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The Fed, China, and ETFs (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
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Speaker 1: with essential market moving news. Find 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. Looking at my e
0:22
Speaker 1: c O go function for the economic calendar, lots of
0:25
Speaker 1: stuff going on. We got the I s M manufacturing
0:28
Speaker 1: stuff tomorrow, the jolts number still looking at a ten
0:32
Speaker 1: million uh job open to go figure that fed me
0:35
Speaker 1: minutes tomorrow. We got initial claims Thursday. Then of course
0:39
Speaker 1: the non farm pay rolls, the big labor and number
0:43
Speaker 1: comes out Friday. Still look for two adds down two
0:46
Speaker 1: hundred sixty three thousand the week before, so certainly slowing,
0:49
Speaker 1: but still pretty healthy. But that's a lot of stuff
0:52
Speaker 1: for IRA Jersey's filled to reserve to kind of digest there.
0:55
Speaker 1: So our Jersey joins as Chief US Interest Rate Strategies
0:58
Speaker 1: for Bloomberg Intelligence. I what do you think that the
1:00
Speaker 1: FEDS really looking at these days as they think about
1:03
Speaker 1: their next meeting and their next messaging here for this market. Yeah,
1:08
Speaker 1: so I think the messaging that you just mentioned, Paul
1:11
Speaker 1: is probably going to be more important to the direction
1:13
Speaker 1: of treasury yields than is UM. You know, what they
1:16
Speaker 1: do at the next meeting, whether they go twenty five
1:19
Speaker 1: or fifty at the next meeting, probably is less relevant
1:22
Speaker 1: than UM them describing what they're react. It's the market
1:28
Speaker 1: is pricing fifty. I suspect, uh it it will be fifty,
1:31
Speaker 1: but UM. But but there's a non trivial chance that
1:35
Speaker 1: they could do less. So for example, when you look
1:37
Speaker 1: at some of those data that are coming out this week, UM,
1:41
Speaker 1: you know, the Fed will get get the full run
1:42
Speaker 1: of this month's data. UM, the I S M new
1:45
Speaker 1: orders numbers which we get tomorrow are That's my favorite
1:49
Speaker 1: indicator for the future path of the economy real right
1:53
Speaker 1: it Yeah, it is for a number of reasons. One
1:56
Speaker 1: is that it tends to be the best predictor of
1:59
Speaker 1: what the overall business sector is going to do, not
2:02
Speaker 1: necessarily the job sector, but but certainly the um the
2:05
Speaker 1: business sector. And we're at the level right now where
2:09
Speaker 1: we're either showing a mid cycle slowdown like we had
2:12
Speaker 1: we had in or where if we go lower, we're
2:16
Speaker 1: going to be near recessionary levels. So so I think
2:19
Speaker 1: that that can be a really important indicator if we
2:22
Speaker 1: if it stays at forty seven ish, then that's fine.
2:24
Speaker 1: If it goes below forty five, that's typically recession type levels. Um.
2:29
Speaker 1: So I think that there's going to be some interesting,
2:31
Speaker 1: you know, fireworks that could come depending on how that
2:34
Speaker 1: data shows shows tomorrow. And of course the jobs numbers, right,
2:37
Speaker 1: we'll be watching wages will be right now, Um, the
2:41
Speaker 1: FED is focused on services wages and um and and
2:45
Speaker 1: that's going to be a key focus then for us
2:48
Speaker 1: and for the rest of the market is do those
2:49
Speaker 1: continue to run at six percent year on year? And
2:53
Speaker 1: if they do, then you know, that's when a fifty
2:55
Speaker 1: basis point it's probably I don't want to say assured,
2:58
Speaker 1: but certainly more like if if we do to get
3:01
Speaker 1: those kind of numbers, I mean, twenty five basis points
3:03
Speaker 1: would be pretty weak sauce that would be a signal
3:06
Speaker 1: that this is no vulgar Powell we're watching right, more
3:10
Speaker 1: of Burns and Powell. Well, the way that I look
3:13
Speaker 1: at it, mat is is the FED is trying to
3:15
Speaker 1: get into calibration mode, right and and because they can
3:19
Speaker 1: go more and they can still do the same amount
3:21
Speaker 1: if they go fifty or twenty five, they just might
3:24
Speaker 1: have to go an extra five kind of at the end, right. So,
3:27
Speaker 1: so so they know at some point over the next
3:30
Speaker 1: six months they want to stop hiking and are likely
3:32
Speaker 1: to stop hiking. You just look at the dots. You
3:34
Speaker 1: just you know, you hear what J. Powell and other
3:37
Speaker 1: members of the feders saying. And the FED is interested
3:42
Speaker 1: in getting towards the end and waiting and seeing if
3:45
Speaker 1: the hikes that they've already done feed through the economy. Right.
3:48
Speaker 1: We always talk about long and variable legs. So we're
3:50
Speaker 1: at the point where, you know, if they if they
3:52
Speaker 1: hike another seventy five or take another hundreds, so maybe
3:55
Speaker 1: five for example, by by May, then uh, then they're
4:00
Speaker 1: in a wait and see mode. And given that just
4:02
Speaker 1: about every forecaster thinks that the second half of the
4:04
Speaker 1: year we're going to have, you know, the near recession.
4:07
Speaker 1: If not in recession, then you know, they can probably
4:10
Speaker 1: say job done in that situation, because recessions typically come
4:15
Speaker 1: with significantly lower inflation, right, but also typically with tighter
4:20
Speaker 1: uh financial constraints, right, And we don't have that. So Uh,
4:26
Speaker 1: giving us twenty five basis point hikes isn't exactly going
4:28
Speaker 1: to get us there? By the way, I was wondering,
4:31
Speaker 1: you know, we were at nine c p i um
4:34
Speaker 1: what in June last year, and if the Fed gets
4:38
Speaker 1: us closer to two, that would be a drop of
4:42
Speaker 1: seven percentage points in headline cp I scoured the terminal
4:47
Speaker 1: for the last time we saw that happen such a
4:49
Speaker 1: huge drop in such a short period of time, and
4:52
Speaker 1: it was from July of two thousand eight to July
4:55
Speaker 1: of two thou nine. Uh, you don't want to be
4:58
Speaker 1: in that situation, do you? Or or do they? Well,
5:02
Speaker 1: it's so you know, they don't necessarily want to be
5:05
Speaker 1: a two percent but you know, why do you get
5:06
Speaker 1: to two percent? Right? If you get to two percent
5:08
Speaker 1: because oil prices fall to thirty bucks of barrel, then
5:12
Speaker 1: that's a great situation for the Fed, right because you
5:14
Speaker 1: have inflation. Inflation expectations would likely be significantly lowered. At
5:18
Speaker 1: the same time, that's kind of a tax cut on
5:20
Speaker 1: the consumer, and the consumer would then have more discretionary spending,
5:24
Speaker 1: you know, non energy discretionary spending to to help boost
5:27
Speaker 1: the economy. So so that's a scenario where you might
5:30
Speaker 1: actually um with lower energy prices, where you might actually
5:34
Speaker 1: avoid a recession. UM. You know that being said, I
5:37
Speaker 1: think that that seems pretty unlikely that you get that
5:39
Speaker 1: type of move in in energy prices. And and because
5:43
Speaker 1: of that, um, you know, a fault to two percent
5:45
Speaker 1: would mean that you'd have to have wages go down
5:48
Speaker 1: or massive marching compression, particularly in the services sector. UM.
5:52
Speaker 1: And that that's not necessarily public companies, right, because most
5:55
Speaker 1: services are provided by small businesses, not public companies. Um.
5:59
Speaker 1: And and that means things like proprietors income, which which
6:02
Speaker 1: we also look at for for the health of the
6:05
Speaker 1: economy overall, would have to would have to shrink massively.
6:09
Speaker 1: And and you know that that could still mean a recession. Right,
6:12
Speaker 1: So you can wind up with a situation where you
6:15
Speaker 1: do get significantly slower consumer spending, you get prices falling
6:20
Speaker 1: in some sectors. And keep in mind, prices in the
6:22
Speaker 1: good sector are already falling um now, not in every sector,
6:26
Speaker 1: but in many sectors. So with good prices going down,
6:30
Speaker 1: the question now is how quickly do services prices UH
6:33
Speaker 1: stop increasing? And um, you know it's hard to it's
6:36
Speaker 1: hard to know that and that's going to be driven
6:38
Speaker 1: again by by the wage data that we get this Friday. Hey,
6:42
Speaker 1: is quantitative tightening still a thing? Like if I'm a
6:45
Speaker 1: mortgage backed security trader or government bond trader, Morgan Stanley,
6:49
Speaker 1: is the Fed call me up to buy my bonds? Um?
6:53
Speaker 1: Well they are a little bit, but only well not
6:55
Speaker 1: not mortgages for sure. For treasuries, they do buy some
6:58
Speaker 1: treasuries on refunding months, so they'll buy some treasuries in
7:02
Speaker 1: UH at auction UH in February because they have more
7:07
Speaker 1: UM maturing treasuries in February than UH than they are
7:12
Speaker 1: are allowing to run off in the balance sheet. But
7:13
Speaker 1: the mortgages were not even close because there's very very
7:17
Speaker 1: few refinancings going on right now because mortgage rates are
7:21
Speaker 1: so high compared to the mortgage rates that most people have,
7:24
Speaker 1: So there's significant volatility in that market, in part because
7:28
Speaker 1: there's not a lot of supply, which is a little
7:30
Speaker 1: bit ironic, but it's also the UM. The Fed isn't
7:34
Speaker 1: buying everything that's cheap, so UM, you're at You're at
7:38
Speaker 1: a point now where you're going to see continued volatility
7:41
Speaker 1: I think in mortgage spreads. UM but the mortgage rate
7:44
Speaker 1: probably is peaked, um, both in terms of spread and
7:48
Speaker 1: also in rate, and that's due in at least in
7:51
Speaker 1: our view, because tenure treasury yields we think peaked around
7:55
Speaker 1: that that three three point facing me four point um,
7:59
Speaker 1: and we're out likely to get back up there um.
8:01
Speaker 1: So we're we're looking for mortgage rates kind of stabilize here.
8:05
Speaker 1: But that's still you know, there's still a massive sticker
8:08
Speaker 1: shot going on. People aren't used to paying six or
8:10
Speaker 1: six and a half percent. I always joked because twenty
8:13
Speaker 1: five years ago when I got my first mortgage, I
8:15
Speaker 1: had a seven percent mortgage. So for me, it's like, okay,
8:17
Speaker 1: this is kind of like, you know, the high end
8:19
Speaker 1: of the range, back to square one exactly. Hey, you know,
8:23
Speaker 1: when Pale came into my consciousness, it was probably in
8:26
Speaker 1: the mid seventies when he came over for the New
8:28
Speaker 1: York Cosmos. But as we think about look back on
8:31
Speaker 1: his life, holy cow, he had a Hall of Fame
8:33
Speaker 1: career the way before that, with all the World Cup
8:36
Speaker 1: stuff in his in his club stuff. But I'm just
8:38
Speaker 1: looking at some live footage here on the Bloomberg video
8:41
Speaker 1: screen of Brazil as they continue to more in Pale,
8:43
Speaker 1: but wow, what a name within the sport. Yeah, he was,
8:46
Speaker 1: And I have to say his playing for the Cosmos
8:49
Speaker 1: is the reason why I am so into soccer because
8:52
Speaker 1: it came to my little tiny soccer club on Long
8:54
Speaker 1: Island where I played four back in the nineteen seventies
8:57
Speaker 1: six or seventy seven, and did some things with a
9:00
Speaker 1: ball that just amazed us and shocked us. And I
9:02
Speaker 1: just fell in love with the sport in part because
9:04
Speaker 1: of what Paley did in front of us. You know,
9:06
Speaker 1: forget the fact that like Franz Beckenbauer was also there,
9:08
Speaker 1: I had no idea who he was, but Pale had
9:11
Speaker 1: such a big personality and his his fame transcended the
9:14
Speaker 1: sport right where in the nineteen seventies, you know, no
9:18
Speaker 1: one could name any professional soccer player in the United States,
9:21
Speaker 1: but they could all name Pale, right, So I think
9:24
Speaker 1: that that was just a massive uh. He was just
9:26
Speaker 1: a massive figure in the sport and helped grow the
9:28
Speaker 1: sport both here and abroad. Um created, you know, purveyor
9:32
Speaker 1: of the beautiful game, which which Brazil to this day
9:35
Speaker 1: tries to continue to live up to his legacy and
9:37
Speaker 1: beloved as well right and without the kind of tarnished
9:41
Speaker 1: You know, other soccer greats have been involved in taking
9:46
Speaker 1: bribes for putting the World Cup in places it doesn't belong.
9:50
Speaker 1: I want to mention any names, or or doing drugs, right,
9:54
Speaker 1: so and and you know, even at well, I was
9:56
Speaker 1: thinking of Beckenbauer. Yeah, I was thinking of Diego Maradonna.
10:01
Speaker 1: But um, yeah, I think you know Pale. You know,
10:04
Speaker 1: Pale was a class act. And I think just about
10:06
Speaker 1: everyone who's ever so, Chef Messing, who has been a
10:10
Speaker 1: commentator for the New York Red Bulls for a very
10:12
Speaker 1: long time. Um, and and who's who who I know, Um,
10:16
Speaker 1: you know he he stayed in touch with Pale. Pale
10:19
Speaker 1: stayed in touch with Bob Smith, a guy from down
10:21
Speaker 1: here in Central Jersey, um, who is also a professional
10:24
Speaker 1: soccer player. Pale kept in touch with all these guys
10:26
Speaker 1: and was just everyone that I've talked to about Pale
10:29
Speaker 1: just says he's such a regular guy. You know, he's
10:32
Speaker 1: super famous. Good stuff. I were Jersey Chief US Interest
10:34
Speaker 1: rate strategist. Thanks so much for joining us. Well. The
10:40
Speaker 1: story over the last several weeks has been the reopening
10:43
Speaker 1: of China, the dropping, if you will of the zero
10:46
Speaker 1: COVID policy and the pace at which China is reopening,
10:50
Speaker 1: taking a lot of people around the world by surprise.
10:53
Speaker 1: What does it mean for the global economy? What does
10:55
Speaker 1: it mean for the people of China? Um, just a
10:57
Speaker 1: Bloomberg story out here today China's biggest cities see subway
11:01
Speaker 1: use rebound as COVID peaks. We want to check in
11:05
Speaker 1: with all things China. When we want to do that,
11:07
Speaker 1: we check in with Leland Miller. He's the CEO of
11:09
Speaker 1: China beige Book International, just extraordinary data analysis on all
11:14
Speaker 1: things China. So, Leland, We've had a couple of weeks
11:17
Speaker 1: here where we've had been able to digest you know,
11:20
Speaker 1: this this reopening of China. What do you think are
11:23
Speaker 1: some of the key takeaways here as they continue to
11:26
Speaker 1: reopen and pretty aggressively. Yeah, well, there's certainly just letting
11:30
Speaker 1: it rip. Um. You know, there's there's several different stories
11:33
Speaker 1: and they focus on on different parts of this of
11:36
Speaker 1: this so called recovery. Uh. The first is, you know
11:39
Speaker 1: what happened in Q four, what happened specifically in December,
11:42
Speaker 1: And I think everyone's come around the idea that December
11:44
Speaker 1: was very, very bad. You know, everyone was talking about reopening,
11:48
Speaker 1: but there wasn't actually reopening because everybody was hiding either
11:50
Speaker 1: getting COVID or they were hiding in their rooms trying
11:52
Speaker 1: not to get COVID. So so nothing good happened December.
11:55
Speaker 1: Our dad are some of the worst you know, we've
11:56
Speaker 1: seen in many, many, many years. Uh. Then there's a
11:59
Speaker 1: quite what's going to happen later in Q one? And
12:01
Speaker 1: I think people are optimistic that when COVID's passed, then
12:05
Speaker 1: then there was going to be a bounce back in
12:06
Speaker 1: the recovery because in the in the economy. So then
12:09
Speaker 1: the question is like what happens in January, February and March.
12:12
Speaker 1: You know, how do you time this? And I think
12:14
Speaker 1: that that's really the question market should be focusing on.
12:17
Speaker 1: There's a lot of focus on COVID peaking in the
12:19
Speaker 1: big cities right now, subway indicators, etcetera. But you're talking
12:23
Speaker 1: about a very small all be an important part of China.
12:26
Speaker 1: There's plenty of China left to left to left the
12:29
Speaker 1: infection to spread. So I think this is gonna be
12:31
Speaker 1: a slower economic recovery than people think. You know, albeit, uh,
12:35
Speaker 1: you know, the economy should be back in Q two.
12:38
Speaker 1: Well so, but as China really investable? I mean, I
12:42
Speaker 1: know the market has a very short memory, but it
12:44
Speaker 1: was only a few months ago that jack Ma was
12:47
Speaker 1: nowhere to be seen. Um, you know, if if this
12:50
Speaker 1: is a country that takes company leaders and puts them
12:55
Speaker 1: into some sort of isolation. I don't know the details
12:58
Speaker 1: of what happened there, but that isn't the only thing
13:00
Speaker 1: that we saw and the most recent incident of China
13:04
Speaker 1: interfering with investor assets. Um, what do we expect in
13:10
Speaker 1: the future. Well, obviously there's there's plenty of reason to
13:14
Speaker 1: be to be worried about investing in China. You know,
13:17
Speaker 1: you there's limited rule of law. You know, you don't
13:21
Speaker 1: always know what you're investing in. But the landscape has
13:24
Speaker 1: changed from you know, six months ago and twelve months ago.
13:27
Speaker 1: People are looking at these, you know, incredibly low valuations
13:31
Speaker 1: for Chinese stocks. They're not liking what they're seeing. Around
13:33
Speaker 1: the rest of the world. There's an emerging market investment
13:36
Speaker 1: story that people want to buy into, and there's a
13:38
Speaker 1: COVID recovery story and a pullback of COVID zero recovery story.
13:42
Speaker 1: So everyone went from being very embarished on China uninvestable
13:46
Speaker 1: to being absolutely you know, all in, let's let's do this.
13:50
Speaker 1: And it's interesting because when you talk to funds investing
13:52
Speaker 1: in China, they say, we don't really care what happens
13:55
Speaker 1: in the next you know, months, or even three months
13:57
Speaker 1: or sometimes even six months, just as long as talks
14:00
Speaker 1: go up for us, you know, by mid year, you know,
14:02
Speaker 1: we're going in, and we don't care what happens in
14:04
Speaker 1: the meantime. Leland, I know, you know, I'm just thinking
14:07
Speaker 1: about kind of what we experienced here in the U.
14:10
Speaker 1: S and the West, you know, as the pandemic initially,
14:13
Speaker 1: as the virus initially went through the population, and the
14:16
Speaker 1: terrible numbers. I guess we have some anecdotal data coming
14:19
Speaker 1: out of China, but we don't really have any good
14:20
Speaker 1: data about hospitalization's death rates, that type of thing. Is
14:25
Speaker 1: there any good guesses you're using. Well, look, there's been
14:30
Speaker 1: model after model that said China was going to hit
14:32
Speaker 1: you know, a million plus and million plus deaths, and
14:36
Speaker 1: I don't think anything has changed. Due to the fact
14:38
Speaker 1: that they're that they're getting infected much faster than anyone
14:41
Speaker 1: thought possible. So you know, it is a black box.
14:44
Speaker 1: We don't know the death ray. We don't know the
14:46
Speaker 1: cases either, although we assume just about everybody's getting COVID
14:50
Speaker 1: in the big cities and that will eventually spread to
14:52
Speaker 1: the countryside. So we don't and it has it's a
14:54
Speaker 1: black box. But I think what it has done is
14:56
Speaker 1: it is made investors a little bit more opt mystic,
15:00
Speaker 1: oddly because they're seeing low reported deaths or or very
15:04
Speaker 1: little reporting on deaths, but they know everyone's getting infected.
15:07
Speaker 1: So there's this idea, okay, world, we're just weeks away
15:10
Speaker 1: from COVID peaking in China. That's actually not what the
15:13
Speaker 1: numbers say. There may be COVID peaks in some of
15:16
Speaker 1: the larger cities, but you've got a lot more to spread.
15:18
Speaker 1: So the fact that this is such a black box
15:20
Speaker 1: I think is making it hard for investors. But you know,
15:22
Speaker 1: there will be a recovery, it just may not be
15:24
Speaker 1: as quickly as people are assuming. Leland In terms of
15:27
Speaker 1: the timing, here was this simply a case of President
15:30
Speaker 1: she wanting to get through the party Congress, get his
15:33
Speaker 1: you know, next term, before he just pulled the band
15:37
Speaker 1: aid off here. I don't think so, but I'll tell
15:40
Speaker 1: you what I don't know anybody who knows who can
15:42
Speaker 1: explain what happened other than the fact that that she
15:45
Speaker 1: just sort of, you know, flipped on something that that
15:49
Speaker 1: you know, he seemed pretty passionate about for three years.
15:52
Speaker 1: Obviously that the economy was near a breaking point. We've
15:54
Speaker 1: been reporting on that for for for not just months,
15:57
Speaker 1: but years. Uh, you know, the the situa age with
16:00
Speaker 1: the protests pressured him. But the fact that they had
16:03
Speaker 1: multiple years to prepare for COVID zero coming off and
16:06
Speaker 1: instead of you know, waiting after COVID spread season in
16:09
Speaker 1: the winter, or preparing with m RNA vaccinations or or
16:12
Speaker 1: therapeutics campaign or vaccinating the elderly, they just pulled it back.
16:17
Speaker 1: And it's very hard to imagine this was well thought out,
16:21
Speaker 1: so huge mystery, but it doesn't it doesn't speak very
16:26
Speaker 1: highly of their you know, long term strategic prowess. What
16:29
Speaker 1: do you think about the UM conflict with Taiwan UM
16:35
Speaker 1: How bad could it get in terms of you know,
16:39
Speaker 1: military intervention because they still are reliant on that economy
16:43
Speaker 1: for chips to run their own right. Yeah, Look, taiwan
16:47
Speaker 1: Is is hovering in the background. I don't think it's
16:49
Speaker 1: a near term issue. But obviously they're gearing up their
16:52
Speaker 1: military capabilities. The United States is doing similarly. You know,
16:56
Speaker 1: Taiwan just reinstituted year long conscription. So this is something
17:00
Speaker 1: it should be on hand everyone's mind. But I think
17:03
Speaker 1: that the state of the global economy, the state of
17:05
Speaker 1: China's economy right now, being so weak and and and
17:07
Speaker 1: in the midst of this COVID wave, I don't think
17:09
Speaker 1: anything is is on the minds of the leadership right now.
17:12
Speaker 1: But this certainly should be a discussion topic as we go,
17:16
Speaker 1: you know, a year or two in the future, because
17:18
Speaker 1: by the end of this decade, you do have some
17:20
Speaker 1: pretty pretty nasty, uh, pretty nasty challenges coming forward. And
17:24
Speaker 1: and uh, you know, people have to be aware of
17:27
Speaker 1: the possibility that this is something that that Beijing is
17:29
Speaker 1: going to want to do before not too long. Leland,
17:32
Speaker 1: do we have any good data or about the support
17:36
Speaker 1: that she still has with his people, given maybe the
17:39
Speaker 1: last few weeks with the COVID outbreak, You know, no,
17:43
Speaker 1: we don't. There's there's no way of getting attitudes. I
17:45
Speaker 1: think anyone who answered that survey negatively would put their
17:48
Speaker 1: life at risk. But look, I think that the reality
17:50
Speaker 1: here is that this has definitely been a ding to
17:52
Speaker 1: the leadership, but that doesn't mean that the leadership is fracturing.
17:56
Speaker 1: It doesn't mean that chij and Ping, you know, is
17:58
Speaker 1: has has weakened dramatically. We just don't know. So a
18:01
Speaker 1: lot of it will depend on how fast they can
18:03
Speaker 1: get out of this current COVID wave and back to
18:05
Speaker 1: an economy that's actually working. And then I think we
18:08
Speaker 1: have to revaluate about six months and see where we
18:10
Speaker 1: are there. Alright, great stuff. Leland Miller. He's the CEO
18:13
Speaker 1: of China beij Book International. Uh really one of our
18:16
Speaker 1: goat two voices when we want to get the what's
18:18
Speaker 1: going on on the ground there in China. In our
18:24
Speaker 1: Suitet conversation today, we want to check in with air
18:26
Speaker 1: nor Limb CEO at Exaction No sorry, Evaccion Biotech. The
18:31
Speaker 1: symbols e v A x on trades on nastac. You
18:34
Speaker 1: can punch it into your Bloomberg Professional service. Take a
18:37
Speaker 1: look at that. Stocks pretty flat today, but they've got
18:39
Speaker 1: some big now. Yeah, but it was the open I know,
18:44
Speaker 1: crazy stuff. So um part thanks so much for joining
18:47
Speaker 1: us here. Talk to us about your news in the
18:48
Speaker 1: cancer space today. What did you guys disclose. Yeah, thanks
18:54
Speaker 1: so much for calling on. What we've done today is
18:57
Speaker 1: just releasing the news. But the FDA has accepted will
19:00
Speaker 1: giving a green light to our clinical trial, our phase
19:04
Speaker 1: two clinical trial for a personalized cancer vaccine. So what
19:10
Speaker 1: exactly is this? There's a lot of different kinds of cancer.
