1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 2 00:00:04,040 --> 00:00:05,240 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,720 Speaker 2: Every business day we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,600 Speaker 2: and Bloomberg experts, along with essential market moven news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever 6 00:00:17,360 --> 00:00:20,480 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. 7 00:00:21,160 --> 00:00:23,360 Speaker 1: Let's bring in Data Peterson. She's a chief economist this 8 00:00:23,440 --> 00:00:25,920 Speaker 1: conference board. Dana, thanks so much for joining us here. 9 00:00:25,960 --> 00:00:28,400 Speaker 1: Talk to us about the Leading Economic Index. What it, 10 00:00:28,720 --> 00:00:31,040 Speaker 1: what you guys reported today, what it tells you, and 11 00:00:31,040 --> 00:00:32,159 Speaker 1: what should we take away from all this? 12 00:00:33,280 --> 00:00:37,040 Speaker 3: Absolutely so, the Leading Economic indicator fell again for I 13 00:00:37,040 --> 00:00:42,160 Speaker 3: think the fourteenth consecutive months, and the weakness was definitely 14 00:00:42,240 --> 00:00:46,360 Speaker 3: in expectations from the ism in terms of manufacturing and 15 00:00:46,400 --> 00:00:50,120 Speaker 3: also from consumers. And then the yield curve continued to 16 00:00:50,159 --> 00:00:55,120 Speaker 3: be negative, and also the leading credit indicator was negative. 17 00:00:55,480 --> 00:00:58,600 Speaker 3: So that's all telling us that there's still some weakness 18 00:00:58,600 --> 00:01:01,480 Speaker 3: out there. There's still expectations that maybe we'll go into 19 00:01:01,520 --> 00:01:06,080 Speaker 3: a recession. Certainly it's pointing to recession starting probably about now. 20 00:01:06,160 --> 00:01:09,080 Speaker 3: I know we keep forecasting it, but the key thing 21 00:01:09,200 --> 00:01:11,800 Speaker 3: is that there's been strength in the labor market that's 22 00:01:12,000 --> 00:01:14,600 Speaker 3: definitely forestalling what we think is the inevitable. 23 00:01:15,319 --> 00:01:18,560 Speaker 4: It's interesting because even though it's a leading economic index, 24 00:01:18,600 --> 00:01:21,200 Speaker 4: a lot of investors look at it more as lagging, 25 00:01:21,400 --> 00:01:23,640 Speaker 4: just because of when you're looking at the economy, and 26 00:01:23,680 --> 00:01:26,200 Speaker 4: since investors are looking you know, six months twelve months out, 27 00:01:26,240 --> 00:01:29,319 Speaker 4: do you think that's why we're seeing the stock market 28 00:01:29,360 --> 00:01:31,959 Speaker 4: more supported. Do you think investors think the worst of 29 00:01:31,959 --> 00:01:33,319 Speaker 4: the pain is already passed? 30 00:01:34,680 --> 00:01:38,120 Speaker 3: Well, I think investors are looking at data like labor markets, 31 00:01:38,160 --> 00:01:40,600 Speaker 3: and indeed, in the leading economic indicator and even in 32 00:01:40,640 --> 00:01:45,560 Speaker 3: our current economic indicator, the labor market data are holding up. Why. 33 00:01:45,720 --> 00:01:49,000 Speaker 3: It's because of labor shortages and so many businesses instead 34 00:01:49,000 --> 00:01:52,200 Speaker 3: of letting people go, they're holding on to their workers. 35 00:01:52,240 --> 00:01:54,920 Speaker 3: And then you also still have a number of sectors 36 00:01:54,960 --> 00:01:57,040 Speaker 3: that are still trying to catch up from losses during 37 00:01:57,040 --> 00:02:00,600 Speaker 3: the pandemic, especially services that are in high demand. And 38 00:02:00,640 --> 00:02:03,400 Speaker 3: so if you're looking at that, you know, I understand 39 00:02:03,400 --> 00:02:05,800 Speaker 3: why investors might look at our measure and say, well, 40 00:02:05,880 --> 00:02:07,880 Speaker 3: what's going on here? Right? 41 00:02:08,240 --> 00:02:10,560 Speaker 1: So talk to us about the housing market data that 42 00:02:10,639 --> 00:02:12,720 Speaker 1: continues to kind of befuddel me in the midst of 43 00:02:12,800 --> 00:02:16,000 Speaker 1: rising interest rates, still strong. How do you think about 44 00:02:16,120 --> 00:02:17,200 Speaker 1: the housing market right here? 45 00:02:18,240 --> 00:02:20,960 Speaker 3: Well, I think you're coming off of very low levels. 46 00:02:21,160 --> 00:02:23,360 Speaker 3: When you look at most of the housing market data, 47 00:02:23,840 --> 00:02:27,280 Speaker 3: it really slowed dramatically last year, so and it seems 48 00:02:27,320 --> 00:02:29,919 Speaker 3: like we kind of reached the bottom. So you're still 49 00:02:29,960 --> 00:02:31,600 Speaker 3: you're in a hole and you're just trying to climb 50 00:02:31,639 --> 00:02:34,360 Speaker 3: out of that hole. And so the thing is that 51 00:02:34,400 --> 00:02:36,560 Speaker 3: we're probably not going to see a real resurgence in 52 00:02:36,600 --> 00:02:39,720 Speaker 3: housing activity until next year, when we think the Fed 53 00:02:39,760 --> 00:02:41,280 Speaker 3: will begin cutting interest rates. 54 00:02:41,800 --> 00:02:44,560 Speaker 4: So if you're expecting more of that weakness in the 55 00:02:44,600 --> 00:02:48,000 Speaker 4: economy to start around, Now, where is it being driven by? 56 00:02:48,200 --> 00:02:51,240 Speaker 4: Is it the consumer, which obviously you know propelling GDP 57 00:02:51,440 --> 00:02:53,440 Speaker 4: by more than two thirds of when you were looking 58 00:02:53,480 --> 00:02:54,480 Speaker 4: at economic growth. 59 00:02:55,760 --> 00:02:58,880 Speaker 3: Well, it's got to come from several places already. Like 60 00:02:58,919 --> 00:03:02,800 Speaker 3: I said, the housing market, it has collapsed, and we 61 00:03:02,840 --> 00:03:04,880 Speaker 3: don't we think it's just going to be middling, so 62 00:03:04,919 --> 00:03:08,200 Speaker 3: it's not going to be a contributor. But businesses have 63 00:03:08,320 --> 00:03:13,960 Speaker 3: been pulling back certainly on spending on equipment and also 64 00:03:14,080 --> 00:03:17,400 Speaker 3: structures because the cost of capital is rising for many 65 00:03:17,440 --> 00:03:21,400 Speaker 3: of them, and you definitely need consumers to spend less. 66 00:03:21,600 --> 00:03:24,120 Speaker 3: So we have seen a little bit of moderation in 67 00:03:24,200 --> 00:03:27,040 Speaker 3: terms of spending on big ticket items that you have 68 00:03:27,080 --> 00:03:29,840 Speaker 3: to finance. The consumers are still spending a lot of 69 00:03:29,840 --> 00:03:33,840 Speaker 3: money on services, especially travel and restaurants, things they couldn't 70 00:03:33,880 --> 00:03:36,680 Speaker 3: really spend on during the pandemic. So the key thing 71 00:03:36,800 --> 00:03:40,920 Speaker 3: is when that excess income that consumers have, you know, 72 00:03:40,920 --> 00:03:43,040 Speaker 3: the excess savings go away. We think they're going to 73 00:03:43,080 --> 00:03:45,440 Speaker 3: run out of steam in the second half of this year. 74 00:03:45,960 --> 00:03:48,480 Speaker 3: And also we think consumers are going to become a 75 00:03:48,480 --> 00:03:51,760 Speaker 3: little bit more concerned about job prospects and that might 76 00:03:51,800 --> 00:03:53,600 Speaker 3: cause them to pull back on some of the spending 77 00:03:53,640 --> 00:03:54,000 Speaker 3: as well. 78 00:03:54,320 --> 00:03:56,320 Speaker 4: A follow up I have to that is when it 79 00:03:56,400 --> 00:03:59,280 Speaker 4: comes to the repayment for the student debt that was 80 00:03:59,320 --> 00:04:02,800 Speaker 4: delayed off and going through forbearance during the pandemic, that's 81 00:04:02,800 --> 00:04:05,640 Speaker 4: supposed to presume in October. So when you're thinking about 82 00:04:05,640 --> 00:04:08,200 Speaker 4: the consumer and those types of payments that are going 83 00:04:08,200 --> 00:04:10,839 Speaker 4: to start up again, is that also going into those 84 00:04:10,880 --> 00:04:12,520 Speaker 4: calculations of a pullback there. 85 00:04:13,600 --> 00:04:16,680 Speaker 3: Absolutely we have folded that into our forecast for the 86 00:04:17,680 --> 00:04:20,480 Speaker 3: last the second half of this year. And then also 87 00:04:20,600 --> 00:04:23,960 Speaker 3: let's not forget the debt ceiling deal. While that's not 88 00:04:24,040 --> 00:04:26,400 Speaker 3: really going to affect the fiscal year twenty twenty three, 89 00:04:26,560 --> 00:04:28,919 Speaker 3: it does affect fiscal year twenty twenty four, and that 90 00:04:29,000 --> 00:04:31,440 Speaker 3: starts in October as well. 91 00:04:31,560 --> 00:04:32,200 Speaker 5: Dan, to talk to. 92 00:04:32,160 --> 00:04:35,120 Speaker 1: Us about your view of the labor market here still, 93 00:04:35,600 --> 00:04:38,880 Speaker 1: you know, very strong by historical measures here, and I 94 00:04:38,920 --> 00:04:41,520 Speaker 1: know the Fed is talking about they expect the unemployment 95 00:04:41,600 --> 00:04:43,360 Speaker 1: rate to go up and you know, maybe I have 96 00:04:43,360 --> 00:04:45,480 Speaker 1: a fore handle here in a not too distant future. 97 00:04:45,960 --> 00:04:47,480 Speaker 5: What's your view at the conference. 98 00:04:47,120 --> 00:04:50,640 Speaker 3: Ward, Yes, we think also that we're probably going to 99 00:04:50,680 --> 00:04:53,360 Speaker 3: have a four handle, that the unemployment rate may ultimately 100 00:04:53,480 --> 00:04:57,360 Speaker 3: rise by one percentage point to four and a half percent, 101 00:04:57,440 --> 00:05:01,040 Speaker 3: But that's that's not going to happen probably until early 102 00:05:01,640 --> 00:05:05,560 Speaker 3: next year, because the unemployment rate really lags what goes 103 00:05:05,600 --> 00:05:10,160 Speaker 3: on with GDP. And so certainly if the Fed continues 104 00:05:10,200 --> 00:05:12,920 Speaker 3: to hike interest rates, which is strongly signaling a chair 105 00:05:13,040 --> 00:05:17,800 Speaker 3: Powell signaled that certainly to Congress very recently, then that's 106 00:05:17,839 --> 00:05:21,720 Speaker 3: also going the weigh on the economy and consequently the 107 00:05:21,800 --> 00:05:22,440 Speaker 3: labor market. 108 00:05:22,680 --> 00:05:25,440 Speaker 4: What industries do you think are most vulnerable to layoffs 109 00:05:25,520 --> 00:05:25,960 Speaker 4: right now? 110 00:05:27,440 --> 00:05:31,600 Speaker 3: So those pandemic darlings, those industries now are very vulnerable, 111 00:05:31,720 --> 00:05:36,800 Speaker 3: so tech, finance, residential construction, and some of the sectors that. 112 00:05:36,800 --> 00:05:40,080 Speaker 4: We've continued to see those cost cutting efforts, those are 113 00:05:40,120 --> 00:05:41,960 Speaker 4: going to still be the ones that we'll. 114 00:05:41,760 --> 00:05:45,440 Speaker 3: See absolutely because there's not as much demand for their 115 00:05:45,480 --> 00:05:46,560 Speaker 3: products and services. 116 00:05:47,440 --> 00:05:49,479 Speaker 1: All right, Dan, thank you so much for joining us. 117 00:05:49,560 --> 00:05:52,200 Speaker 1: I always appreciate getting some thoughts from you. Dana Peterson, 118 00:05:52,279 --> 00:05:56,480 Speaker 1: Chief Economists at the Conference Board. The Leading Economic Indicator 119 00:05:56,800 --> 00:06:00,360 Speaker 1: data out today kind of showing some continuedness, and I 120 00:06:00,400 --> 00:06:02,120 Speaker 1: think that Dantas had fourteen months in a row with 121 00:06:02,160 --> 00:06:05,720 Speaker 1: a negative number, so it's very interesting to keep out 122 00:06:05,720 --> 00:06:06,279 Speaker 1: an eye on that. 123 00:06:06,400 --> 00:06:06,599 Speaker 5: Again. 124 00:06:06,640 --> 00:06:09,839 Speaker 1: It came in it negative zero point seven percent on 125 00:06:09,920 --> 00:06:12,960 Speaker 1: the Leading Index versus negative zero point six percent last month. 126 00:06:14,800 --> 00:06:18,240 Speaker 6: You're listening to the Team Ken's are Live program Bloomberg 127 00:06:18,279 --> 00:06:21,640 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot Com, 128 00:06:21,720 --> 00:06:24,880 Speaker 6: the iHeartRadio app and the Bloomberg Business app, or listen 129 00:06:24,920 --> 00:06:27,039 Speaker 6: on demand wherever you get your podcasts. 130 00:06:30,120 --> 00:06:33,160 Speaker 1: Let's pivot here to the Big Take story of the 131 00:06:33,240 --> 00:06:35,599 Speaker 1: day on the Bloomberg terminal. This is we love the 132 00:06:35,600 --> 00:06:38,760 Speaker 1: Big Take stories. They are so well researched, so well reported. 133 00:06:38,760 --> 00:06:39,480 Speaker 4: Away the best. 134 00:06:39,560 --> 00:06:41,160 Speaker 5: Yeah, deep, good team efforts. 135 00:06:41,200 --> 00:06:43,000 Speaker 1: They really dive deep here and today is a good 136 00:06:43,000 --> 00:06:46,280 Speaker 1: one talking about the electric vehicle market in Ford Motor 137 00:06:46,279 --> 00:06:50,359 Speaker 1: Company in particular, they're racing as is GM and stillant 138 00:06:50,480 --> 00:06:53,479 Speaker 1: Is to kind of really take the lead here in 139 00:06:53,520 --> 00:06:58,119 Speaker 1: this ev transformation. Ford gets nine point two billion dollars 140 00:06:58,160 --> 00:07:01,600 Speaker 1: from the US government for the effort. Oxshot Rathi one 141 00:07:01,600 --> 00:07:03,440 Speaker 1: of the reporters on the story. He's a senior climate 142 00:07:03,480 --> 00:07:06,960 Speaker 1: reporter with Bloomberg News. He joins us here. Okshot talk 143 00:07:06,960 --> 00:07:10,840 Speaker 1: to us about Ford and the support it is receiving 144 00:07:10,960 --> 00:07:14,560 Speaker 1: from the government authorities to kind of make this transformation 145 00:07:14,640 --> 00:07:16,160 Speaker 1: to electric vehicles. 146 00:07:16,560 --> 00:07:19,680 Speaker 7: Right, every car maker has to make this transformation and 147 00:07:19,800 --> 00:07:21,840 Speaker 7: it's not going to be cheap. It has to be made, 148 00:07:21,920 --> 00:07:24,119 Speaker 7: but it's not going to be cheap. And that's where 149 00:07:24,160 --> 00:07:27,720 Speaker 7: the US government is coming in. Ford last year said 150 00:07:27,760 --> 00:07:30,200 Speaker 7: it's going to spend us but just fifty billion dollars 151 00:07:30,520 --> 00:07:34,200 Speaker 7: over the next four years towards electrification strategy. And this 152 00:07:34,440 --> 00:07:37,480 Speaker 7: nine point two billion dollar loan, it's a conditional loan. 153 00:07:37,520 --> 00:07:40,400 Speaker 7: The conditions are very light and they'll meet them, no doubt, 154 00:07:41,240 --> 00:07:45,200 Speaker 7: but that will go towards building three battery factories. And 155 00:07:45,400 --> 00:07:48,160 Speaker 7: that is a lot of battery factories, but still not enough. 156 00:07:48,800 --> 00:07:52,840 Speaker 7: Ford has an ambition to electrify its entire fleet, but 157 00:07:52,920 --> 00:07:57,200 Speaker 7: it's starting out with increasing its number of electric vehicles 158 00:07:57,240 --> 00:07:59,720 Speaker 7: made from one hundred and thirty thousand last year to 159 00:07:59,760 --> 00:08:03,120 Speaker 7: two million by twenty twenty six. So that's quite a 160 00:08:03,240 --> 00:08:05,920 Speaker 7: jump and they need all the help they can and 161 00:08:06,080 --> 00:08:09,040 Speaker 7: Joe Biden's Climate Plan is allowing the government to be 162 00:08:09,080 --> 00:08:12,400 Speaker 7: able to give these billions out right now to be 163 00:08:12,400 --> 00:08:15,120 Speaker 7: able to encourage these companies down the transition. 164 00:08:15,640 --> 00:08:18,480 Speaker 4: And what you were mentioning for. Did have an investor 165 00:08:18,560 --> 00:08:21,160 Speaker 4: event last month actually, where they were focusing on this 166 00:08:21,280 --> 00:08:25,800 Speaker 4: fifty billion dollar plan for EV models and the availability 167 00:08:25,840 --> 00:08:28,840 Speaker 4: in the cost of these crucial battery metals, and when 168 00:08:28,840 --> 00:08:31,760 Speaker 4: you were thinking about nickel and cobalt, they've been key 169 00:08:31,760 --> 00:08:34,600 Speaker 4: concerns for years among EV makers trying to build out 170 00:08:35,000 --> 00:08:37,040 Speaker 4: their electric lineup. So what do you think are the 171 00:08:37,040 --> 00:08:38,280 Speaker 4: main hurdles at play? 172 00:08:40,000 --> 00:08:44,160 Speaker 7: So the main order from a Ford perspective actually is profitability. 173 00:08:44,760 --> 00:08:47,080 Speaker 7: Ford is going to lose three billion dollars this year 174 00:08:47,160 --> 00:08:51,040 Speaker 7: on its TV business, and it says it's going to 175 00:08:51,080 --> 00:08:55,760 Speaker 7: turn the losses into profit by twenty twenty six. Of course, 176 00:08:56,240 --> 00:08:58,880 Speaker 7: that is just from a company's perspective, but you're right, 177 00:08:59,040 --> 00:09:03,800 Speaker 7: metals are going to be another constraint. And so this program, 178 00:09:03,880 --> 00:09:06,720 Speaker 7: the US government program, it's called the Loan Program's Office, 179 00:09:06,760 --> 00:09:09,000 Speaker 7: which gave this nine point two billion dollar loan for 180 00:09:09,040 --> 00:09:12,679 Speaker 7: a battery manufacturing facility, is also giving out billions of 181 00:09:12,760 --> 00:09:16,600 Speaker 7: dollars in battery recycling facility. And so the goal would 182 00:09:16,640 --> 00:09:20,040 Speaker 7: there be to take the batteries that are already in 183 00:09:20,080 --> 00:09:23,280 Speaker 7: the United States, recycle their metals, and reuse them. So 184 00:09:23,320 --> 00:09:25,520 Speaker 7: that's one way in which you can deal with the 185 00:09:25,559 --> 00:09:29,679 Speaker 7: metal crunch that is coming. But another is that you're 186 00:09:29,679 --> 00:09:32,120 Speaker 7: going to have to mine metals. And now is America 187 00:09:32,200 --> 00:09:35,600 Speaker 7: ready to do it domestically? That remains unclear. It's very 188 00:09:35,679 --> 00:09:38,160 Speaker 7: much a live topic in the US Congress. 189 00:09:38,480 --> 00:09:40,720 Speaker 1: So actually, I just gave us a sense of this 190 00:09:40,840 --> 00:09:43,640 Speaker 1: nine point two billion dollars, the two or three plants 191 00:09:43,640 --> 00:09:46,719 Speaker 1: they're thinking about here. Where is that in total the 192 00:09:47,120 --> 00:09:48,880 Speaker 1: total need that they will have. 193 00:09:48,840 --> 00:09:50,079 Speaker 5: For these types of facilities. 194 00:09:50,160 --> 00:09:53,400 Speaker 1: Is this just kind of a good first step or 195 00:09:53,440 --> 00:09:55,600 Speaker 1: is this kind of a giant leap for fulfilling their 196 00:09:55,640 --> 00:09:56,720 Speaker 1: ultimate needs. 197 00:09:56,760 --> 00:10:00,320 Speaker 7: I guess it's actually both, which is to say, they're 198 00:10:00,320 --> 00:10:03,480 Speaker 7: going from zero battery facilities to three. So it's a giantly, 199 00:10:04,000 --> 00:10:05,880 Speaker 7: but it's the first step because if you're going to 200 00:10:05,920 --> 00:10:08,640 Speaker 7: have to electrify your entire fleet, you're going to have 201 00:10:08,679 --> 00:10:12,480 Speaker 7: to build many more battery factories. And that's probably why 202 00:10:12,480 --> 00:10:16,800 Speaker 7: this loan makes sense. If it's a giant leap, companies 203 00:10:17,400 --> 00:10:21,199 Speaker 7: are typically conservative in taking those and getting a bit 204 00:10:21,240 --> 00:10:23,720 Speaker 7: of government support, which would be in terms of a 205 00:10:23,800 --> 00:10:27,120 Speaker 7: loan with conditions that are easier than what you would 206 00:10:27,120 --> 00:10:30,240 Speaker 7: get on Wall Street, can make the difference between making 207 00:10:30,240 --> 00:10:33,520 Speaker 7: a decision or not, and so that's going to help forward. 208 00:10:33,640 --> 00:10:36,640 Speaker 7: But you're absolutely right, there is a long way to 209 00:10:36,679 --> 00:10:40,920 Speaker 7: go for to transition to a fully electric vehicle company, 210 00:10:41,280 --> 00:10:44,840 Speaker 7: which there is already one giant one in America called Tesla. 211 00:10:45,400 --> 00:10:47,560 Speaker 4: I was just taking a look at Ford stock. Let's 212 00:10:47,559 --> 00:10:50,439 Speaker 4: stick your simple afforts up about twenty two percent this 213 00:10:50,600 --> 00:10:54,040 Speaker 4: year after that investor day last month, do you think 214 00:10:54,040 --> 00:10:57,520 Speaker 4: they were successfully able to persuade investors on the merits 215 00:10:57,520 --> 00:10:59,680 Speaker 4: of this plan when you are looking at this sixteen 216 00:10:59,720 --> 00:11:02,360 Speaker 4: four increase an EV production in the span of just 217 00:11:02,400 --> 00:11:03,280 Speaker 4: a few years. 218 00:11:04,920 --> 00:11:07,840 Speaker 7: Well, Ford is trying to convince the investors as hard 219 00:11:07,880 --> 00:11:10,959 Speaker 7: as it can. So there was a long conversation internal 220 00:11:11,040 --> 00:11:14,040 Speaker 7: I'm sure even longer to try and see whether it 221 00:11:14,120 --> 00:11:17,199 Speaker 7: is worth splitting the company into its TV business and 222 00:11:17,280 --> 00:11:21,480 Speaker 7: into and its separate traditional engine business. But Ford came 223 00:11:21,520 --> 00:11:24,080 Speaker 7: to a conclusion that that wouldn't be right because there 224 00:11:24,160 --> 00:11:29,079 Speaker 7: are certain specializations between the two companies on design et cetera. 225 00:11:29,679 --> 00:11:34,760 Speaker 7: On manufacturing also some components that are just too good 226 00:11:34,760 --> 00:11:36,840 Speaker 7: to give up. You would have to replicate, you would 227 00:11:36,880 --> 00:11:40,240 Speaker 7: have to actually increase costs. And so they decided in 228 00:11:40,280 --> 00:11:43,680 Speaker 7: the end to stick with one company doing two things. 229 00:11:44,000 --> 00:11:46,559 Speaker 7: But they are going to separate out the business in 230 00:11:46,720 --> 00:11:49,880 Speaker 7: reporting terms, and that's going to give investors an insight 231 00:11:50,000 --> 00:11:53,320 Speaker 7: into whether this transition is going as for things it 232 00:11:53,679 --> 00:11:58,760 Speaker 7: can go with this current business structure. And you know, 233 00:11:59,160 --> 00:12:03,600 Speaker 7: given that the stock prices up, clearly businesses clearly investors 234 00:12:03,679 --> 00:12:06,800 Speaker 7: are in a position thinking that Ford's going in the 235 00:12:07,120 --> 00:12:13,040 Speaker 7: right direction. But it's going to be analyzing as things go. 236 00:12:13,880 --> 00:12:16,840 Speaker 7: There are clearly plans and Ford is starting to execute them. 237 00:12:17,240 --> 00:12:20,079 Speaker 7: Now how well it executes them is the caution. 238 00:12:20,240 --> 00:12:22,840 Speaker 1: Ok, shot, how about the Fords competitors in the US 239 00:12:22,960 --> 00:12:26,679 Speaker 1: Stillantis and GM. Is the US government prepared to support 240 00:12:26,679 --> 00:12:28,400 Speaker 1: those as well. 241 00:12:28,600 --> 00:12:33,520 Speaker 7: So the US goverment has already funded a GM battery plant. 242 00:12:33,720 --> 00:12:36,560 Speaker 7: So GM got two point five billion dollars last year 243 00:12:37,120 --> 00:12:38,920 Speaker 7: in December twenty twenty two. 244 00:12:39,880 --> 00:12:40,280 Speaker 8: And. 245 00:12:41,800 --> 00:12:45,880 Speaker 7: STILLANTIS is actually getting money from the Canadian government. Okay, 246 00:12:46,200 --> 00:12:51,679 Speaker 7: So in Canada, Volkswagen got ten billion dollars and STILLANTIS 247 00:12:51,800 --> 00:12:55,880 Speaker 7: is in conversation to get something similar for its battery factories. 248 00:12:56,240 --> 00:12:59,800 Speaker 7: But yes, it's one of those industries where profitability is hard, 249 00:13:00,520 --> 00:13:05,040 Speaker 7: upfront investments high, and they tend to be national champions, 250 00:13:05,080 --> 00:13:08,720 Speaker 7: so to speak, and governments want to protect them both 251 00:13:08,760 --> 00:13:12,960 Speaker 7: for having the company domestically but also from the perspective 252 00:13:13,000 --> 00:13:16,480 Speaker 7: of jobs that they give to many many different states 253 00:13:16,480 --> 00:13:17,560 Speaker 7: that they. 254 00:13:17,600 --> 00:13:20,040 Speaker 1: All right, Okshott, great reporting for you and your team. 255 00:13:20,080 --> 00:13:23,640 Speaker 1: Appreciate that. Oxshot Rothy a senior reporter for climate for 256 00:13:23,679 --> 00:13:25,640 Speaker 1: Bloomberg News. He and his team put out this Big 257 00:13:25,640 --> 00:13:28,120 Speaker 1: Take story. Always good stories. You can find those stories 258 00:13:28,440 --> 00:13:32,560 Speaker 1: at Bloomberg dot com, Slash Big Take or nispace Big Take. 259 00:13:32,720 --> 00:13:34,120 Speaker 1: Go on the Bloomberg terminal. 260 00:13:34,520 --> 00:13:37,640 Speaker 6: You're listening to the tape Cats are live program Bloomberg 261 00:13:37,679 --> 00:13:41,280 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio. The 262 00:13:41,360 --> 00:13:44,560 Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 263 00:13:44,600 --> 00:13:47,439 Speaker 6: You can also listen live on Amazon Alexa from our 264 00:13:47,440 --> 00:13:51,840 Speaker 6: flagship New York station. Just say Alexa, play Bloomberg eleven thirty. 265 00:13:53,640 --> 00:13:56,360 Speaker 1: Just meant Paul Sweeney here the Bloomberg Interactive Workers Studio. 266 00:13:56,360 --> 00:13:57,400 Speaker 5: We're going to Mike McLoone. 267 00:13:57,559 --> 00:13:59,959 Speaker 1: He's a senior macro strategist for Bloomberg Intelligence. 268 00:14:00,600 --> 00:14:01,839 Speaker 5: Just should we tell Mike what we. 269 00:14:01,840 --> 00:14:06,240 Speaker 4: Just yes, nicknamed him Miami Mike, Miami Mike. 270 00:14:06,400 --> 00:14:08,199 Speaker 1: That's where we're going with Mike. That's that's You can 271 00:14:08,240 --> 00:14:10,640 Speaker 1: thank Katie Greifeld for that. But you are forever known 272 00:14:10,720 --> 00:14:13,439 Speaker 1: up here in the Bloomberg radio circles as Miami Mike. 273 00:14:13,480 --> 00:14:14,000 Speaker 5: How do you like that? 274 00:14:14,760 --> 00:14:15,440 Speaker 9: I'll take it. 275 00:14:15,480 --> 00:14:18,720 Speaker 10: I actually last night got to shake of Mayor Mayor 276 00:14:18,920 --> 00:14:21,280 Speaker 10: Suarez's hand for the fourth time last night, So I 277 00:14:21,280 --> 00:14:22,760 Speaker 10: feel like I'm entrenched in the city. 278 00:14:22,880 --> 00:14:23,200 Speaker 5: You are. 279 00:14:23,320 --> 00:14:26,360 Speaker 1: You are our guy down there, and that's great. Hey, Mike, 280 00:14:26,400 --> 00:14:28,160 Speaker 1: you know what we've been hearing about a lot over 281 00:14:28,200 --> 00:14:31,960 Speaker 1: the last few days is that this equity market is 282 00:14:32,120 --> 00:14:33,280 Speaker 1: over bought. 283 00:14:33,560 --> 00:14:34,640 Speaker 5: A do you buy that? 284 00:14:34,880 --> 00:14:37,600 Speaker 1: And b If so, what do you look at that 285 00:14:37,720 --> 00:14:39,200 Speaker 1: kind of give you that sense. 286 00:14:39,480 --> 00:14:42,520 Speaker 10: Well, I really appreciated your conversation about Gene and Martin 287 00:14:42,560 --> 00:14:45,440 Speaker 10: Adams earlier. She has been spot on. But right now 288 00:14:45,480 --> 00:14:47,760 Speaker 10: we have a little dichotomy, which we're supposed to with 289 00:14:47,960 --> 00:14:51,640 Speaker 10: pure research professionals with on a Wong. On a Wong 290 00:14:51,760 --> 00:14:54,720 Speaker 10: is our our chief economist. Now, she points out the 291 00:14:54,800 --> 00:14:57,480 Speaker 10: term she's used for second half is ugly for the 292 00:14:57,600 --> 00:15:00,000 Speaker 10: US economic It's trajectory. 293 00:15:00,120 --> 00:15:00,280 Speaker 9: Now. 294 00:15:00,320 --> 00:15:02,800 Speaker 10: She started saying this a year ago, and she said 295 00:15:02,840 --> 00:15:05,640 Speaker 10: it would start in basically three Q she moved a 296 00:15:05,640 --> 00:15:08,480 Speaker 10: little forward the banking crisis. So I'm going with that, 297 00:15:08,600 --> 00:15:10,600 Speaker 10: and I look at it for first, you look at 298 00:15:10,640 --> 00:15:13,720 Speaker 10: it a simple risk asset manager or a trader. Markets 299 00:15:13,720 --> 00:15:17,360 Speaker 10: have bounced in this opium for a soft landing in 300 00:15:17,400 --> 00:15:19,960 Speaker 10: the FED eventually ease. So the risk is it all 301 00:15:20,000 --> 00:15:23,200 Speaker 10: tilts back towards a recession. The FED not easy in 302 00:15:23,200 --> 00:15:26,360 Speaker 10: what you're seeing testifying right now from Erman Pow. He 303 00:15:26,640 --> 00:15:28,800 Speaker 10: is banging hard and he has no incentive all to 304 00:15:28,880 --> 00:15:30,840 Speaker 10: let the markets know they're going to provide more liquidity. 305 00:15:30,920 --> 00:15:33,920 Speaker 9: So the lessons of liquidity and contraction. 306 00:15:33,600 --> 00:15:36,840 Speaker 10: Money supplight minus five percent you mentioned LII, the annual 307 00:15:36,880 --> 00:15:39,440 Speaker 10: measure is down has dropped the most in about thirty years. 308 00:15:39,440 --> 00:15:41,880 Speaker 10: It's down almost eight percent. To me, that all tilts 309 00:15:41,920 --> 00:15:46,040 Speaker 10: towards a pretty ugly second half, and I think that's 310 00:15:46,080 --> 00:15:48,400 Speaker 10: the risk. Also, there was one little thing metric going 311 00:15:48,400 --> 00:15:52,080 Speaker 10: with just last Friday and Tuesday, the Nasdaq reached about 312 00:15:52,120 --> 00:15:55,160 Speaker 10: twenty four percent above its two hundred day movement average. 313 00:15:55,280 --> 00:15:58,280 Speaker 10: It has not stayed sustained above that level, that high 314 00:15:58,360 --> 00:16:02,520 Speaker 10: lofty level the Internet bubble that ended in two thousand. 315 00:16:03,200 --> 00:16:07,640 Speaker 4: Now when it comes to what's happening with the bitcoin space, 316 00:16:07,800 --> 00:16:10,120 Speaker 4: because I know you cover all things with this, it 317 00:16:10,160 --> 00:16:14,520 Speaker 4: actually hit its highest soele level since April yesterday after 318 00:16:14,640 --> 00:16:18,200 Speaker 4: obviously when you're thinking the correlation with this ETF type 319 00:16:18,200 --> 00:16:21,200 Speaker 4: optimism that Katie Greyfield was just here talking to us 320 00:16:21,280 --> 00:16:24,240 Speaker 4: about that what are you seeing there with bitcoin? And 321 00:16:24,400 --> 00:16:26,040 Speaker 4: because the last time you were here, we were talking 322 00:16:26,040 --> 00:16:29,400 Speaker 4: about how that thirty thousand sort of threshold level was 323 00:16:29,640 --> 00:16:34,240 Speaker 4: the psychologically key level that investors were watching exactly. 324 00:16:34,280 --> 00:16:36,840 Speaker 10: I stick with that, Jess, and I just sent an 325 00:16:36,960 --> 00:16:39,640 Speaker 10: editorial I'm going to point that out for publishing tomorrow, 326 00:16:39,680 --> 00:16:43,560 Speaker 10: that there's so much enthusiasm about this thirty thousand level. 327 00:16:43,560 --> 00:16:45,760 Speaker 10: I think the risk is similar to the stock market. 328 00:16:45,800 --> 00:16:48,480 Speaker 10: If we get a little bit of rollover the fastest 329 00:16:48,480 --> 00:16:50,840 Speaker 10: horse in the race that went up the most this year, 330 00:16:50,880 --> 00:16:53,840 Speaker 10: again it bounds, risks go back, going back down. Now, 331 00:16:53,880 --> 00:16:58,560 Speaker 10: this ETF from Blackrock, Eric Belchunus points out it might 332 00:16:58,600 --> 00:17:01,320 Speaker 10: not get approved until next We don't know that for sure, 333 00:17:01,320 --> 00:17:04,720 Speaker 10: but there's so much enthusiasm here at this level. Here, 334 00:17:04,800 --> 00:17:07,680 Speaker 10: I look at it as the macro is still unfavorable. 335 00:17:07,680 --> 00:17:10,760 Speaker 10: Bitcoin phases its first recession. It's one of the riskiest 336 00:17:10,760 --> 00:17:13,600 Speaker 10: assets in the business. It's still the least risky crypto, 337 00:17:13,920 --> 00:17:16,720 Speaker 10: and it's at this key threshold. And my senses from 338 00:17:16,760 --> 00:17:18,760 Speaker 10: digging into all the crypto people as they're all a 339 00:17:18,800 --> 00:17:21,720 Speaker 10: little too giddy. I sense this around sixty thousand when 340 00:17:21,720 --> 00:17:23,840 Speaker 10: Mayor Suarez took his salary in bitcoin. 341 00:17:23,920 --> 00:17:25,320 Speaker 9: So I'm concerned at. 342 00:17:25,200 --> 00:17:27,800 Speaker 10: These levels that we're gonna have here's the bottom line. 343 00:17:27,840 --> 00:17:30,800 Speaker 10: I'm concerned we're gonna have that ebbing tied in the 344 00:17:30,840 --> 00:17:33,399 Speaker 10: stock market. Hopefully Gino will be right, but I'm sensing 345 00:17:33,520 --> 00:17:36,159 Speaker 10: more at least get a correction, and then Bitcoin will 346 00:17:36,200 --> 00:17:38,439 Speaker 10: drop with that. So what we need eventually is bitcoin 347 00:17:38,480 --> 00:17:40,280 Speaker 10: to either I'll perform the Nasdaq. But the problem is 348 00:17:40,280 --> 00:17:42,840 Speaker 10: it's been the same level with the NASTEK since twenty seventeen. 349 00:17:42,880 --> 00:17:44,639 Speaker 9: It's about two to one right now versus a. 350 00:17:44,680 --> 00:17:49,159 Speaker 10: Nasdaq and it or we needed to transition in a 351 00:17:49,160 --> 00:17:52,399 Speaker 10: recession towards trading more like treasury bonds or gold. 352 00:17:52,160 --> 00:17:54,399 Speaker 9: And it's just not there yet. Maybe it's starting, but 353 00:17:54,440 --> 00:17:55,520 Speaker 9: I don't see it yet. 354 00:17:55,800 --> 00:17:56,040 Speaker 5: Mike. 355 00:17:56,640 --> 00:17:59,879 Speaker 1: If we're having a top second half economically in the 356 00:18:00,000 --> 00:18:02,560 Speaker 1: commodities space, are you looking at is this is my 357 00:18:02,640 --> 00:18:04,040 Speaker 1: time to go out and b like pork bellies? 358 00:18:04,119 --> 00:18:05,040 Speaker 5: What should I be thinking about? 359 00:18:05,119 --> 00:18:05,959 Speaker 9: Yeah? 360 00:18:06,000 --> 00:18:08,160 Speaker 10: Gold, I the only think I think goes backed up, 361 00:18:08,240 --> 00:18:10,080 Speaker 10: it's rallied, but it's still a five percent in the 362 00:18:10,240 --> 00:18:13,520 Speaker 10: I think gold's going to be the best performing commodity, 363 00:18:13,800 --> 00:18:16,000 Speaker 10: probably one of the best reporting commodities as we tilt 364 00:18:16,080 --> 00:18:19,119 Speaker 10: this recession specifically get to a serious recession. But the 365 00:18:19,160 --> 00:18:22,159 Speaker 10: problem I see for most commodities it's still a bear market, 366 00:18:22,400 --> 00:18:25,520 Speaker 10: and typically to bottom a bear market need a long 367 00:18:25,680 --> 00:18:29,040 Speaker 10: lag to significant amount of federal reserve easy and we're 368 00:18:29,119 --> 00:18:31,639 Speaker 10: still tightening, and that to me is the key thing. 369 00:18:31,720 --> 00:18:34,280 Speaker 10: So just today, right now cordill is down another four percent, 370 00:18:34,280 --> 00:18:36,560 Speaker 10: set sixty nine dollars a bill. I'm still looking afford 371 00:18:36,600 --> 00:18:39,280 Speaker 10: to head towards fifty dollars a barrow, and there's precedent 372 00:18:39,320 --> 00:18:42,320 Speaker 10: for that. It's done it since twenty fourteen to keep 373 00:18:42,320 --> 00:18:44,880 Speaker 10: its actually since the financial crisis in two thousand and 374 00:18:44,920 --> 00:18:47,280 Speaker 10: this year already natural gas has done the equivalent. 375 00:18:47,640 --> 00:18:48,359 Speaker 9: So I look at. 376 00:18:48,280 --> 00:18:50,359 Speaker 10: Commodities, there are still bear marketing. The bottom line is 377 00:18:50,400 --> 00:18:52,720 Speaker 10: you have to ask yourself what ends that. All the 378 00:18:52,800 --> 00:18:57,040 Speaker 10: data from China is disappointing, and the FED and most 379 00:18:57,040 --> 00:18:59,120 Speaker 10: central banks are still tightening. We just saw the Bank 380 00:18:59,160 --> 00:19:02,760 Speaker 10: of England just did a surprise fifty based point hike. 381 00:19:03,119 --> 00:19:04,879 Speaker 10: That's not a good environment for commodities. 382 00:19:05,400 --> 00:19:05,600 Speaker 9: Mike. 383 00:19:05,640 --> 00:19:09,119 Speaker 4: When it comes to the gold to copper ratio, last 384 00:19:09,119 --> 00:19:11,280 Speaker 4: time you were here, it was moving lower. Now it's 385 00:19:11,320 --> 00:19:13,800 Speaker 4: actually moving higher this month. What do you think this 386 00:19:13,920 --> 00:19:16,960 Speaker 4: is telling us in relation to when we're especially when 387 00:19:16,960 --> 00:19:19,199 Speaker 4: it comes to copper and what that means for the 388 00:19:19,240 --> 00:19:20,680 Speaker 4: trajectory of the global economy. 389 00:19:21,560 --> 00:19:25,360 Speaker 10: Yes, so the gold outpracing copper is what I fully expect, 390 00:19:25,359 --> 00:19:29,840 Speaker 10: and that's normally what happens in a recession, and when 391 00:19:29,880 --> 00:19:32,199 Speaker 10: the FED starts it has to ease for that. So 392 00:19:32,240 --> 00:19:34,440 Speaker 10: I think that's going to really break out and potentially 393 00:19:34,520 --> 00:19:37,199 Speaker 10: make new highs. That's what it did during we had 394 00:19:37,200 --> 00:19:39,960 Speaker 10: that big pump and liquidity, right they had twenty twenty one, 395 00:19:40,240 --> 00:19:43,080 Speaker 10: And this is things like the bond manager Jeff Gunnle 396 00:19:43,119 --> 00:19:45,479 Speaker 10: like watches. So gold to copper, I think is going 397 00:19:45,520 --> 00:19:49,359 Speaker 10: to break out higher. And also remember the enduring propensity 398 00:19:49,400 --> 00:19:52,199 Speaker 10: over time is for gold to beat most commodities. Certainly 399 00:19:52,200 --> 00:19:54,760 Speaker 10: when it comes from having to hold that asset, it's 400 00:19:54,800 --> 00:19:58,160 Speaker 10: the easiest, the cheapest to store. And so I'm quite 401 00:19:58,160 --> 00:20:02,120 Speaker 10: bullish gold versus most combintic to my particularly crudel, particularly copper. 402 00:20:02,359 --> 00:20:04,520 Speaker 9: Copper and crudel the most industrial sensitive. 403 00:20:04,960 --> 00:20:08,880 Speaker 10: And if Onna Wong's right and I leading indicators are right, 404 00:20:08,960 --> 00:20:11,920 Speaker 10: and the yield curves right, the inverted deal curve, which 405 00:20:11,920 --> 00:20:14,840 Speaker 10: I think it will be, then we should expect copper 406 00:20:14,840 --> 00:20:17,560 Speaker 10: to underperform gold and go to outperform in the next 407 00:20:17,760 --> 00:20:18,199 Speaker 10: year or so. 408 00:20:18,400 --> 00:20:21,439 Speaker 4: It's interesting because that indicator actually rose with US stocks 409 00:20:21,440 --> 00:20:23,720 Speaker 4: after the lows in two thousand and nine, twenty eleven, 410 00:20:23,760 --> 00:20:26,880 Speaker 4: twenty eighteen, and in twenty twenty. So does that actually 411 00:20:26,920 --> 00:20:28,600 Speaker 4: point to brighter times ahead? 412 00:20:29,960 --> 00:20:33,400 Speaker 10: Well, it's it's it will point to brighter times ahead 413 00:20:33,400 --> 00:20:35,520 Speaker 10: once copper starts outperforming goal. 414 00:20:35,680 --> 00:20:39,240 Speaker 9: So this case right now points to recession. 415 00:20:39,280 --> 00:20:41,480 Speaker 10: It fits in with Anna's model, it fits in with 416 00:20:41,720 --> 00:20:47,120 Speaker 10: the UH, the inverted Yeeld curve, and with plunging commodities. 417 00:20:47,200 --> 00:20:50,480 Speaker 10: So I fully expect that we need some kind of shock. 418 00:20:50,560 --> 00:20:53,160 Speaker 10: We need to not have this recession and the FED 419 00:20:53,240 --> 00:20:54,879 Speaker 10: a year from now to sa oh, we're still at 420 00:20:54,920 --> 00:20:57,960 Speaker 10: the same rates because economy is doing great. That will 421 00:20:58,000 --> 00:21:00,880 Speaker 10: repress gold. Remember gold is a good competition for gold 422 00:21:00,960 --> 00:21:02,920 Speaker 10: is high rates. You're getting five percent in a T bill, 423 00:21:02,960 --> 00:21:05,320 Speaker 10: that's great, and the stock market out performing the rest 424 00:21:05,320 --> 00:21:07,200 Speaker 10: of the world, the US stock market. If that starts 425 00:21:07,240 --> 00:21:11,760 Speaker 10: tilting lower, gold's gonna beat most asset. So I see 426 00:21:11,800 --> 00:21:13,880 Speaker 10: it right now is look at copper on the year 427 00:21:14,000 --> 00:21:16,000 Speaker 10: it was, it's basically up about two percent. 428 00:21:16,040 --> 00:21:16,719 Speaker 9: But here's a key thing. 429 00:21:16,720 --> 00:21:19,560 Speaker 10: The way to look at copper the dollar price of copper, 430 00:21:19,600 --> 00:21:21,919 Speaker 10: if you overlay that with the S and P five hundred, 431 00:21:21,920 --> 00:21:23,800 Speaker 10: just take the S and P five hundred and divide 432 00:21:23,800 --> 00:21:26,080 Speaker 10: it by a thousand. They've been almost the exact same 433 00:21:26,640 --> 00:21:29,320 Speaker 10: for about five years. So right now the dollar price 434 00:21:29,359 --> 00:21:32,160 Speaker 10: of copper implies that S and P five hundred should 435 00:21:32,160 --> 00:21:35,639 Speaker 10: be about three thousand, nine hundred and it's currently about 436 00:21:35,680 --> 00:21:39,320 Speaker 10: four thousand, four hundred. The question we'll see within the 437 00:21:39,320 --> 00:21:42,000 Speaker 10: next few months if that ration has that relationship and 438 00:21:42,040 --> 00:21:44,680 Speaker 10: broken down, or is copper being the leading indicator and 439 00:21:44,680 --> 00:21:47,080 Speaker 10: showing us what leading indicators are telling us that they 440 00:21:47,119 --> 00:21:50,000 Speaker 10: were heading towards a pretty bad recession, which means the 441 00:21:50,040 --> 00:21:51,439 Speaker 10: stock market's gonna have a problem. 442 00:21:51,520 --> 00:21:53,199 Speaker 1: All right, I got your gold call. You've been very 443 00:21:53,240 --> 00:21:56,720 Speaker 1: consistent on that, Mike. How about the poor man's gold silver? 444 00:21:58,680 --> 00:22:00,880 Speaker 9: Bilver has been a really good performing this year. 445 00:22:00,920 --> 00:22:04,639 Speaker 10: The problem with silver is it's no longer a monetary ascid. 446 00:22:04,640 --> 00:22:07,639 Speaker 10: It's much more an industrial metal. It's been replaced by gold, 447 00:22:08,000 --> 00:22:11,159 Speaker 10: and Sir Isaac Newton started that in the seventeenth century 448 00:22:11,200 --> 00:22:14,800 Speaker 10: when he was head of the US I'm sorry the 449 00:22:15,119 --> 00:22:23,000 Speaker 10: British mint. So I think what we've seen this year 450 00:22:23,240 --> 00:22:25,680 Speaker 10: so far as a bounce in silver, just like you've 451 00:22:25,720 --> 00:22:29,639 Speaker 10: seen in some of the other commodities. I'm sorry, like 452 00:22:30,040 --> 00:22:31,719 Speaker 10: it's the stock market, but I think silver is going 453 00:22:31,760 --> 00:22:34,600 Speaker 10: to more succumb to the recession. The industrial metals like 454 00:22:34,640 --> 00:22:39,280 Speaker 10: copper trade lower and gold outperform, but overall the price 455 00:22:39,320 --> 00:22:43,240 Speaker 10: of gold versus copper is really I'm sorry versus silver. 456 00:22:43,440 --> 00:22:46,800 Speaker 10: The gold silver ratio has appreciated over time. I expect 457 00:22:46,800 --> 00:22:49,760 Speaker 10: that to kick in and to rally go to outperform silver, 458 00:22:49,800 --> 00:22:52,000 Speaker 10: particularly if we get to a New York's recession. 459 00:22:52,200 --> 00:22:54,400 Speaker 1: All right, Mike, thanks as always for joining us. Always 460 00:22:54,440 --> 00:22:59,359 Speaker 1: appreciate getting your input there. Mike yep aka Miami Mike 461 00:22:59,440 --> 00:23:01,840 Speaker 1: Senior Mac was strategist for Bloomberg Intelligence. We can talk 462 00:23:01,840 --> 00:23:04,399 Speaker 1: to him about anything on a commodity space. 463 00:23:06,600 --> 00:23:09,960 Speaker 6: You're listening to the team Ken's are Live program Bloomberg 464 00:23:10,080 --> 00:23:13,479 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot Com, 465 00:23:13,520 --> 00:23:16,640 Speaker 6: the iHeartRadio app and the Bloomberg Business app, or listen 466 00:23:16,720 --> 00:23:18,960 Speaker 6: on demand wherever you get your podcasts. 467 00:23:20,800 --> 00:23:22,880 Speaker 1: I just met in Paul Sween here in a Bloomberg 468 00:23:22,880 --> 00:23:27,160 Speaker 1: INTERACTI broker studio. It just here's a company, Jess, Equinix. 469 00:23:27,240 --> 00:23:30,280 Speaker 1: It's like a June sized company and I don't know 470 00:23:30,320 --> 00:23:31,199 Speaker 1: anything about it. 471 00:23:31,680 --> 00:23:33,000 Speaker 4: Data center provider. 472 00:23:33,240 --> 00:23:35,720 Speaker 1: Yeah, I mean that's like that is call it the 473 00:23:35,840 --> 00:23:36,880 Speaker 1: backbone of technology. 474 00:23:36,920 --> 00:23:38,240 Speaker 5: Got to the data center somewhere. 475 00:23:38,560 --> 00:23:41,840 Speaker 1: It's a seventy billion market cap company, Equinix. Eqix is 476 00:23:41,880 --> 00:23:44,000 Speaker 1: a ticker. The good news is we have the CFO 477 00:23:44,080 --> 00:23:46,960 Speaker 1: in our Bloomberg Interactive Broker studio. Keith Taylor, CFO of 478 00:23:47,000 --> 00:23:50,639 Speaker 1: Equinox again eq Ix. We also have Jeff Langbaum. He 479 00:23:50,840 --> 00:23:53,480 Speaker 1: is the reet analyst who covers all of the reats, 480 00:23:53,480 --> 00:23:57,480 Speaker 1: including Equinix, because Equinox is a REAT. So we're gonna 481 00:23:57,480 --> 00:23:59,439 Speaker 1: be brought Jeff in here because he's the smartest guy 482 00:23:59,440 --> 00:24:01,159 Speaker 1: we having to build. Need to talk about this company. 483 00:24:01,200 --> 00:24:03,840 Speaker 1: So Keith, let's start with you talk to us about Equinix. 484 00:24:03,880 --> 00:24:06,640 Speaker 1: What do you guys do? Number one and number two? 485 00:24:06,720 --> 00:24:08,399 Speaker 1: I knew you guys had a big investor day yesterday. 486 00:24:08,440 --> 00:24:09,639 Speaker 1: What was kind of the message you were trying to 487 00:24:09,640 --> 00:24:10,080 Speaker 1: get across? 488 00:24:10,160 --> 00:24:13,920 Speaker 11: Yeah, Paul looks largest data center company in the world. 489 00:24:14,840 --> 00:24:18,439 Speaker 11: Think of all things digital coming into our environment. We 490 00:24:18,520 --> 00:24:21,280 Speaker 11: sit on a foundation of two thousand networks, three thousand 491 00:24:21,359 --> 00:24:23,960 Speaker 11: cloud and IT services companies. We've got two hundred and 492 00:24:23,960 --> 00:24:27,119 Speaker 11: fifty data centers about around the world, and we're investing 493 00:24:27,160 --> 00:24:31,119 Speaker 11: a tremendous amount of capital. All things digital belong inside Equinics. 494 00:24:31,840 --> 00:24:36,960 Speaker 4: What specific companies are you providing these connected digital infrastructures too, 495 00:24:37,000 --> 00:24:41,040 Speaker 4: because I've seen you also work with companies like Google, Cloud, Zoom, Oracles, 496 00:24:41,040 --> 00:24:42,200 Speaker 4: so these are some big names. 497 00:24:42,560 --> 00:24:46,320 Speaker 11: No, absolutely, but first and form, the top ten customers 498 00:24:46,320 --> 00:24:49,639 Speaker 11: for us represent about eighteen percent of our business, and 499 00:24:49,680 --> 00:24:53,200 Speaker 11: it's the large hyperscalers. And think of us as effectively 500 00:24:53,240 --> 00:24:55,800 Speaker 11: on an off ram to the Internet and to the cloud. 501 00:24:56,520 --> 00:24:59,480 Speaker 11: We have again two thousand networks, three thousand IT and 502 00:24:59,520 --> 00:25:03,679 Speaker 11: cloud companies. We have majority of the forty percent of 503 00:25:03,680 --> 00:25:07,560 Speaker 11: the cloud on ramps. And so it's how data transfers 504 00:25:07,760 --> 00:25:11,520 Speaker 11: through basically the systems. And for us, they need proximity, 505 00:25:11,560 --> 00:25:14,480 Speaker 11: they need diversity, and we provide that. We're in seventy 506 00:25:14,520 --> 00:25:17,280 Speaker 11: one markets around the world, will soon soon be in 507 00:25:17,280 --> 00:25:19,919 Speaker 11: in seventy five and thirty one country is going to 508 00:25:19,960 --> 00:25:22,359 Speaker 11: thirty five. So a very exciting time for us. 509 00:25:23,440 --> 00:25:26,600 Speaker 12: Well, and from from the rep perspective, it paints a 510 00:25:26,680 --> 00:25:28,679 Speaker 12: very different picture than a lot of the other asset 511 00:25:28,680 --> 00:25:30,760 Speaker 12: classes that we typically talk about. 512 00:25:30,920 --> 00:25:33,200 Speaker 5: Right, demand is through the roof. 513 00:25:33,200 --> 00:25:35,320 Speaker 12: I mean, they spent a lot of time yesterday talking about, 514 00:25:35,440 --> 00:25:37,679 Speaker 12: you know, the demand drivers for their business and just 515 00:25:37,760 --> 00:25:39,280 Speaker 12: you know, the just the connectivity. 516 00:25:40,200 --> 00:25:41,440 Speaker 5: We haven't even touched on AI. 517 00:25:42,200 --> 00:25:45,879 Speaker 12: I'm sure Keith is nun is tired of talking about it, 518 00:25:45,920 --> 00:25:48,560 Speaker 12: but I mean that's probably the next wave, right, the 519 00:25:48,640 --> 00:25:51,920 Speaker 12: demand for the data center business is through the roof 520 00:25:51,960 --> 00:25:55,159 Speaker 12: and you can see it extending out over the next 521 00:25:55,640 --> 00:25:57,040 Speaker 12: whatever timeframe you choose. 522 00:25:57,119 --> 00:25:58,320 Speaker 5: So what do you think about AI. 523 00:25:59,000 --> 00:26:03,080 Speaker 11: Well, at first, the opportunities amous if you believe that 524 00:26:03,160 --> 00:26:06,439 Speaker 11: all things digital have a home inside Aquinics, and you 525 00:26:06,480 --> 00:26:09,320 Speaker 11: think about AI where it will take us. I just 526 00:26:09,359 --> 00:26:12,120 Speaker 11: think it's a broader opportunity for us. So it's exciting. 527 00:26:12,160 --> 00:26:16,480 Speaker 11: Whether it's autonomous driving, you know, whether it's AI, whether 528 00:26:16,480 --> 00:26:19,800 Speaker 11: it's electronic trading, all those have a home inside Aquinics. 529 00:26:19,880 --> 00:26:22,600 Speaker 11: So a lot of our message Paul was yesterday was 530 00:26:22,600 --> 00:26:24,879 Speaker 11: really about the opportunity that's in front of us, and 531 00:26:25,040 --> 00:26:28,080 Speaker 11: Charles talked about, you know, the size of the market opportunity. 532 00:26:28,119 --> 00:26:30,080 Speaker 11: We see it as roughly one hundred and forty billion 533 00:26:30,080 --> 00:26:34,600 Speaker 11: dollars opportunity and we'll play inside that space. So it's 534 00:26:34,600 --> 00:26:37,040 Speaker 11: an exciting time for us. And sort of the back 535 00:26:37,119 --> 00:26:41,160 Speaker 11: end of the conversation was really about we're no, we're 536 00:26:41,240 --> 00:26:46,800 Speaker 11: the best representative of a very strong financial financially strong 537 00:26:46,840 --> 00:26:49,320 Speaker 11: company that has the balance sheet, has the liquidity, has 538 00:26:49,359 --> 00:26:53,160 Speaker 11: the wherewithal to invest to scale where I think others 539 00:26:53,200 --> 00:26:55,320 Speaker 11: are going to have a tougher time over the next 540 00:26:55,400 --> 00:26:56,480 Speaker 11: the next little while. 541 00:26:56,800 --> 00:26:59,119 Speaker 12: And Keith, you can you talk a little bit about 542 00:26:59,200 --> 00:27:02,000 Speaker 12: what the growth looks like from you, you know, from 543 00:27:02,040 --> 00:27:06,040 Speaker 12: your perspective in terms of top line bottom line, you know, 544 00:27:06,080 --> 00:27:10,440 Speaker 12: and frankly how that differentiates you from your data center piers, 545 00:27:10,480 --> 00:27:12,280 Speaker 12: but also reads broadly. 546 00:27:12,840 --> 00:27:15,080 Speaker 11: Yes, well, the top line. What we told the market 547 00:27:15,160 --> 00:27:18,760 Speaker 11: yesterday we had our analyst day and today's our twenty 548 00:27:18,760 --> 00:27:22,399 Speaker 11: fifth anniversary. Interestingly enough, and so twenty five years into 549 00:27:22,480 --> 00:27:25,720 Speaker 11: our history. We basically told them, you know, just despite 550 00:27:25,760 --> 00:27:27,720 Speaker 11: our scale and size today that we can still grow 551 00:27:27,760 --> 00:27:31,120 Speaker 11: the top line eight to ten percent. But I said 552 00:27:31,160 --> 00:27:34,800 Speaker 11: there's accelerants to that that we're not willing to share 553 00:27:34,920 --> 00:27:36,919 Speaker 11: just yet, and one of them is AI and just 554 00:27:36,960 --> 00:27:40,480 Speaker 11: the opportunity, and largely we said that because of it's 555 00:27:40,520 --> 00:27:43,240 Speaker 11: in its infancy. The other aspect of it was really 556 00:27:43,320 --> 00:27:47,360 Speaker 11: digital services. It's going to be an adjacency service to 557 00:27:46,920 --> 00:27:49,480 Speaker 11: our to are for our customers. And again it's just 558 00:27:49,520 --> 00:27:51,960 Speaker 11: a little bit early on the flip side. When we 559 00:27:52,000 --> 00:27:55,480 Speaker 11: look at we look at profitability, we said that we 560 00:27:55,480 --> 00:27:59,080 Speaker 11: can grow AFFO per share seven to ten percent. And 561 00:27:59,119 --> 00:28:01,080 Speaker 11: part of the reason we said seven to ten percent, 562 00:28:01,560 --> 00:28:04,679 Speaker 11: as many people know, there's an element of refinancing that 563 00:28:04,720 --> 00:28:06,480 Speaker 11: we have to do, and the cost of capital, of 564 00:28:06,520 --> 00:28:10,520 Speaker 11: course is larger today. But despite that, we also committed 565 00:28:10,760 --> 00:28:13,600 Speaker 11: and suggested that we could spend three billion dollars a 566 00:28:13,680 --> 00:28:15,960 Speaker 11: year for the next five years. That's fifteen billion dollars 567 00:28:16,440 --> 00:28:18,120 Speaker 11: and the majority of us going to be funded from 568 00:28:18,160 --> 00:28:21,200 Speaker 11: internal resources. It means the cash flow in the business 569 00:28:21,240 --> 00:28:23,960 Speaker 11: is fueling that growth, which is which I think is 570 00:28:24,000 --> 00:28:26,760 Speaker 11: just a great opportunity, unparalleled compared to anyone else. 571 00:28:26,920 --> 00:28:29,760 Speaker 4: You're based in California. I wanted to get your view 572 00:28:29,960 --> 00:28:32,760 Speaker 4: after we saw a lot of those regional banking stresses 573 00:28:32,800 --> 00:28:35,080 Speaker 4: back in March, what your outlook is for growth and 574 00:28:35,119 --> 00:28:36,760 Speaker 4: if you were impacted at all by that. 575 00:28:37,880 --> 00:28:39,160 Speaker 9: Yeah, just the. 576 00:28:40,640 --> 00:28:42,520 Speaker 11: Obviously there were stress in the system. I think what 577 00:28:42,560 --> 00:28:45,200 Speaker 11: it did was it created an environment where decisions were 578 00:28:45,240 --> 00:28:49,360 Speaker 11: paused and it caused people to stop and reflect on 579 00:28:49,440 --> 00:28:52,920 Speaker 11: what really was happening within the financial segment. A large 580 00:28:52,960 --> 00:28:56,080 Speaker 11: component of our business is certainly in with the banking industry. 581 00:28:57,280 --> 00:28:59,920 Speaker 11: A lot of the electronic trading takes place inside Equin 582 00:29:00,680 --> 00:29:03,560 Speaker 11: that all said, the implications to us was very, very minor, 583 00:29:04,880 --> 00:29:06,640 Speaker 11: and I'm saying minor in the sense that we had 584 00:29:06,680 --> 00:29:09,600 Speaker 11: Silicon Valley Bank we first Republican some of the others, 585 00:29:09,600 --> 00:29:12,280 Speaker 11: but it wasn't a meaningful part of our revenue exposure. 586 00:29:13,760 --> 00:29:17,000 Speaker 12: Keith, you mentioned just a minute ago the potential to 587 00:29:17,040 --> 00:29:19,360 Speaker 12: spend three billion dollars a year fifteen billion dollars in 588 00:29:19,400 --> 00:29:27,719 Speaker 12: total on capex. That's expanding your portfolio domestically globally. Can 589 00:29:27,800 --> 00:29:30,320 Speaker 12: you talk about the demand trends that is fueling the 590 00:29:30,440 --> 00:29:33,000 Speaker 12: need for so much space and why you feel comfortable 591 00:29:33,080 --> 00:29:34,320 Speaker 12: putting that much capital to work. 592 00:29:34,720 --> 00:29:38,520 Speaker 11: Yeah, well, right now, we have fifty projects underway today 593 00:29:38,560 --> 00:29:41,920 Speaker 11: of size in thirty seven marcus in twenty five countries, 594 00:29:41,960 --> 00:29:44,240 Speaker 11: so it gives you a sense of the breadth of 595 00:29:44,320 --> 00:29:46,520 Speaker 11: our business. One of the things I shared with the 596 00:29:46,600 --> 00:29:50,040 Speaker 11: investors yesterday also was seventy five percent of our revenues 597 00:29:50,040 --> 00:29:51,960 Speaker 11: come from customers who want to operate in more than 598 00:29:52,040 --> 00:29:54,240 Speaker 11: one region of the world, and so we're the best 599 00:29:54,320 --> 00:29:58,640 Speaker 11: manifestation of that. So we draw comfort from I think 600 00:29:58,720 --> 00:30:01,120 Speaker 11: we have something that's very uni relative to the majority 601 00:30:01,160 --> 00:30:04,640 Speaker 11: of the marketplace. Number two, all things digital feel like 602 00:30:04,640 --> 00:30:07,320 Speaker 11: they should have a home and equinics. And then number three, 603 00:30:07,400 --> 00:30:10,360 Speaker 11: I suggest they are posited that, you know, in with 604 00:30:10,480 --> 00:30:13,280 Speaker 11: the difficulties in the marketplace. It feels like the supply 605 00:30:13,440 --> 00:30:15,959 Speaker 11: over time is going to get constrained because cost capital 606 00:30:16,040 --> 00:30:19,200 Speaker 11: is high, is harder to build. You have supply chain 607 00:30:19,360 --> 00:30:23,440 Speaker 11: implications to power, access to power, access to water. These 608 00:30:23,520 --> 00:30:26,560 Speaker 11: all would suggest that for the unsophisticated it's going to 609 00:30:26,600 --> 00:30:28,840 Speaker 11: be harder build. And therefore we think we can we 610 00:30:28,920 --> 00:30:31,360 Speaker 11: can fill that void, and in many ways we even 611 00:30:31,400 --> 00:30:34,880 Speaker 11: believe that pricing can move up favorably towards us. But 612 00:30:35,040 --> 00:30:37,440 Speaker 11: you know the beauty is look, I suggested three billion 613 00:30:37,480 --> 00:30:41,640 Speaker 11: dollars a year. We have, we have levers. We can 614 00:30:41,680 --> 00:30:44,080 Speaker 11: pull them as we see the information. We're making decisions, 615 00:30:44,120 --> 00:30:46,440 Speaker 11: and their decisions are long term based. You have to 616 00:30:46,520 --> 00:30:49,160 Speaker 11: decide today what you're going to do years years from now, 617 00:30:49,520 --> 00:30:51,080 Speaker 11: and we can pull back in those if we need to. 618 00:30:51,400 --> 00:30:54,120 Speaker 1: So Keith, you know your CEO was just on the 619 00:30:54,200 --> 00:30:56,480 Speaker 1: desk start a little bit earlier. But we prefer to 620 00:30:56,520 --> 00:30:59,360 Speaker 1: get the money guy in the studio here because you guys, 621 00:30:59,400 --> 00:31:01,360 Speaker 1: you really pull the I'm looking at your balance sheet here, 622 00:31:02,000 --> 00:31:04,080 Speaker 1: I see about fifteen billion of net debt. I see 623 00:31:04,160 --> 00:31:05,880 Speaker 1: you know a little bit more than three billion dollars 624 00:31:05,880 --> 00:31:07,360 Speaker 1: three and a half million dollars for free cashally she 625 00:31:07,440 --> 00:31:07,720 Speaker 1: gets some. 626 00:31:07,760 --> 00:31:08,800 Speaker 5: Leverage on the balance sheet. 627 00:31:09,560 --> 00:31:12,960 Speaker 1: Is it too much leverage? Is it optimal leverage? Where 628 00:31:13,000 --> 00:31:15,000 Speaker 1: are you in terms of your balance sheet? And if 629 00:31:15,040 --> 00:31:17,480 Speaker 1: you need to fund fifteen billion dollars, where's that coming from? 630 00:31:17,520 --> 00:31:17,720 Speaker 9: Again? 631 00:31:17,960 --> 00:31:22,040 Speaker 11: Yeah, well, look, I'll tell you a few things. First 632 00:31:22,080 --> 00:31:24,880 Speaker 11: and foremost, we're lever three point four times when you 633 00:31:24,920 --> 00:31:27,360 Speaker 11: look at an industry average at about six point one times, 634 00:31:27,640 --> 00:31:30,760 Speaker 11: So that's one. Number two. We have two point six 635 00:31:30,800 --> 00:31:32,920 Speaker 11: billion dollars of cash on our balance sheet, is correct. 636 00:31:33,080 --> 00:31:35,680 Speaker 11: We have a four billion dollar unused line of credit, 637 00:31:35,880 --> 00:31:38,400 Speaker 11: So I feel that we have the liquidity, but more 638 00:31:38,480 --> 00:31:41,480 Speaker 11: than anything, the affo that we generate in the business. 639 00:31:41,560 --> 00:31:43,920 Speaker 11: Think of that as the cash flow because it's after tax, 640 00:31:44,160 --> 00:31:46,480 Speaker 11: after interest, after running the business and investing. 641 00:31:46,560 --> 00:31:49,520 Speaker 5: Ros I tried to teach me, fine it. 642 00:31:50,240 --> 00:31:51,120 Speaker 12: Paul loves dividends. 643 00:31:51,160 --> 00:31:54,640 Speaker 11: Talk to you, but think about that's a three billion 644 00:31:54,680 --> 00:31:58,040 Speaker 11: dollar number or they're about that's growing in the range 645 00:31:58,160 --> 00:32:01,840 Speaker 11: of seven to ten percent per year. So Number one, 646 00:32:01,920 --> 00:32:04,600 Speaker 11: you've got the cash and because of our structure, we 647 00:32:04,800 --> 00:32:07,520 Speaker 11: only have to distribute out forty two cents of every 648 00:32:07,600 --> 00:32:11,000 Speaker 11: dollar to the shareholders in the form of a dividend, 649 00:32:11,520 --> 00:32:14,040 Speaker 11: and as a result, you're keeping fifty eight cents. And 650 00:32:14,120 --> 00:32:16,640 Speaker 11: when you do that, unless just you three billion for 651 00:32:16,720 --> 00:32:19,760 Speaker 11: a simple number times sixty percent, you get to keep 652 00:32:19,840 --> 00:32:22,680 Speaker 11: one point eight billion dollars a year just to fund 653 00:32:22,720 --> 00:32:25,640 Speaker 11: your growth. And of course it's a growing number. So 654 00:32:26,040 --> 00:32:28,640 Speaker 11: it's actually the model works exceedingly well. So the dividend 655 00:32:29,080 --> 00:32:31,200 Speaker 11: is going up, the investment is going up, but I 656 00:32:31,240 --> 00:32:33,400 Speaker 11: think the opportunity is going up even more so. 657 00:32:33,440 --> 00:32:36,120 Speaker 4: If you have that cash, are you looking to acquire 658 00:32:36,240 --> 00:32:39,120 Speaker 4: any particular companies to expand your network globally? 659 00:32:40,000 --> 00:32:44,800 Speaker 11: Just the answer is, Look, we're alway, We're always going 660 00:32:44,840 --> 00:32:48,640 Speaker 11: to look at acquisitions. We've done thirty in our time, 661 00:32:48,760 --> 00:32:51,960 Speaker 11: thirty plus. But the best use of our capital is 662 00:32:52,000 --> 00:32:54,360 Speaker 11: actually investing in organic bill that's where we get the 663 00:32:54,440 --> 00:32:58,160 Speaker 11: highest return. But we are expanding in the Aussian countries. 664 00:32:58,240 --> 00:33:00,480 Speaker 11: We want to be another markets. So it's an exciting time. 665 00:33:01,640 --> 00:33:04,000 Speaker 11: But I rather build organically than buy somebody. 666 00:33:05,360 --> 00:33:07,560 Speaker 5: All right, Keith, So glad to get some of your 667 00:33:07,600 --> 00:33:07,880 Speaker 5: time here. 668 00:33:08,200 --> 00:33:11,760 Speaker 1: Keith Taylor, CFO Equinox, joining us as well as Jeff Langboun, 669 00:33:11,760 --> 00:33:15,320 Speaker 1: who covers all the reats including Equinics for Bloomberg Intelligence. 670 00:33:15,800 --> 00:33:18,880 Speaker 6: You're listening to the tape Cat's are live program Bloomberg 671 00:33:19,000 --> 00:33:22,560 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the 672 00:33:22,640 --> 00:33:25,840 Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 673 00:33:25,920 --> 00:33:28,680 Speaker 6: You can also listen live on Amazon Alexa from our 674 00:33:28,760 --> 00:33:33,120 Speaker 6: flagship New York station, Just say Alexa play Bloomberg eleven thirty. 675 00:33:35,000 --> 00:33:36,320 Speaker 1: I want to talk about this economy. 676 00:33:36,360 --> 00:33:37,480 Speaker 5: We want to talk about this FED. 677 00:33:37,520 --> 00:33:39,800 Speaker 1: We want to see where we're going here, and to 678 00:33:39,880 --> 00:33:43,360 Speaker 1: do that, we have a welcome guest, returning, Chevin yeltikin 679 00:33:43,720 --> 00:33:47,080 Speaker 1: the dean at the University of Rochester Business School, joining 680 00:33:47,160 --> 00:33:49,360 Speaker 1: us live here in our Bloomberg Interactive Brooker Studio. Chevin, 681 00:33:49,760 --> 00:33:52,440 Speaker 1: so great to see you again. What do you make 682 00:33:52,800 --> 00:33:55,440 Speaker 1: of this Federal Reserve? We've heard FED Chairman Pal today 683 00:33:55,480 --> 00:33:57,160 Speaker 1: in front of the Senate, yesterday in front of the House, 684 00:33:57,200 --> 00:34:00,320 Speaker 1: and every other FED president is speaking all over the place. 685 00:34:00,880 --> 00:34:03,160 Speaker 1: This FED seems pretty consistent about raising rates here. 686 00:34:03,600 --> 00:34:07,960 Speaker 8: Yes, he definitely wanted to signal that they did. They're 687 00:34:08,040 --> 00:34:11,239 Speaker 8: not pausing for good. I mean see, you know, even 688 00:34:11,320 --> 00:34:13,640 Speaker 8: though they've they've paused for a bit, and they might 689 00:34:13,760 --> 00:34:16,400 Speaker 8: pause through that the summer or something, but until that 690 00:34:16,560 --> 00:34:19,760 Speaker 8: inflation figures come down to about two percent or somewhere 691 00:34:19,800 --> 00:34:22,600 Speaker 8: close to it. They're not pausing for a long period 692 00:34:22,680 --> 00:34:25,400 Speaker 8: of time, So that was that was quite a strong statement. 693 00:34:25,280 --> 00:34:28,960 Speaker 4: And also pointing out that at least two more rate increases, 694 00:34:29,000 --> 00:34:31,960 Speaker 4: which something James Bullard had already pointed to about a 695 00:34:32,040 --> 00:34:34,440 Speaker 4: month ago, and that's been priced into their dot plots. 696 00:34:34,680 --> 00:34:36,040 Speaker 4: What do you think it's going to take and when 697 00:34:36,120 --> 00:34:38,200 Speaker 4: do you think the next potential rate increase could be? 698 00:34:38,280 --> 00:34:40,080 Speaker 4: Paul and I've been talking about this a lot this morning, 699 00:34:40,120 --> 00:34:42,400 Speaker 4: because there's not a ton of data between now and 700 00:34:42,520 --> 00:34:44,120 Speaker 4: the next FED meeting in late July. 701 00:34:44,680 --> 00:34:46,560 Speaker 8: I mean, one of the interesting things about his statement 702 00:34:46,719 --> 00:34:49,200 Speaker 8: was he was saying, you know, monetary policy takes a 703 00:34:49,239 --> 00:34:52,520 Speaker 8: little while to sort of percolate throughout the economy, and 704 00:34:52,760 --> 00:34:55,160 Speaker 8: what we're really doing is kind of giving it a 705 00:34:55,400 --> 00:34:58,759 Speaker 8: chance to percolate, rather than what we're seeing is very 706 00:34:58,800 --> 00:35:03,120 Speaker 8: strong data for us to stop the inflationary you know, 707 00:35:03,360 --> 00:35:06,080 Speaker 8: suppressing inflation. So I don't think much is going to 708 00:35:06,160 --> 00:35:07,880 Speaker 8: come between now and then. It's just that they're going 709 00:35:07,960 --> 00:35:10,879 Speaker 8: to look at some very micro data, very low frequency data, 710 00:35:10,960 --> 00:35:13,680 Speaker 8: to be able to tell whether, you know, if the 711 00:35:13,719 --> 00:35:17,360 Speaker 8: economy is not plunging into any kind of major you know, 712 00:35:17,560 --> 00:35:20,120 Speaker 8: slow down. I think they're going to continue to raise. 713 00:35:20,040 --> 00:35:22,440 Speaker 1: Rates, all right, smart people like you tell tell me 714 00:35:22,480 --> 00:35:26,400 Speaker 1: about this long and variable lags of FED policy. I 715 00:35:26,480 --> 00:35:29,560 Speaker 1: mean the Fed raise it's in strate over five hundred 716 00:35:29,560 --> 00:35:32,240 Speaker 1: basis points within a year. Why don't we just stop 717 00:35:32,400 --> 00:35:34,040 Speaker 1: and just see how it plays out over the next 718 00:35:34,080 --> 00:35:36,839 Speaker 1: several months. Why do they feel the need to kind 719 00:35:36,880 --> 00:35:40,200 Speaker 1: of keep talking very hawkishly about raising rates, do you think? 720 00:35:40,880 --> 00:35:42,719 Speaker 8: I think because they know that people are going to 721 00:35:42,800 --> 00:35:46,600 Speaker 8: be making investment decisions and certainly pricing things into long 722 00:35:46,680 --> 00:35:50,319 Speaker 8: term and they don't want to signal that they're done. 723 00:35:51,040 --> 00:35:53,080 Speaker 8: They want to leave a lot of kind of gray 724 00:35:53,160 --> 00:35:55,520 Speaker 8: room for them to maneuver. I think that's part of 725 00:35:55,600 --> 00:35:57,640 Speaker 8: it as well, because we're not there yet, We're not 726 00:35:57,760 --> 00:36:00,680 Speaker 8: seeing inflation, especially core inflation is still kind of high, 727 00:36:02,200 --> 00:36:05,279 Speaker 8: and I think it really gives them an opportunity to 728 00:36:05,360 --> 00:36:08,040 Speaker 8: be able to maneuver the economy in whatever way that 729 00:36:08,200 --> 00:36:10,920 Speaker 8: they see fit at the time that the data arrives. 730 00:36:10,960 --> 00:36:13,880 Speaker 8: I mean, this is not a perfect science, but nowhere 731 00:36:13,960 --> 00:36:16,560 Speaker 8: near it. Right, there's a lot of weight and see 732 00:36:16,880 --> 00:36:19,680 Speaker 8: and feel the ground and feel the data and crutch 733 00:36:19,719 --> 00:36:23,360 Speaker 8: the numbers and do another kind of you know, projection. 734 00:36:24,000 --> 00:36:27,400 Speaker 8: So I think what we're seeing is just really that 735 00:36:27,640 --> 00:36:30,879 Speaker 8: kind of work being played out. But now we get 736 00:36:30,920 --> 00:36:33,800 Speaker 8: to see that data very very frequently ourselves, which we 737 00:36:33,840 --> 00:36:35,560 Speaker 8: didn't used to do twenty thirty years ago. 738 00:36:35,960 --> 00:36:38,400 Speaker 4: I like to use the ECFC function in the terminal 739 00:36:38,440 --> 00:36:41,080 Speaker 4: to kind of gauge where economy is pulled by Bloomberg 740 00:36:41,520 --> 00:36:44,239 Speaker 4: are gauging where the economy is headed. And coming into 741 00:36:44,320 --> 00:36:47,080 Speaker 4: this year, as you know, a lot of economists were 742 00:36:47,239 --> 00:36:49,520 Speaker 4: expecting that we would already be in a recession at 743 00:36:49,560 --> 00:36:51,719 Speaker 4: this point. Now it continues to get pushed back, but 744 00:36:51,800 --> 00:36:54,240 Speaker 4: it's more when you're looking at a quarter over quarter basis, 745 00:36:54,320 --> 00:36:56,520 Speaker 4: not year over year. Now it's looking maybe for the 746 00:36:56,680 --> 00:36:59,640 Speaker 4: tail end of this year. What do you think, how 747 00:36:59,680 --> 00:37:02,600 Speaker 4: do you where this away when you still see resilient 748 00:37:02,719 --> 00:37:07,080 Speaker 4: consumer data versus the inflation backdrop, and this whole coming 749 00:37:07,120 --> 00:37:10,520 Speaker 4: into this year where everybody was telegraphing a recession that 750 00:37:10,680 --> 00:37:12,879 Speaker 4: hasn't necessarily come to fruision just yet. 751 00:37:13,920 --> 00:37:15,239 Speaker 8: I would like to say that I was one of 752 00:37:15,320 --> 00:37:17,840 Speaker 8: the very few economists who kept saying, even on record 753 00:37:17,920 --> 00:37:21,000 Speaker 8: in this show, that I actually thought that the economy 754 00:37:21,040 --> 00:37:24,320 Speaker 8: had a lot of pockets of resilience that that recession. 755 00:37:24,680 --> 00:37:27,040 Speaker 8: You know, what we see where the recession it, you know, 756 00:37:27,440 --> 00:37:30,799 Speaker 8: signs there's a lot in the expectations, but that's because 757 00:37:30,840 --> 00:37:32,600 Speaker 8: we're also talking a lot about it. I mean, a 758 00:37:32,640 --> 00:37:34,920 Speaker 8: lot of the news we receive are negative these days, 759 00:37:35,000 --> 00:37:39,080 Speaker 8: from Ukraine to relations with China to a whole variety 760 00:37:39,160 --> 00:37:40,760 Speaker 8: of things. A lot of the news that we receive 761 00:37:40,800 --> 00:37:45,720 Speaker 8: are negative. So that's affecting expectations. But consumers are very resilient, 762 00:37:45,920 --> 00:37:48,279 Speaker 8: and I don't think it's just that fiscal stimulus that 763 00:37:48,400 --> 00:37:51,040 Speaker 8: but that fiscal stimulus had run its course a while ago. 764 00:37:51,120 --> 00:37:54,000 Speaker 8: Our savings direct are down back to close to zero again, 765 00:37:54,280 --> 00:37:56,880 Speaker 8: so it's not really people spending the money that they 766 00:37:56,960 --> 00:37:59,920 Speaker 8: had been given, you know, two years ago during the pandemic. 767 00:38:00,400 --> 00:38:02,600 Speaker 8: There's a lot of consumer resilience. There's a lot of 768 00:38:02,680 --> 00:38:05,799 Speaker 8: resilience in the service market. Housing market is still doing 769 00:38:06,160 --> 00:38:08,160 Speaker 8: relatively well. I mean, it's not what it was a 770 00:38:08,280 --> 00:38:11,440 Speaker 8: year and a half ago. I just I think it's 771 00:38:11,520 --> 00:38:14,520 Speaker 8: still really really pessimistic to say that we're going to 772 00:38:14,600 --> 00:38:17,360 Speaker 8: go into a recession. Labor market is very tight, we 773 00:38:17,520 --> 00:38:20,719 Speaker 8: can't hire people fast enough, and we're losing people every day. 774 00:38:21,360 --> 00:38:23,840 Speaker 1: How about your students at University of Rochester, the business 775 00:38:23,840 --> 00:38:25,399 Speaker 1: school there, how are they doing in the job market. 776 00:38:25,520 --> 00:38:28,520 Speaker 8: They're doing really well. So one of the places that 777 00:38:28,600 --> 00:38:32,840 Speaker 8: they go to typically is the tech market. So the 778 00:38:32,920 --> 00:38:36,239 Speaker 8: tech market certainly has taken a hit. What we are 779 00:38:36,360 --> 00:38:38,279 Speaker 8: seeing is a little bit of a slow down in 780 00:38:38,400 --> 00:38:41,279 Speaker 8: decision making. They're not pulling out of the market, they're 781 00:38:41,360 --> 00:38:45,200 Speaker 8: not you know, stopping interviews, but they are taking a 782 00:38:45,280 --> 00:38:49,480 Speaker 8: little longer to extend or putting out the start dates 783 00:38:49,880 --> 00:38:52,359 Speaker 8: further into the summer rather than a Junie start date, 784 00:38:52,400 --> 00:38:55,200 Speaker 8: a September start date or a little bit later. But 785 00:38:55,440 --> 00:38:57,680 Speaker 8: we haven't really consulting as one of the areas that 786 00:38:57,760 --> 00:38:59,879 Speaker 8: where we do see actually a slow down. 787 00:39:00,120 --> 00:39:02,640 Speaker 4: Okay, what do you think the catalysts could really be 788 00:39:02,880 --> 00:39:07,960 Speaker 4: to actually see growth slow more significantly, because are we 789 00:39:08,040 --> 00:39:09,839 Speaker 4: really headed for a recession or is it just kind 790 00:39:09,880 --> 00:39:11,840 Speaker 4: of a little bit more of a slower growth regime 791 00:39:11,920 --> 00:39:14,799 Speaker 4: for the next few quarters. It's really hard. 792 00:39:15,000 --> 00:39:17,200 Speaker 8: I mean, I know this is such an economist answer, 793 00:39:17,239 --> 00:39:19,440 Speaker 8: but at the same time, you know, we're talking about 794 00:39:19,480 --> 00:39:23,160 Speaker 8: the housing market slowing down at the same time inventory 795 00:39:23,280 --> 00:39:26,120 Speaker 8: is really low, you know, and at the same time, 796 00:39:26,200 --> 00:39:28,080 Speaker 8: we know that the cost of building is going up, 797 00:39:28,120 --> 00:39:30,280 Speaker 8: so people who want to build want to build sooner 798 00:39:30,440 --> 00:39:33,239 Speaker 8: rather than later, because we still have a lot of 799 00:39:33,320 --> 00:39:36,920 Speaker 8: supply issues going on at the same time, we have geopolitics, right, 800 00:39:37,600 --> 00:39:39,080 Speaker 8: and then we have a very strong dollar. 801 00:39:39,480 --> 00:39:40,120 Speaker 6: There's just so. 802 00:39:40,280 --> 00:39:44,640 Speaker 8: Many mixed signals and mixed sort of information coming through 803 00:39:44,960 --> 00:39:47,800 Speaker 8: that it's really hard to make a very strong prediction. 804 00:39:47,920 --> 00:39:50,160 Speaker 8: And that's why I think all of us are having 805 00:39:50,239 --> 00:39:52,759 Speaker 8: a really hard time to pinpoint exactly what's going to 806 00:39:52,800 --> 00:39:55,160 Speaker 8: happen and when it's going to happen. But I've been 807 00:39:55,239 --> 00:39:58,600 Speaker 8: much more optimistic because the resilience is certainly there. I 808 00:39:58,680 --> 00:40:02,040 Speaker 8: think if we see a La Baber market really tightness 809 00:40:02,160 --> 00:40:04,360 Speaker 8: go away, that's when we're going to get worried. 810 00:40:04,480 --> 00:40:08,600 Speaker 4: Why are so many people overlooking some of these resilient 811 00:40:08,840 --> 00:40:13,160 Speaker 4: pockets and still going toward ward this kind of gloom scenario. 812 00:40:14,320 --> 00:40:15,440 Speaker 8: Maybe it sells more. 813 00:40:18,600 --> 00:40:22,000 Speaker 4: Obviously what we saw with decades high inflation exactly. 814 00:40:22,200 --> 00:40:24,920 Speaker 8: I mean, because typically I think historically too, if you 815 00:40:25,000 --> 00:40:28,240 Speaker 8: saw inflation and that kind of numbers in inflation almost 816 00:40:28,280 --> 00:40:31,120 Speaker 8: close to sort of double digits, historically when we look back, 817 00:40:31,200 --> 00:40:33,600 Speaker 8: those were followed by recessions. 818 00:40:33,160 --> 00:40:35,480 Speaker 4: And then also the Fed obviously not having the best 819 00:40:35,600 --> 00:40:38,840 Speaker 4: track record when it comes to say these soft type. 820 00:40:39,840 --> 00:40:44,080 Speaker 8: They have absolutely so I think looking back historically, people 821 00:40:44,120 --> 00:40:46,200 Speaker 8: are right to assume that there is going to be 822 00:40:46,360 --> 00:40:50,560 Speaker 8: some sort of a slow down. But again, we're seeing 823 00:40:50,719 --> 00:40:53,000 Speaker 8: a lot of growth in the service sector at least 824 00:40:53,040 --> 00:40:55,560 Speaker 8: sort of going towards back to the pandemic levels. We're 825 00:40:55,640 --> 00:40:58,640 Speaker 8: seeing a lot of sort of consumer resilience and labor 826 00:40:58,680 --> 00:41:01,640 Speaker 8: market resilience. And I'm not quite sure that you know, 827 00:41:01,760 --> 00:41:04,399 Speaker 8: firms are really holding onto labor because you know, there's 828 00:41:04,440 --> 00:41:09,200 Speaker 8: a lot of talk about labor hoarding, and it's it's 829 00:41:09,280 --> 00:41:13,000 Speaker 8: certainly new. You know, placements are just not getting the 830 00:41:13,120 --> 00:41:18,000 Speaker 8: applications that we used to see pre pandemic. So it's hard. 831 00:41:18,320 --> 00:41:19,400 Speaker 8: It's hard to replace people. 832 00:41:19,600 --> 00:41:23,120 Speaker 1: Let's talk about Turkey. Oh, central Bank hikes policy eight 833 00:41:23,160 --> 00:41:28,200 Speaker 1: to fifteen percent. Liar drops to a record low. I'm 834 00:41:28,200 --> 00:41:32,040 Speaker 1: you're expert on Turkey, I know, just give us their 835 00:41:32,080 --> 00:41:33,000 Speaker 1: thirty thousand foot view. 836 00:41:33,040 --> 00:41:33,680 Speaker 5: What's happening there. 837 00:41:34,040 --> 00:41:36,160 Speaker 8: I mean, it's a good sign that they're reversing the 838 00:41:36,239 --> 00:41:39,800 Speaker 8: policy of low interest rates, this idea that you know, 839 00:41:39,920 --> 00:41:43,160 Speaker 8: low interest rates with curb inflation is diametrically opposed to 840 00:41:43,239 --> 00:41:45,600 Speaker 8: anything that we know about how any economy works. So 841 00:41:46,160 --> 00:41:49,560 Speaker 8: they have raised it, but not raised it fast or 842 00:41:49,880 --> 00:41:53,200 Speaker 8: large enough. They now have, you know, a new finance 843 00:41:53,239 --> 00:41:56,600 Speaker 8: minister along with a new central Bank governor, so hopefully 844 00:41:56,719 --> 00:41:59,800 Speaker 8: we'll see a little bit more orthodox policies coming. 845 00:41:59,600 --> 00:41:59,920 Speaker 9: Out of it. 846 00:42:00,200 --> 00:42:02,399 Speaker 8: The lira is a huge I mean it's now down 847 00:42:02,440 --> 00:42:07,600 Speaker 8: to about one dollar to twenty lirias or so. Election, well, 848 00:42:07,680 --> 00:42:10,080 Speaker 8: he's got another five year term, so there will be 849 00:42:10,320 --> 00:42:13,520 Speaker 8: at least you know, we'll see how that pans out too. 850 00:42:13,600 --> 00:42:16,200 Speaker 8: But Turkey, it's going to take a while before investors 851 00:42:16,280 --> 00:42:16,600 Speaker 8: come back. 852 00:42:17,160 --> 00:42:19,080 Speaker 1: I know, there's been so many challenges in Turkey in 853 00:42:19,200 --> 00:42:22,399 Speaker 1: terms of natural disasters, and so how are the people doing? 854 00:42:23,520 --> 00:42:25,920 Speaker 8: They are, at least the people that I'm in touch with, 855 00:42:26,080 --> 00:42:29,440 Speaker 8: and they have a very negative outlook. They have a 856 00:42:29,560 --> 00:42:32,080 Speaker 8: very negative outlook about the you know, they don't trust 857 00:42:32,120 --> 00:42:34,880 Speaker 8: the inflation numbers. They don't really trust some of the numbers. 858 00:42:35,000 --> 00:42:37,040 Speaker 5: Yet they put er one back in for another five years. 859 00:42:37,680 --> 00:42:39,960 Speaker 8: Yes, absolutely, all. 860 00:42:39,880 --> 00:42:42,360 Speaker 5: Right, you're an expert, so we're going to. 861 00:42:42,360 --> 00:42:42,880 Speaker 1: Be coming here. 862 00:42:44,200 --> 00:42:47,480 Speaker 8: I want to say it was a very fair election, right. 863 00:42:48,800 --> 00:42:51,160 Speaker 1: Yep, we'll leave it there all right. Chevin Yeltakain, thank 864 00:42:51,200 --> 00:42:53,600 Speaker 1: you so much for join us. Always appreciate getting your perspective. 865 00:42:54,040 --> 00:42:57,239 Speaker 1: Chevin is the dean at the University of Rochester Business School. 866 00:42:57,239 --> 00:42:59,880 Speaker 1: I'm a big fan of Rochester. They turn out a 867 00:43:00,120 --> 00:43:02,440 Speaker 1: lot of good graduates there. I've hired a bunch of 868 00:43:02,520 --> 00:43:03,480 Speaker 1: myself back in the day. 869 00:43:03,840 --> 00:43:06,920 Speaker 6: You're listening to the tape Cat's are live program Bloomberg 870 00:43:07,040 --> 00:43:10,919 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, tune 871 00:43:10,960 --> 00:43:13,879 Speaker 6: in app, Bloomberg dot Com, and the Bloomberg Business App. 872 00:43:13,960 --> 00:43:16,719 Speaker 6: You can also listen live on Amazon Alexa from our 873 00:43:16,800 --> 00:43:21,160 Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 874 00:43:22,560 --> 00:43:25,160 Speaker 4: I'm really excited for our next guest, first time I've 875 00:43:25,200 --> 00:43:27,560 Speaker 4: been able to meet him in person. What is work 876 00:43:27,680 --> 00:43:27,880 Speaker 4: for you? 877 00:43:28,160 --> 00:43:30,640 Speaker 5: Oh boy, this must be a street for you. 878 00:43:30,800 --> 00:43:32,920 Speaker 1: Barry Ridholt's host of Masters in Business. I mean for me, 879 00:43:33,000 --> 00:43:35,360 Speaker 1: it's nothing, but it's just Barry just host some Masters 880 00:43:35,400 --> 00:43:37,120 Speaker 1: of business. I think you run some money too. He's 881 00:43:37,120 --> 00:43:41,319 Speaker 1: a chairman in chief Investment off Serbert Holts Wealth Management. Hey, 882 00:43:41,360 --> 00:43:44,240 Speaker 1: Barry s and P five hundred. It's up fourteen percent 883 00:43:44,360 --> 00:43:46,759 Speaker 1: this year. Why don't I just index my money and 884 00:43:46,880 --> 00:43:48,359 Speaker 1: just go onto the golf course. 885 00:43:48,560 --> 00:43:49,480 Speaker 13: I don't know, why don't you? 886 00:43:49,640 --> 00:43:51,080 Speaker 1: I don't know, I mean, why am I sitting her 887 00:43:51,120 --> 00:43:52,719 Speaker 1: waits and trying to do research and all that kind 888 00:43:52,719 --> 00:43:53,760 Speaker 1: of stuff just by the index? 889 00:43:54,080 --> 00:43:57,360 Speaker 13: I mean, at the very least, having the core of 890 00:43:57,520 --> 00:44:02,000 Speaker 13: your investment portfolio be index and then you know, I 891 00:44:02,160 --> 00:44:05,160 Speaker 13: like to describe it as the Christmas tree and the ornaments. 892 00:44:05,560 --> 00:44:07,680 Speaker 13: If your core is the S and P five hundred, 893 00:44:08,120 --> 00:44:09,880 Speaker 13: you know you're never going to be that far off 894 00:44:09,920 --> 00:44:13,359 Speaker 13: from the market. You'll at the very least compound at 895 00:44:13,400 --> 00:44:17,000 Speaker 13: a different at a pretty close to market rate. And 896 00:44:17,120 --> 00:44:21,280 Speaker 13: then if you feel like you're enthusiastic about different things, 897 00:44:22,000 --> 00:44:24,800 Speaker 13: maybe you like value, maybe you like technology, maybe you 898 00:44:24,880 --> 00:44:27,719 Speaker 13: want to go regional and say I think India is 899 00:44:27,880 --> 00:44:30,480 Speaker 13: the next great growth region or whatever it happens to be. 900 00:44:30,560 --> 00:44:34,319 Speaker 13: I'm just randomly pulling examples out of the air. That's 901 00:44:34,360 --> 00:44:39,640 Speaker 13: perfectly fine. You can absolutely start with the index, especially 902 00:44:39,719 --> 00:44:42,239 Speaker 13: when you look at how easy it is to go 903 00:44:42,320 --> 00:44:45,359 Speaker 13: out and buy an ETF and the cost is four 904 00:44:45,480 --> 00:44:48,880 Speaker 13: or five basis points' it's practically free. So for the 905 00:44:49,080 --> 00:44:53,719 Speaker 13: average you know, home viewer listening at home. It's a 906 00:44:53,760 --> 00:44:54,720 Speaker 13: great place to start. 907 00:44:54,960 --> 00:44:57,279 Speaker 4: And you had a column recently specifically about this and 908 00:44:57,360 --> 00:45:01,280 Speaker 4: why indexing should be a part of investors core investment strategy. 909 00:45:01,320 --> 00:45:04,319 Speaker 4: What were these five issues? Can you walk us through 910 00:45:04,400 --> 00:45:04,879 Speaker 4: with sure? 911 00:45:05,680 --> 00:45:08,920 Speaker 13: You know, it's funny because there's sort of been a 912 00:45:09,080 --> 00:45:13,440 Speaker 13: cottage industry trashing indexing. If you remember a couple of 913 00:45:13,520 --> 00:45:15,600 Speaker 13: years ago, we heard it was un American, it was 914 00:45:15,680 --> 00:45:20,120 Speaker 13: anti competitive. When Jack Bogel and Vanguard first launched in 915 00:45:20,239 --> 00:45:25,480 Speaker 13: seventy four, they were told it was literally communistic. The 916 00:45:25,760 --> 00:45:30,320 Speaker 13: advantage so let's start out first and foremost costs. And 917 00:45:31,040 --> 00:45:34,400 Speaker 13: while the active side has gotten much better on costs 918 00:45:34,880 --> 00:45:36,719 Speaker 13: used to be about two hundred basis points for the 919 00:45:36,880 --> 00:45:40,640 Speaker 13: average active mutual fund, that's now somewhere between let's call 920 00:45:40,680 --> 00:45:44,400 Speaker 13: it fifteen seventy five basis points. It's not four BIPs. 921 00:45:44,480 --> 00:45:49,040 Speaker 13: It's you know, appreciably higher over thirty years. If you're 922 00:45:49,040 --> 00:45:52,160 Speaker 13: gonna compound with fees of seventy five basis points just 923 00:45:52,239 --> 00:45:55,400 Speaker 13: for the fund, say nothing about the advice or trading 924 00:45:55,520 --> 00:45:58,440 Speaker 13: or taxes or anything like that, that's gonna end up 925 00:45:58,440 --> 00:46:01,320 Speaker 13: being about twenty percent of your total returns. It really 926 00:46:01,400 --> 00:46:05,359 Speaker 13: has a giant impact so costs are a big part 927 00:46:05,400 --> 00:46:09,279 Speaker 13: of it. Second of the five things is simply behavior. 928 00:46:09,560 --> 00:46:12,520 Speaker 13: You know, if you're just buying an index, you're not 929 00:46:12,800 --> 00:46:15,880 Speaker 13: engaging in stock selection, you're not market timing, you're not 930 00:46:16,080 --> 00:46:19,160 Speaker 13: jumping in and out, you're not thinking about all the 931 00:46:19,280 --> 00:46:24,160 Speaker 13: things that lead human beings to make bad investment decisions. 932 00:46:24,239 --> 00:46:27,960 Speaker 13: It turns out people are full of cognitive errors and 933 00:46:28,080 --> 00:46:32,960 Speaker 13: behavioral biases, and it leads us to places that not 934 00:46:33,239 --> 00:46:36,480 Speaker 13: the greatest when it comes to to making investing. I 935 00:46:36,640 --> 00:46:40,520 Speaker 13: mentioned stock selection, which you don't do. That's the third thing. 936 00:46:41,520 --> 00:46:44,800 Speaker 13: There have been a number of studies. Hendrik Besting Minder 937 00:46:44,880 --> 00:46:48,640 Speaker 13: is probably the most famous of the studies. Most stocks 938 00:46:49,640 --> 00:46:52,279 Speaker 13: don't really do anything. Some stocks go up a little, 939 00:46:52,360 --> 00:46:54,640 Speaker 13: some stocks go down a little. A couple really crash 940 00:46:54,719 --> 00:46:57,920 Speaker 13: and burn. But it turns out the market indexes are 941 00:46:57,960 --> 00:47:02,200 Speaker 13: primarily driven by the big winners, and that's one one 942 00:47:02,280 --> 00:47:05,040 Speaker 13: and a half percent of the total stocks. So not 943 00:47:05,160 --> 00:47:08,160 Speaker 13: only do you have to find that needle in a haystack, 944 00:47:08,600 --> 00:47:10,960 Speaker 13: you also have to avoid all the rest of the 945 00:47:11,840 --> 00:47:15,480 Speaker 13: mass stocks really really hard. When you buy an index 946 00:47:15,600 --> 00:47:18,000 Speaker 13: like the S and P five hundred that's cap weighted, 947 00:47:18,440 --> 00:47:20,879 Speaker 13: not only are you pretty much guaranteed to have those 948 00:47:20,960 --> 00:47:24,120 Speaker 13: winners in them, but as they get bigger, you own 949 00:47:24,239 --> 00:47:27,840 Speaker 13: more of them. The Apple is the largest component in 950 00:47:27,840 --> 00:47:29,920 Speaker 13: the S and P five hundred. It's also the biggest 951 00:47:30,960 --> 00:47:33,239 Speaker 13: US company in the world. And what a surprise. It 952 00:47:33,360 --> 00:47:35,480 Speaker 13: used to be a tiny percentage of the S and 953 00:47:35,560 --> 00:47:38,920 Speaker 13: P five hundred in the nineties and now it's large. 954 00:47:40,120 --> 00:47:44,239 Speaker 13: And then the last couple of things are really I 955 00:47:44,280 --> 00:47:49,719 Speaker 13: don't know, a little Pickyn, but those three are the 956 00:47:50,120 --> 00:47:51,239 Speaker 13: where you start from. 957 00:47:51,440 --> 00:47:53,120 Speaker 5: Yep, ye, hey, Barry. 958 00:47:53,320 --> 00:47:55,759 Speaker 1: When I started out in the business, we went to 959 00:47:55,800 --> 00:47:57,920 Speaker 1: the mutual funds because that's where all the money was. 960 00:47:57,960 --> 00:47:59,840 Speaker 1: As a sellside analysts, I'd got the Boston three or 961 00:47:59,840 --> 00:48:02,520 Speaker 1: four times a year, walk around town seeing Fidelity and 962 00:48:02,560 --> 00:48:04,600 Speaker 1: Puttingham and all those because that's where the money was. 963 00:48:05,560 --> 00:48:08,279 Speaker 1: Now I'm asking my question, is there any future for 964 00:48:08,320 --> 00:48:11,040 Speaker 1: the mutual fund business? ETFs is gobbling up all the 965 00:48:11,160 --> 00:48:14,600 Speaker 1: money I've got mutual funds converting to ETFs. It's a 966 00:48:14,680 --> 00:48:17,480 Speaker 1: race to the bottom on costs. What's the future of 967 00:48:17,480 --> 00:48:18,400 Speaker 1: the mutual fund business? 968 00:48:18,400 --> 00:48:18,880 Speaker 12: Do you think so? 969 00:48:19,360 --> 00:48:23,640 Speaker 13: The single biggest advantage of ETFs is that there's no 970 00:48:23,960 --> 00:48:28,360 Speaker 13: phantom capital gains tax. Maybe This is a little controversial. 971 00:48:28,440 --> 00:48:30,960 Speaker 13: This is my opinion, but it's hard to argue that 972 00:48:31,640 --> 00:48:35,040 Speaker 13: if I own a mutual fund and I don't sell it, right, 973 00:48:35,120 --> 00:48:37,480 Speaker 13: I continue to hold it. But there are sales and 974 00:48:37,560 --> 00:48:40,560 Speaker 13: transactions within and people who own that fund buy it 975 00:48:40,680 --> 00:48:44,160 Speaker 13: or sell it. Suddenly I get a tax bill that's terrible. 976 00:48:44,640 --> 00:48:49,040 Speaker 13: So I could understand why in taxable accounts there's a 977 00:48:49,320 --> 00:48:54,880 Speaker 13: built in preference for ETFs. However, the mutual fund structure 978 00:48:55,560 --> 00:48:59,359 Speaker 13: is well known, it's well understood in many ways. It's 979 00:48:59,440 --> 00:49:04,400 Speaker 13: scale very nicely, whereas you have some issues with ETF scaling. 980 00:49:04,920 --> 00:49:08,719 Speaker 13: So in qualified tax accounts, in iras and four oh 981 00:49:08,719 --> 00:49:11,040 Speaker 13: one k's, of course you want to go with the 982 00:49:11,160 --> 00:49:13,680 Speaker 13: mutual fund. They don't trade during the day, so there's 983 00:49:13,680 --> 00:49:15,960 Speaker 13: none of that headache. You get priced daily. That's all 984 00:49:16,040 --> 00:49:21,160 Speaker 13: you really need. The costs have come down dramatically, and 985 00:49:21,320 --> 00:49:24,839 Speaker 13: your biggest concern is that phantom tax that goes away 986 00:49:24,920 --> 00:49:26,960 Speaker 13: in a four oh one K or an IRA. So 987 00:49:27,160 --> 00:49:29,560 Speaker 13: I think the future of mutual funds is going to 988 00:49:29,600 --> 00:49:35,520 Speaker 13: be in those retirement accounts. Yeah, ETFs give you some thematics, 989 00:49:35,560 --> 00:49:37,279 Speaker 13: they give you some indexes, they give you some other 990 00:49:37,360 --> 00:49:41,280 Speaker 13: things that work better in the non tax exempt accounts. 991 00:49:42,080 --> 00:49:44,080 Speaker 13: There's room for both of them. They each serve a 992 00:49:44,120 --> 00:49:44,680 Speaker 13: different role. 993 00:49:45,200 --> 00:49:47,319 Speaker 4: Money market mutual funds have been such a hot topic, 994 00:49:47,360 --> 00:49:51,040 Speaker 4: and especially given just with investors being able to yield more, 995 00:49:51,719 --> 00:49:55,440 Speaker 4: and last week actually the Investment Company Institute showed how 996 00:49:55,480 --> 00:49:57,200 Speaker 4: there were flows coming out of that for the first 997 00:49:57,239 --> 00:49:59,760 Speaker 4: time in about two months. I'm wondering, what's the catalyst 998 00:50:00,040 --> 00:50:02,840 Speaker 4: push more of the cash that's sitting there into the 999 00:50:03,040 --> 00:50:03,920 Speaker 4: equity market. 1000 00:50:05,040 --> 00:50:08,440 Speaker 13: That's that's always a key question. I Mean, the amazing 1001 00:50:08,520 --> 00:50:12,360 Speaker 13: thing is, you know, you got zero in money market 1002 00:50:12,440 --> 00:50:15,839 Speaker 13: funds and practically nothing in bonds for a long time. Wait, 1003 00:50:16,200 --> 00:50:18,520 Speaker 13: I could put money in a money market fund can 1004 00:50:18,640 --> 00:50:21,920 Speaker 13: get five and a half percent pretty safely. I mean, 1005 00:50:22,120 --> 00:50:24,439 Speaker 13: as long as it's a name brand that you don't 1006 00:50:24,440 --> 00:50:26,680 Speaker 13: have to worry about it somehow being tied to some 1007 00:50:26,960 --> 00:50:30,160 Speaker 13: stable coin that blows up. But like if you want 1008 00:50:30,200 --> 00:50:34,000 Speaker 13: a Vanguard or a Fidelity or a Franklin Templeton money 1009 00:50:34,040 --> 00:50:37,960 Speaker 13: market fund, you're gonna get five percent. That's pretty safe money. 1010 00:50:38,560 --> 00:50:41,920 Speaker 13: If I'm gonna rotate some of that into the equity market, 1011 00:50:42,880 --> 00:50:46,760 Speaker 13: there really has to be a promise or an expected 1012 00:50:46,800 --> 00:50:52,480 Speaker 13: return appreciably higher than five percent, and you know, up 1013 00:50:52,600 --> 00:50:56,040 Speaker 13: fourteen percent for the year halfway through the year. That's 1014 00:50:56,080 --> 00:50:59,399 Speaker 13: a good year, right, you know the equity market. Could 1015 00:50:59,520 --> 00:51:02,080 Speaker 13: you know, right, gone fishing and take the rest of 1016 00:51:02,120 --> 00:51:04,080 Speaker 13: your gear off and it's a good year. Not that 1017 00:51:04,200 --> 00:51:07,719 Speaker 13: that's gonna happen unless your own pal goes fishing and 1018 00:51:07,800 --> 00:51:09,680 Speaker 13: takes the rest of the year off and then we're 1019 00:51:09,719 --> 00:51:10,440 Speaker 13: off to the races. 1020 00:51:10,520 --> 00:51:13,480 Speaker 4: Yeah, NASAK one hundred is off to its best first 1021 00:51:13,520 --> 00:51:14,600 Speaker 4: six months to a year ever. 1022 00:51:14,840 --> 00:51:18,360 Speaker 13: Actually be fair, it's coming off a horrific. 1023 00:51:18,040 --> 00:51:20,239 Speaker 4: Yes, right for last year. 1024 00:51:20,440 --> 00:51:22,160 Speaker 5: But by the way, people. 1025 00:51:23,040 --> 00:51:27,279 Speaker 13: Don't think this way, but NASDAK down thirty percent. I'm 1026 00:51:27,400 --> 00:51:31,719 Speaker 13: absolutely a buyer anytime. Maybe not the whole position. Maybe 1027 00:51:31,760 --> 00:51:34,319 Speaker 13: you're waiting to see if you're down forty percent or more. 1028 00:51:34,719 --> 00:51:37,680 Speaker 13: But anytime you have that sort of a selloff in 1029 00:51:37,920 --> 00:51:42,600 Speaker 13: that rapid period of time, you have to you have 1030 00:51:42,719 --> 00:51:46,120 Speaker 13: to think, hey, this is fallen so far out of 1031 00:51:46,200 --> 00:51:48,840 Speaker 13: favor that the valuations have become attractive. 1032 00:51:48,920 --> 00:51:51,680 Speaker 1: Thirty seconds balance power, I'm sorry, master's in business. 1033 00:51:51,680 --> 00:51:52,440 Speaker 5: Who you got coming up? 1034 00:51:53,360 --> 00:51:55,880 Speaker 13: So coming up in two weeks of Jenny Johnson of 1035 00:51:55,920 --> 00:52:02,600 Speaker 13: Franklin Templeton next week is going to be Alana Weinstein, 1036 00:52:02,680 --> 00:52:05,479 Speaker 13: one of the Hedge fun Hunter and this weekend Peter 1037 00:52:05,600 --> 00:52:10,200 Speaker 13: Borish pulled Tudor Jones' partner and runs the Robin Hood Foundation. 1038 00:52:10,200 --> 00:52:13,680 Speaker 5: You get players every time every Tuesday. His recording here 1039 00:52:13,719 --> 00:52:14,399 Speaker 5: and a lot of fun. 1040 00:52:14,560 --> 00:52:15,920 Speaker 1: I kind of just make sure I kind of walk 1041 00:52:15,960 --> 00:52:17,160 Speaker 1: by the studio to see who's there. 1042 00:52:17,480 --> 00:52:19,400 Speaker 5: Ye kind of like stargazing Barry Ridolts. 1043 00:52:19,680 --> 00:52:23,440 Speaker 1: He's host of Masters in Business fantastic podcast, check it out. 1044 00:52:24,040 --> 00:52:26,600 Speaker 1: He also is a chairman and chief investment officer Rit 1045 00:52:26,719 --> 00:52:29,000 Speaker 1: Holtz Wealth Management. Love getting him here and it's good 1046 00:52:29,000 --> 00:52:29,800 Speaker 1: to get him in studio. 1047 00:52:33,239 --> 00:52:36,319 Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can 1048 00:52:36,400 --> 00:52:40,120 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 1049 00:52:40,239 --> 00:52:43,880 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 1050 00:52:44,160 --> 00:52:46,799 Speaker 2: at Matt Miller nineteen seventy three and on. 1051 00:52:46,880 --> 00:52:49,920 Speaker 1: Faull Sweeney I'm on Twitter at pt Sweeney. Before the podcast, 1052 00:52:50,000 --> 00:52:52,680 Speaker 1: you can always catch us worldwide at Bloomberg Radio Time