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Speaker 2: Let's talk technology here. There's a lot happening again. The
Speaker 2: Bloomberg News story today, which is just amazing to me. Nvidia,
Speaker 2: Microsoft and Apple are bigger than the China stock market.
Speaker 3: That's it.
Speaker 2: I don't know who did that math, but that's like
Speaker 2: a good math. That makes a good story to me.
Speaker 4: That's a great story. I mean, does it mean they're
Speaker 4: overvalued or China's undervalued?
Speaker 2: All right, let me check in with somebody who might
Speaker 2: have an opinion here on Rock ran a Bloomberg Intelligence
Speaker 2: senior tech analyst on a Rock. I mean, ever since
Speaker 2: I've known you, this is we're going fourteen years. You've
Speaker 2: got like the easiest job on Wall Street. All you
Speaker 2: got to do is say tech spending is going up.
Speaker 2: Buy these things that's good for technology. Step back today,
Speaker 2: you walk into a portfolio manager's office here, and the
Speaker 2: portfolio manager he's been in he or she has been
Speaker 2: in industrials their entire career. Now they're told they need
Speaker 2: to get some tech exposure. Where do you send them?
Speaker 5: Yeah, so this is you know, you just made a
Speaker 5: comment that you know, eighteen months ago or so when
Speaker 5: you heard of AI, you said, go by in video
Speaker 5: and that's you know, that has worked out very well.
Speaker 5: But now the question is for the next leg of
Speaker 5: AI beneficiaries, do you go downstream or you still stick
Speaker 5: to the hardware players? And that's a very tough question, frankly,
Speaker 5: but there are enough players in the software area, in
Speaker 5: the in the services area that have not seen the
Speaker 5: benefit of AI, and I think those are the companies
Speaker 5: they're going to see sales improve over the next you know,
Speaker 5: let's say a couple of years, because the downstream effect
Speaker 5: of all the increased spending has to reach them.
Speaker 6: It's just a matter of time.
Speaker 5: The difficult part is to put a real pulse on
Speaker 5: when that's going to happen.
Speaker 4: Yeah, let me throw a fly into the ointment. Can
Speaker 4: the Justice Department screw all this up at some point?
Speaker 6: Yeah, they will try very hard.
Speaker 5: And you know, I think these companies are also getting
Speaker 5: smarter and smarter. But frankly speaking, I think what we
Speaker 5: saw after the financial crisis was banks did become much bigger,
Speaker 5: and I think unfortunately for the Justice Department and other regulators,
Speaker 5: I think the large tech companies will become much bigger
Speaker 5: because of AI, just because they have the capacity to
Speaker 5: run these workloads. It's not easy to run them in
Speaker 5: your you know, backyard or so you really need powerful
Speaker 5: computers to do these processing and they have an unfair
Speaker 5: advantage here.
Speaker 3: All right, Anrarag. We can't get you on the horn
Speaker 3: without talking about Apple.
Speaker 2: And I know next week June tenth, I believe, will
Speaker 2: be the Developer Conference for Apple, and that's a you know,
Speaker 2: an event every year where people like John Tucker and
Speaker 2: I who don't know much about technology, we do pay
Speaker 2: attention because that tends to be when Apple introduces some
Speaker 2: cool stuff, maybe that it moves the stock of Apple,
Speaker 2: maybe it moves the socks in other tech companies. Give
Speaker 2: us a preview of June tenth at in Cupertino, California.
Speaker 5: Yeah, so I would say that you know, these companies
Speaker 5: hold these events every year, but I would say for Apple,
Speaker 5: I don't think it has ever been so important than
Speaker 5: this year as to what big updates they're going to
Speaker 5: do their software because right now, Apples was caught off
Speaker 5: guard like most of the companies did when chat GPD
Speaker 5: came out and people figured out they are really behind
Speaker 5: the curve when it comes to AI adoption or their
Speaker 5: you know, investments in this area.
Speaker 6: So Apple's been behind, there's no lying about it.
Speaker 5: But we are expected to see you know, you could
Speaker 5: say alliance between Apple and Open Ai. We don't know
Speaker 5: if they're going to do a similar deal with with Google.
Speaker 5: That's pending, So there's going to be a lot of
Speaker 5: interesting stuff that shows up on Monday when Apple's going
Speaker 5: to showcase how this technology is going to get into
Speaker 5: your phone and make your life a little bit easier
Speaker 5: than what it is. And if that, if that thing
Speaker 5: goes through, if it's executed, well, then the the shipment
Speaker 5: data or the unit unit sales data that we have
Speaker 5: seen for iPhones over the last three years, which has
Speaker 5: typically been flat, I mean, the Apple's not seen any
Speaker 5: improvement there.
Speaker 6: I mean you could see a lift over there.
Speaker 4: Let me ask you about Microsoft real quickly. What's the
Speaker 4: deal that they struck with this AI startup.
Speaker 7: I think it's Inflection, Yeah, so basically they paid them
Speaker 7: a fee as you could say compensation to hire a
Speaker 7: lot of their employees and make them part of Microsoft's
Speaker 7: internal AI division.
Speaker 5: And that's the you know, that's what it's been looked
Speaker 5: at because, as you know, larger companies cannot easily buy
Speaker 5: any companies at this point, or AI companies, so they
Speaker 5: are trying to see if they could.
Speaker 6: They are you know, you could.
Speaker 5: Say, skirting the rules around acquisitions by doing this end
Speaker 5: mass hiring folks.
Speaker 2: One of the I think the real key advantages of
Speaker 2: Bloomberg Intelligence is that they have access to the best
Speaker 2: data for every industry that they cover in a technology space.
