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Speaker 2: Tesla moving over sharp turn, there's settling on the Nueva
Speaker 2: Leon site in northern Mexico for its next massive car plant.
Speaker 2: Only nine months ago, politicians and executives actually hailed it
Speaker 2: as a paragon of near shoring, the idea that international
Speaker 2: companies will set up much more of their production in
Speaker 2: Mexico to be closer to the US. Tim So the
Speaker 2: company investment in the country is expected to reach about
Speaker 2: ten billion dollars over multiple phases. But construction of this factory,
Speaker 2: which had been slated to make Tesla it's cheaper next
Speaker 2: generation vehicles, is delayed due to Elon Musk's misgivings about
Speaker 2: the global economy. Other problems, including permitting delays and a
Speaker 2: dearth of infrastructure, have plagued the process. So joining us
Speaker 2: to walk us through some of these issues here. Amy
Speaker 2: Stillman is Bloomberg News Mexico business reporter, and she spoke
Speaker 2: to some locals who are now lowering their expectations as
Speaker 2: the carmaker has held off on starting construction. So Amy
Speaker 2: is joining us on Zoom from Mexico City walk us
Speaker 2: through these issues. How did we get to this point?
Speaker 3: Amy, great?
Speaker 4: Thank you, Jess.
Speaker 5: Yes, well, certainly, when it was first announced that Tesla
Speaker 5: would be setting up a factory in Mexico at the
Speaker 5: start of March, people were very excited. The local politicians,
Speaker 5: you know, held it as the beacon of near shoring
Speaker 5: that you know, this is going to bring a huge
Speaker 5: amount of investment to Mexico, and it was also viewed
Speaker 5: by residents in the area as a great boon for
Speaker 5: the local economy.
Speaker 4: Now fast forward about you know, nine.
Speaker 5: Months or so, where we're at at now, and really
Speaker 5: there's been no activity whatsoever.
Speaker 4: I went and visited the site.
Speaker 5: It's essentially, you know, sort of desert along the highway
Speaker 5: with cactuses and no real construction going on. And one
Speaker 5: of the issues is is that Tesla is still yet
Speaker 5: to receive certain federal and state permits for the construction.
Speaker 4: They have received a.
Speaker 5: Permit for the land use, which is a very very
Speaker 5: recent phenomenon that just happened this week. But essentially there
Speaker 5: is an issue around delays to permits as well as
Speaker 5: a lack of infrastructure. Elon Muss has requested that the
Speaker 5: government help in terms of road infrastructure. There's another issue
Speaker 5: around water access as well. And then you add those
Speaker 5: issues happening in Mexico to the fact that the global
Speaker 5: economy isn't doing as well that Elon Muss doesn't see
Speaker 5: as much demand. So there's really been quite a significant
Speaker 5: change in the.
Speaker 4: Way that Tesla has been viewing Mexico.
Speaker 6: What would you say is the biggest factor here? Does
Speaker 6: it come from Tesla amy or is it coming from
Speaker 6: the Mexican government given that the company is looking for
Speaker 6: concessions here that perhaps the government isn't willing to just
Speaker 6: hand out.
Speaker 4: That's a great question, and certainly it's nuanced. You have
Speaker 4: a few opposing forces.
Speaker 5: The local state government is extremely keen on Tecla coming.
Speaker 5: In addition to that that that permit that I mentioned
Speaker 5: that was recently approved, the state government has also just
Speaker 5: said that they're going to provide one hundred and fifty
Speaker 5: three million dollar incentive for Tesla to come to, you know,
Speaker 5: to help with the road infrastructure, and also a reduction
Speaker 5: in the taxes around the payroll. You know, they've they've
Speaker 5: done a ton that the governor has done a ton
Speaker 5: in terms of advertising around the fact that Tesla is coming.
Speaker 5: At the same time, the federal government has really tried
Speaker 5: to push forward development of the south of Mexico, not
Speaker 5: the north, which is where Tesla is headed. And you know,
Speaker 5: there's been some concerns from the federal government that perhaps
Speaker 5: the investment should be in this other.
Speaker 4: Part of Mexico where there's more poverty.
Speaker 5: So there are some questions around whether the federal government
Speaker 5: will throw its full weight to bring Tesla over now
Speaker 5: when it comes to Elon Musk, certainly, you know, he's
Speaker 5: seemed very enthusiastic about the project. It does raise a
Speaker 5: few questions whether perhaps some of the difficulties that they've.
Speaker 4: Seen have you know, changed his mind. He did announce
Speaker 4: in a recent.
Speaker 5: Interview that they're going to be working on the next generation,
Speaker 5: more affordable entry level vehicle from Texas first and then
Speaker 5: Mexico because.
Speaker 4: The plant won't be ready. So it's a little bit
Speaker 4: of both sides.
Speaker 2: What do you think the potential repercussions for Tesla would
Speaker 2: be when it comes to production, right.
Speaker 5: Well, I think certainly we're going to see you know,
Speaker 5: a delay with the production. You know, there were some
Speaker 5: speculation about whether the plant would be built at all.
Speaker 5: It certainly seems that you know, Tecla will continue to
Speaker 5: pursue this, that it will be constructed. But certainly the idea.
Speaker 4: Here, what local officials have said.
Speaker 5: In the beginning was that you know, we were going
Speaker 5: to see production start possibly in twenty twenty four next year.
Speaker 5: Now they're pushing that number back out to twenty twenty five,
Speaker 5: possibly even twenty twenty six, So that would certainly affect
Speaker 5: the rollout of this new generation vehicle. Much will obviously
Speaker 5: depend on, you know, how quickly they can can get
Speaker 5: the factory.
Speaker 6: Up and running and give us an idea of what's
Speaker 6: at stake here. I mean, after all, auto factory is
Speaker 6: something that politicians in the US fight over against one
Speaker 6: another because the economic impact of something like this can
Speaker 6: be so huge. It's not just the people who are
Speaker 6: hired at the plant, it's the ripple effects throughout a
Speaker 6: local economy of those you know, high paying jobs. What's
Speaker 6: at stake here?
Speaker 4: Yes, well that's certainly very much the case.
Speaker 5: And you know, as I said, uh, the Tesla Tesla
Speaker 5: plant has really been the poster boy for this this
Speaker 5: move toward nearshoring, which is, you know, companies looking to
Speaker 5: invest closer to the US. And certainly if this plant,
Speaker 5: you know, doesn't get up and running, that.
Speaker 4: Will look pretty poor.
Speaker 5: It doesn't bode well for other companies that are looking
Speaker 5: to set up here. At the same time, what we've
Speaker 5: seen is a real huge influx of suppliers to Tesla
Speaker 5: that a lot of companies have come over, especially from
Speaker 5: China and other places, to be able to supply Tesla
Speaker 5: in Mexico. So they're they're starting to set up so
Speaker 5: it will be very interesting to see as well, you know,
Speaker 5: whether they're going to be able to continue with their plans.
Speaker 4: One company in particular that I spoke with.
Speaker 5: Yan Lun from China, you know, had said that, well,
Speaker 5: right now we're supplying to they're they're Austin factory, you know,
Speaker 5: but but we set.
Speaker 4: Up here for the Mexico factory.
Speaker 5: So I'm I'm sure they're also you know, highly anticipating
Speaker 5: that Tesla will get started. At the same time, you know,
Speaker 5: the residents, as I mentioned, were very excited about the
Speaker 5: rival of Tesla. There's still cautious optimism that this will
Speaker 5: help propel the local economy, help create jobs, not just
Speaker 5: in the Tesla factory, as you pointed out, but also
Speaker 5: you know, all the suppliers that are living in all
Speaker 5: of the supply chain that will require employees.
Speaker 2: And you're speaking about those local residents, what are some
Speaker 2: of their top questions right now in the wake of
Speaker 2: all of this unraveling.
Speaker 5: Well, certainly a big question is how soon will will
Speaker 5: Tesla get.
Speaker 4: Up and running. I think that's that's definitely on everybody's minds.
Speaker 4: At the same.
Speaker 5: Time, you know, there are certain questions around also, you know,
Speaker 5: the the talent, the labor pool. Residents are very excited
Speaker 5: about the opportunity to work for Tesla.
Speaker 4: I've also spoken to some some local business owners.
Speaker 5: Funnily enough, there are some competing businesses that are less excited.
Speaker 5: They're worried about the you know, the talent being being
Speaker 5: suctioned up by the the Tesla factory.
Speaker 4: So there are some competing competing forces.
Speaker 5: But certainly overall, people are people are waiting, people are excited.
Speaker 4: They hope that that you know, more jobs will come.
Speaker 6: Yeah, I guess the question that I have is, you know,
Speaker 6: what kind of moves the needle here. What are you
Speaker 6: watching to see whether or not this is this factory
Speaker 6: actually happens. Is it a global change and demand for EV's.
Speaker 6: It's something that we've covered a lot here, especially when
Speaker 6: it comes to American companies like gm Ford and Tesla
Speaker 6: facing waiting demand or is it something that comes from
Speaker 6: I don't know, perhaps something else. I mean, at the
Speaker 6: end of the day, Elon Musk is the one who
Speaker 6: makes this decision amy.
Speaker 5: Of course, of course, and and I think certainly you know,
Speaker 5: there are pressures to get moving on on electric vehicle production.
Speaker 5: Tesla is not the only company you mentioned a few
Speaker 5: others that has said that they would look to EV
Speaker 5: production in Mexico. You know, we've seen a lot of
Speaker 5: big players BMW for the few others that have also
Speaker 5: you know, said that they.
Speaker 4: Would be looking to EV production.
Speaker 5: I think a lot of those big companies are waiting
Speaker 5: to see what happens with Techla as well, to see
Speaker 5: whether Tecla can achieve this goal.
Speaker 4: Will they move a bit quicker.
Speaker 5: At the same time, you've got a pretty strong competition
Speaker 5: from some Chinese players like BYD.
Speaker 4: You know, Tesla and BYD have been neck and neck,
Speaker 4: and that.
Speaker 5: Will certainly that will certainly play out in Mexico, where
Speaker 5: BYD has announced recent partnerships in Mexico, is selling currently
Speaker 5: selling vehicles.
Speaker 6: Whatever whatever happens, we're going to be sure to have
Speaker 6: to check in with you. That's Amy Stillman joining us
Speaker 6: live on zoom from Mexico City. Check out her story
Speaker 6: and more on the Bloomberg terminal and at Bloomberg dot Com.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 6: Well, it's been a whild year for Crypto Jeazz. I
Speaker 6: think it's fair to say that at the end of
Speaker 6: every single year, but there were some things that made
Speaker 6: this year unique. There were some arrests, there were multiple bankruptcies,
Speaker 6: and then of course Sam Bankment Freed is in jail
Speaker 6: right now after being found guilty of stealing customer funds.
Speaker 6: He's awaiting sentencing in March. If any year should have
Speaker 6: out betted this sector, this one would have been it.
Speaker 6: And yet it didn't actually happen because we have this
Speaker 6: crypto comeback, brewing bitcoins value briefly surpassing forty four thousand
Speaker 6: dollars earlier this month. That's its highest point in more
Speaker 6: than a year, fueled by all this anticipation over eight
Speaker 6: possible sec approval of a Bitcoin ETF. Joining us not
Speaker 6: a dig deeper into the future of cryptos Ophelia Snyder,
Speaker 6: co founder of twenty one co, who joins us on
Speaker 6: zoom from New York City. Good to have you with us, Ophelia.
Speaker 6: How are you.
Speaker 3: I'm very well, Thank you, Thank you for having me.
Speaker 6: So how would you characterize the state of crypto right now?
Speaker 6: And you know, I don't want to conflate crypto and bitcoin,
Speaker 6: which a lot of people certainly do. Bitcoin is a cryptocurrency,
Speaker 6: But I think a lot of the optimism that we've
Speaker 6: seen in crypto this year has been the result of
Speaker 6: optimism over bitcoin.
Speaker 7: So I think optimism is probably a good way of
Speaker 7: describing the current state of crypto markets. I think we've
Speaker 7: had a very long and quite transparently, quite brutal winter
Speaker 7: across the space.
Speaker 3: I mean, you guess we're just talking about some.
Speaker 7: Of these things, but it seems like now a lot
Speaker 7: of that has shaken out, there's a lot less regulatory
Speaker 7: uncertainty about some of the large players Coidmese, Finance, some
Speaker 7: of these large names. We're starting to see a lot
Speaker 7: less uncertainty around. You've seen a lot of the bad
Speaker 7: actors get shaken out, and we've seen the industry really
Speaker 7: consolidate and double down, and I think you're seeing now
Speaker 7: the fruits of basically eighteen months of people working on things.
Speaker 7: I think bigcoins certainly leading some of that narrative today
Speaker 7: between the having THETF and some of the interesting market
Speaker 7: dynamics that have happened there.
Speaker 3: But I think it's broadly true across the industry.
Speaker 2: Like you were mentioning aphilia, we're waiting on the possibility
Speaker 2: of the SEC approval of a bitcoin ETF How much
Speaker 2: of that do you think has been priced into some
Speaker 2: of these crypto coins, including bitcoin, and how much more
Speaker 2: and potential further room could there be for an asset
Speaker 2: class like that.
Speaker 7: So I think people have to some extent priced in
Speaker 7: the expectation of an approval, but I think there's a
Speaker 7: little bit of mispricing there still, the reason being crypto
Speaker 7: doesn't really has never really seen big American style asset
Speaker 7: management money, it's ever been possible really for them to
Speaker 7: enter space.
Speaker 3: There's been a little bit.
Speaker 7: Of Oria money, there's been a little bit of sort
Speaker 7: of other institutional money, but it's tiny compared to you know,
Speaker 7: what is a couple of basis points on a multi
Speaker 7: trillion dollar industry. It's very different and so quantum larger
Speaker 7: than most market participants in crypto currently have ever seen
Speaker 7: in terms of what that allocation really looks like once
Speaker 7: you start to get away from pure play retail or
Speaker 7: ultra sophisticated institutions. So I think the issue is to
Speaker 7: some extent, yes, to some extent no, I think it's
Speaker 7: going to take longer to see that money come in
Speaker 7: than most people are currently expecting, but I think it
Speaker 7: will be larger than what most people are currently expecting.
Speaker 6: What makes you say that, Aphelia, Because I'm wondering that
Speaker 6: it's not like bitcoin has been inaccessible to people at
Speaker 6: this point, and to traders, they're really looking forward to
Speaker 6: ETFs just for trading and what they can do with those.
Speaker 6: But are there really people on the side lines right
Speaker 6: now who haven't, who are interested in getting into crypto
Speaker 6: who haven't.
