Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to Bloomberg Market. It's a special holiday edition. It
Speaker 2: is a holiday shortened week. I'm Vonne Quinn along with
Speaker 2: Shanale Masak, and we are just seconds away from those
Speaker 2: closing bells that you could hear ring at the exchanges.
Speaker 2: And it's another up date at least for the Dow,
Speaker 2: but we just flipped negative shenale for the other major indusices,
Speaker 2: including then I was like one hundred.
Speaker 3: Absolutely fascinating day because you did see that drop off
Speaker 3: in the ten year yield, but you did still see
Speaker 3: the S and P five hundred, let lower, the Dow
Speaker 3: Jones just in the green, the Nasdaq lower, where you
Speaker 3: saw little lover was outside of those major indexes. You
Speaker 3: saw the Russell two thousand with that lower yield story
Speaker 3: up almost one percent, about nine tenths of one percent body.
Speaker 3: So there was green in the screen somewhere in the market,
Speaker 3: just not at those major indexes.
Speaker 2: There were people nibbling today and maybe at the codes
Speaker 2: they were just taking profits because they're didn't have a
Speaker 2: long weekend before the beginning of a new year. But
Speaker 2: joining us now to breakdown today's market moves. Is Bloomberg's
Speaker 2: Alexandra Semenova and Natalia Kenietievich. So Alex talk to us
Speaker 2: a little bit about some of the gainers that we saw,
Speaker 2: because we did see some very very very happy companies today.
Speaker 4: Yeah, Vanni.
Speaker 1: Even with the Nasdaq one hundred down today, there is
Speaker 1: a tech a technology sector that has been a big
Speaker 1: winner in this session. Quantum computing stocks broadly up across
Speaker 1: the board, a sector that has become an area of
Speaker 1: intense interest on Wall Street and certainly one to watch
Speaker 1: in twenty twenty five. DWave Quantum up more than twenty percent,
Speaker 1: Rerigetti Computing up more than thirty percent, in Quantum Computing
Speaker 1: up more than ten percent. All these stocks have seen
Speaker 1: very pronounced moves here to date, up one thousand percent,
Speaker 1: two thousand percent on some of these names, and again
Speaker 1: though it's not on fundamentals here, but on the transformative
Speaker 1: potential of the technology. Take QBTS, for example, a DWave Quantum.
Speaker 1: This is a company with a two point two billion
Speaker 1: dollar market cap and just nine million dollars in revenue.
Speaker 1: Another name, speaking of tech that I'm looking at today
Speaker 1: is it's up about three tenths of a percent. This
Speaker 1: is after its price target was raised to a street
Speaker 1: high of three hundred and twenty five dollars by Wedbush
Speaker 1: Security Securities by none other, of course, than Dan Ives.
Speaker 1: He says that the company is heading into a multi
Speaker 1: year AI driven upgrade cycle. This upgrade cycle, he says,
Speaker 1: is being underestimated by Wall Street. He has an outperform
Speaker 1: rating on the stock, of course, and even though the
Speaker 1: move today was pretty modest on this upgrade, it is
Speaker 1: up more than thirty percent this year. And finally I'm
Speaker 1: taking a look also at game Stop. Shares rose as
Speaker 1: much as ten percent today, up about six percent into
Speaker 1: the close. And this is of course, after a post
Speaker 1: on x from Keith Gill, also known as Roaring Kitty.
Speaker 1: You guys remember him from the game stock saga back
Speaker 1: in twenty twenty one. This post was an image of
Speaker 1: a gift on Twitter without any text, so no real
Speaker 1: reason that the stock is moving higher, and trading volume
Speaker 1: today was almost five times the twenty day average for
Speaker 1: this time of day, according to data compiled by Bloomberg.
Speaker 1: The stock also rose for a fifth straight session for
Speaker 1: its longest winning streak since November first, and game Stop
Speaker 1: shares are up about eighty six percent this year.
Speaker 3: Guys appreciate it so much, Natalia. Let's take a look
Speaker 3: at the decliners on the day. We bring in Italian
Speaker 3: Nazevich for that, right.
Speaker 5: So, I'm looking at energy producers guys, specifically companies that
Speaker 5: are related to natural gas industry. We see stocks like Targa,
Speaker 5: it's one of the worst performance in the s and
Speaker 5: P five hundred AQT is also lower, and the main
Speaker 5: reason for that is natural gas futures. We see that
Speaker 5: natural gas posted almost a seven percent decline on Thursday,
Speaker 5: and that was driven by forecasts. Now, forecasters expect a
Speaker 5: little bit warmer than expected weather in the last couple
Speaker 5: days of twenty twenty four. As a result, it always
Speaker 5: built concerns about some oversupply, and futures of natural gas
Speaker 5: move lower. As a result. We see that natural gas
Speaker 5: companies are moving lower as well. And another stock that
Speaker 5: I'm keeping an eye on is of course, micro Strategy.
Speaker 5: We watch closely what's been happening with bitcoin. It's not
Speaker 5: moving lower. Micro Strategy shares are down by four percent,
Speaker 5: almost five percent. Investors are also reacting to companies news
Speaker 5: to issue additional shares to fund further Bitcoin purchases. Just
Speaker 5: a reminder, micro Strategy is seeking a permission to increase
Speaker 5: a number of authorized shares of Class A common stock
Speaker 5: and preferred stock. That's according to December twenty twenty three filing.
Speaker 5: And of course Bitcoin will be still volatile tomorrow as
Speaker 5: well because we see a huge option expiration tomorrow. As
Speaker 5: a result, we will keep an eye on all cryptorelated stocks.
Speaker 2: Yes, there's going to be a lot of vilesilcy between
Speaker 2: now and the end of the year. It looks like Natalia. Also,
Speaker 2: the VIX index itself not shoining too much fear. Today
Speaker 2: the VIX was down to under fifteen. Of course, we
Speaker 2: know that that can move pretty quickly. So in general,
Speaker 2: we had a sort of a mixed day, about two
Speaker 2: hundred stocks lower and nearly three hundred stocks higher, but
Speaker 2: not hugely higher. But that's still pretty good breath.
Speaker 5: Right, still pretty good breath. Yes, and again we are
Speaker 5: still looking at final trading days of this year if
Speaker 5: we will see more potential upside move driven by the
Speaker 5: so called Santa Claus rally. And now, as you mentioned,
Speaker 5: volatility is also on traders radar. What I heard from
Speaker 5: sources I spoke with next year will be a little
Speaker 5: bit different. This year was volatile. We saw huge moves
Speaker 5: in the Vigsy index. But they say that next year
Speaker 5: volatility will be a little bit more predictable because they
Speaker 5: it will be driven by Donald Trump's It will be
Speaker 5: driven by Donald Trump's policies, and as soon as traders
Speaker 5: know what exactly he will implement, it will cause of
Speaker 5: course volatility. But you can play volatility in a little
Speaker 5: bit different way and potentially again more because this year,
Speaker 5: for example, when we looked at those role control funds,
Speaker 5: those funds typically follow the market direction, they were lagging
Speaker 5: because it was so hard to predict volatility moves in
Speaker 5: twenty twenty four. So lots of expectations that next year
Speaker 5: will be a little bit different.
Speaker 3: Ladies, thank you so much for joining us today. Of course,
Speaker 3: hard at work into the end of the year. We're
Speaker 3: all just kind of wiping off our calendars and playbooks
Speaker 3: to prepare for twenty twenty five and the end of
Speaker 3: the trade.
Speaker 4: This year has certainly been strong.
Speaker 3: We're going to now be joined by Aaron Gibbs, she's
Speaker 3: chief investment officer at main Street Asset Management, to talk
Speaker 3: about that playbook. So you think about the gains that
Speaker 3: we've seen this year how much the S and P
Speaker 3: has been driven by those megacap tech names, and a
Speaker 3: lot of people are scouring the market for other opportunities.
Speaker 3: How do you see those other opportunities playing out, especially
Speaker 3: when you see how sensitive some of the small cap
Speaker 3: names have been to the interest rate movements today, the
Speaker 3: Russell two thousand was your relative gainer exactly.
Speaker 6: I think now that we have a better sense of
Speaker 6: where the FED is heading, we're seeing obviously a more
Speaker 6: stable inflationary environment of slow and steady, and we're also
Speaker 6: looking at reduction of fiscal stimulus.
Speaker 7: Where we're really going to see.
Speaker 6: Productivity are obviously potentially from AI gains, But where we
Speaker 6: might see company profitability would more likely be within some
Speaker 6: of your small caps, as some of the larger caps
Speaker 6: are starting to face some headwinds, And from an investor standpoint,
Speaker 6: not only MA I'm looking at where companies might grow,
Speaker 6: where that profitability might come from, but also just where
Speaker 6: the value is because as we have had such big
Speaker 6: run ups from these high expectations of increased productivity within
Speaker 6: these megacaps, there really is a lot of money on
Speaker 6: the table from some of the small our companies. Some
Speaker 6: of the lesser known companies even within the s and
Speaker 6: P five hundred, where if they even if they just
Speaker 6: meet let's say, fifteen percent growth, they don't have to
Speaker 6: be twenty twenty five percent growth, but they're undervalued by
Speaker 6: twenty five percent compared to historical gains. Those are the
Speaker 6: companies that could do really well if we finally see
Speaker 6: some expansion of market breath.
Speaker 3: You really started to see Marcus largely shake off many
Speaker 3: of the risks we've seen out there.
Speaker 4: That was interest rate.
Speaker 3: Risk, it was geopolitical risk. Yet we're sitting here at
Speaker 3: an SMP five hundred at your end, well above six thousand. Still,
Speaker 3: what are the risks you're looking at next year that
Speaker 3: could particularly throw investors off this more bullish course.
Speaker 7: So two of two big issues I see.
Speaker 6: One is just a slowing global economy. We're seeing some
Speaker 6: major economies really facing some headwinds, so China, South Korea, Europe,
Speaker 6: and so those larger cap company is particularly multinational where
Speaker 6: they do have to worry about revenue risks, they do
Speaker 6: have to worry about dollar the dollar currencies. Those of
Speaker 6: the companies that might face more headwinds than some of
Speaker 6: the more domestic focused smaller companies.
Speaker 7: Another issue is just the reduction of fiscal stimulus.
Speaker 6: Is this really looks like from an economic standpoint, we're
Speaker 6: starting to hit that peak of the cycle and that
Speaker 6: the economy might slow down. So you need companies that
Speaker 6: are able to operate efficiently, that aren't so focused on
Speaker 6: the fiscal stimulus and can really drive from other organic
Speaker 6: revenue sources and more perhaps more domestically.
Speaker 7: So those are the two big.
Speaker 6: Headwind headwinds for those or lack of slowing fiscal stimulus
Speaker 6: and then slowing global external trade that might really potentially
Speaker 6: debrail some of the larger CAB companies next year.
Speaker 2: Yeah, Aaron, you say earnings may start to disappoint, does
Speaker 2: that up? And already in Q one of next year?
Speaker 2: After all, Jack Morgan is out January fifteenth, it's only
Speaker 2: a couple of weeks away.
Speaker 6: Yes, Well, we did have a rather a low beat
Speaker 6: rate for Q three already, and we know that analysts
Speaker 6: are obviously lowering some.
Speaker 7: Of their expectations for Q four. Right now, Earning's expectations
Speaker 7: for next year are pretty darn optimistic.
Speaker 6: We're looking at fourteen percent growth for the S and
Speaker 6: P five hundred and twenty percent growth for the SMP
Speaker 6: small cap.
Speaker 7: For earnings profit, those are some high numbers.
Speaker 6: Whenever we're looking at mid teens to even twenties, they
Speaker 6: have often.
Speaker 7: Been revised down. So we'll see. Obviously we have a
Speaker 7: lot to.
Speaker 6: Be able to deal with next year, even though at
Speaker 6: least the FED part of that story seems to be
Speaker 6: more stable. But certainly I think people should be prepared
Speaker 6: for disappointment and when the stock market really is price
Speaker 6: per perfection, as we're seeing in many of the sectors
Speaker 6: right now, particularly within.
Speaker 7: The large caps, not within the small caps, investors.
Speaker 6: Should be very weary if we do see some weakening
Speaker 6: or some deterioration within the economy and within some of
Speaker 6: these industries.
Speaker 2: Where do you anticipate any weakening in the economy? Erin,
Speaker 2: we haven't seen any really at all this year.
Speaker 6: No, we've been very fortunate, and I, like I said,
Speaker 6: a lot of it has been through physical stimulus through
Speaker 6: dollar trade. I think if some of the tariffs come
Speaker 6: through that Trunk has promised, that could be a huge
Speaker 6: negative impact, particularly on materials, industrials, consumers, just a host
Speaker 6: of industries. And so that's something that I think investor
Speaker 6: should be very wary of and just remain up to
Speaker 6: date and be ready to switch if that changes, because
Speaker 6: that type of policy could have a significant impact on
Speaker 6: company's profitability for next year.
Speaker 3: What do you think your favorite trades are to set
Speaker 3: up for the new dynamic under a new president.
Speaker 6: Yes, so one I would like to say again small apps,
Speaker 6: they're a little more insulated from tariffs. They might be
Speaker 6: again more domestically focused, less exposure to dollar and burrency trades.
Speaker 7: So that's one of my favorites.
Speaker 6: And again there's such a low value that just have
Speaker 6: less downside risk. On the other side, I do like
Speaker 6: some of the stable industrial sort of the growth at
Speaker 6: a reasonable price means like Honeywell, Caterpillar, nice stable earnings quality.
Speaker 7: They can weather the storm, that can weather a.
Speaker 6: Few quarters of potential volatility and still beat expectations.
