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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day, we bring

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Speaker 1: you interviews from ceo s, market crows, and Bloomberg experts,

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Speaker 1: along with essential market moving news. Find the Bloomberg Markets

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Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,

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Speaker 1: and at Bloomberg dot com slash podcast. If you think

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Speaker 1: about all the way back to early February, Tesla announced

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Speaker 1: that the company goes investing one point five billion dollars

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Speaker 1: in bitcoin it's on the balance sheet, and also said

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Speaker 1: it was gonna accept bitcoin is a form of payment

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Speaker 1: for its cars. But last night, in a tweet, Elon

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Speaker 1: Musk made a major U turn, saying that Tesla has

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Speaker 1: suspended vehicle purchases using bitcoin. And it's just three months

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Speaker 1: after that head scratching move, so really strange. Here, let's

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Speaker 1: get some color on this, return to one of the

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Speaker 1: experts on all things Tesla. That's Dan Ives, Managing director

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Speaker 1: Equity Research at web Bush Securities. Dan, what do you

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Speaker 1: make of Mr musk kind of surprise tweet last night?

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Speaker 1: And it's a head scratch? Sure, I mean the U

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Speaker 1: turn in the matter of three months. It's it's called

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Speaker 1: crypto investors and testa investors off guard because nothing's changed

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Speaker 1: in terms of the nature of mining crypto in the

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Speaker 1: last three months, right, Like presumably Elon musk knew going

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Speaker 1: into it what the potential environmental effects of crypto mining

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Speaker 1: would be. Right, It's like me going into a pizza

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Speaker 1: place ordering a sway and being surprised or sauce and cheese.

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Speaker 1: And I think that's the frustration. And also are from

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Speaker 1: one of the biggest proponents of crypto, and that's why

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Speaker 1: you know Tessa. It doesn't really dramatically change the Tessa

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Speaker 1: stories from a transaction perspective, but in terms of crypto,

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Speaker 1: you know, this is it's been a U turner, and

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Speaker 1: I think many investors feel like carpet was sort of

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Speaker 1: pulled out from under them. Yeah, that's kind of you know,

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Speaker 1: if I'm a Tesla investor, I'm used to a certain

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Speaker 1: level of volatility. I'm used with level of Elon musk

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Speaker 1: risk in my investment. And you know, whether it's an

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Speaker 1: odd tweet here or there, I take that because of

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Speaker 1: the tremendous upside I see and maybe the e V

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Speaker 1: market that's the bargain I've made, but now these stocks

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Speaker 1: are under pressure. Dan, I know you've talked about it

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Speaker 1: with us before. You know, the trade has been the

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Speaker 1: kind of let's let's invest in some of these um

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Speaker 1: you know, rotation names, cyclical names, and that's not certainly

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Speaker 1: the Amazons are the Teslas of the world. How do

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Speaker 1: you view the as you talked to investors today, how

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Speaker 1: do you view the Tesla story here? I think you

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Speaker 1: hit on a great point because this is not what

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Speaker 1: we were were six months ago, and so you know,

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Speaker 1: investors are frustrated. You're seeing risk off, multiple inflation worries,

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Speaker 1: so right now in that's what they're focusing on, deliveries

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Speaker 1: and fundamental perform So patience is wearing sin, especially when

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Speaker 1: it comes to Tessa investors that don't want to see

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Speaker 1: the sort of sideshow on off, on off. When it

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Speaker 1: comes to Bitcoin, I think what it's doing is really

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Speaker 1: just adding to the volatility and some of the risk

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Speaker 1: around test that's now been brought in from doing a

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Speaker 1: one e D in three months. We remember, they haven't

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Speaker 1: even had a car that's been transaction in bitcoin yet.

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Speaker 1: Very Fair just continues to be um. You know, one

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Speaker 1: of the more head scratching moves that I've seen even

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Speaker 1: in covering Musk for all these years, but covering it

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Speaker 1: as an analyst looking at it from a fundamental perspective,

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Speaker 1: in the most recent quarter, Tesla did reap a pretty

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Speaker 1: decent windfall from selling bitcoin, and it also has continually

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Speaker 1: reaped the reward of carbon credits the company profiting from those,

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Speaker 1: and those aren't necessarily going to last forever. What happens

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Speaker 1: if both of those things go away? Well, from a

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Speaker 1: carbon credit perspective, I mean that that's still a toe

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Speaker 1: and that that's going to last for another eten twenty

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Speaker 1: four months and ultimately in a Biden green tide away

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Speaker 1: back could be more of an accelerate, but but no doubt,

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Speaker 1: I mean there's more and more pressure on them to

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Speaker 1: just make more money selling cars. Remember they saw more

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Speaker 1: you look on their bitcoin profit. It was more than

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Speaker 1: they did in all the EV profits you know, last year.

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Speaker 1: So you you're starting to see now, especially in China,

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Speaker 1: especially on e V globally, you know, more focused on

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Speaker 1: Tassa even despite chip short is really accelerating on the

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Speaker 1: EV delivery side. And you've seen a stock that's the

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Speaker 1: glass half empty or stock that's up seven a year ago,

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Speaker 1: and and now you know, right now it's a risk

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Speaker 1: off market. Investors want to see fundamental performance, not noise

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Speaker 1: in terms of what they're seeing with his on off

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Speaker 1: on bitcoin that ultimately just really puts a little bit

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Speaker 1: of an overhang around the store real quickly, Dan, when

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Speaker 1: will it come to be profitable on a per unit

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Speaker 1: basis manufacturing? We're glad that depends on China. I mean

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Speaker 1: China the key you know, as we will out into

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Speaker 1: the next year where they could start to turn more

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Speaker 1: profitable on just on the standalone basis. And as you

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Speaker 1: talk about from n e V credit that's going to

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Speaker 1: continue to be there, but especially as we're going to

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Speaker 1: next six to a month, more and more believes or

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Speaker 1: focus on profitability when it comes to the standalone EV business.

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Speaker 1: All right, Dan, thanks very much for joining us. We

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Speaker 1: always appreciate getting your perspective, your thoughts on all things

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Speaker 1: Tesla and Elon must and I've managing director equity research

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Speaker 1: analysts at web Bush Securities, and you know, Dan was

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Speaker 1: just suggesting, you know, investors obviously don't like uncertainty, um,

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Speaker 1: and you get a lot of uncertainty with Elon Muskin.

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Speaker 1: This is just another reminder here for some of the

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Speaker 1: risk that test investors have to get used to. Kind Well, Paul,

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Speaker 1: just about twenty four hours ago, there was a pretty

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Speaker 1: important meeting going on in the Oval Office at the

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Speaker 1: White House, President Biden having his first face to face

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Speaker 1: meeting with Congressional Republicans trying to bring them around the

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Speaker 1: table on his long term economic plan. And coming out

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Speaker 1: of that meeting, Republicans did say, you know, it was good.

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Speaker 1: There are places where we can find by partisanship on

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Speaker 1: infrastructure spending. But the red line is going to be

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Speaker 1: the taxes. So let's get more on taxes right now.

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Speaker 1: Kate Barton, Global Vice Chair of tax at e Y

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Speaker 1: joins us now to discuss Kate, I am sure you

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Speaker 1: have poured over every detail of what the President has proposed.

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Speaker 1: What part of it to you could be the most damaging. Well,

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Speaker 1: there's a lot in both of the plans, the American

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Speaker 1: Job Plan in the American's Family Plan, and you're right,

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Speaker 1: we are looking at them. We would like more information

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Speaker 1: on our clients would and so there's a lot here,

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Speaker 1: I mean, you know, and it's based on the corporate side.

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Speaker 1: Tax rates going from twenty one to twenty eight. But

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Speaker 1: on the individual side, there's also some significant changes, um,

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Speaker 1: not the least of which is the capital gains rate change,

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Speaker 1: which really has a big impact on businesses as well

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Speaker 1: as where where individuals will invest their capitals. And so

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Speaker 1: those are some of the highlights. All of that is

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Speaker 1: really important in the days ahead, and probably one of

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Speaker 1: the biggest aspects is the relationship that the US um

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Speaker 1: UH Treasury will have with the O e c D

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Speaker 1: efforts and the connection to the global sides UM. So

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Speaker 1: that's a big change in administration, so that we're watching

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Speaker 1: like crazy as well. So, Kate, let's talk about the

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Speaker 1: capital gains tax specifically. What have we seen historically as

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Speaker 1: maybe rates go up versus rates go down, do we

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Speaker 1: see capital formation or capital investment materially change as capital

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Speaker 1: gains rates are in fact moved up and down. We

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Speaker 1: do see that having a big impact. And so historically

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Speaker 1: rates capital gain rates have been kept lower because it's

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Speaker 1: really thought by most leading economists to encourage more investment

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Speaker 1: and more efficient investments. So higher capital gains rates increase

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Speaker 1: the cost of capital, and typically what we've seen from

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Speaker 1: economic studies is that it can cause the holder to

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Speaker 1: hold onto the investment for longer, so they'll just wait,

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Speaker 1: you know, waited out, if you will, for the rates

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Speaker 1: to change or for a sunnier day, and so um,

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Speaker 1: you know that can be less efficient quite frankly over

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Speaker 1: the longer term or even the mid term. Kate, If

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Speaker 1: I'm one of your clients and I'm staring down the

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Speaker 1: barrel of a higher capital gains tax or a higher

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Speaker 1: corporate tax, what do you tell me to do to

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Speaker 1: protect myself against that? Now, well, there's a lot to this,

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Speaker 1: I mean, so you know, the headline rates are not

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Speaker 1: about what it's you know, it's it's actually what you pay.

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Speaker 1: So you know, you really do need to get into

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Speaker 1: the detail. And we actually do need more details. So

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Speaker 1: what we're really saying is stay calm uh, model it

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Speaker 1: up and so they'll be more coming out. We're waiting

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Speaker 1: for Treasury to release the Green Books, which should come

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Speaker 1: out at the end of May, and so we'll have

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Speaker 1: more details then and then we've got to see how

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Speaker 1: the legislation takes form. But I think the companies really

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Speaker 1: are modeling um this all out, particularly the multinationals, trying

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Speaker 1: to figure out how the attax rate will go up

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Speaker 1: and what can they do now to UM to plan

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Speaker 1: against that. On the individual side, I think everyone is

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Speaker 1: holding and waiting to see what will happen. Remember, this

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Speaker 1: is legislation that's going to come in to pay for

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Speaker 1: all the infrastructure spending that the President wants to do,

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Speaker 1: and it's really just the beginning of the negotiations. And

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Speaker 1: so you don't want to act prematurely because there's still

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Speaker 1: a lot of steps that have to happen before this

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Speaker 1: becomes legislation. Okay, a lot of folks that are opposed

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Speaker 1: to raising taxes, UM just say, hey, if the I

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Speaker 1: R S would just collect what's out there and close loopholes,

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Speaker 1: that that would raise a tremendous amount of money. What's

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Speaker 1: your view on just kind of again, some of these

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Speaker 1: I guess, for lack of a better term, loopholes in

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Speaker 1: the current tax system. Well, from a perspective, enforcement is important.

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Speaker 1: I mean, I don't think there's a country around the

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Speaker 1: world right now that's not focused on making sure that

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Speaker 1: the tax laws they have on the books right now

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Speaker 1: are actually being enforced and paid. In the US, who

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Speaker 1: certainly heard a lot about that, so so clothe, you know,

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Speaker 1: making sure everybody's paying that taxes is important and and

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Speaker 1: part of the plan too is to beef up this

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Speaker 1: aspect of the I R S so that they would

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Speaker 1: get more resources focused on enforcement focused on corporations or

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Speaker 1: businesses that um or high networks individuals that are not

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Speaker 1: paying uh their fast share of tax. So so that is,

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Speaker 1: you know, a necessity, and the US isn't the only

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Speaker 1: country that's going to be doing that, so um So

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Speaker 1: that's important, but it's not going to be enough to

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Speaker 1: really if the plan is to pay for uh the spending,

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Speaker 1: than other things are going to have to happen as well.

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Speaker 1: All Right, Kate, thanks so much for joining us. We

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Speaker 1: really appreciate getting your perspective, your global perspective, Kate Barton,

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Speaker 1: Global Vice Chair of tax at Ian y UM. Again,

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Speaker 1: taxes are on the table. The question is what can

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Speaker 1: get done politically, and uh, you know, as you mentioned, Kaylee,

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Speaker 1: the the Republicans said we are not going to reopen

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Speaker 1: the tax law. So that feels like a redline. It

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Speaker 1: does feel like a red line. And it's not just

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Speaker 1: the Republicans. You have moderate Democrats as well. Joe Mansion,

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Speaker 1: West Virginia is not on board with a corporate tax rate.

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Speaker 1: So President Biden has some work to do on both

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Speaker 1: sides of the aisle Pas absolutely in Bloomberg News. We

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Speaker 1: will be following that up closely, of course, as it

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Speaker 1: impacts corporations, uh and individuals. Lots going on market, Kayley,

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Speaker 1: snap back in the market today, you know, after the

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Speaker 1: two day sell off, it's kind of I guess it's

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Speaker 1: a good sign. Um. You know, some few people saying, hey,

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Speaker 1: interest rates, maybe inflation not that big of a deal.

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Speaker 1: But all right, let's bring in Shawn O'Hara. He's a

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Speaker 1: president of Pacer et F Sean, thanks so much for

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Speaker 1: joining us here. Katy and I were just kind of

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Speaker 1: going back and forth with a you know, bull bear

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Speaker 1: scenario as it relates to this market. Is the bull

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Speaker 1: market still very much intact? Or are there some concerns

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Speaker 1: coming in here about inflation about maybe the Fed may

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Speaker 1: need to taper end or tighten. What's your view? Oh,

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Speaker 1: thanks for having me a good morning. Um. I think,

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Speaker 1: you know, I think what's going on right now is

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Speaker 1: the market is you know, is further ahead of its

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Speaker 1: current earnings then it would normally be. And so we

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Speaker 1: need sort of a perfect reopening in order for earnings

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Speaker 1: to continue to accelerate to justify these equity valuation levels,

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Speaker 1: and any little crack and if you will, in that

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Speaker 1: facade of it's going to be perfect and everything is

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Speaker 1: going to be fine, potentially threatens the markets value valuations

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Speaker 1: in the short run. And so what feeds into that

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Speaker 1: is the supply chain issues. You know, we have the

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Speaker 1: colonial pipeline thing, You've got the chip shortage, you've got

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Speaker 1: lumber prices skyrocketing, um and it was all sort of

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Speaker 1: you know, I guess highlighted by yesterday's CPI number, which

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Speaker 1: you know the Fed tells us as transitory. I'm not

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Speaker 1: sure what transitory means are how long transitory lasts. But

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Speaker 1: when you have a market this extent, and particularly on

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Speaker 1: the growth names, where in a rise in inflation and

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Speaker 1: a corresponding rise in interest rates potentially threatens their future earnings,

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Speaker 1: then I think we need to start to discount those

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Speaker 1: levels a little bit. And so I think that's the

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Speaker 1: battle that's going on. It's it's no different than the

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Speaker 1: battle that's been going on all year as it relates

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Speaker 1: to inflation and interest rate sources, growth stock. So yesterday

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Speaker 1: was just a bit more severe and we're seeing a

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Speaker 1: nice bounce back here. Um, but there are places in

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Speaker 1: this market that you know that are not over valued

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Speaker 1: that you can do well with. You know, we have

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Speaker 1: a strategy at Pacer, for example, it's a hundred large

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Speaker 1: gap stocks. We labeled a value strategy, but it's not

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Speaker 1: traditional value. Don't use price to book. We use free

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Speaker 1: cash flow yield. And in this environment that finds up

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Speaker 1: like year and a day. It's not the traditional names

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Speaker 1: that everybody knows. We're overweight tech, but we're not overweight

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Speaker 1: The big social media tech names were overweight. Names like

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Speaker 1: Intel and IBM were overweight the consumer. You know, the

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Speaker 1: only real number that's better currently today than it was

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Speaker 1: going into side stock prices which are way ahead of

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Speaker 1: where they were, even though earnings aren't back. There is

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Speaker 1: consumer spending. So this consumer has a lot of money

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Speaker 1: in their pocket. They do, you know, I never I

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Speaker 1: never bought the argument that they were going to buy

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Speaker 1: stocks in bitcoin. I always thought they just start to

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Speaker 1: spend it on really the stimmies. You didn't think the

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Speaker 1: Stimmies were at play in the whole game stop phenomenon, Yeah,

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Speaker 1: not really. I mean, I think there's probably some of that,

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Speaker 1: but I think you know, people have been locked up

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Speaker 1: and they want to spend the money and go do

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Speaker 1: things and have some fun. And so you know, we're

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Speaker 1: overweight consumer discretion, which is a great place to be

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Speaker 1: because of that that that underlying if your and of

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Speaker 1: course consumers going out and spending more money feeds back

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Speaker 1: into that inflation conversation. How do you hedge against that?

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Speaker 1: How is that showing up in the et F world? Well,

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Speaker 1: I mean I think the way people traditionally would hedge

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Speaker 1: against that would be to use come podities. Although commodities

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Speaker 1: are fairly difficult to own um and you know in

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Speaker 1: the traditional et F because you know, like oil for example,

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Speaker 1: you can't own in an e t F because you

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Speaker 1: can't get to you own oil futures as the underlying

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Speaker 1: and that's cut. But how could you maybe play the

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Speaker 1: boom we're seeing in commodities through an E t F?

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Speaker 1: What you know, what's the side play there? I think

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Speaker 1: it's the producers perhaps is the best way to play that.

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Speaker 1: You know, the miners as an example, if you wanted

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Speaker 1: to you know, move away from gold or oil or

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Speaker 1: just by you know x L E, which is the

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Speaker 1: energy producers, I mean, financials and energy have been on

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Speaker 1: a terra so far this year as well, and so

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Speaker 1: you know, if you're worried about inflation, you know, then

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Speaker 1: the the the the the producer of those commodities as

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Speaker 1: a way to play it. You're not getting pure exposure,

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Speaker 1: but it's very difficult for people to get pure exposure

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Speaker 1: to commodities outside of gold, which you could buy like

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Speaker 1: via g LD. You actually have physical behind you. What's

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Speaker 1: one of the most some them or one of the

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Speaker 1: more popular ETFs that you're seeing in the market right now. Well,

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Speaker 1: I mean from our perspective, just sort of broad labeling,

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Speaker 1: if you will, high yield. We have a strategy that

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Speaker 1: you know, moves between high yield and treasuries. It's been

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Speaker 1: a great product for us, not only in performance, but

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Speaker 1: also in terms of inflow and as the investors are

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Speaker 1: looking for yield in this environment where there isn't any

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Speaker 1: um you know, where the tenure treasuries at one sixty ish,

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Speaker 1: you know, bouncing around a little bit, and even corporate

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Speaker 1: bond funds are at like one sixty, which is kind

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Speaker 1: of ironic. Um. You know, anything that has an attractive

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Speaker 1: yield to it is attractive in this market. You're starting

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Speaker 1: to see flows there. All right, I think you're starting

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Speaker 1: to see flows to lower p higher quality names that okay,

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Speaker 1: start to de risk their portfolio. Hey, Sean, thanks so

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Speaker 1: much for joining us. We really appreciate it. Sean O'Hara,

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Speaker 1: President Pacer et F S giving us his view on

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Speaker 1: the markets and the E t F space. We'll have

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Speaker 1: more coming up. This is Bloomberg, Paul. We've been talking

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Speaker 1: about how people are starting to take their vacation days.

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Speaker 1: Summertime is coming and I think a lot of people

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Speaker 1: might be spending some time by the pool this summer.

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Speaker 1: And we're going to talk to a guy that knows

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Speaker 1: a lot about that, Kevin Holler, and he is Hayward CEO.

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Speaker 1: It is a leading global manufacturer of both residential and

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Speaker 1: commercial pool and SPA equipment. Kevin, great to talk to you.

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Speaker 1: I am looking forward to summertime, but first I need

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Speaker 1: to get your take on something I've heard a lot

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Speaker 1: about in the past twenty four hours. Forget about a

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Speaker 1: gasoline shortage, there is a serious chlorine shortage out there.

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Speaker 1: What's going on? Yeah, there's uh. Good to be with

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Speaker 1: you that this morning, Kayley and Paul. Uh, there is

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Speaker 1: uh chlorine shortage out there resulting from Hurricane Laura late

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Speaker 1: last summer. But Heyward, we're actually part of the solution.

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Speaker 1: We have alternatives. We actually make a more natural form

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Speaker 1: of chlorine salt chlorine generation UM, and we have inventory available.

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Speaker 1: We moved very quickly to what to try and provide solutions.

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Speaker 1: We also have some UV and some ozone product which

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Speaker 1: when paired with any form of chlorine can actually use

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Speaker 1: your need buy up to. So there is a shortage

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Speaker 1: out there, but at Hayward we're trying to be part

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Speaker 1: of the solution and get people in the pools this summertime. Kevin,

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Speaker 1: give us a sense of how your business was impacted

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Speaker 1: by the pandemic. Did people build more pools, did they

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Speaker 1: use their pools more often? Was there increased demand for

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Speaker 1: your products and services? Gives a sense yes to all

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Speaker 1: three paul Um. You know, I'd say the pandemic really

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Speaker 1: became an advertisement for a trend that was already in

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Speaker 1: existence for five or eight years leading up to to

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Speaker 1: COVID UH people were looking to get in their pools

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Speaker 1: earlier last year people started building pools UH more more frequently.

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Speaker 1: So what we saw was, you know, the strength of

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Speaker 1: our business really after markets, so we benefit greatly from

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Speaker 1: the new construction that's going on, but that's really just

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Speaker 1: adding to the installed base, which creates this annuity like

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Speaker 1: revenue stream for us as folks you know, used their

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Speaker 1: pools more often. The other thing that we really saw

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Speaker 1: was people were starting to upgrade their pool pad so

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Speaker 1: the equipment needed. They started bringing in some some more

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Speaker 1: comfort products like salt clorine generation or automation controls or

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Speaker 1: heaters for example, to extend their pool season, open it

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Speaker 1: up sooner and be able to swim later into this season.

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Speaker 1: But Kevin, to what extent was that demand pulled forward

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Speaker 1: by the pandemic? How sticky is that? Do you expect

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Speaker 1: it to continue once we kind of re emerge from this.

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Speaker 1: I absolutely do. I think that again, the trend was

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Speaker 1: there prior and it's going to continue. People have been

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Speaker 1: investing in outdoor living for for for years. The pool

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Speaker 1: is the centerpiece of that out backyard investment, and this

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Speaker 1: is this is an amenity that we're seeing the boomers

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Speaker 1: invest in. This is an amenity that we see the

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Speaker 1: millennials looking to add to their homes. So again, with

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Speaker 1: the migration out of the city's UH are and into

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Speaker 1: warmer climates. This is gonna be a trend that's going

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Speaker 1: to continue for years to come. All right, fascinating story.

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Speaker 1: We really appreciate you taking a time there, Kevin, Kevin

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Speaker 1: hollerand president and CEO of Hayward Industries, just with the

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Speaker 1: people using their pools a little bit more. Oh yeah,

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Speaker 1: I wish I was one of them. I really do. Yeah,

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Speaker 1: it's interesting. I think I think is Kevin was suggesting, Um,

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Speaker 1: the pool is you know, people are spending more and

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Speaker 1: more time outdoors and that's likely to be a longer

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Speaker 1: term issue, and more and more people leaving the city

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Speaker 1: for the suburbs, and one of the things they're really

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Speaker 1: are leaving for is outdoor space and outdoor living. I mean,

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Speaker 1: that's what I lack here in the city and why

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Speaker 1: I do not have a swimming pool that I have

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Speaker 1: access to. Thanks for listening to the Bloomberg Markets podcast.

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Speaker 1: You can subscribe and listen to interviews with Apple Podcasts

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Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm

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Speaker 1: on Twitter at Matt Miller three. Put on false Sweeney

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Speaker 1: I'm on Twitter at pt Sweeney Before podcast. You can

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Speaker 1: always catch us worldwide at Bloomberg Radio m