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Amazon Prime Day Sales Record Expected · 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: called Apple Podcasts or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast. All right, it is
0:22
Speaker 1: Prime Day today and tomorrow for Amazon. Doesn't mean that
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Speaker 1: much for me, but apparently I am one of the outliers.
0:30
Speaker 1: US shoppers will spend twelve billion dollars online in two days. Uh,
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Speaker 1: let's get the skinny on that with Punam Goyle, senior
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Speaker 1: US retail analyst for Bloomberg Intelligence. So, Punam, give us
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Speaker 1: a sense for Prime Day. It's we're such a weird
0:45
Speaker 1: in the past fifteen months have been such a weird
0:47
Speaker 1: time for all of us. Everybody's behavior has been disrupted.
0:50
Speaker 1: Give us a sense of how important Prime Day is
0:52
Speaker 1: to an Amazon, you know, maybe versus last year. Sure,
0:58
Speaker 1: thanks Paul. So Prime Days basically very important for Amazon.
1:02
Speaker 1: It's expected in our view, to bring in about twelve
1:04
Speaker 1: billion dollars and grows merchandise sales. That's built from third
1:08
Speaker 1: party and first party. UM. Now what's interesting here and
1:11
Speaker 1: why it's important is because Amazon Prime Day is when
1:14
Speaker 1: Amazon gets to sell more of its own inventory. So
1:17
Speaker 1: if you think about the Amazon business, more than half
1:20
Speaker 1: of the business is from third party, but on Amazon
1:23
Speaker 1: Prime Day, two thirds of the business is Amazon's owned business.
1:28
Speaker 1: So that's why it's so important. It's great for them
1:30
Speaker 1: because it's UM they get to promote some of their
1:31
Speaker 1: own products. The other thing is they get to bring
1:33
Speaker 1: on more Prime members. So Prime members today we have
1:36
Speaker 1: over two hundred million Prime members, with the US having
1:39
Speaker 1: about two thirds of the U S population households each
1:43
Speaker 1: having a Prime member in there, so opportunity to grow.
1:46
Speaker 1: That is where Prime Day helps. Where deals are promoted
1:49
Speaker 1: and consumers who are not Prime members can join Prime,
1:52
Speaker 1: which then creates a more stickier customer for them in
1:54
Speaker 1: the longer term. And I wonder how much this has
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Speaker 1: grown with Amazon because revenue growth at Amazon has been
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Speaker 1: off the hook. We're talking about a company that made
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Speaker 1: less than two hundred way less than two hundred billion
2:10
Speaker 1: in revenue in and they're gonna make about five hundred
2:15
Speaker 1: billion in revenue this year. So have we seen Prime
2:21
Speaker 1: Day revenue grow at the same pace. We've actually seen
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Speaker 1: it grow much faster than that. So using the same
2:27
Speaker 1: time frame that you just use, prime day sales where
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Speaker 1: two point four billion dollars and we're expecting twelve billion
2:36
Speaker 1: this year, so that's a sixfold increase almost. But I'm
2:39
Speaker 1: talking to us about the other side of the equation,
2:41
Speaker 1: the supply side, getting stuff to people's doors. We keep
2:46
Speaker 1: hearing lots of stories about supply chain disruptions, and boy,
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Speaker 1: when I think about a company that really realizes upon
2:52
Speaker 1: a global supply chain, it's Amazon dot Com. What are
2:56
Speaker 1: they telling you about being able to get stuff to
2:59
Speaker 1: people's doors. You know, it hasn't been called out as
3:02
Speaker 1: a hiccup yet in order we see it. But what
3:04
Speaker 1: I have personally seen and I've heard from people is that,
3:07
Speaker 1: you know, the one day the two day delivery that
3:09
Speaker 1: you're used to expecting, maybe it doesn't come in one
3:11
Speaker 1: day anymore anymore. Some items maybe they take two or
3:14
Speaker 1: three days, but they're still getting them out there. You know,
3:16
Speaker 1: if if anyone can do it, we think it's Amazon.
3:18
Speaker 1: They're pretty diversified how they ship. They use carriers, but
3:21
Speaker 1: they also have their own trucks and performent networks to
3:25
Speaker 1: help them. So we think Amazon can still you know,
3:28
Speaker 1: go past those bottlenecks. We haven't seen, um, those constraints
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Speaker 1: impact them like we have some other companies in retail.
3:35
Speaker 1: By the way, I'm not not totally related to this story,
3:38
Speaker 1: but I always wonder how to look at other no no,
3:42
Speaker 1: no cars man. Uh the weight they're is getting really
3:46
Speaker 1: long for cars and motorcycles. But you know, a lot
3:49
Speaker 1: of times I'll choose Amazon instead of many other online
3:53
Speaker 1: vendors because I want my stuff now. Um, and I'm
3:57
Speaker 1: probably just a horrible person. But I guess other people
4:00
Speaker 1: I feel the same way. Are our other vendors. Are
4:03
Speaker 1: other online sites hurrying up to try and match that? Yeah? Absolutely.
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Speaker 1: So you know, Walmart and Target, I say, are are
4:11
Speaker 1: both playing in the space more aggressively than they ever
4:14
Speaker 1: have in the past. They now have programs where you
4:17
Speaker 1: can get same day delivery, whether it's through Walmart Plus
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Speaker 1: or whether it's to ship through ship it at Target,
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Speaker 1: so you can get things to your door the same
4:25
Speaker 1: day today in retail across many other larger retailers. But
4:29
Speaker 1: once again, the inventory there may be a little more limited,
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Speaker 1: um than it is on Amazon. Because they don't necessarily
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Speaker 1: have everything that they have available online for seing day
4:38
Speaker 1: delivery or even next day. All Right, it's a great
4:43
Speaker 1: topic because more and more of us well, it touches
4:45
Speaker 1: so many um and a lot more obviously than it
4:48
Speaker 1: did in two thou two thousand nine, um, and it
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Speaker 1: looks like it's pretty sticky. Punham is a great person
4:55
Speaker 1: to talk to. She's our senior US retail analyst for
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Speaker 1: Bloomberg Intelligence, so she knows all there is to know
5:01
Speaker 1: about this fascinating and growing story um well and hopefully
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Speaker 1: continues to grow because that means the economy does as well.
5:10
Speaker 1: So that's the story on Prime Day. Get acquainted with it.
5:14
Speaker 1: It's here to stay, Paul and spreading really around the world.
5:18
Speaker 1: This is Bloomberg right now. Let's go to Omar agular
5:25
Speaker 1: ceio of Passive Equity Multi Asset Strategies for Charles Schwab
5:28
Speaker 1: Investment Management. He joins us. Omar, thanks so much for
5:31
Speaker 1: joining us. You know, when I think about Charles Schwab,
5:33
Speaker 1: I just think of, you know, just the army of
5:35
Speaker 1: individual investors out there, the retail investors, uh that trade
5:40
Speaker 1: on your platform. What are you hearing most from the average.
5:45
Speaker 1: If you have a Charles Schwab investment management client right now, Hily,
5:51
Speaker 1: good morning. Um. You know, in general, you know what
5:54
Speaker 1: we see um industry wide on in general for retail
5:58
Speaker 1: investors is you know there you know, they're concerned about inflation.
6:01
Speaker 1: Inflation seems to be what is top of mind as
6:05
Speaker 1: continued concerns about the all the work that has been
6:10
Speaker 1: done with prices going up, significant amount of imbalances between
6:14
Speaker 1: demand and supply, and in general, you know what would
6:17
Speaker 1: that do to interest rates? I think when we see
6:20
Speaker 1: the the data and the volatility around the data, you know,
6:25
Speaker 1: a lot of what comes to investor's head is, well,
6:28
Speaker 1: this is going to affect earnings for companies. Is there's
6:31
Speaker 1: going to be something that affects prices and in general?
6:33
Speaker 1: How is that going to reflect in the volatility of
6:36
Speaker 1: my portfolios? Well you can just tell them, um, you know,
6:40
Speaker 1: if we start to see real inflation and the Fed
6:42
Speaker 1: turns hawkish and the dots rise, they can expect to
6:45
Speaker 1: see the ten year yield fall. Well that seems to
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Speaker 1: be what that's crazy, right, That's just insane. That seems
6:55
Speaker 1: to be exactly how the market, you know, it seems
6:57
Speaker 1: to be reacting to what what I would probably they
7:00
Speaker 1: say was something that the Federal Reserve tried to put
7:04
Speaker 1: together last week, and in an effort to try to
7:08
Speaker 1: reduce the fears of inflation, they actually created more uncertainty
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Speaker 1: for investors. I think a big significant part of the tone,
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Speaker 1: the hockey shtone that we all heard from jeron Power
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Speaker 1: last week, you know, translated into more volatility around the
7:23
Speaker 1: timing of the tapering program. And I think the market
7:27
Speaker 1: seemed to be now more comfortable thinking that the tapering
7:30
Speaker 1: will happen earlier than later, thinking that the Fed will
7:34
Speaker 1: be aggressive in reacting to any signs of inflation. So
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Speaker 1: in a way that that inflation discussion created a little
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Speaker 1: more volatility in what we may see down the road.
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Speaker 1: All right, So I guess one of the questions is,
7:46
Speaker 1: if we are going to be in a rising interest
7:49
Speaker 1: rate environment over the next several years, is economic growth
7:53
Speaker 1: our corporate earnings are they strong enough to offset that?
7:56
Speaker 1: How do you feel about that? Well, economic growth and
7:58
Speaker 1: earnings growth are city to be the for for us,
8:01
Speaker 1: the catalyst of what may upset a little bit of
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Speaker 1: that volatility and inflation components if you actually think about,
8:07
Speaker 1: you know, the numbers that we expect. Even in the
8:09
Speaker 1: second quarter, we're gonna, you know, get to the highest
8:13
Speaker 1: possible numbers we have seen in a while. And granted
8:15
Speaker 1: that there is a base case effect, we're expecting over
8:18
Speaker 1: sixty percent year of a year EPs growth in the
8:21
Speaker 1: second quarter, which is going to be a record. Um.
8:24
Speaker 1: You know, when you put that together with a potential
8:26
Speaker 1: of you know, over seven percent of GDP growth in
8:30
Speaker 1: one you know, we're talking about something that I don't
8:33
Speaker 1: think we have seen in a long long time. Um.
8:35
Speaker 1: The big question in our minds is, you know, at
8:39
Speaker 1: what point we go through that significant moving to the
8:42
Speaker 1: mid cycle and the deceleration of economic growth and earnings
8:45
Speaker 1: growth is something that the market feels comfortable. So whether
8:48
Speaker 1: it's the third quarter of this year or whether it's
8:51
Speaker 1: you know, at the end of this year when we're
8:53
Speaker 1: starting to see that deceleration and how fast that deceleration is.
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Speaker 1: This that steepness of deceleration is what I think is
8:59
Speaker 1: going to be some for us to continue to watch.
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Speaker 1: If you had to put your money in one basket
9:03
Speaker 1: or another, would it be value or growth? Well, I
9:07
Speaker 1: think we we continue to tell investors that we have
9:09
Speaker 1: to be barbelled, we we this. You know, we are
9:12
Speaker 1: in unprecedented charts, you know, in the business cycle and
9:15
Speaker 1: the economic cycles. Again, you know, we have never been
9:18
Speaker 1: you know, in this situation in any you know, these
9:20
Speaker 1: cycles before. Because in a way, this is not even
9:24
Speaker 1: a mid cycle in the traditional sense, because we are reopening.
9:28
Speaker 1: We're still in that process of reopening. The global economy
9:31
Speaker 1: is not yet fully open, and as such, it is
9:34
Speaker 1: very hard to put a component of saying, well, this
9:38
Speaker 1: is now the cyclical trade is done, and therefore we're
9:41
Speaker 1: going to go to the mid cycle, you know, high
9:43
Speaker 1: quality growth. So our our approach right now until we
9:47
Speaker 1: get a little more clarity on the data is, you know,
9:49
Speaker 1: the cyclical trade still has some room, but you've got
9:52
Speaker 1: to be prepared for the next leg, which is going
9:55
Speaker 1: into the high quality growth. So, you know, again, a
9:57
Speaker 1: long way to tell you the Barbell strategies to be
10:00
Speaker 1: the most prudent at the moment. All right, thanks so
10:04
Speaker 1: much for joining us. Omar always great to get your inside.
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Speaker 1: Omar Aguilar c I, O of Passive Equity and multi
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Speaker 1: Asset Strategies at Charles Schwab Investment Managers. You know, when
10:18
Speaker 1: we started Bloomberg intelligence, Bloomberg's in house research investment research business.
10:22
Speaker 1: We said, we're going to really focus on the data,
10:25
Speaker 1: because that's what Bloomberg does. It has the world class
10:28
Speaker 1: best data, and we'll let the data do the talking.
10:30
Speaker 1: In our analysts make lots of great charts and graphs
10:33
Speaker 1: from that data and they tell you what's important. And
10:35
Speaker 1: nobody does that better than Mike McGlone. He's got the
10:37
Speaker 1: best charts, tells fantastic stories that really make you understand
10:42
Speaker 1: what's going on in his business. Uh. And Mike joins
10:44
Speaker 1: us here because we need to talk about bitcoin. And
10:47
Speaker 1: I'm looking at some charts here and it's not a
10:49
Speaker 1: good chart for XPT. It's off another nine percent today, Mike,
10:53
Speaker 1: So do we start looking at support levels for this
10:56
Speaker 1: type of thing like you do with all the other
10:58
Speaker 1: commodities you follow? Is that important when you look at
11:01
Speaker 1: something like bitcoin. Bitcoin is very technical because it's still
11:05
Speaker 1: a lot of people don't understand it, and there's a
11:06
Speaker 1: lot of traders, and a lot of them are young
11:08
Speaker 1: and inexperience, and there's a lot of bots trading them.
11:10
Speaker 1: I mean, it's so automated. But I look at thirty thousand,
11:13
Speaker 1: it's pretty good support. It ended last year around twenty
11:15
Speaker 1: nine thousand. Now we might get a little dip below there,
11:17
Speaker 1: just to kind of tweak out the last of the
11:19
Speaker 1: speculative accesses. But what I see here is lower prices
11:23
Speaker 1: are attracting more the longer term bine hole types. And
11:26
Speaker 1: it's last week it peaked around forty thousand, So thirty
11:28
Speaker 1: to forty thousand. I still thinking should get to the
11:30
Speaker 1: hundred thousand this year. The key thing I'm worried about
11:33
Speaker 1: is what happened last year. Bonnil is collapsing, the stock
11:36
Speaker 1: market declining. It's the macro, and if the stock market
11:38
Speaker 1: goes down and bonnels go down, bitcoin is part of
11:41
Speaker 1: that macro. But in the big picture, what the Fed said,
11:43
Speaker 1: I think, you know, kind of tweaking things a little bit.
11:46
Speaker 1: The the the Fed squawk of that, to me, is
11:51
Speaker 1: actually good and long term for bitcoin like it is
11:53
Speaker 1: for gold. So you think bitcoin is more of an
11:57
Speaker 1: inflation hedge, Well a, Matt, Well, Well, I mean here's
12:02
Speaker 1: the thing, because if the FED starts to raise rates,
12:06
Speaker 1: Bitcoin and gold don't pay any dividends or have any
12:11
Speaker 1: kind of return like that unless you use some funky
12:14
Speaker 1: yield farming strategies so why well, ultimately it will be
12:18
Speaker 1: inflation hedge. But look at gold in the last ten years,
12:21
Speaker 1: in the last twenty years, it hasn't been an inflation.
12:23
Speaker 1: Has has been a deflation. Has been working better with
12:25
Speaker 1: yields collapsing, and gold is kicking him right now finally
12:28
Speaker 1: because yields the thirty year drop alow and to one
12:31
Speaker 1: point nine four. Last night I got up and I
12:32
Speaker 1: looked at like, WHOA. So to me, what's happening is
12:35
Speaker 1: it's not inflation. Think of what it's going to take
12:37
Speaker 1: for the Fed. The raised rates. That's a dream right now,
12:40
Speaker 1: and it's started that. They're trying to warn us a
12:42
Speaker 1: litit because they remember what happened last time with the
12:44
Speaker 1: taper tantrum. It's just classic Fed. They have to do that.
12:47
Speaker 1: But they're still dreaming of raising rates. And then the
12:49
Speaker 1: key thing is if the stock market doesn't go up,
12:52
Speaker 1: deflation is the main problem. You see that most commodities,
12:55
Speaker 1: most of them peak crude oil is still a little
12:56
Speaker 1: bit higher here. Copper peaked at ten thousand dollars, But
12:59
Speaker 1: I kick in. Bitcoin is is replacing gold in portfolios
13:04
Speaker 1: in many cases, but it's not inflation yet. At some
13:07
Speaker 1: point we'll get there. I didn't know when that's what
13:09
Speaker 1: that's gonna take. But to me, until the stock market,
13:12
Speaker 1: until we get that past that pain, that that period
13:15
Speaker 1: when he had a little bit of an ebbing tide
13:16
Speaker 1: and you see, here's who's wearing clothes kind of kicked
13:19
Speaker 1: in maybe a little bit last week. Is I fully
13:21
Speaker 1: expect golden bitcoin being the two key asses wearing clothes
13:24
Speaker 1: because there's still that I feel that organic and see
13:27
Speaker 1: the organic demand below the market. All right, so we
13:29
Speaker 1: did see. I'm wondering, like for bitcoin, for those that
13:32
Speaker 1: don't fully understand it as a security, what is it
13:36
Speaker 1: most highly correlated with? Do you think? So what should
13:38
Speaker 1: people be looking at to say, gf bon yields go up?
13:42
Speaker 1: You know, bitcoins? I mean, how should I think about? So?
13:44
Speaker 1: How did you know what I'm researching right now on
13:46
Speaker 1: the bloom Bird portfolio? Potum, I'm I'm I'm working on
13:49
Speaker 1: what's called port that's our portfolio function that putting bitcoin
13:52
Speaker 1: with the bond market and just taking a US Treasury
13:55
Speaker 1: market portfolio and using bitcoin of ten percent and a
13:57
Speaker 1: lot of people here are doing that. Ray Dally as
14:00
Speaker 1: if you mentioned that he'd rather old bitcoin than bonds,
14:02
Speaker 1: it has zero correlation to most assets. Is a unique
14:05
Speaker 1: thing about it. Now when markets plunge like we did
14:07
Speaker 1: last year, everything has a high correlation to the stock mark,
14:09
Speaker 1: and that kicked in. You saw that with crude oil,
14:11
Speaker 1: saw that with bitcoin. But no, now it's coming back,
14:13
Speaker 1: and I think that's what people are doing looking forward. Okay,
14:16
Speaker 1: in a gold portfolio, now I have to have a
14:18
Speaker 1: little bitcoin because it's clearly replacing gold unless it fails.
14:21
Speaker 1: But if that trend continues, But in a in a
14:24
Speaker 1: in a in a bond portfolio, it's really a nice compliment.
14:28
Speaker 1: Say five to ten going forward, zero rates. If we
14:31
Speaker 1: do get inflation at some point, it should kick in.
14:34
Speaker 1: But if you look past performance, very low low correlation,
14:38
Speaker 1: it doesn't really add to volatively in the in the
14:40
Speaker 1: bond portfolio, but it gives you those much better returns.
14:43
Speaker 1: Now that's past performance looking forward. If it just keeps
14:46
Speaker 1: doing what it has been, which I'm too, I'm not
14:48
Speaker 1: smart at the fair to winning, it might change. It
14:50
Speaker 1: should be a good compliment. And for me that's what's happening.
14:52
Speaker 1: Every day that goes by that it doesn't fail, it
14:54
Speaker 1: becomes more legitimate. Yeah, is there a material risk that
14:59
Speaker 1: bitcoin fails. Yeah, well it lessens every day. It's some
15:03
Speaker 1: kind of you have to have I have to reconsider
15:05
Speaker 1: that because it's new technology something some kind of technological glitch,
15:09
Speaker 1: some kind of you know, the issue with energy where
15:11
Speaker 1: point out how strong it is. So every time you
15:14
Speaker 1: tryd of throw something at it, you kind of get
15:15
Speaker 1: used to them, like, okay, knocks the price down. Then
15:17
Speaker 1: you look around like, actually, that's a positive thing for bitcoin.
15:20
Speaker 1: So it's more likely to be beaten than fail, right,
15:22
Speaker 1: I mean that much more likely option is that, uh,
15:26
Speaker 1: the market chooses something else like either well that's the thing,
15:30
Speaker 1: and that's kind of like to say, okay, in a
15:32
Speaker 1: gold portfolio, you have to have bitcoin, but kind of now,
15:34
Speaker 1: don't have to have a little bit of THEORYM in that,
15:35
Speaker 1: because the THEORYM represents a whole building block of all
15:38
Speaker 1: defy and and decentralized financial and it's all risen. By
15:43
Speaker 1: the way, I'm a little confused. Well it's not that
15:47
Speaker 1: I'm confused, but there there are stories in China that
15:51
Speaker 1: are bad for bitcoin. They're shutting down miners apparently, and
15:54
Speaker 1: they're banning people from accepting it and using it, so
15:58
Speaker 1: it seems like China the government is against bitcoin. On
16:01
Speaker 1: the other hand, people in China own more bitcoin than
16:06
Speaker 1: people in most other countries, and all of these new
16:10
Speaker 1: unicorn businesses are popping up. I don't know if you
16:12
Speaker 1: read about a group of Morgan Stanley traders that started
16:15
Speaker 1: a company called Amber Group, which trades not only trades bitcoin,
16:20
Speaker 1: but authors a bunch of other fintech solutions with crypto.
16:24
Speaker 1: They have now a billion dollar valuation. Um there's a
16:28
Speaker 1: Chinese crypto lender, Babel Finance. They've raised forty million from
16:32
Speaker 1: investors like Sequoia and tiger Um. The list goes on
16:37
Speaker 1: and on of these new startups in Hong Kong and
16:40
Speaker 1: on the mainland. Does China love bitcoin? Is it the
16:43
Speaker 1: savior bitcoin? Or do they hate bitcoin? Are they terrified
16:46
Speaker 1: of matt What you described as very very short term
16:49
Speaker 1: bullish and long term very I'm sorry, short term barrass
16:52
Speaker 1: very long term bullis China pushing back and being agnostic
16:55
Speaker 1: towards the bitcoin makes a lot of sense. Authoritarian society,
16:59
Speaker 1: no free flow cap, do not allow their citizens to
17:01
Speaker 1: have free flow capital and any other currencies outside the
17:04
Speaker 1: currents of the country, and that makes a lot of sense.
17:07
Speaker 1: It's actually showing how how the strength of how good
17:09
Speaker 1: bitcoin is for countries like US and the rest Western world.
17:13
Speaker 1: We have free coal, free flow capital, and discourse where
17:16
Speaker 1: you can exchange different currencies. So it's a savior for
17:19
Speaker 1: a lot of Chinese citizens. So they're trying to hide
17:21
Speaker 1: it from the government, but it's also extolling the problem
17:24
Speaker 1: Chinese really going backwards the last few years and many
17:27
Speaker 1: people with President Zy this whole concept of trying to
17:30
Speaker 1: you know, eliminate corruption. You know what that means, he's
17:33
Speaker 1: just bringing people who agree with him. So it's to me,
17:35
Speaker 1: what's happening to China is very bullish book for bitcoin.
17:38
Speaker 1: In the short term, it's miners have to leave, they
17:40
Speaker 1: have to sell because they're getting a little discombobulated. But
17:43
Speaker 1: they're moving more to more renewable sources, a lot of
17:45
Speaker 1: it North America. Gasler in Canada is one of the
17:49
Speaker 1: top attractions right now, and it's all going renewable anyhow
17:52
Speaker 1: because of the costs. So I look at what happened
17:54
Speaker 1: in China is just that's that's the new Cold War
17:58
Speaker 1: and US has already winning organic. All right, Mike, thanks
18:01
Speaker 1: so much, always great check in with you on Bitcoin,
18:04
Speaker 1: Mike mcgloan there Bloomberg Commodities. We've been talking about inflation
18:12
Speaker 1: a lot recently in the market is trying to get
18:14
Speaker 1: a handle on is it good inflation or perhaps something
18:17
Speaker 1: more longer term and if so, how problematic is that
18:21
Speaker 1: for the market. Let's check in with Brian wash He's
18:23
Speaker 1: a financial advisor at Walsh and Nicholson Financial Group. Brian,
18:28
Speaker 1: if I'm really concerned about evaluation, I'm sorry, inflation. Should
18:32
Speaker 1: I just go out and buy gold as a hedge
18:36
Speaker 1: boarding and thanks for having me? And my answer to
18:39
Speaker 1: that is no. UM. When you actually look at gold
18:42
Speaker 1: when it was supposed to work in inflationary environment UM
18:46
Speaker 1: in more recent times, and it hasn't UM. When you
18:50
Speaker 1: look at UM, the the correlation with gold to the
18:54
Speaker 1: equity market that has increased over time. So gold is
18:58
Speaker 1: a great buffer when you have a market sell off
19:02
Speaker 1: UM like like we have back in March of last year.
19:04
Speaker 1: But we're talking about inflation and future inflation. It has
19:08
Speaker 1: not provided a great hedging strategy and in fact UM
19:12
Speaker 1: we at our firm, we are more inclined to look
19:16
Speaker 1: towards commodities such as sugar and wet UM to hedge
19:21
Speaker 1: inflation as it has proved this year to work much
19:24
Speaker 1: better than gold, so you think commodity is also better
19:28
Speaker 1: than And by the way, speaking of commodities, did you
19:31
Speaker 1: look at oils? Yeah? Thanks for you know, we've been
19:34
Speaker 1: looking at this morning, but it just spiked up here.
19:36
Speaker 1: We've got w t I crude oil two dollars an ounce.
19:40
Speaker 1: I'm a barrel that's up a dollar twenty barrel. It's
19:43
Speaker 1: up almost one percent, So big move up there. Yeah,
19:46
Speaker 1: Brent up one and a half percent to seventy fifty barrel,
19:50
Speaker 1: so big moves up in commodities. What about equities? UM?
19:55
Speaker 1: I wonder Brian, can can you make an argument for
19:58
Speaker 1: equities as good as a good inflation edge? Do you
20:00
Speaker 1: have to look at certain industry groups? Yeah? So, I
20:06
Speaker 1: mean right now, there's really nowhere else to go. I mean,
20:09
Speaker 1: you have to be in the equity market. You have
20:10
Speaker 1: a supportive you have support of UM physical and monetary policy,
20:15
Speaker 1: UM fixed income is it gonna give you really anything?
20:18
Speaker 1: Right now? So there really is no place else to
20:21
Speaker 1: go other than the equity markets. But if you're looking
20:23
Speaker 1: to hedge inflation UM very similar to hedging interest rates.
20:27
Speaker 1: You know you need to look at quality companies who
20:29
Speaker 1: have who have a history of increasing their dividends. UM.
20:33
Speaker 1: If you have that and you have higher commodity prices,
20:36
Speaker 1: higher inflation, higher interest rates, those types of companies will
20:40
Speaker 1: fare a lot better. UM. And when you have these
20:43
Speaker 1: high inflationary environments, these high interest rate environments, you need
20:46
Speaker 1: to have cash on hand. UM. Now is not the time,
20:50
Speaker 1: in our opinion, to be barreling into growth stocks. UM.
20:53
Speaker 1: We think you need to have quality on the balance sheet, UM,
20:56
Speaker 1: quality in your portfolio, and and position a wordingly for
21:00
Speaker 1: for higher interest rates and higher inflation. And you know,
21:05
Speaker 1: short term, obviously we're seeing what the fintas clung a
21:07
Speaker 1: transitory inflation every move. Um. We believe that it's not transitory.
21:12
Speaker 1: We think we're gonna see it continue um through into
21:17
Speaker 1: three and I think that's when you're gonna start seeing
21:19
Speaker 1: it effect Um the equity markets in a in a bigger,
21:22
Speaker 1: bigger way. Bryan, are you You've you've been in this
21:24
Speaker 1: game a while here, You've got some experience. When you
21:27
Speaker 1: see valuations where they are today, when you see you know,
21:31
Speaker 1: meme stock trading, you know kind of the Reddit traders,
21:35
Speaker 1: when you see SPACs exploding in the end of last
21:37
Speaker 1: year beginning of this year. Does that suggest to you
21:40
Speaker 1: that there's a lot of froth in this market? I
21:42
Speaker 1: better be a little bit careful. Absolutely, I mean, UM,
21:48
Speaker 1: there's no doubt about it. I have people calling me
21:50
Speaker 1: who have never had questions before about investments calling me
21:54
Speaker 1: asking them about a m C and game stop in bitcoin.
21:57
Speaker 1: So UM, anytime, you know, for me, I see some people, UM,
22:01
Speaker 1: you know, reaching out regarding certain things, Um, you have
22:05
Speaker 1: to start to wonder. And it's across the board. I mean,
22:07
Speaker 1: there's nothing in this marketplace right now, at least on
22:11
Speaker 1: the US side, that is trading uh in any capacity. Um,
22:16
Speaker 1: that's justified everything to me, you know, is is just
22:21
Speaker 1: a lot of pent up demand, pent up cash that
22:23
Speaker 1: people want to spend. UM. And you know they're they're
22:27
Speaker 1: riding the federal uh FED policy wave right now. And UM,
22:32
Speaker 1: I I really, I truly believe um that you know,
22:36
Speaker 1: the rest of this year will probably be pretty decent
22:39
Speaker 1: frequity markets. But once two comes around, UM, I think
22:44
Speaker 1: you're gonna see that valuation bubble um start to start
22:48
Speaker 1: to dissipate a little bit. But nothing just dissipate, right,
22:51
Speaker 1: not pop I mean, you co founded walshon Nicholson, so
22:54
Speaker 1: you've been through a real bubble. We see big text
22:59
Speaker 1: docs with huge valuations. You don't think this is gonna
23:02
Speaker 1: be you know, Like again, well, I think it depends
23:07
Speaker 1: on where you're looking. I mean I think, um, you know,
23:09
Speaker 1: some companies, um, you know, it's a fair better. I
23:13
Speaker 1: mean I think you know, when you look at Amazon, Google's,
23:15
Speaker 1: Microsoft's of the world, Um you know. No, I don't
23:18
Speaker 1: think you're gonna see a pop there. I mean, those
23:20
Speaker 1: are companies that have overtaken our world and overtaken our
23:23
Speaker 1: our you know, the public um interest in general. But
23:28
Speaker 1: some of these smaller UM tech companies with these crazy valuations,
23:32
Speaker 1: UM yeah, I do think you're gonna see um, you know,
23:35
Speaker 1: more of a pop there. So I think on the
23:38
Speaker 1: on the large end, large cap end of the tech market,
23:41
Speaker 1: it's more of a distipate distipating um reset versus the
23:45
Speaker 1: small and mid cap end. Is is definitely gonna see
23:48
Speaker 1: some the broad of the down the downtre and there.
23:52
Speaker 1: All right, Brian, very cool to get your take. Thanks
23:54
Speaker 1: so much for joining us. Brian Walsh, financial advisor at
23:56
Speaker 1: Walsh and Nicholson talking to us about markets. Thanks for
24:02
Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
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Speaker 1: listen to interviews of Apple Podcasts or whatever podcast platform
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Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt
24:13
Speaker 1: Miller three and on Fall Sweeney. I'm on Twitter at
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Speaker 1: pt Sweeney. Before the podcast, you can always catch us
24:19
Speaker 1: worldwide at Bloomberg Radio