Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Let's bring in now
Speaker 1: Andy Peter Horn. He is the CEO of Fat Brands UM.
Speaker 1: They run own and run restaurants including Johnny Rockets, Fat
Speaker 1: Burger and Buffalo's Cafe. I say, there used to be
Speaker 1: a Johnny Rockets on Third and like fifty six, UM,
Speaker 1: and I would go there and get double bacon cheeseburger
Speaker 1: with that Apple would smoked bacon and a peanut butter milkshake,
Speaker 1: which I would I would kill someone for one of
Speaker 1: those right now. But uh, what's changed about the business? Um?
Speaker 1: And he since since I've been down there. I'm I'm
Speaker 1: in Berlin the last five years, so I haven't been
Speaker 1: back in the States and I don't even think that, um,
Speaker 1: that restaurant on Third Avenue is open anymore. So what's
Speaker 1: what's Johnny Rockets, What's fatburger like now, well, you know,
Speaker 1: thanks for having me. The Johnny Rockets brand, we bought
Speaker 1: it six months ago and about three five restaurants a
Speaker 1: hundred and seventy five of those are international. They're all
Speaker 1: over the place, all over Europe, all over Latin and
Speaker 1: South America. UM and you know we have like a
Speaker 1: hundred of them down there, so they're they're everywhere today,
Speaker 1: growing rapidly. Uh. We don't have one in in Manhattan today,
Speaker 1: but hopefully we'll have another one there soon. Uh. And
Speaker 1: you know, businesses growing alright, So give us a just
Speaker 1: give us a we're thirteen fourteen months andy into this pandemic.
Speaker 1: Give us a kind of a big four the pandemic
Speaker 1: and kind of where we are now, how has a
Speaker 1: pandemic impacted your businesses? You've got we've been we've been
Speaker 1: fortunate and that most of our brands have met or
Speaker 1: exceeded their their levels. Now they've recovered the burger brand
Speaker 1: Stapper Elevation Burger, which is an organic grass fed burger
Speaker 1: chain on the East Coast, and Johnny Rockets recovering nicely
Speaker 1: allowed delivery and to go business. So they were really
Speaker 1: fortunate to be able to take advantage of that market. Um,
Speaker 1: they're probably at normal. There are a lot of special
Speaker 1: venues that aren't quite open yet, like amusement park, steam parks,
Speaker 1: things like that everywhere where. Johnny Rackett's new movie Theaters
Speaker 1: has a lot of locations on the Hurricane Growing Wings,
Speaker 1: Buffalo's Cafe. Those are casual dining restaurants with full bars
Speaker 1: and outdoor dining rooms and all that. They're like a
Speaker 1: hundred and seventeen percent of normal. So they're just recovering
Speaker 1: like crazy. And part of that is because during the pandemic,
Speaker 1: when outdoor dining was allowed, delivery and to go raised awareness,
Speaker 1: and then when customers allowed to come back to the
Speaker 1: dining rooms, you have all this additional delivery business that
Speaker 1: customers didn't really know about before, and so now they're
Speaker 1: over acent of normal. So doing very well. They're a
Speaker 1: little bit of trouble in the Midwest with our steakhouse
Speaker 1: unit Ponderosa and Bonanza where a lot of closures for
Speaker 1: a long period of time. Probably lost some stores there,
Speaker 1: but it's a small percentage of our total seven hundred restaurants.
Speaker 1: So we've been very fortunate. When you say organic and
Speaker 1: grass fed, my mouth immediately starts to water and I
Speaker 1: jumped on the Fat Burger website site. I see you
Speaker 1: have an x x x L Triple King burger that's
Speaker 1: one and a half pounds. Um, I would attempt it.
Speaker 1: I'm not sure if I can. We have a contest
Speaker 1: if you eat that burger, the Triple X Challenge, or
Speaker 1: it used to be called the Triple King Challenge. If
Speaker 1: you can eat that burger, you get a T shirt
Speaker 1: and a certificate. But oftentimes we see guys and girls
Speaker 1: go into the restaurant, and the girls always win because
Speaker 1: they're much smarter and they're not eating French fries and
Speaker 1: drinking too much soda while they're trying to get that
Speaker 1: thing down, and they're very methodical about it. So it's
Speaker 1: definitely a contest burger. Well, as the Grateful Dead said,
Speaker 1: the women are smarter. Um. What I noticed is there's
Speaker 1: not a lot of fake meat here on Fat Burger.
Speaker 1: On the Johnny Rockets menu, I do see, Um, you
Speaker 1: know a garden burger, a black bean burger. What do
Speaker 1: you think about the fake meat trend? I don't know.
Speaker 1: Fake meat is a pejorative term, but you know what
Speaker 1: I mean, right, Um, more and more baste proteins exactly.
Speaker 1: So we we have plant based proteins across all of
Speaker 1: our brands today. That's the Impossible Burger UH domestically UM
Speaker 1: and it's to beyond Burger in some international markets because
Speaker 1: of distribution. But the Possible Borger is a great product. M.
Speaker 1: Plant based proteins are here to stay. Brands need to
Speaker 1: adapt them. And basically, you take that that patty that
Speaker 1: tastes like beef and bleeds like beef, and you add
Speaker 1: the toppings that come with your burger, whether it's an
Speaker 1: Elevation product or a Fat Burger product or Johnny Rockets product,
Speaker 1: and it's gonna taste like Johnny Rockets burger, a fatburger,
Speaker 1: you know, it's just got a different element of the patty.
Speaker 1: But plant based proteins are here, they're not going away.
Speaker 1: They make up a segment of the market where it's
Speaker 1: much better than the ordinary you know, garden Burger or
Speaker 1: Boca Patty Burger, which we have also. But you know,
Speaker 1: if you want the flavor of beef, then you're gonna
Speaker 1: enough to go to a plant based protein sen And
Speaker 1: it's it's really because people don't want to eat the
Speaker 1: red meat. It's not because they're the healthiest product in
Speaker 1: the market. Because they're not. It's just a delicious product
Speaker 1: on the cost side. And he talked us about employees
Speaker 1: and the ability to attract and retain employees. These days,
Speaker 1: there's so much talk out there that the stimulus is
Speaker 1: impacting that two words for you, total nightmare. The labor
Speaker 1: market in the labor market in the restaurant industry right
Speaker 1: now has been decimated by the stimulus package and unemployment benefits,
Speaker 1: and it's impossible to get people to come back to
Speaker 1: work and to get new hires, new general managers, new
Speaker 1: employees in the restaurants that are under construction to be built.
Speaker 1: And this is not something that we experienced nine months
Speaker 1: ago in the first round of PPP loans and stimulus
Speaker 1: checks went out. We really didn't see this problem. But
Speaker 1: now we have people hanging around the hoop to get
Speaker 1: their check and spend their money instead of coming back
Speaker 1: to work, and it's it's just been a problem now.
Speaker 1: Obviously it's going to wear off fairly soon when unemployment
Speaker 1: benefits drop off in the stimulus checks are spent. Right now,
Speaker 1: it's been very difficult and it's driven up food prices
Speaker 1: as well because the same problem exists at the processing
Speaker 1: plants and for the distribution centers. So we have shortages
Speaker 1: all over the country because the like Cisco and US
Speaker 1: Foods and all the big broadline distributors have run out
Speaker 1: of drivers. All right, that's I think we've heard that
Speaker 1: around the business and you Weader Horn, CEO Fat Brands,
Speaker 1: thank you so much for joining us. We appreciate your
Speaker 1: thoughts on the restaurant industry. Let's get the latest, shall we,
Speaker 1: on some of the leading geopolitical issues that are out
Speaker 1: there right now in the news. When we do that,
Speaker 1: we always like to turn to Admiral James Trevites. He's
Speaker 1: a calumnist for Bloomberg Opinion, retired US Navy admiral and
Speaker 1: a former military commander of NATO, and Admiral Strevitis is
Speaker 1: always kind with his time when we want to talk
Speaker 1: some of these big geopolitical issues. Admiral, thanks so much
Speaker 1: for joining us here. I'd love to start on the
Speaker 1: Ukraine because that seems to be the most topical here.
Speaker 1: We have Russia massing troops on the border there. What
Speaker 1: do you think is going on and what do you
Speaker 1: think the US response should be, if any? We should
Speaker 1: first start with recognizing that Russia actually invaded Ukraine and
Speaker 1: carved a significant chunk out of their territory, the Peninsula
Speaker 1: of Crimea strategically important in the Black Sea. Russia has
Speaker 1: continued to service and support rebel groups in southeastern Ukraine,
Speaker 1: so there's a lot of bad history there. And now
Speaker 1: over the last two to three weeks we've seen reports vary,
Speaker 1: but between twenty thousand and I saw numbers. I has
Speaker 1: eighty thousand troops. This is a significant force. So the
Speaker 1: reason for it, I think is threefold. One is Putin
Speaker 1: is rattling a saber at the United States because he
Speaker 1: knows that there are going to be some significant sanctions
Speaker 1: coming against his regime for the activities on cyber in
Speaker 1: our election, and above all the solar windsack Number two,
Speaker 1: Putin is playing to his home crowd, if you will,
Speaker 1: all politics are local in the end, He's trying to um,
Speaker 1: if you will, show the the strength and the power
Speaker 1: of Russia, how they can drive events. And then, third
Speaker 1: and finally, he is seeking to uh distract from the
Speaker 1: imprisonment and the poisoning of Alexander Navalny his political opponents.
Speaker 1: So he's got a shopping list of things he wants
Speaker 1: to do. He's got eighty thousand troops on the border.
Speaker 1: Let's say I think the chances are still low that
Speaker 1: he will actually conduct an invasion, but he is certainly
Speaker 1: seeking to demonstrate that he can make things very difficult
Speaker 1: for the United States in the West if he desires
Speaker 1: to well. And Biden's been pretty bold when talking to
Speaker 1: President Putin. I don't think it's unfair to say that, Um.
Speaker 1: Donald Trump seemingly adored the Russian leader, and you know,
Speaker 1: Biden comes right out of the gate kicking calling him
Speaker 1: a murderer. Um. On the other hand, Admiral, it does
Speaker 1: seem as though a lot of these geopolitical hotspots, a
Speaker 1: lot of these bad actors are are are showing strength
Speaker 1: right when this new administration comes into office. Is am
Speaker 1: I seeing it the wrong way? Or do the Russians
Speaker 1: and the Chinese just feel more comfortable doing these kind
Speaker 1: of things with Democrats in office. I don't know if
Speaker 1: it's more comfortable, but there's certainly a long history on
Speaker 1: both sides, Republican and Democrat, of having to experience testing
Speaker 1: when you take over. And so when President Trump took over,
Speaker 1: we saw Kim Jong unt launch ballistic missiles. UM when
Speaker 1: the President Biden takes over. As you just saw, we
Speaker 1: see Ukraine. But the other one, and you're absolutely right,
Speaker 1: is Taiwan. We've seen the Chinese fly fighters into the
Speaker 1: ear defense zone of Taiwan, highest number UH since Taiwan
Speaker 1: started recording these kind of incidents. China has a carrier
Speaker 1: strike group operating just off the coast of Taiwan right now.
Speaker 1: So I think it's very true to say that every
Speaker 1: administration gets tested early. The question is how do you respond.
Speaker 1: And in my most recent Bloomberg opinion piece which came
Speaker 1: out this morning, um, my prescription is you've got to stare,
Speaker 1: Putin down. He is a killer, and if you give
Speaker 1: in to him, if you appease him, there's no future
Speaker 1: in that process. So I think we've got to take
Speaker 1: a fairly strong stance across that Ukrainian border, not with
Speaker 1: armed US military troops parachuting in there, but giving more
Speaker 1: weapons to Ukraine, providing them training, allowing them partnership agreements
Speaker 1: with NATO. They're not members of NATO, but they've been
Speaker 1: a close ally or a close partner of NATO over
Speaker 1: the years. So there's a lot we can do to
Speaker 1: demonstrate to Putin that there will be a significant cost
Speaker 1: to add to him. Admiral, this brings up an issue. UM.
Speaker 1: You know, I was kind of excited to see a
Speaker 1: positive headline ari e NATO cooperation this morning at the
Speaker 1: meeting in Brussels. They're gonna put another five the US
Speaker 1: gonna put another five hundred troops here in Germany where
Speaker 1: I am in Berlin. On the other hand, I have
Speaker 1: been uh stationed here for the last five years and
Speaker 1: just shocked to see that. Um. The Chancellor, who otherwise
Speaker 1: is considered you know, a leader of the G twenty,
Speaker 1: is so determined to get a pipeline up to Russia,
Speaker 1: essentially a pipeline that funnels cash to Vladimir Putin in
Speaker 1: exchange for his natural gas. And now it looks like
Speaker 1: Germans are also looking to get the Russian vaccine. Um
Speaker 1: is it important where you buy your commodities? I mean, uh,
Speaker 1: aren't we funding a really problematic regime here we are?