19:13
Speaker 1: I've read on UM your website that it's melanoma treatment.
19:17
Speaker 1: But explain it to us, you know, obviously not so
19:20
Speaker 1: complicated that we need a doctor to understand it a
19:22
Speaker 1: little bit more in depth. Yeah, well, it's it's pretty
19:26
Speaker 1: similar to what was in the news about a month
19:28
Speaker 1: ago from Moderna and Murphy with our a Morna vaccine.
19:31
Speaker 1: So this is a similar vaccine where we essentially make
19:35
Speaker 1: a new product for each patient. So very simply, we
19:39
Speaker 1: take a sample from the patient, we use artificial intelligence
19:43
Speaker 1: to see where the mutations are, and then we create
19:46
Speaker 1: a vaccine that is tailored for just that patient. And
19:50
Speaker 1: all is just to make sure that we get a
19:53
Speaker 1: strong immune response towards that. Very humor, So when you
19:57
Speaker 1: say vaccine, I think of something that's preventative. Um, does
20:00
Speaker 1: that mean this won't treat someone who already has metastasized melanoma? Oh, yes,
20:08
Speaker 1: and that's it's usually called therapeutic vaccines or indeed personalized
20:13
Speaker 1: cancer immunotherapies. So these are patients at with advanced metastatic
20:19
Speaker 1: cancer where we can look at the tumors and through
20:23
Speaker 1: artificial intelligence identify the different mutations in that very tumor
20:28
Speaker 1: and that is the basis for this immunotherapy. Or well,
20:31
Speaker 1: that's incredible news. And um, what does this mean for
20:37
Speaker 1: you know, maybe patients listening? Um, is there a possibility
20:41
Speaker 1: that anyone's going to be able to get access to
20:44
Speaker 1: this in the near in the near future, Well, I
20:48
Speaker 1: definitely think this is the future. How long it will
20:51
Speaker 1: take that depends because it is challenging. We need to
20:54
Speaker 1: make it right for every patient. But given that it
20:59
Speaker 1: can be done, we also know today that the sects
21:02
Speaker 1: are better. We already have a phase one trial that
21:06
Speaker 1: has been presenting most of the results where we can
21:09
Speaker 1: show that we have two thirds of the patients responding
21:12
Speaker 1: to the therapy in the late stage metastatic melanoma. So
21:15
Speaker 1: that's quite the very promising results, I would say, And
21:20
Speaker 1: so from our perspective, we are really confident it works
21:23
Speaker 1: and it will provide better results. But again, you need
21:27
Speaker 1: to make a drug for each patient, so it is
21:29
Speaker 1: more complicated, and I would think it would be extreme,
21:32
Speaker 1: extraordinarily difficult to get this to market in scale. If
21:36
Speaker 1: every vaccine is personalized for an individual patient, how do
21:40
Speaker 1: you in fact distributed in scale or get it to
21:43
Speaker 1: the patients. Yeah, today we have a peptide based platform,
21:49
Speaker 1: you know Modern and Murky. They are developing their own
21:52
Speaker 1: in an m RNA based platform, and we have ourselves
21:55
Speaker 1: a new DNA based platform coming up and we needse platform.
22:00
Speaker 1: Once you have proven that is effective, you can definitely
22:04
Speaker 1: streamline all the processes and make this very quick. Today
22:09
Speaker 1: we can do it with a peptide based platform in
22:12
Speaker 1: about two months. We foresee that in a couple of
22:16
Speaker 1: years we would be able to do it with a
22:18
Speaker 1: DNA based platform in maybe two weeks and then bring
22:21
Speaker 1: down the cost tremendously. So it can definitely be done,
22:25
Speaker 1: be done. It's just we need the engagement or bigger
22:28
Speaker 1: players like the formats. But as I said that Mark
22:32
Speaker 1: is already there and also other formats like growth, so
22:36
Speaker 1: they are taking it very seriously enough. So what does
22:39
Speaker 1: your capital structure look like? We just mentioned your depositary
22:44
Speaker 1: seats trading here e v a X is the ticker.
22:49
Speaker 1: I see a market cap of forty two million dollars,
22:51
Speaker 1: which is fairly small, um, but I guess you're in
22:56
Speaker 1: the position to to exponentially grow that. What is the
22:59
Speaker 1: structure look look like now? Yes, and so we are
23:04
Speaker 1: a Danish company coming from a private setting. And then
23:06
Speaker 1: we were listening in New York about two years ago,
23:09
Speaker 1: and at the start there was a lot of the
23:12
Speaker 1: institutions they have over the last year many of them
23:16
Speaker 1: actually left the company in the quite depressing market that
23:21
Speaker 1: has been here. We see now that hopefully there is
23:26
Speaker 1: coming more interesting back into this field, especially into personalized
23:30
Speaker 1: cancer mini therapy. But that's that very still quite a
23:33
Speaker 1: significant part of retail and the Scandinavian retails and also
23:40
Speaker 1: smaller US investors. Alright, great stuff. Pair Pear Norland, he's
23:44
Speaker 1: the CEO of Evaccition, the symbols e v a X.
23:48
Speaker 1: I was some promising news on some of their drug therapies.
23:51
Speaker 1: We wanted to check in there because it seems like
23:54
Speaker 1: here with the m r n A vaccine technology and
23:58
Speaker 1: others starting to move pretty quickly here, so we want
24:01
Speaker 1: to always stay on top of that. Let's get to Washington,
24:07
Speaker 1: d C. Because apparently the rumor is Connress is going
24:10
Speaker 1: back to work here, so we want to see what
24:12
Speaker 1: it will be up. I don't know, we'll see Nathan Dean,
24:15
Speaker 1: Senior US POSSI annalso Bloomberg Intelligence Joints US here, Nathan.
24:19
Speaker 1: All right, the folks done, Congress are getting back to work.
24:23
Speaker 1: I think the first order of businesses doesn't the Republican
24:25
Speaker 1: Party have to get uh speaker or something. What's the
24:29
Speaker 1: latest on that? That's absolutely right, you know, right now
24:31
Speaker 1: the Republican caucus is actually debating about who's going to
24:34
Speaker 1: be the next Speaker of the House. And it's actually
24:36
Speaker 1: uh fairly good for those of us who want to
24:38
Speaker 1: watch popcorn and uh, you know, politics intrigue right now
24:42
Speaker 1: Speaker McCarthy is struggling to get those votes. Now. From
24:45
Speaker 1: a market perspective, really this is just a delay of
24:47
Speaker 1: a few weeks. I mean, eventually whoever becomes speaker, you know,
24:51
Speaker 1: we we anticipate that to be resolved in the next
24:54
Speaker 1: week or so. But the Republicans need this because they
24:57
Speaker 1: already have like five or seven bills just ready to
25:00
Speaker 1: go on repealing I R S funds, abortions, immigration, border security.
25:05
Speaker 1: None of these bills are really going to pass. But
25:07
Speaker 1: usually when we're a new Congress comes in, whoever is
25:11
Speaker 1: the Speaker of the House needs those few weeks to say, Okay,
25:13
Speaker 1: these are our policy goals and this is how we're
25:16
Speaker 1: gonna move forward, and any further intrigue, if you will,
25:19
Speaker 1: is just going to delay that. Um, what are the
25:22
Speaker 1: chances that we see uh, George Santos elected speaker? Well,
25:27
Speaker 1: you know that's actually that's another issue that's obviously that's
25:30
Speaker 1: playing out right now. I mean the Bloomberg newss have
25:32
Speaker 1: reported that you know, he's under investigation and so forth.
25:35
Speaker 1: But what I will say in multiple jurisdictions in different
25:39
Speaker 1: countries on different continents exactly. I mean, we we saw
25:42
Speaker 1: the news out of Brazil that you know, they dusted
25:45
Speaker 1: off an investigation as well, but you know, because they
25:48
Speaker 1: couldn't find him, right he was a scoff law. Well,
25:51
Speaker 1: you know, it just signals though that the problem that
25:54
Speaker 1: the Republicans are going to have with the House of
25:55
Speaker 1: Representatives because they have such a thin majority, and if
25:59
Speaker 1: they were to lose George Santos and there's another runoff,
26:02
Speaker 1: that's just another person that you know, it can make
26:04
Speaker 1: that margin even slimmer. So you know, as this plays
26:07
Speaker 1: out through twenty four, I just also remind people is that,
26:13
Speaker 1: you know, you always have like five to seven retirements
26:16
Speaker 1: or deaths or so forth in the house, and so, uh,
26:18
Speaker 1: you know, with such a slim margin, you know, obviously
26:20
Speaker 1: things could change. Dude, I mean, Kevin McCarthy and the
26:25
Speaker 1: speaker bid is nothing on you know, popcorn drama compared
26:29
Speaker 1: to what's going on with Santos. Is there a possibility
26:33
Speaker 1: that this guy, I mean the Post. I was reading
26:35
Speaker 1: a story in the Post. So he lied about graduating
26:39
Speaker 1: from college, not just where, but graduating at all. Uh.
26:42
Speaker 1: He lied about working for Goldman Sachs and city where's
26:46
Speaker 1: the OPO research before he got here. He lied about
26:50
Speaker 1: he's at He owned thirteen properties, he lives with his
26:52
Speaker 1: sister and doesn't own one, but he's thinking about buying one. UM.
26:55
Speaker 1: Maybe more damning is the fact that he may have
27:00
Speaker 1: spent campaign funds on personal travel and rent um and
27:06
Speaker 1: now we find out that Brazil is reopening UM an
27:10
Speaker 1: investigation into him. He's apparently stole a checkbook and then
27:15
Speaker 1: went and used the stolen checks to buy stuff, admitting
27:19
Speaker 1: later that he did it, but now he denies it.
27:21
Speaker 1: I mean, can this guy really stay i mean even
27:25
Speaker 1: start in office. So you know, obviously members of members
27:29
Speaker 1: in Congress under investigation is not a new thing. I mean,
27:32
Speaker 1: there's there's always a member of Congress who's under investigation
27:35
Speaker 1: for something. Um. You know, it will just be interesting
27:38
Speaker 1: to see though, do the Republicans actually embrace him or
27:41
Speaker 1: do they keep him aside. You know, we saw statements
27:43
Speaker 1: over the weekend saying that, you know, it wouldn't be
27:46
Speaker 1: and I'm paraphrasing here, essentially saying, uh, you know, resigning
27:51
Speaker 1: is not a bad thing for him. Um to your
27:53
Speaker 1: earlier point about the opposition research, that is a question
27:56
Speaker 1: that the Democrats are going to be asking themselves. Why
27:58
Speaker 1: didn't we actually discover this until the reporters did so? Uh,
28:02
Speaker 1: you know, this process is going to play out. It's
28:04
Speaker 1: not going to happen fairly soon, I don't think. But
28:06
Speaker 1: even if it does, if he were to just resign
28:09
Speaker 1: in the next week or so, you would have a
28:10
Speaker 1: special election and so forth. But the damonamics of Congress
28:13
Speaker 1: wouldn't change. Paul, I'm gonna ask a question that may
28:15
Speaker 1: be controversial. Okay, what does this say about people in
28:18
Speaker 1: Long Island that they would elect this guy. I don't know.
28:22
Speaker 1: I don't know, uh, Nathan. I mean as I think about,
28:27
Speaker 1: you know, the Republicans and their inability to get a
28:29
Speaker 1: speaker done in a timely basis, does that just highlight
28:33
Speaker 1: that this is a party that really is maybe more
28:37
Speaker 1: divided than maybe we initially thought. No. I mean, look,
28:41
Speaker 1: you always you always have, you know, wings of certain
28:45
Speaker 1: parties that are always going to be you know, challenging
28:48
Speaker 1: the speaker and challenging leadership to take their position. Uh.
28:51
Speaker 1: You know, we saw this under Speaker Baner, and we
28:53
Speaker 1: saw this under Speaker Pelosi. So that's always out there.
28:56
Speaker 1: The question is that can they come together and unify
29:00
Speaker 1: for an agenda because you know, this is a divided Congress.
29:03
Speaker 1: So the Republicans understand that there's not going to be
29:06
Speaker 1: a lot of policy wins here. I mean, this is
29:08
Speaker 1: going to be one of those where where they're gonna
29:10
Speaker 1: have to pick their fights, you know, the leverage points
29:11
Speaker 1: of government funding bills and the debt ceiling and so forth.
29:14
Speaker 1: From the market perspective, though, you know, the most concerning
29:17
Speaker 1: thing for us in terms of whether the Republicans are
29:20
Speaker 1: unified or not comes to the debt ceiling. Fortunately that's
29:23
Speaker 1: going to be in September, so a lot of things
29:25
Speaker 1: are going to happen between now and then. But uh,
29:27
Speaker 1: you know, we still anticipate that this session may actually
29:30
Speaker 1: be somewhat fruitful for legislation to get across some some legislation,
29:33
Speaker 1: not a lot. I gotta ask you about something that
29:35
Speaker 1: isn't being legislated anymore, but I guess worked out at Treasury,
29:40
Speaker 1: and that is um the tax credits for evs from
29:44
Speaker 1: the I r A. This is absolutely fascinating because the
29:48
Speaker 1: law um as it stands, I mean, most electric vehicles,
29:53
Speaker 1: if not all, are gonna be will no longer be
29:57
Speaker 1: eligible in a couple of months for dollar tax credit.
30:00
Speaker 1: But I guess it's up to Treasury to decide which vehicles,
30:05
Speaker 1: uh you know how lacks they are um when they
30:08
Speaker 1: try and adhere to the legislation because battery has to
30:12
Speaker 1: have of its components coming from a trading ally and
30:17
Speaker 1: we're not even sure what a trading ally is. How
30:19
Speaker 1: we're going to figure this out, you know. And it
30:21
Speaker 1: was funny I was reading about how like the certain
30:24
Speaker 1: you know, the the uh, the height of your base
30:28
Speaker 1: of the car determines how Sometimes it's an suv, sometimes
30:31
Speaker 1: it's not, and so forth like that. Yeah, the Tesla model, why,
30:34
Speaker 1: for example, is two hundred thirty eight pounds too heavy
30:37
Speaker 1: to qualify, sorry, too light to qualify for the suv
30:41
Speaker 1: tacked credit, so it won't get it. And someone suggested
30:44
Speaker 1: on Twitter that Elon must just added two fifty pound
30:47
Speaker 1: weight to the trunk that you know, drivers can remove
30:49
Speaker 1: after they buy the car. But you know, but there's
30:52
Speaker 1: nothing new. So I mean, obviously the IRA comes out,
30:54
Speaker 1: it's thousands of pages and so forth, but it's written
30:57
Speaker 1: at the you know, hundred thousand foot view level, and
31:00
Speaker 1: most legislation actually directs the uh, you know, the executive branch,
31:04
Speaker 1: via the regulators or the agencies and so forth, to
31:07
Speaker 1: actually put that down at the ten foot branch. And
31:10
Speaker 1: so as Treasury actually jumps into this, they're gonna look
31:12
Speaker 1: at the discrepancies and discrepancies in Congress is nothing new.
31:15
Speaker 1: This happens all the time, and so you know, as
31:19
Speaker 1: this as your Treasury moves forward to actually implement this stuff,
31:22
Speaker 1: if they see certain discrepancies where they think it's just
31:25
Speaker 1: not going to work out, or so forth, like that
31:27
Speaker 1: they always have the ability to go back to Congress
31:29
Speaker 1: and saying, hey, fix this. And if Congress doesn't do this,
31:32
Speaker 1: then you know, they can look within their statute to
31:34
Speaker 1: see is there any wiggle room that they can use
31:36
Speaker 1: issue A via the rulemaking process. Nathan, the State of
31:39
Speaker 1: the Union is coming up from not mistake in any
31:43
Speaker 1: preview of what we may hear, what we should be
31:45
Speaker 1: in to look out for. So the two things that
31:47
Speaker 1: I'm looking for, you know, obviously we're still a month
31:50
Speaker 1: and so away, is geopolitical issues, so essentially Russia and China.
