1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,520 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,840 Speaker 1: at Bloomberg dot com slash podcast. Earnings coming up. We've 7 00:00:22,840 --> 00:00:26,079 Speaker 1: had the banks, we've had some tech. Tech wasn't very good, 8 00:00:26,200 --> 00:00:28,840 Speaker 1: Thank you very much, Silicon Valley. Now we're gonna get 9 00:00:28,840 --> 00:00:31,000 Speaker 1: in some of the big insurance companies and let's get 10 00:00:31,000 --> 00:00:33,320 Speaker 1: a preview what we might see. Matt Palozoli, he's a 11 00:00:33,360 --> 00:00:36,920 Speaker 1: senior analyst covering insurance for Bloomberg Intelligence. He's here in 12 00:00:36,920 --> 00:00:40,400 Speaker 1: our Bloomberg Interactive Broker studio because he is a professional. 13 00:00:40,479 --> 00:00:42,760 Speaker 1: He is in the office. Matt, what do we need 14 00:00:42,800 --> 00:00:45,760 Speaker 1: to look for here in these big insurance companies. We've 15 00:00:45,760 --> 00:00:48,480 Speaker 1: got a rising interest rate environment. How does that play 16 00:00:48,520 --> 00:00:50,600 Speaker 1: through in the earnings? What that you're gonna be seeing? 17 00:00:50,920 --> 00:00:53,920 Speaker 1: So for the insurance companies, UH, they make a lot 18 00:00:53,920 --> 00:00:56,840 Speaker 1: of their income on investment income, So they invest their 19 00:00:56,880 --> 00:01:00,760 Speaker 1: premiums and UH they get the with the float, and 20 00:01:00,960 --> 00:01:04,319 Speaker 1: with rising interest rates, they're invested almost and fixed income. 21 00:01:04,360 --> 00:01:08,679 Speaker 1: So it's kind of just all all upside from here. 22 00:01:08,680 --> 00:01:11,200 Speaker 1: It's all upside from here. Put then the perspective with 23 00:01:11,400 --> 00:01:13,840 Speaker 1: the rate hike that you're now potentially seeing, we're looking 24 00:01:13,880 --> 00:01:16,240 Speaker 1: at seventy five bases points priced into the market. Walk 25 00:01:16,319 --> 00:01:18,520 Speaker 1: us through, at least for the people like me who 26 00:01:18,560 --> 00:01:21,319 Speaker 1: don't know insurance as well as you do, how that 27 00:01:21,360 --> 00:01:24,759 Speaker 1: actually affects the bottom line for likes of Geico for example. 28 00:01:24,880 --> 00:01:28,160 Speaker 1: Sure so, uh, Like I said, they get premiums in, 29 00:01:28,400 --> 00:01:32,400 Speaker 1: they invest them in high quality fixed income and generate 30 00:01:32,400 --> 00:01:35,399 Speaker 1: investment income. So the average duration of the portfolios is 31 00:01:35,400 --> 00:01:37,679 Speaker 1: about four years, so it's not instant. It takes time 32 00:01:37,720 --> 00:01:40,959 Speaker 1: for the portfolio to run over um, but the investment 33 00:01:40,959 --> 00:01:43,520 Speaker 1: income goes up, you know, pay taxes on it and 34 00:01:43,560 --> 00:01:46,600 Speaker 1: go straight to the bottom line. All right, Our good 35 00:01:46,600 --> 00:01:52,320 Speaker 1: buddy out in Omaha, Nebraska, Warren Buffett, uh Bertrad Hathaway. 36 00:01:52,320 --> 00:01:54,920 Speaker 1: They're reporting numbers. They do it on a Saturday. First 37 00:01:54,960 --> 00:01:56,840 Speaker 1: of all, what's up with that? Why did they do 38 00:01:56,880 --> 00:01:59,040 Speaker 1: it on a Saturday? Paul, You are a cell side 39 00:01:59,040 --> 00:02:01,320 Speaker 1: analysts like we were, are used to working on the weekend. 40 00:02:01,920 --> 00:02:04,680 Speaker 1: They do it on the weekend so that there's kind 41 00:02:04,680 --> 00:02:08,240 Speaker 1: of no market reaction until one day. I guess they 42 00:02:08,240 --> 00:02:10,120 Speaker 1: could do it after the close on a day, but 43 00:02:10,120 --> 00:02:12,160 Speaker 1: they like to do it and give quote, you know, 44 00:02:12,200 --> 00:02:14,799 Speaker 1: give the market time to digest. So he still does 45 00:02:14,880 --> 00:02:17,880 Speaker 1: the big rents out the arena and and all the 46 00:02:17,919 --> 00:02:20,800 Speaker 1: Warren Buffett acolytes go out there to kind of hear 47 00:02:20,919 --> 00:02:22,960 Speaker 1: him and Mr Munger speak and all that kind of stuff. 48 00:02:23,000 --> 00:02:24,919 Speaker 1: Is that's still the case. That is the case that 49 00:02:24,960 --> 00:02:28,799 Speaker 1: happened already, so that that's the annual meeting. That's with 50 00:02:28,919 --> 00:02:31,480 Speaker 1: earlier results. So we're just talking third quarter results because 51 00:02:31,480 --> 00:02:34,560 Speaker 1: there's no no call or anything anything anything there that 52 00:02:34,560 --> 00:02:36,320 Speaker 1: we should been to look out for. Like I mean, 53 00:02:36,320 --> 00:02:38,600 Speaker 1: for war Buffet, it's always what are you gonna do 54 00:02:38,639 --> 00:02:40,960 Speaker 1: with the cash? Where's the next big deal? Now? I 55 00:02:41,000 --> 00:02:44,280 Speaker 1: know they bought this reinsurance company, Allegheny. They just closed 56 00:02:44,280 --> 00:02:46,320 Speaker 1: a week or so ago, So that closed that was 57 00:02:46,360 --> 00:02:49,360 Speaker 1: announced earlier. I don't think they're doing anything big in 58 00:02:49,400 --> 00:02:52,880 Speaker 1: the near term. They've been bulking up on Occidental stock, 59 00:02:53,240 --> 00:02:56,360 Speaker 1: so with the warrants that they have in the ownership already, 60 00:02:56,400 --> 00:02:59,240 Speaker 1: they have about thirty of the company, and they've got 61 00:02:59,240 --> 00:03:04,960 Speaker 1: approval to own for my favorite Berkshire Hathaway company because 62 00:03:04,960 --> 00:03:08,280 Speaker 1: they own a lot in in a massive portfolio into 63 00:03:08,360 --> 00:03:11,440 Speaker 1: every sector. Sorry, Darry Queen, do they really Yeah? Oh 64 00:03:11,480 --> 00:03:14,359 Speaker 1: I didn't know that. Okay, well it's not Terry Queen 65 00:03:14,440 --> 00:03:16,239 Speaker 1: is not my favorite candy mine is. Are you gonna 66 00:03:16,320 --> 00:03:18,360 Speaker 1: keep guessing all of the compass? This could take out 67 00:03:18,400 --> 00:03:22,680 Speaker 1: the rest of the show. BNSF Railway that is I 68 00:03:22,720 --> 00:03:24,919 Speaker 1: think the most fascinating. When we were covering the rail strike, 69 00:03:25,280 --> 00:03:27,040 Speaker 1: one of the companies at the heart of the issue 70 00:03:27,320 --> 00:03:31,280 Speaker 1: was BNSF. Any any thoughts there. It's interesting to me 71 00:03:31,320 --> 00:03:35,520 Speaker 1: that they're investing more in the kind of occidental BNSF. 72 00:03:36,200 --> 00:03:39,559 Speaker 1: It's kind of investing stuff, you know. Well, it's very industrials. 73 00:03:39,560 --> 00:03:43,400 Speaker 1: It's very it's very warm, Buffett, very wet. So so 74 00:03:43,440 --> 00:03:46,320 Speaker 1: they have a big energy business besides their investments in 75 00:03:46,400 --> 00:03:49,640 Speaker 1: Chevron and oxy um so on the insurance analyst. But 76 00:03:49,680 --> 00:03:52,680 Speaker 1: I know a little bit about railroads. Um. The thing 77 00:03:52,720 --> 00:03:59,760 Speaker 1: about um their volumes went down this quarter, so they 78 00:03:59,800 --> 00:04:04,360 Speaker 1: were moving less stuff. But uh, their revenue gets boosted 79 00:04:04,440 --> 00:04:09,400 Speaker 1: by fuel search arches, right, which seems a little uh paradoxical. 80 00:04:09,440 --> 00:04:11,360 Speaker 1: But they actually can. Their revenue will go up because 81 00:04:11,360 --> 00:04:14,280 Speaker 1: they pass across that that fuel costs. So I think 82 00:04:14,400 --> 00:04:17,000 Speaker 1: revenue goes up, but volumes were down for Burlington Northern. 83 00:04:17,120 --> 00:04:19,800 Speaker 1: Hey man, I'm looking at the SMP five Property and 84 00:04:19,839 --> 00:04:26,200 Speaker 1: casualty insurance sub industry gets level four index. So the 85 00:04:26,240 --> 00:04:29,120 Speaker 1: insurance stocks have done they're really at perform the market. 86 00:04:29,200 --> 00:04:31,640 Speaker 1: What's the when you talk to institutional investors today, what 87 00:04:31,640 --> 00:04:33,640 Speaker 1: are they saying. They are saying, we've kind of made 88 00:04:33,640 --> 00:04:35,400 Speaker 1: our money, we're done, or we have more room to go. 89 00:04:35,680 --> 00:04:38,080 Speaker 1: So I was like coming out of the third quarter, 90 00:04:38,960 --> 00:04:42,120 Speaker 1: I wasn't I wasn't inspired. Um, these stocks have done well, 91 00:04:42,160 --> 00:04:45,680 Speaker 1: they're kind of good inflation hedges. Generally for commercial insurance, 92 00:04:45,720 --> 00:04:48,359 Speaker 1: people have to buy it no matter what. UM. But 93 00:04:48,600 --> 00:04:51,279 Speaker 1: that story may have played out a little bit through 94 00:04:51,320 --> 00:04:55,560 Speaker 1: the year. UM the margin outlook is not if anything, 95 00:04:55,600 --> 00:04:58,239 Speaker 1: it's it's negative revisions going forward. So I can see 96 00:04:58,279 --> 00:05:01,560 Speaker 1: why it might have stalled out. What about the impact 97 00:05:01,640 --> 00:05:04,599 Speaker 1: of Hurricane Ian very quickly, how much damage does that do? 98 00:05:04,920 --> 00:05:07,240 Speaker 1: That was big? We think about sixty billion dollars for 99 00:05:07,279 --> 00:05:10,880 Speaker 1: the industry. It's gonna cause Berkshire several billion UM, but 100 00:05:11,320 --> 00:05:13,920 Speaker 1: very manageable and it might actually re accelerate some pricing. 101 00:05:14,279 --> 00:05:17,480 Speaker 1: What's the explained to me? The reinsurance business, I'll give 102 00:05:17,480 --> 00:05:21,719 Speaker 1: you twenty seconds to reinsurance business is insurance for insurance companies. Uh. 103 00:05:21,760 --> 00:05:25,640 Speaker 1: It protects you, protects your top layer if you have 104 00:05:25,760 --> 00:05:28,800 Speaker 1: a giant loss. So you say, okay, if I lose 105 00:05:28,839 --> 00:05:30,960 Speaker 1: a billion dollars and I want the reinsurance company to 106 00:05:31,000 --> 00:05:32,960 Speaker 1: take five hundred of it and I pay them a fee. 107 00:05:33,279 --> 00:05:36,479 Speaker 1: And companies need that, specifically smaller ones in Florida, but 108 00:05:36,760 --> 00:05:38,640 Speaker 1: everyone can use it as a bit of capital management. 109 00:05:38,640 --> 00:05:40,440 Speaker 1: And is there any backup for the reinsurer or is 110 00:05:40,440 --> 00:05:43,680 Speaker 1: that the government? There's retro reinsurance, which is reinsurance for reinsurance. 111 00:05:44,839 --> 00:05:46,880 Speaker 1: Do we cover those companies? We cover some of those 112 00:05:46,880 --> 00:05:48,960 Speaker 1: two most of them sell both of it. All right, 113 00:05:49,400 --> 00:05:51,919 Speaker 1: gets done at insurance business. All I know is I 114 00:05:52,040 --> 00:05:54,599 Speaker 1: just it just comes out of my check and I'm like, okay, whatever, 115 00:05:54,640 --> 00:05:58,040 Speaker 1: I guess I'm insured. I guess I'm covered at the 116 00:05:58,040 --> 00:06:01,080 Speaker 1: extent of my knowledge of instecturance. Is it so anyway? 117 00:06:01,080 --> 00:06:03,600 Speaker 1: Matt Palozola, he knows it a lot better. Thank thankfully, 118 00:06:03,960 --> 00:06:06,719 Speaker 1: he's a senior annalyst coming the property casualty insurance sector 119 00:06:06,760 --> 00:06:10,680 Speaker 1: for Bloomberg Intelligence looking at this market here kind of 120 00:06:10,720 --> 00:06:14,480 Speaker 1: just really not much conviction one way or the other. Uh. 121 00:06:14,600 --> 00:06:17,920 Speaker 1: Kind of punched on the SP five today. Uh, and 122 00:06:17,960 --> 00:06:20,040 Speaker 1: we'll see how well we get out of the FED tomorrow. 123 00:06:23,960 --> 00:06:26,880 Speaker 1: All right. Sam Fazelli, he's in the Bloomberg Interactive Broker 124 00:06:26,920 --> 00:06:30,080 Speaker 1: studio that is caused for celebration. He's the head of 125 00:06:30,120 --> 00:06:32,840 Speaker 1: European Research. He's a pharmaceutical analysts. But the only time 126 00:06:33,000 --> 00:06:34,520 Speaker 1: Critty we've ever wanted to talk to him over the 127 00:06:34,600 --> 00:06:37,479 Speaker 1: last three years has been about COVID. But he actually 128 00:06:37,520 --> 00:06:39,760 Speaker 1: has a day job. He actually does stuff. Yes, he 129 00:06:39,800 --> 00:06:41,760 Speaker 1: actually has a day job. He's like one of the 130 00:06:41,800 --> 00:06:45,599 Speaker 1: best pharmaceutical analysts in Europe. Uh, he's been doing it 131 00:06:45,640 --> 00:06:48,039 Speaker 1: for decades. So now we can get back to just 132 00:06:48,240 --> 00:06:52,160 Speaker 1: nuts and bolts pharmaceutical analysis. And these are mega companies. 133 00:06:52,200 --> 00:06:55,040 Speaker 1: They do deals all the time. Another deal got done today. 134 00:06:55,640 --> 00:06:59,200 Speaker 1: Let's talk about Sam. Some of the big companies reporting 135 00:06:59,279 --> 00:07:02,800 Speaker 1: numbers here, So let's talk about Eli, Lily Viser. What 136 00:07:02,839 --> 00:07:04,600 Speaker 1: are you seeing from some of these big companies. Because 137 00:07:04,640 --> 00:07:06,919 Speaker 1: they they are global companies, they have to deal with 138 00:07:06,960 --> 00:07:09,560 Speaker 1: the stronger dollar. UM what are you seeing from some 139 00:07:09,560 --> 00:07:12,200 Speaker 1: of these big farmer companies. Yes, so all of them 140 00:07:12,200 --> 00:07:15,520 Speaker 1: are obviously suffering is perhaps the right or wrong phrase, 141 00:07:15,560 --> 00:07:17,600 Speaker 1: but suffering from the strength of the dollar. But but 142 00:07:17,800 --> 00:07:20,920 Speaker 1: you saw that in Viser's case, it didn't really matter 143 00:07:21,000 --> 00:07:23,480 Speaker 1: because it seems like governments wants to still soak up 144 00:07:23,520 --> 00:07:26,720 Speaker 1: as much COVID vaccines as possible. So if you look 145 00:07:26,760 --> 00:07:29,640 Speaker 1: at their beat today and look at their guidance rays 146 00:07:29,800 --> 00:07:31,920 Speaker 1: which of course has got the stock up about three percent, 147 00:07:33,040 --> 00:07:35,920 Speaker 1: is pretty much all to do with the community vaccine 148 00:07:36,480 --> 00:07:39,840 Speaker 1: um and that's through government orders. Let's not forget this 149 00:07:39,880 --> 00:07:41,400 Speaker 1: is not available to you and I to go and 150 00:07:41,440 --> 00:07:43,840 Speaker 1: just buy in the shop. So which vaccine is community? 151 00:07:43,960 --> 00:07:48,080 Speaker 1: It's called these covid vaccina. Okay, it's a catchy name, 152 00:07:48,080 --> 00:07:53,280 Speaker 1: community rights better than some random exactly unpronounceable drug names. 153 00:07:53,320 --> 00:07:56,080 Speaker 1: So that's been what's driving that stock. I mean, the 154 00:07:56,160 --> 00:07:58,680 Speaker 1: dollar was really not a story for them, of course 155 00:07:58,720 --> 00:08:00,760 Speaker 1: it is. It is impacted where it's a story for them. 156 00:08:01,160 --> 00:08:03,640 Speaker 1: Lily was interesting because the stocks down four it was 157 00:08:03,680 --> 00:08:06,400 Speaker 1: down a bit more the earliest up and the only 158 00:08:06,400 --> 00:08:09,640 Speaker 1: reason they missed or they've reduced guidance is because of dollar. 159 00:08:10,080 --> 00:08:13,200 Speaker 1: Now I would usually see through that, right, Whereas the 160 00:08:13,320 --> 00:08:17,080 Speaker 1: base business for Lily is amazing. They've done a phenomenal 161 00:08:17,160 --> 00:08:19,960 Speaker 1: job in bringing new drugs one after the other. And 162 00:08:20,080 --> 00:08:22,760 Speaker 1: of course today Munjaro is the one that everyone's looking at. 163 00:08:22,840 --> 00:08:26,280 Speaker 1: What is actual new diabetes drug with the best efficacy 164 00:08:26,280 --> 00:08:30,480 Speaker 1: you've ever seen and it also helps you drop twenty pounds. 165 00:08:31,160 --> 00:08:33,240 Speaker 1: So this is the drug that everyone's figured trying to 166 00:08:33,240 --> 00:08:35,160 Speaker 1: figure out is it a ten billion or a fifteen 167 00:08:35,240 --> 00:08:38,080 Speaker 1: or a twenty and some people have got some random 168 00:08:38,160 --> 00:08:40,520 Speaker 1: numbers out there are a hundred billion market potentially for this. 169 00:08:40,720 --> 00:08:44,120 Speaker 1: Such best advocacy you've ever seen for diabetes drugs yet 170 00:08:44,280 --> 00:08:48,319 Speaker 1: interesting phenomenal, phenomenal HD and something science related, So I 171 00:08:48,360 --> 00:08:52,079 Speaker 1: guess something sciences. Yes, But that stock poll, if you 172 00:08:52,080 --> 00:08:54,240 Speaker 1: look at the multiple and you look at how far 173 00:08:54,280 --> 00:08:56,839 Speaker 1: it's up this year and what the expectations are, I'm 174 00:08:56,840 --> 00:08:59,280 Speaker 1: not surprised it's giving up a little today, but at 175 00:08:59,320 --> 00:09:01,360 Speaker 1: the end of the day it is one of the 176 00:09:01,400 --> 00:09:05,000 Speaker 1: best growth stories, similar to what we also see for 177 00:09:05,080 --> 00:09:08,480 Speaker 1: astro Centco in Europe across farmer Alright. So when I 178 00:09:08,559 --> 00:09:10,920 Speaker 1: look at so that that's Lily and we'll get to 179 00:09:10,960 --> 00:09:14,360 Speaker 1: a big big sector column a second, but fightser with 180 00:09:14,559 --> 00:09:18,160 Speaker 1: it's got such a big lift in their sales from 181 00:09:18,200 --> 00:09:20,680 Speaker 1: the COVID drug. I'm looking at the f A function 182 00:09:20,679 --> 00:09:23,680 Speaker 1: on the Bloomberg terminal, forty two billion of revenue in 183 00:09:24,520 --> 00:09:28,599 Speaker 1: exploiting to eight billion, going to a close to a 184 00:09:28,679 --> 00:09:31,920 Speaker 1: hundred billion this year, and then it drops pretty significantly. 185 00:09:32,280 --> 00:09:34,680 Speaker 1: So if I'm an investor in Fighter, do I want 186 00:09:34,679 --> 00:09:38,160 Speaker 1: to be anywhere near a story where I've got revenue 187 00:09:38,000 --> 00:09:42,160 Speaker 1: declined significant declines. So that's the toughest thing. I've just 188 00:09:42,280 --> 00:09:44,320 Speaker 1: come off the call, which is still going on, okay, 189 00:09:44,320 --> 00:09:47,080 Speaker 1: and that is the question what's gonna happen in three Now. 190 00:09:47,120 --> 00:09:48,880 Speaker 1: I put my neck on the line saying that I 191 00:09:48,920 --> 00:09:50,959 Speaker 1: think vaccines are not going to do anywhere near the 192 00:09:51,040 --> 00:09:54,400 Speaker 1: numbers have done this year next year, partly because I 193 00:09:54,400 --> 00:09:56,280 Speaker 1: think people are just going to get over the idea. 194 00:09:56,360 --> 00:09:59,000 Speaker 1: But they are doing clever things. Are you're combining it 195 00:09:59,080 --> 00:10:02,360 Speaker 1: with the flu vaccines who just get one shot, and 196 00:10:02,400 --> 00:10:05,840 Speaker 1: they're talking about pricing which is five or six times 197 00:10:05,920 --> 00:10:08,640 Speaker 1: higher than numbers that have been charging governments, so you 198 00:10:08,679 --> 00:10:10,640 Speaker 1: can make up for a lot of volume loss so 199 00:10:10,640 --> 00:10:12,480 Speaker 1: I don't have to pay for they if I get 200 00:10:12,480 --> 00:10:15,000 Speaker 1: a COVID shot next year. Next year. I mean, do 201 00:10:15,080 --> 00:10:18,240 Speaker 1: you mind taking five to one percent of the cash 202 00:10:18,240 --> 00:10:19,760 Speaker 1: you carry with you and pay you a hundred bucks 203 00:10:19,760 --> 00:10:23,000 Speaker 1: for it? Probably not no, okay, but but you and 204 00:10:23,040 --> 00:10:24,760 Speaker 1: I are not the people who catch for this. Right 205 00:10:24,800 --> 00:10:26,400 Speaker 1: at the end of the day, you need the volume. 206 00:10:26,600 --> 00:10:28,800 Speaker 1: And this is the problem that most people have right now. 207 00:10:29,120 --> 00:10:31,920 Speaker 1: They don't know how to model. They've been saying, look, 208 00:10:31,920 --> 00:10:33,560 Speaker 1: we'll give you as much of a guy that's possible. 209 00:10:33,760 --> 00:10:35,920 Speaker 1: We have to wait till the twelfth of December when 210 00:10:35,960 --> 00:10:39,520 Speaker 1: they have their they have an R and dcoll or 211 00:10:39,880 --> 00:10:42,840 Speaker 1: the Endless Day. So okay. Well, speaking of the COVID vaccine, 212 00:10:42,880 --> 00:10:44,839 Speaker 1: one of the major drivers this morning, at least in 213 00:10:44,880 --> 00:10:48,040 Speaker 1: the pre market, was rumors that potentially China might be 214 00:10:49,040 --> 00:10:52,640 Speaker 1: reconsidering their COVID's real policy. At some point, um tom 215 00:10:52,720 --> 00:10:55,680 Speaker 1: Orlick a Bloomer Economics came up Bloomber Surveillance and said, 216 00:10:55,760 --> 00:10:57,840 Speaker 1: the timeline of that is not going to be tomorrow, 217 00:10:57,880 --> 00:10:59,200 Speaker 1: is not gonna be next week, It's going to be 218 00:10:59,240 --> 00:11:01,959 Speaker 1: at the early if this is indeed true once again 219 00:11:02,080 --> 00:11:05,520 Speaker 1: on UH confirmed rumors at the at the moment will 220 00:11:05,559 --> 00:11:08,600 Speaker 1: be the first quarter of is that the time frame 221 00:11:08,679 --> 00:11:12,480 Speaker 1: you would agree with. Yeah, I mean, look, the president 222 00:11:12,520 --> 00:11:15,320 Speaker 1: ge doubled down or the company of the country has 223 00:11:15,320 --> 00:11:17,720 Speaker 1: doubled down on the on the zero COVID. The problem 224 00:11:17,760 --> 00:11:22,240 Speaker 1: they have is you cannot avoid deaths and infections even 225 00:11:22,280 --> 00:11:26,240 Speaker 1: if you vaccinate the people, because not everybody responds to 226 00:11:26,280 --> 00:11:30,080 Speaker 1: the vaccine. And also you have a situation where some 227 00:11:30,120 --> 00:11:32,280 Speaker 1: of the vaccines will never give you the kind of 228 00:11:32,320 --> 00:11:34,360 Speaker 1: protection that you want, even the ones that we have here. 229 00:11:34,760 --> 00:11:39,480 Speaker 1: So whether I don't think that's driving the vaccine names here, 230 00:11:40,600 --> 00:11:42,959 Speaker 1: because they've had the opportunity to have these vaccines in 231 00:11:43,400 --> 00:11:46,880 Speaker 1: China for two years, over two years with BioNTech or Moderna, 232 00:11:47,679 --> 00:11:50,160 Speaker 1: I think the Chinese are likely to be waiting to 233 00:11:50,200 --> 00:11:55,520 Speaker 1: get something more regional, something that they have made, get 234 00:11:55,559 --> 00:11:57,560 Speaker 1: that through to the market. So to that end, let 235 00:11:57,600 --> 00:12:00,560 Speaker 1: me ask you a science question. Um, can't they just 236 00:12:00,640 --> 00:12:03,920 Speaker 1: go and get a Visor vaccine, moderna vaccine they've being 237 00:12:03,960 --> 00:12:06,680 Speaker 1: a Chinese government and scientists and just reverse engineer it 238 00:12:06,720 --> 00:12:09,959 Speaker 1: and say, hey, we've now got our Chinese vaccine. Yeah, 239 00:12:10,040 --> 00:12:11,600 Speaker 1: I mean, I don't think it's as easy as that 240 00:12:11,640 --> 00:12:15,599 Speaker 1: because so there's so many steps involved in this manufacturer. 241 00:12:16,240 --> 00:12:18,920 Speaker 1: You could try and make something similar to it. But 242 00:12:18,920 --> 00:12:21,320 Speaker 1: what it will be identical or not? Who knows. I 243 00:12:21,360 --> 00:12:24,640 Speaker 1: mean even the two vaccines are not identical between fis 244 00:12:24,679 --> 00:12:27,160 Speaker 1: it right? Right? All right? So let's step back here. 245 00:12:27,679 --> 00:12:30,040 Speaker 1: You're talking to your big institutional investor clients all over 246 00:12:30,080 --> 00:12:32,840 Speaker 1: the world. What are they saying about Big Farmer? Do 247 00:12:32,920 --> 00:12:35,520 Speaker 1: I buy it as a or is this something that 248 00:12:35,559 --> 00:12:37,679 Speaker 1: it's already been a nice safe haven for me. I'm 249 00:12:37,679 --> 00:12:41,120 Speaker 1: going to rotate out into some more maybe cyclical stuff. Yes, 250 00:12:41,200 --> 00:12:43,680 Speaker 1: So really I want to bounce that back at you. 251 00:12:43,920 --> 00:12:46,520 Speaker 1: Do you see the cyclical stucks moving? Because if that's 252 00:12:46,559 --> 00:12:49,000 Speaker 1: the if the day that that people start making that decision. 253 00:12:49,360 --> 00:12:53,559 Speaker 1: The defensives, including Parma Industrial, just put up its best 254 00:12:53,880 --> 00:12:56,679 Speaker 1: month of October since nineteen seventy six, so there was 255 00:12:56,720 --> 00:13:00,440 Speaker 1: a lot of like Caterpillar had some great numbers last week, 256 00:13:00,480 --> 00:13:03,560 Speaker 1: you know, and and conversely the big tech companies, uh 257 00:13:03,600 --> 00:13:06,440 Speaker 1: that I know well had some disappointing numbers. So maybe 258 00:13:06,480 --> 00:13:09,880 Speaker 1: it's already starting to happen a little bit. Um you know. 259 00:13:09,960 --> 00:13:11,960 Speaker 1: I don't know, but I think if I'm a big Farmer, 260 00:13:12,040 --> 00:13:14,200 Speaker 1: I just think it's such a great place to be 261 00:13:14,200 --> 00:13:17,920 Speaker 1: because they're big, they're growing um, lots of free cash flow, 262 00:13:18,640 --> 00:13:20,760 Speaker 1: dividends and things like that. I'm just not sure what's 263 00:13:20,800 --> 00:13:24,280 Speaker 1: the bear case for Big Farmer is always a part 264 00:13:24,360 --> 00:13:27,600 Speaker 1: of my portfolio. I think that that pretty much makes 265 00:13:27,600 --> 00:13:30,920 Speaker 1: sense to me because they have a phenomenal innovation that's 266 00:13:30,960 --> 00:13:34,120 Speaker 1: going on, which is feeding off the fantastic work that 267 00:13:34,120 --> 00:13:37,040 Speaker 1: scientists have been doing. That is, that is not the issue. 268 00:13:37,080 --> 00:13:39,199 Speaker 1: The thing is, if you're talking five to ten years, 269 00:13:39,520 --> 00:13:41,600 Speaker 1: there's very little doubt for me that that you need 270 00:13:41,679 --> 00:13:46,600 Speaker 1: to have some exposure to Farmer because that is, there's 271 00:13:46,720 --> 00:13:50,320 Speaker 1: always been cash generative. Even if the Inflation Reduction Act 272 00:13:50,640 --> 00:13:53,080 Speaker 1: eventually bites the way that it's been doing, they have 273 00:13:53,160 --> 00:13:57,240 Speaker 1: ways of getting away from its impacts. But really, I 274 00:13:57,280 --> 00:13:59,760 Speaker 1: think this is definitely the case short term trading. Is 275 00:13:59,800 --> 00:14:02,280 Speaker 1: that for the discussion, what are you drinking in the 276 00:14:02,400 --> 00:14:08,760 Speaker 1: bordo these days? What did I have? I had a 277 00:14:08,840 --> 00:14:13,240 Speaker 1: nice bottle of Villefery. Alright, two thousand and one sounds 278 00:14:13,240 --> 00:14:15,959 Speaker 1: good to me. San Fazelli had of European Economic Research, 279 00:14:16,240 --> 00:14:24,360 Speaker 1: Bloomberg Intelligence. All right, let's talk banks. Pretty We love 280 00:14:24,440 --> 00:14:27,000 Speaker 1: talking banks and big global banks. We've seen some pretty 281 00:14:27,040 --> 00:14:29,880 Speaker 1: solid numbers out of most of them. Uh, certainly the 282 00:14:29,960 --> 00:14:31,480 Speaker 1: U S banks, But I want to break it down 283 00:14:31,480 --> 00:14:32,760 Speaker 1: a little bit. I also want to talk about Credit 284 00:14:32,840 --> 00:14:37,320 Speaker 1: Swiss my former employer, Alison Williams, senior global banks analysts. Also, 285 00:14:37,360 --> 00:14:39,920 Speaker 1: what's the latest on Credit Swiss here? I mean yet 286 00:14:39,960 --> 00:14:43,640 Speaker 1: another restructuring here. I kind of hear some M and 287 00:14:43,720 --> 00:14:47,960 Speaker 1: A noise out there? What's the latest? Yeah, it's interesting. 288 00:14:48,000 --> 00:14:50,920 Speaker 1: I mean I'm not I'm not sure why the M 289 00:14:50,960 --> 00:14:54,480 Speaker 1: and A noise is surfacing today when they've you know, 290 00:14:54,480 --> 00:14:58,160 Speaker 1: sort of made their announcements. They've they've already made the 291 00:14:58,280 --> 00:15:02,520 Speaker 1: choice to UM dilute the current shareholders, shore of capital 292 00:15:02,560 --> 00:15:04,880 Speaker 1: and sort of move on. And I think it's going 293 00:15:04,920 --> 00:15:08,840 Speaker 1: to be a tough slog for the bank from here. UM. 294 00:15:08,920 --> 00:15:11,600 Speaker 1: But you know, if if not now, I'm not sure 295 00:15:13,040 --> 00:15:15,760 Speaker 1: when I guess if you will on on M and A. UM. 296 00:15:15,800 --> 00:15:18,880 Speaker 1: I think that just given it a restructuring and things 297 00:15:18,920 --> 00:15:22,640 Speaker 1: are chopping, maybe there continues to be UM noise around 298 00:15:22,680 --> 00:15:25,040 Speaker 1: the bank. But I think that a lot of the 299 00:15:25,120 --> 00:15:29,240 Speaker 1: rumors that sort of get circulated are UM. You know, 300 00:15:29,280 --> 00:15:32,080 Speaker 1: it would be very difficult to come through fruition. So 301 00:15:32,320 --> 00:15:36,600 Speaker 1: for example, credit suits combining with any other major bank, 302 00:15:37,400 --> 00:15:42,800 Speaker 1: you know, there's the regulation. The regulations, especially involving crossboater 303 00:15:42,840 --> 00:15:47,600 Speaker 1: regulations would really make it. Um, you know, it's not impossible, 304 00:15:47,760 --> 00:15:51,760 Speaker 1: but close to that, Alison. I heard an analogy this morning, 305 00:15:51,840 --> 00:15:54,960 Speaker 1: I believe I Charlie Wells over our London office, and 306 00:15:55,000 --> 00:15:57,080 Speaker 1: he kind of said the way the buyers may be 307 00:15:57,160 --> 00:15:59,640 Speaker 1: looking at credit sweez or potential buyers, I should say, 308 00:16:00,240 --> 00:16:03,240 Speaker 1: was kind of like going into a suit shop and 309 00:16:03,320 --> 00:16:05,160 Speaker 1: really just going to buy a tie, but then ending 310 00:16:05,240 --> 00:16:08,000 Speaker 1: up buying the whole suit. Is that the way to 311 00:16:08,040 --> 00:16:11,960 Speaker 1: think about this? I mean, I think that you're maybe 312 00:16:12,000 --> 00:16:15,440 Speaker 1: one step farther than that today. Um, you know that 313 00:16:15,640 --> 00:16:19,040 Speaker 1: I think that was the case. And why uh, you know, 314 00:16:19,120 --> 00:16:21,560 Speaker 1: going sort of going into the announcement and so much 315 00:16:21,560 --> 00:16:23,600 Speaker 1: speculation about what will they keep, what will they get 316 00:16:23,640 --> 00:16:25,800 Speaker 1: rid of, what will they keep? You know? Um, but 317 00:16:25,920 --> 00:16:28,640 Speaker 1: I think what what they sort of made clear is 318 00:16:28,680 --> 00:16:32,240 Speaker 1: that you know, they're finally stepping away from some businesses 319 00:16:33,160 --> 00:16:36,720 Speaker 1: that you know are not you know, adjacent to the chie. 320 00:16:36,760 --> 00:16:38,520 Speaker 1: So you need you need a shirt and a collar 321 00:16:38,640 --> 00:16:40,640 Speaker 1: to wear with the tie. Maybe the shirt is very 322 00:16:40,680 --> 00:16:43,240 Speaker 1: integral with how the tide looks, but who cares about 323 00:16:43,280 --> 00:16:45,240 Speaker 1: the pants? The pants are something that you wear but 324 00:16:45,800 --> 00:16:48,800 Speaker 1: don't really impact how the tide looks. And so some 325 00:16:48,960 --> 00:16:51,160 Speaker 1: of the businesses that they are getting rid of, the 326 00:16:51,280 --> 00:16:54,000 Speaker 1: Security chie Product Group for example. You know, it's a 327 00:16:54,040 --> 00:16:57,640 Speaker 1: great profitable business over time, but it tends to have 328 00:16:57,840 --> 00:17:03,440 Speaker 1: its its worst performance in bad time, so that you know, always, uh, 329 00:17:04,080 --> 00:17:05,960 Speaker 1: is not good to to sort of be made more 330 00:17:06,000 --> 00:17:08,320 Speaker 1: that vulnerable and it really has nothing to do with 331 00:17:08,960 --> 00:17:13,200 Speaker 1: their core wealth business. So you know, moving that out, 332 00:17:13,280 --> 00:17:16,680 Speaker 1: moving ownership of that out. You know that it's still 333 00:17:16,760 --> 00:17:19,000 Speaker 1: not finalized in terms of what the terms are going 334 00:17:19,080 --> 00:17:20,360 Speaker 1: to be. I think those are kind of the things 335 00:17:20,359 --> 00:17:23,200 Speaker 1: that people are waiting on, um. But I think they 336 00:17:23,280 --> 00:17:26,760 Speaker 1: are you know, really trying to take a bigger step 337 00:17:26,800 --> 00:17:29,480 Speaker 1: to hone the one the focus. We hear this from. 338 00:17:29,520 --> 00:17:31,399 Speaker 1: You know, we've been hearing this from you know, banks 339 00:17:31,400 --> 00:17:34,400 Speaker 1: like Deutsche Bank and Credit Suites for for multiple years. 340 00:17:34,440 --> 00:17:36,760 Speaker 1: Deutsche Bank finally made the tough move, got rid of 341 00:17:36,800 --> 00:17:40,440 Speaker 1: equities trading, focused on what they're good at, finally getting 342 00:17:40,480 --> 00:17:44,080 Speaker 1: some benefit from the environment. Things are working out for them, um, 343 00:17:44,119 --> 00:17:47,679 Speaker 1: you know, Credit Suites finally making some tougher choices. Like 344 00:17:47,720 --> 00:17:49,359 Speaker 1: I said that the business is good, and I think 345 00:17:49,440 --> 00:17:51,800 Speaker 1: that's why they didn't want to move away from it, 346 00:17:51,840 --> 00:17:54,640 Speaker 1: but they really had to focus on, you know, protecting 347 00:17:54,720 --> 00:17:57,040 Speaker 1: the core at this point, Alison, just real quick thirty 348 00:17:57,080 --> 00:18:01,040 Speaker 1: seconds the Saudi National Bank now it's Credit Swiss as 349 00:18:01,040 --> 00:18:03,200 Speaker 1: the bankrucy pushed back from the U S or Swiss 350 00:18:03,240 --> 00:18:07,160 Speaker 1: governments on this. You know, there's there's obviously a lot 351 00:18:07,240 --> 00:18:10,680 Speaker 1: of headlines around it. I'm not gonna go down that path, 352 00:18:10,920 --> 00:18:15,040 Speaker 1: but um, you know that that's certainly something that's gotten 353 00:18:15,080 --> 00:18:18,760 Speaker 1: intention in terms of who the shareholder is. Yeah, it's 354 00:18:18,840 --> 00:18:21,040 Speaker 1: interesting to see how that plays out. But I guess 355 00:18:21,080 --> 00:18:24,600 Speaker 1: at this point Credit Swiss needs the capital, uh and 356 00:18:24,640 --> 00:18:27,320 Speaker 1: they know the Saudi National Bank. So good to get 357 00:18:27,359 --> 00:18:30,399 Speaker 1: an update on Credit Swiss. Always seems to be in 358 00:18:30,720 --> 00:18:34,280 Speaker 1: the in the news here today. Alison Williams, senior bank 359 00:18:34,320 --> 00:18:42,080 Speaker 1: analyst for Bloomberg Intelligency is based in our Princeton office. 360 00:18:42,160 --> 00:18:44,919 Speaker 1: Jolts numbers can be hire expected. We also had some 361 00:18:45,000 --> 00:18:46,920 Speaker 1: ECO data coming out of the I s M kind 362 00:18:46,920 --> 00:18:50,240 Speaker 1: of showing can continued I guess slow down in some 363 00:18:50,320 --> 00:18:54,480 Speaker 1: of the manufacturing sector from the prior month. So all this, 364 00:18:54,640 --> 00:18:56,359 Speaker 1: I guess adds up for the market saying hey, this 365 00:18:56,520 --> 00:18:59,520 Speaker 1: fed you can keep raising rates. Here a little bit 366 00:18:59,520 --> 00:19:02,439 Speaker 1: here to about that, So, lindsay, Pegsa. She does this 367 00:19:02,520 --> 00:19:06,040 Speaker 1: for a living. She's the chief economist managing director at Stephle. 368 00:19:06,359 --> 00:19:09,399 Speaker 1: So lindsay, again, some eco data today that seems to 369 00:19:09,400 --> 00:19:11,480 Speaker 1: give maybe the Fed some more cover to continue to 370 00:19:11,560 --> 00:19:14,600 Speaker 1: raise rates. How how do you think the next twenty 371 00:19:14,600 --> 00:19:16,240 Speaker 1: four hours you're going to play out for our freed 372 00:19:16,280 --> 00:19:19,840 Speaker 1: to reserve. Well, I think, as you mentioned, the decision 373 00:19:20,040 --> 00:19:22,640 Speaker 1: this week is pretty much already baked into the cake, 374 00:19:22,800 --> 00:19:26,160 Speaker 1: or baked into market expectations. The bigger question is how 375 00:19:26,200 --> 00:19:30,800 Speaker 1: does the Fed frame the economic outlook for future policy adjustments, 376 00:19:30,800 --> 00:19:33,879 Speaker 1: particularly as we come up with that final December summary 377 00:19:33,880 --> 00:19:38,280 Speaker 1: of economic projections. Now, the Fed has consistently revised higher 378 00:19:38,320 --> 00:19:42,960 Speaker 1: its forecast for rates and inflation by nearly two basis points, 379 00:19:43,200 --> 00:19:45,800 Speaker 1: and I do expect that, given the backdrop of a 380 00:19:45,880 --> 00:19:48,760 Speaker 1: still solid labor market, a five decade low in the 381 00:19:48,800 --> 00:19:52,320 Speaker 1: unemployment rate, and a near four decade high and inflation, 382 00:19:52,720 --> 00:19:56,399 Speaker 1: the Fed will continue to revise higher expectations beyond what 383 00:19:56,480 --> 00:19:59,440 Speaker 1: the market is anticipating in terms of that terminal rate 384 00:19:59,480 --> 00:20:04,399 Speaker 1: come twenty twenty three. Well, lindsay, if you're starting to 385 00:20:04,400 --> 00:20:06,840 Speaker 1: see the market really hit consensus, which I want to 386 00:20:06,880 --> 00:20:08,960 Speaker 1: say they did a couple of weeks ago, really, and 387 00:20:09,440 --> 00:20:12,520 Speaker 1: all these investment banks are just now catching up. Cough 388 00:20:12,560 --> 00:20:16,159 Speaker 1: cough Goldman. But I have to ask about why you're 389 00:20:16,160 --> 00:20:19,280 Speaker 1: seeing so much bond market volatility. Then if the consensus 390 00:20:19,400 --> 00:20:25,520 Speaker 1: is tomorrow fifteen December, February in March, well, it could 391 00:20:25,520 --> 00:20:29,720 Speaker 1: be that the market consistently underestimates inflation. We look at 392 00:20:29,760 --> 00:20:32,520 Speaker 1: the Bloomberg data and we see that forecasts are typically 393 00:20:32,560 --> 00:20:35,119 Speaker 1: about fifty to even a hundred basis points below the 394 00:20:35,200 --> 00:20:39,320 Speaker 1: reality of inflation. And looking right now, we're well above 395 00:20:39,400 --> 00:20:41,880 Speaker 1: what the Fed anticipated would be the year end level 396 00:20:41,920 --> 00:20:44,359 Speaker 1: of prices, and even further above, of course, the FEDS 397 00:20:44,400 --> 00:20:47,719 Speaker 1: two target range. So it may be that the market 398 00:20:47,800 --> 00:20:50,600 Speaker 1: is more looking at what it hopes to happen as 399 00:20:50,600 --> 00:20:53,200 Speaker 1: opposed to what the Fed will need to do to 400 00:20:53,400 --> 00:20:56,719 Speaker 1: realistically rain in price pressures, which, if we take the 401 00:20:56,720 --> 00:20:59,680 Speaker 1: Fed at their word, they say that is their primary 402 00:21:00,000 --> 00:21:03,360 Speaker 1: turn right now, their primary focus, willing to take more 403 00:21:03,440 --> 00:21:07,040 Speaker 1: pain now in order to ensure longer run price stability 404 00:21:07,040 --> 00:21:10,160 Speaker 1: for the economy. The bedrock, as German Powell tells us, 405 00:21:10,160 --> 00:21:13,480 Speaker 1: of the economy, lindsay what's your recession and call here 406 00:21:13,480 --> 00:21:15,480 Speaker 1: and a lot of folks are just wondering as are 407 00:21:15,520 --> 00:21:18,399 Speaker 1: going to happen? Be how long will it be? See 408 00:21:18,520 --> 00:21:20,480 Speaker 1: how deep wi it be? How do you frame that 409 00:21:20,560 --> 00:21:23,560 Speaker 1: for your clients? Well, I think it's a pretty difficult 410 00:21:23,560 --> 00:21:26,080 Speaker 1: outlook for the economy at this point. Should the Fed 411 00:21:26,160 --> 00:21:29,080 Speaker 1: remain on this more aggressive pathway? I think a recession 412 00:21:29,200 --> 00:21:32,560 Speaker 1: is all but ensured. But that being said, I do 413 00:21:32,640 --> 00:21:36,320 Speaker 1: think the consumer is starting from a relatively stronger position 414 00:21:36,560 --> 00:21:39,639 Speaker 1: than in previous cycles, and so we may have a 415 00:21:39,760 --> 00:21:43,040 Speaker 1: bit more leeway or a bit more stability on the 416 00:21:43,040 --> 00:21:46,320 Speaker 1: part of the consumer going forward, still at very low levels, 417 00:21:46,359 --> 00:21:49,800 Speaker 1: but still in positive territory. That translates to me to 418 00:21:50,080 --> 00:21:54,600 Speaker 1: a prolonged period of negative activity, but very minimal negative 419 00:21:54,800 --> 00:21:59,600 Speaker 1: activity through before potentially getting back into a more robust 420 00:21:59,640 --> 00:22:04,840 Speaker 1: position of economic strength as we come out in Lindsay, 421 00:22:04,840 --> 00:22:07,680 Speaker 1: I've been asking all the guests this. You specifically mentioned 422 00:22:07,800 --> 00:22:10,479 Speaker 1: how the commodities trade is perhaps baked into the market. 423 00:22:11,240 --> 00:22:15,479 Speaker 1: Is it worth reconsidering the market consensus given that we 424 00:22:15,560 --> 00:22:20,520 Speaker 1: have a potential windfall tax on oil companies that historically 425 00:22:20,640 --> 00:22:23,440 Speaker 1: has shown to halt production, or I should at least 426 00:22:23,520 --> 00:22:26,920 Speaker 1: stymy it and put make prices higher. At the same time, 427 00:22:26,960 --> 00:22:28,880 Speaker 1: you have issues in the grains market. When it comes 428 00:22:28,880 --> 00:22:32,359 Speaker 1: to Ukraine, we're talking about peak inflation being in the 429 00:22:32,440 --> 00:22:36,600 Speaker 1: rare view mirror. But can we be sure of that? Oh, 430 00:22:36,640 --> 00:22:40,120 Speaker 1: absolutely not. I think the risk to inflation is certainly 431 00:22:40,160 --> 00:22:43,720 Speaker 1: to the upside. You talk about windfall taxes, international conflict, 432 00:22:44,160 --> 00:22:47,800 Speaker 1: political and certainty overseas. All of these factors leave a 433 00:22:47,800 --> 00:22:50,080 Speaker 1: lot of question marks when we talk about the longer 434 00:22:50,200 --> 00:22:55,679 Speaker 1: term trajectory of agricultural commodity energy costs, all playing into 435 00:22:55,760 --> 00:22:58,680 Speaker 1: how that's going to affect broader based inflation here in 436 00:22:58,720 --> 00:23:01,480 Speaker 1: the US. So the notion that we're going to see 437 00:23:01,480 --> 00:23:05,880 Speaker 1: this nice, steady downward trajectory of prices allowing the FED 438 00:23:05,960 --> 00:23:09,640 Speaker 1: too nice and neatly back off from rate increases, that 439 00:23:09,720 --> 00:23:13,640 Speaker 1: seems a bit too easy, if you will, and certainly 440 00:23:13,680 --> 00:23:17,680 Speaker 1: premature relative to what we're seeing in terms of market volatility. 441 00:23:18,000 --> 00:23:20,840 Speaker 1: So I am not quite on board yet that the 442 00:23:20,840 --> 00:23:23,760 Speaker 1: worst of that the scenario in terms of price pressures 443 00:23:23,880 --> 00:23:27,520 Speaker 1: is behind us. Lindsay, what's your call on the consumer here? 444 00:23:27,520 --> 00:23:30,720 Speaker 1: We're going to obviously get some jobs data on Friday. 445 00:23:30,840 --> 00:23:33,080 Speaker 1: How resilient is this is this consumer in your mind 446 00:23:33,080 --> 00:23:36,760 Speaker 1: going forward? Well, I do think the consumer has a 447 00:23:36,800 --> 00:23:40,280 Speaker 1: certain number of variables are adding that are adding temporary support. 448 00:23:40,440 --> 00:23:44,040 Speaker 1: Consumers are increasingly willing to eat through the remaining savings 449 00:23:44,040 --> 00:23:47,840 Speaker 1: that they have. They've also been benefited by some additional 450 00:23:47,880 --> 00:23:50,400 Speaker 1: state and local stimulus that has come down the pipeline, 451 00:23:50,400 --> 00:23:53,399 Speaker 1: with nearly a dozen states or large governments to the 452 00:23:53,560 --> 00:23:57,920 Speaker 1: large cities implementing another round of direct payments. We also 453 00:23:57,960 --> 00:24:01,639 Speaker 1: see consumers increasingly turn learning to credit card debts or 454 00:24:01,640 --> 00:24:04,880 Speaker 1: other sources of debt to supplement their spending. So all 455 00:24:04,920 --> 00:24:07,960 Speaker 1: of these factors together have been able to provide some 456 00:24:08,080 --> 00:24:11,440 Speaker 1: temporary support that is likely to linger for some time, 457 00:24:11,560 --> 00:24:15,479 Speaker 1: maybe one to three months, maybe longer. Now it's certainly 458 00:24:15,480 --> 00:24:19,600 Speaker 1: not enough to provide robust consumer activity. We're not talking 459 00:24:19,600 --> 00:24:22,760 Speaker 1: about four or five six percent growth, but we are 460 00:24:22,800 --> 00:24:25,640 Speaker 1: still talking about positive activity in the range of one 461 00:24:25,720 --> 00:24:28,919 Speaker 1: to two percent real spending, which should be enough to 462 00:24:29,000 --> 00:24:32,680 Speaker 1: help provide again at least a floor to economic growth 463 00:24:32,680 --> 00:24:35,840 Speaker 1: as we fall back into negative territory presumably in the 464 00:24:35,880 --> 00:24:39,080 Speaker 1: fourth quarter. All right, lindsay, really good stuff, really really 465 00:24:39,119 --> 00:24:43,080 Speaker 1: appreciate getting your time, your perspective. That's Lindsay Peza, chief 466 00:24:43,080 --> 00:24:49,800 Speaker 1: economist and managing director over at Stifle. Well, we're a 467 00:24:49,880 --> 00:24:54,000 Speaker 1: week away from mid term elections. There's several key states 468 00:24:54,040 --> 00:24:57,800 Speaker 1: that have some competitive races, and that's obviously going to 469 00:24:57,840 --> 00:25:00,560 Speaker 1: have an impact on control of the House and Senate. 470 00:25:01,400 --> 00:25:04,399 Speaker 1: One of the swing votes, or one of the areas 471 00:25:04,520 --> 00:25:07,720 Speaker 1: that you know these politicians are trying to attract, is 472 00:25:07,920 --> 00:25:09,960 Speaker 1: the labor vote. So we want to get a sense 473 00:25:09,960 --> 00:25:12,760 Speaker 1: of how that might break. So we welcome Kip Iberg, 474 00:25:12,880 --> 00:25:16,080 Speaker 1: Senior vice president of Government and Industry Relations for the 475 00:25:16,080 --> 00:25:20,359 Speaker 1: Association of Equipment Manufacturers. Kim, thanks so much for joining 476 00:25:20,440 --> 00:25:23,080 Speaker 1: us here. I guess it's my working assumption that labor 477 00:25:23,440 --> 00:25:27,760 Speaker 1: typically supports the Democratic Party. Is is that generally true? 478 00:25:27,800 --> 00:25:31,080 Speaker 1: And is that expected to be true here in these midterms? Well, 479 00:25:31,160 --> 00:25:34,640 Speaker 1: thanks for having me on, Paul, and and it might 480 00:25:34,640 --> 00:25:37,480 Speaker 1: have been true once upon a time, but it is 481 00:25:37,880 --> 00:25:41,960 Speaker 1: h not true today. And and in fact, the manufacturing vote, 482 00:25:42,040 --> 00:25:44,480 Speaker 1: the labor vote, as you refer to it, is very 483 00:25:44,560 --> 00:25:48,560 Speaker 1: much up for swing with one week out to the election, 484 00:25:48,760 --> 00:25:52,000 Speaker 1: and what our industry are looking for two point eight 485 00:25:52,040 --> 00:25:57,640 Speaker 1: million voters is concrete proposals from candidates up and down 486 00:25:57,720 --> 00:26:00,760 Speaker 1: the ballot on how to write are economic ship, how 487 00:26:00,840 --> 00:26:03,640 Speaker 1: to get the economy back up and running, and how 488 00:26:03,720 --> 00:26:07,120 Speaker 1: to make sure that our industry, manufacturing, US manufacturing continue 489 00:26:07,160 --> 00:26:10,840 Speaker 1: to drive the US economy. So, Kip, there was a 490 00:26:10,880 --> 00:26:14,840 Speaker 1: lot of, I guess discussion that during the beginning of 491 00:26:14,880 --> 00:26:18,960 Speaker 1: pandemic about reassuring or on shoring some of the manufacturing 492 00:26:19,440 --> 00:26:21,840 Speaker 1: that had been off short and we really felt the 493 00:26:21,880 --> 00:26:24,919 Speaker 1: pain when China shut down, for example, and we couldn't 494 00:26:24,920 --> 00:26:28,040 Speaker 1: get you know, chips and things like that. Is that 495 00:26:28,160 --> 00:26:32,160 Speaker 1: something that your members feel like it's a reality. Can 496 00:26:32,320 --> 00:26:35,960 Speaker 1: some of that manufacturing be brought back to the US. 497 00:26:37,240 --> 00:26:41,080 Speaker 1: It can? And And to address your your first point, 498 00:26:41,440 --> 00:26:45,240 Speaker 1: you know, we recently surveyed hundred top manufacturing CEOs and 499 00:26:45,320 --> 00:26:48,600 Speaker 1: they said that there is still an urgent need to 500 00:26:48,640 --> 00:26:53,760 Speaker 1: boast American competitiveness by addressing supply chain challenges still labor shortages, 501 00:26:54,080 --> 00:26:56,160 Speaker 1: and trade and balances. And if you do not address 502 00:26:56,240 --> 00:26:59,320 Speaker 1: those three things, it's going to continue to be difficult 503 00:26:59,680 --> 00:27:02,639 Speaker 1: for you as manufacturers to make things in America, you know, 504 00:27:02,680 --> 00:27:05,960 Speaker 1: in a competitive way. And so we have seen some 505 00:27:06,119 --> 00:27:09,880 Speaker 1: great improvements since the pandemic, but we are still not back, Paul, 506 00:27:09,960 --> 00:27:12,520 Speaker 1: to where we were in late and you know the 507 00:27:12,520 --> 00:27:15,359 Speaker 1: only way to do that is to again invest in 508 00:27:15,359 --> 00:27:17,600 Speaker 1: the American work or right shore up our supply chains. 509 00:27:17,640 --> 00:27:20,440 Speaker 1: We've seen some progress through some legislation that Congress passed 510 00:27:20,480 --> 00:27:23,920 Speaker 1: earlier this year, the Chips Act at the Oceanship were formact, 511 00:27:24,440 --> 00:27:27,399 Speaker 1: but you know, supply chains are still squishy, uh, And 512 00:27:27,440 --> 00:27:30,920 Speaker 1: you know we still have you know, shortages of skilled labor, 513 00:27:31,320 --> 00:27:33,320 Speaker 1: and you know we're still dealing with tariffs. So all 514 00:27:33,359 --> 00:27:36,720 Speaker 1: those three things are opportunities for candidates out on the 515 00:27:36,720 --> 00:27:39,480 Speaker 1: stump right now, you know, to talk to voters about 516 00:27:39,480 --> 00:27:41,640 Speaker 1: how they plan to address that. And unfortunately we're still 517 00:27:41,680 --> 00:27:43,960 Speaker 1: seeing a whole lot of polemics and not enough policy. 518 00:27:45,040 --> 00:27:47,320 Speaker 1: What about the f X picture of it, There seems 519 00:27:47,359 --> 00:27:50,720 Speaker 1: to be a lot of questions about whether or not 520 00:27:50,800 --> 00:27:53,440 Speaker 1: it actually makes sense to have a lot more near 521 00:27:53,440 --> 00:27:56,280 Speaker 1: shoring or manufacturing if there is still this long term 522 00:27:56,320 --> 00:27:59,200 Speaker 1: bowl case for the dollar. How does FEX play into 523 00:27:59,240 --> 00:28:02,119 Speaker 1: all of this? But that's a that's a great question 524 00:28:02,160 --> 00:28:06,359 Speaker 1: creating and I think look, anytime you can locate, in 525 00:28:06,400 --> 00:28:11,640 Speaker 1: our case, suppliers close to the manufacturing operations, that's always 526 00:28:11,680 --> 00:28:14,359 Speaker 1: going to be good news for our industry and for 527 00:28:14,520 --> 00:28:17,120 Speaker 1: US manufacturing as a whole. And I think the one 528 00:28:17,200 --> 00:28:19,560 Speaker 1: lesson that we've learned certainly as an industry coming out 529 00:28:19,560 --> 00:28:21,960 Speaker 1: of the pandemic is that, you know, there's been a 530 00:28:22,000 --> 00:28:24,560 Speaker 1: lot of advantages to global supply chains over the years 531 00:28:24,600 --> 00:28:27,600 Speaker 1: in terms of competitive pricing and being able to source 532 00:28:27,680 --> 00:28:31,000 Speaker 1: components from from different markets. So if one market is down, 533 00:28:31,040 --> 00:28:33,920 Speaker 1: you can pivot easily to another one. But that only 534 00:28:33,920 --> 00:28:37,359 Speaker 1: works if we can actually move goods seamlessly, you know, 535 00:28:37,400 --> 00:28:39,280 Speaker 1: from one part of the world to another, and I 536 00:28:39,320 --> 00:28:41,680 Speaker 1: think right now the jury on whether we can continue 537 00:28:41,720 --> 00:28:43,800 Speaker 1: to do so it's still out. So we are very 538 00:28:43,840 --> 00:28:46,120 Speaker 1: much looking as an industry at how can we both 539 00:28:46,160 --> 00:28:49,400 Speaker 1: the relationships with suppliers more locally, whether it's down the road, 540 00:28:49,720 --> 00:28:52,240 Speaker 1: whether it's you know, within the state, or whether it's 541 00:28:52,280 --> 00:28:54,920 Speaker 1: within the country. And French shoring certainly you know, placed 542 00:28:54,920 --> 00:28:56,880 Speaker 1: into that as well, but particularly with the sort of 543 00:28:56,880 --> 00:29:01,000 Speaker 1: geopolitical realignment that we're seeing right now, what going on Ukraine, 544 00:29:01,320 --> 00:29:04,280 Speaker 1: questions about China are the long term partner. You know, 545 00:29:04,320 --> 00:29:06,920 Speaker 1: more and more of our industries looking to move operations, 546 00:29:07,040 --> 00:29:11,480 Speaker 1: whether it's you know, manufacturing or suppliers from you know, Asia, 547 00:29:11,840 --> 00:29:15,680 Speaker 1: from other parts of Eastern Europe, Russia, back to the 548 00:29:15,760 --> 00:29:18,000 Speaker 1: US or back to friendly countries where we had long 549 00:29:18,080 --> 00:29:22,000 Speaker 1: term strategic relationships with kept talking us about the labor 550 00:29:22,080 --> 00:29:25,880 Speaker 1: situation in your industry among your members. Here we here 551 00:29:25,920 --> 00:29:29,800 Speaker 1: just time and time again from companies across the economic 552 00:29:29,840 --> 00:29:33,400 Speaker 1: spectrum and many different industries that it's just really really 553 00:29:33,400 --> 00:29:39,360 Speaker 1: difficult to attract and retain talent. How's it in your industries? Well, 554 00:29:39,400 --> 00:29:42,360 Speaker 1: looking at the next decade, Paul, we're facing up to 555 00:29:42,680 --> 00:29:45,160 Speaker 1: depending on again on obviously on the economic outlook for 556 00:29:45,160 --> 00:29:47,560 Speaker 1: our industry, but we could be facing a shortage of 557 00:29:47,680 --> 00:29:51,400 Speaker 1: up to a million UH, skilled laborers in our industry. 558 00:29:51,440 --> 00:29:53,320 Speaker 1: And you know, as you're trying to get back to 559 00:29:53,360 --> 00:29:55,560 Speaker 1: where we were before the pandemic. And by the way, 560 00:29:55,600 --> 00:29:57,960 Speaker 1: I should say demand for many of our members products, 561 00:29:57,960 --> 00:30:00,480 Speaker 1: it's through the roof. Many of them have all sold 562 00:30:00,520 --> 00:30:02,920 Speaker 1: out all their inventory for next year. UH. And the 563 00:30:02,960 --> 00:30:05,040 Speaker 1: only way that we can continue to to expand and 564 00:30:05,320 --> 00:30:08,840 Speaker 1: to capitalize on strong demand is through you know, the 565 00:30:08,840 --> 00:30:11,479 Speaker 1: skilled labor force. And it's just not there. And and 566 00:30:11,480 --> 00:30:13,320 Speaker 1: this is a big problem not just for our industry 567 00:30:13,320 --> 00:30:16,560 Speaker 1: but for US manufacturing. Not enough young people want to 568 00:30:16,640 --> 00:30:19,080 Speaker 1: explore careers in manufacturing and we've got to figure this 569 00:30:19,120 --> 00:30:21,560 Speaker 1: out as a country. How do we put a premium 570 00:30:21,920 --> 00:30:27,200 Speaker 1: on skilled labor, on learning a trade versus you know, 571 00:30:27,360 --> 00:30:29,880 Speaker 1: going through a four year you know, college degree. It 572 00:30:29,960 --> 00:30:32,240 Speaker 1: is not for everyone, and you know, if we pursue 573 00:30:32,280 --> 00:30:33,920 Speaker 1: that path, we're going to continue to be in a 574 00:30:33,920 --> 00:30:37,360 Speaker 1: world of hurt. So you're you you represent a trade 575 00:30:37,360 --> 00:30:41,440 Speaker 1: group that represents off road heavy equipment manufacturers across North America. 576 00:30:41,520 --> 00:30:44,560 Speaker 1: So would an example be a Caterpillar or a Deer 577 00:30:44,640 --> 00:30:46,800 Speaker 1: or something like that. Yeah, that's correct. We have a 578 00:30:46,800 --> 00:30:49,120 Speaker 1: thousand member companies ranging from those two that you just 579 00:30:49,160 --> 00:30:50,720 Speaker 1: mentioned all the way down to a lot of small 580 00:30:50,800 --> 00:30:54,440 Speaker 1: family owned companies that make both equipment and parts. So 581 00:30:54,600 --> 00:30:57,680 Speaker 1: is that I mean in terms of feeling that labor need, 582 00:30:57,760 --> 00:31:01,280 Speaker 1: is that you know, you know, may be increasing support 583 00:31:01,320 --> 00:31:04,720 Speaker 1: for trade schools or just the trades within the high 584 00:31:04,760 --> 00:31:07,000 Speaker 1: school situation, because we hear the same thing from lots 585 00:31:07,040 --> 00:31:10,800 Speaker 1: of other industries, whether it's a transportation industry or others. Yeah, 586 00:31:10,800 --> 00:31:13,400 Speaker 1: it's it's all above right, It's it's more support, more 587 00:31:13,440 --> 00:31:17,760 Speaker 1: investment in community coologists, in trade schools, um in apprenticeship 588 00:31:17,760 --> 00:31:20,400 Speaker 1: program we our industry has had some success with that, 589 00:31:20,680 --> 00:31:22,520 Speaker 1: but we need more of it. But I think it's 590 00:31:22,560 --> 00:31:26,640 Speaker 1: also shift uh in in people's outlook on education, what 591 00:31:26,680 --> 00:31:28,480 Speaker 1: it means to have a good education. And I think 592 00:31:28,680 --> 00:31:31,320 Speaker 1: you know, what was true two decades, three decades, four 593 00:31:31,360 --> 00:31:33,480 Speaker 1: decades ago is no longer true. You can have a 594 00:31:33,520 --> 00:31:37,200 Speaker 1: great career in manufacturing our industry past above the national 595 00:31:37,240 --> 00:31:40,040 Speaker 1: average UM, and you can get a job right now, Paul, 596 00:31:40,080 --> 00:31:42,240 Speaker 1: if you walked into a member company and you said 597 00:31:42,240 --> 00:31:44,600 Speaker 1: you wanted to become a welder, they will train you 598 00:31:44,640 --> 00:31:47,200 Speaker 1: while paying your full salary and benefits, and you will 599 00:31:47,200 --> 00:31:49,000 Speaker 1: have a guarantee job after a year when you know 600 00:31:49,000 --> 00:31:50,480 Speaker 1: how to well. I mean, those are the kinds of 601 00:31:50,560 --> 00:31:52,600 Speaker 1: jobs that we need to create more of in this country. 602 00:31:52,840 --> 00:31:55,920 Speaker 1: All right, Kip, good stuff. They're appreciate getting your perspective there. 603 00:31:56,360 --> 00:32:00,000 Speaker 1: Kip Idberg a senior vice president Government and industry Relations 604 00:32:00,240 --> 00:32:04,200 Speaker 1: for the Association of Equipment Manufacturers again the off road 605 00:32:04,640 --> 00:32:08,360 Speaker 1: heavy equipment that's across North America. Again, they have over 606 00:32:08,440 --> 00:32:12,040 Speaker 1: one thousand company members across two product lines, so they 607 00:32:12,080 --> 00:32:15,959 Speaker 1: represent a pretty big swath of the labor force in 608 00:32:15,960 --> 00:32:22,480 Speaker 1: industrial America. Thanks for listening to the Bloomberg Markets podcast. 609 00:32:22,880 --> 00:32:26,080 Speaker 1: You can subscribe and listen to interviews with Apple Podcasts 610 00:32:26,200 --> 00:32:30,120 Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm 611 00:32:30,120 --> 00:32:34,160 Speaker 1: on Twitter at Matt Miller three. Put on fall Sweeney 612 00:32:34,200 --> 00:32:36,840 Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you 613 00:32:36,840 --> 00:32:39,240 Speaker 1: can always catch us worldwide at Bloomberg Radio