Latest / Bloomberg Intelligence / Outlook For Semiconductors, Domestic Chip Production

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Outlook For Semiconductors, Domestic Chip Production · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
Speaker 1: my co host Matt Miller. Every business day, we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. Right now, let's get
0:22
Speaker 1: over to Hans Albrished. He is a portfolio manager and
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Speaker 1: option strategist at Horizons E t F Management and UM,
0:31
Speaker 1: a great day to have you on, Hans, because we've
0:33
Speaker 1: had some really kind of weird news in the E
0:37
Speaker 1: t F space. I'm thinking of the short arc E
0:40
Speaker 1: t F, which Matt Levine was writing about yesterday. I mean,
0:43
Speaker 1: if you don't like Cathy Woods strategy, you could just
0:46
Speaker 1: find out what she's going along and short at yourself. Um,
0:50
Speaker 1: or you could just short the arc E t F.
0:53
Speaker 1: Why would someone feel compelled to build a short arc
0:56
Speaker 1: et F. Well, I think, uh, you know, I think
1:02
Speaker 1: it's a bit like shorting bitcoin. You know, there's a
1:05
Speaker 1: we have a product actually that allows you to take
1:07
Speaker 1: part in a short bitcoin effectively. Uh, and I think
1:11
Speaker 1: that becomes a bit of a trading vehicle for people,
1:13
Speaker 1: because you know, the stocks that Kathy tends to invest in,
1:17
Speaker 1: or these exponential, these emerging technologies that often get uh,
1:22
Speaker 1: you know, stretched and overextended, and and I think this
1:25
Speaker 1: sort of gives people away to kind of play both
1:27
Speaker 1: sides of the equation um because you know, some of
1:31
Speaker 1: these companies are smaller, and uh, we know that Cathy's uh,
1:34
Speaker 1: you know, can have large a large percentage of the
1:38
Speaker 1: holdings of some of these companies, and some people think
1:41
Speaker 1: that that's sort of something that can reverse over time,
1:43
Speaker 1: So a bit of a mean reversion play from that perspective,
1:47
Speaker 1: I think. But I say that's more of a trader's
1:50
Speaker 1: trader's vehicle than something you want to hold for a
1:52
Speaker 1: long time, because of course I'm I'm a true believer
1:55
Speaker 1: in these technologies over time, so Hans. Other news we
1:58
Speaker 1: got today came from BMW kind of learning about the
2:00
Speaker 1: impact of the chip shortage on its business. So maybe
2:03
Speaker 1: that's not a reason to want to be invested in
2:05
Speaker 1: an automaker like that, but maybe it's a good investment
2:08
Speaker 1: idea to invest in the company that makes the products
2:11
Speaker 1: that are seeing shortage. The chipmakers and you obviously at
2:15
Speaker 1: Horizon ETFs launched uh C HPS, the first Canadian semiconductor
2:20
Speaker 1: e t F. What kind of interest are you seeing
2:22
Speaker 1: in that product. We're seeing some good interest. It's the
2:26
Speaker 1: first one that really takes a very global perspective. So
2:30
Speaker 1: a lot of the products you see out there, the
2:32
Speaker 1: socks and things like that, have very much a US focus.
2:35
Speaker 1: And what we'd like to talk about is that, you know,
2:39
Speaker 1: this is really a global movement, this exponential and emerging
2:43
Speaker 1: movement where semiconductors are the new oil. Right we hear
2:46
Speaker 1: about data being the new oil. Semis are really the
2:48
Speaker 1: new oil. The oil. They make up the foundation for
2:51
Speaker 1: almost everything in our new world, and and that goes
2:55
Speaker 1: for everywhere in the world. And so you've got some
2:57
Speaker 1: areas of the world. Asia is the biggest cloud growth
3:00
Speaker 1: area in the world. You've got robotics and automation being very,
3:03
Speaker 1: very big in that part of the world. So it's
3:05
Speaker 1: better to have exposure to companies that are some of
3:08
Speaker 1: the very big and influential companies that exist outside of
3:12
Speaker 1: outside of the US. Is there gonna be a time
3:16
Speaker 1: in you know, the near to medium term future when
3:20
Speaker 1: we ramp up chip production by so much and demand
3:24
Speaker 1: falls off that we have a glut. Well, it could
3:28
Speaker 1: be you know, we oftentimes we kind of uh, we
3:31
Speaker 1: overextend one way or another. I think it's going to
3:34
Speaker 1: be difficult in the in the chip space because it
3:36
Speaker 1: is very very capex um extend, very capex intensive um
3:42
Speaker 1: and so it's not that easy to adjust. And we
3:45
Speaker 1: saw that in the during the pandemic where some some
3:48
Speaker 1: areas like automakers sort of it was very much uh,
3:52
Speaker 1: an example of expectation versus an actual reality Jewels, where
3:56
Speaker 1: everybody sort of took their pedal, took their foot off
3:59
Speaker 1: the pedal, and then suddenly auto demand you know, went
4:03
Speaker 1: through the roof because everybody started doing the good old
4:05
Speaker 1: American day trip, uh, the good old American road trip. Um.
