A Closer Look At The Fed And Renewables

much for joining us here. We love to get your thoughts. I mean, you get a little bit of a roll over in the market today. UM, but I'd love to get your thoughts on this Federal Reserve. Are you comfortable with kind of that the pace of the tapering and more importantly, the communication around potential rate increases or are you in that camp that I think is growing that's

saying maybe the Feds kind of falling behind here. Well, thank you so much for having me and and I think a really important question as we think about our outlook into Um, I think we're to the first party your question. We are comfortable with tapering and what's been communicated, you know, I think what is still outstanding is whether or not that pace changes as we get through in

November and into December. But you're right to think what the market is really watching is what happens from a liftoff perspective, and and tightening, which is now projected to be somewhere in in in mid two UM. You know, to us, demand is strong, consumers resilient. You're just referencing that as we look at some of the earnings and retail data. But it really comes back to this, to

the conversation around inflation. So what kind of inflation do you expect in two and is it going to be enough to drive the Fed fundrate up to fifty basis points between fifty and seventy five, because that's what the market is pricing in right now, and I feel like it just seems a little aggressive for this dovish group

of Fed governors. Yeah, I think, you know, when we when we look at inflation, I mean, I think there's still this question of transitory and I think one of the challenges is that we've seen demand come back and be quite robust, and we're still seeing that met with some of the pressures and supply chain UM. And then we also have the commodity story at place that's definitely

creating some short term pressure. It's interesting to look at five year inflation expectations versus more forward looking inflation expectations. There's still some confidence that inflation is somewhat transitory and or the set is going to get it right. So and we think it's probably prudent at some point for

them to step into the market in two. But to your point, it's probably a little bit slower as we continue to really just kind of navigate the cycle and and some of the unprecedented recovery that we've been seeing. You know. I know you are used to be the formal global head of fixed income at Demo Global Asset Management, and I have to say, I really feel sorry for my friends that are fixed income portfolio managers. I look at the tenure at one point five and I'm like,

what do people do all day? Where do you find opportunities in the fixed income market? Now? You I think it's a question that we continue to have a lot of dialogue on with with with our clients, especially as we think about what the implications are for real returns, you know, going back to what we're seeing on the earnings picture, gives us a lot of confidence and you basically have to manage down expectations. Right. Well, I think there's two pieces of it. You know, one, yes, of course,

it's about thinking about what the expectations are. But the other piece of it is how can you get total returned? So you know, the yield is one component, but how can we capture opportunities to create a better total return picture than the yield? What otherwise support? So for us, it comes back to credit sectors which continue to be resilient. But then looking underneath of that and saying where we

see strength, where do we see recovery? Real estate that you highlighted, the consumer, some of the leisure sectors coming back, and we think there's still good opportunities to get to positive real returns through using a total return approach. All right, So if we look at the SMP five right now, and on the equity side of the equation, it seems priced to perfection and we're starting to realize that you've got to have earnings to impress. Um, you were talking,

we were talking about the retailers. You mentioned them as well. Um, if you get margin compression because you can't pass on the higher prices, you're in trouble. How do you see that going forward? Yeah, I think it's a great question

as we look back on their earning cycle. It's one of the things that was raised to date and through the third quarter we saw UM corporations effective and their ability to pass on the prices, but certainly important, especially if we don't have the demand to support it into into two. You know, it's been interesting. Even if we look at spread markets and we look at the curve, we do see some softening as we get these inflation.

UM prints worried about both the ability to pass it on and what does it mean for earnings, but also if it forces the Fed to act, what it does to the overall broader support of the economy. Do you know, Woodward, thank you so much for joining us, or really appreciate your thoughts and you're taking the time, do you know, Woodward,

President of McKay Shields looking at the market. You know, we had the COP twenty six conference in Glasgow over the last couple of weeks and I don't know, maybe it's just me, but I was expecting some big stuff, some big announcements, and I'm not sure looking back that I necessarily got that a lot of talk here, but boy, there's a certainly a lot to discuss here. Let's get into a little bit of that as we think about the President Biden's in Infrastructure Bill, renewable energy and what

we did maybe get from COP twenty six. We can do that today with VJ. Monter Purgata. He's a president and CEO of Montrose Environmental Group. So, VJ, is my takeaway from COP twenty six? Am I being a little too pessimistic? Or what did you take away from that? Hey, Paul, Hey Matt, it's great to be talking to you guys. Um you know, I it's uh, it's kind of a tale of two cities for me, Paul, Matt. It's if you think about wanting to stabilize the impact of the climate,

it's a monumental human endeavor um. And so you know, if you think about the the lack of consistency of political will um of standards um uh, and and the the need to build a consensus um, we're in effect the hold into the slowest adopters, right, So you know the need to put these leaders together and have the delegates come through and think about how to build that

consensus is important. But then if you step back and think about the the the desire by all of us, and you alluded to it Paullen matt to wanting more action and clear goals UM and visible steps were far from it. So in that sense, it's a little disappointing UM and I think we haven't done enough to unleash the power of the market UM to help achieve some of those goals. So do we expect miss your market

to do UM more than MR Government has done. I mean, we talk every day with people about how E s G is more than a trend now it's actually a strategy. But we still don't have any great metrics. Maybe that's one good thing that's come out of copy and we

still have a lot of greenwashing. Yeah, I mean, look, my general view is that you need a little bit of MR Government and MR market, But depending on your goal UM, especially for all the reasons we just talked about, right, lack of lack of consistency and consensus, MR market is going to be much more powerful here UM to setting a set of frameworks and standards that everyone around the

world can work towards. UM. E s G is a little bit of a different force Paul, and that it's one that we're both subject to and a lot of our investors are really interested in UM and I continue to struggle with what it means though by virtue of all the things we do that we think, is it from Montrose and for our business and for our clients. We've kind of accidentally fallen into being an E S

G company and making a positive impact. But but yeah, we we hear those concerns from our investors all the time, you know, VJ. There's a lot of folks, including uh, Michael Bloomberg, the founder of Bloomberg LP and this radio operation that believes it's really up to the cities that's where you can get a lot of stuff done. You know, UM, how do you think about that strategy as opposed to

getting the whole world together in Glasgow? It's I mean, the cities play a play a huge role, Pauly Matt, but I don't know that I fully agree that it's all up to the cities. UM. There are huge swaths of participants, UM, you know, in agricultural communities, in places where cities perhaps don't play as prominent of a role. Those of us like the two of you and me that go between cities all the time. I think cities

have a material role, but not the only role to play. UM. So I struggle when there's kind of the responsibility shouldered by one group. I think this is one of those areas where you need businesses, communities, cities, countries, the transportation sector, the inter government UM agencies all working together. I mean, if you, if you think about the pandemic, is an example of how coordinated that was in terms of the response.

And I'm not saying it was perfect. Um we we set a pretty monumental goal collectively across countries, within countries, private sector, public sector, and we made a hell of a dent um. It would be great to see something coordinated like that on the topic of this nature. What's

the one most powerful change we could see? V G. You know, I I read a story I think a couple of weeks ago saying that, um, the major producers from the u US, from Germany, from Japan need to promise to stop building internal combustion engines, which you know, on the one hand, that hurts me, it's like a

wooden stake deep into my heart. On the other hand, it makes a lot of sense, because, um, you know, they're responsible for a huge portion of carbon emissions personal vehicles, and it strikes me as also, Um, I don't know if the term ironic is right ever since a lot is more set. But that that that all these car makers like, we're going to electrify her whole fleet by But when you say, does that mean you won't be producing any internal combustion engines? Like, no, no, no, no,

no no, We're still going to be building those. So is that do you think the biggest change that we could make as a society. No, no, I think, And I think part of the problem Paula Matt is that you know, we're trying to prescribe a solution. And this goes back to what I was trying to say earlier. I probably didn't say it all that eloquently. Be great to let the market help decide what that set of

solutions should be. I think one of the biggest changes we could make is to set a price on carbon and to set in place some kind of cap and trade mechanism, but more on a global scale, and then let capital, innovation and market forces determine whether you want combustion engines or not, and how they would phase out if at all, um and which sectors and which parts um of the markets, of the economy, of the global production cycle, which by the way includes a whole lot

more than each of us driving cars, how all that would play out. So I think I personally would go several steps higher than just picking on one aspect of a source of emissions d j um. The Infrastructure Bill Present Bidence Infrastructure Bill, it's got some stuff in there about the environment. Is it enough? Is it a good step? Do you think it's a it's a good step. I think um. You know, from Mantra's perspective, Polymat it's uh.

The investments infrastructure which are good for our country, have a positive impact on our services and the demand for our services um and a lot of it. Uh. It requires anytime you build a road, anytime we build a bridge, already with existing rules and laws, you have to do environmental assessments um. Uh. And so in that sense it's good. I think it goes one step further, which is encouraging

from my perspective. There's dollars in there allocated for the removal of the forever chemicals, the pflus chemicals from water, which is one of the biggest um UH concerns of our generation. Um Uh. There's water infrastructure investments, reuse and access investments. So all of those um types of initiatives I think are good for the environment and good for the community, which is why I think it's great. All right, VJ thank you so much for joining us. Really appreciate

your time and getting your perspective. VJN. Pagata, President and c of Mantro's Environmental Group. Kind of working with companies UH to surprise support for cleaner air, cleaner water, and there's a lot to be done. In copy six was a move forward. You know, we're here, we are in November, mid November. Start time to get some of those year

ahead outlook pieces. And boy, after the year we've had this year, a lot of folks, I'm not seeing a lot of consistency out there, a lot of consensus, I should say, but let's bring our next guest and see where we land here. David Coudla, found their CEO and ce IO of Mainstay Capital Management, joins us. David, you know, we just got through a pretty darn good earning season. Um you know, the FED is kind of communicated what they're gonna do here. It seems pretty clear. Does that

set us up for a pretty good two? I think it sets us up for a pretty good It certainly I think sets us up for a good end of year run. But I quickly need to get into the corvette discussion. Oh please, do I have a C seven z R one Corvette? Holding onto it? I have a I have a C eight, but I have the C seven z R one because that is the last, you know, that is the front engine manual transmission, true manual transmission with a stick right that I will have in a corvette.

So I'm holding onto that one. I have driven a couple of those, and I'm on the track. In fact, I got to drive a few UM C seven's on the track up at where was that new Jersey Motorsports Park. Gorgeous car, and really I think it was a huge breakthrough from the C six to the C seven. Um they made uh so much headway and it's the last of the front engine cars. So I will say, having lived in Germany now David for a few years and I've been driving a nine eleven on the auto bawn,

it's not ideal for high speeds. You want the weight in the front when you're going fast. Sorry, my red railing this conversation, right, But I do want to try THEE. So if I'm ever near you, I'm gonna ask to drive that. Well, well we'll drive them both, and the and this and I drove my C. I've driven the C seven on the track, seven five horsepower zero one.

That is a lot of fun. So um. Yeah, So through year end, we think it looks we've still got a very constructive setup for stocks, even given a little bit of weakness we've had over a couple of days last week or this week. As we get into you know, it becomes a function of we have some things on the horizon, right, we have what is going to happen here within the next several days on appointment for the FED chair, what happens with inflation, how high does inflation go?

And and the FED needs to act more rather than less. Um. So, you know, some of the things that have been tail winds and accommodative FED become headwinds next year. But for now, a lot of liquidity in the system has been pushing stocks higher. We think we're good through at least year end. Matt was just complaining about how much it costs for him to fill up is f one fifty raptor And that kind of brings us back to that inflation discussion. Um, you know, how big of a headwin is that next year?

And I suspect that higher gas prices are the are the biggest problem for inflation expectations because that's when people really notice. They're the biggest problem for President Biden for sure. And we've seen what's been happening, you know what the calls he's been making around the world for other countries to release their spr But yeah, the you know when we talk about inflation, and and really this is the you know, it's I think it's difficult to call what

the the peak will be some time next year. But but here's where we're at. The inflation there is a problem because it's a supply chain. It's endurable goods primarily it is affecting you know, other goods and services, but primarily durable goods. And we know that that supply chain heel. It's already Los Angeles sports starting to heal a little bit already, but we know the supply chain will heal.

So you know, I would submit by this time next year, we will see inflation a lot lower than these numbers we're seeing now between here and there. How much higher it goes anybody's call, But it's certainly you know, it's certainly risk the market. I think the key thing though, is it's primarily durable goods inflation. When the supply chain heals, we'll see we'll see inflation subside, and we'll see some of the secular forces like technology that have been deflationary.

UH started to become more pronounced again. All right, David, thank you so much. We appreciate your calls on the market and your calls on the Corvette. Of course, I mean, now we know well where to go. I'm gonna go ahead and say, even though I care deeply about the Corvette and it's an incredible legacy, your call on inflation as um as we were just hearing from Katie Greifeld earlier, is incredibly important in this market. Yeah, it really is,

so we appreciated it. Could look coming on, founder CEO and CIO of main Stay Capital Management. Now, let's bring in my friend and yours, Berry Rid Holtz. He's a Bloomberg opinion columnist, UH, and we have brought back David Coudla. We did. Yeah. I don't know if, boy, I don't

know if the producers told Barry why. Um, but Barry, we were talking a little bit about corvettes and I was mentioning your C two, and then we talked to David Coudla a little bit earlier and he said, you know, before we get to inflation, let me get on this corvette discussion. He is the CEO of main Stay Capital Management and also a corvette enthusiast. He has a C seven. Um, which one do you have? David? C seven z R one and a sting right. I like the I think

they did an amazing job on that. I like both of them. Um. The only ones that I've driven are the C six, which I loved but I couldn't keep um the back wheels on the ground, and the C seven, which I spent a considerable amount of time with on the track. I thought they were both incredible. Um, Barry, what do you think about the shift from the front engine to the mid engine? The C eight is the first time they've moved the engine from you know, the

front wheels to behind the driver. Well, if you want to remain competitive in the current marketplace, at least in terms of internal combustion engine and be able to compete with Ferrari and Lamborghini and McLaren and the four GT and go down the list the oud R eight. You there are just so many obvious benefits of moving mid engine. It's it's more balanced, it handles more naturally shifting weight

from front to back. If you want to spend time on track, mid engine is really very much um how you're going to ring out those last uh hundreds of a second on on your lap time versus a tail happy, front engine, rear driven traditional muscle car. So, David, do you actually feel the difference? Yes, you do. And GM we have a lot of GM clients. The chief engineer of of the C seven Corvette is a client. Uh. We we have a lot of GM clients and and a lot of discussions about all this and the you know,

I agree with Barry. I think GM did an excellent job of squeezing everything they could out of a front engine vehicle. But you know, competing on the track with these other mid engine cars like Ferrari, and when you know everybody starts seeing the numbers for what you know, they're going to be able to do. The Zeo six is coming. Uh. I'm first in line at at a Chevy dealership for the zero six, which will be six dred and seventy horsepower. Um, we're gonna be put I

say we. GM is gonna be putting up some numbers that are going to scare some of these car may that are at four, five, six times the cost of that.

That's the amazing thing is on a dollar per horsepower rating, what what General Motors was able to accomplish with this car is really quite astonishing that the next closest thing is like a Mustang three fifty or a Mustang g T five that Ford has put out, and you're not going to get the same sort of performance, You're not going to get the same sort of lap times nor the just really uh you know, I know some people find the new VET a little over the top. Um,

but so are all of the McLarens and Lamborghinis. It is a car that can compete toe to toe with the best automobiles in the world. It's it's quite an accomplishment with a base price of fifty ridiculous. Barry and David, I have to ask you, guys, um, I think one of the reasons when I see you guys, and I'll throw Matt in there as well. Driving down the road and these awesome, awesome cars. I think one of the reasons you like doing that is because it sounds so cool.

As these things go electric, it ain't gonna sound so cool. What do you guys think about that? I'm okay with that. I mean, my my C two has side pipes. It is loud, like you hear me coming to towns away. The ability to sort of stealthily sneak up and and pass the police without them seeing you there, there are advantages to that. And I try and stay, you know, within five to ten miles of the posted speed limit. Well, I'm not looking to have a longer conversation on the

side of the road. I'm sure you can with I don't know, but I'm guessing the C eight had you can. You can control the exhaust sounding ways, but it's always gonna make a noise compared to a rivian, Right, David, So, what do you think about the fact that, um, are people gonna buy these products in the husiasts? Are enthusiasts gonna buy these products? Are are motor Head's gonna buy these products. It's already got Riva in a market cap of a hundred thirty billion dollars, which is like forty

billion more than GM. Yeah. So here's an analogy is in boats, when you go from an io where you've got those pipes, you may have captain's call where the pipes are in the air round under the water, and you hear it like you do in a car going versus going to outboards. And that's the toughest part boat with you know, my boat without boards, I missed that sound of my boat within with an i OWE And

I think for enthusiasts it's the same thing. I think that there are things that the d offers because of a flat torque curve that you you just can't get with with ice vehicles. But uh yeah, we're gonna, we're gonna, we're gonna miss it, or I think enthusiasts will will miss that aspect of it. E v But when you talk about the power of an e v UM, you

know there's something for enthusiasts as well. What I'm excited about is to hear the flat plane crank in the zero six um that made a huge difference in the Mustang performance, but mainly the experience when they brought the five point two Leader with the flat plane crank. Now the zero six is going to have that with their five point five Leader. It's a little bit smaller displacement, but I agree with you, David, that has got to be one of the most anticipated releases of the year.

And my only hope is that they do a g T three version. You know, Porsche has um the g T three and what I mean is a touring version. What they downplay it. They take off the whale tail, they get rid of the spoilers, and they just make it look more like a touring car. I'd love to have a zero six without all the stuff on it isn't not an option that's like a zero seven package gives you all that flare and the whale tail. I think you could get it fairly modest, can't you. Yeah,

you can't, and you can't. And your question about you know, the sound out the tail pipe. You know, one thing that's I love about the Core Bett and a lot of the g M vehicles is the UH with the the variable suspension and UH tuning that they have. You know, you have three modes touring, sport, and track, and I call track beast mode and you get that tail pipe when you're sitting there a vital All right, David could let thank you so much. We appreciated mainstay capital. He

came back for a second round the Tall cars. Of course. Barry Richelts, Bloomberg opinion columnist, hosts of Masters in Business, for this little segment of car Talk, bout you buy Matt Miller and your friends at a Bloomberger Radio. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Get on Faull Sweeney. I'm on Twitter

at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Rady