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Inflation, ESG, Video Games, And Streaming (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news on the Bloomberg Markets Podcast,
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. So let's talk to
0:22
Speaker 1: somebody who does this stuff for a living. Chance see
0:25
Speaker 1: I own partner, Oxbow Advisers. Chance you know the last
0:30
Speaker 1: I don't know four or five weeks have suggested that
0:34
Speaker 1: the market might be thinking maybe this FED can go
0:37
Speaker 1: slower rather than faster in terms of raising rates. How
0:40
Speaker 1: do you think about it? Yeah, Hi, Paul and Matt,
0:44
Speaker 1: I think yeah. It's been interesting to see this rally
0:46
Speaker 1: here July and into August. It seems like investors are
0:50
Speaker 1: getting more excited that the FED may be able to
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Speaker 1: pull off this soft landing. We don't think, though, that
0:56
Speaker 1: the lower than expected inflation number yesterday really changes the
0:58
Speaker 1: Fed's plans. We think they're still going to hike in
1:00
Speaker 1: September and November. You wouldn't really see them hit a
1:04
Speaker 1: point that you might think they'd be about done hiking
1:07
Speaker 1: until you see the federal funds rate above the two
1:09
Speaker 1: year rate. That's usually when you'd start to see maybe
1:12
Speaker 1: they would start to pivot in terms of their activity.
1:15
Speaker 1: But we would expect the inflation rate to still only
1:18
Speaker 1: come down slowly, and we're still seeing an economic slowdown.
1:21
Speaker 1: So for us, our positions unchanged that we continue to
1:23
Speaker 1: be pretty cautious in this environment. We did see the
1:25
Speaker 1: two year come down drastically UM after the CPI number.
1:29
Speaker 1: Now it's at three spot one seven three per cent,
1:34
Speaker 1: so it looks like we need to go another sixty
1:36
Speaker 1: seven point three basis points. Do you think they're gonna
1:39
Speaker 1: go seventy five chance? I don't know. It seems like
1:43
Speaker 1: maybe they just go with fifty um. Although when you
1:46
Speaker 1: have the equity market rising like this, they kind of
1:49
Speaker 1: given them permission to raise however much they want. Uh. Really,
1:53
Speaker 1: only when the equity market starts to go down into
1:55
Speaker 1: a significant extent that you think maybe that might really
1:58
Speaker 1: pressed whether they want to push through as many hikes
2:00
Speaker 1: as they'd intend to, especially with three and a half
2:02
Speaker 1: percent unemployment. I know it's a backwards looking data point,
2:05
Speaker 1: but still, uh, they seem to be really interested in
2:08
Speaker 1: front loading. I think that's the case. And I think
2:12
Speaker 1: the other thing to keep in mind is, even though
2:14
Speaker 1: the month over month number on inflation was lower than
2:18
Speaker 1: expected and you're starting to see, Okay, maybe we peaked
2:20
Speaker 1: at nine percent last month and now it's going to
2:22
Speaker 1: start trending down, you're still looking at an above eight
2:25
Speaker 1: percent annual inflation number and how many months in a
2:28
Speaker 1: row of real wages being negative for workers around the country.
2:34
Speaker 1: And that's really where their top of mind is. And
2:36
Speaker 1: like you said, if the unemployment rate is this low,
2:38
Speaker 1: they're gonna want to keep pushing on that to try
2:40
Speaker 1: and get back to an inflation number that at least
2:43
Speaker 1: allows wage growth to be at least even, I know,
2:46
Speaker 1: rather than losing versus inflation. Yeah, but this you look
2:48
Speaker 1: at this equity markets chance and he really gets your
2:51
Speaker 1: attention here. I mean, we get the SMP up, you know,
2:53
Speaker 1: sixt offense low, the NaSTA on offense low. I mean,
2:58
Speaker 1: you can't it's nothing to sneeze at. But is it
3:01
Speaker 1: now suggests that maybe there's some risk greater risk in
3:05
Speaker 1: the equity markets right here? Or do you think there's
3:06
Speaker 1: more upside to go? We certainly think there's greater risk
3:10
Speaker 1: at these prices. Just some numbers that we've been looking at. First,
3:13
Speaker 1: the forward price to earnings ratio is back to nearly
3:16
Speaker 1: eighteen times, which that's above the historic average, and that's
3:20
Speaker 1: with earnings growth decelerating. We just went through a quarter
3:23
Speaker 1: of earnings reports where it really was the energy, materials,
3:27
Speaker 1: and industrial sectors that carried the earnings growth, and we
3:30
Speaker 1: would expect their contribution to fade a bit and the
3:32
Speaker 1: quarters that come considering the commodities prices are now starting
3:35
Speaker 1: to come down. And then just looking at our own
3:38
Speaker 1: portfolio are long term growth strategy that we managed for
3:41
Speaker 1: our equity clients. We try to hold positions for the
3:44
Speaker 1: long term, but we look at all of the positions
3:47
Speaker 1: in there, there isn't a single one in that list
3:48
Speaker 1: that we would consider to be undervalued versus their UH
3:51
Speaker 1: on their current valuation versus their historic average. So it
3:54
Speaker 1: just tells you how much markets have rallied back and
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Speaker 1: we don't see much opportunity at these prices. We've had
4:00
Speaker 1: actually been reducing our exposure to cyclical sectors that typically
4:03
Speaker 1: do well late cycle but then start to underperform in
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Speaker 1: a recession, So like financials, energy, and materials. We've been
4:10
Speaker 1: cutting back in those areas. How do you assess earning
4:12
Speaker 1: season so far? I mean what, um, you know, what
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Speaker 1: kind of forward e from the forward price earnings ratio
4:20
Speaker 1: can you gauge from what we've seen. Yeah, it seems
4:24
Speaker 1: like this current quarter that just we got done reporting, Uh,
4:28
Speaker 1: everyone has seemed to already expect there's going to be
4:30
Speaker 1: some disappointment. So it was actually the first quarter you
4:33
Speaker 1: had in quite a while where companies that reported mrs
4:36
Speaker 1: actually were up one percent the day after they reported,
4:39
Speaker 1: which that rarely ever happened. So that tells you how
4:41
Speaker 1: low expectations were. But it is notable to us that
4:44
Speaker 1: companies with very long track records of outperforming expectations reported mrs,
4:49
Speaker 1: like Microsoft or Alphabet and uh, and that just tells
4:53
Speaker 1: you that it's going to be a more difficult environment
4:54
Speaker 1: in the quarters to come. And you're still seeing some
4:57
Speaker 1: news coming out like we're seeing with a Nvidia or
5:00
Speaker 1: icon that there's some weakness on the horizon. And uh, frankly,
5:03
Speaker 1: it's almost a quarter early for some of those semiconductor businesses.
5:06
Speaker 1: I think it was gonna be more the third quarter
5:08
Speaker 1: that people were expecting to see that weakness and it
5:11
Speaker 1: arrived even sooner than that. So monitoring this closely. Alright, Chance,
5:16
Speaker 1: question of the morning. Here, You've got your undergraduate degree
5:19
Speaker 1: and your NBA Indiana. What the heck is a Hoosier?
5:25
Speaker 1: I actually I don't even have a great explanation for that.
5:29
Speaker 1: Nobody does. No, I don't know, um and I'm probably
5:34
Speaker 1: failing for everybody who who grew up and I went
5:36
Speaker 1: to school at that there. But I wouldn't be able
5:38
Speaker 1: to agree with you a great definition. I mean, my
5:40
Speaker 1: mild definition. It's somebody from Indiana. I think that might be.
5:43
Speaker 1: It actually is basically it not based off an animal
5:47
Speaker 1: or anything like That's like, it wasn't the state bird?
5:49
Speaker 1: Is it a state? I got nothing, and I've asked
5:51
Speaker 1: every Indiana grad I know, I got nothing. But anyway, Chance,
5:55
Speaker 1: thanks for chipping in there. We appreciate it. Chance Fukan
5:58
Speaker 1: c I O partner Oxbow Advisors. Danielle Bragg, a founder
6:06
Speaker 1: and CEO of Defined dot AI, joins US fashionating area
6:11
Speaker 1: of technology artificial intelligence. Danielle, thank you so much for
6:14
Speaker 1: joining us, just for my own sake. How do you
6:17
Speaker 1: define artificial intelligence? Hi? Medh and everybody? Well, artificial intelligence
6:25
Speaker 1: is the simulation of a of a human brain. And
6:29
Speaker 1: just like a name says artisticially, so it is it
6:33
Speaker 1: counts with unlight and unlike UH software, it is trained,
6:38
Speaker 1: it is not coded. So it's just like a human brain.
6:42
Speaker 1: The more we learn, the more we can resolve daily situation.
6:48
Speaker 1: And you know, I think I heard a lot about
6:50
Speaker 1: this a couple of days ago as President Biden signed
6:53
Speaker 1: the Chips Act. Is the federal government subsidizing AI research?
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Speaker 1: You think enough that we can keep up in the
7:01
Speaker 1: kind of race to win technology. Well, the the US
7:06
Speaker 1: government has been has been growing AI investment across all
7:11
Speaker 1: their uh, all the departments that that has been on
7:15
Speaker 1: the rise in the last five years. We have now
7:20
Speaker 1: this Unair Task Force for the for the Investment of
7:26
Speaker 1: AI in the Nation, which I'm part of alongside with
7:31
Speaker 1: my colleagues twelve called well independent people. So yeah, the
7:37
Speaker 1: West CONN continues to pour. But the interesting thing is
7:40
Speaker 1: that the US on itself, the United States with the
7:44
Speaker 1: private sector part as well, has been has invested fifty
7:48
Speaker 1: two point nine billion last year, UH, followed by China
7:54
Speaker 1: very far out with seventeen point two billions. So we
7:57
Speaker 1: are putting in the public and the private sector are
8:00
Speaker 1: a lot of investment. So where where where do you
8:03
Speaker 1: think the most I guess appealing or attractive applications for
8:08
Speaker 1: artificial intelligence are because you know, I listen to conference calls,
8:12
Speaker 1: quarterly earnings conference calls, and I've got companies from you know,
8:16
Speaker 1: like cookie makers, to technology companies, to entertainment companies, to
8:21
Speaker 1: people who make shoes whatever, everybody's carmakers. Everybody talks about
8:26
Speaker 1: artificial intelligence in their business. So I'm just wondering, where
8:29
Speaker 1: do you think some of the most you know, tragic
8:32
Speaker 1: actuations are. Yeah, well, the thing is a lot of
8:36
Speaker 1: people talk about it and they're not doing AI. They
8:40
Speaker 1: are still doing rule based systems and they just INSERTA
8:43
Speaker 1: to where they A because it looks more fancy. But
8:46
Speaker 1: where the thing is exciting right now, And you can
8:50
Speaker 1: see in the rise, including in our business, which is
8:52
Speaker 1: what we see our clients do is conversationally everywhere, which
8:57
Speaker 1: is this part of the I where you can talk
9:00
Speaker 1: two machine as you are talking to people. And this
9:03
Speaker 1: is happening across everywhere. So in fitness steak in of course,
9:08
Speaker 1: now we we are I mean in education and healthcare
9:12
Speaker 1: with tele medazine, with and the classic ones on virtual
9:18
Speaker 1: systems and in the car and in the house. And
9:21
Speaker 1: if you combine conversationally I with robots, that will help
9:25
Speaker 1: you whether you're in a work setting on or you
9:27
Speaker 1: environ in a in a homesteading with daily tasks around
9:31
Speaker 1: the house. This is becoming really exciting. How long until
9:35
Speaker 1: it actually works? I mean I've been using the newest
9:38
Speaker 1: and best car in fontainment systems. You know, I test
9:42
Speaker 1: out new cars every every couple of weeks, and it
9:45
Speaker 1: never really works. I'll say, you know, like play the
9:48
Speaker 1: grateful Dead channel for me and it'll call my mom
9:51
Speaker 1: that That is a great point. The investment done so
9:56
Speaker 1: far is still not up to the results the we
10:00
Speaker 1: should be at already. Uh And and on top of that,
10:05
Speaker 1: while language model language models are more capable than ever
10:08
Speaker 1: and you probably all know the latest on the the
10:14
Speaker 1: suspicion that Google has created as C D N A I,
10:17
Speaker 1: which is not We're so far from resolving the basics.
10:20
Speaker 1: We can't get into the emotion emotionally I yet. But
10:24
Speaker 1: the problem with that is the as you as you
10:26
Speaker 1: grow more larger models, the models are more biased too,
10:31
Speaker 1: and the rise of the ethical AI is everywhere, which
10:35
Speaker 1: also translates into regulations, and we've seen from twenty sixteen
10:41
Speaker 1: to twenty twenty one bills in twenty twenty five countries
10:46
Speaker 1: going from one to eighteen. And now you see all
10:49
Speaker 1: the data privacy all around. So now you're right, we're
10:53
Speaker 1: very far. I'm glad you brought up the sentient AI
10:55
Speaker 1: at Google because that's one of my favorite stories, really
10:58
Speaker 1: non market stories of the here. But are we in
11:00
Speaker 1: a race to our own enslavement or death? I mean,
11:03
Speaker 1: isn't this AI going to eventually take us over or
11:06
Speaker 1: kill us? I mean a movie about that. I think
11:09
Speaker 1: Ellen must Bill Gates. All these people are worried about
11:11
Speaker 1: that the terminator, Well they yeah, they are really being
11:15
Speaker 1: in the space for twenty two years and understanding how
11:19
Speaker 1: slow technology moves in these fields. We are still resolving barely,
11:24
Speaker 1: like you guys said, the narrow AI problem, which is
11:28
Speaker 1: resolving one task at the time. Lets let alone a contextual,
11:32
Speaker 1: contextual information interaction between systems. We're very sharp on that.
11:37
Speaker 1: We are in towards the world and more and more
11:40
Speaker 1: this ethically I is uh an every big company and
11:44
Speaker 1: small company has this UH this charter. Now starting data,
11:49
Speaker 1: if you starting the data side but everybody is on
11:53
Speaker 1: the same path to work along machine and not replace humans.
12:01
Speaker 1: Humans activity will continue to be right for generations her
12:08
Speaker 1: years from now, I hope so. Daniel Le Bragga, founder
12:10
Speaker 1: and CEO of to Find dot Ai. Our next guest
12:16
Speaker 1: is from the Great State of Ohio. And remember Mary,
12:18
Speaker 1: yesterday we were talking about Cedar Point. They had the Gemini,
12:21
Speaker 1: they have the Demon draw but they but they never
12:25
Speaker 1: to me. I never thought it was as good as
12:28
Speaker 1: King's Island, probably because King's I was a little bit
12:30
Speaker 1: further away. I couldn't get there as easily, and King's
12:33
Speaker 1: Island had the Beast, which was the largest wooden roller
12:35
Speaker 1: coaster in the whole world. Yeah. So the Beck Ramaswamy
12:39
Speaker 1: is in the studio with us right now. He has
12:42
Speaker 1: started um an asset management company called Strive Asset Management.
12:46
Speaker 1: He's written a couple of books as well, um the
12:49
Speaker 1: most well, the first one being Woke Incorporated Inside Corporate
12:53
Speaker 1: America's Social Justice Scam, and the second book, I'm Gonna
12:57
Speaker 1: Guess is not yet published next month, next next month.
13:00
Speaker 1: So Beck is here with us in studio. I'm really
13:02
Speaker 1: excited because yesterday he launched his first E T F
13:05
Speaker 1: strive Asset Management's first e t f UM which is
13:08
Speaker 1: d r l L that's the ticker in the New
13:10
Speaker 1: York Stock Exchange, and uh, it was extremely successful. Tell
13:14
Speaker 1: us about it. Yeah, we're happy to have seen this
13:15
Speaker 1: taken off. Hopefully that that, you know, trend continues, because
13:18
Speaker 1: I think it's really important what we hope to deliver
13:20
Speaker 1: to the U S energy sector the man It actually
13:22
Speaker 1: is really simple, dr LLL drill. It's a new what
13:25
Speaker 1: I call post E s G mandate to the U
13:27
Speaker 1: S energy sector, telling these companies that you should focus
13:31
Speaker 1: exclusively on what allows you to be most successful, most
13:34
Speaker 1: profitable over the long run, without regard to any other environmental, social,
13:40
Speaker 1: or political agenda. As important as those agendas, maybe we
13:44
Speaker 1: should sort them out through the political process, but in
13:46
Speaker 1: the boardroom, we're focused exclusively on the success of companies
13:50
Speaker 1: and that's a really different message then you get from
13:52
Speaker 1: other large asset managers, and we think we need to
13:54
Speaker 1: have that debate well in the boardrooms. It was described
13:56
Speaker 1: to me yesterday when we were talking about your launch,
13:59
Speaker 1: because is we're gonna have you on Bloomberg's e t
14:01
Speaker 1: f i Q on Monday UM. It was described to
14:04
Speaker 1: me as an anti woke e t F. And my
14:06
Speaker 1: first thought was, why would you want to do an
14:08
Speaker 1: anti woke or awoke e t F because you wanted
14:11
Speaker 1: the goal of investing is to make the most money
14:13
Speaker 1: you can. And then so it's not, actually it's anti
14:16
Speaker 1: woke e t F. It's not. I have I have
14:18
Speaker 1: literally no idea why the well, Actually, my best guess
14:22
Speaker 1: is in fairness, my book was called woking. I wrote
14:24
Speaker 1: that in a personal capacity. So maybe people want to
14:27
Speaker 1: push this narrative together for a headline, but for Stripes purposes,
14:31
Speaker 1: our goal is to focus companies on excellence. There's nothing
14:35
Speaker 1: woke or anti woke about it. And you know what,
14:37
Speaker 1: I think that the E s G movement may have
14:40
Speaker 1: offered some useful lessons for energy companies in the last decade,
14:43
Speaker 1: maybe not the ones that they offered as their headlines,
14:46
Speaker 1: but energy companies did overspend and over lever in the
14:49
Speaker 1: early twenty teens, saying they're investing for growth. The shale
14:52
Speaker 1: revolution was assigned shiny object. Interest rates were low, there
14:55
Speaker 1: were some mistakes made for profitability in this sector. So
14:58
Speaker 1: I think there are good lessons learned, but I think
15:00
Speaker 1: the time has come to move past that e s
15:02
Speaker 1: G investment consensus to say, you know what, fossil fuels
15:05
Speaker 1: are not going anywhere after and if American energy companies
15:09
Speaker 1: can actually invest to fill a massive looming supply, demand
15:13
Speaker 1: and balance for global energy, that can lead these companies
15:16
Speaker 1: to be more successful to trade at higher multiples. They
15:18
Speaker 1: traded a lower multiple than the SMP five hundred, certainly
15:21
Speaker 1: than US Tech today. They traded a lower multiple than
15:24
Speaker 1: they've traded over their last thirty year average. I think
15:26
Speaker 1: a b SG movement is in large part responsible for that.
15:29
Speaker 1: We can unlock value by causing these companies to behave
15:33
Speaker 1: in a way that actually takes exclusively their own financial
15:37
Speaker 1: interests over the long run into account, rather than these
15:40
Speaker 1: environmental and social agendas that have been imposed on them
15:43
Speaker 1: top down by their shareholders. And it's interesting because when
15:46
Speaker 1: I went to business school many moons ago, I learned
15:49
Speaker 1: that the responsibility of the corporation was to maximize profits
15:53
Speaker 1: for shareholders. Uh that has changed, I guess over the
15:56
Speaker 1: last six, seven, eight years. I think the Business Roundtable
15:58
Speaker 1: even came out with something saying kind of replacing shareholders
16:01
Speaker 1: with stakeholders, introducing this whole against certain elements of the
16:06
Speaker 1: E s G concept. Um, that's what I learned, and
16:08
Speaker 1: I went to the most leftist college in the entire country,
16:11
Speaker 1: exactly in Antioch. So what's the response been to your
16:14
Speaker 1: your book, this E T F. Maybe I know you've
16:17
Speaker 1: had discussions probably with investors, boards, things like that. What's
16:21
Speaker 1: the feedback. So the feedback, certainly behind closed doors, is
16:24
Speaker 1: almost universally positive. And then I think even in the
16:27
Speaker 1: open what I've been pleased about is we're starting conversations
16:30
Speaker 1: that people were not having, and I want to see
16:31
Speaker 1: those conversations happen in the boardrooms of U S energy companies.
16:34
Speaker 1: I think we're gonna catalyze. It actually spoke to the
16:37
Speaker 1: one of the largest that might be the largest energy
16:39
Speaker 1: conference in the country. It was the Intercom conference in
16:41
Speaker 1: Denver earlier this week. It was a room full of
16:44
Speaker 1: oil and gas ceo s. I don't think it's because
16:47
Speaker 1: of the quality of my speech, but I got a
16:48
Speaker 1: standing ovation at the end of the speech, which actually mystified.
16:51
Speaker 1: There was a reporter in the room who tweeted about this,
16:52
Speaker 1: who said, wait a minute, why are the same oil
16:55
Speaker 1: executives who told me that they believe in their E
16:57
Speaker 1: S G principles giving a standing ovation to Vec ramist
17:00
Speaker 1: Amy speech because she, I think misunderstood it to be
17:02
Speaker 1: anti E s G. I think the things she missed
17:04
Speaker 1: is we're talking about moving forward past the E s
17:08
Speaker 1: G investment consensus to meet an important human need. We
17:11
Speaker 1: have a massive energy shortage, a supply demand imbalance that
17:16
Speaker 1: isn't just short term. This isn't going away because systematic
17:20
Speaker 1: underinvestment in production is a multi year peycle, not being
17:25
Speaker 1: an energy When I see these energy prices going higher
17:27
Speaker 1: and higher and higher, that yes, come back a little bit.
17:29
Speaker 1: I see what's going on in Ukraine and Germany and
17:31
Speaker 1: the and the energy crisis they're having in Europe, which
17:34
Speaker 1: is going to get even worse this winter. Mike's dumb
17:37
Speaker 1: question is like, just go build some more refineries on
17:39
Speaker 1: the Gulf coast and we'll crank all this stuff out.
17:42
Speaker 1: It would you really do that? In this regulatory environment
17:45
Speaker 1: that my own president goes to Saudi Arabia before he
17:47
Speaker 1: goes to Texas, Well, you know what it's it's it's
17:50
Speaker 1: really interesting. So I think that there's there's two shackles
17:52
Speaker 1: on the U s energy industry. One is imposed by policymakers.
17:55
Speaker 1: The second is imposed by lowercase p policymakers through the
17:58
Speaker 1: E s G movement in the boardroom. I'm actually optimistic
18:01
Speaker 1: on the first of those. So here's something that I
18:03
Speaker 1: think most market participants have not caught up to yet.
18:05
Speaker 1: But it was a big deal West Virginia versus e
18:08
Speaker 1: p A. I personally think it was the most important
18:10
Speaker 1: Supreme Court case on this year's docket, which found that
18:13
Speaker 1: one of the regulations imposed by the e p A
18:15
Speaker 1: on the coal industry was actually unconstitutional because it caused
18:20
Speaker 1: the EPA basically exceeded the scope of the statutory authority
18:23
Speaker 1: granted to it by Congress. If that was unconstitutional, then
18:26
Speaker 1: most of the regulations on the U. S energy industry
18:29
Speaker 1: are also unconstitutional. And guess what the one way to
18:32
Speaker 1: fix that is for Congress. In the spring Court basically
18:34
Speaker 1: implies this Congress could pass the law and make it
18:36
Speaker 1: part of the law. That's not gonna happen after what's
18:38
Speaker 1: coming this November, after the changing political wins in this country.
18:41
Speaker 1: So on the political and regulatory side, I think what
18:44
Speaker 1: people see as a headwind amongst investors could actually be
18:46
Speaker 1: a tail wind for the sector that leaves the real
18:49
Speaker 1: remaining obstacle to be in the boardrooms imposed by e
18:52
Speaker 1: SG linked asset managers. That's what we're hoping to fix
18:54
Speaker 1: it strip. By the way, a lot of people on
18:56
Speaker 1: the left also think that was the most important ruling,
18:58
Speaker 1: but they're very much ended it right. Well, Congress is
19:02
Speaker 1: going to have to make laws for every single regulation
19:06
Speaker 1: rather than uh, you know, giving that power to a
19:10
Speaker 1: board like the body like the e p A exactly.
19:13
Speaker 1: Let let me ask quickly, how difficult is it to
19:15
Speaker 1: go up against the goliath in the E t F
19:17
Speaker 1: industry like black Rock, which does have some pretty strong
19:19
Speaker 1: E s G and sustainability principle. But we'll find out.
19:21
Speaker 1: It's it's it's we announced it yesterday. I will say
19:24
Speaker 1: that the folks of the New York Stock Exchange told
19:26
Speaker 1: me it was one of the strongest, if not strongest
19:28
Speaker 1: launch of its kind in years that they had seen.
19:30
Speaker 1: And I think that again, I don't take credit for that.
19:32
Speaker 1: I think that this is this is a demand that
19:34
Speaker 1: already exists amongst capital owners in this country, amongst everyday
19:38
Speaker 1: citizens whose money is today being invested by large asset
19:41
Speaker 1: managers who are delivering messages to the energy company's boardrooms
19:45
Speaker 1: that most of those everyday citizens disagree with. So that's
19:47
Speaker 1: what we have going for us is I think the
19:49
Speaker 1: majority of capital owners, the majority of capital does not
19:51
Speaker 1: want the black Rock message delivered to the boardrooms. They
19:54
Speaker 1: want the Strive message, I believe, delivered to the boardrooms. Now.
19:56
Speaker 1: The question is there's a lot of plumbing to do
19:58
Speaker 1: to make sure that capital can actually flow through vehicles
20:01
Speaker 1: like ours that actually speak on their behalf. It's up
20:03
Speaker 1: to us to see if we can do it. All right,
20:04
Speaker 1: Thanks so much for joining us here in our studios.
20:07
Speaker 1: Here the fact. Ramiswanny, co founder and executive chairman of
20:11
Speaker 1: Strive Asset Management. I'm not a gamer, Matt, you probably
20:18
Speaker 1: know that. But our next guest is going to give
20:21
Speaker 1: us a kind of lay of the land. What's going
20:22
Speaker 1: on in the world. I used to be a big
20:24
Speaker 1: gamer back in the day. I have. I've bought every
20:27
Speaker 1: single Call of Duty release and spent hundreds of dollars
20:32
Speaker 1: in the game up until what age, up until I
20:35
Speaker 1: had a baby, which was October. That's when I stopped
20:40
Speaker 1: putting in three to four hours the world. You're forty
20:43
Speaker 1: eight years of age, and but I will play until
20:47
Speaker 1: the end of my life. I love playing called. Mark Alfinbain,
20:50
Speaker 1: CEO of X one e Sports, joins us. Mark, give
20:54
Speaker 1: us a sense of kind of where we are in
20:56
Speaker 1: the gaming market trends, you know, kind of prependemic, going
21:00
Speaker 1: into the pandemic and now coming out of the pandemic. Yeah,
21:04
Speaker 1: thanks for having me here today and just going back,
21:06
Speaker 1: if you held onto some of those video games you're
21:08
Speaker 1: talking about, they may actually be worth some money right now.
21:12
Speaker 1: A lot of these video games self for like thousands
21:15
Speaker 1: of dollars on eBay, so you might want to hold
21:17
Speaker 1: onto the I've still got Duke Newcomb um for the
21:21
Speaker 1: Nintendo sixty four. I've still got Kid Chameleon, which is
21:24
Speaker 1: one of my all time favorite games um as well
21:27
Speaker 1: as obviously all the Mario titles. YEA, keep from a
21:31
Speaker 1: good condition and pass them down. But yeah, the the
21:34
Speaker 1: you know, the industry really significantly increased. If we looked
21:38
Speaker 1: at the global value of the industry, just before COVID
21:42
Speaker 1: in around two thousand nineteen, the industry was around a
21:44
Speaker 1: hundred and thirty billion dollar industry, and by about two
21:48
Speaker 1: one it had grown to a hundred and eighty billion
21:50
Speaker 1: dollar industry. As you could imagine, um generations of people
21:54
Speaker 1: were at home and we're you know, spending a lot
21:57
Speaker 1: of time doing things like you know, looking at TikTok
21:59
Speaker 1: videos and playing video games. So it generated a significant, uh,
22:04
Speaker 1: you know, sustainable bump for overall video game usage. I
22:08
Speaker 1: have to say, during the pandemic, I got this um
22:11
Speaker 1: high school friends chat group and we're all, you know,
22:16
Speaker 1: some of my buddies were paying like a grand for
22:18
Speaker 1: a Microsoft Xbox or for the PlayStation five because you
22:22
Speaker 1: couldn't just you couldn't find them anywhere. Is that demand?
22:25
Speaker 1: Has that fallen and has the supply caught up it? Actually,
22:30
Speaker 1: interestingly it hasn't. So the you know, if you can
22:33
Speaker 1: find a PlayStation five right now, that's something you may
22:36
Speaker 1: also want to want to get your hands on. They've
22:38
Speaker 1: been very very elusive to find. Probably last year, I
22:42
Speaker 1: would say we're one of the largest Christmas gifts out there,
22:45
Speaker 1: if you can, if you can get them. But between
22:48
Speaker 1: the consoles, the other thing really moving up on popularity
22:52
Speaker 1: is the virtual reality gaming we're seeing with the Oculus Quest,
22:57
Speaker 1: and that's almost like the next revolution of gaming as
22:59
Speaker 1: the aiming industry reinvents itself. Can you play legit games
23:03
Speaker 1: with that? I mean can you really, um have a
23:07
Speaker 1: first person shooter that works well with the oculus there
23:10
Speaker 1: are you know, there's a game up there called Population One,
23:13
Speaker 1: which is a multiplayer game. UM and it's really the
23:16
Speaker 1: new form of social you know, kind of social communication.
23:20
Speaker 1: I would say, jumping on these multiplayer games, especially if
23:23
Speaker 1: you could imagine you're in the same virtual reality environment
23:27
Speaker 1: and your friends are, you know, people around the world.
23:29
Speaker 1: It's it's a really incredible experience. It's it's come a
23:32
Speaker 1: little bit since the days of Atari in the early eighties.
23:34
Speaker 1: I would say, I gotta say that's how I mean.
23:37
Speaker 1: I've I was always into Atari and Nintendo and Sega.
23:40
Speaker 1: But when I first got a job and moved to
23:43
Speaker 1: Germany out of college, all my friends were scattered around
23:46
Speaker 1: the world and we couldn't really afford to call each other.
23:49
Speaker 1: So what we did is we all got xboxes, we
23:51
Speaker 1: all got Halo, and we would just sit in Halo
23:54
Speaker 1: in the chat, you know, and like shooting at each other. Well,
23:57
Speaker 1: it's also incredibly if you think about during COVID couldn't
24:00
Speaker 1: really see people. People were are restricted, especially in certain
24:04
Speaker 1: parts of the world, and it's really was the only
24:06
Speaker 1: way to feel like you were with people during this time,
24:09
Speaker 1: which probably is the reason why the industry grew so
24:12
Speaker 1: tremendously during that cult period. Alright, Mark, I see on
24:16
Speaker 1: your CV that you have a bachelor's in business from
24:18
Speaker 1: the University of Manitoba. And to be honest to just
24:21
Speaker 1: to show my ignorance, I did not know where Manitoba was.
24:25
Speaker 1: I know it's in Canada, but wearing Canada. So I
24:27
Speaker 1: go to my Google Maps. It's kind of right smack
24:29
Speaker 1: in the middle of Canada. It's home to Winnipeg and
24:32
Speaker 1: it's also home to Lake Winnipeg. Do people kind of
24:36
Speaker 1: is that a busy like summer place to go, like Winnipeg. Yeah, yeah,
24:40
Speaker 1: if you're if you're living in Winnipeg right now, chances
24:42
Speaker 1: you would not be in your home during the summertime.
24:45
Speaker 1: You're going to be at one of the lakes. Lake
24:47
Speaker 1: Winnipeg is a nice place called Grand Beach Um also
24:50
Speaker 1: a home actually of the NHL's Winnipeg jeff A Story franchise.
24:56
Speaker 1: But the one thing I would say about Winnipeg, I
24:58
Speaker 1: think it might literally be the coldest place in the world,
25:02
Speaker 1: with the population of over five thousand people. I heard Philip, Well,
25:08
Speaker 1: so when you guys, have your fifteen minutes of summer.
25:10
Speaker 1: You've got to get out to Lake Winnipeg. It is
25:13
Speaker 1: so I think it's literally three months and you're really
25:16
Speaker 1: maximizing that time. So a lot of out there barbecues. Um,
25:20
Speaker 1: you do get de sensipized with the cold a little bit.
25:22
Speaker 1: So if you come anywhere south of the border, winter
25:25
Speaker 1: is like summer too. All right, we gotta get you
25:28
Speaker 1: back on mar because I want to know about the
25:30
Speaker 1: the next sort of evolutions that are coming in the
25:33
Speaker 1: gaming industry. But we don't have any more time. So
25:35
Speaker 1: Mark elfen Bind, their CEO of x one E Sports,
25:40
Speaker 1: do a remote in Manitoba. The tick, yeah, we should
25:42
Speaker 1: do that. We should go up there. The ticker is
25:44
Speaker 1: this is on the Canadian Stock Exchange X one so
25:48
Speaker 1: x O n E. That's some cool stuff. So yeah,
25:51
Speaker 1: I want to get to the sports next time we
25:53
Speaker 1: chat with them, because that's actually big business there. We're
25:59
Speaker 1: gonna talk about some this near and dear to my
26:01
Speaker 1: hard pol And I'm pretty excited about the story. Um,
26:05
Speaker 1: it's probably a big deal for you too, being a
26:07
Speaker 1: calms guy. Um, but the reporter we're gonna bring in
26:11
Speaker 1: he he dissed me pretty hard twice yesterday. Jerry Smith
26:15
Speaker 1: is a media reporter for Bloomberg News. One of them.
26:17
Speaker 1: He wrote the story about CBS and NBC vying for
26:24
Speaker 1: the Big Ten um getting it from ESPN. And Jerry,
26:29
Speaker 1: you referred to the Buckeyes as Ohio State University, but
26:35
Speaker 1: you know it's the Ohio State University. Boy, And I
26:38
Speaker 1: can only imagine you did this because you're a Northwestern guy. Yeah.
26:43
Speaker 1: I just wanted to apologize personally to you for that
26:46
Speaker 1: and and I really do hope you forgive me. I
26:49
Speaker 1: even messaged you and you didn't message back. Busy guy.
26:53
Speaker 1: He's he's got big media moguls. He talks to Jerry
26:56
Speaker 1: to me, the news was here the Big ten. You know,
27:00
Speaker 1: Big ten has been on ESPN for a very long time,
27:04
Speaker 1: and the ESPN kind of walked away. That's what shocked me.
27:07
Speaker 1: What's going on there? Yeah, so they walked away from
27:11
Speaker 1: the bidding, and it's it's a big deal because this
27:14
Speaker 1: is a relationship that ESPN has had with the Big
27:16
Speaker 1: Tent for about four decades UM, and the price just
27:20
Speaker 1: got too high for them. Um. So what you know,
27:24
Speaker 1: what we expect to see now is that Big ten sports,
27:28
Speaker 1: with college football being the big draw, are going to
27:31
Speaker 1: be on Fox, CBS, and NBC. Fox is going to
27:35
Speaker 1: have that noon window, CBS will have a three thirty window,
27:38
Speaker 1: and and UM an NBC, which really to this point
27:42
Speaker 1: is just mostly broadcast Notre Dame football, they'll have the
27:45
Speaker 1: evening window in prime time. So, I mean, I've covered
27:49
Speaker 1: the Walt Disney Company for decades from a financial analyst perspective,
27:52
Speaker 1: I I can't recall them walking away from too many
27:56
Speaker 1: marquee events. Now the Big ten here, we've got a
28:00
Speaker 1: cricket league, which I know that's a big fan of
28:02
Speaker 1: in India. I'm sorry, the India Cricket League. Um they
28:05
Speaker 1: walked away from that? Is? Well? Here is it? Are
28:09
Speaker 1: things changing at ESPN where they tightening their belts? Yeah, well,
28:13
Speaker 1: I think a couple of things are happening. You. You're right.
28:16
Speaker 1: They are under pressure from Wall Street to UM you know,
28:20
Speaker 1: show more profits, particularly in streaming, and we saw that
28:22
Speaker 1: in UM some of the moves they're making, uh in
28:25
Speaker 1: their earnings yesterday where they're raising prices for their streaming services. Uh.
28:30
Speaker 1: So they are being a little more selective about what
28:33
Speaker 1: type of sports rights. Uh they go after and as
28:36
Speaker 1: you know, sports rights to keep getting more expensive. Uh.
28:39
Speaker 1: The other thing to think about is ESPN is still
28:42
Speaker 1: has a lot of sports rights, and if you think
28:45
Speaker 1: about college they still have. They actually going to take
28:48
Speaker 1: over the SEC and a couple of years from CS
28:52
Speaker 1: and that's that's huge. I mean, that's arguably more popular
28:55
Speaker 1: than the Big Ten in terms of college football. And
28:57
Speaker 1: then you've got you know, they have the rights to
28:59
Speaker 1: the a c S, the Big Twelve, the Pack twelve,
29:02
Speaker 1: which are going to be renewing renegotiating their rights soon.
29:05
Speaker 1: So I would not say that ESPN is walking away
29:09
Speaker 1: from college sports. They're very much uh still a major
29:12
Speaker 1: college sports broadcaster. But they did decide that the Big
29:16
Speaker 1: Ten is going to be too um, you know, just
29:18
Speaker 1: too much too expenses for them. How about just broadly
29:21
Speaker 1: speaking about sports rights fees, Jerry, you can you cover
29:23
Speaker 1: a lot of these all these big media companies with
29:26
Speaker 1: court cutting at all and streaming taking a bigger percentage
29:30
Speaker 1: of viewership. How did the big media companies justify spending
29:36
Speaker 1: ever increasing amounts on sports rights when their audience is
29:39
Speaker 1: really in decline because of court cutting. Yeah, I mean,
29:43
Speaker 1: I think we're the media companies are really going to
29:46
Speaker 1: start to feel the squeeze here going forward. I mean,
29:48
Speaker 1: on one hand, they're trying to protect the cable bundle
29:51
Speaker 1: and live sports is really the biggest reason why people
29:55
Speaker 1: are still subscribing to cable. But as you point out
29:58
Speaker 1: that there's cable subscriptions are really um. Cord cutting is accelerating,
30:04
Speaker 1: and the fees that these media companies get from cable
30:07
Speaker 1: subscribers is continuing to go down at the same time
30:10
Speaker 1: that they're paying more and more for these sports rights.
30:13
Speaker 1: Uh So, yeah, it's um. That's part of why you're
30:16
Speaker 1: starting to see companies like ESPN be a little more
30:18
Speaker 1: selective because the money from the cable bundle UM is
30:22
Speaker 1: not supporting it's not going to support these ever escalating
30:25
Speaker 1: rights fees the way they used to. It hurts me
30:28
Speaker 1: to think of the SEC, well just in general, but
30:32
Speaker 1: as a better, more popular football company. It's close. No,
30:36
Speaker 1: it's I think it's it's not good what's happening. The
30:39
Speaker 1: Big Town was three and three against the SEC last season.
30:43
Speaker 1: But I mean, Jerry, one of the things that we've
30:45
Speaker 1: seen is you know, these super the expansion Jerry, how
30:49
Speaker 1: how how much were the realignment really so you've got
30:51
Speaker 1: USC and U c l A going into the big
30:53
Speaker 1: tent exactly. And I mean it just kind of says, hey, Jerry,
30:56
Speaker 1: you're awake Forest undergrad. Like if you're the SEC for football,
31:01
Speaker 1: You're like, well, if I'm not in the SEC and
31:03
Speaker 1: I'm not in the Big Ten, where am I. I
31:07
Speaker 1: think we're seeing a real consolidation in both UM college
31:12
Speaker 1: sports and college sports broadcasting. I think what you're starting
31:15
Speaker 1: to see now is that the Big Ten and the
31:18
Speaker 1: SEC are the super conferences, and ESPN and Fox are
31:23
Speaker 1: the broadcasters that have the rights. I mean, you know,
31:25
Speaker 1: Fox has UM, you know, part owner of a Big
31:28
Speaker 1: ten network, and they've got UM They've renewed their Big
31:31
Speaker 1: Ten rights deal. And then ESPN as as chose in
31:34
Speaker 1: the SEC, so um, you know, and we I think
31:37
Speaker 1: we're going to start to see more schools that continue
31:41
Speaker 1: to go towards these bigger super conferences and UM it's
31:44
Speaker 1: really a rivalry that a lot of people feel like
31:47
Speaker 1: between ESPN and Fox here alright. So I mean I
31:51
Speaker 1: think that the question for a lot of folks is
31:54
Speaker 1: is it you know, if I'm a I don't know,
31:56
Speaker 1: the University of Colorado, If I'm Awake Force or even
31:59
Speaker 1: a Duke. I mean, it just seems like if I'm
32:01
Speaker 1: not in one of these big power power conferences, I'm
32:05
Speaker 1: going to risk out on some of the losing the
32:07
Speaker 1: growth in the TV money which is kind of driving
32:09
Speaker 1: all of this. Um. I mean to put USC and
32:12
Speaker 1: U c l A to leave that Packed twelve or
32:14
Speaker 1: Pack ten, whatever it's called, it just seems sacrilege to me.
32:18
Speaker 1: And you're not gonna but it's all about the money, yeah,
32:20
Speaker 1: to eat TV money. So Jerry's just a trend that's
32:23
Speaker 1: gonna continue. Do you think. I think the big test
32:26
Speaker 1: will be the next big college right sports rights deal,
32:30
Speaker 1: and that's going to be the Pack twelve. And then
32:32
Speaker 1: I think after that will be the Big twelve and
32:34
Speaker 1: we'll have to see, um, you know, whether the big
32:37
Speaker 1: broadcasters like ESPN are are willing to u spend um
32:42
Speaker 1: more and more money for these conferences that have lost
32:46
Speaker 1: some really popular teams. And then and then schools like
32:49
Speaker 1: Duke or Wake Forest aren't going to be able to
32:52
Speaker 1: spend as much money on the program, right. So I mean,
32:54
Speaker 1: I mean, at least Duke has the hoops, which really
32:56
Speaker 1: drives the athletics. Well, wait for great football team they
33:00
Speaker 1: had for such how many people go there? Like a
33:02
Speaker 1: fifty people go to week for Erry Head Wait for
33:04
Speaker 1: you got thirty seconds Stary to give us breakdown wake
33:06
Speaker 1: Forest football? Why are they so good? You know, you'd
33:09
Speaker 1: have to have somebody smarter than me. But I feel
33:12
Speaker 1: like wake Forest has always um hunched above its weight.
33:15
Speaker 1: I mean when I was there, there were four thousand
33:17
Speaker 1: undergrads and uh I was there when Chris Paul was there. Yeah,
33:20
Speaker 1: we had a nice run in basketball. Um so yeah,
33:23
Speaker 1: the conference is still is still strong. But um, you know,
33:26
Speaker 1: I think we're seeing with these sports right deals at
33:29
Speaker 1: Big ten and SEC really dominate, all right, Jerry good,
33:32
Speaker 1: good stuff. Jerry Smith excellent media reporter for Bloomberg News,
33:35
Speaker 1: phoning it in. I will note today thanks for listening
33:40
Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen
33:44
Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.
33:48
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three.
33:53
Speaker 1: Pet On false Sweeney I'm on Twitter at pt Sweeney.
33:55
Speaker 1: Before the podcast, you can always catch us worldwide at
33:58
Speaker 1: Bloomberg Radio four