4:09
Speaker 1: And so when when things get out of balance in
4:12
Speaker 1: that to that perspective, you can have some problems. Some
4:15
Speaker 1: of that capacity went to other areas of chip demand,
4:18
Speaker 1: and then when the automakers needed that demand again, it
4:20
Speaker 1: wasn't there. And it's very difficult to kind of move
4:23
Speaker 1: to shift that capacity around. Uh. And it's going to
4:26
Speaker 1: take a little while for for us to solve this
4:28
Speaker 1: problem because it isn't as easy as flicking a switch.
4:31
Speaker 1: I'm a road trip fanatic, and when I go on
4:34
Speaker 1: a road trip at all, I like to bring my iPhone,
4:38
Speaker 1: my Apple Watch, my iPad. I need as many chips
4:41
Speaker 1: as I basically can in the car to feel like
4:43
Speaker 1: I'm safe. Hans, thanks so much for joining us, Hans
4:45
Speaker 1: alversh there is a VP and portfolio manager at Horizons
4:49
Speaker 1: et F Management. Gotta get you back on and talk
4:52
Speaker 1: more about chips in the future. Let's bring in Kara Murphy.
4:59
Speaker 1: She is cheap in vestment officer at Kestra Holdings. They
5:02
Speaker 1: have a hundred twenty three billion dollars of assets under management.
5:05
Speaker 1: And Carrey, you are optimistic, right, I mean, at least
5:10
Speaker 1: in terms of the economy. You think we see uh
5:13
Speaker 1: some good signs with foot traffic, air traffic, consumer spending,
5:18
Speaker 1: et cetera. How much longer does that continue or have
5:20
Speaker 1: we maybe peaked? So I am optimistic, and I think
5:25
Speaker 1: part of it is because we still have a tremendous
5:27
Speaker 1: amount of momentum in the system, both from fiscal and
5:29
Speaker 1: monetary stimulus that started last year. But you know, we've
5:33
Speaker 1: been looking very closely as COVID case counts go up,
5:36
Speaker 1: like how is the consumer actually reacting. So, while certainly
5:39
Speaker 1: a health concern, on a continuing basis, what we're seeing
5:43
Speaker 1: is that people aren't really changing their behavior very much. Um.
5:46
Speaker 1: We're continuing to see foot traffic even in COVID hotspots,
5:49
Speaker 1: in places like restaurants, hotels, gems. Air traffic is holding
5:54
Speaker 1: study at pre COVID levels. Consumer spending is now above
5:59
Speaker 1: pre COVID levels. So what we're seeing is that the
6:03
Speaker 1: economic impact of the increased case counts are pretty minimal. Okay,
6:07
Speaker 1: So does that mean you want to keep going towards
6:09
Speaker 1: the value, the cyclical, the reopening kind of place. Yeah, well,
6:14
Speaker 1: I think we are starting to see a rotation towards
6:16
Speaker 1: a little bit more quality UM in the market. But
6:20
Speaker 1: I do think there's a nice consumer theme out there
6:22
Speaker 1: as well. So areas like home builders, discount retailers, those
6:27
Speaker 1: are areas that will continue to benefit from both the
6:29
Speaker 1: consumer kind of coming out of their pandemic shell low
6:33
Speaker 1: interest rates being willing to actually walk stores again. Um.
6:38
Speaker 1: And so I think there's some interesting opportunities there. What
6:41
Speaker 1: about the growth stocks, what about those mega texts that
6:45
Speaker 1: have powered this market higher? Are you done with those? Yeah?
6:51
Speaker 1: It's very hard to bet against those stocks, right, I mean,
6:54
Speaker 1: like tremendous top line growth, free cash flow generation um
6:59
Speaker 1: at a norm arisen out of momentum. So so I
7:01
Speaker 1: wouldn't want to bet against them, but I think their
7:04
Speaker 1: attractiveness compared to let's say a year ago, is lower.
7:09
Speaker 1: Let's talk about E s G. But we actually have
7:11
Speaker 1: a great live law going on on the terminal right now.
7:14
Speaker 1: You can type T live T L I V go
7:16
Speaker 1: into your terminal and it's with Steve Liberatory over at
7:19
Speaker 1: nu Vene talking about E s G and the risk
7:22
Speaker 1: of green washing. How do you get around that green
7:25
Speaker 1: washing risk when trying to make E s G oriented investments?
7:31
Speaker 1: So I think first of all, it's important to understand
7:33
Speaker 1: that that there is a growing demand for the ability
7:36
Speaker 1: to express your values in a portfolio. And so we
7:40
Speaker 1: certainly see this um with our clients who are asking
7:44
Speaker 1: to be able to have some consistency between what's important
7:47
Speaker 1: to them and the holdings that they have. So I
7:49
Speaker 1: think that's one very important trend to keep in mind.
7:52
Speaker 1: Another is that like the data that we have in
7:55
Speaker 1: E s G is so much better, the analytical capability
7:58
Speaker 1: is so much better than what we had like ten
8:00
Speaker 1: years ago. So you know, I think this concern about
8:03
Speaker 1: greenwashing is the idea that you know, suddenly everybody has
8:05
Speaker 1: got an E. S. D. BEN and everybody's you know,
8:08
Speaker 1: using these other factors to sort of determine investment. Um.
8:12
Speaker 1: And that is a risk. But we're in so much
8:14
Speaker 1: better place today than we were ten years ago. UM.
8:17
Speaker 1: So I think that's all a very good thing. Yeah.
8:20
Speaker 1: And also, I mean, what are you gonna gonna do.
8:22
Speaker 1: You're gonna drive up the cost of capital of bad
8:24
Speaker 1: businesses or do you invest in good businesses hoping that
8:28
Speaker 1: sometime regulation gets past. Um. It seems like an interesting
8:33
Speaker 1: conundrum to me. I want to get to home builders because, um,
8:36
Speaker 1: you have written about the pullback that we've seen. Um,
8:42
Speaker 1: but there's still so much demand, as Kaylee and I
8:45
Speaker 1: can attest to m for homes and so little inventory.
8:48
Speaker 1: What happens here? Well, and I think you can guess right,
8:53
Speaker 1: tremendous demand, limited supply. You know, I think that's really
8:56
Speaker 1: going to continue to buoy prices, particularly at homes. And
9:00
Speaker 1: you know, the home builders have been very deliberate and
9:03
Speaker 1: sort of holding back some of their inventory. UM. So
9:06
Speaker 1: we'll start to see that come online in the second
9:08
Speaker 1: half of this year and then even into next year.
9:11
Speaker 1: And then the meantime, we've seen a lot of input
9:13
Speaker 1: costs really received. I mean, lumber has gotten a lot
9:15
Speaker 1: of attention and that's come back tremendously at the same
9:18
Speaker 1: time that home builders shares have been receiving. So and
9:21
Speaker 1: then even when we look at valuations, while they're you know,
9:24
Speaker 1: towards the high end of their typical valuation range, as
9:28
Speaker 1: earnings continue to increase, um, as these homes come back online,
9:32
Speaker 1: as prices hold firm, um, I think you'll continue to
9:35
Speaker 1: see these stocks do well. Maybe good news for the
9:38
Speaker 1: home builders stocks, less so for Matt Miller who's trying
9:41
Speaker 1: to buy a house in Westchester potentially, I don't know
9:44
Speaker 1: how much luck that's going to have. I've had some
9:46
Speaker 1: listeners right in with some tips, so if anybody knows
9:49
Speaker 1: a place in Bronxville, Yeah, Matt is using his platform
9:52
Speaker 1: to get tips. And we only have about thirty seconds left,
9:54
Speaker 1: but of course, earning seasons winding down, we still do.
9:57
Speaker 1: We'll hear from the retailers later on this month. How
9:59
Speaker 1: strong a position are they in. I think the retailers
10:02
Speaker 1: are in a great position, so you know, We're particularly
10:05
Speaker 1: focus on the discount ones who didn't benefit as much
10:08
Speaker 1: from the rush to online last year. But like I said,
10:11
Speaker 1: starting to see more foot traffic. We're also seeing um
10:14
Speaker 1: wage increases, particularly in low wage earners, which again should
10:18
Speaker 1: really help those discount retailers. Kara, thanks so much for
10:22
Speaker 1: joining us today. Kara Murphy, their chief investment officer over
10:25
Speaker 1: at Castro Holdings that said they had a hundred twenty
10:28
Speaker 1: three billion dollars in assets under management, So um, some
10:32
Speaker 1: real firepower there and some great insight on what to
10:36
Speaker 1: do in this market you're not looking for. I thought
10:39
Speaker 1: you were looking for a house too. I would in
10:42
Speaker 1: theory that would be great map, But after looking at
10:44
Speaker 1: what prices has done over the last couple of months,
10:46
Speaker 1: I think I'm just gonna have to wait it out.
10:47
Speaker 1: See when it cools down, maybe I'll find my entry point. Yeah,
10:50
Speaker 1: I mean I may try and wait it out as well.
10:53
Speaker 1: Hopefully it'll cool down by like January or February. UM.
10:57
Speaker 1: But it's an amazing market right now. If you're a seller.
11:00
Speaker 1: I know a guy who sold a house. He put
11:03
Speaker 1: his house on the market Friday and it was done cash,
11:06
Speaker 1: no contingencies within like five minutes. Uh yeah, very very
11:11
Speaker 1: hot marketly alright, Our big take today is on Gary Gensler,
11:18
Speaker 1: the head of the SEC, readying more crypto oversight. His
11:23
Speaker 1: intention is to protect investors and he's made that pretty clear.
11:26
Speaker 1: But the thing is he's also um, I guess he's
11:30
Speaker 1: said at least open or neutral on the technology, the
11:33
Speaker 1: blockchain technology, and he even taught a class at m
11:36
Speaker 1: I T about it, so a lot of people have
11:38
Speaker 1: speculated he might be a friend to the crypto world.
11:42
Speaker 1: Robert Schmidt joins us who wrote the big take story
11:44
Speaker 1: today with Benjamin Bain and Robert. I guess you know.
11:48
Speaker 1: The issue is a lot of crypto investors, a lot
11:53
Speaker 1: of crypto believers are also very libertarian, and a lot
11:58
Speaker 1: of people take that to mean also anti regulation. Hey Matt, Yeah,
12:02
Speaker 1: thanks for having me. And it is true. I mean
12:04
Speaker 1: this is a you know, a system that has developed
12:07
Speaker 1: kind of outside of the government, So there's kind of
12:09
Speaker 1: a real hesitancy on some of the people who are
12:12
Speaker 1: real enthusiasts here, uh to have the government wagh in
12:16
Speaker 1: uh and said rules for this market. Um. But as
12:19
Speaker 1: you saw with our Ginseler piece, Ginseler is um saying
12:23
Speaker 1: you know what the government has to have a role here.
12:25
Speaker 1: This is a one point six trillion dollar market and growing,
12:29
Speaker 1: and so from an investor standpoint, he doesn't think that
12:32
Speaker 1: there's a lot of protections. Talk a little bit about
12:36
Speaker 1: his his background and how exactly that informs his opinion
12:40
Speaker 1: in his policy approach when it comes to crypto. Yeah,
12:44
Speaker 1: it is fascinating because the government, as you guys might imagine,
12:48
Speaker 1: is not full of crypto experts, replaced crypto with anything
12:55
Speaker 1: well true, and especially you know talking to people say
12:57
Speaker 1: on Capitol Hill, right, nobody knows exactly what any of
13:00
Speaker 1: this stuff is and it is confusing. Um. So Ginsler
13:03
Speaker 1: has really put himself in an interesting place because he's, uh,
13:06
Speaker 1: he's one of the few people who really understands this stuff.
13:09
Speaker 1: And he developed a very popular course at m I
13:13
Speaker 1: T on blockchain and money. Um. He's long been interested
13:17
Speaker 1: in kind of these intersection of finance and technology. Uh,
13:21
Speaker 1: and he studied it for three years before he was
13:23
Speaker 1: appointed SEC chairman. So he says, well, look, this is serendipity,
13:27
Speaker 1: but I'm glad I'm here and I'm glad I understand
13:30
Speaker 1: this stuff well. And there are a lot of people, Um,
13:33
Speaker 1: there are people in the crypto space. I shouldn't say
13:36
Speaker 1: a lot, because I don't know how many, but I
13:38
Speaker 1: we talked to on a regular basis people who work
13:42
Speaker 1: with crypto in the investment world, and UM, people who
13:46
Speaker 1: are pro regulation of in some form or another, who
13:49
Speaker 1: say that we need to have some clear cut rules
13:54
Speaker 1: in order to get this really widely adopted and going. Um,
13:59
Speaker 1: maybe Gainsler is their friend. Yeah, he is. I think
14:02
Speaker 1: although you know, it all comes down to um as
14:04
Speaker 1: everything does in Washington, and the details of this stuff
14:07
Speaker 1: and what kind of regulation and oversight you want. But um,
14:12
Speaker 1: that's true. Ginsler talked to us about, you know, the
14:15
Speaker 1: early days of the auto industry, and he said, well,
14:17
Speaker 1: you know, people were driving around. There were barely roads,
14:20
Speaker 1: there were no traffic lights, there were no speed limits,
14:22
Speaker 1: people were getting killed, you know, and once the government
14:24
Speaker 1: stepped in and said, hey, we've got to have some
14:27
Speaker 1: some kind of rules here. Uh, the industry took off.
14:30
Speaker 1: And he sees, you know, UM, crypto as as similar,
14:34
Speaker 1: that it really does need some guardrails there before it's
14:38
Speaker 1: widely adopted. I should point out that I normally live
14:41
Speaker 1: in Berlin, and living in Germany, probably the number one
14:46
Speaker 1: best thing about living in Germany actually by far in
14:49
Speaker 1: a way, is the fact that there's no speedle in
14:51
Speaker 1: it on the auto bun. I can't believe no other
14:56
Speaker 1: developed Western countries have that, because it's such a great
15:00
Speaker 1: part of life there. But to the story, back to
15:05
Speaker 1: Gary Gainsler, Robert, I guess once he forms an opinion
15:09
Speaker 1: about this and kind of decides what direction he wants
15:12
Speaker 1: to go with this regulation, what kind of speed and
15:15
Speaker 1: or lack thereof are we talking about? Was how some
15:18
Speaker 1: of these things could actually come to fruition. Yeah, well,
15:21
Speaker 1: you know that the government is never fast about anything. Um.
15:25
Speaker 1: And Ginsler also has a lot on his plate, a
15:28
Speaker 1: lot of stuff that we've talked about over the over
15:30
Speaker 1: the months, you know about the game stop trading and
15:35
Speaker 1: Arcagos family office blow up. He's got a lot of
15:38
Speaker 1: things that he needs to deal with, uh, stuff that's complex,
15:41
Speaker 1: high profile. UM And he's just added this to his list.
15:45
Speaker 1: So we're not totally sure, but it will be a while.
15:48
Speaker 1: And you know he is, as we point out in
15:52
Speaker 1: our article, he ran the Commodities Futures Trading Commission during
15:56
Speaker 1: the Obama administration and put in a whole new set
15:59
Speaker 1: of rules for swaps, which you know, many people think
16:03
Speaker 1: was a big cause of the financial crisis, and he
16:06
Speaker 1: did it fast and he muscled it through, so people
16:09
Speaker 1: are not discounting his ability to do this. You know,
16:12
Speaker 1: he's he's he's I guess he's kind of heroic almost
16:16
Speaker 1: in in that he came to the rescue there, and
16:19
Speaker 1: I think a lot of people on both sides of
16:20
Speaker 1: the aisle have a lot of respect for him. You
16:23
Speaker 1: quote Hester Pierce, Republican commissioner on the sec UM who
16:29
Speaker 1: is also more of a libertarian. She says, I come
16:32
Speaker 1: from a perspective that people should have the maximum freedom
16:35
Speaker 1: to engage in transactions they want to engage in voluntarily.
16:39
Speaker 1: Sounds almost American of her um, but she is supportive
16:44
Speaker 1: too of some regulations. She says society needs to have
16:47
Speaker 1: that discussion about what the right regulatory framework is. Yeah,
16:50
Speaker 1: she thinks that like, hey, we need to set rules,
16:53
Speaker 1: and maybe what she sees as regulations might be different
16:56
Speaker 1: than what Ginceler j'ss regulation. But she kind of agrees
16:59
Speaker 1: that in order for this all to take off and
17:03
Speaker 1: be beneficial to society and um, you know, maybe help
17:06
Speaker 1: our economy grow, that you really do need to kind
17:09
Speaker 1: of tell everybody what the what the rules are, so
17:14
Speaker 1: you know, they don't disagree on that. They probably do
17:16
Speaker 1: disagree on on you know, what the actual policy might be.
17:20
Speaker 1: But that's what these commissions do. They have five members,
17:22
Speaker 1: they get together, they talk about it, and they try
17:24
Speaker 1: to hash something out. And just to be clear, you know,
17:26
Speaker 1: one of the big problems that we have in crypto.
17:29
Speaker 1: Anybody who reads Matt Levin's columns UM gets a lot
17:33
Speaker 1: of info about the defive space and the fact that
17:36
Speaker 1: there are these Ponzi schemish rug poll um scams that
17:43
Speaker 1: continue to get investors over and over again. Not that
17:46
Speaker 1: the investors don't expect it to happen. I think a
17:48
Speaker 1: lot of people going into this no that they're gonna
17:50
Speaker 1: get ripped off half the time. But this is what
17:53
Speaker 1: they one of the main things they want to put
17:54
Speaker 1: a stop to, right, Yeah, they sure do. And the
17:57
Speaker 1: SEC kind of since, uh you since crypto exploded, has
18:02
Speaker 1: been kind of pursuing an aggressive enforcement approach on this
18:05
Speaker 1: and and Gaincler definitely says that, you know, the fraud
18:09
Speaker 1: has got to stop. We've got to figure out how
18:11
Speaker 1: to do this, uh, and he said he was going
18:13
Speaker 1: to continue um the investigations into all of this stuff.
18:17
Speaker 1: Can you talk about the influence gainst their wheels outside
18:20
Speaker 1: of just the sec you you talk about in the
18:22
Speaker 1: article how he also sits on the Financial Stability Oversight Council. Yeah,
18:26
Speaker 1: there's two kind of panels that that are important in
18:31
Speaker 1: this area. One is the Financial Stability Oversight Council that's
18:33
Speaker 1: kind of an uber group of regulators that looks at, um,
18:37
Speaker 1: you know, practices that are potentially dangerous to the financial system.
18:41
Speaker 1: And then the President's Working Group on Financial Markets, which
18:44
Speaker 1: is a smaller group that advises the President on some
18:48
Speaker 1: of these same you know, market impacts of things. And uh,
18:51
Speaker 1: he's really, um, the main person on both those panels
18:56
Speaker 1: that is, uh, you know, most experienced in crypto. So
18:59
Speaker 1: people who've worked with him on this stuff say that
19:02
Speaker 1: his his views are taken pretty seriously. Robert. He didn't
19:05
Speaker 1: give you any clue as to whether or not we're
19:06
Speaker 1: going to get a bitcoin ETF allowed in the U
19:09
Speaker 1: S anytime soon. Yeah, unfortunately not. Um, but he is
19:12
Speaker 1: giving a speech today at the Aspen Security Forum which
19:17
Speaker 1: may touch on some of that, and UM he said that,
19:21
Speaker 1: you know, he's continuing to think about it. And he
19:22
Speaker 1: understands that a lot of people are very interested in this.
19:25
Speaker 1: I feel like if he was going to tell Aspen,
19:27
Speaker 1: he probably would have told you, Benjamin, I have a
19:30
Speaker 1: feeling we're gonna be as well. Yeah, exactly. I think
19:32
Speaker 1: it's still going to be a little while, but for now,
19:34
Speaker 1: I think there's some Canadian ETFs that do pretty much
19:37
Speaker 1: the same thing. Great Big Take story, Robert, thanks so
19:39
Speaker 1: much for joining us. Really appreciate your insight. Robert Schmidt
19:43
Speaker 1: writing with Benjamin Bain about Gary Gensler getting ready for
19:47
Speaker 1: more crypto over society wants to make rules, which makes
19:51
Speaker 1: sense considering the fact that that's his job. He's a
19:55
Speaker 1: rulemaker UM in the Securities and Exchange Commission, and he's
20:00
Speaker 1: going to be dealing with something that he knows fortunately
20:02
Speaker 1: a lot about, So maybe people will be less angry
20:05
Speaker 1: about the rules that he makes. I think there are
20:07
Speaker 1: a lot of people that just don't understand what goes
20:09
Speaker 1: on in this space to begin with. But if you
20:11
Speaker 1: want to get a look at the story, decide n
20:14
Speaker 1: I big take go. This is Bloomberg. Let's get away
20:21
Speaker 1: from politics and get back over to the markets, because
20:24
Speaker 1: we're seeing a lot of action in the markets, say,
20:26
Speaker 1: not a lot of direction in terms of equity indexes,
20:29
Speaker 1: but um, we still see yields and incredible lows one
20:32
Speaker 1: sixteen fifty six on the tenure right now, and we see, uh,
20:37
Speaker 1: the the real yields right now dropping and they and
20:41
Speaker 1: they have been down for a while, but right now
20:44
Speaker 1: down at negative one hundred and eighteen basis points. So
20:48
Speaker 1: it's a pretty incredible Uh, it's a pretty incredible environment
20:51
Speaker 1: to working in. Dan Genter joins us. He is the
20:54
Speaker 1: chief executive officer of r NC Genter Capital Management. They've
20:57
Speaker 1: got five billion dollars of assets under management, and Dan,
21:00
Speaker 1: I wonder what you make of this. It must be
21:02
Speaker 1: one of the most asked questions. Why are rates so
21:06
Speaker 1: low if we're looking at economic growth that's so strong. Well,
21:11
Speaker 1: I think the only thing you can really look at, Matt,
21:13
Speaker 1: is that just a fairly typical flight to quality and
21:17
Speaker 1: the and the real concern here is what's happening with
21:19
Speaker 1: the delta variant of COVID nineteen. I mean, you we've
21:22
Speaker 1: had a number of false starts with regards to you know,
21:26
Speaker 1: people trying to come come out of the closet and
21:28
Speaker 1: get back and reintegrate into society and and now I
21:32
Speaker 1: think when companies literally were setting guidelines and dates for
21:35
Speaker 1: people to return to the office and setting in those parameters,
21:39
Speaker 1: you know, now they don't know what to do again.
21:41
Speaker 1: So I think that you're you're in a situation where
21:43
Speaker 1: you're combining two factors, which is the market has just
21:46
Speaker 1: had a tremendous run of what we've seen so far
21:50
Speaker 1: this year, both on the back of earnings and some
21:52
Speaker 1: multiple expansion. You know, it's it's trying to take a
21:56
Speaker 1: deep breath anyway, and now when you put the new
21:58
Speaker 1: COVID fears on top up of it, you're just again
22:01
Speaker 1: you're seeing some concern, You're seeing some flight to quality.
22:04
Speaker 1: You're seeing or you're going to be able to continue
22:06
Speaker 1: to push these earnings forward at this pace, which is
22:09
Speaker 1: what we really need to support the market. Are you
22:11
Speaker 1: one of those people fleeing to quality, Dan, or where
22:13
Speaker 1: are you positioning now? We were really in a situation
22:17
Speaker 1: where right now we're we're just looking for values. So
22:20
Speaker 1: I guess too some degree you could say that we're
22:23
Speaker 1: going to quality, but but for us, it's belling more
22:25
Speaker 1: with that we've been really focusing on since the fourth
22:29
Speaker 1: quarter of last year. I mean, we we feel that
22:32
Speaker 1: the overall market itself is it's look, it's earnings are
22:35
Speaker 1: really the game right now. We think the concerns about
22:38
Speaker 1: inflation are really have kind of faded into the background
22:40
Speaker 1: at least for the time being, and earnings is really
22:43
Speaker 1: what is going to drive this market. The ability to
22:46
Speaker 1: expand multiples beyond here we think is very very limited.
22:50
Speaker 1: So being focused on earnings and then in line with that,
22:53
Speaker 1: being focused on valuations to us we think is key,
22:57
Speaker 1: you know, and that we feel will continue with a
23:00
Speaker 1: resurgence of some rotation back to value that we saw
23:03
Speaker 1: in the first half. It's great to have somebody on
23:05
Speaker 1: the program UM who actually in a sense puts his
23:10
Speaker 1: money where his mouth is with stock picks. And you've
23:13
Speaker 1: got a couple that I think are pretty popular. UM,
23:16
Speaker 1: b m Y and CVX are are a couple that
23:19
Speaker 1: we've had UM guys and and and gals on in
23:22
Speaker 1: the past. Who are really behind these these stocks? Why? Well,
23:26
Speaker 1: I think again it's value. I mean, when you look
23:28
Speaker 1: at what you're getting for Bristol Myers. The biggest issue
23:31
Speaker 1: with Bristol Myers is that people are very concerned about
23:34
Speaker 1: the back end of the pipeline. As certain drugs are
23:37
Speaker 1: coming off a pattern, we don't have as much concern
23:40
Speaker 1: and we think the current flows are very strong. I mean,
23:42
Speaker 1: they're going to continue to be a leader in oncology
23:44
Speaker 1: and cardio vasco disease. I mean they have some of
23:47
Speaker 1: the biggest drugs that are in that area. You look
23:49
Speaker 1: at where their cash flow is right now, they have
23:51
Speaker 1: eight percent free cash flow as you have a company
23:54
Speaker 1: that's trading at at a you know, an eight point
23:56
Speaker 1: three pe right now based upon our estimates. So I
24:00
Speaker 1: think that the real issue is is that we like
24:02
Speaker 1: the healthcare space. We think this is really undervalued and
24:06
Speaker 1: the and the big thing becomes, as I mentioned, is
24:08
Speaker 1: the back end, because we feel that when you look
24:10
Speaker 1: at the new drugs that are coming online, I mean,
24:13
Speaker 1: these have revenue capability that's twenty billion, and the street
24:18
Speaker 1: very cautiously is putting roughly a ten billion dollar number
24:21
Speaker 1: on that. So so we see that potential being significantly higher.
24:25
Speaker 1: And then when you look at the current valuation at
24:27
Speaker 1: roughly eight times and you get a two point eight
24:30
Speaker 1: percent yield while you wait, you know, we find that
24:33
Speaker 1: very attractive. And when you look at cv X, it's
24:35
Speaker 1: It's a similar thing in the oil space. Uh. And
24:39
Speaker 1: if you want to make a pure play on the
24:41
Speaker 1: commodity price, this is one of the best places to
24:43
Speaker 1: do it. And we think at roughly seventy dollars a
24:46
Speaker 1: barrel now we think will continue to creep up near
24:49
Speaker 1: closer to eighty. Uh. You're in a situation where you
24:52
Speaker 1: look at forward you know, earnings of what we think
24:54
Speaker 1: is quite reasonable here. You know, you're trading about fourteen
24:58
Speaker 1: times and a big kicker is you're getting five and
25:01
Speaker 1: a quarter percent while you wait in dividend yield and
25:04
Speaker 1: they only need fifty dollars a barrow to cover it.
25:06
Speaker 1: So it's to us once again, very strong value. Dan
25:09
Speaker 1: just quickly, we only have about thirty seconds left. But
25:11
Speaker 1: what would you be staying far away from here? What
25:14
Speaker 1: kind of sector? Well, I don't want to paint it
25:18
Speaker 1: with a total brush, but I think would be taking
25:20
Speaker 1: some money off the table and some of the technologies.
25:22
Speaker 1: I mean, you're you know, once again, we think they've
25:24
Speaker 1: had a good run again. They've come back, you know,
25:26
Speaker 1: after a value took over in the fourth quarter, in
25:28
Speaker 1: the first half of the year, and so you know,
25:30
Speaker 1: looking at that to maybe lighten up a little bit
25:32
Speaker 1: and get back into some of the cyclicals. Dan, thanks
25:35
Speaker 1: very much for your time. Really appreciate getting your insight today.
25:39
Speaker 1: Dan Genter is the chief executive officer at r n
25:42
Speaker 1: C Genter Capital Management, and as I said, he's got
25:46
Speaker 1: five billion dollars in assets under management and talk talks
25:50
Speaker 1: to us about stocks that he likes, about actual picks,
25:54
Speaker 1: which is great to have. You like Lincoln National, he
25:56
Speaker 1: likes b m, Y, like CVX, and he likes Altrea.
26:00
Speaker 1: This is Bloomberg. Thanks for listening to the Bloomberg Markets podcast.
26:05
Speaker 1: You can subscribe and listen to interviews of Apple Podcasts
26:08
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
26:12
Speaker 1: on Twitter at Matt Miller three. On Fall Sweeney, I'm
26:16
Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can
26:19
Speaker 1: always catch us worldwide at Bloomberg Radio.