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Speaker 2: Tesla, the stock is down six percent here today. They
Speaker 2: missed pretty significantly on their deliverables for the first quarter. Again,
Speaker 2: stockdown six percent today, off thirty three about thirty four
Speaker 2: percent year to date, So definitely a challenging time for
Speaker 2: the folks at Tesla. Steve Manjoins is Global Autos and
Speaker 2: Industrials analyst for Bloomberg Intelligence. Steve put into context this
Speaker 2: miss year. How big of a miss was it and
Speaker 2: what does it mean going forward? Do you think for Tesla?
Speaker 3: Oh, it's definitely a bad day for Tesla, as you
Speaker 3: can see the stock. Look they're I mean, it's a
Speaker 3: time you know, they just actually raise prices on their cars,
Speaker 3: puts in the question about that strategy. You know, their
Speaker 3: inventory jumped by forty forty six thousand units. It's at
Speaker 3: the all time high at the moment, so there's a
Speaker 3: lot of questions out there. You know, with you know,
Speaker 3: the end market, the consumer hesitating a bit on buying evs.
Speaker 3: So what's going to be for Tesla going forward? Definitely
Speaker 3: their one point million target sales target for the year
Speaker 3: is definitely at risk.
Speaker 4: Do we know why? Like, what's the why behind it?
Speaker 4: They're going to talk about production misses in terms of
Speaker 4: supply chain issues, et cetera. But then Ruvian kind of
Speaker 4: crushed it, So so what's the real reason here?
Speaker 3: Yeah, they actually, you know, Tesla attributed to the RESC
Speaker 3: hostilities and you know that's that's partly right because a
Speaker 3: lot of their Model three and Model why they're most
Speaker 3: the best selling vehicles actually come from China, and you know,
Speaker 3: you know, you would assume a lot of these vehicles
Speaker 3: shipped through the Pacific Ocean avoiding the Red Sea. But
Speaker 3: you know, let's you know, we'll give them benefit of
Speaker 3: doubt that it had some impact. Maybe it's not necessarily
Speaker 3: the shipment of vehicles, maybe the shipment of parts right
Speaker 3: through the Red Sea that's impacted the production uh in
Speaker 3: in China. And remember they actually cut some of the
Speaker 3: some production in China recently as well, so you know
Speaker 3: that could be the reason. But like you said, Rivian
Speaker 3: sales have gone up. You know, is there anything specific
Speaker 3: to to Tesla.
Speaker 5: I don't.
Speaker 3: I don't really think so. One you know, one quarter
Speaker 3: is not gonna tell us the trend for the long term.
Speaker 3: I think Tesla vehicles are still you know, liked by
Speaker 3: a lot of consumer. We just did a survey, actually recently,
Speaker 3: a buying intention survey. You know, Tesla has the greatest
Speaker 3: UH brand loyalty still amongst all brands in the in
Speaker 3: the auto industry.
Speaker 2: Yes, so, Steve, I guess obviously the big question on investors'
Speaker 2: minds is what is the real demand for EV's in
Speaker 2: general and Tesla in particular, look in it, I guess
Speaker 2: the near and intermediate term. Do you have a view
Speaker 2: on that?
Speaker 3: Yeah, I mean I've always thought that not only Tesla,
Speaker 3: but the entire EV market is going through a rough
Speaker 3: patch this year and likely into the next year. You know,
Speaker 3: my long term view is still optimistic about EV's. I
Speaker 3: think there's enough policies out there to push you know,
Speaker 3: greener vehicles, more greener vehicles on the road. I think
Speaker 3: the issue today is about affordability. There's actually not enough
Speaker 3: affordable EV's out there for the masses currently a lot
Speaker 3: of vehicles are expensive. They're over fifty thousand dollars and
Speaker 3: not a lot of people can buy them, especially during
Speaker 3: high interest rate environments.
Speaker 4: So that has been the rhetoric really for a bit,
Speaker 4: and Elon Mus seems to say, Okay, we're going to
Speaker 4: do the lower cost, but give us a second. Right,
Speaker 4: we had this wave of Model Y all three, et cetera,
Speaker 4: and now we're going to have another wave of more
Speaker 4: affordable EV's.
Speaker 6: How when does that wave happen?
Speaker 3: A lot of it actually comes online at the end
Speaker 3: of twenty twenty five. Starts coming online at the end
Speaker 3: of twenty twenty five. That's when you have a Model two.
Speaker 3: GM is also relaunching the more affordable Bolt all of
Speaker 3: them are, you know, thirty thousand or less. And then
Speaker 3: you have you know, GM will continue to roll out
Speaker 3: cheaper vehicles, and you have Rivian also launching the R
Speaker 3: two and R three, you know, in twenty twenty six
Speaker 3: and twenty twenty seven.
Speaker 4: So it doesn't want a carnam Bar two by the way,
Speaker 4: total side, no, I mean everyone, but go ahead.
Speaker 3: Yeah, but you know, a lot a lot of the
Speaker 3: more affordable EV's coming in, and the hope is that,
Speaker 3: you know, the the addressable market for the EV, market
Speaker 3: for the EV industry expands as more more cars, cheaper
Speaker 3: cars come on the road and are available to consumers.
Speaker 2: But if I if I were an investor in this company,
Speaker 2: I'd be saying, Okay, you need to bring in a
Speaker 2: cheaper priced car for the mass market, but I'm not
Speaker 2: sure you can convince me that you can do it
Speaker 2: at a profit. What's the expectation of their ability to
Speaker 2: turn out lower price models on a per unit profitable basis.
Speaker 3: That that's a very good question. I think scale is
Speaker 3: the most important thing. I mean, this is a scale
Speaker 3: volume game and the auto industry has been like that
Speaker 3: for one hundred years. So you know, the question is,
Speaker 3: you know, are the cheaper vehicles going to resonate as
Speaker 3: you push more production through an assembly plant. In the
Speaker 3: auto industry, the unit cost does fall significantly in you know,
Speaker 3: in a logarithmic kind of trend. So we're hoping that
Speaker 3: it will cut. But specifically to Tesla, I want to
Speaker 3: also mention that they've done a really good job in
Speaker 3: vertically in grading their processes throughout the whole value chain, right,
Speaker 3: and that actually does cut costs, especially in you know,
Speaker 3: newer tech like this. You know, if I look at
Speaker 3: over one hundred years ago, Henry Ford basically did the
Speaker 3: same thing. You know, switching everybody from horse carriages to
Speaker 3: automobiles actually required vertical required Ford to be to vertically
Speaker 3: integrate and able to manage costs and manage design and
Speaker 3: be nimble and flexible to react to consumer.
Speaker 4: Tastes in the meantime before we let you go, just
Speaker 4: that stock has been so painful, Like one sixty twenty
Speaker 4: nine is sort of the low that we saw back
Speaker 4: in April, and then after that you got to go
Speaker 4: all the way back to nearly one hundred bucks.
Speaker 6: Do we get there? What do you think?
Speaker 3: I mean, you know, I don't think you'll get there.
Speaker 3: I think there's still a lot of value in the company.
Speaker 3: You know, they've you know, they've based thickly you know,
Speaker 3: change paradigm, shifted the whole entire autence industry in terms
Speaker 3: of vehicle design, in terms of manufacturing. But don't forget right,
Speaker 3: they also is doing a lot around full self driving
Speaker 3: autonomous vehicles. They have a supercomputer that's actually doing that
Speaker 3: for them. So there's there's still a lot of hope.
Speaker 3: I think if you look at if you talk to
Speaker 3: the bulls in the street, there's still a lot of
Speaker 3: hope in them rolling out the FSD the full self
Speaker 3: driving full to everybody on a road and get to
Speaker 3: level four and five automless driving.
Speaker 2: All right, Steve, thanks so much for joining us as
Speaker 2: Steve Man Global Autos and Industrials research channels. Bloomberg Intelligence
Speaker 2: coming to us from Princeton, New Jersey via that Skype thing. Again,
Speaker 2: Tesla down, you know, on down six percent today on
Speaker 2: that pretty big actually most of the analyst as saying,
Speaker 2: extraordinarily big miss. They're really surprised to the marketplace stock
Speaker 2: down six percent today, thirty four percent year to date.
Speaker 2: And again, as you mentioned, Alex, the company into press
Speaker 2: release calling a lot of supply issues as reasons for
Speaker 2: the miss, not calling out a demand issue. But of
Speaker 2: course that's what a lot of folks are concerned about
Speaker 2: if they think about not just Tesla, but just kind
Speaker 2: of the evy market in generals are trying to think
Speaker 2: about the ultimate demand for electric vehicles in this market.
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Speaker 4: Let's add one more name to the downside here. It's
Speaker 4: Apple down six tens of one percent. Although it could
Speaker 4: be worse, like it could be Tesla, and so there
Speaker 4: is that. But I take a look at this chart, Paul.
Speaker 6: It is ugly.
Speaker 4: We surpassed the low that we saw earlier in the year,
Speaker 4: in early March. I should say, the next level if
Speaker 4: I just look at it looks to be what we
Speaker 4: saw at the low back in October of one seventy.
Speaker 4: I mean, it just it looks really really ugly, and
Speaker 4: you have to wonder where we go from here.
Speaker 5: Yeah.
Speaker 2: Jess Metten, our good friend from Bloomberg News, covers the
Speaker 2: stock market. She's got a great story out today, and
Speaker 2: just putting into context, the first quarter the stock was
Speaker 2: off twelve percent. That's the worst performance relative to the
Speaker 2: in p five hundred and over a decade.
Speaker 5: Just to put it in perspective.
Speaker 4: I mean, usually if you see that kind of down
Speaker 4: draft and Apple, you're like, oh, forget it. Now's like
Speaker 4: one hundred and dolling over where everything's going to be terrible,
Speaker 4: and that hasn't been the case. Anaur Agrana joined this
Speaker 4: a Bloomberg Intelligence technology analysts standing by. So do we
Speaker 4: breach the one sixty five low that we saw back
Speaker 4: in October of twenty twenty three? Do we have to
Speaker 4: go back to earlier next year? Like where's the bottom
Speaker 4: on a rog?
Speaker 7: Yeah, it's very tough to say.
Speaker 8: The only reason is because when you look at Apple,
Speaker 8: the fundamentals are.
Speaker 7: Not good right now because of a lot.
Speaker 8: Of pressure in China, and we see no hope at
Speaker 8: this point that's going to change in the upcoming earning season.
Speaker 8: I think the only silver lining for Apple could be
Speaker 8: if during the June By Developer conference they are able
Speaker 8: to announce any big you know, AI push into the phones.
Speaker 8: I mean, that's the only thing that can perhaps you know,
Speaker 8: go out and give you a new refresh cycle by
Speaker 8: the end of the year. But other than that, it
Speaker 8: looks like a pretty bleak year for them on a
Speaker 8: fundamental basis.
Speaker 2: How About from a technical basis, I would think that
Speaker 2: these guys are buying back stock aggressively. They can be
Speaker 2: even be more aggressive if they wanted to does that
Speaker 2: put it kind of a floor for the stock somewhere
Speaker 2: in or around here, do you think?
Speaker 8: Yeah, I'm actually I've been surprised that they have not
Speaker 8: been more aggressive in buying back shares over the last
Speaker 8: few years, because they do have the capacity to do it.
Speaker 8: You know, they spent somewhere around ninety two hundred billion
Speaker 8: dollars almost their entire fee cast flow, buying back shares.
Speaker 8: But they've talked about being a little more aggressive in principle,
Speaker 8: but in practice, I've not seen that.
Speaker 7: And you know, perhaps.
Speaker 8: Maybe this year could be a change while they go
Speaker 8: out and do some some more, but I haven't seen
Speaker 8: that yet.
Speaker 6: So what do they do?
Speaker 4: I mean, if that's the case, yeah, no, that's it.
Speaker 7: What do you see?
Speaker 8: So one of the things you don't say is by
Speaker 8: the fourth quarter of this year or by December, you
Speaker 8: will see easier comparisons in China. So that could be
Speaker 8: you know one one hope.
Speaker 7: Second thing is we are seeing a big push.
Speaker 8: From Wawei right now because of the brand new phone
Speaker 8: that they launched last year. That's really driving a lot
Speaker 8: of the sales, and that's going to go out in
Speaker 8: an ever three ye year from now, So you know,
Speaker 8: you will see you could say, a lower benchmark or
Speaker 8: a lower you know, water line for them to cross
Speaker 8: for next year. And with some Genii features coming in
Speaker 8: this year, you know, one could expect that maybe next
Speaker 8: year we could see that, you know, instead of the
Speaker 8: zero to you know, five percent growth, maybe we can
Speaker 8: see five to ten percent growth on the top line.
Speaker 8: And I think that can change things around for Apple.
Speaker 2: So is there a bare case that China doesn't turn around?
Speaker 2: China is no longer a growth market for Apple? Be
Speaker 2: it competitive issues, be it change in investor sentiment towards
Speaker 2: Western companies and Western technology, be it the economy. They
Speaker 2: could be in for a Japan like period of malaise.
Speaker 2: I mean, you could really paint a reasonable scenario where
Speaker 2: China's not a growth market for them.
Speaker 5: Ever.
Speaker 8: Yeah, and then they have to sit down and look
Speaker 8: at their strategy and say, do we really go down
Speaker 8: the chain of you know, cutting down pricing. They have
Speaker 8: never done that. They've always believed in margins. But if
Speaker 8: they were to you know, push a lower priced phone,
Speaker 8: let's say in the emerging market, whether that's in India, Indonesia, Brazil,
Speaker 8: I mean, that can really help out and take care
Speaker 8: of some of that opset in China, but we haven't
Speaker 8: seen that. I mean, if Apple doesn't play that game,
Speaker 8: it doesn't you know, we go down that market. But
Speaker 8: they can actually do that if need be, in order
Speaker 8: to gain market share, but we haven't seen that yet.
Speaker 4: So you have CCTV over in China reporting that President
Speaker 4: g and President Biden talked last night discussing China US ties,
Speaker 4: et cetera. Do you feel like Tim Cook is like
Speaker 4: calling government officials, mean, like, you guys got to help
Speaker 4: me out here.
Speaker 7: Yeah, I see.
Speaker 8: If you see, in the last one month, he went
Speaker 8: to China and he basically promised them that he's going
Speaker 8: to do more investments in the area. And that is
Speaker 8: on the back of a lot of discussion about supply
Speaker 8: chain diversification away from China. So he's made a couple
Speaker 8: of trips in the last one year, you know, basically
Speaker 8: saying that listen, we're here for the long run. Please
Speaker 8: help us out and you know, maybe maybe maybe we
Speaker 8: need two or three or more of these phone calls,
Speaker 8: and you know, China is going to be.
Speaker 7: Back up for them.
Speaker 2: If I were buying Apple Computer today, I would have
Speaker 2: one catalyst, and that would be AI that it's something
Speaker 2: there's no AI in the Apple story and on mining
Speaker 2: stock today because I think Cooper Tino will figure out
Speaker 2: a way to get AI into the narrative. Would that
Speaker 2: be a decent call there.
Speaker 8: Oh, that would be a very decent call. In fact,
Speaker 8: the news released by Mark Ellman that they're you know,
Speaker 8: talking to Google about their Google's large language model. I
Speaker 8: think that's going to really help them if they go
Speaker 8: out and you know, make that partnership because you know,
Speaker 8: Google is uh, you know, the search engine you know
Speaker 8: came at this point and they are the default engine
Speaker 8: for Apple products. They have an old relationship. Google pays
Speaker 8: a lot of money for that search right on the
Speaker 8: Apple ecosystem. If Apple's able to go out and showcase
Speaker 8: that you need to upgrade the phones because you need
Speaker 8: a better memory and you need more processing power, that
Speaker 8: is the case for people to go out and you
Speaker 8: know people with older phones of iPhone eleven twelve, there
Speaker 8: are a lot of phones out there that are really
Speaker 8: old at.
Speaker 7: This point, and you know which you need.
Speaker 8: That processing power. You know, you may lead into a
Speaker 8: refresh cycle out there.
Speaker 6: An RAG.
Speaker 4: What do you feel like at some point though, does
Speaker 4: Apple need to do their own AI strategy, like they
Speaker 4: don't tend to do that partnership stuff. Right, They kind
Speaker 4: of cleaned a lot of their ranks with the AI car,
Speaker 4: with the AI car, with the car self driving car,
Speaker 4: petting that aside. They were supposed to repurpose those people
Speaker 4: in the.
Speaker 6: AI and then that didn't happen.
Speaker 4: I mean, at what point does that become an actual
Speaker 4: good catalyst for the stock.
Speaker 8: So they are pushing a lot of money into that area.
Speaker 8: But remember Google's been doing it longer than them, and
Speaker 8: they are trying to figure out some of their applications
Speaker 8: on you know, similar to chat GPT. Now I think,
Speaker 8: you know, you just can't expect them to you know,
Speaker 8: they just shut the card division down a couple of
Speaker 8: months ago, and you know, they just moved the engineers.
Speaker 8: You can't expect them to come out with a product
Speaker 8: in the next three to six months. It's going to
Speaker 8: take some time. Meanwhile, there is nothing wrong in licensing
Speaker 8: technology from Google. Remember Apples not in the search business.
Speaker 8: They license that technology from somebody. It's possible for the
Speaker 8: short term they will license that technology and after that,
Speaker 8: you know, once they figure out that things can work
Speaker 8: on their ecosystem a little bit better as part of
Speaker 8: their operating system. They don't need that partnership, but you know,
Speaker 8: I think in the near term they do. They do
Speaker 8: need to you know, partner with somebody, either it's Google
Speaker 8: or open Ai.
Speaker 2: So for this developer conference in June, how big is
Speaker 2: that going to be for the company and for the stock?
Speaker 8: Yeah, I think it is probably the biggest you know
Speaker 8: moment for them for the last couple of years, as
Speaker 8: we have seen a reduction or a decline in the
Speaker 8: growth rate of their products business, which is predominantly you know,
Speaker 8: iPhone and all the others. I think this is going
Speaker 8: to be the biggest cat list everybody is watching for
Speaker 8: and see what can they showcase if they are able
Speaker 8: to convince the street that this is going to lead
Speaker 8: to the next you know, big push in people going
Speaker 8: up and not just you know products, It's going to
Speaker 8: help out services also. It's going to make some of
Speaker 8: those products a little more stickier. People you know, make
Speaker 8: fun of CD for example right now, if it's powered
Speaker 8: by Google, if it has a lot more you know,
Speaker 8: firepower to do a lot of operations, maybe I'm not
Speaker 8: going to open the third party app that's on my
Speaker 8: phone to go out and search for things that I'm
Speaker 8: doing right now. Maybe I'll just be by default using it.
Speaker 8: I say this a lot. I mean Google and you
Speaker 8: know Apple for that matter, control the distribution of the
Speaker 8: operating system through the mobile apps. That's a very powerful ecosystem. I'll,
Speaker 8: i'll you know, of course, you guys to look at
Speaker 8: what was Strip Advisor a few years ago, or what
Speaker 8: was you know, even Yelp.
Speaker 7: I mean, those.
Speaker 8: Market caps have really gone down because people go to
Speaker 8: Google directly and search for those things rather than going
Speaker 8: to the application. So I think if Apple's able to
Speaker 8: play this thing out properly, their distribution system is strong
Speaker 8: enough to you know, really monetize on that.
Speaker 6: It's true, I don't like trust Yelp anymore. I don't
Speaker 6: know what that's about.
Speaker 4: But then but then the flip side, then you have
Speaker 4: all the regulators right from the EU and the US
Speaker 4: finds they want to rethink how they're doing things, how
Speaker 4: they wind up up. So there's also that hidden risk
Speaker 4: up there on or I'm going to let you go,
Speaker 4: but great stuff.
Speaker 6: Super appreciate it.
Speaker 4: And I'm a'm gonna joining us from Bloomberg Intelligence like
Speaker 4: they're clearly coming after their ecosystem and by day I
Speaker 4: mean European regulators and US regulators, So like, how do
Speaker 4: you get ahead of that? How do you manage it
Speaker 4: when like that's your going to be your lifeblo at
Speaker 4: the end of the day, when you run out of
Speaker 4: cool products.
Speaker 2: Right, and that's going to be something that's one of
Speaker 2: the many challenges, many headwinds that you know a lot
Speaker 2: of folks when you look at Apple, they say, this
Speaker 2: is something that the stock has to deal with. It's
Speaker 2: a headwind just like it was from Microsoft the eighties
Speaker 2: and nineties until they were able to put that behind
Speaker 2: them write a few big checks along the way.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 4: The SMP draw down so far this year has only
Speaker 4: been barely two percent, So do we get there? Let's
Speaker 4: ask Shelby mcfatten, investment analyst over at Motley Fool Asset Management.
Speaker 4: She joined US now in the Bloomberg Interactive at brokers
Speaker 4: at Studio Shelby, this is is this the selloff we've
Speaker 4: all been waiting for?
Speaker 6: Is it a buy the dip kind of thing? What
Speaker 6: do you think?
Speaker 3: You know?
Speaker 9: Unfortunately, I'm going to air towards no. And I'm really
Speaker 9: heavy on that unfortunately, right because we know these valuations
Speaker 9: have just been so rich, and when you're looking at
Speaker 9: the long term for your investment strategy, you know it's
Speaker 9: easier to say, Okay, we'll just sort of hold out.
Speaker 9: It's all right. But we do get really excited about
Speaker 9: some of those buying opportunities, either to add to current
Speaker 9: positions or to be able to enter new ones. So
Speaker 9: I think when we look at what might cause a dip,
Speaker 9: we don't yet have those factors being quite as strong.
Speaker 9: I think we might need a couple more quarters to
Speaker 9: see at least what might happen with interest rates being
Speaker 9: a sort of force to push the market down a
Speaker 9: bit more so do so?
Speaker 2: Do you need to see higher rates? You need to
Speaker 2: see weaker earnings? What do you think is what do
Speaker 2: you think we'll push this market down? When and if
Speaker 2: we do get that correction?
Speaker 9: You know, I think it could be a combination of both,
Speaker 9: and it really in some ways depends on the sectors, right,
Speaker 9: So when we think about tech, we do know that
Speaker 9: those being you know, higher duration, very sensitive, that interest
Speaker 9: rates are going to most likely affect the tech sector
Speaker 9: quite a bit. And then on the other end of
Speaker 9: that small caps as well. We've seen the sort of
Speaker 9: damage that can be done to valuations to both of
Speaker 9: those groups, So that's one sort of focus, and then
Speaker 9: outside of that, we do again need to see the
Speaker 9: change in those fundamentals. So in some of the companies,
Speaker 9: we're seeing that the valuations are just stretched for optimism
Speaker 9: for wanting to hold on.
Speaker 4: At the same time, though, if interest rates are going up,
Speaker 4: and I say interest rates like the ten years going
Speaker 4: up because the economy just firing on all cylinders, does
Speaker 4: that change the reaction function to say small caps or
Speaker 4: big tech.
Speaker 9: In some ways yes and no. So if the economy
Speaker 9: keeps firing, we might sort of have a situation where
Speaker 9: trading sort of shakes out those who are not interested
Speaker 9: in holding out and seeing whether there is more or
Speaker 9: less volatility than they've expected. When it comes to things
Speaker 9: like small caps especially do that thinner trading volume. But
Speaker 9: when it comes to the larger caps, there's a chance
Speaker 9: that we kind of just settle out at a higher
Speaker 9: clip that we end up with. What is the fed'sphear
Speaker 9: is that we just step up in inflation and invaluation basis.
Speaker 9: So it's one of those things where, unfortunately it's a
Speaker 9: little bit of a seesaw we all have to sort
Speaker 9: of waiver to shake out.
Speaker 2: One of the names on your list is see our h.
Speaker 2: It's a Irish company, which is why I'm interested in it,
Speaker 2: building products company. Is this an infrastructure act kind of
Speaker 2: play for you guys, CRH, Yes, so ticker.
Speaker 9: When we entered the position, that was one of the
Speaker 9: reasons that we had piqued some interest, and other was
Speaker 9: that they were going to be moving their listing from
Speaker 9: LSE to the New York Stock Exchange and going ahead
Speaker 9: and starting to do their gap reporting, so realizing getting
Speaker 9: a little bit more bang for their buck, starting to
Speaker 9: get that multiple that they were looking for, and of
Speaker 9: course the fact that the IIJA was going to bring
Speaker 9: forward some.
Speaker 6: Of that cash flow for them.
Speaker 9: On top of that, before the infrastructure build, they were
Speaker 9: already the number one provider in North America for asphalt
Speaker 9: ready mixed concrete cement, So they were sort of this
Speaker 9: sleeper agent in all of the repair and just keeping
Speaker 9: up with the roads and things like that, apart from
Speaker 9: any new build. So it's a company that is not
Speaker 9: thought of a lot, but they're really king in what
Speaker 9: they do.
Speaker 4: How is the booking for that all working? Because I've
Speaker 4: been struck, what'd say, the infrastructure build for example, like
Speaker 4: we all were expecting like a huge wave of money
Speaker 4: and orders, and like the orders are there, but like
Speaker 4: it's not coming the way we were all expecting. In
Speaker 4: the middle of a structural shift, the industry is still cyclical.
Speaker 9: And you're absolutely right. And what we've seen and what
Speaker 9: management has mentioned is that they're getting stretched out a bit.
Speaker 9: So the contract money is coming through, but it's not
Speaker 9: coming through, you know, twenty four to twenty five. It's
Speaker 9: twenty four, six, twenty seven, and they're not necessarily being canceled,
Speaker 9: but they're being taken in slimmer chunks and they have
Speaker 9: to get finished. But at the end of the day,
Speaker 9: rates are still high, and so construction can still be
Speaker 9: a bit more expensive, especially when you're talking about new
Speaker 9: as opposed to repair and remodel. So yeah, that contract
Speaker 9: stretching is absolutely a real phenomenon there.
Speaker 2: So you've got a real estate company on your list
Speaker 2: of stocks, you guys are looking at it, and that's
Speaker 2: got to be a dicey place to be. Alexander Research
Speaker 2: real Estate Are is the ticker symbol. Talk to us
Speaker 2: about that company, because I'm nervous about anything that's got
Speaker 2: real estate in its.
Speaker 9: Name, and I think that's completely fair, and I think
Speaker 9: that a lot of folks would think that on first
Speaker 9: hearing as well. What we're really interested in with Alexandria
Speaker 9: real Estate is one the valuation they've gotten crushed because
Speaker 9: why real estate. But what sets them apart is not
Speaker 9: only they're really deep bench on management that we like,
Speaker 9: they've got an outstanding return for investors when it comes
Speaker 9: to cash delivered back they really just pump out cash
Speaker 9: as a red there. And also their focus on healthcare
Speaker 9: and life sciences. That's really what we're hinging on when
Speaker 9: it comes to our thesis for Alexandria real Estate. And
Speaker 9: because of that, they're also just less exposed to that
Speaker 9: office that is really crushing a lot of the reads
Speaker 9: right now because they're not having to deal with that
Speaker 9: pendulum swing of over development of offices, making them that
Speaker 9: sort of second home for employees and then employees sort
Speaker 9: of saying I'd like to never come back, thank you
Speaker 9: very much. So when we have these new advances in sciences,
Speaker 9: they need more buildings, and that's sort of that's really
Speaker 9: the crux of the thesis for Alexandria real estate there.
Speaker 9: So if they can keep delivering on cash and keep
Speaker 9: on that train, it's a great investment.
Speaker 2: So you guys obviously have done the work on the
Speaker 2: real estate space. You're Motley, you're based done in the
Speaker 2: DC area, right, Yes, our federal employees are they back
Speaker 2: to work five days a week, four days a week, three.
Speaker 5: Days a week.
Speaker 6: You you're in exist hundred percent?
Speaker 2: What is that?
Speaker 9: It seems to be a bit agency by agency at
Speaker 9: this point from my understanding, friends of mine that I
Speaker 9: know are more about three days. When you're looking at
Speaker 9: the contractors, many of them are fully remote now, So
Speaker 9: it kind of depends. If you work for a three
Speaker 9: letter you're probably in four or five days a week.
Speaker 9: If you work for a different agency you might be
Speaker 9: more flexible.
Speaker 5: I do know.
Speaker 4: It's the difference though, Like not being in the office,
Speaker 4: you do you one hundred percent miss out on those
Speaker 4: like random conversations that all of a sudden like mean
Speaker 4: something in a few years or in though I think
Speaker 4: you're right, I just don't know like what the career path.
Speaker 2: But if I were investing in real estate, that would
Speaker 2: be my base case. Like, yeah, occupancies, whatever they are today,
Speaker 2: that's what I'm going to model out. You're not going
Speaker 2: to get any better. I don't think you're get any worse.
Speaker 2: That's what I would model.
Speaker 4: And the same idea at Bloomberg is like, you have
Speaker 4: a desk, right, but if you could also go to
Speaker 4: any desk, would the same experience like that kind of
Speaker 4: idea versus sort of here's an office.
Speaker 6: Kind of thing.
Speaker 4: You also like meta that's not goes up a whopping
Speaker 4: one hundred and thirty percent in the last year, you
Speaker 4: still like it at these levels to buy.
Speaker 9: Yeah, so at this point it is a little bit
Speaker 9: rich in the valuation. So we do watch out for
Speaker 9: any sort of opportunities. And the thing about these textocs
Speaker 9: is that because they can be a little bit viatle,
Speaker 9: you just watch every day and sometimes you do get one.
Speaker 9: But what we like about it is that their say
Speaker 9: do ratio as we call it on our team, as
Speaker 9: they do yes, the say do ratio, So they say
Speaker 9: they're going to moderate costs. They say they're going to
Speaker 9: go ahead and sort of leave behind any investments or
Speaker 9: capital allocation that's not paying off for them. And over
Speaker 9: the last eighteen months or so they've done it. We've
Speaker 9: seen that improvement in their margin. We've seen it starting
Speaker 9: to come through on cash flow. We see that management's
Speaker 9: getting more serious about tangible ways to handle AI. And
Speaker 9: also when we look a little bit forward, we compare
Speaker 9: them to another advertising competitor. Meta's got more retail media exposure,
Speaker 9: which in these times, you know, consumers turning a little
Speaker 9: bit more to goods as opposed to services. So when
Speaker 9: we look at the advertising market in search, for example,
Speaker 9: that's going to lean a little bit towards services as
Speaker 9: goods are coming down more, retail media has an opportunity
Speaker 9: to stand out. So Meta is definitely a little bit
Speaker 9: more poised in that regard.
Speaker 2: Yeah, they I mean that went from being since its inception,
Speaker 2: a top line revenue growth story to really order pass
Speaker 2: two years to being a cost cutting story. Yes, and
Speaker 2: that's what that's what worked. I mean I didn't see
Speaker 2: that coming, but they actually did. They did it what
Speaker 2: they said.
Speaker 6: They do, they do I learned something that's so cool.
Speaker 6: What other company has a good say do? Who else
Speaker 6: has got a good say do? That's a great question,
Speaker 6: it was a bad one.
Speaker 9: Well I don't know if legal wants me to do that,
Speaker 9: but fair enough, but you know, I would say we
Speaker 9: could probably throw Apple out there for having a decent
Speaker 9: say do. And in some situations, I think what ends
Speaker 9: up happening is their valuation gets sort of bounced around
Speaker 9: like a hacky sack because they say that they're going
Speaker 9: to do very reasonable things, and sometimes that's not enough
Speaker 9: for the market.
Speaker 5: Right.
Speaker 9: Mature companies tend to say that, and when you want
Speaker 9: that intense growth and they say, well, we're actually not there.
Speaker 9: We're kind of giving cash back and we're doing responsible allocation.
Speaker 9: They're saying it and they're doing it, but it may
Speaker 9: not be what the market wants to hear.
Speaker 2: Yeah, the market wants to hear. Don't worry about China. Yeah,
Speaker 2: China's fine, don't yes, exactly, there's lots of stuff there
Speaker 2: and don't worry about it.
Speaker 4: Great stuff, You're awesome, you come back all the time.
Speaker 4: Shelby McFadden, investment analysts at Motley Full Asset Management.
Speaker 6: I think we should do sadu ratios like.
Speaker 2: All the time. Like Tucker is right well in the
Speaker 2: say ratio, I.
Speaker 4: Think he totally does, like he delivers, like what you
Speaker 4: see is what you get.
Speaker 2: You know, it's true. I don't know what is what
Speaker 2: you get, So.
Speaker 6: I don't know. That sometimes sounded like an insult, but
Speaker 6: it didn't.
Speaker 5: It didn't mean to be.
Speaker 4: I'm gonna I'm gonna take this and run with it
Speaker 4: for a very long time. Okay, Shelby, thanks a lot,
Speaker 4: really appreciate it. I loved having you join us. There.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple card Play and
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Speaker 4: All right, let's get to the bond market here, because
Speaker 4: you're looking at back in yields continuing to rise. It's
Speaker 4: after a pretty solid sell off yesterday as well. The
Speaker 4: tenure yield up about seven or eight basis points. We're
Speaker 4: looking at the thirty, the ten they're all at the
Speaker 4: highest level now that we've seen so far. This year
Speaker 4: as stocks wind up dropping, Ira Jersey, Bloomberg Intelligence Chief
Speaker 4: US interest rate strategist joins us Now, Ira, how do
Speaker 4: you square the data that we continue to see ism manufacturing,
Speaker 4: the jolts numbers, even factory orders, Like, how much higher
Speaker 4: can we go and yield before things start to hurt?
Speaker 10: Yeah, well, obviously they're going to start to hurt risk assets,
Speaker 10: probably sooner rather than later, just because the expectation has
Speaker 10: been that the Fed was going to cut interest rates,
Speaker 10: and as we keep on getting these better and better numbers,
Speaker 10: we're just.
Speaker 5: Going to either do one of two things.
Speaker 10: Either we're going to price out ray cuts altogether, or
Speaker 10: as you've seen recently, is we're just going to push
Speaker 10: out when those cuts are going to start because the
Speaker 10: economy is just not slowing. So the higher yields that
Speaker 10: you're seeing, I think in the back end of the
Speaker 10: curve is just a reflection of the idea that if
Speaker 10: the Fed does ultimately cut, it might not cut that
Speaker 10: much number one, and number two, that the cuts are
Speaker 10: going to continue to be priced out. What's surprising me
Speaker 10: about this move is that a lot of it's coming
Speaker 10: in the back end of the curve. So, like you
Speaker 10: mentioned ten year yields, thirty year yields, two year yields
Speaker 10: have gone up, and at around four point seven percent,
Speaker 10: they're still pricing more or less for three interest rate
Speaker 10: cuts this year. I think that that's probably the next
Speaker 10: nut to crack, where you really need those two year
Speaker 10: yields to go up toward toward five percent in order
Speaker 10: to get ten year yields above four and a half.
Speaker 5: For sure.
Speaker 2: Is there a scenario, ira in any of your crazy
Speaker 2: models that you and your team have their DNA Prinson
Speaker 2: that says no rate cuts in twenty twenty four, good one.
Speaker 5: Yeah, so there actually is.
Speaker 10: And I think that that's a case that you can't
Speaker 10: completely dismiss, especially when you see the strength and the
Speaker 10: data as powerful as it has been recently. So unless
Speaker 10: you wind up getting a more significant slowdown and inflation
Speaker 10: amid this very strong growth, which seems, you know, less
Speaker 10: and less likely as time goes on, then the possibility
Speaker 10: that the Fed doesn't cut interest rates at all this
Speaker 10: year and maybe into next year has to be on
Speaker 10: your radar. And I think and one of the things
Speaker 10: that you've seen in the rates market, so you know,
Speaker 10: libor is no more so now we use something called SOFUR.
Speaker 5: The secure over night Financing rate.
Speaker 10: Well, so most short term interest rate bets are put
Speaker 10: on in SOFUR futures right now, and if you look
Speaker 10: at the options on those futures, you know there's now
Speaker 10: about a twenty percent chance being priced that the Fed
Speaker 10: does nothing or even maybe hikes interest.
Speaker 5: Rates before the end of the year.
Speaker 10: And I think that that and that's a significant shift
Speaker 10: from where we were in mid February, when you know,
Speaker 10: we were pricing only for cuts.
Speaker 5: It was a matter of how many.
Speaker 6: That's interesting.
Speaker 4: So does the fact that we're seeing more move in
Speaker 4: the back end versus the long sorry, yeah, the back
Speaker 4: end versus the front end. What does that tell you
Speaker 4: about the potential hike or no cut scenario.
Speaker 10: Well, I think a big part of it is people
Speaker 10: were I think edging long. So you know a lot
Speaker 10: of people, you know, including in our own Bloomberg Economics team,
Speaker 10: thought that we were going to start to see a
Speaker 10: significance slowing in the economy now. So they had gotten
Speaker 10: long interest rates, had gotten long treasuries, and we're ready.
Speaker 5: For a rally.
Speaker 10: So I think one of the reasons you're seeing the
Speaker 10: back end under formed a little bit is just people.
Speaker 5: Getting out of that risk.
Speaker 10: Once that those positions are cleaner, then you wind up
Speaker 10: with a scenario where people look at the fundamentals and say, okay,
Speaker 10: what's the actual fair value for ten.
Speaker 5: Year yield and two year yield?
Speaker 10: Right now, everyone's kind of in risk management mode saying, okay,
Speaker 10: we're too long risk given the economic environment. Let's right
Speaker 10: size our risk and then we'll determine whether or not
Speaker 10: there's some value here, value or not value there. So
Speaker 10: I think that's the mode that we're in right now. Plus,
Speaker 10: remember we're early in the core or you know, I
Speaker 10: think some of the positioning last week had to do
Speaker 10: with month and rebalancing before people put out their quarterly
Speaker 10: or semi annual fund reports and the like. So some
Speaker 10: of this maybe is that people wanted to be long
Speaker 10: going into quarter end and now they don't see a
Speaker 10: big reason to be long at the moment. So that's
Speaker 10: one reason why people are getting out of risk. And
Speaker 10: it's easy to do when you see, you know, decent
Speaker 10: data like we've had the last two days.
Speaker 2: So the ten year I ref got it at four
Speaker 2: spot three eight. Here is there a technical kind of
Speaker 2: level that I need to be watching for like if
Speaker 2: it breaks above four fifty, then it can go significanly
Speaker 2: higher than that. Is there any technicals here that you're
Speaker 2: paying attention to.
Speaker 10: Yes, and we just broke a very important one actually,
Speaker 10: So four point three to five percent was the level
Speaker 10: that we were watching the last two months. Now that
Speaker 10: we're above that, we'll be targeting four point five one percent,
Speaker 10: call it four and a half percent from round numbers,
Speaker 10: and then above that is four point seven percent, So
Speaker 10: we really have a little bit of a gap here
Speaker 10: another ten or twelve basis points. You know, interestingly, when
Speaker 10: you look at some of the momentum oscillators. I was
Speaker 10: just looking at this with Chris Caine, one of my
Speaker 10: other Bloomberg Intelligence colleagues, who's a chartered market technician, so
Speaker 10: he's one of those people with a three letter acronym
Speaker 10: after his name and looks at charts all the time.
Speaker 10: So he and I were actually just talking about this
Speaker 10: and the relative strength and index, and some momentum oscillators
Speaker 10: aren't yet at extreme levels to think that.
Speaker 5: The selloff is over near term.
Speaker 10: Now you get another day like we have today, then momentum,
Speaker 10: probably those momentum indicators will be in extreme levels.
Speaker 5: And you can maybe think of a little bit.
Speaker 10: Of a pause in the selloff for a little while.
Speaker 10: But we're not there quite yet, so we could see
Speaker 10: more volatility. You know, when we have some FED speakers
Speaker 10: at twelve today, if they sound a little bit more
Speaker 10: hawkish then Jay Powell was last week, then certainly you
Speaker 10: can wind up probably adding on to some of the
Speaker 10: market angst right now.
Speaker 4: Some feels like an understatement. We got Bowman speaking in
Speaker 4: ten ten, you got Williams speaking at twelve, Mess's speaking
Speaker 4: at twelve ot five and Daily speaking at one three.
Speaker 2: Why did they do that? Did they get paid to speak?
Speaker 6: It's a question.
Speaker 4: Yeah, Well, so what's going to learn from like a
Speaker 4: million different FED officials at the same time.
Speaker 10: Well so a lot of the FED speakers, you know,
Speaker 10: these these lunches and these different activities that that that
Speaker 10: the FED presidents, the regional FED presidents or FED governors do.
Speaker 10: A lot of them are scheduled months and months in advance.
Speaker 10: You know, they're part of their job is to be
Speaker 10: out in the community, listen to people, let the public
Speaker 10: know what they're thinking, is how they how they think
Speaker 10: the economy is going to be, what monetary policy is
Speaker 10: going to be.
Speaker 5: It's part of their job, you know. It's it's funny.
Speaker 10: People always ask me, why do these people go out
Speaker 10: there all the time and make all these comments. They've
Speaker 10: actually always made these comments that just when Alan Greenspan
Speaker 10: was the chair, we didn't pay attention to anyone except
Speaker 10: Alan Greenspan, And more recently things have been more democratized
Speaker 10: within the Federal Reserve. So therefore all of these FED
Speaker 10: speakers get more attention, you know, maybe than they deserve.
Speaker 10: But but it is helpful in the fact that now
Speaker 10: we know what the district of the Federal Reserve looks
Speaker 10: like in terms of you know, who who thinks that
Speaker 10: interest rates should be raised, who thinks that they shouldn't
Speaker 10: be raised, who thinks they should be cut right, So
Speaker 10: there's a variety of views and having those views, I
Speaker 10: think does muddy.
Speaker 5: The waters a little bit.
Speaker 10: But an aggregate though, uh, these discussions have always happened.
Speaker 5: Just it was, you know, we just didn't pay attention.
Speaker 10: And now now that we do, we wind up having
Speaker 10: more headlines and maybe generates more volatility the FED Maybe
Speaker 10: could could you know, pull pull that in a little
Speaker 10: bit and basically say, hey, don't make a lot of
Speaker 10: monetary policy comments. But I think the cats out of
Speaker 10: the bag now, and you know we're just going to
Speaker 10: have have continued FED speak that's going to be very
Speaker 10: important to markets on a minute umnit basis.
Speaker 2: All right, I'm all in on the men's and women's
Speaker 2: Final four, so I'm not really paying attention to soccer.
Speaker 2: But if there's one match I need to follow in
Speaker 2: your world of soccer, what would it be?
Speaker 5: Oh? I think Aston Villa of course.
Speaker 10: My my villains have had a big win over the weekend,
Speaker 10: a t nil two nail victory, so we're moving up
Speaker 10: the table.
Speaker 5: Yeah, I'm going to watch the Villa match this weekend
Speaker 5: for sure.
Speaker 2: All Right, Irid Jersey, good stuff. We appreciate it as always.
Speaker 2: Ira Jersey, chief US Interest rate strategist, chief soccer strategists
Speaker 2: for Bloomberg Intelligence, bringing it to us from Princeton, New Jersey.
Speaker 2: Uh so, I don't. I'm all in on the final four.
Speaker 2: The women's had great games for sports, dude, what are
Speaker 2: you doing women's sports? I'm just saying I'm all in
Speaker 2: And this is the first year I've really been like
Speaker 2: paying this level of attention. I mean, Michael Bard, the
Speaker 2: Business of Sports he's always.
Speaker 5: In on it.
Speaker 2: But that's you know, I'm kind of paying attention to it.
Speaker 2: So Final four, ya, yay?
Speaker 6: There better than an NBA game, I would say.
Speaker 2: Last night, Yeah it was. I mean it's just super competitive,
Speaker 2: super competitive, and that's all you went. And they got
Speaker 2: a great Final four Yukons South Carolina.
Speaker 4: Patal Now male and female athletes.
Speaker 2: Non comparence is not it's not even there.
Speaker 6: Do you think we change the changes now?
Speaker 2: After no? No, no, But it gets better. I mean
Speaker 2: the women are getting more and more and more, but
Speaker 2: it's but so are the men and so it's just
Speaker 2: getting kind of crazy out there.
Speaker 5: So we'll see it.
Speaker 2: But anyway, we got the Final four to look forward
Speaker 2: to this weekend. That's coming up.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
Speaker 1: Auto with the Bloomberg Business. You can also listen live
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Speaker 1: say Alexa play Bloomberg eleven thirty.
Speaker 2: How about this for an investment strategy, maintain very low
Speaker 2: exposure to overall stock markets by being long selected high
Speaker 2: quality companies and short market index that's what our next
Speaker 2: guest is up to, Lucas to Mickey joints us here,
Speaker 2: founder and managing partner of LRT Capital Management, joining us
Speaker 2: from Austin, Texas. It's got to be overcrowded by now
Speaker 2: Austin Texas. Everybody I knowing to Austin, Texas. Great, So anyway,
Speaker 2: he's down there, Lucas, thanks so much for joining us here.
Speaker 2: Talk to us about your investment strategy. Did I characterize
Speaker 2: that right? And how has it performed for you?
Speaker 11: You know, it's it's something exactly right what you said.
Speaker 11: We don't predict where the market is going to do
Speaker 11: in the short term because I don't think that's something
Speaker 11: we have any expertise in doing, and frankly we don't
Speaker 11: think others can do that. But our strategies have to
Speaker 11: put it, politely, crush the market with very low volatility
Speaker 11: in very low market exposure. So it's worked out fairly well.
Speaker 4: What do you do when you wind up seeing though,
Speaker 4: like record after record for the overall SMP. I mean,
Speaker 4: I appreciate today it's a little different because we're actually
Speaker 4: down one percent, So how do you kind of fight
Speaker 4: against that?
Speaker 11: Yeah, so you know, our strategy because we're effectively buying
Speaker 11: quality companies and then we're shorting indexes, which, in a
Speaker 11: simplistic way, the index is quality plus junk. Junk typically
Speaker 11: outperforms in a type of fomal market that I think
Speaker 11: we've had over the last three four months. So it
Speaker 11: is a little frustrating on a day to day basis
Speaker 11: because you can see, you know, why am I doing
Speaker 11: all this work when I could just buy Social and
Speaker 11: make all the money or super microcomputer. But I think
Speaker 11: over longer term, you know, when you have a downturn
Speaker 11: and they do happen corrections as we call them, you know,
Speaker 11: you do see the value of being disciplined and having
Speaker 11: an actual strategy.
Speaker 2: So how do you define high quality companies in the
Speaker 2: alongside of your portfolio? Sure, so for us.
Speaker 11: When we're talking about quality, it's really down to a
Speaker 11: combination of qualitative and quantitative metrics. So we're looking for
Speaker 11: number one companies that have some kind of mote, meaning
Speaker 11: some kind of ability to earn high rates of return
Speaker 11: on invested capital and more importantly, sustain those returns over
Speaker 11: long periods of time. And here these are simple things
Speaker 11: that Buffett has talked about for fifty years. May it
Speaker 11: be network effects, scale economies in tangible assets, brands, pathents, licenses,
Speaker 11: government approvals. And then that's number one, we're looking for
Speaker 11: something that can earn a good greater return. But number two,
Speaker 11: it has to be able to actually reinvest within that
Speaker 11: competitive mode, because if you're just generating cash, generating returns,
Speaker 11: but you can't reinvest, you're just returning that to shareholders.
Speaker 11: The mode is kind of in the president in the past,
Speaker 11: but not necessarily in the future. And number three, we're
Speaker 11: looking for management teams that do a reasonably good job
Speaker 11: of capital allocation, because ultimately, capital allocation is the link
Speaker 11: between shareholder value and business value. And so if you
Speaker 11: have a bad management that allocates capital poorly, then you
Speaker 11: may have a good business, but you may actually never
Speaker 11: see the benefit as a shareholder come through. And so
Speaker 11: every business is different. No business is an A plus
Speaker 11: and all those three dimensions you know, and it so
Speaker 11: it depends on the business which one you weigh more.
Speaker 11: If you think about a visa, I have an incredible mode.
Speaker 11: You have a business that grows generally faster than GDP
Speaker 11: every year and the management doesn't matter that much. I mean,
Speaker 11: as long as they're not actively setting in the company
Speaker 11: on fire. You know, I'm sorry, but I could become
Speaker 11: CEO of Visa tomorrow and I would kick my legs
Speaker 11: up and probably do nothing for the next five years,
Speaker 11: and very little would change in the trajectory of Visa
Speaker 11: the business right. And then you have other companies like
Speaker 11: a Danaher or a trans Time which are growing through acquisition,
Speaker 11: so their management, acquisition and capital location strategies matter tremendously.
Speaker 4: To that point, then are there sectors that could sort
Speaker 4: of fit the bill or is that too hard to
Speaker 4: dissect because it's truly on like a company by company
Speaker 4: and management basis, So you know there there is.
Speaker 11: There are some sectors where you find companies with more
Speaker 11: modes than others. So technology business services tend to lend
Speaker 11: themselves to high switching costs, intellectual property, network effects, et cetera.
Speaker 11: On the flip side, we're not very interested in commoditized businesses,
Speaker 11: so we're not you're not going to find a lot
Speaker 11: of mining in our portfolio. You're not going to find,
Speaker 11: you know, a lot of shipping names, commoditized airlines.
Speaker 2: Those sort of things.
Speaker 11: We do look for things that have commodity, like exposures
Speaker 11: where we think there actually is a mote but the
Speaker 11: company may trade in a way with a commoditized sector.
Speaker 11: And because that's very important for a diversification purpose for
Speaker 11: the portfolio loocause.
Speaker 2: How many names do you typically have in the longside
Speaker 2: of your portfolio?
Speaker 11: So as of today, we have ninety four positions and
Speaker 11: we typically are around eighty two one hundred, but the
Speaker 11: top twenty names are about forty five percent of our
Speaker 11: long exposure, so that should give you a sense of
Speaker 11: how that balances out. And typically the larger exposures in
Speaker 11: our portfolio are the lower volatility names, and so the
Speaker 11: names like a trade desk for example, which we own,
Speaker 11: which is a business that we admire, we think has
Speaker 11: a durable competitive advantage, but can be very volatile. It's
Speaker 11: not uncommon to see trade desk up or down ten
Speaker 11: or twenty percent. That's a sub one percent position for us,
Speaker 11: whereas something like a chem d which is a very stable,
Speaker 11: very kind of boring business, that's around a three percent position.
Speaker 11: So we size really based on the volatility contribution of
Speaker 11: the different pieces in the portfolio.
Speaker 4: Before I let you go, do you have AI plays?
Speaker 11: We own TSMC and we think that's probably the best
Speaker 11: pixel shovels name that we can come up with. There's
Speaker 11: plenty of AI names and semiconductor companies that are within
Speaker 11: our portfolio or that are within our call it investable universe,
Speaker 11: but we don't have the hottest ones that everyone has
Speaker 11: beat Nvidia on others. So TSMC is really the largest
Speaker 11: direct exposure for us in that space.
Speaker 2: And on the short side, you just short SPX or
Speaker 2: how do you play the short side.
Speaker 11: So we're shorting mid and small cap indexes and that's
Speaker 11: to just match the basis risk of the longside. So
Speaker 11: typically most of our companies, you know, we do have
Speaker 11: things across the market cap spectrum. TSMC is obviously a
Speaker 11: giant company. We own North from Grammen as well, but
Speaker 11: actually most of our names are mid caps. So as
Speaker 11: a result, we're primarily short mid and then some small
Speaker 11: cap indexes, and we're short five particular indexes. Nothing too fancy,
Speaker 11: you know, things that you would know right all.
Speaker 2: Right, lookus fascinating strategy put up some good numbers, so
Speaker 2: good for you, guys. Lucas to Mickey joins Is here.
Speaker 2: He's a founder and managing partner l RT Capital Management,
Speaker 2: joining us from Austin, Texas.
Speaker 1: This is the Bloomberg Intelligence Podcast, available on apples, Spotify,
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