WEBVTT - Exxon Plunges, PCE Rises, Tech Earnings 0:00:02.920 --> 0:00:10.799 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.840 --> 0:00:15.000 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:17.480 Eastern on Affo Car Playing and Broud Auto with the 0:00:17.520 --> 0:00:21.320 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:23.320 or watch us live on YouTube. 0:00:25.400 --> 0:00:27.479 Lots of earnings coming out this week. 0:00:27.720 --> 0:00:29.760 We also had in addition to the tech game, so 0:00:29.760 --> 0:00:32.160 I also had a lot of big energy companies report. 0:00:32.240 --> 0:00:36.600 Exxon Chevron reported. Let's break it all down with Vince Piazza. 0:00:36.640 --> 0:00:38.800 He's a senior equity research channels covering the oil and 0:00:38.840 --> 0:00:42.680 gas space for Bloomberg Intelligence. Joining us from Philadelphia via 0:00:42.960 --> 0:00:45.000 zoom So, Vince, let's break it down. Let's start with 0:00:45.159 --> 0:00:48.400 Exxon Mobile. Looks like they missed a little bit here 0:00:49.440 --> 0:00:52.120 on some of their earnings. Give us the lowdown from 0:00:52.200 --> 0:00:52.760 Xon Mobile. 0:00:54.480 --> 0:00:58.880 Well, look, I think here's the takeaway we're telling investors 0:00:58.960 --> 0:01:03.639 and listeners right, this is about cash. Cash is king. Yes, 0:01:03.760 --> 0:01:06.720 they missed, they telegraphed some of that miss It's really 0:01:06.800 --> 0:01:12.240 on lower natural gas prices, margins, a lot of timing 0:01:12.560 --> 0:01:17.080 effects and maintenance issues one timers. Really, But if you 0:01:17.200 --> 0:01:21.160 think about Exon Mobile this quarter, I want you to 0:01:21.280 --> 0:01:24.880 say cash is king free cash flow of over ten 0:01:25.000 --> 0:01:27.800 billion dollars this quarter. That's a forty billion dollar run 0:01:27.959 --> 0:01:31.319 rate annualized. You know, they paid out something like six 0:01:31.400 --> 0:01:36.759 point eight billion distributions, dividends and also share buybacks. Thirty 0:01:36.840 --> 0:01:39.240 three billion of cash on the balance sheet at the 0:01:39.400 --> 0:01:42.760 end of Q one. This is the lowest financial leverage 0:01:42.840 --> 0:01:49.640 they've had in roughly a decade. So, yes, earnings did miss. 0:01:49.800 --> 0:01:52.559 That seems to be dragging it down roughly four percent 0:01:52.680 --> 0:01:56.520 this morning. But the main takeaway for us is that 0:01:57.160 --> 0:02:01.880 they're in a really strong position balance sheets, they're generating capital, 0:02:02.680 --> 0:02:06.280 they're paying dividend to three percent yield, and they're buying 0:02:06.400 --> 0:02:11.880 backstop the Pioneer acquisition. At least from what I heard, 0:02:12.520 --> 0:02:15.399 it doesn't really seem that there's much in the way 0:02:15.480 --> 0:02:19.799 it's going to push the closing of that deal past 0:02:20.800 --> 0:02:25.000 past the first half. So once that deal closes, Paul, 0:02:25.120 --> 0:02:28.320 you're looking at a stop buy back run rate of 0:02:28.840 --> 0:02:32.119 roughly twenty billion dollars a year. So I think they're 0:02:32.160 --> 0:02:36.880 in a fairly good position, probably better than this four 0:02:36.960 --> 0:02:40.120 percent clip that you're seeing this morning, and I think, 0:02:40.240 --> 0:02:43.160 quite frankly better than what Chevron had to offer. 0:02:43.480 --> 0:02:47.240 Yeah, breakdown Chevron for US that company adjusted EPs beat, 0:02:47.680 --> 0:02:50.560 upstream earnings beat, but the cash flow from operations for 0:02:50.600 --> 0:02:53.680 the first quarter six point eight billion dollars versus estimates 0:02:53.720 --> 0:02:55.079 of seven point eight billion. 0:02:56.639 --> 0:02:59.840 Yeah, so you know, again cash is king, right, they 0:03:00.080 --> 0:03:03.880 posted gap free cash flow of just under a three billion, 0:03:04.040 --> 0:03:07.200 yet they paid out three billion of divvies and another 0:03:07.320 --> 0:03:11.760 three billion and shary purchases. You know, if you compare 0:03:11.880 --> 0:03:16.880 the financial leverage, right, Exon is net debt to cap 0:03:17.000 --> 0:03:21.079 of roughly three percent, again, lowest in a decade. For Chevron, 0:03:21.360 --> 0:03:24.799 it's closer to nine percent, So they're not generating the 0:03:24.960 --> 0:03:27.000 kind of free cash flow and they're probably dipping in 0:03:27.560 --> 0:03:30.440 to the balance sheet to help fund those distributions. 0:03:30.760 --> 0:03:30.919 You know. 0:03:31.120 --> 0:03:38.080 Obviously there's also the uncertainty around preemption rights over Hess 0:03:38.160 --> 0:03:42.800 and really really Guyana, so that remains an open question. 0:03:43.600 --> 0:03:49.080 Whereas Exxon's acquisition a Pioneer looks like it shouldn't be 0:03:49.200 --> 0:03:52.720 that many issues for them to close at that time. 0:03:52.800 --> 0:03:56.320 Whereas you know, the Hess deal for Chevron could get extended, 0:03:56.720 --> 0:04:01.800 so fewer questions around Exon, yet it's four more. I 0:04:01.920 --> 0:04:04.120 have more questions around Chevron and that seems to be 0:04:04.440 --> 0:04:07.920 you know, roughly down one percent. But in terms of 0:04:08.000 --> 0:04:10.680 what's going on, what what has gone on this year, 0:04:11.320 --> 0:04:14.560 I mean Exon even with that four percent clip, it's 0:04:14.680 --> 0:04:16.880 up seventeen percent this year. Yeah, and it's you know, 0:04:17.400 --> 0:04:20.880 pretty much in line with with crude and what we've 0:04:20.880 --> 0:04:22.480 seen CREWD do this year as well. 0:04:22.600 --> 0:04:24.200 And that's the one I wanted to get to Vincent 0:04:24.240 --> 0:04:26.440 we just updated. I mean, both of these companies are 0:04:26.560 --> 0:04:29.240 so diversified within the energy space. 0:04:29.839 --> 0:04:34.080 How highly correlated are they to the price of Brent crude? 0:04:35.760 --> 0:04:35.960 Yeah. 0:04:36.040 --> 0:04:39.960 Look, you know what with the acquisitions that Exon has 0:04:40.040 --> 0:04:43.200 made and what the acquisition that Exon you know will 0:04:43.279 --> 0:04:46.919 make with Pioneer, they're going to be much more correlated 0:04:47.120 --> 0:04:51.280 to us on sure, And in this case, Pioneer is 0:04:51.800 --> 0:04:57.440 is much more exposed to to the to the permium 0:04:57.480 --> 0:05:02.120 basin and much more exposed to regional Texas benchmarks in 0:05:02.240 --> 0:05:04.360 the case of in the case of Chevron, you know, 0:05:04.800 --> 0:05:08.280 with the UH with with the Hess deal, they're going 0:05:08.400 --> 0:05:13.120 to have some US exposure via via the Bakan, but 0:05:13.880 --> 0:05:17.720 you know, obviously the Guyana exposure in offshore, so that 0:05:17.800 --> 0:05:22.480 seems to be more tilted toward seaborne marks, whereas Exon 0:05:22.880 --> 0:05:26.640 and they're the importance of the Permian for Exon I 0:05:26.680 --> 0:05:29.640 will likely shine through post the Pioneer deal. 0:05:30.200 --> 0:05:33.200 We had Tesla earnings earlier this week, we talked a 0:05:33.240 --> 0:05:38.200 lot about dropping demand for electric vehicles. I'm wondering to 0:05:38.320 --> 0:05:43.479 what extent is that bullish for companies like Exon and Chevron. 0:05:45.560 --> 0:05:49.280 So when we discuss natural gas, you know, we've had 0:05:51.000 --> 0:05:58.039 rough and storage actually ballooned. You know, we're roughly thirty 0:05:58.360 --> 0:06:00.680 percent above the five year high for now gas storage 0:06:00.680 --> 0:06:03.840 in the US, and that's a new a new five 0:06:03.920 --> 0:06:07.520 year average high. We have over we have an oversupply issue, 0:06:07.560 --> 0:06:09.160 and we had a horrible winter, so we didn't see 0:06:09.200 --> 0:06:12.240 the demand, the cyclical demand. But in terms of natural 0:06:12.320 --> 0:06:16.159 gases share in the more important sectors, the power stack, 0:06:17.200 --> 0:06:20.760 that has actually improved over the last several years, So 0:06:21.320 --> 0:06:26.880 that gas as a feedstock into power generation that will increase. 0:06:27.360 --> 0:06:30.600 It's not so much evs, but think about the amount 0:06:30.680 --> 0:06:33.600 of power that one needs for all these data all 0:06:33.640 --> 0:06:37.279 these data centers. Whether you're mining bitcoin or whether you're 0:06:37.360 --> 0:06:41.239 Microsoft and these other tech companies building out their data centers, 0:06:41.520 --> 0:06:45.360 you're still going to need and a massive amount of power. 0:06:46.720 --> 0:06:51.040 And while you still are investing in solar and wind 0:06:52.200 --> 0:06:56.960 uh and other technologies, you're still going to need that 0:06:57.240 --> 0:07:02.240 transparency and the depend didn't see on natural gas as 0:07:02.279 --> 0:07:04.320 a major feedstock into the power sect. 0:07:05.120 --> 0:07:09.720 Hey, Vince, just wondering kind of where we are in 0:07:10.320 --> 0:07:14.200 terms of this commitment to going green, greener energy. I 0:07:14.280 --> 0:07:17.280 was at a bn EF conference with Alex Steele last 0:07:17.320 --> 0:07:19.280 week in New York, and a lot of the energy 0:07:19.280 --> 0:07:21.040 companies were there, and they're talking about the investments that 0:07:21.040 --> 0:07:23.680 they're making and thinking things like that. How do investors 0:07:23.760 --> 0:07:26.680 feel about the investments that these energy companies are making 0:07:26.800 --> 0:07:29.320 in their traditional fossil fuels versus maybe some of the 0:07:29.800 --> 0:07:31.160 newer technologies. 0:07:32.640 --> 0:07:34.160 Yeah, I still think we're in the. 0:07:35.680 --> 0:07:36.560 Early stages. 0:07:36.960 --> 0:07:37.080 Uh. 0:07:37.240 --> 0:07:42.960 You know, Exon talked about direct air capture and gray 0:07:43.240 --> 0:07:47.000 versus green hydrogen. You're still going to need significant amount 0:07:47.200 --> 0:07:52.080 of civic support, government support for these projects. 0:07:52.240 --> 0:07:52.400 You know. 0:07:52.520 --> 0:07:55.200 Occidental seems to be more further along in terms of 0:07:55.640 --> 0:07:59.600 direct air capture. Exon talked about that. Excellon continues to 0:07:59.640 --> 0:08:02.920 talk about it, but I think we're still somewhat a 0:08:03.000 --> 0:08:09.960 ways from using it as a mechanism in our models 0:08:10.920 --> 0:08:14.680 for a fundamental change in the makeup of these entities. 0:08:15.520 --> 0:08:19.400 It's still going to be about upstream extraction and cracking 0:08:19.440 --> 0:08:23.400 the molecules and putting them into the system, into the broad. 0:08:24.800 --> 0:08:26.760 All right, Vince, thanks so much, appreciate it. 0:08:27.040 --> 0:08:30.000 Vince Biazza, senior equity analyst covering the oil and gas 0:08:30.000 --> 0:08:33.440 space for Bloomberg Intelligence. There again, we had a couple 0:08:33.480 --> 0:08:38.160 of the big companies report earnings here, Exxon Mobile and Chevron. 0:08:39.679 --> 0:08:43.520 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:08:43.640 --> 0:08:47.160 weekdays at ten am Eastern on applecar Play and Android 0:08:47.200 --> 0:08:50.320 Auto with the Bloomberg Business. You can also listen live 0:08:50.480 --> 0:08:53.599 on Amazon Alexa from our flagship New York station Just 0:08:53.720 --> 0:08:56.319 say Alexa playing Bloomberg eleven thirty. 0:08:58.080 --> 0:09:00.559 We're a little lonely today. Friday's on a big in 0:09:00.720 --> 0:09:01.319 person day. 0:09:01.520 --> 0:09:02.240 Not a lot of people. 0:09:03.040 --> 0:09:03.160 You know. 0:09:03.280 --> 0:09:07.040 We're here in our Bloomberg Interactive Broker studio, but we're 0:09:07.120 --> 0:09:08.679 kind of kind of lonely here. But I'll say we're 0:09:08.760 --> 0:09:11.480 joined now by Sarah Ponsek. She's a financial advisor at 0:09:11.520 --> 0:09:16.160 UBS Private Wealth Management. She's based down a Boca Briton, Florida. 0:09:16.920 --> 0:09:20.040 Nice Trade from New York City, she joined the mess 0:09:20.760 --> 0:09:21.720 of moving down to Florida. 0:09:21.760 --> 0:09:24.200 She was actually a little bit on the early side. Sarah, 0:09:24.240 --> 0:09:24.520 thanks so. 0:09:24.600 --> 0:09:27.679 Much for joining us here. A lot of earnings, a 0:09:27.800 --> 0:09:32.199 lot of economic data. This week, we've seen some volatility 0:09:32.320 --> 0:09:34.720 in the equity markets, pulling back maybe four or five 0:09:34.720 --> 0:09:36.040 percent here off off the peak. 0:09:36.480 --> 0:09:38.360 What are you telling your clients at ubs? 0:09:39.559 --> 0:09:41.160 It's great to be here with you both. And yes, 0:09:41.200 --> 0:09:43.160 I was part of the mass exodus down to Florida, 0:09:43.200 --> 0:09:45.959 but I tell everyone that I I was raised here, 0:09:46.240 --> 0:09:49.440 I'm from Florida. I have a lot of a lega. 0:09:51.040 --> 0:09:53.680 But no, Look, this was a big week in terms 0:09:53.720 --> 0:09:56.000 of information when you think about what's driving the market 0:09:56.080 --> 0:10:00.199 right now and what is most important when it comes 0:10:00.200 --> 0:10:03.559 to thinking about the market outlook, there's really two components 0:10:03.559 --> 0:10:03.719 of that. 0:10:04.040 --> 0:10:07.600 One inflation and growth, which we had insight into this week, 0:10:08.000 --> 0:10:11.599 and two tech and tech earnings, because so much of 0:10:11.679 --> 0:10:14.920 this rally that we have seen over the past five months, 0:10:14.960 --> 0:10:18.920 past year has been predicated upon this assumption that we 0:10:19.000 --> 0:10:20.440 are going to see. 0:10:21.200 --> 0:10:26.400 Unbelievable growth and AI. Now, with that said, what did 0:10:26.480 --> 0:10:27.520 we learn this week? 0:10:28.080 --> 0:10:32.040 Honestly, nothing too new at the PCEE numbers this morning 0:10:32.160 --> 0:10:34.800 that came in pretty much bang in line with expectations. 0:10:35.080 --> 0:10:37.880 Inflation sticky. We all know that the Fed's dealing with 0:10:38.000 --> 0:10:40.120 it and they're just waiting at this point in time. 0:10:40.679 --> 0:10:44.160 And we saw some unbelievable tech earnings overnight as well, 0:10:44.360 --> 0:10:48.440 proving that CAPEC spending in AI is paying off. 0:10:48.640 --> 0:10:50.920 So, you know, as for what we saw this. 0:10:51.000 --> 0:10:55.240 Week, how that reflects into the outlook for the market ahead, 0:10:55.559 --> 0:10:57.199 There really isn't too much of a change at this 0:10:57.280 --> 0:10:57.800 point in time. 0:10:58.400 --> 0:11:01.160 Okay, So when you look at the macro data, not 0:11:01.320 --> 0:11:03.040 just this week, but what we've seen over the last 0:11:03.120 --> 0:11:06.920 several months, are we really going to get cuts this 0:11:07.080 --> 0:11:08.679 year from the Federal reserves era? 0:11:09.760 --> 0:11:12.120 It's a good question. I think it's the million dollar 0:11:12.240 --> 0:11:14.120 questions on everyone's mind. 0:11:14.280 --> 0:11:17.080 And frankly, I don't even know if FED Chair Powell 0:11:17.559 --> 0:11:19.480 and his colleagues at the FED know the answer to 0:11:19.559 --> 0:11:22.920 that question right now. Look, our economists base case is 0:11:22.960 --> 0:11:26.760 that we will still see two FED rate cuts this year. 0:11:27.400 --> 0:11:30.599 Coming into the year, our expectation was for three. We 0:11:30.760 --> 0:11:34.200 never bought into the markets expectations that we might see 0:11:34.440 --> 0:11:37.960 six seven rate cuts throughout twenty twenty four. We were 0:11:38.000 --> 0:11:41.360 standing pad at three that has since been revised to two, 0:11:41.840 --> 0:11:45.960 with that starting likely in September, sometime in the back 0:11:46.080 --> 0:11:49.160 half of the year. But again, the only way that 0:11:49.200 --> 0:11:51.160 we are actually going to see that come to fruition 0:11:51.440 --> 0:11:55.000 is if we see progress on the inflation front, and 0:11:55.320 --> 0:11:58.760 right now there are concerns and question marks surrounding that. 0:11:58.920 --> 0:12:00.600 So I would say, if we think about what, what's 0:12:00.679 --> 0:12:04.719 the biggest risk to you know, our base case right now, 0:12:05.200 --> 0:12:08.000 what's our biggest risk to the market outlook, it is 0:12:08.080 --> 0:12:12.960 that inflation stays sticky for longer and that those cuts 0:12:13.120 --> 0:12:14.959 just get pushed out into the future. 0:12:15.280 --> 0:12:17.040 And I know there has been some talk of even 0:12:17.120 --> 0:12:22.040 a great hike at this point. That's not our forecasts 0:12:22.080 --> 0:12:24.800 at this point in time, and we would you know, 0:12:25.160 --> 0:12:26.600 there'd be a lot that would have to happen. 0:12:26.640 --> 0:12:29.000 We would need to see a reacceleration in inflation for 0:12:29.120 --> 0:12:30.720 us to believe that that might be on the table. 0:12:31.400 --> 0:12:33.720 So, Sarah, what do you mean you speak to your 0:12:33.800 --> 0:12:36.679 clients kind of what are you telling them here as 0:12:36.720 --> 0:12:41.720 it relates to any change in maybe asset allocation, stocks, bonds, alternatives. 0:12:42.000 --> 0:12:43.719 What's what's kind of the message you're trying to get 0:12:43.720 --> 0:12:45.800 across to your clients So the. 0:12:45.840 --> 0:12:48.360 Message within the last couple of weeks, because it seems 0:12:48.360 --> 0:12:50.880 as though, you know, investors always have short term amnesia. 0:12:50.920 --> 0:12:53.480 You see any blip in the market, any volatility, and 0:12:53.520 --> 0:12:56.679 there is concern. So even amongst clients of ours who 0:12:57.360 --> 0:12:59.880 you know have had phenomenal performance over the last year. 0:13:00.559 --> 0:13:01.800 For all, if you look at the S and P 0:13:01.960 --> 0:13:04.480 five hundred over a five month span, we saw the 0:13:04.559 --> 0:13:07.679 stock market almost just go straight up thirty percent over 0:13:07.800 --> 0:13:10.079 five months, and all of a sudden over the last 0:13:10.120 --> 0:13:12.000 couple of weeks, we are faced with volatility and we 0:13:12.080 --> 0:13:14.319 see a pullback. What are we telling them in relation 0:13:14.440 --> 0:13:17.000 to that, Well, one we all have to know as investors, 0:13:17.480 --> 0:13:22.559 pullbacks are normal. Corrections are a healthy element of the 0:13:22.679 --> 0:13:25.400 investment process. In fact, if you actually look at how 0:13:25.520 --> 0:13:28.720 often we see five percent pullbacks in the stock market 0:13:28.960 --> 0:13:32.400 and averagely happen about three times a year. So making 0:13:32.480 --> 0:13:35.160 sure that you don't see this pullback as a reason 0:13:35.240 --> 0:13:38.520 to completely throw your plan and strategic acid allocation. 0:13:38.200 --> 0:13:38.760 Out of place. 0:13:39.160 --> 0:13:42.160 Now, as you're asking a question as to what we're 0:13:42.360 --> 0:13:45.280 talking about, if we're making any changes as it pertains 0:13:45.320 --> 0:13:48.400 to asset allocation, I would say the biggest message to 0:13:48.480 --> 0:13:51.680 get across right now. For a long term investor who's 0:13:51.679 --> 0:13:53.800 trying to build wealth long term is if you are 0:13:53.960 --> 0:13:57.000 sitting on a lot of cash right now, which a 0:13:57.160 --> 0:13:59.240 lot of investors are. If you look at the amount 0:13:59.280 --> 0:14:02.920 of cash and market funds, it's above six trillion dollars, 0:14:03.000 --> 0:14:05.520 So there's a lot of cash out there. At this 0:14:05.720 --> 0:14:08.640 point in time, you should be looking to buy bonds 0:14:08.800 --> 0:14:11.960 lock in yields, because yes, it's great that you can 0:14:12.000 --> 0:14:13.920 get a juicy five five and a half percent in 0:14:14.000 --> 0:14:17.000 a money market right now on your cash, But what 0:14:17.120 --> 0:14:19.280 are you going to be thinking And I'm not even 0:14:19.280 --> 0:14:20.880 going to say a year from now, but two three 0:14:20.960 --> 0:14:23.280 years from now, we see interest rates come back down 0:14:23.320 --> 0:14:25.560 and all of a sudden, you didn't invest your cash. 0:14:25.640 --> 0:14:27.320 You're not getting a return on your cash. 0:14:27.680 --> 0:14:29.240 And by the way, at that point in time, you 0:14:29.320 --> 0:14:31.640 can't go out and buy bonds yielding what they're yielding 0:14:31.720 --> 0:14:34.320 now either. So making sure that if you're someone who's 0:14:34.360 --> 0:14:38.160 sitting on a hefty cash position, working through a plan 0:14:38.280 --> 0:14:40.600 and making sure that you're putting that cash to work, 0:14:41.280 --> 0:14:43.400 at least in the bond market at this point in time. 0:14:44.000 --> 0:14:47.720 For stocks, look, we're seeing volatility, it might make sense 0:14:47.840 --> 0:14:49.480 to ease into the market over a period of time. 0:14:49.520 --> 0:14:52.120 Don't need to do it all at once. But it's 0:14:52.200 --> 0:14:54.640 time in the market, not timing the market that matters. 0:14:55.120 --> 0:14:58.400 And over a long period of time, cash is not 0:14:58.560 --> 0:14:59.880 the best asset class to be sitting. 0:15:00.480 --> 0:15:03.320 I'm wondering what you make of the boom in some 0:15:03.520 --> 0:15:08.080 of these options linked products. I write about ETFs, and 0:15:08.520 --> 0:15:10.920 earlier this week I wrote about a new ETF that 0:15:11.080 --> 0:15:16.440 offers one hundred percent downside protection, but it caps the upside. 0:15:16.800 --> 0:15:19.720 We know that covered call ETFs have seen about seventy 0:15:19.800 --> 0:15:24.280 billion dollars. Is that a product that people are interested 0:15:24.320 --> 0:15:26.880 in from your view, Sarah, or is it just an 0:15:26.920 --> 0:15:29.720 easier bet to just buy bonds don't worry about all 0:15:29.720 --> 0:15:30.800 the time it's done well. 0:15:30.920 --> 0:15:35.040 Well, it's a completely different, you know, investment scenario investors 0:15:35.080 --> 0:15:38.520 who are looking to trade options or you know, we 0:15:38.880 --> 0:15:41.360 do work with clients when it comes to structured products 0:15:41.440 --> 0:15:45.640 or structured notes as well. Occasionally investors like the idea 0:15:45.960 --> 0:15:49.800 of you know, being able to have their cake and 0:15:49.880 --> 0:15:53.080 eat it too. In essence, what you're describing is an 0:15:53.080 --> 0:15:56.640 investment product in which you can get upside but limit 0:15:56.720 --> 0:15:59.960 your downside as well well. Investors, you know, would take 0:16:00.120 --> 0:16:01.840 that any day of the week. Of course, there's always 0:16:01.880 --> 0:16:03.680 trade offs, and I don't know the specifics of the 0:16:03.760 --> 0:16:06.680 ETF that you're speaking of, but I would imagine that 0:16:06.760 --> 0:16:09.280 there's got to be some trade offs. You can't get 0:16:09.320 --> 0:16:11.480 one hundred percent upside in the stock market and you 0:16:11.520 --> 0:16:14.440 had cap your downside one hundred percent as well. But 0:16:14.560 --> 0:16:16.920 I would say from our perspective more so, I have 0:16:17.160 --> 0:16:20.200 had clients who might be sitting on and I'm not 0:16:20.240 --> 0:16:23.560 going to name particular names, but maybe a large megacap 0:16:23.640 --> 0:16:26.960 tech stock that has run up significantly over the last year, 0:16:27.400 --> 0:16:30.160 and we're talking about different options strategies with them on 0:16:30.680 --> 0:16:33.120 how to limit their downside or how to maybe take 0:16:33.200 --> 0:16:37.000 some profits while being really smart and tactical tactical about 0:16:37.000 --> 0:16:39.800 the tax implications of realizing those gains as well. You know, 0:16:40.320 --> 0:16:43.880 how do you deal with the actual ramifications of having 0:16:44.240 --> 0:16:48.080 a position in your portfolio that has performed phenomenally. That's great, 0:16:48.680 --> 0:16:50.400 but at that point in time, if it is a 0:16:50.520 --> 0:16:54.320 significant portion of your portfolio, how can you diversify out 0:16:54.360 --> 0:16:56.960 of that position? How can you limit your downside? But 0:16:57.080 --> 0:16:59.400 while being cognizant of the tax effects as well. 0:17:00.080 --> 0:17:02.480 Sarah, thanks so much for joining us. Always appreciate checking 0:17:02.520 --> 0:17:02.840 in with you. 0:17:02.960 --> 0:17:06.760 Sarah Ponsek, She's a financial advisor UBS Private Wealth Management 0:17:06.800 --> 0:17:09.720 down there in lovely Boca Raton, Florida. 0:17:09.800 --> 0:17:11.680 Back going back to her home state. 0:17:11.800 --> 0:17:12.000 There. 0:17:14.520 --> 0:17:18.400 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:17:18.520 --> 0:17:21.840 weekdays at ten am Eastern on Focarplay and Android Auto 0:17:21.920 --> 0:17:24.800 with the Bloomberg Business App. Listen on demand wherever you 0:17:24.920 --> 0:17:27.880 get your podcasts, or watch us live on YouTube. 0:17:29.240 --> 0:17:31.440 Let's talk tech earnings. At least was just reporting on 0:17:31.560 --> 0:17:36.240 some of the tech names. Both Microsoft and Google reported 0:17:36.560 --> 0:17:40.480 numbers last night, beating expectations, putting in some pretty solid numbers. 0:17:40.720 --> 0:17:44.840 Both stocks trading quite well here this morning. Let's bring 0:17:44.880 --> 0:17:46.919 in man Deep Singh and Onna rog Rana. They are 0:17:47.000 --> 0:17:51.960 senior technology analyst for Bloomberg Intelligence. Man Deep is here 0:17:52.000 --> 0:17:54.639 in our Bloomberg Interactor Brooker Studio, and Honurrock is in 0:17:55.600 --> 0:17:59.600 work is in Chicago, hon rog Let's start with you Microsoft. 0:18:00.280 --> 0:18:02.760 What you see from our good friends in Seattle last night. 0:18:04.119 --> 0:18:05.800 Yeah, I was a bit surprised. I think the beat 0:18:06.000 --> 0:18:08.879 was much more than what I had anticipated. I was 0:18:08.920 --> 0:18:12.080 actually a little more pessimistic going in but they really 0:18:12.200 --> 0:18:14.639 showed that they are the you know, one software company 0:18:14.680 --> 0:18:18.000 that's really capitalizing on the AI demand. So so I 0:18:18.040 --> 0:18:20.520 mean all go down to Microsoft side margins. A good 0:18:20.880 --> 0:18:23.639 outlook is good, so you know, no bad news there. 0:18:24.600 --> 0:18:27.640 All right, So man, deep, let's like likewise on alphabet, 0:18:27.640 --> 0:18:30.280 I'm seeing stock you know, fifty two weeks high today, 0:18:30.480 --> 0:18:33.920 just ripping. You've liked this name, You've been on top 0:18:33.960 --> 0:18:34.720 of it all along. 0:18:35.240 --> 0:18:37.200 What were some of the takeaways from the quarta last night. 0:18:37.680 --> 0:18:43.840 Was focus because everyone thought their traditional search is getting disrupted. 0:18:44.040 --> 0:18:48.119 You know, they're going to lose share in search. And 0:18:48.280 --> 0:18:51.280 what they showed us last night is not only you know, 0:18:51.640 --> 0:18:55.000 they have maintained their share, Jenny I is actually helping 0:18:55.160 --> 0:18:59.600 engagement with their search and not just search on maps, 0:18:59.720 --> 0:19:03.600 on YouTube and on top of that, I think what 0:19:04.160 --> 0:19:08.560 really should excite investors is they have got the cloud 0:19:08.640 --> 0:19:14.080 business where you see accelerating growth along with YouTube. So 0:19:14.280 --> 0:19:17.439 now it's one hundred billion dollar ERUR business going at 0:19:17.480 --> 0:19:20.680 twenty five percent without any impact. 0:19:20.320 --> 0:19:20.920 To the cost. 0:19:21.480 --> 0:19:24.520 Remember, everyone thought, oh, the search queries are going to 0:19:24.600 --> 0:19:28.359 cost more because you have to use this GENI infrastructure. No, 0:19:28.880 --> 0:19:31.920 there was a five hundred basis point margin expansion in search. 0:19:32.040 --> 0:19:35.680 So clearly they have executed very well and it's not 0:19:35.840 --> 0:19:38.720 a one quarter thing. I think this is going to continue. 0:19:39.320 --> 0:19:42.879 So, Mandy, the cloud operation for Google first quarter profit 0:19:42.960 --> 0:19:45.920 of nine hundred million dollars, that was ahead of estimate 0:19:45.960 --> 0:19:48.840 projections of six hundred and seventy two million. So can 0:19:48.880 --> 0:19:51.159 you talk a little bit more about what's fueling that 0:19:51.440 --> 0:19:53.600 beat in the cloud side for Google. 0:19:53.800 --> 0:19:56.200 I mean, in the case of cloud, there is one 0:19:56.320 --> 0:19:59.480 traditional cloud revenue and then there is the GENAI link 0:19:59.560 --> 0:20:02.920 cloud revenue. And what Google has done well is one 0:20:03.040 --> 0:20:06.280 they are getting the n video GPUs and that's where 0:20:06.400 --> 0:20:09.240 you know, the sixty percent increase in CAPEX is coming in. 0:20:09.400 --> 0:20:12.119 And the market didn't mind that capex in increase in 0:20:12.240 --> 0:20:16.160 contrast to Meta where the stock felt. So clearly they're 0:20:16.280 --> 0:20:20.359 deploying that those GPUs on the cloud and it's contributing 0:20:21.119 --> 0:20:23.440 in terms of additional revenue, which is where the beat 0:20:23.520 --> 0:20:25.960 comes from in terms of why that growth rate accelerated. 0:20:26.160 --> 0:20:28.320 And anag I'm just kind of looking at the you know, 0:20:28.480 --> 0:20:32.680 Microsoft such An Adela, the CEO. He's been infusing Microsoft's 0:20:32.920 --> 0:20:37.280 entire product line with AI technology from partner Open AI. 0:20:37.440 --> 0:20:41.080 How much of advantage is partnering with open ai. How 0:20:41.160 --> 0:20:43.040 much is advantage does that give Microsoft? 0:20:44.600 --> 0:20:46.879 I think it's only in terms of time, so you know, 0:20:46.960 --> 0:20:48.920 before all the others ketchup and try to do the 0:20:48.960 --> 0:20:51.119 same thing. I think it's a land grab thing at 0:20:51.160 --> 0:20:53.040 this point of you know, try to get as much 0:20:53.040 --> 0:20:55.720 as you can get people hooked into these products with 0:20:55.840 --> 0:20:59.200 open AI and then you know, but I'm fairly certain 0:20:59.240 --> 0:21:03.480 other companies, everybody from Google to Amazon will have similar 0:21:04.320 --> 0:21:07.000 infrastructure for other people to play where they currently have 0:21:07.119 --> 0:21:09.600 it already. It's just that it's not getting infused in 0:21:09.680 --> 0:21:10.840 products that quickly. 0:21:11.960 --> 0:21:17.800 What exactly are like Microsoft's AI services? What are some 0:21:17.960 --> 0:21:22.160 examples of how that company is basically deploying a AI 0:21:22.359 --> 0:21:24.200 especially for these enterprise customers. 0:21:25.359 --> 0:21:27.720 Yeah, the first and the foremost is they run open 0:21:27.760 --> 0:21:30.520 AI's back end, so you use more chat GPT, they 0:21:30.600 --> 0:21:32.440 make more money off of it, and that's the number 0:21:32.480 --> 0:21:34.760 one place where you see we see their growth rate. 0:21:34.800 --> 0:21:37.840 Now we calculate that to somewhere around a billion dollars 0:21:37.880 --> 0:21:40.240 a quarter at this point run rate of all AI 0:21:40.359 --> 0:21:43.720 services added in for Microsoft, So that's a very big 0:21:43.800 --> 0:21:46.600 number or annualized at four billion The second part is 0:21:46.720 --> 0:21:50.400 a product called GitHub where they have infused open Ai services, 0:21:50.520 --> 0:21:53.040 so it helps people code things on a very much 0:21:53.119 --> 0:21:55.920 faster pace. Then you have Office three sixty five that 0:21:56.119 --> 0:22:00.240 also has copilots built in using open Ai services. I 0:22:00.280 --> 0:22:02.520 would say their entire suite, you know, same thing, were 0:22:02.560 --> 0:22:05.199 LinkedIn same thing for you know, other products. So they 0:22:05.840 --> 0:22:08.640 are using a lot of those R and D dollars 0:22:08.720 --> 0:22:11.560 from or R and D expertise from open Ai to 0:22:11.760 --> 0:22:12.880