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Speaker 1: Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Speaker 2: All right, everybody, a bunch of earnings crossing, as we said,
Speaker 2: metages crossing, and we are seeing that stock certainly rally
Speaker 2: in the aftermarket. It's up about six and a half percent.
Speaker 2: And again it must have to do with the outlook
Speaker 2: because it says third quarter revenue, so we're talking about
Speaker 2: top line thirty two to thirty four point five billion.
Speaker 2: The estimate on the street was thirty one point eighteen billion.
Speaker 3: What is interesting is the comment from Remain at the
Speaker 3: end there that the cost increasing for reality Labs, which
Speaker 3: is the metaverse of meta, and that is what the
Speaker 3: company's been spending so much money on at least last year,
Speaker 3: what scared away so many investors. That's not scaring away
Speaker 3: investors today.
Speaker 2: No, it's interesting, right, reality labs is meta, it's the
Speaker 2: VR headsets, right, and exactly they're saying, says Sez twenty
Speaker 2: twenty four. Reality Labs operating losses to increase meaningfully, all right,
Speaker 2: So let's get to it. Certainly keeping an eye on
Speaker 2: all of these numbers as well as John Erlichman, he's
Speaker 2: co anger at Bloomberg Markets on BTV, joining us on
Speaker 2: the phone from Toronto. John, good to have you here.
Speaker 2: We are seeing Meta pop in the after hours. What's
Speaker 2: the number one or two headline that has caught your
Speaker 2: attention that you've.
Speaker 4: Got, Basically, Carol, a couple of solid quarters from Meta
Speaker 4: after a really sloppy twenty twenty two is interesting. I
Speaker 4: was thinking back to around this time last year when
Speaker 4: the company talked about rolling out a new automated ad platform,
Speaker 4: and ironically there was a lot of focus on artificial
Speaker 4: intelligence at the time, you know, last year, given the
Speaker 4: pressure the company was feeling, they were already starting to
Speaker 4: build a narrative around cost cutting, and you were just
Speaker 4: talking about all those cost cutting initiatives and the restructuring
Speaker 4: charges associated with them. So, yes, Wall Street likes the
Speaker 4: financial discipline on the bottom line. Yes, Wall Street, in
Speaker 4: reaction to these numbers, likes better than expected performance on
Speaker 4: the top line. But this is a company that has
Speaker 4: invested so much in AI and acquired so much AI
Speaker 4: technology over the last decade. You have to wonder if
Speaker 4: they could redo it, if they'd leave the metaaname out.
Speaker 3: Yeah, I leveraged John. I was just going to ask
Speaker 3: you about that, because you what you kept saying over
Speaker 3: and over again, and look what they said in the
Speaker 3: statement today. It's it's sort of like in Mark Zuckerberg's
Speaker 3: first comment in the press release, it's like the metaverse
Speaker 3: is an afterthought. It's the last thing that gets to
Speaker 3: mention the launch of Quest three this fall. Before that,
Speaker 3: he says he's got the most exciting roadmap that I've
Speaker 3: seen in a while with Lamaitu. That's kind of like
Speaker 3: the chat GPT competitor threads. We all know what that is,
Speaker 3: reels new AI products in the pipeline, and then he
Speaker 3: gets to the launch of Quest three. Should they have
Speaker 3: not changed the name?
Speaker 4: Well, look, I think that Mark Zuckerberg still wants that
Speaker 4: meta plan to work, undoubtedly, but I think that there's
Speaker 4: a real good reason for them to be leveraging AI
Speaker 4: because everybody is and it's interesting, like we've got these
Speaker 4: standout stocks from twenty twenty three and heading into Microsoft's results,
Speaker 4: the AI hype was tested, and I think we were
Speaker 4: schooled on the fact that they're still working a lot
Speaker 4: of that AI into the Microsoft suite of products right now.
Speaker 4: So there's a bullish view that Microsoft will work some
Speaker 4: of that technology in, but maybe they're not quite there.
Speaker 4: Meta is there. Meta has been working all of this
Speaker 4: into their ad platforms for a long time, and the
Speaker 4: rollout of a specific platform, which is known as Advantage,
Speaker 4: was really seen as a potential boostered revenue. And so
Speaker 4: I think that there were a lot of people who
Speaker 4: felt that after a solid first quarter, that shouldn't be
Speaker 4: a surprise if they could do this. You mentioned Tim Reels,
Speaker 4: and I do think that there's a lot of advertisers
Speaker 4: out there, you know, whether we're talking as much about
Speaker 4: Reels as we're talking about, say a new product by Threads,
Speaker 4: or certainly what's happening over at TikTok. The bottom line
Speaker 4: is the fact that they constantly talk about this suite
Speaker 4: of apps, their family of apps. They can still give
Speaker 4: a very strong proposition to advertisers on leveraging what they've got.
Speaker 2: To be fair, if they did not give a better
Speaker 2: than forecasted or estimate for third quarter revenue, this would
Speaker 2: be a different story. And we saw those expenses, investors
Speaker 2: would be so happy. But because their outlook is upbeat
Speaker 2: and they're raising their forecast, this is why we're seeing
Speaker 2: some enthusiasm. So it's basically, Okay, you guys are spending,
Speaker 2: we get that, but you're also look at the top line.
Speaker 2: You're doing well. You're doing better than we thought.
