Banks, Jack Dorsey, India, and Gene Editing (Podcast)

I need some perspective. I need a little bit of cynicism, maybe even a little bit of snark, and for that I go to Cameron christ Our Macroman. He's a Bloomberg News Cameron, you're out with the note today saying the yield curve says rate cuts are nearly a certainty. What do you mean by that, Well, I look at the

front end of the old curve. I mean the two year note has obviously gone crazy ballistic since the Silicon Valley bank stuff hit the tape, and the inversion between the three months sector and the two year sector is now, you know, kinda hit one hundred basis points earlier earlier today. That's only the second time that's happened in the last forty years. The other one was the very beginning of two thousand and one, which is when the FED actually cut rates kind of on the first real trading day

of the year. And if you look at all times when three months two year was inverted by at least fifty basis points, the FED is cut rates within six months on like ninety three percent of those occasions. So statistically, we only get pricing like this when the FED is about to make a pretty swift turn. I guess one question though for you, is inflation under control? I mean, we've had rate cuts from the ECP, from the Bank of England and obviously from the FED. You know, are

they pretty much done? Is inflation under control at the moment? No? But in the future who knows? And that's really the issue with all those banking sector stress is you just don't know what the impact is going to be. Um. I mean, I think we can we can pretty clearly say it's not a two thousand and eight situation because there's not all this toxic you know, toxic waste on bank balance sheets. There's other kinds of waste, which is you know, which is government issued or government guaranteed UH

debt UM. But that's a slightly ket different kind of fish because it's held in holding maturity UM buckets, and there are liquidity uh measures in place so that banks can can obviously meet the needs of depositors UM who

want their money. But I think the issue that mister Powell raised on Wednesday is the right one, which is that if we get this sort of significant tightening and credit conditions that seems likely as a result of all of this banking kerfuffle, and essentially it's going to take the place of r of rate hikes in in in UM, restraining the growth of credit and ultimately UM ultimately demand. So it does make sense that the Fed has kind

of shifted its perspective UM. The market, I think is sort of obviously leaning very very very very heavily towards this is a big deal uh, and the economy is going to enter a recession sort of post haste UM, which then raises the question of why the equity market hasn't done more poorly on on a broader basis UH. And then we get to a more philosophical question. Yeah, philosophical question of you know, who's who's at the vanguard of economic analysis and who's sort of in the caboose um.

You know, i'd remind you and listeners that the stock market reached new highs after the FED first cut rates in two thousand and seven, um, and that obviously went pretty horridly wrong in the end. Even you know what, the provider that this is not a sort of a two thousand and eight situation. And Cameron on the recession discussion, I have a hard time kind of getting to a recession, like a lot of folks are talking about. I've got,

you know, still pretty darn your full employment. We had a good jobs print today still this week below two hundred thousand. We get the pm I numbers today coming in much stronger than expected. I don't know, I kind of feel like we can soft land this thing. What do you think. I think it's become a lot more difficult given the stress in the banking sector. Okay, I

think what we're probably going to see. And again this is something I've written, I think Powell alluded to it on Wednesday, is some of the cumuloultive impact of tightening generally and credit tightening in particular, is nonlinear. It kind of has no impact, no impact, no impact. And then

an animal falls on your foot. It's I can use sort of a Warner Brothers well, a wily coyote type metaphor there, And I think that's the It's certainly he looks like there's an enhanced risk that that's what's going to happen. Um, we don't know, uh, And so I think it makes sense to keep one's options open and maintain analytical flexibility and not be dogmatic about what the

future looks like, have a little humility about the outlook. Um. Well, I think we can say though, is that the market, the market pricing as it stands now in the sixth income market is one that is not a stable equilibriate.

Either the Fed's going to have to deliver rate cuts um and short rates are going to drop fairly soon, or the market's going to have to recalibrate the yield curve UM and the two year yield's gonna have to go quite a bit higher again because this sort of spread between the very short rate and the two year treasury is just not somewhere that it can can it can last for very long um For no other reason that leverage owners of the two year yield have to pay the shorts, you have to pay the REPO rate

to finance their positions, and that's a big negative carry trade.

And the one thing we know about fixed income operators is there's nothing they hate more than negative care to one thing, though, I mean, you've made the point about you know, you've got the FED tightening conditions as well, but I mean you go back to banks tightening conditions, and so I look ahead to the second half of the year, you can see these two paths kind of diverging or converging rather onto the American spender, and then there's going to be a lot of reason for people

to pull back their purse strings, not to mention the fact that the employment market could start looking really, very very tricky. So I mean, looking ahead to that, do you see that you know there's a substantial potential for things to be a lot tougher and for fixingtom to get a lot more expensive later on. Yeah, absolutely, there's the potential for things to get a lot tougher. And if that happens, then yeah, the pricing that's already in

placent in the yield curve will come to pass. But then you have to ask the question of what's the you know, what's the stock markets still doing? Up on the air? Um, you know, in an environment where things are bad enough and people sort of retrench quickly enough that these rate cuts that are in the price are merited. That's not a situation where the earnings outlook is anything but awful. Would I would think, So there is this sort of dissonance between what's being priced across various aspects

of you know, of the financial market universe. Cameras spent thirty seconds and how concerned are you about the US banking system? A lot more so than a couple of weeks ago. I think if everyone agrees that it's healthy,

then it's healthy. But if everyone thinks that it's in trouble, then the nature of facts fractional reserve banking means that it kind of almost becomes a self fulfilling prophecy, particularly in this environment of social media where people can sort of fan the flames of fear without facts really intruding on then earth. Okay, camera christ Macro Strategy, Bloomberg News and most notably on his CV. He's a graduate of Duke University. What happened to our hoops team this year? Dude?

You're listening to the Team Cancer Live program Bloomberg Markets weekdays at ten am easting on Bloomberg dot Com, the I Heard Radio app, and the Bloomberg Business app. We're listening on demand wherever you get your podcast block. Obviously. In the news this week, Hindenburg Research out with a short seller report on this company. The company vows to fight. I need the latest on this name and do that. We turn to Jenny Sreen, finance reporter with Bloomberg News.

I believe she's in London somewhere. I'm not really sure she's over there. Jennifer During Thanks, Yeah, okay, all right, so Jenny Sreen, thanks, So what for joining us? Give us the latest here? Because Block Jack Dorsey all that kind of stuff. They're going to fight this thing, aren't they. Yeah, No, that's exactly right. They're out with I mean a relatively concise statement, given the length of the Hindenburg Research report that was put out on them. But yeah, they've vowed

to fight it. They've said they'll work with the SEC to do so, and they seem pretty ready to dispute the claims that we're brought against them. Can you just summarize for us what are the claims. What's the thesis of this short? Yeah, absolutely, So, you know, it's interesting.

I think there was a lot of stuff that the investors likely already knew in the report, and so I think the biggest new piece was really just the idea that a lot of fraud and a lot of criminal activity could be going over the cash app network specifically.

So this is like a person to person payments app that you know, rivals the likes of Venmo or Zell and Hindenburg, and you know, a bunch of public records requests and a lot of other deep dive research says that they've found evidence of a widespread fraud on this network. And so that that's really I think when investors are

worried about and really keying in on. I mean, the thing I really want to know about this is where the regulators are on this, and what they're thinking is because you know, we've certainly seen concerns raised about Zell for example, and you know, you wonder if these these new payment systems, these new ways of transferring money super quickly from one to another. It's they've been around for a little while. So I feel like the regulators really

have gotten a bit flat footed on this. Yeah, it's interesting because I think, um, you know, with sell, a lot of the complaints and consumer criticism is that UM fraudsters have seized it and convinced consumers to send money to the wrong person essentially, and so in that instance, you know, it's really UM a fraudster says, hey, you know, send me this, and a person might think it's their aunt or their uncle or their friend, and and it turns out to be a scammer. So that's one area, UM.

But really what this report shows is UM that there was UM, you know, use of this network by UM sexual traffickers and and just all sorts of really a criminal CD underbelly that that's really being alleged here. And so I think there's very different kinds of fraud and

mouthfee sense that could be occurring. And regulators, I have to imagine, are are looking closely at this and kind of um taking a closer look because I think, um, you know a lot of these FinTechs have popped up and you know, and unfortunately oftentimes see bad actors really looking to see a lot of new technologies. Have we heard from any big shareholders for block here, because the stock has obviously been under significant pressure since this report

came out. That's actually a good point. We haven't um no one has swept into their defense just yet. You know, I think a lot of the analyst community, at the very least, they're really trying to draw lines between what is a known issue and what block has been publicly out there trying to fix. You know, they're one of many payment providers that have seen a slowdown in volumes, for instance, and then they've got different strategies in place to fix that, and then what is the new stuff?

And I think a lot of this, you know, potential criminal activity and then the allegations there. That's really what I think analysts and in the investor community more broadly is trying to understand maybe before sticking their neck out right. I'm just looking at the a n R functional on the Bloomberg terminal for analyst rating recommendations forty buys, eleven holds and two cells, which it looks like they're still kind of supporting the name. Yeah, they haven't got the

news yet maybe or are they so? Jenny? I mean, I guess what are next steps here for the company? I mean, I imagine that we um I guess we hope we've reached out for additional comment and really had to have them address some of these allegations more directly. The statement that we got last night was really, I would say, you know, obviously very forceful in terms of promising legal action and then really trying to take a stand against it, but not really addressing the specific claims.

And I think you know, in the cases in the past where you've seen these big short Siller reports, you often do see company responses that are you know, tens of pages long and very detailed, and so I feel like that's we hope that's what we'll get, you know. Notwithstanding that, I think they have earnings coming up in a couple of weeks and they'll absolutely have to address it then. So you know, I think we're just going to have to wait and see how the company wants

to respond from here. Do you see any other knock on impact into any other sectors of the financial services

industry from this? I definitely think, you know, especially with players like Sell and Venmo, this just ratchets up the scrutiny on those guys even more because I think, you know, there's always a concern that would you know, where there's one issue, there's many, and so you'll probably see regulators looking more closely at all of these e money providers and looking for ways that they can make sure that you know, there is criminal activity, that they can catch

it and tamp down on it, and that these providers do have systems in place to catch it. You know, Jenny, we don't read too much about short selling in successful short saying bad I guess we have. Recently, these Hindenburg folks have been kind of busy. They I guess the most notable short report and short action they've taken this against Adani an Indian companies. So can you tell us a little about Hindenburg Research and kind of what their business is. Yeah, I mean, I think it's it's exactly

like you said. They usually write these really big reports and then use social media and other ways to kind of distribute them and promote their ideas. But they're betting against the stocks fall, so you have to kind of keep that in mind as you're reporting on them and reading these research that they definitely have an angle and have a financial incentive to cause this type of decline that we've seen in blocks stock this week. But You're

absolutely right, Donnie. Was their other big report that they did this year. A couple of years ago they had went out on Lordstown. They had a lot on the ev market just a few years ago. So I think, you know, they're relatively new player, but definitely have caused quite a stir every time they do take one of these very public formal positions. I'm very interested in your point that you know they're putting this all out on social media. It seems like these kinds of the kinds

of angles on these stories move very very quickly. I mean, do you have a sense that it moves a little bit too quickly? Um? I mean I think, Um, I guess as a journalist, you know, we cover the stocks

drop and try to explain that for readers. But yeah, I mean, I think everybody reading any research, you know, even if it's a you know, someone who's not a short seller, sometimes there's folks who of uh invested in the stock who put out their ideas and they want to see the stock go up, so they would have a bias too in some ways. So um, yeah, I think it's important whenever we're reading any research to kind of take into account what financial incentives the author might have.

And Jenny following up on that, how's the track record of Hindenburg Research been? I mean, I you know, they were relatively unknown to me until the Donnie news broke, because I was always think of Carson Block at whatever firm he's at as a prominent short seller. Um, what's the track record for Hindenburg? Um, it's a good question.

I mean, I feel like, especially with something like a Donnie, I guess, you know, obviously they want to see the stock drop and then the Donni case, it absolutely dropped in the days and weeks following that report. Um, but I think and ultimately it depends on when Endiburg decides to sell their position and how much they're really hoping to net and so. UM. You know, it's always a long term, you know discussion, like if if Donnie seems to turn things around or is able to back back

these allegations sufficiently. Um, it'll be I'm interested to see if I think it's still probably too a little bit too early to tell. All Right, Jenny, thank you so much. We appreciate that. Jenny Serene she is a financial reporter for Bloomberg News. Checking her out, She's based in New York, but she's spent in a few months over in the

London studio. You're listening to the tape cans are our live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty. All right, let's get the kind of an overlay. What's you know? What are the stock pickers thinking these days? I mean, good luck to them.

Scott Harrison, he does this stuff for a living. He's a portfolio manager for Argent Capital Management. Scott Harrison, you sit out there, You've got a lot of cross currents out there. We just finished up earnings, waft some more earnings kicking off in a few weeks. He got that earnings probably at risk, and you got central bankers whippin' rates all over the place, and then you out a little bit of a bank. I'm not going to call it a crisis, but some angst out there about the

global banking space. Your portfolio management, you get paid to put money to work. How do you put it all together? Yeah, thank you. I appreciate that, and I think the word you use their angst is very appropriate for what we're seeing in the market today. And for us, we start thinking about crisis well before it, so we think about risk and our portfolio is a constant part of our

investment process. But what I like to remind investors is that while the financial sector is getting all the attention for the right reasons, if the stock market itself goes down, there might be opportunities outside of financials that really we should be looking for. And ultimately, regardless of what's going on in the environment, there are going to be companies that can continue to compound cash flows and that come out of whatever is going on today come out in

a stronger position going forward. So that's really what we're doing. We're a fundamental invest we are looking at company fundamentals, We're rolling up our sleeves, and we're really looking for those opportunities today that can compound cash flows as we look out over the next three to five years. So what are your favorite sectors now at this point? Sure, I look at last year and the two hardest hit areas of the stock market last year, consumer discretion and

information technology. I view the weakness of last year is potentially presenting opportunities today. So semiconductors, for instance, we're one of the hardest hit areas in technology last year, and that's an area that we've been increasing our exposure to this year. In a company like Texas Instruments, for instance, is a name recently that's correct, and you know we've we've added to that to our investment strategy over the

last several months. And ultimately, what we're looking for all those companies that can offer attractive dividends, that can compound cash flows over time, and that management to speaks our language. They believe that growing free cash flow per share is the best way to create value for shareholders, and that's exactly what we believe in. So there are opportunities like

Texas Instruments tractor supply company. I'm guessing the company is basically what the name says it is, but I don't think we have any tractor supply stores here in Manhattan. Tell us about this company, okay? Sure that that's another great opportunity and that that fits in the consumer discretionary sector that I mentioned earlier, Tractor Supply actually started around a great depression in the thirties and they started out

offering exactly what the name says, supplies for tractors. But it's evolved into a leading retailer and today about half of the company's business comes from livestock or pets. More than eighty percent of the sales of the company has to do with immediate use products, and they are the dominant leader in rural markets. So we can think of home depot and lows and those types of retailers and urban markets. Tractor Supply is the equivalent for the rural

community and they have a strong following. They supply and really target the rancher community, and there is no company that comes close to them in terms of market share and what they're able to do. Scott, I got to get out in New York City more often. This is a twenty five billion dollar market cap stock, and you put it up on the comp functional in the Bloomberg Trauma, I get a five year look at this stock. Over five years, this stock has compounded thirty two percent a

year versus S ANDP of eleven percent. Scott, how about that, I've never heard of this thing? Well, that's you know, you just said our favorite word there, which was compounding. We believe the compounding cash flows is the greatest forces investing, and Tractor Supply has done just that through the pandemic. Alan They've increased sales by over seventy percent. There is

no competitor that's close to them in their markets. Strong barriers, strong brand, and just a company that continues to execute um and just the hallmark to them. While other retailers have struggled coming out of the pandemic and dealing with that transition, they have just executed phenomenally and continue to target that high single digit growth rate. And compounding is exactly the right word that I would use when I think of Tractor Supply, I think the closest one Jennifer

to hear, I'm looking at it Middletown, New Jersey. John. I have been in that store numerous times, so I'm like, are you like a hobby farmer dude? Um? No, I mean they have dog food and stuff like that. I needed supplies for my chainsaw. Of course, who doesn't need supplies? I mean the Tractors Supply would describe it's sort of

like a less crowded home depot lights. Okay, I'm gonna check it out this weekend, all right, But with the with the hobby farmers, this is the question that fascinates me because genuine question and food inflation in this country pretty out of hand, I mean, egg prices. So my question to Scott is do you see that there's a upticking interest in the products of this company with company with people saying, you know, I think I'm going to start growing my own food. Um, you know, that's a

great question, and you're exactly right. An interesting fact about Trackers supply about twenty percent of their customers own chickens, and so we certainly have witnessed inflation when it comes to eggs. And so this is what started out is a niche market many years ago is taking on greater and greater importance. And that's just one example of where it's showing up. All right, the over under on tom Keene ever being within one hundred miles of a tractor

supply company store. I'm gonna take take taking the undernet real quick, thirty seconds. Garment, they were the leaders in that mapping thing back in the day, but now I got Google Maps. Garment still thing, that's right, m You're exactly right. Garment has transitioned itself completely different company than the one that we would have known from ten years ago.

R and D has increased from ten percent of sales to twenty percent, and they have products ranging from everything from your smart watches, so your auto infotainment, but even into the cockpits of airplanes. Garment is just a dominant leader there. R and D is second to none, and

it's another one of those great companies. Three percent dividend yield compounding annually and for shareholders, this is a company that offers attractive returns that we can own for the long term thirteen percent compounded and your return over the last five years again, S ANDP about ten ten point six. So another APT performer. There's Scott great stuff. Really appreciate you throwing out some names. There's some really interesting one.

Scott Harrison, portfolio manager, Argent Capital Management. I'm going to this tractor supply store. It's on Root thirty five in Middletown. I can I can hit that. Yeah, I'll see what they got in there. That's the staples. I think, do a little store walk down there. You're listening to the team Ken's are live program, Bloomberg Markets, Jayson ten Am staring Bloomberg dot Com, the I Heard Radio app, and the Bloomberg Business App. We're listening on demand wherever you

get your podcast. We only have some banking turmoil out there in the marketplace. I'm not calling a crisis, but clearly there's some turmoil punctuated by you know, small number of banks actually failing. Um, you know, most notably probably a Silicon Valley bank, And of course that raises questions about, you know, the availability of capital for companies and growing companies and get a sense of what that all means

and how that might play out. We check to our next guest, Rania set Home, managing partner of the set Home Law Group. Rania, thanks so much for joining us here. Um, there's a I guess a growing concern out there as we see some of the stress and the banking system that the availability of capital and maybe the cost of capital, is it going to become more difficult, particularly for smaller companies.

What are you hearing from your clients. I mean, everyone has a concern about it, and most concerns are valid. Interest rates are increasing, they're inching higher. They were just raised this week in fact, and I think there will continue to be raised. So everything is more expensive, and it's causing the clients to burn through their money even quicker than anticipated. I mean, what do you see is the next likely move for a startup that's looking to

raise some money. I think they're going to have to go searching for debt financing with companies that have relationships with multiple banks and trying their best. I mean, I think banks aren't going to be as aggressive as they were in the past. I was just speaking to a couple of banks. I can't, you know, say their names on the radio, but they said they're putting all debt financing on hold right now. So some banks are out

of that game, the smaller regional ones. So I guess the issue for you know, we've seen a lot of depositors just pull the money on put it into money market funds. But that doesn't do me any good if I'm looking to open up a new store or start a new business. Do you think this could become a real issue or is this something that maybe you know is kind of specific to a handful of banks. No. I think this is a real issue. I mean, one

of the problems that startup space is not. When they do look for funding through banks like SVB or any other banks, they're required to maintain a majority of their money with that bank. It's sort of like collateral. It's not exactly a collateral, but it's like collateral. And then they're left putting all their eggs in one basket. And so what I've been suggesting is to work with a bank that can offer you an insured cash slop or

an insured bank deposit. And what that allows you to do is have a single bank relationship, but that bank then moves your money around to various banks within the network, so that no single bank is holding more than the FDIC insurance maximum. But I believe that maximum needs to go up. Two hundred and fifty thousand dollars maybe a lot for the average person, but it's not for a startup,

and it's not for an average business. Do you have a sense that regulators would you take your advice and start looking at raising that If regulators took my advice, the world to be a very different place. I don't think they're going to take my advice right now. You know, the government has been spending a lot of money since twenty twenty the world and the global economy was essentially

shut down. And we can all argue about whether or not that was a good idea, But when you stop the economy from working and then put an influx of money into the world so people can survive, it's sort of like an IOU that's coming due. And I think

that's what we're finding. And there was really no information available to the banks about the increase of the interest rates until it was close in time, and so banks like SBB that purchased you know, long term bonds with low interest rates, they were in a lot of hurt. They had to sell it at a loss and that you know, accelerated their demise. The ones that didn't hedge well and ones that didn't manage the duration are in trouble.

But so RNIA. If you have a client who's making a small business and maybe they're feeling, you know, a little bit of angst about kind of access to capital, cost of capital, what are you telling them to do during these times? I'm telling them to work with wealth managers that have relationships at institutions that they may not even know about. You know, some you know, venture capital firms that may not be famous in their space, because you know, you look at places like why Combinator, and

I think they shut down an entire division. So a lot of what's happening also is all of these companies are going to the same let's say ten players, and those ten players are exhausted now they have no cash and they can't support the demand. So you have to diversify not just with her banking relationships by using these i CSS, but also diversify your relationships with banking professionals

so you have access to capital from other companies. One thing I wonder is you know a startup can consider a new strategy bit do you have any insight in how easy it is for a startup to execute a new funding strategy? For example, you know around the real worries about SVB, when we saw lines of customers out on the streets. You know, we were hearing that banks weren't able to take phone calls from their wire transfer

departments because they were just so completely overloaded. Have you seen the mechanics of the banking system ease up a little bit or are you still hearing there's a bunch of strain. I think it's still strained. Everybody is being extremely reactive. I mean, who can blame them, but reactivity

never works in anybody's favor. And it looks like, at least in the short term, the large institutional banks that we all know, the ones that have a bank on every block or every other block, are the safe that's right now. And in fact, some of them, you know, are purchasing parts of these banks that are that have gone under. So, Rinia, you know, we've heard about some of the challenges out on the West Coast and Silicon Valley with some of those funds, some of those VC

funded companies and their relationships with SUVVVB. Do you think there's similar kind of exposure here on the East Coast and other parts of the country that have a big VC community. I think yeah. I think this is a problem nationwide, and in some cases some of the banks that I think collapsed, like Signature, it was also due to their investment portfolios. They invested differently, but it was still the investment portfolio that brought them to this place.

And it's all about lack of diversification really when you get down to it. Okay, Rinia set Home, thanks so much for joining us. Rinia set Home managing partner set Home Law Group. You're listening to the tape cancer our live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa

play Bloomberg eleven thirty. A lot of my friends been telling me the next ten years is the decade for India, and that kind of came into focus a little bit when we saw China just kind of shut down and then not really figure out their COVID policy Jennifer So amongst other reasons. But that just kind of came into focus when China kind of shut down a little bit. And we are very fortunate today to have a wonderful voice to kind of get us to that story. Sunji Sanyo.

He's an economist, he's an author, and he's a principal economic advisor to the Indian government and Prime Minister Mody and he joins us here in a Bloomberg Interactive Broker studio. Sunjie, thanks so much for joining us. We appreciate you coming in. If you were to give me the elevator pitch for India. Okay, what would it be? Well, it's by some margin, the fastest growing major economy in the world. It's financial system and like what's happening in much of the world is

rock solid. And you know, if the world was not going through so much stone oil, it could easily be growing at eight percent plus. I guess one thing I'm very interested to hear you talk about is India's manufacturing policy, because this has been a very big focus for a very long time. Do you feel that you're getting to where you need to be with that? I think you were targeting twenty five percent of GDP. Do I have

that right? Well, if you take if you're looking at manufacturing, we would be looking at something in the early twenties, guests. But I think rather than take the percentage, the problem here is the following. India has an extremely competitive services sector, and we probably the first economy ever which has gone directly from agriculture to services in the sense that almost sixty plus percent of their economy is services more our exports and are more than half of it is services.

Probably the only developing country in the world where that is the case. So we are very oriented towards services, very competitive technology of various kinds, but other things as well. What's happening is that that creates a disbalance in our economy in that you have a decent sized manufacturing sector but has while it has transformed itself over the last decade. And we do have some areas where we are very competitive,

like automobiles, pharmaceuticals. Many of the farm generic pharmaceuticals are bar here are from India. But in a general principle we have not been as visible in the supply chains as say China is, and so we want to correct this imbalance. You know, a large economy needs to have all cylinders firing, and manufacturing hasn't quite been an area that's done quite so well. What are the major areas

of focus for development for India from this government? What is it really focusing on over the next over the longer term. So the first thing is, given the turbulence, make sure there's no macroeconomic stress on the system. So we are conservative or macroeconomic stress. You know, we can easily grow this economy at eight percent. We'd be quite happy with six and a half right now, given what's going on in the world. Meanwhile, we are building out,

doing a massive build out of infrastructure. We did not blow out our budgets during the COVID crisis. We're quite restrained. But since then we have dramatically expanded out our infrastructure budgets. This year we are going to see a thirty three percent increase in our structure spending, and this is on top of several years or increase. What type of infrastructure are you focusing on a lot of physical infrastructure, so

roads and highways, airports, stuff like that. If you take Mumbai for example, it's probably right now the largest concentration of cranes in the world. It's basically a construction site. Not a pleasant place to live, right, I can assure you, because everything is dug up. But in a couple of years time, it will have a completely brand new metro system, it will have a completely new airport, links to the mainland, coastal road, blah blah blah. And that's happening to many

other cities in India as well. One thing I'm wondering about this great construction push that you have, in this great infrastructure push, is how much of that are you looking towards the outside world for investment. How much inward investment are you looking for? And one thing I want you to talk particularly about if you don't mind, is also the semiconductor push that has been a great feature of talks between India and the US. So the infrastructures

push itself is largely domestically driven. Of course, we do have large investors from the rest of the world, especially sovereign wealth funds investing into it, but mostly funded domestically and executed domestically. We have the engineering capacities large companies like Large and two bro etc. Which can do it. So this is not where we are really looking at the foreign companies coming in. We really want, as I said,

to insert ourselves into the global supply chains. And many of the companies, large international companies already have something in India, partly for the domestic market or because they have the services outsourcing where it's a design or their accounts department, et cetera. They're already in India. So what we want them to do is now to add their manufacturing bit. And that's the point we are making earlier, is to come and do that in India. So we design the chips.

Whether you don't actually manufacture them. So we want that to move now. Of course, for a variety of reasons. Some of it is moving out of China. We want some of it to come to India. One because it puts US in the map, in the supply chain, but it also for another reason. One of the things we discovered during the COVID crisis is that if you rely entirely on a single foreign source, it can suddenly shut

down for all kinds of reasons. It could be a pandemic, it could be geopolitical reasons, whatever it is, you've got to be careful about this. And so we are very keen that at least some basic things like chips do get manufactured in India. For example, in twenty twenty one, we discovered we have this huge automobiles industry, very competitive, but can't get chips, so the whole thing shuts down effectively.

So we think that at least some basic things, some basic chemicals, basic things like chips, they have we have to have some capacity on shore. I believe the US is doing something similar as well, with because of similar reasons, not geopolitical, but just from a resilience perspective, makes sense. What are the major challenges that India has and the government has been executing their growth plan. You've always had one of the world's largest populationship that population is for

the longest time been very young and educating. You've had a lot of wind at your back. What's held India back if you believe it has been held back or and what are some of the challenges going for? So the wind on our back is really taking off. So yes, we have just I think this months gone past China as the world's largest population. But do remember the average Indian is some twenty eight years old, and so it's only now that we are seeing the proportion of population

of working age exploding out. And we are still far away from the time when we go into the aging phase. So we have now about twenty five thirty years where a very significant and growing proportion of our population will be a working age And unlike China, which had a very spiky demographic, because the one child policy, ours is much smoother, we will take a good leisurely thirty years

over this. So this is an opportunity. It's not a sufficient reason to be to see high growth, but it certainly is a necessary condition for seeing you know, year on year growth without labor market tightening. So we are in that place. We will be there for twenty five thirty years. But what we now need to do is to make sure, as I said, the infrastructure is there. The physical infrastructure. Also, another thing that India is doing somewhat differently from others is because we are going through

this transition in the post digital world. Remember everybody else, including the US or China more recently, etc. Happened during or before the digital age. We are going through this in the digital age, so far more than many other countries. We are actually putting everything online in multiple ways. For example, every Indian has got an Adhar number, which is like a social security number, but it is much more sophisticated

than that. I mean, you can use your thumbering face recognition et C. Now this means that you can basically use this to get bank accounts, get social security, pay out insurance very quickly. We might even allow you to go through airports using it and so on. So there are many, many such things that we are creating public digital public goods, which allows many people to do things that would have been done up with a country a

much later phase on their development. One question. A tailwind in interest in India has been the closing in China, the COVID policy, the pressure on the technology industry as that eases. What do you think that does to interest in India? Well, I mean the issues which about China, and not know about just the closures at that point

in time. There are far wider issues relating of course to geostrategic issues, but also to what has been understood I think by many people that you know, there's no rule of law as far as, for example, the treatment of large businesses is concerned what happened to Ali Baba for example, and so on. So you have to understand that we therefore are much more in sync with the rule of law approach. We are world's largest democracy, much

more transparent. May look more messy, but in the longer run you get what you see, ye, And so I think this fascination for an authoritararian system has I think somewhat eased off in our sense. This is our opportunity to build on top of that, and that to some extent is happening. We are a member of something called the Quad. You may be aware of that, where there's an alliance between Japan Australia, India, in the US and that is building out to the Indo Pacific area and

in the West Asia. There's another group called I to YouTube between India, US, Israel and the UAE. So there are new geostrategic configurations that are emerging out of this and we intend to play on important role in that. Lastly, before we let you go, I think people all around the world learned a lot about their healthcare system during this whole COVID issue. What did India learn about its healthcare system? What are the challenges and what are the opportunities?

I guess well, um, obviously, like everybody else, COVID hit us hard, particularly in the second Delta wave. But on the other hand, we also demonstrated that we could create our own vaccines and we could go out and then one point four billion people, that's about a billion of them were eligible they're old enough to get vaccinated, and we delivered a billion vaccines and did it again with

the boosters. So you know, we have global level capacities both in terms of production of vaccines but also to delivering it. And importantly we know exactly which day, which particular vaccine was given to everybody because the whole thing is, as I said, is digitally set up, so you don't have those sort of non phone and it's literally written handed. Don't get me started. But anyway, we got it done. We have a digital footed out. We all figured it out.

Send Ji San, y'all, thank you so much for joining us. You're listening to the tape cancer our live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty. Let's get right to our next guest, Ali er Month, genomic revolution analyst at our investment Not Ali, I've been

in research business for more than thirty years. I've managed research departments. I don't think I've ever seen the term genomic revolution analyst. Let's just start there. What do you do? Following? Thanks so much and thanks for having me on. So genomics is really an interdisciplinary approach. It's basically a field of biology and we think about the structure, you know, the evolution and different mappings of how we edit genomes.

And I think what's really interesting about ARC is that we have analysts that focus on specific areas of expertise rather than strong financial backgrounds. So I can say for myself, I previously conducted cancer research at Sloan Country and Cancer

Center and Monteer Medical Center. I then became really interested in the intersection between AI and medicine, and so I went to IBM Watson Health And so being able to have all of this sort of previous knowledge on cancer epidemiology by statistics and artificial intelligence and how those things will propel and change medicine makes me really able to look at companies and decipher sort of which ones maybe

win or loser situations within the marketplace. This is fascinating and I have hundreds of questions, but I'm just going to start with one. Going back to what you were saying about your involvement with artificial intelligence, Can you look ahead a little bit for us, What kind of new breakthroughs is AI making possible here? Yeah? So, actually, this is going to be a topic that Kathy and I will be speaking about at a Forbes Women's summit soon.

It's a really important topic that you're bringing up. We think that several tools are going to be really important to accelerate drug discovery, and I think AI is really primed to be one of them. So one example that we're seeing now and I think we'll only get better and better with time, so that would be like neural

network based algorithms. So that would be things like alpha fold that was announced if you remember a while ago, by alphabet which is a subsidiary of deep Mind, and that can actually predict protein folding, so that was very exciting. It also had an open source database of protein structures that was powered by alpha fol two and based on their amino acid sequences, the database can predict the three dstructor of about you know, almost all all known human proteins.

So that's it at three hundred and fifty thousand. So our research really suggests that these neural network based algorithms could reduce these research and development costs, which get very high for our companies, and we know in different macro and difficult macro environment conditions right now and when it's a little bit harder to raise keeping those costs low, but increasing efficiency is really important, so we think that this could increase the value of clinical trial assets we

think it could increase the probability of clinical trials phase transition. So, you know, a tactical example of this maybe is that so enabling this technology could probably shorten the average time

spend in preclinical experimentation. And so the duration typically in preclinical testing from discovery to phase one is about four years, and based on our model assumptions, that number is going to drop to three years, and then with these sort of AI neural network based algorithms that could drop even further to two years. So we think that would be you know, a major cost and really increase efficiency. Alex, what are some of the companies or types of companies

in your ETF and why are they there? Yeah, So one of the things that we focus on, and a lot of the things that I cover are things that are going to be called precision therapies. So precision therapies are these very disruptive novel medicines that are we focus on disruptive innovation, so no real surprise there. We believe that these type of companies are going to impact the

way we practice medicine. So one interesting change that I'd love to highlight is that previously before the Human Genome Project before we understood more sort of of our body's mechanics, we focused on creating these chronic therapies, right, so therapies that we would need to continuously take to manage symptoms, but we didn't actually address the specific cause of disease. So with things like one example would be gene editing, where you actually change, modify, add delete some form of

your DNA. So gene editing then could address the underlying causes of those diseases, and then it can also be used in the future, sort of like in the changing our healthcare approach, So in an upstream approach, whereas now we have a downstream approach, meaning that you get cancer, we treat your cancer. In an upstream approach, it would mean that before you get cancer, we look to see what genes you have that may cause cancer and how we can address them before you actually even get the cancer.

So we also see that, you know, these therapies are being tested more and more in the clinic, so we're seeing that gene editing clinical trials are basically trickling. We think that would happen by the end of the decade, which shows sort of the way medicine is moving. That would also accelerate probably first approvals, and we think that it's possible that the first approval could even come as soon as this year. When you look at where these innovations are coming from, do you have a sense that

it comes from big farmers? It more a story for a little We think there's room in both in our portfolio and air KG. We actually do have large cap format as well as these smaller cap companies. We have a long term approach, and so we look at the companies that are most likely to be able to capitalize and create these therapeutics, whether they're a large cap or

small caps. One of the ways we do that is we have a fifteen percent cager or hurdle, so all of our companies really had a lot of room to grow. We also have a very rigorous sort of company modeling and frameworks for analyzing our companies. So we focus on this sort of bottoms up in top Stone research process. So all of our research is actually open sourced. We give it away for free, so if you ever want to check out any of our research, you can just

go on to ardashonvest dot com. We also do a big ideas deck every year, which is sort of our best ideas of this year, and this year we focused on precision therapies and molecular diagnostics from a healthcare perspective.

But going back to our framework that we look at a particular market segment and we figure out we typically use like a right Law cost decline curve and we try to figure out, Okay, how is this company or how is this segment going to decrease costs but still increase productivity, and then we really find the companies that we think are most likely to change the world with

the progress. And then we of course always have our score for the companies that we have a framework for that where we look at things like mote, product leadership, you execution, people, management, and culture, etc. Fascinating, fascinating stuff, Ali Erman, thank you so much for joining us. Really appreciate getting your thoughts on this complex issue, but a fascinating issue and certainly an opportunity for investors to do what you can do with the AARKG which is the

ARC Fund. There. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you for. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three, and I'm fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio