WEBVTT - How Smart Is Your Home? Outlook For Smart Home Tech 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.640 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.120 at Bloomberg dot com slash podcast. All right, let's take 0:00:22.160 --> 0:00:24.239 a look at the smart home. And she met. You know, 0:00:24.280 --> 0:00:27.040 I recently sold my house and I'm only built it 0:00:27.120 --> 0:00:30.200 seventeen years ago. But apparently it's not smart enough because 0:00:30.200 --> 0:00:33.320 the new buyer had his tech guy come by to 0:00:33.400 --> 0:00:35.479 do an assessment. I think they're gonna be a big upgrade. 0:00:35.520 --> 0:00:37.159 I don't have a tech guy, but apparently a lot 0:00:37.159 --> 0:00:39.040 of people have a tech guy. You need a tech 0:00:39.040 --> 0:00:42.159 guy for your house. Aaron Amy, tech guy, co founder 0:00:42.240 --> 0:00:45.800 and CEO of Brilliant Home Technology. Aaron, thanks so much 0:00:45.840 --> 0:00:49.519 for joining us here. I guess the smart home, I 0:00:49.600 --> 0:00:51.559 know it's a big thing. Give us a sense of 0:00:51.600 --> 0:00:54.200 how big it is, how fast it's growing. What are 0:00:54.200 --> 0:00:56.960 people doing to their homes these days? Yeah, I mean 0:00:57.160 --> 0:01:00.080 it's it's the next great platform. Because technology advance is 0:01:00.120 --> 0:01:02.720 in a series of platform wars, and we've seen that 0:01:02.720 --> 0:01:06.600 happen with personal computers, Internet and then mobile. Uh. Smart 0:01:06.600 --> 0:01:09.240 home has is the next great platform and it has 0:01:09.360 --> 0:01:13.240 rapidly grown to more than seventy five billion dollars and 0:01:13.400 --> 0:01:16.680 is taking over every home. But so what is it? 0:01:16.720 --> 0:01:19.480 I mean? Is this where like the lights turn on 0:01:19.560 --> 0:01:21.480 and off when you walk in and out of rooms, 0:01:21.600 --> 0:01:27.040 does your stereo, like your playlist follow you around? Um? 0:01:27.080 --> 0:01:30.520 You know, does it adjust the thermos stat I don't 0:01:30.520 --> 0:01:33.720 get it. It does all of those things, and it 0:01:33.800 --> 0:01:37.039 basically personalizes your home, so it does what you wanted 0:01:37.120 --> 0:01:38.880 to do with a minimum of us and bother and 0:01:38.920 --> 0:01:41.920 it opens up new kinds of possibilities. So when someone's 0:01:41.959 --> 0:01:43.720 at the door, you see who it is and you 0:01:43.760 --> 0:01:46.319 can talk to them. You can give people permission to 0:01:46.360 --> 0:01:48.440 come into your home without having to make a key 0:01:48.480 --> 0:01:51.760 for them and the security risks that that entails. And 0:01:51.800 --> 0:01:54.400 then you can automate functions. So when you're gonna watch 0:01:54.400 --> 0:01:56.080 a movie or you're gonna go to bed, all of 0:01:56.080 --> 0:01:58.920 the different things that need to happen, whether it's temperature, 0:01:59.120 --> 0:02:02.080 whether it's light, whether it's locks and so on, can 0:02:02.120 --> 0:02:05.680 all happen automatically. So what are some of the most 0:02:05.680 --> 0:02:11.959 popular functionality that I guess people are asking for these days. Yeah, 0:02:11.960 --> 0:02:15.200 I mean smart locks has been a really important category 0:02:15.240 --> 0:02:18.160 of access control because there are a lot of security 0:02:18.200 --> 0:02:23.160 benefits uh to to being able to control access remotely. UH. 0:02:23.240 --> 0:02:27.040 Security has been a big area where where you have 0:02:27.120 --> 0:02:29.800 you have peace of mind that your home is secure. Uh. 0:02:30.000 --> 0:02:35.000 Lighting is a very important area. Smart music is another. 0:02:35.200 --> 0:02:38.280 Is another big one. Smart climate control both saves a 0:02:38.280 --> 0:02:41.200 lot of energy and makes homes more comfortable. So all 0:02:41.200 --> 0:02:44.760 of these categories have already proven themselves to be very significantly. 