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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day, we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. I want to get

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Speaker 1: some good tech ideas for two and so I said, hey,

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Speaker 1: let's get Dan ives On. Um, I'm sure he's, you know, somewhere,

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Speaker 1: it's either skiing or on the beach somewhere, but we're

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Speaker 1: here hard at work. But maybe we can get Dan

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Speaker 1: ives On. He's the yes, senior tech analyst for web Bush.

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Speaker 1: He's been doing us for a long time. Dan, thanks

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Speaker 1: so much for taking a time here, my friend. What

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Speaker 1: are your best ideas that you're talking to your clients

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Speaker 1: about right now? Yeah, And I think there's obviously some

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Speaker 1: nervousness or divisiveness in terms of where tex Head and

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Speaker 1: I think some of the themes, regardless what happens with

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Speaker 1: the ten years said they're going to continue to I

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Speaker 1: think the massive I mean one Apple and we talked

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Speaker 1: about Apple glass today and we be that that comes

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Speaker 1: out in two thousand twenty two, along with what's the

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Speaker 1: supercycle playing out? Despite the chip short, I think apples

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Speaker 1: anywhere between the three to three and a half trillion

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Speaker 1: dollar mark cap two tho, so that continues to being

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Speaker 1: where the top your names in the large cap along

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Speaker 1: with Microsoft is our favorite cloud play, and then we

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Speaker 1: love cyber security names like z Scale or Cannibal, cyber

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Speaker 1: Arc or some of our fevers. I think those are

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Speaker 1: the themes. And then just to put a bow around it,

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Speaker 1: electric vehicles Tesla, followed by our supply chain play which

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Speaker 1: is life Cycle and e V. There's sure top picks

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Speaker 1: this week going to next year. So a lot of

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Speaker 1: those are huge. Obviously, Apple is a two point eight

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Speaker 1: trillion dollar company and change Microsoft is worth more than

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Speaker 1: two and a half trillion dollar. Ears. Um, let me

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Speaker 1: pull up Tesla or what's Tesla looking at right now?

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Speaker 1: Like billion Tesla? Wow, one point zero four trillion, so

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Speaker 1: they're massive. Um, what do you think about the competitors?

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Speaker 1: What do you think about ribby in and Lucid and

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Speaker 1: the Bollinger and all of these you know haven't yet

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Speaker 1: sold a lot of products. Competitors, Well, I think Ribby

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Speaker 1: In is the one along with Ford and GM, you

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Speaker 1: know which I think a reratings. I think Ribbyan is

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Speaker 1: the real deal. I think now it's obviously to be

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Speaker 1: coming out of the box that's been given a high evaluation,

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Speaker 1: but in my opinion, and a tough climate right with

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Speaker 1: no chips. Well, but but as me and you and

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Speaker 1: the team have talked about, I'm not looking at the

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Speaker 1: next six twelve months. When I look at the next

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Speaker 1: three four to five years, Ribby and I think a

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Speaker 1: category changer in terms of pickup trucks and stvs, in

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Speaker 1: terms of what are Jane the team have done in

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Speaker 1: the vertically integrated front, and really it's the it's the

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Speaker 1: only company that's come out on e VS vertically integrated

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Speaker 1: that now you could put in the same potential breadth

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Speaker 1: as Tessa if they execute over the next years. If

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Speaker 1: that happens, then we're looking at the two to three

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Speaker 1: hundred billion dollar market for a name that you know today.

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Speaker 1: I think it's just still in the early days of

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Speaker 1: building this out. Hey, Dan, I'm sure your institutional investor

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Speaker 1: clients are asking you, how does tesla Um fit into

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Speaker 1: a more competitive EV market over the next several years.

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Speaker 1: What's your response? So I don't view it as a

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Speaker 1: zero sum game. It's not Tessa or because Tessa is

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Speaker 1: going to continue dominating evs. My view is it's a

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Speaker 1: five trillion dollar greing tide away. Two and a half

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Speaker 1: trillion of that is Tesla's in terms of where that

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Speaker 1: market heading, especially with more and more compe pacity coming

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Speaker 1: on with you look at Brewin in Austin. Those are

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Speaker 1: significant protesting at two million vehicles per year, but when

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Speaker 1: you look over all the v s, it's still three automobiles.

