Markets, ESG, And The Global Economic Outlook (Podcast)

story here Shannai Basset Bloomberg News. She covers all things Wall Street fours and how about this headline Goldman legend, crypto star and top banker. Weren't worn of the next big risk? Like we don't have enough to worry about? Shinali, thanks so much for joining us here in our Bloomberg Interactive Broker studio. So you talk to these three big folks on Wall Street? What are their concerns? Who did you speak to and what are their concerns? I spoke

to three people. We do this project twice a year, and it's my favorite because there's so many things happening day to day. This is a risk management business, and what you have is former Goldman Sacks investment strategists now Columbia Business School professor to star in her entire tenure. Really worried now and also she was known for being bullish.

Joseph Cohin she's worried about the American dream, and the reason she's worried is because she believes that the US has really fallen off and investing in the workforce and protecting its workforce via agencies. Meanwhile, we should just define the American dream. I mean, I think everyone has a different idea of what it is or is there one universally agreed definition of the American dream? She defines it.

She defines it in terms of income. She defines it whether every generation is doing better than the previous one. And what we've seen, she says, over the last thirty or forty years, is that media and household income adjusted for inflation has not risen. And you're seeing that in the job market today only compounding with way just not rising as flash fastest inflation. Where do inflationary pressures matter? Again?

With the next big risk? Ken Molis, billionaire banker, banker to companies around the world from Saudi Arabia to Hong Kong, is worried about the globalization. He thinks that's a lot of these de global and these forces going to be inflation or even more when you come about when you come to the idea that supply chains are breaking apart across the world and countries will be more responsible for

their own supply chains from food to energy to financial assets. Right, well, because we had such a big problem with globalization in the first place, it's not like supply chains are breaking. We're taking them apart, dismantling them and moving them in some cases, right, so that we don't have to rely on Russia or China necessarily to do the work that we need to get done. And he cites this in

terms of Germany, for example, being in extreme trouble. But when I asked if this was just about the war, he said, you know, think about Brexit for example, or what's happening in Sri Lanka and the worry about just getting basic resources to two citizens. Let's listen to same bank and Freed also really quickly here let's take listen to what his concern is because it is different than

the other two. A lot of the discourse around you know, COVID and pandemics in general has you know, as you served, you know, Franks focused on things like masks by the time. That's the debate. We have already failed at the much more important goal, which is avoiding ending up there in the first place, by having countermeasures ready beforehand, by having

early detection systems, by having good ventilation in buildings. The goals to get to a place where outgrages don't become pandemics in the first place, and where we don't have to shut down, uh, you know, the economy, where people don't have to die, where we don't have to make trade offs, and hopefully we can you know, I think spend you know, tens of billions of dollars today to save tens of trillions of dollars. So there you go, Sam being been Free, the cryptocurrency billionaire who is known

for shoring up his industry. He's spending a lot of his personal capital, philanthropic efforts, charitable efforts really towards preventing the next pandemic, which he worries will be deadlier and further cripple already decimated economies around the world. But all three of these folks comes down to investment and how governments,

particularly the US government investors. All Right, So the big take story on the terminal on the Bloomberg dot com slash big take you had Abby Joseph Cohen, former government sex strategists now Columbia, Sam Bank, Ben Fried who was the ft X chief executive officer, and Ken molis Uh CEO of his Molis and Company big investment bank or some cool thoughts there, all right, So, Shnale, we've just gotten through three four days of the big bank earnings here?

Is there when you talk to investors? Is there a takeaway here that we're getting from these names? Caution, caution and more caution. David Solomon is addressing investors right now on a call and they're asking, you know, are we just going to see a huge pullback and risk among corporate borrowers, investors willing to put money to work and risk your assets? And he's saying that people just have to get used to the new price of things. Is there loan growth out there? Are people taking on debt

to fund new businesses, new cap backs. It just seems like I just sold a million credit card. Essentially, they just brought on a million new clients in the last quarter a loan and so there is some signs of optimism here, but again they also lost three million dollars in a loan book, as Fred's widen. So there's a

cost to doing business for these banks here. Also the credit thing could be seen from the other direction, right like if you need to get a credit card to fill up your car and feed your family, which you used to be able to do with your bank account balance, that's a problematic. Real quick point here. Bank of America only nine percent of its clients are below six sixty and credit score that was twelve a couple of years ago. Maybe it's just that Bank of America has less risky clients.

It has shedded the riskies, said the risky and then if you're a riskier borrower in America, where do you go? And the investment bankers? Tough quarter for them, right, yes, for the underwriters. But Goldman sachs Is advisory fees were one point two billion dollars, Paul, how do you make one point two billion dollars environment length is? That's double

what you saw at Morgan Stanley. It's insane, wow, because you don't usually see that disparity between Goldman and We're in Stanley on the banking side, and that tells you even though they said they're slowing the hiring velocity here, They're going to be very precise and how they do that. All right, good stuff. Shali Bastak, she covers all things Wall Street for US, got the Big Take story. You can check that out on Bloomberg uh dot com, slash Big Take or n I Big Take on the Bloomberg terminal.

Those Big Take stories are awesome, Snali, big in depth reporting there, as we see almost every day from the Big Take folks here. And we also got a summary of the big investment banks reporting earnings, and a Shnally noted,

probably the takeaway is caution. Samir Samana, senior global market strategist for Wells Fargo, joins A Sames also a former fixed income trader, and that's where I want to start, Samir, I'm looking at my I end go function on the Bloomberg terminal Corporate, the Bloomberg US corporate total return down thirteen point four percent year to date. What are you

guys doing in the fixing co market? You know, so for much of the year we were kind of been playing defensive, you know, kind of strategy, so kind of going shorter on the duration. We've been most unfavorable on long term fixed income. More recently we downgraded credit UM too unfavorable again with the thinking data slowdown will probably impact spreads and there's still well off kind of their historical wides, so there's probably still an opportunity to kind

of shy away from that UM. And then now that you know it seems like the Feds you know, gotten some religion around you know, rate increases UM, we actually took long term fix and come back to neutral UM. We think at this point there's probably some two way risk, especially if the recession were to to show up sooner and be a little bit deeper than people expect. So we we have taken uh, you know, some of that duration you know out just a little bit UM again

wouldn't be you know, leaning out over our skis. But those are a couple of things that we've we've we've done recently. Also, I think it's worth noting munis right, especially when you look at the relatives to corporates and relatives to treasuries UM, those seem like a pretty interesting place to to put some money, especially if you're in a higher tax bracket. You're preaching to the choir some here, but I cannot get like colleague, here, Matt Miller to

really jump in both feet into the muni's. I can't imagine the words munis and interesting in the same sense to be to be fair, right, you just buy that stuff, put it away and collect coupons, which is good, yep, um, but nobody trades it. Uh what about equities some here? I mean there has been a lot of the big bears have been saying that we're halfway through this yet. But um, if everybody's freaked out, isn't that the time

to buy? It's probably a good bit of damage that's already been done, you know, kind of like fixing come. We've been playing defense on the equity side too, from the standpoint of you know, we've been going up in market cap from small, stimids and large, and we've been going from developed markets and emerging markets to the US. So you know, those part of this yere things have played you know, pretty nicely in our favor. So we feel like, you know, we have some some room maybe

to to be opportunistic being kind of in that defensive position. Um. So you know, as we look towards probably you know, kind of a recovery into next year, I think we'll maybe kick the tires on some of the areas where we're unfavorable, like small caps, emerging markets and developed markets, but we think it's much too soon, so stay kind

of in higher cap, higher quality areas. On the sector side, we're probably a little bit more balanced again with the thinking that um, you know, we like energy, we like healthcare, we like tech. We think they have some you know, characteristics that could help them do well. Um, energy is kind of your statflationary play healthcare if we tip into a recession, and then tech kind of has that secular growth aspect to it, um, and we've paired it against

