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Markets, The Supply Chain, And California · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Well, my personal China
• 0:22
  Speaker 1: Bellweather stock is Ali baba b A b A stocks
• 0:27
  Speaker 1: down sevent today, fifty two week low. I blame the
• 0:31
  Speaker 1: political situation in China, and I blame all emerging markets
• 0:35
  Speaker 1: strategists as well. And then that includes Damien Sassaur, who
• 0:39
  Speaker 1: is our chief emerging market strategist. Is the Do you
• 0:43
  Speaker 1: cover the UK as well as chief market I know
• 0:47
  Speaker 1: I don't cover the UK, but people have been asking
• 0:49
  Speaker 1: you that. Actually it is the second largest economy in
• 0:53
  Speaker 1: the world, uninvestable debt, demographics and declining productivity. That is China.
• 0:58
  Speaker 1: And for me, look, it comes down to reserves. In
• 1:00
  Speaker 1: an environment like this, it's who has liquidity buffers to
• 1:03
  Speaker 1: protect their currencies during times of distress. China's got three
• 1:06
  Speaker 1: trillion reasons not to be worried. But the rapid deterioration
• 1:09
  Speaker 1: of their currency base is not to be ignored. I mean,
• 1:11
  Speaker 1: we're down seven and a half percent year today. They've
• 1:13
  Speaker 1: lost about two hundred and fifty billion dollars of soft
• 1:16
  Speaker 1: currency reserves this year. That's quite a bit of money,
• 1:19
  Speaker 1: but it pales in comparison to what we're seeing across
• 1:21
  Speaker 1: the whole of em I mean, reserves are down eight
• 1:23
  Speaker 1: point one percent across you know the major eighteen markets.
• 1:26
  Speaker 1: And uh, I mean you've got countries like Malaysia, Indonesia,
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  Speaker 1: the Philippines that are just feeling the pain and their
• 1:31
  Speaker 1: currencies are trading pretty much at all time loads. So
• 1:34
  Speaker 1: you know, where do we go from here? To anyone's guess?
• 1:37
  Speaker 1: But not uninvestable, right, I mean, how can you even
• 1:40
  Speaker 1: say that about such a huge economy given a longer
• 1:43
  Speaker 1: time horizon. Clearly, even if you have concerns now, there's
• 1:48
  Speaker 1: got to be some opportunity down the road. Is the
• 1:52
  Speaker 1: worst case scenario for an Ali Baba investor, for example,
• 1:57
  Speaker 1: And Ali Baba investor was doing one buying one thing,
• 2:00
  Speaker 1: but it's buying the growth of the middle class in China.
• 2:03
  Speaker 1: That's it. Forget the Internet, forgett e commerce. That was
• 2:06
  Speaker 1: the play. Now. Offsetting that was this broad thing called
• 2:11
  Speaker 1: China risk. This is China risk. The government can come
• 2:15
  Speaker 1: in and shut you down tomorrow, yeah, and they can
• 2:19
  Speaker 1: block out the truth. I mean, look, I think all
• 2:21
  Speaker 1: of us, inherently, fundamentally, we just want they could do that.
• 2:24
  Speaker 1: Last year, that's it, and next year that that hasn't
• 2:28
  Speaker 1: changed at all just because she has stacked some governing board.
• 2:32
  Speaker 1: He was still all powerful before this, yes he was,
• 2:35
  Speaker 1: but I mean the question was was he going to
• 2:36
  Speaker 1: use that power and how is he going to use
• 2:38
  Speaker 1: that power. I mean, look, I think a lot of
• 2:40
  Speaker 1: people are getting up in arms this morning about how
• 2:43
  Speaker 1: he stacked the deck, not so much with she loyalists,
• 2:45
  Speaker 1: but really with people who are sympathetic to the COVID
• 2:47
  Speaker 1: zero policy. Right, So that was the big thing. I
• 2:49
  Speaker 1: think most analysts, not myself, thought that that policy might
• 2:53
  Speaker 1: very well change before the end of the year, if
• 2:55
  Speaker 1: not in the beginning of next year. And now that
• 2:57
  Speaker 1: seems to be out the door. So I think that's
• 2:59
  Speaker 1: why Chinese equities, why A shares, why in the Hong
• 3:01
  Speaker 1: Kong you know what? Why everything is kind of down today. Look,
• 3:05
  Speaker 1: it's anyone's guests, but I mean, for me. I mean
• 3:07
  Speaker 1: it's it's about liquidity, and if you don't have the
• 3:09
  Speaker 1: ability to protect your currency and protect currency stability in
• 3:12
  Speaker 1: times of distress, you know, everything else goes out the door,
• 3:15
  Speaker 1: including the equity valuations for many of those thoughts like
• 3:17
  Speaker 1: matuan ten cents in Ali Baba. But is that what
• 3:21
  Speaker 1: we're watching right now? I mean, um, we've been looking
• 3:24
  Speaker 1: at six ninety to seven for seven thirty now almost yeah, no,
• 3:30
  Speaker 1: for so long. You know, it's not huge swings. This
• 3:32
  Speaker 1: isn't like the pound or the euro. This isn't like
• 3:34
  Speaker 1: crazy talk. It's managed currency exactly. It's a managed currency.
• 3:38
  Speaker 1: But look, it is a currency that is so heavily
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  Speaker 1: involved in global trade, and you know we now I mean, look,
• 3:43
  Speaker 1: if you just look at export flows, I mean they
• 3:44
  Speaker 1: came out overnight. I mean exports are down significantly. I'm
• 3:47
  Speaker 1: talking double digits. China in the US, China and the
• 3:49
  Speaker 1: Eurozone down seven percent, China in the UK down eleven.
• 3:52
  Speaker 1: So you know, global trade is going in one direction
• 3:54
  Speaker 1: and that's down. And you know that means that, you know,
• 3:57
  Speaker 1: if there's not enough demand for China's exports abroad, it's
• 4:00
  Speaker 1: just gonna weigh that much more heavily on its domestic economy.
• 4:02
  Speaker 1: And look, if you just look an unemployment, it's ticked
• 4:04
  Speaker 1: up to five point five percent overnight. You know, retail
• 4:07
  Speaker 1: sales are down again. No one is lending in China
• 4:10
  Speaker 1: because why lend to households or two small companies if
• 4:13
  Speaker 1: to your point, you know, the government could come in
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  Speaker 1: and take it from you tomorrow. So what does this
• 4:18
  Speaker 1: mean then, for not if Paul wants to buy Ali
• 4:21
  Speaker 1: Baba or not, but what does this mean for if
• 4:24
  Speaker 1: Tesla wants to sell more cars in China? That's a
• 4:26
  Speaker 1: great question. What does this mean if JP Morgan and
• 4:29
  Speaker 1: Goldman Sachs want to do more business in China. I
• 4:32
  Speaker 1: know Matt loves the auto sector, so let's go there.
• 4:33
  Speaker 1: You know, it has slashed their prices by five percent
• 4:36
  Speaker 1: overnight right in China, so the currency weekends. So they're
• 4:38
  Speaker 1: they're because they're starting a they're starting a price war
• 4:41
  Speaker 1: for electronic vehicles in China, and that and that is
• 4:44
  Speaker 1: what and so that they've laid the gauntlet down. So
• 4:47
  Speaker 1: that's a very different story. But we must remember how
• 4:49
  Speaker 1: auto sales drives not just China, I mean the Eastern
• 4:53
  Speaker 1: European block is completely hungry pole in Czech Republic dominated
• 4:57
  Speaker 1: by auto sales. And so if we now get into
• 4:59
  Speaker 1: a price where are you know, every you know, part
• 5:01
  Speaker 1: they're manufacturing is worth that much less, it's gonna be really,
• 5:03
  Speaker 1: really painful for a lot of these countries operating out
• 5:06
  Speaker 1: along the periphery and emerging markets. And it's not just
• 5:10
  Speaker 1: little startups like Tesla right, entrenched incumbent automakers like Folks Swag.
• 5:15
  Speaker 1: They're sending their CEO with the German Chancellor to Beijing
• 5:20
  Speaker 1: next month to probably plead on bended knee for more access.
• 5:24
  Speaker 1: Yeah yeah, now, I mean look, I mean, look, it's
• 5:26
  Speaker 1: very difficult to gauge where we are. What I can
• 5:28
  Speaker 1: tell you is as even the economies that got out
• 5:30
  Speaker 1: in front of the tightening cycle, the Brazils, the Chile's,
• 5:32
  Speaker 1: the Czech Republics, everyone, you know, you know, you're finally
• 5:36
  Speaker 1: starting to see them pumping the brakes on tightening. But
• 5:38
  Speaker 1: how much more can they pump the brakes really with
• 5:40
  Speaker 1: inflation running hot the way it is, I don't know,
• 5:42
  Speaker 1: but activity I mean, right now, technically, Brazil, Chili, some
• 5:44
  Speaker 1: of these economies are technically in recession probably as we speak,
• 5:47
  Speaker 1: you know, and so for me, it's going to be
• 5:49
  Speaker 1: very interesting to see some of the central bank meetings
• 5:50
  Speaker 1: we're seeing this week. We've got Brazil on Wednesday, We've
• 5:52
  Speaker 1: got Columbia towards the end of the week. We've got
• 5:54
  Speaker 1: Hungry this week. Those are all very important economies to see.
• 5:58
  Speaker 1: You know, where their central banks are at, where their
• 5:59
  Speaker 1: heads are, whether or not they can stem the decline.
• 6:01
  Speaker 1: But with reserves coming off, what that means is that
• 6:04
  Speaker 1: it exposes investors to risk of capital outflows in mass.
• 6:07
  Speaker 1: And that's where we are. The life and times of
• 6:10
  Speaker 1: an emerging market strategy. It's very difficult to create a
• 6:12
  Speaker 1: bush narrative policeto. Luckily you're doing well in the fantasy
• 6:17
  Speaker 1: and a sports betting and sports betting expert on top
• 6:20
  Speaker 1: of that. Boy, but that's a that's a combo right there.
• 6:23
  Speaker 1: David Sassaur, he's our chief strategist for all things emerging
• 6:26
  Speaker 1: markets at Bloomberg Intelligence. It's just a weird tape here.
• 6:35
  Speaker 1: Got the SMP up two tenths of one percent, the
• 6:37
  Speaker 1: deal up seven tenths and one percent, and then that's
• 6:39
  Speaker 1: that down eight tenths of one percent. So well, I
• 6:41
  Speaker 1: guess the tech stocks are going to get super hard
• 6:43
  Speaker 1: because of the China concerns, right, and I think the
• 6:46
  Speaker 1: broader market is up on um relief out of the UK.
• 6:51
  Speaker 1: That Richie Sunak is going to be the Prime minister
• 6:55
  Speaker 1: seems that seems like the reasonable choice. And all we're
• 6:57
  Speaker 1: by the way, we're set up for almost six billion
• 7:00
  Speaker 1: dollars uh so earnings from companies that have six trillion
• 7:06
  Speaker 1: dollars sorry in market cap like massive from tomorrow. We
• 7:09
  Speaker 1: got General Electric, we got General Motors, we got Coca Cola,
• 7:13
  Speaker 1: I mean, just a ton then Tech at the end
• 7:15
  Speaker 1: of the week, at the end of at the end
• 7:16
  Speaker 1: of the day tomorrow, Microsoft and alphabetay is of course Google, Yeah,
• 7:21
  Speaker 1: of course, okay, I'll be good stuff. So, you know, earnings,
• 7:24
  Speaker 1: sharpen your pencil. Let's check in on somebody who does
• 7:27
  Speaker 1: this kind of stock stuff for a living. Robert Stimpson,
• 7:31
  Speaker 1: c I O and portfolio manager at Oak Associates. So, Robert,
• 7:36
  Speaker 1: we've had a couple of three days of some you know,
• 7:39
  Speaker 1: upward moves into market, and what do you make of that?
• 7:43
  Speaker 1: Is that are we still in this bear market? But
• 7:44
  Speaker 1: we're just getting a little bit of a technical bumpers
• 7:47
  Speaker 1: or anything else going on. Out there. Well, the market
• 7:51
  Speaker 1: certainly has been you know, healthier or stronger than last
• 7:54
  Speaker 1: week or so, but UM, you know, we do that
• 7:57
  Speaker 1: we do view that as uh kind of acovery from
• 8:00
  Speaker 1: a very over sold position. Um, the market was very
• 8:05
  Speaker 1: washed out after uh sustained weakness since August, and uh,
• 8:10
  Speaker 1: you know, it's been more of a of a balance
• 8:12
  Speaker 1: in our opinion, given we're in a window between you know,
• 8:16
  Speaker 1: a bottom in September and a earning season in November.
• 8:22
  Speaker 1: So but do you think that was the bottom in
• 8:25
  Speaker 1: September or um? You know, does it really depend on
• 8:28
  Speaker 1: what happens this earning season. Um, if we have a
• 8:32
  Speaker 1: big recession, is it likely to come next year? I
• 8:34
  Speaker 1: guess these are the questions, These are the questions everyone's asking.
• 8:38
  Speaker 1: But you know, in general, I tend to say that,
• 8:41
  Speaker 1: you know, a recession doesn't matter for stocks. They simply
• 8:44
  Speaker 1: do not like a slowing economy, and that is what
• 8:46
  Speaker 1: we have. So whether it's a mid cycle slowdown or
• 8:49
  Speaker 1: a soft landing or a recession, UH, stocks tend to
• 8:53
  Speaker 1: struggle when the economy is slowing, and that's the environment
• 8:57
  Speaker 1: we're in. So the last week may have been better,
• 9:00
  Speaker 1: but we do think it's going to be well into
• 9:02
  Speaker 1: next year before stocks get further signals that has sustained
• 9:06
  Speaker 1: advance is really possible, and bottoming is a process, and
• 9:10
  Speaker 1: we're in the middle of that process. So what do
• 9:13
  Speaker 1: we do here? I mean, do I just take my
• 9:15
  Speaker 1: money and put it into your bond and get my
• 9:17
  Speaker 1: four point five percent? Is that what I do until
• 9:19
  Speaker 1: I get a better sense of where this economy is going? Well,
• 9:23
  Speaker 1: that depends if you're a long term investor a short
• 9:25
  Speaker 1: term investor. Um it Oak Associates We are long term investors,
• 9:29
  Speaker 1: and the market is certainly presenting a lot of long
• 9:32
  Speaker 1: term opportunities here. Um. Given the decline the market has
• 9:36
  Speaker 1: experienced the you know, year to date, valuations in many
• 9:40
  Speaker 1: sectors are very attractive. And if you're able to take
• 9:42
  Speaker 1: a long term view and not worried about this quarter
• 9:45
  Speaker 1: or what the the January number is gonna look like, UM,
• 9:48
  Speaker 1: you should do very well. Where what sectors do you like? Well,
• 9:52
  Speaker 1: you know, one group you like is the semiconductors. They've
• 9:55
  Speaker 1: been under a lot of pressure on concerns over a
• 9:58
  Speaker 1: new sort of chip war with China. UM, but valuations
• 10:01
  Speaker 1: have come down a lot from a year ago, year
• 10:04
  Speaker 1: and a half ago when the industry was showing uh,
• 10:07
  Speaker 1: you know, double ordering and concerns over supply chain issues UM,
• 10:12
  Speaker 1: and we were a little more cautious on the group
• 10:14
  Speaker 1: back then, but valuations have contracted, so now we're more
• 10:17
  Speaker 1: constructive on it. UMU as a group, though, I've been
• 10:21
  Speaker 1: really confused because it seems like UM chips that are
• 10:26
  Speaker 1: made for PCs are pretty much worthless. I mean, we're
• 10:29
  Speaker 1: we're we're puking them, and and chips that are made
• 10:32
  Speaker 1: for you know, cars are impossible to find. Still, Yeah,
• 10:36
  Speaker 1: you're absolutely right, UM anything PC server gaining related. UM.
• 10:43
  Speaker 1: Not only is their abundant supply at this point, but
• 10:46
  Speaker 1: UM a lot of that demand was pulled forward during
• 10:48
  Speaker 1: the pandemic UM and now there's just not as much
• 10:51
  Speaker 1: of a need for it. So yeah, the opportunities are
• 10:53
  Speaker 1: not in the PC, they're more in the industrial, the
• 10:56
  Speaker 1: automotive as well as the equipment sector. UM names like
• 11:00
  Speaker 1: k l A, ten Core, LAMB Research. Their long term
• 11:04
  Speaker 1: sales are driven by generational changes, improvements and yields and
• 11:08
  Speaker 1: new factories, and we know that those are going to
• 11:10
  Speaker 1: continue regardless of the current supply of certain chips. So Robert,
• 11:15
  Speaker 1: you're based in Akron. Right, ye, all right, how the
• 11:19
  Speaker 1: great state of Ohio, by the way, but it's perilously
• 11:22
  Speaker 1: close to Michigan. I will say, how's the economy in Akron, Ohio.
• 11:27
  Speaker 1: When I think Akron, Ohio, I think good Middle America,
• 11:30
  Speaker 1: good folks, tires, tires, of course, tires. Absolutely, How are
• 11:35
  Speaker 1: things in Acron? You know, our economy is is quite
• 11:39
  Speaker 1: stable at this point. Um. I think we're still seeing
• 11:43
  Speaker 1: some of the by products of the pandemic. Restaurants are
• 11:47
  Speaker 1: a little bit understaffed. We're seeing a lot more automated
• 11:50
  Speaker 1: teller machines at restaurants, grocery stores. Um. But I think,
• 11:55
  Speaker 1: like much of America, the employment situation has been really
• 12:00
  Speaker 1: strong nationwide, and as a result, there's still labor shortages.
• 12:05
  Speaker 1: It's some basic service industries and um, you know, it
• 12:09
  Speaker 1: kind of gives you the feel that the economy is
• 12:11
  Speaker 1: doing fine. All right, Well, you're Ohio State Buckeys. I
• 12:15
  Speaker 1: think you're gonna be upset this weekend, and Happy Valley
• 12:17
  Speaker 1: by Penn State. That's the call right here. I'm taking
• 12:20
  Speaker 1: the points whatever. We'll see, all right, Robert, thank you
• 12:23
  Speaker 1: so much. We appreciate that. Robert Stimpson, ce Io and
• 12:25
  Speaker 1: portfolio manager at Oak Associates, located in the great city
• 12:30
  Speaker 1: of Akron, Ohio, entire capital. Uh good stuff right there, Matt.
• 12:37
  Speaker 1: Go when you're sitting in front of your Bloomberg terminal
• 12:40
  Speaker 1: and then you click on vessels and it shows you
• 12:43
  Speaker 1: where all the global ships are all around the world
• 12:46
  Speaker 1: import in transit, and so we've been focusing on that
• 12:49
  Speaker 1: really since the beginning of the pandemic, and focusing on
• 12:51
  Speaker 1: some of the big U s ports like Los Angeles
• 12:53
  Speaker 1: Long Beach, things like that, Savannah on the East Coast,
• 12:55
  Speaker 1: and of course Bayo, New Jersey, which is the center
• 12:59
  Speaker 1: of global trade. In my opinion, Um, you look at
• 13:01
  Speaker 1: it now, boy, there's not that many ships off port
• 13:04
  Speaker 1: of Things really gotten a lot better just looking at this.
• 13:07
  Speaker 1: So we want to bring in Jeans Saroka. He's the
• 13:09
  Speaker 1: CEO of the Port of Los Angeles. He joins us
• 13:12
  Speaker 1: here in our Bloomberg Interactive Broker Studio, who has been
• 13:14
  Speaker 1: really good making himself available during this pandemic to give
• 13:17
  Speaker 1: us a sense of kind of what's going on in
• 13:19
  Speaker 1: the Port of Los Angeles, because that really is one
• 13:21
  Speaker 1: of the the main global ports in the world. Gene,
• 13:25
  Speaker 1: thanks so much for joining us here. How are things
• 13:27
  Speaker 1: in l A. How are things at the port? If
• 13:28
  Speaker 1: I bring my big ship up? How long do I
• 13:30
  Speaker 1: have to wait? Paul Matt Good to be with you guys.
• 13:33
  Speaker 1: Today the situation is much better. The marine terminals are fluid.
• 13:37
  Speaker 1: The backlog of vessels has gone from a hundred and
• 13:40
  Speaker 1: nine in January down to single digits as of today.
• 13:45
  Speaker 1: And those ships that are waiting outside the port stay
• 13:48
  Speaker 1: there no longer than twenty four hours before they come
• 13:50
  Speaker 1: in for work. So that's good news. I mean that
• 13:53
  Speaker 1: sounds like the supply chain issues are simmering down. Um
• 13:59
  Speaker 1: is it? Can you sound the all clear? Are you
• 14:01
  Speaker 1: still concerned? Oh, Matt? The supply chain always needs improvement.
• 14:04
  Speaker 1: You've got to hone your craft every day. But by
• 14:07
  Speaker 1: and large it's moving in a good fluid form right now.
• 14:10
  Speaker 1: The dwell times on cargo moving out by truck, which
• 14:13
  Speaker 1: represents two thirds of all of our business, is down
• 14:16
  Speaker 1: to pre pandemic times, so the cargo velocity is good.
• 14:18
  Speaker 1: Still working on the rail piece, but seeing great improvement
• 14:21
  Speaker 1: over the last eight weeks. And I know the less
• 14:23
  Speaker 1: you know the last couple of times you've been here.
• 14:25
  Speaker 1: It's it's not just getting the ships into port. It's like,
• 14:27
  Speaker 1: as you mentioned, getting them unloaded, getting the cargo out
• 14:31
  Speaker 1: very either rail or truck, and then finding cargo space,
• 14:34
  Speaker 1: warehouse space. So talk to about that supply chain as
• 14:37
  Speaker 1: you go out from the port and kind of get
• 14:39
  Speaker 1: into the you know, kind of the storage areas and
• 14:42
  Speaker 1: so on. Right working our way backwards, there's two billion
• 14:45
  Speaker 1: square foot of warehousing available from the shores of the
• 14:49
  Speaker 1: Pacific to the desert region, Paul, right now, about zero
• 14:52
  Speaker 1: point two percent vacancy. In more normal times as we
• 14:55
  Speaker 1: head into that peak season, you'd see about five percent vacancy,
• 14:58
  Speaker 1: but those warehouses still filled to the gills. You've seen
• 15:02
  Speaker 1: people switch from ordering just in case to just in time,
• 15:05
  Speaker 1: taking whatever cargo they could from the manufacturer in Asia
• 15:08
  Speaker 1: bringing it here to help solve that equation around this
• 15:11
  Speaker 1: insatiable appetite of the American consumer. So they so they're
• 15:14
  Speaker 1: stocking up there just in case they need it, because
• 15:18
  Speaker 1: they're worried that something may happen, uh like we saw
• 15:22
  Speaker 1: in the pandemic, and they won't be able to get it.
• 15:24
  Speaker 1: It's not that they can't sell the stuff, and it's
• 15:27
  Speaker 1: not that they can't truck the stuff. That's exactly right.
• 15:30
  Speaker 1: And Matt, it's been the build up over the last
• 15:32
  Speaker 1: two and a half to three years of all this
• 15:34
  Speaker 1: inventory coming in because we've been buying so much. Now
• 15:37
  Speaker 1: at this point, you head into a holiday season where
• 15:40
  Speaker 1: the good segments are a little bit more narrow to
• 15:43
  Speaker 1: think about what you want for to give the kids
• 15:45
  Speaker 1: and friends for the holidays, winter, where, etcetera. You've got
• 15:49
  Speaker 1: to get this inventory out of the warehouses and into
• 15:52
  Speaker 1: the economy, and it may look different. It could be
• 15:54
  Speaker 1: patio furniture or flat screen TVs other products. So you've
• 15:58
  Speaker 1: got two distinct areas to look out. What's gonna sell
• 16:00
  Speaker 1: now and what you have to push into the market.
• 16:02
  Speaker 1: The heck, a lot of the stuff that you guys
• 16:05
  Speaker 1: bring in is coming out of China. And we're focused
• 16:07
  Speaker 1: so much on China today because we've got data, economic
• 16:11
  Speaker 1: data out of the second biggest economy in the world.
• 16:14
  Speaker 1: We also got um some political news. She is cemented
• 16:20
  Speaker 1: his spot at the top for an unprecedented third term.
• 16:23
  Speaker 1: Tell us about how important it is to China is
• 16:26
  Speaker 1: to your business. Right, having lived in China for over
• 16:29
  Speaker 1: four years and keeping up great relationships there on the
• 16:31
  Speaker 1: business side, I can tell you flat out, for the
• 16:34
  Speaker 1: Port of Los Angeles, it's about sixty percent of our
• 16:37
  Speaker 1: trade volume, essentially the biggest book of business across the
• 16:40
  Speaker 1: board and by far to the number two competitor. The
• 16:44
  Speaker 1: other piece to this is it's been a rocky relationship
• 16:46
  Speaker 1: on the trade and government side over the last four
• 16:48
  Speaker 1: years with the introduction of tariffs retaliatory tariffs. Yet I
• 16:52
  Speaker 1: don't even think the authors would have seen that yielded
• 16:55
  Speaker 1: more imports, less exports, in the whitest gap in trade
• 17:00
  Speaker 1: our country's history. Gene talked to us about labor. I
• 17:03
  Speaker 1: know in past discussions it's it's hard to find folks
• 17:06
  Speaker 1: to unload the ships to you know, load up the
• 17:09
  Speaker 1: trains and trucks and things like that. How's the labor
• 17:11
  Speaker 1: situation in l A Three segments of labor Paul. One
• 17:14
  Speaker 1: is the dock worker group. That's about fifteen thousand folks
• 17:17
  Speaker 1: that are moving the containers on and off ships to
• 17:19
  Speaker 1: truck and rail. That's been solid. They've been at full employment,
• 17:22
  Speaker 1: working on average about six days a week since the
• 17:25
  Speaker 1: pandemic began. Second is the truck driving group, and with
• 17:29
  Speaker 1: about twenty drivers registered to do business at the port,
• 17:32
  Speaker 1: they're in good shape as well, but they have a
• 17:35
  Speaker 1: mandate on hours of service federal regulations where they can
• 17:38
  Speaker 1: work eleven hours a day and if they work consecutively
• 17:41
  Speaker 1: have to take some time off. Matching up the volume
• 17:44
  Speaker 1: with the workers availability on the trucking side is key.
• 17:47
  Speaker 1: And then last is the warehouse workers. As I mentioned,
• 17:49
  Speaker 1: those warehouses have been full and that's been a very
• 17:52
  Speaker 1: challenging location to attract, recruit and retain talent. Got to
• 17:58
  Speaker 1: have more focus on that, whether it's pay, benefits, training,
• 18:01
  Speaker 1: or upward mobility. So but you know, the concern is
• 18:05
  Speaker 1: the concern was getting the people you needed to fill
• 18:08
  Speaker 1: those spots. It looks like you're doing quite well on
• 18:11
  Speaker 1: that side. Then paying them um a price. Wage spiral
• 18:16
  Speaker 1: is the big worry for the FED and for a
• 18:18
  Speaker 1: lot of businesses. Do you see anything like that? Yeah,
• 18:21
  Speaker 1: it's gonna be interesting because right now we're in the
• 18:23
  Speaker 1: middle of the dock workers negotiation with their employers Association,
• 18:27
  Speaker 1: and I'm sure that one of the hot topics in
• 18:29
  Speaker 1: there is around compensation and benefits. How we look, the
• 18:32
  Speaker 1: shipping industry has made a lot of money over the
• 18:34
  Speaker 1: last three years. The workers have been out on those
• 18:37
  Speaker 1: docks working essentially throughout this pandemic and in this surge
• 18:41
  Speaker 1: of cargo, they deserve to be paid as well. Looking
• 18:43
  Speaker 1: at these other workers that are not represented by organized
• 18:47
  Speaker 1: labor is where you'll probably see a change in pace
• 18:50
  Speaker 1: when it comes to pay and retention concepts. Ten million
• 18:53
  Speaker 1: jobs open nationwide, we have not been immune to making
• 18:56
  Speaker 1: sure we have the right people in the proper spots.
• 18:58
  Speaker 1: So just about the competitive environment on the West Coast,
• 19:02
  Speaker 1: who do you who does l A really compete against
• 19:04
  Speaker 1: and how do you how do you compete against the
• 19:06
  Speaker 1: other ports? Yeah, of the nation's goods move inbound through
• 19:10
  Speaker 1: the ports of l A and Long Beach, about thirty
• 19:12
  Speaker 1: percent of exports. I like to think we compete against everybody,
• 19:16
  Speaker 1: but realistically, speaking from Asia to the interior of the country,
• 19:19
  Speaker 1: it's the fastest, most efficient way. And with a twenty
• 19:23
  Speaker 1: million population base in southern California, you've got a local
• 19:28
  Speaker 1: purchasing power that's unlike anywhere else in the country. But
• 19:32
  Speaker 1: the East and Gulf Coast ports have hired really great people,
• 19:34
  Speaker 1: invested in aligned with policy makers. We've got to be
• 19:37
  Speaker 1: on our game every day. I was looking at like,
• 19:41
  Speaker 1: if I'm coming from Asia, naturally I go to the
• 19:44
  Speaker 1: West coast, but there were some times when people were
• 19:45
  Speaker 1: coming the shippers are coming through the canal and going
• 19:48
  Speaker 1: to like Savannah for example, because it was backed up
• 19:51
  Speaker 1: on the west coast. Has that been alleviated No, not really.
• 19:54
  Speaker 1: What we saw where shippers earlier this summer begin their
• 19:58
  Speaker 1: moved bringing cargo through of the Panama or Suez Canals
• 20:01
  Speaker 1: to the eastern Gulf coast. And in fact, while we
• 20:04
  Speaker 1: were moving record breaking numbers again this year for the
• 20:06
  Speaker 1: first seven months and working those ships down from a
• 20:09
  Speaker 1: hundred and nine to basically five, this morning you saw
• 20:13
  Speaker 1: that cargo shift. Jean Stroka, uh here runs support of
• 20:16
  Speaker 1: l a lots of boats going in and out. I
• 20:19
  Speaker 1: think it's an important part of the economy. Speaking of
• 20:21
  Speaker 1: export to the United States, speaking of hey, so Jeane,
• 20:23
  Speaker 1: we've got this crazy strong dollar. Um when you think
• 20:28
  Speaker 1: about currencies, how does that impact your business? How do
• 20:30
  Speaker 1: you kind of factor that into kind of your planning. Yeah,
• 20:33
  Speaker 1: it makes American imports that much cheaper, but it puts
• 20:38
  Speaker 1: a damper on American exports, and that's what we witnessed.
• 20:41
  Speaker 1: We're down thirty seven and the last forty nine months
• 20:43
  Speaker 1: on exports in part by trade policy of the previous
• 20:48
  Speaker 1: administration and in part by the strength of the US dollar.
• 20:51
  Speaker 1: We're competing against soybeans from Brazil that have a better
• 20:54
  Speaker 1: exchange rate, textile peace goods coming out of Southeast Asian
• 20:58
  Speaker 1: nations that go into the finished garment, again competing against
• 21:02
  Speaker 1: that strong U. S dollar. So as we try to
• 21:04
  Speaker 1: ramp up every available avenue to pick up U S
• 21:07
  Speaker 1: agriculture and manufactured goods, this will continue to be a headwind.
• 21:11
  Speaker 1: It's got to make people also even more interested in
• 21:15
  Speaker 1: sourcing goods out of Asia than they already were. I mean,
• 21:18
  Speaker 1: labor there has gotten more expensive, but as the dollar
• 21:22
  Speaker 1: um continues to get stronger, that evens things out, right,
• 21:25
  Speaker 1: So I just imagine, um, anyone making mass producing goods
• 21:31
  Speaker 1: is gonna at least get parts out of Asia. That's right.
• 21:34
  Speaker 1: And it's interesting to Matt because the parts and components
• 21:38
  Speaker 1: that we import for American factories are about as much
• 21:41
  Speaker 1: volume as the American retail goods that we talk about
• 21:44
  Speaker 1: so much today. So that's a really key input to
• 21:49
  Speaker 1: our economy, as well as that volume through the port
• 21:51
  Speaker 1: you know, gene. When the pandemic began and we had
• 21:55
  Speaker 1: shortages of various items, most notably the microchips. There's this
• 21:59
  Speaker 1: big discussion and big move to onshore a lot of stuff,
• 22:03
  Speaker 1: and I'm sorry, I just don't see it personally. I
• 22:05
  Speaker 1: maybe just because I grew up in the world where
• 22:07
  Speaker 1: globalization became the norm. When you talk to your shipping clients,
• 22:13
  Speaker 1: how did they think about that on shoring aspect, Is
• 22:15
  Speaker 1: that really something that's going to be material or do
• 22:19
  Speaker 1: you still think it's gonna be a global trade environment.
• 22:23
  Speaker 1: It's a real topic of discussion with most who we
• 22:25
  Speaker 1: talked to. In fact, I just had j Timmins, the
• 22:28
  Speaker 1: CEO of the North American Manufacturers Group, on our press
• 22:31
  Speaker 1: conference last month. But it's nuanced, it's layered. There's gotta
• 22:35
  Speaker 1: be tax policy that supports it. There's gotta be a
• 22:38
  Speaker 1: plan for jobs. With ten million jobs open nationwide, we
• 22:42
  Speaker 1: don't have enough workers to go to all these different
• 22:44
  Speaker 1: segments in the American economy. And Matt, as you said,
• 22:47
  Speaker 1: the ability to buy the products at a decent price
• 22:50
  Speaker 1: and get them in here to the factories looks a
• 22:53
  Speaker 1: little bit different than it did even months ago. Yeah,
• 22:56
  Speaker 1: what is your take on what we're gonna in terms
• 23:00
  Speaker 1: of the U S economy in the next months and quarters.
• 23:03
  Speaker 1: I mean, there's been so much talk about a recession.
• 23:06
  Speaker 1: We're almost, you know, talking our way into almost talking
• 23:09
  Speaker 1: our way into it, except for the fact that it's
• 23:11
  Speaker 1: it almost looks like it's not gonna happen, right, So
• 23:13
  Speaker 1: there's some people saying this could be the recession that
• 23:15
  Speaker 1: never transpired. We did see two quarters of contraction, but
• 23:21
  Speaker 1: no one's labeled that a recession yet, and it just
• 23:24
  Speaker 1: seems like we could skirt it when you look at
• 23:27
  Speaker 1: how well we're doing an earning season. Yeah, there was
• 23:30
  Speaker 1: a lot of talk months ago about a soft landing,
• 23:32
  Speaker 1: a hard landing, a little bit of turbulence of bumpy landing.
• 23:36
  Speaker 1: It's an equation that we haven't seen before. Again, so
• 23:41
  Speaker 1: many jobs open, lowest unemployment since the nineteen sixties. The
• 23:44
  Speaker 1: consumer seems resilient. Flat numbers for July, August, and September,
• 23:48
  Speaker 1: where many thought we would fall off a cliff, Producer prices,
• 23:52
  Speaker 1: wholesale prices remaining elevated, and that means that we're still
• 23:55
  Speaker 1: ordering from those folks to do the outputs. So it's
• 23:59
  Speaker 1: going to be interesting. But again, looking at inflation at
• 24:02
  Speaker 1: eight point two percent, that's what's on our minds. We
• 24:05
  Speaker 1: feel it at the gas pump, we feel it at
• 24:06
  Speaker 1: the grocery store. Can we get through this on the
• 24:09
  Speaker 1: resilience of the consumer. I think we can. It's just
• 24:12
  Speaker 1: in time. Inventory, is that passee? Because it seems like
• 24:16
  Speaker 1: that's we all learned that in business school, But then boy,
• 24:18
  Speaker 1: it can came up to bite us here during this pandemic. Yeah.
• 24:22
  Speaker 1: I think it's interesting because as we passed through the
• 24:26
  Speaker 1: pandemic and this import surge, no one wanted to be
• 24:29
  Speaker 1: the paper company, so they began ordering everything they could,
• 24:34
  Speaker 1: and the fight for factory floor space in Asia was
• 24:36
  Speaker 1: just like it was throughout the supply chain and other segments.
• 24:39
  Speaker 1: I'll take whatever order I can get, and if it's
• 24:41
  Speaker 1: patio furniture or a flat screen TV, maybe it's that
• 24:45
  Speaker 1: that Barbie doll, I'm gonna take what I can get,
• 24:47
  Speaker 1: and therefore I'm gonna build up my inventory so I'm
• 24:50
  Speaker 1: not going to run out of products for this insatiable
• 24:52
  Speaker 1: appetite of the American consumer that's yielded a lot of
• 24:56
  Speaker 1: inventory here in the US that now must be bled out,
• 24:58
  Speaker 1: maybe through discounting as we go into this all important
• 25:01
  Speaker 1: holiday season. All Right, good stuff as always. Jean Starroka,
• 25:04
  Speaker 1: thank you so much for joining us live here in
• 25:05
  Speaker 1: our Bloomberg Interactor Broker studio. We appreciate having these conversations
• 25:09
  Speaker 1: during the past two and a half years on the
• 25:11
  Speaker 1: global supply side, supply chain, that's been a big issue.
• 25:14
  Speaker 1: Matt and I we can sider ourselves. I think quasi
• 25:16
  Speaker 1: experts on the supply chain. I'm not necessarily an expert,
• 25:19
  Speaker 1: but I'm willing to get my cd L and drive
• 25:21
  Speaker 1: a truck in and out of the Port of Los Angeles. Yeah,
• 25:24
  Speaker 1: that might be you know, if things continue, might calling.
• 25:27
  Speaker 1: That might be your calling, Jean Stroka, the Port of
• 25:29
  Speaker 1: Los Angeles, we appreciate it. I'm a big fan of
• 25:35
  Speaker 1: the state of California. I mean, there's so much to do,
• 25:37
  Speaker 1: There's so many different regions of the state. It's just awesome.
• 25:40
  Speaker 1: I think I wish the financial capital of America would
• 25:44
  Speaker 1: move there. You know, Yeah, that'd be cool. Well, there's
• 25:46
  Speaker 1: a lot of dough out there, no question about it.
• 25:48
  Speaker 1: If you're a technology person, is already there. California catching
• 25:51
  Speaker 1: Germany as a number four economy. We've got Matt Winkler
• 25:54
  Speaker 1: in studio. He's got a column out today talking about
• 25:57
  Speaker 1: California breaking down the numbers. Matt Winkler, I don't know
• 26:01
  Speaker 1: what he founded. Bloomberg News is that kind of and
• 26:04
  Speaker 1: he's like an editor in chief emeritus. Okay, so that's big, right, Yeah, Okay,
• 26:08
  Speaker 1: that's good, he hied me. He hired to al Right,
• 26:11
  Speaker 1: despite that, we haven't in our studio, Matt, California. Say
• 26:14
  Speaker 1: what you will, people, everybody's going to California, Texas and Florida.
• 26:19
  Speaker 1: California is still the bomb, right, So Paul and Matt,
• 26:22
  Speaker 1: great to be with you. If you look at UM California,
• 26:28
  Speaker 1: or rather Corporate California, which is almost four hundred publicly
• 26:32
  Speaker 1: traded companies, there really isn't an industry group or or
• 26:38
  Speaker 1: category where California is number one. And if you add
• 26:41
  Speaker 1: up the growth in sales and profit of these companies
• 26:48
  Speaker 1: since when COVID disrupted the world economy, you would find
• 26:53
  Speaker 1: that California has actually been on a tear, such a
• 26:56
  Speaker 1: tear that um it is continued. If you like this
• 27:01
  Speaker 1: trajectory where uh it it leap frog Brazil in France
• 27:05
  Speaker 1: and two thousand fifteen, uh and supplanted, the UK is
• 27:09
  Speaker 1: the number five economy in two thousand seventeen, and here
• 27:12
  Speaker 1: we are two thousand twenty two. If you looked at
• 27:15
  Speaker 1: the trend lines for California and Germany, which we do
• 27:21
  Speaker 1: in the column, uh, they are the narrowest they ever
• 27:24
  Speaker 1: been in by some estimates, because we're not gonna have
• 27:26
  Speaker 1: twenty two figures until twenty three. California has already overtaken
• 27:30
  Speaker 1: Germany as the fourth largest economy in the world. The
• 27:33
  Speaker 1: interesting thing is that the narrative we hear, um, I'll say,
• 27:39
  Speaker 1: in the media, which is meta because obviously we are
• 27:43
  Speaker 1: the media. But the narrative we hear is that everyone's
• 27:45
  Speaker 1: moving out right, that California is over taxing and over
• 27:49
  Speaker 1: regulating all of these businesses, not giving startups a chance
• 27:52
  Speaker 1: or even big companies like Tesla, and they'd rather be
• 27:55
  Speaker 1: in Texas or Alabama or Florida. How un true is that?
• 28:00
  Speaker 1: Why do we hear it so much? Well, because, um,
• 28:04
  Speaker 1: you know, the easiest story to write is to go
• 28:07
  Speaker 1: to the local gas station and ask people, are you happy?
• 28:10
  Speaker 1: And the answer is gonna be no, And so we
• 28:13
  Speaker 1: have a crisis and it's called a gas crisis now California. Um,
• 28:20
  Speaker 1: the whole notion of you know, high taxes and regulation
• 28:23
  Speaker 1: just gets blown away because, as I said, there isn't
• 28:26
  Speaker 1: an industry in America where California companies are number one
• 28:32
  Speaker 1: by an overwhelming margin um against companies in any other state.
• 28:37
  Speaker 1: And that's been true, by the way, over ten years,
• 28:40
  Speaker 1: five years, two years, one year. But it's especially been
• 28:43
  Speaker 1: true during the period that we call the pandemic because
• 28:49
  Speaker 1: so much innovation occurs in in California, and we got
• 28:53
  Speaker 1: a lot of innovation during the stay at home economy.
• 28:57
  Speaker 1: Many companies that didn't exist prior to two thousand and eighteen,
• 29:02
  Speaker 1: we're flourishing by two thousand twenty one because California is
• 29:06
  Speaker 1: number one in innovation. And by the way, the proof
• 29:08
  Speaker 1: of that is that the biggest companies in the world,
• 29:11
  Speaker 1: when they have to situate their research and development, people
• 29:15
  Speaker 1: guess where they go, overwhelmingly to California. It's interesting that
• 29:19
  Speaker 1: we were talking before we came on the air here
• 29:22
  Speaker 1: about the value of the higher education system in California,
• 29:27
  Speaker 1: the UKAU system, the cow State system. UM. I mean,
• 29:32
  Speaker 1: it just seems like it's it's been such so strong,
• 29:35
  Speaker 1: so supportive of the entire state's development, and there's really
• 29:39
  Speaker 1: nothing like it that I can think of in any
• 29:41
  Speaker 1: other state. No. I mean, look, Nelson Rockefeller tried to
• 29:45
  Speaker 1: replicate what Governor Pat Brown, Jerry's father did in New
• 29:50
  Speaker 1: York State with the state university system in New York.
• 29:53
  Speaker 1: He tried to replicate that, and he did a lot
• 29:56
  Speaker 1: to to make it quite row bust. However, you're right, Um,
• 30:02
  Speaker 1: you can't find a higher education system UM as diverse
• 30:08
  Speaker 1: as UM you know, uh robust as the one that
• 30:13
  Speaker 1: exists in California. And just you know, if you look
• 30:16
  Speaker 1: at the Bay Area alone, you've got the University of
• 30:18
  Speaker 1: California Berkeley, You've got uh, the University of San Francisco,
• 30:23
  Speaker 1: you have Stanford University, UM, and UM, it's hard to
• 30:28
  Speaker 1: find anything like those gems. But actually they're all along
• 30:36
  Speaker 1: the coast, they're inland, they're everywhere. Um. You know, the
• 30:42
  Speaker 1: gems of higher education in California everywhere. And that's created
• 30:46
  Speaker 1: an environment where you get some of the smartest people
• 30:48
  Speaker 1: in the world and they lead in other industries or
• 30:52
  Speaker 1: areas as well. Well. Yeah, I mean you mentioned bleak
• 30:56
  Speaker 1: reference to Tesla. Um. You know, Tesla is now one
• 30:59
  Speaker 1: of the its just maybe the largest manufacturing company in
• 31:03
  Speaker 1: California because it has uh something like fifty employees. So
• 31:07
  Speaker 1: Elon Musk may have gone to Texas for a tax
• 31:12
  Speaker 1: free and regular regulation free lifestyle, but the people who
• 31:17
  Speaker 1: work for him um have actually increased numerically in California
• 31:23
  Speaker 1: since he made Texas headquarters. And that's not an isolated example.
• 31:28
  Speaker 1: It's that companies still are there. Obviously. All right, good stuff,
• 31:34
  Speaker 1: as always, Matt Winkler, Bloomberg News Editor in Chief Emeritus.
• 31:40
  Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
• 31:43
  Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever
• 31:47
  Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
• 31:50
  Speaker 1: at Matt Miller. On fal Sweeney, I'm on Twitter at
• 31:54
  Speaker 1: pt Sweeney. Before the podcast, you can always catch us
• 31:57
  Speaker 1: worldwide at Bloomberg Radio