Investing Beyond Earth

at Bloomberg dot com slash podcast. All right, let's say you want Matt to invest in space as in the Cosmos, there is an e t F for that to procure space et F ticker symbol you guessed it, u f O. Andrew Shannon, chief executive Officer procure a M joins us this morning. Andrew a lot of interest growing in the commercialization of space working at the spaces x launched last Friday. Talk to us about your space et F. What's in your space et F? Thanks so much for having me.

So we launched UFO back in April of and we've seen the space industry go through some dramatic changes. That's really opening up for the commercialization of the space industry.

And so someone looking to invest in UFO will notice that the underlying index that are fund tracks um actually focuses with at least eighty percent of the weight of the fund is actually in companies deriving a majority of their revenues from space, while up to of the underlying index can focus on some more diversified companies that are major players in the space industry. Think you're diversified aerospace

and defense names your Lockeeds and Bowings, um. But because it's not the largest driver of their revenues, that entire tranche is capped at. So you're really looking at companies that are driving significant revenues from space. So satellite companies, launch providers, companies that are relying upon space based systems and services, so communications is a major driver UM, as

well as satellite operators and manufacturers as well. So I see, um, your top ten holdings in include Dish Network, which makes sense because the satellites garment. I guess also um uh Serious x M, which a lot of people are listening to us on Serious x M. What about the explorers like Virgin Galactic for example, or I know Blue Origin and Space x aren't publicly accessible, but do you see a future in which we can be owning you know,

companies that make rockets and take people to outer space. Well, so you're already getting exposure to those companies in the funds, so many people aren't familiar. But Boeing and Lockey to actually have a joint venture called the United Launch Alliance, which helps you send send things to outer space. Virgin Galactic, like you mentioned, is a holding specializing in space tourism. Um that they're still working on their product and experience to be able to safety bring people to outer space.

But some of those kind of topics that you're already mentioning are things that are already in the fund. And so although SpaceX being a private company, isn't in the fund, their ability to help lower the cost of sending things to outer space is actually benefiting many companies in the portfolio.

So I think the company like max Are, which helps build satellites well to the extent that someone can now purchase the satellite from max Bar and send it to outer space for significantly less than they could maybe even just five years ago, is now opening up for significantly more clients for the space industry. So they're already having

knock on effects. And then you look at this launch that you know they helped NASA send people to the I s S. Just this past week, and you're it's almost like a Bogo special that SpaceX is offering for its clients. For NASSAIS to spend over eighty million dollars a seat to send an astronauts to the I s S. It's now coming in in the mid forty million dollar range, So that frees up more budget for space agencies like

the E s A, NASA and beyond. So, Andrew, do you believe there will be more space oriented companies coming to the public markets, will be more opportunities for investors to to in eston what appears to be a growing commercialization of space. We certainly hope so. And you're already seeing in the stack market. There's been eight or so companies that have been named as the targets for potential SPACK mergers. Are Fund doesn't invest in a company that is a STACK until actually SPACs UM and and the

merger has fully gone through. So there is opportunity for more companies as they go public, weather NEA, AD, SPACK and I p O or even spinoffs UM that could find their way into UFO. But right now there's over thirty companies from around the world UM, you know with a with a space focus that you could currently get exposure to in the fund, but we're not capped at the amount of companies that can be added, So we certainly will welcome more companies with a pure place space

focus in the future. How big is this industry and what kind of growth should we expect? Yes, so the Space Foundation puts up the Space Report annually, and I believe in rough in July we should get the numbers for twenty In twenty nineteen it was roughly a four four billion dollar industry. And you look at different research houses and banks. Morgan Stanley is predicting by you know, over a trillion dollars by twenty forty. Bank of America actually for nix Um that the industry will be about

two point seven trillion dollars right now. Roughly one third of the commercial market is actually communications companies. And if you look at what these different banks are saying is going to be the main driver for the space industry in the next twenty years or so, UM, they point to broadband internet and communications, and that's something that our our fund already has a pretty significant exposure to. So, you know, you can't really play the space industry without UM.

You know, incorporating communications and broadband internet and some of these other companies that are going to be driving that, um your potential growth. So you know, right now that's kind of the composition of the funds, but certainly as more areas like even resource extraction and infrastructure build out and outer space UM, even the militarization and defense of space, which is something that hasn't gone that ton of attention, but it's clearly picking up all these are areas that

people could potentially get exposure to currently and in the future. Andrew, is there any sense that space X will go public at any time in the future. Well, certainly Elon Musk's uh the likes to tease, uh, you know that bad idea. UM. He's mentioned that potentially he would spin off Starlink, which is our satellite network UM business before going public with SpaceX, and he even said that he wouldn't go public with

SpaceX until um. You know, we have people on mars UM here who knows, you know, if those timelines are are accurate. But certainly there are some really ambitious hopes. But there's also plenty of the man for investing in space X through the private markets, and we've seen through stock and through debt. Um Your Canadian pensions have had a very huge interest in investing in space, even beyond just SpaceX. But yeah, they've been able to access Castle

pretty easily and they've had some tremendous success. So you maybe not a real rush for them, but you know, if the time's right, you know, I wouldn't put a test Elon Musk to bring another company public, all right, we appreciate that, Andrew, really fascinating and discussionary Ander Shan and CEO of procure a m Again, they the only pure place space et f. It trades under the symbol u f O. So if you want exposure to space,

Matt there you go. Yeah, and it seems like something, you know, the kind of exposure that you want to have on the very long term, right, you want to just take this put in your pocket and not look at it for I was gonna say twenty years, but probably ten years is um? You know we should be at Mars by then, right, ten? Yeah, it would be I'll tell you what, you know, it's it's nice having

Elon Musk. They're supporting the commercial of space flight and uh space X. Ever or to consider going public, I think there would be a huge demand because A it's Elon Musk, but B it's space. It's pretty cool, and you can think about some of the commercial aspects going for Let's get over to a company called Emblem m L sorry m b L M Emblem. They've disemvoweled UM their name, which is very trendy lately. I think Aberdeen did the same. Uh. This morning, Mario Natarelli joins us.

He's a managing partner at Emblem and Mario, you've recently done conducted your brand intimacy COVID study. Um, it's difficult, I think for listeners to imagine what that is. Brand intimacy makes my childish mind think of Victoria's secret. But when you put it together with COVID, I guess it makes sense with COVID also Netflix some chill, But what exactly is the brand intimacy study? Oh? Sure, disinvowelled and Victoria's secrets. That's a great interest. So yeah, listen, we

make decisions based on a motion. Behavioral scientists have proven that, and yet most of what we do in the branding and marketing world is rationally driven. So what we wanted to do was measure, not just how brands perform, but how do people feel about the brands that they use and love. So if we're eleven years in on the science of understanding the bonds that we filled with the brands that we love, all right, what did we learn the pandemic? I'm guessing you know, obviously the pandemic upended

our daily lives to so many different degrees. What did you find in terms of which brands performed well during this pandemic? Yeah, it was see. You know, we did the study twice pre impost pandemic, and we weren't sure what we were going to discover. What we found out is that people bonded with brands more during the pandemic than prior we thought would do extremely well like Apple and Amazon continued to thrive and of course did very well.

And then no surprise to many, Zoom, uh Purel and Netflix were fast risers and took advantage of our you know, sequestered lives. So the biggest UH winners during the COVID per um we're U S A A. Is that right? Um? The United States Automobile Association. Now it comes to services, the insurance company. I got it, okay, uh U S a A. I'm reading as A as a gearhead is a different thing than the banking and insurance can conglomerate. How do they land in first place? Yeah, good questions.

So financial services do historically very poorly in our study, which is that a little ironic that the people we trust with our money we don't have strong emotional bonds with. But U s a A UM finished first in our ranking post coded. This is a brand that really understands community. It's oriented around service members. UM really understands how you emotionally bond and connect with its stakeholders, So probably no surprise.

It is interesting that most of the financial service brands that did well are not the typical iconic retail banks. So PayPal, U s a A, even TV Bank rose up in the rankings. UH, credit cards and and the big banks all did uh, you know, as poorly as they usually do in this study. I'm want to go out there and say, I think us A A does stand for United Services Automobile Association, although we just call it USA A. I think that's the actual name for it.

All right, Well, at least Wikipedia is showing me that right now. Anyway, who else did well overall in the study. You know, it's interesting brands that sort of harken back to kind of fond memories of the past or kind of comfort related brands that Campbell's, for example, did extremely well. Plus COVID, Ben and Jerry's, for a brand that's all about indulgence, did extremely well. Um, automotive brands surprisingly withheld and did pretty well during COVID, which we thought would

they would take a hit, but they didn't. So those are just some of the brands that were strong performers. All right, Mary, I'm a Wall Street guy. I don't don't care about brands. I think you know, marketing is just you know, paint of blue and sell it to me. Um, well, let me tell you why you're wrong the telling. As a stock investor, do I care about brand value. So

here's the deal. We rank the most intimate brands and then we compare them to the top performer brands, and the fortune and center iforce indects our brands up foremost in revenue and profit every year, short term and long term. So if you aren't paying attention of this, you're missing something. I mean, the power of brands, Paul is huge. Look at Ferrari. You think Race could get a evaluation like that if it weren't for the brand. Yeah, against the

margins help as well. So who who do you think is gonna stick in terms because you know, maybe post COVID, when the lockdown's over, we're not gonna see um consumers care as much about PayPal as they did during you know, their online shopping extravaganza. I think PayPal has done very well in our study over the ten years. Brands that are going to receive maybe Purell probably won't stick as long,

or maybe Zoom may fade a little. I think those brands are working aggressively to build product that's gonna resonate with us beyond the pandemic. I think the brands that did extremely well, like Amazon and Apple, you know, increase their leads and build stronger kind of portfolios. I think they're gonna, you know, see that advantage continue. Obviously. Let

me just say one more thing about brands. You know, what's interesting is that brands that are hardware related smartphones, brands do extremely well and better than the content or the apps or the services on the phone. So another thing to kind of think about is the role of technology plays and building intimacy. Hey, Mario, thank you so much. We really appreciate that. Very interesting study. Mario and not a Relly from Emblem talking to us about brand infacy

and the value of brands. And uh, you know, Matt, I kind of asked that question of facetious because I have seen a lot of studies that show like positive correlation between brand value and shareholder returns here and you bring up a great example, you know, Ferrarians and some of these other mega brands that I heard this arcasm.

I knew you were trying to play the devil's advocate to some extent, So I think it makes sense though, I mean especially I think we've learned more about the strength of brands during COVID than we than we need to be. All Right, thanks so much, appreciate it. All right, let's get our latest update on all things Wall Street. We do that with Shale Bassic Bloomberg Wall Street reporter Shinnali loves you talk to you about you know, E

S G investing. It's kind of been a little bit of a theme today for us, and it comes on the heels of the Biden uh Climate Summit, of the Global Summit from last week here what's the perspective of kind of our own kicking off today exactly and kind of just get a sense of what's the the feeling from Wall Streets perspective as to is this really a long term investment theme that will be with us for

some time? Well, yeah, that's the most important thing. It has to be long term because none of these things change over time. And with a lot of these issues right, namely climate and also what's so issues, namely race um, they have been problems that have been brewing for a long time, and frankly, the financial industry has exacerbated in

a lot of ways. So you know, at the end of the day, you look back to the people who are counting on these investors, right that the people who have their pension funds at stake that have been very vocal and very loud and forcing these changes that you know, really the the large asset managers are are really starting to step up now, but hopefully kept to be held accountable too. So we have, as I said, this Green Summit kicking off today. It's a two day summit. Um.

There's some huge names. I know. Francine Lackwa talked to Al Gore. He's got to be kind of the poster politician for UM the green movement. And you're going to talk to Melody Hobson later today, who runs Ariel Investments. But she's also I mean she's now she's the chairwoman of Starbucks, but she used to be the chair dream

Works as well. A huge career here. What does she have to say about E. S G. Yeah, it's really interesting because she's a major board member right, a board of She's on the board of JP Morgan and as you said, share of Starbucks, So she has influence in that way. But they're also an investor right over at our Investments, and so how do they vote with their feet? Right? How do they hold companies to account? What we're finding

is two sorts of approaches. Right, you have this terminal headline right now on black Rocks lettery seeking activism, right, forcing those changes. Uh, Hobson's firm is trying to work with companies to to really get them to be more constructive and change the way they hire suppliers, look at more minority owned businesses. When it comes down to it, our arial in itself is really trying to invest in more minority owned businesses as well as work at the

companies they they invest in. There's something interesting happening that I wanted to point to this coming weekend, for example, is Warren Buffett's annual meeting. What they are facing is also company their own shareholders who are very frustrated with social issues that they're facing, the impacts of their business on the customers and employees around them, and as well as environmental issues. Right now, Newberger Berman has votes that are out there that are really trying to force change

among one of the biggest investors in the world. So it's interesting we this is growing momentum clearly, Chanale for as you're reporting for uh E s G, and it seems like the focus has been on environmental maybe a

little bit less so on social and governance. I mean, even though the tech company screen well on you know, environmental, you take a look at some of their supervoting share structures just for example, and that doesn't mark well a grade well for the governance issue, yeah, that's for sure.

And there's a lot of pressure on the SEC to kind of change the way that they force people to disclose things, right because at the end of the day, a lot of this comes down to disclosure on top of you know, just companies saying that they're doing the right thing, and so you know, on the social issues in particular, you know, we're coming up on one year since George Floyd has been murdered, right, we are also coming up on a hundred years since the Tulsa race massacre.

You know, these issues are very very real to a lot of people who are demanding not just change but also disclosure. And you know, on top of climate, you're seeing these social issues really come to the forefront of the investment community's minds and where can they use their own money to create change? And the race issues as well, um which we see in in all other facets of

American life. It's interesting that Melody hops and when she was named the chairwoman of Starbucks, was the first black woman ever to be the chairwoman or chair well, I guess it could only be a chairwoman of of any SMP five companies. So she's making waves there. And of course, as you point out, running aerial investments can also vote as an investor. Shinnelli Boss, thanks very much for that. Let's bring in Kevin Tynon joins us from Bloomberg Intelligence.

He's our go to guy when it comes to reporting on the automakers and um, a senior autos analyst. I don't know if you're titles guy analysts. Yeah, I'm I've been asking Kevin for advice on cars for at least fifteen years. I'd say, so, he's a he's got the crease.

I actually, I actually, I know we're gonna talk about Tesla, but before we get to it, you, me and Paul have all been pretty interested in the mock E and Uh, I think that you've had a chance to drive Ford Mustang mach E. It's tough to get a dealership lots across America. It looks so cool, and I've heard positive reports. So I wanted to know, have you had a chance behind the wheel, and what do you think I have? I had it for um for about a week, a

couple of weeks ago, maybe about a month ago. UM, and I guess I was totally whelmed, neither neither over nor underwhelmed by it. Um, and I have to say it was a little chilly. Well, let me give you two things that that kind of jumped out at me. One was I had to drive it to the office, and I don't live far from this office, and we have charging stations here because right right, So I wanted to give it back with to Ford with a full charge on it. So I had it charges at three

miles of range per hour. So if I left it overnight, I would have had about, you know, forty miles of range on It's got to be a faster way there is. But I mean, I don't have a you know, a level two charger in my garage. That would have just been plugging it into the outlet you know where I where I plugged my compressor. So um, and then when it was full, it only read a hundred and eighty

miles of range. And then the other thing was while I was driving it in that cold March morning, the you know, the big guy pad stuck to the dashboard froze, so I couldn't I couldn't change the radio station. I couldn't change the temperature. I couldn't, you know, because it's sort of like the way Tesla doesn't wear. Everything runs

through that center that center screen. So once it froze, and it restarted right away and was fine after you know, I I restarted the car, but um, but it was just kind of strange that I couldn't do anything, you know, I had to listen to hair Nation blasted all right, Kevin, So are our good friend Elon musk Uh and Tesla report earnings after the clothes today. We know that the deliveries came in better than expected. What are you really

gonna be looking for at this quarter? Um, you know, I think a lot the delivery number was similar to the fourth quarter, so you know, I think a lot of things will probably be sequentially in line with what we saw at the end of And I think I don't know what what other people want, but for me, I think what will be interesting will be the trajectory

of the regulatory credit sales this year. Right. Those were one point six billion dollars last year and it put them at you know, one point two billion in profits.

So you know, it'll be interesting to see how those, um, you know, reconciled to each other quartered a quarter as we go through by all of those in order to make you know, the demon the beast to the t r X. Yeah, and I think GM, you know, was did a little hedge and probably Ford as well, just in case, um, you know, in terms of the election and if things intensified before they had a chance to get you know, Lyric and gmc hummer and more Bolt

sales or whatever they wanted to do. But yeah, the the the majority of it was to the former f c A. And now that it's Statlantis, you that's they're saying by next year they won't need to buy any more credits. And I think that's what's you know again, That's what's interesting to me is that you're starting to get even if they're just compliance vehicles, you're getting competing automakers getting to the point where they're going to sell enough of them that they don't need to pay Tesla

to be profitable. All right, That's where I want to go, Kevin. This is the money question I think for Tesla and this EV market. It seems to me that if I think about where the comments Volkswagen is made, the comments GM is made, and FOD is made that this these these are not compliance vehicles, it seems like they are really going all in on the EV market. Is that

in fact the case? Do you think, well, look, they have to say that, right, and I've you know, I recently drove the new Bolt EUV and you're, you know, there with the engineers and talking to them and it's a great vehicle for what it is, and you know, and and God bless them, you know, those those engineers and and those general motors people really believe in the vehicle and they they don't want to hear it when I say like, yeah, but you really don't want to

sell it if it's losing money, do you? You know? So? Um, it's something like they have to say it, and I think, um, are they not a path of profitability? There will be you know as as uh you know, economies of scale and and raw materials cost comes down there you can

see that path. And I think that's part of the reason why you get commentary from automakers that we're going to do this, and they then they put a ten year timeline on it, you know, and it's like, well, couldn't you do that faster if you really wanted to do it? Um? You know? Why by why by five does it take so long to do this? Um? You know? And and I think that just comes back to the

to the profit dynamics that are currently in place. You know, Look, Tesla's nine years in and they did five hundred thousand units. Lest you know, it's not a lot I actually drove around in a bolt with Mark Royce once and he was telling me how great it was. And you don't want to contradict Mark Royce, the president of GM, because he's he's a big dude, you know, and he can get pretty serious pretty fast. But I was thinking, man, you have a nineteen sixty three Corvette C two split window.

Do you like this thing? You gotta be kidding me, But he did seem very enthusiastic. Kevin Tynan, Senior Auto's analyst for Bloomberg Intelligence, Thanks very much for joining us. 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 three. Put on false Sweeney

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