WEBVTT - Markets, Diamonds, And Autonomous Driving 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 0:00:11.560 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.479 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.919 at Bloomberg dot com slash podcast. I want to get 0:00:22.120 --> 0:00:25.440 um straight back to markets here. The volatility has been 0:00:26.280 --> 0:00:30.040 uh uh really, I don't want to say unprecedented, but 0:00:30.080 --> 0:00:35.080 it's been unique certainly. And uh it's come through commodity, 0:00:35.240 --> 0:00:39.560 from commodities, through rates into stocks and Um, right now 0:00:39.600 --> 0:00:42.320 we're gonna talk to somebody who has to put his 0:00:42.360 --> 0:00:44.879 money where his mouth is. Phil Palumbo is the CEO 0:00:45.000 --> 0:00:48.360 of Palumbo Wealth Management. Um, how do you deal with 0:00:48.400 --> 0:00:51.080 this kind of situation? Phil? How do your clients deal 0:00:51.120 --> 0:00:54.360 with this kind of volatility? Well? First, I think you 0:00:54.400 --> 0:00:55.960 know you have to. You have to put it on 0:00:56.000 --> 0:00:58.240 the table that we could bank on the recession at 0:00:58.280 --> 0:00:59.920 the end of twenty two, if not the beginning of 0:01:01.440 --> 0:01:03.960 the way I look at it, the binary decision for 0:01:04.000 --> 0:01:05.920 the FET it's either he's going to let inflation run 0:01:06.040 --> 0:01:07.840 or he's gonna have to step in and raise interest 0:01:07.920 --> 0:01:10.440 rates aggressively, and he doesn't want to do both, which 0:01:10.440 --> 0:01:12.479 tells me that it's going to be a hard landing 0:01:12.560 --> 0:01:15.160 versus a soft landing, which is going to create increased 0:01:15.200 --> 0:01:18.720 volatility and eventually put us into a recession. And so 0:01:18.760 --> 0:01:21.320 how do you invest around that given that there are 0:01:21.400 --> 0:01:24.000 so many uncertainties. I mean, it feels like a fifty 0:01:24.000 --> 0:01:26.759 basis point hike next week has been all but ruled out, 0:01:27.040 --> 0:01:29.360 but where the FED goes from there is still a question. 0:01:29.400 --> 0:01:31.720 Like Matt was saying earlier, I think there's still six 0:01:31.800 --> 0:01:36.119 hikes are so priced into the next year, but again seven, 0:01:36.200 --> 0:01:39.920 So look at WORP, W I RP, going do I 0:01:39.920 --> 0:01:41.760 spend a lot of time on that page just staring 0:01:41.760 --> 0:01:43.800 at the numbers, not quite sure what to make of it. 0:01:43.880 --> 0:01:49.960 But each number represents a basis basis hike, basis point hike. Okay, okay, 0:01:50.040 --> 0:01:53.320 So point being there that you know there's still seven 0:01:53.440 --> 0:01:55.960 hikes priced in, but you have started to see some 0:01:56.040 --> 0:01:59.200 chatter that those bets could be paired back. How do 0:01:59.200 --> 0:02:02.880 you position your portfolio around that those bets will will 0:02:02.920 --> 0:02:04.280 be paired back? The fact is not gonna be able 0:02:04.280 --> 0:02:06.240 to raise rates seven times will be in a recessment 0:02:06.280 --> 0:02:08.400 before that happens. So in the meantime, I've been very 0:02:08.440 --> 0:02:09.960 vocal about to see when I was on your show, 0:02:10.000 --> 0:02:14.720 two evaluations were aggressively high, whether it's the high flying technology, 0:02:14.800 --> 0:02:17.239 the technology sector, or even just d SMP five DRED, 0:02:17.520 --> 0:02:20.760 So those were opportunities to reduce risk and rebound portfolios. 0:02:21.040 --> 0:02:23.440 So if you're a fully invested investor, and you've been 0:02:23.480 --> 0:02:25.799 over the past three plus years, you actually performed well 0:02:26.200 --> 0:02:28.919 Project two. If you didn't take risk off the table 0:02:29.240 --> 0:02:31.800 any type of big run ups in the markets like 0:02:31.880 --> 0:02:34.760 we saw yesterday, which will happen during these situations, you 0:02:34.800 --> 0:02:37.360 should reduce risk from your portfolio. That's number one. Number 0:02:37.360 --> 0:02:40.480 two you should be looking at heads equity strategies within 0:02:40.520 --> 0:02:43.600 your equity portfolio to protect you on the downside. Three 0:02:44.440 --> 0:02:46.440 is you should have gold and you should have commodities, 0:02:46.480 --> 0:02:48.520 which have been always very vocal with that. Within a 0:02:48.520 --> 0:02:53.320 balanced portfolio, gold and commodities when inflation accelerates does really well, 0:02:53.720 --> 0:02:56.640 and history going back to an eight proves that, and 0:02:56.720 --> 0:02:59.480 gold is a hedge against stocks going down. So if 0:02:59.480 --> 0:03:02.720 you're truly balance properly, which most people are not, this 0:03:02.840 --> 0:03:04.440 is the thing that you can be doing to help 0:03:04.480 --> 0:03:07.400 counter balance risk when we do enter in a recession 0:03:07.440 --> 0:03:08.800 at some point at the end of twenty two in 0:03:08.800 --> 0:03:11.160 the beginning of twenty three. So what you're saying, we're 0:03:11.320 --> 0:03:13.120 now an environment where you want to sell the rallies 0:03:13.200 --> 0:03:15.360 rather than buy the dip. Absolutely, you sell the rip 0:03:15.360 --> 0:03:17.200 and you don't buy the dip in this environment. However, 0:03:17.240 --> 0:03:18.920 the only thing I will say though, is that for 0:03:19.000 --> 0:03:20.800 new money, which have a lot of clients that sold 0:03:20.800 --> 0:03:23.520 businesses and have new capital, this is the best time 0:03:23.560 --> 0:03:25.720 to come into new money, right because you're getting the 0:03:25.760 --> 0:03:28.600 opportunity to be able to build out a portfolio when 0:03:28.560 --> 0:03:30.960 you've got valuations that are declining here, right, So this 0:03:31.000 --> 0:03:32.919 is gonna be a great opportunity to buy stocks of 0:03:33.000 --> 0:03:36.760 great businesses at a cheaper level. So for new money, 0:03:36.840 --> 0:03:39.360 it's excellent. You know. For fully invested investors, you know 0:03:39.400 --> 0:03:42.320 you're gonna be in for some pain again. Hopefully you 0:03:42.320 --> 0:03:45.680 did some rebalancing and you and you have a properly 0:03:45.680 --> 0:03:48.400 balanced portfolio to help you muscle through this. Can we 0:03:48.440 --> 0:03:50.360 talk about the yield curve a little bit, because I'm 0:03:50.400 --> 0:03:54.440 looking at the twos tens spread. It got below twenty 0:03:54.520 --> 0:03:57.920 basis points earlier this week, you know, a few banks 0:03:58.120 --> 0:03:59.960 or at least one bank has suggested it could invert 0:04:00.040 --> 0:04:02.320 it in the next week or so. How much of 0:04:02.320 --> 0:04:05.600 the signal are you taking from that tremendous amount of signals? 0:04:05.600 --> 0:04:08.000 So Green Spin always said, tell me where the tenure is, 0:04:08.000 --> 0:04:09.480 and I'll tell you where the where the where the 0:04:09.720 --> 0:04:11.520 where the economy is going. I say, tell me where 0:04:11.520 --> 0:04:13.080 the yield curve is. I'll tell you where the economy 0:04:13.160 --> 0:04:15.360 is going. The yield curve is flat, continue continues to 0:04:15.400 --> 0:04:17.880 flatten out around twenty three basis points. The two is 0:04:17.920 --> 0:04:20.719 intend that is going to invert. Somebody on TV just 0:04:20.720 --> 0:04:22.720 the other day just said if it inverts this time, 0:04:22.720 --> 0:04:24.159 it's different. We're not going to go with the recess. 0:04:24.160 --> 0:04:27.480 And I think that's ridiculous. The track records accurate. And 0:04:28.120 --> 0:04:29.839 then if you take that and you put on top 0:04:29.880 --> 0:04:33.279 of that forty year high inflation data a fetter reserve, 0:04:33.320 --> 0:04:35.760 that's gonna have to raise interest rates. We're coming off 0:04:35.880 --> 0:04:40.520 extreme valuations before. When you put it all together and 0:04:40.520 --> 0:04:43.000 connect the dots, I just don't see how you know, 0:04:43.040 --> 0:04:44.760 we don't like I keep on saying, you know, enter 0:04:44.800 --> 0:04:47.360 into recession. So yield curve. To answer your question, is 0:04:47.800 --> 0:04:51.480 one of the most important