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Speaker 1: That's why I think you're going to see more and

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Speaker 1: more the Fords of gm US and others benefits. All right, Dan, Hey, um,

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Speaker 1: we're gonna let you go at that moment. We'll touch

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Speaker 1: base with you soon. Dan, i'ves web Bush Security Senior Technology.

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Speaker 1: Let's bring in Ian Lyndon. He's a managing director and

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Speaker 1: head of US rate strategy at Femail Capital Markets. UM

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Speaker 1: in great to get you on the program. I just

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Speaker 1: want to quickly get the auction my auction questions out

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Speaker 1: of the way. First, we have another auction today, thirty

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Speaker 1: year auctions that I think one o'clock. We get the

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Speaker 1: headlines yesterday, we had the ten year, I think the

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Speaker 1: three year the day before, and people are paying more

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Speaker 1: and more attention ever since seven year auction went off

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Speaker 1: the rails if months back, how do you think they're

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Speaker 1: doing well? I think that's a great question. I think

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Speaker 1: we need to look at it in two ways. First,

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Speaker 1: we have seen more of a concession at auction, so

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Speaker 1: the auctions have been tailing more than they had previously,

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Speaker 1: but the bitter composition has been more typical than the

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Speaker 1: headlines would have suggested. More importantly, it's very difficult to

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Speaker 1: argue that there's not sponsorship for US treasuries when ten

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Speaker 1: year yields are below one fifty and thirty year yields

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Speaker 1: are below two percent. So while there might need to

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Speaker 1: be greater moments of concession, particularly on the curve, to

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Speaker 1: take down these incrementally um smaller than they were auction sizes,

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Speaker 1: I think the fact of the matter is that there's

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Speaker 1: plenty of end user demand for treasury products at this point. Alright, So, Ian,

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Speaker 1: I've got a federal reserve, you know, pulling back on

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Speaker 1: the tapering, maybe even faster than initially thought. Rate increases,

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Speaker 1: next year, rate increases in But then I looked down

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Speaker 1: in my tenure and I'm stuck at one point four

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Speaker 1: eight percent. Should I be surprised that that shouldn't be higher? Well,

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Speaker 1: if we didn't believe the FED had the tools and

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Speaker 1: the willingness to combat inflation in the long run and weren't,

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Speaker 1: and the FED wasn't able to keep inflation expectations anchored

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Speaker 1: in that situation, one should expect that the curve would

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Speaker 1: be steeper and ten and thirty year yields would be higher.

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Speaker 1: I'm certainly sympathetic to the idea that on an outright basis,

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Speaker 1: ten year yields below one fifty contain a fair amount

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Speaker 1: of sticker shock, and I think part of that has

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Speaker 1: to do with the assumption, which has been proven to

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Speaker 1: be um tricky at this point in the cycle, that

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Speaker 1: longer end treasury yields tins and thirties should be a

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Speaker 1: function of US growth and inflation fundamentals. The reality is

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Speaker 1: that long che treasuries are a function of global growth

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Speaker 1: and inflation fundamentals. And so while the US might be

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Speaker 1: recovering well from the pandemic, we're seeing high inflation numbers,

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Speaker 1: we're seeing continued growth. The reality is that there are

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Speaker 1: different pockets in different regions in the world who are

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Speaker 1: recovering at a much slower pace, and that adds to

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Speaker 1: the structural demand that we continue to see for treasures.

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Speaker 1: All right, so what do you think we're gonna see

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Speaker 1: in two with all of those variables? I note that

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Speaker 1: you were ranked first in the two thousand eighteen Institutional

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Speaker 1: Investors survey for US rate strategists, strategists and technical analysts.

