Surveillance: Golden Age for Security Selection With Kantor

and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course on the Bloomber So the Persian Gulf into the Straight of Homer's into the Gulf of a Man, and it's in the Gulf of a Man going into the Straight of Homer's that we've heard from two tankers who were reportedly damaged in a suspected attack just in the Gulf of a Man, just

weeks after a previous incident in the region. One of the owners, So we've got a Japanese owner of one of these vessels telling local media it had been hit by a shell. The second tanker, this tanker is owned by Norway's Frontline, suffered three detonations. This is according to the Norway Maritime Authority. Both ships have been evacuated. Crude

yesterday had a really sessions. We bounced aggressively off a five month low this morning, up around about three percentage points on both Brent and w C. I to get some more insight and clarity as to what is happening in the region. I want to bring in from Dubai. Anthony Di Paola Bloomberg Middle East Energy Markets Reporter, Anthony, Good morning to you, sir. Just walk us through what we know so far and what we're learning is the

as progress. Good morning to you there. Well, what we're really looking to learn still is what the exact cause of these attacks was. We we don't know. In the case of either ships. There were explosions, there were fires on both ships, but you don't know what caused those, and then we will be looking for some responsibility. UM. The attacks that you mentioned that took place in the Portafu Gerra just last month. UM, people there, the US, the saluities pointed the figure at the finger at Iran.

The UA itself hasn't yet a signed to blame. They said it was a state actor involved, so we'll be looking to see where the blame is pointed here. We do know that the cruise have been taken off those vessels. UM. There are, as you've mentioned, rescue and and and retrieval operations going on there to try to secure these vessels and and and luckily that the cruiser are safe. But we will be seeing a lot of additional mayhem in the markets, both oil and shipping as we go forward

and see what the follow from this is. In your world, there's Abu Dhabi, and then you go up to Dubai, and then you go up to russ alcame if I'm pronouncing that right, how far or close emotionally is a strait of Hormuz for the United Air Memorates and for that matter, for all the oil producers. Is this like an event right next door or is it removed? No,

this is this is clearly next door. Uh fuj Eira, the port where the attacks took place last month is an hour by car from Dubai, just cutting across the mountains. Abu Dhabi, Dubai, Russell Kinma, they're all on the US there. You didn't mention where the one of the other emirates, Sharjah Uh that's one of the emirates that had several islands taken by Iran just when the UA declared independence in one Uh. It was that that weekend that that the u A formed as a country and Iran seized

three islands in the Gulf. So you know, these tensions go go way back uh, and they are coming back. But this is really um right in this neighborhood right here. Uh. The you mentioned one of the tankers had filled up in in Abu Dhabi in the port of Ruwyte. The other tanker co loaded a cargo of methanol that's another royal product uh in uh Katar and then went to

Saudi Arabia. So the last ports of call ports of call for these two vessels were Saudi Arabia and the U E. And they were hit just outside the straight of four moves, the choke point that leads into the Persian Gulf. Anthony rites to cant help with me this morning to get some more insight on this. That's Anthony de Pounder that Bloomberg's Middle East Energy Markets reported joint to get sat At Baby. Now to Jason Gammon, now Jeffrey's Energy Research unless he joins us out of the

city of London. Jason, good day to you. Let's talk about the price action. This kind of incident took place a number of weeks ago. Crude rolled over by one ten since then, how do you frame this just in terms of the price action and crude right now, Jason, Jonathan I think we have a real tug at war between extreme concerns around the demand side and UH that's been corroborated by a large inventory builds in the US.

Relative to all these potential disruptions to supply. We know that the UH the Iranian sanctions are starting to really bite into their exports. Even more. We know Venezuelan exports are down. I would have thought that the supply of tide concerns would have been really driving the price action. I've been dead wrong. It's really been more than con turns on the demand side. So when you have these two factors that are both potentially extreme, that's what leads

to this high volatility and price. Let me cut to the chase. You got a high volatility in price, but I got a vector down. Many others are telling us stability or vector down an oil price. Is this tanker attacked an opportunity to short the market. Well, Tom, I I think the other big event that is coming up is the the OPEC Plus meeting, which could be on June, could be delayed into July. I think that that is a relatively critical event. I would see that as an

event that probably has more downside than upside. To it. Uh, simply because I think the markets already pricing in and extension enough cuts into the back half. So you know that that might actually be a real catalyst if you if you want to short the market. And I want to explain that Mr Gamble, My question is what we call rude and Mr Gamble had answered that question John in a graceful way. Is any gentleman from the sales side would and I do apologize for saying should we

