China, Ukraine, And Markets (Podcast)

I want to talk to him because he had some weaker than expected, much weaker than expected economic data come out of China overnight, and that's kind of spooky markets a little bit. So so let's talk to somebody who kind of doves this stuff. But here. So he's the see of Mitchell Madison Group. But here's the scam. Jackson Wyoming. You were doing the remote thing, Hans, before it was the cool thing to do. How are you working this scam to be working from Jackson Way. I mean, that's

the first question. You know that the truth of this even worse. I split my time between Jackson Hole and Mala, who I just got back. You're killing us. It is even worse, all right, Well, the good stuff is Matt he has got his undergraduate from the University of Michigan. You'll be having but even more impressive for me NBA

from the Tux School. The Touch School is such an awesome school, a Dartmouth dart meth for for the NBA program, and that all the Tux that I know are really smart and they're super duper loyal to their school for some unknown reason. It's what's going on in China here this data, I mean, it just seems they've got some challenges over there. What do you make of it? Well, I think what's going on in China is just the result of COVID lockdowns. That's insane. Zero COVID policy has

taken a text obviously we've all seen that. But it's also a significant wealth effect from the property crash, right, I mean, if the population has been it's highly leveraged, it's invested in property, it's not going well. That is of course going to put a crimp on spending. And I think in the medium to longer term you will see an impact of the writing interest rates in the West that would just simply have the normal micro economy in macro economic impact that always pass slowing demand, and

it's going to slow down. The problem with China is that their populations at its Factson depends highly on growth, right, So they're in a bit of the trouble. So what does that mean though for us? What does it mean for you Jackson Wyoming? I mean I saw I saw a headline that said no one is immune, um JP Morgan says, and I thought, wow, they're really playing this a little bit dramatic. And then this morning, you know, everybody was it's all in the Asia focus, and of

course it was our top headline. But we're only off, you know, thirteen points on the SMP five. Is it really that important to markets in the US? Hard to say. I mean, it's it's you mentioned Dartmouth, right, NBA. It was really interesting. This whole thing reminds me a little bit of Japan in the late eighties and nineties and even the nineties. I remember going to class and listening to professors, you know, telling us how the Japanese SYS

more government direction might be superior. And then the next class you would learn about the pre market micro economics the normal way. If you pointed out that the trichotomy, that they just be like well maybe that's a different class, right. So I think what's going on is is economic reality, the Western system, free calcitualism is right. China is not playing the game correctly. They have tremendous problems with demography.

I think they are going to be a long term declining power, right, and we're gonna have to deal with that, right, I think would be very very dangerous. Declining powers are unstable, they do crazy things. Yeah, you see it in While, you see it in Ukraine, you see it. You could see in Taiwan, which would be much more of a problem. China obviously much bigger, much more interdependent, and I don't know if we can as business people count on you know,

government solved this problem. So I think what I see and what I what I would do, And this is my background. Supply team manage man is advising corporations that what they have done the last twenty thirty years getting it to China has to be done in some way going backwards, because really bad stuff could happen, right, and when really bad stuff could happen, it's a game of musical chairs. And there's not enough industrial capacity on the

planet to replace China. For everybody at the same time quickly. And when you look at the biggest US manufacturers, Um, is it scary? Are too are too many of them? Too deep in? I think so? I think overall, I think overall it is um it's too much, right, I mean, you can't you can't replace China with something else in

the in the short term, It's not possible, right. So, but that's also on the it's also a good news story in some ways because if there's you know, a great degree of mutual dependency creates polygo stability, right So, I for example, I envisioned that when Biden talks to z they're going to talk about removing parraffs, right mean, Biden needs it for use and play, and China it's just for growth. And they're going to think about this Taiwan thing. That's kind of where I wanted to go.

