Markets, Cannabis Industry, Yelp Survey

at Bloomberg dot com. We're getting some earnings. It's been a great year for pretty much everything because we have experienced the everything rally that if you were entirely expecting. Joining us on to talk about how to position heading into your end is Greg han. He is chief investment officer for Winthrop Capital Management, joining us here in our Bloomberg Interactive Broker studios. So, Greg, what are you doing cashing in, sitting on your hands and waiting for the

year to pass. No, I wouldn't say we're cashing in, but we are moving to risk out of portfolios, both on the fixed income side and the equity side. This is something we started probably midway through the last quarter and we're trying to get it done before mid November. So what is your view for as we know pair through these earnings here and we start to look out, do you think the FED will be continued to be supportive and you might go a little bit more risk

on as you head into next year. Um, so this is a change for us heading into this quarter. What we're looking at, we would have been saying, yes, we're going to continue to de risk. We're seeing enough momentum in Brexit and US China trade issues that could be a catalyst for fixed investment and consumption from a global standpoint, those barriers get reduced. I don't know that they'll be removed, but reduced. We could actually see this economic recovery go

into the next two quarters in two thousand twenty. So which assets in particular look like a bye that wouldn't have otherwise looked like a bye? If Brexit is resolved and there is some sense of some sort of trade truce between the US and China. Large cap equity has had a great run, so the S and ps up over but when you look at mid cap and small cap, small caps legged. So that's one area, and with private credit expansion, we'd expect small cap to do well. The

other areas the international space, developed countries have lagged. We have not been a big mean reversion kind of firm. We're looking for capital flows to help support that, and so we'll probably increase our allocation to international next year. And does that include emerging markets? It does, Yeah, as long as capital is flowing. And that was historically the

European banks were big lenders into the the emerging economies. Um, but it's right now, it's still It looks like a train wreck when you look backwards, but you have to look forwards and look for the opportunity. So right now, what's your sort of breakdown in terms of the US versus international exposure? We're um in our in our portfolios were about fift internationals, so it would be developed, developed,

five percent emerging. So in your fixed income portfolio, you know, I'm starting to think about credit quality a little bit more as were you know, ten eleven years into this economic cycle. It's got to end sometime. What are you see in terms of the credit quality? So we have been watching closely for a shift in credit and it's a great question. We're focused in the leverage loan market. That's where the biggest his you know, where the change

in covenants, that's the first sign of a deterioration. But when you look at banks, the when you when you look at the loan lost provisions, UM, they're the banks are really really healthy right now. So we're not seeing it in the credit side. Go back twenty five years and two thirds of the investment grade market was rated single and higher. Today two thirds of the corporate market is rated triple B and lower. It's it's you know, it's it's shifted and we have lower interest rates and

lower cost of capital for companies. It doesn't make sense from great So so people have been raising this issue for a while, and everyone's been looking for the cracks in credit markets, and some people point to leverage loans UH and even higher bond saying that there is a slice of them, both markets that have fallowen out of bed recently plunging in price. Is this a market event or an economic event. That's a good question, Lisa Um.

From from the standpoint of capital flows, I would say that this is this is a capital market event, UM. And it's when you look at concentrations in certain sectors, like the energy sector in the high yield space, that's citiosyncratic I think in that area, UM. But the rest of the market looks. I mean it's it's credit has been really really healthy, consumers healthy, and we'll tell you the manufacturing sector is healthy. So the FED meets next week, UM on the what do you expect from the Fed?

And do you think the Fed will continue to be dubbish and supportive of this economy? Yeah, Paul, I think this is um. We we're expecting twenty five basis points and then in December our base case has shifted out to a hold with improvement. It's all contingent on what we see how a Brexit and the US China trade issues. So right now, what do you like the least to own heading into your end? That's a great question. So financi twill assets have been challenged probably the least. Right

now we are reducing significantly high yield. So we still have a short sleeve in short duration high yield, but hi yell pulling that that out, uh anything levered so leverage loans, b dcs. We want to stay out of the levered part of UM the markets, and we're really running right up the middle UM dividend paint stocks we still are invested in, So I was gonna shift gears to stocks. So Again, one of the things we hear a lot from folks that are managing money is need

to be defensive. But me talk defensive whether it's utilities or reads or consumer staples. We also hear that those sectors aren't cheap, and so you kind of run into the risk because how do you manage that balance? Yeah, that's that's that's another good point that both bull sectors, reads and utilities have had a great run this year.

And really what it is now is named names specific and if you're investing in e t F, you've gotta be careful because a lot of E t F sleeves have concentration issues in um single names like Microsoft in the in the technology sleeve. So you kind of have to do your homework to see what's in there. And you've got to pick your stocks right. So let's say you do everything right heading into your end, what kind

of returns are you expecting? So if we ended the year today, which was I start to say that uh the S and P WED it would be twenty it would be return and bonds at eight percent in this interest rate environment, to have an eight percent return in fixed income is surreal, So then why not just cash in well, we have to stay fully invested. Were so much of what we do is either funding liabilities or relative return, and we're not market timers, and we're not

good at that the timing thing. So we're about a fifth of the way through earnings. Anything jump out at you. Here's you kind of parsed through some of the early country reporting. Yeah, the banks have done really well. Again, I was surprised at how well the bank earnings have come through, and and um, so that was that was a pleasant surprise. We're we're gonna be looking at Microsoft coming up and the Amazon comes up this week also, so we're watching that. Sorry, are you long the banks

right here? How's your exposure? Yeah, we've we've we've shifted. Um, we we swapped Bank America into City. We still own JP Morgan and we're trying to get into the regional sleeve. Um, we've been longholders of Wells Fargo and we're encouraged by new management. So very good. Greig Han, thanks so much for joining us. Craig Han as President, chief Investment Officer Winthrop Capital Management based in Indianapolis, but joining us here

in our Bloomberg Broker's Interact. Their Brokers studio. Greig, thanks so much for joining us. All Right, now let's shift gears to UBS for getting earnings from a number of banks UVS reporting it's investment bank lagging behind here with all the details. Alison Williams, Bloomberg Intelligence Senior Financial Analyst. Alison, what are sort of the highlights of the financial report here? So? I think the number one highlight was the strong wealth flows,

especially in Asia. This is of strategic importance for you, bas It's I think why a lot of investors own the stock and we saw sort of a dip last quarter, very strong flows there and invested assets at a record. Obviously we have to watch what's happening with asset prices going forward. The negative, um was the investment bank because you pointed out and so profit coming in below expectations. Um, you know a lot of companies have been beating the numbers.

However they're beating, they're beating beaten down expectations and unfixed income treating which isn't a big as big of a piece for UBS. But I think that the critical thing that they talked about was they are they're reorganizing the bank. This is something that Bloomberg News has reported on UM. They didn't say specifics there, but they did say they're going to take a one hundred million dollar restructuring charge

leading to ninety million dollars of annual savings going forward. So, Alison, what do you think what is your view of UBS? Can they continue to be? Well? First of all, are they a global investment bank? And if so, can they continue to be Because we've seen, you know, Deutsche Bank essentially say we're not a global investment bank and we're cutting back. What's the UB strategy? So I think they are global investment bank, but they do have a little

bit of a different mix. So they are more focused on Asia and they are more focused on Europe UM, and so they say they're gaining share in those areas. We don't have sort of all the numbers in from from some of those local competitors to sort of validate that UM, but they are generally more focused on those areas which have been feeling the pressure. And I was waiting for you, Paul to ask me if the savings

meant staff cut. That's where I was going. And I was prepared with my answer this time, which is you always asked me this class savings me and staff cuts. And my answer to you is always like, well, there's staff with Zoso technology and we're seeing both at ubs. And basically what they're saying is, look, you know, we are gonna cut some staff a hundred percent of the cost savings are going to be in compensation, but we're

going to continue to invest in technology. And I think that's important because I think that's really what the US banks have done, right, is that you know, they sort of benefited from this virtuous cycle about our economy. We got the tax cuts, they were able to spend. But I think you know, UMS has had some interesting anecdotal wins in their research department. They have this UM Evidence lab.

