WEBVTT - Elon Musk's U-Turn Move On Bitcoin 

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

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<v Speaker 1>my co host Matt Miller. Every business day, we bring

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<v Speaker 1>you interviews from ceo s, market crows, and Bloomberg experts,

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<v Speaker 1>along with essential market moving news. Find the Bloomberg Markets

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<v Speaker 1>Podcast on Apple Podcasts or wherever you listen to podcasts,

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<v Speaker 1>and at Bloomberg dot com slash podcast. If you think

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<v Speaker 1>about all the way back to early February, Tesla announced

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<v Speaker 1>that the company goes investing one point five billion dollars

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<v Speaker 1>in bitcoin it's on the balance sheet, and also said

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<v Speaker 1>it was gonna accept bitcoin is a form of payment

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<v Speaker 1>for its cars. But last night, in a tweet, Elon

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<v Speaker 1>Musk made a major U turn, saying that Tesla has

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<v Speaker 1>suspended vehicle purchases using bitcoin. And it's just three months

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

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<v Speaker 1>get some color on this, return to one of the

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

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<v Speaker 1>Equity Research at web Bush Securities. Dan, what do you

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<v Speaker 1>make of Mr musk kind of surprise tweet last night?

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

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<v Speaker 1>turn in the matter of three months. It's it's called

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<v Speaker 1>crypto investors and testa investors off guard because nothing's changed

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<v Speaker 1>in terms of the nature of mining crypto in the

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<v Speaker 1>last three months, right, Like presumably Elon musk knew going

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<v Speaker 1>into it what the potential environmental effects of crypto mining

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

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<v Speaker 1>place ordering a sway and being surprised or sauce and cheese.

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<v Speaker 1>And I think that's the frustration. And also are from

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<v Speaker 1>one of the biggest proponents of crypto, and that's why

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<v Speaker 1>you know Tessa. It doesn't really dramatically change the Tessa

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<v Speaker 1>stories from a transaction perspective, but in terms of crypto,

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<v Speaker 1>you know, this is it's been a U turner, and

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<v Speaker 1>I think many investors feel like carpet was sort of

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

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<v Speaker 1>if I'm a Tesla investor, I'm used to a certain

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<v Speaker 1>level of volatility. I'm used with level of Elon musk

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

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<v Speaker 1>odd tweet here or there, I take that because of

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<v Speaker 1>the tremendous upside I see and maybe the e V

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

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

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<v Speaker 1>with us before. You know, the trade has been the

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<v Speaker 1>kind of let's let's invest in some of these um

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<v Speaker 1>you know, rotation names, cyclical names, and that's not certainly

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<v Speaker 1>the Amazons are the Teslas of the world. How do

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<v Speaker 1>you view the as you talked to investors today, how

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<v Speaker 1>do you view the Tesla story here? I think you

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<v Speaker 1>hit on a great point because this is not what

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<v Speaker 1>we were were six months ago, and so you know,

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

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

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<v Speaker 1>and fundamental perform So patience is wearing sin, especially when

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<v Speaker 1>it comes to Tessa investors that don't want to see

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<v Speaker 1>the sort of sideshow on off, on off. When it

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<v Speaker 1>comes to Bitcoin, I think what it's doing is really

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<v Speaker 1>just adding to the volatility and some of the risk

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<v Speaker 1>around test that's now been brought in from doing a

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

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<v Speaker 1>even had a car that's been transaction in bitcoin yet.

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<v Speaker 1>Very Fair just continues to be um. You know, one

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<v Speaker 1>of the more head scratching moves that I've seen even

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<v Speaker 1>in covering Musk for all these years, but covering it

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<v Speaker 1>as an analyst looking at it from a fundamental perspective,

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<v Speaker 1>in the most recent quarter, Tesla did reap a pretty

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<v Speaker 1>decent windfall from selling bitcoin, and it also has continually

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<v Speaker 1>reaped the reward of carbon credits the company profiting from those,

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<v Speaker 1>and those aren't necessarily going to last forever. What happens

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<v Speaker 1>if both of those things go away? Well, from a

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<v Speaker 1>carbon credit perspective, I mean that that's still a toe

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<v Speaker 1>and that that's going to last for another eten twenty

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<v Speaker 1>four months and ultimately in a Biden green tide away

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<v Speaker 1>back could be more of an accelerate, but but no doubt,

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<v Speaker 1>I mean there's more and more pressure on them to

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<v Speaker 1>just make more money selling cars. Remember they saw more

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<v Speaker 1>you look on their bitcoin profit. It was more than

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<v Speaker 1>they did in all the EV profits you know, last year.

