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Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 2: my co host Matt Miller.

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Speaker 1: Every business day we bring you interviews from CEOs, market pros,

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Speaker 1: and Bloomberg experts, along with essential market movin news.

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Speaker 2: I'm the Bloomberg Markets Podcast called Apple Podcasts or wherever

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Speaker 2: you listen to podcasts, and at Bloomberg dot com, Slash podcast,

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Speaker 2: at Emma Go m Go, and I'm just clicking on

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Speaker 2: the time. Series is a terrible year for MNA, I mean,

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Speaker 2: less than three and a half trillion. You compare that

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Speaker 2: to twenty twenty one, which was a banner year of

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Speaker 2: about six and a half trillion of deals done. I mean,

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Speaker 2: this is the weakest year since twenty thirteen. How about

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Speaker 2: twenty twenty four any better? It's check in with Ted Smith,

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Speaker 2: co founder and president of Union Square Advisors.

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Speaker 3: Of course is highlight of.

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Speaker 2: His career when he's a managing director of Credit Swiss

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Speaker 2: First Fauston. I think we crossed passed there back in

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Speaker 2: the day. Hey, Ted, talk to us about twenty twenty three.

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Speaker 2: What did you see in the marketplace and more importantly,

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Speaker 2: what are you guys in the M and A biz

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Speaker 2: thinking about twenty twenty four?

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Speaker 4: Morning, Paul, Great to be with you again. Thanks well,

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Speaker 4: you hit the nail on the head. It certainly has

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Speaker 4: not been a great year for M and A in

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Speaker 4: twenty twenty three, off almost half from the peaks of

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Speaker 4: twenty twenty one. We saw a lot of fits and

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Speaker 4: starts this year. Heard the earlier commentary with Danielle about

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Speaker 4: where things are with the FED. That certainly put some

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Speaker 4: freeze on the market. The higher cost of capital for

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Speaker 4: longer meant that some folks stayed on the sidelines. Also,

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Speaker 4: as the large corporate acquirers were thinking about whether they

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Speaker 4: wanted to get back into the market or not. Took longer,

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Speaker 4: frankly than we thought at the beginning of the year,

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Speaker 4: so we started to see some green shoots really in

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Speaker 4: late late summer and right after Labor Day. We do

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Speaker 4: think activity is picking up now and we'll continue into

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Speaker 4: twenty twenty four, but we were delayed by about six

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Speaker 4: months from our beginning of twenty twenty three forecast on

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Speaker 4: when we thought M and A would start to pick

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Speaker 4: up from twenty twenty two, which itself was significantly down

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Speaker 4: from twenty one and ted.

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Speaker 5: When you look at though question around regulatory uncertainty, it

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Speaker 5: seems like the FTC is pushing back against everything. Is

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Speaker 5: that something that's top of mind at all?

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Speaker 3: It certainly is.

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Speaker 4: I mean, we think about it, and obviously acquirers think

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Speaker 4: about it. Such a big part of the market though

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Speaker 4: today is about private equity as acquirers, not just the strategics,

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Speaker 4: and they typically are not as wound around the issue

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Speaker 4: from a regulator's perspective. And also we've seen an approach

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Speaker 4: for a long time from the large strategic acquirers of

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Speaker 4: asking forgiveness rather than permission to do a number of

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Speaker 4: these deals. So we think that attitude will continue to pervade.

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Speaker 4: The FTC clearly and the DOJ clearly want to flex

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Speaker 4: their muscles here amongst the really large tech acquirers, and

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Speaker 4: we think that will continue to be the case. On

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Speaker 4: the other hand, there's a lot of other acquirers out

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Speaker 4: there other than the Magnificent seven that we think don't

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Speaker 4: get as much scrutiny and will probably rise up and

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Speaker 4: participate in more m and.

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Speaker 2: A ted the era of free money is over. We've

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Speaker 2: got a ten year trading north of four percent here,

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Speaker 2: So the cost of debt capitals higher for acquirers. How

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Speaker 2: is that impacting kind of activity, structures, that kind of thing.

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Speaker 4: Yeah, we definitely saw a little more structure, both in

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Speaker 4: terms because of the cost of debt, but also just

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Speaker 4: uncertainty in the market generally. But the reality, at least

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Speaker 4: for technology companies where USA we spend our time, is

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Speaker 4: that the cost of debt is still cheaper than the.

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Speaker 3: Cost of equity in most cases.

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Speaker 4: So while it's more expensive than it was a year ago,

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Speaker 4: two years ago, the total explosion in private credit that

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Speaker 4: we've seen over the last couple of years has really

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Speaker 4: made debts still a possible source of capital and meaningful

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Speaker 4: source of capital. We just completed a four hundred and

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Speaker 4: sixty million dollar transaction that was exclusively done in the

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Speaker 4: private credit market for a large private equity firm in

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Speaker 4: one of its portfolio companies.

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Speaker 3: So it's available.

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Speaker 4: Yes, it's more expensive than it has been, but we

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Speaker 4: continue to see the private credit markets being really active,

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Speaker 4: particularly in the tech sector.

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Speaker 5: Inted. I talked to IPO bankers for the bulk of

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Speaker 5: my day, and they keep kind of pounding the table

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Speaker 5: on valuation discrepancy. When you look at private equity buyers

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Speaker 5: who are in need to return some of the cash

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Speaker 5: to LPs, are they going to caveon valuation or how

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Speaker 5: are those conversations going to play out?

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Speaker 3: Yeah, I think it's a really good question. I think.

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Speaker 4: We continue to think that the IPO market is going

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Speaker 4: to be tepid going forward. I was an IPO banker

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Speaker 4: for the first phase of my career, and so I've

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Speaker 4: seen this up and down movie before. But we really

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Speaker 4: just don't see a lot of product likely to come

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Speaker 4: loose in the IPO markets. We do think those private

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Speaker 4: equity buyers who do need to return capital to their

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Speaker 4: LPs are more likely to pursue sales to either Strategics

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Speaker 4: or other private equity firms, but far more frequently and

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Speaker 4: at more volume than we'll see in the IPO market.

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Speaker 4: And if they do cave on value, we think that's

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Speaker 4: going to be the exception to pursuing an IPO rather

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Speaker 4: than the rule.

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Speaker 2: Hey, Ted, I know you guys at Union Square Advisors.

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Speaker 2: You know traffic a lot in the tech space. If

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Speaker 2: I go out to sand Hill Road and look for

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Speaker 2: some capital, or if I just go talk to the

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Speaker 2: folks out there, who are their VC folks, who are

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Speaker 2: the real capital folks out there for the tech industry.

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Speaker 2: What's the mood out there on sand Hill Road these days?

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Speaker 4: I think it's We're glad. Twenty twenty three is almost

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Speaker 4: in the rearview. Mirror is one big part of that.

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Speaker 4: There continues to be a lot of focus around investment,

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Speaker 4: around all things AI, although I think the irrational exuberance

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Speaker 4: around that is even coming down a bit.

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Speaker 3: Again.

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Speaker 4: I used the term green shoots earlier about what we

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Speaker 4: were seeing in M and A. We're certainly seeing a

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Speaker 4: little bit of an unloosening of the purse strings in

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Speaker 4: earlier stage VC, which obviously then leads to mid stage

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Speaker 4: and late stage VC investing for the right companies. So

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Speaker 4: I think right now the mood is we're going to

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Speaker 4: get through the end of the year. We're going to

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Speaker 4: take stock of where our portfolio is, but we want

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Speaker 4: to put more capital to work in twenty four than

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Speaker 4: we did in twenty three.

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Speaker 5: And looking at twenty four, how does that timeline play out.

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Speaker 5: Do we see a flurry of activity call it second

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Speaker 5: quarter ahead of an election in November and elections globally,

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Speaker 5: or how does that shape up in twenty twenty four.

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Speaker 3: It's a really good question.

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Speaker 4: It's somewhat ironic that we're sitting here talking about that

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Speaker 4: the more stable year is going to be the election

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Speaker 4: year than the year that we just went through, but

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Speaker 4: we do think that that may be there, at least

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Speaker 4: for the first half of the year.

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Speaker 3: That may be true.

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Speaker 4: We're working on a number of transactions where we've been

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Speaker 4: in prep mode for the fall that are going to

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Speaker 4: launch in January. I aspect our competitors are doing exactly

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Speaker 4: the same thing. So we do see sort of a

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Speaker 4: Q one Q two flurry of activity well ahead of

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Speaker 4: what we've seen in twenty twenty three. And then the

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Speaker 4: uncertainty that the elections always inject into the markets, may

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Speaker 4: take over as we hit summer and early fall leading

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Speaker 4: into the elections. As we all know, markets hate uncertainty,

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Speaker 4: so we'll see some up and down on that. We

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Speaker 4: may see some slowing in both the investing and the

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Speaker 4: M and A life cycle as we move closer to

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Speaker 4: the election, and then we may see a lot of

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Speaker 4: activity post November once it's clear one way or the

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Speaker 4: other which way things are going, at least in this country.

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Speaker 2: And Ted, one of the things that's new to me,

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Speaker 2: at least compared to when I was in your game

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Speaker 2: on the street is the growth of private credit. How

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Speaker 2: important is that to just getting deals done? Because we

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Speaker 2: talked to a lot of private credit people and the

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Speaker 2: capital is flowing into their funds like crazy and they're

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Speaker 2: really really active. Talk to us about that private credit business,

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Speaker 2: what it means for your M and A market.

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Speaker 4: Yeah, it's today, Paul, it's north of a two trillion

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Speaker 4: dollars asset class. So to your point, a lot of

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Speaker 4: money has gone into it. We continue to have that

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Speaker 4: be an incredible part of the work that we're doing

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Speaker 4: in our capital Off of our Capital Market's desk. We're

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Speaker 4: not underwriters we're arrangers, but we still have a tremendous

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Speaker 4: business led by Mike Meyer, who's driving that for us.

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Speaker 4: They're part of virtually every deal that we do on

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Speaker 4: the financing side, unless it's a pure equity deal. And

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Speaker 4: then when we're talking on the M and A side,

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Speaker 4: if there is going to be a debt component associated

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Speaker 4: with it, again, we'll tap a broad range of relationships

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Speaker 4: in that private credit market. So it's a long winded

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Speaker 4: way of saying they've become incredibly important not only to

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Speaker 4: our business but to the tech business broadly over the

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Speaker 4: last five years.

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Speaker 3: And we don't see that dimming at all.

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Speaker 5: And how does that structure play out in twenty twenty four.

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Speaker 5: Are we seeing a mixture of debt being brought on

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Speaker 5: in some of those cash offers? Do you see kind

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Speaker 5: of earnouts being part of that? In twenty twenty four.

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Speaker 4: We've seen more structure, We've seen some earnouts, We've seen

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Speaker 4: other sort of bells and whistles, if you will, higher

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Speaker 4: preferences in certain investments, not in every case, but in

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Speaker 4: some over the course of twenty twenty three, as people

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Speaker 4: evaluated being a little more risk averse. I think as

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Speaker 4: we go into twenty twenty four, I heard again the

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Speaker 4: great conversation about what's happening in and around the FED.

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Speaker 4: As we start to see some stabilization and some easing there,

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Speaker 4: we think some of that structure may fall away a

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Speaker 4: little bit, but generally that market will be very active,

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Speaker 4: and we will see a combination of debt capital used

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Speaker 4: in cash on hand by strategic buyers and for private

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Speaker 4: equity buyers who again have big checkbooks but also like

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Speaker 4: to use debt to increase their returns, we think they'll

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Speaker 4: be very active in doing that in twenty twenty four.

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Speaker 2: Ded, thanks so much for joining us. Really appreciate getting

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Speaker 2: your thoughts here At Ted Smith, he's a co founder

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Speaker 2: and as president of Union Square Advisors.

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Speaker 6: You're listening to the team Ken's Are Live program Bloomberg

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Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot Com,

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Speaker 6: the iHeartRadio app, and the Bloomberg Business App, or listen

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Speaker 6: on demand wherever you get your podcasts.

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Speaker 2: I'm going to go to a big Pfeiser, big pharma here.

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Speaker 2: Pfizer the stock off pretty substantially today, falls to its

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Speaker 2: lowest in ten years on a disappointing forecast, and I'm

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Speaker 2: looking at the stock right here. We're gonna bring in

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Speaker 2: Sam Fazzelli. He is the head of European Research and

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Speaker 2: he's a farmer analysts Bloomberg Intelligence. He's based in London.

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Speaker 2: He has a PhD. Not really good with the zoom thing,

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Speaker 2: but he's pretty smart. I've been told here. So Sam,

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Speaker 2: what's going on with Pfizer? These are the great, great

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Speaker 2: people that brought us the COVID vaccine stocks down fifty

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Speaker 2: percent year to date. It's given up so much of

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Speaker 2: kind of what it gained during the COVID period. What's

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Speaker 2: the story on Pfizer with the guidance they gave and

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Speaker 2: kind of maybe the longer term view.

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Speaker 7: Yeah, Hi, Paul.

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Speaker 8: By the way, I'm fully zoomed up here, so I

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Speaker 8: don't know zoom thing was. Look, I mean it's I.

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Speaker 3: Literally I don't know if you've got only one left

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Speaker 3: in the office. I mean, just for the people on Uh,

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Speaker 3: let me see this YouTube, all right.

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Speaker 2: I'm making a I'm making a phone call to somebody.

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Speaker 3: This is ridiculous.

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Speaker 7: It's a no, no, no, they're all they're all.

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Speaker 8: They're all having tea time.

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Speaker 7: Come on, now.

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Speaker 8: Look, the the thing with Pfizer is that they've there's

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Speaker 8: been this uncertainty since the massive boom in COVID vaccine sales,

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Speaker 8: et cetera, as to what is the long term shape

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Speaker 8: of this business. And you know, frankly, we've just had

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Speaker 8: cut after cut after cut, and we're now being told

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Speaker 8: that maybe next year, instead of the eight billion that

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Speaker 8: consensus was looking for for COVID vaccines is going to

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Speaker 8: be five. Maybe instead of the a five billion of

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Speaker 8: packed slovid sales.

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Speaker 7: Is going to be three. So you know, that's a

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Speaker 7: big cut.

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Speaker 8: But in reality, if you take out Covid, and you

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Speaker 8: take out the acquisition they've just completed today or yesterday,

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Speaker 8: the at least going forward, if you take those numbers

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Speaker 8: out for twenty twenty four, you're still a couple of

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Speaker 8: billion or a billion or so short of consensus. So

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Speaker 8: it's not just about vaccines, it's not just about pack slovid.

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Speaker 8: Business is tough for this company, which is why they're

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Speaker 8: doing the deal they're doing.

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Speaker 5: Sam, you mentioned the deal they're doing acquiring Cgena, a

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Speaker 5: canter drug manufacturer. What could Pfiser have done or should

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Speaker 5: Piser have done differently with the best fit of hindsight,

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Speaker 5: it's down fifty seven percent from a December twenty twenty

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Speaker 5: one peak and lost almost two hundred billion dollars in

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Speaker 5: market value.

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Speaker 8: Yeah, I honestly don't think it's something that I mean,

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Speaker 8: clearly they could have had a more exciting pipeline, you know,

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Speaker 8: if things had gone better for them in the obesity

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Speaker 8: drug that they reported a week or two ago. There

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Speaker 8: are quite a lot of headwinds for this company, which

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Speaker 8: is again why they're doing the deal.