31:54
Speaker 1: How does the President going to take those issues on,
31:57
Speaker 1: what's his vision and so forth? When it comes to
32:00
Speaker 1: domestic policy, it's nice to hear what he says, but
32:03
Speaker 1: you know, Congress more often than not just says, thank you,
32:05
Speaker 1: Mr President, but we're gonna do whatever we want anyway.
32:07
Speaker 1: The second thing that I'm going to look for into
32:09
Speaker 1: the State of the Union is whether or not he
32:11
Speaker 1: announces that he uses it as a catalyst to run
32:13
Speaker 1: for re election or not. I'm not sure he will.
32:16
Speaker 1: I think that decision will come outside of the State
32:18
Speaker 1: of the Union. But you know, if he were to
32:20
Speaker 1: decide that, I'm not going to run for re election.
32:22
Speaker 1: He's going to lose a lot of political capital, and
32:24
Speaker 1: that state of the Union may fall flat. So I
32:26
Speaker 1: think that decision will come afterwards, but there's always the
32:29
Speaker 1: chance it could. All right, good stuff. Nathan Dean coming
32:33
Speaker 1: to us from Washington, d C. He's all he's knee
32:36
Speaker 1: deep in all this Congress and policies. You know, the
32:39
Speaker 1: best thing for me is about three We're one year
32:42
Speaker 1: closer to getting my salt deduction back. Is that right?
32:47
Speaker 1: When I think, Nathan, by the way, isn't it is
32:51
Speaker 1: he still there? Isn't it? When we get the salt back? Well,
32:55
Speaker 1: you know the Trump tax cuts expiring five and so
32:58
Speaker 1: I think that the eight I'm bringing the salt back
33:01
Speaker 1: will actually be uh be a lot more. Uh. We'll
33:04
Speaker 1: take place later this year and earlier next year. And
33:06
Speaker 1: for those of you living in New York and New Jersey,
33:09
Speaker 1: hopefully it works out on the positive side for you.
33:11
Speaker 1: See Matt smiling, he's hoping. Nathan Dean, senior ys policy
33:14
Speaker 1: analyst with Bloomberg Intelligence, thanks so much for joining us
33:18
Speaker 1: here again. I guess I gotta get a speaker there
33:21
Speaker 1: for the Republican Party. That's kind of the first order
33:23
Speaker 1: business before they can move anything forward. So apparently that
33:26
Speaker 1: they're still kind of negotiating. I kind of envisioned backroom
33:28
Speaker 1: deals getting cut here between various factions, kind of like
33:32
Speaker 1: like the old days. Here, let's talk commodities. Let's talk
33:39
Speaker 1: E T F S. Let's talk commodity E T S.
33:42
Speaker 1: We can do that. Bob Inter, director of ETF Investment
33:44
Speaker 1: Strategy at Aberdeen, joins us live here in the Bloomberg
33:47
Speaker 1: Interactive Broker studio. Bob, we're throwing out it's it's in
33:52
Speaker 1: the rear view mirror. Three. What are some of the
33:55
Speaker 1: ideas that you're thinking about for your clients. Sure, so
33:58
Speaker 1: we look at the act drop coming into this year,
34:02
Speaker 1: and we see that the US dollar long positioning it
34:05
Speaker 1: still looks pretty crowded. Started to come off at the
34:07
Speaker 1: end of last year, but it still looks crowded. If
34:09
Speaker 1: we start to get a reversal of that, we could
34:11
Speaker 1: see some dollar weakness that's generally speaking, really very good
34:16
Speaker 1: for precious medals. Second thing, we have commodity inventories which
34:21
Speaker 1: are really incredibly low. No one's paying attention to it. Um.
34:25
Speaker 1: The London Medals Exchange just announced twenty five year low
34:29
Speaker 1: in the six major medals inventories. Why yeah, why is that? Why? Well,
34:37
Speaker 1: it some of it is because there are labor strikes
34:42
Speaker 1: in South America that have reduced supply. UM. At one point,
34:47
Speaker 1: natural gas was the equivalent of apparel for an oil equivalent.
34:53
Speaker 1: So those are costs that go into the manufacture of
34:56
Speaker 1: these very energy intense medals. So if you can't if
35:01
Speaker 1: you compete in the global marketplace, you don't make it
35:03
Speaker 1: in Europe, you make it somewhere else. So is that why?
35:06
Speaker 1: I mean? I was looking at gold this morning. Right now,
35:08
Speaker 1: it's trading eighteen thirty a troy ounce, and I thought,
35:11
Speaker 1: why is gold on a tear to the upside when
35:16
Speaker 1: you know we're still dealing with runaway inflation. The Fed
35:19
Speaker 1: has raised four or fifty basis points in one year
35:22
Speaker 1: and is going to keep going this year. Um, it
35:24
Speaker 1: just doesn't make much sense add into the at in
35:28
Speaker 1: the fact that inflation is coming down, right, So it's
35:30
Speaker 1: if it's really a hedge, why buy it now? It
35:33
Speaker 1: absolutely stood out to us going into the end of
35:36
Speaker 1: the year last year we said something's the market is
35:39
Speaker 1: fundamentally looking at gold differently than than it did before.
35:42
Speaker 1: At one point last year, eighteen trillion dollars of negative
35:46
Speaker 1: yielding bonds across the world. Now it's about a trillion
35:51
Speaker 1: just what's left. In Japan. Real yields rose, they came
35:55
Speaker 1: back a little bit, but they rose at one point
35:57
Speaker 1: that the real yield equivalent, it would tell you the
36:01
Speaker 1: gold should be seven an ounce, and here it is
36:04
Speaker 1: at eight hundred. So something different is going on. What
36:07
Speaker 1: the something different is that in the third quarter official
36:12
Speaker 1: gold purchases from central banks and the like, we're four
36:16
Speaker 1: hundred tons now. That is more than double the last
36:22
Speaker 1: roughly double the last the next closest largest purchase in
36:27
Speaker 1: a quarter, and it's the largest since they've been keeping records.
36:31
Speaker 1: And there they're stocking up, they're diversifying their reserves away
36:36
Speaker 1: from U S dollars. That's big, that's a big deal.
36:39
Speaker 1: Talk to us about China. They're reopening. We've been talking
36:42
Speaker 1: about it for the last few weeks now. And if
36:43
Speaker 1: I'm a commodity guy and I'm thinking about my demand model,
36:47
Speaker 1: my supply model, wow, i gotta recalibrate now. It's it's
36:51
Speaker 1: actually a little bit bigger than just than just China.
36:53
Speaker 1: If you think about it, we're returning the calendar here.
36:57
Speaker 1: It's been three years since we've seen what global demand
37:01
Speaker 1: really looks like. The whole world hasn't been open simultaneously
37:05
Speaker 1: for three years. We can't predict the next three months.
37:08
Speaker 1: And now we're trying to say exactly what demand is
37:11
Speaker 1: going to look like, and we haven't seen to come
37:13
Speaker 1: on and say that. You know, we continue to ask
37:15
Speaker 1: these questions and everybody posits of forecast anyway, but it's
37:21
Speaker 1: fair to say there's zero visibility, dude, Like we're in
37:24
Speaker 1: completely unprecedented, unchartered territory, so we don't know what's going
37:28
Speaker 1: to happen. Correct. Um, it is uh also a massive
37:33
Speaker 1: economy coming online. So even if um, you have tens
37:38
Speaker 1: of millions of infections a day, you've got to figure
37:41
Speaker 1: more people are going to be filling up their cars,
37:44
Speaker 1: more people are gonna want to be using um, you know,
37:47
Speaker 1: natural resources. Considering the high frequency data we saw, apparently
37:51
Speaker 1: more people are using the subway in China, that's correct.
37:54
Speaker 1: Just very recently we've started to see an uptick in
37:57
Speaker 1: the mobility data, and um, you know it's kind of
38:03
Speaker 1: there's the mobility restrictions, the official mobility restrictions were dropped,
38:06
Speaker 1: and then mobility absolutely plummeted because it was voluntarily restricted.
