Markets, Snap, Credit, And Motorcycle Sharing (Podcast)

Advisor Investments. Maybe we'll get his communing anecdote of the day. But Jim, what are you doing with this market? Here? We've got nowhere to hide. Bond market, I got crushed, equity markets. I'm near bear market territory. What are you doing well? We're taking a discipline diversified course. We know that bear markets are are not unusual, even though this one feels unusual given the lack of volatility that we

saw in the market over the past several years. Um, we know that every downturn feels as if the current

conditions an inevitable outcome will be different. We don't think they will be, but we do think we're in for a protracted period of time where investors nerves will be tested, and they will need to stay focused on their long term investment goals rather than the near term price disruptions, which of course are are alarming, made excessively so, not just due to the return of volatility, but of course due to the general geopolitical state of the world, which

feels as the things that become more unhinged than usual. You know, I'm looking up at uh Bloomberg surveillance on on television right now, Jim. We have Bob Prince on. He's the co chief investment officer at Bridgewater UM, one of the biggest hedge funds and not the biggest hedge fund in the country. He says that this inflation is like the seventies. Again, he says, the US has headed towards a stagflation the likes of which we haven't seen

since the nineteen seventies. And there was there was a while when, UM, you know, big investors, UM, super rich guys, we're saying this is nothing like the seventies. But now it seems to be the common the consensus. Do you agree, No, I don't agree, and I certainly hope that that he isn't right, because that grinding bear market of nineteen seventy four through night three was profoundly difficult for anyone who was who anyone who is an investor, are they a

professional or individual? I would say that I take some measure of comfort in the fact that the vast majority of hedge funds don't seem to deliver on what their mandate is. Maybe this time will be different for them. It's the perfect environment for those who have skill sets that enable them to short the market UM, but those skill sets usually are found wanting in terms of the

return that they deliver. I do think that we're in for a protracted period of inflationary pressure UM, you know, ironic, We of course set against the potential for some kind of recession, whether it's a technical recession of two negative quarters of GDP or just an existential recession where businesses and consumers stop spending enough to trigger UM, to trigger the kind of recessionary environment where it becomes even more

difficult to maneuver. I take some measure of comfort in the fact that while the first quarter obviously was the worst quarter for bonds in fifty years of bond buffers did not hold ever since then, they've been behaving relatively reasonably in terms of on down days, giving us that defensiveness that we we aim to achieve from them in our portfolios, and on updates, letting the market run where

it runs on the equity side. So I think we're getting to a more defensible position in terms of asset allocation, but we're not out of the woods yet. I think we've got considerable downward pressure to have to be able to manage through it all right, Jim, thanks so much for checking in with us. We appreciate that. Jim Lowell, chief investment officer for Advisor Investments. Again, a sell off in the marketplace today, uh and the equities led by

nastac off three and a half percent. Again some tough economic data, as Greg was pointing out, also snapped down on some cautious outlook, bringing all the other social media names down with I'm looking at Alphabet here down eight percent as well. So we want to talk tech. I want to kind of bring it out a little bit and and not just focus on Snap but really on the whole tech space here and what we're seeing out there.

A lot of carnage. Dan i'ves Managing director and senior equity analyst, and web Bush Securities has had a very constructive view on a tech space for a long time, has been right. Then as we step back here, let's step back a little bit just from Snap and we we can talk about Snap and what the um Mr Spiegel's comments mean for the space, But how are you looking at tech here and what we're seeing in the

in the pullback in these names. Look, I think it's just indiscriminate selling regardless of where the companies play enterprise, cyber cloud, consumer, ad tech, And I think what we're just seeing is just a massive risk off regardless of prise. And it looks when when tech sells off on a Snap warning that's been one of the more little quality tech companies last decade, it just shows just how white

knuckle this is. But of course it makes sense if you're in the business that relies on advertising revenue and advertisers no longer paying for UM your services. Is this are the broader implications clear to you? Or do you

does it still feel like a Snap um specific problem? Look, I mean Snap they bleamed everything except the wind, you know, in terms of their their warning, and I think it just comes down to one d The point clearly we're seeing softness and then that's and that's something that's already beaten too. These stocks, I mean a lot of these names right now are baking in a mild to modest

recession already. You know, our point is you want to stay away from the consumer ad plays, but you want to be more focused on enterprise because enterprise is what we believe is holding up strong, and that's going to be a popular strength, you know, during this market storm. But overall, I believe tech is way oversold relative to what I believe would be a mild recession, where in streets baking. And much worse all right now is that

as you know, is off from it's high. So I mean, how do let's start with maybe just the biggest name that I know you cover Dan and a lot of folks own in their portfolio, which is Apple. How do you think about that kind of a name. Look, I mean, we just did checks last week, and if you look in the supply chain in China, you know, Regard, we

won't see a zero COVID in China. It's tracking slightly better than expectations so far, and I think it just shows that pockets of demand across the boarder are holding up better than expected. And I think Apple is a good example one where the valuation here is basically discounting thirty You know of of demand that goes away, which we disagree with, and that's why I think you have

to separate. You can't treat every company equally. I think you look at names like Apple, Microsoft, the cloud theme in terms of ways to play Google as well as Amazon cybersecurity, and I think that's we are going to see just more of a have and have not in tech And I think this is just a perfect example. It's playing out. But again, good news is going to be perceived as bad news. Bad news is gonna be perceived as worse news. That's just a cycle that we're

in right now. If we look at your universe of coverage, Dan, you know, not just Tesla and Apple, but also I guess Um, Palo Alto, Ziff Davis, rivan Um, some of the names seemed like they would be very poorly affected by worsening relationships with China. Others wouldn't be affected. How do you see, um, your universe of stocks. If US China relationships get worse, look, I think that's the black Swan.

Then right, and and of course even we've seen this week there's just worries about tensions there as well as Taiwan and look at China. That continues to right now be the dark cloud over attack, especially when it comes to Apple, when it comes to Tessa, the supply chain, which is really key across the board in terms of chips. But that's also why believe when it comes to software, whether it's cloud, whether it's cyber security, those are much

more insulated. And I think more and more we're gonna see these enterprise names that are going to continue to outperform. You know is right now, there's just worries about what's going on. I think snapped send flamers because of also the niature of just missing four weeks after they give guidance to basically just takeaway guidance, say it's the disaster and give minimal reasoning around that. I mean that, I think that's really what scared investments here. You know that

you mentioned you know cybersecurity clouds too. Of the areas the stronger areas within the whole text substack. Uh Dan, what are those companies saying about maybe customer demand? Is there anything that a recession fears are coming through and maybe their order books at all looks so far we haven't seen it. I mean, you've seen some cracks in terms of slower hiring, and I think you'll see sales

for US next week. Talk about strength overall Europe. Weakness has been spotty in terms of what we've seen, and that's why I Apoloy just keeps coming down to right now beat into these stocks. Are street numbers coming down by in two three. So if it's anything between a soft landing, even just a slight to modest recession, then than stocks today Texas especially a way over sold here.

And that's why we're just right now in this scenario spray char analysis just given what we've called, you know, Rubric's Q macro and any bad news is just going to get new exacerbated. That's what we're seeing today. Any concern about the housing market, Dannemy, We've seen really bad numbers today in new home sales, and I'm starting to hear more and more people say this this could turn quickly and be maybe the gray Swan that people had

had difficulty spotting. Well, I I view it. I mean there's differently in a view, but I view it that that also takes some of the said's job. It already takes care of it, right, That would ultimately be less interest rate hikes that you'll see down the road. After fifty and fifty you're gonna see a fro off come at the market whoeverages come out of the system. But that's why I do not view this as a dot com bubble burst Todd Oh. I don't look at OH

eight or nine see any comparisons. I just view as a massive overcraction risk who's coming out of the system. But again, in the news cycle that we're in with what we're seeing horrific in Ukraine as well as zero COVID in China, you're just seeing investadors, regardless of price, get out of risk assets. All right, Dan, Good, good

overview there from your perspective. We always appreciate getting the big tech call there, Dan, i'ves managing director and senior equity analysts at web Bush Securities and again calling out some of the stronger areas from Dan's perspective in the tech stack, call it the cloud, which is certainly a big growth there we've heard about for many years, as well as cybersecurity as two of maybe the stronger areas within the tech spend that he thinks will fare better,

and they certainly are on the way down here in terms of relative underperformance, but also on the turn as well. I get about literally two pitches from PR like flax every day. Mostly don't ever open even open the emails. I got one though, um from Lisa Peterson saying like, hey, dude, I hear you're into bikes. If you want to go to any city and rent a bike, that's a difficult thing to do. Easy with cars part of motorcycles, She says,

I have a solution for you. It's called Rider's Share, And so she pitched me them one of the co founders and the ceomore, Guillermo Cornejo, to come on and talk about his business, which I just think is absolutely fascinating. We got him now on the line. Guiermo, thanks so much for joining us. Um, I'm dreaming big for this company, but you guys are just getting started. Tell us about how you got the idea and how you're executing on it.

Thank you. Right there, Share right there's share dot Com started four years ago because I could not afford to buy a motorcycle, and I really wanted to write one, but renting was even more expensive than owning. So I was like, it's time to you know, bring a peer to peer into motorcycle rentals. And so how has that

worked out? I noticed that I just did a quick search around, um where I live in Westchester, and I can get everything from a Vespa for like thirty dollars a day to yeah, Harley like Street Clyde for a hundred and fifty which or actually I think I saw Harley Fat Boy for like ninety bucks, which is a great price. There's a big differentiation in price, but there's

a lot of supply out there just going peer to peer. UM, I feel like there's more growth though, Guillermo, you could get rental uh companies, dealerships involved, you could go international, get out of the US. I mean, what what what are your plans for the company right now? Our main focus is to continue to grow that supply. UM, we have thousands of motorcycles, but we have an appen men to support dozens of thousands of motorcycles and just and for the people that don't know, UM, we don't own

any of the motorcycles. We use the airbnb model basically, but You've got insurance set up right, correct. We provide insurance and road and assistance. We've met the writers, you know. We we basically the risk the transaction as much as possible. Gamma. I'm a big fan of the company Harley Davidson. Ever since it kind of came public. I always followed the quarterly results, and I know one of the challenges for

them is getting younger people into the motorcycle. UM Activity talk to us how you view that side of the business, the demand side, the total market size. When I work in the auto industry, we saw that millennials actually love buying cars when they kind of afford it. So that's kind of what riders shared asked. We make writing a motorcycle more accessible, so the media and age of our user is in the midferities. We're looking to partner with O E. M S to get more you know, more

butts on seats. Yes, UM, you should definitely hook up with Harley Davidson. One of the cool things about that company, and I'm obviously a huge Ducati fan myself as well. Course, UM both of them are going electric. Harley is already there. Ducatti is building the electric bikes for UM Moto g P does this? Do you think this is a big game changer because there's a lot of kids out there who don't like extremely loud uh you know, fat bobs

with straight pipes. I happen to love that that sound, Harley, you know the classic potato potato potato. It's so loud and offensive, which is why I like it. But the kids, you know, are different. Um, do you think switching to electric is going to be a big difference for the whole motorcycle industry? Gammo? They're easier to ride because young kids don't know how to ship gears. Oh true, you don't have to worry about you don't have to worry

on maintenance as much. But electric motorcycles aren't there yet. None of them has the ranch that at Tesla has, so I think we're still I mean, the technology is there, somebody has needs to come up with a design that has very low drag and very long range. Well, and they're expensive, right, I mean one of the things you enable people to do is to dip a toe in

the water and see if they like it. Absolutely. And because like the motorcycles have very low maintenance cost, we we can make their rental sit even more affordable by using three bags. You know, I'm very interested. I've told you Matt and getting a vespa in my middle age, and maybe I can try it out through this thing you can't. In fact, there's a bunch of vespers I saw in New Jersey near you. Um, it looks like

one guy who has just a whole garage full of scooters. Garmo, great, great talking to you, UM, and we wish you the best, Lucky Armore Cornejo there co founder and CEO of riders Share UM. And if you are interested in checking out a motorcycle or a scooter or anywhere around the country, UM America that is, you can go ahead and check

it out. And Paul I recommend to you to try because for me, UM, my first ride on a Vestpo was a life changing event and I think it's still the most fun way to get around cities is riding a Vestpo or any kind of scooter. So I think I might have to do scooting around the summit, New Jersey.

That was good stuff. Jason Greenblatt, he's a senior portfolio manager at American Century Investments, And I want to talk fixed income, obviously with with you Jason, Um, but I want to start it out from the perspective of the consumer, because we just heard Brian moynihan on Bloomberg Surveillance saying that the idea that UM Americans have spent their stimmies

already is the wrong idea. The idea that the consumer is in a difficult place right now, at least from his vantage point as running one of the biggest credit card operations in the country, is just wrong. Um, what do you think about the consumer, especially given the inflation that we're seeing in concerns, little cracks that we're seeing in markets like housing. Good morning, Thanks for having me on. Yeah, I think the consumer topic is is certainly uh topical today.

Whether you mentioned Brian moynihan with Bank of America today, for Jamie Diamond and JP Morgan yesterday talking about the strength of the consumer. We we agree. We think that you know, consumers in great shape today. However, what's the question for tomorrow? And we think that we're starting to see cracks. You know, we mentioned Abercrombie and Fitch, we had Target and Walmart, and the shift in consumer spending, this change from goods two services is certainly having an

impact and inflation is front and center. Rising rates, higher costs passed through of costs that we saw in the first quarter is starting away on consumer demand, and we think that the consumer may be in trouble in the second half of this year. And where does that hit In fixed income we were just talking about out UM, you know, high yield problems crack starting to show, so

does it make its way down to investment grade? Investment grade is is certainly taking a licking year to date, right between rising treasury prices, rising treasury yields, I'm sorry, and also credit spreads widening, But we could also say that yields are more normalized at this point at four and a half percent. Where it starts to to impact UM credit particularly is is valuations on the equity side become cheaper, so do M and A potentials and leveraging

A balance sheets. So we're very worried about what could be coming down the pipe in terms of new supply of debt to to either buy back shares and or buy companies from from company A to company B, whether that's private equity or from financial buyers. You know in the UM, you know space of company A buying up here you know, Uh, Jason, I just punched an I N go to get the Bloomberg Index browser, and I see the total return for US corporate bonds off negative

thirteen point three six percent year to date. So you are, at American Century, a member of the Global Fixed Income Investment Committee, which sets investment outlooks for the global fixed income group. Holy cow, what do you tell your teams? What do your teams tell you after a minus first four and a half months of the year. Yeah, it's

just a fair point there. Um. Certainly growth is slowing. Um, the FED is trying to combat inflation, and you know, as early as two plus weeks ago we had Chairman Powell saying they will do what it takes to bring inflation down to two. Now we're starting to hear some some rumblings of perhaps will will pause in September. We had Bostick out yesterday talking about September is is maybe a point where we'll wait and see on the data as far as the outlook goes. You know, I know

recession is certainly on a lot of people's minds. It's certainly a discussion point for US internally. Um, that's not our base case at the moment, I would say we're more in the stagflation camp, where we think inflation will remain stubbornly high. It may come off of eight and a half percent, but it will remain high. And then you have a consumer having this negative wealth effect, and so we think growth is slowing. It's gonna it's gonna slow dramatically in our minds in the second half of

this year. So UM, I wonder what what you're telling then, investors? I mean, you have what two billion in assets under management. UM. You've seen obviously market pullbacks of the past, but they're different from this, right, this is UH fiscal a monetary stimulus driven UM issue. How to investors in fixed income deal with that? Sure? UM, you know, for sure taking on higher quality, more liquid risk to us makes sense,

particularly in the front end. We think that credit spreads and rates have repriced enough where you can start to dip your toes in and and earn carry to help protect you in the event that rates do rise further. UM. The other area where we've really been focused on our story bonds bonds that have a catalyst, for example, rising stars UM bonds that perhaps you know are a bit more UM immune to this rising rate environment. Um, you know that would be non cyclical sectors, So we think

there's reason for the point defense here. But there are opportunities and dislocations that we see that can benefit our client's portfolios. So in the corporate sector, are there sectors that you guys like at the moment um? You know, some people suggested, you know, healthcare or you know some of the real tried and true areas of technology, whether maybe some exposures to the cloud or cybersecurity, and think things like that. How do you guys think about the

corporate space? Shut high quality, single A and and better offers what's perceived to be safe spread. The challenge with that though is M and A and we think that you know, as valuations, asn't mentioned before, become cheaper, particularly in equities, companies will be more prone to to level up and perhaps um issue additional debt at concessions and

hurt us as bond holders. We prefer to be buying these companies after the downgrade, after the event takes place, and we think we can get them at cheaper levels. So we're we're really not favorable on on healthcare and tech from an event risk perspective, and in fact we're underweight in those two sectors. What we like at the moment is high quality, highly liquid front end on We think that those offer value here and they also insulate

us a bit from event risk. And I'm talking more particularly in front end banks that don't have this type of event risk, and we'll benefit from a rising rate environment. By the way, before you ran investment grade credit at Aberdeen and distressed dead at RBS, you went to Penn State. Dan, I've happy as well, happy value. Is it beaver Stadium? Is there any chance, uh, you know, this year looking forward to for example, when you when you get to play the Ohio State buck Eyes, is it going to

be super depressing? Is there any reason to believe in Penn State? We we support them in thick and thin, for sure. The Nitney lines always come out and leave their heart on the fields. And yeah they lost a lot of players last season, but we'll we'll still support them and think that the rising stars will all right. Good stuff, Big fan to Jason Green, the senior portfolio manager American Century Investments. 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 fall Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio