1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,520 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,360 Speaker 1: at Bloomberg dot com slash podcast. Well, my personal China 7 00:00:22,440 --> 00:00:27,280 Speaker 1: Bellweather stock is Ali baba b A b A stocks 8 00:00:27,280 --> 00:00:31,880 Speaker 1: down sevent today, fifty two week low. I blame the 9 00:00:31,880 --> 00:00:35,879 Speaker 1: political situation in China, and I blame all emerging markets 10 00:00:35,880 --> 00:00:39,400 Speaker 1: strategists as well. And then that includes Damien Sassaur, who 11 00:00:39,479 --> 00:00:43,239 Speaker 1: is our chief emerging market strategist. Is the Do you 12 00:00:43,320 --> 00:00:47,479 Speaker 1: cover the UK as well as chief market I know 13 00:00:47,560 --> 00:00:49,640 Speaker 1: I don't cover the UK, but people have been asking 14 00:00:49,640 --> 00:00:53,360 Speaker 1: you that. Actually it is the second largest economy in 15 00:00:53,400 --> 00:00:58,560 Speaker 1: the world, uninvestable debt, demographics and declining productivity. That is China. 16 00:00:58,640 --> 00:01:00,680 Speaker 1: And for me, look, it comes down to reserves. In 17 00:01:00,720 --> 00:01:03,000 Speaker 1: an environment like this, it's who has liquidity buffers to 18 00:01:03,000 --> 00:01:06,000 Speaker 1: protect their currencies during times of distress. China's got three 19 00:01:06,360 --> 00:01:09,600 Speaker 1: trillion reasons not to be worried. But the rapid deterioration 20 00:01:09,600 --> 00:01:11,760 Speaker 1: of their currency base is not to be ignored. I mean, 21 00:01:11,800 --> 00:01:13,880 Speaker 1: we're down seven and a half percent year today. They've 22 00:01:13,880 --> 00:01:16,800 Speaker 1: lost about two hundred and fifty billion dollars of soft 23 00:01:16,800 --> 00:01:19,200 Speaker 1: currency reserves this year. That's quite a bit of money, 24 00:01:19,240 --> 00:01:21,440 Speaker 1: but it pales in comparison to what we're seeing across 25 00:01:21,480 --> 00:01:23,399 Speaker 1: the whole of em I mean, reserves are down eight 26 00:01:23,400 --> 00:01:26,520 Speaker 1: point one percent across you know the major eighteen markets. 27 00:01:26,640 --> 00:01:29,679 Speaker 1: And uh, I mean you've got countries like Malaysia, Indonesia, 28 00:01:29,680 --> 00:01:31,720 Speaker 1: the Philippines that are just feeling the pain and their 29 00:01:31,720 --> 00:01:34,600 Speaker 1: currencies are trading pretty much at all time loads. So 30 00:01:34,920 --> 00:01:36,960 Speaker 1: you know, where do we go from here? To anyone's guess? 31 00:01:37,000 --> 00:01:40,120 Speaker 1: But not uninvestable, right, I mean, how can you even 32 00:01:40,160 --> 00:01:43,920 Speaker 1: say that about such a huge economy given a longer 33 00:01:43,959 --> 00:01:48,200 Speaker 1: time horizon. Clearly, even if you have concerns now, there's 34 00:01:48,240 --> 00:01:52,000 Speaker 1: got to be some opportunity down the road. Is the 35 00:01:52,000 --> 00:01:56,760 Speaker 1: worst case scenario for an Ali Baba investor, for example, 36 00:01:57,160 --> 00:02:00,360 Speaker 1: And Ali Baba investor was doing one buying one thing, 37 00:02:00,400 --> 00:02:03,040 Speaker 1: but it's buying the growth of the middle class in China. 38 00:02:03,200 --> 00:02:06,320 Speaker 1: That's it. Forget the Internet, forgett e commerce. That was 39 00:02:06,440 --> 00:02:11,320 Speaker 1: the play. Now. Offsetting that was this broad thing called 40 00:02:11,560 --> 00:02:15,840 Speaker 1: China risk. This is China risk. The government can come 41 00:02:15,880 --> 00:02:19,440 Speaker 1: in and shut you down tomorrow, yeah, and they can 42 00:02:19,440 --> 00:02:21,280 Speaker 1: block out the truth. I mean, look, I think all 43 00:02:21,280 --> 00:02:24,720 Speaker 1: of us, inherently, fundamentally, we just want they could do that. 44 00:02:24,840 --> 00:02:28,560 Speaker 1: Last year, that's it, and next year that that hasn't 45 00:02:28,639 --> 00:02:32,160 Speaker 1: changed at all just because she has stacked some governing board. 46 00:02:32,240 --> 00:02:35,040 Speaker 1: He was still all powerful before this, yes he was, 47 00:02:35,120 --> 00:02:36,799 Speaker 1: but I mean the question was was he going to 48 00:02:36,960 --> 00:02:38,679 Speaker 1: use that power and how is he going to use 49 00:02:38,720 --> 00:02:40,320 Speaker 1: that power. I mean, look, I think a lot of 50 00:02:40,320 --> 00:02:43,079 Speaker 1: people are getting up in arms this morning about how 51 00:02:43,080 --> 00:02:45,680 Speaker 1: he stacked the deck, not so much with she loyalists, 52 00:02:45,680 --> 00:02:47,760 Speaker 1: but really with people who are sympathetic to the COVID 53 00:02:47,800 --> 00:02:49,960 Speaker 1: zero policy. Right, So that was the big thing. I 54 00:02:49,960 --> 00:02:53,440 Speaker 1: think most analysts, not myself, thought that that policy might 55 00:02:53,520 --> 00:02:55,280 Speaker 1: very well change before the end of the year, if 56 00:02:55,320 --> 00:02:57,040 Speaker 1: not in the beginning of next year. And now that 57 00:02:57,160 --> 00:02:59,160 Speaker 1: seems to be out the door. So I think that's 58 00:02:59,160 --> 00:03:01,880 Speaker 1: why Chinese equities, why A shares, why in the Hong 59 00:03:01,960 --> 00:03:05,120 Speaker 1: Kong you know what? Why everything is kind of down today. Look, 60 00:03:05,120 --> 00:03:07,000 Speaker 1: it's anyone's guests, but I mean, for me. I mean 61 00:03:07,080 --> 00:03:09,160 Speaker 1: it's it's about liquidity, and if you don't have the 62 00:03:09,200 --> 00:03:12,040 Speaker 1: ability to protect your currency and protect currency stability in 63 00:03:12,040 --> 00:03:15,200 Speaker 1: times of distress, you know, everything else goes out the door, 64 00:03:15,200 --> 00:03:17,840 Speaker 1: including the equity valuations for many of those thoughts like 65 00:03:17,919 --> 00:03:20,960 Speaker 1: matuan ten cents in Ali Baba. But is that what 66 00:03:21,000 --> 00:03:24,519 Speaker 1: we're watching right now? I mean, um, we've been looking 67 00:03:24,560 --> 00:03:29,679 Speaker 1: at six ninety to seven for seven thirty now almost yeah, no, 68 00:03:30,200 --> 00:03:32,680 Speaker 1: for so long. You know, it's not huge swings. This 69 00:03:32,760 --> 00:03:34,680 Speaker 1: isn't like the pound or the euro. This isn't like 70 00:03:34,760 --> 00:03:38,240 Speaker 1: crazy talk. It's managed currency exactly. It's a managed currency. 71 00:03:38,280 --> 00:03:40,560 Speaker 1: But look, it is a currency that is so heavily 72 00:03:40,600 --> 00:03:43,240 Speaker 1: involved in global trade, and you know we now I mean, look, 73 00:03:43,240 --> 00:03:44,960 Speaker 1: if you just look at export flows, I mean they 74 00:03:44,960 --> 00:03:47,520 Speaker 1: came out overnight. I mean exports are down significantly. I'm 75 00:03:47,520 --> 00:03:49,800 Speaker 1: talking double digits. China in the US, China and the 76 00:03:49,800 --> 00:03:52,160 Speaker 1: Eurozone down seven percent, China in the UK down eleven. 77 00:03:52,840 --> 00:03:54,840 Speaker 1: So you know, global trade is going in one direction 78 00:03:54,880 --> 00:03:57,400 Speaker 1: and that's down. And you know that means that, you know, 79 00:03:57,440 --> 00:04:00,240 Speaker 1: if there's not enough demand for China's exports abroad, it's 80 00:04:00,240 --> 00:04:02,960 Speaker 1: just gonna weigh that much more heavily on its domestic economy. 