Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Let's bring in Mark Douglas.
Speaker 1: He is the CEO of Mountain m n T n UH,
Speaker 1: and we bring him in to talk about all things
Speaker 1: tech really on the on the com side, on the
Speaker 1: streaming side, and Adam all lined up to talk about
Speaker 1: Netflix and what I feel like is a turnaround and
Speaker 1: sentiment there as well as Google. They're getting sued by
Speaker 1: the Department of Justice and it's going to be a
Speaker 1: jury trial. Holy Comoley could be the first breakup since
Speaker 1: mob El. Remember that that can't happen. I don't think
Speaker 1: so either. But um, let's talk to Mark first about
Speaker 1: the tech sector in general. Mark, we have these big
Speaker 1: earnings coming out this week, Amazon, Alphabet and Apple, UM
Speaker 1: and everyone is expecting this earning sea to be horrendous,
Speaker 1: So executives might even take advantage. We thought of this
Speaker 1: earning season to throw in the kitchen sink and get
Speaker 1: everything out of the way. You know, are all their
Speaker 1: dirty laundry. It hasn't been that bad, has it. It hasn't.
Speaker 1: I think, um, this is an interesting place win right
Speaker 1: now because normally, if you look back at all the
Speaker 1: previous downturns, it's like this is herd mentality where everyone
Speaker 1: like when rushes to the next thing, Like when if
Speaker 1: you go back to two thousand when the tech sector crash,
Speaker 1: then everyone ran that by houses and then you know,
Speaker 1: it's like this herd. But right now the herd is
Speaker 1: just kind of grazing, just all kind of standing around,
Speaker 1: not knowing where to go or what to do. So
Speaker 1: things are neither like going up nor they like crashing
Speaker 1: that hard. Everyone's waiting for you know, what am I
Speaker 1: supposed to do now? And nobody seems to know. I
Speaker 1: think what I'm hearing from some tech analysts is tech
Speaker 1: spending is still gonna go row intercessionary environment. It's just
Speaker 1: gonna grow at a lower rate than we've been used to.
Speaker 1: Is that kind of how you see? It was on
Speaker 1: fire over the last It's very hard to forecast revenue
Speaker 1: in a tech company right now, because your customers don't
Speaker 1: even know what they want, what they're going to spend.
Speaker 1: So I know from my company, like our customers normally
Speaker 1: tell us that by in December what their plans are
Speaker 1: for Q one. Most of them didn't even know until
Speaker 1: like third week of January. That is still trying to
Speaker 1: figure it out. So it's really hard to forecast. So
Speaker 1: I think you're gonna see forecasts be pretty soft, but
Speaker 1: it's an opportunity for overachievement. Everyone's going to be kind
Speaker 1: of kind of the other um, you know, the other
Speaker 1: thread that we can pull from tech has been labor.
Speaker 1: They've been firing all the excess workers that they rushed
Speaker 1: higher over the last year and a half two years.
Speaker 1: Where do you think we are there? I mean, the
Speaker 1: question is a lot of people think they're gonna fire
Speaker 1: too many people. UM obviously hired too many people. But
Speaker 1: can't they run with a surplus of employees? Well, I
Speaker 1: think some people would say Ellen, Elon Musk obviously, if
Speaker 1: you say Elon Musk, other Elons, Yeah, whoever that is.
Speaker 1: I think a lot of people would say Ellen proved
Speaker 1: that maybe a lot of tech companies have over hired
Speaker 1: since you know, but nothing has changed since he essentially
Speaker 1: cut eighty percent of the staff or our parts of
Speaker 1: eighty percent of staff. I talked to people, and some
Speaker 1: of these big Twitter you mean yea Twitter. I talked
Speaker 1: to some people, you know, people at some of the
Speaker 1: big companies I do, big tech companies do wonder what
Speaker 1: do you do for a living at this time at
Speaker 1: this company? So there's there's definitely fat. If you guys
Speaker 1: see some of the videos that post away, people say
Speaker 1: the day in the life of working at Google and
Speaker 1: and I saw one the other day and the person
Speaker 1: got laid off a weekly. So there's there's fat to
Speaker 1: cut on in allge So there's still more pink slift
Speaker 1: to come. I don't know. And we haven't seen that
Speaker 1: kind of firing. No, no, this is definitely I mean
Speaker 1: what you know, everyone knows we're kind of in a
Speaker 1: in a downward you know, the market crash. Everything's going down,
Speaker 1: but um, it's going to go back up. Also, I
Speaker 1: I talked to some like people who manage um trillions
Speaker 1: of dollars, like some of the biggest equity firms in
Speaker 1: the world, and they seem like they're really anxious to
Speaker 1: put money back in the stock market, and and if
Speaker 1: they do, the market is going to go up. So
Speaker 1: I think they're people are ready to get back in.
Speaker 1: They just want stability before they mark. What are you
Speaker 1: hearing from some of the digital advertising players out there?
Speaker 1: You know, we're gonna hear from Facebook and Google and
Speaker 1: uh and some of the other's Amazon of course this week.
Speaker 1: How tough is it out there in the digital ad
Speaker 1: space if if you're not in the growth sectors? Pretty tough. So, um,
Speaker 1: my company were in performance television with returning TV into
Speaker 1: this direct response at channel and so if we look
Speaker 1: at our customer as we already have, they're they're covering,
Speaker 1: you know, they're not really increasing or decreasing. So but
Speaker 1: we have all this growth from new customers coming into
Speaker 1: the market. If you don't have that trend of a
Speaker 1: lot of new customers, it's it's are you guys playing
Speaker 1: in the in the streaming the ad supported streaming business? Exactly? Yeah,
Speaker 1: we're turning streaming television into essentially add words for for
Speaker 1: TV and that's where the incremental AD dollars are going.
Speaker 1: Are they going to Peacock versus NBC? Are they're going
Speaker 1: to Paramount Plus versus the cps, Well, they're just going
Speaker 1: into I think streaming in general. I think I think
Speaker 1: it's television after you know, it's kind of almost one
Speaker 1: of the first like traditional ad channels. And now for
Speaker 1: the first time in what is it seven eight decades,
Speaker 1: it's now like this full digital marketing channels. So it's
Speaker 1: become a growth set. It's it's become a growth sector again.
Speaker 1: And I think all the TV networks, but especially like
Speaker 1: NBC at Comcast, um Disney Plus and Hulu. You know
Speaker 1: those companies that are really obviously Netflix now with their
Speaker 1: ad business, they're you know, they're those companies that really
Speaker 1: have the dollars to investment. They are going to benefit
Speaker 1: the most. Does Google own the marketplace for ads, for
Speaker 1: digital ads, no matter where you're going to advertise, no
Speaker 1: matter who's buying the ads. Do they own that? Is
Speaker 1: that the problem with the well they own? They own search.
Speaker 1: I think I'm glad you brought that up. But just
Speaker 1: in general, a little known fact is that for the
Speaker 1: first time, Google and Meta like don't have less than
Speaker 1: half the march, so the rest of the market is
Speaker 1: actually growing. I mean, on the whole Google lawsuit thing,
Speaker 1: I think that it's UM not directed with the real
Speaker 1: action is the analogy I would use is what they're
Speaker 1: suing them over the tools, like the software that serves
Speaker 1: an AD. So that's like going after a company because
Speaker 1: they have a dominant position in hammers where the real
Speaker 1: action is, well, they have all the data and where
Speaker 1: people are going to move to. That's where the real access.
Speaker 1: Google has just a massive amount of data. Know, Google
Speaker 1: knows I'm here right now, right because I have Google
Speaker 1: Maps in my pocket. But we're gonna sue him over
Speaker 1: the hammers, like it makes no sense. And I think
Speaker 1: this one after al Capone for Taxia, Yeah, exactly, that works.
Speaker 1: So I think this um the government going after them
Speaker 1: is not actually going to have much of an impact
Speaker 1: because where the real action is is the data privacy
Speaker 1: legislation around the data. All privacy legislation makes Google, Meta,
Speaker 1: Apple and Amazon essentially even stronger because it goes after
Speaker 1: anonymous data while they have like your personal identity, and
Speaker 1: so they get to continue to use the personal data
Speaker 1: while everyone else's market. That's a big player on TikTok,
Speaker 1: he's all over that platform. Talks about TikTok, What do
Speaker 1: you tell us what's the future of TikTok. Uh, Well,
Speaker 1: it's i there's so many people using it, it's not
Speaker 1: going to be banned in the United States that I
Speaker 1: was thinking, Yeah, that ships sail. I mean Trump years
Speaker 1: ago tried to bring up this issue and everyone was like,
Speaker 1: well if Donald Trump spring it up, we're not gonna
Speaker 1: listen that. You know, they have all of the status
Speaker 1: an open mic in every living room. But um TikTok
Speaker 1: is doing extremely well. I don't see it diminishing in
Speaker 1: any way in the near future. So they are crushing it.
Speaker 1: And what about Netflix. I mean, this was last year
Speaker 1: the market beat it down like a redheaded step child.
Speaker 1: And I nothing against Gingers. I am a step child myself.
Speaker 1: So but now it seems like sentiment is really shifted,
Speaker 1: especially after the last Earns report they added seven and
Speaker 1: a half million subscribers. Yeah, I mean the market is
Speaker 1: just up and down on in general, but on Netflix
Speaker 1: in particular. Thing about Netflix, just through the math. Let's
Speaker 1: say they're average subscriptions like twelve dollars. They have two
Speaker 1: hundred and forty million subscribes. It's like three billion dollars
Speaker 1: a month coming in and people like, yeah, but they
Speaker 1: missed you know, subscriber numbers by hundred thousands. Yeah, but
Speaker 1: they got three a billion dollars in three billion dollars
Speaker 1: a month. It's just overreactions, possibly in both directions. Overreacted
Speaker 1: in terms of downward sentiment and possibly a little bit
Speaker 1: and upward sentiment. And we got some new management there,
Speaker 1: so we'll see how that plays out. YEA, so good stuff.
Speaker 1: Mark Douglas, President and CEO of Mountain, joining us in
Speaker 1: our Bloomberg Interactive Broker Studio giving us the latest on
Speaker 1: all things tech and all things digital advertising. Quincy Crosby
Speaker 1: joints us here. She's a chief Global strategist for lp
Speaker 1: L Financial. That's a nastact treated firm lp L. A
Speaker 1: is it took her load into your Bloomberg terminal, Quincy,
Speaker 1: A lot to digest here this week. What's most important
Speaker 1: to you? What's your gonna what's gonna be your focus
Speaker 1: this week? Simply because we had a strong rally. Volume
Speaker 1: was good on the rally, and the rally was cyclically
Speaker 1: oriented for the most are. Now granted you we can
Speaker 1: dismiss the rally. We can say it was you know,
Speaker 1: short covering UH traders going in and taking advantage of
Speaker 1: the tax claws only in in you know. Uh. But
Speaker 1: nonetheless you started to see volume pickup in rally, and
Speaker 1: it was a rally that suggested that the market is
Speaker 1: looking ahead of everything. You know, we always would say
Speaker 1: the market gets news worked. Anyway, February tends to be
Speaker 1: a month where the market is tends to actually say,
Speaker 1: have these rallies, um dissipate. It's probably the worst month
Speaker 1: for the market next to September. So we're gonna watch
Speaker 1: very closely how these big tech names do because the
Speaker 1: waiting in the indextions, it's just them that these are
Speaker 1: the big tech guys. We're gonna see if they can
Speaker 1: if they can garner any interest from traders at least
Speaker 1: and certainly investors. All Right, so, um, what are you
Speaker 1: looking forward to see to prove that this rally really
Speaker 1: has legs? Quincy? I mean, what are some signs? I
Speaker 1: was just looking at the break down of um, the
Speaker 1: industrial groups that have won and lost this year, and
Speaker 1: you've got all the you know, consumer discretionary and tech
Speaker 1: companies that have done well. Meanwhile, consumer staples and um,
Speaker 1: you know, utilities have done poorly. So it looks like
Speaker 1: the defensive are getting sold off. And the um You know,
Speaker 1: the growth companies are are putting up some gains, but
Speaker 1: I guess that could be explained by the short covering narrative.
Speaker 1: So what do we need to see UM two ensure
Speaker 1: us that this rally is solid. Well, what one thing
Speaker 1: would be I look at the semiconductors. They are the
Speaker 1: they are the consummate dull weather for global growth, and
Speaker 1: they've been they've actually the days that they've been outperforming
Speaker 1: even the the growth growth nas the gross the growth residence,
Speaker 1: so to speak. We'll say if they can hold, obviously
Speaker 1: then they sell off, but we'll see if they can hold.
Speaker 1: It's very important that they participate, uh in a rally
Speaker 1: and stay strong. You know. The other thing that we're
Speaker 1: going to look at is on a technical basis, is
Speaker 1: whether or not going through the obstacle course of this
Speaker 1: week their earnings obstacle course the said statement his press conference,
Speaker 1: then you know Friday's payroll report and see where wages are,
Speaker 1: how they're moving. Is whether or not this market an
Speaker 1: a rally. If it does rally, can actually cross forty
Speaker 1: that is, you know, one of the most important levels
Speaker 1: for the market, and it's been difficult obviously for this
Speaker 1: market to launch an absolute attack on quincy. Tough, tough
Speaker 1: for everybody out there and the equity biz in the
Speaker 1: fixed income markets as you start oute, what are you
Speaker 1: telling your clients in terms of positioning here after such
Speaker 1: a tough year. Well, you know, we're trying to figure
Speaker 1: out obviously, whether or not the market has discounted a recession.
Speaker 1: Is it an earnings recession? Is that a rolling recession
Speaker 1: is going to be a shallow recession. Our view at
Speaker 1: LPL researches that will be fairly shallow. That's with all
Speaker 1: the information we have now. However, one thing that we
Speaker 1: have now it's not just about equities. We've got the
Speaker 1: sixth income market and we're looking at it and investing
Speaker 1: in it. The treasury market is offering very attractive return,
Speaker 1: guaranteed return, and investment grade corporates as well. We also
Speaker 1: sawt we're not advocating this, but we've seen money going
Speaker 1: into high yield. Who whatever thought, you know, if all
Speaker 1: of these dire headlines, money would go into high yield.
Speaker 1: But those are the ones who think we're not going
Speaker 1: to have a recession, will be a soft or soft
Speaker 1: just landing. But the point is that companies when out
Speaker 1: and borrowed during the period when money was so easy
Speaker 1: and rates were so low, so that their balances, their
Speaker 1: cash balances are strong. And right now these companies are
Speaker 1: still you know, making certain that they cut costs when
Speaker 1: they have to and that you know, they're going to
Speaker 1: manage costs going into three, especially if there is a recession.
Speaker 1: So we're saying investment grade corporate, we're saying the treasury
Speaker 1: that can help the portfolio. And also on the equity side,
Speaker 1: we're looking at dividends. This is crucial, we think for
Speaker 1: this market. And you know, some of the sectors are
Speaker 1: doing well. Take a look at the industrials today, they're up. Granted,
Speaker 1: the the defense names are helping to underpin the the
Speaker 1: industrials along with machinery. So there are pockets in the
Speaker 1: market that are still attractive, attractively valued, especially after sell
Speaker 1: off such as we had in the defense names, but
Speaker 1: they're coming back today. So again, until there is more
Speaker 1: certain in terms of where we are headed and whether
Speaker 1: or not the market is actually discounted even a percentage
Speaker 1: of a possibility of that you know, final final deep
Speaker 1: sell off, we want the clients to be uh certain, careful,
Speaker 1: conservative Quincy. Just want to ask before you came to
Speaker 1: Wall Street, you spent a lot of time at diplomatic
Speaker 1: postings around the world. Uh. You served as Assistant Secretary
Speaker 1: of Commerce and also UM as Energy attached at the
Speaker 1: US Embassy in London. UM, what do you think about
Speaker 1: the reopening of China and the kind of I guess,
Speaker 1: the the spat that seems to be, you know, mellowing
Speaker 1: out between the US and China right now. How is
Speaker 1: that going to drive the market this year? You know
Speaker 1: obviously that this is you know, a major event. Is
Speaker 1: the world's second largest economy. And it was interesting that
Speaker 1: when they announced the final lift of the zero COVID policy,
Speaker 1: we the countries that country indexes that've got a booth
Speaker 1: were none other than Germany, France, Italy. These are that
Speaker 1: these are the strongest trading partners in the West with China,
Speaker 1: not necessarily the US. So the question becomes whether or
Speaker 1: not this um, you know, multilateral approach that let received
Speaker 1: from China around the world trying to shore up uh,
Speaker 1: you know, positive on the bilateral front, good feelings and
Speaker 1: so on, even with the United States, But whether or
Speaker 1: not it masks UM. You know, the issue on Taiwan.
Speaker 1: And the other issue is regarding selling of any kind
Speaker 1: of technology that helps the military. Their military has grown,
Speaker 1: is grown faster than our military. Take a look at
Speaker 1: the naval components. It's it's larger than than the the
Speaker 1: US and even today, I mean speaking of you know, Europe,
Speaker 1: the US is been pushing the Netherlands with a SML
Speaker 1: but you know it's it is a chip mak, right,
Speaker 1: it's a manufacturer ships. Uh. Finally they have come out
Speaker 1: and said they're going to be more cheerful with their
Speaker 1: sales to China. They're going to you know, trying to
Speaker 1: break off some of the parts that would go right
Speaker 1: into laws. Um. Yeah, so that is not going away.
Speaker 1: And you know, and by the way, it is in
Speaker 1: the US across the aisles, Democrats and Republicans, this is
Speaker 1: an area where they agree they do to be sot
Speaker 1: on China. One of the very few. Quincy, thanks so
Speaker 1: much for joining us. Quincy Crosby there. She is chief
Speaker 1: global strategist at LPL Financial. Joining us to talk about
Speaker 1: what to expect in the markets after this rally that
Speaker 1: we've seen and throughout the rest of the year. Let's
Speaker 1: talk stocks right now. Ted Oakley founder managing partner of
Speaker 1: ox Bow Advisors, joins us Ted. I mean brutal year
Speaker 1: for equities, also for fixed income as well. What do
Speaker 1: you what's the message you went out to your clients
Speaker 1: with when you were kind of saying, all right, let's
Speaker 1: get ready for well, I think you know what we
Speaker 1: did in twenty two was we were extremely defensive. You know,
Speaker 1: we were fifty uh cash or short term treasuries primarily.
Speaker 1: So while but your your clients don't your clients don't
Speaker 1: mind you being in that much cash. Well, we were
Speaker 1: getting you gotta remember now, it's not that it's not
Speaker 1: Tina anymore. You can get you can get four and
Speaker 1: a half percent or four sixty five right now and
Speaker 1: even a three months and so we do a lot
Speaker 1: with the floating right treasuries, but that's just a holding
Speaker 1: spot for us UM. And then this year coming into it,
Speaker 1: we just don't have I mean, we have a lot
Speaker 1: of stocks on the two D probably a two hundred
Speaker 1: stock screen we have, but none of those are they're
Speaker 1: just not in evaluation areas where we want to come
Speaker 1: by can we own stocks? But the stocks we've alreadyo owned,
Speaker 1: but we're not buying too many things. You know, right
Speaker 1: at this point other than some income oinants, we are
Speaker 1: buying another portfolio. What are the levels that you're watching for,
Speaker 1: and um, what do you think it's gonna take for
Speaker 1: us to get down back down there again? Because we've
Speaker 1: had pretty a pretty enthusiastic rally we have and I
Speaker 1: will tell you it reminds me of the January of
Speaker 1: oh one, two thousand one, you know, in the matter
Speaker 1: markets seld Off hard nasdac uh you know, during two
Speaker 1: thousand and came back at the end of the year,
Speaker 1: had a good month in January, and then the rest
Speaker 1: of the year of NAZAC getting a lower by far
Speaker 1: of a lot of that. And so we're sort of
Speaker 1: and people they talked about, you know, two thousand nine eleven,
Speaker 1: but acts of the market was lower before and ended
Speaker 1: up the year like that. So anyway, go to back
Speaker 1: to your question what we're looking for. If you say
Speaker 1: we're gonna do two hundred dollars on the SMP, I
Speaker 1: know everybody's at two twenty five and all that, but
Speaker 1: we think two hundred would be the best might be.
Speaker 1: And so if you put yeah, put you know, if
Speaker 1: you look at two hundred, it's only twelve or cent
Speaker 1: below estimates. It's not that far. So if you do
Speaker 1: two hundred and you take you know, you're take an
Speaker 1: SMP at calling four thousand sixty, you're almost at twenty
Speaker 1: multiple right now. And that's not where you get your
Speaker 1: best buys ever, And so that's kind of where we're
Speaker 1: looking at it. I think that's I think that's yet
Speaker 1: to come. And and I said, well, we'll see. I
Speaker 1: guess that's that's what makes a horse race. But that's
Speaker 1: where we are right now. So you know, this is
Speaker 1: gonna be a busy week TED four earnings. We've got
Speaker 1: a hundred nine SPI companies reporting here. Um, do you
Speaker 1: think we're gonna start seeing some big revisions downward in
Speaker 1: earnings guidance from a lot of these companies. Well, you should.
Speaker 1: But one of the things that we've noticed so much
Speaker 1: the last five years really is they've been allowed to
Speaker 1: get away with so much in the way of accruals
Speaker 1: and all these adjustments to gap earnings that you have
Speaker 1: to look through a lot of it. But I think
Speaker 1: if you looked at an acremement the real cash earnings, yes,
Speaker 1: I think those are some of those are gonna have
Speaker 1: to be revised down for sure. So what are some
Speaker 1: of the sectors here? I mean, I mean, as you
Speaker 1: sit here with the high levels of cash, when you
Speaker 1: do get ready to deploy, where do you think you'll
Speaker 1: you'll put it? Will it be in some of the
Speaker 1: defensive names where you try to get back into growth.
Speaker 1: Where do you think the play is going to be? Well,
Speaker 1: we have a mix. We have a mixed now. But
Speaker 1: if you look at our favorite companies, you know they're
Speaker 1: gonna be companies that can go through a tough procession period.
Speaker 1: If you take Visa and MasterCard, you know they have
Speaker 1: enough cash in a quarter almost to pay off all
Speaker 1: the debt um and and if you inflate people use cards,
Speaker 1: you know, the prices go up, people use cards more.
Speaker 1: We think two other things like that. You know, obviously
Speaker 1: you know we like uh, some defensive names O'Riley, you know,
Speaker 1: a health And then we you know, we on the
Speaker 1: we on the oils, we on gas pipelines, um. And
Speaker 1: we particularly like the oil wyalties because you don't have
Speaker 1: the capital investment. And so we think we mix all
Speaker 1: those together and come up with a pretty good, you know,
Speaker 1: pretty good mix overall. So we get some cash for
Speaker 1: at the same time. And I'm getting on the treasury yep. Absolutely,
Speaker 1: And I know you're based in Texas there. I'm just
Speaker 1: envisioning you sitting around with your buddies talking oil NonStop. Um,
Speaker 1: what is kind of the feeling down there about energy
Speaker 1: because it's had such a really two great years for investors. Yeah, well,
Speaker 1: you know I mentioned this to you before. A lot
Speaker 1: of the oil people are not uh they're not great
Speaker 1: for a sentiment here. You know, they get really excited
Speaker 1: about when the prices up. For us, we felt we've
Speaker 1: actually cut back on the majors and added to the
Speaker 1: royalties because the royalties pay a lot more cash and
Speaker 1: if we missing the oil goes higher, we'll participate in
Speaker 1: the way. But I think what they forget is that, uh,
Speaker 1: you know, you've had a big run and if you
Speaker 1: do slow the economy down, it's not a guarantee. But
Speaker 1: if you do slow it down, no matter what happened, Um,
Speaker 1: you know, the price of oil will dri up a
Speaker 1: little bit. And I know they never look at this,
Speaker 1: but if you look at miles driven by people in
Speaker 1: the last year, it's down. And so I think, you know, gasling,
Speaker 1: which is a big piece of that will probably be
Speaker 1: a news. Consumption will go lower, but there, you know,
Speaker 1: but that's what they think. What we think is it
Speaker 1: will drift with the economy and then you know, if
Speaker 1: you want to pick it up the lower level, you
Speaker 1: probably can. So you don't think we're gonna see Remember
Speaker 1: in um two thousand and eight, when we knew that
Speaker 1: the whole world was going to hell in a handbasket.
Speaker 1: But yeah, um, the Chinese were still driving more and
Speaker 1: more and more cars, and things weren't quite as bad
Speaker 1: in Europe as they were here. Yet the housing crisis
Speaker 1: hadn't rolled around the world and oil went to a
Speaker 1: hundred forty six dollars a barrel. They don't think that's
Speaker 1: gonna happen again. Oh yeah, eventually, Yeah, I do. I
Speaker 1: think I think this is just a short term swoon. Uh.
Speaker 1: But long term, if you look at if you look
Speaker 1: at the numbers and supply the men, it's almost impossible
Speaker 1: not to go back up. I mean, it's just once
Speaker 1: you come out of it into a newer, a better economy.
Speaker 1: And you gotta remember, China's just coming out to now.
Speaker 1: So once you come out and that's and everybody else,
Speaker 1: then you're going to be in a situation where the
Speaker 1: price the price will go, It'll go it had almost
Speaker 1: has to go up right now. Not not short term,
Speaker 1: but I'm talking about it in the long term and
Speaker 1: has to go up because there's not enough of it. Ted,
Speaker 1: how to folks down in Texas really think about uh
Speaker 1: kind of this move towards a more greener energy, uh
Speaker 1: infrastructure if if you will, maybe in terms of time
Speaker 1: or just kind of has an investment opportunity. I mean,
Speaker 1: are you taking advantage of it even though you're surrounded
Speaker 1: by wildcatters? Oh? Yeah? If you look across Texas and
Speaker 1: we have a tremendous amount of wind power now and
Speaker 1: a tremendous amount of solar power, all of those are
Speaker 1: you know there? If you you go out in the
Speaker 1: ranches and uh in Sexes and look around it, they
Speaker 1: have a lot of them have windmills now, I mean
Speaker 1: a lot and you know, so they're using wind, they're
Speaker 1: using solar. It's not they're not um not using it.
Speaker 1: They just they blended in with the other things they
Speaker 1: had all right, Ted, good stuff appreciated. Always checking in
Speaker 1: with you. Ted Oakley. He's a founder and managing partner
Speaker 1: Oxbow Advisors. Let's check out what some of the pros
Speaker 1: are doing in the marketplace here, because again a busy
Speaker 1: busy week, lots of earnings, lots of eco data. Lyle
Speaker 1: Himbau Uh joins us. He's a partner Granted Group Advisors. Lyle,
Speaker 1: thanks for joining us here at Brutal two. We've got
Speaker 1: a busy, busy week here. The markets have rebounded off
Speaker 1: of those October lows. What are you telling your clients?
Speaker 1: Great question right now? You know, you know if everything
Speaker 1: for us is really about you know, valuation, valuation, valuation, right,
Speaker 1: So when you look at the market today, and this
Speaker 1: is part of the things that we put in our
Speaker 1: quarly commentary to our clients, UH, is that we're treating
Speaker 1: at eighteen point two times this year's earnings. In itself,
Speaker 1: that's not so bad, but when you look at historical
Speaker 1: norms of being between fifteen and sixteen, um, it's a
Speaker 1: little high, right, So we could have a little bit
Speaker 1: of retrenchment here coming down, but it's not so bad
Speaker 1: if we have the growth. But if we don't have
Speaker 1: the growth, there would be really no reason to really
Speaker 1: go chase the market up here at this particular moment,
Speaker 1: and by the way, that's across all companies, even those
Speaker 1: that don't have an E. Right, if you look at
Speaker 1: all the companies, only the ones that have an E,
Speaker 1: we're trading at almost twenty times. Yeah, the ones that
Speaker 1: have an E are like really really the small cap guys.
Speaker 1: There are a bunch of small companies that I tell
Speaker 1: the v C guys that call us a cold cause
Speaker 1: he said, there's no reason for me to place money
Speaker 1: with your privately when I can get public valuation of
Speaker 1: private value equity valuations in the public market at this point, right,
Speaker 1: So some of them are you know, the E is
Speaker 1: essential going forward here in a sort of a flat market.
Speaker 1: How much, by the way, um, how much of this
Speaker 1: could change? We we've been talking about earnings performance on
Speaker 1: the SMP on the nasdack, but we're only into it, right.
Speaker 1: What kind of swings do you see in an earning
Speaker 1: season like this, um, when there seems to be so
Speaker 1: much uncertainty in the markets. Is there uncertainty in the
Speaker 1: the remaining of the company's coming out earnings or do
Speaker 1: we have a pretty good indicator? Might be the indications
Speaker 1: are pretty good for those of people that put out
Speaker 1: the earnings in advance. But you know right now, you know,
Speaker 1: I think earn the cost of good soul is increasing.
Speaker 1: So like we don't think there's gonna be a really
Speaker 1: hard landing or economic recession, but in the short term here,
Speaker 1: I think there's going to be a margin recession. Right,
Speaker 1: So Poplin is okay, but the bottom line might be
Speaker 1: affected because it's just so much costs so much more
Speaker 1: to you know, you know, to establish that output for
Speaker 1: you know, to deliver our product, how much of it? Also,
Speaker 1: you know, it's being measured against an unfair, unfair time.
Speaker 1: I mean, um, you know, because Paul is so focused
Speaker 1: on the media and streaming and everything. Um, they've gone
Speaker 1: through an exceptional and extraordinary period, the likes of which
Speaker 1: is unlikely to be repeated for decades, right, I mean
Speaker 1: once the next time, we're all gonna be locked in
Speaker 1: our homes forced to watch every single program on Netflix. Yeah,
Speaker 1: well I'm guilty of that. I went through. Uh, I
Speaker 1: did some binge watching for a while, so the but
Speaker 1: the I can't foresee, you know, you can't predict the unpredictable,
Speaker 1: right when stuff like that happens, uh, is it is
Speaker 1: really it's it's a once in a lifetime of that,
Speaker 1: and that's why the valuations in tech got so crazy
Speaker 1: back in twenty one. Right at the end of twenty one,
Speaker 1: we were really three standard deviations over valid back in November. Uh,
Speaker 1: in December of twenty one, it was really expensive. And
Speaker 1: now then that's why seeing this, you know, you know
Speaker 1: uh pullback in Nastac. The Naszak is still over I
Speaker 1: would say that the Nazak is still slightly overvalued. I
Speaker 1: still think we're we have some downside, really interested in general,
Speaker 1: the SMP and the NAZAC. But I think there's going
Speaker 1: to be um another I think a milder leg down
Speaker 1: won't be as uh big as twenty two. But three's
Speaker 1: so far is uh based on what I see in
Speaker 1: the earnings, we should have some short term volatility going
Speaker 1: on to the downside. Lie on. One of the concerns
Speaker 1: that I think some some strategists call out, some fund
Speaker 1: managers call out, is earnings risk. And if I look
Speaker 1: at the SMP five hundred on the Bloomberg terminal, looking
Speaker 1: like about dollars per share earnings this year, some folks
Speaker 1: are even suggesting the downside to be two hundred two earnings.
Speaker 1: Here are you in that camp? Do you think earnings
Speaker 1: risk is is material in this market? It? You know,
Speaker 1: from when you look at it, that's a great question.
Speaker 1: When you look at it from a historical perspective, you know,
Speaker 1: there's I don't want scary audience. But if you look
Speaker 1: at off Ford p s, you get a much lower
Speaker 1: SMP number. But let's assume we're not going to have
Speaker 1: this hard landing. And then when you look at the
Speaker 1: valuations here, you know, assume it's sixteen you know multiple,
Speaker 1: you know, at least for the short term, if we
Speaker 1: don't have you know, a fall off in the economy.
Speaker 1: But at the end of the day, if if the
Speaker 1: guys are right there, some people are looking at hundred.
Speaker 1: Uh my friends over at Cratt Swifts they're saying, uh
Speaker 1: to fifteen as the best case scenario, and imply a
Speaker 1: sixteen multiple, you're getting thirty four hundred, right at least
Speaker 1: on the short term. Right, So but you have to
Speaker 1: I think, you know, for long term investors, I think
Speaker 1: you really got to look out to twenty four right now.
Speaker 1: You see earnings coming down. I saw in Bloomberg. I think, um,
Speaker 1: I think earnings for this year down to two twenty
Speaker 1: four to twenty three. But for next year, the earnings
Speaker 1: are starting to come down for four and they were
Speaker 1: at two fifty five. I think that down to two
Speaker 1: seven and that's just starting. UM. So when you look
Speaker 1: at normal metrics, you know, you know you and since
Speaker 1: the market looks forward not backwards, uh, you've really got
Speaker 1: to look at you know, sixteen multiple I think would
Speaker 1: be normal and based it on around two forty or so.
Speaker 1: And you're gonna get around, Lyle, what do you expect
Speaker 1: to hear from j Powell and co On or really
Speaker 1: just from UM Chairman Powell on Wednesday? Can you deliver
Speaker 1: a very hawkish basis points? Is that what we're looking
Speaker 1: for now? Yeah? I think I think, I think you
Speaker 1: know the market is predicting basis points. That's that's that's
Speaker 1: a done deal. Uh. If he goes fifty basis points,
Speaker 1: which I'm sort of hoping he will, just to rip
Speaker 1: the band aid off and get this over with because
Speaker 1: you remember, his mandate is to really control inflation, and
Speaker 1: inflation is controlled by wage inflation. Uh. Core inflation is
Speaker 1: controlled by wage inflation. And uh, he's really got to
Speaker 1: get that on control. If he does fifty, Uh, this
Speaker 1: market will go down all right, good stuff appreciated as
Speaker 1: always Lyle Himball. He is a partner at granted A
Speaker 1: Group Advisors. It's interesting Ford hits back at Tesla's price
Speaker 1: cut by lopping nearly six dollars off the Mustang. Mocke
Speaker 1: I want to see what's going on there. What are
Speaker 1: the folks in Detroit really think about this stuff? Keith not,
Speaker 1: and he covers the autos industry for Bloomberg. He is
Speaker 1: based in our Detroit bureau. Keith, You know Ford here,
Speaker 1: what do you think they're doing? Are they following Tesla?
Speaker 1: Are they trying to be a price leader? Is there
Speaker 1: a demand part problem out there? What's going on with
Speaker 1: this price cut? They're absolutely following Tesla. That's what they
Speaker 1: told me when I asked him that direct question. Is
Speaker 1: this a response to Tesla? The answer was yes. So
Speaker 1: they're trying to, you know, build a beach head in
Speaker 1: the electric vehicle market. Tesla controls two thirds of the
Speaker 1: US market and Ford is the number two seller of
Speaker 1: electric vehicles thanks to the Mustang MAKEE. So they're cutting
Speaker 1: prices by an average of forty five hundred dollars a car.
Speaker 1: That's as much as a nine cut um. But Tesla's cuts,
Speaker 1: you might recall, were as much as so Tesla has
Speaker 1: a much wider profit margin that it can mind as
Speaker 1: it cuts places. Ford already has admitted that it's losing
Speaker 1: money on the Mackie. But the Machi looks way cooler
Speaker 1: than a Tesla. I mean, the Tesla design hasn't changed
Speaker 1: since I first drove one in two thousand ten, you know. Um,
Speaker 1: and for some cars that works, like the Dodge Challenger
Speaker 1: I think has been around in its current form since
Speaker 1: before that. But the Mackie is like the new new thing,
Speaker 1: right or um to my eye at least, it's certainly
Speaker 1: more interesting and more pleasing. Yeah, I mean, the Mackie
Speaker 1: came out a couple of years ago. It is newer.
Speaker 1: But obviously, you know, American buyers vote with their pocketbooks, right,
Speaker 1: and Tesla controls two thirds of the elect vehicle market
Speaker 1: in the United States. So what do the sales look
Speaker 1: like for the Maki then, Keith, I mean, um, I'm
Speaker 1: seeing more and more than my test drop one last year. Uh,
Speaker 1: and maybe that's what sort of opened my eyes to it. Um.
Speaker 1: Is it is it selling? Well? Oh yeah, man, it's
Speaker 1: selling fantastic for GV sales more than double last year.
Speaker 1: And part of what's going on here in a way
Speaker 1: that Sport is hoping to improve the margin picture on
Speaker 1: this vehicle is they are boosting capacity at their Mexican
Speaker 1: plant by sixty so they planned to build a hundred
Speaker 1: and thirty thousand makis this year, up from sixty seven
Speaker 1: thousand last year. The exciting thing to me is that
Speaker 1: you can get into such a cool looking vehicle, um
Speaker 1: with you know, the obvious torque benefits of an e
Speaker 1: V for so cheap. I mean, every other vehicle I
Speaker 1: look at is costing eye popping amounts, and this one
Speaker 1: still hovers around you know, forty grand even with options. Yep. Yeah,
Speaker 1: the lowest price Mackie. Uh. They cut the price on
Speaker 1: that one by nine hundred dollars, so that now starts
Speaker 1: at that's the real old drive one. Uh. The high
Speaker 1: end Markie, which is the the GT Uh. They cut
Speaker 1: that price byred so that now starts at six. There's
Speaker 1: another California Route one Extended Range edition that starts around
Speaker 1: fifty seven nine, So you know, it's right starting below
Speaker 1: fifty grand and then climbing well. But Keith, when I
Speaker 1: do the math as a consumer, who looks to save
Speaker 1: UH taxes in any way I can. I'm adding the
Speaker 1: credit back in. Is that is that right for me
Speaker 1: to add theredit back in? Is that a lock with
Speaker 1: the Ford Mustang Maki or are we still not sure
Speaker 1: exactly who's going to get these credits? Um, you can
Speaker 1: get the credit um currently if you're below fifty K
Speaker 1: on this type of vehicle. So some of the makis
Speaker 1: will call it qualify certainly the the base model at
Speaker 1: but there's also an all wheel drive model that also
Speaker 1: is below the bogey. So um you can qualify it
Speaker 1: for it on some of the make models. But so
Speaker 1: that's the cutoff, not no e V, you know, totally
Speaker 1: b EV if it costs more than fifty five thousand
Speaker 1: gets tax credit anymore for this particular model configuration. There's
Speaker 1: different levels. It's a very complex formula, so you know
Speaker 1: math and and it's a formula that's still in flux
Speaker 1: and will change more in the coming months. Hey, Keith,
Speaker 1: you know Kevin Tynan at Bloomberg Intelligence has been really
Speaker 1: consistent on his EV analysis over the last several years.
Speaker 1: Were basically saying when Detroit can make money on evs,
Speaker 1: they'll make evs but if they're getting the price here,
Speaker 1: what's Ford saying about the profitability the unprofitability of these things.
Speaker 1: Ford has said since June that the profits have been
Speaker 1: wiped out on the make because of rising commodity costs.
Speaker 1: They are working continually to try and cut costs out
Speaker 1: of this thing. They feel like boosting production as much
Speaker 1: as they're doing is going to help the profit picture.
Speaker 1: You know, they're trying to make up for in volume,
Speaker 1: if you will, but they are not making money on
Speaker 1: this car. The choice they're making right now is trying
Speaker 1: to gain market share. Established that beach head. They liked
Speaker 1: being the number two seller of electric vehicles, way ahead
Speaker 1: of general motors. So they want to stay in that
Speaker 1: position and grow from there. And sometimes you have to
Speaker 1: take some short term pain to make the long term gain. Keith,
Speaker 1: you're in Detroit. What are the real car people in Detroit?
Speaker 1: What are they saying about the e V business? Are
Speaker 1: they grudgingly moving towards evs? Are rushing get ahead? I
Speaker 1: see these everywhere. There's Tesla's in my neighborhood. There's ribbans
Speaker 1: in my neighborhood. They are not knuckle drivers here in Detroit.
Speaker 1: They are driving evs so and everybody likes the instant torque,
Speaker 1: Like Matt, I've driven the Marquee several times. It's a
Speaker 1: it's a blast as our all the evs out there
Speaker 1: because of that instant torque. I've drove the F one
Speaker 1: fifty Lightning. You know. You you touch the accelerator pedal
Speaker 1: on that thing and it's like warp speed. So how
Speaker 1: can you not enjoy this? So? Yeah, this car town
Speaker 1: loves electric vehicles? Do we do we know whether there's
Speaker 1: going to be more needed more laborers to build these
Speaker 1: things are less fewer, right, it takes fewer to fewer
Speaker 1: people put together. Yep. There are fewer moving parts in
Speaker 1: an electric vehicle and it'll take I think the estimates
Speaker 1: have been about one third fewer workers to assemble them.
Speaker 1: You know, you have an electric motor um or multiple
Speaker 1: electric motors, there's there's it's not a lot. It's not
Speaker 1: as much as you get from an internal combustion engine.
Speaker 1: That's what I thought. That's what I thought. All right,
Speaker 1: good stuff. Keith Notton, he's our autist reporter based in Detroit,
Speaker 1: which is a good thing. That's where you want him
Speaker 1: to be. Uh, talking about the V business, Forward cutting
Speaker 1: the price on their mocke pretty significant, and I mean
Speaker 1: they're pretty clear. I mean, as Keith was reporting in
Speaker 1: response to Tesla, they want to take market share, and um,
Speaker 1: it's a cool little vehicle to do so. I just
Speaker 1: think they need more. Thanks for listening to the Bloomberg
Speaker 1: Markets podcast. You can subscribe and listen to interviews with
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
Speaker 1: I'm on Twitter at Matt Miller V three. Pet On
Speaker 1: Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast,
Speaker 1: you can always catch us worldwide at Bloomberg Radio