WEBVTT - Uber Offers Self-Driving Cars; Gold vs. Crude 0:00:01.440 --> 0:00:05.320 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:00:05.400 --> 0:00:08.479 weekdays at ten am Eastern on Apple Car, playing Android 0:00:08.480 --> 0:00:11.600 Auto with the Bloomberg Business App. Listen on demand wherever 0:00:11.640 --> 0:00:14.840 you get your podcasts, or watch us live on YouTube. 0:00:15.680 --> 0:00:18.800 Joining us now in studio. Man Deep Sync senior technology 0:00:19.640 --> 0:00:22.119 industry analyst over at Bloomberg Intelligence. So this is a 0:00:22.160 --> 0:00:24.079 headline that Lisa talked to us about earlier in the 0:00:24.120 --> 0:00:26.640 morning and we were both like, hint, no, that's not 0:00:26.720 --> 0:00:30.040 for us. So apparently Uber strikes in a chord with 0:00:30.200 --> 0:00:34.120 GM Cruise in terms of Uber's going to have self 0:00:34.200 --> 0:00:37.320 driving cars roaming around. Do I want this in my life? 0:00:38.000 --> 0:00:41.560 Well, I think it's just a function of how technology 0:00:41.560 --> 0:00:42.400 gets rolled out. 0:00:42.560 --> 0:00:44.240 So that's a yes for Man Deep. 0:00:45.080 --> 0:00:46.800 Yes, Okay, he's a forward looking guy. 0:00:46.960 --> 0:00:50.520 We see that already in three cities in the US. 0:00:50.600 --> 0:00:56.880 San Francisco, Phoenix and you know La. And what Vemo 0:00:56.960 --> 0:01:01.080 has shown is they have the technology to have the 0:01:01.160 --> 0:01:04.560 car right on its own and even though the scale 0:01:04.600 --> 0:01:07.480 is very small, they're doing one hundred k rides per week. 0:01:07.880 --> 0:01:12.480 Compare that to Uber, which does ten billion rides in 0:01:12.520 --> 0:01:13.440 a year globally. 0:01:13.920 --> 0:01:18.520 Well, what kind of rides are we talking about. 0:01:18.560 --> 0:01:21.559 God, so Veimo compared to that is doing one hundred 0:01:21.640 --> 0:01:24.640 k rides of five million annually if you run rate that. 0:01:24.760 --> 0:01:28.240 But look, what they have shown is this is the future. 0:01:28.760 --> 0:01:32.040 And Uber is trying to figure out where they fit 0:01:32.120 --> 0:01:35.720 in this future because they don't have their own autonomous technology, 0:01:35.800 --> 0:01:38.520 so they have to partner with someone. It's not going 0:01:38.600 --> 0:01:41.760 to be Tesla. Tesla has told us they want to 0:01:41.880 --> 0:01:45.479 do right sharing via their own app. They don't want 0:01:45.480 --> 0:01:49.160 a ride sharing intermediary. They have the fleet, they have 0:01:49.280 --> 0:01:53.200 the software, they have the app. Why use somebody else's app. 0:01:53.480 --> 0:01:55.520 And in the case of Weveimo, even though they have 0:01:55.560 --> 0:01:59.680 a partnership with Uber, bulk of their rights are through 0:01:59.720 --> 0:02:03.400 their own app. So that's where Uber doesn't have a choice. 0:02:03.440 --> 0:02:06.920 It partners with Cruise Cruises. I mean in terms of 0:02:06.960 --> 0:02:10.519 the technology, I would say way behind Tesla and Vemo. 0:02:11.680 --> 0:02:13.760 But at the same time with Uber, like I said, 0:02:14.120 --> 0:02:18.239 they divested their own autonomous R and D division back 0:02:18.320 --> 0:02:21.560 during the pandemic, so they are not developing anything in house. 0:02:22.160 --> 0:02:24.320 And in this case, it's just a matter of getting 0:02:24.320 --> 0:02:25.800 what they have in the market. 0:02:25.919 --> 0:02:28.400 You know, my first reaction is like a hard no, 0:02:28.520 --> 0:02:30.440 I'm not getting to an autonomous vehicle. But I get 0:02:30.440 --> 0:02:33.480 into a vehicle every morning at four p thirty morning 0:02:33.480 --> 0:02:34.480 with some dude. I don't know. 0:02:34.720 --> 0:02:36.280 Yeah, we're just not the early adopters. 