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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

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Speaker 2: Tesla, the stock is down six percent here today. They

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Speaker 2: missed pretty significantly on their deliverables for the first quarter. Again,

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Speaker 2: stockdown six percent today, off thirty three about thirty four

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Speaker 2: percent year to date, So definitely a challenging time for

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Speaker 2: the folks at Tesla. Steve Manjoins is Global Autos and

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Speaker 2: Industrials analyst for Bloomberg Intelligence. Steve put into context this

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Speaker 2: miss year. How big of a miss was it and

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Speaker 2: what does it mean going forward? Do you think for Tesla?

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Speaker 3: Oh, it's definitely a bad day for Tesla, as you

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Speaker 3: can see the stock. Look they're I mean, it's a

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Speaker 3: time you know, they just actually raise prices on their cars,

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Speaker 3: puts in the question about that strategy. You know, their

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Speaker 3: inventory jumped by forty forty six thousand units. It's at

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Speaker 3: the all time high at the moment, so there's a

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Speaker 3: lot of questions out there. You know, with you know,

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Speaker 3: the end market, the consumer hesitating a bit on buying evs.

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Speaker 3: So what's going to be for Tesla going forward? Definitely

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Speaker 3: their one point million target sales target for the year

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Speaker 3: is definitely at risk.

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Speaker 4: Do we know why? Like, what's the why behind it?

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Speaker 4: They're going to talk about production misses in terms of

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Speaker 4: supply chain issues, et cetera. But then Ruvian kind of

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Speaker 4: crushed it, So so what's the real reason here?

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Speaker 3: Yeah, they actually, you know, Tesla attributed to the RESC

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Speaker 3: hostilities and you know that's that's partly right because a

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Speaker 3: lot of their Model three and Model why they're most

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Speaker 3: the best selling vehicles actually come from China, and you know,

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Speaker 3: you know, you would assume a lot of these vehicles

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Speaker 3: shipped through the Pacific Ocean avoiding the Red Sea. But

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Speaker 3: you know, let's you know, we'll give them benefit of

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Speaker 3: doubt that it had some impact. Maybe it's not necessarily

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Speaker 3: the shipment of vehicles, maybe the shipment of parts right

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Speaker 3: through the Red Sea that's impacted the production uh in

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Speaker 3: in China. And remember they actually cut some of the

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Speaker 3: some production in China recently as well, so you know

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Speaker 3: that could be the reason. But like you said, Rivian

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Speaker 3: sales have gone up. You know, is there anything specific

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Speaker 3: to to Tesla.

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Speaker 5: I don't.

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Speaker 3: I don't really think so. One you know, one quarter

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Speaker 3: is not gonna tell us the trend for the long term.

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Speaker 3: I think Tesla vehicles are still you know, liked by

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Speaker 3: a lot of consumer. We just did a survey, actually recently,

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Speaker 3: a buying intention survey. You know, Tesla has the greatest

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Speaker 3: UH brand loyalty still amongst all brands in the in

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Speaker 3: the auto industry.

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Speaker 2: Yes, so, Steve, I guess obviously the big question on investors'

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Speaker 2: minds is what is the real demand for EV's in

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Speaker 2: general and Tesla in particular, look in it, I guess

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Speaker 2: the near and intermediate term. Do you have a view

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Speaker 2: on that?

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Speaker 3: Yeah, I mean I've always thought that not only Tesla,

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Speaker 3: but the entire EV market is going through a rough

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Speaker 3: patch this year and likely into the next year. You know,

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Speaker 3: my long term view is still optimistic about EV's. I

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Speaker 3: think there's enough policies out there to push you know,

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Speaker 3: greener vehicles, more greener vehicles on the road. I think

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Speaker 3: the issue today is about affordability. There's actually not enough

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Speaker 3: affordable EV's out there for the masses currently a lot

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Speaker 3: of vehicles are expensive. They're over fifty thousand dollars and

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Speaker 3: not a lot of people can buy them, especially during

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Speaker 3: high interest rate environments.

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Speaker 4: So that has been the rhetoric really for a bit,

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Speaker 4: and Elon Mus seems to say, Okay, we're going to

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Speaker 4: do the lower cost, but give us a second. Right,

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Speaker 4: we had this wave of Model Y all three, et cetera,

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Speaker 4: and now we're going to have another wave of more

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Speaker 4: affordable EV's.

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Speaker 6: How when does that wave happen?

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Speaker 3: A lot of it actually comes online at the end

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Speaker 3: of twenty twenty five. Starts coming online at the end

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Speaker 3: of twenty twenty five. That's when you have a Model two.

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Speaker 3: GM is also relaunching the more affordable Bolt all of

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Speaker 3: them are, you know, thirty thousand or less. And then

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Speaker 3: you have you know, GM will continue to roll out

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Speaker 3: cheaper vehicles, and you have Rivian also launching the R

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Speaker 3: two and R three, you know, in twenty twenty six

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Speaker 3: and twenty twenty seven.

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Speaker 4: So it doesn't want a carnam Bar two by the way,

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Speaker 4: total side, no, I mean everyone, but go ahead.

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Speaker 3: Yeah, but you know, a lot a lot of the

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Speaker 3: more affordable EV's coming in, and the hope is that,

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Speaker 3: you know, the the addressable market for the EV, market

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Speaker 3: for the EV industry expands as more more cars, cheaper

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Speaker 3: cars come on the road and are available to consumers.

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Speaker 2: But if I if I were an investor in this company,

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Speaker 2: I'd be saying, Okay, you need to bring in a

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Speaker 2: cheaper priced car for the mass market, but I'm not

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Speaker 2: sure you can convince me that you can do it

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Speaker 2: at a profit. What's the expectation of their ability to

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Speaker 2: turn out lower price models on a per unit profitable basis.

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Speaker 3: That that's a very good question. I think scale is

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Speaker 3: the most important thing. I mean, this is a scale

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Speaker 3: volume game and the auto industry has been like that

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Speaker 3: for one hundred years. So you know, the question is,

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Speaker 3: you know, are the cheaper vehicles going to resonate as

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Speaker 3: you push more production through an assembly plant. In the

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Speaker 3: auto industry, the unit cost does fall significantly in you know,

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Speaker 3: in a logarithmic kind of trend. So we're hoping that

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Speaker 3: it will cut. But specifically to Tesla, I want to

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Speaker 3: also mention that they've done a really good job in

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Speaker 3: vertically in grading their processes throughout the whole value chain, right,

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Speaker 3: and that actually does cut costs, especially in you know,

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Speaker 3: newer tech like this. You know, if I look at

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Speaker 3: over one hundred years ago, Henry Ford basically did the

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Speaker 3: same thing. You know, switching everybody from horse carriages to

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Speaker 3: automobiles actually required vertical required Ford to be to vertically

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Speaker 3: integrate and able to manage costs and manage design and

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Speaker 3: be nimble and flexible to react to consumer.

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Speaker 4: Tastes in the meantime before we let you go, just

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Speaker 4: that stock has been so painful, Like one sixty twenty

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Speaker 4: nine is sort of the low that we saw back

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Speaker 4: in April, and then after that you got to go

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Speaker 4: all the way back to nearly one hundred bucks.

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Speaker 6: Do we get there? What do you think?

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Speaker 3: I mean, you know, I don't think you'll get there.

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Speaker 3: I think there's still a lot of value in the company.

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Speaker 3: You know, they've you know, they've based thickly you know,

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Speaker 3: change paradigm, shifted the whole entire autence industry in terms

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Speaker 3: of vehicle design, in terms of manufacturing. But don't forget right,

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Speaker 3: they also is doing a lot around full self driving

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Speaker 3: autonomous vehicles. They have a supercomputer that's actually doing that

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Speaker 3: for them. So there's there's still a lot of hope.

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Speaker 3: I think if you look at if you talk to

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Speaker 3: the bulls in the street, there's still a lot of

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Speaker 3: hope in them rolling out the FSD the full self

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Speaker 3: driving full to everybody on a road and get to

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Speaker 3: level four and five automless driving.

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Speaker 2: All right, Steve, thanks so much for joining us as

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Speaker 2: Steve Man Global Autos and Industrials research channels. Bloomberg Intelligence

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Speaker 2: coming to us from Princeton, New Jersey via that Skype thing. Again,

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Speaker 2: Tesla down, you know, on down six percent today on

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Speaker 2: that pretty big actually most of the analyst as saying,

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Speaker 2: extraordinarily big miss. They're really surprised to the marketplace stock

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Speaker 2: down six percent today, thirty four percent year to date.

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Speaker 2: And again, as you mentioned, Alex, the company into press

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Speaker 2: release calling a lot of supply issues as reasons for

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Speaker 2: the miss, not calling out a demand issue. But of

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Speaker 2: course that's what a lot of folks are concerned about

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Speaker 2: if they think about not just Tesla, but just kind

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Speaker 2: of the evy market in generals are trying to think

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Speaker 2: about the ultimate demand for electric vehicles in this market.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple car Play and

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Speaker 1: Android Auto with the Bloomberg Business. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station,

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Speaker 1: Just say Alexa playing Bloomberg eleven thirty.

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Speaker 4: Let's add one more name to the downside here. It's

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Speaker 4: Apple down six tens of one percent. Although it could

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Speaker 4: be worse, like it could be Tesla, and so there

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Speaker 4: is that. But I take a look at this chart, Paul.

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Speaker 6: It is ugly.

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Speaker 4: We surpassed the low that we saw earlier in the year,

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Speaker 4: in early March. I should say, the next level if

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Speaker 4: I just look at it looks to be what we

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Speaker 4: saw at the low back in October of one seventy.

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Speaker 4: I mean, it just it looks really really ugly, and

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Speaker 4: you have to wonder where we go from here.

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Speaker 5: Yeah.

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Speaker 2: Jess Metten, our good friend from Bloomberg News, covers the

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Speaker 2: stock market. She's got a great story out today, and

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Speaker 2: just putting into context, the first quarter the stock was

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Speaker 2: off twelve percent. That's the worst performance relative to the

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Speaker 2: in p five hundred and over a decade.

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Speaker 5: Just to put it in perspective.

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Speaker 4: I mean, usually if you see that kind of down

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Speaker 4: draft and Apple, you're like, oh, forget it. Now's like

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Speaker 4: one hundred and dolling over where everything's going to be terrible,

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Speaker 4: and that hasn't been the case. Anaur Agrana joined this

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Speaker 4: a Bloomberg Intelligence technology analysts standing by. So do we

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Speaker 4: breach the one sixty five low that we saw back

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Speaker 4: in October of twenty twenty three? Do we have to

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Speaker 4: go back to earlier next year? Like where's the bottom

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Speaker 4: on a rog?

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Speaker 7: Yeah, it's very tough to say.

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Speaker 8: The only reason is because when you look at Apple,

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Speaker 8: the fundamentals are.

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Speaker 7: Not good right now because of a lot.

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Speaker 8: Of pressure in China, and we see no hope at

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Speaker 8: this point that's going to change in the upcoming earning season.

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Speaker 8: I think the only silver lining for Apple could be

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Speaker 8: if during the June By Developer conference they are able

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Speaker 8: to announce any big you know, AI push into the phones.

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Speaker 8: I mean, that's the only thing that can perhaps you know,

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Speaker 8: go out and give you a new refresh cycle by

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Speaker 8: the end of the year. But other than that, it

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Speaker 8: looks like a pretty bleak year for them on a

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Speaker 8: fundamental basis.

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Speaker 2: How About from a technical basis, I would think that

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Speaker 2: these guys are buying back stock aggressively. They can be

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Speaker 2: even be more aggressive if they wanted to does that

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Speaker 2: put it kind of a floor for the stock somewhere

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Speaker 2: in or around here, do you think?

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Speaker 8: Yeah, I'm actually I've been surprised that they have not

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Speaker 8: been more aggressive in buying back shares over the last

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Speaker 8: few years, because they do have the capacity to do it.

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Speaker 8: You know, they spent somewhere around ninety two hundred billion

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Speaker 8: dollars almost their entire fee cast flow, buying back shares.

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Speaker 8: But they've talked about being a little more aggressive in principle,

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Speaker 8: but in practice, I've not seen that.

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Speaker 7: And you know, perhaps.

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Speaker 8: Maybe this year could be a change while they go

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Speaker 8: out and do some some more, but I haven't seen

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Speaker 8: that yet.

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Speaker 6: So what do they do?

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Speaker 4: I mean, if that's the case, yeah, no, that's it.

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Speaker 7: What do you see?

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Speaker 8: So one of the things you don't say is by

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Speaker 8: the fourth quarter of this year or by December, you

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Speaker 8: will see easier comparisons in China. So that could be

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Speaker 8: you know one one hope.

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Speaker 7: Second thing is we are seeing a big push.

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Speaker 8: From Wawei right now because of the brand new phone

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Speaker 8: that they launched last year. That's really driving a lot

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Speaker 8: of the sales, and that's going to go out in

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Speaker 8: an ever three ye year from now, So you know,

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Speaker 8: you will see you could say, a lower benchmark or

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Speaker 8: a lower you know, water line for them to cross

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Speaker 8: for next year. And with some Genii features coming in

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Speaker 8: this year, you know, one could expect that maybe next

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Speaker 8: year we could see that, you know, instead of the

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Speaker 8: zero to you know, five percent growth, maybe we can

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Speaker 8: see five to ten percent growth on the top line.

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Speaker 8: And I think that can change things around for Apple.

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Speaker 2: So is there a bare case that China doesn't turn around?

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Speaker 2: China is no longer a growth market for Apple? Be

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Speaker 2: it competitive issues, be it change in investor sentiment towards

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Speaker 2: Western companies and Western technology, be it the economy. They

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Speaker 2: could be in for a Japan like period of malaise.

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Speaker 2: I mean, you could really paint a reasonable scenario where

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Speaker 2: China's not a growth market for them.

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Speaker 5: Ever.

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Speaker 8: Yeah, and then they have to sit down and look

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Speaker 8: at their strategy and say, do we really go down

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Speaker 8: the chain of you know, cutting down pricing. They have

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Speaker 8: never done that. They've always believed in margins. But if

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Speaker 8: they were to you know, push a lower priced phone,

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Speaker 8: let's say in the emerging market, whether that's in India, Indonesia, Brazil,

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Speaker 8: I mean, that can really help out and take care

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Speaker 8: of some of that opset in China, but we haven't

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Speaker 8: seen that. I mean, if Apple doesn't play that game,

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Speaker 8: it doesn't you know, we go down that market. But

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Speaker 8: they can actually do that if need be, in order

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Speaker 8: to gain market share, but we haven't seen that yet.

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Speaker 4: So you have CCTV over in China reporting that President

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Speaker 4: g and President Biden talked last night discussing China US ties,

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Speaker 4: et cetera. Do you feel like Tim Cook is like

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Speaker 4: calling government officials, mean, like, you guys got to help

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Speaker 4: me out here.

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Speaker 7: Yeah, I see.

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Speaker 8: If you see, in the last one month, he went

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Speaker 8: to China and he basically promised them that he's going

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Speaker 8: to do more investments in the area. And that is

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Speaker 8: on the back of a lot of discussion about supply

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Speaker 8: chain diversification away from China. So he's made a couple

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Speaker 8: of trips in the last one year, you know, basically

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Speaker 8: saying that listen, we're here for the long run. Please

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Speaker 8: help us out and you know, maybe maybe maybe we

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Speaker 8: need two or three or more of these phone calls,

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Speaker 8: and you know, China is going to be.

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Speaker 7: Back up for them.

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Speaker 2: If I were buying Apple Computer today, I would have

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Speaker 2: one catalyst, and that would be AI that it's something

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Speaker 2: there's no AI in the Apple story and on mining

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Speaker 2: stock today because I think Cooper Tino will figure out

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Speaker 2: a way to get AI into the narrative. Would that

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Speaker 2: be a decent call there.

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Speaker 8: Oh, that would be a very decent call. In fact,

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Speaker 8: the news released by Mark Ellman that they're you know,

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Speaker 8: talking to Google about their Google's large language model. I

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Speaker 8: think that's going to really help them if they go

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Speaker 8: out and you know, make that partnership because you know,

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Speaker 8: Google is uh, you know, the search engine you know

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Speaker 8: came at this point and they are the default engine

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Speaker 8: for Apple products. They have an old relationship. Google pays

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Speaker 8: a lot of money for that search right on the

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Speaker 8: Apple ecosystem. If Apple's able to go out and showcase

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Speaker 8: that you need to upgrade the phones because you need

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Speaker 8: a better memory and you need more processing power, that

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Speaker 8: is the case for people to go out and you

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Speaker 8: know people with older phones of iPhone eleven twelve, there

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Speaker 8: are a lot of phones out there that are really

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Speaker 8: old at.

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Speaker 7: This point, and you know which you need.

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Speaker 8: That processing power. You know, you may lead into a

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Speaker 8: refresh cycle out there.

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Speaker 6: An RAG.

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Speaker 4: What do you feel like at some point though, does

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Speaker 4: Apple need to do their own AI strategy, like they

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Speaker 4: don't tend to do that partnership stuff. Right, They kind

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Speaker 4: of cleaned a lot of their ranks with the AI car,

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Speaker 4: with the AI car, with the car self driving car,

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Speaker 4: petting that aside. They were supposed to repurpose those people

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Speaker 4: in the.

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Speaker 6: AI and then that didn't happen.

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Speaker 4: I mean, at what point does that become an actual

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Speaker 4: good catalyst for the stock.

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Speaker 8: So they are pushing a lot of money into that area.

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Speaker 8: But remember Google's been doing it longer than them, and

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Speaker 8: they are trying to figure out some of their applications

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Speaker 8: on you know, similar to chat GPT. Now I think,

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Speaker 8: you know, you just can't expect them to you know,

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Speaker 8: they just shut the card division down a couple of

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Speaker 8: months ago, and you know, they just moved the engineers.

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Speaker 8: You can't expect them to come out with a product

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Speaker 8: in the next three to six months. It's going to

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Speaker 8: take some time. Meanwhile, there is nothing wrong in licensing

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Speaker 8: technology from Google. Remember Apples not in the search business.

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Speaker 8: They license that technology from somebody. It's possible for the

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Speaker 8: short term they will license that technology and after that,

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Speaker 8: you know, once they figure out that things can work

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Speaker 8: on their ecosystem a little bit better as part of

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Speaker 8: their operating system. They don't need that partnership, but you know,

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Speaker 8: I think in the near term they do. They do

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Speaker 8: need to you know, partner with somebody, either it's Google

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Speaker 8: or open Ai.

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Speaker 2: So for this developer conference in June, how big is

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Speaker 2: that going to be for the company and for the stock?

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Speaker 8: Yeah, I think it is probably the biggest you know

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Speaker 8: moment for them for the last couple of years, as

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Speaker 8: we have seen a reduction or a decline in the

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Speaker 8: growth rate of their products business, which is predominantly you know,

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Speaker 8: iPhone and all the others. I think this is going

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Speaker 8: to be the biggest cat list everybody is watching for

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Speaker 8: and see what can they showcase if they are able

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Speaker 8: to convince the street that this is going to lead

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Speaker 8: to the next you know, big push in people going

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Speaker 8: up and not just you know products, It's going to

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Speaker 8: help out services also. It's going to make some of

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Speaker 8: those products a little more stickier. People you know, make

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Speaker 8: fun of CD for example right now, if it's powered

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Speaker 8: by Google, if it has a lot more you know,

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Speaker 8: firepower to do a lot of operations, maybe I'm not

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Speaker 8: going to open the third party app that's on my

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Speaker 8: phone to go out and search for things that I'm

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Speaker 8: doing right now. Maybe I'll just be by default using it.

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Speaker 8: I say this a lot. I mean Google and you

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Speaker 8: know Apple for that matter, control the distribution of the

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Speaker 8: operating system through the mobile apps. That's a very powerful ecosystem. I'll,

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Speaker 8: i'll you know, of course, you guys to look at

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Speaker 8: what was Strip Advisor a few years ago, or what

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Speaker 8: was you know, even Yelp.

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Speaker 7: I mean, those.

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Speaker 8: Market caps have really gone down because people go to

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Speaker 8: Google directly and search for those things rather than going

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Speaker 8: to the application. So I think if Apple's able to

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Speaker 8: play this thing out properly, their distribution system is strong

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Speaker 8: enough to you know, really monetize on that.

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Speaker 6: It's true, I don't like trust Yelp anymore. I don't

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Speaker 6: know what that's about.

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Speaker 4: But then but then the flip side, then you have

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Speaker 4: all the regulators right from the EU and the US

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Speaker 4: finds they want to rethink how they're doing things, how

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Speaker 4: they wind up up. So there's also that hidden risk

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Speaker 4: up there on or I'm going to let you go,

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Speaker 4: but great stuff.

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Speaker 6: Super appreciate it.

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Speaker 4: And I'm a'm gonna joining us from Bloomberg Intelligence like

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Speaker 4: they're clearly coming after their ecosystem and by day I

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Speaker 4: mean European regulators and US regulators, So like, how do

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Speaker 4: you get ahead of that? How do you manage it

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Speaker 4: when like that's your going to be your lifeblo at

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Speaker 4: the end of the day, when you run out of

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Speaker 4: cool products.

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Speaker 2: Right, and that's going to be something that's one of

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Speaker 2: the many challenges, many headwinds that you know a lot

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Speaker 2: of folks when you look at Apple, they say, this

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Speaker 2: is something that the stock has to deal with. It's

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Speaker 2: a headwind just like it was from Microsoft the eighties

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Speaker 2: and nineties until they were able to put that behind

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Speaker 2: them write a few big checks along the way.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, card Play and

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Speaker 1: Endroud Auto with the Bloomberg Business App. Listen on demand

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 4: The SMP draw down so far this year has only

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Speaker 4: been barely two percent, So do we get there? Let's

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Speaker 4: ask Shelby mcfatten, investment analyst over at Motley Fool Asset Management.

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Speaker 4: She joined US now in the Bloomberg Interactive at brokers

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Speaker 4: at Studio Shelby, this is is this the selloff we've

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Speaker 4: all been waiting for?

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Speaker 6: Is it a buy the dip kind of thing? What

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Speaker 6: do you think?

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Speaker 3: You know?

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Speaker 9: Unfortunately, I'm going to air towards no. And I'm really

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Speaker 9: heavy on that unfortunately, right because we know these valuations

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Speaker 9: have just been so rich, and when you're looking at

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Speaker 9: the long term for your investment strategy, you know it's

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Speaker 9: easier to say, Okay, we'll just sort of hold out.

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Speaker 9: It's all right. But we do get really excited about

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Speaker 9: some of those buying opportunities, either to add to current

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Speaker 9: positions or to be able to enter new ones. So

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Speaker 9: I think when we look at what might cause a dip,

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Speaker 9: we don't yet have those factors being quite as strong.

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Speaker 9: I think we might need a couple more quarters to

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Speaker 9: see at least what might happen with interest rates being

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Speaker 9: a sort of force to push the market down a

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Speaker 9: bit more so do so?

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Speaker 2: Do you need to see higher rates? You need to

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Speaker 2: see weaker earnings? What do you think is what do

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Speaker 2: you think we'll push this market down? When and if

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Speaker 2: we do get that correction?

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Speaker 9: You know, I think it could be a combination of both,

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Speaker 9: and it really in some ways depends on the sectors, right,

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Speaker 9: So when we think about tech, we do know that

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Speaker 9: those being you know, higher duration, very sensitive, that interest

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Speaker 9: rates are going to most likely affect the tech sector

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Speaker 9: quite a bit. And then on the other end of

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Speaker 9: that small caps as well. We've seen the sort of

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Speaker 9: damage that can be done to valuations to both of

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Speaker 9: those groups, So that's one sort of focus, and then

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Speaker 9: outside of that, we do again need to see the

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Speaker 9: change in those fundamentals. So in some of the companies,

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Speaker 9: we're seeing that the valuations are just stretched for optimism

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Speaker 9: for wanting to hold on.

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Speaker 4: At the same time, though, if interest rates are going up,

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Speaker 4: and I say interest rates like the ten years going

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Speaker 4: up because the economy just firing on all cylinders, does

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Speaker 4: that change the reaction function to say small caps or

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Speaker 4: big tech.

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Speaker 9: In some ways yes and no. So if the economy

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Speaker 9: keeps firing, we might sort of have a situation where

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Speaker 9: trading sort of shakes out those who are not interested

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Speaker 9: in holding out and seeing whether there is more or

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Speaker 9: less volatility than they've expected. When it comes to things

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Speaker 9: like small caps especially do that thinner trading volume. But

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Speaker 9: when it comes to the larger caps, there's a chance

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Speaker 9: that we kind of just settle out at a higher

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Speaker 9: clip that we end up with. What is the fed'sphear

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Speaker 9: is that we just step up in inflation and invaluation basis.

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Speaker 9: So it's one of those things where, unfortunately it's a

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Speaker 9: little bit of a seesaw we all have to sort

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Speaker 9: of waiver to shake out.

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Speaker 2: One of the names on your list is see our h.

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Speaker 2: It's a Irish company, which is why I'm interested in it,

441
00:20:50,560 --> 00:20:54,280
Speaker 2: building products company. Is this an infrastructure act kind of

442
00:20:54,720 --> 00:20:57,320
Speaker 2: play for you guys, CRH, Yes, so ticker.

443
00:20:57,480 --> 00:20:59,679
Speaker 9: When we entered the position, that was one of the

444
00:20:59,680 --> 00:21:02,200
Speaker 9: reasons that we had piqued some interest, and other was

445
00:21:02,240 --> 00:21:04,360
Speaker 9: that they were going to be moving their listing from

446
00:21:04,480 --> 00:21:07,240
Speaker 9: LSE to the New York Stock Exchange and going ahead

447
00:21:07,280 --> 00:21:11,160
Speaker 9: and starting to do their gap reporting, so realizing getting

448
00:21:11,200 --> 00:21:13,800
Speaker 9: a little bit more bang for their buck, starting to

449
00:21:13,800 --> 00:21:16,040
Speaker 9: get that multiple that they were looking for, and of

450
00:21:16,080 --> 00:21:18,440
Speaker 9: course the fact that the IIJA was going to bring

451
00:21:18,560 --> 00:21:19,720
Speaker 9: forward some.

452
00:21:19,760 --> 00:21:20,920
Speaker 6: Of that cash flow for them.

453
00:21:21,200 --> 00:21:23,760
Speaker 9: On top of that, before the infrastructure build, they were

454
00:21:23,800 --> 00:21:27,400
Speaker 9: already the number one provider in North America for asphalt

455
00:21:27,440 --> 00:21:29,720
Speaker 9: ready mixed concrete cement, So they were sort of this

456
00:21:29,800 --> 00:21:33,399
Speaker 9: sleeper agent in all of the repair and just keeping

457
00:21:33,480 --> 00:21:36,160
Speaker 9: up with the roads and things like that, apart from

458
00:21:36,160 --> 00:21:38,760
Speaker 9: any new build. So it's a company that is not

459
00:21:38,960 --> 00:21:41,199
Speaker 9: thought of a lot, but they're really king in what

460
00:21:41,280 --> 00:21:41,600
Speaker 9: they do.

461
00:21:41,880 --> 00:21:43,760
Speaker 4: How is the booking for that all working? Because I've

462
00:21:43,760 --> 00:21:45,960
Speaker 4: been struck, what'd say, the infrastructure build for example, like

463
00:21:46,200 --> 00:21:48,760
Speaker 4: we all were expecting like a huge wave of money

464
00:21:49,000 --> 00:21:51,959
Speaker 4: and orders, and like the orders are there, but like

465
00:21:52,000 --> 00:21:54,560
Speaker 4: it's not coming the way we were all expecting. In

466
00:21:54,560 --> 00:21:58,840
Speaker 4: the middle of a structural shift, the industry is still cyclical.

467
00:21:58,600 --> 00:22:01,080
Speaker 9: And you're absolutely right. And what we've seen and what

468
00:22:01,119 --> 00:22:03,640
Speaker 9: management has mentioned is that they're getting stretched out a bit.

469
00:22:03,880 --> 00:22:06,719
Speaker 9: So the contract money is coming through, but it's not

470
00:22:06,840 --> 00:22:09,640
Speaker 9: coming through, you know, twenty four to twenty five. It's

471
00:22:09,760 --> 00:22:13,760
Speaker 9: twenty four, six, twenty seven, and they're not necessarily being canceled,

472
00:22:14,320 --> 00:22:17,720
Speaker 9: but they're being taken in slimmer chunks and they have

473
00:22:17,760 --> 00:22:19,320
Speaker 9: to get finished. But at the end of the day,

474
00:22:19,560 --> 00:22:22,879
Speaker 9: rates are still high, and so construction can still be

475
00:22:22,920 --> 00:22:25,240
Speaker 9: a bit more expensive, especially when you're talking about new

476
00:22:25,280 --> 00:22:28,360
Speaker 9: as opposed to repair and remodel. So yeah, that contract

477
00:22:28,359 --> 00:22:30,240
Speaker 9: stretching is absolutely a real phenomenon there.

478
00:22:30,640 --> 00:22:33,400
Speaker 2: So you've got a real estate company on your list

479
00:22:33,400 --> 00:22:35,320
Speaker 2: of stocks, you guys are looking at it, and that's

480
00:22:35,359 --> 00:22:38,840
Speaker 2: got to be a dicey place to be. Alexander Research

481
00:22:39,400 --> 00:22:43,119
Speaker 2: real Estate Are is the ticker symbol. Talk to us

482
00:22:43,119 --> 00:22:45,919
Speaker 2: about that company, because I'm nervous about anything that's got

483
00:22:45,920 --> 00:22:46,840
Speaker 2: real estate in its.