Speaker 2: All right, erin thank you so much for joining us
Speaker 2: on this holiday week. That is Aaron Gibbs, chief investment
Speaker 2: officer at Main Street as a management joining us there.
Speaker 2: All right, that's move on now to another sticking point
Speaker 2: in Washington. One of President Biden's final acts in office
Speaker 2: will be deciding the fate of Nippon Steele's proposed acquisition
Speaker 2: of US Steel. A government panel.
Speaker 4: Deadlocked on the deal earlier this week.
Speaker 2: Well, this morning Nippon Steele delayed the closing date of
Speaker 2: the deal into twenty twenty five, joining us from Washington, DC.
Speaker 2: Now is John Harney, John, will Biden get this done
Speaker 2: and decided in the next you know, twenty thirty days?
Speaker 2: Does it have to be done or might it actually
Speaker 2: bleed into the next administration.
Speaker 8: Well, he has fifteen days from Monday to say whether
Speaker 8: or not the deal should go forward. He is not
Speaker 8: you know, he has not said flatly he's going to
Speaker 8: kill it, but he has made plenty of indications that
Speaker 8: that will be his decision. The announcement today that the
Speaker 8: closing has been put off simply faces reality. They Nippon
Speaker 8: Steele has put off the closing before this as this
Speaker 8: huge twelve plus billion acquisition has become further ensnared in
Speaker 8: American politics in the election. It remains unlikely at this
Speaker 8: point that Donald Trump will have a say on killing
Speaker 8: the deal or not. But both companies say that if
Speaker 8: President Biden says no, they will go to court and
Speaker 8: then who knows where it will end.
Speaker 3: To that end what happens from here, because this, of
Speaker 3: course is a very politically sensitive deal has a lot
Speaker 3: to do in terms of how steel workers in America
Speaker 3: feel about foreign ownership, and a lot to do with
Speaker 3: how the Committee on Foreign Investment CIPIUS operates in relation
Speaker 3: to how they seek to block deals moving forward.
Speaker 4: What does it say about areas.
Speaker 3: That are sensitive to the American to me as it
Speaker 3: comes to foreign for foreign investment.
Speaker 8: Well, all those realms, if you will, are important. Certainly, SITHIUS,
Speaker 8: by the way, deadlocked over whether or not the acquisition
Speaker 8: should go forward, leaving it, you know, leaving it to
Speaker 8: the White House, and that was a step that had
Speaker 8: to be taken. But also there's a there's an international
Speaker 8: there's also international relations. Japan is not an adversary like
Speaker 8: say China, but a very close ally Prime minister issue
Speaker 8: of Japan today urged President Biden to approve the deal. Now,
Speaker 8: whether or not he'll do that or not, you know, that's.
Speaker 9: We'll see what happens.
Speaker 8: But but you're right in that this became a very
Speaker 8: political issue, as as as many other parts of American
Speaker 8: American business and culture have you know, many steel workers
Speaker 8: have this you know, you know, and other Americans have
Speaker 8: a strong you know, there's a strong history behind US
Speaker 8: Steel's an iconic American company, you know, but Upon Steel
Speaker 8: and US Steel say, there are many good reasons for
Speaker 8: this acquisition to go forward, apart from politics, apart from
Speaker 8: for lack of a better word, in nostalgia.
Speaker 3: John, we have to leave it there. We thank you
Speaker 3: so much for joining us today. That is John Harney
Speaker 3: of Bloomberg New Jennifer Gregel, she's associated their associate professor
Speaker 3: of Communications in Syracuse University. For more on Musk, Trump
Speaker 3: and the future of social media under the new administration.
Speaker 4: So we're looking at what the president elect might do
Speaker 4: moving forward. We're trying to read the tea leaves.
Speaker 3: How do you think social media is going to play
Speaker 3: a role in the upcoming in the upcoming world, I mean,
Speaker 3: how do you think they are going to really use
Speaker 3: Musk platforms relative to some of the other more established
Speaker 3: ones you've seen out there.
Speaker 10: Yeah, I love, Well, maybe a little context because I know,
Speaker 10: over the last four years, you know, I've kind of
Speaker 10: been sitting back a little bit more and watching this
Speaker 10: all play out, and I know Musk is the person
Speaker 10: of the moment, and we're throwing around these like sophisticated
Speaker 10: terms like retail investors, you know, but like it's really
Speaker 10: about the public. Sometimes the market's trying to make sense
Speaker 10: of what's going on. And for me, the one piece
Speaker 10: that I've seen lacking in the media over the last
Speaker 10: four years and especially this past year, is any critique
Speaker 10: of really the Biden administration and how they've handled not
Speaker 10: just like their leverage over social media, but even this
Speaker 10: upcoming potential TikTok.
Speaker 11: Band that's looming and now it's going to.
Speaker 10: The Supreme Court, and I know you're just talking about
Speaker 10: meme stocks and also bitcoin, like you know, like it
Speaker 10: or not. President Trump is coming to power next year,
Speaker 10: and he has an incredible amount of leverage ability to
Speaker 10: cut deals, not just with TikTok, but any of those competitors. So,
Speaker 10: you know, again circling back to Facebook, you know, it's
Speaker 10: no surprise that you know, kind of late in the
Speaker 10: last election you saw like Mark Zuckerberg, you know, kind
Speaker 10: of maybe you know, kind of posing up a little
Speaker 10: bit more. And I think it's because we were missing
Speaker 10: that context. I know, for me, it was really difficult
Speaker 10: to cut through at times and to provide that critique.
Speaker 10: But I'm not sure the markets or the public have
Speaker 10: really heard enough critique going into this. It's it's been
Speaker 10: really focused on Musk and obviously he has the president's ear,
Speaker 10: you know again, I know there's jokes about him being
Speaker 10: the unelected president. Of course he's incredibly rich and he
Speaker 10: has Twitter, but he has again he has made that
Speaker 10: work for him. So for me, I think we just
Speaker 10: need a little bit more history and looking into you know,
Speaker 10: those who were in power. They I think they they
Speaker 10: had a lot of confidence going into this that Biden
Speaker 10: would continue and then they pass laws like that too.
Speaker 10: So I think it's going to be actually unsettling to
Speaker 10: some of those those larger social media companies. I'm not sure,
Speaker 10: you know again their future is so sure and that
Speaker 10: we should only be talking about TikTok for example.
Speaker 2: Yeah, Jennifer, I mean, what would Donald Trump like to do?
Speaker 2: Because on the one hand, he needs leverage with the
Speaker 2: country like China, especially if he's going to be imposing
Speaker 2: extra tariffs and so on, and this seems sort of
Speaker 2: like a you know, easy pickings if you.
Speaker 10: Like, it's exactly, and he's got easy pickings with bitcoin,
Speaker 10: you know, do you make a.
Speaker 11: Reserve or don't you?
Speaker 8: Right?
Speaker 10: So he man, he has so many levers going into
Speaker 10: this next term, right, So I think when we think
Speaker 10: about you know, it's taking some notes looking at the
Speaker 10: last section, this is not a moment of clarity, like
Speaker 10: we do not have confidence, we don't have certainty, and
Speaker 10: I think I think the markets are reacting to that
Speaker 10: more than.
Speaker 11: Just this fed you know, announcement.
Speaker 10: Obviously we saw a major market moment there, but I
Speaker 10: see uncertainty coming into the end of the year, not
Speaker 10: just because it's the end of the year, but because
Speaker 10: we really.
Speaker 11: Don't know how President Trump is going to play his cards.
Speaker 11: We just know that he has a lot in his hand.
Speaker 2: And Jennifer, all these tech executives that are visiting mar
Speaker 2: Alago and you know, digging deep for their million dollars
Speaker 2: or whatever it's costing them. Well, in these US executives,
Speaker 2: I mean, in particular, what will that buy them?
Speaker 10: Yeah, Well, that was what was interesting about the TikTok
Speaker 10: case was that they went to extraordinary lengths to legislate
Speaker 10: the carve out TikTok. Otherwise it would have looked just
Speaker 10: like every other platform, you know, Facebook would have been
Speaker 10: in the same situation.
Speaker 11: And that was kind of what I think.
Speaker 10: Gave TikTok comfort for a while. I think going into
Speaker 10: this legislative path was incredibly risky. It is a huge
Speaker 10: threat to freedom of information, freedom of expression. Unfortunately, you
Speaker 10: know again that even the expiration day, it was.
Speaker 11: Right in front of the next term.
Speaker 10: It was I believe it just an incredibly dangerous piece
Speaker 10: of legislation to target.
Speaker 11: One platform like that. It doesn't matter.
Speaker 10: If it was an external kind of foreign actor or
Speaker 10: whatever the reasoning was. It's it was very, very targeted.
Speaker 10: And the timing, you know, would have given the Biden
Speaker 10: administration some leverage not only with TikTok, but with maybe
Speaker 10: the sitting platforms going into.
Speaker 11: The last election. They could have maybe you know again.
Speaker 10: Struck as some type of sweetheart deal with Facebook. So
Speaker 10: it's it's really, you know, again, we have to look
Speaker 10: at the timing of all that that was passed in
Speaker 10: April last year, March. You know, we knew in March
Speaker 10: Trump was taking the helm at the RNC.
Speaker 11: Again, I just I.
Speaker 10: Don't like it. I don't like it.
Speaker 3: You know, you look at how TikTok has been treated
Speaker 3: by lawmakers, and you've seen both parties really voice their concerns.
Speaker 3: At the end of the day, do you think that
Speaker 3: whether or not there is a full on band that
Speaker 3: is pursued in the early days of Trump administration, or
Speaker 3: a wholesale sale of the platform, does that pressure really
Speaker 3: go away?
Speaker 11: Well, and great point.
Speaker 10: Again, I'm just trying to sneak into a tiny piece
Speaker 10: of critique on Biden here because we really haven't seen it.
Speaker 11: I mean, that's just.
Speaker 10: That's that's been my experience in the last four years.
Speaker 10: I haven't seen much in the media. But as you
Speaker 10: point out, it was like bipartisan to get that through.
Speaker 10: But that again is something that is telling. I think
Speaker 10: that on both sides of the aisle that President Trump
Speaker 10: was a threat, you know, and that it wasn't just
Speaker 10: Biden per se, but it was all of the incumbent
Speaker 10: And we saw this actually way back and this reminds me,
Speaker 10: honestly in twenty twelve when we saw under the Obama
Speaker 10: runner they instituted the modernization of what was called the
Speaker 10: Smithmont Act. And you know, again, Trump was starting to
Speaker 10: make waves at that time, starting to maybe put his
Speaker 10: hat in the presidential rank, and the incumbents were bipartisans.
Speaker 11: It's again, it's a little bit of.
Speaker 10: A gatekeeping action from those who are currently in Congress
Speaker 10: in the White House saying hey, we don't want this
Speaker 10: out outsider maybe coming in.
Speaker 8: You know.
Speaker 10: So it spoke to maybe the political climate of those
Speaker 10: who were sitting in power to that maybe maybe they
Speaker 10: were trying to gate keep a little bit. But I
Speaker 10: just believe that it gave an incredible amount of leverage
Speaker 10: to any incumbent at that time.
Speaker 2: Jennifer much That is Jennifer Greegel. They are associate professor
Speaker 2: at Syracuse University. Once again, Jennifer Gregel joining us there.
Speaker 3: And you asked, retail sales this holiday season rose three
Speaker 3: point eight percent compared to last year. That's according to
Speaker 3: data from MasterCards spending polls, showing that consumers were more
Speaker 3: willing to spend in store and online if promotions were there.
Speaker 3: And it's exactly the type of momentum that brands like
Speaker 3: True Classic are hoping to bank on. The men's wear
Speaker 3: brand is expanding its business across the United States. It's
Speaker 3: partnering with Target. Joining us now is the CEO of
Speaker 3: True Classic.
Speaker 4: Ben Yeah, Yahalom.
Speaker 3: And you know, Funnie and I were talking about this
Speaker 3: men'sware where do people like to traditionally buy. It's interesting
Speaker 3: that you've partnered with Target more recently. But are they
Speaker 3: going into the store, They're going online.
Speaker 4: To do it.
Speaker 9: I would say very similar.
Speaker 12: Tobou Oliver shared that the decompenetration is being rising over
Speaker 12: the past few years, but only in It's still very
Speaker 12: much the case that the majority of clothing is being
Speaker 12: purchased in a physical retlocation, namely over sixty percent.
Speaker 2: How did you get to five hundred million in revenue
Speaker 2: in just four and a half years a new brand?
Speaker 2: You know, I mean nothing in its background to prove itself.
Speaker 2: So how did it happen?
Speaker 9: It's a fascinating story.
Speaker 12: We pride ourselves on focusing on people and we want
Speaker 12: to make sure that they.
Speaker 2: Look Yeah, but you know when everybody says that, they
Speaker 2: all say it's always about the people, and the people
Speaker 2: are special on Our customers deserve the best, But how
Speaker 2: do you actually prove that? How what are you giving
Speaker 2: to the people that they were asking for and weren't.
Speaker 12: Getting great product, great service, great price point, great marketing product.
Speaker 12: We really nailed it with a perfectly fitted shirt that
Speaker 12: feels great, offered it a good price point, They love
Speaker 12: wearing it. They vote with their dollars From a marketing standpoint,
Speaker 12: we do amazing ads that truly engage with our customers,
Speaker 12: tell them why they should care about us, how it's
Speaker 12: going to make them feel, feel a sense of confidence,
Speaker 12: feel a sense of self esteem, and they love that.
Speaker 12: And from a price standpoint, we offer them a premium
Speaker 12: clothing option for a fraction of the price of alternatives
Speaker 12: out there. And everybody loves a good value and we
Speaker 12: like delivering that consumer surplus. From a distribution standpoint, we've
Speaker 12: done everything online on the main first few years and
Speaker 12: now we're moving on to retail. So early days it's
Speaker 12: been very much direct to consumer and now we're on
Speaker 12: this path towards an omni channel global brand.
Speaker 2: So who is your customer, what agency? How much does
Speaker 2: he make and how tall is he?
Speaker 9: Okay, variety of customers.
Speaker 12: I would say the core one is a thirty four
Speaker 12: to fifty four years old man. HHI over one hundred
Speaker 12: million dollars one hundred thousand dollars a year across the
Speaker 12: United States, majority in California and Texas and New York.
Speaker 12: But now we have expanded internationally, so we have customers
Speaker 12: across different heights. We do have a decent number of
Speaker 12: customers in the United States, over twenty seven percent were
Speaker 12: pretty tall north of six feet two inches and all
Speaker 12: in it's not just him, but also her who buys
Speaker 12: for him, and she buys for her dad, she buys
Speaker 12: for her husband, she buys for her son, and she
Speaker 12: is a very important customer to us as well.
Speaker 3: When you look at your website right now, the few
Speaker 3: things that are on at the top of the site
Speaker 3: number one most like Staple six pack T shirt. It
Speaker 3: was almost one hundred eighty dollars for the pack, but
Speaker 3: you can buy it now for under one hundred. Same
Speaker 3: for the classic three pack. It's marked down from ninety
Speaker 3: bucks for the three pack to less than sixty dollars.
Speaker 3: Are these really just holiday promotional draw downs or are
Speaker 3: you finding a consumer that is quite concerning?
Speaker 4: Do you need to keep discounting into the new year?
Speaker 9: Yeah, those are our pack discounts.
Speaker 12: So if you were to buy those items individually, those
Speaker 12: would actually retail for twenty nine ninety nine a shirt.
Speaker 12: But when you buy them in a pack, we benefit
Speaker 12: from stronger unit economics and we're happily providing those benefits
Speaker 12: over to the customer. So those are meant to incentivize
Speaker 12: consumers who are willing to buy in bulk to do so,
Speaker 12: and therefore benefit from a steeper promotion and a steeper discount.
Speaker 3: How often are you finding people take advantage of those
Speaker 3: discounts right now? Because you mentioned pricing was one of
Speaker 3: your competitive advantages.
Speaker 4: Is it because you're able to.
Speaker 3: Benefit from those unit economics or are you finding that
Speaker 3: there's an optimal price for a T shirt right now?
Speaker 12: I don't know if there is an optimal price for
Speaker 12: a T shirt, but I would say that the American consumer,
Speaker 12: and I would say probably globally as well, are tired
Speaker 12: of overpaying for premium goods and they are looking for
Speaker 12: options that don't compromise quality but offer that to them
Speaker 12: at a reasonable price point.
Speaker 9: And that's exactly the area we play in.
Speaker 2: So talk to us about margins. Where you make most
Speaker 2: of your clothing specifically, I don't mean where you put
Speaker 2: the tag on, I mean where the actual product gets
Speaker 2: mostly made, And how concerned are you for next year?
Speaker 2: In Taros.
Speaker 12: We have been already prepared for that for quite some
Speaker 12: time with the tension between the US and China, and
Speaker 12: we used to be primarily sourcing our products from China,
Speaker 12: but we've diversified away and in this point, we're pretty
Speaker 12: well diversified. We manufacture in Cambodia and Vietnam, in Egypt
Speaker 12: and Turkey and Mexico, and we have the ability to
Speaker 12: shift our supply chains to different vendors, different manufacturers worldwide
Speaker 12: to ensure that we are not in any particular pickle
Speaker 12: with tariffs, duties or even importation issues like we just
Speaker 12: had last week with a pretty big gift from the
Speaker 12: Mexican government to overnight just decided that we're not allowed
Speaker 12: to import more goods over there, which is significantly impacting
Speaker 12: many eCOM brands like ourselves, but we have good options
Speaker 12: to mitigate against that.
Speaker 2: So, Ben, what is the secret? Because you've been also
Speaker 2: at Meta and you've helped the hyper growth of other
Speaker 2: companies your four years at Meta, and you know you
Speaker 2: know how to leverage Facebook and Instagram marketing strategy, and
Speaker 2: it seems that those are the strategies that work best
Speaker 2: these days. You know, consumers, whether it's women or men,
Speaker 2: seem to be getting targeted more on those platforms. Is
Speaker 2: that the success to True Classics so far is that
Speaker 2: you've been able to do that? And if so, what
Speaker 2: advice would you give other brands? Yeah?
Speaker 12: I would say that those platforms are definitely the main
Speaker 12: ones Meta, Google, et cetera. To get the brand off
Speaker 12: the ground these days, with relatively limited resources for us,
Speaker 12: we were able to bootrap this company to your point,
Speaker 12: no X factors, no celebrities, no big VC money, and
Speaker 12: grow it north of nine figures in two short years
Speaker 12: and do so profitably on the back of digital advertising.
Speaker 12: So yes, highly recommend for any brand who is trying
Speaker 12: to get off the ground to invest in really understanding
Speaker 12: how to leverage those platforms to their advantage.
Speaker 9: But it's not magic.
Speaker 12: You have to have a great product, you have to
Speaker 12: have a great service, and you have to ultimately find
Speaker 12: that product market fit with that advertising model baked into
Speaker 12: your business model. And when we did that, and we
Speaker 12: are not just advertising the product, we're telling great stories.
Speaker 12: We're connecting with humans on an emotional level. We explain
Speaker 12: to them what is the benefit of our products, how
Speaker 12: they're going to fill in our product, not just what
Speaker 12: is the product, and that makes a huge difference. So
Speaker 12: for us, creative content, storytelling, excellent customer service, exceptional quality
Speaker 12: in our products are all pillars of ultimately finding that
Speaker 12: product market fit and fast growth.
Speaker 3: So when you think about all of those social media platforms,
Speaker 3: and by the way, I'm a total sucker for buying
Speaker 3: on those platforms.
Speaker 4: So I know what you mean, but we all are.
Speaker 3: How do you kind of kick through the noise, because
Speaker 3: of course there are a lot of people selling on
Speaker 3: Instagram and on TikTok, So how do you get your
Speaker 3: story through without As you were talking about those celebrity names,
Speaker 3: for example, attaching to the brand.
Speaker 12: I think it all goes back to storytelling and if
Speaker 12: you really zoom out and look at that, what gets
Speaker 12: you is someone who's able to hit the nail on
Speaker 12: the head, whether it's a motivator or a barrier to
Speaker 12: start a journey with a new company or buy a
Speaker 12: particular product. So for us, it's always been, for example,
Speaker 12: like really illustrating very well the fit and the feel
Speaker 12: and how that shirt is going to look on you
Speaker 12: when you try it on, and do so in an
Speaker 12: authentic way with influencers and customers who tell those stories.
Speaker 9: Better than we can.
Speaker 12: And with that, people actually pay attention and they want
Speaker 12: to give it a try. And when they come to
Speaker 12: our site and they see over two hundred thousand and
Speaker 12: five star reviews, when they see that growing community of
Speaker 12: almost five million people worldwide, and how much they rave
Speaker 12: about it they want to try it, especially when the
Speaker 12: price tag is not particularly high. So you have got
Speaker 12: to kind of figure out a way to your point
Speaker 12: like stand out and differentiate yourself. And I would say
Speaker 12: on the media side, it's absolutely about storytelling and then
Speaker 12: from a product and offer standpoint, that's where your website
Speaker 12: has to shine.
Speaker 3: How much does philanthropy matter because you donate T shirts
Speaker 3: to homeless veterans shelter schools each month? Is that a
Speaker 3: big part of the story for you and what people
Speaker 3: are attaching.
Speaker 9: To incredibly important.
Speaker 12: But what I would say for us in particular is
Speaker 12: that we're actually not if you will, like advertising and
Speaker 12: particularly forefront about that. We do that because we want
Speaker 12: to empower people to look good and feel good, and
Speaker 12: we genuinely want to do so, not just with the
Speaker 12: clothing we sell, but also in ways where we can
Speaker 12: do great clothing to people in need. And most recently
Speaker 12: around the holidays, we donated almost ten million dollars worth
Speaker 12: of retail value of inventory to many people around LA
Speaker 12: who needed those clothes for the holiday season. So I
Speaker 12: would say it's important for us as humans, because we
Speaker 12: believe in showing up to humans and in giving back.
Speaker 12: But I wouldn't say it's a core pillar of the
Speaker 12: story of the brand and how we've been showing up.
Speaker 12: I would say that still to this date, probably many
Speaker 12: people amongst our customers don't even understand or know the
Speaker 12: extent to which our film tropic efforts have gone, and
Speaker 12: that's something we should probably do a better job articulating
Speaker 12: to them. But I would say it's important to us
Speaker 12: as humans.
Speaker 2: Ben, thank you so much for joining at all the
Speaker 2: very best your partnership with Target Expanding, and that has
Speaker 2: been yahalo on. They're true classic CEO