1 00:00:02,920 --> 00:00:08,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,960 --> 00:00:13,840 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 3 00:00:13,920 --> 00:00:16,599 Speaker 2: weekdays at ten am Eastern on Affle Car Playing and 4 00:00:16,760 --> 00:00:19,640 Speaker 2: Broud Auto with the Bloomberg Business app. Listen on demand 5 00:00:19,680 --> 00:00:24,000 Speaker 2: wherever you get your podcasts, or watch us live on YouTube. 6 00:00:25,079 --> 00:00:29,120 Speaker 3: Interesting on those isms expansionary territory here ism manufacturing coming 7 00:00:29,160 --> 00:00:30,800 Speaker 3: in at over fifty. So let's get to the man 8 00:00:30,800 --> 00:00:33,159 Speaker 3: behind the data. Tim Fioria's chair for the Institute of 9 00:00:33,200 --> 00:00:37,360 Speaker 3: Supply Management's Manufacturing Business Survey Committee. Tim we knew we 10 00:00:37,360 --> 00:00:39,880 Speaker 3: were in the trough. Is this legit expansion here? 11 00:00:40,560 --> 00:00:40,720 Speaker 4: Yeah? 12 00:00:40,720 --> 00:00:43,640 Speaker 5: Absolutely, Alex, Good morning, Paul, Good morning Alex. So this 13 00:00:43,720 --> 00:00:47,760 Speaker 5: is the third month for covering demand and there's not 14 00:00:47,840 --> 00:00:49,800 Speaker 5: a lot to complain about in this report. I mean, 15 00:00:49,840 --> 00:00:53,440 Speaker 5: we've got good demand to beat the seasonals expanded for 16 00:00:54,560 --> 00:00:58,400 Speaker 5: it's on average the last three months, it's an expansionary period. 17 00:00:58,600 --> 00:01:02,160 Speaker 5: We had production go up, which is output pretty significantly. 18 00:01:02,240 --> 00:01:04,880 Speaker 5: We were continuing to have layoffs, which I think is good, 19 00:01:04,920 --> 00:01:07,800 Speaker 5: but that should probably end soon. Suppliers are starting to 20 00:01:07,800 --> 00:01:10,440 Speaker 5: stiffen up. So overall, this is a very good report. 21 00:01:10,520 --> 00:01:14,480 Speaker 5: Remember last time we spoke August September, we declared that 22 00:01:14,520 --> 00:01:17,600 Speaker 5: we thought we were in the manufacturing trough. In January 23 00:01:17,600 --> 00:01:19,560 Speaker 5: we indicated that we thought we're starting to climb out. 24 00:01:19,600 --> 00:01:21,720 Speaker 5: We climbed out in January, a little bit of February, 25 00:01:21,760 --> 00:01:23,959 Speaker 5: even more now in March. So we're well on our 26 00:01:24,000 --> 00:01:26,240 Speaker 5: path here to a good manufacturing recovery. 27 00:01:26,800 --> 00:01:29,480 Speaker 6: And Tim you always tell us to kind of focus 28 00:01:30,160 --> 00:01:33,280 Speaker 6: on the new orders, and new orders showed some expansion 29 00:01:33,280 --> 00:01:33,640 Speaker 6: as well. 30 00:01:34,200 --> 00:01:37,000 Speaker 5: Yeah, they sure did. They pop back above fifty. We 31 00:01:37,040 --> 00:01:39,480 Speaker 5: also had pretty significant new expert orders. There were a 32 00:01:39,480 --> 00:01:42,479 Speaker 5: flat expansion to the prior month, but they're expanding. Nonetheless, 33 00:01:43,120 --> 00:01:45,800 Speaker 5: backlog was stable, which is okay, it's in the mid forties. 34 00:01:45,800 --> 00:01:48,160 Speaker 5: That's all right. That'll come back probably in the early summer. 35 00:01:48,800 --> 00:01:51,920 Speaker 5: And cuss Er inventories went way too low again, which 36 00:01:51,960 --> 00:01:55,160 Speaker 5: is very good. So we've got demand increasing, we've got 37 00:01:55,160 --> 00:01:58,240 Speaker 5: production increasing, we've got staffing being finalized. 38 00:01:58,280 --> 00:01:58,560 Speaker 7: Here. 39 00:01:58,960 --> 00:02:01,240 Speaker 5: We still had a one to one hired a fire ratio, 40 00:02:01,320 --> 00:02:03,440 Speaker 5: which means that we still have a lot of companies 41 00:02:03,520 --> 00:02:07,880 Speaker 5: letting people go. Seventy percent of our layoffs attrition freeze 42 00:02:07,920 --> 00:02:11,120 Speaker 5: activities were actually layoffs, so you know, people have been 43 00:02:11,120 --> 00:02:13,639 Speaker 5: getting a little bit more urgent on the tool to use, 44 00:02:14,400 --> 00:02:16,360 Speaker 5: and like I said, on the input side, we had 45 00:02:16,360 --> 00:02:20,800 Speaker 5: inventory still contracting by getting very close to fifty. Across 46 00:02:20,840 --> 00:02:22,440 Speaker 5: all the industry sectors. 47 00:02:22,480 --> 00:02:23,520 Speaker 7: They all did well. 48 00:02:23,919 --> 00:02:26,160 Speaker 5: None of them did exceptionally well, but most of them 49 00:02:26,200 --> 00:02:29,520 Speaker 5: came in above fifty of the top six. If they 50 00:02:29,560 --> 00:02:31,680 Speaker 5: didn't come in above fifty, they were like forty nine. So, 51 00:02:32,320 --> 00:02:34,920 Speaker 5: you know, March is a big manufacturing month. We have 52 00:02:35,000 --> 00:02:38,320 Speaker 5: seasonal factors that hit us. We overcame the seasonal factors. 53 00:02:39,200 --> 00:02:42,200 Speaker 5: We only had thirty percent of manufacturing GDP declining in 54 00:02:42,200 --> 00:02:45,320 Speaker 5: the month, down from forty percent to prior month. And 55 00:02:45,360 --> 00:02:49,200 Speaker 5: even more importantly, only one percent of manufacturing GDP contracted 56 00:02:49,240 --> 00:02:50,040 Speaker 5: below forty five. 57 00:02:50,360 --> 00:02:53,440 Speaker 3: Yes, alex So Tim, so you were mentioning the layoffs, 58 00:02:53,480 --> 00:02:57,320 Speaker 3: like legit layoffs. Do we expect that to end if 59 00:02:57,360 --> 00:03:00,320 Speaker 3: we wind up seeing manufacturing truly recover? So, like you 60 00:03:00,360 --> 00:03:02,920 Speaker 3: mentioned recovery, and I'm wondering what that looks like, and 61 00:03:02,919 --> 00:03:04,919 Speaker 3: then what the reflection is on the job market. 62 00:03:05,760 --> 00:03:07,720 Speaker 5: So you know, a couple of reasons I think companies 63 00:03:07,760 --> 00:03:09,760 Speaker 5: are cleaning up their staffing. You know, we did a 64 00:03:09,800 --> 00:03:11,920 Speaker 5: lot of urgent things over the last couple of years 65 00:03:11,919 --> 00:03:14,519 Speaker 5: to get headcount, probably hired some people that we don't 66 00:03:14,520 --> 00:03:16,840 Speaker 5: really want to keep, so some of that cleansing is 67 00:03:16,880 --> 00:03:19,240 Speaker 5: going on. But we are going to cross that conversion 68 00:03:19,280 --> 00:03:22,640 Speaker 5: line where you need the labor regardless of whether it's 69 00:03:22,680 --> 00:03:25,239 Speaker 5: one hundred percent productive or ninety five percent production. So 70 00:03:25,240 --> 00:03:27,320 Speaker 5: I think we're going to see that layout activity start 71 00:03:27,320 --> 00:03:29,800 Speaker 5: to diminish. In fact, I'm going to start to reverse 72 00:03:29,840 --> 00:03:32,639 Speaker 5: symmetric and start to look for hiring activities. So I 73 00:03:32,680 --> 00:03:35,320 Speaker 5: would guess that probably by June we'll see that slow down, 74 00:03:35,480 --> 00:03:36,960 Speaker 5: especially for the second half of the year. 75 00:03:37,640 --> 00:03:39,480 Speaker 6: Tim thanks so much for joining us. As always, always 76 00:03:39,520 --> 00:03:42,520 Speaker 6: appreciate getting your insights here for this data. Tim Fury, 77 00:03:42,920 --> 00:03:46,400 Speaker 6: chairman of the Manufacturing Business Survey at the Institute for 78 00:03:46,560 --> 00:03:49,839 Speaker 6: Supply Management. Again, the ISM manufacturing headline number came into 79 00:03:49,920 --> 00:03:54,560 Speaker 6: fifty point three, signaling expansion above fifty. The consensus was 80 00:03:54,560 --> 00:03:57,240 Speaker 6: for forty eight point three, so a well above consensus 81 00:03:57,480 --> 00:03:59,960 Speaker 6: and last period a last month was forty seven point eight. 82 00:04:00,120 --> 00:04:02,800 Speaker 6: So it's TIMO saying a good momentum there for the 83 00:04:02,880 --> 00:04:04,160 Speaker 6: manufacturing site. 84 00:04:05,440 --> 00:04:09,320 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 85 00:04:09,400 --> 00:04:12,920 Speaker 2: weekdays at ten am Eastern on applecar Play and Android 86 00:04:12,960 --> 00:04:16,120 Speaker 2: Auto with the Bloomberg Business. You can also listen live 87 00:04:16,200 --> 00:04:19,359 Speaker 2: on Amazon Alexa from our flagship New York station Just 88 00:04:19,440 --> 00:04:22,080 Speaker 2: Say Alexa playing Bloomberg eleven thirty. 89 00:04:23,400 --> 00:04:26,760 Speaker 3: The avenue is It's interesting. Is UPS as well as FedEx? 90 00:04:27,040 --> 00:04:28,360 Speaker 8: Two things to watch one. 91 00:04:28,800 --> 00:04:32,880 Speaker 3: FedEx won a contract to be the cargo carrier for 92 00:04:32,920 --> 00:04:37,080 Speaker 3: the USPS. FedEx, on the other hand, failed to come 93 00:04:37,160 --> 00:04:40,039 Speaker 3: up with a deal at a container deal for the 94 00:04:40,040 --> 00:04:42,400 Speaker 3: government as well, So a little bit of divergence between 95 00:04:42,440 --> 00:04:42,719 Speaker 3: the two. 96 00:04:42,800 --> 00:04:43,640 Speaker 8: So who do we go to? 97 00:04:43,839 --> 00:04:47,360 Speaker 3: Lee Clasgow, Bloomberg Intelligence senior transport logistics and shipping analyst 98 00:04:47,360 --> 00:04:51,120 Speaker 3: who was off last week during the biggest shipping logistic 99 00:04:51,320 --> 00:04:52,400 Speaker 3: nightmare that we've. 100 00:04:52,240 --> 00:04:53,960 Speaker 6: Seen quite a long time. 101 00:04:54,040 --> 00:04:56,440 Speaker 8: That nicely, Yeah, Lee, did you get a vacation or 102 00:04:56,480 --> 00:04:57,119 Speaker 8: not so much? 103 00:04:57,640 --> 00:04:59,760 Speaker 7: Not so much. I got woken up pretty early with 104 00:04:59,760 --> 00:05:02,800 Speaker 7: one US coast time, so it was a fun day 105 00:05:02,839 --> 00:05:03,080 Speaker 7: for me. 106 00:05:03,760 --> 00:05:04,800 Speaker 8: Yeah, I can imagine that. 107 00:05:04,920 --> 00:05:05,599 Speaker 7: Hence the beard. 