They've also invested in their electronic trading platform, and I think that's the story we're going to continue to hear more about. In terms of fixed income trading. We also got this big announcement from Deutsche Bank. We knew they were going to be making cuts to their rate business, Bloomberg News saying they think it's going to be ten per cent. Um also saying, and again this is hearsay, but you know that the bank is going to continue

to invest on technology. You know, the shift in fixed income trading that we've seen in equities trading I think is going to continue, and I think it is important. And to your point, if you want to be a player, that you need to invest just get your sense. Do you think that UBS would be better off just as a wealth management unit and not with its investment bank?

I think And that is the questions that investors asked because I think, you know, when people look at companies like UBS and Credit SUITEZ, that's what they want to own. They want to own the wealth management business, recurring revenue, very high return on equity um. But there are sort

of benefits of having the investment capabilities. Think about wealthy Asians that want to sell their businesses, the M and A opportunities, the financing opportunities, and UBS and credit switets, you know, continue to pound the table to make the case of the synergies between the banks. You know. I do think that there is some, uh, there is some

validity to that argument, um. And I think we will see from from Credit Suite next week, who has also been under pressure given they're sort of trailing trading revenue a lot of which I do think it is due to mix. You know theyy I think are going to continue to outperform when they report next week. Alison William thanks so much for joining us. We really appreciate. We know it's a busy time with the global investment banks

reporting earnings. Allison's the senior analysts covering global investment banks and asset management for Bloomberg Intelligence, joining us on uh the phone. Well, we all know that the cannabis market in the United States is growing rapidly and there's a lot of players that are trying to find their niche within the business that includes the marketing and advertising and education around cannabis, and our next guests are certainly trying

to make their mark there. We welcome Jeremy Jacob's, co founder and chairman of Enlightened, and Colby mackenzie, co founder also on their board of managers of Enlightened. Both of them join us here in our Bloomberg Interactive Brokers studio. So Jeremy and let me let me start with you, which give us a sense of what Enlightened is and what you guys are trying to do in this market. Yeah, so Enlightened feels a really interesting niche. We're the largest

media company within the cannabis space. We operate a network of television screens and roughly a thousand cannabis dispensaries across thirty six states and three countries. Really to kind of get a feel. If you imagine standing in line and you look up and there's a television screen. It's educating you, it's entertaining you, but it's also advertising to you. That's the biggest part of enlightened business. So Colby, how often are people standing online at a cannabis dispensary able to

watch television? Yeah, it's It's actually an interesting thing because I was definitely a newbie to the space when I co founded this with Jeremy and expected it to be like most of a retail where you just walk in walk out as fast as you can. But you've kind of seen this trend in retail as a whole, and cannabis is kind of leading that, and it's really become like this experience. So you're not going there just to

have a quick general store type transaction. Instead, you're going there to experience and learn and really find your niche within the space. And so we actually have tracking technology that says they're in there for twenty one minutes. Okay, when when when you say you're in cannabis dispensary for an experience, I know, I just think, okay, so you go there to get high? Is that? What's going on? UM?

A little different than that. So, because there's so many different strains, so many different types, so many different things that you have options, it actually is like information overload and it turns into this like please help me, like deer in the headlights type experience. And that's why our screen is there to kind of guide them along the way without feeling embarrassed. So, Jeremy, what are the types of advertisers that advertise on the Enlightened Network? Great question. Really,

they fall into two categories. The first one is obvious, the endemic advertisers the products that would be carried on the shield same way if you had a screen in a convenience store and be obvious to promote candy balls and cokes, well, vape pins, edibles, uh, you know, premium bud that's prepackaged. Those types of advertisers. But what we're seeing really more than anything, is an increasing demand from non cannabis companies that have decided to focus on that

cannabis market. For example, Vice Showtime, a lot of entertainment companies that come out with programs like Long Appetite Obviously that's catered towards the cannabis market. Uh. And then you look at companies like door Dashes an advertiser of ours, and Vans delivery of food that's excellent for cannabis consumers both hungry and lazy, as well as Vans, you know, a very popular skateboarding shoe. So there is a portion

of the cannabis demographic that that fits perfectly. So we're really seeing a growth in the non endemic advertisers in a really big way. How many cannabis dispensaries are there so interesting question because it is a transition from a gray market in many states to a legal market. So from a legal perspective, you're looking at about five thousand cross the nation. So I guess that when you say it's a gray area, are there other facilities that have

access to your television feed? Sadly, no, we actually only work in the legal ones. But sadly, when I say gray, you're talking largely about like a California market where it was medical and it was very kind of gray as to what was a dispensary. We've always had a role in a board. Our board is very strict on this rule, legal or no TV for them. So so Jeremy, give us a sense of and Kobe as well. I know

you guys have maybe some maybe different thoughts. Where are we Just give us a sense of where are we in terms of the states, How many states have legalized marijuana, and what is I would guess the holding grail for the industry would be a federal legalization. Give us a sense where you think that might be. Yeah, so you've you've got about a dozen states that are now recreational. Uh, and you know that's really when the tipping point occurs,

especially for sales volume, is when you go recreational. Outside of that totality, you've got around thirty thirty three thirty six, depending on how you look at medical marijuana, whether it's been elected or actually implemented. So you're looking at two thirds of the country past that there's at least decriminalization and most of the other states. There's very few states that don't have some sort of cannabis legislation that's in place.

As far as federal legalization, I think that's a big debate with everyone, but most of us with inside the industry definitely feel it's within two years. You know, it's a strong political marketplace right now, and so everybody wants to grab ahold of that. I wonder how much though the vaping scare recently has sort of set that effort

back me. I mean, have you've seen a sort of fewer people showing up to the dispensaries or if not that more pushback from regulators and so the interesting thing on the vaping scare is, I feel like you saw

a ton of reaction outside the industry. Inside the industry, it was it wasn't really viewed in any major capacity because it actually shows a sign that you need to move towards legalization because with legalization you have more regulation, particularly coming from federal assistance and money, and all of the illegal activity and kind of the vaping scare came from stuff that turned out to be not legal. Jeremy, we have literally twenty seconds. How much buying power do

these people have? Cannabas consumers are some of the strongest bars on the planet. There's some of the most loyal They're big spenders. They spend on averages short of a hundred extra dollars on cannabis, and so they've been proven to be some of the most loyal, biggest spenders. Jeremy Jacobs as well as Colby Mackenzie, co founders of the company Enlightened, which runs a television in dispensaries across the country. Who knew that it was twenty one minutes in in

a cannabis Who knew a lot of these things. We're having so many people associated with the cannabis business come in here, and there's so many different ways that this is actually growing as a business. Yeah, and then it's a it's a real big money maker. The official data is confusing, conflicted, and often not enough. That has been the conclusion of many investors certainly that are looking for alternative sources of data, one of them being yelped, where

you write reviews of the places you go. Uh. Carl Biolic, Data science editor joining us here for yelp in our Blombergadder Actor Broger Studios. Carl, can you give us a sense you have this yelp economic average? Can you give us a sense of what it is and what it's showing us right now? Sure, it's a look at how businesses are doing, and how consumers are engaging with businesses

and how that's changing. And it's across many different industries and all across the country, including in fifty metros that we track, And we just released today our third quarter findings, which show that things were pretty flat. The economic average was up about zero point one percent, so a little bit of good news, sort of the sum total of all the different things we saw affecting the national and

