State Of U.S. Infrastructure Demands Bold Action

parties to talk about legislation. What can they get done. One of the key topics, of course, is infrastructure. So is a perfect time to chat with our next guest, Ed Mortimer, he's a Vice president for Transportation and Infrastructure at the US Chamber of Commerce. And Greg Reagan, he's a president of Transportation and Trades Department at the A f l C I o U. They both join us here today to talk about infrastructure. And let's start with

you here. You know, from the Chamber of Commerce's perspective, what do you think or how much should UH we allocate this year in this upcoming plan to infrastructure? What's the number in your perspective? Also, thanks for the opportunity to speak from the business community's perspective. This is a critical issue as we're getting through a pandemic. UM, we need to have a federal vision and investment to build

twenty century infrastructure. And so we're teamed with my colleague at the n f l C i OH to say in action is not an option UM. And we look at infrastructure in in a in a in a broad sense. We look at our physical infrastructure, focusing on our transportation networks, our water systems, woral broadband, our energy grid UM. And so you know the investments that need to be made. We need to not just fix what we currently have, but we need to know with autonomous vehicles and drones,

we need to modernize. And so you know, the numbers are high, but I will tell your listeners the numbers of doing nothing are pretty high. To the average American loses dollars a year due to inadequate infrastructure. Currently, our economy loses seven billion dollars lost productivity. So doing nothing actually cost us more than making the investments necessary to provide long term economic growth for our economy and modernizing

our infrastructure. Why has you know, I've lived obviously for decades in America, and I've lived UM for a little over a decade here in Germany altogether, both economies have crumbling infrastructure, and these are the leading, you know, industrial economies of the world. Why have we let it go for so long? Greg, I think we've just rested on our laurels. We are, you know, we built it up.

We made the massive investments to build the interstate highway system, to to build out Amtrak, to do UM, to make these big things, and then I think everyone said, well, but job is done here. Um. I think there was an austerity period in our in our government that that is hesitant to make any big investments. And frankly, we've

waited too long. Everything has and and unfortunately that's the way sometimes government works, as you wait until wait, until it's it's right in your face, before the problem is right in your face, before you have to solve it. But I think we're past that point now and we need to have the leadership and have the federal investments that can can rebuild our infrastructure and make us a

modern competitive country. Again, Greg, how much of infrastructure spending generally do you think should be some type of public private effort as opposed to simply the government coming in we think there is a role for P three's public private partnerships in our infrastructure. You know, in general, I don't think that is the primary solution here. I think we need big federal spending UM, and the states and

local governments will meet, oftentimes sharing that cost as well. Um. There are some places where P threes makes sense, UM, but I think that is for US. It's a relatively small part of the overall pie. And you mentioned, UM, this isn't just you know, the plane vanilla infrastructure that we that we think of, um, roads, bridges, ports, airports, But the bill that the President has proposed is also about childcare and nutrition and you know, broadband deployment. How

important is that other stuff to the US infrastructure. So I think that's kind of what the debate is going on right now. As you mentioned, President Biden put up the American Jobs Plan, which included a lot of the care economy, and we can again from the business community, we think those are important and they need to be addressed. But I think we're trying to get bipartisan consensus so we can actually get a bill to the President's desk

this year. And if you look at the Republican counterproposal that was put up by a Senator Shelling Moore Capital. There does appear to be some bipartisan consensus that the physical infrastructure is something that can be addressed in the

federal legislation this year. We may be able to tackle some of those other issues down the road, but let our view is let's get what can get done this year now, and so that would be more focused on the physical infrastructure, and then let's continue that conversation and see if there are other ways that we can address some of the other issues that the President has brought

up through the American Jobs Program. Greg, I guess from labor's perspective, what do you think of the top two or three items on your wish list that you'd like to give to President Biden In Leaders of Congress here, we would like to see what you know, the American's Jobs planned. However, how our Congress ends up finally addressing that.

But the key part for that is is the big upfront investment in our in our various transportation systems, um you know, a stimulative type of investment that will sort of reset the standard for our country allow us to get some of the big projects done like Gateway for instance, or the big people I mean gate Gateway. It's insane that we haven't done that. We're talking about over a hundred year old tunnels, um that are I go through them.

I go through them twice a day, and I kind of have my fingers cross every time we go into the tunnels. It's it's it's amazing. And and the fact that we haven't found the you know, in the we're our GDP UH is supported by that region and we can't six hundred year old tunnels, it shows that our priorities are kind of out of whack here. And if you go down in Baltimore the B and P Tunnel, that one was built during during US grants first term as president, and that has that hasn't been been addressed.

So you know, but we need the big money from the federal leadership to get from the federal government to get all that stuff done. And then you know, when you look at those big projects, they're going to succeed when a lot of the local spending, whether it be transit, whether it be other rail projects, highways and bridges, airports, all of these things need to be upgraded, and they they're going to rely on each other to be successful down the road. All right, and this is UH. This

week is designated United for Infrastructure Week. It's actually the ninth annual, but I have to admit the first time I've heard of it. What what does that campaign hoped to then accomplish? Paul, So, I think you know you mentioned this is our ninth year, and so you know we're glad to see it's taken a nine years, but we're now at the top of the federal agenda UM and this year our our theme is U Lead with

Infrastructure UM. In Action on infrastructure this year is not an option from our perspective, and we truly want to see this federal legislation bipartisan solutions that will provide a long term blueprint for infrastructure moving forward. Ed Mortimer and Greg Reagan, thank you very much. This is Bloomberg. Now, as fall said, we're gonna bring in Brian Smallock right now. He is a principal and portfolio manage. You're at Hood river Hood River Capital Management. They have three and a

half billion dollars under management. Brian, UM, let me first get your reaction to the inflation print. It was twice as high as the highest UM the highest forecast I guess in our survey, and if you look at the core number, the biggest game since Yeah, the inflation is definitely ticking up. When we talked to our companies, you

see it across the board. It's not that surprising to us, given the amount of money that's been printed, how expansionary money policy has been, and the fact that we're paying people to not work. So you're seeing you're seeing wage pressure as the economy is coming back with a vengeance. So that combination isn't great. I think it's going to persist. And you have to take an account whenever you're looking at any sort of stock, can they manage cost pressures

or Martin is gonna hold up? And as the top line benefit of reopening outweigh the negatives of cost pressure coming from inflation. Brian, You guys, uh, they're managing. Focus on small cap stocks, give us a sense of kind of how they've been performing kind of throughout this pandemic and kind of what what's your view of that kind of that part of the market right now. So small cap has been extremely strong since the pandemic has broken. There's been multiple reasons for that for that to happen.

Small cap companies have more domestic focus, so the top line is held in better. Small cap companies are also more nimbles, so they can adjust their business models um. And and they don't have as much currency exposure, so so that's that's so that's a good thing too. Um. If you look on an absolute basis, the Restle two dozen growth index last year was up almost so it's huge. This year, it's not up as much, but you've seen a big shift front within the index and within small

cap in general, from growth to value. So it's just been more important over the last four or five months to pay attention to evaluation, which it's obviously something that we focused on up the river. Will small caps get hit harder by wage pressure? I mean we talk about people not wanting to come back to work if they're getting paid to stay home essentially, and Paul and I hear this from you know, hotel operators, restaurant owners, et cetera.

But the bottom line is, um, if you pay them more, they'll come in right, So, uh, is that going to hit smaller businesses harder? I think for the most part they'll laeable to manage through it. And hopever, we can do it on a case by case basis. You just want to be in businesses that have pricing power and can put through cost pressures in a relatively time timely fashion. So like, for example, if you're a banker insurance company,

you can do that pretty quickly. Um, if you're selling actresses, you can take up the price your mattresses if demand exceeds supply. So for the most part, I think it's okay, but they're going to be surprises and you have to be able to manage it. And that's that's why in small cap it makes sense to use an active manager because it's inefficient. You can figure out what businesses are gonna be able to adjust to the dynamic inflationary environment. So, Brian,

I know you guys are overweight financials. Talk to us about some of those regional banks. Why you like that part of the market and presumably seeping in yield curves to their benefit. And presumably I guess a reopening trade to the economy has gotta be good for their their

loan book. Yeah, exactly, so, so you have loan growth that's going to be accelerating in margins which are basically at all time lows because the yield curve has been terrible for their business, and now if that improves, you can see a dramatic uptick in their margins and acceleration their loan growth. And the stocks are relatively inexpensive. When we look at the rest of the market, you can easily find a regional bank that trade anywhere from ten

to thirteen times earnings. Compare that to your typical tech stock or biotech stock or software company. It's a lot more expensive. Those stocks were run up during the pandemic, and that's part of the reason why you've seen this trade from from growth to value. It's because you're seeing relative value of companies like regional banks. They are seeing their business has improved and they look absolutely cheap. Then

your pick is Western Alliance. We like Western Alliance. We also in Try State, which is another one the reason why I like Western Alliance that they've had a good loan growth franchise or extended period of time. They grow their loans north of teen percent. They have a best in class efficiency ratio covering it around. They just did a really acreative deal which we think is over thirty

of creative earnings called the Mara Home. So the earnings estimates need to move up fairly substantially for next year, and it's cheap and around eleven tents earnings. You also like Purple. You mentioned mattress sellers, and I thought, what's that? Where's that coming from? But I see that you like Purple, and I know they are a few Bloomberg anchors who sleep on those mattresses. Yeah, so the smallest, just about three of them. Uh, And we like it. We we

like the product a lot. Uh. It's a lot better than a than a phone mathress, which which tends to sleep a little hot and loses the shape over time. Us the only one that has a special polymer. And so so it's so so there's actually no prusch. You cantually put an egg under you soft soft related anyway. So so so Purple is stealing ship. They just prenounced the quarter yesterday to beat on top line, and more importantly, they beat on margins. All right, refinitely give it there,

But that's a good name. We will do some more digging there. We'll chat with you coming up soon. Brian Smaller, Principal portfolio manager, hood River Capital Management. I want to bring in Mike McLane or commodity strategist for Bloomberg Intelligence, to talk about cryptos, and Mike, we do talk to

you on a reg basis about cryptos. One of the things we've been hearing a lot more and more of the past months is these uh, these currencies or these blockchain systems are becoming regulated and becoming more acceptable and and and getting into the mainstream, which to me, you know, as a kind of libertarian, red blooded American, is such a bummer. That's why I am so pumped about the

Internet computer. It is putting another layer of censorship protection between you know, ethereum smart contracts and and and users. Plus it's been wildly popular talk to us about this new um, this new system, and it's got a utility token of course. Well that's another thing we both have in common, Matt. We both have that Midwestern sensibility. I'm from Chicago, You're Cleveland, right, and you know Columbus Columbus, We go Hi, we drive boy the many times in

the Interstate eight. And I'm trying to understand more about what it really is. But what it's what it's catching me and grabbing me is there's so many signs of two thousand seventeen, like things kept coming into space like you. You and the Internet computer might have a good solid use case. I just haven't dug into it much lately. In fact, just I just sent to editors my my theory um Um technical outlook because I want to write

a primer on that for next week. And then I look at I think, look at then you're gonna love it. I had to say, Mike, you are going to love it because what this does it doesn't necessarily compete with ethereum, but it helps Ethereum work on a decentralized Internet. So you know, right now, if you're using ethereum smart contract, chances are you're using it over a website that's hosted by Amazon Web Services or Microsoft, and then you get this big tech governance layer in there that can affect

your transaction or um you know, your outcome. But what the Internet computer does is um It's blockchain works over a number of many, multiple different servers around the world, none of which are at any time in control of your contracts. So it completely decentralizes um the the use of these Ethereum contracts over the Internet and takes out that layer of control that you know big tech government would have if you are using it over Amazon or Microsoft.

It sounds like a win win. I'm so impressed it jumped up so fast. UM. And how long has it been around I mean just recently as lunch right. Well, they've been developing it for years, but UM, it's only recently UM been put out there, UM on display and immediately was brought into trade on coin basically started trading on Monday. It's already worth forty eight billion dollars in

market cap, one of the biggest cryptos out there. But the token itself, which is what I keep trying to tell people, isn't as exciting or important as UM, the blockchain platform that they've created, which is the case for so many of these things. I've noticed. It's a coin market kept on dot com. It's number nine. It looks like it's moving up rapidly. But to me it makes complete sense. Is what's happening Like with Ethereum, everybody's realizing, oh wow, this is the platform for the space. Looks

like this is a major company. When you look at things like Tether, it's most widely traded on the entire space. Tether is an Ethereum token, and it looks like they're all just complimenting each other and the rest of the financial world, like we come back to our own backgrounds, like us young as older people have to say, which just embraces technology, and that's what I see them as

happening Wall Street financialization avances. You say that as you look at that list of the top cryptos, what I don't see is a JP Morgan branded one or a Wells Fargo branded one. To me, it's still as I listened to some of these you know big banks, cus they're still not there, are they. Oh no, well they're not.

They're also And then there's an investment case. You know, you what's really stilted this year's if you don't add bitcoin to your portfolio, allow your clients to do it, you're gonna lose money and you may look look really bad ten years from now. But things like dose coin you can't. That's just expeculative. So we have to differentiate

the difference. It looks like to me, we have a major use case for intricate net computer and then you look at dose coin that's just gambling, so trading versus investing. It looks like in the computer Internet, and it's annoying that investments in the investment bucket. It's to me, it's annoying, you know, because and I'll say this, I'm not long crypto, so just everyone knows, you know, I have used this

in the past. I might have fragments of a bitcoin in a locked wallet, but which because I'm because I'm reporting on it, I never really thought it would be ethical to buy it. I wish I hadn't been so ethical because I'd be driving the lambos right now. But I just think it's fascinating and the does coin aspect kind of um, it's a b in my bonnet right because it's it's such a it's a meme coin, and it's so useless and meaningless. I mean, it's not useless

obviously anymore, because it's worth a lot of money. But it annoys me when people look at the Internet computer which has a silly name, and then they think, oh, this is just another meme coin. Well, this is definitely not another meme coin. I know. We can see that. The key thing I think people need to differentiate about things like dose coining. And I have twenty something kids and all their friends that's what they talk about that's what it's fun. It's like more than kids exactly in

their twenties. And but that's what they you know. Just think of the money you might have spent at a bar or a restaurant, or to a game, or going to the track or going to a casino. Why not we can't. You can do it on your phone with your friends and drink at a bar and double dog there each other over social media. And to me, that's what's happening on a global scale. But then I look at it in a computer and whoa, this is impressive.

But this is part of that rapidly advancing technology overwhelming us. I can't buy it on DraftKings. I don't think you can buy dose corn on draft kings yet. But maybe along with your black jack hands and poker and it's all a boy, you could pick it up. Recommend their strategy Mike mcloan Commodity Strategies for Bloomberg Intelligence. Thanks for joining us. This is Bloomberg. Let's get over right now

to Calm Vault. The CEO, Sanjay merchand Donnie joins us to talk about what businesses can do using data, maybe differently, in order to increase the their or reduce their integrity gap increase their success. Sanji talked to us about what com Vault does. First. Umball has been in the data business since the beginning. We've been around twenty five years.

This year's our anniversary as a company, and we help customers and what we call that data journey, which is about really how they store, protect, manage and use data UM And we do this through a series of um Intelligent data services delivered you through the cloud or on premise.

So you know, we've been in the data business all through and that's what we do today, all right, Sanja In you know the prior fourteen months, the way everybody goes about their daily lives has been upended, the way we work, the way we learn, doing it much more

on a remote basis, was corporate America? Was the average household ready for this from a data perspective, a data storage, a data retrieval, a data data security perspective, You know, absolutely not, Because what happened was, you know, I like to think, I like to simplify things, and in my mind there were were sort of seen three structural shifts in the last fourteen months. First, when the pandemic came upon us. It was all about, gosh, how do we

get people working remotely? How does this even happen? So you know, things like firewalls and getting them laptops and

changing business process that they could do things. We got through that, um, you know, and then quickly got into the phase we said, how do we optimize this, you know, how do we sort of really make sure that we're doing this right because this is here to stay and that's been going where in the throes of that and then now we're sort of seeing a third structural shift that's happening where folks are you know, quickly moving to

public cloud services, quickly moving into digital transformational capabilities, and this is where data becomes key. And all through this journey of the last fourteen months, what's really come to before is that that enterprises businesses that are looking at data as a as a vital asset our ted would will tend to do better because it's it's you know, it really is now the lifeblood, the core capability inside

of a business. And what we do is all the way through we've helped customers really do that journey, you know, make sure that as they transform, as they go through these structural shifts. Data is front and center, it's being protected, it's giving them the asset to analyze to run their business with. So I'd say that you know, no one was really prepared and just for what would happen data protection or or you know, using data really turned on

its head. But we've been resilient, we've been quick, and we've been able to as a you know, um as companies don't turn around and help and and really get there. So I think we're much better today that we were fourteen months ago, and we're not going back. I mean, how much of it the sticky sound? I think a lot of it is thinking. I think you know what it's taught as is UH. You know that there are

benefits and being able to do things remotely. You know, you don't have to go into your data center for everything. You don't have to travel across the world to have a meal with a customer, UH to close the deal. There are many other ways you can you can get this done, and I think there are some benefits. There's also some some downside. You know, there's a lot of burnout, there's a lot of you know, screen time that that people are happy to get away from and get back

in person. But I think there are some things in here that exam will stay remote, light touch, Uh, these are these are good things, um, digital transformation, these are good things, and I think they're here to stay. Sun. One of the things we're concerned about with more and more remote work remote learning is the security of the data. And we see that yet again with a colonial pipeline

hack and that the problems it's causing. Where do you think you know, it takes me when when you look at the companies that you work with, where are we in terms of really securing our systems and our data? You know, this is a continuous thing. Um, let's let's let's be oversimplified. You know, the bad guys, what do they want? They want the data. It's not about the infrastructure,

It's about the data so much. And uh, and the new frontier is really is really the digital the digital asset, which is effectively, I hope you know, is the data. So what we have to do is really think of data as the assets that you have to protect in different ways. It's not just physically you know, putting you know, putting bigger walls of modes. It's really really saying Okay, what data matters, Where does it live, what are the policies we want to have it around, who gets access

to it? And so it's really it's really doubling down on the way we manage data and the way we think about data. That becomes key, you know, because the vectors will keep changing. A few years ago it was a different attack vector. Today it's it's ransomware. Tomorrow it will be something else. What really matters is what are the core assets, what are the concentric circles of data

that really really run your business that are important? And how do you protect that your I p H. And what we do is is, you know, you're never a hundred percent safe because you know, things just keep you know, the the attack surface just gets keeps getting better. What we have to do is help companies, help businesses who who don't, who weren't built to have Pentagon level defenses

sort of protect their assets in a simplified way. And and you know, we're constantly from up We don't a security company, but where we look at data as being the lifeblood of the business and we do everything we can in our technology to help customers manage that better, protect that better. UM isolate keeps things better. Um, but it's a it's a constant journey. Hey, Sanja, thank you so much for joining us. We really appreciate you taking

the time. Sanjay Merchant Donnie, he's the CEO of Convolt taking a look at companies data storing the data, are retrieving the data when that data is lost in so clearly, Um, that is becoming a bigger and bigger issue for most companies here, particularly data sensitive companies. As more and more work goes to the cloud. As we work more from home, perhaps learn more from home, more data is being in applications quite frankly, are being put up in the cloud,

and data security becomes a key issue. 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.