H Hans. I mean President gy and President Biden are set to meet later this year. That seems like a big deal to me at least. What would you like to see on the agenda on the table for a discussion that maybe we could actually get something done. Yeah, I think, like I said, I think it's in a mutual interest to get better trade relations going, and I think they're going to do something on the tarifor front. I'm pretty sure about that. I mean, it's it's in

everybody's best interest, right. It will certainly have a short term positive impact on US inflation, which is critical, and I also wonder what kind of impact we'll have on China. You know, we spoke with the Chinese econost this morning, who seemed very worried that, you know, Europeans and Americans would stop buying their goods or not buy their goods

as much, and that's a big problem for them. I can't imagine that people will always always go for price, and most people don't even know what's meet in China, so I find that a little bit hard to believe. Well, No, the idea was that if we go into a recession, we just won't have the you know, the purchasing power to to keep up the kind of consumerism that we've been practicing. No, I think that, Like I said that, I think that's going to happen. I think that's part

of the reason why China might be slowing down. But I don't think that we're going to follow up the cliff here in the West in the US. All right, Hans, great stuff. Really appreciate getting your perspective there, Hans dal See of the Mitchell Madison Group. Kind of red and green on the screen here to market, not sure what it wants to do here. We've obviously had that big move off the bottom after that brutal first half of

the year for both socks and bonds. A lot of folks de scratching their heads saying, okay, now what want's check in with Jay Hatfield, CEO, founder and portfolio manager of the Infrastructure Capital Advisors. Jay, Now, what, good morning, Thanks for having me back on Well, it's a little bit complicated. We had been constructive on stocks editing into earnings, and we were correct that earnings are relatively strong compared

to expectations. And we do think the economy is relatively strong because of pandemic tail winds, but the negatives are an erratic fed We think that two target is arbitrary and way too low, so they're going to pursue that

to percent target. They tend to focus on backward looking indicators like employment and CPI, whereas they should be looking at the money supply, which is down and already this year and then finally the other negatives were headed into September, which is typically a terrible month for stocks, lack of information about earnings, and then you have a closing of the buy back window. So we're we're relatively neutral to

cautious on stocks here after this big run. But you think so j just to go back to the beginning, you don't have a negative outlook on the economy. You think the US economy, even after two quarters of contraction, is still in a pretty strong place. Yeah. The key facts there if you look back at the eleven post World War Two recessions, they all had a crash in

housing and autos. But we have a pandemic recovery tail winds in that we're record low housing inventories one point two million units versus normal two seven thousand new cars versus a million, So the chances of mass layoffs in those cyclical sectors or zero. And then you have strong employment because we're moving from goods which you're mostly made overseas to services which are all provided in the US

and labor intensive. It's a strong job market and the normal sectors that crack all time lows for inventories, we do see talked about the economy. We do see what looks like some real weakness in the tech sector, and I don't know if that's because they you know, overhired um last year at the beginning of this year, but there you know, some of the biggest companies are cutting by some of the growthier for off of yer companies cutting, a lot of them are doing hiring freezes. Is this

just a sector specific issue, we think so. What is obviously entirely unique about this cycle is the pandemic. So during the pandemic, those are the big beneficiaries. But of course UM services was getting smashed, so you're just seeing a rotation from those goods producing companies. And also they

have exposure to foreign currency. You know, keep in mind, almost no one focuses on the fact that the set is already reduced the monetary base or money supply by fifteen percent this year, which is the biggest decline since the Great Depression. That's caused a dollar to skyrocket. So that's going to make those large cap exporters earnings weaker. But if you look, they're not really doing mass layoffs, are just hiring at a slower pace, So that's not

enough to derail the US economy. Jay, You've had a long and varied career on wall straight by side, sell side, wanted it. The industries that you've really focused on has been energy, global power, more in Stanley and so on. You know, what we're really starting to understand here is we've got oil pulling back yet again now were and change on w T I CRWEDE. It just seems like the supplying to demand are kind of out of whack.

You know, as we make this transition to green energy, there's still a big demand for traditional energy fossil fuels and are good friends in Europe. Boy, they're gonna have a tough winter. How do you think about this economy and how it's trying to manage the transition from fossil fuels to green fuels. Seems like there's gonna be some problems there. Well, I think we've made a massive mistake by not recognizing that natural gas is a very clean fuel.

It's the only efficient way to transport hydrogen because pure hydrogen you have to cool to negative for hundred fifty one degrees fahrenheit to transport it, whereas natural gas is to only two fifty. So the Europeans blew the energy transition by not procuring enough natural gas, which then allows you to shut down coal. In the US, we the

free market did that. That's why we're the leader in the world for reducing carbon not because of any policy coming from the government, but just because the economics of having excess natural gas. So but to your point, the we're relatively constructive on the oil market. We're still projecting, but the key factor to watch is European natural gas prices. They're trading at the equivalent of four dollars a barrel of oil and a btu basis, So that's a huge

support for the market. And these China blips are usually temporary. They're pretty sticky demand in China, right, Yeah, it's interesting to see how this plays that And again we'll be focusing on Europe this winter. It seems like it's going to be a big challenge for them. Jay half Fields, CEO, founder and portfolio manager at Infrastructure Capital Advisors, giving us

his thoughts on these markets. Matt, our next guest you and we struggle with English, which is a challenge because we speak for living, but our next guest speaks English and Hebrew. Okay, I get that. Then Russian and Ukrainian I'm like, who really cares about that? But now that is absolutely front and center. Dr Ariol Cohen, Senior Fellow for the Atlantic Council the Eurasia Center. Dr Cohen, thanks so much for joining us here. You know, I guess we'd love to get an update on what you think

the current status is in Ukraine. But what I'd really love to get is why did Putin do this? It just seems like a monstrous miscalculation here, but I'd love to get your perspective. The dean of my alma matter, the Fletcher School of Loyal Diplomacy, former Dean adimiral Stavridian's former Supremah Yeah, former Suprema UH Allied commander NATO said that Putty realizes that he made a mistake. I meant putting ten times. So this is kind of a guy who will never admit that he made a mistake. Whether

he realizes he made a mistake or not. There's some indications he may be realizing it, but he is desperate to say face. He's not going to give Ukrainians any quarter. So one would hope that we can extricate ourselves out of this horrible war in a few months. But for that Ukrainians need to deliver the Russians more blows, especially in the south when where they are using the Western supplied long range range rockets to disrupt the Russian logistics

and they're destroying methodically the key bridges. So if the Russian troops are, for example, on the left bank of the right bank of the NAPER, they would pull out, possibly because they don't want to stuck there with other bridges. UM. So the logistics is extremely important in the war UH. And there's another dimension that I'm very worried about, and that's the nuclear power stations. Remember, Ukraine is producing of its electricity through nuclear um contributing less to global emissions

than many other countries. But the Russians and the Ukrainians of bombarding some of these UM stations, including the huge uh power station and Zapariga four reactors four units. And the last thing we need is one of these reactors to be punctured by a show and have a radioactive emissions there. So God forbid, you know something like ser no,

we don't want that. So Dr Cohen, I would you know, initially I would think um for the whole conflict there should be some back channel way to communicate UM with Vladimir Putin, figure out a solution. Even if you can't get them to pull completely out of Ukraine, maybe you can say, hey, let's all avoid these nuclear power plants. But then I wonder, how does the chain of command, How well does the chain of command actually work, how strong is the link, how how um efficient is communication?

Or are these units on the ground really just operating on their own In a sense, I don't think they're operating on their own. The Russian military is extremely centralized. Who is less centralized actually are the Ukrainians. But what we've seen is that the Russians cut a deal with the Turks and with Ukraine, and they are going to allow the grain to flow out of Ukraine, out of

the port of Odessa on the Black Sea. UM to the world market's very important, So we don't contribute to or the conflict doesn't contribute two people starving in Africa or something like that. And the next day the Russian military is delivering a rocket strike on the part of Odessa. So questions were raised about that, uh, and then it stopped. So hopefully the command and controlled chain in Russia is still intact. However, Uh, you raised the very important question,

and that is who is communicating with the Russians. And we saw recently that Russia said that Switzerland is not going to be the go between because Switzerland imposed sanctions on Russia and therefore the Russian said they're not impartial. So having a channel of communication, it is important, having people who could go back and force, like the late Great German foreign minister uh Gensher. I think it's from ye Han has so Dr Coleman, what yeah, go ahead?

So I guess the question is how strong is the support within Russia for Putin and this war? I think about just our country here. When the dead bodies start coming back, that's when people start taking notice here, how strong is his support? Remember Russia, the country is a lost twenty seven millions in World War Two, civilians and military. Uh,

they do recognize that wars come with a body count. However, having said that a lot of Russian families have only one child, that's only one son, and I do believe that there's more discontent, especially among the relatives of the men who died. But Putin's regime is not unlike the Soviet predecessors who kept a tight lid on the public opinion, but we see four now. For now, I stressed the public support is anywhere between sixty and that's quite considered considerable.

But in the future that the economic situation is going to deteriorate, and it is deterierating. We can see it right now with Western technology management investment all drying up abruptly, and the Chinese are not capable but don't want to replace the Western economic partners. Russia will continue to deteriorate and with that the public support of this war will go down. I just want to quickly ask about the gas. How difficult is it going to be this winter for

the Europeans to access Russian supplies? You know, it's not going to be pleasant. However, the projections are that by December nine of German um storage will be filled with gas. And Germany is a key country here. Other countries will need to scramble. The Italians are getting more gas from from Algeria on the existing pipeline. They're putting more pumping stations on that pipeline, and countries like Qatar and Australia and others who have any extra lergy and we in

the United States can sell more lergy. They're more regasification ships that are heading towards Europe. It will be more, expect more expensive, but I do not believe it will be a catastrophe. Aerial co and thank you so much for your time. You really appreciate getting your informed insights. Dr Errol Cohen. He's a senior fellow the Atlanta Council Eurasia Center. Deep deep background and experience uh in European politics, geopolitics. You know, last week we had in video they disappointed

with a big miss and revenue. They called out a slump in their gaming business, and I think that caused a lot of folks in the industry to kind of step back and say, all right, let's get a sense of where the gaming industry, which has been such a great growth story within the communication space, where that is right now, where it's going as we come out of

the back end of this pandemic. So our next guest is really a timely one and hand CEO and chairwoman of Super League Gaming that as a publicly traded company on the NASTAC s l g G as a ticker you can put into your Bloomberg Professional Service and get all the information you need on that and thanks so much for joining us here. UM give us just kind of tell us what you guys are doing at Super League Gaming, what your company is all about, and kind

of how you fit into this gaming ecosystem. Yeah, thank you for having me. UM. Super League started about eight years ago, and our focus was really on the fact that these days, if you, if you know, speak to young kids, pretty much everyone's a gamer. Over eight percent of kids say that gaming is their favorite form of entertainment.

And this was all pre COVID, right, so it was already bigger than the film box office, bigger than tv UM, and we were really focused on kind of debunking the myth of who these gamers are, because gaming these days isn't something that they're going to grow out of, very different than the gaming that we did as kids. It's it's not just you against the machine. It's actually got

a fair amount of community and and um commerce. It's really a place where kids are expressing their physical selves in this digital world and so they see it as one blended life. And how we fit in is we really focus on what we call metaverse games or open world gaming platfor forms, because that really speaks to kind of Generation Z and and Gen Alpha these days. Um, they're not just there for the competition. They want to

step into these games like Minecraft and Roadblocks. You know, Minecraft has been around for over a decade um, and and hundreds of millions of kids are spending a lot of their playtime in these worlds where they can create, they can become game designers and developers. But it's also the digital cul de sac. It's it's where their friends are and where they want to interact with their digital selves as much as they want to interact with their digital, um physical life. So they kind of call it a

digital world that we're living in. And so what I often say to brand's anti investors is is, you know, we're not talking about um, you know, metaverse capital m and something that's kind of abstract in five to ten years away. Um, you know, these games have been around for some time and this is where kids are. And what we do is we bring brands and advertisers into those worlds to create exciting experiences and content for them. So how come investors don't seem to get the story

or or believe in it? Judged by the stock performance? I mean, yeah, yeah, I had a huge jump during the pandemic, but let's leave that out. Um, we've still seen the stock come down to a dollar from you know, leaving out the ten dollar peak, um, you know six

at least. Yeah, absolutely, UM, I think some of this is just that fundamentally, when when we're kind of sitting in that nano cap space, you know, the stock doesn't have a lot of stability, that that kind of anomaly spike that we had that you pointed out, we became a bit of a meme stock during that time and got swept up in and what was happening with a MC and game stop. By the way, do you actively

work to shun that? Because if I google s l G G, I'm I'm looking at you know, all these meme stock um kind of results and not so much about the actual company and what you do. Yeah. No, So that was definitely one of those kind of times

where we had that kind of unusual spike. But but for us, really I do agree with you that I think that right now, you know, the the market doesn't really um, we're not getting the credit probably um that I believe we would deserve for the kinds of step change revenue growth that we are showing, and so I have to believe that as we get the more attention to the stock and and show those keep delivering those types of results that you know, over time, the share

price will reflect that we went from you know, we we went public when we were pre revenue and so um in we did about two million in revenue last year, about eleven million this year. We gave guidance that we would do UM twenty to twenty two million. We're beating analysts estimates and and on plan to deliver those results. And so we feel like that step change um top line growth that we continue to deliver against overtime will be reflected in the in the share price, in the

ultimate market cap of the company. And what's your maybe like three to five year outlook for the sports business in general? Again, it's it's a business that you know, a lot of investors aren't really familiar with, but it certainly has the growth characteristics that I'm sure they would appreciate. Yeah, you know, the the E sports category was really where we started as a company. We were really focused on

creating a bit of a little league for youth. So think of E sports as just competitive video gaming um. You know a lot of projections were saying, hey, that's going to be about a three billion dollar business. By that's not that big. We all know that, right. I mean I ran a three billion dollar P and L at BP globally and it was small fish. So UM, so that E sports category, most of that value is really talking about those the establishment of those professional teams

in leagues. You saw the recent I p O of Phase Clan UM and so that is an exciting but a very small subset. What we started to do the company really around the pandemic. And I think our response is something else that I think that over time investors will will give us credit for. UM is we really cast a much wider net. We said, look, we already have an interesting foothold with young gamers, but let's speak to all the segments of gamers, not just the highly

competitive ones. So we now reach with that strategy that we put into place during COVID about seventy million unique under eighteen gamers a month, namely in games like Minecraft in Roadblocks. UM that's sizeable reach, really second only to the people who make those platforms themselves, Microsoft and and Roadblocks, and so we have sizeable reach in haft and we

speak to a very diverse audience of gamers. So now we're talking about there's three billion gamers on the planet and in game advertising is projected to be a fifty six billion dollar um um category by four We think that's far more interesting than just those the more narrow segment of just e sports. And you expect to make a profit in your your time at the company. Oh absolutely, I mean what we've talked to two. We just had our earnings call. In fact, we took UM investors into

the metaverse. We did a video um um earnings announcement, and and what we talked about is the fact that not only are we delivering UM faster on the top line, but we're also seeing our operating losses shrinking faster than expected this year. And so we're very mindful in the current state of the market that while investors last year we're pushing us hard on top line top line, now they wanted both. They want top line delivery and they

want us to get cash flow positive fast. All right, and thank you so much for joining us, and hand CEO and chairwoman of Super League Gaming, 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 nineteen seventy three pt On False Sweeney, I'm on Twitter at p T Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio