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Afghanistan, The Fed, VC, And Inflation (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
Speaker 1: my co host Matt Miller. Every business day, we bring
0:06
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. I don't know, for me,
0:23
Speaker 1: the most compelling read on the Bloomberg terminal today as
0:26
Speaker 1: the article I first read on the train coming in
0:29
Speaker 1: entitled how a Bloomberg reporter's family escaped the Taliban an
0:33
Speaker 1: account of the extreme measures it takes to get out
0:35
Speaker 1: of Afghanistan. And clearly we have a lot of news
0:38
Speaker 1: items about, you know, the folks that were helping the
0:40
Speaker 1: US and Afghanistan UH and are still left behind and
0:43
Speaker 1: trying to get them out. And this is a first
0:45
Speaker 1: hand account. And Reharden was there. She is the reporter
0:50
Speaker 1: on the story. She's a Washington carsponting for Bloomberg Television.
0:53
Speaker 1: And Marie, thanks so much for joining us. Tell us
0:56
Speaker 1: about this Bloomberg reporter's family who was able to escape
0:59
Speaker 1: the Taliban and and what are your connections to the story.
1:02
Speaker 1: Thanks so much and thanks thanks for reading the piece.
1:05
Speaker 1: Uh this family that I helped evacuate alongside with completely
1:12
Speaker 1: the support of Bloomberg and Bloomberg Security operations, we had
1:15
Speaker 1: devised this plan. They are a colleagues family. It was
1:18
Speaker 1: nine of them. They were in Hara, Afghanistan, and we
1:22
Speaker 1: were able to get them to Pakistan and then finally
1:25
Speaker 1: get a country to agree to asylum because we reached
1:27
Speaker 1: out to a ton for Greece and so I had
1:31
Speaker 1: met them when they made it over the border in
1:34
Speaker 1: Islamabad to go through some paperwork. UM, given how chaotic
1:38
Speaker 1: evacuations were not, a lot of paperwork was completely in order,
1:41
Speaker 1: but we were still able to UM. Pakistan has been
1:44
Speaker 1: dealing with a lot of these issues, over a hundred
1:46
Speaker 1: thousand people like this. They were working as what they
1:49
Speaker 1: would call humanitarian corridor. And so that was my involvement,
1:53
Speaker 1: and really we thought I should. I felt like I
1:56
Speaker 1: should write this piece because I was given such a
1:58
Speaker 1: first hand a count and glimpse of how hard it
2:02
Speaker 1: is this whole process. There's so many nose there's so
2:06
Speaker 1: many false hopes, and it's like every other next step
2:10
Speaker 1: almost feels like a miracle until the very end, and
2:12
Speaker 1: even though the family is safe and they definitely are
2:18
Speaker 1: so fortunate and realize their fate is so different than
2:21
Speaker 1: their friends at home. I'm a far had our colleagues
2:25
Speaker 1: brother who I spent a lot of time with, said
2:27
Speaker 1: that his friends at home say to him, we are
2:30
Speaker 1: alive but dead mentally given the fate of the country
2:33
Speaker 1: under Taliban rule. The fact of the matter is that
2:37
Speaker 1: even if you're lucky enough to get out and have
2:40
Speaker 1: the support, it's such an uphill battle for refugees and
2:44
Speaker 1: there's really no centralized system. And now the world is
2:47
Speaker 1: grappling with another refugee crisis when it looks at Ukraine.
2:50
Speaker 1: So the numbers just continue and I don't feel like
2:52
Speaker 1: there's a lot of attention put on it. So, um,
2:55
Speaker 1: let's hear first of all about the family, I mean,
2:58
Speaker 1: big extended family. I wish, you know, we could show
3:02
Speaker 1: all of our radio listeners their their picture that we
3:04
Speaker 1: had on television this morning, because they look so happy
3:06
Speaker 1: and healthy. Now where are they, How are they doing well?
3:11
Speaker 1: The family is in Greece, They're doing very well. Um.
3:14
Speaker 1: It was nine of them, right, so quite a lot.
3:16
Speaker 1: Not everyone spoke English. They speak dry, which is like
3:20
Speaker 1: the Afghan version of farsi Um and they're very educated people,
3:26
Speaker 1: so they left jobs. His sister, Frey Doune, our colleague.
3:29
Speaker 1: His sister Lena was working for you in Habitat. His
3:32
Speaker 1: brother Farhad was a web developer. He also was running
3:35
Speaker 1: a very uh Western focused cultural site about human rights
3:41
Speaker 1: in Afghanistan as well. And his younger brother, Hamaiun was
3:46
Speaker 1: just finishing up. He's incredibly bright, his engineering degree at
3:49
Speaker 1: Harat University. So they had they left this all behind.
3:53
Speaker 1: But of course for them they could not stay. And
3:57
Speaker 1: so much of that was because the answer you get
4:00
Speaker 1: from so many people is because of the outlook for
4:03
Speaker 1: women and girls in the country now. So his sister
4:06
Speaker 1: that worked for you in Habitat, that would have come
4:08
Speaker 1: to an end. His other sister, if she wanted to
4:10
Speaker 1: go to college a little bit younger, that would be impossible.
4:14
Speaker 1: Women's lives are back to talibanes, covering up from head
4:18
Speaker 1: to toe. They've pretty much disappeared from the streets many
4:22
Speaker 1: of them. Only a few really are able to keep
4:24
Speaker 1: their jobs. So many of them are now relegated back
4:27
Speaker 1: to their homes. They can't even go out and travel
4:30
Speaker 1: without a male chaperone. Uh so for so many of
4:33
Speaker 1: these women, and some of them were even born during
4:37
Speaker 1: US when the US was in the country during this
4:40
Speaker 1: US occupation, so they don't even understand what the Taliban
4:44
Speaker 1: rule feels like. And that that's that was like a
4:47
Speaker 1: heartbreaking moment getting to know his sisters and what their
4:50
Speaker 1: fate could have been. So emrie. I mean, this is
4:54
Speaker 1: a positive story with a positive ending thanks to you
4:57
Speaker 1: and the folks at Bloomberg. What is the expected fate
5:02
Speaker 1: of the other folks who would like to get out
5:04
Speaker 1: of Afghanistan? How many people are stuck there? Are stuck there? Yeah,
5:08
Speaker 1: I mean it's incredibly difficult. So it's a it's a
5:12
Speaker 1: country of about forty million um inside. They also recently
5:16
Speaker 1: had a a earthquake. They face dire hunger. So many
5:22
Speaker 1: people in Afghanistan um there are serious, serious issues and
5:27
Speaker 1: so much as that is because more than forty of
5:30
Speaker 1: their budget GDP came from international aid and not all
5:34
Speaker 1: was pulled given the Taliban is running the country now
5:38
Speaker 1: and they just don't have the infrastructure to supply basic
5:44
Speaker 1: needs for people heating, hung being able to eat, the
5:49
Speaker 1: price of food, the price of energy. We talked about
5:51
Speaker 1: it every day in the West, but it's gone up
5:54
Speaker 1: in Afghanistan. Even some people have come to sell their
5:58
Speaker 1: young daughters into marriage so they can feed the rest
6:01
Speaker 1: of the family. And when you look at those that
6:03
Speaker 1: are trying to flee, many of them are in limbo.
6:07
Speaker 1: Whether it's Pakistan that has more than a million Iran
6:10
Speaker 1: that likely has a million Afghans. And then you look
6:14
Speaker 1: at the schemes at some of the countries in the
6:16
Speaker 1: West are doing, they haven't actually been fully successful. In
6:20
Speaker 1: the United Kingdom alone, ten thousand Afghans are still being
6:23
Speaker 1: housed in hotels. Right, and Marie, thank you so much
6:26
Speaker 1: for this reporting. Just said an extraordinary story, folks. Please
6:29
Speaker 1: check it out Bloomberg dot com. Uh and you can
6:32
Speaker 1: also find it on the terminal And Marie Hordern, Washington
6:35
Speaker 1: correspondent Bloomberg Television. Fascinating story, outstanding reporting of just a
6:40
Speaker 1: compelling story here all right, next week Bloomberg is sending
6:47
Speaker 1: the surveillance radio slash TV team out at Jackson Hole, Wyoming.
6:53
Speaker 1: Why because a bunch of central bankers get out there,
6:55
Speaker 1: get together out there this time of year, and they
6:57
Speaker 1: talk about economic stuff, monetary policy, all that kind of stuff.
7:01
Speaker 1: I did not rate a ticket. I'll let you know,
7:04
Speaker 1: so I'll be here. But we want to get a
7:06
Speaker 1: sense of what might be happening at in Jackson Hole,
7:08
Speaker 1: what might be going on in the minds of our
7:10
Speaker 1: good friends at the Federal Reserve. And we do that.
7:12
Speaker 1: We go to our good friend Danielle di Martino, Booth
7:15
Speaker 1: CEO and chief strategist for Quill Intelligence. She was a
7:18
Speaker 1: former adviser at the Federal Reserve Bank of Dallas, so
7:21
Speaker 1: she knows a thing or two about the fit. Um.
7:24
Speaker 1: All right, so Tom and company will be out in
7:27
Speaker 1: Jackson Hole. H Danielle, what do you think they should
7:30
Speaker 1: be looking out for? What? Maybe? What questions should they
7:32
Speaker 1: be asking? Well, I think that before we go there,
7:36
Speaker 1: I think I should point out that I'm at the
7:38
Speaker 1: st four where Tom Keane stocks up nice and um,
7:41
Speaker 1: I'm actually getting his entire line as we speak at
7:45
Speaker 1: music in the background. Yes, indeed, Uh, I think the
7:48
Speaker 1: question that really needs to be asked is about quantitative tightening,
7:52
Speaker 1: because even if we do see kind of a dissipation
7:55
Speaker 1: in the magnitude of the rate types, let's say we
7:58
Speaker 1: get tifty basis point since September maybe and November maybe
8:03
Speaker 1: in December. I think the FED intends to and certainly
8:06
Speaker 1: wants to keep quantitative tightening, ramping up to being full
8:11
Speaker 1: speed by the end of September and and moving forward
8:14
Speaker 1: with that in the background. To use j Pale's words,
8:17
Speaker 1: the effect of that liquidity depletion, I think is the
8:20
Speaker 1: great unknown for marketing, for investors in the market as
8:24
Speaker 1: well as central banks bankers. And I'd love to hear
8:27
Speaker 1: a little bit more about where they think that's going,
8:30
Speaker 1: how how that's going to play out. Alright, So hopefully
8:33
Speaker 1: we get more on that, and I know that's been
8:35
Speaker 1: a black box for a lot of people in terms
8:37
Speaker 1: of the minutes that we got yesterday. Danielle Um. The
8:41
Speaker 1: debate rages on today was that did we witness a
8:45
Speaker 1: Dovish pivot or um are they saying, you know, we're
8:49
Speaker 1: gonna get stuck in raising rates higher for longer? Well?
8:54
Speaker 1: I think I think what the key kakeaway yesterday was
8:57
Speaker 1: that they introduced to risk, and risks are not introduced
9:00
Speaker 1: into FED language without purpose, And because they introduced that
9:04
Speaker 1: downside risk, I think that that's why they've been perceived
9:07
Speaker 1: as dubblish, even though they were more emphatic in terms
9:11
Speaker 1: of their inflation goals. So but again these there there's
9:15
Speaker 1: no happenstance in FED language, and everything is debated deeply
9:18
Speaker 1: before any bourbage is at it. So I think that
9:21
Speaker 1: that market participants were correct to to deduce that there
9:24
Speaker 1: might be a pause coming up. You know, it's it's interesting, Daniel.
9:28
Speaker 1: We heard from a lot of the retailers this week here,
9:31
Speaker 1: and you know they all have various levels of caution
9:35
Speaker 1: in their outlook. Here. What is the quill uh view
9:40
Speaker 1: of the economy? Is there a recession in? Are we
9:44
Speaker 1: in one today? If you define up by two quarters
9:46
Speaker 1: of negative GDP growth? You know, I've been watching SMP
9:51
Speaker 1: Global's GDP estimate tickdown, tickdown, tickdown. Um, it's it's now.
9:56
Speaker 1: I believe at point seven for the third quarter and
10:00
Speaker 1: the second quarters kind of going to come out a
10:02
Speaker 1: whisper under uh under the zero line negatives. And if
10:07
Speaker 1: that's the case, then we'll probably see three consecutive prints
10:10
Speaker 1: in in the negative column and and and that is
10:13
Speaker 1: truly a trend. Once you see that number three economists
10:16
Speaker 1: will tell you that a trend has indeed been established.
10:19
Speaker 1: And you know what we're looking at is the leading
10:21
Speaker 1: sectors for the economy. We're looking at the used car
10:24
Speaker 1: market really flat out collapse here, when when you're looking
10:28
Speaker 1: at the wholesale side and we're looking at housing, you
10:31
Speaker 1: know it's at quill we've actually gotten rid of We've
10:34
Speaker 1: we've expunged all worse since the pandemic markers. We now
10:38
Speaker 1: go back and look at trends prior to the pandemic,
10:40
Speaker 1: and if you look at the existing home sales report
10:42
Speaker 1: this morning, we haven't seen home sales falling like this.
10:46
Speaker 1: That's a long time ago, and I think you need
10:48
Speaker 1: to have perspective when it comes to interstrate sensitive leading
10:52
Speaker 1: sectors of the economy. Those were the days the nineties, right,
10:57
Speaker 1: um in terms so in terms of the inflation that
11:00
Speaker 1: we're seeing and and the problems that people are facing,
11:03
Speaker 1: does the FED take that into account? For example, their
11:07
Speaker 1: rates mean that home sales are too expensive, but then
11:12
Speaker 1: those who are looking to buy a home are also
11:14
Speaker 1: seeing rent climb rapidly. Does that discussion, um, you know,
11:20
Speaker 1: yield any kind of sympathy from the Fed. I'm not
11:25
Speaker 1: sure if it's I'm not sure if we should be
11:27
Speaker 1: calling it sympathy. Because of the way that housing and
11:30
Speaker 1: shelter insflation. Rental inflation moves through the CPI is so
11:35
Speaker 1: slowly that's that's going to be problematic. A goodfriend amount
11:38
Speaker 1: Ivy's element, who has been following the housing industry for
11:40
Speaker 1: more than two decades, she anticipates that we're going to
11:43
Speaker 1: see that shelter print it's seven point zero percent from
11:46
Speaker 1: what we saw in July, which was five. That will
11:49
Speaker 1: be problematic for the FED, regardless of how impossible affordability is,
11:53
Speaker 1: whether you're talking about buying or renting, because you know
11:56
Speaker 1: a lot of there's there was talk over the last
11:59
Speaker 1: decade or two of out the FED put, and the
12:02
Speaker 1: idea was that, I guess sympathy is not the right word,
12:05
Speaker 1: but the FED doesn't like to see the market go
12:07
Speaker 1: down for a variety of reasons, and when it does,
12:10
Speaker 1: they sort of rushed to the rescue in the past. Now,
12:12
Speaker 1: I guess the messages there is no FED put And
12:15
Speaker 1: I don't think a lot of people feel bad for
12:16
Speaker 1: market participants, but you've gotta feel bad for people who
12:19
Speaker 1: can't afford housing. You do, and whether you feel quote
12:24
Speaker 1: unquote bad for market participants, right the markets are operating
12:27
Speaker 1: into the assumption that the FED put is alive and well,
12:30
Speaker 1: that's what we've seen since July. I don't think anybody
12:33
Speaker 1: actually believes and that is a reflection of people assuming
12:39
Speaker 1: that that Powell will indeed pivot all right. Daniel D.
12:43
Speaker 1: Martino Booth thanks once again. Danielle is CEO and chief
12:46
Speaker 1: Strategies for Quill Intelligence. Video gaming, one of the fastest
12:53
Speaker 1: growing areas in the media slash tech space over the
12:57
Speaker 1: last decades, certainly got a big, big bump with the
13:00
Speaker 1: stay at home during the pandemic. But we saw in Video,
13:03
Speaker 1: which makes a lot of video gaming stuff on the
13:07
Speaker 1: technology side, post some disappointing results calling out their gaming business.
13:11
Speaker 1: So the question is kind of where are we in
13:12
Speaker 1: that whole video gaming biz. It's such a big business
13:15
Speaker 1: for a lot of folks. Josh Chapman, managing partner for
13:17
Speaker 1: Convoy Ventures, joins his Convoy Ventures is an early stage
13:21
Speaker 1: venture fund dedicated to the video gaming market. Josh, thanks
13:24
Speaker 1: so much for taking the time here, love to get
13:26
Speaker 1: in light of in videos results in some of the
13:29
Speaker 1: commentary on the gaming business. What's your view of the
13:32
Speaker 1: of the state of the video gaming business these days? Absolutely,
13:36
Speaker 1: and Paul, thanks, Matt, thank you so much for having me. Um.
13:40
Speaker 1: You know, although historical indicators are certainly valuable resources, we
13:44
Speaker 1: looked at the economic downturn. We are living in a
13:47
Speaker 1: kind of a new era of the video gaming industry.
13:50
Speaker 1: Is models and evolved. Social stigmas have really evaporated around gaming.
13:55
Speaker 1: It used to be not very cool to game. Now
13:56
Speaker 1: it's totally socially acceptable. Still thinks sort of. It's uh,
14:03
Speaker 1: it's certainly an exciting space to be in and has
14:07
Speaker 1: lots of controversy, but uh, three point two billion people
14:11
Speaker 1: play video games today, right, this is now the news
14:14
Speaker 1: social square in many senses, and COVID showed that in
14:17
Speaker 1: spades where video gaming allowed for a community platform to
14:22
Speaker 1: continue where people weren't just talking, they were also having
14:26
Speaker 1: fun and exploring, whether it was virtual worlds or not.
14:28
Speaker 1: It's it really played a key role to your point
14:31
Speaker 1: about in video and some of the brains calls that
14:34
Speaker 1: are showing sort of this dip. What we're really seeing
14:36
Speaker 1: here is a correction to more the eight to twelve
14:39
Speaker 1: percent annual growth that video gaming has seen for over
14:42
Speaker 1: two decades now. Um So, COVID kind of pushed the
14:46
Speaker 1: video game industry up to a you know, fifteen to
14:50
Speaker 1: annual growth rate. Really we're we're talking about is the
14:53
Speaker 1: reversion to the mean for video gaming, and so this
14:56
Speaker 1: is sort of a COVID correction that we're seeing across
14:58
Speaker 1: earnings on the public side and then obviously what we
15:01
Speaker 1: do on the you know, early stage video gaming BC side,
15:05
Speaker 1: as we're looking at the video gaming tech and platforms
15:08
Speaker 1: that are you know, hopefully going to be on your
15:10
Speaker 1: Bloomberg derminal in five to ten years. Josh, what are
15:13
Speaker 1: the games? What are the games right now that are
15:15
Speaker 1: the most successful that that you care about as a
15:19
Speaker 1: as someone in finance. I mean, when I was a kid,
15:21
Speaker 1: it was all about Mario and Um and friends. And
15:25
Speaker 1: as I got older, I got really into Halo because
15:28
Speaker 1: you could play that. Again, since you're really people all
15:30
Speaker 1: over the world, that was the best, dude. When I
15:32
Speaker 1: first moved to Berlin, I had friends moving to Paris,
15:35
Speaker 1: friends moving to Washington, d C. Friends moving to San Diego,
15:38
Speaker 1: and we could all buy an Xbox and hang out
15:41
Speaker 1: every night. It was just a cool, um way to
15:45
Speaker 1: to chill with your boys. And now I play Call
15:48
Speaker 1: of Duty all the time, even sometimes I spend way
15:51
Speaker 1: too many hours in Red Dead Redemption, but I'm a
15:54
Speaker 1: very mainstream h forty eight year old gamer. What is it?
15:58
Speaker 1: What are the kids playing? Well, I'll kind of what
16:02
Speaker 1: you're highlighting there is that gaming is allowing people to
16:06
Speaker 1: build community and connect globally. Right, that's case in point
16:09
Speaker 1: exactly what you just described. Secondly, there's a really interesting
16:12
Speaker 1: staff that the average gamers an age of thirty six,
16:15
Speaker 1: and so while you know the there is certainly a
16:18
Speaker 1: cohort of younger and what they're playing like Fall Guys
16:21
Speaker 1: or Fortnite or um lots of other different games that
16:25
Speaker 1: are coming out all around the world. Um, things like
16:28
Speaker 1: Call of Duty. I play that as well, and I
16:30
Speaker 1: grew up playing tons of pale and hosting land parties
16:33
Speaker 1: in Africa and Latin America where I grew up, and
16:35
Speaker 1: so community has always been at the core of what
16:39
Speaker 1: gaming is. But what we focus on a lot is
16:42
Speaker 1: really looking at on the investment, looking at tech in
16:45
Speaker 1: platforms instead of content content, which is studios and like
16:49
Speaker 1: games themselves at maturity trade between point five to two
16:52
Speaker 1: times revenue UM. Tech in platforms and staff businesses whether
16:56
Speaker 1: there be two B or B two C trade at
16:59
Speaker 1: eight forty times revenue at full maturity. So from an
17:03
Speaker 1: investment thesis. You want to own things like Roadblocks, Discord, Unity,
17:07
Speaker 1: app Love and Twitch, things like those companies, because at
17:11
Speaker 1: maturity that's a dramatically different investment profile and return profile
17:15
Speaker 1: for LPs. So give us a sense, Josh of kind
17:19
Speaker 1: of the VC environment today for the video gaming business.
17:23
Speaker 1: How robust is it? You know, where's the smart money going?
17:27
Speaker 1: Where do you think the opportunities are? Has it taken
17:29
Speaker 1: a hit as you can come out of the pandemic? Yeah,
17:33
Speaker 1: so gaming is certainly not immune to what's going on
17:37
Speaker 1: across all adventure. You know, the venture capital market, fuel
17:40
Speaker 1: volume is down year to date, dollars invested is down
17:43
Speaker 1: six here today, valuations have come down forty six, especially
17:48
Speaker 1: at series being later given the halt of the I
17:52
Speaker 1: p O window that's really led to growth equity and
17:54
Speaker 1: late stage venture to come to a grinding halt since
17:57
Speaker 1: we're focused more on speed Series A. You know, the
18:00
Speaker 1: venture market around gaming specifically. You know, five years ago
18:05
Speaker 1: there was less than five at a million of dedicated
18:08
Speaker 1: asset management towards video gaming. Now there's well over four billion.
18:12
Speaker 1: We're one of those firms. Uh, and now we've launched
18:15
Speaker 1: our third fund looking at this space. But you know,
18:18
Speaker 1: the the video game industry continues to drive and that's
18:21
Speaker 1: what's driving LP capital into dedicated funds. You can see
18:25
Speaker 1: this with Entrees and Horrors just launched their third vertical
18:28
Speaker 1: focus gaming funds. Uh, their third vertical of industry focus
18:33
Speaker 1: is gaming. And that's really a signal to sort of
18:36
Speaker 1: the bulge bracket BC market that gaming deserves dedicated attention
18:41
Speaker 1: and investment and can't be lumped in anymore to just
18:45
Speaker 1: your media team or your BtoC team. At what point
18:48
Speaker 1: do we see games really merge with movies and TV shows,
18:54
Speaker 1: with you know, radio and television entertainment as well as
18:59
Speaker 1: theater stuff. Yeah, we're already seeing that. If you remember
19:03
Speaker 1: the popular Netflix showed the witcher um that was originally
19:07
Speaker 1: a video game, and so video games are becoming shows.
19:10
Speaker 1: And then we've already seen things like Spider Man becoming
19:13
Speaker 1: one of the most successful franchises on PlayStation. The emergence
19:18
Speaker 1: the merging of media and video gaming is absolutely converging.
19:22
Speaker 1: A fund stat here is that the video game industry
19:24
Speaker 1: brings in well over two hundred billion dollars in revenue
19:27
Speaker 1: per year. To put that into context, Hollywood brings in
19:30
Speaker 1: about forty billion, and music globally brings in about So
19:36
Speaker 1: gaming is the predominant entertainment media industry in the world.
19:41
Speaker 1: But now video gaming is going from just being about
19:44
Speaker 1: fun to now merging with other industries like healthcare and education.
19:48
Speaker 1: We've made investments in this space, so think you know,
19:51
Speaker 1: VR oculus meditation things instead of the high cost of
19:56
Speaker 1: going to therapy, or think of in you know, education specifically,
20:00
Speaker 1: were invested in a company called Legends of Learning. Five
20:03
Speaker 1: of elementary and middle school kids in America used this
20:06
Speaker 1: platform to play games and learn. Matt play games and
20:09
Speaker 1: learn science, and so games are interacting with other industries
20:14
Speaker 1: in a really really cool way. Yeah, good stuff. Josh Chapman,
20:17
Speaker 1: thanks so much for joining us there managing partner Convoy Ventures.
20:21
Speaker 1: I was aware of the size of gaming visa VI
20:24
Speaker 1: you know, the movie business or the music business. It
20:27
Speaker 1: is huge. It's been one of the fastest growing pieces
20:30
Speaker 1: of the media. Pie just not my demo, but I
20:34
Speaker 1: know it's a big biz. Matt. So, this inflation Reduction Act,
20:42
Speaker 1: it's got a bunch of stuff in it that I'm
20:44
Speaker 1: not sure it's necessary. I mean, it touches a lot
20:46
Speaker 1: of industries, even your beloved auto. I think it should
20:49
Speaker 1: maybe you've had a different name. Yes. In any case, UM, yeah,
20:53
Speaker 1: it's it touches the car industry. And Keith lang Um,
20:57
Speaker 1: an automotive regulations reporter, wrote a great piece on it
20:59
Speaker 1: a couple of days ago that just UM prompted so
21:02
Speaker 1: many questions. Keith Um joins us now and it's great
21:06
Speaker 1: to have you on the program. UM. My question and
21:10
Speaker 1: the questions that are asked of me most most often
21:13
Speaker 1: are how can I get tax credit? And your piece
21:17
Speaker 1: points out that, UM, not everybody's gonna not every electric
21:21
Speaker 1: car gives you that tax credit, and next year, no
21:24
Speaker 1: current offerings are going to give you that credit. How's
21:27
Speaker 1: that work? Well? Even under the current system, UM, not
21:30
Speaker 1: only not every electric car qualified, it had to be
21:33
Speaker 1: a specific type of plug in high, plug in electric
21:37
Speaker 1: or plug in hybrid. UM. Under the new system, starting
21:41
Speaker 1: as soon as the President signed the bill, there's a
21:44
Speaker 1: requirement UM that most of the cars parts the car
21:47
Speaker 1: had to be assembled in North America to qualify. UM.
21:51
Speaker 1: Basically to comply with the the U s m c A,
21:55
Speaker 1: the trade deal that was passing the Trump administration that
21:57
Speaker 1: replaced NAFTA, and UM, the auto industry groups here in
22:01
Speaker 1: Washington say that that would take the number of models
22:04
Speaker 1: that qualify qualified last week there were seventy two models
22:08
Speaker 1: and now about se those won't qualify today, which takes
22:12
Speaker 1: this down to about twenty two that qualify. Yes, I
22:15
Speaker 1: mean some some very popular models like the Hunda and
22:18
Speaker 1: Kiya's out there. They're not gonna, I guess um qualify
22:22
Speaker 1: under that. And then next year even cars that are
22:25
Speaker 1: built here, uh like by GM or Ford or bmw UM,
22:30
Speaker 1: because their components are sourced from the wrong places, they
22:33
Speaker 1: won't qualify as that right. Yeah, there are mineral requirements
22:36
Speaker 1: for the batteries, which is the minerals are the key
22:39
Speaker 1: to UM electric electric vehicle production and most of those
22:44
Speaker 1: are built in China. UM those requirements were added to
22:47
Speaker 1: the bill to win Senator Joe Mansion support. He insisted
22:52
Speaker 1: on that, and he was not a fan of any
22:56
Speaker 1: tax credits for electric cars. He once called them loo
23:00
Speaker 1: to Chris UMAs anyway, so he didn't he wasn't saying
23:04
Speaker 1: that electric cars and ludicrous. He said it was ludicrous
23:07
Speaker 1: that the federal government was subsidizing because he saw he
23:10
Speaker 1: saw them as the tax credits as a giveaway to
23:14
Speaker 1: cars that were built in China or not built in
23:16
Speaker 1: the US. So in order to get his support for
23:19
Speaker 1: this bill, for the broader bill, which included many long
23:22
Speaker 1: sought democratic priorities, this is uh kind of a light
23:27
Speaker 1: version of the Build Back Better bill that dominated discussion
23:30
Speaker 1: in Washington for a year. And to get his vote,
23:33
Speaker 1: they had to get any sort of ev text credit
23:36
Speaker 1: in the bill. They had to put um these these
23:40
Speaker 1: stringent requirements on mineral production. What do you expect to happen? Then,
23:45
Speaker 1: our companies that build a lot of cars in this country,
23:49
Speaker 1: like the Big Three or BMW um going to change
23:54
Speaker 1: the way they sourced these minerals in order to hold
23:57
Speaker 1: onto that tax credit as a sales incentive next year. Well,
24:01
Speaker 1: that's the hope in the long term. The auto industry
24:04
Speaker 1: groups have said that they just need a little more
24:07
Speaker 1: lead time too. There's there are a lot of car
24:08
Speaker 1: companies have announced plans to open battery plants in the
24:13
Speaker 1: US in the next year or two, but it takes
24:15
Speaker 1: a while to get those type of plants online. So
24:16
Speaker 1: they're saying that it's not feasible to say we're going
24:19
Speaker 1: to have that done by January. But over the life
24:21
Speaker 1: these tax credits will last for ten years. So the
24:23
Speaker 1: hope is that as those plants come online more production
24:28
Speaker 1: has moved to domestic sources or North American sources, that
24:31
Speaker 1: cars that are not eligible next year will become eligible
24:35
Speaker 1: in a year or two or three. Yep, I don't know.
24:38
Speaker 1: I mean, well, listen, I want to get UM. I
24:41
Speaker 1: want to get an X five right now, the hybrid version.
24:45
Speaker 1: And I'm worried that if I put in the order today,
24:48
Speaker 1: if they're not done by the end of two I
24:51
Speaker 1: won't be able to get the tax credit. And that's big. Yeah,
24:53
Speaker 1: that's two thousand in New York and you don't even
24:56
Speaker 1: have your pickup truck yet. So just hold next year
24:59
Speaker 1: a playing We appreciate a keip playing automotive regulations reporter. Yes,
25:03
Speaker 1: we have an automotive regulations reporter. That's what's so cool
25:05
Speaker 1: about Bloomberg News. Let's bring in now Sodic Waba. He
25:12
Speaker 1: is founder UH and chairman of I Squared Capital and UM.
25:17
Speaker 1: He used to basically run the infrastructure business at Morgan Stanley.
25:22
Speaker 1: He's very UH connect well connected in Washington as well
25:26
Speaker 1: as in Paris and London and many other cities. Where
25:29
Speaker 1: are you well connected. Uh me, yeah, um, Grandville, Ohio.
25:33
Speaker 1: There you go. I'm well connected in Grandville, Ohio. UM.
25:36
Speaker 1: Sodek has an incredible resume, though, and so we go
25:39
Speaker 1: to him, especially on stuff focused on infrastructure, but also
25:42
Speaker 1: on UM uh Washington, d C. So thanks so much
25:46
Speaker 1: for joining us. I want to first ask you about
25:48
Speaker 1: this Inflation Reduction Act that the President signed um either
25:53
Speaker 1: yesterday or the day before. I'm so confused by the
25:56
Speaker 1: title because it seems to be more of a green CLIs.
26:00
Speaker 1: I'm at spending bill, So what do we know about
26:03
Speaker 1: what's in there? Well, M Latin Paul, thanks for having me. Uh. Look,
26:10
Speaker 1: it's worth recapping just for a second, what has happened
26:13
Speaker 1: in the last year, right, So, You've had an infrastructure
26:15
Speaker 1: bill last year, or about one point two pillion to
26:18
Speaker 1: upgrade our infrastructure, roads, bridges, etcetera. You've had a G
26:23
Speaker 1: seven announced by the G seven countries to spend six
26:26
Speaker 1: hundred billion dollars in infrastructure globally, of which the US
26:30
Speaker 1: is going to invest two hundred billions. You have the
26:33
Speaker 1: Chips and Science Acts which were signed last week, and
26:36
Speaker 1: it was honored to be at the White House for
26:38
Speaker 1: the signing. Ceremony. That's about two hundred eighty billion, which
26:41
Speaker 1: should encourage tech enabled infra. And finally what you mentioned,
26:46
Speaker 1: which is in Fish and Reduction Act, which is over
26:48
Speaker 1: seven hundred billion and will invest in green energy among
26:51
Speaker 1: other things. So really, at the end of the day,
26:54
Speaker 1: you can honestly say that the president President has ushered
26:57
Speaker 1: what I would call the infrastructure decade, actually be increased
27:01
Speaker 1: American productivity, and yes, reduce inflation. What what are some
27:06
Speaker 1: what are some of the key parts of the Inflation
27:10
Speaker 1: Reduction Act in your perspective, What are some of the
27:12
Speaker 1: most important ones that we should pay attention to that
27:14
Speaker 1: we as investors, consumers, citizens, we may actually see and feel. Right,
27:21
Speaker 1: So you asked about whether it helps in reduction in
27:24
Speaker 1: reducing inflation, the answer is yes. It won't do it immediately.
27:28
Speaker 1: You're not going to get inflation to two percent. That
27:30
Speaker 1: was never the purpose of the act. But it will
27:33
Speaker 1: reduce the deficit, and reduction of the deficit means you know,
27:36
Speaker 1: a demand and that reduces inflation. It will help in
27:40
Speaker 1: reducing the energy builds for household that has gone up
27:44
Speaker 1: significantly over the last couple of years. So that is
27:48
Speaker 1: going to immediately help households field, the reduction initiation and
27:53
Speaker 1: cost of living. Um, you're going to have an increase
27:56
Speaker 1: in efficiency in our energy system, so all of these
27:59
Speaker 1: will help uh reduce inflation over the coming years. I
28:04
Speaker 1: gotta I gotta wonder how you know, I got a
28:06
Speaker 1: kind of bill for yeah, and my energy bills are
28:11
Speaker 1: um every month over a thousand dollars. Does this mean
28:14
Speaker 1: since it's past soduct that next month are going to
28:17
Speaker 1: be five? Uh, maybe not the next month, but certainly
28:23
Speaker 1: of over the coming months and years. It will reduce
28:25
Speaker 1: your bill because what it will do it will give
28:28
Speaker 1: credit to households to be able to upgrade and have
28:32
Speaker 1: more efficient systems, better coding system better heating systems. You
28:36
Speaker 1: can get credits of up to thousand dollars, so it
28:40
Speaker 1: will significantly reduce your energy bills, no doubt about. It's
28:44
Speaker 1: mostly targeted towards lower income hunciles. That's an important consideration
28:48
Speaker 1: because they in the fact that it's the opered opinion
28:51
Speaker 1: that Groom they all published, they tend to be much
28:53
Speaker 1: more impacted from energy increases in the cost of energy
28:57
Speaker 1: than others. All Right, So the chip sacked just going
29:01
Speaker 1: back to a previous bill, That seems pretty material for
29:04
Speaker 1: me because I remember the beginning of the pandemic when
29:06
Speaker 1: we said, oh boy, we're not getting our chips from
29:09
Speaker 1: from China and Taiwan because they're all shut down. We
29:11
Speaker 1: need to ensure more of this stuff. Give us your
29:15
Speaker 1: perspective of the Chips Act and maybe how it may
29:18
Speaker 1: ensure some more stability that part of the supply chain.
29:24
Speaker 1: We realized in the the COVID and during the pandemic,
29:28
Speaker 1: but in fact we were overly relying on international supplies
29:33
Speaker 1: for very basic elements like the chips. So what the
29:36
Speaker 1: Chips Act is doing two things. Number one, insure that
29:39
Speaker 1: we're able to unshowd the manufacturing the chips in the
29:42
Speaker 1: United States. And the second thing is to retake the
29:46
Speaker 1: lead if you want, in science and innovation that will
29:50
Speaker 1: allow us then to be able to protect our own
29:52
Speaker 1: technology and grow it and take an edge over let's say,
29:56
Speaker 1: other countries. So these two elements are absolutely critical. So
30:00
Speaker 1: a good going to have massive investments food universities through
30:04
Speaker 1: research centers in those technologies that will ultimately be able
30:08
Speaker 1: then to allow uge to manufacturer. Alright, so that great stuff.
30:14
Speaker 1: Really appreciate getting your informed perspective on a number of
30:17
Speaker 1: these pieces of legislation that the President has signed into law,
30:22
Speaker 1: and we'll see how that impacts the economy is going forward. Sadekwabba,
30:25
Speaker 1: founder chairman and managing partner of I Squared Capital, with
30:30
Speaker 1: a long background in infrastructure, UH and economics as well,
30:34
Speaker 1: appreciate getting his perspective. Thanks for listening to the Bloomberg
30:38
Speaker 1: Markets podcast. You can subscribe and listen to interviews with
30:42
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
30:47
Speaker 1: I'm on Twitter at Matt Miller three. Pet Ball Sweeney
30:51
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
30:54
Speaker 1: can always catch us worldwide at Bloomberg Radio