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Tesla, Economy, Tech, and Anti-ESG (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 1: my co host Matt Miller. Every business day, we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. Let's round table what's
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Speaker 1: going on because there's always an ongoing story with Tesla,
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Speaker 1: twitter elon Musk, We're gonna do that with man Deep
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Speaker 1: singh Uh. He covers technology. Kevin, he's in our studio.
0:32
Speaker 1: Kevin Tynan joins us on the phone. He covers the
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Speaker 1: auto sector for both of them for Bloomberg Intelligence. So
0:37
Speaker 1: we're getting our money out of Bloomberg Intelligence this morning,
0:40
Speaker 1: which is the research department for Bloomberg customers. Be I
0:45
Speaker 1: go on the terminal. Kevin, let's start with you here. Um,
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Speaker 1: is there a demand problem for Tesla vehicles out there?
0:54
Speaker 1: There is, there's probably a demand problem for everybody, all
0:58
Speaker 1: auto makers. But I think, wait, wait, wait, wait, let
1:01
Speaker 1: before we get started, Kevin, let's set the scene here.
1:05
Speaker 1: You're in Vegas. Yeah, Now, the CS is a consumer
1:09
Speaker 1: electronic show for those who don't know. But it's really not.
1:11
Speaker 1: It's really the auto show, which has some electronic stuff
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Speaker 1: around it. It has become that it is unbelievable decade,
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Speaker 1: which is now why Kevin might not even go to
1:21
Speaker 1: the Detroit Auto Show, which used to be like the
1:23
Speaker 1: super Bowl and automakers. So Kevin, just before we get
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Speaker 1: to Tesla, gives set the set the stage here. What's
1:28
Speaker 1: going on at CES? What do you expect to hear?
1:30
Speaker 1: What do you expect to hear from the auto companies? Uh?
1:32
Speaker 1: This year? Well, most importantly, where are you staying? Do
1:34
Speaker 1: you have a suite at the Bellagio? Uh? Mike Dean?
1:38
Speaker 1: Are European guys at the Bellagio? I actually have time share?
1:42
Speaker 1: So I just come and stay in my league. You've
1:44
Speaker 1: gotten share in Vegas. My man, pots and pans, as
1:48
Speaker 1: they say, all right, Michael Dean, he's the class act.
1:51
Speaker 1: He's got the bags, all right, Kevin, So talk to
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Speaker 1: us about CS. What are you looking for? Yeah, there's
1:56
Speaker 1: a hopefully it's a big bounce back from last year.
1:59
Speaker 1: Last year as a ghost town, c e S was
2:02
Speaker 1: absolutely dead. Um, just from the people reaching out and
2:07
Speaker 1: companies reaching out this year. It seems like it should
2:09
Speaker 1: be much better this year. A lot of still a
2:13
Speaker 1: lot of autonomous you know light our self driving software companies.
2:19
Speaker 1: It doesn't seem like it's going to be as much
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Speaker 1: you know from the O E M s this year
2:24
Speaker 1: about you know, EV products or I think it's going
2:27
Speaker 1: to be a lot of that ancillary businesses, infrastructure, um,
2:34
Speaker 1: you know, autonomous driving. It's gonna be a lot of
2:37
Speaker 1: things like that this year. Nobody with the final solution
2:41
Speaker 1: per se, but a lot of the moving parts up
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Speaker 1: to that. All right, so uh man, deep, where do
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Speaker 1: your world's collide here? Why are you not in Vegas?
2:52
Speaker 1: By the way, well, I think the AD companies don't
2:55
Speaker 1: like to showcase a lot of their stuff when you
2:58
Speaker 1: look at you know, what alphabet is to wing even
3:00
Speaker 1: though they have a Waymo unit which is also an
3:03
Speaker 1: autonomous driving a lot of their AI. When you think
3:07
Speaker 1: about their capabilities, whether it's on the third side or
3:11
Speaker 1: add side that they don't talk about it as much
3:14
Speaker 1: in terms of you know, these kind of shows, and
3:17
Speaker 1: they are more device driven at the end of the day,
3:20
Speaker 1: you know, it is um more focused towards devices and
3:25
Speaker 1: that's why, yeah, not something but there's a lot of
3:28
Speaker 1: the stuff running on Azure. The cloud. Companies have their
3:32
Speaker 1: own kind of events. You know, both Microsoft and AWS
3:37
Speaker 1: have their annual conferences, and they don't. I would just
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Speaker 1: imagine more and more of uh technology is I mean,
3:44
Speaker 1: we know more technologies in the cloud. Cars are becoming
3:47
Speaker 1: technological little you know, driving cell phones. So I imagine
3:51
Speaker 1: you know, a lot of the stuff that I type
3:54
Speaker 1: into the like Google Pad in my Chevy Silverado is
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Speaker 1: stored in the cloud. Well so us because it's stored
4:00
Speaker 1: in the cloud doesn't mean you know, it's at the
4:03
Speaker 1: cutting edge that that ship has selled. You know. Now
4:05
Speaker 1: we're talking about what can you do next? In terms
4:08
Speaker 1: of open chat, GPTs the new craze. Now, the reason
4:12
Speaker 1: why people are excited about it is because it kind
4:16
Speaker 1: of disrupts the Google search dominance around showing links and
4:19
Speaker 1: clicking you are else. This is more about generative AI
4:24
Speaker 1: using large language models, and a lot of that was
4:28
Speaker 1: in the academia for all the longest time, but now
4:31
Speaker 1: suddenly it's hitting mainstream because of cloud. Cloud gives you
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Speaker 1: the processing power to do a lot of these things,
4:38
Speaker 1: and I think that's why we are talking about it.
4:42
Speaker 1: All right, Kevin, So we just in terms of maybe
4:45
Speaker 1: not just Tesla, but give us your sense of how
4:47
Speaker 1: this demand for electric vehicles is going to roll out,
4:50
Speaker 1: you know, over the next couple of years. Again a
4:52
Speaker 1: little bit of a disappointment there for Tesla. Uh, most recently,
4:55
Speaker 1: how do you think about that bigger picture? Yeah, you know,
4:59
Speaker 1: and I'm and I'm starting to lay out, you know,
5:01
Speaker 1: the mindset for the next at least year plus. And
5:05
Speaker 1: you know, the thing I keep coming back to is that,
5:08
Speaker 1: arguably you know where we are now in terms of
5:12
Speaker 1: ev discussion, hype, whatever you want to call it. You know,
5:17
Speaker 1: I feel like it was the germ of the idea
5:20
Speaker 1: was was from one person, right, and media and markets
5:26
Speaker 1: and investors and governments and other automakers eventually brudging lee,
5:32
Speaker 1: kicking and screaming got on board with that. You know.
5:34
Speaker 1: But I wonder if the you know, the real science
5:40
Speaker 1: behind the transition completely away from internal combustion completely to electrification. Uh,
5:48
Speaker 1: if we're not getting the full story right that when
5:51
Speaker 1: you go from minding of materials for the batteries, who
5:55
Speaker 1: controls those materials, what those materials cost, all the way
5:59
Speaker 1: through the process of how we're going to consistently charge
6:02
Speaker 1: that many vehicles UM to the disposal of the battery
6:07
Speaker 1: is something that I don't think anybody's really wanted to
6:10
Speaker 1: talk about. I think the markets and the media is
6:14
Speaker 1: focused on tailpipe versus no tail pipe, and I think
6:17
Speaker 1: there's a lot going on in the process that is
6:20
Speaker 1: just sort of glossed over. And I think in this
6:24
Speaker 1: market and in this economy, UH, that due diligence and
6:28
Speaker 1: those questions are gonna be asked more seriously, UM, And
6:31
Speaker 1: I'm not sure people are gonna like those answers no.
6:34
Speaker 1: And you know, ironically, well, I never know if I'm
6:36
Speaker 1: using the the word ironic correctly because I grew up
6:41
Speaker 1: with a lot it's more a set. But it seems
6:42
Speaker 1: ironic to me, UM that the Biden Administration's I r
6:47
Speaker 1: a UH legislation is what kind of pulled the curtain aside,
6:52
Speaker 1: right all of a sudden, after the Biden administration put
6:55
Speaker 1: this ira A legislation out that's supposed to give um
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Speaker 1: tax rebates or attacks incentives to companies that produce in
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Speaker 1: the US, you know, batteries with components and ingredients that
7:08
Speaker 1: come from the US. No one really knows what what
7:11
Speaker 1: that was where they where those things came from, or
7:14
Speaker 1: didn't ever really give it a lot of thought. And
7:16
Speaker 1: now the Treasury Department is sitting on this legislation, like
7:19
Speaker 1: what in the heck are we gonna do? Because nobody's
7:21
Speaker 1: going to get this tax credit unless we let you know,
7:26
Speaker 1: all these American producers use Chinese chemicals in their batteries,
7:30
Speaker 1: right yeah, And I and I think you know that
7:34
Speaker 1: my concern in terms of ev adoption is that, like
7:37
Speaker 1: you said, when you pull back this curtain, or when
7:39
Speaker 1: you start asking real questions, which nobody has had to
7:42
Speaker 1: do because the stocks just went up, right, and that
7:46
Speaker 1: you know that that the end justified those means. Is
7:50
Speaker 1: that now if we start asking real questions or difficult questions,
7:53
Speaker 1: I'm not sure you know that those answers are what
7:57
Speaker 1: necessarily we want to hear. I mean, Tesla does its
8:00
Speaker 1: semi launch. It's a megawatt of power to charge that thing.
8:05
Speaker 1: Think of a truck stop along the highway. I just
8:07
Speaker 1: drove sixteen hours straight from Florida over the holiday. You know,
8:12
Speaker 1: I think I think my longest stop was seven minutes, right,
8:16
Speaker 1: And but think about those truck stops that I pulled
8:19
Speaker 1: into that if those are if those are charging electric center,
8:23
Speaker 1: Like that's a small city in terms of of a
8:26
Speaker 1: power draw. Um, you know to do yeah, just to
8:32
Speaker 1: do what we already do now. Alright, alright, good stuff, alright,
8:36
Speaker 1: good stuff on the auto front, real quick? Uh man deep.
8:39
Speaker 1: What's the theme for coming out of tech? Thirty seconds?
8:42
Speaker 1: Free cash flow. Everyone is fixated on free cash freelove.
8:46
Speaker 1: And that's why you keep hearing about layoffs because investors
8:50
Speaker 1: want to make sure that these companies are making money,
8:53
Speaker 1: whether it's a marketplace company, think like AI or VR Juicy,
9:00
Speaker 1: I think of those big juicy margins. Mandy Sing, senior
9:04
Speaker 1: tech analysts Bloomberg Intelligence, joining us here in a Bloomberg
9:07
Speaker 1: interactor broker studio. And Kevin Tyne and senior auto analysts
9:10
Speaker 1: Bloomberg Intelligence. He's at Vegas. He's at the Consumer Electronics Show,
9:14
Speaker 1: which is hundreds of thousands of tech geeks get together
9:18
Speaker 1: in the desert and see what the new toys are
9:20
Speaker 1: that's coming up. This is Bloomberg. We want to get
9:27
Speaker 1: a preview here. Three outlook on the big banks, the
9:31
Speaker 1: investment banks, the asset managers. There's nobody better to do
9:36
Speaker 1: that with. And Alison Williams. She's a senior global analysts
9:38
Speaker 1: covering all the financial services companies for Bloomberg Intelligence. She
9:42
Speaker 1: joins us from Bloomberg's sprawling Princeton, New Jersey campus. Man,
9:46
Speaker 1: if you've been to the Princeton office, it's great. And
9:50
Speaker 1: they just and they just redid it, right, Allison, just
9:52
Speaker 1: did a big renovation. They did all right good stuff.
9:56
Speaker 1: I mean the little bit of Princeton one time. Really, Yes,
10:00
Speaker 1: need to get out a little more. There is a
10:04
Speaker 1: university there right. My buddy Brian Sullivan from a network
10:08
Speaker 1: that I will not name, lives there. So best hoagies
10:11
Speaker 1: in the world, Hoghaven. Just a little plug there, Allison.
10:13
Speaker 1: What's the key theme that you're looking for here in
10:18
Speaker 1: I mean, I know we're gonna have some bank earnings
10:19
Speaker 1: coming up in a few weeks, but what are some
10:21
Speaker 1: of the bigger themes that you and and and big
10:23
Speaker 1: bank investors are looking at. So so, obviously the big
10:27
Speaker 1: question is going to continue to be recession, right, so
10:30
Speaker 1: that the depth of the recession, the length of the recession, um.
10:34
Speaker 1: But I think what we're focused on is the overall
10:37
Speaker 1: level of profitability at these banks and just um, you know,
10:42
Speaker 1: the incredible power that they have to withstand UM even
10:48
Speaker 1: a deep recession. Keep in mind that the last two
10:50
Speaker 1: cycles we had were crises, right, So we had the
10:53
Speaker 1: pandemic UM and before that it was the global financial crisis. UM.
10:58
Speaker 1: So as we go think about session UM, you know,
11:01
Speaker 1: that might be sort of in the back of investors minds,
11:04
Speaker 1: but we think that the cycle looks a lot more
11:06
Speaker 1: like you know, that of two thousand UM, and we
11:10
Speaker 1: think that regardless of the provisions, regardless of the change
11:13
Speaker 1: in accounting that's going to make those provisions very front loaded. UM,
11:18
Speaker 1: the banks are in a great position to weather the storm.
11:21
Speaker 1: And then specifically to the investment banking unit. You know, UM,
11:25
Speaker 1: we're going to hear more and more stories over the
11:27
Speaker 1: next couple of weeks about some of the head COUMP
11:29
Speaker 1: cuts and some of the COMP cuts. But I think
11:32
Speaker 1: that you know, again looking back to the global financial crisis,
11:36
Speaker 1: you know, we will see some reductions, but nowhere near
11:40
Speaker 1: what we saw back then. Yet revenue is within that range.
11:45
Speaker 1: So the profitability UM of these banks is really strong,
11:49
Speaker 1: and we think that that's what investors should be focusing on.
11:52
Speaker 1: So UM, basically, the net interest margin works out too
11:58
Speaker 1: offset the higher loan lost provisions. What if we do
12:02
Speaker 1: see though a ton of defaults coming up in UM,
12:08
Speaker 1: what if we see that those loan lost provisions aren't
12:10
Speaker 1: just provisions but actually you know, necessary. So I think
12:15
Speaker 1: you know the best way to frame that or think
12:17
Speaker 1: about that is UM. You know, Jamie dimond Um gave
12:21
Speaker 1: a great scenary analysis for JP Morgan, the bank that
12:26
Speaker 1: he runs, on the last earnings called you know, if
12:30
Speaker 1: we see six unemployment, we could see six billion of
12:35
Speaker 1: added provisions over a couple of quarters. That number for
12:40
Speaker 1: UM in the pandemic was closer to fifteen billion over
12:44
Speaker 1: a couple of quarters. UM. So I think that gives
12:46
Speaker 1: you a sense of um, you know, sort of the
12:49
Speaker 1: magnitude there and so UM you know, net interest income,
12:54
Speaker 1: you know, the growth that we have last year was tremendous.
12:57
Speaker 1: We're not expecting UM similar growth this year, but it
13:00
Speaker 1: but again we're at sort of a high level. And
13:03
Speaker 1: then again, as far as trading goes, we think that
13:07
Speaker 1: there's still more volatility and fixed income. Could we see
13:09
Speaker 1: some moderation um, you know, from the extraordinary levels of
13:13
Speaker 1: this past year, Yes, but we think we remain in
13:16
Speaker 1: a historically high range The same is true for equity trading.
13:20
Speaker 1: Equity trading was down over the past year. But but
13:23
Speaker 1: again historically, high fees are going to be the big question.
13:26
Speaker 1: And I think that's the one thing that we're going
13:28
Speaker 1: to be looking at this quarter in terms of setting
13:31
Speaker 1: a run rate for the year. You know, I p
13:33
Speaker 1: O s um. We're far in few between last year
13:36
Speaker 1: after a record We have pipelines that remained sort of
13:41
Speaker 1: full over the past year, though getting a bit stale.
13:44
Speaker 1: Can those be executed? We're entering the year. You know,
13:47
Speaker 1: granted things were choppy in the last fourth quarter, but
13:50
Speaker 1: we we did. Stocks did end the year higher versus
13:53
Speaker 1: three Q And will there be companies taking advantage of
13:57
Speaker 1: that um to do public You know, there's still a
14:01
Speaker 1: question around UM, you know, pricing expectations. Obviously those have
14:06
Speaker 1: had to reset compared with a year ago. But that's
14:11
Speaker 1: what we're looking for in one queue. How much of
14:13
Speaker 1: that can come to market? Hey, Alice, when I think
14:15
Speaker 1: about you know, um, the Wells, Fargoes of the world,
14:18
Speaker 1: the city banks, the Bank of America's I think of
14:21
Speaker 1: corporate lending, consumer lending and loan growth was something that
14:26
Speaker 1: has talked about a lot. How is it out there?
14:28
Speaker 1: Are companies borrowing? Are are people borrowing to grow to
14:33
Speaker 1: start businesses and things like that. I think, you know
14:35
Speaker 1: what we'll see in the most recent quarter, um. You know,
14:38
Speaker 1: a couple of things that so commercial balances um, you know,
14:43
Speaker 1: really slowed last quarter. But a lot of that UM
14:46
Speaker 1: was you know, attributed to some of the banks talking
14:49
Speaker 1: about trying to restrain their bounty because they had to
14:53
Speaker 1: move up their capital ratios, right, and so the way
14:56
Speaker 1: that they moved those up is by reducing the denominator
14:59
Speaker 1: to to look a bit healthier. UM. So they said that,
15:03
Speaker 1: you know, they expect this quarter that might normalize a
15:06
Speaker 1: little bit um. So, so we will see the capital markets.
15:10
Speaker 1: The bond market did open up a little bit in
15:12
Speaker 1: the fourth quarter, UM, so perhaps some might have gone
15:15
Speaker 1: a little bit more might have gone to the capital markets,
15:17
Speaker 1: but we expect to see some growth. I think the
15:19
Speaker 1: real question is on the consumer side, and especially on
15:22
Speaker 1: the credit card side in general. Fourth quarter is the
15:26
Speaker 1: strongest quarter, obviously due to holiday spending. And we'll see
15:31
Speaker 1: if consumers are borrowing um and then we're gonna be
15:35
Speaker 1: you know, the one side. Are they borrowing? Is it
15:38
Speaker 1: healthy borrowing or is it constrained borrowing? And what's happening
15:41
Speaker 1: on the credit side of things as we head into
15:45
Speaker 1: alson just real quickly. I know you also follow the
15:47
Speaker 1: asset managers, the black rocks of the world that hero prices.
15:50
Speaker 1: What what's the call there for twenty three for those companies.
15:53
Speaker 1: I mean, I think things still look healthy. You know,
15:56
Speaker 1: we sort of face our forecast there. You know, it's
15:58
Speaker 1: all about the It's all about the markets in terms
16:01
Speaker 1: of the current earnings and our equity strategy team, UM.
16:05
Speaker 1: You know, things were about flat farish value, so not
16:09
Speaker 1: expecting much either way um over the next year or so. UM.
16:14
Speaker 1: But you know, in general, investors want to see flows
16:18
Speaker 1: and so while their earnings relate to the markets, flows
16:21
Speaker 1: really can drive evaluations. UM. You know, again, relying on
16:27
Speaker 1: our strategy team's forecast, value looks like um, it has
16:31
Speaker 1: the edge. So we expect managers such as t ROW
16:34
Speaker 1: may continue to see pressure in some of their growth
16:37
Speaker 1: funds UM, hopefully offsetting that with hopefully for them off
16:41
Speaker 1: setting that with some of the retirement money. UM. But
16:44
Speaker 1: in general that the I guess the one exciting thing
16:47
Speaker 1: will be active versus passive. This is an environment that
16:51
Speaker 1: favors active uh, you know, higher rates, lots of volatility,
16:56
Speaker 1: low correlations. Um. So we'll see if that can give
16:59
Speaker 1: active last All right, good stuff, Allison Williams, thanks so
17:02
Speaker 1: much for joining us. We always appreciate getting the overview
17:05
Speaker 1: of the big banks, investment banks, asset managers, jillions of
17:10
Speaker 1: dollars under management. Allison has been covering those companies for decades. Uh.
17:14
Speaker 1: And she's the senior global banks and asset Managers analysts
17:18
Speaker 1: for Bloomberg Intelligence. She's based in our Princeton, New Jersey office.
17:22
Speaker 1: Lots of good folks down there doing good work. Really
17:25
Speaker 1: the backbone of some of the global data that we
17:27
Speaker 1: all depend upon for the Bloomberg terminal. This Chris Bloomberg.
17:34
Speaker 1: I s M data came in, uh, you know, kind
17:38
Speaker 1: of mixed data. But the new orders came in lower
17:41
Speaker 1: than last quarter. We want to get our last month.
17:42
Speaker 1: We want to get the bottom of all this. We
17:44
Speaker 1: welcome Tim Fiuri. He's the chairman of the Institute for
17:47
Speaker 1: Supply Management otherwise known as I s M. So Tim
17:51
Speaker 1: on the numbers you guys reported this morning, Matt and
17:53
Speaker 1: I want to start with with the new orders at
17:55
Speaker 1: forty five point too, was that a big concern for you. Yeah,
17:58
Speaker 1: I got it. Well, it's a bit surprising. I'm waiting
18:01
Speaker 1: for for sellers to come back in and negotiate with
18:03
Speaker 1: buyers to get the new orders flowing again. You know,
18:06
Speaker 1: I look at I look at demand, new orders, new
18:09
Speaker 1: export orders back while I was in customer inventories, and
18:12
Speaker 1: the new orders had the single biggest impact on the
18:14
Speaker 1: p m I declining month over a month at a
18:17
Speaker 1: two point loss. So, you know, a bit of a
18:19
Speaker 1: surprise here at forty five point two. I think you know,
18:22
Speaker 1: back to your common Paul earlier on the show, that
18:25
Speaker 1: when things get down to forty five, they get a
18:26
Speaker 1: little concerning that. That's been my experience on the p
18:29
Speaker 1: m I overall number. So we're still at forty eight
18:32
Speaker 1: point four. I've been saying now for several months. Forty
18:35
Speaker 1: eight to fifty two is probably the range that we're
18:36
Speaker 1: gonna be running in for quite some time. It feels
18:39
Speaker 1: like that's exactly where we were in December. I'm makes
18:41
Speaker 1: us to move into January because December was a really
18:44
Speaker 1: weird month. We had a lot of seasonal factors. Take
18:47
Speaker 1: take the numbers up. I think the non seasonal number
18:50
Speaker 1: would have been about not unusual, but then a lot
18:54
Speaker 1: of people went home early, A lot of people took
18:56
Speaker 1: all the vacation. I think people re up for earlier
18:59
Speaker 1: than they normally do. So yeah, I'm a little concerned
19:01
Speaker 1: about the new order number. Our prices have come down
19:04
Speaker 1: a month over month. Here seven percent of the respondents
19:07
Speaker 1: indicated same of lower prices, same as in November. Uh,
19:11
Speaker 1: I think there's there's probably a more fundamental here. So
19:14
Speaker 1: percent of manufacturing GDP is now in contraction. That means
19:17
Speaker 1: it's nine or less. The alarming numbers that it's contracting,
19:23
Speaker 1: it's forty five or less. So that's up from six
19:27
Speaker 1: total in November at less. So we're not on a
19:32
Speaker 1: good trend here. But we just finished our forecast. You
19:35
Speaker 1: guys have you know, we believe to each other on
19:37
Speaker 1: the Business Panel believes is gonna be a lot like
19:41
Speaker 1: two that the second half of twenty three is going
19:44
Speaker 1: to be quite a lot of uncertainty here in the
19:47
Speaker 1: first half. I wondered, Tim, I mean, aside from the
19:51
Speaker 1: you know, concerning amount of contractions that you're seeing, Um,
19:57
Speaker 1: is the data less noisy now me than it was
20:00
Speaker 1: last year? I mean, are we getting back to normal,
20:03
Speaker 1: even if we're talking about, you know, a normal recession. Yeah, definitely.
20:08
Speaker 1: I we this is like three or four months, it's
20:10
Speaker 1: a normality. I think back in September October I pretty
20:14
Speaker 1: much said, hey, the numbers that we have now, so
20:16
Speaker 1: it's not a supply constraint expansion that that the suppliers
20:20
Speaker 1: delivered much better. Prices started to come down, so I
20:24
Speaker 1: think they're much more normal, but it's gonna take probably
20:26
Speaker 1: a little time to get there. At this point, I
20:28
Speaker 1: would say we're in normal economic contract and expansion, meaning
20:32
Speaker 1: we're waiting for demand to come back. If demand doesn't
20:35
Speaker 1: come back in the next two or three months, then
20:37
Speaker 1: you're gonna see a lot of suppliers having to release people.
20:40
Speaker 1: And nobody really wants to see that. And I think
20:42
Speaker 1: the reason why the new order level isn't accelerating is
20:45
Speaker 1: because we still have very long lead times. There's still
20:47
Speaker 1: thirty five percent above troth Ley times. If we got
20:50
Speaker 1: fifteen points of those back, I think bars would be
20:53
Speaker 1: much more inclined to go ahead and negotiate deals because
20:56
Speaker 1: the pricing has been coming down, has to come down
20:58
Speaker 1: to the right level, and probably not, but you know,
21:01
Speaker 1: you got delivering Cronser prices coming down, lead times just
21:04
Speaker 1: still stopping lee strong. So buyers are saying, hey, I
21:07
Speaker 1: don't believe these lead times, so I'm not gonna opt in.
21:10
Speaker 1: Intellers are saying, well, you're gonna need to. This is
21:12
Speaker 1: all going to get itself resolved in the last couple
21:14
Speaker 1: of months for sure. All right, Tim, great stuff. I
21:16
Speaker 1: really appreciate you checking in there on this I s
21:19
Speaker 1: M data that was released this morning. Tim Fury, he's
21:22
Speaker 1: the chairman of the Institute for Supply Management. All right,
21:28
Speaker 1: let's pivot here and talk tech. And we talk tech
21:31
Speaker 1: for a lot of people. That means you gotta start
21:33
Speaker 1: with Apple. And I'm looking at the stock here. You know,
21:36
Speaker 1: it was all twenty nine percent last year. That's up
21:39
Speaker 1: about one today. But we had you know, people are
21:42
Speaker 1: definitely calling the question the ability of Apple to continue
21:45
Speaker 1: to grow through what might be a recession looking likely
21:49
Speaker 1: in So let's bring in on a rock Ronic. He's
21:51
Speaker 1: a senior technology technology analyst with Bloomberg Intelligence. You know,
21:57
Speaker 1: the stock down kind of last year, ish, um, that's
22:02
Speaker 1: another performance for you know, the Apple shareholders that they're
22:05
Speaker 1: not used to that. What's your call on the Apple story?
22:07
Speaker 1: These days. So I think, Paul, I think everybody is
22:11
Speaker 1: getting to a realization that Apple cannot grow in double
22:15
Speaker 1: digits forever. And I think this is something we've been
22:17
Speaker 1: hopping on for a while, that this is a company
22:20
Speaker 1: at best on the top line will grow you know,
22:22
Speaker 1: somewhere around five and on the bottom line with buy
22:25
Speaker 1: bags and uh, you know, I would say a little
22:28
Speaker 1: bit of expansion, you know, EPs somewhere around n I
22:31
Speaker 1: think I think the world is coming to your realization
22:34
Speaker 1: this is not a double digits growth growth story anymore.
22:38
Speaker 1: And I think that the valuation is reflecting that now.
22:41
Speaker 1: So can I get back to that story? I mean,
22:44
Speaker 1: what's the great big hope for Apple? Is it a car?
22:48
Speaker 1: Is it some sort of virtual reality glasses? Can they
22:52
Speaker 1: sell more of the watch? I mean, what, what's where's
22:54
Speaker 1: the growth for them? So? I mean, in all, honestly,
22:58
Speaker 1: if the global GDP somewhere around two and a half
23:01
Speaker 1: three percent, you know, growing at you know, six to
23:03
Speaker 1: eight percent is not a bad idea, I mean, in
23:05
Speaker 1: my in my view, but um, this year is going
23:08
Speaker 1: to be slow growth because of global consumer spending soda.
23:11
Speaker 1: Next year there's going to be a rebound on that
23:13
Speaker 1: but I would say in the long run, this is
23:14
Speaker 1: still a story that is more of a high single
23:17
Speaker 1: digit growth story. Now when you talk about specific products, UM,
23:21
Speaker 1: you know you would see the iPhone installed based growth
23:24
Speaker 1: steadily over time. UM, air pods is a very big
23:28
Speaker 1: growth story also. But again you know remember air pods,
23:31
Speaker 1: air watches and all these things they are they may
23:34
Speaker 1: grow in double digits, but from a overall you know,
23:37
Speaker 1: Apple's revenue point of view, they really don't contribute much
23:40
Speaker 1: because they're very small portion of the overall time. All right,
23:44
Speaker 1: if if, if this is the stock I'm thinking about,
23:46
Speaker 1: as you know, an analysts, portfolio manager and investor, and
23:49
Speaker 1: I'm penciling and high single digit earnings growth And look
23:52
Speaker 1: at the pe today, looking at it's twenty times earnings,
23:55
Speaker 1: I mean, I'm paying twice the growth rate here. Is
23:57
Speaker 1: is that a fair multiple? I think? You know, this
24:01
Speaker 1: is where this is a marquee name for you know,
24:04
Speaker 1: other reasons. If you were to put a DC evaluation
24:06
Speaker 1: on it, I mean, I I think the number you're
24:08
Speaker 1: going to get is slightly different because, um, this is
24:11
Speaker 1: a stock that can you know, that should in all
24:14
Speaker 1: logic continue to grow for many years to come. So
24:18
Speaker 1: you could argue that over the next seven eight years,
24:20
Speaker 1: this would you know, be a substantial portion of the
24:24
Speaker 1: overall you know, take framework when it comes to anything
24:27
Speaker 1: consumer devices. You you know, we expect a fair fair
24:30
Speaker 1: larger number of iPhones down the road. So I think
24:33
Speaker 1: this is more of a value at a reasonable price
24:36
Speaker 1: rather than growth name. I think the is was treated
24:38
Speaker 1: as a growth name for the last few years. Um.
24:40
Speaker 1: I think this is going to be very very much
24:42
Speaker 1: like a Coca Cola or a Costco, And I would
24:44
Speaker 1: argue both of them are trade way more than twenty
24:47
Speaker 1: times earnings Baul, Do they have a Does Apple have
24:51
Speaker 1: a deep en up bench that you have no concern
24:54
Speaker 1: about Tim Cook? I mean, he seems very healthy and
24:58
Speaker 1: he's young, but you know who fills his place if
25:04
Speaker 1: he needs to go in terms, and has done an
25:08
Speaker 1: amazing job over the last several years. But I would
25:11
Speaker 1: I would argue that Apple is one of those companies
25:13
Speaker 1: that does not need a revolutionary, needed or that big
25:17
Speaker 1: of a visionary At this point, the installed base on
25:19
Speaker 1: its products is so wide right now that you know
25:22
Speaker 1: it needs to figure out how it's going to sell
25:24
Speaker 1: into that installed base. Most services, more content, more video
25:28
Speaker 1: and more accessories. So I I really don't think that
25:31
Speaker 1: we need that level of Steve Jobs kind of a
25:34
Speaker 1: person at this point for this company. I'll tell you
25:36
Speaker 1: what they need on or wrong. They need to listen
25:38
Speaker 1: to my advice here, and my advice is they need
25:41
Speaker 1: to raise their dividends. I mean, they got a dividend
25:43
Speaker 1: yield less than one percent. I mean, are you kidding me?
25:46
Speaker 1: I wanted to They can do both. I want a
25:50
Speaker 1: two or three four percent of it then yield? Can
25:52
Speaker 1: you make that happen? Fair? Fair? Fair point, Paul. But
25:55
Speaker 1: I would argue that they're going to use close to
25:57
Speaker 1: a hundred billion and buying back their shares. If if
26:00
Speaker 1: you are a long term Apple chairholders, you know they
26:03
Speaker 1: would buy close to a hundred billion dollars. I mean,
26:05
Speaker 1: that's there's no company out there that generates that amount
26:08
Speaker 1: of free count. They can do both, They can do both.
26:11
Speaker 1: I don't know why they. I don't know why they.
26:14
Speaker 1: If you're gonna pay a dividend, now, I guess they're
26:16
Speaker 1: paying it. If you're gonna be a value stock, well
26:19
Speaker 1: that's the thing they don't want even be paying with
26:21
Speaker 1: that brush. But I mean, I guess they pay this
26:23
Speaker 1: token dividends, So dividend funds presumably can buy and own Apple,
26:28
Speaker 1: and I guess that's kind of their strategy. But I'm like,
26:30
Speaker 1: you can afford to do both and put out a
26:33
Speaker 1: nice dividend out there. I think that would be a
26:35
Speaker 1: whole new set of investors. But my advice has been
26:39
Speaker 1: falling on deafit. I'm going to say that Costco pays
26:43
Speaker 1: less than one percent dividends. Okay, So I'm I'm you know,
26:46
Speaker 1: I want you to think about Apple not so much
26:49
Speaker 1: as a technology stock that somebody can come out and
26:52
Speaker 1: take their business away tomorrow. This is very much like
26:54
Speaker 1: a consumer um, you know, discriptionary stock where you know something,
26:58
Speaker 1: You're right, Costco same dividend and yield, same dividend yield.
27:01
Speaker 1: So you've you're you're you're prepared for that question, I know.
27:05
Speaker 1: But that's how I think about this company. I don't
27:08
Speaker 1: think about this company as a Microsoft or something else.
27:10
Speaker 1: This is something This is a brand that will remain
27:13
Speaker 1: with us twenty years from now. It is not going
27:15
Speaker 1: to be a tech company that somebody can come and
27:17
Speaker 1: take their market share away from them. That's not going
27:19
Speaker 1: to happen. So the real way to think about this
27:22
Speaker 1: company is something that is going to be able to
27:25
Speaker 1: sell into that install base. And I never understood and
27:28
Speaker 1: when people ask me all the time, why is Costco
27:29
Speaker 1: trading get such a high marketple And the reason for
27:32
Speaker 1: that is because somebody like a Costco or a Coca
27:34
Speaker 1: Cola will be around twenty years from now and and
27:37
Speaker 1: Costco is at thirty one times elearnings. So you you
27:40
Speaker 1: want to look at this not so much from a
27:42
Speaker 1: traditional tech point of view, Paul, but more so into
27:45
Speaker 1: these brands that will remain with us for a very
27:48
Speaker 1: long So is that how the market has a market
27:50
Speaker 1: transitioned from you know, looking at this as a tech
27:54
Speaker 1: s doctor just a big, big consumer name. No, that's
27:57
Speaker 1: what that's That is my argument that you have to
27:59
Speaker 1: think of this in a very different way because a
28:02
Speaker 1: lot of investors get into this with the idea that
28:05
Speaker 1: you know, this is a technique. A car is going
28:07
Speaker 1: to come and completely change the nature of this business,
28:10
Speaker 1: and they're going, this is not how you want to
28:12
Speaker 1: think about this. This is a brand that is, you know,
28:15
Speaker 1: a central to our life as what we do on
28:17
Speaker 1: a daily basis, and this is going to do you
28:19
Speaker 1: logically remained with us for a very long period of time.
28:22
Speaker 1: You cannot say that about any software company. Frankly buying
28:25
Speaker 1: Microsoft perhaps that it is going to be remained with
28:28
Speaker 1: you ten years from now. Well, each of them can
28:31
Speaker 1: be unseated tomorrow by somebody you know, new coming in.
28:34
Speaker 1: Both Apple and Microsoft are a part of your life. Um,
28:39
Speaker 1: the differences you enjoy Apple, right? No? I like Microsoft
28:44
Speaker 1: as well? Like what dude, not Windows? Surely? No? I
28:50
Speaker 1: mean I'm talking about enterprise application almost almost you know,
28:54
Speaker 1: they're the heart and lung of every enterprise that's out.
28:58
Speaker 1: And so I saw Ubs down. It did it today,
29:00
Speaker 1: and I think in part due to some concerns about Azure.
29:04
Speaker 1: What's your view of Microsoft here? These days? It will
29:06
Speaker 1: slow down? I mean once again, I mean I'm not
29:08
Speaker 1: sure why the stocks start focus on what wouldn't slow
29:11
Speaker 1: down this year? Give me one metric for any in
29:14
Speaker 1: the enterprise business that's not going to slow down this year.
29:17
Speaker 1: So I'm I'm sometimes surprised about the stock reaction because
29:22
Speaker 1: you know, all companies have said aws said they're going
29:24
Speaker 1: to slow down, So why why are people so surprised
29:27
Speaker 1: about it? So, I mean, I I my my two
29:30
Speaker 1: cents on this entire thing is people, it seems, want
29:33
Speaker 1: to be short thing, you know, tech going into this year,
29:36
Speaker 1: and how do they do it. They find Apple, they
29:39
Speaker 1: find Microsoft. There is no other real way to do
29:40
Speaker 1: it given the large market gap of it. So if
29:43
Speaker 1: if there is a multiple compression on this thing, so
29:46
Speaker 1: be it. And the long run, and I said this recently,
29:50
Speaker 1: you know, look what happened with Southwest. Do you think
29:53
Speaker 1: the whole world is done with enterprise spending on technology?
29:56
Speaker 1: The world is full of legacy applications that are so
30:00
Speaker 1: old and so behind that they need to upgrade. So
30:03
Speaker 1: you think there are a lot of I think there
30:04
Speaker 1: are a lot of Southwest airlines out there that are
30:06
Speaker 1: big companies that maybe have underinvested in technology that for
30:12
Speaker 1: whatever reason, they're gonna have to step it up. Yeah,
30:15
Speaker 1: I can give you Like you you could pick any
30:17
Speaker 1: industry out there that is so far behind what you're
30:20
Speaker 1: used to on your iPhone, Audio, Amazon app that is
30:23
Speaker 1: not the benchmark. If you look at those as the
30:25
Speaker 1: benchmarks for any enterprises, enterprises would get a grade of
30:28
Speaker 1: two to three on a scale of one to ten,
30:31
Speaker 1: whereas your iPhone would get somewhere around our nine or
30:34
Speaker 1: a ten. You have to invest. There is no way
30:36
Speaker 1: out of it before We only have a minute left.
30:39
Speaker 1: But I have to ask you about the Apple car.
30:42
Speaker 1: It's due out in six which seems increasingly um you know,
30:46
Speaker 1: around the corner. But you don't seem that pumped about it,
30:49
Speaker 1: are you? Don't you think this is going to be
30:50
Speaker 1: a revolution. It's not gonna be a game changer. It
30:53
Speaker 1: would love to It will increase the market cap quite
30:55
Speaker 1: a bit. It will be a beautiful car, I'm sure.
30:57
Speaker 1: But tell me, in honesty and all honesty, if the
30:59
Speaker 1: price point of this car is fifty how many units
31:03
Speaker 1: will be sold ever year? Well? Think about math point. Yeah,
31:07
Speaker 1: but but that's like that's like Rivan Tesla, the Ford Lightning, Uh,
31:12
Speaker 1: you know, the electric Selverado. These are all gonna be
31:15
Speaker 1: around there as well. I mean, you can't get into
31:17
Speaker 1: a night eleven for less than one oh six. Yeah,
31:20
Speaker 1: but but how many nine elevens do you do you
31:22
Speaker 1: sell each year? The Tesla to the Model three can
31:24
Speaker 1: be sold many many models. It's not a problem. But
31:27
Speaker 1: Apple is not going to make a car forty thousand dollars.
31:29
Speaker 1: Apple's not going to get into that business. Lamborghini. Apple
31:31
Speaker 1: gets into a business but has a forty percent margins
31:34
Speaker 1: forty percent margin. Is only one company out there, Lamborghini.
31:36
Speaker 1: How many units do you think they ten thousand or
31:39
Speaker 1: they try, I mean Lamborghini Ferrari, they sell less than
31:42
Speaker 1: ten thousand. Eleven is about that. Let the answer to
31:45
Speaker 1: every question, the auto question, he comes right back to
31:47
Speaker 1: the Lamborghini example. I mean, you've done this once or twice.
31:50
Speaker 1: They're capped pretty much at a ten thousand. All right,
31:53
Speaker 1: we're gonna let you go. We're gonna gonna let you
31:55
Speaker 1: go here. But we'll come back to this. I guess
31:57
Speaker 1: let's get him back on tomorrow. Let's get him back
31:59
Speaker 1: onto when when he's in New York. We'll get him
32:00
Speaker 1: in studio. So that's how we do it, because he's
32:02
Speaker 1: he's just you know, he's somewhere else, some undisclosed location.
32:06
Speaker 1: So we'll get back to him. But on a rock Ronda,
32:07
Speaker 1: he covers all things technology for Bloomberg Intelligence, giving us
32:10
Speaker 1: his call on Apple. You had a little discussion there
32:14
Speaker 1: on Microsoft, but I mean, I think he still remains
32:17
Speaker 1: a bowl on Apple. But I'm sticking with my argument
32:19
Speaker 1: that they should they don't need to, but they should
32:23
Speaker 1: raise their dividend give shareholders that maybe a two or
32:26
Speaker 1: three percent yield as opposed to the zero point eight
32:29
Speaker 1: percent yield right now. O r f nan Oh yeah,
32:37
Speaker 1: I think that's like an et F for orphan stocks
32:40
Speaker 1: or something like that. I don't know, but we got
32:41
Speaker 1: the guy who's in charge of this stuff, and he's
32:43
Speaker 1: gonna be ringing the bell the New York Stock Exchange,
32:45
Speaker 1: which is still a thing. By the way, Um, it's
32:48
Speaker 1: a good market. Have you ever shot during the bell
32:50
Speaker 1: the New York Stock Exchange? And I worked on New
32:52
Speaker 1: York Stock Exchange, but I made money on the New
32:54
Speaker 1: York Stock Exchange floor. Mark Newman, c io at Constrained
32:57
Speaker 1: Capital joins us here. Mark Tuck to us about you're
33:01
Speaker 1: in our Bloomberg and ar actor Brooker studio, so it
33:02
Speaker 1: gets the gold star. He's usually based in Atlanta, but
33:04
Speaker 1: he's here in New York today. Mark. What is constraint capit?
33:08
Speaker 1: What do you guys do? What is O r f
33:10
Speaker 1: N because I'm putting into my terminal. Yeah, thanks a lot.
33:13
Speaker 1: So O RFN is the E s G Orphans Index
33:16
Speaker 1: E t F okay, so E s G Orphans Index.
33:21
Speaker 1: So this is companies that don't go into E s
33:24
Speaker 1: G funds. So these sectors, the six sectors that I
33:28
Speaker 1: quantitatively selected, have been routinely excluded from the e s G.
33:32
Speaker 1: So this is like a sin so it's like tobacco.
33:36
Speaker 1: So it is a combination of what I call the
33:38
Speaker 1: sin stocks, which we would say tobacco, alcohol, and gambling. Firearms, yes, firearms.
33:44
Speaker 1: But there's a bit of a nuance there in terms
33:46
Speaker 1: of the size of the company because it's a market
33:48
Speaker 1: cap weighted index, so the biggest companies make it, so
33:51
Speaker 1: a Smith and Wesson wouldn't make it because it's so small. Um.
33:54
Speaker 1: And then on the other side is the woke sort
33:56
Speaker 1: of I call them the woke shame stocks if you will.
33:58
Speaker 1: Fossil fuel, nuclear or energy and weapons and these again
34:02
Speaker 1: all just happing big weapons. So the Lockeed Martins and so,
34:08
Speaker 1: you know, interesting in the weapons area is like the
34:10
Speaker 1: Ukraine story. We just gave them forty seven billion, we
34:13
Speaker 1: gave them fifty billion earlier in the year, and they
34:15
Speaker 1: turn around and buy you know, battery systems from lockeed
34:20
Speaker 1: Martin and raytheon. And the ironic thing is that E
34:23
Speaker 1: s G investors have been excluded from the weapons manufacturers
34:27
Speaker 1: as part of E s G. They're not E s
34:29
Speaker 1: G friendly now right now we're defending democracy, right so
34:33
Speaker 1: it gets very nuanced, and that's you know, a tricky
34:36
Speaker 1: part of e SG. And for the last year, my
34:38
Speaker 1: Bloomberg terminal up seventeen. You guys have had good performance. Yes,
34:43
Speaker 1: thankfully we have. UM. The E s G Orphans Index,
34:47
Speaker 1: which is what the E t F is based office,
34:49
Speaker 1: returned about twenty two last year, UM, which you know,
34:53
Speaker 1: obviously the SMP was down about nineteen and the NASDAG
34:56
Speaker 1: was down over thirty. So I'm pretty happy with that.
34:58
Speaker 1: And then the orphans or FN launched in mid May
35:01
Speaker 1: and has done really well. So I mean, you've got
35:04
Speaker 1: like x on Mobile, Philip mars raytheon Chevron, Boeing and
35:08
Speaker 1: has a Bush Diagio. Those are names, yes, those are
35:11
Speaker 1: and you know these there's a lot of recent talk
35:14
Speaker 1: about the anti E s G if you will, and
35:16
Speaker 1: there are sector based stocks and e t F s
35:19
Speaker 1: that do that, but this one actually separated the whole
35:23
Speaker 1: E s G factor and sort of it's the isolated
35:25
Speaker 1: E s G factor anti E s G E t
35:28
Speaker 1: F hence the name constrained Capital. I love the name
35:31
Speaker 1: of the firm. Is this Your main focus is the
35:34
Speaker 1: orphan E T F your main focus there, You're looking
35:36
Speaker 1: to put together other products. What's the story? So thank you? Yeah,
35:39
Speaker 1: it is the first one out of the gate. And
35:41
Speaker 1: the idea behind constraint capital a hedge fund legend. Cliff
35:45
Speaker 1: as Nous of a q R. He wrote a really
35:48
Speaker 1: interesting white paper back in May of two thousand seventeen
35:51
Speaker 1: and discussed constraints on capital and how they create, they
35:55
Speaker 1: cause malinvestment and misallocation of capital, and then opportunities and
35:59
Speaker 1: these were secure eties that have been excluded under constraints
36:02
Speaker 1: avoided if you will become high expected return securities. And
36:06
Speaker 1: it has to attract investors by lower prices over time.
36:09
Speaker 1: And now it's starting to do that thing because it's
36:11
Speaker 1: a very uncrowded space and versus And we had Matt
36:15
Speaker 1: who's the guy we had in with r L. V Ramaswamy, Yeah,
36:19
Speaker 1: Viva Rama Swanny is another guy dri drive and d
36:22
Speaker 1: R L L His is his thing. And he's saying, basically,
36:25
Speaker 1: you know, by the energy companies, you know, drill, drill, drill,
36:28
Speaker 1: you know, and let don't I don't want my companies
36:30
Speaker 1: making social decisions from me. I want to maximizing shareholder values. Well,
36:34
Speaker 1: let's other parts of society deal with those exactly. So
36:37
Speaker 1: his thing isn't really anti E s G per se,
36:40
Speaker 1: and I don't think yours is really either. It's just
36:43
Speaker 1: the maximization of profits. He's also looking to find those
36:47
Speaker 1: opportunities that have been kind of discarded by the E
36:50
Speaker 1: s G world. Yeah, So I spoke to the VAC
36:52
Speaker 1: a few times, and I really like their approach and
36:54
Speaker 1: their thoughts and the one I call us cousins as
36:57
Speaker 1: opposed to siblings, if you will. And I find that
37:00
Speaker 1: they're approaching things from a corporate level. They're gonna approach
37:03
Speaker 1: the c suite and say, hey, Google, your your ads
37:05
Speaker 1: are biased or your your searches are biased. I've approached
37:09
Speaker 1: it from isolating the company's most excluded and really focused
37:14
Speaker 1: at the investor level and saying here, this diversifies your
37:17
Speaker 1: portfolio against what's not crowded. And yes, they've been isolated
37:22
Speaker 1: by the E s G community. And now that there's
37:24
Speaker 1: that pushback and that has shined a light in the neighborhood,
37:27
Speaker 1: if you will, UH, taking on black Rock and those
37:30
Speaker 1: kinds of things, I expect flows to revert and come back,
37:34
Speaker 1: and and the the the nuance of E s G
37:37
Speaker 1: become wider, and these malign securities to find more inflows
37:40
Speaker 1: over time. Where do you think we are in that
37:42
Speaker 1: whole E s G movement? It feels like it's lost
37:46
Speaker 1: some momentum, But some of the folks tell me no,
37:49
Speaker 1: I mean, how do you think about it? So this
37:51
Speaker 1: is the first year while two thousand two where returns
37:54
Speaker 1: really suffered, and I think that you have certain sales points,
38:00
Speaker 1: if you will, calling things E s G sort of
38:03
Speaker 1: all things E s G. And when I look at
38:04
Speaker 1: a name like Amazon, for example, that has a huge
38:07
Speaker 1: carbon footprint, biggest outside the energy space, and it was
38:11
Speaker 1: down almost what I think, forty five or fifty this
38:13
Speaker 1: past year. And everyone is in Amazon, even a lot
38:16
Speaker 1: of big E s G funds own Amazon is like
38:19
Speaker 1: a top three holding at black Rock and at Vanguard.
38:21
Speaker 1: And I think that people are starting to realize weight
38:23
Speaker 1: what do I own and why do I own it?
38:25
Speaker 1: And is this really E s G? Or is it
38:27
Speaker 1: a failed objective within E s G. And I think
38:29
Speaker 1: that we're in the early innings of people realizing that
38:32
Speaker 1: they've sort of been misled they've paid higher fees, they've
38:35
Speaker 1: had lower returns, and worst of all is the failed objectives.
38:38
Speaker 1: And I think as returns people see their returns and say,
38:41
Speaker 1: wait a second, what just happened here? That's when they
38:44
Speaker 1: sort of wake up. So I think it's early ends.
38:46
Speaker 1: But again, if I made for one more second, the
38:49
Speaker 1: the evolution of E. S G from here will be
38:51
Speaker 1: three dimensional, not two dimensional. It's not going to turn
38:54
Speaker 1: off and turn on. The new word is going to
38:55
Speaker 1: be sustainability. We've seen a lot of that this year
38:57
Speaker 1: already or in the past few weeks. In a month
39:00
Speaker 1: or two, I think that's how it evolves, and they'll
39:02
Speaker 1: be sort of chasing, if you will. I call it
39:04
Speaker 1: like the greyhound chasing the hair around the track, right though,
39:07
Speaker 1: he's sort of chasing that thing to find out what
39:09
Speaker 1: what's the next new thing? So to speak. One of
39:12
Speaker 1: the big drivers I see big holdings is energy, and
39:15
Speaker 1: that's had a phenomenal year in two one of the
39:18
Speaker 1: very few sectors that have really put up some performance.
39:21
Speaker 1: What's your energy called? Here? Because if energy goes the
39:23
Speaker 1: other way, obviously you guys are exposed, right And I
39:26
Speaker 1: think that we have a twenty allocation fossil fuel and
39:30
Speaker 1: nuclear energy. So that's basket. I think I've always said
39:35
Speaker 1: you can't get to the future of energy without present energy, right.
39:38
Speaker 1: We can't do this quantum leap into batteries, into solar
39:42
Speaker 1: in the wind without using what we have currently. So
39:45
Speaker 1: I do think in the near term there is some
39:47
Speaker 1: concern on energy prices. You know, the recession is a
39:49
Speaker 1: bit of a talk um, but going forward, and I
39:52
Speaker 1: interviewed an expert, a Nasa Haji, an energy expert, and
39:56
Speaker 1: he basically said, if you think we're at peak or
39:59
Speaker 1: you know, basically the oil situation is we we still
40:03
Speaker 1: need oil to do a lot of things heat our homes,
40:07
Speaker 1: cool our homes, and over time demand is still going
40:10
Speaker 1: to be there from developed world along with developing world
40:14
Speaker 1: in fossil fuel. So I don't think it's going anywhere
40:16
Speaker 1: in the short term. In the short term, it might
40:19
Speaker 1: have a little struggle if if the recession comes to
40:21
Speaker 1: play and demand does shrink. What's the nuclear I mean,
40:24
Speaker 1: I look at your top holdings. I see Excen, Philip
40:26
Speaker 1: Morris raytheon Chevron. Where's the nuclear play there? So next
40:32
Speaker 1: Terra Duke Dominion s O Southern Company, American ap So
40:38
Speaker 1: these are that that looks like the energy area excuse me,
40:41
Speaker 1: where I think we really could see some revolutionary change
40:45
Speaker 1: in the next few decades. Because you know, we tried
40:48
Speaker 1: it once, we went big into it. Globally, we kind
40:50
Speaker 1: of backed away from it, some people running scared, some
40:52
Speaker 1: people still thinking it's cheap if we already built it,
40:54
Speaker 1: but it's too expensive to build again. Now we're seeing
40:58
Speaker 1: real technological advances that like, you know, this could be
41:02
Speaker 1: you know, free power, that's right. And you know, the
41:04
Speaker 1: interesting thing is over the past year, part of the
41:07
Speaker 1: constraints on capitol we saw in the EU was Germany
41:11
Speaker 1: shutting down their nuclear plants and then all of a sudden,
41:14
Speaker 1: Russia had sort of an advantage and they took advantage
41:16
Speaker 1: of it. Now we've seen a lot of coal burning
41:19
Speaker 1: recently in the last few months, last half of the year,
41:22
Speaker 1: because of the energy situation, the energy crisis, if you will.
41:25
Speaker 1: And in the end, a ton of coal is more
41:29
Speaker 1: damaging and pollutant than a marble size piece of uranium.
41:33
Speaker 1: So that's the whole nuclear nuclear tradeoff, if you will.
41:37
Speaker 1: And it's um you know, it's a sustainable carbon free
41:41
Speaker 1: you know, energy source. So I think that, uh, it's
41:45
Speaker 1: going to be a very big thing going forward. As
41:47
Speaker 1: you say, Matt, I mean it seems like a you know,
41:51
Speaker 1: an amazing opportunity for for I wouldn't say limitless energy,
41:54
Speaker 1: but cleaner and cleaner and and and and sustainable. Well
42:00
Speaker 1: that's the key, right, the fact that it's going to
42:01
Speaker 1: be sustainable now that they can power reactors with spent
42:06
Speaker 1: fuel um and that they don't create the kind of
42:08
Speaker 1: waste that they did before where we need to find
42:10
Speaker 1: like a mountain in Utah to stores to all that stuff.
42:13
Speaker 1: And I think that the part of the image that
42:16
Speaker 1: nuclear has in a bit of the in a bit
42:19
Speaker 1: of the media areas is needs a little bit of reworking.
42:21
Speaker 1: If you have three mile Island was a long time ago,
42:23
Speaker 1: Yeah it was. I was. I remember Mark Newman, ce
42:25
Speaker 1: io Constraint Capital, joining us here in the Bloomberg and
42:28
Speaker 1: Actor Broker Studio. Who'll be ringing in the New York
42:31
Speaker 1: so Exchange tomorrow. So you'm the lookout for that. Thanks
42:36
Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe
42:39
Speaker 1: and listen to interviews with Apple Podcasts or whatever podcast
42:43
Speaker 1: platform you prefer. I'm Matt Miller. I'm on Twitter at
42:47
Speaker 1: Matt Miller three. Put on bal Sweeney. I'm on Twitter
42:51
Speaker 1: at pt Sweeney. Before the podcast. You can always catch
42:53
Speaker 1: us worldwide at Bloomberg Radio