A Look At Markets, Amazon, And Facebook's New Name

joins us from uh San Francisco. Ed, big story here, big names. What's Amazon doing? Yeah, it's interesting because we've reported the influence that Amazon had over this company already. You know, just for the audience. This is a company that's made very few vehicles on talking tens of units of battery electric pickups, but is really closely followed because Amazon is also a customer of Rivian. They've ordered a

hundred thousand delivery vans. You know, we we've known that they've made private investments along the way in this company. But stake in a company that's about I P O is is important right as part of market functioning. UM. But it's just you know it frankly adds evidence to the piece we put out last month that this is a company under immense pressure because it's biggest customer is also one of its biggest shareholders, and it's kind of pulling the strings of what Rivian is trying to do.

Why would Amazon not just out right by this company. It's a great question because Amazon has taken that approach in the past. If you think about its efforts in autonomous driving, it bought Zooks. Now, the context there was that Zooks was struggling, it was desperate to raise money, um, and you know it was basically shopping itself around. UM. So it has taken that approach in the past. But you know, Rivian is run by this guy R. J. Scaringe, a PhD holder from m I T. He has big

dreams and visions for electric vehicles. You know, they are already making their own vehicles for consumers right a battery electric pick up. They're already coming off the assembly and limited deliveries. And you know, this is a story about a founder and a guy who's built a company really quickly. But in order to get to this stage, he's had to make compromises, and the Amazon stake of seems to be the biggest compromise of all. Do we know, you know,

it's interesting here. Amazon's invested more than one point three billion dollars in this automaker. They have about a hundred and fifty million shares of preferred stock, but the voting do we know what their voting power is here? Because it just feels like, as you suggested in your reporting,

that they're really in control here. This is what's kind of fun about the story that when Rivian filed its S one, remember the S one's in right and it's public, they said Ford has a stake of more than five percent in Rivian. They said t ro Price has a stake of more than five percent in Rivian. You know, these big names or x UM. Other investors include Fidelity,

black Rock. But the Amazon stake was redacted very high up, you know, And so now we know that the ownership interest is um you know, and you'd assume that the voting rights are proportionate based on the volume of preferred stock that's been issued. Amazon has about a hundred and fifty million shares of preferred stock. So well, I don't have to tell you this because you have the privilege of covering them all for us here at Bloomberg. But there's a lot of players in the e V space.

It's a market that's getting very, very crowded, and and there's kind of this narrative out there that they're not all going to make it. Does an investment from Amazon make Rivian one of the ones that's going to have that sticking power? Yeah, I mean according to sources, as we've reported, you know, the valuation of eighty billion dollars that Rivian is seeking in its i p O is based largely on the fact that Amazon is an investor and a customer. You know, you saw the influence of

the hurt steal with Tesla this past week. For example, the infancy of EVS was about selling to consumers gaining traction EVY adoption. But now you're seeing corporates come in and decide about their policy with regards to carbon reduction, and you can see the power of a big corporate placing a mass order. So Rivian kind of hit that sweet spot, right. It has three products to consumer ones and then the Amazon Van. The Amazon van gives it

guaranteed revenue. It's a contract for a hundred thousand vans. We know that, we know what the deadline is and they're on track to meet it. And as we reported, according to sources, there's some great perks in the deal, like they get recurring software revenues. Amazon pays them basically for over the air updates for the duration of the contract.

It's a great thing to have. But as we've also reported, Rivian have had to make some sacrifices and put those consumer products on the back burner because if Jeff Bezos is one of your biggest shareholders, right and he is expectations because he tweeted after we published the story saying, Hey r J, where's my vans? Um? You know, you can imagine the pressure on that company's management team to deliver. Just lastly, and what do we know about the product

that the van itself? Yeah, so the van can do up to a hundred and fifty miles in a single charge. It's very much a product for last mile delivery. Amazon already buys delivery and right from Mercedes, from Ram, from Ford um it's going to be a direct competitor to Ford's e transit van, which is interesting given Forward is an investor in rivian Um and you know it's it's I'm hearing it's having some supply chain issues because it's a bulky products. You need a lot of metal, you

need a lot of semiconductors. But you know, it's a simple design and it shares common battery and motor architecture with the consumer products. That's how Rivian's been able to put it off. That's kind of the key. The underlying technology is the same across all three products. Alright, thank you so much for bringing this story here. In this reporting again, Amazon discloses steak and EV maker Rivian, So a big, big validation I guess, if you will, of

the company's technology. Edlar Low, technology reporter for US at Bloomberg News. He is based in San Francisco. All Right, everybody's got their strategies for managing this market. Again. Equity markets at or near all time highs. Interest rates uh, very much muted, but the tenure at one point five seven percent. Our next guest focuses on the three bees.

We're gonna get the latest on that. John Augustine, chief investment officer for Huntington Private Bank Joints, is on the home on the phone from Columbus, Ohio, where the Penn State Knitney Lions are coming in this weekend to fight the Ohio State University. John, thanks so much for joining us. Talk to us about the three bees. How are they kind of guiding your investment outlook? Sir Paul, good morning, and it is gonna be a good game in Columbus this weekend. So the three be so number one, we

want to be bond light. Real yields are still too negative for us in the bond world. We don't see recession, so to us, the sixty portfolio should be more of a se So that's number one. Number two with respect to the stock market, we've been here at a lot of rotate the value this summer and early now into the fall. But our our equity team has stayed with growth. They've barbelled between growth and value, and that's worked for us, that's worked for our customers. They've got good returns here

in October. So that's the second be barbell and stocks. The third be is just broadened. And what would mean by broaden is include some commodities, include some real estate with your stocks and bonds. So make sure you're broad in your conducts next year. Is going to be more of an interest rate driven year, which could bring up volatility. So we just want to make sure we're broad and our conduct for our clients. So those are three bees.

All right, Well, let's talk about a few of your specific holdings, because I see within your top equity holdings for a few of your strategies are Apple and Amazon, and those two companies you know didn't do so well when they reported after the bell yesterday. Are you a buyer of the dip here? Not yet, we have to see how it forms. So they're both that a little over three percent today. Now. One interesting thing though for our for our equity team, what we put on them

is a five percent limit on positions. The reason we do that is a lot of our institutional customers have a five percent limit or feeling on individual positions, so that in many cases makes us fang light portfolios. So as an example, Amazon's a little bit about six percent. Excuse me, Microsoft and Apple reach six percent of the S and P five, so that puts us at one good point there, but Microsoft having a better month. So we are in all those stocks you have to be,

but we do limit positions. So it's interesting you're just love to get your thoughts here. Were more than halfway through earnings, uh this cycle? What's your takeaway? Forward estimates are not going down? So so current quarters up? You know, the coming into the quarter it was plus percent estimate. Actual today looks like plus thirty six with a little over half reporting after the company in the SMP five.

What surprises us, though, Paul, is we haven't seen forward estimates go down as much as current quarter estimates are going up. That's unusual to us. That's a healthy sign. All right, Well, let's talk about the signs we're getting from the bond market. I know you said seventy and

more appropriate portfolio allocation. But when you think about prior to today, as of yesterday's close, an equity market and an all time high, and you had a yield curve that is telling you that there's some serious fear out there about economic growth. How do you kind of square those things? Well, what's really interesting to us, Keyley, is the two year and ten year moves over the past, you know, just so far this month in Europe in the US, because they're completely opposite. In the US, it's

the two year that's moving up. That signals to US a more hawkish fe it in Europe. It's the ten uere that's moving up. That sink signals to us our fixed income team a more lenient ECB that wants growth and it's not going to inhibit. So there's a big difference between two and ten years yields US Europe, and the Fed is going to have to thread that needle next week. They don't want an inverted yield curve. They've

already kind of done it thirties to twenty. We don't think they're gonna want to invert the yeld curve anymore. So they've got to thread that needle on tapering and potential rate increases at their statement press conference next Wednesday, John what's the give us a name or two that you've recently edited to your profoilio and why Well, the equity team has come into again under the Barbell theme.

So what they're looking at more now is coming in, for instance, UM with a Parker Hannason, but the bringing in Johnson and Johnson, so cyclical name, growth name coming in with Caterpillar, but then bringing in Crown Castle into some of the portfolios which we own and all three of our equity portfolios, so they're coming in with a barbell aspect. Usually they'll bring in a cyclical and they'll bring in a growth at the same time, and we like that approach. It's worked for us this year. Hey, John,

thanks so much for joining us. We always love getting your thoughts and some of the names that you and your teams are looking at. Crown Castle, it's a great name. I did a lot of work with that company back in the day in the wireless space. John Augustine, Chief Investment Officer, Huntington Private Bank, joining us on the phone from Columbus, Ohio, home of the Ohio State University, which we're welcoming in my pen lines. I know I'm putting

that out to Matt, so it should be fun. I want to bring on Brenda O'Connor, Senior vice president, Financial advisor for UBS International. Brenda, thanks so much for joining us here. You know, we love to to speak to you and just get a sense of you know, what your clients, what your individual clients are asking you. Today. We've got markets you know, making backar nearar all time highs. We've had very strong third quarter earnings. What are you

hearing the most from your clients? Well, thank you for having me right. You know, nervous, There risk some nervousness about Q three earnings because investors just weren't sure how bad the damage was going to be from three things really delta, supply chain issues and increasing input costs. And here we are well into Q three earnings, two percent of companies have exceeded expectations and markets are up twenty

three percent year to date. So when I'm looking at my client portfolios, I can't help but think we're up eight percent last year, We're up a dred percent from the March lows. Maybe it's time to de risk a little bit, and we're looking to private assets to do that. That being said, we are so positive on equities. We think the SMP will be at around for eight hundred by next June and five thousands by the end of

next December. Well, I feel like we've been having this conversation, and granted we have had this conversation many, many, many many times, but the death of the sixty forty portfolio and whether that's a strategy that still works. When you say you're looking to de risk a little bit, how do you think about kind of that ratio in your portfolio allocation. Right, So, right now, we really really like private real estate. It is a great inflation heads and

we can talk about that more a bit later. It's a diverse fire to equities, and it's also great source of income and giving given more fixed income, Marcus that that's super important. We're also not too concerned about these lofty valuations or the prospect of a housing bubble. Think of this. In the US, there's a five point five million deficit of housing units because construction has dragged for

the last two decades. It's going to take another ten years to make this up, which is great for the sector. And as vacancy rates are under five percent, which they are now, that's great for landlord pricing powers. We really like allocating to real estate, private real estate, given where markets are right now. So Brannan, you're in South Florida, and I love to get a sense of kind of what's that market like down there? Is it is robust

is people make it out to be. We've got obviously a lot of folks here in the New York metro area, you know, making their migration down there in this time, not temporary, not seasonal, bit more permanent, right And you can see that everywhere in terms of real estate prices, you can you can see that in terms of the

influx of New Yorkers and finance professionals, tech professionals. In terms of an investment perspective, I've also noticed that the appetite for international is somewhat different than we see in other parts of the country. So, for example, we're really looking to China right now. We downgraded China over the summer on the back of the regulatory crackdown and education and gaming. Chinese equities are down year to day, But

we do think some of this is priced in. We also think some of the fysical titany this person investors tend to be under allocated to this region. So we think there are opportunities in terms of green tech and consumer durable, but in investment preferences for international seems to be a little bit different in self Florida, given the international dynamic of this market. While we're talking about the migration to Florida, one of the reasons it's so attractive

is because of taxes. Frankly, especially compared to you know, the New York tri state area where Paul and I find ourselves. While we're talking about taxes. Given the quote unquote framework that we've gotten in terms of what the tax package is going to look like on capital Hill, how does that affect your clients and what you're telling them to do. Right, It doesn't change too much because our expectations for for next year already factor in, uh, some some tax cuts. So let me talk about this

in the context of something like in growth UM. You know, Q three obviously came in at much lower than we saw in in Q two, at six point seven first lower than the consensus. There wasn't anything too surprising here, given that the this was the first quarter with no government stimulus, uh, none of the headwinds that we saw earlier like delta or supply bottlenecks. We do expect Q

four to be much stronger. People are traveling again, hotel occupancies above sixty five, open table reservation numbers have recovered from their severe August September dip, and we do think that UM GDP is going to be about five point three percent for two. So all our expectations both on on GDP inflation UM outlook do factor in, uh some of those those tax sites that we're expecting to see.

So Brenda, in terms of equities, um, you know, for those of your clients that have the courage to be in the stock market where the sectors that you're suggesting they focus on. When we're talking to our clients, it is all about continuing to follow this positive earning story. We do not think that the reflection trade is quite over yet. We still energy and financials. Think about financials alone, we've seen a record here in m and A for

the investment bank banks. Loan moss reserve continue to be released and net interest margins will only start to look better. Is that ten uere inches towards one point eight and higher. The financials that have reported this quarter, by the way, have been expectations by a margin of so financials is scenario that we're definitely looking at right and we definitely saw some positive beats when it comes to the energy complex to day with Exxon and Chevron and those buy backs.

Man and Goldman sass talking about that, Paul and how by backs could be even eight percent above the levels they are this year. There's a lot of cash out there. There's a lot of cash out there. Hey, Brenda, thank you so much for joining us. We always appreciate getting your perspective. Brenda O'Connor, Senior vice president, financial visor for UBS International, based in the Greater Miami, Florida area. Lots

of news coming out of Silicon Valley this week. We've got earnings and uh fast name had earnings from Amazon and Apple, and then also Facebook making a big, big investment in what it calls the metaverse, and in fact big enough that they are changing the name of the company from Facebook two Meta Technologies, Inc. I believe. Mark Berg, and technology reporter for Bloomberg News, joins us on the phone from San Francisco. Mark, What is meta? What is

the metaverse? What is Facebook doing here? Actually? I think it's meta platforms. What's kind of confusing is they're what they're not doing is they're not doing what what Alphabet Dead or Google did six years ago, which is sort of form a new parent company that that have houses a bunch of different companies. They're sort of renaming themselves

but keeping the brand. And part of the idea to here is that Mark Zuckerberg, the CEO, as just sort of betting on Facebook's future being in augmented reality and what he calls the metaverse, which is sort of this a vague idea from science fiction that we will be able to like engage with with each other in mental reality, spaces and virtual reality using some sort of all to find headgear. At this point it is an oculous device. But during the presentation, Sorry, Zuckerberg also showed off service

smart watch and talked about glasses as well. Well, it's one thing to decide your company's future, you know, looks like that, and you're going to push more into the meta metaverse in this augmented reality. You can still do that without rebranding entirely and without changing the name of your company, Which makes me wonder how much of this is actually because Facebook found itself in very hot water politically. There's been a lot of negative news flow over the

last several months. Really is this also kind of pr related? We saw a lot of people came out with the comparison to Philip Morris from two thousan three a belief when they re branded, and certainly Facebook has been called

by critics the new tobacco um. You know, they addressed us very briefly guest during the presentation, there was sort of a Interestingly enough, they had Nick Clegg, who was the BP of Government Affairs speak and talk about how they're when they're approaching the metaverse there going to bake it a lot of the privacy and data controls that arguably have not been part of Facebook from the onset.

Well and Paul I couldn't help but notice what represented Alexandria Cossio curt Has tweeted after this and she talked about the rebrand and she said meta as in, we are a cancer to democracy, metastasizing into global surveillance and propaganda machine for boosting authoritarian regimes and destroying civil society for profits. So clearly the progressives are not that impressed,

not that impressed. And Mark, I mean ten billion dollars next year, that's kind of a big number, but I mean, I know it's for Facebook and they can afford in everything. Is the sense that this is something that they're going to throw real money behind over the next ten years. I think. So if you look at the strategically, you know, a key thing to focus on here is that Facebook U has been sort of boxed out by Apple and Google for it's an entire existence at least on the

mobile phone in the past decade. Right, So Facebook doesn't own the operating system, which is this big existential concern for them. You've heard them talk a lot about Apples fees.

They've really been challenged by Apple's ad tracking changes. And this is the way for Facebook to sort of cleverly and I think strategically get ahead and say the next computing platform, we not only are going to be there, but we're going to be defining company investing the most and and um clearly like Apple has been investing a lot in augmented reality, Google has a certain extent. Ten

billions seems like a lot on paper. I saw something someone to say, like, you know, Netflix invest maybe twice the amount in it's media right now. And this is a both a I think investment in media, but also in hardware, silicon and alto sort of technology that hasn't been betted yet. Well that's a great point that I understand the concept and the idea and they and kind of you know the goal behind it, and yet it still feels very esoteric and nebulous in a way. How

refined is this idea. I don't know for a fact of how much the presentation yesterday was legitimate technology and how much of it was Um, stimulation. It seems like a fair amount of it was was stimulated, and they talked about this is something that we're hoping the next five or ten years. Um. You know, we saw any helpless note to say, this is not the iPhone moment. There's no actual device, there's no actual kind of this is uh an imagine well, which which to um, you

know Facebook defense. This is something that Google has been doing too, where they talk about, here are these projects that we're working on and then give a demo of a thing that doesn't actually work. Mark internally, How concerned is the company, the board, senior executives about the backlash from Washington and regulators and just the public in general. Um, you know, we had Emily Chang had senior executive on yesterday. We answered this, I thought in a really telling way. Um,

it didn't seem that concerned. I think that they are. They don't see advertisers leaving as far as they know. Um, they don't seem as concerned about it about a breakup. Um, clearly this has been you know, they are they're kind of their positions so far at least both sort of

on on the PR side. And then I could say politically has been the fight back a little bit and the pushback on this and to make this a broader issue around not just Facebook but with social media and and to that point, you know, the lawmakers right now are not writing laws about Facebook. They're writing laws about the laws that will effect TikTok, YouTube, Twitter, the rest of the like as supported digital platforms. Hey, Mark, thanks so much for joining us giving us that update. Here.

Mark Bergen, technology reporter for Bloomberg News, joining us on the phone from San Francisco. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews of Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three. Pet On false Sweeney I'm on Twitter at p T Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.