an unfavorable to discretionary. Right, So if you you kind of part and parcel growth, you've got tech, cons and discretionary, we're overweight tech, we're neutral cons, and we're unfavorable and discretionary. Um. We're also unfavorable on rates and on industrials. So you know, we've basically tried to kind of barbel with portfolio where we're not getting too defensive because again, um, you know, with rates still low, equities are you know, still a

reasonable evaluation. So we've tried to be more balanced than than outright defensive. You know, it feels semear. I mean, I've been in this game for thirty plus years, but it feels like the confidence, the sentiment in the marketplace today is just really bad. Whether it's a recession, whether it's in inflation, uh, interest rates, It's almost kind of gets me to the point of I haven't seen it this bad in a long time. It almost makes me

feel like, maybe actually buy in here. You know, it's not a bad idea to stick to a plan, right, I mean, if your dollar cost averaging, or if you've got cash flows coming in and your continue to allocate to equities, I mean, I think, you know, I think there's a good point to be made about you know, look, we started this journey at hundred. We started this journey in January. We're now closer to thirty eight hundred, forty hundred,

and we're already in the middle part of July. And so you know, if you think about bear markets lasting a little over a year and you see them kind of draw down about thirty, you could argue you that you're about you know, a half to two thirds of the way on both price and time. So you know, again it's not a bad idea to stick to a plan and ta casine to allocate equities. I mean, you know, nobody should take what we're saying as as a reason

to avoid them all together. I think you know, what we try to do, you know, with respect to our investment professionals, in our clients, is just make sure that

they're not surprised. And I think, you know, from that standpoint, I think what we're at least telling them is, you know, look, as these rate hikes, you know, continue to kind of pile up and work with the lag that they normally work with, you know, they're going to have much of their impact in the second half of this year, and so you know, it's just hard to to say that you're not going to see a shoe drop with restrict

to earnings, right. I mean, you've got consensus still, you know, showing growth for this year and next year and the year after that. So I guess earnings do go to the sky after all. Um, So you know, until those expectations come down, it's just hard to say that, you know, stocks can can do well. I appreciate the sentiment piece of it, but sentiment sometimes can be a little bit

too jumpy, right, Alright, awesome stuff. Samir thanks so much for joining us giving us your thoughts here as we try to navigate these markets rules, certainly for equity and fixed income investors. Samir Samana, senior Global market strategists at Wells Fargo, join us here giving us his thoughts on these markets. All right, let's talk E s G. Environmental, social, and governance. That has been one of the big big

themes and investments. I'm going to say over the last ten of fifteen years here in the U s and maybe even longer than that in Europe. And it's so big that Bloomberg Intelligence, the investment research arm of Bloomberg, has multiple E s G analysts and our lead E s G analysts, Shaheen, contractor, she covers all things s G for Bloomberg Intelligence. She joins us here in a Bloomberg Interactive broker studio. She heen. It's just been the rage people like, Oh, E s G investing. I have

to have exposure to it. You've been telling me this this for years. Talk to us about kind of where we are today because everywhere you look in the marketplace, equities, fixed income down double digits. How is E s G investing and the flows into history how's that behaving this year? Suppose this year has been particularly interesting for E S SHE especially after all the growth we've seen in the last few years, and this year has actually been one of the few have you've seen a bit of a

slow down. So if you consider E S G E T S as you know, it's just a slice of the pie. Assets at the end of the second quarter with about four dred billion about decline over the last year. Yes, so it's just assets in E S G in E T F rappers, right, not the price of the E T s because they've come down more than that. Correct, So that asset decline, you're right, is largely because of market contraction, but we have to recognize that flow is slowed more fresc than on. Yes, I mean my question

is has the especially the environmental side of it. Has that been hurt or helped by um the inflation combined with the war in Ukraine, which amplifies the inflation, right, because either the lack of fossil fuels out of Russia pushes us more towards wind and solar, like we've got to build that out faster, but at the same time we're also using all the coal that we can and maybe turning nuclear reactors back on. Yeah. Yeah, so answer

