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Speaker 1: Hello, and welcome to What Goes Up. My name is

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Speaker 1: Mike Reagan. I'm a senior editor at Bloomberg, and I'm

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Speaker 1: Bildonna Higher Across Acid reporter with Bloomberg. And this week

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Speaker 1: on the show, well, stocks, bonds, even crypto, they're all

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Speaker 1: tanking this year. Is it time to buy? Or is

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Speaker 1: it time to stuff your money under the mattress. We'll

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Speaker 1: get into it with the chief investment officer of a

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Speaker 1: registered investment advisory, but Bildona first, I need to thank you.

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Speaker 1: I know I was off on vacation last week and

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Speaker 1: you filled in on the podcast without me admirably. I

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Speaker 1: will admit I haven't yet listened to it. You probably shouldn't.

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Speaker 1: We made a lot of fun of you. I figured

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Speaker 1: that you were. You burned me a few times, and

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Speaker 1: I will say, during vacation, I got a terrible sun burned.

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Speaker 1: So I can only hand all so much burn at

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Speaker 1: one time. I'm very, very ashamed of myself for that

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Speaker 1: burn remain Bostic filled in and I told him that

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Speaker 1: if just if you just happened to be stuck in

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Speaker 1: California for some reason, or you couldn't get a return ticket,

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Speaker 1: I told him he was welcome to fill in for

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Speaker 1: the rest of eternity for you. Oh okay, well good,

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Speaker 1: so you've already lined up my replacement exactly. Okay, but

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Speaker 1: no more parents. I promise to a minimum because we

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Speaker 1: did miss you, and I will say I'm very ashamed

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Speaker 1: of getting sunburned. I've dealt with Molinomo myself. A remindered

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Speaker 1: everyone this is a time of year where we all

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Speaker 1: get burned. In my case, I I blame the delicious

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Speaker 1: cocktails that they serve at the Hotel Grenado. Yeah so

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Speaker 1: uh lemon vodka concoction that had me let my guard down.

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Speaker 1: So yeah, um, I recommend everyone reapply I think you

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Speaker 1: maybe after the second cocktail every two cockos. I don't

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Speaker 1: know the ratio the reapply to cocktail ratio is is

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Speaker 1: up to the individual. But a reminder to uh to

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Speaker 1: where that sun block. At this time of year, I

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Speaker 1: cannot protect myself from vildanna and romains burns. Unfortunately, but

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Speaker 1: hopefully you did not tell all this week's guests to

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Speaker 1: burn me as much as you did. Really did, Actually

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Speaker 1: I did. I told her. You know, it's a fun podcast.

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Speaker 1: We can have as much fun as she wants. But

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Speaker 1: speaking of the guests. I do want to bring in

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Speaker 1: Efan Devit. She's the chief investment officer at Monetta. I

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Speaker 1: want to welcome you to our show. Maybe just to

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Speaker 1: start out, you can tell us a little bit about Monetta,

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Speaker 1: What's what the firm does, where you guys are based,

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Speaker 1: and what you've been up to recently. Great, well, thank you.

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Speaker 1: We are fee only financial advisors were in our i A.

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Speaker 1: We are one of the top ten independent r i

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Speaker 1: as in the US. Our headquarters are in St. Louis,

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Speaker 1: and we have thirty two billion in assets under management.

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Speaker 1: And although our headquarters are in St. Louis, we have

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Speaker 1: a national footprint. And I myself and based in the

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Speaker 1: Chicago office. Okay, well, if he I was actually editing

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Speaker 1: a column this morning that happened of your name in it,

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Speaker 1: so I I figured that's a good segue. Uh So,

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Speaker 1: one topic I wanted to ask you about, which is

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Speaker 1: the nature of of defensive stocks, and um, you know,

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Speaker 1: I'll sort of recap the column for listeners who aren't

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Speaker 1: privileged to read taking stock on the Bloomberg terminal, which

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Speaker 1: you really should be doing, by the way, but if

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Speaker 1: you're not, you know, I think it's a very sort

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Speaker 1: of headache inducing time to think about how do you

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Speaker 1: play defense in this stock market? UM? You know, traditionally

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Speaker 1: you would you would go to something like consumer stables, utilities,

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Speaker 1: high dividend payers with stable earning streams. UM. The pandemic

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Speaker 1: obviously turned that on its head. The way to play

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Speaker 1: defense in that environment was to buy all the internet um,

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Speaker 1: e commerce, you know, streaming, social media. That all the

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Speaker 1: stocks that reflected what people were doing while they were

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Speaker 1: stuck inside, which is you know, craually have been kind

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Speaker 1: of the opposite of defensive stocks, those high growth tech

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Speaker 1: stocks now as crazy as it sounds, you know, you

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Speaker 1: look at the leaders of the market this year, Energy

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Speaker 1: up a million percent, beating basically everything. People playing defense

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Speaker 1: against this inflationary oil shock environment by by buying energy stocks.

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Speaker 1: I'm wondering how you unpack it all? What what does

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Speaker 1: defensive means to you right now in the stock market? Um?

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Speaker 1: Given the risks are kind of across the spectrum. You know,

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Speaker 1: some people are worried about a looming recession next year.

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Speaker 1: Everyone else is worried about inflation and an erosion of

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Speaker 1: purchasing power, higher interest rates. What does it mean to

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Speaker 1: be defensive? Is there a way to to sort of

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Speaker 1: still allocate the stocks and be defensive in this environment.

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Speaker 1: It's an excellent question. I mean, ultimately, the way to

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Speaker 1: be defensive at a portfolio level is to have a

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Speaker 1: well diversified portfolio, and by that I mean across all

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Speaker 1: asset classes, so including bonds, including alternatives, including cash flow generators,

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Speaker 1: including real assets, and that is our best way of

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Speaker 1: assuring an old weather portfolio. When it comes to stock,

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Speaker 1: defensive stocks are perhaps a bit of a misnomer because

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Speaker 1: ultimately we are in equities, which are a higher risk

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Speaker 1: reward asset class. They will be marked to market, they

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Speaker 1: will experience volatility. We can see equities with a high

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Speaker 1: correlation to each other, especially when there's a sell off event.

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Speaker 1: But that said, there are still sectors that might be

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Speaker 1: considered value stocks, which as opposed to growth stocks, have

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Speaker 1: been quite out of favor as a whole for the

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Speaker 1: last number of years, and there have been pockets of

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Speaker 1: time was when investors have cycled into value in that

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Speaker 1: great kind of growth value rotation that we might see,

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Speaker 1: but those rotation periods have actually been quite short. So

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Speaker 1: I think we shouldn't be under the illusion that these

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Speaker 1: defensive stocks are essentially somewhere to hide if there is

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Speaker 1: a dramatic equity market correction, but they should be somewhere

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Speaker 1: where investors may go in a flight to safety. The

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Speaker 1: additional complexity though right now, around these so called defensive

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Speaker 1: stocks a new listed high dividend payers in that is

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Speaker 1: that traditionally, when interest rates rise, these are seen as

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Speaker 1: perhaps bond proxies, or had been seen as bond proxies,

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Speaker 1: and then funds flow out of these defensive stocks when

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Speaker 1: interest rates rise, because bonds become relatively more attractive, so

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Speaker 1: they tend to see funds flowing out when it's just

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Speaker 1: right rise. So they're not actually that defensive if we

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Speaker 1: see a rising rate environment, So it's all relative. Are

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Speaker 1: they more defensive than a high growth portfolio? Absolutely? Are

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Speaker 1: they going to protect your capital in an equity market downturn?

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Speaker 1: Not necessarily. Yeah. It's just such a unique environment because

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Speaker 1: usually when you're seeing yields rising, it's because growth is

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Speaker 1: picking up, you know, it's it's a different point in

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Speaker 1: the cycle. We just have kind of this unique sort

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Speaker 1: of upside down cycle now where you know you have

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Speaker 1: decelerating growth and rising yields. Um So how do you

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Speaker 1: sort of play that you know, given especially the last

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Speaker 1: couple of weeks, we have seen yields sort of come

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Speaker 1: down a little bit um off their highs, oil come

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Speaker 1: come off of its highs. I mean, is the worst

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Speaker 1: of that inflation shock over? Do you think can? And

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Speaker 1: and you know, are those defensive place a little bit

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Speaker 1: more defensive now in that case, Well, just as we

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Speaker 1: could adjust to to anything, any new normal somehow quickly

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Speaker 1: becomes the norm. We saw that with COVID restrictions, where

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Speaker 1: how mask wearing became the norm, how restrictions became the norm.

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Speaker 1: I think when it comes to inflation numbers, something that

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Speaker 1: was perhaps eye popping at a forty year high starts

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Speaker 1: to become normal very quickly. I would be surprised if

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Speaker 1: we were to see high single digit inflation persists, maybe

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Speaker 1: for a few more months, maybe it through the middle

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Speaker 1: of the year. But ultimately we have to remember the

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Speaker 1: base effect and some of those numbers and some of

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Speaker 1: the contribution of the shock rises and energy and some

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Speaker 1: other components in there that perhaps were not likely to

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Speaker 1: be sustained. Food prices would be an example. So the

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Speaker 1: quick heat question around all of these inflation numbers is stickiness.

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Speaker 1: But I've just written a piece called head Winds and

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Speaker 1: cross Currents, because, as you mentioned, there is an abundance

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Speaker 1: of risk right now in markets, and they're all inter related,

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Speaker 1: but equally they're all any one of the could potentially

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Speaker 1: grow to exponentially to become a serious problem. Those are

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Speaker 1: the problems you noted around inflation, around is yours right rising?