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Speaker 1: Big deal. Yeah, well appreciate that one to Yale. So

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Speaker 1: that's also pretty pretty smart. I think, Um, what do

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Speaker 1: you think we're gonna see? I mean, is are we

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Speaker 1: still going to see inflation coming back down to normal

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Speaker 1: levels in the middle of next year? Are we gonna

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Speaker 1: see rate increases in the second half? Are we going

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Speaker 1: to see the actual rates numbers normal? Lies? So I

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Speaker 1: think that we are going to see the base effects

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Speaker 1: in Q two two become relevant because the upside that

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Speaker 1: we saw, the bulk of the upside in the realized

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Speaker 1: inflation was in the second quarter of this year. It

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Speaker 1: was driven by new and used auto prices. It was

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Speaker 1: driven by airfares as well as oh we are or

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Speaker 1: rents and shelter costs that materially raises the bar for

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Speaker 1: Q two of next year for the pace of inflation

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Speaker 1: to accelerate. So my baseline assumption is that while there

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Speaker 1: will continue to be a fair amount of inflation the system,

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Speaker 1: the shock of the headline year over year figures will

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Speaker 1: start to moderate. I do think we get to rate

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Speaker 1: hikes in twenty two and the bigger risk, and I

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Speaker 1: think that this is really important when we think about

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Speaker 1: the way that the rates market plays out. The bigger

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Speaker 1: risk is what does the market ultimately believe the terminal

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Speaker 1: rate for this cycle is want to be. The FETE

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Speaker 1: has told us that they expected all else to be

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Speaker 1: equal to be two and a half. Now, if we

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Speaker 1: think about the last cycle we struggled to get We

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Speaker 1: got to two and a half, but we had to

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Speaker 1: quickly reduce to one seventy five. So there are two

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Speaker 1: camps at the moment, the lower terminal and the higher

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Speaker 1: terminal camps that are going to drive the debate and

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Speaker 1: that will dictate where the five year sector goes at

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Speaker 1: the beginning of next year. So we're leaning more bearishly

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Speaker 1: on the treasury market than we have in the past

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Speaker 1: with the five years sector poised to underperform, and so

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Speaker 1: that means that five thirties will continue to flatten. Five

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Speaker 1: tins will flatten as well. But all of this within

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Speaker 1: the context of a higher overall rate range. So I

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Speaker 1: could easily see ten year yields touching two next year

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Speaker 1: in the first half thirty year yields back above to fifty.

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Speaker 1: And this has to do with the fact that the

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Speaker 1: economy is growing and that the labor market is improving

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Speaker 1: and inflation is back in the system. Hey, and there

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Speaker 1: was an argument, you know, over the last several months

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Speaker 1: that perhaps the FED was falling behind the market, falling

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Speaker 1: behind perhaps other central banks. Did they allay those concerns

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Speaker 1: by that pivot we saw, you know, a week or

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Speaker 1: two ago in terms of the tapering in the rate conversation,

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Speaker 1: they certainly did seem to come in line with what

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Speaker 1: we're seeing with other major central banks. I will off

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Speaker 1: the caveat though, that the other central banks that were

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Speaker 1: a bit more hawkish were ones that had different exposures

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Speaker 1: to energy prices. So the Reserve Bank of Australia, the

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Speaker 1: Bank of Canada, for example, higher energy prices have decidedly

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Speaker 1: different ramifications for those economies than what we see here

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Speaker 1: in the US. And then the Bank of England has

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Speaker 1: a different relationship with imported inflation prices as well or

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Speaker 1: imported costs, just because of the nature of their economy.

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Speaker 1: So while it made sense to see coordination in terms

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Speaker 1: of central banking banking moves at the beginning of the

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Speaker 1: pandemic when we were all responding to the uncertainties associated

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Speaker 1: with the coronavirus, on the way out, we shouldn't actually

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Speaker 1: be expecting in the same degree of coordination because each

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Speaker 1: economy is performing differently and responding to some of the

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Speaker 1: pandemic dislocations in a different manner. All that said, I

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Speaker 1: do think that the that that power made it very

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Speaker 1: clear that the hawkish pivot is going and has come

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Speaker 1: to fruition. We're going to see an acceleration of tapering

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Speaker 1: next week and that will set up the FED to

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Speaker 1: have more flexibility in when and how they choose to

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Speaker 1: normal normalize policy rates next year. When when you look

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Speaker 1: at the economy and the economic growth as it's affected

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Speaker 1: by rates, clearly monetary policy is still loose even if

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Speaker 1: they're tightening um When does it start to affect When

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Speaker 1: do we start to see um uh financial conditions really

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Speaker 1: get tighter because of higher rates? Since I don't think,

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Speaker 1: you know, two or three rate hikes from zero is

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Speaker 1: that much. So if you decompose the if you break

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Speaker 1: down the financial condition index, what we actually see is

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Speaker 1: over the last decade decade and a half, the biggest

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Speaker 1: driver has been the has been equity volatility and to

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Speaker 1: some extent, the dollar. And so if we see a

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Speaker 1: run up and equity volatility, which only occurs when stock

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Speaker 1: sell off, that in and of itself will tighten financial conditions.

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Speaker 1: And that gets us back to the Powell put that

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Speaker 1: has been talked about a great length and certainly still exists.

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Speaker 1: So I'm less concerned about the incremental rate hikes per

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Speaker 1: se and how they translate through to financial conditions, and

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Speaker 1: I'm more worried about whether or not record or near

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Speaker 1: record high equity price is are able to absorb a

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Speaker 1: FED that has gone from being, as you point out,

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Speaker 1: extremely accommodative to moving forward with a slightly tighter policy stance.

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Speaker 1: And but you think the power put is still there, Yes,

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Speaker 1: I do think the power put is there, but it's

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Speaker 1: not an outright number. It doesn't matter. So let's put

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Speaker 1: it this way. If the uh SMP five ended next

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Speaker 1: year off, that wouldn't trigger a FED response. But if

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Speaker 1: the SMP dropped ten or fift over the course of

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Speaker 1: two days or three days, that's that's the spike of

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Speaker 1: volatility that didn't gets the set involved. So it isn't

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Speaker 1: an outlete number as much as it is the trajectory,

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Speaker 1: and that's going to be I think an important background

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Speaker 1: story for in Lyin. Thank you so much for joining us.

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Speaker 1: Really appreciate getting your thoughts in Lngin, Managing director in

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Speaker 1: head of US rate Strategy at BEMO Capital Markets Fixed

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Speaker 1: Income Strategy Team. Let's get back to the plane vanilla

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Speaker 1: market in a way, although really I want to talk

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Speaker 1: about E t F strategies. Ross Klein as the founder

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Speaker 1: and chief investment officer at change Bridge Capital, he manages

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Speaker 1: E t F strategy sustainable and long short UM at

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Speaker 1: Ross tell us first of all about the UHUM, the

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Speaker 1: sustainable portion of that it's become. It was a fad

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Speaker 1: that seems to have become now really a strategy that

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Speaker 1: you can't ignore. What do you how do you? How

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Speaker 1: do you execute that? Yeah, Hey, Paul, hey Matt, thanks

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Speaker 1: for the time today. Um change Bridge manages uh C

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Speaker 1: B s e change Bridge Capital Sustainable Equity e t F.

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Speaker 1: Our approach to E s G investing is neither exclusionary

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Speaker 1: nor passive. Uh. We believe E s G investing is

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Speaker 1: highly nuanced and requires a lot of analysis from active

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Speaker 1: portfolio managers. We manage thirty to forty securities. It's a

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Speaker 1: high conviction portfolio where we understand the holdings incredibly well.

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Speaker 1: We talked to management teams. We identify companies that are

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Speaker 1: making real progress, and we're finding opportunities in small cap

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Speaker 1: space where the rating agencies haven't necessarily picked up coverage

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Speaker 1: yet and the companies are showing a mutually beneficial relationship

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Speaker 1: between their efforts to improve their relationship with all stakeholders

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Speaker 1: and their bottom line performance. And so that's a fantastic

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Speaker 1: breeding ground for us to identify idiosyncratic, unique investing opportunities

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Speaker 1: for clients. Hey, well share with us if you will,

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Speaker 1: kind of one of your your bigger holdings, your higher

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Speaker 1: conviction names that's in your sustainable E t F and

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Speaker 1: why it's in there. Yeah, absolutely, Um, so you know

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Speaker 1: I'll give you one that you might not suspect is

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Speaker 1: an E s G type holding. UM Skyline Champion is

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Speaker 1: is Takr sk Y, our largest holding in that portfolio.

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Speaker 1: Skyline Champion manufacturers manufactured housing. In the environment that we're in,

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Speaker 1: where affordable housing is effectively in a crisis, they're a solution. UH.

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Speaker 1: The average manufactured house is more than two hundred thousand

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Speaker 1: dollars less expensive than the average stick built house for

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Speaker 1: an equivalent home. UH, They're able to produce them more efficiently.

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Speaker 1: They're able to produce the more environmentally friendly ways than

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Speaker 1: an outdoor stick built home. UH. We believe that this

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Speaker 1: is an opportunity for investors to recognize they can buy

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Speaker 1: a house that's more environmentally friendly, built more efficiently, more affordable,

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Speaker 1: and find a company that actually benefits from those trends.

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Speaker 1: As folks start to shift towards rural and more suburban housing.

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Speaker 1: They are beneficiary of this environment. The company is in

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Speaker 1: a effectively a duopoly with Clayton. There are not a

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Speaker 1: lot of other manufacturers. Demand is ramping incredibly. They've made

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Speaker 1: tremendous strides in their ability to UH have a diverse workforce. UH.

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Speaker 1: They made um a focused effort to diversify the range

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Speaker 1: of backgrounds and opinions for years and this has really

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Speaker 1: helped them manage the company through what's been a tumultuous.

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Speaker 1: You know twenty four months, is it the biggest holding

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Speaker 1: in CBL as as well? It is yes. When we

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Speaker 1: have high conviction and a security and we understand it well, Um,

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Speaker 1: you'll see that we own it in size in both

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Speaker 1: portfolios generally. Hey, Rolls, thanks so much for joining us,

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Speaker 1: really appreciated. Ross Klein their founder and chief investment officer

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Speaker 1: of chain Bridge Capital LLC. They're an active et F

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Speaker 1: manager running two strategies again to sustainable strategy in a

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Speaker 1: long short strategy as well. Want to Skyline is one

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Speaker 1: of their names. I want to plug. Also his UH nonprofit,

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Speaker 1: Ross is on the advisory Advisory Council for Graceful Gears,

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Speaker 1: which is a nonprofit that provides elite automobile experiences to

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Speaker 1: people's serious medical conditions. So bringing joy to people who

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Speaker 1: who need it, um with sweet cars and I think

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Speaker 1: that's pretty awesome. Yeah, I'm glad you brought that up. Matt.

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Speaker 1: Let's bring on the next guest, Matt Tammy. Hey good.

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Speaker 1: She's a vice president and financial advisor at UBS and UH.

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Speaker 1: She created the Impact Investment Group at UBS. Let's talk

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Speaker 1: E s G investing. It's just one of the fastest

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Speaker 1: growing areas within investing and Tammy, thanks so much for

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Speaker 1: joining us here. I'd love to get your thoughts on

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Speaker 1: what really makes a good representative E s G stock

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Speaker 1: in your mind. Him, I'm happy to be on with

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Speaker 1: you today. Uh. Yes, that's the question that many of

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Speaker 1: my clients come to us and ask. And what we're

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Speaker 1: looking at for E s G is um the totality

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Speaker 1: of a company and what that means is that they're

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Speaker 1: not only doing what they do well in terms of environmental, social,

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Speaker 1: and government, but they have an intentionality of improving. So

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Speaker 1: we don't want to play goatch you with companies. We

