Tesla, Economy, Tech, and Anti-ESG (Podcast)

singh Uh. He covers technology. Kevin, he's in our studio. Kevin Tynan joins us on the phone. He covers the auto sector for both of them for Bloomberg Intelligence. So we're getting our money out of Bloomberg Intelligence this morning, which is the research department for Bloomberg customers. Be I go on the terminal. Kevin, let's start with you here. Um, is there a demand problem for Tesla vehicles out there? There is, there's probably a demand problem for everybody, all

auto makers. But I think, wait, wait, wait, wait, let before we get started, Kevin, let's set the scene here. You're in Vegas. Yeah, Now, the CS is a consumer electronic show for those who don't know. But it's really not. It's really the auto show, which has some electronic stuff around it. It has become that it is unbelievable decade, which is now why Kevin might not even go to the Detroit Auto Show, which used to be like the super Bowl and automakers. So Kevin, just before we get

to Tesla, gives set the set the stage here. What's going on at CES? What do you expect to hear? What do you expect to hear from the auto companies? Uh? This year? Well, most importantly, where are you staying? Do you have a suite at the Bellagio? Uh? Mike Dean? Are European guys at the Bellagio? I actually have time share? So I just come and stay in my league. You've gotten share in Vegas. My man, pots and pans, as they say, all right, Michael Dean, he's the class act.

He's got the bags, all right, Kevin, So talk to us about CS. What are you looking for? Yeah, there's a hopefully it's a big bounce back from last year. Last year as a ghost town, c e S was absolutely dead. Um, just from the people reaching out and companies reaching out this year. It seems like it should be much better this year. A lot of still a lot of autonomous you know light our self driving software companies.

It doesn't seem like it's going to be as much you know from the O E M s this year about you know, EV products or I think it's going to be a lot of that ancillary businesses, infrastructure, um, you know, autonomous driving. It's gonna be a lot of things like that this year. Nobody with the final solution per se, but a lot of the moving parts up to that. All right, so uh man, deep, where do your world's collide here? Why are you not in Vegas?

By the way, well, I think the AD companies don't like to showcase a lot of their stuff when you look at you know, what alphabet is to wing even though they have a Waymo unit which is also an

autonomous driving a lot of their AI. When you think about their capabilities, whether it's on the third side or add side that they don't talk about it as much in terms of you know, these kind of shows, and they are more device driven at the end of the day, you know, it is um more focused towards devices and that's why, yeah, not something but there's a lot of the stuff running on Azure. The cloud. Companies have their own kind of events. You know, both Microsoft and AWS

have their annual conferences, and they don't. I would just imagine more and more of uh technology is I mean, we know more technologies in the cloud. Cars are becoming technological little you know, driving cell phones. So I imagine you know, a lot of the stuff that I type into the like Google Pad in my Chevy Silverado is stored in the cloud. Well so us because it's stored in the cloud doesn't mean you know, it's at the cutting edge that that ship has selled. You know. Now

we're talking about what can you do next? In terms of open chat, GPTs the new craze. Now, the reason why people are excited about it is because it kind of disrupts the Google search dominance around showing links and clicking you are else. This is more about generative AI using large language models, and a lot of that was in the academia for all the longest time, but now

suddenly it's hitting mainstream because of cloud. Cloud gives you the processing power to do a lot of these things, and I think that's why we are talking about it. All right, Kevin, So we just in terms of maybe not just Tesla, but give us your sense of how this demand for electric vehicles is going to roll out, you know, over the next couple of years. Again a little bit of a disappointment there for Tesla. Uh, most recently,

how do you think about that bigger picture? Yeah, you know, and I'm and I'm starting to lay out, you know, the mindset for the next at least year plus. And you know, the thing I keep coming back to is that, arguably you know where we are now in terms of ev discussion, hype, whatever you want to call it. You know, I feel like it was the germ of the idea was was from one person, right, and media and markets and investors and governments and other automakers eventually brudging lee,

kicking and screaming got on board with that. You know. But I wonder if the you know, the real science

behind the transition completely away from internal combustion completely to electrification. Uh, if we're not getting the full story right that when you go from minding of materials for the batteries, who controls those materials, what those materials cost, all the way through the process of how we're going to consistently charge that many vehicles UM to the disposal of the battery is something that I don't think anybody's really wanted to

talk about. I think the markets and the media is focused on tailpipe versus no tail pipe, and I think there's a lot going on in the process that is just sort of glossed over. And I think in this market and in this economy, UH, that due diligence and those questions are gonna be asked more seriously, UM, And I'm not sure people are gonna like those answers no. And you know, ironically, well, I never know if I'm using the the word ironic correctly because I grew up

with a lot it's more a set. But it seems ironic to me, UM that the Biden Administration's I r a UH legislation is what kind of pulled the curtain aside, right all of a sudden, after the Biden administration put this ira A legislation out that's supposed to give um tax rebates or attacks incentives to companies that produce in the US, you know, batteries with components and ingredients that come from the US. No one really knows what what that was where they where those things came from, or

didn't ever really give it a lot of thought. And now the Treasury Department is sitting on this legislation, like

what in the heck are we gonna do? Because nobody's going to get this tax credit unless we let you know, all these American producers use Chinese chemicals in their batteries, right yeah, And I and I think you know that my concern in terms of ev adoption is that, like you said, when you pull back this curtain, or when you start asking real questions, which nobody has had to do because the stocks just went up, right, and that

you know that that the end justified those means. Is that now if we start asking real questions or difficult questions, I'm not sure you know that those answers are what necessarily we want to hear. I mean, Tesla does its semi launch. It's a megawatt of power to charge that thing. Think of a truck stop along the highway. I just

drove sixteen hours straight from Florida over the holiday. You know, I think I think my longest stop was seven minutes, right, And but think about those truck stops that I pulled into that if those are if those are charging electric center, Like that's a small city in terms of of a power draw. Um, you know to do yeah, just to do what we already do now. Alright, alright, good stuff, alright, good stuff on the auto front, real quick? Uh man deep.

What's the theme for coming out of tech? Thirty seconds? Free cash flow. Everyone is fixated on free cash freelove. And that's why you keep hearing about layoffs because investors want to make sure that these companies are making money, whether it's a marketplace company, think like AI or VR Juicy, I think of those big juicy margins. Mandy Sing, senior tech analysts Bloomberg Intelligence, joining us here in a Bloomberg interactor broker studio. And Kevin Tyne and senior auto analysts

Bloomberg Intelligence. He's at Vegas. He's at the Consumer Electronics Show, which is hundreds of thousands of tech geeks get together in the desert and see what the new toys are that's coming up. This is Bloomberg. We want to get a preview here. Three outlook on the big banks, the investment banks, the asset managers. There's nobody better to do that with. And Alison Williams. She's a senior global analysts covering all the financial services companies for Bloomberg Intelligence. She

joins us from Bloomberg's sprawling Princeton, New Jersey campus. Man, if you've been to the Princeton office, it's great. And they just and they just redid it, right, Allison, just did a big renovation. They did all right good stuff. I mean the little bit of Princeton one time. Really, Yes, need to get out a little more. There is a university there right. My buddy Brian Sullivan from a network that I will not name, lives there. So best hoagies

in the world, Hoghaven. Just a little plug there, Allison. What's the key theme that you're looking for here in I mean, I know we're gonna have some bank earnings coming up in a few weeks, but what are some of the bigger themes that you and and and big bank investors are looking at. So so, obviously the big question is going to continue to be recession, right, so that the depth of the recession, the length of the recession, um.

But I think what we're focused on is the overall level of profitability at these banks and just um, you know, the incredible power that they have to withstand UM even a deep recession. Keep in mind that the last two cycles we had were crises, right, So we had the

pandemic UM and before that it was the global financial crisis. UM. So as we go think about session UM, you know, that might be sort of in the back of investors minds, but we think that the cycle looks a lot more like you know, that of two thousand UM, and we think that regardless of the provisions, regardless of the change in accounting that's going to make those provisions very front loaded. UM, the banks are in a great position to weather the storm.

And then specifically to the investment banking unit. You know, UM, we're going to hear more and more stories over the next couple of weeks about some of the head COUMP cuts and some of the COMP cuts. But I think that you know, again looking back to the global financial crisis, you know, we will see some reductions, but nowhere near what we saw back then. Yet revenue is within that range.

So the profitability UM of these banks is really strong, and we think that that's what investors should be focusing on. So UM, basically, the net interest margin works out too offset the higher loan lost provisions. What if we do see though a ton of defaults coming up in UM, what if we see that those loan lost provisions aren't just provisions but actually you know, necessary. So I think you know the best way to frame that or think

about that is UM. You know, Jamie dimond Um gave a great scenary analysis for JP Morgan, the bank that he runs, on the last earnings called you know, if we see six unemployment, we could see six billion of added provisions over a couple of quarters. That number for UM in the pandemic was closer to fifteen billion over

a couple of quarters. UM. So I think that gives you a sense of um, you know, sort of the magnitude there and so UM you know, net interest income, you know, the growth that we have last year was tremendous. We're not expecting UM similar growth this year, but it but again we're at sort of a high level. And then again, as far as trading goes, we think that

there's still more volatility and fixed income. Could we see some moderation um, you know, from the extraordinary levels of this past year, Yes, but we think we remain in a historically high range The same is true for equity trading. Equity trading was down over the past year. But but again historically, high fees are going to be the big question. And I think that's the one thing that we're going to be looking at this quarter in terms of setting a run rate for the year. You know, I p

O s um. We're far in few between last year after a record We have pipelines that remained sort of full over the past year, though getting a bit stale. Can those be executed? We're entering the year. You know, granted things were choppy in the last fourth quarter, but we we did. Stocks did end the year higher versus three Q And will there be companies taking advantage of that um to do public You know, there's still a question around UM, you know, pricing expectations. Obviously those have

had to reset compared with a year ago. But that's what we're looking for in one queue. How much of that can come to market? Hey, Alice, when I think about you know, um, the Wells, Fargoes of the world, the city banks, the Bank of America's I think of corporate lending, consumer lending and loan growth was something that has talked about a lot. How is it out there? Are companies borrowing? Are are people borrowing to grow to start businesses and things like that. I think, you know

what we'll see in the most recent quarter, um. You know, a couple of things that so commercial balances um, you know, really slowed last quarter. But a lot of that UM was you know, attributed to some of the banks talking about trying to restrain their bounty because they had to move up their capital ratios, right, and so the way that they moved those up is by reducing the denominator to to look a bit healthier. UM. So they said that, you know, they expect this quarter that might normalize a

little bit um. So, so we will see the capital markets. The bond market did open up a little bit in the fourth quarter, UM, so perhaps some might have gone a little bit more might have gone to the capital markets, but we expect to see some growth. I think the real question is on the consumer side, and especially on the credit card side in general. Fourth quarter is the strongest quarter, obviously due to holiday spending. And we'll see if consumers are borrowing um and then we're gonna be

you know, the one side. Are they borrowing? Is it healthy borrowing or is it constrained borrowing? And what's happening on the credit side of things as we head into alson just real quickly. I know you also follow the asset managers, the black rocks of the world that hero prices. What what's the call there for twenty three for those companies. I mean, I think things still look healthy. You know,

we sort of face our forecast there. You know, it's all about the It's all about the markets in terms of the current earnings and our equity strategy team, UM. You know, things were about flat farish value, so not expecting much either way um over the next year or so. UM. But you know, in general, investors want to see flows and so while their earnings relate to the markets, flows

really can drive evaluations. UM. You know, again, relying on our strategy team's forecast, value looks like um, it has the edge. So we expect managers such as t ROW may continue to see pressure in some of their growth funds UM, hopefully offsetting that with hopefully for them off setting that with some of the retirement money. UM. But in general that the I guess the one exciting thing

will be active versus passive. This is an environment that favors active uh, you know, higher rates, lots of volatility, low correlations. Um. So we'll see if that can give active last All right, good stuff, Allison Williams, thanks so much for joining us. We always appreciate getting the overview of the big banks, investment banks, asset managers, jillions of

dollars under management. Allison has been covering those companies for decades. Uh. And she's the senior global banks and asset Managers analysts for Bloomberg Intelligence. She's based in our Princeton, New Jersey office. Lots of good folks down there doing good work. Really the backbone of some of the global data that we all depend upon for the Bloomberg terminal. This Chris Bloomberg. I s M data came in, uh, you know, kind of mixed data. But the new orders came in lower

than last quarter. We want to get our last month. We want to get the bottom of all this. We welcome Tim Fiuri. He's the chairman of the Institute for Supply Management otherwise known as I s M. So Tim on the numbers you guys reported this morning, Matt and I want to start with with the new orders at forty five point too, was that a big concern for you. Yeah, I got it. Well, it's a bit surprising. I'm waiting for for sellers to come back in and negotiate with

buyers to get the new orders flowing again. You know, I look at I look at demand, new orders, new export orders back while I was in customer inventories, and the new orders had the single biggest impact on the p m I declining month over a month at a two point loss. So, you know, a bit of a surprise here at forty five point two. I think you know, back to your common Paul earlier on the show, that when things get down to forty five, they get a

little concerning that. That's been my experience on the p m I overall number. So we're still at forty eight point four. I've been saying now for several months. Forty eight to fifty two is probably the range that we're gonna be running in for quite some time. It feels like that's exactly where we were in December. I'm makes us to move into January because December was a really weird month. We had a lot of seasonal factors. Take

take the numbers up. I think the non seasonal number would have been about not unusual, but then a lot of people went home early, A lot of people took all the vacation. I think people re up for earlier than they normally do. So yeah, I'm a little concerned about the new order number. Our prices have come down a month over month. Here seven percent of the respondents indicated same of lower prices, same as in November. Uh, I think there's there's probably a more fundamental here. So

percent of manufacturing GDP is now in contraction. That means it's nine or less. The alarming numbers that it's contracting, it's forty five or less. So that's up from six total in November at less. So we're not on a good trend here. But we just finished our forecast. You guys have you know, we believe to each other on the Business Panel believes is gonna be a lot like two that the second half of twenty three is going to be quite a lot of uncertainty here in the

first half. I wondered, Tim, I mean, aside from the you know, concerning amount of contractions that you're seeing, Um, is the data less noisy now me than it was last year? I mean, are we getting back to normal, even if we're talking about, you know, a normal recession. Yeah, definitely. I we this is like three or four months, it's

a normality. I think back in September October I pretty much said, hey, the numbers that we have now, so it's not a supply constraint expansion that that the suppliers delivered much better. Prices started to come down, so I think they're much more normal, but it's gonna take probably a little time to get there. At this point, I would say we're in normal economic contract and expansion, meaning

we're waiting for demand to come back. If demand doesn't come back in the next two or three months, then you're gonna see a lot of suppliers having to release people. And nobody really wants to see that. And I think the reason why the new order level isn't accelerating is because we still have very long lead times. There's still

thirty five percent above troth Ley times. If we got fifteen points of those back, I think bars would be much more inclined to go ahead and negotiate deals because the pricing has been coming down, has to come down to the right level, and probably not, but you know, you got delivering Cronser prices coming down, lead times just still stopping lee strong. So buyers are saying, hey, I don't believe these lead times, so I'm not gonna opt in.

Intellers are saying, well, you're gonna need to. This is all going to get itself resolved in the last couple of months for sure. All right, Tim, great stuff. I really appreciate you checking in there on this I s M data that was released this morning. Tim Fury, he's the chairman of the Institute for Supply Management. All right, let's pivot here and talk tech. And we talk tech for a lot of people. That means you gotta start with Apple. And I'm looking at the stock here. You know,

it was all twenty nine percent last year. That's up about one today. But we had you know, people are definitely calling the question the ability of Apple to continue to grow through what might be a recession looking likely in So let's bring in on a rock Ronic. He's a senior technology technology analyst with Bloomberg Intelligence. You know, the stock down kind of last year, ish, um, that's another performance for you know, the Apple shareholders that they're

not used to that. What's your call on the Apple story? These days. So I think, Paul, I think everybody is getting to a realization that Apple cannot grow in double

digits forever. And I think this is something we've been hopping on for a while, that this is a company at best on the top line will grow you know, somewhere around five and on the bottom line with buy bags and uh, you know, I would say a little bit of expansion, you know, EPs somewhere around n I think I think the world is coming to your realization this is not a double digits growth growth story anymore. And I think that the valuation is reflecting that now.

So can I get back to that story? I mean, what's the great big hope for Apple? Is it a car? Is it some sort of virtual reality glasses? Can they sell more of the watch? I mean, what, what's where's the growth for them? So? I mean, in all, honestly, if the global GDP somewhere around two and a half three percent, you know, growing at you know, six to eight percent is not a bad idea, I mean, in my in my view, but um, this year is going to be slow growth because of global consumer spending soda.

Next year there's going to be a rebound on that but I would say in the long run, this is still a story that is more of a high single digit growth story. Now when you talk about specific products, UM, you know you would see the iPhone installed based growth steadily over time. UM, air pods is a very big

growth story also. But again you know remember air pods, air watches and all these things they are they may grow in double digits, but from a overall you know, Apple's revenue point of view, they really don't contribute much

because they're very small portion of the overall time. All right, if if, if this is the stock I'm thinking about, as you know, an analysts, portfolio manager and investor, and I'm penciling and high single digit earnings growth And look at the pe today, looking at it's twenty times earnings, I mean, I'm paying twice the growth rate here. Is is that a fair multiple? I think? You know, this is where this is a marquee name for you know,

other reasons. If you were to put a DC evaluation on it, I mean, I I think the number you're going to get is slightly different because, um, this is a stock that can you know, that should in all logic continue to grow for many years to come. So you could argue that over the next seven eight years, this would you know, be a substantial portion of the overall you know, take framework when it comes to anything consumer devices. You you know, we expect a fair fair

larger number of iPhones down the road. So I think this is more of a value at a reasonable price rather than growth name. I think the is was treated as a growth name for the last few years. Um. I think this is going to be very very much like a Coca Cola or a Costco, And I would argue both of them are trade way more than twenty times earnings Baul, Do they have a Does Apple have a deep en up bench that you have no concern

about Tim Cook? I mean, he seems very healthy and he's young, but you know who fills his place if he needs to go in terms, and has done an amazing job over the last several years. But I would I would argue that Apple is one of those companies that does not need a revolutionary, needed or that big of a visionary At this point, the installed base on its products is so wide right now that you know it needs to figure out how it's going to sell

into that installed base. Most services, more content, more video and more accessories. So I I really don't think that we need that level of Steve Jobs kind of a person at this point for this company. I'll tell you what they need on or wrong. They need to listen to my advice here, and my advice is they need to raise their dividends. I mean, they got a dividend yield less than one percent. I mean, are you kidding me? I wanted to They can do both. I want a

two or three four percent of it then yield? Can you make that happen? Fair? Fair? Fair point, Paul. But I would argue that they're going to use close to a hundred billion and buying back their shares. If if you are a long term Apple chairholders, you know they would buy close to a hundred billion dollars. I mean, that's there's no company out there that generates that amount of free count. They can do both, They can do both. I don't know why they. I don't know why they.

If you're gonna pay a dividend, now, I guess they're paying it. If you're gonna be a value stock, well that's the thing they don't want even be paying with that brush. But I mean, I guess they pay this token dividends, So dividend funds presumably can buy and own Apple, and I guess that's kind of their strategy. But I'm like, you can afford to do both and put out a nice dividend out there. I think that would be a whole new set of investors. But my advice has been

falling on deafit. I'm going to say that Costco pays less than one percent dividends. Okay, So I'm I'm you know, I want you to think about Apple not so much as a technology stock that somebody can come out and take their business away tomorrow. This is very much like a consumer um, you know, discriptionary stock where you know something, You're right, Costco same dividend and yield, same dividend yield. So you've you're you're you're prepared for that question, I know.

But that's how I think about this company. I don't think about this company as a Microsoft or something else. This is something This is a brand that will remain with us twenty years from now. It is not going to be a tech company that somebody can come and take their market share away from them. That's not going to happen. So the real way to think about this company is something that is going to be able to

sell into that install base. And I never understood and when people ask me all the time, why is Costco trading get such a high marketple And the reason for that is because somebody like a Costco or a Coca Cola will be around twenty years from now and and

Costco is at thirty one times elearnings. So you you want to look at this not so much from a traditional tech point of view, Paul, but more so into these brands that will remain with us for a very long So is that how the market has a market transitioned from you know, looking at this as a tech s doctor just a big, big consumer name. No, that's what that's That is my argument that you have to think of this in a very different way because a lot of investors get into this with the idea that

you know, this is a technique. A car is going to come and completely change the nature of this business, and they're going, this is not how you want to think about this. This is a brand that is, you know, a central to our life as what we do on a daily basis, and this is going to do you logically remained with us for a very long period of time. You cannot say that about any software company. Frankly buying Microsoft perhaps that it is going to be remained with

you ten years from now. Well, each of them can be unseated tomorrow by somebody you know, new coming in. Both Apple and Microsoft are a part of your life. Um, the differences you enjoy Apple, right? No? I like Microsoft as well? Like what dude, not Windows? Surely? No? I mean I'm talking about enterprise application almost almost you know, they're the heart and lung of every enterprise that's out. And so I saw Ubs down. It did it today, and I think in part due to some concerns about Azure.

What's your view of Microsoft here? These days? It will slow down? I mean once again, I mean I'm not sure why the stocks start focus on what wouldn't slow down this year? Give me one metric for any in the enterprise business that's not going to slow down this year. So I'm I'm sometimes surprised about the stock reaction because you know, all companies have said aws said they're going to slow down, So why why are people so surprised

about it? So, I mean, I I my my two cents on this entire thing is people, it seems, want to be short thing, you know, tech going into this year, and how do they do it. They find Apple, they find Microsoft. There is no other real way to do it given the large market gap of it. So if if there is a multiple compression on this thing, so be it. And the long run, and I said this recently,

you know, look what happened with Southwest. Do you think the whole world is done with enterprise spending on technology? The world is full of legacy applications that are so old and so behind that they need to upgrade. So you think there are a lot of I think there are a lot of Southwest airlines out there that are big companies that maybe have underinvested in technology that for

whatever reason, they're gonna have to step it up. Yeah, I can give you Like you you could pick any industry out there that is so far behind what you're used to on your iPhone, Audio, Amazon app that is not the benchmark. If you look at those as the benchmarks for any enterprises, enterprises would get a grade of two to three on a scale of one to ten, whereas your iPhone would get somewhere around our nine or a ten. You have to invest. There is no way out of it before We only have a minute left.

But I have to ask you about the Apple car. It's due out in six which seems increasingly um you know, around the corner. But you don't seem that pumped about it, are you? Don't you think this is going to be a revolution. It's not gonna be a game changer. It would love to It will increase the market cap quite a bit. It will be a beautiful car, I'm sure. But tell me, in honesty and all honesty, if the price point of this car is fifty how many units

will be sold ever year? Well? Think about math point. Yeah, but but that's like that's like Rivan Tesla, the Ford Lightning, Uh, you know, the electric Selverado. These are all gonna be around there as well. I mean, you can't get into a night eleven for less than one oh six. Yeah, but but how many nine elevens do you do you sell each year? The Tesla to the Model three can be sold many many models. It's not a problem. But Apple is not going to make a car forty thousand dollars.

Apple's not going to get into that business. Lamborghini. Apple gets into a business but has a forty percent margins forty percent margin. Is only one company out there, Lamborghini. How many units do you think they ten thousand or they try, I mean Lamborghini Ferrari, they sell less than ten thousand. Eleven is about that. Let the answer to every question, the auto question, he comes right back to the Lamborghini example. I mean, you've done this once or twice.

They're capped pretty much at a ten thousand. All right, we're gonna let you go. We're gonna gonna let you go here. But we'll come back to this. I guess let's get him back on tomorrow. Let's get him back onto when when he's in New York. We'll get him in studio. So that's how we do it, because he's he's just you know, he's somewhere else, some undisclosed location. So we'll get back to him. But on a rock Ronda, he covers all things technology for Bloomberg Intelligence, giving us

his call on Apple. You had a little discussion there on Microsoft, but I mean, I think he still remains a bowl on Apple. But I'm sticking with my argument that they should they don't need to, but they should raise their dividend give shareholders that maybe a two or three percent yield as opposed to the zero point eight percent yield right now. O r f nan Oh yeah, I think that's like an et F for orphan stocks

or something like that. I don't know, but we got the guy who's in charge of this stuff, and he's gonna be ringing the bell the New York Stock Exchange, which is still a thing. By the way, Um, it's a good market. Have you ever shot during the bell the New York Stock Exchange? And I worked on New York Stock Exchange, but I made money on the New York Stock Exchange floor. Mark Newman, c io at Constrained

Capital joins us here. Mark Tuck to us about you're in our Bloomberg and ar actor Brooker studio, so it gets the gold star. He's usually based in Atlanta, but he's here in New York today. Mark. What is constraint capit? What do you guys do? What is O r f N because I'm putting into my terminal. Yeah, thanks a lot. So O RFN is the E s G Orphans Index E t F okay, so E s G Orphans Index. So this is companies that don't go into E s

G funds. So these sectors, the six sectors that I quantitatively selected, have been routinely excluded from the e s G. So this is like a sin so it's like tobacco. So it is a combination of what I call the sin stocks, which we would say tobacco, alcohol, and gambling. Firearms, yes, firearms. But there's a bit of a nuance there in terms of the size of the company because it's a market cap weighted index, so the biggest companies make it, so

a Smith and Wesson wouldn't make it because it's so small. Um. And then on the other side is the woke sort of I call them the woke shame stocks if you will. Fossil fuel, nuclear or energy and weapons and these again all just happing big weapons. So the Lockeed Martins and so, you know, interesting in the weapons area is like the Ukraine story. We just gave them forty seven billion, we gave them fifty billion earlier in the year, and they turn around and buy you know, battery systems from lockeed

Martin and raytheon. And the ironic thing is that E s G investors have been excluded from the weapons manufacturers as part of E s G. They're not E s G friendly now right now we're defending democracy, right so it gets very nuanced, and that's you know, a tricky part of e SG. And for the last year, my Bloomberg terminal up seventeen. You guys have had good performance. Yes,

thankfully we have. UM. The E s G Orphans Index, which is what the E t F is based office, returned about twenty two last year, UM, which you know, obviously the SMP was down about nineteen and the NASDAG was down over thirty. So I'm pretty happy with that. And then the orphans or FN launched in mid May and has done really well. So I mean, you've got like x on Mobile, Philip mars raytheon Chevron, Boeing and

has a Bush Diagio. Those are names, yes, those are and you know these there's a lot of recent talk about the anti E s G if you will, and there are sector based stocks and e t F s that do that, but this one actually separated the whole E s G factor and sort of it's the isolated E s G factor anti E s G E t F hence the name constrained Capital. I love the name of the firm. Is this Your main focus is the orphan E T F your main focus there, You're looking

to put together other products. What's the story? So thank you? Yeah, it is the first one out of the gate. And the idea behind constraint capital a hedge fund legend. Cliff as Nous of a q R. He wrote a really interesting white paper back in May of two thousand seventeen and discussed constraints on capital and how they create, they cause malinvestment and misallocation of capital, and then opportunities and these were secure eties that have been excluded under constraints

avoided if you will become high expected return securities. And it has to attract investors by lower prices over time. And now it's starting to do that thing because it's a very uncrowded space and versus And we had Matt who's the guy we had in with r L. V Ramaswamy, Yeah, Viva Rama Swanny is another guy dri drive and d R L L His is his thing. And he's saying, basically, you know, by the energy companies, you know, drill, drill, drill, you know, and let don't I don't want my companies

making social decisions from me. I want to maximizing shareholder values. Well, let's other parts of society deal with those exactly. So his thing isn't really anti E s G per se, and I don't think yours is really either. It's just the maximization of profits. He's also looking to find those opportunities that have been kind of discarded by the E s G world. Yeah, So I spoke to the VAC a few times, and I really like their approach and their thoughts and the one I call us cousins as

opposed to siblings, if you will. And I find that they're approaching things from a corporate level. They're gonna approach the c suite and say, hey, Google, your your ads are biased or your your searches are biased. I've approached it from isolating the company's most excluded and really focused at the investor level and saying here, this diversifies your portfolio against what's not crowded. And yes, they've been isolated

by the E s G community. And now that there's that pushback and that has shined a light in the neighborhood, if you will, UH, taking on black Rock and those kinds of things, I expect flows to revert and come back, and and the the the nuance of E s G become wider, and these malign securities to find more inflows over time. Where do you think we are in that whole E s G movement? It feels like it's lost some momentum, But some of the folks tell me no,

I mean, how do you think about it? So this is the first year while two thousand two where returns really suffered, and I think that you have certain sales points, if you will, calling things E s G sort of all things E s G. And when I look at a name like Amazon, for example, that has a huge carbon footprint, biggest outside the energy space, and it was down almost what I think, forty five or fifty this

past year. And everyone is in Amazon, even a lot of big E s G funds own Amazon is like a top three holding at black Rock and at Vanguard. And I think that people are starting to realize weight what do I own and why do I own it? And is this really E s G? Or is it a failed objective within E s G. And I think that we're in the early innings of people realizing that they've sort of been misled they've paid higher fees, they've had lower returns, and worst of all is the failed objectives.

And I think as returns people see their returns and say, wait a second, what just happened here? That's when they sort of wake up. So I think it's early ends. But again, if I made for one more second, the the evolution of E. S G from here will be three dimensional, not two dimensional. It's not going to turn off and turn on. The new word is going to be sustainability. We've seen a lot of that this year

already or in the past few weeks. In a month or two, I think that's how it evolves, and they'll be sort of chasing, if you will. I call it like the greyhound chasing the hair around the track, right though, he's sort of chasing that thing to find out what what's the next new thing? So to speak. One of the big drivers I see big holdings is energy, and that's had a phenomenal year in two one of the very few sectors that have really put up some performance.

What's your energy called? Here? Because if energy goes the other way, obviously you guys are exposed, right And I think that we have a twenty allocation fossil fuel and nuclear energy. So that's basket. I think I've always said you can't get to the future of energy without present energy, right. We can't do this quantum leap into batteries, into solar in the wind without using what we have currently. So I do think in the near term there is some

concern on energy prices. You know, the recession is a bit of a talk um, but going forward, and I interviewed an expert, a Nasa Haji, an energy expert, and he basically said, if you think we're at peak or you know, basically the oil situation is we we still need oil to do a lot of things heat our homes, cool our homes, and over time demand is still going to be there from developed world along with developing world in fossil fuel. So I don't think it's going anywhere

in the short term. In the short term, it might have a little struggle if if the recession comes to play and demand does shrink. What's the nuclear I mean, I look at your top holdings. I see Excen, Philip Morris raytheon Chevron. Where's the nuclear play there? So next Terra Duke Dominion s O Southern Company, American ap So these are that that looks like the energy area excuse me, where I think we really could see some revolutionary change in the next few decades. Because you know, we tried

it once, we went big into it. Globally, we kind of backed away from it, some people running scared, some people still thinking it's cheap if we already built it, but it's too expensive to build again. Now we're seeing real technological advances that like, you know, this could be

you know, free power, that's right. And you know, the interesting thing is over the past year, part of the constraints on capitol we saw in the EU was Germany shutting down their nuclear plants and then all of a sudden, Russia had sort of an advantage and they took advantage of it. Now we've seen a lot of coal burning recently in the last few months, last half of the year, because of the energy situation, the energy crisis, if you will.

And in the end, a ton of coal is more damaging and pollutant than a marble size piece of uranium. So that's the whole nuclear nuclear tradeoff, if you will. And it's um you know, it's a sustainable carbon free you know, energy source. So I think that, uh, it's going to be a very big thing going forward. As you say, Matt, I mean it seems like a you know, an amazing opportunity for for I wouldn't say limitless energy,

but cleaner and cleaner and and and and sustainable. Well that's the key, right, the fact that it's going to be sustainable now that they can power reactors with spent fuel um and that they don't create the kind of waste that they did before where we need to find like a mountain in Utah to stores to all that stuff. And I think that the part of the image that nuclear has in a bit of the in a bit of the media areas is needs a little bit of reworking.

If you have three mile Island was a long time ago, Yeah it was. I was. I remember Mark Newman, ce io Constraint Capital, joining us here in the Bloomberg and Actor Broker Studio. Who'll be ringing in the New York so Exchange tomorrow. So you'm the lookout for that. 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 bal Sweeney. I'm on Twitter at pt Sweeney. Before the podcast. You can always catch us worldwide at Bloomberg Radio