Speaker 4: I think a pretty good learning lesson Carol last year
Speaker 4: and how it feels when you don't deliver. And we
Speaker 4: know there's there's a certain amount of math behind sing
Speaker 4: or whatever, but you remember when they lost two hundred
Speaker 4: and fifty billion dollars in market value just as a
Speaker 4: snap of the fingers. So I think they learned their lesson,
Speaker 4: and a lot of this comes down to communication. And
Speaker 4: you're still seeing a company that wants to spend and
Speaker 4: retool for the future. You know, Mark Zuckerberg seems obsessed
Speaker 4: with what Elon Musk is doing too, whether Threads works
Speaker 4: out or not. He's always trying to compete and stay
Speaker 4: irrelevant and all that jazz and focus on the future.
Speaker 4: But I think for today, they had a lot of
Speaker 4: easy levers that they could pull, and the fact that
Speaker 4: the ad environment has changed. We just saw that with
Speaker 4: Google right the AD market typically dips early and between
Speaker 4: Alphabet and Meta, and now we have this view that
Speaker 4: the AD recovery is showing some signs of life.
Speaker 3: So the question is in this for you know, a
Speaker 3: question for for managers everywhere, but also for all the
Speaker 3: people who were in my LinkedIn feed over the last
Speaker 3: few months saying that you know they, after X number
Speaker 3: of years at Meta, I no longer have a job.
Speaker 3: I'm now open to work the tens of thousands of
Speaker 3: people that the company laid off. To what extent can
Speaker 3: we attribute this success to decreasing those costs?
Speaker 5: Oh?
Speaker 4: One hundred percent?
Speaker 2: Tim?
Speaker 4: I mean, the reality is that this is a company
Speaker 4: that grew because it had the opportunity to grow. And
Speaker 4: I think the reason I the reason I brought up
Speaker 4: the same quarter a year ago and the company talking
Speaker 4: about introducing updated versions of their AD tools, well because
Speaker 4: it's even their messaging then alluded to the fact that
Speaker 4: AI would allow them to do more with less. So
Speaker 4: I think it's a pretty sobering time still at the company,
Speaker 4: given how many people, and you know, when you lose
Speaker 4: your colleagues, that's not fun. And at the same time,
Speaker 4: we're sitting here on a day where maybe, you know,
Speaker 4: the headline is that maybe we don't see the recessionary
Speaker 4: environment that anybody thought tech overspent, tech over hired. And
Speaker 4: I think the fact that AI is as advanced as
Speaker 4: it is allows these companies to do more with less,
Speaker 4: So one hundred percent, it plays a key role there.
Speaker 4: As for the stock market reaction, you know, this is
Speaker 4: an interesting one because the second best performer in the
Speaker 4: S and P this year, right behind Nvidia. I mean
Speaker 4: literally this is like one hundred and forty five percent
Speaker 4: coming into the earnings report. But this is still a
Speaker 4: stock that has a long way to go to get
Speaker 4: back to its all time high.
Speaker 2: So rat still down about twenty two percent from that
Speaker 2: September twenty twenty one high, and we talk about it.
Speaker 2: We wrote about it, you know on the Bloomberg two
Speaker 2: John As you know that with a pe of about
Speaker 2: twenty six, I mean, it's valuation, as our writers reported,
Speaker 2: might be at saving grace because if you look at
Speaker 2: some of the other big megacap tech names, they have
Speaker 2: run up so much, but their valuation has gotten really heady,
Speaker 2: and so you're even you know, so maybe that's their
Speaker 2: saving grace that they weren't so overvalue.
Speaker 4: Perhaps, I think so already you're going to be seeing
Speaker 4: these headlines about this being, you know, a return to
Speaker 4: profitability for the company, and I think that they're definitely
Speaker 4: going to leverage some sort of but I still think
Speaker 4: there's plenty of issues that this company has to deal with,
Speaker 4: you know, I think, you know, let's let's just talk
Speaker 4: about the landscape of social media. You know, it's hard
Speaker 4: to gauge how TikTok is doing every day, but they're
Speaker 4: definitely giving Facebook's or met I should say, properties are
Speaker 4: run for their money, so they're always having to navigate that.
Speaker 4: We haven't heard in the updates on the Elon Musk
Speaker 4: Mark Zuckerberg cage match, but we've definitely seen We've definitely
Speaker 4: seen threads launched. It'll be interesting to see if they
Speaker 4: have any more data on how that is doing so far.
Speaker 4: And that is a bit of a for the company
Speaker 4: to take. You've got Elon Musk now creating an everything
Speaker 4: app at a time when some people have said Zuckerberg
Speaker 4: could continue doing the exact same thing because they own
Speaker 4: WhatsApp and this family of apps, and Facebook itself has
Speaker 4: tried to be a bigger player in payments in the
Speaker 4: past as well. So there's a lot on the go
Speaker 4: and I don't think there's any shortage of competition or
Speaker 4: easy answers going forward. But this has always been that
Speaker 4: company that has set up so much advertising revenue and
Speaker 4: pulling some levers again to show their muscle.
Speaker 2: Well, the stock, which was up more than seven percent
Speaker 2: the after market's still up about four percent here, but
Speaker 2: definitely tempering some of the gains back, but we'll continue
Speaker 2: to monitor it. Chapote also out with their numbers. Second
Speaker 2: quarter revenue very slight miss com sales were slightness as well.
Speaker 2: Second quarter just at EPs was a beat, and we're
Speaker 2: seeing that stock under some pressure in the aftermarket, down
Speaker 2: about almost six to seven percent. Research while up about
Speaker 2: two and a half percent in the aftermarket following it's earnings,
Speaker 2: and it came out yeah with its results. All right,
Speaker 2: John Oakman, thank you so much. You're listening and watching Bloomberg.
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Speaker 6: Meadows.
Speaker 2: You know, just atworthosings as well. Then he's breaking down
Speaker 2: all those results after the close. Stock still up about
Speaker 2: almost five percent the after market, but it's off its
Speaker 2: pop that we saw of about maybe six seven percent
Speaker 2: just after it reported. You had Microsoft and an alphabet
Speaker 2: and snap last night texas instrument. So let's go over that.
Speaker 2: What we've gotten so far from tech megacaps and earnings
Speaker 2: this week and in this earning season. Back with us
Speaker 2: is James Chochmak, partner in technology analyst at Clockwise Capital.
Speaker 2: He is on Zoom in Miami. James, So good to
Speaker 2: have you back with Tim and me. So Meta, let's
Speaker 2: kick it off with Meta. It's up about five percent
Speaker 2: in the aftermarket. Does it make sense the trade? And
Speaker 2: what do you like about the results? Are not?
Speaker 5: Like?
Speaker 6: No, I think the results were great. I think the
Speaker 6: aftermarket reaction speaks for itself. I think at the tale
Speaker 6: of two cities when you look at Meta on the
Speaker 6: one side and Snapchat on the other, I think that
Speaker 6: we're going to see is that these big, big ad
Speaker 6: platforms continue to accrue more and more value and more
Speaker 6: and more of the online digital ad market as they
Speaker 6: implement their AI capabilities and invest.
Speaker 5: On that front.
Speaker 6: So I think it's going to be increasingly hard for
Speaker 6: the niche players unless they have some type of completely
Speaker 6: differentiated value proposition.
Speaker 5: Are they actually tracked the maximum value?
Speaker 3: But James, James, good to talk to you, by the way,
Speaker 3: it's been a while.
Speaker 5: Sure, yeah, are they actually.
Speaker 3: Implementing this AI technology yet? Because if you look at
Speaker 3: some of the notes today in the wake of Microsoft earnings,
Speaker 3: this is Microsoft and we can talk about meta too.
Speaker 3: Was it was, you know, they were like, show us,
Speaker 3: you know, show us where the AI capability is.
Speaker 2: It's going to take.
Speaker 6: Time, let's be fair, right, Yeah, I mean, look, I
Speaker 6: think it's going to be a constant state of iteration
Speaker 6: in getting the right ad in front of the right
Speaker 6: user at the right time. And that's been the mission
Speaker 6: of digital ads since day one, as dollars moved from
Speaker 6: analog to Digital's the that's the golden value proposition that
Speaker 6: they're selling. They're just going to be able to get
Speaker 6: better at it. But also on the flip side, as
Speaker 6: you think about the generative AI aspects of it in
Speaker 6: the production of ads, you know, there's a lot of
Speaker 6: money spent being toward the middlemen in the creation of
Speaker 6: these ads and think about being able to create a
Speaker 6: thousand ads and in several seconds, you know, tailored toward
Speaker 6: every type of constituency that you.
Speaker 5: Can think of.
Speaker 6: And where are you going to deploy that excess capital
Speaker 6: that you would have spent on that front.
Speaker 5: You're likely going to deploy it toward the.
Speaker 6: Advertising themselves, so they in essence, you know, it's not
Speaker 6: just a metas specific. I think as the industry adopts
Speaker 6: these tools and capability, I think that you will see
Speaker 6: more and more dollars shift towards these platforms.
Speaker 2: What I find always kind of wild is the reach
Speaker 2: of META as a company overrole. And I'm looking at
Speaker 2: Facebook users topping three billion. I mean, that's real numbers,
Speaker 2: whether you like it or not, and it's up three
Speaker 2: percent like that is worth something, correct, Yeah.
Speaker 6: It is, But at the end of the day, you
Speaker 6: still have to place a value on it. We actually,
Speaker 6: you know, we trimmed our position around three hundred. We
Speaker 6: were up about one hundred percent on it heading into
Speaker 6: the print because some of the buyside expectations have gotten
Speaker 6: you know, out of control, you know, looking for ten
Speaker 6: percent higher numbers than where the street currently is, and
Speaker 6: you saw those disappointments on the buyside, getting the head
Speaker 6: of themselves on Netflix, on Microsoft as well as on Tesla.
Speaker 6: So you know, handicapping for that, we did take some
Speaker 6: money off the table. Well then this is a go ahead.
Speaker 3: Yeah, Well you go ahead, James, and then I'll follow up.
Speaker 6: Well, I was just going to say, you know, also
Speaker 6: investors are really rethinking how they're valuing these companies, you know,
Speaker 6: as the investments on the AI front require a lot
Speaker 6: of capital expenditures, so a lot of the valuation that
Speaker 6: the methodologies have increasingly shipped from an earning spasis to
Speaker 6: a free cash floard basis.
Speaker 5: And that's kind of changing the valuation calculus as well.
Speaker 3: What about TikTok? You look at time spent on these apps, Yeah,
Speaker 3: and you look at where the eyeballs are, how much
Speaker 3: time they're spending using these what's the TikTok factor here
Speaker 3: for meta platforms.
Speaker 6: I think it's a factor for all of them because
Speaker 6: time is finite. Every minute I spend on this service
Speaker 6: is a minute not spent on another. I mean we're
Speaker 6: cognizant of it when it comes to meta, when it
Speaker 6: comes to Alphabet, when it comes to Spotify and any
Speaker 6: type of media consumption Netflix exactly an Yeah, I mean,
Speaker 6: if you've got to be cognizant of it, and you know,
Speaker 6: we're only here at once in this world.
Speaker 5: For only a certain number of minutes, and whoever can capture.
Speaker 3: That existential very quickly.
Speaker 2: It's funny that you say that because Tim and I
Speaker 2: recently had a conversation this whole idea. You're right, like,
Speaker 2: you have a limited time on this.
Speaker 3: You know what's funny though, that I really want to
Speaker 3: be spending the limited time I have on this earth
Speaker 3: glued to my phone exactly right.
Speaker 2: I mean, it's really I do think there's a major
Speaker 2: rethink going on, and we all just have so much time.
Speaker 2: And you know, I went back to reading, and I'm like,
Speaker 2: I forgot how much I love books. You talk to
Speaker 2: me about reading and going back like real books, like
Speaker 2: real books. Snap. Did we talk about Snap?
Speaker 3: We didn't talk about Snap with James yet.
Speaker 2: Are we just writing this one off? It just seems
Speaker 2: like quarter after quarter it's a little difficult.
Speaker 5: Yes, you.
Speaker 3: Becoming Snap for years? James? What's what's going on?
Speaker 5: Yeah?
Speaker 6: I know, Well the thing that I mean, he sold
Speaker 6: me on a different value proposition than what it ended
Speaker 6: up being, which is why I was initially constructed on it.
Speaker 6: But the problem with Snap is, you know, they don't
Speaker 6: they don't really know what they are. You know, this
Speaker 6: is a in order to succeed, you either have to
Speaker 6: be everything to everyone and then to be that you
Speaker 6: have to massive scale like a metal, like a YouTube,
Speaker 6: or you have to be incredibly niche and maximize the
Speaker 6: average value per user by a tremendous amount of engagement
Speaker 6: on a per user level.
Speaker 5: Unfortunately, they're trying to.
Speaker 6: Be a Meta without the scale of Meta, and that's
Speaker 6: a losing proposition and I just don't see it.
Speaker 5: You know.
Speaker 6: It contrasts that with a pinterest, you know, which is
Speaker 6: a different value proposition, one that requires necessary necessity, takes
Speaker 6: a different level of engagement, a different and aspirational level
Speaker 6: of engagement. You know, those are two both niche services,
Speaker 6: but one is better than the other.
Speaker 2: So I'm looking at just a bunch of earnings in
Speaker 2: the aftermarket. I mean, we just talked about Meta in
Speaker 2: a big way and some of the other big tech
Speaker 2: this week, but you got topotely down about eight percent,
Speaker 2: the company saying inflation hit some popular menu items. You know,
Speaker 2: we've gone through Bank earnings, we've gone through, We've gotten
Speaker 2: some chip names. I mean, what are you thinking about
Speaker 2: this earning season so far?
Speaker 5: It's a good question.
Speaker 6: I mean, we're we're actually broadening out our portfolio. Obviously,
Speaker 6: you know, we're tech first. You know, we're called Clockwise
Speaker 6: Capital because we believe the purpose of technology is to
Speaker 6: save time i e. Productivity, and you know that that's
Speaker 6: what we booked to invest in big secular themes.
Speaker 5: However, you know, we've had a tremendous run.
Speaker 6: A vast majority of the growth that we've seen or
Speaker 6: the appreciation of the market has been a factor of
Speaker 6: the multiple expansion versus earnings expansion. So actually we've added
Speaker 6: a lot of names that are you know, not traditionally tech,
Speaker 6: you know, into our wheelhouse we have We've added Coke,
Speaker 6: we have added Spirit, Arrow Systems.
Speaker 5: We're in JP Morgan Standard and Poors.
Speaker 6: You know, a lot of names that you wouldn't really
Speaker 6: think because we think that there's going to be a
Speaker 6: rotation here from growth to value, as if things settled
Speaker 6: down on the growth side, but obviously still full steam
Speaker 6: ahead on the big names like Amazon and Navidio.
Speaker 2: I love what you said, and I think this is
Speaker 2: like something worth repeating that the appreciation of the market
Speaker 2: was because of multiple expansion, not earnings expansion. Like when
Speaker 2: we talk about the importance of fundamentals. This is why
Speaker 2: earnings matter, right when we go through the earning season
Speaker 2: to see whether or not, especially some of these names
Speaker 2: that have run up so dramatically, whether or not they,
Speaker 2: you know, are worth the valuation that we see in
Speaker 2: the marketplace.
Speaker 3: So James, just in the last minute.
Speaker 6: The biggest Yeah, go ahead, I'm just gonna say on
Speaker 6: that point, the biggest disconnect in the market between earnings
Speaker 6: and multiple expansion is Nividia. Nividia has lagged from an
Speaker 6: earning standpoint, from a multiple standpoint, while their earnings have searched.
Speaker 5: So I mean, that's why we're putting our money there.
Speaker 3: Interesting, Okay, last minute. Next week, we've got Apple and Amazon.
Speaker 3: Give us some expectations there.
Speaker 6: Apple is one that I can't believe we didn't add
Speaker 6: it to the portfolio. It's one that we just didn't
Speaker 6: see that much upside to it, and it's worked. But
Speaker 6: I think that Apple Apple is going to be just fine.
Speaker 6: I think that the.
Speaker 5: Expectations around phones and.
Speaker 6: Desktop and everything as modest services continues to grow. Obviously,
Speaker 6: China is the question mark so and that was one
Speaker 6: of the reasons why we didn't invest in the concentration there.
Speaker 5: But I think the shares should continue to do well,
Speaker 5: and as relates to Amazon, that's one that we continue
Speaker 5: to like a lot.
Speaker 6: I think that you're going to see the bottoming out
Speaker 6: of AWS, potentially coming out slightly ahead of the ten
Speaker 6: percent growth that the streets expecting, and then possible reacceleration
Speaker 6: as you look into third quarter. And I think that
Speaker 6: in and of itself should be enough to send shares.
Speaker 5: Hire looking forward to get to one fifty nine of
Speaker 5: the year.
Speaker 2: Always love getting time with you. James B. Will James Chock,
Speaker 2: mac partner and technology analyst at Clockwise Capital. Really a
Speaker 2: nice overview of the tech and some of the big
Speaker 2: names that we've gotten, but also the broader perspective when
Speaker 2: it comes to earnings and what we've seen in terms
Speaker 2: of the market reaction. He of course, was joining us
Speaker 2: on zoo from Miami.
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Speaker 2: Speaking of somebody who always gives energy to all that
Speaker 2: he does. Might drop Elon Musk, and we've been talking
Speaker 2: about him since the.
Speaker 3: We're gonna say, Jenny Surrey, all right, that too.
Speaker 2: I feel like I failed everybody. She does have great energy.
Speaker 2: She's also got a most read story on the Bloomberg
Speaker 2: and it's about Elon Musk, what he's up to and
Speaker 2: looking to go after Bumpa, the King of Wall Street
Speaker 2: Jamie Diamond.
Speaker 3: Okay, come on, we've heard him talking about this for years. Jenny.
Speaker 3: I love this piece because you really did a deep
Speaker 3: dive into what X means and trying to, you know,
Speaker 3: translate what we heard from Twitter's new CEO and a
Speaker 3: tweet recently about the future of X, which sounds like
Speaker 3: it's going to tie us all together and everything.
Speaker 7: Yeah, I mean, I think that's exactly right. I think
Speaker 7: they would like it to be the super app. And
Speaker 7: we've seen a lot of tech giants want to achieve
Speaker 7: similar ambitions and it's been hard. It's really hard in
Speaker 7: the US to pull off so we'll see they've got
Speaker 7: lofty goals. And yeah, our story today was really just
Speaker 7: trying to show it's really it's a lot harder than
Speaker 7: anything to do this here.
Speaker 2: Yeah, I'd like to be five nine and living on
Speaker 2: an island, but hey, here I am. We all have loftys.
Speaker 3: You said it's difficult in the US because what they're
Speaker 3: trying to do is essentially create you know, what is it, well,
Speaker 3: we chat or you know, a Chinese super app here
Speaker 3: in the US.
Speaker 7: Yeah, so it's a very different market. You know, over
Speaker 7: in China, consumers have shown this willingness to do their banking,
Speaker 7: to do their shopping, to their social media, to do
Speaker 7: all their messaging all in one app. And so you've
Speaker 7: got these big super apps like Alley Pay and we
Speaker 7: chat pay that have billions of users literally, And so
Speaker 7: we've seen a ton of different tech giants here think well,
Speaker 7: if it's so successfu on China, let's try this model here.
Speaker 7: And so that's really what we think we're hearing from
Speaker 7: the folks over at Twitter and now X And Yeah,
Speaker 7: I think our story today was really just trying to
Speaker 7: show that a lot of different US tech giants have
Speaker 7: tried to pull this off, and US consumers just seem
Speaker 7: to show a different willingness, like they really prefer to
Speaker 7: have things kind of compartmentalize. You do your banking with
Speaker 7: a bank, you do your social media with a social
Speaker 7: media company, and you do your commerce with an Amazon
Speaker 7: or a retailer, and so they just haven't shown this
Speaker 7: willingness to kind of bleed through those lines.
Speaker 2: Well, you know, I was thinking about this. It's because
Speaker 2: it's just the way we've always done it right, And
Speaker 2: I think about they always talk about emerging markets. If
Speaker 2: you want to see financial innovation, go look at an
Speaker 2: emerging market, because they just started out differently, and we've
Speaker 2: got to kind of deal with a legacy financial system
Speaker 2: of how we operate.
Speaker 8: Yeah.
Speaker 7: No, I think that's actually exactly right. And a lot
Speaker 7: of the cases where super apps have taken off in
Speaker 7: places like India or China, they haven't had the credit
Speaker 7: card usage that we have here, and so we find
Speaker 7: it relatively easy to send payments and make payments. Other
Speaker 7: places don't. And so we're not really trying to fix anything.
Speaker 7: We're just trying to bring kind of the latest and
Speaker 7: greatest versus other countries that really had huge, giant problems
Speaker 7: to actually fix with how payments were done.
Speaker 2: Can we talk about what some of the other big
Speaker 2: tech behemoths have done, because it's you might know them
Speaker 2: Meta platforms, Alphabet, Amazon, what they've tried to do and
Speaker 2: not been really able to do it yet.
Speaker 8: Yeah.
Speaker 7: No, I mean I think Google is a great example
Speaker 7: of they got really far down this path. They had
Speaker 7: even lined up, you know, almost a dozen bank partners.