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Speaker 1: want everybody to um feel like they can participate in

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Speaker 1: E s G. But we look for companies that are

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Speaker 1: moving in the right direction moving whether is moving more

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Speaker 1: to carbon capture or whether is um on on the

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Speaker 1: social as that really go deaving into those diversity inclusions

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Speaker 1: and government issues. So you created the Impact Investment Group

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Speaker 1: at UBS will walk us through what impact investing is

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Speaker 1: as opposed to you know, other E s G investing

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Speaker 1: or activists investing. Well, that's a great question. Uh. Ten

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Speaker 1: years ago we started the Impact Investment groups, so we

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Speaker 1: were a little bit ahead of the curve on this,

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Speaker 1: And what we try to do is we try to

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Speaker 1: advise our clients across an umbrella of um financial activities,

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Speaker 1: whether it's market rate, securities, are alternatives, or philanthropy. And

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Speaker 1: our real position on this at the Impact Investment Group

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Speaker 1: is that you want to target those areas that you

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Speaker 1: are interested in influencing, and you want to target them

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Speaker 1: with each one of those lasers, if you will, the

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Speaker 1: market rate, securities, the the alternative, and also with your

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Speaker 1: philanthropy and and make something of the umbrella that that

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Speaker 1: at least has some targeted point of view on the

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Speaker 1: way you want to impass the world. So so that's

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Speaker 1: our approach. So Temmy, when my financial advisor approaches me

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Speaker 1: with an idea, you know, Mike, silly question, or maybe

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Speaker 1: the only question is all right, what kind of return

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Speaker 1: can I expect here? But are you when you talk

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Speaker 1: to your clients, are you getting more and more of

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Speaker 1: your clients saying, talk to me about the E. S

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Speaker 1: G aspects of this idea you're bringing to me. Because

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Speaker 1: I don't think about it that way, but I think

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Speaker 1: I'm increasingly in the mind party. Well, you know, I

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Speaker 1: think that there are people that at the very forefront

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Speaker 1: of their minds, have the E s G or the

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Speaker 1: social investment screen that they think about. But I've yet

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Speaker 1: to need a person that doesn't care about the quality

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Speaker 1: of the water that they drink or the air that

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Speaker 1: they breathe. And so I break it into two groups.

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Speaker 1: I break it into the evangelist group of people that

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Speaker 1: really UM want to talk about UM this and have

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Speaker 1: studied it right. And then I break it into more

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Speaker 1: of the lay person that wants to have investments that

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Speaker 1: have a positive impact on their future and their kids

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Speaker 1: and choos UM and and want to do things that

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Speaker 1: aligned with that. Now you mentioned return, and I think

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Speaker 1: that that's an interesting question because UM, over the last

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Speaker 1: let's say five to seven years, the return on E

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Speaker 1: s G has been it's higher than that of the

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Speaker 1: SMP five hundreds simply by deleting UM fossil fuels. So, Tammy,

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Speaker 1: we don't have enough time, but I want to get

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Speaker 1: you back on because I'd love to ask you kind

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Speaker 1: of an off script question. But I noticed you studied

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Speaker 1: You got your j D in securities and tax law,

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Speaker 1: which makes sense for your industry, But you studied physics

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Speaker 1: and electrical engineering at Tuskegee and I just wonder what

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Speaker 1: kind of impact that has had on your career and

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Speaker 1: how you have designed um uh, you know, your program

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Speaker 1: at UBS. So I hope we can get you back

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Speaker 1: on again because I think it's really fascinating to me.

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Speaker 1: Hey Good there is vice president and financial advisor at UBS.

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Speaker 1: She created the Impact Investment Group. Thanks for listening to

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Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to

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Speaker 1: interviews with Apple Podcasts or whatever podcast platform you prefer.

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Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three

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Speaker 1: and on Fall Sweeney. I'm on Twitter at pt Sweeney

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Speaker 1: Before the podcast. You can always catch us worldwide at

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Speaker 1: Bloomberg Radio