Speaker 7: So think about it really simply most people don't manage
Speaker 7: their own money, right, whether that's your for A one
Speaker 7: K or your IRA, or you know, you're working with
Speaker 7: a financial advisor of some kind, or you know, your
Speaker 7: local RAA wherever that it is that you are. None
Speaker 7: of those structures have ever been able to really access
Speaker 7: this space. It's really difficult for an advisor to you know,
Speaker 7: support a client making that allocation. Historically, that's just been
Speaker 7: I'm so sorry, we can't help you.
Speaker 3: Fry Coinbase.
Speaker 7: It's very different when an advisor can actually make a
Speaker 7: strategic allocation, or a client can request this a strategic
Speaker 7: allocation from their advisor, the very different structure to that.
Speaker 7: So it's not people waiting on the sidelines per se.
Speaker 7: It's just most people's money is tied up in other ways.
Speaker 7: And you know, I set up my entire company with
Speaker 7: the goal of helping my mom get into the space.
Speaker 7: She started talk to me about this in twenty fourteen, saying,
Speaker 7: you know, there's this really cool thing called bitcoin.
Speaker 3: Have you heard of it? I have no idea what
Speaker 3: you're talking about it, but.
Speaker 8: He's the one who told you about it. Yeah, that's
Speaker 8: a that's pretty amazing.
Speaker 6: Yeah, tell us a little more about that, because that's
Speaker 6: not typically something we hear.
Speaker 7: Right, My mom's brilliant and came to me one day
Speaker 7: and said, MERK spent too much money on hedging, and
Speaker 7: global monetary policy is too reliant on an assumption of
Speaker 7: geopolitical stability to work long term. We need an alternative.
Speaker 7: It's going to help ensure better cross border trading and
Speaker 7: be a long term tool for economic stability and peace.
Speaker 7: Have you heard of a thing called bitcoin? Like, I
Speaker 7: have no idea what you're talking about, but okay, And
Speaker 7: that's actually how I started looking at crypto. But my mom, interestingly,
Speaker 7: despite completely getting the point both on the monetary policy
Speaker 7: perspective as well as on the floor X side, she
Speaker 7: never actually made the allocation.
Speaker 3: The reason she didn't make.
Speaker 7: The allocation is that there is no way within her
Speaker 7: existing financial infrastructure, you know, the way she does her
Speaker 7: tax reporting, the way she works with her advisors, that
Speaker 7: was going to make it possible for her to come
Speaker 7: into the space, at least not in a way that
Speaker 7: she felt comfortable with, both from a technology perspective, but
Speaker 7: also like purely from an infrastructure perspective, And that applies
Speaker 7: to both a lot of individuals but also applies to.
Speaker 3: Things like funds. It's really hard.
Speaker 7: To trade in custody of crypto from a fiduciary perspective,
Speaker 7: like the level of engagement that you need with your infrastructure,
Speaker 7: and I know that is a permanently unsexy thing to
Speaker 7: think about, but tax reporting and custodial and trading infrastructure
Speaker 7: is a huge part of what these fiduciaries need to provide,
Speaker 7: and they need to provide it to a certain level.
Speaker 7: And it's a completely different piece of infrastructure. It's not
Speaker 7: as simple as well, you want it, we can sell
Speaker 7: it to you. There's always been a bunch of gates
Speaker 7: to this, and we've certainly seen that in Europe, where
Speaker 7: you know, we've been operating for the last five years
Speaker 7: and selling quite frankly similar.
Speaker 3: Products to what's being contemplated in the US.
Speaker 7: And we see a lot of our clients being people
Speaker 7: for whom you know, buying direct physical is just either
Speaker 7: not what they want to do or.
Speaker 3: Not an option.
Speaker 2: Well, talk to us about regulation because that's still pending
Speaker 2: in Washington and the risks because there's still a lot
Speaker 2: of skepticism when it comes to institutional adoption for crypto.
Speaker 7: Yes there is, and I think that it is changing.
Speaker 7: You know, when I when I started talking to large
Speaker 7: institutions about crypto and blockchain and bitcoin five years ago,
Speaker 7: everyone looked at me like I was completely out of
Speaker 7: my mind and that this was just not something didn't
Speaker 7: make any sense. Are you one hundred percent sure that
Speaker 7: you know this exists?
Speaker 4: How?
Speaker 3: How can you even have a digital asset? What does
Speaker 3: that mean?
Speaker 7: You know, there were a lot more questions on basic
Speaker 7: viability and whether or not we were just nuts. I
Speaker 7: think that is no longer the case. I don't think
Speaker 7: really the doubts around you know, whether or not this
Speaker 7: asset's going to exist, going to continue to be built out.
Speaker 7: The value of watching two institutions, the value of smart
Speaker 7: contracts to institutions, and I think that's especially true in
Speaker 7: terms of ethereum.
Speaker 3: And you're starting to see, you.
Speaker 7: Know, large asset managers bring tokenization projects forward. You're starting
Speaker 7: to see more utility and cross border payments. You're starting
Speaker 7: to see real use cases and everything from financial services.
Speaker 3: To video games.
Speaker 7: And I think that's really exciting and it's changed the
Speaker 7: dialogue because now there's a real thematic here, and there's
Speaker 7: a real proven use case that's not solely contained to
Speaker 7: the crypto world.
Speaker 6: Well, really appreciate you joining us this after noon. That's
Speaker 6: Ophilia Snyder, co founder of twenty one Code, joining us
Speaker 6: on zoom from New York City again. To get crypto
Speaker 6: on the Bloomberg terminal prices, just get up the dashboard
Speaker 6: ceryp go on the Bloomberg terminal. Bitcoin now at about
Speaker 6: forty and forty four dollars.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 5: Well.
Speaker 6: The MSCI Asia Pacific Index rallied nearly three percent this week.
Speaker 6: It was led higher by Australian, Korean, and Chinese shares
Speaker 6: as tech stalks climbed. Bonds rallied through the region, including
Speaker 6: in Japan and Indonesia.
Speaker 8: It's a sign that.
Speaker 6: Global investors are becoming comfortable with risk your assets this
Speaker 6: after being cautious on investing in Asia over the past decade.
Speaker 6: As the investors do with deglobalization and slower economic growth
Speaker 6: in the region. Joining us now in the Bloomberg Interactor
Speaker 6: Broker studio is somebody we check in with every few months.
Speaker 6: John Whihar is head of Asians Asia Special Situations for
Speaker 6: Pick Day Asset Management, usually based in Singapore, but when
Speaker 6: he comes to the US we like to get him
Speaker 6: in the Bloomberg Interactive Broker's studio. It's good to see you.
Speaker 8: How are you great?
Speaker 9: Thank you, how are you doing well?
Speaker 8: Things? What brings you to New York every few months?
Speaker 9: A couple of things, Meeting investors, talking to investors, research,
Speaker 9: touching base with brokers and lost those kinds of things. So, yeah,
Speaker 9: always a good trip. And I lived here for a while,
Speaker 9: so a bit.
Speaker 6: Of social How has the tone or the reception been
Speaker 6: this trip versus last time you were here a few
Speaker 6: months ago, because a lot has changed since then.
Speaker 9: You know, a lot's changed, But one thing that hasn't
Speaker 9: changed is the sentiment around China. So sentiment around China
Speaker 9: is pretty bad. It's pretty low, and we certainly haven't
Speaker 9: seen a tick up there yet. I think there's quite
Speaker 9: a lot of apathy. Positioning is about as bad as
Speaker 9: I've ever seen it, And so you know, I think
Speaker 9: we're sort of waiting for that to defy itself.
Speaker 8: Is it uninvestable China?
Speaker 9: I don't think it's uninvestable. I don't think that at all.
Speaker 9: I mean, hey, it's still in the world's second largst economy,
Speaker 9: second large stock market, So I don't think uninvestable is
Speaker 9: the right way. But there are risks and certainly if
Speaker 9: you look at macroeconomically what's happening there, there are challenges
Speaker 9: that are giving pause for thought for investors.
Speaker 2: So recently though, what sort of driving things when you
Speaker 2: have a backdrop of the past decade that has been
Speaker 2: so tough for equities in Asia.
Speaker 9: Look, I think the main thing that investors really want
Speaker 9: to understand is the geopolitical and that's obviously also the
Speaker 9: hardest as well. It's very unpredictable, and so you know,
Speaker 9: when investors are trying to frame their investment views around Asia,
Speaker 9: obviously you start with China and you try to understand
Speaker 9: what risks are from the geopolitical perspective. And I think
Speaker 9: that's still something that people don't understand. It's hard to unpack.
Speaker 9: It's changing very quickly, and as a result, with the
Speaker 9: macro backdrop also being challenged, people are saying, we're sort
Speaker 9: of happy it's sit on the sidelines at the moment.
Speaker 6: What it's twenty five look like? I mean, what are
Speaker 6: the opportunities that you're presenting right now to clients? Where
Speaker 6: do you see room to run?
Speaker 9: Look, I think the first thing to say is that
Speaker 9: China is not dead by any means. There are opportunities
Speaker 9: in China. As I said, you know, we are talking
Speaker 9: about a very large economy and we are talking about
Speaker 9: a lot of consumers there. So there are opportunities, and
Speaker 9: certainly we agree that you know, you, Paul, we need
Speaker 9: a little bit more nuanced in the way that you
Speaker 9: do invest in China rather than perhaps just directionally. But
Speaker 9: the story of twenty to four will most likely be
Speaker 9: Japan as simple as that. Japan. We're seeing a lot
Speaker 9: of regular reform happening in Japan right now, listing rules
Speaker 9: around the TSC focused on your price to book improvement ROI,
Speaker 9: these kinds of things, and so you know, there's a
Speaker 9: lot happening in Japan that that's happening from the ground
Speaker 9: up level, from the corporate level. That is really exciting
Speaker 9: people because we're starting to see a cheap market and
Speaker 9: market that's historically cheap. Finally, unlocking value with the corporate level, Is.
Speaker 6: It hard to convince investors to allocate enough to Asia
Speaker 6: given that there has been in recent years such a
Speaker 6: history of our performance when it comes to us, Actually.
Speaker 9: Exactly exactly right, I mean that is that's the bug bear.
Speaker 8: I mean, that's got to be one of your biggest one.
Speaker 9: Hundred percent, one hundred percent. Look at the end of
Speaker 9: the day, why if it don't break wide and you
Speaker 9: don't fix it. I mean, if you look at what's
Speaker 9: happening right now in the US markets, I mean, why
Speaker 9: would you Why would you take money out of the
Speaker 9: US markets?
Speaker 8: Really make your job easier?
Speaker 9: It doesn't make my job any easier, but also it
Speaker 9: creates that creates opportunities as well. So there's still value
Speaker 9: opportunities out there. There's still a lot of events driven
Speaker 9: situations that are interested to us. You get stocks that
Speaker 9: do large buybacks or take over as MBOs, these kinds
Speaker 9: of things. There are opportunities there regardless of who's involved.
Speaker 9: So you know that's interesting to us, and that's why
Speaker 9: you are seeing these high loves of transactions because of
Speaker 9: that apathetic market.
Speaker 2: What are some of the top questions and concerns that
Speaker 2: you hear from your clients.
Speaker 9: I think in regards to Japan, the question that you
Speaker 9: always get is why is it different this time? We've
Speaker 9: seen these instances before, as we know around aber Nomics
Speaker 9: twenty fourteen saw the market move up brevery sharply, not
Speaker 9: just to give a pullback a few months afterwards. So
Speaker 9: there is that level of skepticism. But ironically that skepticism
Speaker 9: exists both from international investors and the local investors themselves.
Speaker 9: But it's worth noting that the regulators in the Tokyo
Speaker 9: Stock Exchange METI and even Kausheta sign himself, the PM,
Speaker 9: they're very focused on making it different this time, and
Speaker 9: so they're approaching They're approaching it from an angle of
Speaker 9: corporate form, creating companies that are that are more robust,
Speaker 9: balance sheets that are more streamlined, and ultimately focusing on
Speaker 9: shaholder engagement, shoholder returns and ultimately efficient markets.
Speaker 6: John, when do you think you'll come back here and
Speaker 6: sit down with us and say, the last year in
Speaker 6: China was a very good year.
Speaker 9: I mean, I hope it's next year, but like ultimately
Speaker 9: it's it's really difficult to tell.
Speaker 6: I think is the government setting it up for that,
Speaker 6: for that for twenty twenty four to be that. Are
Speaker 6: they doing the right kind of reforms? Are they doing
Speaker 6: the kind of stimulus?
Speaker 9: Great question. I don't think we're seeing that yet. I
Speaker 9: don't think that's clear.
Speaker 8: I think they're really targeted.
Speaker 9: It has been very targeted. There's been there has been
Speaker 9: loosen but ultimately we have not seen this, you know
Speaker 9: quotation fingers a bazooka stimulus that people have been waiting for,
Speaker 9: and that may be a red herring itself, so you know,
Speaker 9: we're all waiting. I think ultimately what we'd really love
Speaker 9: to see is the throwing of geopolitical relations, the thawing
Speaker 9: of the of the standoff that we've seen, but it's
Speaker 9: just difficult to see with you know, eleven months out
Speaker 9: from an election. This is an election talking point, so
Speaker 9: you know, I mean, we're ever hopeful, evergreen, But you know,
Speaker 9: I don't think, you know, I don't think there's anything
Speaker 9: immediate that gives us anything that to be spactaically bullsh about,
Speaker 9: at least directionally other than positioning, I should.
Speaker 2: Say, right, and especially when you're talking about sort of
Speaker 2: different conflicts where they're thinking about when it comes to
Speaker 2: the US versus what's going on with Beijing. What about
Speaker 2: when it comes to those repercussions, particularly with industries like
Speaker 2: chip makers, technology stocks, which really took off this year
Speaker 2: after getting so hit hard last year. How do you
Speaker 2: view that, particularly when it comes to Asia equities.
Speaker 9: Yeah, so, I mean, look, we really are seeing a
Speaker 9: bipolarization of the world and technology along with that. So
Speaker 9: it's it's very very clear. The big beneficiaries of this
Speaker 9: whole sort of decoupling have been the US chip companies,
Speaker 9: Taiwanese companies as well, obviously TSMC, and then as a
Speaker 9: derivative to that, the Japanese technology guys as well. So
Speaker 9: we are seeing we are seeing winners and we are
Speaker 9: seeing losers from that. But you know, it's not just
Speaker 9: the American hip guys that are that are winning here,
Speaker 9: it is the others as well. It's it's it's the Taiwanese,
Speaker 9: the Japanese as well. And not to mention, you know,
Speaker 9: we've got a lot of investment in semiconductors and technology
Speaker 9: into Southeast Asia as well, So you look at places
Speaker 9: like Malaysia that's becoming a kind of a semi hub
Speaker 9: as well. There's a lot of investment going south. And
Speaker 9: then obviously the big grill in the room is India
Speaker 9: have a lot of growth happening and you're not necessarily
Speaker 9: in the semiconductor space, but a lot of a lot
Speaker 9: of growth happening in You're.
Speaker 8: A lot of investors helping. It's the next China.
Speaker 9: I mean, you know, the GDP print was brilliant, so
Speaker 9: GEDI prooping the other day.
Speaker 8: But you know, John, we love it when you join us.
Speaker 8: We got to run.
Speaker 6: John Whittier is head of Asian Special Situations for PEA
Speaker 6: Day Asset Management, joining us here in.
Speaker 8: The Blueberg Interactive at broker's studio.
Speaker 4: M Marco.
Speaker 5: A journal.
Speaker 4: Bet you let me drive?
Speaker 9: Oh no, no, no, no, honey, please, I'll travel.
Speaker 8: I want to drive.
Speaker 4: It's the question.
Speaker 8: This is the drive to the clothes.
Speaker 1: We'll bach other down on Bluemberg Radio.
Speaker 8: Well here we are hard to believe.
Speaker 6: It's already close to the end of another week and
Speaker 6: it's another week of green.
Speaker 8: Look at that so much green.
Speaker 6: Yeah, the SEB five hundred, It is on track for
Speaker 6: it's seventh straight week of gains. That if it holds,
Speaker 6: which it looks like it will, would be its longest
Speaker 6: winning streak going all the way back to two thousand seventeen.
Speaker 8: Yeah, look at that.
Speaker 6: We'll see if it will see if what happens next week.
Speaker 6: Let's go to our drive of the closed guest. We
Speaker 6: got Brook May, managing partner at Evans May Wealth, joining
Speaker 6: us on a zoom from Carmel, Indiana.
Speaker 8: Good to have you with us, Brooke. How are you well?
Speaker 10: Thank you?
Speaker 8: How are you doing pretty well?
Speaker 6: Did this rally starting back in October on October twenty seventh,
Speaker 6: up about fifteen percent on the S and p fford
Speaker 6: since then?
Speaker 8: Did this catch you off guard.
Speaker 2: A little bit?
Speaker 10: We were optimistic going in to your end. It tends
Speaker 10: to be a good time for the market. November and
Speaker 10: December tend to be the to of the best months,
Speaker 10: so weren't completely cough guard, but fifteen percent, that's more
Speaker 10: than we expected.
Speaker 5: Brooke.
Speaker 2: Whenever I spoke with you in the last couple of weeks,
Speaker 2: you were talking about leading into this FED decision earlier
Speaker 2: this week, that the FED fears that any signal from
Speaker 2: policy makers that area could be coming may cause another
Speaker 2: big rally and asset prices. And we got a big
Speaker 2: rally there. But what's your take on the way that
Speaker 2: tones of Pal's tone was in this particular speech, because
Speaker 2: a lot of people were thinking he would push back
Speaker 2: harder against that, but not quite as much ended up
Speaker 2: as people and investors were thinking.
Speaker 10: Yeah, I was in that hawkish camp. I thought that
Speaker 10: the comments were going to be airing on the side
Speaker 10: of caution to ensure that we didn't get that asset
Speaker 10: price elevation that that we we saw. So his comments,
Speaker 10: you know, indicating that rate hikes will be coming, obviously,
Speaker 10: the market responded favorably. He didn't say when, though, And
Speaker 10: I think that a lot of good poisterres have started
Speaker 10: to price in the first quarter, and I don't think
Speaker 10: that'll be the case unless we see unemployment tick above
Speaker 10: four percent.
Speaker 9: I think that I don't think.
Speaker 6: I don't think that is going to cut rates in
Speaker 6: the first quarter unless unemployment goes above four percent, I don't.
Speaker 10: I think they're going to take the opportunity to be patient.
Speaker 10: We're clearly now on that path to two percent, which
Speaker 10: is the phrase that they had been using for several quarters.
Speaker 10: We're on the path at this point, there's no question.
Speaker 10: And so are they going to wait until we get
Speaker 10: to two percent? Probably not, but they're going to have
Speaker 10: the ability to be patient if unemployment stays sub four percent,
Speaker 10: and right now, with the economy looking the way that
Speaker 10: it is, it's very possible.
Speaker 6: So given that that's your thought, do you think that
Speaker 6: the markets are kind of over their skis when it
Speaker 6: comes to expectations for rate cuts.
Speaker 10: Yes, I do, but that doesn't mean that we're expecting
Speaker 10: or forecasting a crash or a significant pullback in the
Speaker 10: market right now. Any type of pullback we're going to
Speaker 10: see as by a buying opportunity. When we look out
Speaker 10: to the end of twenty twenty four, our price target
Speaker 10: is fifty two hundred to fifty four hundred on the SMP,
Speaker 10: which a few weeks ago seemed like a stretch, but
Speaker 10: with the rally we've had, that's really lated in to
Speaker 10: fourteen percent upside from here. So if we see the
Speaker 10: earnings growth that we're expecting, we think that we'll see
Speaker 10: earnings of eleven percent from this year to next year.
Speaker 10: At nineteen times forward earnings, it's reasonable that we could
Speaker 10: get there. When we look at Q three earnings announcements, companies,
Speaker 10: they were able to prove that they can navigate a
Speaker 10: higher interest rate environment they've had two years to prepare,
Speaker 10: so we think that that'll continue where earnings are a
Speaker 10: little better than expected, and therefore the market will continue
Speaker 10: to rally.
Speaker 2: When it comes to some of those buying opportunities, how
Speaker 2: are you advising clients to position? What are you telling
Speaker 2: them to buy, what are you telling them to sell?
Speaker 10: We don't think you can be sector specific or really
Speaker 10: even asset class specific right now. We want to we're
Speaker 10: taking kind of a bottoms up perspective. We're looking at
Speaker 10: individual companies one by one. As you can see, the
Speaker 10: Russell two thousand has really rallied the last few weeks,
Speaker 10: and if you peel it back and look at Russell
Speaker 10: two thousand companies, about about thirty percent of their debt
Speaker 10: is at variable rates, so they're not necessarily and the
Speaker 10: clear yet, especially considering that only sixty percent of Rustle
Speaker 10: two thousand companies are actually profitable. So we're going to
Speaker 10: be very selective. It doesn't mean we wouldn't buy small
Speaker 10: caps in this environment. We think that they're that environment
Speaker 10: is improving, but we're going to look at the fundamentals
Speaker 10: for each company, and we want companies that have low
Speaker 10: leverage and strong balance sheets. Really good free cash flow.
Speaker 8: How are you looking at fixed income right now?
Speaker 6: And I just want to bring our Bloomberg audience a
Speaker 6: headline across the Bloomberg terminal. Moments ago, the Treasury thirty
Speaker 6: year yield falling below four percent, the lowest since July.
Speaker 6: So we're seeing yields fall at the long end of
Speaker 6: the curve, but move higher today at the short end.
Speaker 8: Of the curve.
Speaker 6: Still that the drop in yields that we've seen in
Speaker 6: such a short time has been pretty remarkable. How are
Speaker 6: you watching the bond market?
Speaker 10: It really has been remarkable is a great word to
Speaker 10: describe it. We got excited about bonds five six weeks ago,
Speaker 10: whenever that was a good time.
Speaker 4: We are equity biased.
Speaker 10: Over eighty percent of our portfolio is allocated to equities.
Speaker 10: Our clients are high net worth and ultra high net worth,
Speaker 10: and oftentimes they've been investors for decades, so they're comfortable
Speaker 10: with that volatility, and we've over allocated.
Speaker 3: In that space.
Speaker 10: But a few weeks ago we said, you know what,
Speaker 10: it's time to buy some bonds because we could get
Speaker 10: really good yields on municipals and high quality corporates. Now
Speaker 10: we're kind of back to a level that we've been seeing,
Speaker 10: you know, over the last few years or so, so
Speaker 10: we're not as excited. But for our clients that do
Speaker 10: have a small allocation to bonds, we think that they'll
Speaker 10: have decent returns over the next few years.
Speaker 2: We've seen the ten yured treasury yield come down a
Speaker 2: percentage point since October nineteenth, that's when it briefly crossed
Speaker 2: above five But at what point Because clearly this has
Speaker 2: been supportive for equities as we've seen yields come down dramatically,
Speaker 2: But in your view, when it comes to fixed income,
Speaker 2: at what threshold are you watching to where yields are
Speaker 2: coming down so quickly that it's more of a concern
Speaker 2: about potentially the economy.
Speaker 10: Yeah, the bond market tends to be a great leaning indicator,
Speaker 10: oftentimes better than the stock market for what's to come.
Speaker 10: And right now we think the tenure treasure will be
Speaker 10: in a trading range from three point eight to four
Speaker 10: point five percent, and so if we see a significant
Speaker 10: drop below three point eight percent, that would be telling
Speaker 10: that there might be some issues right around the corner.
Speaker 10: But right now, at these levels, we feel like it's
Speaker 10: not signaling that anything of a significant magnitude is going
Speaker 10: to occur in the near term.
Speaker 6: How much do equity markets have to drop for you
Speaker 6: to see it buying opportunity in the next few weeks?
Speaker 10: Three percent, five percent. We're a bigger We tend to
Speaker 10: be fully invested.
Speaker 8: You said, you said you are fully invested.
Speaker 10: We are, we are we We tend to stay fully invested.
Speaker 10: We keep minimal amounts of cash on the sidelines. But
Speaker 10: for clients that are depositing money or wanting to dollar
Speaker 10: cost average in, we're telling them right now, you know,
Speaker 10: let's not wait any pullback at all. Let's go ahead
Speaker 10: and get invested because you can't time it, and we
Speaker 10: think the next six, twelve, eighteen months are are going
Speaker 10: to be really good for the market.
Speaker 6: Brook May, thanks for joining us and taking the time
Speaker 6: this afternoon. Really do appreciate it. Brooke May is managing
Speaker 6: partner Evans May Wealth. She joins us this afternoon on
Speaker 6: assume this is.
Speaker 1: The Bloomberg Business Week podcast. I'll a a little on Apple,
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