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Speaker 1: This is Bloomberg Business Wait inside from the reporters and

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Speaker 1: editors who bring you America's most trusted business magazine, plus

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Speaker 1: global business finance and tech news. The Bloomberg Business Week

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Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

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Speaker 2: All Right, everybody, China you know has long been at

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Speaker 2: the heart of Apple supply chain, about eighty percent of

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Speaker 2: the company's manufacturing partners holding a footprint in that country. Now,

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Speaker 2: as US and China Relations Hour, which is something we're

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Speaker 2: going to talk about a little bit later on, new

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Speaker 2: production sites are changing the way Apple's devices are made.

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Speaker 2: And this is according to today's Bloomberg Big Take, this

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Speaker 2: is a story deemed a priority by the Bloomberg editorial team.

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Speaker 2: It's a must read, basically.

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Speaker 3: Jess Meantime, speaking of Apple devices, the company is working

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Speaker 3: on a revamped iPad pro for next year. This would

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Speaker 3: be its first major overhaul in a half decade. Carol,

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Speaker 3: it can't come soon enough after sales slipped to its

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Speaker 3: lowest level since the cusp of the pandemic this past quarter.

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Speaker 2: All right, there's a lot going on, so let's get

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Speaker 2: to it. Today's Apple Round Up back with us as

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Speaker 2: our own Mark German. He's chief technology correspondent here at

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Speaker 2: Bloomberg News. As you know, he said, go do for

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Speaker 2: all of us on everything to do with Apple. He

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Speaker 2: joins us once again on Zoom from Los Angeles. Mark,

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Speaker 2: great to have you back with us. We do want

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Speaker 2: to start a big picture, if we may, about Apple's

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Speaker 2: massive supply chain, so much of it's still in China,

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Speaker 2: that seems to be changing, but very slowly. Give us

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Speaker 2: a little perspective here.

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Speaker 4: Yeah, Carol, thank you so much. I'm very happy to

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Speaker 4: be back. So the Apple supply chain, the modern supply chain,

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Speaker 4: i should say, set up about two decades go by

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Speaker 4: Tim Cook. The idea was to build all the products

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Speaker 4: through a company called fox Con in China, have the

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Speaker 4: manufactured there at scale, at speed, with precision, and then

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Speaker 4: shipped globally. Right. But over the last decade or so,

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Speaker 4: we've seen some changes there. They've added additional manufacturing partners,

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Speaker 4: companies like Quanta Computing, companies like Jabble, companies like Pegatron

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Speaker 4: and Tata, and now you're seeing them retain their Chinese

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Speaker 4: base of manufacturing. All those companies still build products for

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Speaker 4: Apple in mainland China, but in terms of growth in

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Speaker 4: terms of expansion of supply chain that's happening external to China.

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Speaker 4: So you're seeing new sites in places like Thailand, India, Vietnam,

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Speaker 4: and Malaysia, right those four countries, but with the majority

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Speaker 4: share of that expansion happening particularly in India, and then

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Speaker 4: Vietnam is a close second, Malaysia third, and Thailand fourth.

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Speaker 3: So when you're looking at that expansion in those particular

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Speaker 3: areas that you were just talking about, how does that

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Speaker 3: translate financially for Apple?

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Speaker 4: Well, India is a big example of how it translates financially.

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Speaker 4: India and their Prime Minister, you know Modi there, they've

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Speaker 4: implemented terif related rules and fines that if you produce

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Speaker 4: products externally to India and then import them into the country,

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Speaker 4: there's really high import taxes. So what Apple had to

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Speaker 4: do from a financial perspective is build new sites in

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Speaker 4: India to produce versions of the iPhone for sale to

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Speaker 4: save on those taxes.

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Speaker 2: Do other countries want Apple? I feel like it's a

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Speaker 2: stupid question mark, but I mean I would assume everybody's

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Speaker 2: buying to be like here, co produce manufacturer, you know here?

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Speaker 2: Is that the case?

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Speaker 4: I mean every country you can name up to the

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Speaker 4: United States is throwing as many incentives at Apple and

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Speaker 4: these other technology companies chip companies in order to get

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Speaker 4: them to produce products in their respective countries and cities. Obviously,

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Speaker 4: anytime Apple comes into your city, it's an economic you know,

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Speaker 4: boom for the area. You're talking about much more employment,

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Speaker 4: much more spending. So it is a positive and that's

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Speaker 4: why those incentives exist. Now, speaking of the US, I

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Speaker 4: will add you know, Apple doesn't do anything other than

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Speaker 4: token manufacturing at a city in a small part in Austin,

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Speaker 4: Texas for one mac. So I really count that as

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Speaker 4: basically no production in the US and not being facetious.

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Speaker 4: But what they will be doing is they will be

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Speaker 4: working with TSMC to produce a very small number of

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Speaker 4: chips at a plan in Arizona, starting some time at

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Speaker 4: the tail end of next year.

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Speaker 2: Well what I want to know though, is like I've

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Speaker 2: bought an Apple product. My husband and I and I

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Speaker 2: just I think over the years and we have been

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Speaker 2: fascinating just kind of tracking it through the supply chain

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Speaker 2: and knowing when it's on our shores on the West coast.

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Speaker 2: I mean, it's just such an incredibly efficient supply chain,

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Speaker 2: and I do wonder will that efficiency potentially change over time,

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Speaker 2: and then will it also maybe cost me more for

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Speaker 2: an Apple device.

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Speaker 4: I think the answer is no on both. They've been

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Speaker 4: shipping products from Vietnam and Malaysia and Thailand for a

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Speaker 4: couple of years now, and there really hasn't been any

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Speaker 4: hiccups that I think the consumer has noticed, either on

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Speaker 4: a pricing perspective, but also on shipment times. If you

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Speaker 4: think about the releases, where the timing really matters for

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Speaker 4: when you receive the product. That's really when a new

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Speaker 4: product goes on sale, particularly the iPhone, and the first

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Speaker 4: round of iPhones are still shipped from China, so you're

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Speaker 4: not going to see any hiccups there. In all likelihood,

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Speaker 4: there have been some changes on pricing. There are going

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Speaker 4: to be a few tweaks of pricing in some countries

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Speaker 4: on the new iPhones being announced on September twelfth. They

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Speaker 4: should also go in sale September twenty second, by the way,

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Speaker 4: but I don't think those are production related. I think

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Speaker 4: those are parts related, and obviously inflation and the current

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Speaker 4: state of the economy globally, so I don't I wouldn't

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Speaker 4: put two and two together personally, do you think.

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Speaker 3: This would have happened without the US China tensions that

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Speaker 3: are currently going on.

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Speaker 4: I think that what really got the ball rolling on

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Speaker 4: opening new sites outside of China was the Donald Trump

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Speaker 4: tariffs that were a key a key issue in twenty

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Speaker 4: seventeen to twenty nineteen, right. Those really scared Apple and

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Speaker 4: made them start investigating how they can push some of

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Speaker 4: that supply chain outside of China. Quite frankly, it shouldn't

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Speaker 4: have taken Trump to get Apple to think outside of China,

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Speaker 4: but that's what really did it, and I think that

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Speaker 4: acceleration has been caused by those tensions. I think something

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Speaker 4: that people don't talk about enough, to be honest with you,

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Speaker 4: is TSMC and the impact of production there. So TSMC

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Speaker 4: they manufacture all of Apple's modern chips that go into

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Speaker 4: all their products. They're based in Taiwan, so you're seeing

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Speaker 4: a lot of production happening there. I'm no geopolitical expert,

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Speaker 4: but I think you know, Taiwan is probably a major

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Speaker 4: risk point for Apple, and if the Taiwan factory goes down,

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Speaker 4: I mean, I'm told it can take even up to

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Speaker 4: north of the year for Apple and TSMC to build

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Speaker 4: up a site at that same capacity elsewhere.

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Speaker 2: I love that you went there, because did you see

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Speaker 2: the story on the Bloomberg about the Fox Colon Technology

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Speaker 2: Group founder. I guess he's running for Ago and basically said,

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Speaker 2: you know that he's safe because he because of how

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Speaker 2: much did they play into Apple supply chain, and basically

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Speaker 2: also how much I guess Chinese either pension fund are

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Speaker 2: so on and so forth invest in it that Beijing

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Speaker 2: isn't going to want to play around with them. And

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Speaker 2: I wonder if that's the same story for TSMC well.

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Speaker 4: I think that's the same logic that applies to Apple.

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Speaker 4: I think it's the same logic that applies to CSMC.

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Speaker 4: But it's only logical until it's not until something changes

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Speaker 4: in the world and the global economy and these geopolitical tensions,

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Speaker 4: then it's fine. But when something changes, then it's a

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Speaker 4: nightmare and it's the end of the world for them.

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Speaker 4: And the question is is there that plan be in

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Speaker 4: place in order to mitigate that damage. And I think

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Speaker 4: what Apple's trying to do to mitigate that is opening

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Speaker 4: up these production lines outside of China, and I think

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Speaker 4: if you look ten years down the road, it's very

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Speaker 4: possible that the majority of the Apple supply chain will

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Speaker 4: be outside of China, but it's going to take a

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Speaker 4: long time. It's been moving very slow. It's been more

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Speaker 4: of an augmentation outside of China rather than a replacement

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Speaker 4: at this point.

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Speaker 2: Great perspective.

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Speaker 3: I want to switch gears real quickly and ask you

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Speaker 3: about the iPad pro. What do we know so far

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Speaker 3: about what could be coming for next year?

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Speaker 4: So it'll be a redesigned ipet pro next year with

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Speaker 4: an M three chip. Speaking of TSMC, that's going to

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Speaker 4: be their next generation three and nanimeter processor designed by Apple.

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Speaker 4: You're going to see OLED displays. So now the iPad

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Speaker 4: will be using the same screen technology as the iPhone.

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Speaker 4: Remember when Apple shifted to old in twenty seventeen with

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Speaker 4: the iPhone ten. You're gonna get that same new screen technology.

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Speaker 4: It looks so much better these days. Everyone's used to

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Speaker 4: old on their phone, so they don't really know the difference.

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Speaker 4: But next time you see an iPad from today, hold

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Speaker 4: up an old iPhone next to an lcdipad and you'll

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Speaker 4: see the difference. You're also going to see that new

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Speaker 4: design I mentioned improved cameras slightly larger display on the

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Speaker 4: top end model. So I think it's going to overall

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Speaker 4: be a very compelling new product. First redesign to the

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Speaker 4: iPad pro since the tail end of twenty eighteen, as.

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Speaker 2: Well, Magic keyboard twenty seconds, imagineboard.

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Speaker 4: That's right, I forgot about that new function row at

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Speaker 4: the top, larger trackpad, make it a little bit more laptop.

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Speaker 4: Likely costs, yeah, probably between three hundred and fifty and

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Speaker 4: four hundred dollars.

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Speaker 2: Okay, it's an important device to Apple.

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Speaker 5: Quickly.

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Speaker 4: It used to be more important. Now it's sort of lagging,

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Speaker 4: and it's really important for Apple to make it important again.

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Speaker 4: I think they'll get it done.

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Speaker 2: I say, we use our iPads still a lot, along

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Speaker 2: with everything else Apple in our world. Mark German, thank

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Speaker 2: you that big perspective. I think so important to understanding

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Speaker 2: this company and just the world, and great to get

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Speaker 2: an update on what's going on in terms of the

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Speaker 2: iPad pro. Mark German a go to on all things Apple.

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Speaker 2: We say it a million times because it's so true.

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Speaker 2: He's chief technology correspond at Bloomberg News. Joining us on

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Speaker 2: zoom from our La bureau.

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Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch US

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Speaker 1: live weekday afternoons from three to six Eastern Listen on

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Speaker 1: Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app,

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Speaker 1: or watch US live on YouTube.

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Speaker 2: All right, everybody, another twenty four hours and another twenty

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Speaker 2: four hour news cycle package news on China. This includes

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Speaker 2: US Commerce Secretary Gena Ramondo saying today that the majority

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Speaker 2: of US China trade has nothing to do with national

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Speaker 2: security and that it's possible to promote and protect experts.

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Speaker 2: At the same time, she commented on the exact framework

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Speaker 2: to do so.

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Speaker 6: We agree to establish a new Commercial Issues Working Group,

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Speaker 6: a formal working group which will involve US and Chinese

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Speaker 6: government officials and very importantly US.

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Speaker 7: And Chinese commercial private sector representatives as we seek solutions

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Speaker 7: on trade and investment issues and to advance US commercial

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Speaker 7: interests in China.

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Speaker 2: And that, of course is the US Commerce Secretary Gena Ramando,

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Speaker 2: who has been meeting with Chinese official Many would ask,

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Speaker 2: is it really possible to do bith to promote and

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Speaker 2: protect experts At the same time, we have a great

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Speaker 2: voice on this and excited to have back with us

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Speaker 2: one that we have leaned on a lot in the

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Speaker 2: past when it comes to US China relations, the intersection

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Speaker 2: between geopolitics, policy, and the markets with US the Stefan Seelig.

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Speaker 2: He's managing partner Bridge Park Advisors. He is a former

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Speaker 2: Undersecretary of Commerce for International Trade at the US Department

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Speaker 2: of Commerce. That was during President Obama's administration. He's once

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Speaker 2: again with us on zoom from Long Island. Sefan, so

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Speaker 2: good to have you back with us.

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Speaker 5: How are you I'm great, Thank you, Carol. Great to

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Speaker 5: hear your voice again.

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Speaker 2: Well, same here. Tell us about what we heard from

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Speaker 2: the Commerce secretary. Is it possible to do both promote

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Speaker 2: and protect exports at the same time.

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Speaker 5: Yeah, I mean, I think these clearly are two different

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Speaker 5: tracks on the one hand. On the other hand, I

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Speaker 5: think over the last number of years, those messages have

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Speaker 5: become somewhat muddled, and the Chinese have interpreted a lot

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Speaker 5: of the actions that have been taken both in the

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Speaker 5: Biden and Trump administrations as actions that are meant to

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Speaker 5: depress their development and the rise of China, as opposed

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Speaker 5: to protecting our national security interests. And as the secretary said,

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Speaker 5: they really are different things. And I think the value

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Speaker 5: of this dialogue, which is really just re establishing what

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Speaker 5: had been in place. And frankly, what I had led

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Speaker 5: during my tenure is to is to foster relationships that

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Speaker 5: will allow us to potentially make progress in what is

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Speaker 5: a fiercely competitive relationship.

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Speaker 2: Well, take us back, I mean take us back to

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Speaker 2: your time during the Obama administration, the importance of the

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Speaker 2: US commercial relationship with China. Rank it and how you

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Speaker 2: all approached it then, and what you believe was how

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Speaker 2: China ranked it as well? And is it very different today?

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Speaker 5: Well, look, it has primacy in so many ways. We're

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Speaker 5: talking about the two biggest economies in the world. The

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Speaker 5: amount that we import and export to each other is

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Speaker 5: very significant, with the exception of Mexico in Canada, there

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Speaker 5: are no two more important relationships in Mexico and Canada

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Speaker 5: is obviously because they are border states. When I was

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Speaker 5: Under Secretary, I spend more time in China than any

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Speaker 5: country by far, and I work to foster the relationship

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Speaker 5: with my counterpart at the Ministry of Commerce to reflect

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Speaker 5: that reality.

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Speaker 2: But do they rank this relationship as important and do

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Speaker 2: they still? You think today?

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Speaker 5: For sure? And in many respects, I think they view

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Speaker 5: it as more important because the number of issues that

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Speaker 5: we're competing on are growing, but also the number of

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Speaker 5: issues that we need to cooperate on are also growing.

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Speaker 5: So as their economy grows, and as they look to

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Speaker 5: establish themselves as a major player both in political, economic,

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Speaker 5: and commercial spheres, you know, their ability to work effectively

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Speaker 5: with the United States becomes only more important. And I

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Speaker 5: think that's exacerbate right now, Carol, because frankly, you know,

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Speaker 5: their economy is slowing, and they're facing a set of

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Speaker 5: economic issues that we haven't seen or they haven't seen

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Speaker 5: in decades.

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Speaker 3: What is the biggest issue, because you laid out some

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Speaker 3: of it just teasing it there, and when you're talking

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Speaker 3: about the economy, but then there's the geo political issues,

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Speaker 3: there's the financial markets. There's also when you think about

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Speaker 3: the property concerns and how that's tied to the economy.

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Speaker 3: Which is the most pressing issue at this point.

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Speaker 5: Well, I mean, look from their perspective, they have a

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Speaker 5: slowing economy. This year, it's going to grow it roughly,

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Speaker 5: you know, four percent, which is, you know, far less

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Speaker 5: than the double digit growth than they've had in the past.

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Speaker 5: But I would say it's still you know, roughly two

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Speaker 5: x what we're growing at as you point out, you know,

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Speaker 5: they have a real estate crisis in the making country Garden,

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Speaker 5: which is their largest developer, may default on their debt payments. China,

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Speaker 5: Evergrand filed for Chapter eleven. Their exports are slumping for

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Speaker 5: you know, all the reasons that we're talking about, which

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Speaker 5: is our economies begin to fringe sure and the impact

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Speaker 5: of sanctions on their economy. Exports alone are down fifteen

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Speaker 5: percent year over year for them. They're facing rising unemployment,

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Speaker 5: especially amongst young people, where some statistics suggest that more

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Speaker 5: than one out of every five young people in China

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Speaker 5: are now unemployed, which is going to have real risks

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Speaker 5: to social stability in that country. They're seeing failing or

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Speaker 5: slowing foreign investment in the country, The remendee is depreciating,

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Speaker 5: and consumers are losing confidence, which is causing them to

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Speaker 5: spend less money than they had in the past as

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Speaker 5: they look to save. And so for all of those reasons,

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Speaker 5: the Chinese economy is under real pressure, and I think

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Speaker 5: as a result of that, it reminds them, and not

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Speaker 5: just us, about how vital each we each are to

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Speaker 5: each other in our success.

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Speaker 2: Seven do you think you know? So, China's made it

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Speaker 2: very clear that they don't want to be the manufacturer

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Speaker 2: to the world, and they have definitely taken steps for that.

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Speaker 2: We talked about this earlier in a segment about Apple

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Speaker 2: slowly moving you know, iPhone production elsewhere, but it's still

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Speaker 2: for the most part in China. But should we want

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Speaker 2: China to be developing its domestic economy? Should we want

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Speaker 2: it to be moving along from you know, kind of

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Speaker 2: a very special emerging market to more of like a

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Speaker 2: developed world and developed market. Should we want that?

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Speaker 5: Well, you know, it's a two edge short, right, because

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Speaker 5: you know, that competition that they're that development underscores makes

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Speaker 5: them stronger in some ways, but it also makes us

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Speaker 5: stronger because they're going to be buying more of our

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Speaker 5: products and services, and they're going to have more money,

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Speaker 5: you know, to spend in our economy through either foreign

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Speaker 5: directive investment, intermediate goods, or otherwise. So it depends on

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Speaker 5: if you think of them as a competitor but also

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Speaker 5: as a customer, and they're both.

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Speaker 3: So what do you think is the right strategy for

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Speaker 3: the Biden administration to take towards China when they are

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Speaker 3: economically vulnerable at this point?

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Speaker 5: Well, look, I think what the Secretary said is extraordinarily

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Speaker 5: important that it's about, you know, communication. The President said

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Speaker 5: to the Secretary when before she left, that we need

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Speaker 5: to communicate to avoid conflict. And I think in any

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Speaker 5: in any situation where you have fierce competitors, you also

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Speaker 5: need intense diplomacy. And the Secretary is a very capable

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Speaker 5: commercial diplomat, and that's what she went over there and

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Speaker 5: is over there doing now. And frankly, what hasn't happened

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Speaker 5: over the last five years when there have been no

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Speaker 5: face to face meetings between our commerce secretary or under

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Speaker 5: secretaries and their counterparts in Stefan?

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Speaker 2: What's more important the stress with or the tensions between

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Speaker 2: China and Taiwan, and then how that relates to the

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Speaker 2: rest of the world, or the relationship that President Ji

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Speaker 2: has with President putin What should we spend more time

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Speaker 2: on or it can be both.

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Speaker 5: You know, I'm not sure I could ordinately rank them, Carol,

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Speaker 5: but clearly China has different interests geopolitically and economically and

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Speaker 5: commercially than we do. And you know what I've always

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Speaker 5: said is, you know, hitting China over the head with

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Speaker 5: a cudgel is not going to be an effective way

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Speaker 5: to actually make progress, and what we need to do

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Speaker 5: is to look for win win outcomes where there are

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Speaker 5: things that advance our interests and advance their interests and

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Speaker 5: their whole.

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Speaker 2: Host boks sephan if I may, I'd love to talk

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Speaker 2: to you a little bit about politics, because we were

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Speaker 2: just talking a lot about the importance of that relationship

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Speaker 2: between US and China. The Republican presidential hopefuls the debate

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Speaker 2: last week talked a lot about China. There was a

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Speaker 2: lot of pushback. Is that cause for concern when you

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Speaker 2: see that? I know some of it is all just

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Speaker 2: grandstanding and performance, but some of it is not.

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Speaker 5: Yeah, I guess, Carol, you know it's really not just

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Speaker 5: the Republicans. In fact, the only thing I can think

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Speaker 5: of where the Republicans and Democrats seem to be agreeing

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Speaker 5: is getting tough with China. And I think there's a

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Speaker 5: little bit of a contest between them as who can

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Speaker 5: appear to be tougher with China. And I don't think

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Speaker 5: being tough is necessarily always being smart, and so, you know, frankly,

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Speaker 5: I think the conversation that should be about what should

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Speaker 5: we be doing to advance our interests as opposed to

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Speaker 5: what should we be doing just to punish China.

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Speaker 3: And is that a cause for concern at all?

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Speaker 5: Well, for sure, especially just as I mentioned, you know,

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Speaker 5: with China's economy being under pressure, I think the last

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Speaker 5: thing we want to do is push them so hard

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Speaker 5: that they lash out and take actions that would be

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Speaker 5: adverse to us. And we get into this, you know,

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Speaker 5: tit for tat because you know, as you've said, you know,

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Speaker 5: these are the two biggest economies in the world, and

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Speaker 5: we can punish each other plenty, and that doesn't really

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Speaker 5: help us.

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Speaker 2: Would you want to be back in the White House advising.

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Speaker 5: Well, you know, look, I think it was it was

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Speaker 5: an honor for me to you know, do that during

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Speaker 5: the Obama administration, and I think, you know, to the

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Speaker 5: extent that you know you are called to do that,

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Speaker 5: I think it's a really hard thing to turn down

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Speaker 5: for any of us that care about our country.

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Speaker 3: When you're looking at some of the Republican candidates, who

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Speaker 3: kind of stands out in your mind that when you're

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Speaker 3: thinking about the US and China relations as far as

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Speaker 3: what could be a potential viable candidate in that sort

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Speaker 3: of realm, Well, I'm.

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Speaker 5: Not sure that that's an easy answer. Jess, because as

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Speaker 5: I've said, I think there's just a lot of a

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Speaker 5: lot of piling on. And I also would say, is

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Speaker 5: you know, what people say on the stage in the

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Speaker 5: you know, primaries season is probably not necessarily going to

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Speaker 5: directly inform their policies. You know, if they get into

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Speaker 5: the they get into the Oval. You know that being said,

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Speaker 5: you know, I think this has to be you know,

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Speaker 5: on the radar screen for whoever is sitting in the

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Speaker 5: Oval office because of the importance not only you know, geopolitically,

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Speaker 5: but commercially and economically for you know, employment in our country,

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Speaker 5: the success of our economy and our consumer well.

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Speaker 2: And I'm curious to Stefan about your clients and those

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Speaker 2: CEOs that you are talking about, you know, is US

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Speaker 2: China typically top of mind for them or I'm curious

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Speaker 2: what is if it's not.

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Speaker 5: That you know, there's a lot of trepidation about going

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Speaker 5: into China, and I think especially and that really, I

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Speaker 5: think is the purpose of the Secretary's trip, which is

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Speaker 5: to really re establish a dialogue so people can begin

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Speaker 5: to plan because if the relationship is so uncertain and

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Speaker 5: so volatile, it's very difficult for companies to you know,

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Speaker 5: effectively plan. And if you can't plan, you can't make investments.

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Speaker 5: And so I think, uh, you know that is is

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Speaker 5: is just critical.

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Speaker 3: And especially when you're talking about companies, the curbs that

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Speaker 3: are being put on chip makers, how much of that

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Speaker 3: do you think when you're especially this is companies that

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Speaker 3: have performed very well in the stock market this year.

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Speaker 3: But I mean, when it comes to those types of companies,

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Speaker 3: what do you think that would really mean for them?

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Speaker 3: And when it comes to doing deals with China.

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Speaker 5: Well, look, it's it's a very big market and we've

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Speaker 5: seen them take actions including blocking you know, Intel's acquisition

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Speaker 5: of an Israeli chip company, which is really adverse to

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Speaker 5: the interests of a of a US of a US company.

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Speaker 4: Uh.

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Speaker 5: And so that that really is the point about you know,

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Speaker 5: they have the ability to respond in kind I would say,

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Speaker 5: or I will say, some of the things we have done,

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Speaker 5: I scratch my head a little bit, like the bomb,

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Speaker 5: the like the recent executive of order that is limiting

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Speaker 5: private equity and venture capital investment in you know, advanced

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Speaker 5: chip making and other sectors. It strikes me that you know,

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Speaker 5: the one thing that China you know, doesn't lack for

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Speaker 5: is capital and so the notion that somehow we are

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Speaker 5: going to constrain their development by not having US investors

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Speaker 5: invest in certain sectors in their economy is not just

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Speaker 5: something that I can easily follow the logic of.

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Speaker 2: So in terms of you know, going back to some

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Speaker 2: of the things that the folks that you work with,

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Speaker 2: your clients and CEOs on their top of mind. You know,

438
00:23:34,480 --> 00:23:36,960
Speaker 2: we just had a headline crossing the Bloomberg terminal San

439
00:23:36,960 --> 00:23:41,000
Speaker 2: Francisco's San Francisco Fed's head of Banks to Provision will retire.

440
00:23:41,440 --> 00:23:45,320
Speaker 2: So you know, certainly the US banking sector and the

441
00:23:45,359 --> 00:23:48,520
Speaker 2: failure of Silicon Valley banks still on the mind of everybody,

442
00:23:48,560 --> 00:23:52,000
Speaker 2: and watching the regional banking sector and for perhaps what

443
00:23:52,080 --> 00:23:55,120
Speaker 2: the San Francisco FED missed and maybe you know what

444
00:23:55,200 --> 00:23:58,679
Speaker 2: we may still be missing. Perhaps that sector certainly on

445
00:23:58,720 --> 00:24:03,280
Speaker 2: our minds. What else, you know, Stefan, is you know,

446
00:24:03,440 --> 00:24:06,480
Speaker 2: in a day where we talk constantly about FED policy,

447
00:24:06,960 --> 00:24:09,840
Speaker 2: higher inflation are persistent and sticky inflation, even though it's

448
00:24:09,880 --> 00:24:11,879
Speaker 2: down a lot in the past year, what else is

449
00:24:12,000 --> 00:24:13,320
Speaker 2: kind of top of mind?

450
00:24:14,240 --> 00:24:16,600
Speaker 5: Well, I would say, you know, we did avoid anything

451
00:24:16,680 --> 00:24:19,439
Speaker 5: resembling a banking crisis, you know, so the FED seems

452
00:24:19,440 --> 00:24:22,360
Speaker 5: to have done a very good job of managing that situation.

453
00:24:23,280 --> 00:24:25,480
Speaker 5: I would say there are really two things. One is,

454
00:24:25,600 --> 00:24:29,760
Speaker 5: you know, is inflation going to be tamed? And what

455
00:24:29,920 --> 00:24:31,800
Speaker 5: is the Fed going to have to do in terms

456
00:24:31,840 --> 00:24:34,040
Speaker 5: of raising interest rates in the future to make sure

457
00:24:35,040 --> 00:24:37,719
Speaker 5: you know that happens. You know, are we going And

458
00:24:37,800 --> 00:24:40,679
Speaker 5: if you look at historical data, you know you really

459
00:24:40,720 --> 00:24:43,920
Speaker 5: do have a you know, short window four or five

460
00:24:44,000 --> 00:24:46,399
Speaker 5: months to really have a good view about what the

461
00:24:46,440 --> 00:24:49,119
Speaker 5: economy is going to do. And I think you know,

462
00:24:49,119 --> 00:24:51,119
Speaker 5: over the next four or five months, folks are not

463
00:24:51,240 --> 00:24:56,399
Speaker 5: worried about dipping dipping into a recessionary period. But uh,

464
00:24:56,760 --> 00:24:59,960
Speaker 5: but forecasting for a period that is longer than that

465
00:25:00,160 --> 00:25:02,800
Speaker 5: is exceedingly hard to do. And the question is going

466
00:25:02,840 --> 00:25:05,080
Speaker 5: to be if they have to raise interest rates you know,

467
00:25:05,160 --> 00:25:07,679
Speaker 5: once twice or three more times, which I think you

468
00:25:07,720 --> 00:25:10,760
Speaker 5: know is not outside of the realm of possibility. To

469
00:25:10,800 --> 00:25:13,320
Speaker 5: what degree does that have a dampening impact on growth

470
00:25:13,320 --> 00:25:14,080
Speaker 5: in our country?

471
00:25:14,400 --> 00:25:18,720
Speaker 3: How much does China's disinflation actually help the US?

472
00:25:20,800 --> 00:25:24,399
Speaker 5: Well, it certainly doesn't help their consumer and it doesn't

473
00:25:24,400 --> 00:25:27,800
Speaker 5: help you know, their economic engine, which is we've talked about, Jess,

474
00:25:27,880 --> 00:25:30,719
Speaker 5: is you know, so important for you know, us in

475
00:25:30,800 --> 00:25:37,000
Speaker 5: terms of being a buyer of US goods and services.

476
00:25:37,240 --> 00:25:39,280
Speaker 5: One of the things the Secretary is for sure going

477
00:25:39,320 --> 00:25:42,520
Speaker 5: to talk about is the importance of tourism. You know,

478
00:25:42,600 --> 00:25:46,000
Speaker 5: since the pandemic tourism Chinese tourism in the United States

479
00:25:46,040 --> 00:25:48,919
Speaker 5: and US touris to tourism in China has you know,

480
00:25:49,040 --> 00:25:51,320
Speaker 5: fallen off a cliff. The number of flights that are

481
00:25:51,320 --> 00:25:54,160
Speaker 5: going between the two countries is very small, and travel

482
00:25:54,160 --> 00:25:57,879
Speaker 5: and tourism, which was a part of the government that

483
00:25:57,960 --> 00:26:01,400
Speaker 5: I helped look after when I was there, is the

484
00:26:01,400 --> 00:26:04,159
Speaker 5: most important part of our service economy. And that's a

485
00:26:04,280 --> 00:26:08,080
Speaker 5: perfect example of something you know, that we need to

486
00:26:08,160 --> 00:26:10,240
Speaker 5: be on track if you know, we are going to

487
00:26:10,240 --> 00:26:14,200
Speaker 5: continue to grow and create good paying jobs here.

488
00:26:14,760 --> 00:26:14,960
Speaker 8: You know.

489
00:26:15,040 --> 00:26:18,520
Speaker 2: And I it's interesting too, because we talked a lot

490
00:26:18,920 --> 00:26:22,560
Speaker 2: last week about Boeing right and maybe the ability to

491
00:26:22,600 --> 00:26:24,760
Speaker 2: once again get back into the Chinese markets only with

492
00:26:24,800 --> 00:26:28,240
Speaker 2: the seven thirty seven max, which has been obviously problematic

493
00:26:28,280 --> 00:26:30,840
Speaker 2: for understandable reasons, but it's so important to their growth

494
00:26:30,840 --> 00:26:33,160
Speaker 2: story going forward. I do want to just stay with

495
00:26:33,320 --> 00:26:36,399
Speaker 2: what you talked about the possibility of maybe three or

496
00:26:36,440 --> 00:26:38,879
Speaker 2: four more rate increases. You are on the board of

497
00:26:38,880 --> 00:26:44,760
Speaker 2: the Simon Property Group, well known redeveloper, malls, outlets, mixed

498
00:26:44,880 --> 00:26:47,960
Speaker 2: use property concerns here in the US. Do you feel

499
00:26:48,000 --> 00:26:52,119
Speaker 2: like we are fine or do are there still risks

500
00:26:52,119 --> 00:26:52,520
Speaker 2: out there?

501
00:26:53,600 --> 00:26:53,719
Speaker 4: Well?

502
00:26:53,760 --> 00:26:56,000
Speaker 5: Look, you know, there is no such thing as the

503
00:26:56,000 --> 00:26:58,480
Speaker 5: real estate market, right, so the real estate market in

504
00:26:58,960 --> 00:27:01,760
Speaker 5: New York is different at San Francisco, which is different

505
00:27:01,760 --> 00:27:06,280
Speaker 5: than Austin. And you know, apartments are different than office,

506
00:27:06,320 --> 00:27:09,439
Speaker 5: which is different than multi family that is different from malls.

507
00:27:10,240 --> 00:27:12,920
Speaker 5: Not to sound like a booster for the company whose

508
00:27:12,920 --> 00:27:15,879
Speaker 5: board I sit on, but Simon Property has the best management,

509
00:27:15,920 --> 00:27:18,120
Speaker 5: the best malls, and the best balance sheet in the industry.

510
00:27:18,400 --> 00:27:21,399
Speaker 5: So we're feeling very very good about our position. You know,

511
00:27:21,640 --> 00:27:24,159
Speaker 5: you can't say that, I presume if you are an

512
00:27:24,200 --> 00:27:26,040
Speaker 5: owner of office buildings in San Francisco.

513
00:27:27,640 --> 00:27:32,280
Speaker 2: No, really, well said, you're right, location, location, location, top

514
00:27:32,320 --> 00:27:34,200
Speaker 2: of mine. Every morning when you get up and you

515
00:27:34,320 --> 00:27:35,960
Speaker 2: look at the news stories, what is it? And just

516
00:27:36,000 --> 00:27:37,680
Speaker 2: got about thirty seconds left?

517
00:27:38,640 --> 00:27:40,919
Speaker 5: Well, you know, look, the world is a volatile and

518
00:27:41,000 --> 00:27:43,840
Speaker 5: dangerous place, and so I think when you wake up,

519
00:27:43,920 --> 00:27:46,800
Speaker 5: you just you know, there's a you take a deep breath.

520
00:27:47,160 --> 00:27:49,720
Speaker 5: If something bad is not happening in Asia or in

521
00:27:49,760 --> 00:27:55,280
Speaker 5: the Gulf or you know elsewhere, because frankly, any one

522
00:27:55,320 --> 00:27:57,760
Speaker 5: of those things can you know, throw a wrench into

523
00:27:57,800 --> 00:28:01,119
Speaker 5: the global economy, given how interconnect who we are. You know,

524
00:28:01,160 --> 00:28:05,160
Speaker 5: we've lived through this situation in the Ukraine with Russia.

525
00:28:05,240 --> 00:28:08,280
Speaker 5: But you know, and we see how problematic that is.

526
00:28:08,359 --> 00:28:11,639
Speaker 5: But the connectivity between the US and the Russian economy

527
00:28:12,040 --> 00:28:16,359
Speaker 5: is infinitezantly small compared to the connectivity between you know,

528
00:28:16,520 --> 00:28:20,600
Speaker 5: the US and Asia and China and elsewhere. And so

529
00:28:20,720 --> 00:28:24,040
Speaker 5: you know that to me is you know, highest on

530
00:28:24,119 --> 00:28:24,960
Speaker 5: the list, I would guess.

531
00:28:25,080 --> 00:28:27,679
Speaker 2: Stefan, thank you so much and really great to connect

532
00:28:27,720 --> 00:28:28,600
Speaker 2: and hear your voice again.

533
00:28:28,920 --> 00:28:29,399
Speaker 8: Be well.

534
00:28:29,720 --> 00:28:33,240
Speaker 2: Stefan Sielig, Managing partner, Bridge Park Advisors. Joining us on

535
00:28:33,359 --> 00:28:34,800
Speaker 2: zoom from Long Island, New York.

536
00:28:36,600 --> 00:28:40,160
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us

537
00:28:40,200 --> 00:28:44,320
Speaker 1: live weekday afternoons from three to six Eastern on Bloomberg Radio,

538
00:28:44,440 --> 00:28:47,680
Speaker 1: the Bloomberg Business App, and YouTube. You can also listen

539
00:28:47,800 --> 00:28:50,920
Speaker 1: live on Amazon Alexa from our flagship New York station,

540
00:28:51,360 --> 00:28:54,120
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.

541
00:28:56,600 --> 00:28:58,840
Speaker 2: I got to say, Jess something I look forward to

542
00:28:58,840 --> 00:29:00,480
Speaker 2: every year, and that is the put out by the

543
00:29:00,520 --> 00:29:03,120
Speaker 2: Bloomberg New Economy team. It's a group of people who

544
00:29:03,160 --> 00:29:05,880
Speaker 2: are probably not household names and yet really should be

545
00:29:05,880 --> 00:29:09,040
Speaker 2: because they are truly changing the world one step at

546
00:29:09,080 --> 00:29:11,400
Speaker 2: a time. The latest class of individuals has been named.

547
00:29:11,440 --> 00:29:14,160
Speaker 2: It is the Bloomberg New Economies twenty twenty three Class

548
00:29:14,160 --> 00:29:16,160
Speaker 2: of Catalysts. And here to tell us a bit more

549
00:29:16,160 --> 00:29:19,440
Speaker 2: about it is Bloomberg New Economy editorial director Eric Shaftsker

550
00:29:19,480 --> 00:29:22,200
Speaker 2: on zoom in Toronto. Eric, thank you so much for

551
00:29:22,240 --> 00:29:26,040
Speaker 2: doing this. I really do look forward to this list.

552
00:29:26,440 --> 00:29:28,920
Speaker 2: I think they're just an amazing group of individuals. But

553
00:29:28,960 --> 00:29:32,080
Speaker 2: give everybody a reminder of who they are. How you

554
00:29:32,120 --> 00:29:33,560
Speaker 2: guys find them?

555
00:29:34,120 --> 00:29:37,200
Speaker 9: Well, you said the keywords, the three key world words,

556
00:29:37,240 --> 00:29:40,400
Speaker 9: excuse me, change the world, and it truly does take

557
00:29:40,440 --> 00:29:42,800
Speaker 9: a special kind of person to change the world, and

558
00:29:42,840 --> 00:29:46,600
Speaker 9: that is those are the people I should say that

559
00:29:46,680 --> 00:29:50,600
Speaker 9: we every year are on the hunt for We're not alone,

560
00:29:50,640 --> 00:29:52,800
Speaker 9: of course, there are lots of investors out there, venture

561
00:29:52,840 --> 00:29:55,120
Speaker 9: capitalists who are in the hunt for people who can

562
00:29:55,240 --> 00:29:57,480
Speaker 9: change the world. But our focus is, you know, Carol,

563
00:29:57,560 --> 00:30:01,160
Speaker 9: is slightly different. We're looking for people who's focus is

564
00:30:01,320 --> 00:30:05,400
Speaker 9: on or whose mission, if you will, is about outcomes

565
00:30:05,800 --> 00:30:10,120
Speaker 9: and not necessarily about money in the process. They may

566
00:30:10,160 --> 00:30:14,200
Speaker 9: prove to be extremely successful entrepreneurs, but as I say,

567
00:30:14,200 --> 00:30:17,000
Speaker 9: we're more interest in their capacity to change the world

568
00:30:17,000 --> 00:30:20,680
Speaker 9: and not necessarily their capacity to make billions of dollars.

569
00:30:22,680 --> 00:30:28,280
Speaker 9: We look everywhere, we tap into the wisdom of Bloomberg's

570
00:30:28,360 --> 00:30:31,760
Speaker 9: unparalleled global newsroom. As you know, we have about two

571
00:30:32,360 --> 00:30:37,200
Speaker 9: seven hundred reporters, editors, researchers, and analysts scattered across the globe,

572
00:30:37,320 --> 00:30:41,440
Speaker 9: and that gives us a reach that very few other

573
00:30:41,560 --> 00:30:45,120
Speaker 9: organizations on this planet have. And so with their help,

574
00:30:45,320 --> 00:30:48,680
Speaker 9: we solicit nominations and then we go through a selection

575
00:30:48,840 --> 00:30:52,840
Speaker 9: process to find the twenty people whom we chose as

576
00:30:52,880 --> 00:30:53,920
Speaker 9: this year's catalysts.

577
00:30:54,080 --> 00:30:56,440
Speaker 3: So Eric walks through this list. What are the highlights?

578
00:30:58,040 --> 00:31:01,360
Speaker 9: Well, I don't want to, I'm I'm very reluctant.

579
00:31:01,480 --> 00:31:04,040
Speaker 2: Right, you don't have to pick a favorite child, you

580
00:31:04,120 --> 00:31:06,520
Speaker 2: don't have to do a way right.

581
00:31:07,840 --> 00:31:11,000
Speaker 9: But well, first, the first thing I would say is,

582
00:31:11,200 --> 00:31:13,520
Speaker 9: I'm very proud. We are all very proud of the

583
00:31:13,520 --> 00:31:17,719
Speaker 9: fact that this is a very rich list. And what

584
00:31:17,800 --> 00:31:19,680
Speaker 9: I mean by that is not the amount of money

585
00:31:19,720 --> 00:31:22,520
Speaker 9: these people have. Eleven of these twenty people are women,

586
00:31:23,160 --> 00:31:25,480
Speaker 9: and if you look at them, it's a very diverse

587
00:31:25,560 --> 00:31:26,760
Speaker 9: list from across the world.

588
00:31:26,760 --> 00:31:27,440
Speaker 4: These people are.

589
00:31:27,360 --> 00:31:34,120
Speaker 9: Doing amazing things in many different places. Marina Bellattani, for example,

590
00:31:34,240 --> 00:31:39,560
Speaker 9: runs a firm in Brazil called mobbi Bio. And what

591
00:31:39,680 --> 00:31:45,280
Speaker 9: she's trying to do isn't just make fashion more sustainable.

592
00:31:45,760 --> 00:31:49,800
Speaker 9: Sustainable fashion is a goal I think we can all embrace,

593
00:31:50,400 --> 00:31:54,240
Speaker 9: but how you do it matters. Much of the faux

594
00:31:54,320 --> 00:31:59,240
Speaker 9: leather that's made today is not bidegradable, and so bizarrely

595
00:31:59,680 --> 00:32:03,120
Speaker 9: report is biodegradable. And so if you make faux leather

596
00:32:04,000 --> 00:32:06,720
Speaker 9: for the sake of the animals, perhaps that isn't biodegradable,

597
00:32:06,720 --> 00:32:08,400
Speaker 9: you're not really doing the planet a whole lot of good.

598
00:32:08,480 --> 00:32:10,920
Speaker 9: So what she's done is she's gone to these trees

599
00:32:11,080 --> 00:32:14,680
Speaker 9: in the rainforest, which of course are harvested sustainably anco trees,

600
00:32:14,760 --> 00:32:18,719
Speaker 9: and she's making a biodegradable plant leather. That's one example.

601
00:32:18,720 --> 00:32:22,400
Speaker 9: There's another gentleman from Australia named Guy Hudson who is

602
00:32:22,440 --> 00:32:24,880
Speaker 9: the founder and CEO of a firm called loam Bio.

603
00:32:25,480 --> 00:32:28,400
Speaker 9: We're all interested in carbon capture. As you know, carbon

604
00:32:28,440 --> 00:32:32,040
Speaker 9: capture is produced, proving excuse me to be very difficult

605
00:32:32,080 --> 00:32:34,920
Speaker 9: to do at scale. What loam bio does is it

606
00:32:34,960 --> 00:32:41,640
Speaker 9: injects a safe fungus into soil that produces what are

607
00:32:41,680 --> 00:32:47,760
Speaker 9: called microaggregates that double the carbon storage capacity of soil

608
00:32:47,880 --> 00:32:52,959
Speaker 9: and actually also serve to improve its yields. It's yields

609
00:32:52,960 --> 00:32:57,080
Speaker 9: for farmers. So you know, two for the price of one.

610
00:32:57,880 --> 00:33:02,960
Speaker 9: Very ingenious and with a potential to truly change, if

611
00:33:03,000 --> 00:33:05,880
Speaker 9: you will, for lack of a better term, transform the

612
00:33:05,880 --> 00:33:09,760
Speaker 9: carbon storage capacity of agriculture. And then I'll just point

613
00:33:09,760 --> 00:33:11,720
Speaker 9: out one other person, and of course we can go

614
00:33:11,760 --> 00:33:14,120
Speaker 9: through more if you like. But Rico Yu in Hong

615
00:33:14,240 --> 00:33:16,320
Speaker 9: Kong is the founder and CEO of this firm called

616
00:33:16,400 --> 00:33:22,000
Speaker 9: arca Reef, which is using racontically three D print the

617
00:33:22,040 --> 00:33:25,920
Speaker 9: substrate for coral reefs. The situation in Florida, for those

618
00:33:25,920 --> 00:33:28,480
Speaker 9: of us living in the United States, has really thrust

619
00:33:28,520 --> 00:33:31,680
Speaker 9: into focus the tragedy that's unfolding on the world's coral

620
00:33:31,720 --> 00:33:36,680
Speaker 9: reefs because of you know, hot water, overheated ocean water,

621
00:33:37,120 --> 00:33:40,240
Speaker 9: and the bleaching process that really kills coral reefs. There

622
00:33:40,280 --> 00:33:43,280
Speaker 9: needs to be a way to allow reefs to flourish

623
00:33:43,360 --> 00:33:45,360
Speaker 9: in other parts of the world where they don't naturally

624
00:33:45,400 --> 00:33:48,560
Speaker 9: take and this three D printing process of terra cotta

625
00:33:48,600 --> 00:33:53,400
Speaker 9: clay is just you know, strikes me anyway, is as genius,

626
00:33:53,440 --> 00:33:54,760
Speaker 9: if not just ingenious.

627
00:33:54,960 --> 00:33:56,160
Speaker 2: You know, I think you and I have talked about

628
00:33:56,200 --> 00:33:58,200
Speaker 2: as a diver, and I think you dive. You know,

629
00:33:59,000 --> 00:34:02,120
Speaker 2: we have seen the devastation in the world's reefs, and

630
00:34:02,200 --> 00:34:04,160
Speaker 2: so this to me, I just want to kind of

631
00:34:04,160 --> 00:34:06,000
Speaker 2: read more about what they're doing because I just find

632
00:34:06,040 --> 00:34:09,040
Speaker 2: it kind of mind blowing. The other thing is Eric,

633
00:34:09,040 --> 00:34:12,320
Speaker 2: I feel like, yes, there are individuals from developed markets,

634
00:34:12,320 --> 00:34:14,480
Speaker 2: but it is always a reminder when we go through

635
00:34:14,480 --> 00:34:18,160
Speaker 2: these lists how important the developing world is in defining

636
00:34:18,480 --> 00:34:20,759
Speaker 2: like unique solutions to the world's problems.

637
00:34:21,360 --> 00:34:24,360
Speaker 9: That's right, And many of the solutions developed in the

638
00:34:25,360 --> 00:34:28,880
Speaker 9: developed world, or at least conceived of in the developed world,

639
00:34:29,440 --> 00:34:33,240
Speaker 9: aren't immediately relevant to the developing world. The developing world

640
00:34:33,280 --> 00:34:37,320
Speaker 9: is where most of the world's people live. It has,

641
00:34:37,360 --> 00:34:40,440
Speaker 9: you know, faces the greatest obstacles in terms of economic

642
00:34:40,440 --> 00:34:43,880
Speaker 9: development and improvement of quality of life, let alone GDP

643
00:34:44,000 --> 00:34:47,120
Speaker 9: per capita. It is where I think it's safe to

644
00:34:47,120 --> 00:34:50,440
Speaker 9: say the world's most confounding problems exist. And so that

645
00:34:50,640 --> 00:34:53,640
Speaker 9: is where some of these you know, whether they be

646
00:34:53,760 --> 00:34:57,600
Speaker 9: made in Bangladesh, made in India, made in Indonesia, solutions

647
00:34:57,600 --> 00:35:03,560
Speaker 9: made in Brazil, solutions should end are appearing and we

648
00:35:03,640 --> 00:35:05,760
Speaker 9: love the fact that we can highlight them.

649
00:35:06,480 --> 00:35:09,080
Speaker 3: I have to also point out AI is such a

650
00:35:09,120 --> 00:35:11,879
Speaker 3: hot topic, and you do have Adam Winschel in there.

651
00:35:11,960 --> 00:35:14,759
Speaker 2: You worked it in, Eric worked it in helping.

652
00:35:14,440 --> 00:35:17,880
Speaker 3: AI companies reduce bias in their information systems that they provide.

653
00:35:18,040 --> 00:35:20,200
Speaker 3: What did you find when it comes to AI and

654
00:35:20,239 --> 00:35:21,479
Speaker 3: how it fits into your list?

655
00:35:21,520 --> 00:35:23,120
Speaker 2: And just got about thirty seconds get up.

656
00:35:23,239 --> 00:35:25,719
Speaker 9: Well, AI is important, as you say, because it's everywhere.

657
00:35:26,680 --> 00:35:30,880
Speaker 9: But you know, how can innovators contribute in this in

658
00:35:30,880 --> 00:35:32,040
Speaker 9: a new economy sense?

659
00:35:32,040 --> 00:35:32,480
Speaker 3: To AI?

660
00:35:32,560 --> 00:35:34,759
Speaker 9: It is by what you say, making it more objective.

661
00:35:34,880 --> 00:35:39,120
Speaker 9: If we're able to improve the quality of AI tools

662
00:35:39,160 --> 00:35:41,959
Speaker 9: that are being developed in the developed in the developed world,

663
00:35:42,040 --> 00:35:44,319
Speaker 9: then I think they'll be that much more applicable to

664
00:35:44,400 --> 00:35:45,360
Speaker 9: the global economy.

665
00:35:45,400 --> 00:35:48,760
Speaker 2: All right, so appreciate it. Eric Shasker, Bloomberg New Economy

666
00:35:48,880 --> 00:35:52,440
Speaker 2: Editorial Director there on zoom in Toronto, breaking down Bloomberg

667
00:35:52,440 --> 00:35:55,520
Speaker 2: New Economies twenty twenty three, Class of catalysts. Highly recommend

668
00:35:55,840 --> 00:35:57,840
Speaker 2: if you want to be inspired a little bit in awe.

669
00:35:58,400 --> 00:36:02,359
Speaker 2: Just people changing the world and this list you can

670
00:36:02,360 --> 00:36:04,680
Speaker 2: find out more just head to Bloomberg dot com and

671
00:36:04,719 --> 00:36:07,040
Speaker 2: you can also find it on the Bloomberg terminal. Eric,

672
00:36:07,080 --> 00:36:09,200
Speaker 2: thank you so much, so appreciate it. All right, you

673
00:36:09,239 --> 00:36:11,880
Speaker 2: are listening and watching Bloomberg Business Week on this Monday,

674
00:36:11,960 --> 00:36:14,800
Speaker 2: Carl Master along with just metten just in for Tim Stanevik.

675
00:36:14,920 --> 00:36:18,560
Speaker 2: As you know, we are on Bloomberg Radio, on YouTube

676
00:36:18,600 --> 00:36:21,960
Speaker 2: and of course streaming on Bloomberg Originals. Don't go anywhere.

677
00:36:22,040 --> 00:36:25,040
Speaker 2: Lots more to come right here on Bloomberg BusinessWeek.

678
00:36:28,719 --> 00:36:30,560
Speaker 4: M brother mac.

679
00:36:32,200 --> 00:36:34,320
Speaker 8: A journal Now about you?

680
00:36:34,400 --> 00:36:34,879
Speaker 4: Let me drive?

681
00:36:35,400 --> 00:36:37,160
Speaker 5: No, no, no, no, who's going to drive?

682
00:36:38,239 --> 00:36:38,719
Speaker 4: Honey?

683
00:36:38,719 --> 00:36:39,080
Speaker 1: Please?

684
00:36:39,200 --> 00:36:40,760
Speaker 5: How do the gravels?

685
00:36:41,080 --> 00:36:41,440
Speaker 7: Let's wat?

686
00:36:41,719 --> 00:36:42,399
Speaker 2: I want to drive.

687
00:36:42,440 --> 00:36:45,600
Speaker 5: It's a good question.

688
00:36:46,040 --> 00:36:47,840
Speaker 9: Good try.

689
00:36:49,400 --> 00:36:52,000
Speaker 1: This is the drive to the Globes.

690
00:36:51,520 --> 00:36:53,640
Speaker 5: Dot com for me. I think we'll buy around.

691
00:36:54,120 --> 00:36:55,760
Speaker 1: On Bloomberg Radio.

692
00:36:55,800 --> 00:37:00,359
Speaker 2: All right, TikTok, everybody, eighteen minutes left in today's trading session. Master,

693
00:37:00,400 --> 00:37:02,480
Speaker 2: long have just met and Jess as you know, in

694
00:37:02,560 --> 00:37:05,359
Speaker 2: for Tim Stanovic, and we've got a great guest with us.

695
00:37:05,640 --> 00:37:07,960
Speaker 2: Bill speed back with us founder and CIO over at

696
00:37:07,960 --> 00:37:11,120
Speaker 2: SMED Capital Management the smeide Value Fund. We say it

697
00:37:11,160 --> 00:37:13,960
Speaker 2: every time he joins us for good reason. They've got

698
00:37:14,000 --> 00:37:16,920
Speaker 2: about four point eight billion in assets under management, at

699
00:37:16,960 --> 00:37:19,399
Speaker 2: least according to Bloomberg Data, continues to be a top

700
00:37:19,400 --> 00:37:22,680
Speaker 2: performer in the ninety ninth percentile over the past five years,

701
00:37:22,680 --> 00:37:26,759
Speaker 2: with an average annual return to nearly eleven percent. He's

702
00:37:26,800 --> 00:37:28,680
Speaker 2: a nice guy, but we also like his performance, which

703
00:37:28,719 --> 00:37:29,879
Speaker 2: is why we have him on.

704
00:37:29,960 --> 00:37:30,240
Speaker 6: Bill.

705
00:37:30,880 --> 00:37:32,000
Speaker 2: Good to have you back with us.

706
00:37:32,040 --> 00:37:34,839
Speaker 8: How are you? I'm well, thank you?

707
00:37:35,520 --> 00:37:37,440
Speaker 2: Can I be honest with you? We want to get

708
00:37:37,480 --> 00:37:40,399
Speaker 2: into your thoughts on the markets. But we just had

709
00:37:40,440 --> 00:37:42,880
Speaker 2: our Bill Maloney in here, and we've had guests on

710
00:37:42,920 --> 00:37:46,200
Speaker 2: about financial literacy. Why is it that we aren't smarter

711
00:37:46,520 --> 00:37:49,320
Speaker 2: as a world, as a country in terms of teaching

712
00:37:49,800 --> 00:37:54,840
Speaker 2: kids from a younger age about investing and financial literacy

713
00:37:54,880 --> 00:37:58,040
Speaker 2: so they really understand where wealth comes from and how

714
00:37:58,040 --> 00:38:00,680
Speaker 2: to build it so they have a better, stronger fundial future.

715
00:38:02,680 --> 00:38:05,200
Speaker 8: Well, as a general rule, I just think back to

716
00:38:05,520 --> 00:38:10,120
Speaker 8: being kids. Getting kids to sit down and do math

717
00:38:10,160 --> 00:38:17,880
Speaker 8: problems was problematic just from impatience. And there's a sizeable

718
00:38:17,920 --> 00:38:21,040
Speaker 8: group of people that are better English than they are math.

719
00:38:21,960 --> 00:38:26,279
Speaker 8: So the getting the non math oriented people to do

720
00:38:26,360 --> 00:38:29,719
Speaker 8: the math is sometimes difficult. I would say.

721
00:38:30,400 --> 00:38:32,319
Speaker 3: So, if you had to choose a book to read

722
00:38:32,760 --> 00:38:35,160
Speaker 3: to one of your clients that they're asking about how

723
00:38:35,160 --> 00:38:37,520
Speaker 3: to learn more about investing, where do you point them to?

724
00:38:39,080 --> 00:38:41,600
Speaker 8: Oh? I get asked that question by young people coming

725
00:38:41,600 --> 00:38:44,279
Speaker 8: into the business all the time. I'd recommend the same

726
00:38:44,320 --> 00:38:51,760
Speaker 8: three books, The Bible, The Intelligent Investor by Ben Graham

727
00:38:52,200 --> 00:38:57,719
Speaker 8: and A Short History of Financial Euphoria by John Kenneth Galbraith.

728
00:38:58,560 --> 00:39:04,480
Speaker 8: And Avoiding the Really the ignorance is what Charlie Munger

729
00:39:04,560 --> 00:39:07,959
Speaker 8: calls it. Avoiding ignorance is as important over say thirty

730
00:39:08,040 --> 00:39:10,400
Speaker 8: or forty years as it was. Everybody's going to have

731
00:39:10,400 --> 00:39:12,800
Speaker 8: some big winners. But who avoids the ignorance?

732
00:39:13,840 --> 00:39:16,879
Speaker 3: And what are your top questions that you hear from

733
00:39:16,920 --> 00:39:20,080
Speaker 3: your clients as far as things that they just don't understand,

734
00:39:20,080 --> 00:39:21,160
Speaker 3: what they want to learn more about it?

735
00:39:21,360 --> 00:39:23,600
Speaker 2: What's the ignorance that maybe we have to be careful,

736
00:39:23,600 --> 00:39:24,440
Speaker 2: we're not I don't want.

737
00:39:24,320 --> 00:39:26,960
Speaker 3: To tell ignoring maybe, but like maybe you feel more

738
00:39:26,960 --> 00:39:29,080
Speaker 3: comfortable going to your financial advisor.

739
00:39:29,320 --> 00:39:32,680
Speaker 8: Well, the number one issue right now is the number

740
00:39:32,680 --> 00:39:35,680
Speaker 8: one issue in the market, both that people want to

741
00:39:35,680 --> 00:39:40,279
Speaker 8: know about the bill, Why are you so convinced that

742
00:39:40,320 --> 00:39:43,680
Speaker 8: this inflation is not going to go away? And that

743
00:39:43,719 --> 00:39:47,359
Speaker 8: we're in an inflationary ere that that is the number

744
00:39:47,400 --> 00:39:50,480
Speaker 8: one question we get from financial advisors and institutions all

745
00:39:50,520 --> 00:39:53,600
Speaker 8: across the country. Why are you so adamant compared to

746
00:39:53,760 --> 00:39:57,239
Speaker 8: other people. So we just got a chart today from

747
00:39:57,280 --> 00:40:00,000
Speaker 8: the folks at Cyprus Capital. They put out great charge

748
00:40:00,560 --> 00:40:05,480
Speaker 8: and it shows that the thirty year tips the Treasury

749
00:40:05,520 --> 00:40:10,000
Speaker 8: inflation protected securities got to a two percent spread for

750
00:40:10,040 --> 00:40:13,960
Speaker 8: the first time since twenty twelve, and it hit me

751
00:40:14,080 --> 00:40:16,759
Speaker 8: like a load of bricks. We were trying to tell

752
00:40:16,800 --> 00:40:20,480
Speaker 8: people in twenty twelve that they shouldn't be worried about

753
00:40:20,480 --> 00:40:24,480
Speaker 8: inflation because they were looking at the growth and the

754
00:40:24,480 --> 00:40:27,360
Speaker 8: money supply to try to get us out of the

755
00:40:27,400 --> 00:40:31,719
Speaker 8: financial crisis and thinking that that was automatically going to

756
00:40:31,760 --> 00:40:37,040
Speaker 8: equate to inflation. But that money supply only becomes inflationary

757
00:40:37,440 --> 00:40:43,240
Speaker 8: if it gets used. So fast forward to today, nine

758
00:40:43,520 --> 00:40:50,640
Speaker 8: plus trillion dollars of stemmy checks and PPP and government

759
00:40:50,719 --> 00:40:56,080
Speaker 8: forgiveness and YadA, YadA, YadA. The borrowing this time did

760
00:40:56,360 --> 00:41:00,920
Speaker 8: get put into the system. People do want to buy houses.

761
00:41:01,000 --> 00:41:04,600
Speaker 8: They didn't in two thousand and nine, ten, eleven, and twelve,

762
00:41:05,239 --> 00:41:10,800
Speaker 8: So the last time we got here, people were definitely

763
00:41:10,920 --> 00:41:14,960
Speaker 8: afraid of inflation in twenty eleven, twenty twelve for no

764
00:41:15,080 --> 00:41:18,839
Speaker 8: reason whatsoever. And this time there are too many millennials

765
00:41:19,000 --> 00:41:22,040
Speaker 8: with too much money chasing too few goods, and the

766
00:41:22,160 --> 00:41:24,959
Speaker 8: cat is already out of the bag. You cannot take

767
00:41:25,040 --> 00:41:26,520
Speaker 8: this and stuff it back in.

768
00:41:26,880 --> 00:41:29,319
Speaker 2: You shared notes with our producer Paul Brennan, and you say,

769
00:41:29,360 --> 00:41:32,719
Speaker 2: this financial euphoria episode has gone to a sustained high

770
00:41:32,760 --> 00:41:36,319
Speaker 2: that makes the dot com bubble look like small change.

771
00:41:36,840 --> 00:41:38,560
Speaker 2: So how does it end then?

772
00:41:38,719 --> 00:41:42,520
Speaker 8: In your view, well, it ends the way they all end.

773
00:41:42,800 --> 00:41:46,239
Speaker 8: It ends the way RCA ended in twenty nine, the

774
00:41:46,280 --> 00:41:50,040
Speaker 8: way the Go Go sixties added for the Jerry Size

775
00:41:50,120 --> 00:41:53,400
Speaker 8: Enterprise Fund, the way the nifty to fifty died in

776
00:41:53,480 --> 00:41:56,680
Speaker 8: nineteen seventy two, the way the dot com bubble died.

777
00:41:57,400 --> 00:42:01,439
Speaker 8: They all end the same way. The residential real estate

778
00:42:01,440 --> 00:42:05,360
Speaker 8: Euphouri three to six, they all end the same way.

779
00:42:05,160 --> 00:42:09,080
Speaker 8: So it's funny people say, well, gee, you know, it

780
00:42:09,880 --> 00:42:13,040
Speaker 8: just seems like it's going on forever. Yes, we've basically

781
00:42:13,080 --> 00:42:16,799
Speaker 8: had a three or four year topping process in this

782
00:42:16,920 --> 00:42:20,960
Speaker 8: financial Elfouria episode compared to say, a year and a

783
00:42:21,000 --> 00:42:23,759
Speaker 8: half topping process in the dot com bubble. That's why

784
00:42:23,840 --> 00:42:25,800
Speaker 8: we think it's going to be so much more damaging

785
00:42:26,080 --> 00:42:29,399
Speaker 8: because they've sucked way more people in and way more

786
00:42:29,440 --> 00:42:33,160
Speaker 8: money in. And then they called up Doug Flutie and said, hey,

787
00:42:33,239 --> 00:42:35,640
Speaker 8: let's throw a hail Mary and get people all jacked

788
00:42:35,680 --> 00:42:39,040
Speaker 8: up about this AI thing, and they did so.

789
00:42:39,080 --> 00:42:42,320
Speaker 3: Then tell us specific names that you're buying in your.

790
00:42:42,200 --> 00:42:47,319
Speaker 8: Selling well, not doing much selling because we've kind of

791
00:42:47,320 --> 00:42:51,600
Speaker 8: avoided the Euphorix stuff since the second half of twenty

792
00:42:51,640 --> 00:42:54,800
Speaker 8: twenty one. But we really like the oil business. We

793
00:42:56,520 --> 00:43:04,320
Speaker 8: like oxy o vand Devon Apache. It's just an ideal setup.

794
00:43:04,320 --> 00:43:07,879
Speaker 8: There's just almost no money is being spent poking holes

795
00:43:07,920 --> 00:43:11,960
Speaker 8: in the ground, and therefore whoever has existing streams of

796
00:43:12,000 --> 00:43:15,600
Speaker 8: production it will get much more valuable. I'm on a

797
00:43:15,719 --> 00:43:21,759
Speaker 8: drive from the Portland, Oregon area down to where we

798
00:43:21,840 --> 00:43:25,440
Speaker 8: live in Phoenix, and I passed a whole bunch of

799
00:43:25,480 --> 00:43:30,880
Speaker 8: wind turbines in the windiest area of the Columbia River Gorge,

800
00:43:31,360 --> 00:43:35,520
Speaker 8: the Gorge Scenic Area, and they're not moving today. So

801
00:43:35,680 --> 00:43:39,040
Speaker 8: some days they don't move, but every day people need

802
00:43:39,040 --> 00:43:43,879
Speaker 8: the energy and it doesn't always sunshine where they make

803
00:43:44,120 --> 00:43:50,360
Speaker 8: solar energy, whereas the fossil fuels are there every single day,

804
00:43:50,680 --> 00:43:52,560
Speaker 8: regardless of whether the wind blows.

805
00:43:52,880 --> 00:43:55,560
Speaker 2: Hey, just real quickly, just got about thirty forty seconds,

806
00:43:56,040 --> 00:43:59,480
Speaker 2: and I agree with you because the transition to evs

807
00:43:59,480 --> 00:44:03,680
Speaker 2: it's happened, but it's slow, and supply demand metrics seem

808
00:44:03,760 --> 00:44:06,719
Speaker 2: to be in oil's favor. Thirty seconds left. Homebuilders you

809
00:44:06,760 --> 00:44:08,560
Speaker 2: still like that, right, that group, some of.

810
00:44:08,560 --> 00:44:12,880
Speaker 8: Them still like them. They were very strong and we

811
00:44:12,920 --> 00:44:14,920
Speaker 8: had a bit of a uphouric on the news that

812
00:44:14,960 --> 00:44:19,080
Speaker 8: Buffetts folks were buying. That's a great five to ten

813
00:44:19,160 --> 00:44:24,240
Speaker 8: year play because whenever we finally decide to stop kitening

814
00:44:24,320 --> 00:44:29,320
Speaker 8: credit and allow rates to come down in the next recession,

815
00:44:29,719 --> 00:44:32,480
Speaker 8: I think those stocks will take off like a cut cat.

816
00:44:32,320 --> 00:44:35,560
Speaker 2: All right, And they've already had some nice performance outperformance,

817
00:44:35,600 --> 00:44:38,319
Speaker 2: certainly in the past year or so, or certainly this year.

818
00:44:38,400 --> 00:44:41,560
Speaker 2: Bill smeeid, we always appreciate it. Bill smeeith, he's founder

819
00:44:41,560 --> 00:44:44,480
Speaker 2: in CIO at Smeat Capital Management. We mentioned the value

820
00:44:44,600 --> 00:44:49,200
Speaker 2: fund beating pretty much all of its peers over the

821
00:44:49,280 --> 00:44:53,160
Speaker 2: past five years ninety nine percentile. Carol Master just metten.

822
00:44:53,520 --> 00:44:54,520
Speaker 2: This is Bloombird.

823
00:44:56,360 --> 00:45:01,760
Speaker 1: This is the Bloomberg Business Week podcast, Spotify and anywhere

824
00:45:01,800 --> 00:45:05,719
Speaker 1: else you get your podcast. Listen live weekday afternoons from

825
00:45:05,760 --> 00:45:09,800
Speaker 1: three to six Eastern on Bloomberg dot com, the iHeartRadio app,

826
00:45:09,880 --> 00:45:12,439
Speaker 1: tune In, and the Bloomberg Business App. You can also

827
00:45:12,520 --> 00:45:15,960
Speaker 1: watch us live every weekday on YouTube and always on

828
00:45:16,000 --> 00:45:17,080
Speaker 1: the Bloomberg terminal