Markets, Cannabis, And Rivian (Podcast)

at the Wells Fargo Investment Institute. Franca, I'm guessing you're having some I guess interesting calls with your clients here as these markets sell off here and uh during this first four and a half months of two gives a sense of kind of what your clients are asking you and maybe wait, wait what you're telling them? Absolutely, you're right. We get calls all the time really concerned about inflation. Have we seen the peak in inflation? What are we

expecting to happen with inflation? And then also, you know, what should I do as a client when fox are down and bonds are down together? Where can I go? And so I'll kind of start off with looking at inflation. It might be a little bit too early to tell whether or not inflation is peeped. With cp I we saw a little bit of a slowdown from the previous month.

The same with p p I, but both a little bit higher than what analysts were expecting, and so that's something we really want to watch really closely with those increases, especially in the services areas where inflation might be a little stickier than many of us expected. And so inflation is something we're watching closely over the next eighteen months. We think inflation can remain um above those long term averages through three before sort of returning to more normalized level.

That's next year, Paul, I know where we're thinking about. We're thinking about next year, and you know, we really want to try the guy our clients to that longer term perspective, especially if they're in longer term plans, to not make rash decisions because of the short term volatility and to really stick to that long term plan. Well, recently in our vice, our allocation advice, we've brought a

little bit more neutral with our stocks. If you have if you have a longer term perspective Veronica um and you're worried about inflation that far out do you, you know, start getting into stocks now, assuming you just hold out or start adding to your position now if you've already got it just because you have a longer term position. Okay, we've taken a lot of pain, but and and there may be more to come. Um, but do you think stocks are a good way to head against inflation? Absolutely,

That's exactly what we've been telling our clients. If you've got a targeted allocation to your equities, you want to make sure that you are moving back into equities during these down terms. If you're a long term investor, you really want to make sure that you've got that allocation set up the way that you intended it so that when markets start to recover, you're able to recover quickly and not be over allocated in the less risky areas

like bonds. And it's hard to weather that short term volatility, but if you're thinking out to that long term, you've got to keep that perspective and make sure that that allocation is set up so that you can, you know, recover quickly when markets eventually upswing right and Veronica, what's the Wells Fargo economic call? Are you guys calling for

a recession? Because I'm sure you know a lot of folks are concerned that maybe this federal reserve may go a little too fast, too quickly, and in fact push this economy into a recession. What do you guys think about that? Here in the US, we are expecting economic growth this year um and economic growth next year, but at lower levels than what we were expecting before. So our base case is slowing economic growth, but we're acknowledging

that the risks of the recession are rising. It's something that we're watching very closely, especially looking at the consumer spending data. That's something we'll be watching very closely. We've seen weakening consumer sentiment not yet spill over into weakening weaker consumer spending, but that's something that we're keeping a close eye on because that's a huge driver for the U. S economy. What do you think about the moves that

we've seen in crypto? How much does it matter to you know, real investors, to to your clients, um, because they're making huge headlines and it's like watching a train wreck here in slow motion, but we're not seeing much contagion into the you know, playing vanilla uh financial assets right now, we don't have any kind of recommended allocations in crypto, and so we kind of guide our investors towards, you know, a stock bond and then if you've got

exposure in real assets you like um commodities right now in the longer term perspective, and so that's sort of where we're kind of guiding our clients towards those types of assets as opposed to something like crypto. N I guess a lot of folks are saying, you know, stagflation is probably the bigger risk than recession. And you know, so we got you got inflation, which we do. You have slowing growth with which we do. Is that something

that you're talking to your clients about. It's it's a question we've gotten sometimes just what will you know the slow growth and this higher inflation. Mean, we do recognize that inflation should remain higher than are those longer term averages in the near term, but we are expecting it to slow. So it's a risk, but it's not our our basic case, it's not our base risk that we're seeing right now. We're a little bit more concerned about the flowing and economic growth. All right, ron Kay, thank

you so much for joining us. Appreciate getting your thoughts here on these markets. Ronica willis investment strategy analyst at Wells Fargo Investment Institute. Check out with Robert Teater, head of Investment Policy and Strategy Group at Silver Crest Asset Management. Robert, you know in the wall of worry that is out there, there are increasing number of bricks here, most recently, I guess, geopolitical risk. Are there any positive science out there that

might support this market at some point? I think that's a great question. There are a massive number of bricks in that wall of worry. I think most of them have been reasonably well factored into the market here. In other words, they're pretty well known. But I think the most important item to crack some of this downside momentum is is solving some of those problems and solving some of those bricks. And the and the most important of all the bricks, of course, is inflation. And so that's

where we take a bit of a deeper. I've and say, you know, what's going on with these metrics and inflation, and are we starting to see some glimmers of hope? And I think we are, and so hopefully that will start to be reflected going forward in prices. Where are you seeing glimmers of hope? Yes, there there aren't a lot. So from the very beginning of the inflation problem, we've asked ourselves three questions, which is inflation, is its spiking,

is it's spreading, and is it's sticking around? Clearly, it's been sticking around for a long time. It has spiked quite a bit, although perhaps it's starting to slow a little bit as the month over month eatings have come

in just a little bit lighter than prior months. And then to the question of is it's spreading, We've done some analysis around all the categories within c p I, looking at where they sit versus their three year pre COVID average, and we've seen a slight decline in the number of categories that are showing inflation above that prior historical average. It's only slight, so you know, there's still seventy categories above the three year average, but that's down

from in prior months. So we'll see if this trend continues a little bit for inflation at least perhapsing and maybe easing a little bit in coming months. Robert, are you are you in the camp that believes that the federal reserve can materially rain in inflation. I'm not sure i am, because it just feels like it's so much more supply side driven to the all the supply chain challenges that have developed over the actual economy. Though, Yeah,

that'll do it, but that's not we're looking for. How do you think about the FEDS ability, Robert to to kind of get a handle on inflation, right that and that is the blunt tool instrument, and I think that's partially what investors are starting to worry about here. Like you, I share the view that inflation is a pretty complex

problem here. A lot of it is related to supply chains and whack the mole problems and a lot of different things going on um Clearly, one area though, where the rate hikes transmit pretty quickly is in the fact that you know, we've seen rates of all types go up pretty quickly, especially for things like mortgages, and with housing being a big part of cp I, that will hopefully start to moderate some of the price increases that we're seeing in the housing market and transmit to a

little bit more stability and pricing overall. But as for the other increases, those are related to a lot of problem, solve thing that needs to go on industry by industry. So what is an investor to do right now? Especially if UM we are in a position where markets are going to just sure and lower and lower UM. Where

where does an investor go? Well, I think one of the things here that's really important is to try to focus on time horizon and that's not easy to do when markets are sometimes going up and down three, you know, one day after the other. But I think it is really these are going down three one day after the other. They have been and there's been there's been a few that have been up. But I agree it is a very choppy environment and I think it's I think it

is likely to stay that way. It's not an easy environment to make some changes in though, because I do think that the longer term fundamental backdrop is still pretty sound. So forecast for the economy are still for pretty decent growth New York FED at at four percent or so, Earnings came in pretty solid this quarter, and the outlook

going forward is pretty solid. So I think the underlying fundamental picture is still very decent, if not good, But it's in this macro environment that's been very difficult and The challenge there of is we don't know the timeline exactly when those problems will change, but when they do, those clouds will start parting. And I think what we see behind it is is a pretty good backdrop again for the economy and earnings. Is it even worth your time and analysis and investors time and analysis to try

to get a sense of where the bottom is? Are there any valuation calls to be made? Is there a volume call to be made where you say, Okay, this feels like the bottom. Yeah, that's never easy to do. Certainly evaluations come in quite a bit, so that's a bit compelling. Um. I think sentiment has gotten to the sort of maximum awfulness, So that's potentially another sign that

we could be nearing a bottom. And the thing that I'm really looking for is when do we see any change in the things that have caused the momentum to the downside to really build? And again, in my mind, there's really only two ways to break that downside momentum.

One is to see some improvement in inflation, the biggest brick in the in the wall of where as he were saying, And the second would be if we get the passage of time and a little bit of stability, and investors again are allowed to you know, enabled to look forward a bit and look at the picture that's headed over the next six quarters or so when we think the earnings backdrop is good. So either of those two things I think would turn the tide of it.

It's a pretty challenging and unpredictable environment right now. Do you like any alternative assets? I mean, with your hedge fund history, where are you hedging? Yeah, no, that's a good question. It should be a good environment for a number of different types of alternative investments, partly because of the time horizon function and partly because of the ability

to hedge out some market risk. We do think that stock selection plays a really key role here, So strategies like long short equity or active equity management on the on the public market side, um, we like a lot because we think again that problem solving is happening industry by industry, company by company having to deal with the myriad of issues that have come up as a result of COVID and supply chain challenges and staffing challenges, and we could go on and on with the challenges, but

companies solving those, we think sets up very well for stock selection here, all right, Robert here, thank you so much for joining us. Good good stuff there, Robert Teeter, head of Investment Policy and Strategy Group of Silver Crust Asset Management. Now, let's get to marijuana. Kim Rivers joins us chair and CEO over at true leave UM and can tell us, first of all, what exactly you're doing in the industry. You're growing? Are you an intermediary? Are

you selling? What's true leave do sure So truly is a multi space operator. We operate in eleven markets across the US. We have a very large fut print with the largest retail supprint of a hundred and sixty five retail locations and over four million square feet of cultivation and processing, which allows us at the scale to manufacture over SKUs that we distribute through both retail and wholesale channels.

All right, So, to me, the most interesting thing complex and difficult in the cannabis industry right now is UM identifying strains and translating that to the consumer. I just watched eight documentary CBD Nation and talked about UM, the fact that certain strains can shrink tumors, fight Alzheimer's. UM do all these amazing things, but you've got to have the right ratio of THHC to cb D as well as the right turpenes um and it gets so difficult.

How do you do that? Yeah, well we think that obviously communication through brand is uh, you know where the future of cannabis and certainly something that we're very focused on. UM. You're speaking about, you know, both ratio in terms of different CANNABINALT components of products. There's a lot of work and we're doing a lot of work right now on the R and D space around UM, you know, formulations

of specific products to address specific concerns. But really it comes down to you know, basic brand building and basic basic communication and matching brands UM with needs skates across markets at the correct value propositions. So UM, you know, certainly there's exciting work that's going on in the annabis arena UM and we're we're friend and center in that work across That's just what we're doing in our eleven markets.

So what are the brands UM out there. I'm not as familiar with the flower as I am with the edibles, but you've got conna Um, You've got plus you've got Kiva that are big players. What brands are you are you running? Yeah? So I mean on the edible front, right, we have we have see Talk that we run in house. We launched that that suite of products UM earlier this year across UM again across our home markets. We also

have a brand partnership with with Banging in the edible space. Uh. When we look at our wellness, health and wellness brands, we have Momenta Ethanson who is the Survivor winner and just completed the Boston Marathon as a brand ambassador for US. Uh. He actually completed the Boston Marathon utilizing our products as part of his regimen. Uh, so that was very exciting.

We have, certainly on the flower side, our premium flower Strange Streams are cult of our collection which have to your point communicated benefits of higher level PC but also a higher level of turpene and flavonoid profiles which have been very very well adopted in our markets. So again it's important to have brands across segments. Muses our our concentrate line again for folks who who are are concentrate

users UM and you know it's UM. We've got also a partner with Blue River, which is a solventless company who's doing some exciting work on the solventless side of things. But um, really I would stay going back to edibles. One of the things that we've really been focused on in edibles is not only, of course, great tasting products UM that are consistent, but also adding in additional nanoformulations

fast act. Yeah. Act. That's the key, Paul, because you don't want to you don't want to take an edible and think, like a half hour later, this isn't working. Then you eat another one only to realize that was too much. Right, So the key this nanotechnology. So what's the key again, I'm ready. There's a nanotechnology that helps it helps you get hit, get get the hit of its master so that you know, you know how your dose should be exactly. Hey Kim, where are we with

kind of the state by state cannabis legislation? How broad is this? Like? How many states can cannabis be recreational sold? Uh? So, I mean currently recreational cannabis UM is available UM in you know, less than half of the states, but that's certainly increasing and we expect to increase that to increase over time. We've got large parts of the country, particularly in the southeast, and then uh, you know, the the central part of the country that have yet to adopt

medical programs. Um. So you know, typical lifecycle of cannabis adoption and the state is to lead with a medical program that oftentimes is restrictive on the front side and then develops over time into a more lenient and then finally an adult use market. And certainly that's the pattern that we've seen. Yeah, across it's all going there. It's just it's a matter of time. Where are you on the Sativa versus Indica debate, because well, we've got to

define that, Okay. So there's a lot of people who swear by sativa versus Indica, saying the former gives you like a nice head buzz, it'll get you energetic, maybe a little pressure behind the eyes, but you can be really creative and get things done, whereas indica is like a couch high. It's a body high. It'll help you sleep, you know. Um. But then some people say that differentiator

isn't necessarily reliable. What do you think, Kim, Well, I mean, I think and again it all comes down to the science and and really I mean the science and indicate sitiva are are labels that that have developed over time as just a simplified indicator on how certain strings typically

affect folks. UM. But really it does come down to UM again the terp turpine profile UM and in the genetics of that particular plant UM, which again is why we think there is such an opportunity for clear communication UM in branding in this in the space. So you know, I think that looks to tiva indica serve as a as a you know, a decent indicator so that folks can make at least an informed UM informed decision, but really as just like just like with wine or with

other other products, that folks become more sophisticated. We find that UM, you know, instead of just focusing on those labels UH there instead you know, gravitating more towards understanding what the underlying UM, you know, components of that particular product, all about the turps. I think that's the key, you know, and the science there's still a long way to go in terms of identifying the turpins and figuring out what they do, UM, what mixtures UH result in in which affects.

I think it's just so fascinating UM you're the extra. I'm learning him. Are you high right right now? No? I just said earning, so m my my, now I am. I have been if you can tell my throat I have. I have been kind of pounding some uh let's see throat coat tea and some big cuill over here. But sometimes if you're congested, maybe just a little bit of you know, just just one little hit can can dry you up right away, right away. All right, Kim Rivers,

thank you so much for joining us. Kim Rivers chair and CEO of Truly It is a publican trade stock. T c n n F is the ticker. Ed Ludlow is also in San Francisco, UM and he is basically our kind of evies reporter rocket ships. He's the rocket guy. UM. He really covers all the Silicon Valley like tech stuff. And what about weed? Do you ever indulge? I do not cover that industry and I do not indulge, but

in California many people do. And that's do we have a dedicated before we get to riving, because that's why do we have a dedicated weed reporter. We do. Tiffany Carry and I really recommend you follow her on Twitter and on the Bloomberg terminal for all of her reporting. All right, I'm in let's get to Ribbyan right now, because um, I was not only UM was I reading the stories yesterday and following very closely, especially because I'm

sure you saw that Folkswagen is bringing back the International Scout. Yes, and it looks a heck of a lot like a Ribban. It kind of does, isn't it. Yeah, And it's electric. It'll be a direct competitor UM to that, and the Bronco went for it. Finally electrifies the Bronco. Why didn't bring that one out electric first? I'll never understand. But Ribbyan did pretty well. And I saw an analyst quote UM at a Wells Fargo calm Lange, and I thought was really good. He said, no, bad news is sometimes

good news. Yeah. I mean, that's basically the perfect sum of the earnings that nothing really happened. You know. They reaffirmed guidance for the year they'll build twenty five thousand evs. That was already essentially a cut forecast of the year because the factory on paper was capable of doing fifty thousand this year and supply chain problems part shortages. Um, But you know this is a company that's fledgling. Right.

We've been so caught up in the equity story where the stocks fallen from a hundred and seventy two dollars a share in November following the I p O to around dollars a share that we forget. It's just a fledgling company trying to get off the ground. So it is is there still again judging by the start press you just mentioned here, we're down sev year to date, right, I guess there's real concern about it. This is an ongoing concern whether they can actually make enough cars to

turn a profit. We've we've really been debating this um in the team today because not all EV makers or would be ey makers are equal, right, you know, Rivian, I've been inside the factory. It's real. You know, they produced around twenty vehicles in the quarter. They've built five thousand of them since starting production in September. They are supply constrained, right, That demand vastly outweighs their ability to build. But their ability to build is also constrained by part shastages.

And the message from management on the cool was very much it's improving and and they're having to go cap in hand right to their suppliers and say we're ready to build vehicles. You guys just have to give us the parts, because when you're a small player, you don't have that leverage of scale that say a Tesla has or a GM or Ford has to put pressure on supplies to make them come up with the goods. By

the way, your your wedding is coming up. If I decided, listen, I'm gonna give breaking News a Rivian for his wedding, UM and I put in the order today, would I get the truck and time? No? Not even close. So I mean we're talking. That's a generous offer. By the way, Matt, you know my better half, she's very much thinking about a future home and sort of kitchen where but if a Rivian would be good. But this is the story. You know that it's a one or two year waiting list.

It's exactly and it's one or two you're waiting list for an expense SA products. They've already raised prices, right, and they've actually come out and said subsequently that we can't actually guarantee the price. Now, how much is a conservatively built I'm sure you've been on the configurator and put together your dream riving and how much is it a conservatively built truck dollars? Basically, Yeah, it's a lot,

isn't it. And especially if you're gonna wait by that time, you'd imagine that Ford with the F one fifty might use that opportunity to to scale quicker and offer a lower end product similar price point though, by the way, because I've I've configured my F one fifty lightning on the website and I also get to eight or ninety's and that's without putting on the rooftop tent and um I got the tunnel grill. I mean, there's so many cool things, especially that you can add to ominal fashioned stock.

Guy when I buy an imp and I see, uh, you know some of these big big insider self stock like day one when they're when when they can, like in this case, forward and shaping work and sold the ribbyan staff. What does the company say about that? Yeah, they they're sanguine about it. I mean, you raise a

really good point. A lot of the pressure on this stock in recent weeks has been the lock up expiry, right, and this was a blockbuster ip O. Remind your listeners six biggest I p O in in US history, the biggest one at a time where it was still revenue still distant volume revenue sales were actually soften. They expecting this quarter had just gone, Um, how do you valueate? I mean on the cool Adam Jonas of Morgan Sanley, who you guys are familiar with, he was really fixated

on enterprise value. Superstar car analyst, right, superstar car analyst. And he was like, guys, the market has no patients for companies like yours who are burning through cash. Ribbyan's point is, well, we are burning through cash, but we have seventeen billion dollars on the balance sheet. I don't want to pus in the same bucket as Nicola. That's what I'm saying is that not we v makers are equal. Right that you you think about the Lord's Towns, the Nicholas,

they don't have seventeen billion dollars of cash. The concern from market, and what you see reflects in the equity story is it's going to take them a lot and a long time to reach profit. But the message from the management was scale, scale brings profit. We've got a beautiful, shiny factory. And I can tell you because I know I've been there. Thousands of built trucks are on the lot waiting for delivery. They just fledgling working out the logistics.

I like the suv uh, the enclosed suv version, rather than the pick up truck, because if I'm gonna pick up truck, I'm gonna get America pickups. Trying to get American pickup truck ed love West Coast Corresponding Bloomberg News bring us the latest on ribbing that starts up today. That's a good news. The bad news down seventy year to date. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews of Apple podcasts

or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Put on ball Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio