How Smart Is Your Home? Outlook For Smart Home Tech

seventeen years ago. But apparently it's not smart enough because the new buyer had his tech guy come by to do an assessment. I think they're gonna be a big upgrade. I don't have a tech guy, but apparently a lot of people have a tech guy. You need a tech guy for your house. Aaron Amy, tech guy, co founder and CEO of Brilliant Home Technology. Aaron, thanks so much for joining us here. I guess the smart home, I know it's a big thing. Give us a sense of

how big it is, how fast it's growing. What are people doing to their homes these days? Yeah, I mean it's it's the next great platform. Because technology advance is in a series of platform wars, and we've seen that happen with personal computers, Internet and then mobile. Uh. Smart home has is the next great platform and it has rapidly grown to more than seventy five billion dollars and is taking over every home. But so what is it?

I mean? Is this where like the lights turn on and off when you walk in and out of rooms, does your stereo, like your playlist follow you around? Um? You know, does it adjust the thermos stat I don't get it. It does all of those things, and it basically personalizes your home, so it does what you wanted to do with a minimum of us and bother and it opens up new kinds of possibilities. So when someone's at the door, you see who it is and you

can talk to them. You can give people permission to come into your home without having to make a key for them and the security risks that that entails. And then you can automate functions. So when you're gonna watch a movie or you're gonna go to bed, all of the different things that need to happen, whether it's temperature, whether it's light, whether it's locks and so on, can all happen automatically. So what are some of the most

popular functionality that I guess people are asking for these days. Yeah, I mean smart locks has been a really important category of access control because there are a lot of security benefits uh to to being able to control access remotely. UH. Security has been a big area where where you have you have peace of mind that your home is secure. Uh. Lighting is a very important area. Smart music is another. Is another big one. Smart climate control both saves a

lot of energy and makes homes more comfortable. So all of these categories have already proven themselves to be very significantly. So where do consumers get hold of all this? I mean, Paul's HomeBuyer had a tech guy. I don't even know where I would go to get one. Yeah, so there certainly are some, you know, some tech guys that you can get in so on. Increasingly, what we're seeing a brilliant is new homes being built with technology in them as well. So you can buy it yourself and you

can install it yourself. You can have it a tech guy do it if you're not that is that chech forward yourself, or it simply comes when you get a new house or or you move into a new apartment. Because the developers are increasingly building homes as smart homes. So one of the things I'm concerned about. All right, what I've noticed, I guess, is that the technology changes so quickly. So whatever tech you put into your house,

it's out of date, you know, five years later. It seems like it's got to be super super flexible to be adaptable going forward. It is, um, it is, and that's one of the changes. Uh. And one of the things that companies like Brilliant are doing is making sure that what we're doing is extensible. So for example, we're updating our software every two weeks, and the software is really the heart of the system. UM. So your home actually gets better as you as you live in it.

And we've already seen this in other rbunus, like if you have a Tesla car, for example, you know they're always software updates, and and you know, one day your car can parallel park itself. One day it can send the autonomously drive. Uh. And that happens without having to update the underlying hardware platform. Are you worried about these devices getting hacked? I mean, I wouldn't want, for example, somebody to be watching me through my refrigerator or whatever

you know, watching through the refrigerator. Note this is this is a really important topic. And uh and yes, you know, the the responsible companies in this field are very very careful about about security and actually bring additional security to uh to bear. I myself have a background in cybersecurity. UM. And you know, I think that we have the ability

to offer much better security. For example, you don't have to leave your key under the welcome matter at a fake rock in the garden that everyone knows what it looks like. Uh. If it's to give people access to your house, all right, I guess that's that's where we're own, Matt. So when you, you know, buy your I'm happy to go there. I just want someone to do it for me. Yeah, you got a guy. We'll find you a guy. All right,

maybe Aaron, Maybe we'll do that for Aaron. Amy, co founder CEO Brilliant Home Technology, is talking about upgrading the homes to technology. UM and again you know again, what I've noticed is the technology changes so quickly. So you look at some of those houses where they have like panels, you know, kind of in the wall, and they don't use them anymore. The intercom all that kind of stuff. I gotta say, I I first heard about all this stuff when Bill Gates Um built Zanna Do two point

oh like twenty years ago. So now regular people are getting what exactly Let's get to the vaccine mandate for federal employees. It looks like President Biden is set to announce a vaccine mandate, and we have Josh wynd Grove who's broken the story. Josh, what are we looking for? You know, we're gonna hear from five PM, probably probably gonna get some more details beforehand. But to rewind to Jill Live, they said a rule he had to be vaccinated or you had an option to sort of do

testing and masking and that sort of thing. Now he's expanding it, sort of taking away that option B so you have to be vaccinated, and he's expanding the number or the scope of the federal contract workforce that it applies to. Also previously was aimed at on site, so essentially more people being covered by this without an option to instead of get a vaccine, get regular testing and masking. So you know, obviously many details still TPD. You would

expect pushback or legal challenges potentially to this. We don't know when this would take effect. We don't know what it would mean for let's say, a federal worker who showed up on that day without being able to demonstrate vaccination. So definitely moving target on this one, but a substantial expansion of the vaccine requirement and for federal workers. You know, it's interesting, Josh, you know roughly how many people were talking about here, Like it's not all federal employees, just

executive branch employees plus federal contractors. That still sounds like a lot of people to make. Yeah, I mean, I think we're talking millions of people, but the exact member, you know, we don't know. And I think the question that I have right now is is, you know, why are we going to see push back from labor groups.

Are they're going to be legal challenges or arbitration, you know, grievances, these kinds of things filed, you know, potentially, but the White House broadly abews these sort of you know, Alkhart mandates. Pretty big one for them is the ctereral government. But you know, for smaller companies are doing the same thing as a good way to sort of spur vaccination rates people sort of you know, I don't want to be

ordered by the government to do it overall. But if your employer requires that, there's there's evidence of that leads to enough tick in vaccinations. But you know, of course, the concern on the flip side is that it might generate blowback or you know, get people's backed up, you know, that kind of thing. So, you know, broad a lot of moving parts in this especially it's almost like they're

trying to antagonize, um, the Trumpian anti vaxers. We know that percent maybe more are valy opposed, right, Uh yeah. I mean there's different camps where you've got hardcore anti vax people. You've got people that can be bothered, you have people that have barriers, like they don't have paid time off to go get it, that sort of thing. You know. I think it's worth noting that vaccine has a nancy has been declining in the US, not maybe as fast as other countries, but it's been going down.

And we now have you know, seventy of US adults with at least one shot. That's a fairly big number. And you know they had shot for seventy in July, they hit it in August and now seventy five. The problem of courses with delta you might need to get quite a bit higher than that when you And of course there's the whole segment of the population those under twelve that aren't eligible for a vaccine and are probably

weeks or months away from being eligible. So you know the yeah, absolutely, you know, if you're die hard anti vax or, this is probably not going to change your mind. But there's there's folks in the middle essentially that aren't vaccinated to have questions. Maybe I haven't gotten around to it that that I think they're sort of hoping the mandates at the employer level in other with your job making you do it. Well, we'll have it if you

have a difference. Yeah, Josh, it's you know, the big take story of the day that Matt and I had we were talking about this morning, focused on, you know, corporate mandates. Um, does a White House hope or anticipate that by taking this aggressive federal policy that they will you know, maybe coax or urge or prod some big corporations to kind of follow suit with vaccine and dates. Yeah. Absolutely, you know they're sort of hoping that people joined the

parade behind them in this big wave started. You recall with the approval of Fiser's vaccine, remember from montsore reason, and only on an emergency authorization. When the FDA gave full approval, Biden's administration took that as a real sort of turning point to start saying, Okay, you know, corporate America, look, you know, you know it's not an emergency authorized vaccine,

is now an approved vaccine. So you're on stronger footing morally legally what have you to be able to require vaccination? So I think we're going to expect to hear him call for that this evening, beat that drum. We also expect him to give an update on boosters. Remember they planned to start sister shots in a week from Monday. Maybe more on testing, a couple other elements on schools.

There could be some you know, news if you will, in this speech, But broadly, I think he just wants to kind of sweep together what they've been doing over the summer to try to curb this thing as those cases rose. But so far, as far as we know, this is only a requirement for the two two vaccine shots, or is it? Will they require three? Now that's a good question right now that they consider too to be fully vaccinated, so that but that's that's as of now,

so presumably that may change. But that is a huge open question right now among researchers about what will happen. And of course those folks have got that Johnson and Johnson shot something fourteen million of people in the US. They don't know what they're going to do for booster shots, and you know they're considered fully vaccinated after one shot, so you know, this, uh, a lot of questions still

to be answered. We expect to have some clarity in you know, the afternoon, either around the speech, perhaps before the speech, on on what exactly they're proposing. And as I say, I'm expecting a bit of a wave of statements from labor groups and what have you saying you know, responding to this, you know, about their members potentially being forced to do this, and we just simply don't know the what you know, what if kind of factor? If someone shows up? Are they fired? Are they furloughed? Are

they sent home? Are they you know, work from home? Like, what is the deal? We don't know. It's gonna be fascinatorry. We're gonna get more details coming throughout the day. You'll have and your team, lots of reporting there, I am sure. Josh wind Grove, White House, correspondent for Bloomberg News, joinings on the phone from Washington, d C. Again green on the screen, yet again at or near all time highs. As we continue to hear that from Greg jard and

his reporting seemingly on a daily basis. It's just for a lot of folks, this feels like a market and looks like a market that is priced to perfection and might have some vulnerability into it, but that's not stopping this market. Let's check in with an expert who knows this stuff. Lisa Chalotte, chief investment officer for wealth management at Morgan Stanley. They have one point five trillion with a t UH and assets under management. Lisa, thanks so

much for joining us here today. I guess I'll start with kind of the wall of worry, uh kind of question or topic here. How concerned are you about this market given some of the headwinds that you know, folks rightfully point out, whether it's rising interest rates tapering and you know, just the delta variant. How do you view

this market right here? Uh? So, look, you know we've been on the record, um, you know, to say that this is a market that for the most part, while I can claim that it's climbing the wall of worry and and certainly positioning uh in you know, the megacap

tex sox, it's suggests an element of defensiveness. UM. You know, our sense has been that that this is a market uh you know that is shrugging off most of the concerns, whether it is um you know, disruptions coming from delta variant, whether it's you know, supply chain concerns, whether it's been the China regulator or uh crackdown, or you know, shifts in policy um from the Fed. UM. Nothing really has gotten in the way of this market. You know. It's

it's notable. I think uh that uh for for much of the period, uh you know, after the first quarter, many folks were saying that the market was rallying because interest rates were falling. Uh. You know, really, over the last month or so, we've seen the ten year back up from its ultimate lows on the ten year of one seventeen. We're back up here, uh into the mid one thirties on the ten yere Uh And and even that has not uh you know, interrupted this this grind

higher UM in markets. So you but you expect a pullback right least, so you expect to ten to correction before the end of the year. Yeah, we do, and and and um. The reason for that is essentially two fold. So with that move in rates, we ultimately think that price earnings ratios, especially on those most expensive stocks, should compress.

We've seen PE multiple compression uh in many many other parts of the market, whether you're talking about international stocks, you're talking about value stocks, more cyclical stocks, you're talking about the small caps. Uh. This is the one area of the market that has remained immune so far. Uh. And there's just no precedent for that. Uh. You know, historically when rates go up, ultimately PE ratios um do come down. So we we see that as a risk.

In secondarily, Uh, you know, we're seeing folks talk about the growth scare. We're seeing people downgrade their estimates for third quarter GDP growth. Even at Morgan Stanley ellen Ventner has cut her third quarter number from six point five percent annualized growth rates to a two point nine percent. That's a pretty big cut. Uh. And yet folks, uh, you know, don't think that's going to harm earnings in the third quarter. And we think that that could be

another negative catalysts. So, you know, lower PE ratios and potentially earnings disappointments or or fewer positive earnings or visions are the two catalysts that that might unleash that ten fiercent correction. So with that type of correction between now and the end of the end of the year possible, are you suggesting people raise cash? Are you suggesting they rotate into uh, just maybe more cyclical names. How do

you think people should position themselves for that? Yeah, so we're we're in the camp that says this is about UH rotating and actively managing UM. So we are buyers of consumer services, of financials, of some of the uh industrial cyclicals, from some you know, safer healthcare names and some staples. UM. It's just really some of these long duration oriented UM secular growth stocks that that we just think are long in the tooth and need to kind

of take their hit. So we're rotating here. Uh no need to panic and go to cash and get paid nothing, uh and even negative returns after inflation. But we do think that we're in a bull market. It's just a bull market in things other than the SMP depth. How important is the infrastructure bill or how important is um fiscal Uh you know, trillions of dollars in continued fiscal support. UM.

You know. Our perspective is that it's not so much the dollars, because what people forget is that a lot of this is going to be spent over you know, multiple years, if not, if not a decade, uh, and so on any annual basis, it's it's it's fractions of percentage points of growth. UM. But it's really the the shift in mind that uh, that we are in a m in a more fiscally active environment and and um, you know that is growth oriented. Uh. And so you

know we are constructive broadly. I don't know, um you know exactly what the form of final legislation is going to take, given all the puts and takes of this, but we do think we're going to get something, uh. And that's something on the margin. Is helpful. Lisa, great to get your take. Thank you so much for joining us. Hope we can get you back on soon. Lisa Shallatt is the chief investment Officer for wealth Management at Morgan Stanley. Obviously very important for you to get so always good

to to hear from Lisa. You know, we are seeing continued gains in the markets right now, and as we heard earlier from UM from Dave Wilson, we see the SMP five lead by energy, financials and materials. This is Bloomberg. Now let's get over to Nathan Chetty. I told you we're going to be joined by the head of multi asset at now ven they've got one point two trillion dollars in assets under management. We're gonna talk about the

opportunities and risks in private markets. Where do you start when? Um, uh, Nathan, when analyzing such a huge universe, Thanks uh, Matt Paul for having me on. It is indeed a massive universe, and I think, um, it's only growing. We've seen a ton of interest in in private markets, and I think

this has been driven really by two phenomenon. The first is this lower expected return environment at least on a go for a basis, and I I'd argue the second one is partly driven by the volatility we're seeing in economic variables and brought broad indicator. So investors are moving to private markets in order to incorporate them in their portfolios for more diversification. They're trying to eat out every basis point of return that they can, and that liquidity

premium UM is certainly one place to source it. So it's interesting, Nathan, we hear a little bit more I guess really over the last several weeks and months about private credit, and I guess that's simply, you know, investors looking anywhere they can for yield. Give us kind of the risk return profile as you know, you guys got to go out from you know, maybe you know, looking at treasuries, are looking at public corporates to to going out into the private credit market. Give us a sense

of the risk return that you guys think about. Yeah, private credit has just absolutely exploded, and and part of that is due to UM, you know, some of the bank rag et cetera, and ultimately UM syndicated loans haven't had the same levels of plot that we was seen

in the past. So the credits stepped in there UM and really have a risk return profile that's not dissimilar to their public cousins, meaning syndicated loans, but at least on the middle market lending or senior secured side, we're looking at high single digits and uh, you know, a lower risk profile than you'd see in public markets, and again part of that is due to that illiquidity risk

premium that you're getting UM. I think another reason why private credit is of such interest is you're sitting higher in the cap structure. Private equity or VC has always been part of UH portfolios, but with private credit, you're sitting higher up in that cap structure, have to deploy less risk, but again a very attractive risk return profile, particularly UM for income oriented investors. So how much does how much do things like FED policy matter to private markets?

How quickly you see follow through? I mean, look, FED policy matters for all markets, public or private, and it depends on the private market we're talking about. Some are going to UM transmit or or reverberate in in those private markets quicker than others, particularly those that are sensitive to fixed income. We're just talking about private credit. Most of private credit is in UM live or plus type

landing or floating rate structures. So UM you have some UH some ability to manage that rates duration risk, which is really going to reflect FED policy much more so than you would with public market rate sensitive assets, and those are obviously going to be reflected UM immediately in the private real assets space. UM, not dis similar funding rates, credit spreads. They all are going to have an impact on UH demand and and ultimately debility to to purchase

and supply in the real asset space. But but but the the implications and that transmission from shifts in FED policy are going to take some time. They're going to take UM multiple quarters, and ultimately I guess that goes back to why we've seen such a huge uptake in demand and interest is to mitigate some of that volatility around UM, you know, economic variables, and that volatility around policy uncertainty gives it time to digest UM and ultimately

reflect more fundamentals going forward. Nathan, we're presumably heading into UH. You know, there is inflation in this economy, Nathan, the discussion, I guess the debate is whether it's transitory and there's something more longer term. How does your portfolio, a portfolio that has a lot of you know, alternative assets, private market investments, private credit investments, how does that typically fair

in you know, a inflationary perhaps rising rate environment. UM. Thanks for the question, And obviously inflation is is top of mind for all investors right now, it's re entered the conversation. It does exist. There's supply chain issues, and we can argue UM round and round about its transitory nature. We do believe that it's going to settle UM at a at a level that's higher than we've seen in

the past decade, this disinflationary decades. So UM in a portfolio the size of ours and a portfolio that is highly diversified traversing public and private markets. The big area where UM, say an uptakeing inflation is going to influence the portfolios in the bond equity correlation. I mean people hold bonds in their portfolio as a diversified against equities. When we enter higher inflation regimes, we see that correlation tends to flip. I mean this this dynamic of correlation

that's thirty years ago it was positively correlated. So UM for us very much about finding diversification. You need to find divertification real assets, UM and private assets to provide that diversification that we're seeking in those environments. All right, Nathan, thank you so much for joining us. For really appreciation appreciate it. Nathan Chetty, head of Multi Asset at Nuvine, talking to us about the private market alternatives in a portfolio.

This is Bloomberg. 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. Yet on boul Sweeney. I'm on Twitter at pt Sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio.