is that that does represent a bit of a departure for Elon Musk. You do feel like in Las Vegas at least, you know, some of the magic, some of that kind of Elon Musk star doest.
It just doesn't feel quite, you.
Know, shine quite as brightly. Maybe that's the lights of the strip drowning it out. I don't know, but but it definitely feels like there's something different.
Going on there all right. Back to the workers though and their conditions. Is this something unusual in terms of infrastructure projects? And I'm always a little wary when there's a line in your story. Although no one has been killed at a boring company work site so far in Vegas, it doesn't just speak to how tricky it is.
Yeah, as I said, these are not like no one's saying, they're using chemicals that are worse than anybody else what the workers are saying, what you see in these ocean complaints are sort of like little things that maybe add up to a dangerous situation. And you know, we have seen similar stories like this around Tesla's car factories around there. You know, Reuter's had a great piece uh some weeks
ago about you know, death at a SpaceX site. So you know, I mean when you're when you're radically trying to cut costs, when you're going around telling people that the only law that matters are the laws of physics, right, I think I think to some extent they're going to be costs of that, and we're seeing that, and and but we should say, like this isn't This is probably more an indictment of Boring Company being less innovative rather than it's like the most dangerous place in there.
You know, there just hasn't been proof rock three yet, Max. And that, by the way, is the tunnel boring machine.
Read the story you'll find out more.
Yeah, which is you know, promising, over promising and under delivering.
They have good names.
Those Ton Sliot would be proud, of course.
They do, all right, Max, Thank you so much, Max Staffkin. He is Bloomberg Business to be Calm, a story featured in the new episode of the Elon Inc. Podcast, debuting tomorrow on The Bloomberg and at Bloomberg dot Com slash Elon Inc.
Your listening to the Bloomberg Business Week podcast. Listen live each weekday starting a two pm Eastern do applecar Play and Android Auto with the Bloomberg Business ad. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
Joel.
I don't know if you saw this over the weekend, but actually you definitely didn't because it happened like in the middle of the night and you hopefully, yeah, hopefully you're asleep. Micro Strategy, it's the largest publicly held corporate holder. Bitcoin suffered a hack on its x account that tricked some people into handing over a total of more than four hundred one thousand dollars to the attacker.
Not good, right, the account was compromised. That's pretty amazing, and they're not alone. Listen. Some of the other instances of hacking in the corporate world in the last couple of weeks alone include the Danish it and consulting company net Company, a cyber attack against the division of United Health Group, and hackers believe to be part of a cybercrime group gaining access to some of Prudential's IT system. I mean, there's constantly a lot going on.
Yeah, no question, the hackers are getting more and more sophisticated and going after more and more valuable data. That's certainly what IBM's X Force, the form of the firm's threat intelligence service, has found. We've got with us Charles Henderson, global managing Partner and a head of X Force at IBM. He joins us from Austin, Texas. Good to have you with us this afternoon, Charles, how are you hey.
I'm doing great. Thanks for having me again.
Yeah.
So every year you guys come out with this sort of state of the landscape, and you know, I was actually surprised to see that it's ransom attacks went down in twenty twenty three, but not necessarily down for a good reason. The idea is that they're sort of like becoming more sophisticated.
Here.
So let's take a step back and just think about the landscape out there, because each and every day it does seem like there's another hacking story.
Yeah, you know, what's old is new again. And I think what you're seeing is not necessarily a change in crime, but it's a change in monetization strategy. The cyber criminals are getting some headwinds and the market forces dictate a change from ransomware, where you have governments that are stepping in and saying, hey, we're going to forbid you from paying the ransom. You have organizations that are better suited to just recover from backup or really anything but pay
the ransom. And you're seeing attackers change their business strategy to accommodate.
A changing work.
Okay, so it's interesting, right in terms of some of the shifts, I guess what really kind of freaked us out or me out specifically is the exploiting of identity. And I just think about how increasingly so much of us have loaded everything and anything in our world, a
lot of it financially connected or related, onto our phones. Right, And we've got Norton, we've got different types of systems in terms of storing our passwords and so on and so forth, but nonetheless, are identity, it sounds like, is increasingly at risk. What have you guys found out give us some color around the number alone.
So normally, when I get up here and I say, hey, there's a five or ten, maybe even a twenty percent increase in something, that's a signal that you should be paying attention.
Right, Well, we.
Have a seventy one percent increase in credential based attacks. That's where somebody takes a valid credential set and just logs in.
And the truth of the matter is that logging in.
Is a lot easier than breaking okay, and once you have valid credentials, you really render a lot of the primeter defenses useless because a lot of these detection and response capabilities are centered around finding things that look abnormal, and a log in is just the system behaving normally. And a lot of this comes back to the fact
that we're not using multi factor authentication. Users have a tendency to reuse passwords, and when passwords are compromised, there aren't a lot of organizations that are checking to make sure that those compromised passwords are not still use.
In their vice.
Well, I'm also amazing how much I get something in the mail or some kind of email. Oh, by the way, you know, our systems were compromised and it was your information and here I'm finding about it, you know, several weeks after the fact.
I mean, so be vigilant.
Yeah, thanks to be more specific in terms of what kinds of things are to your awareness are being targeted.
So you know, the world at large suffers a lot of breaches, and each time a breach occurs, information is in it, and the attackers are taking that information and selling it on the black market, on the dark web, and a lot of it is prudentials, and prudential sets have escalated in value because criminal organizations are becoming adept at using those credentials to affect a breach. They're using
it as their initial point of access. And essentially, when you have valid credentials and you know that users are going to reuse passwords, it becomes really easy. We're taking an already stat deck and we're really giving the criminals a real advantage.
My concern, Charles, is less about you know what I'm doing right now to keep myself safe. I'm pretty confident. Well I shouldn't say that because then everyone's going to try to attack me. But anyway, my bigger concern is like what's already out there and I always get like, you know, these annoyed like I was at the dentist. I think I shared this story its a dentist a couple of years ago, and they're like, we need your social Security number and there's no way I'm giving you
my social Security number. You're a dentist, Like you're good at filling cavities, but I have no idea how good you are accum You never except yeah, like I need it for the insurance. And I'm like, really, if you do, then I'm not going to come here. And he's like, Okay, we don't need it for the insurance, Like we'll figure that out another way. But it's like, never give out your socials. But it's out there, that's the problem, and
then it gets stolen, and I mean, what's it. What's a consumer to do?
Well?
You know, first of all, I think I think you had a great strategy there, which is just don't give the private information that you don't need to give. Secondarily, there's some information that you may have given out. Maybe you have a password that you use more than once, and I know we tell you not to do it, but statistics show you're going to do it well every time. You get a note that says your information has been breached,
that's a great time to rotate all your passwords. Okay, and at the very least look at the password you are using in the Bridge account make sure you're not using it elsewhere. Similarly, you can start to think about the type of information that may be exposed in a given breach and ensure that you understand what your exposure is.
Is artificial intelligence helping fight against a cyber attax or is it helping to stimulate and increase the frequency and maybe even the sophistication of cyber attacks? And yes, yes is a good answer too.
Yeah, there's three real I think pillars of AI if you want to think about it.
When it comes to security.
There's AI as a target, there's AI as a tool to prevent attacks, and there's AI abating an attack. And right now we're in the very early stages of AI, and we really haven't seen AI used in massive attacks just yet. That said, you know, we've seen it used maybe in helping to craft phishing emails as an example of a foreign language. That's not to say it won't be used, it's just an early phase of adoption. Secondly, we have AI used in defense, So AI used in
defensive attack. You're really starting to see that blossom. And the hope is that the security industry can stay ahead of attackers in leveraging AI. And then finally you have AI as a target for attack. And it's really important that we start looking at the supporting infrastructure that we're using in a lot of these AI instaf and say, hey, have we thought.
About security there?
Not to mention the AI itself, but you know, think about all the things you used to train AI or to host the functionality of AI. There's a lot of attack surface there. And as we rush to this this new market, we want to make sure that we're doing it responsible.
Charles, how concerned are you about spoofing? And I'm not just I don't just mean spoofing when it comes to you know, the caller ID says Amazon's calling and it's not, you know, really Amazon. More so when it comes to the voice stuff, and you know, we had that robook call earlier this year during the New Hampshire primary that was not actually Joe Biden but sounded like President Biden.
And then you have all these you know, people who are saying, okay, you know, I didn't know if my son was actually in jail, and I got this call that said he needed money, and those sorts of things that used to be emails that you could ignore, but now they're getting pretty sophisticated.
You know.
I think there's a learning curve on the part of the general population there in terms of, hey, these things can be faked.
You know.
Ten years from now, I think we'll have a deep understanding collectively as a society that just because you hear or see something on video or audio doesn't mean that.
There's a high fidelity to it. It can be faked.
And I think that until we get to that learning curve, there's certainly going to be abuse of the ability to use AI and other technologies to fake audio and video.
Hey, one last thing, Europe feeling the brend to the cyber attacks. According to you guys your report and when you're finding is making up thirty two percent of global incidents. Why and how is the US doing? And we just have about a minute or so left here, So.
The US is right behind them.
So don't breathe a sigh of relief just yet this year, essentially, or in twenty twenty three, essentially, Asia, pac and Europe switch places. Some of that can be geopolitical tension, other can just be following the money trail and you know, easy targets. At the end of the day, attackers are going to take the path at least resistance.
One last piece of advice for those of us who are worried about our identity being stolen, Just a quick piece of advice thirty seconds. Is it just simple? Passwords? Be smart folks.
Passwords is a great start.
First of all, use unique passwords, complicated passwords, all of that.
But most of the organizations you deal with.
Will offer multi factor authentication as an option, if not require it. Just because they don't require it doesn't mean you shouldn't be using it. Enable multi factor authentication. It only works if you enable it.
Agreed. I kind of love it.
I do too, I do it for everything.
I'm like, okay, okay, hey, we.
Got to hear on the Bloomberg terminal, every time you log in rights your password, you get your fingerprint.
It's really cool.
Or you can use the iPhone out.
No, it's good and it's super super secure.
Muck a journal.
How about you let me drive? Oh no, no, no, no, who's.
Going all right, please, I'll do the gravel wat I want to drive.
It's a good question.
Which is the drive to the globe down?
Thing?
Well by around on Bloomberg Radio.
All right, everybody just got about eighteen minutes left in today's trading session. Carol Master along with Tim Stenovik, Charlie of course, just breaking down the numbers. We were just talking with our Bill Maloney uh and Jess who covers the markets. Uh goes on the Squawk and talks about interesting trends and stories.
We squawks on the weekends.
He does, there's news.
He's kind of NonStop. But it's just he said today, it was like you kind of were searching for things to talk about. Although he did note bitcoin topping fifty three thousand, reaching the highest in more than two years.
It gives me something to think about, that's it. Yeah, what maybe like a little comment about bitcoin during the close today and we'll see they're like we need those dueling comments. Hey, I know somebody who has their eye on the markets all the time. That's An Maletti, head of active equity at all Spring Global Investment. She joins us from Wisconsin and good to have you with us this afternoon.
How are you good? Thanks for having me back.
Okay, quiet day, But that's okay because not every day can be like what we saw last week. You're arguing that the sign that we're seeing that breath is expanding when it comes to the rally that we've seen so far this year, bodes well for stocks moving forward this year.
I do think it does. Signs of breath are generally positive. We saw a lot of concentration, as everyone knows, that
was the theme of twenty three the Magnificent seven. What quietly started to happen in October of last year is a broadening out and it's something that we talked about in our outlook piece for twenty twenty four that we really believe that would be the trend for twenty twenty four, that especially in the small and mid cap space, that those areas of the market that had been ignored would
start to outperform in twenty twenty four. And that's what we've started to see kind of quietly, and name by name, which is another thing that I think is warranted. Fundamentals do matter, valuations do matter, and we're starting to see that. And so for the last I think eleven of the thirteen eleven of the last thirteen weeks, we've seen the
S and P mid cap index outperform. We're kind of nearing where the high was in November of twenty twenty one, so not quite at that peak, but close to that peak. And the Russell two thousand even, you know, continues to look attractive. You know, people forgot that we've been in a bear market for the Russell two thousand one that
lasted twenty three months, and that's a long time. The average bear market for the Russell two thousand typically lasts eleven months, where the typical bull market for the Russell two thousand last thirty five months. And so you know it, just the rally started in October, we're early into it. And so if fundamentals and the macro economy can stay strong, I think the quiet areas of the market are the places to be and in the places that have been ignored are still the places to be.
