1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg markets podcast. I'm Paul Sweeney. Alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOS, market pros and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,520 Speaker 1: with essential market moving news on the Bloomberg markets podcast, 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,480 Speaker 1: at Bloomberg Dot com, slash podcast s and p five hundred. 7 00:00:22,520 --> 00:00:26,799 Speaker 1: You know, getting close to retesting those June lowe's. Certainly 8 00:00:26,840 --> 00:00:29,400 Speaker 1: feels very heavy out there in terms of the tape. 9 00:00:29,880 --> 00:00:32,320 Speaker 1: Looking across the asset classes, let's check in with the professional, 10 00:00:32,360 --> 00:00:35,680 Speaker 1: a j Odin's Senior Investment Strategist for bn Y Melon 11 00:00:35,800 --> 00:00:38,279 Speaker 1: Investors Solutions. A J thanks so much for joining us here. 12 00:00:38,920 --> 00:00:42,479 Speaker 1: What are you telling your clients at B N Y? Hey? 13 00:00:42,520 --> 00:00:44,760 Speaker 1: Thanks for having me. Um, right now we're telling clients 14 00:00:44,760 --> 00:00:47,720 Speaker 1: you know, we need to remain under underweight and equities 15 00:00:47,800 --> 00:00:50,400 Speaker 1: right now. I mean we we see the fat that 16 00:00:50,680 --> 00:00:53,479 Speaker 1: isn't going to capitulate or pivot anytime soon, and so 17 00:00:53,960 --> 00:00:57,160 Speaker 1: you know we're staying. You know, obviously we need to 18 00:00:57,200 --> 00:01:00,840 Speaker 1: stay in the markets, but remaining underweight equities, looking for, 19 00:01:01,040 --> 00:01:04,399 Speaker 1: you know, more defensive names, large cap stocks, with, you know, 20 00:01:04,520 --> 00:01:08,680 Speaker 1: income generating equities. Um, we're neutral from a fixing commerspective, 21 00:01:08,720 --> 00:01:11,200 Speaker 1: but we prefer short duration. However, as we start to 22 00:01:11,200 --> 00:01:13,840 Speaker 1: see the tenure continue to move up, we're gonna act 23 00:01:13,880 --> 00:01:15,720 Speaker 1: continue you start to add a little bit more duration 24 00:01:15,720 --> 00:01:19,200 Speaker 1: in the portfolio. Um, we're replacing that underweight in equities 25 00:01:19,240 --> 00:01:22,160 Speaker 1: with an overweight in real assets, just because we need 26 00:01:22,160 --> 00:01:25,080 Speaker 1: to be allocate to the sources of inflation. However, pulling 27 00:01:25,080 --> 00:01:27,679 Speaker 1: back on that commodity pieces. We're seeing energy come down today, 28 00:01:27,720 --> 00:01:29,880 Speaker 1: but that's that's kind of how we're we're positioning our 29 00:01:29,959 --> 00:01:32,520 Speaker 1: our clients a little bit more defensive in nature. Um, 30 00:01:32,560 --> 00:01:38,520 Speaker 1: looking at utilities, healthcare, Um, things names like that. What 31 00:01:38,600 --> 00:01:41,800 Speaker 1: does that mean in terms of the thought that we 32 00:01:41,920 --> 00:01:45,520 Speaker 1: have to have capitulation to really have a sustainable but market? 33 00:01:45,560 --> 00:01:47,760 Speaker 1: In the last hour pulseween I we're speaking to David 34 00:01:47,800 --> 00:01:50,120 Speaker 1: Sowerby and he said, you know, we can't really tell 35 00:01:50,160 --> 00:01:52,640 Speaker 1: what capitulation looks like. We don't know what the signals are. 36 00:01:53,360 --> 00:01:56,400 Speaker 1: Your take on that? What do you look for? You know, 37 00:01:56,480 --> 00:01:58,880 Speaker 1: I think we're gonna have to follow the feed here. We, 38 00:01:59,280 --> 00:02:01,240 Speaker 1: I feel like, the more kit for the last fourteen, 39 00:02:01,320 --> 00:02:04,360 Speaker 1: fifteen years has been under this this sort of understanding 40 00:02:04,400 --> 00:02:06,560 Speaker 1: that you know, the market's gonna or the Fens gonna come, 41 00:02:07,080 --> 00:02:09,200 Speaker 1: come through, you know, ride through on a white horse 42 00:02:09,240 --> 00:02:11,000 Speaker 1: and sort of Save the markets when there's a massive 43 00:02:11,040 --> 00:02:13,880 Speaker 1: dip like this Um. But you know, we have to 44 00:02:13,960 --> 00:02:17,200 Speaker 1: understand that we've benefited from the amount of quantitative easing 45 00:02:17,200 --> 00:02:19,480 Speaker 1: that's come in and that nine trillion dollar balance sheet, 46 00:02:19,639 --> 00:02:21,520 Speaker 1: as part of their mandate, is trying to run that 47 00:02:21,600 --> 00:02:24,560 Speaker 1: off as well. And so you know, when when inflation 48 00:02:24,639 --> 00:02:27,320 Speaker 1: is persistently highlight this, you know they're they're waiting for 49 00:02:27,639 --> 00:02:30,160 Speaker 1: to see a downward trend of that. You know, the 50 00:02:30,360 --> 00:02:34,359 Speaker 1: last month we're seeing inflation rise in parts of of 51 00:02:34,360 --> 00:02:38,440 Speaker 1: of the PC and C P I um, aside from energy, 52 00:02:38,520 --> 00:02:41,560 Speaker 1: and so you know, wage wage pressures continue to add 53 00:02:42,000 --> 00:02:45,639 Speaker 1: onto the inflation narrative until we start to see cooling 54 00:02:45,639 --> 00:02:47,799 Speaker 1: and the labor markets. Can Imagine, the FT's going to 55 00:02:47,880 --> 00:02:49,880 Speaker 1: continue to move forward, and that's I felt like they 56 00:02:49,880 --> 00:02:52,760 Speaker 1: gave a good projection of where what the potential terminal 57 00:02:52,840 --> 00:02:55,000 Speaker 1: rate could be. And so a market at some point 58 00:02:55,000 --> 00:02:58,320 Speaker 1: will stabilize as as we start to see yields sort 59 00:02:58,320 --> 00:03:00,320 Speaker 1: of normalized here. But obviously when you're seeing, you know, 60 00:03:00,760 --> 00:03:02,720 Speaker 1: the five basis points swing up in the two year 61 00:03:03,120 --> 00:03:05,200 Speaker 1: at four seventeen right now. You know we're going to 62 00:03:05,280 --> 00:03:07,720 Speaker 1: continue to see repricing and so we start to see 63 00:03:07,800 --> 00:03:11,440 Speaker 1: yields normalize a bit. So you're you're you're not alone 64 00:03:11,480 --> 00:03:13,760 Speaker 1: in saying that following the Fed is is the way 65 00:03:13,800 --> 00:03:15,799 Speaker 1: to go. But I have to talk about the precedent 66 00:03:15,840 --> 00:03:18,560 Speaker 1: that's set. The last time the federal reserved high rates 67 00:03:18,600 --> 00:03:22,880 Speaker 1: like this about seen through. At the same time, they 68 00:03:22,919 --> 00:03:25,800 Speaker 1: had this massive quantity of tightening operation, which was massive 69 00:03:25,840 --> 00:03:27,480 Speaker 1: at the time, not of the same skills it is 70 00:03:27,600 --> 00:03:31,040 Speaker 1: right now, and the equity market actually rallied over that 71 00:03:31,120 --> 00:03:35,040 Speaker 1: time frame. You had tech leading that charge despite rising rates. 72 00:03:35,360 --> 00:03:42,280 Speaker 1: Why is this time different? You know, that's a great question. Um, 73 00:03:42,400 --> 00:03:44,960 Speaker 1: what we would say here is that the reason why 74 00:03:45,000 --> 00:03:48,200 Speaker 1: this time is different, I think, has a lot to 75 00:03:48,280 --> 00:03:52,240 Speaker 1: do with inflation and it's it's really it's really been 76 00:03:52,280 --> 00:03:55,440 Speaker 1: this sort of differentiator in the market. Um and and 77 00:03:55,480 --> 00:03:59,800 Speaker 1: many of the different UH exogenists supply driven impacts that 78 00:03:59,840 --> 00:04:02,000 Speaker 1: we're dealing with here. You know, Russia Ukraine conflict is 79 00:04:02,040 --> 00:04:04,480 Speaker 1: still having spillower effects. There's still the risk for for 80 00:04:04,560 --> 00:04:07,960 Speaker 1: energy prices to go up Um and China, zero covid 81 00:04:08,000 --> 00:04:10,800 Speaker 1: policy having an impact on supply chains and any other 82 00:04:11,040 --> 00:04:14,000 Speaker 1: geopolitical tensions that it's sit out there between China and Taiwan, 83 00:04:14,280 --> 00:04:16,240 Speaker 1: but also the concept of reshowing and on showing and 84 00:04:16,279 --> 00:04:18,240 Speaker 1: how you know, even though the Fed has a two 85 00:04:18,240 --> 00:04:20,599 Speaker 1: percent target for inflation, that it's potential that we could 86 00:04:20,600 --> 00:04:23,720 Speaker 1: see persistently higher inflation for longer as jobs move back 87 00:04:23,760 --> 00:04:26,520 Speaker 1: to the US, and so I feel like inflation is 88 00:04:26,520 --> 00:04:29,039 Speaker 1: is that is that differentiator in the in the in 89 00:04:29,080 --> 00:04:31,840 Speaker 1: the environment that we're seeing today and the feds, and 90 00:04:31,880 --> 00:04:34,520 Speaker 1: not just the Fed but on a global perspective major 91 00:04:34,800 --> 00:04:39,320 Speaker 1: central banks, trying to maintain price stability. So H is 92 00:04:39,800 --> 00:04:44,400 Speaker 1: a recession part of the bing y melon kind of outlook, 93 00:04:44,440 --> 00:04:46,320 Speaker 1: I guess, for markets? Is that kind of what you're 94 00:04:46,320 --> 00:04:49,760 Speaker 1: factory into your models? We're definitely looking at it. Um 95 00:04:49,800 --> 00:04:52,040 Speaker 1: You know, I I wouldn't say you know it's it's 96 00:04:52,080 --> 00:04:55,280 Speaker 1: it's a high probability. I know we do have a 97 00:04:55,360 --> 00:04:58,120 Speaker 1: more recent UH snapshot. Our projection come out in a 98 00:04:58,120 --> 00:05:00,599 Speaker 1: few weeks, so I don't want to uh jump ahead 99 00:05:00,640 --> 00:05:04,360 Speaker 1: and give any sort of UH indications before that comes out, 100 00:05:04,360 --> 00:05:06,840 Speaker 1: but it is something that we're wearing on. I'd say Europe. 101 00:05:07,120 --> 00:05:08,920 Speaker 1: Europe in the UK, some of the news coming out 102 00:05:09,200 --> 00:05:12,400 Speaker 1: about potentially being in a recession is definitely something that 103 00:05:12,400 --> 00:05:14,760 Speaker 1: we're looking at as well. And and but you know, 104 00:05:14,839 --> 00:05:16,800 Speaker 1: the U s seems to be a relative out performer 105 00:05:17,200 --> 00:05:19,320 Speaker 1: Um when you're looking at many of the developed market countries. 106 00:05:19,360 --> 00:05:21,400 Speaker 1: But to that question that you had, yes, it is 107 00:05:21,440 --> 00:05:23,719 Speaker 1: something that we're looking at, but I think we believe 108 00:05:23,760 --> 00:05:26,360 Speaker 1: that the Fed can still pull this off and navigate 109 00:05:26,720 --> 00:05:29,520 Speaker 1: this this landing Um of the economy. Are you guys 110 00:05:29,560 --> 00:05:32,960 Speaker 1: holding more cash than you typically do? Uh, we're definitely 111 00:05:32,960 --> 00:05:36,320 Speaker 1: moving into Um. A little bit more cash, for sure. Um, 112 00:05:36,400 --> 00:05:39,040 Speaker 1: and even within some of our our tacticle asset allocation, 113 00:05:39,080 --> 00:05:42,279 Speaker 1: looking at Treasury floating rate securities. Um. But, like I 114 00:05:42,320 --> 00:05:45,760 Speaker 1: said before, as we start to see higher duration, I'm sorry, 115 00:05:45,800 --> 00:05:48,400 Speaker 1: higher yields from the ten year, we're gonna start to 116 00:05:48,400 --> 00:05:50,800 Speaker 1: add a little bit more duration to the portfolio. All right, 117 00:05:50,839 --> 00:05:52,800 Speaker 1: a J great stuff. Really appreciate you taking the time 118 00:05:52,920 --> 00:05:55,039 Speaker 1: checking in with us. Hey, J Odin, he's a senior 119 00:05:55,080 --> 00:05:59,000 Speaker 1: investment strategist at B and y melon's investors solutions. B 120 00:05:59,240 --> 00:06:06,760 Speaker 1: N Y, the Bank of the York Nicole dugal joins us. 121 00:06:06,800 --> 00:06:10,800 Speaker 1: He's a senior vice president general manager for automotive at Qualcom, 122 00:06:10,839 --> 00:06:13,320 Speaker 1: and your qualcom has probably got this monster booth there 123 00:06:13,360 --> 00:06:16,560 Speaker 1: which shows off all all its cool stuff. Nicole, talk 124 00:06:16,640 --> 00:06:20,240 Speaker 1: to us about where we are with just kind of 125 00:06:20,279 --> 00:06:24,320 Speaker 1: the computerization of the automobile. I mean, Matt Miller had 126 00:06:24,360 --> 00:06:28,440 Speaker 1: to wait for US Chevy silverado truck for months because 127 00:06:28,480 --> 00:06:31,800 Speaker 1: they couldn't get enough chips to fund to drive all 128 00:06:31,800 --> 00:06:35,680 Speaker 1: this stuff that's in the car. Where are we now? Yeah, 129 00:06:35,720 --> 00:06:38,159 Speaker 1: good morning, thank you for having me. Look, I think 130 00:06:38,240 --> 00:06:42,479 Speaker 1: the car industry is going through this massive transformation where 131 00:06:42,880 --> 00:06:47,200 Speaker 1: every automaker realizes that the platform that they're building has 132 00:06:47,880 --> 00:06:51,719 Speaker 1: so much more potential, so much more capable, capability to 133 00:06:52,279 --> 00:06:55,800 Speaker 1: really create a brand identity for the automaker, to connect 134 00:06:55,800 --> 00:06:59,360 Speaker 1: with their customers, make it a services platform, find new 135 00:06:59,360 --> 00:07:02,080 Speaker 1: ways to monitor times, and really the center of it 136 00:07:02,160 --> 00:07:06,719 Speaker 1: all is chips and software. These platforms are all becoming 137 00:07:06,839 --> 00:07:10,680 Speaker 1: much more advanced technologically, you know, keeping up with the 138 00:07:10,680 --> 00:07:14,200 Speaker 1: most complex technology that we are defining today. So, uh, 139 00:07:14,240 --> 00:07:17,720 Speaker 1: this progression has started. It's upon us and we really 140 00:07:17,800 --> 00:07:22,320 Speaker 1: seeing every card company become a technology company and our 141 00:07:22,360 --> 00:07:26,160 Speaker 1: snapdrag and digital chassis is the basis on top of 142 00:07:26,160 --> 00:07:29,040 Speaker 1: which we are building these partnerships with automakers. Talk to 143 00:07:29,120 --> 00:07:32,000 Speaker 1: us a little about pricing here. I mean it's clear 144 00:07:32,040 --> 00:07:34,880 Speaker 1: that chips are in demand and have been in demand 145 00:07:34,920 --> 00:07:37,320 Speaker 1: and probably will be in demand, I want to say, 146 00:07:37,360 --> 00:07:39,880 Speaker 1: for the next minimum year or so, as we starts 147 00:07:39,880 --> 00:07:42,440 Speaker 1: see supply chain issues really a bait. What does that 148 00:07:42,520 --> 00:07:45,960 Speaker 1: mean for pricing? How much of a premium can you 149 00:07:46,080 --> 00:07:52,120 Speaker 1: charge based on that really Um unabated demand? Yeah, you know, 150 00:07:52,200 --> 00:07:58,400 Speaker 1: I think automotive is and remains a very competitive space. Uh. 151 00:07:58,560 --> 00:08:01,280 Speaker 1: What is changing, however, as you know, as we are 152 00:08:01,280 --> 00:08:04,960 Speaker 1: able to integrate more and more functionality into the chips 153 00:08:05,000 --> 00:08:08,000 Speaker 1: that we build, it allows us to be able to a, 154 00:08:08,760 --> 00:08:13,520 Speaker 1: bring technology, bring products over to more affordable segments of 155 00:08:13,600 --> 00:08:18,800 Speaker 1: the value chain also, uh, bring much more capability to 156 00:08:18,840 --> 00:08:21,000 Speaker 1: the higher end. So there is certainly a price premium 157 00:08:21,040 --> 00:08:24,320 Speaker 1: that we can extract by the integration capabilities that we 158 00:08:24,400 --> 00:08:27,720 Speaker 1: have Alba, bringing more technology to really every year of vehicle. 159 00:08:28,840 --> 00:08:31,760 Speaker 1: All right, so, Nicole, in the past couple of months 160 00:08:31,760 --> 00:08:35,080 Speaker 1: I experienced to first for me. Number One, I drove 161 00:08:35,160 --> 00:08:38,360 Speaker 1: my first pickup truck. Number two, I drew my first 162 00:08:38,400 --> 00:08:41,000 Speaker 1: electric vehicle. That happened to be the electric pickup truck, 163 00:08:41,040 --> 00:08:44,240 Speaker 1: and I was just blown away by the technology of 164 00:08:44,280 --> 00:08:46,400 Speaker 1: that E v in the in terms of the performance. 165 00:08:46,440 --> 00:08:48,960 Speaker 1: So okay, I get the EV thing that's coming. I 166 00:08:49,000 --> 00:08:54,560 Speaker 1: get it. Autonomous Driving, that's another thing altogether. How do 167 00:08:54,600 --> 00:08:58,880 Speaker 1: you envision the evolution towards autonomous drivings? I know calcom 168 00:08:59,000 --> 00:09:01,679 Speaker 1: is going to be right at the four front of them. Yeah, 169 00:09:01,760 --> 00:09:03,959 Speaker 1: it's an excellent question and you know, our snap dragon 170 00:09:04,040 --> 00:09:08,920 Speaker 1: right platform really addresses this transition towards autonomous driving. So 171 00:09:08,920 --> 00:09:10,600 Speaker 1: there are a few things going on, you know. I 172 00:09:10,640 --> 00:09:13,600 Speaker 1: think your experiences in terms of driving a new vehicle 173 00:09:13,679 --> 00:09:16,600 Speaker 1: and really being impressed with all of the electronics inside. 174 00:09:16,640 --> 00:09:19,560 Speaker 1: I think that is certainly indication of one shift. I 175 00:09:19,600 --> 00:09:22,640 Speaker 1: think the other, clearly, is that cars are becoming safer 176 00:09:22,840 --> 00:09:26,400 Speaker 1: because there is technology, there are sens there is a 177 00:09:26,440 --> 00:09:31,160 Speaker 1: lot of capability now available to make cars much more safe. 178 00:09:31,559 --> 00:09:35,360 Speaker 1: The transition from safety to comfort, to where you can 179 00:09:35,440 --> 00:09:37,679 Speaker 1: actually allow the car to take you from point a 180 00:09:37,800 --> 00:09:41,360 Speaker 1: to point B, is a complex part. It is something 181 00:09:41,400 --> 00:09:44,120 Speaker 1: that is going to take time because it really is 182 00:09:44,160 --> 00:09:46,600 Speaker 1: about making sure that this can be implemented in a 183 00:09:46,679 --> 00:09:50,440 Speaker 1: safe way. We are already seeing, for example, for highway applications, 184 00:09:50,840 --> 00:09:54,640 Speaker 1: the ability for cars to be operating in autonomous mode 185 00:09:55,440 --> 00:09:58,640 Speaker 1: for long durations, for long length of time. But as 186 00:09:58,679 --> 00:10:01,160 Speaker 1: you start to bring in more way ability, more animous 187 00:10:01,240 --> 00:10:03,400 Speaker 1: there is clearly a lot of work that needs to 188 00:10:03,440 --> 00:10:05,960 Speaker 1: be done. And mostly, in my mind, this is actually 189 00:10:06,000 --> 00:10:09,679 Speaker 1: a question of the safety responsibility that automakers owe to 190 00:10:09,840 --> 00:10:12,720 Speaker 1: their consumers. So, while the tech might be there, you 191 00:10:12,760 --> 00:10:15,079 Speaker 1: have to do this in a very responsible fashion because 192 00:10:15,080 --> 00:10:19,319 Speaker 1: you're essentially taking control away from the driver giving you 193 00:10:19,480 --> 00:10:23,480 Speaker 1: the vehicle, and that's kind of where the responsibility potion 194 00:10:23,559 --> 00:10:26,520 Speaker 1: has to be really high. Cool. Yeah, I know you 195 00:10:26,559 --> 00:10:28,360 Speaker 1: focus on the auto industry, but just I'd love to 196 00:10:28,360 --> 00:10:31,760 Speaker 1: get your thoughts just over on the overall UH semiconductor 197 00:10:32,480 --> 00:10:36,839 Speaker 1: supply issue kind of where are we as an industry 198 00:10:36,920 --> 00:10:40,480 Speaker 1: in terms of getting supply matched with demand on a 199 00:10:40,480 --> 00:10:44,840 Speaker 1: global basis, because that was a big, big problem continues 200 00:10:44,880 --> 00:10:47,480 Speaker 1: to be a big, big problem for, you know, getting 201 00:10:47,480 --> 00:10:49,719 Speaker 1: these economies kind of reopen and back up, up and 202 00:10:49,800 --> 00:10:53,160 Speaker 1: running where already think? You know, I think from an 203 00:10:53,160 --> 00:10:56,480 Speaker 1: auto perspective we've been fortunate in that we've actually been 204 00:10:56,520 --> 00:11:01,520 Speaker 1: able to prioritize availability of semising to supply for our 205 00:11:01,640 --> 00:11:06,680 Speaker 1: automaker customers ahead of all other verticals and through Covid 206 00:11:06,679 --> 00:11:09,080 Speaker 1: we were actually able to manage that quite well. Uh. 207 00:11:09,160 --> 00:11:11,000 Speaker 1: You know, as we look at the next year or so, 208 00:11:11,440 --> 00:11:15,240 Speaker 1: they are clearly still, uh, pockets of the market, you know, 209 00:11:15,360 --> 00:11:19,280 Speaker 1: certain types of semiconductors that are still in short supply. 210 00:11:19,440 --> 00:11:23,640 Speaker 1: Supplies catching up, but I think, you know, through the 211 00:11:23,679 --> 00:11:26,400 Speaker 1: second half of next year I do feel that the Automan, 212 00:11:26,600 --> 00:11:29,160 Speaker 1: that the auto industry, is going to start to see 213 00:11:29,640 --> 00:11:32,440 Speaker 1: much better balance between supplying the man so we have 214 00:11:32,520 --> 00:11:34,040 Speaker 1: had a minute left. talked to us a little bit 215 00:11:34,040 --> 00:11:38,199 Speaker 1: about the regional challenges that call comes specifically might be facing. 216 00:11:38,200 --> 00:11:40,920 Speaker 1: I mean, like the auto industry is really in North America. 217 00:11:40,960 --> 00:11:43,400 Speaker 1: It's in Germany as well, but a lot of the 218 00:11:43,480 --> 00:11:46,319 Speaker 1: chips are coming from abroad. Talk to us about the 219 00:11:46,360 --> 00:11:51,400 Speaker 1: challenges there. So, you know, we are a fabulous company. 220 00:11:51,520 --> 00:11:58,480 Speaker 1: We have partnerships globally across many different H semiconductor fabric 221 00:11:58,640 --> 00:12:02,960 Speaker 1: fabrication partner and very the way that we have established 222 00:12:03,000 --> 00:12:06,520 Speaker 1: the businesses to have the ability to build products across 223 00:12:06,920 --> 00:12:13,240 Speaker 1: multiple locations, have dual sourcing strategies. H The automotive supply 224 00:12:13,400 --> 00:12:17,520 Speaker 1: chain is highly complex and so scale is a very 225 00:12:17,559 --> 00:12:20,160 Speaker 1: important factor and you have to be able to work 226 00:12:20,200 --> 00:12:24,720 Speaker 1: across a wide variety of complexity, whether it's partnerships at 227 00:12:24,760 --> 00:12:27,400 Speaker 1: the front end or the back end. Because of the 228 00:12:27,440 --> 00:12:30,120 Speaker 1: scale which we operate, this is something that we've actually 229 00:12:30,160 --> 00:12:32,360 Speaker 1: been able to do, perhaps a bit better than some 230 00:12:32,440 --> 00:12:35,679 Speaker 1: of the other more entrance players that do not have 231 00:12:35,760 --> 00:12:39,840 Speaker 1: similar scale from a from an overall semic supply perspective. 232 00:12:40,480 --> 00:12:42,720 Speaker 1: All right, Nicole, thank you so much for joining us there. 233 00:12:43,080 --> 00:12:45,680 Speaker 1: Nicole de Gal, senior VP and general manager. He covers 234 00:12:45,679 --> 00:12:49,360 Speaker 1: the automotive business for Qualcom and again, the transition to 235 00:12:49,640 --> 00:12:53,360 Speaker 1: electric vehicles well on the way Um and again the 236 00:12:53,360 --> 00:12:56,200 Speaker 1: performance that I experienced, which is awesome. Now the question is, 237 00:12:56,240 --> 00:13:01,679 Speaker 1: you know, getting more and more autonomous. Looking at the 238 00:13:01,720 --> 00:13:05,120 Speaker 1: shares of the Nicola U N K L A is 239 00:13:05,160 --> 00:13:07,480 Speaker 1: your ticker, you can put in there. Trading at three 240 00:13:07,520 --> 00:13:09,840 Speaker 1: dollars and eight cents to share. It's off five percent today, 241 00:13:09,840 --> 00:13:13,600 Speaker 1: off year to date, fifty two week low. It is ugly. 242 00:13:13,640 --> 00:13:15,120 Speaker 1: But we want to talk about, and that's so much 243 00:13:15,200 --> 00:13:18,440 Speaker 1: the stock. But what's going on with it's founder? Ed Ludlow, 244 00:13:18,520 --> 00:13:21,880 Speaker 1: joins us. Ed Ludlow's west coast correspondent, but he's in 245 00:13:21,920 --> 00:13:25,000 Speaker 1: New York, but he's from England, so I don't know 246 00:13:25,040 --> 00:13:28,120 Speaker 1: where he calls home here, but he joins us here 247 00:13:28,320 --> 00:13:31,280 Speaker 1: talk about the trial of Nicola founder Trevor Milton and 248 00:13:31,559 --> 00:13:34,640 Speaker 1: give us the background here on the issue here, at 249 00:13:34,679 --> 00:13:37,160 Speaker 1: the trial here. What's going on, a kind of where 250 00:13:37,200 --> 00:13:40,600 Speaker 1: are we? So Nikola was the post to child right 251 00:13:40,679 --> 00:13:43,760 Speaker 1: of this wave of EV companies that went public. Vis 252 00:13:43,840 --> 00:13:49,600 Speaker 1: Back Special Purpose Act was in company one and Milton 253 00:13:49,760 --> 00:13:52,760 Speaker 1: was like bill to be the next mosque. He was 254 00:13:52,840 --> 00:13:56,959 Speaker 1: this visionary who would make hydrogen powered fuel cell semi trucks. 255 00:13:57,240 --> 00:14:02,280 Speaker 1: That's a reality, and retail investors poured money into this stock. 256 00:14:02,920 --> 00:14:05,320 Speaker 1: But you know, things change really quick. You know, at 257 00:14:05,360 --> 00:14:07,320 Speaker 1: one point they had a market cap bread and forward, 258 00:14:07,760 --> 00:14:11,440 Speaker 1: but just after they went public, Bloomberg reported that their 259 00:14:11,480 --> 00:14:14,520 Speaker 1: first truck, their debut truck that they'd unveiled in twenty six, 260 00:14:15,360 --> 00:14:19,560 Speaker 1: was grossly exaggerated, never worked, missing parts. The next thing 261 00:14:19,560 --> 00:14:23,920 Speaker 1: that happens a short seller takes notice, cites that Bloomberg report, 262 00:14:24,040 --> 00:14:28,240 Speaker 1: looks into Trevor Milton and basically accuses him of deceiving investors. 263 00:14:28,760 --> 00:14:32,560 Speaker 1: The SEC gets involved, looks into him and ultimately by 264 00:14:32,640 --> 00:14:36,239 Speaker 1: September of that year. He resigns. A year later he's indicted, 265 00:14:36,520 --> 00:14:38,760 Speaker 1: charged with securities and wire fraud and that is the 266 00:14:38,760 --> 00:14:43,200 Speaker 1: trial that's ongoing in Manhattan right now. So walk us 267 00:14:43,200 --> 00:14:46,240 Speaker 1: through now what comes next in the trial and walks 268 00:14:46,240 --> 00:14:49,080 Speaker 1: through the timeline. What have we seen? Where are we 269 00:14:49,160 --> 00:14:52,320 Speaker 1: see next? So we're in day ten of the trial 270 00:14:52,520 --> 00:14:57,120 Speaker 1: to working weeks in and it's just been astonishing. Um, 271 00:14:57,160 --> 00:15:01,840 Speaker 1: you know, we've had key witnesses, including Nicholas current outgoing CEO, 272 00:15:02,000 --> 00:15:05,720 Speaker 1: Mark Russell, who basically testified and told the jury that 273 00:15:05,840 --> 00:15:08,080 Speaker 1: he did have a lot of concerns about things that 274 00:15:08,160 --> 00:15:11,680 Speaker 1: Milton was saying, that in fact most of what much 275 00:15:11,680 --> 00:15:13,520 Speaker 1: of what he said was not true and that he 276 00:15:13,640 --> 00:15:17,760 Speaker 1: and other executives had warned Milton that, as the executive 277 00:15:17,800 --> 00:15:22,120 Speaker 1: chairman at the company, he everything he said equated to 278 00:15:22,120 --> 00:15:25,640 Speaker 1: a press release, equated to a securities filing. We heard 279 00:15:25,680 --> 00:15:28,560 Speaker 1: from Nicolas Social Media Manager, and a big part of 280 00:15:28,560 --> 00:15:30,600 Speaker 1: the story around Milton is he was a big user 281 00:15:30,600 --> 00:15:35,640 Speaker 1: of twitter, sounds familiar, right, and Instagram, and she testified 282 00:15:36,120 --> 00:15:39,880 Speaker 1: that they had a policy that non public information must 283 00:15:39,880 --> 00:15:42,640 Speaker 1: not be shared on social media. She testified that only 284 00:15:43,280 --> 00:15:46,320 Speaker 1: herself and Milton had access to the company's accounts and 285 00:15:46,400 --> 00:15:49,480 Speaker 1: she testified that Milton was breaching his own company social 286 00:15:49,520 --> 00:15:52,960 Speaker 1: media policies. Next we hear from the CFO. We heard 287 00:15:53,000 --> 00:15:56,120 Speaker 1: from a retail investor that says they lost a hundred 288 00:15:56,160 --> 00:15:59,480 Speaker 1: and sixty thousand dollars because of investing in the company 289 00:15:59,520 --> 00:16:01,880 Speaker 1: based on what Milton says. That's the crux of the case, 290 00:16:01,920 --> 00:16:04,120 Speaker 1: by the way. So I look at I see Steve 291 00:16:04,120 --> 00:16:05,960 Speaker 1: Gursky is the chairman of the board, who's a long 292 00:16:06,040 --> 00:16:10,840 Speaker 1: time auto executive, longtime analyst. He and I used to 293 00:16:10,840 --> 00:16:12,440 Speaker 1: work together way back in the day when he covered 294 00:16:12,480 --> 00:16:18,080 Speaker 1: the auto stocks. He's a savvy investor, savvy auto person. 295 00:16:18,760 --> 00:16:21,400 Speaker 1: It looks like Trevor Milton perhaps duped a lot of 296 00:16:21,440 --> 00:16:25,400 Speaker 1: smart people, not just kind of retail investors as well, potentially. Yes, 297 00:16:25,680 --> 00:16:27,480 Speaker 1: I think it's important to say, like the defense are 298 00:16:27,480 --> 00:16:30,000 Speaker 1: going to argue and they're trying to prove and convince 299 00:16:30,040 --> 00:16:33,720 Speaker 1: a jury that a Milton genuinely believed what he was 300 00:16:33,760 --> 00:16:36,800 Speaker 1: saying was true, but also that he was the CEO 301 00:16:36,840 --> 00:16:39,640 Speaker 1: of the company right, it was his duty to market 302 00:16:39,680 --> 00:16:43,040 Speaker 1: the company. He was following the marketing plan and the 303 00:16:43,080 --> 00:16:45,840 Speaker 1: burden of proof this is the American justice system is 304 00:16:45,880 --> 00:16:48,200 Speaker 1: on the prosecution to not just prove that he lied, 305 00:16:48,520 --> 00:16:53,000 Speaker 1: but those lies in fact did prompt investors to invest. 306 00:16:53,480 --> 00:16:55,920 Speaker 1: And Steve Gursky is really interesting and that that's the 307 00:16:56,040 --> 00:16:59,600 Speaker 1: extra bit of this trial that we're learning what really 308 00:16:59,600 --> 00:17:02,880 Speaker 1: took ace at the time. For example, yesterday a GM 309 00:17:03,040 --> 00:17:07,560 Speaker 1: current GM employee and engineer testified that the pickup truck, 310 00:17:07,600 --> 00:17:10,760 Speaker 1: the Badger, that GM had agreed initially to build on 311 00:17:10,840 --> 00:17:15,520 Speaker 1: Nikola's behalf was not going to contain any parts from Nikola. Well, 312 00:17:16,000 --> 00:17:19,119 Speaker 1: Trevor Milton gave an interview saying seventy of the parts 313 00:17:19,119 --> 00:17:21,280 Speaker 1: would come from Nikola. So we're kind of filling the 314 00:17:21,320 --> 00:17:23,359 Speaker 1: blanks of what we knew at the time. What is 315 00:17:23,400 --> 00:17:26,200 Speaker 1: the fine here? What is the what is the defense 316 00:17:26,359 --> 00:17:29,879 Speaker 1: APP or the prosecution, excuse me, after when it comes 317 00:17:29,920 --> 00:17:33,320 Speaker 1: to if they win this case, do the investors benefit? 318 00:17:33,640 --> 00:17:37,480 Speaker 1: What is Trevor Milton cast a great question. This is 319 00:17:37,480 --> 00:17:41,160 Speaker 1: a criminal trial and he faces two counts of securities fraud, 320 00:17:41,240 --> 00:17:45,080 Speaker 1: two counts of wire fraud. The most severe penalty for 321 00:17:45,119 --> 00:17:47,640 Speaker 1: one of the counts is twenty five years in prison, 322 00:17:48,200 --> 00:17:51,919 Speaker 1: and so I think most legal experts and based on president, 323 00:17:52,000 --> 00:17:54,760 Speaker 1: he is unlikely, I found guilty, to face that much 324 00:17:54,760 --> 00:17:56,760 Speaker 1: prison time. But the other way looking at it is 325 00:17:56,800 --> 00:17:59,480 Speaker 1: the holistic picture that they were the poster child of 326 00:17:59,520 --> 00:18:02,680 Speaker 1: the EB back wave. There are many commentators that would 327 00:18:02,680 --> 00:18:05,400 Speaker 1: say this is kind of the shot across the bow 328 00:18:05,520 --> 00:18:10,960 Speaker 1: from the government and regulators about the perils of investing 329 00:18:10,960 --> 00:18:13,399 Speaker 1: in companies that when public virus back, and also the 330 00:18:13,440 --> 00:18:15,840 Speaker 1: behavior some of those companies. We know there are many 331 00:18:15,920 --> 00:18:19,800 Speaker 1: that have encountered financial trouble. Um You know. It's kind 332 00:18:19,800 --> 00:18:22,879 Speaker 1: of an interesting tale of a market that's changed, the 333 00:18:22,960 --> 00:18:25,399 Speaker 1: specific market. What's the timing here? I mean I know 334 00:18:25,480 --> 00:18:28,040 Speaker 1: you're here in part to cover this trial. What's the 335 00:18:28,040 --> 00:18:31,320 Speaker 1: expectation when we might get a kind of windingness up 336 00:18:31,320 --> 00:18:32,880 Speaker 1: and when we get a ruling? Yes, so it's it's 337 00:18:32,880 --> 00:18:35,320 Speaker 1: built to be a five week trial winding up around 338 00:18:35,320 --> 00:18:39,520 Speaker 1: October fourteenth. That's at least what the judge brief the jury. 339 00:18:39,920 --> 00:18:42,040 Speaker 1: You know, the government will need a few weeks to 340 00:18:42,080 --> 00:18:43,919 Speaker 1: present their case and they have a long list of 341 00:18:43,920 --> 00:18:47,200 Speaker 1: witnesses that they've been calling, Um you know, and that 342 00:18:47,240 --> 00:18:50,240 Speaker 1: would leave about a week for the defense before closing arguments. 343 00:18:50,320 --> 00:18:52,960 Speaker 1: And you know this is being really closely followed. That 344 00:18:53,080 --> 00:18:55,280 Speaker 1: people want to know what happened to this guy, but 345 00:18:55,400 --> 00:18:57,760 Speaker 1: many stuck with nickle. But you pointed out the stock. 346 00:18:58,080 --> 00:19:00,000 Speaker 1: You know, the stock breached four dollars for the first 347 00:19:00,080 --> 00:19:03,359 Speaker 1: US time. Um, you know, the background being that most 348 00:19:03,880 --> 00:19:07,440 Speaker 1: SPECTA quad companies, Star trading attend. There's a share. So 349 00:19:07,520 --> 00:19:09,800 Speaker 1: you're out of the money right if if you held 350 00:19:09,840 --> 00:19:13,440 Speaker 1: onto your your shares. You know it's become in the background. 351 00:19:13,720 --> 00:19:16,040 Speaker 1: Has Become a boring truck company and at a really 352 00:19:16,119 --> 00:19:17,960 Speaker 1: hard time. I'm looking at some of the stockholders, shore 353 00:19:18,040 --> 00:19:21,800 Speaker 1: Vanguard Group, nor just bank, Black Rock, h some state streets. 354 00:19:21,800 --> 00:19:24,360 Speaker 1: So a lot of the some big big funds own 355 00:19:24,440 --> 00:19:25,879 Speaker 1: this thing. So I'm sure there's a lot of folks 356 00:19:25,880 --> 00:19:28,800 Speaker 1: paying attention, in addition to obviously all the retail uh 357 00:19:28,840 --> 00:19:31,879 Speaker 1: investors as well. Ed Ludlow, thanks so much for joining us. 358 00:19:31,920 --> 00:19:37,640 Speaker 1: There are we got in our studio here, Leo Kelly, 359 00:19:37,680 --> 00:19:40,080 Speaker 1: CEO Verdon's capital visors. I have no interest in any 360 00:19:40,080 --> 00:19:42,040 Speaker 1: of that. I just found out, first of all, he's 361 00:19:42,040 --> 00:19:43,960 Speaker 1: a graduate of the College of New Jersey in Ewing, 362 00:19:43,960 --> 00:19:45,800 Speaker 1: New Jersey, which I have. I grew up in that 363 00:19:45,880 --> 00:19:47,679 Speaker 1: area so I'm very familiar with that. That school has 364 00:19:47,680 --> 00:19:50,320 Speaker 1: gotten so good so quickly, but then you just worked 365 00:19:50,320 --> 00:19:53,760 Speaker 1: a couple of summers at Bloomberg and Princeton. Well, you 366 00:19:53,760 --> 00:19:55,760 Speaker 1: just found his new best friends. Yeah, exactly. I mean 367 00:19:56,040 --> 00:19:57,720 Speaker 1: I can't believe he still doesn't have his badge or 368 00:19:57,720 --> 00:20:05,080 Speaker 1: his badge doesn't work. Who says it doesn't? Late night 369 00:20:05,119 --> 00:20:07,760 Speaker 1: snack there? You've got to get a free lunch sometimes. Exactly. 370 00:20:08,000 --> 00:20:10,840 Speaker 1: All Right, Leo, you've been doing this wealth management stuff 371 00:20:10,840 --> 00:20:13,280 Speaker 1: for a long time in Merrila Kelly wealth management and 372 00:20:13,359 --> 00:20:16,120 Speaker 1: I got your own firm here. What do you talk 373 00:20:16,160 --> 00:20:17,719 Speaker 1: to well, what do you say to your clients these 374 00:20:17,800 --> 00:20:22,879 Speaker 1: days when they see their performance in yes one, great years, 375 00:20:23,359 --> 00:20:25,680 Speaker 1: this year just brutal equities and fixed income. Where do 376 00:20:25,720 --> 00:20:26,760 Speaker 1: you go? So what do you what do you tell 377 00:20:26,840 --> 00:20:30,159 Speaker 1: your clients? Well, the first thing we tell them is 378 00:20:30,560 --> 00:20:36,240 Speaker 1: that they have to remain calm as always and Um. 379 00:20:36,400 --> 00:20:38,560 Speaker 1: But in the bigger picture we've been talking about this 380 00:20:38,640 --> 00:20:40,880 Speaker 1: inflation and rising interest rates now for a couple of years. 381 00:20:41,280 --> 00:20:44,360 Speaker 1: It's never made sense to me, Um, that we could 382 00:20:44,400 --> 00:20:47,119 Speaker 1: put this much money, grow M to a percent a 383 00:20:47,240 --> 00:20:50,320 Speaker 1: year and not have inflation. We didn't buy into the 384 00:20:50,400 --> 00:20:53,720 Speaker 1: transitory we didn't buy into rates would remain low. So 385 00:20:54,320 --> 00:20:57,920 Speaker 1: they've been prepared. I don't think you can be prepared 386 00:20:58,000 --> 00:20:59,720 Speaker 1: for this, though. I don't think you'd be prepared for 387 00:20:59,800 --> 00:21:02,480 Speaker 1: eight or nine. We're running up to four on the 388 00:21:02,560 --> 00:21:06,360 Speaker 1: ten year Um and the result of this, in my opinion, 389 00:21:06,640 --> 00:21:09,280 Speaker 1: all of the money being flooded into the system, is 390 00:21:09,400 --> 00:21:13,600 Speaker 1: we're moving into a secular change in interest rates and 391 00:21:13,800 --> 00:21:15,520 Speaker 1: that's going to change a lot of things in the market. 392 00:21:15,640 --> 00:21:18,440 Speaker 1: So what people have relied on to be constants in 393 00:21:18,480 --> 00:21:20,760 Speaker 1: the market in the past, it's all going to change 394 00:21:20,800 --> 00:21:24,360 Speaker 1: and that's what we're talking to our clients about. Well, 395 00:21:24,600 --> 00:21:26,560 Speaker 1: one of the things that we've been talking about throughout 396 00:21:26,600 --> 00:21:29,800 Speaker 1: this show has been the C word capitulation, not clients Um, 397 00:21:30,200 --> 00:21:33,440 Speaker 1: and I'm curious if you're in the camp that says 398 00:21:34,160 --> 00:21:37,600 Speaker 1: to see a sustainable rebound in the stock market you 399 00:21:37,720 --> 00:21:40,600 Speaker 1: have to see capitulation. And if you answers yes, tell 400 00:21:40,640 --> 00:21:42,960 Speaker 1: me how we discover like, how you detect it. For 401 00:21:43,040 --> 00:21:45,920 Speaker 1: Answers No, tell me why not. Well, this is starting 402 00:21:45,960 --> 00:21:47,760 Speaker 1: to feel like we're getting there. I don't think we're 403 00:21:47,800 --> 00:21:49,720 Speaker 1: there yet and I think if you think seasonally, we 404 00:21:49,880 --> 00:21:52,359 Speaker 1: we did get to a bear market. Bear markets do 405 00:21:52,480 --> 00:21:55,080 Speaker 1: not typically go down touch a bottom and then run 406 00:21:55,160 --> 00:21:57,520 Speaker 1: off to the races. It takes a few of these 407 00:21:57,640 --> 00:22:01,240 Speaker 1: tests and often a new low before we see the 408 00:22:01,280 --> 00:22:03,040 Speaker 1: bottom of the market. So we have been talking to 409 00:22:03,040 --> 00:22:07,119 Speaker 1: our clients about get ready. September seasonally bad. Um, November, 410 00:22:07,160 --> 00:22:10,520 Speaker 1: December seasonally better. Right, we recover from that. Normally there's 411 00:22:10,520 --> 00:22:13,680 Speaker 1: actually one more tempt at the bottom before you run 412 00:22:13,760 --> 00:22:16,480 Speaker 1: off to the races. But sorry, really quickly. They're seasonally 413 00:22:16,560 --> 00:22:19,760 Speaker 1: bad because it's a reaction, from what I've seen historically, 414 00:22:19,800 --> 00:22:22,840 Speaker 1: to usually a summer rally like a or a Santa Rally, 415 00:22:22,960 --> 00:22:24,960 Speaker 1: followed then by some sort of correction when you have 416 00:22:25,200 --> 00:22:28,159 Speaker 1: higher volume. Now, well, we did have a rally. We 417 00:22:28,200 --> 00:22:31,960 Speaker 1: had a rally off the down from the summer and 418 00:22:32,640 --> 00:22:36,360 Speaker 1: Um again, I think more than seasonality, and I don't 419 00:22:36,359 --> 00:22:39,359 Speaker 1: want to I don't want to make this a technical conversation. Right, 420 00:22:39,400 --> 00:22:40,879 Speaker 1: more than a seasonal rally. We have to take a 421 00:22:40,920 --> 00:22:43,919 Speaker 1: step back. We have higher energy prices still, even though 422 00:22:43,960 --> 00:22:46,600 Speaker 1: they've come down. We've got really large inflation, we've got 423 00:22:46,720 --> 00:22:51,640 Speaker 1: rapidly rising interest rates, we have an extraordinarily aggressive fed 424 00:22:52,040 --> 00:22:56,600 Speaker 1: and replicate that everywhere in the world. That is not 425 00:22:57,000 --> 00:23:01,560 Speaker 1: exactly what I would call stimulus. So us that says 426 00:23:02,000 --> 00:23:05,520 Speaker 1: be prepared for volatility. What we're telling clients is be 427 00:23:05,640 --> 00:23:08,560 Speaker 1: prepared for volatility. We have to be active in the markets. 428 00:23:09,000 --> 00:23:11,760 Speaker 1: Going to sleep on a sixty pass of portfolio? Those 429 00:23:11,800 --> 00:23:14,359 Speaker 1: days are done, they're behind us. That's exactly right. I 430 00:23:14,400 --> 00:23:15,880 Speaker 1: mean that you think about it, this year, I guess 431 00:23:15,920 --> 00:23:18,560 Speaker 1: you know the S and p off more than most 432 00:23:18,600 --> 00:23:21,159 Speaker 1: of the bonding disease that we look at here on 433 00:23:21,160 --> 00:23:24,240 Speaker 1: the bloomber criminal off. You know ten there's really been 434 00:23:24,280 --> 00:23:27,000 Speaker 1: nowhere to hide here Tis and you've got some clients 435 00:23:27,040 --> 00:23:28,520 Speaker 1: who want to, you know, maybe take a little bit 436 00:23:28,560 --> 00:23:30,760 Speaker 1: more risk, maybe put some cash into the market. Where 437 00:23:30,800 --> 00:23:34,880 Speaker 1: are you suggesting? They look well, and I will be specific, 438 00:23:35,000 --> 00:23:37,840 Speaker 1: but the first place is um not what has been 439 00:23:37,920 --> 00:23:41,159 Speaker 1: successful prior okay, as we go and we have higher 440 00:23:41,240 --> 00:23:44,000 Speaker 1: interest rates and more volatility, right, that's going to impact pe. 441 00:23:44,280 --> 00:23:48,280 Speaker 1: So the the higher pe steady growth companies, I don't 442 00:23:48,359 --> 00:23:51,000 Speaker 1: think perform as well. Now, it's not to say that 443 00:23:51,040 --> 00:23:53,320 Speaker 1: they're going to go down necessarily, but I just don't 444 00:23:53,359 --> 00:23:56,680 Speaker 1: think they perform as well. We like earnings power. Strong 445 00:23:56,760 --> 00:23:59,720 Speaker 1: dollar means small cap looks interesting to us right, small 446 00:23:59,760 --> 00:24:02,640 Speaker 1: cap growth and small cap value growth, because it's down 447 00:24:02,720 --> 00:24:06,000 Speaker 1: so much value because there's value there. Um, we like 448 00:24:06,160 --> 00:24:10,080 Speaker 1: the international markets, but there's gonna be tremendous volatility. International, 449 00:24:10,160 --> 00:24:15,720 Speaker 1: developed international is two to three standard deviations lower evaluation, 450 00:24:16,200 --> 00:24:18,840 Speaker 1: relative valuation, than what we see in the norm, than 451 00:24:18,880 --> 00:24:21,800 Speaker 1: the medium. So to me that says let's put some 452 00:24:21,920 --> 00:24:24,280 Speaker 1: money there and yes, we're gonna have to go through 453 00:24:24,320 --> 00:24:27,840 Speaker 1: the gyrations of the market. But, as we tell our clients, 454 00:24:28,240 --> 00:24:30,399 Speaker 1: when you invest in equity you sign a contract and 455 00:24:30,480 --> 00:24:33,200 Speaker 1: that contract says I know there's going to be volatility, 456 00:24:33,320 --> 00:24:35,760 Speaker 1: I accept that for a higher rate of return and 457 00:24:35,840 --> 00:24:37,680 Speaker 1: I'm willing to put up with it. Well, now is 458 00:24:37,720 --> 00:24:39,920 Speaker 1: the time to now's the time to earn your money 459 00:24:40,000 --> 00:24:41,880 Speaker 1: to make good on that. All Right, Leo Kelly, thank 460 00:24:41,920 --> 00:24:43,480 Speaker 1: you so much for joining us. Leo Kelly is the 461 00:24:43,520 --> 00:24:47,359 Speaker 1: CEO of verdant's capital Advisors, joining us uh live in 462 00:24:47,440 --> 00:24:53,760 Speaker 1: our Bloomberg interactive broker studio here today. So we've got 463 00:24:53,840 --> 00:24:56,880 Speaker 1: central bankers around the world raising interest rates to trying 464 00:24:56,920 --> 00:25:00,280 Speaker 1: to tame inflation at the risk of recession, and then 465 00:25:00,320 --> 00:25:02,480 Speaker 1: I wake up this morning, and that includes the Bank 466 00:25:02,560 --> 00:25:03,960 Speaker 1: of England, and then, you know, we wake up this 467 00:25:04,040 --> 00:25:06,600 Speaker 1: morning we see the UK announces his biggest tax cut 468 00:25:07,080 --> 00:25:09,760 Speaker 1: since nineteen seventy two. What is up with that? Talk 469 00:25:09,840 --> 00:25:12,359 Speaker 1: about it seems like a lack of coordination. So we 470 00:25:12,400 --> 00:25:14,560 Speaker 1: figured we've got to get ED price in here. He's 471 00:25:14,560 --> 00:25:17,879 Speaker 1: a senior fellow and former British trade official, uh at, 472 00:25:18,040 --> 00:25:20,600 Speaker 1: from M N Y U. and what do you make 473 00:25:20,800 --> 00:25:24,680 Speaker 1: of your English government and this tax cut vs V 474 00:25:24,920 --> 00:25:26,399 Speaker 1: kind of what the Bank of England is trying to 475 00:25:26,440 --> 00:25:29,639 Speaker 1: do with other central banks? Sure, thank thanks. At odds, 476 00:25:29,800 --> 00:25:32,200 Speaker 1: I think is a fair enough description. Straight off the BAT. 477 00:25:32,280 --> 00:25:36,520 Speaker 1: At odds Um, I would say that the the the 478 00:25:36,600 --> 00:25:39,440 Speaker 1: point of the Conservative Party is, in part as we 479 00:25:39,520 --> 00:25:43,320 Speaker 1: said earlier, cutting taxes. So that doesn't that's not surprising, Um, 480 00:25:43,400 --> 00:25:45,800 Speaker 1: but it's sort of it's kind of ignoring context. And 481 00:25:45,880 --> 00:25:49,560 Speaker 1: so the other point of the Conservative Party is fiscal responsibility. Um, 482 00:25:50,040 --> 00:25:52,560 Speaker 1: fiscal responsibility. This ain't so if you're asking me, what 483 00:25:52,680 --> 00:25:54,480 Speaker 1: the you know what the Bank of England is doing. 484 00:25:54,520 --> 00:25:56,720 Speaker 1: Probably not enough. We're at two in a quarter. They'll 485 00:25:56,760 --> 00:26:00,360 Speaker 1: they'll have to go higher. And the the the let's see, 486 00:26:00,400 --> 00:26:03,440 Speaker 1: mixture of the policy posture in the UK seems to 487 00:26:03,480 --> 00:26:08,800 Speaker 1: me to be inflationary. Um, in an inflationary context. Now, well, 488 00:26:08,920 --> 00:26:11,080 Speaker 1: I guess my question here is if you are, and 489 00:26:11,080 --> 00:26:13,960 Speaker 1: I'm trying to be as empathetic as possible, so help 490 00:26:14,040 --> 00:26:16,920 Speaker 1: me be in their shoes. But literally, if you are 491 00:26:17,400 --> 00:26:19,520 Speaker 1: Um Andrew Bailey, you are in the Bank of England, 492 00:26:19,560 --> 00:26:21,600 Speaker 1: it totally makes sense to be restrictive right now. If 493 00:26:21,640 --> 00:26:23,480 Speaker 1: you are on the political side and you're seeing people 494 00:26:23,720 --> 00:26:28,480 Speaker 1: getting laid off, not being able to afford housing bills, etcetera, 495 00:26:28,800 --> 00:26:31,199 Speaker 1: then it makes sense to stimulate the economy from from 496 00:26:31,280 --> 00:26:33,359 Speaker 1: that perspective. But why is this not being done in 497 00:26:33,400 --> 00:26:36,359 Speaker 1: a coordinated manner? I mean less trust was very open 498 00:26:36,400 --> 00:26:39,520 Speaker 1: about wanting to do this when she was campaigning. Right, 499 00:26:40,400 --> 00:26:43,520 Speaker 1: is economic policy ever coordinated? You tell me. I don't 500 00:26:43,560 --> 00:26:45,120 Speaker 1: think it is. I don't know if that's a cop 501 00:26:45,160 --> 00:26:47,240 Speaker 1: out answer, but I don't think it is. And I 502 00:26:47,400 --> 00:26:50,680 Speaker 1: think that, yes, let's trust, the prime minister was open 503 00:26:50,720 --> 00:26:53,760 Speaker 1: about being someone who would cut taxes. And yes, of 504 00:26:53,840 --> 00:26:56,600 Speaker 1: course our back is against the wall. visit the energy 505 00:26:56,680 --> 00:26:58,520 Speaker 1: so of course, again there has to be some sort 506 00:26:58,560 --> 00:27:01,320 Speaker 1: of fiscal intervention because people are going to be cold. 507 00:27:02,000 --> 00:27:05,040 Speaker 1: It's that simple, rights Um. But again, the Bank of 508 00:27:05,080 --> 00:27:10,040 Speaker 1: England is probably thinking our independence is the most important thing. 509 00:27:10,600 --> 00:27:13,240 Speaker 1: And to what extent do we have to hike to 510 00:27:13,400 --> 00:27:16,800 Speaker 1: demonstrate that our independence is the most important thing? Let's 511 00:27:16,840 --> 00:27:20,440 Speaker 1: remember that we're facing an inflationary supply side shock on 512 00:27:20,480 --> 00:27:23,199 Speaker 1: the energy side, right. So that that if you look 513 00:27:23,240 --> 00:27:25,920 Speaker 1: at rates, that's kind of also a bit on the 514 00:27:25,960 --> 00:27:28,480 Speaker 1: one hand. On the other you might say, well, let's 515 00:27:28,600 --> 00:27:31,720 Speaker 1: cut rates to fight the deflationary pressure the unemployment that 516 00:27:32,320 --> 00:27:34,520 Speaker 1: results from that. On the other hand, and I think 517 00:27:34,560 --> 00:27:37,119 Speaker 1: at nine this is what you should do. You should 518 00:27:37,160 --> 00:27:40,800 Speaker 1: hike to fight, to fight that inflation, right, but that sorry, 519 00:27:40,840 --> 00:27:43,639 Speaker 1: they're they're at odds with each other at the end 520 00:27:43,680 --> 00:27:45,879 Speaker 1: of the day. So it's kind of like neither side 521 00:27:45,920 --> 00:27:48,640 Speaker 1: almost has gets the full effect of what they're trying 522 00:27:48,720 --> 00:27:51,560 Speaker 1: to achieve because they counteract. talked to us a little 523 00:27:51,560 --> 00:27:53,200 Speaker 1: about the politics of it as well. When you walked 524 00:27:53,240 --> 00:27:56,000 Speaker 1: in here. I asked you about the Conservative Party specifically. 525 00:27:56,119 --> 00:28:00,200 Speaker 1: They haven't cut taxes for I think three years, but 526 00:28:00,320 --> 00:28:04,399 Speaker 1: that's part of their party line, that's part of the 527 00:28:04,560 --> 00:28:08,080 Speaker 1: DNA right. If you vote conservative, you're voting for a 528 00:28:08,200 --> 00:28:10,640 Speaker 1: tax cart Um and they and they've delivered right. They've 529 00:28:10,720 --> 00:28:13,360 Speaker 1: cut what is it? They've cutty the top right down 530 00:28:13,400 --> 00:28:15,360 Speaker 1: to four. The timing is impecable because they haven't done 531 00:28:15,359 --> 00:28:18,119 Speaker 1: it for three years and now they're doing it right, right, well, 532 00:28:18,119 --> 00:28:19,800 Speaker 1: it's always a good time to cut taxes if you're 533 00:28:19,800 --> 00:28:21,640 Speaker 1: a tor here, right, don't yeah, I don't think it's 534 00:28:21,640 --> 00:28:24,560 Speaker 1: a Um, a bad time. So that's that's two billion 535 00:28:25,119 --> 00:28:28,080 Speaker 1: and then five billion out of the basic rate. So 536 00:28:29,480 --> 00:28:31,720 Speaker 1: I think again, I'll go back to context pretty and 537 00:28:31,880 --> 00:28:35,720 Speaker 1: say that makes sense without context. In context, it seems 538 00:28:35,720 --> 00:28:38,320 Speaker 1: to me like it's sort of shooting your load a bit. Earli. 539 00:28:38,960 --> 00:28:41,440 Speaker 1: I think what we're doing as a country is saying 540 00:28:42,360 --> 00:28:44,920 Speaker 1: bet on us in the medium term. Bet On us 541 00:28:45,040 --> 00:28:48,640 Speaker 1: after this spending comes through, the system, comes through the economy. 542 00:28:48,680 --> 00:28:51,280 Speaker 1: There's probably a two year lag on economic policy anyway. 543 00:28:51,760 --> 00:28:54,680 Speaker 1: Then take another look at us, right, because at that 544 00:28:54,760 --> 00:28:58,040 Speaker 1: point we will be in different shape relative to other 545 00:28:58,120 --> 00:29:02,120 Speaker 1: jurisdictions and other economies. So, looking at the pound, sterling here, 546 00:29:02,200 --> 00:29:05,560 Speaker 1: Brook Blow One ten were now one spot, zero nine 547 00:29:05,640 --> 00:29:08,200 Speaker 1: three to a couple of people of today have said 548 00:29:09,000 --> 00:29:11,600 Speaker 1: the UK economy looks kind of like an emerging market. Here. 549 00:29:11,640 --> 00:29:16,160 Speaker 1: I'm currency, I'm outrage. I'm leaving immediately. Exactly. I mean, 550 00:29:16,640 --> 00:29:20,160 Speaker 1: it's what do you make of the sterling here in 551 00:29:20,240 --> 00:29:23,280 Speaker 1: the training. Well, I came on your show previously and 552 00:29:23,360 --> 00:29:25,560 Speaker 1: said that parity was something we should be talking about. 553 00:29:25,720 --> 00:29:28,920 Speaker 1: So I think that that's I'm not going to deny that. 554 00:29:29,040 --> 00:29:33,520 Speaker 1: That is realistic. Um Emerging markets. I mean, that's a 555 00:29:33,560 --> 00:29:36,120 Speaker 1: bit of a that's a bit of a cheeky. That's me, 556 00:29:36,360 --> 00:29:38,680 Speaker 1: isn't it? That's something for twitter. Well, to be fair. 557 00:29:38,920 --> 00:29:41,960 Speaker 1: To be fair, I saw this on yen's Nord big who, 558 00:29:41,960 --> 00:29:43,920 Speaker 1: who's the CEO and founder ex anti data and the 559 00:29:44,040 --> 00:29:47,440 Speaker 1: former FEX, head of Goldman, I believe, and he said 560 00:29:47,520 --> 00:29:50,560 Speaker 1: that the way you define an emerging market currency, forgive me, 561 00:29:51,560 --> 00:29:53,480 Speaker 1: I'm ready for it. I'm ready for it. Says the 562 00:29:53,520 --> 00:29:57,280 Speaker 1: way you you need define emerging market currency is when 563 00:29:57,320 --> 00:29:59,959 Speaker 1: you have a basically in the United States, for example, 564 00:30:00,000 --> 00:30:01,960 Speaker 1: when you have yields go higher, it supports the dollar 565 00:30:01,960 --> 00:30:04,160 Speaker 1: interest rate differentials. They said emerging mark currency is the 566 00:30:04,200 --> 00:30:08,520 Speaker 1: opposite of that which the pound, the cable rate, is 567 00:30:08,560 --> 00:30:14,120 Speaker 1: actually supporting. So technically, in theory, by that definition, I'll 568 00:30:14,120 --> 00:30:15,800 Speaker 1: split the difference. I'll split the difference with you and 569 00:30:15,960 --> 00:30:19,840 Speaker 1: say a very high quality emerging market. Okay, and again, British, 570 00:30:19,880 --> 00:30:22,800 Speaker 1: have you. I'm very British, but I think that the 571 00:30:23,240 --> 00:30:25,520 Speaker 1: future is unwritten. And again, this is all that. This 572 00:30:25,640 --> 00:30:28,360 Speaker 1: is all coming out of Brexit, right. So sterling is 573 00:30:28,400 --> 00:30:32,320 Speaker 1: rewriting its core narrative. The old sterling narrative was we've 574 00:30:32,360 --> 00:30:35,480 Speaker 1: got Anglo Saxon innovation and European market size. That was 575 00:30:35,640 --> 00:30:38,160 Speaker 1: that was very juicy. Now that that has to change 576 00:30:38,160 --> 00:30:40,640 Speaker 1: because we've left the EU, I don't think that that 577 00:30:40,800 --> 00:30:44,000 Speaker 1: rules out future roles for sterling as a hedge in 578 00:30:44,080 --> 00:30:46,760 Speaker 1: the world against other narratives. That will also change. So 579 00:30:46,800 --> 00:30:49,400 Speaker 1: I'm optimistic in the sense that the UK is like 580 00:30:49,720 --> 00:30:53,160 Speaker 1: front loading its twenty century supply side shock or one 581 00:30:53,200 --> 00:30:56,080 Speaker 1: of them, and reacting to these these things that we're seeing, 582 00:30:56,120 --> 00:30:59,680 Speaker 1: like covid and Ukraine, in a way that ultimately is 583 00:30:59,720 --> 00:31:02,480 Speaker 1: add aisle. And ultimately, you know, with agility there's always 584 00:31:02,480 --> 00:31:05,120 Speaker 1: a premium in the medium term. What's the feeling how 585 00:31:05,160 --> 00:31:08,080 Speaker 1: tough of this winter be for Europe, for the UK? Um, 586 00:31:08,880 --> 00:31:11,520 Speaker 1: what's the thinking these days in terms of energy and 587 00:31:11,840 --> 00:31:15,040 Speaker 1: all that time? Yeah, well, tough, tough, I think. I 588 00:31:15,120 --> 00:31:17,240 Speaker 1: think that if we sort of move over the channel 589 00:31:17,320 --> 00:31:20,160 Speaker 1: to the Germans, M Schultz is not happy. We saw 590 00:31:20,200 --> 00:31:23,360 Speaker 1: that the other day. Um, I said earlier, people are 591 00:31:23,360 --> 00:31:25,120 Speaker 1: gonna get cold and I think I'll stand by that. 592 00:31:25,240 --> 00:31:26,640 Speaker 1: I think some people are going to be cold and 593 00:31:26,680 --> 00:31:28,240 Speaker 1: it might be worse than that. If you think about 594 00:31:28,320 --> 00:31:31,000 Speaker 1: elderly people, if you think about children, if you think 595 00:31:31,000 --> 00:31:34,160 Speaker 1: about businesses and firms shutting down, it's not just temperature, 596 00:31:34,200 --> 00:31:36,400 Speaker 1: it's also going to be activity. So I think it's 597 00:31:36,520 --> 00:31:41,440 Speaker 1: very tough. But looking even further right, further east, I'm 598 00:31:41,480 --> 00:31:44,680 Speaker 1: not sure that Puson is having the best time that 599 00:31:44,720 --> 00:31:46,520 Speaker 1: he you know, the best time that he thought he would. 600 00:31:47,240 --> 00:31:50,880 Speaker 1: So yeah, a lot of Geo political issues out there today. 601 00:31:51,040 --> 00:31:53,120 Speaker 1: Just happened to be in the United Kingdom again. A 602 00:31:53,280 --> 00:31:57,120 Speaker 1: big big tax cuts in the face of rising interest 603 00:31:57,200 --> 00:31:59,880 Speaker 1: rates and a slowing economy, ed price joints as his 604 00:32:00,000 --> 00:32:02,560 Speaker 1: a senior fellow to N Y U formers, British trade 605 00:32:02,600 --> 00:32:05,400 Speaker 1: official joining us here in our Bloomberg interactive broker studio. 606 00:32:08,480 --> 00:32:11,560 Speaker 1: Thanks for listening to the Bloomberg markets podcast. You can 607 00:32:11,600 --> 00:32:15,360 Speaker 1: subscribe and listen to interviews with apple podcasts or whatever 608 00:32:15,480 --> 00:32:19,080 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on twitter 609 00:32:19,400 --> 00:32:23,200 Speaker 1: at Matt Miller. Three on ball Sweeney, I'm on twitter 610 00:32:23,280 --> 00:32:26,080 Speaker 1: at PT Sweeney. Before the podcast you can always catch 611 00:32:26,200 --> 00:32:27,720 Speaker 1: US worldwide at Bloomberg radio.