81 00:04:02,960 --> 00:04:04,800 Speaker 1: And look, if you just look an unemployment, it's ticked 82 00:04:04,880 --> 00:04:07,080 Speaker 1: up to five point five percent overnight. You know, retail 83 00:04:07,080 --> 00:04:09,960 Speaker 1: sales are down again. No one is lending in China 84 00:04:10,160 --> 00:04:13,240 Speaker 1: because why lend to households or two small companies if 85 00:04:13,360 --> 00:04:16,000 Speaker 1: to your point, you know, the government could come in 86 00:04:16,000 --> 00:04:18,279 Speaker 1: and take it from you tomorrow. So what does this 87 00:04:18,360 --> 00:04:21,799 Speaker 1: mean then, for not if Paul wants to buy Ali 88 00:04:21,800 --> 00:04:23,960 Speaker 1: Baba or not, but what does this mean for if 89 00:04:24,000 --> 00:04:26,479 Speaker 1: Tesla wants to sell more cars in China? That's a 90 00:04:26,480 --> 00:04:29,240 Speaker 1: great question. What does this mean if JP Morgan and 91 00:04:29,279 --> 00:04:31,960 Speaker 1: Goldman Sachs want to do more business in China. I 92 00:04:32,000 --> 00:04:33,920 Speaker 1: know Matt loves the auto sector, so let's go there. 93 00:04:33,960 --> 00:04:35,840 Speaker 1: You know, it has slashed their prices by five percent 94 00:04:36,000 --> 00:04:38,520 Speaker 1: overnight right in China, so the currency weekends. So they're 95 00:04:38,640 --> 00:04:41,320 Speaker 1: they're because they're starting a they're starting a price war 96 00:04:41,560 --> 00:04:44,640 Speaker 1: for electronic vehicles in China, and that and that is 97 00:04:44,720 --> 00:04:47,039 Speaker 1: what and so that they've laid the gauntlet down. So 98 00:04:47,040 --> 00:04:49,839 Speaker 1: that's a very different story. But we must remember how 99 00:04:49,880 --> 00:04:53,160 Speaker 1: auto sales drives not just China, I mean the Eastern 100 00:04:53,200 --> 00:04:56,960 Speaker 1: European block is completely hungry pole in Czech Republic dominated 101 00:04:57,000 --> 00:04:59,320 Speaker 1: by auto sales. And so if we now get into 102 00:04:59,360 --> 00:05:01,200 Speaker 1: a price where are you know, every you know, part 103 00:05:01,240 --> 00:05:03,640 Speaker 1: they're manufacturing is worth that much less, it's gonna be really, 104 00:05:03,640 --> 00:05:06,279 Speaker 1: really painful for a lot of these countries operating out 105 00:05:06,320 --> 00:05:10,040 Speaker 1: along the periphery and emerging markets. And it's not just 106 00:05:10,720 --> 00:05:15,480 Speaker 1: little startups like Tesla right, entrenched incumbent automakers like Folks Swag. 107 00:05:15,760 --> 00:05:20,000 Speaker 1: They're sending their CEO with the German Chancellor to Beijing 108 00:05:20,080 --> 00:05:24,039 Speaker 1: next month to probably plead on bended knee for more access. 109 00:05:24,200 --> 00:05:26,760 Speaker 1: Yeah yeah, now, I mean look, I mean, look, it's 110 00:05:26,839 --> 00:05:28,560 Speaker 1: very difficult to gauge where we are. What I can 111 00:05:28,600 --> 00:05:30,320 Speaker 1: tell you is as even the economies that got out 112 00:05:30,360 --> 00:05:32,599 Speaker 1: in front of the tightening cycle, the Brazils, the Chile's, 113 00:05:32,640 --> 00:05:36,279 Speaker 1: the Czech Republics, everyone, you know, you know, you're finally 114 00:05:36,279 --> 00:05:38,120 Speaker 1: starting to see them pumping the brakes on tightening. But 115 00:05:38,200 --> 00:05:40,159 Speaker 1: how much more can they pump the brakes really with 116 00:05:40,200 --> 00:05:42,279 Speaker 1: inflation running hot the way it is, I don't know, 117 00:05:42,360 --> 00:05:44,760 Speaker 1: but activity I mean, right now, technically, Brazil, Chili, some 118 00:05:44,760 --> 00:05:47,200 Speaker 1: of these economies are technically in recession probably as we speak, 119 00:05:47,560 --> 00:05:48,920 Speaker 1: you know, and so for me, it's going to be 120 00:05:49,000 --> 00:05:50,920 Speaker 1: very interesting to see some of the central bank meetings 121 00:05:50,920 --> 00:05:52,840 Speaker 1: we're seeing this week. We've got Brazil on Wednesday, We've 122 00:05:52,839 --> 00:05:54,800 Speaker 1: got Columbia towards the end of the week. We've got 123 00:05:54,880 --> 00:05:57,880 Speaker 1: Hungry this week. Those are all very important economies to see. 124 00:05:58,040 --> 00:05:59,680 Speaker 1: You know, where their central banks are at, where their 125 00:05:59,720 --> 00:06:01,599 Speaker 1: heads are, whether or not they can stem the decline. 126 00:06:01,640 --> 00:06:04,200 Speaker 1: But with reserves coming off, what that means is that 127 00:06:04,240 --> 00:06:07,520 Speaker 1: it exposes investors to risk of capital outflows in mass. 128 00:06:07,800 --> 00:06:10,400 Speaker 1: And that's where we are. The life and times of 129 00:06:10,400 --> 00:06:12,839 Speaker 1: an emerging market strategy. It's very difficult to create a 130 00:06:12,839 --> 00:06:17,920 Speaker 1: bush narrative policeto. Luckily you're doing well in the fantasy 131 00:06:17,920 --> 00:06:20,920 Speaker 1: and a sports betting and sports betting expert on top 132 00:06:20,920 --> 00:06:23,200 Speaker 1: of that. Boy, but that's a that's a combo right there. 133 00:06:23,279 --> 00:06:26,760 Speaker 1: David Sassaur, he's our chief strategist for all things emerging 134 00:06:26,839 --> 00:06:35,040 Speaker 1: markets at Bloomberg Intelligence. It's just a weird tape here. 135 00:06:35,200 --> 00:06:37,280 Speaker 1: Got the SMP up two tenths of one percent, the 136 00:06:37,320 --> 00:06:39,159 Speaker 1: deal up seven tenths and one percent, and then that's 137 00:06:39,240 --> 00:06:41,520 Speaker 1: that down eight tenths of one percent. So well, I 138 00:06:41,520 --> 00:06:43,560 Speaker 1: guess the tech stocks are going to get super hard 139 00:06:43,600 --> 00:06:46,279 Speaker 1: because of the China concerns, right, and I think the 140 00:06:46,320 --> 00:06:51,280 Speaker 1: broader market is up on um relief out of the UK. 141 00:06:51,640 --> 00:06:55,080 Speaker 1: That Richie Sunak is going to be the Prime minister 142 00:06:55,320 --> 00:06:57,840 Speaker 1: seems that seems like the reasonable choice. And all we're 143 00:06:57,880 --> 00:07:00,680 Speaker 1: by the way, we're set up for almost six billion 144 00:07:00,800 --> 00:07:06,680 Speaker 1: dollars uh so earnings from companies that have six trillion 145 00:07:06,760 --> 00:07:09,440 Speaker 1: dollars sorry in market cap like massive from tomorrow. We 146 00:07:09,560 --> 00:07:13,280 Speaker 1: got General Electric, we got General Motors, we got Coca Cola, 147 00:07:13,360 --> 00:07:15,080 Speaker 1: I mean, just a ton then Tech at the end 148 00:07:15,120 --> 00:07:16,480 Speaker 1: of the week, at the end of at the end 149 00:07:16,520 --> 00:07:21,800 Speaker 1: of the day tomorrow, Microsoft and alphabetay is of course Google, Yeah, 150 00:07:21,880 --> 00:07:24,160 Speaker 1: of course, okay, I'll be good stuff. So, you know, earnings, 151 00:07:24,600 --> 00:07:27,560 Speaker 1: sharpen your pencil. Let's check in on somebody who does 152 00:07:27,600 --> 00:07:31,120 Speaker 1: this kind of stock stuff for a living. Robert Stimpson, 153 00:07:31,280 --> 00:07:35,960 Speaker 1: c I O and portfolio manager at Oak Associates. So, Robert, 154 00:07:36,000 --> 00:07:39,600 Speaker 1: we've had a couple of three days of some you know, 155 00:07:39,800 --> 00:07:43,080 Speaker 1: upward moves into market, and what do you make of that? 156 00:07:43,200 --> 00:07:44,760 Speaker 1: Is that are we still in this bear market? But 157 00:07:44,800 --> 00:07:47,360 Speaker 1: we're just getting a little bit of a technical bumpers 158 00:07:47,600 --> 00:07:51,119 Speaker 1: or anything else going on. Out there. Well, the market 159 00:07:51,200 --> 00:07:54,480 Speaker 1: certainly has been you know, healthier or stronger than last 160 00:07:54,480 --> 00:07:57,200 Speaker 1: week or so, but UM, you know, we do that 161 00:07:57,480 --> 00:08:00,600 Speaker 1: we do view that as uh kind of acovery from 162 00:08:00,600 --> 00:08:05,160 Speaker 1: a very over sold position. Um, the market was very 163 00:08:05,200 --> 00:08:10,440 Speaker 1: washed out after uh sustained weakness since August, and uh, 164 00:08:10,480 --> 00:08:12,360 Speaker 1: you know, it's been more of a of a balance 165 00:08:12,360 --> 00:08:16,160 Speaker 1: in our opinion, given we're in a window between you know, 166 00:08:16,640 --> 00:08:21,120 Speaker 1: a bottom in September and a earning season in November. 167 00:08:22,560 --> 00:08:25,120 Speaker 1: So but do you think that was the bottom in 168 00:08:25,160 --> 00:08:28,480 Speaker 1: September or um? You know, does it really depend on 169 00:08:28,480 --> 00:08:32,040 Speaker 1: what happens this earning season. Um, if we have a 170 00:08:32,040 --> 00:08:34,679 Speaker 1: big recession, is it likely to come next year? I 171 00:08:34,720 --> 00:08:38,520 Speaker 1: guess these are the questions, These are the questions everyone's asking. 172 00:08:38,559 --> 00:08:40,680 Speaker 1: But you know, in general, I tend to say that, 173 00:08:41,200 --> 00:08:44,280 Speaker 1: you know, a recession doesn't matter for stocks. They simply 174 00:08:44,320 --> 00:08:46,800 Speaker 1: do not like a slowing economy, and that is what 175 00:08:46,840 --> 00:08:49,480 Speaker 1: we have. So whether it's a mid cycle slowdown or 176 00:08:49,520 --> 00:08:53,040 Speaker 1: a soft landing or a recession, UH, stocks tend to 177 00:08:53,080 --> 00:08:57,320 Speaker 1: struggle when the economy is slowing, and that's the environment 178 00:08:57,360 --> 00:08:59,520 Speaker 1: we're in. So the last week may have been better, 179 00:09:00,280 --> 00:09:02,280 Speaker 1: but we do think it's going to be well into 180 00:09:02,360 --> 00:09:06,800 Speaker 1: next year before stocks get further signals that has sustained 181 00:09:06,840 --> 00:09:10,400 Speaker 1: advance is really possible, and bottoming is a process, and 182 00:09:10,440 --> 00:09:13,720 Speaker 1: we're in the middle of that process. So what do 183 00:09:13,800 --> 00:09:15,360 Speaker 1: we do here? I mean, do I just take my 184 00:09:15,400 --> 00:09:17,440 Speaker 1: money and put it into your bond and get my 185 00:09:17,520 --> 00:09:19,840 Speaker 1: four point five percent? Is that what I do until 186 00:09:19,840 --> 00:09:23,600 Speaker 1: I get a better sense of where this economy is going? Well, 187 00:09:23,600 --> 00:09:25,720 Speaker 1: that depends if you're a long term investor a short 188 00:09:25,800 --> 00:09:29,599 Speaker 1: term investor. Um it Oak Associates We are long term investors, 189 00:09:29,600 --> 00:09:32,800 Speaker 1: and the market is certainly presenting a lot of long 190 00:09:32,880 --> 00:09:36,480 Speaker 1: term opportunities here. Um. Given the decline the market has 191 00:09:36,520 --> 00:09:40,240 Speaker 1: experienced the you know, year to date, valuations in many 192 00:09:40,280 --> 00:09:42,640 Speaker 1: sectors are very attractive. And if you're able to take 193 00:09:42,679 --> 00:09:45,040 Speaker 1: a long term view and not worried about this quarter 194 00:09:45,200 --> 00:09:48,640 Speaker 1: or what the the January number is gonna look like, UM, 195 00:09:48,720 --> 00:09:52,720 Speaker 1: you should do very well. Where what sectors do you like? Well, 196 00:09:52,760 --> 00:09:55,360 Speaker 1: you know, one group you like is the semiconductors. They've 197 00:09:55,400 --> 00:09:58,000 Speaker 1: been under a lot of pressure on concerns over a 198 00:09:58,000 --> 00:10:01,720 Speaker 1: new sort of chip war with China. UM, but valuations 199 00:10:01,720 --> 00:10:04,000 Speaker 1: have come down a lot from a year ago, year 200 00:10:04,040 --> 00:10:07,880 Speaker 1: and a half ago when the industry was showing uh, 201 00:10:07,920 --> 00:10:12,760 Speaker 1: you know, double ordering and concerns over supply chain issues UM, 202 00:10:12,840 --> 00:10:14,440 Speaker 1: and we were a little more cautious on the group 203 00:10:14,440 --> 00:10:17,800 Speaker 1: back then, but valuations have contracted, so now we're more 204 00:10:17,840 --> 00:10:21,679 Speaker 1: constructive on it. UMU as a group, though, I've been 205 00:10:21,720 --> 00:10:25,960 Speaker 1: really confused because it seems like UM chips that are 206 00:10:26,000 --> 00:10:29,000 Speaker 1: made for PCs are pretty much worthless. I mean, we're 207 00:10:29,040 --> 00:10:32,040 Speaker 1: we're we're puking them, and and chips that are made 208 00:10:32,080 --> 00:10:36,440 Speaker 1: for you know, cars are impossible to find. Still, Yeah, 209 00:10:36,440 --> 00:10:42,920 Speaker 1: you're absolutely right, UM anything PC server gaining related. UM. 210 00:10:43,000 --> 00:10:46,160 Speaker 1: Not only is their abundant supply at this point, but 211 00:10:46,679 --> 00:10:48,880 Speaker 1: UM a lot of that demand was pulled forward during 212 00:10:48,880 --> 00:10:51,559 Speaker 1: the pandemic UM and now there's just not as much 213 00:10:51,559 --> 00:10:53,719 Speaker 1: of a need for it. So yeah, the opportunities are 214 00:10:53,760 --> 00:10:56,120 Speaker 1: not in the PC, they're more in the industrial, the 215 00:10:56,160 --> 00:11:00,600 Speaker 1: automotive as well as the equipment sector. UM names like 216 00:11:00,679 --> 00:11:04,680 Speaker 1: k l A, ten Core, LAMB Research. Their long term 217 00:11:04,679 --> 00:11:08,360 Speaker 1: sales are driven by generational changes, improvements and yields and 218 00:11:08,400 --> 00:11:10,880 Speaker 1: new factories, and we know that those are going to 219 00:11:10,960 --> 00:11:15,800 Speaker 1: continue regardless of the current supply of certain chips. So Robert, 220 00:11:15,800 --> 00:11:19,120 Speaker 1: you're based in Akron. Right, ye, all right, how the 221 00:11:19,200 --> 00:11:22,600 Speaker 1: great state of Ohio, by the way, but it's perilously 222 00:11:22,679 --> 00:11:27,800 Speaker 1: close to Michigan. I will say, how's the economy in Akron, Ohio. 223 00:11:27,920 --> 00:11:30,800 Speaker 1: When I think Akron, Ohio, I think good Middle America, 224 00:11:30,920 --> 00:11:35,800 Speaker 1: good folks, tires, tires, of course, tires. Absolutely, How are 225 00:11:35,800 --> 00:11:39,720 Speaker 1: things in Acron? You know, our economy is is quite 226 00:11:39,760 --> 00:11:42,720 Speaker 1: stable at this point. Um. I think we're still seeing 227 00:11:43,080 --> 00:11:47,960 Speaker 1: some of the by products of the pandemic. Restaurants are 228 00:11:47,960 --> 00:11:50,480 Speaker 1: a little bit understaffed. We're seeing a lot more automated 229 00:11:50,520 --> 00:11:55,680 Speaker 1: teller machines at restaurants, grocery stores. Um. But I think, 230 00:11:55,840 --> 00:11:59,840 Speaker 1: like much of America, the employment situation has been really 231 00:12:00,000 --> 00:12:04,600 Speaker 1: strong nationwide, and as a result, there's still labor shortages. 232 00:12:05,120 --> 00:12:09,560 Speaker 1: It's some basic service industries and um, you know, it 233 00:12:09,600 --> 00:12:11,839 Speaker 1: kind of gives you the feel that the economy is 234 00:12:11,880 --> 00:12:15,040 Speaker 1: doing fine. All right, Well, you're Ohio State Buckeys. I 235 00:12:15,080 --> 00:12:17,439 Speaker 1: think you're gonna be upset this weekend, and Happy Valley 236 00:12:17,480 --> 00:12:20,800 Speaker 1: by Penn State. That's the call right here. I'm taking 237 00:12:20,800 --> 00:12:23,120 Speaker 1: the points whatever. We'll see, all right, Robert, thank you 238 00:12:23,120 --> 00:12:25,520 Speaker 1: so much. We appreciate that. Robert Stimpson, ce Io and 239 00:12:25,559 --> 00:12:30,000 Speaker 1: portfolio manager at Oak Associates, located in the great city 240 00:12:30,040 --> 00:12:37,440 Speaker 1: of Akron, Ohio, entire capital. Uh good stuff right there, Matt. 241 00:12:37,720 --> 00:12:39,760 Speaker 1: Go when you're sitting in front of your Bloomberg terminal 242 00:12:40,040 --> 00:12:43,320 Speaker 1: and then you click on vessels and it shows you 243 00:12:43,360 --> 00:12:46,440 Speaker 1: where all the global ships are all around the world 244 00:12:46,760 --> 00:12:49,400 Speaker 1: import in transit, and so we've been focusing on that 245 00:12:49,480 --> 00:12:51,680 Speaker 1: really since the beginning of the pandemic, and focusing on 246 00:12:51,760 --> 00:12:53,640 Speaker 1: some of the big U s ports like Los Angeles 247 00:12:53,640 --> 00:12:55,800 Speaker 1: Long Beach, things like that, Savannah on the East Coast, 248 00:12:55,840 --> 00:12:59,120 Speaker 1: and of course Bayo, New Jersey, which is the center 249 00:12:59,160 --> 00:13:01,800 Speaker 1: of global trade. In my opinion, Um, you look at 250 00:13:01,800 --> 00:13:04,360 Speaker 1: it now, boy, there's not that many ships off port 251 00:13:04,400 --> 00:13:07,160 Speaker 1: of Things really gotten a lot better just looking at this. 252 00:13:07,600 --> 00:13:09,520 Speaker 1: So we want to bring in Jeans Saroka. He's the 253 00:13:09,559 --> 00:13:12,040 Speaker 1: CEO of the Port of Los Angeles. He joins us 254 00:13:12,040 --> 00:13:14,719 Speaker 1: here in our Bloomberg Interactive Broker Studio, who has been 255 00:13:14,720 --> 00:13:17,520 Speaker 1: really good making himself available during this pandemic to give 256 00:13:17,600 --> 00:13:19,600 Speaker 1: us a sense of kind of what's going on in 257 00:13:19,720 --> 00:13:21,600 Speaker 1: the Port of Los Angeles, because that really is one 258 00:13:21,640 --> 00:13:25,240 Speaker 1: of the the main global ports in the world. Gene, 259 00:13:25,280 --> 00:13:27,360 Speaker 1: thanks so much for joining us here. How are things 260 00:13:27,400 --> 00:13:28,959 Speaker 1: in l A. How are things at the port? If 261 00:13:28,960 --> 00:13:30,800 Speaker 1: I bring my big ship up? How long do I 262 00:13:30,800 --> 00:13:33,600 Speaker 1: have to wait? Paul Matt Good to be with you guys. 263 00:13:33,640 --> 00:13:37,480 Speaker 1: Today the situation is much better. The marine terminals are fluid. 264 00:13:37,720 --> 00:13:40,679 Speaker 1: The backlog of vessels has gone from a hundred and 265 00:13:40,800 --> 00:13:45,240 Speaker 1: nine in January down to single digits as of today. 266 00:13:45,520 --> 00:13:48,480 Speaker 1: And those ships that are waiting outside the port stay 267 00:13:48,480 --> 00:13:50,480 Speaker 1: there no longer than twenty four hours before they come 268 00:13:50,520 --> 00:13:52,840 Speaker 1: in for work. So that's good news. I mean that 269 00:13:53,160 --> 00:13:58,920 Speaker 1: sounds like the supply chain issues are simmering down. Um 270 00:13:59,080 --> 00:14:01,000 Speaker 1: is it? Can you sound the all clear? Are you 271 00:14:01,040 --> 00:14:04,760 Speaker 1: still concerned? Oh, Matt? The supply chain always needs improvement. 272 00:14:04,800 --> 00:14:07,080 Speaker 1: You've got to hone your craft every day. But by 273 00:14:07,120 --> 00:14:10,640 Speaker 1: and large it's moving in a good fluid form right now. 274 00:14:10,920 --> 00:14:13,360 Speaker 1: The dwell times on cargo moving out by truck, which 275 00:14:13,400 --> 00:14:16,240 Speaker 1: represents two thirds of all of our business, is down 276 00:14:16,240 --> 00:14:18,880 Speaker 1: to pre pandemic times, so the cargo velocity is good. 277 00:14:18,920 --> 00:14:21,280 Speaker 1: Still working on the rail piece, but seeing great improvement 278 00:14:21,400 --> 00:14:23,480 Speaker 1: over the last eight weeks. And I know the less 279 00:14:23,800 --> 00:14:25,360 Speaker 1: you know the last couple of times you've been here. 280 00:14:25,360 --> 00:14:27,720 Speaker 1: It's it's not just getting the ships into port. It's like, 281 00:14:27,800 --> 00:14:31,160 Speaker 1: as you mentioned, getting them unloaded, getting the cargo out 282 00:14:31,400 --> 00:14:34,560 Speaker 1: very either rail or truck, and then finding cargo space, 283 00:14:34,640 --> 00:14:37,920 Speaker 1: warehouse space. So talk to about that supply chain as 284 00:14:37,960 --> 00:14:39,640 Speaker 1: you go out from the port and kind of get 285 00:14:39,640 --> 00:14:42,680 Speaker 1: into the you know, kind of the storage areas and 286 00:14:42,720 --> 00:14:45,720 Speaker 1: so on. Right working our way backwards, there's two billion 287 00:14:45,880 --> 00:14:49,040 Speaker 1: square foot of warehousing available from the shores of the 288 00:14:49,080 --> 00:14:52,880 Speaker 1: Pacific to the desert region, Paul, right now, about zero 289 00:14:52,920 --> 00:14:55,840 Speaker 1: point two percent vacancy. In more normal times as we 290 00:14:55,880 --> 00:14:58,840 Speaker 1: head into that peak season, you'd see about five percent vacancy, 291 00:14:58,920 --> 00:15:02,720 Speaker 1: but those warehouses still filled to the gills. You've seen 292 00:15:02,760 --> 00:15:05,520 Speaker 1: people switch from ordering just in case to just in time, 293 00:15:05,560 --> 00:15:08,360 Speaker 1: taking whatever cargo they could from the manufacturer in Asia 294 00:15:08,560 --> 00:15:11,720 Speaker 1: bringing it here to help solve that equation around this 295 00:15:11,840 --> 00:15:14,880 Speaker 1: insatiable appetite of the American consumer. So they so they're 296 00:15:14,920 --> 00:15:18,480 Speaker 1: stocking up there just in case they need it, because 297 00:15:18,480 --> 00:15:22,160 Speaker 1: they're worried that something may happen, uh like we saw 298 00:15:22,200 --> 00:15:24,080 Speaker 1: in the pandemic, and they won't be able to get it. 299 00:15:24,080 --> 00:15:27,120 Speaker 1: It's not that they can't sell the stuff, and it's 300 00:15:27,120 --> 00:15:30,360 Speaker 1: not that they can't truck the stuff. That's exactly right. 301 00:15:30,600 --> 00:15:32,320 Speaker 1: And Matt, it's been the build up over the last 302 00:15:32,320 --> 00:15:34,040 Speaker 1: two and a half to three years of all this 303 00:15:34,120 --> 00:15:37,640 Speaker 1: inventory coming in because we've been buying so much. Now 304 00:15:37,680 --> 00:15:40,640 Speaker 1: at this point, you head into a holiday season where 305 00:15:40,640 --> 00:15:43,000 Speaker 1: the good segments are a little bit more narrow to 306 00:15:43,080 --> 00:15:45,480 Speaker 1: think about what you want for to give the kids 307 00:15:45,480 --> 00:15:49,480 Speaker 1: and friends for the holidays, winter, where, etcetera. You've got 308 00:15:49,480 --> 00:15:52,480 Speaker 1: to get this inventory out of the warehouses and into 309 00:15:52,520 --> 00:15:54,520 Speaker 1: the economy, and it may look different. It could be 310 00:15:54,560 --> 00:15:58,120 Speaker 1: patio furniture or flat screen TVs other products. So you've 311 00:15:58,160 --> 00:16:00,760 Speaker 1: got two distinct areas to look out. What's gonna sell 312 00:16:00,800 --> 00:16:02,880 Speaker 1: now and what you have to push into the market. 313 00:16:02,920 --> 00:16:05,040 Speaker 1: The heck, a lot of the stuff that you guys 314 00:16:05,360 --> 00:16:07,920 Speaker 1: bring in is coming out of China. And we're focused 315 00:16:07,960 --> 00:16:11,040 Speaker 1: so much on China today because we've got data, economic 316 00:16:11,120 --> 00:16:14,720 Speaker 1: data out of the second biggest economy in the world. 317 00:16:14,880 --> 00:16:19,560 Speaker 1: We also got um some political news. She is cemented 318 00:16:20,000 --> 00:16:23,680 Speaker 1: his spot at the top for an unprecedented third term. 319 00:16:23,800 --> 00:16:26,360 Speaker 1: Tell us about how important it is to China is 320 00:16:26,400 --> 00:16:29,000 Speaker 1: to your business. Right, having lived in China for over 321 00:16:29,080 --> 00:16:31,640 Speaker 1: four years and keeping up great relationships there on the 322 00:16:31,680 --> 00:16:34,000 Speaker 1: business side, I can tell you flat out, for the 323 00:16:34,040 --> 00:16:37,120 Speaker 1: Port of Los Angeles, it's about sixty percent of our 324 00:16:37,200 --> 00:16:40,920 Speaker 1: trade volume, essentially the biggest book of business across the 325 00:16:40,960 --> 00:16:44,240 Speaker 1: board and by far to the number two competitor. The 326 00:16:44,280 --> 00:16:46,760 Speaker 1: other piece to this is it's been a rocky relationship 327 00:16:46,800 --> 00:16:48,880 Speaker 1: on the trade and government side over the last four 328 00:16:48,920 --> 00:16:52,680 Speaker 1: years with the introduction of tariffs retaliatory tariffs. Yet I 329 00:16:52,720 --> 00:16:55,720 Speaker 1: don't even think the authors would have seen that yielded 330 00:16:55,880 --> 00:16:59,720 Speaker 1: more imports, less exports, in the whitest gap in trade 331 00:17:00,000 --> 00:17:03,240 Speaker 1: our country's history. Gene talked to us about labor. I 332 00:17:03,280 --> 00:17:06,040 Speaker 1: know in past discussions it's it's hard to find folks 333 00:17:06,080 --> 00:17:08,960 Speaker 1: to unload the ships to you know, load up the 334 00:17:09,040 --> 00:17:11,200 Speaker 1: trains and trucks and things like that. How's the labor 335 00:17:11,240 --> 00:17:14,680 Speaker 1: situation in l A Three segments of labor Paul. One 336 00:17:14,800 --> 00:17:17,440 Speaker 1: is the dock worker group. That's about fifteen thousand folks 337 00:17:17,480 --> 00:17:19,399 Speaker 1: that are moving the containers on and off ships to 338 00:17:19,480 --> 00:17:22,520 Speaker 1: truck and rail. That's been solid. They've been at full employment, 339 00:17:22,560 --> 00:17:25,080 Speaker 1: working on average about six days a week since the 340 00:17:25,080 --> 00:17:28,919 Speaker 1: pandemic began. Second is the truck driving group, and with 341 00:17:29,000 --> 00:17:32,480 Speaker 1: about twenty drivers registered to do business at the port, 342 00:17:32,840 --> 00:17:35,000 Speaker 1: they're in good shape as well, but they have a 343 00:17:35,000 --> 00:17:38,359 Speaker 1: mandate on hours of service federal regulations where they can 344 00:17:38,400 --> 00:17:40,920 Speaker 1: work eleven hours a day and if they work consecutively 345 00:17:41,000 --> 00:17:43,880 Speaker 1: have to take some time off. Matching up the volume 346 00:17:44,160 --> 00:17:47,040 Speaker 1: with the workers availability on the trucking side is key. 347 00:17:47,160 --> 00:17:49,720 Speaker 1: And then last is the warehouse workers. As I mentioned, 348 00:17:49,880 --> 00:17:52,639 Speaker 1: those warehouses have been full and that's been a very 349 00:17:52,760 --> 00:17:58,119 Speaker 1: challenging location to attract, recruit and retain talent. Got to 350 00:17:58,160 --> 00:18:01,679 Speaker 1: have more focus on that, whether it's pay, benefits, training, 351 00:18:01,760 --> 00:18:05,159 Speaker 1: or upward mobility. So but you know, the concern is 352 00:18:05,640 --> 00:18:08,680 Speaker 1: the concern was getting the people you needed to fill 353 00:18:08,720 --> 00:18:11,520 Speaker 1: those spots. It looks like you're doing quite well on 354 00:18:11,560 --> 00:18:16,240 Speaker 1: that side. Then paying them um a price. Wage spiral 355 00:18:16,359 --> 00:18:18,119 Speaker 1: is the big worry for the FED and for a 356 00:18:18,119 --> 00:18:21,200 Speaker 1: lot of businesses. Do you see anything like that? Yeah, 357 00:18:21,200 --> 00:18:23,000 Speaker 1: it's gonna be interesting because right now we're in the 358 00:18:23,040 --> 00:18:27,000 Speaker 1: middle of the dock workers negotiation with their employers Association, 359 00:18:27,440 --> 00:18:29,320 Speaker 1: and I'm sure that one of the hot topics in 360 00:18:29,359 --> 00:18:32,720 Speaker 1: there is around compensation and benefits. How we look, the 361 00:18:32,760 --> 00:18:34,600 Speaker 1: shipping industry has made a lot of money over the 362 00:18:34,680 --> 00:18:36,960 Speaker 1: last three years. The workers have been out on those 363 00:18:37,000 --> 00:18:41,240 Speaker 1: docks working essentially throughout this pandemic and in this surge 364 00:18:41,240 --> 00:18:43,919 Speaker 1: of cargo, they deserve to be paid as well. Looking 365 00:18:43,920 --> 00:18:47,200 Speaker 1: at these other workers that are not represented by organized 366 00:18:47,280 --> 00:18:50,000 Speaker 1: labor is where you'll probably see a change in pace 367 00:18:50,040 --> 00:18:53,119 Speaker 1: when it comes to pay and retention concepts. Ten million 368 00:18:53,200 --> 00:18:56,120 Speaker 1: jobs open nationwide, we have not been immune to making 369 00:18:56,119 --> 00:18:58,440 Speaker 1: sure we have the right people in the proper spots. 370 00:18:58,480 --> 00:19:01,960 Speaker 1: So just about the competitive environment on the West Coast, 371 00:19:02,000 --> 00:19:04,480 Speaker 1: who do you who does l A really compete against 372 00:19:04,560 --> 00:19:06,560 Speaker 1: and how do you how do you compete against the 373 00:19:06,600 --> 00:19:10,560 Speaker 1: other ports? Yeah, of the nation's goods move inbound through 374 00:19:10,560 --> 00:19:12,400 Speaker 1: the ports of l A and Long Beach, about thirty 375 00:19:12,440 --> 00:19:16,000 Speaker 1: percent of exports. I like to think we compete against everybody, 376 00:19:16,040 --> 00:19:19,720 Speaker 1: but realistically, speaking from Asia to the interior of the country, 377 00:19:19,880 --> 00:19:23,480 Speaker 1: it's the fastest, most efficient way. And with a twenty 378 00:19:23,520 --> 00:19:28,359 Speaker 1: million population base in southern California, you've got a local 379 00:19:28,400 --> 00:19:31,600 Speaker 1: purchasing power that's unlike anywhere else in the country. But 380 00:19:32,040 --> 00:19:34,639 Speaker 1: the East and Gulf Coast ports have hired really great people, 381 00:19:34,760 --> 00:19:37,600 Speaker 1: invested in aligned with policy makers. We've got to be 382 00:19:37,600 --> 00:19:41,080 Speaker 1: on our game every day. I was looking at like, 383 00:19:41,280 --> 00:19:43,960 Speaker 1: if I'm coming from Asia, naturally I go to the 384 00:19:44,040 --> 00:19:45,800 Speaker 1: West coast, but there were some times when people were 385 00:19:45,840 --> 00:19:48,520 Speaker 1: coming the shippers are coming through the canal and going 386 00:19:48,560 --> 00:19:51,720 Speaker 1: to like Savannah for example, because it was backed up 387 00:19:51,720 --> 00:19:54,879 Speaker 1: on the west coast. Has that been alleviated No, not really. 388 00:19:54,960 --> 00:19:58,520 Speaker 1: What we saw where shippers earlier this summer begin their 389 00:19:58,600 --> 00:20:01,719 Speaker 1: moved bringing cargo through of the Panama or Suez Canals 390 00:20:01,760 --> 00:20:04,120 Speaker 1: to the eastern Gulf coast. And in fact, while we 391 00:20:04,119 --> 00:20:06,679 Speaker 1: were moving record breaking numbers again this year for the 392 00:20:06,680 --> 00:20:09,399 Speaker 1: first seven months and working those ships down from a 393 00:20:09,480 --> 00:20:13,440 Speaker 1: hundred and nine to basically five, this morning you saw 394 00:20:13,480 --> 00:20:16,520 Speaker 1: that cargo shift. Jean Stroka, uh here runs support of 395 00:20:16,920 --> 00:20:19,200 Speaker 1: l a lots of boats going in and out. I 396 00:20:19,200 --> 00:20:21,479 Speaker 1: think it's an important part of the economy. Speaking of 397 00:20:21,520 --> 00:20:23,760 Speaker 1: export to the United States, speaking of hey, so Jeane, 398 00:20:23,760 --> 00:20:28,159 Speaker 1: we've got this crazy strong dollar. Um when you think 399 00:20:28,160 --> 00:20:30,399 Speaker 1: about currencies, how does that impact your business? How do 400 00:20:30,440 --> 00:20:33,680 Speaker 1: you kind of factor that into kind of your planning. Yeah, 401 00:20:33,720 --> 00:20:38,640 Speaker 1: it makes American imports that much cheaper, but it puts 402 00:20:38,680 --> 00:20:41,000 Speaker 1: a damper on American exports, and that's what we witnessed. 403 00:20:41,080 --> 00:20:43,520 Speaker 1: We're down thirty seven and the last forty nine months 404 00:20:43,520 --> 00:20:47,959 Speaker 1: on exports in part by trade policy of the previous 405 00:20:48,000 --> 00:20:51,440 Speaker 1: administration and in part by the strength of the US dollar. 406 00:20:51,800 --> 00:20:54,920 Speaker 1: We're competing against soybeans from Brazil that have a better 407 00:20:54,960 --> 00:20:58,760 Speaker 1: exchange rate, textile peace goods coming out of Southeast Asian 408 00:20:58,840 --> 00:21:02,320 Speaker 1: nations that go into the finished garment, again competing against 409 00:21:02,320 --> 00:21:04,359 Speaker 1: that strong U. S dollar. So as we try to 410 00:21:04,440 --> 00:21:07,440 Speaker 1: ramp up every available avenue to pick up U S 411 00:21:07,480 --> 00:21:10,840 Speaker 1: agriculture and manufactured goods, this will continue to be a headwind. 412 00:21:11,040 --> 00:21:15,080 Speaker 1: It's got to make people also even more interested in 413 00:21:15,200 --> 00:21:18,440 Speaker 1: sourcing goods out of Asia than they already were. I mean, 414 00:21:18,800 --> 00:21:21,639 Speaker 1: labor there has gotten more expensive, but as the dollar 415 00:21:22,119 --> 00:21:25,200 Speaker 1: um continues to get stronger, that evens things out, right, 416 00:21:25,200 --> 00:21:31,200 Speaker 1: So I just imagine, um, anyone making mass producing goods 417 00:21:31,280 --> 00:21:34,360 Speaker 1: is gonna at least get parts out of Asia. That's right. 418 00:21:34,480 --> 00:21:38,280 Speaker 1: And it's interesting to Matt because the parts and components 419 00:21:38,320 --> 00:21:41,720 Speaker 1: that we import for American factories are about as much 420 00:21:41,800 --> 00:21:44,760 Speaker 1: volume as the American retail goods that we talk about 421 00:21:44,880 --> 00:21:49,000 Speaker 1: so much today. So that's a really key input to 422 00:21:49,080 --> 00:21:51,560 Speaker 1: our economy, as well as that volume through the port 423 00:21:51,800 --> 00:21:54,920 Speaker 1: you know, gene. When the pandemic began and we had 424 00:21:55,000 --> 00:21:59,359 Speaker 1: shortages of various items, most notably the microchips. There's this 425 00:21:59,480 --> 00:22:03,119 Speaker 1: big discussion and big move to onshore a lot of stuff, 426 00:22:03,160 --> 00:22:05,760 Speaker 1: and I'm sorry, I just don't see it personally. I 427 00:22:05,960 --> 00:22:07,920 Speaker 1: maybe just because I grew up in the world where 428 00:22:07,920 --> 00:22:12,920 Speaker 1: globalization became the norm. When you talk to your shipping clients, 429 00:22:13,080 --> 00:22:15,680 Speaker 1: how did they think about that on shoring aspect, Is 430 00:22:15,720 --> 00:22:19,280 Speaker 1: that really something that's going to be material or do 431 00:22:19,320 --> 00:22:22,440 Speaker 1: you still think it's gonna be a global trade environment. 432 00:22:23,040 --> 00:22:25,439 Speaker 1: It's a real topic of discussion with most who we 433 00:22:25,520 --> 00:22:28,399 Speaker 1: talked to. In fact, I just had j Timmins, the 434 00:22:28,440 --> 00:22:31,720 Speaker 1: CEO of the North American Manufacturers Group, on our press 435 00:22:31,720 --> 00:22:35,440 Speaker 1: conference last month. But it's nuanced, it's layered. There's gotta 436 00:22:35,480 --> 00:22:38,200 Speaker 1: be tax policy that supports it. There's gotta be a 437 00:22:38,280 --> 00:22:42,040 Speaker 1: plan for jobs. With ten million jobs open nationwide, we 438 00:22:42,040 --> 00:22:44,080 Speaker 1: don't have enough workers to go to all these different 439 00:22:44,119 --> 00:22:47,200 Speaker 1: segments in the American economy. And Matt, as you said, 440 00:22:47,440 --> 00:22:50,440 Speaker 1: the ability to buy the products at a decent price 441 00:22:50,480 --> 00:22:53,439 Speaker 1: and get them in here to the factories looks a 442 00:22:53,440 --> 00:22:56,280 Speaker 1: little bit different than it did even months ago. Yeah, 443 00:22:56,840 --> 00:23:00,560 Speaker 1: what is your take on what we're gonna in terms 444 00:23:00,640 --> 00:23:03,880 Speaker 1: of the U S economy in the next months and quarters. 445 00:23:03,920 --> 00:23:06,280 Speaker 1: I mean, there's been so much talk about a recession. 446 00:23:06,440 --> 00:23:09,600 Speaker 1: We're almost, you know, talking our way into almost talking 447 00:23:09,600 --> 00:23:11,000 Speaker 1: our way into it, except for the fact that it's 448 00:23:11,080 --> 00:23:13,280 Speaker 1: it almost looks like it's not gonna happen, right, So 449 00:23:13,320 --> 00:23:15,439 Speaker 1: there's some people saying this could be the recession that 450 00:23:15,480 --> 00:23:20,520 Speaker 1: never transpired. We did see two quarters of contraction, but 451 00:23:21,000 --> 00:23:24,359 Speaker 1: no one's labeled that a recession yet, and it just 452 00:23:24,480 --> 00:23:27,120 Speaker 1: seems like we could skirt it when you look at 453 00:23:27,160 --> 00:23:30,480 Speaker 1: how well we're doing an earning season. Yeah, there was 454 00:23:30,520 --> 00:23:32,520 Speaker 1: a lot of talk months ago about a soft landing, 455 00:23:32,520 --> 00:23:35,679 Speaker 1: a hard landing, a little bit of turbulence of bumpy landing. 456 00:23:36,840 --> 00:23:40,919 Speaker 1: It's an equation that we haven't seen before. Again, so 457 00:23:41,000 --> 00:23:44,119 Speaker 1: many jobs open, lowest unemployment since the nineteen sixties. The 458 00:23:44,160 --> 00:23:48,360 Speaker 1: consumer seems resilient. Flat numbers for July, August, and September, 459 00:23:48,400 --> 00:23:52,120 Speaker 1: where many thought we would fall off a cliff, Producer prices, 460 00:23:52,160 --> 00:23:55,640 Speaker 1: wholesale prices remaining elevated, and that means that we're still 461 00:23:55,760 --> 00:23:59,480 Speaker 1: ordering from those folks to do the outputs. So it's 462 00:23:59,480 --> 00:24:02,600 Speaker 1: going to be interesting. But again, looking at inflation at 463 00:24:02,640 --> 00:24:05,000 Speaker 1: eight point two percent, that's what's on our minds. We 464 00:24:05,080 --> 00:24:06,840 Speaker 1: feel it at the gas pump, we feel it at 465 00:24:06,840 --> 00:24:09,040 Speaker 1: the grocery store. Can we get through this on the 466 00:24:09,080 --> 00:24:12,439 Speaker 1: resilience of the consumer. I think we can. It's just 467 00:24:12,520 --> 00:24:15,959 Speaker 1: in time. Inventory, is that passee? Because it seems like 468 00:24:16,000 --> 00:24:18,720 Speaker 1: that's we all learned that in business school, But then boy, 469 00:24:18,920 --> 00:24:22,359 Speaker 1: it can came up to bite us here during this pandemic. Yeah. 470 00:24:22,359 --> 00:24:26,040 Speaker 1: I think it's interesting because as we passed through the 471 00:24:26,080 --> 00:24:29,560 Speaker 1: pandemic and this import surge, no one wanted to be 472 00:24:29,640 --> 00:24:33,920 Speaker 1: the paper company, so they began ordering everything they could, 473 00:24:34,200 --> 00:24:36,600 Speaker 1: and the fight for factory floor space in Asia was 474 00:24:36,640 --> 00:24:39,080 Speaker 1: just like it was throughout the supply chain and other segments. 475 00:24:39,320 --> 00:24:41,400 Speaker 1: I'll take whatever order I can get, and if it's 476 00:24:41,600 --> 00:24:45,280 Speaker 1: patio furniture or a flat screen TV, maybe it's that 477 00:24:45,280 --> 00:24:47,480 Speaker 1: that Barbie doll, I'm gonna take what I can get, 478 00:24:47,640 --> 00:24:50,400 Speaker 1: and therefore I'm gonna build up my inventory so I'm 479 00:24:50,440 --> 00:24:52,800 Speaker 1: not going to run out of products for this insatiable 480 00:24:52,800 --> 00:24:56,040 Speaker 1: appetite of the American consumer that's yielded a lot of 481 00:24:56,080 --> 00:24:58,440 Speaker 1: inventory here in the US that now must be bled out, 482 00:24:58,560 --> 00:25:01,320 Speaker 1: maybe through discounting as we go into this all important 483 00:25:01,320 --> 00:25:03,960 Speaker 1: holiday season. All Right, good stuff as always. Jean Starroka, 484 00:25:04,000 --> 00:25:05,520 Speaker 1: thank you so much for joining us live here in 485 00:25:05,560 --> 00:25:09,080 Speaker 1: our Bloomberg Interactor Broker studio. We appreciate having these conversations 486 00:25:09,160 --> 00:25:11,399 Speaker 1: during the past two and a half years on the 487 00:25:11,480 --> 00:25:14,560 Speaker 1: global supply side, supply chain, that's been a big issue. 488 00:25:14,600 --> 00:25:16,600 Speaker 1: Matt and I we can sider ourselves. I think quasi 489 00:25:16,680 --> 00:25:19,520 Speaker 1: experts on the supply chain. I'm not necessarily an expert, 490 00:25:19,520 --> 00:25:21,880 Speaker 1: but I'm willing to get my cd L and drive 491 00:25:21,880 --> 00:25:24,200 Speaker 1: a truck in and out of the Port of Los Angeles. Yeah, 492 00:25:24,240 --> 00:25:27,040 Speaker 1: that might be you know, if things continue, might calling. 493 00:25:27,080 --> 00:25:29,399 Speaker 1: That might be your calling, Jean Stroka, the Port of 494 00:25:29,400 --> 00:25:35,000 Speaker 1: Los Angeles, we appreciate it. I'm a big fan of 495 00:25:35,000 --> 00:25:37,520 Speaker 1: the state of California. I mean, there's so much to do, 496 00:25:37,560 --> 00:25:40,440 Speaker 1: There's so many different regions of the state. It's just awesome. 497 00:25:40,640 --> 00:25:44,240 Speaker 1: I think I wish the financial capital of America would 498 00:25:44,240 --> 00:25:46,280 Speaker 1: move there. You know, Yeah, that'd be cool. Well, there's 499 00:25:46,320 --> 00:25:48,679 Speaker 1: a lot of dough out there, no question about it. 500 00:25:48,760 --> 00:25:51,680 Speaker 1: If you're a technology person, is already there. California catching 501 00:25:51,720 --> 00:25:54,440 Speaker 1: Germany as a number four economy. We've got Matt Winkler 502 00:25:54,600 --> 00:25:57,160 Speaker 1: in studio. He's got a column out today talking about 503 00:25:57,160 --> 00:26:01,439 Speaker 1: California breaking down the numbers. Matt Winkler, I don't know 504 00:26:01,440 --> 00:26:04,760 Speaker 1: what he founded. Bloomberg News is that kind of and 505 00:26:04,760 --> 00:26:08,119 Speaker 1: he's like an editor in chief emeritus. Okay, so that's big, right, Yeah, Okay, 506 00:26:08,160 --> 00:26:10,959 Speaker 1: that's good, he hied me. He hired to al Right, 507 00:26:11,000 --> 00:26:14,840 Speaker 1: despite that, we haven't in our studio, Matt, California. Say 508 00:26:14,880 --> 00:26:18,840 Speaker 1: what you will, people, everybody's going to California, Texas and Florida. 