Bloomberg Markets Special Simulcast Day Two

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Clomber News. We want to get right onto our first guest here, Michelle Schneider. She's managing director of the Market Gauge Group. She's also the author of the best selling book Plant Your Money Tree, A Guide to Growing your Wealth. Uh, Michelle, Tim keeps reminding me that we're sitting on like twenty plus percent gains percentage

gains here in the markets here. How do you grow that going into next year? Do you have confidence here that some of the gains that we saw this year that that's going to persist in Well, what's so interesting about this coming year is that we have a lot more question and essence about what's going to happen versus when we were going from one, we knew we were having a change of administration, but we knew that the

federal Reserve, for example, was going to stay accommodative. And now, of course going into two, we know that's changing a bit. And so we also know that we have an infrastructure program coming up and the possibility of more government spending, and there's also still the unknown of haw far inflation

will continue. So when you put that all together, really it looks like what the market is playing out here is a scenario where as we see big tech can continue to lead, although it's come off today, but we have a situation where small caps, which are the Russell to thousand literally have gone sideways. From February one to date, they have traded between If we look at our WM two oh seven and two thirty four, there was one

brief flip above two thirty four in November. And what's that saying is that even though transportation is now out pacing it, we're still looking at the potential of not much growth in the industrial manufacturing sector, which we desperately need to continue to grow g d P. Okay, So Michelle, let's take this one step further and talk a little bit about what our audience wants to know in terms of where they should allocate their portfolio in give us

some of your picks for the year. Well, for one thing, it was really very bullish right now in oil, and I think if oil goes up, as it seems like it will, we also then can look at alternative energy. There is definitely a correlation between electric vehicles, which have been strong, but if you look at the whole old energy space compared to oil, it's still relatively weak. If oil goes up, then there will be more interest I

think in ets like tan or p BW. We also are looking at Mountain Pass just in terms of rare earth minerals as something that could potentially double in So

that's one big area for us. Another is obviously at some point this whole pandemic thing has to at least be absorbed where normalcy comes back, and that leaves a lot of opportunity in travel and leisure, some chain restaurants, and then if inflation takes whole, we're looking at consumer staples which have already gone up and made a new all time high, but particularly companies that have pricing power, things like medical devices, some of the high tech that

Cathy Wood looks at that have gotten beat up that could also be somewhat immune to inflation. And then, uh, finally, you know, we're still very interested here in the whole medical space, but instead of the the whole healthcare the way it was with XLV, we're looking more at medical supplies like an intuitive surgical or I h I, which is an E t F because those two are inflation.

And the last thing I'll say about it is precious metals have been stagnant as well, and if inflation kicks in, which it still can, we could be a good year for gold and silver. Michelle, you took the thought right out of my head. I want to really point out to our viewers here you were one of the first female traders on the New York Commodities Exchange, which makes

me really want to draw on your commandity's experience. You already discussed oil, but talked to us about gold in particular, because since it hit that two thousand level in July, it's kind of been hovering a really in kind of a trading range a little bit of sideways. What helps gold break out in the face of this very, very

long list of worries. Well, we know that gold is definitely going to be reactive to any geopolitical concern and at this point we don't really have anything strong happening, but we do have the underpinnings of Russian Ukraine that could always erupt. But besides that, we know it's an inflationary factor, and that's where you have seen so many people looking at inflation through cryptocurrency initially in the year,

or through food commodities or industrial medals. But gold could actually erupt if inflation gets to the point where people think that it is much more out of control than where a lot of people are saying now it has peaked. So those two areas are eighteen hundred has been this sort of transitional type of number to look at. We're sitting right around eighteen hundreds. So if we can get back up through eighteen forty, it's very possible that a lot of people that have ignored it could come in

and really start buying. Well that's the hedge though, But that's the hedge if, of course, the FED doesn't do anything. If the Fed actually does start to raise rates, normalize policy, and do so aggressively. Does that take some of the bloom off of the rose of gold Well? Yes, but I don't think that's going to happen. First of all, they have to finish the taper, so we're looking at about March, right, And then in terms of aggressive action by the Fed, they have a big price to pay

if they get too aggressive. They really still think that the whole inflation narrative is transitory. Maybe we're looking at max a year out. So I don't think that they're going to do anything too aggressive until they wake up one day and realize that things have gotten out of control. And then of course they're going to put the kabash on any economic growth that we've had, which is still also limping along. We really haven't had major growth, alright, Michelle,

A great stuff, Michelle Schneider. They're managing director of the market Gage Group, helping us kick off the our simulcast here. This is a special Bloomberg Markets coverage simulcast across our Bloomberg TV, radio and YouTube platforms. Remain Bossi here alongside Tim Stanovic and Krety Gupta taking a look right now in the commodity space, watching settlement right now of nim

Ex scrude futures. We are going to settle higher year for a fifth strade day, a pretty phenomenal run here, about eleven h higher here over that five day stretcher official settlement right now at SI SO five. That's the start of the new session for those folks watching this on your screen. Natural gas futures over in Europe down for a fifth strade day, down about three tents of a percent. That's the smallest decline over that five day stretch.

Your gold futures pulling back slightly, basically called it unchanged. And you guys remember when used to talk about lumber all the time. I remember you had that phenomenal run up in lumber. Future is back in where it doubled, and then we started off this year. The first four months you had a doubling of that doubling, and then

of course it's kind of cratered. But look at this back above eleven hundred bucks upper a thousand uh board feet here, up four percent here on the day, now up for a fourth straight day, creaty well off the high. As of course, we were up around seventeen earlier this year. But I think back, you know, a year and a half or so ago, we were something like three hundred bucks UH per board feet remain. It's interesting that you bring in lumber because that's exactly where I want to

go with our next conversation. Timberland our cultural land. There is no shortage of land. It is in demand upon not intended and thanks to that commodities and inflation really driving it. I want to bring in our next US Jason Walter, National Land Realty CEO and founder. Jason, thank you so much for joining us. Let's really talk about that lumber picture. Timberland in particular is really important when it comes to just the commodity rises that you've seen,

not only this year. What does that look like, Well, we just see we see it continue to go up.

The stuff in prices is finally caught up for the lumber prices to an extent, and we see that continuing especially for the first half of how much of when we talk about the distortions that we saw earlier this year, particularly that variants that we saw in stompage prices UH and in the futures market here, how much of that was specifically driven by the housing market, and how much of that was driven maybe just by speculators, Well, a lot of it was driven just by control and supply.

You know, a lot of the a lot of the sawmills and timber companies controlled the supply of starting four or five years ago, and so that that's really what drove it up. The housing market just put fuel on fired. But things are starting to settle out a little bit more than even out across the markets. Okay, when you say things are starting to settle out and even out across the markets, what's the time frame that you're giving. The timeline line that you're giving here for perhaps a

cycle top, we're looking at it topping out in second quarter. Um. You know, part of the issue you have is just supply across the board. I mean, it's it's getting harder and harder to find land. Um, and so it's that

that's going to become an issue. The latter part of Jason, how does this viewed, say abroad, for someone who's looking at making perhaps a hedge against inflation, is land somewhere where they could possibly look to that to do that in the long term, Yeah, I mean, it's historically outperformed everything even even twice as much as gold. So I mean, there isn't a better place to put your money in inflationary period, especially in the commodity driven timberland, agg land,

recreational land. So we've we've just seen incredible numbers. I do think in two you know, I get asked every day, when is this market going to slow down? I don't think demand will slow down, but supply is going to become a real issue. Um, it's already becoming an issue. There's just there's only so much land to sell, and and it's becoming the prices they're just getting outrageous, and

there's so much competition there. I mean, we've talked to a lot of wealth managers who talk about this idea of looking at real estate, whether it's as a hedge, but more importantly just as an alternative form of earning a little bit of interest in capital? Here? How do you make the assessments? So, and I'm looking at it more from the perspective of just kind of the rank and file investors, maybe those who aren't experienced in real estate.

I mean, what are they looking at? What do they use to sort of make an assessment of not just what's available, but what could potentially be profitable. Well, a lot of a lot of our clients are driven by use. I mean there that's what we call recreational and they're they're looking to build a house on one day, but they're hunting on it, they're fishing on it, they're using it for recreational lotions probably of our clientele. UM as far as the pure timber and egg investors, Uh, there's

not a lot of middle ground there. You're either a sophisticated investor or or you're not. UM. There's there's not a lot of It's not like the stock market where you can just kind of puddle in it. It's a big part of the narrative that emerged over the last let's say, twenty twenty two months as we've been in this pandemic has been the idea of families searching for more land, more space so they can do stuff outside

rather than be together inside. Do you see this as a permanent shift or or something that when we do finally get to the other side of this pandemic, we'll see prices kind of go down a little bit and demand go down a little bit. I do think, I mean it's settled out in the beginning, you know, April May, and you had people kind of going to one extreme. They want to move from a neighborhood to earning a hundred acres of alien, you know, sixty miles out of town.

And we've seen that kind of uh settle out into Instead of moving from a neighborhood in an urban area to sixty miles out, they might buy ten or fifteen acres um and we've seen a lot of that. So it's like it's anything else. You have extremes in the early stages and then things settled down. But I do believe you'll see people have just gotten used to isolation a little bit and and some people really enjoyed it. Jason Walter, National Land Realty CEO and founder, We're gonna

have to leave it there. Thanks so much for joining us. Really appreciate you taking the time. This is Special Markets coverage simulcast on Bloomberg TV Radio and on YouTube. I'm Tim Stanevik along with Creedy Gupta and Romaine Bostick. The other big headline out there right now is Apple apparently paying out bonuses of a hundred eighty thousand dollars to retain engineering talent. The man who broke that story, Mark German, joining us right now. Mark. This isn't just a hundred

eighty thousand dollars in cash, is it? No? Not in cash. These are in r s U so restricted stock units. So the way it works is they'll give these grants out in January, so about a month from now, and they will vest every year annually for four years. So that eight divided by four. There's some people reporting under fifty thousand, some people in the sixties, eighties, and nineties. It's really a long range between that, about fifte eighty.

And these are going out to individual contributors, so people without direct reports. In many cases, these are individual engineers working on products like Apple's upcoming mixed reality headset, working on silicon engineering the chips that now power the Mac, the iPhone, iPad and all of Apple's devices. A small stepset is also going to software engineering. Uh, individual contributors as well as people in the operations department. Uh. You know,

these bonuses are out of cycle. These are are random and unusual. In many cases, people receive them and we're taking a back surprise. These are not part of the normal compensation packages. This is not something that I believe Apple has done before. And this is really an effort to retain key talent. Apple is, you know, losing talent right now. There are people more than the usual number of people leaving. People don't want to eventually return to

the office. There's other companies like Meta, Google who are going to be more lax about their office return you know, policies in the middle of next year. Uh. Meta is paying out base salaries that in many cases are much higher than the base salaries that Apple and others are paying out, and they have been aggressively recruiting Apple engineers given their shift to hardware in the so called metaverse.

So this is an effort to sort of stop that and retain the key people that push out these products and are really court developing the Apple devices on an annual basis. Yeah, Mark, you've reported on defections from Apple self driving car team in recent months as well as this most recent news. Of course, I'm wondering if this is gonna be enough to get people to stay at the company, because you did say that there are higher salaries,

higher base salaries that companies like Meta for example. Yeah, So the hope for for Apple at least the management giving out these RSU stock bonuses that that that this will offset some of the recruiting being done at least for a period of time from Meta and other companies. I mean, a hundred thousand, two hundred eighty thousand, fifty thousand is even a lot of money, and in many cases that could help, you know, match or or offset

the higher base salaries that Meta is offering. And if you look at Apple stock, obviously they're nearing that three trillion dollar threshold. These RSU bonuses are only going to become more valuable as Apple's stock continues to rise. Obviously, some of the price targets we're seeing is that there will be a rise in Apple stock price. These hundred k, hundred eight k, fifty k, you know, r s U s could you know eventually at some point be worth

double than they are today. Mark talked to us about the other ways that Apple can actually pay its employees. We're talking about time off, We're talking about perhaps working from home, will more flex schedule. Where does that kind of fit into all this in a market that is very hot when it comes to finding a job right now, and a market where a lot of other big tech names. I'm thinking Amazon are dealing with unionization for example. Yeah,

for decades. You know, the perks that Apple has offered employees in many cases, uh, you know, are not as substantial as you might see from Meta, from Meta or Google. Steve Jobs liked to to frequently say, obviously ten plus years ago that you have to buy your own lunch at Apple, right, whereas Google and Meta are companies that you know, provide free lunch. I know that's a simple thing, but you know that's important to you know, a lot

of the engineering talent um. But in terms of the normal parks that you're going to expect from a company for on K, vacation, health benefits, obviously, these RSU bonuses are you know, higher in many cases that these other companies are. So Apple in terms of employee benefits is is extremely a generous even down to their retail employees.

If you recall during the height of the COVID nineteen pandemic, when all of the Apple retail sorts globally were shut for several months, those employees were still being paid and they were able to work from home as customer service agents and for online sales. So they have been fairly good to their employees. But employees are also, you know, at the same time, not happy with the company, not

happy with some leadership or the management. They have been feeling underpaid on base salaries compared to META when they're seeing some of their coworkers get offered these gigantic pay packages.

You're also seeing uh employee concerned about return to office plans and having to work in the office us if you're a hardware engineer during this variant, right, they're expecting hardware engineers to be back in the office either four days per week or full time with the headline sometime mid next year, they're saying it today, not yet to

be determined, but they're aiming for bidden next year. You're seeing all employees needed to be in the office at least three days per week, whereas you see other companies that are going to be going fully remote for many of those roles. So what we're seeing is a sea change or Apple may need to up some of its benefits in addition to this money to retain their top engineers. A great scoop today really give us some insight and to the talent war out there in California and beyond.

I guess across the tech sector here, Mark German as always all over it. We'll catch up with him soon, I'm sure. Of course he talks about those R s U s and what it can mean if the stock goes up. It's down today. We're still on that. Of course, we'll watch for that three chillion dollar market cap. And as he pointed out to him and creaty uh, you're basically every analyst in the street thinks this stock is

going higher next year. This is Bloomberg Markets especial Sill Markets coverage, our global simulcast today, joined right now by Tim Stenovic and pretty goodime Romaine Bostick here counting you down to the close, just about eleven and a half minutes left to go out here in the trading day, SMP five hundred flat on the day. The Philadelphia Semiconductor Index, which of course yesterday closed at a record high, down a little bit today by about seven tents of her percent.

Airlines rebounding pretty nicely from yesterday's so off of about one point seven percent. Retail stocks also higher, and keep an eye on the Arc Innovation et F Cathy Woods, a flagship fund here down about one percent here on the day down for a second straight day. But you go back to the beginning of the year, guys, this outperformed the market. I mean it was up something like twenty percent, outperforming the SMP by like twenty percentage points.

As of right now, it's heading into the end of the year trailing the SMP five hundred by something like fifty percentage points. If you can believe that, it's remarkable and it raises the question, you know, and Cathy Wood will defend this over and over again her five year time horizon. She was out just a couple of weeks ago talking about how well the fund is gonna do two and she got some heat for it, but was and a nonomally for the fund. I think that you

have people. I think it's a fair question to ask. I mean, it's a high beta tech play. At the end of the day, right this isn't something that is

really going to be specific to alone. It's something that you're going to start to see more funds drop into, not just here in the States, but around the world as people really see that defensive bid, whether that's now or where that's in five years in the face of decelerating growth and in fairness to Kathy would I mean, she has made it clear that you know, she is I guess, for lack of a better we're kind of a moonshot type of person, that this is more than

just about short term gains here, that she's making bets on some big structural changes in our society and more importantly in technology. All right, let's talk about the broader market here and bring in uh a friend of the show here, Katie Nixon, chief investment officer over at Northern Trust Wealth Management, joining the program now as we count you down to the close here on this Tuesday afternoon, just about ten minutes ago. And Katie, you know, we're

pretty much wrapping up the year here. Whatever gains we we lock in over the last few days here a sort of immaterial to I guess the narrative that we've seen leading up to this. I think what everyone really us to know is how confident, how optimistic are you heading into we remain? Thank you for having me on today, and I would say we're pretty constructive going into two.

I mean, you can't deny the strength of fundamentals right now, um, in corporate America in particular, and even in the economy that we're having fits and starts related to this omicron variant of course, um, but we expect, as we've said before, that this will create maybe demand delayed, but not destroyed. So we actually expect above trend growth in two Um.

What about inflation and potentially you know you mentioned omicron being fits and starts, does it does it turn into something that's beyond fits and starts that causes more supply chain scenarils is perhaps people once again shift spending. Look, we've seen this story play out before, shifts spending from from services to goods. We really have seen this story

play out before. It's been a year of deja vu after deja wo um, And I guess the interesting thing right now is the way that we have really modified and and and and figured out ways to live with

with covid um. The recent CDC guideline change I think is really interesting and so far as it will probably mitigate some of the supply chain constraints that we worried about as we saw ami crom sort of ramp up as the as the dominant variant in the US, So we do think we'll see the supply constraint issues prolong, but not for as long as we had feared when this when this latest version of the virus came and

came into interview. So, yes, supply constraints will continue, but we still think that we'll get past them sort of in mid Hey, let's talk about where we are in the market psycho in particular, we just came out of with this massive rebound really kind of thriving in value and then a switch into a lot of those defensive growth plays, those yielding sectors in the back half of going into do we get closer to that scary R word, which is recession really kind of perhaps eclipsing these kind

of ten years, seven year long recessions that we've had and going back to perhaps the historical norm of recession. Ever, you say five years, So we don't have a recession in our in our five year forecast. Actually, um, we think our point of view is that the FED is going to be uh, very much on hold. Maybe we'll get one, maybe two rate hikes off next year, but the cycle will be really short in terms of FED policy,

So we're constructive on growth going forward. Now, what I would say is this whole growth value debate is it's so interesting because It's been a year of both and UM, and I think investors who have tried to pivot between growth and value have probably gotten burned because the cycles have been really short and at the end of the day, you've been fined being being in each. But what I would say is now is a great time for investors

to think about quality. And you mentioned quality dividends, and I think the intersection between those two is really going to be interesting for investors going forward. You get the defensive nature of Equality stocks, they have a sustainable profit margins, the ability to pass on price increases amid these supply chain constraints that we talked about, and then you've got that dividend that burden the hand to provide some current income. Katie.

Of course, we are focused right now on the countdown to the close of US markets, but I do want to get your thoughts on some of the markets outside the US, particularly in the developed world, particularly in Europe, and whether you see anything attractive over there heading into next year. So remain. We actually are favorable to Europe for a couple of reasons. First of all, we think UM monetary policy is going to continue to be very accommulative, and we have some fiscal policy adding to the to

the mix um in two as well. Then you also have this interesting dynamic in the European equity markets where the markets themselves, the benchmarks are pretty highly levered to value into cyclical stock. So if you're a believer in the baroque global growth momentum, and we certainly are, you really want to be in those areas that are going

to take advantage of that. And I would just add also, um, we have some fiscal stimulus finally now in Japan as well, so we expect to see some economic growth there that can can be pulled through to some corporate profitability. So we're favorable and developed x US markets UM in general. Right now, Katy, let's say that somebody's watching the simulcaster listening to us on Bloomberg Radio right now, and they've been hesitant to put money in the market, waiting for

some sort of pullback. Look, I know professionals always advised against timing the market, but is it fair to say, in your opinion that you think there will be some sort of pullback or opportunity to get in when it's not hitting a record high. You know what I would say if there's always the up. The opportunity for a pullback of five or tem percent correction are normal normal features of a right the tem percent five percent pullback

behind the two percent pullback. So yeah, we haven't had a lot of volatility, so I think your point is a good one. We we anticipate that will have volatility next year because we're in a year of transition, right. We've had a sort of one way bets for a couple of years now, strong fiscal, strong monetary, tons of liquidity. Those things are going to slowly be be put in reverse,

so you can anticipate that will have some volatility. I just think market timing is so difficult because when you you have those strong, strong pullbacks, those tend to be very difficult time for times for the individual investor to put money to the market. So our advice always is set your strategic plan, align your your assets with your goals, and then get invested as soon as you can. And I think this year has been a real cautionary tale

against people who have tried to time the market. Katie, you just mentioned that you are in the camp of global growth momentum. Let's really broaden this out and talk about the international playbook here, especially when it comes to tackling not only COVID nineteen. You have China with their zero tests, zero COVID policy, the United States dealing with

vaccinations and boosters and testing as well. But then you also have different rate paths when he comes to emerging market central banking, for say the FED or the BOE.

How does this all come together? Well, I'm glad you raised the emerging markets, and I think the big question mark and the big source of uncertainty there is China and the implications of not just the zero COVID policy on Chinese economic growth, but also on supply chains, the regulatory crackdowns that they've had on some of the high growth sectors, and then clearly the the trying to tap down the speculation on the property markets. Those are really

strong headwinds to economic growth. Now we have started to see Chinese authorities, the PBOC start to provide some stimulus, um it's been slower than we anticipated actually, so we we think that in two were gonna have to see much more, much stronger policy action from China as a way to sort of reignite interest in emerging market equities. But until that happens. I think emerging markets remains sort of the big area of uncertainty from an investor's perspective

right now. Katie Nixon over at a Northern trustt Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube. Sarah to Bloomberg Global News