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Markets, 5G, And Supply Chain Bottlenecks · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. I want to talk
• 0:22
  Speaker 1: about banks here. We've got banks earnings are gonna be
• 0:25
  Speaker 1: kicking off this earning season in a few days, and
• 0:28
  Speaker 1: can be really interested to hear what these banks CEOs
• 0:31
  Speaker 1: talk about or how they phrase their business outlook in
• 0:34
  Speaker 1: term of a rising interest rate environment. Dave Ellison, he's
• 0:37
  Speaker 1: a portfolio manager at the Hennessey Large and Small Cap
• 0:40
  Speaker 1: Financial Funds Day, thanks so much for joining us here.
• 0:42
  Speaker 1: We got that inflation print today kind of in line
• 0:45
  Speaker 1: with expectations. We have rates rising both on the short
• 0:48
  Speaker 1: end and a little bit now even on the longer end.
• 0:52
  Speaker 1: How do you expect the banks to kind of talk
• 0:55
  Speaker 1: about their business, you know, when we get these earnings
• 0:57
  Speaker 1: calls over the next week or two. Well, I think
• 1:01
  Speaker 1: the anyway, good morning, But to everyone, I think when
• 1:05
  Speaker 1: it comes to the banks, I mean, they're you know,
• 1:08
  Speaker 1: not much different happened in the fourth quarter that happened
• 1:11
  Speaker 1: in the third quarter or the second quarter. So the
• 1:14
  Speaker 1: erneys are gonna be good. Credit is going to be fine.
• 1:16
  Speaker 1: I think the story is going to be that loan
• 1:19
  Speaker 1: demand is getting better and that's going to drive I
• 1:23
  Speaker 1: think the narrative for you know, the rest of the year.
• 1:26
  Speaker 1: Rates are a factor, but you know again, they FED
• 1:30
  Speaker 1: hasn't moved rate yet, and rates take a while to
• 1:33
  Speaker 1: bleed into the margins or the erne's of these companies,
• 1:37
  Speaker 1: So the impact of a rise in rates this year
• 1:39
  Speaker 1: really won't impact us until the fourth quarter of next
• 1:43
  Speaker 1: year or beyond. And I don't think they're going to
• 1:45
  Speaker 1: go up enough to really make a difference to the
• 1:48
  Speaker 1: demand for credit. So, uh, you know, the most important
• 1:52
  Speaker 1: thing here is loan growth. And if the FED is
• 1:55
  Speaker 1: going to back off growing their balance sheet and actually
• 1:58
  Speaker 1: shrink it, then the bands have an opportunity to fill
• 2:01
  Speaker 1: in that hole at the bank that the FED has
• 2:04
  Speaker 1: been filling for many years now by providing all of
• 2:07
  Speaker 1: this credit and liquidity and start to use their excess liquidity,
• 2:11
  Speaker 1: which will drive earnings higher. Will they make any money
• 2:15
  Speaker 1: on that? I mean, if there's no net interest margin
• 2:18
  Speaker 1: out there, what's the point. Well, I think it's you know,
• 2:22
  Speaker 1: there is a decent margin out there now. You know,
• 2:24
  Speaker 1: they're not lending at the ten year rate. You know,
• 2:27
  Speaker 1: most loans are going on at two and a half
• 2:29
  Speaker 1: to three and a half percent. Yeah, the cost of
• 2:32
  Speaker 1: funds is not you know, at forty or fifty basis points,
• 2:37
  Speaker 1: it's more like zero or close to it. So, um,
• 2:40
  Speaker 1: so you can make you know that the profitability of
• 2:43
  Speaker 1: the industry is very good here. It's not bad by
• 2:47
  Speaker 1: any means that. Having been in this business since the
• 2:49
  Speaker 1: early eighties, believe me, things are really good right now.
• 2:53
  Speaker 1: Uh JP Morgan's making a billion dollars a month after
• 2:56
  Speaker 1: tax I think they're doing fine. The issue is how
• 2:59
  Speaker 1: do they grow that and how do they get their
• 3:00
  Speaker 1: multiple up? And actually, you know, for people that invest
• 3:05
  Speaker 1: in these names, you know what makes them go hired
• 3:07
  Speaker 1: and it's going to be long growth and so yeah,
• 3:10
  Speaker 1: that's kind of where I wanted to go to. I mean,
• 3:12
  Speaker 1: if I have a rising interest rate in environment, steepening
• 3:14
  Speaker 1: yielder presumably um as we go through the year here, um,
• 3:19
  Speaker 1: do I want to own the big money center banks
• 3:21
  Speaker 1: and JP Morgan's, the b of A's the cities or
• 3:24
  Speaker 1: or maybe the regionals. How how do you think about that? Well,
• 3:28
  Speaker 1: I I think you know. My view is the bigger
• 3:32
  Speaker 1: banks are the place to be in general because they
• 3:35
  Speaker 1: have the profits, they have the in a sense, the
• 3:38
  Speaker 1: Fang network effect, and they can make investments in technology
• 3:43
  Speaker 1: and stay ahead of this sort of PayPal square or
• 3:47
  Speaker 1: now Block, you know, movement against them in terms of
• 3:52
  Speaker 1: taking share. So I you know, I favor the bigger
• 3:55
  Speaker 1: banks because I think they have the opportunity to to
• 3:58
  Speaker 1: grow loans, to the investments, to stay relevant against this
• 4:03
  Speaker 1: massive move of tech names trying to get into this
• 4:07
  Speaker 1: business and and take away the low hanging sort of
• 4:10
  Speaker 1: high profitable fruit that's out there. Do you I mean,
• 4:15
  Speaker 1: if they go out there and buy the technology that
• 4:18
  Speaker 1: they can't build or don't want to embark on, do
• 4:21
  Speaker 1: you then try and pick those names before they get
• 4:24
  Speaker 1: um taken up by the banks. I don't think that's
• 4:29
  Speaker 1: gonna happen as much. I think a lot of the companies. Again,
• 4:32
  Speaker 1: what I'm hearing from the bigger banks is they're going
• 4:35
  Speaker 1: to build it in house. Uh. They have the ability
• 4:38
  Speaker 1: to hire the people, they have the money, and uh,
• 4:41
  Speaker 1: you know, I think they have Again, they have the
• 4:43
  Speaker 1: network effect to test it and see what works. So
• 4:47
  Speaker 1: I think this idea that Bank America or JP Morgan
• 4:49
  Speaker 1: is going to buy PayPal, and somebody's going to buy Block,
• 4:52
  Speaker 1: and somebody's going to buy a firm, and somebody's going
• 4:54
  Speaker 1: to buy whatever other you know, I just don't think
• 4:58
  Speaker 1: that's going to happen. The value ations are too high
• 5:01
  Speaker 1: and and the regulatory structure just doesn't allow these guys
• 5:05
  Speaker 1: to do that anymore. So again, it's going to be
• 5:08
  Speaker 1: a build, make it work for themselves, retain customers, build
• 5:13
  Speaker 1: a good mobile platform, make it better, make it better
• 5:16
  Speaker 1: than Square, PayPal or some of these other guys, and
• 5:20
  Speaker 1: and just you know, go for it and try to
• 5:22
  Speaker 1: get the customers back. And I think they have the
• 5:25
  Speaker 1: ability to do that. So Dave, on the bigger banks,
• 5:29
  Speaker 1: do you prefer the ones that have a big capital
• 5:33
  Speaker 1: market slash investment banking franchise like a JP Morgan um
• 5:38
  Speaker 1: or maybe more of a retail commercial corporate bank presence
• 5:43
  Speaker 1: like a Wacovia. Well, I think you can own and
• 5:47
  Speaker 1: I own all of those names. Uh, for that reason,
• 5:50
  Speaker 1: I think I think the most interesting story now or
• 5:53
  Speaker 1: the two most interesting stories are Bank America in terms
• 5:56
  Speaker 1: of their ability to you know, play the retail benefits
• 6:00
  Speaker 1: of the growth in loans, and then of course have
• 6:03
  Speaker 1: some exposure to the very profitable capital markets business now.
• 6:07
  Speaker 1: But I think the other one is City Corps. Everybody's
• 6:10
  Speaker 1: talking about Wells Fargo now, and everybody loves well Fargo,
• 6:14
  Speaker 1: but I think City Corps is in a significant transition.
• 6:18
  Speaker 1: That is, you know again, they made that sale yesterday.
• 6:22
  Speaker 1: The stock is very cheap, They've got tons of capital,
• 6:25
  Speaker 1: they're very profitable, and I think the question is what
• 6:28
  Speaker 1: is that company going to look like in a couple
• 6:30
  Speaker 1: of years, And I suspect it's, you know, it's it's
• 6:33
  Speaker 1: the company will look better and the stock will be
• 6:37
  Speaker 1: appreciably higher than it is now relative to book value
• 6:39
  Speaker 1: and earnings. Dave, great to get your picks and your
• 6:42
  Speaker 1: take on the industry. Thanks so much for joining us.
• 6:44
  Speaker 1: Dave Ellison there um from Hennessy Large and Small Cat
• 6:47
  Speaker 1: Financial Funds. Let's bring an Alex jail Off right now,
• 6:54
  Speaker 1: co head of investment Strategies at Bernstein Private Wealth Management,
• 6:58
  Speaker 1: and I got a lot of talk about with you. Alex.
• 7:00
  Speaker 1: First off, I was pretty excited about. Bernstein is one
• 7:03
  Speaker 1: of the banks that's overweight UM energy stocks and they're
• 7:07
  Speaker 1: just trading at a huge discount, especially the European energy
• 7:11
  Speaker 1: producers trading at I think a discount to the stock
• 7:15
  Speaker 1: six hundred and forward earnings are so much higher UM
• 7:19
  Speaker 1: than the benchmark index. Do you like oil producers too? Well,
• 7:23
  Speaker 1: first of all, let me just go back to the
• 7:24
  Speaker 1: beer conversation. I will see your Pilsner in Prague and
• 7:28
  Speaker 1: I will raise you a Guinness in Dublin, which I
• 7:30
  Speaker 1: I still think is the just the number one beer experience.
• 7:33
  Speaker 1: I mean, I love, I do love Guinness, especially the
• 7:37
  Speaker 1: extra cold, which I think is four degrees colder than
• 7:40
  Speaker 1: the typical task. And it is different in Dublin than
• 7:42
  Speaker 1: and it's different, it's a million times. Look, it's a
• 7:45
  Speaker 1: good segue to talk about what's going on in Europe,
• 7:47
  Speaker 1: and you mentioned energy producers. If you want to find
• 7:50
  Speaker 1: the intersection of what's cheap today, and look, you have
• 7:54
  Speaker 1: to look hard to find anything that has a reasonable valuation.
• 7:59
  Speaker 1: Europe is exceptionally attractive today on a valuation basis, and
• 8:03
  Speaker 1: there's a dynamic that's going on within Europe that we
• 8:06
  Speaker 1: think is very interesting it's around dividends. There's been a
• 8:09
  Speaker 1: lot of dividend cuts that have occurred in the midst
• 8:11
  Speaker 1: of the pandemic, and our view is in the first
• 8:14
  Speaker 1: quarter and second quarter of twenty two, you get reinstatement
• 8:18
  Speaker 1: and you get a pickup in dividends. So some of
• 8:20
  Speaker 1: the energy story revolves around dividends. But I would say,
• 8:24
  Speaker 1: more broadly, European dividend reinstatement and increase. That's that's a
• 8:28
  Speaker 1: trade in itself. So Alex, just generally speaking geographically, you
• 8:32
  Speaker 1: like Europe more so than the US, well more so
• 8:37
  Speaker 1: than the US is is a little bit more than
• 8:40
  Speaker 1: what I would say, because what the US is clearly
• 8:43
  Speaker 1: the most powerful economy. UH. Even with the inflation readings
• 8:47
  Speaker 1: that we've seen today, there is real strength. There's a
• 8:52
  Speaker 1: strong view that will have good growth this year, higher
• 8:56
  Speaker 1: growth in the first half than the second half, but
• 8:58
  Speaker 1: good solid growth throughout the year UH, and that inflation
• 9:02
  Speaker 1: as it comes down, that will allow consumers UH to
• 9:07
  Speaker 1: continue to spend and companies to have expanded their margins
• 9:11
  Speaker 1: over the period. So the US continues to be the
• 9:14
  Speaker 1: market that we want to have the highest exposure to.
• 9:17
  Speaker 1: But look, we continue to maintain Uh, a pretty meaningful
• 9:21
  Speaker 1: exposure to foreign markets. And we are circling in pencil,
• 9:26
  Speaker 1: but circling Europe as an opportunity for two and what
• 9:29
  Speaker 1: what what let's get back to the US. I wonder
• 9:32
  Speaker 1: what kind of industry groups you like here. Well, if
• 9:37
  Speaker 1: you look at the backdrop, you've got to start with rates.
• 9:40
  Speaker 1: And as rising rates is a big part of our forecast.
• 9:44
  Speaker 1: Not not dramatically higher. This isn't gonna be uh, something
• 9:47
  Speaker 1: that's going to overwhelm the market and the economy, but
• 9:50
  Speaker 1: rising rates very strong indicator for banks. So financials have
• 9:55
  Speaker 1: to be part of the program. If you think about
• 9:58
  Speaker 1: the mid cycle recover bree that we're in from an
• 10:01
  Speaker 1: economic perspective, cyclicals are interesting. Uh And and so there
• 10:06
  Speaker 1: there's continues to be a favoritism around quality and earnings
• 10:11
  Speaker 1: and cash flow generation with that cyclical tilt. But I'll
• 10:16
  Speaker 1: tell you it's no longer this discussion of which one
• 10:19
  Speaker 1: is going to win value or growth. I think that's
• 10:22
  Speaker 1: an outdated notion. And in fact, we'd look at companies
• 10:25
  Speaker 1: that generate reliable cash flows with great visibility into the
• 10:30
  Speaker 1: next few quarters, if not the next few years. So
• 10:33
  Speaker 1: it's it's a little bit of everything. It's a mixed bag.
• 10:36
  Speaker 1: We we favor balance over trying to make a style call.
• 10:40
  Speaker 1: But it's all coming back to cash flow, all right, Alex,
• 10:43
  Speaker 1: thank you so much for joining us, too short of
• 10:44
  Speaker 1: a visible. We'll touch based with you soon. Alex shall
• 10:47
  Speaker 1: off Cohed Investment Strategies, Bernstein Private Wealth and Management likes
• 10:51
  Speaker 1: his Guinness uh in Dublin, which is always makes him
• 10:54
  Speaker 1: a friend of this show. All right, let's talk about
• 11:01
  Speaker 1: five G. It's rolling out all things great. Everybody loves
• 11:04
  Speaker 1: five gun. Be able to download a movie in like
• 11:06
  Speaker 1: a nanosecond. But apparently there's some problem with airlines and
• 11:09
  Speaker 1: planes and I know, the electronics and stuff like that.
• 11:13
  Speaker 1: Let's bring it in an extra because I really don't
• 11:15
  Speaker 1: understand that. Diana firtch got Wroth, adjunct professor at George
• 11:18
  Speaker 1: Washington University, joins us um. Diana, thanks so much for
• 11:22
  Speaker 1: taking the time. Can you explain the concerns that the
• 11:25
  Speaker 1: airlines have about five G? Yes, yes I can. And
• 11:31
  Speaker 1: before that, I just want to say the best way
• 11:33
  Speaker 1: not to have your car stolen is to have a
• 11:35
  Speaker 1: manual transmit. That's a great People can't buy them, most
• 11:38
  Speaker 1: people can't drive them. So the concerns are with these
• 11:43
  Speaker 1: devices called radio or radar altimeters, which are NAVIGA part
• 11:49
  Speaker 1: of the navigation systems of planes, and the new five
• 11:53
  Speaker 1: G deployment could interfere with these radio altimeters. So the
• 11:59
  Speaker 1: f a A, which is devoted to keeping aircraft and
• 12:03
  Speaker 1: passengers safe, wants to put in place safety measures such
• 12:07
  Speaker 1: as not having higher antennas or higher power around certain airports.
• 12:14
  Speaker 1: The problem is that while of companies such as A T,
• 12:17
  Speaker 1: T Arrizon and T Mobile paid a collective ninety four
• 12:21
  Speaker 1: billion dollars last year to roll out these high pot
• 12:26
  Speaker 1: five G systems, and they do not want to be
• 12:29
  Speaker 1: told that they should be dialing them back or lowering
• 12:33
  Speaker 1: the power or not having them close to airports. So
• 12:36
  Speaker 1: that's where the problem is. The f a A has
• 12:39
  Speaker 1: convinced these wild of companies to delay rolling out five
• 12:44
  Speaker 1: G for another couple of weeks, and then after that
• 12:47
  Speaker 1: we will have to see what happens. I mean, isn't
• 12:50
  Speaker 1: it kind of binary? Either it's dangerous or it's not.
• 12:54
  Speaker 1: Either there's a possibility that it ruins the altimeter sensors
• 12:58
  Speaker 1: and the plane crashes on land, or it doesn't, which
• 13:01
  Speaker 1: is it? So it's not exactly. Bine, Well, I mean
• 13:08
  Speaker 1: it is binary, but the problem is that under certain
• 13:11
  Speaker 1: circumstances and in certain planes, it is dangerous, and in
• 13:15
  Speaker 1: other circumstances it isn't. So it's not all radar altimeters
• 13:20
  Speaker 1: that are affected. Some of them are more tied into
• 13:23
  Speaker 1: the plane's navigation systems than others. And it's not a
• 13:26
  Speaker 1: matter of old ones or new ones. Some of the
• 13:30
  Speaker 1: older ones cause fewer problems than the new ones because
• 13:33
  Speaker 1: the newer ones do automatic things such as affect the
• 13:37
  Speaker 1: planes landing gear, for example. So how how is this
• 13:41
  Speaker 1: going to play out here? Interesting and terrifying? It's interesting, terrifying, absolutely,
• 13:45
  Speaker 1: because it kind of feels binary. But it is this
• 13:48
  Speaker 1: something that the airlines can fix? Is this something that
• 13:51
  Speaker 1: the telecom companies need to adjust? Do we have to
• 13:54
  Speaker 1: work together? Is there? Uh? Well, this isn't going to
• 14:02
  Speaker 1: be fixed right away because, as the manufacturers of Boeing
• 14:07
  Speaker 1: and Airbus planes have said, you cannot just swap out
• 14:10
  Speaker 1: one radar altimeter for another, like you can swap an
• 14:13
  Speaker 1: easy pass out of your car and put another easy
• 14:16
  Speaker 1: pass in it. These take time to take out. The
• 14:20
  Speaker 1: f a A is committed to keeping passengers safe That
• 14:24
  Speaker 1: means if they think that there is two high five
• 14:27
  Speaker 1: G par at one airport, they will ask the plane
• 14:32
  Speaker 1: to be diverted to another airport, or they might cancel
• 14:37
  Speaker 1: that particular flight, which is going to wreck havoc with
• 14:41
  Speaker 1: airline flights. We already have problems with not enough crews
• 14:46
  Speaker 1: and existing delays. This is going to add more delays. Probably.
• 14:51
  Speaker 1: It has very high stand It has very high, very
• 14:54
  Speaker 1: very high standards, and the FA is going to make
• 14:56
  Speaker 1: sure that everyone is safe. Are they higher? Are they
• 15:00
  Speaker 1: higher than French standards? I mean, how does this work
• 15:04
  Speaker 1: in other countries? Well, five G is already being deployed
• 15:09
  Speaker 1: in other countries, but the US air space is the
• 15:12
  Speaker 1: most complex in the world, and the f A holds
• 15:15
  Speaker 1: itself and our aviation sector to the highest safety standards.
• 15:20
  Speaker 1: In other countries, five G has lower power levels, It
• 15:24
  Speaker 1: has antenna's tilted downward to reduce potential interference to flights.
• 15:30
  Speaker 1: It has different placement of antenna's relative to air fields,
• 15:34
  Speaker 1: It has frequencies with a different proximity to frequencies used
• 15:37
  Speaker 1: by aviation equipment. And what the f A wants to
• 15:42
  Speaker 1: do is have mitigations on the five G spectrum rolled
• 15:46
  Speaker 1: out here, similar to in other countries. For example, a
• 15:49
  Speaker 1: month ago, Canada just put limits on its five G deployment.
• 15:52
  Speaker 1: It said antenna's could not be pointed up, they have
• 15:55
  Speaker 1: to be pointed down, and they could not be in
• 15:57
  Speaker 1: certain waves of spectrum close to where the radar altimates are.
• 16:02
  Speaker 1: This was not a problem I wasn't that aware of.
• 16:04
  Speaker 1: But now I say, and now I gotta pay attention
• 16:07
  Speaker 1: another problem out there. Great Diana Firsch got Wroth acting
• 16:10
  Speaker 1: Professor George Washington University. She's been in government before that. Um.
• 16:16
  Speaker 1: She was the chief of Staff at the Council of
• 16:17
  Speaker 1: Economic Advisors at the White House, former Acting Assistant Secretary
• 16:21
  Speaker 1: for Economic Policy Department. Let's bring in right now, Oscar
• 16:30
  Speaker 1: de Bak. He is the CEO of d h l's
• 16:33
  Speaker 1: supply chain. Uh and man, the supply chain is incredibly important.
• 16:39
  Speaker 1: I don't think any of us realized until the pandemic
• 16:43
  Speaker 1: how key it is. I mean, it affects everything in
• 16:47
  Speaker 1: markets because this is what's behind inflation. And you know,
• 16:52
  Speaker 1: most importantly, it affects my ability to buy the car
• 16:56
  Speaker 1: that I want or the truck because they're just not
• 16:58
  Speaker 1: in the lots right now. UM. D h L however,
• 17:01
  Speaker 1: still gets you your stuff on time, which I know
• 17:05
  Speaker 1: because I use it constantly for shipping. It must be
• 17:09
  Speaker 1: hard Oscar. You know all these manufacturing companies are finding
• 17:12
  Speaker 1: it so difficult to get pieces and parts around the world.
• 17:16
  Speaker 1: How much has it affected your business? I mean, is
• 17:18
  Speaker 1: there you know, an average delay for DHL package of
• 17:23
  Speaker 1: a few hours compared to pre pandemic or is it
• 17:26
  Speaker 1: unchanged now? I think I think the timings we is unchanged.
• 17:31
  Speaker 1: We still are able to meet the timelines and to
• 17:34
  Speaker 1: meet the But the thing is, obviously the availability of products,
• 17:37
  Speaker 1: as as you already mentioned, can be an issue, and
• 17:41
  Speaker 1: we can help our customers there by by managing their
• 17:44
  Speaker 1: supply change looking at that time and make sure that
• 17:47
  Speaker 1: the forecasting has done in such a way that we
• 17:49
  Speaker 1: preepack earlier and and capacity earlier. Luckily, we can for
• 17:55
  Speaker 1: our customers buy capacity easier and that helps a bit
• 18:00
  Speaker 1: obviously in today's very complex supply, but it's got to
• 18:04
  Speaker 1: cost a heck of a lot more. I moved to
• 18:06
  Speaker 1: Germany in two thousand sixteen. I brought a poor show
• 18:10
  Speaker 1: with me because it was pretty cheap. It was a
• 18:12
  Speaker 1: few grand. Now, when I moved back to New York
• 18:16
  Speaker 1: last week I had to sadly, heartbreakingly, tearfully leave my
• 18:21
  Speaker 1: nine eleven behind because it just doesn't make any sense
• 18:25
  Speaker 1: with the today's prices to ship it back. I might
• 18:27
  Speaker 1: as well just sell it in Berlin. How much are
• 18:30
  Speaker 1: you seeing in terms of price appreciation? Yeah, I know,
• 18:34
  Speaker 1: you obviously see it. And I think you could probably
• 18:36
  Speaker 1: sell the pores really well because of the scarcity of
• 18:38
  Speaker 1: coarse in Germany. But but yeah, no, that is it.
• 18:42
  Speaker 1: But you know, for effect, ocean freight prices depending on
• 18:46
  Speaker 1: the faith but have gone up four times, are fraid
• 18:49
  Speaker 1: and times. So it is. It is a situation that
• 18:52
  Speaker 1: we have at the moment. We're not yet out of that. UM.
• 18:55
  Speaker 1: I think that is something that gradually during the year
• 18:58
  Speaker 1: will well, we'll start to happen. But it will require
• 19:02
  Speaker 1: better planning, It will require a better use of data.
• 19:05
  Speaker 1: I think it will also. We for instance, made made
• 19:08
  Speaker 1: specific investments also in robotics, in data analytics, UM, because
• 19:13
  Speaker 1: the availability of people is a topic as well, and
• 19:17
  Speaker 1: so it's it's it's important that we made the investments
• 19:20
  Speaker 1: ahead of girth and that helped us for instance, now
• 19:23
  Speaker 1: in the in the last quarter in the US because
• 19:26
  Speaker 1: of the two thousand robots that we had there to
• 19:28
  Speaker 1: be able to actually still meet the demand in the
• 19:31
  Speaker 1: in fulfillment operations UM and still be able to UH
• 19:37
  Speaker 1: to attract people UM that we needed for those operations. Oscar,
• 19:41
  Speaker 1: does this call into question that the supply chain challenges
• 19:44
  Speaker 1: we have? Is this call intent question? Just in time
• 19:48
  Speaker 1: inventory that seemed to be, you know, a basic tenant
• 19:51
  Speaker 1: for much of the global trade over the last generation
• 19:54
  Speaker 1: or two. Is that now called in the question given
• 19:57
  Speaker 1: what we experienced over last year. Yeah, I would say so.
• 20:01
  Speaker 1: I think just in time is getting reinvented. UM. I
• 20:05
  Speaker 1: think what we've seen here is that just in time
• 20:07
  Speaker 1: when went a little bit over the top, and then
• 20:09
  Speaker 1: with the disruptions that we've had over over the past year,
• 20:13
  Speaker 1: you can clearly see that it now takes a long
• 20:15
  Speaker 1: time to resettle that. So the whole definition on how
• 20:18
  Speaker 1: much talk you take you need to keep, how close
• 20:21
  Speaker 1: to the customer you do, do you do you need
• 20:23
  Speaker 1: to steer to keep the stalk, how well do you
• 20:26
  Speaker 1: need to be able to forecast? That is at this
• 20:29
  Speaker 1: moment as we speak, changing and only if we start
• 20:33
  Speaker 1: to redefine just in time, then the ectual disruption of
• 20:36
  Speaker 1: supply change will gradually stop. What are you seeing in
• 20:41
  Speaker 1: terms of UH energy inputs? Paul and I are sitting here,
• 20:45
  Speaker 1: you know, jaws a gape watching Brent crude and imax
• 20:50
  Speaker 1: trade north of a D and I wonder how how
• 20:53
  Speaker 1: much longer that holds on? So so it can be
• 21:01
  Speaker 1: specific in the question. No, I mean we we've just
• 21:03
  Speaker 1: seen a massive run up in oil costs, and you
• 21:07
  Speaker 1: know this must be one of the biggest inputs when
• 21:09
  Speaker 1: you're trying to figure out um your budget for the year.
• 21:13
  Speaker 1: You've got your energy costs, you've got your labor um,
• 21:16
  Speaker 1: you've got the equipment that you rent, the boats and absolutely,
• 21:20
  Speaker 1: so what do you what do you think? So there's
• 21:24
  Speaker 1: a clear there's a clear as as you as you know,
• 21:26
  Speaker 1: there's a clear inflation, there's a clear coast increase that
• 21:29
  Speaker 1: that is happening at the moment, and I don't I
• 21:30
  Speaker 1: don't think it's going to go away. What is going
• 21:33
  Speaker 1: to be important is UH is still in this case
• 21:36
  Speaker 1: to help our customers to find ways on how we
• 21:38
  Speaker 1: can optimize supply change. But but the extreme invasion, labor cost,
• 21:42
  Speaker 1: energy cost, it is there as it's there to stay
• 21:46
  Speaker 1: for for for the coming period, and we need to
• 21:48
  Speaker 1: make sure that we find ways on how we be
• 21:50
  Speaker 1: more efficient in the way the way we manage our subbrojects.
• 21:53
  Speaker 1: What about labor cost oscar You know, um Jamie Diamond,
• 21:57
  Speaker 1: the CEO of JP Morgan the other day and he
• 22:00
  Speaker 1: has never seen such pressure upward pressure on wages. Are
• 22:05
  Speaker 1: you seeing the same thing? Yeah, we do. We do
• 22:08
  Speaker 1: see that because that um, labor be couse specifically in
• 22:12
  Speaker 1: the US, specifically North America, and labor couse increase is
• 22:17
  Speaker 1: substantial and it depends a little bit in which data
• 22:19
  Speaker 1: and which which with scarcity there is, but it can
• 22:22
  Speaker 1: we can go up to ten percent. So that is
• 22:25
  Speaker 1: definitely there at the moment, and that is obviously driving
• 22:28
  Speaker 1: part of the inflation um and that's not going to
• 22:31
  Speaker 1: go away. UM. I actually think that this, as with
• 22:35
  Speaker 1: many of the trends that we see at the moment,
• 22:37
  Speaker 1: those trends actually started already pre Corona, but during the
• 22:41
  Speaker 1: crisis that has actually accelerated it and now become even
• 22:44
  Speaker 1: more visible. But the fact that there is less label
• 22:48
  Speaker 1: labor available for for certain type of type of jobs
• 22:52
  Speaker 1: was already a signal that was there before, that's still
• 22:55
  Speaker 1: there today, and that drives actually the closed up and
• 22:57
  Speaker 1: that's why it's important, like what we have been doing
• 23:00
  Speaker 1: to make the investments in alternative ways in automation, in globotics,
• 23:04
  Speaker 1: because we need to be innovative in the way we
• 23:07
  Speaker 1: manage for install filming centers and by having for instance,
• 23:13
  Speaker 1: for Kift truck unmant for Kift trucks, by having picking robots.
• 23:18
  Speaker 1: Um then by having collaborative robotics meaning that people work
• 23:21
  Speaker 1: together with robots, not replace the work together with robots,
• 23:24
  Speaker 1: that actually helps tremendously in UH in solving the issue
• 23:29
  Speaker 1: of not only labor costs, but labor scarcity as well. Right, Hey, Oscar,
• 23:33
  Speaker 1: thanks so much for joining us. Really appreciate getting your
• 23:36
  Speaker 1: perspective here on this global supply chain continues to be
• 23:39
  Speaker 1: a challenge for the global economy. Oscar Debak, CEO of
• 23:43
  Speaker 1: d h L managing their supply chain and certainly the
• 23:47
  Speaker 1: person that I'm sure he gets a lot of phone
• 23:49
  Speaker 1: calls from a lot of his customers saying where is
• 23:51
  Speaker 1: the stuff? Um, But it's really been extraordinary how the
• 23:54
  Speaker 1: global supply chains really been challenged here by the closure
• 23:59
  Speaker 1: of the Global account me back in twenty then the
• 24:01
  Speaker 1: rapid reopening and rapid re acceleration really kind of threw
• 24:05
  Speaker 1: that into disarray for many industries, and we see that
• 24:08
  Speaker 1: across the board. Thanks for listening to the Bloomberg Markets podcast.
• 24:13
  Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
• 24:16
  Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
• 24:20
  Speaker 1: on Twitter at Matt Miller three. On false Sweeney, I'm
• 24:25
  Speaker 1: on Twitter at pt Sweeney Before the podcast. You can
• 24:27
  Speaker 1: always catch us worldwide at Bloomberg Radio.