Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Well, my personal China
Speaker 1: Bellweather stock is Ali baba b A b A stocks
Speaker 1: down sevent today, fifty two week low. I blame the
Speaker 1: political situation in China, and I blame all emerging markets
Speaker 1: strategists as well. And then that includes Damien Sassaur, who
Speaker 1: is our chief emerging market strategist. Is the Do you
Speaker 1: cover the UK as well as chief market I know
Speaker 1: I don't cover the UK, but people have been asking
Speaker 1: you that. Actually it is the second largest economy in
Speaker 1: the world, uninvestable debt, demographics and declining productivity. That is China.
Speaker 1: And for me, look, it comes down to reserves. In
Speaker 1: an environment like this, it's who has liquidity buffers to
Speaker 1: protect their currencies during times of distress. China's got three
Speaker 1: trillion reasons not to be worried. But the rapid deterioration
Speaker 1: of their currency base is not to be ignored. I mean,
Speaker 1: we're down seven and a half percent year today. They've
Speaker 1: lost about two hundred and fifty billion dollars of soft
Speaker 1: currency reserves this year. That's quite a bit of money,
Speaker 1: but it pales in comparison to what we're seeing across
Speaker 1: the whole of em I mean, reserves are down eight
Speaker 1: point one percent across you know the major eighteen markets.
Speaker 1: And uh, I mean you've got countries like Malaysia, Indonesia,
Speaker 1: the Philippines that are just feeling the pain and their
Speaker 1: currencies are trading pretty much at all time loads. So
Speaker 1: you know, where do we go from here? To anyone's guess?
Speaker 1: But not uninvestable, right, I mean, how can you even
Speaker 1: say that about such a huge economy given a longer
Speaker 1: time horizon. Clearly, even if you have concerns now, there's
Speaker 1: got to be some opportunity down the road. Is the
Speaker 1: worst case scenario for an Ali Baba investor, for example,
Speaker 1: And Ali Baba investor was doing one buying one thing,
Speaker 1: but it's buying the growth of the middle class in China.
Speaker 1: That's it. Forget the Internet, forgett e commerce. That was
Speaker 1: the play. Now. Offsetting that was this broad thing called
Speaker 1: China risk. This is China risk. The government can come
Speaker 1: in and shut you down tomorrow, yeah, and they can
Speaker 1: block out the truth. I mean, look, I think all
Speaker 1: of us, inherently, fundamentally, we just want they could do that.
Speaker 1: Last year, that's it, and next year that that hasn't
Speaker 1: changed at all just because she has stacked some governing board.
Speaker 1: He was still all powerful before this, yes he was,
Speaker 1: but I mean the question was was he going to
Speaker 1: use that power and how is he going to use
Speaker 1: that power. I mean, look, I think a lot of
Speaker 1: people are getting up in arms this morning about how
Speaker 1: he stacked the deck, not so much with she loyalists,
Speaker 1: but really with people who are sympathetic to the COVID
Speaker 1: zero policy. Right, So that was the big thing. I
Speaker 1: think most analysts, not myself, thought that that policy might
Speaker 1: very well change before the end of the year, if
Speaker 1: not in the beginning of next year. And now that
Speaker 1: seems to be out the door. So I think that's
Speaker 1: why Chinese equities, why A shares, why in the Hong
Speaker 1: Kong you know what? Why everything is kind of down today. Look,
Speaker 1: it's anyone's guests, but I mean, for me. I mean
Speaker 1: it's it's about liquidity, and if you don't have the
Speaker 1: ability to protect your currency and protect currency stability in
Speaker 1: times of distress, you know, everything else goes out the door,
Speaker 1: including the equity valuations for many of those thoughts like
Speaker 1: matuan ten cents in Ali Baba. But is that what
Speaker 1: we're watching right now? I mean, um, we've been looking
Speaker 1: at six ninety to seven for seven thirty now almost yeah, no,
Speaker 1: for so long. You know, it's not huge swings. This
Speaker 1: isn't like the pound or the euro. This isn't like
Speaker 1: crazy talk. It's managed currency exactly. It's a managed currency.
Speaker 1: But look, it is a currency that is so heavily
Speaker 1: involved in global trade, and you know we now I mean, look,
Speaker 1: if you just look at export flows, I mean they
Speaker 1: came out overnight. I mean exports are down significantly. I'm
Speaker 1: talking double digits. China in the US, China and the
Speaker 1: Eurozone down seven percent, China in the UK down eleven.
Speaker 1: So you know, global trade is going in one direction
Speaker 1: and that's down. And you know that means that, you know,
Speaker 1: if there's not enough demand for China's exports abroad, it's
Speaker 1: just gonna weigh that much more heavily on its domestic economy.
Speaker 1: And look, if you just look an unemployment, it's ticked
Speaker 1: up to five point five percent overnight. You know, retail
Speaker 1: sales are down again. No one is lending in China
Speaker 1: because why lend to households or two small companies if
Speaker 1: to your point, you know, the government could come in
Speaker 1: and take it from you tomorrow. So what does this
Speaker 1: mean then, for not if Paul wants to buy Ali
Speaker 1: Baba or not, but what does this mean for if
Speaker 1: Tesla wants to sell more cars in China? That's a
Speaker 1: great question. What does this mean if JP Morgan and
Speaker 1: Goldman Sachs want to do more business in China. I
Speaker 1: know Matt loves the auto sector, so let's go there.
Speaker 1: You know, it has slashed their prices by five percent
Speaker 1: overnight right in China, so the currency weekends. So they're
Speaker 1: they're because they're starting a they're starting a price war
Speaker 1: for electronic vehicles in China, and that and that is
Speaker 1: what and so that they've laid the gauntlet down. So
Speaker 1: that's a very different story. But we must remember how
Speaker 1: auto sales drives not just China, I mean the Eastern
Speaker 1: European block is completely hungry pole in Czech Republic dominated
Speaker 1: by auto sales. And so if we now get into
Speaker 1: a price where are you know, every you know, part
Speaker 1: they're manufacturing is worth that much less, it's gonna be really,
Speaker 1: really painful for a lot of these countries operating out
Speaker 1: along the periphery and emerging markets. And it's not just
Speaker 1: little startups like Tesla right, entrenched incumbent automakers like Folks Swag.
Speaker 1: They're sending their CEO with the German Chancellor to Beijing
Speaker 1: next month to probably plead on bended knee for more access.
Speaker 1: Yeah yeah, now, I mean look, I mean, look, it's
Speaker 1: very difficult to gauge where we are. What I can
Speaker 1: tell you is as even the economies that got out
Speaker 1: in front of the tightening cycle, the Brazils, the Chile's,
Speaker 1: the Czech Republics, everyone, you know, you know, you're finally
Speaker 1: starting to see them pumping the brakes on tightening. But
Speaker 1: how much more can they pump the brakes really with
Speaker 1: inflation running hot the way it is, I don't know,
Speaker 1: but activity I mean, right now, technically, Brazil, Chili, some
Speaker 1: of these economies are technically in recession probably as we speak,
Speaker 1: you know, and so for me, it's going to be
Speaker 1: very interesting to see some of the central bank meetings
Speaker 1: we're seeing this week. We've got Brazil on Wednesday, We've
Speaker 1: got Columbia towards the end of the week. We've got
Speaker 1: Hungry this week. Those are all very important economies to see.
Speaker 1: You know, where their central banks are at, where their
Speaker 1: heads are, whether or not they can stem the decline.
Speaker 1: But with reserves coming off, what that means is that
Speaker 1: it exposes investors to risk of capital outflows in mass.
Speaker 1: And that's where we are. The life and times of
Speaker 1: an emerging market strategy. It's very difficult to create a
Speaker 1: bush narrative policeto. Luckily you're doing well in the fantasy
Speaker 1: and a sports betting and sports betting expert on top
Speaker 1: of that. Boy, but that's a that's a combo right there.
Speaker 1: David Sassaur, he's our chief strategist for all things emerging
Speaker 1: markets at Bloomberg Intelligence. It's just a weird tape here.
Speaker 1: Got the SMP up two tenths of one percent, the
Speaker 1: deal up seven tenths and one percent, and then that's
Speaker 1: that down eight tenths of one percent. So well, I
Speaker 1: guess the tech stocks are going to get super hard
Speaker 1: because of the China concerns, right, and I think the
Speaker 1: broader market is up on um relief out of the UK.
Speaker 1: That Richie Sunak is going to be the Prime minister
Speaker 1: seems that seems like the reasonable choice. And all we're
Speaker 1: by the way, we're set up for almost six billion
Speaker 1: dollars uh so earnings from companies that have six trillion
Speaker 1: dollars sorry in market cap like massive from tomorrow. We
Speaker 1: got General Electric, we got General Motors, we got Coca Cola,
Speaker 1: I mean, just a ton then Tech at the end
Speaker 1: of the week, at the end of at the end
Speaker 1: of the day tomorrow, Microsoft and alphabetay is of course Google, Yeah,
Speaker 1: of course, okay, I'll be good stuff. So, you know, earnings,
Speaker 1: sharpen your pencil. Let's check in on somebody who does
Speaker 1: this kind of stock stuff for a living. Robert Stimpson,
Speaker 1: c I O and portfolio manager at Oak Associates. So, Robert,
Speaker 1: we've had a couple of three days of some you know,
Speaker 1: upward moves into market, and what do you make of that?
Speaker 1: Is that are we still in this bear market? But
Speaker 1: we're just getting a little bit of a technical bumpers
Speaker 1: or anything else going on. Out there. Well, the market
Speaker 1: certainly has been you know, healthier or stronger than last
Speaker 1: week or so, but UM, you know, we do that
Speaker 1: we do view that as uh kind of acovery from
Speaker 1: a very over sold position. Um, the market was very
Speaker 1: washed out after uh sustained weakness since August, and uh,
Speaker 1: you know, it's been more of a of a balance
Speaker 1: in our opinion, given we're in a window between you know,
Speaker 1: a bottom in September and a earning season in November.
Speaker 1: So but do you think that was the bottom in
Speaker 1: September or um? You know, does it really depend on
Speaker 1: what happens this earning season. Um, if we have a
Speaker 1: big recession, is it likely to come next year? I
Speaker 1: guess these are the questions, These are the questions everyone's asking.
Speaker 1: But you know, in general, I tend to say that,
Speaker 1: you know, a recession doesn't matter for stocks. They simply
Speaker 1: do not like a slowing economy, and that is what
Speaker 1: we have. So whether it's a mid cycle slowdown or
Speaker 1: a soft landing or a recession, UH, stocks tend to
Speaker 1: struggle when the economy is slowing, and that's the environment
Speaker 1: we're in. So the last week may have been better,
Speaker 1: but we do think it's going to be well into
Speaker 1: next year before stocks get further signals that has sustained
Speaker 1: advance is really possible, and bottoming is a process, and
Speaker 1: we're in the middle of that process. So what do
Speaker 1: we do here? I mean, do I just take my
Speaker 1: money and put it into your bond and get my
Speaker 1: four point five percent? Is that what I do until
Speaker 1: I get a better sense of where this economy is going? Well,
Speaker 1: that depends if you're a long term investor a short
Speaker 1: term investor. Um it Oak Associates We are long term investors,
Speaker 1: and the market is certainly presenting a lot of long
Speaker 1: term opportunities here. Um. Given the decline the market has
Speaker 1: experienced the you know, year to date, valuations in many
Speaker 1: sectors are very attractive. And if you're able to take
Speaker 1: a long term view and not worried about this quarter
Speaker 1: or what the the January number is gonna look like, UM,
Speaker 1: you should do very well. Where what sectors do you like? Well,
Speaker 1: you know, one group you like is the semiconductors. They've
Speaker 1: been under a lot of pressure on concerns over a
Speaker 1: new sort of chip war with China. UM, but valuations
Speaker 1: have come down a lot from a year ago, year
Speaker 1: and a half ago when the industry was showing uh,
Speaker 1: you know, double ordering and concerns over supply chain issues UM,
Speaker 1: and we were a little more cautious on the group
Speaker 1: back then, but valuations have contracted, so now we're more
Speaker 1: constructive on it. UMU as a group, though, I've been
Speaker 1: really confused because it seems like UM chips that are
Speaker 1: made for PCs are pretty much worthless. I mean, we're
Speaker 1: we're we're puking them, and and chips that are made
Speaker 1: for you know, cars are impossible to find. Still, Yeah,
Speaker 1: you're absolutely right, UM anything PC server gaining related. UM.
Speaker 1: Not only is their abundant supply at this point, but
Speaker 1: UM a lot of that demand was pulled forward during
Speaker 1: the pandemic UM and now there's just not as much
Speaker 1: of a need for it. So yeah, the opportunities are
Speaker 1: not in the PC, they're more in the industrial, the
Speaker 1: automotive as well as the equipment sector. UM names like
Speaker 1: k l A, ten Core, LAMB Research. Their long term
Speaker 1: sales are driven by generational changes, improvements and yields and
Speaker 1: new factories, and we know that those are going to
Speaker 1: continue regardless of the current supply of certain chips. So Robert,
Speaker 1: you're based in Akron. Right, ye, all right, how the
Speaker 1: great state of Ohio, by the way, but it's perilously
Speaker 1: close to Michigan. I will say, how's the economy in Akron, Ohio.
Speaker 1: When I think Akron, Ohio, I think good Middle America,
Speaker 1: good folks, tires, tires, of course, tires. Absolutely, How are
Speaker 1: things in Acron? You know, our economy is is quite
Speaker 1: stable at this point. Um. I think we're still seeing
Speaker 1: some of the by products of the pandemic. Restaurants are
Speaker 1: a little bit understaffed. We're seeing a lot more automated
Speaker 1: teller machines at restaurants, grocery stores. Um. But I think,
Speaker 1: like much of America, the employment situation has been really
Speaker 1: strong nationwide, and as a result, there's still labor shortages.
Speaker 1: It's some basic service industries and um, you know, it
Speaker 1: kind of gives you the feel that the economy is
Speaker 1: doing fine. All right, Well, you're Ohio State Buckeys. I
Speaker 1: think you're gonna be upset this weekend, and Happy Valley
Speaker 1: by Penn State. That's the call right here. I'm taking
Speaker 1: the points whatever. We'll see, all right, Robert, thank you
Speaker 1: so much. We appreciate that. Robert Stimpson, ce Io and
Speaker 1: portfolio manager at Oak Associates, located in the great city
Speaker 1: of Akron, Ohio, entire capital. Uh good stuff right there, Matt.
Speaker 1: Go when you're sitting in front of your Bloomberg terminal
Speaker 1: and then you click on vessels and it shows you
Speaker 1: where all the global ships are all around the world
Speaker 1: import in transit, and so we've been focusing on that
Speaker 1: really since the beginning of the pandemic, and focusing on
Speaker 1: some of the big U s ports like Los Angeles
Speaker 1: Long Beach, things like that, Savannah on the East Coast,
Speaker 1: and of course Bayo, New Jersey, which is the center
Speaker 1: of global trade. In my opinion, Um, you look at
Speaker 1: it now, boy, there's not that many ships off port
Speaker 1: of Things really gotten a lot better just looking at this.
Speaker 1: So we want to bring in Jeans Saroka. He's the
Speaker 1: CEO of the Port of Los Angeles. He joins us
Speaker 1: here in our Bloomberg Interactive Broker Studio, who has been
Speaker 1: really good making himself available during this pandemic to give
Speaker 1: us a sense of kind of what's going on in
Speaker 1: the Port of Los Angeles, because that really is one
Speaker 1: of the the main global ports in the world. Gene,
Speaker 1: thanks so much for joining us here. How are things
Speaker 1: in l A. How are things at the port? If
Speaker 1: I bring my big ship up? How long do I
Speaker 1: have to wait? Paul Matt Good to be with you guys.
Speaker 1: Today the situation is much better. The marine terminals are fluid.
Speaker 1: The backlog of vessels has gone from a hundred and
Speaker 1: nine in January down to single digits as of today.
Speaker 1: And those ships that are waiting outside the port stay
Speaker 1: there no longer than twenty four hours before they come
Speaker 1: in for work. So that's good news. I mean that
Speaker 1: sounds like the supply chain issues are simmering down. Um
Speaker 1: is it? Can you sound the all clear? Are you
Speaker 1: still concerned? Oh, Matt? The supply chain always needs improvement.
Speaker 1: You've got to hone your craft every day. But by
Speaker 1: and large it's moving in a good fluid form right now.
Speaker 1: The dwell times on cargo moving out by truck, which
Speaker 1: represents two thirds of all of our business, is down
Speaker 1: to pre pandemic times, so the cargo velocity is good.
Speaker 1: Still working on the rail piece, but seeing great improvement
Speaker 1: over the last eight weeks. And I know the less
Speaker 1: you know the last couple of times you've been here.
Speaker 1: It's it's not just getting the ships into port. It's like,
Speaker 1: as you mentioned, getting them unloaded, getting the cargo out
Speaker 1: very either rail or truck, and then finding cargo space,
Speaker 1: warehouse space. So talk to about that supply chain as
Speaker 1: you go out from the port and kind of get
Speaker 1: into the you know, kind of the storage areas and
Speaker 1: so on. Right working our way backwards, there's two billion
Speaker 1: square foot of warehousing available from the shores of the
Speaker 1: Pacific to the desert region, Paul, right now, about zero
Speaker 1: point two percent vacancy. In more normal times as we
Speaker 1: head into that peak season, you'd see about five percent vacancy,
Speaker 1: but those warehouses still filled to the gills. You've seen
Speaker 1: people switch from ordering just in case to just in time,
Speaker 1: taking whatever cargo they could from the manufacturer in Asia
Speaker 1: bringing it here to help solve that equation around this
Speaker 1: insatiable appetite of the American consumer. So they so they're
Speaker 1: stocking up there just in case they need it, because
Speaker 1: they're worried that something may happen, uh like we saw
Speaker 1: in the pandemic, and they won't be able to get it.
Speaker 1: It's not that they can't sell the stuff, and it's
Speaker 1: not that they can't truck the stuff. That's exactly right.
Speaker 1: And Matt, it's been the build up over the last
Speaker 1: two and a half to three years of all this
Speaker 1: inventory coming in because we've been buying so much. Now
Speaker 1: at this point, you head into a holiday season where
Speaker 1: the good segments are a little bit more narrow to
Speaker 1: think about what you want for to give the kids
Speaker 1: and friends for the holidays, winter, where, etcetera. You've got
Speaker 1: to get this inventory out of the warehouses and into
Speaker 1: the economy, and it may look different. It could be
Speaker 1: patio furniture or flat screen TVs other products. So you've
Speaker 1: got two distinct areas to look out. What's gonna sell
Speaker 1: now and what you have to push into the market.
Speaker 1: The heck, a lot of the stuff that you guys
Speaker 1: bring in is coming out of China. And we're focused
Speaker 1: so much on China today because we've got data, economic
Speaker 1: data out of the second biggest economy in the world.
Speaker 1: We also got um some political news. She is cemented
Speaker 1: his spot at the top for an unprecedented third term.
Speaker 1: Tell us about how important it is to China is
Speaker 1: to your business. Right, having lived in China for over
Speaker 1: four years and keeping up great relationships there on the
Speaker 1: business side, I can tell you flat out, for the
Speaker 1: Port of Los Angeles, it's about sixty percent of our
Speaker 1: trade volume, essentially the biggest book of business across the
Speaker 1: board and by far to the number two competitor. The
Speaker 1: other piece to this is it's been a rocky relationship
Speaker 1: on the trade and government side over the last four
Speaker 1: years with the introduction of tariffs retaliatory tariffs. Yet I
Speaker 1: don't even think the authors would have seen that yielded
Speaker 1: more imports, less exports, in the whitest gap in trade
Speaker 1: our country's history. Gene talked to us about labor. I
Speaker 1: know in past discussions it's it's hard to find folks
Speaker 1: to unload the ships to you know, load up the
Speaker 1: trains and trucks and things like that. How's the labor
Speaker 1: situation in l A Three segments of labor Paul. One
Speaker 1: is the dock worker group. That's about fifteen thousand folks
Speaker 1: that are moving the containers on and off ships to
Speaker 1: truck and rail. That's been solid. They've been at full employment,
Speaker 1: working on average about six days a week since the
Speaker 1: pandemic began. Second is the truck driving group, and with
Speaker 1: about twenty drivers registered to do business at the port,
Speaker 1: they're in good shape as well, but they have a
Speaker 1: mandate on hours of service federal regulations where they can
Speaker 1: work eleven hours a day and if they work consecutively
Speaker 1: have to take some time off. Matching up the volume
Speaker 1: with the workers availability on the trucking side is key.
Speaker 1: And then last is the warehouse workers. As I mentioned,
Speaker 1: those warehouses have been full and that's been a very
Speaker 1: challenging location to attract, recruit and retain talent. Got to
Speaker 1: have more focus on that, whether it's pay, benefits, training,
Speaker 1: or upward mobility. So but you know, the concern is
Speaker 1: the concern was getting the people you needed to fill
Speaker 1: those spots. It looks like you're doing quite well on
Speaker 1: that side. Then paying them um a price. Wage spiral
Speaker 1: is the big worry for the FED and for a
Speaker 1: lot of businesses. Do you see anything like that? Yeah,
Speaker 1: it's gonna be interesting because right now we're in the
Speaker 1: middle of the dock workers negotiation with their employers Association,
Speaker 1: and I'm sure that one of the hot topics in
Speaker 1: there is around compensation and benefits. How we look, the
Speaker 1: shipping industry has made a lot of money over the
Speaker 1: last three years. The workers have been out on those
Speaker 1: docks working essentially throughout this pandemic and in this surge
Speaker 1: of cargo, they deserve to be paid as well. Looking
Speaker 1: at these other workers that are not represented by organized
Speaker 1: labor is where you'll probably see a change in pace
Speaker 1: when it comes to pay and retention concepts. Ten million
Speaker 1: jobs open nationwide, we have not been immune to making
Speaker 1: sure we have the right people in the proper spots.
Speaker 1: So just about the competitive environment on the West Coast,
Speaker 1: who do you who does l A really compete against
Speaker 1: and how do you how do you compete against the
Speaker 1: other ports? Yeah, of the nation's goods move inbound through
Speaker 1: the ports of l A and Long Beach, about thirty
Speaker 1: percent of exports. I like to think we compete against everybody,
Speaker 1: but realistically, speaking from Asia to the interior of the country,
Speaker 1: it's the fastest, most efficient way. And with a twenty
Speaker 1: million population base in southern California, you've got a local
Speaker 1: purchasing power that's unlike anywhere else in the country. But
Speaker 1: the East and Gulf Coast ports have hired really great people,
Speaker 1: invested in aligned with policy makers. We've got to be
Speaker 1: on our game every day. I was looking at like,
Speaker 1: if I'm coming from Asia, naturally I go to the
Speaker 1: West coast, but there were some times when people were
Speaker 1: coming the shippers are coming through the canal and going
Speaker 1: to like Savannah for example, because it was backed up
Speaker 1: on the west coast. Has that been alleviated No, not really.
Speaker 1: What we saw where shippers earlier this summer begin their
Speaker 1: moved bringing cargo through of the Panama or Suez Canals
Speaker 1: to the eastern Gulf coast. And in fact, while we
Speaker 1: were moving record breaking numbers again this year for the
Speaker 1: first seven months and working those ships down from a
Speaker 1: hundred and nine to basically five, this morning you saw
Speaker 1: that cargo shift. Jean Stroka, uh here runs support of
Speaker 1: l a lots of boats going in and out. I
Speaker 1: think it's an important part of the economy. Speaking of
Speaker 1: export to the United States, speaking of hey, so Jeane,
Speaker 1: we've got this crazy strong dollar. Um when you think
Speaker 1: about currencies, how does that impact your business? How do
Speaker 1: you kind of factor that into kind of your planning. Yeah,
Speaker 1: it makes American imports that much cheaper, but it puts
Speaker 1: a damper on American exports, and that's what we witnessed.
Speaker 1: We're down thirty seven and the last forty nine months
Speaker 1: on exports in part by trade policy of the previous
Speaker 1: administration and in part by the strength of the US dollar.
Speaker 1: We're competing against soybeans from Brazil that have a better
Speaker 1: exchange rate, textile peace goods coming out of Southeast Asian
Speaker 1: nations that go into the finished garment, again competing against
Speaker 1: that strong U. S dollar. So as we try to
Speaker 1: ramp up every available avenue to pick up U S
Speaker 1: agriculture and manufactured goods, this will continue to be a headwind.
Speaker 1: It's got to make people also even more interested in
Speaker 1: sourcing goods out of Asia than they already were. I mean,
Speaker 1: labor there has gotten more expensive, but as the dollar
Speaker 1: um continues to get stronger, that evens things out, right,
Speaker 1: So I just imagine, um, anyone making mass producing goods
Speaker 1: is gonna at least get parts out of Asia. That's right.
Speaker 1: And it's interesting to Matt because the parts and components
Speaker 1: that we import for American factories are about as much
Speaker 1: volume as the American retail goods that we talk about
Speaker 1: so much today. So that's a really key input to
Speaker 1: our economy, as well as that volume through the port
Speaker 1: you know, gene. When the pandemic began and we had
Speaker 1: shortages of various items, most notably the microchips. There's this
Speaker 1: big discussion and big move to onshore a lot of stuff,
Speaker 1: and I'm sorry, I just don't see it personally. I
Speaker 1: maybe just because I grew up in the world where
Speaker 1: globalization became the norm. When you talk to your shipping clients,
Speaker 1: how did they think about that on shoring aspect, Is
Speaker 1: that really something that's going to be material or do
Speaker 1: you still think it's gonna be a global trade environment.
Speaker 1: It's a real topic of discussion with most who we
Speaker 1: talked to. In fact, I just had j Timmins, the
Speaker 1: CEO of the North American Manufacturers Group, on our press
Speaker 1: conference last month. But it's nuanced, it's layered. There's gotta
Speaker 1: be tax policy that supports it. There's gotta be a
Speaker 1: plan for jobs. With ten million jobs open nationwide, we
Speaker 1: don't have enough workers to go to all these different
Speaker 1: segments in the American economy. And Matt, as you said,
Speaker 1: the ability to buy the products at a decent price
Speaker 1: and get them in here to the factories looks a
Speaker 1: little bit different than it did even months ago. Yeah,
Speaker 1: what is your take on what we're gonna in terms
Speaker 1: of the U S economy in the next months and quarters.
Speaker 1: I mean, there's been so much talk about a recession.
Speaker 1: We're almost, you know, talking our way into almost talking
Speaker 1: our way into it, except for the fact that it's
Speaker 1: it almost looks like it's not gonna happen, right, So
Speaker 1: there's some people saying this could be the recession that
Speaker 1: never transpired. We did see two quarters of contraction, but
Speaker 1: no one's labeled that a recession yet, and it just
Speaker 1: seems like we could skirt it when you look at
Speaker 1: how well we're doing an earning season. Yeah, there was
Speaker 1: a lot of talk months ago about a soft landing,
Speaker 1: a hard landing, a little bit of turbulence of bumpy landing.
Speaker 1: It's an equation that we haven't seen before. Again, so
Speaker 1: many jobs open, lowest unemployment since the nineteen sixties. The
Speaker 1: consumer seems resilient. Flat numbers for July, August, and September,
Speaker 1: where many thought we would fall off a cliff, Producer prices,
Speaker 1: wholesale prices remaining elevated, and that means that we're still
Speaker 1: ordering from those folks to do the outputs. So it's
Speaker 1: going to be interesting. But again, looking at inflation at
Speaker 1: eight point two percent, that's what's on our minds. We
Speaker 1: feel it at the gas pump, we feel it at
Speaker 1: the grocery store. Can we get through this on the
Speaker 1: resilience of the consumer. I think we can. It's just
Speaker 1: in time. Inventory, is that passee? Because it seems like
Speaker 1: that's we all learned that in business school, But then boy,
Speaker 1: it can came up to bite us here during this pandemic. Yeah.
Speaker 1: I think it's interesting because as we passed through the
Speaker 1: pandemic and this import surge, no one wanted to be
Speaker 1: the paper company, so they began ordering everything they could,
Speaker 1: and the fight for factory floor space in Asia was
Speaker 1: just like it was throughout the supply chain and other segments.
Speaker 1: I'll take whatever order I can get, and if it's
Speaker 1: patio furniture or a flat screen TV, maybe it's that
Speaker 1: that Barbie doll, I'm gonna take what I can get,
Speaker 1: and therefore I'm gonna build up my inventory so I'm
Speaker 1: not going to run out of products for this insatiable
Speaker 1: appetite of the American consumer that's yielded a lot of
Speaker 1: inventory here in the US that now must be bled out,
Speaker 1: maybe through discounting as we go into this all important
Speaker 1: holiday season. All Right, good stuff as always. Jean Starroka,
Speaker 1: thank you so much for joining us live here in
Speaker 1: our Bloomberg Interactor Broker studio. We appreciate having these conversations
Speaker 1: during the past two and a half years on the
Speaker 1: global supply side, supply chain, that's been a big issue.
Speaker 1: Matt and I we can sider ourselves. I think quasi
Speaker 1: experts on the supply chain. I'm not necessarily an expert,
Speaker 1: but I'm willing to get my cd L and drive
Speaker 1: a truck in and out of the Port of Los Angeles. Yeah,
Speaker 1: that might be you know, if things continue, might calling.
Speaker 1: That might be your calling, Jean Stroka, the Port of
Speaker 1: Los Angeles, we appreciate it. I'm a big fan of
Speaker 1: the state of California. I mean, there's so much to do,
Speaker 1: There's so many different regions of the state. It's just awesome.
Speaker 1: I think I wish the financial capital of America would
Speaker 1: move there. You know, Yeah, that'd be cool. Well, there's
Speaker 1: a lot of dough out there, no question about it.
Speaker 1: If you're a technology person, is already there. California catching
Speaker 1: Germany as a number four economy. We've got Matt Winkler
Speaker 1: in studio. He's got a column out today talking about
Speaker 1: California breaking down the numbers. Matt Winkler, I don't know
Speaker 1: what he founded. Bloomberg News is that kind of and
Speaker 1: he's like an editor in chief emeritus. Okay, so that's big, right, Yeah, Okay,
Speaker 1: that's good, he hied me. He hired to al Right,
Speaker 1: despite that, we haven't in our studio, Matt, California. Say
Speaker 1: what you will, people, everybody's going to California, Texas and Florida.
Speaker 1: California is still the bomb, right, So Paul and Matt,
Speaker 1: great to be with you. If you look at UM California,
Speaker 1: or rather Corporate California, which is almost four hundred publicly
Speaker 1: traded companies, there really isn't an industry group or or
Speaker 1: category where California is number one. And if you add
Speaker 1: up the growth in sales and profit of these companies
Speaker 1: since when COVID disrupted the world economy, you would find
Speaker 1: that California has actually been on a tear, such a
Speaker 1: tear that um it is continued. If you like this
Speaker 1: trajectory where uh it it leap frog Brazil in France
Speaker 1: and two thousand fifteen, uh and supplanted, the UK is
Speaker 1: the number five economy in two thousand seventeen, and here
Speaker 1: we are two thousand twenty two. If you looked at
Speaker 1: the trend lines for California and Germany, which we do
Speaker 1: in the column, uh, they are the narrowest they ever
Speaker 1: been in by some estimates, because we're not gonna have
Speaker 1: twenty two figures until twenty three. California has already overtaken
Speaker 1: Germany as the fourth largest economy in the world. The
Speaker 1: interesting thing is that the narrative we hear, um, I'll say,
Speaker 1: in the media, which is meta because obviously we are
Speaker 1: the media. But the narrative we hear is that everyone's
Speaker 1: moving out right, that California is over taxing and over
Speaker 1: regulating all of these businesses, not giving startups a chance
Speaker 1: or even big companies like Tesla, and they'd rather be
Speaker 1: in Texas or Alabama or Florida. How un true is that?
Speaker 1: Why do we hear it so much? Well, because, um,
Speaker 1: you know, the easiest story to write is to go
Speaker 1: to the local gas station and ask people, are you happy?
Speaker 1: And the answer is gonna be no, And so we
Speaker 1: have a crisis and it's called a gas crisis now California. Um,
Speaker 1: the whole notion of you know, high taxes and regulation
Speaker 1: just gets blown away because, as I said, there isn't
Speaker 1: an industry in America where California companies are number one
Speaker 1: by an overwhelming margin um against companies in any other state.
Speaker 1: And that's been true, by the way, over ten years,
Speaker 1: five years, two years, one year. But it's especially been
Speaker 1: true during the period that we call the pandemic because
Speaker 1: so much innovation occurs in in California, and we got
Speaker 1: a lot of innovation during the stay at home economy.
Speaker 1: Many companies that didn't exist prior to two thousand and eighteen,
Speaker 1: we're flourishing by two thousand twenty one because California is
Speaker 1: number one in innovation. And by the way, the proof
Speaker 1: of that is that the biggest companies in the world,
Speaker 1: when they have to situate their research and development, people
Speaker 1: guess where they go, overwhelmingly to California. It's interesting that
Speaker 1: we were talking before we came on the air here
Speaker 1: about the value of the higher education system in California,
Speaker 1: the UKAU system, the cow State system. UM. I mean,
Speaker 1: it just seems like it's it's been such so strong,
Speaker 1: so supportive of the entire state's development, and there's really
Speaker 1: nothing like it that I can think of in any
Speaker 1: other state. No. I mean, look, Nelson Rockefeller tried to
Speaker 1: replicate what Governor Pat Brown, Jerry's father did in New
Speaker 1: York State with the state university system in New York.
Speaker 1: He tried to replicate that, and he did a lot
Speaker 1: to to make it quite row bust. However, you're right, Um,
Speaker 1: you can't find a higher education system UM as diverse
Speaker 1: as UM you know, uh robust as the one that
Speaker 1: exists in California. And just you know, if you look
Speaker 1: at the Bay Area alone, you've got the University of
Speaker 1: California Berkeley, You've got uh, the University of San Francisco,
Speaker 1: you have Stanford University, UM, and UM, it's hard to
Speaker 1: find anything like those gems. But actually they're all along
Speaker 1: the coast, they're inland, they're everywhere. Um. You know, the
Speaker 1: gems of higher education in California everywhere. And that's created
Speaker 1: an environment where you get some of the smartest people
Speaker 1: in the world and they lead in other industries or
Speaker 1: areas as well. Well. Yeah, I mean you mentioned bleak
Speaker 1: reference to Tesla. Um. You know, Tesla is now one
Speaker 1: of the its just maybe the largest manufacturing company in
Speaker 1: California because it has uh something like fifty employees. So
Speaker 1: Elon Musk may have gone to Texas for a tax
Speaker 1: free and regular regulation free lifestyle, but the people who
Speaker 1: work for him um have actually increased numerically in California
Speaker 1: since he made Texas headquarters. And that's not an isolated example.
Speaker 1: It's that companies still are there. Obviously. All right, good stuff,
Speaker 1: as always, Matt Winkler, Bloomberg News Editor in Chief Emeritus.
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 1: at Matt Miller. On fal Sweeney, I'm on Twitter at
Speaker 1: pt Sweeney. Before the podcast, you can always catch us
Speaker 1: worldwide at Bloomberg Radio