a question definitely, hoot. And that's because hes she funds tend to be overweight deck on the way energy, as you said, and that's not been so great so far. To right, deck has been particularly challenged. Energy has has sort of skyrocketed. I mean, you're looking at it from an investment perspective, but what about maybe a policy perspective. It's it's boosted because even though now we're using dirty,

dirty coal. Um, you know, politicians are saying we really we need to build these wind farms, or we need to invest more in solar energy or solar capacentator production, et cetera. So over the long term, yes, this hopefully will accelerate a shift to cleaner energy over the long term, especially to reduce Russia sort of dependency on oil and gas. Um. But if you look at short term performance, if you

ask me, Hot continued for the rest of the hot. Okay, So talk to us about just, um, where's the demand coming for E s G investments? Because when I first started hearing about E s G, it was probably more than a decade ago, and it was from European institutional investors that I would go visit. They would say, I'll be talking to them about Disney and they would ask me what the E S G score was, And I said, what are you even talking about? I mean, it's Mickey Mouse.

How how bad can he be? Um? But now it's become more of a thing here in the US. Where are we kind of in kind of the development of SG. So if you think about assets Europe, you're right. Europe has been you know, the traditional sort of the heavyweight, but the US has got up. US assets have seen It's gone from about se as a ship to about

which is quite substantial. But if you share total invested assets, okay, okay, yes, but if you consider where these assets are coming from, I would still describe it as very institutional and still very European if that makes sense, but definitely institutional and nature. So, um, we focus on the E, the S and the G. Is that improving over this year? I mean, so it seems like, well, here's a government story for you, Matt Porsche is come in public, right, and that's not a

good G thing because their governance there. It seems like all the shareholders like if I'm gonna be a public shareholder. I'm getting like almost no rights there in that company because the rights are sticking with VW and all their crazy shareholders have a family that owns all of that family and right family. So what am I getting, Well, you're hopefully you're going to participate in future growth. So I'm tying an E S G with an I P I P O big. I guess you probably don't focus

on that kind of government. We do? We do, Yeah, we do. I think governance has always been sort of a stronghold. It's been the E N S that have sort of picked up an attention, particularly the I think the S has picked up in terms of attention a lot after COVID, but that's really been only in the US. I mean, if you ask me, the whole Tesla thing is really a G issue, though everybody keeps confusing it. So so what is your view or what is the E S G view community's view of Tesla? Yes, SHE

community is very divided. I can tell you my view. So my view is that Tesla fits well within an E or an impact for you know, one that creates externality on the world. But if you ask me E S SHE in terms of risk mitigation. Tesla's g does not put it in that bucket, and I wouldn't consider it as in any fund, but everybody does. Right, it's divided,

it's it's the most hotly debated thing. But yes, a lot of funds too because MSc I does have it as a high E s SHE scoring company, and a lot of e sc et F tend to be MSCI based, so it ends up in many funds. By the way, in terms of the debates in the E s G community, we had on Engine number one recently and you know, um, they are the I guess activist fund that got board seats and two board seats at Exon. You wouldn't normally

think of Xon in an E s G fund. You don't want to hold Xon because they're doing all the polluting. On the other hand, maybe you do want to hold x On so you can control the future of the company. Correct. So I think that's sort of the new angle of proxy voting and you know, owning a company to be able to vote your feet if that makes sense and create change, and that's really the strategy behind what Engine one is doing. Then you vote e t F, they're just going to hold the SMP five and engage with

all the companies. So it really depends on what you're trying to achieve. When so energy companies, they're kind of the poster, at least for me, of you know, an E s G like a poor score or a week score on E s G. But some people have said these guys are really particularly the European energy companies, are really trying to go green, and so that might you know, say, hey, maybe you think about him as an E s G compliant company earlier to rape the Earth of all her

resources in the greenest possible way. So so fun, I think to your point, when I think of you know, E s G, I don't think of it as being you know, energy is bad and this is good. I think it's more within an industry, what are the better performing companies, because otherwise then you just end up with what you have today right on the way energy oh waits something and you don't have diversification benefits. That's kind

of what I think. I mean, I look at an E s G fund, it kind of looks like a tech fund to me, Teken healthcare fund and mean industry agnostic. Yeah there you go, all right, chicken contractor e s G Research channels for Bloomberg Intelligence, joining us lie of in our Bloomberg Interactive Broker studio. We'll talk sustainable energy here. We can do that with pair Reg Narson, CEO of Climate Rock. Climate Rock is a nastack listed stocks c l R c U is a symbol to punch in

on your Bloomberg terminal. It's a blank check company looking to get into the sustainable energy biz. Per Thanks so much for joining us here. Tell us about Climate Rock. What are you guys looking to do? Yeah, thank you for thank you for having me. And you know we

we are sustainable energy. UM. We chose the route of the of the s back market to list the company that would invest into sustainable energy meaning renewable energy so wind and solar, hydro electric power, Global Investment mandate UM in a time where you know, climate chains and so it's very high on the agenda, and also where innergy security at least six months have become very high in

the agenda as well. So the combination of of these sort of major UH GEO political and and and and do you trains in the market is suggesting that you know, we are in a in a good spot for that many opportunities to do with the capsule be raised Back in late April early May, UM, we raised seventy five million plus a bit extra, so close to eighty UM. And I'm looking to um acquire company or companies in the in in this in this sector that's growing across

all the continents. So per I mean, you came public via blank check at in April dollars to share. That's kind of where the stock is right now. What is your expectation in terms of the timing potentially getting you know, a defining transaction done for you guys, Well, I think I think we will be in a position to do something in the near future with a with an idea to close that in the wintertime. I mean, it would be great for us if we can close before before

the Christmas season sets in. But but you know, it's certainly something that will be done within that twelve months that we set ourselves as a target to to conclude our bustance combination. How much does it matter, um that markets have tanked this year and how much of a problem would it be if they continue to fall at the same pace. Well, it's in's in general, it obviously

makes a big difference. I think, you know, when we look at our specifically, you know, we did at what I would call a relatively small I p o UM. That means that we are relatively speaking less exposed to

any redemptions. UM. We are looking at potential targets that would create a very attractive market value on top of of where we are UM, and we're looking to executed transaction where you know, there will be as little casts going out of the deal as possible, so everybody stays in in in the stock, and therefore we have to

raise less capital uh and then execute this UM. The reason for that is that we see this potential business combination being a growth stock, and we believe that we have opportunities to grow significantly after the dese bag UM and and that would give us the opportunity to raise various sources of capital now at the same time, not being an ip or tech stock, but being renewable energy start.

We also expect to be able to use a business combination with a cast glowing business to allow ourselves to have a sort of relatively conservative combination equity and debt. So we we position ourselves to not having to raise too much cast and raise the cast through a combination of equity and debt, and at the same time probably also bout being in in in a sector which is one of the I will call the mega trends in the market position us to have you know, um less

redemption than average. So renewables is a broad broad space here where specifically are you guys most interested in? So I think that two ways of looking at it geographically, and actually that three geographically sector wise. And then where do you want to be in the value gain the industry?

And and we certainly see a business that will combine some operating cash flows from service income with some activities, uh you know, in development, so that we are bringing a combination of resilient long term cash flows with the off side of of development across solar and wind. Mainly, I believe is where you know, you can safely be at the moment. We don't like to go into sectors where we're taking too much pizza risk, but we could go into hydrogen. It's an interesting sector. It's a very

hot topic. It's also an area that is UM you know, has a real demand UM just taking industries, you know that the consumption in global industry hydrogen is about two on a billion dollars a year, so if you completely replace that the green hydrogen, that's a massive opportunity for for comp fungus. Al Right, Pat, thanks so much for joining us. Pere Regnarson their CEO of Climate Rock Tick or c l R. See you. Thanks for listening to

the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Pet On Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio