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
00:00:11,560 --> 00:00:15,600
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

5
00:00:15,600 --> 00:00:18,479
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

6
00:00:18,480 --> 00:00:23,360
Speaker 1: at Bloomberg dot com slash podcast. I promised you Phil Orlando,

7
00:00:23,400 --> 00:00:25,239
Speaker 1: and we will bring you Phil Orlando. He's the chief

8
00:00:25,239 --> 00:00:28,640
Speaker 1: equity market strategist and ahead of client portfolio management at

9
00:00:28,680 --> 00:00:35,519
Speaker 1: Federated Hermes. And what an insane weekend, Phil Um. You know,

10
00:00:35,840 --> 00:00:39,720
Speaker 1: do you have to look at at the playbook, rip

11
00:00:39,760 --> 00:00:41,519
Speaker 1: it up, throw it away, right up a new one

12
00:00:41,560 --> 00:00:46,200
Speaker 1: when you see this kind of volatility and commodities, well,

13
00:00:46,280 --> 00:00:48,519
Speaker 1: for for sure. First of all, Matt, thank you very

14
00:00:48,600 --> 00:00:52,240
Speaker 1: much for having me back on um. You know, we

15
00:00:52,240 --> 00:00:55,280
Speaker 1: we had this longer term view going back. I guess

16
00:00:55,280 --> 00:00:57,440
Speaker 1: a year and a half ago that oil at thirty

17
00:00:57,520 --> 00:01:01,120
Speaker 1: or thirty five dollars a barrel was low and was

18
00:01:01,160 --> 00:01:04,800
Speaker 1: probably gonna work higher. But we we've just seen a

19
00:01:04,880 --> 00:01:08,160
Speaker 1: forty five percent increase in two weeks, going from ninety

20
00:01:08,200 --> 00:01:10,800
Speaker 1: dollars a barrel to a hundred and thirty dollars a barrel,

21
00:01:11,319 --> 00:01:16,319
Speaker 1: you know earlier today, I mean that's insane, um and um.

22
00:01:16,440 --> 00:01:21,440
Speaker 1: The implication on inflation data, I think it is something

23
00:01:21,480 --> 00:01:23,640
Speaker 1: that that we're sort of focused on. So we're going

24
00:01:23,720 --> 00:01:26,679
Speaker 1: to get an update on the consumer price index later

25
00:01:26,800 --> 00:01:30,679
Speaker 1: this week. So the consumer price index in January was

26
00:01:30,760 --> 00:01:33,399
Speaker 1: up seven and a half percent. That's a forty year high.

27
00:01:33,560 --> 00:01:36,039
Speaker 1: That number is expected to go to seven point nine

28
00:01:36,080 --> 00:01:38,760
Speaker 1: percent in February, but none of that is going to

29
00:01:38,880 --> 00:01:42,040
Speaker 1: reflect this forty five percent spike we just saw an

30
00:01:42,120 --> 00:01:45,000
Speaker 1: energy So as bad as the inflation data is today

31
00:01:45,640 --> 00:01:47,280
Speaker 1: and as bad as it's going to be when we

32
00:01:47,319 --> 00:01:50,600
Speaker 1: see this update a couple of days, you know, March April,

33
00:01:51,040 --> 00:01:53,920
Speaker 1: those numbers are going higher because we don't have an

34
00:01:53,920 --> 00:01:57,680
Speaker 1: answer to what's going on right now. I'm wondering if Phil,

35
00:01:57,800 --> 00:01:59,800
Speaker 1: you know, if you look at the year ahead, how

36
00:02:00,040 --> 00:02:03,280
Speaker 1: ad kind of get for the everyday consumer feeling these

37
00:02:03,280 --> 00:02:05,960
Speaker 1: price increases. I'm looking at a note from David Kelly

38
00:02:06,000 --> 00:02:08,440
Speaker 1: over at JP Morgan, and he says, if oil prices

39
00:02:08,480 --> 00:02:11,119
Speaker 1: stay at a barrel for the rest of the year,

40
00:02:11,680 --> 00:02:14,959
Speaker 1: gasoline will average close to four twenty for the year,

41
00:02:15,320 --> 00:02:21,040
Speaker 1: adding more than a thousand dollars. Sweet goodness. But you know, Phil,

42
00:02:21,080 --> 00:02:23,440
Speaker 1: I'm wondering, you know, if you are just kind of

43
00:02:23,440 --> 00:02:28,640
Speaker 1: the everyday person in the US, how is this impacting you.

44
00:02:29,800 --> 00:02:33,080
Speaker 1: It's impacting you significantly. My wife and I put gas

45
00:02:33,080 --> 00:02:36,120
Speaker 1: in the car yesterday and it dawned on us that

46
00:02:36,120 --> 00:02:38,800
Speaker 1: that and we bought, you know, at a cheap gas station.

47
00:02:39,120 --> 00:02:41,120
Speaker 1: Place of gas has gone up fifty cents in the

48
00:02:41,120 --> 00:02:44,680
Speaker 1: New York area in the last week or two. Um.

49
00:02:45,040 --> 00:02:48,120
Speaker 1: You look at and Dr Kelly, I think is one

50
00:02:48,160 --> 00:02:50,400
Speaker 1: of the most brilliant economists in the game today. So

51
00:02:50,440 --> 00:02:52,880
Speaker 1: I'm not going to disagree with anything that David said.

52
00:02:53,400 --> 00:02:55,960
Speaker 1: But we've done some analysis on this too, and every

53
00:02:56,040 --> 00:03:00,520
Speaker 1: one penny change at the pump impacts consumers spending by

54
00:03:00,560 --> 00:03:04,400
Speaker 1: about one point two billion dollars. Well, we've just doubled

55
00:03:04,440 --> 00:03:07,320
Speaker 1: the price of gasoline over the last year or so.

56
00:03:07,400 --> 00:03:10,600
Speaker 1: We've gone from two dollars eleven cents, we're now up

57
00:03:10,600 --> 00:03:13,760
Speaker 1: to what you say, four dollars and twenty cents. That

58
00:03:13,760 --> 00:03:18,280
Speaker 1: that's going to take a significant amount of firepower out

59
00:03:18,360 --> 00:03:22,560
Speaker 1: of the consumer. We've already seen confidence levels go down

60
00:03:22,600 --> 00:03:25,920
Speaker 1: to eleven year lows with the Michigan Sentiment. We've already

61
00:03:25,919 --> 00:03:29,680
Speaker 1: seen the savings rate come down to an eight year

62
00:03:29,760 --> 00:03:33,760
Speaker 1: low of six six point four percent. UM, that's going

63
00:03:33,800 --> 00:03:36,960
Speaker 1: to start to have a deletarious impact in our view

64
00:03:37,240 --> 00:03:41,600
Speaker 1: on UH, consumption, economic growth and and UH. And I'm

65
00:03:41,640 --> 00:03:45,080
Speaker 1: not sure that we can fully appreciate right now because

66
00:03:45,200 --> 00:03:48,040
Speaker 1: this thing is sort of exploding right in front of us.

67
00:03:48,440 --> 00:03:50,960
Speaker 1: But you know, we took our GDP estimate for the

68
00:03:51,000 --> 00:03:54,440
Speaker 1: first quarter down at our macro policy meeting last week.

69
00:03:54,480 --> 00:03:56,720
Speaker 1: I'm sure a lot of other firms are doing the

70
00:03:56,760 --> 00:03:59,840
Speaker 1: same thing. Um, you've got to reflect the fact that

71
00:04:00,160 --> 00:04:03,920
Speaker 1: we have done a poor job managing the situation. Energy

72
00:04:03,960 --> 00:04:07,119
Speaker 1: prices are up, inflations up, and that's can impact economic

73
00:04:07,240 --> 00:04:10,600
Speaker 1: rowth well. And of course there's a war, right UM,

74
00:04:10,840 --> 00:04:15,960
Speaker 1: that that changes everything. We had some incredible tail winds though. UM.

75
00:04:16,000 --> 00:04:20,480
Speaker 1: Matt Winkler came out with a column today talking about, Yes, UM,

76
00:04:20,600 --> 00:04:24,760
Speaker 1: consumers outlook is poor, but CEOs outlook is incredibly strong.

77
00:04:24,839 --> 00:04:29,960
Speaker 1: The Business Roundtable had their quarterly Economic Outlook Index at

78
00:04:29,960 --> 00:04:32,159
Speaker 1: an all time high at the end of last year.

79
00:04:32,200 --> 00:04:34,320
Speaker 1: If you look at the first quarter earning season, three

80
00:04:34,400 --> 00:04:37,320
Speaker 1: hundred companies in the SMP five hundred say they're gonna

81
00:04:37,400 --> 00:04:39,920
Speaker 1: hire more people this year than at any point during

82
00:04:39,920 --> 00:04:45,679
Speaker 1: the past three decades. UM, So capex plans are off

83
00:04:45,720 --> 00:04:49,560
Speaker 1: the charts. I mean, corporate America is still so strong.

84
00:04:50,480 --> 00:04:56,080
Speaker 1: Does this, um, you know, volatility due to war reflect

85
00:04:56,240 --> 00:04:59,839
Speaker 1: or or give you some kind of buying opportunity. So,

86
00:05:00,279 --> 00:05:02,920
Speaker 1: met you said something very interesting, which was that the

87
00:05:02,960 --> 00:05:05,880
Speaker 1: CEO meeting was was was held at the end of

88
00:05:05,960 --> 00:05:09,360
Speaker 1: last year. And if you look at the job's data

89
00:05:09,400 --> 00:05:11,479
Speaker 1: we've seen and we just got an update on Friday,

90
00:05:11,600 --> 00:05:14,360
Speaker 1: the labor market is very strong. You know, we've been

91
00:05:14,400 --> 00:05:18,200
Speaker 1: averaging what five six seven hundred thousand highers a month

92
00:05:19,080 --> 00:05:21,119
Speaker 1: over the last six months or so. So the labor

93
00:05:21,200 --> 00:05:25,280
Speaker 1: markets not the problem. Manufacturing is very strong. UM. We're

94
00:05:25,400 --> 00:05:29,000
Speaker 1: we've got inventory or stocking going on. Uh. There there's

95
00:05:29,040 --> 00:05:33,080
Speaker 1: a significant deficit that manufacturers are trying to fill that

96
00:05:33,200 --> 00:05:36,080
Speaker 1: part of the market strong. What what we were talking

97
00:05:36,120 --> 00:05:41,119
Speaker 1: about a few minutes ago was the consumer that UM,

98
00:05:41,160 --> 00:05:43,440
Speaker 1: putting food on the table, putting gas in your car,

99
00:05:43,560 --> 00:05:48,160
Speaker 1: heating your home uh is costing a lot more today

100
00:05:48,200 --> 00:05:51,440
Speaker 1: than it was a year ago. And and that's going

101
00:05:51,480 --> 00:05:55,000
Speaker 1: to begin to have a negative impact on the consumer.

102
00:05:55,040 --> 00:05:58,679
Speaker 1: And if you look at you know, economic growth, corporate

103
00:05:58,680 --> 00:06:02,200
Speaker 1: earnings growth. UM. The peak of the cycle was the

104
00:06:02,279 --> 00:06:05,080
Speaker 1: second quarter a year ago. We're we're not going into

105
00:06:05,080 --> 00:06:08,359
Speaker 1: a recession tomorrow, but but we are back on a

106
00:06:08,880 --> 00:06:12,080
Speaker 1: you know, a significant glide path to something that's a

107
00:06:12,120 --> 00:06:14,920
Speaker 1: lot slower. All right, Phil, great to get some time

108
00:06:14,960 --> 00:06:16,960
Speaker 1: with you. Thanks so much for joining us. Really appreciate

109
00:06:17,000 --> 00:06:20,600
Speaker 1: your insight. Phil Orlando is the chief equity market strategist

110
00:06:20,640 --> 00:06:25,080
Speaker 1: and the head of client portfolio Management at Federated Hermes Um.

111
00:06:25,120 --> 00:06:30,279
Speaker 1: We do see Hinnali stocks that have bounced backed, or

112
00:06:30,360 --> 00:06:32,520
Speaker 1: we did see stocks that bounced back to some extent

113
00:06:32,600 --> 00:06:36,080
Speaker 1: in Europe. Um, they're now back down in the red.

114
00:06:36,160 --> 00:06:38,320
Speaker 1: The CAT is now off one percent, the Dacks is

115
00:06:38,400 --> 00:06:40,240
Speaker 1: down one and a half percent. Here in the US,

116
00:06:40,760 --> 00:06:44,560
Speaker 1: we're seeing the indexes fall further. Maybe as we heard

117
00:06:44,560 --> 00:06:48,400
Speaker 1: Phil talk um, he seemed a little bit not constructive,

118
00:06:48,600 --> 00:06:50,320
Speaker 1: and maybe that's why the DOWN now is down four

119
00:06:50,400 --> 00:06:53,359
Speaker 1: hundred thirty points, the SMP off one point four percent.

120
00:06:57,200 --> 00:06:59,800
Speaker 1: We're gonna talk to pre Amisser right now, Managing director,

121
00:07:00,000 --> 00:07:04,360
Speaker 1: Global head of Rate Strategy over TV Securities. Pre Um,

122
00:07:04,400 --> 00:07:07,320
Speaker 1: really looking forward to getting your take. What is this

123
00:07:08,200 --> 00:07:11,000
Speaker 1: rising price of oil, you know, the the insane amount

124
00:07:11,040 --> 00:07:14,080
Speaker 1: of I guess uncertainty caused by the war in Ukraine.

125
00:07:14,120 --> 00:07:18,240
Speaker 1: Mean for your outlook, sure, thanks for having me, Matt.

126
00:07:18,560 --> 00:07:21,960
Speaker 1: So you know we're in a stack flationary shock. We're

127
00:07:22,000 --> 00:07:25,200
Speaker 1: living through the shock right now. Plus as you said, uncertainty.

128
00:07:25,240 --> 00:07:27,960
Speaker 1: So the market prices in the risk that this could

129
00:07:28,000 --> 00:07:30,840
Speaker 1: get worse and prices could continue to rise. I don't

130
00:07:30,880 --> 00:07:35,160
Speaker 1: think an overall Russia embargo of the oil is priced in.

131
00:07:35,440 --> 00:07:37,400
Speaker 1: So I do think if there's an announcement that the

132
00:07:37,520 --> 00:07:41,000
Speaker 1: US or globally or or US and you are putting

133
00:07:41,040 --> 00:07:42,920
Speaker 1: forth the s embargo, I think you're going to see

134
00:07:42,920 --> 00:07:46,720
Speaker 1: for the rise and commodity prices. And so the the

135
00:07:46,840 --> 00:07:50,000
Speaker 1: rates market is really struggling right now with pricing in

136
00:07:50,400 --> 00:07:54,920
Speaker 1: higher inflation, but as the stagflation aspect of it as well,

137
00:07:54,920 --> 00:07:57,760
Speaker 1: and which is why real rates are declining. At the

138
00:07:57,760 --> 00:08:00,600
Speaker 1: same time, you have the FED that signal that inflation

139
00:08:00,680 --> 00:08:02,760
Speaker 1: was high before the war and therefore they're going to

140
00:08:02,800 --> 00:08:05,600
Speaker 1: start lift off. So it's all about I think the

141
00:08:05,720 --> 00:08:07,920
Speaker 1: you know, next week's psyche is Priceton and the market

142
00:08:08,400 --> 00:08:11,760
Speaker 1: percent price for it. We've taken fifty basis points off,

143
00:08:11,840 --> 00:08:14,480
Speaker 1: but it's really what's after that. Do you think that

144
00:08:14,520 --> 00:08:17,760
Speaker 1: the FED will start to raise more slowly given all

145
00:08:17,800 --> 00:08:21,920
Speaker 1: of these very serious concerns that are out there about

146
00:08:21,960 --> 00:08:25,800
Speaker 1: the direction of inflation here. Yeah, So I think there

147
00:08:25,880 --> 00:08:29,000
Speaker 1: was a big debate before the war within FED officials

148
00:08:29,000 --> 00:08:31,640
Speaker 1: then in the macro community. Should the FED start with

149
00:08:31,680 --> 00:08:33,920
Speaker 1: a bang and then they have to do less later on,

150
00:08:34,040 --> 00:08:36,600
Speaker 1: or do they go gradual? And you could tell every

151
00:08:36,640 --> 00:08:39,080
Speaker 1: FED official was in one camp or the other at

152
00:08:39,080 --> 00:08:42,680
Speaker 1: the margin the war. Absolutely, we should push more FED

153
00:08:42,720 --> 00:08:45,560
Speaker 1: officials into the gradual camp. I think chare powerless in

154
00:08:45,640 --> 00:08:47,520
Speaker 1: that camp, and so we do think that they start

155
00:08:47,559 --> 00:08:51,680
Speaker 1: with but I think they're likely to continue to raise

156
00:08:52,200 --> 00:08:55,960
Speaker 1: in consecutive twenty five basis point increments till year end.

157
00:08:56,080 --> 00:08:58,920
Speaker 1: We have them going five more times after March to

158
00:08:59,040 --> 00:09:01,960
Speaker 1: get close to the one seventy five WI range, which

159
00:09:02,000 --> 00:09:04,720
Speaker 1: is where you're in the realm of neutral. I didn't

160
00:09:04,760 --> 00:09:07,280
Speaker 1: going above neutral, which I don't think the FED wants

161
00:09:07,280 --> 00:09:09,960
Speaker 1: to communicate. That would be really negative because you've got

162
00:09:09,960 --> 00:09:14,200
Speaker 1: the consumer reeling under higher prices plus restrictive policy. But

163
00:09:14,400 --> 00:09:17,160
Speaker 1: right now we're just moving off to Z and so

164
00:09:17,240 --> 00:09:19,560
Speaker 1: you know, circulation is never fun. But if the economy

165
00:09:19,559 --> 00:09:22,680
Speaker 1: has momentum, which it does this wage inflation, we think

166
00:09:22,679 --> 00:09:25,200
Speaker 1: the consumer will be able to handle gradual piece of

167
00:09:25,280 --> 00:09:28,320
Speaker 1: rate increases as well as of course higher prices. You know,

168
00:09:28,800 --> 00:09:31,199
Speaker 1: I'm looking at the f R A O I A

169
00:09:31,400 --> 00:09:36,800
Speaker 1: spread that sounds wonky, but what really it is, Yes,

170
00:09:37,040 --> 00:09:39,400
Speaker 1: and the reason I'm looking at it is is an

171
00:09:39,440 --> 00:09:44,439
Speaker 1: airport in Germany on the show. Alright, alright, you learn

172
00:09:44,480 --> 00:09:45,760
Speaker 1: something new every day. But the thing is, if you

173
00:09:45,800 --> 00:09:48,520
Speaker 1: look at it, it is really blown out. And what

174
00:09:48,640 --> 00:09:52,760
Speaker 1: it means normally is that there are some stresses underneath

175
00:09:52,760 --> 00:09:57,400
Speaker 1: the financial system that the average person isn't necessarily seeing

176
00:09:57,520 --> 00:10:00,679
Speaker 1: that much. I'm wondering what it says to you and

177
00:10:00,840 --> 00:10:04,960
Speaker 1: overall financial stability. Yeah, you know this. And then when

178
00:10:04,960 --> 00:10:07,520
Speaker 1: you say fray, I actually do think of library right away,

179
00:10:07,600 --> 00:10:10,240
Speaker 1: not the airport. So it is a big deal for

180
00:10:10,280 --> 00:10:13,760
Speaker 1: the rates market. And the last week the frau way

181
00:10:13,920 --> 00:10:17,760
Speaker 1: or the library Ois spread is indicating into bank funding issues,

182
00:10:17,800 --> 00:10:20,640
Speaker 1: and you know that that does tighten financial conditions. This

183
00:10:20,720 --> 00:10:22,960
Speaker 1: was the only topic we were talking about last week.

184
00:10:23,240 --> 00:10:25,440
Speaker 1: Of course, now it's shifted to oil, which is also

185
00:10:25,520 --> 00:10:28,400
Speaker 1: tightening conditions. But what's happening is I think the market's

186
00:10:28,440 --> 00:10:32,520
Speaker 1: nervous that does the war result in the lack of

187
00:10:32,559 --> 00:10:36,200
Speaker 1: availability of funding, in which case, now you've got a

188
00:10:36,200 --> 00:10:38,679
Speaker 1: funding you've already credit issues, and now do you have

189
00:10:38,720 --> 00:10:42,240
Speaker 1: a funding crisis. I would actually now I'm a little

190
00:10:42,360 --> 00:10:45,240
Speaker 1: less worried about the funding side. There's a lot of

191
00:10:45,360 --> 00:10:49,440
Speaker 1: money in the system. Banks have excess reserves, um you know,

192
00:10:49,480 --> 00:10:52,480
Speaker 1: money market funds have not seen massive increases on the

193
00:10:52,480 --> 00:10:55,440
Speaker 1: prime side, which is what we had going into the

194
00:10:55,520 --> 00:10:58,360
Speaker 1: COVID crisis. We just lived through the COVID sort of

195
00:10:58,440 --> 00:11:01,320
Speaker 1: deleveraging EPI, so I don't think there has been more

196
00:11:01,400 --> 00:11:05,679
Speaker 1: leverage built up. So is the cost of funding going up? Absolutely,

197
00:11:05,760 --> 00:11:08,240
Speaker 1: and that's what that library spread is showing you. But

198
00:11:08,360 --> 00:11:11,280
Speaker 1: we've got um, you know, liquority in the system, and

199
00:11:11,280 --> 00:11:13,960
Speaker 1: we've got center bank facilities and they're not getting tapped.

200
00:11:14,440 --> 00:11:18,000
Speaker 1: So right now, the way things stand, I think there

201
00:11:18,080 --> 00:11:21,320
Speaker 1: is higher cost, but it's still not systemic enough where

202
00:11:21,320 --> 00:11:23,120
Speaker 1: the FED needs to step in or where we have

203
00:11:23,160 --> 00:11:26,160
Speaker 1: to get concerned that somebody doesn't get funding. I think

204
00:11:26,160 --> 00:11:29,040
Speaker 1: the need for funding is lower, but credit risk is

205
00:11:29,040 --> 00:11:32,080
Speaker 1: absolutely getting repriced higher, and that should show up in

206
00:11:32,280 --> 00:11:35,320
Speaker 1: wider front end as well, as you know longer dated

207
00:11:35,320 --> 00:11:37,760
Speaker 1: credit spread, we only have thirty seconds, so ask a

208
00:11:37,760 --> 00:11:40,719
Speaker 1: gigantic question. Um, we were looking at the librar or

209
00:11:40,760 --> 00:11:43,120
Speaker 1: spread last week because of his old and pos are

210
00:11:43,160 --> 00:11:46,560
Speaker 1: and then on I think people kind of dismissed that

211
00:11:47,280 --> 00:11:50,840
Speaker 1: alarmist warning that we got from him on last weekend.

212
00:11:50,880 --> 00:11:54,840
Speaker 1: But then he had a great podcast with Joe Wisenhal

213
00:11:54,880 --> 00:11:57,600
Speaker 1: and Tracy Alloway talking about the dollar as a world

214
00:11:57,679 --> 00:12:00,680
Speaker 1: reserve currency. Is that going to change range due to

215
00:12:00,760 --> 00:12:06,480
Speaker 1: this war? So if we're talking long term, would um,

216
00:12:06,640 --> 00:12:09,520
Speaker 1: you know, people outside the US want an alternative show,

217
00:12:10,000 --> 00:12:12,480
Speaker 1: but is there an alternative? I have to say, like

218
00:12:12,520 --> 00:12:16,120
Speaker 1: the liquidity, the size, the rule of law, certain things

219
00:12:16,160 --> 00:12:19,040
Speaker 1: that work for the dollars a reserve currency, I would

220
00:12:19,040 --> 00:12:21,960
Speaker 1: struggle to find an alternative. So you know it's a

221
00:12:22,000 --> 00:12:24,800
Speaker 1: desire there, yes, but I don't know if the dollar

222
00:12:24,880 --> 00:12:28,040
Speaker 1: will be replaced anytime soon. It's the same question you

223
00:12:28,040 --> 00:12:30,000
Speaker 1: can make with swift and the the reason the dollar

224
00:12:30,080 --> 00:12:32,760
Speaker 1: works that everyone uses it, so there's that network effect.

225
00:12:33,200 --> 00:12:36,800
Speaker 1: So I'm a little less concerned that, you know, lack

226
00:12:36,880 --> 00:12:39,840
Speaker 1: of alternatives will mean that that the dollar actually stays

227
00:12:40,440 --> 00:12:43,719
Speaker 1: a reserve acid. It's a question we're asking renewed now

228
00:12:43,760 --> 00:12:48,080
Speaker 1: that Visa, MasterCard, and MX have all um stopped their

229
00:12:48,120 --> 00:12:50,880
Speaker 1: business in Russia and now everyone on that side of

230
00:12:50,920 --> 00:12:53,120
Speaker 1: the Iron curtain, if I can use that phrases, looking

231
00:12:53,120 --> 00:12:56,720
Speaker 1: for UM is looking for a solution again. Pretty great.

232
00:12:56,760 --> 00:13:00,680
Speaker 1: Talking to your preamisra There, managing director and the global

233
00:13:00,720 --> 00:13:07,280
Speaker 1: head of rate strategy at TV Securities. Everett Milman joins

234
00:13:07,360 --> 00:13:11,479
Speaker 1: US chief market analystic Gainesville Coins to talk about commodities,

235
00:13:11,600 --> 00:13:15,080
Speaker 1: and I guess we'll start specifically, Everett with gold. We

236
00:13:15,120 --> 00:13:17,160
Speaker 1: saw it run up past two thousand dollars for a

237
00:13:17,200 --> 00:13:22,880
Speaker 1: little while today. UM, if Russian bullion is effectively banned

238
00:13:23,480 --> 00:13:27,000
Speaker 1: new gold out of Russia's band, how important is that?

239
00:13:27,040 --> 00:13:31,360
Speaker 1: How important is their production? Well, they are um one

240
00:13:31,400 --> 00:13:34,080
Speaker 1: of the major holders of gold, and they certainly make

241
00:13:34,200 --> 00:13:37,880
Speaker 1: up some large proportion of global demands. But the main

242
00:13:38,000 --> 00:13:40,400
Speaker 1: impact of that move that I would be looking for

243
00:13:40,600 --> 00:13:45,480
Speaker 1: is banning Russian gold from you know, London and access

244
00:13:45,520 --> 00:13:48,720
Speaker 1: to Western trade really does push them into the arms

245
00:13:48,720 --> 00:13:52,000
Speaker 1: of Shanghai. And there are a few other global exchange

246
00:13:52,120 --> 00:13:56,160
Speaker 1: exchanges where Russia could theoretically get its gold to market.

247
00:13:56,280 --> 00:13:59,120
Speaker 1: So in some sense, in the short term, yes, it

248
00:13:59,120 --> 00:14:02,880
Speaker 1: it is a negative for Russian gold, but ultimately, in

249
00:14:02,920 --> 00:14:05,400
Speaker 1: the long run it may change some of the kind

250
00:14:05,400 --> 00:14:09,200
Speaker 1: of alliances and um, the trade of gold in the

251
00:14:09,240 --> 00:14:11,640
Speaker 1: east to west. We may see Russia really turned more

252
00:14:11,679 --> 00:14:14,640
Speaker 1: to Beijing into Shanghai for its goal. By the way,

253
00:14:14,640 --> 00:14:21,280
Speaker 1: how how important is gold as a reserve currency store

254
00:14:21,320 --> 00:14:24,520
Speaker 1: of wealth? As we see you know, central banks around

255
00:14:24,520 --> 00:14:29,920
Speaker 1: the world telling a large autonomous nation you can no

256
00:14:30,000 --> 00:14:32,520
Speaker 1: longer have access to the dollars that we were holding

257
00:14:32,560 --> 00:14:37,160
Speaker 1: for you, you know, effectively hitting the green back as

258
00:14:37,160 --> 00:14:41,600
Speaker 1: a world reserve currency pretty hard, right. UM. I think

259
00:14:41,640 --> 00:14:45,640
Speaker 1: it is still crucial, although gold is often overlooked because

260
00:14:45,640 --> 00:14:48,320
Speaker 1: it is seen as his barbarous relic that we no

261
00:14:48,400 --> 00:14:52,080
Speaker 1: longer directly back our money with gold, of course, UM.

262
00:14:52,120 --> 00:14:54,560
Speaker 1: But as you said, central banks around the world hold

263
00:14:55,080 --> 00:14:58,080
Speaker 1: many many tons of gold. UM. And we've been seeing

264
00:14:58,120 --> 00:15:00,960
Speaker 1: that on the COMEX, in the l B m A

265
00:15:01,520 --> 00:15:04,480
Speaker 1: that there have been outflows. There's been quite a bit

266
00:15:04,520 --> 00:15:07,240
Speaker 1: of gold kind of taken out of the over the

267
00:15:07,280 --> 00:15:11,320
Speaker 1: counter trading markets. UM. And that implies that oftentimes there

268
00:15:11,360 --> 00:15:15,960
Speaker 1: are large sovereign buyers behind those moves. So given that, UM,

269
00:15:16,000 --> 00:15:18,800
Speaker 1: not just Russia, but anyone who's willing to do business

270
00:15:18,880 --> 00:15:22,440
Speaker 1: with Russia could be cut off from Western finance and

271
00:15:22,480 --> 00:15:27,000
Speaker 1: from Western banking. That does perhaps highlight gold role in

272
00:15:27,320 --> 00:15:31,240
Speaker 1: the future that it is UM still a zero risk

273
00:15:31,280 --> 00:15:35,080
Speaker 1: asset that has the same characteristics as a reserve currency,

274
00:15:35,200 --> 00:15:37,680
Speaker 1: even though UM I don't believe any of this directly

275
00:15:37,760 --> 00:15:41,720
Speaker 1: threatens the dollar status. All right, Everett, thanks so much

276
00:15:41,720 --> 00:15:43,680
Speaker 1: for joining us every moment in their chief market analyst

277
00:15:43,720 --> 00:15:46,760
Speaker 1: at Gainesville Coins. Hopefully get spent a little bit more

278
00:15:46,760 --> 00:15:55,320
Speaker 1: time with you later. I'm looking at the SMP right now,

279
00:15:55,360 --> 00:15:57,400
Speaker 1: Seale breaking it down by industry group. You gotta look

280
00:15:57,400 --> 00:16:00,680
Speaker 1: at sp X L one or L two or L three.

281
00:16:01,000 --> 00:16:02,440
Speaker 1: It's kind of a pain. You don't do that with

282
00:16:02,480 --> 00:16:05,560
Speaker 1: the toxics D but I'll look at it level one.

283
00:16:05,680 --> 00:16:08,680
Speaker 1: I'm trying to see how chips have done. I guess

284
00:16:08,840 --> 00:16:10,760
Speaker 1: you've got to break it down to infotech. I suppose

285
00:16:10,760 --> 00:16:12,960
Speaker 1: I could just look at the Socks Index, right is

286
00:16:13,000 --> 00:16:17,440
Speaker 1: that the Philly Socks Index to see UM how chips

287
00:16:17,440 --> 00:16:19,880
Speaker 1: have done in terms of semiconductors. Or I could look

288
00:16:19,880 --> 00:16:22,880
Speaker 1: at the eye shares e t F to see how

289
00:16:22,920 --> 00:16:26,080
Speaker 1: they've done year to date. Because we've been talking about

290
00:16:26,160 --> 00:16:29,960
Speaker 1: the supply chain problem and chip shortage for so long, UM,

291
00:16:30,160 --> 00:16:34,400
Speaker 1: but the industry has lost a lot of market cap

292
00:16:34,800 --> 00:16:37,440
Speaker 1: since two began. Let's bring in Lincoln Clark to talk

293
00:16:37,480 --> 00:16:40,400
Speaker 1: about what's going on and why. He's a partner of KPMG,

294
00:16:40,560 --> 00:16:44,560
Speaker 1: but he's also the global leader of their semiconductor practice. Lincoln,

295
00:16:44,560 --> 00:16:48,240
Speaker 1: thanks so much for joining us. UM. How is the

296
00:16:48,280 --> 00:16:52,000
Speaker 1: semi conductor industry faring right now? There's such as we

297
00:16:52,040 --> 00:16:56,840
Speaker 1: all have discovered, such a crucial part of the manufacturing

298
00:16:56,880 --> 00:17:01,400
Speaker 1: process for almost everything that we buy in you is UM,

299
00:17:01,400 --> 00:17:05,080
Speaker 1: but they haven't been rallying this year. Good morning, Matt,

300
00:17:05,160 --> 00:17:08,600
Speaker 1: thank you for making some time. And uh yeah, the

301
00:17:08,640 --> 00:17:11,159
Speaker 1: semi conductor industry, you're right if you you were talking

302
00:17:11,200 --> 00:17:14,320
Speaker 1: about the socks tracker, they're certainly some market cap has

303
00:17:14,359 --> 00:17:17,960
Speaker 1: been taken out of it. But we undertook a survey

304
00:17:18,000 --> 00:17:22,080
Speaker 1: of semiconductor executives in the fourth quarter so October November

305
00:17:22,160 --> 00:17:26,320
Speaker 1: last year, looking out to two, and the confidence that

306
00:17:26,600 --> 00:17:29,480
Speaker 1: is at an all time high. UM. You know, we're

307
00:17:29,520 --> 00:17:33,119
Speaker 1: focused on not just revenue growth, but capex, head count,

308
00:17:33,240 --> 00:17:37,160
Speaker 1: R and D and profitability. So notwithstanding the market cap

309
00:17:37,240 --> 00:17:40,640
Speaker 1: changes that you're referring to, their the executives themselves are

310
00:17:40,760 --> 00:17:43,479
Speaker 1: very very positive this. This is a great point and

311
00:17:43,560 --> 00:17:46,040
Speaker 1: I don't know if you've seen it, Yeah, but Matt Winkler,

312
00:17:46,119 --> 00:17:49,680
Speaker 1: or Editor in Chief emeritus, wrote an opinion piece this

313
00:17:49,720 --> 00:17:56,800
Speaker 1: morning about um C suite confidence. Basically, then the CEOs

314
00:17:56,880 --> 00:17:59,639
Speaker 1: of companies, not just in semi inductors, but across the

315
00:17:59,760 --> 00:18:04,200
Speaker 1: SMP five D are really optimistic for future growth, really

316
00:18:04,200 --> 00:18:09,320
Speaker 1: optimistic for profits, adding more employees than they have at

317
00:18:09,400 --> 00:18:13,920
Speaker 1: any time over the last decade. UM is the semiconductor

318
00:18:13,960 --> 00:18:16,840
Speaker 1: industry ramping up um the same way. I mean, we've

319
00:18:16,840 --> 00:18:19,719
Speaker 1: seen so many Capex reports in terms of investment. Are

320
00:18:19,720 --> 00:18:24,680
Speaker 1: they hiring people? Are they bringing production back home? Well,

321
00:18:24,800 --> 00:18:28,280
Speaker 1: the we've been doing this confidence index for seventeen years

322
00:18:28,320 --> 00:18:31,080
Speaker 1: with the Global Semi Conductor Alliance, and the confidence that

323
00:18:31,119 --> 00:18:34,320
Speaker 1: they exhibited in twenty two was the highest it's been.

324
00:18:34,760 --> 00:18:38,240
Speaker 1: If you think about the drivers that are behind the

325
00:18:38,320 --> 00:18:41,119
Speaker 1: semi conductor, as you mentioned, it's become very visible to

326
00:18:41,160 --> 00:18:44,639
Speaker 1: everybody that semi conductors are in pretty much everything that

327
00:18:44,760 --> 00:18:48,960
Speaker 1: might impact our work life, personal life. But the drivers

328
00:18:48,960 --> 00:18:50,920
Speaker 1: of that. You know a lot of businesses are going

329
00:18:50,920 --> 00:18:53,680
Speaker 1: from work from home to now a hybrid of work

330
00:18:53,680 --> 00:18:57,280
Speaker 1: from office and home. That's gonna you know, drive demand

331
00:18:57,400 --> 00:19:02,520
Speaker 1: for relooking at the office, infrastructure, cloud and digitization continues.

332
00:19:02,720 --> 00:19:05,480
Speaker 1: And then you know automotive, which has become i think

333
00:19:05,560 --> 00:19:08,640
Speaker 1: very visible and industrial. You know, they still have a

334
00:19:08,720 --> 00:19:12,640
Speaker 1: desperately seeking semi conductor's mentality, I think. And then you

335
00:19:12,680 --> 00:19:16,240
Speaker 1: have your you know, wireless vi G and gaming that continues.

336
00:19:16,520 --> 00:19:19,120
Speaker 1: Profitability I think is going to be a little bit

337
00:19:19,119 --> 00:19:23,560
Speaker 1: more stressed this year. As um Our survey would say that,

338
00:19:23,600 --> 00:19:26,080
Speaker 1: you know, thirty four percent of our executives think their

339
00:19:26,119 --> 00:19:30,520
Speaker 1: revenue is growing to grow over but you know, nearly

340
00:19:30,560 --> 00:19:33,879
Speaker 1: seventy say that they think the profitability might only grow

341
00:19:33,960 --> 00:19:36,199
Speaker 1: in the sort of want to ten percent. So some

342
00:19:36,280 --> 00:19:40,879
Speaker 1: of the costs of production, logistics, transportation, you know, that's

343
00:19:41,080 --> 00:19:43,640
Speaker 1: playing through a little bit on profitability. But top line,

344
00:19:43,960 --> 00:19:47,280
Speaker 1: very very confident, high growth. I mean, how does this

345
00:19:47,520 --> 00:19:52,520
Speaker 1: global geopolitical story really play into things here? It just

346
00:19:52,560 --> 00:19:55,679
Speaker 1: sounds like a lot of these executives are speaking, um,

347
00:19:55,720 --> 00:20:01,000
Speaker 1: you know, before Russia's invasion of Ukraine. Yeah, its Sonali,

348
00:20:01,119 --> 00:20:04,840
Speaker 1: thank you. I mean, the you know, the pandemic and

349
00:20:04,920 --> 00:20:10,600
Speaker 1: some of the geopolitical um pieces of the semiconductor industry

350
00:20:10,640 --> 00:20:12,480
Speaker 1: had you been going on for a period of time.

351
00:20:12,520 --> 00:20:15,800
Speaker 1: So I think executives have had that in the back

352
00:20:15,840 --> 00:20:18,840
Speaker 1: of the mind as the setting strategy. Clearly, the you know,

353
00:20:18,880 --> 00:20:21,240
Speaker 1: the situation of the last two or two and off

354
00:20:21,280 --> 00:20:24,080
Speaker 1: weeks or so here just creates and continues to create

355
00:20:24,200 --> 00:20:28,359
Speaker 1: more uncertainty, just just going to exacerbate the supply chain

356
00:20:28,440 --> 00:20:31,879
Speaker 1: issues that the semiconductor and many industry other industries to

357
00:20:31,880 --> 00:20:34,119
Speaker 1: be fair or going to face. Having said that, Lincoln,

358
00:20:34,119 --> 00:20:38,399
Speaker 1: how important is how important are Russia and Ukraine to

359
00:20:38,720 --> 00:20:45,880
Speaker 1: semiconductor production? I mean, um, do they supply you know, wafers, silicon,

360
00:20:46,000 --> 00:20:50,280
Speaker 1: anything that you need. Russia doesn't have any substantial or

361
00:20:50,400 --> 00:20:54,399
Speaker 1: Ukraine any substantial leading edge wafer capacity. Um. You know

362
00:20:54,480 --> 00:20:57,320
Speaker 1: there are some core elements though that you know, filter

363
00:20:57,400 --> 00:21:00,320
Speaker 1: into semic production and you've probably seen some just qushing

364
00:21:00,359 --> 00:21:07,320
Speaker 1: around palladium for example. But said, yes, that's reacting a

365
00:21:07,400 --> 00:21:11,880
Speaker 1: little bit. Um, So if if a semi conductor company,

366
00:21:11,960 --> 00:21:15,480
Speaker 1: you know, I had that supplier in that neighborhood as

367
00:21:15,520 --> 00:21:18,600
Speaker 1: a you know the first source, obviously you know the

368
00:21:18,800 --> 00:21:21,159
Speaker 1: second and said sources. But I think we'll be driving

369
00:21:21,200 --> 00:21:25,280
Speaker 1: a lot of proteoma activity right now. Lincoln, great to

370
00:21:25,320 --> 00:21:27,320
Speaker 1: get some time with you. Thanks so much for joining

371
00:21:27,400 --> 00:21:29,760
Speaker 1: us on such an important issue. Lincoln Clark is a

372
00:21:29,800 --> 00:21:34,840
Speaker 1: partner at KPMG. He is also KPMG's global leader of

373
00:21:34,960 --> 00:21:40,919
Speaker 1: the Semiconductor practice. Thanks for listening to the Bloomberg Markets podcast.

374
00:21:41,320 --> 00:21:44,520
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts

375
00:21:44,680 --> 00:21:48,560
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm

376
00:21:48,600 --> 00:21:52,800
Speaker 1: on Twitter at Matt Miller, vree on Fall Sweeney I'm

377
00:21:52,800 --> 00:21:55,439
Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can

378
00:21:55,480 --> 00:21:57,680
Speaker 1: always catch us worldwide at Bloomberg Radio.