WEBVTT - Markets, The Supply Chain, And California 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.360 at Bloomberg dot com slash podcast. Well, my personal China 0:00:22.440 --> 0:00:27.280 Bellweather stock is Ali baba b A b A stocks 0:00:27.280 --> 0:00:31.880 down sevent today, fifty two week low. I blame the 0:00:31.880 --> 0:00:35.879 political situation in China, and I blame all emerging markets 0:00:35.880 --> 0:00:39.400 strategists as well. And then that includes Damien Sassaur, who 0:00:39.479 --> 0:00:43.239 is our chief emerging market strategist. Is the Do you 0:00:43.320 --> 0:00:47.479 cover the UK as well as chief market I know 0:00:47.560 --> 0:00:49.640 I don't cover the UK, but people have been asking 0:00:49.640 --> 0:00:53.360 you that. Actually it is the second largest economy in 0:00:53.400 --> 0:00:58.560 the world, uninvestable debt, demographics and declining productivity. That is China. 0:00:58.640 --> 0:01:00.680 And for me, look, it comes down to reserves. In 0:01:00.720 --> 0:01:03.000 an environment like this, it's who has liquidity buffers to 0:01:03.000 --> 0:01:06.000 protect their currencies during times of distress. China's got three 0:01:06.360 --> 0:01:09.600 trillion reasons not to be worried. But the rapid deterioration 0:01:09.600 --> 0:01:11.760 of their currency base is not to be ignored. I mean, 0:01:11.800 --> 0:01:13.880 we're down seven and a half percent year today. They've 0:01:13.880 --> 0:01:16.800 lost about two hundred and fifty billion dollars of soft 0:01:16.800 --> 0:01:19.200 currency reserves this year. That's quite a bit of money, 0:01:19.240 --> 0:01:21.440 but it pales in comparison to what we're seeing across 0:01:21.480 --> 0:01:23.399 the whole of em I mean, reserves are down eight 0:01:23.400 --> 0:01:26.520 point one percent across you know the major eighteen markets. 0:01:26.640 --> 0:01:29.679 And uh, I mean you've got countries like Malaysia, Indonesia, 0:01:29.680 --> 0:01:31.720 the Philippines that are just feeling the pain and their 0:01:31.720 --> 0:01:34.600 currencies are trading pretty much at all time loads. So 0:01:34.920 --> 0:01:36.960 you know, where do we go from here? To anyone's guess? 0:01:37.000 --> 0:01:40.120 But not uninvestable, right, I mean, how can you even 0:01:40.160 --> 0:01:43.920 say that about such a huge economy given a longer 0:01:43.959 --> 0:01:48.200 time horizon. Clearly, even if you have concerns now, there's 0:01:48.240 --> 0:01:52.000 got to be some opportunity down the road. Is the 0:01:52.000 --> 0:01:56.760 worst case scenario for an Ali Baba investor, for example, 0:01:57.160 --> 0:02:00.360 And Ali Baba investor was doing one buying one thing, 0:02:00.400 --> 0:02:03.040 but it's buying the growth of the middle class in China. 0:02:03.200 --> 0:02:06.320 That's it. Forget the Internet, forgett e commerce. That was 0:02:06.440 --> 0:02:11.320 the play. Now. Offsetting that was this broad thing called 0:02:11.560 --> 0:02:15.840 China risk. This is China risk. The government can come 0:02:15.880 --> 0:02:19.440 in and shut you down tomorrow, yeah, and they can 0:02:19.440 --> 0:02:21.280 block out the truth. I mean, look, I think all 0:02:21.280 --> 0:02:24.720 of us, inherently, fundamentally, we just want they could do that. 0:02:24.840 --> 0:02:28.560 Last year, that's it, and next year that that hasn't 0:02:28.639 --> 0:02:32.160 changed at all just because she has stacked some governing board. 0:02:32.240 --> 0:02:35.040 He was still all powerful before this, yes he was, 0:02:35.120 --> 0:02:36.799 but I mean the question was was he going to 0:02:36.960 --> 0:02:38.679 use that power and how is he going to use 0:02:38.720 --> 0:02:40.320 that power. I mean, look, I think a lot of 0:02:40.320 --> 0:02:43.079 people are getting up in arms this morning about how 0:02:43.080 --> 0:02:45.680 he stacked the deck, not so much with she loyalists, 0:02:45.680 --> 0:02:47.760 but really with people who are sympathetic to the COVID 0:02:47.800 --> 0:02:49.960 zero policy. Right, So that was the big thing. I 0:02:49.960 --> 0:02:53.440 