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. The consumer, despite this
Speaker 1: rampant inflation that's hitting all of us, whether the gas
Speaker 1: pumper in the supermarket, the consumers kind of hanging in there,
Speaker 1: you know. I mean, we got some retail sales today
Speaker 1: kind of came in a little bit better than expect
Speaker 1: to look. Under the hood, there's definitely some concern there,
Speaker 1: but you know, the headline number was pretty decent. I
Speaker 1: want to break it down with Angie Solanki, National director
Speaker 1: of Retail Services in the United States for Colliers. Colliers
Speaker 1: is a publicly traded company uh NASDACS c I G
Speaker 1: I is a took her to put into your Bloomberg
Speaker 1: terminal and you what you make of the August retail
Speaker 1: sales numbers. It was great to see that we had,
Speaker 1: even though it was a slight rise, that there is
Speaker 1: still confidence. Uh spend is still occurring, but it's occurring
Speaker 1: more so where they're focused on value oriented because there's
Speaker 1: still the inconsistency. Right there may be still a little
Speaker 1: bit of concern as we see inflation still continuing to occur,
Speaker 1: but overall there's still some confidence. I think retailers were
Speaker 1: pleasantly surprised. So the headline number onto was again of
Speaker 1: three tenths of one per cent, and I'm wondering what
Speaker 1: that looks like when you adjusted for inflation, because these
Speaker 1: numbers are not adjusted for inflation, right, correct? Correct? Um,
Speaker 1: They definitely are not. I think that what we should
Speaker 1: look at is if we look at, you know, the
Speaker 1: last time we've seen inflation hit as as high as
Speaker 1: it is right now this year, it was many many
Speaker 1: moons ago. So yes, it's hurting us in terms of
Speaker 1: the pocketbook, but overall, the drag we're seeing is still
Speaker 1: isn't it's it's not as significant. People still understand that
Speaker 1: there's an increase that they need to be mindful, um,
Speaker 1: but they're still you know, they still need to look
Speaker 1: at staple products, groceres spend um we're seeing from retailers
Speaker 1: right now, though, is this really interesting kind of juxtaposition
Speaker 1: in terms of they are starting to push out more
Speaker 1: private labeled brands. So they're they're pushing out their more
Speaker 1: their own brands and other brands good stuff. So it's September,
Speaker 1: but I know retailers they're thinking holiday season already. UM,
Speaker 1: what's the expectation when you talk to some of the
Speaker 1: retailers out there about how this holiday season may shape up. Well,
Speaker 1: there's still quite a bit of product in inventory out there,
Speaker 1: so you know, the concern right now is how much
Speaker 1: discounting really is required, So retailers are preparing for that. Um,
Speaker 1: it's still going to be, you know, a fairly busy
Speaker 1: holiday season. If they start to discount the product to
Speaker 1: lure you know, the inflation worried shopper in UM, that
Speaker 1: will start to show spend an increase in spend. But
Speaker 1: I think it's really more that there's a quite a
Speaker 1: bit of inventory be concerns still around discounting. You know,
Speaker 1: this is the first holiday season that we're seeing where
Speaker 1: consumers are going to most likely slow down due to
Speaker 1: the high inflation UM in many many years. So we
Speaker 1: don't really have any learnings from this since it's been
Speaker 1: so long. UM, there's been talk about third party sellers
Speaker 1: over at Amazon looking to potentially cut prices even further
Speaker 1: to move these you know, this inventory that they're sitting on,
Speaker 1: So that will be interesting for us to watch. In
Speaker 1: terms of the gasoline component, we've seen prices at the
Speaker 1: pump come down. Paul checks the regular unloaded up gas
Speaker 1: average every day, um, and you know, the sales figures
Speaker 1: excluding gas we're up zero eight percent, So I'm pretty strong.
Speaker 1: Do you see people taking the savings essentially that they're
Speaker 1: getting from the drop in pump prices and putting it elsewhere? Yeah. Actually,
Speaker 1: we're seeing, um, you know, roughly a one percent rise
Speaker 1: in spend at restaurants and bars. And this was in
Speaker 1: the month of August. So even though food costs have
Speaker 1: you know, have been hit pretty hard, you know, there's
Speaker 1: still this you know, need to go out to be
Speaker 1: out socialized. So it's a small percentage increase, but I
Speaker 1: think people are saying, hey, if I'm going to spend
Speaker 1: you know, call it a hundred and fifty dollars for
Speaker 1: a meal for two people at home groceries I have
Speaker 1: to buy, then I have to cook, and then I
Speaker 1: have to clean. Why not just go out and have
Speaker 1: a little fun. So, Um, I think that people are
Speaker 1: really thinking where should they spend their time and if
Speaker 1: it's a cost versus time versus value there they're spending
Speaker 1: it in the restaurants, which is great for for definitely
Speaker 1: our our restaurants and bars. Well, my household, I clean.
Speaker 1: I'm the cleaner guy. I take care of it. Yet
Speaker 1: I love doing that. Just leave me alone in the kitchen,
Speaker 1: glass of wine. I'll clean up all day long. So, Angie,
Speaker 1: and you're going out and spending money at restaurants and bars,
Speaker 1: I am absolutely that that that's kind of my thing, Angie. Um,
Speaker 1: for these retailers, can they are they gonna have enough
Speaker 1: labor here for this holiday season? It just seems to
Speaker 1: be a persistent problem across many industries. Yes, that is
Speaker 1: the one worry, right, um, because you're it's a combination
Speaker 1: of just resources human resources people. Um. But the second
Speaker 1: piece of this, right is the uh, the cost. So
Speaker 1: wages continue to be a concern for many retailers. Um,
Speaker 1: they continue to increase wages. So that's going to be
Speaker 1: really something that they're gonna have to focus on. It
Speaker 1: is it relates to Okay, if we need to push product,
Speaker 1: need to bring in volume of people. We want to
Speaker 1: increase our sales. We need people to to have that movement.
Speaker 1: But the other thing we're also seeing is technology. Right,
Speaker 1: so technology continued to be a big play. I don't
Speaker 1: know if you've read, like Starbucks is coming out with
Speaker 1: this what they're calling their reinvention strategy to kind of
Speaker 1: offset some of that labor concern and labor issues. And
Speaker 1: so they're looking at automating more so over the next
Speaker 1: several years where you can just get your food and
Speaker 1: drink orders very quickly and and it cuts down on
Speaker 1: that employee labor shortage and or cost issue. Alright, Angie,
Speaker 1: Great Great stuff has always Anti Slanki, national director of
Speaker 1: Retail Services for Colliers, talking about retail sales came in
Speaker 1: a little bit better than expected for the month of August.
Speaker 1: Let's get over speaking of driving across this beautiful country.
Speaker 1: Let's get over to Brent Shooty right now. He's a
Speaker 1: chief investment strategist at Northwestern Mutual. Brent, are you in Chicago.
Speaker 1: I'm in Milwaukee. Know I was in Chicago earlier in
Speaker 1: my career, but I moved to the beautiful city of Milwaukee.
Speaker 1: Got it, Well, I just knew that you did your
Speaker 1: MBA at the University of Chicago. They do numbers there
Speaker 1: at the university. Highly respected by this program. UM. I'm
Speaker 1: glad to have you on because I have been having
Speaker 1: discussions with investors here in New York and and yesterday
Speaker 1: we heard from Ray Dalio that he's on the bare side.
Speaker 1: He says if the FED raises rates to four and
Speaker 1: a half percent or more, which looks highly likely they'll do,
Speaker 1: stocks could fall. On the other hand, UM. David Rubinstein
Speaker 1: UM yesterday of Carlisle Fame, who also has a television
Speaker 1: program here on Bloomberg Television, said he thinks that professional
Speaker 1: investors are looking for bargains right now. This is when
Speaker 1: you should be buying. Um. Do you side with one
Speaker 1: or the other? I think it comes down to your
Speaker 1: out look on inflation. And certainly, as I look at charts,
Speaker 1: graphs and mosaics of ford looking indicators of inflation, I
Speaker 1: find it very hard to see any reason and why
Speaker 1: inflation is permanent or here to stay, and why the
Speaker 1: fudge should actually raise rates above four and a half percent.
Speaker 1: The only thing that people can point to is the
Speaker 1: actual backward looking number itself. You're gonna hear chair Pal
Speaker 1: again talk about inflation being broad and being sticky. Let
Speaker 1: me take those two things apart really quickly to explain
Speaker 1: why I don't think either one of them is relevant.
Speaker 1: So the broadside people look at the medium or the
Speaker 1: trimmed mean PC, and they're all elevated. The odd thing
Speaker 1: this time reflecting the economy is that the good side
Speaker 1: was at twelve percent it's now coming down to seven
Speaker 1: point one percent on a year of your basis. The
Speaker 1: services side is actually going up. And so yes, the
Speaker 1: meeting is high, but this is really odd. They usually
Speaker 1: move in the same direction. They're moving in the opposite
Speaker 1: direction because goods was favored early and now it's moving
Speaker 1: to services. That's that's going to resolve itself. That's one
Speaker 1: thing about because rent has been a real thorn in
Speaker 1: the fed side as well as you know my kid
Speaker 1: brother trying to find an apartment in New York. Sure,
Speaker 1: I mean sticky reflects housing and and housing unfortunately comes
Speaker 1: in with lag. Tell me who on Wall Street doesn't
Speaker 1: know that that owner's equivalent rent of that shelter has
Speaker 1: a twelve to sixteen month leg And where do you
Speaker 1: think home prices are going next? Take a look at
Speaker 1: housing demanded look at the mortgage demand this week. It
Speaker 1: was done year over year. The housing market has gone
Speaker 1: from boom to bust. And so as I look forward,
Speaker 1: I think inflation is still set to slow. The CPI
Speaker 1: data is backward looking, and I have trouble finding anything
Speaker 1: other than the labor market right now, which tells me
Speaker 1: that inflation is going to be permanent. So given that backdrop, Brent,
Speaker 1: have have we seen the lows in these equity markets?
Speaker 1: Do you think we'll retest that low back? And I
Speaker 1: guess late June, I'm not for sure that we won't
Speaker 1: retest it. I mean you just mentioned to smart people
Speaker 1: having different outlooks, and that usually has AT's a war
Speaker 1: until we resolve it. On one side, I do think
Speaker 1: the bottom is in. I think if you look back
Speaker 1: to the sixties eighty two time period when inflation was
Speaker 1: the economic problem like it is today. So I don't
Speaker 1: ignore the recent time trades, but I look back to
Speaker 1: that one when cp I peaked, the market bottomed. That's
Speaker 1: what happened in every one of those sixty six, seventy,
Speaker 1: seventy four eight and then Volker did Voker did um.
Speaker 1: I don't think that's going to happen this time. But
Speaker 1: those times where when CPI peaked the market bottom, that's
Speaker 1: point number one. Two. Sentiment is already awful. People have
Speaker 1: sold already. The AI sentiment has been below twenty nine
Speaker 1: times this year. It only been below thirty eight. Are
Speaker 1: only been below that thirty times in the prior thirty
Speaker 1: forty years. Each one of those times except one lead
Speaker 1: to four looking positive returns, throwing a positive throwing the
Speaker 1: fifty percent retracement of blows that we had, which has
Speaker 1: a nearly perfect record going back to and I think
Speaker 1: you have the basis for the market having put in
Speaker 1: the bottom. That doesn't mean it won't be a grinding
Speaker 1: back and forth advance, but I don't think we're going
Speaker 1: to go below those tune sixteenth lows. Alright. So with
Speaker 1: that outlook, Brent, if you have UM cash to put
Speaker 1: to work here, what do you do with it? Where
Speaker 1: do you put it? Do you like equities? UM? Have
Speaker 1: bonds taken a big enough beating, our yields high enough?
Speaker 1: Do you like commodities that they're still room to run
Speaker 1: there or they rolling over? I mean, what do you
Speaker 1: do with money? Sure? And so this is where We've
Speaker 1: been expressing our belief for the past here two years
Speaker 1: that you need to invest in things that are cheap UM.
Speaker 1: You need to invest in value, not the technology favorites
Speaker 1: of the past and the growth favorites of the past,
Speaker 1: the hope streams and themes hope them dreams, teams and
Speaker 1: mean stocks I talked about before. You need to invest
Speaker 1: across the board, I stage should say, but we do
Speaker 1: like on a marginal basis value type stocks and the
Speaker 1: SMP five hundred, We like the SMP six hundred, which
Speaker 1: is UH the small cap area of the market, higher
Speaker 1: quality small cap UM. And I do think bonds right
Speaker 1: now are going to once again hedge stocks. They certainly
Speaker 1: haven't this year, but I think at current yields right
Speaker 1: now really yields UM they do provide a hedge and
Speaker 1: so I would I would make sure that people UM
Speaker 1: don't be don't start selling your bonds right now like
Speaker 1: I think many people want to do. UH. And so
Speaker 1: that's kind of where we're position. We still do own commodities,
Speaker 1: albeit we are underweight our normal benchmark. And by the way,
Speaker 1: that's a that's a position that we have owned historically.
Speaker 1: We weren't the people who believe that inflation was dead.
Speaker 1: Now it's here. And I'm kind of on the other
Speaker 1: side of that argument right now. I think that the
Speaker 1: inflation that we're having right now will come back because
Speaker 1: it is mostly related to what happened post COVID. All right, Brent,
Speaker 1: you said you're in Milwaukee. Milwaukee is one of my
Speaker 1: favorite towns. Vernon it is. Um, it's a great town.
Speaker 1: Talk to how is the market there? How is Milwaukee?
Speaker 1: Because I think, you know, how's the economy how are
Speaker 1: people kind of feeling about things in general? Just kind
Speaker 1: of what's going on in mama real estate? What's the
Speaker 1: real estate? Looks like we're all feeling pretty good right
Speaker 1: now because the weather is still nice. Come visit me
Speaker 1: in a month or two much and people will be
Speaker 1: a little tour um. In general, I think the Milwaukee
Speaker 1: economy is doing just fine. I mean, you know, certainly,
Speaker 1: I think as you look around the country, people are
Speaker 1: doing good. I mean, the unemployment rate is low. The
Speaker 1: one big thing that sticks out that is the thing
Speaker 1: that we have to fix. And if you fix that thing,
Speaker 1: you fix the market is inflation. And that's where I
Speaker 1: think there's good news because I do believe the Ford
Speaker 1: indicators point to lower inflation. Yeah, you know, um, somebody
Speaker 1: who was telling me yesterday she didn't think we're gonna
Speaker 1: come down to four or five percent by May June
Speaker 1: of next year, and I reminded her of the cops.
Speaker 1: I mean, surely for that reason. It would be insane
Speaker 1: if we were still over five percent after a nine
Speaker 1: point one percent in June of this year. Yeah. I mean,
Speaker 1: you look at it, supply and demand. I mean, the
Speaker 1: said talks about that all the time. Demand has moderated.
Speaker 1: Um PC is running a PC, Consumptions running two point
Speaker 1: two percent year every year. UM it was running six
Speaker 1: and a half percent before the Fed started hiking. The
Speaker 1: housing market has slowed, inventories have rebuilt, and so I
Speaker 1: do think it will begin to push back. I think
Speaker 1: the big risk is that the Federal Reserve doesn't feel
Speaker 1: they can have a forward outlook because they see, I
Speaker 1: assume some of those things that many of us in
Speaker 1: the market see. The question that I have is are
Speaker 1: they so hot haunted by what happened in eighty that
Speaker 1: they feel the need to keep ongoing Because inflation right
Speaker 1: now is still high and there are lots of screaming
Speaker 1: about it. Are they able to actually pause, because I
Speaker 1: think they've accomplished in six months a lot already. I
Speaker 1: just think it hasn't completely shot up in the numbers.
Speaker 1: All right, Brent, great stuff as always, appreciate getting some
Speaker 1: of your valuable time. Brent Shooty, Chief investments Strategist, Northwestern
Speaker 1: Mutual located in beautiful Milwaukee, Wisconsin. We're talking beer. I
Speaker 1: think they do that there. They do brought worst, they
Speaker 1: do cheese. Uh. They get a lot of good money
Speaker 1: management institutional investor money in Milwaukee. Believe it or not.
Speaker 1: It punches way above its weight. Francis O joined us
Speaker 1: Craft Technologies. I think they do artificial intelligence for investing.
Speaker 1: I don't know. When I started on the block trading
Speaker 1: Nescar Payne eight six. Every morning, my boss, Johnny coglan
Speaker 1: would just run by and screaming my ear by them low,
Speaker 1: sell them high. That's all I had to do. But
Speaker 1: now you can use artificial intelligence. Francis, thanks so much
Speaker 1: for joining us here. Tell us what you guys are
Speaker 1: doing a Craft Technologies, Thank you, thank you for inviting me. Um. Yeah,
Speaker 1: the Fiow and sale high we tried to do something
Speaker 1: so like that as well. So the Craft clons. We
Speaker 1: very the artficture Intelligent investment tech company providing the services
Speaker 1: to us A management companies from the S location Signal
Speaker 1: MONGST the signal security selections. We provide a cater solution
Speaker 1: to our plan. Also the sponsor of the an units
Speaker 1: et F as well. So first of all, I want
Speaker 1: to point out that Craft is not like the macaroni
Speaker 1: and cheese that's spelled q R A F T craft technology.
Speaker 1: And um, you said you have an AI E t F.
Speaker 1: So how does that work? It's an active e t
Speaker 1: F and you use your algorithm to trade it. Yes, exactly,
Speaker 1: we are using the artificial intelligence, specifically the deeplonging model
Speaker 1: to trying to predict relative strengths of the stocks among
Speaker 1: the universe. So you apply the uh DAT technology into
Speaker 1: the activity manager of the ETF of the world. So
Speaker 1: we're calling me the listing four et FC and n
Speaker 1: I S right now. But so hang on, you trade
Speaker 1: E t F with your algorithm or you offer an
Speaker 1: e t F that's actively traded. Yes, later one we
Speaker 1: offer on EPO. So what's the ticker. The ticker we
Speaker 1: have the mb q UM, the quality A moment h
Speaker 1: d IV, the one of most performing beast performing ETF
Speaker 1: this series MVQ. Nice alright, I go on e t F,
Speaker 1: go on my Bloomberg and um, it's pretty cool. You
Speaker 1: can put in craft there and then you can define
Speaker 1: exactly the family of francis. How does how does your
Speaker 1: technology the use of artificial intelligence? How does that or
Speaker 1: how has it been doing this year when we've had
Speaker 1: a tremendous underperformance of both equities and fixed income, lots
Speaker 1: of volatility, the fixed pushing higher? How has your process
Speaker 1: worked well? So you're utilizing a the diploming model, which
Speaker 1: is training the am L don't to liplicate the well
Speaker 1: framed human perform management there. This is a making process
Speaker 1: but without human emotional bience risk. So processing from the
Speaker 1: mental data, price data, and macmak data to be our
Speaker 1: model is trying to the maker scores and the foecust
Speaker 1: relative performance at the stack amongst the universe. But the
Speaker 1: EATP that I mentioned m v Q, the next value
Speaker 1: et which is applying the ai WA m AIM methodology
Speaker 1: into the value invest in the world, UMDAB each are
Speaker 1: actually performing value well this year uh year today. As
Speaker 1: of today NVQUE is only full person below the full
Speaker 1: person losses, which is almost eleven percent point of performance
Speaker 1: even against the widely used nscr U s A and
Speaker 1: as value index UM show and even for the last
Speaker 1: long year period NVC is even more possibly tend close
Speaker 1: to percent. All right, I want to point out that
Speaker 1: is n v Q as in Victor, Nancy Veronica. Okay, Um,
Speaker 1: what's Q in the craft craft? Yes, exactly, n v Q. No.
Speaker 1: I I was thinking in the military alphabet. If I
Speaker 1: had Greg Jarrett here, he would do me right away.
Speaker 1: Q looks like Quebec. So it's actually in the military
Speaker 1: alphabet November Victor Quebec. Really que is a taker? Okay,
Speaker 1: very good? All right, So francis, what's kind of what
Speaker 1: do you guys as you look at the market here?
Speaker 1: What what's what are you thinking about here as you
Speaker 1: talk to your clients? Right? The carom back environment is
Speaker 1: definitely not so multi papab between investors at all, Like
Speaker 1: you're there are a lot of risk um that we
Speaker 1: haven't seen this year, from being the heightened inflated inflation
Speaker 1: environments and then the fact the hike is also not
Speaker 1: favorable poetical risk and also be pretty much like the
Speaker 1: perfect storm is hitting the financial market right now. And
Speaker 1: if someone who still wants to have a position into
Speaker 1: active market a letter I think about the lever wants
Speaker 1: to say, let's think about the value investments. UM could
Speaker 1: be the way to play for the next six to
Speaker 1: twelve months on until there was a clear trajectory of
Speaker 1: decidities are deciding to any sign on deluring there interested
Speaker 1: UMU the legend back to the normal area shop for
Speaker 1: now the gross act mark had it won't be so
Speaker 1: much the value. The values that delated relate to play
Speaker 1: relatively safer than the other mechandescent classes. All right, francis
Speaker 1: good stuff. We appreciate it. Francis Oh, CEO of Craft Technologies,
Speaker 1: UH talking to us about the e t F. He
Speaker 1: uses artificial intelligence there in the investment process. Where is
Speaker 1: Kevin Tyn I am so pumped for him. He's at
Speaker 1: the Detroit Auto Show. UM. For a number of reasons.
Speaker 1: This is spend a lot of time in Detroit. I
Speaker 1: used to spend a ton of time in Detroit, and
Speaker 1: the Auto show was typically in January, like the worst
Speaker 1: time in the year to visit Detroit, but everybody went
Speaker 1: because the super Bowl of UM, the automotive industry. Now
Speaker 1: they have it in a more reasonable season, but I
Speaker 1: don't think as many people are there. Well, the ce
Speaker 1: S Show, I think is an auto show with a
Speaker 1: couple of computers around it. Yeah, that's what the Toyot
Speaker 1: president was saying yesterday as well. Kevin tell us first
Speaker 1: of all about what the auto show is like. I mean,
Speaker 1: it just wasn't the hype um this year that there
Speaker 1: used to be, you know, pre pandemic back in the
Speaker 1: day when Detroit was all about it. Yeah, it is
Speaker 1: very very different. Um, I would say for the most part,
Speaker 1: full displays are only General Motors, Ford and Statlantis. There's
Speaker 1: a small Toyota booths and even smaller Subaru booth, and
Speaker 1: that is it's what is it. Yeah, So there's a
Speaker 1: couple of you know, there's a couple of like drone
Speaker 1: and see plane companies showing stuff and electric truck plot
Speaker 1: forms that so they they went out of the way
Speaker 1: to fill the space with non automotive stuff. And then
Speaker 1: there's this thing called automobility which is charging companies and
Speaker 1: light ar and so it's and even the media center,
Speaker 1: you know, we would come in here and media center
Speaker 1: would take up this entire ballroom and Bloomberg and our
Speaker 1: our team from Southfield here would just have a whole
Speaker 1: table editors, reporters running from scrum to scrum and uh,
Speaker 1: it's it's it's like a closet now. And there was
Speaker 1: five people in the entire media it used to be.
Speaker 1: It used to cover bill multiple halls and multiple floors.
Speaker 1: And well, I think it reflects I mean, you guys
Speaker 1: know Kevin and Matt. I mean it reflects auto companies
Speaker 1: are technology companies today. I mean, and I guess that
Speaker 1: makes more sense to be in Vegas, you know, in
Speaker 1: for the ce S show, because man, that's what the
Speaker 1: cars today are. I mean, we saw all these micro
Speaker 1: talk to us about just the general buzz there as
Speaker 1: it relates to the transition to electric vehicles. Um, you know,
Speaker 1: where are we? You know? The interesting thing is, and
Speaker 1: I can't remember who wrote the story that I read yesterday.
Speaker 1: It was either Elizabeth Berman or Monica Raymond or Chris Ralvald,
Speaker 1: But one of our German reporters talking about Herbert Diese
Speaker 1: at his going away speech, you see this Kevin Um, Yeah,
Speaker 1: this former CEO of Folkswagen when he was leaving. Um
Speaker 1: he basically pointed out the fact that the transition to
Speaker 1: electric is easy. The transition to software is hard. That's
Speaker 1: where everyone's getting it wrong. Right. Anyone can put a
Speaker 1: battery in a car, Okay, Tesla seems to have been
Speaker 1: doing it better than anyone else. But putting all these
Speaker 1: software systems and getting them to work together and getting
Speaker 1: them to work as well as your iPhone or whatever
Speaker 1: you use, it's not easy, and a lot of them
Speaker 1: are failing or at least having real troubles, right, Kevin, Yeah,
Speaker 1: And and it's the same thing with autonomous. Right. We've
Speaker 1: heard so much about self driving, and you know how
Speaker 1: right around the corner it is. And really we've we've
Speaker 1: got the hardware figured out, right, and if that's of
Speaker 1: the battle, that the last ten percent is as difficult
Speaker 1: as it was to get to that point. And I
Speaker 1: think you're seeing that in electrification and you're also seeing
Speaker 1: it in autonomous. But but Paul, to your point about
Speaker 1: the show being technology, you know, the other thing too,
Speaker 1: is that you're you're you're having an auto show to
Speaker 1: drum up demand and get the public to see your
Speaker 1: new product, of which you have none in inventory. So
Speaker 1: so to you in four years, right, I mean so
Speaker 1: that's kind of I think the feeling puts, you know,
Speaker 1: looking at the main auto shows right Detroit in January
Speaker 1: used to be in January, you have New York right
Speaker 1: around um Easter, and then you would have California right
Speaker 1: around Thanksgiving, and it would always be kind of divided.
Speaker 1: Where Detroit obviously is four GM and the De Lantis
Speaker 1: domestic brands backyard, you would have the European makes really
Speaker 1: kind of focus on New York because it was considered
Speaker 1: the premium show, and then the West Coast show would
Speaker 1: be a little bit more high tech, and you'd have
Speaker 1: the Asia based manufacturers UM with a bigger presence there.
Speaker 1: And now it just seems like I'm not sure there's
Speaker 1: any presence anywhere other than like Paul said at CEF,
Speaker 1: I guess Baby Vegas. I got. I prefer Detroit, honestly,
Speaker 1: no matter what time of year, I prefer Detroit to
Speaker 1: Las Vegas. But I have a special treat for for
Speaker 1: all of you. Um there is one really cool thing
Speaker 1: that happened at this car show, and that is Ford
Speaker 1: unveiling It's brand new seventh generation Mustang and icon of
Speaker 1: car that I have been a huge fan of ever
Speaker 1: since I got gum on the seat of my dad's
Speaker 1: sixty four and a half notch back. Um, and we've
Speaker 1: got Jim Owns with us on the line here from
Speaker 1: Detroit as well. He is the marketing manager for the
Speaker 1: Mustang project. Jim, you know, this looks at first glance,
Speaker 1: it looks more like an evolution than a revolution. But
Speaker 1: there's some pretty major changes both to the power train,
Speaker 1: UM and the interior as well as the exterior designed
Speaker 1: that I really think makes this car a much more
Speaker 1: attractive UM proposition. And I already wanted the old one,
Speaker 1: So tell us about it. Um, we're so excited to
Speaker 1: be on and talk about this. And you know, the
Speaker 1: sixty four and a half Mustang that you got the
Speaker 1: gum stuck on literally was a sixty five. You know,
Speaker 1: there was really no such thing as the sixty four
Speaker 1: and a half, even though all the Mustang fans around
Speaker 1: the world they were all titled sixty five. So don't
Speaker 1: worry about getting that gum stuck on your dad. That's
Speaker 1: he He would always refer to it that way. And UM,
Speaker 1: even yesterday my wife was saying, that's silly. Why was
Speaker 1: it sixty four and a half? I don't know why
Speaker 1: it was. I don't know why that year sticks with me.
Speaker 1: Maybe that's when they showed it at the World's Fair,
Speaker 1: or they put it up. You know, they took apart
Speaker 1: you know this, they took apart a Mustang for the debut.
Speaker 1: They carried it up the Empire State Building and put
Speaker 1: it back together on the view on platform. We did
Speaker 1: it twice. We did it in nineteen six and at
Speaker 1: the time the size of the Mustang and the elevator
Speaker 1: sizes have not changed on the Empire State Building, right,
Speaker 1: they have never changed because of you know, the historical
Speaker 1: aspect of that building. So in sixty six it took
Speaker 1: four different times to go up the elevator when we
Speaker 1: did it with the Gen six Mustang and we put
Speaker 1: it out there the bright yellow one. UM, it took
Speaker 1: a few more times to put it up there, and
Speaker 1: we installed it up there. So yeah, it's been on
Speaker 1: top of the Empire State Building twice. UM sixty four
Speaker 1: and a half piece is when Ford started changing production
Speaker 1: runs in their customers wanted to delineate between the original
Speaker 1: and then the second one where they delineated it, and
Speaker 1: that's the sixty four and a half, sixty five and
Speaker 1: it's always a fun conversation over um. You had mentioned
Speaker 1: the seventh generation and how you thought of it as
Speaker 1: an evolution and and it has to be a you know,
Speaker 1: for the six generations previously, it still has to be
Speaker 1: unmistakably Mustang, right, and that we think we hit a
Speaker 1: home run on it. And in the seventh generation it
Speaker 1: has to reach to that new audience to bring the
Speaker 1: new seventh generation customers in, and we think we hit
Speaker 1: a home run with the design and that interior which
Speaker 1: is just completely filled with gaming technology that the younger
Speaker 1: audiences love. And then you said you talked a little
Speaker 1: bit about the power trains and an all new Eco
Speaker 1: Boost that has better performance, better power, more efficient production
Speaker 1: of power. And then for Mustang fans globally, right, you
Speaker 1: have cars on six of the seven continents. Um, it
Speaker 1: is a fourth generation Coyote that will be the highest
Speaker 1: horsepower Mustang gt tyote I've ever done. I'm so happy
Speaker 1: to hear that, you know, because I was worried that
Speaker 1: the horse power figures were gonna go down. And I
Speaker 1: know that you're not going to tell us, well, go
Speaker 1: ahead and tell us, just tell us, well, so i'd
Speaker 1: loved I'd love to tell you just as a secret
Speaker 1: whisper in your ear, But no, the asterisks are that,
Speaker 1: you know, we're still in the testing and certification pieces
Speaker 1: that will come closer to the summer of twenty three
Speaker 1: when we launched the twenty four model year. But as
Speaker 1: a you know, as a person who has not only
Speaker 1: worked for Mustangs for four generations of them, also worked
Speaker 1: for Carol Shelby for four years, you know, horsepower means
Speaker 1: something and this is this is going to be one
Speaker 1: that pulls you from the seat of your pants. And
Speaker 1: we can't tell you how excited we are. All right, Jim,
Speaker 1: Let's say I order a new Ford, when am I
Speaker 1: going to get it? It looks like we're not going
Speaker 1: to have a railroad strike, so that's good news. But
Speaker 1: talk to us just about the supply chain getting stuff
Speaker 1: from the auto industry these days. Yeah, and it's been, um,
Speaker 1: it has been, you know, just like every other industry.
Speaker 1: It's been you know, a struggle to identify you know,
Speaker 1: when you can have your plant open and what parts
Speaker 1: are coming in. And with Mustang, you ask about the Mustang.
Speaker 1: This will be a twenty four model year, right, so
Speaker 1: it'll be the fifty nine year model year for this
Speaker 1: Mustang and that will be available in June of her
Speaker 1: I'm sorry, in the summer of twenty three as a
Speaker 1: twenty four model year. Right now, you can still go
Speaker 1: in and order your twenty two are soon to order
Speaker 1: your twenty three model your Mustang that is the existing one. UM.
Speaker 1: And you know, we've been able to UM keep the
Speaker 1: plants running and keep Mustang customers happy by delivering you know,
Speaker 1: not only the Eco Boost, but right now the mach one,
Speaker 1: the Trema. Yeah, with the Trumic seven speed dual clutch.
Speaker 1: That's you know, shifts years in eighty milliseconds. Yeah, that's
Speaker 1: a lot of fun. I want that. And are are
Speaker 1: we going to have? Do we know about the transmission
Speaker 1: options available in the new seventh gen? Yeah? So what
Speaker 1: we've announced last night with the reveal of not only
Speaker 1: the coup and convertible Eco Boost and GT, we introduced
Speaker 1: for the first time in twenty one years, a new
Speaker 1: specialty performance brand called the dark Horse. UM. For time
Speaker 1: that we've had the forward facing pony on the car
Speaker 1: UM and it is UM. It is extremely UM that
Speaker 1: the fitting now of the dark Horse name. Now that
Speaker 1: will be our specialty performance derivative that will have the
Speaker 1: tremack box in the manual and the drift break and
Speaker 1: the break manual transmission. It'll have a manual, it'll have well,
Speaker 1: it'll have the automatic. I think the auto boxes pretty
Speaker 1: amazing as well, and I'm gonna save the manuals guy.
Speaker 1: So um, I was so impressed by the Shelby GT
Speaker 1: five auto boxes. I think I would take that over
Speaker 1: the stick. The cool thing about this new Mustang is
Speaker 1: it's going to have an electric emergency break, a drift break.
Speaker 1: Nobody likes a good m and a trade more than me,
Speaker 1: because again, the first thing I do is I go
Speaker 1: the m A page and I see who the bankers are.
Speaker 1: And my good friend Frank Quattrone advised the seller, so
Speaker 1: I know he got maximum price from this. So Adobe's
Speaker 1: minus software company, Adobe's down? What is going on? He
Speaker 1: covers all things technology for Bloomberg Intelligence. He's located. I
Speaker 1: have no idea where, but we have him in the
Speaker 1: Bloomberg Interactive Broker studio here in New York. Today. Adobe
Speaker 1: a great company, big market cap um and this is
Speaker 1: a hundred fifty billion market cup company stocks down six
Speaker 1: on this. What's up? So you think about it. When
Speaker 1: I looked at the deal, I said, okay, twenty billion,
Speaker 1: it must have good financials. They're gonna do two million
Speaker 1: and annual recording revenue it's aigma. It's a private company.
Speaker 1: They're gonna do maybe four million after that. So if
Speaker 1: you do a little bit of math around it, that
Speaker 1: means fifty times sales or sales hundred times sales cash flow.
Speaker 1: So I think that's what's happening here. The street is saying,
Speaker 1: why are you overpaying so much for an asset where
Speaker 1: the contribution to the top line is going to be
Speaker 1: very small and the bottom line is actually going to
Speaker 1: dilute your margins. It is insane to pay that much,
Speaker 1: especially now when valuations have come in. What are people
Speaker 1: paying for similar assets? So again it see, according to Adobe,
Speaker 1: this is a technology that they're buying that that nobody
Speaker 1: else has, So that's their rationale. The outside people are
Speaker 1: buying less than ten time sales right now for software companies.
Speaker 1: But once again their argument is this is the technology
Speaker 1: that can reshape the company. Um, we published a note
Speaker 1: yesterday where we basically say said that Adobe's long term
Speaker 1: growth is not going to be like it has been
Speaker 1: over the past decade because it's coming to a mature business.
Speaker 1: So they really need to figure out what they do,
Speaker 1: and if that means acquisitions, they may do the acquisition.
Speaker 1: But we don't think that valuation is going to bounce
Speaker 1: back ever again like it was in the you know,
Speaker 1: before the pandemic or during the pandemic. All right, so
Speaker 1: tell us what Adobe is in one set, and tell
Speaker 1: us what Figma is in one sentence, and why Adobe
Speaker 1: wanted to buy Figma and spend twenty billion large. The
Speaker 1: real killer app that Adobe has is their creative cloud product,
Speaker 1: Adobe Photoshop all the photo editing tools that you need.
Speaker 1: Figma is a platform where people can collaborate. You are creators.
Speaker 1: You can use you know, to exchange ideas. You can
Speaker 1: go there. That's a whiteboard all web based stuff, and
Speaker 1: those two things marry very well for the next generation creator.
Speaker 1: Adobe is um. For some sometimes it's the bane of
Speaker 1: my existence because I try and access files on my
Speaker 1: computer that I can't unless I'm subscribed to Adobe. And
Speaker 1: then once I subscribe to Adobe, I found it impossible
Speaker 1: to cancel that subscriptions. They just suck me dry. Um
Speaker 1: is everybody else or other consumers as annoyed. Do they
Speaker 1: struggle to find another word? Do they hate Adobe as
Speaker 1: much as I do? You can open those documents using
Speaker 1: a web browser, So if you're just using a PDF
Speaker 1: opener to do that, that's a free thing. You probably
Speaker 1: downloaded a more expensive version and never deleted it from
Speaker 1: your computer, but we can talk about that another time.
Speaker 1: But so in a case, if you just want to
Speaker 1: read a document, it's okay, that's free. But if you
Speaker 1: want to you know, signature on it, you want to
Speaker 1: go out and edit it and highlight it and send
Speaker 1: it to your teammate, then you have to pay for
Speaker 1: that particular software package. And that's the second piece of
Speaker 1: their business called a document cloud, which is all of PDF.
Speaker 1: But the real killer app is the the Photoshop, which
Speaker 1: there is no graphic design and outdate in the world
Speaker 1: that would not be using that for the world work
Speaker 1: that they do. To me, that product is as powerful
Speaker 1: as Microsoft ex Cell. Alright, and Paul, I guess you
Speaker 1: probably spent decades with Microsoft Exel as your number one
Speaker 1: back in the day, most clicked back in the day.
Speaker 1: And the analyst, yeah, absolutely was before it was before Xcel. Actually, U,
Speaker 1: I can't remember what we had before Excel. What do
Speaker 1: we use on our I don't know WordPress, I have
Speaker 1: that even before that. All right, I'm bringing up one
Speaker 1: of Matt Miller's favorite functions here, c O m p uh.
Speaker 1: Comparative returns Adobe over the last five years about fifteen
Speaker 1: percent return the SMP about eleven. So it's done pretty well.
Speaker 1: I see a lot of buy ratings out there for Adobe,
Speaker 1: six or seven kind of hold ratings, no cells. So
Speaker 1: the street still likes this name. What's the what's the
Speaker 1: theme behind the bullish call here? So go back in
Speaker 1: four or the company went into a massive undertakeoff, changing
Speaker 1: their business model, went from a license model to a
Speaker 1: subscription model. Unbelievable success since then, very strong growth rate
Speaker 1: plus in fact, I would say, closer to margin expansion
Speaker 1: like you have not seen as of today. Margins are
Speaker 1: closer to adjusted operating margins for this company. So massive
Speaker 1: margin expansion. And that was an entire call yesterday that Okay,
Speaker 1: it's done exceeding well in the last you know, ten
Speaker 1: audios or seven eight years. But now they're coming to
Speaker 1: a point that growth rate goes to closer to fifteen
Speaker 1: and there is no Mougin expansion. So the valuation. I
Speaker 1: would say premium they got close to compared to Microsoft,
Speaker 1: I think it's going to die now. And Microsoft's you know,
Speaker 1: economics look a little bit better here compared to Adobe.
Speaker 1: I don't know. Software. I mean it's it's a I mean,
Speaker 1: you've got the easiest drap in the world. You just say,
Speaker 1: I slapped by ratings on everything software. I mean, it's
Speaker 1: just like growing business. How has it performed? Just probably
Speaker 1: speaking forget about the hardware soft We'll talk to some
Speaker 1: other you know, man deep on that one maybe. But
Speaker 1: the software side, is it just a secular growth story.
Speaker 1: It is a massive secular story. You you go back
Speaker 1: and read and reasons you know later from ten years
Speaker 1: ago and say software is going to eat the world.
Speaker 1: Software at that time, Paul, when you hired me was
Speaker 1: about two hundred billion in market size. It's close to
Speaker 1: seven billion market now. You don't have to do much
Speaker 1: just right the way. Yeah, and now and now what
Speaker 1: the kids are talking about is the cloud. That's the
Speaker 1: new thing. And I play the clouds three point, which
Speaker 1: by I'm still have no idea what that. If you
Speaker 1: have any call on web three point, it's it's a gimmick, right, Yeah,
Speaker 1: that's right. Yeah, let's let's get started. Somebody's gonna send
Speaker 1: me a lot of hate me a lot, Okay, So
Speaker 1: best call right now in or the best growth story
Speaker 1: in tech right now? I would say, given the cuttered
Speaker 1: macro environment, I would put it put Microsoft on that
Speaker 1: this because it's a safety stock as well as it
Speaker 1: does everything right. Even in a bad, bad, bad economics environment,
Speaker 1: they'll still grow tender. And it's Microsoft. The story a
Speaker 1: cloud story, it is all. It's purely a cloud story.
Speaker 1: So it's not a Windows story at all anymore. No,
Speaker 1: but Windows does provide a lot of good cash flow,
Speaker 1: except and again Office provides a very good cash flow.
Speaker 1: It has two cash cows that fund anything they want
Speaker 1: to fund, you know, to be honest, video games, activision
Speaker 1: like and they can do anything out there. But what
Speaker 1: happens is Microsoft is now the de facto thing you
Speaker 1: need no matter where you are, what enterprise you are.
Speaker 1: And it is a growth story for me because you
Speaker 1: know what, they will double their revenue in the next
Speaker 1: five years. Can you imagine that at the company with
Speaker 1: three billion revenue will double the revenue in the next
Speaker 1: five years. Oh yeah, yeah, I mean it's just an awesome,
Speaker 1: awesome story. Anora Rana, senior software in I T Services
Speaker 1: analyst Bloomberg Intelligence. Actually in the office he's supposed to
Speaker 1: be in, which is the New York City world headquarters
Speaker 1: of Bloomberg and Bloomberg Intelligence. A Bloomberg Intelligence analysts. What's
Speaker 1: the percentage of them that are in the office. I
Speaker 1: don't know. I'm gonna say maybe half, you know, I
Speaker 1: don't know who knows. 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 three. Pet On Ball
Speaker 1: Sweeney I'm on Twitter at pt Sweeney. Before the podcast,
Speaker 1: you can always catch us worldwide at Bloomberg Radio.