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Speaker 2: A bit of a roller coaster ride in shares of Amazon,
Speaker 2: from a rally right after earnings to a drop on
Speaker 2: the analys call last night to some selling today, but
Speaker 2: it's definitely off its lows of the session. Amazon though,
Speaker 2: seeing some pressure after warning that growth in its cloud
Speaker 2: computing business is cooling. So let's get into it because
Speaker 2: Amazon is a massive company with a lot of moving parts.
Speaker 2: To break it down, Spencer Soaper is with us Bloomberg
Speaker 2: News Technology and e Commerce reporter on zoom out there
Speaker 2: in Seattle, along with Punham Goyle Senior Alas for e
Speaker 2: commerce eth leisure at leisure excuse me off price retail
Speaker 2: at Bloomberg Intelligence. She is on the phone in New Jersey. Guys,
Speaker 2: thank you so much for being with Mattie me. Spencer
Speaker 2: kick it off for us in terms of the story
Speaker 2: that is Amazon on this Friday.
Speaker 3: Yeah, well yesterday it was a head scratcher. You know,
Speaker 3: we got.
Speaker 4: The earnings release came out after market closed, and there's
Speaker 4: a lot of good.
Speaker 3: News in it.
Speaker 4: You know, they beat pretty much across the board and
Speaker 4: all their businesses more than analysts were expecting, both from
Speaker 4: the cloud computing revenue side, you know, on its e
Speaker 4: commerce business, on its advertising business.
Speaker 3: Everything was looking really good.
Speaker 4: And then about ninety minutes later on the analyst call,
Speaker 4: they divulged that you know, give you know clo cloud
Speaker 4: computing sales are actually slowing down a little bit so
Speaker 4: far in April in the market.
Speaker 3: That really jobs of the market. People got nervous and
Speaker 3: shared started going down from there.
Speaker 4: So it really was a reaction to just the outlook
Speaker 4: of Amazon's cloud computing business.
Speaker 3: Is what the what the market reacted to today put.
Speaker 5: On What was the moment on the earnings call where
Speaker 5: the tenor started to shift from extreme excitement.
Speaker 6: To oh no, I'd agree with sponsor here. You know,
Speaker 6: as soon as they say that there's a five hundred
Speaker 6: pace point acceleration in AWS in the month of April,
Speaker 6: that was it. I mean, that was really the big
Speaker 6: drawback on the earnings column. From there, it didn't matter
Speaker 6: what they.
Speaker 2: Said, well, as I said, like Amazon, massive company, a
Speaker 2: lot of moving parts, some are more important than others,
Speaker 2: bring a lot more in in terms of the top
Speaker 2: and bottom line. Back to you, Spencer for a moment. Cloud,
Speaker 2: I mean, it is so important to Amazon and the story.
Speaker 2: Is there any kind of okay, guys, twenty four hours later,
Speaker 2: a little bit of perspective, there's still it's big. But
Speaker 2: we've all been kind of worried a little bit about
Speaker 2: cloud or is it just a little rough Considering some
Speaker 2: of the other big tech names aka Microsoft and their
Speaker 2: cloud business this week, well.
Speaker 4: There were some questions more broadly about Amazon, you know,
Speaker 4: so there was the slowing the cloud, but also questions
Speaker 4: about whether it could be losing its competitive position and
Speaker 4: even concerns about, you know, what's the fate of like
Speaker 4: the voice activated assistant alexta now that we've got things
Speaker 4: like chat GP and things coming along that have kind
Speaker 4: of relegated the voice activated stuff kind of to the sidelines.
Speaker 4: So yeah, there's there's definitely concerns beyond simply slowing cloud sales.
Speaker 4: But that's still the predominant thing is if businesses are
Speaker 4: cutting or spending and Amazon's saying that, and they're saying, yes,
Speaker 4: our cloud customers are trying to reduce costs or looking
Speaker 4: for other ways to store data that are less expensive.
Speaker 4: We're trying to help accommodate them that basically, this uh,
Speaker 4: this slowdown will persist and could get.
Speaker 2: Worse, all right, guys, And I also want to kind
Speaker 2: of pivot to AI.
Speaker 3: Right.
Speaker 2: This has been the you know words, catch phrases if
Speaker 2: you will, that I feel like in this earning season
Speaker 2: that every CEO to some extent has to drop, especially
Speaker 2: if you're in the tech space.
Speaker 7: So punam in terms of what they had to say.
Speaker 2: And I know you really focus on the retail side
Speaker 2: of the business, but what did we How much was
Speaker 2: Amazon kind of pushed and asked and queried about when
Speaker 2: it came to AI.
Speaker 6: You know, AI is something that they are going to
Speaker 6: continue to put across all of their businesses, So it's
Speaker 6: just not on the cloud side, but also on the
Speaker 6: retail side. AI is very important because if you think
Speaker 6: about how consumers shop, if Amazon can get smarter about
Speaker 6: their search queries about how they pitch product to the customer,
Speaker 6: then that can lead to higher conversion. So I don't
Speaker 6: think AI is just about the cloud. You know, we've
Speaker 6: heard a lot about generative AI and so forth, and
Speaker 6: it's a topic that we think they will definitely push
Speaker 6: hard on along with other retailers in space. Everyone is
Speaker 6: focused on AI just to really use data to make
Speaker 6: better decisions across every piece of the organization, not just
Speaker 6: you know, when it comes to product, but also on
Speaker 6: the back end side, whether it's distribution, logistics, back office,
Speaker 6: et cetera.
Speaker 5: I guess the way I think about it though, is
Speaker 5: that the cloud is sort of the bones that allow
Speaker 5: for the generative AI to do its thing. Spencer, when
Speaker 5: you look at Amazon, Microsoft and Google this week in
Speaker 5: terms of what we learned in earnings, which do you
Speaker 5: feel has has the best bones when it comes to
Speaker 5: the cloud that's needed to run generative AI.
Speaker 4: Well that's the That's the thing that Amazon's CEO Jesse
Speaker 4: was trying to say to analysts last night is Listen,
Speaker 4: all of this stuff runs on the cloud, and Amazon
Speaker 4: is the market leader uh there and has the data
Speaker 4: space and the infrastructure, and it's always tried to position
Speaker 4: itself more as kind of the the back end of
Speaker 4: it and the tools that people could utilize, and that's
Speaker 4: where it's positioning itself now. They don't necessarily not in
Speaker 4: the forefront, but some consumer facing thing that people are using,
Speaker 4: but providing the tools to help sharpen and home these
Speaker 4: technological advancements going forward. But yet folks still seem to
Speaker 4: be a little worried about about Amazon's Amazon's place place
Speaker 4: in it. But I think I think generally the tenor
Speaker 4: on the on the market reaction is more just about
Speaker 4: the basic cloud computing business and just folks businesses in
Speaker 4: general cut cutting their costs, including in their in their
Speaker 4: cloud infrastructure.
Speaker 2: Yeah, it's just kind of interesting because I do feel
Speaker 2: like we're increasingly using more and more cloud space, whether
Speaker 2: it's personally or professionally. Put them come on in on
Speaker 2: the retail side of their business and what we saw there,
Speaker 2: because things have really changed since the pandemic. It's a
Speaker 2: story we've been telling for some time.
Speaker 6: Yeah, you know, the retail side of the businesses and
Speaker 6: mixed it was better than expected this quarter. But I
Speaker 6: think what we have to think about is the one
Speaker 6: P versus three P part of Amazon, and it's the
Speaker 6: three P which continues to show outsized growth and we
Speaker 6: think will be a big driver to GMB going forward.
Speaker 6: For Amazon. You know, buy with Prime is a big
Speaker 6: initiative that they have in place that can really bring
Speaker 6: more sellers using their services onto the platform and just
Speaker 6: open Amazon up to other people. It's been a huge
Speaker 6: success from what we've heard from them, and I think
Speaker 6: it'll just really help them also solve their distribution slash
Speaker 6: warehousing initiatives where they can use some of that space
Speaker 6: non to to non prime merchandise.
Speaker 2: Yeah, and I thought, well, forgive me, and I thought
Speaker 2: the advertising right services business, And I'm not sure if
Speaker 2: this is what you are specifically talking about. I mean,
Speaker 2: this has really been a growth area punam for the company.
Speaker 6: Yeah, advertising is separate from the online piece, but it
Speaker 6: definitely has been an area that they're growing. And keep
Speaker 6: in mind, the advertising business is also a very profitable business,
Speaker 6: so you know there they've said in their shareholding water
Speaker 6: that they want to go after grocery, and grocery is
Speaker 6: laser thin profit margins, low single digits at best, whereas
Speaker 6: the advertising business carries fifty percent plus profit margins. It's
Speaker 6: a lucrative, just like the cloud business, which has very
Speaker 6: high profit margins and contributes almost entirely to all of
Speaker 6: Amazon's profits.
Speaker 5: Yeah, I mean it makes sense then on all of
Speaker 5: those headlines that Amazon was on such a terror after
Speaker 5: the earnings came out yesterday. Spencer, We've got about a
Speaker 5: minute left on this here. I'm wondering when you look
Speaker 5: at today's trade, the share price is basically a little
Speaker 5: bit over where they were at before earnings even came out,
Speaker 5: so still up on the week. But do you think
Speaker 5: that that performance is that justified by the earnings or
Speaker 5: do you think it's a result of Microsoft doing so
Speaker 5: well and then Amazon coming out later? What do you
Speaker 5: make of the trade impact?
Speaker 4: Yeah, I mean basically right back where they started, right
Speaker 4: so there might have been some encouragement among investors based
Speaker 4: on the Microsoft news, and we saw kind of a
Speaker 4: run up as that they progressed in amazon As share
Speaker 4: price before the earnings, and then once they double the
Speaker 4: cloud news a tank. So I mean who knows. But
Speaker 4: the big worry now is does the April slow down
Speaker 4: and cloud sales persist? And that is that just you know,
Speaker 4: a sign of course things to come later.
Speaker 2: Hey guys, really quickly twenty seconds each, Spencer. Did Amazon
Speaker 2: answer all your questions.
Speaker 7: On the call? And if not, what would you have
Speaker 7: wanted to know more about?
Speaker 8: Yeah?
Speaker 3: I mean they addressed they address most things.
Speaker 7: And Punham just real quickly your thoughts too.
Speaker 6: I think they kind of gave a good outline and
Speaker 6: their press release and on their call and all their
Speaker 6: business segments, so they did do a good job of
Speaker 6: explaining it. I'd just love to see what else they're
Speaker 6: going to do on grocery following up on the shareholders letter,
Speaker 6: just the path to how they will make grocery a
Speaker 6: bigger piece of Amazon.
Speaker 2: All right, guys, thank you so much covering all sides
Speaker 2: of Amazon. Spencer Sober Tech and e Commerce reporter at
Speaker 2: Bloomberg News there on Zoom from Seattle, and of course
Speaker 2: our Putam Goyle, senior analysts for e commerce, ath leisure,
Speaker 2: off price retail at Bloomberg Intelligence on the phone in
Speaker 2: New Jersey. As we said, Amazon shares, they're down, but
Speaker 2: they're definitely off their loads.
Speaker 7: Of the session.
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Speaker 2: All right, everybody, just catching up on the market clothes
Speaker 2: here with our TV colleagues remain in Scarlett. One of
Speaker 2: the things we did talk about, and we saw some
Speaker 2: really strong outperformance today, was the energy names. Energy stocks
Speaker 2: were the top performing major industry group out of eleven
Speaker 2: in the S and P five hundred today at Exon
Speaker 2: a mobile and Chevron rooping profits not seen since oil
Speaker 2: topped one hundred and forty five dollars in Maryland two
Speaker 2: thousand and eight. It's kind of wild considering where oil
Speaker 2: trades today. So let's get to it a round table.
Speaker 2: Bloomberg News US Oil reporter Kevin Crowley is on the
Speaker 2: phone from Houston. Also with US is Simone Foxman, Blueberg
Speaker 2: News reporter here in our Bloomberg Interactive Brokers studio. A
Speaker 2: lot to get through. Let me just get some initial
Speaker 2: thoughts from you, Simone in terms of what we got
Speaker 2: from these two players.
Speaker 9: Yeah, well, Exon clearly the stand out as opposed to
Speaker 9: Chevron if we're comparing, But both of these oil majors
Speaker 9: beating expectations by a wide margin, and we're seeing profits
Speaker 9: from these companies that we haven't seen since two thousand
Speaker 9: and eight. Remember two thousand and eight, one hundred and
Speaker 9: forty five dollars a barrel. Think about where we are
Speaker 9: with crude right now. We're looking at eighty dollars a
Speaker 9: barrel seventy nine to fifty four at the close for Brent,
Speaker 9: so clearly a different region. Exon seems to have made
Speaker 9: bank a little bit by investing a lot of money
Speaker 9: pre pandemic. That was something that its investors were very
Speaker 9: concerned about. But now now that there's higher oil prices,
Speaker 9: we're seeing a lot of demand. Meanwhile, Chevron, you know,
Speaker 9: the concerning thing here for investors was.
Speaker 7: That production dropped in the first quarter.
Speaker 9: That said, you know, we still ended up for the day,
Speaker 9: so and generally, as you said, energy strong today.
Speaker 2: All right, So Kevin, come on in on this. So
Speaker 2: how is it that they are able to be so
Speaker 2: profitable in a very different, fundamentally oil priced market.
Speaker 10: Well, really, I mean, I think we have to go
Speaker 10: back to the pandemic because both of these companies they
Speaker 10: really cut expenditure a lot during COVID nineteen when we
Speaker 10: all remember crude went negative one day, and really since
Speaker 10: coming out of COVID, obviously we've the demand was rowed back,
Speaker 10: but these company spending levels have not come back as quickly.
Speaker 10: They're actually both both eggs on a chevron are both
Speaker 10: spending a lot less than they were in twenty nineteen
Speaker 10: before COVID. So really you have you have pretty strong
Speaker 10: income from decent commodity prices, but you have that very
Speaker 10: low spending on the and there's been a real hesitancy
Speaker 10: to build, to build major projects around the world, and
Speaker 10: that's why they're really they're really making that making that margin.
Speaker 10: At the moment I.
Speaker 2: Forgot, you know, that the prices went negative, which was
Speaker 2: really crazy.
Speaker 7: It was such a nutty time.
Speaker 2: Kevin continued with us for a moment, because we know
Speaker 2: that it's really important for the energy companies to spend
Speaker 2: and to invest. I mean, at this point, even though
Speaker 2: we're shifting to a renewable world increasingly, we're still largely
Speaker 2: dependent on fossil fuel. So if there isn't a spend,
Speaker 2: that makes me a little nervous about what kind of
Speaker 2: supplies we'll see in the future.
Speaker 10: Yeah, and that's that was that's what was so interesting
Speaker 10: about today. Actually, for the last say three or four years,
Speaker 10: really production growth has been a bit of a dirty
Speaker 10: word in the in the oil business because a it
Speaker 10: means money going out the door, and the energy transition.
Speaker 10: But we're starting to see a bit of a change.
Speaker 10: And you know, we talked about the difference in share
Speaker 10: price performance today between Egxon and Chevron, and it's pretty interesting.
Speaker 10: The reasons why Eggson's been growing production quite strongly Guyana
Speaker 10: and the Permian actually, you know, those those two those
Speaker 10: two regions up forty percent in the in the past year.
Speaker 10: Where Chevron has really been struggling. They've production dropped in
Speaker 10: the first quarter, you know, had some issue had The
Speaker 10: Permian is growing for them, but they've had some issues there,
Speaker 10: and really the Permian forisch everyone is simply making up
Speaker 10: for the clients else elsewhere in the world. So you
Speaker 10: have one company's growing another company that's not. And what's
Speaker 10: interesting now is that the company that's growing ex or
Speaker 10: Mobile is the one that's being rewarded in the stock market.
Speaker 10: I remember a few weeks ago, bp of pivoted their
Speaker 10: strategy to invest a bit more in fossil fuels, and
Speaker 10: the investors also rewarded them. So I think I think
Speaker 10: we're starting to detect a bit of a change of
Speaker 10: sentiment now where the investment community are looking towards towards
Speaker 10: sort of long towards are starting to value growth and
Speaker 10: fossil fuels once again because of those shortages that we've
Speaker 10: talked about.
Speaker 5: Can you simone help me square still we've been talking
Speaker 5: about this, but help me square the barrel price with
Speaker 5: these great earnings.
Speaker 9: I think it's about demands. There are just question marks,
Speaker 9: ongoing question marks about how much demand, whether it's from China,
Speaker 9: whether it's from the US, whether it's from Europe. At
Speaker 9: least in the near term, I think when you look
Speaker 9: farther out, the story kind of changes. But it's this
Speaker 9: question you know that we've been grappling with across the
Speaker 9: economic data. We don't know how strong the consumer is,
Speaker 9: we don't know how much the central banks are going
Speaker 9: to continue hiking rates, most especially the FED, and therefore
Speaker 9: it's very difficult to predict where oil prices go. But
Speaker 9: you know, to what Kevin was saying one thing before
Speaker 9: I mentioned this, Kevin wrote ten bylines today since like
Speaker 9: six fifteen am. And so that is really impressive, Kevin.
Speaker 2: You on the live blog today, as these earnings are,
Speaker 2: it's pretty impressive.
Speaker 9: Yeah, plus live blog not counting that. But I would say,
Speaker 9: you know what he's what he's kind of saying about
Speaker 9: you know, shareholders rewarding investment in a way they haven't before.
Speaker 9: You know, this is kind of the dichotomy as well
Speaker 9: that we are hearing between the IEA, which is a
Speaker 9: major international agency backed by some of the Western countries,
Speaker 9: and OPEK. You know, opek is saying, y'all haven't invested
Speaker 9: enough in natural gas or in oil for a long time.
Speaker 9: That's why we're seeing all the volatility in the market.
Speaker 9: And then here you have there's more consumer consumer related
Speaker 9: organization saying actually.
Speaker 7: It's just you guys. You guys are the issue.
Speaker 2: Well, yeah, and that's a really good point. You know,
Speaker 2: I brought up in the past, you know, having gone
Speaker 2: up to the Baka like several years ago when shale
Speaker 2: and just the amount of drilling that we were doing
Speaker 2: in the United States and everybody was like, look at
Speaker 2: the US, you know, they're becoming energy independent.
Speaker 7: Kevin, where is the United States and all of this?
Speaker 10: Yeah, so the US, the US US is the worl's
Speaker 10: biggest oil producer at the moment because opek Is has
Speaker 10: cut back a little bit. But what's very different to
Speaker 10: now compared with the days when I mentioned you went
Speaker 10: out to the bark and is that companies are being
Speaker 10: much more restrained. They're looking very much at the at
Speaker 10: the future. They're looking at how many and the wells
Speaker 10: they can drill on their acres. They're looking at moderating
Speaker 10: production growth. They're very, very focused on their near term
Speaker 10: cash flows, making sure that they're profitable today rather than
Speaker 10: trying to drill baby drill and just you know, ramp
Speaker 10: up production just for the just for the sake of it.
Speaker 10: So so there's a lot more there's a lot more
Speaker 10: caution in the in the shale patch compared to compared
Speaker 10: to what we saw a few years ago. And that's
Speaker 10: why OPEK now is the fields at Liberty to cut
Speaker 10: production like they did at the beginning of April. They
Speaker 10: cut a million bows a day, and because they no
Speaker 10: longer see that threat, the market share threat from from
Speaker 10: shale and and relics of shell producers are quite happy
Speaker 10: for that. They're happy for OPEC to cut production and
Speaker 10: keep price inside.
Speaker 5: What's the likelihood of more cuts from them?
Speaker 10: The one earlier this this month was a huge surprise,
Speaker 10: so I certainly wouldn't rule anything out. And if it
Speaker 10: hasn't really impacted the market that much, it's definitely big
Speaker 10: concerns over over economic growth, the effect of the effect
Speaker 10: of rising interest rates here in the US and around
Speaker 10: the world. And you know, China was the big It's
Speaker 10: supposed to roar back this year and swallow up a
Speaker 10: huge amount of oil demand. Hasn't really happened yet. People say,
Speaker 10: maybe happen in the second half, but we're not. We're
Speaker 10: not seeing it quite well.
Speaker 2: And we have a story of US oil heading for
Speaker 2: a six monthly drop because as demand outlook worse, and
Speaker 2: so we've seen like the trend line, no doubt about someone.
Speaker 2: You're just back from the Middle East.
Speaker 9: I am, And that's why I'm going to ask about
Speaker 9: natural gas because I was in Klaser, you know, one
Speaker 9: of the world's largest producers of natural gas. Actually this
Speaker 9: is for Kevin. You know, we heard this major bullish
Speaker 9: outlook from some of these oil field contractors SLB, Baker, Hughes,
Speaker 9: Halliburton and a lot of them mentioning how much natural
Speaker 9: gas was going to be part of their business. I
Speaker 9: feel like we heard less of that today from these
Speaker 9: oil majors, even though some of them are moving into
Speaker 9: the space.
Speaker 7: Yeah, what what's the thinking there?
Speaker 8: Why?
Speaker 9: You know, what's your take?
Speaker 7: Kevin just got about twenty seconds.
Speaker 10: Yeah, the majors are interested in gas, but they want
Speaker 10: liquified batual gas. They want the big projects that they
Speaker 10: can ship around the world. They're not too interested in
Speaker 10: the local market for gas because the value is a
Speaker 10: lot lower, but definitely big projects where they can ship
Speaker 10: gas around the world.
Speaker 7: Okay, very got it.
Speaker 2: Kevin, We got to run Kevin Crowley and Simon Foxman,
Speaker 2: so appreciate it.
Speaker 7: This is Bloomberg.
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Speaker 2: Well transparency. This next guest came to us because Mattie's
Speaker 2: mom works for this company. She's head of marketing. But
Speaker 2: what we love, Maddie about this when you pitched it
Speaker 2: in and I'm like, we got to talk to them.
Speaker 2: They're a small business. They're in the business of moving
Speaker 2: people around. So in many ways, it's a great indicator
Speaker 2: of the economy, you know, beyond the official statistics like
Speaker 2: the batch we got today. It's just another way of
Speaker 2: trying to figure out where we are.
Speaker 5: Yeah, Carol, you and I love a good low key
Speaker 5: economic indicator when it comes to this show, so we're
Speaker 5: going to get to it. We've got Nick Friedman here.
Speaker 5: He is, of course, the co founder of College Hunks
Speaker 5: Hauling Junk. He's going to talk with us about the
Speaker 5: business of moving people and removing their stuff, and he
Speaker 5: joins us on zoom from Tampa. Nick, great to have
Speaker 5: you on the show. Thanks for being here. Besides the
Speaker 5: fact that you obviously have the best marketing team in
Speaker 5: the entire world, talk to me about the business for
Speaker 5: the people who may not be familiar. I know started
Speaker 5: right out of college, hence the name. Tell me about
Speaker 5: the size of the scope and how business is doing. Yeah.
Speaker 8: So, our company, College Hunks Hauling Junks, started when I
Speaker 8: was in college with just a beat up cargo van.
Speaker 8: Fast forward almost twenty years, twenty year overnight success. We've
Speaker 8: gotten now two hundred franchise locations around the country, approaching
Speaker 8: three hundred million in an annual sales, over five thousand employees,
Speaker 8: and it's moving in junk removal, like you said, and
Speaker 8: we've made HUNKS into an acronym which stands for honest, uniform, nice,
Speaker 8: knowledgeable service.
Speaker 5: Okay, So besides the acronym, though, Nick, talk to me
Speaker 5: about the business side itself, right, We talk a lot
Speaker 5: about the current craziness in the housing market. Where have
Speaker 5: you seen the biggest impact when it comes to those
Speaker 5: macro factors impacting the moves that you're doing.
Speaker 8: Well, we saw a big boom coming out of COVID.
Speaker 8: We were expecting twenty thirty forty percent year over year
Speaker 8: growth coming out of COVID, and then this year, probably
Speaker 8: about middle of last year, we saw a significant deceleration
Speaker 8: in that growth. So we actually budgeted this year for
Speaker 8: what we could call a conservative ten percent year over
Speaker 8: year growth. We're actually falling slightly short of that. More
Speaker 8: so impacted on our side with the junk removal service, which,
Speaker 8: as you might imagine from a consumer standpoint, if you're
Speaker 8: holding back on some of your consumer spending disposable income,
Speaker 8: the likelihood of paying to get rid of items would
Speaker 8: be less. But also even on the move moving side,
Speaker 8: if people are moving less, obviously the interest rates are higher,
Speaker 8: the moving volume statistics are down, and so we're impacted
Speaker 8: by that as well, and we're still growing year every
Speaker 8: year in that business, but not quite as much as
Speaker 8: we as we had hoped for.
Speaker 2: Nick, I'm wondering economic indicators. What really, like, what do
Speaker 2: you watch?
Speaker 7: If any? Is it labor statistics?
Speaker 2: I'm thinking, you know, here we are, we're focused on
Speaker 2: a Friday afternoon. You've got First Republic, which has been
Speaker 2: a troubled regional bank, and it's crashing once again in
Speaker 2: the aftermarket. You've got Reuters reporting that the FDI see
Speaker 2: getting ready to place it into receivership. You know, we
Speaker 2: watch the bank sector. It creates nervousness. What is it
Speaker 2: that you watch specifically to say, Okay, maybe this is
Speaker 2: where our business might go, or just kind of an
Speaker 2: indication of the outlook.
Speaker 8: Yeah, I mean I look closely at housing market trends.
Speaker 8: I look closely at consumer spending because we are a
Speaker 8: consumer brand primarily, and really just the overall S and
Speaker 8: P five hundred is a good end indicator. I mean,
Speaker 8: I look back at sort of the two thousand and
Speaker 8: eight crash, and some of the early tremors of that
Speaker 8: are similar to me in terms of what we're seeing
Speaker 8: with some of the banking falls that you just mentioned,
Speaker 8: And so when there's bad news on Wall Street, when
Speaker 8: there's you know, ticks up in the interest rate and
Speaker 8: people are not buying homes or selling them for the
Speaker 8: price that they were a year ago, that's going to
Speaker 8: trickle down to companies like ours that are in the
Speaker 8: home services space. And we're sort of that first call
Speaker 8: they make when they are moving or when they want
Speaker 8: to upgrade their furniture, clean out their garage, they're calling us.
Speaker 8: And if that's not happening as much, or they're holding
Speaker 8: on to their wallet because their portfolios down, that's kind
Speaker 8: of could be as in demand as as it has
Speaker 8: been coming out of COVID.
Speaker 2: I know, Maddie shared with us, you guys are over
Speaker 2: two hundred locations. You know, some of them are small,
Speaker 2: some of them bring in several million dollars a year.
Speaker 2: I am curious when you look at the outlook, do
Speaker 2: you think recession or do you think not recession.
Speaker 8: I don't want to put a direct label on it,
Speaker 8: but I will tell you we're being much more conservative.
Speaker 8: You know, where one of the mantras we say within
Speaker 8: our company has always been revenue is vanity, profit is sanity,
Speaker 8: and cash flow is king well we came up with
Speaker 8: another one. If cash flow is king, then lean is queen,
Speaker 8: and so we want to be lean and disciplined with
Speaker 8: our spending. Maybe not be as aggressive with you know,
Speaker 8: testing new marketing options, but be very more laser focused
Speaker 8: with how we're going to acquire clients, how we're going
Speaker 8: to convert those clients and turn those into repeat and
Speaker 8: referral business. So, because of what we've experienced in the past,
Speaker 8: what i'd say twelve months, we're being more conservative. We're
Speaker 8: being more disciplined, maybe hesitating before we invest in that
Speaker 8: new piece of equipment or new piece new key hire,
Speaker 8: because we want to make sure we focus on the
Speaker 8: cash flow and sort of be lean coming through this uncertain,
Speaker 8: volatile market.
Speaker 2: Are you also lean because you're concerned about access to
Speaker 2: capital and the higher cost of capital?
Speaker 8: Absolutely, asolutely, without a doubt. We've got to be lean
Speaker 8: in terms of cash flow, and that has a cost
Speaker 8: of capital as well. So we're being more conservative about
Speaker 8: how much we borrow, more conservative about how much we
Speaker 8: extend ourselves. Whereas maybe the past two years before things
Speaker 8: slowed down, it was all about grow, grow, grow, you know,
Speaker 8: burn the cash, burn the fuel. Let's let's let's, you know,
Speaker 8: keep pushing forward. And I studied economics in college, so
Speaker 8: I know a little enough to be dangerous. And you know,
Speaker 8: inflation happens because we pumped a lot of money into
Speaker 8: the economy, and now you know, the FED is ticking
Speaker 8: up interest rates to try to slow things down. And
Speaker 8: so as a small business, medium sized business, we're sort
Speaker 8: of feeling the effects of like the push forward and
Speaker 8: now sort of the pull back, and we're just having
Speaker 8: to make sure you know that those that climate is
Speaker 8: going to impact everybody, and so we just got to
Speaker 8: be more smart and strategic than everybody else.
Speaker 5: Hey, Nick, talk to me a little bit about the
Speaker 5: demo of your customers and how it's changed, because I
Speaker 5: know you guys are kind of like the FED, where
Speaker 5: bad economic news is really good for you. During COVID,
Speaker 5: you did really well coming out of that. How has
Speaker 5: your demo changed in terms of the customer and how
Speaker 5: have their moves changed?
Speaker 8: Yeah, I mean I think we're actually getting a lot
Speaker 8: more moves right now for apartments, which was maybe not
Speaker 8: what we were experiencing coming out of COVID because people
Speaker 8: were buying and selling homes, you know, like it was
Speaker 8: going out of fashion the past couple of years, and
Speaker 8: now with the housing market slowing down, people are staying
Speaker 8: in apartment communities are moving, apartment communities are moving within.
Speaker 8: We're starting to see a tick up and demand there.
Speaker 8: There's still disposable income there. That's not to say that
Speaker 8: maybe there's not an income level there that's able to
Speaker 8: hire our services. Because once you fall below a certain threshold,
Speaker 8: people are going to do this themselves. They're going to
Speaker 8: move their own furniture or they're going to get rid
Speaker 8: of their own junk. But if you're looking to hire
Speaker 8: a full service solution, they have to have some level
Speaker 8: of disposable income to be able.
Speaker 1: To do that.
Speaker 7: Well, Nick, a great perspective on what's going on. I
Speaker 7: so appreciate your time. Nick Friedman.
Speaker 2: He's co founder of College Hunk's Hauling Junk. Joining us
Speaker 2: via zoom from Tampa, Florida. Thank you so much, brother
Speaker 2: Marc a journal Now about you?
Speaker 8: Let me drive? No, no, no, no, honey, please how do
Speaker 8: the driving gravel?
Speaker 1: Let's mate, I want to try it. It's a good
Speaker 1: question time. This is good drive to the.
Speaker 3: Clothes dot Com for me.
Speaker 2: A thing well by Don on Bloomberg Radio all right, everybody,
Speaker 2: we have just under eighteen minutes left in today's trading session.
Speaker 2: It is time for the drive to the closed. And
Speaker 2: you heard Charlie giving you the numbers. We're pretty much
Speaker 2: holding on to our gains here when it comes to
Speaker 2: the equity side of thing, and we're counting down to
Speaker 2: the FED meeting next week. A lot of earnings we've
Speaker 2: been getting through. We are on track though, for some
Speaker 2: weekly gains when it comes to the major equity averages.
Speaker 7: So let's get to it.
Speaker 2: Our market guest on this Friday, Katerina Semonetti. She's senior
Speaker 2: vice president and private wealth advisor over at Morgan Stanley
Speaker 2: Private Wealth Management, joining us once again on Zoom from Philadelphia.
Speaker 7: Katerina, I don't know about you, but I am exhausted.
Speaker 7: It's been quite a week.
Speaker 2: It's just a lot of stuff coming at us, you know,
Speaker 2: when it comes to earnings, economic news, just kind.
Speaker 7: Of where we are going. So here we are, we
Speaker 7: sit on a Friday. Equity seem rather enthusiastic. How do
Speaker 7: you see it?
Speaker 11: Carolin and madisone. Thank you for having me on the
Speaker 11: show and happy Friday, and I agree with you. Boy,
Speaker 11: what a week and the question is, you know, are
Speaker 11: we looking at the market that is showing all the
Speaker 11: sorts of resilience in face of the mixed earnings and
Speaker 11: face of the risk and all the uncertainty that we
Speaker 11: seemingly are facing. And is this the sign of the
Speaker 11: health of the economy that we are maybe not accounting
Speaker 11: for or is it being foolishly optimistic? And unfortunately, this
Speaker 11: is the difficult part for the investors because that's where
Speaker 11: they find themselves in these two camps. Because you have
Speaker 11: one camp that is getting ready for the decline in
Speaker 11: the market, getting ready for all the risks, the pressures
Speaker 11: on earnings, the stickness of the inflation that he remains
Speaker 11: high to the point where FED is not really ready
Speaker 11: to declare victory yet, possibility of economic procession, and generally
Speaker 11: the unknown of what the delete effect the FED action
Speaker 11: is going to yield. And then the other camp that
Speaker 11: is so excited about the fact that market has been
Speaker 11: positive this year so far despite of earnings.
Speaker 2: All right, so which camp are you in? Are you
Speaker 2: in the more optimistic that, hey, earnings seeming pretty good?
Speaker 2: Mohammedel Arian He was on our error earlier and said,
Speaker 2: you know, there's no guarantee that we have to go
Speaker 2: to recession, and if you look at earnings, it would
Speaker 2: point to otherwise that maybe we'll avoid it.
Speaker 7: Are you in that camp?
Speaker 2: Are you in the camp that youo folks, you know
Speaker 2: your expectations about where we are, and especially in terms
Speaker 2: of what the Fed is going to do in the
Speaker 2: slow down that you know you're missing it. So which
Speaker 2: one are you in?
Speaker 11: I'm in the camp that the bear market is not
Speaker 11: over yet, and I think it will be smart to
Speaker 11: not ignore the warnings of the market and specifically the earnings,
Speaker 11: specifically the fact that effect that this this regional bank
Speaker 11: situation might have on the availability of the liquidity and
Speaker 11: potential credit crunch that it might pause. We cannot spend
Speaker 11: the way we have been spending in this high interest
Speaker 11: rate environment, neither consumers or the institutions. And this is
Speaker 11: going to have a long lasting effect. Now in the
Speaker 11: longer run, I'm absolutely optimistic no bear market lasts forever.
Speaker 11: We just have to have a somewhat longer view on
Speaker 11: equities and also take advantage of the higher yields that
Speaker 11: are you know, finally are available to us on the
Speaker 11: fixed income side.
Speaker 5: So bigger picture than on the financials are you advising
Speaker 5: to stay away for now because of concerns about that
Speaker 5: credit tightening.
Speaker 11: Well, we have to be very selective. We generally have
Speaker 11: to be very selective with equities right now, but specifically
Speaker 11: with financials. There's some financial institutions that are showing tremendous
Speaker 11: strength and quite frankly are trading below where they should be,
Speaker 11: so they present some attractive buying opportunities. But there are
Speaker 11: certain parts of the financial sectors, you know, where we
Speaker 11: have to be very cautious.
Speaker 2: You know, it is such an interesting environment at this point,
Speaker 2: and we keep reminding everybody that Fed policy there's no
Speaker 2: exact science to it, and it's not uncommon for the Fed,
Speaker 2: you know, overdo it, miss the mark if you will,
Speaker 2: And so we do wonder, you know, what's going to
Speaker 2: happen from here. Having said that, and we were just
Speaker 2: talking a little bit about the financials, do you feel
Speaker 2: like as investors, are you guys are at Morgan Stanley
Speaker 2: kind of shelving the banking crisis for now and you
Speaker 2: feel like, all right, we've got this, that's one thing
Speaker 2: that we can maybe take off the wall of worry
Speaker 2: list or not yet.
Speaker 11: Well, to your point, what we tell clients is that
Speaker 11: the current environment is like trying to stop the fast
Speaker 11: moving train that has no breaks, right, you know, and
Speaker 11: you're throwing well, everything we have added and Federal Reserve
Speaker 11: is really trying to control the situation. But the question
Speaker 11: is how effective they're going to be. And we see
Speaker 11: it that while they're not round raising rates yet, we're
Speaker 11: already talking about the rate cuts. Are we going to
Speaker 11: get them later this here or possibly next year? So
Speaker 11: this banking situation isn't going to have effect absolutely, we
Speaker 11: are just gauging how deep of an effect it's going
Speaker 11: to be. And if we look back at two thousand
Speaker 11: and eight, we emerged from two thousand and eight as
Speaker 11: the healthier, much better positioned financial system, and I think
Speaker 11: the lessons are going to be learned from this crisis
Speaker 11: as well, and hopefully we move forward without making these mistakes.
Speaker 5: So you think that lesson will be, what more regulation
Speaker 5: on the bank similar to kind of the recommendations we
Speaker 5: got from the federport on SVB today.
Speaker 11: Well, I think the main lesson is going to be
Speaker 11: not underestimating interest rate risk and having sufficient levels of liquidity,
Speaker 11: but also the regulation that will be applied to all
Speaker 11: the banks so old levels because the consumers here in
Speaker 11: the United States, you know, should be able to comfortably
Speaker 11: walk into the bank and expect the bank to be
Speaker 11: regulated on the same level as the bank across the street.
Speaker 2: So you say, stay defensive. So you're talking healthcare, energy, utilities, consumers, staples.
Speaker 7: Is that fair?
Speaker 11: That absolutely is fair, and just generally stocks that pay dividends,
Speaker 11: that have strong competitive positioning, that have strong time the
Speaker 11: buying power and pricing power, and the same power in
Speaker 11: this market. It is really important these days to understand
Speaker 11: what we own, the simple conscience investment strategy that allows
Speaker 11: investors to pivot based on the ever changing environment. So
Speaker 11: when we get to the end of the week like this,
Speaker 11: we can actually act accordingly, possibly have some cash on
Speaker 11: the sidelines, take advantage of the higher yields, and be
Speaker 11: prepared that if this market where to drop, that we
Speaker 11: can actually act and take advantage of the dips in
Speaker 11: the market.
Speaker 2: Cattery know what about big technology? I mean Microsoft, I'm
Speaker 2: looking at about a seven percent gain for the week.
Speaker 2: I'm just throwing one name out there, I think it's
Speaker 2: safe to say. And Amazon, we just talked about a
Speaker 2: lot that there was kind of a you know, some concerns,
Speaker 2: certainly about the cloud business. But you know, overall this week,
Speaker 2: big tech, you know, really came in very strongly group
Speaker 2: that everybody keeps saying, forget it, forget it, It's time
Speaker 2: to look at other things. What is your read on
Speaker 2: big technology. Are you telling your clients, your wealthy clients,
Speaker 2: that they need to stay away from tech or that
Speaker 2: they should be all in, especially when we're talking so
Speaker 2: much about AI as being the next growth driver.
Speaker 11: Well, we are absolutely not telling them to stay away
Speaker 11: because technology is here to stay. Technology drives every single
Speaker 11: aspect of our life. But like with everything else, we
Speaker 11: have to be selective and we have to understand why
Speaker 11: the position in tech that we're taking on is going
Speaker 11: to be here a year from now, ten years for now,
Speaker 11: potentially thirty years for now. What is that competitive advantage
Speaker 11: and what is that ability for that technology company to
Speaker 11: generate consistently generate earnings. We can just view tech as
Speaker 11: this great, successful, wonderful sector that cannot fail, you know anything,
Speaker 11: Any sector in the market has its ups and its downs,
Speaker 11: So it's really important to own quality within technology.
Speaker 2: All right, got to leave it on that note, Katerina,
Speaker 2: thank you so much, appreciate it, have a great weekend.
Speaker 2: Katerina Seminetti shes Senior VP, private Wealth Advisor of at
Speaker 2: Morgan Stanley Private Wealth Management on Zoom from Philadelphia. Interesting,
Speaker 2: a little bit more defensive, saying that the bear market
Speaker 2: or the bear cycle isn't.
Speaker 7: Over tech, it's here to stay.
Speaker 2: Yeah, well that's fair, right, Yeah, when we look at
Speaker 2: our lives and it makes it a heck of a
Speaker 2: lot of sense.
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