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 --> 00:00:15,600 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 --> 00:00:23,040 Speaker 1: at Bloomberg dot com slash podcast. Let's turn to Omar Aguilar, 7 00:00:23,280 --> 00:00:25,919 Speaker 1: CEO and ce IO Schwab Asset Management. Omar, thanks so 8 00:00:25,960 --> 00:00:28,400 Speaker 1: much for joining us. I'm sure your phone is ringing 9 00:00:28,400 --> 00:00:30,760 Speaker 1: off the hook with your Schwab clients saying what do 10 00:00:30,840 --> 00:00:33,320 Speaker 1: I do in this market here? What are you telling 11 00:00:33,320 --> 00:00:37,560 Speaker 1: Schwab clients? Good morning, Thanks for having me And um, 12 00:00:37,600 --> 00:00:40,199 Speaker 1: you know we're we're telling clients to just take a 13 00:00:40,240 --> 00:00:42,080 Speaker 1: deep breath and in a stay of the screen set 14 00:00:42,080 --> 00:00:45,400 Speaker 1: a little bit. Um. It is is we have we 15 00:00:45,520 --> 00:00:49,120 Speaker 1: have a market that went away from fundamentals to focus 16 00:00:49,120 --> 00:00:51,839 Speaker 1: on mackero and right at this moment, it's really all 17 00:00:51,880 --> 00:00:56,000 Speaker 1: about sentiment. Um. You know, we clearly see significant amount 18 00:00:56,000 --> 00:01:01,200 Speaker 1: of client anxiety, UM, which is very understandable. Um about 19 00:01:01,280 --> 00:01:03,080 Speaker 1: you know, what's going on in the market, what's going 20 00:01:03,120 --> 00:01:05,560 Speaker 1: on in the economy, Um, you know, as you just 21 00:01:05,760 --> 00:01:08,000 Speaker 1: laid out what they see on their house and there 22 00:01:08,000 --> 00:01:10,760 Speaker 1: are gas prices anytime they go to the pump, anytime 23 00:01:10,800 --> 00:01:13,039 Speaker 1: that they go out to a restaurant. You know, they 24 00:01:13,080 --> 00:01:16,600 Speaker 1: clearly see that inflation numbers hitting them on their real 25 00:01:16,680 --> 00:01:19,280 Speaker 1: pockets and then at the time at the same time 26 00:01:19,319 --> 00:01:21,920 Speaker 1: they see everything that is going on overall. So you know, 27 00:01:22,000 --> 00:01:25,240 Speaker 1: this is this is an area where we encourage clients 28 00:01:25,280 --> 00:01:27,759 Speaker 1: to top three advisors to look at their strategy. And 29 00:01:27,959 --> 00:01:29,960 Speaker 1: you know, there's a lot of strategies you can use 30 00:01:30,040 --> 00:01:32,880 Speaker 1: to try to minimize any any inside is that you 31 00:01:32,920 --> 00:01:35,680 Speaker 1: may have to do things that may not help you. So, UM. 32 00:01:35,720 --> 00:01:38,480 Speaker 1: I heard Paul Tutor Jones the other day. I'm not 33 00:01:38,520 --> 00:01:40,600 Speaker 1: sure if Critty will know who Paul Tutor Jones is, 34 00:01:40,640 --> 00:01:42,000 Speaker 1: but to those of us who have been on the 35 00:01:42,040 --> 00:01:45,840 Speaker 1: street for a few decades, he is an absolute legend. Right. 36 00:01:46,360 --> 00:01:49,760 Speaker 1: He was saying capital preservation is his number one concern 37 00:01:49,880 --> 00:01:52,200 Speaker 1: right now, which kind of freaked me out a little bit. 38 00:01:52,680 --> 00:01:58,680 Speaker 1: I wonder, are your investors reallocating right now or rebalancing 39 00:01:59,160 --> 00:02:02,320 Speaker 1: um in eiver of capital preservation rather than looking for 40 00:02:02,360 --> 00:02:05,800 Speaker 1: any more games? Well where where where that you know, 41 00:02:05,880 --> 00:02:09,560 Speaker 1: if you take a step back and you know, for 42 00:02:09,720 --> 00:02:12,440 Speaker 1: any of the business and economic cycles that we have 43 00:02:12,560 --> 00:02:16,960 Speaker 1: seen historically, we have clearly accelerated going through the last 44 00:02:17,000 --> 00:02:18,840 Speaker 1: part of the cycle. A lot of that as a 45 00:02:18,919 --> 00:02:22,440 Speaker 1: result of you know, the war in in Ukraine and 46 00:02:22,560 --> 00:02:25,880 Speaker 1: also just the fact that the Federal Reserve has you know, 47 00:02:26,240 --> 00:02:29,520 Speaker 1: probably been slow and reacting to what the inflation numbers 48 00:02:29,600 --> 00:02:31,760 Speaker 1: were going even in the last year. So when you 49 00:02:31,800 --> 00:02:35,240 Speaker 1: put that into perspective, um, you know, this is the 50 00:02:35,280 --> 00:02:37,640 Speaker 1: part where you need to become defensive. This is the 51 00:02:37,680 --> 00:02:39,600 Speaker 1: part where you need to start figure out how you 52 00:02:39,639 --> 00:02:42,519 Speaker 1: increase your duration in your bond portfolio. This is the 53 00:02:42,560 --> 00:02:46,000 Speaker 1: part where you need to be very selective in the 54 00:02:46,080 --> 00:02:49,160 Speaker 1: kind of issues that you have with cash flows, high 55 00:02:49,200 --> 00:02:52,959 Speaker 1: quality areas that will allow you to protect your balance sheet. Now, 56 00:02:53,040 --> 00:02:56,359 Speaker 1: the fact that capital preservation it is really a risk profile, 57 00:02:56,480 --> 00:02:59,520 Speaker 1: and the risk profile doesn't necessarily meet the investment objectives 58 00:02:59,560 --> 00:03:02,200 Speaker 1: of every investor. So when we encourage people to see 59 00:03:02,240 --> 00:03:05,160 Speaker 1: is that well, if your objective it still is to grow, 60 00:03:05,520 --> 00:03:08,560 Speaker 1: depending on what your situation is, you just need to 61 00:03:08,560 --> 00:03:11,679 Speaker 1: figure out what is the right rebalancing strategy to maintain 62 00:03:11,720 --> 00:03:14,799 Speaker 1: that risk profile that makes you feel comfortable for some people, 63 00:03:15,080 --> 00:03:17,360 Speaker 1: you know, people that are close to retirement, people that 64 00:03:17,400 --> 00:03:20,720 Speaker 1: are in retirement where capital preservation is their main objective. 65 00:03:21,040 --> 00:03:24,080 Speaker 1: Clearly this is an opportunity to de risk, but it's 66 00:03:24,160 --> 00:03:28,880 Speaker 1: not necessarily for every investor. So omar one of the 67 00:03:28,919 --> 00:03:31,280 Speaker 1: pieces of chatter I've picked up on the last maybe 68 00:03:31,360 --> 00:03:33,960 Speaker 1: day or two, it's just kind of where's the bottom 69 00:03:33,960 --> 00:03:35,800 Speaker 1: in this thing? In the selling phase here? Do you 70 00:03:35,840 --> 00:03:38,360 Speaker 1: even try to catch the bottom? Do you think about 71 00:03:38,680 --> 00:03:41,160 Speaker 1: identifying the bottom? And if you do, what are some 72 00:03:41,200 --> 00:03:44,200 Speaker 1: of the metrics you look at? Yes, Well, we encourage 73 00:03:44,280 --> 00:03:47,080 Speaker 1: clients to you know, try to speculate. You know, the 74 00:03:47,200 --> 00:03:49,720 Speaker 1: chances that you're going to find the bottom and actually 75 00:03:49,720 --> 00:03:53,000 Speaker 1: be there are very very low. We always, um, you know, 76 00:03:53,080 --> 00:03:57,720 Speaker 1: have these particular you encourage clients not to try to speculate. 77 00:03:57,920 --> 00:04:00,520 Speaker 1: That's correct, not to try to speculate. We you know, 78 00:04:00,600 --> 00:04:04,720 Speaker 1: market timing it's very very difficult, um And we have 79 00:04:04,880 --> 00:04:07,800 Speaker 1: this phrase that we tell clients, you know, time in 80 00:04:07,880 --> 00:04:11,960 Speaker 1: the market is better that timing the market. And what 81 00:04:12,120 --> 00:04:15,560 Speaker 1: that means is that is staying invested and stay consistent 82 00:04:15,640 --> 00:04:18,760 Speaker 1: with invested risk profile and the long term objectives is 83 00:04:18,800 --> 00:04:21,680 Speaker 1: more important than trying to find, you know, the dips 84 00:04:21,720 --> 00:04:24,240 Speaker 1: and the bottoms of the market and trying to figure 85 00:04:24,240 --> 00:04:26,960 Speaker 1: out where it is now. That being said, markets like 86 00:04:27,040 --> 00:04:30,880 Speaker 1: these provide opportunities for you know, tactless harvesting. This is 87 00:04:30,920 --> 00:04:35,440 Speaker 1: an opportunity to reallocate within the rest tolerance of every client. 88 00:04:35,680 --> 00:04:38,400 Speaker 1: And this is an opportunity just to find other opportunities 89 00:04:38,400 --> 00:04:40,680 Speaker 1: that they may have not had in the past. All right, 90 00:04:41,160 --> 00:04:43,280 Speaker 1: you know you know why sounds so smart man? You 91 00:04:43,320 --> 00:04:45,480 Speaker 1: want to do PhD from Duke there and you can 92 00:04:45,560 --> 00:04:49,440 Speaker 1: do it. Why, by the way, how much swab asset management? 93 00:04:49,520 --> 00:04:51,719 Speaker 1: Just we got ten seconds here? What are you? What 94 00:04:51,760 --> 00:04:54,920 Speaker 1: are you managing? What are the assets? We're close to 95 00:04:55,080 --> 00:04:59,000 Speaker 1: seven six hundred and ninety billion dollars? Alright, couple sucks 96 00:04:59,000 --> 00:05:02,520 Speaker 1: in the market change that is, oh Mar Aguilar CEO 97 00:05:02,600 --> 00:05:06,280 Speaker 1: and c i O schwab Asset Management PhD from Duke. 98 00:05:06,400 --> 00:05:08,680 Speaker 1: I will add giving us his thoughts on these markets. 99 00:05:08,720 --> 00:05:10,800 Speaker 1: Here again a little bit of bounced back. We're definitely 100 00:05:10,839 --> 00:05:15,800 Speaker 1: off our highest put some green on the screen today. 101 00:05:16,640 --> 00:05:18,440 Speaker 1: I want to get to our next guest right away. 102 00:05:18,960 --> 00:05:23,039 Speaker 1: Uh Matt Faster our chief strategy obviously for XPO Logistics, 103 00:05:23,320 --> 00:05:25,800 Speaker 1: it's a publicly traded company on the New York socka Change. 104 00:05:25,920 --> 00:05:28,160 Speaker 1: XPO is the ticker there. It's got about a six 105 00:05:28,200 --> 00:05:31,520 Speaker 1: billion dollar market cap. Matt. One of the key issues 106 00:05:31,560 --> 00:05:34,239 Speaker 1: that Matt Miller and I have been focused on keenly 107 00:05:34,320 --> 00:05:37,920 Speaker 1: since the beginning of this pandemic from an economic perspective, 108 00:05:37,920 --> 00:05:41,440 Speaker 1: has been the supply chain, the global supply chain challenges. 109 00:05:41,520 --> 00:05:43,839 Speaker 1: And there's no company that I can think of that 110 00:05:43,920 --> 00:05:46,880 Speaker 1: has a more broader view of the global supply chain 111 00:05:47,240 --> 00:05:49,600 Speaker 1: than XPO Logistics. So, Matt, thanks so much for joining 112 00:05:49,680 --> 00:05:53,080 Speaker 1: us here. I'd love to get your expert opinion on 113 00:05:53,160 --> 00:05:56,400 Speaker 1: how we got here, i e. Supply chain problems that 114 00:05:56,440 --> 00:05:59,600 Speaker 1: are impacting everybody, and how we get out of this thing. 115 00:06:01,160 --> 00:06:03,600 Speaker 1: Thanks for having me really happy to be here, and 116 00:06:03,720 --> 00:06:06,599 Speaker 1: especially happy to be here on a day after we 117 00:06:06,680 --> 00:06:11,160 Speaker 1: reported strong results and a strong outlook. On your question 118 00:06:11,360 --> 00:06:14,360 Speaker 1: as to how we got here from the supply chain perspective, 119 00:06:15,160 --> 00:06:18,320 Speaker 1: think of it this way. First of all, in very 120 00:06:18,320 --> 00:06:22,600 Speaker 1: early two thousand and twenty, we saw some initial disruption 121 00:06:22,880 --> 00:06:25,960 Speaker 1: as the first round of COVID hit China and you 122 00:06:26,000 --> 00:06:29,640 Speaker 1: had to slow down in UH import and export activity 123 00:06:30,160 --> 00:06:32,560 Speaker 1: from China. We thought at the time that that was 124 00:06:32,600 --> 00:06:34,880 Speaker 1: going to be the crux of the impact. Little did 125 00:06:34,920 --> 00:06:39,760 Speaker 1: we know, obviously, in so many ways subsequent to that, uh, 126 00:06:39,800 --> 00:06:43,279 Speaker 1: there was, as you know, virtually a halt in the 127 00:06:43,279 --> 00:06:47,719 Speaker 1: global economy at a moment in time, after which you 128 00:06:47,800 --> 00:06:52,000 Speaker 1: had a resumption of demand. Uh, and you had a 129 00:06:52,000 --> 00:06:54,600 Speaker 1: lot of goods making their way into the United States 130 00:06:54,640 --> 00:06:59,559 Speaker 1: and around the United States with finite capacity. And even 131 00:06:59,640 --> 00:07:02,760 Speaker 1: in a normal demand environment, it's sort of the pick 132 00:07:02,839 --> 00:07:05,160 Speaker 1: of the Python situation. You try to get an enormous 133 00:07:05,160 --> 00:07:09,320 Speaker 1: amount of goods through a fixed amount of infrastructure. Now 134 00:07:09,640 --> 00:07:12,840 Speaker 1: that infrastructure was even more constumed than it otherwise would 135 00:07:12,880 --> 00:07:16,080 Speaker 1: have been, because during the pandemic, lots of providers of 136 00:07:16,160 --> 00:07:20,720 Speaker 1: supply chain services pulled back on their orders of new equipment. 137 00:07:21,120 --> 00:07:24,880 Speaker 1: Beyond that, obviously, you had fiscal stimulus, and there was 138 00:07:24,920 --> 00:07:28,280 Speaker 1: a lot of money in people's hands. Moreover, they were 139 00:07:28,320 --> 00:07:31,000 Speaker 1: spending a lot of that money on goods rather than services. 140 00:07:31,440 --> 00:07:34,480 Speaker 1: So you had more goods than usual making their way 141 00:07:34,560 --> 00:07:38,680 Speaker 1: through less infrastructure than usual, all at once. And then finally, 142 00:07:39,280 --> 00:07:41,840 Speaker 1: as you know, whether you call it a great resignation 143 00:07:41,960 --> 00:07:45,440 Speaker 1: or simply a labor shortage, there are fewer people to 144 00:07:45,520 --> 00:07:49,440 Speaker 1: help perform those tasks, so there was less infrastructure, Uh, 145 00:07:49,480 --> 00:07:52,640 Speaker 1: there was less labor to get the job done, there 146 00:07:52,680 --> 00:07:56,160 Speaker 1: was more demand. There was obviously in that sense, a 147 00:07:56,200 --> 00:08:00,000 Speaker 1: perfect storm. Now our role has been and remains helped 148 00:08:00,200 --> 00:08:04,680 Speaker 1: people are customers and ultimately their customers navigate through that. 149 00:08:04,720 --> 00:08:06,920 Speaker 1: And that's something that we've been able, thankfully to do. 150 00:08:07,240 --> 00:08:11,040 Speaker 1: And obviously your services have been a huge demand. You 151 00:08:11,160 --> 00:08:15,440 Speaker 1: just as you said, published results that beat estimates and 152 00:08:15,520 --> 00:08:19,040 Speaker 1: you raised your outlook as well for the full year. 153 00:08:19,920 --> 00:08:25,600 Speaker 1: Given that UM, you have a really good view of UM, 154 00:08:25,760 --> 00:08:30,880 Speaker 1: the US economy, the global economy. How do you see UM, 155 00:08:30,960 --> 00:08:32,960 Speaker 1: how do you see it developing right now? I mean, 156 00:08:32,960 --> 00:08:36,400 Speaker 1: obviously for XPO the picture looks great because the industry 157 00:08:36,400 --> 00:08:38,080 Speaker 1: that you're in, the area that you're in is in 158 00:08:38,360 --> 00:08:41,720 Speaker 1: is in huge demand. What about for the broader economy, 159 00:08:41,800 --> 00:08:46,600 Speaker 1: do you see a slowdown this year? There are cross winds, 160 00:08:46,920 --> 00:08:49,920 Speaker 1: for sure. There are a number of macro factors to 161 00:08:50,040 --> 00:08:53,120 Speaker 1: consider and for them to keep their eye on. The 162 00:08:53,240 --> 00:08:58,760 Speaker 1: said has obviously been has started the process of raising rates. 163 00:08:58,800 --> 00:09:02,400 Speaker 1: That's been an in partner sponse to an inflationary environment. 164 00:09:02,440 --> 00:09:06,440 Speaker 1: That's something we need to watch. There obviously is a 165 00:09:06,480 --> 00:09:09,840 Speaker 1: war in Ukraine, and that's something that we need to watch. 166 00:09:09,920 --> 00:09:14,040 Speaker 1: The Our European business has actually performed quite well. We're 167 00:09:14,040 --> 00:09:17,720 Speaker 1: primarily in the western part of Europe, UK, France, and Spain. 168 00:09:18,160 --> 00:09:20,800 Speaker 1: Organic revenue growth in that part of the world accelerated 169 00:09:20,800 --> 00:09:24,000 Speaker 1: for US in the first quarter versus the fourth quarter. 170 00:09:24,480 --> 00:09:27,840 Speaker 1: And then in China, obviously there have been COVID related 171 00:09:27,880 --> 00:09:32,280 Speaker 1: lockdowns that has led to UH some suspension or slow 172 00:09:32,360 --> 00:09:34,840 Speaker 1: down in the amount of freight making its way to 173 00:09:34,960 --> 00:09:39,200 Speaker 1: our shores from China. Obviously, something we're watching very carefully. 174 00:09:39,240 --> 00:09:42,720 Speaker 1: To our view is that once those lockdowns ease, you'll 175 00:09:42,720 --> 00:09:45,480 Speaker 1: see a flood of freight and certainly nothing like what 176 00:09:45,520 --> 00:09:47,320 Speaker 1: you saw in two thousand twenty that we spoke about 177 00:09:47,360 --> 00:09:51,040 Speaker 1: a moment ago, but potentially some retightening of the truckload 178 00:09:51,080 --> 00:09:55,000 Speaker 1: markets and other transportation markets. So definitely some cross winds 179 00:09:55,000 --> 00:09:58,199 Speaker 1: and things to watch. But if if our business is 180 00:09:58,240 --> 00:10:01,640 Speaker 1: a gauge of what we're seeing in truck brokerage, where 181 00:10:01,400 --> 00:10:06,400 Speaker 1: we were helped arrange truckload transportation UH for for many 182 00:10:06,400 --> 00:10:09,120 Speaker 1: many of the largest shippers in the country and the 183 00:10:09,160 --> 00:10:11,880 Speaker 1: world in the first In the first quarter, our load 184 00:10:11,880 --> 00:10:15,560 Speaker 1: growth was our volume growth has the sixth consecutive quarter 185 00:10:16,960 --> 00:10:20,400 Speaker 1: growth or more. And in April our volume growth was 186 00:10:20,520 --> 00:10:23,000 Speaker 1: quite strong. Our growth and revenue per day, and our 187 00:10:23,080 --> 00:10:26,360 Speaker 1: less than truckload business in April a bit stronger than 188 00:10:26,800 --> 00:10:29,400 Speaker 1: And you really focused the business, right, I mean you 189 00:10:29,440 --> 00:10:32,520 Speaker 1: were for years, for a couple of decades at least 190 00:10:32,520 --> 00:10:36,920 Speaker 1: at Goldman sachs Um and you came in to run XPO. 191 00:10:37,679 --> 00:10:40,959 Speaker 1: Just give us the shorthand version of what you've done 192 00:10:41,520 --> 00:10:48,000 Speaker 1: to to focus m this logistics business. Well, well, well, uh, my, my, my, 193 00:10:48,000 --> 00:10:50,720 Speaker 1: my boss. Brad Jacobs is our chairman, CEO and founders, 194 00:10:50,720 --> 00:10:53,640 Speaker 1: so he runs XPO. I'm the chief strategy officer, So 195 00:10:54,280 --> 00:10:56,360 Speaker 1: I want to put myself in my place, if you will, 196 00:10:56,760 --> 00:10:59,200 Speaker 1: about what we've what we've done, what we've done collectively. 197 00:10:59,200 --> 00:11:04,400 Speaker 1: I appreciate the motion, um, what we've done collectively of 198 00:11:04,520 --> 00:11:08,360 Speaker 1: late to your point, we have refocused the business we 199 00:11:08,960 --> 00:11:12,920 Speaker 1: used to operate within XPO, a supply chain or contract 200 00:11:12,920 --> 00:11:17,720 Speaker 1: logistics business offering warehousing and distribution services also for many 201 00:11:17,720 --> 00:11:19,880 Speaker 1: of the largest companies in the world. We spun that 202 00:11:19,960 --> 00:11:23,800 Speaker 1: company off as g XO last August. They've had a 203 00:11:23,880 --> 00:11:26,680 Speaker 1: very good run. They reported their numbers last week. That 204 00:11:26,720 --> 00:11:31,280 Speaker 1: was a very successful spin, and we are further focusing 205 00:11:31,280 --> 00:11:35,839 Speaker 1: our business. We recently divested our intermodal operation. We sold 206 00:11:35,880 --> 00:11:39,600 Speaker 1: that in March. We've indicated that we planned to divest 207 00:11:39,679 --> 00:11:43,560 Speaker 1: our European transportation operation, the business I spoke about a 208 00:11:43,559 --> 00:11:46,840 Speaker 1: moment ago, and and then also in the fourth quarter, 209 00:11:47,440 --> 00:11:51,720 Speaker 1: we plan on divesting our tech enabled brokera services platform 210 00:11:51,800 --> 00:11:54,640 Speaker 1: into a separate public company, which will leave the remain 211 00:11:54,720 --> 00:11:57,960 Speaker 1: COO if you will, XPO as an lt L enterprise 212 00:11:58,000 --> 00:12:01,520 Speaker 1: and then the brokerage business as a separate public company. 213 00:12:01,559 --> 00:12:03,800 Speaker 1: And what what we what we found through g x 214 00:12:03,840 --> 00:12:06,199 Speaker 1: O and what we expect to find when we complete 215 00:12:06,200 --> 00:12:08,720 Speaker 1: the spin, is that these companies each will be better 216 00:12:08,760 --> 00:12:11,600 Speaker 1: fit for their purposes of serving their customers and able 217 00:12:11,600 --> 00:12:15,480 Speaker 1: to engage in many decisions that are precisely specified to 218 00:12:15,679 --> 00:12:18,600 Speaker 1: their business missions, and we think will be quite successful. 219 00:12:18,800 --> 00:12:20,959 Speaker 1: About thirty seconds left, I love to get your best 220 00:12:21,200 --> 00:12:24,360 Speaker 1: guests as to when these supply chain issues will become 221 00:12:24,360 --> 00:12:29,800 Speaker 1: more normalized. Uh. We think that it's gonna stay tight 222 00:12:30,520 --> 00:12:34,760 Speaker 1: for a while. We think that disruption will persist for 223 00:12:34,800 --> 00:12:38,320 Speaker 1: a while. We think that things actually might tighten up 224 00:12:38,360 --> 00:12:40,680 Speaker 1: a bit more. Again, as I said in the second half, 225 00:12:40,720 --> 00:12:44,080 Speaker 1: if it has great flow resumes from China. Uh. We 226 00:12:44,160 --> 00:12:46,839 Speaker 1: we are there to help our customers. Were there last 227 00:12:46,920 --> 00:12:49,200 Speaker 1: Christmas to help people get their gifts under their trees. 228 00:12:49,200 --> 00:12:51,760 Speaker 1: Were there to help our industrial customers I get their 229 00:12:51,800 --> 00:12:54,600 Speaker 1: equipment out there, and and and I think next year 230 00:12:54,760 --> 00:12:57,400 Speaker 1: you could see some normalization. But I think the value 231 00:12:57,400 --> 00:13:01,640 Speaker 1: of outsourced transportation advice answer this says, has been proven 232 00:13:01,679 --> 00:13:03,640 Speaker 1: to show and that should endure. All Right, good stuff, 233 00:13:03,679 --> 00:13:08,200 Speaker 1: Matt Fassler, chief strategy officer for XPO Logistics Logistics, giving 234 00:13:08,240 --> 00:13:11,760 Speaker 1: us the latest on the supply chain issues still out there. 235 00:13:14,720 --> 00:13:18,520 Speaker 1: If I were to choose a diesel, a big diesel engine, 236 00:13:19,240 --> 00:13:22,000 Speaker 1: I would definitely go with the power stroke. Ford has 237 00:13:22,120 --> 00:13:24,840 Speaker 1: a six point seven Leader power stroke. It's only available 238 00:13:24,840 --> 00:13:27,040 Speaker 1: in the super duty trucks. I wish they sold it 239 00:13:27,120 --> 00:13:31,040 Speaker 1: in the half tons, but it puts out more than 240 00:13:31,200 --> 00:13:38,920 Speaker 1: a thousand pound feet of torque pound feet unbelievable torque figures. Now. 241 00:13:38,920 --> 00:13:42,360 Speaker 1: I know Greg Jarrett because he was stuck in some 242 00:13:42,400 --> 00:13:46,200 Speaker 1: oil field fires during the First Persian UH, during the 243 00:13:46,240 --> 00:13:49,760 Speaker 1: First Golf War. UM is allergic diesel. He's gonna be 244 00:13:49,920 --> 00:13:54,120 Speaker 1: very happy when they start putting out electric pickup trucks 245 00:13:54,160 --> 00:13:56,240 Speaker 1: for a long time we thought Teslas was going to 246 00:13:56,320 --> 00:13:58,840 Speaker 1: make a cyber truck. I'm not sure if that's really 247 00:13:58,880 --> 00:14:02,600 Speaker 1: still happening. I've started to see some Rivyan's um on 248 00:14:02,640 --> 00:14:06,160 Speaker 1: the street. Uh there, you know, a hundred thousand dollar vehicles, 249 00:14:06,160 --> 00:14:08,720 Speaker 1: and they're not really what you think of that work truck, 250 00:14:09,120 --> 00:14:12,079 Speaker 1: you know, although TfL did um use one on on 251 00:14:12,080 --> 00:14:14,320 Speaker 1: on a farm for a little bit. Um. I think 252 00:14:14,360 --> 00:14:17,240 Speaker 1: most people are waiting for Ford to put out the 253 00:14:17,360 --> 00:14:21,640 Speaker 1: F one fifty Lightning. Obviously, the F one fifty or 254 00:14:21,640 --> 00:14:25,640 Speaker 1: the series pickup truck is like the best selling nameplate 255 00:14:25,800 --> 00:14:30,360 Speaker 1: of all not just trucks but cars in the US 256 00:14:30,440 --> 00:14:33,640 Speaker 1: and has been for at least forty years. I'm gonna 257 00:14:33,680 --> 00:14:38,080 Speaker 1: say that's not a joke. Um. Americans by by their 258 00:14:38,160 --> 00:14:41,120 Speaker 1: F Series trucks and absolutely love him. Jason Turnbull joins 259 00:14:41,240 --> 00:14:44,360 Speaker 1: us right now. He is the marketing manager for the 260 00:14:44,440 --> 00:14:48,400 Speaker 1: Lightning and he's been working at Forward for uh the 261 00:14:48,440 --> 00:14:50,280 Speaker 1: better half of the better end of a decade, I 262 00:14:50,280 --> 00:14:52,600 Speaker 1: should say a little more. I think what thirteen years? Jason, 263 00:14:53,360 --> 00:14:55,840 Speaker 1: great to have you on the program. Tell us when 264 00:14:55,920 --> 00:14:59,200 Speaker 1: we're gonna actually see this truck. I'm so worried that 265 00:14:59,320 --> 00:15:03,680 Speaker 1: it's gonna be like, um, you know, not until because 266 00:15:04,200 --> 00:15:08,240 Speaker 1: the chip shortage and the supply chain issues are are 267 00:15:08,280 --> 00:15:12,760 Speaker 1: making us wait for all these automotive products. Well, thank you, 268 00:15:12,960 --> 00:15:16,000 Speaker 1: thank you for having me. Yeah. So that as the Lightning, 269 00:15:16,120 --> 00:15:21,160 Speaker 1: It's are all electric, all electric basic pickup truck. And 270 00:15:21,200 --> 00:15:23,680 Speaker 1: the greatest thing is we announced it two years ago, 271 00:15:24,280 --> 00:15:27,960 Speaker 1: we revealed it a year ago, and starting this month, 272 00:15:28,160 --> 00:15:32,080 Speaker 1: we're actually starting customer deliveries. So it's a real product 273 00:15:32,200 --> 00:15:36,600 Speaker 1: under UNDERT dollars and we're really excited about it this alright. 274 00:15:36,640 --> 00:15:38,960 Speaker 1: So I knew, like Mike Lavine is a buddy of 275 00:15:39,000 --> 00:15:41,320 Speaker 1: mine over at Forward and he gets to test the 276 00:15:41,360 --> 00:15:44,120 Speaker 1: coolest all the new products, you know, and I see 277 00:15:44,160 --> 00:15:47,320 Speaker 1: pictures of him taking the Lightning out to like Moab 278 00:15:47,720 --> 00:15:50,760 Speaker 1: or on the Baja or whatever. But I didn't know 279 00:15:50,840 --> 00:15:53,240 Speaker 1: that real people we're gonna start, So people are going 280 00:15:53,320 --> 00:15:55,920 Speaker 1: to start taking deliveries. What's the weight list? Though? If 281 00:15:55,920 --> 00:15:59,680 Speaker 1: I put my order in today for a Lightning, when 282 00:16:00,040 --> 00:16:02,520 Speaker 1: am I gonna be likely to go pick it up 283 00:16:02,560 --> 00:16:06,040 Speaker 1: from my from my four dealer. Yeah. So when we 284 00:16:06,080 --> 00:16:11,040 Speaker 1: revealed last May, we took reservations and last December we 285 00:16:11,120 --> 00:16:14,120 Speaker 1: hit two hundred thousand reservations. We just had to shut 286 00:16:14,160 --> 00:16:17,120 Speaker 1: off our reservation system because now our goal is to 287 00:16:17,640 --> 00:16:21,240 Speaker 1: fulfill and convert those all the orders. So if you 288 00:16:21,240 --> 00:16:23,720 Speaker 1: don't have to have a have a resonance right now, 289 00:16:24,320 --> 00:16:27,760 Speaker 1: you're really gonna wait probably about eighteen months before that 290 00:16:27,800 --> 00:16:30,280 Speaker 1: you can place in order for a lightning because we're 291 00:16:30,360 --> 00:16:33,720 Speaker 1: later focused on getting them out the door to the 292 00:16:33,760 --> 00:16:36,800 Speaker 1: current customers that have ordered. Jason, I think you just 293 00:16:36,840 --> 00:16:39,920 Speaker 1: answered my question because you know, it's one thing to 294 00:16:40,000 --> 00:16:44,120 Speaker 1: drive around a Tesla around Coupertino, California. It's another thing 295 00:16:44,160 --> 00:16:47,000 Speaker 1: to go on my big ranch out in the middle 296 00:16:47,040 --> 00:16:49,280 Speaker 1: of Arizona where I have to do some real work 297 00:16:49,320 --> 00:16:53,360 Speaker 1: with a pickup truck and convert that to electric. Are 298 00:16:53,680 --> 00:16:56,600 Speaker 1: Ford f one fifty buyers are are they ready to 299 00:16:56,600 --> 00:17:00,560 Speaker 1: go electric? So this is a key benefit of definitely 300 00:17:00,600 --> 00:17:03,680 Speaker 1: like me as we are attracting a broad range of customers. 301 00:17:03,720 --> 00:17:07,640 Speaker 1: So from that traditional truck customer, it is gonna tow 302 00:17:07,720 --> 00:17:10,600 Speaker 1: and haul just like your current gas du towes up 303 00:17:10,600 --> 00:17:14,199 Speaker 1: to ten thousand pounds, halls over two thousand pounds. It 304 00:17:14,240 --> 00:17:19,040 Speaker 1: will have three range, so it will do the bill 305 00:17:19,160 --> 00:17:22,359 Speaker 1: as well as it passed all their ability capability is 306 00:17:22,400 --> 00:17:24,840 Speaker 1: built for tough and at the same time as we 307 00:17:24,840 --> 00:17:27,600 Speaker 1: were attracting new to e V and new to Ford 308 00:17:27,600 --> 00:17:30,040 Speaker 1: customers that really want that technology to do. So we 309 00:17:30,080 --> 00:17:34,240 Speaker 1: have that hands free blue cruise highway driving. We have 310 00:17:34,280 --> 00:17:37,480 Speaker 1: onboard scales that actually measures what's in your pickup bed. 311 00:17:37,800 --> 00:17:40,639 Speaker 1: So this product can do all the work stuff and 312 00:17:40,640 --> 00:17:44,080 Speaker 1: then also is loaded with advanced technology. For me, the 313 00:17:44,119 --> 00:17:47,320 Speaker 1: coolest thing is you can power your house. So here 314 00:17:47,320 --> 00:17:49,000 Speaker 1: in the Northeast we have a lot of storms that 315 00:17:49,080 --> 00:17:52,000 Speaker 1: knock out power. If you have this thing parked in 316 00:17:52,040 --> 00:17:55,120 Speaker 1: your garage and it's charged, you can use it as 317 00:17:55,240 --> 00:17:58,639 Speaker 1: as use it as a generator. UM. I still have 318 00:17:58,840 --> 00:18:02,320 Speaker 1: range anxiety though, Jason, and I'm wondering, was there ever 319 00:18:02,480 --> 00:18:06,800 Speaker 1: any thought, even you know, as a as a dealer 320 00:18:06,920 --> 00:18:11,400 Speaker 1: add on to offer like a diesel generator to put 321 00:18:11,440 --> 00:18:13,880 Speaker 1: in the bed so that I don't have to worry 322 00:18:13,920 --> 00:18:17,960 Speaker 1: about getting to a charging station. Yeah. So when we're 323 00:18:17,960 --> 00:18:20,639 Speaker 1: developing the product, it was all about efficiency. So the 324 00:18:20,720 --> 00:18:24,240 Speaker 1: way that we package the battery and kind of how 325 00:18:24,240 --> 00:18:27,240 Speaker 1: it's within the frame rails and how it's a parallel system, 326 00:18:27,320 --> 00:18:30,439 Speaker 1: it is the most efficient. UM And what we found 327 00:18:30,560 --> 00:18:34,640 Speaker 1: is for customers, over of them charge at home. So 328 00:18:34,760 --> 00:18:38,520 Speaker 1: for the most part, you know they can they drive 329 00:18:38,640 --> 00:18:41,439 Speaker 1: less than that three miles rains a day when you 330 00:18:41,480 --> 00:18:45,200 Speaker 1: go on a road trip. That's where EV infrastructure is critical. 331 00:18:45,400 --> 00:18:48,240 Speaker 1: And we really believe that as we grow the footprint, 332 00:18:48,359 --> 00:18:51,239 Speaker 1: it will meet our customers needs. So how quickly can 333 00:18:51,280 --> 00:18:54,080 Speaker 1: you grow the footprint? I mean, um, you know, I 334 00:18:54,160 --> 00:18:56,240 Speaker 1: live in the great state of Ohio. I'm from there, 335 00:18:56,320 --> 00:18:59,440 Speaker 1: thank God, and uh, but I live way out here 336 00:18:59,560 --> 00:19:02,160 Speaker 1: in New York, and so I try and get back 337 00:19:02,200 --> 00:19:04,879 Speaker 1: as much as possible. That's like a six mile trip. 338 00:19:04,920 --> 00:19:08,960 Speaker 1: I would have to I probably realistically charge up twice 339 00:19:09,440 --> 00:19:12,320 Speaker 1: on the way back. And I'm driving through like legit 340 00:19:12,440 --> 00:19:15,960 Speaker 1: flyover country like I go when you when I go 341 00:19:16,080 --> 00:19:19,600 Speaker 1: through Pennsylvania. Yeah, exactly. Happy Valley is like the only 342 00:19:19,680 --> 00:19:23,480 Speaker 1: sign of life for six hours. How am I going 343 00:19:23,520 --> 00:19:27,520 Speaker 1: to charge this thing on the way home to Granville? Yeah. 344 00:19:27,560 --> 00:19:29,720 Speaker 1: The key thing at Forward is we realize, you know, 345 00:19:29,760 --> 00:19:32,640 Speaker 1: we're not the experts in basically e V basically charging. 346 00:19:32,720 --> 00:19:35,520 Speaker 1: So what we're doing is we're partnering with all the 347 00:19:35,640 --> 00:19:42,520 Speaker 1: major UM charging station so Electry America EV go green lots, 348 00:19:42,840 --> 00:19:45,920 Speaker 1: so to our customer is in our ford past app 349 00:19:46,320 --> 00:19:50,639 Speaker 1: it just kind of looked like Ford foard charges for 350 00:19:50,880 --> 00:19:53,240 Speaker 1: charging stations and you can be folly lead the driveway. 351 00:19:53,640 --> 00:19:56,600 Speaker 1: You can plug in your address, your destination and it 352 00:19:56,600 --> 00:19:59,720 Speaker 1: will automatically tell you what's the most efficient route and 353 00:20:00,000 --> 00:20:02,320 Speaker 1: here to charge. So our goal is to be, which 354 00:20:02,320 --> 00:20:05,000 Speaker 1: we are right now, the largest EV network because we 355 00:20:05,160 --> 00:20:08,240 Speaker 1: partner with all the charting stations, you know, instead of 356 00:20:08,280 --> 00:20:13,560 Speaker 1: going alone. So Jason, as you you know, ramp up 357 00:20:13,560 --> 00:20:17,040 Speaker 1: your manufacturing gis a sense of supply chain challenges that 358 00:20:17,119 --> 00:20:19,159 Speaker 1: you guys are feeling. Here can you get all the 359 00:20:19,200 --> 00:20:22,040 Speaker 1: chips you need for these evs and and plus the 360 00:20:22,080 --> 00:20:25,239 Speaker 1: old ice. Yeah, So what I can say is, you know, 361 00:20:26,080 --> 00:20:29,840 Speaker 1: a macro kind of impact in the industry is is 362 00:20:29,840 --> 00:20:32,280 Speaker 1: the tip short at Ford? You know, we're managing that 363 00:20:32,359 --> 00:20:35,919 Speaker 1: as best we can. And lightning is a key product launched, 364 00:20:35,960 --> 00:20:40,359 Speaker 1: so we're prioritizing. So we're laser focused on having a 365 00:20:40,640 --> 00:20:45,280 Speaker 1: on time on track and a quality lawn for lightning Pacifically, dude, 366 00:20:45,280 --> 00:20:49,760 Speaker 1: that's two laser focused, two times you've focus. This is 367 00:20:49,760 --> 00:20:52,040 Speaker 1: an old phrase that Alan mollally brought to the Ford 368 00:20:52,080 --> 00:20:55,159 Speaker 1: Motor Company back in the day. I like it. I 369 00:20:55,240 --> 00:20:57,240 Speaker 1: like it. I'm sure you get points for it. Farley 370 00:20:57,280 --> 00:21:00,320 Speaker 1: Will Farley will allow it. By the way, Jim is 371 00:21:00,320 --> 00:21:02,600 Speaker 1: a good friend of mine, and I'm sure he won't 372 00:21:02,640 --> 00:21:06,240 Speaker 1: mind you sharing just with us, just with me and Paul, 373 00:21:07,359 --> 00:21:10,480 Speaker 1: some of your secret plans. I've been driving the Broncho 374 00:21:10,600 --> 00:21:13,560 Speaker 1: around for the last week and it is a ton 375 00:21:13,640 --> 00:21:16,639 Speaker 1: of fun. I gotta say, I'm super impressed by the 376 00:21:16,640 --> 00:21:18,959 Speaker 1: two point seven leader V six in there, and I 377 00:21:19,000 --> 00:21:22,560 Speaker 1: hate V six is traditionally. I think it's the most 378 00:21:22,600 --> 00:21:25,640 Speaker 1: boring if you're gonna choose an engine, obviously a V eight, right, 379 00:21:25,720 --> 00:21:28,000 Speaker 1: but at least an in line six. They went with 380 00:21:28,040 --> 00:21:29,719 Speaker 1: a V on this and I thought, oh no. But 381 00:21:29,840 --> 00:21:33,480 Speaker 1: it's so fast and it's so responsive, so I'm blown away. 382 00:21:34,160 --> 00:21:37,400 Speaker 1: My question, though, is, Jason, when do you go electric? 383 00:21:37,600 --> 00:21:39,560 Speaker 1: I don't know why you didn't introduce the Bronco as 384 00:21:39,560 --> 00:21:41,919 Speaker 1: an electric vehicle in the first place. How long do 385 00:21:41,960 --> 00:21:43,879 Speaker 1: we have to wait for, at the very least, a 386 00:21:43,960 --> 00:21:48,199 Speaker 1: hybrid Bronco. Yeah, so I I can't count on that, 387 00:21:48,280 --> 00:21:51,000 Speaker 1: But what I can tell you is Ford strategies. We're 388 00:21:51,040 --> 00:21:53,479 Speaker 1: not just saying we're going electric everything, because we know 389 00:21:53,560 --> 00:21:58,240 Speaker 1: a sucy in in the oment. There's different usage cases, 390 00:21:58,280 --> 00:22:02,760 Speaker 1: so someone's gonna tow heavyweight long distances frequently a dis 391 00:22:03,440 --> 00:22:08,000 Speaker 1: or guest engine will work. Obviously, Bronco is a blasted 392 00:22:08,119 --> 00:22:11,080 Speaker 1: drive currently, and we're always looking at kind of feature 393 00:22:11,119 --> 00:22:15,920 Speaker 1: plans electrified, so stay tuned in the future. All right, Jason, 394 00:22:15,920 --> 00:22:19,200 Speaker 1: thanks so much for joining us. Jason Turnbull their marketing manager, 395 00:22:20,119 --> 00:22:23,360 Speaker 1: clearly doing an excellent job talking about the F one 396 00:22:23,359 --> 00:22:25,959 Speaker 1: fifty Lightning. We're pumped to see that come out. I'm 397 00:22:26,000 --> 00:22:28,200 Speaker 1: also pumped to see an electric Broncho. It's got to happen. 398 00:22:28,200 --> 00:22:30,720 Speaker 1: I heard the Broncos is awesome. Dude, It's so much fun. 399 00:22:30,960 --> 00:22:33,760 Speaker 1: I've been driving it back and forth to Westchester. I 400 00:22:33,840 --> 00:22:36,679 Speaker 1: dropped the top yesterday the sun was out. I'm like 401 00:22:36,760 --> 00:22:41,440 Speaker 1: blasting bad religion flying up the west Side Highway. Super 402 00:22:41,480 --> 00:22:44,320 Speaker 1: super fun. Alright, good stuff. Jason Turbull F one fifty Lightning, 403 00:22:44,320 --> 00:22:50,320 Speaker 1: marketing manager for the Ford Motor Company. I want to 404 00:22:50,320 --> 00:22:53,040 Speaker 1: bring in John Author. She covers all this great economy 405 00:22:53,080 --> 00:22:57,080 Speaker 1: market stuff for Bloomberg News and Bloomberg Opinion. John, you 406 00:22:57,119 --> 00:22:58,560 Speaker 1: know we're looking at the markets here. We had to. 407 00:22:58,840 --> 00:23:00,560 Speaker 1: Did you see the top of his colle I did not. 408 00:23:01,720 --> 00:23:03,800 Speaker 1: I love it all right, let us I love it. 409 00:23:04,720 --> 00:23:07,679 Speaker 1: Party over Oops, out of time. Oh, I got it. 410 00:23:07,720 --> 00:23:13,200 Speaker 1: Look at him being so hip there, um passing quoting 411 00:23:13,200 --> 00:23:17,399 Speaker 1: a song from forty years ago. But yes, okay, twenty 412 00:23:17,440 --> 00:23:20,600 Speaker 1: three years ago. No, wait, the song was. But it 413 00:23:20,680 --> 00:23:22,439 Speaker 1: must have come out in the eighties, because I remember 414 00:23:22,520 --> 00:23:25,080 Speaker 1: I had it was it was it was before Purple Rain. 415 00:23:25,119 --> 00:23:27,359 Speaker 1: I think it was about eighty two or eighty three. Yeah, 416 00:23:27,400 --> 00:23:30,679 Speaker 1: it was on the Little Red Corvette album. Uh, what 417 00:23:30,760 --> 00:23:34,120 Speaker 1: a great record. I loved Prince. Not that we're all 418 00:23:34,160 --> 00:23:36,480 Speaker 1: more interested in Prince than what's going on in the 419 00:23:36,480 --> 00:23:39,080 Speaker 1: financial market, so on what is going on in the 420 00:23:39,080 --> 00:23:41,399 Speaker 1: financial markets from your perspective time. Yeah, the point is 421 00:23:41,400 --> 00:23:45,000 Speaker 1: you're comparing this to two thousands, so it's rough and 422 00:23:45,080 --> 00:23:48,880 Speaker 1: in some in something well, in some critical respect, it ease. 423 00:23:48,920 --> 00:23:53,000 Speaker 1: I mean, bear in mind, what what's different? Um Or 424 00:23:54,240 --> 00:23:56,480 Speaker 1: Until recently, I would have said this didn't have that 425 00:23:56,600 --> 00:24:01,120 Speaker 1: much in common with two thousand, because that was very 426 00:24:01,200 --> 00:24:07,560 Speaker 1: much an internally financially driven incidents, whereas this time around, 427 00:24:07,680 --> 00:24:10,960 Speaker 1: we're you know, we have a war, we have in 428 00:24:11,119 --> 00:24:14,080 Speaker 1: writing inflation, we have the shock from the pandemic. There 429 00:24:14,119 --> 00:24:19,720 Speaker 1: were all kinds of very obvious external reasons why why 430 00:24:19,800 --> 00:24:22,240 Speaker 1: they're the markets are being shocked and having to react. 431 00:24:23,040 --> 00:24:26,880 Speaker 1: But what is interesting the last few days, in particular, 432 00:24:27,280 --> 00:24:30,879 Speaker 1: is how this has been about driven about, and the 433 00:24:30,920 --> 00:24:35,400 Speaker 1: stock market has been driven all about valuation. It's the 434 00:24:35,440 --> 00:24:39,600 Speaker 1: most overpriced stocks that have sold off the most period 435 00:24:40,000 --> 00:24:43,840 Speaker 1: right the way through the markets that that that relatively 436 00:24:43,920 --> 00:24:47,440 Speaker 1: cheap stocks are barely down. Some of them are actually 437 00:24:47,800 --> 00:24:50,960 Speaker 1: gaining a bit. If wal Mart or you Will Brands 438 00:24:51,040 --> 00:24:54,600 Speaker 1: or whatever doing moderately well, and the names that have 439 00:24:54,680 --> 00:24:59,600 Speaker 1: excited people are tanking very very somlicitus and maybe not 440 00:25:00,680 --> 00:25:03,560 Speaker 1: maybe not enough yet, right John. I heard um Luke 441 00:25:03,640 --> 00:25:06,720 Speaker 1: Kawa was on the Odd Lots podcast on Friday, and 442 00:25:06,720 --> 00:25:12,639 Speaker 1: he said, you know, valuations have come in, um, but uh, 443 00:25:12,720 --> 00:25:16,040 Speaker 1: you know, terminal rate expectations are up a hundred basis points, 444 00:25:16,040 --> 00:25:21,000 Speaker 1: so maybe it's not worth it yet. I would I 445 00:25:21,040 --> 00:25:25,160 Speaker 1: would certainly say that there is no clarity over While 446 00:25:25,200 --> 00:25:27,880 Speaker 1: there isn't clarity over the terminal rate, while there isn't 447 00:25:27,920 --> 00:25:31,440 Speaker 1: clarity over how inflation comes under control, then there can't 448 00:25:31,440 --> 00:25:37,320 Speaker 1: be clarity over an appropriate valuation either. If you look, 449 00:25:37,600 --> 00:25:40,080 Speaker 1: it's you know, I don't want to get too technical, 450 00:25:40,160 --> 00:25:42,760 Speaker 1: but if you look at the cyclically adjusted pe, which 451 00:25:42,800 --> 00:25:49,440 Speaker 1: is Robert Schiller's great invention at university, which has been 452 00:25:49,560 --> 00:25:54,440 Speaker 1: very good at predicting medium term returns, like returns over 453 00:25:54,480 --> 00:25:58,080 Speaker 1: the next ten years. Then it has come down sharply 454 00:25:59,240 --> 00:26:01,840 Speaker 1: in the last a few months, but it's still almost 455 00:26:01,840 --> 00:26:09,359 Speaker 1: exactly at the level it was at before the Great Crash. 456 00:26:09,520 --> 00:26:11,840 Speaker 1: So we've already been talking about Prince forty years ago, 457 00:26:11,880 --> 00:26:15,840 Speaker 1: and we're about as expensive us we were almost a 458 00:26:15,920 --> 00:26:19,480 Speaker 1: hundred years ago before that's crash. But by the way, 459 00:26:19,520 --> 00:26:22,119 Speaker 1: in particular reason of evaluation for things to stop selling 460 00:26:22,119 --> 00:26:24,480 Speaker 1: off now, and who knows what was on the charts, 461 00:26:24,520 --> 00:26:28,280 Speaker 1: then yes I don't. By the way, I wonder what 462 00:26:28,400 --> 00:26:33,080 Speaker 1: you how do you explain to a layman um like 463 00:26:33,200 --> 00:26:38,440 Speaker 1: me why rising rates are bad for these you know, 464 00:26:38,880 --> 00:26:44,200 Speaker 1: growthy text docs, for these disruptive innovators? Why is why 465 00:26:44,200 --> 00:26:48,160 Speaker 1: are rising rates necessarily bad for you know, a Netflix 466 00:26:48,440 --> 00:26:53,359 Speaker 1: or maybe even an Amazon? What's the relationship there? Okay, 467 00:26:53,440 --> 00:26:56,800 Speaker 1: if your gross is in the future, if you if 468 00:26:56,800 --> 00:26:59,800 Speaker 1: all your earnings are in the future, you're not turning 469 00:26:59,840 --> 00:27:04,400 Speaker 1: out earnings regularly now, But all the hopes reasonably enough, 470 00:27:04,440 --> 00:27:07,280 Speaker 1: but all the hopes are for growth in the future, 471 00:27:08,000 --> 00:27:13,240 Speaker 1: then you need in any discounted cash flow analysis through 472 00:27:13,400 --> 00:27:16,080 Speaker 1: to account for the time value of money and discount 473 00:27:16,680 --> 00:27:23,040 Speaker 1: those future flows by a reasonable interest rate. In Layman's terms, 474 00:27:23,600 --> 00:27:26,399 Speaker 1: money in the future isn't worth as much as money 475 00:27:26,520 --> 00:27:31,360 Speaker 1: is today. That's worth in the future declines as interest 476 00:27:31,480 --> 00:27:35,880 Speaker 1: rates rise, So if all your value is in the future, 477 00:27:37,040 --> 00:27:42,240 Speaker 1: higher rates will clover your valuation. Meanwhile, if you're mules 478 00:27:42,359 --> 00:27:48,480 Speaker 1: brands making rubber made and sharpies and stuff, your valuation 479 00:27:48,560 --> 00:27:51,400 Speaker 1: is centered in the here and now and rates don't 480 00:27:51,440 --> 00:27:54,000 Speaker 1: matter anything like so much. John, if I'm a glass 481 00:27:54,080 --> 00:27:58,160 Speaker 1: half empty person, is it fair to say these markets 482 00:27:58,200 --> 00:28:02,360 Speaker 1: aren't going to rebound until industrate stuff one up? Still 483 00:28:02,359 --> 00:28:06,160 Speaker 1: we're confident in terms of are they going to make 484 00:28:06,200 --> 00:28:11,280 Speaker 1: a firm rebounds and get above get above the levels 485 00:28:11,320 --> 00:28:12,720 Speaker 1: they were at at the turn of the year. I 486 00:28:13,080 --> 00:28:15,879 Speaker 1: don't see how that can happen until we have clarity 487 00:28:16,560 --> 00:28:20,600 Speaker 1: about where interest rates are headed. No, I that doesn't 488 00:28:20,600 --> 00:28:23,679 Speaker 1: mean that I doubt it. But it's possible that the 489 00:28:23,720 --> 00:28:25,919 Speaker 1: bottom is already in. But in terms of a really 490 00:28:26,080 --> 00:28:30,240 Speaker 1: strong recovery to the levels that we've seen in the 491 00:28:30,840 --> 00:28:33,520 Speaker 1: seen as recently as the turn of the year, we 492 00:28:33,600 --> 00:28:38,240 Speaker 1: need to know how bad inflation and the interest rates 493 00:28:38,280 --> 00:28:40,200 Speaker 1: are going to get. Yeah, you need to know what 494 00:28:40,280 --> 00:28:41,800 Speaker 1: the Fed is going to do before you can price 495 00:28:41,800 --> 00:28:44,920 Speaker 1: it in, right, and and and the fad itself doesn't 496 00:28:44,960 --> 00:28:48,000 Speaker 1: know because the Fed itself doesn't know exactly how bad 497 00:28:48,000 --> 00:28:50,479 Speaker 1: the inflation problem and how quickly it will come under control. 498 00:28:50,640 --> 00:28:53,880 Speaker 1: So I don't see a way. I'm sure there are 499 00:28:53,880 --> 00:28:55,960 Speaker 1: plenty of ways I'm not thinking of where people can 500 00:28:56,040 --> 00:29:00,760 Speaker 1: make money over the next few months. Um. In terms 501 00:29:00,760 --> 00:29:05,160 Speaker 1: of a sustained clear buying opportunity taking us up to 502 00:29:05,200 --> 00:29:08,520 Speaker 1: new levels, I don't see how that's possible in the 503 00:29:08,560 --> 00:29:10,760 Speaker 1: next few months. Somebody clever up there is going to 504 00:29:10,800 --> 00:29:13,920 Speaker 1: make money in the next few months. They always do. Um. 505 00:29:13,960 --> 00:29:16,560 Speaker 1: But in terms of a secular uplift to the stock 506 00:29:16,600 --> 00:29:20,440 Speaker 1: market of the kind we've been become accustomed to, that 507 00:29:20,440 --> 00:29:23,680 Speaker 1: that can't happen until we know what's happening with the 508 00:29:24,040 --> 00:29:25,840 Speaker 1: with inflation in rates. Well, you've got to be able 509 00:29:25,840 --> 00:29:28,400 Speaker 1: to see who lives through this if we have the 510 00:29:28,480 --> 00:29:31,760 Speaker 1: kind of drops like we had in at the end 511 00:29:31,800 --> 00:29:34,440 Speaker 1: of the Internet bubble. I remember a buddy of mine 512 00:29:34,480 --> 00:29:36,640 Speaker 1: was working at bat Alex Brown and he said, I 513 00:29:36,640 --> 00:29:39,880 Speaker 1: don't care. Um, if you think all these you know, 514 00:29:40,000 --> 00:29:44,520 Speaker 1: revenue churning tech companies are worthless. I think Amazon is 515 00:29:44,560 --> 00:29:47,120 Speaker 1: still going to be a big behemoth someday. And I 516 00:29:47,200 --> 00:29:49,720 Speaker 1: always think about that because I should have bought Amazon 517 00:29:50,200 --> 00:29:52,840 Speaker 1: when he was telling me. But we still I mean, 518 00:29:53,320 --> 00:29:56,680 Speaker 1: the cruel math part of this is bt Alex Brown 519 00:29:58,280 --> 00:30:00,880 Speaker 1: that he is known to its friends of Deutsche Bank. Yeah. Yeah. 520 00:30:00,880 --> 00:30:04,120 Speaker 1: The poor math thing is we have to in order 521 00:30:04,160 --> 00:30:06,400 Speaker 1: to get back to the turn of the year, we've 522 00:30:06,400 --> 00:30:08,400 Speaker 1: got to climb so much further than we've fallen because 523 00:30:08,440 --> 00:30:12,600 Speaker 1: the denominator is smaller now, right, Um, the Nasdaq has 524 00:30:12,640 --> 00:30:16,800 Speaker 1: lost like, but it's got to go up to get 525 00:30:16,880 --> 00:30:20,240 Speaker 1: back to where it was on January third, Math, Yes, 526 00:30:20,840 --> 00:30:24,960 Speaker 1: uh and uh. At some point that probably will happen, 527 00:30:25,320 --> 00:30:30,200 Speaker 1: but it's unlikely to happen this year unless inflation comes 528 00:30:30,640 --> 00:30:36,640 Speaker 1: really rapidly under control without hurting growth. So to that end, 529 00:30:37,480 --> 00:30:39,080 Speaker 1: see how that can happen. So when we get the 530 00:30:39,080 --> 00:30:40,960 Speaker 1: CPI did it, tomar John, what what? What do you 531 00:30:40,960 --> 00:30:44,760 Speaker 1: think we should really be focusing on? You should be 532 00:30:44,880 --> 00:30:50,040 Speaker 1: focusing on rents, which is the big element that most 533 00:30:50,200 --> 00:30:54,400 Speaker 1: worries people that that um, that's a third of the index, 534 00:30:54,960 --> 00:30:57,640 Speaker 1: and for one reason another it tends to show up 535 00:30:57,680 --> 00:31:01,080 Speaker 1: in in the CPI with a leg uh. And it's 536 00:31:01,080 --> 00:31:04,640 Speaker 1: been relatively under control and is now rising. So that 537 00:31:05,120 --> 00:31:09,880 Speaker 1: is a critical issue. Um. And beyond that, take a 538 00:31:09,960 --> 00:31:15,680 Speaker 1: look at the trimmed mean of inflation, where you remove 539 00:31:15,800 --> 00:31:21,760 Speaker 1: outliers in both directions. But by the way, it's lately Sorry, well, 540 00:31:21,800 --> 00:31:23,800 Speaker 1: I was gonna say, we're we're about to have to 541 00:31:23,960 --> 00:31:26,160 Speaker 1: listen to President Biden come out and talking to talk 542 00:31:26,200 --> 00:31:30,840 Speaker 1: about inflation. I can see the background, um behind his podium. 543 00:31:30,840 --> 00:31:33,520 Speaker 1: It says lowering costs and tackling inflation, which I'm sure 544 00:31:33,520 --> 00:31:37,160 Speaker 1: he wants voters to think that he's doing. Um. This 545 00:31:37,240 --> 00:31:40,480 Speaker 1: brings very little he can do, certainly decide of the midsterms. 546 00:31:40,480 --> 00:31:43,080 Speaker 1: There's more or less nothing he can do. But it's 547 00:31:43,080 --> 00:31:45,800 Speaker 1: a It's a rule of politics, isn't it you If 548 00:31:45,840 --> 00:31:48,600 Speaker 1: you're the one in charge when the economy goes sour, 549 00:31:48,680 --> 00:31:52,080 Speaker 1: it's yours. It doesn't matter how much money the federal 550 00:31:52,160 --> 00:31:55,840 Speaker 1: government was spending even before he came into office, exactly. John, 551 00:31:56,000 --> 00:31:58,520 Speaker 1: I want to just finally ask you what your take 552 00:31:58,680 --> 00:32:03,200 Speaker 1: is on the housing market and interest rates, because we 553 00:32:03,240 --> 00:32:06,440 Speaker 1: saw a mortgage rates climb to. I think at the 554 00:32:06,560 --> 00:32:08,720 Speaker 1: end of last week it was already five point three percent, 555 00:32:09,360 --> 00:32:13,240 Speaker 1: and at least anecdotally, I have heard first time buyers 556 00:32:13,520 --> 00:32:16,320 Speaker 1: scared out of the market or people selling their homes 557 00:32:16,320 --> 00:32:20,440 Speaker 1: say well, we better lower the price now. Um is it? 558 00:32:20,520 --> 00:32:24,440 Speaker 1: Is it problematic because you know, we've seen this huge 559 00:32:24,560 --> 00:32:28,600 Speaker 1: land grab and prices are unbelievable, there's no inventory, and 560 00:32:28,640 --> 00:32:34,800 Speaker 1: now you've got mortgage rates rising. Yes, it's it's very problematic. 561 00:32:34,840 --> 00:32:39,000 Speaker 1: And this is the big difference, bad difference from two thousands. 562 00:32:39,680 --> 00:32:42,880 Speaker 1: In the two thousand was an equity market bubble, a 563 00:32:43,000 --> 00:32:46,520 Speaker 1: massive one, but it wasn't a housing market bubble as well. 564 00:32:47,240 --> 00:32:49,680 Speaker 1: This time we have something that looks as though it 565 00:32:49,760 --> 00:32:53,520 Speaker 1: might even be a bubble in American housing. Now. There's 566 00:32:53,560 --> 00:32:57,840 Speaker 1: one huge advantage that the US has compared to almost 567 00:32:57,880 --> 00:33:00,640 Speaker 1: the rest of the world, which is that America for 568 00:33:00,760 --> 00:33:05,320 Speaker 1: years have preferred fixed rate mortgages. I happen to be 569 00:33:05,360 --> 00:33:08,760 Speaker 1: looking into piece of research, so something like from Deutsche 570 00:33:08,760 --> 00:33:12,080 Speaker 1: Bank that shows that only about two percent of US 571 00:33:12,120 --> 00:33:17,000 Speaker 1: mortgages are on variable rates. In the UK, it's more 572 00:33:17,080 --> 00:33:20,479 Speaker 1: like forty In Australia, Italy, Germany, We're talking about more 573 00:33:20,520 --> 00:33:26,400 Speaker 1: than are variable, so the impact of rising mortgages takes 574 00:33:26,520 --> 00:33:31,440 Speaker 1: longer to affect house prices here than it does in 575 00:33:31,760 --> 00:33:36,479 Speaker 1: the other developed economies. But plainly, at this point it's uh, 576 00:33:36,760 --> 00:33:41,480 Speaker 1: you know, this is overextended and people have been making 577 00:33:41,520 --> 00:33:46,080 Speaker 1: their calculations on the assumption that money would stay phenomenally 578 00:33:46,200 --> 00:33:50,400 Speaker 1: historically cheap and it isn't anymore. So, yes, it's very concerning. 579 00:33:50,640 --> 00:33:53,000 Speaker 1: All right, John Authors, thank you so much. We appreciate that. 580 00:33:53,120 --> 00:33:55,960 Speaker 1: John Author's covers global markets and investments and the Red 581 00:33:55,960 --> 00:33:59,760 Speaker 1: so Thanks Bloomberg News and Bloinion. Rents really a year 582 00:33:59,800 --> 00:34:01,560 Speaker 1: for the right. He sounds like a soccer fan, I know, 583 00:34:01,680 --> 00:34:04,240 Speaker 1: but he's a big Red Sox guy. I didn't know that. Yeah. Absolutely, 584 00:34:05,880 --> 00:34:09,000 Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can 585 00:34:09,040 --> 00:34:12,800 Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever 586 00:34:12,880 --> 00:34:16,560 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 587 00:34:16,800 --> 00:34:20,319 Speaker 1: at Matt Miller three and on Fall Sweeney I'm on 588 00:34:20,320 --> 00:34:23,240 Speaker 1: Twitter at pt Sweeney. Before the podcast. You can always 589 00:34:23,280 --> 00:34:25,160 Speaker 1: catch us worldwide at Bloomberg Radio.