US Recession Call Trickier Than Ever

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also on the Bloomberg Terminal. The story Tim taps into how traditional economic indicators, well they can't predict the timing of a downturn, and then some of the newer forecasting methods they're just kind of untested. Yeah, this is why I calling us recession is trickier than ever before, especially with all the mixed signals that we're getting. It is just not easy. We hear over and over again, it's not easy from CFO was it's tough here with the story.

We got Bloomberg News US econom reporter Katya Dmitrieva on zoom the in the ninety nine one studio and Bloomberg Bureau in Washington, d C. Along with the editor of Business Week, Joe Webber. He's here in the Bloomberg Interactive Broker's studio. Come on, Joel. I thought this was easy. I thought all you had to do was be the national view of economic research and you just, you know, say, look in your crystal ball. I thought that tells you exactly when the recession may or may not go. Yeah.

And on top of that that no pressure for economist here because they've had some noteworthy misses. Uh, you know there's an inflation thing from GDPHO things. Yeah. So so really, what's what's happened here is this, Uh, there's been a proliferation of data. Everybody's got an opinion now, right, gad you and and what is the best we can come up with with how to figure out how to call a recession? Yeah, there's a lot of data. In addition to the traditional indicators, you also have all of the

new ones. You know, everything from the open table restaurant reservations to h where people are flying and if they're flying, if they're coming back into the office, and then even things like plastic surgery. Some economists like to look at that as a gauge of sort of how much people are spending on things that are completely discretionary of the time.

So you have a lot of stuff to look at. Um, And unfortunately, you know, unfortunately it's no easier this time around with this data than it was, for example, during the last recession or pre COVID I should say, twenty nineteen, when everyone was thinking, okay, we're due for a recession before times the PC pre COVID times. Um, you know, I think right now, Uh, there is some indication of stress. Um,

there is some indication that things are slowing down. But the tricky thing is trying to figure out when you're piecing together all these different pieces of the economy. Um, is the image that you get that we're entering a reset shan or is it simply a renormalization and kind of a slowing down to something we might have seen in nineteen. So that's what's proving very difficult for for a lot of economists right now. I'm so glad we're

talking to you right now. We we just spoke with Mario Cordero, who runs the Port of Long Beach, and he was saying that, um, you know, we kind of like tried to hold his feet to the fire and get him to say whether or not we're in a recession, whether or not he sees one coming. I mean, this is the guy who can look out his window and see the economic activity, you know, how many ships are lined up in the economic activity that's taking part. And he wouldn't. He was like, I'm on team soft landing,

but he wasn't comfortable making a call. We said like yes or no, and he wouldn't do it. Yeah, he wouldn't do it, right, Yeah, you know, I mean that's the exact same experience that you're going to get with a lot of other economists right now. I mean, even Claudia Sam you know she created the some rule. Uh, this is sort of when you talk about art versus science and economy. This is pretty much as science as

you can get. You know, It's a line on a chart attracts the on him ployment rate over time, compared to the sort of past twelve months unemployment rate, and it is very accurate in terms of predicting at a certain point. Okay, we've entered a recession, and yet even when I was chatting with her, she was saying, you know,

I hope that it's wrong this time around. And there's a chance that it might be wrong this time around because the consumer outlook is still pretty strong and we haven't seen a lot of kind of impact negative impact in the labor market yet. Um. And again, I mean, we could enter a situation where consumer spending managers to

hold up. Right. So, we saw the retail sales figures for the past few months pretty dismal, but we're coming off of that high, right, So um, we could enter a situation where companies have a bit more room to cut prices now, Um, now that the FED is kind of done its job and we're seeing inflation slow down a bit. Um, And then we could have consumers saying, Okay, I'm going to keep spending, maybe not like I did two years ago or a year ago, but you know,

I gonna keep this economy going. Everyone's going to keep doing their part. Uh. So it's just still a big question mark words later, you know, twenty economists interviews later, and it's still to be I'll do my part. Um, So what about the yield curve, because that's then as you write a tried and true recession indicator, does it still hold as much weight as we've always thought or is it sort of slightly maybe less? And these other things kind of take into account, like what what's the

new uh, you know, the new thinking on inverted yield curves? Yeah, the yield curve is a funny one people people love it and it's a great Um. It's a great indicator of what investors are thinking and whether they see kind of a recession down the road. And it's pretty straightforward. Um when sort of the short versus long term the curve inverts like it's a it's a signal. It's one signal of many signals. Um, But how does it compare

with a drop in sales of men's underwear? Yeah? Yeah, I know, Alan Green's fans favored or used to be his favorite indicator. Um. You know, it's it's more accurate than a lot of other indicators. The thing. The thing with the yield curban version though, is that there could be a false positive. So we have in the nineteen sixties where the yield curve inverted and we didn't have a recession immediately afterwards. And we also had the yield

curve inverting twice at least twice last year. And we're you know, I mean, you could talk to some economists, they'd argue, we're already in a recession, but we don't see, um, the traditional signs of a recession right this very second. So you could maybe even call call that a false positive. So with a lot of these indicators, like you really

have to take them all together. So yield curve plus the som rule plus you know, for example, the Conference Boards leading Indicator index, which is weakening and flashing rend. It's going to wait for a year when everybody says, oh,

guess what we were in all it already happened. Hey, listen, how does though there's a great sound bite in your in your story are a great quote about how this is the most traditional of traditional recessions in a couple of decades, right, the last two we know, right, we had the financial mailtdown, the housing crisis, that's one, and then you had a pandemic that shut down the economy thirty seconds left. It being traditional makes it easier or harder to call. It makes it just as hard to call.

I mean, we're lucky this time and that right now we don't have a black Swan event, at least not yet fingers crossed like we did for the last two especially the last pandemic recession. UM. But it doesn't make it any easier. In fact, I would argue, what makes it harder because you're seeing, uh, you know, kind of a slowdown of demand, but you're also seeing these mixed signals of like positive things happening in the economy. So I would say it's it's just as hard as it

was before. It's not easy calling a US recession. That's it. Um. What a great story and so relevant, certainly to all of our conversations we're having Katya Dmitreva. She is US economy reporter at Bloomberg News via zoom from Washington, d C. Thanks to her, along with Joell Webber, the editor of Bloomberg Business Week, this is Bloomberg Radio. You're listening to Bloomberg Business Week with Carol Messer and Tim Stenovic on

Bloomberg Radio. We want to get to our next guest because our big take today a story in the upcoming issue of Bloomberg Business Week. It's talking about how traditional economic indicators can't predict the timing of a downturn. We keep, you know, talking about when a recession, what kind of recessions, so on and so forth. I think a great indicator has anything to do with transportation. Yeah. One indicator you could say that has often been relied on as a

good gauge of economic health is anything to do with transport. Carol, and we're lucky to have back with us to that end. Mario Cordero, executive director at the Port of Long Beach, who joins us via zoom in Long Beach, California. Mario, good to have you with us. How are you well, Thank you, Thank you for the kind invitation. We'll talk to us about activity at the ports. Um. We've spoken to you a couple of times throughout the last two years.

How many ships right an hour off the coast waiting to get in zero So we essentially have no vessel backup since back in November. So it's essentially a great success here in the largest complex for the United States here in terms of containerized cargo. Would you say that things are back to quote unquote normal as they were, you know before the pandemic. Well overall will be lard to the fluidity here in the Poor Long Beach, I

would say is back to normal. Obviously. On the other hand, the nations supply chain, there's still some work ahead, but again far better than when we were a year ago. So tell us what changed. Is it that there's more truckers to pick up the goods off of ships, there's more workers to get the goods off of ships, or there's less ships coming in. I know that there's a

lot of factors. We could look at what is different, what is a combination of factors, But I think the bottom line here with the economy is as we all know, uh, the imports that come into our nation's gateways, and the numbers reflect where we are in our economy. So the good news is, I think we're doing very well in terms of the surge that we had that we handled here twenty million containers at the St. Peter Bay complex

that is together to Port Lammis, Los Angeles. So the economy has slowed, but I think we all have to agree that to a certain extent, it's an intention here given the Federal Reserve in their attempts to control the inflationary rate that we were experiencing in two. So part of that plane of action is to slow the economy and the holiday season. Though it was successful, it did, uh was lord in the expectation that some people thought, and so I think you're starting to see that the

consumer demand is dissipating. And the other and last aspect to this is we had very, very high inventories in the fourth quota of two because of the cargo that was moved here from Asia ahead of time, given the surge and all the bottleneck issues that we were experiencing in you to write. We talked about that with companies, right They built up their inventories because they didn't want to be caught off guard and without goods that consumers want, and as a result, they didn't need to ship in

new um. So that makes a lot of sense when you say that the economy has slowed. So the activity that you were seeing, U are the level of economic activity? Is its similar to what we saw just pre pandemic or is it below that level? Give us some more context. You're someone who understands the levels in and out different economic downs, you know, different economic cycles. So give us a more perspective and color. Thank you. We are getting

to pre pandemic in many metrics. But keep in mind and when you look at the economy and the inflationary rate for you, for December, we're now at a six point five percent given the peak of what we were experiencing in the summer six what no, seven seven, I'm sorry, seven point one percent year to year in terms of the slationary rate, so you're talking about so that was in November and December we went down to six point five So when you look in terms of what that

rate was in the height of the escalating inflationary issue of the utmost of nine. Again good metric in terms of again what the Federal Reserve is doing, asked to monetary policy. The second point to that is we could all agree how much the supply chain was part of the phraseology used by the Federal Reserve in terms of factors that were uh causing inflation. So they dead news at least for the supply chain. We are not high on the list anymore in terms of those inflationary factors.

And I'm talking about supply chain disruption and of course transportation costs. You know, with regard to the West Coast, the transportation costs from Asia to the West Coast are now back to a normal type of setting. So again to your question, yes, we're seeing now is a semblance of normalization that is pre pandemic numbers here. Maybe it's a good thing that President Biden isn't visiting your port anymore, as he did, you know in June of last year, right, Yes,

And I think credit to the White House emboy. Uh, first was John mccardi and now General Steam Alliance and bringing out the stakeholders together to try to address these various challenges we had here going back to the COVID nineteen impacts. We talked with Mario Cordero, executive director at the Port of Long Beach via Zoom in Long Beach, California. Mary.

When you say transportation costs back to normal, is that though still inflated because there's still inflation in those numbers or no, Well, I think transportation costs back to normal. You know, we we had about a reduction of what that containerized cargo costs to bring the container from Asia to to to the West Coast. And I think in large part is the capacity question. Uh. You know, we

have more a city here now. Uh. And of course the carriers are canceling sailings because of that diminished import number. And when I say diminished important numbers, not just a question of the West Coast, is diminished important number overall to the nation. But on the other hand of good news, if you ask any of these international carriers and UH and the American and the shipper, you know, bottom line, the market here is in the USA in terms of

consumer demand. So despite the diminishment of that consumer demand, we are in a very good setting in terms of going back to pre pandemic numbers. Just in the last minute we have with you, Mario, any indication to you that we're going into a recession are already there, because some say that we could be like kind of right there right now. Well, I think you know, there are those who talk about a soft landing, and I'm in

that category. And of course over those if you go back to the summer and spring two who were predicting a serious recession of a magnitude level, we're not there. So I think the good news is I think you're starting to see that number one. The important thing that CPI and the consumer Price Index is diminishing. And of course, on the other hand, with regard to the recessionary numbers, I think there's still a lot of optimism among the economists that we're not going to have the type of

recession that some people fear. So the good news is, yes, there's a cycle here, and I think it's going to be a mild one, uh that we're going to go through. So hopefully, uh, we're all correct on that side of the column. So I look forward to a second half better than the first half. But yes or no, we're not there in a recession yet. Yes or no, Uh no, we're not there a serious recession. Mary Cardero, thank you so much, Executive director at the Port of Long Beach,

joining us from California. This is Bloomberg. These sees Bloomberg Business Week with Carol Masair and Tim Stenebec on Bloomberg Radio. A story about how startups are getting created, are creating what they are doing, They're getting creative. I should say, when they are in the hunt for crash and for cash, catch by that it's Wednesday that these things happening. It's some day, just like they're getting creative. I'm getting creative. Um,

but some of that creativity is raising eyebrows. Well, we got a great voice with us. He's quoted in this story, Ken Smith. He's from Next Round Capital Partners. He helped start up start ups obtained financing. He's with us right now in the Bloomberg Interactive Broker's studio. Ken. Good to have you with us. You know, as as we heard um Charlie going through the markets, you were telling us a little bit about you know, your impressions of Elon Musk and you know how he paid overpaid for tests

for Twitter. Excuse me ahead of Tesla earnings this afternoon. Um, the environment has shifted so much just in the past year. What are you seeing in the work that you're doing when you're out there helping startups raise money? First, thank you for having me. It's a pleasure to be here. Um. Yeah, we're seeing an in ironment which is drastically shifted in

the last twelve months. Particularly. I think UH investors obviously are kind of coming off a very very rosy scenario which was two thousand one, where multiples were sky high and people were paying for growth at any cost, And now we're back to fundamentals, as they say, and investors are really focused on when companies are gonna be profitable or they're gonna be cash break even, and and particularly what multiples are they paying now for that future growth

given interest rate headwinds, the FED and a potential recession. So a smarter market today in terms of focusing on fundamentals, where it got a little stupid when there was so much cheap money, they got super crazy. Uh, some firms and I won't name names, we're doing you know, ten deals a week, right, How can you keep that pace and and really be doing serious diligence um on these companies?

So what we're seeing now is really kind of a very much a pullback, very much focus on what's gonna work not only now but in several years from now, and durable business models. What I want to ask you, Kenny, is that in a market like this, does it create companies that will ultimately be your Google's, your Facebook's there, I say Twitter, you know, the companies that actually have longer legs and sustainability going forward because of the focus

on fundamentals. Absolutely, you're going to see companies that really were sort of cash burning machines. That need adventure capital to continue growing, right, they could continue to feed losses. And a lot of the consumer models if you look back at Casper Mattresses, if you look at back at Lime, at Bird, these were ideas that just consumed massive amounts of money. The vcs had to continue funding at ever raising rounds and ever raising prices. And when that's working

and money is cheap, it's great. You can run a business like that all day long. But when the month, when the tide goes out, as Warren Buffett says, you know, look out below, right, investors are just not willing to fund those losses indefinitely. So what's the environment that exists right now in the context of the new companies that are out there being created. Are we in a more normalized world of you know, I don't know, the nineteen

nineties perhaps where we see interest rates not at zero? Right? So now we're I believe we're in the sort of two thousand nine period called two thousand twenty to two thousand eight for the venture capital IPO market where everything where everything ground to a halt, and two thousand seven was two thousand one. But but what came after that, it was like the best time ever to be a ventric right, and a lot of the venture capitalists hadn't

seen a two thousand twenty two yet. Remember a lot of these firms got started in two thousand ten, two thousand eleven, two thousand twelve. All they knew was a

bowl market. If you were an employee started working for a startup, you got all these options and all you saw them is go straight up, straight up, straight up, and you never sold a share, and you were the smartest person in the world because then if you had the I p O the lock up and you were rich, and that's all you had to do is just keep

doing that over and over again. Now venture capitalists are starting to have to think like hedge fund managers, although they have to say, you know, Chime was a twenty five billion a year ago, and that was it a hundred times multiple, and now Chime is trading at ten billion and potentially it was public down the six billion. Should I have sold a lot a year ago? Do I need to start actually managing a portfolio? Because this whole buy and whole thing in the VC world isn't

gonna work in every environment. They got lucky and it worked for a while, but it's just not gonna work in time one of those startup you know, so called neo banks. That's right, So what does this mean for startups who do need cash? I mean, Hmma Palmer who wrote this story, she's our hedge fund reporter here at Bloomberg News. She talked about how startups are having to be creative in terms of the hunt for cash. So

what are you doing? What does that mean? And what do they have to promise or what they have to do? I think early stage startups if we defined the world by early stage, mid stage companies series C, Series D, and then late stage post series E, when you really have a business going on. I think a lot of what I was talking about in the article was companies

that have already raised money. They have significant businesses going on hundred million, two hundred million, three hundred million revenues, but are still burning cash, right, and so they have a certain amount of cash and kind of two thousand two was sort of a freebee there, southing twenty two sorry was a freebee. You raise a lot of money in twenty one. You had plenty of cash to get

through twenty two. Now you're hoping as a CFO, you wake up and this all goes away, right, because you don't want to go out and raise money at a discount or a fifty percent discount to what you did, hence the down round. Right. Not only that, but you've got employees and executives to keep happy, right, and if you wipe out their equity, guess what, you got a lot of upset people walking around the office saying, hey,

what did you do? So this is gonna be the interesting part two thousand twenty three and mid part this year into two thousand, rubber is going to meet the road. Every CFO is gonna have to say, what's this? Where are we going with this? Do I keep growing my business or do I dilute my investors and wipe out my equity of my employees? Right? And that's gonna be the big dilemma. So you see companies like Sneak that just did a down round. They got a major free

pass only down right from their previous round. If you can do that, you should do that all day long. But I think companies but Sneak is in a SAS software high margin business, so they can probably get away with it. But if you're instat cart trying to raise money now or go puff good luck. Yeah, we've seen I mean, we've written about the challenge that those companies

are facing quite a bit in Business Week. So I guess my question is about the types of businesses that are going to come of age during this period of hiring rates and you know where the money isn't free anymore, that's right, m Are these gonna be just better businesses? Are you optimistic? Or is are you? Are you kind

of very optimistic? I'm almost glad this has happened because it's making CFOs and companies actually have to be aware of cost, be aware of how much money they're burning of investors money to grow these businesses, responsible about hiring and hiring and right sizing your organization and not just throwing money at problems because that's what everyone got, punched drunk on free money. So if you're just punched drunk on free money, you're gonna hire as many people as

you want. You're going to invest as much money into sales and marketing. So you're gonna go after bad product ideas and they may or may not work, But do you care there's a VC standing by and wanting to give you more money. What are the opportunities. Then, the opportunities are in virtual reality, companies like Andrew the opportunity he's although I think it's the defense that's right. I think companies like company. He's the guy who created Oculus,

sold it to Facebook. Now he's trying to take that. Andrill is one of our top requested names, obviously, and I start talk about open ai. But open aiy is kind of the new Uh, let's just say darling of the private world. Um, and we're going to see a shakeout in that world. I think I can that world to when Yahoo was the leader in search and then Google came along and actually made it a business, right, And so that's what we're kind of seeing with AI

is who can actually make it into a workable business model. Um. We're seeing a lot in logistics and transportation companies like flex Sport. And then we're also seeing a lot of the sas businesses which do cloud data storage, AI, machine learning, data, bricks, data robot companies that actually are helping businesses be more efficient with very high profit margins. In the In the interim, he does it also mean that companies will go to

public sooner rather than later? I don't think so. I think we're in a very interesting period where investors are willing to pay a certain multiple. You look at public company multiples that are comparable, and if you're a private company CFO, you might say, you know what, it's probably better to stay private for right now. I agree, But because it's a different environment, there isn't so much cheap money, it's not going to force some companies to have to

tap the public markets. Do you think there'll be enough out there? I think that when companies do start raising money again in the private market, if the appetite is there and they can do it at the right price, they're going to try to stay private until the market recovers and then you can go public at a higher multiple. Remember businesses in software that are growing at selling for five times multiple from the public market. You know a

lot of these private businesses times more plus. So that trend continues, because it's something that Tim and I talk a lot about. It just kind of floors us when we go to different conferences. We were at Milk and it was all about the private markets. That trend continues, that the private markets are continue to fund so much out there. Just got about thirty seconds. That's right. Look, that doesn't change a lot of the best ideas are

the early stage ideas vcs. If you're a VC that caught open a I, really you're sitting on a hundred times your money. That is where the real money is made. You got to catch them early enough, though, you know many times once they get too late, just like Uber had raised so many financing rounds by the time of one public at one down. So you know, you just got to catch the timing right. But this is innovation.

We're gonna pay for it. There's gonna be a bull market again, and you know, stay positive and look at fundamentals. All right, we certainly will. Ken SMI thank you so much. Next round. Capital Partners founder joining us in our Bloomberg Interactive studio. Check at him a parm Oer, our hedge fund reporter at Bloomberg News. Her story talks about exactly what Ken just laid out for us. You're listening to Bloomberg Business Week with Carol mess Here and Tim Stenovic

on Bloomberg Radio. Chinese eight RS. They have been on a tear this year. The Nazi Golden Dragon China Index of Chinese eight RS at trade here in the US. It's up about eight year to day, up seventy seven percent since October of last year. Mind you, it's still way off its highs that we saw back a couple of years ago. It is the m q Q Emerging Markets Internet and e Commerce et F invests in the space and is up nearly eight in the past month,

in the past three months. It's a lot of numbers. Yeah, sorry, that's no. It makes sense though, a lot of perspective because we just want this sector has been on fire and has really seen a pretty strong bounce back as of late. We've got a great voice on this to give us more on the space, which includes companies like ten Cent, Ali, Baba, Pinduo, Duo, j D, dot Com, by Do and more. Kevin Carter's with us. He's the founder of e m q Q, joining us on the

phone from San Francisco. Good to have you with us, Kevin, How are you. I'm great, Thanks for having me. Okay, So Carol talks about this space all the time. I made a point today by telling her you haven't talked about you know, Chinese internet companies that are traded here in the US once this week, which is just like such an anomaly for But you do it for good reason, Carol, because these are really important companies and it's a really

important economy. It's the second biggest economy in the world. That said, investors are a little scared of it over the past couple of years, given what we saw with COVID in China and given trade tensions between the U S and China. In addition of that, Um, what's the Chinese government going to do with these big companies? So what's the thesis that you have for having exposure to the space? Sure? Well, um, you know, the thesis of

e m q Q is pretty simple. You've got six and a half billion people in emerging markets, and they're becoming consumers first and foremost. They want more and better food, clothing, appliances, etcetera. They're getting their first computer ever and it's happening today, and it's not a desktop, it's a sixty dollar Android based smartphone. And and they're getting the Internet for the

first time when they get that smartphone. And because they don't have a target store, they don't have a bank account, there even more digital than we are. So to think of it as the fang stocks for you know, the other ninety percent of the world's people, and and China is the biggest part of that story. And China has been the biggest part of what we do UM. And it's also the biggest e commerce market in the world.

I mean, China might be an emerging market in a traditional sense, but when it comes to you know, smartphones and e commerce and and all things are related. China is the most developed country on the planet. And you know, in many ways they are the Jetsons. So it's obviously a China play. That's your biggest you know, when it comes to geography, Uh, you're bigger exposure, but you do have exposure to South Korea, India and elsewhere around the world. Uh.

And you do track the Emerging Markets Internet Index. You are beholden to the index. And I guess what I want to ask you, Well, there has been quite a bounce back as of late Kevin UM the index the area, it's still down about from the high back in mid February one. And it's it's still a group that in many ways with that China exposure, is beholden to what the Chinese government and regulators they're do. That's a big variable I would say, if you look at the last

couple of years, so why risk that exposure? Well, I mean you're absolutely right, the last couple of years until October, the end of October, this was a horrible place to be investing the from the top to the bottom. I think at one point we were down about and you know the first part of that, we're all the China concerns that you alluded to, um And essentially there were two different China fears and risks that that we're just

troubling investors over that period. And the first was the so called China tech crackdown, which I don't think people quite understand um. And I think that really that really isn't it. What do people not understand about the China crackdown? Well, first of all, all over the planet, the Internet platforms, you know, they've grown so fast that no regulators have been able to keep up. And you don't have to

look very far. Every day you'll see one of the fang stocks in the newspaper for getting fined, or look at what we saw with Marck Garland yesterday exactly. It's I mean it's and in Europe as well, I mean Google pays you know, goodness knows how many billions of dollars and fines they pay a year. So this isn't

a China specific thing. The only problem is people are so conditioned to be afraid of the Chinese government that when they do something, instead of being you know, a regulatory you know, worded in a favorable way, it's a

it's a crackdown. And and and I you know, I've been involved with investing in China for eighteen years, and you know I have gone through as they happened, each of the four regulatory issues from the ant group I p O canceled to the online education uh you know uh rule change, and every one of those things were very sensible to me that the government did. I mean, they cost us a little money, they were fines, and the fintech rules changed so that the you know, the

fintech companies aren't as valuable. But but but either way, it looks like that's behind us. However you want to characterize it as a crackdown, and you know, things like jack Ma's missing, fine, but if you look and listen to the Chinese government, at least over the last twelve weeks, it's over. They did their regulations, that they can just change their minds. President she has proved he's willing to sacrifice economic growth before and other priorities in exchange for control. Kevin,

that we've seen that time and time again. How do you know that that doesn't change again. Well, it certainly could change again. But if you listen to you know, his his most recent comments on on the matter, he's and China has a lot of problems, by the way, and I think, you know, trying to get this tension behind them, and so the at the highest level they have stated that the regulatory crackdown is over. Um so, but you're right, they could change their minds and go

any number of different directions. But but let me just say that's that was the one big fear. The second big fear was the de listing risk and the D word, which I spend more time on this than unfortunately almost anything in my career. And it was so intellectually dishonest on so many levels and had such a low chance of happening and more importantly, a very low chance that

anyone loses any money. I mean, people don't seem to understand that a stock market is different than a share of ownership and you know, a corporation and whether it trades here or there are somewhere else, no one's gonna steal your your shares. But people didn't understand that in any time the D words showed up, it crushed the stocks.

Now this has also been somewhat resolved. You can go to the pc I O B website Bill to tell you that they went and did their exams in Hong Kong in October and and they felt they had full access to what they needed and it should be uh, you know something that's behind us now. And again, is it fair to say that being bullish on this area requires you to have faith in the Chinese government in a way that you don't have to have faith in other governments when you're you know, you have to yeah,

when you're investing in those regions. Yeah. Well, let me let me say one important thing. We have a second offering which is called f m q Q, which is the same thing without China. So for people that don't like China, or maybe they already own a China product that they don't want China, you can buy the story

without China. But the reality is that you know, emerging markets are risky and and the emerging markets governments are the volatile and you know, we've seen what's happened in Russia and and it really doesn't matter what form of government you had. If the leader goes crazy, then you might you may be in trouble. But but here's what's

exciting about this story. UM, let's move beyond the China park because China, you know, China's e commerce markets the most developed, you know, as I said, on the planet by far, it's four times as big as all of the other forty five of emerging markets combined. And that's why it's been about of the revenue from this emerging markets internet sector. But now India, the rest of Southeast Asia, which is very young, especially relative to the West, into China, UM,

south the rest of Southeast Asia. You've got five and a half billion people beyond China in what we call the next frontier emerging markets. And those people are just getting their smartphones today and they're getting online for the first time, and the growth there over the next decade is going to be stunning. Well, and as you said, the f m q Q South Korea India looks like our your top geographic holdings and if I look at the performance of that and this again takes out China.

In the past three months, it's up almost seventeen percent. Here, I looks like it's beating the index and UH in the last month up about thirteen and a half percent UM. Great conversation, Kevin, really appreciate it. Kevin Carter, founder of e m q Q, JO earning us on the phone from San Francisco. I'm roa macro journal. Yeah, but you let me drive? No, no, no no, all right, please, I don't want to drive. It's good question. This is the

drive to the clothes up on Bluebird Radio. Right just about seventeen minutes left in today's trading session, I heard Charlie breaking down the numbers he's been on the market turnaround. Still in the red for the SMP down at NAZAC, but definitely off its lows of the session. But you know, we're kind of driven from data point to data point and earnings released to earnings release. We've got some big ones after the closing bell. Yeah, but is there something

bigger happening? And how do we kind of draw all these earnings and results together? For that, we turned to Jimmy Lee, the founder and CEO at the Wealth Consulting Group. It's an independent management, registered investment advisory firm. They've got about two point nine billion dollars in assets under management. Jimmy joins us once again on the phone from Las Vegas. Jimmy, how are you great? Thanks for having me on. It's

good to have you back with us. Okay, let's take a step back, UM, not talking about our nings yet. I just want to get your views on the macro and the landscape that you're seeing, because I don't think we've been able to speak to you yet in um, what are you? What are you seeing as you look out?

I think what we what we were going through now is a shift from just a few weeks ago, from a a lot more of the pundits believing that we're definitely going to be in a recession and it's just not you know, not knowing how deep it's going to be, to where I think a lot a lot of those bears have turned more bullish, thinking that we may actually

avoid a recession. And so I think that the negative sentiment, although it's still very very high, there's a little less than what it was just a few weeks ago, and I think that's what we're seeing. So I think, you know, good news, You're you're seeing money get put to work into risk assets such as equities and also fixed income and bond has been a good place for investors this year as many people think rates are going to stabilize

and then go down at some point. It does seem like the conversation certainly has shifted over the last few weeks. But what do you think are we are we going to be able to pull this off? Well, my base case has been all along that we could avoid a recession. I wasn't in the camp of we're definitely going to be in a recession. And you know, whether the FED raises fifty or seventy five or maybe even one percent,

I don't think really it matters that much. It's more about are they gonna you know, pause at some point and when's that going to be? And certainly it's gonna be in the first half of this year. Some people like myself think it could be as early as March um and if that happens, I would be a little bit of a surprise, and I think that would help, um, you know, fuel this rally that we're seeing in stocks what makes you think or what signs are you seeing

that inflation maybe comes down faster than many expected. Well, I've been I've been kind of talking are you along or the last few months anyways about and last year about just how big housing and shelter which was the problem in last month's report, right, how big that is a part of course cp I, nearly course c p I. And I think it's been well reported now that you know, the BLS collect that data with the Ruby mirror, and everybody knows that housing market and rents have kind of

stabilized and and it's it's been tough in the housing market. And so you know, when that data eventually gets into the inflation numbers, at least the headline numbers that they're fed looking at, they think will look a lot better. Um, and I think they'll be able to pause and then and then I think that there was even a chance that they could lower before the end of the year. Why do you think that they would lower. They've come out and said, well as of last month, that they

don't plan to lower. You know what, I agree in terms of the sentiments, not the sentiment, the statements and what people are listening to from the FED members about how hawk is they're sounding, But you know, I think they can change that. So if we get weakness in the economy in the second half of the year from from the high interest rates, um, I think that that would be the main reason that we could see some weakness,

maybe even in the labor data down the road. You know, Jimmy, I'm looking at the note you shared with our producer Paul Brennan, and you know, the things are areas that you would be overweighted include something that shows an economy that's that's either turning around or is already turned around.

That's energy, industrial, materials, and financials. Is that safe to say that that's why that's your play, because you don't I think we're going to be in a recession and that you do think inflation will come down and at the FED stops sooner rather than later. Yes, And I also believe that China is a big part of a global growth story, especially for for the Asian countries, and I think China will end up being in a net

positive for global growth this year. And so yes, I think that that we avoid a recession at least that's what I hope, and that I think a lot of acid classes, equities, fixed income, and real estate will have an bounce back this year. I still think we're gonna be volable for the time being, but you know, investors need to get a positioned ahead of the pause. I think by the time you know, those words come out of Pale's mouth, I think stocks will be higher. And

that's that's the main reason. Okay, so, uh, new client comes to you with a bunch of cash right now, how do you deploy it? I know it depends on their age, what their goals are, um, but but how do you time You know, you can't time the market. We know that how do you time the investments? It's very difficult to time the market. But history has shown that in any given twelve month period, literally any given twelve month period going back, seventy five percent of the time,

the stock market is higher. So it's very difficult to to not, you know, want to put the money to work knowing that. But usually we'll we'll take the cash and and add some into the portfolio that we want to invest into fairly soon and then and then look at deploying the rest depending on what's going on in the recent news that we're that we're headed against, and so you know, i'd say maybe like a half now

and half over the coming months. Type strategy is typically how we would do it, unless there's some sort of an event that we're watching out for and we'd want to wait for that to We just got about forty five seconds or so left here. Does it matter if that the real inflation rate that we get back to is not or in the Fed funds rate that we get back to it is not two percent that it runs, that the run rate is higher, whether it's four percent or so even three percent, does that matter in terms

of investment strategy for you? You know, we're nearing the point where the Fed funds rates crossing potentially, um, you know, where inflation is core CPI and so now we're getting to a point where where rates really can be restrictive and can work on inflation. And so I think, you know, once once we get inflation lower than where the Fed funds rate is, I think then we're gonna be just fine.

And so now will that change Fed speak? I don't know, but um, I can tell you that I think there's a lot of money sitting in in cash and money market funds and c D is that that's waiting for a brighter outlook. Um, because still, even though that the sentiment has moved a little bit more positive over the last few weeks, I think that the negative sentiment is still pretty bad out there, and that's what people were

hearing in at least retail investors are so. But for us, I think that, you know, the rates that we're getting to now is a comfortable workple place, all right, Gonna leave it there. Hey, Jimmy, thank you so much. Jimmy Lee, founder and chief executive officer of Wealth Consulting Group two point nine billion roughly in assets under management, joining us on the phone from Las Vegas. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or

Bloomberg dot com. You can also listen to our radio show at two pm Eastern on Bloomberg Radio or stream us live on YouTube and Bloomberg dot com.