1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,560 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,759 Speaker 1: at Bloomberg dot com slash podcast. Let's check in with 7 00:00:21,800 --> 00:00:25,000 Speaker 1: Ira Jersey. He actually thinks about this stuff all day 8 00:00:25,079 --> 00:00:27,680 Speaker 1: when he's not thinking about soccer. Uh. That's because he's 9 00:00:27,720 --> 00:00:30,520 Speaker 1: a US interest rate strategist for Bloomberg Intelligence, so we 10 00:00:30,600 --> 00:00:33,159 Speaker 1: pay him to think about this stuff. So, Ira, you 11 00:00:33,200 --> 00:00:35,760 Speaker 1: looked at the data this morning, and I'm gonna ask 12 00:00:35,760 --> 00:00:38,519 Speaker 1: you to put your little FED chairman hat on. What 13 00:00:38,560 --> 00:00:42,040 Speaker 1: are you taken away from today's data? Uh? Really not 14 00:00:42,320 --> 00:00:43,960 Speaker 1: very much. I mean I think this is more or 15 00:00:44,040 --> 00:00:47,160 Speaker 1: less what the Fed was thinking. Um. You know, Matt 16 00:00:47,159 --> 00:00:49,280 Speaker 1: just mentioned a second ago that you know, inflation is 17 00:00:49,320 --> 00:00:51,880 Speaker 1: not coming down very quickly. That's you know, very true. 18 00:00:51,920 --> 00:00:54,080 Speaker 1: And I think that that's always been the risk and 19 00:00:54,120 --> 00:00:57,080 Speaker 1: the danger is that, um, you know, the market was 20 00:00:57,200 --> 00:01:00,080 Speaker 1: pricing for inflation to come down much faster than it 21 00:01:00,160 --> 00:01:02,200 Speaker 1: was ever likely to come down, and that's one of 22 00:01:02,200 --> 00:01:04,880 Speaker 1: the reasons why what you're seeing today and and the 23 00:01:04,880 --> 00:01:07,280 Speaker 1: reason why two year yields are are off so much, 24 00:01:07,360 --> 00:01:11,039 Speaker 1: is that we're now pricing out some potential cuts later 25 00:01:11,040 --> 00:01:13,000 Speaker 1: in the year. And I think that that's probably the 26 00:01:13,080 --> 00:01:15,440 Speaker 1: right move. I do think that the FED is going 27 00:01:15,520 --> 00:01:17,200 Speaker 1: to do what it says and hike two or three 28 00:01:17,200 --> 00:01:20,200 Speaker 1: more times at twenty five basis points each then basically 29 00:01:20,240 --> 00:01:22,360 Speaker 1: do nothing for the better part of the year. And 30 00:01:22,360 --> 00:01:24,680 Speaker 1: and the market is starting to come around to that 31 00:01:24,720 --> 00:01:27,000 Speaker 1: way of thinking, which you know, Paul, I've told the 32 00:01:27,080 --> 00:01:30,600 Speaker 1: stock market due the last six weeks, not the stock market. 33 00:01:30,760 --> 00:01:34,639 Speaker 1: I mean, we rallied yesterday into this inflation print. Today 34 00:01:34,640 --> 00:01:37,960 Speaker 1: we got it and it was at expectations are higher 35 00:01:38,000 --> 00:01:42,039 Speaker 1: than expected, and were continue to see prices rise. I 36 00:01:42,120 --> 00:01:45,080 Speaker 1: just can't work it out. What what's the disconnect between 37 00:01:45,520 --> 00:01:49,440 Speaker 1: stocks and bonds? Uh, well, I can't. I can't really 38 00:01:49,440 --> 00:01:53,120 Speaker 1: speak about equity valuations, but I think maybe, um, you know, 39 00:01:53,200 --> 00:01:55,160 Speaker 1: maybe part of it is the idea that there still 40 00:01:55,200 --> 00:01:58,200 Speaker 1: is some some pricing power for certainly for some goods 41 00:01:58,240 --> 00:02:00,480 Speaker 1: and services, um you know. But I can tell you 42 00:02:00,520 --> 00:02:02,920 Speaker 1: that that from the rates perspective, you know, the reason 43 00:02:02,920 --> 00:02:05,680 Speaker 1: why you're seeing this deeper inversion of the yield curve 44 00:02:05,680 --> 00:02:08,799 Speaker 1: where now the deepest inverted that we've been in decades UM, 45 00:02:08,960 --> 00:02:11,360 Speaker 1: and we're at the and and we're likely to see 46 00:02:11,360 --> 00:02:13,440 Speaker 1: more um. You know, we have fair value on the 47 00:02:13,480 --> 00:02:16,120 Speaker 1: two year yield assuming that the Fed does what we 48 00:02:16,160 --> 00:02:18,600 Speaker 1: think it will do at around four so we still 49 00:02:18,600 --> 00:02:21,680 Speaker 1: have another five basis points to go here in in 50 00:02:21,680 --> 00:02:24,040 Speaker 1: the two year yield. And you know, we're looking for 51 00:02:24,160 --> 00:02:26,320 Speaker 1: ten year yield maybe to get up towards three ninety, 52 00:02:26,400 --> 00:02:29,400 Speaker 1: but not break four percent. So that's an interesting you know, 53 00:02:29,440 --> 00:02:32,200 Speaker 1: I think a really interesting dynamic where you can see 54 00:02:32,600 --> 00:02:34,880 Speaker 1: very inverted yield curves. You wind up with in an 55 00:02:35,240 --> 00:02:38,880 Speaker 1: environment where um, where that that probably persists for most 56 00:02:38,880 --> 00:02:41,839 Speaker 1: of the year UM and people are gonna be saying like, hey, 57 00:02:41,840 --> 00:02:43,160 Speaker 1: that that's a signal that we're going to be in 58 00:02:43,200 --> 00:02:45,760 Speaker 1: a recession blah blah blah, and and you know, maybe so, 59 00:02:46,200 --> 00:02:47,800 Speaker 1: but it's going to take a long time for that 60 00:02:47,840 --> 00:02:50,359 Speaker 1: to filter through to the to the rest of the market. 61 00:02:50,360 --> 00:02:53,799 Speaker 1: And maybe that's what the equity markets uh really thinking here, 62 00:02:53,840 --> 00:02:55,320 Speaker 1: is that we're not going to be in a recession, 63 00:02:55,360 --> 00:02:57,680 Speaker 1: that there's not going to be a very hard landing. 64 00:02:58,120 --> 00:03:01,080 Speaker 1: I mean, if you look at the ursion, it's crazy 65 00:03:01,160 --> 00:03:04,240 Speaker 1: that this is the most inversion we've been as far 66 00:03:04,280 --> 00:03:07,960 Speaker 1: as I can see since what the seventies, because you 67 00:03:08,040 --> 00:03:12,360 Speaker 1: had so the early eighties, which means that you know, 68 00:03:12,480 --> 00:03:16,120 Speaker 1: the bursting of the Internet bubble was nothing on this. 69 00:03:16,400 --> 00:03:20,360 Speaker 1: You know, nationwide housing bust, well, global housing bust uh 70 00:03:20,440 --> 00:03:23,799 Speaker 1: in the two thou eight global financial crisis didn't hold 71 00:03:23,840 --> 00:03:27,160 Speaker 1: a candle to this, right, It's it's only this recession 72 00:03:27,200 --> 00:03:29,280 Speaker 1: that gets us back to like the blow up of 73 00:03:29,320 --> 00:03:32,600 Speaker 1: Breton Woods. Well, I think though, Matt, you know, what 74 00:03:32,639 --> 00:03:34,360 Speaker 1: we have to appreciate is that this is also the 75 00:03:34,360 --> 00:03:36,480 Speaker 1: first time since the early eighties that we've had inflation 76 00:03:36,560 --> 00:03:39,560 Speaker 1: like this, right, and and it's coming down so uh 77 00:03:39,640 --> 00:03:42,760 Speaker 1: so slowly that the market is trying to adjust to 78 00:03:43,040 --> 00:03:46,920 Speaker 1: what is the near term outlook for both inflation and 79 00:03:47,280 --> 00:03:49,280 Speaker 1: you know, policy rates, which is that they're going to 80 00:03:49,480 --> 00:03:51,440 Speaker 1: it's going to remain a little bit higher for longer 81 00:03:51,480 --> 00:03:54,640 Speaker 1: than the market was initially thinking versus where are we 82 00:03:54,680 --> 00:03:57,240 Speaker 1: going to be in four years? Um So, in four 83 00:03:57,320 --> 00:04:00,160 Speaker 1: years we might be in a deflationary environment and you know, 84 00:04:00,160 --> 00:04:02,640 Speaker 1: we're not there yet, and hopefully we won't get there, 85 00:04:02,680 --> 00:04:04,880 Speaker 1: but but you can you can see an environment where 86 00:04:04,880 --> 00:04:09,560 Speaker 1: we go back more to like es level of interest 87 00:04:09,640 --> 00:04:12,480 Speaker 1: rates and of of an economy where you know, a 88 00:04:12,520 --> 00:04:15,160 Speaker 1: five or six percent mortgage is just normal. Look, I 89 00:04:15,560 --> 00:04:17,240 Speaker 1: keep on bringing this up. My first mortgage that I 90 00:04:17,279 --> 00:04:19,839 Speaker 1: got in the late nineties was seven and I thought 91 00:04:19,880 --> 00:04:22,720 Speaker 1: that was a decent rate. You know, so so, but 92 00:04:22,720 --> 00:04:25,640 Speaker 1: but what we've gotten accustomed to very low interest rates, right, 93 00:04:25,680 --> 00:04:28,000 Speaker 1: so we have to get readjusted to a higher interest 94 00:04:28,080 --> 00:04:32,040 Speaker 1: rate environment, which especially considering the prices paid. You know, uh, 95 00:04:33,360 --> 00:04:37,080 Speaker 1: who was it iceman Um from the Big Short Steve 96 00:04:37,120 --> 00:04:39,720 Speaker 1: Eisman was. I keep bringing this up, but on the 97 00:04:39,760 --> 00:04:42,800 Speaker 1: Odd Lots podcast he said, I do the back of 98 00:04:42,839 --> 00:04:46,599 Speaker 1: the napkin math from three percent rates to the seven 99 00:04:46,600 --> 00:04:50,200 Speaker 1: percent rate mortgage that we're looking at now, housing prices 100 00:04:50,200 --> 00:04:54,480 Speaker 1: have to drop thirty in order to make up for that. 101 00:04:54,680 --> 00:04:58,159 Speaker 1: People don't maybe realize what a big jump that is. Well, 102 00:04:58,200 --> 00:05:00,159 Speaker 1: but in fairness too, you have to also look the 103 00:05:00,160 --> 00:05:02,040 Speaker 1: income side of the equation, right, because if you look 104 00:05:02,040 --> 00:05:05,240 Speaker 1: at something like housing affordability. And Erica Heidelberg, who's our 105 00:05:05,240 --> 00:05:07,479 Speaker 1: mortgage strategist, who reports to me she's been doing some 106 00:05:07,520 --> 00:05:10,120 Speaker 1: great work on this. Um. You have to appreciate that 107 00:05:10,320 --> 00:05:13,279 Speaker 1: affordability is certainly lower because of the higher interest rates, 108 00:05:13,279 --> 00:05:15,880 Speaker 1: but you also have have wages that are growing at 109 00:05:15,880 --> 00:05:17,520 Speaker 1: six percent a year, right, So if you think about 110 00:05:17,520 --> 00:05:20,440 Speaker 1: it from an affordability perspective, it doesn't necessarily have to drop. 111 00:05:20,960 --> 00:05:23,200 Speaker 1: Does it have to drop you know, some level you know, 112 00:05:23,279 --> 00:05:26,960 Speaker 1: five and fiftent? Yeah? Maybe, but we also rallied yea, 113 00:05:27,040 --> 00:05:29,000 Speaker 1: you know, but but houseprace has also went up massively 114 00:05:29,000 --> 00:05:30,919 Speaker 1: over the last couple of years as well, so you 115 00:05:30,920 --> 00:05:33,680 Speaker 1: would expect potentially some type of adjustment. And quite frankly, 116 00:05:33,760 --> 00:05:36,040 Speaker 1: that's what the FET is trying to engineer right there, 117 00:05:36,040 --> 00:05:37,479 Speaker 1: trying to get some of the froth out of the 118 00:05:37,520 --> 00:05:41,640 Speaker 1: real economy. Um. That hasn't necessarily translated as directly to 119 00:05:41,760 --> 00:05:44,719 Speaker 1: the financial economy, right, That's one reason why the equity 120 00:05:44,760 --> 00:05:47,159 Speaker 1: market is maybe where it is at the moment um. 121 00:05:47,279 --> 00:05:49,760 Speaker 1: But the but but we're still much lower, right, We're 122 00:05:49,760 --> 00:05:52,440 Speaker 1: still very far off the highs, and in terms of 123 00:05:52,440 --> 00:05:55,119 Speaker 1: of equity markets, we haven't we're not making new highs 124 00:05:55,200 --> 00:05:58,320 Speaker 1: yet and um, and an environment where we're not going 125 00:05:58,320 --> 00:06:01,280 Speaker 1: to fall into recession, than then try waters probably not 126 00:06:02,240 --> 00:06:06,320 Speaker 1: can't be completely unexpected. All right, so, Ira, super bowls 127 00:06:06,360 --> 00:06:08,839 Speaker 1: over pitchers and catchers not yet, so I can actually 128 00:06:08,839 --> 00:06:11,080 Speaker 1: focus a little bit in European soccer or any soccer. 129 00:06:11,200 --> 00:06:14,280 Speaker 1: What am I? What am I watching this coming weekend? Um? 130 00:06:14,400 --> 00:06:16,200 Speaker 1: You know I haven't looked at the fixtures for this weekend, 131 00:06:16,240 --> 00:06:19,159 Speaker 1: but I know after this past weekend that the battle 132 00:06:19,200 --> 00:06:20,920 Speaker 1: at the top of the Premier League is heating up 133 00:06:20,920 --> 00:06:23,400 Speaker 1: where you don't have Manchester City up there at the moment, 134 00:06:23,440 --> 00:06:26,159 Speaker 1: you have Arsenal and Manchester United currently one and two 135 00:06:26,400 --> 00:06:28,960 Speaker 1: in the in the table. So he's gotta keep mean. 136 00:06:29,040 --> 00:06:31,640 Speaker 1: John Farrow is pretty happy, I think an Arsenal guy. 137 00:06:33,040 --> 00:06:38,760 Speaker 1: He's a Chelsea guy, but um Arsenal because Manchester UH 138 00:06:39,040 --> 00:06:41,800 Speaker 1: United about to be bought by Dubai, right, and don't know, 139 00:06:42,520 --> 00:06:45,680 Speaker 1: the little Easterner has already owned Manchester City a lot. 140 00:06:45,760 --> 00:06:47,960 Speaker 1: So all right, Ira, thanks so much for joining us, 141 00:06:47,960 --> 00:06:51,640 Speaker 1: our Jersey chief US interest rate strategist for Bloomberg Intelligence, 142 00:06:52,000 --> 00:06:53,960 Speaker 1: uh breaking down some of the inflation data and what 143 00:06:54,120 --> 00:06:56,640 Speaker 1: how the FED might interpret that data going forward and 144 00:06:56,720 --> 00:07:00,560 Speaker 1: next upcoming meetings, well more coming up. This is Bloomber. 145 00:07:04,480 --> 00:07:08,680 Speaker 1: I am in a bit of a tough spot, right, 146 00:07:08,720 --> 00:07:11,840 Speaker 1: now I'm looking for a couple of cars that you 147 00:07:11,880 --> 00:07:13,800 Speaker 1: have a couple of cars I have to have. Well, 148 00:07:13,840 --> 00:07:17,920 Speaker 1: there's there's certain first, especially the Dodge Challenger. I have 149 00:07:18,280 --> 00:07:26,000 Speaker 1: to get um not really uh before they are done 150 00:07:26,080 --> 00:07:27,880 Speaker 1: making them. So this is the last year for the 151 00:07:27,920 --> 00:07:30,600 Speaker 1: six point four Leader hemmy, and I must have that's 152 00:07:30,640 --> 00:07:34,600 Speaker 1: what I hear. A Challenger scat pack wide body. Tough 153 00:07:34,640 --> 00:07:37,640 Speaker 1: to find allocations for that, and the prices are off 154 00:07:37,680 --> 00:07:40,120 Speaker 1: the charts. I also want a Bronco, but I was 155 00:07:40,160 --> 00:07:42,400 Speaker 1: at the Ford dealership the other day and they said, 156 00:07:42,520 --> 00:07:46,360 Speaker 1: look forwards, putting a stop to the good combinations with 157 00:07:46,440 --> 00:07:50,800 Speaker 1: the big sasquatchas package you know. Um, they're just giving 158 00:07:50,800 --> 00:07:53,720 Speaker 1: out the little ones right now. So that's that's hard. 159 00:07:53,920 --> 00:07:56,400 Speaker 1: And that's not even getting into electric car territory. Because 160 00:07:56,400 --> 00:07:58,520 Speaker 1: if I wanted a Lightning right now, or if I 161 00:07:58,520 --> 00:08:01,600 Speaker 1: wanted to order a Silver to e V, I mean, 162 00:08:01,760 --> 00:08:04,760 Speaker 1: I would be paying probably a hundred grand. It's crazy. 163 00:08:04,960 --> 00:08:07,400 Speaker 1: Prices are off the charts right now. I want to 164 00:08:07,400 --> 00:08:10,640 Speaker 1: bring in David Welch, who wrote our Big Take story 165 00:08:10,760 --> 00:08:15,280 Speaker 1: today about this pricing situation. Car prices hit record highs 166 00:08:15,320 --> 00:08:18,320 Speaker 1: as automaker's limit output UM and we're seeing it really 167 00:08:18,360 --> 00:08:22,679 Speaker 1: across the industry. But evs play a big, big piece 168 00:08:23,080 --> 00:08:26,400 Speaker 1: into this right now. David joined us out of Detroit, 169 00:08:26,480 --> 00:08:29,640 Speaker 1: the motor city obviously, So David, what are you finding 170 00:08:29,720 --> 00:08:32,439 Speaker 1: Because we've been in this situation for a couple of 171 00:08:32,559 --> 00:08:35,240 Speaker 1: years now, our prices are just ramping up and it 172 00:08:35,280 --> 00:08:39,920 Speaker 1: doesn't seem like there's any end in sight. Yeah, they've 173 00:08:40,120 --> 00:08:43,520 Speaker 1: they've been going nuts since really the pandemic started. A 174 00:08:43,520 --> 00:08:46,920 Speaker 1: lot of it is production related, but going forward and 175 00:08:47,000 --> 00:08:50,200 Speaker 1: even to a circumstance right now, car companies want to 176 00:08:50,440 --> 00:08:55,959 Speaker 1: keep productions somewhat constrained because they've learned that making fewer 177 00:08:56,040 --> 00:08:58,120 Speaker 1: vehicles and selling them a big prices is just a 178 00:08:58,160 --> 00:09:01,040 Speaker 1: way better business than atting deal or loss with a 179 00:09:01,080 --> 00:09:04,120 Speaker 1: bunch of production and hoping it will sell and when 180 00:09:04,120 --> 00:09:07,840 Speaker 1: it doesn't, inevitably putting four or five dollars in rebates 181 00:09:07,840 --> 00:09:11,160 Speaker 1: out there to make it move. Um, But that's how 182 00:09:11,200 --> 00:09:14,120 Speaker 1: they've always done it. There's no way they're going to 183 00:09:14,240 --> 00:09:20,280 Speaker 1: maintain this discipline, are they. Well, we'll see, but let's 184 00:09:20,280 --> 00:09:23,959 Speaker 1: look at a few numbers first. So Too and General 185 00:09:24,000 --> 00:09:26,880 Speaker 1: Motors say that the industry probably has enough semi conductor 186 00:09:26,960 --> 00:09:29,920 Speaker 1: chips this year in the US, let's start with to 187 00:09:29,920 --> 00:09:32,640 Speaker 1: make fifteen million vehicles, which is two to two and 188 00:09:32,679 --> 00:09:36,680 Speaker 1: a half million fewer than they usually make, you know, 189 00:09:37,000 --> 00:09:41,360 Speaker 1: years with pretty strong economies and low unemployment like this one, Um, 190 00:09:41,400 --> 00:09:43,200 Speaker 1: And that's been the case for the past couple of years. 191 00:09:43,200 --> 00:09:45,360 Speaker 1: In fact, they only sold about thirteen million last year. 192 00:09:45,960 --> 00:09:48,840 Speaker 1: So there's a lot of pent up demand out there, 193 00:09:48,840 --> 00:09:51,320 Speaker 1: people looking for cars, people like you, who either couldn't 194 00:09:51,320 --> 00:09:53,760 Speaker 1: find what they wanted because it didn't exist, or they 195 00:09:53,760 --> 00:09:56,079 Speaker 1: didn't find what they wanted but a dealer was charging 196 00:09:56,080 --> 00:09:57,719 Speaker 1: two thousands over stick er and they walked, and for 197 00:09:57,840 --> 00:10:00,439 Speaker 1: that they just keep driving their card wait until prices 198 00:10:00,480 --> 00:10:04,280 Speaker 1: came back. What I would give two that would be 199 00:10:04,320 --> 00:10:07,760 Speaker 1: a dream come true. I'm hearing, David, I'm hearing on 200 00:10:07,840 --> 00:10:12,080 Speaker 1: the Challenger, Um, I'm hearing the best deal I've heard 201 00:10:12,080 --> 00:10:15,080 Speaker 1: so far as five thousand over sticker. And good friends 202 00:10:15,120 --> 00:10:18,640 Speaker 1: of mine whom I've grown up with since elementary school 203 00:10:18,720 --> 00:10:23,240 Speaker 1: are saying ten to twenty k over. I mean, look, 204 00:10:23,559 --> 00:10:26,599 Speaker 1: there's there are some crazy galaging. Those are the exceptions. 205 00:10:26,640 --> 00:10:29,040 Speaker 1: And I was searching for a key for my daughter, 206 00:10:29,640 --> 00:10:32,319 Speaker 1: helping her find a car, and you know, she ended 207 00:10:32,400 --> 00:10:36,559 Speaker 1: up having to buy some stupid thing where you basically 208 00:10:36,559 --> 00:10:39,040 Speaker 1: scotch guard the seats for four d over sticker and 209 00:10:39,360 --> 00:10:41,880 Speaker 1: that was it. And you know some are one or 210 00:10:41,880 --> 00:10:44,120 Speaker 1: two thousand over sticker. A lot of that has actually 211 00:10:44,120 --> 00:10:46,880 Speaker 1: gone away. So prisons are sockening up a little. But 212 00:10:46,960 --> 00:10:48,880 Speaker 1: there's just there's not enough production out there and still 213 00:10:48,960 --> 00:10:50,920 Speaker 1: enough pent up demand where these high prices are probably 214 00:10:50,960 --> 00:10:56,559 Speaker 1: gonna last this year and maybe into and that's when 215 00:10:56,720 --> 00:11:00,360 Speaker 1: we'll kind of figure out do they really have disciplined Yeah, 216 00:11:00,440 --> 00:11:03,000 Speaker 1: that's kind of production. I mean, I'm just looking at 217 00:11:03,160 --> 00:11:05,120 Speaker 1: you know, you have the Big Take story today out 218 00:11:05,160 --> 00:11:07,319 Speaker 1: on this topic. So you can find that at bloomber 219 00:11:07,360 --> 00:11:10,120 Speaker 1: dot com, Slash Big Take or ni space Big Take 220 00:11:10,200 --> 00:11:12,800 Speaker 1: go on the Bloomberg terminal, and it is a deeply 221 00:11:12,840 --> 00:11:15,920 Speaker 1: reported story here. But it just comes down to, I 222 00:11:15,960 --> 00:11:18,720 Speaker 1: think back to the Henry Ford. I mean, that's the 223 00:11:18,760 --> 00:11:23,680 Speaker 1: business model. Crank out, seventeen millions are and you move them. 224 00:11:23,720 --> 00:11:25,360 Speaker 1: But I mean I understand that this is a better 225 00:11:25,400 --> 00:11:27,760 Speaker 1: economic model. David. I will tell you that Paul has 226 00:11:27,760 --> 00:11:31,079 Speaker 1: been pushing for automakers to get back to peak start 227 00:11:31,440 --> 00:11:32,920 Speaker 1: for a couple of years now, so it's one of 228 00:11:33,040 --> 00:11:34,920 Speaker 1: this is along with working from home. This is one 229 00:11:34,960 --> 00:11:38,600 Speaker 1: of his pet peeves. And and there's no shortages of 230 00:11:39,240 --> 00:11:41,560 Speaker 1: chips and stuff, right, I mean so there still are, 231 00:11:41,679 --> 00:11:46,000 Speaker 1: right David, there's still Yeah, there's still It's like the 232 00:11:46,080 --> 00:11:48,160 Speaker 1: chip shortage. It is not binary. We don't go from 233 00:11:48,200 --> 00:11:50,800 Speaker 1: having nuns having as many as you possibly wanted things 234 00:11:50,840 --> 00:11:53,640 Speaker 1: all over by the roadside like that. We we're like 235 00:11:53,720 --> 00:11:57,280 Speaker 1: I said, we're going to go from having a dearth 236 00:11:57,360 --> 00:11:59,360 Speaker 1: of chips to being able to make about fifteen million 237 00:12:00,080 --> 00:12:03,000 Speaker 1: US this year. That's not near peak ins fact, that's 238 00:12:03,080 --> 00:12:05,760 Speaker 1: twelve fifty percent Bulle peak. So if you have if 239 00:12:05,760 --> 00:12:07,920 Speaker 1: you're still twelve to fifty Bullie peak in terms of 240 00:12:07,920 --> 00:12:10,280 Speaker 1: what you canm produce this year, and there's still a 241 00:12:10,280 --> 00:12:12,640 Speaker 1: lot of consumers out there, like you guys who want 242 00:12:12,640 --> 00:12:16,720 Speaker 1: a car, then it's still a sellers market. And I'll 243 00:12:16,760 --> 00:12:19,480 Speaker 1: throw one more thing at you. This year and next 244 00:12:19,559 --> 00:12:22,040 Speaker 1: we're gonna have about five or six hundred thousand fewer 245 00:12:22,240 --> 00:12:25,280 Speaker 1: vehicles coming off lease because automakers and fevers were not 246 00:12:25,440 --> 00:12:29,000 Speaker 1: leasing as much. So people can the cars they purchased, 247 00:12:29,000 --> 00:12:30,760 Speaker 1: they can hold longer than at least least you gotta 248 00:12:30,840 --> 00:12:32,800 Speaker 1: you gotta buy the car, get something new. It's just 249 00:12:32,840 --> 00:12:36,760 Speaker 1: what's the contract siss. So the used market, even though 250 00:12:36,760 --> 00:12:41,280 Speaker 1: that has been softening up a bit, is still not 251 00:12:41,360 --> 00:12:43,600 Speaker 1: going to come roaring back as a source for cars 252 00:12:43,600 --> 00:12:45,520 Speaker 1: because you don't have as many coming off least. I'm 253 00:12:45,559 --> 00:12:47,640 Speaker 1: not saying prices won't weaken this year for new and 254 00:12:47,760 --> 00:12:49,560 Speaker 1: used cars. I think they will. But in order for 255 00:12:49,720 --> 00:12:51,480 Speaker 1: to get really affordable, which is the whole point of 256 00:12:51,520 --> 00:12:53,600 Speaker 1: the big take, for middle class buyers to be able 257 00:12:53,600 --> 00:12:55,360 Speaker 1: to afford this and get a payment from the current 258 00:12:55,440 --> 00:12:57,679 Speaker 1: rate of seven seventy bucks a month down to more 259 00:12:58,080 --> 00:13:01,040 Speaker 1: affordable four month, prices will need to soften the world 260 00:13:01,040 --> 00:13:04,199 Speaker 1: this year. They need to collapse. They're not, they're not, 261 00:13:04,320 --> 00:13:07,520 Speaker 1: but we do see some softening. You put up point 262 00:13:07,559 --> 00:13:10,199 Speaker 1: out in the story, and I remember, um, Paul and 263 00:13:10,280 --> 00:13:13,800 Speaker 1: I spoke with Keith Notton when he when he when 264 00:13:13,800 --> 00:13:16,640 Speaker 1: he had talked just talked to Ford about cutting prices 265 00:13:16,640 --> 00:13:19,960 Speaker 1: on the Mockee that and they told him in response 266 00:13:20,080 --> 00:13:22,360 Speaker 1: this question, why, um, well, we got to do it 267 00:13:22,360 --> 00:13:24,920 Speaker 1: because Tesla just cut prices. So you're starting to see 268 00:13:24,960 --> 00:13:29,920 Speaker 1: little cracks, right, And the question is can uh you know, 269 00:13:30,080 --> 00:13:33,880 Speaker 1: if if Jim Farley and Elon Musk are already um 270 00:13:34,040 --> 00:13:39,760 Speaker 1: you know, are already falling falling out of rank um 271 00:13:39,880 --> 00:13:43,400 Speaker 1: can Mary Barra and Mark Royce and the rest of 272 00:13:43,440 --> 00:13:47,679 Speaker 1: the industry. You know, hold hold hold the line for 273 00:13:47,800 --> 00:13:51,000 Speaker 1: the moment. I think the EV market and the internal 274 00:13:51,040 --> 00:13:54,160 Speaker 1: combustion vehicle market are kind of two different markets. Uh. 275 00:13:54,200 --> 00:13:56,760 Speaker 1: And also after after Chess of cut prices, they went 276 00:13:56,760 --> 00:14:00,520 Speaker 1: back and it's not increase um. There are some other 277 00:14:00,600 --> 00:14:02,960 Speaker 1: dynamics going on there. Some of the price decreases we 278 00:14:03,000 --> 00:14:06,320 Speaker 1: saw from Forward and Tessa were so they can get 279 00:14:06,320 --> 00:14:08,920 Speaker 1: their sticker prices under the thresholds where their customers can 280 00:14:08,960 --> 00:14:12,280 Speaker 1: get federal tax credits. So you drop your the price 281 00:14:12,320 --> 00:14:14,079 Speaker 1: of your car by three thousand, you get under a 282 00:14:14,120 --> 00:14:16,320 Speaker 1: certain threshold, and the government gives that from swing under 283 00:14:16,320 --> 00:14:19,840 Speaker 1: seventy bucks or bucks whatever, you know, whatever it comes 284 00:14:19,880 --> 00:14:22,480 Speaker 1: out to for that vehicle, and it's an even bigger 285 00:14:22,480 --> 00:14:25,240 Speaker 1: bonus and they'll sell more thanks to Uncle Sam. So 286 00:14:25,320 --> 00:14:27,520 Speaker 1: there was some of that going on, and I do 287 00:14:27,640 --> 00:14:31,360 Speaker 1: think Look, Test was in a funky position right now. 288 00:14:31,560 --> 00:14:34,360 Speaker 1: They have a ton of production capacity coming online that's 289 00:14:34,400 --> 00:14:38,080 Speaker 1: pretty new, and and the plant now some types hasn't 290 00:14:38,080 --> 00:14:41,440 Speaker 1: even really begun to get close to full production. So 291 00:14:41,560 --> 00:14:44,280 Speaker 1: Ellen saw his sales goals being missed. He wanted to 292 00:14:44,280 --> 00:14:47,520 Speaker 1: grow sales. He only grew up by forty still great 293 00:14:47,520 --> 00:14:50,720 Speaker 1: by anyone else's standards, but that was it um and 294 00:14:50,760 --> 00:14:52,760 Speaker 1: he didn't like that. He has a ton of production 295 00:14:52,800 --> 00:14:56,040 Speaker 1: coming online. All of his vehicles, particularly the models and 296 00:14:56,040 --> 00:14:59,720 Speaker 1: the modeloques haven't been redesigned in almost a decade. The 297 00:14:59,720 --> 00:15:03,120 Speaker 1: model as almost told enough to shave. So he's got 298 00:15:03,440 --> 00:15:07,040 Speaker 1: and look at his cars. People love them. They're good products, 299 00:15:07,080 --> 00:15:09,840 Speaker 1: but they all go like so the like tests with 300 00:15:09,960 --> 00:15:13,040 Speaker 1: vehicles are different sizes and shapes of the same sauceage. 301 00:15:13,640 --> 00:15:16,240 Speaker 1: So you know, I think he's got three things going on. 302 00:15:16,360 --> 00:15:19,520 Speaker 1: He does have new competition coming in from Foard, GM, 303 00:15:19,680 --> 00:15:23,720 Speaker 1: Volkswagen out uh BMW Mercendies had vehicles out the Koreans 304 00:15:23,760 --> 00:15:25,840 Speaker 1: Hunt i KA have some very good products out there, 305 00:15:26,040 --> 00:15:27,800 Speaker 1: so that he has competition, He has a ton of 306 00:15:27,800 --> 00:15:29,960 Speaker 1: compassion becoming online, and he has I'm fresh in any 307 00:15:29,960 --> 00:15:32,040 Speaker 1: of his vehicles. All of that, all of that is 308 00:15:32,440 --> 00:15:35,800 Speaker 1: any other vehicle market, any of the vehicles segment says 309 00:15:35,800 --> 00:15:37,840 Speaker 1: you gotta cut prices, and I think that David Real 310 00:15:37,920 --> 00:15:41,200 Speaker 1: Real quickly thirty seconds. What are consumers doing today? Are they? 311 00:15:41,200 --> 00:15:43,240 Speaker 1: Are they paying a hundred thousand dollars for a pickup trend? 312 00:15:44,920 --> 00:15:47,960 Speaker 1: Some of them are. Yeah, So like there are a 313 00:15:48,000 --> 00:15:52,280 Speaker 1: variety of things going on. People are buying expensive vehicles, 314 00:15:52,320 --> 00:15:55,160 Speaker 1: but that's your wealthy or more fooling consumers. A lot 315 00:15:55,200 --> 00:15:58,520 Speaker 1: of your middle class consumers are either writing or vehicle 316 00:15:58,560 --> 00:16:01,120 Speaker 1: for another year or two and just putting money into repairs, 317 00:16:01,560 --> 00:16:04,560 Speaker 1: or they're buying like eight nine year old vehicles in 318 00:16:04,600 --> 00:16:06,800 Speaker 1: the youth markets because that's where you can really get affordably. 319 00:16:06,880 --> 00:16:10,160 Speaker 1: Right now, all right, amazing stuff. I mean, I'll be 320 00:16:10,280 --> 00:16:13,840 Speaker 1: it's fascinating to see if this industry can maintain its discipline. Uh, 321 00:16:13,880 --> 00:16:17,440 Speaker 1: but we'll see. David Watch, Detroit Bureau Chief or Bloomberg News. 322 00:16:20,440 --> 00:16:23,040 Speaker 1: All right, let's talk crypto and there's a million ways 323 00:16:23,080 --> 00:16:26,920 Speaker 1: we can go here, but I want to go crypto regulation. 324 00:16:27,160 --> 00:16:29,760 Speaker 1: I mean, is this a space that's going to be regulated? 325 00:16:29,880 --> 00:16:32,200 Speaker 1: Needs to be regulated? For all that stuff? We turn 326 00:16:32,240 --> 00:16:35,800 Speaker 1: to Nathan Dean, He's a senior policy analysts for Bloomberg Intelligence. Nathan, 327 00:16:36,120 --> 00:16:38,400 Speaker 1: you're the smart guy in the room. BS and management 328 00:16:38,400 --> 00:16:40,520 Speaker 1: from Purdue Heckla Hoops team. This year. Where did that 329 00:16:40,560 --> 00:16:43,040 Speaker 1: come from? And then an NBA from Chicago, So you 330 00:16:43,040 --> 00:16:45,360 Speaker 1: are over educated to that to the max. What do 331 00:16:45,400 --> 00:16:47,880 Speaker 1: you make of all this crypto space in terms of regulation? 332 00:16:48,520 --> 00:16:51,000 Speaker 1: You know, it sounds like there's a massive crackdown coming. 333 00:16:51,000 --> 00:16:53,240 Speaker 1: And I mean just putting it in Purdue terms, it's 334 00:16:53,280 --> 00:16:56,160 Speaker 1: like if produced you know, playing the uh you know, 335 00:16:56,240 --> 00:16:58,280 Speaker 1: one of the smallest teams out there. It's just one 336 00:16:58,280 --> 00:17:00,080 Speaker 1: of those things where you know, we've seen over the 337 00:17:00,120 --> 00:17:02,400 Speaker 1: past year the SEC c come in and register, come 338 00:17:02,440 --> 00:17:05,080 Speaker 1: and talk to us. In the industry largely has not, 339 00:17:05,359 --> 00:17:08,200 Speaker 1: and just within the last few months we've started to 340 00:17:08,240 --> 00:17:10,560 Speaker 1: see the SEC start to crack the whip. One of 341 00:17:10,640 --> 00:17:12,480 Speaker 1: the things that they've done is they've sent out what 342 00:17:12,560 --> 00:17:15,920 Speaker 1: are known as wells notices out to many different crypto players. 343 00:17:16,080 --> 00:17:19,160 Speaker 1: In fact, packs so's announced that they had received one. Essentially, 344 00:17:19,160 --> 00:17:21,320 Speaker 1: what this is is the SEC has decided we're going 345 00:17:21,359 --> 00:17:23,879 Speaker 1: to take an enforcement action against you, but we're just 346 00:17:23,920 --> 00:17:25,800 Speaker 1: giving you a heads up so that you can give 347 00:17:25,880 --> 00:17:28,280 Speaker 1: us a written response of why we shouldn't do this. 348 00:17:28,600 --> 00:17:31,479 Speaker 1: It's not going to stop the SEC, but we are 349 00:17:31,480 --> 00:17:33,840 Speaker 1: going to see a lot more enforcement actions between now 350 00:17:34,200 --> 00:17:36,359 Speaker 1: and the next few months. And that's really going to 351 00:17:36,400 --> 00:17:39,240 Speaker 1: issue a further chill to the industry. I get how 352 00:17:39,320 --> 00:17:43,200 Speaker 1: staking could be considered a security, certainly staking as a service, 353 00:17:43,920 --> 00:17:47,359 Speaker 1: um in the cracking case. It's harder for me to 354 00:17:47,480 --> 00:17:51,359 Speaker 1: grasp how stable coin is a security because you're not 355 00:17:51,400 --> 00:17:55,240 Speaker 1: expecting any return from a stable coin. No. So, actually, 356 00:17:55,359 --> 00:17:57,600 Speaker 1: sec each chairman Gary Ginsler gave a speech last year 357 00:17:57,600 --> 00:18:00,000 Speaker 1: where you essentially insinuated a stable coins of money mark 358 00:18:00,040 --> 00:18:03,520 Speaker 1: good funds and money market funds has its own, you know, 359 00:18:03,560 --> 00:18:07,119 Speaker 1: regulatory regime, and in the sec S eyes, you know 360 00:18:07,160 --> 00:18:10,440 Speaker 1: potentially they should be following that money market reform. Now, 361 00:18:10,480 --> 00:18:12,439 Speaker 1: if you assume that they're not a security, well then 362 00:18:12,480 --> 00:18:14,480 Speaker 1: they could be considered a deposit. And if they are 363 00:18:14,480 --> 00:18:17,880 Speaker 1: a deposit, then there are other types of banking regulations 364 00:18:17,880 --> 00:18:20,440 Speaker 1: that need to apply here. And so I think when 365 00:18:20,440 --> 00:18:22,880 Speaker 1: you move forward with stable coins, the idea here is 366 00:18:22,880 --> 00:18:25,160 Speaker 1: is that there's got to be some type of regulation. 367 00:18:25,520 --> 00:18:27,959 Speaker 1: You can't have nothing. But the question is what does 368 00:18:28,000 --> 00:18:30,840 Speaker 1: it look like now. I still believe that Congress will 369 00:18:30,840 --> 00:18:33,840 Speaker 1: eventually move forward on a stable coin regulation. In fact, 370 00:18:34,119 --> 00:18:36,359 Speaker 1: as we speak right now, the Senate Banking Committee is 371 00:18:36,400 --> 00:18:39,880 Speaker 1: talking about this. But you know, outside of stable coins. 372 00:18:39,920 --> 00:18:42,959 Speaker 1: For the rest of the crypto industry, it's really not 373 00:18:43,000 --> 00:18:46,040 Speaker 1: looking good right now in terms of new regulations. Is 374 00:18:46,080 --> 00:18:51,879 Speaker 1: this to what extent? Is this maybe increased regulatory attention 375 00:18:52,240 --> 00:18:55,080 Speaker 1: a function of FTX going bust and Sam Bankman freedom 376 00:18:55,119 --> 00:18:58,280 Speaker 1: all that mess. Oh? Absolutely, I mean this gave it 377 00:18:58,359 --> 00:19:00,600 Speaker 1: was like given the politicians a piece of andy and 378 00:19:00,680 --> 00:19:03,080 Speaker 1: making them all excited because it gave them a talking point. 379 00:19:03,440 --> 00:19:06,119 Speaker 1: You know, they can understand the failure of a company. 380 00:19:06,119 --> 00:19:09,520 Speaker 1: They understand that there are over nine million creditors out 381 00:19:09,520 --> 00:19:12,399 Speaker 1: there who potentially may not get their funds back. And 382 00:19:12,440 --> 00:19:15,760 Speaker 1: this is essentially giving politicians the ability to say, we 383 00:19:15,840 --> 00:19:19,280 Speaker 1: need new regulation, we need customer protections, we need anti 384 00:19:19,359 --> 00:19:22,439 Speaker 1: money launching. The problem is that there are multiple different 385 00:19:22,440 --> 00:19:25,359 Speaker 1: ideas out there right now. Senator Brown is talking about 386 00:19:25,400 --> 00:19:27,520 Speaker 1: doing this. Senator Tim Scott, the ranking member for the 387 00:19:27,560 --> 00:19:31,240 Speaker 1: Senate Banking Committee, was talking about putting in new customer protections. 388 00:19:31,480 --> 00:19:35,400 Speaker 1: Senator Elizabeth Warren is actually building a coalition including some 389 00:19:35,440 --> 00:19:39,480 Speaker 1: conservative Republicans, to come up with her own crypto bill, 390 00:19:39,840 --> 00:19:41,439 Speaker 1: and this is where it's going to play out over 391 00:19:41,480 --> 00:19:44,840 Speaker 1: the next six months. The problem for the crypto industry, though, 392 00:19:45,040 --> 00:19:48,360 Speaker 1: is that they've always said they want clarity. The problem 393 00:19:48,440 --> 00:19:50,359 Speaker 1: is is that the clarity is coming, or it could 394 00:19:50,359 --> 00:19:53,000 Speaker 1: be coming, and it may not be exactly what they want. 395 00:19:53,080 --> 00:19:57,040 Speaker 1: It may be very very onerous, very restrictive, and it's 396 00:19:57,040 --> 00:19:58,960 Speaker 1: gonna cost a lot of money to comply with it. 397 00:19:59,280 --> 00:20:00,919 Speaker 1: All right, let's get onto it. Well. First of all, 398 00:20:00,960 --> 00:20:04,840 Speaker 1: let me plug my show, uh Bloomberg Bloomberg Crypto one 399 00:20:04,880 --> 00:20:08,320 Speaker 1: pm this afternoon. We are focused on this issue for 400 00:20:08,359 --> 00:20:11,320 Speaker 1: a full thirty minutes. Nice, which is I guarantee the 401 00:20:11,359 --> 00:20:14,920 Speaker 1: most you want to hear about it? Okay, is the 402 00:20:15,000 --> 00:20:19,040 Speaker 1: upper limit? You don't want to hear anymore about token? Yeah, no, 403 00:20:19,080 --> 00:20:21,200 Speaker 1: it's doing great. Um. I want to talk though, while 404 00:20:21,240 --> 00:20:22,920 Speaker 1: we have you, Nathan, about some of the other things. 405 00:20:22,920 --> 00:20:25,719 Speaker 1: First of all, whatever happened to this guy is falling 406 00:20:25,760 --> 00:20:28,680 Speaker 1: dead ceiling? People? Are they still like warning about how 407 00:20:28,720 --> 00:20:31,639 Speaker 1: horrible this is and what a problem we face. Yeah, 408 00:20:31,720 --> 00:20:33,440 Speaker 1: but now that the State of the Union is over, 409 00:20:33,680 --> 00:20:37,240 Speaker 1: you know, the Congress is actually turning back to other topics. 410 00:20:37,280 --> 00:20:39,679 Speaker 1: I mean the dead ceiling. The problem with the dead ceiling. 411 00:20:39,720 --> 00:20:42,040 Speaker 1: It was a good thing that the politicians began to 412 00:20:42,040 --> 00:20:44,640 Speaker 1: look at it on an earlier earlier in the year. 413 00:20:44,880 --> 00:20:47,560 Speaker 1: I honestly didn't think they were going to do that. Um, 414 00:20:47,600 --> 00:20:50,400 Speaker 1: you know, but they've gotten their initial talking points through 415 00:20:50,600 --> 00:20:52,639 Speaker 1: out there in the public, and now they've turned to 416 00:20:52,680 --> 00:20:54,919 Speaker 1: other issues. The problem with it is is that with 417 00:20:55,000 --> 00:20:57,520 Speaker 1: Treasury setting this June fifth date, in our own rate 418 00:20:57,560 --> 00:21:01,399 Speaker 1: strategist Irish Jersey saying, potentially even September October is the 419 00:21:01,600 --> 00:21:03,680 Speaker 1: X date, Congress has a lot of time to sit 420 00:21:03,720 --> 00:21:06,359 Speaker 1: around and do nothing, and so it's more likely going 421 00:21:06,400 --> 00:21:09,040 Speaker 1: to be one of those situations where they'll start talking 422 00:21:09,080 --> 00:21:11,879 Speaker 1: about it again. But until the market and until New 423 00:21:11,960 --> 00:21:14,240 Speaker 1: York comes down and says, folks, you need to start 424 00:21:14,280 --> 00:21:17,040 Speaker 1: looking at this. We're getting worried, that's when they'll actually 425 00:21:17,080 --> 00:21:20,480 Speaker 1: start negotiating. So I think you'll see some more negotiations, 426 00:21:20,480 --> 00:21:23,280 Speaker 1: probably in April or May uh, and then certainly more 427 00:21:23,280 --> 00:21:25,520 Speaker 1: information if that June d gets pushed back out to 428 00:21:25,600 --> 00:21:28,040 Speaker 1: September October. All right, then the two things that I 429 00:21:28,040 --> 00:21:31,800 Speaker 1: always need to keep abreast of, okay, uh, safe banking 430 00:21:32,040 --> 00:21:35,879 Speaker 1: so that weed companies can can expand and grow, and 431 00:21:35,920 --> 00:21:41,080 Speaker 1: then um, the salt tax deduction. What do we know, Nathan, 432 00:21:41,480 --> 00:21:43,240 Speaker 1: You know I'm not giving you good hopes on either 433 00:21:43,320 --> 00:21:45,400 Speaker 1: of them. I mean when it comes to safe banking. Uh, 434 00:21:45,440 --> 00:21:47,000 Speaker 1: you know, there was a real opportunity to get it 435 00:21:47,040 --> 00:21:49,199 Speaker 1: done last year in the lame duck. Uh. You know, 436 00:21:49,240 --> 00:21:51,440 Speaker 1: we're gonna see a catalyst around April twenty if that's 437 00:21:51,480 --> 00:21:56,240 Speaker 1: when the Senate Democrats especially like to yeah exactly that 438 00:21:56,320 --> 00:21:57,680 Speaker 1: you'll see a lot of catalysts and a lot of 439 00:21:57,720 --> 00:22:00,400 Speaker 1: movement around April twenty. But we just don't it. I mean, 440 00:22:00,440 --> 00:22:02,640 Speaker 1: the one thing for the marijuana industry going right now 441 00:22:02,720 --> 00:22:05,440 Speaker 1: is that President Biden has directed his agencies to look 442 00:22:05,440 --> 00:22:09,720 Speaker 1: at reschedulizing, uh every declassifying marijuana. But that's a multi 443 00:22:09,760 --> 00:22:12,119 Speaker 1: Schedule one drug? Is it still a Schedule one drug? 444 00:22:12,560 --> 00:22:17,879 Speaker 1: Still a Schedule one drug? And yeah, and you know 445 00:22:17,960 --> 00:22:20,399 Speaker 1: it does give the industry hope that a change is coming, 446 00:22:20,400 --> 00:22:23,800 Speaker 1: but it's a multi year process, and you know, regulations 447 00:22:23,880 --> 00:22:26,600 Speaker 1: never moved fast. And then on the salt deduction, you know, 448 00:22:26,680 --> 00:22:30,360 Speaker 1: we saw the Salt Coalition, the lawmakers from New York 449 00:22:30,359 --> 00:22:32,720 Speaker 1: and New Jersey give a speech last week outside the 450 00:22:32,800 --> 00:22:34,960 Speaker 1: Capitol Hill and I'm just sorry again for the folks 451 00:22:35,000 --> 00:22:37,240 Speaker 1: in New York and New Jersey. It's just not something 452 00:22:37,280 --> 00:22:39,800 Speaker 1: that I think is gonna happen anytime soon, alright, as 453 00:22:39,840 --> 00:22:42,840 Speaker 1: long as they don't extend it past Oh that's when 454 00:22:42,840 --> 00:22:48,480 Speaker 1: a sunset, that's when the Trump uh tax thing wears off. Yeah, 455 00:22:48,560 --> 00:22:51,199 Speaker 1: thirty seconds. Think what will they get done in the 456 00:22:51,200 --> 00:22:54,640 Speaker 1: next couple of years? So, you know, I think you're 457 00:22:54,640 --> 00:22:57,960 Speaker 1: gonna have to see anti China. You know, anti being 458 00:22:58,000 --> 00:23:01,360 Speaker 1: anti China is really popular big tech. You know, there's 459 00:23:01,359 --> 00:23:03,199 Speaker 1: a lot of ideas floating around there in terms of 460 00:23:03,200 --> 00:23:06,479 Speaker 1: technology right now. That's gonna take some time. But you've 461 00:23:06,480 --> 00:23:08,800 Speaker 1: got to look at these months past pieces of legislation, 462 00:23:08,880 --> 00:23:10,720 Speaker 1: so like the dead stealing the government funding bills and 463 00:23:10,760 --> 00:23:13,080 Speaker 1: so forth. That's when the lobbyists are going to try 464 00:23:13,080 --> 00:23:16,840 Speaker 1: and attach things like the salt deduction uh and potentially 465 00:23:16,880 --> 00:23:19,080 Speaker 1: try and you know, get government to pass it that way. 466 00:23:19,160 --> 00:23:21,320 Speaker 1: So I'm not saying things can't get done. It's just 467 00:23:21,359 --> 00:23:24,000 Speaker 1: it's not gonna be these gradioseconomic stimulus bills. All right. 468 00:23:24,040 --> 00:23:27,000 Speaker 1: That's called gridlock, I think is kind of what we Yeah, 469 00:23:27,000 --> 00:23:28,840 Speaker 1: that's why we give him thirty seconds to tell us 470 00:23:28,840 --> 00:23:31,520 Speaker 1: what Congress is gonna get done exactly, all right, Nathan, 471 00:23:31,600 --> 00:23:33,360 Speaker 1: good stuff. If they if they do get anything done, 472 00:23:33,400 --> 00:23:35,159 Speaker 1: give us a ring, and we'll certainly chat about it. 473 00:23:35,359 --> 00:23:38,440 Speaker 1: Nathan Dean, senior policy annals for US and Latin America 474 00:23:38,880 --> 00:23:41,840 Speaker 1: for Bloomberg Intelligence. That's right. I mean, I'll tell you 475 00:23:42,359 --> 00:23:45,119 Speaker 1: almost nobody on Wall Street has policy annals like we do, 476 00:23:45,240 --> 00:23:49,080 Speaker 1: covered all different parts of the government and where policy 477 00:23:49,080 --> 00:23:51,919 Speaker 1: can impact industries and companies. So nobody knows it like 478 00:23:51,920 --> 00:23:54,240 Speaker 1: our Nathans. Nobody knows that like our Nathan's. We're gonna 479 00:23:54,280 --> 00:24:00,840 Speaker 1: more coming up. This is Bloomberg. All right. Let's talk 480 00:24:00,880 --> 00:24:04,280 Speaker 1: about a big, big picture topic here. We're talking E 481 00:24:04,480 --> 00:24:08,120 Speaker 1: s G. We're talking diversity um maybe in the technology space, 482 00:24:08,119 --> 00:24:10,560 Speaker 1: because there's been some some news coming out of Silicon 483 00:24:10,640 --> 00:24:13,399 Speaker 1: Valley on that front. And there was a recent op 484 00:24:13,520 --> 00:24:16,800 Speaker 1: ed in Newsweek entitled why Elon Musk and Peter Thiel 485 00:24:17,119 --> 00:24:19,760 Speaker 1: are wrong on E S G Investing? And the person 486 00:24:19,800 --> 00:24:22,159 Speaker 1: who wrote that op ed piece isn't Bloomberg in her 487 00:24:22,200 --> 00:24:26,160 Speaker 1: active broker studio. Help me out with the pronunciation here, Anniellason. 488 00:24:26,600 --> 00:24:30,800 Speaker 1: She's a founder of Edge and Power. She's based in Zurich, 489 00:24:31,040 --> 00:24:33,399 Speaker 1: but she's here in our Bloomberg in actor broker studio today. 490 00:24:33,400 --> 00:24:36,320 Speaker 1: How good is that? Aniella? Thanks so much for joining us. 491 00:24:36,359 --> 00:24:39,119 Speaker 1: Here talk to us about why you wrote this OpEd 492 00:24:39,160 --> 00:24:40,919 Speaker 1: and what are some of the key takeaways from your 493 00:24:40,920 --> 00:24:45,040 Speaker 1: operator as you think about diversity inequality. Thank you for 494 00:24:45,119 --> 00:24:48,320 Speaker 1: having me so. One of the main reasons why we 495 00:24:48,440 --> 00:24:51,240 Speaker 1: wrote that opened is that, of course, with all the 496 00:24:51,320 --> 00:24:54,440 Speaker 1: layoffs that are going on in the tech sector right now, 497 00:24:54,880 --> 00:24:58,720 Speaker 1: the big question is why should companies continue their investments 498 00:24:58,720 --> 00:25:03,600 Speaker 1: in diversity equita susan. Are these investments only making sense 499 00:25:03,720 --> 00:25:07,200 Speaker 1: when things are going well and times are good, and 500 00:25:07,320 --> 00:25:12,560 Speaker 1: it is this disposable investment in that times. And there 501 00:25:12,600 --> 00:25:16,480 Speaker 1: are three reasons why we believe that companies should continue 502 00:25:16,560 --> 00:25:21,600 Speaker 1: their dn I investments also in tougher times, in times 503 00:25:21,640 --> 00:25:25,960 Speaker 1: of dayoffs. First and foremost, it's because study after study 504 00:25:26,480 --> 00:25:32,040 Speaker 1: shows positive correlation between profitability and diversity. The most recent 505 00:25:32,119 --> 00:25:35,639 Speaker 1: one published in January by the World Economic Forum shows 506 00:25:35,760 --> 00:25:42,119 Speaker 1: that ethnically diverse and gender diverse companies outperformed their industry 507 00:25:42,280 --> 00:25:46,840 Speaker 1: peers in terms of profitability by thirty six percent and 508 00:25:47,000 --> 00:25:50,760 Speaker 1: twenty five per cent. That is fascinating because I would 509 00:25:50,800 --> 00:25:54,359 Speaker 1: expect and our performance in terms of revenue growth. Right 510 00:25:54,400 --> 00:25:57,000 Speaker 1: if you want to sell more stuff to more people, 511 00:25:57,440 --> 00:25:59,960 Speaker 1: you need to get more people to sell that stuff 512 00:26:00,200 --> 00:26:04,120 Speaker 1: right um in a sense, But profitability is an even 513 00:26:04,200 --> 00:26:06,440 Speaker 1: more interesting metric. Why why do you think that is? 514 00:26:06,840 --> 00:26:10,280 Speaker 1: I think that profitability is also related to the capacity 515 00:26:10,320 --> 00:26:13,879 Speaker 1: of the organization to show agility, to adapt to changing 516 00:26:13,960 --> 00:26:18,080 Speaker 1: market conditions, to show resilience, and to show an increased 517 00:26:18,160 --> 00:26:22,600 Speaker 1: capacity to innovate. And all these are positively correlated with 518 00:26:22,760 --> 00:26:26,159 Speaker 1: a more diverse workforce. So just looking at your that 519 00:26:26,280 --> 00:26:30,000 Speaker 1: was only one three oh three, gore you just jump 520 00:26:30,040 --> 00:26:31,960 Speaker 1: in all the time. What's reason number two? Why we 521 00:26:32,000 --> 00:26:34,879 Speaker 1: should care about reason number two is that we should 522 00:26:34,920 --> 00:26:38,200 Speaker 1: really care about people who stay in the workforce, So 523 00:26:38,640 --> 00:26:42,000 Speaker 1: we should really give them some good news and positive 524 00:26:42,119 --> 00:26:45,000 Speaker 1: vibes and showing them that we need them to stay 525 00:26:45,040 --> 00:26:48,640 Speaker 1: engaged as opposed to quiet equitters, as opposed to quiet quitters. 526 00:26:48,800 --> 00:26:53,000 Speaker 1: And very interestingly, a Gallop study show that in the 527 00:26:53,200 --> 00:26:57,359 Speaker 1: US right now, the number one reason for diverse talent, 528 00:26:57,520 --> 00:27:04,000 Speaker 1: women and other historically underrepresented groups to join or to 529 00:27:04,200 --> 00:27:09,639 Speaker 1: stay a company is how well they feel respected, what 530 00:27:09,920 --> 00:27:12,399 Speaker 1: is their work life balance, and what is their personal 531 00:27:12,520 --> 00:27:15,360 Speaker 1: well being taken care of in the workplace. So these 532 00:27:15,359 --> 00:27:19,200 Speaker 1: are key ingredients for engagement. Alongside it's a good motivator 533 00:27:19,320 --> 00:27:22,000 Speaker 1: is basically what you're saying exactly. What's number three. Number 534 00:27:22,080 --> 00:27:25,280 Speaker 1: three is that, of course we need to take a 535 00:27:25,400 --> 00:27:28,560 Speaker 1: long term view of diversity, equity and inclusion. We cannot 536 00:27:28,640 --> 00:27:32,479 Speaker 1: continue considering it as a layer on top of an 537 00:27:32,560 --> 00:27:36,360 Speaker 1: organizational core purpose. It's fundamental to it because it's investment 538 00:27:36,440 --> 00:27:40,240 Speaker 1: in people. So there has been. Number three is a 539 00:27:40,240 --> 00:27:42,240 Speaker 1: little softer than I think. Number three is a little 540 00:27:42,240 --> 00:27:44,560 Speaker 1: bit wishier, washier than number I mean, number one. I 541 00:27:44,600 --> 00:27:47,160 Speaker 1: get it, you're driving the bottom line. Number two, okay, 542 00:27:47,200 --> 00:27:50,600 Speaker 1: you're motivating your soldiers. Number three, we should because we should, 543 00:27:51,280 --> 00:27:55,760 Speaker 1: well not exactly. In the last three months, one in 544 00:27:56,040 --> 00:28:01,960 Speaker 1: four American employees where truth it whether they were looking 545 00:28:02,000 --> 00:28:05,520 Speaker 1: actively for an opportunity or not, and thirty nine percent 546 00:28:05,640 --> 00:28:08,880 Speaker 1: of those decline a job offer because the company could 547 00:28:08,920 --> 00:28:13,920 Speaker 1: not demonstrate their commitments to diversity, equity inclusion. Now, in 548 00:28:14,040 --> 00:28:18,159 Speaker 1: a market where there is a lot of competing demand 549 00:28:18,280 --> 00:28:21,840 Speaker 1: for talent, being able to demonstrate long term commitment to 550 00:28:21,960 --> 00:28:25,720 Speaker 1: that gives you an edge in terms of attracting, retaining, 551 00:28:26,160 --> 00:28:31,080 Speaker 1: and motivating the best talent. Okay, sorry, now go ahead, Sorry, 552 00:28:31,080 --> 00:28:32,679 Speaker 1: I just wanted to get through those I know. Let 553 00:28:32,720 --> 00:28:34,560 Speaker 1: me take the other side. Of the coins. Some influential 554 00:28:34,640 --> 00:28:37,560 Speaker 1: folks out there, Elon Musk, the pushing back on this stuff. 555 00:28:37,600 --> 00:28:41,080 Speaker 1: Elon Musk recently called E s G the devil. Peter 556 00:28:41,200 --> 00:28:43,360 Speaker 1: Teel's out there and some others, Bill Actman and so 557 00:28:43,480 --> 00:28:46,080 Speaker 1: on and so forth. What is there? And we've had 558 00:28:46,120 --> 00:28:49,120 Speaker 1: effect Ramaswani come in here and say he's telling companies 559 00:28:49,200 --> 00:28:52,320 Speaker 1: just focused on profits, don't worry about social stuff. He 560 00:28:52,360 --> 00:28:54,920 Speaker 1: would like reason number one, He might even like reason 561 00:28:55,040 --> 00:28:58,440 Speaker 1: number two. He might. Yeah, So what's the pushback that 562 00:28:58,680 --> 00:29:01,360 Speaker 1: that you in the s G community are seeing from 563 00:29:01,400 --> 00:29:03,400 Speaker 1: some of these folks. Yes, So I think that that 564 00:29:03,600 --> 00:29:06,520 Speaker 1: the main pushback is related exactly to what you said. E. 565 00:29:06,680 --> 00:29:09,200 Speaker 1: S G is perceived as wishy washy. And why is 566 00:29:09,240 --> 00:29:12,400 Speaker 1: E s G perceived as wishy washy Because we do 567 00:29:12,600 --> 00:29:15,720 Speaker 1: not feel that we can measure some of the aspects 568 00:29:15,760 --> 00:29:18,160 Speaker 1: behind the s G, especially behind the S and behind 569 00:29:18,200 --> 00:29:21,520 Speaker 1: the G taxonomy just isn't there in objective ways. We 570 00:29:21,680 --> 00:29:25,520 Speaker 1: cannot agree how material some of those topics are, and 571 00:29:25,720 --> 00:29:29,440 Speaker 1: we cannot agree to some standards of excellence when it 572 00:29:29,520 --> 00:29:32,760 Speaker 1: comes to the s G. So because we cannot make 573 00:29:33,240 --> 00:29:38,040 Speaker 1: that link, which is undoubtedly there, we tend to think 574 00:29:38,160 --> 00:29:41,600 Speaker 1: that E s G it is an afterthought and it's 575 00:29:41,720 --> 00:29:46,040 Speaker 1: destroying shareholder value, while e s G is about creating 576 00:29:46,120 --> 00:29:51,760 Speaker 1: sustainable shareholder value and keeping the company competitive long term. Well, 577 00:29:52,440 --> 00:29:55,280 Speaker 1: see the argument the background a Swami would make if 578 00:29:55,320 --> 00:29:57,560 Speaker 1: you were here. Actually I can't speak for him, no, 579 00:29:57,920 --> 00:30:00,760 Speaker 1: but I would guess he would say, Look, my number 580 00:30:00,800 --> 00:30:03,560 Speaker 1: one motivation is profit, and if I need to put 581 00:30:04,560 --> 00:30:09,320 Speaker 1: uh some environmental or social concerns aside for that, I'm 582 00:30:09,360 --> 00:30:12,840 Speaker 1: going to do it. Yes, I think that you will 583 00:30:13,080 --> 00:30:16,120 Speaker 1: always have investors. You might think that's short sided. Well, 584 00:30:16,320 --> 00:30:18,840 Speaker 1: I think that that's his opinion and he's entitled to 585 00:30:18,920 --> 00:30:21,640 Speaker 1: have it. I think that the beauty of guessing that's 586 00:30:21,720 --> 00:30:23,920 Speaker 1: his opinion. I can't. We haven't have both of you 587 00:30:24,000 --> 00:30:26,880 Speaker 1: on together. That would be a very good conversation. I 588 00:30:26,960 --> 00:30:30,080 Speaker 1: think that the idea of it is to go beyond 589 00:30:30,160 --> 00:30:32,280 Speaker 1: this very polarized view. I think that there will always 590 00:30:32,320 --> 00:30:35,640 Speaker 1: be companies and investors that will take that view. Our 591 00:30:35,720 --> 00:30:39,360 Speaker 1: focus is profit, profit only short term, and there will 592 00:30:39,400 --> 00:30:42,640 Speaker 1: be companies who will take a longer term view of 593 00:30:42,800 --> 00:30:46,440 Speaker 1: how they create value for their stakeholders, and the two 594 00:30:46,560 --> 00:30:51,080 Speaker 1: can coexist. We just have to make sure that we 595 00:30:51,480 --> 00:30:53,520 Speaker 1: there are very clear signs because they will always be 596 00:30:53,640 --> 00:30:55,960 Speaker 1: people who want to work for one company or to 597 00:30:56,080 --> 00:30:58,360 Speaker 1: the or or the other, or who would want to 598 00:30:58,400 --> 00:31:00,360 Speaker 1: invest in one rather than the other. Well, in this 599 00:31:00,720 --> 00:31:03,680 Speaker 1: E s G also seems to me in a sense 600 00:31:03,880 --> 00:31:08,479 Speaker 1: like um the crypto industry, in that it's nascent, right, 601 00:31:08,520 --> 00:31:14,160 Speaker 1: it's still growing up and getting into its adolescence. We 602 00:31:14,560 --> 00:31:17,800 Speaker 1: just started talking about this really a decade ago, and 603 00:31:18,280 --> 00:31:22,240 Speaker 1: we haven't developed the classifications, we haven't developed the metrics, 604 00:31:22,400 --> 00:31:25,040 Speaker 1: standard metrics that we all agree on yet, but we're 605 00:31:25,080 --> 00:31:28,200 Speaker 1: doing that. For example, you help Bloomberg work on the 606 00:31:28,520 --> 00:31:31,760 Speaker 1: gender Equality Index, don't you so? And as we get 607 00:31:31,840 --> 00:31:35,200 Speaker 1: more metrics like that, and you can show investors, hey, 608 00:31:35,280 --> 00:31:38,640 Speaker 1: look this chart goes up and to the right, then 609 00:31:38,640 --> 00:31:41,200 Speaker 1: they're gonna get on board. Yes, And I think that, 610 00:31:41,320 --> 00:31:44,720 Speaker 1: you know, coming from Europe, I think that Europe is 611 00:31:44,880 --> 00:31:47,840 Speaker 1: a little bit further ahead when it comes to creating 612 00:31:47,920 --> 00:31:52,440 Speaker 1: that taxonomy and creating that clarity around the debate. Because 613 00:31:52,480 --> 00:31:54,840 Speaker 1: one of the things that I still believe needs to 614 00:31:54,920 --> 00:31:57,840 Speaker 1: be clarified is that E s G and E s 615 00:31:57,920 --> 00:32:03,760 Speaker 1: G investments do not necessarily imply a focus on having 616 00:32:04,200 --> 00:32:07,880 Speaker 1: a positive E s G related impact E s G 617 00:32:07,960 --> 00:32:13,280 Speaker 1: investment can be simply considering the E s G related 618 00:32:13,560 --> 00:32:18,240 Speaker 1: risks as part of a certain number of risks in 619 00:32:18,480 --> 00:32:22,360 Speaker 1: evaluating the risk of the portfolio. Or it can be 620 00:32:23,520 --> 00:32:26,719 Speaker 1: considering E s G risks as being the main risks. 621 00:32:27,320 --> 00:32:32,400 Speaker 1: Or it can be impact investment, which is making investments 622 00:32:32,600 --> 00:32:35,920 Speaker 1: with the intent to have a positive E s G impact. 623 00:32:36,040 --> 00:32:38,480 Speaker 1: It's a big broad bucket, it is, and I think 624 00:32:38,520 --> 00:32:42,200 Speaker 1: that there is confusion between the outcome and the process 625 00:32:42,480 --> 00:32:45,840 Speaker 1: in some of these conversations, right yea. Or just just 626 00:32:45,920 --> 00:32:49,320 Speaker 1: to let you know how seriously Bloomberg the terminal takes 627 00:32:49,400 --> 00:32:50,600 Speaker 1: E s G. If you go to one of the 628 00:32:50,640 --> 00:32:53,840 Speaker 1: most widely used functions for financial analysis on the Bloomber terminal, 629 00:32:53,960 --> 00:32:56,400 Speaker 1: f A, go for any ticker right up there with 630 00:32:56,440 --> 00:32:58,840 Speaker 1: the income statement, the balance sheet, the cash low statement, 631 00:32:58,880 --> 00:33:01,480 Speaker 1: there's a tab for E s G M the clip 632 00:33:01,560 --> 00:33:03,320 Speaker 1: on that tab you'll see all the E s G 633 00:33:03,920 --> 00:33:08,920 Speaker 1: metrics on a historical basis that Bloomberg captures for these companies. 634 00:33:09,000 --> 00:33:12,240 Speaker 1: So uh, it's you know, just from the Bloomberg perspective. 635 00:33:12,280 --> 00:33:14,880 Speaker 1: In terms of the efficacy of the data, we value 636 00:33:14,920 --> 00:33:17,840 Speaker 1: it as we would income statement data, balance sheet data. 637 00:33:17,920 --> 00:33:20,719 Speaker 1: Think things like we're trying to build that function exactly right, 638 00:33:20,920 --> 00:33:24,080 Speaker 1: and I would imagine we're working with people I cannela 639 00:33:24,160 --> 00:33:27,120 Speaker 1: to do it. Yeah. So, and I think that you know, 640 00:33:27,200 --> 00:33:29,160 Speaker 1: another way to look at the s G E s 641 00:33:29,240 --> 00:33:34,720 Speaker 1: G is being good ancestors, right, it's behaving respectfully knowing 642 00:33:34,840 --> 00:33:37,440 Speaker 1: that we live in a world with limited resources and 643 00:33:37,640 --> 00:33:41,040 Speaker 1: thinking what kind of a planet, what kind of economy, 644 00:33:41,200 --> 00:33:44,520 Speaker 1: what kind of the social fabric we leave to the 645 00:33:44,640 --> 00:33:48,560 Speaker 1: seventh generation down the line? Ye great stuff, An Godson, 646 00:33:48,800 --> 00:33:53,520 Speaker 1: founder of Edge Empower based in Geneva. I believe right, 647 00:33:53,760 --> 00:33:58,480 Speaker 1: zurch Geneva, zur Okay, good stuff. Join the University of Geneva, 648 00:33:59,080 --> 00:34:00,920 Speaker 1: NBA from university and even why didn't I think of 649 00:34:01,000 --> 00:34:03,240 Speaker 1: that Duke was fun, but Geneva would have been maybe 650 00:34:03,240 --> 00:34:05,040 Speaker 1: a little bit better. Joining us here in a blubern 651 00:34:05,120 --> 00:34:07,200 Speaker 1: Actor broker studio. We're breaking down talking all the E. 652 00:34:07,520 --> 00:34:09,600 Speaker 1: S G stuff. It continues to be get big issue 653 00:34:09,640 --> 00:34:16,680 Speaker 1: for investors. Market sharply lower here this morning. I got 654 00:34:16,719 --> 00:34:20,520 Speaker 1: that print of inflation um kind of suggesting maybe some 655 00:34:20,640 --> 00:34:22,520 Speaker 1: folks are saying, maybe this friend is gonna stay a 656 00:34:22,520 --> 00:34:24,880 Speaker 1: little bit higher for longer. Uh, let's check in with 657 00:34:25,719 --> 00:34:29,200 Speaker 1: two Sharma founder and investment manager of Alpha Structure l 658 00:34:29,400 --> 00:34:33,280 Speaker 1: l C. Two. We had that big inflation print this morning. 659 00:34:33,840 --> 00:34:35,520 Speaker 1: What do you've had, you know, a few hours here 660 00:34:35,560 --> 00:34:39,279 Speaker 1: to die digested? What do you make of it? Hi, 661 00:34:39,480 --> 00:34:42,960 Speaker 1: thank you for having me. Uh. Clearly we're seeing, um, 662 00:34:43,280 --> 00:34:49,600 Speaker 1: some metrics of inflation come down, but we're seeing others increase. Overall, 663 00:34:49,920 --> 00:34:55,680 Speaker 1: the inflation dynamics remains uh, unprereddictable. I think it's hard 664 00:34:55,760 --> 00:34:59,640 Speaker 1: to say, um, how the numbers are going to pan 665 00:34:59,760 --> 00:35:03,480 Speaker 1: out over the next few months, but I think we 666 00:35:03,600 --> 00:35:07,080 Speaker 1: can clearly say that inflation is not coming down at 667 00:35:07,360 --> 00:35:12,080 Speaker 1: the rate that Fred would like to see. Um, we are. 668 00:35:12,640 --> 00:35:16,560 Speaker 1: It's possible last year we've seen goods inflation come down, 669 00:35:16,800 --> 00:35:22,480 Speaker 1: but services remain higher. And it's possible that some of 670 00:35:22,600 --> 00:35:25,400 Speaker 1: that consumer spending last year, which was more driven by 671 00:35:25,480 --> 00:35:28,920 Speaker 1: travel and leisures, some of may come back to goods 672 00:35:29,040 --> 00:35:34,200 Speaker 1: again this year. So I think um, UM, I think 673 00:35:34,719 --> 00:35:38,320 Speaker 1: the Fed is um. It's I think the Freed is 674 00:35:38,400 --> 00:35:42,719 Speaker 1: likely to say, uh in that inflation control mode and 675 00:35:43,040 --> 00:35:45,880 Speaker 1: they want to keep the interest rates higher for longer. 676 00:35:46,200 --> 00:35:51,239 Speaker 1: So I mean we rallied into this number yesterday. Um. 677 00:35:51,400 --> 00:35:54,600 Speaker 1: You know, equities really have been on a tear since 678 00:35:54,680 --> 00:36:00,840 Speaker 1: the October lows. We're trading at four thousand, one hundred basically, 679 00:36:00,960 --> 00:36:05,920 Speaker 1: which is in line with strategists expectations for the year end. 680 00:36:06,480 --> 00:36:10,400 Speaker 1: So in that case, I mean, aren't we too highly 681 00:36:10,520 --> 00:36:14,919 Speaker 1: valued here at you know, eighteen times earnings? I think 682 00:36:16,200 --> 00:36:18,840 Speaker 1: I actually agree with you. I think equity valuations are 683 00:36:19,160 --> 00:36:21,719 Speaker 1: are very high, and it is It's a bit of 684 00:36:21,760 --> 00:36:25,440 Speaker 1: a surprise to me also given the disconnect between the 685 00:36:25,520 --> 00:36:29,440 Speaker 1: bond market and the equity markets, because we've seen yields 686 00:36:29,600 --> 00:36:32,400 Speaker 1: rise across the short end and the long end in 687 00:36:32,560 --> 00:36:35,920 Speaker 1: light of some of this recent data, we've seen the 688 00:36:36,000 --> 00:36:38,600 Speaker 1: economic data being very strong and the risk of a 689 00:36:38,680 --> 00:36:44,120 Speaker 1: recession getting uh pushed back. UM. The labor market is 690 00:36:44,239 --> 00:36:47,719 Speaker 1: remains very strong, so there is no reason for the 691 00:36:47,800 --> 00:36:51,160 Speaker 1: Fed to come around and cut right right now. They 692 00:36:51,200 --> 00:36:54,839 Speaker 1: can focus on this inflation dynamic because the unemployment data 693 00:36:54,920 --> 00:36:59,880 Speaker 1: remains UH very strong. And so to see the equity 694 00:37:00,040 --> 00:37:04,400 Speaker 1: markets rally like they have given all this uh, you know, 695 00:37:04,560 --> 00:37:09,239 Speaker 1: the the underlying interest rate environment remaining UM in a 696 00:37:09,400 --> 00:37:14,719 Speaker 1: tightening space is surprising and and I think partly it 697 00:37:14,880 --> 00:37:17,439 Speaker 1: is driven by the fact that, yes, we have seen 698 00:37:17,680 --> 00:37:21,640 Speaker 1: the econ me stronger the corporate turnings for not as 699 00:37:21,960 --> 00:37:26,080 Speaker 1: weak as sphere, So there's some positive around that. But 700 00:37:26,320 --> 00:37:28,680 Speaker 1: partly I think it has a lot of It has 701 00:37:28,760 --> 00:37:32,279 Speaker 1: been a lot of positioning. The biggest positioning that we 702 00:37:32,400 --> 00:37:36,239 Speaker 1: had in the last year. Uh, that's playing right now. 703 00:37:36,760 --> 00:37:38,799 Speaker 1: Now let's put this in. Let's put this key too 704 00:37:38,880 --> 00:37:43,440 Speaker 1: into perspective. So listeners understand, before you founded Alpha's future, um, 705 00:37:43,560 --> 00:37:46,719 Speaker 1: and after you graduated long in business school, you went 706 00:37:46,840 --> 00:37:50,359 Speaker 1: on to really have a broad career. You worked at 707 00:37:50,360 --> 00:37:54,080 Speaker 1: an insurance company, you were a credit ratings analyst, you 708 00:37:54,160 --> 00:37:56,719 Speaker 1: were in equities at Credit Suite, and then picked Ted 709 00:37:56,760 --> 00:38:00,920 Speaker 1: asset Management. So you've you've been across as sets and 710 00:38:01,320 --> 00:38:04,160 Speaker 1: in regions around the world. What what are we heading 711 00:38:04,239 --> 00:38:06,200 Speaker 1: for right now? What does it look like to you? 712 00:38:06,360 --> 00:38:12,480 Speaker 1: This you know, recession that's so widely forecast globally. Thank 713 00:38:12,520 --> 00:38:17,319 Speaker 1: you for the uh you know, sharing my background. Uh yeah, 714 00:38:17,480 --> 00:38:21,120 Speaker 1: it has been UM. I mean, I think the the 715 00:38:21,360 --> 00:38:25,080 Speaker 1: diversity of perspective I have really helped me look at 716 00:38:25,160 --> 00:38:29,600 Speaker 1: markets from different angles. And uh, what we're seeing right 717 00:38:29,680 --> 00:38:32,880 Speaker 1: now is that your base rates based interest rates, the 718 00:38:33,040 --> 00:38:36,799 Speaker 1: risk free rates are going up. The real rates are high, 719 00:38:37,560 --> 00:38:42,000 Speaker 1: but the equity the premium, which is the excess reward 720 00:38:42,360 --> 00:38:46,040 Speaker 1: you you want for taking equity equity risk that is 721 00:38:46,120 --> 00:38:51,960 Speaker 1: coming down and UM and that is a disconnect given that, uh, 722 00:38:52,560 --> 00:38:56,560 Speaker 1: you know, ultimately we've we've seen peak economy and UM 723 00:38:56,880 --> 00:39:01,239 Speaker 1: an inflation outlook is still very high. So UM, I 724 00:39:01,360 --> 00:39:04,320 Speaker 1: think from our valuation standpoint, we really have to be 725 00:39:04,480 --> 00:39:07,399 Speaker 1: careful about what we buy right now. We don't want 726 00:39:07,480 --> 00:39:12,520 Speaker 1: to indiscriminately change this market rally. We should at least 727 00:39:12,600 --> 00:39:15,480 Speaker 1: from our perspective, what we're recommending to our investors is 728 00:39:15,600 --> 00:39:20,320 Speaker 1: to focus on companies that have quality, that can that 729 00:39:20,480 --> 00:39:25,040 Speaker 1: have frightened power, that have valuation support uh, rather than 730 00:39:25,640 --> 00:39:29,480 Speaker 1: those which are interest rate sensitive and therefore uh you know, 731 00:39:29,680 --> 00:39:34,200 Speaker 1: may suffer from just reduction and valuation multiples. So what 732 00:39:34,280 --> 00:39:36,360 Speaker 1: are some of the examples that fit into the bucket 733 00:39:36,400 --> 00:39:38,480 Speaker 1: that you feel like are higher quality, perhaps a little 734 00:39:38,520 --> 00:39:42,759 Speaker 1: bit bit safer in this uncertain time. So we are 735 00:39:42,840 --> 00:39:48,600 Speaker 1: looking at value opportunities and industrials, healthcare, also technology. UH. 736 00:39:48,880 --> 00:39:52,920 Speaker 1: The companies that have uh you know, have some structural 737 00:39:53,040 --> 00:39:58,280 Speaker 1: mega trends and can grow with the with the economy. Also, 738 00:39:58,840 --> 00:40:01,040 Speaker 1: you know, at a global level, companies that can grow 739 00:40:01,120 --> 00:40:05,959 Speaker 1: with the China reopening story and Europe recovering from last 740 00:40:06,080 --> 00:40:12,480 Speaker 1: year's kind of energy crisis. Um. And also quality defenses 741 00:40:12,640 --> 00:40:15,239 Speaker 1: that can that have pur chasing power and can you 742 00:40:15,280 --> 00:40:20,600 Speaker 1: know pass on cost inflation that have pricing powers. Um. Yeah, 743 00:40:21,160 --> 00:40:25,640 Speaker 1: it's more it's less about selecting sectors, but more about 744 00:40:26,360 --> 00:40:31,600 Speaker 1: looking at companies within sectors that can sustain um, the 745 00:40:31,760 --> 00:40:35,520 Speaker 1: growth environment and the inflation environment and higher interest rates 746 00:40:35,560 --> 00:40:39,799 Speaker 1: from evaluation standpoint, versus those that might be at risk. 747 00:40:40,560 --> 00:40:42,960 Speaker 1: Thank you too. I'm not sure how much you guys 748 00:40:43,040 --> 00:40:45,440 Speaker 1: traffic in the energy space, but the energy stocks are 749 00:40:45,520 --> 00:40:47,719 Speaker 1: just such a great year last year, and I'm looking 750 00:40:47,760 --> 00:40:52,440 Speaker 1: at bring fruit it barrel. Did I miss that trade 751 00:40:52,520 --> 00:40:58,120 Speaker 1: or do you think they're still room to go in energy? Um? See? Energy, 752 00:40:58,200 --> 00:41:01,640 Speaker 1: I think is a hard one to forecast. We don't 753 00:41:01,719 --> 00:41:05,320 Speaker 1: do We don't do commodity forecasting, so uh, and we 754 00:41:05,400 --> 00:41:07,719 Speaker 1: don't play in the energy space because we have a 755 00:41:07,800 --> 00:41:13,320 Speaker 1: focus on sustainability. UM. But I think UM, I mean clearly, 756 00:41:13,360 --> 00:41:16,359 Speaker 1: if if we do see commodity prices go up, both 757 00:41:16,640 --> 00:41:20,879 Speaker 1: energy and other commodities, uh, I mean one, it would 758 00:41:20,880 --> 00:41:25,360 Speaker 1: be a sign of global economies doing well. Um. But 759 00:41:25,600 --> 00:41:29,640 Speaker 1: at the same time, I think more widely. It can 760 00:41:29,760 --> 00:41:35,960 Speaker 1: have a negative impact on global equities from my inflation standpoint. Alright, 761 00:41:36,000 --> 00:41:38,440 Speaker 1: great stuff. I really appreciate getting a few minutes of 762 00:41:38,480 --> 00:41:42,040 Speaker 1: your time. That is to Sharma Founder, an investment manager 763 00:41:42,160 --> 00:41:45,239 Speaker 1: for Alpha's Futures ll C. A little bit of an 764 00:41:45,280 --> 00:41:48,640 Speaker 1: e s G bed there, Matt kind of sustainability, another 765 00:41:48,719 --> 00:41:52,759 Speaker 1: investor incorporating that into their investment framework. We're hearing more 766 00:41:52,760 --> 00:41:54,719 Speaker 1: and more of that. Yeah, yeah, we are. I mean, 767 00:41:54,800 --> 00:41:56,800 Speaker 1: it's an interesting debate that's that's going on. But it 768 00:41:56,880 --> 00:41:59,040 Speaker 1: looks like, um, you can see where the road is 769 00:41:59,120 --> 00:42:01,680 Speaker 1: going at this point. It doesn't look like we're gonna 770 00:42:01,719 --> 00:42:04,279 Speaker 1: turn back, so it makes a lot of sense. All right, good, 771 00:42:04,320 --> 00:42:06,240 Speaker 1: So I forgot more coming up. We've got the equity 772 00:42:06,280 --> 00:42:09,200 Speaker 1: market selling off today. We'll break it down for you 773 00:42:09,320 --> 00:42:17,520 Speaker 1: going forward. This is Bloomberg. Good morning. Thanks for listening 774 00:42:17,560 --> 00:42:21,000 Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen 775 00:42:21,080 --> 00:42:25,319 Speaker 1: to interviews with Apple Podcasts or whatever podcast platform you prefer. 776 00:42:25,760 --> 00:42:30,200 Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller. P 777 00:42:30,360 --> 00:42:32,919 Speaker 1: On fall Sweeney I'm on Twitter at pt Sweeney. Before 778 00:42:32,960 --> 00:42:35,800 Speaker 1: the podcast, you can always catch us worldwide at Bloomberg 779 00:42:35,880 --> 00:42:36,080 Speaker 1: radio