Speaker 1: And um, as I was saying just today in an
Speaker 1: interview with a German newspaper, they were asking the same questions. UM,
Speaker 1: let's add another controversy, which is Germany apparently is determined
Speaker 1: to use Walkway to build their five gene networks. And
Speaker 1: as I said to the German reporter, you know, life
Speaker 1: is full of choices for people and for alliances. And yes,
Speaker 1: it is important to the long term relationship with the
Speaker 1: US and Germany that Germany stands with the United States
Speaker 1: against these authoritarian regimes, both Russia and China. All right,
Speaker 1: let's move from hotspots on the planet Earth to space.
Speaker 1: You also have another column, Oul. You've been prolific talking
Speaker 1: about Russia and China teaming up a new space race.
Speaker 1: What's the latest there and what's the ramifications for the US. Well,
Speaker 1: the big news here is not just space. It is
Speaker 1: the way Russia and China are drawing closer and closer
Speaker 1: and closer together. They're aligning themselves diplomatically, economically, militarily. Largest
Speaker 1: exercise military exercise conducted since the end of the Cold
Speaker 1: War was up on this buryan border between Russia and China,
Speaker 1: about a year ago. Um. This latest thing is that
Speaker 1: Russia and China have come together and announced they will
Speaker 1: create an outpost on the move, a lunar outpost. This
Speaker 1: is a big deal because, um, it has not only
Speaker 1: commercial economic implications, but it also has real military potential
Speaker 1: in both of these nations. As I talked about in
Speaker 1: that Bluebird opinion piece, both of them are really using
Speaker 1: their space programs in a highly militarized way. So we
Speaker 1: had to be quite concerned watching these two nations, both
Speaker 1: authoritarian regimes, both of whom we have difficult relationships with,
Speaker 1: drawing closer and closer together in space and in other areas.
Speaker 1: Admiral thanks very much for joining us. Always great to
Speaker 1: get your take on these issues. Admiral James Traviti's former
Speaker 1: Supreme Allied Commander of NATO. He is uh now, of course,
Speaker 1: retired from the U. S. Navy and a Bloomberg opinion
Speaker 1: columnist as well as an executive consultant at the Carlisle
Speaker 1: Group UM, and has a number of other interests. He's
Speaker 1: got a book out four, a novel of the Next
Speaker 1: World War. I've read the beginning and I only put
Speaker 1: it down because I had to come to work. I
Speaker 1: actually thought about calling in sick and just reading reading
Speaker 1: the rest of the book. It's so good, and I'm
Speaker 1: really into that kind of stuff. So great to have
Speaker 1: General uh, sorry, Admiral James Travities on um talking about
Speaker 1: the geo political hotspots around the world, our listic deference
Speaker 1: as Johnson and Johnson and News this morning, we do
Speaker 1: that with one of our favorite voices and all things pharmaceutical.
Speaker 1: That's Sam Fazelli. He's a senior pharma analyst for Bloomberg
Speaker 1: Intelligence based out of London. He also manages Bloomberg Intelligence
Speaker 1: for all of Europe, so we appreciate getting some of
Speaker 1: his valuable time. Sam, thanks so much for joining us here.
Speaker 1: You know, when I look at the numbers being reported,
Speaker 1: six cases out of almost seven million, you know a
Speaker 1: lot of observers would say that's a pretty good result.
Speaker 1: Why are we pausing this thing? And it's so important
Speaker 1: to get shots into arms. I'd love to get your thoughts, yes,
Speaker 1: Hyphol Sorry, um. I think it's absolutely the right thing
Speaker 1: for the CDC and the FDA to have done because
Speaker 1: number one, this this events, this issue takes sometimes up
Speaker 1: to two weeks after the dose to rear its ugly
Speaker 1: head unfortunately, so it's very possible that the numbers will
Speaker 1: continue to rise, possibly to ten or fifteen. Who knows.
Speaker 1: I can tell you that'd b Astra Zeneca. We're looking
Speaker 1: at something in the region of one in a hundred
Speaker 1: thousand depending on the age of the people who have
Speaker 1: been vaccinated. So if that's the case, then we would
Speaker 1: expect to see more more here, and that I think
Speaker 1: is why the CDC is done and the FDA have
Speaker 1: done what they've done. And of course the US does
Speaker 1: not need the g NJ vaccine to get the majority
Speaker 1: of its people vaccinated. And that's it. It's still a bummer, uh, Sam,
Speaker 1: because I was just just last night made final plans
Speaker 1: to fly back to New York to get the J
Speaker 1: and J vaccine UM since it's proving very difficult to
Speaker 1: get it here in Germany. That won't be the case. Now,
Speaker 1: I would still um take it, uh. And it seems
Speaker 1: to me correct me if I'm wrong. The problems that
Speaker 1: we've seen with blood clots and astras enka and the
Speaker 1: problems that we've seen in UH, the J and J
Speaker 1: vaccine with blood clots seemed to affect females under let's
Speaker 1: say the age of sixty if you like. Is that
Speaker 1: is that a fair assessment? Well, so let's just be
Speaker 1: careful here though about UM, and that is that it's
Speaker 1: only six cases in the US, so that's not an
Speaker 1: enough number of people to make that decision in the
Speaker 1: UK where they've had the most cases, and in Europe,
Speaker 1: when you look at the reported incidents divided by the
Speaker 1: number of people of the different sexes that have been
Speaker 1: vaccinated UM, it doesn't have a Unfortunately, it doesn't distinguish
Speaker 1: it in men and women based in the UK. Maybe
Speaker 1: something different in the US, but I doubt it. All right, Sam,
Speaker 1: you mentioned that, and when you are talking much earlier
Speaker 1: this morning, you kind of you made the comment to
Speaker 1: me that again, we have plenty of supply here from
Speaker 1: five and MODERNA, but I think about Europe, and I
Speaker 1: think about other parts of the world that may be
Speaker 1: relying more on a single dose shot like the Johnson
Speaker 1: and Johnson. This could be a problematic. Now yeah, yeah,
Speaker 1: So both the European Union and the UK I think
Speaker 1: will be fine. It might be a bit slower than
Speaker 1: than expected in terms of or anticipated in terms of
Speaker 1: Bionte Moderna shots, and then so of course we'll have
Speaker 1: novo vax um. But the rest of the world is
Speaker 1: where the problem starts, because they have mostly either the
Speaker 1: J and J statonical vaccine or the vaccine um Russia
Speaker 1: or China. Don't forget the Russian vaccine is also ana virus,
Speaker 1: and I would be amazed if that doesn't have the
Speaker 1: same side effects, which of course will be incredible to
Speaker 1: have if it doesn't. But then you have the China
Speaker 1: vaccines that so far, what we've seen published and not
Speaker 1: thought has been published, they're not that effective. So you
Speaker 1: have a problem involving there. Yeah. UM, I just want
Speaker 1: to cover a couple of headlines, bad headlines we're seeing
Speaker 1: come across the ticker right now. First off, New York
Speaker 1: City suspending its home bound senior vaccine drive due to
Speaker 1: the J and J pause. UM. Even if the J
Speaker 1: J pauses the right thing to do, it's unfortunate that
Speaker 1: they have to stop this effort to go around and
Speaker 1: vaccinate the people who need it most. Also, the US
Speaker 1: is saying what they see with the J and J
Speaker 1: vaccine is similar to the astro vaccine. I guess as
Speaker 1: far as the data that they have, UM, they are
Speaker 1: saying it's unclear if there's any link between blood clots
Speaker 1: and birth control pills. And this goes back to the
Speaker 1: female issue SAM that we were talking about. UM they're
Speaker 1: saying they don't have any evidence to support that, but
Speaker 1: clearly there's that speculation out there. Yeah, but the European
Speaker 1: Unions already answered that question. Two two cases of this
Speaker 1: odd v I T T. It's called vaccine induced thrombosis
Speaker 1: with frombocytopenia. That's a mouthful, this v I T T
Speaker 1: two twenty two cases and there is no obvious link.
Speaker 1: So we we have the answer. We don't need to
Speaker 1: go and ask any more questions on that one. And
Speaker 1: what you get with these things with flights with conceptive pills,
Speaker 1: just the clotting. You don't get that frombocytopenia, that loss
Speaker 1: of blood plate lists that normally causes bleeding. It's very
Speaker 1: rare to have a bleeding issue and a clotting issue
Speaker 1: at the same time. Right, that's the problem here, all right, Sam,
Speaker 1: thank you so much for joining us once again. We
Speaker 1: turn to you often when there's news on the vaccines
Speaker 1: and this pandemic. Um. We appreciate you taking the time.
Speaker 1: Santa Celli, he's a senior pharmaceutical analysts for Bloomberg Intelligence,
Speaker 1: one of the absolute best for decades in the city
Speaker 1: of London doing that, and he's also the manager of
Speaker 1: all of Bloomberg Intelligence for Europe. Getting the latest yere
Speaker 1: on this, Johnson and Johnson vaccine setback here the now,
Speaker 1: the CDC and FDA, we're seeing headlines that they expected
Speaker 1: delay to be quote in a matter of days. Uh
Speaker 1: So hopefully that is the way it turns out. Now,
Speaker 1: I want to get over to David Garanty, chief market
Speaker 1: strategist laid Law and Company, to talk to us about, um,
Speaker 1: his expectations on the markets and tech. And David, I
Speaker 1: always feel like I'm talking to someone famous when we
Speaker 1: have you on, so I'm really psyched to get uh
Speaker 1: some time with you. Um what do you think about
Speaker 1: the coin base? I p oh, it's gonna be what
Speaker 1: a hundred billion dollar valuation, bigger than the exchange on
Speaker 1: which it's going to be listed. Is this a whole
Speaker 1: lot of yape or is this a growth industry? Well,
Speaker 1: I mean coin Base certainly, and thank you Paul for
Speaker 1: your kind words. But you know, coin Base, if we're
Speaker 1: looking at it, certainly has been serving very much as
Speaker 1: a gatekeeper relative to the cryptocurrency market as a whole. Uh,
Speaker 1: you know, given what they've got in terms of an
Speaker 1: account based at fifty eight million accounts and arguably for
Speaker 1: an asset class, has certainly seen very strong performance over
Speaker 1: the last twelve months. You know, they are probably the
Speaker 1: pre eminent exchange to go to. Certainly there are a
Speaker 1: business in which obviously a lot of other exchanges in
Speaker 1: other types of asset classes would like to be involved. Um,
Speaker 1: we don't necessarily see cryptocurrencies, you know, going away much
Speaker 1: as we saw back in two thousand and seventeen, because
Speaker 1: now we see measures coming into place that the cryptocurrency
Speaker 1: market in its own way as being institutionalized. Now. That said,
Speaker 1: we can say cryptos got better traction now, um, but
Speaker 1: we also say, look at the valuation that you're paying
Speaker 1: for coin base, you know, less than two billion dollars
Speaker 1: in revenue last year, a hundred billion dollar likely evaluation.
Speaker 1: You know, it's pretty rich evaluation. Anytime you see something
Speaker 1: going out at more than fifty times revenues, um, you know,
Speaker 1: will they be able to grow into this valuation remains
Speaker 1: to be seen. But yeah, you're you're paying a lot
Speaker 1: to oh this name. Alright. So but if I'm an
Speaker 1: investor here and all I hear is bitcoin this, bitcoin that,
Speaker 1: but I see it going up every day, I feel
Speaker 1: like I've missed it. Is this the way for me
Speaker 1: to maybe get exposure and maybe this is my crypto
Speaker 1: play written large by getting into this coin basis, I
Speaker 1: mean I would agree to it. And it's not just
Speaker 1: a matter of getting Bitcoin exposure, but it's also getting
Speaker 1: exposure to the other cryptocurrencies that are listed, whether we're
Speaker 1: looking at the likes of ethereum, whether we're looking at
Speaker 1: the likes of light coin, UH tether or others. So
Speaker 1: from that standpoint, it's it's a little bit of picks
Speaker 1: and shovel type of play, if you will. And UH
Speaker 1: in an important part of the infrastructure for the overall
Speaker 1: of the currency ecosystem. So yes, in that name, it
Speaker 1: is going to be a marquee holding for investors looking
Speaker 1: at the sector. Hey you UH, do you do you
Speaker 1: have a price target on the smp because I'm looking
Speaker 1: at your note and it says will earnings growth drive
Speaker 1: the SMPI towards Are we going to hit that that
Speaker 1: level this year or are you thinking just sometime in
Speaker 1: the future. I mean, in our view, the trends are
Speaker 1: kind of moving in that direction. And really here at
Speaker 1: the doorstep of first quarter earning season, we just have
Speaker 1: to go back and look at what kind of out
Speaker 1: performance we've had over the second quarter, third quarter fourth
Speaker 1: quarter earning seasons, and there we've seen out performance versus
Speaker 1: Wall Street expectations of about you know, we think that
Speaker 1: we're probably maybe not necessarily at out of performance in
Speaker 1: the first quarter earning season, but we think that nine percent,
Speaker 1: you know, it isn't necessarily out of rather reach. You know,
Speaker 1: if we can move and have a positive estimate revision
Speaker 1: up in terms of SMP five earnings estimates twenty two,
Speaker 1: if we can hold you know, the pe multiple valuation constant, yeah,
Speaker 1: that'll get us. Now, the question in terms of valuation
Speaker 1: multiples is you know, what's going on relative to the
Speaker 1: tenure And we saw the tenure cap out March first one,
Speaker 1: and I think that basically the big surprise in terms
Speaker 1: of strategist expectations has been the fact that the dollar,
Speaker 1: ince than a weakening, is actually strengthened. And the strength
Speaker 1: of the dollar has been important because it now allows
Speaker 1: foreign investors, whether it's Europeans, whether it's Japanese with insurance
Speaker 1: companies or others, uh to you know, buy into US
Speaker 1: treasury is on a currency hedged basis and and certainly
Speaker 1: earned positive spread over what they can get back in
Speaker 1: their own home markets. So our view here is dollars
Speaker 1: strength leads to creator foreign demand for US fixed income,
Speaker 1: which helps to slow down the rate of interest rates
Speaker 1: rising from here, and an interest rate rises are moderating.
Speaker 1: That arguably can work well for equities as long as
Speaker 1: earnings growth comes through and valuation levels hold. I know
Speaker 1: it's a lot to ask, but that's kind of how
Speaker 1: the mechanics work. Yeah, I'd love to talk to you
Speaker 1: a little bit about the chip shortage that we're seeing
Speaker 1: in the technology space, because it's not just a technology issue.
Speaker 1: It's rippling out to other parts of the economy, most
Speaker 1: notably I think the auto industry has been calling it
Speaker 1: out here for several quarters. How bad is it and
Speaker 1: what do you think the solution is? Well, you know,
Speaker 1: certainly the dislocations that took place because things were shut
Speaker 1: down for the period of time that they were in
Speaker 1: you know what I mean said, you've got a little
Speaker 1: imbalances that are built up in the supply chain. If
Speaker 1: we're looking at the lead times people have to have
Speaker 1: right now, I think the numbers of about sixteen weeks
Speaker 1: depending upon the category of semiconductors, um you know, orders
Speaker 1: to delivery, but in some cases it's far worse. It's
Speaker 1: not just the auto industry. If we were to look
Speaker 1: at network routers, um, you know, there are indications that
Speaker 1: order times have stretched out as far as a year.
Speaker 1: Uh and for the rollout of broadband capacity. UM. You know,
Speaker 1: routers obviously are very critical element here and so we're
Speaker 1: seeing um, you know, points of constraint developed across the
Speaker 1: wider economy and not just in the auto sector. And certainly,
Speaker 1: you know, what was interesting about the Biden administration summit
Speaker 1: with CEOs where they were talking about, you know, allocating
Speaker 1: fifty billion dollars of fiscal support towards easing semiconductor shortages
Speaker 1: and putting more capacity here in the US, is that
Speaker 1: you know, there is competition, whether it's amongst the auto
Speaker 1: industry or other sectors who are trying to secure these
Speaker 1: chips supplies. In the process, you know, we have to
Speaker 1: look on a more medium to long term solution that
Speaker 1: can put in place the capacity domestically arguably or at
Speaker 1: least closer by is going to happen. David, five to
Speaker 1: ten years, are we making the super high tech chips
Speaker 1: at home? I'd say, you know, t SMC putting twelve
Speaker 1: billion dollars to work in their five nanometer manufat away
Speaker 1: for plant in Phoenix, Arizona is important in that regard,
Speaker 1: and yeah, five to ten years we're going to have
Speaker 1: that fab online as well as potentially a number of others.
Speaker 1: Obviously Intel made their own announcement I think last week,
Speaker 1: uh twenty billion dollars. So yeah, this we're moving in
Speaker 1: that direction, and we need to move in that direction
Speaker 1: because China certainly indicated they want to be more self sufficient.
Speaker 1: They'll take their first call on that asset. All right, David,
Speaker 1: thank you so much for joining us. We appreciate that
Speaker 1: as always. David Garretty, chief market strategist for laid Long Companies,
Speaker 1: also our president at bt block Key is our what
Speaker 1: do I go to guys for all things technology. Thanks
Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe
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Speaker 1: Matt Miller on Sweeney. I'm on Twitter at pt Sweeney
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