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Speaker 1: Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2: We got with is Eric Wiener. He's Bloomberg News Equity
Speaker 2: America's team leader. He's the author of several books, including
Speaker 2: What Goes Up in Oral History of Wall Street from
Speaker 2: the Great Depression through the Internet bubble in the nine
Speaker 2: to eleven attacks. He joins us here in the Bloomberg
Speaker 2: Interactive Brokers studio. You walked in, I asked how you're doing.
Speaker 2: You said, it's been a day. I think it's fair
Speaker 2: to say.
Speaker 3: That, say that every day.
Speaker 2: That's what I was just gonna say. But I want
Speaker 2: to talk to you about a story that you just
Speaker 2: edited that talks about retail traders coming in and buying
Speaker 2: the day.
Speaker 4: Is that?
Speaker 2: Is that what we're seeing right now? They haven't been
Speaker 2: scared away yet.
Speaker 5: They have not been scared away, and the money well
Speaker 5: where it's interesting because we're seeing different kinds of buying.
Speaker 4: So the kind of buying we're.
Speaker 5: Seeing is actual individuals going into the market and buying
Speaker 5: individual stocks or buying ETF's big flows coming from these guys.
Speaker 5: And in the story which by Esha Day couldn't recommend
Speaker 5: it enough, there are some really great quotes about people
Speaker 5: looking for magic in the market and whatever else. And
Speaker 5: but when you look at the broader UH indicators of
Speaker 5: like iras four to one k's, that looks a little
Speaker 5: bit more bearish, actually significantly more bearish. What's happening there
Speaker 5: appears to be people sort of thinking should I take
Speaker 5: my retirement into cash?
Speaker 2: That I yeah, that's scary to hear.
Speaker 4: Yeah, so after.
Speaker 3: The selling just saying had enough.
Speaker 5: It's enough, right, and that like that is actually the
Speaker 5: biggest pilot cash we have.
Speaker 4: So if if.
Speaker 5: That turns bearish, that becomes a very different story because
Speaker 5: that consistently adds to the stock market going up. There's
Speaker 5: constantly this pressure of buying. Other countries don't have that.
Speaker 5: So that's unique to the United States and it's.
Speaker 4: Part of our market.
Speaker 2: Maybe I'm just like naive here, but I thought that
Speaker 2: I thought that in retirement portfolios. People had like target
Speaker 2: date funds, and you basically don't touch it until you
Speaker 2: You just don't touch it until you retire. Look, you're
Speaker 2: not an investment advisor. I'm not gonna ask you to
Speaker 2: give advice here. But I didn't know people played with
Speaker 2: that money. They do, and so I do.
Speaker 5: I do not that the that is off limits, Yes,
Speaker 5: that is, and you think about it. You try not
Speaker 5: to look at it. You think about it once a quarter.
Speaker 5: You adjusters don't look at it.
Speaker 4: I haven't looked at it, and it.
Speaker 3: Takes a lot, but I like in my head have
Speaker 3: like percentages of what's been going on here, and so
Speaker 3: I don't want to touch it, but anymy go ahead.
Speaker 5: Yeah, and the target date fun thing is important because
Speaker 5: as you get closer I'm an old man, as you
Speaker 5: get closer to retirement, you do different things. You de risk,
Speaker 5: you know, you lessen stocks more in stable things. But
Speaker 5: you do have people who view their IRA or their
Speaker 5: formum one K as a trading vehicle.
Speaker 2: Well, and to be fair, we have seen the bond
Speaker 2: market not do what it's typically supposed to do in
Speaker 2: an environment where stocks go down, So that could cause
Speaker 2: some people to maybe freaked out.
Speaker 3: So how do you make sense of this of someone
Speaker 3: who follows the markets right, and you're thinking about the
Speaker 3: role of retail traders who can be in and out
Speaker 3: pretty quickly and stuff. Maybe it's not that long term bet.
Speaker 3: So what does it really indicate about the markets other
Speaker 3: than it's kind of a plaything.
Speaker 5: Well, what they're buying is the traditional stuff, Well, the
Speaker 5: traditional stuff being like big tech and the big names
Speaker 5: and those that they're like fans. It's like, you know,
Speaker 5: rooting for your favorite football team, rooting for your favorite
Speaker 5: baseball team.
Speaker 4: They are going to buy they believe in Ela Musk.
Speaker 5: They're going to keep buying those stocks until they're proven wrong,
Speaker 5: or until they feel that they're proven wrong. So it's
Speaker 5: a different kind of mentality. The shifting of retirement funds
Speaker 5: to de risking, that's a more programmed move, and that
Speaker 5: if that is in fact a long term trend that
Speaker 5: actually is troubling.
Speaker 2: Does it ever become if we look at the retail
Speaker 2: side of this, does it ever become Do we ever
Speaker 2: get to the point where, and maybe this happened post
Speaker 2: twenty twenty into twenty twenty one, when retail really ruled,
Speaker 2: do we get to a point where retail doesn't have
Speaker 2: the money to buy the dip.
Speaker 5: Yeah, that absolutely happens. The bigger point is that they
Speaker 5: tend to turn bearish right as the market is ready
Speaker 5: to turn bullish. It's kind of a country very indicator.
Speaker 5: If you talk to Wall Street pros so there, when
Speaker 5: they see over enthusiasm among the retail crowd, they kind
Speaker 5: of get nervous.
Speaker 4: This would be an indicator of that.
Speaker 5: But when they start seeing that the fundamentals are strong,
Speaker 5: growth should be you know, stock should be moving up,
Speaker 5: growth is okay, and the retail crowd is going no,
Speaker 5: that's when actually the Wall Street pro.
Speaker 4: Step in and they say, there's a contrary indicator.
Speaker 3: So you know, Eric like, I feel like, if you
Speaker 3: want to tell a story, you can find the data
Speaker 3: points right. So here I'm looking going back to the
Speaker 3: end of twenty twenty two to today, we're up forty
Speaker 3: percent on the S and P five hundred. We're down
Speaker 3: about eight percent year to date, almost nine percent.
Speaker 6: So I think that.
Speaker 3: Doesn't feel so bad. But I mean, do we have
Speaker 3: to think about the last two years or prior years.
Speaker 3: We're maybe off the charts anomalies more so, I don't know, like,
Speaker 3: how do you like when you start playing around with numbers?
Speaker 3: You know what I mean? You can start looking at
Speaker 3: things a little bit differently.
Speaker 4: There are a lot of ways to thin slice this.
Speaker 5: The big numbers to me are two straight years of
Speaker 5: twenty plus percent returns. That's rare, and that's the kind
Speaker 5: of thing where like, no matter who's president, no matter
Speaker 5: what the market is, a kind of a pullback would
Speaker 5: be expected. What's different now is that the political regime changed,
Speaker 5: And normally that doesn't actually mean all that much, but
Speaker 5: it really does here, so everybody.
Speaker 4: Wants as soon as if you.
Speaker 5: Take a step back and just look up to the
Speaker 5: day the inauguration day on January twentieth, or if you
Speaker 5: look at the tariff anounce the day of the tariff announcements,
Speaker 5: can you start seeing a downward trajectory where you see
Speaker 5: the market reacting to what is going on politically.
Speaker 4: That's different. So if you were looking at this year.
Speaker 5: And coming in and you're like, you know, it's president X,
Speaker 5: doesn't matter who it is, and the plans are just
Speaker 5: going to be to keep doing what we've been doing,
Speaker 5: then the market sells off a little bit and you
Speaker 5: look at it and you say, okay, well maybe I
Speaker 5: take some profits here whatever, But it's not this cataclysmic
Speaker 5: sweeping up, sweeping down in that story we talk about.
Speaker 5: We've had just in like the last fourteen sessions, we've
Speaker 5: had five two percent down more than two percent down
Speaker 5: days and two or three two percent up days, which
Speaker 5: like that's incredible, that's crazy swings. So this is the
Speaker 5: difference between now and what was going on before, is
Speaker 5: that this is actually directly related to Washington, and we
Speaker 5: have no clarity on what's going to come out of there.
Speaker 3: All right, crazy stuff. As always, Eric, thank you so much.
Speaker 3: Appreciate Eric Weener, Senior Editor Equities America's joining us here
Speaker 3: in studio.
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Speaker 2: As Carol mentioned, we're focused on the stock market, the
Speaker 2: bond market. Earlier, the S and P five hundred rallied
Speaker 2: as much as three point four percent. These were off
Speaker 2: of media reports that the US was considering lower levees
Speaker 2: on China. Then we saw stocks pair gains after Treasury
Speaker 2: Secretary Scott Besson casts some doubts on a timely resolution
Speaker 2: on the US China trade war. We want to get
Speaker 2: into what's happening in the bond market because we are
Speaker 2: seeing long maturity treasury yields fall, at least felt earlier
Speaker 2: after the President laed fears that he would fire FED
Speaker 2: chair J. Powell. A lot to unpack here. Fortunately, we
Speaker 2: got Katie Kominski with us. She's chief research strategist air
Speaker 2: portfolio manager at Alpha Simplex Group. She joins US from Boston. Katie,
Speaker 2: it's been a bit since we spoke to you. There's
Speaker 2: been a lot happening when it comes to the bond market,
Speaker 2: so we wanted to get your view on really how
Speaker 2: you're thinking about this asset class in an environment where
Speaker 2: it's not necessarily behaving in the way that it typically
Speaker 2: behaves when there's a sell off an aquities.
Speaker 7: That is such a good question. It is the most
Speaker 7: important thing to look at this month. If you look
Speaker 7: at what happened, equities were down and you didn't see
Speaker 7: bonds rallying in response to such an extreme event, And
Speaker 7: to me, this is a suggestion that the market is
Speaker 7: much more concerned about sort of the vulnerability of US
Speaker 7: assets but also the potential for inflation. So both of
Speaker 7: those narratives are key here, and that means that bonds
Speaker 7: are just not behaving like the safe haven asset that
Speaker 7: we love, but gold has so who knows.
Speaker 6: It's definitely something to note.
Speaker 3: Yeah, how do you make sense of that? Like you're
Speaker 3: someone who's watched this, first of all, the bond market
Speaker 3: when it's not acting like it's supposed to, Like, do
Speaker 3: alarm bells go off in your brain and you're like,
Speaker 3: wait a bitute.
Speaker 7: Oh, definitely, because I mean, if you think about the
Speaker 7: typical narrative of this type of move when you have
Speaker 7: such a large risk off you know, trade like we've
Speaker 7: seen in the last few weeks, although it has been volatile,
Speaker 7: you think about the sort of where do you go
Speaker 7: to find safe haven and that's usually fixed income and
Speaker 7: that's not the case if you think there's a probability
Speaker 7: that this type of risk off move could cause dumping
Speaker 7: of US assets or a lack of trust in sort
Speaker 7: of US treasuries, and that's what the market has been
Speaker 7: concerned about. And we've definitely seen some of those signals,
Speaker 7: albeit days like today in the last couple of days,
Speaker 7: you're seeing some.
Speaker 6: Retraction of that concern.
Speaker 7: You're seeing a flattening of the yield curve, which would
Speaker 7: kind of say that people are a little less concerned
Speaker 7: about that.
Speaker 6: But it is definitely.
Speaker 7: Something we're going to have to watch because bonds are
Speaker 7: just not behaving how we would think.
Speaker 2: Do you think the US is losing its status as
Speaker 2: the haven, as the safety play, as the central bank
Speaker 2: to the world.
Speaker 6: Well, I mean that is a clearly important narrative.
Speaker 7: I mean, look how much the markets have moved based
Speaker 7: on the independence of the FED.
Speaker 6: And sort of concern over that.
Speaker 7: Concern as well is that when you have flows out
Speaker 7: of US assets, that they don't get recycled back into
Speaker 7: US treasuries. And so the concern with that is that
Speaker 7: we're just losing some of that safe haven status. And
Speaker 7: it's still too early to tell, but the early indications
Speaker 7: in the market suggest that we should worry about it
Speaker 7: and think about it.
Speaker 3: You know, it's funny I think about Katie. You know,
Speaker 3: for such a long time in terms of US equities,
Speaker 3: we talked about Tina, right, there is no alternative, and
Speaker 3: so money just kept coming into the US equity story
Speaker 3: and markets. So I feel like too, as you say,
Speaker 3: with the ultimate safe haven US treasuries, that there was
Speaker 3: no alternative. Is there, realistically, though, an alternative that I
Speaker 3: understand there are that might give you higher yield or
Speaker 3: but I mean with the same security and dependency that
Speaker 3: the US treasuries have, is there an alternative?
Speaker 7: Oh, I forgot about, Tina, But yeah, I mean, I
Speaker 7: know it wasn't so long ago. I love that it
Speaker 7: wasn't that long ago. But it's been a busy month.
Speaker 7: But yeah, you know, that is a really good question.
Speaker 7: And that's why I think if you look at the
Speaker 7: only place people.
Speaker 6: Have run to is gold, which you know, and.
Speaker 7: That has been such a big story because there's just
Speaker 7: people don't know what that alternative is yet, and there's
Speaker 7: still questionability of whether or not treasuries could be more vulnerable,
Speaker 7: and so I think we're going to have to really
Speaker 7: I don't know the answer, and I think the market
Speaker 7: doesn't know the answer. So at this point, the alternatives
Speaker 7: aren't clear, especially in a world where inflation could be
Speaker 7: an issue.
Speaker 6: Definitely.
Speaker 3: So the whip saw the back and forth, you know,
Speaker 3: is there a point this is something we talk about,
Speaker 3: like with our Gena Martin Adams in terms and other
Speaker 3: market strategists unlike yourself, where there's a point where there's
Speaker 3: just so much back and forth that investors are like,
Speaker 3: I'm out and there's long term implications. I don't know,
Speaker 3: help me in terms of the markets here the treasury trade.
Speaker 3: Is there a point where global investors truly say I'm out?
Speaker 3: And what is that?
Speaker 8: Is it?
Speaker 3: Vetcher J. Powell being moved? Is it the constant back
Speaker 3: and forth? Like, what is that tipping point where investors
Speaker 3: are like, can't do this anymore?
Speaker 5: Well?
Speaker 7: I think, I mean we have seen those type of
Speaker 7: actions in terms of speculative volumes. Yeah, when you look
Speaker 7: at signals, signals have really reduced and generally technical signals
Speaker 7: have become very muted.
Speaker 6: And that's consistent with.
Speaker 7: Sort of investor behavior as well. I'd say that, you know,
Speaker 7: even though you've seen a lot of swings, there definitely
Speaker 7: becomes a point where people just wait. And I think
Speaker 7: if we get into that situation, it could take a
Speaker 7: little bit of time for them to get risk back
Speaker 7: on the table. I think this week is a good
Speaker 7: example that you know, there are still people looking for that,
Speaker 7: you know, recovery. They're looking for sort of potential opportunities,
Speaker 7: which means that it's not there yet, but a lot
Speaker 7: of people have de risks substantially already and they may
Speaker 7: not be coming back right away.
Speaker 2: Katy, you want to go back to something that you
Speaker 2: said that you have your eye on, which is the
Speaker 2: status of the US as this haven, as the dollars
Speaker 2: you know, as the safety or haven currency, the US
Speaker 2: treasury market as one where people can rely on backed
Speaker 2: by the full faith and credit of the US government.
Speaker 2: You said you're watching that status closely, but let's play
Speaker 2: that out a little bit. What happens if the US
Speaker 2: does lose its status. What are the implications of that.
Speaker 7: Well, it would be massive flow into other assets and
Speaker 7: potential for dumping of US treasuries, and what that would
Speaker 7: do is steep in the US yield curve. And that's
Speaker 7: why we've specifically seen.
Speaker 6: That type of movement, but not in extremity.
Speaker 7: So I think it's really a question of flows and preferences,
Speaker 7: and that could be disadvantageous to US assets, depending of course,
Speaker 7: on how extreme it would be. We've already seen massive
Speaker 7: flows to the yen and the euro, and I think
Speaker 7: as we navigate those trends if they continue much longer,
Speaker 7: that that will get people concerned.
Speaker 3: What about the auctions, we had a five year today,
Speaker 3: we did see demand rising at that seventy billion dollars
Speaker 3: scale a five year note. How closely are you're watching
Speaker 3: the auctions? What are they telling you in terms of
Speaker 3: investor demand and still having confidence in the US government.
Speaker 7: Well, I'd say, I mean, the auctions have been reasonable
Speaker 7: and there's been plenty of demand, so that is a
Speaker 7: positive sign.
Speaker 6: Where we see the trends.
Speaker 7: That are more concerning is actually in the market pricing
Speaker 7: less so in sort of the demand for auctions and
Speaker 7: sort of imagine that you know, auctions is sort of
Speaker 7: newly issued treasuries, but there's a lot of treasuries that
Speaker 7: people are holding, and I think that is going to
Speaker 7: be a little harder to measure and that will come
Speaker 7: out in sort of pricing as well. So I think
Speaker 7: it's really going to be watching if this theme accelerates
Speaker 7: more or.
Speaker 6: If it calms down.
Speaker 7: And we're already seeing that in the policy right now
Speaker 7: that there's sort of a backtrack to kind of avoid
Speaker 7: some of that, So that may be something that they're
Speaker 7: atally really thinking about.
Speaker 6: Even though they may not be saying that.
Speaker 3: Well, that's in our last minute. I mean, do you
Speaker 3: feel like things are calming down or is it that
Speaker 3: even the back and forth is calming down a little bit?
Speaker 7: I'd say that, you know, people are becoming a little
Speaker 7: bit you know, numb to it a little bit, I'd say,
Speaker 7: but I think if you look at the size of
Speaker 7: the moves, I mean three percent moves, I know that
Speaker 7: it abated.
Speaker 6: Some today are large moves.
Speaker 7: Generally, I would estimate those roughly as a three sigma move.
Speaker 6: For the S and P in a day. We have
Speaker 6: those every day now.
Speaker 7: So so I think there's some of that that, you know,
Speaker 7: kind of people fatigue, you know, uncertainty fatigue. But there
Speaker 7: is also sort of some backtracking and some positive news
Speaker 7: that sort of maybe it's not as extreme as I
Speaker 7: had thought, and that that has an ability to kind
Speaker 7: of calm.
Speaker 6: Investors a little bit. But I think it's going to
Speaker 6: take time.
Speaker 3: What's more likely in this last thirty seconds ten you're
Speaker 3: getting back up to five percent, are going back down
Speaker 3: to four or below?
Speaker 7: Oh, I think I'm definitely more of a you know,
Speaker 7: you know me, more of a bear. So I would say, like,
Speaker 7: you know, five percent seems likely to be at some point,
Speaker 7: especially if we see inflation prints later this year, bigger
Speaker 7: and outside of what people would have liked due to
Speaker 7: tariff impacts.
Speaker 6: So that's definitely possible.
Speaker 2: Five percent in twenty twenty five.
Speaker 6: Possibly we'll look to see you.
Speaker 3: The CPI moves a lot coming at us, Katie. Thank
Speaker 3: you so much tying it all up so nicely. Kati Kaminski.
Speaker 3: She's chief research strategist portfolio manager of at Alpha Simplex Group.
Speaker 3: Joining us from Boston, Massachusetts.
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Speaker 2: Because, as we mentioned, i'b just out with numbers. Shares
Speaker 2: we're higher in the after hours now down about three
Speaker 2: percent as we speak. I want to bring in Brent
Speaker 2: Thale Phil he's senior technology research analyst to Jefferies. He
Speaker 2: joins us from the West Coast. He's had literally six
Speaker 2: minutes to look at these numbers.
Speaker 4: Brett, Brent, what.
Speaker 2: Is your what is your view? Because at first in
Speaker 2: the after hours, and look, we have to take this
Speaker 2: with a grain of salt, but at first in the
Speaker 2: after hours, investors were happy with what they saw.
Speaker 8: Yeah, I mean it's an inline corner. You know, two
Speaker 8: percent revenue growth is not going to blow your socks off.
Speaker 8: But you know they are leading with nine percent software growth,
Speaker 8: and that was good.
Speaker 9: The consulting business was expected to be negative. It was flat.
Speaker 8: Everyone thought, given what's happening with Doze and all these
Speaker 8: potential economic slowdowns, the first place he would cut our consultants.
Speaker 8: So you know, that business being flat was a little
Speaker 8: bit better than the street thought.
Speaker 9: So cash flow had a really good.
Speaker 8: Number, So four point four billion versus two point seven estimates,
Speaker 8: so you know, good bottom.
Speaker 9: Line, you know, mediocre in line.
Speaker 10: You know.
Speaker 8: Again, I think this has been a story that's just stable, steady. Arvin,
Speaker 8: the CEO has done a really nice job transforming IBM
Speaker 8: into a software company versus just a consulting, low margin company,
Speaker 8: and we like their position. To your point, I think
Speaker 8: no one is going to see what happened with the
Speaker 8: tariffs or some of the concerns that are in place
Speaker 8: in April so these are all March border earnings, and
Speaker 8: again I think you know to your point, you're not
Speaker 8: going to feel this until the second quarter, and so
Speaker 8: I think investors are obviously excited that hopefully we get
Speaker 8: some real resolution. But if we do see u sload on,
Speaker 8: you're not going to see it in Q one numbers.
Speaker 8: You're going to see it all in Q two. And
Speaker 8: most of these companies are probably not going to guide
Speaker 8: for it because they haven't seen it just disappear o
Speaker 8: their pipeline in the last couple of weeks. So we're
Speaker 8: keeping a close eye on it, but overall, I think
Speaker 8: just expectations cross tech. It just got too bearish our
Speaker 8: conversations with investors, institutional investors, as they just didn't want
Speaker 8: to touch any of these names to the ten foot
Speaker 8: point and everything got over sold. And so we're now
Speaker 8: in a situation where service now is bouncing, IBM's bouncing
Speaker 8: the rest of the industry, and tech is bouncing because
Speaker 8: it's been the most hated group year to date.
Speaker 3: Well, what's interesting too, and the chief financial officer, Jim
Speaker 3: Cavanaugh saying specifically that about fifteen of IBM's contracts with
Speaker 3: the federal government have been canceled or paused, amounting to
Speaker 3: about one hundred million in future payments. There is that,
Speaker 3: but they did I'm just looking here. So they did
Speaker 3: give though a forecast, and they do say just forgive
Speaker 3: me as i'm looking through. In response, IBM took the
Speaker 3: unusual step of giving quarterly guidance, saying that sales will
Speaker 3: be about sixteen point four to sixteen point eight billion
Speaker 3: in the period ending in June. Analysts on average had
Speaker 3: projected about sixteen point three billions that they're willing to
Speaker 3: commit to. A second quarter revenue guidance tells you.
Speaker 8: What, Well, again, this is a highly recurring revenue basis.
Speaker 8: So I think the more granulary the better. And I
Speaker 8: think ultimately every CFO is saying they have to put
Speaker 8: it in a little more conservatism in the guide based
Speaker 8: on everything that's going on. I mean, no one knows
Speaker 8: which way is up right now in some of the
Speaker 8: macro indicators, and so it's again, I think some of
Speaker 8: these pipelines are misleading. I think some of the software
Speaker 8: companies have done a disservice and not been a little
Speaker 8: more conservative. And so I guess what I think they're
Speaker 8: trying to showcase is that they have obviously visibility, they
Speaker 8: have recurring contracts, and they've taken into account somebody's changes.
Speaker 8: So I think IBM has been on a multi quarter,
Speaker 8: if not now multi year rejuvenation and re excitement around
Speaker 8: the software business. And investors keep scratching their head why
Speaker 8: does the stock keep going higher. It's going higher because
Speaker 8: they're cutting out the low margin business consulting, and they're
Speaker 8: leaning into the high margin software business and are in
Speaker 8: the CEO as a software guy. He wants to to
Speaker 8: be a software led organization, not consulting, not hardware. And
Speaker 8: there's an element of AI, and there's an element of
Speaker 8: quantum computing. Quantum is still a long ways out, but
Speaker 8: there's an element where you can own that.
Speaker 9: So you know, stock is outperformed. It's down a little bit.
Speaker 4: Uh.
Speaker 8: I think just probably on on on on was it
Speaker 8: wasn't enough. I mean, stock is up twelve percent year
Speaker 8: today and it's massively outperformed almost everything I cover.
Speaker 9: I mean almost every stock I cover is down. Yeah,
Speaker 9: well the percent.
Speaker 8: So it's it's been a it's been a parking lot
Speaker 8: in in the UH in this storm, and I think
Speaker 8: everyone has felt like, hey, it's not gonna blow your
Speaker 8: socks off either way.
Speaker 9: It's gonna be stable, steady.
Speaker 8: They're they're good, They're going through a good transformation, and
Speaker 8: you know it's a it's a very well managed and
Speaker 8: well run company.
Speaker 9: Yeah, so that's a that's a safety spot.
Speaker 10: You know.
Speaker 9: Does that wear off?
Speaker 8: Now as we go back we get terriff resolution? Is
Speaker 8: that going to lag on the on the up? I
Speaker 8: think the answer is yes. I would much rather own Amazon, Microsoft,
Speaker 8: a handful of other names than IBM right here.
Speaker 3: And I do just want to point out that the
Speaker 3: company also reaffirming it's fiscally your forecast, so there is
Speaker 3: that as well.
Speaker 2: Okay, hey Brenta, I'm curious about the move toward more
Speaker 2: software and services, less so with consulting, less so with
Speaker 2: hardware at IBM, given that Arvin Krishna, the CEO, wants
Speaker 2: to do that and has been doing that. Who are
Speaker 2: their biggest competitors out there that they're selling against?
Speaker 8: Oracle, Microsoft, all the hyperscalers, Google, Microsoft, Amazon.
Speaker 9: You know, so like it's you know, I think the
Speaker 9: way you think of it is, oh, IBM is.
Speaker 8: Very big into open source, right, and no religion is right,
Speaker 8: but there are multiple religions same thing as software. Right,
Speaker 8: there's closed source like Microsoft, and then there's open source
Speaker 8: like IBM. And IBM firmly believes in an open source world,
Speaker 8: and so a lot of big enterprises believe in that
Speaker 8: world world uh and and I think IBM has a
Speaker 8: really good perspective. They also do very well in regulated
Speaker 8: industries government financial services, where you have a lot of
Speaker 8: big heavy on prem workloads, right, they don't move them
Speaker 8: to Amazon or Google Public cloud, and so they work
Speaker 8: with some of the largest organizations out there. So they
Speaker 8: tend to thrive really well in that environment. And so
Speaker 8: you know, the competitors you know, on the cloud side
Speaker 8: are Amazon, Microsoft on the on the on the traditional
Speaker 8: enterprise side, it's Oracle, uh and and and.
Speaker 9: Others in that category.
Speaker 8: But I think you know what what IBM has said,
Speaker 8: and I think this is a good strategic change is Look,
Speaker 8: we can't do everything with our own portfolio.
Speaker 9: We'll sell Salesforce, we'll sell Adobe.
Speaker 10: Well, well, we'll partner.
Speaker 8: We want to lead with our software, but if it
Speaker 8: doesn't work for you, we'll lead with others. It's like
Speaker 8: a contractor, like no one should just use their own wood,
Speaker 8: Like I'm gonna use someone else's would in Windows and this.
Speaker 9: Win from Anderson might be better than this window from.
Speaker 8: Marvin, So like, let's sell it all and that helps
Speaker 8: their overall credibilities being independent, having driving the consulting business.
Speaker 8: So it's a you know, I think it's a good strategy.
Speaker 8: Is it the one again that is going to be
Speaker 8: hyper growth? In the excitement in the world the way
Speaker 8: the world is going.
Speaker 9: I don't believe so.
Speaker 8: I think still when you look at the growth rates
Speaker 8: inside Microsoft growing double digits, and software and growing Azure
Speaker 8: at thirty, Amazon still growing their aws cloud business and
Speaker 8: the high teens, these are way more exciting growth businesses.
Speaker 9: So, you know, again, kudos to IBM.
Speaker 8: I'm I'm a huge believer of how they've architected this.
Speaker 8: From a stock perspective, I just think there's way better
Speaker 8: ways to play offense, especially in a world that has
Speaker 8: gotten hit hard in tech.
Speaker 9: You're going to make a lot more money owning some
Speaker 9: of these other names in tech.
Speaker 2: All right, Brent, phil thanks so much for joining us
Speaker 2: on IBM. Brent Thill is senior technology research analyst. He's
Speaker 2: joining us from the West Coast.
Speaker 1: You're listening to the Bloomberg Business Week podcast catch us
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Speaker 2: Tesla's shares rising today by more than five percent. The
Speaker 2: big news last note on the earnings call was that
Speaker 2: Elon valved to pull back significantly from his work with
Speaker 2: the US government pay more mind to Tesla, and that
Speaker 2: seemed to assuage investors who were concerned about the carmakers
Speaker 2: worst quarter in years. We've got Ross Gerber back with us.
Speaker 2: He's president and CEO at Gerber Kawasaki Wealth and Investment
Speaker 2: Management got about three point four billion dollars as of
Speaker 2: the end of last year under management. He joins us
Speaker 2: once again from Santa Monica. Ross, we had you on
Speaker 2: the program yesterday ahead of the earnings call. Now the
Speaker 2: call is done. You set this threads yesterday that said
Speaker 2: ahead of the call, that said, this is the worst
Speaker 2: performance in Tesla's history. Elon, everyone about the tillions of
Speaker 2: tam and robots taking over the world. Anything to get
Speaker 2: you not to look at the facts. As Elon darts
Speaker 2: off to Xai after he announces he's leaving dos, Tesla's
Speaker 2: in bad shape. I'll just leave it there. I'm not
Speaker 2: going to read the whole thing.
Speaker 10: I think I think I said it was a hot
Speaker 10: mess or something something like that.
Speaker 2: Let's just say that. Let's just say that, we'll.
Speaker 10: Keep it at that.
Speaker 2: Do you now that the call happened? Do you stand
Speaker 2: by that? Did he did he managing your view to
Speaker 2: move people's attention away from the cars.
Speaker 10: I'm surprised people aren't like, how did you know? How
Speaker 10: did you know?
Speaker 11: And I was like, well, because he's a special government employee,
Speaker 11: he has to leave by May. It's not like he's
Speaker 11: doing some gift to anybody. He actually has to leave
Speaker 11: the government by May. But I think this perception that
Speaker 11: somehow Elon's going to come back to Tesla and be
Speaker 11: working at Tesla Moore is a false perception because I'm
Speaker 11: also involved with Xai, and I'm an investor in Xai,
Speaker 11: so I know exactly what's going on there. And they
Speaker 11: just merged with Twitter and now they're raising even more
Speaker 11: capital to even get bigger to compete with Chat and
Speaker 11: all the other llms, and and that's his main focus,
Speaker 11: and that's what he really cares about. So I think,
Speaker 11: you know, it's nice what he says, but it's what
Speaker 11: he does that will ultimately matter.
Speaker 3: Well, and you know, we love talking to you, and
Speaker 3: we have for a few years now, and you know
Speaker 3: we always remind and I always go here that you know,
Speaker 3: you're not only just an investor in the company or
Speaker 3: various Elon properties, but you have owned Tesla.
Speaker 2: He's got a cyber truck, multiple cyber truck.
Speaker 3: You got a cyber truck.
Speaker 10: But I drive a cyber truck.
Speaker 2: But he still drives a cyber truck.
Speaker 3: It's not so easy to drive a cyber truck, is
Speaker 3: it anymore?
Speaker 11: I drive it right down the middle of Woke Avenue,
Speaker 11: you know what I mean, which is where I live.
Speaker 11: And you know, fortunately everybody else has a Tesla, so
Speaker 11: it's kind of hard to yell at a guy and
Speaker 11: a cyber truck from your Tesla, right.
Speaker 4: Yeah.
Speaker 8: And this is.
Speaker 11: Probably the biggest issue that I have is I feel
Speaker 11: like Tesla is not Elon's company. It's a public company
Speaker 11: that's owned eighty seven.
Speaker 10: Percent by the pub not Elon.
Speaker 11: And now the perception going from being this climate friendly,
Speaker 11: changing the world for a better place company to being
Speaker 11: associated with Elon Musk and Donald Trump is really one
Speaker 11: of the saddest things that I can imagine for Tesla's brand.
Speaker 11: So I kind of am like fighting back from that
Speaker 11: because I'm like, no, I drive an environmentally friendly truck
Speaker 11: and you're yelling at me from a Ford f one
Speaker 11: point fifty. And Henry Ford was an actual Nazi, So
Speaker 11: I'm like, this is really odd that an oil loving
Speaker 11: Nazi driving car guy is flicking me off.
Speaker 10: You know.
Speaker 2: Do you like the cyber truck. There's a lot of
Speaker 2: reports online about parts falling off, though I have read
Speaker 2: a lot about how people love it. Hannah Elliott love
Speaker 2: driving it around last year.
Speaker 4: Do you like it?
Speaker 10: You know?
Speaker 11: And this is Tesla should be paying me to do
Speaker 11: ads for the cyber truck because I actually love the
Speaker 11: cyber truck.
Speaker 10: The cyber truck saved my life during the Palisades fire.
Speaker 11: I can give you five reasons why you should have
Speaker 11: a cyber truck, and I it also tell you five
Speaker 11: things that are disappointing about the cyber truck that could
Speaker 11: have been better or could be better in new versions
Speaker 11: of it to make the car sell better, you know.
Speaker 10: So I know the truck in and out and.
Speaker 11: Part of the performance on the on the manufacturing side
Speaker 11: is very disappointing. I have not had those problems personally.
Speaker 11: My truck has been solid.
Speaker 10: You know. I let some kid drive it. He crashed it.
Speaker 10: They fixed it quickly. You know. The car has been great.
Speaker 10: The car's been great. But I can't tell you how
Speaker 10: important it was to.
Speaker 11: My survival actually during one of the hardest periods of
Speaker 11: time of my life.
Speaker 2: Is it because of the air filtration? Like what, yes,
Speaker 2: how did you use it?
Speaker 4: Yeah?
Speaker 11: The al filtrations what saved my life because I was
Speaker 11: in the middle of the fire and I couldn't breathe,
Speaker 11: and so I was trying to fight the fire like
Speaker 11: an idiot.
Speaker 10: And but this was before the fireman came and saved me.
Speaker 11: And it was so smoky that my and I had
Speaker 11: an N ninety five mass that I was like dying,
Speaker 11: and so I would like jump into the truck and
Speaker 11: I had the Hepa filter thing running and it worked,
Speaker 11: you know, and so I could breathe, and then I
Speaker 11: would jump out of the truck and then like try
Speaker 11: to deal with fire, and then I could only deal
Speaker 11: with that for so long before I have to get
Speaker 11: back in the Other thing about the.
Speaker 10: Truck, you know, was the Tonu.
Speaker 11: You know, it's a hard tone new So when I
Speaker 11: when I put all my stuff, I was living out
Speaker 11: of my truck for two months and it locks. And
Speaker 11: this is a really nice thing where most pickup trucks
Speaker 11: don't have a way to cover and lock everything in
Speaker 11: your bed, and so I was able to basically keep
Speaker 11: all my important belongings safe in this truck. And one
Speaker 11: of the things that happened after the fire was people
Speaker 11: looters were attacking people's cars knowing that they had all
Speaker 11: their stuff in it, and a lot of people got
Speaker 11: stuff stolen out of their cars even after they dealt
Speaker 11: with the fire, which has sucked, you know, And that was.
Speaker 10: Not a problem I had.
Speaker 11: So, you know, there are many things about this truck
Speaker 11: that are great, and the story just isn't being told.
Speaker 3: Are you okay, your family, your loved ones, okay?
Speaker 10: Now, yeah, my family's great. I'm not okay. I guess
Speaker 10: it's the best way to put it. I've moved back
Speaker 10: into my house. I'm one of the few people that
Speaker 10: survived this fire. The fire ended two.
Speaker 11: Blocks from my house where I fought it, and the
Speaker 11: fireman ultimately stopped it. And so my neighborhood's you know, normal,
Speaker 11: except nobody lives there yet except for me.
Speaker 1: You know.
Speaker 11: I was able to fix my house pretty quickly, and
Speaker 11: I felt it was best for me my family to
Speaker 11: move back as quickly as possible, and that's been true.
Speaker 10: You know.
Speaker 11: But I live a very surreal life, you know, right
Speaker 11: next to the edge of hell, and I see it
Speaker 11: every day and it sucks and and you know, for me,
Speaker 11: I'm mostly suffering from you know, some level of depression
Speaker 11: and you know, PTSD from the event itself, which was
Speaker 11: really traumatic.
Speaker 10: Like I don't recommend fighting fighters.
Speaker 3: We can only imagine, and we from Afar watching, you know,
Speaker 3: certainly felt it, but I can't even imagine seeing it firsthand.
Speaker 10: But I'm doing better, you know, I'm doing better.
Speaker 3: Good, you know good.
Speaker 10: It's hard to see it every day though, you know.
Speaker 3: Yeah, it's hard, no easy turn, and I just I
Speaker 3: want to go back to something that really struck me
Speaker 3: and we wish you well, you know that, you know that.
Speaker 4: No, I'm good.
Speaker 10: I'm compared to so many other people, so.
Speaker 3: I know, I know, I know, but still, you know,
Speaker 3: life keeps throwing us challenges, and some are tougher than others. Ever, well,
Speaker 3: speaking of challenges, and forgive me for this segue, but
Speaker 3: one of the things that struck me. You know, we've
Speaker 3: been lucky to talk with you. This is, you know,
Speaker 3: our second time in the last twenty four hours, and
Speaker 3: one of the things that continue to kind of tim
Speaker 3: and I want to know more and more. And you
Speaker 3: really shed some great color and I want to share
Speaker 3: it with our audience who are watching and listening right
Speaker 3: now who may have missed it yesterday, of what you
Speaker 3: had to say about what's going on in terms of
Speaker 3: EV's in China. I think we don't have any concept
Speaker 3: of how sophisticated, how good they are getting on stuff
Speaker 3: like EV's and other things.
Speaker 10: Well, you know, once again, I haven't been to China.
Speaker 11: I only know because I follow all the car companies
Speaker 11: in China, and I you know, there's a big mis
Speaker 11: or perception about China. I think, and you saw it
Speaker 11: a little bit with the trade negotiations, like they're somehow
Speaker 11: behind us in technology, and like we're holding back our
Speaker 11: technology from them and that will slow them down.
Speaker 10: That is a wildly incorrect way to look at China.
Speaker 11: If we hold our technology back from China, what happens
Speaker 11: is they develop even better technology because we forced them
Speaker 11: to in a way, you know, and they're extremely determined,
Speaker 11: intelligent people who will work extremely hard to achieve whatever
Speaker 11: goal they need to achieve.
Speaker 10: And so when Tesla came.
Speaker 11: To China, China was Tesla was the first company China
Speaker 11: said you can have one hundred percent of ownership of
Speaker 11: the factory. Come here with open arms, and we had
Speaker 11: never really seen that before with companies we're trying to
Speaker 11: always made them do a JV where they would own half.
Speaker 10: The company kind of thing.
Speaker 11: And so the part of that strategy was to send
Speaker 11: a whole new generation of Chinese workers to work for
Speaker 11: Tesla to learn how to do stuff.
Speaker 10: And they have and they have, and so you have Chinese.
Speaker 11: Entrepreneurialism, which is pretty good for a communist country.
Speaker 10: And then you add in know how and government support
Speaker 10: and you get a pretty.
Speaker 11: Potent way to develop pretty good vehicles.
Speaker 10: And that's what they've done.
Speaker 11: And so China's built a whole new infrastructure around electric vehicles,
Speaker 11: which was actually my dream for the United States.
Speaker 2: So it raises the question raws. Since China's evs are
Speaker 2: so good, should and those are not available here in
Speaker 2: the US, should investors really think about the US being
Speaker 2: the only market for Tesla because it can't compete outside
Speaker 2: of the US.
Speaker 10: No, No, Tesla can compete and can it?
Speaker 2: Can it compete on price? Can it compete on quality?
Speaker 10: It can't. You know.
Speaker 11: Once again, if Tesla had a focused CEO who wanted
Speaker 11: to beat the Chinese composition, they could have released that
Speaker 11: cyber cab as a model too with a steering wheel
Speaker 11: on it, and made that thing for twenty five thousand dollars.
Speaker 11: Like people would buy it. It would be really successful.
Speaker 11: The problem with Tesla is they I want to sell
Speaker 11: cars any It's fairly obvious. In fact, they work really
Speaker 11: hard to convince people not to buy their cars. I
Speaker 11: mean it's like the CEO every day talks people out
Speaker 11: of the products. So the real issue to me is,
Speaker 11: you know, if you don't really want to sell cars
Speaker 11: and you want to sell cab rides instead or robots, boy,
Speaker 11: that's going to be a long time till it makes
Speaker 11: one hundred billion in revenue.
Speaker 10: You know what I mean.
Speaker 11: Yeah, So the Chinese are like, okay, we're fine with this,
Speaker 11: and Tesla's falling behind and they're attacking everywhere they can.
Speaker 11: The Europeans and the United States have a lot of
Speaker 11: trade barriers against these Chinese vehicles because they're inexpensive and
Speaker 11: they sell very well. And I was in Mexico City.
Speaker 11: All you see are BYD's. They can't afford a tips,
Speaker 11: you know. And so I think quality, you know, Europe
Speaker 11: and the United States more.
Speaker 10: Europe has always won on quality of vehicles.
Speaker 11: Like design and interior style and things like that, where
Speaker 11: China seems to be behind on that. But when it
Speaker 11: comes to technology, China seems to be well ahead.
Speaker 3: All right, seconds left here, Just to wrap up, Ross,
Speaker 3: Elon gets into your cyber truck. Not exactly, not exactly
Speaker 3: cark karaoke, but you guys have a conversation.
Speaker 2: They know each other. Elon has responded to Ross. I've
Speaker 2: seen the tweets. He knows Mess is an investor in Xai.
Speaker 3: I know he knows you. So what's the thirty second question?
Speaker 3: You ask him?
Speaker 10: Why do you think he said he's coming back to
Speaker 10: Tesla Because he knows. I've been saying it every.
Speaker 3: Day for like months, So that's what you ask him.
Speaker 10: Would would I say to Elon? Yeah?
Speaker 11: Seconds, I said to Elon when I when I first
Speaker 11: met Elon long ago, when he was tweeting a bunch
Speaker 11: of garbage and Tasla was struggling. I think it was
Speaker 11: the end of twenty eighteen, and like I was like, dude,
Speaker 11: you got to stop tweeting this garbage.
Speaker 10: This was like seven years ago, you know what I mean? Yeah,
Speaker 10: And I was like, how is this the mission?
Speaker 11: And we got to raise money and we got to
Speaker 11: save Tesla, and like this is just not helping. And
Speaker 11: I remember him looking at me sort of like, yeah, right, sure,
Speaker 11: like you think I care what you say Twitter?
Speaker 10: And I was like please, just like I'm just saying
Speaker 10: this is nicely.
Speaker 11: And I remember, because I was standing with somebody from
Speaker 11: ARC Investments and people were pretty surprised at it. Confronted
Speaker 11: him about Twitter, and I was a little bit nervous
Speaker 11: because he's a big guy, and you know, I like
Speaker 11: Elon at the time, and so I was trying to
Speaker 11: be nice, you know. And of course he didn't stop tweeting,
Speaker 11: and he raised money the next day, which we invested
Speaker 11: in Tesla at that time, and it was extremely profitable.
Speaker 10: And I would say the same thing to him today
Speaker 10: and it's.
Speaker 11: Like I don't have to agree with your opinions in
Speaker 11: your viewpoint in life. But do you have to share
Speaker 11: that with everybody all the time. It's not necessary and
Speaker 11: it's not helping you be successful. So why share opinions
Speaker 11: that are so unpalatable to so many people when it's
Speaker 11: completely hurting you.
Speaker 10: From achieving your goals? That's what I would say.
Speaker 3: All right, good stuff, Elon, if you're listening, we'd love
Speaker 3: to hear what you would respond to to Ross. Ross,
Speaker 3: thank you so much for all of it, and for
Speaker 3: being so honest and real. Ros Gerber, He's present, and
Speaker 3: stay safe, be well, of course, of Gerberg Kawasaki Wealth
Speaker 3: and Investment Management out there in Santa Monica.
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