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. It was fed chair
Speaker 1: at Jerome Powell. He's delivering his semi annual Monetary Policy
Speaker 1: report to the Senate Banking Committee, and Matt I think
Speaker 1: that the one takeaway I had here from some of
Speaker 1: his comments to date is that he's cautiously optimistic about
Speaker 1: the economic recovery and feels comfortable with where the FED
Speaker 1: is in terms of rates and in terms of uh
Speaker 1: continued bond buying, and in terms of how well they
Speaker 1: can control inflation as well. He doesn't think it's going
Speaker 1: to be the kind of problem that they won't be
Speaker 1: able to get their hands around. Um. The other's interesting thing,
Speaker 1: I think, and from j Powell, I guess this is characteristic.
Speaker 1: He's staying out of President Biden's way. He tried to
Speaker 1: avoid clashes with President Trump as well, but um, the
Speaker 1: opposite wasn't true. Uh, And maybe I guess I've gotten
Speaker 1: used to the President making comments about the FED chair,
Speaker 1: but I thought it was interesting today in John Pharaoh's
Speaker 1: interview with the new Director of the Council of Economic
Speaker 1: Advisors Brian Deese, Dee wouldn't answer Pharaoh's question as to
Speaker 1: whether Biden had met with Powell yet. He just wasn't
Speaker 1: gonna give any ground. And you know, Pharaoh falled up
Speaker 1: like three times. Um, des wouldn't say. I don't know
Speaker 1: if that's because Biden hasn't met with Chair Powell and
Speaker 1: he feels like that would be an irresponsible message to send,
Speaker 1: or whether um, this is just a new a new
Speaker 1: relationship between a president and a federal chair and a
Speaker 1: big change obviously since the last administration. Or let's get
Speaker 1: a recap of what we did here this morning from
Speaker 1: FED Chairman Chow. We're fortunate to be able to do
Speaker 1: that today, Matt. We've got Carl Ricka Dona, Chief US
Speaker 1: Economists for Bloomberg Economics, and then Emmons, Managing director Global
Speaker 1: macro Strategy at Medley Investors. And let's start with you.
Speaker 1: Carl here, what did you take away from FED Chairman's comments?
Speaker 1: Today any changes in the near intermediate term do you believe.
Speaker 1: Good morning, Paul. Really, the story here is that no
Speaker 1: news is news and in of itself here because it
Speaker 1: shows the FED that is unwavering and its policy stance
Speaker 1: despite the ongoing rise and treasury yields and the improvement
Speaker 1: improving tonally seen in the economic data. So the FED
Speaker 1: is very resolute in its commitment to provide policy accommodation,
Speaker 1: and they're showing no signs of starting to waiver as
Speaker 1: they're being tested with potential signs of an economy that
Speaker 1: really is surging forward with the pretty robust growth. The
Speaker 1: least one I want to make uh you to your
Speaker 1: question is that fast growth does not have to be inflationary.
Speaker 1: And so we can look back to the probably the
Speaker 1: best parallel episode, and that was the hard stop procession
Speaker 1: of two. At that time, it was a FED chair
Speaker 1: Paul Bulker slamming on the brakes of the economy and
Speaker 1: then releasing it. Uh. This time that hard stop is
Speaker 1: not caused by the FED. It's caused by lockdowns related
Speaker 1: to coronavirus, and we can unlock the brake, the economy
Speaker 1: can surge forward. And if nineteen eight three eighty four
Speaker 1: eighty five is a piece of precedent, and I think
Speaker 1: it may be Uh, we did not see a lot
Speaker 1: of inflation during that period. I want to ask Ben
Speaker 1: the question, but before I do, I gotta say hello
Speaker 1: to Carl. It has been so long, man, I've it's
Speaker 1: been since like Bloomberg rewind since I've seen you. And uh,
Speaker 1: it's great to hear your voice. Um, and have you
Speaker 1: on the program. Ben. With that. Ben and I are
Speaker 1: old old friends now we speak on daily basis. Um.
Speaker 1: What Ben? The other thing that that the Fed chair said,
Speaker 1: which you know Carl says, fast growth doesn't have to
Speaker 1: mean inflation. Um, the chair said, look, uh, serious deficits
Speaker 1: don't have to meet I mean inflation anymore. Do you
Speaker 1: think it's a concern at all that we're building up
Speaker 1: such a huge debt to GDP level and that he
Speaker 1: is sitting on such a gigantic balance sheet. Does that
Speaker 1: bother him? Should it? I met a good talk to
Speaker 1: you again. Yeah. I think what he was saying is
Speaker 1: that the link between inflation and deficits has weakened over
Speaker 1: the years, and he did say that it could change, right,
Speaker 1: But I think what he's saying too is that because
Speaker 1: of the twenty five years of disciflationary pressure, therefore the
Speaker 1: link between deficits and inflation is low. And if you
Speaker 1: didn't take that to your question of the debt though,
Speaker 1: and that matters to the economy clearly, I think him
Speaker 1: too probably understands that over time large large debt and
Speaker 1: deficits will drag down the economy again again adding to
Speaker 1: more disciflationary impression rather than inflation impression. And think that's
Speaker 1: just what he, I think, is trying to say with
Speaker 1: that that question. And I think additionally to that that
Speaker 1: the message seems to be overalled. Is the same today
Speaker 1: he didn't respond to a question about the linkage between
Speaker 1: multipolicy and and the asset valuation. So I do think
Speaker 1: that he sees inflation in the ASCID markets not so much,
Speaker 1: you really call me, I just think, you know, I
Speaker 1: never got past econ one oh one, so I'm probably
Speaker 1: the least qualified here. But I have always understood that
Speaker 1: when countries build up huge debts, what they really like
Speaker 1: to do is massively devalue the currency so that they
Speaker 1: don't actually have to pay That. Isn't that, Carl, Do
Speaker 1: you think that's always the plan? Well, Matt, I know
Speaker 1: that you're a rule breaker and you like to be
Speaker 1: the bad boy. So the rules are a little different
Speaker 1: for the U. S. Economy. So in what we would
Speaker 1: call an in country, an average sized economy or country,
Speaker 1: you run into the problems where deficits can be inflationary
Speaker 1: and cause currency devaluation and whatnot. In the U. S economy,
Speaker 1: that's a very unique role. It's the largest economy in
Speaker 1: the world, is the most powerful military in the world,
Speaker 1: and it's also a reserved currency. And so that means
Speaker 1: that in fact, looking back to the last recession, when
Speaker 1: we had the US credit rating downgrade, that actually proved
Speaker 1: a positive for treasury guilds UH and the currency actually
Speaker 1: appreciated because there was a flight of capital into the US. So, well,
Speaker 1: we certainly can't just run willy milly indefinitely higher deficits
Speaker 1: and whatnot. What's happening at the moment is said the
Speaker 1: deficit spending is reducing slack in the economy. In the
Speaker 1: best way for the US economy to be able to
Speaker 1: pay down those debts at some future date is to
Speaker 1: get back to full employment and full capacity as quickly
Speaker 1: as possible. UH. If it's a weak, uh, starved recovery
Speaker 1: like we saw after the O nine recession. Uh, then
Speaker 1: that that puts the economy a much weaker footing to
Speaker 1: make those debt payments. So get back to full employment,
Speaker 1: the tax revenue will come with it, and at that
Speaker 1: point then you can start to look at addressing these
Speaker 1: fiscal imbalances. So so Ben, you know, we're hearing again
Speaker 1: from chairman Palace, as Carl suggested, no surprise, but lower
Speaker 1: for longer. Is there a risk here that the market
Speaker 1: kind of moves past the Fed? Here we've seen a
Speaker 1: little lifting rates, We've seen uh, some steeping in the
Speaker 1: Yeel curve. Does the market kind of moved past where
Speaker 1: the Fed is and is comfortable? Yeah, it is somewhat happening,
Speaker 1: Ball because you know, you look at those rate high
Speaker 1: probabilities in FETs in the futures, right, they have moved
Speaker 1: off And it does show that the market is pricing
Speaker 1: in the recovery aided by the vaccination rollouts as at
Speaker 1: some point that the economy one is fully reopened and
Speaker 1: then it's a closer to full capacity, by which means
Speaker 1: inflation will be in the temporary above targets. And yeah,
Speaker 1: then it pulls forward, as we call it rate hike.
Speaker 1: That's the function of the steeping of the yield curve
Speaker 1: and the rise in nominal and real interest rates, and
Speaker 1: so that could indeed be somewhat ahead of what what
Speaker 1: ultimately the FAT will will do. I will say though,
Speaker 1: that so far it's been viewed as that they're not
Speaker 1: leaning against what the market is doing, and there was
Speaker 1: a question about that in the testimony earlier. Right, How
Speaker 1: the link is between multi policy and asset values. Yeah,
Speaker 1: that's a clear link. But there's also recognition that there's
Speaker 1: a lot of different elements going on at the same
Speaker 1: time in terms of how the recoverage price into the
Speaker 1: inter the financial markets. Right, how we're getting out of
Speaker 1: the pandemic to a full open economy, and it does
Speaker 1: lead to cep Ye curve and some expectation of feature rates. Ben,
Speaker 1: I'm looking at a just thirty seconds here, but I'm
Speaker 1: looking at a couple of charts that you emailed me yesterday. Um,
Speaker 1: if the herd immunity and you know, UM continues to rise,
Speaker 1: infections continue to drop, is the rate hike probability for UM,
Speaker 1: you know, December going to climb substantially? Yeah, that good math.
Speaker 1: It's it's it's definitely there that that's a correlation that
Speaker 1: I think we should take note of that the market
Speaker 1: is implying that it is really the stay at home trade.
Speaker 1: So that speakers we will talk about as being deflated
Speaker 1: today right that rotation is happening out of tech stay
Speaker 1: at home into the opening and I think that's the
Speaker 1: link with that rate high probability. The market is prishing
Speaker 1: in the economies out of the pandemic fully reopens and
Speaker 1: that's steep you curve dam reflects that, and that's where
Speaker 1: the rate type of probability rise comes from. So yes,
Speaker 1: there's a clear link between the reopening trade and the
Speaker 1: rate type probability. Ben, thanks so much for joining us.
Speaker 1: Pleasure to speak to you again. Ben Emmons there from
Speaker 1: Medley Global Advisors and Carl Ruka don are chief US economists.
Speaker 1: Wrapping up the comments from FED chairman Pal of course,
Speaker 1: will continue to bring your headlines from that event which
Speaker 1: is ongoing. Me and Greg we know a lot about
Speaker 1: cars when it comes to drive, trains and design, but
Speaker 1: when it comes to business of producing them. If I
Speaker 1: have a question, I usually call up Ed Ludlow, a
Speaker 1: reporter out in San Francisco. He knows what he's talking about,
Speaker 1: and he got a killer story. Um. Today he got
Speaker 1: the interview with the Lucid CEO, one of the hardest
Speaker 1: properties I gotta say on TV today, ed what did
Speaker 1: you learn? I actually learned quite a lot. You know,
Speaker 1: I followed the company closely for about two years. And
Speaker 1: the thing is, no one's really been interested in Lucid
Speaker 1: until all the spack rumors started right in recent weeks
Speaker 1: and months. But you know, Lucid is a company that
Speaker 1: is run by this guy, Peter Rawlinson, formerly chief engineer
Speaker 1: on Tesla's Model Esque, and for the entirety of the
Speaker 1: time I've known him, which is about three years now,
Speaker 1: he has preached prudence and discipline and patience in bringing
Speaker 1: the car to market. And what we learned is the
Speaker 1: kind of main takeaway from the interview is that during
Speaker 1: the due diligence process with the Churchill Capital spack Michael
Speaker 1: Klein Spack, that it was actually the guy at the spack,
Speaker 1: Michael Cline Klein and Alan Moulally, the former Ford CEO,
Speaker 1: who pushed Lucid to delay production because what they saw
Speaker 1: was a good product, you know, a luxury TV that
Speaker 1: has significant range about five dred and fifteen miles on
Speaker 1: a single charge, but they were worried that Lucid would
Speaker 1: experience the same quality control issues that Tesla went through.
Speaker 1: So that was kind of the biggest and most surprising
Speaker 1: takeaway from the interview. Today, it should be pointed out
Speaker 1: that Malali is I mean, he's the man when it
Speaker 1: comes to this stuff. He built the seven seven seven,
Speaker 1: notwithstanding the recent engine problems, which didn't have anything to
Speaker 1: do with Boeing, and he's the guy who turned around Ford.
Speaker 1: So when Bill Ford's company was, you know, breathing its
Speaker 1: last breath, he called up Alan and he flew in
Speaker 1: and fixed it for him. Right. So it's interesting because
Speaker 1: broadly speaking, if you look at the SPACs that have
Speaker 1: done deals with e vs, what is the one thing
Speaker 1: that they have in common. They have a former automotive
Speaker 1: executive somewhere near the top I'm thinking of course, like
Speaker 1: for example, nikola Um and the spack that took them public,
Speaker 1: they had Steve Gerski, former GM executive. In my conversation
Speaker 1: with Lucid CEO Peter Rolinson's day, he basically said that
Speaker 1: what happened was he took Ala mulally for a test
Speaker 1: drive in the car, and that it was like that
Speaker 1: conversation at the wheel in a pre production prototype that
Speaker 1: kind of brought about this idea that they should take
Speaker 1: their time now. Peter Rawlinson is an experienced was motive
Speaker 1: executive in his own right, you know, prior to Tesla
Speaker 1: he had jobs at Jaguar, Land Rover and other automakers.
Speaker 1: But it's interesting that that he rather than sort of
Speaker 1: going with the new age technology ev approach, there's some
Speaker 1: deference right to the old automotive head about what the
Speaker 1: right course of action, and it kind of echoes this.
Speaker 1: How I've known Peter in the time that I've interviewed
Speaker 1: him the last few years, it is patients and prudence.
Speaker 1: And when we started reporting on the back a lot,
Speaker 1: there's a lot of height from retail investors, a lot
Speaker 1: of excitement from within Lucid and sources about the need
Speaker 1: to get a car to market quickly. It's astonishing how
Speaker 1: quickly that narrative has changed overnight, and we're starting to
Speaker 1: see the red headlines crossing the Bloomberg terminal Regarding this interview,
Speaker 1: and one of the interesting things that came out is
Speaker 1: that the um you know it's the delay was called.
Speaker 1: But as you mentioned by the Churchill spack itself, but
Speaker 1: they're also getting some bridge financing from Saudi Arabia. Tops
Speaker 1: about that. Yes, So the transaction with Churchill won't close
Speaker 1: until sometime in the second quarter, right, And in the meantime,
Speaker 1: Lucid is hiring like crazy and it's trying to get
Speaker 1: its production lines fired up. They need cash. So what
Speaker 1: I'm told is that that's going to simply come from
Speaker 1: saudiast Public Investment Fund six million dollars bridge financing, however
Speaker 1: you want to put it. You know what's really interesting.
Speaker 1: In the run up to this deal, a lot of
Speaker 1: retail traders basically aid this back on speculation. But last
Speaker 1: night in the investor deck, we actually looked under the
Speaker 1: hood and saw what Lucid's plan is, and they're expecting
Speaker 1: negative free cash flow or cash burn of ten billion
Speaker 1: dollars between now and you guys talk about Uber right,
Speaker 1: not not pyem but spread out over that time, Babe,
Speaker 1: you guys, you you guys cover Uber right. You've talked
Speaker 1: about how cash burn with such a significant story around them,
Speaker 1: when would they be profitable and stop kind of growing
Speaker 1: and and think about profitability. Well, if there's one thing
Speaker 1: you learn on this beat, it's the prototypes are easy.
Speaker 1: Production is hard, and it all takes cash. It all
Speaker 1: takes capital, and you know they will have to go
Speaker 1: to the public markets again, um, the capital markets again.
Speaker 1: The Lucid CEO confirmed that during the interview. But but
Speaker 1: what's astonishing is that you know they are some way
Speaker 1: from profits, some way from meaningful revenue as well. And
Speaker 1: it kind of brings it back home that this is
Speaker 1: a pre revenue startup, right despite the eyewatering evaluation. If
Speaker 1: they keep it to ten billion, I'll be shut you know,
Speaker 1: because that's the kind of number that you overrun. I mean,
Speaker 1: it takes a billion dollars to develop a car from scratch.
Speaker 1: And that's if you're already GM or Ford, Right, that's
Speaker 1: if you already know exactly what you're doing, have your
Speaker 1: factories built, etcetera, etcetera. Let me ask you about Rivian,
Speaker 1: because this is the other kind of viable um competitor
Speaker 1: to Tesla. Lucid and Rivian really the only two that
Speaker 1: are likely to bring out a car in the next
Speaker 1: twelve months for sale. And you and Katie Roof and
Speaker 1: a guy with a really cool name. Keel Porter from
Speaker 1: the story about their I I P. Keel Porter is
Speaker 1: such a cool name. It sounds like he should be
Speaker 1: in a movie with Tom Keane and White. Yeah, in anyone.
Speaker 1: In any case, their IPO could come as soon as September.
Speaker 1: It's not a spack, it's legit I P O. Tell
Speaker 1: us about it. Yes, according to sources, that's what we're
Speaker 1: hearing that the Rivian is looking at an I P O.
Speaker 1: It's speaking to bank is they hide and you see
Speaker 1: fo whose former JP Morgan executive in the new year, Um,
Speaker 1: don't forget. Rivan is raised eight billion dollars to date
Speaker 1: from private rounds right with some very big name investors.
Speaker 1: More of ideality t rowe price a lot more. And
Speaker 1: they have been in stealth mode in the truest sense
Speaker 1: of the expression. You know, they really spent several years
Speaker 1: under the radar before going public with their design. Even
Speaker 1: what I'm hearing in Rivian is it's a really similar story.
Speaker 1: Lots of prudence and patients. They have a very big
Speaker 1: workforce of around three and a half thousand. They have
Speaker 1: retrofitted and Mitsubishi factory in Normal, Illinois rather than build
Speaker 1: a factory from scratch like Lucid's done. They have a
Speaker 1: lot and I cannot stress this enough, a lot of
Speaker 1: former Tesla engineers at the very senior level for engineering
Speaker 1: and manufacturing, and on paper they will be the first
Speaker 1: to bring a new EV product to market here in
Speaker 1: the US, a battery electric pickup in June. And I
Speaker 1: think you and I've talked about this map, but Americans
Speaker 1: by light trucks. They don't buy sedans, they don't buy hatchbags.
Speaker 1: People when I talks people about hatchbacks said they didn't
Speaker 1: even know what that is. So you know the anticipation
Speaker 1: right exactly. The anticipation here very top year, and the
Speaker 1: anticipation with Rivan is like, well, here we go a
Speaker 1: battery electric car that is actually in line with what
Speaker 1: Americans like to drive. And Jon ed that drove on
Speaker 1: the long way up with you and McGregor and Charlie Warman. Uh,
Speaker 1: you actually saw that Rivan truck and action. So that's
Speaker 1: a great advertisement advertisement, as you would say, Hey, thanks
Speaker 1: so much for joining us. We appreciate Ed Ludlow, reporter
Speaker 1: for Bloomberg News, joining us from San Francisco from red Headlines.
Speaker 1: Come here across matt Us ready sanctions to punish Russia
Speaker 1: over mal Valley. So it's very interesting in there. So
Speaker 1: we'll have to follow up with that story going forward.
Speaker 1: One of them, I thought the most interesting stories on
Speaker 1: the Bloomberg UM so far this week has been one
Speaker 1: about how Joe Biden will spend more money after this
Speaker 1: one point nine trillion dollar stimulus package on infrastructure, And
Speaker 1: we're gonna bring in Josh Deets to talk a little
Speaker 1: bit about that, his senior portfolio manager at Aberdeen Standard Investments. Typically,
Speaker 1: when I talked to somebody Josh at Aberdeen, UM, there
Speaker 1: in Edinburgh, but you are in New York City, UM,
Speaker 1: which is a place that probably needs a heck of
Speaker 1: a lot more spending than Edinburgh. Where do you think project?
Speaker 1: Where do you? Where do you think Biden? I guess
Speaker 1: Biden famously doesn't like LaGuardia, right, well, who does? Where
Speaker 1: do you think Biden's gonna start? So I think it's
Speaker 1: a combination. Right. When people talk about infrastructure, historically it's
Speaker 1: always been roads and bridges, but we actually think that's
Speaker 1: part of an infrastructure plan. But it's also about modernizing
Speaker 1: the economy, tackling climate change, and address some racial and
Speaker 1: social economic inequalities and part of broadband. Broadband right exactly
Speaker 1: as we're all working from home and our kids are
Speaker 1: in zoom school from home. It shows what an essential
Speaker 1: asset that broadband is currently. So I think it's going
Speaker 1: to be a combination of all of those. It's just
Speaker 1: not gonna be fixing Guardia Airport or the airports in general,
Speaker 1: but that will be part of it. All Right, Well,
Speaker 1: we have a little tunnel connecting New Jersey and New
Speaker 1: York that goes under the Hudson River. We need to
Speaker 1: fix that, uh, Josh, So see what you can do there.
Speaker 1: So talk to us a little bit about you know
Speaker 1: again this uh, this infrastructure bill. It seems like there's
Speaker 1: a little fatigue here on the you know, getting more
Speaker 1: money from Congress in terms of fiscal stimulus. Is there
Speaker 1: a bipartisan support for h kind of a more of
Speaker 1: an infrastructure type of playing Josh. Both Democrats and Republicans
Speaker 1: have talked about it for years, probably the only issue
Speaker 1: they agree on. And I would actually say what we've
Speaker 1: seen now in this one point nine billion ballots stimulus package,
Speaker 1: to me, it's more of a stabilization package. The infrastructure
Speaker 1: plan would actually be a stimulus for the economy because
Speaker 1: there's a multiplier effect and will have growth from that
Speaker 1: rather than just stabilized in the company. And that's why
Speaker 1: I think it's so important. He didn't meet with the
Speaker 1: Republicans a couple of weeks ago to discuss it, and
Speaker 1: I think this was part of his campaign pledged, and
Speaker 1: I think he really wants to get this done sooner
Speaker 1: then later, so we could have possibly have it by
Speaker 1: the stub or possibly the fourth quarter. Don't forget the
Speaker 1: other thing they agree on. AOC and Ted Cruz both
Speaker 1: thought it was stupid for Robin Hood to shut down
Speaker 1: Game Stop buyers UM. In terms of the money, I mean,
Speaker 1: two to three trillion is what you expect, right, So
Speaker 1: if you add that to the one point nine trillion
Speaker 1: support program and the other four and a half trillion
Speaker 1: we've spent, you're already getting towards ten trillion dollars of
Speaker 1: spending in like a four or five year period UM.
Speaker 1: That's got to be some kind of record. It is.
Speaker 1: It's tremendous how much our debt has grown, and it
Speaker 1: is worrisome. I will say the one part about an
Speaker 1: infrastructure package ten and should lead to growth, and it
Speaker 1: wouldn't be all up front like these other packages. This
Speaker 1: would be spent over an eight or ten year period.
Speaker 1: So hopefully we'll have growth and that will help the
Speaker 1: economy and hopefully pay down some of the debt we've
Speaker 1: accumulated over the past few months. All right, Josh, given
Speaker 1: the potential for more fiscal studius, again on the infrastructure side,
Speaker 1: how are you positioning your portfolio? So it's a combination.
Speaker 1: First of all, we view this as a free call option,
Speaker 1: so we were positioning or portfolio currently for what we
Speaker 1: still have expected spending, not from the government, from the
Speaker 1: private side, and a lot has to do with climate
Speaker 1: change and we see growth there. You know, we expect
Speaker 1: ten to twelve per cent or I should say low
Speaker 1: double digit growth and renewables over the next decade um
Speaker 1: to come. Right now, about the three quarters of the
Speaker 1: world judge by g d P has committed to net
Speaker 1: zero emissions, So we think renewables are be a way
Speaker 1: to play the infrastructure and the growth. And another part
Speaker 1: of it is um prepared for five G and we
Speaker 1: believe that macro towers are the most cost effective way
Speaker 1: to deploy wireless spectrum. So I would say in the
Speaker 1: renewable side you like quite a bit. And then from
Speaker 1: the five G and the towers just one other part
Speaker 1: as the economy is reopened, and we started to see
Speaker 1: that with Israel right now and their economy started reopen
Speaker 1: being they've been able to distribute the vaccines. We do
Speaker 1: think there's also an opportunity in transportation right now as
Speaker 1: we start airline stocks move over the past couple of days,
Speaker 1: we think airports and roads are also a good place
Speaker 1: to invest for infrastructure. So if I translate a little bit,
Speaker 1: and this doesn't have to be the exact pick, but
Speaker 1: so you like Siemens and and Ge, you like Ericsson
Speaker 1: and Noki? Are you like American Tower? Crowncastle? What about Caterpillar?
Speaker 1: What about So? What about what about um? You know,
Speaker 1: the big industrial earth moving equipment maker. I mean, isn't
Speaker 1: that the kind of typical infrastructure winner. So it's interesting
Speaker 1: because that's the way people look at it. And those
Speaker 1: companies that cats and DearS, they might be great companies,
Speaker 1: but they're much more cicklical, right, And that's really betting
Speaker 1: on some type of stimulus package. When I'm talking about
Speaker 1: are really we want to own the owners of infrastructure
Speaker 1: who are going to grow as it commonly comes back,
Speaker 1: and also have the ability to grow from um countries
Speaker 1: pledge for zero costs admissions going forward. So that's where
Speaker 1: we really want to play. We want to own the
Speaker 1: owners of infrastructure rather than the construction companies or rather
Speaker 1: than the suppliers to that. So it's a little bit
Speaker 1: different than what people wouldn't generally say this is a
Speaker 1: type of infrastructure place, so we wouldn't have the ricks
Speaker 1: and manokias in the are fun, but we much more
Speaker 1: prefer the wireless powers. All right, Joy Jeff forgot to
Speaker 1: leave it there here just because of the time, but
Speaker 1: I'm definitely down with that tower called Josh D's, portfolio
Speaker 1: manager of the Aberdeen Standard Global Infrastructure Income Fund. We
Speaker 1: appreciate it. Only we've heard so far from Chairman Pal
Speaker 1: is probably what most market participants were expecting to hear.
Speaker 1: That is generally lower for longer as it relates to
Speaker 1: rates and status quo as it relates to asset purchases
Speaker 1: in the market. Let's see how that translates in for
Speaker 1: a professional investor. We do that with David Harden, CEO
Speaker 1: and Chief Investment Officer of Summit Global Investments, they have
Speaker 1: one point two billion dollars in assets under management. We
Speaker 1: appreciate him taking the time, David, So again, it's kind
Speaker 1: of seems steady as she goes from the Fed. Is
Speaker 1: that consistent with what you're looking for and how you've
Speaker 1: structured your portfolio? Absolutely, Paul Matt, thanks for having me.
Speaker 1: Appreciate being here. I think from an investor, stand for
Speaker 1: it prudently and properly ahead, and that's where the Fed
Speaker 1: seems to be steadily going forward lower longer they had
Speaker 1: they said they have the tools that it is not
Speaker 1: going to turn on the dime. If they're plation out there, well,
Speaker 1: all of us are saying yes, but obviously the Fed
Speaker 1: is saying no. So what does that mean? You know,
Speaker 1: it looks like the market is worried that inflation is
Speaker 1: coming back, and that's going to push the Fed to
Speaker 1: raise rates, and so the market raising rates itself and
Speaker 1: that's pushing down stock prices. Does this give you maybe
Speaker 1: an entry point? Is that a buying opportunity this dip,
Speaker 1: especially if you're a trader or investor either one? Absolutely,
Speaker 1: because right now, let's face it, we know this this
Speaker 1: one trillion plus dollar packages coming as well, and about
Speaker 1: that it is going to come right into savings in
Speaker 1: the market, So another four five billion is going to
Speaker 1: be coming into the market. You want to be in
Speaker 1: front of that, all right, David, I know that you
Speaker 1: guys at summit really utilize E s G environmental, social
Speaker 1: and governance. It's a big part of your analytical framework.
Speaker 1: Tell us kind of what your E s G analysis
Speaker 1: is kind of suggested to your right now. Well, one
Speaker 1: of the things that we've noticed clearly is the companies
Speaker 1: that have good environmental environmental social governance standards and abide
Speaker 1: by those standards have lower volatility, have smoother paths, and
Speaker 1: companies that violate those standards have much more volatility and
Speaker 1: downside risk. And so we want to avoid these companies
Speaker 1: that you know that they're not very high quality, that
Speaker 1: have a lot of potential for unwanted surprises through a
Speaker 1: s G and that's our focus. Obviously, with the size
Speaker 1: of about two billion dollars, we're not going to go
Speaker 1: out and make the huge change that everybody would would
Speaker 1: desire in the world, but we feel like we have
Speaker 1: really a great method to avoid the violators, and that's
Speaker 1: the key. You you point out that risk has been
Speaker 1: risk management has been thrown to the wayside, and with
Speaker 1: you know, the four and a half trillion in stimulus
Speaker 1: that we've had another two trillion at least to come,
Speaker 1: you can understand why. Um it kind of reminds me
Speaker 1: John Author's said timing a market bubble is tough, But
Speaker 1: when you're in one, what do you do? How do
Speaker 1: you deal with that pressure? You know, it's very true.
