1 00:00:01,440 --> 00:00:05,320 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 2 00:00:05,400 --> 00:00:08,479 Speaker 1: weekdays at ten am Eastern on Affle Car, playing Android 3 00:00:08,520 --> 00:00:11,600 Speaker 1: otto with the Bloomberg Business app. Listen on demand wherever 4 00:00:11,680 --> 00:00:15,520 Speaker 1: you get your podcasts, or watch us live on YouTube. 5 00:00:16,920 --> 00:00:19,200 Speaker 2: In a couple of star wars tech names reporting last night, 6 00:00:20,000 --> 00:00:23,680 Speaker 2: Amazon a good quarter. Stock up six and a half percent. 7 00:00:23,960 --> 00:00:26,560 Speaker 2: It's up very close, within a couple of dollars of 8 00:00:26,640 --> 00:00:30,120 Speaker 2: its all time high, and it is a fifty fifty 9 00:00:30,160 --> 00:00:31,880 Speaker 2: two week high, buten just a couple of bucks away 10 00:00:31,880 --> 00:00:35,479 Speaker 2: from its all time high. Meta also reported numbers stocks 11 00:00:35,560 --> 00:00:38,600 Speaker 2: up twenty percent. This is a trillion dollar market cap stock. 12 00:00:38,640 --> 00:00:40,800 Speaker 2: It's not like a penny stock. This is a trillion 13 00:00:40,800 --> 00:00:43,920 Speaker 2: dollar market cap stock. No, and it's up twenty percent. 14 00:00:44,000 --> 00:00:47,040 Speaker 2: So some real, real paper money's being made out there 15 00:00:47,080 --> 00:00:49,320 Speaker 2: for some people. Let's break this stuff down. We can 16 00:00:49,360 --> 00:00:51,760 Speaker 2: do it with two of our best at Bloomberg Intelligence. 17 00:00:51,800 --> 00:00:55,600 Speaker 2: Put On Goile, she covers the retail business for Bloomberg Intelligence, 18 00:00:55,640 --> 00:00:58,160 Speaker 2: and Men Deep Sing, supposedly a tech analyst. We'll see 19 00:00:58,200 --> 00:01:00,560 Speaker 2: if he's got the goods here today. Let's start with 20 00:01:00,640 --> 00:01:05,920 Speaker 2: you Amazon. It seems like the consumer is in pretty 21 00:01:05,959 --> 00:01:08,160 Speaker 2: good shape. What you hear from Amazon last night. 22 00:01:08,920 --> 00:01:11,520 Speaker 3: Yeah, thanks Paul. The consumer is an excellence shape and 23 00:01:11,520 --> 00:01:13,399 Speaker 3: that's part of the strength that we saw on holiday. 24 00:01:13,480 --> 00:01:16,200 Speaker 3: So the nine percent online sales gain that you saw 25 00:01:16,280 --> 00:01:19,000 Speaker 3: come from them and twenty percent and third party was 26 00:01:19,040 --> 00:01:22,160 Speaker 3: pretty impressive and actually probably the best in a few 27 00:01:22,240 --> 00:01:25,240 Speaker 3: years since after the pandemic. So clearly a sign that 28 00:01:25,280 --> 00:01:27,959 Speaker 3: the consumer has the funds to spend. But I'd say 29 00:01:27,959 --> 00:01:30,920 Speaker 3: it also means that the consumers choosing Amazon to spend 30 00:01:30,959 --> 00:01:33,240 Speaker 3: their funds there. I think that's very key, as you 31 00:01:33,280 --> 00:01:36,160 Speaker 3: will see some losers still coming out of the holiday season, 32 00:01:36,480 --> 00:01:40,080 Speaker 3: but online is gaining traction, and Amazon is what comes 33 00:01:40,080 --> 00:01:41,520 Speaker 3: to mind when you want to shop online. 34 00:01:41,800 --> 00:01:43,880 Speaker 4: So what I found to be really fascinating was like 35 00:01:43,880 --> 00:01:45,800 Speaker 4: a nugget. I forgot what research report I read it in, 36 00:01:45,840 --> 00:01:49,600 Speaker 4: but that the cost to serve a customer's order fell 37 00:01:49,640 --> 00:01:52,440 Speaker 4: by forty five cents a unit last year. Can you 38 00:01:52,680 --> 00:01:54,560 Speaker 4: how big a deal is that and how hard was 39 00:01:54,560 --> 00:01:55,400 Speaker 4: it to get there? 40 00:01:56,320 --> 00:01:59,600 Speaker 3: So Amazon doesn't disclose how many units they sell, so 41 00:01:59,600 --> 00:02:01,840 Speaker 3: it's kind of hard to back into that. I'd say 42 00:02:01,880 --> 00:02:04,960 Speaker 3: it's still a fairly small piece of the cost space. 43 00:02:05,160 --> 00:02:06,880 Speaker 3: But what I would say is what's going to help 44 00:02:06,920 --> 00:02:09,640 Speaker 3: them to continue to drive these costs down is just 45 00:02:09,720 --> 00:02:12,640 Speaker 3: the efficiencies that they've created within their fulfillment network. 46 00:02:12,720 --> 00:02:12,880 Speaker 5: Right. 47 00:02:13,080 --> 00:02:16,840 Speaker 3: You've heard them talk about getting packages to customers faster, 48 00:02:17,680 --> 00:02:20,760 Speaker 3: and that's really a function of how they centralized their 49 00:02:20,880 --> 00:02:25,359 Speaker 3: shipping and distribution networks. And we think that traditionally, when 50 00:02:25,400 --> 00:02:27,480 Speaker 3: you hear about things coming to you faster, it's usually 51 00:02:27,480 --> 00:02:31,040 Speaker 3: more expensive, and in the case of Amazon, it's actually cheaper. 52 00:02:31,080 --> 00:02:33,640 Speaker 3: So it's pretty impressive, and it's all driven by scale. 53 00:02:33,720 --> 00:02:37,000 Speaker 2: The trucks are everywhere. I mean, it's just amazing. They 54 00:02:37,080 --> 00:02:39,359 Speaker 2: gotta be the biggest trucking fleet in the country. I 55 00:02:39,360 --> 00:02:41,480 Speaker 2: don't know. Let's bring in Man deep sing here. Let's 56 00:02:41,480 --> 00:02:45,520 Speaker 2: get to the technology aspect of Amazon, which has really 57 00:02:45,520 --> 00:02:48,720 Speaker 2: been the driver of its profitability and many would argue 58 00:02:48,760 --> 00:02:51,440 Speaker 2: the stock price performance, Mandy, would you hear from Amazon 59 00:02:51,520 --> 00:02:54,040 Speaker 2: last night about its cloud business AWS? 60 00:02:55,400 --> 00:02:58,400 Speaker 6: I mean, look, I think when you compare it to 61 00:02:59,160 --> 00:03:04,040 Speaker 6: Microsoft Azure growth, the growth is still kind of far 62 00:03:04,120 --> 00:03:08,639 Speaker 6: weaker between the two. But Amazon is, you know, much 63 00:03:08,680 --> 00:03:11,400 Speaker 6: higher run rate, ninety seven billion dollar run rate, so 64 00:03:11,800 --> 00:03:14,600 Speaker 6: they clearly seem to be stepping up in terms of 65 00:03:14,639 --> 00:03:18,520 Speaker 6: their generative AI exposure, and they've given investors hope that 66 00:03:18,560 --> 00:03:22,520 Speaker 6: they will be able to catch up. But look, overall, 67 00:03:22,600 --> 00:03:25,600 Speaker 6: I think profitability wise, they seem to be doing very 68 00:03:25,600 --> 00:03:30,040 Speaker 6: well on the AWS front. AD business continues to work 69 00:03:30,200 --> 00:03:32,600 Speaker 6: very well for them, you know, twenty six percent growth, 70 00:03:32,639 --> 00:03:36,520 Speaker 6: So Amazon, I think the diversification play they have and 71 00:03:36,560 --> 00:03:40,200 Speaker 6: the fact that they seem to capitalize on any new trend, 72 00:03:40,600 --> 00:03:43,960 Speaker 6: you know, seemingly fast, even though in this case Microsoft 73 00:03:44,040 --> 00:03:47,440 Speaker 6: Azure clearly still has the strongest momentum when it comes 74 00:03:47,440 --> 00:03:48,240 Speaker 6: to generative AA. 75 00:03:48,560 --> 00:03:51,400 Speaker 4: What I also found really interesting, Mandeep is that with 76 00:03:51,880 --> 00:03:56,640 Speaker 4: Amazon and even Meta, they're spending more, but the market 77 00:03:56,640 --> 00:03:58,600 Speaker 4: feels okay about that. I saw the same thing with 78 00:03:58,960 --> 00:04:01,560 Speaker 4: Exxon too. They're spending a little bit more, but their 79 00:04:01,600 --> 00:04:05,200 Speaker 4: market's okay with that. What do you make of that? 80 00:04:06,680 --> 00:04:09,480 Speaker 6: I mean, look, when you know Meta is growing at 81 00:04:09,520 --> 00:04:13,720 Speaker 6: over twenty percent, nobody cares about the reality lab losses. 82 00:04:14,680 --> 00:04:18,520 Speaker 6: They're losing eighteen billion dollars a year on reality labs. 83 00:04:18,560 --> 00:04:21,200 Speaker 6: It's okay. They get a pass the moment that growth 84 00:04:21,360 --> 00:04:23,880 Speaker 6: papers And we saw that in twenty twenty two when 85 00:04:23,880 --> 00:04:29,000 Speaker 6: they had those negative quarters, everyone you know, start started 86 00:04:29,000 --> 00:04:33,000 Speaker 6: to complain about you know how irresponsible management was im 87 00:04:33,000 --> 00:04:35,720 Speaker 6: betting on Metaverse, and yesterday there was not even a 88 00:04:35,760 --> 00:04:38,159 Speaker 6: mention of Reality Labs, given you know, the beat and 89 00:04:38,240 --> 00:04:41,280 Speaker 6: rays and the fact that they really seem to be 90 00:04:41,320 --> 00:04:44,440 Speaker 6: executing very well with twenty five percent layoffs. So it 91 00:04:44,480 --> 00:04:46,840 Speaker 6: all comes down to your top line. And if they 92 00:04:46,920 --> 00:04:50,200 Speaker 6: keep executing the way they did last quarter, I think 93 00:04:50,440 --> 00:04:54,760 Speaker 6: people don't mind the capex and generative AI. CAPEX actually 94 00:04:55,240 --> 00:04:58,599 Speaker 6: is a trend that we're seeing across the board from hyperscalers. 95 00:04:58,600 --> 00:05:02,839 Speaker 6: So what we I heard last night was Meta does 96 00:05:02,880 --> 00:05:05,080 Speaker 6: have a generative AI play. It may not be on 97 00:05:05,120 --> 00:05:08,719 Speaker 6: the cloud, but they are deploying their AI assistance everywhere 98 00:05:08,760 --> 00:05:10,599 Speaker 6: and that seems to be helping engagement. 99 00:05:11,240 --> 00:05:14,279 Speaker 2: Hey put them give us this an update on the 100 00:05:14,320 --> 00:05:18,280 Speaker 2: advertising business for Amazons. I think that's a business not 101 00:05:18,440 --> 00:05:20,840 Speaker 2: enough people pay attention to or it gets enough credit 102 00:05:21,000 --> 00:05:23,359 Speaker 2: because there's some big numbers there it is. 103 00:05:23,400 --> 00:05:25,760 Speaker 3: It's actually at a run rate of sixty billion now 104 00:05:25,800 --> 00:05:27,919 Speaker 3: and we think it can get to one hundred billion 105 00:05:28,400 --> 00:05:31,599 Speaker 3: by twenty twenty eight. So clearly great growth there. And 106 00:05:31,640 --> 00:05:33,640 Speaker 3: what you have to remember, and when they mentioned this 107 00:05:33,760 --> 00:05:37,000 Speaker 3: a little, you know, the advertising business is very lucrative 108 00:05:37,279 --> 00:05:40,479 Speaker 3: it carries about fifty percent profit margins. So if you 109 00:05:40,520 --> 00:05:42,839 Speaker 3: think about just the run rate they're at, that's thirty 110 00:05:42,839 --> 00:05:45,080 Speaker 3: billion dollars to the bottom line in the coming year. 111 00:05:45,440 --> 00:05:48,640 Speaker 3: That's huge for Amazon, and that's really the backbone of 112 00:05:48,640 --> 00:05:52,120 Speaker 3: what's driving profitable growth in North America or you could 113 00:05:52,120 --> 00:05:53,239 Speaker 3: say their retail business. 114 00:05:53,360 --> 00:05:57,279 Speaker 2: See that that was revenue that propelled my career? Is 115 00:05:57,320 --> 00:06:01,279 Speaker 2: that advertising revenue? But during the peak of microos, radio TV, 116 00:06:01,720 --> 00:06:04,760 Speaker 2: cable TV, maybe in a little bit on newspapers, we. 117 00:06:04,760 --> 00:06:07,720 Speaker 4: Still know the radio people. We love the radio to 118 00:06:07,760 --> 00:06:08,159 Speaker 4: the radio. 119 00:06:08,320 --> 00:06:11,159 Speaker 2: Now it's sixteen billion dollars going on Amazon. 120 00:06:11,720 --> 00:06:14,520 Speaker 4: Amazing. Hey Mandy, before we let you guys go to 121 00:06:14,560 --> 00:06:17,719 Speaker 4: your point before. If we keep getting these kind of numbers, 122 00:06:18,279 --> 00:06:20,400 Speaker 4: can we still call like Meta a growth company even 123 00:06:20,400 --> 00:06:23,000 Speaker 4: though it's now paying this dividend. Typically you don't see 124 00:06:23,000 --> 00:06:24,720 Speaker 4: that in the growth of your company. Is like, can 125 00:06:24,800 --> 00:06:25,719 Speaker 4: all things be true? 126 00:06:27,279 --> 00:06:30,800 Speaker 6: I mean, advertising is a very cyclical business. Right now 127 00:06:30,839 --> 00:06:33,440 Speaker 6: we are coming out of LA trough and ad pricing 128 00:06:33,520 --> 00:06:36,640 Speaker 6: environment is improving, and if you're an e commerce company, 129 00:06:36,800 --> 00:06:39,839 Speaker 6: there is nowhere else to go to acquire customers. Given 130 00:06:39,880 --> 00:06:43,080 Speaker 6: Meta has four billion you know users across its family 131 00:06:43,120 --> 00:06:46,400 Speaker 6: of apps, so clearly they get that mind share, and 132 00:06:46,400 --> 00:06:49,400 Speaker 6: it's still a duopoly when it comes to digital ad spending, 133 00:06:49,440 --> 00:06:52,479 Speaker 6: but I would say we are closer to saturation in 134 00:06:52,560 --> 00:06:55,560 Speaker 6: terms of that digital ad growth then we were, you know, 135 00:06:55,560 --> 00:06:59,080 Speaker 6: a couple of years back. So not a lot of 136 00:06:59,200 --> 00:07:02,200 Speaker 6: runway in from maintaining that twenty percent plus growth, but 137 00:07:02,520 --> 00:07:05,679 Speaker 6: the next few quarters I think they clearly will benefit 138 00:07:05,720 --> 00:07:08,440 Speaker 6: from this at pricing tailvin A right, guys. 139 00:07:08,279 --> 00:07:08,680 Speaker 7: That's good. 140 00:07:08,760 --> 00:07:11,400 Speaker 4: Yeah, amazing guys, Thanks lot, really appreciated, Mandy P. Sink 141 00:07:11,640 --> 00:07:14,840 Speaker 4: and Punam Goyle really great. I mean, like I was 142 00:07:14,880 --> 00:07:17,880 Speaker 4: shocked when I saw those numbers, Like Apple didn't surprise 143 00:07:17,960 --> 00:07:19,600 Speaker 4: me that much, but when I saw those numbers come 144 00:07:19,600 --> 00:07:21,560 Speaker 4: through the terminal yesterday on the clothes, I was just 145 00:07:21,640 --> 00:07:22,239 Speaker 4: totally forged. 146 00:07:22,320 --> 00:07:23,640 Speaker 2: Now the thing with Apple, and we've talked to a 147 00:07:23,640 --> 00:07:27,200 Speaker 2: couple experts today, including gene monsters. If I were investor 148 00:07:27,240 --> 00:07:29,600 Speaker 2: in Apple, I'd still be really concerned about China. I 149 00:07:29,600 --> 00:07:32,000 Speaker 2: don't feel like I don't have a call of Hey, 150 00:07:32,040 --> 00:07:34,000 Speaker 2: is it just the Chinese economy kind of slowing down 151 00:07:34,080 --> 00:07:36,600 Speaker 2: or is it Chinese people saying I'm not buying Western stuff. 152 00:07:36,880 --> 00:07:40,080 Speaker 2: I'm by it. It's more nationalistic. Now that's a concern, 153 00:07:40,240 --> 00:07:44,480 Speaker 2: although i DC the research firm says Apple's got like 154 00:07:44,480 --> 00:07:47,040 Speaker 2: it's best market share ever, so I don't know how 155 00:07:47,040 --> 00:07:47,800 Speaker 2: that's all playing out. 156 00:07:47,880 --> 00:07:50,040 Speaker 4: So, but the competition is real no matter which we 157 00:07:50,160 --> 00:07:51,440 Speaker 4: look at it, It's all about competition. 158 00:07:51,640 --> 00:07:51,840 Speaker 3: Yep. 159 00:07:53,320 --> 00:07:57,200 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 160 00:07:57,280 --> 00:07:59,800 Speaker 1: weekdays at ten am Eastern on Apple. 161 00:07:59,520 --> 00:08:02,640 Speaker 8: Car Play and and royd Otto with a Bloomberg Business app. 162 00:08:02,680 --> 00:08:05,520 Speaker 1: You can also listen live on Amazon Alexa from our 163 00:08:05,560 --> 00:08:12,200 Speaker 1: flagship New York station just say Alexa playing Bloomberg eleven thirty. 164 00:08:11,880 --> 00:08:14,320 Speaker 2: Big Tech Earnings. And there's some themes coming across here 165 00:08:14,360 --> 00:08:17,160 Speaker 2: in terms of AI, in terms of digital advertising that 166 00:08:17,200 --> 00:08:19,880 Speaker 2: are pretty well, it's pretty constructive here and we've been 167 00:08:19,880 --> 00:08:21,360 Speaker 2: talking about most of the morning here. We're going to 168 00:08:21,400 --> 00:08:24,120 Speaker 2: bring in Angela Zino. He's a senior equity analyst and 169 00:08:24,200 --> 00:08:27,920 Speaker 2: vice president c f R Research. He joins us via 170 00:08:28,120 --> 00:08:30,920 Speaker 2: Zoom from New York. Angela, I'd love to start with 171 00:08:31,000 --> 00:08:34,480 Speaker 2: Apple because for me, that's the most fascinating story coming 172 00:08:34,480 --> 00:08:36,400 Speaker 2: out of big tech. I just don't know which way 173 00:08:36,440 --> 00:08:39,480 Speaker 2: to go, and my big big issue is China. Could 174 00:08:39,520 --> 00:08:42,640 Speaker 2: you give us your sense about how you think China 175 00:08:42,760 --> 00:08:45,000 Speaker 2: is as an opportunity and as a risk to the 176 00:08:45,000 --> 00:08:45,680 Speaker 2: Apple story. 177 00:08:46,760 --> 00:08:47,719 Speaker 1: Yeah, and I. 178 00:08:47,679 --> 00:08:50,599 Speaker 7: Think Apple there's a huge Bullbard debate going on with 179 00:08:50,920 --> 00:08:54,960 Speaker 7: that name right now. And when I think about Apple, yes, 180 00:08:55,040 --> 00:08:58,360 Speaker 7: I mean China is absolutely an issue right now. We're talking, 181 00:08:58,480 --> 00:09:00,760 Speaker 7: you know, a thirteen percent of client revenue in that 182 00:09:00,800 --> 00:09:04,240 Speaker 7: region when overall you actually did see you know, a 183 00:09:04,280 --> 00:09:06,679 Speaker 7: broader industry growth in the in you know, the some 184 00:09:06,880 --> 00:09:11,000 Speaker 7: reporter there mid single digit decline on the constant currency 185 00:09:11,000 --> 00:09:13,840 Speaker 7: basis from so from that perspective doesn't seem as bad. 186 00:09:14,240 --> 00:09:16,640 Speaker 7: My guess is some of the guidance that they alluded to, 187 00:09:16,760 --> 00:09:18,800 Speaker 7: even though they kind of blamed some of the tough 188 00:09:18,840 --> 00:09:22,160 Speaker 7: comps from a year ago, probably also indicates that there 189 00:09:22,240 --> 00:09:24,240 Speaker 7: is going to continue to be some weakness going on 190 00:09:24,360 --> 00:09:27,839 Speaker 7: in China, probably through calendar twenty twenty four at the 191 00:09:28,000 --> 00:09:31,640 Speaker 7: very least. So you know, it's China becomes an issue 192 00:09:31,679 --> 00:09:34,680 Speaker 7: for Apple becomes ahead wind. We do expect them to 193 00:09:34,800 --> 00:09:38,120 Speaker 7: continue to lose share, but there is so much good 194 00:09:38,200 --> 00:09:42,480 Speaker 7: stuff going out outside of China where we think kind 195 00:09:42,520 --> 00:09:45,239 Speaker 7: of the story really plays out, but specifically in Asia 196 00:09:45,320 --> 00:09:49,520 Speaker 7: Asia Group seven percent outside of China, and you know, 197 00:09:49,720 --> 00:09:51,240 Speaker 7: you kind of look at areas that are going to 198 00:09:51,240 --> 00:09:53,760 Speaker 7: continue to attribute, you know, to that in sold base growth. 199 00:09:53,840 --> 00:09:56,400 Speaker 7: It's going to be areas like in India and Indonesia 200 00:09:56,400 --> 00:09:57,840 Speaker 7: over the next decade plus. 201 00:09:58,040 --> 00:10:00,160 Speaker 4: So Angelo, what's it going to take for appily at 202 00:10:00,400 --> 00:10:02,680 Speaker 4: for that because it feels like the straight up China 203 00:10:02,720 --> 00:10:05,480 Speaker 4: competition is truly what this company is training on. 204 00:10:06,360 --> 00:10:08,560 Speaker 7: Yeah, I mean, it's going to take time first. I mean, 205 00:10:08,640 --> 00:10:11,280 Speaker 7: but you know, when we think about the actual numbers 206 00:10:11,360 --> 00:10:14,400 Speaker 7: here in terms of you know, not the top line, 207 00:10:14,440 --> 00:10:16,400 Speaker 7: but more on the bottom line side of things than 208 00:10:16,400 --> 00:10:18,080 Speaker 7: on the free cash flow side of things, and that's 209 00:10:18,080 --> 00:10:21,200 Speaker 7: really what drives we think the valuation is in Apple, 210 00:10:21,200 --> 00:10:24,200 Speaker 7: it's that free cash flow number. Despite the lower the 211 00:10:24,200 --> 00:10:27,440 Speaker 7: five billion are so less in expected revenue, the free 212 00:10:27,440 --> 00:10:30,439 Speaker 7: cash flow number hasn't budget in terms of expectations here 213 00:10:30,520 --> 00:10:32,560 Speaker 7: over the next year. And a big reason for that 214 00:10:33,320 --> 00:10:36,319 Speaker 7: is because of all the kind of improvement they're they're 215 00:10:36,320 --> 00:10:38,880 Speaker 7: doing on the margin side of things, the better mix 216 00:10:38,920 --> 00:10:41,400 Speaker 7: on the services, but also the fact that margins are 217 00:10:41,440 --> 00:10:44,360 Speaker 7: improving not only on the services side, but also on 218 00:10:44,400 --> 00:10:46,720 Speaker 7: the product side of things. So that's really kind of 219 00:10:46,760 --> 00:10:51,560 Speaker 7: helping to sustain you know, the actual free cash flow 220 00:10:51,640 --> 00:10:54,960 Speaker 7: potential of this company. So you know, you have to 221 00:10:54,960 --> 00:10:56,960 Speaker 7: be patient if you're an investor in this name and 222 00:10:57,040 --> 00:11:00,679 Speaker 7: kind of believe in the whole compounding effect over time. 223 00:11:00,760 --> 00:11:04,600 Speaker 7: But right now, it's tough to really kind of expect 224 00:11:04,679 --> 00:11:07,160 Speaker 7: significant gains from a stock price perspective here over the 225 00:11:07,200 --> 00:11:08,080 Speaker 7: next three to six months. 226 00:11:08,120 --> 00:11:10,080 Speaker 2: All right, Well, talk about significant games from the stock 227 00:11:10,120 --> 00:11:14,439 Speaker 2: price perspective. Meta platforms up twenty percent today, all time high. 228 00:11:14,840 --> 00:11:17,480 Speaker 2: Over two hundred billion dollars of market cap was created 229 00:11:17,679 --> 00:11:21,920 Speaker 2: just today in trading. So an end. They're paying a dividend. 230 00:11:21,960 --> 00:11:23,920 Speaker 2: They they've been listening to me. Now the folks at 231 00:11:23,920 --> 00:11:26,120 Speaker 2: Apple need to listen to me and up their dividend 232 00:11:26,160 --> 00:11:29,160 Speaker 2: and give me a good three percent dividend yield. Talk 233 00:11:29,200 --> 00:11:32,480 Speaker 2: to us about Meta here. Boy, it seems like everything's 234 00:11:32,559 --> 00:11:34,680 Speaker 2: working there. What's your key takeaway? 235 00:11:35,960 --> 00:11:38,520 Speaker 7: Yeah, I think this is as good a quarter as 236 00:11:38,880 --> 00:11:41,319 Speaker 7: an investor could have asked for. I mean, you're right 237 00:11:41,320 --> 00:11:44,280 Speaker 7: they initiated the dividend, but you know it implies less 238 00:11:44,280 --> 00:11:46,520 Speaker 7: than a one percent divit in yield, right. I think 239 00:11:46,520 --> 00:11:48,920 Speaker 7: it's more kind of you know the fact that they're 240 00:11:49,520 --> 00:11:52,680 Speaker 7: just demonstrating to investors out they're the conviction they have 241 00:11:52,800 --> 00:11:55,079 Speaker 7: in that business and kind of some of the guidance 242 00:11:55,080 --> 00:11:58,320 Speaker 7: that they provided out there. But listen, I think they're 243 00:11:58,360 --> 00:12:00,680 Speaker 7: running on all cylinders. Grew the top one twenty five 244 00:12:00,679 --> 00:12:04,079 Speaker 7: percent actually to one guide points to an acceleration of 245 00:12:04,080 --> 00:12:06,800 Speaker 7: growth where we actually expected growth to start to decelerate 246 00:12:06,840 --> 00:12:10,080 Speaker 7: sharply in the first half of twenty twenty five four. 247 00:12:10,880 --> 00:12:13,000 Speaker 7: You kind of look at how they're doing this. They're 248 00:12:13,040 --> 00:12:17,160 Speaker 7: actually keeping operating expenses in check. And there's nothing you 249 00:12:17,160 --> 00:12:19,600 Speaker 7: know better that Wall Street lights than kind of keeping 250 00:12:19,600 --> 00:12:23,160 Speaker 7: the opex numbers in check in a world where AI 251 00:12:23,320 --> 00:12:27,360 Speaker 7: is extremely expensive, and they continue to grow that top 252 00:12:27,440 --> 00:12:30,280 Speaker 7: line by holding it, you know, by keeping it unchanged. 253 00:12:30,320 --> 00:12:32,920 Speaker 7: So I think, you know, that's really the key as 254 00:12:33,000 --> 00:12:35,440 Speaker 7: far as the metastory is concerned, and you really do 255 00:12:35,520 --> 00:12:37,840 Speaker 7: have to love it if you're an investor. 256 00:12:38,600 --> 00:12:40,880 Speaker 4: I mean, Paul does. He's he's been talking about it 257 00:12:40,920 --> 00:12:44,240 Speaker 4: pretty much all day. But the idea that like the 258 00:12:44,760 --> 00:12:48,439 Speaker 4: year of Efficiency of twenty twenty three will continue despite 259 00:12:48,600 --> 00:12:51,440 Speaker 4: the information we got on Reality Labs in terms of 260 00:12:51,440 --> 00:12:53,440 Speaker 4: how much they're losing and the capex going into it. 261 00:12:53,480 --> 00:12:55,679 Speaker 4: When do I care about that when it comes to Meta. 262 00:12:56,880 --> 00:12:59,839 Speaker 7: As far as you know, losses and reality labs and 263 00:12:59,880 --> 00:13:03,199 Speaker 7: the potential revenue trajectory there, I mean yeah, I mean, 264 00:13:03,960 --> 00:13:05,640 Speaker 7: this is a long term vision for the company, so 265 00:13:05,679 --> 00:13:08,160 Speaker 7: they're looking for they're making these investments for five ten 266 00:13:08,240 --> 00:13:10,240 Speaker 7: years out from now. You're not going to get the 267 00:13:10,320 --> 00:13:13,920 Speaker 7: immediate type of return that you're seeing on the AI 268 00:13:14,040 --> 00:13:16,439 Speaker 7: side of things. I mean, AI has been absolutely phenomenal 269 00:13:16,480 --> 00:13:20,959 Speaker 7: for Meta because it's a parent that advertisers are willing 270 00:13:21,000 --> 00:13:23,319 Speaker 7: to kind of pay up for it because you're you're 271 00:13:23,320 --> 00:13:26,720 Speaker 7: getting a higher ROI out there, so you know, it 272 00:13:26,800 --> 00:13:28,680 Speaker 7: makes a lot of sense. You're you're seeing the you know, 273 00:13:29,600 --> 00:13:32,679 Speaker 7: most of the kind of the the extra CAPEC spends 274 00:13:33,160 --> 00:13:36,120 Speaker 7: that's going into this company really on the AI side 275 00:13:36,120 --> 00:13:38,640 Speaker 7: of things. But as far as those losses are concerned, 276 00:13:38,720 --> 00:13:40,600 Speaker 7: that's going to that's going to remain because you're not 277 00:13:40,600 --> 00:13:43,800 Speaker 7: going to see that revenue trajectory really kind of play 278 00:13:43,800 --> 00:13:46,000 Speaker 7: out for at least kind of another three to five 279 00:13:46,080 --> 00:13:49,319 Speaker 7: years at your you know, in the basic past case scenario, So. 280 00:13:49,320 --> 00:13:52,200 Speaker 2: Angela, if investors are trafficking in the metas of the world, 281 00:13:52,240 --> 00:13:55,040 Speaker 2: the Google's, even Amazon, they have to have a call 282 00:13:55,120 --> 00:13:58,760 Speaker 2: on digital advertising? What's your call on digital advertising? 283 00:13:59,320 --> 00:14:01,560 Speaker 7: So entering the year it was it was a high 284 00:14:01,559 --> 00:14:04,679 Speaker 7: single digit growth rate, so you know, it's pretty much 285 00:14:04,760 --> 00:14:06,440 Speaker 7: going to be a similar growth rate that we saw 286 00:14:06,480 --> 00:14:08,720 Speaker 7: in twenty twenty three, and our outlook for twenty twenty 287 00:14:08,720 --> 00:14:11,160 Speaker 7: five also kind of a high single digit growth pace. 288 00:14:11,200 --> 00:14:13,520 Speaker 7: I think how you're going to get that growth pace 289 00:14:13,600 --> 00:14:15,679 Speaker 7: is going to be interesting. I mean, it looks like 290 00:14:16,400 --> 00:14:18,640 Speaker 7: on the social media side of things, you're seeing some 291 00:14:18,720 --> 00:14:22,160 Speaker 7: additional share gain taking place there relative to what you're 292 00:14:22,160 --> 00:14:25,120 Speaker 7: seeing on the search side. I think although alphabet you know, 293 00:14:25,360 --> 00:14:27,920 Speaker 7: to be fair, did not provide any type of guidance 294 00:14:28,080 --> 00:14:31,280 Speaker 7: on their end, but it just appears like that momentum 295 00:14:31,280 --> 00:14:34,360 Speaker 7: continues to really be taking form on the social media 296 00:14:34,360 --> 00:14:37,280 Speaker 7: side of things. We'll get some additional numbers next week 297 00:14:37,320 --> 00:14:39,880 Speaker 7: when the snaps and pinterests of the world start reporting, 298 00:14:40,080 --> 00:14:42,640 Speaker 7: but there are much smaller player in the industry. But 299 00:14:42,640 --> 00:14:44,560 Speaker 7: I think at the end of the day, the numbers 300 00:14:44,600 --> 00:14:47,240 Speaker 7: look pretty good for us. There's probably upside to those 301 00:14:47,240 --> 00:14:49,960 Speaker 7: assumptions that I've provided to you because of some of 302 00:14:50,000 --> 00:14:51,840 Speaker 7: that AI play and the fact that you're going to 303 00:14:51,880 --> 00:14:55,120 Speaker 7: see an acceleration. You know, away from those traditional sources 304 00:14:55,600 --> 00:14:57,400 Speaker 7: to more of the digital side of things. 305 00:14:57,640 --> 00:14:59,800 Speaker 4: Hey, Angelo, taking a look at just the run that 306 00:14:59,840 --> 00:15:01,880 Speaker 4: we seen with some of these guys on some of 307 00:15:01,920 --> 00:15:05,000 Speaker 4: the numbers, even in Vidia at another record high today, 308 00:15:05,600 --> 00:15:08,000 Speaker 4: What stock is most over their skis right now? 309 00:15:10,000 --> 00:15:13,560 Speaker 7: That's a great question. That No, that's that's that's a 310 00:15:13,600 --> 00:15:16,240 Speaker 7: really good question. You know, as far as you know 311 00:15:16,480 --> 00:15:19,480 Speaker 7: we're concerned. I say the names we like the most, 312 00:15:19,520 --> 00:15:23,520 Speaker 7: the ones where there were absolute table pounders on our 313 00:15:23,640 --> 00:15:27,400 Speaker 7: Microsoft and Nvidia. I think those names on any type 314 00:15:27,400 --> 00:15:29,800 Speaker 7: of pullback, you just continue to load up and buy 315 00:15:29,880 --> 00:15:32,280 Speaker 7: more of it. You have to love kind of the 316 00:15:32,320 --> 00:15:34,840 Speaker 7: meta results here. But if there were a name I 317 00:15:34,880 --> 00:15:37,320 Speaker 7: were to throw out there right now, it would probably 318 00:15:37,400 --> 00:15:40,120 Speaker 7: be meta one because of the type of move that 319 00:15:40,160 --> 00:15:42,040 Speaker 7: you've seen in the in the in the stock today. 320 00:15:43,160 --> 00:15:45,400 Speaker 7: I'd also say that the comps do get a little 321 00:15:45,440 --> 00:15:47,720 Speaker 7: bit more difficult in the second half of this year, 322 00:15:47,960 --> 00:15:50,920 Speaker 7: So there could be a scenario where as those comps 323 00:15:50,960 --> 00:15:53,600 Speaker 7: get a little bit more challenging and they need to 324 00:15:53,840 --> 00:15:57,040 Speaker 7: you know, potentially you know, spend a little bit more, 325 00:15:57,560 --> 00:16:00,640 Speaker 7: that could kind of set up some potential disppointment later 326 00:16:00,720 --> 00:16:03,120 Speaker 7: this year for the thought. So that's probably the name 327 00:16:03,440 --> 00:16:05,480 Speaker 7: where maybe I would raise a little bit of an 328 00:16:05,480 --> 00:16:08,120 Speaker 7: eyebrow among kind of the you know, the mags have 329 00:16:08,200 --> 00:16:08,960 Speaker 7: a names right now. 330 00:16:09,240 --> 00:16:12,480 Speaker 4: Hey, Angela, thanks a lot, super appreciate it. Angelousio, Vice President, 331 00:16:12,520 --> 00:16:15,240 Speaker 4: Senior equity analyst at cfr A Research. 332 00:16:16,680 --> 00:16:20,560 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 333 00:16:20,640 --> 00:16:23,720 Speaker 1: weekdays at ten am Eastern on fo card playing Android 334 00:16:23,760 --> 00:16:26,840 Speaker 1: outo with the Bloomberg Business App. Listen on demand wherever 335 00:16:26,920 --> 00:16:30,760 Speaker 1: you get your podcasts, or watch us live on YouTube. 336 00:16:31,720 --> 00:16:35,920 Speaker 2: That'd be very, very encouraged by the strong labor numbers 337 00:16:35,920 --> 00:16:38,760 Speaker 2: I got out today in terms of giftness, economy growing. 338 00:16:38,920 --> 00:16:40,400 Speaker 4: Yeah, but I still think that the idea of like 339 00:16:40,440 --> 00:16:43,400 Speaker 4: people still feel bad and then the number is still 340 00:16:43,440 --> 00:16:46,440 Speaker 4: good and bridging that gap and how that winds up 341 00:16:46,440 --> 00:16:48,480 Speaker 4: playing out. We're still really early in twenty twenty four, 342 00:16:48,480 --> 00:16:50,440 Speaker 4: but how that plays out I think really interesting. 343 00:16:50,680 --> 00:16:53,160 Speaker 2: Yeah, I guess that's a messaging story for you know, 344 00:16:53,240 --> 00:16:56,640 Speaker 2: the politicians out there. You know, you got a GDP 345 00:16:56,760 --> 00:16:59,280 Speaker 2: print better than expected. Everybody kind of has a job, 346 00:16:59,320 --> 00:17:01,240 Speaker 2: wages are going up, inflations coming down. 347 00:17:01,840 --> 00:17:03,680 Speaker 4: But man, but then you have to wonder, does that 348 00:17:03,720 --> 00:17:05,159 Speaker 4: mean that we were going to wind up seeing the 349 00:17:05,200 --> 00:17:07,680 Speaker 4: FED not cut in May, and then does that keep 350 00:17:07,720 --> 00:17:10,400 Speaker 4: conditions tighter? And then you have real rates actually increasing, 351 00:17:10,400 --> 00:17:11,960 Speaker 4: et cetera, et cetera, and then it actually does wind 352 00:17:12,040 --> 00:17:14,119 Speaker 4: up hurting later sort of the longer you push it off, 353 00:17:14,600 --> 00:17:17,000 Speaker 4: then are we headed for something a lot harder. 354 00:17:17,080 --> 00:17:18,600 Speaker 2: Yeah, that's a great point, and that's kind of the 355 00:17:18,600 --> 00:17:21,240 Speaker 2: discussion now. I guess it's all about May. Jonny Biley 356 00:17:21,320 --> 00:17:24,960 Speaker 2: joins us. She's a chief workforce analyst at inmploy Bridge 357 00:17:25,160 --> 00:17:28,479 Speaker 2: joins us on zoom from Pompino Beach, Florida. 358 00:17:28,560 --> 00:17:29,000 Speaker 8: What is it? 359 00:17:29,040 --> 00:17:30,000 Speaker 2: What are we doing wrong here? 360 00:17:30,240 --> 00:17:31,800 Speaker 4: I don't want to be in Florida. 361 00:17:32,040 --> 00:17:33,680 Speaker 2: Be in Florida right now because it's been we haven't 362 00:17:33,680 --> 00:17:36,440 Speaker 2: seen the sun in like two weeks, that's true. 363 00:17:36,480 --> 00:17:39,440 Speaker 4: I don't know I was in Florence. So if we're 364 00:17:39,480 --> 00:17:40,960 Speaker 4: reassigning bet. 365 00:17:44,280 --> 00:17:46,560 Speaker 2: Well, pretty Jony, thanks so much for joining us here. 366 00:17:46,840 --> 00:17:48,359 Speaker 2: I'd love to get your thoughts here and kind of 367 00:17:48,400 --> 00:17:51,120 Speaker 2: what we saw on this job's uh date data print 368 00:17:51,160 --> 00:17:52,600 Speaker 2: this morning? How do you how do you kind of 369 00:17:52,720 --> 00:17:53,639 Speaker 2: deal with it? 370 00:17:54,280 --> 00:17:58,080 Speaker 9: Well, definitely a big surprise right this morning, and I 371 00:17:58,080 --> 00:18:01,920 Speaker 9: don't think anyone predicted numbers that would be that high. 372 00:18:01,920 --> 00:18:04,000 Speaker 9: I think maybe Goldman Sachs said it was going to 373 00:18:04,000 --> 00:18:07,520 Speaker 9: be about two hundred and fifty thousand, but never expected 374 00:18:07,640 --> 00:18:11,480 Speaker 9: over three hundred and fifty thousand jobs created. And the 375 00:18:11,560 --> 00:18:15,359 Speaker 9: reason I think it really is a surprise is we 376 00:18:15,640 --> 00:18:18,120 Speaker 9: are still you know, seeing. 377 00:18:17,960 --> 00:18:20,960 Speaker 5: Layoffs, you know, not just in the big tech. 378 00:18:20,720 --> 00:18:25,480 Speaker 9: Companies, but we're seeing more and more employers that are 379 00:18:25,880 --> 00:18:26,919 Speaker 9: you know, cutting back. 380 00:18:27,119 --> 00:18:29,280 Speaker 5: Now, there is some optimism about. 381 00:18:29,000 --> 00:18:32,719 Speaker 9: Twenty twenty four. Certainly the companies that we work with 382 00:18:32,760 --> 00:18:37,280 Speaker 9: at employee Bridge, I would say our hiring managers are 383 00:18:37,320 --> 00:18:41,119 Speaker 9: cautiously optimistic and they are saying that they are predicting, 384 00:18:41,600 --> 00:18:45,440 Speaker 9: you know, a better year of growth of job growth 385 00:18:45,440 --> 00:18:49,400 Speaker 9: in twenty twenty four than twenty twenty three, but we're 386 00:18:49,480 --> 00:18:54,920 Speaker 9: not seeing the robust growth that this report actually shows. 387 00:18:55,200 --> 00:18:58,320 Speaker 4: Well, let's talk about the one thing that confused me 388 00:18:58,359 --> 00:19:01,520 Speaker 4: the most in the report, and that average hourly work 389 00:19:01,520 --> 00:19:04,560 Speaker 4: week goes down, which basically means maybe there's a demand problem, 390 00:19:04,600 --> 00:19:07,480 Speaker 4: but wages go up. What does that mean? 391 00:19:09,000 --> 00:19:11,000 Speaker 5: Yeah, I was surprised by that number as well. 392 00:19:11,080 --> 00:19:14,800 Speaker 9: So we are seeing people working a little bit less. 393 00:19:14,880 --> 00:19:19,520 Speaker 9: The hours you know worked per week did decline, and 394 00:19:19,600 --> 00:19:23,640 Speaker 9: to your point seeing wages go up so substantially. That 395 00:19:23,800 --> 00:19:25,960 Speaker 9: was a surprise as well. We're not seeing as much 396 00:19:26,080 --> 00:19:31,200 Speaker 9: wage movement. We track wage data as well. Employ Bridge 397 00:19:31,240 --> 00:19:38,359 Speaker 9: focuses primarily on the supply chain sector, so manufacturing, construction, drivers, transportation, 398 00:19:38,760 --> 00:19:42,159 Speaker 9: and I'll tell you wages have been pretty pretty flat. 399 00:19:42,440 --> 00:19:45,600 Speaker 9: But when we see hours go down, it is the demand. 400 00:19:45,720 --> 00:19:49,240 Speaker 9: You know, the employers are not demanding right that workers 401 00:19:50,359 --> 00:19:54,480 Speaker 9: are working overtime or you know, working really that full 402 00:19:54,600 --> 00:19:55,800 Speaker 9: forty hour work week. 403 00:19:56,359 --> 00:19:57,720 Speaker 5: We're not near that level. 404 00:19:57,840 --> 00:20:02,200 Speaker 9: So it definitely is a supply and demand issue. And 405 00:20:03,320 --> 00:20:07,520 Speaker 9: again I think something that would be concerning in this report. 406 00:20:08,040 --> 00:20:11,000 Speaker 9: But there were some real bright spots in the report, 407 00:20:11,119 --> 00:20:15,399 Speaker 9: you know, seeing professional and business services add I believe 408 00:20:15,400 --> 00:20:19,359 Speaker 9: it was seventy four thousand jobs. That was a big number, 409 00:20:19,520 --> 00:20:22,919 Speaker 9: and we had seen some declines in that sector. I 410 00:20:22,960 --> 00:20:25,840 Speaker 9: did go back and look at the revisions and they 411 00:20:25,880 --> 00:20:29,600 Speaker 9: have revised them upwards. So you know, those are more 412 00:20:29,640 --> 00:20:33,560 Speaker 9: of the white collar professional jobs, and that definitely came 413 00:20:33,600 --> 00:20:34,800 Speaker 9: back stronger. 414 00:20:34,359 --> 00:20:36,040 Speaker 5: Than I think anyone predicted. 415 00:20:36,920 --> 00:20:40,359 Speaker 9: We did see that also increase in the Jolts Report, 416 00:20:40,520 --> 00:20:43,800 Speaker 9: the job opening report that came out earlier in the week. 417 00:20:44,800 --> 00:20:48,040 Speaker 9: There was a big increase in the professional service sector 418 00:20:48,840 --> 00:20:49,720 Speaker 9: job posting. 419 00:20:49,920 --> 00:20:51,320 Speaker 5: So that is a good sign. 420 00:20:51,440 --> 00:20:54,080 Speaker 9: That can mean some good things for twenty twenty four 421 00:20:54,840 --> 00:20:59,399 Speaker 9: that employers are you know, hiring more of those skills positions. 422 00:21:00,240 --> 00:21:04,640 Speaker 2: Where are these people working, Jonny, Are they coming back 423 00:21:04,680 --> 00:21:06,480 Speaker 2: to the office or is it three days a week, 424 00:21:06,520 --> 00:21:09,560 Speaker 2: four days a week. I mean, we're we're like the 425 00:21:09,640 --> 00:21:11,640 Speaker 2: last people to ask because we're in five days a week, 426 00:21:11,680 --> 00:21:14,240 Speaker 2: so you know, but we're we're the normal people. What 427 00:21:14,280 --> 00:21:14,720 Speaker 2: are they doing? 428 00:21:15,720 --> 00:21:17,320 Speaker 5: Yeah, So it is interesting. 429 00:21:17,359 --> 00:21:19,440 Speaker 9: I think, you know, one of the big concerns out 430 00:21:19,440 --> 00:21:23,400 Speaker 9: there certainly is commercial real estate because you can see 431 00:21:23,520 --> 00:21:27,159 Speaker 9: in large cities that people are not coming back to work. 432 00:21:27,400 --> 00:21:31,760 Speaker 9: They're not in the office buildings employers, you know, in 433 00:21:31,760 --> 00:21:35,560 Speaker 9: this again mostly in the white collar you know, professional 434 00:21:35,600 --> 00:21:41,360 Speaker 9: service jobs and also in healthcare, we do see that, 435 00:21:41,520 --> 00:21:45,680 Speaker 9: like there's opportunities to even work you know remote or 436 00:21:45,720 --> 00:21:50,879 Speaker 9: go to a hybrid schedule, and employees don't necessarily want 437 00:21:50,960 --> 00:21:52,119 Speaker 9: to go back to the office. 438 00:21:52,200 --> 00:21:56,400 Speaker 5: They like the flexibility, and I do have some concerns 439 00:21:56,440 --> 00:21:56,800 Speaker 5: about that. 440 00:21:56,920 --> 00:21:59,640 Speaker 9: I think there there are a lot of benefits, right 441 00:21:59,680 --> 00:22:04,199 Speaker 9: of collaboration and working together and these social aspects. I 442 00:22:04,200 --> 00:22:07,960 Speaker 9: have some big concerns about our younger generations that are 443 00:22:08,119 --> 00:22:11,600 Speaker 9: just getting into the workplace. I have two children in college, 444 00:22:11,760 --> 00:22:13,520 Speaker 9: you know, I don't want them to have their first 445 00:22:13,640 --> 00:22:15,879 Speaker 9: job and like be working from home. 446 00:22:16,040 --> 00:22:17,280 Speaker 5: They're going to miss out. 447 00:22:17,200 --> 00:22:21,600 Speaker 9: On so many great experiences and building those professional, you know, 448 00:22:21,680 --> 00:22:22,880 Speaker 9: communication skills. 449 00:22:23,200 --> 00:22:24,919 Speaker 5: So I do have some concerns about it. 450 00:22:24,920 --> 00:22:28,640 Speaker 9: But right now, for the most part, we're seeing hybrid 451 00:22:28,720 --> 00:22:32,959 Speaker 9: models remote work. Of course, that's very different in the 452 00:22:33,080 --> 00:22:37,679 Speaker 9: trades and in supply chain where people really have to 453 00:22:37,720 --> 00:22:38,760 Speaker 9: be on site. 454 00:22:38,920 --> 00:22:41,800 Speaker 4: Yeah, Hey, Joni, thanks a lot. We really appreciate it. 455 00:22:41,800 --> 00:22:43,919 Speaker 4: It's really fun to dissect all of this with you. 456 00:22:44,080 --> 00:22:46,399 Speaker 4: Thank you so much for joining us to a bilely 457 00:22:46,560 --> 00:22:50,600 Speaker 4: chief workforce Analyst at employee Bridge on January. Job support 458 00:22:50,840 --> 00:22:54,320 Speaker 4: just coming in a lot better than estimated. 459 00:22:54,720 --> 00:22:58,600 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 460 00:22:58,680 --> 00:23:01,600 Speaker 1: weekdays at ten Amy's there on applecar. 461 00:23:01,200 --> 00:23:03,960 Speaker 8: Play and Android Otto with the Bloomberg Business app. 462 00:23:04,119 --> 00:23:06,960 Speaker 1: You can also listen live on Amazon Alexa from our 463 00:23:06,960 --> 00:23:12,520 Speaker 1: flagship New York station, Just Say Alexa playing Bloomberg eleven thirty. 464 00:23:13,080 --> 00:23:16,560 Speaker 4: Big tech still strong, high yields. Maybe that hurts equities. 