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Speaker 1: Let's get to our guest, Louis Lao is with us.

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Speaker 1: He his partner also portfolio manager at Brandis Investment Partners.

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Speaker 1: He joined from San Diego, California. Louis, thanks for being

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Speaker 1: with us. There's a lot to unpack here. We'll get

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Speaker 1: to the macro in a moment. In the wake of

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Speaker 1: that very very strong employment report, also over the weekend,

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Speaker 1: in terms of market moving news, the Senate passing the

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Speaker 1: Democrats bill on climate, healthcare, and taxes. There are a

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Speaker 1: couple of things here, and I'm curious to get your

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Speaker 1: take on whether or not you want to put money

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Speaker 1: to work in the current environment. There is the notion

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Speaker 1: that we're going to see a sharp reduction in greenhouse

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Speaker 1: gas emissions as a result of this bill. There's obviously

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Speaker 1: technology involved here. I want to get your thoughts on that.

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Speaker 1: And then the bill also allows Medicare to negotiate drug

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Speaker 1: prices for the first time. How would you play that?

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Speaker 1: Give me your sense of this. Yeah, I think on

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Speaker 1: the pharmaceuticals we're not as concerned because a lot of

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Speaker 1: the negotiations and prices can still be positive for the

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Speaker 1: pharma companies with private insurance. Medic Care Medicaid is only

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Speaker 1: a small part of the payments that they received, so

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Speaker 1: I wouldn't be too concerned. In fact, healthcare is one

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Speaker 1: of our top picks this year in terms of sector calls. Uh,

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Speaker 1: we're not too interested in technology, adding a lot in

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Speaker 1: big tech in the US because still the evaluations are

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Speaker 1: elevated and they're kind of running in the face of

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Speaker 1: higher interest rates and higher discover rates. But I was

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Speaker 1: picking it more specifically about the technology that is used

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Speaker 1: to reduce greenhouse gas emissions. Is that something you'd be

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Speaker 1: interested in playing, you know, as value investors, I think

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Speaker 1: we tend to be pretty conservative at valuing some of

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Speaker 1: these technologies, and so that's an area that we're not uh,

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Speaker 1: you know huge and at the moment, Okay, fair enough,

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Speaker 1: let's talk macro. Now, we had that super strong jobs

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Speaker 1: report here in the States five twenty eight thousand. That

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Speaker 1: was the addition in non farm payrolls double estimates. How

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Speaker 1: do you keep a job as an economist when you're

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Speaker 1: off by a mile? That's a separate topic for conversation,

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Speaker 1: I guess. So it looks as tho we're going to

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Speaker 1: see seventy five basis points from the FED in September. Um,

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Speaker 1: are you concerned now that we're going to see a

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Speaker 1: much more aggressive FED for a while longer? You know,

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Speaker 1: I think the conventional definitional recession, you know, being two

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Speaker 1: consecutive quarters on negative economic growth, that goes out the window,

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Speaker 1: you know, with a very strong job to report. I

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Speaker 1: think that you know, shows a very strong consumer pent

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Speaker 1: up savings. So I think the rate I mean, the

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Speaker 1: bad news is the rate hikes will likely continue, but

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Speaker 1: the good news is, uh, you know, the US consumer

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Speaker 1: and the job market is likely strong enough to absorb

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Speaker 1: some of those pressures. And then if you look at

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Speaker 1: earnings that have been released over the last couple of months,

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Speaker 1: I mean, it's not exactly created. You still see pretty

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Speaker 1: strong corporate earnings coming through, and I'm wondering there if

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Speaker 1: there will be a lag. I mean, maybe some of

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Speaker 1: those rate hikes really haven't taken hold yet and and

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Speaker 1: we're likely to see, maybe in the next six months,

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Speaker 1: a sharp downturn and economic performance possible. Yeah, it could be.

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Speaker 1: I mean I think, you know, so some of those

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Speaker 1: sectors like real estate construction is seeing a pronounced slow down.

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Speaker 1: You know, you could have travel and some of the

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Speaker 1: consumer discretionaries slow down in the next six months, so

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Speaker 1: it could very well be possible that's still on the come.

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Speaker 1: One of the things we've been tracking today is this

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Speaker 1: pullback in crude oil. You know, for all of last

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Speaker 1: week here in New York, w t I was down

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Speaker 1: nearly ten percent. We're a week now by more than

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Speaker 1: one percent, holding around eighty eight bucks of barrel in

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Speaker 1: w t I. What does this mean for the macro

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Speaker 1: picture and do you think the trade in terms of

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Speaker 1: going along some of the big energy producers, is that

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Speaker 1: done now? You know? I think our view has always been,

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Speaker 1: you know, there will be a slowdown from decline of

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Speaker 1: a hundred dollars dollars a barrel closer to a d

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Speaker 1: I think just based on the global economy slowing down,

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Speaker 1: demand in China, and the emerging market slowing down. So

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Speaker 1: I think that was always a possibility. While the supply

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Speaker 1: has not really been reduced by the Middle East and

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Speaker 1: some of the oil producers. So in terms of energy,

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Speaker 1: you know, I think that still goes on. I think

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Speaker 1: the energy companies are still very profitable between eighty dollars

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Speaker 1: a barrel and hundred dollars, and some of these companies

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Speaker 1: are paying record dividends, returning capital to shareholders, so I

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Speaker 1: think the energy trade still goes on within that range.

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Speaker 1: Let's pivot to Asian and thanks for sending the note.

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Speaker 1: Over a couple of your conviction calls, and at the

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Speaker 1: top of the list, some of the chip makers in

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Speaker 1: Taiwan and Korea make me the case here the Barry

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Speaker 1: are the bullish case, I should say. You know, I

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Speaker 1: think that you know, the duo political situation Pelosi's visit.

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Speaker 1: I think I've driven down some of the Taiwanese tech

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Speaker 1: companies hardware and semi conductors. You know, they could easily

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Speaker 1: be down in the last quarter, but we don't really

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Speaker 1: see the demand coming down a lot. I think one

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Speaker 1: of the the areas that we still like is cutting

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Speaker 1: edge semi conductors, you know, in Taiwan and Korea. I

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Speaker 1: think the area that we're a little bit concerned about

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Speaker 1: is just anything to do with hardware with smartphones, because

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Speaker 1: there's clearly been a slowdown in smartphone sales, not just

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Speaker 1: Apple but also the Chinese producers. So we do like

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Speaker 1: um memory as well. You know that that's an area

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Speaker 1: where Korean producers dominate. You know, the industry is a

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Speaker 1: lot more consolidate that now than it has been in

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Speaker 1: the last decade. So I think these are the reasons

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Speaker 1: why we don't think demand is as bad as chap

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Speaker 1: prices imply not a saturated market. That's curious. So let's

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Speaker 1: talk a little bit about what's happening on the mainland economy.

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Speaker 1: Trade data over the weekend exports a real strong spot here,

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Speaker 1: with a move up about eighteen percent, much above forecast.

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Speaker 1: How would you be exposed to mainland China right now

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Speaker 1: on the equity side, you know, I think, um, some

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Speaker 1: of the areas that have been really depressed are areas

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Speaker 1: that have been exposed to consumption, so things like sports,

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Speaker 1: where life, insurance, home appliances. I mean, these are the

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Speaker 1: areas that have been very depressed, as as well as travel. Um.

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Speaker 1: I think the export data shows that China's lockdowns, you know,

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Speaker 1: while bad for sentiment, has actually not been bad for

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Speaker 1: industrial production. So I think that is an area that

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Speaker 1: still continues to be healthy. But if you're really looking

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Speaker 1: for what's beaten down, I think anything that's linked to

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Speaker 1: consumption would definitely be the way to go. I would

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Speaker 1: offer up that maybe in the next you know, the

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Speaker 1: first quarter next year would be when we might see

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Speaker 1: China start to back off from the zero COVID. That's interesting, Louis.

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Speaker 1: Thanks for your insight. Appreciate the time that you've taken

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Speaker 1: to spend with us here on daybreak. Asia Louis Law partner,

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Speaker 1: portfolio manager at Brandest Investment Partners, joining us from San

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Speaker 1: Diego