Markets, Energy, And Esports (Podcast

The head of equity Strategy joins us Chris Harvard to talk about what's going on in these markets, and Chris, I guess you know your job has been made a lot more difficult the last few days because this geopolitical risk has to be harder to forecast than anything that Fed's ever done. Yeah. I think that's right. The geopolitical is very hard to forecast. We're very headline driven and

it's just hard to parse out. But but I think getting back to the FED longer term, it's really about the FED, and we can talk about that as much sure as loot as you want, but until we get that some sort of resolution on Ukraine Russia, it's going to continue to cause volatility. But again, I think the bigger picture, which I really want to focus on longer term, is the FED and what the FED is going to do.

All right, let's go there, Chris. If you look at the w I r P function on the Bloomer terminal, we're uh, it's new and improved. It is new and improved. Love it pretty cool? Um? Talking about seven rate increases in two that seems kind of wacky to me to to use the cf A term. What do you think that's your scientific term? I see, um yea. When I find what I find a little wacky is that they're still buying bonds. They've let seven heights come into the market,

We're still buying bonds. I think when we look back over time, we're gonna we're gonna realize, we're gonna scratch our heads. Why did we continue to do this? Why did we Why did the Fed taper so long? And tapering did cause some of the inflation that we're seeing. Um, bigger picture in the Fed open the door. The FED really allowed themselves a lot of optionality the last meeting, and I think they have to reduce that optionality because people are having a hard time planning. They don't know

if it's it's twenty five or fifty. Uh, they don't know if it's going to be twenty five at a clip. They really don't know what's going to happen when the balance sheet. And I think the Fed has to reduce their optionality. They have to give people a little bit more clarity on the path that they're they're going to take. And for us, we're we're really focused on that March meeting because I don't think the die is cast just yet. If they get very aggressive the second half that economically

will be a lot tougher. If they're much more moderate, I think we can have a decent year and I think the economy will hold up just just five. But you do think we're going to see a cut, right? You mean just don't know if it's I mean hike. You just don't know if it's gonna be twenty five basis points or fifty. That's right, that's right. So the

markets telling it's twenty five. That seems about right. Um. The Fed hasn't been real clear about things, but they it would be surprising to me that they if they go fifty. Um, But again, anything is on the table. They really need to provide a little bit more clarity. And that's what's happening, is a market is just uncertain about what they're doing, and the speed of their turnaround is often surprised people. So until we get that March meeting, it's just going to be a lot of all, a

lot of uncertainty and a lot of guessing by market participants. Chris, we're pretty much through this earning season, Um, what are some of your takeaways here? Did it leave any maybe valuation risk you might have felt in this market? Yeah, forecasts have been slashed for earning growth exactly. So one of the things that I think is happening under the scene, we talk a lot about the supply chain. Supply chain is kind of get gotten swept away from the headlines

with Ukraine and Russia. But one of the positives that I've seen is the average company is having a difficult time with the supply chain. But if you look at some of the larger companies, UM, Apple, p and even Walmart yesterday indicated this. They seem to indicate that they could use their heft and their might to wrestle the supply chain, and they did indicate that it seems for them the supply chain are the worst of the supply chain is over which I think is a good harbinger

for other companies. The other thing I would say about earning season is we've been talking about higher prices and higher prices, and I've never seen this kind of pricing in the summertime. I was telling class, we've never seen this kind of pricing environment might twenty career. Now. What we're seeing on pricing is pricing is still going higher, but at the decelerating rate. And one of the things we've been talking about, does the consumers start to bok

at some of these higher prices? Is the consumer is demand a little bit more elastic now than it was last year, since pent up demand has been satisfied, and it looks like we're beginning to see that, and I think that's that's potentially a plus when it comes to inflation. Hey, Chris, you guys are walls Fargo You over huts and yards, right, We're that's that's we have a number of offices, but one of them is hutsing yards. That's where trading Florida. Yeah,

I mean, it's what's it like over there? I mean, are people, as I know, they opened this hut they open huts and yards. It's this amazing office complex and all the far west side of Manhattan, but High Line over there exactly. But it seemed to open just before the pandemic dill are put in. Yep, that's very cool. What's it like over there? Because are there people there or is it a ghost town? Um? There are people there. And what I would say, so I live in New York or I live in the city, And what I

would say is weather. On Saturday, the weather was nice and people were out and about and and it looked like a normal day and spring day. Whether it gets colder, people come back inside. I think the demand is there. I think people want to get out. I think they're willing to get out. And I think in the springtime things are going to look a lot more normal. I

think people are a lot more comfortable. I also have a child that goes to school in the city, and I talked a lot of different parents and they're they're comfortable and they're ready to go. Yeah, I think I agree with you. I think the city is going to explode in the next month or so. Blossom blossoms are much better. Just doesn't explode. Yeah, it's just gonna be I think there's a lot of pent up there. Chris Harvey, head of equity strategist at Wells Fargo Securities. Let's tuck

global energy. It's not too much of a stretch. They're about to go from autos two global energy. But we bring an Aerngy guill Day kpmg u S Energy sector leader, Angy. I'm looking at oil here. You know, we're in and around ninety dollars a barrel. It feels like it's pretty comfortable up here. How do you think about global oil going forward, given maybe some of these political tensions we're seeing right now. Well, thanks Paul and Matt for having me.

You know, geo political tensions and oil prices go hand in hand. Um, we've seen that for years. I think the real question and the challenge that we're seeing now is the under supply in the market. You know, inventories are the lowest level since two thousand three, and so that's a real challenge for us. And there's several reasons

for that, but that's that's the thing we've got to overcome. Yeah, and what's interesting to me, we've been talking about this for a few days now and people have been coming on saying, you know what, there's not the spare capacity out there that you think there is. UM. On the other hand, we saw oil prices come down pretty drastically yesterday and this morning. Now they're bouncing back to some extent.

But is the idea that Iran is getting further with nuclear talks and maybe the market thought and that capacity could come into the market. Well, that's that's an interesting question because opeq Uh plus their production quotas have not been with the target output levels that they've they've committed to, and so if you ask yourself, why is that. I think OPEC is looking by nature, it's a cautious group, so they're looking long term out in the next seven

eight quarters before they they really unload their production. So I think i RAN definitely definitely played a role in that UM. You know, if a deal is reached, that could be anywhere from five hundred thousand, seven hundred thousand barols per day coming back on the market, maybe some even say as much as a as a million barrels put per day over the course of the year. So

that's definitely something I think OPEK is is watching. Andy, are you surprised that we haven't seen more production come on from your good friends down in Texas and Oklahoma, the oil patch, the shale folks. Well, not really, because the investor sentiment has changed. You know, oil and gas companies have been directed by the capital markets and the investment community not to grow production. They have rewarded them on returning cash to shareholders, and so that's what they've

focused on. They've really focused on getting their costs down, you know, operating with discipline and returning cash to shareholders. So it's not unexpected to me that they aren't, you know, returning to uh, very active drink. We have senior counts increase, but they're being very directed and by their shareholders that they needed to return cash discipline. Surprised me, that's for sure. Are Gilday, thanks so much for joining US national sector

leader Energy, Natural Resources and Chemicals at KPMG. A proud graduate of Texas A and M. Right now springing, David Dietz's a Managing Principal and senior portfolio manager strategists at p PAC Gladstone Bank. David, we got geopolitical risk, we've got rising interest rates, we've got slowing economy. We even have some earnings acceleration kind of slowing down in terms of the earnings growth there. How are you thinking about this market, David, Well, certainly, it's a lot of things

to worry about. It's a very ste ball of worry to add to those items. Of course, you've got a federal Reserve which is by by all accounts, is poised to raise interest rates come March. We don't know where there's twenty five or fifty. And of course we've also got this UH options exploration Day which is enhancing the volatility. So um, you know, it's we've had three great years. This year has started uh kind of poorly here, SMP fire down eight percent, the Barclays Aggregate, the high quality

bonded next down four percent. So investors really wondering where to go with their money here. But you know, the flip side is a lot of the worries that we're gonna be talking about today and are pretty well, I think, Chris Ston, you know, we'll have to see. Certainly, let's look at the Ukraine Russian situation. Historically, these geopolitical events are short term problems for the markets. Um, you know, I don't think it's gonna affect anyone's plans to go

out for dinner this weekend. I don't think anyone's good defer a car purchase because of what's going on now. The bad news is, I think it could, depending on how things work out, raise energy prices. But guess what, Unlike the nineteen seventies, were energy independent here, so we have a lot more control. So I wouldn't let be that, let that be the reason why you dumped your portfolio. Obviously, what the FED does with interest rates and the risk

of a policy error is probably issue number one for investors. Yeah, well, in the bat The other bad news is, even if you want to purchase the car, where you're gonna find it, nobody's got anything on lots right, And if you do, see like a used vehicle, late model along the lines of what you're looking for, is gonna cost ten thousand dollars more than the new M S r P. So this kind of scarcity, this kind of inflation, it's starting

to eat into corporate earnings. Does that worry you? Everything worries me, But you know, so the inflation problem is, you know, really our most important problem, because ultimately that's the only reason the FED is gonna hike rates. They don't just have higher interest rates that they don't have a problem to solve. Um. The reasons for optimism there is where our car availability going to be a year for now, and I would submit that a lot of

the inflation is due to pandemic supply disruptions. So you've got like seventy five ships off the port of Los Angeles where we're gonna be a year from now, I would submit and hope there's gonna be less depending on where. There's another area. You've got about five million people who don't want to return to work. A lot of those people are concerned about illness and so forth. So I think there's reasons to believe that inflation could relax a

little bit. Otherwise, there's no question about there's other types of inflation. If it gets into the you know, wages and so forth, that it may be more difficult. But to the extent that inflation abates a little bit, defed maybe less aggressive, and that could allow for stocks to have a rebound here. All right, David, thanks so much. We always appreciate getting your perspective on these markets. Here the benefit of your experience, David Deed's managing principle and

senior portfolio strategist at Pepack Gladstone Bank. Where is that paste? It's in New Jersey, baby, kind of western New Jersey and horse country out west of you. Yes, and but there's an office in Summit, because there's everything's in Summit. It's like the blooming financial metropolis of north central New Jersey. Day I'll get the invite. Yes, someday you get to invite, we'll get you out there. Canuebra get chat on the golf course. And Mr Dietz is remember there as well.

Uh so looking at these markets here again, kind of rolling over a little bit, not gonna oversell at the SMP off about four tenths of one per cent geopolitical issues at the four. One of the things that I do in Jamaica, believe it or not, and uh it's embarrassing, is I play video games one there. Sometimes I just bring my consoles with me and play everywhere. And I want to bring Grant Johnson right now is the CEO of E Sports Entertainment Group. The ticker is pretty sweet

g nb L Gamble it's an online gambling platform. I don't get exactly, um what you're doing, but I was thinking about it reading through it, Grant, I love to play you know, Halo or Call of Duty or a Fortnite or uh Player Unknown battle Ground with a group of friends, and the only thing will make it better is if I could bet with them at the same time. It would be sweet if I could take out like my brother or my cousin. And also they owe me ten bucks for every head shot. Is this along the

right lines. You're talking the right language, man. And by the way, playing video games has nothing to be embarrassed about. A virgens them prefer video gaming to traditional sports. So but I'm practically a boomer, that's the problem. I am definitely a boomer, and I still play about two hours a day. So it's it's it's actually the biggest growing sector of entertainment in the world. I mean, the video game industry is bigger than the movie and music industries combined.

So that gives you some sense of comfort that you're in good company. What what what is E sports? Grant? Sure, E sports is competitive video game play. Now. E sports is a subsection of the larger gaming industry, and it is organized events where professional, paid teams participate against each other for cash. Prizes. You've heard a lot of these names, you know, Phase Clan and Cloud nine, Team Liquid, et cetera. These teams compete for multimillion dollar prizes all around the

world all year, and that's the sports business. I have a gaming analogy that will probably help bring it home for the listeners because we have to separate software platforms. At one is and I compared to golf. When people watch golf, they bet on the masters, and that's professional watching the professionals play and you're betting on them. That's our VI g G platform. That's the platform we just law in New Jersey, where the first and only, by

the way, licensed esports gambling site in North America. Our other platform is Land Dual, and this looks like it's the product you're looking for, Matt. This platform allows you to compete against others in planes. So if I take this back to golf, people bet on the masters, but far more people beat against each other when they're playing closest to the whole, best drive, best ball, you know who's gonna win the match. That's Land Dual. So we're

actually having the inaugural event. We're launching this software in partnership with the hard Rock this March, also in New Jersey. Obviously New Jersey is a card here for us. Uh, we're launching with Madden, where three fifty competitors are coming to compete against each other on one on one model model skill play for purse each individual game. So if you're you and I are playing Madden, you win, and we both bet five bucks, ten bucks a hunter bucks,

you win the purse. The house takes aig. Think of it as equivalent of poker for video gaming. So why Jersey? I mean we we were looking through your resume and guessing that you're Canadian. I have lived in the States. I I lived in New York, Pelham, New York for three years. But yes, I I hell them. I love Pelham. I want I wanted to move to Pelham, but there's no inventory this um But but it is Jersey because

Atlantic City or um or is there another reason? Well, Jersey is one of the most, if not the most progressive states. I mean, if you recall back in with the Supreme Court overturned the ruling allowing online sports book wagering, which started a bit of a gold rush. You know, from then until now, we had two states which were Nevada and New Jersey that we're allowing. This is now I think two states and counting and uh and that was spearheaded by New Jersey. So they're very innovative. The

Gaming Commission there is very innovative. The governor has gone on record stating that they want to be in the front of the vanguard of this huge gaming industry and the sports which is why you know we made our application. There are auditors and our attorneys are also in New Jersey, so that that helps. We have office in Hoboken, and it's it's close to New York, so it has a lot of things going for it and and less but certainly not least. You already pointed out Atlantic City, and

that's specifically why we're launching land Duel. I told you that New Jersey. It's where's that, buddy. I'm telling you we we we got it all. It's a great state of New Jersey. Grant Johnson, thanks so much for joining us. Fascinating story here. Grant Johnson, he's the CEO and the company is called the Sports Entertainment Group. It's a public traded company trades on the Nasdaq g m b L. It's an online gaming platform, some pretty cool stuff again,

doing some good stuff in New Jersey. 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. Pet On Fall Sweeney, I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio