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Jobs, Markets, And A Look At Tesla · 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
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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. Again, jobs day came
0:23
Speaker 1: in well below expectations. Is this something we need to
0:27
Speaker 1: be concerned about? Is this something the FED really needs
0:29
Speaker 1: to be concerned about as they think about the beginning
0:31
Speaker 1: tapering perhaps next month. Let's check in with Lindsay Pegs
0:34
Speaker 1: as she's at chief econrass for Stifle Financial, joining us
0:37
Speaker 1: on the phone from Minneapolis. H Lindsay, thanks so much
0:40
Speaker 1: for joining us here again, another big miss here, second
0:43
Speaker 1: straight month. Here. Do we have a theme here? Do
0:45
Speaker 1: we have something to worry about? Well, we do know
0:48
Speaker 1: that the data and the labor market has been increasingly volatile,
0:52
Speaker 1: and it's not to say that this wasn't expected in
0:54
Speaker 1: the aftermath of a crisis. It will take time for
0:57
Speaker 1: balance to be restored to the marketplace. Obviously, this morning's
1:01
Speaker 1: number very disappointing. On the heels of last numbers last
1:05
Speaker 1: month there to the last month's number coming in under expectations.
1:09
Speaker 1: But remember this follows the July number, which was well
1:12
Speaker 1: over a million, surging past expectations. So when we smoothed
1:15
Speaker 1: this out, we're still talking about adding about half a
1:19
Speaker 1: million jobs each month, and we have been since March.
1:23
Speaker 1: So there's still is a very clear underlying positive trends
1:26
Speaker 1: in hiring, but there's now more volatility month to month. Yeah. Well, lindsay,
1:31
Speaker 1: we knew this recovery was going to happen in fits
1:33
Speaker 1: and starts, right, but September wasn't theory supposed to be
1:36
Speaker 1: a start month because kids were back at school, those
1:39
Speaker 1: extra unemployment benefits rolled off. If that didn't happen in September,
1:44
Speaker 1: how can we have any confidence that that effect is
1:47
Speaker 1: indeed going to happen. Well, there are a number of
1:50
Speaker 1: variables that should have helped pull workers into the labor market.
1:53
Speaker 1: As you mentioned, kids are going back to school, the
1:56
Speaker 1: unemployment benefits ended September six. We also have growing confidence
2:01
Speaker 1: in the vaccine initiative, which is well underway, but there's
2:04
Speaker 1: still variables pushing in the opposite direction. We still see
2:07
Speaker 1: working families struggling with daycare or elder care issues. We
2:12
Speaker 1: still see millions of Americans reporting that they're concerned about
2:16
Speaker 1: the virus spreading or contracting the virus. So it's not
2:19
Speaker 1: a flip to switch scenario. This will take time even
2:22
Speaker 1: in the case of benefits. Benefits this time around were
2:25
Speaker 1: arguably so overly generous, plus the moratorium on rents or evictions,
2:30
Speaker 1: plus the additional checks landing in people's mailboxes. So for
2:34
Speaker 1: many Americans, they've actually been able to accumulate a sizable
2:37
Speaker 1: amount of wealth which won't carry them indefinitely, but it
2:40
Speaker 1: could carry them for several months even now after the
2:43
Speaker 1: expiration of those enhanced unemployment benefits. So it's more likely
2:47
Speaker 1: that we see a slow trickle into the labor market
2:51
Speaker 1: as opposed to and open the floodgates and everyone jumps
2:54
Speaker 1: back in. So one of the things that jumped out
2:57
Speaker 1: of me is this the as we looked at the
2:59
Speaker 1: participation rate was um, women women leaving the job market. Um,
3:04
Speaker 1: how concerning is that to you? And is it is
3:06
Speaker 1: it primarily a function of we're in that kind of
3:09
Speaker 1: that weird period. Kids going back to school, but maybe
3:11
Speaker 1: they're not going back to school and that kind of thing. Now,
3:14
Speaker 1: this is a very big concern. We have seen women
3:17
Speaker 1: under an extreme amount of pressure from an employment standpoint.
3:20
Speaker 1: One in four women reporting that they've either have been
3:23
Speaker 1: forced to downshift their career or leave the labor force
3:26
Speaker 1: entirely as a result of the virus and the associated policies.
3:30
Speaker 1: So this essentially translates into millions of women leaving the
3:33
Speaker 1: labor force undoing years, if not decades in terms of
3:39
Speaker 1: enticing women and developing women in the labor market. So,
3:42
Speaker 1: if we're not able to re establish a trend of
3:46
Speaker 1: pulling workers, and in particular women, female workers back into
3:50
Speaker 1: the labor market, this has significant long run implications. Yeah. Well,
3:55
Speaker 1: and it's not just women leaving the labor force as well.
3:57
Speaker 1: We talk a lot about how the pandemic accelerated, you know,
4:00
Speaker 1: early retirement, and a lot of those people of a
4:02
Speaker 1: certain age may not be returning ever to the labor force.
4:05
Speaker 1: They may have just called it quits right then and there.
4:08
Speaker 1: So when you think about some of those dynamics, does
4:11
Speaker 1: the FED need to redefine what maximum employment is when
4:15
Speaker 1: it's thinking about achieving its dual mandate. It's a good
4:20
Speaker 1: question and It's something that the FED certainly has been
4:22
Speaker 1: considering when they talk about the dynamic metrics of the
4:26
Speaker 1: labor market, not only adjusting the threshold, but also looking
4:30
Speaker 1: at the different cohorts of the labor market that may
4:33
Speaker 1: have been disproportionately impacted, making sure that most groups or
4:39
Speaker 1: or the majority of groups have been including in the recovery,
4:42
Speaker 1: and if not, the FED has said that they're willing
4:44
Speaker 1: to err on the side of caution. Now that being said,
4:47
Speaker 1: we have been a dramatic improvement in the unemployment rate
4:50
Speaker 1: across the board, and this does seem to be enough
4:53
Speaker 1: for the FED to move forward at least with the
4:56
Speaker 1: first step of removing accommodative policy. So at least from
5:00
Speaker 1: the chairman's perspective, as he told us that the latest
5:02
Speaker 1: effle MC meeting that box in terms of inflation and
5:06
Speaker 1: the labor market, both of those have been checked. All Right,
5:09
Speaker 1: let's switch a litle it off the labor front and
5:11
Speaker 1: just take a look at supply chain issues. I'm wondering,
5:14
Speaker 1: you know, we're hearing from more and more companies and
5:16
Speaker 1: what that supply chain is an ongoing and significant issue
5:20
Speaker 1: on their operations. Is it enough to materially impact, say
5:24
Speaker 1: your GDP forecast for the remainder of this year, maybe
5:27
Speaker 1: going into next year. How are you trying to capture
5:29
Speaker 1: um that issue? Well, producers at this point are still
5:33
Speaker 1: putting forth a very great effort to try to ramp
5:37
Speaker 1: up output to meet a still heightened level of demand
5:40
Speaker 1: in the marketplace. But even if they are able to
5:42
Speaker 1: find workers, which as we just talked about, is still
5:45
Speaker 1: a big challenge with a sizeable labor supply gap, bottlenecks,
5:50
Speaker 1: disruptions in the international supply chain are continuing to restrict
5:55
Speaker 1: that flow of goods out to the marketplace. And I
5:57
Speaker 1: do think it's important to remember that we're very much
5:59
Speaker 1: a global, globally integrated production line. If we're a US
6:04
Speaker 1: producer trying to make goods for our domestic base, well,
6:08
Speaker 1: if there's a particular component or part that comes from
6:12
Speaker 1: Sri Lanka or Vietnam, but with much of the developing
6:15
Speaker 1: world one, two or three steps behind us in terms
6:18
Speaker 1: of controlling the virus and re establishing normalcy, this is
6:23
Speaker 1: going to have significant negative implications for US producers. And
6:27
Speaker 1: as a result, absolutely we have to look at the
6:29
Speaker 1: supply constraints and the capacity restraints when we're talking about
6:33
Speaker 1: our overall great forecast between that and still a very
6:39
Speaker 1: tepid labor market, are very moderate labor market. I do
6:43
Speaker 1: think growth is going to remain positive, but slow to
6:46
Speaker 1: a three to four percent range in the back half
6:48
Speaker 1: of the year. Well, let's talk about the consumer's role
6:51
Speaker 1: within that growth, because the Americans consumer is what powers
6:53
Speaker 1: this economy. And as we talk about these supply chain
6:55
Speaker 1: issues resulting in higher input costs for companies, companies by
7:00
Speaker 1: and large have been able to pass those on through
7:02
Speaker 1: just higher prices for their customers. With the kind of
7:06
Speaker 1: wage growth we are seeing exing out inflation, how long
7:09
Speaker 1: are consumers going to be able to be tolerant of
7:12
Speaker 1: those price increases. It's a good question, and I would
7:15
Speaker 1: imagine that we have at least enough cushion for the
7:18
Speaker 1: next several months, again against the backdrop of not only
7:22
Speaker 1: rising wages, additional bonuses, incentive packages that has been offered
7:26
Speaker 1: by employers, but also the one point seven trillion and
7:29
Speaker 1: accumulated wealth that consumers have as a backstop to these
7:34
Speaker 1: rising prices. But it's certainly not an indefinite fix, and
7:38
Speaker 1: if in fact, transitory price pressures do prove to be
7:42
Speaker 1: longer lasting. As we look out to the end of
7:44
Speaker 1: the year and into two, at some point consumers are
7:48
Speaker 1: going to be priced out of the market and they're
7:50
Speaker 1: going to have to pull back on demand for both
7:53
Speaker 1: goods and services. Lindsay. One of the issues right now
7:56
Speaker 1: as we think about how the you know, the business
7:58
Speaker 1: or economic response to this pandemic is one of the
8:02
Speaker 1: decisions for companies and for employee employees is do I
8:05
Speaker 1: come back to work? And how many days do I
8:07
Speaker 1: come back to work? Because the argument can certainly made
8:09
Speaker 1: that the US economy was pretty darn efficient and productive
8:14
Speaker 1: during the lockdown and during these past eighteen months. As
8:17
Speaker 1: an economist looking at the macro picture, do you have
8:20
Speaker 1: an opinion about what's best for the U s economy
8:23
Speaker 1: or what could contribute the most to the US economy
8:26
Speaker 1: kind of a hybrid model, back to work model like
8:28
Speaker 1: the old days, or or just strictly working from home. Well,
8:32
Speaker 1: I think all of the above. I don't think there's
8:34
Speaker 1: a one size fits all answer for individuals or sectors
8:38
Speaker 1: of the economy. For some sectors that it simply does
8:41
Speaker 1: not make sense for workers to be at home. They
8:44
Speaker 1: can't efficiently do their job, and so when the economy
8:47
Speaker 1: eventually returns to normalcy, we would expect those sectors to
8:50
Speaker 1: welcome back those employees full time. But for some it
8:53
Speaker 1: does make sense to have the flexibility of a hybrid model.
8:56
Speaker 1: Perhaps they're losing production or productivity time in commute times.
9:02
Speaker 1: Many individuals drive forty five minutes or an hour to
9:06
Speaker 1: the office at that valuable time that they could have
9:08
Speaker 1: otherwise been using to execute activities at their full time position.
9:13
Speaker 1: So it's really going to depend on the individual. It's
9:15
Speaker 1: going to depend on the business and what fits one
9:18
Speaker 1: business may not be best for the next. Lindsay, just
9:22
Speaker 1: quickly after this kind of disappointing headline number, at least
9:26
Speaker 1: on the payrolls report, you've seen some lawmakers, including Nancy Pelosi,
9:29
Speaker 1: putting out statements saying this just underscores the need for
9:32
Speaker 1: further fiscal stimulus and investment in the longer term in
9:36
Speaker 1: the economy here in the United States. How are you
9:38
Speaker 1: thinking about the fiscal equation and the ultimate size of
9:43
Speaker 1: those packages out in the in the works on Capitol Hill. Well,
9:47
Speaker 1: I think anytime there's on evenness in the data or
9:50
Speaker 1: uncertainty in the outlook, officials in Washington will use that
9:54
Speaker 1: as an opportunity to push fiscal and initiatives in the
9:58
Speaker 1: name of economic growth and job creation. But we do
10:01
Speaker 1: have to be careful as we're talking about further stimulus
10:04
Speaker 1: dollars being spent. Looking in hindsight at the Enhanced Unemployment
10:09
Speaker 1: Benefits program, we do know that in some cases this
10:12
Speaker 1: actually created an incentive for workers to remain outside of
10:16
Speaker 1: the labor market by essentially compensating them equal to or
10:20
Speaker 1: even above what they would otherwise earn in the private sector.
10:24
Speaker 1: So we do have to reach that delicate balance providing
10:26
Speaker 1: a safety net but certainly not encouraging individuals to remain
10:31
Speaker 1: outside of the productive capacity position. Lindsay, thank you so
10:34
Speaker 1: much for joining us. Yet again, we always appreciate getting
10:37
Speaker 1: your thoughts and insight. Lindsay PEGSA, chief economists for Stiple Financial.
10:42
Speaker 1: This is Bloomberg. All right, Let's talk with a big
10:47
Speaker 1: Penn State alum. Dan Ives is the Penn State nitt
10:51
Speaker 1: Allan's head to Iowa to play number three Iowa this weekend. Dan,
10:54
Speaker 1: thanks so much for joining us here. Dan ives as
10:56
Speaker 1: a managing director equity research for web Bush. Dan. Let's
10:59
Speaker 1: talk test of here, Ellen moving. I guess the headquarters
11:04
Speaker 1: to Austin, Texas, joining a long list of companies moving
11:07
Speaker 1: to Texas and Florida and thin things like that. Should
11:10
Speaker 1: I care about that or should I just focus on
11:13
Speaker 1: when that plant in Austin is gonna be built, When
11:15
Speaker 1: the plant in Berlin is gonna be ready to go
11:17
Speaker 1: to crank out some more cars. What's important thing here? Yeah,
11:20
Speaker 1: it's a great question. I think right now it's about
11:23
Speaker 1: capacity build out for Wind is going to be keen Europe.
11:26
Speaker 1: Austin is going to be the hub and part of
11:28
Speaker 1: why they're moving the headquarters there. It's important because this
11:32
Speaker 1: is going to give them about it anywhere from five
11:34
Speaker 1: seven improvements potentially just from a margin perspective, given the
11:40
Speaker 1: robotic nature and how scalable Austin is going to be.
11:44
Speaker 1: The headquarter move obviously passes as well just lower costs
11:49
Speaker 1: of living. This is a no brainer strategic move from
11:51
Speaker 1: Musk and PASSA right move at the right time. Well,
11:55
Speaker 1: it's great to have in theory the production capacity down.
11:57
Speaker 1: But also yesterday Elon Musk was talking about some of
12:00
Speaker 1: the supply side challenges Tesla is facing. It's not just
12:03
Speaker 1: even the chip shortage, but ships, you know, all the ips.
12:07
Speaker 1: How much downside risk is there on the production side
12:10
Speaker 1: due to some of those supply chain challenges. Yeah, that's
12:13
Speaker 1: a near term headwind, of course, Tessa and and the
12:15
Speaker 1: rest of the automotive and tech supply chains you know,
12:18
Speaker 1: with but they've been able to navigate it a lot
12:20
Speaker 1: better than other automakers. I think you saw that with
12:22
Speaker 1: the three Q numbers. It's still about a forty tho
12:26
Speaker 1: unit headwind. But as began to twenty two, which starts
12:29
Speaker 1: to moderate and this green tidal wave starts to take cold,
12:33
Speaker 1: I believe Passa, you know, lead this charge here, but
12:36
Speaker 1: you're gonna see GM four another's benefit. But no doubt
12:40
Speaker 1: so why chain a near term hit? But you look
12:43
Speaker 1: through that and I think capacity we're starting to see
12:46
Speaker 1: right lights as we go in two thousand and twenty two.
12:49
Speaker 1: So as this business continues to evolved in it and
12:52
Speaker 1: we get some of the major automakers on a global
12:55
Speaker 1: scale committing obviously significant resources to this, how do you
12:59
Speaker 1: think Tesla will position itself? Is it trying to be hey,
13:04
Speaker 1: we're the best, were the first, were the best, were
13:08
Speaker 1: the most unique? Or are they gonna say we're gonna
13:11
Speaker 1: be the biggest? How do you think they're gonna position themselves. Yeah,
13:14
Speaker 1: well I have it's brand. It's a unique brand they
13:17
Speaker 1: feel globally and that's part of the cashe that Tessa
13:20
Speaker 1: was built. But ultimately come down to battery technology and
13:22
Speaker 1: the innovation coming out of Tessa. We think battery technology
13:26
Speaker 1: costs could be reduced by fifty of next two to
13:28
Speaker 1: three years. That's enable him to go after the Matches
13:31
Speaker 1: forty fifty cars and that's really where you start to
13:35
Speaker 1: keep demand significantly ramp. And that's how Tess to go
13:38
Speaker 1: to nine hundred thousand units potentially this year to what
13:41
Speaker 1: I've used two million units when we look out the
13:43
Speaker 1: next two years. Wow. Okay, So how is Tesla gonna
13:47
Speaker 1: be able to withstand competition from the likes of GM
13:50
Speaker 1: and others who are legacy automakers who have had you know,
13:54
Speaker 1: much greater scale who are getting into the e V space. Yeah,
13:58
Speaker 1: and we don't be this is a zero or some game.
14:00
Speaker 1: I think GM. There's a massive renaissance of growth happened Detroy,
14:03
Speaker 1: which just came back from the analyst day, and that's
14:06
Speaker 1: the rerating stock is they benefit and go after this
14:09
Speaker 1: green tide away. But today it's two percent of autos
14:13
Speaker 1: or evs in the US weren't good about two thou
14:18
Speaker 1: me massive beneficiary GM for Tessa and others as part
14:23
Speaker 1: of this, you know, moved to evs, which we view
14:26
Speaker 1: is the biggest transformation to the auto industreets in nineteen fifties.
14:30
Speaker 1: So I continue to view it as it's not just Tessa,
14:34
Speaker 1: but Tessa is going to be a disproportionate beneficiary, I
14:38
Speaker 1: think even as we're seeing this quarter. So, Dan, I
14:41
Speaker 1: did see your Bloomberg television uh hit from I guess
14:46
Speaker 1: yesterday or something. It looks like you're broadcasting from the
14:48
Speaker 1: back of a car story there. Yeah, that was from
14:53
Speaker 1: the GM analyst day, you know. And and specifically you
14:57
Speaker 1: know that they released some of these Hummers E d
15:00
Speaker 1: s and super cruise technology, which you know, Paul, I mean,
15:04
Speaker 1: it's really what they're coming out with is something that's special.
15:08
Speaker 1: And I think we're gonna look back and look at
15:11
Speaker 1: this is really a pivotal turnaround for GM. We have
15:14
Speaker 1: an eighty five dollar stock price, so I think this
15:16
Speaker 1: could be one that moves a lot higher from here.
15:20
Speaker 1: All right, talk to us a little bit more. Let's
15:22
Speaker 1: just broaden it out a little bit, uh Dan, Just
15:24
Speaker 1: in terms of tech here, you know, I think we've
15:26
Speaker 1: seen rotations in and out of tech, in and out
15:29
Speaker 1: of cyclicals. Um, how do you think about your space?
15:34
Speaker 1: I mean you follow the tech space across the board.
15:37
Speaker 1: What's your call here? As you talk to maybe some
15:38
Speaker 1: of your clients and you're saying, you know, in a
15:41
Speaker 1: rising interest rate environment, I might not want to be
15:43
Speaker 1: as overweight technical about go buy some more energy your banks.
15:46
Speaker 1: How do you kind of respond to that? Yeah? I mean, look,
15:49
Speaker 1: a lot of handholding the last few weeks, but ultimately
15:52
Speaker 1: a ten twenty bit move in the tenure doesn't change
15:56
Speaker 1: our decades long pool thesis in tech, which we expected
16:00
Speaker 1: own well in two thousand twenty two. It's it's a
16:02
Speaker 1: basically fourth in Dushia revolution playing out in terms of
16:05
Speaker 1: the digital transformation to trillion of spending. We want to
16:10
Speaker 1: continue to play names like Apple on five G, Microsoft, Uncloud,
16:15
Speaker 1: cyber security, which we kind of view as a golden age,
16:18
Speaker 1: names like cyber r G, Scour and others. So to us,
16:22
Speaker 1: it's a green light to own tech despite some of
16:24
Speaker 1: the white knuckles. We have a sixteen thousand target for
16:27
Speaker 1: Nadzach year end and I think this is one week
16:29
Speaker 1: to a timber send move into year end, especially on
16:32
Speaker 1: three to earnings that we expect to be Well, let's
16:35
Speaker 1: talk about those earnings stand because it seems every single
16:38
Speaker 1: quarter when we come in, expectations are impossibly high for
16:42
Speaker 1: some of these big tech names, and often they are
16:45
Speaker 1: actually able to exceed them, but you don't necessarily see
16:49
Speaker 1: the share reward because valuations are so rich are already
16:52
Speaker 1: so why would earnings be a catalyst this time around? Yeah,
16:57
Speaker 1: it's a great point. I think ultimately the street has
17:00
Speaker 1: has sold really closed earnings. I think this is gonna
17:03
Speaker 1: be a little different because as we go not just
17:06
Speaker 1: some three que but into qute four and the streets
17:08
Speaker 1: massively underestimating the growth stories that we're seeing across pack
17:13
Speaker 1: and as much as we could talk about ratings potentially
17:15
Speaker 1: being compressed because of what's happened the tenure, I think
17:18
Speaker 1: streets underestimating growth across tax by anywhere from ten over
17:23
Speaker 1: the next year. And that's why I view this as
17:25
Speaker 1: a seminal earning season to really you know, turn the
17:29
Speaker 1: tide there from a sentiment perspective, can they do that?
17:34
Speaker 1: I mean, you know, in terms of we were just
17:36
Speaker 1: talking a little bit earlier, Kayley asked about that supply chain.
17:38
Speaker 1: I'm I'm just an observer who thinks that that's gonna
17:41
Speaker 1: be a bigger issue this earning season than I think.
17:44
Speaker 1: Maybe the market's discounting. In one of the areas where
17:47
Speaker 1: it may be more pronounced, is technology. Do you think
17:51
Speaker 1: the streets taking in for your tech names, you know,
17:54
Speaker 1: kind of what we're seeing across the bord in terms
17:56
Speaker 1: of supply chain issues. Yeah, I think the street as
18:00
Speaker 1: to something say, it's almost overly discounted for the supply chain.
18:04
Speaker 1: I mean, we're starting to see throughout our Asia check
18:06
Speaker 1: that's actually moderating going into early next year. So we're
18:11
Speaker 1: going to continue out of that head wind. This quarter,
18:13
Speaker 1: streets took and past that, and that's the important thing.
18:16
Speaker 1: You'll have those headwinds, but as you look into two
18:18
Speaker 1: thousand twenty two, it starts to moderate and it's gonna
18:21
Speaker 1: be a massive lift in terms of seeing in terms
18:24
Speaker 1: of overall growth for tech. That's why I view this
18:27
Speaker 1: is not time to throw in the white towel, but
18:28
Speaker 1: actually double down. Chech so Dan to these supply chain issues.
18:33
Speaker 1: I had a little bit of an episode about a
18:35
Speaker 1: month and a half ago, I was on the TV
18:37
Speaker 1: set and I was trying to put my Apple Watch
18:39
Speaker 1: back on, and I dropped it on its face and
18:41
Speaker 1: it just totally shattered to the point where you could
18:43
Speaker 1: see the chips inside. And everybody said, wait, wait, wait
18:46
Speaker 1: for the new one to come out if you're going
18:47
Speaker 1: to buy a new one, But I had no faith
18:49
Speaker 1: I would get one on my wrist in the near terment.
18:51
Speaker 1: I'm glad I just bought a replacement that day because Apple,
18:54
Speaker 1: you know, those watches, even though the event was last month,
18:57
Speaker 1: aren't coming out until a week from now. As Apple
19:00
Speaker 1: moves forward, how do they need to diversify their supply
19:03
Speaker 1: chain so they don't risk those kind of delays again? Yeah,
19:08
Speaker 1: I mean they're really married to the as of supply
19:12
Speaker 1: chain and that's not really going to change. To some extent.
19:15
Speaker 1: They'll diverse ty a bit in terms of more factories.
19:18
Speaker 1: But but right now, Apples handled the supply chain and
19:21
Speaker 1: a lot better than anyone that had anticipated. And you'll
19:25
Speaker 1: continue to have some delays in some products. When we
19:27
Speaker 1: look at this as on third team and what we're seeing,
19:31
Speaker 1: I mean, this continues to really be smoothed, you know,
19:34
Speaker 1: smooth sound. You have some shortages into year end and
19:37
Speaker 1: especially on Apple Watch and some other areas like Mac,
19:41
Speaker 1: but overallpartsmen a lot worse than the bite because Cook
19:45
Speaker 1: and Cupertino continue to to navigate this and almost have
19:48
Speaker 1: pap On like ability, unlike litther competitors. Dan Less question
19:54
Speaker 1: here on Apple um services, is that still a good
19:59
Speaker 1: growth driver for this name? Oh? I think it's massive,
20:03
Speaker 1: I mean services A big part of the reading that
20:05
Speaker 1: we've seen. If I go back, I mean to in
20:09
Speaker 1: the street was assigning today it's we think it's worth
20:11
Speaker 1: one point five trillions, and despite epic and some of
20:14
Speaker 1: the regulatory worries, I think that's something that continues to
20:18
Speaker 1: be mid teen growth. I think that's another upside supplies
20:21
Speaker 1: this quarter. It's a big part of the reading in
20:23
Speaker 1: the stock and how we get to a three trillion
20:25
Speaker 1: dollar valuation going into two thousand twenty two. Hey, Dan,
20:29
Speaker 1: thanks so much for joining us. We always love chatting
20:32
Speaker 1: with you because we can go many different directions. Lots
20:34
Speaker 1: of great names you cover, The stories are working, certainly,
20:38
Speaker 1: we always appreciate getting your perspective. Dan Ives, Managing Director
20:41
Speaker 1: Equity Research for web Bush Securities, work Bill SMEE, Chief
20:46
Speaker 1: Investment Officer, smeet to Capital Management, Phil, thanks so much
20:49
Speaker 1: for joining us here again. We got a jobs number
20:52
Speaker 1: today disappointing. Um, yet we still have and combined with
20:57
Speaker 1: that as a lot of inflation out there that some
20:59
Speaker 1: folks are concerned that it may not be the transitory type.
21:02
Speaker 1: And one of the areas is right out there and energy.
21:05
Speaker 1: So Bill gives the thoughts on the energy space. Where
21:09
Speaker 1: are you guys there where do you think they're opportunities
21:11
Speaker 1: or has it already been priced in? Well, thanks for
21:15
Speaker 1: having us, and it is not even vaguely close to
21:19
Speaker 1: being priced in. Uh, you've got uh teacup of market
21:24
Speaker 1: capitalization in the energy sector and oil specifically oil and gas.
21:30
Speaker 1: Uh three of the S and P. So you're gonna
21:33
Speaker 1: have a three percent position in the SMP be far
21:36
Speaker 1: and away the best performing sector. Because energy is just
21:40
Speaker 1: as important as it was five years ago and ten
21:43
Speaker 1: years ago. And like Warren Buffett likes to say, the
21:47
Speaker 1: people that think that will make a fast transition away
21:50
Speaker 1: from carbon fuels and the people that think will never
21:53
Speaker 1: transition are both crazy. So so the thing to understand
21:58
Speaker 1: is whether it's making a electricity out of natural gas
22:03
Speaker 1: and and combustion or whether it's moving cars around. You
22:07
Speaker 1: just have way more demand coming from a huge pop
22:12
Speaker 1: positive demographic population shift, right, all of a sudden, ninety
22:16
Speaker 1: million millennials want to own a home. They're buying in
22:19
Speaker 1: the suburbs, both have to have a car, you know.
22:22
Speaker 1: Just a whole bunch of things are going on at
22:24
Speaker 1: the same time. And and and the Arab Spring torpedoed
22:28
Speaker 1: oil and gas production in the United States of America,
22:31
Speaker 1: and the body politic is trying to shame the industry
22:36
Speaker 1: into avoid drilling and expanding that supply. Hence, Yeah, so, Bill,
22:42
Speaker 1: given all of those kind of idiosyncratic to energy kind
22:45
Speaker 1: of factors, do you have to treat energy differently than
22:48
Speaker 1: you would treat the basket of value, cyclical, reflationary stocks,
22:52
Speaker 1: whatever you want to call them. Well, yeah, they're they're
22:55
Speaker 1: kind of in their own world now. Because we'll just
22:58
Speaker 1: give you one example. Our largest position is Continental Resources.
23:02
Speaker 1: Continental Resources in two thousand and eighteen, when oil was
23:06
Speaker 1: seventy dollars a better peeked out at a price of
23:08
Speaker 1: sixty eight dollars a year. Price oil is eight right now,
23:12
Speaker 1: and we don't even know where it's going to go
23:15
Speaker 1: and the stocks trading at fifty two. So we believe
23:18
Speaker 1: that that spread or our margin of safety is the
23:22
Speaker 1: fact that so many people have flooded out of any
23:25
Speaker 1: participation in oil and gas, for example, on an E
23:29
Speaker 1: S G basis, that that there is a margin of
23:32
Speaker 1: safety there, that that it's the kind of thing that
23:34
Speaker 1: Peter Lynch loved. He liked to own a stock that
23:37
Speaker 1: went way up and nobody loved it after it went
23:38
Speaker 1: way up. Bill just probably speaking here, you know, starting
23:44
Speaker 1: you know, more than a year ago, we had this
23:46
Speaker 1: nice rotation into the cyclical names of this market, including energy,
23:51
Speaker 1: including banks, um and and that's worked so well for
23:54
Speaker 1: so long, and there's been fits and starts, and that
23:56
Speaker 1: is you know, um, there's been bouts of rotating back
23:59
Speaker 1: into growth. But in a rising interest rate environment, how
24:03
Speaker 1: do you feel about that trade? Well? It I always
24:07
Speaker 1: remind people that after a terrible bear market, and there
24:11
Speaker 1: was a terrible bear market in value investing for about
24:14
Speaker 1: seven years, when a when a a deep bear market ends,
24:19
Speaker 1: the first year, you get an explosion, you know. So
24:22
Speaker 1: the bottom of the stock market eighty two, the first
24:25
Speaker 1: year was a huge move up the bottom of the
24:27
Speaker 1: stock market No. Nine was a huge move up the
24:30
Speaker 1: first year, and then you settle into a light correction
24:35
Speaker 1: and bull moves for another seven or eight years. So
24:39
Speaker 1: so again we're in the very early stages of stop
24:43
Speaker 1: and think about there. There's so many investors out there
24:46
Speaker 1: that are momentum investors, and the place to find momentum
24:50
Speaker 1: at the moment is a place that it's almost impossible
24:54
Speaker 1: for them to get into because it's not that big, right,
24:57
Speaker 1: it's three per cent of the S and P and
25:00
Speaker 1: what they do own the big tech stuff, the things
25:04
Speaker 1: and all that is like all added together is like
25:08
Speaker 1: the S and P. So you could you could see
25:10
Speaker 1: a fire hose trying to put water in a teacup
25:12
Speaker 1: for a while. I want to ask you about the
25:15
Speaker 1: home builders as well. You were talking about all the
25:17
Speaker 1: millennials going out there looking to get some more space,
25:19
Speaker 1: moving out to the suburbs, buying a house, something I
25:21
Speaker 1: am unfortunately not in a position to do at the moment.
25:24
Speaker 1: But how do you play that from an equity perspective? Boy,
25:27
Speaker 1: they have discounted those stocks as if they're the same
25:31
Speaker 1: cyclical companies that got caught in the oh five oh
25:34
Speaker 1: six stupidity. They used to be land developers that put
25:40
Speaker 1: houses on the land to get them sold, right, that
25:43
Speaker 1: used to be their business. And secondly, it used to
25:46
Speaker 1: be a fragmented industry where where, for example, the largest
25:51
Speaker 1: home builder d R Hurt and they built one percent
25:53
Speaker 1: of the homes in the United States and this year
25:56
Speaker 1: they'll build nine and that's just one of the top
25:59
Speaker 1: ten public traded home builders. So it used to be fragmented.
26:03
Speaker 1: And what you're going to see happen here, we're talking
26:07
Speaker 1: about stocks trading at seven times earnings that have a
26:10
Speaker 1: ten to fifteen ten year growth possibility. That's pretty easy
26:16
Speaker 1: to do in that there's ninety million millennials and there
26:18
Speaker 1: was only sixty five million Gen xers. So they satisfy
26:21
Speaker 1: an economic need, which is one of our eight criteria.
26:24
Speaker 1: They will build the single family residences that are needed
26:27
Speaker 1: to meet what the population wants. And then, of course,
26:30
Speaker 1: my age group, the baby boomers, the older boomers are
26:32
Speaker 1: staying in their house and are going to stay in
26:34
Speaker 1: their house way longer than prior generations. A because they're
26:37
Speaker 1: healthier other than COVID than prior generations, and b because
26:41
Speaker 1: obviously it's not quite as exciting to move into a
26:44
Speaker 1: communal set up in a post COVID world. All right, Bill,
26:48
Speaker 1: thanks so much for joining us. We always love getting
26:50
Speaker 1: your perspective, the perspective of a veteran value investor, certainly
26:55
Speaker 1: having some good opportunities right here and good performance. More
26:58
Speaker 1: to the point of value folk are Bill Smeed, chief
27:01
Speaker 1: investment officer. Smeed a Capital Management. He's been a value
27:04
Speaker 1: investor for decades, calling out now some of the energy
27:09
Speaker 1: stocks as well as the bank stocks that are working
27:11
Speaker 1: for him. We'll have more coming up. This is Bloomberg,
27:14
Speaker 1: Good morning. I want to bring in Omar Aglar. He
27:20
Speaker 1: is the chief investment officer and head of investments for
27:23
Speaker 1: Charles Schwab Asset Management. They've got a new study as fascinating.
27:26
Speaker 1: They look at how UH you know, kind of behavioral
27:28
Speaker 1: science and how that views or how that skews or
27:31
Speaker 1: impacts UH investing. So let's bring in Omar. Interesting study here.
27:37
Speaker 1: Omar talk to us about your Bee Fi barometer. What
27:42
Speaker 1: is that survey and what are you looking for? What
27:44
Speaker 1: are you asking? Yes, thank you on good morning, um
27:48
Speaker 1: I we have this is the third year we conduct
27:51
Speaker 1: these UH research and he has been incredibly helpful for
27:56
Speaker 1: us in serving our clients as we partner with the
28:00
Speaker 1: wi ands as really to get this survey out to
28:03
Speaker 1: advisors to understand, you know, what are the behavioral tendencies
28:06
Speaker 1: that they see on their clients as they see information.
28:09
Speaker 1: And what's interesting obviously about this year is that now
28:12
Speaker 1: we have data of the pre pandemic behavioral biases that
28:16
Speaker 1: client observed during the pandemic of last year, and now
28:20
Speaker 1: in this process of obviously trying to get out of
28:23
Speaker 1: the pandemic um, the research shows that, you know, there
28:27
Speaker 1: are two areas where advisors and clients continue to observe
28:32
Speaker 1: natural behavioral biases, which is, you know, one is called
28:35
Speaker 1: recency bias, which is the tendency of people to just
28:39
Speaker 1: look at the most recent information for making decisions. And
28:42
Speaker 1: the other one is confirmation bias and confirmation biases that
28:45
Speaker 1: where you try to find information that confirms your own views.
28:50
Speaker 1: And that is obviously very typical, especially because the news
28:53
Speaker 1: flows continues to be incredibly fluid and it's and it's changing,
28:57
Speaker 1: it changed into what the information that the investors and
29:01
Speaker 1: clients wanted to see in and even you know, with
29:04
Speaker 1: today's you know, labor market report, you know, people are
29:07
Speaker 1: just trying to see how they can process that information.
29:10
Speaker 1: So these study is very helpful, you know, understanding how
29:13
Speaker 1: clients make decisions, and we clearly, um, you know, have
29:17
Speaker 1: you know, learn a lot from it. Yeah, you know,
29:19
Speaker 1: Paul I had the pleasure of speaking with Omar at
29:21
Speaker 1: the Bloomberg invest Global Conference earlier this week, and we
29:24
Speaker 1: focused a lot on the retail traders. So Omar, I'm wondering,
29:27
Speaker 1: you know, you and I had a conversation about retail traders.
29:30
Speaker 1: How the meme stock mania seems to be over, but
29:32
Speaker 1: it was still a thing where people were getting their
29:34
Speaker 1: investment ideas from breddit, in from social media. How are
29:38
Speaker 1: do those kind of fads and kind of that fomo
29:40
Speaker 1: aspect play in here? What do you see in the survey?
29:44
Speaker 1: It's uh, it is an interesting uh, you know results.
29:47
Speaker 1: We we for the first time this year, we added
29:50
Speaker 1: a few questions related to precisely social media and the
29:54
Speaker 1: impact of social media and investment decision process. And what
29:58
Speaker 1: we what we observe is you know, two things. One
30:00
Speaker 1: is you're You're totally right, as we discuss Kelly, there
30:03
Speaker 1: is a lot of new investors coming into the markets
30:06
Speaker 1: as a result of these you know, fomo setting and
30:09
Speaker 1: these you know, fear of missing out the access and
30:12
Speaker 1: the ability to get into the different programs and different providers.
30:17
Speaker 1: It is now easier than it was you know, even
30:19
Speaker 1: a couple of years ago. So that process, you know,
30:21
Speaker 1: it is actually helpful. Is we do welcome you know,
30:24
Speaker 1: more participants in the market. That's very good. And what
30:27
Speaker 1: the study of these B five parameters show does is
30:30
Speaker 1: that advisors are doing a great job in working with
30:33
Speaker 1: their clients to understand whether those um investments are actually
30:39
Speaker 1: good for them. Whether it's a meme stocks, whether it's
30:41
Speaker 1: it's back, whether it's an n f T, even digital currencies.
30:45
Speaker 1: You know, advisors are working with their clients to understand
30:48
Speaker 1: whether that's a suitable component. And getting that level of
30:51
Speaker 1: education and advice is probably what we learned the most
30:54
Speaker 1: about these B five barometer you know, it's it's good
30:57
Speaker 1: for people to be invested in the market. We continue
30:59
Speaker 1: to see interest in this and I don't think, Kyley,
31:02
Speaker 1: this is gonna you know disappear. You know, there will
31:04
Speaker 1: be you know, always, you know, another story that people
31:07
Speaker 1: will get interested in. So more, is there a general
31:10
Speaker 1: consensus from your data about how maybe you know, investor
31:13
Speaker 1: behavior has changed and pre impost pandemic. Not that we're
31:17
Speaker 1: necessary fully out of this pandemic, but we can see
31:19
Speaker 1: certainly let it in the tunnel. But in terms of
31:22
Speaker 1: risk taking, our people more or less risk tolerant, well,
31:27
Speaker 1: it's it has changed, you know, quite significantly, and it's
31:30
Speaker 1: it's almost like, you know, perfect textbook example of how
31:33
Speaker 1: this works. Because in the world of behavioral finance, you know,
31:37
Speaker 1: biases get divided into what it's called emotional reaction and
31:41
Speaker 1: what it's called cognitive. You know, biases cognitive being a
31:44
Speaker 1: little more rational when you're trying to convince yourself about
31:47
Speaker 1: the decisions you're about to make. An emotional would tends
31:49
Speaker 1: to be more you know, when you overreact or react
31:52
Speaker 1: without necessarily given it to two more thoughts. It's interesting
31:55
Speaker 1: to see because you know, during as you might expect,
31:59
Speaker 1: the majority of the biases ended up being you know,
32:02
Speaker 1: heavily emotional, with with loss of version being you know,
32:05
Speaker 1: one of the main drivers for a lot of decisions
32:07
Speaker 1: that we saw and again combined with recency biases and
32:10
Speaker 1: said because people use information on the most recent data
32:14
Speaker 1: to try to make decisions, but it was clearly dominated
32:17
Speaker 1: by by the loss of version and protection and uncertainty.
32:20
Speaker 1: As we became you know, we got the vaccines out,
32:23
Speaker 1: we started the rotation in the market. We started to
32:25
Speaker 1: just see this big economic recovery. Then the cognitive biases
32:29
Speaker 1: and started to turn on, and those were tend to
32:32
Speaker 1: be more of overconfidence. They tend to be more about
32:35
Speaker 1: trying to understand, you know, how can they get their
32:38
Speaker 1: understanding that the fedue will be there, the central banks
32:40
Speaker 1: will be there, the stimulus will be there, so they
32:43
Speaker 1: those we became more prevalent overall, and now we're in
32:47
Speaker 1: this you know, world of warrior as we say, where
32:49
Speaker 1: you know, we're starting to see these balance our early
32:52
Speaker 1: fascinating discussion there Omar Agular, chief investment Officer, head of
32:56
Speaker 1: investments for Charles swab Asset Management. Looking at the you
33:00
Speaker 1: sees um that investors have um you know, across the
33:03
Speaker 1: board and you know, folks presumably were impacted clearly by
33:08
Speaker 1: the pandemic. And we had a lot of those retail
33:09
Speaker 1: investors as you were mentioning, Kaylee came into the market.
33:12
Speaker 1: We saw that early on in the pandemic, people were
33:14
Speaker 1: looking for something to do, uh, and they were trading
33:17
Speaker 1: memestocks and we saw some crazy trading patterns. There's just phenomenal.
33:22
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
33:25
Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever
33:29
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
33:33
Speaker 1: at Matt Miller three. On False Sweeney, I'm on Twitter
33:36
Speaker 1: at pt Sweeney Before the podcast. You can always catch
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