Speaker 7: City Group was one of them. They had spent months
Speaker 7: on the project, had talked about it very publicly and
Speaker 7: really tried to prime the pump for how much USA
Speaker 7: just was going to get and how great it was
Speaker 7: going to be. And then at the very last minute
Speaker 7: they kind of said, you know what, this isn't going
Speaker 7: to work. We're going in a different direction. So you've
Speaker 7: seen really big, ambitious, i mean meta with the Libra
Speaker 7: a few years ago. They were going to revolutionize remittances
Speaker 7: and change the way we send money overseas and immediately
Speaker 7: face a lot of regulatory pushback. All their partners have
Speaker 7: been in the project and now they're out, and so
Speaker 7: I think it's just a lot harder. You know, it
Speaker 7: looks like a really attractive space financial services to get into.
Speaker 8: It's you've got these.
Speaker 7: Really sticky consumers that use them a lot, like you
Speaker 7: use your credit card every day, right, but it's just.
Speaker 2: A lot harder to become loyal to banking names.
Speaker 3: So, Jenny, you put this tweet? Sorry, what is it called?
Speaker 1: Now?
Speaker 3: An ex?
Speaker 2: You put an X just doesn't We're still calling it tweets.
Speaker 3: Okay, I'm gonna call it a tweet. You put this
Speaker 3: tweet in uh in your piece and it's it's from
Speaker 3: Linda Akarino in the new CEO of Twitter, who writes, quote,
Speaker 3: X is the future state of unlimited interactivity centered in audio, video, messaging, payment,
Speaker 3: slash banking, creating a global marketplace for ideas, goods, services,
Speaker 3: and opportunities powered by AI X will connect us all
Speaker 3: in ways we're just beginning.
Speaker 2: To imagine, brought to you by the Twitter X no
Speaker 2: Tesla marketing.
Speaker 3: Like I think someone said, someone sent me this tweet
Speaker 3: like a couple of weeks ago when she sent her
Speaker 3: her last week and it was it was like you know,
Speaker 3: a meme from Succession in the in season three or no,
Speaker 3: the most recent season where they're all sitting around where
Speaker 3: it's like it's masterclass meets the new Yorker. It meets
Speaker 3: The New York Times meets Bloomberg, and that's like, what
Speaker 3: is she saying here?
Speaker 7: I mean, that is a lot of buzzwords in one tweet.
Speaker 7: I do think they're trying to get at the idea
Speaker 7: that they want to be kind of this one stop
Speaker 7: shop for folks. And yeah, so yes, there's a lot
Speaker 7: of other elements of that in there. But I think
Speaker 7: they want to be the place that you go to,
Speaker 7: not just send your tweets or do your your kind
Speaker 7: of basic social media stuff. They want to be where
Speaker 7: you go for messaging, they want to be where you
Speaker 7: go for payments, they want to be where you go
Speaker 7: for shopping things like that.
Speaker 8: So I think that's the goal. I yes, a lot
Speaker 8: of people have probably Teaseder that time.
Speaker 2: Can I say one thing though, Elon Musk is kind
Speaker 2: of not completely a financial virgin if you will right
Speaker 2: if you go, PayPal very successful, and I do think
Speaker 2: we're all in it getting to a point we just
Speaker 2: talked about. I know that I just think it works,
Speaker 2: but we're also at a time where we're also inundated
Speaker 2: by apps and stuff that if somebody can give me one,
Speaker 2: I would be kind of happy. So yes, financial versions,
Speaker 2: but it works. He's not one.
Speaker 7: Elon was a founder of PayPal, and I think it's
Speaker 7: actually a really good point. He does know this space
Speaker 7: really well. He since watched PayPal and all of its
Speaker 7: triumphs and tribulations. I think two years ago is really
Speaker 7: actually a good time to look at PayPal because they
Speaker 7: actually said exactly that. They said, we feel app fatigue.
Speaker 7: We are going to be the next super app in
Speaker 7: the US. We think we can do it, mainly because
Speaker 7: we come from a position of finance. Consumers already trust
Speaker 7: us with their money, so we have this really good
Speaker 7: leg up on the Googles or the facebooks or the
Speaker 7: Apples of the world.
Speaker 8: We're going to do this.
Speaker 7: Two years on, they have seen their stock completely slump,
Speaker 7: mostly because people felt like they got too distracted. You
Speaker 7: now have CEO Dan Shulman talking constantly about, you know,
Speaker 7: really focusing on the core checkout button and that core
Speaker 7: checkout experience, completely retrenching from all their ambitions and super
Speaker 7: apdom and so yeah, I mean, I think PayPal is
Speaker 7: a good example because one it shows that Elon has
Speaker 7: the kind of payments chops that it might take. But
Speaker 7: also PayPal has gone here and has decided it wasn't
Speaker 7: worth it, So you kind of have to take both
Speaker 7: sides of that example.
Speaker 2: He doesn't mind breaking things up either. No, and breaking
Speaker 2: things if you will. He's certainly done in the auto
Speaker 2: industry in the.
Speaker 8: EV world, but in finance you can't do that.
Speaker 2: It's a little bit different regulatory framework.
Speaker 8: And people's money. I mean, cars are important to I
Speaker 8: shouldn't say.
Speaker 2: That, Jenny, Thank you so much. Jenny's ray.
Speaker 3: I'm brother Marc.
Speaker 1: A journal How about you let me drive?
Speaker 3: Oh no, no, no, no, who's gone drive?
Speaker 1: Honey?
Speaker 3: Please?
Speaker 1: I'll do the riding gravel.
Speaker 6: Let's mate, I want to try it.
Speaker 5: It's good question.
Speaker 1: This is the drive to the globe dot com TM
Speaker 1: thing we'll buy around? Should it on on Bloomberg Radio?
Speaker 2: All right, everybody three? Another FED f O MC meeting.
Speaker 2: It is in the books. Carol Master along with Tim
Speaker 2: Stanevik live here on Bloomberg Business Week. Thanks so much
Speaker 2: for staying with Bloomberg on TV, on radio, and across
Speaker 2: our streaming platform as well and on YouTube. When it
Speaker 2: comes to the latest FED decision, and it's interesting to
Speaker 2: hear what our team had to say. Tim, it feels
Speaker 2: like we got a little bit of everything, kind of
Speaker 2: a little bit boring and kind of what we expected.
Speaker 3: I think somebody's ready for vacation, you know, Oh Jay, Yeah, yeah,
Speaker 3: you know. He's got eight weeks until the next meeting
Speaker 3: of the Federal Reserve. Between now and then, there is
Speaker 3: a little thing called Jackson Hole, and I wonder if
Speaker 3: we'll hear any details then. But the fact of the
Speaker 3: matter is, I mean, one of my big takeaways is
Speaker 3: that a lot can happen between now and September.
Speaker 2: And he said that data dependent. They're going to watch it.
Speaker 2: Every meeting is a live meeting. There's no cadence already
Speaker 2: cooked in the books, at least on the FED.
Speaker 3: I mean a live meeting. And he talked about the
Speaker 3: descent in this one, and we'll see it in the
Speaker 3: minutes in three weeks. But you know, it was unanimous
Speaker 3: for this decision.
Speaker 2: I will say one hot take he doesn't see inflation
Speaker 2: back at two percent until about twenty twenty five.
Speaker 3: That's a long time away.
Speaker 2: That's a long time away, And that the Fed will
Speaker 2: not be cutting.
Speaker 3: Rates this year higher for longer anyone.
Speaker 2: Yeah, it's another thing, all right, So let's see what
Speaker 2: our market guest has to say our drive to the
Speaker 2: closed guests on this FED Wednesdays. Brian Jacobson, Senior investment
Speaker 2: strategist at all Spring Global Investments with us on Zoom
Speaker 2: from Wisconsin. Brian, A lot going on. It feels like
Speaker 2: a little bit of a ho hum meeting, and I
Speaker 2: feel like markets have settled to kind of where they
Speaker 2: were prior to the FED decision. If we saw any
Speaker 2: kind of movement coming off of it. What is the
Speaker 2: most important thing you heard from Michey?
Speaker 9: Thanks for having me so now. I actually I'm a
Speaker 9: chief economist at Annex Wealth Management here in elm Grove, Wisconsin.
Speaker 9: And when I was talking to our investment policy committee
Speaker 9: prior to this, trying to dissect what it is that
Speaker 9: Shair Poll was saying what was really important, it seemed
Speaker 9: like it was hard to find something important. It was
Speaker 9: almost as though he was trying to be as non
Speaker 9: newsworthy as humanly possible. So I agree with you that
Speaker 9: he seemed a little tired. Maybe he needs a little vacation,
Speaker 9: a little R and R before that Jackson Hole trip.
Speaker 2: I think I need a little vacation. I'm so sorry
Speaker 2: about the title mess, so forgive me so chief economist,
Speaker 2: and you said, what was the firm?
Speaker 9: Ye, we're at Annex Wealth Management Wealth.
Speaker 2: You guys keep changing things around on us. I'm just
Speaker 2: gonna say it's the.
Speaker 3: Same, Brian Jacobson. We know what it is, so we do.
Speaker 3: We do love having you on the program. Still joining
Speaker 3: us for Wisconsin this afternoon, Brian. So what happens between
Speaker 3: now and September? I mean, how does yeah go ahead?
Speaker 9: YEA, Honestly, I think that uh, really this was a
Speaker 9: hesitant hike, right, So they had that hawkish hold. Now
Speaker 9: this is kind of a hesitant hike, like we're going
Speaker 9: to do it. Maybe we kind of talked ourselves into
Speaker 9: a corner of needing to do it, and now perhaps
Speaker 9: we're in that pregnant pause. I don't see any compelling
Speaker 9: reason why they needed to upgrade the economic view from
Speaker 9: modest to moderate, right, So, in FED speak, modest is
Speaker 9: pretty slow, moderist moderate is slightly better. So I thought
Speaker 9: it was a little confusing as to why he would
Speaker 9: upgrade economic activity. And we do get a lot of
Speaker 9: data between now and September, and I don't think there's
Speaker 9: going to really be a strong case for a further
Speaker 9: hike from here.
Speaker 2: What though. You know, it's interesting though, of what we got,
Speaker 2: and if you watch the market reaction, it does feel
Speaker 2: like we're pretty much where we were. He did also
Speaker 2: say the idea of hiking rates until inflation is at
Speaker 2: two percent is way past target. So is he acknowledging,
Speaker 2: in your view, Brian, that they could overdo it here?
Speaker 5: Well?
Speaker 9: I think that he is trying to remind people that
Speaker 9: that long and variable legs debate maybe where it is
Speaker 9: that he falls on that, which is that they don't
Speaker 9: have to keep hiking until they hit the target. It
Speaker 9: would almost be like if you are trying to take
Speaker 9: a medicine for a headache, and if you keep popping
Speaker 9: ibuprofen until the headache goes away, you would have overdosed.
Speaker 5: Right.
Speaker 9: So I think that the idea here is that where
Speaker 9: they are now is pretty close to what they think
Speaker 9: could be cruising speed, and as long as inflation continues
Speaker 9: to sort of choppily move towards two percent, they will
Speaker 9: be content with that.
Speaker 3: As long though, as long as inflation continues to move
Speaker 3: toward two percent.
Speaker 9: And that's going to be I think the big challenge
Speaker 9: is between now and say the November meeting, we are
Speaker 9: probably going to see that headline inflation number move higher
Speaker 9: because we do have higher food and energy prices. So
Speaker 9: is he going to have to start again talking away
Speaker 9: from the idea that well, headline inflation, we're not ignoring it,
Speaker 9: but it is very volatile because it is driven by
Speaker 9: those volatile components. So it is going to be an
Speaker 9: interesting conversation as far as perhaps what that September meeting
Speaker 9: looks like to justify not hiking.
Speaker 2: We all have to remember this isn't an exact science,
Speaker 2: and that's the tricky part that the Central Bank has
Speaker 2: to deal with. I did think it was interesting when
Speaker 2: he said we remain committed to bringing inflation to that
Speaker 2: two percent goal and keeping it anchored there. And I
Speaker 2: think that's what's key, and that's why we have to think,
Speaker 2: you know, tim to some extent this higher for longer,
Speaker 2: as you were saying, you know before, it's that they've
Speaker 2: got to make sure that it's not a case if
Speaker 2: it gets down to two percent and then it pops
Speaker 2: up again.
Speaker 3: What I thought was really interesting, Brian, is that we
Speaker 3: didn't hear much talk or any, indeed many questions about
Speaker 3: what we've seen in the equity market over the last
Speaker 3: few months, this AI fueled rally and whether or not
Speaker 3: that is indeed financial conditions listening to an extent that
Speaker 3: Fetcher Powell was not comfortable with.
Speaker 9: Yeah, it did seem like in previous press conferences, it's
Speaker 9: almost like some people were baiting him, saying that, oh,
Speaker 9: you know, the equity markets are moving up, and so
Speaker 9: would you have to say about that?
Speaker 3: Right?
Speaker 9: And so he probably would have batted away some of
Speaker 9: those questions anyways, perhaps learning from previous mistakes that he
Speaker 9: really shouldn't comment about market reactions, especially short term ones.
Speaker 9: I was glad that people didn't ask about the most
Speaker 9: recent market moves. It did seem like it was more
Speaker 9: focused on, you know, sort of that outlook from the Fed,
Speaker 9: what data are they looking at? And honestly, I came
Speaker 9: away thinking that their forward guidance is almost worthless because
Speaker 9: their forward guidance is only as good as their forecasts,
Speaker 9: and their forecasts haven't really been all that great. You know,
Speaker 9: if the staff economists are now taking out a recession.
Speaker 9: We didn't get a lot of data since the last meeting,
Speaker 9: So what data came in that convinced them that we're
Speaker 9: not going to necessarily.
Speaker 3: Have I guess some of the data that I guess
Speaker 3: that that came in is jobs are on average showing
Speaker 3: what month of jobs reports more than two hundred thousand
Speaker 3: jobs out of the economy every month.
Speaker 9: True, but you know that would have been a collapse
Speaker 9: in jobs if we would have gotten anything close to
Speaker 9: you know, like the one hundred thousand run rate, that
Speaker 9: might be more consistent with stable with a stable unemployment rate,
Speaker 9: or even consistent with labor force growth. And so there
Speaker 9: really wasn't a lot of data since then, and so
Speaker 9: if they maybe what happened is they moved the starting
Speaker 9: line for the recession out of the fourth quarter and
Speaker 9: put it more in twenty twenty four instead.
Speaker 2: Your next focal point when it comes to the US economy.
Speaker 9: I'm really interested in next week. It's the first week
Speaker 9: of the month, and so it is almost like Christmas
Speaker 9: floor economists, you know, we get the ism numbers, we
Speaker 9: also get the employment situation report. This Sluice is coming
Speaker 9: out as far as that Senior Loan Officer Opinion survey,
Speaker 9: although he already kind of teased it, it's almost like
Speaker 9: he gave us an early opening for the gift there
Speaker 9: to say what that would indicate but is this divergence
Speaker 9: between manufacturing and services continuing or are we finding maybe
Speaker 9: some stability, some bottoming for manufacturing so we can transition
Speaker 9: from a roving recession to more of a stumbling recovery.
Speaker 3: Roving recession, hesitant height hike, pregnant pause. I'm seeing as
Speaker 3: a pattern with alliteration. Brian, Hey, in our last thirty seconds, I'm.
Speaker 9: A sucker for a literation, a large language model that
Speaker 9: I have in my head.
Speaker 3: Hey, I like it. We're gonna do a lot of
Speaker 3: AI on the show a little later today, very briefly
Speaker 3: twenty seconds on the housing market and the way that
Speaker 3: a POW will describe more supply coming online.
Speaker 9: Yeah, I'm curious about the as far as with existing
Speaker 9: home sales. If we do find stability with mortgage rates,
Speaker 9: people are eventually going to have to relocate. But from
Speaker 9: a GDP and growth perspective, it's really about the new
Speaker 9: housing naics. So new housing construction is what can triggers
Speaker 9: to real good on that.
Speaker 2: So thank you so much for Jacobs and chief Economist
Speaker 2: and Annex Wealth Management join us on zoo from Wisconsin.
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