Speaker 3: One of those data.
Speaker 2: Providers Thatloomberg Intelligence has access to is id C. That
Speaker 2: is the gold plated provider of really independent data on
Speaker 2: tech spending, amongst other things a RAG. I know, you've
Speaker 2: worked a lot with the IDC folks. You use your
Speaker 2: the id data a lot in your research. What are
Speaker 2: you getting, What are you sensing in terms of total
Speaker 2: tech spend, in terms of what's incremental for AI and
Speaker 2: maybe what's just kind of taking from one tech you know,
Speaker 2: capex budget and.
Speaker 3: Putting it into AI. What do we know?
Speaker 5: Yeah, so at least this for this year, for twenty
Speaker 5: twenty four. It's more of a reallocation at this point,
Speaker 5: and you know, you have to really think you're long
Speaker 5: and hard and say whether that's going to be the
Speaker 5: same case in twenty five and twenty six.
Speaker 6: We think things are going to improve.
Speaker 5: Geopolitical conditions are not the best right now, so CIOs
Speaker 5: or CFOs are not that excited about ramping up their
Speaker 5: tech budgets. But we think tech as a percentagea of
Speaker 5: global GDP is still a small portion. It's you know,
Speaker 5: we talk about a lot, but it's not as big
Speaker 5: as let's say, healthcare spending in the US, for example,
Speaker 5: when you compare both the numbers.
Speaker 6: So we really feel.
Speaker 5: That, I mean, there are enough you could say, legs
Speaker 5: to this particular story out now. We think it's going
Speaker 5: to be in the form of more software spending over
Speaker 5: the next several years than services spending. Hardware is doing well,
Speaker 5: So I think that may continue or that may not.
Speaker 5: That it's a big question, but we think we think
Speaker 5: it's going to be incremental spent coming in the next
Speaker 5: few years.
Speaker 4: The expectations are really high for technology. What if they
Speaker 4: don't meet the expectations, What's what's in the unexpected bin
Speaker 4: at this point and the potential downside.
Speaker 5: Yeah, you see, you talked about two or three names,
Speaker 5: you know, Nvidia, Apple, and Microsoft. But if you look
Speaker 5: at other companies, let's say, if you were to pull
Speaker 5: a chart of salesforce or workday or accenture or you
Speaker 5: know tcs, they've all been going down or they have
Speaker 5: not seen the same benefit coming through. And that's where
Speaker 5: the allocation is being taken away from and going into
Speaker 5: the hardware areas. So those are the companies that you
Speaker 5: know could see slight improvement next year. The sentiment is
Speaker 5: really bad in the software arena right now because of
Speaker 5: the lack of that spending. I think you know that
Speaker 5: may change next year if economic conditions improve, or I
Speaker 5: would say geopolitical conditions improve.
Speaker 2: All right, Don Rod, thanks so much for joining us
Speaker 2: on Rod Rana. He's a senior technology channels for Bloomberg
Speaker 2: Intelligence based in that burgeoning tech hub of Chicago, Illinois.
Speaker 2: We appreciate him checking in there. So even HPE, you
Speaker 2: think about HP Hewlett Packard Enterprises, they actually came out
Speaker 2: with numbers yesterday were really strong and they cited AI servers.
Speaker 2: So there's a company like Dell. You think Dell PC's right.
Speaker 2: You think HP PCs printer stuff like that. But they're
Speaker 2: doing these servers that are being used by these AI
Speaker 2: folks and boomits moving their numbers.
Speaker 4: Are you saying, well you have to do is attach
Speaker 4: AI something else one of your products?
Speaker 2: Well, one of the one of the things I'm thinking
Speaker 2: about when you think about AI, what we have not
Speaker 2: had like we had with Google and you know, kind
Speaker 2: of the Internet and all that kind of stuff. Where's
Speaker 2: that big IPO company that is the I AI ipo?
Speaker 3: Like Google was, Oh how do I play the Internet? Oh?
Speaker 3: You go buy this Google thing or you buy Yahoo.
Speaker 2: Back in the day, you know, there isn't that IPO
Speaker 2: that's coming out and everybody says, oh, this is the
Speaker 2: AI play.
Speaker 4: Well, I think startups and where the angel investors are
Speaker 4: putting money right now, who's out there you've never heard of?
Speaker 8: Right?
Speaker 2: That's kind of where you know, I'm looking to the
Speaker 2: dan Ives of the world to say, hey, where's that
Speaker 2: next company that's going to come public that's going to
Speaker 2: be the AI play.
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Speaker 2: So check us out there on Bloomberg Podcast. Is how
Speaker 2: you search for us there? As least was just reporting
Speaker 2: Lululemon has what Bloomberg first ward is saying, Lululemon jumps
Speaker 2: on quote better than feared ONEQBE reports. I think the
Speaker 2: expectations a little bit low there, but the stock's ratling
Speaker 2: about two and a half three percent here today. But
Speaker 2: the shares of Lululemon are down thirty eight percent year
Speaker 2: to date. So let's figure out what's going on there
Speaker 2: in Lululemon. Again, I'm a big fan, but it's interesting
Speaker 2: the stock has really been under pressure. Punhum Goyle, she's
Speaker 2: a senior US retail analyst for Bloomberg Intelligence. She joins
Speaker 2: us via zoom from Princeton, New Jersey. Punham, what did
Speaker 2: you see in Lululemon's earnings and what does it tell
Speaker 2: you about maybe the retail consumer.
Speaker 8: Sure, So I think the earnings are better than expected
Speaker 8: because well, we do see slow in growth at Lululemon,
Speaker 8: where it's decelerating from the mid teens to low double
Speaker 8: digits near ten percent. There is concern that is that
Speaker 8: because of a slower macro and the fact that Lulu
Speaker 8: Lemon is losing out to competition Alo Yoga, et cetera.
Speaker 8: We discovered that part of that is true, but part
Speaker 8: of that is not true, and I think that's why
Speaker 8: investors have a little more confidence.
Speaker 4: How big is the US market for them? And are
Speaker 4: they selling overseas and how much?
Speaker 8: Yeah, so the US market the America is eighty percent
Speaker 8: of their business. International is twenty percent, with China half
Speaker 8: of that.
Speaker 4: And is demand picking up or slowing in China or
Speaker 4: is it new to the Lulu Lemon market.
Speaker 8: So international was a bright spot this quarter. International sales
Speaker 8: grew about thirty five percent, and within that, China was
Speaker 8: up Mainland China was up forty five percent, So a
Speaker 8: lot of growth there. It's a bright spot for lul Lemon.
Speaker 8: International is part of their three pronged strategy to double
Speaker 8: sales into twenty twenty seven. It's been doing very very
Speaker 8: well and we expect that to continue.
Speaker 3: All right.
Speaker 2: So and folks, if you want the best research on
Speaker 2: the street on Lululan, Lululemon just gonna be I go
Speaker 2: and you can find Punam's research there.
Speaker 3: And I'm looking at your research here. Punham.
Speaker 2: You're talking about you know, when you talk about that
Speaker 2: doubling sales to twelve and a half million, you know
Speaker 2: by twenty twenty six the company, and you're saying strong
Speaker 2: international growth. Okay, I get that men's growth. Talk to
Speaker 2: us about Lululemon and men's I mean, it's just not
Speaker 2: John and I don't know where to go with this.
Speaker 4: Do real men go to Lululemon?
Speaker 8: Is what it's. Real men are going to Lululemon. You know,
Speaker 8: it's one of their bright spots right now. And they
Speaker 8: actually think that men's could become overtime. I think you'll say,
Speaker 8: take some time fifty percent of the business. So there's
Speaker 8: a lot of opportunity in men's. And you know when
Speaker 8: you walk those stores and I looked at the men's inventory,
Speaker 8: it actually looks great. It's not just about outfitting the
Speaker 8: men to go to the gym. It's about outfitting the
Speaker 8: men to go into work with casual, comfortable where that they.
Speaker 4: Can where everybody who listens to this program of views
Speaker 4: this on YouTube knows Paul is the company fashion police. Yes,
Speaker 4: if you saw somebody in like Lululemon come into the office,
Speaker 4: might have a.
Speaker 3: Film, it might be a problem.
Speaker 2: But I'm going to refer to Punum because she knows
Speaker 2: fashion here and she knows what works. So if I'm
Speaker 2: Lulu Lemon, talk to us just about what they're saying
Speaker 2: about the consumer out there, Punham.
Speaker 8: So the consumer, We've been talking about this for a
Speaker 8: while now. The consumer is selective. They're choosing where to shop,
Speaker 8: when to shop, how to shop, and if they see
Speaker 8: the right product, they are still purchasing it. The one
Speaker 8: thing that struck out during the call was that traffic
Speaker 8: was up in the quarter, which means people are still
Speaker 8: going to Lulu Lemon. They still have purchased intent. But
Speaker 8: there were some product missteps which they're working to correct
Speaker 8: into the second half of the year, where they didn't
Speaker 8: have the right colors, or they didn't have enough colors.
Speaker 8: I should say, they didn't have enough depth and sizes.
Speaker 8: They were running out of the small sizes. So these
Speaker 8: are problems that I would think are execution related and
Speaker 8: are being fixed and can be fixed into the back half.
Speaker 8: So while there is still part of a macro problem,
Speaker 8: the story isn't that Lemon people are not going to
Speaker 8: shop there. People still are interested in the apparel. They
Speaker 8: just have to fix the product a little and really
Speaker 8: improve our execution into the back half.
Speaker 4: They're known for form fitting, but just to get back
Speaker 4: to the men's fashion, they have anything for old fat guys.
Speaker 8: Well, their ABC men's franchise is really popular and it's
Speaker 8: not form fitting. It's about the casual flare and they
Speaker 8: have done very well there. And you don't need to
Speaker 8: wear tight leggings for men's that's not the appeal there.
Speaker 8: That's for the women. But I'd say even for the woman,
Speaker 8: you know what worked really well in the corner where
Speaker 8: they're loose fitting pants and their biker shorts. So yes,
Speaker 8: leggings is a big business for them, but they are
Speaker 8: broadening that.
Speaker 3: Hey, let's switch gears just a little bit.
Speaker 2: I saw it yesterday reporting in a Wall Street journal
Speaker 2: Punum Dollar Tree is among the potential sales spin off
Speaker 2: of Family Dollar.
Speaker 3: What is going on with the dollar stores here.
Speaker 2: I would have thought that if a part of the
Speaker 2: consumer market is weak and the low end economically, that.
Speaker 3: Perhaps that would be good for the dollar stores. But
Speaker 3: what's going on there?
Speaker 8: So they're really two very different types of dollar stores.
Speaker 8: Gen Bartashus covers the space, but from my coverage over
Speaker 8: years ago, I can tell you that Dollar Tree targets everyone, right.
Speaker 8: I would shop at Dollar Tree, Paul. You would shop
Speaker 8: a Dollar Tree. You buy that one twenty five item
Speaker 8: there and you go treasure hunt. But a family Dollar customer,
Speaker 8: that's their principal discount store. That is where they buy
Speaker 8: their groceries, that is where they buy their day to
Speaker 8: day needs. So as that customer's wallet is being stretched,
Speaker 8: that business does come into more pressure.
Speaker 4: I'm going to tell you my Dollar Tree story. I
Speaker 4: bought a loaf of bread I brought to the counter
Speaker 4: and the casher said, sir, you don't want that. Apparently
Speaker 4: they had some sort of rat problem. I didn't know
Speaker 4: about it.
Speaker 3: All right, Punam, thank you so much for joining us there.
Speaker 2: Putnam Goyle, Senior US e Commerce and retail Anams Bloomberg
Speaker 2: Intelligence give us a breakdown on Lululemon again, some better
Speaker 2: than feared or results, and n actually lifted their guidance
Speaker 2: a little bit here. So some good news there for
Speaker 2: Lululemon stocks up about two and a half percent, but
Speaker 2: it's down pretty big this year, concerns about growth.
Speaker 4: There.
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Speaker 2: If you look at the equal weighted standard and Poor's
Speaker 2: index of about five percent, the question is kind of
Speaker 2: where do we go from here with We've got a
Speaker 2: FED that appears at.
Speaker 3: Some point it's going to be cutting rates. You got
Speaker 3: that on one hand.
Speaker 2: The other hand, you've got decent earnings growth That kind
Speaker 2: of seems pretty constructive here in the marketplace. Let's check
Speaker 2: in with somebody who does this stuff for a living.
Speaker 2: Nicole Webbs. She's the senior vice president. She's a financial
Speaker 2: advisor at Wealth Enhancement Group, joining us via that Zoom thing.
Speaker 2: So Nicole, is you sit down and talk to your
Speaker 2: clients here today. They've had a pretty good start to
Speaker 2: the year by and large. What are you telling them
Speaker 2: about the back half of this year.
Speaker 9: Yeah, you know, I think the back half is a
Speaker 9: little bit to be determined, But in the interim, we
Speaker 9: expect it to be pretty choppy. And I say that,
Speaker 9: you know, for a myriad of reasons. You know, I
Speaker 9: think the first being, there was so much expectation that
Speaker 9: entering this year and your lead in was so perfect,
Speaker 9: was that you know, we're going to see this broadening
Speaker 9: out in the market, a breath that would come through
Speaker 9: the first two quarters of twenty twenty four, and that's
Speaker 9: not really been the case. And actually over the last
Speaker 9: couple of weeks which we've seen is less breath and
Speaker 9: more leadership in mega technology again, and so you know,
Speaker 9: probably to get that next stickiness the next run from here,
Speaker 9: one would expect that we need more confidence throughout the
Speaker 9: cap spectrum, not just concentrated in technology. And then you
Speaker 9: couple that with the fact that we've had a lot
Speaker 9: of interest rate volatility. I mean, really even in the
Speaker 9: last five, six, seven trading days, the tenure has moved
Speaker 9: a lot, and so you know, there's there's some underpinnings
Speaker 9: to this market right now that we expect to keep
Speaker 9: it choppy for the coming weeks ahead.
Speaker 4: The data that we've been getting, does that show slowing
Speaker 4: that indicates, uh, interest rate cut that's going to be
Speaker 4: good for equities, or does it show slowing of the
Speaker 4: economy that's going to be bad for corporate profits.
Speaker 9: You know, our stance on cuts is that it kind
Speaker 9: of circles back to the ECB today, which I I
Speaker 9: loved that their words were a bit hawkish in tone,
Speaker 9: but their actions were that they want to see rate stabilize.
Speaker 4: Yeah, they ec be cut, but at the same time
Speaker 4: Lagarn also said there were inflation concerns or if she
Speaker 4: doesn't know how close they are to the neutral radar
Speaker 4: words to that effect exactly.
Speaker 9: And so you know, I think as we keep seeing
Speaker 9: economic data that is in support of you know, many
Speaker 9: consumers that are slowing, but then many who are benefiting
Speaker 9: from the run in the markets also clipping five percent
Speaker 9: coupons on risk free assets, and you kind of need
Speaker 9: to start hearing a tone from our FED that we
Speaker 9: need to start the process of normalization of rates because
Speaker 9: there are certain elements of the inflationary trends around us,
Speaker 9: some of these pockets of stickiness and service, the undersupply
Speaker 9: in housing that simply probably can't be fixed by leaving
Speaker 9: rates as restrictive as they are. And so, you know,
Speaker 9: I think it was a really balanced message from the
Speaker 9: ECB and one that we would love to see, you know,
Speaker 9: the Fed here take more of that stance on. You
Speaker 9: can remain hawkish in your tone, but you can start
Speaker 9: to move towards normalization and do it at a slow
Speaker 9: and steady pace, versus continuing this narrative of going into
Speaker 9: a cutting cycle, which you know, sounds very different.
Speaker 10: It sounds like fixing a new problem.
Speaker 3: So Nicole, talk to us about valuation here.
Speaker 2: I'm looking at kind of s and P earnings growth
Speaker 2: kind of ten eleven maybe twelve percent over the you know,
Speaker 2: next year or so. Is that enough to support this
Speaker 2: valuation in the market or do you feel like you
Speaker 2: need to maybe get a little defensive in valuation.
Speaker 10: There?
Speaker 9: You know, there's there's this convergence of themes, one of
Speaker 9: them being we went in to the year with earning expectation,
Speaker 9: you know, consensus among analysts. Generally, you see analysts start
Speaker 9: to cut those earnings forecasts, which in the first month
Speaker 9: or two we did, and then we've seen a steady
Speaker 9: increase in those earnings expectations and where we think this
Speaker 9: market is going to take us. You know, again, though,
Speaker 9: I go back to the earlier comment, which is we
Speaker 9: need more than just the support of mega technology or
Speaker 9: that next leg or the next wave of this bull market,
Speaker 9: or to have more confidence in it.
Speaker 10: But at the same time.
Speaker 9: It's pretty clear that you need a lot of free
Speaker 9: cash flow, that there's going to be a huge capex
Speaker 9: expenditure over the next many years to build the new infrastructure,
Speaker 9: to build the AI factories, and that the megatech companies
Speaker 9: are the ones who have the cash flow and the
Speaker 9: access to do that. And so you know, aside from
Speaker 9: more government intervention or more fiscal money put at building
Speaker 9: out this infrastructure, we do believe that you're probably going
Speaker 9: to continue to see multiples that are substantiated by both
Speaker 9: the investment.
Speaker 10: Towards future growth the breadth of that growth.
Speaker 9: And then you know, also, though, when do you start
Speaker 9: to see some of those productivity reshoring metrics for further
Speaker 9: se access again down that cap spectrum within the s
Speaker 9: and P five hundred, And then as we think even
Speaker 9: further about the broadening out of the market, it really
Speaker 9: does seem like until the FED starts to enter a
Speaker 9: normalization narrative around interest rates that we're not going to
Speaker 9: get that further support from mid and small cap, which
Speaker 9: again has just been very volatile amongst you know, the
Speaker 9: consumer data, the inflation data, and then again interest rate volatility.
Speaker 4: Do you move beyond the big megacap stocks and maybe
Speaker 4: into the derivatives of artificial intelligence? Do you have to
Speaker 4: be more strategic in that area now?
Speaker 9: Overall, you know, we think it's really important to think
Speaker 9: about artificial intelligence, the build out of the infrastructure as
Speaker 9: being future.
Speaker 10: Table stakes among many companies.
Speaker 9: So if we think, you know, of the Internet, at
Speaker 9: one point it was incredibly interesting and now it's as
Speaker 9: if you would never run a business without it. And
Speaker 9: I know that is a little bit cliche and simplified,
Speaker 9: but I do think you have to look beyond just
Speaker 9: the productivity within each company and think more about end benefactors.
Speaker 9: So right now there's so much onus put on the suppliers.
Speaker 9: We've seen the pressure on software because there's a lot
Speaker 9: of curiosity about you know, is that more of a
Speaker 9: middleman that gets gets stripped out of this equation. But
Speaker 9: you know, we think of and it's a very easy
Speaker 9: example would be you know, John Deere, you know things
Speaker 9: that become end benefactors in terms of access to you know,
Speaker 9: robotic arms and the ability for artificial intelligence instead of
Speaker 9: fertilizing entire fields.
Speaker 4: It's the tractor that doesn't need a farmer.
Speaker 10: It is the tractor that doesn't need a farmer.
Speaker 9: Thank you.
Speaker 10: You got there faster than I could.
Speaker 9: And so you have to think about what are businesses
Speaker 9: that are truly revolutionized and what businesses just become table
Speaker 9: stakes owners of you know AI as part of its
Speaker 9: operating technology.
Speaker 2: Nicole, I'm guessing you probably get some phone calls from
Speaker 2: your clients saying, hey, I can just buy a two
Speaker 2: year treasury and get close to five percent here. That's
Speaker 2: not a bad place to be. What do you tell
Speaker 2: them about fixed income these days?
Speaker 9: Yeah, you know, it is the I never thought that
Speaker 9: I would spend so much of my time for consecutive
Speaker 9: years talking about treasuries.
Speaker 10: It is incredibly interesting.
Speaker 9: And you know, I would say post the Great Financial Crisis,
Speaker 9: we started to really change the way we ran financial
Speaker 9: models because we sat in a zero percent interest rate
Speaker 9: environment for so long, and effectively you had to think
Speaker 9: about how you then modeled total return as a component
Speaker 9: of that. And so now if you were running projections
Speaker 9: at five six percent, maybe seven, but someone can clip
Speaker 9: five point four on the short end, it becomes really
Speaker 9: hard to get them to take equity premium risk over
Speaker 9: that risk free rate. And so it's really a combination
Speaker 9: of thinking about public markets, private markets, and then how
Speaker 9: much duration are you going to build into your portfolio today?
Speaker 9: You know how far out are you going to go?
Speaker 9: Because for many the tax equivalent yield on a tenure
Speaker 9: is still incredibly lucrative, and so that is becoming a
Speaker 9: bigger part of the overall conversation.
Speaker 2: All right, Nicole, thank you so much for joining us.
Speaker 2: As always, Nicole Web She's a senior vice president financial
Speaker 2: advisor at Wealth Enhancement Group. Joining us from New York
Speaker 2: via zoom.
Speaker 1: Here, you're listening to the Bloomberg Intelligence Podcast. Catch us
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Speaker 3: For the month of June.
Speaker 2: Bloomberg Radio is committed to bringing new segments and guests
Speaker 2: focused on the topic of equality. Today, we're speaking with
Speaker 2: Norman chen CEO of the Asian American Foundation. He joins
Speaker 2: us via zoom from San Francisco. Norman, thanks so much
Speaker 2: for joining us here. I love to just start at
Speaker 2: the really basics here. Tell us what you do at
Speaker 2: the Asian American Foundation, what's the focus and how are
Speaker 2: you guys impacting this environment.
Speaker 11: Well, first, thanks for having me. The Asian American Foundation
Speaker 11: is a three year old organization that was formed at
Speaker 11: the peak of anti Asian hate in twenty twenty one,
Speaker 11: where we work together across the country, across all sectors
Speaker 11: on safety, belonging, and prosperity for our community.
Speaker 4: Does the China rhetoric, which in Washington has been focused
Speaker 4: on technology and trade, does something as subtle as that
Speaker 4: does that conversation need to to change or at least
Speaker 4: acknowledge that it can result in what you see in
Speaker 4: terms of hate speech and hate action against the AAPI community.
Speaker 11: Yeah, language is really important, as we saw during COVID
Speaker 11: rhetoric blaming China for COVID kung flu Wuhan virus severely
Speaker 11: affected our community, leading to thousands and thousands of attacks
Speaker 11: that continue today. While they are legitimate competitive issues with
Speaker 11: China that need to be addressed. Inappropriate or inflammatory language
Speaker 11: does lead to perceptions and misperceptions of our community that
Speaker 11: continues to lead to feelings that Asian Americans are threats
Speaker 11: in this country, that we're more loyal to Asia than
Speaker 11: to the US, and other misunderstandings.
Speaker 2: So, practically speaking, Norman, think you practically speaking Norman, how
Speaker 2: do you guys go about trying to affect change?
Speaker 6: How do you do that?
Speaker 11: Yeah, we have four pillars to achieve safety belonging to prosperity.
Speaker 11: Number one is to address the immediate hate and tax
Speaker 11: against our community. And we work with a network of
Speaker 11: fifty six national partners or partners across the country and
Speaker 11: fourteen cities that provide care to victims and survivors that
Speaker 11: have suffered these terrible attacks. So those partners are on
Speaker 11: the ground. They provide medical, financial, legal support to those
Speaker 11: who have been traumatized by these incidents. But longer term,
Speaker 11: we work in education and narrative change. So we promote
Speaker 11: the teaching of Asian American history in schools around the country,
Speaker 11: and now seven states have mandated the teaching of Asian
Speaker 11: American history because Asian American history is a critical part
Speaker 11: of American history. And then on our Narrative Change piece,
Speaker 11: we're working to tell more authentic stories about Asian Americans
Speaker 11: and less the stereotypical kinds of stories. One survey that
Speaker 11: we did as people around the country, can you name
Speaker 11: a prominent or famous Asian American And for most people
Speaker 11: in the country, they cannot, were largely invisible to them.
Speaker 11: The number one name that has come up over the
Speaker 11: past four years, over twenty thousand Peace book is Jackie Chan,
Speaker 11: who is actually not even Asian American, He's from Hong Kong.
Speaker 11: And then it's Bruce Lee. So you can see the
Speaker 11: impact that movies and TV shows have on the general psyche,
Speaker 11: and so that's really important to address that as well.
Speaker 4: The Alan Mole shooting that was what a little more
Speaker 4: than a year ago at this point, where Young targeted
Speaker 4: Texas location because presumably, at least we're told by authorities
Speaker 4: because of its aa PI population in Texas. Can you
Speaker 4: tell us what the response has been.
Speaker 11: Yeah, we have wonderful partners in Texas that are really
Speaker 11: advocating for the teaching of Asian American history. They're also
Speaker 11: fighting against land laws that prohibit Asian Americans from buying
Speaker 11: property in Texas, so wonderful partners. There's a real activity
Speaker 11: in Texas, and we also work with corporate partners that
Speaker 11: are helping to promote Asian American programs in that state.
Speaker 4: Yeah, you mentioned the property, but I believe there was
Speaker 4: also a bill in Georgia that I think had the
Speaker 4: backing of Governor Brian Kemp that would ban for Asian
Speaker 4: foreign nationals Chinese foreign nationals from owning property in the state.
Speaker 4: Can you give us an update on that.
Speaker 11: Yeah, there's legislation and multiple states around the country. Unfortunately,
Speaker 11: there has been fear mongering, as you pointed to earlier,
Speaker 11: that people who are Chinese nationals shouldn't own property, and
Speaker 11: they're trying to focus it around certain military or sensitive institutions.
Speaker 11: While there are legitimate national security issues that need to
Speaker 11: be addressed, this perception that Asian buyers Chinese buyers are
Speaker 11: potentially a threat really affects the market, so that realtors
Speaker 11: in these markets now are afraid or hesitant to bring
Speaker 11: on Asian buyers, and so that really has a ripple
Speaker 11: effect to the broader community. The sense that somehow Asians
Speaker 11: are not loyal to America, that will provide and provide
Speaker 11: risks to America, and we're really trying to fight that.
Speaker 4: Yeah, you sound like we can go back to World
Speaker 4: War two and Hawaii interment of Asian Americans exactly.
Speaker 11: Yes, one hundred and twenty thousand Japanese Americans, seventy percent
Speaker 11: who are citizens, were incarcerated for three years because people
Speaker 11: thought that they were going to be disloyal, and it
Speaker 11: turns out there was no proof at all during that
Speaker 11: time that any of those people or any national security
Speaker 11: risk of the country.
Speaker 4: It's an unfortunate a long history of the United States.
Speaker 2: Norman talk to us about is there a role for
Speaker 2: you know, corporations, businesses and their leaders to kind of
Speaker 2: get involved here.
Speaker 3: What are we seeing?
Speaker 11: Yeah, well, thanks for the question. So one very interesting
Speaker 11: fact about TAP is that we were formed by prominent
Speaker 11: Asian American business people such as Joe Tai, owner of
Speaker 11: the Brooklyn Nets, Joe Bay co CEO of KKR, Jerry Yang,
Speaker 11: co founder of Yahoo. So we have very much a
Speaker 11: DNA with business background. And so one of the real
Speaker 11: strengths of TAFF is that we are working across all sectors,
Speaker 11: so not just nonprofit or philanthropy, but also across the
Speaker 11: corporate sector, across government sector, and also with media and entertainment,
Speaker 11: and in our gatherings around the country. We have such
Speaker 11: a mix of people with who all want to support
Speaker 11: our community but come at it from different backgrounds. So
Speaker 11: our fourth pillar, which I didn't mention, is called representation
Speaker 11: and resources, and a lot of that is focused on
Speaker 11: our corporate partners.
Speaker 3: So what does that mean.
Speaker 11: We know from our Status Index research that feelings that
Speaker 11: Asian Americans are the least likely to feel like we
Speaker 11: truly belong in this country, and in fact, only eighteen
Speaker 11: percent believe we truly belong and are accepted. Major reasons
Speaker 11: for that are discrimination, racism. Clearly someone spits at you
Speaker 11: or insult you, you don't feel very good, but also because
Speaker 11: we don't see enough of our people in senior positions.
Speaker 11: Asian Americans make up fifteen to thirty percent of workforces,
Speaker 11: but only three percent of the c suite. Despite the
Speaker 11: model minority myth which makes people believe that, oh, Asian
Speaker 11: Americans are highly successful in business, it's not proportional across
Speaker 11: the organization. So we're working with our corporate partners to
Speaker 11: not only add and increase the presence of Asian Americans
Speaker 11: on boards right at the c suite level, even among ergs,
Speaker 11: but also working with our corporates to funnel more resources
Speaker 11: to our community to make these changes.
Speaker 2: Norman, thanks so much for joining us. Really appreciate getting
Speaker 2: some of your time. Norman Chen, he's the CEO of
Speaker 2: the Asian American Foundation.
Speaker 3: Joining us via zoom from San Francisco.
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Speaker 2: Thirty John Tucker, He's sitting in for Alex Steel today
Speaker 2: on Paul Sweeney.
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Speaker 3: John. I don't know.
Speaker 2: I'm at the point of my life here. All the
Speaker 2: kids are out of the house. I'm eating out more
Speaker 2: in restaurants than they ever have, and maybe.
Speaker 3: It's also a post COVID type of thing.
Speaker 2: I don't know, restaurants I think are packed. I mean,
Speaker 2: I think the restaurant business is doing pretty good. I
Speaker 2: know there's different levels of well.
Speaker 4: The restaurants you're going to are different than the restaurants
Speaker 4: like somebody like me and Charlie Pellett go to.
Speaker 2: You think I'll go into the squad tavern tonight, Pete's
Speaker 2: and Beer Knight.
Speaker 3: That's what I'm doing tonight.
Speaker 2: But anyway, Barry Ridholts, he's got a piece out on
Speaker 2: this whole restaurant thing. What does it mean as an
Speaker 2: economic indicator? So someone in the touch base with Barry
Speaker 2: and see what he's doing there. Barry Ridholts hosts of
Speaker 2: Masters in Business on Bloomberg Radio. Fantastic podcast folks, if
Speaker 2: you want a business podcast markets all that kind of stuff.
Speaker 2: He gets the greatest guest. It's called a Master's in Business.
Speaker 2: He's also got a day job. He's a founder of
Speaker 2: Ridholts Wealth Management. He joins his via zoom. Barry, I
Speaker 2: know you've been known to go to a restaurant or
Speaker 2: to maybe not the kind that John Tucker goes to.
Speaker 2: But how do you look at the restaurant business as
Speaker 2: just an indicator of the economy?
Speaker 12: These issues whenever you hear me complaining about some terrible
Speaker 12: bit of economic and nowais or discussion. It's because some
Speaker 12: clients said, Hey, I know you've been constructive on stocks
Speaker 12: for the past two years, but look at this video
Speaker 12: a friend just sent me. The restaurant industry is collapsing.
Speaker 12: We have to get out of stocks. And you know,
Speaker 12: I go look at the video, and not only is
Speaker 12: it mostly incorrect, it violates every rule of statistical analysis.
Speaker 12: It's filled with band information and denominator blindness, and so
Speaker 12: it sends me down the rabbit hole of hey, what's
Speaker 12: really happening in the world to restaurants. And as it
Speaker 12: turns out, the restaurant industry is on target. In twenty
Speaker 12: twenty four, it will be the US restaurant industry's biggest
Speaker 12: year ever in sales one point one trillion dollars by
Speaker 12: the end of December, and that's based on the first
Speaker 12: half a year of actual sales and then estimates from
Speaker 12: the Restaurant Association National Restaurant Association for the rest of
Speaker 12: the year. Now, again, I'm a little skeptical when people
Speaker 12: are forecasting a five point four percent increase in revenue,
Speaker 12: maybe inflation adjusted. Some of that's right, but when they
Speaker 12: survey restaurant operators, about a third of them said they're
Speaker 12: expecting to see higher real sales for the full year,
Speaker 12: and two thirds of them have said the restaurants in
Speaker 12: their area have rebounded from the pandemic fully. So, you know,
Speaker 12: it's taken a while for this sector the.
Speaker 4: Economy to recover.
Speaker 12: But man, you try and make reservations at a decent restaurant,
Speaker 12: you'd better be looking out two or three weeks or
Speaker 12: you're not going to get in.
Speaker 4: It also depends on where you're located. Barry, I think
Speaker 4: you did an interview with Bobby Flay some years ago
Speaker 4: who was saying it's almost impossible for a restaurant owner
Speaker 4: an individual to turn a profit in a place like
Speaker 4: Manhattan because the rents are so high.
Speaker 12: Right, Well, first of all, it's a very difficult business
Speaker 12: no matter where you are. It's razor thin profits. The
Speaker 12: Restaurant Industry Association says that two thirds of restaurants will
Speaker 12: fail in the first five years. It is tough. You know,
Speaker 12: a great restaurant is a really good business, but restaurants
Speaker 12: and as an industry, are incredibly competitive, incredibly difficult. Now,
Speaker 12: the interesting thing about the discussion with Bobby Flay, where
Speaker 12: I'm a giant fan of my wife and I have
Speaker 12: his cookbooks.
Speaker 4: We've missed.
Speaker 12: Back when Miracle Grill was his first restaurant and I
Speaker 12: was living on twenty seventh Street, we would go over there,
Speaker 12: and that was before Mesa and some of his other
Speaker 12: bigger restaurants. But given what's been taking place with work
Speaker 12: from home and how empty office spaces are, the proposal
Speaker 12: I've made is, hey, if you're an office building owner
Speaker 12: and you want to get more office space rented, well,
Speaker 12: then you better cut a deal with your ground floor
Speaker 12: tenants to make sure it's filled. Because nothing reduces the
Speaker 12: value of an office floor than coming in and seeing
Speaker 12: a boarded up restaurant or a a null retailer on
Speaker 12: the ground floor. I think retail as a service, restaurants
Speaker 12: as a service is something that the major urban areas
Speaker 12: need to consider because their bread is buttered ll upon
Speaker 12: intended with the twenty year office leases that they're gonna
Speaker 12: you know, sell tens of thousands of dollars worth over
Speaker 12: the next twenty years, tens of thousands of square foot.
Speaker 12: A restaurant that's down on the corner, a deli, a
Speaker 12: half decent restaurant, even a high end restaurant. They need
Speaker 12: to be a whole lot more flexible than they've been.
Speaker 12: And they really have to think about this in a
Speaker 12: very different way.
Speaker 3: You know.
Speaker 2: I saw a article on the Bloomberg yeshay, I've been
Speaker 2: waiting waiting to read and it finally came out.
Speaker 3: I say about San Francisco and how.
Speaker 2: There are signs at San Francisco is bottoming and turning
Speaker 2: for the first year. Last year they actually added people
Speaker 2: in San Francisco, eight hundred and forty additional.
Speaker 3: People on the on you know, it was positive. They
Speaker 3: got to start somewhere. I mean, Barry, what do you
Speaker 3: think about a market?
Speaker 2: I know, you spend a lot of time in San Francisco,
Speaker 2: a lot of you know, there's a lot of ingenuity there,
Speaker 2: a lot of money there. How do you think about
Speaker 2: a city like San Francisco, which, in my opinion, before
Speaker 2: the pandemic was a jewel of this country in terms
Speaker 2: of you gotta go there.
Speaker 12: How do you think one of the most beautiful cities
Speaker 12: in the country, No doubt, you know there there are
Speaker 12: everybody wants that one answer, like a binary yes or no.
Speaker 12: And here's a solution. We have a lot of problems
Speaker 12: that are multi factor. There are a lot of things
Speaker 12: driving it. When you look at when you look at
Speaker 12: a city like New York or San Francisco, nimby is
Speaker 12: a giant problem. The all the rules that prevent a
Speaker 12: additional building and construction that that's an ongoing issue.
Speaker 3: Like there isn't a.
Speaker 12: Whole lot of things that can't be solved when prices
Speaker 12: are too high. You know, the old joke is the
Speaker 12: cure for high prices is high prices. You either have
Speaker 12: to lower your prices or bring on more supply. We're
Speaker 12: starting to see that in suburbia. It hasn't quite happened
Speaker 12: in New York City or San Francisco, at least not rapidly.
Speaker 12: And I have vivid recollections of watching the entire Lower
Speaker 12: Manhattan region following September eleventh completely pivot from uptown downtown
Speaker 12: to much more of a residential area. And I think
Speaker 12: that has to happen in more cities. Yes, I know
Speaker 12: a lot of these buildings don't lend themselves to fast
Speaker 12: and easy conversions. Let a few half a billion or
Speaker 12: billion dollar buildings go into receivership. You'll see how fast
Speaker 12: and easy. They get converted. They'll get converted to residential.
Speaker 12: And I think we have to recognize that what the
Speaker 12: pandemic taught us, which is we are no longer in
Speaker 12: a you know, nine to five Monday to Friday, nineteen
Speaker 12: fifties mad men era of office work. That ship has sailed.
Speaker 12: There are some firms that insist on five days a week.
Speaker 12: For us, we give employees a whole lot more flexibility.
Speaker 12: We think that's a great recruiting and retention advantage over
Speaker 12: some larger firms. But it's pretty obvious the hybrid methodology
Speaker 12: is here to stay, and that means we have too
Speaker 12: much office space and too little residential in these urban centers.
Speaker 2: Yep, all right, great stuff has always Barry, appreciate your perspective.
Speaker 2: Barry Redholts, host Semester's in Business on Bloomberg Radio and
Speaker 2: also founder of Ritholtz Wealth Management.
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