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Speaker 7: The reality is it's just the stock is resetting to.

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Speaker 8: What the facts are in the world of COVID, and

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Speaker 8: it was very difficult to second guest those. Nobody knew

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Speaker 8: how bad the vaccine fatigue would be when it comes

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Speaker 8: to dealing with the second and third year or fourth

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Speaker 8: year of boosters.

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Speaker 7: Nobody knows what is going to be next year. I

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Speaker 7: actually think, and I think they've said it.

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Speaker 8: Themselves today, that they're being as conservative as possible on

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Speaker 8: the COVID vaccine front for next year. It's they're assuming

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Speaker 8: the same as this year, but the lower sales in

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Speaker 8: terms of foll use for lower sales, So let's see

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Speaker 8: how this pans out.

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Speaker 7: Is it going to be a better year for them?

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Speaker 8: Is this the low point from which guidance is going

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Speaker 8: to start going up is what I think everybody's going

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Speaker 8: to have to be figuring out.

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Speaker 2: Yeah, and when you look at the an R function

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Speaker 2: on the Bloomberg terminal professer, which is analyst recommendations, it's

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Speaker 2: right as Sam was suggesting, fourteen buys, fourteen holes. The

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Speaker 2: street has no idea what's going on with this name. Sam,

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Speaker 2: let's broad that out a little bit. You mentioned the

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Speaker 2: weight loss drugs, and that is boy if Ai was

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Speaker 2: the early part of twenty twenty three's driver of the market.

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Speaker 2: It seems like these weight loss drugs have been the

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Speaker 2: driver for the second half of the year, big big store. Here,

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Speaker 2: can you and I know you guys at Bloomberg Intelligence

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Speaker 2: have done a ton of work on let's have a big,

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Speaker 2: big seminal research report out on this market. Here, can

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Speaker 2: you frame out kind of where we are today with

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Speaker 2: these weight loss drugs and how much of a driver

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Speaker 2: is it for the farmer industry going forward?

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Speaker 8: Yeah, so for the industry as a whole. Let me

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Speaker 8: just start with your last question. I think a lot

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Speaker 8: of people are getting into the game. You know that

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Speaker 8: Rash has just got announce a deal. You've got Astra

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Speaker 8: Zenekos got into this. Pfizer is doing its best to

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Speaker 8: stay in the game. One company that did rule themselves

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Speaker 8: out is Johnson and Johnson. They said, it's two crowded,

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Speaker 8: too busy, We're not interested, and they have a pretty

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Speaker 8: powerful oncology business. But and then where are we going

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Speaker 8: with this? With this u with these drugs. The reality

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Speaker 8: is that the more we see from them in terms

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Speaker 8: of the control of other obesity related side of issues,

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Speaker 8: cardiovascular disease, kidney disease, and in time cancer and other

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Speaker 8: types of diseases that are the results of this upsetting

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Speaker 8: balance in the body, which is essentially what happens in

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Speaker 8: these patients. They are what we call a constantly under

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Speaker 8: a state of inflammation, which is bad. I mean inflammatory response.

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Speaker 8: The whole body is under that stress when you have

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Speaker 8: extra poundage around. So that's what I think. These drugs

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Speaker 8: are going to be shown to continue to be powerful,

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Speaker 8: but we're going to get more data, We're going to

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Speaker 8: get more competitive competition coming. Prices are going to have

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Speaker 8: to go up, and I'm assuming volume will go up

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Speaker 8: on the back of it.

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Speaker 5: And Sam, is there an indication or an area that's

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Speaker 5: most similar or reminiscent to you of weight loss drugs

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Speaker 5: in terms of the potential market. I'm just looking at

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Speaker 5: some of the stock moves we've seen with Novo and

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Speaker 5: Lily and a lot of the small caps, and it

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Speaker 5: does remind me of the gold rush that was COVID vaccines.

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Speaker 7: Yep. Except the COVID vaccines.

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Speaker 8: You know, we were vaccinating an entire population to try

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Speaker 8: and manage that pressure, and we I think we did

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Speaker 8: the most countries at a pretty good job of that.

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Speaker 8: But then you come back to the diseases endemic and

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Speaker 8: most of the countries are now suggesting it for only

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Speaker 8: sixty five plus, certainly in the UK where I am,

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Speaker 8: and the reality.

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Speaker 7: Is a lot of people got bored with it. I

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Speaker 7: don't think people are going to get bored with obesity drugs.

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Speaker 7: Some people are not going to tolerate them. Some people

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Speaker 7: are not going.

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Speaker 8: To be able to take them for fifty two weeks

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Speaker 8: or whatever, eighty eight weeks, which was the latest data

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Speaker 8: set that camera, But that doesn't matter as long as

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Speaker 8: they can keep their weight down, take a holiday from

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Speaker 8: the drug, come back to it. I think this is

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Speaker 8: a much more sticky market than covid Vaccini's was.

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Speaker 5: Yeah very quickly.

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Speaker 7: Though.

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Speaker 5: Is it reminiscent of kind of hepsi in terms of

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Speaker 5: the fact that these drugs do require you to be

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Speaker 5: on them forever? Essentially?

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Speaker 8: Yeah, But again, if you remember Hipsey was a blip,

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Speaker 8: we had a large rise and then everybody got under

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Speaker 8: control and helps he was curative.

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Speaker 7: We don't have a curative setting here.

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Speaker 8: I think the best thing I'm going to equal it

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Speaker 8: to potentially is if we get a highly effective Alzheimer's drug.

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Speaker 8: Remember the obesity game has been in play for ten

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Speaker 8: twenty years.

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Speaker 7: Now we've got effective drugs.

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Speaker 8: I think we might see that with Alzheimer's in the

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Speaker 8: next ten to fifteen years.

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Speaker 2: I mean, the headquarters for Bloomberg in London is spectacular

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Speaker 2: Queen Victoria Street. It is the absolute coolest building you'll

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Speaker 2: ever see or and these knuckleheads are not in the office.

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Speaker 2: I'm going to make a phone call as soon as

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Speaker 2: we're done here. Sam Fazzelli, head of European Research. He

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Speaker 2: covers all the farmer stuff for Bloomberg Intelligence, one of

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Speaker 2: the top form analysts in the city of London for

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Speaker 2: Bloomberg Intelligence.

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Speaker 6: You're listening to the tape Cat's are Live program Bloomberg

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Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

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Speaker 6: You can also listen live on Amazon Alexa from our

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Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

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Speaker 2: Some news out on Tesla today. They're recalling two million

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Speaker 2: cars to fix autopilot safety flaws. That sounds kind of important.

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Speaker 2: Let's check in with somebody who knows this stuff, cold

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Speaker 2: Steve Man, Global auto market research leader Bloomberg Intelligence. He's

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Speaker 2: based in Princeton, New Jersey. Not in and of itself

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Speaker 2: is news because for ten years he ran our Asia

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Speaker 2: business for Bloomberg Intelligence. Somehow he got back into this

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Speaker 2: country despite all my efforts to keep him out. He's

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Speaker 2: a good man, he's a great analyst. We appreciate getting

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Speaker 2: some time, and Steve, don't be afraid. You can get

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Speaker 2: on that New Jersey trains and get up to New

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Speaker 2: York City, the capital of the financial world, anytime you want.

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Speaker 7: Will do.

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Speaker 2: Thanks for joining us, Steve. What do we make here

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Speaker 2: of Tesla?

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Speaker 7: Here?

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Speaker 2: Is this a problem? I mean just sounds like it

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Speaker 2: kind of a standard auto issue.

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Speaker 9: It is it is a standard auto issue. If you

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Speaker 9: just look at the surface, it's two million cars. There's

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Speaker 9: a lot of vehicles, it's everything they've built so far.

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Speaker 9: It's it's in terms of costs, it's a minor change,

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Speaker 9: it's an over the air fix. But what's really I

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Speaker 9: think we'll get into the investor's mind is how is

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Speaker 9: this going to impact this company going forward? Because they

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Speaker 9: do have an aggressive target to roll out AI, roll

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Speaker 9: out autonomous vehicle at level five fully automated by next year.

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Speaker 9: So now this recall it's about a simple fix at

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Speaker 9: the level too, a much more basic level in UH

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Speaker 9: driving automation. So it puts in a question like, look,

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Speaker 9: you know, is ELON is a test like going to

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Speaker 9: get to a level five, a much more sophisticate level

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Speaker 9: next year.

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Speaker 5: And see when you look at it, you mentioned that

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Speaker 5: it's an over there where over the air software fix.

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Speaker 5: This is a two year probe. So when you talk

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Speaker 5: about expectations for fully autonomous vehicles, kind of where could

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Speaker 5: that target move If this is just a signal that

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Speaker 5: again Tesla is going to have to punt.

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Speaker 9: Just a little bit, well, you know, I think the

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Speaker 9: fix is kind of small and like you said earlier,

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Speaker 9: it's I think it's a little bit too early to

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Speaker 9: say if this was significant delay that, but it does

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Speaker 9: put into an investor's mind, like you know, some doubts,

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Speaker 9: right if you look at the valuation for Tesla, it's

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Speaker 9: pretty a big chunk of it. It's about AI, it's

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Speaker 9: about autonomous vehicle, and because of this recall, it's likely

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Speaker 9: to you know, put some doubts into the investor's mind

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Speaker 9: in terms of are they going to achieve it now?

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Speaker 9: If they don't achieve it next year, I have no

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Speaker 9: doubts they will achieve it. I mean, that's the where

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Speaker 9: the world is moving to wright AI. They're going to

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Speaker 9: achieve it now. You know, there are some questions in

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Speaker 9: terms of how they're going to get there. Are they

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Speaker 9: going to get their next year or they do they

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Speaker 9: need to add other you know, other equipment for example

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Speaker 9: to get them there.

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Speaker 5: Uh?

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Speaker 9: Do they have to add more software redundancy to get

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Speaker 9: them there? Because of this recall? So delays potentially delays,

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Speaker 9: But I still think they will get there eventually.

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Speaker 2: Hey, Steve, you know, one of the issues out there

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Speaker 2: as it relates to electric vehicles has been trying to

441
00:20:34,359 --> 00:20:37,880
Speaker 2: get a sense of what the ultimate demand is for evs.

442
00:20:38,040 --> 00:20:40,919
Speaker 2: I just bought a new vehicle, had zero interest in

443
00:20:40,920 --> 00:20:42,679
Speaker 2: paying any kind of premium to get an EV so

444
00:20:42,760 --> 00:20:47,440
Speaker 2: I went with the old internal combustion engine. What's your think,

445
00:20:47,520 --> 00:20:50,399
Speaker 2: what's your take on kind of global demand for evs.

446
00:20:50,440 --> 00:20:53,040
Speaker 2: Even Ford announce that they're cutting production of their F

447
00:20:53,119 --> 00:20:54,240
Speaker 2: one fifty E truck.

448
00:20:55,240 --> 00:20:58,360
Speaker 9: I think there's there's big, huge differences depending on what

449
00:20:58,440 --> 00:21:01,840
Speaker 9: region you're talking about. You know, we've China that's definitely

450
00:21:01,840 --> 00:21:05,479
Speaker 9: going higher. It's you know, they're selling one million vehicle

451
00:21:05,680 --> 00:21:10,760
Speaker 9: EV's battery EV's one million battery evs, you know a month.

452
00:21:11,200 --> 00:21:15,160
Speaker 9: That's how much US sells in a year. So they're accelerating.

453
00:21:15,400 --> 00:21:17,520
Speaker 9: Now if you're at you know, if you're talking about

454
00:21:17,640 --> 00:21:20,760
Speaker 9: US and Europe, there's some delay and the main reason

455
00:21:20,840 --> 00:21:25,520
Speaker 9: why is the battery supply chain is not built out

456
00:21:26,480 --> 00:21:29,440
Speaker 9: for the US and European market. So what that means

457
00:21:29,560 --> 00:21:32,880
Speaker 9: is the cost, the end cost to the consumer will

458
00:21:32,920 --> 00:21:37,040
Speaker 9: be much higher because they have to import those those

459
00:21:37,080 --> 00:21:43,160
Speaker 9: batteries into into those regions. Now, we have the Inflation

460
00:21:43,240 --> 00:21:47,480
Speaker 9: Reduction Act, you know, that's that's actually coming online, and

461
00:21:47,720 --> 00:21:51,479
Speaker 9: with that act, it's actually uh, what they're doing is

462
00:21:51,560 --> 00:21:56,399
Speaker 9: limiting the amount of materials and components battery materials, battery

463
00:21:56,400 --> 00:22:01,240
Speaker 9: components from China. That will also raise price for consumer here.

464
00:22:01,320 --> 00:22:04,439
Speaker 9: So there is some risk in terms of demand in

465
00:22:04,480 --> 00:22:06,760
Speaker 9: the next i say, in the next three years, but

466
00:22:07,000 --> 00:22:10,640
Speaker 9: because of the long term this inflation reduction Act, it's

467
00:22:10,640 --> 00:22:14,160
Speaker 9: actually the whole intent is to build out the supply chain,

468
00:22:14,200 --> 00:22:17,359
Speaker 9: the battery supply chain in the US, and hopefully as

469
00:22:17,400 --> 00:22:23,880
Speaker 9: those capacity, battery manufacturing capacity ramps up, the costs will

470
00:22:23,880 --> 00:22:27,040
Speaker 9: come down for battery production and that's going to get

471
00:22:27,080 --> 00:22:30,760
Speaker 9: passed on to consumer and hopefully that will you know,

472
00:22:30,800 --> 00:22:33,800
Speaker 9: create some demand lift and lift demand up for battery evs.

473
00:22:34,400 --> 00:22:37,240
Speaker 5: And see if you mentioned the demand overseas. Just looking

474
00:22:37,320 --> 00:22:40,119
Speaker 5: at the terminal the financials from Tesla, about half of

475
00:22:40,119 --> 00:22:42,840
Speaker 5: their revenue generated from the US and just over twenty

476
00:22:42,880 --> 00:22:45,679
Speaker 5: two percent based on twenty twenty two sales in China.

477
00:22:45,800 --> 00:22:48,960
Speaker 5: How do those competitive dynamics though shape up? Given Neo

478
00:22:49,040 --> 00:22:52,919
Speaker 5: and other companies operating in China, and as Paul mentioned.

479
00:22:53,200 --> 00:22:58,199
Speaker 9: The US competition, yeah, it is, it is. It's I

480
00:22:58,200 --> 00:23:02,240
Speaker 9: think evs in China. You know, China's always been a

481
00:23:02,359 --> 00:23:06,679
Speaker 9: very hyper competitive market for the auto industry. It hasn't

482
00:23:06,760 --> 00:23:10,800
Speaker 9: been for battery EV's, but it's becoming that. It's you know,

483
00:23:10,920 --> 00:23:14,399
Speaker 9: there's Neil, there's x pun UH, there's leap motor. You

484
00:23:14,440 --> 00:23:16,160
Speaker 9: can yeah. You know, in the last few years, there's

485
00:23:16,200 --> 00:23:18,800
Speaker 9: been a lot of uh public companies. There's been the

486
00:23:18,840 --> 00:23:22,840
Speaker 9: public companies that came uh that listed uh y you know,

487
00:23:22,960 --> 00:23:25,480
Speaker 9: and there's all uh, there's all uh. There's a whole

488
00:23:25,480 --> 00:23:29,080
Speaker 9: host of private companies that are producing battery EV's. So

489
00:23:30,000 --> 00:23:35,000
Speaker 9: it's it's becoming a tougher market. But Elon, Musk and

490
00:23:35,200 --> 00:23:39,639
Speaker 9: Tesla still have a niche. They still have I would say,

491
00:23:39,680 --> 00:23:42,719
Speaker 9: you know, a m a majority uh of the market

492
00:23:42,880 --> 00:23:46,120
Speaker 9: in in China for battery EV's, But if you look

493
00:23:46,119 --> 00:23:49,200
Speaker 9: at if you include pahvs, that's a different story. Byd

494
00:23:49,520 --> 00:23:52,639
Speaker 9: is the the market share leader. But if you just

495
00:23:52,640 --> 00:23:57,760
Speaker 9: look at the battery ev Tesla still leads because of uh,

496
00:23:57,800 --> 00:23:59,520
Speaker 9: the the brand cachet it carries.

497
00:23:59,800 --> 00:24:03,320
Speaker 2: So, you know, one of the issues here in the States,

498
00:24:03,400 --> 00:24:05,320
Speaker 2: I think there is This is just my opinion, not

499
00:24:05,400 --> 00:24:08,119
Speaker 2: based on any research but just talking to people. I

500
00:24:08,119 --> 00:24:10,440
Speaker 2: don't think the demand here for evs is as strong

501
00:24:10,480 --> 00:24:12,600
Speaker 2: as maybe the companies think it is or maybe some

502
00:24:12,640 --> 00:24:13,439
Speaker 2: analysts think it is.

503
00:24:14,520 --> 00:24:18,800
Speaker 9: Yeah, that yeah, that's true. We're actually you know, sales

504
00:24:18,840 --> 00:24:23,040
Speaker 9: is probably gonna definitely will slow down. You know, we're

505
00:24:23,080 --> 00:24:26,800
Speaker 9: probably thinking around a ten percent range right from you know,

506
00:24:27,080 --> 00:24:31,280
Speaker 9: high mid mid kind of double digits. So it's definitely

507
00:24:31,320 --> 00:24:34,679
Speaker 9: going to slow down. And I think it's a major story.

508
00:24:34,960 --> 00:24:37,800
Speaker 9: Major reason for that is the affordability. Like I said earlier,

509
00:24:38,400 --> 00:24:42,600
Speaker 9: batteries are are still being imported. There's gonna be bans

510
00:24:42,600 --> 00:24:45,399
Speaker 9: and materials, you know, because the China actually owns the

511
00:24:45,400 --> 00:24:49,560
Speaker 9: battery supply chain. And if you're banning that technology from China,

512
00:24:49,600 --> 00:24:51,440
Speaker 9: and where else are you going to get the batteries

513
00:24:51,480 --> 00:24:55,040
Speaker 9: from really, But so that means they'll take time. It'll

514
00:24:55,080 --> 00:24:57,840
Speaker 9: take time for the US to build up the supply chain.

515
00:24:58,400 --> 00:25:00,359
Speaker 9: And once they have the supply chain, I think the

516
00:25:00,400 --> 00:25:03,119
Speaker 9: costs will come down. Hopefully by then, the you know,

517
00:25:03,200 --> 00:25:08,080
Speaker 9: the EV charging infrastructure will be you know, expanded, uh

518
00:25:08,200 --> 00:25:11,800
Speaker 9: further to what it is what we have today and

519
00:25:11,920 --> 00:25:14,679
Speaker 9: uh and with the lower pricing with uh you know,

520
00:25:14,760 --> 00:25:20,359
Speaker 9: EV infrastructure built out, charging officure structure built out, hopefully

521
00:25:20,440 --> 00:25:23,919
Speaker 9: it will create some demand for battery V. And but

522
00:25:23,960 --> 00:25:26,880
Speaker 9: that's like I said earlier, that's probably two three years

523
00:25:26,920 --> 00:25:29,320
Speaker 9: from now. I think we're gonna take a break, take

524
00:25:29,359 --> 00:25:32,679
Speaker 9: a We're gonna slow down a little bit until the

525
00:25:32,720 --> 00:25:34,160
Speaker 9: supply chain catches up.

526
00:25:34,720 --> 00:25:37,480
Speaker 5: Is the cyber truck actually gonna drive sales for Tesla?

527
00:25:38,280 --> 00:25:41,119
Speaker 9: I don't think so. I don't think it's a high

528
00:25:41,240 --> 00:25:47,600
Speaker 9: volume product for cyber truck for Tesla. Uh, it's you know,

529
00:25:48,640 --> 00:25:53,320
Speaker 9: the styling is not for everyone. Everybody everybody, uh, you know,

530
00:25:53,400 --> 00:25:57,280
Speaker 9: everybody's used to the traditional truck. They have to prove themselves.

531
00:25:57,800 --> 00:26:02,680
Speaker 9: You have strong incumbents GM, Ford and Chrysler that they

532
00:26:02,760 --> 00:26:06,199
Speaker 9: have to overcome the mindset of the average consumer that

533
00:26:06,320 --> 00:26:09,919
Speaker 9: buys pickup truck to go with the cyber truck. So

534
00:26:10,119 --> 00:26:12,800
Speaker 9: I don't think so. But Tesla is planning to roll

535
00:26:12,840 --> 00:26:16,439
Speaker 9: out a compact vehicle. You know, some have dubbed it

536
00:26:16,480 --> 00:26:20,280
Speaker 9: as a model to uh. And you know, I think

537
00:26:20,359 --> 00:26:23,479
Speaker 9: that could be the next things, that next thing that

538
00:26:23,520 --> 00:26:27,280
Speaker 9: we should be focusing on, because that you know that

539
00:26:27,280 --> 00:26:30,120
Speaker 9: that that's going to help them not only expand into

540
00:26:30,160 --> 00:26:33,680
Speaker 9: other segments within the auto market, but also help them

541
00:26:33,720 --> 00:26:37,760
Speaker 9: expand into other regions as well, because pickup trucks is

542
00:26:37,800 --> 00:26:39,880
Speaker 9: really big in the US, but not so in other

543
00:26:39,920 --> 00:26:40,520
Speaker 9: parts of the world.

544
00:26:40,640 --> 00:26:43,520
Speaker 2: Right, Steve Man, absolute best Steve Man, global Auto market

545
00:26:43,600 --> 00:26:48,000
Speaker 2: research leader Bloomberg Intelligence. He is back in the USA,

546
00:26:48,040 --> 00:26:49,840
Speaker 2: as they say, based on our Princeton office. We'll be

547
00:26:49,840 --> 00:26:51,600
Speaker 2: talking a lot more to Steve Man about the global

548
00:26:52,240 --> 00:26:55,600
Speaker 2: auto industry, unique insights into Asia given his time over there,

549
00:26:55,680 --> 00:26:56,680
Speaker 2: so good to have him back.

550
00:26:57,080 --> 00:27:00,720
Speaker 6: You're listening to the Take Catcher Live program bloom Markets

551
00:27:00,760 --> 00:27:04,160
Speaker 6: weekdays at ten am Eastern on Bloomberg Radio, the tune

552
00:27:04,200 --> 00:27:07,160
Speaker 6: in app, Bloomberg dot Com, and the Bloomberg Business App.

553
00:27:07,200 --> 00:27:10,040
Speaker 6: You can also listen live on Amazon Alexa from our

554
00:27:10,040 --> 00:27:15,000
Speaker 6: flagship New York station, Just say Alexa Play Bloomberg eleven thirty.

555
00:27:15,920 --> 00:27:19,320
Speaker 2: Mike Green joints as Supportfolio Manager Chief Strategist to simplify

556
00:27:19,359 --> 00:27:21,640
Speaker 2: asset management. Joins us live here in our Bloomberg Interactive

557
00:27:21,640 --> 00:27:24,440
Speaker 2: Broker studio. Mike, I'm not going to be paying attention.

558
00:27:24,480 --> 00:27:26,640
Speaker 2: I'll probably be sitting on a train somewhere. You will

559
00:27:26,680 --> 00:27:29,960
Speaker 2: be paying attention to, as will other professional investors out there.

560
00:27:30,680 --> 00:27:32,000
Speaker 2: What do you want to hear? What do you think

561
00:27:32,040 --> 00:27:33,399
Speaker 2: we're going to hear? What should we hear?

562
00:27:33,440 --> 00:27:35,200
Speaker 10: Do you think well, I think the market is pretty

563
00:27:35,280 --> 00:27:36,960
Speaker 10: much prices in at this point, right, there's a zero

564
00:27:37,000 --> 00:27:40,040
Speaker 10: percent probability slightly less than one percent probability that there's

565
00:27:40,040 --> 00:27:42,159
Speaker 10: going to be any actual movement. Fed's not going to

566
00:27:42,720 --> 00:27:44,920
Speaker 10: upset the apple cart in that process. At the same time,

567
00:27:44,960 --> 00:27:47,479
Speaker 10: I think everybody is expecting, effectively a stern lecture on

568
00:27:47,520 --> 00:27:50,280
Speaker 10: financial conditions and that we, you know, really should be

569
00:27:50,359 --> 00:27:54,000
Speaker 10: more responsible in our thought process. And I think that's

570
00:27:54,040 --> 00:27:55,200
Speaker 10: going to be the underlying story.

571
00:27:55,280 --> 00:27:55,480
Speaker 7: Right.

572
00:27:55,600 --> 00:27:58,080
Speaker 10: We saw with inflation today that the FED is actually

573
00:27:58,200 --> 00:28:00,800
Speaker 10: rapidly moving towards the subjective of two percent. Some people

574
00:28:00,840 --> 00:28:03,320
Speaker 10: would actually argue, myself included, that we're probably going to

575
00:28:03,359 --> 00:28:06,919
Speaker 10: overshoot to the downside, and that becomes the key question.

576
00:28:07,119 --> 00:28:08,840
Speaker 10: But I think the one thing, if I were to

577
00:28:08,840 --> 00:28:11,720
Speaker 10: make a quick observation, it's that everybody keeps pricing the

578
00:28:11,760 --> 00:28:14,800
Speaker 10: markets off of twenty five basis point moves and that's

579
00:28:15,040 --> 00:28:17,600
Speaker 10: a pretty good model when you're talking about hikes, because

580
00:28:17,640 --> 00:28:20,440
Speaker 10: the FED tends to hike in a somewhat conservative fashion.

581
00:28:20,520 --> 00:28:22,399
Speaker 10: It was a surprise when they did seventy fives and

582
00:28:22,440 --> 00:28:25,760
Speaker 10: fifties contributed to the volatility in twenty twenty twenty two.

583
00:28:26,320 --> 00:28:28,560
Speaker 10: As we look at cuts, though those actually you have

584
00:28:28,560 --> 00:28:31,159
Speaker 10: about a fifty to fifty chance about equal probability of

585
00:28:31,200 --> 00:28:33,800
Speaker 10: fifty basis point cuts. And so a lot of the

586
00:28:33,840 --> 00:28:36,440
Speaker 10: statements around we're going to cut early, we're going to

587
00:28:36,480 --> 00:28:38,360
Speaker 10: cut in the first quarter, I think are contingent on

588
00:28:38,400 --> 00:28:40,240
Speaker 10: the idea that the only cut that can occur is

589
00:28:40,280 --> 00:28:43,520
Speaker 10: at twenty five. I think it's more likely actually that

590
00:28:43,520 --> 00:28:45,360
Speaker 10: we probably see a fifty later in the year, and

591
00:28:45,360 --> 00:28:47,960
Speaker 10: that would suggest that the probabilities that the market has

592
00:28:48,440 --> 00:28:50,840
Speaker 10: are not quite as crazy as people think. Right if

593
00:28:50,840 --> 00:28:53,080
Speaker 10: we were to wait and be more patient and not

594
00:28:53,200 --> 00:28:56,200
Speaker 10: cut in the first quarter or certainly not January, but

595
00:28:56,320 --> 00:28:59,000
Speaker 10: instead we're to wait and cut in July, August, September,

596
00:28:59,080 --> 00:29:02,000
Speaker 10: et cetera, and do so in fifty basis point increments

597
00:29:02,000 --> 00:29:04,720
Speaker 10: that would be consistent with pricing. Also feels probably more accurate.

598
00:29:05,200 --> 00:29:06,600
Speaker 5: So what happened in the first half of the year.

599
00:29:06,640 --> 00:29:09,520
Speaker 5: Though from a market's perspective, if the Fed, as you said,

600
00:29:09,640 --> 00:29:12,560
Speaker 5: kind of punts until there's called a jumbo cut in

601
00:29:12,600 --> 00:29:13,840
Speaker 5: the summer, well.

602
00:29:13,640 --> 00:29:16,440
Speaker 10: That becomes the real question, right, because what we where

603
00:29:16,440 --> 00:29:19,280
Speaker 10: we are today, is it a very bifurcated market. If

604
00:29:19,280 --> 00:29:23,240
Speaker 10: I'm Apple or if I'm a wealthy US individual, I'm

605
00:29:23,320 --> 00:29:25,520
Speaker 10: celebrating the fact that interest rates are higher because I've

606
00:29:25,520 --> 00:29:27,600
Speaker 10: got a significant amount of cash on my balance sheet

607
00:29:27,640 --> 00:29:29,440
Speaker 10: or in my bank accounts. I'm suddenly earning a really

608
00:29:29,440 --> 00:29:31,840
Speaker 10: attractive return on that, and with the retreat and inflation,

609
00:29:32,320 --> 00:29:34,880
Speaker 10: that makes me feel much wealthier. If I'm a senior citizen,

610
00:29:34,880 --> 00:29:37,600
Speaker 10: I've benefited from an eight point three eight percent increase

611
00:29:37,600 --> 00:29:40,000
Speaker 10: in social Security this year. That now looks like one

612
00:29:40,000 --> 00:29:42,680
Speaker 10: of the greatest giveaways in history, right, So when we

613
00:29:42,720 --> 00:29:44,800
Speaker 10: think about it from that perspective, actually, if the FED

614
00:29:44,840 --> 00:29:47,600
Speaker 10: starts to cut it becomes actually a problem for those

615
00:29:47,760 --> 00:29:50,320
Speaker 10: entities on the flip side of the equation. We're seeing

616
00:29:50,320 --> 00:29:54,240
Speaker 10: from things like the NFIB small business surveys the credit

617
00:29:54,280 --> 00:29:57,800
Speaker 10: availability is not loose for small businesses. That small businesses

618
00:29:57,840 --> 00:30:00,440
Speaker 10: are really struggling, and the lower income of it, Americans

619
00:30:00,440 --> 00:30:02,640
Speaker 10: who need access to credit to pay their daily bills,

620
00:30:02,880 --> 00:30:06,120
Speaker 10: they're also really struggling using credit cards, thirty percent interest rates, etc.

621
00:30:06,840 --> 00:30:09,800
Speaker 10: So this is a very bifurcated market, and it really

622
00:30:09,880 --> 00:30:12,479
Speaker 10: becomes an interesting question of do we get to the

623
00:30:12,520 --> 00:30:15,400
Speaker 10: point where something breaks and the FED is forced to

624
00:30:15,440 --> 00:30:18,320
Speaker 10: do this or as many particularly that are active in

625
00:30:18,360 --> 00:30:21,520
Speaker 10: the FED, FED researchers, etc. Are kind of hoping for

626
00:30:21,600 --> 00:30:24,640
Speaker 10: it is the FED behave in a proactive fashion. I

627
00:30:24,640 --> 00:30:25,720
Speaker 10: think the odds of that are low.

628
00:30:26,400 --> 00:30:31,360
Speaker 2: Hey, Mike, you've been doing this a long time. Equities, credit, FX, commodities,

629
00:30:31,360 --> 00:30:32,120
Speaker 2: all that kind of stuff.

630
00:30:32,880 --> 00:30:34,320
Speaker 5: If we're in a higher.

631
00:30:34,000 --> 00:30:36,120
Speaker 2: For longer kind of range here, I mean, I guess

632
00:30:36,160 --> 00:30:38,160
Speaker 2: we'll start cutting at some point this year. Where do

633
00:30:38,160 --> 00:30:40,240
Speaker 2: you see some of the best opportunities right here, just

634
00:30:40,280 --> 00:30:41,400
Speaker 2: across asset classes.

635
00:30:41,440 --> 00:30:42,160
Speaker 3: Well, I think that.

636
00:30:42,040 --> 00:30:45,080
Speaker 10: There's a couple of interesting things that have happened that suggest,

637
00:30:45,240 --> 00:30:48,560
Speaker 10: as we particularly come into the presidential election here, that

638
00:30:48,600 --> 00:30:51,200
Speaker 10: the opportunities are relatively limited for Biden to goose the

639
00:30:51,200 --> 00:30:53,800
Speaker 10: economy once more. And so some of the areas that

640
00:30:53,840 --> 00:30:56,200
Speaker 10: have fallen deeply out of favor would include areas in

641
00:30:56,280 --> 00:31:00,320
Speaker 10: green investment. Things tied to the Inflation Reduction Act actually

642
00:31:00,360 --> 00:31:03,720
Speaker 10: point to some of those as having fallen significantly enough

643
00:31:03,760 --> 00:31:06,160
Speaker 10: that now is a contrarian play. They become somewhat interesting

644
00:31:06,160 --> 00:31:08,840
Speaker 10: some of the lithium plays, et cetera. On the flip

645
00:31:08,880 --> 00:31:11,000
Speaker 10: side of that. And just to be very clear, the

646
00:31:11,000 --> 00:31:13,720
Speaker 10: Inflation Reduction Act terribly named because it can be used

647
00:31:13,720 --> 00:31:16,440
Speaker 10: to stimulate the economy, but you know, we have to

648
00:31:16,440 --> 00:31:18,480
Speaker 10: actually acknowledge that that will be one of the goals

649
00:31:18,520 --> 00:31:21,600
Speaker 10: going into twenty twenty four. The other thing that I

650
00:31:21,600 --> 00:31:23,520
Speaker 10: would highlight is is that we've now seen a really

651
00:31:23,560 --> 00:31:27,640
Speaker 10: interesting event where g has made the pilgrimage to Mecca, right,

652
00:31:27,840 --> 00:31:30,480
Speaker 10: and that I think is as we're seeing in the

653
00:31:30,480 --> 00:31:32,520
Speaker 10: weakness of the Chinese economy. That was something I called

654
00:31:32,560 --> 00:31:35,160
Speaker 10: for earlier in the year. That's certainly borne out. A

655
00:31:35,200 --> 00:31:37,600
Speaker 10: lot of people had expected this giant, you know, giant

656
00:31:37,680 --> 00:31:40,280
Speaker 10: China rebound on a China reopening. We're now seeing that

657
00:31:40,320 --> 00:31:42,000
Speaker 10: their economy is very structurally weak.

658
00:31:42,640 --> 00:31:44,600
Speaker 2: That's something that continues into twenty forty.

659
00:31:44,640 --> 00:31:47,840
Speaker 10: I think, well, that becomes the interesting question because that unfortunately,

660
00:31:47,840 --> 00:31:50,280
Speaker 10: this is a situation with both in which both g

661
00:31:50,600 --> 00:31:53,520
Speaker 10: and Biden need to stimulate their economy. They need to

662
00:31:53,680 --> 00:31:55,640
Speaker 10: figure out ways to make sure that we don't go

663
00:31:55,760 --> 00:31:59,920
Speaker 10: into deeper economic drawdowns that could be proved problematic for

664
00:32:00,040 --> 00:32:01,720
Speaker 10: each of them. For Biden it would mean a failure

665
00:32:01,800 --> 00:32:03,480
Speaker 10: to be re elected, or for the Democratic Party it

666
00:32:03,480 --> 00:32:05,200
Speaker 10: would mean a failure to be re elected. If Biden

667
00:32:05,240 --> 00:32:09,200
Speaker 10: doesn't stand Fji, it has far more dire consequences, he

668
00:32:09,240 --> 00:32:11,280
Speaker 10: goes out with his boots on, and.

669
00:32:11,240 --> 00:32:14,480
Speaker 5: So does that present an opportunity you're saying within Chinese equities.

670
00:32:14,640 --> 00:32:16,440
Speaker 10: I think it's interesting if you look at some of

671
00:32:16,440 --> 00:32:18,400
Speaker 10: the Chinese equities, for example, if you look at the

672
00:32:18,480 --> 00:32:20,240
Speaker 10: large cap Chinese ETFs, or you.

673
00:32:20,200 --> 00:32:22,160
Speaker 5: Look at the the FXI is what you're look.

674
00:32:22,200 --> 00:32:24,520
Speaker 10: FXI would be an interesting example of that, as would

675
00:32:24,600 --> 00:32:29,800
Speaker 10: you know Asher for example. Those are interesting contrarian opportunities

676
00:32:29,880 --> 00:32:34,440
Speaker 10: where the pricing is I would argue underappreciating the potential

677
00:32:34,440 --> 00:32:35,920
Speaker 10: for a stimulus type rebound.

678
00:32:36,040 --> 00:32:38,560
Speaker 5: Actually, just to call that out, the FXI is return

679
00:32:39,360 --> 00:32:41,640
Speaker 5: a loss of fifteen percent this year a wait in

680
00:32:41,680 --> 00:32:43,080
Speaker 5: the face of ESPX being.

681
00:32:42,960 --> 00:32:47,360
Speaker 10: A right without recovering in twenty twenty two. Right, So

682
00:32:47,400 --> 00:32:49,400
Speaker 10: it's not like it's a reversal from last year. It's

683
00:32:49,440 --> 00:32:50,880
Speaker 10: been down fairly significantly.

684
00:32:51,120 --> 00:32:54,800
Speaker 2: How about just kind of the US versus international versus

685
00:32:54,840 --> 00:32:56,880
Speaker 2: emerging markets, where do you see kind of the best

686
00:32:57,320 --> 00:32:58,600
Speaker 2: I guess risk reward here.

687
00:32:59,080 --> 00:33:01,680
Speaker 10: Well, China certainly falls into the potential for an emerging

688
00:33:01,680 --> 00:33:03,960
Speaker 10: market rebound, and we are kind of at this situation

689
00:33:04,000 --> 00:33:05,920
Speaker 10: where if I look at things like oil prices, etc.

690
00:33:06,360 --> 00:33:09,280
Speaker 10: They've retreated significantly. Many people were very bullish on it

691
00:33:09,320 --> 00:33:12,280
Speaker 10: going into this year. Obviously that's failed to materialize. That

692
00:33:12,360 --> 00:33:14,880
Speaker 10: suggests that the growing consumption out of places like the

693
00:33:14,880 --> 00:33:17,920
Speaker 10: emerging markets has been weaker than anticipated. We've seen supply

694
00:33:18,040 --> 00:33:21,760
Speaker 10: cuts rather than dramatic additions, US production being the notable

695
00:33:21,800 --> 00:33:25,440
Speaker 10: exception there. If I look at the emerging markets, you

696
00:33:25,480 --> 00:33:29,800
Speaker 10: know they clearly have growth potential. India is obviously benefiting

697
00:33:29,840 --> 00:33:32,000
Speaker 10: from picking up from China there, and I would highlight

698
00:33:32,040 --> 00:33:34,720
Speaker 10: that is the notable outlier in the emerging market space.

699
00:33:35,280 --> 00:33:38,040
Speaker 10: But if I look elsewhere around the world, a China

700
00:33:38,080 --> 00:33:41,360
Speaker 10: slowdown is really problematic for the emerging markets, and so

701
00:33:41,440 --> 00:33:45,200
Speaker 10: you can get a momentary bounce, But if we're really

702
00:33:45,240 --> 00:33:47,920
Speaker 10: looking at kind of the much broader picture of how

703
00:33:47,960 --> 00:33:50,680
Speaker 10: this develops, we're now in this uncomfortable time period where

704
00:33:50,680 --> 00:33:53,640
Speaker 10: it's about how do we change supply chains as compared

705
00:33:53,680 --> 00:33:55,600
Speaker 10: to how do we dramatically expand them as we did

706
00:33:55,640 --> 00:33:58,360
Speaker 10: under the China regime. And so I think emerging markets

707
00:33:58,400 --> 00:34:01,080
Speaker 10: continue to be challenged. They continue to be in a

708
00:34:01,120 --> 00:34:04,520
Speaker 10: situation where, particularly with very strong US dollar against emerging

709
00:34:04,560 --> 00:34:08,120
Speaker 10: markets and high interest rates, it's becoming harder and harder

710
00:34:08,120 --> 00:34:10,560
Speaker 10: for people to justify investment in many of those regions.

711
00:34:10,800 --> 00:34:13,440
Speaker 5: If we can say internationally, what's your view on the

712
00:34:13,600 --> 00:34:16,840
Speaker 5: UK and Europe, it just feels like, again you pointed

713
00:34:16,840 --> 00:34:20,160
Speaker 5: to Bloomberg TV talking about the IPO market, for all

714
00:34:20,200 --> 00:34:23,680
Speaker 5: intents and purposes, Europe is nil in that front.

715
00:34:24,120 --> 00:34:26,400
Speaker 10: Well, I think something really interesting is happening in Europe

716
00:34:26,440 --> 00:34:28,719
Speaker 10: and that they're suddenly actually facing the same thing that

717
00:34:28,719 --> 00:34:31,080
Speaker 10: they did with Japan in nineteen eighty nine. Right, So,

718
00:34:31,160 --> 00:34:33,239
Speaker 10: if you look at the nineteen eighties, Europe enjoyed quite

719
00:34:33,239 --> 00:34:34,759
Speaker 10: a bit of shaden freud at the idea of the

720
00:34:34,880 --> 00:34:38,520
Speaker 10: United States becoming second fiddle to Japan. You saw that

721
00:34:38,560 --> 00:34:40,520
Speaker 10: exact same type of shad and freud as it related

722
00:34:40,560 --> 00:34:43,080
Speaker 10: to China. And what changed it, of course, was Japan

723
00:34:43,120 --> 00:34:46,160
Speaker 10: began going after the European auto market. Same things happening

724
00:34:46,200 --> 00:34:48,279
Speaker 10: right now. China going after the European auto market, I

725
00:34:48,280 --> 00:34:50,080
Speaker 10: would argue, has been one of the key catalysts and

726
00:34:50,160 --> 00:34:53,239
Speaker 10: changing the tenor and tone of behavior towards China. I

727
00:34:53,280 --> 00:34:55,360
Speaker 10: think that's one of the reasons why China is slowly

728
00:34:55,440 --> 00:34:59,520
Speaker 10: backing away from some of its aggressiveness on trade. On

729
00:34:59,560 --> 00:35:01,680
Speaker 10: the flips out of it. Europe itself is just so

730
00:35:01,719 --> 00:35:05,560
Speaker 10: structurally challenged that it becomes a really interesting question of

731
00:35:05,640 --> 00:35:08,120
Speaker 10: how far does it have to go before change actually

732
00:35:08,120 --> 00:35:10,759
Speaker 10: starts to emerge. And we just have not seen an

733
00:35:10,800 --> 00:35:14,400
Speaker 10: incredible amount of emphasis on growth in Europe. They've effectively

734
00:35:14,440 --> 00:35:17,479
Speaker 10: tried to limit the amount of damage to the euro

735
00:35:18,200 --> 00:35:21,400
Speaker 10: limit the amount of damage to their economy from terrible

736
00:35:21,480 --> 00:35:24,640
Speaker 10: choices they made around energy in particular over the last decade.

737
00:35:25,520 --> 00:35:27,920
Speaker 10: And to change that is going to require a radical

738
00:35:28,160 --> 00:35:31,560
Speaker 10: reimagination of Europe where they try to go for growth

739
00:35:31,600 --> 00:35:35,240
Speaker 10: as compared to preserving something that really can't be preserved anymore.

740
00:35:36,440 --> 00:35:38,080
Speaker 2: Have you ever gotten involved with crypto or what is

741
00:35:38,120 --> 00:35:42,400
Speaker 2: your involvement or exposure to crypto? Well, so that's not

742
00:35:42,480 --> 00:35:43,800
Speaker 2: my generation, but I mean.

743
00:35:44,160 --> 00:35:46,160
Speaker 10: Yeah, well I think I think you and I are

744
00:35:46,200 --> 00:35:50,439
Speaker 10: roughly the same generation. But look, I think that there's

745
00:35:50,480 --> 00:35:53,400
Speaker 10: some really interesting stuff around crypto. It has some of

746
00:35:53,440 --> 00:35:58,319
Speaker 10: the same positive bubble dynamics associated with the build out

747
00:35:58,400 --> 00:36:00,759
Speaker 10: of the Internet in the late nineteen ninety and I

748
00:36:00,840 --> 00:36:03,040
Speaker 10: think that there's actually an incredible need to move to

749
00:36:03,040 --> 00:36:06,680
Speaker 10: what I call digital securities right digitally native securities, the

750
00:36:06,800 --> 00:36:09,280
Speaker 10: idea of a smart token that has far more information

751
00:36:09,400 --> 00:36:12,600
Speaker 10: contained in it than a qsip does. For example, opens

752
00:36:12,640 --> 00:36:15,600
Speaker 10: up the ideas of creating all sorts of interesting structured products,

753
00:36:15,719 --> 00:36:19,480
Speaker 10: investment vehicles that people could desperately use, et cetera. But

754
00:36:19,560 --> 00:36:23,160
Speaker 10: crypto itself is basically a technology now in search of

755
00:36:23,200 --> 00:36:26,799
Speaker 10: that of that need. And I think it's a fascinating

756
00:36:26,880 --> 00:36:30,000
Speaker 10: insight in terms of crypto itself that the only thing

757
00:36:30,040 --> 00:36:32,640
Speaker 10: we have is speculation after ten plus years.

758
00:36:32,719 --> 00:36:34,440
Speaker 2: All right, Mike, thanks so much for joining us. Appreciate

759
00:36:34,440 --> 00:36:37,080
Speaker 2: getting you on our studio. Mike Greenie's portfolio manager, chief

760
00:36:37,080 --> 00:36:39,160
Speaker 2: strategist at Simplify Asset Management.

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00:36:39,440 --> 00:36:42,560
Speaker 1: Thanks for listening to the Bloomberg Markets podcasts. You can

762
00:36:42,560 --> 00:36:46,360
Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever

763
00:36:46,440 --> 00:36:50,160
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

764
00:36:50,360 --> 00:36:52,279
Speaker 1: at Matt Miller nineteen seventy three.

765
00:36:52,760 --> 00:36:55,200
Speaker 2: And I'm fall Sweeney. I'm on Twitter at pt Sweeney.

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00:36:55,239 --> 00:36:57,920
Speaker 2: Before the podcast, you can always catch us worldwide at

767
00:36:57,920 --> 00:36:58,840
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