local economy in the third quarter. So, Carl, is there anything did you guys in your data see any regional differences. Are certain parts of the country doing better than others. Yeah, this time we really focused on California and California metros which have been struggling, in particular in the Bay Area. San Jose, out of the fifty big metro's we've been tracking for almost three years now, has fallen the most and San Francisco has fallen the second most, So it's

a pretty clear picture. In northern California, Sacramento is also below average. And then if you go to southern California, San Diego is one of the worst performing metros. In l A is in the bottom town as the West wrong with California. Well, so this has changed since the third quarter of fourth quarter of sixteen. So there's certainly many great things going on in California. I say, is you know California based business. I mean, there's there's great

things in the economy. It would be one of the world's largest economies. There is what nasty letters from people living in California. But you know this has changed, so

there are struggles. There are declines that we attribute, we think mainly to just the difficulty of being able to set up shop in California and then to find workers who are near your business and to be able to pay them enough that they can afford to live near your business while still turning a profit and having enough customers nearby who are going to give you that density that you need to to stay competitive. Are there areas where you saw a surprising amount of strength. Yeah. We

we've been tracking for the last two quarters. A We call the five boom towns, the ones each quarter that have grown the most since the start of this series three years ago. This time, Milwaukee was the strongest. There's also strength in Buffalo, Portland, Maine, Honolulu. You know, maybe these are not the ones you would put on a list normally, and you know, what do we say they have in common besides that they've been doing very well

in the ELP economic average. But we do think there are these smaller metros that have been able to attract businesses and uh, you know, allow people to take more risks perhap. But is this is this a real sort of sense of where we are in terms of you know, however, many years into this economic recovery, the areas that kind of lagged behind for longest are finally seeing some positive momentum in their local growth. Is that sort of the

story here? I think that's a big part of it. Yes, I think we are seeing that there are places that if you had checked in, you know, ten years ago and where were they relative to each other, you might see something really different. And that this last three year periods of interesting period, as you're saying, like in terms of recovery. We've had a new president during this time. So it is really just this change through the history of this average, and we're gonna be interested to see

what's the boom town in one year, in five years. So, Caroll, one of the great things about the YELP reviews is the restaurant reviews, So what are you seeing in that categories.

I'm sure you guys have a lot of data points there. Yeah, and we're looking at reviews potentially, but also all the other things people do with restaurants and seeing that really the lower priced restaurants and the restaurant and food options that you might go to when you really want to eat at home and they're supplying food that you're gonna take and eat at home, those are the strongest um.

You know, there are some exceptions, but we're also seeing some of the more expensive categories and restaurants declining, which you know, could be a signal that people are being more frugal, but they might also just want to eat food made outside the home more often, so they're going to lower priced options to make that possible. But it's interesting to see strength in some of these categories like

pizza and chicken wings and delis. Although this all goes together, right, some of the higher priced markets are seeing the slowest growth, and you know, when whether it's in other businesses as well. California, I know that New York with property, but you're also seeing slower growth or less popularity at the higher end of restaurants. What is the implication economically if the high end is starting to pull back a bit, I mean, it could it could suggest that there's some lack of

confidence in you know, spending money and consumption. Uh, there are other signals we look to for that, of course, but you know, I think that it's it's a complex picture because I think there's also just shifting geographically and that may have to do with how expensive markets are, but also what the local regulations are and opportunities for workers in different sectors around the country. And in terms of food, I think one thing that we've seen as a company in general is just a stepping up of

quality in the lower price categories. So I think people also have recognized that that, you know, what used to be considered like fast food, let's say, has has really stepped up in a lot of cases. You know, some of the lower priced local restaurants as well have really been competitive in quality. Carl bial like, thank you so much for joining us. Carls a data science editor for YEP, joining us here in our Bloomberg Inactive Broker studio. Thanks

for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Boy. It's I'm on Twitter at Lisa A. Bramwoy. It's One before the Podcast. You can always catch us worldwide on Bloomberg Radio to belated