38:11
Speaker 1: But we're starting to see that bounce back, and again
38:14
Speaker 1: I think I think it's we're fundamentally see similar things
38:18
Speaker 1: like what we see in New York where the easy
38:20
Speaker 1: past data for bridges and tunnels went right back to
38:23
Speaker 1: pre pandemic levels, and the subways and the trains are
38:27
Speaker 1: not anywhere near that. I'm doing my part. I'm on
38:31
Speaker 1: the trains and subway every Yeah, but you're alone. I'm alone,
38:34
Speaker 1: well except on the weekends. Then they're pack. You can't.
38:36
Speaker 1: It's standing your moan because people are coming in the
38:38
Speaker 1: party in the city, but god forbid they come into
38:40
Speaker 1: their offices. Silver. What do I do with a work
38:43
Speaker 1: from home acts to grind? Yes? I do? What do
38:46
Speaker 1: we do? What do we do with silver? Here? We
38:48
Speaker 1: talk a lot about gold, but what's your calling silver?
38:51
Speaker 1: So we we like to break it down a little simply.
38:54
Speaker 1: Silver has two main demand drivers. One is industrial, right,
38:59
Speaker 1: so that's in all sorts of medical instruments, it's in
39:02
Speaker 1: solar panels. But it's also used by investors in the
39:05
Speaker 1: same way that it would um be used like that
39:09
Speaker 1: someone would use gold, so we think of baby gold,
39:12
Speaker 1: so we think of it as half copper and half gold,
39:14
Speaker 1: which isn't the right way to look at it, but
39:16
Speaker 1: in shorthand that's the way we look at it. It's
39:18
Speaker 1: more industrial used in industrial than gold. Absolutely, yes, And
39:24
Speaker 1: you're not concerned about the market being sort of owned
39:29
Speaker 1: by a couple of big players silver because I know
39:33
Speaker 1: that for a long time it was a real zero
39:35
Speaker 1: hedge like conspiracy theory thing that some big bank was
39:38
Speaker 1: running the silver market all over the place. I won't
39:40
Speaker 1: say which one. Palladium is that something that we care
39:44
Speaker 1: about for if you if you uh, you know, I'm
39:48
Speaker 1: glad I want everyone else to have a catalytic converter.
39:53
Speaker 1: Why is that? I don't love it for me, you know?
39:55
Speaker 1: And it really stuffs up the exhaust. I want the
39:57
Speaker 1: engine to be able to breathe. But yes, palladium is
39:59
Speaker 1: used catalytic converters and that's a good thing. Absolutely, And
40:02
Speaker 1: it's actually there are sort of poster child for this
40:05
Speaker 1: environmental trade that we have for metals. Is that, you know,
40:09
Speaker 1: you're just not economists scratch their head when they look
40:13
Speaker 1: at palladium because it's had tremendous returns over tremendous yearly
40:17
Speaker 1: returns over a long period of time. That's not supposed
40:19
Speaker 1: to happen. The price is supposed to go up, supply
40:21
Speaker 1: is supposed to respond, the price is supposed to come down,
40:24
Speaker 1: and that just hasn't happened for a number of reasons.
40:27
Speaker 1: There's no such thing as that pure palladium. Mind, the
40:29
Speaker 1: rest of the metals that come out of it have
40:31
Speaker 1: to also work and be profitable. But the sheer increase
40:37
Speaker 1: in the Chinese environmental regulations year over year, it was
40:40
Speaker 1: China's called China three, than China four, than China four
40:43
Speaker 1: A China four B meant that a car in China
40:47
Speaker 1: went from having roughly a gram of palladium in it
40:50
Speaker 1: in this catalytic converter to having three grams. You don't
40:54
Speaker 1: care how many cars are getting sold when the actual
40:58
Speaker 1: loading of the metal triples. Yeah, and supply just couldn't react.
41:02
Speaker 1: And so it's those sort of environmental regulations that tell
41:07
Speaker 1: us that an environmental metal can perform well over a
41:13
Speaker 1: long period of time, can exponentially growing. Bob, you are
41:19
Speaker 1: director of E t F Investment Strategy, So we're talking
41:21
Speaker 1: a lot about commodities, but I want to get to
41:23
Speaker 1: the E t F part of this because I have
41:24
Speaker 1: a program that's dedicated to E t F s. What
41:27
Speaker 1: an incredible year two was for issuance um, for new
41:32
Speaker 1: E t s, for thematic E t f s, and
41:35
Speaker 1: even any year when there were no I, P O
41:37
Speaker 1: S and M and A was dead. What does look
41:40
Speaker 1: like to you SOE for for us, we think that
41:50
Speaker 1: that backdrop going into twenty leaving two coming into three
41:55
Speaker 1: really sets us up for some some nice um return
42:00
Speaker 1: in in a few areas, and one of them is UH.
42:05
Speaker 1: We we have a an E t F The ticker
42:09
Speaker 1: is g L t R. It's called Glitter. It's a
42:11
Speaker 1: precious metals basket. These are physically held there in a vault.
42:17
Speaker 1: We list the serial numbers of the bars of all
42:20
Speaker 1: of the metals on our website. You can go in,
42:23
Speaker 1: you can see it. There's no roll yield problems UM
42:27
Speaker 1: and it is roughly allocated. It is a market UH.
42:32
Speaker 1: The allocation fluctuates based on market value and UH and
42:36
Speaker 1: it started in so it's fluctuated away from its original weight.
42:40
Speaker 1: But right now it's about fifty seven percent goal, seven
42:44
Speaker 1: percent over four platinum and twelve percent palladium. We talked
42:50
Speaker 1: about palladium. Platinum is what you use in a cut
42:53
Speaker 1: cataly converter for a diesel powered boo, yeah yeah, and
43:00
Speaker 1: and uh we we talked about gold and silver and
43:02
Speaker 1: so okay, we think the backdrop that we spoke about
43:06
Speaker 1: is positive for for for glitter, for glitter, g L
43:09
Speaker 1: t R g LTR Bob Mentor, Director of ETF Investment Strategy,
43:13
Speaker 1: thanks so much for joining us here. The firm is Aberdeen.
43:15
Speaker 1: He got his bachelor's in economics from Rutgers. Rutgers men's
43:18
Speaker 1: basketball had a huge win yesterday they beat number one
43:21
Speaker 1: per Du. That is a signature wind that come times March,
43:26
Speaker 1: that is gonna be a big for the committee they're on.
43:29
Speaker 1: They're picking teams for the big dance, talking commodities, talking metals,
43:33
Speaker 1: and lots of ways to play it on the precious metals,
43:37
Speaker 1: the base metals, all that kind of stuff. And there's
43:39
Speaker 1: certainly et F plays there alrightwo ugly, it's in the
43:46
Speaker 1: rear view folks here at Bloomberg Market. So we look
43:48
Speaker 1: forward and we do that with Gina Martin Adams today,
43:51
Speaker 1: chief equity strategist for Bloomberg Intelligence. All right, geane a.
43:54
Speaker 1: You know, I could put on my chief equity strategist hat,
43:57
Speaker 1: and if I do that, I say I've seen peak inflation.
44:00
Speaker 1: I can see the end of rate hikes at some
44:02
Speaker 1: point in the next you know, certainly the next six months.
44:05
Speaker 1: Maybe I feel like, Okay, I've got some earnings risk,
44:08
Speaker 1: but that's not too bad. I think I can take
44:10
Speaker 1: some risk here. But people keep coming back to me
44:13
Speaker 1: and saying, whoa, whoa, whoa. The earnings risk is bigger
44:15
Speaker 1: than you think. What's your call there as we start up?
44:21
Speaker 1: So our call is, yes, there is some likely downward
44:25
Speaker 1: estimate revision pressure to continue. But looking at past estimate
44:30
Speaker 1: or past recessions for guidance in the upcoming year is
44:33
Speaker 1: probably going to prove a faulty strategy. And what I
44:37
Speaker 1: mean by that is our most most likely sort of
44:40
Speaker 1: behavioral pattern as investors is to look at pastor recessions
44:43
Speaker 1: as guidance as to what to expect in the recession
44:45
Speaker 1: that is emerging in the US. But the reality is
44:50
Speaker 1: all recessions look very different, and the recession in the
44:52
Speaker 1: environment where inflation has piqued inflation was largely supply based,
45:00
Speaker 1: and some of those supply constraints are easy going forward
45:03
Speaker 1: creates a very different profit outlook than your typical recession,
45:06
Speaker 1: and certainly very different than the two thousand eight recession,
45:10
Speaker 1: where we were in the midst of a financial crisis
45:13
Speaker 1: which created that really big down draft in earnings. So
45:16
Speaker 1: we do think that we have some downward revision pressure
45:19
Speaker 1: to come. But the recession I had really unlikely to
45:22
Speaker 1: look like any of the past several recessions will be
45:25
Speaker 1: unique in its characteristics, and that should really drive your
45:28
Speaker 1: investment strategy for well. Michael Burry says, um, it could
45:32
Speaker 1: be the kind of recession that drives us from terrifying
45:36
Speaker 1: inflation back into deflation and and requires not only the
45:41
Speaker 1: FED to cut rates, but more fiscal stimulus from the government. Um.
