1 00:00:14,000 --> 00:00:16,840 Speaker 1: Welcome to What Goes Up, a weekly markets podcast. I'm 2 00:00:16,880 --> 00:00:19,520 Speaker 1: Moldana Hirich, a market reporter at Bloomberg. 3 00:00:19,360 --> 00:00:23,320 Speaker 2: And I'm Emily Graffeo across asset reporter at Bloomberg. Mike 4 00:00:23,400 --> 00:00:24,919 Speaker 2: Reagan is out this week. 5 00:00:24,840 --> 00:00:27,040 Speaker 1: And this week on the show, our stock's in a 6 00:00:27,120 --> 00:00:30,000 Speaker 1: new bull market or not? There's a raging debate on 7 00:00:30,040 --> 00:00:32,200 Speaker 1: Wall Street as both the S and P five hundred 8 00:00:32,280 --> 00:00:35,440 Speaker 1: and the NAZAQ one hundred continued to search. We'll get 9 00:00:35,440 --> 00:00:38,120 Speaker 1: into it with the chief global strategist for a major 10 00:00:38,200 --> 00:00:42,320 Speaker 1: asset manager. But first, Emily, welcome back to the show. 11 00:00:42,360 --> 00:00:44,360 Speaker 1: We're so happy to have you, Thank you, thank you 12 00:00:44,400 --> 00:00:49,120 Speaker 1: for having me Mike Reagan. On last week's show, Katie 13 00:00:49,120 --> 00:00:52,479 Speaker 1: filled in and she told us one of her deepest 14 00:00:52,560 --> 00:00:56,280 Speaker 1: dark secrets, which is what she's very, very deathly afraid 15 00:00:56,320 --> 00:00:59,800 Speaker 1: of the dark. The dark, So that can't be your 16 00:00:59,840 --> 00:01:00,520 Speaker 1: answer to. 17 00:01:00,960 --> 00:01:05,640 Speaker 2: This isn't really a secret. But I'm very afraid of birds, flying, birds, 18 00:01:05,760 --> 00:01:08,840 Speaker 2: out of control birds, How do you live life? So 19 00:01:09,440 --> 00:01:12,520 Speaker 2: it's when I went to a conference a few months 20 00:01:12,520 --> 00:01:16,160 Speaker 2: ago in Miami for ETFs. I was having a business 21 00:01:16,319 --> 00:01:18,560 Speaker 2: lunch with a source and I was trying to be 22 00:01:18,640 --> 00:01:22,040 Speaker 2: really serious and professional, and there was a bird and 23 00:01:22,080 --> 00:01:25,920 Speaker 2: it kept flying towards us and I was being really 24 00:01:26,000 --> 00:01:29,600 Speaker 2: fantastic and freaking out. But the source was very kind 25 00:01:29,640 --> 00:01:31,479 Speaker 2: about it and he would show it off. 26 00:01:31,520 --> 00:01:33,760 Speaker 1: But I don't beget it though, because there's so many 27 00:01:33,760 --> 00:01:34,720 Speaker 1: birds everywhere. 28 00:01:34,800 --> 00:01:38,440 Speaker 2: The New York City pigeons are different, harmless, they mind 29 00:01:38,480 --> 00:01:40,759 Speaker 2: their own business. It's it's other birds. 30 00:01:40,959 --> 00:01:45,679 Speaker 1: I see you. I don't see our guest this week 31 00:01:45,720 --> 00:01:48,680 Speaker 1: is laughing, so I do want to bring her in. 32 00:01:49,040 --> 00:01:52,920 Speaker 1: It's Sema Sha, chief global strategist for Principal Asset Management. Sima, 33 00:01:52,960 --> 00:01:54,120 Speaker 1: I'm so happy to have you back. 34 00:01:54,000 --> 00:01:55,840 Speaker 3: On the show. Oh, it's great to be here. Thank you. 35 00:01:55,920 --> 00:01:58,000 Speaker 1: Yeah, we have you here in person, which is really great. 36 00:01:58,480 --> 00:02:01,080 Speaker 3: Yeay, it's fun to be hit. Although just twenty four hours. 37 00:02:01,400 --> 00:02:04,320 Speaker 1: Maybe let's just start with some of your views on 38 00:02:04,320 --> 00:02:07,760 Speaker 1: what you're expecting from the economy and from markets. You 39 00:02:07,840 --> 00:02:11,079 Speaker 1: said that a recession is not imminent, but you're still 40 00:02:11,160 --> 00:02:14,440 Speaker 1: forecasting one, so maybe just tell us about your projections. 41 00:02:15,000 --> 00:02:19,560 Speaker 3: Yeah, so we are still expecting a recession, maybe increasingly 42 00:02:19,600 --> 00:02:21,960 Speaker 3: in the minority and actually expecting a full recession to 43 00:02:22,000 --> 00:02:24,760 Speaker 3: come through, but we are expecting it start in Q four. 44 00:02:25,200 --> 00:02:26,520 Speaker 3: I know a lot of people out there who are 45 00:02:26,560 --> 00:02:28,720 Speaker 3: expecting recesion expected to come in Q three. I look 46 00:02:28,720 --> 00:02:30,640 Speaker 3: at the labor market the strength of it, and I 47 00:02:30,680 --> 00:02:33,760 Speaker 3: say that that's almost impossible. But Q four we would 48 00:02:33,800 --> 00:02:37,520 Speaker 3: expect fairly mild negative growth, and then in Q one 49 00:02:37,600 --> 00:02:40,320 Speaker 3: a deeper downturn, but then by Q two this is 50 00:02:40,320 --> 00:02:43,000 Speaker 3: back to recovery. So this is historically a very short 51 00:02:43,040 --> 00:02:46,119 Speaker 3: recession and historically very very mild recession. 52 00:02:47,520 --> 00:02:51,239 Speaker 2: So unlike some strategists on the street that have been 53 00:02:51,320 --> 00:02:54,920 Speaker 2: pushing out their expectations for when this recession is finally 54 00:02:54,960 --> 00:02:57,160 Speaker 2: going to get here, it seems like for a while 55 00:02:57,480 --> 00:03:00,400 Speaker 2: you have been thinking that it's not going to come. 56 00:03:00,440 --> 00:03:02,960 Speaker 2: It's not going to be an imminent recession. How is 57 00:03:03,000 --> 00:03:06,120 Speaker 2: your view though, shifted from the beginning of the year 58 00:03:06,160 --> 00:03:06,680 Speaker 2: to now. 59 00:03:07,480 --> 00:03:10,360 Speaker 3: Yeah, So we have had this expectation for recession in 60 00:03:10,360 --> 00:03:12,760 Speaker 3: the second half of twenty twenty three, since the early 61 00:03:12,800 --> 00:03:14,400 Speaker 3: part of twenty twenty two. So this is a long 62 00:03:14,440 --> 00:03:17,320 Speaker 3: held view for recession. I'm really based on this idea 63 00:03:17,360 --> 00:03:20,119 Speaker 3: of the long and variable aggs all based around fad 64 00:03:20,160 --> 00:03:22,600 Speaker 3: policy is going to trigger a recession. But since the 65 00:03:22,600 --> 00:03:24,880 Speaker 3: beginning of this year, I should actually, even in the 66 00:03:25,000 --> 00:03:29,239 Speaker 3: last two or three months, with this continued outperformance strength 67 00:03:29,280 --> 00:03:31,600 Speaker 3: of the labor market. The one thing that we have 68 00:03:31,760 --> 00:03:34,000 Speaker 3: changed is that we have reduced the duration of recession 69 00:03:34,040 --> 00:03:37,200 Speaker 3: from three quarters to two quarters. I almost wonder if 70 00:03:37,240 --> 00:03:38,960 Speaker 3: this is even going to feel like a recession. You know, 71 00:03:38,960 --> 00:03:40,960 Speaker 3: if you look around, are you going to say, Wow, 72 00:03:41,040 --> 00:03:43,920 Speaker 3: the usism recession probably not beca It's that mild. So 73 00:03:43,960 --> 00:03:45,960 Speaker 3: I think maybe the more important part of this, at 74 00:03:46,040 --> 00:03:50,360 Speaker 3: least from an ass allocation perspective, is what the impact 75 00:03:50,360 --> 00:03:52,280 Speaker 3: on earnings is going to be. And you can already 76 00:03:52,280 --> 00:03:55,560 Speaker 3: see that downward trend. You get into recession, earnings will 77 00:03:55,600 --> 00:03:57,480 Speaker 3: continue to come down, and that's really what's going to 78 00:03:57,480 --> 00:04:01,000 Speaker 3: weigh on asset prices if you don't get a labor market. 