484
00:22:46,760 --> 00:22:49,360
Speaker 9: Name, and I think that's completely fair, and I think

485
00:22:49,359 --> 00:22:51,639
Speaker 9: that a lot of folks would think that on first

486
00:22:51,680 --> 00:22:54,200
Speaker 9: hearing as well. What we're really interested in with Alexandria

487
00:22:54,280 --> 00:22:56,960
Speaker 9: real Estate is one the valuation they've gotten crushed because

488
00:22:57,080 --> 00:23:00,199
Speaker 9: why real estate. But what sets them apart is not

489
00:23:00,240 --> 00:23:02,320
Speaker 9: only they're really deep bench on management that we like,

490
00:23:02,520 --> 00:23:05,960
Speaker 9: they've got an outstanding return for investors when it comes

491
00:23:06,040 --> 00:23:09,520
Speaker 9: to cash delivered back they really just pump out cash

492
00:23:09,560 --> 00:23:12,160
Speaker 9: as a red there. And also their focus on healthcare

493
00:23:12,200 --> 00:23:15,879
Speaker 9: and life sciences. That's really what we're hinging on when

494
00:23:15,920 --> 00:23:19,080
Speaker 9: it comes to our thesis for Alexandria real Estate. And

495
00:23:19,119 --> 00:23:21,439
Speaker 9: because of that, they're also just less exposed to that

496
00:23:21,600 --> 00:23:24,440
Speaker 9: office that is really crushing a lot of the reads

497
00:23:24,520 --> 00:23:27,119
Speaker 9: right now because they're not having to deal with that

498
00:23:27,280 --> 00:23:31,120
Speaker 9: pendulum swing of over development of offices, making them that

499
00:23:31,400 --> 00:23:33,680
Speaker 9: sort of second home for employees and then employees sort

500
00:23:33,720 --> 00:23:35,399
Speaker 9: of saying I'd like to never come back, thank you

501
00:23:35,480 --> 00:23:38,480
Speaker 9: very much. So when we have these new advances in sciences,

502
00:23:38,520 --> 00:23:41,560
Speaker 9: they need more buildings, and that's sort of that's really

503
00:23:41,600 --> 00:23:43,919
Speaker 9: the crux of the thesis for Alexandria real estate there.

504
00:23:43,960 --> 00:23:46,520
Speaker 9: So if they can keep delivering on cash and keep

505
00:23:46,560 --> 00:23:48,000
Speaker 9: on that train, it's a great investment.

506
00:23:48,119 --> 00:23:50,159
Speaker 2: So you guys obviously have done the work on the

507
00:23:50,200 --> 00:23:53,240
Speaker 2: real estate space. You're Motley, you're based done in the

508
00:23:53,280 --> 00:23:56,760
Speaker 2: DC area, right, Yes, our federal employees are they back

509
00:23:56,800 --> 00:23:58,520
Speaker 2: to work five days a week, four days a week, three.

510
00:23:58,440 --> 00:23:58,800
Speaker 5: Days a week.

511
00:23:58,840 --> 00:24:00,520
Speaker 6: You you're in exist hundred percent?

512
00:24:00,920 --> 00:24:01,440
Speaker 2: What is that?

513
00:24:01,600 --> 00:24:04,320
Speaker 9: It seems to be a bit agency by agency at

514
00:24:04,320 --> 00:24:07,679
Speaker 9: this point from my understanding, friends of mine that I

515
00:24:07,720 --> 00:24:09,760
Speaker 9: know are more about three days. When you're looking at

516
00:24:09,800 --> 00:24:13,679
Speaker 9: the contractors, many of them are fully remote now, So

517
00:24:13,720 --> 00:24:15,440
Speaker 9: it kind of depends. If you work for a three

518
00:24:15,520 --> 00:24:17,960
Speaker 9: letter you're probably in four or five days a week.

519
00:24:18,280 --> 00:24:20,040
Speaker 9: If you work for a different agency you might be

520
00:24:20,080 --> 00:24:20,760
Speaker 9: more flexible.

521
00:24:20,840 --> 00:24:21,159
Speaker 5: I do know.

522
00:24:21,160 --> 00:24:23,920
Speaker 4: It's the difference though, Like not being in the office,

523
00:24:23,960 --> 00:24:26,240
Speaker 4: you do you one hundred percent miss out on those

524
00:24:26,280 --> 00:24:29,000
Speaker 4: like random conversations that all of a sudden like mean

525
00:24:29,080 --> 00:24:32,360
Speaker 4: something in a few years or in though I think

526
00:24:32,400 --> 00:24:34,639
Speaker 4: you're right, I just don't know like what the career path.

527
00:24:34,800 --> 00:24:37,400
Speaker 2: But if I were investing in real estate, that would

528
00:24:37,440 --> 00:24:41,000
Speaker 2: be my base case. Like, yeah, occupancies, whatever they are today,

529
00:24:41,160 --> 00:24:42,800
Speaker 2: that's what I'm going to model out. You're not going

530
00:24:42,840 --> 00:24:44,680
Speaker 2: to get any better. I don't think you're get any worse.

531
00:24:45,040 --> 00:24:45,880
Speaker 2: That's what I would model.

532
00:24:46,000 --> 00:24:47,439
Speaker 4: And the same idea at Bloomberg is like, you have

533
00:24:47,480 --> 00:24:49,520
Speaker 4: a desk, right, but if you could also go to

534
00:24:49,520 --> 00:24:52,040
Speaker 4: any desk, would the same experience like that kind of

535
00:24:52,080 --> 00:24:54,240
Speaker 4: idea versus sort of here's an office.

536
00:24:54,400 --> 00:24:54,840
Speaker 6: Kind of thing.

537
00:24:55,000 --> 00:24:57,760
Speaker 4: You also like meta that's not goes up a whopping

538
00:24:57,760 --> 00:25:00,879
Speaker 4: one hundred and thirty percent in the last year, you

539
00:25:00,920 --> 00:25:02,640
Speaker 4: still like it at these levels to buy.

540
00:25:03,160 --> 00:25:05,560
Speaker 9: Yeah, so at this point it is a little bit

541
00:25:05,640 --> 00:25:07,800
Speaker 9: rich in the valuation. So we do watch out for

542
00:25:07,880 --> 00:25:10,440
Speaker 9: any sort of opportunities. And the thing about these textocs

543
00:25:10,520 --> 00:25:12,360
Speaker 9: is that because they can be a little bit viatle,

544
00:25:12,400 --> 00:25:14,359
Speaker 9: you just watch every day and sometimes you do get one.

545
00:25:14,680 --> 00:25:17,040
Speaker 9: But what we like about it is that their say

546
00:25:17,119 --> 00:25:19,880
Speaker 9: do ratio as we call it on our team, as

547
00:25:19,920 --> 00:25:22,720
Speaker 9: they do yes, the say do ratio, So they say

548
00:25:22,920 --> 00:25:25,480
Speaker 9: they're going to moderate costs. They say they're going to

549
00:25:25,480 --> 00:25:29,320
Speaker 9: go ahead and sort of leave behind any investments or

550
00:25:29,359 --> 00:25:31,680
Speaker 9: capital allocation that's not paying off for them. And over

551
00:25:31,680 --> 00:25:34,280
Speaker 9: the last eighteen months or so they've done it. We've

552
00:25:34,280 --> 00:25:36,480
Speaker 9: seen that improvement in their margin. We've seen it starting

553
00:25:36,480 --> 00:25:38,360
Speaker 9: to come through on cash flow. We see that management's

554
00:25:38,359 --> 00:25:42,199
Speaker 9: getting more serious about tangible ways to handle AI. And

555
00:25:42,240 --> 00:25:44,200
Speaker 9: also when we look a little bit forward, we compare

556
00:25:44,240 --> 00:25:49,000
Speaker 9: them to another advertising competitor. Meta's got more retail media exposure,

557
00:25:49,200 --> 00:25:52,600
Speaker 9: which in these times, you know, consumers turning a little

558
00:25:52,640 --> 00:25:55,160
Speaker 9: bit more to goods as opposed to services. So when

559
00:25:55,200 --> 00:25:59,240
Speaker 9: we look at the advertising market in search, for example,

560
00:25:59,280 --> 00:26:01,520
Speaker 9: that's going to lean a little bit towards services as

561
00:26:01,520 --> 00:26:04,600
Speaker 9: goods are coming down more, retail media has an opportunity

562
00:26:04,640 --> 00:26:07,040
Speaker 9: to stand out. So Meta is definitely a little bit

563
00:26:07,080 --> 00:26:08,199
Speaker 9: more poised in that regard.

564
00:26:08,640 --> 00:26:11,360
Speaker 2: Yeah, they I mean that went from being since its inception,

565
00:26:11,440 --> 00:26:14,160
Speaker 2: a top line revenue growth story to really order pass

566
00:26:14,280 --> 00:26:17,199
Speaker 2: two years to being a cost cutting story. Yes, and

567
00:26:17,240 --> 00:26:19,640
Speaker 2: that's what that's what worked. I mean I didn't see

568
00:26:19,640 --> 00:26:22,159
Speaker 2: that coming, but they actually did. They did it what

569
00:26:22,200 --> 00:26:23,159
Speaker 2: they said.

570
00:26:23,280 --> 00:26:25,720
Speaker 6: They do, they do I learned something that's so cool.

571
00:26:25,800 --> 00:26:28,320
Speaker 6: What other company has a good say do? Who else

572
00:26:28,359 --> 00:26:30,439
Speaker 6: has got a good say do? That's a great question,

573
00:26:31,160 --> 00:26:32,600
Speaker 6: it was a bad one.

574
00:26:33,560 --> 00:26:35,119
Speaker 9: Well I don't know if legal wants me to do that,

575
00:26:35,160 --> 00:26:39,199
Speaker 9: but fair enough, but you know, I would say we

576
00:26:39,240 --> 00:26:41,520
Speaker 9: could probably throw Apple out there for having a decent

577
00:26:41,520 --> 00:26:44,280
Speaker 9: say do. And in some situations, I think what ends

578
00:26:44,320 --> 00:26:48,160
Speaker 9: up happening is their valuation gets sort of bounced around

579
00:26:48,200 --> 00:26:51,560
Speaker 9: like a hacky sack because they say that they're going

580
00:26:51,600 --> 00:26:53,840
Speaker 9: to do very reasonable things, and sometimes that's not enough

581
00:26:53,840 --> 00:26:54,359
Speaker 9: for the market.

582
00:26:54,520 --> 00:26:54,720
Speaker 5: Right.

583
00:26:55,240 --> 00:26:59,240
Speaker 9: Mature companies tend to say that, and when you want

584
00:26:59,280 --> 00:27:02,160
Speaker 9: that intense growth and they say, well, we're actually not there.

585
00:27:02,200 --> 00:27:05,440
Speaker 9: We're kind of giving cash back and we're doing responsible allocation.

586
00:27:06,200 --> 00:27:07,880
Speaker 9: They're saying it and they're doing it, but it may

587
00:27:07,920 --> 00:27:09,200
Speaker 9: not be what the market wants to hear.

588
00:27:09,320 --> 00:27:12,000
Speaker 2: Yeah, the market wants to hear. Don't worry about China. Yeah,

589
00:27:12,240 --> 00:27:14,920
Speaker 2: China's fine, don't yes, exactly, there's lots of stuff there

590
00:27:14,960 --> 00:27:15,720
Speaker 2: and don't worry about it.

591
00:27:16,119 --> 00:27:19,280
Speaker 4: Great stuff, You're awesome, you come back all the time.

592
00:27:19,560 --> 00:27:22,520
Speaker 4: Shelby McFadden, investment analysts at Motley Full Asset Management.

593
00:27:22,560 --> 00:27:25,080
Speaker 6: I think we should do sadu ratios like.

594
00:27:25,119 --> 00:27:27,359
Speaker 2: All the time. Like Tucker is right well in the

595
00:27:27,400 --> 00:27:28,240
Speaker 2: say ratio, I.

596
00:27:28,160 --> 00:27:31,200
Speaker 4: Think he totally does, like he delivers, like what you

597
00:27:32,200 --> 00:27:33,960
Speaker 4: see is what you get.

598
00:27:34,080 --> 00:27:36,400
Speaker 2: You know, it's true. I don't know what is what

599
00:27:36,440 --> 00:27:37,720
Speaker 2: you get, So.

600
00:27:37,720 --> 00:27:39,280
Speaker 6: I don't know. That sometimes sounded like an insult, but

601
00:27:39,320 --> 00:27:39,600
Speaker 6: it didn't.

602
00:27:39,600 --> 00:27:40,399
Speaker 5: It didn't mean to be.

603
00:27:41,960 --> 00:27:43,520
Speaker 4: I'm gonna I'm gonna take this and run with it

604
00:27:43,800 --> 00:27:45,800
Speaker 4: for a very long time. Okay, Shelby, thanks a lot,

605
00:27:45,840 --> 00:27:49,000
Speaker 4: really appreciate it. I loved having you join us. There.

606
00:27:49,600 --> 00:27:53,520
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

607
00:27:53,600 --> 00:27:56,640
Speaker 1: weekdays at ten am Eastern on Apple card Play and

608
00:27:56,640 --> 00:27:59,800
Speaker 1: Android Auto with the Bloomberg Business. You can also listen

609
00:28:00,119 --> 00:28:03,120
Speaker 1: live on Amazon Alexa from our flagship New York station,

610
00:28:03,480 --> 00:28:06,280
Speaker 1: Just say Alexa play Bloomberg eleven thirty.

611
00:28:07,280 --> 00:28:09,200
Speaker 4: All right, let's get to the bond market here, because

612
00:28:09,200 --> 00:28:11,160
Speaker 4: you're looking at back in yields continuing to rise. It's

613
00:28:11,200 --> 00:28:13,399
Speaker 4: after a pretty solid sell off yesterday as well. The

614
00:28:13,440 --> 00:28:16,040
Speaker 4: tenure yield up about seven or eight basis points. We're

615
00:28:16,040 --> 00:28:17,760
Speaker 4: looking at the thirty, the ten they're all at the

616
00:28:17,800 --> 00:28:20,200
Speaker 4: highest level now that we've seen so far. This year

617
00:28:20,280 --> 00:28:23,200
Speaker 4: as stocks wind up dropping, Ira Jersey, Bloomberg Intelligence Chief

618
00:28:23,280 --> 00:28:27,720
Speaker 4: US interest rate strategist joins us Now, Ira, how do

619
00:28:27,760 --> 00:28:31,800
Speaker 4: you square the data that we continue to see ism manufacturing,

620
00:28:32,040 --> 00:28:35,200
Speaker 4: the jolts numbers, even factory orders, Like, how much higher

621
00:28:35,240 --> 00:28:37,640
Speaker 4: can we go and yield before things start to hurt?

622
00:28:39,080 --> 00:28:41,880
Speaker 10: Yeah, well, obviously they're going to start to hurt risk assets,

623
00:28:41,960 --> 00:28:45,560
Speaker 10: probably sooner rather than later, just because the expectation has

624
00:28:45,600 --> 00:28:47,720
Speaker 10: been that the Fed was going to cut interest rates,

625
00:28:47,720 --> 00:28:49,840
Speaker 10: and as we keep on getting these better and better numbers,

626
00:28:49,840 --> 00:28:50,280
Speaker 10: we're just.

627
00:28:50,160 --> 00:28:52,000
Speaker 5: Going to either do one of two things.

628
00:28:52,040 --> 00:28:54,920
Speaker 10: Either we're going to price out ray cuts altogether, or

629
00:28:55,000 --> 00:28:57,200
Speaker 10: as you've seen recently, is we're just going to push

630
00:28:57,240 --> 00:28:59,800
Speaker 10: out when those cuts are going to start because the

631
00:29:00,000 --> 00:29:04,800
Speaker 10: economy is just not slowing. So the higher yields that

632
00:29:04,840 --> 00:29:06,240
Speaker 10: you're seeing, I think in the back end of the

633
00:29:06,240 --> 00:29:08,760
Speaker 10: curve is just a reflection of the idea that if

634
00:29:08,760 --> 00:29:11,000
Speaker 10: the Fed does ultimately cut, it might not cut that

635
00:29:11,120 --> 00:29:13,520
Speaker 10: much number one, and number two, that the cuts are

636
00:29:13,560 --> 00:29:17,240
Speaker 10: going to continue to be priced out. What's surprising me

637
00:29:17,320 --> 00:29:19,720
Speaker 10: about this move is that a lot of it's coming

638
00:29:19,760 --> 00:29:21,240
Speaker 10: in the back end of the curve. So, like you

639
00:29:21,320 --> 00:29:24,600
Speaker 10: mentioned ten year yields, thirty year yields, two year yields

640
00:29:24,640 --> 00:29:27,240
Speaker 10: have gone up, and at around four point seven percent,

641
00:29:27,240 --> 00:29:30,120
Speaker 10: they're still pricing more or less for three interest rate

642
00:29:30,160 --> 00:29:33,240
Speaker 10: cuts this year. I think that that's probably the next

643
00:29:33,360 --> 00:29:35,880
Speaker 10: nut to crack, where you really need those two year

644
00:29:35,960 --> 00:29:38,960
Speaker 10: yields to go up toward toward five percent in order

645
00:29:39,000 --> 00:29:41,280
Speaker 10: to get ten year yields above four and a half.

646
00:29:41,320 --> 00:29:41,720
Speaker 5: For sure.

647
00:29:42,360 --> 00:29:45,640
Speaker 2: Is there a scenario, ira in any of your crazy

648
00:29:45,680 --> 00:29:48,040
Speaker 2: models that you and your team have their DNA Prinson

649
00:29:48,120 --> 00:29:52,480
Speaker 2: that says no rate cuts in twenty twenty four, good one.

650
00:29:52,680 --> 00:29:54,560
Speaker 5: Yeah, so there actually is.

651
00:29:54,680 --> 00:29:56,880
Speaker 10: And I think that that's a case that you can't

652
00:29:56,880 --> 00:30:00,120
Speaker 10: completely dismiss, especially when you see the strength and the

653
00:30:00,200 --> 00:30:04,600
Speaker 10: data as powerful as it has been recently. So unless

654
00:30:04,600 --> 00:30:07,320
Speaker 10: you wind up getting a more significant slowdown and inflation

655
00:30:07,920 --> 00:30:11,040
Speaker 10: amid this very strong growth, which seems, you know, less

656
00:30:11,040 --> 00:30:15,080
Speaker 10: and less likely as time goes on, then the possibility

657
00:30:15,120 --> 00:30:17,760
Speaker 10: that the Fed doesn't cut interest rates at all this

658
00:30:17,880 --> 00:30:20,120
Speaker 10: year and maybe into next year has to be on

659
00:30:20,160 --> 00:30:22,160
Speaker 10: your radar. And I think and one of the things

660
00:30:22,160 --> 00:30:25,240
Speaker 10: that you've seen in the rates market, so you know,

661
00:30:25,360 --> 00:30:29,080
Speaker 10: libor is no more so now we use something called SOFUR.

662
00:30:28,760 --> 00:30:30,480
Speaker 5: The secure over night Financing rate.

663
00:30:31,440 --> 00:30:35,160
Speaker 10: Well, so most short term interest rate bets are put

664
00:30:35,240 --> 00:30:38,000
Speaker 10: on in SOFUR futures right now, and if you look

665
00:30:38,080 --> 00:30:41,680
Speaker 10: at the options on those futures, you know there's now

666
00:30:41,680 --> 00:30:44,480
Speaker 10: about a twenty percent chance being priced that the Fed

667
00:30:44,520 --> 00:30:47,000
Speaker 10: does nothing or even maybe hikes interest.

668
00:30:46,760 --> 00:30:48,360
Speaker 5: Rates before the end of the year.

669
00:30:48,360 --> 00:30:51,120
Speaker 10: And I think that that and that's a significant shift

670
00:30:51,160 --> 00:30:53,920
Speaker 10: from where we were in mid February, when you know,

671
00:30:53,960 --> 00:30:55,400
Speaker 10: we were pricing only for cuts.

672
00:30:55,400 --> 00:30:56,560
Speaker 5: It was a matter of how many.

673
00:30:56,760 --> 00:30:57,600
Speaker 6: That's interesting.

674
00:30:57,880 --> 00:30:59,800
Speaker 4: So does the fact that we're seeing more move in

675
00:30:59,840 --> 00:31:02,280
Speaker 4: the back end versus the long sorry, yeah, the back

676
00:31:02,360 --> 00:31:04,880
Speaker 4: end versus the front end. What does that tell you

677
00:31:04,920 --> 00:31:07,280
Speaker 4: about the potential hike or no cut scenario.

678
00:31:08,240 --> 00:31:09,920
Speaker 10: Well, I think a big part of it is people

679
00:31:09,960 --> 00:31:12,760
Speaker 10: were I think edging long. So you know a lot

680
00:31:12,760 --> 00:31:16,800
Speaker 10: of people, you know, including in our own Bloomberg Economics team,

681
00:31:17,000 --> 00:31:18,400
Speaker 10: thought that we were going to start to see a

682
00:31:18,440 --> 00:31:21,360
Speaker 10: significance slowing in the economy now. So they had gotten

683
00:31:21,440 --> 00:31:25,920
Speaker 10: long interest rates, had gotten long treasuries, and we're ready.

684
00:31:25,680 --> 00:31:26,880
Speaker 5: For a rally.

685
00:31:26,920 --> 00:31:29,200
Speaker 10: So I think one of the reasons you're seeing the

686
00:31:29,200 --> 00:31:31,560
Speaker 10: back end under formed a little bit is just people.

687
00:31:31,320 --> 00:31:32,560
Speaker 5: Getting out of that risk.

688
00:31:33,000 --> 00:31:36,520
Speaker 10: Once that those positions are cleaner, then you wind up

689
00:31:36,520 --> 00:31:39,280
Speaker 10: with a scenario where people look at the fundamentals and say, okay,

690
00:31:39,280 --> 00:31:42,560
Speaker 10: what's the actual fair value for ten.

691
00:31:42,480 --> 00:31:43,600
Speaker 5: Year yield and two year yield?

692
00:31:43,680 --> 00:31:46,360
Speaker 10: Right now, everyone's kind of in risk management mode saying, okay,

693
00:31:46,360 --> 00:31:50,760
Speaker 10: we're too long risk given the economic environment. Let's right

694
00:31:50,840 --> 00:31:53,320
Speaker 10: size our risk and then we'll determine whether or not

695
00:31:53,360 --> 00:31:56,360
Speaker 10: there's some value here, value or not value there. So

696
00:31:56,680 --> 00:31:58,480
Speaker 10: I think that's the mode that we're in right now. Plus,

697
00:31:58,520 --> 00:32:01,560
Speaker 10: remember we're early in the core or you know, I

698
00:32:01,560 --> 00:32:03,520
Speaker 10: think some of the positioning last week had to do

699
00:32:03,600 --> 00:32:07,160
Speaker 10: with month and rebalancing before people put out their quarterly

700
00:32:07,240 --> 00:32:10,920
Speaker 10: or semi annual fund reports and the like. So some

701
00:32:11,000 --> 00:32:12,840
Speaker 10: of this maybe is that people wanted to be long

702
00:32:12,880 --> 00:32:15,560
Speaker 10: going into quarter end and now they don't see a

703
00:32:15,600 --> 00:32:19,000
Speaker 10: big reason to be long at the moment. So that's

704
00:32:19,040 --> 00:32:20,760
Speaker 10: one reason why people are getting out of risk. And

705
00:32:20,800 --> 00:32:22,920
Speaker 10: it's easy to do when you see, you know, decent

706
00:32:23,000 --> 00:32:24,960
Speaker 10: data like we've had the last two days.

707
00:32:25,400 --> 00:32:28,000
Speaker 2: So the ten year I ref got it at four

708
00:32:28,040 --> 00:32:30,840
Speaker 2: spot three eight. Here is there a technical kind of

709
00:32:31,080 --> 00:32:33,040
Speaker 2: level that I need to be watching for like if

710
00:32:33,080 --> 00:32:36,640
Speaker 2: it breaks above four fifty, then it can go significanly

711
00:32:36,680 --> 00:32:38,320
Speaker 2: higher than that. Is there any technicals here that you're

712
00:32:38,360 --> 00:32:39,040
Speaker 2: paying attention to.

713
00:32:40,200 --> 00:32:42,840
Speaker 10: Yes, and we just broke a very important one actually,

714
00:32:42,840 --> 00:32:45,840
Speaker 10: So four point three to five percent was the level

715
00:32:45,840 --> 00:32:48,520
Speaker 10: that we were watching the last two months. Now that

716
00:32:48,520 --> 00:32:51,760
Speaker 10: we're above that, we'll be targeting four point five one percent,

717
00:32:52,040 --> 00:32:53,959
Speaker 10: call it four and a half percent from round numbers,

718
00:32:54,800 --> 00:32:57,360
Speaker 10: and then above that is four point seven percent, So

719
00:32:58,160 --> 00:32:59,760
Speaker 10: we really have a little bit of a gap here

720
00:32:59,720 --> 00:33:02,840
Speaker 10: another ten or twelve basis points. You know, interestingly, when

721
00:33:02,840 --> 00:33:05,400
Speaker 10: you look at some of the momentum oscillators. I was

722
00:33:05,480 --> 00:33:07,160
Speaker 10: just looking at this with Chris Caine, one of my

723
00:33:07,200 --> 00:33:11,160
Speaker 10: other Bloomberg Intelligence colleagues, who's a chartered market technician, so

724
00:33:11,200 --> 00:33:13,200
Speaker 10: he's one of those people with a three letter acronym

725
00:33:13,280 --> 00:33:15,640
Speaker 10: after his name and looks at charts all the time.

726
00:33:16,280 --> 00:33:18,000
Speaker 10: So he and I were actually just talking about this

727
00:33:18,120 --> 00:33:22,560
Speaker 10: and the relative strength and index, and some momentum oscillators

728
00:33:22,560 --> 00:33:25,120
Speaker 10: aren't yet at extreme levels to think that.

729
00:33:25,440 --> 00:33:27,760
Speaker 5: The selloff is over near term.

730
00:33:27,840 --> 00:33:31,240
Speaker 10: Now you get another day like we have today, then momentum,

731
00:33:31,280 --> 00:33:33,880
Speaker 10: probably those momentum indicators will be in extreme levels.

732
00:33:33,880 --> 00:33:35,840
Speaker 5: And you can maybe think of a little bit.

733
00:33:35,720 --> 00:33:38,400
Speaker 10: Of a pause in the selloff for a little while.

734
00:33:38,440 --> 00:33:41,040
Speaker 10: But we're not there quite yet, so we could see

735
00:33:41,080 --> 00:33:43,120
Speaker 10: more volatility. You know, when we have some FED speakers

736
00:33:43,160 --> 00:33:45,640
Speaker 10: at twelve today, if they sound a little bit more

737
00:33:45,640 --> 00:33:48,800
Speaker 10: hawkish then Jay Powell was last week, then certainly you

738
00:33:48,840 --> 00:33:50,960
Speaker 10: can wind up probably adding on to some of the

739
00:33:51,000 --> 00:33:52,120
Speaker 10: market angst right now.

740
00:33:52,400 --> 00:33:55,560
Speaker 4: Some feels like an understatement. We got Bowman speaking in

741
00:33:55,640 --> 00:33:58,120
Speaker 4: ten ten, you got Williams speaking at twelve, Mess's speaking

742
00:33:58,120 --> 00:33:59,960
Speaker 4: at twelve ot five and Daily speaking at one three.

743
00:34:00,320 --> 00:34:01,920
Speaker 2: Why did they do that? Did they get paid to speak?

744
00:34:02,560 --> 00:34:03,200
Speaker 6: It's a question.

745
00:34:03,720 --> 00:34:05,720
Speaker 4: Yeah, Well, so what's going to learn from like a

746
00:34:05,760 --> 00:34:07,640
Speaker 4: million different FED officials at the same time.

747
00:34:08,719 --> 00:34:11,400
Speaker 10: Well so a lot of the FED speakers, you know,

748
00:34:11,480 --> 00:34:15,839
Speaker 10: these these lunches and these different activities that that that

749
00:34:15,920 --> 00:34:19,040
Speaker 10: the FED presidents, the regional FED presidents or FED governors do.

750
00:34:19,480 --> 00:34:21,680
Speaker 10: A lot of them are scheduled months and months in advance.

751
00:34:21,719 --> 00:34:23,440
Speaker 10: You know, they're part of their job is to be

752
00:34:23,480 --> 00:34:26,280
Speaker 10: out in the community, listen to people, let the public

753
00:34:26,360 --> 00:34:30,480
Speaker 10: know what they're thinking, is how they how they think

754
00:34:30,520 --> 00:34:32,560
Speaker 10: the economy is going to be, what monetary policy is

755
00:34:32,560 --> 00:34:33,000
Speaker 10: going to be.

756
00:34:33,520 --> 00:34:35,560
Speaker 5: It's part of their job, you know. It's it's funny.

757
00:34:35,560 --> 00:34:37,560
Speaker 10: People always ask me, why do these people go out

758
00:34:37,560 --> 00:34:39,239
Speaker 10: there all the time and make all these comments. They've

759
00:34:39,239 --> 00:34:42,160
Speaker 10: actually always made these comments that just when Alan Greenspan

760
00:34:42,320 --> 00:34:44,279
Speaker 10: was the chair, we didn't pay attention to anyone except

761
00:34:44,320 --> 00:34:49,080
Speaker 10: Alan Greenspan, And more recently things have been more democratized

762
00:34:49,120 --> 00:34:52,399
Speaker 10: within the Federal Reserve. So therefore all of these FED

763
00:34:52,400 --> 00:34:56,480
Speaker 10: speakers get more attention, you know, maybe than they deserve.

764
00:34:56,520 --> 00:34:59,000
Speaker 10: But but it is helpful in the fact that now

765
00:34:59,000 --> 00:35:01,840
Speaker 10: we know what the district of the Federal Reserve looks

766
00:35:01,880 --> 00:35:03,880
Speaker 10: like in terms of you know, who who thinks that

767
00:35:03,960 --> 00:35:06,240
Speaker 10: interest rates should be raised, who thinks that they shouldn't

768
00:35:06,239 --> 00:35:08,640
Speaker 10: be raised, who thinks they should be cut right, So

769
00:35:08,960 --> 00:35:11,799
Speaker 10: there's a variety of views and having those views, I

770
00:35:11,800 --> 00:35:12,960
Speaker 10: think does muddy.

771
00:35:12,640 --> 00:35:13,759
Speaker 5: The waters a little bit.

772
00:35:14,719 --> 00:35:18,360
Speaker 10: But an aggregate though, uh, these discussions have always happened.

773
00:35:18,360 --> 00:35:20,720
Speaker 5: Just it was, you know, we just didn't pay attention.

774
00:35:20,400 --> 00:35:23,160
Speaker 10: And now now that we do, we wind up having

775
00:35:23,200 --> 00:35:27,279
Speaker 10: more headlines and maybe generates more volatility the FED Maybe

776
00:35:27,320 --> 00:35:29,879
Speaker 10: could could you know, pull pull that in a little

777
00:35:29,880 --> 00:35:32,400
Speaker 10: bit and basically say, hey, don't make a lot of

778
00:35:32,400 --> 00:35:34,680
Speaker 10: monetary policy comments. But I think the cats out of

779
00:35:34,680 --> 00:35:36,520
Speaker 10: the bag now, and you know we're just going to

780
00:35:36,600 --> 00:35:40,520
Speaker 10: have have continued FED speak that's going to be very

781
00:35:40,520 --> 00:35:43,000
Speaker 10: important to markets on a minute umnit basis.

782
00:35:42,719 --> 00:35:44,840
Speaker 2: All right, I'm all in on the men's and women's

783
00:35:44,880 --> 00:35:46,840
Speaker 2: Final four, so I'm not really paying attention to soccer.

784
00:35:46,880 --> 00:35:49,160
Speaker 2: But if there's one match I need to follow in

785
00:35:49,200 --> 00:35:50,560
Speaker 2: your world of soccer, what would it be?

786
00:35:51,280 --> 00:35:53,680
Speaker 5: Oh? I think Aston Villa of course.

787
00:35:53,760 --> 00:35:57,160
Speaker 10: My my villains have had a big win over the weekend,

788
00:35:57,239 --> 00:35:59,520
Speaker 10: a t nil two nail victory, so we're moving up

789
00:35:59,560 --> 00:35:59,920
Speaker 10: the table.

790
00:36:00,880 --> 00:36:02,800
Speaker 5: Yeah, I'm going to watch the Villa match this weekend

791
00:36:02,840 --> 00:36:03,200
Speaker 5: for sure.

792
00:36:03,320 --> 00:36:05,760
Speaker 2: All Right, Irid Jersey, good stuff. We appreciate it as always.

793
00:36:05,800 --> 00:36:10,360
Speaker 2: Ira Jersey, chief US Interest rate strategist, chief soccer strategists

794
00:36:10,360 --> 00:36:14,520
Speaker 2: for Bloomberg Intelligence, bringing it to us from Princeton, New Jersey.

795
00:36:14,880 --> 00:36:16,879
Speaker 2: Uh so, I don't. I'm all in on the final four.

796
00:36:16,960 --> 00:36:20,120
Speaker 2: The women's had great games for sports, dude, what are

797
00:36:20,160 --> 00:36:22,560
Speaker 2: you doing women's sports? I'm just saying I'm all in

798
00:36:22,680 --> 00:36:24,799
Speaker 2: And this is the first year I've really been like

799
00:36:25,400 --> 00:36:28,080
Speaker 2: paying this level of attention. I mean, Michael Bard, the

800
00:36:28,080 --> 00:36:29,480
Speaker 2: Business of Sports he's always.

801
00:36:29,280 --> 00:36:29,600
Speaker 5: In on it.

802
00:36:29,600 --> 00:36:32,319
Speaker 2: But that's you know, I'm kind of paying attention to it.

803
00:36:32,440 --> 00:36:35,040
Speaker 2: So Final four, ya, yay?

804
00:36:35,360 --> 00:36:38,120
Speaker 6: There better than an NBA game, I would say.

805
00:36:38,239 --> 00:36:41,080
Speaker 2: Last night, Yeah it was. I mean it's just super competitive,

806
00:36:41,160 --> 00:36:42,960
Speaker 2: super competitive, and that's all you went. And they got

807
00:36:43,000 --> 00:36:46,440
Speaker 2: a great Final four Yukons South Carolina.

808
00:36:45,280 --> 00:36:48,720
Speaker 4: Patal Now male and female athletes.

809
00:36:48,640 --> 00:36:50,720
Speaker 2: Non comparence is not it's not even there.

810
00:36:50,960 --> 00:36:52,399
Speaker 6: Do you think we change the changes now?

811
00:36:52,400 --> 00:36:55,279
Speaker 2: After no? No, no, But it gets better. I mean

812
00:36:55,320 --> 00:36:57,120
Speaker 2: the women are getting more and more and more, but

813
00:36:57,200 --> 00:36:59,680
Speaker 2: it's but so are the men and so it's just

814
00:36:59,680 --> 00:37:01,359
Speaker 2: getting kind of crazy out there.

815
00:37:01,400 --> 00:37:02,080
Speaker 5: So we'll see it.

816
00:37:02,080 --> 00:37:03,759
Speaker 2: But anyway, we got the Final four to look forward

817
00:37:03,760 --> 00:37:05,880
Speaker 2: to this weekend. That's coming up.

818
00:37:08,280 --> 00:37:12,160
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

819
00:37:12,239 --> 00:37:15,760
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

820
00:37:15,800 --> 00:37:18,960
Speaker 1: Auto with the Bloomberg Business. You can also listen live

821
00:37:19,040 --> 00:37:22,239
Speaker 1: on Amazon Alexa from our flagship New York station, Just

822
00:37:22,280 --> 00:37:24,920
Speaker 1: say Alexa play Bloomberg eleven thirty.

823
00:37:26,239 --> 00:37:29,520
Speaker 2: How about this for an investment strategy, maintain very low

824
00:37:29,560 --> 00:37:33,200
Speaker 2: exposure to overall stock markets by being long selected high

825
00:37:33,320 --> 00:37:37,000
Speaker 2: quality companies and short market index that's what our next

826
00:37:37,000 --> 00:37:39,680
Speaker 2: guest is up to, Lucas to Mickey joints us here,

827
00:37:39,760 --> 00:37:44,040
Speaker 2: founder and managing partner of LRT Capital Management, joining us

828
00:37:44,080 --> 00:37:47,239
Speaker 2: from Austin, Texas. It's got to be overcrowded by now

829
00:37:47,320 --> 00:37:51,200
Speaker 2: Austin Texas. Everybody I knowing to Austin, Texas. Great, So anyway,

830
00:37:51,200 --> 00:37:53,600
Speaker 2: he's down there, Lucas, thanks so much for joining us here.

831
00:37:53,840 --> 00:37:56,320
Speaker 2: Talk to us about your investment strategy. Did I characterize

832
00:37:56,360 --> 00:38:00,000
Speaker 2: that right? And how has it performed for you?

833
00:38:00,239 --> 00:38:02,840
Speaker 11: You know, it's it's something exactly right what you said.

834
00:38:03,520 --> 00:38:06,680
Speaker 11: We don't predict where the market is going to do

835
00:38:06,800 --> 00:38:09,240
Speaker 11: in the short term because I don't think that's something

836
00:38:09,440 --> 00:38:11,839
Speaker 11: we have any expertise in doing, and frankly we don't

837
00:38:11,840 --> 00:38:16,040
Speaker 11: think others can do that. But our strategies have to

838
00:38:16,320 --> 00:38:20,240
Speaker 11: put it, politely, crush the market with very low volatility

839
00:38:20,239 --> 00:38:23,279
Speaker 11: in very low market exposure. So it's worked out fairly well.

840
00:38:24,280 --> 00:38:25,879
Speaker 4: What do you do when you wind up seeing though,

841
00:38:26,200 --> 00:38:29,759
Speaker 4: like record after record for the overall SMP. I mean,

842
00:38:29,760 --> 00:38:31,840
Speaker 4: I appreciate today it's a little different because we're actually

843
00:38:31,880 --> 00:38:34,399
Speaker 4: down one percent, So how do you kind of fight

844
00:38:34,440 --> 00:38:34,920
Speaker 4: against that?

845
00:38:36,000 --> 00:38:40,040
Speaker 11: Yeah, so you know, our strategy because we're effectively buying

846
00:38:40,360 --> 00:38:44,320
Speaker 11: quality companies and then we're shorting indexes, which, in a

847
00:38:44,400 --> 00:38:49,960
Speaker 11: simplistic way, the index is quality plus junk. Junk typically

848
00:38:50,000 --> 00:38:53,600
Speaker 11: outperforms in a type of fomal market that I think

849
00:38:53,600 --> 00:38:56,480
Speaker 11: we've had over the last three four months. So it

850
00:38:56,520 --> 00:38:59,000
Speaker 11: is a little frustrating on a day to day basis

851
00:38:59,040 --> 00:39:00,959
Speaker 11: because you can see, you know, why am I doing

852
00:39:00,960 --> 00:39:04,560
Speaker 11: all this work when I could just buy Social and

853
00:39:04,880 --> 00:39:08,319
Speaker 11: make all the money or super microcomputer. But I think

854
00:39:08,640 --> 00:39:11,800
Speaker 11: over longer term, you know, when you have a downturn

855
00:39:12,000 --> 00:39:16,920
Speaker 11: and they do happen corrections as we call them, you know,

856
00:39:16,960 --> 00:39:20,600
Speaker 11: you do see the value of being disciplined and having

857
00:39:20,640 --> 00:39:21,560
Speaker 11: an actual strategy.

858
00:39:22,120 --> 00:39:25,719
Speaker 2: So how do you define high quality companies in the

859
00:39:25,719 --> 00:39:29,800
Speaker 2: alongside of your portfolio? Sure, so for us.

860
00:39:29,640 --> 00:39:32,080
Speaker 11: When we're talking about quality, it's really down to a

861
00:39:32,080 --> 00:39:36,319
Speaker 11: combination of qualitative and quantitative metrics. So we're looking for

862
00:39:36,400 --> 00:39:40,240
Speaker 11: number one companies that have some kind of mote, meaning

863
00:39:40,360 --> 00:39:42,920
Speaker 11: some kind of ability to earn high rates of return

864
00:39:43,040 --> 00:39:47,600
Speaker 11: on invested capital and more importantly, sustain those returns over

865
00:39:47,719 --> 00:39:51,360
Speaker 11: long periods of time. And here these are simple things

866
00:39:51,440 --> 00:39:54,799
Speaker 11: that Buffett has talked about for fifty years. May it

867
00:39:54,880 --> 00:40:01,080
Speaker 11: be network effects, scale economies in tangible assets, brands, pathents, licenses,

868
00:40:01,400 --> 00:40:05,600
Speaker 11: government approvals. And then that's number one, we're looking for

869
00:40:05,600 --> 00:40:09,040
Speaker 11: something that can earn a good greater return. But number two,

870
00:40:09,120 --> 00:40:12,399
Speaker 11: it has to be able to actually reinvest within that

871
00:40:12,480 --> 00:40:17,400
Speaker 11: competitive mode, because if you're just generating cash, generating returns,

872
00:40:17,719 --> 00:40:20,359
Speaker 11: but you can't reinvest, you're just returning that to shareholders.

873
00:40:20,760 --> 00:40:23,720
Speaker 11: The mode is kind of in the president in the past,

874
00:40:24,120 --> 00:40:27,560
Speaker 11: but not necessarily in the future. And number three, we're

875
00:40:27,560 --> 00:40:31,360
Speaker 11: looking for management teams that do a reasonably good job

876
00:40:31,760 --> 00:40:36,720
Speaker 11: of capital allocation, because ultimately, capital allocation is the link

877
00:40:37,160 --> 00:40:41,600
Speaker 11: between shareholder value and business value. And so if you

878
00:40:41,640 --> 00:40:45,120
Speaker 11: have a bad management that allocates capital poorly, then you

879
00:40:45,160 --> 00:40:46,960
Speaker 11: may have a good business, but you may actually never

880
00:40:47,000 --> 00:40:50,719
Speaker 11: see the benefit as a shareholder come through. And so

881
00:40:50,800 --> 00:40:53,640
Speaker 11: every business is different. No business is an A plus

882
00:40:53,680 --> 00:40:56,400
Speaker 11: and all those three dimensions you know, and it so

883
00:40:56,440 --> 00:40:59,120
Speaker 11: it depends on the business which one you weigh more.

884
00:40:59,560 --> 00:41:02,400
Speaker 11: If you think about a visa, I have an incredible mode.

885
00:41:02,600 --> 00:41:05,440
Speaker 11: You have a business that grows generally faster than GDP

886
00:41:05,600 --> 00:41:10,360
Speaker 11: every year and the management doesn't matter that much. I mean,

887
00:41:10,400 --> 00:41:12,440
Speaker 11: as long as they're not actively setting in the company

888
00:41:12,440 --> 00:41:15,479
Speaker 11: on fire. You know, I'm sorry, but I could become

889
00:41:15,560 --> 00:41:18,280
Speaker 11: CEO of Visa tomorrow and I would kick my legs

890
00:41:18,360 --> 00:41:20,600
Speaker 11: up and probably do nothing for the next five years,

891
00:41:20,880 --> 00:41:23,439
Speaker 11: and very little would change in the trajectory of Visa

892
00:41:23,520 --> 00:41:27,120
Speaker 11: the business right. And then you have other companies like

893
00:41:27,239 --> 00:41:31,120
Speaker 11: a Danaher or a trans Time which are growing through acquisition,

894
00:41:31,560 --> 00:41:36,520
Speaker 11: so their management, acquisition and capital location strategies matter tremendously.

895
00:41:37,360 --> 00:41:40,640
Speaker 4: To that point, then are there sectors that could sort

896
00:41:40,640 --> 00:41:42,359
Speaker 4: of fit the bill or is that too hard to

897
00:41:42,400 --> 00:41:44,880
Speaker 4: dissect because it's truly on like a company by company

898
00:41:44,880 --> 00:41:49,000
Speaker 4: and management basis, So you know there there is.

899
00:41:49,640 --> 00:41:52,480
Speaker 11: There are some sectors where you find companies with more

900
00:41:52,520 --> 00:41:57,080
Speaker 11: modes than others. So technology business services tend to lend

901
00:41:57,080 --> 00:42:02,000
Speaker 11: themselves to high switching costs, intellectual property, network effects, et cetera.

902
00:42:02,800 --> 00:42:07,840
Speaker 11: On the flip side, we're not very interested in commoditized businesses,

903
00:42:07,880 --> 00:42:09,359
Speaker 11: so we're not you're not going to find a lot

904
00:42:09,400 --> 00:42:12,680
Speaker 11: of mining in our portfolio. You're not going to find,

905
00:42:13,040 --> 00:42:17,760
Speaker 11: you know, a lot of shipping names, commoditized airlines.

906
00:42:17,400 --> 00:42:18,280
Speaker 2: Those sort of things.

907
00:42:18,680 --> 00:42:23,920
Speaker 11: We do look for things that have commodity, like exposures

908
00:42:24,360 --> 00:42:26,680
Speaker 11: where we think there actually is a mote but the

909
00:42:26,800 --> 00:42:30,840
Speaker 11: company may trade in a way with a commoditized sector.

910
00:42:31,400 --> 00:42:35,120
Speaker 11: And because that's very important for a diversification purpose for

911
00:42:35,239 --> 00:42:37,680
Speaker 11: the portfolio loocause.

912
00:42:37,320 --> 00:42:40,320
Speaker 2: How many names do you typically have in the longside

913
00:42:40,360 --> 00:42:41,319
Speaker 2: of your portfolio?

914
00:42:42,320 --> 00:42:45,319
Speaker 11: So as of today, we have ninety four positions and

915
00:42:45,360 --> 00:42:49,400
Speaker 11: we typically are around eighty two one hundred, but the

916
00:42:49,440 --> 00:42:53,640
Speaker 11: top twenty names are about forty five percent of our

917
00:42:54,000 --> 00:42:56,480
Speaker 11: long exposure, so that should give you a sense of

918
00:42:56,520 --> 00:43:01,600
Speaker 11: how that balances out. And typically the larger exposures in

919
00:43:01,640 --> 00:43:06,799
Speaker 11: our portfolio are the lower volatility names, and so the

920
00:43:06,960 --> 00:43:10,640
Speaker 11: names like a trade desk for example, which we own,

921
00:43:11,160 --> 00:43:13,879
Speaker 11: which is a business that we admire, we think has

922
00:43:13,960 --> 00:43:17,399
Speaker 11: a durable competitive advantage, but can be very volatile. It's

923
00:43:17,440 --> 00:43:20,000
Speaker 11: not uncommon to see trade desk up or down ten

924
00:43:20,080 --> 00:43:24,200
Speaker 11: or twenty percent. That's a sub one percent position for us,

925
00:43:24,600 --> 00:43:29,200
Speaker 11: whereas something like a chem d which is a very stable,

926
00:43:29,360 --> 00:43:32,400
Speaker 11: very kind of boring business, that's around a three percent position.

927
00:43:32,440 --> 00:43:36,040
Speaker 11: So we size really based on the volatility contribution of

928
00:43:36,120 --> 00:43:37,719
Speaker 11: the different pieces in the portfolio.

929
00:43:37,840 --> 00:43:40,000
Speaker 4: Before I let you go, do you have AI plays?

930
00:43:41,600 --> 00:43:45,400
Speaker 11: We own TSMC and we think that's probably the best

931
00:43:45,440 --> 00:43:48,959
Speaker 11: pixel shovels name that we can come up with. There's

932
00:43:49,040 --> 00:43:53,319
Speaker 11: plenty of AI names and semiconductor companies that are within

933
00:43:53,360 --> 00:43:57,800
Speaker 11: our portfolio or that are within our call it investable universe,

934
00:43:58,520 --> 00:44:02,160
Speaker 11: but we don't have the hottest ones that everyone has

935
00:44:02,280 --> 00:44:05,640
Speaker 11: beat Nvidia on others. So TSMC is really the largest

936
00:44:05,640 --> 00:44:07,200
Speaker 11: direct exposure for us in that space.

937
00:44:07,440 --> 00:44:09,759
Speaker 2: And on the short side, you just short SPX or

938
00:44:09,960 --> 00:44:11,640
Speaker 2: how do you play the short side.

939
00:44:11,480 --> 00:44:16,279
Speaker 11: So we're shorting mid and small cap indexes and that's

940
00:44:16,400 --> 00:44:19,960
Speaker 11: to just match the basis risk of the longside. So

941
00:44:20,640 --> 00:44:23,040
Speaker 11: typically most of our companies, you know, we do have

942
00:44:23,520 --> 00:44:27,880
Speaker 11: things across the market cap spectrum. TSMC is obviously a

943
00:44:27,920 --> 00:44:31,680
Speaker 11: giant company. We own North from Grammen as well, but

944
00:44:31,800 --> 00:44:35,680
Speaker 11: actually most of our names are mid caps. So as

945
00:44:35,719 --> 00:44:38,800
Speaker 11: a result, we're primarily short mid and then some small

946
00:44:38,800 --> 00:44:43,400
Speaker 11: cap indexes, and we're short five particular indexes. Nothing too fancy,

947
00:44:43,440 --> 00:44:45,160
Speaker 11: you know, things that you would know right all.

948
00:44:45,120 --> 00:44:48,520
Speaker 2: Right, lookus fascinating strategy put up some good numbers, so

949
00:44:48,800 --> 00:44:51,319
Speaker 2: good for you, guys. Lucas to Mickey joins Is here.

950
00:44:51,400 --> 00:44:54,440
Speaker 2: He's a founder and managing partner l RT Capital Management,

951
00:44:54,520 --> 00:44:55,920
Speaker 2: joining us from Austin, Texas.

952
00:44:56,040 --> 00:45:00,560
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953
00:45:00,760 --> 00:45:04,400
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954
00:45:04,560 --> 00:45:07,520
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955
00:45:07,640 --> 00:45:11,080
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956
00:45:11,120 --> 00:45:14,279
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957
00:45:14,440 --> 00:45:16,080
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