45:46
Speaker 1: What do you think of his tweet? He of the
45:48
Speaker 1: big short Of course, you know, I'm not Michael Burry,
45:52
Speaker 1: so I can't really speak to his strategy. But what
45:55
Speaker 1: I will say is we absolutely are in a period
45:58
Speaker 1: of disinflation. Definitely saw inflation peak in the summer of
46:03
Speaker 1: last year. I frankly don't think we're going to have
46:06
Speaker 1: a massive deflationary crisis coming in three I do think
46:11
Speaker 1: that the monetary measures have a lot of people quite
46:14
Speaker 1: scared as to the potential financial implications. But offsetting that
46:19
Speaker 1: contraction in money growth, you do have very strong balance
46:23
Speaker 1: sheets in the part of us households to offset some
46:26
Speaker 1: of that pressure, which puts puts us in a very
46:28
Speaker 1: different position than we were in the two thousand seven
46:31
Speaker 1: two thou eight period. I think it's only natural for
46:35
Speaker 1: most people to look back and say, Okay, well, what
46:38
Speaker 1: were our recent experiences and attribute that is the most
46:41
Speaker 1: likely um, you know, outcome. Fore, I just think, you know,
46:47
Speaker 1: we sit in a very different position. We will see disinflation, certainly,
46:51
Speaker 1: we will see the unemployment rates start to take a
46:53
Speaker 1: little bit higher. But there are some you know, unique
46:56
Speaker 1: characteristics of the economy today that didn't exist fifteen years ago. Uh.
47:01
Speaker 1: Certainly we've been through the last fifteen years to set
47:03
Speaker 1: us up for the next cycle, and so I want
47:07
Speaker 1: to try to account for that when I think about
47:09
Speaker 1: where we're headed. And I know from reading your work
47:12
Speaker 1: over the years, you and your team you have score
47:14
Speaker 1: cards at different sectors. You kind of like, what's your
47:16
Speaker 1: score card telling you these days? As you as we start, Yeah,
47:20
Speaker 1: so our scorecard last updated at the end of the
47:22
Speaker 1: last earning season said you want to start to lean
47:25
Speaker 1: into cyclicals, into three cyclicals being financials and industrials popped
47:31
Speaker 1: up toward the top of our scorecard to accompany, energy
47:35
Speaker 1: and consumer stables. So it's a little bit of a
47:37
Speaker 1: mix right now. It would suggest to me a tiptoeing
47:41
Speaker 1: into what are likely to be the leaders in the
47:43
Speaker 1: next up cycle in stocks, while still hanging onto some
47:47
Speaker 1: of the you know, strong defensive place that work in
47:51
Speaker 1: the current environment, those being energy and consumer stables. What
47:56
Speaker 1: do you think about I mean, in looking at equities,
47:58
Speaker 1: you have to also, um, I guess, confer with the
48:03
Speaker 1: credit market, and we're seeing some cracks there. Loan loss
48:07
Speaker 1: provisions at banks surged in the last reporting quarter I
48:11
Speaker 1: think was the amount they were raised, of course from
48:15
Speaker 1: fairly low levels. But um, we have eight hundred and
48:20
Speaker 1: thirty four billion dollars of leverage loan issuance in two
48:24
Speaker 1: which is more than double the rate of two thousand seven,
48:26
Speaker 1: And Paul Singer says that the global financial system, maybe
48:31
Speaker 1: in contrast to the US consumer, is vastly over leveraged.
48:35
Speaker 1: Now that could also be UM a dramatic statement, but
48:40
Speaker 1: are you seeing these cracks in in the in the
48:42
Speaker 1: credit side, and does it concern you. So what I
48:46
Speaker 1: use for credit when I'm looking at the equity market
48:49
Speaker 1: is actually really simple. It is simply, you know, what
48:52
Speaker 1: is the corporate credit markets suggest is the likely outcome
48:55
Speaker 1: for equities. We look at high yield and high grade
48:57
Speaker 1: spreads as one of our prime are indicators of potential distress,
49:02
Speaker 1: distress emerging in the credit markets. Those spreads have certainly
49:06
Speaker 1: widened from all time low levels reached you know, in
49:09
Speaker 1: the early stages of this recovery process, but they're at
49:13
Speaker 1: about the same levels that we saw during the you know,
49:17
Speaker 1: many many recessions and earnings that that emerged in two
49:21
Speaker 1: thousand and eighteen as well as in twenty. They're not
49:25
Speaker 1: even anywhere close pandemic peaks, nor do they look to
49:30
Speaker 1: be going there anytime soon. They're nowhere close to two
49:34
Speaker 1: thousand eight crisis peaks either. So I think when you suggest,
49:38
Speaker 1: you know, some of these things are moving off of
49:40
Speaker 1: record low levels, that's the correct characterization. We're certainly not
49:44
Speaker 1: in an environment in which credit is easy, um, nor
49:48
Speaker 1: are we an environment that simply lacks distress at all.
49:52
Speaker 1: But we are moving into some form of a recession
49:55
Speaker 1: in the US, and that's reflected in some widening and
49:57
Speaker 1: credit spreads, which know, I think is consistent with an
50:01
Speaker 1: environment for a relatively moderate earnings recession persisting in the
50:07
Speaker 1: in the smp fid Gina, how about small cap stocks?
50:11
Speaker 1: Is it time to look there or with a pending
50:14
Speaker 1: recession that should wait. Look, I think small caps have
50:18
Speaker 1: priced in a tremendous amount of weakness, Paul. Small caps
50:21
Speaker 1: have been in a bear market for nearly two years now.
50:25
Speaker 1: Small caps are trading at extraordinary discounts by comparison to
50:29
Speaker 1: large cap stocks. So you've priced in a tremendous amount
50:32
Speaker 1: of risk in small caps. Yes, you will have stronger
50:36
Speaker 1: earnings declines and small caps than you do in large caps.
50:39
Speaker 1: Certainly there's much more um likely default risk and some
50:44
Speaker 1: degree of earnings distress and small caps. But our work
50:47
Speaker 1: would suggest you've largely priced that in. We even have.
50:51
Speaker 1: Our work would even suggests that we've priced in the
50:54
Speaker 1: entirety of a FED balance sheet reduction as well as
50:57
Speaker 1: very very tight interest rate policy invaluations for small caps.
51:02
Speaker 1: So I would suggest small caps downside is relatively limited.
51:06
Speaker 1: You also don't have the risk of you know, a
51:08
Speaker 1: bubble still deflating in small caps. This is one of
51:11
Speaker 1: the kind of underappreciated aspects of what's really happened in
51:15
Speaker 1: the large cap index over the course of the last
51:17
Speaker 1: year is you know, not only are we experiencing some
51:20
Speaker 1: degree of earnings distress, but we've seen um, you know,
51:24
Speaker 1: a bubble that emerged in large cap tech and tech
51:27
Speaker 1: related stocks really deflates substantially over the last year. That
51:32
Speaker 1: bubble is still in the process of deflating. In our view,
51:34
Speaker 1: that doesn't that doesn't really plague the small cap index. Alright,
51:38
Speaker 1: great stuff as always, Gina Martin Adams. She's the chief
51:41
Speaker 1: equity strategist for Bloomberg Intelligence. If you have access to
51:44
Speaker 1: the Bloomberg terminal print, offer us market three Outlook report.
51:49
Speaker 1: It has got great stuff and it gives you the perspective.
51:54
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
51:57
Speaker 1: subscribe and listen to interviews of Apple podcasts or whatever
52:01
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
52:05
Speaker 1: at Matt Miller three. On Fall Sweeney, I'm on Twitter
52:09
Speaker 1: at pt Sweeney. Before the podcast, you can always catch
52:12
Speaker 1: us worldwide at Bloomberg Radio.