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Tesla, Markets, Bitcoin, and Deere (Podcast) · Bloomberg Intelligence

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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day, we bring
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Speaker 1: you interviews from 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
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Speaker 1: at Bloomberg dot com slash podcast. Auto Nation they put
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Speaker 1: out some good numbers. Stock is up pretty substantially today.
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Speaker 1: But here's something that um talking about the car business. Matt,
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Speaker 1: so I just want to come come along with us.
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Speaker 1: The uh they're talking the CEO is talking about he
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Speaker 1: expects light vehicle sales to be close to fifteen million
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Speaker 1: this year, up from thirteen point seven million in two.
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Speaker 1: Where's the seventeen million number. Let's let's get Kevin Tynan
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Speaker 1: on here. Kevin Tyne he covers all the auto stuff,
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Speaker 1: the car stuff, truck stuff for Bloomberg Intelligence. He is
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Speaker 1: clearly an expert. So Kevin, I look at the Auto
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Speaker 1: Nation numbers, good numbers, But the CEO saying fifteen million SAR?
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Speaker 1: Is that? Is that all you guys can do? Kevin?
1:01
Speaker 1: There's nothing, there's almost nothing that makes Paul angrier than
1:04
Speaker 1: not aiming for peaks are other than working from home,
1:08
Speaker 1: which makes him less angry now that he has a
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Speaker 1: beach house. Yes, Kevin, am I here here all right?
1:21
Speaker 1: So here's I thought was interesting about some of the
1:24
Speaker 1: Auto Nation numbers. Was you know, they talked about beware
1:27
Speaker 1: going forward, you know, chips not so much an issue.
1:31
Speaker 1: Uh uh, left some demand on the table in in two.
1:37
Speaker 1: So automakers ramping up some production and prices are gonna fall,
1:42
Speaker 1: which is not what happened in the fourth quarter, right,
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Speaker 1: It was I think the third consecutive record price or
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Speaker 1: average revenue per transaction for Auto Nations specifically in the quarter.
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Speaker 1: But but gross profit per vehicle new and used was compressed.
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Speaker 1: And really what that comes down too is the manufacturers
2:01
Speaker 1: seeing retailers getting over sticker from November one through November
2:08
Speaker 1: twenty two and saying, well, obviously we're not We're not
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Speaker 1: charging enough at wholesale. So margins are compressing for automation,
2:15
Speaker 1: which is where they kind of directed your eye during
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Speaker 1: the call or during the release. Yet prices are still
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Speaker 1: very high, in fact, another record for them for this quarter.
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Speaker 1: So yeah, I mean, I think the industry or the automakers.
2:28
Speaker 1: The manufacturers don't want to leave sales behind, so that
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Speaker 1: means a little bit more production, which just comes along
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Speaker 1: with with softer pricing. But we're not going back to
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Speaker 1: pricing structures. I always thought, you know in the Sopranos,
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Speaker 1: when Tony takes over that um, gambling addicts sports business,
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Speaker 1: and he just squeezes in for every penny he got
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Speaker 1: until the guys broke. I feel like the automakers are
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Speaker 1: kind of doing that to the average consume. We're right now,
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Speaker 1: the average monthly payment for a new car is seven
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Speaker 1: hundred and seventy seven dollars. That's double what it was
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Speaker 1: in late nineteen pre pandemic. UM. And now we hear
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Speaker 1: uh from the credit card companies that, um, they're having
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Speaker 1: problems meeting those payments. Mary baritole us yesterday. The lower
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Speaker 1: end consumers are starting to miss their auto payments. I mean,
3:29
Speaker 1: at some point this is going to be a problem,
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Speaker 1: a problem. The prices are just too high, Kevin, Yeah,
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Speaker 1: and it's and a lot of that is due to mix. Remember,
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Speaker 1: you know, we we can go back to which was
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Speaker 1: the last time in the US truck and car mix
3:42
Speaker 1: was fifty fifty and it hasn't been closed since, right,
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Speaker 1: So there's there's a part of that that is, hey,
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Speaker 1: if there is a finite amount of chips or production
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Speaker 1: or our cost structure is is lean enough, we're just
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Speaker 1: gonna make the most profitable things. Uh. And along with
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Speaker 1: that comes higher prices. So you know, I don't know,
4:01
Speaker 1: there there's very little opportunity to go back because the
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Speaker 1: more affordable things just don't exist anymore. Right. So I
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Speaker 1: think that's where you get the automakers looking at it
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Speaker 1: and saying, well, buy something certified, pre owned or pre
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Speaker 1: owned from your dealerships. We don't live in that twenty
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Speaker 1: dollar space anymore. And that's you know, even use cars
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Speaker 1: are twenty to thirty dollars now. So yeah, it's it's
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Speaker 1: certainly going to affect demand, but I think at different
4:30
Speaker 1: points in the supply they don't care as much as
4:34
Speaker 1: they used to write because your fixed cost structure is
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Speaker 1: now rationalized to the point where you don't have to
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Speaker 1: sell every possible thing at any possible price, and you
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Speaker 1: can kind of hold out and say, no, we live
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Speaker 1: in this fifty dollar market. And I mean the volume
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Speaker 1: brands that GM has or that Ford has or Toyota,
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Speaker 1: you know those are those are moving up because their
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Speaker 1: mixes so much richer. Hey, Kevin, you know we had
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Speaker 1: Mary Barra here yesterday at Bloomberg talking to our print folks,
5:02
Speaker 1: are radio and TV folks, and boy, really aggressive commentary
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Speaker 1: on their push into evs. Give us your your latest
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Speaker 1: feeling about kind of what we're gonna hear from the Fords,
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Speaker 1: from the GMS, and maybe what it means for the incumbents.
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Speaker 1: Like I gotta say, from what I heard Mary tell
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Speaker 1: us and what she told David Weston on Bloomberg Television
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Speaker 1: and Radio, um, it seems like GM their E V
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Speaker 1: business is a coiled spring that's just about to get
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Speaker 1: set off. I mean they want to make uh and
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Speaker 1: sell fifty billion dollars worth of evs profitable, fifty billion
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Speaker 1: dollars the evs by that's just that's like next year, right, yeah,
5:46
Speaker 1: that is and and and what was you know, unit
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Speaker 1: wise was that's a million, dude, that's a million at
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Speaker 1: fifty grand apiece. Right, It's a million in two years
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Speaker 1: from forty thousand last year. Right. So so the thing
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Speaker 1: I see with that is right, it's it's going to
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Speaker 1: be if, if it's possible, it's going to have to
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Speaker 1: be a lot of the I don't know, thirty dollars
6:12
Speaker 1: you said that, Yester, right, I mean, so, so you
6:16
Speaker 1: have to be concerned about margin and profitability if that's
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Speaker 1: what you're planning to do, because essentially, right, if you
6:23
Speaker 1: look across at Ford who talked about break even on
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Speaker 1: Mustang Maki going back, you know, several quarters fifty dollars
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Speaker 1: now because of material costs, it's maybe sixty dollars. Well,
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Speaker 1: how many thirty thousand dollar things do you want to sell?
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Speaker 1: You know, if your cost to produce them is above that,
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Speaker 1: you know, a million of them, that's you know, that's
6:42
Speaker 1: that's just not how you usually run the business. So
6:45
Speaker 1: one or two things has to happen. Either you're gonna
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Speaker 1: give up a ton of profitability a margin to make
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Speaker 1: that transition and hope you're rewarded with profitability kind of
6:53
Speaker 1: the way you know Tesla operated, I'm going to market.
6:58
Speaker 1: I mean, there are a lot of people out there, Kevin,
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Speaker 1: who were skeptical on Tesla for a long time, and
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Speaker 1: yet that company was worth over a trillion dollars for
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Speaker 1: a substantial period. Right, So maybe that's the trade is
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Speaker 1: that you say, well, we're going to give up some
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Speaker 1: profitability or a lot of profitability to do one million
7:14
Speaker 1: units in the next two years, um, but we'll be
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Speaker 1: rewarded in market cap. What are you driving these days, Kevin?
7:21
Speaker 1: It's still my V twelve. Oh, no, big deal like it.
7:27
Speaker 1: I think the transition from internal combustion engine to e
7:30
Speaker 1: V is gonna ge a tough one. What's the V twelve.
7:31
Speaker 1: It's like an SL six five. It's a nice Yeah,
7:36
Speaker 1: I don't see the I'll be the last one. You're
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Speaker 1: gonna be the last one, all right, Kevin Tyden, thanks
7:42
Speaker 1: so much for joining us. Kevin Titan is the senior
7:44
Speaker 1: Auto's analyst for Bloomberg Intelligence, working out of our lovely
7:48
Speaker 1: Princeton office in Princeton, New New Jersey, and he is
7:50
Speaker 1: a noted card geek of some magnitude. Uh I heard
7:55
Speaker 1: he bought his car based he bought his house based
7:57
Speaker 1: on the garage. Yes, exactly, he said. Went searching for garages,
8:01
Speaker 1: his wife was searching for houses, and they find finally
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Speaker 1: found one that kind of satisfied both to get to
8:09
Speaker 1: these markets. Here Omar Aguilar, he joins us. He's the
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Speaker 1: CEO and c i O. A Schwab asset management swap.
8:15
Speaker 1: Just give you a sense how big these guys are.
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Speaker 1: Schwab seven seven seven billion in assets under managed management,
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Speaker 1: the third largest provider of index mutual funds, the fifth
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Speaker 1: largest provider of etf These guys are massive. But I'm
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Speaker 1: not sure I want to go up to Omar Cock
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Speaker 1: to party and initiative discussion. Get this, he's got a
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Speaker 1: PhD Statistics and decision sciences. Now the good news is
8:35
Speaker 1: from Duke. But who gets a pH d in statistics
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Speaker 1: and decisions? I loved statistics. It was brutal. I mean
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Speaker 1: I took one class and I quite enjoyed it. All right,
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Speaker 1: good stup Omar, thanks so much for joining us here. Boy.
8:48
Speaker 1: I think about all of the SWAB clients all over
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Speaker 1: this planet. Boy, I mean, what do you tell them
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Speaker 1: after what was a brutal, brutal year in two, whether
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Speaker 1: those equities or fit s income waity, what are you
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Speaker 1: tell them about three? Well, you know, thanks for having me,
9:05
Speaker 1: and thanks for you know, talking about his statistics. That's
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Speaker 1: definitely been uh, you know a big part of my life. Uh.
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Speaker 1: And it's not as bad as you think once you
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Speaker 1: get used and find the good thing on it on
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Speaker 1: how you can actually use that to help people. But
9:19
Speaker 1: but you're right, you know, two was probably one of
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Speaker 1: the most difficult years for all investors and particularly you know,
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Speaker 1: when people look at their statements, even in the worst
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Speaker 1: possible scenarios. You know, over the last you know, thirty years,
9:32
Speaker 1: when equity markets and risky assets on their perform, you know,
9:37
Speaker 1: everybody counted on the fact that they a you know,
9:39
Speaker 1: could have their bonds or their cash doing you know,
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Speaker 1: most of the you know, saving and in in last year,
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Speaker 1: there were only two asset classes that ended up having
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Speaker 1: you know, positive returns, cash and commodities, and you know,
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Speaker 1: outside of those two asset classes, the rest ended up
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Speaker 1: you know, on their performing. So so clearly just from
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Speaker 1: the perspective of of clients that had expectations of using
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Speaker 1: you know, fixed income as a as a cushion or
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Speaker 1: when when volatility inequities, you know, that obviously didn't work.
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Speaker 1: So what we talk clients, you know, is that these
10:11
Speaker 1: you know, these tends will happen. This is very rare.
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Speaker 1: There are very rare occasions with these happens, and it
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Speaker 1: happens usually because we had something that we didn't expect.
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Speaker 1: Actually would probably say two things that didn't expect. One
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Speaker 1: is we're just coming out of COVID, and in fact,
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Speaker 1: you know, we're still in the process of coming out
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Speaker 1: of COVID. And second, we nobody expected to have a
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Speaker 1: war that just you know, ignorite inflation pressures that made
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Speaker 1: things really, really hard. Um So what we talk about
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Speaker 1: now is what what happens from now on. And the
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Speaker 1: good news is that there is more opportunities to invest
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Speaker 1: in diversify now than what we had even you know,
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Speaker 1: just you know, six to eight months ago. What do
10:48
Speaker 1: you what do you do at Schwab asset Management about
10:53
Speaker 1: the sort of newer or alternative asset classes that retail
10:57
Speaker 1: investors are just starting to dip their toes into. A
11:00
Speaker 1: mean e t f s are just gaining so much ground,
11:04
Speaker 1: I know, spies thirty, but it's still new ish as
11:06
Speaker 1: a rapper at least um uh Crypto has had a
11:11
Speaker 1: rough year obviously, but it's a new asset class that
11:14
Speaker 1: some people are interested in. And then hedge funds did
11:17
Speaker 1: well last year, private credit did well last year, but
11:19
Speaker 1: that's normally just set aside for sophisticated investors. So how
11:23
Speaker 1: do you deal with these things at Schwab? Well, great question,
11:27
Speaker 1: and yes, this happens all the time, and we we
11:30
Speaker 1: have had you know, significant amount of interest, you know,
11:34
Speaker 1: and and this you know happens in many cases. You know,
11:37
Speaker 1: you may recall not too long ago, the discussion about memestocks,
11:40
Speaker 1: and you know what, people can use that information to
11:43
Speaker 1: invest and you know how they can use several information
11:47
Speaker 1: is the good news is that you know, we attract
11:49
Speaker 1: a lot of investors to start in being interested in investing.
11:53
Speaker 1: I think our challenge and our goal and mission continues
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Speaker 1: to be to educate clients on how to think about
12:00
Speaker 1: the long term and what to think about the way
12:02
Speaker 1: to invest from the basic level of what are the
12:05
Speaker 1: fundamentals of what you try to achieve financially an investment
12:09
Speaker 1: wise for each one of your goals. And what that
12:12
Speaker 1: means is that areas like you know, for example, you know,
12:15
Speaker 1: digital assets, any type of of of related information that
12:19
Speaker 1: is more supply and demand that there is little in
12:21
Speaker 1: terms of fundamental there's little in terms of history. You know,
12:25
Speaker 1: they tend to just be an option for clients to
12:28
Speaker 1: start getting their interest in investing, but not necessarily to
12:32
Speaker 1: form the core of their long term strategy. We tend
12:35
Speaker 1: to just you know, continue to educate clients to say, well,
12:38
Speaker 1: you know, the basic asset classes, the basic areas of
12:41
Speaker 1: investing for the long run as of today, you know,
12:44
Speaker 1: still consists on the basic cash fixed income equities, and
12:48
Speaker 1: yes there will be other alternatives that are based on
12:50
Speaker 1: fundamentals that could actually help in the diversification process. So, Mari,
12:55
Speaker 1: I just think it's just a huge, huge number of
12:58
Speaker 1: clients out there. Um, how do you attract new clients,
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Speaker 1: younger clients. What's the schwab way to get some of
13:04
Speaker 1: these young folks to really think about investing for the
13:07
Speaker 1: long term. Yes, we we have done, you know, quite
13:11
Speaker 1: a bit of workfoll and this where you know, we
13:13
Speaker 1: we started at the early stages of working with with
13:17
Speaker 1: our current clients and let them know that it's actually
13:20
Speaker 1: you know, good for for for their own families to
13:24
Speaker 1: just get invested in the clients, you know, whether it's
13:26
Speaker 1: investing in slices of stuffs that they like on their
13:30
Speaker 1: own and create opportunities in areas that they can have
13:33
Speaker 1: like for example, investment teams and things where they can
13:36
Speaker 1: actually start putting you know, information for their own families,
13:40
Speaker 1: for their own kids, to just try to get early
13:42
Speaker 1: into the investment area and understand that it's it's something
13:45
Speaker 1: that they need to balance risk and returns and think
13:48
Speaker 1: about you know, holding and saving, and that's probably the
13:51
Speaker 1: key word, you know, continue to educate clients to save
13:54
Speaker 1: so that they can continue to form you know, a
13:57
Speaker 1: nest you know as they go. The other piece that
13:59
Speaker 1: we actually try to have is we're here to help,
14:01
Speaker 1: you know, trying to work with the financial advisor, trying
14:04
Speaker 1: to work with somebody that has you know, being in
14:07
Speaker 1: the business for a while then can guide them in
14:09
Speaker 1: what is the best way to use their resources. It's
14:11
Speaker 1: another big part. And the last thing we do is
14:14
Speaker 1: understand that we are humans. You know. We do a
14:16
Speaker 1: lot of work in decision sciences and behavioral aspects so
14:20
Speaker 1: that we can understand, you know, when people emotions get high,
14:23
Speaker 1: especially in these periods of high uncertainty, and therefore we
14:26
Speaker 1: try to educate people on what is what is sort
14:28
Speaker 1: of the utility function and the reaction function they can
14:31
Speaker 1: use in periods when things are not as clear. Omar,
14:34
Speaker 1: what are you expecting from the economy this year? We're
14:37
Speaker 1: getting some uh more bad news on the consumer, which
14:42
Speaker 1: seems to be that um he or she is still
14:46
Speaker 1: spending a ton, but a lot of it's going on
14:48
Speaker 1: credit cards and delinquencies are rising. Yes, Um, we expect
14:55
Speaker 1: a really bumpy ride. We expect the economy going in
14:59
Speaker 1: through uh really you know on certain times, you know,
15:03
Speaker 1: for the next three quarters, it's gonna be a roller coaster.
15:07
Speaker 1: I I can I can tell you that you know,
15:09
Speaker 1: we're still in these you know, very confusing set of
15:13
Speaker 1: level of indicators that we get every time that we
15:15
Speaker 1: need to get a new data point, you know, and
15:18
Speaker 1: of course you know, the whole discussion between you know,
15:21
Speaker 1: what will be the reaction from central banks and into
15:25
Speaker 1: their fight of inflation and how much of these inflation
15:28
Speaker 1: is as sticky as it looks like just the Prince
15:31
Speaker 1: this year with cp I p p I suggesting that,
15:34
Speaker 1: you know, the long road to get the two percent
15:36
Speaker 1: target for the FED is really gonna be long and bumpy. Um.
15:41
Speaker 1: You know, not too long ago people were talking about
15:43
Speaker 1: still the rate cuts because they thinking that the economy
15:46
Speaker 1: was going to recover quickly. Well, we are not even
15:49
Speaker 1: in a you know, talking about recession anymore. We're talking
15:52
Speaker 1: about a potentially and re engineering of the economy that
15:55
Speaker 1: may not even get into a landing. So so the
15:59
Speaker 1: strength and receiling of the economy, at least on the
16:01
Speaker 1: data that we have, suggest that it will take some
16:04
Speaker 1: more time for everything that the fettes manufacturing to actually
16:09
Speaker 1: play a role. And when that happens, then we can
16:11
Speaker 1: actually feel a little more you know stable for actually
16:14
Speaker 1: make you know, changes into our economic forecast. So putting that, uh,
16:19
Speaker 1: that motif altogether, that backdrop altogether, omar, what's in thirty
16:22
Speaker 1: seconds kind of what's your main communication point to your
16:25
Speaker 1: clients about well, Tina is no longer in existent, Paul,
16:29
Speaker 1: that there's a lot of opportunities for people to actually invest.
16:33
Speaker 1: I think some of your earlier commentary was that related.
16:37
Speaker 1: If you actually think that the short term of the
16:39
Speaker 1: curve today in fixed income, it's probably giving you as
16:42
Speaker 1: much you know, yield as you can get with earnings.
16:45
Speaker 1: And if you think about that, you know, the opportunity
16:48
Speaker 1: to just diversify between you know, the short term, the
16:51
Speaker 1: long term and equities is probably the best we have
16:53
Speaker 1: had in a while. So this is a good opportunity
16:55
Speaker 1: for people to you know, diversify their strategies between bonds
16:59
Speaker 1: and equally is that we probably haven't had for at
17:01
Speaker 1: least fiefteen years. All right, o'mark, I really appreciate you
17:05
Speaker 1: taking a time to check in with us Omar Aguilar.
17:07
Speaker 1: He's CEO and c i O of Schwab Asset Management,
17:12
Speaker 1: talking about diversification, talking about the longer term investment parameters
17:16
Speaker 1: that you know most investors you know, need to probably
17:19
Speaker 1: focus on. Um, we should have got his favorite professor
17:23
Speaker 1: from from Duke from Duke. Yeah, we'll do that next time.
17:25
Speaker 1: I mean these statistics and decision sciences. That sounds pretty
17:29
Speaker 1: heavy on the math. That sounds awesome to me. I
17:31
Speaker 1: don't know. I was told there wouldn't be any math
17:32
Speaker 1: theoris like game theory. I guess. I guess there's some
17:35
Speaker 1: smart people down there at Duke. So uh, good stuff.
17:40
Speaker 1: We had a story overnight that credit card debt for
17:43
Speaker 1: Americans has risen to almost a trillion dollars. I don't
17:48
Speaker 1: know if that means Americans are using credit cards more
17:51
Speaker 1: or that prices are higher. And there's a business I've
17:54
Speaker 1: been looking into for a few weeks now called Imprint,
17:57
Speaker 1: and as far as I can understand, what they do
18:00
Speaker 1: is to try and help other companies with credit card
18:04
Speaker 1: issuance with rewards programs and loyalty programs, that kind of thing.
18:08
Speaker 1: I've managed to get the CEO in here in our
18:10
Speaker 1: studio in New York City. Dara Murphy joins us. He's
18:13
Speaker 1: also the founder of the business. So great to have
18:16
Speaker 1: you here. Dara tell us, first of all, what Imprint
18:19
Speaker 1: does well, thanks for having me on. Imprint was started.
18:24
Speaker 1: It's about two and a half years ago, and the
18:26
Speaker 1: goal was to compete with banks that help America's great
18:29
Speaker 1: bronze launch credit cards. Co branded credit cards have been
18:32
Speaker 1: a thing for thirty years in the America. You can
18:34
Speaker 1: you get a great Delta card if you work with
18:36
Speaker 1: om X. But there's a lot of great bronze out
18:38
Speaker 1: there that the biggest banks, the bulge bracket banks, won't
18:40
Speaker 1: work with. And we saw an opportunity to go help
18:43
Speaker 1: those those great brodens, whether their hotel companies been a
18:46
Speaker 1: around for thirty years, grocery stores, or some of our
18:48
Speaker 1: clients that have been around for a hundred years. Our
18:50
Speaker 1: goal is to help them issue credit cards. And so
18:52
Speaker 1: what we do and we talk to them, is we
18:54
Speaker 1: give them a pitch that we're like a buying plus
18:56
Speaker 1: a technology company and you get everything from us that
18:59
Speaker 1: you would get from Barclays, for example, which is a
19:01
Speaker 1: big co branded credit card business. But in addition, you
19:04
Speaker 1: get an experience that a great brand can be proud of.
19:07
Speaker 1: So what what is um let's take the grocery store,
19:10
Speaker 1: for instance. What is the benefit to them? Is it?
19:14
Speaker 1: I guess loyalty? Right? If you have a brand and
19:16
Speaker 1: credit card, you must really like that business. But do
19:18
Speaker 1: consumers get a discount? Are they encouraged the shop? They're
19:22
Speaker 1: more often? Are there other programs? Does it work? It
19:26
Speaker 1: should be a virtuals cycle, right, so the brand should
19:29
Speaker 1: get a stickier customer that comes back more and more.
19:31
Speaker 1: You get this beautiful boost of incrementality when you put
19:34
Speaker 1: a credit card in the person's pocket. And the reason
19:36
Speaker 1: you get the incrementality is you give the person a
19:39
Speaker 1: reason to come back. So you give them some base rewards.
19:42
Speaker 1: Everybody knows that five at the brand, one and a
19:44
Speaker 1: half two percent everywhere else, so it's a reason to
19:46
Speaker 1: use the card all the time. And then you make
19:48
Speaker 1: them feel more special. Right. We're working with our grocery
19:51
Speaker 1: partner on express checkout lanes only for card holders. UM,
19:55
Speaker 1: we have that in our I just noticed that that's
19:58
Speaker 1: a good enough. That was just in the past couple
20:00
Speaker 1: months at the ACME in UH somewhere in New Jersey.
20:03
Speaker 1: I don't know the shop right by me. The lines
20:05
Speaker 1: are always so damn long. But I feel like I
20:07
Speaker 1: would definitely get a credit card if I could go
20:09
Speaker 1: to I mean, you open a company right at the
20:13
Speaker 1: beginning of a pandemic, but I would think, like, just
20:17
Speaker 1: for me personally, I use my cards much more frequently
20:21
Speaker 1: now than I ever did before. And I'm guessing that's
20:23
Speaker 1: a trend. How did how did? How have you seen
20:26
Speaker 1: the business kind of involved over the past few years.
20:28
Speaker 1: We've just been fortunate over the last few years that
20:30
Speaker 1: customers are coming back to commerce. They're going back into
20:33
Speaker 1: the real world. On brands that we work with, which
20:35
Speaker 1: we call America's great brands, really want to away to
20:39
Speaker 1: lock in their customers. All brands that have been around
20:41
Speaker 1: for over thirty years, they're under threat from the e
20:44
Speaker 1: commerce giants, whether that's Instant Cart or door Dash or Amazon,
20:48
Speaker 1: who have a trove of data. You think about Uber,
20:50
Speaker 1: you open the Uber app. Before you open the Uber app,
20:52
Speaker 1: it knows whether you're going to order food or whether
20:54
Speaker 1: you're going to order an Uber and all of these
20:57
Speaker 1: UH incumbents are in trouble because they don't have access
21:00
Speaker 1: to that data. Well, credit cards are a great way
21:01
Speaker 1: to bothe get your customers to spend more and become
21:03
Speaker 1: more loyal, but also get to know more about your
21:05
Speaker 1: customers and give them reasons to come back. And so
21:08
Speaker 1: when we started the company, we've been riding this wave
21:10
Speaker 1: of all of these great brands that people have tons
21:13
Speaker 1: of affinity for, love the actual experience and go to
21:15
Speaker 1: the hotel or going into the grocery store and giving
21:18
Speaker 1: them the power to lock in their customer better, giving
21:21
Speaker 1: that customer a better deal. And so, as we talked about,
21:23
Speaker 1: it should be this um self propelling circle of you
21:27
Speaker 1: get a better reward, you want to go back, and
21:28
Speaker 1: the brand gets a stick of your customer. There is
21:31
Speaker 1: credit card debt associated with that you brought up with
21:33
Speaker 1: the start, but our goal is to be the most
21:35
Speaker 1: trusted experience, right, So there are definitely credit cards definitely
21:39
Speaker 1: have a bad name in some parts of the economy,
21:41
Speaker 1: particularly with banks sutil you think, I think it's particularly
21:45
Speaker 1: certain store cards where the banks didn't make it easy
21:47
Speaker 1: for you to pay off, where you get these gotcha bills,
21:50
Speaker 1: you get these junk fees that President Biden has been
21:52
Speaker 1: railing against. That's a terrible experience. If we work with
21:55
Speaker 1: the great brand, we want you to We know that
21:58
Speaker 1: you trust the brand already, and our job is to
22:00
Speaker 1: engender more trust, not less trust. And so we actually
22:04
Speaker 1: think that if we work with the brand, if we
22:05
Speaker 1: give the customer better experience, we can make it easier
22:07
Speaker 1: to see what your interest is. You never get a
22:09
Speaker 1: gotcha fee, You're much more likely to use the cards,
22:11
Speaker 1: You're much more likely to be willing to take credit
22:14
Speaker 1: when you need it and then pay it back when
22:16
Speaker 1: you don't, and you're much more likely to shop with
22:17
Speaker 1: the brand. And so that's part of the cycle of
22:19
Speaker 1: if you do right by the customer, you do right
22:21
Speaker 1: by the brand, you get us a better outcome for everyone.
22:23
Speaker 1: Does it make a difference to you if we go
22:25
Speaker 1: into a recession, or let's qualify that better. Does it does?
22:29
Speaker 1: How much does it make a difference to you if
22:30
Speaker 1: we go into a recession? It makes a difference to
22:33
Speaker 1: every business. If we go into a recession, right spending
22:35
Speaker 1: goes down, delinquencies naturally go up in a down cycle.
22:39
Speaker 1: Our thing is how do you match risk with reward?
22:42
Speaker 1: Um we have a risk function of ten or eleven
22:45
Speaker 1: people that focus on a multibillion dollar book of loans.
22:48
Speaker 1: Their job is to forecast the cycle and keep us
22:50
Speaker 1: safe throughout it. And our job is, honestly not to
22:53
Speaker 1: give credit to people who haven't figured out yet how
22:56
Speaker 1: to responsibly use it, because it's a bad outcome. It's
22:58
Speaker 1: a bad outcome for our company, and and it's a
23:00
Speaker 1: bad outcome for the brand, and it's a terrible outcome
23:02
Speaker 1: for the consumer. And so not are we only are
23:05
Speaker 1: we trying to protect our balance sheet or P and
23:07
Speaker 1: L when we underwrite people, we're kind of looking at
23:09
Speaker 1: for them too, and also looking out for our brand partners.
23:11
Speaker 1: Are you threatened by Clarna or what's the other one firm? Yeah,
23:16
Speaker 1: a firm where you can buy now, pay later. So
23:19
Speaker 1: they're different products that serve different things. And so you
23:22
Speaker 1: think about a Clarna, it's great to buy a Peloton,
23:25
Speaker 1: I turn up, I want this one thing I want
23:27
Speaker 1: to loan, and I'm going to forget about it and
23:29
Speaker 1: not come back. The hard thing is when you don't
23:31
Speaker 1: have a card, you can't use it every day. The
23:32
Speaker 1: card lets you shop with merchants that you go back
23:35
Speaker 1: to a bunch. It's not just buying a one time
23:37
Speaker 1: peloton or a fridge, and it lets you give rewards.
23:39
Speaker 1: You don't get any reward from Klarna. And so the
23:41
Speaker 1: whole purpose of Klarna, if you're a business, is help
23:44
Speaker 1: me with this incremental conversion. Make it easier to press
23:47
Speaker 1: the buy button. Our whole businesses can we bring back
23:50
Speaker 1: the customer more and make them stickier? And so we
23:52
Speaker 1: serve different problems and a lot of times our partners
23:54
Speaker 1: have a Clarina installed of the check out and it
23:57
Speaker 1: doesn't cannibalize us because we serve a different thing. How
24:00
Speaker 1: millennials gen z, how do they engage with credit cards
24:03
Speaker 1: in general? And my daughter is twenty six, she's a
24:06
Speaker 1: point maven. I mean, it's amazing what she does with
24:09
Speaker 1: the points, and so she's technically gen Z. And if
24:11
Speaker 1: you can, if you listen to the media for the
24:13
Speaker 1: last around this, for the last ten years, they would
24:15
Speaker 1: have said gen Z doesn't like, doesn't want credit cards,
24:18
Speaker 1: They're going to not use them. And in reality, what
24:20
Speaker 1: we've seen over the last two or three years is
24:22
Speaker 1: the highest uptake rate of credit cards is gen Z.
24:25
Speaker 1: You have waves like people become consumers, they start to
24:27
Speaker 1: worry about their credit score and they can't just use
24:30
Speaker 1: buy an out, pay later. And so we've seen a
24:33
Speaker 1: real adoption rate by gen Z and by millennials of
24:35
Speaker 1: credit cards. They're just more thoughtful. To be honest, a
24:38
Speaker 1: lot of people have a hangover seeing their parents in
24:40
Speaker 1: the in the global financial crisis, dealing with too much time,
24:43
Speaker 1: and there's a lot more thoughtful. They want to do
24:45
Speaker 1: more socially conscious things with their rewards. So one of
24:48
Speaker 1: the things we offer is, yeah, you can earn your points,
24:50
Speaker 1: your cash back that you can use of the brand.
24:52
Speaker 1: You can also donate it. And they really like that.
24:54
Speaker 1: And so we see gen Z using their rewards to
24:57
Speaker 1: make themselves feel better, not just to consume more, and
25:00
Speaker 1: to do things like I want to give this to
25:02
Speaker 1: the right social cause. There's a real difference between let's
25:04
Speaker 1: say older millennials who are buying a home, they have kids,
25:08
Speaker 1: their budget conscious for the first time, the boom boomers
25:10
Speaker 1: who still carry a wat of cash. There you go.
25:14
Speaker 1: Fall's an old school Wall Street bankers, so he's always
25:16
Speaker 1: going to carry a roll of cash in this pocket.
25:18
Speaker 1: But I'll let you in a little secret. He hasn't
25:20
Speaker 1: used any cash for two years. All right, Dark Great,
25:23
Speaker 1: get you in here. I want to get you back
25:25
Speaker 1: because we can tell by your accent that you're from
25:27
Speaker 1: France or something. So I want to hear what it's
25:29
Speaker 1: like to start a business, especially in the pandemic um
25:33
Speaker 1: and and scale it at the way you have. So
25:34
Speaker 1: Dar Murfy Great to get you in here. He is
25:36
Speaker 1: the CEO and the founder of Imprint. Let's talk a
25:43
Speaker 1: little crypto here. We're gonna check in with Bloomberg Cross
25:45
Speaker 1: Asset reporter Katie Griffelgie's here in our Bloomberg inter Active
25:48
Speaker 1: Broker studio, and we also have Bloomberg Intelligence Senior macro
25:51
Speaker 1: strategist Mike McGlone. He's manning the Bloomberg Intelligence my AMI outpost. Mike,
25:56
Speaker 1: hopefully get the work is not too hard down there
25:59
Speaker 1: for you here in this Ebruary day. But talk to
26:01
Speaker 1: us about crypto. I blinked and this thing is back
26:04
Speaker 1: bitcoins back above thousand. Give us your macro call here
26:08
Speaker 1: as you talk to clients. The fastest horse in the
26:10
Speaker 1: race has bounced the most is here, and I think
26:12
Speaker 1: bounces the keyword Paul, because it looks to me more
26:16
Speaker 1: at risk of a bear market rally than the beginning
26:18
Speaker 1: of something new and enduring. So here's the significance of
26:21
Speaker 1: cryptos are facing their first potential US recession and bitcoin
26:25
Speaker 1: has never the fifty week moving average technically has never
26:28
Speaker 1: dropped below the two week moving average, which it has done.
26:31
Speaker 1: So it's somewhat and that all happens around twenty five tho.
26:34
Speaker 1: So the markets bumped up to very good level, and
26:35
Speaker 1: I look at it is Yes, I think in the
26:37
Speaker 1: big picture this is a very good bull market. But
26:39
Speaker 1: I think what's happening around these levels that we're seeing
26:42
Speaker 1: more of the responsive sellers. Okay, great, I'm bullish, but
26:45
Speaker 1: at these levels you gotta prove it. Hey, what do
26:48
Speaker 1: you think about You know, as we see regulators cracked
26:52
Speaker 1: down the sec sending out wells notices, um settling with
26:57
Speaker 1: crack in on the securitization of theorium, which was like,
27:01
Speaker 1: I mean, ethereum staking. That was part of the great
27:05
Speaker 1: hope of the future of crypto, right, why are we
27:09
Speaker 1: still seeing these games? You know, it's a good question.
27:12
Speaker 1: I have something very scary to tell you about though,
27:15
Speaker 1: a death cross it could be approaching when it comes
27:19
Speaker 1: to bitcoin. Matt Mayley. He pointed this out in a note.
27:21
Speaker 1: I think it was yesterday. He was looking at bitcoin's
27:24
Speaker 1: fifty week moving average. It touched the two hundred week
27:29
Speaker 1: moving average. When that happens, apparently it's very he's looking
27:34
Speaker 1: at weeks we Typically it's the daily moving average, but
27:37
Speaker 1: he's looking at the the moving averages when it comes
27:41
Speaker 1: to the weeks. But in any case, that has never
27:43
Speaker 1: happened before, and I don't know, the name implies that
27:47
Speaker 1: that could be bad. I'd be curious to hear Mike's
27:48
Speaker 1: thoughts on it. Yeah, well that's the death cross bad Mike, Well,
27:52
Speaker 1: that's the thing. But the key thing I learned as
27:54
Speaker 1: the traders, once it hits the popular press like us,
27:57
Speaker 1: then you want to do the opposite. But the key
27:59
Speaker 1: thing point Katie point out, it is the weekly so
28:01
Speaker 1: it's a significant rollover. Everything is kind of tilting down
28:05
Speaker 1: in cryptos, and they bounced up to very good levels.
28:07
Speaker 1: The key thing I look at is what was the
28:09
Speaker 1: major force of pressured almost all risk asses, most notaly
28:12
Speaker 1: cryptos last year, and that was expectations for FED right hikes,
28:16
Speaker 1: and that's still there. The s don't fight the FED
28:19
Speaker 1: mantras still there. So I see the risk is now
28:21
Speaker 1: that the stock markets rolling over, cryptos are rolling over.
28:24
Speaker 1: But you can see what's going to happen in the
28:26
Speaker 1: long term when this whole thing bottoms, is crypto should
28:29
Speaker 1: come out ahead. The key things right now is we're
28:31
Speaker 1: still fighting the FED and markets have bounced, and my
28:34
Speaker 1: bias is the macro. In terms of the macros, the
28:37
Speaker 1: stock market low is probably not in typically goes down
28:39
Speaker 1: a lot more in a recession, that which means more
28:42
Speaker 1: pressure for cryptos, most normally bitcoin. I just want to
28:44
Speaker 1: know how these prices are going up. Like Katie, you
28:47
Speaker 1: talk to investors all morning long, right Bill, Donna sits
28:51
Speaker 1: right behind you. She talks to investors constantly. Mike, I'm
28:55
Speaker 1: sure that you, you know, probably go to lunch or
28:58
Speaker 1: some steakhouse with a bunch of investors at least once
29:00
Speaker 1: a week. Have has either one of you talked to
29:03
Speaker 1: anyone who's bought bitcoin. I haven't you know? You know,
29:08
Speaker 1: I'm obsessed with cash right now. So that's like the
29:10
Speaker 1: spiritual opposite of bitcoin, I would say. But it is interesting.
29:14
Speaker 1: For a while, it felt like you could just like
29:16
Speaker 1: neatly put the macro conversation on bitcoin. Stocks are rallying,
29:20
Speaker 1: so of course bitcoin is ralling to it feels like
29:22
Speaker 1: it's almost broken away from that. And I don't have
29:26
Speaker 1: a good narrative right now for why it's rallying the
29:28
Speaker 1: way it is. I mean, I'm sure some of that
29:30
Speaker 1: just comes down to really pour liquidity and you can
29:33
Speaker 1: really push it around. My Katie wrote a great story
29:35
Speaker 1: the other day about how cash is basically yielding five percent.
29:38
Speaker 1: What's the yield on bitcoin? Well, exactly, Matt, I agree
29:41
Speaker 1: with you. To me, this is a boomer dream when
29:44
Speaker 1: you can go plunk into a two you note and
29:45
Speaker 1: get an over nine percent for two years, you say so,
29:47
Speaker 1: thank you very much. I haven't been able to do
29:49
Speaker 1: that predicting, but I did get a call from of
29:51
Speaker 1: the smartest people I know in the bid is a
29:53
Speaker 1: big arbitrage hedge fund last last in December. In the minute,
29:57
Speaker 1: he said to me, Mike, what's this gbtcson? I knew
30:00
Speaker 1: that was a bottom because the discount got so extreme,
30:03
Speaker 1: and this is a distress distressed debt person. So to me,
30:06
Speaker 1: this is a beer market. Explain to everyone else. There
30:10
Speaker 1: is a great scale bitcoin trust. It's the most widely
30:14
Speaker 1: tracked bitcoin um exchange trading product. It's not an e
30:18
Speaker 1: t F but it's a trusts not yet, but it
30:23
Speaker 1: got to extreme discount and had you know, hit the
30:26
Speaker 1: stops and it's up what fifty percent since like this year.
30:34
Speaker 1: Now that's a beer bear market rally. But it just
30:36
Speaker 1: got too cheap on a discounted you know, discount to
30:39
Speaker 1: premium basis. So I look at it. Okay, market get
30:42
Speaker 1: way over sold. It's bounced, but we still face so
30:44
Speaker 1: significant headwinds that yes, and the big picture, I think
30:47
Speaker 1: bitcoin is gonna go continue to go up a lot
30:49
Speaker 1: more like most assets. But right now, what are we
30:51
Speaker 1: looking at from the Fed? They are still tightening into
30:53
Speaker 1: stock markets rolling over and we're potentially heading towards the recession.
30:56
Speaker 1: These are bad for risk gus. It's in bitcoins when
30:58
Speaker 1: the risk rolled in incredibly bearish calling about three seconds there. Well,
31:04
Speaker 1: it's the key fact that I really have to point
31:06
Speaker 1: out is bitcoin is the leading indicator. If it sustains
31:09
Speaker 1: above this twenty five thousand lover, that means a lot
31:11
Speaker 1: for everything. And I look at as an next trader,
31:13
Speaker 1: and may you say to yourself, Okay, prove it. I'll
31:15
Speaker 1: structure a put position here and make you prove it.
31:18
Speaker 1: And if it does work, and then we'll get into
31:19
Speaker 1: the longer term trade. Remember the old thing on Wall
31:21
Speaker 1: Street and people would say, oh, I'm bullish, and then
31:24
Speaker 1: boss would say, okay, well of south housand, what do
31:26
Speaker 1: you mean I'm bullish? And you say, well, sell thousand.
31:28
Speaker 1: We see what happens the market doesn't go down, Okay,
31:31
Speaker 1: we'll buy ten THO. He just said, g BTC isn't
31:35
Speaker 1: an e t F yet. What do you say if
31:38
Speaker 1: I told you I haven't seen Evil Dead two yet,
31:42
Speaker 1: that implies that you're going to in the future, which Mike,
31:45
Speaker 1: you're implying this will become an e t F in
31:47
Speaker 1: the future. Have you ever heard of Gary Gensler? Terribly unlikely,
31:51
Speaker 1: But I think that's what's happening. And so we launched
31:54
Speaker 1: a Bloomberg Galaxy Cryptoline XS almost five years ago. What's
31:57
Speaker 1: the main thought is this space needs to track in
32:00
Speaker 1: decks and E t F to track and indext like
32:02
Speaker 1: the S and B five founder, I think you're gonna
32:04
Speaker 1: protect investors. That's where it's going to go. I think
32:07
Speaker 1: right now, typically it isn't. We're in a pretty extreme
32:09
Speaker 1: regulation mode and a lot of firms in the US
32:12
Speaker 1: are are not they're leaving the US are trying to
32:14
Speaker 1: avoid the regulation. But to me, to protect investors and
32:17
Speaker 1: not pick winners, that's we're eventually gonna go. It's just
32:20
Speaker 1: gonna take a while. So, Mike, you're down in Miami,
32:24
Speaker 1: the self proclaimed capital, bitcoin capital or crypto capital of
32:28
Speaker 1: the U S the I guess the Austin, Texas or
32:30
Speaker 1: the you know, something like that, trying to be cool.
32:32
Speaker 1: What's the mood down there of the folks that have
32:35
Speaker 1: come down there and really planted their flag in this
32:38
Speaker 1: crypto space. I was at a conference in the December
32:43
Speaker 1: right near the Lows and it was packed and Mayor
32:47
Speaker 1: Swore has spoken. The people there were all focused on
32:49
Speaker 1: the macro big picture and seemed quite positive that the
32:52
Speaker 1: problem is some of the retail people got hurt from
32:55
Speaker 1: ft X. That that really is sad. I mean, they
32:58
Speaker 1: haven't been able to have they put their trust with
33:00
Speaker 1: an exchange that was not a good fiduciaring. It wouldn't
33:04
Speaker 1: be able to do it through n ET for something,
33:06
Speaker 1: so to me, that's scary. But overall the mood is
33:08
Speaker 1: still quite positive. In the big picture. You look at bitcoin,
33:10
Speaker 1: it looks like it's potentially body but it's four thousand
33:14
Speaker 1: right now. The last time it put a significant low
33:16
Speaker 1: around eighteen or nineteen in two thoust and around three
33:19
Speaker 1: to four thousand, so it's still we'll get the big,
33:22
Speaker 1: big sure yep from its lows. Uh. So you know
33:27
Speaker 1: that's pretty good. You bought something, you think about it,
33:30
Speaker 1: and as a class a major exchange goes belly up.
33:33
Speaker 1: Potential for fraud we'll find out. And yet the underlying
33:37
Speaker 1: sec you think some fraud may have been in the
33:40
Speaker 1: crypto industry. Possibly, well, I can't say for certain. We can't.
33:43
Speaker 1: We'll have that trial to figure it all out. But
33:45
Speaker 1: interesting to see that assets still trading well. All right,
33:48
Speaker 1: good stuff. Mike McGlone, Bloomberg Intelligence. He's down in our
33:51
Speaker 1: Miami outpost manning all things crypto from down there. Katie
33:55
Speaker 1: Riefeld Cross Asset reported one of the big inners in
34:00
Speaker 1: the stock market today is dear income stocks up six
34:04
Speaker 1: per cent on the back of some good, good numbers.
34:06
Speaker 1: Let's break it all down with Chris Chile. You know
34:08
Speaker 1: he's an equity research channelst at Bloomberg Intelligence. So Chris,
34:11
Speaker 1: when I when I think of deer, I think of
34:14
Speaker 1: the American farmer. So can I surmise that the American
34:17
Speaker 1: farmers doing pretty well these days. They sure are, and
34:21
Speaker 1: we're not really seeing much signs of the slowdown either. UM.
34:23
Speaker 1: It was a real solid, beaten raised quarter. UM pricing
34:27
Speaker 1: continues to be unbelievably strong, up double digits again, and
34:32
Speaker 1: we also saw higher production, particularly in the large jag
34:35
Speaker 1: business and construction as some of these UM supply constraints
34:38
Speaker 1: are beginning to show, you know, real tangible evidence of
34:41
Speaker 1: easing UH. And the demand for farm equipment again remarkably
34:45
Speaker 1: strong with no signs of slowing. Orders are essentially filled
34:48
Speaker 1: out into four Q and for some products were booked
34:51
Speaker 1: for the entire year UM. So this is going to
34:55
Speaker 1: even spill over into four because inventories are quite lean.
34:58
Speaker 1: So there's certain the legs to the cycle, you know.
35:01
Speaker 1: I'm UH next week, I'm gonna go down to the
35:03
Speaker 1: Duccatti dealership in Soho and talk to the North American
35:07
Speaker 1: CEO of that business. Nice They have a similar issue.
35:10
Speaker 1: So if you want UM like a Ducatti multi strata,
35:15
Speaker 1: you're probably gonna wait until the end of the year
35:17
Speaker 1: before they can fill your order. They're all sold out already,
35:20
Speaker 1: pretty much everything they make and UM But the thing is,
35:25
Speaker 1: I wonder about new buyers who may have to finance.
35:29
Speaker 1: Maybe with Ducatti, it's a little different because it's kind
35:32
Speaker 1: of a wealthier person's product and it's a toy. They
35:35
Speaker 1: could buy it in cash if finance costs are too high.
35:38
Speaker 1: But what's the deal with financing, Chris, You know a
35:41
Speaker 1: tractor or a plow or something that you get from deer,
35:44
Speaker 1: because I imagine rates are around seven percent? UM? Do
35:49
Speaker 1: farmers just pay cash? Are the buyers all institutional? How
35:53
Speaker 1: does that work out? You know, it's kind of a
35:55
Speaker 1: tale of two farmers. UM on the small end of
35:59
Speaker 1: the spectrum and the small local farmers. No doubt that
36:04
Speaker 1: is having a material impact. And that's the one area
36:07
Speaker 1: of the business where you're starting to see a slowdown. UM.
36:10
Speaker 1: When it comes to your large professional farmers who made
36:13
Speaker 1: record profits last year, yes they are using cash UM,
36:17
Speaker 1: and yes they could weather these little bit higher rates UM.
36:20
Speaker 1: So as you look at the large corporate you know,
36:24
Speaker 1: professional farmers UM, it tends to have less of an
36:27
Speaker 1: impact UM. But you know, we're coming off record profitability
36:31
Speaker 1: last year. Farming comes going to be down this year,
36:34
Speaker 1: but still it would be above any prior peak cycle,
36:38
Speaker 1: So farmers are still in a healthy financial position. How
36:41
Speaker 1: is the family farm in America? Chris? I mean, um,
36:46
Speaker 1: what's the split, you know, big institutional corporate farms to
36:50
Speaker 1: family farms. What's it looked like right now? Yeah, it's
36:53
Speaker 1: something similar to you know, it's like UM farmers or
37:00
Speaker 1: you know, corporate owned, but account for nearly like eighty
37:02
Speaker 1: percent of our production. Something in that ballpark. So when
37:06
Speaker 1: we think about the the large professional farmers that that
37:11
Speaker 1: moved the needle, the small egg business is important, and
37:14
Speaker 1: it's somewhat split between um like agg production systems and
37:18
Speaker 1: haying forage. And then they have the you know, the
37:20
Speaker 1: traditional kind of turf and utility business that caters more
37:23
Speaker 1: towards your consumer oriented products, and that's where the biggest
37:26
Speaker 1: weakness is within their portfolio. But really that's it. I
37:30
Speaker 1: mean construction strong, large egg, very strong. That is referred
37:34
Speaker 1: to as the Peretto principle. The Peretto principle, right, So
37:38
Speaker 1: it's the same in a lot of different things. You
37:40
Speaker 1: could say, for example, of the people have eighty percent
37:44
Speaker 1: of the wealth yep got it? Okay, that makes sense?
37:46
Speaker 1: So all right, Chris. So if if I'm a family
37:49
Speaker 1: farmer in Western Jersey. And that can happen because we
37:52
Speaker 1: are the guarded state, and I want to go and
37:54
Speaker 1: I gotta buy a couple of plows, a couple of
37:55
Speaker 1: big tractors from my farm. Can I haggle with the
37:58
Speaker 1: sales person because I can't haggle with the car salesman anymore.
38:02
Speaker 1: Not this year. There's just no inventory out there. So
38:06
Speaker 1: pricing has just been remarkably strong. Pricing in their large
38:10
Speaker 1: egg business was up in the first quarter here, which
38:14
Speaker 1: is phenomenal. We've never seen anything like that before. UM.
38:18
Speaker 1: And the other the problem to also if you try
38:20
Speaker 1: to find a use piece of equipment, use prices are
38:22
Speaker 1: near record levels. There's just no inventory in the channel,
38:26
Speaker 1: partly due to the the supply chain and then just
38:28
Speaker 1: partly we've been under producing for the past few years. UM.
38:32
Speaker 1: This is going to be another year in three were
38:34
Speaker 1: demand outstrips supply. So UH pricing, while it will moderate
38:38
Speaker 1: as we progress through the year, UM, we still expect
38:41
Speaker 1: it to remain quite strong and from a price cost perspective,
38:45
Speaker 1: UM will be a significant margin teil win for deer
38:49
Speaker 1: who is the big I remember when my buddy Adam
38:52
Speaker 1: Johnson needed to buy a tractor for his farm up state.
38:55
Speaker 1: He won. He lives in Manhattan. Yeah no, but I
38:57
Speaker 1: think he wanted to get like a Mahindra, who were
39:00
Speaker 1: the big competitors to John Dear. If you think about
39:03
Speaker 1: the large act business in North America, it's really a
39:07
Speaker 1: duopoli with Deer and CNH Industrial. The case brand um
39:12
Speaker 1: As is another big player who has made some pretty
39:15
Speaker 1: significant strides to get into some larger equipment. And then
39:17
Speaker 1: you also have Caboda, which tends to be more on
39:19
Speaker 1: the kind of the small mid horse power, but if
39:22
Speaker 1: you're talking large high horse power equipment, it's really Deer.
39:25
Speaker 1: In case Lamborghini, what Lamborghini was a tractor brand to
39:29
Speaker 1: start with you? What was it really? Yeah? Uh, what's
39:32
Speaker 1: his name? Ferrucio Lamborghini. He was rich from his tractor
39:36
Speaker 1: business and he loved Ferrari's cars, but he thought Enzo's
39:40
Speaker 1: clutches were crap. I found out it was the same
39:42
Speaker 1: clutch that he used in this tractor. So he said,
39:44
Speaker 1: you know what, I'm gonna build my own. There you go,
39:46
Speaker 1: good story. I haven't heard that before from Matt Miller.
39:49
Speaker 1: Um So, Chris, let's let's switch gears. Since I'm gonna
39:51
Speaker 1: since we got on the phone, another one of my
39:53
Speaker 1: favorite companies that you cover, Caterpillar. Now, Caterpillars not tied
39:58
Speaker 1: to the farmer as much as obviously dear, and I'm
40:01
Speaker 1: guessing there's some recession risk in a name like that.
40:03
Speaker 1: What's the calling Caterpillar here? You know what there is,
40:07
Speaker 1: and you know it's somewhat similar if you think about it.
40:10
Speaker 1: The weakness is really kind of isolated right now, more
40:13
Speaker 1: in their residential construction exposure, which really is quite small
40:17
Speaker 1: if you think about their construction business that is non
40:21
Speaker 1: resi UM, and there's significant tail winds there with the
40:25
Speaker 1: government investments, whether it be the infrastructure i RA A
40:29
Speaker 1: chip sack. I mean, we've got billions and billions of
40:31
Speaker 1: dollars that are going to start flowing through the system.
40:34
Speaker 1: We're only seeing that begin to hit the backlog now,
40:37
Speaker 1: so we think that's a significant tail wind. And then
40:39
Speaker 1: over the next two or three years, you also have
40:42
Speaker 1: UM mining equipment continues to be UM historically old age
40:47
Speaker 1: of the fleet. We we have a replacement cycle there
40:50
Speaker 1: that's unfolding, and you know, we're still seeing pretty good
40:52
Speaker 1: investments when it comes to energy, UM and commodity related products.
40:57
Speaker 1: So there's certainly some favorite bull Macro tail winds, notwithstanding
41:02
Speaker 1: some of the the slower residential spending. You know why
41:05
Speaker 1: I brought up Lamborghini because now because Chris was saying
41:09
Speaker 1: CNCH Industrial is the big competitor to Deer, and Chris,
41:13
Speaker 1: you know who owns CNH Industrial Fiat UH, which also
41:19
Speaker 1: owns Ferrari or a sizeable steak in Ferrari. That's I
41:23
Speaker 1: think really fascinating that those tests supercarmakers have said just
41:26
Speaker 1: clicked in CNH for the timble symbol and it says
41:28
Speaker 1: acquired by Fiat I am on so and by the way,
41:34
Speaker 1: if you've seen you know top Gear, Jeremy Clarkson, he
41:38
Speaker 1: has a new show where he buys a farm and
41:41
Speaker 1: tries to run it. He gets a big Lamborghini tractor
41:43
Speaker 1: because he likes the brand name, and then he finds
41:45
Speaker 1: out it's too large to fit in his barn. Tough
41:49
Speaker 1: problems there, Chris, So, China reopening, what does that mean
41:52
Speaker 1: for your big industrial companies, whether it's like a Cat
41:55
Speaker 1: or Deer or some many other big industrial companies that
41:58
Speaker 1: you cover. Yeah, with the with the China reopening, I
42:02
Speaker 1: think um as it relates to deer, I think this
42:05
Speaker 1: is another tail when for them. Now you know they
42:08
Speaker 1: don't sell a lot of equipment directly into China, just
42:10
Speaker 1: the farms over there aren't conducive to a lot of
42:12
Speaker 1: these larger equipment. But why I do think it helps is,
42:16
Speaker 1: you know, global crop supplies are historically tight, largely due
42:21
Speaker 1: to the to the war in Ukraine and the restriction
42:23
Speaker 1: of shipments and fertilizer coming out of that market. But
42:26
Speaker 1: now you throw on the China reopening, um, grain supplies
42:31
Speaker 1: are going to remain historically tight. So we think this
42:33
Speaker 1: keeps crop prices elevated for the next couple of years
42:36
Speaker 1: and really gives additional legs to the cycle. So we
42:39
Speaker 1: see China reopening as a tail when there. As you
42:42
Speaker 1: think about cat you know, China's only roughly five percent
42:46
Speaker 1: of their sales, but it's the largest equipment market in
42:49
Speaker 1: the world. Any kind of reopening infrastructure investments over there
42:54
Speaker 1: certainly would add some upside well. And if they let
42:56
Speaker 1: the ethanol um proportion of gasoline and rise up to
43:00
Speaker 1: fift that's going to be another tail wind, right for
43:04
Speaker 1: corn prices. Yeah, we're we're looking at kind of I
43:07
Speaker 1: think a structural deficit um when it comes to crops
43:11
Speaker 1: supply demand. So barring some kind of unforeseen weather events
43:17
Speaker 1: and um, you know, we're still going to look at
43:20
Speaker 1: you know, historically tight supplies here probably for the next
43:23
Speaker 1: several years. Um. And at the end of the day,
43:25
Speaker 1: you know, if farmers continue to make money, they tend
43:28
Speaker 1: to reinvest in equipment. Where where are you based, Chris,
43:31
Speaker 1: You're you're down in Princeton. Princeton, New Jersey is a
43:35
Speaker 1: very nice little farm area. I was gonna say, if
43:37
Speaker 1: you're in the Midwest, you don't want to miss the
43:38
Speaker 1: Miller's Port Corn Festival. Miller's Sport, the Miller's Port, Ohio
43:42
Speaker 1: of course, best corn festival in the country. Really the
43:46
Speaker 1: most delicious corner that I imagine. It's in the fall
43:50
Speaker 1: at some point, right around right around October Fest. All right, Chris,
43:53
Speaker 1: great stuff. Chris Chile and equity research channels for Bloomberg
43:55
Speaker 1: Intelligence joining us here. Thanks for listening to the Bloomberg
44:02
Speaker 1: Markets podcast. You can subscribe and listen to interviews of
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Speaker 1: Apple podcasts or whatever podcast platform you prefer. I'm Matt Miller.
44:11
Speaker 1: I'm on Twitter at Matt Miller three on Fall Sweeney.
44:15
Speaker 1: I'm on Twitter at pt Sweeney Before the podcast, you
44:18
Speaker 1: can always catch us worldwide at Bloomberg Radio