465 00:23:16,720 --> 00:23:18,320 Speaker 4: Maybe you wind up having a FED that's going to 466 00:23:18,320 --> 00:23:20,240 Speaker 4: push out its rate cuts. That's going to be negative 467 00:23:20,240 --> 00:23:22,159 Speaker 4: for equities, But the economy is strong, that should be 468 00:23:22,160 --> 00:23:24,439 Speaker 4: good for equities. Do you guys get all that? You 469 00:23:24,480 --> 00:23:26,640 Speaker 4: got that? We're good to go? Now, Well, let's ask 470 00:23:26,640 --> 00:23:29,040 Speaker 4: someone who knows more than us, James Demmert. He is 471 00:23:29,119 --> 00:23:32,400 Speaker 4: chief investment officer at main Street Research. Hey, James, there's 472 00:23:32,400 --> 00:23:35,680 Speaker 4: a lot of conflicting resource narratives here. What's the right 473 00:23:35,720 --> 00:23:36,240 Speaker 4: one for you? 474 00:23:37,320 --> 00:23:42,440 Speaker 10: Good morning, Alex and Paul. I think the narrative is 475 00:23:42,640 --> 00:23:46,080 Speaker 10: again investors get really caught up with FED talk, and 476 00:23:47,240 --> 00:23:50,240 Speaker 10: you know, just look at the basic fundamentals here. We 477 00:23:50,320 --> 00:23:53,520 Speaker 10: had to blowout jobs report. What does that tell us? 478 00:23:53,760 --> 00:23:58,120 Speaker 10: Investors should know the economy is really resilient, right, I mean, 479 00:23:58,119 --> 00:24:01,560 Speaker 10: that's really great data there this morning. And then I 480 00:24:01,600 --> 00:24:05,040 Speaker 10: think at the same time, you know, there's a concern 481 00:24:05,080 --> 00:24:06,880 Speaker 10: that people are sort of caught up with the FEED 482 00:24:06,960 --> 00:24:09,119 Speaker 10: has to keep cutting rates or has to start right away. 483 00:24:09,640 --> 00:24:12,200 Speaker 10: And they're doing the right thing. I mean, they're they're 484 00:24:12,280 --> 00:24:15,399 Speaker 10: luckier or smart, They've got the economy right where they 485 00:24:15,440 --> 00:24:18,200 Speaker 10: want it. Who would have guessed? And so I think 486 00:24:18,240 --> 00:24:22,440 Speaker 10: investors here should realize inflation's gone. The PCEE their favorite 487 00:24:22,480 --> 00:24:25,359 Speaker 10: number right, less than three, very close to where they 488 00:24:25,359 --> 00:24:28,639 Speaker 10: want it to be. They don't need to cut. And 489 00:24:28,760 --> 00:24:32,240 Speaker 10: you've got a resilient economy. What that means, new business cycle, 490 00:24:32,560 --> 00:24:36,080 Speaker 10: new ball market. Keep it simple, Investors, don't overthink this. 491 00:24:36,880 --> 00:24:40,280 Speaker 10: Earnings are what drive stocks in phase one. That's where 492 00:24:40,280 --> 00:24:43,400 Speaker 10: we are. Focus on earnings. Look at Meta right, look 493 00:24:43,440 --> 00:24:47,360 Speaker 10: at Amazon, look at Microsoft. Focus on earnings. Yes, higher 494 00:24:47,480 --> 00:24:50,040 Speaker 10: rates can have an effect negati effect on certain parts 495 00:24:50,080 --> 00:24:52,679 Speaker 10: of the market. If rates are higher for longer, we 496 00:24:52,720 --> 00:24:53,800 Speaker 10: can talk more about that. 497 00:24:54,320 --> 00:24:54,520 Speaker 8: Yeah. 498 00:24:54,520 --> 00:24:57,240 Speaker 2: I mean, I'm former equity analyst, so I like to 499 00:24:57,280 --> 00:24:59,480 Speaker 2: think earnings matter. I spent so much time trying to 500 00:24:59,520 --> 00:25:01,159 Speaker 2: figure out wh the earnings are going for some of 501 00:25:01,200 --> 00:25:05,159 Speaker 2: these companies build these monster models. What are you seeing 502 00:25:05,200 --> 00:25:08,280 Speaker 2: so far, James? Again, today is all about to fed. 503 00:25:08,359 --> 00:25:10,159 Speaker 2: But again, we've had a ton of earnings, including some 504 00:25:10,160 --> 00:25:12,199 Speaker 2: big tech last night. What do you see in some 505 00:25:12,240 --> 00:25:14,000 Speaker 2: of the earnings that we've had so far? 506 00:25:15,119 --> 00:25:17,120 Speaker 10: Well, I think you know, one of the things investors 507 00:25:17,119 --> 00:25:20,160 Speaker 10: should really focus on here is you know what's driving 508 00:25:20,200 --> 00:25:22,679 Speaker 10: these earnings. And one of the things I think that 509 00:25:22,880 --> 00:25:24,960 Speaker 10: all of us should be excited about you're already seeing 510 00:25:25,000 --> 00:25:29,679 Speaker 10: it in tech earnings. Is this effect of AI right A, 511 00:25:30,160 --> 00:25:34,080 Speaker 10: that's going to be a tailwind for better productivity growth 512 00:25:34,440 --> 00:25:39,680 Speaker 10: within companies that should lead to higher stock places over time. 513 00:25:40,080 --> 00:25:42,439 Speaker 10: We're also, and I think this is really important, the 514 00:25:42,480 --> 00:25:45,240 Speaker 10: META numbers show us that as an equity MLS, you 515 00:25:45,280 --> 00:25:48,560 Speaker 10: can appreciate this. We've gone through an era of efficiency 516 00:25:48,560 --> 00:25:50,800 Speaker 10: what we call it otherwise, I know it's cost cutting, 517 00:25:51,320 --> 00:25:53,600 Speaker 10: and that cost cutting that a lot of companies have 518 00:25:53,680 --> 00:25:56,080 Speaker 10: done over the last eighteen months as they had inflation 519 00:25:56,160 --> 00:25:59,960 Speaker 10: fears and market fears is now coming to be very rewarded. 520 00:26:00,160 --> 00:26:02,560 Speaker 10: So I think, you know, the cost cutting is obviously 521 00:26:02,560 --> 00:26:05,560 Speaker 10: increasing margins. Meta a really good example, but that's going 522 00:26:05,600 --> 00:26:09,080 Speaker 10: on across all sectors. And then you've got this sort 523 00:26:09,119 --> 00:26:12,680 Speaker 10: of forward looking productivity growth that we're really excited about. 524 00:26:12,680 --> 00:26:14,720 Speaker 10: And that's why we think not just a new business cycle, 525 00:26:14,800 --> 00:26:16,760 Speaker 10: but maybe a supercycle. 526 00:26:16,720 --> 00:26:20,800 Speaker 4: Supercycle, a business supercycle. But hey, if we wind up 527 00:26:20,840 --> 00:26:24,560 Speaker 4: having higher for longer now the economy actually is heating 528 00:26:24,680 --> 00:26:26,600 Speaker 4: up and it's just kind of firing on all cylinders, 529 00:26:27,040 --> 00:26:29,879 Speaker 4: doesn't that at some point isn't that bad for equities? 530 00:26:31,240 --> 00:26:33,320 Speaker 10: Well, it could be, and it could be bad for 531 00:26:33,400 --> 00:26:35,960 Speaker 10: the economy, and it could, you know, bring the inflation 532 00:26:36,359 --> 00:26:40,000 Speaker 10: boogeyman back. And that's why again investors should just get 533 00:26:40,040 --> 00:26:43,600 Speaker 10: over their anticipation the Fed has to cut. I think 534 00:26:43,600 --> 00:26:46,679 Speaker 10: the Fed's doing the right thing. They see this economy 535 00:26:46,720 --> 00:26:48,800 Speaker 10: is strong. The last thing they want to do is cut. 536 00:26:48,960 --> 00:26:51,240 Speaker 10: I think that's exactly where we'd end up in that 537 00:26:51,440 --> 00:26:54,000 Speaker 10: risk of oh gosh, now it's you know, they've really 538 00:26:54,119 --> 00:26:57,119 Speaker 10: juiced it by lowering rates when it was already pretty 539 00:26:57,160 --> 00:26:59,720 Speaker 10: smoke and hot. I think the Fed sort of just 540 00:26:59,720 --> 00:27:03,080 Speaker 10: sit back and does nothing. And let's face it, it 541 00:27:03,200 --> 00:27:05,640 Speaker 10: might be that, you know, everybody anticipates all these rate cuts, 542 00:27:05,640 --> 00:27:07,800 Speaker 10: even the FED does this year, it could be the 543 00:27:07,800 --> 00:27:11,040 Speaker 10: economy strong enough that they don't need to do any 544 00:27:11,200 --> 00:27:14,040 Speaker 10: and earnings then will drive stocks. So I think as 545 00:27:14,080 --> 00:27:16,160 Speaker 10: long as the FED keeps their hand on the tiller 546 00:27:16,320 --> 00:27:20,000 Speaker 10: very carefully here, the economy can grow all by itself. 547 00:27:20,119 --> 00:27:23,120 Speaker 10: The market is obviously pushing interest rates up today. Let 548 00:27:23,160 --> 00:27:26,119 Speaker 10: the market do that. Keep the Fed out of the 549 00:27:26,119 --> 00:27:27,920 Speaker 10: out of the way, and I think the economy can 550 00:27:27,960 --> 00:27:29,600 Speaker 10: be perfectly fine and not overheat. 551 00:27:30,280 --> 00:27:33,320 Speaker 2: James, I like big numbers as much as the next person. 552 00:27:33,359 --> 00:27:35,320 Speaker 2: Big round numbers, and you've got them in your research. 553 00:27:35,480 --> 00:27:37,160 Speaker 2: You say, over the next ten years, the Dow, Jones 554 00:27:37,160 --> 00:27:42,120 Speaker 2: industrials could cross one hundred thousand, s and P fifteen thousand, 555 00:27:42,520 --> 00:27:46,119 Speaker 2: NASDAK fifty thousand, all within the next ten years or so. 556 00:27:46,800 --> 00:27:49,040 Speaker 2: What's kind of the thesis that get you those kind 557 00:27:49,080 --> 00:27:49,720 Speaker 2: of numbers? 558 00:27:50,119 --> 00:27:53,879 Speaker 10: Yeah, Dow one hundred k, right, yep, you know some 559 00:27:54,119 --> 00:27:57,679 Speaker 10: historic reference. I just finished my recent book which is 560 00:27:57,720 --> 00:28:00,200 Speaker 10: really about the market and what it does over time, 561 00:28:00,520 --> 00:28:02,080 Speaker 10: and so you know, really what we're using is some 562 00:28:02,160 --> 00:28:05,160 Speaker 10: data points. One is if it is a new business cycle, 563 00:28:05,160 --> 00:28:06,960 Speaker 10: which we believe it is, and if it's an AI 564 00:28:07,280 --> 00:28:11,920 Speaker 10: driven productivity growth type of cycle. What we're doing is 565 00:28:11,920 --> 00:28:15,680 Speaker 10: we're attaching what would growth rates be for companies, and 566 00:28:15,720 --> 00:28:19,080 Speaker 10: we can see earnings tripling over that seven to ten 567 00:28:19,160 --> 00:28:21,639 Speaker 10: year period. That's usually as long as a business cycle lasts. 568 00:28:22,280 --> 00:28:24,640 Speaker 10: Ten is a long time. I'd say seven to eight 569 00:28:24,720 --> 00:28:29,080 Speaker 10: nine years, we'll probably see earnings triple again with this 570 00:28:29,240 --> 00:28:32,680 Speaker 10: AI tailwind and that sort of just through the math. Right, 571 00:28:33,240 --> 00:28:37,920 Speaker 10: the Dow goes to one hundred grand, the SMP goes 572 00:28:37,960 --> 00:28:41,160 Speaker 10: to fifteen, and the Nasdaq and the SMP probably you know, 573 00:28:41,200 --> 00:28:44,760 Speaker 10: we'd say Nasdaq is fifty thousand, because that's the core 574 00:28:45,280 --> 00:28:48,880 Speaker 10: of where that AI really is going to provide better 575 00:28:48,920 --> 00:28:49,600 Speaker 10: earnings growth. 576 00:28:49,680 --> 00:28:54,760 Speaker 4: WHOA, that feels like a lot. What's your downside to 577 00:28:54,800 --> 00:28:58,040 Speaker 4: that thesis? Like, what what would be your risk to that? 578 00:28:59,600 --> 00:29:02,320 Speaker 10: Well, that's a good point. I mean, you can't just say, Wow, 579 00:29:02,360 --> 00:29:04,280 Speaker 10: that's going to happen and let's put it all an 580 00:29:04,280 --> 00:29:06,760 Speaker 10: index monet and go go home or come back in 581 00:29:06,760 --> 00:29:09,160 Speaker 10: ten years. I think there's a lot of risks in this, 582 00:29:09,360 --> 00:29:11,560 Speaker 10: and one of them is, well a lot of them 583 00:29:11,600 --> 00:29:14,160 Speaker 10: are the obvious ones, right, you know, if we fall 584 00:29:14,240 --> 00:29:17,360 Speaker 10: it into a significant recession, maybe because the Fed doesn't 585 00:29:17,400 --> 00:29:21,720 Speaker 10: manage the interest rate cycle correctly, I think I think 586 00:29:21,760 --> 00:29:24,360 Speaker 10: I'd give them the faith that that's not going to happen. 587 00:29:25,320 --> 00:29:27,440 Speaker 10: But we also have you know, we have national debt. 588 00:29:27,440 --> 00:29:30,600 Speaker 10: That's a problem. Usually that's taking taken care of. As 589 00:29:30,600 --> 00:29:32,960 Speaker 10: it was in the nineties we had such a big economy. 590 00:29:33,000 --> 00:29:35,959 Speaker 10: We actually filled the debt back that hole that the 591 00:29:35,960 --> 00:29:39,080 Speaker 10: debt was creating. We filled it up by capital gain 592 00:29:39,120 --> 00:29:42,120 Speaker 10: saxes on corporations. So but you've got some stuff going on, 593 00:29:42,200 --> 00:29:44,640 Speaker 10: and of course we have this geopolitical risk. You know, 594 00:29:44,680 --> 00:29:46,880 Speaker 10: they can always turn the world upside down, which is 595 00:29:46,880 --> 00:29:50,080 Speaker 10: why you know, in our case we use risk management tools. 596 00:29:50,240 --> 00:29:52,560 Speaker 10: I think it's very important investors, you know, things like 597 00:29:52,600 --> 00:29:56,479 Speaker 10: stop loss orders are really important. Know how much equity 598 00:29:56,480 --> 00:29:58,880 Speaker 10: exposure you need. Even if I say down one hundred K, 599 00:29:59,400 --> 00:30:01,680 Speaker 10: I'm not saying investors you should be fully one hundred 600 00:30:01,680 --> 00:30:05,040 Speaker 10: percent in stocks. Understand your planning, how much risk you 601 00:30:05,080 --> 00:30:07,280 Speaker 10: need to take, and only have enough equity exposure to 602 00:30:07,320 --> 00:30:10,720 Speaker 10: get the return that you need because there are those 603 00:30:10,840 --> 00:30:13,280 Speaker 10: risks out there, and there's some ways to protect yourself. 604 00:30:13,800 --> 00:30:16,080 Speaker 2: What are some of the sectors that you think are 605 00:30:16,160 --> 00:30:18,240 Speaker 2: interesting right here, James, A lot of folks, you know, 606 00:30:18,320 --> 00:30:19,880 Speaker 2: we got a lot of tech numbers over the last 607 00:30:19,920 --> 00:30:23,320 Speaker 2: couple of days showing some pretty good strength there. What 608 00:30:23,360 --> 00:30:24,600 Speaker 2: are some sectors you guys. 609 00:30:24,400 --> 00:30:31,560 Speaker 10: Like, Yeah, I know, right, it's the elephant. We are 610 00:30:31,600 --> 00:30:34,520 Speaker 10: big fans of tech, and that's where we're overweighted. But 611 00:30:34,680 --> 00:30:37,360 Speaker 10: I gots you know, if you look at just about 612 00:30:37,360 --> 00:30:39,520 Speaker 10: every other sector of the market, and this is important. 613 00:30:39,920 --> 00:30:44,320 Speaker 10: If you look at Ford pe earnings pees, right, you 614 00:30:44,560 --> 00:30:47,640 Speaker 10: usually pes or are not correct when you're starting a 615 00:30:47,680 --> 00:30:50,640 Speaker 10: new business cycle because the e is going to be 616 00:30:50,680 --> 00:30:53,080 Speaker 10: bigger than people expect because of the earnings of the 617 00:30:53,080 --> 00:30:55,560 Speaker 10: profit margins. So we look at valuation and we look 618 00:30:55,600 --> 00:30:58,480 Speaker 10: at what sectors look good. Oh, it's not just tech, 619 00:30:58,840 --> 00:31:03,680 Speaker 10: it's the financials, the historically cheap, it is the industrial 620 00:31:03,720 --> 00:31:06,400 Speaker 10: companies historically cheap. A lot of this stuff is less 621 00:31:06,440 --> 00:31:09,920 Speaker 10: than fifteen times earnings. I think even you know, if 622 00:31:09,960 --> 00:31:12,320 Speaker 10: you wanted to reach out into the remarket which has 623 00:31:12,320 --> 00:31:14,680 Speaker 10: gotten crushed, or the small cap stocks which are not 624 00:31:14,720 --> 00:31:18,080 Speaker 10: acting well today but they certainly would thrive over the 625 00:31:18,120 --> 00:31:20,520 Speaker 10: next few years, I think investors should look there. So 626 00:31:20,560 --> 00:31:23,880 Speaker 10: I think pretty much broadly across all sectors, you're going 627 00:31:23,960 --> 00:31:29,080 Speaker 10: to see some better earnings from these low valuations. And 628 00:31:29,200 --> 00:31:31,560 Speaker 10: again you're gonna have the AI tailwind. I mean, AI 629 00:31:31,640 --> 00:31:35,000 Speaker 10: is going to have a tremendous effect on healthcare, and 630 00:31:35,040 --> 00:31:37,680 Speaker 10: we were really excited about that as well. Low valuations. 631 00:31:37,760 --> 00:31:39,840 Speaker 4: That's all right, James, thanks a lot. That was a 632 00:31:39,840 --> 00:31:42,960 Speaker 4: bullish view to a Friday. We appreciate it. James Emmert. 633 00:31:43,080 --> 00:31:46,040 Speaker 4: He's a chief investment officer at main Street Research. 634 00:31:47,600 --> 00:31:51,480 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 635 00:31:51,560 --> 00:31:55,080 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 636 00:31:55,120 --> 00:31:55,600 Speaker 1: Auto with. 637 00:31:55,640 --> 00:31:56,840 Speaker 8: The Bloomberg Business app. 638 00:31:57,000 --> 00:31:59,760 Speaker 1: You can also listen live on Amazon Alexa from our 639 00:31:59,760 --> 00:32:03,480 Speaker 1: flo USIP New York station just say Alexa playing Bloomberg 640 00:32:03,520 --> 00:32:04,200 Speaker 1: eleven thirty. 641 00:32:06,080 --> 00:32:08,600 Speaker 4: So we brought up a University of Michigan sentiment. So 642 00:32:08,640 --> 00:32:12,520 Speaker 4: this is a wonderful indicator. The inflation expectations also can 643 00:32:12,560 --> 00:32:15,360 Speaker 4: tend to use market tend to move markets. We got 644 00:32:15,360 --> 00:32:17,640 Speaker 4: the final read for January. Here's where they stacked up. 645 00:32:18,640 --> 00:32:23,280 Speaker 4: Michigan sentiment up to seventy nine current conditions, lower than 646 00:32:23,320 --> 00:32:27,160 Speaker 4: the last read, but at eighty one point nine. Expectations 647 00:32:27,400 --> 00:32:30,440 Speaker 4: much stronger actually at seventy seven point one, and the 648 00:32:30,480 --> 00:32:32,920 Speaker 4: one year inflation expectations at two point nine. We've kind 649 00:32:32,920 --> 00:32:35,160 Speaker 4: of been around that level for a while. We want 650 00:32:35,200 --> 00:32:37,560 Speaker 4: to do is bring you direct analysis from the person 651 00:32:37,720 --> 00:32:40,200 Speaker 4: who knows these numbers, who did these numbers, and for 652 00:32:40,360 --> 00:32:43,719 Speaker 4: that we're doing with Joanne Shue, University of Michigan Surveys 653 00:32:43,760 --> 00:32:46,760 Speaker 4: of Consumer Director. She joins us, Now, Joan, always good 654 00:32:46,800 --> 00:32:48,719 Speaker 4: to see you on a you miss day. What's your 655 00:32:48,720 --> 00:32:49,520 Speaker 4: take from the numbers. 656 00:32:51,560 --> 00:32:54,440 Speaker 11: This is telling us that consumers are really starting to 657 00:32:54,520 --> 00:32:58,000 Speaker 11: feel more sure that the inflation slowdown is going to continue. 658 00:32:58,720 --> 00:33:02,040 Speaker 11: They had been reserving, judge for much of the fall 659 00:33:02,120 --> 00:33:04,120 Speaker 11: of twenty twenty three, you know, not really sure if 660 00:33:04,120 --> 00:33:06,600 Speaker 11: the slowdown was going to persist or if inflation was 661 00:33:06,640 --> 00:33:08,680 Speaker 11: going to come back. And at this point they're feeling 662 00:33:08,760 --> 00:33:10,920 Speaker 11: much more confident about it, and that is the main 663 00:33:10,960 --> 00:33:16,239 Speaker 11: thing that's supporting this very large increase in sentiment that's 664 00:33:16,280 --> 00:33:18,000 Speaker 11: been continuing on for two months now. 665 00:33:18,600 --> 00:33:22,840 Speaker 2: So, Joanne, the good sentiment numbers that you're talking about, 666 00:33:22,880 --> 00:33:25,360 Speaker 2: you know, I guess coincide or let me let me 667 00:33:25,360 --> 00:33:27,480 Speaker 2: ask you to what extent do they coincide with the 668 00:33:27,520 --> 00:33:30,240 Speaker 2: fact that, again we get the non farm payroll number 669 00:33:30,240 --> 00:33:32,440 Speaker 2: came in today really strong kind of everybody who wants 670 00:33:32,440 --> 00:33:35,200 Speaker 2: a job has a job. That figures into your data 671 00:33:35,200 --> 00:33:35,800 Speaker 2: as well, right. 672 00:33:36,520 --> 00:33:41,720 Speaker 11: Oh, absolutely. You know, consumers are by and large they're workers, 673 00:33:41,760 --> 00:33:46,120 Speaker 11: and so they recognize that labor markets are strong. And 674 00:33:46,120 --> 00:33:49,120 Speaker 11: that's also bearing out when we ask people about where 675 00:33:48,880 --> 00:33:51,160 Speaker 11: they think their incomes are going in the year ahead. 676 00:33:51,400 --> 00:33:54,680 Speaker 11: Their income expectations have strengthened over the last few months, 677 00:33:55,120 --> 00:33:58,760 Speaker 11: and that's very much supporting strong consumer spending as well 678 00:33:58,800 --> 00:33:59,840 Speaker 11: as their strong levels of. 679 00:33:59,800 --> 00:34:04,920 Speaker 4: Sen Joanne, is there any divide between if the respondents 680 00:34:04,960 --> 00:34:07,479 Speaker 4: identify as Democrat or Republican. 681 00:34:08,760 --> 00:34:12,239 Speaker 11: So there is typically a partisan gap in sentiment and 682 00:34:12,280 --> 00:34:15,799 Speaker 11: this month is no different. As it turns out, this 683 00:34:15,960 --> 00:34:20,000 Speaker 11: two month increase, Republicans saw most of that gain in 684 00:34:20,080 --> 00:34:25,560 Speaker 11: December and we're not particularly changed in January. Independence as 685 00:34:25,600 --> 00:34:28,600 Speaker 11: well as Democrats, they also saw a gain in December 686 00:34:28,600 --> 00:34:31,839 Speaker 11: and continued to gain in January as well. 687 00:34:32,480 --> 00:34:36,160 Speaker 4: For all three political groups, we're. 688 00:34:36,040 --> 00:34:38,480 Speaker 11: At the highest level of sentiment in a couple of 689 00:34:38,560 --> 00:34:40,959 Speaker 11: years now, So interesting, what. 690 00:34:40,960 --> 00:34:44,439 Speaker 2: Is your sense? I mean, we need your survey work. 691 00:34:44,480 --> 00:34:47,800 Speaker 2: I mean, is a recession still kind of on the table, 692 00:34:47,880 --> 00:34:50,759 Speaker 2: or if you take your data, you take the GDP print, 693 00:34:50,800 --> 00:34:52,960 Speaker 2: you take the labor print. I'm not sure I can 694 00:34:53,040 --> 00:34:55,080 Speaker 2: make a recession call here. 695 00:34:56,480 --> 00:35:00,719 Speaker 11: Consumers actually are quite split on what they think is 696 00:35:00,760 --> 00:35:03,439 Speaker 11: going to happen with the economy going forward. There's still 697 00:35:03,480 --> 00:35:06,360 Speaker 11: forty eight percent of people who are expecting challenging, you know, 698 00:35:06,440 --> 00:35:09,560 Speaker 11: bad times with business conditions ahead, compared with forty one 699 00:35:09,560 --> 00:35:12,360 Speaker 11: percent to expect good times ahead. Now, this isn't to 700 00:35:12,400 --> 00:35:16,319 Speaker 11: say that we will be in a recession. You know, 701 00:35:16,360 --> 00:35:20,239 Speaker 11: consumer sentiment numbers are about seven percent below average, so 702 00:35:20,280 --> 00:35:22,360 Speaker 11: they are not nowhere close to the lows we were 703 00:35:22,400 --> 00:35:25,359 Speaker 11: seeing last year, but the fact that we're on an 704 00:35:25,400 --> 00:35:27,879 Speaker 11: upward trajectory, we're pretty much back to the same upper 705 00:35:27,920 --> 00:35:30,320 Speaker 11: trajectory that we've been seeing since the all time historic 706 00:35:30,360 --> 00:35:33,400 Speaker 11: low from June twenty twenty two, and that definitely bodes 707 00:35:33,440 --> 00:35:39,360 Speaker 11: well for in terms of supporting GDP growth in the 708 00:35:39,400 --> 00:35:40,040 Speaker 11: months ahead. 709 00:35:40,280 --> 00:35:43,680 Speaker 4: Here's what I find confusing, Joanne, because if you wind 710 00:35:43,760 --> 00:35:46,959 Speaker 4: up having respondents feeling better about the economy, which would 711 00:35:46,960 --> 00:35:49,000 Speaker 4: imply like, Okay, maybe the FED is going to cut rates, 712 00:35:49,000 --> 00:35:51,560 Speaker 4: so I can feel a little bit of pressure ease. 713 00:35:51,960 --> 00:35:54,560 Speaker 4: But then because of that we see an acceleration which 714 00:35:54,560 --> 00:35:57,000 Speaker 4: then increases GDP, which then means the FED has to 715 00:35:57,080 --> 00:36:00,839 Speaker 4: keep rates higher for longer and not cut. Is any 716 00:36:00,840 --> 00:36:03,000 Speaker 4: of that track and the data and the conversations that 717 00:36:03,040 --> 00:36:07,440 Speaker 4: you have, I mean, I think this is you ask 718 00:36:07,520 --> 00:36:09,759 Speaker 4: an interesting question. And the reason this is interesting is 719 00:36:09,800 --> 00:36:12,239 Speaker 4: because you know, the survey is not happening in a vacuum. 720 00:36:12,440 --> 00:36:16,600 Speaker 11: Policy makers, including FED policy makers, are are reacting to 721 00:36:16,719 --> 00:36:21,080 Speaker 11: lots of data, including ours, and when we are asking 722 00:36:21,280 --> 00:36:25,279 Speaker 11: consumers what they think is happening now, they you know, 723 00:36:25,360 --> 00:36:27,719 Speaker 11: they are folding in their own expectations for where FED 724 00:36:27,760 --> 00:36:30,439 Speaker 11: policy is going to go. We have the largest share 725 00:36:30,560 --> 00:36:34,680 Speaker 11: expecting rate cuts since two thousand and eight, So consumers 726 00:36:34,680 --> 00:36:37,920 Speaker 11: are absolutely expecting rate cuts in the year ahead. Now, 727 00:36:38,200 --> 00:36:41,239 Speaker 11: of course, you know, if all the strong indicators in 728 00:36:41,280 --> 00:36:46,200 Speaker 11: the economy lead the FED to, you know, take to 729 00:36:46,239 --> 00:36:48,440 Speaker 11: exercise more caution in their rate cuts, I think we'll 730 00:36:48,440 --> 00:36:51,320 Speaker 11: see that play out in consumer expectations, especially as it 731 00:36:51,360 --> 00:36:54,480 Speaker 11: passes through to consumer interest rates and credit conditions. But 732 00:36:54,719 --> 00:36:59,839 Speaker 11: in this very moment, you know, consumers are expecting much 733 00:36:59,840 --> 00:37:02,680 Speaker 11: more strengthen the economy than they were expecting six months ago, 734 00:37:02,840 --> 00:37:03,439 Speaker 11: a year ago. 735 00:37:03,840 --> 00:37:05,400 Speaker 4: All right, Joanne, it's good to catch up with you. 736 00:37:05,640 --> 00:37:08,040 Speaker 4: We'll get you for that preminary February read too, Joanneshu, 737 00:37:08,200 --> 00:37:11,520 Speaker 4: University of Michigan, Surveys of Consumers, Director Paul. Do you 738 00:37:11,560 --> 00:37:13,400 Speaker 4: feel better than I do? 739 00:37:13,719 --> 00:37:16,400 Speaker 2: I do? I think the I feel like I can 740 00:37:16,440 --> 00:37:18,480 Speaker 2: really see the end in sight for the FED, and 741 00:37:18,520 --> 00:37:20,600 Speaker 2: that's all I need. That's really all I need. And 742 00:37:20,640 --> 00:37:22,960 Speaker 2: I think if earnings are going to kind of stay 743 00:37:22,960 --> 00:37:25,440 Speaker 2: in there relative to where the market's disc and I 744 00:37:25,480 --> 00:37:28,000 Speaker 2: think the market's set up for a pretty good move here. 745 00:37:28,000 --> 00:37:29,600 Speaker 2: And then we've seen a lot of it. We've seen it. 746 00:37:29,800 --> 00:37:31,520 Speaker 2: We are Yeah, The question is how much do we 747 00:37:32,400 --> 00:37:33,960 Speaker 2: see in November and December. 748 00:37:34,440 --> 00:37:39,000 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 749 00:37:39,200 --> 00:37:42,120 Speaker 1: and anywhere else you will get your podcasts. Listen live 750 00:37:42,200 --> 00:37:45,760 Speaker 1: each weekday, ten am to noon Eastern on Bloomberg dot com, 751 00:37:45,880 --> 00:37:49,279 Speaker 1: the iHeart Radio app, tune In, and the Bloomberg Business app. 752 00:37:49,400 --> 00:37:52,520 Speaker 1: You can also watch us live every weekday on YouTube 753 00:37:52,640 --> 00:37:54,480 Speaker 1: and always on the Bloomberg terminal