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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day, we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. We have a perfect

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Speaker 1: segue there. Talking about retail sales, Greg Jarrett, we have

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Speaker 1: Angie Solanki joining US, National director of Retail for US Colliers. Uh, Angelie,

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Speaker 1: thanks so much for joining us. Here is Greg was

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Speaker 1: just mentioning really strong retail sales coming out this morning.

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Speaker 1: You know, what do you make of it, because again

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Speaker 1: across the board the West, some concerned about the consumer,

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Speaker 1: but some really strong numbers this morning. Yeah, we're actually

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Speaker 1: quite surprised and also excited. I mean, we're forecasting for

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Speaker 1: year and somewhere around six percent increase in holiday sales,

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Speaker 1: and we just feel that people are still looking to

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Speaker 1: get back into the stores. The traffic is back. We

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Speaker 1: saw about eighty three to increase in foot traffic, whether

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Speaker 1: it was department stores, apparel stores, or beauty So people

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Speaker 1: are getting ready for the holidays. Is there going to

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Speaker 1: be enough stuff for them to buy? I mean, I'm

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Speaker 1: I'm already having visions of walking into the Toys r

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Speaker 1: Us and seeing the shelves empty, although I don't know

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Speaker 1: they'll be walking into a Toys are Why aren't you

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Speaker 1: walking into a Toys r Us for Steve there? Yeah,

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Speaker 1: find a different store. But yeah, there aren't any more

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Speaker 1: or less in terms of physical stores. However, we do

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Speaker 1: still have the same concerns. So, you know, holidays shopping,

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Speaker 1: although it is starting early, we definitely think the reason

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Speaker 1: why is because shoppers are a bit worried about the

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Speaker 1: supply chain, may feel Holidays away from them, so they're

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Speaker 1: going to be potentially less merchandise well just may not

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Speaker 1: arrive on time. So there is you know, those concerns

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Speaker 1: still do exist. Um, so we'll probably see an early

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Speaker 1: shopping spree and that's going to actually, I think help,

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Speaker 1: although um retailers hopefully are well prepared for this. Yeah,

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Speaker 1: that's kind of where I wanted to go, because we

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Speaker 1: don't hear from the retail companies in terms of earnings

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Speaker 1: for a couple more weeks here. I mean, what are

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Speaker 1: the retailers saying about their inventories are about their ability

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Speaker 1: to get product when it's needed, because boy, we're hearing

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Speaker 1: it from so many others that there wrote backups at

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Speaker 1: the ports. For example, there's lacks of lack of truck drivers,

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Speaker 1: trains are backed up, the containers and everywhere you look.

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Speaker 1: It seems to really be a big issue. Yeah, it's

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Speaker 1: a bit of a mis uh mismatch. And what I

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Speaker 1: mean by that is possibly what is occurring right now.

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Speaker 1: Some retailers are receiving shipments that were prior season, so

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Speaker 1: that now they're conflicted with hold on a second, I

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Speaker 1: don't even have my holiday shipment. Now I have my

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Speaker 1: prior season merchandise. How am I going to put that

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Speaker 1: into the store? Do I need to discount that? So

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Speaker 1: the pressure that is being pushed onto retailers is just

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Speaker 1: it's just all over the map. And I feel for

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Speaker 1: them because it's a big struggle. Um, not only are

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Speaker 1: they struggling with you know, the merchandise coming in on

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Speaker 1: time or over a merchandise meaning that they probably have

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Speaker 1: either received multiple orders two or three times what they

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Speaker 1: planned for, So now they may have too much merchandise

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Speaker 1: during the holiday season, and will that extend their holiday

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Speaker 1: potential sales into January February. By the way, do you

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Speaker 1: think we saw savings rates jump during the pandemic and

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Speaker 1: they've come back down stabilized a couple of percentage points

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Speaker 1: above the historical average. Do consumers spend down back to

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Speaker 1: you know, the norm? I know we're actually going to

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Speaker 1: see an increase in spend based on some surveys we've

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Speaker 1: been reading, we actually see that consumers are going to

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Speaker 1: spend either a little bit more compared to prior year UM,

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Speaker 1: but probably roughly around you know, about six to seven

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Speaker 1: hundred dollars on the average spend for gifts during this

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Speaker 1: holiday season. I think if people are still really in

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Speaker 1: the mood to celebrate, you know, the mass mandates are

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Speaker 1: relaxing quite a bit, especially in our more dense urban cities,

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Speaker 1: So we will definitely see a bit more spend occurred

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Speaker 1: this year, and then we'll start to see hopefully and

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Speaker 1: softening UM and next year with the with the savings

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Speaker 1: and so forth. And you talked to us about real estate,

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Speaker 1: retail real estate. I'm here on Lexington Avenue between fifty

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Speaker 1: eight and fifty nine Street, UM. All of the retail

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Speaker 1: space with the exception of one very small Swiss chocolate

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Speaker 1: store remain empty. Are what are we thinking about? What

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Speaker 1: are the retailers saying about, you know, getting back into

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Speaker 1: the physical stores now? They're definitely retailers are very excited.

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Speaker 1: It's actually been a very busy year. I have to

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Speaker 1: stay within our organization at Colliers. We've just and the

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Speaker 1: transactions are speeding up. I think what we're seeing is

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Speaker 1: the falling right now. Fifty fine million square feet of

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Speaker 1: retail has been absorbed across the US year to date,

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Speaker 1: and there's another fifty million square feed about that is

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Speaker 1: under construction. So we are seeing momentum. There's movement from

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Speaker 1: other markets, global markets where retailers are coming into our

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Speaker 1: into the US. But what we're seeing is a very

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Speaker 1: strategic approach. So they're really taking the time to say, Okay,

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Speaker 1: if we're going to expand, where should we expand first.

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Speaker 1: So what I mean by about is, of course, a

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Speaker 1: lot of people left the city and so when they left,

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Speaker 1: um retailers follow. And so the retailers are saying, let's

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Speaker 1: go into some of these suburban markets where we're seeing

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Speaker 1: you know, year over year sales increases from our competitors. Uh,

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Speaker 1: and there's some great locations. Let's try to get in

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Speaker 1: now and then we'll start to look at or relook

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Speaker 1: at some of our urban markets. But it's not going

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Speaker 1: to you know, there's still it's still you know, viable space. Please.

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Speaker 1: You know, remb umber that rechire not going away, and

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Speaker 1: the physical footprint is definitely not going away. I wonder

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Speaker 1: if anybody wants to move back to Midtown. Our stores

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Speaker 1: are empty, right, Paul? Is it still pretty empty around

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Speaker 1: the Bloomberg office. Yeah, but the tourists are slowly coming back.

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Speaker 1: I was again, I was out in the city having

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Speaker 1: dinner last night, and I noticed that the tourists are

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Speaker 1: starting to come back. So it's the worst of both

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Speaker 1: worlds exactly. They're always welcome, of course. Of course, Hey, Angie,

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Speaker 1: thanks so much for joining us. Angie Solanki, their national

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Speaker 1: director of retail for the US. Over at call, you're

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Speaker 1: talking to us about what do you expect this holiday

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Speaker 1: season after we had some real bang up numbers on

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Speaker 1: the US economy. Let's bring in a j Odin right now.

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Speaker 1: He's an investment strategist at b n y Melon Investor Solutions,

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Speaker 1: and um, we're looking at another rally today after yesterday

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Speaker 1: we had the biggest games. I believes in March. What's

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Speaker 1: driving us higher in the face of inflation concerns, supply

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Speaker 1: chain issues, labor shortages. Thanks for having it, That's a

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Speaker 1: great question, and I think a lot of it has

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Speaker 1: to do with we're chipping away slowly at that wall

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Speaker 1: of worry that we saw in September. September were sort

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Speaker 1: of everything sort of came together in this perfect storm,

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Speaker 1: and we saw the death ceiling issues sort of added

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Speaker 1: to that persistent inflation question, and then the news that's

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Speaker 1: trying to about the potential for real estate um position

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Speaker 1: more contagion issue, but obviously became more contained. And so

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Speaker 1: all of that created a lot of volatility in October

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Speaker 1: and now obviously I mean in September, but obviously now

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Speaker 1: we chipped away a little bit. The death citing issue

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Speaker 1: pushed off until December, and although supply chain issues haven't

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Speaker 1: been resolved, the labor market numbers that we're getting being

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Speaker 1: a little bit stronger, moving from five down to four

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Speaker 1: point eight were we I think the market is digesting

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Speaker 1: the fact that although we're still going to have some

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Speaker 1: persistent inflation, supply chains are gonna take a little bit

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Speaker 1: time to normalize that the markets are still supportive of

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Speaker 1: rich assets and inflations. Clearly here that's why you're seeing

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Speaker 1: fixed incomes fell off, But where investors are going is

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Speaker 1: to where they can get some sense of inflation protection.

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Speaker 1: That's I guess, while you're also seeing movement in the

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Speaker 1: crypto market as well. So clearly the quality names, the

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Speaker 1: ones that have pricing power, are going to have staying

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Speaker 1: power and the age and ability to ride out some

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Speaker 1: of this inflationary turbulence that we're gonna see for the

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Speaker 1: next few months. And I think that's why you're seeing

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Speaker 1: the doubt out performing the rest of the major industry.

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Speaker 1: So a J do I Do I stick with that

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Speaker 1: rotational trade? You know, a lot of folks made back

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Speaker 1: boys September of last year really arguably into the more

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Speaker 1: cyclical names, maybe the banks, the energy names. Do I

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Speaker 1: stick with that? Order? I try to again take a

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Speaker 1: look at the quality top line growth stories, whether it's

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Speaker 1: tech or healthcare. How do I think about that? I

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Speaker 1: think it's gonna be a little bit of both. You

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Speaker 1: want some income, right, you want diving in um yield

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Speaker 1: as well, all as you want those quality names. UM

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Speaker 1: We're gonna see turbulence overall, But it seems like this

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Speaker 1: is reopened three point oh in a sense. Right, we

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Speaker 1: keep coming back to to you know, it's reopening the economy.

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Speaker 1: Then there seems like we pull back a bit. But

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Speaker 1: even seeing the news about international travel restriction being lifted

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Speaker 1: for vaccinated UM consumers, that's that's that's all positive news.

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Speaker 1: And and it seems like this time hopefully that we're

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Speaker 1: gonna we're gonna be staying in that reopen trend. So

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Speaker 1: to your point, I think it's gonna be a little

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Speaker 1: bit of both. It's gonna be income quality with those

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Speaker 1: with pricing power, but also reefs as well. We like those, um,

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Speaker 1: going going forward as we we we navigate this inflationary pressure. Um.

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Speaker 1: What about property here? I wonder you like reads, Um,

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Speaker 1: do you buy real estate even even in this inflated market?

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Speaker 1: Do you think you're so you're saying about the actual

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Speaker 1: individual housing? Um? Yeah, you know, I think I think

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Speaker 1: prices prices are a bit high, um. And so from

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Speaker 1: from individual perspective, I mean, if I think about myself,

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Speaker 1: I would probably probably hold tight a bit um. And

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Speaker 1: but I mean from a reef financing perspective, it seems

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Speaker 1: like that's what a lot of consumers are doing, and

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Speaker 1: it doesn't make sense while rates are low, um, even

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Speaker 1: though they are creeping up, creeping up a bit um,

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Speaker 1: you do you do get the value. I mean, you know,

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Speaker 1: housing prices, Hopefully you'll hold the value. I mean it

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Speaker 1: in a sense that that real act, that the ability

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Speaker 1: to just sort of in a sensive access as an

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Speaker 1: equity in and keeping keeping too inflation trends, so I

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Speaker 1: I would caution it just because of prices and hopefully

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Speaker 1: you know when when things normalize a bit, maybe prices

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Speaker 1: come back when it comes to individual housing. But from

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Speaker 1: the res perspective, we do like the income um and

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Speaker 1: and instability to sort of deal with the tapering and

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Speaker 1: the potential for area likes that are coming into Paul

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Speaker 1: Paul is not the best time to buy an individual,

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Speaker 1: but converse league a great time to sell a j

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Speaker 1: We've we had some good financials. Have earnings results in

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Speaker 1: the financials UH this week capped off here by Goldman

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Speaker 1: Sax today. What are you looking for UH in this

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Speaker 1: earning period as we kind of get into the meat

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Speaker 1: of over the next couple of weeks. I mean, it's

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Speaker 1: super spinning is so important, right, I mean, we have

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Speaker 1: to think about with this pandemic, everything sort of came

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Speaker 1: to a stand cell and we've been looking for organic

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Speaker 1: growth to take over, and it's to be it's that

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Speaker 1: handoff for that bridge between fiscal and monetary policy to

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Speaker 1: come over into really just from the economy itself sort

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Speaker 1: of standing on its own. And so continuing to see

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Speaker 1: strong earning numbers is important for us because we need

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Speaker 1: to know that that baton handoffs can happen, and that

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Speaker 1: as we see capering and potential for rate hikes down

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Speaker 1: the future, that we won't see any sort of pullback

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Speaker 1: in the economy. So I think to continue to see

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Speaker 1: stronger earning numbers is going to be important overall. And

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Speaker 1: the earnings that we've seen so far, you're impressed, I

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Speaker 1: mean you're be with the for example, the financials we've seen.

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Speaker 1: I think it's showed divertification from the banks. I mean,

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Speaker 1: when we think about the banks, can we think about uh,

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Speaker 1: it's usually it's a lot of it has to do

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Speaker 1: with the yield curve, but their ability to do so

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Speaker 1: in a low interest rate environment and still produced is

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Speaker 1: a positive for the market. So I think that strong financials. Uh. Overall,

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Speaker 1: it's definitely a positive seeing as that we're still at

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Speaker 1: you know, a zero percent fund. Ray All right, A

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Speaker 1: j thank you so much for joining us. We really

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Speaker 1: appreciate getting your thoughts here. A j Oden investment strategist

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Speaker 1: for b n Y Melan Investors Solution. So, Matt, not

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Speaker 1: a good time to be a buyer real estate. I

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Speaker 1: think that's terribly unfortunate in my case. Um, I'm if

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Speaker 1: it's your if it's your primary residence, I think there's

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Speaker 1: not much you can do. And yeah, but you're just

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Speaker 1: not going to be headed home pretty soon. I feel

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Speaker 1: like if I if I rent a place, I'm just

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Speaker 1: gonna be I feel like I'm just giving money away hurt. Yeah,

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Speaker 1: but you gotta think that the market's not gonna be

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Speaker 1: this crazy for this long. But who knows. Um so,

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Speaker 1: but it's even a rental markets in the city, it's

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Speaker 1: gotten very tight, very quickly. But maybe on the burbs

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Speaker 1: it's a little bit better. Well, they buy the dippers

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Speaker 1: seemed to have won the day again today. Let's get

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Speaker 1: a sense of maybe where we go from here. As

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Speaker 1: we get into the meat of this third quarter earning season,

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Speaker 1: we bring in a grizzled voice from the investment community.

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Speaker 1: Christine Hooper, chief Global market strategist for Investment, Well, I

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Speaker 1: say grizzle because listen to this. They have one point

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Speaker 1: five trillion dollars in assets under management. So when Christina speaks,

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Speaker 1: people listen, and we are so approached to having Christina

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Speaker 1: on our show over time. Christina again. It feels like,

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Speaker 1: just when people were starting to get a little worried,

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Speaker 1: a little bit spooked about this market, the wall of

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Speaker 1: worry and all those things that are out there, the

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Speaker 1: past couple of days, I kind of erased that a

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Speaker 1: little bit. Well, certainly, but I wouldn't say we're out

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Speaker 1: of the woods yet. I would expect continued volatility. What

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Speaker 1: we learned from the f O m C minutes is

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Speaker 1: that the FED is full speed ahead and likely to

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Speaker 1: announce and begin tapering in November. I think that will

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Speaker 1: contribute to volatility, as will the continuation of earning season.

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Speaker 1: Not so much. I think for any negative surprises, I

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Speaker 1: certainly will get a few of those, but I think

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Speaker 1: it's more about the guidance for the future and issues

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Speaker 1: like supply chain disruptions. So what about um inflation? Is

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Speaker 1: the FED moving you think quick enough to keep this

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Speaker 1: under control. Well, um, hopefully it is. I think so,

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Speaker 1: just because I'm of the camp that that most of

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Speaker 1: the inflation we're seeing is relatively transitory. Now keep in

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Speaker 1: mind that transitory doesn't mean that it goes away in

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Speaker 1: a month or two um. In fact, there's some some

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Speaker 1: dictionaries that would define transitory is not permanent. But I

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Speaker 1: do think we're likely to see elevated prices, higher inflation

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Speaker 1: war of the coming months, and that it may not

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Speaker 1: uh may not moderate until the middle of next year.

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Speaker 1: So we have to to buckle our seatbelts and expect

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Speaker 1: that to be problematic, and that some of the headlines

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Speaker 1: could be scary, but this really shouldn't impact long term investors. So, Christina,

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Speaker 1: we had a lot of the big bank's report results

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Speaker 1: this week, have to buy some just some eye popping

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Speaker 1: numbers out of Goldman Sacks today. What did you take

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Speaker 1: from the financials and what we saw this week? Well,

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Speaker 1: I certainly expected financials to be a highlight of earnings.

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Speaker 1: Right that there are certainly far more tail winds than

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Speaker 1: headwinds for the financial space, So this isn't surprising. I

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Speaker 1: just don't want us to be lulled into a false

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Speaker 1: sense of security because some some sectors, some industries are

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Speaker 1: not going to fare as well in this environment as

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Speaker 1: financials have. So which ones are are you most concerned about? Well,

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Speaker 1: I think certainly the ower marchin industries um UM, transportation,

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Speaker 1: general retail, um, autos um, those that are certainly being

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Speaker 1: um impacted by supply chain disruptions. I think that's where

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Speaker 1: we're going to see some of the pain uh this

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Speaker 1: this earning season. And again though I don't think it

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Speaker 1: should deter investors. I think we just need to be

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Speaker 1: prepared for this. Yeah, I'm looking at my map go

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Speaker 1: function on the Bloomberg terminal and I like to look at,

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Speaker 1: you know, the the number of ships cargo ships that

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Speaker 1: are outside Los Angeles or Savannah, New York and some

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Speaker 1: of the big U s ports. It ain't get any

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Speaker 1: better out there. And I'm kind of concerned over the

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Speaker 1: next couple of weeks when we hear from consumer products companies,

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Speaker 1: technology companies, industrial companies that we're going to hear a

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Speaker 1: lot about supply chain issues. It just feels like it's

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Speaker 1: going to be a longer term issue that perhaps the

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Speaker 1: market is not fully discounting how do you think about that? Well,

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Speaker 1: I think the market is certainly store in to discount it. Um.

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Speaker 1: This is very understandable. We're coming out of this incredible

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Speaker 1: economic disruption in the pandemic. UM. So it makes sense

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Speaker 1: that we're experiencing all these issues and it makes sense

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Speaker 1: that it will take some time for them to be

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Speaker 1: worked out. Um. Having so, having said all that, I

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Speaker 1: would expect, especially not only companies UH in those areas,

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Speaker 1: to talk about difficulties thus far, but to give guidance

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Speaker 1: for the fourth quarter. I'm quite frankly this situation has

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Speaker 1: gotten worse in the last couple of weeks, so it's

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Speaker 1: it's more going to be about UH next quarters earnings

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Speaker 1: and the impact there. So I think guidance is absolutely critical.

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Speaker 1: UH to the extent that companies have visibility, I was

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Speaker 1: going to say, don't you think visibility is lacking right now? Um,

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Speaker 1: Certainly some have greater visibility than others. I think as

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Speaker 1: think companies have. Some companies at least have a better sense,

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Speaker 1: for example, of semiconductor supplies and how that situation is

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Speaker 1: of versus what we're seeing in in in other areas

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Speaker 1: in terms of supply chain disruptions. But yes, UM. In general,

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Speaker 1: visibility is going to be a challenge. Do you think

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Speaker 1: earnings have come down enough to reflect some of these

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Speaker 1: margin pressures that we might see in Christina or do

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Speaker 1: you think there's maybe some risk to this market from

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Speaker 1: from earnings. Well, I certainly think that that earnings UM

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Speaker 1: are are going to be negatively impacted. And I think

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Speaker 1: it doesn't mean that we're going to see anything terrible UM,

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Speaker 1: but certainly for those companies with the narrow margins, it's

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Speaker 1: going to have a significant impact. But again, it's a

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Speaker 1: relatively short term problem in the grand scheme of things.

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Speaker 1: It seems like a long term problem right now because

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Speaker 1: it could last several quarters UM, but UM for those

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Speaker 1: with a long time horizon, these are kinds of issues

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Speaker 1: that could present buying opportunities if they're reflected in stock prices.

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Speaker 1: I just want to quickly get your take on rates.

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Speaker 1: We've seen the ten year climb back up to one

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Speaker 1: sixty basically right now. One where do you see rates going? So?

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Speaker 1: I think that that the movement is going to be higher,

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Speaker 1: but I don't think that it's going to be a

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Speaker 1: smooth move and they're certainly going to be headlines events,

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Speaker 1: data releases that can send the yell lower temporarily, UM.

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Speaker 1: But in my mind, we're going to be closer to

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Speaker 1: two than one percent when we finished this year, and

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Speaker 1: I think we're going to be higher than where we

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Speaker 1: are today. So and again, just following up on that,

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Speaker 1: Christine UM, just wondering about the FED, UM, do you

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Speaker 1: expect this tapering, in this eventual rate increase policy that

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Speaker 1: we're likely to see over the next six and twelve months.

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Speaker 1: Do you expect this to be I guess well received

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Speaker 1: by the market or rational received by the market. I

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Speaker 1: think it will. Let's keep in mind that the stock

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Speaker 1: market has become so incredibly dependent upon accommodative monetary policy,

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Speaker 1: and so this is a situation in which UM, the

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Speaker 1: market is going to welcome, UM a a very slow

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Speaker 1: normalization process. And so I think in particular, things like

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Speaker 1: when J. Powell says that there has been a very

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Speaker 1: conscious un coupling of tapering from rate hikes, I think

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Speaker 1: that's a very well received because right now markets have

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Speaker 1: come to accept the fact that we're going to see

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Speaker 1: tapering start soon. UM, They're more wary about rate hikes

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Speaker 1: and where that might take us. So I think that

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Speaker 1: this this approach is and will be well received by markets.

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Speaker 1: All right, thanks so much for joining us, Christina. Always

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Speaker 1: great to get your insight. Christine and Hooper their chief

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Speaker 1: global market strategists over at Investco. As Paul said, they

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Speaker 1: have about one and a half trill billion dollars of

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Speaker 1: assets under management out of Atlanta. That does it for

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Speaker 1: this Friday. This is Bloomberg. Now let's get to Mark Noble.

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Speaker 1: He's the executive VP of E T F Strategy at

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Speaker 1: Horizons E T S and we want to talk about

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Speaker 1: the supply chain issues the semiconductor industry, how that's reshaping

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Speaker 1: supply chains. Um, Mark, what do you think about where

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Speaker 1: we stand right now? Is there any light at the

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Speaker 1: end of the tunnel here? I? I don't think so. Um.

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Speaker 1: I actually think that you know right now the semiconductor

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Speaker 1: issue with supply chains and the fact that semiconductors have

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Speaker 1: become probably the most highly politicized industry globally, means we're

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Speaker 1: probably looking at three for us to get some sort

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Speaker 1: of supply chain movement where these can get to market.

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Speaker 1: UM very much viewing what's happening with a semiconductor's market

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Speaker 1: to be similar to what we saw in the seventi

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Speaker 1: three oil shock, where the pandemic has really shown the

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Speaker 1: fragility of the supply chain where we've been so heavily

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Speaker 1: reliant on Asian manufacturing. The vast majority of semi connector

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Speaker 1: components are manufactured in Asia, the majority of i P

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Speaker 1: is in North America but not manufactured there. And it's

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Speaker 1: resulted in a situation where you know, the United States

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Speaker 1: and China are very much at odds to get control

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Speaker 1: of the semiconductor, which has really come to the four

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Speaker 1: as the key technology used for all consumer electronics, from

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Speaker 1: everything from you know, smart TVs and artificial intelligence to

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Speaker 1: of course what we've seen with automobiles. So it is

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Speaker 1: almost at a crisis situation, and you know, no amount

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Speaker 1: of money being thrown at it is probably going to

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Speaker 1: allow us to have reassoring of this commodity. And I'm

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Speaker 1: very much unu as a commodity until there's you know,

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Speaker 1: more excess manufacturing capacity, which will take a couple of

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Speaker 1: years to built. Mark, I don't even know how we

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Speaker 1: out here. I don't even have cocktail our kind of

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Speaker 1: knowledge of this topic. How did we get here? Well,

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Speaker 1: the reason that we got here was that for the

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Speaker 1: last fourty years, globalization has occurred where supply chain has

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Speaker 1: all been focused on just in time delivery of technology.

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Speaker 1: And so the United States benefit in technology has really

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Speaker 1: come from the I P which is developing the technology.

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Speaker 1: You know, you have Silicone Valley providing sort of the

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Speaker 1: brain trust for development of technology. But to actually build components,

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Speaker 1: you have components built all around the world. So for example,

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Speaker 1: if I'm doing etching on semiconductors, that's likely happening through

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Speaker 1: a SML in in Netherlands, but I'm actually building the

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Speaker 1: key components that go into you know, glaphics processing units,

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Speaker 1: which are the major driver of things like artificial intelligence

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Speaker 1: even automobiles. Now that's being done in Taiwan, and then

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Speaker 1: I have shipping coming through China, and I have you know,

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Speaker 1: Japan and Korea also offering different pieces, and all these

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Speaker 1: these uh uh supply chain opponents would come together to

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Speaker 1: create this just in time manufacturing. When you have any

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Speaker 1: disruption of the supply chain, which we've seen with the

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Speaker 1: pandemic UH it results in a breakdown of any one

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Speaker 1: of these components, you end up with complete gridlock in

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Speaker 1: getting these semiconductors to market. But that's only one piece

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Speaker 1: of it. The more important piece is that data is

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Speaker 1: really you know, the idea of data. If we talk

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Speaker 1: about where the economy is going for the next two decades,

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Speaker 1: really what we're moving forward is a digital economy, and

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Speaker 1: a digital economy requires semiconductors to move data. Very much

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Speaker 1: view data as the new oil. So semiconductors are the

430
00:24:33,400 --> 00:24:35,960
Speaker 1: new engine of that data. And if you want to

431
00:24:36,000 --> 00:24:38,840
Speaker 1: be you know, the lead economies in the next couple

432
00:24:38,880 --> 00:24:41,600
Speaker 1: of decades, you need to have exposure to semiconductors. And

433
00:24:41,680 --> 00:24:44,560
Speaker 1: what's happened is China, for example, realize that they have

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00:24:44,640 --> 00:24:47,359
Speaker 1: a huge vulnerability relative to the rest of the world,

435
00:24:47,400 --> 00:24:50,720
Speaker 1: and that they use semiconductors for all of their technology development,

436
00:24:50,720 --> 00:24:54,160
Speaker 1: but they don't actually manufacture them. So they've been holding semiconductors.

437
00:24:54,320 --> 00:24:56,760
Speaker 1: They've been taking you know, I p and people from

438
00:24:56,800 --> 00:24:59,280
Speaker 1: Taiwan to come and work there. And the United States

439
00:24:59,280 --> 00:25:02,960
Speaker 1: has now double down, even introduced an act in called

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00:25:02,960 --> 00:25:06,120
Speaker 1: the you know uh Chips in America Act where they're

441
00:25:06,119 --> 00:25:09,040
Speaker 1: also trying to double down to control the supply. So really,

442
00:25:09,040 --> 00:25:11,560
Speaker 1: for your listeners, it's almost viewing it like the oil

443
00:25:11,600 --> 00:25:14,600
Speaker 1: shock in the nineteen seventies, again where the safety and

444
00:25:14,640 --> 00:25:18,959
Speaker 1: security of these massive global economies is focused on controlling

445
00:25:19,080 --> 00:25:21,239
Speaker 1: supply of semi conductor is the way that they were

446
00:25:21,240 --> 00:25:27,800
Speaker 1: focused on controlling supply of oil in the eighties. So, um,

447
00:25:27,880 --> 00:25:30,560
Speaker 1: what's an investor to do in this situation? I mean,

448
00:25:30,600 --> 00:25:34,200
Speaker 1: what's the best way to hedge against these problems? Well,

449
00:25:34,480 --> 00:25:36,680
Speaker 1: it's interesting, you know, you would think this would create

450
00:25:36,760 --> 00:25:40,560
Speaker 1: volatility in the space, but actually creates an interesting opportunity

451
00:25:40,600 --> 00:25:45,480
Speaker 1: because one, there's only excess capacity being built and demand increasing.

452
00:25:45,480 --> 00:25:47,920
Speaker 1: So where we expect the semiconductor market to probably be

453
00:25:47,960 --> 00:25:51,320
Speaker 1: about a trillion dollar market by it's roughly a five

454
00:25:51,680 --> 00:25:54,439
Speaker 1: billion dollar market now. And the one thing that's interesting

455
00:25:54,440 --> 00:25:57,280
Speaker 1: in this market that doesn't exist with other technology markets

456
00:25:57,400 --> 00:25:59,639
Speaker 1: is that there's going to be I believe, hundreds of

457
00:25:59,680 --> 00:26:03,080
Speaker 1: billion of dollars spent by governments globally to support an

458
00:26:03,119 --> 00:26:08,960
Speaker 1: underpinned development and manufacturing in semiconductors. So your baseline revenue

459
00:26:08,960 --> 00:26:11,680
Speaker 1: of these companies or subsidies is very well controlled, even

460
00:26:11,720 --> 00:26:13,560
Speaker 1: if you end up with volatility. So as a long

461
00:26:13,680 --> 00:26:17,520
Speaker 1: term buy and hold investment, uh, it's probably extremely attractive

462
00:26:18,119 --> 00:26:21,040
Speaker 1: simply because demand is not going away and you've got

463
00:26:21,160 --> 00:26:23,760
Speaker 1: massive public investment going into this, like you would with

464
00:26:23,760 --> 00:26:26,159
Speaker 1: an infrastructure investment. So even if you end up an

465
00:26:26,160 --> 00:26:29,680
Speaker 1: inflationary market, you have that being supported with money coming

466
00:26:29,680 --> 00:26:32,640
Speaker 1: in from the public. And then long term semi conductors

467
00:26:32,680 --> 00:26:35,080
Speaker 1: are only going to be more widely used in all

468
00:26:35,160 --> 00:26:37,920
Speaker 1: facets of our life, which means long term demand does

469
00:26:37,960 --> 00:26:41,320
Speaker 1: not decline. So this is definitely a long term investment

470
00:26:41,320 --> 00:26:43,399
Speaker 1: play that has a lot of opportunity even if it

471
00:26:43,440 --> 00:26:46,960
Speaker 1: becomes a political powder keg at certain periods during the

472
00:26:47,000 --> 00:26:49,480
Speaker 1: supply chain disruption. All right, Mark, thanks so much for

473
00:26:49,560 --> 00:26:51,560
Speaker 1: joining us. Really appreciate that. I certainly have a better

474
00:26:51,600 --> 00:26:53,800
Speaker 1: understanding here, but I'm disappointed that we can't just throw

475
00:26:53,840 --> 00:26:56,880
Speaker 1: money at the problem. It's usually my strategy their Mark Noble,

476
00:26:56,920 --> 00:26:59,920
Speaker 1: executive VP of et F Strategy at Arise and ETFs.

477
00:27:00,080 --> 00:27:01,720
Speaker 1: Why can't you just throw money and build a more

478
00:27:01,840 --> 00:27:04,240
Speaker 1: a new fab plant. But apparently that takes a while.

479
00:27:04,280 --> 00:27:06,320
Speaker 1: I guess takes a while. It takes some time to

480
00:27:06,359 --> 00:27:10,240
Speaker 1: do that, and um, Unfortunately it looks like companies like

481
00:27:10,280 --> 00:27:12,359
Speaker 1: t SMC are willing to throw more money at it

482
00:27:12,359 --> 00:27:14,800
Speaker 1: than companies like Intel. Yeah. Interesting, but we got to

483
00:27:14,840 --> 00:27:17,520
Speaker 1: get some of that back on short. Sounds like as

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00:27:17,560 --> 00:27:20,280
Speaker 1: we talked to some of the experts like Mark. Thanks

485
00:27:20,280 --> 00:27:23,760
Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe

486
00:27:23,800 --> 00:27:27,520
Speaker 1: and listen to interviews with Apple Podcasts or whatever podcast

487
00:27:27,560 --> 00:27:31,080
Speaker 1: platform you prefer. I'm Matt Miller. I'm on Twitter at

488
00:27:31,119 --> 00:27:34,760
Speaker 1: Matt Miller three. Put on false Sweeney I'm on Twitter

489
00:27:34,800 --> 00:27:37,600
Speaker 1: at pt Sweeney before the podcast. You can always catch

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00:27:37,720 --> 00:27:39,240
Speaker 1: us worldwide at Bloomberg Radio.