Bloomberg Markets: The Euro Close Full Show (12/10/2021)
The countdown is on in Europe. This is Bloomberg Markets European clothes with Guy Johnson and Alix Steel. It is Friday December 10th. We are just 30 minutes away from the close of trading are over in Europe. Stocks running a little bit heavy all across the board volume. Also coming in a relatively light. Let's take a look at some of the movers here. I'm here in New York. A guy is over the g x o Nestlé warehouse counter. Yes we move. Distribution center over in Darby. So here's we're looking at
here. European stocks like I said trading heavy down by a quarter percentage point. Daimler are the exception here finally spinning off its truck business that having a huge impact for the company potentially really three of them up to do some things there maybe even added to the DAX. And we're also taking a look what's happening with the cable rate trading really heavy throughout the week getting a little bit of a rebound here as the CPI has a Goldilocks feel right here in the U.S. That's kind of a snapshot as we're about 29 minutes away from the close of trading in the U. S.. Now that is one of the stories here are watching in Europe are over in the U.K. guy you're in Derby. You have a hat on. No not a hat. You have a yellow basket of a scarf
that have a hat on. Well you could say I got a very impressive scarf and I've got it. And I've got a very nice yellow jackets both of which I'm very happy with. You may decide that this is something you want to mock me for but oh I think I look very good. This is then as we're about to prove it. We talked about my ticket. This is the new start. This is the way forward. I'm telling you Alex. Yes we're here. This is one of the most advanced logistics sites in the world. It was built here in Derby. Derby is kind of right in the middle of the U.K. There's a rail yard just next door. There's an airport just next door. It's one of the one of the next to one of the busiest motorways in the U.K. And as a result of which what they've done
here is bring advanced technology in trying to solve some of the logistics problems that we spent our entire day our entire week in that sort of month off the months talking about trying to deal with that supply chain crunch story that we've been so focused on. Look we're going to have to see significant capital investment going forward. That is clear. Ellen Zentner from Morgan Stanley talking to us about that in the last hour. Companies are going to have to invest if they're going to get round this supply chain problem story Alex and that supply chain story. Claire in the U.K. GDP data today also clear in that U.S. CPI number one hundred percent guy. And part of the issue also potentially is will we see the port open up. We'll dissect that throughout the next hour as well. Port of L.A. is what we're talking about. So I was mentioning where the main story is here is that U.S. no it came in hot but expectedly hot. And it feels like the market took that as a Goldilocks kind of scenario.
Boomers. Kitty Greifeld is joining us now Katie. Well Alex Goldilocks is right especially if you look at the bond market you can see that two year yields are actually a little bit lower. That's where fed hike expectations are priced. The consensus on Wall Street seems to be that this probably isn't going to change the needle too much for the Fed at least when it comes to that liftoff. That's why you're seeing the stock market broadly higher today. You can see the S&P 500 up about four tenths of a percent as is the Nasdaq 100. The tech sector also posting gains here. This is a sector that's very sensitive to
interest rate hikes. And those expectations no surprise that it's getting a little bit of a bit today after a rough couple of days. And Haven's not really in demand today. You can see that Bloomberg dollar index taking a little bit of a leg. Lower guy. Absolutely. Let's continue the conversation about that inflation narrative. Certainly the big story the day the US inflation print it came through and I know it came through pretty much in
line with expectations but U.S. inflation is now running at the same clip we saw back in 1982. That was the era of Thatcher. It was the era of Reagan. Inflation was running and running hot. So what we're now going to see is a situation where companies are going to be forced to invest because you've seen the growth impact in the U.K. the U.K. economy today the data coming through for the month of October well below expectations. And the reason for that is that
the supply chain story is basically throttling back the growth narrative. And that's ultimately where we're going to have to see investment to try and fix that. There are short term solutions and there are long term solutions. This facility here the G8 so Nestlé facility represents a long term solution to trying to deal with this problem. I'm joined now by a guest that we've had on this program many times before. He's wearing a new hat. Actually he's not wearing a new hat. He's wearing a very nice new fluorescent jacket with the words GSO emblazoned across it which I think I think is the way forward from a style point of view. But my dear Jack so CIO very nice to meet you in person. Thank you guy.
Thank you for inviting us. It's inviting you to. 18 football fields worth of automation. It is an incredible facility. Look why is this so important. Why is this so important for the logistics industry that we see this kind of capital investments. This is a significant step change from the warehouses of all. The warehouses of all. You said it. If you go back to the Dickensian warehouse of 20 years ago people were pushing these boxes around by hand and they were getting 30 40 50 packs per hour. You bring in technology to that game 20 years later today in the warehouse of the future as we are here with Nestlé actually really the warehouse of the present as we've created. And you see those pick rates go from 50 per hour to 300 per hour. The delta between being mediocre and great is a massive step up. So what's happening is is that customers are coming to
a third party logistics provider like us and saying I haven't got time to worry about my cost base or my warehousing. The game's just got harder. Technology has increased the curve. I need a partner who can work with me to make me great. Help me turn good integrate. And that's why we're seeing this flow of customers coming for it. In terms of what happens next industrial automation is suddenly accelerating Iot Internet of Things robotics A.I. all coming together to produce these kinds of solutions. Just give me a sense of the the the curve and how it's going to look in terms of industrial optimization going forward and what you think it can do. Not now but in five years time ten years time at the
foothills here of greatness. Think about where the industry starting from. Most warehouses. The industry has 5 percent automated. We're leading the way 30 percent automation across our warehouses. And if you come to us we're not having to show you a YouTube video about what great looks like. We can actually show you facilities like this where we've lived it and done it and raised pick rates as I mentioned from that 50 per hour rate to 100 200 300 per hour. So it's a complete game change when it
goes from 5 percent to 30 percent. As an industry I think it could be as high as 60 70 percent going forward. If you were to look at other industries. But there is a long long trajectory of growth here. Mark it's so good to see you. I feel very left out. You guys are clearly winning and I'm not part of this but it's great to see you on the floor of the logistic center. I'm curious as to what the why for something like this is because if I'm a huge warehouse that's used to doing everything by hand retrofitting it and changing it the capital outlay is got to be quite expensive. And I'm wondering how you balance all of it. You're totally right. There's two two elements to this. Cap CapEx bill per year a Juliette Saly is roughly around 250 million dollars Alex. Now half of that is technology. We're
really less of a warehousing company and more of a technology outsourcing company more of an advisory more of a consultancy someone you call when you want to turn that good integrate as I mentioned. And what we're seeing recently particularly in the trends that we're seeing with new customers is more demand for first time outsourcers than we ever have before. A hugely healthy trend. A new demand also from seeing the small customers want to
gravitate towards the big three piano players. So the bigger getting bigger here. And in so doing what's happening is is that customers want to spend more of the CapEx upfront themselves particularly those first time outsourcers. So it is a very exciting backlog. I loved guys point about investment in the industry. We're going to see more and more investment across robotics than we ever have done. And this is going to be one of the great growth stories of the next 20 years. I wanted to let people hold that thoughts.
Yesterday I caught up with Adrian Jones from the Unite Union to get his take. Let's listen to what he had to say. Change is inevitable. We are Luddites. We're not talking about smashing not the robots here. This is about understanding what the implications of new technology and automation may be. And inevitably that will be a cost of some jobs. We can't just have an up skilling and do skilled people along the way.
Not Luddites. They recognize the unions that robots are going to be the way forward that we are going to. We are going to have to find a way of managing this process. How do you bring staff along with the robots. Big investment in robots. How do you invest in your staff so that we get that harmony that exists between people and the robotics. You're totally right. It's people and robots not people versus robots. This is making environments more efficient and it's making environments more importantly more safe. That's what we've really found when we've integrated automation within our network. Customers demand it teammates love it and it helps shareholder value creation. This is really the holy trinity of what we're looking to achieve.
Teammates shareholders and bringing it all together as the customer solution. Mark I wanted to ask a question about current conditions. We're seeing more restrictions in the UK. Cases continue to climb. The UK now reporting fifty eight thousand new Covid cases as of today. Are we going to have a repeat of 2020 where we all stay at home. We all buy a lot of stuff or you have to then deliver it. And what that does to supply chains and the inflationary
impulse. What are you noticing right now. So there's a couple of things we've lived this now through four bouts over the last two years so it's very very important for us to continue to monitor the data as you rightly point out. Alex I'd say a couple of things. And that is what we're seeing on the ground and all the great themes that you've had on your show today whether it be air freight whether it be in the Port of Los Angeles whether it be the new variant whether it be inflation is guy said this is about solving problems. You give me a problem I give you a solution. We are really here as a consultancy to help our customers be great. And that includes optics and variance. As you've explained what we're looking to do through this period is really emphasize our strengths. Half of this business is e-commerce.
And when people are working from home they're buying more stuff online. That naturally helps our volumes as a business. And it creates demand for customers who want more e-commerce driven solutions more reversed with just X driven solutions. So I'm not saying we're proliferating. All I'm saying is is that we're seeing that customer demand demand as we go through this winter period. It's exciting. I keep seeing cartons of condensed milk going past apparently. So it's to do with the Great British Bake Off but the flexibility exists within the system to be able to manage that. You talk about the tech and the techies is well represented here. It's not represented at every facility. So you aren't going to be
clearly taking this tack and using it elsewhere as you think about how you are going to progressed. VIX. So how do you think your next analyst how do you think the market should be valuing a tech heavy logistics company. Is it is it that the logistics company of old how do you incorporate that tech into the valuation if you think about what a technology outsourcing company trades on in the public markets right now. We're looking at roughly multiples on the between ba da scale of around 19 times 2022 numbers. To contextualize that we as a pure play scale LIDAR technology advance company ironically are only trading at around 15 to 16 times. So it contextualize us where we are in that journey. We started out with people saying that we should be more like 8 9 10 times in the Dickensian warehouse of old. We're on that journey as we go. People will realize ISE
persistence my growth profile. They'll realize the TAM that exists for a company that barely has seven and a half billion of dollars of revenue. We have a 430 billion dollar total addressable market. This is literally just getting started. You tell me companies that with this environment and the content that we've had last year that can compound growth going forwards we're going to be part of a few if not the only. This is a unique story going to be into to see. I guess the track record
is part of that. Once the analyst community starts to get used to that. Mark. Thank you for inviting us. We've really enjoyed being here today. It's been a great pleasure. The G X. Oh see I oh thank you very much indeed. We're going to continue the supply chain story. We're going to take you back to the ports of L.A. We're gonna speak to Jean Sur Port of L.A. executive director. That conversation coming up a little bit later in this program. We'll be joined by Ed Ludlow for that conversation 430 p.m. in London 10 thirty a.m. in New York.
What's coming up next. We'll get back to the markets. We'll figure out exactly how that inflation number should be positioned in your portfolio. How should we think about it. Ursula Marconi head of BlackRock Portfolio Analysis and Solutions in the EMEA region. Joining us next. This is Bloomberg. All throughout the show we've been talking about supply chain issues that impact everything from UK output in today's U.S. inflation number. What do you do about that. If you're an investor let's go to Ursula Marconi head of BlackRock Portfolio
Analysis and Solutions in EMEA. BlackRock is the world's largest asset manager with seven point four trillion dollars in assets under management. Ursula it's a pleasure. It's hard to take a view in the markets in 2022 without having a strong view on where inflation is headed. What are your clients talking to about. Absolutely. Alex thank you so much for having me. So I would say that if I think about talking to clients then the things that are pervasive at the moment those two huge ones and that closely connected and very clearly one of the two is inflations. That's
your point. It's been a theme throughout the year. But what I'm noticing is that over the last weeks and I think the U.S. CPI reading stay privacy the urgency to act for investors has clearly accelerated. And rightly so. We speak with about a thousand large clients every year from pension funds to private banks all how to restructure and evolve them. Yes it will for years if I think about inflation. There isn't one asset class in those assets or locations that doesn't need to change up the
back of this new regime. And so just to give you some examples if I think the big one range across all these portfolios that we receive and we think about applying the BlackRock views to how that asset allocation should change moving to 2022 and preparing for the next year we're looking at three and a half times the current allocation to inflation in bonds and we're looking at significantly higher allocation to China bonds within the alternative schemes. We're looking at significantly higher exposures to real estate infrastructure equities and in general for equities. And I'm not going back to public markets again an overweight particularly in Europe. So again this is a major shift if I think about these portfolios. If you think about the wealth market in EMEA which is around 10 trillion these numbers that I'm giving you point towards money emotion over the next months which will be incredible.
So how do I think about the central bank reaction function with all of this though. The Fed clearly has pivoted. Its reaction function has changed. It's now much more focused on inflation. If we are to see rates going higher and the moment the market is pricing in a terminal right. That's not too high. But let's say the Fed actually has to push hard on the brakes. How does that change the thinking. I hear you totally. And again I think what I'm trying to outline
here is that we're going to go through a period three to six months where there's going to be some volatility and we'll need to adapt to that. But what I work with investors on is these strategic assets allocation. The big paradigm changes that will stay with them and therefore for use for the years to come. And I think in that context the picture that I was trying to paint very much remains and I get your question. But again that is the direction of travel. And what I'm trying to urge investors to think about is that we need a paradigm shift beyond this volatility and these questions which apply to the tactical component. And for me very much this year discussion around inflation is up par in terms of magnitude with the sustainable transition I mentioned at the beginning.
There are two huge topics. Inflation is one and I feel sustainability is definitely the other one. So how do you build a sustainable portfolio in this inflationary environment when many think that the transition to green energy for example will be inflationary. Absolutely. That is the question. And so let me actually take a step back and connect the two elements because climate change IBEX is very much part of the inflationary story. These two things are somehow inextricably inexorable to be connected. And so if you think about a smooth transition to a next zero I see that as the least inflationary outcome compared to a disorderly transition or the business as usual that we're seeing now in other worlds. And if you think that climate change is real and unavoidable and we definitely think that absent of all the options that are available for investors today an orderly transition and an embrace man of the topic is the best option both in terms of growth and in terms of inflation. So in
terms of the two again go together and this is the answer tectonic shift that we're seeing. If I look at the end of the third quarter these easier assets under management in sustainable products across the globe reached three trillion dollars. So again this is massive. And if we talk about what European investors are telling us in their interactions with us this three points that come out very clearly. The first one is that this is just the beginning. The confirmation of the
appetite for team adoption of these strategies is very clear. We recently run a service as a survey. We over 200 of those large private banks and ISE managers in the rich region that I mentioned earlier and 75 percent told us they plan to bring sustainability to the core of their assets allocation. So it's not something that they do at the fringes anymore. It's something that becomes central. The second element I think is very clear is that sustainability is becoming embedded in investing across all asset classes. We now talk to investors about sustainability sustainability and emerging markets sustainability and goals. And then the third one is again how to think about the challenges from a full construction perspective.
So again data and evolution that from. So it's been great to talk with you three and she points to wrap the conversation up where. Thank you very much indeed. Ursula Marconi of BlackRock. This is Bloomberg. Well Daimler's truck division gaining traction on his first day of trading after its historic spin off from the iconic brand. Joining us now is Christopher Rawls a Bloomberg Frankfurt bureau chief. What's this company actually going to be worth. What are analysts talking about in terms of this IPO. Yeah basically the. The trading W has been pretty robust. They have been started trading at 28 euros per share which gives them a market valuation of roughly 23 24 billion euros. That's that's
pretty solid. But at the same time also when I started to take into consideration that that's still quite a bit like below the earnings multiples of its direct peers like Volvo being the truck sector and also BMW on the passenger car side. So what do you think it has to do to kind of get back up to where say Volvo is or something along those lines. I think there will definitely need to deliver on their promises to improve the financial returns. That has been a longstanding criticism from investors that white Volvo is slightly smaller than Daimler trucks. It always has been more agile and more nimble and more profitable. All right thanks a lot. Really really fun. It's a big day of Bloomberg's Christoph Rodwell.
Thank you very much. Coming up we're just about four minutes away from the close of trading over and near a busy week. Plus we'll tackle more supply chain issues that are driving up prices all across the world and impacting growth. We're going to talk to James broke up Port of Los Angeles executive director next. And what can be done to ease the pressure. This is Bloomberg. Thirty minutes to the close of trading. Over in Europe stocks trading heavy volume also light. We're going to talk more about the global supply supply crisis here with Mark Gurman Duka. So see I oh we'll be joining us next live from the DAX O. NYSE Distribution Center in Derby. Looking forward to that.
This is Bloomberg and. The countdown is on in Europe. This is Bloomberg Markets European clothes with Guy Johnson and Alix Steel. It is Friday December 10th. We are just 30 minutes away from the close of trading over in Europe. Stock trading a little bit heavy all across the board volume. Also coming in a relatively light. Let's take a look at some of the movers here. I'm here in New York. Guy is over at the G X O Nestlé warehouse counter. Yes we move. Thank you. Distribution center
over in Derby. So here's we're looking at here. European stocks like I said trading heavy down by a quarter percentage point. Daimler are the exception here. Finally spinning off its truck business that having a huge impact for the company potentially really frees them up to do some things there maybe even added to the DAX. And we're also taking a look what's happening with the cable rate trading really heavy throughout the week getting a little bit of a rebound here as the CPI has a Goldilocks feel right here in the US. That's kind of the snapshot as we're about 29 minutes away from the close of trading in the U. S.. Now that is one of the stories we're watching in Europe over in the U.K.. Guy you're in Derby. You have a hat on. No not a hat. You have a
yellow vest. You've a scarf that have a hat on. Well you could say I've got a very impressive scarf and I've got it. And I've got a very nice yellow jackets both of which I'm very happy with. You may decide that this is something you want to mock me for but oh I think I look very good. This is then as we're about to prove it. We talked about my ticket. This is the new star. This is the way forward. I'm telling you Alex. Yes we're here. This is one of the most advanced logistics sites in the world. It was built here in Derby. Derby is kind of right in the middle of the U.K. There's
a rail yard just next door. There's an airport just next door. It's one of the one of the next to one of the busiest motorways in the U.K. And as a result of which what they've done here is bring advanced technology in trying to solve some of the logistics problems that we spent our entire day our entire week the sort of month off the month talking about trying to deal with that supply chain crunch story that we've been so focused on. Look we're gonna have to see significant capital investment going forward. That is clear. Ellen Zentner from Morgan Stanley talking to us about that in the last hour. Companies are going to have to invest if they're going to get round their supply chain problem story Alex. And that supply chain story. Claire in
the U.K. GDP data today also clear in that U.S. CPI number one hundred percent guy. And part of the issue also potentially is will we see the port open up. We'll dissect that throughout the next hour as well. Of L.A. is what we're talking about. So Guy was mentioning where the main story is here is that U.S. number eight came in hot but expectedly hot. And it feels like the market took that as a Goldilocks kind of scenario. Bloomberg's Kitty Greifeld is joining us now Katie. Well Alex Goldilocks is
right especially if you look at the bond market you can see that two year yields are actually a little bit lower. That's where fed hike expectations are priced. The consensus on Wall Street seems to be that this probably isn't going to change the needle too much for the Fed at least when it comes to that lift off. That's why you're seeing the stock market broadly higher today.
You can see the S&P 500 up about four tenths of a percent as is the Nasdaq 100. The tech sector also posting gains here. This is a sector that's very sensitive to interest rate hikes. And those expectations no surprise that it's getting a little bit of a bit today after a rough couple of days. And Haven's not really in demand today. You can see the Bloomberg dollar index taking a little bit of a leg lower. Guy. Absolutely. Let's continue the conversation about that inflation narrative. Certainly the big story of the day the US inflation prints it came through and I know it came through pretty much in line with expectations but US inflation is now running at the same clip we saw back in 1982. That was the year of Thatcher. It was the era of Reagan. Inflation was running and running hoss. So what we're now going
to see is a situation where companies are going to be forced to invest because you've seen the growth impact in the U.K. the U.K. economy today the data coming through for the month of October well below expectations. And the reason for that is that the supply chains story is basically throttling back the growth narrative. And that's ultimately where we're going to have to see investment to try and fix that. There are short term solutions and there are long term solutions. This facility here the G8 so Nestlé facility represents a long term solution to trying to deal with this problem. I'm joined now by a guest that we've had on this program many times before. He's wearing a new hat. Actually he's not wearing a new hat.
He's wearing a very nice new fluorescent jacket with the words GSO emblazoned across it which I think I think is the way forward from a style point of view. My my G. GSO CIO very nice to meet you in person. Thank you guy. Thank you for inviting us. It's inviting you to 18 football fields worth of automation. It is an incredible facility. Look why is this so important. Why is this so important for the logistics industry that we see
this kind of capital investment. This is a significant step change from the warehouses of all. The warehouses of all. You said it. If you go back to the Dickensian warehouse of 20 years ago people were pushing these boxes around by hand and they were getting 30 40 50 packs per hour. You bring in technology to that game 20 years later today in the warehouse of the future as we are here with Nestlé actually really the warehouse of the president as we've created. And you see those pick rates go from 50 per hour to 300 per hour.
The delta between being mediocre and great is a massive step up. So what's happening is is that customers are coming to a third party logistics provider like us and saying I haven't got time to worry about my cost base or my warehousing. The game's just got harder. Technology has increased the curve. I need a partner who can work with me to make me great. Help me turn good integrate. And that's why we're seeing this flow of customers coming for it. In terms of what happens next industrial automation is suddenly accelerating. Internet of Things robotics A.I. all coming together to produce these kinds of solutions.
Just give me a sense of the the the curve and how it's going to look in terms of industrial automation going forward and what you think it can do. Not now but in five years time. Ten years time. The foothills here of greatness. Think about where the industry starting from. Most warehouses. The industry is 5 percent automated. We're leading the way 30 percent automation across our warehouses. And if you come to us we're not having to show you a YouTube video about what great looks like. We can actually show you facilities like this where we've lived it and done it and raised pick rates as I mentioned from that 50 per hour rate to 100 200 300 per hour. So it's a complete game change when it goes from 5 percent to 30 percent. As an industry I think it could be as high as 60 70 percent going forward. If
you were to look at other industries where there is a long long trajectory of growth here. Mark it's so good to see you. I feel very left out. You guys are clearly winning and I'm not part of this but it's great to see you on the floor of the logistics center. I'm curious as to what the why for something like this is because if I'm a huge warehouse that's used to doing
everything by hand retrofitting it and changing it the capital outlay is got to be quite expensive. And I'm wondering how you balance all of it. You're totally right. There's two elements to this. Our CapEx bill per year a Juliette Saly is roughly around 250 million dollars Alex. Now half of that is technology. We're really less of a warehousing company and more of a technology outsourcing company more of an advisory and more of a consultancy someone you call when you want to turn that good integrate as I mentioned. And what we're seeing recently particularly in the
trends that we're seeing with new customers is more demand for first time outsourcers than we ever have before. A hugely healthy trend. A new demand also from seeing the small customers want to gravitate towards the big three piano players. So the bigger getting bigger here. And in so doing what's happening is is that customers want to spend more of the CapEx up themselves particularly those first time outsourcers. So it is a very
exciting backlog. I loved guys point about investment in the industry. We're going to see more and more investment across robotics than we ever have done. And this is going to be one of the great growth stories of the next 20 years. I wanted to let people hold that thoughts. Yesterday I caught up with Adrian Jones from the Unite Union to
get his take. Let's listen to what he had to say. Change is inevitable. We are Luddites. We're not talking about smashing not the robots here. This is about understanding what the implications of new technology and automation may be. And inevitably that will be a cost of some jobs. We can't just have an up skilling and do
skilled people along the way. Not Luddites. They recognize the unions. The robots are gonna be the way forward that we are going to. We are going to have to find a way of managing this process. How do you bring staff along with the robots. Big investment in robots. How do you invest in your staff so that we get that harmony that exists between people and the robotics. You're totally right. It's people and robots not people versus robots. This is making
environments more efficient and it's making environments more importantly more safe. That's what we've really found when we've integrated automation within our network. Customers demand it. Teammates love it. And it helps shareholder value creation. This is really the holy trinity of what we're looking to achieve. Teammates shareholders and bringing it all together as the customer solution. Mark I wanted to ask a question about current conditions. We're seeing more restrictions in the UK. Cases continue to climb. The UK now reporting fifty eight thousand new Covid cases as of today. Are we going to have a repeat of 2020 where we all stay at home. By a lot of stuff or you have to then deliver it. And
what that does to supply chains and the inflationary impulse. What are you noticing right now. So there's a couple of things we've lived this now through four bouts over the last two years so it's very very important for us to continue to monitor the data as you rightly point out. Alex I'd say a couple of things and that is what we're seeing on the ground and all the great themes that you've had on your show today whether it be air freight whether it be in the Port of Los Angeles whether it be the new variant whether it be inflation. As Guy said this is about solving problems. You give me a
problem I give you a solution. We are really here as a consultancy to help our customers be great. And that includes optics and variance. As you've explained what we're looking to do through this period is really emphasize our strengths. Half of this business is e-commerce. And when people are working from home they're buying more stuff online. That naturally helps our volumes as a business. And it creates demand for customers who want more e-commerce driven
solutions more reversed with just X driven solutions. So I'm not saying we're proliferating. All I'm saying is is that we're seeing that customer demand demand as we go through this winter period. It's exciting. I keep seeing cartons of condensed milk going past apparently. So it's to do with the Great British Bake Off but the flexibility exist within the system to be able to manage that. You talk about the tech and the tech is is well represented here. It's not represented at every facility. So you
are going to be clearly taking this tack and using it elsewhere as you think about how you are going to progressed. VIX. So how do you think your next analyst how do you think the market should be valuing a tech heavy logistics company. Is it is it that the logistics company of old how do you incorporate that tech into the valuation if you think about what a technology outsourcing company trades on in the public markets right now. We're looking at roughly multiples on the EBIT model scale of around 19 times 2022 numbers. To contextualize that we as a pure play scale LIDAR technology advance company ironically are only
trading at around 15 to 16 times. So contextualize is where we are in that journey. We start it out with people saying that we should be more like 8 9 10 times in the Dickensian warehouse of old. We're on that journey as we go. People will realize us persistent small growth profile. They'll realize the TAM that exists for a company that barely has seven and a half billion of dollars of revenue. We have a 430 billion dollar total addressable market. This is literally just getting started. You tell me companies that with this environment and the constant we've had last year that can compound growth going forwards we're going to be part of a few if not the only. This is a unique story going into to see. I guess the track record is part of that. Once the analyst community starts to get used to that. Mark.
Thank you for inviting us. We've really enjoyed being here today. It's been a great pleasure. Motlanthe Deka. The G X. Oh see I. Oh thank you very much indeed. We're going to continue the supply chain story. We're going to take you back to the ports of L.A. We're gonna speak to Jean Sorokin Port of L.A. executive director. That conversation coming up a little bit later in this program. We'll be joined by Ed Ludlow for that conversation 430 p.m. in London 10 thirty a.m. in New York.
What's coming up next. We'll get back to the markets. We'll figure out exactly how that inflation number should be positioned in your portfolio. How should we think about it. Ursula Marconi head of BlackRock Portfolio Analysis and Solutions in the EMEA region. Joining us next. This is Bloomberg. All throughout the show we've been talking about supply chain issues that impact everything from UK output in today's US inflation number. What do you do about that. If you're an investor let's go to Ursula Marconi head of BlackRock Portfolio Analysis and Solutions in EMEA. BlackRock is the world's largest asset manager with seven point four trillion dollars in assets
under management. Ursula. It's a pleasure. It's hard to take a view in the markets in 2022 without having a strong view on where inflation is headed. What are your clients talking to about. Absolutely. Alex thank you so much for having me. So I would say that if I think about talking to clients then the things that are pervasive at the moment there's two huge ones and that closely connected and very clearly one of the two is inflations. That's your point. It's been a theme throughout the year. But what I'm noticing is that over the last weeks and I can beat US CPI reading state privacy the urgency to act for investors has clearly accelerated and rightly so. We speak with about a
thousand large clients every year from pension funds to private banks all how to restructure and involve them. Yes it will for years if I think about inflation. There isn't one asset class in those assets allocations that doesn't need to change up the back of this new regime. And so just to give you some examples if I think the big governor range across all these portfolios that we receive and we think about applying the BlackRock views to how that asset allocation should change. Moving to 20 22 and preparing for the next year we're looking at three and a half times the current allocation to inflation linked bonds and we're looking at significantly higher allocation to China bonds within the alternative schemes. We're looking at significantly higher exposures to real estate infrastructure equities and in general for equities. And I'm not going back to public markets again an
overweight particularly in Europe. So again this is a major shift if I think about these portfolios. If you think about the wealth market EMEA which is around 10 trillion these numbers that I'm giving you point towards money emotion over the next months which will be incredible. So how do I think about the central bank reaction function with all of this though. The Fed clearly has pivoted. Its Fiat reaction function has changed. It's now much more focused on inflation. If we are to see rates going higher and the moment
the market is pricing in a terminal rate that's not too high. But let's say the Fed actually has to push hard on the brakes. How does that change the thinking. I hear you totally. And again I think what I'm trying to outline here is that we're going to go through a period three to six months where there's gonna be some volatility and we'll need to adapt to that. But what I work with investors on is these strategic assets allocation. The big paradigm changes that will stay with them
and their portfolios for the years to come. And I think in that context the picture that I was trying to paint very much remains and I get your question. But again that is the direction of travel. And what I'm trying to urge investors to think about is that we need a paradigm shift beyond this volatility and these questions which apply to the tactical component. And for me very much this year discussion around inflation is up par in terms of magnitude with the sustainable transition I mentioned at the beginning. There are two huge topics. Inflation is one and I feel
sustainability is definitely the other one. So how do you build a sustainable portfolio in this inflationary environment when many think that the transition to green energy for example will be inflationary. Absolutely. That is the question. And let me actually take a step back and connect the two elements because climate change IBEX is very much part of the inflationary story. These two things are somehow inextricably in extra to be connected. And so if you think about a smooth transition to the next zero I see that as the least inflationary outcome compared to a disorderly transition all the business as usual. But we're seeing now in other worlds and if you think that climate change is real and unavoidable and we definitely think that absent of all the options that are available for investors today an orderly transition and an embrace of the topic is the best option both in terms of growth and in terms of inflation. So in terms of the team again they go together and this is the
tectonic shift that we've seen. If I look at the end of the Fed or to DCA assets under management in sustainable products across the globe reached three trillion dollars. So again this is massive. And if we talk about what European investors are telling us see in their interactions with us this three points that come out very keenly. The first one is that this is just the beginning. The confirmation of the appetite for team adoption of these strategies is very clear. We recently run a service as a survey with over 200 of those large private banks and ISE managers in the rich regions that I mentioned earlier and 75 percent told us they plan to bring sustainability to the core of their assets allocation.
So it's not something that they do at the fringes anymore. It's something that becomes central. The second element I think is very clear is that sustainability is becoming embedded in investing across all asset classes. We talk to investors about sustainability sustainability and emerging markets sustainability and goals. And then the third one is a guide how
to think about the challenges from a profitable structural perspective. So again data and evolution in that from. So it's been great to talk with you. Three interesting points to wrap the conversation up with. Thank you very much indeed. Ursula Marconi of BlackRock. This is Bloomberg. We're just about 20 seconds away from the close of trading. Over in Europe here's what this looks like here. It's light red.
We're not really red but we're a little red. Volume is quite light. Over in Europe. Also here in the US as well. So overall you have the U.K. down by about three tenths of 1 percent. So a little bit of heavy trading as we head into the end of this week. You have to wonder that trading is going to feel really off as we go into the holiday season. Let's just take a look
over. The major indices are one. Take a look at the stock. Six hundred here. It's been kind of a rocky day ending lower by about three tenths of 1 percent. On the upside though LP P is sitting in a record high. It's a Polish clothing retailer. It got an upgrade from JP Morgan after super stellar earnings. So there's still some earnings bright spots. And we're seeing that here in the U.S. as well despite the overall weakness in the equity market. So I feel like it's time to take a look at where
we are for the week. It's been quite a week. We're kind of repricing the bill. We were dealing with weaker growth in the U.K. We're dealing with a huge rise in Micron variant as well. So all that percolating through. So where are we. This is a period for one day. You're looking at auto parts. You're also looking at tobacco and food and beverages for example doing well. So the safety kind of trades and also autos is being led higher by Daimler. However if you take a look for the whole week interestingly enough you've cyclicals and bagel and basic resources and the reopening trades you have a little bit of cyclicality and then you also have a little bit of the reopening. That's before of course we got some really negative headlines on crime. So a couple of individual names though I did want to highlight and some of the stories we have been talking
about. So Daimler closing up by two and a half percent. We have that spin out. You have a Jefferies analysts saying that the market cap of the truck's spin out could be about 44 billion euros. That would match ball those a huge huge number. Also Royal Dutch Shell quite interesting down six tenths of one percent. Energy kind of going nowhere fast today as part of the issue. But it's saying good bye to the Netherlands. It's going to list a single line of shares in the U.K. that so they can actually give more cash back to shareholders. There is currently a tax withholding in the Netherlands that's kind of hampering
that. That should clean it up. It doesn't necessarily hurt also that The Hague District Court said that Shell had to speed up Ziering out some of their emissions. They like that one so much. And running it out with probably one of the most fun stories today at Santander. That stock down by about nine tenths of one percent. The company is going to have to pay Andrew or sell about sixty eight million euros after they did kind of a U-turn on him pointing him as CEO. Oh and they have to give that to him. It's kind of deferred comp. There's going to be a ruling it's gonna go back to the courts etc. But that's a really nice
way to get money for a job that you didn't actually get. I think we'd all kind of appreciate that at the end of the day. But Guy what I was mentioning earlier was UK GDP you have the cable rate up a little bit but that's where the dollar is trading a little heavy. But UK GDP did not come in very good for October and I feel like that's before we get the AMA Akron and that in some sense kind of setting the narrative as we go into the holidays. Yeah essentially the Bank of England next week and I think this
is the kind of the ying and yang of the. Of the story that we're watching carefully around supply chains at the moment. On the one hand US CPI you'll talk about that in just a moment. Super strong GDP here in the UK came through a point one versus a point four estimate down from point six. So we're seeing the supply chain story really weighing on the economy. And as you
say Alex that's before all microns and and the new restrictions that we're seeing have really come into force. And that does maybe lead you to the conclusion as you say are we going to really see the Bank of England hiking rates in this kind of environment or actually are we going to see such strong inflation like we're seeing in the states here in the UK that it doesn't have any choice regardless of the growth narrative that we're seeing. It's gonna be a really interesting balancing act. I'm really looking forward to hearing from the Bank of England next week. Yeah I'm looking forward to of course hearing from the Fed and how they're going to balance the risk of inflation. So we get this super hot CPI number. It just meets expectations right. So you're looking at near 7 percent but we didn't get to that 7 percent handle and equities
and the bond market really took it as the Fed doesn't have to get more aggressive but they're still on track for maybe condensing the time that they're going to taper. And you're seeing about 70 basis points of rate hikes now priced in for 2022 to dig barley in between it though is how are things like the supply chain issues going to solve themselves. So it alleviate some of the pressure on prices. And that's something that we've been talking about throughout the last two hours. You have a CPI as I mentioned are rising at the fastest rate since 1982. So let's go to the hub of that. And that's the port of Los Angeles where Dean said okay he's executive director there along with Bloomberg's and Ludlow. And I'll hand it over to you.
Yeah. We're delighted to be joined by the pull of L.A. executive director Jean Sirica because this is the emblem of what's happening with global supply chains. Jean. Ninety seven ships waiting to come in at various distances 21 days waiting for a bus. Are things better since last time I was here in September. We're gaining some traction at the aging containers that we've talked about so many times before are now down nearly 60 percent since October 24th. Imports overall are down by half. Those were
the ones sitting on the docks not moving out to the domestic supply chain. Recently on November 17th the industry changed the way they wanted to bring ships here to the port of Los Angeles and to the port of Long Beach. So now we're measuring every ship that is just left. Asia is traversing. The Pacific is now sitting one hundred and fifty miles out or has yet to enter the port. And if we use that same definition back on the 13th of October when the president announced his changes in the supply chain we're about 10 percent better than we were at that point in time but still a long way to go. Some measurable successes
along the way. We still have to keep working at all nodes in the supply chain. That's the short term. There's a piece of legislation. It's made its way through the House. Now it goes to the Senate. How does that piece of legislation help us in the long term. I think what it does is open up things like transparency transparency information sharing and the requirements on service levels that may have been lacking in some people's eyes so far. I describe the Port of Los Angeles the port complex Long Beach next door as this kind of many tentacle beast. Right. You have the longshoremen the truck drivers. You have the ships bringing in the containers. And then further down the supply chain rail road infrastructure without
asking you to point a finger. What is the biggest issue right now. It is the strength of the American consumer and the continued demand that we're trying to fulfill all nodes in the supply chain or stressed from factory orders that are a little bit behind to the vessel space trying to get the cargo through 10 lanes of freeway down into five through the U.S. domestic supply chain. But add inventories in warehouses nationwide are up about two percentage points compared to the same time last
year and are in store. Inventories are just about a percentage point shy of where we were 12 months ago. We are making progress. And I'm going to give you a second pat your ear piece backing. I know that guy and Alex want to I want to jump in with a question. But before they do I'm just going to ask you very quickly about container rates. Yes we're down from the peak we
were at in September but we're still 10 times what we were at in December 2000. Pre pandemic levels. Whose stomachs. Those costs. I mean is that tolerable much longer. No I don't think it is. And it's a supply demand equation that is going to have to work itself through the market. But some of the oversight that needs to be done in this area is right in front of us. All right. I believe I've got a question. Yeah. Jean let me jump in and thank you very much Jean. Great to
catch up again. Great to see you. I'm at a I'm at one of the most automated logistics sites in the world. It's here in the UK. The robots are definitely in charge. What can you do at the pulse of L.A. to automate more of what is causing friction right now. What's the plan guy. Good to see. A worldwide only 5 percent of ports have some
semblance of automation or robotics here at the ports of Los Angeles and Long Beach. Of the 12 marine terminals there are four that have automation and robotics in place today including one that's just announced that the combination of a great and skilled workforce with the efficiencies of the technology will be the key to our future. Each step along the way we've improved productivity we've improved the throughput but we've got a long way to go here to have a long way to go. And I wonder in the meantime how do you take the workforce that you have and retrain them so we don't leave them on the wayside. Well we do have to invest in technology to get this moving more smoothly. Gene. Alex this is something you and I talked about recently as well.
The Port of Los Angeles along with the port of Long Beach and the private sector will be opening up the nation's first training and development center for dock workers and others in the supply chain. The first in the nation. And this is exactly what we have to do to reskill and upscale our partners in labor to make sure they're ready for the challenges of the future. OK so we know what's needed. Who's helping you. Is Mr. Paul Carrier the White House helping you. Who are you speaking to to get the short term and the long term issues fixed. I've been very pleased with the federal government's response from the cabinet members to having a meeting with the president myself and then the work that John Polcari our port on VOY is doing every day.
We speak multiple times. He holds meetings with industry three times a week working on all of these issues including getting the domestic supply chain flowing. Remember at the productivity at the port from vessel is still best in class. Each one of these ships coming in here completely unloads and loads back before going to Asia. We've been averaging a peak season month
year for the last year and a half meeting with the president. Give us the inside scoop on that. What did the president privacy. Well what he said was that we have a lot of work to do together. And it was a combination of public and private sector interest investments. And his focus was on the infrastructure law. What it does for a place like Los Angeles is it will accelerate these shovel ready projects we have including the training center and repurpose of lands to remove those bottlenecks on both rail and truck sites. In terms of what comes next Jeanne just give me a sense of where we are. Are we starting to see green shoots in terms of the
supply chain coming back. What is your sense of what the situation is going to look like in 2022. Yeah volume is going to continue to be strong guy. We're gonna have an early lunar new year landings here just after that first week of February holiday. The retailers and home improvements the large importers are telling me Q2 of next year heavily focused on restocking their warehouses shelves and fulfillment centers. If we do all that right we'll have the ability to pivot maybe into an early peak season next year. Still focused on the lead times that it's going to take to get product to the
American consumer and factory floor. GDP great to catch you up again. We really appreciate it. As ever your time is really really useful to all of us. Jean Sorokin Port of Los Angeles executive director. And of course our thanks to Bloomberg's ad Ludlow. Great job guys. Okay. What do you got coming up for you. We're gonna carry on the
conversation about what is happening in the supply chain story. We're going to do that on Bloomberg Radio. The cable show is coming up at the top of the hour. Alex and myself 5:00 p.m. London time 12 p.m. New York time. We're on DHB Digital Radio. You can also find us on Spotify and iTunes with the podcast. This is Bloomberg.
2021-12-13 21:03