And so I was just want to go what's been the good of the market so far in terms of trends and maybe just I was gonna say technicals, but we don't have to go there. But just in terms of fundamentals, what's been the bad of the market so far this year, because if I look at the S and P five hundred, most of the major industry groups
are higher by a lot so far this year. And then we've got like real estate utilities at the bottom of the pack losing some ground, and we kind that makes some sense in terms of the interest rate environment. But what is the good and bad of the market so far?
Yeah, Carol, it's a great question, and what I really like, as you point out, it's hard to see it when you look at the suctor level, but the good and the bad really is happening kind of at the company level, and you're even caring about it. You guys talk about it every afternoon when you talk about earnings, and you're seeing earnings react to what the company is delivering on and so if the company is actually delivering and producing
growth and earnings, then the company is getting rewarded. And that wasn't always the case. In twenty twenty four for the small and MidCap space, you are seeing multiple compression even if the companies were performing, even if they were delivering earnings. Where in the meg seven stocks, yes they were delivering earnings, but you were also seeing huge multiple expansion, and so fundamentals are really starting to matter, so is valuation.
I would say there are.
Still some areas of the market that look attractive to us. You can't ignore technology, so I'll just throw that out there. Our managers certainly are still interested in technology, but it's not necessarily just a few select names. They are looking down cap and looking at technology names, and it's because margins are really strong in those areas, in that area in particular. And we think sustainable healthcare, though, is kind
of about the other end of the spectrum. It has been the area that's been the baby thrown out with the pathwater. In some cases, fundamentals weren't the greatest in twenty twenty three. They were hurt by a lot of factors lower utilization, post COVID, etc. But we're starting to see utilization pick up. I think also the fears of the GLP one drugs now is starting to get sorted out, like what might be reality and what might be just
kind of like fear. And when you look at Earning's growth projections for twenty twenty four, healthcare has one of the best expectations for Earning's growth, and so that is an area that I would say, generally speaking, our managers are also very interested in.
Well and it's actually the third best performing major industry out of eleven in the S and P five hundred as a whole, up about seven point seven percent. And it's interesting. I love that you went there because it's I feel like there's been so much news. There's been a fair amount of M and A activity like within the space, so you definitely see some things moving around. Where do you not want to be right now?
I think the areas of the market where you really just want to stay away from kind of factor into that low quality space. And I know that's kind of a generalization, so let me just define that a little bit. Certainly, I would be fearful our managers are kind of shining away from companies that don't have great balance sheets, the where cash flow, where free cash flow is kind of on the decline, where the competitive situation for companies doesn't
look great. And so I know it's easy to kind of go to low quality when the market is rallying like this, because that's where you think you're going to get the biggest bang for your buck. But I don't think that's a good long term strategy because the macro environment is still certain. So generally speaking, I would stay away from anything that appears to be low quality, and
that's what our managers are doing. I do think the utility space has been a little bit more difficult, as you pointed out, because of rates that you know probably will stay that way for a good portion of the year, but you know it does have a yield and you know at a certain point that's going to be attractive to Hey, and.
Just thirty seconds left, our team breaking the news that Charter Communications is said to weigh a takeover of ALTCUSA. You argue that M and A is going to start accelerating in the later half of the year. Where should we be looking for M and A.
I think, you know, healthcare is definitely one of the places technology as well, but I think we're going to see it across the board. Companies and CEO CFOs tend to get a little bit more optimistic once we see rates stabilize and once they think that the economy is pretty stable, and so I think the setup is pretty ripe right now for M and A.
Hey, ten seconds M and A activity that we are seeing, that's a good market side that's a positive. Correct, Yes, it is so a great sign. All right, good stuff. Thank you covered so much ground as we always do with Anna Maleetti, and take care be well. A Maleetti, head of Active Equity over an all Spring Global Investments, joining us from a Nominee Falls, Wisconsin.
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