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Markets, Diamonds, And Autonomous Driving · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast
• 0:15
  Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. I want to get
• 0:22
  Speaker 1: um straight back to markets here. The volatility has been
• 0:26
  Speaker 1: uh uh really, I don't want to say unprecedented, but
• 0:30
  Speaker 1: it's been unique certainly. And uh it's come through commodity,
• 0:35
  Speaker 1: from commodities, through rates into stocks and Um, right now
• 0:39
  Speaker 1: we're gonna talk to somebody who has to put his
• 0:42
  Speaker 1: money where his mouth is. Phil Palumbo is the CEO
• 0:45
  Speaker 1: of Palumbo Wealth Management. Um, how do you deal with
• 0:48
  Speaker 1: this kind of situation? Phil? How do your clients deal
• 0:51
  Speaker 1: with this kind of volatility? Well? First, I think you
• 0:54
  Speaker 1: know you have to. You have to put it on
• 0:56
  Speaker 1: the table that we could bank on the recession at
• 0:58
  Speaker 1: the end of twenty two, if not the beginning of
• 1:01
  Speaker 1: the way I look at it, the binary decision for
• 1:04
  Speaker 1: the FET it's either he's going to let inflation run
• 1:06
  Speaker 1: or he's gonna have to step in and raise interest
• 1:07
  Speaker 1: rates aggressively, and he doesn't want to do both, which
• 1:10
  Speaker 1: tells me that it's going to be a hard landing
• 1:12
  Speaker 1: versus a soft landing, which is going to create increased
• 1:15
  Speaker 1: volatility and eventually put us into a recession. And so
• 1:18
  Speaker 1: how do you invest around that given that there are
• 1:21
  Speaker 1: so many uncertainties. I mean, it feels like a fifty
• 1:24
  Speaker 1: basis point hike next week has been all but ruled out,
• 1:27
  Speaker 1: but where the FED goes from there is still a question.
• 1:29
  Speaker 1: Like Matt was saying earlier, I think there's still six
• 1:31
  Speaker 1: hikes are so priced into the next year, but again seven,
• 1:36
  Speaker 1: So look at WORP, W I RP, going do I
• 1:39
  Speaker 1: spend a lot of time on that page just staring
• 1:41
  Speaker 1: at the numbers, not quite sure what to make of it.
• 1:43
  Speaker 1: But each number represents a basis basis hike, basis point hike. Okay, okay,
• 1:50
  Speaker 1: So point being there that you know there's still seven
• 1:53
  Speaker 1: hikes priced in, but you have started to see some
• 1:56
  Speaker 1: chatter that those bets could be paired back. How do
• 1:59
  Speaker 1: you position your portfolio around that those bets will will
• 2:02
  Speaker 1: be paired back? The fact is not gonna be able
• 2:04
  Speaker 1: to raise rates seven times will be in a recessment
• 2:06
  Speaker 1: before that happens. So in the meantime, I've been very
• 2:08
  Speaker 1: vocal about to see when I was on your show,
• 2:10
  Speaker 1: two evaluations were aggressively high, whether it's the high flying technology,
• 2:14
  Speaker 1: the technology sector, or even just d SMP five DRED,
• 2:17
  Speaker 1: So those were opportunities to reduce risk and rebound portfolios.
• 2:21
  Speaker 1: So if you're a fully invested investor, and you've been
• 2:23
  Speaker 1: over the past three plus years, you actually performed well
• 2:26
  Speaker 1: Project two. If you didn't take risk off the table
• 2:29
  Speaker 1: any type of big run ups in the markets like
• 2:31
  Speaker 1: we saw yesterday, which will happen during these situations, you
• 2:34
  Speaker 1: should reduce risk from your portfolio. That's number one. Number
• 2:37
  Speaker 1: two you should be looking at heads equity strategies within
• 2:40
  Speaker 1: your equity portfolio to protect you on the downside. Three
• 2:44
  Speaker 1: is you should have gold and you should have commodities,
• 2:46
  Speaker 1: which have been always very vocal with that. Within a
• 2:48
  Speaker 1: balanced portfolio, gold and commodities when inflation accelerates does really well,
• 2:53
  Speaker 1: and history going back to an eight proves that, and
• 2:56
  Speaker 1: gold is a hedge against stocks going down. So if
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  Speaker 1: you're truly balance properly, which most people are not, this
• 3:02
  Speaker 1: is the thing that you can be doing to help
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  Speaker 1: counter balance risk when we do enter in a recession
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  Speaker 1: at some point at the end of twenty two in
• 3:08
  Speaker 1: the beginning of twenty three. So what you're saying, we're
• 3:11
  Speaker 1: now an environment where you want to sell the rallies
• 3:13
  Speaker 1: rather than buy the dip. Absolutely, you sell the rip
• 3:15
  Speaker 1: and you don't buy the dip in this environment. However,
• 3:17
  Speaker 1: the only thing I will say though, is that for
• 3:19
  Speaker 1: new money, which have a lot of clients that sold
• 3:20
  Speaker 1: businesses and have new capital, this is the best time
• 3:23
  Speaker 1: to come into new money, right because you're getting the
• 3:25
  Speaker 1: opportunity to be able to build out a portfolio when
• 3:28
  Speaker 1: you've got valuations that are declining here, right, So this
• 3:31
  Speaker 1: is gonna be a great opportunity to buy stocks of
• 3:33
  Speaker 1: great businesses at a cheaper level. So for new money,
• 3:36
  Speaker 1: it's excellent. You know. For fully invested investors, you know
• 3:39
  Speaker 1: you're gonna be in for some pain again. Hopefully you
• 3:42
  Speaker 1: did some rebalancing and you and you have a properly
• 3:45
  Speaker 1: balanced portfolio to help you muscle through this. Can we
• 3:48
  Speaker 1: talk about the yield curve a little bit, because I'm
• 3:50
  Speaker 1: looking at the twos tens spread. It got below twenty
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  Speaker 1: basis points earlier this week, you know, a few banks
• 3:58
  Speaker 1: or at least one bank has suggested it could invert
• 4:00
  Speaker 1: it in the next week or so. How much of
• 4:02
  Speaker 1: the signal are you taking from that tremendous amount of signals?
• 4:05
  Speaker 1: So Green Spin always said, tell me where the tenure is,
• 4:08
  Speaker 1: and I'll tell you where the where the where the
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  Speaker 1: where the economy is going. I say, tell me where
• 4:11
  Speaker 1: the yield curve is. I'll tell you where the economy
• 4:13
  Speaker 1: is going. The yield curve is flat, continue continues to
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  Speaker 1: flatten out around twenty three basis points. The two is
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  Speaker 1: intend that is going to invert. Somebody on TV just
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  Speaker 1: the other day just said if it inverts this time,
• 4:22
  Speaker 1: it's different. We're not going to go with the recess.
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  Speaker 1: And I think that's ridiculous. The track records accurate. And
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  Speaker 1: then if you take that and you put on top
• 4:29
  Speaker 1: of that forty year high inflation data a fetter reserve,
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  Speaker 1: that's gonna have to raise interest rates. We're coming off
• 4:35
  Speaker 1: extreme valuations before. When you put it all together and
• 4:40
  Speaker 1: connect the dots, I just don't see how you know,
• 4:43
  Speaker 1: we don't like I keep on saying, you know, enter
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  Speaker 1: into recession. So yield curve. To answer your question, is
• 4:47
  Speaker 1: one of the most important aspects of of of the
• 4:51
  Speaker 1: of the data points in terms of where we're going
• 4:54
  Speaker 1: with the economy. I just want to quickly get an
• 4:57
  Speaker 1: example of a hedge equity strategy. We're not getting too
• 4:59
  Speaker 1: deep in the weeds, the options weeds. What do you uh,
• 5:03
  Speaker 1: what would you advise? So what we did as a
• 5:06
  Speaker 1: firm is we spoke this, uh this this company called
• 5:09
  Speaker 1: a Little Harbor. They have an e t F called
• 5:11
  Speaker 1: MSTB Mary Sam Thomas Boy. Essentially, what they do they
• 5:15
  Speaker 1: long d SMP five hundred and they use options vixed
• 5:18
  Speaker 1: through VIX futures to to hedge out the equity side
• 5:22
  Speaker 1: of it. So about of our equity portfolios in this
• 5:26
  Speaker 1: particular exchange traded fund. We did this transaction September October
• 5:31
  Speaker 1: one and we're still along at right now. So the
• 5:34
  Speaker 1: thought is, if we do hit a recession, we go
• 5:35
  Speaker 1: into a bear market, we hope that they'll do what
• 5:38
  Speaker 1: they're supposed to do. Right, Um, that's number one. Typically
• 5:42
  Speaker 1: we before that we had spy on that of our
• 5:45
  Speaker 1: clients portfolios. So now we just moved that to the
• 5:48
  Speaker 1: ms TWB to hedge out the the SNP five hundred,
• 5:51
  Speaker 1: so that's what we're using. We don't use any types
• 5:53
  Speaker 1: of collars on our equity strategies or we don't buy puts,
• 5:56
  Speaker 1: you know, so we don't do any of the individual options.
• 5:58
  Speaker 1: We depend on other managers to do that for us.
• 6:01
  Speaker 1: And just quickly, I mean, how is that strategy been
• 6:03
  Speaker 1: playing out? If I look at the VIX right now,
• 6:05
  Speaker 1: it's spent most of March above thirty with this particular
• 6:09
  Speaker 1: strategy of the sup full is greater than ten toll percent,
• 6:12
  Speaker 1: then the VIX the the options or uh, the risk
• 6:16
  Speaker 1: on it down so we will actually kick in. So
• 6:18
  Speaker 1: it's pretty much been fun with the SPV SPF just
• 6:21
  Speaker 1: been doing from pete to trough so far. So it
• 6:23
  Speaker 1: really hasn't kicked in yet. It's only if you get
• 6:25
  Speaker 1: a major waterfall decline where really will click, will click
• 6:29
  Speaker 1: and protected that piece of the portfolio. Alright, Phil, great
• 6:33
  Speaker 1: to get some time with you, very interesting stuff. Thanks
• 6:36
  Speaker 1: so much for joining us. Phil Palumbo there who runs
• 6:39
  Speaker 1: his own fun Palumbo Wealth Management and UM it used
• 6:43
  Speaker 1: to be at UBS, spent years a decade at UBS,
• 6:46
  Speaker 1: and before that was at Morgan Stanley. So it's the
• 6:48
  Speaker 1: guy who knows what he's talking about. Very interesting m
• 6:51
  Speaker 1: edging strategy. Let's talk about cars. I'm ready, Really we're
• 7:01
  Speaker 1: going to talk about light oar Angus Pacola joins us,
• 7:04
  Speaker 1: co founder and CEO of Auster And if you didn't know,
• 7:09
  Speaker 1: Austa is one of the hottest light our companies out
• 7:12
  Speaker 1: there right now, went public vias back in one and Angus,
• 7:16
  Speaker 1: it's great to have you on the program. Um. I'm
• 7:19
  Speaker 1: still trying to get my head around sort of light
• 7:24
  Speaker 1: our versus Tesla um test because Tesla says they don't
• 7:29
  Speaker 1: want to use lighter but they have had partnerships and
• 7:32
  Speaker 1: light our companies. Why why is light are important? Right now? Sure?
• 7:38
  Speaker 1: And before I answer that, I just want to give
• 7:40
  Speaker 1: a brief kind of perspective on Auster and what we're
• 7:43
  Speaker 1: doing in light are that stands apart and really Outster
• 7:46
  Speaker 1: is the digital light our company building digital chips that
• 7:50
  Speaker 1: transform a legacy analog technology into the digital future. And
• 7:55
  Speaker 1: and on the performance of benefits and affordability of digital technology.
• 7:59
  Speaker 1: We diversus right, diversified across markets. So what what Tesla
• 8:05
  Speaker 1: is lacking? And I think that what what Lighter brings
• 8:08
  Speaker 1: to the table is an absolute trust in data quality
• 8:13
  Speaker 1: UM that that is not there with cameras. So what
• 8:18
  Speaker 1: you see from Tesla is they've gotten in some hot
• 8:20
  Speaker 1: water because occasionally, and it is occasionally, the cars get
• 8:24
  Speaker 1: confused with camera technology because cameras, because cars are basically
• 8:29
  Speaker 1: because Tesla UM has neural networks to try and decipher
• 8:33
  Speaker 1: what they see in video, right like humans, but they're
• 8:35
  Speaker 1: not as good exactly right, Yeah, So a camera needs
• 8:38
  Speaker 1: a neural network in order to interpret its environment UM,
• 8:42
  Speaker 1: and that sometimes gets confused, and so it sometimes crashes.
• 8:46
  Speaker 1: And that's really that's a really challenging UM situation to
• 8:49
  Speaker 1: be in if you want to go to full autonomy,
• 8:51
  Speaker 1: where people aren't paying attention and they get to fall
• 8:53
  Speaker 1: suits in their cars. Lighter, on the hand, other hand,
• 8:56
  Speaker 1: directly measures the information that you care about with no
• 8:59
  Speaker 1: additional post processing, and it does it so reliably that
• 9:03
  Speaker 1: Lighter is already used in safety critical environments across the
• 9:07
  Speaker 1: world like industrial settings UM and and it's trusted to
• 9:11
  Speaker 1: save people's lives day in and day out and has
• 9:14
  Speaker 1: for about thirty years in the industrial setting. So Lighter
• 9:17
  Speaker 1: doesn't get confused and you can truly trust the data
• 9:20
  Speaker 1: with your life, and so Tesla aside. I mean, what
• 9:23
  Speaker 1: does adoption of light ar look like? Yeah, and that's
• 9:29
  Speaker 1: that's really um So lidar is the third and kind
• 9:33
  Speaker 1: of last critical sensing technology after cameras and ratear. Sensors
• 9:38
  Speaker 1: and light are because you can trust your life on it,
• 9:41
  Speaker 1: and because it's so effective at understanding the true and
• 9:45
  Speaker 1: rich three D environment around anything any machine, whether it's rolling, flying, driving,
• 9:50
  Speaker 1: or monitoring those moving objects. It's the perfect sensor for
• 9:54
  Speaker 1: bringing our entire world into the autonomy age. And I
• 9:58
  Speaker 1: think of it as it's like finally realizing the future
• 10:01
  Speaker 1: that the Jetsons the Jetsons TV show laid out. So
• 10:05
  Speaker 1: flying cars drive and robots that delivery packages, um, safer
• 10:09
  Speaker 1: cross crosswalks with lower congestion at intersections, and yes, self
• 10:14
  Speaker 1: driving cars are all made possible because of lighter technology
• 10:18
  Speaker 1: in combination with the autonomy technology stack that rides above it.
• 10:22
  Speaker 1: And so it's a really fantastic, safer, cleaner, less congested,
• 10:26
  Speaker 1: more efficient, higher quality of life future that we're building
• 10:30
  Speaker 1: through a combination of lighter sensors and and affordable autonomy technology.
• 10:35
  Speaker 1: It does make sense. I mean from what you're saying,
• 10:38
  Speaker 1: it makes sense to me to combine it with video
• 10:42
  Speaker 1: and you don't need I guess, radar UM and and
• 10:45
  Speaker 1: the neural network. But what Tesla says is that you
• 10:48
  Speaker 1: have to pre map the environment with a light ar
• 10:51
  Speaker 1: and then create a high dep map and then insert
• 10:54
  Speaker 1: the lanes. And if you have to do that, it
• 10:56
  Speaker 1: seems like a lot of computing power. Yeah, I think
• 11:00
  Speaker 1: that's just kind of that that's that's the legacy way
• 11:03
  Speaker 1: of thinking about it. But most companies using LIDER today
• 11:07
  Speaker 1: don't pre map, and they do similar things. It's a
• 11:10
  Speaker 1: similar software stack and algorithmic stack to camera technology, but
• 11:16
  Speaker 1: they don't have to rely as heavily on machine learning UM,
• 11:19
  Speaker 1: which is great. Machine learning is great at distinguishing between
• 11:22
  Speaker 1: a hot dog and your cat in an image nine
• 11:25
  Speaker 1: percent of the time, but it's not great at doing
• 11:29
  Speaker 1: a hundred percent of the time and an auto and
• 11:31
  Speaker 1: then you know, when when human life is involved, you
• 11:34
  Speaker 1: want to be able to do it a d percent
• 11:35
  Speaker 1: of the time. Solider allows you to remove some of
• 11:39
  Speaker 1: the fancy machine learning, trust the data with your life,
• 11:42
  Speaker 1: just kind of the raw data coming out of the sensor,
• 11:44
  Speaker 1: but also apply some of the learnings that we've gotten
• 11:47
  Speaker 1: from the camera world. So you know, we don't have
• 11:49
  Speaker 1: to pre map anymore. That's not what companies are doing today.
• 11:52
  Speaker 1: It is what companies thought about doing five years ago,
• 11:54
  Speaker 1: but the industry has moved on from that, and I
• 11:56
  Speaker 1: think TUSSA was just kind of right in not premapping,
• 12:00
  Speaker 1: And so I solicited questions from our Blueberg news Print
• 12:03
  Speaker 1: team about what to ask you. And Andrew Grant said
• 12:06
  Speaker 1: that the most important question for lighter companies right now
• 12:09
  Speaker 1: is whether A d S or a v S are
• 12:11
  Speaker 1: the most important market. A d S a d a
• 12:15
  Speaker 1: S being advanced driver assistant systems, a VS being autonomous vehicles.
• 12:20
  Speaker 1: Which of those markets do you see is more important
• 12:22
  Speaker 1: for your company? Yeah, well, well this is one of
• 12:26
  Speaker 1: the places that OUST stands apart. So we've built this
• 12:29
  Speaker 1: more affordable, more performance digital lighter technology, putting lighter onto
• 12:33
  Speaker 1: literally one silicon chip, and that's allowed us to diversify
• 12:36
  Speaker 1: across many different applications and automotive, industrial, smarter prastruction, robotics,
• 12:41
  Speaker 1: and so we actually aren't trying to bet on whether
• 12:45
  Speaker 1: a v S or eight ASS is the more important
• 12:48
  Speaker 1: market because we're playing in both. Our products are literally
• 12:50
  Speaker 1: good enough to play in both, just like digital cameras
• 12:53
  Speaker 1: are able to play in the eight ASS market and
• 12:56
  Speaker 1: the AD market. Digital cameras go on telephone poles and
• 12:59
  Speaker 1: they also go on the drones that are flying on bars. Um.
• 13:02
  Speaker 1: So digital technology is so flexible you can address all
• 13:04
  Speaker 1: these markets. And I actually am a big believer in
• 13:07
  Speaker 1: both ADAS and a v s now eight AS I
• 13:10
  Speaker 1: think is the sure bet with huge volumes, and it's
• 13:14
  Speaker 1: it's more clear on how eight AS is moving from
• 13:17
  Speaker 1: L two plus hands on driver aware systems to L
• 13:21
  Speaker 1: three driver you know, hands free, eyes free systems, and
• 13:25
  Speaker 1: they're lighter plays a huge part and allowing a person
• 13:28
  Speaker 1: in the car to take notes on the way to
• 13:30
  Speaker 1: work and be hands free, eyes free. Um. But lighter
• 13:33
  Speaker 1: is also the critical sensing technology on autonomous vehicles and
• 13:37
  Speaker 1: in many cases it's the only sensor on an autonomous vehicle. UM.
• 13:42
  Speaker 1: And so that's going to happen. But I think it's
• 13:44
  Speaker 1: a little less because apes are such a high bar
• 13:48
  Speaker 1: in terms of technology and reliability. Are Our veteran war
• 13:51
  Speaker 1: reporter Greg Jarrett Angus points out that light ar is
• 13:54
  Speaker 1: extremely helpful in military applications. Do you, um, do you
• 13:59
  Speaker 1: see a big market there as well? Yeah, that's absolutely right.
• 14:03
  Speaker 1: So um, lighter can be incredibly useful in situations like convoying.
• 14:08
  Speaker 1: You know, there's a huge amount the number of support
• 14:11
  Speaker 1: vehicles in the military is far greater than the number
• 14:15
  Speaker 1: of active kind of UH fighting vehicles. And that's where
• 14:19
  Speaker 1: most casualties happen in wars, and the supply chain, and
• 14:22
  Speaker 1: so there's immense opportunities to automate a supply chain. Um,
• 14:26
  Speaker 1: these vehicles should be automated. It's fuel trucks, it's it's
• 14:29
  Speaker 1: food trucks with all kinds of supply vehicles that historically
• 14:32
  Speaker 1: have been hit by their their I D s and
• 14:35
  Speaker 1: things like that, and you really would like those vehicles
• 14:38
  Speaker 1: just be autonomous. It's so fascinating. I wish we had
• 14:41
  Speaker 1: more time, Angus. Hopefully we can get you back. Thanks
• 14:44
  Speaker 1: so much for joining us and Angus. Pacola there the
• 14:47
  Speaker 1: CEO of ALSTA. Let's get over now to Dave Harden.
• 14:53
  Speaker 1: He is the founder and president of Summit Global Investors. Dave,
• 14:59
  Speaker 1: what do you take from the kind of alatility that
• 15:01
  Speaker 1: we've seen, you know, wash through commodities because of this
• 15:04
  Speaker 1: war um in two rates and and kind of you know,
• 15:09
  Speaker 1: on this side of the Atlantic, it hasn't rocked the
• 15:11
  Speaker 1: equity markets as much as it has on the other side,
• 15:13
  Speaker 1: but we still were, uh, you know, down three percent
• 15:17
  Speaker 1: on Monday, up three percent yesterday, now we're down again today.
• 15:21
  Speaker 1: How do you deal with this? Well, you know, this
• 15:24
  Speaker 1: volatility has made everybody understand that risk is important, right,
• 15:28
  Speaker 1: So people people need to understand that risk management is
• 15:31
  Speaker 1: essential to having better portfolios. And the better they understand
• 15:35
  Speaker 1: what's in their portfolio, the better of the portfolio performers
• 15:38
  Speaker 1: they hope. So having some exposure right now the commodities
• 15:41
  Speaker 1: or word overweight energy, I think those things are very
• 15:44
  Speaker 1: prudent in the portfolio. And maybe some people might even
• 15:46
  Speaker 1: say energies. The more defense you heard, the you know,
• 15:49
  Speaker 1: the expert come on and say, hey, I think it's
• 15:51
  Speaker 1: gonna be here and settle into this range. And there's
• 15:53
  Speaker 1: a lot of truth to that. So it's really hard
• 15:55
  Speaker 1: to go to somebody like Venezuela. It's really hard to
• 15:57
  Speaker 1: go to somebody out there that you know, we haven't
• 15:59
  Speaker 1: really been friends with with Iran and switch hands from
• 16:02
  Speaker 1: one dictator to another dictator. So from our standpoint, I
• 16:05
  Speaker 1: think you have to have some commodity exposure, energy exposure
• 16:08
  Speaker 1: in your portfolio, and our models, from a quantitative perspective,
• 16:12
  Speaker 1: from a risk perspective, all tell us and a fundamental
• 16:15
  Speaker 1: outlook that having some of that exposure is important, but
• 16:18
  Speaker 1: it's gonna be volatile. So I think in a volatile
• 16:21
  Speaker 1: market you have to look for things to protect the
• 16:24
  Speaker 1: down and still get some of the upside. You know,
• 16:27
  Speaker 1: mathematically people forget that if you only went down half
• 16:30
  Speaker 1: of what the market went down every day, you would
• 16:32
  Speaker 1: only need to go up six in the up market
• 16:36
  Speaker 1: to outperform. So it's a lot better to try to
• 16:39
  Speaker 1: protect in volatility than it is trying to get that upside.
• 16:43
  Speaker 1: You know, when the market's up to I want to
• 16:44
  Speaker 1: be up two point two. That's a lot harder to
• 16:47
  Speaker 1: do and you get crushed on the down. So my
• 16:49
  Speaker 1: advice and volatility is start to look at risk and
• 16:52
  Speaker 1: start to manage risk. And you can find that in
• 16:55
  Speaker 1: some defensives right now. You can find that in health
• 16:57
  Speaker 1: care right now. So that's some of the things that
• 17:00
  Speaker 1: we're doing for our clients. And if we are six
• 17:02
  Speaker 1: short days away from the FED meeting, and the narrative
• 17:05
  Speaker 1: for a few months now has been you know, the
• 17:07
  Speaker 1: FED put is dead. You're not going to see the
• 17:09
  Speaker 1: central bank come in and prop up asset prices. But
• 17:13
  Speaker 1: I mean the SMP five hundred flirting with correction territory.
• 17:17
  Speaker 1: At what point do you think that makes FED policymakers blink? Well, um,
• 17:23
  Speaker 1: they blinked when we when Russia invaded Ukraine. Remember that Thursday.
• 17:28
  Speaker 1: They came out and there was so much FED speak.
• 17:30
  Speaker 1: They were almost scared. And I'm putting in my language here.
• 17:34
  Speaker 1: I don't want to put words in their mouth, but
• 17:36
  Speaker 1: they were almost scared to see a negative three and
• 17:38
  Speaker 1: a half percent down day. They had to come out
• 17:41
  Speaker 1: and talk about that they might not raise interest rates
• 17:43
  Speaker 1: as much and they might not do this. And we
• 17:45
  Speaker 1: saw that swing negative three and a half percent to
• 17:48
  Speaker 1: positive three and a half percent. Why only because the
• 17:52
  Speaker 1: FED right, So we've already seen them blink. They're they're
• 17:55
  Speaker 1: absolutely worried about this market. And I'm not saying they
• 17:59
  Speaker 1: shouldn't be, but the BED making a mistake, a policy mistake,
• 18:04
  Speaker 1: has definitely increased because of what's going on in the
• 18:07
  Speaker 1: world today. Their their vision is not as clear. It's cloudy.
• 18:11
  Speaker 1: If you will inflation, I mean seven point nine. Really,
• 18:15
  Speaker 1: what does it matter if it's seven point nine or
• 18:17
  Speaker 1: eight or set the point is seven inflation, that's the point.
• 18:22
  Speaker 1: So they are backed into a corner um and this
• 18:26
  Speaker 1: creates a lot of problems and it increases the larger
• 18:30
  Speaker 1: downside risks. Again another reason why for our clients as
• 18:34
  Speaker 1: a whole, you need to look at managing risks. We
• 18:38
  Speaker 1: we do see the market is priced in a lot
• 18:43
  Speaker 1: of of of hikes and I guess we'll talk with
• 18:46
  Speaker 1: you about that a little bit later, David. Great having
• 18:48
  Speaker 1: you on the program, Dave Harden talking to us about
• 18:51
  Speaker 1: what we're seeing. Now, now let's get over to Amos Shaw,
• 18:58
  Speaker 1: the president of A. L. T R. Creed Diamonds, and
• 19:02
  Speaker 1: you know, we've seen such incredible swings in commodity prices, Amish,
• 19:07
  Speaker 1: I wonder if the diamond industry has been hit the
• 19:10
  Speaker 1: same way as um the moves we've seen in oil
• 19:15
  Speaker 1: or in gold, et cetera. Even though, of course the
• 19:20
  Speaker 1: kind of diamonds that that you're creating are different than
• 19:23
  Speaker 1: the kind that are mined. So the overall diamond industry
• 19:28
  Speaker 1: in the inflationary situation in the last six months has
• 19:32
  Speaker 1: already seen almost like a price increase. However, with the
• 19:37
  Speaker 1: current situation of conflict with the Russia being almost of
• 19:42
  Speaker 1: the diamonds in circulation in about twy of new production
• 19:47
  Speaker 1: that comes in the system is everywhere from those areas.
• 19:51
  Speaker 1: Um there is no direct sanctions on diamonds, the sanctioned
• 19:55
  Speaker 1: around the bank as well as the CEO. However, it's
• 19:59
  Speaker 1: the consumers sentiment that's going to make the most difference.
• 20:03
  Speaker 1: So with the consumers starting to talk about it, I
• 20:06
  Speaker 1: think we're expecting a price search in a tightening of supply. Wow,
• 20:12
  Speaker 1: I mean we all. I feel like it's been well broadcast.
• 20:15
  Speaker 1: How big of a supplier of you know, energy of
• 20:17
  Speaker 1: natural gas Russia is haven't heard as much about diamonds.
• 20:21
  Speaker 1: And it's interesting that this is happening at the same
• 20:24
  Speaker 1: time as you know, we're heading into a so called
• 20:27
  Speaker 1: wedding boom. I don't know. If I look at my mailbox,
• 20:30
  Speaker 1: I've gotten so many safe the dates for the coming year,
• 20:33
  Speaker 1: how because they were put off for two years exactly exactly. So,
• 20:38
  Speaker 1: I mean the fact that you do have you know
• 20:40
  Speaker 1: already you're seeing these price increases given the demand obviously
• 20:44
  Speaker 1: is growing as well. I mean, how how much higher
• 20:48
  Speaker 1: do you think the prices could naturally go? Here? I
• 20:52
  Speaker 1: think the consumer sentiment could rise this anything between ten. However,
• 20:58
  Speaker 1: UM geopolitically shift. Consumer today is starting to look at
• 21:03
  Speaker 1: the options because today they have a choice. They have
• 21:06
  Speaker 1: a choice of created diamonds, labgown diamonds that are grown
• 21:10
  Speaker 1: above the earth, that are not grown in these contract territories,
• 21:15
  Speaker 1: cutting polished in other countries, and jewelry is made either
• 21:19
  Speaker 1: in US or in Asia. So they have a choice
• 21:23
  Speaker 1: with US going you know, we're expecting two point five
• 21:25
  Speaker 1: million million millennials to get married this to get engaged
• 21:29
  Speaker 1: this year, So there is a choice. Um, the price
• 21:34
  Speaker 1: is going to be subjected to how long this conflict last?
• 21:37
  Speaker 1: Where are your Where do you do all of your work?
• 21:40
  Speaker 1: Where do you create your diamonds and cut and polish them?
• 21:44
  Speaker 1: Is is Russia? Part of the supply chain? No are
• 21:48
  Speaker 1: growing is actually in India. Cutting and polishing is in India.
• 21:53
  Speaker 1: The design of jewelry is done in United States. And
• 21:55
  Speaker 1: we finished jewelry between China and United States. How much
• 21:59
  Speaker 1: how much of competitor are you too? You know earth
• 22:03
  Speaker 1: mind diamonds. I mean when people are looking, um, do
• 22:08
  Speaker 1: they get to see both choices? Is price um roughly
• 22:12
  Speaker 1: in line? Is the quality indistinguishable? So u A Alto
• 22:19
  Speaker 1: created diamond is chemically, optically and physically same as an
• 22:24
  Speaker 1: earth mind diamond. The only difference that's grown about the
• 22:27
  Speaker 1: Earth from a price value being that we are not
• 22:30
  Speaker 1: a part of a monolith pricing strategy. It's demand and supply.
• 22:34
  Speaker 1: So today, uh, it's almost a fifty better value. So
• 22:38
  Speaker 1: you almost get a fifty percent larger diamond for the
• 22:41
  Speaker 1: same price. And the best part is over seventy of
• 22:44
  Speaker 1: consumers today that shop for engagement drinks are aware of
• 22:48
  Speaker 1: lab grown diamonds, and so, I mean, I could definitely
• 22:52
  Speaker 1: see how this would be a tail when for lab
• 22:53
  Speaker 1: grown diamonds. But what about some of the diamond alternatives.
• 22:57
  Speaker 1: I hope I say this word right. Mossonites, that's something
• 23:00
  Speaker 1: you hear about more and more as sort of a
• 23:02
  Speaker 1: substitute for exactly Yeah, I can't even pretend to pronounce that.
• 23:07
  Speaker 1: But how how do you see that competitive landscape unfolding? Actually,
• 23:12
  Speaker 1: this is very good you brought it up because in
• 23:14
  Speaker 1: two thousand eighteen UM the US Federal Commission made sure
• 23:21
  Speaker 1: that these can no longer be even identified to look
• 23:24
  Speaker 1: like or market it as diamond alternatives. Cubic, zirconia and
• 23:28
  Speaker 1: moisonite are actually formed from chemicals. One is their conium
• 23:32
  Speaker 1: dioxide and another is another chemical that is given the
• 23:35
  Speaker 1: form in a structure to look like a diamond. They're
• 23:38
  Speaker 1: actually not diamonds. Only earth mine diamonds and lab grown
• 23:43
  Speaker 1: diamonds and ultra created diamonds are carbon. They are diamonds.
• 23:49
  Speaker 1: It's interesting I'm seeing such a broad price range um
• 23:52
  Speaker 1: when I look up just google Altar created diamonds and
• 23:56
  Speaker 1: click on the shopping tab. Some of them are two
• 24:00
  Speaker 1: rand three grand for two carrots. Some of them are
• 24:02
  Speaker 1: fifteen grand for two carrots. So it depends on the quality.
• 24:06
  Speaker 1: Just like earth Mind diamonds, the difference of prize is
• 24:10
  Speaker 1: relative to the characteristics the shape, the size, the color
• 24:14
  Speaker 1: and clarity. They are graded just like earth Mind diamonds
• 24:18
  Speaker 1: because they're both diamonds, and hence the pricing is uh
• 24:23
  Speaker 1: to the Four Seas and ultimately the demand and supply
• 24:26
  Speaker 1: for them, and thee very important thing that has changes.
• 24:31
  Speaker 1: Technology evolved, the value has got better for the consumer
• 24:34
  Speaker 1: and excessibility has gone easier. All right, Amy, thanks so
• 24:37
  Speaker 1: much for joining us, Amy Shaw, their president of alter
• 24:40
  Speaker 1: Created Diamonds. Thanks for listening to the Bloomberg Markets podcast.
• 24:44
  Speaker 1: You can subscribe and listen to interviews of Apple Podcasts
• 24:48
  Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
• 24:51
  Speaker 1: on Twitter at Matt Miller three, pet On Ball Sweeney,
• 24:56
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• 24:58
  Speaker 1: can always catch us worldwid at Bloomberg Radio m