0:02:36.639 --> 0:02:40.200 It's all right, I mean, but what's better than the 0:02:40.240 --> 0:02:43.720 other I don't know. So how does Uber view? 0:02:44.880 --> 0:02:45.080 You know? 0:02:45.120 --> 0:02:48.320 The driver list technology is a long term net positive 0:02:48.639 --> 0:02:49.400 or I. 0:02:49.320 --> 0:02:53.680 Mean it's definitely a negative simply because Uber operates on 0:02:53.760 --> 0:02:57.200 an asset light model, and even then it struggled to 0:02:57.240 --> 0:02:59.960 reach profitability. Right now, it's at a point where they 0:03:00.040 --> 0:03:03.840 incremental margin is positive. What happens with the autonomous rights 0:03:04.120 --> 0:03:08.160 is the incremental margin goes much lower because one, you 0:03:08.200 --> 0:03:11.320 have to license the technology from somebody, in this case 0:03:11.400 --> 0:03:14.680 Cruise or Vemo, so you have to pay them. And 0:03:14.720 --> 0:03:17.800 then the take rates go down because the autonomous rides 0:03:17.840 --> 0:03:21.959 have a much different unit economics then ride with a driver, 0:03:22.560 --> 0:03:26.000 so instead of getting that thirty percent take rate, their 0:03:26.040 --> 0:03:27.160 take rate goes lower. 0:03:27.760 --> 0:03:31.000 But eventually don't the I guess that's not true. And 0:03:31.000 --> 0:03:33.040 to say eventually the money that they'd have to pay 0:03:33.120 --> 0:03:35.880 to say GM Cruise, does that decrease But no, it 0:03:35.920 --> 0:03:38.360 probably increases, right because GM's gonna want to get more 0:03:38.400 --> 0:03:39.600 for their PA exactly. 0:03:39.720 --> 0:03:43.200 So if you don't own the technology, why would a 0:03:43.320 --> 0:03:47.960 GM or a Wemo or Tesla want one more intermediary 0:03:48.480 --> 0:03:51.520 when they could do their own app with the fleet. 0:03:51.840 --> 0:03:55.320 So Uber has two choices, either they license the technology 0:03:55.640 --> 0:03:58.400 or they start buying the cars. And if they start 0:03:58.400 --> 0:04:01.240 buying the cars, it's not an asset model anymore. So 0:04:01.280 --> 0:04:03.640 they have to buy the cars from Tesla, buy the 0:04:03.640 --> 0:04:07.200 cars from Veimo and these are so yeah. 0:04:06.920 --> 0:04:10.839 Why then did they divest their R and D back 0:04:10.840 --> 0:04:13.320 in the pandemic? It seems like now I understand the 0:04:13.400 --> 0:04:15.360 long term. Oh that's a problem. 0:04:15.560 --> 0:04:18.560 Yeah it is. And back then they were under pressure. 0:04:18.600 --> 0:04:21.760 Remember when you went into the pandemic, all these companies 0:04:21.839 --> 0:04:25.279 had cash flow issues. They were burning cash every month. 0:04:25.600 --> 0:04:28.159 So the best option for them was to divest this 0:04:28.480 --> 0:04:31.719 raise cash. And you know, it was never part of 0:04:31.800 --> 0:04:35.040 their long term plans when it comes to developing this 0:04:35.160 --> 0:04:37.880 in house. And I think right now it's proving to 0:04:37.920 --> 0:04:38.839 be a wrong decision. 0:04:39.360 --> 0:04:41.720 So how then does Ruber If you're an investor and 0:04:41.720 --> 0:04:43.359 you're looking at Uber stock, how does that have to 0:04:43.400 --> 0:04:44.159 be re rated? 0:04:44.240 --> 0:04:44.400 Then? 0:04:45.120 --> 0:04:45.880 Longer term? 0:04:45.920 --> 0:04:46.960 Like short term forget it? 0:04:47.560 --> 0:04:50.359 So look at what we have now, Uber is still 0:04:50.360 --> 0:04:54.279 the scale player. I mentioned ten billion rides, and right 0:04:54.320 --> 0:04:57.599 now they are the ones who have the most supplied. Now, 0:04:57.880 --> 0:05:01.760 if this thing scales up very quickly, which I don't 0:05:01.800 --> 0:05:04.600 think anyone is betting on right now, that autonomous skills, 0:05:04.760 --> 0:05:07.599 there's a lot of skepticism around taking these rides, so 0:05:07.640 --> 0:05:09.120 this will be more graduate. 0:05:09.240 --> 0:05:10.960 Front and center, right there in front of you. 0:05:11.040 --> 0:05:13.880 Yeah. So in that case, I think Uber has more 0:05:13.920 --> 0:05:16.560 time on hand. Like nobody is thinking of a next 0:05:16.600 --> 0:05:19.880 twelve month scenario where Uber loses, you know, thirty percent 0:05:19.880 --> 0:05:23.680 of their volume. We're talking about a gradual shift towards autonomous, 0:05:23.680 --> 0:05:25.800 and in that case, Uber has more time to do 0:05:25.920 --> 0:05:28.599 these kind of partnerships. I think Cruise is one. They'll 0:05:28.600 --> 0:05:31.880 probably try to partner with Tesla, if that would be 0:05:31.920 --> 0:05:33.960 my guess, Even if it comes at the expense of 0:05:34.040 --> 0:05:37.039 gross margin, they'll take the hit because it's all about 0:05:37.080 --> 0:05:39.640 existence and you know, maintaining the platform. 0:05:39.720 --> 0:05:42.120 And yeah, all right, Mandy, we appreciate it. You here 0:05:42.160 --> 0:05:42.640 next week. 0:05:43.320 --> 0:05:43.760 Oh yeah. 0:05:43.800 --> 0:05:47.640 In video intelligence, in video has changed everyone's vacation schedule, 0:05:48.279 --> 0:05:52.200 Man deep saying joining us a senior technology analyst at Bloomberg. 0:05:51.760 --> 0:06:01.080 Intelligence you're listening to the Bloomberg and Tell Elligence podcast. 0:06:01.320 --> 0:06:04.560 Catch us live weekdays at ten am Eastern on applecar 0:06:04.680 --> 0:06:07.640 Play and Android Auto with the Bloomberg Business App. You 0:06:07.680 --> 0:06:10.960 can also listen live on Amazon Alexa from our flagship 0:06:11.000 --> 0:06:14.799 New York station Just Say Alexa playing Bloomberg eleven thirty. 0:06:15.400 --> 0:06:17.280 All right, Today's focus on munis is brought to you 0:06:17.360 --> 0:06:22.720 by Bam Mutual. Bam Bam Bam Bam Bam Mutual insures 0:06:22.800 --> 0:06:25.760 municipal bonds that financial es central infrastructure and provides guaranteed 0:06:25.800 --> 0:06:28.479 income to provide to improve any portfolio. Be part of 0:06:28.480 --> 0:06:32.240 building America. Invest in BAM in short bonds. Our next 0:06:32.240 --> 0:06:35.880 guest joins us Amanda Albright, municipal financi reporter for Bloomberg News, 0:06:36.200 --> 0:06:39.760 also formerly of the Daily tar Heel, which means she 0:06:39.839 --> 0:06:42.120 went to the University of North Carolina, which means somehow 0:06:42.120 --> 0:06:44.640 she got through my screen of no tar heels on 0:06:44.680 --> 0:06:48.680 this program. But she's pretty solid there man to talk 0:06:48.720 --> 0:06:50.520 to us about the municipal bond market. You guys have 0:06:50.600 --> 0:06:52.839 a lot of great stories out recently. The one that 0:06:52.880 --> 0:06:56.440 really grabbed my attention is college's need up to one 0:06:56.520 --> 0:07:00.200 trillion dollars of campus upgrades to lure students, and I 0:07:00.200 --> 0:07:02.120 guess they're coming to the munis will bond market for that. 0:07:02.800 --> 0:07:06.919 Yes, So Moody's put out this estimate that colleges and 0:07:07.080 --> 0:07:11.280 universities might need seven hundred and fifty to nine hundred 0:07:11.280 --> 0:07:17.040 and fifty billion of spending on infrastructure, facilities, dorms, classrooms 0:07:17.520 --> 0:07:20.960 over the next decade in order to essentially stay competitive. 0:07:21.640 --> 0:07:24.800 The interesting thing about that number is that only encompasses 0:07:24.880 --> 0:07:28.360 their universe of credits that they rate, so the actual 0:07:28.440 --> 0:07:32.800 number could be even higher. It was interesting this story 0:07:32.840 --> 0:07:36.040 came out. Basically, the argument that Moody's is laying out 0:07:36.160 --> 0:07:39.040 is that colleges need to have really pretty campuses in 0:07:39.120 --> 0:07:43.320 order to attract customers, their students, and their students' parents 0:07:43.560 --> 0:07:46.600 who want their kids to go to a really pretty 0:07:46.680 --> 0:07:51.480 looking school and have kind of that pride. But interestingly enough, 0:07:51.560 --> 0:07:54.040 after the story came out, I got some messages from 0:07:54.080 --> 0:07:57.239 readers that disagreed with this premise and think that schools 0:07:57.280 --> 0:08:00.680 need to focus on teaching students and providing a good 0:08:00.680 --> 0:08:04.400 academic experience and they don't need to think about facilities. 