short the market? Like in the next hour, Grates have Jason with us because Jason didn't just come with the commodity also covers the names the energy producers. So Jason, talk to me about what on earth people should be doing right now the companies that fall under your coverage because so many people have been burnt by the energy

players as they start to see crude inflec higher. Well, you know, I think when it comes to actually investing in the equities, Jonathan, it's it's important to remember that these companies have really restructured their businesses to be able to fund their capital and dividends down to fifty and barrel. Uh, we we fit that Sprendt. That is, we are actually seeing pretty good valuation in these names. Uh. We believe that the market is now just discounting about fifty one

dollar oil into the price they're playing. They're training at standard deviation below U. There are historic pe relative to the market, So I think there are good investment opportunities in the equities. I would say that if you think oil prices are going down, we probably want to wait to put on those equity trades. But we think there's a good die you here, Jason, thank you for the briefing. Jason, Kamba and Jeffreys Quickly. We had Paul Tutor Jones in

yesterday and Charles cantre joins us from new Berger. Berman Pharall is going to bring him in and beat him to death because this is the global Wall Street discussion of the day. We're not going to talk about Whole Foods and Amazon. John. I can go to the Bloomberg and see that avocados are two point four standard deviations higher. Nobody cares. Let's talk about the courage in the market. I think it's really really difficult right now on a

sector basis to position your portfolio. And what I'd love to talk to you about, Charles. The conversation had yesterday with Henry people in Advanced and he said, look, if you want to slip strip out the trade story from your portfolio and focus on sensitives that are less focused on sectors that are less sensitive to trade, you'll effectively end up exposing yourself to a really really domestic cyclical portfolio.

And vice adversity be trying to strip out the cyclicality, you'll end up with the portfolio really really exposed to trade. So on a sector bast basis, it's really tough right now, Charles, Yes, and it's it's a stock picker's dream right now. John, it's um and and and you see that in the results of of of just those that are focused on on the individual securities and and and can manage and

understand valuations and volatility. You can't strip out global trade because because our companies thankfully have become global and they've taken their products to the global stage to grow their earnings and cash flow. And so those moments where where people where the factors are driving underlying securities becomes the golden age of stock picking. And for us, we were

fortunate because I don't think of us as radioactive. I think of us as double active because we get to take advantage of that opportunity on on both sides of the book, both being long and short. And so we we love opportunity set right now in in in in loving in in running a fundamentally driven long short equity strategy. And and it's super exciting because the factor stuff um is breaking down and and and the underlying security analysis is working again in a big way. So walk us

through the process. Just help us understand a little bit how you're approaching these securities at the moment. Look, look, we've we own securities that went down forty five percent in the fourth quarter and went up forty five in

the first quarter. And I'll tell you nothing changed other than someone decided that was a fact that they didn't want or it was a factor that they did one and so on the long side of the book, it's all about understanding marginal safety and being an owner of businesses.

And on the short side, it's it's rapid five, take advantage of the volatility, make make ten or twelve percent and move on and and and stocks stocks are reacting to news and fundamentals, And I think it will be very interesting from here for the next couple of quotas, because you know the stock markets were rebounded five percent. Yes it's two percent off, it's high. Yes, it's up

a lot since since Christmas. But but but, but the fundamentals, I think given the global trade, I think you'll see a weaker earnings outlook as the numbers come through, and that will create more volatility as well. Tell us the physics of not the growth of revenues, the growth of operating income, the growth of free cash flow, but the persistency or or inertial force of one of those given metrics. To me, I look at consumer stocks, what evaluation and

their ability to do it every day. Look on the consumer side, it you have retailers out there that will remain nameless for now that are trading at three times earning, three times ibada um and and the view there is Amazon and others, Um I'll putting you out of business each of them every day. And you have a real estate footprint that is way too large UM. For the side, we would be very reluctant to own those despite the valuation, because I think investings about thinking about the future, not

thinking about where we've come from. UM. And so it's it's The big debate right now is is we are late cycle. And the question is what do you want to own when you laid cycle? You want to change and and I think my experiences in a recession, the value stocks actually get murdered because they are the most cyclical and low PE be comes infinitive pe because the earnings evaporate. And and and I think we stay focused on those businesses that, because of their secular dynamics, can

continue to grow. And revenue growth solves all other problems because with it just does and and and it allows you the flexibility to to to to ride through um a cyclical slowdown. So you said it's the golden age for security selection, but you sudden wouldn't go as far as it's the time to begin picking up the value. I mean you think it's dangerous to start going down the value I wouldn't be going down the value chain.

I would stay focused. I think you have to understand value and values in the eye of the beholder of course, um um. I mean look on the other side of the equation, you have software software companies that have unbelievably clear revenue growth prospects trading at ten eleven twelve times revenue. I'm not sure i'd go there either, UM, And I think I think the goal of us is to squarely in the middle. But we we were staying away from the cyclical stuff on the long side. Much more likely

to find that on the short side. UM. Just given where we are in in in you know, at the back end, not the end of the cycle. I don't think we anywhere near the end of the cycle. But we're much closer to the end of the cycle than the beginning. And I think the debate we have at our firm is will value work better than growth? And I think growth just works better because because despite low valuations,

the earnings um of a cyclical company evaporate. UM. In in a down to really smart shoves and great to see you as always. There's change cancer their new burger Berman, what do you have? It's gonna bring a Cathy James falls Okay, fringing, but please insist swap sense for financial Research Chief Fixed Income Strategies, Cathy. Great to have you with us on the program. Tom and are talking about

the demand for sovereign paper is quite remarkable, isn't it. Yeah, it is, but you know, when you think about it, there's just so little yield out there, particularly in sovereign paper that UM. If your pension fund, insurance company's sovereign wealth fund, you need, you need to buy something with yield, and you're gonna go. Okay, wherever you can find it is dividend growth, your new yield. Well, it's part of it.

You know. When we talked to our m clients, what we talked about is, you know, getting yield in UM wherever you can get it right now, balancing that against the risk that you're taking. So, Cathy, let's talk about the risks. Nomura coming out with the really interesting survey and it's from the team in Asia, so this is an Asian audience to think about that. There's a bit of a regional bus here, but I still find it fascinating.

The following quote. Around seventy of the participants expect Trump policies to be the most important determinant of risk sentiment in the next three to six months, followed by China stimulus. Less than ten percent viewed the US FED as an important driver. Just ten percent in the survey saw the FED and FED policy as the most important determinant of risk sentiment in the next three to six months. Kathy, what do you think about that? Well, I think they

might be underestimating the influence of the FED. But I do think, you know, it makes sense because the you know, the administration's policies towards trade are really contributing to what's going on in the market. So if you look at what's slowing down manufacturing in the world, well, certainly a big contributor to that is this trade conflict and what's weighing on sentiment in certain areas, you know, the trade conflicts. So to some extent, that makes sense. But I wouldn't

underestimate the Fez influence on the market. If you did an efficient market analysis. Let's say it's right, now, what's your waiting to fixed income? It's actually it actually well it depends on the person obviously, But you know, we're still pretty much in a sixty forty world because we're we're relatively cautious about the equity market because of this slowdown growth of that we're anticipating, and so we're we'd still be probably sixty forty maybe you know, in cash.

So if I got this right, I mean, forget about the equity market, folks, go look at the double digit returns you've seen there. If I'm priced up in fixed income, how do I lock in that gain and adjust to your new reality of equity caution? Yeah, so it's been a you're to date has been fantastic in the fixed income So what do I do? Fantastic? Yeah, people don't realize how much total return has gone up. Well, we think you you have to shift up in credit quality.

So hild had a eight percent total return I think here to date on the end of date or nine. That's six a year, folks. Just for those keeping score at home. Yeah, we're not multiplying by two. Oh well, I can do that because it's show biz. But our expectation is, you know, second half of the year at best, you probably earned the coupon. So we'd shift up in credit quality here, and that allows you to lock in some of the games that you might have gotten on

the right gear part, Kathy. For a more adult view of the fixed income market, I recommend The Real Yield Fridays one pm a Bloomberg Television because John Farrell doesn't multiply by two. Kathy was on it recently appearance she had hire an ento uge just to look important. Said Kathy, pissing me on that statement going up in quality? What

does that actually mean? So that means if you're and say the corporate bond sector, we would limit the exposure in high yield and in even an investment grade, we wouldn't get too concentrated at the lower tier, particularly the triple B area, which you know everybody knows is expanded in size and is now half of half the universe.

So we try to work in some of those single A names and a little higher so that you're cushioned if we do hit um, a downturn in the economy, you don't want to have too much exposure to the weaker credits. Does this work both ways, Cathy? If you avoid the triple bes in investment grade and avoid the triple seas and say hi yield, but you want the single aiser investment grade, do you want the double bees in high yield or you just avoiding high yield altogether? Um?

You know, I don't know that you'd get a tremendous amount of safety in the double bees. Um. If we go into a downturn, I think high yield will probably all moved together. So avoid some of these situations in the credit market, it's and the self renmark. I think

we also need to have a conversation as well. We've had a big move in ten years, in thirty years, if you want to pick up some duration on the U S side of things, because you think that's going to be an effective hedge into a downturn given the move we've already had, Kathy, does that make sense? You know, you always need something because it's your single best Treasuries tend to be your single best diversifier versus stock. So if you're worried about the stock market, you want to hedge,

you don't really have a lot of other options. But I would say, given the move that we've had a little bit, I'm a little reluctant to say now is the moment to add a lot of duration. You know, it goes a great idea six months ago. Right now, I think we could probably bounce. And I think the market is built in a little too much in the way of fat easing in the near term and a little too much on the downturn that everyone's expecting to

come to the reality. And I just bring up Caterpillar because I just interviewed the Darren Hood the congressman from pure Illinois. Get a Caterpillar piece out nine years with a big fat coupon, is trading at one way over premium way out there to yield three point one percent. I mean even you know, in the old days of the SMP bond ledger, you know Pim Fox would bring it in for him and I look at how do you do this in corporate bonds right now with those

low yields? Yeah, that's what trouble. The spreads are so tight, um and so far below average. So what does someone do a swap? I mean, what what are you buying fixed income given price up? Yeah, well we're you know, we're staying. Actually we're suggesting barbells, some short term paper

and some longer term paper up and credit quality. We actually like municipal bonds because the yield curve is actually normally sloped in the municipal So you're the thing to say, for a taxable investor owned munis, it just depends on your tax bracket. It could make sense um, and particularly in in a higher tax state, it may actually make sense over corporate or treasury. I mean, Kathy Johns think of so much with Schwab's off hormos Hong Kong protests,

they yield, the world's coming to an end. None of it matters. There is only one story today, particularly among the ut of America, in the ute of Wall Street, and that is you are with child and how many weeks do you get off? And of course I come with us with the ancient view of you were like back to work in two days. Rebecca Greenfield and a guy named x Abelson Wright the read on Wall Street Today, Wall Street Dad's find parental leave easier to get than

to take Maxiet the ball out of the park. This is so so true. I'm given ex as or x weeks and I'm glued to the phone at home. Well, your listeners know that you're very hard to impress, so I'm really glad you feel that way. What do you do? Don't give me that, Rebecca, let me talk to you. Do you are you of child? Do you know? I don't, I don't have This is a huge deal. I mean we're getting there with women Dad's. I think it's really cool they take X amount of weeks off, But there's

massive guilt the whole way. Is Jamie Diamond upset that somebody at JP Morgan is off for X number of weeks. I don't think you would say that. I think the banks are happy to be offering more and more time two people. UM they offer. They keep upping the amount of leaves that they are offering. UM. They offer up to sixteen weeks for primary caregivers and then a varying amount of time for secondary caregivers. But what we're finding is that by that time they're ready for s a prop.

I disagree. I don't know about your kids. Evidently you've got supercocious little ones. Um. I. I think a lot of dads want to be home for that amount of time, and I think a lot of moms would appreciate them

being confident. Okay, Max, I have to ask is this Are people finding it difficult to take this time off because their bosses are telling them that they can't, or because they feel guilty and they feel like their careers are going to suffer and they have not adjusted yet to the mindset of taking off weeks at a time in order to change diapers. I think guilt and fear

definitely play a role. And we didn't talk to anyone who said, Lisa that there was an overt message from a boss being like, you know, Tom, do not take this leave. It was a little bit more ephemeral and the signals were more subtle. So, for example, we talked to this guy named ka Hi who was he was an m D at Black Rock, who talked about these nudges and winks, you know, hey, will we be able

to reach you while you're gone? And it's that kind of thing that gave him the feeling like, you know what, what could possibly be so interesting that you would want to leave here for you know, ten days. I think he said something like, you know you're you're not the mother,

So I guess that Rebecca, you're not the mother. And yet I'd really be curious to know how many women who go out maternity leave are still fielding phone calls and emails from work and don't fully disconnect as well, I mean, other words, how many women don't fully take off their leave. Also, I think there are certainly people who take time off and still are connected to work.

I think the difference between men and women is that it is sometimes physically a lot harder for a woman if she has given birth to walk into the office the next day, and in a culture that really values that um it's going to be easier for men to do that. And so men do that, they do they can go back to your vast research. Did you find their women at home taking off X number of weeks?