Speaker 1: Let's face it, a flash mob of retail investors has
Speaker 1: no idea and does not care about risk, and there
Speaker 1: is little risk management going on today. But I think
Speaker 1: that what you're looking for is regardless if we have
Speaker 1: a correction, you know, in in eight months, or the
Speaker 1: FED makes a communication mistake, which it did not this morning,
Speaker 1: you know, or disreplation, trade continues and then falls off.
Speaker 1: Liquidity wins growth momentum. The point here is that you
Speaker 1: want to be in companies that will do well in
Speaker 1: all of these trades. You know, companies like best buy
Speaker 1: or companies that you know that we own Best buy
Speaker 1: up and its online growth executing really well. It's value,
Speaker 1: it's not really expensive, so it plays well in the value,
Speaker 1: it plays well in the growth. It has liquidity, so
Speaker 1: that you know you want to be in these companies
Speaker 1: that's a tough one today. Well yeah, it sure was
Speaker 1: um and we go on a little bit of home depot.
Speaker 1: But you know, that's what that that I think that's
Speaker 1: what you want to be into is companies that do
Speaker 1: well regardless of the trade. Alright, So, Dave, I mean
Speaker 1: a lot of folks kind of see this big, big
Speaker 1: move in the market, you know, off the bottom over
Speaker 1: the last twelve months and say, okay, that that's due
Speaker 1: in large parts of the fed flooding of the market,
Speaker 1: which we got more confirmation today it's due to fiscal stimulus,
Speaker 1: and now it's due to thank goodness, the vaccines coming
Speaker 1: into the market, you know, kind of bringing the reopening
Speaker 1: trade back to the foe. Is there evaluation concerned here? David?
Speaker 1: How do you think about valuation in this market? Well, yes,
Speaker 1: there is valuation concerns, but the risk speaking behavior is
Speaker 1: going to continue. And if you look back at all
Speaker 1: these other corrections, valuation wasn't the thing that sparked the
Speaker 1: big down draft, right, so valueation does not seem to
Speaker 1: create a market correction in and of itself. And so
Speaker 1: I don't think in this time period, right at the moment,
Speaker 1: you need to be so focused, laser focused on valuation.
Speaker 1: Take for example, Apple, which we own Apple right now
Speaker 1: is trading about thirty times multiple, right, but it's five
Speaker 1: year average multiples only seventeen. So someone would say, gosh,
Speaker 1: this is really expensive. But look at their innovation, look
Speaker 1: at their growth. They just had a hundred plus quarter
Speaker 1: like Amazon, So I think there's a lot of innovation there.
Speaker 1: People are looking them for the next dance. They've done
Speaker 1: great on E S G as well. So from our standpoint,
Speaker 1: I think you need to let the evaluation maybe hold up,
Speaker 1: you know, not make as much weight in your decision
Speaker 1: as it would in a normal trade. If they can
Speaker 1: make an e V, they could shoot for a thousand valuation, right,
Speaker 1: I mean thirty that's a that's peanuts. If they could
Speaker 1: make a thousand dollar phone that doesn't break when you
Speaker 1: drop it, that would also be another reason to to
Speaker 1: boost the valuation. David, it's been a pleasure having you
Speaker 1: on the program today. Great talking to Dave Harden. He's
Speaker 1: the CEO and chief investment officer at Summit Global Investments.
Speaker 1: They manage a couple of billion dollars there. Said they're
Speaker 1: not going to change the world, but he definitely loves
Speaker 1: what he does and his employees. So I think that's
Speaker 1: pretty good. Pretty good, Lake City, It's actually bountiful you
Speaker 1: talk to check out the website even better, very cool.
Speaker 1: This is Bloomberg. Thanks for listening to the Bloomberg Markets podcast.
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