Latest / Bloomberg Intelligence / Twitter, Oil, and Equities (Podcast)

Transcript

Twitter, Oil, and Equities (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
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. All right, here's the
0:22
Speaker 1: here's the latest across the Bloomberg terminal. Musk says no
0:26
Speaker 1: one wants top job, but some people have piped up.
0:29
Speaker 1: I mean, it just gets crazier by the day. He's
0:32
Speaker 1: got a you know, a survey out there, Critty saying,
0:35
Speaker 1: you know, if you want me to step down, I'll
0:36
Speaker 1: step down, and of the respondent says, yeah, you should
0:39
Speaker 1: step down. So that's news. Then my question is who
0:42
Speaker 1: wants the job? So we come back to the story
0:44
Speaker 1: because this story just keeps giving Man deep Seeing, senior
0:47
Speaker 1: technology analyst for Bloomberg Intelligence, and Dan Ives, senior equity
0:51
Speaker 1: analyst at Wedbush Securities and join us here. Uh. Dan,
0:54
Speaker 1: I hate to kind of keep bringing this up because again,
0:57
Speaker 1: but you know, you've been one of the biggest supporters
0:59
Speaker 1: of this name of electric vehicles, really educating investors over
1:03
Speaker 1: the last you know, five six, seven years about the
1:05
Speaker 1: e V market, the potential, the upside here, but the
1:09
Speaker 1: fundamental calls being overwhelmed by the Elon Musk call any
1:14
Speaker 1: kind of how do you view the lasts worth of news?
1:17
Speaker 1: Just more the same? I guess yeah, look good. I
1:19
Speaker 1: think it's been a twilight soon because I'd say about
1:24
Speaker 1: of the sell off that we're seeing in Tessa is
1:27
Speaker 1: Twitter driven. I mean, and it would be a step
1:30
Speaker 1: in the right direction clearly from Musk to give up
1:33
Speaker 1: the reins is CEO of Twitter. But look, this is
1:36
Speaker 1: a forty four billion dollar nightmare that you know, just
1:40
Speaker 1: continues to increase. I think it's black eye from Musk,
1:43
Speaker 1: a black eye for Tesla. Mandy. Talk to us a
1:46
Speaker 1: little bit about this now private business here. Is there
1:49
Speaker 1: any sort of recovery? I think the last time we
1:51
Speaker 1: had you on, I want to say, last week, you
1:53
Speaker 1: said that if this was a publicly traded stock still
1:56
Speaker 1: Twitter would be worth less than ten dollars a share,
1:58
Speaker 1: which incredible, And again Ellen bought and I think he
2:03
Speaker 1: still looking for new investors, by the way, who are
2:05
Speaker 1: still looking at the same amount. But man, deep is
2:07
Speaker 1: there any sort of scenario here where Twitter's valuation is
2:12
Speaker 1: re upt well, So clearly now he's talking about a
2:16
Speaker 1: management change and bringing in someone else than him to
2:20
Speaker 1: run the company, and I think it will be positive
2:24
Speaker 1: depending on who he gets. Look if you get somebody
2:27
Speaker 1: like Cheryl Sandberg, that's a big you know, uh moment
2:31
Speaker 1: for the company, even if this thing takes a long
2:34
Speaker 1: time to turn around. But I think somebody with credentials
2:39
Speaker 1: is going to make a big deal in terms of,
2:41
Speaker 1: you know, what could happen to Twitter going forward. But
2:45
Speaker 1: we know right now the company is bleeding advertisers, the
2:49
Speaker 1: employee morale is low, it's struggling with regulators. So clearly
2:54
Speaker 1: a lot is going wrong with the company right now.
2:57
Speaker 1: So you need somebody who can study the ship, somebody
2:59
Speaker 1: who has good credentials, and I think that could make
3:01
Speaker 1: a difference here. So, Dan, you mentioned that in your opinion,
3:05
Speaker 1: you know, maybe the decline in Tesla stock is due
3:08
Speaker 1: to Twitter. So one of the questions I have, and
3:10
Speaker 1: you've covered this company's systems inception, can you give us
3:13
Speaker 1: a sense of isn't really Elon Musk? How critical is
3:16
Speaker 1: Elon Musk to the day to day management of Tesla
3:20
Speaker 1: to the strategic direction of Tesla. Is there a deep bench, there,
3:24
Speaker 1: is there a management team there? Book Musk is the
3:28
Speaker 1: hearts and rungs of the Tesla story. And I mean
3:30
Speaker 1: you'd have to go back maybe two jobs with Apple
3:34
Speaker 1: and Jack Wells g E for any sort of comparisons.
3:38
Speaker 1: I mean, look, I think that's the issue is that
3:40
Speaker 1: his attention has really been to focus more on Twitter
3:43
Speaker 1: and the perception perceptions, reality is that Tessa needs him
3:47
Speaker 1: more than they ever have and and and that's sort
3:50
Speaker 1: of the frustration here is that the Twitter spider Web
3:55
Speaker 1: has just been a disaster for Tesla holders. And it's
3:59
Speaker 1: also have taken attention from much from his golden child
4:02
Speaker 1: Tessa to what's really a quick fan situation when it
4:06
Speaker 1: comes to Twitter. And and Dan, just do you have
4:10
Speaker 1: any sense, again having followed this company since this inception
4:15
Speaker 1: the board, is there any chance that this board can
4:18
Speaker 1: have any influence on this overall situation specifically kind of
4:22
Speaker 1: dealing with elon Musk. Look, I think ultimately Musk, you know,
4:27
Speaker 1: when he speaks, others listen in terms of you know,
4:30
Speaker 1: the board situation means, I think there could be you know,
4:34
Speaker 1: definitely more pressure from the board or at the end
4:38
Speaker 1: of the day, I mean, must continues to go to
4:40
Speaker 1: the beat of a different drum and he's not really
4:42
Speaker 1: going to listen to anyone. I do think here the
4:45
Speaker 1: writings in the wall, I feel like he did start
4:47
Speaker 1: to understand that he's not gonna be able to turn
4:51
Speaker 1: around Twitter himself to some extent. Actually, it's made it worse,
4:54
Speaker 1: you know, since Wad October, and that's been part of
4:56
Speaker 1: the overhang on Tesla because with the big this issue
5:00
Speaker 1: pause that he's using Tesla as his own personal ATM
5:04
Speaker 1: machine to fund Twitter. Well, what kind of upside does
5:08
Speaker 1: that then mean for Tesla shares? Specifically, if you say
5:10
Speaker 1: that this split attention is then reverted right back to
5:15
Speaker 1: to Tesla, what kind of stock performance could we expect? Well,
5:19
Speaker 1: I think then the whole storage change is because they
5:22
Speaker 1: navigate the China headwinds even or a session, I still
5:26
Speaker 1: think they could because of two million vehicles sold in
5:30
Speaker 1: two thousand twenty three, and then the transformation story, which
5:34
Speaker 1: is taking a major hiccup during this period, continues on.
5:37
Speaker 1: Then I think you could be looking, you know, and
5:40
Speaker 1: what I believe is this doctor could be much higher
5:42
Speaker 1: from here. You know two in the fifty hour is
5:44
Speaker 1: our price target. But in the near term, I mean,
5:48
Speaker 1: this is the black cloud you know over the Tesla
5:52
Speaker 1: story that needs to clear and it's really self inflicted
5:56
Speaker 1: from must that's going to go down and still is
5:58
Speaker 1: we'd is probably most over the attack acquisition issuing men
6:02
Speaker 1: deep Um, you know I'm looking at again the news
6:05
Speaker 1: today is you know the poll that Ellen put out
6:07
Speaker 1: and his users voting that he should step down. In reality,
6:12
Speaker 1: I mean, you know the business, you know the players here.
6:15
Speaker 1: I can't imagine someone with the chops of like a
6:17
Speaker 1: Sheryl Sandberg coming into this role given the ownership structure.
6:23
Speaker 1: How do you think this might maybe plays after just
6:25
Speaker 1: a Twitter management Twitter business perspective. Yes, so look, I
6:31
Speaker 1: think Elon Musk is surrounded by a lot of people
6:34
Speaker 1: who know how to run this business, so I think
6:37
Speaker 1: he's gonna get external help. The key question remains how
6:42
Speaker 1: much independence this new person can get in terms of
6:45
Speaker 1: running the company. And look, online advertising, even though it's
6:49
Speaker 1: a secular growth market, the growth seems to be slowing,
6:53
Speaker 1: so we're not talking about you know, plus growth anymore
6:57
Speaker 1: in online ads. This is more of you know, low
6:59
Speaker 1: te means after we are you know, through this cyclical downturn.
7:03
Speaker 1: That's a kind of growth, and it's getting competitive. I
7:06
Speaker 1: mean you see likes of Netflix and you know Disney
7:09
Speaker 1: Plus getting into online at So Twitter as a company,
7:13
Speaker 1: to my mind is sort of mature stage, you know,
7:16
Speaker 1: use the growth is uh sort of slowing down ads
7:20
Speaker 1: that we know they're having issues and it's not easy
7:24
Speaker 1: to revive Twitter and make it, you know, a growth
7:27
Speaker 1: company again. And that's why I think the choices are narrow.
7:30
Speaker 1: But look, Elon Musk is surrounded by people who can
7:34
Speaker 1: run this company for sure. But what does that that
7:38
Speaker 1: mean in terms of things like the margin loans for example,
7:40
Speaker 1: what is the likelihood that some of that debt can
7:44
Speaker 1: actually be exchanged and then um, I don't want to
7:48
Speaker 1: say advertised, but actually gain interest for shareholders that aren't
7:52
Speaker 1: the biggest banks to actually grab them. What do you think? Yeah,
7:56
Speaker 1: So that that's where you know, it's a good thing
7:58
Speaker 1: that the company is private and right now they just
8:01
Speaker 1: have to manage the death situation, make sure they pay
8:04
Speaker 1: off the interests, and manage the margin loan situation. But
8:08
Speaker 1: they have that kind of balance sheet and even though
8:11
Speaker 1: must may have to sell more stock. He can manage
8:13
Speaker 1: the situation. The question is is there a viable business
8:17
Speaker 1: that he can Uh, you know, at some point I
8:19
Speaker 1: p O again and and get out of this thing.
8:22
Speaker 1: But the way it's being run right now clearly uh
8:26
Speaker 1: you know it's in decline and uh, we're not even
8:28
Speaker 1: thinking about when Twitter may go public again. Dan, just
8:32
Speaker 1: stepping back from the Elon factor, what's the what's your
8:37
Speaker 1: call for Tesla as it relates to just competition with
8:39
Speaker 1: all the big auto manufacturers globally in two seeming to
8:43
Speaker 1: go all in on evs. How do you think TESTA
8:46
Speaker 1: positions itself? Okay, I think Tesla is in a position
8:51
Speaker 1: of strength, but new doubt the three one three areas
8:54
Speaker 1: where there is going to be a major beneficiary. You
8:56
Speaker 1: look with Mary doing the GM and Farowly for their
9:00
Speaker 1: into benefiting the plan as well as others from the
9:02
Speaker 1: ABU machities and and everyone else. Because this is not
9:05
Speaker 1: a zero from game and you're really getting into a
9:09
Speaker 1: combing an inflection year for e d S and two
9:11
Speaker 1: thousand and twenty three. But right now, in terms of
9:14
Speaker 1: what's happening with Musk, there's been popping of the Champagne
9:18
Speaker 1: in Detroit as they watched this because it's the best ever.
9:21
Speaker 1: Hap alright, great stuff. We appreciate getting the the updates,
9:25
Speaker 1: seems like on this never ending story. Dan ives's the
9:28
Speaker 1: senior analysts UH covering all things technology for what Bush Securities,
9:32
Speaker 1: And again it just to put it in context, and
9:34
Speaker 1: it's been a super supporter of UH, you know, the
9:38
Speaker 1: electric vehicle business and Tesla from the beginnings, done such
9:41
Speaker 1: a great job educating Wall Street UH and his investing
9:44
Speaker 1: clients about, you know, this whole new business. But now
9:48
Speaker 1: obviously shareholders of of Tesla and supporters of the stock
9:52
Speaker 1: have to deal with kind of this issue with Elon
9:54
Speaker 1: Musk and the ownership of Twitter and the impact that's
9:57
Speaker 1: having on Tesla. So tough time for those sharehold Mandeep
10:00
Speaker 1: Sein covers all things technology for Bloomberg Intelligence. He joins
10:04
Speaker 1: us as well, so we'll have to get those two
10:05
Speaker 1: folks together created just give us a sense of the
10:08
Speaker 1: business of Twitter the business of Tesla as they both
10:11
Speaker 1: try to negotiate ownership by Elon Musk. I don't know
10:18
Speaker 1: about the rest of We've gone'm putting in the rear view.
10:22
Speaker 1: I'm looking forward to three. It's got to be better. Right. Uh,
10:26
Speaker 1: let's check in with some people who kind of do
10:27
Speaker 1: this stuff for living. Gina Martin Adams, chief equity analystm
10:30
Speaker 1: Bloomberg Intelligence, and Cameron christ macro strategists with Bloomberg News. So, Gina,
10:36
Speaker 1: let's start with you here. My sixty or forty portfolio
10:39
Speaker 1: got slammed around all year, equities down, bonds down. How
10:44
Speaker 1: should I which my expectations? Yeah, I think it's a
10:48
Speaker 1: It's a great question, certainly, and something everyone is thinking
10:51
Speaker 1: about at this point in time. You know, our expectations
10:53
Speaker 1: are the equity market side of the equation anyway, will
10:56
Speaker 1: be a touch better, but maybe not back to the
11:00
Speaker 1: double digit average annual gains that we became accustomed to
11:02
Speaker 1: in the in the last cycle. So our expectation is
11:05
Speaker 1: a little bit more moderate for the next cycle. We
11:08
Speaker 1: see the likelihood for higher for longer interest rates, higher
11:12
Speaker 1: for longer inflation, pressuring valuations, and earnings growth alike. So
11:16
Speaker 1: our average anual return expectation for the next three years
11:19
Speaker 1: is somewhere between five and seven as opposed to the
11:23
Speaker 1: average anual growth that you were that you got out
11:25
Speaker 1: of stocks following the Great Financial Crisis. Well, Cameron hop
11:31
Speaker 1: on in here. You wrote a column today and I
11:33
Speaker 1: love the title of your your Macroman column saying it's
11:36
Speaker 1: kind of funny how no one wants crash protection. Talk
11:39
Speaker 1: to us a little bit about the hedging picture. Are
11:40
Speaker 1: people just going into cold? I wouldn't say that. I
11:46
Speaker 1: mean there are a number of uh peculiarities of the
11:51
Speaker 1: option market. UM. One is that there's a very large
11:54
Speaker 1: stray that happened every quarter UH where the institution is
12:00
Speaker 1: all buys a slightly out of the money UH put
12:02
Speaker 1: on the SMP and sells a put that's quite a
12:05
Speaker 1: bit further out of the money, and that that probably
12:08
Speaker 1: with some other flow dynamics, may have reduced the relative
12:13
Speaker 1: ball premium that people put on very low delta options UM.
12:18
Speaker 1: And the other thing is that quite unusually, the average
12:22
Speaker 1: winning day in two has been a lot bigger than
12:26
Speaker 1: the average losing day. I mean, you normally think about
12:29
Speaker 1: the equity market sort of riding the escalator up and
12:31
Speaker 1: then following down the elevator shaft. But it's it's been
12:35
Speaker 1: quite quite contrary UM this year, where the average winning
12:39
Speaker 1: days about twenty bases points bigger than the average than
12:42
Speaker 1: the average losing day, which suggests that, uh, you know,
12:46
Speaker 1: we we are not experiencing the sort of discontinuous moves
12:50
Speaker 1: that would that would to the downside, that would normally
12:53
Speaker 1: lead lead people to sort of really scramble for crash protection.
12:57
Speaker 1: A you know, one of the risks out there, at
12:59
Speaker 1: least in my mind, is still maybe some earnings risk.
13:02
Speaker 1: And I look at the Bloomberg terminal for the SMP
13:05
Speaker 1: for next year, like two four bucks up about five.
13:09
Speaker 1: We had Doug cass On from C Breeze Partners early
13:12
Speaker 1: in earlier on today he said, no, way, think about
13:15
Speaker 1: two hundred for earnings. What how are you thinking about
13:19
Speaker 1: earnings in twenty three. Yeah, we also have an earnings
13:23
Speaker 1: decline baked into our model, our fair value model, so
13:25
Speaker 1: as you get a small single digit drop in earnings growth,
13:28
Speaker 1: I think the really interesting thing about this particular cycle
13:31
Speaker 1: is that most of the SMP five hundred has already
13:33
Speaker 1: entered in earnings recession. When you exclude energy from the equation.
13:37
Speaker 1: The index earning stream actually peaked all the way back
13:39
Speaker 1: at the end of and most sectors showed a decline
13:43
Speaker 1: in earnings throughout this year. So you've got a lot
13:46
Speaker 1: of moving parts to contend with going into three. Certainly
13:50
Speaker 1: the energy sector will weigh heavily on the earning stream
13:53
Speaker 1: for the SMP five hundred going into three, because we've
13:56
Speaker 1: seen some deterioration in oil prices over the second half
13:59
Speaker 1: of this er, and the really strong sort of operating
14:02
Speaker 1: margin expansion that these companies enjoyed in twenty two will
14:06
Speaker 1: fade into three. That will likely be the biggest drag.
14:10
Speaker 1: But on the other end of the spectrum, financials have
14:12
Speaker 1: already been in a pretty significant earnings recession this year
14:16
Speaker 1: that should ease in three as long as we move
14:19
Speaker 1: past this m most negative point of spread in the
14:22
Speaker 1: yield curve occurring currently. As long as the yield curve
14:26
Speaker 1: becomes slightly less negative in spread, we should see better
14:29
Speaker 1: earnings growth for the financial sector. Consumer sectors also have
14:33
Speaker 1: been heavily have experienced this heavy weight of compressing operating
14:37
Speaker 1: margins because of high input costs. That should ease into
14:42
Speaker 1: three as well. So I think the story for twenty
14:45
Speaker 1: three on the earnings and the earning stream is really
14:48
Speaker 1: just a lot of moving parts. Overall, certainly a decline,
14:52
Speaker 1: but our work would suggest this looks nothing like the
14:55
Speaker 1: two thousand and eight two thousand nine earnings recession or
14:58
Speaker 1: the two thousand one earning stres And it's a really
15:01
Speaker 1: unique experience, mostly because of the fact that we're only
15:05
Speaker 1: two years out of the pandemic recession and we're still
15:09
Speaker 1: contending with a lot of moving parts on the earning stream.
15:12
Speaker 1: It's interesting that you say that, Gina, Mike Wilsonever Morgan
15:15
Speaker 1: Stanley makes the exact opposite argument. He also says his advice,
15:19
Speaker 1: don't assume the market is pricing this kind of outcome
15:21
Speaker 1: until it actually happens, which cam brings me to you,
15:24
Speaker 1: what exactly is the carnage of the stock market pricing
15:29
Speaker 1: in Uh, Well, you could argue, uh, it's priced in
15:35
Speaker 1: higher interest rates, but it has you know, has yet
15:38
Speaker 1: to price in a significant deterioration in the in the
15:42
Speaker 1: economic environment. Um. You know, I think the earnings prospects
15:48
Speaker 1: for next year are going to be pretty heavily dependent
15:52
Speaker 1: not on what's happened in the past, but also what
15:54
Speaker 1: happened in the future. And the fact is is that, well,
15:57
Speaker 1: we did have two quarters of slightly negative grow with
16:00
Speaker 1: in the first half of this year. That was largely
16:01
Speaker 1: a function of exports and inventory adjustments rather than underlying
16:05
Speaker 1: domestic demand. If we see a deterioration and underlying domestic demand,
16:11
Speaker 1: which does seem relatively reasonable given that policy is going
16:16
Speaker 1: to get more restrictive over the course of the year.
16:19
Speaker 1: If we look at the real FED funds, right, Uh,
16:23
Speaker 1: then it does seem plausible to suggest that there could
16:27
Speaker 1: be some significant down moves in in earnings relative to expectations. Still,
16:32
Speaker 1: and and let's FACTI if we if we have SMP
16:35
Speaker 1: earnings of two bucks, uh, and you slap of fifteen
16:38
Speaker 1: or sixteen p on not you get uh, you know,
16:41
Speaker 1: you get the SMP at three thousand or thirty two hundred,
16:44
Speaker 1: which is a long way from where we are now.
16:47
Speaker 1: I don't want to We're not We're not. We're not
16:49
Speaker 1: in a job to be fun, to have fun. I mean,
16:52
Speaker 1: that's not fun on the job. You know. Two, I
16:55
Speaker 1: thought I took my my pain there, Gina, Are there
17:00
Speaker 1: I don't know? Are there some sectors? I mean, if
17:02
Speaker 1: I want to go out on the risk curve and
17:04
Speaker 1: the equity space, are there some sectors I should be
17:06
Speaker 1: focusing on here? Do you think? Yeah? You know, our
17:09
Speaker 1: work would suggest actually you start to wiggle your way
17:12
Speaker 1: into some of the early cycle sectors at this stage
17:15
Speaker 1: in the market. We run a fair value model for
17:17
Speaker 1: the S and P five hundred and as of our
17:19
Speaker 1: October laws and the index that would suggest we not
17:22
Speaker 1: only priced something close to four and a half percent
17:24
Speaker 1: FED funds, but we also priced at double digit decline
17:26
Speaker 1: and earnings growth coming in the next year. So and
17:29
Speaker 1: my work would say that we've done gone a long
17:31
Speaker 1: way to pricing that earnings recession, provided that the FED
17:34
Speaker 1: does eventually stop raising interest rates. But there is there
17:37
Speaker 1: are a lot of question marks in the outlook um.
17:39
Speaker 1: As I mentioned, I don't see two this as a
17:42
Speaker 1: two thousand ninth scenario, mostly because financials, which is one
17:45
Speaker 1: of those early cycle sectors that I mentioned the leverage scenario,
17:48
Speaker 1: and financial doesn't look at all like two thousand and
17:50
Speaker 1: two thousand nine. We've got half the overall leverage and
17:53
Speaker 1: the public financial sector that we had at that point
17:56
Speaker 1: in time, despite the fact that the economy is a
17:57
Speaker 1: whole lot bigger. So financial else to us, looks like
18:01
Speaker 1: an area of opportunity along with something like a consumer
18:04
Speaker 1: some of the consumer names that have been inordinately beaten
18:07
Speaker 1: down over the course of this year, anticipating again that
18:11
Speaker 1: decline and demand coming into three. So I would say
18:16
Speaker 1: you start to leg in to some of the cyclical space,
18:19
Speaker 1: cyclical space into There's no rush to do so, because
18:23
Speaker 1: we do space negative estimate revision pressure for the index
18:26
Speaker 1: at large. But if you look at where the valuation
18:29
Speaker 1: opportunities are, they are in those early cyclical sectors. The
18:32
Speaker 1: bloated part of the market is still a problem. The
18:35
Speaker 1: bloated part of the market is that large cap growth
18:38
Speaker 1: space that became inordinately excessively valued in the pandemic, and
18:43
Speaker 1: we're still, you know, recovering from that addiction we had
18:47
Speaker 1: to large cap growth and that will probably continue to
18:49
Speaker 1: be a drag. That's too big man. I made my
18:52
Speaker 1: bread and butter and that space, like a lot of
18:54
Speaker 1: other people kind of playing on the big tech names
18:57
Speaker 1: and the big consumer cyclical kind of stuff. So so
19:00
Speaker 1: we'll have to see how that plays out. Right. Gina
19:01
Speaker 1: Martin items great stuff has always chief equity analysts with
19:04
Speaker 1: Bloomberg Intelligence and Camera Christ macro strategist with the colmdown
19:10
Speaker 1: call of the morning. I mean two on SMP earnings,
19:14
Speaker 1: you put a fifteen sixteen multiple on that. That's some
19:16
Speaker 1: pretty decent downside for the SMP. C Suite Conversation today.
19:24
Speaker 1: Today we're joined by John Carter, All, CEO of en
19:27
Speaker 1: Dava that is a London, England based company. The A
19:32
Speaker 1: d R S trade here on the New York Socker Strange.
19:34
Speaker 1: U D A v A is your ticker. John, Thanks
19:38
Speaker 1: so much for joining us here, UH technology company, I
19:41
Speaker 1: T services company. Tell us about what you guys are
19:44
Speaker 1: doing at Endava. Sure, and thanks for having me on
19:49
Speaker 1: and I appreciate it. Um So in Dava drives technology
19:54
Speaker 1: change for our customers, so we focus on the technology
19:58
Speaker 1: waves that are rolling through chosen industries that we focus on.
20:02
Speaker 1: Um and developed the expertise to drive fundamental change for
20:07
Speaker 1: our customers, so things like autonomous vehicles and how that
20:12
Speaker 1: is affecting mobility. Even today, business practices are adjusting using
20:19
Speaker 1: technology to you know, all of the change that's going
20:23
Speaker 1: to come. Has autonomous vehicles hit the market and there
20:26
Speaker 1: are many different technologies across many industries where we're helping
20:30
Speaker 1: clients go through those adjustments. One of the big themes
20:35
Speaker 1: for obviously companies globally right now is that there is
20:37
Speaker 1: going to be a massive slowdown. We were just talking
20:41
Speaker 1: in our last segment about it really hitting the profits
20:44
Speaker 1: in the bottom line of a lot of these companies.
20:46
Speaker 1: Are you seeing the same for your business? So at
20:51
Speaker 1: the moment, our guidance looking forward is for good solid growth.
20:57
Speaker 1: So we've guided on a constant currency basis of tween
21:01
Speaker 1: twenty three and for our fiscal year which runs to
21:06
Speaker 1: the end of June. UM and at the moment we're
21:09
Speaker 1: seeing good strong demand supporting that. Um so um. You know,
21:16
Speaker 1: our rationale is that clients are still investing in the
21:21
Speaker 1: areas of deep fundamental change UM that a driving step
21:27
Speaker 1: change shifts in their industries and feeling that they can't
21:31
Speaker 1: step back from it. There's maybe a little bit of review,
21:36
Speaker 1: extra review around should we be spending the money, but
21:40
Speaker 1: largely we're seeing it come through. So John, give us
21:44
Speaker 1: a sense of maybe who are a typical customer of
21:47
Speaker 1: years or what are some of the verticals that you
21:48
Speaker 1: guys really focus on in kind of what are what's
21:51
Speaker 1: your software do for those clients? Sure, um, so we're
21:57
Speaker 1: we're writing the spoke software for clients you seem sort
22:00
Speaker 1: of the technologies that are out there already touched on mobility.
22:05
Speaker 1: Another area is payments, so as you see the shift
22:09
Speaker 1: to electronic payments, and frictionless payments and different ways in
22:13
Speaker 1: which that can be done real time and so on.
22:16
Speaker 1: We're helping clients make that adjustment retail as it's becoming
22:22
Speaker 1: more omni channel and adopting some of those friction as payments.
22:26
Speaker 1: I was talking about media. You see the shift to
22:29
Speaker 1: streaming and just coming over the horizon. You can see
22:33
Speaker 1: things like the metaverse coming through AI and wearables transforming
22:38
Speaker 1: access that personally relevant healthcare. And then in insurance you
22:44
Speaker 1: can see data transforming and personalizing the sorts of products
22:48
Speaker 1: that clients want to put out. In insurance, of course
22:51
Speaker 1: there's digital banking. The shift there continues to gather an momentum.
22:54
Speaker 1: It's got a long way to run and so on.
22:58
Speaker 1: It looks like you have a recently announced acquisition of
23:01
Speaker 1: a Lexicon in Australia. Talked to us a little bit
23:04
Speaker 1: about that business, sure, So you know, one of our
23:09
Speaker 1: strategies as a business is to diversify our footprint UM.
23:14
Speaker 1: So we do usfy across industries. We started in the
23:18
Speaker 1: financial services space UM and then we diversify geographically. So
23:24
Speaker 1: Lexicon is target that we settled on in Australia to
23:30
Speaker 1: really push what we're doing in the Asia Pacific arena,
23:34
Speaker 1: and they work with clients in a similar way to
23:37
Speaker 1: the way that we do, accelerating their digital transformation programs. UM.
23:43
Speaker 1: They've got employees in Australia and Vietnam, so very much
23:47
Speaker 1: fits our model. John, How did your business evolve? How
23:53
Speaker 1: has it impacted over the last several years of this pandemic.
23:57
Speaker 1: We know that software generally held up as as a
24:00
Speaker 1: sector pretty darn well, but it be interested to kind
24:02
Speaker 1: of get your view. Yeah, So, I mean, we started
24:07
Speaker 1: the business in February two thousand in London, were inentially
24:11
Speaker 1: focused on city of London. UM, and you know we've
24:15
Speaker 1: we've built up we I Pod in July, just over
24:21
Speaker 1: four years ago. Since then we've traveled in size um
24:25
Speaker 1: and improved our margins. So that took us through the pandemic.
24:31
Speaker 1: The pandemic was a very short, very slight pull back
24:36
Speaker 1: maybe two percent right at the beginning of the pandemic,
24:39
Speaker 1: where clients like a step back and went, my goodness,
24:42
Speaker 1: what's happening here? But then very quickly settled into very
24:47
Speaker 1: strong acceleration and when we hit peaks of sixty year
24:51
Speaker 1: on year growth as clients were adopting technologies to enable
24:57
Speaker 1: them to stay in touch with their clients in stay
25:00
Speaker 1: at home environments, et cetera. Delivery being one of the
25:03
Speaker 1: big areas of growth. Part volnability space well delivery, and
25:08
Speaker 1: I would argue the buying now, pay later types of
25:10
Speaker 1: models as well. It's interesting that you kind of talk
25:13
Speaker 1: about this evolution of technology. You mentioned the e V space,
25:16
Speaker 1: which is really interesting something fort we pay attention to
25:19
Speaker 1: quite a bit at Bloomberg, but talked to us a
25:21
Speaker 1: little bit about the payment system. It almost feels like
25:25
Speaker 1: that's an involving business as well. Yeah, so payments, it's
25:30
Speaker 1: been one of our core areas of focus for over
25:33
Speaker 1: twenty years, so initially working with the banks and then
25:38
Speaker 1: some of the payment providers that got separated out from
25:41
Speaker 1: the banks. Increasingly we see payments as being something that
25:46
Speaker 1: we're taking to other industries as they're getting to grips
25:51
Speaker 1: with how to provide a more seamless, richingless type of
25:58
Speaker 1: service to quite as retailers, for instance, they want to
26:03
Speaker 1: move to on omni channel in which they're integrating payment solution.
26:07
Speaker 1: They want to take a little bit more ownership of
26:09
Speaker 1: the buy mow pay later type solutions, and they want
26:13
Speaker 1: them to keep their hands on the customer data and
26:16
Speaker 1: not see it go down the chain into their payments providers. UM. So, actually,
26:22
Speaker 1: you know, the experience we have in other industries is
26:26
Speaker 1: becoming part of the value add that our clients seeing
26:30
Speaker 1: us bringing that payments experience, or in other spaces, for instance,
26:37
Speaker 1: insurance type services might move from being insure a car
26:41
Speaker 1: to actually insure a journey. And you know that that
26:46
Speaker 1: requires a radical rethink of how you build your products
26:49
Speaker 1: and how you relate to the insurance industry. And the
26:51
Speaker 1: data helps clients to bridge that gap. All right, John,
26:54
Speaker 1: great stuff, appreciate getting a few minutes of your time there.
26:57
Speaker 1: John cut Roll, he CEO of and DAVA. That is
27:02
Speaker 1: a New York Stock Change listed stock. Let's switch over
27:10
Speaker 1: and talk global energy. We've got w t I crude
27:13
Speaker 1: oil here pretty much unchanged on the day, seventy four
27:16
Speaker 1: dollars thirty one cents a barrel Brent crude just under
27:20
Speaker 1: eighty dollars per barrel. You know, you've got to think
27:22
Speaker 1: about or when you think about global energy, you gotta
27:25
Speaker 1: think about supplying demand and demand big variables always China,
27:29
Speaker 1: and I think China is opening up. I don't know
27:32
Speaker 1: I guess we'll believe it when we see a Fernando.
27:34
Speaker 1: I think it is Fernando Valley used the senior ANALYSTM
27:37
Speaker 1: Bloomberg Intelligence cover the global energy space for Bloomberg Intelligence. So, Fernando,
27:43
Speaker 1: it appears like you might have some movement in your
27:46
Speaker 1: demand models coming from China. How do you guys think
27:49
Speaker 1: about it? Oh, well, you're you're right, but I think
27:53
Speaker 1: it's actually down first and then up just because similar
27:56
Speaker 1: to us, when you reopen at this space, especially with
27:59
Speaker 1: more contagious variant variant, you have faster transmission and then
28:04
Speaker 1: more sickness and people avoid contact altogether. And you're starting
28:09
Speaker 1: to see that in large cities and China. UM. But
28:13
Speaker 1: then as you said, uh, as people build naturally immunity
28:17
Speaker 1: and they start to readjust to the to the new normal,
28:20
Speaker 1: is it were? Uh, then we expect an increase in consumption.
28:24
Speaker 1: UM if we go back to levels that could mean
28:28
Speaker 1: as much as six seven hundred thousand barrels a day
28:31
Speaker 1: of additional imports to China. The big question then becomes
28:35
Speaker 1: how does their economy rebound? Remember, this is a country
28:38
Speaker 1: that has very high leverage levels, particularly in their real
28:42
Speaker 1: estate segment. That accounts for as much as thirty of
28:44
Speaker 1: GDP Fernando. When we're looking at the actual market itself,
28:50
Speaker 1: it looks like open interest in crude contracts has just
28:54
Speaker 1: completely collapsed. How much of the drop in crude really
28:59
Speaker 1: had seventy four seventy four handle on imax? How much
29:02
Speaker 1: of that is due to perhaps a lack of faith
29:06
Speaker 1: in economic growth as opposed to simply people pulling out
29:10
Speaker 1: of these positions. I think you hit the nail on
29:13
Speaker 1: the head. I think the lack of trust in economic
29:17
Speaker 1: activity lead to traders not wanting to be exposed to
29:22
Speaker 1: this market, and they decided to retreat in their positions. UM.
29:26
Speaker 1: The volatility has clearly been an issue as well. We've
29:29
Speaker 1: had a lot of vlatility over the past three months,
29:32
Speaker 1: with the news of will we have a recession, will
29:35
Speaker 1: defend pivot, will trying to reopen, will COVID zero become
29:39
Speaker 1: the facto rule in China? And as we've approached the
29:44
Speaker 1: your end as well, traders are trying to lock in
29:46
Speaker 1: gains from the everything that we've seen over the much
29:50
Speaker 1: higher prices earlier this year, and I think all of
29:53
Speaker 1: that led to a drop in liquidity. UM I had
29:57
Speaker 1: as well of governments trying to re fill their their reserves.
30:02
Speaker 1: So the US government is, as I see the reporting,
30:05
Speaker 1: starting to refill its reserves. How does that play out?
30:08
Speaker 1: I don't really remember how this works. Well, technically, they
30:12
Speaker 1: will buy crude in either open market or forward contracts UH.
30:18
Speaker 1: Currently we've only seen them being out in the market
30:21
Speaker 1: for about three million barrels, which is a drop in
30:23
Speaker 1: the bucket. We've released well over a d eighty million
30:27
Speaker 1: barrels UH since the middle of this year, so it'll
30:31
Speaker 1: take some time for that to um lead to a
30:35
Speaker 1: recovery in the strategic petroleum reserve. Levels were well below
30:39
Speaker 1: the tenure averages for for the the spr UM and
30:43
Speaker 1: it will take some time and in all likelihood they
30:47
Speaker 1: will space that out so that there isn't a huge
30:49
Speaker 1: surge in oil prices. You know, they try to do
30:52
Speaker 1: it all at once. It would certainly leads to an
30:53
Speaker 1: impact on w t I prices. Well. Fernando talked to
30:57
Speaker 1: us about the broader energy picture. Of course, we have
30:59
Speaker 1: some headlines coming out the EU this morning. They're agreeing
31:01
Speaker 1: to cap gas prices at a hundred and eighty euros
31:04
Speaker 1: temporarily just to ease the sky high prices, there is
31:09
Speaker 1: there a knock on effect into the other parts of
31:12
Speaker 1: the energy market. UM. I think with the YOUU CAPT specifically,
31:17
Speaker 1: there are a lot of caveats that to actually being
31:21
Speaker 1: an enacted the prices have to be above those levels
31:24
Speaker 1: for two weeks, and then they have to be above
31:27
Speaker 1: an LERG benchmark for ten days actually on top of
31:31
Speaker 1: that in order for that price CAPT to really play out.
31:33
Speaker 1: So it remains to be seeing whether that that cap
31:36
Speaker 1: will actually come into effect. Um. And if you think
31:39
Speaker 1: about how the energy system is set up in Europe
31:42
Speaker 1: with renewables, UH, hopefully every two weeks that we would
31:46
Speaker 1: have a change and get some new generations. We saw
31:49
Speaker 1: with the UK now producing more wind over the past
31:52
Speaker 1: two past week than they had in the previous two.
31:55
Speaker 1: So I don't think there will be a huge knock
31:57
Speaker 1: on effect. If it actually did come into fruition, it
32:01
Speaker 1: might actually spark more less competition in Asia and cheaper
32:06
Speaker 1: prices for lergy because they U is essentially pricing itself
32:09
Speaker 1: out and we're seeing places like Pakistan and India struggling
32:13
Speaker 1: to get some of the supplies that they were hoping
32:16
Speaker 1: for because the U has drained so much of the
32:19
Speaker 1: lergy market. So how about on the supply side here,
32:23
Speaker 1: give us just an update a where US production is here?
32:27
Speaker 1: Where are we visa V capacity? Do you expect us
32:31
Speaker 1: that the U S producers to ramp up at af
32:33
Speaker 1: they can? How's the supply look from the US? UH?
32:37
Speaker 1: It looks sluggish to say the least. It we're still
32:40
Speaker 1: hovering around the low twelve million barrel day levels. Um.
32:44
Speaker 1: Remember we picked at thirteen point three UH. And there's
32:47
Speaker 1: a combination of issues there. One, as we said before, Paul,
32:51
Speaker 1: the inventory the wells, they're not just not the same
32:55
Speaker 1: quality as they used to be, so the productivity for
32:57
Speaker 1: a well is not as good as it was in priority.
33:00
Speaker 1: And the second part is just the shortages that we're
33:02
Speaker 1: seeing across the supply chain aren't really resolved. The costs
33:06
Speaker 1: have risen significantly from steel to Santa labor, and it's
33:10
Speaker 1: difficult for them to make a make a return, especially
33:13
Speaker 1: at seventy four dollar w c I Fernando talked to
33:17
Speaker 1: us a little bit about the SPR release and the
33:19
Speaker 1: Biden administrations. Bid I believe there's a headline a couple
33:22
Speaker 1: of days ago that in February they were going to
33:25
Speaker 1: start looking for bids to buy oil and replenish the
33:28
Speaker 1: spr It's I think crime every wrong. I think it
33:31
Speaker 1: was like either sixty two or sixty eight or something
33:33
Speaker 1: that the which is the price that the Biden administration
33:35
Speaker 1: would look to buy into. Talk to us a little
33:38
Speaker 1: bit about the effect of that on the market. That
33:42
Speaker 1: can have a significant impact, especially when you look at
33:44
Speaker 1: the spread between Brenton w t I, which has been
33:47
Speaker 1: a support for for US refiners. They especially the ones
33:52
Speaker 1: that are landlocked, they tend to make that spread between
33:56
Speaker 1: Brenton w t I. That helps their margins. So that
33:59
Speaker 1: would be net for those for that group. Um, but
34:02
Speaker 1: sixty two to sixty eight, I mean they're probably looking
34:05
Speaker 1: at the forward curve and uh, it's just not going
34:08
Speaker 1: to be realistic when you actually come into a spot
34:10
Speaker 1: market and you're trying to make it the strange actions work,
34:13
Speaker 1: especially at that volume. You know, for talking about a
34:16
Speaker 1: hundred fifty million barrels of UH to refill back to
34:19
Speaker 1: the levels for more UH, they would they would shift
34:23
Speaker 1: that curve very quickly if they don't space it out
34:26
Speaker 1: over the course of several several months of not a
34:28
Speaker 1: couple of a couple of years. Fernando thirty seconds here.
34:31
Speaker 1: Just for clarification, did you say that the refining spread
34:34
Speaker 1: would then be negative and buy an administration hopped into
34:38
Speaker 1: the market. No, this spread between Brent and w C
34:41
Speaker 1: I so w is five dollars cheaper than Brent, and
34:44
Speaker 1: gasoline and diesel are priced off of Brent. Alright, good stuff.
34:48
Speaker 1: Fernando Valley, he covers the global energy space for Bloomberg Intelligence.
34:52
Speaker 1: Here looking at the i nd GO function created on
34:58
Speaker 1: the Bloomberg terminal gives you all the yeah, the returns
35:02
Speaker 1: Bloomberg Index browser. I'm looking at the Bloomberg u S
35:05
Speaker 1: Aggricultural Value UH index for the credit for the fixed
35:09
Speaker 1: income stuff. Down about eleven point one. That's bad, but
35:13
Speaker 1: it was actually a lot worse a few months ago.
35:15
Speaker 1: The bonds have been rallying a little bit here, and
35:18
Speaker 1: I want to get a sense of kind of what's
35:19
Speaker 1: going on out there. So we turned to Liz McCormick,
35:22
Speaker 1: chief corresponding Global macro Markets for Bloomberg News. I think
35:25
Speaker 1: she's down in our DC studio, which is pretty cool. Liz,
35:29
Speaker 1: thanks so much for joining us here. You know, it
35:31
Speaker 1: seems like, you know, it's it's not as bad as
35:34
Speaker 1: it was earlier in the year for the fixed income space.
35:36
Speaker 1: What are you seeing? Yeah, it's amazing And I am
35:39
Speaker 1: in our lovely DC office here, um, but yeah, and
35:42
Speaker 1: you know, our folks in the corporate finance tea and
35:44
Speaker 1: wrote a nice story. And I tell you you see
35:46
Speaker 1: it everywhere from either the credit or the sovereign folks.
35:49
Speaker 1: It's like they said that the outlooks are all about, oh,
35:52
Speaker 1: the year of the bond, the comeback of the bond,
35:54
Speaker 1: and it's like you just lay down, how brutal the
35:57
Speaker 1: year has been with returns. But the flips out of
36:00
Speaker 1: that is it's brought yields higher, right, And people are saying, oh, well,
36:04
Speaker 1: maybe we're at peak inflation, you know, maybe stressing. Maybe,
36:08
Speaker 1: you know, even though the Fed said is going to
36:10
Speaker 1: stay at high rates for a long time, you know,
36:13
Speaker 1: maybe at least the uptick is going to stop soon
36:16
Speaker 1: and maybe it's a time to lean back into the
36:18
Speaker 1: fixed income side. So, like you said, there's folks like
36:21
Speaker 1: Vanguard and others saying, you know, investment grade credit looks
36:25
Speaker 1: good and you know, maybe it's the time to dip
36:27
Speaker 1: back in. And even some on the sovereign sides, like
36:31
Speaker 1: you know, treasuries and you know global sovereigns. Liz. There
36:35
Speaker 1: is a fun fact that Ira Jersey said to me
36:38
Speaker 1: last week, and I've been saying, I think it's like
36:40
Speaker 1: the fourth time on the show that I've said it today,
36:42
Speaker 1: But he essentially argues that the idea of FED cuts
36:44
Speaker 1: being priced in the market is capping yields, especially on
36:48
Speaker 1: the front end of the curve for the two year yield.
36:51
Speaker 1: Is there a possibility here that rate cuts, or at
36:55
Speaker 1: least the possibility of them next year, get pushed out
36:58
Speaker 1: of the curve And how quickly could you see some
37:00
Speaker 1: sort of shock to the front end of the curve
37:02
Speaker 1: if that happens. Well, I have to say and not
37:06
Speaker 1: have to say, but I do agree with Ira that, um,
37:09
Speaker 1: you know, those cuts being priced in are helping, right,
37:12
Speaker 1: especially help and flatten the curve. But I mean, we
37:15
Speaker 1: we saw Bill Dudley right on our opinion page today
37:18
Speaker 1: that kind of the market may need to listen to
37:20
Speaker 1: the FED, and a Jerome pal couldn't have been more
37:23
Speaker 1: clear that, like, hey, we're not even thinking about cutting yet.
37:26
Speaker 1: So I think there is a lot of risk despite
37:29
Speaker 1: everyone saying the year of the bond, which sometimes when
37:31
Speaker 1: everyone's saying the same same thing. It almost makes you nervous, right,
37:34
Speaker 1: there's a you know, risking things go the other way.
37:37
Speaker 1: But I think you're right there there's about fifty basis
37:39
Speaker 1: points of cuts priced in by the end of three.
37:42
Speaker 1: And if you know, we go meeting by meeting by meeting,
37:45
Speaker 1: and the Fed keeps leaving it there and signaling, you know,
37:48
Speaker 1: no cuts to the next year, the market will eventually
37:51
Speaker 1: come in line. And I think you're right. You know
37:53
Speaker 1: that that means maybe then the two year you'll has
37:56
Speaker 1: more room to go upside. So there are some firms
37:59
Speaker 1: like you've probably seeing black Rock is warning like sovereign dead.
38:03
Speaker 1: You know, there's a lot of risks. Inflation could be
38:04
Speaker 1: sticky in the FED stays high long and and in
38:07
Speaker 1: that world, like you said, creedy two year yields could
38:10
Speaker 1: go higher. And Liz, I mean a lot of folks
38:13
Speaker 1: obviously talking about a recession in three. Are we seeing
38:16
Speaker 1: any signs of that concern? And maybe the high yield
38:19
Speaker 1: market at all, maybe some of the lower end. Well
38:22
Speaker 1: I do hear from folks and you're seeing their reports
38:26
Speaker 1: and and this, you know, nice story today is talking
38:29
Speaker 1: about you know, when when things get bad and you
38:32
Speaker 1: have a recession, it's you know, defaults you're worried about
38:35
Speaker 1: and some high yield risks. So I think, you know
38:38
Speaker 1: a lot of them leaning into the market are saying,
38:41
Speaker 1: be selective into the debt markets. Let's go with the safer,
38:45
Speaker 1: you know, like the investment grade, which investment grade like
38:48
Speaker 1: treasury has got really walloped the most because a lot
38:50
Speaker 1: of the bond yield as we've known for the last year,
38:53
Speaker 1: the pain in the bond market has been just pure
38:56
Speaker 1: call it duration risks fed just jamming up rates by
38:59
Speaker 1: over four on your basis points, push yields and you know,
39:02
Speaker 1: not to get too wonky, but you're getting more of
39:05
Speaker 1: a plur pure rake play and investment grade credit, and
39:09
Speaker 1: of course in sovereigns because it's not you know, there's
39:11
Speaker 1: not as much risk of defaults, but high yields and
39:13
Speaker 1: things like that. Um, you know, I was listening on
39:16
Speaker 1: the radio for with you guys this morning. I forget
39:19
Speaker 1: it was chatting with him, but Dennis Gartman was on
39:21
Speaker 1: and he was pretty negative on things, saying, you know,
39:23
Speaker 1: recession coming fed to stay high, and that's when you
39:27
Speaker 1: you worry, is they're going to start to be more
39:29
Speaker 1: default and you know, these lesser grade companies not doing
39:34
Speaker 1: well or having trouble rolling over debt now that yields
39:36
Speaker 1: are higher. It's interesting that you mentioned defaults because it
39:39
Speaker 1: almost feels like at the moment, the consensus here is
39:42
Speaker 1: that if there is a shallow recession, the risk of
39:44
Speaker 1: fallen angels, for example, is very, very low. But let's
39:48
Speaker 1: let's talk a little bit about bond volatility here, because
39:50
Speaker 1: if you look at the move index, you are starting
39:52
Speaker 1: to see it kind of stagnate a little bit. When
39:55
Speaker 1: it comes to volatility, it's extremely high and it's kind
39:57
Speaker 1: of staying at those high levels. Why if the Federal
40:01
Speaker 1: Reserve has been nothing but clear about their strategy moving forward, Well,
40:06
Speaker 1: that I will admit a bit of a head scratcher,
40:08
Speaker 1: because you you know, there's been a few FED meetings
40:11
Speaker 1: that you know, we kind of said, oh, Jerome Power
40:13
Speaker 1: maybe had a little trouble with communication this time. He
40:15
Speaker 1: seemed to have his notes in line. And you're right,
40:18
Speaker 1: volatility has come off, but it's still historically high. And
40:22
Speaker 1: I think kind of getting to what Paul was asking
40:25
Speaker 1: is that, you know, even though people are saying, hey,
40:28
Speaker 1: maybe the debt marks will do better next year, maybe
40:32
Speaker 1: inflation is peaked. There's a lot of maybes, right, So
40:35
Speaker 1: I think there's enough risk out there, um that people
40:40
Speaker 1: aren't you know, there is some volatility selling you you
40:43
Speaker 1: know here here you know that going on, but not
40:45
Speaker 1: in screaming because that I don't know. It's just especially
40:48
Speaker 1: if you've had such bad losses, you've got to be careful,
40:51
Speaker 1: I think. And so people you do still hear people
40:53
Speaker 1: saying I'm holding powder dry keeping cash. Um. And I
40:57
Speaker 1: just don't think people are going to think bond volatile
41:00
Speaker 1: it is over until we kind of see the whites
41:03
Speaker 1: of the eyes, you know, whatever that number is, CPI
41:06
Speaker 1: gets down to four percent, that people really trust that
41:09
Speaker 1: inflation is in this falling trend. And we're still just
41:12
Speaker 1: looking at the twos and tens liz um still about
41:15
Speaker 1: sixty five basis points of inversion there. Um, How are
41:19
Speaker 1: people thinking about an inverted yield curve. I'm just an
41:22
Speaker 1: equity guy, but I've been told if you get an
41:24
Speaker 1: inverted yield curve, that means a recession. But we've been
41:26
Speaker 1: inverted for a long time. It seems like, yeah, we've
41:29
Speaker 1: been inverted for a long time. Um. But you know, like, um, Campbell.
41:34
Speaker 1: Harvey would say, who's now a duke? Who's the one?
41:36
Speaker 1: Who's who? Really? Who found that? You know, that relationship
41:40
Speaker 1: between the shape of the curve and recessions. And he
41:43
Speaker 1: always reminds me Lizzen has never failed me, you know,
41:46
Speaker 1: and you know, I'm like, I know, I know. So
41:48
Speaker 1: we've had like he likes to look at the three
41:50
Speaker 1: month tenure and that's inverted for a while now too,
41:54
Speaker 1: So I would have to lean with him and say,
41:57
Speaker 1: I'm hard pressed to think it's going to be like
41:59
Speaker 1: this time is differ. We don't get a recession, of course,
42:01
Speaker 1: I don't know if it's mild or strong. His thesis
42:05
Speaker 1: doesn't get to that, but um, I do think you know,
42:08
Speaker 1: the Eel curve has been inverted for a long time,
42:10
Speaker 1: and you know, you hear people saying you've probably talked
42:12
Speaker 1: about it. You know, we could see two stents go
42:15
Speaker 1: to minus a hundred basis points, you know, we all
42:17
Speaker 1: you know, we were at minus eighty five on the
42:19
Speaker 1: inversion a bit ago. So maybe it runs further and
42:23
Speaker 1: it takes longer, but it has a pretty good track
42:26
Speaker 1: record of foreshadowing economic downturn. Alright, great stuff as always
42:30
Speaker 1: Liz really appreciate getting some of your time. Liz McCormick.
42:33
Speaker 1: She's the chief corresponding covering global macro markets for Bloomberg News,
42:38
Speaker 1: reporting from our Washington, d C. Studios, which are pretty
42:42
Speaker 1: awesome down there in the nation's capital. Thanks for listening
42:48
Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen
42:51
Speaker 1: to interviews with Apple Podcasts or whatever podcast platform you prefer.
42:56
Speaker 1: I'm Matt Miller, I'm on Twitter at Matt Miller three,
43:00
Speaker 1: and I'm fall Sweeney. I'm on Twitter at pt Sweeney
43:03
Speaker 1: Before the podcast. You can always catch us worldwide at
43:06
Speaker 1: Bloomberg Radio