79 00:04:01,000 --> 00:04:03,240 Speaker 3: And what we're expecting, I mean, we're you're projecting unemployment 80 00:04:03,360 --> 00:04:05,400 Speaker 3: to rise to four point one percent by year end. 81 00:04:05,440 --> 00:04:08,160 Speaker 3: That is still essentially full employment. So it's not I 82 00:04:08,200 --> 00:04:10,800 Speaker 3: don't think going to be a very very tough recession 83 00:04:10,840 --> 00:04:11,840 Speaker 3: for the population. 84 00:04:12,080 --> 00:04:14,560 Speaker 1: Okay, but that's super interesting. The thing you said about 85 00:04:14,600 --> 00:04:16,400 Speaker 1: is it going to feel like a recession? So what 86 00:04:16,480 --> 00:04:19,040 Speaker 1: will it feel like for the everyday American? 87 00:04:20,640 --> 00:04:23,440 Speaker 3: I wonder if it's going to feel any different to 88 00:04:24,400 --> 00:04:26,640 Speaker 3: when you know, almost over the last year, with living 89 00:04:26,640 --> 00:04:29,440 Speaker 3: costs being quite oppressive, maybe you find out more and 90 00:04:29,440 --> 00:04:31,280 Speaker 3: more people around you are losing their jobs. But then 91 00:04:31,320 --> 00:04:32,920 Speaker 3: that will be a very much of a rolling recession. 92 00:04:32,920 --> 00:04:35,120 Speaker 3: I mean, I do buy into this idea that some 93 00:04:35,200 --> 00:04:38,440 Speaker 3: sectors will continue to be very strong, other sectors will 94 00:04:38,480 --> 00:04:41,080 Speaker 3: be really feeling the pain and almost a continuation of 95 00:04:41,120 --> 00:04:44,400 Speaker 3: what you've seen since actually since last year when housing 96 00:04:44,440 --> 00:04:47,800 Speaker 3: was struggling. Now it's manufacturing, energy struggling at least in 97 00:04:47,839 --> 00:04:49,880 Speaker 3: the earning side, and you're probably going to see rolling 98 00:04:50,040 --> 00:04:52,920 Speaker 3: sectors which are struggling, but maybe just a few more 99 00:04:52,920 --> 00:04:55,360 Speaker 3: of them are feeling the effects by year end. 100 00:04:55,720 --> 00:04:57,800 Speaker 2: What does that mean for what it's going to feel 101 00:04:57,839 --> 00:04:59,000 Speaker 2: like for investors? 102 00:04:59,120 --> 00:05:02,440 Speaker 3: Equity investors, Well, as we've seen already, I mean very 103 00:05:02,440 --> 00:05:05,640 Speaker 3: equally investors, it's confusing. Now it's probably going to become 104 00:05:05,720 --> 00:05:08,599 Speaker 3: even more confusing, and it becomes a very very important 105 00:05:08,600 --> 00:05:11,000 Speaker 3: case if you have to pick your sector very wisely. 106 00:05:11,720 --> 00:05:14,720 Speaker 3: You have to think about your styles very carefully as well, 107 00:05:15,160 --> 00:05:17,839 Speaker 3: and just having a blanket view of the broad equity 108 00:05:17,880 --> 00:05:19,920 Speaker 3: market is simply not going to be enough I want 109 00:05:19,920 --> 00:05:21,440 Speaker 3: to make the plug for active management. I mean, this 110 00:05:21,480 --> 00:05:23,599 Speaker 3: is really the environment that active management should start to 111 00:05:23,680 --> 00:05:27,080 Speaker 3: thrive when you have specific sectors which are struggling. 112 00:05:27,920 --> 00:05:31,360 Speaker 1: And can you say more about what's behind your calculation 113 00:05:31,680 --> 00:05:34,560 Speaker 1: for your projections. Is it that you're just thinking about 114 00:05:34,600 --> 00:05:37,599 Speaker 1: how strong the labor marketers or are there other factors 115 00:05:37,680 --> 00:05:38,039 Speaker 1: at play? 116 00:05:38,120 --> 00:05:38,240 Speaker 2: Two? 117 00:05:38,760 --> 00:05:40,200 Speaker 3: Yeah, so there's a couple of things at place. 118 00:05:40,279 --> 00:05:40,440 Speaker 1: I mean. 119 00:05:40,520 --> 00:05:42,279 Speaker 3: One of the reasons that we expect this to be 120 00:05:42,360 --> 00:05:45,200 Speaker 3: fairly mild and actually not coming through in fact till 121 00:05:45,480 --> 00:05:47,720 Speaker 3: you know, towards the end of this year is back 122 00:05:47,760 --> 00:05:49,919 Speaker 3: to that consumer back to that excess saving story. I 123 00:05:49,960 --> 00:05:52,440 Speaker 3: think we are all very familiar with that story. But 124 00:05:52,520 --> 00:05:53,960 Speaker 3: I think at some point last year there was an 125 00:05:53,960 --> 00:05:57,000 Speaker 3: expectation that at least for some of the household's low 126 00:05:57,080 --> 00:06:01,000 Speaker 3: income households, excess savings have been completely exhausted already. But 127 00:06:01,080 --> 00:06:02,640 Speaker 3: if you look at the data now, and we've just 128 00:06:02,680 --> 00:06:04,960 Speaker 3: done a kind of a rejuvenation of those numbers, and 129 00:06:05,000 --> 00:06:06,640 Speaker 3: it looks like they're still half a trillion to go, 130 00:06:07,520 --> 00:06:10,160 Speaker 3: and that should sustain households at least until your end, 131 00:06:10,240 --> 00:06:12,640 Speaker 3: potentially even longer if they start to change their behavior 132 00:06:12,680 --> 00:06:15,520 Speaker 3: a little bit, so that is what really continues to 133 00:06:15,560 --> 00:06:19,719 Speaker 3: support the broader economy. The thing is with the labor 134 00:06:19,760 --> 00:06:22,160 Speaker 3: market is it is very tight today, but it is 135 00:06:22,440 --> 00:06:26,360 Speaker 3: typically the most lagging indicator of any recession. So it 136 00:06:26,480 --> 00:06:29,080 Speaker 3: stays strong. It's stays strong, and then suddenly it drops 137 00:06:29,120 --> 00:06:31,200 Speaker 3: and then it spirals fairly quickly. So although it looks 138 00:06:31,240 --> 00:06:33,360 Speaker 3: good today, it doesn't mean it's going to stay like 139 00:06:33,400 --> 00:06:34,960 Speaker 3: this forever, which I think a lot of people making 140 00:06:34,960 --> 00:06:37,920 Speaker 3: that mistake. So we are anticipating. Q four is when 141 00:06:37,960 --> 00:06:40,440 Speaker 3: you start to see job losses and it does spiral. 142 00:06:40,839 --> 00:06:43,800 Speaker 3: You've also seen actually the interest rates sensitivity of the 143 00:06:43,920 --> 00:06:47,400 Speaker 3: US economy is considerably lower than it was previously, partly 144 00:06:47,440 --> 00:06:51,440 Speaker 3: because actually debt levels for consumers, households, businesses is lower 145 00:06:51,480 --> 00:06:54,160 Speaker 3: than in previous times. So those are the kind of 146 00:06:54,200 --> 00:06:57,279 Speaker 3: the key factors which are driving this not imminent recession 147 00:06:57,320 --> 00:06:58,800 Speaker 3: but also mild recession. 148 00:07:00,000 --> 00:07:02,040 Speaker 2: What is really interesting in your note about the interest 149 00:07:02,120 --> 00:07:04,839 Speaker 2: rates sensitivity, could you talk a little bit more about 150 00:07:05,040 --> 00:07:08,799 Speaker 2: why in this current cycle we're a little bit less 151 00:07:08,920 --> 00:07:12,320 Speaker 2: sensitive to higher interest rates than prior downturns. 152 00:07:12,800 --> 00:07:15,480 Speaker 3: Yeah. So one of the interesting things, and I say 153 00:07:15,520 --> 00:07:18,520 Speaker 3: this coming from the UK, where actually interest rates sensitivity 154 00:07:18,920 --> 00:07:21,600 Speaker 3: there is a lot higher than the US, and one 155 00:07:21,600 --> 00:07:23,840 Speaker 3: of the reasons is is back to the housing mark 156 00:07:23,880 --> 00:07:26,840 Speaker 3: and back to mortgages. So for example, the United Kingdom, 157 00:07:27,360 --> 00:07:30,760 Speaker 3: you have a majority of mortgages are on the variable 158 00:07:30,920 --> 00:07:33,080 Speaker 3: right side, right, so it's rates have gone up. People 159 00:07:33,120 --> 00:07:36,559 Speaker 3: have really started to see that mortgage costs are fullibility fall, 160 00:07:37,120 --> 00:07:39,280 Speaker 3: whereas in the US there's a greater percentage of fixed 161 00:07:39,360 --> 00:07:42,000 Speaker 3: rate mortgages. So the implication is is that people just 162 00:07:42,040 --> 00:07:45,480 Speaker 3: simply don't feel that pain of these FED rate hikes 163 00:07:45,640 --> 00:07:47,720 Speaker 3: which have been incredibly aggressive. But if you're not feeling it, 164 00:07:47,720 --> 00:07:50,600 Speaker 3: then actually it almost doesn't exist. So that's one thing. 165 00:07:51,040 --> 00:07:53,680 Speaker 3: And then once you start to look at the corporate 166 00:07:53,880 --> 00:07:57,480 Speaker 3: debt imbalances, they are lower than what you see certainly 167 00:07:57,560 --> 00:08:00,920 Speaker 3: during the GFC, but also during previous recession. So as 168 00:08:01,000 --> 00:08:03,720 Speaker 3: interest rates rise, that debt servicing cost is not as 169 00:08:04,160 --> 00:08:06,560 Speaker 3: oppressive as maybe it had been in previous times. So 170 00:08:06,600 --> 00:08:08,320 Speaker 3: that is really the key reason, and I think that 171 00:08:08,360 --> 00:08:11,600 Speaker 3: has actually been a process of I guess, of understanding 172 00:08:11,640 --> 00:08:15,400 Speaker 3: for a lot of economists out there. That history. Of course, 173 00:08:15,440 --> 00:08:17,480 Speaker 3: we look to it as a guide, but it cannot 174 00:08:17,480 --> 00:08:19,440 Speaker 3: be the rule. For as we look forward. 175 00:08:20,520 --> 00:08:24,480 Speaker 2: So what does that mean for the FMC meeting next 176 00:08:24,520 --> 00:08:27,520 Speaker 2: week if we get another rate hike, does it even 177 00:08:27,760 --> 00:08:29,000 Speaker 2: matter that much? 178 00:08:30,320 --> 00:08:32,360 Speaker 3: It's a very good point, I would say, Look, once 179 00:08:32,400 --> 00:08:35,920 Speaker 3: you're getting into just additional twenty five BIPs, no, No, 180 00:08:36,040 --> 00:08:38,000 Speaker 3: I don't think it's it's a thing that's It's not 181 00:08:38,040 --> 00:08:40,760 Speaker 3: like it's it's going to suddenly push the economy over. 182 00:08:41,480 --> 00:08:44,280 Speaker 3: I think the interesting part of that twenty five basis 183 00:08:44,320 --> 00:08:47,760 Speaker 3: point hike is the implication to the market expectations, and 184 00:08:47,800 --> 00:08:51,079 Speaker 3: that's really where you're seeing liquidity conditions, or so I 185 00:08:51,080 --> 00:08:54,800 Speaker 3: should say, financial conditions have been very easy, actually have 186 00:08:54,960 --> 00:08:56,920 Speaker 3: eased in fact over the last couple of months, because 187 00:08:57,000 --> 00:08:59,600 Speaker 3: markets have been so certain that the FAD is going 188 00:08:59,640 --> 00:09:01,920 Speaker 3: to stop hiking, that there's going to be rate cuts. 189 00:09:02,200 --> 00:09:04,720 Speaker 3: But once you start to introduce another rate hike, well 190 00:09:05,440 --> 00:09:07,920 Speaker 3: potentially that could reverse a lot of this easy and 191 00:09:07,920 --> 00:09:12,640 Speaker 3: financial conditions. And alongside that increase in rate hike, potentially 192 00:09:12,640 --> 00:09:16,000 Speaker 3: in June, potentially in July, alongside that you should see 193 00:09:16,040 --> 00:09:18,520 Speaker 3: a continued pricing out of rate cuts. And if I 194 00:09:18,520 --> 00:09:20,920 Speaker 3: think about the broad equity market, one of the reasons 195 00:09:20,960 --> 00:09:24,840 Speaker 3: I think why there is some optimism still is just 196 00:09:24,880 --> 00:09:27,040 Speaker 3: this idea that the food will come to the rescue. 197 00:09:27,240 --> 00:09:30,000 Speaker 3: So the more and more they intervene, then I think 198 00:09:30,040 --> 00:09:31,440 Speaker 3: the less that becomes the truth. 199 00:09:37,800 --> 00:09:40,959 Speaker 1: Okay, before we talk more about what you're expecting down 200 00:09:41,000 --> 00:09:43,240 Speaker 1: the line, what do you think we do get from 201 00:09:43,280 --> 00:09:45,800 Speaker 1: the Fed? Because the market is anticipating in the pause 202 00:09:45,840 --> 00:09:50,520 Speaker 1: in June potentially hike in July. What are you foresee happening? 203 00:09:51,160 --> 00:09:53,760 Speaker 3: So we have had a forecast, I think since last 204 00:09:53,760 --> 00:09:57,120 Speaker 3: October when Powell I'd come out with a fairly hawkish 205 00:09:57,240 --> 00:10:01,760 Speaker 3: commentary that the third will peak at five twenty five 206 00:10:01,760 --> 00:10:04,080 Speaker 3: to five fifty, right, So that for us means that 207 00:10:04,080 --> 00:10:06,200 Speaker 3: there is one more rate hike, I would have said 208 00:10:06,240 --> 00:10:10,479 Speaker 3: June suddenly, looking at the labor market data from from April, 209 00:10:11,120 --> 00:10:13,520 Speaker 3: suddenly there is another rate hike to come. But just 210 00:10:13,559 --> 00:10:15,560 Speaker 3: going by the commentary, the kind of words that are 211 00:10:15,600 --> 00:10:18,040 Speaker 3: coming out from so many the FMC members, they are 212 00:10:18,120 --> 00:10:20,679 Speaker 3: very reluctant, and quite rightly so, in wanting to look 213 00:10:20,880 --> 00:10:24,360 Speaker 3: for the evidence of economic slowdown. You know we talk 214 00:10:24,400 --> 00:10:26,920 Speaker 3: about those long and veriable lags. Well, that means that 215 00:10:26,960 --> 00:10:28,520 Speaker 3: they need to take the time to see how the 216 00:10:28,520 --> 00:10:31,199 Speaker 3: economy is responding to the hikes so far, so I 217 00:10:31,240 --> 00:10:34,400 Speaker 3: think from that perspective, it's more likely that they stop 218 00:10:34,640 --> 00:10:37,520 Speaker 3: in June and then they start again in July. The 219 00:10:37,600 --> 00:10:40,160 Speaker 3: one thing that concerns me, though, to be honest, is 220 00:10:40,520 --> 00:10:43,000 Speaker 3: this is now becoming another consensus forecast for one more 221 00:10:43,040 --> 00:10:45,920 Speaker 3: rate hike. When this a consensus, there's always a little 222 00:10:45,920 --> 00:10:47,560 Speaker 3: bit of a concern around it, because if you do 223 00:10:47,679 --> 00:10:50,840 Speaker 3: get a continuation of hikes, maybe another one in September, 224 00:10:51,320 --> 00:10:54,840 Speaker 3: that is where you start to see some negative surprises. 225 00:10:54,880 --> 00:10:56,880 Speaker 3: And when you've got a market which is doing so well, 226 00:10:57,280 --> 00:10:58,840 Speaker 3: that is where the rest really come from. 227 00:10:59,040 --> 00:11:01,840 Speaker 1: What is behind the June pause? Is it also some 228 00:11:01,880 --> 00:11:04,440 Speaker 1: of the banking sector turmoil that we've seen that they 229 00:11:04,440 --> 00:11:07,640 Speaker 1: are really needing to still figure out and think about. 230 00:11:08,240 --> 00:11:10,600 Speaker 3: Yeah, absolutely so, as well as as you said, you know, 231 00:11:10,640 --> 00:11:13,640 Speaker 3: as well as just looking at the broader economy, how 232 00:11:13,679 --> 00:11:15,600 Speaker 3: is the unemployment rate and how is of course, how 233 00:11:15,679 --> 00:11:18,160 Speaker 3: is inflation behaving. One of the key things that we've 234 00:11:18,160 --> 00:11:20,800 Speaker 3: heard the FMC talk about repeatedly over the last couple 235 00:11:20,840 --> 00:11:23,200 Speaker 3: of months is what the impact of the banking crisis 236 00:11:23,240 --> 00:11:25,360 Speaker 3: is going to be, and the difficulty of the banking 237 00:11:25,400 --> 00:11:27,319 Speaker 3: crisis is is actually a lot of it is down 238 00:11:27,400 --> 00:11:32,080 Speaker 3: to behavioral behavioral economics almost how do people respond, how 239 00:11:32,120 --> 00:11:34,400 Speaker 3: do businesses respond, and how to banks respond. It's one 240 00:11:34,400 --> 00:11:36,720 Speaker 3: of those things that's very very difficult to model for us, 241 00:11:36,760 --> 00:11:39,320 Speaker 3: but also for the FAT too, So they are having 242 00:11:39,400 --> 00:11:42,319 Speaker 3: to track the data and see how lending behavior is continuing. 243 00:11:42,679 --> 00:11:45,120 Speaker 3: Up till this point actually has been fairly healthy, so 244 00:11:45,160 --> 00:11:46,800 Speaker 3: that shouldn't really stand in their way. But I think 245 00:11:46,840 --> 00:11:49,000 Speaker 3: they are looking for as much evidence as they can 246 00:11:49,040 --> 00:11:52,920 Speaker 3: gather before they do a hike, which you know, could 247 00:11:52,960 --> 00:11:54,960 Speaker 3: really unsettle financial markets. 248 00:11:55,160 --> 00:11:58,360 Speaker 2: What about inflation. There's a lot of people that doubt 249 00:11:58,360 --> 00:12:01,880 Speaker 2: we can get to the two percent for quite some time. 250 00:12:01,960 --> 00:12:04,480 Speaker 2: Do you think the Fed would ever redefine the two 251 00:12:04,559 --> 00:12:05,400 Speaker 2: percent target? 252 00:12:06,840 --> 00:12:10,920 Speaker 3: Well, first thing is they cannot redefine a two percent 253 00:12:11,000 --> 00:12:14,199 Speaker 3: target until they've hit two percent, because otherwise they lose 254 00:12:14,200 --> 00:12:17,960 Speaker 3: complete credibility. So would they do it this year. Absolutely not, 255 00:12:18,000 --> 00:12:20,120 Speaker 3: because I am studying the camp that they cannot hit 256 00:12:20,160 --> 00:12:23,720 Speaker 3: two percent in twenty twenty three. If you get a recession, 257 00:12:23,880 --> 00:12:25,760 Speaker 3: well that's probably going to be your process which brings 258 00:12:25,760 --> 00:12:27,200 Speaker 3: it down to two percent, And then maybe at that 259 00:12:27,200 --> 00:12:30,440 Speaker 3: point they can say right, looking at the broader set 260 00:12:30,440 --> 00:12:32,960 Speaker 3: of features, looking at the next ten years, or the 261 00:12:33,040 --> 00:12:37,760 Speaker 3: various structural secular inflationary forces. Maybe we want to shift 262 00:12:37,760 --> 00:12:39,319 Speaker 3: it maybe a little bit more flexible two and a 263 00:12:39,320 --> 00:12:43,000 Speaker 3: half to three percent, but study until they've hit two percent. 264 00:12:43,040 --> 00:12:45,280 Speaker 3: I think that they really risk losing credibility. 265 00:12:46,120 --> 00:12:48,640 Speaker 1: We've had a slew of strategists come out in the 266 00:12:48,760 --> 00:12:53,040 Speaker 1: last couple of weeks and they've been upping their SMP targets. Obviously, 267 00:12:53,080 --> 00:12:56,240 Speaker 1: the market's been rallying quite a bit tax talks and 268 00:12:56,320 --> 00:12:59,000 Speaker 1: the broader market as well. But what are your first see. 269 00:12:59,000 --> 00:13:02,160 Speaker 1: It sounds like you would first see a very charpy 270 00:13:02,240 --> 00:13:04,640 Speaker 1: path for stocks through the end of the year. 271 00:13:05,440 --> 00:13:07,480 Speaker 3: Well, so this is where they think the picture becomes 272 00:13:07,840 --> 00:13:11,599 Speaker 3: extremely confusing because this recession forecast, and even if you 273 00:13:11,600 --> 00:13:14,960 Speaker 3: don't expect recession, but you just anticipate slow down, that 274 00:13:15,080 --> 00:13:17,320 Speaker 3: should suggest that the S and P five hundred is 275 00:13:17,320 --> 00:13:19,600 Speaker 3: going to be under downward pressure. Right, the broad equity 276 00:13:19,600 --> 00:13:23,199 Speaker 3: market is underd downward pressure. That makes sense, But then 277 00:13:23,200 --> 00:13:25,800 Speaker 3: you throw in the tech side and actually everything goes 278 00:13:25,800 --> 00:13:28,800 Speaker 3: completely out the window because a math just doesn't add up. 279 00:13:29,240 --> 00:13:32,920 Speaker 3: So if you believe in the strength of AI and sudden, 280 00:13:32,960 --> 00:13:34,920 Speaker 3: maybe there's a bit of froth in the market. But 281 00:13:35,000 --> 00:13:38,280 Speaker 3: if you believe that AI can continue to push tech 282 00:13:38,320 --> 00:13:42,000 Speaker 3: companies forward, it's actually very difficult to see how you 283 00:13:42,040 --> 00:13:44,800 Speaker 3: get the S and B five hundred back below four thousand, 284 00:13:44,840 --> 00:13:47,760 Speaker 3: and certainly down to the previous September of tow belows. 285 00:13:48,240 --> 00:13:50,040 Speaker 3: So I think that has been one of the reasons 286 00:13:50,080 --> 00:13:52,120 Speaker 3: why you have seen so many strategies upping their S 287 00:13:52,160 --> 00:13:54,760 Speaker 3: and B five hundred forecasts just because of the text 288 00:13:54,840 --> 00:13:57,280 Speaker 3: that the math just doesn't add up cerny. For us, 289 00:13:57,360 --> 00:14:01,240 Speaker 3: we are believers in the text. Last year we were 290 00:14:01,280 --> 00:14:04,080 Speaker 3: in the underweight because of the FED hiking cycle. February 291 00:14:04,120 --> 00:14:07,000 Speaker 3: this year we raised our exposure, mainly for cyclical reasons timely, 292 00:14:07,679 --> 00:14:10,360 Speaker 3: very timely. I can't pretend to have known that in 293 00:14:10,480 --> 00:14:12,560 Speaker 3: video would do what it's doing, but said we had 294 00:14:12,600 --> 00:14:14,480 Speaker 3: a cyclical view on it in terms of there's a 295 00:14:14,480 --> 00:14:17,160 Speaker 3: slowdown coming, the FED is nearing the end of its 296 00:14:17,240 --> 00:14:20,760 Speaker 3: hiking path, and the broader global economy is going to 297 00:14:20,800 --> 00:14:22,800 Speaker 3: do better than the US, and typically large cap has 298 00:14:22,880 --> 00:14:25,800 Speaker 3: a greater international revenue exposure than the middle small caps. 299 00:14:26,200 --> 00:14:29,040 Speaker 3: So that was the reason why we went overweight in February. 300 00:14:29,360 --> 00:14:32,920 Speaker 3: But now you've got, of course, this amazing secular discussion 301 00:14:33,160 --> 00:14:37,080 Speaker 3: around around AI and the potential profits for the sector. 302 00:14:38,320 --> 00:14:40,240 Speaker 3: I have to say, I think it's very difficult to 303 00:14:40,280 --> 00:14:43,240 Speaker 3: see this completely collapse back to what it was last year. 304 00:14:43,760 --> 00:14:48,480 Speaker 1: What is the ballcase on AI? Is it that companies 305 00:14:48,600 --> 00:14:50,680 Speaker 1: have a bunch of cash and they're balance sheets and 306 00:14:50,720 --> 00:14:53,800 Speaker 1: they're going to be spending it towards AI development? Or 307 00:14:53,920 --> 00:14:57,400 Speaker 1: is it and I've seen this slightly gloomier review, which 308 00:14:57,440 --> 00:15:00,280 Speaker 1: is that people are thinking about AI as replace seeing 309 00:15:00,280 --> 00:15:02,800 Speaker 1: a lot of jobs. So they're jumping into the market 310 00:15:02,800 --> 00:15:05,960 Speaker 1: because they want to at least take advantage of the 311 00:15:06,000 --> 00:15:08,520 Speaker 1: market upside, and they want to be part of the rally, 312 00:15:08,520 --> 00:15:11,479 Speaker 1: even if it means that AI is, you know, potentially 313 00:15:12,120 --> 00:15:13,480 Speaker 1: displacing tons of jobs. 314 00:15:13,560 --> 00:15:16,200 Speaker 3: Yeah, AI could be the emotional hedge. So I think 315 00:15:16,200 --> 00:15:18,160 Speaker 3: it's a little bit of both, right. I think the 316 00:15:18,600 --> 00:15:21,920 Speaker 3: rationale for having that special to companies which are investing 317 00:15:21,920 --> 00:15:25,160 Speaker 3: in AI is, you know, I think it's it's not 318 00:15:25,320 --> 00:15:27,760 Speaker 3: just like you having the dot com boom. I think 319 00:15:27,800 --> 00:15:32,520 Speaker 3: it's almost a fundamental change in and I guess that 320 00:15:32,600 --> 00:15:34,840 Speaker 3: the way people live their lives do business is that 321 00:15:34,880 --> 00:15:36,920 Speaker 3: AI is probably something which is here to stay. It's 322 00:15:36,960 --> 00:15:38,920 Speaker 3: not like the metaverse, right, this is something which is 323 00:15:38,960 --> 00:15:41,640 Speaker 3: a lot more meaningful. And these companies have the cash 324 00:15:41,640 --> 00:15:43,360 Speaker 3: and the balanceches and I have the same kind of leverage. 325 00:15:43,400 --> 00:15:45,720 Speaker 3: They have the brand. I mean, there's so many reasons 326 00:15:45,760 --> 00:15:48,640 Speaker 3: to have a positive view for AI, but I also 327 00:15:49,120 --> 00:15:51,520 Speaker 3: I mean one of my lingering concerns for the broader 328 00:15:51,560 --> 00:15:54,480 Speaker 3: market is, you know, one of the consensus views is 329 00:15:54,520 --> 00:15:55,800 Speaker 3: that the next ten years is going to be a 330 00:15:55,800 --> 00:15:57,760 Speaker 3: lot more inflationary than the past ten years, and that 331 00:15:57,880 --> 00:16:03,840 Speaker 3: people point to deglobalization, aging, the shift to green energy. 332 00:16:03,880 --> 00:16:06,840 Speaker 3: But what about AI? I mean AI and the potential 333 00:16:06,880 --> 00:16:09,160 Speaker 3: job loss. And we've already heard from places like IBM 334 00:16:09,200 --> 00:16:11,960 Speaker 3: in the United Kingdom. We heard from British Telecom, which 335 00:16:12,000 --> 00:16:13,760 Speaker 3: is saying that they could I think come almost like 336 00:16:13,760 --> 00:16:16,160 Speaker 3: a third of their workforce within the next few years. 337 00:16:16,760 --> 00:16:20,480 Speaker 3: That is deflationary and that could potentially turn that whole 338 00:16:20,520 --> 00:16:22,560 Speaker 3: discussion of the next ten years and how you really 339 00:16:22,560 --> 00:16:26,360 Speaker 3: want an investment as a strategic perspective upside down. But 340 00:16:26,400 --> 00:16:29,000 Speaker 3: at least for the near term, I think AI technology 341 00:16:29,320 --> 00:16:30,800 Speaker 3: you need to have some kind of exposure to that 342 00:16:30,800 --> 00:16:31,880 Speaker 3: in new portfolios. 343 00:16:32,960 --> 00:16:36,760 Speaker 2: How resilient are these AI linked stocks for the next 344 00:16:36,920 --> 00:16:41,360 Speaker 2: six months from an impending recession and earnings downturn. 345 00:16:42,880 --> 00:16:46,200 Speaker 3: I think they are fairly resilient to the broader economic story, 346 00:16:46,920 --> 00:16:49,760 Speaker 3: simply because they are typically the companies that should thrive 347 00:16:50,360 --> 00:16:53,840 Speaker 3: when things get a little more challenging. It's not like 348 00:16:53,880 --> 00:16:57,000 Speaker 3: they're going to completely avoid the downflow that you see 349 00:16:57,000 --> 00:16:59,479 Speaker 3: for the border economy, but I would expect them to outperform. 350 00:17:00,720 --> 00:17:02,840 Speaker 3: The reason I'm hesitating is because there is clearly a 351 00:17:02,840 --> 00:17:05,800 Speaker 3: little froth in the market. You know, valuations have just 352 00:17:05,840 --> 00:17:09,679 Speaker 3: gone to extreme levels. We would anticipate that there's going 353 00:17:09,720 --> 00:17:12,080 Speaker 3: to be a bit of a pullback. Once you get 354 00:17:12,080 --> 00:17:15,080 Speaker 3: their pullback, increase your exposure because I think this is 355 00:17:15,080 --> 00:17:16,920 Speaker 3: a long term trade. But I do think that maybe 356 00:17:16,960 --> 00:17:18,960 Speaker 3: the next six months could be very, very choppy for 357 00:17:18,960 --> 00:17:20,840 Speaker 3: a lot of things in the market. The other thing 358 00:17:20,960 --> 00:17:23,560 Speaker 3: is is that if you don't see a pullback in 359 00:17:23,600 --> 00:17:26,720 Speaker 3: the market, at least pull back in the AI side, 360 00:17:27,320 --> 00:17:30,280 Speaker 3: does it drag the rest of the market up with it? 361 00:17:30,359 --> 00:17:32,679 Speaker 3: Do you get this kind of melt up, this momentum, 362 00:17:32,960 --> 00:17:35,760 Speaker 3: this improved investor sentiment, And I think that would be 363 00:17:35,840 --> 00:17:38,879 Speaker 3: dangerous because all that happens then is that you get 364 00:17:39,000 --> 00:17:42,520 Speaker 3: the liquidity financial conditions continuing to ease, you get a 365 00:17:42,560 --> 00:17:44,800 Speaker 3: new reburst of inflation, kind of like what you saw 366 00:17:44,800 --> 00:17:47,960 Speaker 3: in the nineteen seventies. You got new FED hikes to come, 367 00:17:48,080 --> 00:17:50,760 Speaker 3: and then you essentially get a deeper downturn. So from 368 00:17:50,800 --> 00:17:52,760 Speaker 3: a recession standpoint, you want to get out this way 369 00:17:52,960 --> 00:17:55,480 Speaker 3: sooner the later it comes, the deeper it's going to be. 370 00:17:56,160 --> 00:17:59,480 Speaker 1: I'm really interested in your super long term view, which 371 00:17:59,520 --> 00:18:03,800 Speaker 1: is you're expecting lower returns and higher volatility. I think 372 00:18:03,840 --> 00:18:06,240 Speaker 1: over the next decade. Maybe we can say, like, can 373 00:18:06,280 --> 00:18:07,880 Speaker 1: you talk about that very long term view. 374 00:18:08,320 --> 00:18:10,640 Speaker 3: So if we think about the last ten years, you've 375 00:18:10,680 --> 00:18:13,920 Speaker 3: had an environment of very low volatility and higher rates. 376 00:18:13,920 --> 00:18:15,520 Speaker 3: And one of the key reasons for that was because 377 00:18:15,520 --> 00:18:18,120 Speaker 3: there was a low rate environment, you had low inflation, 378 00:18:18,920 --> 00:18:20,920 Speaker 3: you had central banks not just a FED, but around 379 00:18:20,960 --> 00:18:24,399 Speaker 3: the world keeping equidity conditions extremely easy. And as a result, 380 00:18:24,840 --> 00:18:28,000 Speaker 3: if you're an investor, it wasn't too hard to make 381 00:18:28,000 --> 00:18:30,960 Speaker 3: a positive for ten your portfolio. But now if you 382 00:18:30,960 --> 00:18:34,119 Speaker 3: look at the next ten years, and for the reasons 383 00:18:34,119 --> 00:18:40,440 Speaker 3: of the globalization, aging society shifted to green energy, you're 384 00:18:40,480 --> 00:18:42,560 Speaker 3: probably looking at a time where inflation is going to 385 00:18:42,600 --> 00:18:44,439 Speaker 3: be I mean not meaningfully higher than what you've had 386 00:18:44,480 --> 00:18:47,000 Speaker 3: over the last ten years. But maybe if you think 387 00:18:47,119 --> 00:18:49,520 Speaker 3: that for the US, inflation has averaged about one point 388 00:18:49,600 --> 00:18:52,680 Speaker 3: two percent over the last ten year period, maybe it 389 00:18:52,720 --> 00:18:54,119 Speaker 3: goes up to about two and a half to three 390 00:18:54,160 --> 00:18:56,600 Speaker 3: percent over the next ten years. That is an environment 391 00:18:56,640 --> 00:18:59,080 Speaker 3: where you are moving away from quantitactive easing. So you 392 00:18:59,160 --> 00:19:02,399 Speaker 3: haven't got zero rate environment anymore. And as long as 393 00:19:02,400 --> 00:19:05,879 Speaker 3: you have that, and it's actually more expensive for companies, 394 00:19:06,240 --> 00:19:08,439 Speaker 3: well then you need to make harder decisions. You need 395 00:19:08,480 --> 00:19:11,600 Speaker 3: to have better analysis. But ultimately that is an environment 396 00:19:11,600 --> 00:19:15,320 Speaker 3: where you have lower returns and higher volatility. You need 397 00:19:15,359 --> 00:19:18,359 Speaker 3: to be a little bit more exotic. I think in 398 00:19:18,440 --> 00:19:21,440 Speaker 3: terms of how you're thinking about investing, can you just 399 00:19:21,440 --> 00:19:23,359 Speaker 3: stick to the traditionalist classes or do you need to 400 00:19:23,359 --> 00:19:26,080 Speaker 3: start thinking a little bit outside of the box. So 401 00:19:26,119 --> 00:19:27,480 Speaker 3: I think that the next ten years is going to 402 00:19:27,520 --> 00:19:29,439 Speaker 3: be harder, but potentially more interesting as well. 403 00:19:30,200 --> 00:19:35,000 Speaker 2: I like that word exotic. What's your highest conviction exotic 404 00:19:36,800 --> 00:19:37,840 Speaker 2: for the long term? 405 00:19:38,280 --> 00:19:40,199 Speaker 3: Yeah, okay, now this is not going to sound exotic 406 00:19:40,200 --> 00:19:40,639 Speaker 3: at all. 407 00:19:40,520 --> 00:19:44,120 Speaker 1: But treasury, Yeah, treasure cash. 408 00:19:44,440 --> 00:19:46,119 Speaker 3: You know, if you want to get any kind of 409 00:19:46,320 --> 00:19:50,000 Speaker 3: strong returns in your portfolio, beyond beyond I think study 410 00:19:50,040 --> 00:19:52,560 Speaker 3: what you can make on any kind of traditional equities, 411 00:19:52,600 --> 00:19:56,440 Speaker 3: public equities, public fixed income. Then you have to start 412 00:19:56,480 --> 00:19:59,960 Speaker 3: considering about considering privates. And ideally you want to combine 413 00:20:00,080 --> 00:20:03,919 Speaker 3: two things together, that's emerging markets and privates. And I 414 00:20:03,920 --> 00:20:05,679 Speaker 3: think there is a lot of potential there. But you 415 00:20:05,760 --> 00:20:08,280 Speaker 3: have to look beyond the next year or so because 416 00:20:08,320 --> 00:20:11,359 Speaker 3: there will I think be a lot of cyclical concerns 417 00:20:11,520 --> 00:20:14,040 Speaker 3: as maybe the public weakness catches up with the private 418 00:20:14,440 --> 00:20:17,280 Speaker 3: catch up for the private market. But then, if you're 419 00:20:17,280 --> 00:20:20,200 Speaker 3: taking a ten year perspective, don't you want to have 420 00:20:20,440 --> 00:20:22,919 Speaker 3: a position in some new found companies which are going 421 00:20:22,960 --> 00:20:26,200 Speaker 3: to be benefiting from a growing middle class, a catch 422 00:20:26,280 --> 00:20:35,639 Speaker 3: up economy, and ideally based something on technology. 423 00:20:45,119 --> 00:20:47,360 Speaker 1: Well, I was going to ask you to give us 424 00:20:47,520 --> 00:20:51,080 Speaker 1: your overview what you are seeing internationally as well, and 425 00:20:51,160 --> 00:20:53,760 Speaker 1: maybe what areas you're concerned about or what you are 426 00:20:53,800 --> 00:20:55,240 Speaker 1: currently liking. 427 00:20:56,320 --> 00:20:59,920 Speaker 3: So at the moment, we have had I think generally 428 00:21:00,880 --> 00:21:05,480 Speaker 3: constructive view on China. We are disappointed, of course by 429 00:21:05,960 --> 00:21:08,600 Speaker 3: the economic story in the last couple of months has 430 00:21:08,600 --> 00:21:12,000 Speaker 3: really has been quite disappointing. And yet if you look 431 00:21:12,040 --> 00:21:15,080 Speaker 3: out over a longer term, perspective. So again, maybe the 432 00:21:15,119 --> 00:21:16,920 Speaker 3: next six months are tough, but if you're looking out 433 00:21:16,960 --> 00:21:19,560 Speaker 3: maybe over two to three and obviously a longer term horizon, 434 00:21:19,880 --> 00:21:21,840 Speaker 3: I actually think the China story is quite a constructive 435 00:21:21,840 --> 00:21:24,360 Speaker 3: one again, and the reason is is that what we've 436 00:21:24,440 --> 00:21:26,600 Speaker 3: learned from the Chinese government over I think the last 437 00:21:26,640 --> 00:21:28,199 Speaker 3: five years but it's kind of gone a little bit 438 00:21:28,240 --> 00:21:31,399 Speaker 3: behind the scenes because of COVID and the various lockdowns, 439 00:21:31,920 --> 00:21:35,320 Speaker 3: is that they are aiming for a more stable economy. 440 00:21:35,480 --> 00:21:37,560 Speaker 3: They don't want to have the boom bus cycle. They 441 00:21:37,600 --> 00:21:39,800 Speaker 3: don't want to have an economy which is addicted to leverage, 442 00:21:40,119 --> 00:21:42,240 Speaker 3: and as a result, their stimulus policies are not going 443 00:21:42,320 --> 00:21:45,919 Speaker 3: to be driving incredible growth rates and then sharp drops, 444 00:21:46,560 --> 00:21:49,399 Speaker 3: So we are not anticipating very significant stimnus in the 445 00:21:49,440 --> 00:21:52,120 Speaker 3: second half of this year. This is a government which 446 00:21:52,119 --> 00:21:54,480 Speaker 3: is aiming for fairly stable and I guess a little 447 00:21:54,480 --> 00:21:58,040 Speaker 3: bit boring growth. But the benefit for an invest over 448 00:21:58,080 --> 00:22:00,639 Speaker 3: the next over a year, longer term horizon is that 449 00:22:00,680 --> 00:22:02,560 Speaker 3: this is a more stable economy which avoids a lot 450 00:22:02,560 --> 00:22:04,560 Speaker 3: of the pitfalls and I think investors have fallen into 451 00:22:04,560 --> 00:22:06,840 Speaker 3: previous years, so we do, like China, guess from a 452 00:22:06,840 --> 00:22:07,800 Speaker 3: longer term perspective. 453 00:22:08,920 --> 00:22:12,680 Speaker 1: Well, Sima Shaw, chief Global Strategists for Principal Asset Management. 454 00:22:12,720 --> 00:22:14,640 Speaker 1: We want to thank you for coming in, but you're 455 00:22:14,640 --> 00:22:19,120 Speaker 1: not free to go yet. I call this the taking 456 00:22:19,240 --> 00:22:23,120 Speaker 1: our guests for hostage part of the show, because we're 457 00:22:23,119 --> 00:22:25,919 Speaker 1: going to be playing some games. 458 00:22:26,520 --> 00:22:27,600 Speaker 3: I think games. 459 00:22:27,720 --> 00:22:31,479 Speaker 1: Yeah, I have a game for PROTECTI yes. But first, 460 00:22:31,880 --> 00:22:34,600 Speaker 1: I think both of you have come very well prepared 461 00:22:34,760 --> 00:22:37,840 Speaker 1: for craziest things we saw in market. So Emily, I'll 462 00:22:37,840 --> 00:22:38,560 Speaker 1: have you go first. 463 00:22:38,640 --> 00:22:44,959 Speaker 2: Okay, So the relatively new Amazon CEO Andy Jasse is 464 00:22:45,040 --> 00:22:51,280 Speaker 2: cutting a number of projects side projects that Amazon during 465 00:22:51,280 --> 00:22:55,359 Speaker 2: the Jeff Bezos era came up with. Bloomberg had an 466 00:22:55,400 --> 00:22:59,040 Speaker 2: article last week about thirty seven of the projects that 467 00:22:59,440 --> 00:23:03,040 Speaker 2: they have over the last few years. The craziest one 468 00:23:03,160 --> 00:23:08,440 Speaker 2: I saw was Amazon Books. It was a physical bookstore 469 00:23:09,480 --> 00:23:10,240 Speaker 2: by Amazon. 470 00:23:10,359 --> 00:23:11,680 Speaker 1: Oh, I think I remember this. 471 00:23:11,800 --> 00:23:14,440 Speaker 2: So they closed this last year, so I'm a little 472 00:23:14,480 --> 00:23:15,960 Speaker 2: late to it, but I didn't see it until the 473 00:23:16,040 --> 00:23:19,280 Speaker 2: article last week. But how ironic is that that Amazon? 474 00:23:19,320 --> 00:23:22,760 Speaker 1: Are there any actual physical bookstores or they were just planning? 475 00:23:22,760 --> 00:23:27,840 Speaker 2: They had twenty four physical bookstores and then close them down. 476 00:23:27,920 --> 00:23:29,360 Speaker 1: Were any of them in New York. 477 00:23:29,600 --> 00:23:33,160 Speaker 2: I'm not sure about that. I know one was in Seattle, 478 00:23:33,240 --> 00:23:34,760 Speaker 2: I believe. I think that was the first one. 479 00:23:35,359 --> 00:23:37,440 Speaker 1: I've still never been to one of those stores where 480 00:23:37,480 --> 00:23:38,720 Speaker 1: you just grab stuff and leave. 481 00:23:38,840 --> 00:23:39,480 Speaker 3: You just steal it. 482 00:23:39,800 --> 00:23:42,720 Speaker 1: Yeah, you just steal? Is that what you do? 483 00:23:44,400 --> 00:23:47,160 Speaker 2: Just bring a big bag? And I don't think I've 484 00:23:47,200 --> 00:23:48,240 Speaker 2: ever been in one of those either. 485 00:23:48,560 --> 00:23:50,760 Speaker 1: There's one across the street from us, actually from the office, 486 00:23:50,760 --> 00:23:54,040 Speaker 1: and I've never been. We should go, Sima, what about you? 487 00:23:55,280 --> 00:23:58,760 Speaker 3: Okay, So this one is maybe it's a little bit concerning, 488 00:23:58,840 --> 00:24:01,159 Speaker 3: I think. So we know that Europe is ahead, I 489 00:24:01,200 --> 00:24:04,800 Speaker 3: think with regards to the ESG discussion, maybe taken a 490 00:24:04,800 --> 00:24:07,959 Speaker 3: bit of a backfoot in the US. But so recently 491 00:24:07,960 --> 00:24:11,199 Speaker 3: and I saw this on the Bloomberg terminal, it was 492 00:24:11,440 --> 00:24:12,760 Speaker 3: I did a bit of a double take when I 493 00:24:12,800 --> 00:24:15,439 Speaker 3: saw this and ended up clicking on it. And it 494 00:24:15,480 --> 00:24:18,679 Speaker 3: turns out that one of the German states, as one 495 00:24:18,720 --> 00:24:21,960 Speaker 3: of the richest states, has decided that under its new 496 00:24:22,160 --> 00:24:26,879 Speaker 3: ESG legislation, they are putting US treasuries on the investing blacklist. 497 00:24:27,440 --> 00:24:30,560 Speaker 3: Oh because of America's failure to ratify a number of 498 00:24:30,640 --> 00:24:35,280 Speaker 3: treaties anything like women's rights, controversial weapons, and probably down 499 00:24:35,320 --> 00:24:37,119 Speaker 3: to the ESG perspective. 500 00:24:37,359 --> 00:24:38,360 Speaker 1: Which state was it? 501 00:24:38,680 --> 00:24:40,320 Speaker 3: I wish I could pronounce it. Now you're putting me 502 00:24:40,320 --> 00:24:40,760 Speaker 3: on the spot. 503 00:24:40,920 --> 00:24:41,920 Speaker 1: This is why I did. 504 00:24:42,119 --> 00:24:47,440 Speaker 3: Yeah, but Wittemberg with an English accent. 505 00:24:47,480 --> 00:24:50,480 Speaker 1: That's really interesting. I think see Must is better than yours. 506 00:24:50,720 --> 00:24:54,200 Speaker 3: Sorry, I liked mine. 507 00:24:54,240 --> 00:24:57,680 Speaker 2: It was an ironic business. You know, business is coming 508 00:24:57,720 --> 00:24:59,960 Speaker 2: from simple mm hmm. 509 00:25:01,040 --> 00:25:04,760 Speaker 1: Okay, it's time to play The Price is Precise, which 510 00:25:04,800 --> 00:25:07,600 Speaker 1: I have such a hard time pronouncing. The rules are 511 00:25:07,800 --> 00:25:10,000 Speaker 1: exactly the same as a little game called the Price 512 00:25:10,080 --> 00:25:13,480 Speaker 1: is Right, but we can't call it that, so we 513 00:25:13,560 --> 00:25:17,000 Speaker 1: call it the Price is Precise. Okay, we all know 514 00:25:17,160 --> 00:25:21,200 Speaker 1: Taylor Swift has been on tour for a couple months now. 515 00:25:21,800 --> 00:25:24,080 Speaker 1: I didn't get tickets, super hard to get. 516 00:25:24,480 --> 00:25:25,320 Speaker 3: Did you get tickets? 517 00:25:25,320 --> 00:25:26,520 Speaker 1: You're not a big Tailor Swift fan. 518 00:25:26,960 --> 00:25:30,000 Speaker 3: But I want to play. 519 00:25:30,200 --> 00:25:33,160 Speaker 1: I want to ask both of you to guess how 520 00:25:33,240 --> 00:25:37,960 Speaker 1: much she the concert is expected to gross, and then 521 00:25:37,960 --> 00:25:43,399 Speaker 1: how much she of that gross amount actually gets to keep. Emily, 522 00:25:43,440 --> 00:25:43,720 Speaker 1: you go. 523 00:25:43,720 --> 00:25:47,520 Speaker 2: First, Oh my gosh, I have no idea the whole 524 00:25:47,640 --> 00:25:50,160 Speaker 2: like the whole tour or one single concert, the whole 525 00:25:50,200 --> 00:25:56,720 Speaker 2: tour crickets, I don't know five hundred million, and then 526 00:25:56,720 --> 00:25:57,320 Speaker 2: how much she. 527 00:25:57,359 --> 00:25:58,680 Speaker 1: Makes how much she keeps? 528 00:25:59,359 --> 00:26:03,000 Speaker 3: Fifty million? Seema, So I should do what I used 529 00:26:03,000 --> 00:26:06,040 Speaker 3: to do with my brother, Just go like one dollar higher? 530 00:26:06,200 --> 00:26:09,320 Speaker 1: Yeah or no? If you go over then you lose, 531 00:26:09,600 --> 00:26:12,280 Speaker 1: you lose. Supposed to go one dollar lower, I think? 532 00:26:12,720 --> 00:26:15,560 Speaker 1: But what if it's more like unless you're super sure? 533 00:26:17,240 --> 00:26:21,600 Speaker 3: Ah, now you've made it more complicated restrategizing everything with 534 00:26:21,640 --> 00:26:25,119 Speaker 3: my brother over they is. Okay, I'm going to go 535 00:26:25,240 --> 00:26:31,320 Speaker 3: with four hundred and fifty million, and I reckon she 536 00:26:31,400 --> 00:26:33,400 Speaker 3: makes more of it because didn't Tanna Swift take back 537 00:26:33,440 --> 00:26:37,119 Speaker 3: control over all of her records. So I'm going to 538 00:26:37,160 --> 00:26:41,879 Speaker 3: say she made like fifty aggressive maybe thirty percent. 539 00:26:43,000 --> 00:26:44,520 Speaker 1: Is she a big deal in the UK? 540 00:26:45,040 --> 00:26:49,760 Speaker 3: Oh? Yes, yeah, absolutely, Yeah. Okay, alexa Is is very 541 00:26:49,840 --> 00:26:51,000 Speaker 3: much accustomed to playing test. 542 00:26:51,359 --> 00:26:54,520 Speaker 1: Oh that's nice for you. Hope she gets a lot. 543 00:26:54,400 --> 00:26:56,480 Speaker 3: For you, right, yea for my daughter. 544 00:26:58,200 --> 00:27:01,439 Speaker 1: Okay, you were both actually very close. It's expected to 545 00:27:01,480 --> 00:27:05,080 Speaker 1: grow six hundred and twenty million dollars. I tricked you 546 00:27:05,119 --> 00:27:05,840 Speaker 1: a little. 547 00:27:05,560 --> 00:27:07,879 Speaker 3: You did. Sorry, I had to. 548 00:27:08,280 --> 00:27:09,480 Speaker 1: I had to spice it up a little. 549 00:27:09,520 --> 00:27:10,320 Speaker 2: You helped me a lot. 550 00:27:10,760 --> 00:27:14,840 Speaker 1: However, she's keeping five hundred million of it. Oh wow, 551 00:27:14,920 --> 00:27:17,200 Speaker 1: good for her, But you guess ten billion at. 552 00:27:17,040 --> 00:27:19,480 Speaker 2: First, it's early in the morning. 553 00:27:20,920 --> 00:27:21,680 Speaker 1: Ten billion. 554 00:27:22,200 --> 00:27:25,360 Speaker 2: Well, I know some people have been paying a lot 555 00:27:25,800 --> 00:27:26,560 Speaker 2: for the tickets. 556 00:27:27,000 --> 00:27:27,800 Speaker 1: Ten billion. 557 00:27:31,720 --> 00:27:32,760 Speaker 3: Katie last week. 558 00:27:32,680 --> 00:27:34,919 Speaker 2: Was saying the ice cream was going to cost like 559 00:27:35,040 --> 00:27:37,280 Speaker 2: five hundred thousand dollars first. 560 00:27:39,000 --> 00:27:42,000 Speaker 1: Oh my god. Okay, Sima, thank you so much for 561 00:27:42,040 --> 00:27:44,000 Speaker 1: coming in. It's been great to have you. Thank having 562 00:27:44,119 --> 00:27:46,160 Speaker 1: back on and actually see you in person too. 563 00:27:46,400 --> 00:27:47,200 Speaker 3: Thank you very much. 564 00:27:55,440 --> 00:27:57,480 Speaker 2: What Goes Up will be back next week and so 565 00:27:57,600 --> 00:27:59,800 Speaker 2: then you can find us on the Bloomberg Terminal, website 566 00:27:59,840 --> 00:28:02,360 Speaker 2: and app or wherever you get your podcasts. 567 00:28:03,000 --> 00:28:04,600 Speaker 3: We'd love it if you took the time to rate 568 00:28:04,640 --> 00:28:07,639 Speaker 3: and review the show on Apple Podcasts. Some more listeners 569 00:28:07,640 --> 00:28:10,040 Speaker 3: can find us, and you can find us on Twitter. 570 00:28:10,359 --> 00:28:14,679 Speaker 3: Follow me at Reaganonymous, Wildna Hiric is at Fildona Hirich. 571 00:28:15,359 --> 00:28:18,400 Speaker 2: You can also follow Bloomberg Podcasts at Podcasts. 572 00:28:19,480 --> 00:28:22,680 Speaker 3: What Goes Up is produced by Stacey Wong. Thanks for listening, 573 00:28:22,800 --> 00:28:23,520 Speaker 3: See you next time.