aspects of of of the 0:04:51.520 --> 0:04:53.960 of the data points in terms of where we're going 0:04:54.000 --> 0:04:57.160 with the economy. I just want to quickly get an 0:04:57.160 --> 0:04:59.720 example of a hedge equity strategy. We're not getting too 0:04:59.760 --> 0:05:03.200 deep in the weeds, the options weeds. What do you uh, 0:05:03.480 --> 0:05:06.080 what would you advise? So what we did as a 0:05:06.160 --> 0:05:09.560 firm is we spoke this, uh this this company called 0:05:09.600 --> 0:05:11.560 a Little Harbor. They have an e t F called 0:05:11.680 --> 0:05:15.600 MSTB Mary Sam Thomas Boy. Essentially, what they do they 0:05:15.680 --> 0:05:18.640 long d SMP five hundred and they use options vixed 0:05:18.640 --> 0:05:22.320 through VIX futures to to hedge out the equity side 0:05:22.320 --> 0:05:26.120 of it. So about of our equity portfolios in this 0:05:26.120 --> 0:05:30.520 particular exchange traded fund. We did this transaction September October 0:05:31.480 --> 0:05:34.200 one and we're still along at right now. So the 0:05:34.240 --> 0:05:35.960 thought is, if we do hit a recession, we go 0:05:35.960 --> 0:05:38.599 into a bear market, we hope that they'll do what 0:05:38.640 --> 0:05:41.960 they're supposed to do. Right, Um, that's number one. Typically 0:05:42.120 --> 0:05:45.520 we before that we had spy on that of our 0:05:45.560 --> 0:05:48.200 clients portfolios. So now we just moved that to the 0:05:48.279 --> 0:05:50.760 ms TWB to hedge out the the SNP five hundred, 0:05:51.000 --> 0:05:53.600 so that's what we're using. We don't use any types 0:05:53.600 --> 0:05:56.080 of collars on our equity strategies or we don't buy puts, 0:05:56.120 --> 0:05:58.680 you know, so we don't do any of the individual options. 0:05:58.720 --> 0:06:00.840 We depend on other managers to do that for us. 0:06:01.600 --> 0:06:03.800 And just quickly, I mean, how is that strategy been 0:06:03.839 --> 0:06:05.200 playing out? If I look at the VIX right now, 0:06:05.279 --> 0:06:09.400 it's spent most of March above thirty with this particular 0:06:09.440 --> 0:06:12.159 strategy of the sup full is greater than ten toll percent, 0:06:12.680 --> 0:06:16.440 then the VIX the the options or uh, the risk 0:06:16.480 --> 0:06:18.760 on it down so we will actually kick in. So 0:06:18.760 --> 0:06:21.599 it's pretty much been fun with the SPV SPF just 0:06:21.640 --> 0:06:23.760 been doing from pete to trough so far. So it 0:06:23.839 --> 0:06:25.720 really hasn't kicked in yet. It's only if you get 0:06:25.720 --> 0:06:29.560 a major waterfall decline where really will click, will click 0:06:29.640 --> 0:06:33.400 and protected that piece of the portfolio. Alright, Phil, great 0:06:33.400 --> 0:06:36.120 to get some time with you, very interesting stuff. Thanks 0:06:36.120 --> 0:06:39.360 so much for joining us. Phil Palumbo there who runs 0:06:39.560 --> 0:06:43.440 his own fun Palumbo Wealth Management and UM it used 0:06:43.440 --> 0:06:46.440 to be at UBS, spent years a decade at UBS, 0:06:46.520 --> 0:06:48.680 and before that was at Morgan Stanley. So it's the 0:06:48.720 --> 0:06:51.040 guy who knows what he's talking about. Very interesting m 0:06:51.640 --> 0:07:01.160 edging strategy. Let's talk about cars. I'm ready, Really we're 0:07:01.200 --> 0:07:04.240 going to talk about light oar Angus Pacola joins us, 0:07:04.240 --> 0:07:09.000 co founder and CEO of Auster And if you didn't know, 0:07:09.080 --> 0:07:12.080 Austa is one of the hottest light our companies out 0:07:12.120 --> 0:07:16.920 there right now, went public vias back in one and Angus, 0:07:16.920 --> 0:07:19.920 it's great to have you on the program. Um. I'm 0:07:19.960 --> 0:07:23.920 still trying to get my head around sort of light 0:07:24.000 --> 0:07:29.200 our versus Tesla um test because Tesla says they don't 0:07:29.240 --> 0:07:32.640 want to use lighter but they have had partnerships and 0:07:32.720 --> 0:07:38.200 light our companies. Why why is light are important? Right now? Sure? 0:07:38.320 --> 0:07:40.160 And before I answer that, I just want to give 0:07:40.160 --> 0:07:43.600 a brief kind of perspective on Auster and what we're 0:07:43.600 --> 0:07:46.239 doing in light are that stands apart and really Outster 0:07:46.400 --> 0:07:50.280 is the digital light our company building digital chips that 0:07:50.400 --> 0:07:54.680 transform a legacy analog technology into the digital future. And 0:07:55.440 --> 0:07:59.120 and on the performance of benefits and affordability of digital technology. 0:07:59.160 --> 0:08:04.160 We diversus right, diversified across markets. So what what Tesla 0:08:05.120 --> 0:08:08.640 is lacking? And I think that what what Lighter brings 0:08:08.640 --> 0:08:12.640 to the table is an absolute trust in data quality 0:08:13.200 --> 0:08:17.880 UM that that is not there with cameras. So what 0:08:18.000 --> 0:08:20.120 you see from Tesla is they've gotten in some hot 0:08:20.120 --> 0:08:24.160 water because occasionally, and it is occasionally, the cars get 0:08:24.160 --> 0:08:28.880 confused with camera technology because cameras, because cars are basically 0:08:29.000 --> 0:08:33.160 because Tesla UM has neural networks to try and decipher 0:08:33.200 --> 0:08:35.400 what they see in video, right like humans, but they're 0:08:35.400 --> 0:08:38.400 not as good exactly right, Yeah, So a camera needs 0:08:38.400 --> 0:08:42.240 a neural network in order to interpret its environment UM, 0:08:42.360 --> 0:08:46.000 and that sometimes gets confused, and so it sometimes crashes. 0:08:46.480 --> 0:08:49.520 And that's really that's a really challenging UM situation to 0:08:49.559 --> 0:08:51.040 be in if you want to go to full autonomy, 0:08:51.040 --> 0:08:53.040 where people aren't paying attention and they get to fall 0:08:53.080 --> 0:08:55.640 suits in their cars. Lighter, on the hand, other hand, 0:08:56.080 --> 0:08:59.400 directly measures the information that you care about with no 0:08:59.520 --> 0:09:03.040 additional post processing, and it does it so reliably that 0:09:03.160 --> 0:09:07.240 Lighter is already used in safety critical environments across the 0:09:07.240 --> 0:09:11.760 world like industrial settings UM and and it's trusted to 0:09:11.800 --> 0:09:14.079 save people's lives day in and day out and has 0:09:14.160 --> 0:09:17.360 for about thirty years in the industrial setting. So Lighter 0:09:17.400 --> 0:09:20.480 doesn't get confused and you can truly trust the data 0:09:20.559 --> 0:09:23.640 with your life, and so Tesla aside. I mean, what 0:09:23.679 --> 0:09:28.920 does adoption of light ar look like? Yeah, and that's 0:09:29.040 --> 0:09:33.160 that's really um So lidar is the third and kind 0:09:33.160 --> 0:09:37.760 of last critical sensing technology after cameras and ratear. Sensors 0:09:38.240 --> 0:09:41.200 and light are because you can trust your life on it, 0:09:41.480 --> 0:09:44.840 and because it's so effective at understanding the true and 0:09:45.000 --> 0:09:50.440 rich three D environment around anything any machine, whether it's rolling, flying, driving, 0:09:50.520 --> 0:09:54.040 or monitoring those moving objects. It's the perfect sensor for 0:09:54.160 --> 0:09:58.000 bringing our entire world into the autonomy age. And I 0:09:58.000 --> 0:10:01.280 think of it as it's like finally realizing the future 0:10:01.360 --> 0:10:04.920 that the Jetsons the Jetsons TV show laid out. So 0:10:05.120 --> 0:10:09.520 flying cars drive and robots that delivery packages, um, safer 0:10:09.600 --> 0:10:13.960 cross crosswalks with lower congestion at intersections, and yes, self 0:10:14.040 --> 0:10:18.160 driving cars are all made possible because of lighter technology 0:10:18.200 --> 0:10:22.160 in combination with the autonomy technology stack that rides above it. 0:10:22.640 --> 0:10:26.400 And so it's a really fantastic, safer, cleaner, less congested, 0:10:26.840 --> 0:10:30.280 more efficient, higher quality of life future that we're building 0:10:30.640 --> 0:10:35.239 through a combination of lighter sensors and and affordable autonomy technology. 0:10:35.440 --> 0:10:38.680 It does make sense. I mean from what you're saying, 0:10:38.720 --> 0:10:42.040 it makes sense to me to combine it with video 0:10:42.240 --> 0:10:44.960 and you don't need I guess, radar UM and and 0:10:45.000 --> 0:10:48.000 the neural network. But what Tesla says is that you 0:10:48.080 --> 0:10:51.000 have to pre map the environment with a light ar 0:10:51.160 --> 0:10:54.080 and then create a high dep map and then insert 0:10:54.120 --> 0:10:56.440 the lanes. And if you have to do that, it 0:10:56.440 --> 0:11:00.559 seems like a lot of computing power. Yeah, I think 0:11:00.559 --> 0:11:03.840 that's just kind of that that's that's the legacy way 0:11:03.880 --> 0:11:06.880 of thinking about it. But most companies using LIDER today 0:11:07.120 --> 0:11:10.560 don't pre map, and they do similar things. It's a 0:11:10.600 --> 0:11:15.840 similar software stack and algorithmic stack to camera technology, but 0:11:16.000 --> 0:11:19.520 they don't have to rely as heavily on machine learning UM, 0:11:19.559 --> 0:11:22.400 which is great. Machine learning is great at distinguishing between 0:11:22.400 --> 0:11:25.840 a hot dog and your cat in an image nine 0:11:25.840 --> 0:11:29.360 percent of the time, but it's not great at doing 0:11:29.600 --> 0:11:31.720 a hundred percent of the time and an auto and 0:11:31.760 --> 0:11:34.520 then you know, when when human life is involved, you 0:11:34.520 --> 0:11:35.920 want to be able to do it a d percent 0:11:35.920 --> 0:11:39.040 of the time. Solider allows you to remove some of 0:11:39.080 --> 0:11:42.040 the fancy machine learning, trust the data with your life, 0:11:42.240 --> 0:11:44.160 just kind of the raw data coming out of the sensor, 0:11:44.400 --> 0:11:46.960 but also apply some of the learnings that we've gotten 0:11:47.040 --> 0:11:49.560 from the camera world. So you know, we don't have 0:11:49.640 --> 0:11:52.360 to pre map anymore. That's not what companies are doing today. 0:11:52.480 --> 0:11:54.720 It is what companies thought about doing five years ago, 0:11:54.800 --> 0:11:56.679 but the industry has moved on from that, and I 0:11:56.720 --> 0:11:59.760 think TUSSA was just kind of right in not premapping, 0:12:00.559 --> 0:12:03.480 And so I solicited questions from our Blueberg news Print 0:12:03.480 --> 0:12:06.680 team about what to ask you. And Andrew Grant said 0:12:06.679 --> 0:12:09.600 that the most important question for lighter companies right now 0:12:09.679 --> 0:12:11.920 is whether A d S or a v S are 0:12:11.960 --> 0:12:15.080 the most important market. A d S a d a 0:12:15.120 --> 0:12:19.959 S being advanced driver assistant systems, a VS being autonomous vehicles. 0:12:20.080 --> 0:12:22.640 Which of those markets do you see is more important 0:12:22.679 --> 0:12:26.280 for your company? Yeah, well, well this is one of 0:12:26.320 --> 0:12:29.120 the places that OUST stands apart. So we've built this 0:12:29.400 --> 0:12:33.240 more affordable, more performance digital lighter technology, putting lighter onto 0:12:33.320 --> 0:12:36.719 literally one silicon chip, and that's allowed us to diversify 0:12:36.800 --> 0:12:41.760 across many different applications and automotive, industrial, smarter prastruction, robotics, 0:12:41.800 --> 0:12:45.520 and so we actually aren't trying to bet on whether 0:12:45.600 --> 0:12:48.080 a v S or eight ASS is the more important 0:12:48.080 --> 0:12:50.640 market because we're playing in both. Our products are literally 0:12:50.640 --> 0:12:52.960 good enough to play in both, just like digital cameras 0:12:53.200 --> 0:12:55.959 are able to play in the eight ASS market and 0:12:56.000 --> 0:12:59.240 the AD market. Digital cameras go on telephone poles and 0:12:59.280 --> 0:13:02.000 they also go on the drones that are flying on bars. Um. 0:13:02.080 --> 0:13:04.520 So digital technology is so flexible you can address all 0:13:04.559 --> 0:13:06.960 these markets. And I actually am a big believer in 0:13:07.040 --> 0:13:10.240 both ADAS and a v s now eight AS I 0:13:10.240 --> 0:13:14.400 think is the sure bet with huge volumes, and it's 0:13:14.480 --> 0:13:17.240 it's more clear on how eight AS is moving from 0:13:17.520 --> 0:13:21.480 L two plus hands on driver aware systems to L 0:13:21.640 --> 0:13:25.160 three driver you know, hands free, eyes free systems, and 0:13:25.200 --> 0:13:28.040 they're lighter plays a huge part and allowing a person 0:13:28.080 --> 0:13:30.120 in the car to take notes on the way to 0:13:30.120 --> 0:13:33.120 work and be hands free, eyes free. Um. But lighter 0:13:33.240 --> 0:13:37.560 is also the critical sensing technology on autonomous vehicles and 0:13:37.600 --> 0:13:42.320 in many cases it's the only sensor on an autonomous vehicle. UM. 0:13:42.440 --> 0:13:44.079 And so that's going to happen. But I think it's 0:13:44.080 --> 0:13:48.120 a little less because apes are such a high bar 0:13:48.200 --> 0:13:51.160 in terms of technology and reliability. Are Our veteran war 0:13:51.240 --> 0:13:54.240 reporter Greg Jarrett Angus points out that light ar is 0:13:54.280 --> 0:13:59.400 extremely helpful in military applications. Do you, um, do you 0:13:59.440 --> 0:14:03.360 see a big market there as well? Yeah, that's absolutely right. 0:14:03.400 --> 0:14:08.040 So um, lighter can be incredibly useful in situations like convoying. 0:14:08.360 --> 0:14:11.520 You know, there's a huge amount the number of support 0:14:11.600 --> 0:14:15.199 vehicles in the military is far greater than the number 0:14:15.240 --> 0:14:19.240 of active kind of UH fighting vehicles. And that's where 0:14:19.280 --> 0:14:22.720 most casualties happen in wars, and the supply chain, and 0:14:22.800 --> 0:14:26.360 so there's immense opportunities to automate a supply chain. Um, 0:14:26.480 --> 0:14:29.160 these vehicles should be automated. It's fuel trucks, it's it's 0:14:29.200 --> 0:14:32.760 food trucks with all kinds of supply vehicles that historically 0:14:32.760 --> 0:14:35.480 have been hit by their their I D s and 0:14:35.520 --> 0:14:38.440 things like that, and you really would like those vehicles 0:14:38.440 --> 0:14:41.640 just be autonomous. It's so fascinating. I wish we had 0:14:41.680 --> 0:14:44.400 more time, Angus. Hopefully we can get you back. Thanks 0:14:44.440 --> 0:14:47.120 so much for joining us and Angus. Pacola there the 0:14:47.200 --> 0:14:53.520 CEO of ALSTA. Let's get over now to Dave Harden. 0:14:53.680 --> 0:14:58.680 He is the founder and president of Summit Global Investors. Dave, 0:14:59.080 --> 0:15:01.720 what do you take from the kind of alatility that 0:15:01.760 --> 0:15:04.880 we've seen, you know, wash through commodities because of this 0:15:04.960 --> 0:15:09.000 war um in two rates and and kind of you know, 0:15:09.840 --> 0:15:11.760 on this side of the Atlantic, it hasn't rocked the 0:15:11.760 --> 0:15:13.920 equity markets as much as it has on the other side, 0:15:13.960 --> 0:15:17.520 but we still were, uh, you know, down three percent 0:15:17.720 --> 0:15:21.080 on Monday, up three percent yesterday, now we're down again today. 0:15:21.320 --> 0:15:24.600 How do you deal with this? Well, you know, this 0:15:24.720 --> 0:15:28.320 volatility has made everybody understand that risk is important, right, 0:15:28.400 --> 0:15:31.680 So people people need to understand that risk management is 0:15:31.800 --> 0:15:34.960 essential to having better portfolios. And the better they understand 0:15:35.040 --> 0:15:38.360 what's in their portfolio, the better of the portfolio performers 0:15:38.360 --> 0:15:41.400 they hope. So having some exposure right now the commodities 0:15:41.480 --> 0:15:44.320 or word overweight energy, I think those things are very 0:15:44.360 --> 0:15:46.960 prudent in the portfolio. And maybe some people might even 0:15:46.960 --> 0:15:49.560 say energies. The more defense you heard, the you know, 0:15:49.640 --> 0:15:51.240 the expert come on and say, hey, I think it's 0:15:51.280 --> 0:15:53.520 gonna be here and settle into this range. And there's 0:15:53.520 --> 0:15:55.640 a lot of truth to that. So it's really hard 0:15:55.640 --> 0:15:57.600 to go to somebody like Venezuela. It's really hard to 0:15:57.640 --> 0:15:59.640 go to somebody out there that you know, we haven't 0:15:59.680 --> 0:16:02.480 really been friends with with Iran and switch hands from 0:16:02.480 --> 0:16:05.680 one dictator to another dictator. So from our standpoint, I 0:16:05.720 --> 0:16:08.840 think you have to have some commodity exposure, energy exposure 0:16:08.840 --> 0:16:12.479 in your portfolio, and our models, from a quantitative perspective, 0:16:12.480 --> 0:16:15.240 from a risk perspective, all tell us and a fundamental 0:16:15.240 --> 0:16:18.720 outlook that having some of that exposure is important, but 0:16:18.800 --> 0:16:21.600 it's gonna be volatile. So I think in a volatile 0:16:21.640 --> 0:16:24.160 market you have to look for things to protect the 0:16:24.240 --> 0:16:26.920 down and still get some of the upside. You know, 0:16:27.040 --> 0:16:30.760 mathematically people forget that if you only went down half 0:16:30.760 --> 0:16:32.960 of what the market went down every day, you would 0:16:32.960 --> 0:16:36.280 only need to go up six in the up market 0:16:36.360 --> 0:16:39.280 to outperform. So it's a lot better to try to 0:16:39.360 --> 0:16:43.200 protect in volatility than it is trying to get that upside. 0:16:43.280 --> 0:16:44.800 You know, when the market's up to I want to 0:16:44.800 --> 0:16:47.120 be up two point two. That's a lot harder to 0:16:47.200 --> 0:16:49.920 do and you get crushed on the down. So my 0:16:49.960 --> 0:16:52.800 advice and volatility is start to look at risk and 0:16:52.840 --> 0:16:55.080 start to manage risk. And you can find that in 0:16:55.160 --> 0:16:57.520 some defensives right now. You can find that in health 0:16:57.560 --> 0:17:00.080 care right now. So that's some of the things that 0:17:00.120 --> 0:17:02.560 we're doing for our clients. And if we are six 0:17:02.600 --> 0:17:05.280 short days away from the FED meeting, and the narrative 0:17:05.320 --> 0:17:07.239 for a few months now has been you know, the 0:17:07.240 --> 0:17:09.080 FED put is dead. You're not going to see the 0:17:09.119 --> 0:17:12.880 central bank come in and prop up asset prices. But 0:17:13.320 --> 0:17:17.200 I mean the SMP five hundred flirting with correction territory. 0:17:17.480 --> 0:17:23.560 At what point do you think that makes FED policymakers blink? Well, um, 0:17:23.640 --> 0:17:28.480 they blinked when we when Russia invaded Ukraine. Remember that Thursday. 0:17:28.520 --> 0:17:30.359 They came out and there was so much FED speak. 0:17:30.800 --> 0:17:34.360 They were almost scared. And I'm putting in my language here. 0:17:34.400 --> 0:17:36.600 I don't want to put words in their mouth, but 0:17:36.760 --> 0:17:38.720 they were almost scared to see a negative three and 0:17:38.720 --> 0:17:41.280 a half percent down day. They had to come out 0:17:41.320 --> 0:17:43.720 and talk about that they might not raise interest rates 0:17:43.720 --> 0:17:45.639 as much and they might not do this. And we 0:17:45.680 --> 0:17:48.040 saw that swing negative three and a half percent to 0:17:48.119 --> 0:17:52.040 positive three and a half percent. Why only because the 0:17:52.040 --> 0:17:55.760 FED right, So we've already seen them blink. They're they're 0:17:55.800 --> 0:17:59.119 absolutely worried about this market. And I'm not saying they 0:17:59.119 --> 0:18:04.120 shouldn't be, but the BED making a mistake, a policy mistake, 0:18:04.240 --> 0:18:07.600 has definitely increased because of what's going on in the 0:18:07.600 --> 0:18:11.560 world today. Their their vision is not as clear. It's cloudy. 0:18:11.600 --> 0:18:15.720 If you will inflation, I mean seven point nine. Really, 0:18:15.800 --> 0:18:17.600 what does it matter if it's seven point nine or 0:18:17.640 --> 0:18:22.440 eight or set the point is seven inflation, that's the point. 0:18:22.480 --> 0:18:25.920 So they are backed into a corner um and this 0:18:26.000 --> 0:18:30.640 creates a lot of problems and it increases the larger 0:18:30.680 --> 0:18:34.400 downside risks. Again another reason why for our clients as 0:18:34.400 --> 0:18:38.800 a whole, you need to look at managing risks. We 0:18:38.800 --> 0:18:43.040 we do see the market is priced in a lot 0:18:43.440 --> 0:18:46.520 of of of hikes and I guess we'll talk with 0:18:46.560 --> 0:18:48.480 you about that a little bit later, David. Great having 0:18:48.520 --> 0:18:51.080 you on the program, Dave Harden talking to us about 0:18:51.200 --> 0:18:58.080 what we're seeing. Now, now let's get over to Amos Shaw, 0:18:58.200 --> 0:19:01.400 the president of A. L. T R. Creed Diamonds, and 0:19:02.320 --> 0:19:07.560 you know, we've seen such incredible swings in commodity prices, Amish, 0:19:07.640 --> 0:19:10.720 I wonder if the diamond industry has been hit the 0:19:10.800 --> 0:19:14.960 same way as um the moves we've seen in oil 0:19:15.280 --> 0:19:20.120 or in gold, et cetera. Even though, of course the 0:19:20.200 --> 0:19:23.600 kind of diamonds that that you're creating are different than 0:19:23.640 --> 0:19:28.760 the kind that are mined. So the overall diamond industry 0:19:28.920 --> 0:19:32.560 in the inflationary situation in the last six months has 0:19:32.600 --> 0:19:36.879 already seen almost like a price increase. However, with the 0:19:37.000 --> 0:19:42.800 current situation of conflict with the Russia being almost of 0:19:42.880 --> 0:19:47.560 the diamonds in circulation in about twy of new production 0:19:47.640 --> 0:19:50.320 that comes in the system is everywhere from those areas. 0:19:51.320 --> 0:19:55.520 Um there is no direct sanctions on diamonds, the sanctioned 0:19:55.600 --> 0:19:59.080 around the bank as well as the CEO. However, it's 0:19:59.119 --> 0:20:02.320 the consumers sentiment that's going to make the most difference. 0:20:03.000 --> 0:20:06.879 So with the consumers starting to talk about it, I 0:20:06.880 --> 0:20:11.960 think we're expecting a price search in a tightening of supply. Wow, 0:20:12.119 --> 0:20:15.000 I mean we all. I feel like it's been well broadcast. 0:20:15.080 --> 0:20:17.480 How big of a supplier of you know, energy of 0:20:17.560 --> 0:20:21.160 natural gas Russia is haven't heard as much about diamonds. 0:20:21.160 --> 0:20:24.120 And it's interesting that this is happening at the same 0:20:24.160 --> 0:20:27.200 time as you know, we're heading into a so called 0:20:27.280 --> 0:20:30.120 wedding boom. I don't know. If I look at my mailbox, 0:20:30.119 --> 0:20:33.160 I've gotten so many safe the dates for the coming year, 0:20:33.840 --> 0:20:38.320 how because they were put off for two years exactly exactly. So, 0:20:38.480 --> 0:20:40.639 I mean the fact that you do have you know 0:20:40.920 --> 0:20:44.720 already you're seeing these price increases given the demand obviously 0:20:44.840 --> 0:20:48.200 is growing as well. I mean, how how much higher 0:20:48.240 --> 0:20:52.399 do you think the prices could naturally go? Here? I 0:20:52.440 --> 0:20:57.800 think the consumer sentiment could rise this anything between ten. However, 0:20:58.359 --> 0:21:03.280 UM geopolitically shift. Consumer today is starting to look at 0:21:03.280 --> 0:21:06.919 the options because today they have a choice. They have 0:21:06.960 --> 0:21:10.800 a choice of created diamonds, labgown diamonds that are grown 0:21:10.920 --> 0:21:14.960 above the earth, that are not grown in these contract territories, 0:21:15.440 --> 0:21:19.160 cutting polished in other countries, and jewelry is made either 0:21:19.200 --> 0:21:22.800 in US or in Asia. So they have a choice 0:21:23.400 --> 0:21:25.440 with US going you know, we're expecting two point five 0:21:25.520 --> 0:21:29.600 million million millennials to get married this to get engaged 0:21:29.640 --> 0:21:34.720 this year, So there is a choice. Um, the price 0:21:34.840 --> 0:21:37.040 is going to be subjected to how long this conflict last? 0:21:37.400 --> 0:21:39.920 Where are your Where do you do all of your work? 0:21:40.119 --> 0:21:44.280 Where do you create your diamonds and cut and polish them? 0:21:44.359 --> 0:21:48.280 Is is Russia? Part of the supply chain? No are 0:21:48.520 --> 0:21:52.560 growing is actually in India. Cutting and polishing is in India. 0:21:53.280 --> 0:21:55.479