Everybody's loves it, great, great, great. Where they're basically saying to the dad, after one week or two weeks, here's the door, what's your hurry? Go back to work. It was more like talking to guys who said when I asked him about parents of leaving, I said, you know, I'm max tables sunds from boomer News about parents leave. I got emails back being like, what paternity leave? What are you even talking about? One executive told me that he didn't know a guy who took a paternity leave

longer than a week at all. And you joked about people coming back to work to two days later, and and Becca just talked about how physically difficult it is for women to bounce back. I spoke to a guy who was a trader at JP Morgan. He literally came back to work that day his daughter was born. He was back. I've never done that. I didn't go back.

You get I also just want to point out I want to point out that technically, these banks offer four months off to all parents, and then you know, between two weeks and six weeks off to other parents, So some dads can if they want, they are allowed to four months. Lisaway in here on this because you're facing this every day. I mean, there's offspring Brama Witz is well,

and you know it is a change society. I talked to a senior officer Bloomberg about this at length the other day, Lisa, and it's almost like the companies are out front of the employees. Do you sense that, Lisa, Yes, I think that that is. I think that that's really fair. In other words, how much are people in the mindset men in particular, to take that time off and be at home, especially because it's actually kind of grunt work

at the very beginning. People don't really talk about this, but the baby doesn't do all that much at the very beginning. It really is changing the diapers, doing doctors visits, getting accliment tied to the idea that you're not going to be sleeping all that much. But Rebecca, I guess that I'm curious going forward what companies are doing to try to foster more of a culture of taking this

time off. I mean, has there been any discussion about perhaps having flex time, not necessarily taking an all at the beginning in sort of a a three month chunk, but basically bleeding it out over time, with being able to take days to take the kid to the to the doctor or fill in after the wife goes back

to work. Yeah, so a couple of things. Um. One thing companies can do is just offer the same amount of time to all parents, not have these tiered systems where some people get two weeks and some people get sixteen weeks. And then there are also companies allowing for more flexibility so you don't have to take it all in the beginning. And like you said, you know, I think some people might think it's more helpful to have their partner there later. Not right, Can I take flex

time with a twelve year old? So I go wait in line at Glossier for four hours to get in? Thank you, Max, the right answer. I need to switch hears when we've got Rebecca with us in Max, we we've got to switch user. Max. I need an update with you with all your Wall Street perspective on the future of Deutsche Bank New York. Oh boy, well, Deutsche Bank just can't seem to get out of its own way. I mean, what's the energy. I mean, Sally Baska and you you're on the street, you're needy, buried in this,

give me the future Deutsche Bank. And then I got a question for Rebecca Well. I gotta say, if you want to know what's going out of Deutche Bank, you talked to Shinali, not me. But let's just think about what bars you know? You come on, you know the gossip Max Trouble. Yes, Tom Guineas tried to get me in trouble many times. I'll just say this. My friend Kay Wiggins, one of my favorite Bloomberg colleagues in England, just reported in the last I mean this was like

literally yesterday. Every day it feels like there's something new that seems like something from a showtime show happening. Deutsche Bank apparently had these red flags that were going up about kickbacks, and Deutscha Bank was just doing nothing on Florida,

doing nothing, but that they didn't worry. So I mean, I think that if you without getting in trouble honestly can answer is if you pull up Bloomberg News on any given morning, you'll find out some sort of like bone rattling, Rebecca, Rebecca, I gotta go to you just because the time I'm running out. Rebecc Greenfield, you bleed the Atlantic. It is iconic magazine in America. What do you see in the magazine business right now? What's the

two thousand twenty of magazines in America? Of magazines? Um, I don't know that I'm I'm qualified to talk. You know, you did did the whole thing in digital in the Atlantic and all that. Yeah, I I uh, what is I think? Um? Everyone in trouble today. I know. I think there's a big conversation right now happening about who should be writing magazine cover stories. Um, set off by the editor in chief of The Atlantic, Jeff Goldberg. K Um suggested that only there are more white male candidates

qualified to write magazine story. So I hope the future of magazines is a move away from that and more experimentation and who writes what's very cool? Rebecca Greenfield very good on journalism and her work there in Max Abelson on the Gossipel Wall Street Combined Today, Lisa Abramowitz, I love this line. Wall Street. Dad's find parentally easier to get alright under it is, so who wrote this headline?

To Max? Did you write this? I think we've got to give a shout out to Janet Paskin I editor, Lisa. What do you think, Tom? I think it's great, you know, because you're putting everyone on the spot. What's your view in vlogs because you have you have you have a daughter. Yeah, I'm not I'm not happy about it. Where this is a massive debating home. I mean it's it's like massive. We're like digitally diminishing at the Keen household, digitally diminishing

as best as we can. I feel like, what is this? I feel like I'm on the view right now with Max back up. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide Bloomberg Radio.