0:08:04.440 --> 0:08:07.840 So it's an interesting topic within higher ed and that 0:08:07.960 --> 0:08:10.520 kind of balancing act that colleges are facing right now, 0:08:10.720 --> 0:08:13.880 trying to invest in facilities, trying to lure students, but 0:08:13.920 --> 0:08:16.840 also keep cost low and focus on their core mission. 0:08:16.920 --> 0:08:19.000 It's kind of one of those core debates in the 0:08:19.040 --> 0:08:20.760 higher ed world at the moment. 0:08:20.960 --> 0:08:23.320 Well, also, isn't it true that, like the tuition, even 0:08:23.360 --> 0:08:26.320 though tuition's insane and we're talking like eighty thousand dollars 0:08:26.520 --> 0:08:31.160 like that doesn't cover at all necessarily one person's entire education. 0:08:30.840 --> 0:08:35.720 There too, That's true. I think the interesting thing that 0:08:35.960 --> 0:08:39.240 I think colleges will need to grapple with, and something 0:08:39.280 --> 0:08:42.000 I'm interested in, is how much they kind of break 0:08:42.040 --> 0:08:44.559 down those costs for future students. You know, how much 0:08:44.600 --> 0:08:48.600 of tuition dollars are going to facilities. I think that's 0:08:48.640 --> 0:08:50.280 an interesting question. 0:08:50.720 --> 0:08:53.679 All Right, more money going to universities, less money going 0:08:53.720 --> 0:08:58.240 to municipal funded detention centers on feur inmates, what's going 0:08:58.280 --> 0:08:58.600 on there? 0:08:59.240 --> 0:09:05.640 Yeah, this is a classic political situation in the muni market. 0:09:06.240 --> 0:09:10.880 We've seen with changes in political control, different approaches to 0:09:11.880 --> 0:09:16.200 detentions and corrections policies, and so I think really that story, 0:09:16.240 --> 0:09:18.200 which was a great story that came out I think 0:09:18.280 --> 0:09:23.080 yesterday it highlights this growing risk that MUNI investor any 0:09:23.200 --> 0:09:26.000 to talk to any MUNI investor right now, and politics 0:09:26.080 --> 0:09:30.680 are at the forefront of everything, especially the presidential election. 0:09:31.880 --> 0:09:34.960 The corporate tax rate could be in play, individual tax 0:09:35.040 --> 0:09:37.319 rates could be in play. All of that will kind 0:09:37.360 --> 0:09:39.560 of affect muni's and then you have all these other 0:09:40.080 --> 0:09:45.440 kind I guess lower impacts as well, such as corrections, 0:09:45.480 --> 0:09:48.520 projects like. All of that is very affected by politics. 0:09:48.520 --> 0:09:51.800 So that's why MUNI investors are very focused on the 0:09:51.840 --> 0:09:53.880 election these days, along with everyone else. 0:09:53.880 --> 0:09:55.880 All right, Amanda, Yeah, everybody else, all right, Amanda, thanks 0:09:55.880 --> 0:09:58.840 a lot. Amanda all Bright, Bloomberg Community finance reporter, joining 0:09:58.920 --> 0:09:59.880 us from Kansas. 0:10:01.440 --> 0:10:05.319 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:10:05.400 --> 0:10:08.120 weekdays at ten am Eastern on Apple car Playing and 0:10:08.200 --> 0:10:11.120 broyd Outo with the Bloomberg Business app. Listen on demand 0:10:11.160 --> 0:10:15.480 wherever you get your podcasts, or watch us live on YouTube. 0:10:16.160 --> 0:10:18.760 I'm looking at the screen, lots of things moving all 0:10:18.760 --> 0:10:22.240 over the place. Stocks up, yields down. I'm looking at 0:10:22.280 --> 0:10:25.160 gold up one and a quarter percent, oil up one 0:10:25.200 --> 0:10:28.240 point nine percent on wtacrude oil. Is there a correlation there? 0:10:28.280 --> 0:10:30.160 I think our next guest has some thoughts on that. 0:10:30.240 --> 0:10:34.360 Mike McLoone, senior commodity strategist for Bloomberg Intelligence, zooming in 0:10:34.440 --> 0:10:38.319 from Miami, Florida. Mike, what's going on with gold and crude? 0:10:38.880 --> 0:10:39.480 Paul, Hello. 0:10:39.720 --> 0:10:42.480 We have the difference between an enduring bull market that's 0:10:42.520 --> 0:10:44.520 gold right now it said if you end the week 0:10:44.600 --> 0:10:46.719 the month now, it's at a record high, and an 0:10:46.800 --> 0:10:49.439 enduring bear market that's Crudeill The price in the screen 0:10:49.480 --> 0:10:51.880 you see right now WTI seventy four dollars a barrow 0:10:51.920 --> 0:10:54.280 about there was first traded in two thousand and six. 0:10:54.400 --> 0:10:57.720 That's almost twenty years ago. And as we tilt towards 0:10:57.720 --> 0:11:02.680 this easing cycle, kipically that spread with gold outperforming Crudeli 0:11:02.920 --> 0:11:05.280 widens and it looks like it's just getting started. 0:11:06.200 --> 0:11:08.280 First of all, you bury the lead. We're not coming 0:11:08.320 --> 0:11:11.320 to Miami, Mike, so you can you can stop looking 0:11:11.440 --> 0:11:14.080 for fun things for us to do. You cannot worry 0:11:14.080 --> 0:11:17.920 about your guest rooms like we're good. So the record 0:11:18.000 --> 0:11:20.200 high though that we saw back in gold, that we 0:11:20.320 --> 0:11:23.280 keep hitting here, I'm really struggling as to what is 0:11:23.320 --> 0:11:26.160 actually leading it, because you know, the last ten years 0:11:26.200 --> 0:11:27.920 and we had low rates and all that gold did 0:11:27.960 --> 0:11:30.320 a whole lot of nothing, and it has just been 0:11:30.480 --> 0:11:33.400 feeling like a NonStop tear in the last few years. 0:11:34.360 --> 0:11:35.600 Yeah, let's start with two things. 0:11:35.840 --> 0:11:40.000 The unstoppable rise in US debt to GDP, the very 0:11:40.000 --> 0:11:43.800 expensive US stock market, the Federal Reserve tilting towards easing. 0:11:44.160 --> 0:11:46.240 And the most significant outfit in the room is the 0:11:46.320 --> 0:11:50.120 unlimited friendship between President Zy and President Putin that shifted 0:11:50.120 --> 0:11:53.000 the world order in favor of gold. And it looks 0:11:53.040 --> 0:11:55.680 like it's yourself and so the biggest deepest pockets on 0:11:55.679 --> 0:11:58.440 that planet I starting with China, have been buying the metal. 0:11:58.760 --> 0:12:00.679 And it looks like once we get a little bit 0:12:00.679 --> 0:12:02.959 of a version in lower yields i e. T Bills 0:12:03.000 --> 0:12:05.000 not at five percent anymore, and maybe just a little 0:12:05.040 --> 0:12:07.360 back and fill in the stock market, gold will shine. 0:12:07.400 --> 0:12:09.120 It looks like it's continuing to that now. Right now, 0:12:09.120 --> 0:12:09.920 it's a little bit overdone. 0:12:10.000 --> 0:12:12.640 Manage money net positions IE futures are really long for 0:12:12.679 --> 0:12:15.839 a reason. It's a bull market. But the narrative for 0:12:15.880 --> 0:12:17.600 gold is quite strong. And I'll just meant and with 0:12:17.760 --> 0:12:21.520 is gold is historically very cheap versus SEP five hundred. 0:12:21.760 --> 0:12:24.200 If you just take it divided by the ounces divided 0:12:24.240 --> 0:12:27.760 by the index, particularly when you enter recessions. What oftentimes 0:12:27.880 --> 0:12:30.840 happens when you enter recession and fetis is that that 0:12:30.960 --> 0:12:32.559 spread just kind of narrows a little bit. 0:12:33.200 --> 0:12:36.320 What would take what would change this seems to be 0:12:36.320 --> 0:12:40.040 a structural bullish call on gold. Mike, what would need 0:12:40.040 --> 0:12:40.520 to change that? 0:12:41.520 --> 0:12:43.840 I think the first thing is the US stock markets 0:12:43.880 --> 0:12:46.120 stay resilient. Well, why by golden when it's that resilient. 0:12:46.280 --> 0:12:48.360 The most significant thing was kind of some kind of 0:12:48.440 --> 0:12:52.520 unexpected dayton ie President Zy picking up the phone saying yeah, 0:12:52.520 --> 0:12:55.160 we're done with this unlimited friendship. The dayton that's happening 0:12:55.240 --> 0:12:57.959 globally is part of what's really driving gold. He's somewhat 0:12:58.000 --> 0:13:00.400 getting away from the dollar, looking for an altern to 0:13:00.480 --> 0:13:04.079 US treasuries, particularly with yields dropping and the death the 0:13:04.280 --> 0:13:07.000 GDP just continuing to rise, So that to me would 0:13:07.000 --> 0:13:09.280 be in one of the most significant things. Otherwise, it 0:13:09.360 --> 0:13:11.000 looks to me, once you get a little bit of 0:13:11.040 --> 0:13:13.120 a version lower in the stock market, which at some 0:13:13.200 --> 0:13:16.280 point will happen, gold will probably shine like long bonds, 0:13:16.360 --> 0:13:18.680 like on the month, now on the quarter. Now, gold's 0:13:18.720 --> 0:13:21.439 up about eight percent in the US Treasury. The Bloomberg 0:13:21.520 --> 0:13:24.360 twenty plus long bond indexes up about the same, about 0:13:24.360 --> 0:13:24.800 eight percent. 0:13:25.480 --> 0:13:27.280 What about positioning at this point, Like I know in 0:13:27.360 --> 0:13:29.760 the central banks are buyers, et cetera, and that in 0:13:29.880 --> 0:13:31.319 price spikes, you're not going to see a lot of 0:13:31.320 --> 0:13:34.200 physical buying also, et cetera. But who's left to buy 0:13:34.240 --> 0:13:35.199 in the futures market. 0:13:36.280 --> 0:13:38.080 It's that's the key thing. It's a good point. 0:13:38.240 --> 0:13:41.760 About forty four percent of total co mix futures positions 0:13:41.800 --> 0:13:42.960 are speculative longs. 0:13:43.000 --> 0:13:43.920 It's very high. 0:13:44.040 --> 0:13:46.439 The high it really gets much higher than forty eight. 0:13:46.640 --> 0:13:49.360 But what's really happening is we've had significant outflows in 0:13:49.400 --> 0:13:52.480 gold dtfs since that peak in twenty twenty. They're just 0:13:52.600 --> 0:13:54.679 starting turned inflows and I think that is part of 0:13:54.720 --> 0:13:57.480 that alternative. You see people going to cash and bonds. 0:13:57.520 --> 0:13:59.719 They're looking for alternatives to expensive stock market. So that 0:13:59.720 --> 0:14:01.800 looks it's just rolling over. But if you got a 0:14:01.920 --> 0:14:04.280 day like we had in August fifth, when markets go down, yeah, 0:14:04.280 --> 0:14:06.480 you hit you sell what you can. And there's a 0:14:06.520 --> 0:14:08.480 lot of specative lungs in goal at the moment for 0:14:08.559 --> 0:14:09.960 a good reason. Though it's a bull market. 0:14:10.160 --> 0:14:12.560 That's a trader's term. You sell what you can. Yeah, 0:14:12.640 --> 0:14:14.320 you have on those days. Hey, Mike, thanks so much 0:14:14.360 --> 0:14:16.720 for joining us. I appreciate it very much. As always, 0:14:17.000 --> 0:14:21.440 Mike mcloone's Cedar Commodity Strategists for Bloomberg Intelligence, I'm looking 0:14:21.480 --> 0:14:23.560 at like some of the Whenever you talk to Mike, 0:14:23.560 --> 0:14:27.280 I put up g LCO the Global Commodity Price screen. 0:14:32.640 --> 0:14:36.520 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:14:36.640 --> 0:14:40.160 weekdays at ten am Eastern on applecard Play and Android 0:14:40.160 --> 0:14:42.920 Auto with the Bloomberg Business app. You can also listen 0:14:43.080 --> 0:14:46.120 live on Amazon Alexa from our flagship New York station, 0:14:46.520 --> 0:14:49.280 just say Alexa playing Bloomberg eleven thirty. 0:14:50.280 --> 0:14:52.360 So let's get to the markets here. Equities rally, you 0:14:52.400 --> 0:14:54.400 haven't been to the bond market, and the dollars lower. 0:14:54.480 --> 0:14:55.040 It's classic. 0:14:55.120 --> 0:14:56.040 The Fed is going to cut. 0:14:56.480 --> 0:14:58.320 I guess the question is by how much? And then 0:14:58.400 --> 0:15:00.520 how does that affect your positioning? And the why they're 0:15:00.560 --> 0:15:04.480 cutting too very much important. Dana Duoria, Co, Chief Investment 0:15:04.560 --> 0:15:08.560 Officer of Investment joins us. Now, Dana, how did you 0:15:08.760 --> 0:15:11.040 view the jackson Hole speech by Powell? Was that twenty 0:15:11.120 --> 0:15:13.360 five cuts for you in September or was that fifty. 0:15:13.800 --> 0:15:16.040 I think it's twenty five. Look, I think that you 0:15:16.160 --> 0:15:19.720 could not ask for more dubvish comments from Powell this week. 0:15:20.800 --> 0:15:23.080 You know, I think he knew that the market needed 0:15:23.120 --> 0:15:25.800 to hear something like that in order not to react negatively. 0:15:25.880 --> 0:15:30.960 We've obviously been pricing in significant it decreases, and so 0:15:31.080 --> 0:15:32.960 he delivered, right, and he gave us a speech that 0:15:33.040 --> 0:15:36.000 said yep, I'm there, you know, I think, and even 0:15:36.040 --> 0:15:39.400 words like ensuring that inflation is anchored. You know, it 0:15:39.560 --> 0:15:41.640 was not only a dubbish speech. It was sort of 0:15:41.680 --> 0:15:44.440 a victory lap, right for him to say, Hey, our 0:15:44.520 --> 0:15:47.960 monetary policy worked out, We've tamed inflation. Now it's time 0:15:48.040 --> 0:15:50.440 to turn to unemployment and we are going to cut. 0:15:50.840 --> 0:15:53.200 But I don't think that means, you know, all that 0:15:53.280 --> 0:15:56.080 excitement means that were necessarily getting fifty. I think it's 0:15:56.120 --> 0:15:59.760 his way of saying, you know, yes we can all 0:16:00.160 --> 0:16:02.200 the sigh of relief. I think he still gives himself 0:16:02.240 --> 0:16:04.560 the twenty five In September. 0:16:04.720 --> 0:16:06.640 Hey, Dana, just looking at the price action today, the 0:16:06.720 --> 0:16:09.600 russell is up three point three percent versus a one 0:16:09.640 --> 0:16:12.560 percent for the S and P five hundred. So I 0:16:12.640 --> 0:16:17.120 guess that rotation trade into maybe smaller mid cap stocks 0:16:17.200 --> 0:16:19.920 out of you know, some of the other big cap names. 0:16:20.600 --> 0:16:22.240 Maybe that's really a thing. How do you guys think 0:16:22.240 --> 0:16:22.560 about that? 0:16:23.840 --> 0:16:26.960 Yeah, look, I mean, obviously small caps more interest rates sensitive, 0:16:27.320 --> 0:16:30.120 and you know, this is great news. And certainly as 0:16:30.160 --> 0:16:34.360 you go into an interest rate reducing cycle, you know 0:16:34.560 --> 0:16:37.560 you're you're looking at benefits to small caps. You're looking 0:16:37.600 --> 0:16:41.040 at benefits obviously in the real estate sector already somewhat 0:16:42.120 --> 0:16:45.480 expecting that and pricing that in. So not surprising to 0:16:45.520 --> 0:16:48.360 see that, you know, and then you mentioned even in 0:16:48.400 --> 0:16:50.160 your intro, but what is the reason. 0:16:50.000 --> 0:16:50.960 We expect the cuts? 0:16:51.000 --> 0:16:53.440 I think if you think that cuts are happening because 0:16:54.520 --> 0:16:56.160 you know, the feed is a little bit worried about 0:16:56.160 --> 0:16:58.960 what's going on in the economy, that's not good news 0:16:59.040 --> 0:16:59.680 for small caps. 0:16:59.720 --> 0:16:59.840 Right. 0:17:00.160 --> 0:17:02.560 It's short term good news, but it's not good news. 0:17:02.960 --> 0:17:05.239 You know, if you think you're looking at recession, if 0:17:05.280 --> 0:17:08.680 you think that the FED is playing this right, they're 0:17:08.880 --> 0:17:11.600 hitting the ball right down the middle. They've tamed inflation, 0:17:11.800 --> 0:17:14.920 and now they're going to prevent problems in the economy. 0:17:15.200 --> 0:17:16.440 Great news for small caps. 0:17:17.119 --> 0:17:20.679 I guess the question, though, becomes do they wind up 0:17:20.760 --> 0:17:22.879 cutting because there is a recession. And that's kind of 0:17:22.880 --> 0:17:26.399 the unknowable because if they're cutting for that elusive soft 0:17:26.520 --> 0:17:31.080 landing or normalization, that shouldn't that be a different distribution 0:17:31.800 --> 0:17:34.640 of investment than if you are cutting because things are bad. 0:17:35.680 --> 0:17:38.480 Yes, yeah, it would be. I mean, look a high 0:17:38.600 --> 0:17:43.240 level we advocate strategic, long term, diversified thinking. Don't try 0:17:43.280 --> 0:17:43.720 to time this. 0:17:44.200 --> 0:17:44.359 You know. 0:17:44.720 --> 0:17:48.280 That said, if you're thinking about tilting in a certain 0:17:48.320 --> 0:17:50.880 direction based on one of those outcomes to the other. 0:17:51.240 --> 0:17:54.040 You know, if you think recession's coming, you're tilting towards quality, right, 0:17:54.119 --> 0:17:57.320 you're tilting towards low volatility stocks stacks that sort of 0:17:57.359 --> 0:18:01.560 act as a ballast in bad weather. If you think 0:18:01.800 --> 0:18:04.679 that the FED is getting this right, that they are 0:18:04.760 --> 0:18:07.480 cutting in time, that they're not late with this, that 0:18:07.560 --> 0:18:09.960 they're pivoting at exactly the right moment, that we are 0:18:10.040 --> 0:18:12.200 going to avert, you know, a problem with this the 0:18:12.280 --> 0:18:15.280 AI trade. Maybe maybe your thesis is the AI trade is, 0:18:15.640 --> 0:18:17.359 you know, full steam ahead, and we're even going to 0:18:17.400 --> 0:18:20.360 start to see productivity increases in the rest of the economy. 0:18:21.119 --> 0:18:22.320 Then you know, areas like. 0:18:22.400 --> 0:18:25.280 Small in value where they've been they've been kind of 0:18:25.359 --> 0:18:29.680 ignored from evaluation perspective, they look a lot more attractive. 0:18:30.520 --> 0:18:33.639 You're going to be leaning more heavily there, all. 0:18:33.520 --> 0:18:35.959 Right, Dannis, So today's price action shows us that obviously 0:18:36.080 --> 0:18:38.600 the Fed still matters, The market cares what the Fed 0:18:38.680 --> 0:18:40.359 is going to do. But so to earnings, and we 0:18:40.520 --> 0:18:43.400 just kind of finished up in earnings cycle here, any 0:18:43.520 --> 0:18:47.320 takeaways for you that maybe influence the way you're thinking 0:18:47.320 --> 0:18:48.240 about opportunities. 0:18:49.240 --> 0:18:51.760 Yeah, Look, earnings are cooperating, right, Earnings are in the 0:18:51.800 --> 0:18:55.399 plus category here. We've had a nice earning season. You know, 0:18:55.520 --> 0:18:58.520 combined S and P five hundred, earnings grew nearly eleven 0:18:58.560 --> 0:19:00.280 percent year every year. At this point, we do having 0:19:00.400 --> 0:19:03.639 VideA still to see obviously, the AI king, we want 0:19:03.640 --> 0:19:05.240 to see where that's going to go. That's going to 0:19:05.240 --> 0:19:08.000 be meaningful for the market, potentially even on the same 0:19:08.119 --> 0:19:10.959 level as today, right to the extent that AI has 0:19:11.000 --> 0:19:14.080 been driving a lot of the market's valuation increases, the 0:19:14.200 --> 0:19:16.520 multiples that we're seeing in a big you know that 0:19:16.640 --> 0:19:20.720 big tech, heavy concentrated part of the market, communications and tech, 0:19:21.119 --> 0:19:23.919 so that that's going to be very important. But certainly 0:19:24.000 --> 0:19:27.239 what's nice to see about you know, earnings right now 0:19:27.400 --> 0:19:30.240 is that with nearly eighty percent of the companies beating 0:19:30.280 --> 0:19:34.200 their expectations, and most of the sector is doing well, 0:19:34.359 --> 0:19:37.639 you know, sectors like financials. This is good, you know, 0:19:37.720 --> 0:19:40.440 it shows breadth, right, it's not just earnings coming from 0:19:40.480 --> 0:19:42.679 that concentrated part of the market that's highly valued. 0:19:43.240 --> 0:19:44.680 So I'm glad you brought that up because I feel 0:19:44.680 --> 0:19:46.480 like I've been asking this question ad nauseum, which is 0:19:46.760 --> 0:19:48.639 is in video going to be a market event or 0:19:48.760 --> 0:19:51.520 is it going to be a mag seven slash chip 0:19:51.600 --> 0:19:53.920 stock event? Where do you fall on that? 0:19:55.320 --> 0:19:58.080