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Equities, Cannabis, Chips, And Geopolitics (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
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. Kind of mixed open
0:23
Speaker 1: here for the first forty five minutes or so of
0:27
Speaker 1: trading here, looks like folks are kind of waiting on
0:29
Speaker 1: some of the big echo data. It's gonna get a
0:31
Speaker 1: little sense of kind of how this market's performing, how
0:34
Speaker 1: it may discount some of this echo data we will
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Speaker 1: get this week, most notably CPI Data as well's pp
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Speaker 1: I as well. Cameron christ macro strategists for Bloomberg News
0:44
Speaker 1: and Gina Martin Adams, chief equity strategist for Bloomberg Intelligence.
0:48
Speaker 1: They both join us here. We're gonna round table this thing.
0:52
Speaker 1: I want to record this. Yeah, I think we do
0:56
Speaker 1: that on a daily basis. Then we pot it as
0:59
Speaker 1: kids say, all right, Cameron, um, we got a lot
1:02
Speaker 1: of eco data here today. What are you going to
1:05
Speaker 1: be looking for? What do you think I guess more importantly,
1:07
Speaker 1: what do you think your federal Reserve is gonna be
1:09
Speaker 1: looking for? Well, obviously the CPI is the highlight of
1:13
Speaker 1: the of the week. Uh. Yeah, they made it pretty
1:17
Speaker 1: clear that they need to see more than one or
1:19
Speaker 1: two friendly prints to switch switch course. Um, but last
1:23
Speaker 1: month wouldn't even get a friendly print. So uh, it
1:27
Speaker 1: would be the first step on a on the journey.
1:30
Speaker 1: Could be the sort of the beginning of the end
1:33
Speaker 1: of the cycle if we start to see some significant
1:35
Speaker 1: downside prints and cp I. But as this year has
1:39
Speaker 1: taught us, it is very, very costly to try to
1:41
Speaker 1: preempt that. So, Gina, what does an investor do here?
1:45
Speaker 1: I mean, Um, it seems like every data point out
1:49
Speaker 1: backs up the Fed actually doing what they say, which
1:52
Speaker 1: is shocking to the markets. And then, um, it turns
1:55
Speaker 1: out when we get a drop in inflation, at least
1:58
Speaker 1: according to UM a bunch of research on the street,
2:02
Speaker 1: it's going to be horrible for earnings. Well, I think
2:06
Speaker 1: that remains to be seen for a start. UM, inflation
2:09
Speaker 1: is usually a lagging indicator of growth. Inflation has been
2:12
Speaker 1: in a bizarre position this year relative to the past
2:15
Speaker 1: twenty years, so any forecasters that really have a strong
2:18
Speaker 1: sense of of what inflation is doing probably would would
2:22
Speaker 1: use a model that is not accurately going to forecast
2:25
Speaker 1: the reality over the next couple of quarters. I think
2:28
Speaker 1: that's the sort of the reality of the earning stream
2:30
Speaker 1: is that inflation has been a big pain point for earnings.
2:34
Speaker 1: Revenues have been growing, but margins have been contracting amid
2:38
Speaker 1: the rising input cost pressure, even though companies have been
2:41
Speaker 1: able to pass on some price increases. So we might
2:44
Speaker 1: be somewhat surprised by the degree to which to drop
2:47
Speaker 1: an inflation can actually soothe some of those margin pressure
2:51
Speaker 1: margin pressures going forward. And frankly, that is not what's
2:54
Speaker 1: happened for the last twenty years. What's happened for the
2:56
Speaker 1: last twenty years is company earnings weakness does not come
3:00
Speaker 1: about because inflation is too fast. It comes out about
3:04
Speaker 1: because we see a demand demand drop, right, And so
3:07
Speaker 1: I think that we've got this really mass confusion going
3:10
Speaker 1: on with respect to the earning stream. Um Also, a
3:14
Speaker 1: lot of the earning strength has come from energy. Specifically,
3:19
Speaker 1: energy is very tied not just to inflation, the inflation
3:22
Speaker 1: out but look, but what's happening with the input price, right,
3:25
Speaker 1: and our oil prices actually falling. Now are input prices
3:29
Speaker 1: actually falling in the energy space is a big question
3:32
Speaker 1: mark for the outlook. So I would characterize the current
3:35
Speaker 1: outlook is sort of earnings confusion. Um that earnings confusion
3:39
Speaker 1: probably persists into the next quarter, but companies can do
3:43
Speaker 1: a lot to clear up that earning's confusion, and that's
3:45
Speaker 1: what we'll be looking for in the upcoming earning season.
3:48
Speaker 1: I mean, today, for example, UBS said forward profit will
3:51
Speaker 1: drop fifty this year. That sounds less like confusion and
3:55
Speaker 1: just like a huge loss, right, Yeah, Well, I mean, look,
4:01
Speaker 1: we would be remiss not to note that what's been
4:03
Speaker 1: happening in the auto space has also been completely contrary
4:07
Speaker 1: to historical experience over a cycle. We can't get cars.
4:11
Speaker 1: Cars aren't coming into the United States. They're going to
4:15
Speaker 1: start coming into the United States at a point in
4:17
Speaker 1: time where interest rates are increasing. This is just completely
4:20
Speaker 1: bizarre and a bizarre experience in the earning stream. So
4:24
Speaker 1: do you really want to take a forward example as
4:26
Speaker 1: indicative of what's going to happen for tech companies, healthcare companies,
4:31
Speaker 1: consumer companies at large. I mean, I think this is
4:34
Speaker 1: what I mean by inflation, By inflation and earnings confusion.
4:38
Speaker 1: This is a very very difficult point to take any
4:41
Speaker 1: individual companies as a representative of what's going to happen
4:44
Speaker 1: for the market at large, and that's been the case
4:46
Speaker 1: for much of two all right, well, how about let's
4:49
Speaker 1: take Mike Wilson's point on you know, he says, when
4:51
Speaker 1: inflation comes down, um, the parts that are going to
4:55
Speaker 1: remain resilient our shelter, wages and some services, and then
4:59
Speaker 1: goods will con any decelery. And that's not a constructive
5:02
Speaker 1: picture for the sp It's definitely not a constructive picture
5:06
Speaker 1: for the goods centric industries within the SNP five completely
5:10
Speaker 1: agree with that scenario. Did centric consumer companies generally indicative
5:17
Speaker 1: of what's going to happen at the market at large?
5:19
Speaker 1: Is my point of contention with that piece. Hey, Cameron, So,
5:22
Speaker 1: I mean, I guess the issue is do we have
5:24
Speaker 1: a risk material risk this week of being like really
5:26
Speaker 1: negatively surprised the inflation comes in really hot? Of course,
5:31
Speaker 1: I mean I would say that any analysis is looking
5:33
Speaker 1: at the last twenty or thirty years of inflation what
5:36
Speaker 1: it means for earnings isn't particularly useful because this is
5:39
Speaker 1: a completely different inflation regime, um than than we've had, uh,
5:43
Speaker 1: you know, central bankers Allen Greenspan kind of defined price
5:46
Speaker 1: stability is that level of inflation that doesn't materially impact
5:52
Speaker 1: the decisions of consumers and businesses in the economy. And
5:56
Speaker 1: that's more or less been the case, um from the
5:59
Speaker 1: late eighties, uh really through until last year. UM. So
6:05
Speaker 1: this is a very different scenario to what we've experienced
6:08
Speaker 1: in the nineties, uh and the naughties and and the
6:11
Speaker 1: teams on the one hand and on the other hand,
6:14
Speaker 1: referencing demand, I mean, the fact stated intention is to
6:18
Speaker 1: reduce demand, to break it in the supply um. I
6:21
Speaker 1: mean they haven't. They couldn't be any more clear on
6:24
Speaker 1: what they're trying to accomplish. Is that in the Is
6:28
Speaker 1: that in the price of the stock market? I think
6:31
Speaker 1: that's that's really really debatable. Certainly it is not embedded
6:35
Speaker 1: in the level of earnings expectations. I think over the
6:39
Speaker 1: next over the next few years, and if you look
6:42
Speaker 1: at market valuations based on the on the present value
6:46
Speaker 1: of those future earnings expectations, the market is not cheap,
6:49
Speaker 1: all right. Camera great stuff camera christ Macro strategist, Bloomberg
6:52
Speaker 1: News Gina Martin Adams, Bloomberg intelligence equity strategist. This is Bloomberg.
7:02
Speaker 1: Let's get over right now to Chris Beal's he's the
7:05
Speaker 1: CEO of weed Maps. It's nasdack listed. The ticker is
7:09
Speaker 1: m A p S. And to me this seems like
7:12
Speaker 1: a growth story. Chris. We just got you know, legal
7:16
Speaker 1: weed starting to sell around New York. Um, not entirely
7:21
Speaker 1: legally yet, but I guess people will use your app
7:25
Speaker 1: to find a place where they can uh safely and
7:29
Speaker 1: securely buy weed and um, you know, get reliable quality.
7:33
Speaker 1: Is that is that the case? Yeah? Well, actually one
7:36
Speaker 1: step further, it's sort of what we provide is sort
7:39
Speaker 1: of like Amazon or door Dash for cannabis. So it
7:41
Speaker 1: let's retailers and brands showcase their products and enable online ordering,
7:47
Speaker 1: and then we have a bunch of software that helps
7:48
Speaker 1: them do delivery, post order follow ups, CRM, that sort
7:52
Speaker 1: of thing. But yeah, the idea is to take something
7:54
Speaker 1: that's traditionally been scary, hard to understand and make it
7:58
Speaker 1: easy to shop for consumer is online. So you know
8:02
Speaker 1: how many states are you active in? Can you get
8:04
Speaker 1: delivery service? I mean, delivery service has been the only
8:07
Speaker 1: way to get weed in New York for like thirty years,
8:10
Speaker 1: but can you actually get legal delivery service now here? Yeah,
8:15
Speaker 1: so when in this varies from state to state. Some
8:17
Speaker 1: states only allow in store pick up that sort of thing,
8:20
Speaker 1: but in New York they will allow delivery. So you'll
8:22
Speaker 1: be able to order on weed maps, on the app
8:25
Speaker 1: on your phone, put stuff in a cart. You will
8:28
Speaker 1: be able to or you are able to. You will
8:31
Speaker 1: be able to win adult use open So right now,
8:34
Speaker 1: it's just medical so you could right now just for
8:37
Speaker 1: medical shops if you have a medical card. But when
8:40
Speaker 1: adult use, these disposies that can sell you know, for
8:43
Speaker 1: basically recreational open up. You'll be able to get order
8:47
Speaker 1: on the phone and get delivery right to your door. Chris,
8:50
Speaker 1: are you active in states that have been open for
8:54
Speaker 1: recreational cannabis like Colorado for example, And if so, kind
8:58
Speaker 1: of what's your experience been. Yeah, So, so we're ubiquitous.
9:02
Speaker 1: We're in all thirty seven states that have cannabis legalization.
9:06
Speaker 1: We're actually a fourteen year old company. Were started out
9:08
Speaker 1: in California, and we're we operate internationally and seven international
9:13
Speaker 1: jurisdictions at this point as well. So yeah, we're in Colorado.
9:16
Speaker 1: Interestingly enough, Colorado has very limited delivery. Despite what people
9:20
Speaker 1: might think, they're really kind of just rolling out pilots
9:23
Speaker 1: for it um. But we see we operate in all
9:26
Speaker 1: these different states, and we see very big differences in
9:28
Speaker 1: how the businesses operate, and our software has to deal
9:31
Speaker 1: with the different rules and compliance regulations um. And then
9:34
Speaker 1: the way consumer shop varies a lot. I think New
9:37
Speaker 1: York will be very similar in terms of consumers shopping
9:40
Speaker 1: habits to California, which makes sense because New York has
9:43
Speaker 1: been buying California cannabis for the last thirty years. So,
9:47
Speaker 1: I mean my experience is when I was a kid,
9:51
Speaker 1: you know what we You'd have a delivery guy come
9:53
Speaker 1: and meet you, come to your door, you'd get in
9:56
Speaker 1: his car, whatever. But now that these dispensries are opening up,
10:00
Speaker 1: it's too much fun to go there. Why would I
10:03
Speaker 1: want to get delivery? It's going to Empire is like
10:06
Speaker 1: going to the Dylan's candy store of weed? Um. Is
10:10
Speaker 1: that gonna wear off? Am I gonna get tired of
10:12
Speaker 1: that and want to go for delivery later on? Well?
10:15
Speaker 1: So the thing is is avengeal for a lot of
10:17
Speaker 1: people when they become regular cannabis consumers. And look, we're
10:21
Speaker 1: seeing a lot of that people who are substituting cannabis
10:24
Speaker 1: for alcohol as a healthier alternative. You know what you
10:26
Speaker 1: want or you want to you don't want to go
10:28
Speaker 1: through the hassle and going to the dispensary and a
10:30
Speaker 1: dispensaries the lines can be long, and it can be
10:33
Speaker 1: you know, a bit confusing. But the other big use
10:35
Speaker 1: case we're seeing in mature states, the average cannabis dispensary
10:38
Speaker 1: has over a thousands skews, and so we see a
10:41
Speaker 1: lot of people pulling out weed maps when they're in
10:43
Speaker 1: the store just to go through and understand what are
10:47
Speaker 1: all these different products? Because you know, to go from
10:49
Speaker 1: that that guy saying, hey, come get in my car,
10:52
Speaker 1: he only has what he can carry in his backpack
10:55
Speaker 1: to a dispensary, you got over a thousand different things.
10:57
Speaker 1: And you look at segments like uh concentrates and all
11:01
Speaker 1: these new types of concentrates. Look at edibles, there's a
11:03
Speaker 1: huge growth in the beverage segment. How do you as
11:05
Speaker 1: a consumer makes sense of all of that? I mean,
11:07
Speaker 1: and a lot of times the dispensary doesn't even fully
11:09
Speaker 1: understand everything because the brand explosion is just in the
11:12
Speaker 1: early innings right now, and it's accelerating. By the way,
11:15
Speaker 1: do you have a team of people reviewing these products
11:18
Speaker 1: or do you rely on you know, written in reviews
11:21
Speaker 1: from consumers. So what we do is we rely on
11:25
Speaker 1: written in reviews from verified purchasers. So people who have
11:28
Speaker 1: it's it's I have to be careful. I say this
11:31
Speaker 1: because Amazon, the Amazon review systems fallen under a lot
11:34
Speaker 1: of I think rightful criticism. But what we do is
11:36
Speaker 1: we look at consumers who have purchased online through weed Maps,
11:40
Speaker 1: through the marketplace, and then say, give us feedback, give
11:44
Speaker 1: us reviews on things like how it clinically affected you,
11:48
Speaker 1: how was your store experience, how is the delivery experience,
11:51
Speaker 1: and there's other things we can do. We do have
11:52
Speaker 1: a content and learning part of the site to learn
11:55
Speaker 1: about strains, to learn about new products, where we do
11:58
Speaker 1: have expert reviewers in common taters and we can pull
12:01
Speaker 1: some of that across. The other thing is um A
12:04
Speaker 1: lot of what we do is we have one of
12:05
Speaker 1: the largest brand catalogs out there. So many times the
12:08
Speaker 1: brands will write, they'll provide the images, they'll provide the
12:11
Speaker 1: descriptions and more than that the ascribed clinical effects, and
12:15
Speaker 1: then we syndicate that through all the retailers who carry
12:18
Speaker 1: those branded products. Chris, As far as the stock, what
12:21
Speaker 1: is going on. You're trading for less than sales, you know,
12:25
Speaker 1: three times earnings right now, These are not numbers that
12:28
Speaker 1: we typically see, even for companies that are distressed. Yeah,
12:33
Speaker 1: and on top of that, we've been profitable for essentially
12:35
Speaker 1: our entire history. Uh. We were effectively bootstrapped until we
12:39
Speaker 1: went public. Uh. You know, look, I think what you
12:41
Speaker 1: see it's it's frustrating to me. And I think it's
12:44
Speaker 1: one of those reminders of as a CEO, you have
12:46
Speaker 1: to control what you can control, which is us growing
12:49
Speaker 1: adoption of the marketplace and that. But I think partially
12:52
Speaker 1: what you're seeing is a reflection of stigma. There's still
12:54
Speaker 1: a lot of institutional investors who won't invest in the sector,
12:57
Speaker 1: even for a NASDAQ listed UH technology and sillery provider
13:02
Speaker 1: like maps UH. And I think you know at the
13:06
Speaker 1: end of the day that the market is a factor
13:07
Speaker 1: of supply and demand, and on the demand side, Uh,
13:11
Speaker 1: there's just far too many funds who are reluctant to
13:13
Speaker 1: invest in the cannabis spector despite the fact that some
13:15
Speaker 1: people estimate that's going to be a hundred billion dollar
13:18
Speaker 1: industry at the end of this decade UM. So you know,
13:22
Speaker 1: we're out there trying to educate people, make them understand
13:25
Speaker 1: that there's very deep modes around this business in terms
13:28
Speaker 1: of the regulatory requirements, the data science you have to do.
13:32
Speaker 1: You know, we're solving problems that Frankly, Go Puff and
13:35
Speaker 1: a bunch of other online market places haven't solved because
13:39
Speaker 1: we need to we Yeah, we can't touch the actual
13:41
Speaker 1: cannabis product or do we ever want to. So, but
13:44
Speaker 1: we had President Biden recently kind of you know, say,
13:47
Speaker 1: you know he's gonna expunge federal marijuana convictions. I mean
13:51
Speaker 1: that had to be a step in the right direction. Yeah,
13:55
Speaker 1: it looks I think there's a lot of twists and
13:57
Speaker 1: turns to that because I think it is potentially less
14:00
Speaker 1: impactful than people think on the part in side, because
14:02
Speaker 1: there aren't a lot of federal prisoners who are under
14:05
Speaker 1: federal custody for simple possession. A lot of its trafficking,
14:09
Speaker 1: or they'll attack on other charges to get a plea.
14:11
Speaker 1: But the promise to reschedule if they follow through on
14:16
Speaker 1: that could meaningfully change things. Um, you know, when we've
14:19
Speaker 1: tried to sponsor scientific research on cannabis, those researchers have
14:24
Speaker 1: in some cases gotten threats to have their National Science
14:27
Speaker 1: Foundation or in i H grants funding polled because they're
14:30
Speaker 1: doing cannabis research. So the rescheduling would help there. But
14:32
Speaker 1: but the biggest thing that I think people are missing
14:35
Speaker 1: is it's a stigma reduction. When you look at why
14:38
Speaker 1: funds aren't investing in cannabis names, it's not because they can't.
14:42
Speaker 1: It's a stigma thing. When you look at why major
14:44
Speaker 1: credit card providers don't bank or don't provide credit for
14:48
Speaker 1: financial side, it's that all right. Chris great stuff, Chris
14:50
Speaker 1: Bal's CEO of Weed Maps on the cannabis business. One
14:59
Speaker 1: talk technology, you here, and I'm gonna talk us China
15:01
Speaker 1: supply chain is But we found out the beginning of
15:03
Speaker 1: the pandemic that it is not good to be overreliant
15:07
Speaker 1: on one source of stuff. And like we saw it
15:09
Speaker 1: into technology space with chips and so woulgin Hoe, which
15:13
Speaker 1: by the way, is my favorite name on Wall Street.
15:14
Speaker 1: Wuginhoe is a senior technology analyst for Bloomberg Intelligence. He's
15:18
Speaker 1: got a research report out entitled Untangling US China tech
15:23
Speaker 1: supply chain issues. He says it's difficult but doable. Wulgin,
15:27
Speaker 1: thanks so much for joining us here. Talk to us
15:30
Speaker 1: about kind of what we've learned over the last two
15:32
Speaker 1: and a half three years about that supply chain reliance
15:36
Speaker 1: on China and maybe how some of the technology companies
15:38
Speaker 1: are trying to untangle that right now. Thanks for having
15:41
Speaker 1: me on, Paul so Um. It's it's clear over the
15:46
Speaker 1: past couple of years that China is a main supplier
15:49
Speaker 1: not only for for chips, but more importantly electronics manufacturing.
15:55
Speaker 1: If in our research support that I worked with our
15:58
Speaker 1: Asia UH Boomberg Tmt colleagues, is that roughly of all
16:04
Speaker 1: of the electronics manufacturing source of of China. And it
16:07
Speaker 1: kind of makes sense right over the years manufacturing shifted
16:10
Speaker 1: over from US and Mexico and it and moved over
16:14
Speaker 1: to China because of economies of scales, because what we
16:17
Speaker 1: are fair and focused on margin and trying to unentangle
16:20
Speaker 1: that is going to be uh quite a task. We
16:23
Speaker 1: also have Brendon Murray with us. Uh he is the
16:26
Speaker 1: Bloomberg trades are out of Atlanta? Is that right in Lanta? Brendon.
16:31
Speaker 1: I'm in London. Oh in London, sorry, um, uh in London, Brendon,
16:37
Speaker 1: What do we know about um President Biden right now?
16:41
Speaker 1: And the rules on chip makers? Are the rules on
16:44
Speaker 1: technological access by companies in China? Yeah, Well, what we
16:48
Speaker 1: know right now is that that pre President Biden is
16:51
Speaker 1: trying to make some of those decisions for uh, for
16:55
Speaker 1: for industry rather than uh, you know, basically to try
16:59
Speaker 1: to make it more difficult for for China to produce
17:02
Speaker 1: its chips and easier for Eric companies to get these
17:05
Speaker 1: semiconductors that you know, going just about you know, every
17:08
Speaker 1: household appliance that we buy. So that's that's the administration
17:12
Speaker 1: stance right now. It's it's you know, some of it's
17:15
Speaker 1: borrowed from the Trump administration to uh, you know, try
17:18
Speaker 1: to sort of create our own industries here that you know,
17:21
Speaker 1: many of them migrated away. So so the tech supply
17:25
Speaker 1: chains you know, are definitely well embedded in China and
17:29
Speaker 1: elsewhere in Asia, but they can they can make some
17:33
Speaker 1: progress on them with government incentives and and uh and
17:38
Speaker 1: and penalties um, you know against Chinese producers. But what
17:43
Speaker 1: is this? First of all, I thought you were I
17:46
Speaker 1: mistakenly thought you were in Atlanta because you used to
17:48
Speaker 1: write for the Atlanta Business Chronicle, So that was I
17:52
Speaker 1: guess a while back. But what does this mean for
17:56
Speaker 1: the chip industry in China? I mean, is this a
18:00
Speaker 1: huge blow? Um? You know, will it whither away or
18:04
Speaker 1: is it still going to be I mean, I assume
18:06
Speaker 1: it's the main place that chips are made globally. Yeah,
18:11
Speaker 1: I mean, I think judging by the market reaction in
18:14
Speaker 1: China today to the news from the US on Friday
18:18
Speaker 1: through the weekend, you know, investors do expect it to
18:21
Speaker 1: be uh, you know, to to to you know, to
18:23
Speaker 1: to to cause some cause some problems for the Chinese producers. Hey,
18:28
Speaker 1: would you know I think you know, at some point
18:31
Speaker 1: during this pandemic, when this this issue, the supply chain
18:33
Speaker 1: issues relates to chips became you know, really prevalent, everybody
18:37
Speaker 1: was just saying, well, just let's onshore this stuff. And
18:40
Speaker 1: there's been some announcements in the great state of Ohio,
18:43
Speaker 1: in the state of New York about maybe bringing some
18:45
Speaker 1: of these fabs onshore. Is that really a thing, Is
18:48
Speaker 1: that a solution or is that just more kind of
18:51
Speaker 1: rhetoric and politics? Well, UM. Well, the Biding administration is
18:56
Speaker 1: actually putting their money where the mouth is, right, the
18:59
Speaker 1: fifty two billion doll the Chips Act is supposed to
19:01
Speaker 1: help UM initiate an investment into UH some of these
19:07
Speaker 1: facts and manufacture these UM advanced technology chips. Right, So,
19:12
Speaker 1: so they are trying to onshore some of that to
19:14
Speaker 1: to lessen the reliance. Now, now, you know, just just
19:17
Speaker 1: to pick it back on on Brandon's point that the
19:21
Speaker 1: one thing I will say is that they're trying to
19:23
Speaker 1: what the US is trying to do with some of
19:25
Speaker 1: the I guess renewed UM sanctions on China is to
19:29
Speaker 1: slow down the manufacture of advanced ships. Now, now the
19:32
Speaker 1: one China doesn't really make many advanced ships. It's it's
19:36
Speaker 1: it's mostly Taiwan and and if anything, is UM the
19:39
Speaker 1: US trying to mitigate the reliance on UM on Taiwan
19:45
Speaker 1: on some of these advanced ships because of the geo politics. UM.
19:49
Speaker 1: These are two issues, well, the supply chain and chips
19:51
Speaker 1: are two issues that have become conflated and intertwined over
19:56
Speaker 1: the crisis. But UM, we should keep them separate. I
19:59
Speaker 1: guess right, Brendan, Because you have a great, big story
20:02
Speaker 1: out in the Bloomberg today showing that we could see
20:04
Speaker 1: the supply chain returning to some sense of normalcy. And
20:08
Speaker 1: throughout the story you talk about the reduction in weight
20:13
Speaker 1: times that ships have outside of harbors. Yeah, we definitely
20:18
Speaker 1: need to make a distinction between tech supply chains and
20:21
Speaker 1: normal supply chains. You know that they are they are
20:24
Speaker 1: inter linked to some extent, but but tech supply chains
20:27
Speaker 1: are very you know, very complex and and and difficult
20:31
Speaker 1: to replicate in other countries. But but for other things,
20:35
Speaker 1: more basic sort of lower value goods or you know,
20:38
Speaker 1: textiles or things that don't require you know, lots of
20:41
Speaker 1: you know, complicated machinery or engineering can be can be
20:45
Speaker 1: produced and are being produced and have been shifting out
20:48
Speaker 1: of China for you know, many years, even before the
20:51
Speaker 1: pandemic and the US Trade Board with with with China,
20:54
Speaker 1: So so that shift has been ongoing and and and
20:58
Speaker 1: what we're seeing now is, uh, you know, if you
21:00
Speaker 1: set the tech supply chain aside for a second, we're
21:03
Speaker 1: seeing the demand cooling around around Europe and the US
21:07
Speaker 1: in particular. So so we're seeing a lot of that
21:10
Speaker 1: congestion that we saw. You know that most of US
21:12
Speaker 1: is sort of transportation related as opposed to production related.
21:16
Speaker 1: So some of that is freeing up just because there's
21:19
Speaker 1: there's demand that's coming off. You know, the peak, the
21:22
Speaker 1: peak levels that it is seen over the past couple
21:24
Speaker 1: of years. All right, Brendan, great stuff, Really appreciate you.
21:26
Speaker 1: You're taking a time. Brendan Murray Trades are for Bloomberg
21:30
Speaker 1: News based in London, and Bloomberg News is all over
21:32
Speaker 1: this global supply chain issue, as is Bloomberg Intelligence Investment
21:35
Speaker 1: Research Wujinho technology analysts for Bloomberg Intelligence. They have a big,
21:39
Speaker 1: big report out on the terminal bond market, closed equity
21:47
Speaker 1: market open. Who's in charge out there? I mean, somebody's
21:49
Speaker 1: got to get it together. Here, let's continue our discussion
21:53
Speaker 1: of technology. It's time we're keep our focus on the
21:56
Speaker 1: chip business, um because a lot of industries penned upon
22:00
Speaker 1: the chip business. You didn't think so until we had
22:03
Speaker 1: this pandemic. Then you're like, oh yeah, chips are and everything.
22:05
Speaker 1: Men Deep Seeing, senior technology analyst for Bloomberg Intelligence joins
22:08
Speaker 1: us here in a Bloomberg Interactive broker studio and we
22:11
Speaker 1: talked about chips. We always like to talk about the
22:13
Speaker 1: auto industry because Matt truck was stuck in somewhere in
22:16
Speaker 1: Mexico because you couldn't get enough chips for I don't
22:18
Speaker 1: know what, the electric windows not because of that, probably
22:21
Speaker 1: some other reasons. But Kevin Tyning, he's got all the
22:23
Speaker 1: answers when it comes to the auto business, senior automotive
22:27
Speaker 1: analysts with Bloomberg Intelligence. So, man, deep, I'm looking again
22:30
Speaker 1: the Philly Semiconductor Index, the socks. It's down again today,
22:34
Speaker 1: the lowest since October. What's going on in the chip business?
22:39
Speaker 1: I thought we needed these things well. Of what happened
22:42
Speaker 1: last week was m D pre announced and they said
22:45
Speaker 1: their client segment revenue will be half of what they
22:49
Speaker 1: expected back in August, So not a lot of time
22:53
Speaker 1: had passed from their prior guidance, and within two months
22:56
Speaker 1: they come out and say it will be a billion
22:58
Speaker 1: dollars lower and most likely that will be the case
23:01
Speaker 1: for the fourth quarter as well, So not just one
23:04
Speaker 1: billion lowerd for the year, but two billion. And so
23:06
Speaker 1: what that translates into is, you know, pieces shipments being
23:10
Speaker 1: down almost fifty sixty million, but PCs, I mean, who
23:14
Speaker 1: uses a PC anymore? What? What is this? Is it? Motorola?
23:18
Speaker 1: Is it a Nokia PC and come on, give me
23:20
Speaker 1: a break. Chips are used in electric vehicles and cellular
23:25
Speaker 1: telephones other than Nokia. Um, you know, they're used in
23:27
Speaker 1: a million other products besides personal computers. I'm not running DOSS.
23:32
Speaker 1: I don't care about PCs. So well, these businesses are
23:36
Speaker 1: much more diversified now than they were five years back.
23:40
Speaker 1: And so m D does have a data center business,
23:42
Speaker 1: they have gaming business. Gaming is going down as well,
23:46
Speaker 1: so data center is what is holding off Fell. But
23:49
Speaker 1: guess what when everything is going down, the cloud guys,
23:52
Speaker 1: the hyper skillers are gonna say, okay, why are we
23:55
Speaker 1: spending thirty billion dollars on capex, you know, setting up
23:58
Speaker 1: these new servers when the overall demand is going down.
24:01
Speaker 1: So eventually they'll pair back as well, and that's why
24:04
Speaker 1: you see such violence stock reaction. All right, Kevin Tynan,
24:07
Speaker 1: you've been whining, Matt's been winding, all the gearheads have
24:10
Speaker 1: been whining that they can't get their vehicles because there's
24:13
Speaker 1: not enough chips out there. What are the good folks
24:15
Speaker 1: in Detroit telling you? Yeah, I mean, I'm more of
24:18
Speaker 1: the opinion and this is just my opinion that look,
24:22
Speaker 1: this is the the constrained output by the manufacturers is
24:27
Speaker 1: a little bit more orchestrated than people like to think.
24:30
Speaker 1: And it's not that there isn't a chip shortage. I
24:33
Speaker 1: just think that our at least our domestic manufacturers are
24:37
Speaker 1: managing it such that it's enabling them to move up
24:40
Speaker 1: market basically in every you know, vehicle architecture they can.
24:45
Speaker 1: So there's not a chip shortage. According to m D
24:48
Speaker 1: there's not. They wish there was a chip shortage, right
24:50
Speaker 1: specific pockets there is. So for autos there is still
24:54
Speaker 1: a shortage. But for PCs, well, which one is is
24:58
Speaker 1: autos the pocket and PCs is like the whole enchilada,
25:02
Speaker 1: or is PCs a pocket? Autos is much smaller. Are
25:06
Speaker 1: you hearing from Detroit and from the other companies that
25:08
Speaker 1: they can in fact get the chips. Well, here's the thing, right,
25:12
Speaker 1: I can get the chips I need for the expensive
25:14
Speaker 1: vehicles that have all the margin for me, right, and
25:17
Speaker 1: I can build those. But those darn things that you
25:19
Speaker 1: know I can sell for eighteen thousand dollars that I
25:22
Speaker 1: lose money on, I can't find enough chips for those.
25:25
Speaker 1: And then this is what you get is that you know,
25:28
Speaker 1: everybody talking about affordability and that automakers are missing out
25:32
Speaker 1: because they're going to have an affordability crisis. And I'm
25:35
Speaker 1: saying they're making the affordability crisis. This is exactly where
25:39
Speaker 1: they want to be. They they want to be selling
25:41
Speaker 1: you sixty five tho dollar pickup trucks instead of eighteen
25:44
Speaker 1: thousand dollar small coops and sedans. So you know, the
25:49
Speaker 1: idea that that the automakers will produce more if there
25:54
Speaker 1: were more chips, I think is I think it's wrong.
25:57
Speaker 1: I think this is where they want production going to
26:00
Speaker 1: be relative to demand, keep it in balance. Where they
26:05
Speaker 1: don't want it to take a year to get your
26:07
Speaker 1: sixty pickup truck. They don't want you to wait two
26:10
Speaker 1: years to get your Bronco. Right. But if but if
26:13
Speaker 1: you do have to wait and you're gonna pay over sticker,
26:15
Speaker 1: then we'll take that trade, I guess for a time being.
26:18
Speaker 1: But the bottom line is these are two different conversations.
26:21
Speaker 1: I mean no offense to Eric, but man Deep and
26:25
Speaker 1: Kevin no I shouldn't necessarily be round table because Kevin
26:29
Speaker 1: is worried about at least automakers saying there aren't enough chips,
26:32
Speaker 1: and man Deep is talking about the company's he covers,
26:35
Speaker 1: saying like we're swimming in chips, as chips are in everything,
26:39
Speaker 1: and I didn't even care about a chip until now,
26:43
Speaker 1: Like I'm looking at looking under every hood, every nook
26:46
Speaker 1: and cranny, deceive there's a microchip hiding there. Man, deep
26:49
Speaker 1: are they ever gonna is this? You know, in the
26:52
Speaker 1: great state of Ohio, in the state of New York
26:54
Speaker 1: they're talking about building fabs. Is that what you guys
26:57
Speaker 1: call them, Like the manufacturing plans for making these chips,
27:00
Speaker 1: is that it really going to be a thing that
27:02
Speaker 1: can move the needle? It will and these require you know, planning,
27:06
Speaker 1: So by the time you know the Ohio fabs come online,
27:09
Speaker 1: there will be But at the same time, the good
27:14
Speaker 1: thing is, you know, at the geopolitical level, you see
27:16
Speaker 1: these tensions and you know the direction where things are aheaded.
27:20
Speaker 1: So eventually you know there will be a point when
27:23
Speaker 1: the US based fabs will have a higher utilization, and
27:27
Speaker 1: you know you can do a lot more here because look,
27:29
Speaker 1: these are asset intensive businesses and you require the cap expense.
27:34
Speaker 1: So it's great that the government is involved now because
27:37
Speaker 1: companies can do it on their own. Kevin I just
27:39
Speaker 1: literally just twenty seconds here. Uh, is ubs right? Is
27:42
Speaker 1: Ford's profits going to get cut in half next year? Well?
27:45
Speaker 1: My so my question is where is this you know,
27:48
Speaker 1: overproduction coming from. Is it because demand falls through the
27:51
Speaker 1: floor or because they think that automakers once there are chips, um,
27:57
Speaker 1: they're just gonna accidentally overproduce and it's gonna kill affordability
28:01
Speaker 1: and pricing and everything. And I'm saying that's just not
28:04
Speaker 1: how it's gonna work, all right. Kevin Tyne and good stuff.
28:06
Speaker 1: He covers the auto industry, which is basically a technology
28:10
Speaker 1: industry with four wheels. I'm convinced. Uh. And then Man
28:12
Speaker 1: Deep saying he is a senior tech analyst covers all
28:15
Speaker 1: things technology for Bloomberg Intelligence. He was actually in studio
28:19
Speaker 1: today as he is most as gold star for for
28:22
Speaker 1: Man Deep. And thanks to Kevin Tyne. Time to go
28:26
Speaker 1: with geopolitics right here, we're gonna roundtable this series of stories.
28:30
Speaker 1: Dr Ariel Cohen, Senior Fellow at the Atlantic Council Eurisa Center,
28:34
Speaker 1: joins us as well as Roz Matheson. She covers Bloomberg News.
28:39
Speaker 1: Executive editor for Internet International Government joins us here to
28:43
Speaker 1: talk about a whole host of geopolitical issues, and let's
28:45
Speaker 1: start with Ukraine because it seems to ratchet it up
28:49
Speaker 1: over the weekend and Dr ConA like to start there.
28:52
Speaker 1: Just give us your thoughts on kind of how you
28:53
Speaker 1: see the situation in Ukraine, maybe the events over the weekend,
28:57
Speaker 1: and maybe what's next to come. Okay, So on the
29:02
Speaker 1: eighth of October, one day after putting seventeenth birthday, there
29:07
Speaker 1: was an explosion on the Kirsch Bridge. That's a bridge
29:13
Speaker 1: that connected Crimean peninsula with the mainland. Uh and um
29:19
Speaker 1: it disrupted the traffic on the bridge. Most of the
29:22
Speaker 1: traffic is repaired now it's a multi media bridge. It
29:27
Speaker 1: has UM cars, railroad, electricity and whatnot. Uh So it's
29:33
Speaker 1: a strategic supply line for the Russian military in the
29:37
Speaker 1: Crimea and in the south of Ukraine, in the Carson region.
29:42
Speaker 1: After that UM, the Russian started bombarding Kiev, the capital
29:47
Speaker 1: of Ukraine, Kharkiv, the second largest city, and Viv, the
29:51
Speaker 1: third largest city, as well as other cities all over Ukraine,
29:56
Speaker 1: primarily taking out the energy infrastructure. So we have reports
30:01
Speaker 1: of electricity being shut down in the major Ukrainian cities.
30:05
Speaker 1: And I don't need to explain to our audience. How
30:09
Speaker 1: devastating it is for the civilians. Also a lot of
30:12
Speaker 1: these missile hits were against civilian targets. You know, That's
30:19
Speaker 1: what I don't get. I don't understand why, you know, um,
30:23
Speaker 1: taking out the bridge to um To to block one
30:28
Speaker 1: place where Russian troops come into the theater makes sense.
30:34
Speaker 1: That's a strategic move. Why does Putin then turn around
30:38
Speaker 1: and attack civilians as if that bridge was somehow off limits.
30:45
Speaker 1: The bridge, of course is not off limits because the
30:50
Speaker 1: troops of fuel the AMMA are all going into the
30:53
Speaker 1: theater through that bridge. Um. But attacking civilians is the
30:58
Speaker 1: last time I checked. It's a war cron and I
31:00
Speaker 1: think one of the responses that Biden administration and the
31:04
Speaker 1: Europeans need to do now is to start identifying who
31:08
Speaker 1: are the war criminals of this war. The Ukrainians are
31:13
Speaker 1: doing some of that work, of course, but I think
31:16
Speaker 1: this needs to be escalated because these people need to
31:18
Speaker 1: understand that as long as this war is continuing, they're
31:23
Speaker 1: piling up what may lead to their life uh sentences
31:29
Speaker 1: in the hade Ros I want to bring you in.
31:31
Speaker 1: Roz Matheson, Executive editor for International Government of Bloomberg News
31:35
Speaker 1: you know, ros has been I guess, you know, always
31:37
Speaker 1: a concern in the back of folks mind that maybe
31:39
Speaker 1: President Putin will get so desperate that the nuclear option
31:44
Speaker 1: maybe on the table. What's the latest reporting there? Of course,
31:47
Speaker 1: that remains the concern, But he's been threatening that in
31:50
Speaker 1: some shape or films since the war began. The question
31:53
Speaker 1: is how much is he's back against the war the war,
31:57
Speaker 1: and how much does the war continue to go against
32:00
Speaker 1: him on the ground, and therefore, what are his options
32:02
Speaker 1: really to get any kind of result. I mean, what
32:05
Speaker 1: he's had some success in so far is sort of
32:09
Speaker 1: sowing a bit of disarray within EU more broadly over
32:12
Speaker 1: energy access going into winter, certainly cutting off energy supplies
32:16
Speaker 1: two countries um and as we can see within Ukraine
32:19
Speaker 1: itself as we're just hearing cutting off electricity supply with
32:23
Speaker 1: some of his attacks today. And if you want to
32:26
Speaker 1: splinter Europe further and you want to really push them
32:29
Speaker 1: on the unity question with Ukraine, do you go so
32:31
Speaker 1: far as to use a nuclear weapon in Ukraine to
32:35
Speaker 1: sort of see what the response would be, And that
32:38
Speaker 1: maybe the question right now, there's no there's no sense
32:41
Speaker 1: that he's moving nuclear assets towards that, but certainly he's
32:44
Speaker 1: leaving that option open, and that's really putting us in
32:48
Speaker 1: quite a dangerous phase. As you can see today from
32:51
Speaker 1: the extent of the missile attacks that have gone on
32:53
Speaker 1: across Ukraine. He's suffered numerous personal prestige blows. The bridge himself,
32:59
Speaker 1: that was something you drive a truck over when it
33:01
Speaker 1: was opened, after it was built, So for him it's personal.
33:05
Speaker 1: Dr Cohen, what's the likelihood of the Russians using nuclear weapons? Well,
33:11
Speaker 1: this is UH sixty four billion dollar question. And I'm
33:15
Speaker 1: not talking about the Democratic Party fundraiser at which President
33:20
Speaker 1: Biden found it appropriate to discuss this dire and grave topic.
33:25
Speaker 1: I think the conversation about whether puts In is using
33:28
Speaker 1: tactical nukes or god forbid, it escalates to strategic nuclear exchange.
33:33
Speaker 1: We should could should not be done as a part
33:36
Speaker 1: of a fundraiser. It should be a serious conversation, probably
33:39
Speaker 1: in a speech to the nation by the President. UM.
33:43
Speaker 1: I think the chances are all my contacts in Russia,
33:47
Speaker 1: outside of Russia in the US government are saying that
33:50
Speaker 1: the probability of this is growing. We started UH several
33:57
Speaker 1: months ago talking about I was talking about people corrected
34:02
Speaker 1: me and said, no, thirty now I think it's over.
34:05
Speaker 1: It's quite possible that Russia will use tactical nuclear weapons.
34:10
Speaker 1: And the big question is, of course, what's dex Are
34:13
Speaker 1: we going to respond, How are we going to respond?
34:17
Speaker 1: How Natal allies are going to respond? And this these
34:20
Speaker 1: are the uncharted waters. This is more grave and more
34:25
Speaker 1: diet than the Cuban missile crisis, in which nuclear weapons
34:28
Speaker 1: were not used. And and and how do Russian allies respond?
34:32
Speaker 1: I mean Risal And let me ask you, um, how
34:35
Speaker 1: has the Russian relationship with China fair throughout this war?
34:40
Speaker 1: And you know, if we get there, they have to
34:42
Speaker 1: probably reas the Chinese probably have to reassess their their
34:46
Speaker 1: support for Putin. We have to imagine that the Chinese
34:49
Speaker 1: president is not particularly happy that this is going on,
34:52
Speaker 1: or certainly that it's dragged on so long. Right as
34:54
Speaker 1: he goes into his own leadership moment in China next
34:58
Speaker 1: week where he wants to be reindorsed for a third
35:00
Speaker 1: term because he doesn't need this kind of mess occurring,
35:03
Speaker 1: does he particularly care about the war in Ukraine. That's
35:06
Speaker 1: up for debate. Um, certainly, Um. He has continued to
35:10
Speaker 1: do business with Russia. As of other countries, including India
35:13
Speaker 1: for example, UM in trading. But China has been pretty
35:17
Speaker 1: careful not to step too much into the bounds of sanctions,
35:20
Speaker 1: even if they haven't signed up for them. They're being
35:22
Speaker 1: pretty careful. UM and he in some ways he and
35:25
Speaker 1: Russia do still need each other, um as sort of
35:28
Speaker 1: a bulwalk against against the West as we move into
35:31
Speaker 1: a really truly multipolar world. UM that there's vested interests
35:36
Speaker 1: there is he probably particularly happy with the way that
35:39
Speaker 1: Vladimir Putin is conducting this. You would you would think not,
35:42
Speaker 1: and he's probably expressed that privately. Will he publicly criticized
35:46
Speaker 1: Russia if they test, if they do, if they do
35:49
Speaker 1: a nuclear weapon potentially, But there's still a relationship there,
35:53
Speaker 1: all right, So sobering discussion points there. Again, the odds
35:56
Speaker 1: of a new from Dr Cohen are much higher than
35:58
Speaker 1: I would have thought. Dr Ariel O and senior fellow
36:00
Speaker 1: Atlantic Council Eurasia Center and Ros Math is an executive
36:04
Speaker 1: editor for International Government for Bloomberg News. With again some
36:08
Speaker 1: sobering assessments of the situation in Ukraine. Thanks for listening
36:14
Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen
36:17
Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.
36:22
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller. Put
36:26
Speaker 1: on fall Sweeney I'm on Twitter at pt Sweeney. Before
36:29
Speaker 1: the podcast, you can always catch us worldwide at Bloomberg
36:32
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