Afghanistan, The Fed, VC, And Inflation (Podcast)

at Bloomberg dot com slash podcast. I don't know, for me, the most compelling read on the Bloomberg terminal today as the article I first read on the train coming in entitled how a Bloomberg reporter's family escaped the Taliban an account of the extreme measures it takes to get out of Afghanistan. And clearly we have a lot of news items about, you know, the folks that were helping the US and Afghanistan UH and are still left behind and trying to get them out. And this is a first

hand account. And Reharden was there. She is the reporter on the story. She's a Washington carsponting for Bloomberg Television. And Marie, thanks so much for joining us. Tell us about this Bloomberg reporter's family who was able to escape the Taliban and and what are your connections to the story. Thanks so much and thanks thanks for reading the piece. Uh this family that I helped evacuate alongside with completely the support of Bloomberg and Bloomberg Security operations, we had

devised this plan. They are a colleagues family. It was nine of them. They were in Hara, Afghanistan, and we were able to get them to Pakistan and then finally get a country to agree to asylum because we reached out to a ton for Greece and so I had met them when they made it over the border in Islamabad to go through some paperwork. UM, given how chaotic evacuations were not, a lot of paperwork was completely in order,

but we were still able to UM. Pakistan has been dealing with a lot of these issues, over a hundred thousand people like this. They were working as what they would call humanitarian corridor. And so that was my involvement, and really we thought I should. I felt like I should write this piece because I was given such a first hand a count and glimpse of how hard it

is this whole process. There's so many nose there's so many false hopes, and it's like every other next step almost feels like a miracle until the very end, and even though the family is safe and they definitely are so fortunate and realize their fate is so different than their friends at home. I'm a far had our colleagues brother who I spent a lot of time with, said that his friends at home say to him, we are alive but dead mentally given the fate of the country

under Taliban rule. The fact of the matter is that even if you're lucky enough to get out and have the support, it's such an uphill battle for refugees and there's really no centralized system. And now the world is grappling with another refugee crisis when it looks at Ukraine. So the numbers just continue and I don't feel like there's a lot of attention put on it. So, um, let's hear first of all about the family, I mean,

big extended family. I wish, you know, we could show all of our radio listeners their their picture that we had on television this morning, because they look so happy and healthy. Now where are they, How are they doing well? The family is in Greece, They're doing very well. Um. It was nine of them, right, so quite a lot. Not everyone spoke English. They speak dry, which is like the Afghan version of farsi Um and they're very educated people,

so they left jobs. His sister, Frey Doune, our colleague. His sister Lena was working for you in Habitat. His brother Farhad was a web developer. He also was running a very uh Western focused cultural site about human rights in Afghanistan as well. And his younger brother, Hamaiun was just finishing up. He's incredibly bright, his engineering degree at Harat University. So they had they left this all behind.

But of course for them they could not stay. And so much of that was because the answer you get from so many people is because of the outlook for women and girls in the country now. So his sister that worked for you in Habitat, that would have come to an end. His other sister, if she wanted to go to college a little bit younger, that would be impossible. Women's lives are back to talibanes, covering up from head to toe. They've pretty much disappeared from the streets many

of them. Only a few really are able to keep their jobs. So many of them are now relegated back to their homes. They can't even go out and travel without a male chaperone. Uh so for so many of these women, and some of them were even born during US when the US was in the country during this US occupation, so they don't even understand what the Taliban rule feels like. And that that's that was like a heartbreaking moment getting to know his sisters and what their

fate could have been. So emrie. I mean, this is a positive story with a positive ending thanks to you and the folks at Bloomberg. What is the expected fate of the other folks who would like to get out of Afghanistan? How many people are stuck there? Are stuck there? Yeah, I mean it's incredibly difficult. So it's a it's a country of about forty million um inside. They also recently

had a a earthquake. They face dire hunger. So many people in Afghanistan um there are serious, serious issues and so much as that is because more than forty of their budget GDP came from international aid and not all was pulled given the Taliban is running the country now and they just don't have the infrastructure to supply basic needs for people heating, hung being able to eat, the price of food, the price of energy. We talked about it every day in the West, but it's gone up

in Afghanistan. Even some people have come to sell their young daughters into marriage so they can feed the rest of the family. And when you look at those that are trying to flee, many of them are in limbo. Whether it's Pakistan that has more than a million Iran that likely has a million Afghans. And then you look at the schemes at some of the countries in the West are doing, they haven't actually been fully successful. In the United Kingdom alone, ten thousand Afghans are still being

housed in hotels. Right, and Marie, thank you so much for this reporting. Just said an extraordinary story, folks. Please check it out Bloomberg dot com. Uh and you can also find it on the terminal And Marie Hordern, Washington correspondent Bloomberg Television. Fascinating story, outstanding reporting of just a compelling story here all right, next week Bloomberg is sending the surveillance radio slash TV team out at Jackson Hole, Wyoming.

Why because a bunch of central bankers get out there, get together out there this time of year, and they talk about economic stuff, monetary policy, all that kind of stuff. I did not rate a ticket. I'll let you know, so I'll be here. But we want to get a sense of what might be happening at in Jackson Hole, what might be going on in the minds of our good friends at the Federal Reserve. And we do that. We go to our good friend Danielle di Martino, Booth

CEO and chief strategist for Quill Intelligence. She was a former adviser at the Federal Reserve Bank of Dallas, so she knows a thing or two about the fit. Um. All right, so Tom and company will be out in Jackson Hole. H Danielle, what do you think they should be looking out for? What? Maybe? What questions should they

be asking? Well, I think that before we go there, I think I should point out that I'm at the st four where Tom Keane stocks up nice and um, I'm actually getting his entire line as we speak at music in the background. Yes, indeed, Uh, I think the question that really needs to be asked is about quantitative tightening, because even if we do see kind of a dissipation in the magnitude of the rate types, let's say we get tifty basis point since September maybe and November maybe

in December. I think the FED intends to and certainly wants to keep quantitative tightening, ramping up to being full speed by the end of September and and moving forward with that in the background. To use j Pale's words, the effect of that liquidity depletion, I think is the great unknown for marketing, for investors in the market as well as central banks bankers. And I'd love to hear a little bit more about where they think that's going,

how how that's going to play out. Alright, So hopefully we get more on that, and I know that's been a black box for a lot of people in terms of the minutes that we got yesterday. Danielle Um. The debate rages on today was that did we witness a Dovish pivot or um are they saying, you know, we're gonna get stuck in raising rates higher for longer? Well?

I think I think what the key kakeaway yesterday was that they introduced to risk, and risks are not introduced into FED language without purpose, And because they introduced that downside risk, I think that that's why they've been perceived as dubblish, even though they were more emphatic in terms of their inflation goals. So but again these there there's no happenstance in FED language, and everything is debated deeply

before any bourbage is at it. So I think that that market participants were correct to to deduce that there might be a pause coming up. You know, it's it's interesting, Daniel. We heard from a lot of the retailers this week here, and you know they all have various levels of caution in their outlook. Here. What is the quill uh view of the economy? Is there a recession in? Are we in one today? If you define up by two quarters of negative GDP growth? You know, I've been watching SMP

Global's GDP estimate tickdown, tickdown, tickdown. Um, it's it's now. I believe at point seven for the third quarter and the second quarters kind of going to come out a whisper under uh under the zero line negatives. And if that's the case, then we'll probably see three consecutive prints in in the negative column and and and that is truly a trend. Once you see that number three economists will tell you that a trend has indeed been established. And you know what we're looking at is the leading

sectors for the economy. We're looking at the used car market really flat out collapse here, when when you're looking at the wholesale side and we're looking at housing, you know it's at quill we've actually gotten rid of We've we've expunged all worse since the pandemic markers. We now go back and look at trends prior to the pandemic, and if you look at the existing home sales report this morning, we haven't seen home sales falling like this.

That's a long time ago, and I think you need to have perspective when it comes to interstrate sensitive leading sectors of the economy. Those were the days the nineties, right, um in terms so in terms of the inflation that we're seeing and and the problems that people are facing, does the FED take that into account? For example, their rates mean that home sales are too expensive, but then those who are looking to buy a home are also seeing rent climb rapidly. Does that discussion, um, you know,

yield any kind of sympathy from the Fed. I'm not sure if it's I'm not sure if we should be calling it sympathy. Because of the way that housing and shelter insflation. Rental inflation moves through the CPI is so slowly that's that's going to be problematic. A goodfriend amount Ivy's element, who has been following the housing industry for more than two decades, she anticipates that we're going to see that shelter print it's seven point zero percent from

what we saw in July, which was five. That will be problematic for the FED, regardless of how impossible affordability is, whether you're talking about buying or renting, because you know a lot of there's there was talk over the last decade or two of out the FED put, and the idea was that, I guess sympathy is not the right word, but the FED doesn't like to see the market go down for a variety of reasons, and when it does,

they sort of rushed to the rescue in the past. Now, I guess the messages there is no FED put And I don't think a lot of people feel bad for market participants, but you've gotta feel bad for people who can't afford housing. You do, and whether you feel quote unquote bad for market participants, right the markets are operating into the assumption that the FED put is alive and well,

that's what we've seen since July. I don't think anybody actually believes and that is a reflection of people assuming that that Powell will indeed pivot all right. Daniel D. Martino Booth thanks once again. Danielle is CEO and chief Strategies for Quill Intelligence. Video gaming, one of the fastest growing areas in the media slash tech space over the last decades, certainly got a big, big bump with the

stay at home during the pandemic. But we saw in Video, which makes a lot of video gaming stuff on the technology side, post some disappointing results calling out their gaming business. So the question is kind of where are we in that whole video gaming biz. It's such a big business for a lot of folks. Josh Chapman, managing partner for Convoy Ventures, joins his Convoy Ventures is an early stage

venture fund dedicated to the video gaming market. Josh, thanks so much for taking the time here, love to get in light of in videos results in some of the commentary on the gaming business. What's your view of the of the state of the video gaming business these days? Absolutely, and Paul, thanks, Matt, thank you so much for having me. Um. You know, although historical indicators are certainly valuable resources, we

looked at the economic downturn. We are living in a kind of a new era of the video gaming industry. Is models and evolved. Social stigmas have really evaporated around gaming. It used to be not very cool to game. Now

it's totally socially acceptable. Still thinks sort of. It's uh, it's certainly an exciting space to be in and has lots of controversy, but uh, three point two billion people play video games today, right, this is now the news social square in many senses, and COVID showed that in spades where video gaming allowed for a community platform to continue where people weren't just talking, they were also having fun and exploring, whether it was virtual worlds or not.

It's it really played a key role to your point about in video and some of the brains calls that are showing sort of this dip. What we're really seeing here is a correction to more the eight to twelve percent annual growth that video gaming has seen for over two decades now. Um So, COVID kind of pushed the video game industry up to a you know, fifteen to

annual growth rate. Really we're we're talking about is the reversion to the mean for video gaming, and so this is sort of a COVID correction that we're seeing across earnings on the public side and then obviously what we do on the you know, early stage video gaming BC side, as we're looking at the video gaming tech and platforms that are you know, hopefully going to be on your Bloomberg derminal in five to ten years. Josh, what are

the games? What are the games right now that are the most successful that that you care about as a as someone in finance. I mean, when I was a kid, it was all about Mario and Um and friends. And as I got older, I got really into Halo because you could play that. Again, since you're really people all

over the world, that was the best, dude. When I first moved to Berlin, I had friends moving to Paris, friends moving to Washington, d C. Friends moving to San Diego, and we could all buy an Xbox and hang out every night. It was just a cool, um way to to chill with your boys. And now I play Call of Duty all the time, even sometimes I spend way too many hours in Red Dead Redemption, but I'm a very mainstream h forty eight year old gamer. What is it?

What are the kids playing? Well, I'll kind of what you're highlighting there is that gaming is allowing people to build community and connect globally. Right, that's case in point exactly what you just described. Secondly, there's a really interesting staff that the average gamers an age of thirty six, and so while you know the there is certainly a cohort of younger and what they're playing like Fall Guys or Fortnite or um lots of other different games that

are coming out all around the world. Um, things like Call of Duty. I play that as well, and I grew up playing tons of pale and hosting land parties in Africa and Latin America where I grew up, and so community has always been at the core of what gaming is. But what we focus on a lot is really looking at on the investment, looking at tech in platforms instead of content content, which is studios and like games themselves at maturity trade between point five to two

times revenue UM. Tech in platforms and staff businesses whether there be two B or B two C trade at eight forty times revenue at full maturity. So from an investment thesis. You want to own things like Roadblocks, Discord, Unity, app Love and Twitch, things like those companies, because at maturity that's a dramatically different investment profile and return profile for LPs. So give us a sense, Josh of kind of the VC environment today for the video gaming business.

How robust is it? You know, where's the smart money going? Where do you think the opportunities are? Has it taken a hit as you can come out of the pandemic? Yeah, so gaming is certainly not immune to what's going on

across all adventure. You know, the venture capital market, fuel volume is down year to date, dollars invested is down six here today, valuations have come down forty six, especially at series being later given the halt of the I p O window that's really led to growth equity and late stage venture to come to a grinding halt since we're focused more on speed Series A. You know, the

venture market around gaming specifically. You know, five years ago there was less than five at a million of dedicated asset management towards video gaming. Now there's well over four billion. We're one of those firms. Uh, and now we've launched our third fund looking at this space. But you know, the the video game industry continues to drive and that's what's driving LP capital into dedicated funds. You can see this with Entrees and Horrors just launched their third vertical

focus gaming funds. Uh, their third vertical of industry focus is gaming. And that's really a signal to sort of the bulge bracket BC market that gaming deserves dedicated attention and investment and can't be lumped in anymore to just your media team or your BtoC team. At what point do we see games really merge with movies and TV shows, with you know, radio and television entertainment as well as

theater stuff. Yeah, we're already seeing that. If you remember the popular Netflix showed the witcher um that was originally a video game, and so video games are becoming shows. And then we've already seen things like Spider Man becoming one of the most successful franchises on PlayStation. The emergence the merging of media and video gaming is absolutely converging. A fund stat here is that the video game industry brings in well over two hundred billion dollars in revenue

per year. To put that into context, Hollywood brings in about forty billion, and music globally brings in about So gaming is the predominant entertainment media industry in the world. But now video gaming is going from just being about fun to now merging with other industries like healthcare and education. We've made investments in this space, so think you know, VR oculus meditation things instead of the high cost of going to therapy, or think of in you know, education specifically,

were invested in a company called Legends of Learning. Five of elementary and middle school kids in America used this platform to play games and learn. Matt play games and learn science, and so games are interacting with other industries in a really really cool way. Yeah, good stuff. Josh Chapman, thanks so much for joining us there managing partner Convoy Ventures. I was aware of the size of gaming visa VI you know, the movie business or the music business. It

is huge. It's been one of the fastest growing pieces of the media. Pie just not my demo, but I know it's a big biz. Matt. So, this inflation Reduction Act, it's got a bunch of stuff in it that I'm not sure it's necessary. I mean, it touches a lot of industries, even your beloved auto. I think it should maybe you've had a different name. Yes. In any case, UM, yeah,

it's it touches the car industry. And Keith lang Um, an automotive regulations reporter, wrote a great piece on it a couple of days ago that just UM prompted so many questions. Keith Um joins us now and it's great to have you on the program. UM. My question and the questions that are asked of me most most often are how can I get tax credit? And your piece points out that, UM, not everybody's gonna not every electric car gives you that tax credit, and next year, no

current offerings are going to give you that credit. How's that work? Well? Even under the current system, UM, not only not every electric car qualified, it had to be a specific type of plug in high, plug in electric or plug in hybrid. UM. Under the new system, starting as soon as the President signed the bill, there's a requirement UM that most of the cars parts the car

had to be assembled in North America to qualify. UM. Basically to comply with the the U s m c A, the trade deal that was passing the Trump administration that replaced NAFTA, and UM, the auto industry groups here in Washington say that that would take the number of models that qualify qualified last week there were seventy two models and now about se those won't qualify today, which takes this down to about twenty two that qualify. Yes, I mean some some very popular models like the Hunda and

Kiya's out there. They're not gonna, I guess um qualify under that. And then next year even cars that are built here, uh like by GM or Ford or bmw UM, because their components are sourced from the wrong places, they won't qualify as that right. Yeah, there are mineral requirements for the batteries, which is the minerals are the key to UM electric electric vehicle production and most of those are built in China. UM those requirements were added to

the bill to win Senator Joe Mansion support. He insisted on that, and he was not a fan of any tax credits for electric cars. He once called them loo to Chris UMAs anyway, so he didn't he wasn't saying that electric cars and ludicrous. He said it was ludicrous that the federal government was subsidizing because he saw he saw them as the tax credits as a giveaway to cars that were built in China or not built in

the US. So in order to get his support for this bill, for the broader bill, which included many long sought democratic priorities, this is uh kind of a light version of the Build Back Better bill that dominated discussion in Washington for a year. And to get his vote, they had to get any sort of ev text credit in the bill. They had to put um these these

stringent requirements on mineral production. What do you expect to happen? Then, our companies that build a lot of cars in this country, like the Big Three or BMW um going to change the way they sourced these minerals in order to hold onto that tax credit as a sales incentive next year. Well, that's the hope in the long term. The auto industry groups have said that they just need a little more

lead time too. There's there are a lot of car companies have announced plans to open battery plants in the US in the next year or two, but it takes a while to get those type of plants online. So they're saying that it's not feasible to say we're going to have that done by January. But over the life

these tax credits will last for ten years. So the hope is that as those plants come online more production has moved to domestic sources or North American sources, that cars that are not eligible next year will become eligible in a year or two or three. Yep, I don't know. I mean, well, listen, I want to get UM. I want to get an X five right now, the hybrid version. And I'm worried that if I put in the order today, if they're not done by the end of two I

won't be able to get the tax credit. And that's big. Yeah, that's two thousand in New York and you don't even have your pickup truck yet. So just hold next year a playing We appreciate a keip playing automotive regulations reporter. Yes, we have an automotive regulations reporter. That's what's so cool about Bloomberg News. Let's bring in now Sodic Waba. He is founder UH and chairman of I Squared Capital and UM. He used to basically run the infrastructure business at Morgan Stanley.

He's very UH connect well connected in Washington as well as in Paris and London and many other cities. Where are you well connected. Uh me, yeah, um, Grandville, Ohio. There you go. I'm well connected in Grandville, Ohio. UM. Sodek has an incredible resume, though, and so we go to him, especially on stuff focused on infrastructure, but also on UM uh Washington, d C. So thanks so much for joining us. I want to first ask you about this Inflation Reduction Act that the President signed um either

yesterday or the day before. I'm so confused by the title because it seems to be more of a green CLIs. I'm at spending bill, So what do we know about what's in there? Well, M Latin Paul, thanks for having me. Uh. Look, it's worth recapping just for a second, what has happened in the last year, right, So, You've had an infrastructure bill last year, or about one point two pillion to

upgrade our infrastructure, roads, bridges, etcetera. You've had a G seven announced by the G seven countries to spend six hundred billion dollars in infrastructure globally, of which the US is going to invest two hundred billions. You have the Chips and Science Acts which were signed last week, and it was honored to be at the White House for the signing. Ceremony. That's about two hundred eighty billion, which

should encourage tech enabled infra. And finally what you mentioned, which is in Fish and Reduction Act, which is over seven hundred billion and will invest in green energy among other things. So really, at the end of the day, you can honestly say that the president President has ushered what I would call the infrastructure decade, actually be increased

American productivity, and yes, reduce inflation. What what are some what are some of the key parts of the Inflation Reduction Act in your perspective, What are some of the most important ones that we should pay attention to that we as investors, consumers, citizens, we may actually see and feel. Right, So you asked about whether it helps in reduction in reducing inflation, the answer is yes. It won't do it immediately. You're not going to get inflation to two percent. That

was never the purpose of the act. But it will reduce the deficit, and reduction of the deficit means you know, a demand and that reduces inflation. It will help in reducing the energy builds for household that has gone up significantly over the last couple of years. So that is going to immediately help households field, the reduction initiation and cost of living. Um, you're going to have an increase in efficiency in our energy system, so all of these

will help uh reduce inflation over the coming years. I gotta I gotta wonder how you know, I got a kind of bill for yeah, and my energy bills are um every month over a thousand dollars. Does this mean since it's past soduct that next month are going to be five? Uh, maybe not the next month, but certainly of over the coming months and years. It will reduce your bill because what it will do it will give credit to households to be able to upgrade and have

more efficient systems, better coding system better heating systems. You can get credits of up to thousand dollars, so it will significantly reduce your energy bills, no doubt about. It's mostly targeted towards lower income hunciles. That's an important consideration because they in the fact that it's the opered opinion that Groom they all published, they tend to be much more impacted from energy increases in the cost of energy

than others. All Right, So the chip sacked just going back to a previous bill, That seems pretty material for me because I remember the beginning of the pandemic when we said, oh boy, we're not getting our chips from from China and Taiwan because they're all shut down. We need to ensure more of this stuff. Give us your perspective of the Chips Act and maybe how it may ensure some more stability that part of the supply chain.

We realized in the the COVID and during the pandemic, but in fact we were overly relying on international supplies for very basic elements like the chips. So what the Chips Act is doing two things. Number one, insure that we're able to unshowd the manufacturing the chips in the United States. And the second thing is to retake the lead if you want, in science and innovation that will allow us then to be able to protect our own technology and grow it and take an edge over let's say,

other countries. So these two elements are absolutely critical. So a good going to have massive investments food universities through research centers in those technologies that will ultimately be able then to allow uge to manufacturer. Alright, so that great stuff. Really appreciate getting your informed perspective on a number of these pieces of legislation that the President has signed into law,

and we'll see how that impacts the economy is going forward. Sadekwabba, founder chairman and managing partner of I Squared Capital, with a long background in infrastructure, UH and economics as well, appreciate getting his perspective. 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. Pet Ball Sweeney

I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio