Inflation, Regional Bank Earnings, Cannabis, & Nickel

d Martino Booth. We're very fortunate to have her in our studio again today because she's based in Dallas, so when she comes to New York, we say, please stop by. Danielle d Martino Booth, CEO and chief strategist for Quill Intelligence. All right, Danielle, we haven't chatted with you for a little while here. What is your view about what our federal Reserve is going to do here? Given all the economic data that we've got today and the recession yesterday

and the recession called they used the R word. Yes, wow, they're being so forthright. But to Matt's point, we're like in a time compression chamber. Everything's happening so much more quickly than it used to. I mean, we we've got inflation expectations that are collapsing, lapsing among households. Forget the cps, forget the pipe. Dude, you are doing the Tesla story yesterday. Yeah, I know you're saying right, Tesla buyers are now going to wait and see when the next price cuts come.

And the mindset among you as households has done a complete one complete one eighty. Cox's Automotive came out and said that in the first week of April, applications to finance a car loan we're down twenty three percent year over year. I mean, this is happening so fast, and I think that that's what we have to appreciate about how aggressive and fast the FED was. So you're long and variable, it's like short and sweet. Yeah. By the way, on the loan front, I've been hearing the word credit

crunch more and more often. I think Neil cash Car he said it on one of the Sunday shows a couple of weeks ago, and now everybody's starting to use that phrase. I've all seen seen some survey data that shows consumers aren't getting loans, not because rates are too high, but because the banks are being tighter and tight up with the money. Is that is that true. Are you seeing that in the data? CarMax came out yesterday, CarMax

it was, it was, it was on the terminal. CarMax came out yesterday, and they were like, we're not gonna make as many loans. Our standards are tightening quickly. Capital One pulled all of its floor lines for for dealers, so you know, used card dealerships are going to start dropping like flies because they paid up in January. They've paid up in February at auction, which Mannheim Data told us, and then income tax refund season for US households was

a disaster. Ye, So you're you're down eleven percent year over year and people don't have as much cash as they thought they were gonna have. Now we're gonna start seeing income receipts, which Janet Yellen is praying please bring the receipts in because the nation's checking account is down to like one hundred billion. It's like, you know, she's getting calls saying, you know you've hit your minimum balance?

Are we really? Because Steve Rattner rode An op ed in The New York Times a couple of weeks ago saying he wants people to come back to work and you should really do it, you know, twelve hours a day, sixties and an MD at Goldman, Sorry, but only mds. I'm like, what does that mean for the non MD The one thing he one, well, that means they're they're

gonna make those kids come in. The one thing that I thought the most interesting takeaway was that at least in his estimate, there's still a lot more money in UM consumers bank accounts, checking accounts then there was, you know, prepen heavily concentrated among the older and the wealthier. Okay, at this point, you the burn rate for people making seventy five thousand dollars fifty thousand dollars, that burn rate,

they burned through the cash. In fact, if you look at the fiscal impulse, it turned negative in a big way in the fourth quarter of twenty twenty two, and the fiscal impulses continued to get lower. And remember they your average American family that was getting receiving food stamps was cut by two hundred and thirty three dollars a month. And you have seen there is really good granular data that shows that grocery shopping receipts are collapsing. People are

spending a lot less at the grocery store. This is like, this is before you were born, Matt. But you remember Hamburger Helper. Sure, And this was the thing in the late seventies and eighties. It's that people switched away from steak to ground beef, and how can I make ground beef interesting for the family. We're seeing that in grocery stores. Here's the thing. Ever since I grew this beard, people think, for some reason, I'm a lot younger than I am. I look so much younger with the beard, but I

was actually born in nineteen seventy three. Believe I can go on with my day now. Yeah, I've got a listener, an investor, a Bloomberg client who writes in. And first of all, he hasn't said it, but I know he has seen you speak before and he's a big fan, So that's a b. He's got a question for you. Why does the market interpret a FED cut in late twenty three as a positive and not as the negative that it is supposed to be viewed as rate cuts mean bad things with the economy. Yet SMP forty one

hundred teams like no one cares and stunks. Yeah, it's a direct look at the VIX. I mean it's it's doesn't all all is good here. I'm not so old that I look at the visail well, I look at zero dated zero days. So these two exoptions, right with with deference to the individual asking the question, I think what people need to be prepared for is that the last rate hike on May third does not mean that quantitative tightening ends. So I don't think that. I don't

I believe Powell. I believe Powell in saying there's no rate cut in twenty twenty three. He doesn't care what markets are pricing in. He has talked markets back off of their cliff over and over and over again. People are like, but the markets pricing it in, And I'm like, just wait from to open his mouth. And he's done this since March of twenty twenty two. Nobody realizes that, you know, we just had the largest draw down of the Fed's balance sheet in the most recent week in

the history of mankind. That's how many treasuries rolled off so QT and you know, it's it's what Mike McKee, it's like the Super Bowl every Thursday afternoon and every Friday afternoon, waiting for everybody knows what the H four and the H eight are. Now it's like, how did what is four? And I know the weeds. I know about the Fed's balance sheet. You know, I know what about bank balance sheets. But everybody's watching it so closely

because the credit crunch is happening way fast. Commercial lending is more than ever before. You know, we we we used to interview company CEOs on bloomber TV. We used to talk about company stocks. Now it's just fed from daybreak to sunday. You know. It's what company CEOs want to know is why they can't get the CNI loans that they want. Remember, we're in an inventory correction. So in most operation managers lives, it's been just in time

inventory and now it's just in case. So they're sitting on an inventory that's that is the shortest rate you can possibly name. Operating expensive companies don't know what to do. I would not want to be a CFO right now. So is a recession now in I think we are in recession recession. I think we are in a receptive

I think when it goes is it deep? Is it because it well, well, the FETE says it's going to be mild, right, right, I just how can we be in a recession with three and a half percent unemployment and use cars still going from like new car prices plus new car prices are unaffordable for everybody but the top like three percent. That's very true. But we have seen new car prices fall below MSRP for the first

time in twenty months. New car prices have come down three months in a row, and judging by how buyers view car prices, we ran it in this morning's data. It's Mary Barra's promise to maintain profit margins and hold up high prices and not do incentive spending. That might work,

but it's not gonna work for her competitors. She's holding the line, but Ford is following Tesla and cutting thank you, yeah, yea, So all right, so fed raises here May third, and then is are you kind of with everybody else that they're just gonna kind of hang and see what happens and look at the data. They're gonna hang and roll

their balance sheet down. There was a report that came out of the New York Fed a few days ago that said, well, the balance sheet, we expect the balance She's gonna be six trillion dollars in twenty twenty five. I mean, incorporate that into your thinking. The New York Fed thinks that quantitative tightening is going to continue for the next two years. The market is saying zero interest rates, zero bound. They're not talking about cute little twenty five

bases point rate cuts. They're talking about gwen to the zero bound immediately and restarting quantitative easing. That's what the market wants. The market just doesn't believe the FED put is going away. The market is like your kids, Paul. You've cut them off the payroll. It's been a couple of years, but they know the worst comes to worse when the s hits the fan. They can still go back to the bank of Dad. When they mean absolutely they have that back. Now. I'm trying to cut that

off right down. Yeah, they're good though it I mean they don't, they don't come. It's it's it's pretty good so far, all right, So because they have jobs, because everybody has wait until these FED rate hikes put those kids out of jobs and then all of a sudden, you're gonna have a new roommate in summit or done. Any what you're seeing I mean, you're the entire Northeastern corridor has rising jobless claims from Maine to Pennsylvania. The entire Exceller route. That's my that's my top of my

feather tomorrow. The entire exceler route is seeing rising initial jobless claims. And so it's like the recession recognition is coming hard and fast, and it goes right along with what you were saying right before I came on with this whole idea of long and variable labs being really short. Yeah, all right, So I guess is inflation. I mean, what's

the biggest concern for you out there in this economy? Right? Yeah, if inflation is coming down, although at this morning and the sticking around these levels, uh, if inflation is coming down, and if unemployment is still you know, at a record low. Um, this recession feels okay to me. How long is it gonna last? It's gonna last until your neighbor loses their job, right yep? And then and and and that's why I

think that we're not really prepared. I think we're going to see an unemployment rate shock because everything seems to come like like a with with a bullet. Everything's so dramatic that when it happens. I mean, if we looked at realtors realature's income in the PPI report this morning, and it looks like hockey stick going up and it

looks like it's just collapsed coming down. Yeah, I believe that, and sold so many at high prices last year exactly, and it's just except for Paul's house on the shore, it's welcome. And then we saw, yeah, the consumer price in next Hi, what was the data we saw I did. What was the data we saw um Personal health up six point eight percent in the CPI yesterday? Child that was childcare. Childcare costs are sore. I'm here to tell you as a man with a two and a half

year old kid. Look, I just came back from Berlin, where childcare is luxurious and free. I did not expect it to cost me the average American way. Look at where we look at where the job openings are still really strong, childcare, nursing homes, home healthcare workers. Those individuals are coming back into the labor force, but for now there's still there's still a deficit of these workers. So you pay through the nose for childcare. Those apps and jewels, Yes,

all right, this was an extended block. We're really appreciate you taking the time. Danielle Danielle di Martino Booth. She's a CEO and chief strategist at Quill Intelligence. Highly recommend follow the Dallas fed You store Dallas fed fed Up, fed Up still my favorite. Great follow on Twitter, even though I'm off Twitter, but great following Twitter. Some good stuff committed Twitter side. Yes after Facebook. Yeah, I'm done. Done.

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. Right now when you want to talk about these markets here, we're gonna bring in a professional, Phil Tase. He's a CEO of Tay's Asset Management. He joins us here in our

Bloomberg Interactive Broker Studio. Phil, the last time I think we saw you, or maybe maybe the time before that, we have in our notes ninety percent of the terms assets were in cash, with the remaining ten percent in defensive fixed income. Is that still the case for you, guys, It's not. It was a great place to be in twenty twenty two, but it is it has not this year.

So our algorithms bar trend following funds moved us back into the markets the beginning on January the eighteenth, and then we came fully back in over the next couple of days. We had one brief period when we're out just harshly in March for a couple of days, but we've been just enjoying the rally. So let's talk about your new fund. It's the Tay's Agility Shares Managed Risk ETF. And tell us first of all, what it does. Okay, so it's a different way of trying to address risk

than leaving the markets. And what it is is it's an SMP five hundred type of ETF, but it has full notional options for tection on a leap that's two years out that we buy every year in December. Here's what's super important. If all you're doing is buying the equities market, but you're and hedging but not figuring out a way to pay for that, you're going to give up most of the above inflation gains. And that's why so few people end up doing options over the long term. Well,

so what we also do. Inside of that ETFs, we sell shorter dated calls sixty and ninety days out about five percent above the market. We also sell some put spreads and that brings in a premium each month that helps pay for that put protection. Now, the other important component of this, the way this works is that options

need to be dynamically managed. So if we have that leap and it's at the market and the the markets advanced ten or twenty percent in the year, you need to be able to roll that price up to the market so you can bring your protection higher. Here's another super important point. If the market plummets, we can roll the

leap down and monetize it. So the key to success with options when you're in the equities market is figuring out a way to both pay for the protection but also monetize and when you have wins when the market move lower. I gotta say it for I feel like for me and Paul, we need illustrations options. I'm just

I'm kind of lost there. But what I do know is that on you know, in money markets, in short duration treasury ETFs, you're getting four or five six percent, right, So what kind of returns can you get in something like the agility Shares Managed Risk ETF well, so over its history we have around a seventy percent capture and

a forty percent down capture. But if the market would enter into free fall, which we didn't really see in twenty twenty two, we think you could have more offsetting appreciation in those puts and less market down capture than forty percent. So I'll summarize it. It's a way to be in the market with potentially dramatically less risk on the downside and a way to pay for that risk protection. All right, So mr SK is the ticker, yes, and just kind of summary. The holdings are mostly options M

risk managed risk. So actually no, the holdings are mainly just the S and P five hundred, okay, using options to both you know, address the possibility of it down and you know, options to help pay you for that. So, so what is your view of the market. We've had a whole slew of economic data just recently on an inflation front suggesting that may be cooling. We're gonna have

earnings kicking off tomorrow with some of the banks. How are you guys viewing this market, which, by the way, we should point out, you know yesterday's CPI and today's PPI as fascinating. Well as boring as yesterday's CPI was and as fascinating as today's PPI was, they're not really moving the markets, right, We're still up year to date on the S and P seven and a half percent, right, right, Okay, So I'll give you two views. One is short term.

Over the short term, markets are like teenagers, and sometimes it's gonna be like a group of teenagers. And if you get a momentum driven equity market that's higher than it's like a group of teenagers with beers, right, it's not it's not rational, it doesn't make sense. Over the longer term, they're buying ripped genesre ripped genes again. So over the longer term, we have a lot of challenges. One thing that's not talked about at all that I'm in the process of right the paper right now is

the global debt situation unprecedented. The consequences I think will be significant. That's more than we have time for in this segment. But also we've addressed that though in the past. Okay, it's nuts. So especially when you look at I thought twenty percent interest rates would have been unbearable in the eighties, and someone reminded me, we had a debt to GDP back then, have like twenty or thirty percent. Now five percent hurt just as much because we have debt to

GDP of like one hundred and twenty percent exactly. And the last time we had one hundred percent of debt to GDP was after World War Two. The thing that saved us then was GDP growth, where we grew for twenty years at eight percent a year. That's not going to happen right now. So we have all the kinds of other outcomes. But you know, I was listening to your conversation earlier about the potential for a recession, and

I think you still have this enormous wealth effect. So even though we may enter into a recession, we can't ignore the fact that everyone has so much money. Wealth to GDP is near record levels in the US. Well, Danielle is saying that that's pretty skewed, like the wealthy

have so much money. That's true. That is true. So you know, I think that it's going to be a grind down, but longer term, looking at where valuations are, I think ultimately it's not a great story, So we're still looking at potentially you know, I was just listening to clip again of Mike Wilson. We might agree with him sort of over the next twelve to eighteen months where we think we've got a tough slog, big baby. So last year you were in so much cash, do

you envision kind of getting back to anything close to that? Yeah? Totally, And what would push you there? Just were we used We follow trends. So the reason we're in is because the market has begun to move up, and so we try to buy in in the early stages based on how our systems are built and so then that allows us to participate. But if the market turns down, I was just looking now, if the market moves down only about like about one and a half percent, we're going

to sell range again. So it won't take a lot for us to sell. Sometimes there are false signals right where we can come out and then back in again. But the key is if that happens, you know, the world is long, right, the world is betting on fam of French they're scared to do anything but just be in the markets. But most investors they really can't afford that. Oh,

the mean works. They need to worry about their own specific lives and address risk, all right, So with that in mind, other than managed risk, what else are you buying? What else do you want to own right now? Well, so we are specialists in just owning indo season figuring out ways to hedge that risk, right, So we do have a strategy that So basically MRSK is your wheel house MRSK or we have you know, a couple of

other funds THHLGX, THHSMX funds. Those are our trend following algo funds and those will move into cash inside the funds themselves. So we just like right now being in the markets. I mean, you know, we thought small cap was going to do well. Now we've seen that sort of fall off a ledge recently, so we haven't seen that. But just own the market broadly right now, we think. But the most important advice I would give to investors is that you need to figure out a way to

address contingencies. Right don't bet for markets are going to move higher or betas are going to move lower. Bet since stay with the markets, but figure out a way to address the possibility. We think it's a significant possibility that markets are going to move lower. So do you even care? Given you your style and kind of the way you guys do things, you care about earnings, you're gonna pay attention to that stuff. Yeah, yeah, Well we not actually not really no, because we're just gonna follow

trends one way or another. We keep hoping someone's going to care about earnings. Really does in terms of the ETF business, I mean we've seen it now grow to what ten trillion dollars globally, I mean across the industry, right, and people will continue to convert mutual funds into ets, people continue to bring out new products. Last year was amazing and they're still You've just brought out a new

product yourself. How do you see this market growing? Yeah, I just think that ETFs are going to grow because they have lower expense racers. There's a lot of stuff that goes on with some of these custodians, big custodians where they charge sort of users fees to mutual funds that live there. So there's incentive to convert over to ETFs and avoid all those fees. Plus they can trade them for free. So I think that all is just

going to continue to the movement over there. But the one thing about that most of these ETFs are just buy and hold the market and own it forever and their inb indussees you know that has worked extremely well for the last twenty years. But is active is very hot? Right? Well?

I think you know, I honestly who cares, right because active or beta, if the market falls off a cliff and move down twenty or thirty percent, you're gonna be talking about being down twenty eight percent versus thirty two, right. I mean, you need things that can really address risk. And so I think and people the thing that people aren't thinking thinking about is the possibility of multi year declines.

The longest decline we've had in the last twenty years has been the great you know, the financial crisis, and that was about a sixteen month decline. People aren't thinking about the possibility multi year declines, and those are going to hit in disease hard. All right. It's making my stomach hurts. You can't come in again. There's a lot of risk out there that's multi year declines. Yeah, I

don't think that's I thought that was over. That was generations again ago, exactly good right now, And so let's just enjoy it for the moment. Okay, Yeah, that's my strategy, all right, Phil Tas, thank you so much for joining us. Phil Tas, CEO of Tay's Asset Management, joining us live here on our Bloomberg Interactive Brokers studio. Again, kind of looking at the markets here, Matt just kind of s and p up about a half of one percent, so, you know, a little bit of a lift off of

that PPI data. But maybe we thought we might have gotten a little we might have gotten a little bit more, but we'll see. You're listening to the Take cancerre 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. Now, we were kind of bummed out yesterday because we talked to Morgan Paxia, who runs the Poseidon Investment management firm. They have a weed etf the ticker is PSDN. But we only got a few minutes with them, and also it was raining and in Miami. Yeah then, which makes it even worse. He's there at the Benzinga. I guess it's a weed conference down there. We got him back on the line, and I'm glad I want to spend some time Morgan. Thanks so much

for coming back and joining us again. I was kind of joking around that you were harsh and my mellow and you needed to reach for some sativa yesterday. And we do kind of tend to joke around about smoking weed on this show, but there are serious there are

important reasons for marijuana use, legalization and use. You and your sister started this investment management company because of a difficult time losing your father in the nineties, and you realized I guess then that you know, if we'd had been legal and hadn't had as much of a stigma, it would have been easier for him to go through to the next phase. So talk to us about that and how successful you've been. That's right, Well, thank you

for having me back. Today is a much sunnier day after one and one thousand year rain event we had down here in Florida, so pretty pretty wild times. But yes, for Emily and I was certainly was a passion project initially just seeing that firsthand, what could have happened I guess so to speak, right, where where do you want to see someone find some comfort in their final days and just not even having something that should be readily available as an option not be and actually be thought

of in a negative way. You know, that just all seemed very wrong. And I'll tell you you know, we've been doing this for ten years now, and the amount of people we've talked to over the years that came to this industry with that same familial kind of experience where they had a family member that was sick, they saw benefits, right, So we actually got to see the

positive sides for so many people. And that's how it changes a stigma, is when you get that firsthand experience and you know, a great thing about this industry as there's a lot of different applications. Sure you have that wellness perspective, and we're even seeing people that do find you know, potentially some medicinal benefits for it. But it just should be a legal, regulated option for people instead of pushing it to the illicit market. That just doesn't work, right.

We've learned this over again. Hey Morgan, you know Matt and I have you know kind of learned a lot about the business of cannabis over the last several years as more and more states have legalized it. One of the challenges that we've come to understand from speaking to people like you is just the whole financial side of funding the cannabis industry. Talk to us about what you're

seeing there. I can't imagine some of the banking stresses that we've seen over the last several months or several weeks with some of these regional lenders can be very helpful. Talk to us about the banking side. Sure, yeah, So banking has been an ongoing challenge in our industry where

though people have access to deposit, that's really it. So there's been a big growth of In the earlier days, we had very strong equity support right where you could raise rounds of equity venture capital that we've done private rounds or even when when these companies got public, you know you could do secondaries and then debt financing from

private groups or the riis became very prevalent. But all of that has been very tight and I think when you when you look at these when these banks now are are just really pulling back, retrenching on lending um that just raises risk, the price of risk and the availability of it right becomes even more scarce. And I think that's certainly is the case for our industry. But we're two years into a very tight capital market, so our industry has had to find its own way. Regardless

of this, banking progress has not been happening. Right. We thought we were actually close to seeing some banking reform late last year, but it didn't happen, and so our industry has had to focus on being self funding, becoming cash generative businesses. Well, Morgan, I've been thinking about this for a while because of the Safe Banking Act, and we've been following the progress in Washington, DC, or lack thereof, right, right,

I thought that's what was holding back Weed stocks. But then we got till Ray results and you and I talked about this briefly yesterday. Why would a company like that have a drop in revenue year over year? I mean, isn't this a burgeoning business? Isn't this I mean I have to imagine that weed sales across the country every year just climb and climb and climb. Are they stagnating? Well, Tilray doesn't do business in the US They are a

Canadian company. They're listed in the US, but they're and they have you know, they have their Canadian business, but they also have European business, and they do a lot in alcohol now too. They're almost more of a beer company than they are a cannabis company. So there's some specific things within their business. Okay, peculiarly Cresco. I don't know who makes the Kiva things, but they're brilliant. I mean,

aren't these sales off the hook? So what's happening is you have unit growth, but because there was an overbuilt capacity, we had a lot of price compression, and so even though positive unit growth, the total dollars in certain markets were actually down. But we're getting through that process, right, capacity is being rational, lies we're seeing continued demand and more access, so it's rebalancing that whole issue of oversupply

and price compression. So with that unit growth. But I mean, like Michigan, as I mentioned, I think yesterday for or

actually came out afterwards. Michigan in two hundred and fifty million dollars in legal sales in the month of March, and they've had some of the most aggressive price compression in the last year, so they're actually overcoming that price compression with such strong unit growth, and that's we look at both, right, and you know, we're big investors in a data company called Headsets, so we're constantly looking at these trends and looking at data across all these different markets.

But like legacy markets like California, we've seen that very significant price compression and so it's been more flat. So once we get through that phase, we think we'll start to see much more attractive top line growth. Businesses are bored. Yeah, about thirty seconds left, Morgan, what's the next big thing that you're looking out for that maybe you're looking to invest in. We're still very much focused on cannabis. We think there's a lot of opportunities. Yeah, within the cannabis space.

What's the next we should be looking for? Yeah, So we think states like Missouri are doing great job. There's a lot of movement in the South, so we think those are really interesting markets. So we're still doing work on the operating side, but we're also very passionate and see opportunity on the technology side, so we're doing work

with private companies on the tech side. There's really not much yet in the public markets that we find very attractive on the tech side, that is, so you know, if you look at our et F there's really not much there yet, but always looking, always looking, because we think there's a lot of return there. All right, Morgan, thanks so much for taking the time to come back

to us today. I know we did. We got cut a little short yesterday, so we had so much more we want to cover with you said, thanks for making the time there. Morgan Paxi East co founder along with his sister, and he's managing partner of Poseidon Investment Management that Poseidon Dynamic Cannabis ETFs tickers p S d N. So if you want some some exposure to the cannabis business, that's one of the ways to go. This is Bloomberg.

You're listening to the team. Ken's herline program Bloomberg Markets weekdays at ten, AMI's Daring on Bloomberg dot com, the I Heard Radio app and the Bloomberg Business App. We're listening on demand wherever you get your podcast got big earning starting tomorrow. But let me ask one of our favorite professionals out there kind of what they're looking at. Lizan Son, there's chief Investment strategists from Charles Schwabs. She's got experience, she's got perspective and money at Schwab's got

a couple of shekels under assets. How many trillion dollars Lizan does of assets under manage? Seven trillion dollars? Tiny little seven trillion? Wow, that's amazing. So jeez, all right, Lizanne, what are you focused on? Are you focused on the Eco screen on the Bloomberg terminal that gives you all the PPI and CPI data and all the kind of stuff? What are you really focused on here? So? I you know,

I think it's important. You've seen the needle move a little bit in the last couple of days with regard to expectation for whether the set's going to go twenty five on May sir, recent high it was about seventy two percent likelihood with the batch of data that's dropped to about sixty six, but clearly still in that direction. Yeah, pretty much everything in both the CPI report was either

in line or better than expected. It just does show the important deceleration, the fact that headline inflation dropped a full percent in terms of CPI. I'm what, I'm sort of grappling with is from an equity market perspective, how much of the rally is simply due to the notion of a pause or is it a belief in a pivot?

And I just think that the Goldilocks scenario that seems to be part of that narrative of a pivot doesn't make sense because the FED is not going to pivot to rate cuts unless you either have much more serious stress in the banking system than what we're seeing now and or a much more significant deterioration in the economy and specifically the labor market. This notion that the FED would pivot to cuts a pause makes sense. I think

they'll do it sooner read them later. But a pivot to rate cuts with inflation nowhere near their target, you know, I think that would be such a hit to their credibility. And this year luzianne I mean, I had a listener right in earlier he made the point that it doesn't make any sense that the market interprets a FED cut in twenty twenty three as a positive, because if the FED needs to cut this year, after Jerome Powell has assured us all over and over and over again that

the FED is not going to cut this year. That would mean something very big has broken or they just have no credibility right then it's a credibility problem. I think they understand that the credibility problem pre existed even the fall of best feed be Given that they concede, they probably waited too long to come off the zero bound and start shrinking the balance sheet. So I just I'm not sure I kind of square the whole circle in terms of optimism in the equity market unless it's

purely a function of just a pause. But as history shows that a pause is not necessarily green light for the market, you've got a really mixed bag Historically, post pause. In fact, post pause is often when the bigger sort of part of a crisis unfold, like was the case in O eight. Hey, Luzanne, I'm an old equity analyst. Earnings matter to me, so I'm going to be paying attention to this earning cycle that season, even if most others aren't. What are you looking for? What do you

expect to see? What are you looking to see out of this earnings over the next several weeks. I think what's less important in this earning season are the stats like the beat eight percent by which companies beat. I think it's the outlook and obvious specificity coming from the financial on what they're seeing across the spectrum of you know, demand outflows, credit tightening, loan demand continuing to come down,

net interest margin pressures. But I think it's also the case that analysts are sort of this narrow window they've been operating under in terms of adjusting estimates. Not because they're being lazy or they just don't have the foresight, it's just companies are providing less precision and guidance not quite as dire as with the situation during the worst part of the pandemic, when a record percentage of companies just said, we're not just gutting down, we'll withdrawing guidance

all together because you know, we have no idea. It's gotten better, but it's still not the kind of clarity. So analysts sort of have this, all right, maybe I'll make an adjustment out the next quarter or two, but then wait until we get the current core or commentary and then maybe make adjustments to the out year. So this idea of you know, negative year every year in the first quarter, in the second quarter, that makes sense.

Maybe that's still a little bit too high, but then you get back into positive territory and the third quarter and consensus is that you're back in double ditch a growth territory. About the fourth quarter, that's where I think it's the path of leisure. Distance may still be down, and I think we'll have a bit more color on that forward twenty twenty three guide and so maybe even twenty twenty four that can help with the whole valuation analysis.

You know, the recession worries I think really kicked off in earnest with SBB and signature. At least I was having, you know, slight heart palpitations, and we did see across banking money move from deposits to money market funds to short term treasury ETFs. I feel like its Schwab. You know, there was a little bit of worry, but the you have the real benefit that you have those you know, broker dealer assets, so people who had money could stay

inside Schwab. What do you see in terms of the flows there, Well, I don't comment on our stock on the sort of internals of what's happening at Schwab. That's you know what that ends are enters our CEO if your corvids are CFO, so I but I think there has been a lot of information and yes, um, you know you're you're quoting what I hope we now all know isn't a firm like ours. It stays you know,

within the mothership. So well, that's the benefit. And I don't mean to ask you about the business of SCHWAB. I just mean to ask you know what you're seeing because you're in you have such an advantageous view over

seven trillion dollars in assets. You know, have they come back a little bit from short term treasuries and money market funds or I mean, what we're seeing in terms of flows broadly in the mutual fund space, in the ETF space is consistent with what data from the likes of the icies of the world, so broader overall industry data is pretty consistent. There's clearly been a bias toward not just cash, higher yielding type investments, but fixed income.

There's income and fixed income again, and you've seen those flows on the fixed income side. Obviously, you've also seen flows up the cap spectrum on the equity side, and some renewed interest on the international equity side, which has been a recommendation of ours for some time, not so much sell US by international, but a lot of investors, either because they didn't rebalance or just had a home country bias, let portfolios get a bit over bias toward

US over international. So we are seeing a shift there on the equity side to international. But it's you know, it's as you would expect and somewhat consistent with what you're seeing with broad industry data. Hey, listen, you know so many investors in this marketplace they you know, all they've really known over the last ten, twelve, fourteen years has been Tech has been the leader of this market. Is that still the case or they've given up their

mantle too. I don't know what industrials are something else. Do you need to see tech leading this market to have a broad rally? Not necessarily. In fact, in this particular environment, I think you need to see some stabilization and improvement in financials given what that's at the heart of in terms of the inner workings of the economy right now. And I think there is this misperception that without tech that you can have a market that does well.

We also have to think about how a lot of people think of tech like lowercase T. For instance, you're to day people think, oh it's been a big tech rally. Well, communication services is the best performing sector this year, So there's that kind of trio of sectors comm services, consumer discretionary, where a stock like Amazon falls into consumer discretionary, not tech. So it's these sort of techie companies, and they did represent the lockdown era's kind of defensive names, but they

represented the only ecosystem in which we're living. The more recent pushback into those names, some of it I think is short covering, but some of it I think is in this higher interest rate, higher inflation environment, with the woes in the banking system and the credit contraction we're

starting to see. I think investors are saying, I want big companies that are shorter duration in nature, meaning they have cash flows and earnings in here, and now they've got ample cash on the balance sheet, they don't need to go to credit markets or the banking system to funder operations. So I think the fundamentals behind the move this time are different from what was the case three years ago. Lizzie, thank you so much for joining us.

Really appreciate it. As always. Lizzie Saunders, Chief investment strategist at Charles Ruff. You're listening to the Take kens are Line PROGRAMM Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tun 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 Looking at gold today, up another one point two percent, two thou thirty eight for gold near an all time Hi, what is going on there? Will mcdonnegh, He's the CEO and lead portfolio manager at EMG Advisors. Boy, the goldbugs are out in force here. Well, what's going on with that precious metal gold? Well, you know, as we always see in times where markets are you know, volatile,

people go to flight to quality. They go to gold, and they go to base metals that they take confidence in. You know, they go to the assets that are fixed or diminishing supply because you know, US dollars and the like are clearly worthless day over day, and so we'll continue to see action towards gold and other precious metals. But where's the demand actually coming from? Is this a kind of simply market move this is how you head your portfolio bid or is there physical demand that's driving

this as well? Yeah, there's not physical demand. I think that's what's funny is people just don't know any better. It's just what people have been been doing for a long time is thinking, when I want to be safe, I go to gold. But gold doesn't even you know, make fake teeth anymore. Gold isn't used in society. World uses copper, lithium, nickel, cobalts. Those are the base metals

that we focus on. I have no interest in holding gold for the long term because there's less and less use cases for gold day over day, in year over year. You know. I want fixed supply assets that actually have demands and not just from you know four one ks that pivot to that when they want to lessen their SMP exposures. But isn't that a pretty bold call. I'd say the power of the Chinese an Indian consumer who primarily use gold from a consumption purpose. Yeah, I think

that the future of demand there is not gold. I think that the future is more so copper. It's more so all these green energy metals that have massive rising demand and have more and more volatile supply chains. And yes, gold is still relied on in different parts of the world, but less and less day over day. What's the supply picture for gold? I never think about it that way. I just kind of think about it with the you know, the price on my screen here, But what's the supply

situation look like? Yeah, we all take that stuff for granted, And the truth of the matter is nobody really wants to talk about it because it's not pretty. You know, gold comes from largely non democratic parts of the world that don't have e S or G compliance and you know, so nobody wants to talk about that. They just want to see it on their screen and they don't want to think about what it's going to take to actually

get it. But then also, the volumes that trade in gold are largely by people who have no capacity to take physical delivery of the metal itself, and so it's just more screen the screen as you reference, than it is people that are actually utilizing the underlying metal. And that's why you know, I have concerned for that over the long haul. Well what does it then mean for Well, we got to bring it back to central bank policy specifically, how is the Federal Reserve or the Bank of England.

Looking at what these gold prices are doing. We always ask our guests, what is the bond market telling you about the FED? What is the gold market telling you about the Fed? Well, I think it's telling us that people don't trust the FED and that, you know, the the amount of money that's been pumped into the system. You know, I think it was nineteen seventy two that the US government depegged the US dollar from its gold reserve.

Ever since that day, you know, gold and the underlying price of it has had really no bearing on the value of the US dollar or of global currencies. Sadly, and because of that, we find ourselves in environments like we're in today, where you know, they can just print as much money as they choose to to calm and satiate the markets, and less and less is that correlated to two golds. So more so gold is rising as something that people perceive to have fixed supply or more

finite supply than US dollars have or will have. And therefore, you see when people, you know, find volatility in those markets, they're gonna they're gonna drive to those base metals and those fixed supply assets just because you know there's nobody sitting at the helm that can just press a button and create more of them overnight. So another story here will that got my attention here just in the metal space is JP Morgan. You know, they're the biggest players

in trading metals globally. It kind of feels like maybe they're they're cutting back a little bit. They're cutting back on some of their bonuses, they cut back on their roster of clients they'll deal with. I know they were had some bed uh, you know, exposure to the nickel market last year and that short squeeze. What do you take from when you see something like JP Morgan say maybe we're gonna pull back our exposure to commodities. Yeah, you know, that disappoints me. And I think there's two

angles to it. One is when Silicon Valley Bank goes under and regional banks find a lot of pressure, the big banks who have consolidated those assets now all of a sudden, they don't have to take as much risk, right because they don't have as much competition. And so when you have a zero risk environment, you know where you can buy treasuries that give good yields. JP Morgan ironically also announced today that they're in emerging market debt

because they can get teams like returns. You see people going into the debt markets for high single digit and low double digit returns and not needing to take Chinese counterparty risk, Russian counterparty risk, and trade in some of these more esoteric markets. So it's net negative for all of us because the big banks aren't innovation and putting more risk assets into play. It's net negative for the

global commodities markets because you have one less player. But what that's going to result in is less competition for the same underlying assets, which is arguably going to drive pricing up. I think you just see JP Morgan throwing their hands in the air and saying, we clearly aren't good at this. This isn't our expertise. You know, we don't need to be taking these risks and we got to leave this to the experts, which is good for you know, EMG and good for my business because you

know that happens to be where we focus. So where are you guys other than gold? Where are you guys, you know, doing some work these days? Where you guys active? We are most active. We have an ETF on the New York Stock Exchange called charge HRG, which is purely copper, lithium, nickel, and cobalt, giving investors exposure to the future price activity and exploration of the future you know, price hopefully increase of the base metals necessary for solar wind ev all

of that adoption. You know, we're very heavily allocated to copper today because copper is needed for all solar, all wind all or ev all charging infrastructure for any ev So no matter who wins the race between GM FORD, TESLA, RIVAN, we don't really care. They all need the same base metals, and so we give investors a pure allocation to that, you know, through the New York Stock Exchange under CHRG. I wonder about then, the actual I guess safety of

the trade you mentioned JP Morgan. Recently they've talked about kind of getting into trouble with a nickel trade in which the nickel wasn't actually there was there was no physical supply to back up the contracts that they were pushing.

Does that then have a little bit of a kind of risk factor for other investors, maybe not the biggest banks, to say, well, do we really want to get involved in the commodity trade to begin We've always already seen, for example, in oil prices that open interest is completely dropped. Are we seeing that in the metals? You are for sure you're seeing less players in the term open interest is an important one, and I know you know the

space well. I've followed you tracking it for a while and I think you do a good job covering it. You know, people more and more are realizing that you need to have deep industry expertise to trade in these markets, and so there's a lot of offscreen trading that occurs

between counterparties like miners and like the consumers or the producers. Sadly, you know, China, to their own benefit, have gone out over the last decade and secured off take agreements and locked up you know in Nickels specifically, I think they have thirty five percent of the global processing capacity is in China. So they've gone out and locked in. They locked in these off take agreements from the physicals all across the world, and now we're hoarding and creating a

bottleneck in the processing capacity. So that results in less open interest because there's less parties trading and a more controlled environment, which is bad because you know that arms priced tocovery, and therefore you know it is going to result in higher pricing because there's less counterparties to create competition. So I'm just looking at this HRG. You your ETFE,

where's the biggest swing factor for that ETF. You know, we've taken the position that you know, the four trillion dollars that have been committed to going green and carbon neutrality global over the next ten to fifteen years, which by the way, is more money than every other human endeavor ever undertaken, which is from the World Bank, that demand curve and that pull with stimulus from global governments, with top ten car companies committing to only selling evs,

with the EPA yesterday coming out and saying it's going to be harder and harder for people to get combustion engine vehicles approved because of their emissions, we think that that demand curve is going to be way outpacing the supply capacity for the existing infrastructure, and therefore we think that the price of those base medals is going to increase in these coming years, and that's why we built the product. It's also very hard, as you reference to

trade futures. Yeah. I used to work at Goldman Sachs and my old desk turned me down there when they said unless you have passed on the pause that you can't trade. And yeah, all right, well we're gonna have to have to leave it there just because of time. Will mcdonea CEO and lead portfolio manager for EMG Advisors. You're listening to the tape cancer O 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. Pandu shahre joins us. He is COCO of Indie's Capital. He is Indonesian Coal Mining Association. He's the chairman there, so he can really talk to us about Indonesia. Pan do thanks so much for taking the the time here. Can you give us kind of if you will. Let's start us off with the elevator pitch for Indonesia from

an investment perspective. Yeah, sure, thank you. Thank you for having us Indonesia as a member of the g TWNT. We hosted the gun last year. You know, we've been growing at about five six percent per clip, and in the next seven years, most people expect that will be part of the G seven as the seven largest economy in the world. And a lot of it is actually driven by energy transition and a lot of it is

related to nickel. You are here, I'm in the US right now, Washington, d C. What's so interesting is that, you know, majority of cars motorcycles will be mainly be driven by electric vehicles, and a lot of it will come the battery source will come from nickel, and maybe for some of your listeners that know or don't know, majority or a quarter of those supply will come from Indonesia. Indonesia's the largest nickel producer and now just leader supplier in the world. And you know there's a lot of

activities happening between America and Indonesia. So, you know, happy to talk more about what's going on in our part of the world. Yeah, that's interesting, So talk to us about just the energy pivot you're talking about. I know you're involved or have been involved in the coal industry.

Talk to us about just Indonesian general that switch. Yeah, so you know, the switch happened I think the last two three years where you know, we are the largest coal producer and exporter in the world, and you know, our president essentially says we have to switch and we're moving away from just crossing raw materials and moving into the downstream industry and nickel it's one of the main

market that we're focusing on. And what's interesting in Indonesia today it can go from a raw material of nickel all the way to the battery creation and now creating the motorcycle and what is it called cars. An example, Yanda just finished the largest car manufacturing facility in Indonesia for all of its four wheeler for Southeast Asia. Soon, I think Ford just sign an MoU last week in Jakarta to build a facility too in Indonesia using nickel and hopefully soon I think. I'm sure you've heard it

in Bloomberg about Tesla as well. You know, for ourselves we're building two wheelers motorcycle. Indonesia's the second largest motorcycle in the world right because a massive market. You know, you're talking about per industry thirty to forty billion per anna. So in in Indonesia here talk You talk a lot about the nickel and how important that is. Is it is that sourced in Indonesia. Has that always been a

mineral available? It's always it's always been a middle available in Indonesia, but most people don't know what to do with it right now, with technology and obviously the amount of demand for ev Indonesia has become the battleground for most car manufacturers because essentially all the car manufacturers in the world today has become mineral specialists. And you're seeing this globally, right And if you talk about alternative I would say supply chain, Indonesia today has become one of

the most important places globally for car manufacturers. So if i'm if it Indonesia, give us a sense of the business climate there, particularly on on the venture capital side. I mean it sounds like, obviously resource rich nation, is how easy or how supportive is the environment to kind of build businesses there? Create? Oh venture amazing? I think, thank you for asking this question. I think venture capital I think Indonesia's stopped five in the world after America.

Obviously China is a big market, then it's actually India and Indonesia those are the key growth markets globally or venture related businesses, and as you know, the big side and venture is outside of AI. I think AI is very big here in the US. Number two is related to energy transition, so things related to the carbon credit, anything related to how how do you create more renewable energy sources? What are you doing with processing of raw

materials and creation of batteries. I would say Indonesia stopped for in the world of amount of venture capital investment going into these sectors. Talk to us a little bit about China here. So much change, you know over the last several years. Give us just a sense historically how Indonesia's interacted with China and maybe how that is changing from a you know, both as a customer and as a source and trade in general, things are changing a lot.

I know Bloombergers in the middle of this too, But Indonesia has been you know, we're good friends with everyone. China is a big trading partner. But again, you know, it's just win win, right with a US too. There's been significant amount of new investment coming in especially the last twelve months, and outside of Nickel, there's a lot of investment coming up in digital infrastructure and things related to renewable energy. And that's why we're all here in

Washington and after this we're going to New York. Is because to engage a lot with both the public and the private sector anything to do with energy transition, you have to manage both the public sectors as well as the private sectors. So is that how I mean? I think what we're learning in order at least the folks that are really focusing on the energy transition is a private public partnership. The government can't do at all. Private

companies and venture capitalists can't do it all. It's got to be some type of Is that the kind of the model you're following in Indonesia? I think so we are, and we're learning a lot the way things work in India, for example, that's a good example. I think it is halfway between the US and Indo. A government place a significant role from a policy perspective to encourage people to switch behavior. So there's a certain critical mass where things

switches and everybody start using it. A good example is the usage of electric vehicle. Right today, we used yourtional means for cars. You need to have incentive programs, so in a good example incentive program where people can buy and get a discuss with you buy EV. So the regulation nesia has happened two weeks ago. It's probably the

most aggressive across all the Nation States and Assam. And I think this will help encourage further investment into the EV sector as well as building the manufacturing in Indonesia. So ponder what's a lot of tailwinds of course for Indonesia. What's the biggest challenge for Indonesia to achieve? Kind of what are some of the opportunities. Yeah, I think there's

just two. I mean, we're in such a good momentum today because now we've entered the global stage as we host the gpuenty last year well and this year we're hosting the Assam Sement. I think it's more about execution, continuously execute, execute. And second, obviously we're next year is election years, similar to here in the US, so continuity will be top of mind for any investors. So how do you continue the policy of of creating what's called

a stable environment? So politics also played croll in that. Pondu, thank you so much for taking a time to join us from glad we had had the chance to have this conversation Pendu Shahre, He's COCO of Indies Capital, really involved all across the public private partnerships across Indonesia. He's been called one of the you know, the leading venture

capitalists in Indonesia. So we're just trying to get you know, get more educated on that part of the world, and I think that we're starting to do more and more of that. Is a lot of folks look to say, hey, where else can we source part of our products and services other than China? As China's you know, kind of backing off a little bit again people talking about India, of course, but Indonesia a definitely in the center of that conversation as well. 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, pen On Falswhinnie on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.