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A Look At China's Tech Crackdown, Consumer Sentiment · 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
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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
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  Speaker 1: at Bloomberg dot com slash podcast. Now we have with
• 0:22
  Speaker 1: us one of the most respected names on the street
• 0:24
  Speaker 1: when it comes to analyzing companies in terms of I
• 0:30
  Speaker 1: guess um future cash flows, and he's done the pretty
• 0:34
  Speaker 1: much the best as far as I can see across
• 0:36
  Speaker 1: the industry in terms of his returns. Dan Ives joins
• 0:39
  Speaker 1: us from web Bush Securities, where he's managing director of
• 0:42
  Speaker 1: Equity Research. Dan, I'm gonna kind of rip up the
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  Speaker 1: script here because I know we want to talk about
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  Speaker 1: the China tech crackdown, and I definitely want to hit
• 0:49
  Speaker 1: on Tesla as well in a moment, because Elon Musk
• 0:52
  Speaker 1: is here with me, not with me personally and physically,
• 0:56
  Speaker 1: but you know, within a twenty mile radius in Berlin
• 0:59
  Speaker 1: at his Big A factory. But we just got a
• 1:01
  Speaker 1: consumer sentiment number that um the U miss Director Richard
• 1:06
  Speaker 1: curtain called stunning. The loss of confidence, he said, was stunning.
• 1:10
  Speaker 1: He said over the past half century, the sentiment index
• 1:12
  Speaker 1: has only recorded larger losses in six other surveys, and
• 1:17
  Speaker 1: it's dropped the most since two thousand eleven. What is
• 1:20
  Speaker 1: going on in the U S economy? OK, I think
• 1:24
  Speaker 1: what we're starting to see really coming down of COVID,
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  Speaker 1: it's very uneven in terms of this recovery and and
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  Speaker 1: I think it really is cause almost more and more
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  Speaker 1: of a move to some of these safety blanket names,
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  Speaker 1: especially in tech by the large cab names, because investors
• 1:40
  Speaker 1: right now they almost have a flashlight in a dark
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  Speaker 1: tunnel that they're still trying to figure out what the
• 1:45
  Speaker 1: fundamental stories look like consumer as well as enterprised second
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  Speaker 1: half of the year, and and we continue weave this
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  Speaker 1: is going to be uneven, but you have to focus
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  Speaker 1: on the secular winners, and we've we've tech. It's still
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  Speaker 1: a risk on train a green light to intact and
• 2:00
  Speaker 1: to your end. Dan, on that note, we're taking look
• 2:03
  Speaker 1: at shares of Microsoft right some of the big tech
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  Speaker 1: companies that you cover that are trading at record highs,
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  Speaker 1: and I am curious how much of this is a
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  Speaker 1: defensive move wherewith yields falling, we like the discount cash
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  Speaker 1: flows or these valuations really justified in your opinion, Yeah,
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  Speaker 1: it's a great question. I think there's definitely a bit
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  Speaker 1: defensive on some of these tech names, like a Microsoft,
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  Speaker 1: But a lot of it really comes down to we
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  Speaker 1: are in the midst of a fourth in DSHA revolution.
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  Speaker 1: I mean two trillion of digital transformations spend on the
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  Speaker 1: enterprise and on consumer. When you look at what they're
• 2:40
  Speaker 1: doing in Redmond, when the Delawad and the Charge, Microsoft
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  Speaker 1: continue to gain more and more share in the cloud,
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  Speaker 1: and that what we're seeing is just a further rereading
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  Speaker 1: of the stock from Microsoft, but you're seeing across the
• 2:53
  Speaker 1: whole tech sphere in terms of names like Apple, names
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  Speaker 1: across cybersecurity and cloud because in so just starting realized
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  Speaker 1: this wasn't just to pull forward we've seen the last
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  Speaker 1: eighteen months. It's called first second inning of what really
• 3:07
  Speaker 1: what's going to be a transformation in terms of the
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  Speaker 1: tech sector. You have a thousand dollar price target. I
• 3:13
  Speaker 1: believe on Tesla you have as an outperform. You've done
• 3:15
  Speaker 1: much better than your peers in terms of rating the
• 3:18
  Speaker 1: stock with a nine percent return. Your peers average return
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  Speaker 1: is down. What is happening though, in terms of boosting production,
• 3:31
  Speaker 1: in terms of getting out the solar cell business, in
• 3:35
  Speaker 1: terms of you know, achieving all that he's promised, Like
• 3:39
  Speaker 1: the mack truck, I guess it's an eighteen wheeler that
• 3:43
  Speaker 1: he that he wants to bring out. I mean, can
• 3:44
  Speaker 1: you really do all this stuff? Or does that not
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  Speaker 1: matter to you know, it's this kind of cashlow is
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  Speaker 1: also not matter to Tesla. Yeah, I think for right
• 3:53
  Speaker 1: now in Tesla they almost have a high class problem
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  Speaker 1: because every car that they meet they sell. It's really
• 4:00
  Speaker 1: more of a supply capacity issues, which is why he's
• 4:03
  Speaker 1: in Berlin right now, and which is why there's such
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  Speaker 1: a focus on the build out of Berlin, having that
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  Speaker 1: flagpole in Europe instead of just shipping cars from China,
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  Speaker 1: which is a logistical disaster, as well as Austin. Because
• 4:16
  Speaker 1: right now we're in the green title leave, we're just
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  Speaker 1: in the early stages of it. And Tesla when Musk
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  Speaker 1: is looking out, of course, we have cyber Truck talking
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  Speaker 1: about long haul talking as well. These are aspirations. I
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  Speaker 1: don't I don't think they're just aspirations. I think these
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  Speaker 1: are models that we will continue to see come out,
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  Speaker 1: But for now, for the street, it's about Model three,
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  Speaker 1: Model Y and of course the rebound in China for Tesla,
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  Speaker 1: that is what will continue driving stock A part of
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  Speaker 1: the overrang on Testa this year after Cinderella Story last year.
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  Speaker 1: It's more competition from GMS two v ws to the
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  Speaker 1: pure place and that's been I want to see the
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  Speaker 1: cyber truck what I want to see on the street, Dan,
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  Speaker 1: you know, speaking of China, go out there for us,
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  Speaker 1: but but go broader. I think what is fascinating is
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  Speaker 1: the rewriting that you've had to see on change it,
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  Speaker 1: you know, with a stroke of a pen. Beijing has
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  Speaker 1: told us in the last month that they can entirely
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  Speaker 1: change the rules. How do you evaluate that on a
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  Speaker 1: fundamental basis? With all the headline risk of China tech
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  Speaker 1: crackdown well right now and for investors not just in
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  Speaker 1: the US but globally, you really can't go in China
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  Speaker 1: tech here. I mean, the rules continue get changed, and
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  Speaker 1: it's really been a horror movie. You know, for investors
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  Speaker 1: in China tax factor more and more that money is
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  Speaker 1: routine to US tech, even though there's regulatory risk of
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  Speaker 1: course within the Beltway, this just doesn't compare the scale
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  Speaker 1: and scope of what Beijing is doing with this crackdown.
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  Speaker 1: And it's something where you know, if you own these
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  Speaker 1: names on Friday, you don't know what's going to happen
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  Speaker 1: Monday morning. And it's really the risk off in the
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  Speaker 1: China sectors. One. It's hard for us to look someone
• 6:05
  Speaker 1: in the mirror and own some of these broader themes
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  Speaker 1: have regulatory risk, like to Baba's, the d d S
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  Speaker 1: and others. All right, thanks so much for joining us.
• 6:15
  Speaker 1: Dan is always a pleasure to get you on and uh,
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  Speaker 1: I think you had a lot of insight for our investors,
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  Speaker 1: also for our listeners. Also point out to people that
• 6:25
  Speaker 1: they can check out the A and our page for
• 6:27
  Speaker 1: Dan Ives and just see um how he has crushed
• 6:31
  Speaker 1: it in terms of picking stocks and setting targets. So
• 6:34
  Speaker 1: always good to talk to web Bush Securities Managing Director
• 6:38
  Speaker 1: Dan Ives. We're gonna continue to cover this massive drop
• 6:42
  Speaker 1: in consumer sentiment for you. The you Miss index falling
• 6:46
  Speaker 1: to a reading of seventy. We were looking for more
• 6:50
  Speaker 1: than eighty. This is Bloomberg. Now. There is a lot
• 6:57
  Speaker 1: going on in Washington. Despite the fact that I believe
• 7:01
  Speaker 1: they're currently in recess. Um. They need to figure out
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  Speaker 1: if they're gonna pass this one point two trillion dollar
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  Speaker 1: spending bill before they look at the three and a
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  Speaker 1: half trillion dollar resolution moves or reconciliation moves or um.
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  Speaker 1: If they're gonna, I guess hold hostage is a bad term,
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  Speaker 1: but basically, um make sure they can get the reconciliation
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  Speaker 1: passed before they agree on the bipartisan bill. Nonetheless, it
• 7:27
  Speaker 1: looks like we're gonna get a lot more money spent
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  Speaker 1: on infrastructure eventually, she tell Prasade Joins, a small and
• 7:31
  Speaker 1: MidCap growth portfolio manager, as well as equity research analyst
• 7:35
  Speaker 1: Jennison Associates to talk to us about where investors can
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  Speaker 1: take advantage if we do, and she tall this is
• 7:41
  Speaker 1: an interesting market because it does look like there's gonna
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  Speaker 1: be a lot more money spent, at least for now.
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  Speaker 1: We do face the possibility of a fiscal cliff in
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  Speaker 1: the future, and there are supply chain issues that are
• 7:51
  Speaker 1: really jamming things up a little bit. How do you
• 7:54
  Speaker 1: see the investment environment? Well, it's great to be heroris
• 7:58
  Speaker 1: to thanks for having me, so I guess what I
• 8:01
  Speaker 1: would say on the Infrastructure Bill specifically, is I think
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  Speaker 1: it's meaningful that for the first time as you as
• 8:07
  Speaker 1: you talked about things in DC, that we're actually able
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  Speaker 1: to get something done. Uh. It does show that we've
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  Speaker 1: got bipartisan support for investing in our own infrastructure. And
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  Speaker 1: I think there's some parts of that bill that are bipartisan.
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  Speaker 1: As I mentioned that, you know, whether it's UM investing
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  Speaker 1: in bridges and roads, high speed internet for rural communities,
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  Speaker 1: electric vehicle charging stations, etcetera. Having said that, you know,
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  Speaker 1: on our team, UM and even I think the markets
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  Speaker 1: are not really assuming that this will go through. There's
• 8:43
  Speaker 1: still a lot of wood to chop UM from the
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  Speaker 1: House in terms of getting this passed. And we've maybe
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  Speaker 1: been burned once before on the promise of an infrastructure package.
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  Speaker 1: So I don't think we are getting in over our
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  Speaker 1: skis on this spending specifically. Having said that, so UM,
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  Speaker 1: I think that's a pandemic and just what we've seen
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  Speaker 1: in terms of the supply chain clunches that you mentioned,
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  Speaker 1: UM companies want to have their supply chains closer, and
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  Speaker 1: I think we're about to embark on a real onshoring, reshoring,
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  Speaker 1: capital investment renaissance. In this country. I hate to try
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  Speaker 1: to bring a a contrary opinion here, though it was
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  Speaker 1: interesting yesterday one of them was one of the first
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  Speaker 1: times I finally heard someone say, uh, except taxes have
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  Speaker 1: to go up if we're going to pay for all
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  Speaker 1: of this, and the markets haven't yet priced that in well,
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  Speaker 1: or growth could pay for it. Yes, if we can
• 9:43
  Speaker 1: grow our way out of our debt. But if we can,
• 9:47
  Speaker 1: you know, how are we are there are the markets
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  Speaker 1: prepared for potentially higher taxes in order to pay for this.
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  Speaker 1: I don't believe that the markets are ready for higher
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  Speaker 1: taxes now. Certainly the Biden and Is station is saying
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  Speaker 1: that there is enough pay force for the infrastructure bill
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  Speaker 1: by you know, some of the COVID relief funds and
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  Speaker 1: unused you know, assistance to the states, etcetera. But I
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  Speaker 1: think we know from I think the CBO scoring that's
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  Speaker 1: it's going to cost a lot of money. Um, And
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  Speaker 1: I don't think and you know, and I think that
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  Speaker 1: certainly some members of Congress are really resistant to increase
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  Speaker 1: in taxes, whether it's gas taxes, usage taxes, etcetera. So
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  Speaker 1: that almost seems like a non starter quite frankly, to
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  Speaker 1: pay for it. But um, you know, again, even without
• 10:36
  Speaker 1: the one point two trillion UM, I think that the
• 10:41
  Speaker 1: the you know, the doors open, the gates are open,
• 10:44
  Speaker 1: and we're just going to see a lot more investment
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  Speaker 1: in the country, regardless of what happens in the US.
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  Speaker 1: You know, from from the government standpoint, you know, the
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  Speaker 1: the best way that the government throughout history you found
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  Speaker 1: to get out of debt is inflating their way out.
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  Speaker 1: As someone who looks at you know, especially small and
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  Speaker 1: MidCap stocks, what's your take on inflation. I so we've
• 11:11
  Speaker 1: just come off of a second quarter earning season, and
• 11:13
  Speaker 1: I can tell you almost universally, every single company is
• 11:17
  Speaker 1: talking about inflation, and that inflation is are there in
• 11:20
  Speaker 1: the form of raw materials, it's in the form of wages,
• 11:24
  Speaker 1: it's in the form of freight and logistics, and and
• 11:28
  Speaker 1: for some companies they can you know, pass it through
• 11:31
  Speaker 1: to customers and whether that's consumers or whether that's you know,
• 11:34
  Speaker 1: business to business customers. And so I do think that
• 11:37
  Speaker 1: inflation is real. And you know what I'm perhaps a
• 11:42
  Speaker 1: bit more concerned about is that the alleviation that many
• 11:45
  Speaker 1: companies were hoping for in the back half of this
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  Speaker 1: year and into two seems to be maybe being pushed
• 11:53
  Speaker 1: off to the right. And the reason I say that is,
• 11:56
  Speaker 1: you know, the delta variant um. You know, for for
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  Speaker 1: certain companies that have supply chains still in Southeast Asia
• 12:02
  Speaker 1: where plants are being shut down for weeks. Uh, you know,
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  Speaker 1: they're just not yet seeing the looseness in the supply
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  Speaker 1: chains that we would hope for. So I do think
• 12:12
  Speaker 1: that inflation is there. I do believe that companies are
• 12:16
  Speaker 1: going to price it through as much as possible, and
• 12:20
  Speaker 1: it could, as you said, inflate the economy higher. All right,
• 12:27
  Speaker 1: I think that's all we have time for unfortunately, but
• 12:28
  Speaker 1: hopefully we can get you back Schtel, because it's fascinating,
• 12:31
  Speaker 1: um to get your take on this, especially as you know,
• 12:34
  Speaker 1: typically people come on here and talk only about the
• 12:37
  Speaker 1: big cap stocks. UM. I guess in this market it's
• 12:41
  Speaker 1: all about Mega tex, right, So it's great to hear
• 12:43
  Speaker 1: from a small and MidCap growth portfolio manager. Sheetile Prasad
• 12:47
  Speaker 1: from Jennison Associates talking to us about the expected impact
• 12:51
  Speaker 1: of the infrastructure deal, the possibility of more taxes. I think, sadly,
• 12:56
  Speaker 1: that's always almost an inevitability, um, right. So I mean
• 13:00
  Speaker 1: sadly for those of us who don't like to pay taxes. Well,
• 13:03
  Speaker 1: and with the evaluations, I think she had a good
• 13:05
  Speaker 1: point of the markets might not be ready for and
• 13:08
  Speaker 1: she had a good point. With the five fifty billion
• 13:10
  Speaker 1: dollar bill, we're not looking at it, but with the
• 13:12
  Speaker 1: three and a half trilling dollar bill, we could be
• 13:14
  Speaker 1: looking at higher taxes. And it's just all a matter
• 13:17
  Speaker 1: of how the markets can be prepared for that. Mad
• 13:20
  Speaker 1: absolutely um, and I think that's one of the problems
• 13:23
  Speaker 1: that a lot of Congress people have with it. Like
• 13:27
  Speaker 1: James Rosst Joins, a ce IO and founding partner of
• 13:29
  Speaker 1: Coast Capital and James Bitcoin. You know, everyone is calling
• 13:34
  Speaker 1: for a crash at thirty grand and now we're back
• 13:36
  Speaker 1: up at forty six thousand, three thirteen. What's going on?
• 13:40
  Speaker 1: I nice to do, nice to be with you. Look,
• 13:43
  Speaker 1: I really wouldn't call myself an expert on bitcoin. We
• 13:46
  Speaker 1: really are focused on gold and gold miners where we
• 13:50
  Speaker 1: have some very specific thoughts journey and so far as
• 13:52
  Speaker 1: inflation is concerned. The problem we have with bitcoin is
• 13:56
  Speaker 1: um It's adopted by a lot of people who really
• 13:59
  Speaker 1: want to see go up, but there really are no
• 14:02
  Speaker 1: natural buyers for it. I don't think over and above
• 14:05
  Speaker 1: financial speculators, um. And there seems to be a lot
• 14:08
  Speaker 1: of financial speculators, more than ever before, and the amount
• 14:11
  Speaker 1: of capital in the hand of speculators is much greater
• 14:13
  Speaker 1: than ever before. And you can probably blame very low
• 14:16
  Speaker 1: interest rates for that. The problem with with Bitcoin rather
• 14:20
  Speaker 1: than things like etherium or other coins is it's just flawed.
• 14:24
  Speaker 1: It seems to us destined to be worth if not
• 14:29
  Speaker 1: worth less, then worth certainly a lot less than where
• 14:32
  Speaker 1: it is today, simply because you know, it's a very
• 14:35
  Speaker 1: inefficient still mechanism for for the transfer of value from
• 14:40
  Speaker 1: one person to another, which is what you need as
• 14:41
  Speaker 1: a currency, and that is the store of value. You know.
• 14:45
  Speaker 1: I just don't think that Bitcoin is the best blockchain
• 14:48
  Speaker 1: based cryptocurrency will ever come up with. You know, Etherium
• 14:52
  Speaker 1: is already a superior um platform um. And so why
• 14:56
  Speaker 1: would I want to buy bitcoin when I know that,
• 14:59
  Speaker 1: you know, and also at the point with a better
• 15:01
  Speaker 1: technology is guaranteed to be developed, already has been developed,
• 15:05
  Speaker 1: and let's all that bitcoin too or ethereum, and I
• 15:09
  Speaker 1: know that something even better will be developed. Why does
• 15:13
  Speaker 1: anybody want to buy gold? Uh? Well, people look a
• 15:18
  Speaker 1: number of reasons. First of all, have you ever, you know,
• 15:21
  Speaker 1: gone to a really nice dinner with you know, like
• 15:24
  Speaker 1: like like you know, someone who were very nice jewelry
• 15:27
  Speaker 1: and that makes a certain impact. Have you ever gone
• 15:30
  Speaker 1: to Paris and marvel that how beautiful it is? And
• 15:32
  Speaker 1: have you noticed how the rooftops are guilded? Have you
• 15:36
  Speaker 1: you know, when you got married? What did you you know?
• 15:40
  Speaker 1: If you if you are married, and and and anyone
• 15:42
  Speaker 1: who's married has my sympathies man or woman. By the way,
• 15:46
  Speaker 1: when you got married, what is the how did you
• 15:48
  Speaker 1: convey your love? You know, gold is and has been
• 15:52
  Speaker 1: and will doubtless remain the one that commodity that has
• 15:58
  Speaker 1: been a store of value that has been chair is
• 16:00
  Speaker 1: by people around the world for millennia and will continue
• 16:03
  Speaker 1: to be. And guess what Central bankers who know a
• 16:06
  Speaker 1: whole lot more about um um financing stores of value
• 16:10
  Speaker 1: than than I do. Certainly you know, are not buying bitcoins.
• 16:13
  Speaker 1: They're buying goal and they're maybe they're they're doing their
• 16:15
  Speaker 1: best to outlaw bitcoin, you know. And I think that
• 16:18
  Speaker 1: from never mind uhum the concerns that I just expressed,
• 16:21
  Speaker 1: but from environmental concerns perspective, and also because central banks
• 16:24
  Speaker 1: want to have an ever tight equip on their local economies.
• 16:27
  Speaker 1: From that perspective as well, I think that they will
• 16:31
  Speaker 1: want to see people certainly not adopt bitcoin or not
• 16:34
  Speaker 1: adopt you know, these blockchain based currencies with which to
• 16:38
  Speaker 1: conduct transactions in the countries. I mean and just yeah,
• 16:41
  Speaker 1: there are so many hurdles that bitcoin, blockchain based currencies, uh,
• 16:45
  Speaker 1: cryptocurrencies face. Um, but tas you know, you know, Matt's
• 16:53
  Speaker 1: not going to be happy. I'm going to digress a
• 16:55
  Speaker 1: little bit from bitcoin and blockchain. You mentioned inflation when
• 16:59
  Speaker 1: you're talking talking about gold. We've had a lot of
• 17:02
  Speaker 1: moves in the commodities as of late. You had lumber
• 17:04
  Speaker 1: up and lumber down, copper up and copper down. What
• 17:08
  Speaker 1: are the moves and commodities telling you about that inflation? Well,
• 17:13
  Speaker 1: inflation is upon us and it's real. I have I
• 17:15
  Speaker 1: have a lot of land in upstate New York that
• 17:18
  Speaker 1: I bought a long time ago, and I have a
• 17:20
  Speaker 1: lot of trees. And the prices that I'm getting for
• 17:22
  Speaker 1: the offered, Um, I'm fancy myself and environmentally, so I'm
• 17:26
  Speaker 1: not selling my trees, but the prices that I'm getting offered.
• 17:29
  Speaker 1: You know, are are are getting to be very attractive.
• 17:32
  Speaker 1: Um So, even now with lumber prices having come down,
• 17:35
  Speaker 1: they're so meaningfully above stating what I'm getting offered is
• 17:37
  Speaker 1: meaningfully above where where I was maybe about two years ago. Um.
• 17:41
  Speaker 1: You know, I think that inflation is upon us. You
• 17:44
  Speaker 1: come up, have the most important injection of money into
• 17:48
  Speaker 1: global systems and not have it impact the prices of
• 17:52
  Speaker 1: goods that are limited and supplying limited and production you
• 17:55
  Speaker 1: just cannot. And here's where I think that gold, if
• 17:58
  Speaker 1: I may have just finished up on that topic, is
• 18:00
  Speaker 1: specifically interesting. Gold has been the barometer often creation for
• 18:04
  Speaker 1: a long time. It certainly isn't acting like it now.
• 18:07
  Speaker 1: And I think that that's because one of the main
• 18:08
  Speaker 1: mechanisms of that clock currently is out of order. That
• 18:12
  Speaker 1: mechanism being industry of demand for gold and consumer demands
• 18:16
  Speaker 1: for gold. Seventy percent of the gold that is produced
• 18:18
  Speaker 1: around the world goes into the jewelry market. People. Um uh,
• 18:22
  Speaker 1: And you know I would, I mean give me I'm
• 18:24
  Speaker 1: from you know, but like mostly women by gold, you know,
• 18:29
  Speaker 1: to to as as as part of the way that
• 18:32
  Speaker 1: you know to to basically in the form of jewelry
• 18:34
  Speaker 1: which they like to wear, and you buy jewels and
• 18:36
  Speaker 1: you wear jewelry when you're interacting with others. Um uh.
• 18:39
  Speaker 1: And because of lockdowns still in effect. Um if not
• 18:44
  Speaker 1: formally then at least personally around the world. You know,
• 18:48
  Speaker 1: jewelry sales are down up to you know, depending on
• 18:52
  Speaker 1: the geography year over year, right, And so I think
• 18:54
  Speaker 1: that when we come out of this and people begin
• 18:56
  Speaker 1: to circulate, you have a double whammy of It's it's
• 18:59
  Speaker 1: a stounding if you think about it, that the gold
• 19:01
  Speaker 1: price hasn't crashed, given the fact that like over fifty
• 19:05
  Speaker 1: of sales going to a sector where demand is down
• 19:08
  Speaker 1: like year over year. So we've been thinking about I've
• 19:11
  Speaker 1: been thinking about getting a grill myself, but I wasn't
• 19:13
  Speaker 1: able to get out and I might do it now.
• 19:16
  Speaker 1: It's not just the women, you know, sometimes I like
• 19:19
  Speaker 1: some big gold chains. You could pull it off, you know,
• 19:23
  Speaker 1: maybe in Jesus with the ruby eyes. That's always a
• 19:26
  Speaker 1: good look that never goes out of stop. But all
• 19:28
  Speaker 1: joking aside, I mean, it's astounding to me. You can
• 19:32
  Speaker 1: buy you can go to Subby's or Christy's or auction
• 19:35
  Speaker 1: houses and you can buy big admittedly gaudy you know,
• 19:40
  Speaker 1: gold jewelry or whatever, for like less than the cost
• 19:43
  Speaker 1: of the actual medal um. And so I think that
• 19:46
  Speaker 1: there's anyway with cold. I do think that the one
• 19:49
  Speaker 1: part there are two things people don't think about. A
• 19:51
  Speaker 1: jewelry demand down has been weighing, and we'll continue to
• 19:54
  Speaker 1: weigh until we basically come out of this and decide,
• 19:56
  Speaker 1: you know, and have her the immunity, or basically get
• 19:59
  Speaker 1: to a point where we at to full circulation, whatever
• 20:01
  Speaker 1: it is. I think they will get there over the
• 20:02
  Speaker 1: next couple of years, and I'm not on the hurry
• 20:04
  Speaker 1: for us to get there, because the longest gold prices
• 20:06
  Speaker 1: the press that happier I am becau I'm buying amazing
• 20:08
  Speaker 1: companies that I'm buying at two times cash you're buying
• 20:11
  Speaker 1: the I'm buying miners at two times cash flow. But
• 20:15
  Speaker 1: I'm assuming that I only get fifteen hundred pounds of coal.
• 20:18
  Speaker 1: We're at eighteen hundred now at fifteen hundred, I'm buying
• 20:21
  Speaker 1: them at two times cash flow. So but the other
• 20:23
  Speaker 1: thing that people don't understand about gold is, you know,
• 20:26
  Speaker 1: quite like bitcoin, although in the case of bitcoin it's artificial.
• 20:28
  Speaker 1: In the case of goal. It's it's it's got made
• 20:31
  Speaker 1: um if you believe in God. That's a whole lot
• 20:33
  Speaker 1: of discussion perhaps for as getting dangerous. We're getting dangerous here. Look,
• 20:39
  Speaker 1: by the time you talk about grills and heavy chains,
• 20:41
  Speaker 1: you've already already waked right on tread on. Davis there soory,
• 20:45
  Speaker 1: So I'm just following your cues. But with gold, what
• 20:48
  Speaker 1: people don't understand is production of gold is declining around
• 20:51
  Speaker 1: the world, is declined by fifty over the next ten years.
• 20:55
  Speaker 1: For every ounce of gold that we're taking out of
• 20:56
  Speaker 1: the ground. Were only discovering your point two ounces. So
• 21:00
  Speaker 1: the companies that have long reserves, long mine life and
• 21:04
  Speaker 1: safe jurisdictions, these are ever more precious assets whose prices
• 21:08
  Speaker 1: and valuations have never been as low as they are today.
• 21:11
  Speaker 1: It's it's a you know, so we're huper excited about
• 21:14
  Speaker 1: the work we're doing in the space. It's a it's
• 21:16
  Speaker 1: a technically very difficult space to get your hands around,
• 21:19
  Speaker 1: thinking about five years to put together our internal due
• 21:22
  Speaker 1: diligence competencies. But but avoid it's it's super attractive sector. James,
• 21:27
  Speaker 1: go cross asset with me, and let's get away from
• 21:29
  Speaker 1: some of the gold in the commodities and take a
• 21:31
  Speaker 1: look at Europe. I think what always stands out to
• 21:33
  Speaker 1: me is the lower valuations in Europe. And people come
• 21:37
  Speaker 1: on the program and they say, yeah, but valuations are
• 21:40
  Speaker 1: lower there for a reason. Some of that is the
• 21:44
  Speaker 1: tilt towards cycle goals and value. As we know in
• 21:47
  Speaker 1: the US you have more of a growth weaiting with
• 21:50
  Speaker 1: this delta variant sort of creeping up. Do you buy
• 21:53
  Speaker 1: Europe just because it's value cheaper or is it cheaper
• 21:56
  Speaker 1: for reason? Well be the important question, you know, some
• 22:01
  Speaker 1: of the most look we I've been investing in Europe
• 22:03
  Speaker 1: for most of my for twenty five years now, um
• 22:06
  Speaker 1: um uh, and that's what I live in even breathe.
• 22:09
  Speaker 1: And here's one sort of unofficial answer to the reason
• 22:12
  Speaker 1: why you buy Europe. So much more fun to business
• 22:15
  Speaker 1: companies in Italy than in Idaho or Iowa. And no
• 22:18
  Speaker 1: offense to my friends and Idaho and Iowa. But I
• 22:21
  Speaker 1: think everybody aprees that it least just a much more
• 22:23
  Speaker 1: fun part of the world to go to. But there
• 22:25
  Speaker 1: are a lot here are a couple of things. So
• 22:28
  Speaker 1: the most sophistically investors we point the fact is European
• 22:32
  Speaker 1: markets have never treated at this kind of discount to
• 22:35
  Speaker 1: the US markets. Right, since the American New York Stock
• 22:38
  Speaker 1: Exchange was was created in seventeen two, valuation discrepancy has
• 22:42
  Speaker 1: never been as high as it is today. It was
• 22:44
  Speaker 1: a little bit higher earlier this year. I think you
• 22:48
  Speaker 1: peaked in January, but it's declined by five percent since.
• 22:52
  Speaker 1: And so some of the most thoughtful people will come
• 22:54
  Speaker 1: back and say, well, that's just because America is just
• 22:56
  Speaker 1: much more greatly weighted towards technology and faster world and companies. Right,
• 23:01
  Speaker 1: But in fact, if you look at cross industry analysis,
• 23:04
  Speaker 1: but we've done, you look at there is there isn't
• 23:06
  Speaker 1: a single industry where the average company in Europe is
• 23:10
  Speaker 1: trading at a tent or lower discount compared with its
• 23:14
  Speaker 1: peers in North America. And by the way, margins, tax rates,
• 23:19
  Speaker 1: cash flow profiles very comparable at this point. So I
• 23:23
  Speaker 1: think that's from that perspective in the world that like
• 23:26
  Speaker 1: it or not, as ever more uh integrated globally. We're
• 23:29
  Speaker 1: buying some of the biggest waste management companies in the
• 23:32
  Speaker 1: world that happened to be based in Europe at like,
• 23:34
  Speaker 1: you know, single digit multiples of EBITA here in North
• 23:38
  Speaker 1: In the US, we're buying the same companies at twenty
• 23:40
  Speaker 1: times plus. You know. It's it's just so there's a
• 23:44
  Speaker 1: valuation arbitrage that is impossible to ignore. And I think
• 23:47
  Speaker 1: that for us, there are so many ways to answer
• 23:50
  Speaker 1: your question, but for us, the answer ends up being
• 23:52
  Speaker 1: a micro one. It depends on the company are there
• 23:55
  Speaker 1: and to release value back to investors. Maybe the company
• 23:58
  Speaker 1: is just kind of you know, we're buying tech companies
• 23:59
  Speaker 1: in like re baring some of the leading software companies
• 24:02
  Speaker 1: in the world and fields that are going a year
• 24:05
  Speaker 1: wind them at three times revenues, ten times mortalized arts.
• 24:08
  Speaker 1: You know, these companies, if they just dealist in Europe
• 24:11
  Speaker 1: and read US in North America, you could see theoretically
• 24:14
  Speaker 1: a tenfold increase in evaluation. So it's it's just it's
• 24:17
  Speaker 1: pretty nutty, and it's as nutty as it's ever been, James,
• 24:21
  Speaker 1: and it's been nutty having you on, but fantastic, Thank
• 24:24
  Speaker 1: you so much for joining us. It's want of the
• 24:26
  Speaker 1: point out that I once interviewed Mr T on Bloomberg
• 24:28
  Speaker 1: Television and that guy was wearing like forty pounds of
• 24:32
  Speaker 1: gold chains. So news you can use man now let's
• 24:39
  Speaker 1: get over to Bloomberg Intelligence senior US retail analyst Pooam Goyle.
• 24:43
  Speaker 1: She joins us on the phone from the Garden State Punham.
• 24:48
  Speaker 1: Let's let's talk about the consumer sentiment number. I mean,
• 24:52
  Speaker 1: was it a shocker to you to see consumer sentiment
• 24:55
  Speaker 1: fall by this much? Yeah, I mean it was definitely
• 24:58
  Speaker 1: a surprise, But if you put thing thanto perspective, we
• 25:01
  Speaker 1: are dealing with high inflation right now and the delta
• 25:05
  Speaker 1: variant is rising, so it's not too much of a
• 25:08
  Speaker 1: surprise to see that the consumers are getting worried what's
• 25:10
  Speaker 1: coming next? You know, do they have to worry about
• 25:13
  Speaker 1: not having things and stuff again? Because shipment delays around
• 25:17
  Speaker 1: the globe are dealing deliveries of some essential some non
• 25:21
  Speaker 1: essential items, So there's a lot still moving that the
• 25:24
  Speaker 1: consumer is not sure about. That said, we do think
• 25:28
  Speaker 1: that the consumer is still spending. I mean, we're seeing
• 25:31
  Speaker 1: people travel more, We're seeing people eat out more. We
• 25:34
  Speaker 1: are seeing people spend more, whether it's in stores or
• 25:38
  Speaker 1: even online. You know, it was interesting this week when
• 25:43
  Speaker 1: we had Disney earnings come out, we were thinking of
• 25:46
  Speaker 1: how well that portrays where the consumer is right now.
• 25:51
  Speaker 1: Whether we're staying home or literally going out in to
• 25:54
  Speaker 1: theme parks. How are you taking that as we push
• 25:57
  Speaker 1: forward to t J Max, Walmart, Ross, Target, Lows, Home
• 26:03
  Speaker 1: Depot next week. I know, of course in your coverage
• 26:06
  Speaker 1: you're keenly focused on t J Max and Amazon and others.
• 26:11
  Speaker 1: Where is the health of the consumers? We think about
• 26:13
  Speaker 1: retail sales and where they are shopping and what that
• 26:16
  Speaker 1: is telling us. Sure, So I think there's two things
• 26:19
  Speaker 1: to think about as these retailers report next week. One
• 26:23
  Speaker 1: is the tougher comparisons that they're all up against from
• 26:27
  Speaker 1: last year, because last year and two Q was when
• 26:30
  Speaker 1: online shopping surge, especially for retailers like Home Depot and
• 26:35
  Speaker 1: Lows where you did a lot of do it yourself
• 26:37
  Speaker 1: and a lot of home renovation. So they're up against
• 26:39
  Speaker 1: a very tough comparison. In light of that, though still
• 26:42
  Speaker 1: we do see spending being robust and that people are
• 26:45
  Speaker 1: still continuing to spend on their home So while things
• 26:48
  Speaker 1: may dip a little on a relative basis, there is
• 26:51
  Speaker 1: still strengthened that's space, partly driven by inflation also, where
• 26:55
  Speaker 1: we have seen prices go up. So when you move
• 26:57
  Speaker 1: forward and you look at like a Walmart and a Target.
• 27:00
  Speaker 1: I think it's a little bit of a mixed situation
• 27:02
  Speaker 1: where online sales will be pressured because of the tougher
• 27:05
  Speaker 1: comparisons that they have from last year, but we do
• 27:08
  Speaker 1: still expect to see sales um rise and that's predominantly
• 27:12
  Speaker 1: driven by increased trafficking stores and also as consumers go
• 27:16
  Speaker 1: out and spend more on discretionary items, which is a
• 27:19
  Speaker 1: parallel home toys, etcetera, and back to school, all categories
• 27:23
  Speaker 1: that have a higher margin element to it. So it
• 27:25
  Speaker 1: will be interesting to see the dynamics and how they
• 27:27
  Speaker 1: play out between a wal Mart and the Target UM.
• 27:30
  Speaker 1: But we do think that you will still see underlying
• 27:33
  Speaker 1: consumer strength on an overall basis. And then when you
• 27:35
  Speaker 1: look at TJ Max and Ross there it's not a
• 27:38
  Speaker 1: story of tougher comparisons because last year in two Q
• 27:41
  Speaker 1: their stores were actually closed, so they're expected to post
• 27:45
  Speaker 1: some very robust, robust numbers, not just over but even
• 27:49
  Speaker 1: over For example, at t j X, we're actually expecting
• 27:53
  Speaker 1: to see an acceleration in the pace of games versus
• 27:56
  Speaker 1: one Q in two Q. TJ Max here in Europe
• 28:01
  Speaker 1: is actually called t K max. That is correct, It's
• 28:05
  Speaker 1: kind of weird until you get used to it. I
• 28:07
  Speaker 1: don't know why, because I think t J max works well.
• 28:10
  Speaker 1: It's like someone's name t J max, but t K max.
• 28:12
  Speaker 1: What's that? I guess you don't spend as much time
• 28:15
  Speaker 1: thinking about it as I do. In any case, Um, Punam,
• 28:19
  Speaker 1: thank you so much for joining us, Punam going out
• 28:20
  Speaker 1: senior US retail analysts covering those companies as we await
• 28:26
  Speaker 1: a slew of retail earnings and we see what consumer sentiment,
• 28:31
  Speaker 1: what what inflation expectations? Due to consumer sentiment, I will
• 28:34
  Speaker 1: point out that, you know three, I feel like that's
• 28:37
  Speaker 1: still bang in line with the historical average, right, so
• 28:42
  Speaker 1: we're just used to such low inflation of the past
• 28:44
  Speaker 1: decade til I'm still trying to get over the hard
• 28:47
  Speaker 1: questions you asked, Punam, t k X t those questions,
• 28:53
  Speaker 1: why is it t K max? Anyway, I'll find out.
• 28:57
  Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
• 29:00
  Speaker 1: subscribe and listen to interviews of Apple podcasts or whatever
• 29:04
  Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
• 29:08
  Speaker 1: at Matt Miller three pt On Fall Sweeney, I'm on
• 29:11
  Speaker 1: Twitter at pt Sweeney. Before the podcast. You can always
• 29:14
  Speaker 1: catch us worldwide at Bloomberg Radio