0:02:45.840 --> 0:02:49.359 So where do consumers get hold of all this? I mean, 0:02:49.400 --> 0:02:52.760 Paul's HomeBuyer had a tech guy. I don't even know 0:02:52.800 --> 0:02:55.840 where I would go to get one. Yeah, so there 0:02:55.919 --> 0:02:59.320 certainly are some, you know, some tech guys that you 0:02:59.320 --> 0:03:01.720 can get in so on. Increasingly, what we're seeing a 0:03:01.800 --> 0:03:05.679 brilliant is new homes being built with technology in them 0:03:05.720 --> 0:03:07.880 as well. So you can buy it yourself and you 0:03:07.880 --> 0:03:09.959 can install it yourself. You can have it a tech 0:03:10.000 --> 0:03:11.760 guy do it if you're not that is that chech 0:03:11.840 --> 0:03:15.520 forward yourself, or it simply comes when you get a 0:03:15.560 --> 0:03:18.120 new house or or you move into a new apartment. 0:03:18.200 --> 0:03:23.200 Because the developers are increasingly building homes as smart homes. 0:03:23.200 --> 0:03:25.320 So one of the things I'm concerned about. All right, 0:03:25.320 --> 0:03:27.800 what I've noticed, I guess, is that the technology changes 0:03:27.880 --> 0:03:30.120 so quickly. So whatever tech you put into your house, 0:03:30.840 --> 0:03:33.720 it's out of date, you know, five years later. It 0:03:33.800 --> 0:03:36.880 seems like it's got to be super super flexible to 0:03:36.960 --> 0:03:40.720 be adaptable going forward. It is, um, it is, and 0:03:41.000 --> 0:03:42.960 that's one of the changes. Uh. And one of the 0:03:42.960 --> 0:03:45.800 things that companies like Brilliant are doing is making sure 0:03:45.920 --> 0:03:48.920 that what we're doing is extensible. So for example, we're 0:03:49.000 --> 0:03:51.920 updating our software every two weeks, and the software is 0:03:51.960 --> 0:03:55.640 really the heart of the system. UM. So your home 0:03:55.720 --> 0:03:58.480 actually gets better as you as you live in it. 0:03:58.520 --> 0:04:00.800 And we've already seen this in other rbunus, like if 0:04:00.840 --> 0:04:03.400 you have a Tesla car, for example, you know they're 0:04:03.440 --> 0:04:06.120 always software updates, and and you know, one day your 0:04:06.120 --> 0:04:08.760 car can parallel park itself. One day it can send 0:04:08.760 --> 0:04:12.000 the autonomously drive. Uh. And that happens without having to 0:04:12.080 --> 0:04:16.160 update the underlying hardware platform. Are you worried about these 0:04:16.200 --> 0:04:19.600 devices getting hacked? I mean, I wouldn't want, for example, 0:04:19.680 --> 0:04:23.720 somebody to be watching me through my refrigerator or whatever 0:04:24.200 --> 0:04:27.600 you know, watching through the refrigerator. Note this is this 0:04:27.640 --> 0:04:30.200 is a really important topic. And uh and yes, you know, 0:04:30.360 --> 0:04:34.360 the the responsible companies in this field are very very 0:04:34.360 --> 0:04:39.400 careful about about security and actually bring additional security to 0:04:39.720 --> 0:04:43.680 uh to bear. I myself have a background in cybersecurity. UM. 0:04:43.960 --> 0:04:47.039 And you know, I think that we have the ability 0:04:47.120 --> 0:04:49.760 to offer much better security. For example, you don't have 0:04:49.839 --> 0:04:51.960 to leave your key under the welcome matter at a 0:04:52.000 --> 0:04:53.839 fake rock in the garden that everyone knows what it 0:04:53.839 --> 0:04:56.479 looks like. Uh. If it's to give people access to 0:04:56.520 --> 0:05:00.440 your house, all right, I guess that's that's where we're own, Matt. 0:05:00.520 --> 0:05:02.719 So when you, you know, buy your I'm happy to 0:05:02.800 --> 0:05:05.479 go there. I just want someone to do it for me. Yeah, 0:05:05.520 --> 0:05:07.200 you got a guy. We'll find you a guy. All right, 0:05:07.360 --> 0:05:09.520 maybe Aaron, Maybe we'll do that for Aaron. Amy, co 0:05:09.640 --> 0:05:13.240 founder CEO Brilliant Home Technology, is talking about upgrading the 0:05:13.240 --> 0:05:16.640 homes to technology. UM and again you know again, what 0:05:16.680 --> 0:05:19.640 I've noticed is the technology changes so quickly. So you 0:05:20.040 --> 0:05:22.320 look at some of those houses where they have like panels, 0:05:22.720 --> 0:05:25.039 you know, kind of in the wall, and they don't 0:05:25.080 --> 0:05:27.160 use them anymore. The intercom all that kind of stuff. 