think most analysts, not myself, thought that that policy might 0:02:53.520 --> 0:02:55.280 very well change before the end of the year, if 0:02:55.320 --> 0:02:57.040 not in the beginning of next year. And now that 0:02:57.160 --> 0:02:59.160 seems to be out the door. So I think that's 0:02:59.160 --> 0:03:01.880 why Chinese equities, why A shares, why in the Hong 0:03:01.960 --> 0:03:05.120 Kong you know what? Why everything is kind of down today. Look, 0:03:05.120 --> 0:03:07.000 it's anyone's guests, but I mean, for me. I mean 0:03:07.080 --> 0:03:09.160 it's it's about liquidity, and if you don't have the 0:03:09.200 --> 0:03:12.040 ability to protect your currency and protect currency stability in 0:03:12.040 --> 0:03:15.200 times of distress, you know, everything else goes out the door, 0:03:15.200 --> 0:03:17.840 including the equity valuations for many of those thoughts like 0:03:17.919 --> 0:03:20.960 matuan ten cents in Ali Baba. But is that what 0:03:21.000 --> 0:03:24.519 we're watching right now? I mean, um, we've been looking 0:03:24.560 --> 0:03:29.679 at six ninety to seven for seven thirty now almost yeah, no, 0:03:30.200 --> 0:03:32.680 for so long. You know, it's not huge swings. This 0:03:32.760 --> 0:03:34.680 isn't like the pound or the euro. This isn't like 0:03:34.760 --> 0:03:38.240 crazy talk. It's managed currency exactly. It's a managed currency. 0:03:38.280 --> 0:03:40.560 But look, it is a currency that is so heavily 0:03:40.600 --> 0:03:43.240 involved in global trade, and you know we now I mean, look, 0:03:43.240 --> 0:03:44.960 if you just look at export flows, I mean they 0:03:44.960 --> 0:03:47.520 came out overnight. I mean exports are down significantly. I'm 0:03:47.520 --> 0:03:49.800 talking double digits. China in the US, China and the 0:03:49.800 --> 0:03:52.160 Eurozone down seven percent, China in the UK down eleven. 0:03:52.840 --> 0:03:54.840 So you know, global trade is going in one direction 0:03:54.880 --> 0:03:57.400 and that's down. And you know that means that, you know, 0:03:57.440 --> 0:04:00.240 if there's not enough demand for China's exports abroad, it's 0:04:00.240 --> 0:04:02.960 just gonna weigh that much more heavily on its domestic economy. 0:04:02.960 --> 0:04:04.800 And look, if you just look an unemployment, it's ticked 0:04:04.880 --> 0:04:07.080 up to five point five percent overnight. You know, retail 0:04:07.080 --> 0:04:09.960 sales are down again. No one is lending in China 0:04:10.160 --> 0:04:13.240 because why lend to households or two small companies if 0:04:13.360 --> 0:04:16.000 to your point, you know, the government could come in 0:04:16.000 --> 0:04:18.279 and take it from you tomorrow. So what does this 0:04:18.360 --> 0:04:21.799 mean then, for not if Paul wants to buy Ali 0:04:21.800 --> 0:04:23.960 Baba or not, but what does this mean for if 0:04:24.000 --> 0:04:26.479 Tesla wants to sell more cars in China? That's a 0:04:26.480 --> 0:04:29.240 great question. What does this mean if JP Morgan and 0:04:29.279 --> 0:04:31.960 Goldman Sachs want to do more business in China. I 0:04:32.000 --> 0:04:33.920 know Matt loves the auto sector, so let's go there. 0:04:33.960 --> 0:04:35.840 You know, it has slashed their prices by five percent 0:04:36.000 --> 0:04:38.520 overnight right in China, so the currency weekends. So they're 0:04:38.640 --> 0:04:41.320 they're because they're starting a they're starting a price war 0:04:41.560 --> 0:04:44.640 for electronic vehicles in China, and that and that is 0:04:44.720 --> 0:04:47.039 what and so that they've laid the gauntlet down. So 0:04:47.040 --> 0:04:49.839 that's a very different story. But we must remember how 0:04:49.880 --> 0:04:53.160 auto sales drives not just China, I mean the Eastern 0:04:53.200 --> 0:04:56.960 European block is completely hungry pole in Czech Republic dominated 0:04:57.000 --> 0:04:59.320 by auto sales. And so if we now get into 0:04:59.360 --> 0:05:01.200 a price where are you know, every you know, part 0:05:01.240 --> 0:05:03.640 they're manufacturing is worth that much less, it's gonna be really, 0:05:03.640 --> 0:05:06.279 really painful for a lot of these countries operating out 0:05:06.320 --> 0:05:10.040 along the periphery and emerging markets. And it's not just 0:05:10.720 --> 0:05:15.480 little startups like Tesla right, entrenched incumbent automakers like Folks Swag. 0:05:15.760 --> 0:05:20.000 They're sending their CEO with the German Chancellor to Beijing 0:05:20.080 --> 0:05:24.039 next month to probably plead on bended knee for more access. 0:05:24.200 --> 0:05:26.760 Yeah yeah, now, I mean look, I mean, look, it's 0:05:26.839 --> 0:05:28.560 very difficult to gauge where we are. What I can 0:05:28.600 --> 0:05:30.320 tell you is as even the economies that got out 0:05:30.360 --> 0:05:32.599 in front of the tightening cycle, the Brazils, the Chile's, 0:05:32.640 --> 0:05:36.279 the Czech Republics, everyone, you know, you know, you're finally 0:05:36.279 --> 0:05:38.120 starting to see them pumping the brakes on tightening. But 0:05:38.200 --> 0:05:40.159 how much more can they pump the brakes really with 0:05:40.200 --> 0:05:42.279 inflation running hot the way it is, I don't know, 0:05:42.360 --> 0:05:44.760 but activity I mean, right now, technically, Brazil, Chili, some 0:05:44.760 --> 0:05:47.200 of these economies are technically in recession probably as we speak, 0:05:47.560 --> 0:05:48.920 you know, and so for me, it's going to be 0:05:49.000 --> 0:05:50.920 very interesting to see some of the central bank meetings 0:05:50.920 --> 0:05:52.840 we're seeing this week. We've got Brazil on Wednesday, We've 0:05:52.839 --> 0:05:54.800 got Columbia towards the end of the week. We've got 0:05:54.880 --> 0:05:57.880 Hungry this week. Those are all very important economies to see. 0:05:58.040 --> 0:05:59.680 You know, where their central banks are at, where their 0:05:59.720 --> 0:06:01.599 heads are, whether or not they can stem the decline. 0:06:01.640 --> 0:06:04.200 But with reserves coming off, what that means is that 0:06:04.240 --> 0:06:07.520 it exposes investors to risk of capital outflows in mass. 0:06:07.800 --> 0:06:10.400 And that's where we are. The life and times of 0:06:10.400 --> 0:06:12.839 an emerging market strategy. It's very difficult to create a 0:06:12.839 --> 0:06:17.920 bush narrative policeto. Luckily you're doing well in the fantasy 0:06:17.920 --> 0:06:20.920 and a sports betting and sports betting expert on top 0:06:20.920 --> 0:06:23.200 of that. Boy, but that's a that's a combo right there. 0:06:23.279 --> 0:06:26.760 David Sassaur, he's our chief strategist for all things emerging 0:06:26.839 --> 0:06:35.040 markets at Bloomberg Intelligence. It's just a weird tape here. 0:06:35.200 --> 0:06:37.280 Got the SMP up two tenths of one percent, the 0:06:37.320 --> 0:06:39.159 deal up seven tenths and one percent, and then that's 0:06:39.240 --> 0:06:41.520 that down eight tenths of one percent. So well, I 0:06:41.520 --> 0:06:43.560 guess the tech stocks are going to get super hard 0:06:43.600 --> 0:06:46.279 because of the China concerns, right, and I think the 0:06:46.320 --> 0:06:51.280 broader market is up on um relief out of the UK. 0:06:51.640 --> 0:06:55.080 That Richie Sunak is going to be the Prime minister 0:06:55.320 --> 0:06:57.840 seems that seems like the reasonable choice. And all we're 0:06:57.880 --> 0:07:00.680 by the way, we're set up for almost six billion 0:07:00.800 --> 0:07:06.680 dollars uh so earnings from companies that have six trillion 0:07:06.760 --> 0:07:09.440 dollars sorry in market cap like massive from tomorrow. We 0:07:09.560 --> 0:07:13.280 got General Electric, we got General Motors, we got Coca Cola, 0:07:13.360 --> 0:07:15.080 I mean, just a ton then Tech at the end 0:07:15.120 --> 0:07:16.480 of the week, at the end of at the end 0:07:16.520 --> 0:07:21.800 of the day tomorrow, Microsoft and alphabetay is of course Google, Yeah, 0:07:21.880 --> 0:07:24.160 of course, okay, I'll be good stuff. So, you know, earnings, 0:07:24.600 --> 0:07:27.560 sharpen your pencil. Let's check in on somebody who does 0:07:27.600 --> 0:07:31.120 this kind of stock stuff for a living. Robert Stimpson, 0:07:31.280 --> 0:07:35.960 c I O and portfolio manager at Oak Associates. So, Robert, 0:07:36.000 --> 0:07:39.600 we've had a couple of three days of some you know, 0:07:39.800 --> 0:07:43.080 upward moves into market, and what do you make of that? 0:07:43.200 --> 0:07:44.760 Is that are we still in this bear market? But 0:07:44.800 --> 0:07:47.360 we're just getting a little bit of a technical bumpers 0:07:47.600 --> 0:07:51.119 or anything else going on. Out there. Well, the market 0:07:51.200 --> 0:07:54.480 certainly has been you know, healthier or stronger than last 0:07:54.480 --> 0:07:57.200 week or so, but UM, you know, we do that 0:07:57.480 --> 0:08:00.600 we do view that as uh kind of acovery from 0:08:00.600 --> 0:08:05.160 a very over sold position. Um, the market was very 0:08:05.200 --> 0:08:10.440 washed out after uh sustained weakness since August, and uh, 0:08:10.480 --> 0:08:12.360 you know, it's been more of a of a balance 0:08:12.360 --> 0:08:16.160 in our opinion, given we're in a window between you know, 0:08:16.640 --> 0:08:21.120 a bottom in September and a earning season in November. 0:08:22.560 --> 0:08:25.120 So but do you think that was the bottom in 0:08:25.160 --> 0:08:28.480 September or um? You know, does it really depend on 0:08:28.480 --> 0:08:32.040 what happens this earning season. Um, if we have a 0:08:32.040 --> 0:08:34.679 big recession, is it likely to come next year? I 0:08:34.720 --> 0:08:38.520 guess these are the questions, These are the questions everyone's asking. 0:08:38.559 --> 0:08:40.680 But you know, in general, I tend to say that, 0:08:41.200 --> 0:08:44.280 you know, a recession doesn't matter for stocks. They simply 0:08:44.320 --> 0:08:46.800 do not like a slowing economy, and that is what 0:08:46.840 --> 0:08:49.480 we have. So whether it's a mid cycle slowdown or 0:08:49.520 --> 0:08:53.040 a soft landing or a recession, UH, stocks tend to 0:08:53.080 --> 0:08:57.320 struggle when the economy is slowing, and that's the environment 0:08:57.360 --> 0:08:59.520 we're in. So the last week may have been better, 0:09:00.280 --> 0:09:02.280 but we do think it's going to be well into 0:09:02.360 --> 0:09:06.800 next year before stocks get further signals that has sustained 0:09:06.840 --> 0:09:10.400 advance is really possible, and bottoming is a process, and 0:09:10.440 --> 0:09:13.720 we're in the middle of that process. So what do 0:09:13.800 --> 0:09:15.360 we do here? I mean, do I just take my 0:09:15.400 --> 0:09:17.440 money and put it into your bond and get my 0:09:17.520 --> 0:09:19.840 four point five percent? Is that what I do until 0:09:19.840 --> 0:09:23.600 I get a better sense of where this economy is going? Well, 0:09:23.600 --> 0:09:25.720 that depends if you're a long term investor a short 0:09:25.800 --> 0:09:29.599 term investor. Um it Oak Associates We are long term investors, 0:09:29.600 --> 0:09:32.800 and the market is certainly presenting a lot of long 0:09:32.880 --> 0:09:36.480 term opportunities here. Um. Given the decline the market has 0:09:36.520 --> 0:09:40.240 experienced the you know, year to date, valuations in many 0:09:40.280 --> 0:09:42.640 sectors are very attractive. And if you're able to take 0:09:42.679 --> 0:09:45.040 a long term view and not worried about this quarter 0:09:45.200 --> 0:09:48.640 or what the the January number is gonna look like, UM, 0:09:48.720 --> 0:09:52.720 you should do very well. Where what sectors do you like? Well, 0:09:52.760 --> 0:09:55.360 you know, one group you like is the semiconductors. They've 0:09:55.400 --> 0:09:58.000 been under a lot of pressure on concerns over a 0:09:58.000 --> 0:10:01.720 new sort of chip war with China. UM, but valuations 0:10:01.720 --> 0:10:04.000 have come down a lot from a year ago, year 0:10:04.040 --> 0:10:07.880 and a half ago when the industry was showing uh, 0:10:07.920 --> 0:10:12.760 you know, double ordering and concerns over supply chain issues UM, 0:10:12.840 --> 0:10:14.440 and we were a little more cautious on the group 0:10:14.440 --> 0:10:17.800 back then, but valuations have contracted, so now we're more 0:10:17.840 --> 0:10:21.679 constructive on it. UMU as a group, though, I've been 0:10:21.720 --> 0:10:25.960 really confused because it seems like UM chips that are 0:10:26.000 --> 0:10:29.000 made for PCs are pretty much worthless. I mean, we're 0:10:29.040 --> 0:10:32.040 we're we're puking them, and and chips that are made 0:10:32.080 --> 0:10:36.440 for you know, cars are impossible to find. Still, Yeah, 0:10:36.440 --> 0:10:42.920 you're absolutely right, UM anything PC server gaining related. UM. 0:10:43.000 --> 0:10:46.160 Not only is their abundant supply at this point, but 0:10:46.679 --> 0:10:48.880 UM a lot of that demand was pulled forward during 0:10:48.880 --> 0:10:51.559 the pandemic UM and now there's just not as much 0:10:51.559 --> 0:10:53.719 of a need for it. So yeah, the opportunities are 0:10:53.760 --> 0:10:56.120 not in the PC, they're more in the industrial, the 0:10:56.160 --> 0:11:00.600 automotive as well as the equipment sector. UM names like 0:11:00.679 --> 0:11:04.680 k l A, ten Core, LAMB Research. Their long term 0:11:04.679 --> 0:11:08.360 sales are driven by generational changes, improvements and yields and 0:11:08.400 --> 0:11:10.880 new factories, and we know that those are going to 0:11:10.960 --> 0:11:15.800 continue regardless of the current supply of certain chips. So Robert, 0:11:15.800 --> 0:11:19.120 you're based in Akron. Right, ye, all right, how the 0:11:19.200 --> 0:11:22.600 great state of Ohio, by the way, but it's perilously 0:11:22.679 --> 0:11:27.800 close to Michigan. I will say, how's the economy in Akron, Ohio. 0:11:27.920 --> 0:11:30.800 When I think Akron, Ohio, I think good Middle America, 0:11:30.920 --> 0:11:35.800 good folks, tires, tires, of course, tires. Absolutely, How are 0:11:35.800 --> 0:11:39.720 things in Acron? You know, our economy is is quite 0:11:39.760 --> 0:11:42.720 stable at this point. Um. I think we're still seeing 0:11:43.080 --> 0:11:47.960 some of the by products of the pandemic. Restaurants are 0:11:47.960 --> 0:11:50.480 a little bit understaffed. We're seeing a lot more automated 0:11:50.520 --> 0:11:55.680 teller machines at restaurants, grocery stores. Um. But I think, 0:11:55.840 --> 0:11:59.840 like much of America, the employment situation has been really 0:12:00.000 --> 0:12:04.600 strong nationwide, and as a result, there's still labor shortages. 0:12:05.120 --> 0:12:09.560 It's some basic service industries and um, you know, it 0:12:09.600 --> 0:12:11.839 kind of gives you the feel that the economy is 0:12:11.880 --> 0:12:15.040 doing fine. All right, Well, you're Ohio State Buckeys. I 0:12:15.080 --> 0:12:17.439 think you're gonna be upset this weekend, and Happy Valley 0:12:17.480 --> 0:12:20.800 by Penn State. That's the call right here. I'm taking 0:12:20.800 --> 0:12:23.120 the points whatever. We'll see, all right, Robert, thank you 0:12:23.120 --> 0:12:25.520 so much. We appreciate that. Robert Stimpson, ce Io and 0:12:25.559 --> 0:12:30.000 portfolio manager at Oak Associates, located in the great city 0:12:30.040 --> 0:12:37.440 of Akron, Ohio, entire capital. Uh good stuff right there, Matt. 0:12:37.720 --> 0:12:39.760 Go when you're sitting in front of your Bloomberg terminal 0:12:40.040 --> 0:12:43.320 and then you click on vessels and it shows you 0:12:43.360 --> 0:12:46.440 where all the global ships are all around the world 0:12:46.760 --> 0:12:49.400 import in transit, and so we've been focusing on that 0:12:49.480 --> 0:12:51.680 really since the beginning of the pandemic, and focusing on 0:12:51.760 --> 0:12:53.640 some of the big U s ports like Los Angeles 0:12:53.640 --> 0:12:55.800 Long Beach, things like that, Savannah on the East Coast, 0:12:55.840 --> 0:12:59.120 and of course Bayo, New Jersey, which is the center 0:12:59.160 --> 0:13:01.800 of global trade. In my opinion, Um, you look at 0:13:01.800 --> 0:13:04.360 it now, boy, there's not that many ships off port 0:13:04.400 --> 0:13:07.160 of Things really gotten a lot better just looking at this. 0:13:07.600 --> 0:13:09.520 So we want to bring in Jeans Saroka. He's the 0:13:09.559 --> 0:13:12.040 CEO of the Port of Los Angeles. He joins us 0:13:12.040 --> 0:13:14.719 here in our Bloomberg Interactive Broker Studio, who has been 0:13:14.720 --> 0:13:17.520 really good making himself available during this pandemic to give 0:13:17.600 --> 0:13:19.600 us a sense of kind of what's going on in 0:13:19.720 --> 0:13:21.600 the Port of Los Angeles, because that really is one 0:13:21.640 --> 0:13:25.240 of the the main global ports in the world. Gene, 0:13:25.280 --> 0:13:27.360 thanks so much for joining us here. How are things 0:13:27.400 --> 0:13:28.959 in l A. How are things at the port? If 0:13:28.960 --> 0:13:30.800 I bring my big ship up? How long do I 0:13:30.800 --> 0:13:33.600 have to wait? Paul Matt Good to be with you guys. 0:13:33.640 --> 0:13:37.480 Today the situation is much better. The marine terminals are fluid. 0:13:37.720 --> 0:13:40.679 The backlog of vessels has gone from a hundred and 0:13:40.800 --> 0:13:45.240 nine in January down to single digits as of today. 0:13:45.520 --> 0:13:48.480 And those ships that are waiting outside the port stay 0:13:48.480 --> 0:13:50.480 there no longer than twenty four hours before they come 0:13:50.520 --> 0:13:52.840 in for work. So that's good news. I mean that 0:13:53.160 --> 0:13:58.920 sounds like the supply chain issues are simmering down. Um 0:13:59.080 --> 0:14:01.000 is it? Can you sound the all clear? Are you 0:14:01.040 --> 0:14:04.760 still concerned? Oh, Matt? The supply chain always needs improvement. 0:14:04.800 --> 0:14:07.080 You've got to hone your craft every day. But by 0:14:07.120 --> 0:14:10.640 and large it's moving in a good fluid form right now. 0:14:10.920 --> 0:14:13.360 The dwell times on cargo moving out by truck, which 0:14:13.400 --> 0:14:16.240 represents two thirds of all of our business, is down 0:14:16.240 --> 0:14:18.880 to pre pandemic times, so the cargo velocity is good. 0:14:18.920 --> 0:14:21.280 Still working on the rail piece, but seeing great improvement 0:14:21.400 --> 0:14:23.480 over the last eight weeks. And I know the less 0:14:23.800 --> 0:14:25.360 you know the last couple of times you've been here. 0:14:25.360 --> 0:14:27.720 It's it's not just getting the ships into port. It's like, 0:14:27.800 --> 0:14:31.160 as you mentioned, getting them unloaded, getting the cargo out 0:14:31.400 --> 0:14:34.560 very either rail or truck, and then finding cargo space, 0:14:34.640 --> 0:14:37.920 warehouse space. So talk to about that supply chain as 0:14:37.960 --> 0:14:39.640 you go out from the port and kind of get 0:14:39.640 --> 0:14:42.680 into the you know, kind of the storage areas and 0:14:42.720 --> 0:14:45.720 so on. Right working our way backwards, there's two billion 0:14:45.880 --> 0:14:49.040 square foot of warehousing available from the shores of the 0:14:49.080 --> 0:14:52.880 Pacific to the desert region, Paul, right now, about zero 0:14:52.920 --> 0:14:55.840 point two percent vacancy. In more normal times as we 0:14:55.880 --> 0:14:58.840 head into that peak season, you'd see about five percent vacancy, 0:14:58.920 --> 0:15:02.720 but those warehouses still filled to the gills. You've seen 0:15:02.760 --> 0:15:05.520 people switch from ordering just in case to just in time, 0:15:05.560 --> 0:15:08.360 taking whatever cargo they could from the manufacturer in Asia 0:15:08.560 --> 0:15:11.720 bringing it here to help solve that equation around this 0:15:11.840 --> 0:15:14.880 insatiable appetite of the American consumer. So they so they're 0:15:14.920 --> 0:15:18.480 stocking up there just in case they need it, because 0:15:18.480 --> 0:15:22.160 they're worried that something may happen, uh like we saw 0:15:22.200 --> 0:15:24.080 in the pandemic, and they won't be able to get it. 0:15:24.080 --> 0:15:27.120 It's not that they can't sell the stuff, and it's 0:15:27.120 --> 0:15:30.360 not that they can't truck the stuff. That's exactly right. 0:15:30.600 --> 0:15:32.320 And Matt, it's been the build up over the last 0:15:32.320 --> 0:15:34.040 two and a half to three years of all this 0:15:34.120 --> 0:15:37.640 inventory coming in because we've been buying so much. Now 0:15:37.680 --> 0:15:40.640 at this point, you head into a holiday season where 0:15:40.640 --> 0:15:43.000 the good segments are a little bit more narrow to 0:15:43.080 --> 0:15:45.480 think about what you want for to give the kids 0:15:45.480 --> 0:15:49.480 and friends for the holidays, winter, where, etcetera. You've got 0:15:49.480 --> 0:15:52.480 to get this inventory out of the warehouses and into 0:15:52.520 --> 0:15:54.520 the economy, and it may look different. It could be 0:15:54.560 --> 0:15:58.120 patio furniture or flat screen TVs other products. So you've 0:15:58.160 --> 0:16:00.760 got two distinct areas to look out. What's gonna sell 0:16:00.800 --> 0:16:02.880 now and what you have to push into the market. 0:16:02.920 --> 0:16:05.040 The heck, a lot of the stuff that you guys 0:16:05.360 --> 0:16:07.920 bring in is coming out of China. And we're focused 0:16:07.960 --> 0:16:11.040 so much on China today because we've got data, economic 0:16:11.120 --> 0:16:14.720 data out of the second biggest economy in the world. 0:16:14.880 --> 0:16:19.560 We also got um some political news. She is cemented 0:16:20.000 --> 0:16:23.680 his spot at the top for an unprecedented third term. 0:16:23.800 --> 0:16:26.360 Tell us about how important it is to China is 0:16:26.400 --> 0:16:29.000 to your business. Right, having lived in China for over 0:16:29.080 --> 0:16:31.640 four years and keeping up great relationships there on the 0:16:31.680 --> 0:16:34.000 business side, I can tell you flat out, for the 0:16:34.040 --> 0:16:37.120 Port of Los Angeles, it's about sixty percent of our 0:16:37.200 --> 0:16:40.920 trade volume, essentially the biggest book of business across the 0:16:40.960 --> 0:16:44.240 board and by far to the number two competitor. The 0:16:44.280 --> 0:16:46.760 other piece to this is it's been a rocky relationship 0:16:46.800 --> 0:16:48.880 on the trade and government side over the last four 0:16:48.920 --> 0:16:52.680 years with the introduction of tariffs retaliatory tariffs. Yet I 0:16:52.720 --> 0:16:55.720 don't even think the authors would have seen that yielded 0:16:55.880 --> 0:16:59.720 more imports, less exports, in the whitest gap in trade 0:17:00.000 --> 0:17:03.240 our country's history. Gene talked to us about labor. I 0:17:03.280 --> 0:17:06.040 know in past discussions it's it's hard to find folks 0:17:06.080 --> 0:17:08.960 to unload the ships to you know, load up the 0:17:09.040 --> 0:17:11.200 trains and trucks and things like that. How's the labor 0:17:11.240 --> 0:17:14.680 situation in l A Three segments of labor Paul. One 0:17:14.800 --> 0:17:17.440 is the dock worker group. That's about fifteen thousand folks 0:17:17.480 --> 0:17:19.399 that are moving the containers on and off ships to 0:17:19.480 --> 0:17:22.520 truck and rail. That's been solid. They've been at full employment, 0:17:22.560 --> 0:17:25.080 working on average about six days a week since the 0:17:25.080 --> 0:17:28.919 pandemic began. Second is the truck driving group, and with 0:17:29.000 --> 0:17:32.480 about twenty drivers registered to do business at the port, 0:17:32.840 --> 0:17:35.000 they're in good shape as well, but they have a 0:17:35.000 --> 0:17:38.359 mandate on hours of service federal regulations where they can 0:17:38.400 --> 0:17:40.920 work eleven hours a day and if they work consecutively 0:17:41.000 --> 0:17:43.880 have to take some time off. Matching up the volume 0:17:44.160 --> 0:17:47.040 with the workers availability on the trucking side is key. 0:17:47.160 --> 0:17:49.720 And then last is the warehouse workers. As I mentioned, 0:17:49.880 --> 0:17:52.639 those warehouses have been full and that's been a very 0:17:52.760 --> 0:17:58.119 challenging location to attract, recruit and retain talent. Got to 0:17:58.160 --> 0:18:01.679 have more focus on that, whether it's pay, benefits, training, 0:18:01.760 --> 0:18:05.159 or upward mobility. So but you know, the concern is 0:18:05.640 --> 0:18:08.680 the concern was getting the people you needed to fill 0:18:08.720 --> 0:18:11.520 those spots. It looks like you're doing quite well on 0:18:11.560 --> 0:18:16.240 that side. Then paying them um a price. Wage spiral 0:18:16.359 --> 0:18:18.119 is the big worry for the FED and for a 0:18:18.119 --> 0:18:21.200 lot of businesses. Do you see anything like that? Yeah, 0:18:21.200 --> 0:18:23.000 it's gonna be interesting because right now we're in the 0:18:23.040 --> 0:18:27.000 middle of the dock workers negotiation with their employers Association, 0:18:27.440 --> 0:18:29.320 and I'm sure that one of the hot topics in 0:18:29.359 --> 0:18:32.720 there is around compensation and benefits. How we look, the 0:18:32.760 --> 0:18:34.600 shipping industry has made a lot of money over the 0:18:34.680 --> 0:18:36.960 last three years. The workers have been out on those 0:18:37.000 --> 0:18:41.240 docks working essentially throughout this pandemic and in this surge 0:18:41.240 --> 0:18:43.919 of cargo, they deserve to be paid as well. Looking 0:18:43.920 --> 0:18:47.200 at these other workers that are not represented by organized 0:18:47.280 --> 0:18:50.000 labor is where you'll probably see a change in pace 0:18:50.040 --> 0:18:53.119 when it comes to pay and retention concepts. Ten million 0:18:53.200 --> 0:18:56.120 jobs open nationwide, we have not been immune to making 0:18:56.119 --> 0:18:58.440 sure we have the right people in the proper spots. 0:18:58.480 --> 0:19:01.960 So just about the competitive environment on the West Coast, 0:19:02.000 --> 0:19:04.480 who do you who does l A really compete against 0:19:04.560 --> 0:19:06.560 and how do you how do you compete against the 0:19:06.600 --> 0:19:10.560 other ports? Yeah, of the nation's goods move inbound through 0:19:10.560 --> 0:19:12.400 the ports of l A and Long Beach, about thirty 0:19:12.440 --> 0:19:16.000 percent of exports. I like to think we compete against everybody, 0:19:16.040 --> 0:19:19.720 but realistically, speaking from Asia to the interior of the country, 0:19:19.880 --> 0:19:23.480 it's the fastest, most efficient way. And with a twenty 0:19:23.520 --> 0:19:28.359 million population base in southern California, you've got a local 0:19:28.400 --> 0:19:31.600 purchasing power that's unlike anywhere else in the country. But 0:19:32.040 --> 0:19:34.639 the East and Gulf Coast ports have hired really great people, 0:19:34.760 --> 0:19:37.600 invested in aligned with policy makers. We've got to be 0:19:37.600 --> 0:19:41.080 on our game every day. I was looking at like, 0:19:41.280 --> 0:19:43.960 if I'm coming from Asia, naturally I go to the 0:19:44.040 --> 0:19:45.800 West coast, but there were some times when people were 0:19:45.840 --> 0:19:48.520 coming the shippers are coming through the canal and going 0:19:48.560 --> 0:19:51.720 to like Savannah for example, because it was backed up 0:19:51.720 --> 0:19:54.879 on the west coast. Has that been alleviated No, not really. 0:19:54.960 --> 0:19:58.520 What we saw where shippers earlier this summer begin their 0:19:58.600 --> 0:20:01.719 moved bringing cargo through of the Panama or Suez Canals 0:20:01.760 --> 0:20:04.120 to the eastern Gulf coast. And in fact, while we 0:20:04.119 --> 0:20:06.679 were moving record breaking numbers again this year for the 0:20:06.680 --> 0:20:09.399 first seven months and working those ships down from a 0:20:09.480 --> 0:20:13.440 hundred and nine to basically five, this morning you saw 0:20:13.480 --> 0:20:16.520 that cargo shift. Jean Stroka, uh here runs support of 0:20:16.920 --> 0:20:19.200 l a lots of boats going in and out. I 0:20:19.200 --> 0:20:21.479 think it's an important part of the economy. Speaking of 0:20:21.520 --> 0:20:23.760 export to the United States, speaking of hey, so Jeane, 0:20:23.760 --> 0:20:28.159 we've got this crazy strong dollar. Um when you think 0:20:28.160 --> 0:20:30.399 about currencies, how does that impact your business? How do 0:20:30.440 --> 0:20:33.680 you kind of factor that into kind of your planning. Yeah, 0:20:33.720 --> 0:20:38.640