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<v Speaker 1>So you you're starting to see now, especially in China,

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<v Speaker 1>especially on e V globally, you know, more focused on

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<v Speaker 1>Tassa even despite chip short is really accelerating on the

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

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

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<v Speaker 1>and and now you know, right now it's a risk

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<v Speaker 1>off market. Investors want to see fundamental performance, not noise

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<v Speaker 1>in terms of what they're seeing with his on off

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<v Speaker 1>on bitcoin that ultimately just really puts a little bit

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<v Speaker 1>of an overhang around the store real quickly, Dan, when

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<v Speaker 1>will it come to be profitable on a per unit

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

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<v Speaker 1>China the key you know, as we will out into

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<v Speaker 1>the next year where they could start to turn more

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<v Speaker 1>profitable on just on the standalone basis. And as you

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<v Speaker 1>talk about from n e V credit that's going to

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<v Speaker 1>continue to be there, but especially as we're going to

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<v Speaker 1>next six to a month, more and more believes or

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<v Speaker 1>focus on profitability when it comes to the standalone EV business.

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<v Speaker 1>All right, Dan, thanks very much for joining us. We

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<v Speaker 1>always appreciate getting your perspective, your thoughts on all things

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<v Speaker 1>Tesla and Elon must and I've managing director equity research

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<v Speaker 1>analysts at web Bush Securities, and you know, Dan was

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<v Speaker 1>just suggesting, you know, investors obviously don't like uncertainty, um,

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<v Speaker 1>and you get a lot of uncertainty with Elon Muskin.

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<v Speaker 1>This is just another reminder here for some of the

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<v Speaker 1>risk that test investors have to get used to. Kind Well, Paul,

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<v Speaker 1>just about twenty four hours ago, there was a pretty

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<v Speaker 1>important meeting going on in the Oval Office at the

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<v Speaker 1>White House, President Biden having his first face to face

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<v Speaker 1>meeting with Congressional Republicans trying to bring them around the

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<v Speaker 1>table on his long term economic plan. And coming out

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<v Speaker 1>of that meeting, Republicans did say, you know, it was good.

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<v Speaker 1>There are places where we can find by partisanship on

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<v Speaker 1>infrastructure spending. But the red line is going to be

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<v Speaker 1>the taxes. So let's get more on taxes right now.

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<v Speaker 1>Kate Barton, Global Vice Chair of tax at e Y

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<v Speaker 1>joins us now to discuss Kate, I am sure you

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<v Speaker 1>have poured over every detail of what the President has proposed.

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

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<v Speaker 1>there's a lot in both of the plans, the American

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<v Speaker 1>Job Plan in the American's Family Plan, and you're right,

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<v Speaker 1>we are looking at them. We would like more information

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<v Speaker 1>on our clients would and so there's a lot here,

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

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<v Speaker 1>Tax rates going from twenty one to twenty eight. But

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<v Speaker 1>on the individual side, there's also some significant changes, um,

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<v Speaker 1>not the least of which is the capital gains rate change,

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<v Speaker 1>which really has a big impact on businesses as well

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<v Speaker 1>as where where individuals will invest their capitals. And so

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<v Speaker 1>those are some of the highlights. All of that is

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<v Speaker 1>really important in the days ahead, and probably one of

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<v Speaker 1>the biggest aspects is the relationship that the US um

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<v Speaker 1>UH Treasury will have with the O e c D

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<v Speaker 1>efforts and the connection to the global sides UM. So

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<v Speaker 1>that's a big change in administration, so that we're watching

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

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<v Speaker 1>capital gains tax specifically. What have we seen historically as

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<v Speaker 1>maybe rates go up versus rates go down, do we

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<v Speaker 1>see capital formation or capital investment materially change as capital

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<v Speaker 1>gains rates are in fact moved up and down. We

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<v Speaker 1>do see that having a big impact. And so historically

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<v Speaker 1>rates capital gain rates have been kept lower because it's

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<v Speaker 1>really thought by most leading economists to encourage more investment

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<v Speaker 1>and more efficient investments. So higher capital gains rates increase

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<v Speaker 1>the cost of capital, and typically what we've seen from

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<v Speaker 1>economic studies is that it can cause the holder to

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<v Speaker 1>hold onto the investment for longer, so they'll just wait,

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<v Speaker 1>you know, waited out, if you will, for the rates

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<v Speaker 1>to change or for a sunnier day, and so um,

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<v Speaker 1>you know that can be less efficient quite frankly over

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<v Speaker 1>the longer term or even the mid term. Kate, If

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<v Speaker 1>I'm one of your clients and I'm staring down the

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<v Speaker 1>barrel of a higher capital gains tax or a higher

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<v Speaker 1>corporate tax, what do you tell me to do to

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

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<v Speaker 1>I mean, so you know, the headline rates are not

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<v Speaker 1>about what it's you know, it's it's actually what you pay.

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<v Speaker 1>So you know, you really do need to get into

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<v Speaker 1>the detail. And we actually do need more details. So

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<v Speaker 1>what we're really saying is stay calm uh, model it

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

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<v Speaker 1>for Treasury to release the Green Books, which should come

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<v Speaker 1>out at the end of May, and so we'll have

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<v Speaker 1>more details then and then we've got to see how

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<v Speaker 1>the legislation takes form. But I think the companies really

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<v Speaker 1>are modeling um this all out, particularly the multinationals, trying

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<v Speaker 1>to figure out how the attax rate will go up

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<v Speaker 1>and what can they do now to UM to plan

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<v Speaker 1>against that. On the individual side, I think everyone is

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<v Speaker 1>holding and waiting to see what will happen. Remember, this

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<v Speaker 1>is legislation that's going to come in to pay for

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<v Speaker 1>all the infrastructure spending that the President wants to do,

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<v Speaker 1>and it's really just the beginning of the negotiations. And

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<v Speaker 1>so you don't want to act prematurely because there's still

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<v Speaker 1>a lot of steps that have to happen before this

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<v Speaker 1>becomes legislation. Okay, a lot of folks that are opposed

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<v Speaker 1>to raising taxes, UM just say, hey, if the I

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

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<v Speaker 1>that that would raise a tremendous amount of money. What's

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<v Speaker 1>your view on just kind of again, some of these

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<v Speaker 1>I guess, for lack of a better term, loopholes in

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<v Speaker 1>the current tax system. Well, from a perspective, enforcement is important.

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<v Speaker 1>I mean, I don't think there's a country around the

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<v Speaker 1>world right now that's not focused on making sure that

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<v Speaker 1>the tax laws they have on the books right now

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<v Speaker 1>are actually being enforced and paid. In the US, who

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<v Speaker 1>certainly heard a lot about that, so so clothe, you know,

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<v Speaker 1>making sure everybody's paying that taxes is important and and

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<v Speaker 1>part of the plan too is to beef up this

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<v Speaker 1>aspect of the I R S so that they would

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<v Speaker 1>get more resources focused on enforcement focused on corporations or

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<v Speaker 1>businesses that um or high networks individuals that are not

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<v Speaker 1>paying uh their fast share of tax. So so that is,

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<v Speaker 1>you know, a necessity, and the US isn't the only

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<v Speaker 1>country that's going to be doing that, so um So

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<v Speaker 1>that's important, but it's not going to be enough to

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<v Speaker 1>really if the plan is to pay for uh the spending,

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<v Speaker 1>than other things are going to have to happen as well.

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<v Speaker 1>All Right, Kate, thanks so much for joining us. We

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<v Speaker 1>really appreciate getting your perspective, your global perspective, Kate Barton,

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<v Speaker 1>Global Vice Chair of tax at Ian y UM. Again,

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<v Speaker 1>taxes are on the table. The question is what can

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<v Speaker 1>get done politically, and uh, you know, as you mentioned, Kaylee,

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<v Speaker 1>the the Republicans said we are not going to reopen

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<v Speaker 1>the tax law. So that feels like a redline. It

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<v Speaker 1>does feel like a red line. And it's not just

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<v Speaker 1>the Republicans. You have moderate Democrats as well. Joe Mansion,

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<v Speaker 1>West Virginia is not on board with a corporate tax rate.

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<v Speaker 1>So President Biden has some work to do on both

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<v Speaker 1>sides of the aisle Pas absolutely in Bloomberg News. We

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<v Speaker 1>will be following that up closely, of course, as it

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<v Speaker 1>impacts corporations, uh and individuals. Lots going on market, Kayley,

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<v Speaker 1>snap back in the market today, you know, after the

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<v Speaker 1>two day sell off, it's kind of I guess it's

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<v Speaker 1>a good sign. Um. You know, some few people saying, hey,

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<v Speaker 1>interest rates, maybe inflation not that big of a deal.

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

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<v Speaker 1>president of Pacer et F Sean, thanks so much for

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<v Speaker 1>joining us here. Katy and I were just kind of

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<v Speaker 1>going back and forth with a you know, bull bear

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<v Speaker 1>scenario as it relates to this market. Is the bull

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<v Speaker 1>market still very much intact? Or are there some concerns

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<v Speaker 1>coming in here about inflation about maybe the Fed may

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

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<v Speaker 1>thanks for having me a good morning. Um. I think,

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<v Speaker 1>you know, I think what's going on right now is

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<v Speaker 1>the market is you know, is further ahead of its

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<v Speaker 1>current earnings then it would normally be. And so we

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<v Speaker 1>need sort of a perfect reopening in order for earnings

0:12:28.440 --> 0:12:32.360
<v Speaker 1>to continue to accelerate to justify these equity valuation levels,

0:12:32.880 --> 0:12:35.000
<v Speaker 1>and any little crack and if you will, in that

0:12:35.160 --> 0:12:37.319
<v Speaker 1>facade of it's going to be perfect and everything is

0:12:37.360 --> 0:12:42.800
<v Speaker 1>going to be fine, potentially threatens the markets value valuations

0:12:42.800 --> 0:12:45.439
<v Speaker 1>in the short run. And so what feeds into that

0:12:45.640 --> 0:12:47.720
<v Speaker 1>is the supply chain issues. You know, we have the

0:12:47.760 --> 0:12:50.800
<v Speaker 1>colonial pipeline thing, You've got the chip shortage, you've got

0:12:50.920 --> 0:12:54.400
<v Speaker 1>lumber prices skyrocketing, um and it was all sort of

0:12:54.720 --> 0:12:59.040
<v Speaker 1>you know, I guess highlighted by yesterday's CPI number, which

0:12:59.160 --> 0:13:02.280
<v Speaker 1>you know the Fed tells us as transitory. I'm not

0:13:02.320 --> 0:13:05.600
<v Speaker 1>sure what transitory means are how long transitory lasts. But

0:13:06.120 --> 0:13:08.760
<v Speaker 1>when you have a market this extent, and particularly on

0:13:08.800 --> 0:13:12.560
<v Speaker 1>the growth names, where in a rise in inflation and

0:13:12.840 --> 0:13:17.120
<v Speaker 1>a corresponding rise in interest rates potentially threatens their future earnings,

0:13:17.400 --> 0:13:19.320
<v Speaker 1>then I think we need to start to discount those

0:13:19.400 --> 0:13:20.959
<v Speaker 1>levels a little bit. And so I think that's the

0:13:21.000 --> 0:13:23.120
<v Speaker 1>battle that's going on. It's it's no different than the

0:13:23.120 --> 0:13:25.280
<v Speaker 1>battle that's been going on all year as it relates

0:13:25.280 --> 0:13:29.480
<v Speaker 1>to inflation and interest rate sources, growth stock. So yesterday

0:13:29.640 --> 0:13:31.959
<v Speaker 1>was just a bit more severe and we're seeing a

0:13:32.040 --> 0:13:35.480
<v Speaker 1>nice bounce back here. Um, but there are places in

0:13:35.480 --> 0:13:38.080
<v Speaker 1>this market that you know that are not over valued

0:13:38.120 --> 0:13:40.840
<v Speaker 1>that you can do well with. You know, we have

0:13:40.880 --> 0:13:43.480
<v Speaker 1>a strategy at Pacer, for example, it's a hundred large

0:13:43.520 --> 0:13:46.560
<v Speaker 1>gap stocks. We labeled a value strategy, but it's not

0:13:46.600 --> 0:13:48.920
<v Speaker 1>traditional value. Don't use price to book. We use free

0:13:48.920 --> 0:13:51.960
<v Speaker 1>cash flow yield. And in this environment that finds up

0:13:52.000 --> 0:13:56.080
<v Speaker 1>like year and a day. It's not the traditional names

0:13:56.080 --> 0:13:58.600
<v Speaker 1>that everybody knows. We're overweight tech, but we're not overweight

0:13:58.679 --> 0:14:01.640
<v Speaker 1>The big social media tech names were overweight. Names like

0:14:01.720 --> 0:14:05.120
<v Speaker 1>Intel and IBM were overweight the consumer. You know, the

0:14:05.160 --> 0:14:08.240
<v Speaker 1>only real number that's better currently today than it was

0:14:08.400 --> 0:14:12.280
<v Speaker 1>going into side stock prices which are way ahead of

0:14:12.280 --> 0:14:14.559
<v Speaker 1>where they were, even though earnings aren't back. There is

0:14:14.640 --> 0:14:18.120
<v Speaker 1>consumer spending. So this consumer has a lot of money

0:14:18.120 --> 0:14:21.040
<v Speaker 1>in their pocket. They do, you know, I never I

0:14:21.120 --> 0:14:22.800
<v Speaker 1>never bought the argument that they were going to buy

0:14:22.840 --> 0:14:24.920
<v Speaker 1>stocks in bitcoin. I always thought they just start to

0:14:24.920 --> 0:14:26.960
<v Speaker 1>spend it on really the stimmies. You didn't think the

0:14:27.000 --> 0:14:30.600
<v Speaker 1>Stimmies were at play in the whole game stop phenomenon, Yeah,

0:14:30.720 --> 0:14:33.200
<v Speaker 1>not really. I mean, I think there's probably some of that,

0:14:33.480 --> 0:14:35.200
<v Speaker 1>but I think you know, people have been locked up

0:14:35.200 --> 0:14:36.560
<v Speaker 1>and they want to spend the money and go do

0:14:36.640 --> 0:14:39.200
<v Speaker 1>things and have some fun. And so you know, we're

0:14:39.240 --> 0:14:41.680
<v Speaker 1>overweight consumer discretion, which is a great place to be

0:14:41.680 --> 0:14:46.640
<v Speaker 1>because of that that that underlying if your and of

0:14:46.680 --> 0:14:49.280
<v Speaker 1>course consumers going out and spending more money feeds back

0:14:49.280 --> 0:14:52.360
<v Speaker 1>into that inflation conversation. How do you hedge against that?

0:14:52.400 --> 0:14:55.720
<v Speaker 1>How is that showing up in the et F world? Well,

0:14:55.760 --> 0:14:57.960
<v Speaker 1>I mean I think the way people traditionally would hedge

0:14:57.960 --> 0:15:01.280
<v Speaker 1>against that would be to use come podities. Although commodities

0:15:01.320 --> 0:15:04.800
<v Speaker 1>are fairly difficult to own um and you know in

0:15:04.840 --> 0:15:08.000
<v Speaker 1>the traditional et F because you know, like oil for example,

0:15:08.080 --> 0:15:09.640
<v Speaker 1>you can't own in an e t F because you

0:15:09.640 --> 0:15:12.360
<v Speaker 1>can't get to you own oil futures as the underlying

0:15:12.360 --> 0:15:15.000
<v Speaker 1>and that's cut. But how could you maybe play the

0:15:15.960 --> 0:15:18.400
<v Speaker 1>boom we're seeing in commodities through an E t F?

0:15:18.480 --> 0:15:21.600
<v Speaker 1>What you know, what's the side play there? I think

0:15:21.640 --> 0:15:24.760
<v Speaker 1>it's the producers perhaps is the best way to play that.

0:15:24.840 --> 0:15:26.880
<v Speaker 1>You know, the miners as an example, if you wanted

0:15:26.920 --> 0:15:29.880
<v Speaker 1>to you know, move away from gold or oil or

0:15:29.920 --> 0:15:31.920
<v Speaker 1>just by you know x L E, which is the

0:15:32.040 --> 0:15:34.480
<v Speaker 1>energy producers, I mean, financials and energy have been on

0:15:34.520 --> 0:15:39.120
<v Speaker 1>a terra so far this year as well, and so

0:15:39.480 --> 0:15:42.160
<v Speaker 1>you know, if you're worried about inflation, you know, then

0:15:42.360 --> 0:15:46.040
<v Speaker 1>the the the the the producer of those commodities as

0:15:46.080 --> 0:15:49.480
<v Speaker 1>a way to play it. You're not getting pure exposure,

0:15:49.520 --> 0:15:52.520
<v Speaker 1>but it's very difficult for people to get pure exposure

0:15:52.600 --> 0:15:55.760
<v Speaker 1>to commodities outside of gold, which you could buy like

0:15:55.880 --> 0:15:59.000
<v Speaker 1>via g LD. You actually have physical behind you. What's

0:15:59.040 --> 0:16:00.920
<v Speaker 1>one of the most some them or one of the

0:16:00.960 --> 0:16:06.080
<v Speaker 1>more popular ETFs that you're seeing in the market right now. Well,

0:16:06.160 --> 0:16:09.840
<v Speaker 1>I mean from our perspective, just sort of broad labeling,

0:16:09.840 --> 0:16:12.200
<v Speaker 1>if you will, high yield. We have a strategy that

0:16:12.240 --> 0:16:14.400
<v Speaker 1>you know, moves between high yield and treasuries. It's been

0:16:14.960 --> 0:16:17.240
<v Speaker 1>a great product for us, not only in performance, but

0:16:17.320 --> 0:16:20.040
<v Speaker 1>also in terms of inflow and as the investors are

0:16:20.040 --> 0:16:22.920
<v Speaker 1>looking for yield in this environment where there isn't any

0:16:23.440 --> 0:16:26.000
<v Speaker 1>um you know, where the tenure treasuries at one sixty ish,

0:16:26.120 --> 0:16:28.120
<v Speaker 1>you know, bouncing around a little bit, and even corporate

0:16:28.120 --> 0:16:30.360
<v Speaker 1>bond funds are at like one sixty, which is kind

0:16:30.360 --> 0:16:33.600
<v Speaker 1>of ironic. Um. You know, anything that has an attractive

0:16:33.640 --> 0:16:35.960
<v Speaker 1>yield to it is attractive in this market. You're starting

0:16:35.960 --> 0:16:38.040
<v Speaker 1>to see flows there. All right, I think you're starting

0:16:38.040 --> 0:16:40.920
<v Speaker 1>to see flows to lower p higher quality names that okay,

0:16:41.040 --> 0:16:43.320
<v Speaker 1>start to de risk their portfolio. Hey, Sean, thanks so

0:16:43.360 --> 0:16:45.840
<v Speaker 1>much for joining us. We really appreciate it. Sean O'Hara,

0:16:45.920 --> 0:16:48.640
<v Speaker 1>President Pacer et F S giving us his view on

0:16:48.680 --> 0:16:50.520
<v Speaker 1>the markets and the E t F space. We'll have

0:16:50.560 --> 0:16:57.440
<v Speaker 1>more coming up. This is Bloomberg, Paul. We've been talking

0:16:57.440 --> 0:16:59.920
<v Speaker 1>about how people are starting to take their vacation days.

0:17:00.000 --> 0:17:01.880
<v Speaker 1>Summertime is coming and I think a lot of people

0:17:01.960 --> 0:17:05.000
<v Speaker 1>might be spending some time by the pool this summer.

0:17:05.040 --> 0:17:06.360
<v Speaker 1>And we're going to talk to a guy that knows

0:17:06.400 --> 0:17:09.440
<v Speaker 1>a lot about that, Kevin Holler, and he is Hayward CEO.

0:17:09.600 --> 0:17:12.239
<v Speaker 1>It is a leading global manufacturer of both residential and

0:17:12.320 --> 0:17:16.119
<v Speaker 1>commercial pool and SPA equipment. Kevin, great to talk to you.

0:17:16.280 --> 0:17:18.800
<v Speaker 1>I am looking forward to summertime, but first I need

0:17:18.800 --> 0:17:20.560
<v Speaker 1>to get your take on something I've heard a lot

0:17:20.600 --> 0:17:22.639
<v Speaker 1>about in the past twenty four hours. Forget about a

0:17:22.640 --> 0:17:26.080
<v Speaker 1>gasoline shortage, there is a serious chlorine shortage out there.

0:17:26.119 --> 0:17:30.000
<v Speaker 1>What's going on? Yeah, there's uh. Good to be with

0:17:30.040 --> 0:17:33.159
<v Speaker 1>you that this morning, Kayley and Paul. Uh, there is

0:17:33.440 --> 0:17:37.280
<v Speaker 1>uh chlorine shortage out there resulting from Hurricane Laura late

0:17:37.359 --> 0:17:41.080
<v Speaker 1>last summer. But Heyward, we're actually part of the solution.

0:17:41.160 --> 0:17:44.560
<v Speaker 1>We have alternatives. We actually make a more natural form

0:17:44.760 --> 0:17:49.920
<v Speaker 1>of chlorine salt chlorine generation UM, and we have inventory available.

0:17:50.000 --> 0:17:53.560
<v Speaker 1>We moved very quickly to what to try and provide solutions.

0:17:53.880 --> 0:17:56.600
<v Speaker 1>We also have some UV and some ozone product which

0:17:56.680 --> 0:18:00.199
<v Speaker 1>when paired with any form of chlorine can actually use

0:18:00.280 --> 0:18:03.840
<v Speaker 1>your need buy up to. So there is a shortage

0:18:03.840 --> 0:18:05.840
<v Speaker 1>out there, but at Hayward we're trying to be part

0:18:05.880 --> 0:18:09.680
<v Speaker 1>of the solution and get people in the pools this summertime. Kevin,

0:18:09.720 --> 0:18:12.400
<v Speaker 1>give us a sense of how your business was impacted

0:18:12.400 --> 0:18:16.560
<v Speaker 1>by the pandemic. Did people build more pools, did they

0:18:16.720 --> 0:18:19.600
<v Speaker 1>use their pools more often? Was there increased demand for

0:18:19.680 --> 0:18:23.600
<v Speaker 1>your products and services? Gives a sense yes to all

0:18:23.720 --> 0:18:26.120
<v Speaker 1>three paul Um. You know, I'd say the pandemic really

0:18:26.160 --> 0:18:29.000
<v Speaker 1>became an advertisement for a trend that was already in

0:18:29.040 --> 0:18:32.000
<v Speaker 1>existence for five or eight years leading up to to

0:18:32.200 --> 0:18:35.160
<v Speaker 1>COVID UH people were looking to get in their pools

0:18:35.240 --> 0:18:40.879
<v Speaker 1>earlier last year people started building pools UH more more frequently.

0:18:41.359 --> 0:18:45.080
<v Speaker 1>So what we saw was, you know, the strength of

0:18:45.119 --> 0:18:49.440
<v Speaker 1>our business really after markets, so we benefit greatly from

0:18:49.480 --> 0:18:52.000
<v Speaker 1>the new construction that's going on, but that's really just

0:18:52.119 --> 0:18:56.199
<v Speaker 1>adding to the installed base, which creates this annuity like

0:18:56.400 --> 0:19:00.159
<v Speaker 1>revenue stream for us as folks you know, used their

0:19:00.160 --> 0:19:02.639
<v Speaker 1>pools more often. The other thing that we really saw

0:19:02.880 --> 0:19:05.920
<v Speaker 1>was people were starting to upgrade their pool pad so

0:19:06.160 --> 0:19:09.000
<v Speaker 1>the equipment needed. They started bringing in some some more

0:19:09.040 --> 0:19:14.080
<v Speaker 1>comfort products like salt clorine generation or automation controls or

0:19:14.160 --> 0:19:17.399
<v Speaker 1>heaters for example, to extend their pool season, open it

0:19:17.480 --> 0:19:20.359
<v Speaker 1>up sooner and be able to swim later into this season.

0:19:20.640 --> 0:19:24.120
<v Speaker 1>But Kevin, to what extent was that demand pulled forward

0:19:24.240 --> 0:19:26.679
<v Speaker 1>by the pandemic? How sticky is that? Do you expect

0:19:26.720 --> 0:19:29.159
<v Speaker 1>it to continue once we kind of re emerge from this.

0:19:31.359 --> 0:19:34.399
<v Speaker 1>I absolutely do. I think that again, the trend was

0:19:34.480 --> 0:19:37.840
<v Speaker 1>there prior and it's going to continue. People have been

0:19:37.880 --> 0:19:42.440
<v Speaker 1>investing in outdoor living for for for years. The pool

0:19:42.520 --> 0:19:47.360
<v Speaker 1>is the centerpiece of that out backyard investment, and this

0:19:47.440 --> 0:19:50.200
<v Speaker 1>is this is an amenity that we're seeing the boomers

0:19:50.640 --> 0:19:54.200
<v Speaker 1>invest in. This is an amenity that we see the

0:19:55.000 --> 0:19:58.959
<v Speaker 1>millennials looking to add to their homes. So again, with

0:19:59.040 --> 0:20:03.040
<v Speaker 1>the migration out of the city's UH are and into

0:20:03.040 --> 0:20:05.399
<v Speaker 1>warmer climates. This is gonna be a trend that's going

0:20:05.440 --> 0:20:10.920
<v Speaker 1>to continue for years to come. All right, fascinating story.

0:20:10.960 --> 0:20:13.000
<v Speaker 1>We really appreciate you taking a time there, Kevin, Kevin

0:20:13.000 --> 0:20:17.159
<v Speaker 1>hollerand president and CEO of Hayward Industries, just with the

0:20:17.200 --> 0:20:19.400
<v Speaker 1>people using their pools a little bit more. Oh yeah,

0:20:19.560 --> 0:20:21.800
<v Speaker 1>I wish I was one of them. I really do. Yeah,

0:20:21.880 --> 0:20:26.280
<v Speaker 1>it's interesting. I think I think is Kevin was suggesting, Um,

0:20:26.320 --> 0:20:28.040
<v Speaker 1>the pool is you know, people are spending more and

0:20:28.040 --> 0:20:30.439
<v Speaker 1>more time outdoors and that's likely to be a longer

0:20:30.560 --> 0:20:33.280
<v Speaker 1>term issue, and more and more people leaving the city

0:20:33.280 --> 0:20:34.840
<v Speaker 1>for the suburbs, and one of the things they're really

0:20:34.880 --> 0:20:38.800
<v Speaker 1>are leaving for is outdoor space and outdoor living. I mean,

0:20:38.840 --> 0:20:40.520
<v Speaker 1>that's what I lack here in the city and why

0:20:40.600 --> 0:20:42.840
<v Speaker 1>I do not have a swimming pool that I have

0:20:42.920 --> 0:20:46.320
<v Speaker 1>access to. Thanks for listening to the Bloomberg Markets podcast.

0:20:46.720 --> 0:20:49.919
<v Speaker 1>You can subscribe and listen to interviews with Apple Podcasts

0:20:50.040 --> 0:20:53.960
<v Speaker 1>or whatever podcast platform you prefer. I'm Matt Miller. I'm

0:20:54.000 --> 0:20:58.040
<v Speaker 1>on Twitter at Matt Miller three. Put on false Sweeney

0:20:58.040 --> 0:21:00.840
<v Speaker 1>I'm on Twitter at pt Sweeney Before podcast. You can

0:21:00.880 --> 0:21:05.040
<v Speaker 1>always catch us worldwide at Bloomberg Radio m