0:05:27.200 --> 0:05:29.000 I gotta say, I I first heard about all this 0:05:29.000 --> 0:05:33.280 stuff when Bill Gates Um built Zanna Do two point 0:05:33.320 --> 0:05:36.800 oh like twenty years ago. So now regular people are 0:05:36.839 --> 0:05:43.960 getting what exactly Let's get to the vaccine mandate for 0:05:44.000 --> 0:05:46.760 federal employees. It looks like President Biden is set to 0:05:46.839 --> 0:05:50.400 announce a vaccine mandate, and we have Josh wynd Grove 0:05:50.480 --> 0:05:52.880 who's broken the story. Josh, what are we looking for? 0:05:53.680 --> 0:05:56.279 You know, we're gonna hear from five PM, probably probably 0:05:56.279 --> 0:05:59.599 gonna get some more details beforehand. But to rewind to 0:05:59.720 --> 0:06:01.520 Jill Live, they said a rule he had to be 0:06:01.600 --> 0:06:04.479 vaccinated or you had an option to sort of do 0:06:04.560 --> 0:06:07.200 testing and masking and that sort of thing. Now he's 0:06:07.240 --> 0:06:09.719 expanding it, sort of taking away that option B so 0:06:09.800 --> 0:06:13.200 you have to be vaccinated, and he's expanding the number 0:06:13.320 --> 0:06:17.359 or the scope of the federal contract workforce that it 0:06:17.400 --> 0:06:20.720 applies to. Also previously was aimed at on site, so 0:06:20.839 --> 0:06:25.600 essentially more people being covered by this without an option 0:06:25.640 --> 0:06:29.120 to instead of get a vaccine, get regular testing and masking. 0:06:29.200 --> 0:06:32.320 So you know, obviously many details still TPD. You would 0:06:32.320 --> 0:06:35.520 expect pushback or legal challenges potentially to this. We don't 0:06:35.520 --> 0:06:38.400 know when this would take effect. We don't know what 0:06:38.400 --> 0:06:40.320 it would mean for let's say, a federal worker who 0:06:40.360 --> 0:06:43.960 showed up on that day without being able to demonstrate vaccination. 0:06:44.120 --> 0:06:46.680 So definitely moving target on this one, but a substantial 0:06:46.720 --> 0:06:50.359 expansion of the vaccine requirement and for federal workers. You know, 0:06:50.360 --> 0:06:52.720 it's interesting, Josh, you know roughly how many people were 0:06:52.720 --> 0:06:55.440 talking about here, Like it's not all federal employees, just 0:06:55.520 --> 0:06:59.760 executive branch employees plus federal contractors. That still sounds like 0:06:59.800 --> 0:07:01.360 a lot of people to make. Yeah, I mean, I 0:07:01.400 --> 0:07:03.880 think we're talking millions of people, but the exact member, 0:07:04.360 --> 0:07:06.400 you know, we don't know. And I think the question 0:07:06.720 --> 0:07:09.120 that I have right now is is, you know, why 0:07:09.120 --> 0:07:10.960 are we going to see push back from labor groups. 0:07:11.000 --> 0:07:14.640 Are they're going to be legal challenges or arbitration, you know, grievances, 0:07:14.720 --> 0:07:17.600 these kinds of things filed, you know, potentially, but the 0:07:17.600 --> 0:07:21.720 White House broadly abews these sort of you know, Alkhart mandates. 0:07:21.760 --> 0:07:23.800 Pretty big one for them is the ctereral government. But 0:07:23.800 --> 0:07:25.960 you know, for smaller companies are doing the same thing 0:07:26.400 --> 0:07:29.560 as a good way to sort of spur vaccination rates 0:07:29.600 --> 0:07:31.760 people sort of you know, I don't want to be 0:07:31.920 --> 0:07:34.680 ordered by the government to do it overall. But if 0:07:34.720 --> 0:07:37.480 your employer requires that, there's there's evidence of that leads 0:07:37.480 --> 0:07:40.640 to enough tick in vaccinations. But you know, of course, 0:07:40.680 --> 0:07:42.320 the concern on the flip side is that it might 0:07:42.400 --> 0:07:45.600 generate blowback or you know, get people's backed up, you know, 0:07:45.720 --> 0:07:48.040 that kind of thing. So, you know, broad a lot 0:07:48.080 --> 0:07:50.640 of moving parts in this especially it's almost like they're 0:07:50.680 --> 0:07:55.960 trying to antagonize, um, the Trumpian anti vaxers. We know 0:07:56.080 --> 0:08:02.600 that percent maybe more are valy opposed, right, Uh yeah. 0:08:02.960 --> 0:08:04.960 I mean there's different camps where you've got hardcore anti 0:08:05.000 --> 0:08:06.920 vax people. You've got people that can be bothered, you 0:08:06.960 --> 0:08:09.000 have people that have barriers, like they don't have paid 0:08:09.040 --> 0:08:10.600 time off to go get it, that sort of thing. 0:08:10.640 --> 0:08:12.680 You know. I think it's worth noting that vaccine has 0:08:12.680 --> 0:08:16.080 a nancy has been declining in the US, not maybe 0:08:16.080 --> 0:08:18.000 as fast as other countries, but it's been going down. 0:08:18.000 --> 0:08:22.239 And we now have you know, seventy of US adults 0:08:22.280 --> 0:08:24.840 with at least one shot. That's a fairly big number. 0:08:25.080 --> 0:08:27.480 And you know they had shot for seventy in July, 0:08:27.560 --> 0:08:30.000 they hit it in August and now seventy five. The 0:08:30.000 --> 0:08:31.920 problem of courses with delta you might need to get 0:08:32.320 --> 0:08:34.120 quite a bit higher than that when you And of 0:08:34.160 --> 0:08:36.240 course there's the whole segment of the population those under 0:08:36.240 --> 0:08:38.199 twelve that aren't eligible for a vaccine and are probably 0:08:38.200 --> 0:08:41.800 weeks or months away from being eligible. So you know 0:08:41.920 --> 0:08:44.760 the yeah, absolutely, you know, if you're die hard anti 0:08:44.800 --> 0:08:47.760 vax or, this is probably not going to change your mind. 0:08:47.840 --> 0:08:50.040 But there's there's folks in the middle essentially that aren't 0:08:50.080 --> 0:08:52.640 vaccinated to have questions. Maybe I haven't gotten around to 0:08:52.679 --> 0:08:55.280 it that that I think they're sort of hoping the 0:08:56.040 --> 0:08:58.200 mandates at the employer level in other with your job 0:08:58.280 --> 0:09:00.199 making you do it. Well, we'll have it if you 0:09:00.240 --> 0:09:02.640 have a difference. Yeah, Josh, it's you know, the big 0:09:02.640 --> 0:09:04.880 take story of the day that Matt and I had 0:09:05.280 --> 0:09:08.080 we were talking about this morning, focused on, you know, 0:09:08.240 --> 0:09:12.640 corporate mandates. Um, does a White House hope or anticipate 0:09:12.760 --> 0:09:16.520 that by taking this aggressive federal policy that they will 0:09:16.640 --> 0:09:19.600 you know, maybe coax or urge or prod some big 0:09:19.600 --> 0:09:23.280 corporations to kind of follow suit with vaccine and dates. Yeah. Absolutely, 0:09:23.280 --> 0:09:25.640 you know they're sort of hoping that people joined the 0:09:25.679 --> 0:09:28.960 parade behind them in this big wave started. You recall 0:09:29.080 --> 0:09:32.120 with the approval of Fiser's vaccine, remember from montsore reason, 0:09:32.120 --> 0:09:36.000 and only on an emergency authorization. When the FDA gave 0:09:36.040 --> 0:09:39.360 full approval, Biden's administration took that as a real sort 0:09:39.360 --> 0:09:43.080 of turning point to start saying, Okay, you know, corporate America, look, 0:09:43.200 --> 0:09:45.440 you know, you know it's not an emergency authorized vaccine, 0:09:45.600 --> 0:09:49.120 is now an approved vaccine. So you're on stronger footing 0:09:49.240 --> 0:09:52.440 morally legally what have you to be able to require vaccination? 0:09:52.480 --> 0:09:53.840 So I think we're going to expect to hear him 0:09:54.000 --> 0:09:56.280 call for that this evening, beat that drum. We also 0:09:56.360 --> 0:09:59.360 expect him to give an update on boosters. Remember they 0:09:59.360 --> 0:10:01.840 planned to start sister shots in a week from Monday. 0:10:02.200 --> 0:10:05.280 Maybe more on testing, a couple other elements on schools. 0:10:05.400 --> 0:10:07.800 There could be some you know, news if you will, 0:10:07.960 --> 0:10:10.240 in this speech, But broadly, I think he just wants 0:10:10.240 --> 0:10:11.720 to kind of sweep together what they've been doing over 0:10:11.760 --> 0:10:13.319 the summer to try to curb this thing as those 0:10:13.360 --> 0:10:16.040 cases rose. But so far, as far as we know, 0:10:16.080 --> 0:10:20.040 this is only a requirement for the two two vaccine shots, 0:10:20.120 --> 0:10:24.000 or is it? Will they require three? Now that's a 0:10:24.040 --> 0:10:26.400 good question right now that they consider too to be 0:10:26.440 --> 0:10:29.640 fully vaccinated, so that but that's that's as of now, 0:10:29.800 --> 0:10:32.319 so presumably that may change. But that is a huge 0:10:32.320 --> 0:10:34.680 open question right now among researchers about what will happen. 0:10:34.720 --> 0:10:36.599 And of course those folks have got that Johnson and 0:10:36.679 --> 0:10:39.640 Johnson shot something fourteen million of people in the US. 0:10:39.960 --> 0:10:41.760 They don't know what they're going to do for booster shots, 0:10:41.800 --> 0:10:44.240 and you know they're considered fully vaccinated after one shot, 0:10:44.360 --> 0:10:46.920 so you know, this, uh, a lot of questions still 0:10:46.960 --> 0:10:49.000 to be answered. We expect to have some clarity in 0:10:49.559 --> 0:10:52.400 you know, the afternoon, either around the speech, perhaps before 0:10:53.320 --> 0:10:56.360 the speech, on on what exactly they're proposing. And as 0:10:56.400 --> 0:10:58.360 I say, I'm expecting a bit of a wave of 0:10:58.440 --> 0:11:01.240 statements from labor groups and what have you saying you know, 0:11:01.320 --> 0:11:04.559 responding to this, you know, about their members potentially being 0:11:04.600 --> 0:11:06.280 forced to do this, and we just simply don't know 0:11:06.360 --> 0:11:09.800 the what you know, what if kind of factor? If 0:11:09.840 --> 0:11:12.400 someone shows up? Are they fired? Are they furloughed? Are 0:11:12.440 --> 0:11:14.440 they sent home? Are they you know, work from home? Like, 0:11:14.480 --> 0:11:16.600 what is the deal? We don't know. It's gonna be fascinatorry. 0:11:16.600 --> 0:11:18.559 We're gonna get more details coming throughout the day. You'll 0:11:18.600 --> 0:11:21.280 have and your team, lots of reporting there, I am sure. 0:11:21.360 --> 0:11:24.760 Josh wind Grove, White House, correspondent for Bloomberg News, joinings 0:11:24.760 --> 0:11:30.480 on the phone from Washington, d C. Again green on 0:11:30.520 --> 0:11:33.600 the screen, yet again at or near all time highs. 0:11:33.640 --> 0:11:35.840 As we continue to hear that from Greg jard and 0:11:35.920 --> 0:11:38.880 his reporting seemingly on a daily basis. It's just for 0:11:38.880 --> 0:11:40.719 a lot of folks, this feels like a market and 0:11:40.840 --> 0:11:43.559 looks like a market that is priced to perfection and 0:11:43.640 --> 0:11:46.920 might have some vulnerability into it, but that's not stopping 0:11:47.120 --> 0:11:49.160 this market. Let's check in with an expert who knows 0:11:49.200 --> 0:11:53.360 this stuff. Lisa Chalotte, chief investment officer for wealth management 0:11:53.360 --> 0:11:56.360 at Morgan Stanley. They have one point five trillion with 0:11:56.400 --> 0:11:59.720 a t UH and assets under management. Lisa, thanks so 0:11:59.800 --> 0:12:03.199 much for joining us here today. I guess I'll start 0:12:03.200 --> 0:12:05.880 with kind of the wall of worry, uh kind of 0:12:06.200 --> 0:12:10.320 question or topic here. How concerned are you about this 0:12:10.400 --> 0:12:14.080 market given some of the headwinds that you know, folks 0:12:14.160 --> 0:12:17.000 rightfully point out, whether it's rising interest rates tapering and 0:12:17.160 --> 0:12:19.880 you know, just the delta variant. How do you view 0:12:19.880 --> 0:12:23.800 this market right here? Uh? So, look, you know we've 0:12:23.840 --> 0:12:27.120 been on the record, um, you know, to say that 0:12:27.200 --> 0:12:30.520 this is a market that for the most part, while 0:12:30.559 --> 0:12:33.120 I can claim that it's climbing the wall of worry 0:12:33.280 --> 0:12:37.600 and and certainly positioning uh in you know, the megacap 0:12:37.679 --> 0:12:43.040 tex sox, it's suggests an element of defensiveness. UM. You know, 0:12:43.120 --> 0:12:45.480 our sense has been that that this is a market 0:12:46.240 --> 0:12:50.000 uh you know that is shrugging off most of the concerns, 0:12:50.760 --> 0:12:54.880 whether it is um you know, disruptions coming from delta variant, 0:12:55.000 --> 0:12:58.240 whether it's you know, supply chain concerns, whether it's been 0:12:58.280 --> 0:13:03.880 the China regulator or uh crackdown, or you know, shifts 0:13:03.920 --> 0:13:07.960 in policy um from the Fed. UM. Nothing really has 0:13:08.040 --> 0:13:11.360 gotten in the way of this market. You know. It's 0:13:11.360 --> 0:13:16.520 it's notable. I think uh that uh for for much 0:13:16.559 --> 0:13:19.920 of the period, uh you know, after the first quarter, 0:13:20.400 --> 0:13:23.120 many folks were saying that the market was rallying because 0:13:23.160 --> 0:13:26.600 interest rates were falling. Uh. You know, really, over the 0:13:26.679 --> 0:13:30.240 last month or so, we've seen the ten year back 0:13:30.320 --> 0:13:32.920 up from its ultimate lows on the ten year of 0:13:33.320 --> 0:13:36.920 one seventeen. We're back up here, uh into the mid 0:13:36.960 --> 0:13:40.640 one thirties on the ten yere Uh And and even 0:13:40.679 --> 0:13:45.319 that has not uh you know, interrupted this this grind 0:13:45.480 --> 0:13:49.280 higher UM in markets. So you but you expect a 0:13:49.360 --> 0:13:52.319 pullback right least, so you expect to ten to correction 0:13:52.800 --> 0:13:55.680 before the end of the year. Yeah, we do, and 0:13:55.679 --> 0:13:59.040 and and um. The reason for that is essentially two fold. 0:13:59.160 --> 0:14:02.680 So with that move in rates, we ultimately think that 0:14:02.840 --> 0:14:08.559 price earnings ratios, especially on those most expensive stocks, should compress. 0:14:08.679 --> 0:14:13.000 We've seen PE multiple compression uh in many many other 0:14:13.120 --> 0:14:16.360 parts of the market, whether you're talking about international stocks, 0:14:16.400 --> 0:14:20.720 you're talking about value stocks, more cyclical stocks, you're talking 0:14:20.800 --> 0:14:23.680 about the small caps. Uh. This is the one area 0:14:23.680 --> 0:14:27.480 of the market that has remained immune so far. Uh. 0:14:27.480 --> 0:14:30.160 And there's just no precedent for that. Uh. You know, 0:14:30.280 --> 0:14:34.200 historically when rates go up, ultimately PE ratios um do 0:14:34.400 --> 0:14:36.560 come down. So we we see that as a risk. 0:14:36.600 --> 0:14:40.200 In secondarily, Uh, you know, we're seeing folks talk about 0:14:40.200 --> 0:14:43.440 the growth scare. We're seeing people downgrade their estimates for 0:14:43.520 --> 0:14:48.240 third quarter GDP growth. Even at Morgan Stanley ellen Ventner 0:14:48.360 --> 0:14:51.160 has cut her third quarter number from six point five 0:14:51.240 --> 0:14:55.240 percent annualized growth rates to a two point nine percent. 0:14:55.360 --> 0:14:59.600 That's a pretty big cut. Uh. And yet folks, uh, 0:14:59.640 --> 0:15:03.080 you know, don't think that's going to harm earnings in 0:15:03.120 --> 0:15:05.240 the third quarter. And we think that that could be 0:15:05.280 --> 0:15:09.080 another negative catalysts. So, you know, lower PE ratios and 0:15:09.160 --> 0:15:15.000 potentially earnings disappointments or or fewer positive earnings or visions 0:15:15.000 --> 0:15:17.720 are the two catalysts that that might unleash that ten 0:15:17.840 --> 0:15:21.400 fiercent correction. So with that type of correction between now 0:15:21.400 --> 0:15:23.800 and the end of the end of the year possible, 0:15:24.080 --> 0:15:26.640 are you suggesting people raise cash? Are you suggesting they 0:15:26.760 --> 0:15:30.720 rotate into uh, just maybe more cyclical names. How do 0:15:30.760 --> 0:15:34.960 you think people should position themselves for that? Yeah, so 0:15:35.000 --> 0:15:38.240 we're we're in the camp that says this is about 0:15:38.680 --> 0:15:42.840 UH rotating and actively managing UM. So we are buyers 0:15:43.720 --> 0:15:47.760 of consumer services, of financials, of some of the uh 0:15:47.960 --> 0:15:53.320 industrial cyclicals, from some you know, safer healthcare names and 0:15:53.440 --> 0:15:57.080 some staples. UM. It's just really some of these long 0:15:57.240 --> 0:16:02.040 duration oriented UM secular growth stocks that that we just 0:16:02.080 --> 0:16:04.440 think are long in the tooth and need to kind 0:16:04.440 --> 0:16:09.080 of take their hit. So we're rotating here. Uh no 0:16:09.200 --> 0:16:12.800 need to panic and go to cash and get paid nothing, 0:16:13.160 --> 0:16:17.280 uh and even negative returns after inflation. But we do 0:16:17.360 --> 0:16:19.720 think that we're in a bull market. It's just a 0:16:19.800 --> 0:16:24.160 bull market in things other than the SMP depth. How 0:16:24.160 --> 0:16:27.960 important is the infrastructure bill or how important is um 0:16:28.000 --> 0:16:35.040 fiscal Uh you know, trillions of dollars in continued fiscal support. UM. 0:16:35.480 --> 0:16:37.960 You know. Our perspective is that it's not so much 0:16:38.040 --> 0:16:42.440 the dollars, because what people forget is that a lot 0:16:42.480 --> 0:16:44.520 of this is going to be spent over you know, 0:16:44.920 --> 0:16:48.920 multiple years, if not, if not a decade, uh, and 0:16:49.000 --> 0:16:53.160 so on any annual basis, it's it's it's fractions of 0:16:53.840 --> 0:16:58.160 percentage points of growth. UM. But it's really the the 0:16:59.080 --> 0:17:03.680 shift in mind that uh, that we are in a 0:17:03.000 --> 0:17:08.840 m in a more fiscally active environment and and um, 0:17:08.880 --> 0:17:12.199 you know that is growth oriented. Uh. And so you 0:17:12.240 --> 0:17:16.879 know we are constructive broadly. I don't know, um you 0:17:16.880 --> 0:17:20.960 know exactly what the form of final legislation is going 0:17:21.000 --> 0:17:23.040 to take, given all the puts and takes of this, 0:17:23.880 --> 0:17:26.520 but we do think we're going to get something, uh. 0:17:26.560 --> 0:17:32.160 And that's something on the margin. Is helpful. Lisa, great 0:17:32.240 --> 0:17:34.879 to get your take. Thank you so much for joining us. 0:17:34.880 --> 0:17:37.600 Hope we can get you back on soon. Lisa Shallatt 0:17:37.720 --> 0:17:42.280 is the chief investment Officer for wealth Management at Morgan Stanley. 0:17:42.359 --> 0:17:47.320 Obviously very important for you to get so always good 0:17:47.359 --> 0:17:49.960 to to hear from Lisa. You know, we are seeing 0:17:49.960 --> 0:17:53.800 continued gains in the markets right now, and as we 0:17:53.920 --> 0:18:00.359 heard earlier from UM from Dave Wilson, we see the 0:18:00.520 --> 0:18:06.240 SMP five lead by energy, financials and materials. This is Bloomberg. 0:18:09.840 --> 0:18:11.639 Now let's get over to Nathan Chetty. I told you 0:18:11.640 --> 0:18:13.080 we're going to be joined by the head of multi 0:18:13.119 --> 0:18:16.360 asset at now ven they've got one point two trillion 0:18:16.440 --> 0:18:19.639 dollars in assets under management. We're gonna talk about the 0:18:20.000 --> 0:18:26.720 opportunities and risks in private markets. Where do you start when? Um, uh, Nathan, 0:18:26.760 --> 0:18:32.359 when analyzing such a huge universe, Thanks uh, Matt Paul 0:18:32.440 --> 0:18:35.160 for having me on. It is indeed a massive universe, 0:18:35.200 --> 0:18:39.720 and I think, um, it's only growing. We've seen a 0:18:39.800 --> 0:18:42.480 ton of interest in in private markets, and I think 0:18:42.480 --> 0:18:47.080 this has been driven really by two phenomenon. The first 0:18:47.240 --> 0:18:50.560 is this lower expected return environment at least on a 0:18:50.600 --> 0:18:52.960 go for a basis, and I I'd argue the second 0:18:53.000 --> 0:18:57.639 one is partly driven by the volatility we're seeing in 0:18:57.720 --> 0:19:01.800 economic variables and brought broad indicator. So investors are moving 0:19:01.880 --> 0:19:05.360 to private markets in order to incorporate them in their 0:19:05.400 --> 0:19:09.120 portfolios for more diversification. They're trying to eat out every 0:19:09.160 --> 0:19:11.840 basis point of return that they can, and that liquidity 0:19:11.880 --> 0:19:16.480 premium UM is certainly one place to source it. So 0:19:16.880 --> 0:19:19.960 it's interesting, Nathan, we hear a little bit more I 0:19:19.960 --> 0:19:22.119 guess really over the last several weeks and months about 0:19:22.600 --> 0:19:25.400 private credit, and I guess that's simply, you know, investors 0:19:25.520 --> 0:19:29.040 looking anywhere they can for yield. Give us kind of 0:19:29.080 --> 0:19:32.280 the risk return profile as you know, you guys got 0:19:32.359 --> 0:19:34.760 to go out from you know, maybe you know, looking 0:19:34.760 --> 0:19:38.440 at treasuries, are looking at public corporates to to going 0:19:38.440 --> 0:19:40.440 out into the private credit market. Give us a sense 0:19:40.480 --> 0:19:43.840 of the risk return that you guys think about. Yeah, 0:19:43.920 --> 0:19:47.560 private credit has just absolutely exploded, and and part of 0:19:47.600 --> 0:19:51.359 that is due to UM, you know, some of the 0:19:51.359 --> 0:19:56.560 bank rag et cetera, and ultimately UM syndicated loans haven't 0:19:56.600 --> 0:19:58.480 had the same levels of plot that we was seen 0:19:58.520 --> 0:20:02.520 in the past. So the credits stepped in there UM 0:20:02.560 --> 0:20:07.960 and really have a risk return profile that's not dissimilar 0:20:08.040 --> 0:20:12.440 to their public cousins, meaning syndicated loans, but at least 0:20:12.480 --> 0:20:15.680 on the middle market lending or senior secured side, we're 0:20:15.720 --> 0:20:19.879 looking at high single digits and uh, you know, a 0:20:19.920 --> 0:20:22.720 lower risk profile than you'd see in public markets, and 0:20:22.760 --> 0:20:25.760 again part of that is due to that illiquidity risk 0:20:25.800 --> 0:20:29.760 premium that you're getting UM. I think another reason why 0:20:29.800 --> 0:20:33.280 private credit is of such interest is you're sitting higher 0:20:33.320 --> 0:20:35.840 in the cap structure. Private equity or VC has always 0:20:35.880 --> 0:20:39.160 been part of UH portfolios, but with private credit, you're 0:20:39.160 --> 0:20:41.720 sitting higher up in that cap structure, have to deploy 0:20:41.840 --> 0:20:45.480 less risk, but again a very attractive risk return profile, 0:20:45.560 --> 0:20:55.000 particularly UM for income oriented investors. So how much does 0:20:56.000 --> 0:20:59.160 how much do things like FED policy matter to private markets? 0:20:59.359 --> 0:21:04.120 How quickly you see follow through? I mean, look, FED 0:21:04.200 --> 0:21:07.960 policy matters for all markets, public or private, and it 0:21:08.000 --> 0:21:10.600 depends on the private market we're talking about. Some are 0:21:10.640 --> 0:21:14.960 going to UM transmit or or reverberate in in those 0:21:14.960 --> 0:21:18.960 private markets quicker than others, particularly those that are sensitive 0:21:19.000 --> 0:21:22.679 to fixed income. We're just talking about private credit. Most 0:21:22.880 --> 0:21:27.560 of private credit is in UM live or plus type 0:21:27.640 --> 0:21:31.560 landing or floating rate structures. So UM you have some 0:21:32.640 --> 0:21:36.160 UH some ability to manage that rates duration risk, which 0:21:36.200 --> 0:21:39.560 is really going to reflect FED policy much more so 0:21:39.640 --> 0:21:42.639 than you would with public market rate sensitive assets, and 0:21:42.680 --> 0:21:46.119 those are obviously going to be reflected UM immediately in 0:21:46.160 --> 0:21:50.800 the private real assets space. UM, not dis similar funding rates, 0:21:51.240 --> 0:21:53.680 credit spreads. They all are going to have an impact 0:21:53.760 --> 0:21:58.479 on UH demand and and ultimately debility to to purchase 0:21:58.560 --> 0:22:02.399 and supply in the real asset space. But but but 0:22:02.600 --> 0:22:06.960 the the implications and that transmission from shifts in FED 0:22:07.080 --> 0:22:09.639 policy are going to take some time. They're going to 0:22:09.720 --> 0:22:14.680 take UM multiple quarters, and ultimately I guess that goes 0:22:14.720 --> 0:22:17.320 back to why we've seen such a huge uptake in 0:22:17.359 --> 0:22:21.680 demand and interest is to mitigate some of that volatility 0:22:21.720 --> 0:22:28.160