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Speaker 1: And you mentioned upside down. I think that's a great

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Speaker 1: analogy because there are a lot of things that just

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Speaker 1: don't make sense today. Typically we speak about stagflation, that

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Speaker 1: maybe when we have a rising inflationary environment it's accompanied

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Speaker 1: by high unemployment and that then is that kind of

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Speaker 1: perfect storm that leads to the recession. We don't have

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Speaker 1: a high unemployment environment today. We have an actually very

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Speaker 1: robust labor market, and in fact, we have low unemployment

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Speaker 1: numbers which are back to pre pandemic levels, So that

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Speaker 1: doesn't look like a recipe for recession. Equally, when we

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Speaker 1: have a high inflation environment, we often have a weaker dollar,

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Speaker 1: and we have the opposite. Now we've a dollar at

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Speaker 1: two year highs. So what's that telling us, Perhaps that yes,

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Speaker 1: the dollar should be under pressure because of the of

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Speaker 1: an inflationary environment. But our central bank is taking measures

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Speaker 1: that other central banks are not, and perhaps it's it's

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Speaker 1: it's only looking strong because every other and see worldwide

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Speaker 1: is looking quite weak. So we have a lot of

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Speaker 1: juxtapositions of interesting bactoids right now, and it is challenging

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Speaker 1: for markets to make sense of it. I agree with that.

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Speaker 1: So can you actually talk a little bit more about

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Speaker 1: some of those I think you call them currents. There's

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Speaker 1: all these cross currents that are that are going on

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Speaker 1: right now, these different factors that are weighing on investors.

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Speaker 1: So what what's type of mind for you? Well, I

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Speaker 1: got to start with the two eyes, inflation and interfest rates.

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Speaker 1: So you mentioned inflation being at a forty year high,

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Speaker 1: So it's true that most traders and markets today have

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Speaker 1: never seen inflation at these levels. Most people don't have

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Speaker 1: careers that are are great in forty years, so this

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Speaker 1: is uncharted territory for most market participants today. There is

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Speaker 1: no playbook for this. The last one was I mentioned

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Speaker 1: was in the eighties when we had a very different environment.

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Speaker 1: We had certainly a hawk ish FED then, and when

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Speaker 1: we look to the Fed's potential playbook, we do look

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Speaker 1: to what they did the last time there was inflation

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Speaker 1: in high single in high in high single digits into

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Speaker 1: load into load double digits. So as a result, that

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Speaker 1: is certainly something we have to contended. The key question

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Speaker 1: is is it sticky, is it likely to resist um?

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Speaker 1: And are we likely to have a situation where um

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Speaker 1: the consumer comes under pressure and where companies lose their

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Speaker 1: pricing power and start to see that hit their margins.

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Speaker 1: So really there is a lot of unknown that's unknown

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Speaker 1: currently about how the inflation picture is likely to pan out.

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Speaker 1: But right now, because the consumer still has quite a

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Speaker 1: bit of pent up demand, quite a bit of savings,

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Speaker 1: and perhaps it's still feeling this need to spend on services,

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Speaker 1: we're not seeing it really pinched yet. The other major

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Speaker 1: I is, of course interest rates were in a tightening cycle.

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Speaker 1: We don't know how aggressive is likely to be. I

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Speaker 1: would argue that already quite a few fifty basis point

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Speaker 1: rate rises are priced in for the rest of this year,

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Speaker 1: perhaps three fifty basis point rises are more, or even five.

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Speaker 1: So that is looking like markets already have kind of

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Speaker 1: absorbed that have have factored that in, and for that

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Speaker 1: reason we can expect that we don't expect there to

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Speaker 1: be really any interest rate shocks if that is in

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Speaker 1: fact the interest rate trajectory, But again we don't know

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Speaker 1: how markets are likely to react to that. We see

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Speaker 1: that even that in the last few weeks there's been

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Speaker 1: quite a lot of more volatility as the Fed has

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Speaker 1: sensuated it's stance and it's um it's the language that

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Speaker 1: it's using around the imperative of of being assertive around inflation.

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Speaker 1: We've lost the kind of the looser language of earlier on.

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Speaker 1: So how do The reason I think there's uncertainty around

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Speaker 1: this is how is this likely to play out in

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Speaker 1: terms of a portfolio? Is as likely to cause bonds

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Speaker 1: to to lose And we've had a shocking first quarter

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Speaker 1: for fixed income in terms of how it's it's absolutely

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Speaker 1: return So is this likely to be a poor environment

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Speaker 1: for bonds? We've mentioned equity market volatility? Is it likely

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Speaker 1: to lead to more equity market volatility? So that the

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Speaker 1: two eyes of inflation in interest rates are obviously top

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Speaker 1: of mind, and we can't not mention the geopolitical surprise

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Speaker 1: the potential for ongoing surprise. There it seemed that markets

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Speaker 1: were completely agnostic. It seemed as to the impact of

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Speaker 1: geo political risk for the last eighteen months until the

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Speaker 1: first quarter of this year, until Russian invaded Ukraine, and

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Speaker 1: markets reacted quite suddenly and aggressively to this up ending

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Speaker 1: of global order, so called potential end to globalization. I mean,

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Speaker 1: there was a lot of hyperbole every being used in

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Speaker 1: terms of what this geopolitical event actually meant for the

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Speaker 1: long term. I think for the first time, investors are

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Speaker 1: really starting to now focus on geopolitical risk, and that

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Speaker 1: is again another potential surprise and markets so all of that,

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Speaker 1: and then add to that the backdrop of still ongoing

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Speaker 1: COVID tensions and caution companies emerging from that, house prices

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Speaker 1: that are up last year, rising mortgage rates that are

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Speaker 1: themselves reaching um multi year highs, and there's just this

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Speaker 1: kind of a concoction of risks that any any one

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Speaker 1: of them, as I mentioned food rise to the top

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Speaker 1: be devastating. And so markets are already in a juggling

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Speaker 1: act right now as to which to give emphasis to.

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Speaker 1: You know, you brought up that notion of the consumer

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Speaker 1: um and obviously consumer savings accounts, and that just the

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Speaker 1: normal household balance sheets, just in the aggregate got very

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Speaker 1: very strong during the pandemic you know, whether it be uh,

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Speaker 1: people collecting some some government stimulus money or just not

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Speaker 1: being able to spend money elsewhere. Um, so I wonder

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Speaker 1: you know, in large part the question is, well, how

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Speaker 1: how long does that by the consumer in sort of

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Speaker 1: an accelerating inflation environment. And some pretty interesting tidbits from

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Speaker 1: some of the earnings reports we saw this week. Uh

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Speaker 1: one the guy noticed the visa The spending on the

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Speaker 1: visa network was like off the charts. People are are

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Speaker 1: still spending like crazy. And it gets your notion of

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Speaker 1: pricing power. You know, chip Chipotle raised prices during the

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Speaker 1: order and it didn't hurt them at all. Um, they

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Speaker 1: had a very good quarter. So are there any sort

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Speaker 1: of sectors you're looking at that are more vulnerable to

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Speaker 1: a pricing power problem? You know? Um, you know, Chipola

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Speaker 1: almost strikes me as the type of place where you

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Speaker 1: would cut back if if you were worried about spending, um,

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Speaker 1: you know, and and you'd be going to the supermarket more,

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Speaker 1: going to McDonald's more, you know, a lower priced option.

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Speaker 1: Are there any pockets of the sort of the consumer

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Speaker 1: economy that you think are less vulnerable to um rising

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Speaker 1: prices and others that don't quite have as much pricing power,

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Speaker 1: and their margins might get squeezed. It's an interest in

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Speaker 1: question because I think we can look at normal circumstances,

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Speaker 1: but inflation would mean for different sectors, and then look

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Speaker 1: at the current back drop, whereby the level of assets

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Speaker 1: and money market funds reached a peak right after the

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Speaker 1: pandemic due to stimulus payments and other cares act, etcetera.

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Speaker 1: And the fact that consumers couldn't spend their money and

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Speaker 1: the enhanced unemployment benefit and just the fact that there

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Speaker 1: was nothing to spend money on. Really it couldn't use services.

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Speaker 1: They did consume guns in a very robust way. So

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Speaker 1: because of all that, there is this kind of pent

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Speaker 1: up purchasing power I should say, or released a dry powder.

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Speaker 1: It's it's getting less by the day because obviously inflation

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Speaker 1: erodes cash, so it will erode that actual purchasing power.

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Speaker 1: So I think that's where the interesting dilemma is. Normally,

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Speaker 1: I would say it would be things like discretionary expenditure,

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Speaker 1: expenditure on say hospitality or travel. That would be where

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Speaker 1: I'd see normally and the consuming to be more vulnerable.

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Speaker 1: And ironically Chipotle is probably in that kind of price

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Speaker 1: point of restaurants that's sort of that fast food or

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Speaker 1: enhanced fast food segment where actually that's where people tend

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Speaker 1: to sort downgrade to as opposed to eating more fine

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Speaker 1: dining establishments. So probably is still in that category that

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Speaker 1: is likely to be quite robust and supported. But as

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Speaker 1: far as if we saw United Airlines come out recently

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Speaker 1: to say that they actually expected demand to be buoyant

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Speaker 1: um and we've seen fuel prices passed through into higher

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Speaker 1: airline ticket prices. But notwithstanding, there is that pent up

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Speaker 1: demand to take that that vacation, take that overseas trip,

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Speaker 1: and I don't see that subsiding. So as I said,

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Speaker 1: it may be that that's artificially prolonging the strength of

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Speaker 1: the consumer. These savings, plus the sense of the fear

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Speaker 1: of missing out of having missed out on on perhaps

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Speaker 1: that the normal spending pattern for two years. So for

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Speaker 1: that reason, it's very hard to say at this point

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Speaker 1: where we can see clearly things like Netflix, things like

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Speaker 1: some of It, maybe Peloton, you know, areas that they

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Speaker 1: would have spent money on during the pandemic which now

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Speaker 1: are no longer um adequate substitutes for the real thing

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Speaker 1: or or for going out and spending on cinemas or

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Speaker 1: or you know, taking that bike trip. So I see

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Speaker 1: that there those are areas perhaps that were perhaps overbought

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Speaker 1: during the pandemic um. So it's it's a it's an

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Speaker 1: interesting dilemma really as to what how this purchasing power

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Speaker 1: effect is likely to pan out. I'm really glad you

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Speaker 1: brought that up, because I was just about to ask

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Speaker 1: you about that. Which is this idea that maybe some

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Speaker 1: of the earnings reports so far are giving us a

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Speaker 1: hint that there is consumer pushback for rising prices. So

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Speaker 1: you mentioned Netflix, that's one good example. Then also we

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Speaker 1: have Whirlpool mentioning it, uh and a bunch of the

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Speaker 1: mattress companies. I think sleep number was one of them.

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Speaker 1: Temper Seely had said that just demand is falling off

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Speaker 1: in response to higher prices, but not just on the

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Speaker 1: good side. I believe Jet Blue also had mentioned something

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Speaker 1: about rising prices and consumer pushback. So are you paying

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Speaker 1: attention to some of those things and seeing it crop

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Speaker 1: up a bit more. That's a really interesting point. We

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Speaker 1: see the concept of demand destruction has been used for

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Speaker 1: years in the commodity segments. So the idea that the

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Speaker 1: oil price can't rise to the moon because at some

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Speaker 1: point there will be less driving, less use of fuel,

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Speaker 1: conversion to other forms of energy, and that there is

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Speaker 1: a point out which they're simply isn't it is not

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Speaker 1: going to go on forever unlimited demand at unlimited price.

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Speaker 1: So that's what presents a natural ceiling, and I suggest

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Speaker 1: that that's what what what all these companies are also

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Speaker 1: seeing as demand destruction at certain levels that if something

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Speaker 1: is ultimately a discretion or expenditure, there will be there

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Speaker 1: will be a desire to shift, to find substitutes and

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Speaker 1: and to not not tolerate that price. So that probably

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Speaker 1: actually could be a natural correction on inflation. It's not

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Speaker 1: likely to rise forever, so let's see how that works out.

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Speaker 1: But I think it's an excellent point. You know, if

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Speaker 1: it's funny a lot in the financial world. If you

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Speaker 1: want to have a quick meeting with someone in the

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Speaker 1: US and New York, it's it's usually a coffee meeting,

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Speaker 1: but you and you're you're charming, irish ways you have

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Speaker 1: tea meetings. I've noticed C C I O. T. S

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Speaker 1: Uh that you videotape and and put on the website

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Speaker 1: as a podcast and really interesting one recently with Cathy

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Speaker 1: Wood of Our Investments UM, and it's just been such

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Speaker 1: an amazing story UM with her her et fs and

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Speaker 1: and really the you know, those sectors of the stock

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Speaker 1: market that she she favors, the real sort of high

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Speaker 1: future growth, innovative, disruptive type of companies that the Tesla's

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Speaker 1: of the world and whatnot. I'm curious, you know what

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Speaker 1: you took away from that conversation with her as far

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Speaker 1: as UM. Is that strategy sort of in peril for

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Speaker 1: I don't know, the next couple of years or what

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Speaker 1: do you think needs to be in place in sort

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Speaker 1: of the macro environment maybe to to bring that type

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Speaker 1: of uh OUR performance back that she saw that and

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Speaker 1: that sort of risk taking in the market, you know,

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Speaker 1: on an even broader scale, that that willingness to really

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Speaker 1: UM invest in a company with a future that might

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Speaker 1: not you know, reach truition for five or ten years,

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Speaker 1: that that sort of thing is that is that sort

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Speaker 1: of risk taking just really gone for good now or

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Speaker 1: is there something that will bring it back? But I

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Speaker 1: think we're seeing is just to waive critical thinking. And

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Speaker 1: that was really where I focused my discussion in the

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Speaker 1: interview with Kathy wood was. I wanted to really challenge

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Speaker 1: some of the growth assumptions that were built into some

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Speaker 1: of the modeling they do on seconds, such as driverless

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Speaker 1: cars or artificial intelligence, or perhaps the adoption of digital

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Speaker 1: wallets or the price of bitcoin. I asked her about

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Speaker 1: her modeling and where the probabilities were in there and

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Speaker 1: where the potential was inflection points were in order of

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Speaker 1: this modeling to to big sense or to not. I

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Speaker 1: also asked her about in the past how their modeling

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Speaker 1: had worked out and whether they have an instance where

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Speaker 1: they had been wildly over optimistic, because that often would

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Speaker 1: be the the the the assessment exactly around some of

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Speaker 1: these models is that they are they're overly optimistic, and

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Speaker 1: I don't think that our fascination and our obsession with

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Speaker 1: innovation is likely to go away anytime soon. What we

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Speaker 1: have probably introduced is a dose of realism and the

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Speaker 1: irrational exuberance that on Greenspan were referred to back in

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Speaker 1: O eight. There was perhaps a shade of that around

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Speaker 1: some of these protections. If you think about it, it's

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Speaker 1: probably not five years ago we all thought that today

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Speaker 1: two we'll be driving around and we would have driverless cars.

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Speaker 1: That's not a reality today. Sometimes tech is inherently very

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Speaker 1: difficult to model. Um we are grappling with modeling adoption technology,

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Speaker 1: or grappling with modeling the impact of climate change. So

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Speaker 1: many of these models have so many different inputs that

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Speaker 1: are all often interrelated that any one there's going to

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Speaker 1: be a huge element of a funnel of possibilities and

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Speaker 1: funnel of doubt with any of that modeling. So what

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Speaker 1: we've seen is a dose of realism around some of

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Speaker 1: the projections. It probably is not a coincidence that that

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Speaker 1: has come at the same time as we've seen just

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Speaker 1: there's some of the sheen come off some of the

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Speaker 1: tech stocks that perhaps are not great innovators, but someone

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Speaker 1: even look at Netflix or look at Meta um. Perhaps

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Speaker 1: they're not innovators, but they've seen the sheen come off them.

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Speaker 1: So it probably is a sectoral just a general falling

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Speaker 1: out of favor right now that we're seeing. But as

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Speaker 1: far as innovation, I am watching that very carefully. And

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Speaker 1: if we were to look at the robust demand for

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Speaker 1: say venture capital on which is just the private sect

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Speaker 1: markets way of playing innovation, that has not subsided and

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Speaker 1: if anything, we are seeing massive institutional capital shift into

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Speaker 1: venture capital. We've seen the endowments do it for years now.

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Speaker 1: The pension funds are following suit. Family offices are large

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Speaker 1: participants in that. Venture capital is just innovation and public

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Speaker 1: markets by another name. So that doesn't seem to have

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Speaker 1: slowed down. So there will be a fascination with the

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Speaker 1: next new idea, and I suppose that the test will

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Speaker 1: be um, at what stage is our markets prepared to

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Speaker 1: fund that? And at what stage are they going to

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Speaker 1: want to see the proof statement and the revenues follow

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Speaker 1: h forget about driverless cars. I thought we would have

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Speaker 1: flying cars by now, you know the Jetsons. We do

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Speaker 1: have the video chat though that they had in the

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Speaker 1: jets and so I never thought we'd see that in

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Speaker 1: our life time. I actually thought the flying cars were

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Speaker 1: more likely before that. But there we are talking like

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Speaker 1: they did on the jets and so who knows. I

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Speaker 1: wouldn't want to drive a flying car. I mean, in

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Speaker 1: New York City driving is a nightmare, and a flying

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Speaker 1: car would be like even worse. I feel like a

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Speaker 1: true true nightmare. Um. But even so, you mentioned some

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Speaker 1: of those big tech names, and I feel like the

433
00:23:14,840 --> 00:23:17,800
Speaker 1: notes that I've been reading from the banks and just

434
00:23:17,880 --> 00:23:20,840
Speaker 1: research reports in general, they're sort of mixed on them.

435
00:23:21,200 --> 00:23:25,000
Speaker 1: Where As you said, the shine has come off off

436
00:23:25,040 --> 00:23:26,800
Speaker 1: of some of them. We we saw a bunch of

437
00:23:26,800 --> 00:23:28,679
Speaker 1: them report earnings this week. So how should we be

438
00:23:28,720 --> 00:23:31,720
Speaker 1: thinking about them? Because I remember writing stories during the

439
00:23:31,760 --> 00:23:35,280
Speaker 1: pandemic saying exactly what we had just been talking about,

440
00:23:35,359 --> 00:23:39,760
Speaker 1: where the big tech names were considered defensive place. So

441
00:23:39,800 --> 00:23:43,040
Speaker 1: how should we be thinking about them today? Well, definitely

442
00:23:43,080 --> 00:23:45,480
Speaker 1: not as defensive place. I think that that probably was

443
00:23:45,520 --> 00:23:48,280
Speaker 1: a very much a window of time, and tech has

444
00:23:48,320 --> 00:23:52,040
Speaker 1: always been. It's not we will have see a growth

445
00:23:52,040 --> 00:23:54,840
Speaker 1: and CASHLA is well into the future. It has always

446
00:23:54,880 --> 00:23:57,280
Speaker 1: been in the growth segment, and we've seen some staggering

447
00:23:57,320 --> 00:24:02,359
Speaker 1: performance out of those names, perhaps twenty twenty one, and

448
00:24:02,400 --> 00:24:04,920
Speaker 1: now we were seeing that there's the dose of realism

449
00:24:04,920 --> 00:24:07,720
Speaker 1: as I mentioned before. So we would shouldn't necessarily see

450
00:24:07,720 --> 00:24:10,919
Speaker 1: them as as defensive names, but they will, I believe,

451
00:24:11,000 --> 00:24:13,360
Speaker 1: be important parts of the portfolio. But we are seeing

452
00:24:13,760 --> 00:24:16,280
Speaker 1: changing of the guard. We're seeing a shifting, We're seeing

453
00:24:16,280 --> 00:24:19,800
Speaker 1: the encroachment of regulation. Even in the past week, the

454
00:24:19,840 --> 00:24:24,000
Speaker 1: spat around Twitter and the impact that the deal that

455
00:24:24,080 --> 00:24:26,120
Speaker 1: the LA must bid for Twitter had on the price

456
00:24:26,119 --> 00:24:28,359
Speaker 1: of Tesla. We can see that there is a lot

457
00:24:28,400 --> 00:24:31,440
Speaker 1: of drama always in storytelling around many of these tech names.

458
00:24:31,480 --> 00:24:34,639
Speaker 1: There they are become so large that the regulators cannot

459
00:24:34,640 --> 00:24:38,320
Speaker 1: ignore them, and there will be pressure from around privacy concerns,

460
00:24:38,400 --> 00:24:42,000
Speaker 1: use of data, and are anti competitive concerns as well.

461
00:24:42,359 --> 00:24:44,960
Speaker 1: So we need to watch these players. They are essential

462
00:24:45,160 --> 00:24:48,560
Speaker 1: parts of our ecosystem and they will continue to flex

463
00:24:48,600 --> 00:24:50,960
Speaker 1: their muscle, their cash rich. We will see some of

464
00:24:50,960 --> 00:24:54,320
Speaker 1: the innovation coming from within them, but regulators are not

465
00:24:54,359 --> 00:24:57,320
Speaker 1: turning a blind eye, and that may in fact but

466
00:24:57,440 --> 00:24:59,800
Speaker 1: pressure on the business model. And what we're actually seeing

467
00:24:59,880 --> 00:25:03,720
Speaker 1: is maybe investor expectations around growth, say have subscribers or

468
00:25:03,840 --> 00:25:07,320
Speaker 1: revenues were based on the ROY anchor and I anchor

469
00:25:07,440 --> 00:25:09,720
Speaker 1: that was set during the pandemic um that was an

470
00:25:09,800 --> 00:25:13,880
Speaker 1: unusual due to an exogenous event, and perhaps we need

471
00:25:13,880 --> 00:25:16,920
Speaker 1: to just reset some of those expectations. But they will

472
00:25:16,960 --> 00:25:19,800
Speaker 1: be he and they will dominate the index going forward,

473
00:25:19,840 --> 00:25:24,600
Speaker 1: but they will not be defensive. If you had mentioned UH,

474
00:25:25,200 --> 00:25:27,560
Speaker 1: private offices dipping their toe a little bit more into

475
00:25:27,720 --> 00:25:31,040
Speaker 1: venture capital um and I know Monetta has some family

476
00:25:31,080 --> 00:25:34,880
Speaker 1: office UH clients. I find that space kind of interesting

477
00:25:34,920 --> 00:25:36,760
Speaker 1: because there were a few years there were so many

478
00:25:36,760 --> 00:25:40,120
Speaker 1: hedge funds, whether it be regulatory reasons or whatever else,

479
00:25:40,119 --> 00:25:44,440
Speaker 1: we're converting family offices and we never quite hear very

480
00:25:44,520 --> 00:25:48,280
Speaker 1: much about what they're up to until something like Archagos hits,

481
00:25:48,640 --> 00:25:51,359
Speaker 1: you know, uh in the news again this week for

482
00:25:51,480 --> 00:25:56,200
Speaker 1: just the spectacular blow up of that family office. Um,

483
00:25:56,240 --> 00:25:58,879
Speaker 1: I'm curious how much contact you have with the family

484
00:25:58,920 --> 00:26:01,639
Speaker 1: office clients and is there any sort of you know,

485
00:26:01,960 --> 00:26:04,639
Speaker 1: temperature check that you could give us from sort of

486
00:26:04,680 --> 00:26:07,119
Speaker 1: the risk taking and the strategies of that group. I mean,

487
00:26:07,160 --> 00:26:09,520
Speaker 1: I'm sure there's a lot of a lot of different

488
00:26:10,040 --> 00:26:13,760
Speaker 1: disparity among what they're doing. But um, you know, when

489
00:26:13,760 --> 00:26:16,119
Speaker 1: the only sort of insight you get into this space

490
00:26:16,240 --> 00:26:20,520
Speaker 1: is a situation like Archegos, it really makes you wonder

491
00:26:20,600 --> 00:26:23,359
Speaker 1: what sort of the mood is with that cohort of

492
00:26:23,400 --> 00:26:25,600
Speaker 1: an investors. Are they in general a little bit more

493
00:26:25,720 --> 00:26:29,600
Speaker 1: risk taking than than perhaps, uh, you know, your retail

494
00:26:29,640 --> 00:26:32,200
Speaker 1: clients or your typical hedge fund is. Does that structure

495
00:26:32,200 --> 00:26:35,160
Speaker 1: of a family office sort of encourage a little bit

496
00:26:35,200 --> 00:26:37,760
Speaker 1: more of an embracing risk. It's a really good question.

497
00:26:37,760 --> 00:26:40,760
Speaker 1: I say, each individual family office is as individual as

498
00:26:40,760 --> 00:26:43,159
Speaker 1: the family members in it. So it's very difficult to

499
00:26:43,200 --> 00:26:45,840
Speaker 1: set to say a trend or kind of any norm

500
00:26:45,880 --> 00:26:49,080
Speaker 1: across family office investors. I would say in general versus

501
00:26:49,119 --> 00:26:52,440
Speaker 1: say institutions, there does tend to be perhaps more risk

502
00:26:52,480 --> 00:26:56,280
Speaker 1: appetite because of the whether it be an entrepreneur that's

503
00:26:56,280 --> 00:26:58,600
Speaker 1: behind the family office that has had an uptid and

504
00:26:58,680 --> 00:27:01,480
Speaker 1: it's successful at taking risk some business. We do see

505
00:27:01,520 --> 00:27:05,480
Speaker 1: more esoteric investment strategies come out of family offices. It

506
00:27:05,520 --> 00:27:08,200
Speaker 1: could be that they're more localized in terms of their investment,

507
00:27:08,240 --> 00:27:11,520
Speaker 1: tend to invest locally. Um, they may be a desire

508
00:27:11,640 --> 00:27:13,920
Speaker 1: to invest more in real estate because that's an area

509
00:27:13,920 --> 00:27:17,439
Speaker 1: that has a lot of familiarity. We might see interest

510
00:27:17,520 --> 00:27:19,600
Speaker 1: in some more off the run type of investments such

511
00:27:19,600 --> 00:27:23,560
Speaker 1: as digital assets, because again there is the discretion that

512
00:27:23,600 --> 00:27:27,080
Speaker 1: they have to not be forced to be index focused.

513
00:27:27,920 --> 00:27:30,960
Speaker 1: Different family offices according to the generational situation, may or

514
00:27:30,960 --> 00:27:33,600
Speaker 1: may not need income. And if they don't need income,

515
00:27:33,640 --> 00:27:35,960
Speaker 1: then they can very much be focused on the long

516
00:27:36,080 --> 00:27:39,040
Speaker 1: term and the absolute return of the portfolio. If there

517
00:27:39,080 --> 00:27:41,960
Speaker 1: is a need to take income, and then we look

518
00:27:42,000 --> 00:27:44,280
Speaker 1: at areas such a private credit that are throwing off

519
00:27:44,320 --> 00:27:46,560
Speaker 1: an income and real estate is great for that as well,

520
00:27:46,600 --> 00:27:49,679
Speaker 1: because there's an inflation linkage built into real estate and

521
00:27:49,760 --> 00:27:52,280
Speaker 1: it throws off for reliable income, and it tends to

522
00:27:52,280 --> 00:27:55,680
Speaker 1: be less less marked to market or less um get

523
00:27:55,720 --> 00:27:59,280
Speaker 1: correlated with public markets. So it's all of those factories

524
00:27:59,320 --> 00:28:01,760
Speaker 1: factor in. Certainly we get some of our most interesting

525
00:28:01,800 --> 00:28:05,040
Speaker 1: inquiries on the family office side as there is that

526
00:28:05,160 --> 00:28:09,240
Speaker 1: just a really broad based, extremely stimulating group um of

527
00:28:09,280 --> 00:28:13,320
Speaker 1: clients that that are are really open to ideas. Yeah,

528
00:28:13,520 --> 00:28:15,520
Speaker 1: that makes a lot of sense. But I wonder do

529
00:28:15,560 --> 00:28:17,760
Speaker 1: you think that trend could you know, sort of pick

530
00:28:17,840 --> 00:28:20,200
Speaker 1: up ag end of hedge funds converting. And I'm thinking

531
00:28:20,400 --> 00:28:22,320
Speaker 1: mainly because of all the you know, there's been so

532
00:28:22,400 --> 00:28:26,320
Speaker 1: much scrutiny from the sort of reddit uh traders of

533
00:28:26,359 --> 00:28:29,359
Speaker 1: the world towards hedge funds and and there's been um,

534
00:28:29,400 --> 00:28:33,280
Speaker 1: you know, new disclosure rules coming up on on shure positions.

535
00:28:33,520 --> 00:28:36,280
Speaker 1: Could that drive a further move into family offices? Do

536
00:28:36,280 --> 00:28:38,560
Speaker 1: you think? Yeah, potentially, I mean there's certainly been a

537
00:28:38,640 --> 00:28:40,800
Speaker 1: nice run. I wouldn't say we've seen the kind of

538
00:28:40,840 --> 00:28:43,840
Speaker 1: the legendary runs that we saw in back in in

539
00:28:44,160 --> 00:28:46,880
Speaker 1: the early two thousands in terms of hedge funds fortunes

540
00:28:46,960 --> 00:28:50,160
Speaker 1: being made. Because equity markets themselves have been so strong,

541
00:28:50,320 --> 00:28:54,200
Speaker 1: hedge funds have actually been laggards, and they've struggle to

542
00:28:54,240 --> 00:28:57,120
Speaker 1: find their place in portfolios. They've struggled to to eke

543
00:28:57,240 --> 00:29:00,120
Speaker 1: to earn their place and really earn their key. We've

544
00:29:00,160 --> 00:29:02,960
Speaker 1: seen hedge funds they only earned their keep when they're

545
00:29:02,960 --> 00:29:05,480
Speaker 1: compared to fixed income returns recently, which would be quite

546
00:29:05,480 --> 00:29:08,000
Speaker 1: a muted rate of return. They certainly haven't held their

547
00:29:08,040 --> 00:29:11,040
Speaker 1: own relative equity markets. That said, in a month like

548
00:29:11,080 --> 00:29:13,960
Speaker 1: we're seeing right now. The word on the street is

549
00:29:14,000 --> 00:29:15,880
Speaker 1: that many hedge funds were short going into some of

550
00:29:15,880 --> 00:29:19,680
Speaker 1: this correction, so they're actually maintaining their their their their

551
00:29:19,800 --> 00:29:23,040
Speaker 1: absolute return near today quite nicely. That they're not actually

552
00:29:23,160 --> 00:29:25,719
Speaker 1: falling along with equity markets. So but that said, as

553
00:29:25,760 --> 00:29:28,240
Speaker 1: far as structurally do we see them closed. There have

554
00:29:28,320 --> 00:29:30,920
Speaker 1: been some black eyes and hedge fund land recently, there

555
00:29:31,000 --> 00:29:36,960
Speaker 1: have equally been some extraordinary gains, and certainly those their

556
00:29:36,960 --> 00:29:39,280
Speaker 1: household names are ASSERTI of the well known names and

557
00:29:39,360 --> 00:29:41,800
Speaker 1: hedge fund land. If they are are well known, it's

558
00:29:41,840 --> 00:29:44,479
Speaker 1: because they've been in the business for decades and they

559
00:29:44,520 --> 00:29:47,960
Speaker 1: have probably survived some pretty tumultuous markets. So that is

560
00:29:47,960 --> 00:29:51,560
Speaker 1: staying power that perhaps a survivorship bias. But those hedge

561
00:29:51,600 --> 00:29:53,920
Speaker 1: funds are here for the long haul. They tend to

562
00:29:53,960 --> 00:29:57,360
Speaker 1: have a sticky kind base. They have perhaps a liquidity

563
00:29:57,400 --> 00:30:00,880
Speaker 1: structure that allows them to invest more long term. They're

564
00:30:00,920 --> 00:30:03,280
Speaker 1: not used as the a t M. They've been a

565
00:30:03,280 --> 00:30:05,880
Speaker 1: lot of lessons learned through the liquidity crisis of OH

566
00:30:05,880 --> 00:30:08,520
Speaker 1: eight in terms of how to set terms of exit

567
00:30:09,040 --> 00:30:11,680
Speaker 1: and the type of capital they want to attract. There's

568
00:30:11,680 --> 00:30:15,000
Speaker 1: been a real focus on diversifying capital basis. So that

569
00:30:15,040 --> 00:30:17,040
Speaker 1: means that they don't see the kind of outflows that

570
00:30:17,080 --> 00:30:20,520
Speaker 1: they might have seen during maybe one consultant when Sarah

571
00:30:20,560 --> 00:30:23,000
Speaker 1: on a hedge fund for example. So a will continue

572
00:30:23,000 --> 00:30:25,040
Speaker 1: to happen, there will be fortunes made that will they

573
00:30:25,040 --> 00:30:28,840
Speaker 1: now will want to consolidate and and not run with

574
00:30:28,880 --> 00:30:31,880
Speaker 1: the strict scrutiny. But if anything, I see more regulatory

575
00:30:32,000 --> 00:30:34,200
Speaker 1: risk on the private market side, because that's perhaps the

576
00:30:34,240 --> 00:30:36,440
Speaker 1: side that has not had the same level of scrutiny,

577
00:30:36,480 --> 00:30:38,360
Speaker 1: whereas hedge funds have have run with that level of

578
00:30:38,400 --> 00:30:43,160
Speaker 1: scrutiny now for for many years. You mentioned digital assets,

579
00:30:43,200 --> 00:30:46,000
Speaker 1: and that's actually something I hear quite frequently in reporting

580
00:30:46,160 --> 00:30:51,720
Speaker 1: on cryptocurrencies that family offices really sort of are interested,

581
00:30:51,880 --> 00:30:54,560
Speaker 1: if not doubling in the space. So I'm wondering what

582
00:30:54,680 --> 00:30:59,160
Speaker 1: you make of the cryptocurrency space because you know, just

583
00:30:59,280 --> 00:31:02,720
Speaker 1: looking at it's that that bitcoins daily moves, for instance,

584
00:31:02,800 --> 00:31:06,800
Speaker 1: on some days, it's actually less volatile than what we

585
00:31:06,840 --> 00:31:08,560
Speaker 1: see in tech for instance. So what do you make

586
00:31:08,560 --> 00:31:10,840
Speaker 1: of what's been going on there? It's really interesting. Our

587
00:31:10,880 --> 00:31:13,360
Speaker 1: position of man Etta on digital assets is that we

588
00:31:13,400 --> 00:31:16,760
Speaker 1: provide education. We don't provide recommendations from a compliance standpoint,

589
00:31:17,160 --> 00:31:20,120
Speaker 1: but we need to educate ourselves and our clients have

590
00:31:20,240 --> 00:31:22,480
Speaker 1: come to us with questions and it is a fast moving,

591
00:31:22,520 --> 00:31:27,120
Speaker 1: dynamic area, so we are embracing that wholeheartedly in terms

592
00:31:27,160 --> 00:31:29,560
Speaker 1: of our mission to get all that learning curve. So

593
00:31:29,600 --> 00:31:32,840
Speaker 1: as far as how do you characterize with any new asset,

594
00:31:32,840 --> 00:31:34,840
Speaker 1: we like to see how do we characterize this? Where

595
00:31:34,840 --> 00:31:37,040
Speaker 1: do we plot it on the risk return spectrum? So

596
00:31:37,080 --> 00:31:38,640
Speaker 1: how can we think about it in terms of how

597
00:31:38,680 --> 00:31:42,160
Speaker 1: it is likely to behave in any market environment and

598
00:31:42,240 --> 00:31:44,560
Speaker 1: ultimately with digital assets and has been a process of

599
00:31:44,600 --> 00:31:48,640
Speaker 1: discovery because is it a substitute for gold? Is it

600
00:31:49,160 --> 00:31:52,440
Speaker 1: a risk a safety asset? Is it a substitute for

601
00:31:52,680 --> 00:31:55,680
Speaker 1: for cash or is it ultimately the highest risk reward

602
00:31:55,720 --> 00:31:57,520
Speaker 1: asset you can put in a portfolio that should be

603
00:31:57,600 --> 00:31:59,960
Speaker 1: right out there with emerging market equities and vegure capital,

604
00:32:00,360 --> 00:32:03,120
Speaker 1: And certainly up to now, given the volatility you've seen

605
00:32:03,680 --> 00:32:07,160
Speaker 1: and the way that some of that's a bitcoin has moved,

606
00:32:07,240 --> 00:32:09,760
Speaker 1: and I put this maybe even prior to the current

607
00:32:09,840 --> 00:32:12,800
Speaker 1: all out of the tech stocks, because there's been a

608
00:32:12,840 --> 00:32:14,760
Speaker 1: couple of, as I said, dramas that have led to

609
00:32:14,840 --> 00:32:17,960
Speaker 1: some isolated tex stop falls. But as far as the

610
00:32:18,000 --> 00:32:21,040
Speaker 1: way bitcoin was looking to us in term and digital

611
00:32:21,040 --> 00:32:24,360
Speaker 1: assets in general, in terms of our process of discovery,

612
00:32:24,560 --> 00:32:27,040
Speaker 1: was that it was seen as being quite highly correlated

613
00:32:27,080 --> 00:32:29,880
Speaker 1: to risk assets, not to be something you would use

614
00:32:29,880 --> 00:32:32,840
Speaker 1: in a portfolio as insurance or a hedge. It would

615
00:32:32,840 --> 00:32:34,880
Speaker 1: be very much something that would be there, almost like

616
00:32:34,920 --> 00:32:37,000
Speaker 1: the kind of the play money, the kind of the

617
00:32:36,880 --> 00:32:39,280
Speaker 1: the gambling segments that you would you would look use

618
00:32:39,400 --> 00:32:41,320
Speaker 1: and do not know how it's likely to behave. It

619
00:32:41,320 --> 00:32:44,840
Speaker 1: certainly wasn't an inflation hedge. It certainly wasn't likely to

620
00:32:44,880 --> 00:32:47,280
Speaker 1: be a hedge in a case of a flight to safety.

621
00:32:47,800 --> 00:32:50,800
Speaker 1: That said, I think there has been perhaps an oversimplification

622
00:32:51,120 --> 00:32:53,840
Speaker 1: of digital assets and looking at say bitcoin as a

623
00:32:53,840 --> 00:32:56,200
Speaker 1: proxy for all of them. But if we break apart

624
00:32:56,360 --> 00:32:59,720
Speaker 1: n f t s and look at has say ultimately

625
00:32:59,800 --> 00:33:02,680
Speaker 1: some n f t s could behave in a portfolio,

626
00:33:03,080 --> 00:33:06,920
Speaker 1: They could have their own stream of cash, a royalty

627
00:33:06,960 --> 00:33:09,360
Speaker 1: stream that would attach to them, and that would look

628
00:33:09,440 --> 00:33:12,920
Speaker 1: then like simply any other asset that has a contractual

629
00:33:12,960 --> 00:33:17,520
Speaker 1: cash flow. So we've seen pharmaceutical royalties, film royalties, music

630
00:33:17,600 --> 00:33:21,840
Speaker 1: royalties all sit alongside private credit as being nice sources

631
00:33:21,840 --> 00:33:24,840
Speaker 1: of cash that are not necessarily related to my equity

632
00:33:24,880 --> 00:33:28,320
Speaker 1: market movements. We've seen in the past collectibles like art

633
00:33:28,880 --> 00:33:31,520
Speaker 1: be thrown into portfolio and expected to be kind of

634
00:33:31,560 --> 00:33:34,920
Speaker 1: an alternative alternative or alternative square. They used to be

635
00:33:34,920 --> 00:33:37,800
Speaker 1: called back I think in the early two thousands because

636
00:33:38,240 --> 00:33:40,920
Speaker 1: it was a diversifier, but wasn't really known how that

637
00:33:40,920 --> 00:33:44,480
Speaker 1: would behave. So digital assets are probably in that category,

638
00:33:44,840 --> 00:33:46,560
Speaker 1: but we are definitely as I said that the name

639
00:33:46,560 --> 00:33:50,120
Speaker 1: of the game is discovery right now. Yeah, I think

640
00:33:50,160 --> 00:33:53,040
Speaker 1: that's an important distinction to make about n f t

641
00:33:53,200 --> 00:33:55,120
Speaker 1: s that not a lot of the sort of outsiders

642
00:33:55,120 --> 00:33:57,440
Speaker 1: of the space don't really appreciate that sort of income

643
00:33:57,480 --> 00:34:01,360
Speaker 1: producing yield generating UM potential. You know, they're not all

644
00:34:01,440 --> 00:34:05,479
Speaker 1: just pictures of cartoon apes, smoking cigarettes and stuff like that.

645
00:34:21,320 --> 00:34:22,879
Speaker 1: If you one more thing before we get to our

646
00:34:22,880 --> 00:34:25,759
Speaker 1: crazy things, I wanted to UM. I know you've given

647
00:34:25,800 --> 00:34:29,680
Speaker 1: some thought to the notion of the end of globalization.

648
00:34:29,840 --> 00:34:33,239
Speaker 1: Were the deterioration of of globalization? We've talked a lot

649
00:34:33,280 --> 00:34:35,680
Speaker 1: about it on the podcast. How do you see that

650
00:34:35,760 --> 00:34:39,920
Speaker 1: playing out, UM, and what effects on the market do

651
00:34:39,960 --> 00:34:42,799
Speaker 1: you think it will have. Some of the shocking news

652
00:34:42,800 --> 00:34:46,040
Speaker 1: this week, obviously, was Russia turning off the gas supplies

653
00:34:46,080 --> 00:34:50,160
Speaker 1: to Poland and Bulgaria. I believe the EU pushing back

654
00:34:50,480 --> 00:34:52,800
Speaker 1: UH and saying no, we we do not want anyone

655
00:34:52,920 --> 00:34:57,399
Speaker 1: paying for Russian energy and rubles. UM. It seems every

656
00:34:57,440 --> 00:35:00,600
Speaker 1: day we're you know, the sort of old new world

657
00:35:00,760 --> 00:35:04,000
Speaker 1: order of globalization is breaking apart before our eyes. I mean,

658
00:35:04,080 --> 00:35:07,319
Speaker 1: is that too pessimistic do you think? Or is that

659
00:35:07,400 --> 00:35:10,319
Speaker 1: the right way to read it at this point? You know,

660
00:35:10,360 --> 00:35:12,640
Speaker 1: and against reading what how does that all play out

661
00:35:12,680 --> 00:35:15,080
Speaker 1: the markets? It's a really interesting question. I think we

662
00:35:15,160 --> 00:35:18,640
Speaker 1: are guilty of some oversimplification when we suggest that the

663
00:35:18,719 --> 00:35:22,280
Speaker 1: Russia evading Ukraine, which is the latest of its certainly

664
00:35:22,320 --> 00:35:26,240
Speaker 1: it's land grab elsewhere. Is the end of globalization. Certainly

665
00:35:26,280 --> 00:35:30,480
Speaker 1: it underscores the dangers of interdependencies. But what we saw,

666
00:35:30,520 --> 00:35:33,120
Speaker 1: and I think it was somewhat almost irresponsible to suggest

667
00:35:33,160 --> 00:35:36,000
Speaker 1: that this is the end of globalization because that same week,

668
00:35:36,080 --> 00:35:38,799
Speaker 1: but in fact happened was that President Biden had gone

669
00:35:38,800 --> 00:35:41,720
Speaker 1: to Europe and committed to providing natural gas liquid natural

670
00:35:41,719 --> 00:35:43,960
Speaker 1: gas to Europe from the US. I don't see how

671
00:35:44,000 --> 00:35:46,360
Speaker 1: that signals the end of globalization. That to me is

672
00:35:46,400 --> 00:35:52,400
Speaker 1: just a reorganization of relationships, and ultimately it just resetting

673
00:35:52,800 --> 00:35:55,759
Speaker 1: of some of this some of these these arrangements. So yes,

674
00:35:55,800 --> 00:35:58,200
Speaker 1: we certainly have seen a wave of protectionism that has

675
00:35:58,239 --> 00:36:01,560
Speaker 1: been a global phenomenon for some time. With the supply

676
00:36:01,680 --> 00:36:05,040
Speaker 1: chain constraints that we saw during COVID, we saw the

677
00:36:05,080 --> 00:36:09,680
Speaker 1: benefit of supplying locally and having a less complex supply chain.

678
00:36:10,120 --> 00:36:12,799
Speaker 1: But that's said, many of these bottlenecks have been eat

679
00:36:12,960 --> 00:36:17,640
Speaker 1: now and ultimately, especially if there is pricing pressure and

680
00:36:17,640 --> 00:36:20,960
Speaker 1: and we're seeing that companies are seeing margin margins shrinkage,

681
00:36:21,200 --> 00:36:23,600
Speaker 1: they are going to continue to try to outsource. They

682
00:36:23,600 --> 00:36:27,120
Speaker 1: will not be on shoring facilities if they can still

683
00:36:27,560 --> 00:36:30,480
Speaker 1: ensure that their margin is protected. But through offshoring, you

684
00:36:30,520 --> 00:36:33,920
Speaker 1: do make a very different, interesting and important point, though,

685
00:36:33,960 --> 00:36:37,680
Speaker 1: which is around the the moral implications of some of

686
00:36:37,760 --> 00:36:43,040
Speaker 1: the globalization that we've seen, the very swift multilateral adoption

687
00:36:43,040 --> 00:36:46,480
Speaker 1: of sanctions against Russia. Thought that there was certainly a

688
00:36:46,520 --> 00:36:50,080
Speaker 1: concept of what when does something become uninvestible? When does

689
00:36:50,080 --> 00:36:53,840
Speaker 1: a risk become intolerable? When are we prepared to divest

690
00:36:54,120 --> 00:36:57,360
Speaker 1: entirely from a country stocks because we kind of tolerate

691
00:36:57,640 --> 00:37:00,479
Speaker 1: what's going on in the geopolitical stage. If we take

692
00:37:00,520 --> 00:37:03,319
Speaker 1: that kind of a lens, the e s G lens too,

693
00:37:04,120 --> 00:37:07,160
Speaker 1: And I think if things say employee rights or corporate governance,

694
00:37:07,160 --> 00:37:10,560
Speaker 1: a rule of law, or treatment of minorities, if we

695
00:37:10,719 --> 00:37:13,799
Speaker 1: ethic minorities, if we do take that lens to all

696
00:37:13,840 --> 00:37:16,520
Speaker 1: of our emerging market investments, we might find that many

697
00:37:16,560 --> 00:37:20,319
Speaker 1: of our emerging market become uninvestable as a result. So

698
00:37:20,440 --> 00:37:23,520
Speaker 1: not only does this have implications for how a company

699
00:37:23,920 --> 00:37:26,480
Speaker 1: sets up a supply chain, it will have implications for

700
00:37:26,480 --> 00:37:29,560
Speaker 1: how an investor decides to invest. I think that lens

701
00:37:29,600 --> 00:37:34,600
Speaker 1: will ultimately mean rising standards everywhere. Just as the movement

702
00:37:34,680 --> 00:37:38,239
Speaker 1: towards the energy transition, it is quickly realized that there's

703
00:37:38,239 --> 00:37:42,040
Speaker 1: no point in pursuing this simply among the first world countries,

704
00:37:42,120 --> 00:37:44,319
Speaker 1: that this is only meaningful and we can only get

705
00:37:44,360 --> 00:37:48,040
Speaker 1: to the climate change goals that we are seeking if

706
00:37:48,080 --> 00:37:50,960
Speaker 1: we apply this across the world in a in a

707
00:37:51,000 --> 00:37:53,520
Speaker 1: way that is that it is equitable that we we

708
00:37:53,520 --> 00:37:56,960
Speaker 1: we need to assist emerging markets to get on this

709
00:37:57,040 --> 00:38:00,200
Speaker 1: climate transition path as well. So I think out that

710
00:38:00,200 --> 00:38:04,120
Speaker 1: we've seen this, we are looking globally everything. It only

711
00:38:04,160 --> 00:38:06,560
Speaker 1: matters if we look globally, and so I don't think

712
00:38:06,560 --> 00:38:08,719
Speaker 1: we're the end of globalization. Perhaps is a different form

713
00:38:08,760 --> 00:38:16,080
Speaker 1: of globalization though. That's pretty good. Good answer, more hopeful, hopeful. Yeah,

714
00:38:16,200 --> 00:38:18,840
Speaker 1: I always like it when people pull me out of

715
00:38:18,880 --> 00:38:22,239
Speaker 1: my pessimistic doom and gloom mood and and have me

716
00:38:22,600 --> 00:38:25,120
Speaker 1: more hopeful than I started. So thank you for that.

717
00:38:25,640 --> 00:38:27,520
Speaker 1: But with that said, I think it's time for our

718
00:38:27,560 --> 00:38:32,880
Speaker 1: Crazy Things of the Week. Vil Donna. I heard you

719
00:38:32,880 --> 00:38:34,960
Speaker 1: say before the podcast, you don't do not have a

720
00:38:35,000 --> 00:38:37,719
Speaker 1: washing machine in your apartment there in New York, so

721
00:38:37,920 --> 00:38:40,880
Speaker 1: wish it's like my greatest wish. So I've got a

722
00:38:40,920 --> 00:38:45,359
Speaker 1: washing machine themed crazy thing of the Week. But first

723
00:38:45,440 --> 00:38:48,000
Speaker 1: let's hear yours I can't wait to hear yourself really like,

724
00:38:48,560 --> 00:38:50,400
Speaker 1: it's my greatest wish to have a washing machine. I

725
00:38:50,400 --> 00:38:54,200
Speaker 1: think all New York City. Uh, anybody who lives in

726
00:38:54,239 --> 00:38:57,320
Speaker 1: New York City can can commiserate with me. But I'm

727
00:38:57,360 --> 00:39:00,879
Speaker 1: I'm going back to the cryptocurrency space. Uh. There's a

728
00:39:00,920 --> 00:39:03,800
Speaker 1: lot of crazy stuff this week, but um, something that

729
00:39:03,880 --> 00:39:06,960
Speaker 1: caught myra was the Fidelity said they're going to soon

730
00:39:07,000 --> 00:39:11,239
Speaker 1: allow up for one key participants therefore one key participants

731
00:39:11,280 --> 00:39:14,960
Speaker 1: to put a portion of their savings into bitcoin, and

732
00:39:15,000 --> 00:39:17,600
Speaker 1: employers that decide to offer the option, they'll be able

733
00:39:17,640 --> 00:39:20,120
Speaker 1: to choose what percentage and employee's account can be directed

734
00:39:20,120 --> 00:39:24,279
Speaker 1: into crypto. But there's a cap of so this was

735
00:39:24,360 --> 00:39:28,280
Speaker 1: huge in crypto. It was all over Twitter. I I agree.

736
00:39:28,360 --> 00:39:31,320
Speaker 1: I think that is it is pretty um pretty amazing.

737
00:39:31,360 --> 00:39:34,560
Speaker 1: I mean Fidelity has kind of been, uh getting more

738
00:39:34,560 --> 00:39:37,439
Speaker 1: and more crypto friendly over over the years, but sort

739
00:39:37,480 --> 00:39:40,080
Speaker 1: of a real contrast of Vanguard, where they're they're still

740
00:39:40,120 --> 00:39:42,319
Speaker 1: like to forget it, We're not down anywhere near it.

741
00:39:42,360 --> 00:39:44,840
Speaker 1: But uh so it's interesting. A lit'll be interesting to

742
00:39:44,840 --> 00:39:47,160
Speaker 1: see if that it may actually help them gather assets

743
00:39:47,200 --> 00:39:51,040
Speaker 1: that you know, it won't all be in crypto. But well,

744
00:39:51,120 --> 00:39:54,239
Speaker 1: you know, people who want that exposure is interesting thing

745
00:39:54,280 --> 00:39:56,720
Speaker 1: to watch. How about you if you see anything crazy

746
00:39:56,800 --> 00:39:59,440
Speaker 1: this week, well I'd say more this this past few

747
00:39:59,440 --> 00:40:02,320
Speaker 1: weeks what I've been You know, we've certainly now stopped

748
00:40:02,320 --> 00:40:05,840
Speaker 1: speaking about this inverted deal curve as a harbinder recession.

749
00:40:06,400 --> 00:40:09,520
Speaker 1: I was kind of quite tired of that, um you've

750
00:40:09,520 --> 00:40:11,359
Speaker 1: been said, almost like a voodoo that this that this

751
00:40:11,400 --> 00:40:13,440
Speaker 1: has happened. It happened intra day and all of a

752
00:40:13,480 --> 00:40:16,839
Speaker 1: sudden markets were jumping on the recession bandwagon. Clearly there

753
00:40:16,840 --> 00:40:19,200
Speaker 1: were so many other reasons for that meal curve to behave,

754
00:40:19,239 --> 00:40:21,400
Speaker 1: as it did question whether we're even looking at the

755
00:40:21,440 --> 00:40:23,760
Speaker 1: correcteal curve. They were looking at the two year tenure

756
00:40:24,080 --> 00:40:26,080
Speaker 1: when in fact maybe a three year tenure or even

757
00:40:26,080 --> 00:40:29,120
Speaker 1: a different um set of a set of comparisons would

758
00:40:29,120 --> 00:40:31,920
Speaker 1: have been more appropriate. And the idea that this can

759
00:40:31,960 --> 00:40:35,880
Speaker 1: be a hard harbinger of recession anywhere from six thirty

760
00:40:35,920 --> 00:40:38,839
Speaker 1: six months, as I just think as an indicator, this

761
00:40:38,920 --> 00:40:42,760
Speaker 1: is essentially meaningless. So a lot of newsprint was wasted

762
00:40:43,120 --> 00:40:45,839
Speaker 1: on that particular topic, which I just find is really

763
00:40:45,920 --> 00:40:49,080
Speaker 1: missing again and oversimplification and missing a lot of nuance,

764
00:40:50,040 --> 00:40:53,080
Speaker 1: and it was steepening again before the inquisit even tried

765
00:40:53,160 --> 00:40:58,520
Speaker 1: on on any of those takes. Yeah, I get what

766
00:40:58,560 --> 00:41:02,040
Speaker 1: you're saying to me. Bigger harbinger of recession was a

767
00:41:02,080 --> 00:41:04,239
Speaker 1: hundred and thirty dollar oil You know, I don't. I

768
00:41:04,239 --> 00:41:07,520
Speaker 1: don't see how the the global economy could have withstood that.

769
00:41:07,600 --> 00:41:09,160
Speaker 1: So to see that come off the boil too, I

770
00:41:09,200 --> 00:41:13,080
Speaker 1: think is UH is good um for for the economic outlook.

771
00:41:13,320 --> 00:41:15,319
Speaker 1: Um all right, well do I'll get get to the

772
00:41:15,320 --> 00:41:18,880
Speaker 1: washing machines. I will say, I find it's humorous that

773
00:41:18,960 --> 00:41:22,120
Speaker 1: you hipster's in the city, all crable. What you know,

774
00:41:22,160 --> 00:41:24,680
Speaker 1: all you people who make fun of us suburban dwelling,

775
00:41:26,400 --> 00:41:30,239
Speaker 1: boring family people. I've got a washing machine. Build on it.

776
00:41:30,320 --> 00:41:33,719
Speaker 1: You probably. I've got a dryer. I've got a dishwasher.

777
00:41:33,880 --> 00:41:36,799
Speaker 1: Come to the suburbs. We've got it all. We've got

778
00:41:36,840 --> 00:41:42,360
Speaker 1: it all. So this came from UH. I believe it

779
00:41:42,440 --> 00:41:46,279
Speaker 1: is the earnings call for the Dutch company a s

780
00:41:46,480 --> 00:41:51,120
Speaker 1: m L. They're big company that makes UH manufacturing equipment

781
00:41:51,239 --> 00:41:56,040
Speaker 1: for the semiconductor industry, and the CEO related an anecdote

782
00:41:56,120 --> 00:41:59,719
Speaker 1: on the call. He said, UH he was talking to

783
00:41:59,760 --> 00:42:02,920
Speaker 1: the another CEO of only the way he described it

784
00:42:02,960 --> 00:42:06,000
Speaker 1: was a big industrial conglomerate. He wouldn't say who the

785
00:42:06,040 --> 00:42:08,960
Speaker 1: person was or what company, but he said this person

786
00:42:09,719 --> 00:42:12,920
Speaker 1: told him that the company has resorted to buying washing

787
00:42:12,960 --> 00:42:18,520
Speaker 1: machines and tearing out the semiconductors inside of them to

788
00:42:18,760 --> 00:42:21,840
Speaker 1: use in the manufacturing of their own devices. Again, we

789
00:42:21,840 --> 00:42:24,320
Speaker 1: don't know what devices they're manufacturing. There's a lot of

790
00:42:24,360 --> 00:42:27,759
Speaker 1: skepticism on Twitter about about whether or not this guy

791
00:42:27,840 --> 00:42:30,960
Speaker 1: is sort of spending a yarn here with this story. Um,

792
00:42:31,040 --> 00:42:33,440
Speaker 1: but it goes to show like how how bad that

793
00:42:33,520 --> 00:42:38,520
Speaker 1: semiconductor trunch is. Um, if people are even floating the

794
00:42:38,560 --> 00:42:42,160
Speaker 1: anecdote of someone going and buying up washing machines to

795
00:42:42,239 --> 00:42:44,640
Speaker 1: rip out the semiconductors for all thing, who knew washing

796
00:42:44,640 --> 00:42:47,799
Speaker 1: machines even had computer chip chips in them. I guess

797
00:42:47,800 --> 00:42:50,680
Speaker 1: every every appliance these days does probably probably my air

798
00:42:50,719 --> 00:42:53,719
Speaker 1: fryer and toaster ub and have have chips in them.

799
00:42:53,920 --> 00:42:56,399
Speaker 1: They all sing those the song at the end when

800
00:42:56,440 --> 00:43:00,520
Speaker 1: when when it's finished talking about like my my dish,

801
00:43:00,600 --> 00:43:06,239
Speaker 1: my dishwashers. Yeah right right. It trives you not if

802
00:43:06,239 --> 00:43:08,560
Speaker 1: you leave leave the door on it open, that sort

803
00:43:08,600 --> 00:43:11,759
Speaker 1: of thing. Yeah, exactly. But I know you're wondering, how

804
00:43:11,800 --> 00:43:16,359
Speaker 1: could I turn this crazy thing into a Price's right competition?

805
00:43:16,760 --> 00:43:20,000
Speaker 1: And I found the way. I found the way. Great

806
00:43:20,040 --> 00:43:25,680
Speaker 1: little factoid in that story, uh, is that Susquehanna Financial Group.

807
00:43:25,719 --> 00:43:28,160
Speaker 1: You know you're very familiar with them, Big Options House,

808
00:43:28,200 --> 00:43:32,000
Speaker 1: but you know obviously other business lines as well. They

809
00:43:32,040 --> 00:43:36,120
Speaker 1: actually maintain a data series that tracks the weight time

810
00:43:36,440 --> 00:43:40,680
Speaker 1: for semiconductor deliveries, so the time it takes between when

811
00:43:40,680 --> 00:43:43,839
Speaker 1: you order a semiconductor and when you actually receive it.

812
00:43:44,600 --> 00:43:49,200
Speaker 1: So the Prices Right competition this week is what do

813
00:43:49,239 --> 00:43:53,080
Speaker 1: you think the current weight time for semiconductors is? I

814
00:43:53,080 --> 00:43:55,279
Speaker 1: will say it's at a record high obviously, and it

815
00:43:55,360 --> 00:43:57,600
Speaker 1: keeps getting higher and higher. But what do you think

816
00:43:57,640 --> 00:44:01,480
Speaker 1: it is? The according to Susquehana and their methodology for

817
00:44:01,560 --> 00:44:03,840
Speaker 1: doing this. You know again, I'm sure it depends on

818
00:44:03,880 --> 00:44:06,480
Speaker 1: what you're buying and how big of a buyer you are,

819
00:44:06,560 --> 00:44:09,359
Speaker 1: but the way they index this, what do you think

820
00:44:09,400 --> 00:44:12,080
Speaker 1: the average weight time is for a computer chip? Can

821
00:44:12,120 --> 00:44:15,239
Speaker 1: I go with twenty six weeks? How you read the story?

822
00:44:15,239 --> 00:44:20,120
Speaker 1: Didn't you know? I didn't know? I didn't, I promise, Shoot,

823
00:44:20,719 --> 00:44:22,640
Speaker 1: I just gave it away, gave it away. I did

824
00:44:22,680 --> 00:44:25,280
Speaker 1: not read the Story'll tell you this, it's not exactly

825
00:44:25,320 --> 00:44:27,960
Speaker 1: twenty six weeks. So if you can go over or

826
00:44:28,239 --> 00:44:30,960
Speaker 1: under on twenty six weeks, I was gonna go with

827
00:44:31,080 --> 00:44:33,680
Speaker 1: nine months. I guess like a human gestation period, forty

828
00:44:33,719 --> 00:44:41,959
Speaker 1: weekst station and now it's it's it takes as long

829
00:44:42,440 --> 00:44:44,239
Speaker 1: to get a computer chip as it does have a

830
00:44:44,920 --> 00:44:48,440
Speaker 1: twenty six point six weeks. I can't believe you've nailed that, Valdana,

831
00:44:48,800 --> 00:44:50,759
Speaker 1: and I can't believe I gave I gave up my

832
00:44:50,840 --> 00:44:53,800
Speaker 1: poker face by I can't believe you gave up so easily.

833
00:44:53,800 --> 00:44:56,399
Speaker 1: I listened to a lot of podcasts about the supply chain,

834
00:44:56,480 --> 00:44:58,839
Speaker 1: so it was a good guess. But that's pretty good.

835
00:44:58,880 --> 00:45:01,280
Speaker 1: I can't believe how easily you gave up twenty six

836
00:45:01,480 --> 00:45:04,440
Speaker 1: and a half weeks exactly half year, two fiscal quarters.

837
00:45:04,480 --> 00:45:07,360
Speaker 1: I don't know if that's coincidence or not, but pretty

838
00:45:07,400 --> 00:45:11,360
Speaker 1: pretty interesting anyway. Wow, I've impressed Feldada for once. You

839
00:45:11,520 --> 00:45:14,520
Speaker 1: for once, You've impressed me. Yes, I think this is

840
00:45:14,560 --> 00:45:18,239
Speaker 1: the first time I've ever actually guessed correctly. I will

841
00:45:18,280 --> 00:45:20,880
Speaker 1: not be even though you want to replace me with Romayne.

842
00:45:20,920 --> 00:45:24,680
Speaker 1: I will not be planning a replacement for you. I

843
00:45:24,719 --> 00:45:28,640
Speaker 1: appreciate it. Well, that said, I think that is all

844
00:45:28,680 --> 00:45:31,279
Speaker 1: our time for the week. If he's so great to

845
00:45:31,320 --> 00:45:33,920
Speaker 1: get your insights. UH, really appreciate your time, and I

846
00:45:33,920 --> 00:45:35,640
Speaker 1: hope we can get you back again sometimes than I

847
00:45:35,680 --> 00:45:47,239
Speaker 1: really enjoyed it too. Thanks for joining us What Goes Up.

848
00:45:47,280 --> 00:45:49,640
Speaker 1: We'll be back next week. Until then, you can find

849
00:45:49,680 --> 00:45:52,880
Speaker 1: us on the Bloomberg Terminal website and app, or wherever

850
00:45:52,920 --> 00:45:55,600
Speaker 1: you get your podcasts. We'd love it if you took

851
00:45:55,600 --> 00:45:57,920
Speaker 1: the time to rate and review the show on Apple

852
00:45:58,000 --> 00:46:01,120
Speaker 1: Podcasts so more listeners can find us. I think you

853
00:46:01,120 --> 00:46:04,800
Speaker 1: can find us on Twitter, follow me at Reaganonymous Wildona

854
00:46:04,880 --> 00:46:08,640
Speaker 1: Hierrich is at Bildonna Hirich. You can also follow Bloomberg

855
00:46:08,640 --> 00:46:13,319
Speaker 1: Podcasts at Podcasts. What Goes Up is produced by Stacy Wong.

856
00:46:14,040 --> 00:46:17,440
Speaker 1: The head of Bloomberg podcast is Francesco Levie. Thanks for listening.

857
00:46:17,440 --> 00:46:22,320
Speaker 1: To see you next time. Thank