1 00:00:00,040 --> 00:00:02,640 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:02,680 --> 00:00:07,000 Speaker 1: their trust and independent registered investment advisors to the two 3 00:00:07,280 --> 00:00:11,360 Speaker 1: four trillion dollars. Why learn more and find your independent 4 00:00:11,400 --> 00:00:26,960 Speaker 1: advisor dot com. Welcome to the Bloomberg Surveillance Podcast. I'm 5 00:00:27,040 --> 00:00:30,920 Speaker 1: Tom Keene with David Gura. Daily we bring you insight 6 00:00:31,040 --> 00:00:35,560 Speaker 1: from the best in economics, finance, investment, and international relations. 7 00:00:35,960 --> 00:00:40,559 Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 8 00:00:40,640 --> 00:00:47,640 Speaker 1: of course on the Bloomberg. I want to get to 9 00:00:47,640 --> 00:00:49,199 Speaker 1: it right away. It's a pleasure that Bob Doll here. 10 00:00:49,200 --> 00:00:51,720 Speaker 1: He is the chief equity strategy to being asset management, 11 00:00:51,720 --> 00:00:53,360 Speaker 1: and Bob, it's great to have you with you with us. 12 00:00:53,360 --> 00:00:55,800 Speaker 1: Good morning, Happy Friday. Thank you to you as well. 13 00:00:56,600 --> 00:00:58,480 Speaker 1: A few weeks back you wrote in a note earnings 14 00:00:58,560 --> 00:01:01,920 Speaker 1: must advance for equity market to make meaningful gains. Here 15 00:01:01,920 --> 00:01:04,560 Speaker 1: we are the season nearly coming to a close. Give 16 00:01:04,640 --> 00:01:07,520 Speaker 1: us your sense of of how earnings have have come through. 17 00:01:07,640 --> 00:01:11,560 Speaker 1: Earnings have been fine relative to expectations, but that was 18 00:01:11,680 --> 00:01:15,480 Speaker 1: necessary to keep stocks kind of flat because we know 19 00:01:15,600 --> 00:01:18,120 Speaker 1: that the p s under pressure because interest rates have 20 00:01:18,160 --> 00:01:20,480 Speaker 1: been moving up. So you get this see saw and 21 00:01:20,520 --> 00:01:23,360 Speaker 1: the market's kind of gone nowhere. The good news from 22 00:01:23,360 --> 00:01:25,479 Speaker 1: my point of view is revenue growth starting to pick 23 00:01:25,560 --> 00:01:29,920 Speaker 1: up a bit, first positive revenue compares since two thousand fourteen, 24 00:01:30,000 --> 00:01:32,840 Speaker 1: and another necessary ingredient from the stock market to move hire. 25 00:01:33,240 --> 00:01:35,240 Speaker 1: I look back at the beginning of of earning season, 26 00:01:35,240 --> 00:01:37,319 Speaker 1: of the third quarter earning season, we were looking at banks. 27 00:01:37,360 --> 00:01:40,640 Speaker 1: They outperformed in large part because of what we saw 28 00:01:40,680 --> 00:01:42,400 Speaker 1: in in Fick training, and a lot of people have 29 00:01:42,440 --> 00:01:44,440 Speaker 1: said that's maybe a one off, that's not something that 30 00:01:44,480 --> 00:01:46,600 Speaker 1: Queen can expect to continue for for a long time. 31 00:01:46,880 --> 00:01:49,400 Speaker 1: Looking at other sectors, do you see signs of continuity 32 00:01:49,400 --> 00:01:51,320 Speaker 1: that we can see a good earning season here going forward? 33 00:01:51,560 --> 00:01:54,160 Speaker 1: Tech earnings have been reasonably good, but on the other hand, 34 00:01:54,200 --> 00:01:56,960 Speaker 1: industrial earnings have been not so good. So you get 35 00:01:56,960 --> 00:01:59,800 Speaker 1: these tradeoffs and these back and forth. I don't think 36 00:01:59,840 --> 00:02:04,640 Speaker 1: we have a consistent tailwind to say we've solved the problem. 37 00:02:04,680 --> 00:02:08,400 Speaker 1: But we have more sectors reporting better earnings than reporting 38 00:02:08,400 --> 00:02:10,440 Speaker 1: worse earnings, and we have not seen that for a while. 39 00:02:10,560 --> 00:02:13,799 Speaker 1: We had an earnings recession because of the rising dollar 40 00:02:13,960 --> 00:02:16,960 Speaker 1: and falling oil, and we can't forget how devastating that was. 41 00:02:17,360 --> 00:02:19,640 Speaker 1: They created. I guess as five or six quarters in 42 00:02:19,680 --> 00:02:21,880 Speaker 1: a row of negative compares. Looking at the Bloomberg Dollar 43 00:02:21,919 --> 00:02:25,920 Speaker 1: Spot index now at two, do you expect that strong 44 00:02:26,000 --> 00:02:28,200 Speaker 1: dollar to continue? And what's the effecting to be they're 45 00:02:28,200 --> 00:02:31,520 Speaker 1: going into the fourth quarter for now? Yes, Um, you know. Finally, 46 00:02:31,520 --> 00:02:33,799 Speaker 1: it looks like everybody believes the Fed's going to raise 47 00:02:33,919 --> 00:02:37,640 Speaker 1: rates in December, and so there's some anticipation. Uh. There 48 00:02:38,200 --> 00:02:41,919 Speaker 1: the Fed's biggest challenges to continue to normalize rates without 49 00:02:41,960 --> 00:02:45,200 Speaker 1: the dollar screaming higher. Uh. And so I think that's 50 00:02:45,240 --> 00:02:48,959 Speaker 1: a tough balancing act they will have into two thousand seventeen. 51 00:02:49,400 --> 00:02:52,480 Speaker 1: Bob Dob, if you buy a stock, you buy a sector, 52 00:02:52,639 --> 00:02:55,920 Speaker 1: you buy the market. Is it a bad habit to 53 00:02:56,040 --> 00:02:59,799 Speaker 1: buy the anticipation of where a company will be one year, 54 00:03:00,000 --> 00:03:02,760 Speaker 1: two years, three years from now? Where you say, I 55 00:03:02,800 --> 00:03:05,360 Speaker 1: really don't care what it is right now. Maybe in 56 00:03:05,360 --> 00:03:07,840 Speaker 1: two or three years. Here's where I visualize it. So 57 00:03:07,919 --> 00:03:10,360 Speaker 1: I'll buy the stock today. Is that a dangerous thing 58 00:03:10,400 --> 00:03:13,359 Speaker 1: to do? You're asking me to be an investor? Thank you? 59 00:03:14,919 --> 00:03:19,080 Speaker 1: I thought, I see I know the lines, David. Not 60 00:03:19,280 --> 00:03:22,880 Speaker 1: a traitor, not a speculator. You just say, look, this 61 00:03:22,919 --> 00:03:25,720 Speaker 1: is what I think, and you get on board. We 62 00:03:25,720 --> 00:03:28,160 Speaker 1: can get on the soapbox here. But the short termism, 63 00:03:28,280 --> 00:03:35,080 Speaker 1: as you know, has just Mr doll this early in 64 00:03:35,120 --> 00:03:38,120 Speaker 1: the morning, and you know, we investors have forced that 65 00:03:38,280 --> 00:03:41,880 Speaker 1: on corporations and they've obliged, and so you've got this 66 00:03:42,280 --> 00:03:45,720 Speaker 1: short termism that keeps carrying the day. Look, I still 67 00:03:45,800 --> 00:03:49,600 Speaker 1: think if you buy good companies a reasonable prices that 68 00:03:49,640 --> 00:03:53,440 Speaker 1: have improving fundamentals via earnings and cashual you're gonna win. 69 00:03:53,640 --> 00:03:56,240 Speaker 1: And David, the heart of the matter here for someone 70 00:03:56,280 --> 00:04:00,200 Speaker 1: of the vintage of me and Mr Dull is long 71 00:04:00,240 --> 00:04:04,840 Speaker 1: ago and far away. You bought the company's business plan, 72 00:04:05,000 --> 00:04:09,720 Speaker 1: which by definition was three to five years out. And 73 00:04:09,760 --> 00:04:12,520 Speaker 1: the headline here, David, for young upstarts like you, is 74 00:04:12,560 --> 00:04:15,760 Speaker 1: you did this for every company you had. It wasn't 75 00:04:15,760 --> 00:04:19,320 Speaker 1: like a one off. Every company you had to rationalize 76 00:04:19,640 --> 00:04:21,560 Speaker 1: where will they be well. I was thinking of this 77 00:04:21,600 --> 00:04:24,320 Speaker 1: in the context of Amazon yesterday, as you saw investors 78 00:04:24,440 --> 00:04:26,440 Speaker 1: spooked by the fact that Jeff Basis has been spending 79 00:04:26,480 --> 00:04:28,440 Speaker 1: a lot of money. Here reminded me to Cash Company 80 00:04:28,440 --> 00:04:30,960 Speaker 1: in the in the early days, when investors had to 81 00:04:31,000 --> 00:04:33,040 Speaker 1: be patient because he kept spending and spending and spending. 82 00:04:33,040 --> 00:04:35,200 Speaker 1: Suddenly the company was making money again. They were happy 83 00:04:35,200 --> 00:04:36,960 Speaker 1: and now again the prospects seemed to be that he's 84 00:04:36,960 --> 00:04:38,640 Speaker 1: going to be spending one one again. Are they going 85 00:04:38,680 --> 00:04:40,600 Speaker 1: to trust him to do to do what he's doing here? Again? 86 00:04:40,640 --> 00:04:44,160 Speaker 1: Going forward, the story and Amazon, as we know, has 87 00:04:44,200 --> 00:04:47,080 Speaker 1: been free cash flow. That's still the name of the game. 88 00:04:47,240 --> 00:04:50,640 Speaker 1: The problem is when you don't have earnings and you 89 00:04:50,680 --> 00:04:54,560 Speaker 1: don't have revenues, uh, and you have high valuations relative 90 00:04:54,600 --> 00:04:58,159 Speaker 1: to those things, free cash flow is everything. And the 91 00:04:58,200 --> 00:05:01,080 Speaker 1: disappointment was free cash flow didn't grow like it was 92 00:05:01,080 --> 00:05:03,640 Speaker 1: because he's spending some more money and investors are gonna 93 00:05:03,680 --> 00:05:05,360 Speaker 1: have to get used to that. And so the little 94 00:05:05,600 --> 00:05:08,360 Speaker 1: hiccup here how much of an outlier is he Jeff Bezos? 95 00:05:08,360 --> 00:05:10,240 Speaker 1: When you know you have to put your faith in 96 00:05:10,320 --> 00:05:12,680 Speaker 1: one person guiding this company, there is a tension there 97 00:05:12,720 --> 00:05:16,120 Speaker 1: between Uh, you know what investors want and you know 98 00:05:16,160 --> 00:05:17,880 Speaker 1: they have to put kind of blind faith here in 99 00:05:17,920 --> 00:05:19,960 Speaker 1: the vision of the guy who founded the company. Yeah, 100 00:05:20,160 --> 00:05:22,080 Speaker 1: I mean the good news of company this size and 101 00:05:22,320 --> 00:05:25,040 Speaker 1: all the efficiency around it. You can get lots of information. 102 00:05:25,240 --> 00:05:28,880 Speaker 1: Is he the visionary? Absolutely? If he weren't on the scene, 103 00:05:29,240 --> 00:05:31,680 Speaker 1: you know, we wouldn't be where we are lots of 104 00:05:31,720 --> 00:05:34,760 Speaker 1: companies out of the out of the gates. That's what happens. 105 00:05:34,800 --> 00:05:37,000 Speaker 1: And you have to figure out how you transition, how 106 00:05:37,040 --> 00:05:39,240 Speaker 1: you broaden, and how you deepen. But but he's the man. 107 00:05:39,600 --> 00:05:42,880 Speaker 1: What's the sentiment take away from earning season? How investors 108 00:05:42,920 --> 00:05:47,280 Speaker 1: feeling right now? Investors are so skittish. They're nervous about everything. 109 00:05:47,760 --> 00:05:50,599 Speaker 1: You know, economy is not growing great, and we have 110 00:05:50,680 --> 00:05:53,440 Speaker 1: this crazy election and stocks have been up for how 111 00:05:53,440 --> 00:05:56,120 Speaker 1: many years? And the economy is going nowhere? You want 112 00:05:56,120 --> 00:05:59,240 Speaker 1: me to buy stocks? Are you crazy? That's the normal 113 00:05:59,600 --> 00:06:02,400 Speaker 1: thinking out there. One of your advantages is you get 114 00:06:02,440 --> 00:06:05,720 Speaker 1: to see flow dynamics within Nuvine. Nuvine, of course the 115 00:06:05,800 --> 00:06:09,000 Speaker 1: tradition is unit trusts and municipal bonds, but they do 116 00:06:09,080 --> 00:06:11,599 Speaker 1: a lot of other things as well. How do you 117 00:06:11,680 --> 00:06:16,440 Speaker 1: invest in equities given what you observe it Neuvine and 118 00:06:16,480 --> 00:06:20,880 Speaker 1: what people are doing in bonds. So there's no question Nouvine. 119 00:06:20,920 --> 00:06:26,880 Speaker 1: In other places, muni bonds are are still selling like crazy. 120 00:06:27,360 --> 00:06:31,800 Speaker 1: People understand the advantages of muni's over taxables and the 121 00:06:31,800 --> 00:06:34,839 Speaker 1: appropriate tax brackets and uh, you know, we've had a 122 00:06:34,960 --> 00:06:38,200 Speaker 1: thirty plus year rally and uh in bonds, and so 123 00:06:38,320 --> 00:06:41,040 Speaker 1: you know, jumping on that bandwagon is still a popular 124 00:06:41,080 --> 00:06:43,359 Speaker 1: thing to do, and it will happen until it is in. 125 00:06:43,400 --> 00:06:47,840 Speaker 1: The great distortion that we're living in is the linkage 126 00:06:47,920 --> 00:06:52,640 Speaker 1: of yield higher equities lower because bonds are competition for equities. 127 00:06:52,800 --> 00:06:54,960 Speaker 1: When was the last time you and I heard that analysis? 128 00:06:55,000 --> 00:06:57,440 Speaker 1: And it's gone, it is, And I think part of 129 00:06:57,440 --> 00:07:00,400 Speaker 1: the reason is you've got the SMP five hundreds selling 130 00:07:00,600 --> 00:07:03,440 Speaker 1: at a yield above a tenure treasury and there's been 131 00:07:03,480 --> 00:07:05,600 Speaker 1: times in the last twelve months higher than the thirty 132 00:07:05,760 --> 00:07:08,880 Speaker 1: year treasury. That's a gift if you believe equity earnings 133 00:07:08,880 --> 00:07:11,040 Speaker 1: are going to grow at all in the next ten years. 134 00:07:11,360 --> 00:07:13,360 Speaker 1: I mean, I mean, David, I would go back for 135 00:07:13,480 --> 00:07:16,080 Speaker 1: a price earnings ratio just quickly on the screen of 136 00:07:16,280 --> 00:07:20,760 Speaker 1: SPX of and that's a trailing you know, the trailing multiple. 137 00:07:21,280 --> 00:07:23,400 Speaker 1: Do you expect how long do you expect the bull 138 00:07:23,400 --> 00:07:28,360 Speaker 1: market to go on? What's your forecast for that? So 139 00:07:29,440 --> 00:07:36,200 Speaker 1: that's look the excesses that typically cause a recession, usually 140 00:07:36,280 --> 00:07:38,880 Speaker 1: inflation causing the Fed to stomp on the brakes. That 141 00:07:38,920 --> 00:07:42,360 Speaker 1: caused the equity market to come to his knees. Not visible. 142 00:07:42,880 --> 00:07:45,760 Speaker 1: Uh so you know, somebody said strong growth leads to 143 00:07:46,240 --> 00:07:49,160 Speaker 1: slow to two short cycles, and slow growth least to 144 00:07:49,520 --> 00:07:52,480 Speaker 1: long cycles. This cycle has been so slow, maybe it 145 00:07:52,480 --> 00:07:56,000 Speaker 1: could go on forever. As somebody said, Look, we're not 146 00:07:56,040 --> 00:07:58,120 Speaker 1: in the early stage of this bull market. We know that, 147 00:07:58,720 --> 00:08:01,400 Speaker 1: but that doesn't mean it can't can tenue to grind 148 00:08:01,600 --> 00:08:04,320 Speaker 1: and creep higher. I mean, I look, Bob Doll, I mean, 149 00:08:04,360 --> 00:08:06,240 Speaker 1: we're gonna go. I'm gonna tell you this stock, folks. 150 00:08:06,280 --> 00:08:10,120 Speaker 1: But it's a big successful transportation company. They're in a 151 00:08:10,160 --> 00:08:13,880 Speaker 1: horrific bear market, negative twelve percent from their peak of 152 00:08:13,920 --> 00:08:16,560 Speaker 1: two years ago. And I mean, you know, as Bob 153 00:08:16,600 --> 00:08:18,640 Speaker 1: Dole knows, you can't make money in stocks, I mean 154 00:08:18,680 --> 00:08:23,520 Speaker 1: everyone knows that. In the last ten years, this dog. 155 00:08:24,000 --> 00:08:25,800 Speaker 1: Let me see if I can get it up here quickly. 156 00:08:25,840 --> 00:08:28,560 Speaker 1: It's it's just been a complete failure. It's only done 157 00:08:28,560 --> 00:08:31,920 Speaker 1: twelve point six percent per twelve points six percent per years, 158 00:08:31,960 --> 00:08:35,480 Speaker 1: a little better than clipping coupon. Oh yeah, but it's 159 00:08:35,520 --> 00:08:38,640 Speaker 1: so volatile, Tom, can you really put up That's the problem. 160 00:08:38,679 --> 00:08:42,000 Speaker 1: People People get get they get scared because of the 161 00:08:42,040 --> 00:08:45,040 Speaker 1: shirt termism, and things go down and and they panic 162 00:08:45,080 --> 00:08:47,720 Speaker 1: and sell it rather than recognizing as your point said, 163 00:08:47,880 --> 00:08:49,840 Speaker 1: you look at the long term plan. If you see 164 00:08:49,840 --> 00:08:52,280 Speaker 1: a twelve percent growth, right, you've gotta hang tight, you know, 165 00:08:52,400 --> 00:08:55,240 Speaker 1: Sir John would say from another time in place shares 166 00:08:55,240 --> 00:08:58,199 Speaker 1: are un sale today. In terms of the mystery stock, 167 00:08:58,679 --> 00:09:01,720 Speaker 1: it's the only thing in US history where when it 168 00:09:01,720 --> 00:09:03,800 Speaker 1: goes on sale we want less of it. That's true. 169 00:09:03,920 --> 00:09:07,240 Speaker 1: I mean it's a cliche, but it is so so true. 170 00:09:07,440 --> 00:09:12,160 Speaker 1: David gerin Tom Keane with Robert dal I'm moving management, Bob. 171 00:09:12,800 --> 00:09:15,720 Speaker 1: It's a company with two hundred and seventy three thousand employees. 172 00:09:16,440 --> 00:09:19,400 Speaker 1: They're mating with a company with two thousand, eight hundred 173 00:09:19,440 --> 00:09:24,280 Speaker 1: employees about eight percent. The company has a dividend yield 174 00:09:24,280 --> 00:09:28,120 Speaker 1: of five point three seven percent. I'm listening, except the 175 00:09:28,120 --> 00:09:31,880 Speaker 1: dividend growth is two point two percent per year. So 176 00:09:31,880 --> 00:09:34,439 Speaker 1: they've got a big fat dividend with no dividend growth. 177 00:09:35,040 --> 00:09:39,520 Speaker 1: Can you buy telephone stock? Looks cheap in lots of ways, 178 00:09:39,559 --> 00:09:42,800 Speaker 1: But I think the kind of company just described high yield, 179 00:09:43,240 --> 00:09:46,760 Speaker 1: slow or no dividend growth is rear view mirror story. 180 00:09:47,559 --> 00:09:49,920 Speaker 1: If you think rates are gonna go continue to go down, 181 00:09:50,120 --> 00:09:52,439 Speaker 1: it'll be And let's make clear here, folks, Mr doll 182 00:09:52,520 --> 00:09:54,960 Speaker 1: is not doing by hold seal on telephone. We're not 183 00:09:55,000 --> 00:09:59,120 Speaker 1: doing securities analysis. We're talking about a kind of stock. 184 00:10:00,760 --> 00:10:02,600 Speaker 1: Excuse me, and I look at the free cash flow 185 00:10:03,200 --> 00:10:05,719 Speaker 1: and it's sort of the anti Amazon. Here is how 186 00:10:05,760 --> 00:10:08,320 Speaker 1: I put it. In a slow growth world. As we 187 00:10:08,320 --> 00:10:10,800 Speaker 1: said earlier, free cash flow is king and if you 188 00:10:10,840 --> 00:10:14,319 Speaker 1: don't have it, you struggle. That's why telephone looks so 189 00:10:14,400 --> 00:10:16,640 Speaker 1: cheap but doesn't go on then, David, the key or 190 00:10:16,720 --> 00:10:19,320 Speaker 1: is not if you don't have it, they've got it. 191 00:10:19,360 --> 00:10:21,760 Speaker 1: I mean, let's be honest, telephone has got sixteen billion 192 00:10:21,840 --> 00:10:23,720 Speaker 1: dollars a year they don't know what to do with. 193 00:10:23,800 --> 00:10:26,720 Speaker 1: There's just no growth, there's no first derivative. What is 194 00:10:26,880 --> 00:10:29,000 Speaker 1: the telecom space to look like to you? Going forward? Here? 195 00:10:29,040 --> 00:10:31,760 Speaker 1: Of course the big merger announced this week? Excuse me? 196 00:10:31,960 --> 00:10:35,600 Speaker 1: Can I answer that question? The telephone space is the 197 00:10:35,679 --> 00:10:40,600 Speaker 1: iPhone sevens are in the mail I predict tracking every 198 00:10:41,280 --> 00:10:45,240 Speaker 1: day three out of five children's phones will break this weekend. 199 00:10:45,640 --> 00:10:49,040 Speaker 1: That's the telephone dropping them on the rink. What's it 200 00:10:49,040 --> 00:10:51,080 Speaker 1: look like you? As you know, it's one of the 201 00:10:51,080 --> 00:10:54,600 Speaker 1: most competitive spaces in the world, and there for it's 202 00:10:54,880 --> 00:11:00,280 Speaker 1: very difficult business. The stocks are pretty cheap. Having had that, 203 00:11:00,320 --> 00:11:02,600 Speaker 1: and while I want to be overweight the genre of 204 00:11:02,720 --> 00:11:06,080 Speaker 1: company we just talked about that has decent yields but 205 00:11:06,200 --> 00:11:09,080 Speaker 1: no dividend growth to speak of. I'd rather own a 206 00:11:09,120 --> 00:11:13,000 Speaker 1: telecom stock than utility stock. Utes to me are very 207 00:11:13,040 --> 00:11:17,080 Speaker 1: expensive in lots of different ways, with very little growth 208 00:11:17,120 --> 00:11:21,800 Speaker 1: prospect uh, and telecom not not nearly as expensive. We've 209 00:11:21,840 --> 00:11:25,240 Speaker 1: seen oil prices here below fifty dollars a barrel. Again, 210 00:11:25,320 --> 00:11:27,680 Speaker 1: there is there's speculation something might get hatched at this 211 00:11:27,720 --> 00:11:30,720 Speaker 1: meeting in Vienna at the end of November. Talk about 212 00:11:30,720 --> 00:11:33,240 Speaker 1: the interplay between energy and equities and how long that's 213 00:11:33,280 --> 00:11:35,280 Speaker 1: going to continue here. Yeah, so don't hold your breath 214 00:11:35,280 --> 00:11:38,360 Speaker 1: on that meeting. You know, they might come to an agreement, 215 00:11:38,360 --> 00:11:39,760 Speaker 1: but then we have to take a bed. Who's going 216 00:11:39,760 --> 00:11:42,440 Speaker 1: to cheat the next morning? As it were. Um, Look, 217 00:11:43,080 --> 00:11:45,840 Speaker 1: oil is still low. I know in the short term 218 00:11:45,840 --> 00:11:48,280 Speaker 1: it's gone from twenty seven to fifty dollars a barrel. 219 00:11:48,320 --> 00:11:51,200 Speaker 1: I get that. But relative to a long term pattern, 220 00:11:51,600 --> 00:11:55,640 Speaker 1: oil I think stays low for multiple years. Uh, call 221 00:11:55,720 --> 00:11:58,760 Speaker 1: it thirty to sixty, forty to sixty, somewhere in that zone. 222 00:11:58,800 --> 00:12:01,000 Speaker 1: I can't come to a year a hundred to cause 223 00:12:01,040 --> 00:12:03,360 Speaker 1: me to want to buy the stocks. Oil is never 224 00:12:03,400 --> 00:12:05,960 Speaker 1: made a v bottom. We had a massive sell off 225 00:12:06,000 --> 00:12:09,640 Speaker 1: and we're still adjusting the fundamentals calls supply and demand, 226 00:12:09,720 --> 00:12:11,559 Speaker 1: and I think we'll take more some more time you 227 00:12:11,600 --> 00:12:12,880 Speaker 1: step back from that. I mean, we had a guest 228 00:12:12,960 --> 00:12:15,319 Speaker 1: yesterday from my MG talking about how in nine years 229 00:12:15,400 --> 00:12:17,880 Speaker 1: the level of electric car adoption is going to be huge. 230 00:12:17,880 --> 00:12:20,520 Speaker 1: He was talking about a real move away from oil. 231 00:12:20,840 --> 00:12:23,360 Speaker 1: Are you forecasting that out yet? I mean, you're saying 232 00:12:23,360 --> 00:12:25,000 Speaker 1: here we could have lower oil prices for a couple 233 00:12:25,040 --> 00:12:27,280 Speaker 1: of years. Do we reach a point at which oil 234 00:12:27,320 --> 00:12:28,920 Speaker 1: isn't gonna go up anymore because the demand just in 235 00:12:28,960 --> 00:12:30,640 Speaker 1: place are going to be there. Yeah. Look, I think 236 00:12:31,120 --> 00:12:33,320 Speaker 1: as long as oil is selling it, call it fifty 237 00:12:33,320 --> 00:12:36,719 Speaker 1: dollars a barrel. There's a lot of stuff that's non competitive. 238 00:12:36,720 --> 00:12:39,040 Speaker 1: I keep getting give me that alternative energy, give me 239 00:12:39,080 --> 00:12:41,520 Speaker 1: a win. They'll give me some solar. Yeah, unless the 240 00:12:41,559 --> 00:12:47,120 Speaker 1: government's UM helping their um. You know, you just needs 241 00:12:47,120 --> 00:12:50,520 Speaker 1: sustain hundred fifty oil to make a lot of those 242 00:12:50,559 --> 00:12:53,080 Speaker 1: things economic. I'm exaggerating, but not much. To make the 243 00:12:53,080 --> 00:12:55,160 Speaker 1: point and the interplay of the stock market back to 244 00:12:55,160 --> 00:12:58,640 Speaker 1: your earlier question. Oil coming down is the good news 245 00:12:58,640 --> 00:13:01,479 Speaker 1: for the US. It was the hidity of the decline 246 00:13:01,760 --> 00:13:05,559 Speaker 1: that caused the problem because it moved into financial stress issues. 247 00:13:05,840 --> 00:13:09,560 Speaker 1: Just one minute left, we noticed Carlisle this week pulling 248 00:13:09,600 --> 00:13:12,800 Speaker 1: back from investment in hedge funds. We just had a 249 00:13:12,800 --> 00:13:16,480 Speaker 1: long conversation with Julian Robertson about a time long agoing 250 00:13:16,559 --> 00:13:19,800 Speaker 1: far away. Is the game over for hedge funds for 251 00:13:19,840 --> 00:13:22,680 Speaker 1: the two and twenty business? I think two and twenty 252 00:13:22,760 --> 00:13:27,000 Speaker 1: is mostly finished. Yes, hedge funds won't go away. There's 253 00:13:27,040 --> 00:13:30,240 Speaker 1: a place for them, but sort of like active versus passive, 254 00:13:30,280 --> 00:13:34,559 Speaker 1: the hedge fund industry has not demonstrated the returns that 255 00:13:34,800 --> 00:13:37,120 Speaker 1: justify lots of money going there. They're gonna have to 256 00:13:37,160 --> 00:13:39,160 Speaker 1: do a better job. I mean, I mean the idea 257 00:13:39,160 --> 00:13:41,760 Speaker 1: of the hurdle rate. And again it's within this great distortion. 258 00:13:41,800 --> 00:13:44,640 Speaker 1: Do you invest every day, Mr Doll, assuming the great 259 00:13:44,640 --> 00:13:48,040 Speaker 1: distortion will never go away? You can't. You have to 260 00:13:48,080 --> 00:13:50,000 Speaker 1: be aware of it, but you know over the long 261 00:13:50,120 --> 00:13:54,360 Speaker 1: term rationaley believe it or not, does Prome? This is wonderful, 262 00:13:54,360 --> 00:13:56,760 Speaker 1: Bob Doll, thank you for generous time this morning. He 263 00:13:56,840 --> 00:14:01,520 Speaker 1: was route free. We did not have a out, there's 264 00:14:01,520 --> 00:14:04,920 Speaker 1: a bond route one and the tenure of the two 265 00:14:05,000 --> 00:14:08,000 Speaker 1: year point eight eight and it was I mean full 266 00:14:08,360 --> 00:14:11,360 Speaker 1: full disclosure, folks. We had a two standard deviation moving yield. 267 00:14:11,960 --> 00:14:15,359 Speaker 1: That gets your attention and you saw it David worldwide. 268 00:14:15,720 --> 00:14:19,800 Speaker 1: But there we are as we recalibrate two a dead 269 00:14:19,840 --> 00:14:23,520 Speaker 1: meeting in November and alive being surveillance correction. I'll mention 270 00:14:23,560 --> 00:14:26,200 Speaker 1: this a number of times. I've been talking about the 271 00:14:26,240 --> 00:14:29,840 Speaker 1: first Tuesday of November. Thank you for pointing out I've 272 00:14:29,840 --> 00:14:33,400 Speaker 1: been wrong, wrong, wrong. The election is the second Tuesday 273 00:14:33,440 --> 00:14:49,400 Speaker 1: of November. This is Bloomberg. If we bring in Gene Monster, 274 00:14:49,480 --> 00:14:52,280 Speaker 1: senior research analyst at Piper Jaffrey, talk a bit about 275 00:14:52,320 --> 00:14:55,160 Speaker 1: Apple in addition to talking alphabet UH and Amazon, and 276 00:14:55,240 --> 00:14:58,560 Speaker 1: let's start with the new computers and that touch screen, 277 00:14:58,640 --> 00:15:01,480 Speaker 1: the the utility of it. J How big it change 278 00:15:01,480 --> 00:15:03,360 Speaker 1: is this to the to the Apple ecosystem. And we've 279 00:15:03,360 --> 00:15:05,720 Speaker 1: heard so much here from intelling others about the decline 280 00:15:05,760 --> 00:15:08,600 Speaker 1: of the PC. Apple here banking on the fact that 281 00:15:08,600 --> 00:15:11,640 Speaker 1: there is some life left in the desktop and laptop marketplace. 282 00:15:12,880 --> 00:15:14,760 Speaker 1: Well they are, it's only about ten percent of their 283 00:15:14,760 --> 00:15:17,360 Speaker 1: overall business. But this is a meaningful step up in 284 00:15:17,440 --> 00:15:19,920 Speaker 1: terms of the functionality of these Max and I was 285 00:15:19,920 --> 00:15:22,080 Speaker 1: playing around with them yesterday and it's just kind of 286 00:15:22,160 --> 00:15:25,520 Speaker 1: a new paradigm in terms of how we use computers. 287 00:15:25,520 --> 00:15:29,280 Speaker 1: And so they're definitely still believe in this. They're taking 288 00:15:29,280 --> 00:15:32,720 Speaker 1: the approach that true touch screen isn't the way to 289 00:15:32,720 --> 00:15:35,120 Speaker 1: go because your hands get tired if you have to 290 00:15:35,120 --> 00:15:38,040 Speaker 1: actually touch the screen. So so your hands can rest 291 00:15:38,080 --> 00:15:39,640 Speaker 1: on the keyboard and you can have a lot of 292 00:15:39,680 --> 00:15:42,560 Speaker 1: that functionality built into that bar that they're putting at 293 00:15:42,560 --> 00:15:46,440 Speaker 1: the top, and so, um, it's expensive, and but it 294 00:15:46,800 --> 00:15:51,920 Speaker 1: is definitely some exciting technology in portables. Gene, I remember 295 00:15:51,920 --> 00:15:54,760 Speaker 1: the late Steve Jobs unveiling the iPad, saying that was 296 00:15:54,800 --> 00:15:57,760 Speaker 1: going to herald the end of the laptop and the desktop. 297 00:15:58,720 --> 00:16:02,240 Speaker 1: What has Apple learned here in these intervening years, Well, 298 00:16:02,240 --> 00:16:04,840 Speaker 1: they learned that there's different things you do with different devices, 299 00:16:04,880 --> 00:16:09,000 Speaker 1: and with computers you do more long format content creation. 300 00:16:09,160 --> 00:16:11,760 Speaker 1: They've had a lot of tools around iPads and iPhones 301 00:16:11,880 --> 00:16:14,480 Speaker 1: to make it easier to create content, but at the 302 00:16:14,520 --> 00:16:17,360 Speaker 1: end of the day, people still use their traditional computer 303 00:16:17,600 --> 00:16:22,040 Speaker 1: or your laptop for just that long content. More expansive 304 00:16:22,680 --> 00:16:25,320 Speaker 1: video editing for example. And so I think that they 305 00:16:25,400 --> 00:16:29,440 Speaker 1: learned is that different projects have different devices. Gene helped 306 00:16:29,440 --> 00:16:32,400 Speaker 1: me with Amazon in a question came up yesterday that 307 00:16:32,440 --> 00:16:35,400 Speaker 1: I thought was really interesting, which is give us a 308 00:16:35,440 --> 00:16:39,840 Speaker 1: scope and scale. How much of retail and separately, how 309 00:16:39,920 --> 00:16:44,440 Speaker 1: much of cloud does Amazon have? What's their headroom if 310 00:16:44,480 --> 00:16:48,640 Speaker 1: you will, and those two key groups. So if you 311 00:16:48,640 --> 00:16:52,160 Speaker 1: look at overall e commerce, they have right now about 312 00:16:53,200 --> 00:16:55,920 Speaker 1: of the value on e commerce in the US, and 313 00:16:55,960 --> 00:16:58,320 Speaker 1: it's about it's about ten percent of the value in 314 00:16:58,400 --> 00:17:01,800 Speaker 1: e commerce globally, so that they're they've got headwinds, are 315 00:17:01,840 --> 00:17:04,399 Speaker 1: a room to to go to grow that. If you 316 00:17:04,400 --> 00:17:07,760 Speaker 1: look at total commerce, the numbers much smaller, it's about 317 00:17:07,800 --> 00:17:11,760 Speaker 1: three percent. And so essentially what they have is this 318 00:17:12,000 --> 00:17:15,760 Speaker 1: shift still from traditional brick and mortar to online. That's 319 00:17:15,760 --> 00:17:18,520 Speaker 1: a big opportunity and they can still gain share. And 320 00:17:18,600 --> 00:17:20,720 Speaker 1: I just wanted just to put a fine point on 321 00:17:20,760 --> 00:17:24,000 Speaker 1: that market share gain is they grew units in the 322 00:17:24,119 --> 00:17:30,359 Speaker 1: September quarter of that compares the last court a year ago. 323 00:17:31,520 --> 00:17:35,240 Speaker 1: Help me with cloud obviously that's where all the money is, 324 00:17:35,280 --> 00:17:38,680 Speaker 1: that's the sex appeal, etcetera. How much headroom do they 325 00:17:38,680 --> 00:17:42,399 Speaker 1: have in the cloud space? That one's a little bit 326 00:17:42,600 --> 00:17:45,800 Speaker 1: harder to find, but right now it's about ten percent 327 00:17:45,840 --> 00:17:50,119 Speaker 1: of businesses have some form of their infrastructures on cloud, 328 00:17:50,480 --> 00:17:53,080 Speaker 1: not all of it. And so when you think about 329 00:17:53,119 --> 00:17:56,280 Speaker 1: the cloud team, eventually that will be out. Businesses are 330 00:17:56,280 --> 00:17:58,320 Speaker 1: going to be run off the cloud. There are three 331 00:17:58,359 --> 00:18:01,800 Speaker 1: players in the space, US Amazon is offering is the largest. 332 00:18:01,880 --> 00:18:05,000 Speaker 1: But I just think that that's a massive secular trend, 333 00:18:05,040 --> 00:18:07,840 Speaker 1: probably even bigger than e commerce. But that's going to 334 00:18:07,960 --> 00:18:10,760 Speaker 1: just fundamentally change how businesses operated. David jump in here, 335 00:18:10,800 --> 00:18:13,560 Speaker 1: I was stunned yesterday at the gloom on Amazon. I mean, 336 00:18:13,560 --> 00:18:17,600 Speaker 1: I think it's people that don't even understand the size 337 00:18:17,600 --> 00:18:19,720 Speaker 1: of the pie chart that they're playing in. You know, 338 00:18:19,800 --> 00:18:22,359 Speaker 1: we're talking about how Jeff Bezos could you know what 339 00:18:22,440 --> 00:18:24,239 Speaker 1: he had planned for the company. Here. It seems to 340 00:18:24,240 --> 00:18:26,879 Speaker 1: me that that web services division could really buoy the company. 341 00:18:26,920 --> 00:18:28,680 Speaker 1: Here is as he tries this other stuff. Why aren't 342 00:18:28,680 --> 00:18:32,119 Speaker 1: investors seeing it that way? Well, they're having flashbacks what 343 00:18:32,280 --> 00:18:34,960 Speaker 1: happened in two thousand twelve and two thousand fourteen when 344 00:18:34,960 --> 00:18:37,720 Speaker 1: they went in these heavy investment periods. And I think 345 00:18:37,720 --> 00:18:41,440 Speaker 1: that you know that that's the core reason why as 346 00:18:41,480 --> 00:18:43,600 Speaker 1: Tom said, they're missing the bigger point the areas that 347 00:18:43,600 --> 00:18:46,159 Speaker 1: they're spending in our areas that we know that works, 348 00:18:46,240 --> 00:18:51,080 Speaker 1: fulfillment and content, and so I think that I think 349 00:18:51,080 --> 00:18:54,000 Speaker 1: that investors should just kind of keep their focus on 350 00:18:54,000 --> 00:18:56,480 Speaker 1: on that that they know what to do when they invest. 351 00:18:57,040 --> 00:19:00,240 Speaker 1: G Monster, Thank you so much with Piper jeff for you, 352 00:19:00,440 --> 00:19:02,639 Speaker 1: David Tom Keens throws you with us on a Friday, 353 00:19:02,720 --> 00:19:05,080 Speaker 1: Gene Monster with us as you look at the land 354 00:19:05,080 --> 00:19:07,200 Speaker 1: of technology, not that you do all of it, Gene, 355 00:19:07,240 --> 00:19:10,000 Speaker 1: but most of it. And the fact is X number 356 00:19:10,080 --> 00:19:14,080 Speaker 1: of stocks have created eighty or nine of the gain 357 00:19:14,840 --> 00:19:17,080 Speaker 1: over the last couple of years. How do you respond 358 00:19:17,080 --> 00:19:20,560 Speaker 1: to Piper Jeffrey clients that say, Gene, it's just all 359 00:19:20,600 --> 00:19:23,440 Speaker 1: about like six or seven stocks, how do you respond 360 00:19:23,440 --> 00:19:27,040 Speaker 1: to that? Well, there are other stocks that are getting 361 00:19:27,560 --> 00:19:30,040 Speaker 1: bought ups that are part of this. So part of 362 00:19:30,040 --> 00:19:33,200 Speaker 1: it is that, yes, the bigger companies have bigger budgets 363 00:19:33,240 --> 00:19:36,360 Speaker 1: and have these, you know, a hundred billion dollar plus 364 00:19:36,920 --> 00:19:40,040 Speaker 1: treasure says of cash that they can can use. But 365 00:19:40,119 --> 00:19:41,639 Speaker 1: at the end of the day, it's for us to 366 00:19:41,720 --> 00:19:45,320 Speaker 1: find good trends, and some of those start with smaller 367 00:19:45,320 --> 00:19:48,040 Speaker 1: companies that become bigger companies. If you look at a 368 00:19:48,080 --> 00:19:51,439 Speaker 1: good example that would be linked in as that was 369 00:19:51,480 --> 00:19:54,560 Speaker 1: a small company that ultimately ended the penvty good outcome. 370 00:19:54,680 --> 00:19:58,440 Speaker 1: And so that's how we think about it. To ask 371 00:19:58,440 --> 00:20:01,480 Speaker 1: you about this TV app that Apple is revealed, and 372 00:20:01,520 --> 00:20:05,040 Speaker 1: we can joke about the marketing brainstorm session that must 373 00:20:05,040 --> 00:20:08,159 Speaker 1: have gone into naming that app TV TV. But is 374 00:20:08,200 --> 00:20:10,280 Speaker 1: this another half measure here? It seems like for years 375 00:20:10,280 --> 00:20:12,439 Speaker 1: now we've been waiting for some sort of subscription service 376 00:20:12,480 --> 00:20:15,600 Speaker 1: for for Apple TV and earnest, how excited are you 377 00:20:15,640 --> 00:20:18,439 Speaker 1: at the prospects here of of a TV app for 378 00:20:18,440 --> 00:20:22,679 Speaker 1: Apple's suite of products? It still doesn't get to what 379 00:20:22,760 --> 00:20:25,560 Speaker 1: we need, which is what you described is more of 380 00:20:25,840 --> 00:20:28,800 Speaker 1: a package where consumers can choose from a wide range 381 00:20:28,840 --> 00:20:32,200 Speaker 1: of of of channels and kind of build their own. 382 00:20:32,320 --> 00:20:34,959 Speaker 1: And you know, there's some players like Sling that are 383 00:20:35,000 --> 00:20:37,520 Speaker 1: just putting some together, but a lot of that key 384 00:20:37,520 --> 00:20:40,840 Speaker 1: content still isn't there, like live sports, And so I 385 00:20:40,880 --> 00:20:43,000 Speaker 1: think that it is a half measure. I think that 386 00:20:43,000 --> 00:20:46,280 Speaker 1: that's how this world is going to progress is a 387 00:20:46,320 --> 00:20:48,720 Speaker 1: lot of little steps, and so I think it's in 388 00:20:48,760 --> 00:20:51,600 Speaker 1: that context it's important, but we're still probably a year 389 00:20:51,680 --> 00:20:54,680 Speaker 1: two away from the point where the average person really 390 00:20:54,720 --> 00:20:57,080 Speaker 1: wants to cut the cable. Thought in the context of 391 00:20:57,119 --> 00:20:58,879 Speaker 1: the deal we saw announced this week that a T 392 00:20:59,000 --> 00:21:01,680 Speaker 1: T Time Warner deal, a lot of speculation about how 393 00:21:01,720 --> 00:21:04,520 Speaker 1: Apple was regarding that, if Apple might have been interested 394 00:21:04,560 --> 00:21:07,719 Speaker 1: in in Time Warner. Uh. Put these two events in 395 00:21:07,800 --> 00:21:10,000 Speaker 1: context here, the advent of this new app and the 396 00:21:10,000 --> 00:21:13,760 Speaker 1: announcement of that merger. I think it shows that what 397 00:21:13,840 --> 00:21:17,119 Speaker 1: the TV app does and this Time Warner deal shows 398 00:21:17,160 --> 00:21:19,520 Speaker 1: what Apple strategies if they want to have a broader 399 00:21:19,600 --> 00:21:23,040 Speaker 1: range of content and enable that, and so if they 400 00:21:23,080 --> 00:21:24,960 Speaker 1: would have put a bit in for a Time Warner, 401 00:21:25,000 --> 00:21:27,480 Speaker 1: for example, that doesn't solve the problem that they want. 402 00:21:27,560 --> 00:21:30,480 Speaker 1: That would give them a very wide but still not 403 00:21:30,720 --> 00:21:33,960 Speaker 1: encompassing array of content, and that's really what they want 404 00:21:34,000 --> 00:21:37,600 Speaker 1: to have. Let's search a Google I find I am sorry, Gene, 405 00:21:37,640 --> 00:21:42,399 Speaker 1: I still can't say alphabet something. Do something about that, 406 00:21:42,520 --> 00:21:46,399 Speaker 1: Gene monster. Google, give us an update. I mean, I 407 00:21:46,480 --> 00:21:49,879 Speaker 1: understand it's been a modest moonshot, but it seems to 408 00:21:49,920 --> 00:21:52,240 Speaker 1: get brushed aside in all of this. What is the 409 00:21:52,359 --> 00:21:55,399 Speaker 1: state of Google now? Does the management feel like on 410 00:21:55,520 --> 00:21:58,879 Speaker 1: the up and up? Yeah? I think they do, and 411 00:21:58,920 --> 00:22:01,840 Speaker 1: they have a lot to be excited about and proud about. 412 00:22:02,000 --> 00:22:04,440 Speaker 1: Is that they've kept their revenue growth going. It's a 413 00:22:04,480 --> 00:22:07,200 Speaker 1: seventy four billion dollar company right now. That they grew 414 00:22:07,720 --> 00:22:09,800 Speaker 1: in the September quarter at a similar rate that they 415 00:22:09,840 --> 00:22:12,480 Speaker 1: grew in the June quarter. And despite the fact that 416 00:22:12,520 --> 00:22:15,120 Speaker 1: they had a difficult comp is that a year ago 417 00:22:15,280 --> 00:22:17,200 Speaker 1: they added an extra link you may or may out 418 00:22:17,240 --> 00:22:19,959 Speaker 1: of notice this on your mobile Google searching, and so 419 00:22:20,000 --> 00:22:22,359 Speaker 1: that helped them over the past year and now they're 420 00:22:22,480 --> 00:22:24,680 Speaker 1: now they're coming up against that comp and they're doing well. 421 00:22:25,119 --> 00:22:27,359 Speaker 1: So yes, it does get kind of brushed under because 422 00:22:27,400 --> 00:22:29,760 Speaker 1: they don't have a lot of the drama that some 423 00:22:29,800 --> 00:22:32,520 Speaker 1: of these other names have. But it's a it's just 424 00:22:32,640 --> 00:22:36,639 Speaker 1: a steady story and they are have They're very methodical 425 00:22:36,680 --> 00:22:39,359 Speaker 1: about how they think about the future. And I share 426 00:22:39,400 --> 00:22:41,639 Speaker 1: their vision of this concept that we're going to interact 427 00:22:41,680 --> 00:22:44,240 Speaker 1: with machines in a different way, and they're they're leaving 428 00:22:44,280 --> 00:22:47,560 Speaker 1: that And now, folks, it is time for Meth Friday, 429 00:22:47,840 --> 00:22:54,199 Speaker 1: Gene Munster, Hyper Jeffrey Google slash alphabet to be cute 430 00:22:54,320 --> 00:22:58,879 Speaker 1: because they fear No Evil announced to share repurchase of 431 00:22:59,000 --> 00:23:02,840 Speaker 1: seven zero one nine three zero nine seven six point 432 00:23:02,920 --> 00:23:06,080 Speaker 1: eight three. Gene helped me here the number of letters 433 00:23:06,080 --> 00:23:13,359 Speaker 1: in the alphabet to the power of E. Really so yeah, 434 00:23:13,960 --> 00:23:17,840 Speaker 1: for for geeks, that's apparently really funny. It's just I'm 435 00:23:17,880 --> 00:23:22,960 Speaker 1: just really yes, how oiler of them that was a joke? 436 00:23:24,280 --> 00:23:26,480 Speaker 1: Help me here, Gina. These guys still too cute for 437 00:23:26,520 --> 00:23:30,919 Speaker 1: their own good. How they're pretty smart, so I'll give 438 00:23:31,000 --> 00:23:34,520 Speaker 1: him some room to do things like that. Well, you 439 00:23:34,520 --> 00:23:36,440 Speaker 1: know that that makes a question. Here we saw a 440 00:23:36,480 --> 00:23:39,480 Speaker 1: Google Access that's part of this moonshot division of of 441 00:23:39,560 --> 00:23:43,080 Speaker 1: Google here announcing cuts of nine percent of the workforce 442 00:23:43,200 --> 00:23:46,760 Speaker 1: this week. The CEO of that division is out. Tom 443 00:23:46,800 --> 00:23:49,080 Speaker 1: asked about the cuteness of the company. We have Ruth 444 00:23:49,119 --> 00:23:51,120 Speaker 1: Poor at their at CFO. Are we beginning to see 445 00:23:51,119 --> 00:23:55,520 Speaker 1: the Ruth Poor at Google alphabet? Excuse me? I think 446 00:23:55,520 --> 00:23:57,439 Speaker 1: you are. Yeah, I think And as you said, the 447 00:23:57,440 --> 00:23:59,240 Speaker 1: fiber side, they're they're getting a little bit tighter on. 448 00:23:59,400 --> 00:24:03,000 Speaker 1: But I think what's also important is that they're continuing 449 00:24:03,040 --> 00:24:05,080 Speaker 1: to fund the bets that they feel good about, like 450 00:24:05,160 --> 00:24:09,240 Speaker 1: Otto and self driving cars. And so I think that, yes, 451 00:24:09,520 --> 00:24:11,679 Speaker 1: Ruth Pratts brought some discipline that they haven't had in 452 00:24:11,680 --> 00:24:14,920 Speaker 1: the past, But I think that they're still very committed. 453 00:24:15,119 --> 00:24:17,200 Speaker 1: If you look at their R and D budget, it's 454 00:24:17,200 --> 00:24:19,800 Speaker 1: it's about it's more than what Apple is. It's about 455 00:24:19,800 --> 00:24:22,360 Speaker 1: twelve billion a year, Apples at about ten, and Facebook 456 00:24:22,359 --> 00:24:25,159 Speaker 1: sets five. And so even with these little bit of 457 00:24:25,200 --> 00:24:27,520 Speaker 1: tightening that Ruth Pratt is doing, it's still a company 458 00:24:27,560 --> 00:24:30,399 Speaker 1: that is aggressively investing. So why do investors seem to 459 00:24:30,400 --> 00:24:34,600 Speaker 1: tolerate uh that set up at Google, that binary setup 460 00:24:34,600 --> 00:24:37,840 Speaker 1: of having the core product and the moonshot division, and 461 00:24:37,920 --> 00:24:42,240 Speaker 1: yet they're skittish about it happening at Amazon? I think 462 00:24:42,280 --> 00:24:45,520 Speaker 1: because it just has a much more dramatic impact on 463 00:24:45,560 --> 00:24:48,040 Speaker 1: Amazon's overall results and they can't carve it out like 464 00:24:48,119 --> 00:24:51,520 Speaker 1: they can. Amazon's investing in these in their core business, 465 00:24:51,520 --> 00:24:55,080 Speaker 1: and that shakes investors confidence at times, where Google they 466 00:24:55,119 --> 00:24:57,280 Speaker 1: can and they can separate it in their mind. They 467 00:24:57,320 --> 00:24:59,240 Speaker 1: can think about them as they have a good, strong 468 00:24:59,280 --> 00:25:02,680 Speaker 1: core business, but they're playing around on the bed. One 469 00:25:02,720 --> 00:25:05,440 Speaker 1: final question, what's your single best buy? I mean, it's 470 00:25:05,440 --> 00:25:08,480 Speaker 1: a tough question for you because everything's overweight. What's your 471 00:25:08,880 --> 00:25:12,560 Speaker 1: over overweighted overweight? I think if you take a perspective 472 00:25:12,600 --> 00:25:16,040 Speaker 1: of a year from now, it's Apple because expectations are low, 473 00:25:16,080 --> 00:25:17,879 Speaker 1: and I think that phone every one seven is going 474 00:25:17,960 --> 00:25:19,919 Speaker 1: to deliver. And then I think if you take an 475 00:25:19,920 --> 00:25:21,840 Speaker 1: approach of five or ten years, we don't have ten 476 00:25:21,880 --> 00:25:25,280 Speaker 1: year targets, but the longer term is Amazon and that's 477 00:25:25,280 --> 00:25:29,080 Speaker 1: just the head room they've got. Jean, thank you so much. 478 00:25:29,160 --> 00:25:31,560 Speaker 1: Jean Muster, most generous of your time over the last 479 00:25:32,359 --> 00:25:43,920 Speaker 1: a few days. He is with Piper Jeffrey. Who you 480 00:25:44,040 --> 00:25:47,440 Speaker 1: put your trust in matters. Investors have put their trust 481 00:25:47,520 --> 00:25:51,080 Speaker 1: in independent registered investment advisors to the two and of 482 00:25:51,160 --> 00:25:54,560 Speaker 1: four trillion dollars. Why they see their roles to serve, 483 00:25:54,880 --> 00:25:58,159 Speaker 1: not sell. That's why Charles Schwab is committed to the 484 00:25:58,280 --> 00:26:03,640 Speaker 1: success over seven thousand and independent financial advisors who passionately 485 00:26:03,920 --> 00:26:08,960 Speaker 1: dedicate themselves to helping people achieve their financial goals. Learn 486 00:26:09,040 --> 00:26:20,960 Speaker 1: more at find your independent Advisor dot com. Sarah Senatory 487 00:26:21,000 --> 00:26:24,000 Speaker 1: with us now ab Burnsday. We usually talk about McDonald's 488 00:26:24,000 --> 00:26:26,600 Speaker 1: and faster, but I really wanted to get miss Senator 489 00:26:26,680 --> 00:26:29,720 Speaker 1: back to just talk about the all time train wreck. Sarah. 490 00:26:30,200 --> 00:26:32,280 Speaker 1: You and I know you know, we all studied cf A, 491 00:26:32,520 --> 00:26:36,320 Speaker 1: Johnson and Johnson Titland all from where you sit did 492 00:26:36,400 --> 00:26:44,120 Speaker 1: the management of CHIPOTLEI missmanage this? E Coal, I think, um, 493 00:26:44,560 --> 00:26:49,000 Speaker 1: I think they had a harder um super uh Rodaho 494 00:26:49,160 --> 00:26:51,880 Speaker 1: than you know, some of their predecessors. So I want 495 00:26:51,880 --> 00:26:54,359 Speaker 1: to start with that. You know, social media is so 496 00:26:54,480 --> 00:26:58,040 Speaker 1: different now, yes what existed you know, ten or twenty 497 00:26:58,160 --> 00:27:00,000 Speaker 1: years ago. You know when we look at other completely 498 00:27:00,160 --> 00:27:03,160 Speaker 1: fair you Um, but I think you know, I think 499 00:27:03,200 --> 00:27:06,639 Speaker 1: we can all agree that maybe they were too quiet initially. Um, 500 00:27:06,680 --> 00:27:08,240 Speaker 1: they didn't get out in front of this. You know, 501 00:27:08,320 --> 00:27:11,120 Speaker 1: they've been accused of maybe being a little bit arrogant 502 00:27:11,160 --> 00:27:13,640 Speaker 1: about it. Um, yeah, but they were. They were sort 503 00:27:13,680 --> 00:27:16,960 Speaker 1: of an uncharted territory. So it's hard to say exactly 504 00:27:17,119 --> 00:27:18,840 Speaker 1: what they could have done. If they could have done 505 00:27:18,880 --> 00:27:21,520 Speaker 1: something better. Um, you know, maybe they should have done 506 00:27:21,560 --> 00:27:25,520 Speaker 1: more about quality assurance, communicating that to their customers. They're 507 00:27:25,560 --> 00:27:27,959 Speaker 1: doing that now, and you know, maybe that that may 508 00:27:28,000 --> 00:27:30,080 Speaker 1: be the one thing that a little bit too late. 509 00:27:30,400 --> 00:27:35,240 Speaker 1: What is the catalysts to reverse a set of lower 510 00:27:35,520 --> 00:27:40,200 Speaker 1: lows and lower highs? Technically the chart is the height 511 00:27:40,400 --> 00:27:43,800 Speaker 1: of ugly. It's like teacher course, you have a fundamental 512 00:27:44,040 --> 00:27:48,080 Speaker 1: outperform in the stock, Sarah Senatory needs a catalyst. What 513 00:27:48,320 --> 00:27:51,000 Speaker 1: is it I got to be an earnings beat. I mean, 514 00:27:51,080 --> 00:27:54,640 Speaker 1: this whole year has been a disappointment, one quarter after 515 00:27:54,720 --> 00:27:57,560 Speaker 1: the next, and this most recent quarter was probably the 516 00:27:57,640 --> 00:28:00,560 Speaker 1: biggest of them all. Um, you know, even when you 517 00:28:00,640 --> 00:28:02,960 Speaker 1: adjust for some of the one times it was it 518 00:28:03,119 --> 00:28:05,560 Speaker 1: was really um, you know, the P and L really 519 00:28:05,720 --> 00:28:09,439 Speaker 1: just uh fell apart a little bit um in an 520 00:28:09,680 --> 00:28:14,160 Speaker 1: uncted ways for investors. So they've got to come through 521 00:28:14,359 --> 00:28:16,960 Speaker 1: with the margin targets that they've laid out, with the 522 00:28:17,000 --> 00:28:20,840 Speaker 1: same store sales targets that they've laid out. Once that happens, um, 523 00:28:21,000 --> 00:28:23,480 Speaker 1: you know that people will will will start to be 524 00:28:23,680 --> 00:28:26,120 Speaker 1: interested in the stock again. Sir. We'll talk about what's 525 00:28:26,160 --> 00:28:28,800 Speaker 1: changed fundamentally in the restaurants themselves, but let's talk about 526 00:28:28,840 --> 00:28:31,679 Speaker 1: the boardroom and management. Steve l is still running the company. 527 00:28:31,760 --> 00:28:34,720 Speaker 1: Bill Ackman and Pershing Square getting involved here. There was 528 00:28:34,840 --> 00:28:38,600 Speaker 1: talk of that board being rejiggered. Has that happened. Has 529 00:28:38,680 --> 00:28:42,719 Speaker 1: much happened in terms of getting new blood into the boardroom, Um, 530 00:28:43,080 --> 00:28:46,920 Speaker 1: you know, not yet. Uh, It's it's been a little 531 00:28:46,960 --> 00:28:48,640 Speaker 1: bit slow. I mean, we haven't let let me do this. 532 00:28:48,760 --> 00:28:51,920 Speaker 1: We haven't seen anything since you know, since Pershing filed 533 00:28:52,440 --> 00:28:56,400 Speaker 1: about their ownership. So so from that perspective, haven't you know, 534 00:28:56,600 --> 00:29:00,800 Speaker 1: I think Chipotle UM has in the last year or 535 00:29:00,880 --> 00:29:04,840 Speaker 1: two put a couple of people on new people on UM. 536 00:29:05,000 --> 00:29:07,840 Speaker 1: But in general, uh, this is a very very long 537 00:29:07,960 --> 00:29:11,960 Speaker 1: tenured board, and it's not totally clear that they have 538 00:29:12,360 --> 00:29:15,080 Speaker 1: all of the UM you know, all that they all 539 00:29:15,120 --> 00:29:18,400 Speaker 1: have experience that is particularly relevant. You know. In fact, 540 00:29:18,480 --> 00:29:20,840 Speaker 1: several of them are from you know, most of their 541 00:29:20,880 --> 00:29:24,480 Speaker 1: careers in healthcare. A few were from McDonald's, but you know, 542 00:29:24,560 --> 00:29:27,280 Speaker 1: we're active with McDonald's, you know, twenty years ago. So 543 00:29:27,840 --> 00:29:30,400 Speaker 1: so in that sense, I think there's built very much 544 00:29:30,440 --> 00:29:35,400 Speaker 1: an argument for UM new different or at least additional 545 00:29:35,520 --> 00:29:39,800 Speaker 1: people on the board. This company has tried very hard 546 00:29:39,840 --> 00:29:41,720 Speaker 1: to get people to come back into the stores. They've 547 00:29:41,720 --> 00:29:44,719 Speaker 1: offered rebates, they've offered all kinds of coupons. Are there 548 00:29:44,760 --> 00:29:47,400 Speaker 1: signs that's working, other signs that that is getting people 549 00:29:47,440 --> 00:29:49,240 Speaker 1: to come back and to come back again after that 550 00:29:49,480 --> 00:29:51,200 Speaker 1: or that it's kind of one offer visits to the 551 00:29:51,280 --> 00:29:53,880 Speaker 1: to the to the restaurants. I mean, on the last 552 00:29:53,920 --> 00:29:56,280 Speaker 1: conference call again, setting aside the you know, sort of 553 00:29:56,320 --> 00:29:59,720 Speaker 1: the particularly bad earnings number, UM, there was a lot 554 00:30:00,000 --> 00:30:02,640 Speaker 1: that was that was encouraging in the sense of their 555 00:30:02,720 --> 00:30:05,880 Speaker 1: most frequent customers are coming back, and they're coming back, 556 00:30:06,400 --> 00:30:09,840 Speaker 1: um almost as frequently as they were before, and in particular, 557 00:30:10,120 --> 00:30:12,560 Speaker 1: after they did the big loyalty push in the summer, 558 00:30:13,600 --> 00:30:16,600 Speaker 1: the trends in October seemed to hold up. I mean, 559 00:30:16,680 --> 00:30:19,360 Speaker 1: I mean, Sarah and I love and only Sarah Senator 560 00:30:19,440 --> 00:30:22,360 Speaker 1: can do this, looks buried in her Bernstein report. I 561 00:30:22,440 --> 00:30:27,400 Speaker 1: gotta find here's the language non guest facing elements of business. 562 00:30:27,720 --> 00:30:29,920 Speaker 1: I mean, you didn't write that. That's their language, right, 563 00:30:31,120 --> 00:30:35,640 Speaker 1: That's right, that's that's that's industry jargon, non guests facing 564 00:30:35,880 --> 00:30:38,240 Speaker 1: elements of business. Okay, I get it. The kitchens are 565 00:30:38,320 --> 00:30:41,040 Speaker 1: dump and they're cleaning it up. Do you remember the 566 00:30:41,160 --> 00:30:44,600 Speaker 1: day where Howard Schultz of Starbucks said he'd had enough 567 00:30:45,600 --> 00:30:47,680 Speaker 1: and he had to go in and completely retrained and 568 00:30:47,760 --> 00:30:52,320 Speaker 1: remanage people to invigorate the franchise. Does Does Chipotle need 569 00:30:52,440 --> 00:30:56,480 Speaker 1: to do a Howard Schultz right now? Well, they had, 570 00:30:56,600 --> 00:30:58,240 Speaker 1: you know, they did that day in February where they 571 00:30:58,280 --> 00:31:00,520 Speaker 1: shut down stores for half a day and they really 572 00:31:00,640 --> 00:31:04,200 Speaker 1: did um, you know, and they really talked about food 573 00:31:04,240 --> 00:31:07,840 Speaker 1: safety and and that and really instilling that culture. I think, 574 00:31:08,320 --> 00:31:10,920 Speaker 1: you know, it is the case that they're moving they're 575 00:31:10,960 --> 00:31:15,440 Speaker 1: moving people around, some of their best executives to reinforce 576 00:31:15,600 --> 00:31:20,080 Speaker 1: the need for you know, um, for cleanliness, for operations, um, 577 00:31:20,320 --> 00:31:23,040 Speaker 1: you know, for execution, all of these things. So I 578 00:31:23,120 --> 00:31:25,240 Speaker 1: don't know if they needed a Howard Schultz moment, but 579 00:31:25,320 --> 00:31:27,800 Speaker 1: they certainly recognize that they that they have some work 580 00:31:27,880 --> 00:31:29,800 Speaker 1: to do. I mean, I mean, I look at the 581 00:31:29,920 --> 00:31:33,280 Speaker 1: chart is just absolutely extraordinary, folks. And Sarah, tell me 582 00:31:33,320 --> 00:31:36,440 Speaker 1: you're how you handle and outperform when you're in you're 583 00:31:36,520 --> 00:31:39,320 Speaker 1: on the wrong stock. Here, hold on, it's it's Friday, Sarah. 584 00:31:39,360 --> 00:31:43,080 Speaker 1: I can barely focus here, you know. There we are 585 00:31:43,480 --> 00:31:48,640 Speaker 1: seven hundred to three. I mean, it's been ugly and 586 00:31:49,200 --> 00:31:52,280 Speaker 1: you've got an outperformed. Tell me the quality where you 587 00:31:52,360 --> 00:31:54,280 Speaker 1: can stick with his dog as it moves ever and 588 00:31:54,360 --> 00:31:58,560 Speaker 1: ever lower. Now you're you're ranking me over the coals here. 589 00:31:58,920 --> 00:32:01,479 Speaker 1: But we love you. But but you know, I mean, 590 00:32:01,560 --> 00:32:04,360 Speaker 1: this is a fascinating story. We all eat their all 591 00:32:04,400 --> 00:32:07,600 Speaker 1: our kids here, take twenty dollars go to Chipotle And 592 00:32:07,680 --> 00:32:12,640 Speaker 1: to David's point, Sarah, people are doing that less now right, Uh, 593 00:32:12,720 --> 00:32:14,960 Speaker 1: they're doing it less. Um, you know, Again, if you 594 00:32:15,000 --> 00:32:18,080 Speaker 1: look at the traffic numbers, they're they're they're doing it 595 00:32:18,120 --> 00:32:21,000 Speaker 1: about thirteen percent less than they were. You know, that's 596 00:32:21,200 --> 00:32:24,520 Speaker 1: not a huge loss considering what's happened, you know the news, Um, 597 00:32:24,560 --> 00:32:27,560 Speaker 1: they're they're coming back. Yeah, it's it's certainly been a 598 00:32:27,640 --> 00:32:30,200 Speaker 1: difficult stock to like for the past year, and I 599 00:32:30,320 --> 00:32:35,280 Speaker 1: think you know the uh, it's a reminder that that again, um, 600 00:32:35,520 --> 00:32:39,160 Speaker 1: with social media, these things take longer and longer. Um. 601 00:32:39,280 --> 00:32:41,160 Speaker 1: But the brand is still very good. I mean, I 602 00:32:41,520 --> 00:32:44,320 Speaker 1: challenge you to walk into a Chipotle Tom Manhattan and 603 00:32:44,400 --> 00:32:49,600 Speaker 1: not have to wait in line for fift Absolutely true, David, 604 00:32:49,680 --> 00:32:52,240 Speaker 1: that's a true. Let me add to that. I was 605 00:32:52,280 --> 00:32:54,040 Speaker 1: in a Chipotle a couple of weeks ago. I was 606 00:32:54,080 --> 00:32:57,720 Speaker 1: a total dump. It was like outrageously filthy. But to 607 00:32:57,800 --> 00:33:00,680 Speaker 1: miss Senator's point, the line was out door. Say a 608 00:33:00,760 --> 00:33:02,680 Speaker 1: quick question here. It seems like the impulse would be 609 00:33:02,760 --> 00:33:04,840 Speaker 1: to get the core product right in light of all 610 00:33:04,880 --> 00:33:07,240 Speaker 1: of this is happening, and instead we're seeing an impulse 611 00:33:07,280 --> 00:33:10,600 Speaker 1: here to get into desserts, get into hamburgers. Does that 612 00:33:10,720 --> 00:33:13,640 Speaker 1: make sense to you? Expanding the the the offerings of 613 00:33:13,760 --> 00:33:16,960 Speaker 1: chippotleon as a company who alright, So so I think 614 00:33:17,000 --> 00:33:19,360 Speaker 1: the core product that they have gotten it right it is, 615 00:33:19,480 --> 00:33:22,040 Speaker 1: you know, they will say their their feedback is that 616 00:33:22,120 --> 00:33:25,200 Speaker 1: they get fewer food complaints now than they did before. Um, 617 00:33:25,280 --> 00:33:27,400 Speaker 1: they've brought in some of the prep back in house 618 00:33:27,920 --> 00:33:30,320 Speaker 1: just because that's what people like and it allows a 619 00:33:30,320 --> 00:33:34,120 Speaker 1: little more customization. I personally, I think the food quality 620 00:33:34,160 --> 00:33:37,959 Speaker 1: has always been the hallmark of Chapoleon. It remains that way. Um. 621 00:33:38,040 --> 00:33:40,440 Speaker 1: You know, speed of service is certainly slackened a little 622 00:33:40,440 --> 00:33:42,360 Speaker 1: bit as they focused on different things. You know that 623 00:33:42,520 --> 00:33:45,600 Speaker 1: that experience maybe could still improve, But I think the 624 00:33:45,640 --> 00:33:48,600 Speaker 1: food is quite good. Um. The burgers is a separate concept, 625 00:33:49,000 --> 00:33:51,280 Speaker 1: you know. Um, whether it's a distraction or not, I 626 00:33:51,360 --> 00:33:53,480 Speaker 1: think is a is a good question. But it's small 627 00:33:53,640 --> 00:33:55,760 Speaker 1: and and right now doesn't take a lot of their time. 628 00:33:56,240 --> 00:33:59,000 Speaker 1: Offering a dessert should not be that hard. Um. You know, 629 00:33:59,120 --> 00:34:01,520 Speaker 1: I don't know what they they have in mind. Um, 630 00:34:01,760 --> 00:34:04,360 Speaker 1: as long as it doesn't ruin the trooput, you know, 631 00:34:04,480 --> 00:34:08,120 Speaker 1: it should be almost wholly incremental there. I'm I'm sure 632 00:34:08,200 --> 00:34:09,880 Speaker 1: there are people who would like to be able to 633 00:34:09,920 --> 00:34:12,759 Speaker 1: add something sweet to their chipole meal who haven't been 634 00:34:12,800 --> 00:34:18,360 Speaker 1: able to do it. Does a margaritea counts dessert calories. Okay, 635 00:34:18,400 --> 00:34:20,480 Speaker 1: well we wanted to be sure of that. Sarah Senator 636 00:34:20,560 --> 00:34:23,279 Speaker 1: will continue with this. We'll go Chipotle free in our 637 00:34:23,360 --> 00:34:25,680 Speaker 1: next section and look at a lot of the other 638 00:34:26,239 --> 00:34:30,600 Speaker 1: stories of what we do with our restaurants today. UM 639 00:34:30,840 --> 00:34:34,680 Speaker 1: sit down Dinners, they own Olive Garden, Long Orange Steakhouse, 640 00:34:34,719 --> 00:34:39,520 Speaker 1: Bahama Brief Season fifty two, the Capital Grill, Eddie V's, 641 00:34:39,560 --> 00:34:42,600 Speaker 1: and yardhas. When I say Darden's, I think of three 642 00:34:42,640 --> 00:34:45,920 Speaker 1: eggs over medium hash brown. That's not what this story is, 643 00:34:46,080 --> 00:34:51,200 Speaker 1: is it. No? I don't know why you would think 644 00:34:51,239 --> 00:34:54,560 Speaker 1: of three eggs over medium hash brown. They don't start breakfast, 645 00:34:54,680 --> 00:34:58,160 Speaker 1: But that's definitely not what this story is. What is 646 00:34:58,239 --> 00:35:01,080 Speaker 1: the story now? Because I us we're eating out more, 647 00:35:01,239 --> 00:35:03,680 Speaker 1: but are we eating at those kind of restaurants? Take 648 00:35:03,719 --> 00:35:08,480 Speaker 1: Olive Garden as one example. Um, we're not eating more 649 00:35:08,680 --> 00:35:11,920 Speaker 1: at those restaurants. So the casual dining sector, which is 650 00:35:12,040 --> 00:35:15,880 Speaker 1: what Darden is, you know, the biggest player, and UM 651 00:35:16,320 --> 00:35:20,200 Speaker 1: across It's, It's It's collective brand portfolio has seen negative 652 00:35:20,239 --> 00:35:25,000 Speaker 1: traffic frankly since uh six. So there there is just 653 00:35:25,160 --> 00:35:29,200 Speaker 1: a secular trend away from these types of restaurants and 654 00:35:29,480 --> 00:35:31,880 Speaker 1: and and I've never been in an Eddie V's, folks, 655 00:35:31,920 --> 00:35:33,959 Speaker 1: I have no clue. But they got the jazz bass 656 00:35:34,040 --> 00:35:36,799 Speaker 1: guy with a bass violin, you know, bass fiddle kind 657 00:35:36,840 --> 00:35:39,080 Speaker 1: of thing, stand up base. And they got the shrimp 658 00:35:39,160 --> 00:35:41,239 Speaker 1: cocktail with a lobster tails stuck in the air and 659 00:35:41,280 --> 00:35:44,560 Speaker 1: the oysters in the bottom, and their poor pouring, you know, David, 660 00:35:44,600 --> 00:35:47,000 Speaker 1: one of those martinis which is like a three martini 661 00:35:47,120 --> 00:35:50,120 Speaker 1: lunch in one glass they got, they got. I mean, 662 00:35:50,200 --> 00:35:53,160 Speaker 1: that's the stick. Sarah isn't working anymore? Are we not 663 00:35:53,320 --> 00:35:57,359 Speaker 1: doing that? The high end? Well, it's interesting interesting fact 664 00:35:57,360 --> 00:36:00,279 Speaker 1: about Eddiev's. About half of what they sell is actually dake. 665 00:36:00,640 --> 00:36:02,839 Speaker 1: So I'm sure they do have a delicious seafood tower, 666 00:36:02,960 --> 00:36:05,359 Speaker 1: but people go there for all kinds of things. Um. 667 00:36:05,480 --> 00:36:09,399 Speaker 1: Setting setting that aside, um, you know, I think, um, 668 00:36:09,640 --> 00:36:13,360 Speaker 1: there's always a market for fine dining. UM. You know 669 00:36:13,440 --> 00:36:17,360 Speaker 1: a lot of it depends on what business uh travelers 670 00:36:17,440 --> 00:36:19,640 Speaker 1: and you know what the business expense accounts look like. 671 00:36:20,239 --> 00:36:23,640 Speaker 1: So um, in any given quarter, you know, the fine 672 00:36:23,719 --> 00:36:26,960 Speaker 1: dining um. You know, business can move up or down 673 00:36:27,040 --> 00:36:29,439 Speaker 1: depending on how people are feeling. Um. In the most 674 00:36:29,520 --> 00:36:32,600 Speaker 1: recent quarter, Eddy vs. Did not have a positive same 675 00:36:32,680 --> 00:36:35,200 Speaker 1: store sales number. UM, So that would suggest that there's 676 00:36:35,320 --> 00:36:38,319 Speaker 1: there's certainly been a little bit of retrenchment. Uh maybe 677 00:36:38,400 --> 00:36:41,000 Speaker 1: on that on that spending, UM. But but in general, 678 00:36:41,120 --> 00:36:46,120 Speaker 1: full service restaurants UM, you know have not been a 679 00:36:46,200 --> 00:36:48,719 Speaker 1: place of growth in this industry. It's much more about 680 00:36:48,800 --> 00:36:53,080 Speaker 1: traditional fast food and UM and fast casual. You had 681 00:36:53,120 --> 00:36:56,160 Speaker 1: a Starboard value going in trying to reform Olive Garden. 682 00:36:56,440 --> 00:37:00,359 Speaker 1: I wonder how illustrative that is to the folks Runningchipotle 683 00:37:00,600 --> 00:37:03,160 Speaker 1: right now in terms of what Starboard value pushed for, 684 00:37:03,400 --> 00:37:05,320 Speaker 1: what what Olive Garden was able to do. I know, 685 00:37:05,520 --> 00:37:09,040 Speaker 1: I know they tried to make the supply chain, UH 686 00:37:09,600 --> 00:37:12,200 Speaker 1: make a little more sense here. The trouble with Chipotle 687 00:37:12,360 --> 00:37:14,440 Speaker 1: is that supply chain is so complicated. Isn't it that 688 00:37:14,440 --> 00:37:16,840 Speaker 1: they've tried so hard to get so much locally grown 689 00:37:16,920 --> 00:37:20,279 Speaker 1: stuff that they don't have much of a handle on it. Well? Uh, 690 00:37:20,480 --> 00:37:22,880 Speaker 1: you know, well, I think the latter part of what 691 00:37:23,000 --> 00:37:24,880 Speaker 1: you said is clear that that maybe they didn't have 692 00:37:25,000 --> 00:37:26,839 Speaker 1: the hand on it they needed to, UM, and that's 693 00:37:26,840 --> 00:37:31,960 Speaker 1: why they had these these issues, UM. Supply chain food safety. UM. 694 00:37:32,239 --> 00:37:35,400 Speaker 1: Only a ten percent of Chipotle sourcing is local. Actually, 695 00:37:35,600 --> 00:37:39,560 Speaker 1: so UM, that isn't doesn't appear to be the real issue. UM. 696 00:37:39,680 --> 00:37:42,480 Speaker 1: It appears more just it was sort of growing pains. 697 00:37:42,600 --> 00:37:45,680 Speaker 1: You know, they have this supply chain, UM, and things 698 00:37:45,960 --> 00:37:49,160 Speaker 1: never really grew with the at the pace that the 699 00:37:49,239 --> 00:37:52,520 Speaker 1: business did, and you know eventually came back to bite them. UM. 700 00:37:52,800 --> 00:37:55,480 Speaker 1: But you know, I think you ask a very Germaine question, 701 00:37:55,560 --> 00:37:58,680 Speaker 1: which is what what have we seen? UM? Turnarounds are active? 702 00:37:58,800 --> 00:38:01,759 Speaker 1: Is pushed for in the past. You know Darten found UM, 703 00:38:02,080 --> 00:38:04,759 Speaker 1: you know, a hundred and sixty million dollars in cost 704 00:38:04,840 --> 00:38:08,160 Speaker 1: savings a year UM when they look for it. And 705 00:38:08,600 --> 00:38:10,680 Speaker 1: you know, at the same time their same store sales 706 00:38:11,120 --> 00:38:15,200 Speaker 1: actually got better under the current management team. So you know, 707 00:38:15,560 --> 00:38:18,000 Speaker 1: it is evidence that you can do both. In the 708 00:38:18,120 --> 00:38:20,200 Speaker 1: last minute that we've got Sarah and I want you 709 00:38:20,280 --> 00:38:25,400 Speaker 1: to play Peter Elliott or Wonderful for critic of security analysts. UM, 710 00:38:25,600 --> 00:38:28,719 Speaker 1: I get sticker shock in a steak place. I'm looking 711 00:38:28,760 --> 00:38:32,280 Speaker 1: at a famous steakhouse right now. Fifty five dollars, fifty 712 00:38:32,360 --> 00:38:36,320 Speaker 1: three dollars, fifty seven fifty five thirty six is a 713 00:38:36,360 --> 00:38:39,480 Speaker 1: skirt steak which you can barely chew in sixty five 714 00:38:39,600 --> 00:38:43,359 Speaker 1: dollars if they reached the limit of what will pay 715 00:38:43,520 --> 00:38:48,000 Speaker 1: for a piece of beef. You know, you you you 716 00:38:48,120 --> 00:38:51,080 Speaker 1: walk and rarefied air. I think outside of the city 717 00:38:51,200 --> 00:38:53,520 Speaker 1: you don't have you know, you have steakhouses that charge 718 00:38:53,520 --> 00:38:55,759 Speaker 1: a lot less than that. But but you certainly in 719 00:38:55,880 --> 00:38:59,759 Speaker 1: this environment, I think, you know, beef prices are down. 720 00:39:01,280 --> 00:39:04,800 Speaker 1: There's been massive beef deflation. So I think at some 721 00:39:04,920 --> 00:39:08,239 Speaker 1: point even people who are going to these very high 722 00:39:08,280 --> 00:39:11,160 Speaker 1: end restaurants are just cognizant of that and uh, and 723 00:39:11,239 --> 00:39:13,800 Speaker 1: they just recognize that maybe there's a there's a disconnect 724 00:39:13,880 --> 00:39:16,960 Speaker 1: between when they're paying the restaurant with the grocery store prices. 725 00:39:17,160 --> 00:39:19,840 Speaker 1: Thank you, I feel better, Sarah, just because of you. 726 00:39:19,920 --> 00:39:23,640 Speaker 1: I'm gonna eat Tofu all weekend. He likes his air 727 00:39:23,760 --> 00:39:26,280 Speaker 1: like he likes to stay. Curse with your time, Sarah. 728 00:39:26,400 --> 00:39:31,439 Speaker 1: Senator A. B. Bernstein really just terrific on Chipotle. And again, 729 00:39:31,480 --> 00:39:33,960 Speaker 1: we protect the copyright of all of our guests. I 730 00:39:34,040 --> 00:39:37,120 Speaker 1: had one email. Can you send me out the Chipotle report? No, 731 00:39:37,440 --> 00:39:42,640 Speaker 1: please contact Bernstein. We do protect our good guests copyright. David, 732 00:39:42,680 --> 00:39:45,439 Speaker 1: I can't spend sixty bucks on a piece of beef, 733 00:39:45,480 --> 00:39:48,200 Speaker 1: and I can't do it. It's like a birthday steak. 734 00:39:48,239 --> 00:39:51,759 Speaker 1: It's I'm all chicken palm or you know, millionnaise or 735 00:39:51,960 --> 00:39:57,800 Speaker 1: some other uneatable piece of chicken. More Bloomberg. This is Bloomberg. 736 00:40:11,000 --> 00:40:13,520 Speaker 1: David Gurry here with Tom Keen on Bloomberg Surveillance, recapping 737 00:40:13,600 --> 00:40:16,080 Speaker 1: the big data release this morning from the Commerce Department. 738 00:40:16,120 --> 00:40:18,480 Speaker 1: The headline number for GDP in the last QUARTERGOO at 739 00:40:18,520 --> 00:40:21,160 Speaker 1: two point nine percent. That's the annualized rate. But as 740 00:40:21,160 --> 00:40:24,279 Speaker 1: we've been discussing the underlying details, perhaps not as good 741 00:40:24,320 --> 00:40:27,400 Speaker 1: as that. Soybean related jumping exports boosted that figure. Personal 742 00:40:27,440 --> 00:40:30,440 Speaker 1: consumption was soft. As we said, a big week for 743 00:40:30,480 --> 00:40:33,080 Speaker 1: earnings this week, big week for earnings in technology especially. 744 00:40:33,080 --> 00:40:35,160 Speaker 1: I want to bring in Robert pack He's an Internet 745 00:40:35,200 --> 00:40:38,440 Speaker 1: equity analyst at sun Trust Robinson Humphrey joining us now 746 00:40:38,600 --> 00:40:41,120 Speaker 1: here on Bloomberg Surveillance. And and Robert, let me ask 747 00:40:41,160 --> 00:40:43,239 Speaker 1: you first about Twitter. We sort of began the week 748 00:40:43,640 --> 00:40:46,560 Speaker 1: talking about Twitter. Uh, we've been watching that company on 749 00:40:46,640 --> 00:40:49,040 Speaker 1: the heels of reports that it was considering a sale. 750 00:40:49,440 --> 00:40:52,799 Speaker 1: The suitors walked away. Talk about this moment in time. 751 00:40:52,840 --> 00:40:55,440 Speaker 1: Now the suitors have left. There had been a sort 752 00:40:55,480 --> 00:40:57,800 Speaker 1: of divide among the management ranks of the company. Some 753 00:40:57,920 --> 00:41:00,880 Speaker 1: wanted to to sell or avail themselves of of potentially 754 00:41:00,960 --> 00:41:05,040 Speaker 1: the opportunity to sell. Others wanted to keep the company independent. Uh, 755 00:41:05,760 --> 00:41:07,640 Speaker 1: that side has won out. Jack Dorsey has won out. 756 00:41:07,680 --> 00:41:09,279 Speaker 1: What does that sort of what latitude does that give 757 00:41:09,360 --> 00:41:11,840 Speaker 1: him going forward? Here? Yeah, well thanks for having me. 758 00:41:12,000 --> 00:41:14,120 Speaker 1: So a couple of things there. One is the quarter 759 00:41:14,200 --> 00:41:17,720 Speaker 1: they reported was still challenged, but just better than feared, 760 00:41:17,840 --> 00:41:20,520 Speaker 1: and the guidance they gave, you know, sort of emphasizes 761 00:41:20,600 --> 00:41:22,799 Speaker 1: that challenge going forward. So it's still only a low 762 00:41:23,360 --> 00:41:26,600 Speaker 1: single digit grower um. And so that begs the question 763 00:41:26,760 --> 00:41:29,279 Speaker 1: that is, the core isn't re accelerating based on what 764 00:41:29,320 --> 00:41:31,840 Speaker 1: you've done so far, how can you get that to 765 00:41:31,920 --> 00:41:33,759 Speaker 1: re accelerate? And they have a lot of bets this 766 00:41:33,880 --> 00:41:38,640 Speaker 1: quarter around live NFL video that hopefully does the trick 767 00:41:38,719 --> 00:41:40,840 Speaker 1: for them, But if it doesn't, it then begs the question, 768 00:41:41,280 --> 00:41:43,560 Speaker 1: as he entered two thousand seventeen, and you're not re 769 00:41:43,680 --> 00:41:47,000 Speaker 1: accelerating your core, do you have to pursue M and 770 00:41:47,080 --> 00:41:49,239 Speaker 1: A again? And maybe it's at a lower price than 771 00:41:49,280 --> 00:41:51,000 Speaker 1: where you are today. Give us your sense of the 772 00:41:51,040 --> 00:41:53,600 Speaker 1: bigness of those bets. They're big I think, and that 773 00:41:53,680 --> 00:41:55,960 Speaker 1: they're trying to do something different. But they're not spending, 774 00:41:56,600 --> 00:41:58,680 Speaker 1: at least relatively speaking, a ton of money on say 775 00:41:58,680 --> 00:42:02,080 Speaker 1: broadcasting NFL games. Yeah, exactly right. They're only paying about 776 00:42:02,080 --> 00:42:04,560 Speaker 1: ten million dollars, which is small in the grand scheme 777 00:42:04,600 --> 00:42:06,160 Speaker 1: of things. And the tough part there is for the 778 00:42:06,239 --> 00:42:09,880 Speaker 1: really premium content, they'd be going up against deeper pockets, 779 00:42:09,920 --> 00:42:12,560 Speaker 1: so someone like a Facebook or a YouTube slash Google 780 00:42:12,880 --> 00:42:14,800 Speaker 1: could afford to pay more, and so that that's what 781 00:42:14,920 --> 00:42:16,880 Speaker 1: makes it difficult. I think they're going more after the 782 00:42:17,000 --> 00:42:19,839 Speaker 1: long tail type of content. NFL happens to be more 783 00:42:19,840 --> 00:42:22,080 Speaker 1: of an anomaly, and that's why you'll see their deals 784 00:42:22,120 --> 00:42:24,799 Speaker 1: with the NC double A is more things like gymnastics 785 00:42:24,880 --> 00:42:27,680 Speaker 1: and not things like football. Um, and they'll probably have 786 00:42:27,760 --> 00:42:30,120 Speaker 1: to some cricket leagues and smaller soccer leagues as well. 787 00:42:30,480 --> 00:42:35,520 Speaker 1: When you look back at the week that was again, Twitter, Alphabet, Amazon, uh, 788 00:42:35,600 --> 00:42:38,040 Speaker 1: the the Apple announcement yesterday and Apples earnings as well, 789 00:42:38,080 --> 00:42:40,680 Speaker 1: what's the what's the broader takeaway you have from from 790 00:42:40,920 --> 00:42:42,840 Speaker 1: from this earning season when you look at technology, the 791 00:42:42,880 --> 00:42:46,080 Speaker 1: big technology companies, Yeah, you know, you particularly for the 792 00:42:46,239 --> 00:42:48,040 Speaker 1: for the thing all the Facebook hasn't reported yet, but 793 00:42:48,160 --> 00:42:53,239 Speaker 1: for for Amazon, Google, Netflix, UM, you've seen these larger companies, 794 00:42:53,640 --> 00:42:55,960 Speaker 1: you know, continue to grow, which is just amazing, some 795 00:42:56,040 --> 00:42:59,239 Speaker 1: of them accelerating. So Google actually accelerated its growth off 796 00:42:59,360 --> 00:43:02,000 Speaker 1: its seventy billion dollar base, which is just really amazing 797 00:43:02,040 --> 00:43:04,880 Speaker 1: to see. Um. Netflix, you saw them put up a 798 00:43:04,960 --> 00:43:07,839 Speaker 1: much better quarter than people thought. And even Amazon, while 799 00:43:07,880 --> 00:43:10,839 Speaker 1: people are disappointed on some of the spending, the top 800 00:43:10,920 --> 00:43:13,680 Speaker 1: line growth there is north of thirty So even at 801 00:43:13,760 --> 00:43:17,680 Speaker 1: their size, they're still growing and accelerating their growth rates, 802 00:43:17,719 --> 00:43:19,560 Speaker 1: which is just interesting to see the power and scale 803 00:43:19,600 --> 00:43:23,520 Speaker 1: these large platforms. We love having you on because you 804 00:43:23,640 --> 00:43:26,839 Speaker 1: get brave and courageous every once in a while. It's 805 00:43:26,880 --> 00:43:29,960 Speaker 1: a Robert Peck kind of thing. How do you respond 806 00:43:30,040 --> 00:43:34,920 Speaker 1: to SunTrust crawl clients, institutional retail It raised their hand 807 00:43:35,000 --> 00:43:38,240 Speaker 1: and say, I want to own all the Robert Peck stocks, 808 00:43:38,920 --> 00:43:41,520 Speaker 1: but I need to wait for a pullback. How do 809 00:43:41,600 --> 00:43:44,839 Speaker 1: you respond to that? Yeah, it's it's tough because if 810 00:43:44,840 --> 00:43:47,400 Speaker 1: you look at some of these stocks that we've been recommending, UM, 811 00:43:47,480 --> 00:43:50,160 Speaker 1: a lot of them have grinded higher. Right, So for instance, 812 00:43:50,239 --> 00:43:53,360 Speaker 1: Googles near all time highs, Facebook's near all time highs. 813 00:43:54,160 --> 00:43:56,279 Speaker 1: Amazon to near all time highs, even though it has 814 00:43:56,280 --> 00:43:58,880 Speaker 1: a little bit of a pullback this morning. Um. You know, 815 00:43:58,920 --> 00:44:01,520 Speaker 1: a lot of investors and to look for by by 816 00:44:01,600 --> 00:44:04,800 Speaker 1: the by the large platforms that are working, um, and 817 00:44:04,880 --> 00:44:08,440 Speaker 1: take advantage of pullbacks when you can. But it's difficult 818 00:44:08,480 --> 00:44:10,080 Speaker 1: because usually when you get a pullback in the stock, 819 00:44:10,160 --> 00:44:12,640 Speaker 1: there's usually a reason or a concern which creates a 820 00:44:12,640 --> 00:44:15,160 Speaker 1: little bit of trepidation. What do you do with the 821 00:44:15,320 --> 00:44:20,560 Speaker 1: hold an Amazon? What would make you join camp Bezos? Yeah? Well, 822 00:44:20,719 --> 00:44:24,800 Speaker 1: Amazon first phenomenal company, as I said, tremendous grower, and 823 00:44:24,920 --> 00:44:27,360 Speaker 1: that the spending us hurting the margins. You know this 824 00:44:27,480 --> 00:44:30,280 Speaker 1: near term in the near term here our growth investments, 825 00:44:30,320 --> 00:44:33,879 Speaker 1: you know, it's distribution, fulfillment centers, India, etcetera. The real 826 00:44:34,000 --> 00:44:36,280 Speaker 1: question we have there and the reason why we've been ahold, 827 00:44:36,480 --> 00:44:38,839 Speaker 1: is the multiple on the stock, the price you're paying. 828 00:44:38,960 --> 00:44:41,640 Speaker 1: So you're paying a little north of forty times free 829 00:44:41,719 --> 00:44:44,840 Speaker 1: cash flow for a grower around thirty or so, so 830 00:44:44,920 --> 00:44:47,560 Speaker 1: it's a pretty rich premium there, and we typically look 831 00:44:47,600 --> 00:44:50,600 Speaker 1: for a better risk reward evaluation parameters. As you mentioned, 832 00:44:50,640 --> 00:44:53,200 Speaker 1: we're waiting on Facebook, but looking at the ad space 833 00:44:53,360 --> 00:44:57,000 Speaker 1: in particular, Alphabet reporting yesterday the total number of ads 834 00:44:57,040 --> 00:45:00,439 Speaker 1: clicked on Google's websites jumped forty two And we'll see 835 00:45:00,440 --> 00:45:03,040 Speaker 1: what Facebook has to say about ads there. But you've 836 00:45:03,080 --> 00:45:05,120 Speaker 1: got Verizon trying to get in on this game. There 837 00:45:05,160 --> 00:45:07,600 Speaker 1: are two big players. Verizon wants to be the third. 838 00:45:07,680 --> 00:45:11,879 Speaker 1: How discouraging are the numbers we saw from Alphabet yesterday. Yeah, 839 00:45:12,080 --> 00:45:15,560 Speaker 1: let's say about eighty percent or so of incremental digital 840 00:45:15,680 --> 00:45:19,239 Speaker 1: dollars are going towards Google and Facebook, and that's from advertisers. 841 00:45:19,760 --> 00:45:22,359 Speaker 1: So it's just interesting to see those scaled platforms. It's 842 00:45:22,360 --> 00:45:24,400 Speaker 1: a couple of things that's driving that. One is the 843 00:45:24,520 --> 00:45:26,879 Speaker 1: reach being able to reach you know, in Facebook's case 844 00:45:26,960 --> 00:45:30,239 Speaker 1: at one point seven million billion users a month, right, 845 00:45:30,320 --> 00:45:32,960 Speaker 1: But it's also the target ability, being able to dissect 846 00:45:33,080 --> 00:45:35,000 Speaker 1: that audience, be able to hit the right person you want. 847 00:45:35,080 --> 00:45:37,560 Speaker 1: You see this interesting combination. I think that's why you've 848 00:45:37,560 --> 00:45:39,960 Speaker 1: seen Verizing go after putting some of these properties together 849 00:45:40,040 --> 00:45:42,239 Speaker 1: to get that scale. So adding a Yahoo together with 850 00:45:42,320 --> 00:45:44,640 Speaker 1: an A O L to hopefully get you that breadth, 851 00:45:44,760 --> 00:45:46,480 Speaker 1: and then add the targeting layer on top of that 852 00:45:46,560 --> 00:45:48,160 Speaker 1: to get you that R O I S and advertising. 853 00:45:48,200 --> 00:45:49,520 Speaker 1: I want to come back and talk about this. But 854 00:45:49,680 --> 00:45:53,840 Speaker 1: Robert Peck very quickly here. You look at what they're doing. 855 00:45:53,960 --> 00:45:58,440 Speaker 1: When you say eighty percent of marginal dollars is sustainable, 856 00:45:58,680 --> 00:46:00,520 Speaker 1: it's not a one off. It's out like a one 857 00:46:00,640 --> 00:46:02,680 Speaker 1: or two year thing. You look at that as a 858 00:46:02,760 --> 00:46:06,800 Speaker 1: sustainable trend. Yeah, it's such a large number. It probably 859 00:46:06,840 --> 00:46:08,799 Speaker 1: comes down a little bit over time. But right now, 860 00:46:08,880 --> 00:46:11,359 Speaker 1: when you when you think about the scale, I think 861 00:46:11,360 --> 00:46:13,920 Speaker 1: about what's the next platform that has that type of reach. 862 00:46:14,360 --> 00:46:16,759 Speaker 1: There really isn't one. And that's why you're trying to 863 00:46:16,800 --> 00:46:19,040 Speaker 1: put That's why Verizon is trying to put together things 864 00:46:19,080 --> 00:46:21,480 Speaker 1: like Yahoo and a O L. And we'll see if 865 00:46:21,560 --> 00:46:24,080 Speaker 1: others to be able to provide that scale. But that 866 00:46:24,280 --> 00:46:34,880 Speaker 1: in the US and even across Europe is unique. Thanks 867 00:46:34,920 --> 00:46:39,320 Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen 868 00:46:39,440 --> 00:46:44,720 Speaker 1: to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. 869 00:46:45,520 --> 00:46:48,360 Speaker 1: I'm out on Twitter at Tom Keene. David Gura is 870 00:46:48,520 --> 00:46:52,279 Speaker 1: at David Gura. Before the podcast, you can always catch 871 00:46:52,360 --> 00:47:07,880 Speaker 1: us worldwide. I'm Bloomberg Radio. Y. Who you put your 872 00:47:07,880 --> 00:47:11,480 Speaker 1: trust in matters Investors have put their trust and independent 873 00:47:11,600 --> 00:47:15,480 Speaker 1: registered investment advisors to the two and four trillion dollars. 874 00:47:15,640 --> 00:47:20,120 Speaker 1: Why learn more at find your Independent Advisor dot com.