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Examining Labor, Retail, And Renewable Energy Markets · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. My question is where
• 0:22
  Speaker 1: do we go with these markets in I'm gonna spend
• 0:27
  Speaker 1: the next you know, some of the next few days
• 0:29
  Speaker 1: of you know, getting some free time to maybe read
• 0:31
  Speaker 1: some of those forecasts for an outlooks for Let's check
• 0:35
  Speaker 1: in with a professional here, Marked Oubting, Chief Investment Officer,
• 0:37
  Speaker 1: Blue Bay Asset Management. Mark, thanks so much for joining
• 0:41
  Speaker 1: us here. Heck of a one, we've still got another
• 0:44
  Speaker 1: month or so ago, but just looking at the equity
• 0:46
  Speaker 1: induicries for example, another just stellar year of performance from
• 0:52
  Speaker 1: a risk asset perspective. How are you envisioning two at
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  Speaker 1: this point? Yeah, so it's it's certainly been a strong
• 1:01
  Speaker 1: use for risk assets in one, following on from a
• 1:04
  Speaker 1: very good I guess the concern that I would have
• 1:07
  Speaker 1: as we look forward into two is that one of
• 1:10
  Speaker 1: the big factors that's been pushing markets up, of course,
• 1:12
  Speaker 1: has been the liquidity coming from global central banks, and
• 1:17
  Speaker 1: with policy now starting to turn, with the FED tapering,
• 1:20
  Speaker 1: with the FED likely to to raise rates, we think
• 1:23
  Speaker 1: a couple of times in two. We do think it's
• 1:26
  Speaker 1: going to be a much more challenging landscape next year.
• 1:28
  Speaker 1: So in terms of beta returns, a much more subdue
• 1:31
  Speaker 1: market we think in UM and potentially one which is
• 1:36
  Speaker 1: going to be a bit more volatile as well as
• 1:38
  Speaker 1: central banks step back, expect to see a bit more
• 1:41
  Speaker 1: volatility and markets. And you mentioned, of course that the
• 1:45
  Speaker 1: risks here is that a lot of the valuations of
• 1:47
  Speaker 1: liquidity driven and we have issues about margins and COVID perhaps,
• 1:52
  Speaker 1: but maybe the bullish case, just to be devil's advocate, perhaps,
• 1:57
  Speaker 1: is that saying that yeah, there might be peat growth,
• 1:59
  Speaker 1: but that doesn't mean that it's doesn't mean low growth,
• 2:03
  Speaker 1: does it. They're not necessarily the same things, that's correct,
• 2:08
  Speaker 1: And look, exty markets do love to climb a wall
• 2:11
  Speaker 1: of worry, so um, I guess many people have tried
• 2:15
  Speaker 1: to to write stocks off before uh and I do
• 2:18
  Speaker 1: think we live in a financial sort of landscape where
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  Speaker 1: there is inflation in the presence of inflation, it's it's
• 2:24
  Speaker 1: difficult to own cash, it's difficult to own a lot
• 2:28
  Speaker 1: of sort of high quality fixed income. So as a
• 2:31
  Speaker 1: allocators haven't got too many places to go. And of
• 2:34
  Speaker 1: course equities do have the protection of the fact that
• 2:38
  Speaker 1: earnings will grow in line with prices, and so from
• 2:43
  Speaker 1: that point of view, I still think we're looking at
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  Speaker 1: healthy earnings growth in a context of two. And from
• 2:49
  Speaker 1: a growth standpoint, I think we can look forward to
• 2:52
  Speaker 1: soon continued recovery of the global economy as we move
• 2:55
  Speaker 1: away from the pandemic. All of these are obviously plus factors.
• 3:00
  Speaker 1: I guess the one thing that you would say is
• 3:02
  Speaker 1: that the wind which has been blowing on your back
• 3:05
  Speaker 1: in terms of given you a boost in terms of
• 3:08
  Speaker 1: liquidity and policies or is now starting to turn, and
• 3:12
  Speaker 1: that that children starting to blow into our faces as
• 3:15
  Speaker 1: we moved into two and Mark, you mentioned earnings, and
• 3:19
  Speaker 1: you know you've just come through a stellar third quarter
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  Speaker 1: earnings period, and you know, I guess the question is
• 3:25
  Speaker 1: was it enough? And are the profit outlooks enough to
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  Speaker 1: allay valuation concerns that I think a lot of investors
• 3:33
  Speaker 1: do have. Yeah, well, it really was a very good
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  Speaker 1: scenes and and we we don't think we're done with
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  Speaker 1: good news in terms of earnings. I think the one
• 3:42
  Speaker 1: thing that you would look at, maybe as an equity investor,
• 3:45
  Speaker 1: is that you're you're looking at long dated bond fules
• 3:47
  Speaker 1: as effectively equities are long duration assets. You're you're discounting
• 3:53
  Speaker 1: cash flows over many years, given the very elevated levels
• 3:56
  Speaker 1: of PE. And in that context, if you do see
• 4:01
  Speaker 1: a move up in long dated bond yelds, that could
• 4:03
  Speaker 1: be the one thing which could strain those valuations to
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  Speaker 1: a greater extent. Perhaps could also pumpt a bit of
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  Speaker 1: a rotation maybe away from growth towards value. Perhaps, So
• 4:14
  Speaker 1: there may be some interesting thematics, but I do think
• 4:16
  Speaker 1: that the equity markets will probably take quite a lot
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  Speaker 1: of their queue not just from what the FED is doing,
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  Speaker 1: but rather than what the long end of the bond
• 4:24
  Speaker 1: market is doing. Yeah, and I think that's interesting because yeah,
• 4:27
  Speaker 1: stocks are expensive when you look at them, perhaps on
• 4:30
  Speaker 1: the PE ratios, but then when you compare them to
• 4:32
  Speaker 1: bonds they look a little bit cheaper. So it is
• 4:35
  Speaker 1: a confusing time for asset allocators. And in this confusing time,
• 4:39
  Speaker 1: how do you allocate Ino, Well, I think, per my
• 4:45
  Speaker 1: my earlier comments, I'll tell you with a degree of caution,
• 4:47
  Speaker 1: I think there has been a time where it wanted
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  Speaker 1: to be uh sort of position inquired a bullish fashion
• 4:53
  Speaker 1: over the course of the past eighteen months. I think
• 4:56
  Speaker 1: it is a smart time now to take some risk off,
• 4:59
  Speaker 1: to take able to to honker down a bit and
• 5:02
  Speaker 1: actually be prepared to buy dips if you do see
• 5:05
  Speaker 1: dips occur in the months ahead, if you buy the
• 5:08
  Speaker 1: thesis that there's going to be volatility, I think maybe
• 5:11
  Speaker 1: you're you're you're you're happy to try and sort of
• 5:13
  Speaker 1: pick your moments to try and sort of add risk,
• 5:16
  Speaker 1: but otherwise act with a degree of caution. But I
• 5:19
  Speaker 1: guess the one thing that you say about the high
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  Speaker 1: quality fixed income is that once upon a time we
• 5:24
  Speaker 1: used to talk about the risk free asset. Well, that
• 5:26
  Speaker 1: risk free asset now looks like more of a return
• 5:29
  Speaker 1: free risk given that rates of a nothing and obviously
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  Speaker 1: yields are well below what we see on inflation. So
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  Speaker 1: in many respects, I think it's hard to be underweight
• 5:39
  Speaker 1: stocks and overweight fixed income. You probably want to remain
• 5:43
  Speaker 1: overweight stocks, but I would perhaps be sort of rotating
• 5:46
  Speaker 1: towards more cautious names, more defensives, more and more valuation players.
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  Speaker 1: For example, European banks I think are really cheap and
• 5:54
  Speaker 1: could do pretty well in a rising rate environment. So
• 5:56
  Speaker 1: there will be areas of the market that you say, yes,
• 5:59
  Speaker 1: these are ones that we gotta like, but otherwise I
• 6:02
  Speaker 1: think more of the cautious stance in twenty two. All right, Mark,
• 6:05
  Speaker 1: thanks so much for joining us. Really appreciate getting your thoughts,
• 6:08
  Speaker 1: your perspective on these markets. Marked doubting, Chief investment officer
• 6:12
  Speaker 1: for Blue Bay Asset Management, getting a little bit cautious
• 6:15
  Speaker 1: but still constructive and overweight on equities. Okay, you. We
• 6:24
  Speaker 1: had some retailers this morning, Gap and North from disappointing results.
• 6:27
  Speaker 1: They called out supply chain issues and that kind of
• 6:29
  Speaker 1: raises an issue for holiday spending going forward. If in
• 6:33
  Speaker 1: fact I go to a mall, and that is a
• 6:35
  Speaker 1: huge if will there be stuff on the shelf. Let's
• 6:38
  Speaker 1: check in with Elizabeth Ebert see I O advisory partner
• 6:41
  Speaker 1: for CpG Retail and Logistics for Infosis Consulting Influsis is
• 6:46
  Speaker 1: a huge company nine billion dollar market cap to stocks
• 6:50
  Speaker 1: up year to date. So these folks kind of have
• 6:55
  Speaker 1: their finger on the pulse here, Lizaba, thanks so much
• 6:56
  Speaker 1: for joining us here talk to us about kind of
• 6:59
  Speaker 1: white you're seeing from your retail clients as they try
• 7:03
  Speaker 1: to navigate this really unprecedented disruption in the global supply chain. Absolutely,
• 7:10
  Speaker 1: and and thank you very much for that introduction. After
• 7:13
  Speaker 1: last year, everyone was hoping that this year's Christmas season
• 7:18
  Speaker 1: was going to be, UM, a lot more predictable, we
• 7:21
  Speaker 1: are going to be past covid UH. There was going
• 7:23
  Speaker 1: to be a lot more certainty and transparency into what
• 7:26
  Speaker 1: the season was going to look like. And unfortunately, UM,
• 7:29
  Speaker 1: it's absolutely not that. So there's been a convergence really
• 7:33
  Speaker 1: of of covid UH. You have to remember, and I
• 7:36
  Speaker 1: think someone just said under the hood. Under the hood
• 7:38
  Speaker 1: of what supply chain problems include are are very much
• 7:41
  Speaker 1: the workforce issues, and supply chain does not have many
• 7:45
  Speaker 1: opportunities for working from home, so those roles are being filled.
• 7:49
  Speaker 1: Even with this morning's great employment numbers, the supply chain
• 7:53
  Speaker 1: roles are being filled very slowly, and that's very much
• 7:55
  Speaker 1: affecting what we see with retail and retailers are having
• 7:59
  Speaker 1: to pay more UM and the retail experience, what customers
• 8:03
  Speaker 1: are going to see in the stores is going to
• 8:05
  Speaker 1: be a bit more fraught. There's going to be more
• 8:07
  Speaker 1: challenges in and getting any associate help, There's going to
• 8:11
  Speaker 1: be inventory gaps, so there's there's really more headaches than
• 8:16
  Speaker 1: opposed to what we're hoping for at the end of
• 8:18
  Speaker 1: last year. UM. The other thing I'd like to point
• 8:20
  Speaker 1: out is that retailers stock and plan based on prior
• 8:24
  Speaker 1: year's performance. So last year was an unusual year, and
• 8:28
  Speaker 1: to plan over last year's performance and those trends and
• 8:31
  Speaker 1: have this year be completely off the rails in terms
• 8:34
  Speaker 1: of expectations. Some of those demand forecasting models are simply
• 8:39
  Speaker 1: broken again, and so there's just a huge amount of
• 8:42
  Speaker 1: uncertainty and that's going to be reflected really in the
• 8:44
  Speaker 1: customer experience through the holiday season. And of course it's
• 8:48
  Speaker 1: Black Friday coming up and blee Back intelligence saying that
• 8:51
  Speaker 1: are expecting robust holiday sales despite a lot of these
• 8:55
  Speaker 1: supply chain issues that we have a lot of items
• 8:57
  Speaker 1: are on the shelves if you go and see tailers
• 9:00
  Speaker 1: seemed to be prepared. But there are a few special
• 9:02
  Speaker 1: discounts and office this year, uh, and those don't seem
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  Speaker 1: to be quite as eye catching. Is this all down
• 9:09
  Speaker 1: to the supply chain? Absolutely? And I think what is
• 9:13
  Speaker 1: the primary motivation with retailers and those promotions and um
• 9:17
  Speaker 1: you may have noticed I certainly have in in my
• 9:20
  Speaker 1: email is uh, Black Friday has seemed to be every
• 9:24
  Speaker 1: Friday for the past couple of weeks. Cyber Monday just
• 9:26
  Speaker 1: seems to be Monday. Um. But my sense of it
• 9:29
  Speaker 1: is is that retailers are simply trying to lock in
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  Speaker 1: the sales as quickly as possible because as you think
• 9:34
  Speaker 1: about that supply chain with all of the different links,
• 9:37
  Speaker 1: those links are going to go right out to FedEx
• 9:39
  Speaker 1: and ups and those deliveries. Uh. Today there's announcements about
• 9:43
  Speaker 1: shipping deadlines on December fifteenth for normal, non expedited shipments.
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  Speaker 1: So I think the the strategic objective with the retailers
• 9:52
  Speaker 1: is to move product as quickly as possible and then
• 9:55
  Speaker 1: if things managed to work out, as we're starting to
• 9:57
  Speaker 1: see some of the supply chain issues in the poor workout,
• 10:00
  Speaker 1: that hopefully that help the enthusiastic US consumer just keeps
• 10:05
  Speaker 1: on buying right through the holiday. Let's overall, what do
• 10:08
  Speaker 1: you what are your clients telling you about what they
• 10:10
  Speaker 1: expect here? For retail sales during this holiday period this year.
• 10:14
  Speaker 1: You know, they're they're feeling very positive and very robust.
• 10:18
  Speaker 1: They recognize that there's going to be some complexities with
• 10:21
  Speaker 1: the inventory management issues. Um what they've done is adapt
• 10:24
  Speaker 1: by maintaining more inventory and their distribution centers versus pushing
• 10:28
  Speaker 1: it out to stores, and that's going to push more
• 10:31
  Speaker 1: e commerce volumes or as a customer is in the
• 10:34
  Speaker 1: store than being to order from the store and ship
• 10:37
  Speaker 1: from from a warehouse. Um. So they're they're expecting robust sales.
• 10:42
  Speaker 1: Certainly they're expecting, um uh, the the inflation numbers to
• 10:47
  Speaker 1: to drive up the total sales numbers just simply because
• 10:51
  Speaker 1: things are a bit more expensive. But they are feeling
• 10:54
  Speaker 1: the ability to lighten up on the promotions and even
• 10:57
  Speaker 1: raise prices and still capture those sales. Elizabeth, thank you
• 11:00
  Speaker 1: so much for joining us. Really appreciate getting your broad
• 11:03
  Speaker 1: perspective of retail sales as we head into this all
• 11:06
  Speaker 1: important holiday shopping season. Elizabeth Ebert, c I, O advisory
• 11:11
  Speaker 1: partner for CpG Retail and Logistics at Infosis Consulting. This
• 11:15
  Speaker 1: Elizabeth was mentioning her clients expecting very strong retail sales
• 11:19
  Speaker 1: the challenges that we're seeing from the likes of the
• 11:22
  Speaker 1: Gap and the Nordstrom is to actually have stuff on
• 11:25
  Speaker 1: the shelf to meet that demand. President Biden this week
• 11:31
  Speaker 1: tapped the US oil reserves to try to bring down
• 11:35
  Speaker 1: the cost of energy, particularly gas at the pump. What
• 11:38
  Speaker 1: was interesting to a lot of people was, Hey, it
• 11:40
  Speaker 1: doesn't happen very often, and b there was some coordination
• 11:43
  Speaker 1: with some other countries out there suggesting that the this
• 11:46
  Speaker 1: could have a little bit more bite. But it kind
• 11:48
  Speaker 1: of goes to the whole issue of managing energy. Transitioning
• 11:51
  Speaker 1: to renewable energy, how is that going to play out
• 11:55
  Speaker 1: in a global economy. Let's check in with Nick blitters Wike,
• 11:58
  Speaker 1: chief executive officer and founder of UGE International. UG distributes
• 12:03
  Speaker 1: renewables to address the world's energy and environmental challenges. Nick,
• 12:06
  Speaker 1: thanks so much for joining us here. Where are we?
• 12:11
  Speaker 1: I guess in this transition to renewables, it seems like
• 12:14
  Speaker 1: we kind of had a little bit of a hiccup
• 12:16
  Speaker 1: here because boy, we still need the fossil fuels houses
• 12:20
  Speaker 1: playing out. Yeah, good morning. Um, Well, I think you know, globally,
• 12:24
  Speaker 1: the US now is number two to China in terms
• 12:27
  Speaker 1: of solo that's being deployed. I think the stat a
• 12:30
  Speaker 1: lot of people wouldn't fully appreciated that the last couple
• 12:33
  Speaker 1: of years U asked about of all the energy being
• 12:37
  Speaker 1: is told is solars. So solar is coming quick. Um,
• 12:39
  Speaker 1: it's not gonna get pent right away, but um, but
• 12:42
  Speaker 1: it definitely it's it's coming quick. Here. Um, we saw
• 12:46
  Speaker 1: a COP twenty six that there's still big divisions between
• 12:49
  Speaker 1: countries in terms of meeting targets. Uh. For instance we
• 12:54
  Speaker 1: saw with India and China, and also you know there
• 12:57
  Speaker 1: was no agreement on cobb impermits and what more do
• 12:59
  Speaker 1: you think needs to be done so that everybody is
• 13:03
  Speaker 1: more aligned? Yeah, it's a good question. You know, it's
• 13:07
  Speaker 1: funny you mentioned China and India, which are number one
• 13:09
  Speaker 1: and number three in terms of amount of solar being
• 13:11
  Speaker 1: installed these days. So you know, I think, Um, politically,
• 13:15
  Speaker 1: for whatever reason, the world's at a point where it's
• 13:18
  Speaker 1: having a difficult time coming together on some of these
• 13:20
  Speaker 1: big picture of policies. But you know, I think on
• 13:22
  Speaker 1: the ground, what we're seeing as solar, it's projected to
• 13:26
  Speaker 1: be eight percent of all new energy by the end
• 13:27
  Speaker 1: of this decade, and so I'm hopeful as people start
• 13:31
  Speaker 1: to realize that this decade really does belong to renewable
• 13:33
  Speaker 1: energy UM becoming the main source of energy, Hopefully people
• 13:37
  Speaker 1: will start to realize that UM, it's it doesn't need
• 13:39
  Speaker 1: to be as hard as some people maybe think, and
• 13:41
  Speaker 1: hopefully we can get together and set those set those priorities.
• 13:45
  Speaker 1: Is the US the leader in transitioning to renewables or not?
• 13:52
  Speaker 1: Or not? UM? Well, of course the US has always
• 13:55
  Speaker 1: had a great technology advantage, in an entrepreneurship advantage, I
• 13:58
  Speaker 1: would say, UM, and so on that basis, you do
• 14:01
  Speaker 1: see a lot of innovation from American companies, UM. And
• 14:04
  Speaker 1: I like to think of you g as as being
• 14:06
  Speaker 1: right within that right UM. And so you know, US
• 14:09
  Speaker 1: leads the world that I would say in a number
• 14:11
  Speaker 1: of aspects. Within solar UM. You know, I will say
• 14:14
  Speaker 1: though that China's installing about three times as much solar
• 14:17
  Speaker 1: as the US right now. So we do have a
• 14:18
  Speaker 1: long way to go. And in that transition period that
• 14:21
  Speaker 1: we're talking about towards renewable energies, there's also that question
• 14:24
  Speaker 1: of affordability for the likes of solar, for the likes
• 14:27
  Speaker 1: of wind, and how we get around that given those
• 14:32
  Speaker 1: cost issues well, you say cost issues, I would I
• 14:36
  Speaker 1: would take offense to had to be honest. You know,
• 14:38
  Speaker 1: at this point in time, solar has become the cheapest
• 14:40
  Speaker 1: source of energy and more and more places. Um, you know,
• 14:43
  Speaker 1: I think the use cases are are increasing quite quickly here.
• 14:46
  Speaker 1: So um, you know, a number of years back now,
• 14:49
  Speaker 1: residential solar became cost effective to a number of people,
• 14:52
  Speaker 1: but not everyone can install solar on their rooftop. UM
• 14:55
  Speaker 1: and so where we come in as we developed community
• 14:58
  Speaker 1: solar projects and in essence making it as easy for
• 15:01
  Speaker 1: anyone to get solar energy, just just like signing up
• 15:05
  Speaker 1: for Netflix and um. And so what we do is
• 15:07
  Speaker 1: the installed projects and then distribute that energy to subscribers
• 15:11
  Speaker 1: within a community, which typically tends to be utility zone.
• 15:14
  Speaker 1: And and our model is has been for years providing
• 15:17
  Speaker 1: cheaper energy to two people that we uh we sign
• 15:19
  Speaker 1: up Bloomberg. We actually have a partnership with Bloomberg. If
• 15:23
  Speaker 1: we announced back in the summer, or Bloomberg employees can
• 15:26
  Speaker 1: sign up and save ten percent on their energy bill
• 15:28
  Speaker 1: as well. So you know, solar and of course we're
• 15:31
  Speaker 1: we're focused and the cost here has come down so
• 15:33
  Speaker 1: much over the last decade that it is cost effective
• 15:36
  Speaker 1: for for many many people around the world. Now, Nick,
• 15:39
  Speaker 1: we've had a lot of UM fiscal stimulus. UM, We've
• 15:43
  Speaker 1: got the Build Back Better UH legislation coming through Congress
• 15:47
  Speaker 1: here give us a sense of kind of where the U. S.
• 15:50
  Speaker 1: Government is in terms of supporting UH, this transition to
• 15:55
  Speaker 1: renewable energy. Yeah, well, I would say that right now,
• 15:59
  Speaker 1: the the benefits of the fine administration winning for our
• 16:03
  Speaker 1: sector are finally kind of coming to fruition here. So
• 16:06
  Speaker 1: of course, we had the bipartisan Infrastructure Built signed into
• 16:10
  Speaker 1: law last week that includes about seventy three billion for
• 16:13
  Speaker 1: upgrades to the electric grid, which will have some knock
• 16:15
  Speaker 1: on benefits to renewable energy. But the Build Back Betteract
• 16:19
  Speaker 1: really is what focuses on the movement towards renewable energy. So,
• 16:24
  Speaker 1: you know, for solar, it provides a ten year extension
• 16:26
  Speaker 1: of the investment tax credit, something that was initially put
• 16:29
  Speaker 1: in place by by by President Bush Um but but
• 16:33
  Speaker 1: it's something that would give us a long term certainty
• 16:35
  Speaker 1: and there are some other benefits there as well. And
• 16:38
  Speaker 1: I think we've also seen a nice switch in terms
• 16:40
  Speaker 1: of UM, the US government's approach to trade UM. You know,
• 16:44
  Speaker 1: we've in the industry called it the solar coaster here
• 16:47
  Speaker 1: for a number of years because it's been a bit
• 16:50
  Speaker 1: of a target I think from different different governments in
• 16:53
  Speaker 1: the US and elsewhere. But it is the last two
• 16:55
  Speaker 1: weeks we've had three different trade uh things go through
• 17:00
  Speaker 1: that have made it probably cheaper for US to import
• 17:04
  Speaker 1: import solar panels um in the next in right year
• 17:07
  Speaker 1: and years to come here as well. All right, Nick,
• 17:09
  Speaker 1: very exciting, very interesting. Nick Blitterswike, chief executive officer and
• 17:13
  Speaker 1: founder of u g E International that is a publicly
• 17:16
  Speaker 1: traded company. U g E is the symbol trades in
• 17:19
  Speaker 1: Canada's got a market cap about sixty million dollars uh,
• 17:23
  Speaker 1: So very interesting there as they manage and distribute renewable
• 17:28
  Speaker 1: energy across the communities. And again it is a trend
• 17:32
  Speaker 1: that the folks of Nick Blitzwike have believe will be
• 17:35
  Speaker 1: a long term trend. This, folks, is the Conversation of
• 17:43
  Speaker 1: the morning. Mark Mahaney you know him as the senior
• 17:46
  Speaker 1: managing director and head of Internet Research Forever Core I
• 17:50
  Speaker 1: s I. I consider him to be one of the
• 17:52
  Speaker 1: best most thoughtful analysts out there on Wall Street. Discover
• 17:55
  Speaker 1: the Internet names for you know, twenty plus years since
• 17:58
  Speaker 1: the beginning of this whole thing we call the Internet.
• 18:01
  Speaker 1: He has also got a new book out entitled Nothing
• 18:03
  Speaker 1: but Net ten Timeless stock picking Lessons from Front of
• 18:07
  Speaker 1: Wall Street's top tech Analysts. Hey, Mark, thanks so much
• 18:10
  Speaker 1: for joining us. To really appreciate you taking the time.
• 18:12
  Speaker 1: I'm really fascinated to read this book as I was
• 18:14
  Speaker 1: an analyst for twenty years. I managed analysts for ten years,
• 18:17
  Speaker 1: so I can't wait to get a look at this thing.
• 18:19
  Speaker 1: What are some of the key lessons you learned in
• 18:21
  Speaker 1: your career picking stocks? Okay, well, thanks for the setup,
• 18:26
  Speaker 1: and I very much appreciate the opportunity to talk about it.
• 18:29
  Speaker 1: It's a new book, but it's also my only book. Uh,
• 18:31
  Speaker 1: it's uh. It's kind of a culmination of twenty five
• 18:34
  Speaker 1: years of looking at tech stocks, and one of the
• 18:36
  Speaker 1: single simplest but most important lessons is that the fundamentals
• 18:40
  Speaker 1: really do matter. I've seen cases where stocks and fundamentals
• 18:44
  Speaker 1: to be divorced near term, you know, for a couple
• 18:46
  Speaker 1: of months, but a long term there's no doubt in
• 18:48
  Speaker 1: my mind that stocks follow fundamentals. So that's stronger the
• 18:52
  Speaker 1: revenue growth, the larger the profit pools, the higher the
• 18:55
  Speaker 1: stock price. You find a company that can be materially
• 18:58
  Speaker 1: bigger three years down the road, and almost always its
• 19:01
  Speaker 1: stock price is going to be materially higher. So that's
• 19:03
  Speaker 1: kind of this one most important takeaway. And then in
• 19:06
  Speaker 1: terms of the the advice, and I try to really
• 19:08
  Speaker 1: feel through the initially of the successes and the failures
• 19:12
  Speaker 1: in in the Internet space, both my own stockpics. It's
• 19:15
  Speaker 1: also just the doxyconominally well, the Amazons and the Netflix
• 19:18
  Speaker 1: and the one that didn't eBay and Yahoo and uh
• 19:22
  Speaker 1: and grub Hub, names like that. UM. I tried to
• 19:25
  Speaker 1: draw some lessons and at the end of it, I
• 19:26
  Speaker 1: really had people try to focus on d h ds
• 19:29
  Speaker 1: dislocated high quality companies. I tried to describe what high
• 19:32
  Speaker 1: quality companies are and when to get them when they're dislocated.
• 19:35
  Speaker 1: And that's the one thing to keep in mind from
• 19:37
  Speaker 1: the book. It's that hunt for d h ds, well Mark,
• 19:40
  Speaker 1: if you look at valuations right now that they were
• 19:42
  Speaker 1: sky high, so earnings this isn't really going to need
• 19:45
  Speaker 1: to keep up, So how does that play into your
• 19:47
  Speaker 1: outlook as well? Well? UM One of the lessons I
• 19:52
  Speaker 1: also learned is that they have a title called evaluation
• 19:56
  Speaker 1: is in the eye of the tech stockholder. Valuation is,
• 19:58
  Speaker 1: of course an important factor, but I think it actually
• 20:01
  Speaker 1: should be one of the last factors you really want
• 20:03
  Speaker 1: to focus on finding high quality companies WE really that
• 20:07
  Speaker 1: really had platform potential, and then you know, when they
• 20:10
  Speaker 1: show that they've got an excellent track record or product innovation,
• 20:14
  Speaker 1: that they face large slams total addressable markets. I don't
• 20:17
  Speaker 1: want to say that valuation takes care of itself, but
• 20:20
  Speaker 1: and oftentimes can companies that can really scale, that can
• 20:24
  Speaker 1: maintain super premium growth called plus revenue growth for multiple
• 20:28
  Speaker 1: years from a position of scale, I think the market
• 20:31
  Speaker 1: generally ends up undervaluing those names. I think for many
• 20:34
  Speaker 1: years Netflix was undervalued, Amazon was undervalued because people weren't
• 20:39
  Speaker 1: able to appreciate just how they're how large their market
• 20:42
  Speaker 1: opportunities were, and how well they could execute against those
• 20:45
  Speaker 1: and sustain that premium growth. So that valuation is important,
• 20:49
  Speaker 1: but I don't think it should be the most important
• 20:50
  Speaker 1: factor when it comes to picking text stocks. Hey, Mark,
• 20:53
  Speaker 1: talk to us about management, Like I always thought of
• 20:56
  Speaker 1: my career that you know, management really does matter, or
• 21:00
  Speaker 1: even if you've got a great technology. I really need
• 21:03
  Speaker 1: to get in there and spend time with the management.
• 21:05
  Speaker 1: How do you think about that as you kind of
• 21:08
  Speaker 1: look at companies that you're going to cover. Yeah, if
• 21:13
  Speaker 1: you do, you you prefaced it perfectly. My factor is
• 21:15
  Speaker 1: actually called management matters UM and uh so it's one
• 21:20
  Speaker 1: of the most important criteriaon and determine what a high
• 21:22
  Speaker 1: quality companies. I'm not sure you can get a high
• 21:24
  Speaker 1: quality company that doesn't have an excellent management. So what
• 21:27
  Speaker 1: are you looking for? You're looking for companies that are
• 21:29
  Speaker 1: long term oriented management teams that are long term oriented.
• 21:32
  Speaker 1: I've always had a bias for founder led companies. I
• 21:35
  Speaker 1: just think that they're able to make a decisive decisions
• 21:39
  Speaker 1: in ways that professional managers just don't just don't have
• 21:42
  Speaker 1: the ability, the gravitas in order to do that division.
• 21:45
  Speaker 1: In order to do that, I love to see companies
• 21:47
  Speaker 1: with great vision. I think about Read Hastings and Netflix,
• 21:51
  Speaker 1: and I've always been struck by the fact that Read
• 21:52
  Speaker 1: Hastings started Netflix, and and the name itself conjures up
• 21:57
  Speaker 1: some sort of idea of Flix or movies film coming
• 22:00
  Speaker 1: over the internet. But it was a d D by
• 22:01
  Speaker 1: mail business for the next ten years. But Read absolutely
• 22:04
  Speaker 1: new retastings. Absolutely knew that the future was in streaming,
• 22:08
  Speaker 1: that we just needed the infrastructure and home WiFi systems
• 22:11
  Speaker 1: to be set up. But to have somebody who could
• 22:13
  Speaker 1: look out, you know that we had that kind of
• 22:15
  Speaker 1: basi in five or ten years and realize where home
• 22:19
  Speaker 1: entertainment was going. That was truly impressive. So you find
• 22:22
  Speaker 1: people like that who can kind of call correctly industry
• 22:25
  Speaker 1: pivots the new generation, the development of a new generation
• 22:29
  Speaker 1: of industries. That's really impressive. It's extremely rare. But if
• 22:32
  Speaker 1: you find those people, you want to stick with them.
• 22:35
  Speaker 1: And Mark, speaking of pivots in the industry. In the
• 22:37
  Speaker 1: future of tech, we've all been talking about meta metaverse
• 22:40
  Speaker 1: seems to be all the rage, even though it is
• 22:43
  Speaker 1: potentially years away. Even semi stocks have been rallying on
• 22:48
  Speaker 1: just the mention of this. Uh So, is that something
• 22:50
  Speaker 1: you think investors want to be thinking about getting mettos into.
• 22:56
  Speaker 1: I think so. I think it's going to be a Ritica.
• 22:58
  Speaker 1: I think it's going to be more options value, you know,
• 23:00
  Speaker 1: for theinic several years. Uh And you know, I think
• 23:04
  Speaker 1: it's gonna we're gonna be We're gonna I think it's
• 23:07
  Speaker 1: five to ten years before we really know what miniverse
• 23:10
  Speaker 1: is going to be. Like, I do think when you
• 23:12
  Speaker 1: find these large tech platforms, you want them to have
• 23:15
  Speaker 1: some sort of option value. You want them to have
• 23:18
  Speaker 1: some sort of long term investment um priority. Whether it's
• 23:22
  Speaker 1: alternaty and closing Google, whether it's robotics with them it
• 23:27
  Speaker 1: is not, whether it's metaverse with with Facebook. I think
• 23:29
  Speaker 1: it just makes the underlying asset more valuable. I also
• 23:33
  Speaker 1: think that in a way Facebook needs to invest in
• 23:36
  Speaker 1: the metaverse um because if there's something, if there's something
• 23:39
  Speaker 1: that's going to change our social networks and then they're
• 23:41
  Speaker 1: going to become what's called verse sold in they are today,
• 23:44
  Speaker 1: I mean, that could create systemic risk for Facebook. So
• 23:47
  Speaker 1: I think it's mostly an offensive investment, but there's a
• 23:49
  Speaker 1: little bit of defensivelopment to uh to it. I think
• 23:52
  Speaker 1: that given the amount of effort and energy and resources
• 23:54
  Speaker 1: dollars that are going into the metaverse, I would probably
• 23:57
  Speaker 1: I'm long the concept the winner is aren't going to
• 24:00
  Speaker 1: be determined. Cur five to tend is I think Facebooks
• 24:03
  Speaker 1: in a decent position, but that it's one to mark
• 24:05
  Speaker 1: what's your best idea for I like these dislocated. Um uh,
• 24:12
  Speaker 1: you know, high quality companies. And so there's three names
• 24:14
  Speaker 1: I think in megacap that are reasonably dislocated here. One
• 24:18
  Speaker 1: is Uber, which I still still think it's a great
• 24:21
  Speaker 1: recovery play. There's their racturing business is still below pre
• 24:25
  Speaker 1: COVID level, So I think there's a lot of recovery
• 24:27
  Speaker 1: juice in that stock. And I think it's a high
• 24:30
  Speaker 1: quality asset. It's not Founder let go. That's the one negative.
• 24:33
  Speaker 1: But but I think the rest of the huge end
• 24:35
  Speaker 1: markets really compelling value proposition. I still like Amazon and
• 24:39
  Speaker 1: the Facebook, I think, and I look at Amazon and Facebook,
• 24:42
  Speaker 1: both is reasonably dislocated stocks, high quality assets. When they
• 24:45
  Speaker 1: get dislocated, you should be adding or binding those Mark,
• 24:48
  Speaker 1: thanks so much for joining us today. I really appreciate
• 24:50
  Speaker 1: you taking the time. Mark Mahaney, he's a senior managing
• 24:53
  Speaker 1: director and head of Internet Research forever Core. I s
• 24:56
  Speaker 1: I he's got a book out now, is a new book.
• 24:59
  Speaker 1: It is his first book. As Mark said, it is
• 25:01
  Speaker 1: entitled nothing but net ten Timeless stock picking lessons from
• 25:05
  Speaker 1: one of Wall Street's top tech animals. And again, as
• 25:08
  Speaker 1: I can say, having been in this business for thirty years,
• 25:10
  Speaker 1: Mark absolutely is one of the top annials out there,
• 25:13
  Speaker 1: not just for tech but just in general. Very thoughtful
• 25:16
  Speaker 1: in his analysis and his approach to looking at stocks
• 25:20
  Speaker 1: and picking stocks. Thanks for listening to the Bloomberg Markets podcast.
• 25:25
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 25:29
  Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
• 25:32
  Speaker 1: on Twitter at Matt Miller three. Pet On Fall Sweeney
• 25:37
  Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
• 25:39
  Speaker 1: can always catch us worldwide at Bloomberg Radio.