108 00:05:05,640 --> 00:05:06,559 Speaker 8: Now, hence the beard. 109 00:05:06,640 --> 00:05:08,839 Speaker 3: He just got a lot older over the last week 110 00:05:08,960 --> 00:05:10,560 Speaker 3: or so. So there's a lot to kind. 111 00:05:10,400 --> 00:05:10,839 Speaker 8: Of get through. 112 00:05:10,960 --> 00:05:13,960 Speaker 3: Let's get to the positive UPS news about being that 113 00:05:14,040 --> 00:05:16,080 Speaker 3: cargo carrier for USPS. 114 00:05:16,880 --> 00:05:19,599 Speaker 7: Yeah, so you know, This is somewhat of a surprise. 115 00:05:19,680 --> 00:05:22,320 Speaker 9: I think most people were expecting the FedEx would lose 116 00:05:22,360 --> 00:05:24,599 Speaker 9: maybe about half of that business, but they ended up 117 00:05:24,680 --> 00:05:27,560 Speaker 9: losing all of it. It's about one point seven to 118 00:05:27,640 --> 00:05:30,800 Speaker 9: one point nine billion dollars in revenue, makes up roughly 119 00:05:30,839 --> 00:05:33,520 Speaker 9: around four to five percent of their express business, maybe 120 00:05:33,520 --> 00:05:35,120 Speaker 9: two percent of their total business. 121 00:05:35,800 --> 00:05:36,680 Speaker 7: So it's a. 122 00:05:36,600 --> 00:05:40,560 Speaker 9: Big loss for FedEx. And you know, while FedEx is losing, 123 00:05:40,880 --> 00:05:44,800 Speaker 9: Ups is gaining. What's great about this is maybe not 124 00:05:44,880 --> 00:05:47,000 Speaker 9: so much the revenue and. 125 00:05:46,960 --> 00:05:48,520 Speaker 7: The yields that it provides. 126 00:05:48,560 --> 00:05:51,880 Speaker 9: It's the stability of the freight that it's going to 127 00:05:51,880 --> 00:05:54,120 Speaker 9: be getting into its network. And when you have any 128 00:05:54,120 --> 00:05:58,040 Speaker 9: sort of freight network, you want equilibrium. You want you 129 00:05:58,080 --> 00:06:00,120 Speaker 9: want to be able to predict what you're going to 130 00:06:00,120 --> 00:06:03,640 Speaker 9: to need in terms of resources, and this provides a 131 00:06:03,680 --> 00:06:06,720 Speaker 9: good level set of predictability for them, and they can 132 00:06:06,720 --> 00:06:11,400 Speaker 9: build density onto these routes where the US Postal Service 133 00:06:11,440 --> 00:06:12,159 Speaker 9: will be leveraging. 134 00:06:12,720 --> 00:06:16,640 Speaker 6: Why is the Postal Service making the switch, that's a 135 00:06:16,640 --> 00:06:17,200 Speaker 6: great question. 136 00:06:17,279 --> 00:06:19,680 Speaker 9: They were negotiating with fed X. I guess the two 137 00:06:19,720 --> 00:06:23,760 Speaker 9: parties couldn't come to a conclusion in terms of an agreement, 138 00:06:24,520 --> 00:06:29,400 Speaker 9: so therefore they just decided to part ways. You know, 139 00:06:29,760 --> 00:06:32,279 Speaker 9: one would guess that this isn't maybe not the most 140 00:06:33,520 --> 00:06:37,760 Speaker 9: high margin business for whether it's UPS or fed X. 141 00:06:37,880 --> 00:06:40,120 Speaker 9: But again, I think there is a benefit to having 142 00:06:40,160 --> 00:06:42,040 Speaker 9: this because it does create a lot of density in 143 00:06:42,080 --> 00:06:42,560 Speaker 9: their network. 144 00:06:42,680 --> 00:06:45,159 Speaker 6: Let me ask a silly question. When I'm looking to 145 00:06:45,160 --> 00:06:48,040 Speaker 6: mail package, the United States Postal Service does not even 146 00:06:48,120 --> 00:06:49,440 Speaker 6: come into my mindset. 147 00:06:49,600 --> 00:06:52,280 Speaker 8: Oh god, no, no, who still. 148 00:06:52,160 --> 00:06:56,200 Speaker 6: Uses the US Postal Service versus FedEx? Or or you 149 00:06:56,200 --> 00:06:58,760 Speaker 6: know a UPS store that's right next to the Starbucks 150 00:06:58,760 --> 00:07:00,880 Speaker 6: in town. I can go, you know, get my cafe 151 00:07:01,080 --> 00:07:03,680 Speaker 6: mocha there. I'm not going to the post office. Who 152 00:07:03,800 --> 00:07:05,160 Speaker 6: uses a post office these days? 153 00:07:06,320 --> 00:07:07,000 Speaker 7: I mean I do? 154 00:07:07,160 --> 00:07:11,840 Speaker 9: I guess I'm you do, but I do sometimes. But 155 00:07:11,840 --> 00:07:14,200 Speaker 9: but the reality is the Postal service. You know, obviously 156 00:07:14,320 --> 00:07:17,800 Speaker 9: you were not sending letters to Grandma anymore. But you 157 00:07:17,840 --> 00:07:21,720 Speaker 9: know what we are doing is we're ordering stuff online 158 00:07:22,000 --> 00:07:24,040 Speaker 9: and the US Postal Service provides a lot of the 159 00:07:24,080 --> 00:07:25,360 Speaker 9: final mile delivery. 160 00:07:25,440 --> 00:07:26,160 Speaker 7: So you might be. 161 00:07:26,600 --> 00:07:29,840 Speaker 9: Ordering from a department store or you know, a dot 162 00:07:29,880 --> 00:07:33,760 Speaker 9: com etailer, and you know they might be using UPS 163 00:07:33,760 --> 00:07:37,880 Speaker 9: and FedEx for the line haul, but they might be 164 00:07:38,200 --> 00:07:41,040 Speaker 9: leveraging the postal service for that final mile deliver because 165 00:07:41,080 --> 00:07:43,200 Speaker 9: the postal service at the end of the day has 166 00:07:43,280 --> 00:07:45,600 Speaker 9: to go to everyone's address, and it's it's a cheap 167 00:07:45,600 --> 00:07:47,960 Speaker 9: way to do it, you know. And as more and 168 00:07:47,960 --> 00:07:50,040 Speaker 9: more people are willing to maybe you don't need something, 169 00:07:50,040 --> 00:07:51,920 Speaker 9: maybe you don't need that T shirt overnight, you can 170 00:07:51,960 --> 00:07:54,520 Speaker 9: wait a couple of days, you know, injecting that freight 171 00:07:54,560 --> 00:07:56,040 Speaker 9: into the postal service. 172 00:07:55,720 --> 00:07:56,320 Speaker 7: That makes sense. 173 00:07:56,360 --> 00:07:59,560 Speaker 9: And Amazon's is a big user of that final mile 174 00:07:59,600 --> 00:08:00,480 Speaker 9: delivery as well. 175 00:08:01,080 --> 00:08:02,880 Speaker 8: My daughter does send letters to her grandmother. 176 00:08:03,440 --> 00:08:06,120 Speaker 3: I'm just putting that out there on the flip side, 177 00:08:06,120 --> 00:08:08,000 Speaker 3: and I should point out they mentioned the margin part 178 00:08:08,000 --> 00:08:10,640 Speaker 3: of it. So we talked to the UPS CEO last 179 00:08:10,680 --> 00:08:13,360 Speaker 3: week on television, and their whole pitch is that going 180 00:08:13,400 --> 00:08:18,120 Speaker 3: forward they want to focus on margin and pricing over volume. 181 00:08:18,200 --> 00:08:22,640 Speaker 8: Does this fit into that strategy. 182 00:08:21,480 --> 00:08:22,000 Speaker 7: Yes and no. 183 00:08:22,240 --> 00:08:26,080 Speaker 9: So yes, because so what they're going to be focusing 184 00:08:26,120 --> 00:08:29,920 Speaker 9: on are verticals like small to mid sized shippers, and 185 00:08:29,960 --> 00:08:34,520 Speaker 9: those shippers come with very high margins relative to you know, 186 00:08:34,720 --> 00:08:38,880 Speaker 9: large enterprise companies that are out there, so they're going 187 00:08:38,960 --> 00:08:42,240 Speaker 9: to be really focused on that type of that type 188 00:08:42,280 --> 00:08:42,920 Speaker 9: of business. 189 00:08:43,679 --> 00:08:45,720 Speaker 7: But you know, what the what the. 190 00:08:45,800 --> 00:08:49,160 Speaker 9: Volumes from the postal service brings is a level of 191 00:08:49,200 --> 00:08:52,480 Speaker 9: density that you can leverage because it's all about operational leverage, right. 192 00:08:52,520 --> 00:08:55,880 Speaker 9: You know, no matter what you are in transportation, operational 193 00:08:55,960 --> 00:08:58,840 Speaker 9: leverage is pretty high. Because you add like one more 194 00:08:59,080 --> 00:09:01,800 Speaker 9: piece of freight, that piece of freight tends to have 195 00:09:01,920 --> 00:09:04,800 Speaker 9: higher margins than the first twenty pieces of freight. And 196 00:09:04,880 --> 00:09:07,240 Speaker 9: so what this will do is this will probably help 197 00:09:07,280 --> 00:09:10,640 Speaker 9: them provide a base level of cost coverage and you 198 00:09:10,679 --> 00:09:13,360 Speaker 9: know what a profitable cost coverage at that and then 199 00:09:13,520 --> 00:09:16,800 Speaker 9: all these additional volumes that they're getting from higher margin 200 00:09:17,120 --> 00:09:20,280 Speaker 9: might even carrier, might even carry higher. 201 00:09:20,000 --> 00:09:22,280 Speaker 7: Incremental margins for UPS. 202 00:09:22,320 --> 00:09:25,320 Speaker 9: So long term it could have a very positive impact 203 00:09:25,440 --> 00:09:29,000 Speaker 9: on margins. Near term, it might have somewhat of a mix, 204 00:09:29,559 --> 00:09:32,880 Speaker 9: a negative mixshift, if you will, but you know, we 205 00:09:32,920 --> 00:09:35,680 Speaker 9: think that it does make sense for them to take 206 00:09:35,679 --> 00:09:39,200 Speaker 9: this volume. And other verticals also that they talked about 207 00:09:39,280 --> 00:09:43,120 Speaker 9: during their analyst day were the healthcare vertical, which tends 208 00:09:43,120 --> 00:09:45,840 Speaker 9: to be highly profitable just because of the high touch 209 00:09:45,960 --> 00:09:48,840 Speaker 9: nature and the high service level of that freight that 210 00:09:48,920 --> 00:09:49,800 Speaker 9: goes through their network. 211 00:09:50,360 --> 00:09:53,720 Speaker 6: So Lee looking at the air freight companies to the FedEx, 212 00:09:53,760 --> 00:09:57,800 Speaker 6: the UPS, how is business? How are volumes these days 213 00:09:57,800 --> 00:09:59,920 Speaker 6: that they kind of peeled off from the pandemic or 214 00:10:00,040 --> 00:10:00,720 Speaker 6: how is volume? 215 00:10:01,480 --> 00:10:03,640 Speaker 9: Yeah, so, you know, we're coming off those highs that 216 00:10:03,679 --> 00:10:06,080 Speaker 9: we reached during the pandemic when everyone was sitting at 217 00:10:06,120 --> 00:10:09,040 Speaker 9: home and ordering toilet paper online or at least trying 218 00:10:09,040 --> 00:10:10,680 Speaker 9: to get some toilet paper online. 219 00:10:11,200 --> 00:10:14,720 Speaker 7: You know, we're back to a more normalized level. You know. 220 00:10:14,760 --> 00:10:18,040 Speaker 9: But the reality is what the pandemic has done, is 221 00:10:18,240 --> 00:10:22,320 Speaker 9: it really increased that e commerce penetration. It kind of 222 00:10:22,800 --> 00:10:25,440 Speaker 9: kind of brought brought the penetration forward by three to 223 00:10:25,520 --> 00:10:26,439 Speaker 9: five years. 224 00:10:26,679 --> 00:10:28,040 Speaker 7: Which is a net positive. 225 00:10:28,520 --> 00:10:30,040 Speaker 9: But you know, we have to go back to this 226 00:10:30,160 --> 00:10:33,960 Speaker 9: quote unquote normalization process, which feels like a negative, but 227 00:10:34,000 --> 00:10:37,640 Speaker 9: it's really not because once we get this space, which 228 00:10:37,640 --> 00:10:39,800 Speaker 9: I think we're building right now, you know, we should 229 00:10:39,800 --> 00:10:42,480 Speaker 9: see positive growth from here on out. 230 00:10:42,840 --> 00:10:44,439 Speaker 3: Well, now since you're back, I can also ask you 231 00:10:44,440 --> 00:10:47,959 Speaker 3: about Baltimore. What is the news today? 232 00:10:48,080 --> 00:10:48,200 Speaker 7: Like? 233 00:10:48,320 --> 00:10:51,680 Speaker 3: Where are we I know that there's some salvage ships 234 00:10:51,679 --> 00:10:53,760 Speaker 3: that are coming in to try and get the stuff. 235 00:10:53,720 --> 00:10:57,480 Speaker 8: Off the bottom of the port. Where are we here? 236 00:10:57,640 --> 00:10:58,160 Speaker 8: How's it going? 237 00:11:00,840 --> 00:11:03,280 Speaker 9: I'm not there, and I'm not My hands won't get 238 00:11:03,280 --> 00:11:05,600 Speaker 9: dirty because I just I don't have those kind of hands. 239 00:11:06,200 --> 00:11:08,839 Speaker 9: But you know, it could take four to six weeks 240 00:11:08,880 --> 00:11:12,880 Speaker 9: to clean up the channel area to get the port reopened. 241 00:11:13,840 --> 00:11:16,560 Speaker 9: You know, obviously to rebuild the bridge, we're talking two 242 00:11:16,640 --> 00:11:20,400 Speaker 9: to four years, probably closer to four than two, and. 243 00:11:20,360 --> 00:11:21,920 Speaker 7: So that's going to take time. 244 00:11:22,600 --> 00:11:25,400 Speaker 9: The freight that is going to be impacted can be 245 00:11:25,480 --> 00:11:29,600 Speaker 9: moved to other ports, whether it's coal going to the 246 00:11:29,640 --> 00:11:32,360 Speaker 9: Port of Norfolk versus you. 247 00:11:32,280 --> 00:11:33,559 Speaker 7: Know, going out of Baltimore. 248 00:11:34,240 --> 00:11:37,000 Speaker 9: A lot of roll on roll off equipment, whether it's 249 00:11:37,080 --> 00:11:40,880 Speaker 9: ag or commercial equipment in addition to automotives could go 250 00:11:40,920 --> 00:11:45,600 Speaker 9: to Philly or New York, New Jersey ports. So there's 251 00:11:45,640 --> 00:11:47,559 Speaker 9: going to be you know, there's going to be other 252 00:11:47,600 --> 00:11:50,600 Speaker 9: ports that can pull the slack what you're going to see. 253 00:11:50,640 --> 00:11:53,560 Speaker 9: Because we track weekly rail volumes, you're probably can see 254 00:11:53,559 --> 00:11:57,360 Speaker 9: some volatility and the rail volumes, especially for Norfolk, Southern 255 00:11:57,440 --> 00:12:00,800 Speaker 9: and CSX, the two eastern railroads, and that might make 256 00:12:00,920 --> 00:12:03,920 Speaker 9: earnings maybe a little lumpy or a little lighter than 257 00:12:03,920 --> 00:12:08,120 Speaker 9: what expectations were. But this is not like a huge 258 00:12:08,160 --> 00:12:12,080 Speaker 9: dislocation like we saw, whether it's during the pandemic, and 259 00:12:12,120 --> 00:12:14,680 Speaker 9: it's probably even less of. 260 00:12:13,880 --> 00:12:15,240 Speaker 7: Of a big deal if you will. 261 00:12:16,040 --> 00:12:18,800 Speaker 9: Then what we saw in what we're seeing right now 262 00:12:18,840 --> 00:12:20,880 Speaker 9: in the Red Sea in terms of the impact, I 263 00:12:20,920 --> 00:12:23,320 Speaker 9: think we're gonna this is really like a from a 264 00:12:23,360 --> 00:12:27,360 Speaker 9: supply chain standpoint, It is really a short term negative 265 00:12:27,400 --> 00:12:31,160 Speaker 9: impact where we'll find the new normal. I guess you know, 266 00:12:31,200 --> 00:12:33,320 Speaker 9: I do say that a lot in my job, what 267 00:12:33,440 --> 00:12:36,079 Speaker 9: the new normal is. But we will find a new 268 00:12:36,120 --> 00:12:39,280 Speaker 9: normal as freight finds other ports to go short term 269 00:12:39,360 --> 00:12:42,360 Speaker 9: until the Port of Baltimore opens up, which hopefully will 270 00:12:42,400 --> 00:12:43,840 Speaker 9: be in less than two months time. 271 00:12:44,360 --> 00:12:44,480 Speaker 7: Hey. 272 00:12:44,559 --> 00:12:47,280 Speaker 6: Lee, when you talk to your institutional investor clients and 273 00:12:47,320 --> 00:12:51,360 Speaker 6: you're talking about the transportation space broadly defined, where are 274 00:12:51,360 --> 00:12:52,360 Speaker 6: people most excited? 275 00:12:52,440 --> 00:12:53,160 Speaker 7: Is it the rails? 276 00:12:53,240 --> 00:12:55,560 Speaker 6: Is it the trucks? Is it the marine shippers? 277 00:12:56,559 --> 00:12:58,400 Speaker 7: Yeah, so that's a great question. 278 00:12:58,640 --> 00:13:03,040 Speaker 9: I don't really think it's it's it's on a mode 279 00:13:03,200 --> 00:13:04,000 Speaker 9: basis right now. 280 00:13:04,040 --> 00:13:06,840 Speaker 7: I think it's really by a company's story. 281 00:13:07,240 --> 00:13:09,480 Speaker 9: You know, you have a Norfolk Southern where you have 282 00:13:09,520 --> 00:13:13,120 Speaker 9: a lot of activist investor activists activity going on there, 283 00:13:13,600 --> 00:13:15,800 Speaker 9: so there's a lot of excitement about, you know, how 284 00:13:15,840 --> 00:13:17,760 Speaker 9: that company can improve its margins. 285 00:13:18,240 --> 00:13:18,560 Speaker 7: Uh. 286 00:13:18,600 --> 00:13:20,880 Speaker 9: In the West, you have a new Pacific on on 287 00:13:20,920 --> 00:13:23,160 Speaker 9: the rail side, where you have a new CEO that 288 00:13:23,240 --> 00:13:26,359 Speaker 9: comes in with a lot of precisions scheduling, railroading experience 289 00:13:26,400 --> 00:13:28,800 Speaker 9: and uh, you know, expectations are he's going to be 290 00:13:28,800 --> 00:13:31,480 Speaker 9: able to improve margins. And then on the growth side 291 00:13:31,480 --> 00:13:33,800 Speaker 9: of things in the rail industry, you have a Canadian 292 00:13:33,840 --> 00:13:38,080 Speaker 9: Pacific uh Kansas City, which is uh, you know, the 293 00:13:38,120 --> 00:13:41,559 Speaker 9: byproduct of a merger that happened last year, and they 294 00:13:41,559 --> 00:13:44,560 Speaker 9: had some great growth opportunities because you know, they're the 295 00:13:44,600 --> 00:13:46,839 Speaker 9: only railroad that touches Canada. 296 00:13:46,520 --> 00:13:49,079 Speaker 7: The US and Mexico. And as you know, near. 297 00:13:48,960 --> 00:13:53,280 Speaker 9: Shoring is a long term, slow, but long term secular 298 00:13:53,360 --> 00:13:56,600 Speaker 9: growth story that you know, we're looking at and they're 299 00:13:56,760 --> 00:13:59,839 Speaker 9: they're they're expected to benefit the most from from there. 300 00:14:00,200 --> 00:14:03,199 Speaker 9: And then broadly speaking, I think people are just waiting 301 00:14:03,240 --> 00:14:06,600 Speaker 9: to see the truckload cycle rate cycle start to turn. 302 00:14:07,240 --> 00:14:08,080 Speaker 7: We believe it's going to. 303 00:14:08,080 --> 00:14:11,959 Speaker 9: Happen this quarter. We believe we're bouncing along the bottom. 304 00:14:12,120 --> 00:14:14,720 Speaker 9: What happened in Baltimore could kind of give a boost 305 00:14:14,960 --> 00:14:19,120 Speaker 9: to certain kind of equipment types like flatbed equipment near 306 00:14:19,200 --> 00:14:22,240 Speaker 9: term here, which could be a great base to work 307 00:14:22,280 --> 00:14:25,080 Speaker 9: on positive pricing, which the truckload industry. 308 00:14:24,760 --> 00:14:27,680 Speaker 8: Does really needs before we let you go. 309 00:14:27,880 --> 00:14:30,760 Speaker 3: I mean on that point, we had the ISM manufacturing 310 00:14:30,840 --> 00:14:34,360 Speaker 3: data coming in really strong, and you have been expansionary 311 00:14:34,480 --> 00:14:37,720 Speaker 3: territory for the first time since July of twenty twenty two. 312 00:14:38,160 --> 00:14:40,360 Speaker 3: It has been bouncing along the bottom and troughing for 313 00:14:40,400 --> 00:14:43,160 Speaker 3: like five or six months. You're saying something similar for 314 00:14:43,200 --> 00:14:46,400 Speaker 3: the transportation sector in some ways, does it reaccelerate, Like 315 00:14:46,520 --> 00:14:48,040 Speaker 3: what does the upturn look like? 316 00:14:49,000 --> 00:14:52,120 Speaker 9: So the ISM index is probably a great precursor to 317 00:14:52,600 --> 00:14:58,000 Speaker 9: less than truckload demand. So think companies like XPO, Old Dominion, 318 00:14:58,080 --> 00:15:02,080 Speaker 9: even FedEx Freight is the largest LTL carrier out there. 319 00:15:02,640 --> 00:15:09,000 Speaker 9: Tonnage has been in decline h broadly speaking, and what 320 00:15:09,080 --> 00:15:12,560 Speaker 9: the ISM usually is, it kind of leads demand. 321 00:15:12,240 --> 00:15:13,720 Speaker 7: By by three to six months. 322 00:15:13,720 --> 00:15:18,400 Speaker 9: So the fact that it inflected into expansion territory is 323 00:15:18,440 --> 00:15:19,480 Speaker 9: a positive. 324 00:15:19,040 --> 00:15:22,320 Speaker 7: Sign for the LTL space. You know, That's how we 325 00:15:22,320 --> 00:15:24,880 Speaker 7: look when we're looking at the is m all right? 326 00:15:24,960 --> 00:15:28,280 Speaker 6: Lee great Stuff has always appreciated, uh bringing it as 327 00:15:28,280 --> 00:15:31,400 Speaker 6: he always does. Leek Clasicow, senior Transportation Logistics and shipping 328 00:15:31,440 --> 00:15:35,200 Speaker 6: analysts for Bloomberg Intelligence coming to us from our Princeton 329 00:15:35,240 --> 00:15:38,800 Speaker 6: studio via that technology, the kids call zoom. So that 330 00:15:38,840 --> 00:15:42,720 Speaker 6: worked out worst. Yeah, just looking at the logistics, it 331 00:15:42,720 --> 00:15:46,920 Speaker 6: seems like we're back to normalized logistics, getting up, you know, 332 00:15:46,920 --> 00:15:48,960 Speaker 6: our product from point A to point B. Kind of 333 00:15:49,000 --> 00:15:51,360 Speaker 6: back to where we were. I guess, I guess. My 334 00:15:51,360 --> 00:15:53,960 Speaker 6: My question is what happens to justin time inventory? Is 335 00:15:54,000 --> 00:15:56,320 Speaker 6: that still thing? Or do people learn their lesson like 336 00:15:56,760 --> 00:15:59,440 Speaker 6: that just in time that's a little too dice meat, right. 337 00:15:59,360 --> 00:16:01,440 Speaker 8: But it's not like a huge build up of inventory, right. 338 00:16:01,480 --> 00:16:03,400 Speaker 3: It's like you have enough but not too much and 339 00:16:03,480 --> 00:16:05,280 Speaker 3: kind of finding that sweet spot as I feel like 340 00:16:05,320 --> 00:16:07,760 Speaker 3: retailers have been trying to find for a bit can 341 00:16:07,800 --> 00:16:10,600 Speaker 3: be quite tricky, you know, but it will be interesting. 342 00:16:10,680 --> 00:16:13,600 Speaker 3: I know that we're writing off what happened in Baltimore 343 00:16:13,640 --> 00:16:14,560 Speaker 3: in terms of logistics. 344 00:16:14,600 --> 00:16:16,040 Speaker 8: I know, I know we're doing that. 345 00:16:16,120 --> 00:16:20,560 Speaker 3: There's space, there's capacity at different ports, railroads have capacity, 346 00:16:20,600 --> 00:16:23,720 Speaker 3: et cetera. We have to wonder, though, if it doesn't 347 00:16:23,760 --> 00:16:26,320 Speaker 3: take any shorter than four to six weeks, do we 348 00:16:26,400 --> 00:16:29,120 Speaker 3: have to rethink the disinflationary trend that we're seeing, Like 349 00:16:29,160 --> 00:16:31,360 Speaker 3: not inflation, not something crazy, but just. 350 00:16:31,640 --> 00:16:35,760 Speaker 8: You know, stops the stops the decline. 351 00:16:36,160 --> 00:16:40,040 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 352 00:16:40,120 --> 00:16:42,760 Speaker 2: weekdays at ten am Eastern on Apple car Playing and 353 00:16:42,920 --> 00:16:45,840 Speaker 2: broyd Outo with the Bloomberg Business app. Listen on demand 354 00:16:45,880 --> 00:16:49,560 Speaker 2: wherever you get your podcasts, or watch us live on YouTube. 355 00:16:49,640 --> 00:16:52,280 Speaker 3: But we're looking to sell off all across the bond 356 00:16:52,320 --> 00:16:55,000 Speaker 3: market here, particularly in the long end, and it seems 357 00:16:55,080 --> 00:16:57,560 Speaker 3: like the good data is going to be bad then 358 00:16:57,680 --> 00:16:58,440 Speaker 3: for the market. 359 00:16:58,680 --> 00:17:01,200 Speaker 8: Are we seeing actually a re ex of the economy. 360 00:17:01,240 --> 00:17:02,600 Speaker 8: I think that's going to be my question of the. 361 00:17:02,640 --> 00:17:03,520 Speaker 6: Day, Pall, I like that. 362 00:17:04,440 --> 00:17:04,960 Speaker 8: Let's do it. 363 00:17:05,040 --> 00:17:08,080 Speaker 3: Carol Pepper is founder and CEO at Pepper International and 364 00:17:08,160 --> 00:17:12,199 Speaker 3: she joins us. Now, Carol, are we seeing a reacceleration. 365 00:17:12,760 --> 00:17:12,879 Speaker 4: Now? 366 00:17:12,960 --> 00:17:17,800 Speaker 10: I think we're seeing a steady, continuing good performance. Reacceleration 367 00:17:17,920 --> 00:17:19,920 Speaker 10: would imply that it's going to get a lot hotter 368 00:17:20,359 --> 00:17:22,679 Speaker 10: too quickly and it will not allow the FED to cut. 369 00:17:22,960 --> 00:17:25,040 Speaker 10: I don't believe that's the case. I think we're just 370 00:17:25,119 --> 00:17:28,959 Speaker 10: going to continue to see a good, strong, muscular market 371 00:17:29,040 --> 00:17:31,760 Speaker 10: that's doing well. I don't see it as a reacceleration. 372 00:17:31,840 --> 00:17:34,159 Speaker 10: I see it as fairly a steady state, almost a 373 00:17:34,200 --> 00:17:37,119 Speaker 10: goldilocks market, not too hot, not too cold. 374 00:17:37,359 --> 00:17:39,879 Speaker 6: So if that back. With that background, Carol, what do 375 00:17:39,880 --> 00:17:41,879 Speaker 6: you think are Feeder Reserve is going to do in 376 00:17:41,880 --> 00:17:42,760 Speaker 6: the upcoming meetings. 377 00:17:43,560 --> 00:17:45,320 Speaker 10: I'm definitely in the camp that says they're going to 378 00:17:45,400 --> 00:17:48,080 Speaker 10: cut in June because they have no reason to keep the. 379 00:17:48,080 --> 00:17:48,919 Speaker 4: Rates so high. 380 00:17:49,200 --> 00:17:52,199 Speaker 10: I mean, there's just there's not a lot of justification 381 00:17:52,359 --> 00:17:55,960 Speaker 10: if we don't have rampant inflation and the rates being 382 00:17:56,000 --> 00:17:58,439 Speaker 10: so high do threaten the real estate markets, which in 383 00:17:58,440 --> 00:18:01,000 Speaker 10: turn threaten the banks. So you know, a lot of 384 00:18:01,040 --> 00:18:03,399 Speaker 10: people have been holding on by their fingernails, and a 385 00:18:03,400 --> 00:18:05,159 Speaker 10: lot of banks don't want to take back all that 386 00:18:05,240 --> 00:18:07,600 Speaker 10: real estate, so they really need to start cutting. 387 00:18:09,000 --> 00:18:11,000 Speaker 3: Okay, So if we just do so things are just 388 00:18:11,080 --> 00:18:13,760 Speaker 3: humming along and doing all right. As you were just saying, 389 00:18:14,600 --> 00:18:16,760 Speaker 3: is that enough for equities to keep going up? 390 00:18:18,720 --> 00:18:21,520 Speaker 10: Well, remember, we're going to have the stimulus coming, a 391 00:18:21,560 --> 00:18:23,760 Speaker 10: real stimulus, which is the cut of interest rates. 392 00:18:24,200 --> 00:18:25,520 Speaker 4: That will help real estate. 393 00:18:25,359 --> 00:18:28,080 Speaker 10: That will help banks, That will help consumers because the 394 00:18:28,160 --> 00:18:29,520 Speaker 10: credit card rates will go down. 395 00:18:29,680 --> 00:18:31,600 Speaker 3: But if we don't get that, Carol, if we don't 396 00:18:31,640 --> 00:18:33,480 Speaker 3: get the cuts, or if that gets pushed off even 397 00:18:33,520 --> 00:18:35,720 Speaker 3: by a month, et cetera, can stocks will go up? 398 00:18:36,800 --> 00:18:37,480 Speaker 4: Yes? I think so. 399 00:18:37,640 --> 00:18:40,199 Speaker 10: Because again we're at the beginning of another level of 400 00:18:40,240 --> 00:18:43,520 Speaker 10: secular change. I was around trading the Internet when it 401 00:18:43,600 --> 00:18:46,560 Speaker 10: first launched, and everybody said it was too expensive, don't 402 00:18:46,600 --> 00:18:46,919 Speaker 10: buy it. 403 00:18:46,960 --> 00:18:49,560 Speaker 4: And look where we are today. You know, will there be. 404 00:18:49,560 --> 00:18:52,800 Speaker 10: Blips, yes, but the AI revolution really is going to 405 00:18:52,840 --> 00:18:55,440 Speaker 10: be another huge leg up in productivity. And that's why 406 00:18:55,440 --> 00:18:58,880 Speaker 10: you see the NASDAC running as strongly as it is, 407 00:18:58,960 --> 00:19:02,720 Speaker 10: because people, a lot of people you know, still around 408 00:19:02,760 --> 00:19:05,720 Speaker 10: to remember how it worked out last time. So AI 409 00:19:05,880 --> 00:19:09,280 Speaker 10: is a secular change. The money that's been poured in 410 00:19:09,359 --> 00:19:12,480 Speaker 10: by the Inflation Reduction Act is a secular change. These 411 00:19:12,480 --> 00:19:15,200 Speaker 10: are real things that are causing real things to happen 412 00:19:15,240 --> 00:19:18,240 Speaker 10: in the real world, and those are additional boosts even 413 00:19:18,240 --> 00:19:19,040 Speaker 10: if we don't. 414 00:19:18,840 --> 00:19:21,520 Speaker 4: Get the rate cuts. So there are very positive headwinds. 415 00:19:22,040 --> 00:19:24,240 Speaker 10: And certainly if you compare what's going on here to 416 00:19:24,400 --> 00:19:29,399 Speaker 10: the threat of Russia looming over Europe, the threat of 417 00:19:29,520 --> 00:19:33,720 Speaker 10: China looming over Asia, you know, where do you go 418 00:19:33,760 --> 00:19:35,160 Speaker 10: in the world, Middle East or here. 419 00:19:35,240 --> 00:19:37,480 Speaker 4: Really that's why you see a lot of people moving. 420 00:19:37,359 --> 00:19:41,720 Speaker 10: To you know, Ua, and people bringing their money to 421 00:19:41,760 --> 00:19:44,520 Speaker 10: the United States, lots of international clients. 422 00:19:44,560 --> 00:19:46,400 Speaker 4: As you know, I work with family offices. 423 00:19:46,440 --> 00:19:49,160 Speaker 10: I manage money for people with over one hundred million 424 00:19:49,160 --> 00:19:51,800 Speaker 10: who are who have single family offices, and they're all 425 00:19:52,200 --> 00:19:54,520 Speaker 10: looking at the US as a safe haven. And that's 426 00:19:54,560 --> 00:19:57,640 Speaker 10: going to continue because on a relative basis, the US 427 00:19:57,720 --> 00:20:00,479 Speaker 10: looks fantastic if you think about going to other regions 428 00:20:00,520 --> 00:20:01,040 Speaker 10: of the world. 429 00:20:02,359 --> 00:20:05,240 Speaker 6: So do I stick with my large cap growth stocks, Carol, 430 00:20:05,280 --> 00:20:06,920 Speaker 6: that have been working for me? Or do I try 431 00:20:07,080 --> 00:20:08,680 Speaker 6: try to go out there and find some value? 432 00:20:09,359 --> 00:20:09,560 Speaker 2: No? 433 00:20:09,560 --> 00:20:12,000 Speaker 10: No, no, forget value in my opinion, I mean you 434 00:20:12,000 --> 00:20:16,440 Speaker 10: can honestly value has I've been hearing about the renaissance 435 00:20:16,440 --> 00:20:18,080 Speaker 10: of value for forty years. 436 00:20:19,440 --> 00:20:22,119 Speaker 4: Okay, it just never happens. It's like waiting for goodo. 437 00:20:22,800 --> 00:20:25,080 Speaker 10: I mean, the the United States is a leader in 438 00:20:25,160 --> 00:20:28,480 Speaker 10: technology globally. And if you stick with the large cap 439 00:20:28,520 --> 00:20:31,760 Speaker 10: growth stocks, particularly ones with lots and lots of cash 440 00:20:31,800 --> 00:20:32,160 Speaker 10: on their. 441 00:20:32,080 --> 00:20:34,160 Speaker 4: Balance sheet, which you can easily see if you look 442 00:20:34,200 --> 00:20:37,520 Speaker 4: on you know, any any online. 443 00:20:37,040 --> 00:20:39,960 Speaker 10: System you're a trader on Bloomberg channel wherever you can 444 00:20:40,000 --> 00:20:42,520 Speaker 10: see how much cash they have on their balance sheet. 445 00:20:42,960 --> 00:20:44,600 Speaker 4: That means they can weather any storm. 446 00:20:44,880 --> 00:20:48,840 Speaker 10: So you know, Microsoft, Amazon, Google, these big names are 447 00:20:48,840 --> 00:20:50,480 Speaker 10: going to continue powering upward. 448 00:20:51,880 --> 00:20:54,760 Speaker 3: So okay, to that point if I didn't own though, 449 00:20:54,920 --> 00:20:58,600 Speaker 3: say the mag four Fab four. Is it too late 450 00:20:58,640 --> 00:21:00,399 Speaker 3: to do that or do I need to sort of 451 00:21:00,440 --> 00:21:02,439 Speaker 3: play the themes that you're talking about that are real 452 00:21:02,480 --> 00:21:04,920 Speaker 3: structural shifts in different ways. 453 00:21:04,960 --> 00:21:06,840 Speaker 4: No way, you have to play the big guys. 454 00:21:07,280 --> 00:21:10,439 Speaker 10: This is the leader's market and there are lots of 455 00:21:10,480 --> 00:21:11,359 Speaker 10: fear days coming. 456 00:21:11,359 --> 00:21:12,760 Speaker 4: Don't think we're done with fear days. 457 00:21:12,800 --> 00:21:15,480 Speaker 10: Fear days of the days when something spooks the market. 458 00:21:15,560 --> 00:21:19,440 Speaker 10: Let's say Paul says something that makes the traders fret that. 459 00:21:19,440 --> 00:21:21,280 Speaker 4: Oh he really isn't going to cut. Oh my god, 460 00:21:21,320 --> 00:21:22,040 Speaker 4: what's going to happen? 461 00:21:22,080 --> 00:21:25,240 Speaker 10: And everything will drop like a stone, and you smart 462 00:21:25,320 --> 00:21:27,600 Speaker 10: trader are waiting on the sidelines, and you'll get into 463 00:21:27,680 --> 00:21:29,920 Speaker 10: those big names. There will be fear days, there will 464 00:21:29,920 --> 00:21:32,680 Speaker 10: be fear events. That's just the way things roll these days. 465 00:21:33,080 --> 00:21:34,679 Speaker 10: So on those days you can get in if you 466 00:21:34,720 --> 00:21:37,760 Speaker 10: want to get a better entry point. But frankly, you know, 467 00:21:37,880 --> 00:21:40,280 Speaker 10: I remember when Amazon first came out and everybody said 468 00:21:40,280 --> 00:21:42,480 Speaker 10: it was too expensive. Event it's you know or Microsoft. 469 00:21:42,520 --> 00:21:45,160 Speaker 10: These are up two hundred three hundred thousand percent. I mean, 470 00:21:45,840 --> 00:21:49,399 Speaker 10: there's no waiting for the exact right day. Isn't the answer. 471 00:21:49,480 --> 00:21:52,359 Speaker 10: The answer is get into those stocks, particularly for your 472 00:21:52,400 --> 00:21:56,720 Speaker 10: retirement accounts or your kids college stick the stick them somewhere, 473 00:21:56,760 --> 00:21:58,200 Speaker 10: don't look at them every day, and. 474 00:21:58,200 --> 00:22:00,760 Speaker 4: Just know that you've made a great, solid investment for 475 00:22:00,880 --> 00:22:01,600 Speaker 4: years to come. 476 00:22:02,680 --> 00:22:07,719 Speaker 6: Em XC What is EMXC and why should we buy it? 477 00:22:08,400 --> 00:22:13,760 Speaker 10: Okay, EMXC is the Emerging Markets Mexico Fund. So I've 478 00:22:13,760 --> 00:22:16,360 Speaker 10: been spending a lot of time lately in Mexico. Mexico 479 00:22:16,720 --> 00:22:20,040 Speaker 10: is the destination for a lot of the near shoring activity, 480 00:22:20,200 --> 00:22:23,840 Speaker 10: meaning people are moving their operations out of China's sphere, 481 00:22:23,880 --> 00:22:26,880 Speaker 10: not only China, but anywhere China for example, like Hong Kong, 482 00:22:27,200 --> 00:22:31,040 Speaker 10: anywhere where China has undue influence, They're moving those operations 483 00:22:31,040 --> 00:22:34,840 Speaker 10: to Mexico. Mexico is on fire. If you go to Monterey, 484 00:22:34,960 --> 00:22:37,840 Speaker 10: the building is unbelievable. If you go to Tijuana, the 485 00:22:37,920 --> 00:22:42,880 Speaker 10: building is incredible. Why because all these both European and 486 00:22:43,320 --> 00:22:45,400 Speaker 10: US corporations are moving operations there. 487 00:22:45,800 --> 00:22:49,000 Speaker 4: So that country is doing extremely well. Of course, they have, 488 00:22:49,280 --> 00:22:50,719 Speaker 4: like a lot of countries. 489 00:22:50,800 --> 00:22:53,840 Speaker 10: Right now, they're a little nervous about the presidential election 490 00:22:54,000 --> 00:22:56,240 Speaker 10: coming up, but once we get past that, that country 491 00:22:56,280 --> 00:22:59,160 Speaker 10: is going to continue to do extremely well. So that's 492 00:22:59,200 --> 00:23:02,080 Speaker 10: a way the small percentage of your money to play 493 00:23:02,160 --> 00:23:04,680 Speaker 10: a trend that's going to only get bigger over time. 494 00:23:04,800 --> 00:23:07,159 Speaker 8: Do that also go to Canada, Carol? Or is that 495 00:23:07,359 --> 00:23:08,439 Speaker 8: purely in Mexico? 496 00:23:08,800 --> 00:23:08,960 Speaker 7: You know? 497 00:23:09,119 --> 00:23:11,560 Speaker 10: Because the wages are too high in Canada, so that's 498 00:23:11,560 --> 00:23:13,480 Speaker 10: why they go to Mexico. So it's sort of you 499 00:23:13,520 --> 00:23:17,719 Speaker 10: get emerging market wages and labor in a market that 500 00:23:17,800 --> 00:23:20,840 Speaker 10: where you can literally, like Canada, drive into the US. 501 00:23:20,880 --> 00:23:23,560 Speaker 10: But unfortunately Canada doesn't have enough labor to take all 502 00:23:23,600 --> 00:23:26,199 Speaker 10: of our near shoring, and they're they're more like US, 503 00:23:26,280 --> 00:23:28,919 Speaker 10: they have high wage structure, So that's why people go 504 00:23:28,960 --> 00:23:29,520 Speaker 10: to Mexico. 505 00:23:30,400 --> 00:23:33,280 Speaker 6: Do people Are people going to increasingly go to India 506 00:23:33,359 --> 00:23:36,880 Speaker 6: if China is less investible here? A lot of folks 507 00:23:36,920 --> 00:23:41,000 Speaker 6: have been suggesting that's the next trend in emerging markets. 508 00:23:41,680 --> 00:23:42,360 Speaker 4: Absolutely. 509 00:23:42,400 --> 00:23:45,240 Speaker 10: I mean, for example, two important things happen in February 510 00:23:45,400 --> 00:23:49,560 Speaker 10: MSCI the index for the Rest of the World. If 511 00:23:49,600 --> 00:23:52,960 Speaker 10: you will increase the waiting for India and decrease the 512 00:23:53,040 --> 00:23:54,760 Speaker 10: waiting for China, India. 513 00:23:54,480 --> 00:23:56,440 Speaker 4: Up two points, China down a point. 514 00:23:57,240 --> 00:23:59,800 Speaker 10: JP Morgan this coming month is going to be adding 515 00:24:00,440 --> 00:24:03,399 Speaker 10: India bonds for the first time into their International Bond Index. 516 00:24:03,520 --> 00:24:05,120 Speaker 4: So India is. 517 00:24:05,240 --> 00:24:09,679 Speaker 10: Muscling in and China is falling behind because they're just 518 00:24:09,720 --> 00:24:11,399 Speaker 10: not playing ball with the rest of the world. 519 00:24:11,480 --> 00:24:14,440 Speaker 4: So, yes, India is a great trend right now. It's 520 00:24:14,480 --> 00:24:18,520 Speaker 4: easier to buy India through some emerging market ETFs that 521 00:24:18,600 --> 00:24:19,600 Speaker 4: are equity focused. 522 00:24:19,640 --> 00:24:21,720 Speaker 10: There's really not a lot of great debt options yet, 523 00:24:21,720 --> 00:24:24,960 Speaker 10: but I think those will come because what tends to happen, 524 00:24:25,359 --> 00:24:28,000 Speaker 10: the street gets excited when when a country is included 525 00:24:28,000 --> 00:24:30,359 Speaker 10: an index is now it's worthwhile to go and build 526 00:24:30,359 --> 00:24:35,200 Speaker 10: products around that country. So that's why there's Ida, which 527 00:24:35,240 --> 00:24:37,439 Speaker 10: is a great ETF that you can look at, and 528 00:24:37,520 --> 00:24:40,320 Speaker 10: there's gli In. Both of these you know, gli In 529 00:24:40,480 --> 00:24:43,240 Speaker 10: was up fifty three percent last year. It's smaller, but 530 00:24:43,359 --> 00:24:45,760 Speaker 10: Ida is nine billion dollars already and. 531 00:24:45,760 --> 00:24:47,560 Speaker 4: It was up over thirty percent last year. 532 00:24:47,880 --> 00:24:50,119 Speaker 3: So yeah, here Before we let you go, though, I 533 00:24:50,160 --> 00:24:52,240 Speaker 3: just want to get one day, like, what's the biggest question? 534 00:24:52,320 --> 00:24:54,399 Speaker 3: Like we covered a lot of ground, what's the biggest 535 00:24:54,440 --> 00:24:56,440 Speaker 3: question you're getting right now from your clients? 536 00:24:57,080 --> 00:25:00,800 Speaker 10: Well, it's really will this good time last? And I 537 00:25:00,920 --> 00:25:03,840 Speaker 10: say yes, I say this year it's an election year, 538 00:25:03,960 --> 00:25:06,199 Speaker 10: the good time will last. Don't be too frightened and 539 00:25:06,320 --> 00:25:08,400 Speaker 10: jump out because you're scared, and don't try to time 540 00:25:08,440 --> 00:25:10,640 Speaker 10: the market. Look for long term trends that will work 541 00:25:10,680 --> 00:25:13,840 Speaker 10: for you in the right proportion for your portfolio, and 542 00:25:14,000 --> 00:25:16,680 Speaker 10: stick with them. Don't go crazy unless you have a 543 00:25:16,760 --> 00:25:18,800 Speaker 10: day trading account. That's a whole other story. But if 544 00:25:18,840 --> 00:25:21,920 Speaker 10: you're investing, bind the right trends and ride them over 545 00:25:21,960 --> 00:25:23,200 Speaker 10: the long term. 546 00:25:23,359 --> 00:25:24,080 Speaker 8: Carol, thanks a lot. 547 00:25:24,160 --> 00:25:26,640 Speaker 3: We really appreciated Carol Pepper, a founder and CEO over 548 00:25:26,640 --> 00:25:29,679 Speaker 3: at Pepper International. So interesting because it just flies in 549 00:25:29,720 --> 00:25:32,000 Speaker 3: the face of like my philosophy, which is gold and 550 00:25:32,040 --> 00:25:34,359 Speaker 3: soup canes kind of under the bed, but speaking of 551 00:25:34,440 --> 00:25:37,040 Speaker 3: gold at a record high, but that you know, like, 552 00:25:37,280 --> 00:25:39,480 Speaker 3: don't get scared, we'll have down days and sort of 553 00:25:39,520 --> 00:25:41,159 Speaker 3: buy the dip in the large guys. 554 00:25:41,520 --> 00:25:43,440 Speaker 8: I always wonder what the first member. 555 00:25:43,240 --> 00:25:46,760 Speaker 3: Advantage is for the AI trade, Like do you want 556 00:25:46,800 --> 00:25:48,480 Speaker 3: to buy the first guys or do you want to 557 00:25:48,480 --> 00:25:50,560 Speaker 3: buy the fourth derivative fourth guys? 558 00:25:50,680 --> 00:25:52,760 Speaker 6: I don't know. I mean a lot of Apple investors 559 00:25:52,880 --> 00:25:56,359 Speaker 6: are suggesting, you know, Apple may arguably has missed the 560 00:25:56,359 --> 00:25:58,560 Speaker 6: early move, but they often missed the early move. They 561 00:25:58,600 --> 00:26:00,720 Speaker 6: wait for people and so don't worry that Apple will 562 00:26:00,720 --> 00:26:02,639 Speaker 6: be there. There'll be an AI play there, maybe as 563 00:26:02,680 --> 00:26:06,359 Speaker 6: soon as their June Developer meeting. But the chip makers 564 00:26:06,400 --> 00:26:08,560 Speaker 6: have been the ones that are just the clear winners. 565 00:26:08,560 --> 00:26:11,720 Speaker 6: Obviously in Vidio, but just a chip sector broadly defined 566 00:26:11,760 --> 00:26:14,399 Speaker 6: has been I guess, the initial winners for the AI 567 00:26:14,960 --> 00:26:17,000 Speaker 6: and then the questions get brought that out to software 568 00:26:17,119 --> 00:26:18,960 Speaker 6: like a Microsoft and yeah, so on and so forth. 569 00:26:19,680 --> 00:26:22,080 Speaker 3: And then also I liked your question about value because 570 00:26:22,320 --> 00:26:25,119 Speaker 3: I feel like the theme of the second quarter is rotation, rotation, 571 00:26:25,320 --> 00:26:27,320 Speaker 3: broadening out of the rally, broadening out of the rally 572 00:26:27,800 --> 00:26:30,440 Speaker 3: the rally. And then she's like, no, not gonna happen. Yeah, 573 00:26:30,480 --> 00:26:33,040 Speaker 3: I just go by the big guys, which is quite interesting. 574 00:26:33,200 --> 00:26:35,520 Speaker 6: It's a very aggressive call. I would say, it's even 575 00:26:35,520 --> 00:26:38,440 Speaker 6: a little out of consensus call, sticking with and kind 576 00:26:38,440 --> 00:26:40,320 Speaker 6: of you know, literally in her notes she's saying, go 577 00:26:40,359 --> 00:26:43,199 Speaker 6: out and buy Nvidia today, basically in her notes. So 578 00:26:43,240 --> 00:26:46,000 Speaker 6: we'll have to see. So Carol Pepper's some bold call, 579 00:26:46,040 --> 00:26:47,200 Speaker 6: staying aggressive. 580 00:26:47,560 --> 00:26:52,560 Speaker 2: If you will, you're listening to the Bloomberg Intelligence podcast. 581 00:26:52,840 --> 00:26:55,879 Speaker 2: Catch us live weekdays at ten am Eastern on Apple 582 00:26:55,920 --> 00:26:59,159 Speaker 2: car Play and rout Auto with the Bloomberg business. You 583 00:26:59,200 --> 00:27:02,440 Speaker 2: can also listen live on Amazon Alexa from our flagship 584 00:27:02,520 --> 00:27:06,240 Speaker 2: New York station. Just say Alexa playing Bloomberg eleven. 585 00:27:07,920 --> 00:27:12,000 Speaker 6: T s l A Tesla as mister musklakes to pronounce 586 00:27:12,000 --> 00:27:15,280 Speaker 6: it stops down twenty seven percent year to date. There's 587 00:27:15,359 --> 00:27:18,000 Speaker 6: a million cross currents there, So let me just bring 588 00:27:18,040 --> 00:27:20,359 Speaker 6: in someone who kind of think can clear it up 589 00:27:20,359 --> 00:27:23,480 Speaker 6: for us, Alex Steve Man. He's global autos analyst for 590 00:27:23,560 --> 00:27:28,560 Speaker 6: Bloomberg Intelligence. A Steve stocks down twenty seven percent. You know, 591 00:27:28,800 --> 00:27:32,480 Speaker 6: I'm sorry, stucks on thirty percent year to date. What's 592 00:27:32,520 --> 00:27:34,920 Speaker 6: the rub on Tesla right now? What's the big bear 593 00:27:35,000 --> 00:27:36,879 Speaker 6: case for Tesla? 594 00:27:37,000 --> 00:27:39,359 Speaker 11: Hey, Paul, thanks for having me on the big bearcas 595 00:27:39,480 --> 00:27:41,800 Speaker 11: is really you know, how are they going to do 596 00:27:41,880 --> 00:27:45,240 Speaker 11: this year? You know, EV sales and the US markets 597 00:27:45,280 --> 00:27:48,560 Speaker 11: slowing down, China sales have slowed down as well as 598 00:27:48,920 --> 00:27:53,480 Speaker 11: you know, even with steep price cuts in both regions, 599 00:27:53,920 --> 00:27:56,200 Speaker 11: and then you know they have the cyber truck ramping up, 600 00:27:56,240 --> 00:28:00,680 Speaker 11: and you know it's not the most easiest product to build, 601 00:28:00,920 --> 00:28:04,159 Speaker 11: so that you're facing some challenges there. So earnings, you know, 602 00:28:04,240 --> 00:28:06,000 Speaker 11: I think earning is going to growth is going to 603 00:28:06,040 --> 00:28:08,960 Speaker 11: slow down this year. Free cash flow growth is going 604 00:28:09,040 --> 00:28:11,680 Speaker 11: to slow down this year, So that's the main overhang 605 00:28:11,760 --> 00:28:12,840 Speaker 11: on that stock right now. 606 00:28:12,960 --> 00:28:14,960 Speaker 8: Well, also we're waiting for first quarter deliveries. 607 00:28:15,280 --> 00:28:17,399 Speaker 3: I'm totally unclear as to when we get that number, 608 00:28:17,440 --> 00:28:19,399 Speaker 3: but it does look like Wall Street analysts are getting 609 00:28:19,440 --> 00:28:21,760 Speaker 3: more negative and more negative and what they'll actually be 610 00:28:21,840 --> 00:28:22,560 Speaker 3: able to deliver. 611 00:28:22,960 --> 00:28:24,240 Speaker 6: What are you modeling? 612 00:28:25,200 --> 00:28:28,920 Speaker 11: Yeah, so their number is supposed to come out tomorrow. 613 00:28:29,640 --> 00:28:32,960 Speaker 11: But if you look at yeah, if you look at 614 00:28:33,600 --> 00:28:38,600 Speaker 11: the Chinese auto sales like Neo X Punk BYD they 615 00:28:38,640 --> 00:28:41,720 Speaker 11: all have reported they have really strong March sales number, 616 00:28:42,000 --> 00:28:45,040 Speaker 11: but that's on the back of really steep price cuts 617 00:28:45,720 --> 00:28:49,200 Speaker 11: over the past few weeks. So if you look at 618 00:28:49,200 --> 00:28:52,960 Speaker 11: those number, you kind of infer that probably, you know, 619 00:28:53,440 --> 00:28:56,560 Speaker 11: Tesla is going to report you know, probably low single 620 00:28:56,600 --> 00:28:59,880 Speaker 11: digit growth, may flat to slightly up year on year 621 00:29:00,000 --> 00:29:03,400 Speaker 11: in the first quarter. That's that's pretty much in line 622 00:29:03,440 --> 00:29:08,120 Speaker 11: with consensus because consensus estimates have come down over the 623 00:29:08,120 --> 00:29:09,240 Speaker 11: past few months already. 624 00:29:10,320 --> 00:29:13,960 Speaker 6: So you know, Steve, what do you what's your view 625 00:29:14,200 --> 00:29:18,320 Speaker 6: of you know, overall demand for electric vehicles. It seems 626 00:29:18,640 --> 00:29:20,800 Speaker 6: a lot of folks feel like, boy that it's kind 627 00:29:20,800 --> 00:29:24,080 Speaker 6: of peaked. The early adopters, they're done. The tree huggers 628 00:29:24,080 --> 00:29:28,959 Speaker 6: like Matt Miller, they're done. What's the ultimate demand for EV's? 629 00:29:29,000 --> 00:29:33,200 Speaker 11: Do you think I'm actually optimistic about ev I think 630 00:29:33,320 --> 00:29:37,440 Speaker 11: ev that ship have sailed, and I think we're just 631 00:29:37,520 --> 00:29:41,600 Speaker 11: seeing a cyclical downturn. Part of it is because the 632 00:29:41,640 --> 00:29:45,880 Speaker 11: product that's available to the masses is still not there yet. 633 00:29:45,960 --> 00:29:48,280 Speaker 11: A lot of the EV's that are on sale today 634 00:29:48,720 --> 00:29:51,680 Speaker 11: are over fifty thousand dollars. A lot of people cannot 635 00:29:51,720 --> 00:29:54,320 Speaker 11: afford fifty thousand dollars cars, especially in a high interest 636 00:29:54,360 --> 00:29:58,280 Speaker 11: rate environment. So I think a lot of the automakers, 637 00:29:58,280 --> 00:30:03,240 Speaker 11: including Tesla, G and the rest, are introducing more affordable 638 00:30:03,240 --> 00:30:06,520 Speaker 11: evis in twenty twenty five and twenty twenty six. I 639 00:30:06,560 --> 00:30:08,880 Speaker 11: think that's going to expand the market of a little 640 00:30:08,880 --> 00:30:12,360 Speaker 11: bit more and hopefully my hope is that you know, 641 00:30:12,480 --> 00:30:14,440 Speaker 11: sales will come back at that. 642 00:30:14,480 --> 00:30:16,080 Speaker 8: Time well to that point. 643 00:30:16,120 --> 00:30:20,720 Speaker 3: And this ties into Tesla delivery sales because Elon Musk 644 00:30:20,720 --> 00:30:24,160 Speaker 3: has talked about the facts that getting from their sexy 645 00:30:24,160 --> 00:30:26,800 Speaker 3: models now to the affordable models later, there will be 646 00:30:26,840 --> 00:30:28,880 Speaker 3: a sales slump as they kind of fix production and 647 00:30:28,880 --> 00:30:31,280 Speaker 3: they ramp it up et cetera. How long do you 648 00:30:31,320 --> 00:30:34,640 Speaker 3: think that gap slump, et cetera is going to last? 649 00:30:34,680 --> 00:30:39,680 Speaker 11: For Well, Tesla's going to introduce to the compact vehicle 650 00:30:39,720 --> 00:30:43,920 Speaker 11: that's supposed to be supposedly under thirty thousand dollars. They're 651 00:30:43,920 --> 00:30:48,080 Speaker 11: going to start production in the second half of next year, 652 00:30:48,720 --> 00:30:53,080 Speaker 11: and we probably don't see any contribution to profitability and 653 00:30:53,200 --> 00:30:56,800 Speaker 11: cash flow until twenty twenty six and twenty twenty seven. 654 00:30:57,240 --> 00:30:59,960 Speaker 11: So it's not that too far. It's not that far 655 00:31:00,040 --> 00:31:03,480 Speaker 11: are from now. And you know, GM is doing the 656 00:31:03,480 --> 00:31:08,600 Speaker 11: same thing. They're reintroducing the cheaper version or less lower 657 00:31:08,640 --> 00:31:12,600 Speaker 11: cost version of the Bolt in twenty twenty five as well. 658 00:31:12,720 --> 00:31:15,400 Speaker 11: So I think it's it's it's it's not that far away. 659 00:31:15,600 --> 00:31:18,720 Speaker 11: Twenty twenty four. Like I've always said, it's gonna be 660 00:31:19,000 --> 00:31:22,320 Speaker 11: an adjustment year for for a lot of automakers. They 661 00:31:22,360 --> 00:31:27,080 Speaker 11: gotta they gotta reevaluate the cost structure, reevaluate the portfolio, 662 00:31:27,680 --> 00:31:29,959 Speaker 11: and uh, you know again, this is why I think 663 00:31:30,000 --> 00:31:33,280 Speaker 11: it's a cyclical downturn. In twenty twenty five twenty twenty six, 664 00:31:33,320 --> 00:31:37,400 Speaker 11: you're gonna have cheaper cars, lower costs, and hopefully better 665 00:31:37,440 --> 00:31:40,120 Speaker 11: earnings for the EV market. EV automakers. 666 00:31:40,240 --> 00:31:42,920 Speaker 6: So, Steve, do we know whether the industry I'm even 667 00:31:42,920 --> 00:31:47,440 Speaker 6: gonna call out TESLA or GM. Can the industry replicate 668 00:31:47,480 --> 00:31:50,479 Speaker 6: the profitability it has on its internal combustion engine vehicles, 669 00:31:50,480 --> 00:31:52,920 Speaker 6: which I understand now the unit economics are very good. 670 00:31:53,440 --> 00:31:56,840 Speaker 6: Can you replicate that? Or in the EV space. 671 00:31:57,600 --> 00:32:02,200 Speaker 11: It's very possible because battery lithium prices have come down 672 00:32:02,680 --> 00:32:08,600 Speaker 11: quite a bit, destabilizing at a lower level. The whole 673 00:32:08,600 --> 00:32:12,640 Speaker 11: auto industry is re evaluating their manufacturing, how they build cars. 674 00:32:13,160 --> 00:32:18,080 Speaker 11: So vertical integration has become a very important kind of 675 00:32:18,120 --> 00:32:21,960 Speaker 11: strategy for automakers to cut costs across the supply chain. 676 00:32:22,520 --> 00:32:25,800 Speaker 11: That will take time. And then thirdly, the IRA, the 677 00:32:25,800 --> 00:32:30,240 Speaker 11: Inflation Reduction Act is supposedly on shore a lot of 678 00:32:30,280 --> 00:32:33,920 Speaker 11: the battery manufacturing. Again, that is supposed to cut costs 679 00:32:34,320 --> 00:32:38,000 Speaker 11: for automakers. And that's why I think in twenty twenty five, 680 00:32:38,120 --> 00:32:41,120 Speaker 11: twenty twenty six they're able to roll out more affordable 681 00:32:41,160 --> 00:32:45,400 Speaker 11: evs at a lower price and hopefully, you know, if 682 00:32:45,480 --> 00:32:48,560 Speaker 11: volume does get there, it's going to be a lower 683 00:32:48,560 --> 00:32:49,200 Speaker 11: cost per unit. 684 00:32:49,280 --> 00:32:51,440 Speaker 6: A Steve thirty seconds, why is GM at a fifty 685 00:32:51,440 --> 00:32:52,280 Speaker 6: two week high today? 686 00:32:53,320 --> 00:32:57,600 Speaker 11: Well, they've done a great job in managing the investors 687 00:32:57,680 --> 00:33:03,680 Speaker 11: by buying stock, you know, a very spending a lot 688 00:33:03,680 --> 00:33:07,240 Speaker 11: of money to buystock and an accelerated rate, and you 689 00:33:07,280 --> 00:33:11,040 Speaker 11: know investors love that on that return of cash to. 690 00:33:11,880 --> 00:33:15,280 Speaker 6: That nice all right, you can't, you know, beat him, 691 00:33:15,360 --> 00:33:17,239 Speaker 6: join them. That's a good thing. Steve Man covers all 692 00:33:17,280 --> 00:33:19,920 Speaker 6: the auto stuff for Bloomberg Intelligence. We've got a great 693 00:33:19,920 --> 00:33:23,560 Speaker 6: global team following the global auto of business. Steve just 694 00:33:23,600 --> 00:33:27,160 Speaker 6: relocated from Hong Kong back to the US to Princeton, 695 00:33:27,160 --> 00:33:30,120 Speaker 6: New Jersey, so he knows that global auto space, including 696 00:33:30,200 --> 00:33:33,640 Speaker 6: the Chinese market, which is such a key market for 697 00:33:33,800 --> 00:33:36,960 Speaker 6: the global auto manufacturers, particularly Tesla, who's got a big 698 00:33:36,960 --> 00:33:38,000 Speaker 6: commitment there. 699 00:33:40,600 --> 00:33:44,480 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 700 00:33:44,560 --> 00:33:48,080 Speaker 2: weekdays at ten am Eastern on applecar Play and Android 701 00:33:48,120 --> 00:33:51,280 Speaker 2: Auto with the Bloomberg Business. You can also listen live 702 00:33:51,360 --> 00:33:54,560 Speaker 2: on Amazon Alexa from our flagship New York station just 703 00:33:54,600 --> 00:33:58,840 Speaker 2: Say Alexa playing Bloomberg eleven thirty again. 704 00:33:59,000 --> 00:34:01,240 Speaker 6: Heck of a first quarter four equity markets up ten 705 00:34:01,280 --> 00:34:04,000 Speaker 6: percent for the S and P five hundred looking at 706 00:34:04,000 --> 00:34:06,720 Speaker 6: that October low, up over just over twenty five percent, 707 00:34:06,800 --> 00:34:08,759 Speaker 6: so a big, big move just in the last five 708 00:34:08,800 --> 00:34:12,160 Speaker 6: to six months, I've gone too far? Do we still 709 00:34:12,200 --> 00:34:15,320 Speaker 6: have more room to grow? Let's check out with Christina Hooper. 710 00:34:15,400 --> 00:34:19,759 Speaker 6: She's a chief Global market strategist for Invesco. Christina, again, 711 00:34:19,800 --> 00:34:21,800 Speaker 6: a lot of people, I think are kind of looking 712 00:34:21,840 --> 00:34:23,680 Speaker 6: back at this first quarter we had and looking back 713 00:34:23,800 --> 00:34:26,000 Speaker 6: up to October and say, boy, that was a nice move. 714 00:34:26,680 --> 00:34:30,240 Speaker 6: Now what do we do? What are you telling them? 715 00:34:30,600 --> 00:34:34,080 Speaker 1: Well, I think it's important to keep our focus on 716 00:34:34,120 --> 00:34:38,040 Speaker 1: the longer term. Yes, it seems likely that stocks will 717 00:34:38,080 --> 00:34:40,960 Speaker 1: take something of a breather after such a strong quarter 718 00:34:41,280 --> 00:34:44,839 Speaker 1: and such a strong rally since October. But the reality 719 00:34:45,200 --> 00:34:48,360 Speaker 1: is that we are still waiting for the start of 720 00:34:48,480 --> 00:34:52,120 Speaker 1: rake cuts, which could very well be a positive catalyst 721 00:34:52,239 --> 00:34:56,640 Speaker 1: for stocks. We also have a very significant cash sitting 722 00:34:56,719 --> 00:35:01,000 Speaker 1: on the sidelines that could easily start to move into 723 00:35:01,200 --> 00:35:04,719 Speaker 1: equities as well as fixed income as rates start to 724 00:35:04,760 --> 00:35:10,120 Speaker 1: go down. So what we're saying is don't overreact to 725 00:35:10,239 --> 00:35:14,120 Speaker 1: the environment, but be well diversified, because we could very 726 00:35:14,120 --> 00:35:20,560 Speaker 1: well see a rotation. For example, one more unnoticed development 727 00:35:20,640 --> 00:35:25,239 Speaker 1: last week was the Russell two thousand, surpassing the high 728 00:35:25,360 --> 00:35:28,480 Speaker 1: hit in early March, and I think it's a reminder 729 00:35:28,640 --> 00:35:33,360 Speaker 1: that there are opportunities outside of large cap US stocks 730 00:35:34,080 --> 00:35:36,560 Speaker 1: if we go across the pond, if we look internationally, 731 00:35:36,719 --> 00:35:39,280 Speaker 1: as well as if we look into the smaller capped space. 732 00:35:39,360 --> 00:35:42,080 Speaker 1: But again, the key is to be well diversified across 733 00:35:42,160 --> 00:35:44,240 Speaker 1: the major asset classes and within them. 734 00:35:44,480 --> 00:35:45,440 Speaker 8: So Christina does that? 735 00:35:45,880 --> 00:35:48,839 Speaker 3: Is that a value call or is that just own 736 00:35:48,920 --> 00:35:51,560 Speaker 3: lots of different things because we don't know what form 737 00:35:51,880 --> 00:35:54,080 Speaker 3: the economy will really take in what the FED will do. 738 00:35:55,640 --> 00:35:55,920 Speaker 10: Well. 739 00:35:56,239 --> 00:35:59,440 Speaker 1: I would argue that it's a call on expectations of 740 00:35:59,480 --> 00:36:02,600 Speaker 1: what is going to happen later this year and next year. 741 00:36:03,280 --> 00:36:06,400 Speaker 1: So what I think we're going to see is a 742 00:36:06,719 --> 00:36:10,759 Speaker 1: rather brief and mild slowed down for the global economy 743 00:36:11,160 --> 00:36:18,000 Speaker 1: followed by a reacceleration. And typically asset classes discount these 744 00:36:18,080 --> 00:36:21,719 Speaker 1: events before they happen, which is why I think we're 745 00:36:21,719 --> 00:36:25,240 Speaker 1: starting to see improvement in small caps, why we're seeing 746 00:36:25,280 --> 00:36:27,800 Speaker 1: a broadening of the stock market. 747 00:36:28,200 --> 00:36:31,319 Speaker 6: Does a broadening of the stock market include China? There's 748 00:36:31,320 --> 00:36:33,040 Speaker 6: a lot of folks out there that say China, for 749 00:36:33,080 --> 00:36:36,160 Speaker 6: a variety of reasons, is uninvestable. What do you think? 750 00:36:38,560 --> 00:36:41,719 Speaker 1: So I would argue that sentiment has gotten far too 751 00:36:41,800 --> 00:36:47,440 Speaker 1: negative on Chinese equities, and it really creates a situation 752 00:36:47,800 --> 00:36:53,520 Speaker 1: in which we could see some very positive Chinese equity 753 00:36:53,719 --> 00:36:57,840 Speaker 1: market performance with a little positive surprise. And an example 754 00:36:57,880 --> 00:37:02,200 Speaker 1: of that is the some data we saw, the pm 755 00:37:02,239 --> 00:37:07,120 Speaker 1: I data better than expected and of course no surprise 756 00:37:07,239 --> 00:37:13,160 Speaker 1: that we saw positive reaction because China is just Chinese 757 00:37:13,200 --> 00:37:16,640 Speaker 1: equities have been over sold. There are opportunities there. 758 00:37:17,520 --> 00:37:20,520 Speaker 8: Hmm, that's an interesting call. How do you head? 759 00:37:20,640 --> 00:37:24,400 Speaker 3: I mean, do you go internal stocks like small caps 760 00:37:24,440 --> 00:37:27,480 Speaker 3: that might get a boost from any government stimulus, or 761 00:37:27,560 --> 00:37:30,000 Speaker 3: is it you still want to own US companies with 762 00:37:30,120 --> 00:37:32,239 Speaker 3: exposure just maybe we have to be selective on what 763 00:37:32,360 --> 00:37:33,880 Speaker 3: kind of exposure a lah apple. 764 00:37:36,920 --> 00:37:40,480 Speaker 1: I think there's there's a case for both, but certainly 765 00:37:41,320 --> 00:37:46,080 Speaker 1: Chinese equities, you know, getting in there, especially areas like 766 00:37:46,200 --> 00:37:50,480 Speaker 1: China Tech. I think there's there's significant potential there. I 767 00:37:50,520 --> 00:37:54,759 Speaker 1: think what we're hearing from Chinese policy makers is a 768 00:37:54,800 --> 00:37:58,839 Speaker 1: willingness to be you know, an interest in being very 769 00:37:58,880 --> 00:38:01,839 Speaker 1: business friendly, and I think there's upside potential there. 770 00:38:02,800 --> 00:38:05,600 Speaker 6: How About on the fixed income side here, just broadly speaking, 771 00:38:06,080 --> 00:38:07,520 Speaker 6: do I want to just stick with my two year 772 00:38:07,560 --> 00:38:09,480 Speaker 6: treasury at four point seven percent or all I want 773 00:38:09,480 --> 00:38:11,480 Speaker 6: to go out and take some credit risk here. 774 00:38:13,120 --> 00:38:16,359 Speaker 1: So I think in this environment with an expectation of 775 00:38:16,400 --> 00:38:22,440 Speaker 1: a pretty soft slow down, what I would argue is 776 00:38:22,480 --> 00:38:25,360 Speaker 1: that it is a time to take credit risk and 777 00:38:25,600 --> 00:38:29,560 Speaker 1: also move out in terms of duration locking in rates 778 00:38:29,640 --> 00:38:32,759 Speaker 1: because we know what is likely to happen in the 779 00:38:32,760 --> 00:38:34,240 Speaker 1: future in terms of rate cuts. 780 00:38:34,560 --> 00:38:36,600 Speaker 3: So is that a price appreciation play or is it 781 00:38:36,640 --> 00:38:39,520 Speaker 3: an absolute yield play? 782 00:38:40,320 --> 00:38:41,439 Speaker 1: It's a little of both. 783 00:38:42,120 --> 00:38:45,680 Speaker 3: Interesting and is the U So how do I then 784 00:38:45,800 --> 00:38:49,200 Speaker 3: think about the economy and relation to the FED cuts? 785 00:38:49,280 --> 00:38:51,920 Speaker 3: I mean, just today, right, we get that nice and 786 00:38:52,000 --> 00:38:54,600 Speaker 3: hot im manufacturing data at the top of the ten 787 00:38:54,600 --> 00:38:57,359 Speaker 3: o'clock hour, and we see a pretty sturdy sell off, 788 00:38:57,440 --> 00:39:00,200 Speaker 3: particularly in the back end, like higher for longer there 789 00:39:00,239 --> 00:39:02,400 Speaker 3: for growth will be impacted later, et cetera. 790 00:39:03,320 --> 00:39:04,080 Speaker 8: How do you view that? 791 00:39:05,600 --> 00:39:09,120 Speaker 1: So, I think there was a real overreaction on the 792 00:39:09,160 --> 00:39:12,840 Speaker 1: part of the market to today's data, and understandably so. 793 00:39:13,040 --> 00:39:15,359 Speaker 1: There are a lot of jitters out there. We are 794 00:39:15,440 --> 00:39:20,520 Speaker 1: certainly getting conflicting messages in terms of FED speak. But 795 00:39:21,160 --> 00:39:24,400 Speaker 1: the reality is I don't think anything in that print 796 00:39:24,440 --> 00:39:27,640 Speaker 1: today changes my view that we will see a rake 797 00:39:27,760 --> 00:39:31,840 Speaker 1: cut before the end of the second quarter. Yes, hotter 798 00:39:31,960 --> 00:39:38,960 Speaker 1: than expected, but we didn't see anything dramatic, and in fact, 799 00:39:39,239 --> 00:39:44,160 Speaker 1: employment remains tepid. That's sub index. The price sub index 800 00:39:44,239 --> 00:39:47,840 Speaker 1: went up, but it's largely a result of commodities. So 801 00:39:49,280 --> 00:39:52,840 Speaker 1: I understand why we saw, why we're seeing the reaction 802 00:39:53,080 --> 00:39:56,920 Speaker 1: we are, but I don't believe that's going to change 803 00:39:57,120 --> 00:40:00,000 Speaker 1: the Fed's mind. I mean, we've seen very very significant 804 00:40:00,120 --> 00:40:05,319 Speaker 1: progress on disinflation, and core PC on Friday underscores that. 805 00:40:06,360 --> 00:40:10,600 Speaker 6: So Christina, you know, I'm just guessing thinking about an 806 00:40:10,680 --> 00:40:13,120 Speaker 6: environment where interest rates are coming down, what does that 807 00:40:13,160 --> 00:40:14,520 Speaker 6: mean for real estate? 808 00:40:16,600 --> 00:40:19,000 Speaker 1: I think that takes some of the pressure off real estate, 809 00:40:19,440 --> 00:40:25,160 Speaker 1: and we're likely seeing a bottom for the real estate market, 810 00:40:26,000 --> 00:40:30,840 Speaker 1: certainly for you know, for refinancings that are to come. 811 00:40:30,960 --> 00:40:35,719 Speaker 1: That will certainly certainly be a positive. And we also know, 812 00:40:35,800 --> 00:40:40,640 Speaker 1: of course that there is a pretty strong correlation between 813 00:40:40,760 --> 00:40:44,719 Speaker 1: real estate prices and interest rates. So I think this 814 00:40:44,760 --> 00:40:49,000 Speaker 1: is this is a very positive development. The sooner the 815 00:40:49,000 --> 00:40:51,480 Speaker 1: better in terms of ray cuts starting for real estate. 816 00:40:52,360 --> 00:40:56,440 Speaker 3: You sound like a very engaged goldilockser. I'm just going 817 00:40:56,520 --> 00:40:59,720 Speaker 3: to coin that term goldilockser. What are you then most 818 00:40:59,719 --> 00:41:02,839 Speaker 3: worried about? Because if we go with the way you're 819 00:41:02,880 --> 00:41:05,520 Speaker 3: talking about, this could be very good for many different assets, 820 00:41:06,000 --> 00:41:06,480 Speaker 3: et cetera. 821 00:41:06,760 --> 00:41:08,960 Speaker 8: What do you worry about? 822 00:41:09,440 --> 00:41:12,960 Speaker 1: So I worry about the FED weighing too heavily the 823 00:41:13,000 --> 00:41:17,200 Speaker 1: ghost of Paul Voker. I work about the FED having 824 00:41:17,360 --> 00:41:22,160 Speaker 1: egg on its face from being late to react to 825 00:41:22,600 --> 00:41:28,359 Speaker 1: higher inflation, and as a result of being more more 826 00:41:28,440 --> 00:41:33,960 Speaker 1: hawkish in rate cuts this year, or deciding to forego them, 827 00:41:34,080 --> 00:41:37,360 Speaker 1: or having a reduced number. I think that could be 828 00:41:37,520 --> 00:41:42,960 Speaker 1: really problematic, first of all, because markets are expecting some 829 00:41:43,239 --> 00:41:47,080 Speaker 1: level of rate cuts this year, but also because what 830 00:41:47,120 --> 00:41:50,200 Speaker 1: we know is that there are long and variable legs 831 00:41:50,200 --> 00:41:54,480 Speaker 1: between when monetary policy is implemented and when it shows 832 00:41:54,520 --> 00:41:57,040 Speaker 1: up in the economy. So we could still very well 833 00:41:57,080 --> 00:42:00,239 Speaker 1: see damage from what the Fed has done thus far. 834 00:42:01,320 --> 00:42:05,560 Speaker 1: So to compound that by keeping rates at high levels 835 00:42:05,600 --> 00:42:08,719 Speaker 1: for longer would be a mistake in my opinion. 836 00:42:09,280 --> 00:42:10,520 Speaker 6: All right, Christina, thank you so much. 837 00:42:10,560 --> 00:42:11,080 Speaker 7: We appreciate it. 838 00:42:11,160 --> 00:42:15,759 Speaker 6: Christina Hooper, Chief Global market Strategist for Investco. 839 00:42:16,200 --> 00:42:20,719 Speaker 2: This is the Bloomberg Intelligence podcast, available on Apples, Spotify, 840 00:42:20,920 --> 00:42:24,120 Speaker 2: and anywhere else you'll get your podcasts. 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