509 00:26:19,000 --> 00:26:22,680 Speaker 1: California is still the bomb, right, So Paul and Matt, 510 00:26:22,760 --> 00:26:27,800 Speaker 1: great to be with you. If you look at UM California, 511 00:26:28,440 --> 00:26:32,360 Speaker 1: or rather Corporate California, which is almost four hundred publicly 512 00:26:32,359 --> 00:26:37,960 Speaker 1: traded companies, there really isn't an industry group or or 513 00:26:38,080 --> 00:26:41,280 Speaker 1: category where California is number one. And if you add 514 00:26:41,400 --> 00:26:48,119 Speaker 1: up the growth in sales and profit of these companies 515 00:26:48,240 --> 00:26:53,720 Speaker 1: since when COVID disrupted the world economy, you would find 516 00:26:53,720 --> 00:26:56,199 Speaker 1: that California has actually been on a tear, such a 517 00:26:56,240 --> 00:27:01,000 Speaker 1: tear that um it is continued. If you like this 518 00:27:01,280 --> 00:27:05,920 Speaker 1: trajectory where uh it it leap frog Brazil in France 519 00:27:05,960 --> 00:27:09,680 Speaker 1: and two thousand fifteen, uh and supplanted, the UK is 520 00:27:09,760 --> 00:27:12,720 Speaker 1: the number five economy in two thousand seventeen, and here 521 00:27:12,760 --> 00:27:15,600 Speaker 1: we are two thousand twenty two. If you looked at 522 00:27:15,760 --> 00:27:21,080 Speaker 1: the trend lines for California and Germany, which we do 523 00:27:21,160 --> 00:27:24,040 Speaker 1: in the column, uh, they are the narrowest they ever 524 00:27:24,080 --> 00:27:26,280 Speaker 1: been in by some estimates, because we're not gonna have 525 00:27:26,320 --> 00:27:30,720 Speaker 1: twenty two figures until twenty three. California has already overtaken 526 00:27:30,800 --> 00:27:33,879 Speaker 1: Germany as the fourth largest economy in the world. The 527 00:27:33,920 --> 00:27:39,000 Speaker 1: interesting thing is that the narrative we hear, um, I'll say, 528 00:27:39,080 --> 00:27:43,040 Speaker 1: in the media, which is meta because obviously we are 529 00:27:43,119 --> 00:27:45,320 Speaker 1: the media. But the narrative we hear is that everyone's 530 00:27:45,400 --> 00:27:48,920 Speaker 1: moving out right, that California is over taxing and over 531 00:27:49,000 --> 00:27:52,240 Speaker 1: regulating all of these businesses, not giving startups a chance 532 00:27:52,600 --> 00:27:55,320 Speaker 1: or even big companies like Tesla, and they'd rather be 533 00:27:55,440 --> 00:28:00,560 Speaker 1: in Texas or Alabama or Florida. How un true is that? 534 00:28:00,600 --> 00:28:04,240 Speaker 1: Why do we hear it so much? Well, because, um, 535 00:28:04,280 --> 00:28:07,080 Speaker 1: you know, the easiest story to write is to go 536 00:28:07,160 --> 00:28:10,880 Speaker 1: to the local gas station and ask people, are you happy? 537 00:28:10,960 --> 00:28:13,560 Speaker 1: And the answer is gonna be no, And so we 538 00:28:13,680 --> 00:28:20,160 Speaker 1: have a crisis and it's called a gas crisis now California. Um, 539 00:28:20,240 --> 00:28:23,320 Speaker 1: the whole notion of you know, high taxes and regulation 540 00:28:23,520 --> 00:28:26,720 Speaker 1: just gets blown away because, as I said, there isn't 541 00:28:26,760 --> 00:28:31,480 Speaker 1: an industry in America where California companies are number one 542 00:28:32,480 --> 00:28:37,760 Speaker 1: by an overwhelming margin um against companies in any other state. 543 00:28:37,840 --> 00:28:40,480 Speaker 1: And that's been true, by the way, over ten years, 544 00:28:40,520 --> 00:28:43,480 Speaker 1: five years, two years, one year. But it's especially been 545 00:28:43,520 --> 00:28:48,360 Speaker 1: true during the period that we call the pandemic because 546 00:28:49,120 --> 00:28:53,520 Speaker 1: so much innovation occurs in in California, and we got 547 00:28:53,560 --> 00:28:56,760 Speaker 1: a lot of innovation during the stay at home economy. 548 00:28:57,360 --> 00:29:01,800 Speaker 1: Many companies that didn't exist prior to two thousand and eighteen, 549 00:29:02,280 --> 00:29:06,520 Speaker 1: we're flourishing by two thousand twenty one because California is 550 00:29:06,640 --> 00:29:08,440 Speaker 1: number one in innovation. And by the way, the proof 551 00:29:08,440 --> 00:29:11,320 Speaker 1: of that is that the biggest companies in the world, 552 00:29:11,480 --> 00:29:15,240 Speaker 1: when they have to situate their research and development, people 553 00:29:15,640 --> 00:29:19,720 Speaker 1: guess where they go, overwhelmingly to California. It's interesting that 554 00:29:19,840 --> 00:29:22,160 Speaker 1: we were talking before we came on the air here 555 00:29:22,160 --> 00:29:27,600 Speaker 1: about the value of the higher education system in California, 556 00:29:27,680 --> 00:29:32,240 Speaker 1: the UKAU system, the cow State system. UM. I mean, 557 00:29:32,240 --> 00:29:35,760 Speaker 1: it just seems like it's it's been such so strong, 558 00:29:35,840 --> 00:29:39,120 Speaker 1: so supportive of the entire state's development, and there's really 559 00:29:39,160 --> 00:29:41,040 Speaker 1: nothing like it that I can think of in any 560 00:29:41,040 --> 00:29:45,360 Speaker 1: other state. No. I mean, look, Nelson Rockefeller tried to 561 00:29:45,440 --> 00:29:50,520 Speaker 1: replicate what Governor Pat Brown, Jerry's father did in New 562 00:29:50,600 --> 00:29:53,600 Speaker 1: York State with the state university system in New York. 563 00:29:53,880 --> 00:29:56,640 Speaker 1: He tried to replicate that, and he did a lot 564 00:29:56,800 --> 00:30:02,360 Speaker 1: to to make it quite row bust. However, you're right, Um, 565 00:30:02,440 --> 00:30:07,160 Speaker 1: you can't find a higher education system UM as diverse 566 00:30:08,160 --> 00:30:13,560 Speaker 1: as UM you know, uh robust as the one that 567 00:30:13,640 --> 00:30:16,000 Speaker 1: exists in California. And just you know, if you look 568 00:30:16,040 --> 00:30:18,640 Speaker 1: at the Bay Area alone, you've got the University of 569 00:30:18,680 --> 00:30:22,160 Speaker 1: California Berkeley, You've got uh, the University of San Francisco, 570 00:30:23,200 --> 00:30:28,959 Speaker 1: you have Stanford University, UM, and UM, it's hard to 571 00:30:28,960 --> 00:30:36,040 Speaker 1: find anything like those gems. But actually they're all along 572 00:30:36,080 --> 00:30:40,960 Speaker 1: the coast, they're inland, they're everywhere. Um. You know, the 573 00:30:42,120 --> 00:30:45,760 Speaker 1: gems of higher education in California everywhere. And that's created 574 00:30:46,480 --> 00:30:48,920 Speaker 1: an environment where you get some of the smartest people 575 00:30:48,920 --> 00:30:52,280 Speaker 1: in the world and they lead in other industries or 576 00:30:52,520 --> 00:30:56,320 Speaker 1: areas as well. Well. Yeah, I mean you mentioned bleak 577 00:30:56,360 --> 00:30:59,600 Speaker 1: reference to Tesla. Um. You know, Tesla is now one 578 00:30:59,600 --> 00:31:03,440 Speaker 1: of the its just maybe the largest manufacturing company in 579 00:31:03,800 --> 00:31:07,880 Speaker 1: California because it has uh something like fifty employees. So 580 00:31:07,960 --> 00:31:12,520 Speaker 1: Elon Musk may have gone to Texas for a tax 581 00:31:12,600 --> 00:31:17,200 Speaker 1: free and regular regulation free lifestyle, but the people who 582 00:31:17,240 --> 00:31:23,080 Speaker 1: work for him um have actually increased numerically in California 583 00:31:23,640 --> 00:31:28,520 Speaker 1: since he made Texas headquarters. And that's not an isolated example. 584 00:31:28,680 --> 00:31:34,000 Speaker 1: It's that companies still are there. Obviously. All right, good stuff, 585 00:31:34,080 --> 00:31:37,240 Speaker 1: as always, Matt Winkler, Bloomberg News Editor in Chief Emeritus. 586 00:31:40,000 --> 00:31:43,080 Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can 587 00:31:43,120 --> 00:31:46,920 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 588 00:31:47,000 --> 00:31:50,640 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 589 00:31:50,920 --> 00:31:54,920 Speaker 1: at Matt Miller. On fal Sweeney, I'm on Twitter at 590 00:31:54,960 --> 00:31:57,800 Speaker 1: pt Sweeney. Before the podcast, you can always catch us 591 00:31:57,840 --> 00:31:59,240 Speaker 1: worldwide at Bloomberg Radio