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A Closer Look At The Markets · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast
0:15
Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. Yeah exactly. And of course,
0:22
Speaker 1: those higher oil prices just feeding into the inflationary narrative.
0:26
Speaker 1: So let's get more on that now with Jeffrey Cleveland.
0:29
Speaker 1: He's chief economist at Peyton and Regal. So, Jeff, I
0:32
Speaker 1: don't know how much of Lisa and Ice conversation you
0:34
Speaker 1: just heard there, but talking about the inflationary forces at
0:38
Speaker 1: work in this economy, do you think that central banks,
0:40
Speaker 1: like the FED or underestimating it? Still? I know, I
0:45
Speaker 1: don't think so. I think this is, you know, very
0:48
Speaker 1: difficult topic and popular talkic topic among investors. But um,
0:54
Speaker 1: and there's a lot of noise. So, but you have
0:56
Speaker 1: to go back to taking in and maybe a longer
0:59
Speaker 1: term perspective commodity prices. The price of oil, for example,
1:03
Speaker 1: doesn't tend to give forecasters such as ourselves a good
1:07
Speaker 1: lead on where inflation will be in you know, a
1:10
Speaker 1: year's time, and I think central banks know that, you know,
1:13
Speaker 1: and they're taking that into consideration. Although this is really
1:17
Speaker 1: dangerous to say, these are I think the four this
1:20
Speaker 1: time is different for most dangerous words in the economics profession.
1:25
Speaker 1: The idea here that we have oil prices that are
1:27
Speaker 1: climbing at a time when supplies might not naturally increase
1:32
Speaker 1: to compensate this. The business case has changed in an
1:35
Speaker 1: era that's trying to decarbonize. How much does that change
1:38
Speaker 1: the pack drop for you? You know, it does, It's
1:42
Speaker 1: a it's a factor. But I think I always come
1:43
Speaker 1: back to Okay, when you're talking about inflation, you're talking
1:46
Speaker 1: about a general increase in all prices, right, You're you're
1:50
Speaker 1: not just talking about particular sectors. And if you know,
1:54
Speaker 1: what we're seeing is driven more by the supply side,
1:56
Speaker 1: which is the case in a lot of areas. We
1:58
Speaker 1: did our our chart of the we for example, on
2:00
Speaker 1: natural gas prices on Friday, and you know, there are
2:03
Speaker 1: some very interesting supply side stories there that I think
2:07
Speaker 1: explain a big chunk of the move. If it's coming
2:10
Speaker 1: from the supply side, I don't think that's inflation. That's
2:13
Speaker 1: really the key. It's it's something you know, idiosyncratic, and
2:16
Speaker 1: it seems like, you know. The difficulty right now is
2:18
Speaker 1: we have a bunch of these types of stories piling
2:20
Speaker 1: up all at once, right, So you have you have
2:22
Speaker 1: the crude oil stories, you have natural gas, we have
2:26
Speaker 1: bottlenecks and all kinds of areas. I attribute that this
2:29
Speaker 1: is just a very unique macro environment. Um. But I
2:33
Speaker 1: still would caution investors from jumping to the conclusion that
2:35
Speaker 1: we're going to have a persistent inflation from here. Um.
2:39
Speaker 1: I think you can fall back on some pretty good
2:42
Speaker 1: reliable indicators. One we got on Friday, for example, in
2:44
Speaker 1: the US in that Personal Income and Spending Report, the
2:48
Speaker 1: Dallas Fed tabulates the trimmed me um PC. It's an
2:52
Speaker 1: alternative core inflation measure, and it's hanging in there right
2:55
Speaker 1: around two percent year over year. And I think that's
2:58
Speaker 1: where when the dust settles on all of this, we
3:01
Speaker 1: will we will see consumer prices right around that two
3:04
Speaker 1: to three range. Well. And a huge question within this, Jeffrey,
3:08
Speaker 1: is how much wages are rising to meet higher prices
3:12
Speaker 1: on pretty much everything you can think of at the
3:14
Speaker 1: pump at the grocery store on your holiday gifts. We
3:17
Speaker 1: obviously have the jobs report coming up on Friday. I
3:19
Speaker 1: would argue it's going to be a pretty big one,
3:21
Speaker 1: given September is supposed to be the month where kids
3:24
Speaker 1: are back at school, those additional unemployment benefits have rolled off.
3:27
Speaker 1: It's supposed to be the great return to the labor market.
3:30
Speaker 1: Do you think that actually materialized. I'm a little skeptical.
3:35
Speaker 1: I think, you know, we saw a very weak August
3:38
Speaker 1: report that was driven in large part the slowdown and
3:41
Speaker 1: leisure in hospitality. I don't know, you know, just anecdotally
3:45
Speaker 1: walking around Los Angeles, for example, if we saw a
3:47
Speaker 1: big surgeon hiring in the month of September, I think
3:50
Speaker 1: we're still under the you know, the weight of the
3:54
Speaker 1: pandemic of the variant, at least of the September data.
3:56
Speaker 1: So maybe that story will have to wait for in
3:59
Speaker 1: the fall. I hope full that uh, I'm wrong and
4:01
Speaker 1: in the labor marks at back bounce back much more quickly.
4:04
Speaker 1: On the wage question, though, that that you brought up,
4:06
Speaker 1: I think it's a really essential one and the only
4:08
Speaker 1: thing I could say I would urge investors um again
4:12
Speaker 1: to look at the Atlanta fed wage tracker, and you
4:15
Speaker 1: can break down the different categories by you know, income level,
4:19
Speaker 1: by hourly versus non hourly workers, and I think what
4:22
Speaker 1: you'll find is we are seeing wage pressure, no doubt,
4:25
Speaker 1: but it is confined mostly to UM you know, the
4:29
Speaker 1: lower wage tiers of the spectrum. So definitely seen a
4:34
Speaker 1: lot of upside pressure there on wages that is UM
4:36
Speaker 1: that is you know that affects businesses, that affects small
4:39
Speaker 1: and medium sized businesses. Yes, But if you look at
4:41
Speaker 1: the broader wage trends UM. You can look at a
4:44
Speaker 1: median you know, wage growth, it's still running three to
4:48
Speaker 1: four for an um UM. Nothing worrisome in terms of
4:52
Speaker 1: wage price spirals. So I think investors again that we're
4:54
Speaker 1: we're trying to look out a year from now and
4:57
Speaker 1: and understand where inflation might be. The wage data is
5:02
Speaker 1: not telling us a worrisome longer term story. If you
5:04
Speaker 1: recall the nineties, I'm sure you do write we had
5:07
Speaker 1: five or six percent medium wage growth and we still
5:10
Speaker 1: had moderate inflation right around two to three. So you
5:14
Speaker 1: can even see wage growth take up from here, which
5:17
Speaker 1: I hope it does, and and still not have a
5:19
Speaker 1: runaway inflation story, which really raises the issue Jeffrey, of
5:22
Speaker 1: how much is being priced in that is that I
5:25
Speaker 1: dread using this word because I will get hate males
5:27
Speaker 1: tag inflation and how much this is just sort of
5:30
Speaker 1: a new reflationary trade that basically have gone past the
5:33
Speaker 1: peak reflation and we're now heading into a normalization. And frankly,
5:37
Speaker 1: it is choppy with higher prices. It sometimes uh than growth,
5:41
Speaker 1: and and sort of this mismatch in how things come
5:44
Speaker 1: back online. How you distinguish between those two scenarios which
5:49
Speaker 1: are very different, with one not leading to an expansion,
5:52
Speaker 1: the other one leading to an expansion that's just more
5:54
Speaker 1: tempered when you speak with your fellow with your your
5:57
Speaker 1: fellow members of paid and regal. Yeah, I think you're right.
6:02
Speaker 1: We did see growth peak in the second quarter. We
6:06
Speaker 1: definitely saw slower growth in the US in the third quarter.
6:09
Speaker 1: We've shaved our our GDP estimant for the full year
6:12
Speaker 1: now too. We started at seven point four for we're
6:16
Speaker 1: down to five point five, so we've shaved growth. So
6:18
Speaker 1: growth has sload. Is it stagflation though? I don't think so.
6:21
Speaker 1: I think it's really tough to do this, But there's
6:25
Speaker 1: so much noise right now. Growth slowing to you know,
6:28
Speaker 1: for the year five and a half percent. To me,
6:29
Speaker 1: that's not stagflation. The reason you have to go back,
6:32
Speaker 1: I think to answer your questions directly, why, what's what's
6:36
Speaker 1: causing this? You know, we think it is pandemic related.
6:39
Speaker 1: We think it is bottlenecks on the supply side that
6:42
Speaker 1: have knocked down our growth estimates, and some of that
6:45
Speaker 1: we will we will get payback on in two we think.
6:48
Speaker 1: So it's it's not a more you know, worried. Where
6:51
Speaker 1: we would get more worried, I guess on the growth
6:53
Speaker 1: front is if it was demand had swumped off, and
6:56
Speaker 1: that's not really what you know, we think we're seeing here.
6:58
Speaker 1: Demands you know, particularly from sumers and households will remain
7:01
Speaker 1: very very strong, we think um throughout this rest of
7:04
Speaker 1: the year and into two UM. So it's it's not
7:07
Speaker 1: a demand flump type story. It's you know, it sees
7:10
Speaker 1: idiosyncratic supply side things that are holding back growth. So
7:14
Speaker 1: that that's one part of it. Just discerning okay, what
7:16
Speaker 1: is driving the slowdown that we're seeing. And then the inflation,
7:19
Speaker 1: you know, is inflation and remain elevated um, you know,
7:23
Speaker 1: on a sustain basis more than a couple of quarters.
7:26
Speaker 1: And we think the answer, again, as as I labored already,
7:29
Speaker 1: is no, So we don't. I can't put myself in
7:32
Speaker 1: the stagflation camp quite yet. All right, Jeffrey, I want
7:36
Speaker 1: to ask you you were talking about all the noise
7:38
Speaker 1: that's out there. There certainly has been a lot of
7:40
Speaker 1: noise down in Washington, d C. I know that's pretty
7:43
Speaker 1: much always the case, but it seems like it's gotten
7:44
Speaker 1: a lot louder as of late. You have the ongoing
7:47
Speaker 1: question mark around the dead ceiling, you have discussions around
7:50
Speaker 1: the infrastructure package really at a stalemate now in October
7:53
Speaker 1: thirty one deadline. How would it change your view on
7:55
Speaker 1: the U. S. Economy if we don't see that trillions
7:58
Speaker 1: of dollars in longer term economic expending materializing. Well, I
8:04
Speaker 1: think we will get something done. I can't tell you
8:06
Speaker 1: when it's impossible to figure that out, but I don't
8:10
Speaker 1: think it's going to be the three and a half
8:11
Speaker 1: trillion so to the extent it And it does seem,
8:14
Speaker 1: you know, when you look at the headlines and market movements,
8:17
Speaker 1: market is sort of fixated on that three and a
8:19
Speaker 1: half trillion dollar number, and that could disappoint UM some
8:22
Speaker 1: investors if we don't get it, um, you know, I don't.
8:24
Speaker 1: I don't think we're going to get that that number
8:26
Speaker 1: for us though, the big fiscal pulse already happened. You know,
8:30
Speaker 1: we're already on the other side of it. You look
8:32
Speaker 1: at transfers to households, you can look at you know,
8:35
Speaker 1: quarter over quarter UM those were actually down in the
8:38
Speaker 1: second quarter relative to a year ago because we saw
8:41
Speaker 1: this huge surgeon in spending. Our transfer as the household
8:44
Speaker 1: that's done and for us that that's really the more
8:48
Speaker 1: critical question. UM. Households. Fortunately, you know, they're they're being
8:52
Speaker 1: you know, they're going back into employment. They still have
8:55
Speaker 1: pretty ample savings, so that will be good. But the
8:57
Speaker 1: big party in terms of the fiscal side, I think
8:59
Speaker 1: it's done. So that's I think something to keep in
9:02
Speaker 1: mind for investors to you know, the death ceiling is important. Well,
9:07
Speaker 1: you know, I guess we're playing, um a game of
9:10
Speaker 1: brinksmanship here and it probably lasts you know, into mid
9:13
Speaker 1: October membe later. Ultimately, we think that does get resolved,
9:16
Speaker 1: perhaps something similar to what we saw in I think
9:20
Speaker 1: the other Washington story though, is the FED, the FED board,
9:24
Speaker 1: the possible departure of Jerome Powell, and then two other
9:27
Speaker 1: spots that look like they're going to open up, and
9:30
Speaker 1: that could change, that could change. I think what that
9:33
Speaker 1: gives you is a little a more dubbish FED um
9:36
Speaker 1: And if that's right, that is more important I think
9:39
Speaker 1: for for markets for risk assets than you know, the
9:43
Speaker 1: death ceiling or you know, I hate to say it
9:46
Speaker 1: to my political strategist, but I think that will the
9:48
Speaker 1: FED will ultimately be more important than the size of
9:51
Speaker 1: the fiscal UH build the budget that ultimately ultimately they
9:55
Speaker 1: get decided on monetary policy for the win. Thank you
9:58
Speaker 1: so much, Jeffrey Cleveland, he's chief a anonymists at Payton
10:01
Speaker 1: and Regal. There is, of course the big elephant in
10:06
Speaker 1: the room for anyone who covers markets right now. It
10:09
Speaker 1: is inflation. What your viewpoint on it will determine much
10:12
Speaker 1: of how you position for it. However, which way is
10:14
Speaker 1: up in the air in terms of depending on who
10:16
Speaker 1: you speak with. We're going to speak right now with
10:18
Speaker 1: Efan Devit, chief investment officer at Monida with twenty seven
10:21
Speaker 1: point four billion dollars of assets under management. Even before
10:25
Speaker 1: we get into your inflation call, how do you use
10:28
Speaker 1: this to shape what you want to buy. Inflation is
10:33
Speaker 1: something we look at always as a part of the
10:36
Speaker 1: factors that drive where our portfolio should be positioned. Our
10:39
Speaker 1: goal is that our client portfolios should be resilient too
10:43
Speaker 1: many risks, in particular inflation. So we look at the
10:46
Speaker 1: different components of that portfolios, such as equities and real assets,
10:50
Speaker 1: and want to ensure that we have enough diversification into them,
10:53
Speaker 1: because some have explicit linkage to inflation, such as real
10:56
Speaker 1: assets and real estate, and then some have de fact
11:00
Speaker 1: um positive correlation to inflation, such as equities. Well, let's
11:04
Speaker 1: talk about some of those equities. The NASAC one hundred
11:06
Speaker 1: is now down two percent on the day. We can
11:08
Speaker 1: maybe attribute some of that too higher yields. How do
11:11
Speaker 1: you think about technology in the place it does or
11:13
Speaker 1: does not have in your portfolio right now? Technology will
11:16
Speaker 1: always be a huge components for our portfolio, particularly because
11:19
Speaker 1: many clients will have exposure to large cap stocks, and
11:23
Speaker 1: quite frankly, the Fangs have really comprised such a large
11:26
Speaker 1: percentage and increasingly large percentage of those large cap portfolios.
11:30
Speaker 1: So it is a lynch pin, and we actually saw
11:32
Speaker 1: that they performed very well. Obviously, we spoke your earlier
11:35
Speaker 1: guests about to stay at home stocks and how they
11:38
Speaker 1: really were quite resilient throughout the COVID crisis, and any
11:41
Speaker 1: time there's a crisis of confidence, they do seem to rebound.
11:44
Speaker 1: So technology will always have a huge component there. We
11:47
Speaker 1: do let look to have balanced portfolios across the course,
11:49
Speaker 1: across growth and value. But the fact that with technology
11:53
Speaker 1: and interest rates, if anybody does use a DCS valuation,
11:56
Speaker 1: as interest rates rise, well that will make the future
11:58
Speaker 1: earnings looked up at st and technology. So that seems
12:01
Speaker 1: to be part of the correlation that we're seeing. What
12:03
Speaker 1: do you how do you view the sort of decline
12:05
Speaker 1: that we saw last week that's carrying over to today.
12:08
Speaker 1: Is this the beginning of something bigger or is this
12:10
Speaker 1: a blip that you want to dig in and kind
12:13
Speaker 1: of start buying. I do think it is not the
12:16
Speaker 1: beginning of something bigger, because what we're seeing is a
12:18
Speaker 1: tremendous amount of assets on the sidelines. They've been sitting
12:21
Speaker 1: there waiting to get exposure to equities. And what we
12:24
Speaker 1: see is at every time there is a correction and
12:26
Speaker 1: equity markets or even just just a blip, as you say,
12:29
Speaker 1: or just crisis of confidence. It doesn't last very long.
12:32
Speaker 1: And that's the real phenomenon of the current cycle, is
12:35
Speaker 1: that none of these adjustments last for very long. Because
12:37
Speaker 1: there's such a large amount of money on the sidelines
12:40
Speaker 1: looking to go in. Why where do the sentiments dip
12:44
Speaker 1: come from? Certainly there's a lot of backdrop now in
12:47
Speaker 1: terms of both geopolitical concerns we're looking globally, we've seen
12:50
Speaker 1: the specter of a large scale default. There's a political gridlock. Again.
12:55
Speaker 1: The news on the virus seems to be moderating, and
12:57
Speaker 1: that probably is has not really factored into to send months,
13:00
Speaker 1: but certainly that the tech news you mentioned earlier around Facebook,
13:04
Speaker 1: that is just a reminder of the ability for regulatory
13:07
Speaker 1: twip flash to occur, not just in China, but also here. Well,
13:10
Speaker 1: I'm so glad you brought up China because we continue
13:12
Speaker 1: to watch the evergrand saga unfold day by day by day,
13:16
Speaker 1: and it's that's sprinkling not the only issue you have
13:19
Speaker 1: to worry about there. You have the ongoing regulatory crackdown,
13:21
Speaker 1: you have a broader slow down and economic growth. How
13:25
Speaker 1: do you think about China right now and the risk
13:27
Speaker 1: that it poses. Certainly we've had to completely rethink how
13:31
Speaker 1: we think about China as a source of risk. There
13:34
Speaker 1: is even a suggestion among some commentators that China has
13:36
Speaker 1: become uninvestable. Such has been the frequency of these negative
13:40
Speaker 1: surprises that we've seen time and time again. It seems
13:42
Speaker 1: every week there is a negative surprise. What I would
13:45
Speaker 1: say is that China is only going to be a
13:47
Speaker 1: portion of an emerging markets allocation, and even emerging markets
13:50
Speaker 1: is only a portion of a non US allocation. So
13:52
Speaker 1: it really is quite risk controlled within a portfolio. And
13:56
Speaker 1: as for whether that is sustained as that portion, well
13:58
Speaker 1: that really remains to be seen. Certainly, the risk reward
14:01
Speaker 1: has changed dramatically, and what we can see for China
14:04
Speaker 1: is just as it was first in and first as
14:06
Speaker 1: of the pandemic. It can certainly be a harbinger for
14:09
Speaker 1: the concerns that would perhaps be more global and the
14:13
Speaker 1: ever ground is a great example. And then some traders
14:15
Speaker 1: in this market have never seen at any kind of
14:19
Speaker 1: a large scale default of that nature. The last time
14:21
Speaker 1: we saw it was an O eight, and many people's
14:23
Speaker 1: whole careers have been built in so eight. So that
14:26
Speaker 1: simply is a reminder of just the specter of a
14:28
Speaker 1: large scale default, what it can look like, and how
14:31
Speaker 1: it can it can ripple through the system, not just
14:33
Speaker 1: for other real estate developers, but for banks financial institutions
14:36
Speaker 1: as well. It is a salutary reminder, I believe, of
14:39
Speaker 1: some of the risks that can actually be there bubbling
14:41
Speaker 1: onto the surface. Are you more concerned about the financial
14:44
Speaker 1: risk here or the economic risk of a slowdown in
14:46
Speaker 1: China percolating through the entire ecosystem, through the supply chain
14:50
Speaker 1: disruptions and other sort of transmissions that are more insidious
14:54
Speaker 1: and slow moving. Certainly, I would say that the impact
14:58
Speaker 1: of a slowdown a it's going to be less felt
15:01
Speaker 1: over here. The US has been the engine of developed
15:03
Speaker 1: market markets for some time, and I don't see a
15:06
Speaker 1: slow down in China as really having tremendous round applications. Here,
15:09
Speaker 1: We've already had a significant change in the trade conditions,
15:13
Speaker 1: and that is it's likely to persist. So I don't
15:15
Speaker 1: see that the US is particularly dependent on China. But
15:17
Speaker 1: certainly China does affect the fortunes of the surrounding emerging markets,
15:21
Speaker 1: and for that reason, any slow down there would just
15:24
Speaker 1: be poor for global growth alright. Efan devit Cio of
15:28
Speaker 1: Monetta giving us her market outlook and her take on
15:31
Speaker 1: inflation at least of the China story. Getting a little
15:33
Speaker 1: bit more interested today when you talk about the trade
15:36
Speaker 1: narrative that even just brought up. We obviously got some
15:39
Speaker 1: harsher words out of the Biden administration. We're waiting for
15:41
Speaker 1: the US trade representative to speak, uh later on today,
15:45
Speaker 1: but basically saying they're not holding up their end of
15:47
Speaker 1: the bargain when it comes to be as one deal.
15:49
Speaker 1: And right now we are looking at markets that are
15:53
Speaker 1: going deeper into the red. And just now, Gayley is
15:55
Speaker 1: you just pointed out a headline crossing the New York
15:58
Speaker 1: City says that end of school staff is vaccinated following
16:02
Speaker 1: the mandate that went to effect today. The teachers had
16:06
Speaker 1: to be at least have gotten their first shot, otherwise
16:09
Speaker 1: they could be put on leave, and they're saying that
16:12
Speaker 1: they've got in compliance. Interesting to see, really, you know,
16:18
Speaker 1: being sort of on the precipice of this debate of mandates. Yeah, absolutely,
16:22
Speaker 1: and you're seeing it play out so differently in different
16:24
Speaker 1: states and different sectors where there have been more legal
16:27
Speaker 1: challenges to this. But it's pretty remarkable the jump we
16:30
Speaker 1: have seen in vaccination rates as soon as a mandate
16:32
Speaker 1: goes into place. Some of the hospital systems had vaccination
16:35
Speaker 1: rates around and now they're also in the nineties as well,
16:39
Speaker 1: now that you've put people's jobs on the line. So
16:41
Speaker 1: it is something that is working, even for all of
16:43
Speaker 1: the debate that's around it. And this really translates into
16:46
Speaker 1: just where we are and coming out of the pandemic
16:49
Speaker 1: and how this translates to a market call as we
16:51
Speaker 1: do seem to be on the downward swing in the
16:53
Speaker 1: number of cases and hospitalizations. Ryan Jacob has to evaluate
16:58
Speaker 1: this along with the FED, along with debt ceiling debate,
17:01
Speaker 1: along with all of the mess uh in Washington, d C.
17:04
Speaker 1: And beyond all the way to China, a c i
17:07
Speaker 1: O of the Jacob Internet Fund talking here with us.
17:10
Speaker 1: And the reason Ryan why I say that is because
17:13
Speaker 1: you kind of have to dovetail a rates call a
17:16
Speaker 1: global macroeconomic picture with your view on tech. More than ever,
17:22
Speaker 1: how do you sort of gauge this connection between rates
17:25
Speaker 1: and the tech sector. Well, I do think we're a
17:29
Speaker 1: bit in the minority and that we're not that concerned
17:31
Speaker 1: about higher rates for our particular portfolios. Whether it's the
17:34
Speaker 1: et F of the mutual funds because we tend to
17:37
Speaker 1: focus on smaller MidCap tech companies. UH. In terms of
17:41
Speaker 1: the large higher interest rates, we're really seeing more of
17:44
Speaker 1: an impact on the large and mega cab technology companies
17:48
Speaker 1: that quite frankly, we'll have more difficult time overcoming the
17:53
Speaker 1: headwind of higher rates in terms of revenue and earnings
17:56
Speaker 1: growth more of the companies We focus on our higher
17:59
Speaker 1: growth companies and should be about to overcome it. Basically, Well,
18:02
Speaker 1: there's the rates headwind. There's also a China headwind for technology.
18:06
Speaker 1: Ryan and I was looking through some of the holdings
18:08
Speaker 1: of your fun and saw that Ali Baba Intencent are
18:10
Speaker 1: in there. How worried are you about that crackdown that's
18:13
Speaker 1: happening in China. Does that make you want to rethink
18:15
Speaker 1: some of those holdings. Well, we have been shareholders in
18:18
Speaker 1: Chinese companies for over fifteen years now, so we've seen
18:21
Speaker 1: a lot of highs and lows. Admittedly, this is probably
18:24
Speaker 1: one of the low points that we've seen in terms
18:26
Speaker 1: of um, you know, what's happening in China and the
18:29
Speaker 1: ramifications for these companies. H And admittedly we had cut
18:33
Speaker 1: back our positions considerably. They're probably two of our smallest
18:36
Speaker 1: positions at this point, um, and quite frankly, until conditions
18:40
Speaker 1: improve or we see it, uh, you know, I doubt
18:43
Speaker 1: will increase our allocations. What type of technology companies are
18:47
Speaker 1: you seeing as the greatest opportunity at a time when
18:50
Speaker 1: we already have priced in some of the shift to
18:52
Speaker 1: working from home, where we already have priced in some
18:54
Speaker 1: of the Internet prowess of the likes of Google and
18:57
Speaker 1: Facebook and sort of the dominance that they have, are
19:00
Speaker 1: what types of tech should we be looking for? Well,
19:04
Speaker 1: that is the biggest challenge this year. Which companies can
19:07
Speaker 1: build on the success of last year, uh, and which
19:10
Speaker 1: companies will have a fall offer kind of come off
19:13
Speaker 1: a bit of a sugar high in terms of the
19:15
Speaker 1: impact of their business. And so the companies we're focusing
19:18
Speaker 1: on are the ones where broader adoption has been accomplished
19:22
Speaker 1: and now we've see an acceleration and that's that's what
19:24
Speaker 1: we've seen across our portfolio. So, um, you know, there's
19:27
Speaker 1: a host of names that really fall in that category,
19:30
Speaker 1: but it's a very very tricky environment. Well, give us
19:32
Speaker 1: some of those names, Ryan, Can you get specific which
19:35
Speaker 1: companies in particular, are most fascinating to you right now? Well,
19:39
Speaker 1: you know one of the companies, it's one of our
19:40
Speaker 1: larger positions. Optimized r X basically has electronic health record,
19:46
Speaker 1: advertising and communication services. So this is something that the
19:49
Speaker 1: drug companies were very interested in pre COVID. Once COVID
19:53
Speaker 1: hit and sales reps could no longer go out no
19:56
Speaker 1: more industry conferences or events, they allocated more money to
19:59
Speaker 1: digital and across different platforms. Optimized benefited from that, and
20:04
Speaker 1: then I think when a lot of the drug companies
20:05
Speaker 1: realized the returns they were getting from these investments. Uh,
20:09
Speaker 1: they've been basically accelerating ever since, even even with the
20:13
Speaker 1: prospect of going back to more traditional methods to advertise
20:18
Speaker 1: their products. UM and optimizes seeing that the bump last
20:22
Speaker 1: year and now an acceleration in their pipeline this year, Ryan,
20:25
Speaker 1: before I let you go, when you take a step back,
20:28
Speaker 1: everyone wants to be a tech company. McDonald's wants to
20:30
Speaker 1: be a tech company. Who doesn't want to say that
20:32
Speaker 1: they are on the cutting edge of what's next. How
20:34
Speaker 1: do you parse out what actually fits with your band aid?
20:38
Speaker 1: It's a great question, um, because every company incorporates tech
20:42
Speaker 1: and it's it's very it's not an experimental part of
20:45
Speaker 1: their budget. It's poor to what they do. So um,
20:48
Speaker 1: it's becoming harder and harder. The fund is the Jacob
20:51
Speaker 1: Internet Fund, the mutual fund, but now every you know
20:54
Speaker 1: that was launched over twenty years ago and things have
20:56
Speaker 1: changed and involved and h it is a constant challenge.
21:00
Speaker 1: It actually widens the investment universe for us. So actually
21:03
Speaker 1: in some ways it's been helpful. Alright, Ryan Jacob ce
21:06
Speaker 1: io of the Jacob Internet Fund talking to us about
21:09
Speaker 1: all things technology, Thank you so much. Kind of right now,
21:16
Speaker 1: I want to shift to one area that has been hot,
21:18
Speaker 1: and that has been commodities. And the interesting thing is
21:21
Speaker 1: that we have seen stock sell off, we've seen bond
21:24
Speaker 1: sell off in the past month. The one outlier has
21:27
Speaker 1: been oil. What has not been an outlier gold. It
21:30
Speaker 1: still is not acting materially as a hedge. Perhaps it's
21:33
Speaker 1: up a little bit today, but in general has not.
21:35
Speaker 1: What gives when can this act as a traditional hedge
21:39
Speaker 1: against volatility? Ashraf Rizve probably is wondering at the same
21:42
Speaker 1: thing and probably has an answer, Chief executive officer and
21:45
Speaker 1: founder of Gilded, joining us here in h New York
21:49
Speaker 1: right now, Ashrof, can you give us a sense of
21:51
Speaker 1: the dynamic behind gold and why it hasn't benefited from
21:54
Speaker 1: the risk off feel in both stocks and bonds over
21:57
Speaker 1: the past month. Sure, thanks for having me on the program. UM.
22:03
Speaker 1: I think gold is is caught in this UM comparison
22:08
Speaker 1: of is it inflation? UM. I think most people believe
22:12
Speaker 1: that we are seeing inflation, whether it's transitory or not.
22:15
Speaker 1: UM the impact of potentially real interest rates going up
22:19
Speaker 1: with the taper UM. Physical demand of course has been increasing,
22:25
Speaker 1: but the dollar has been strengthening as well. So the
22:27
Speaker 1: combination of these four factors it's kind of gotten golden
22:30
Speaker 1: a bit of a quagmire where it can't decide whether
22:33
Speaker 1: it's really going up or down. That being said, I
22:36
Speaker 1: think we know that historically it has over long periods
22:39
Speaker 1: of time done very well UM, whether it's an inflation
22:43
Speaker 1: environment or in a even in a deflation environment, particularly
22:48
Speaker 1: now that we're suffering through this UH significant increase in
22:52
Speaker 1: debt that's happening all across the world by governments. So
22:56
Speaker 1: you see a case for holding gold here at least
22:59
Speaker 1: in the long or term. How does what you do
23:01
Speaker 1: it guild in it guilded enable people to own gold. Yeah,
23:07
Speaker 1: that's a great question. I think the key here is
23:10
Speaker 1: that gold has as an asset class been difficult to homee.
23:15
Speaker 1: So what we've really focused on is how can we
23:18
Speaker 1: make physical gold ownership functional? And so that really means
23:22
Speaker 1: making it digital, mobile, and usable. So let's leverage twenty
23:26
Speaker 1: one century technology, a smartphone, a mobile mobile device, a
23:32
Speaker 1: mobile app, and blockchain to be able to provide that
23:35
Speaker 1: physical ownership direct to you in a nice easy way
23:38
Speaker 1: where you can be the direct owner of the property
23:42
Speaker 1: rather than a fractional banking system where it's an IOU
23:47
Speaker 1: where you can leverage it to be able to do
23:49
Speaker 1: things like not only buy and sell, but even in
23:52
Speaker 1: certain countries, were already able to send or gift and
23:57
Speaker 1: and then be able to do other things for example
23:59
Speaker 1: or ultimately a return or be able to borrow lend
24:03
Speaker 1: against it as well. Sure, if how much is this?
24:04
Speaker 1: If you can't beat them, join them? Basically people saying
24:07
Speaker 1: that bitcoin was taking over for gold because people didn't
24:11
Speaker 1: want to have to store the thing and they wanted
24:12
Speaker 1: to have some sort of store of value, how much
24:15
Speaker 1: is it saying Okay, we get that, we get that
24:17
Speaker 1: all right, But well, we'll give you the benefits of that,
24:19
Speaker 1: but we'll give you the absolute reality of gold, which is,
24:23
Speaker 1: you know, last of the test of time. Yeah. I
24:27
Speaker 1: think it's a great question. Um. Ease of use is
24:30
Speaker 1: always paramount, and I believe that one of the things
24:33
Speaker 1: that's happened with digital assets is they have made it
24:36
Speaker 1: easier for people to access. Physical gold has been hard
24:39
Speaker 1: for people to access, and so I think we're making
24:41
Speaker 1: it easier by making a digital mobile and usable. And
24:45
Speaker 1: most importantly, perhaps is that that marketplace is huge. It's
24:49
Speaker 1: a twelve trillion dollar marketplace, probably the single most widely
24:53
Speaker 1: held asset in the world. Billions of people own it,
24:56
Speaker 1: most every major central bank does. So it's really time
25:00
Speaker 1: to bring it into the twenty first century rather than
25:02
Speaker 1: just being what a lot of people have claimed, which
25:04
Speaker 1: is that it's a it's a very expensive paperweight. But
25:07
Speaker 1: by baking it making it twenty century, we can make
25:11
Speaker 1: it usable for everyone and very functional. Yeah. You know, Astrov,
25:15
Speaker 1: a lot of bitcoin bowls call bitcoin digital gold, but
25:18
Speaker 1: you are actually literally doing digital gold over at Guilden.
25:22
Speaker 1: That is Ashraf Risbee. He is the CEO and founder
25:25
Speaker 1: of Gilded talking to us about gold, which, yes, Lisa,
25:29
Speaker 1: she's smiling of a really expensive paperweight. We now don't
25:34
Speaker 1: have paper to even wait down because everything is digital anyway.
25:37
Speaker 1: I mean, it just sort of talks about the other era. Yeah,
25:40
Speaker 1: who even needs pens anymore. It's a brave new world
25:44
Speaker 1: where people don't need gold to hedge against anything. Gold, though,
25:47
Speaker 1: is getting a little bit of a bit to day
25:48
Speaker 1: on a day when the markets are down. Thanks for
25:51
Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
25:54
Speaker 1: listen to interviews with Apple Podcasts or whatever podcast platform
25:59
Speaker 1: you prefer. I'm Matt Miller, I'm on Twitter at Matt
26:02
Speaker 1: Miller three, and I'm fall Sweeney. I'm on Twitter at
26:05
Speaker 1: pt Sweeney. Before the podcast, you can always catch us
26:08
Speaker 1: worldwide at Bloomberg Radio.