Speaker 1: Paul, we have Welcome to the Bloomberg Markets Podcast. I'm
Speaker 1: Paul Sweene. It alongside my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with the essential market news right
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Speaker 3: And then Dan ives over at web Bush, who, as
Speaker 3: we know, is definitely someone who's a well known tech bull.
Speaker 3: And you actually released Wait.
Speaker 4: You have to do a fashion update before you do anything.
Speaker 1: We have to take a look at this disturb and
Speaker 1: Dan streaming on YouTube, so you can't hide the shirt.
Speaker 1: It's out there.
Speaker 5: Okay, I love it.
Speaker 3: It's great. So you were talking to your clients about
Speaker 3: how you still see tex stocks againing about twelve to
Speaker 3: fifteen percent in the second half of the year even
Speaker 3: after this gang buster riley that we've seen in gross stocks,
Speaker 3: obviously led by Ai. Tell us about your case when
Speaker 3: it comes to continued strength there in the second half.
Speaker 6: But look, we believe it's a new tech bowl market
Speaker 6: that's forming and ultimately something that's covered tech. Going back
Speaker 6: to nineties. This I view as a nineteen ninety five
Speaker 6: Internet movement, in other words, not nineteen ninety nine dot
Speaker 6: com bubble burst. You know, I believe based on everything
Speaker 6: we've done, this is the biggest transformational tech trend that
Speaker 6: we've seen. And we were talking about a trillion dollars
Speaker 6: of incremental spend that's now coming into the tech ecosystem,
Speaker 6: which is why, in my opinion, this is a green
Speaker 6: light to own tech. I think it's gonna get broad
Speaker 6: and broader in terms of the rally. And many of
Speaker 6: the bears that continue to say this is hype, they're
Speaker 6: not talking to the CIOs, the CTOs, the it spent
Speaker 6: where well, I think it's something unlike I've ever seen.
Speaker 1: And that's kind of where I wanted to go down
Speaker 1: because you've got this perspective, long time perspective in the
Speaker 1: tech space. In your words, when you're talking to your
Speaker 1: institutional investor clients, and I know you've been on the
Speaker 1: road a lot, what how do you define AI Artificial intelligence?
Speaker 1: Because I hear it thrown about by every company that
Speaker 1: walks through that door, whether they're selling pet food or
Speaker 1: whether they're a tech company. It's everywhere.
Speaker 6: It seems like, well, ultimately, it's really like when you
Speaker 6: think about the shift to cloud and what we've seen
Speaker 6: with data processing power, it was all about you have data,
Speaker 6: whether it's coming in consumer tech, but how do you
Speaker 6: ultimately monetize how do you ultimately mind that data? When
Speaker 6: you look at the models coming out, of course it's Nadella,
Speaker 6: Microsoft Chat, GPT really lead in Nvidia in terms of
Speaker 6: the foundation, this is the start of what I'll cause
Speaker 6: an AI revolution. The use cases now that we're seeing,
Speaker 6: Let's give example, developers, they potentially now could do things
Speaker 6: in an hour that.
Speaker 5: Took them three weeks.
Speaker 6: Advertising could Ultimately there's there's use cases things that could
Speaker 6: take a month now could take basically two hours. And
Speaker 6: the and who benefits it's the software, it's the chips,
Speaker 6: it's the echo sit That's why I believe this this
Speaker 6: is a gold rush that really is going to define,
Speaker 6: in my opinion, a new bowl market for tech that's
Speaker 6: just starting.
Speaker 3: When you were talking about how you're having these conversations
Speaker 3: with these industry players, what specifically are they telling you
Speaker 3: and where are those pockets of strength when it comes
Speaker 3: to say enterprise spending.
Speaker 5: Yeah, and I think part is we go back.
Speaker 6: We sat here in January right hard Landing, dark clouds,
Speaker 6: Armaguet and the whole. So obviously none of that's happened.
Speaker 6: But now the differences at enterprise from a CIO perspective,
Speaker 6: they've gone from yellow light to now potentially green light.
Speaker 6: And you're starting to see ultimately they're looking, they're looking
Speaker 6: over the road and they're not seeing cars company and
Speaker 6: it's ai that today is less than one percent it spend.
Speaker 6: We think next year that's potentially eight to ten percent.
Speaker 4: Wow.
Speaker 5: And that's that's.
Speaker 6: Ultimately look in my view, and it's totally in PA.
Speaker 6: I've talked about it for decades. Is that the transformational
Speaker 6: tech themes if you put them in and you talk
Speaker 6: about you know, evaluation, downgrade today and meta, you put
Speaker 6: them in a little pe box on some historical doing
Speaker 6: your spreadsheet valuations from your office building. I get it
Speaker 6: to me, you can't put them in that box. That's
Speaker 6: why ultimately you've missed the Apples, the Tesla's, the Netflix,
Speaker 6: the metas and everything else if you don't understand the
Speaker 6: transformational growth theme. And that's why right now I think
Speaker 6: it's the fourth Industrial Revolution that's planning out.
Speaker 1: Now what we've seen, and I guess it feels to me,
Speaker 1: Dan that we are in the very top of the
Speaker 1: first inning here, and what we're saying, what we're hearing
Speaker 1: from people like you and from others in the tech space,
Speaker 1: is just buy some of the really good tech names
Speaker 1: that receive the tech spend anyway. They're going to be
Speaker 1: on the forefront when and that's a Microsoft for example,
Speaker 1: and some others, and in the chip companies, when do
Speaker 1: you think there will be that Facebook moment, that Google
Speaker 1: moment where we're a company born of AI. Like Google
Speaker 1: was for search, Facebook was for social, When do you
Speaker 1: think we'll have that first big AI born company and
Speaker 1: where it come from?
Speaker 6: Well, I think also a lot of those AI born
Speaker 6: companies potentially might get acquired before they're actually born.
Speaker 5: And I think that's why.
Speaker 6: You can see massive consolidation across tech right. A lot
Speaker 6: of these tech companies have more cash in some countries.
Speaker 6: But then I think if you look at it by
Speaker 6: the d I think over the next few quarters, we're
Speaker 6: gonna have what I'll call that Apple two thousand and
Speaker 6: seven iPhone moment, that Internet nineteen ninety five moment. We
Speaker 6: saw it with the guidance heard around the world from
Speaker 6: Jensen and Video the four billion dollar guidance raise. But
Speaker 6: I think that's what we're starting to see right now.
Speaker 6: Even when we come to earnings over the next month.
Speaker 6: Of course, investors are going to focus on what numbers
Speaker 6: look like guidance next quarter or two, But there's a
Speaker 6: much bigger story playing out here, and that's why I
Speaker 6: think a lot of these technames continue to be Rock
Speaker 6: or Gibraltar Lake.
Speaker 3: I'm glad you brought up Apple because there's a lot
Speaker 3: of companies like that where during the Internet boom you
Speaker 3: might not have realized certain companies to that would have
Speaker 3: benefited years later. Where do you think are the winners
Speaker 3: that might be getting overlooked and where do you think potent?
Speaker 3: Are the losers right now that are just behind the game?
Speaker 6: Sure, and I think when you look at Apple, cook
Speaker 6: continues to play chess where others play checkers, and I
Speaker 6: think it's an installed based play, best install based in
Speaker 6: the world. From a consumer perspective, iPhone fifteen, I believe
Speaker 6: it's going to be a mini super cycle AI. This
Speaker 6: is just the start of what's going to be that
Speaker 6: drum roll in terms of what I've us as an
Speaker 6: AI App Store over the next twelve to eighteen months.
Speaker 6: I think that's being overlooked as an AI play. I
Speaker 6: think salesforce being overlooked from an AI perspective. I do
Speaker 6: think you have some pure play AI names, even like
Speaker 6: you look at names like palan Tier and others that
Speaker 6: are really from a use case perspective, and I think
Speaker 6: it's really the software echoesis. I think it's the software
Speaker 6: names right now that I really put an asterisk around,
Speaker 6: because that's going to get the predominant amount of Aspen.
Speaker 3: What about Adobe, because I feel like that was a
Speaker 3: player maybe people weren't focusing enough on and then all
Speaker 3: of a sudden we had that strong report when it
Speaker 3: comes to that AI potential there well.
Speaker 6: No, I think you saw from Adobe, you song from
Speaker 6: Mango dB, and I think those are the barometers that
Speaker 6: were now starting to see Adobe that's been just a
Speaker 6: phenomenal job that they've been able to mine into the
Speaker 6: install base. And I think that's just the tip of
Speaker 6: the iceberg of what I believe we're going to see
Speaker 6: over the next month. Look, we can maybe start to
Speaker 6: do some sort of you know, clock to see who
Speaker 6: could actually say AI the most in their conference rights,
Speaker 6: and that's why Krueger and to that maybe because some
Speaker 6: get above one hundred.
Speaker 5: But that's why the big question is going to.
Speaker 6: Be who are the fakes versus the real ones?
Speaker 3: So what do you think are the risks to your
Speaker 3: bowl case?
Speaker 6: So the risks clearly macro things take longer. You've had
Speaker 6: multiple expansion for six months. Investors are patient, but then
Speaker 6: all of a sudden if it doesn't come to fruition,
Speaker 6: you know, and then I think the geopolitical situation US
Speaker 6: China continues to sort of be that you know, when
Speaker 6: dark cloud. But this is going to be patience. And
Speaker 6: that's why I view it as these are moments that
Speaker 6: happen every twenty thirty years, and right now we just
Speaker 6: happen to be living through what I view as a
Speaker 6: nineteen ninety five Internet movement.
Speaker 1: All right. We mentioned Google earlier and to Just's point Losers.
Speaker 1: Initially when this kind of hit my consciousness six months ago,
Speaker 1: AI I said, oh, that's gonna be a real competitor,
Speaker 1: maybe the first real competitor to Google. And you think
Speaker 1: about just search in general, how do you think about
Speaker 1: Google and its position visa.
Speaker 6: Clearly at first black Eye in terms of coming out.
Speaker 6: They missed in Microsoft, you know, beat them to the game.
Speaker 6: I think for Google the golden goose, it's actually not Search.
Speaker 6: I think it's really the cloud. I mean that is
Speaker 6: what from an enterprise perspective, they could potentially redefine themselves
Speaker 6: on AI. And this is also it's not a zero
Speaker 6: some game. It's not just one player. We're talking about
Speaker 6: We view conservatively eight hundred billion potentially in the trillions
Speaker 6: of now incremental it spent.
Speaker 5: We're six months was not here yep.
Speaker 1: Just it's extraordinary and you've got to think, you know,
Speaker 1: a winner like Google with the engineering chops, not to
Speaker 1: mention the balance sheet, we'll be a player there. Hey, Dan,
Speaker 1: thanks so much for joining us. I appreciate you coming
Speaker 1: in studio. Despite the shirt, despite the shirt, it's good stuff.
Speaker 1: Dan ives. He's a senior analyst at wood Bush Securities,
Speaker 1: And what we love about Dan is a he's very
Speaker 1: clear and his his points and his convictions. Definitely, we've
Speaker 1: got the perspective to say, hey, let's put this into
Speaker 1: context of what we've seen in past cycles.
Speaker 3: Hey, he's been doing this a long time.
Speaker 1: He's been doing it a long time, and it's certainly
Speaker 1: helpful to us newbies trying to get our heads around
Speaker 1: what is a I looking at this market here, you know,
Speaker 1: kind of hanging in here. We're about one thirty one
Speaker 1: percent on the S and P five hundred getting in
Speaker 1: a nastac up about a half a percent. So tech is,
Speaker 1: as Dan has been saying for a long time, continues
Speaker 1: to perform.
Speaker 4: You're listening to the team Ken's are Live program Bloomberg
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Speaker 1: You know, one of the numbers that always sticks out
Speaker 1: of me is when we look at the Jolts number,
Speaker 1: you know, the job opening Yes, that's the number that
Speaker 1: historically ran five six million job openings, but it's been.
Speaker 3: Close to ten right consistently.
Speaker 1: You know, I'm like, where did all these people go
Speaker 1: during the pandemic. And one issue that comes up is
Speaker 1: there's some ages, maybe some people are kind of aging
Speaker 1: out of the workforce. But I want to get a
Speaker 1: sense of kind of you know, what ageism means in
Speaker 1: the labor market and for the economy. And our next
Speaker 1: guest did a lot of work on that. Mikhaela Grimm,
Speaker 1: senior economists for Alliance, joins us via Zoom. So, MICHAELA,
Speaker 1: talk to us about kind of what your work showed
Speaker 1: as it relates to agism in the workforce. Are people
Speaker 1: just simply aging out of the workforce.
Speaker 7: What we saw, especially when we looked at the pension systems,
Speaker 7: where we see the need that people should work longer
Speaker 7: or should stay longer in the work in the working
Speaker 7: age population. To cussion the demographic effect on the pension
Speaker 7: systems but on the labor markets as well, is that
Speaker 7: when politicians propose the increase of retirement age, it's often
Speaker 7: answered with protests like we saw in France, because people
Speaker 7: are afraid that they don't find the job in higher
Speaker 7: ages and that any increase in retirement age just means
Speaker 7: longer unemployment before retirement and in the end a kind
Speaker 7: of a hidden pension cut.
Speaker 8: And these fears.
Speaker 7: Are not out of the blue, because we see that
Speaker 7: in higher ages the chances to be unemployed for longer
Speaker 7: are higher.
Speaker 8: The long term unemployment.
Speaker 7: Rates of the age group fifty five plus are much
Speaker 7: higher than in the average workforce population between twenty five
Speaker 7: and fifty four. For example, and if older workers apply
Speaker 7: for a new job, they are often facing stereotypes about
Speaker 7: older workers. And given these environment, many people who get
Speaker 7: unemployed after the age of fifty five either drop out
Speaker 7: of the labor force or decide to go into a retirement.
Speaker 3: How does this differentiate when you're looking on particular regions
Speaker 3: in countries, say the US versus Europe.
Speaker 7: In the US, we see a lower rate of longer
Speaker 7: unemployment in higher ages, and it's already a little bit
Speaker 7: higher the activity.
Speaker 8: Ratio than in the U, for example.
Speaker 7: And we see also that in countries where the retirement
Speaker 7: ages are already higher, like in speed for example, on Singapore,
Speaker 7: you see much higher activity ratio is among the older
Speaker 7: workforce population.
Speaker 1: So, MICHAELA, you know, I guess I was surprised when
Speaker 1: I saw the you know, the incredible uprising public uprising
Speaker 1: in France when they were talking about raising the retirement age.
Speaker 1: I think it was from sixty two to sixty four.
Speaker 1: It didn't seem like that big a deal to me.
Speaker 1: Maybe that's just the US bias. Did that surprise you
Speaker 1: or is that consistent with some of the some of
Speaker 1: the data you've seen.
Speaker 7: Well, from the open point of view, we were surprised
Speaker 7: as well because our government agreed to increase the retirement
Speaker 7: age to sixty seven already. But we see also that
Speaker 7: in France the unemployment ratio of all the workers is
Speaker 7: higher than in Germany, for example, and therefore that was
Speaker 7: the concern, for example, that if the government pushes the
Speaker 7: retirement age sixty four, it just would mean a higher
Speaker 7: rate of our longer term of unemployment before retiring. In
Speaker 7: the end, we saw that in surveys that this was
Speaker 7: one big concern of the working edge population.
Speaker 3: When we're looking at the US specifically, what's been the
Speaker 3: main catalyst that's keeping older workers out of the workforce
Speaker 3: longer and how much did the pandemic end up exacerbating this.
Speaker 7: We we saw in service as well that many older
Speaker 7: workers decided to retire early. But we also seen in
Speaker 7: in in service of from r P that they face
Speaker 7: age discrimination. That there's example, for example, a wish to
Speaker 7: participate more in training measures, that there is a wish
Speaker 7: to have more flexible working hours, to be able to
Speaker 7: choose word to work.
Speaker 8: To have more chance to work from home, to work remotely.
Speaker 7: And still I think companies or many companies that are
Speaker 7: only not only in the US as we did not
Speaker 7: face the impact of demographic change until recently and uh
Speaker 7: it paused for example in many countries, uh at now baby,
Speaker 7: we must start to retire. Now companies feel more the
Speaker 7: pressure to adapt to the needs of an aging workforce population.
Speaker 8: That was not the case in recent years.
Speaker 7: Therefore, I think, since many workers since still face age discrimination,
Speaker 7: the step to say okay, I drop out or take
Speaker 7: a lower page job, or even have to they take
Speaker 7: a lower page job that does not fit to my
Speaker 7: qualifications than earlier time.
Speaker 1: It is an opten What subsidies are, what support? I
Speaker 1: guess can governments provide companies to maybe you know, hire
Speaker 1: more older workers. Is there anything that is there a
Speaker 1: role that governments can play in this.
Speaker 7: Well, we've seen in some countries they are already kind
Speaker 7: of advertise think campaigns in place like in Singapore.
Speaker 8: Where the there is a company, the government.
Speaker 7: Tries to to push for a cultural change, for change
Speaker 7: of the perception of all the workers. But what governments
Speaker 7: can also do as we see a need for reskilling,
Speaker 7: for upskilling, for lifelong learning.
Speaker 8: It's especially.
Speaker 7: Smaller companies who often cannot afford, for example, these kind
Speaker 7: of measures. So it would be one measure to UH
Speaker 7: support companies when offering training trainings for their workers. It
Speaker 7: could be also possible to support subsidy or grant subsidies
Speaker 7: of when employing all the workers coming from long term unemployment.
Speaker 7: It would also be a measure to support part time employment.
Speaker 8: UH. It could be a measure to say, okay.
Speaker 7: We reduce contribution rates or taxes for workers after after
Speaker 7: specific age. Then other measures could be when we look
Speaker 7: at the pension systems to make it possible to combine
Speaker 7: work and retirement, part time retirement, or as I said,
Speaker 7: to come get away from the mental retirement age, make
Speaker 7: retirement ages more flexible and for example grand and right
Speaker 7: to work.
Speaker 1: Yep, all right, all interesting stuff there. Companies, countries, politicians
Speaker 1: have to think about this as the global population continues
Speaker 1: to age.
Speaker 4: You're listening to the tape cats are live program Bloomberg
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Speaker 4: flagship New York station. Just say Alexa, play Bloomberg eleven thirty.
Speaker 3: Yeah, we'll get straight to our next guest who's a
Speaker 3: veteran investor, George Bass, chairman at Sanders Bors Harris joints
Speaker 3: us on Zoom to discuss all things markets and his
Speaker 3: stock pick.
Speaker 1: You know, just when I came on Wall Street in
Speaker 1: the mid sixties, George was, I believe, the chairman of
Speaker 1: Prudential Base, which Bach company proceeded, and then Prudential bought Base,
Speaker 1: one of the top from One Street, and I'll tell
Speaker 1: you what, one of the best research departments on the.
Speaker 3: Street at the time, and we're excited for him to
Speaker 3: be here. George, I wanted to pick your brain because
Speaker 3: in the last couple of months you had been making
Speaker 3: some comments about how you thought the big tech riley
Speaker 3: had run its course, but you still were thinking the
Speaker 3: broader equity market would approach new record highs this year.
Speaker 3: Are you still thinking that'll be the case for the
Speaker 3: second half of the year.
Speaker 9: The majority of the experts, the pundits seemed to be
Speaker 9: on the side of the market weekening. As we get
Speaker 9: further into the year, there's a bit of a war
Speaker 9: between what I'd call Morgan Stanley on the one hand,
Speaker 9: which is predicating a one hundred and eighty some dollar
Speaker 9: earnings on the S and P five hundred and then
Speaker 9: the more optimistic to twenty plus s and P earnings
Speaker 9: estimates of Golden and Sacks, with again the majority of
Speaker 9: the experts, and they are smart people, falling on the
Speaker 9: more negative camp. I do think that they're wrong. And
Speaker 9: by the way, I'll say that they interest to Wall
Speaker 9: Street was more in the nineteen seventies and the sixties.
Speaker 9: But back then, way back then, five percent interest rates
Speaker 9: were common. They were accepted by business, and businesses operated
Speaker 9: very profitably with comfortable profit margins with interest rates at
Speaker 9: five percent. That's happening again today. Over the last decade,
Speaker 9: we sort of forgot that managements and consumers and the
Speaker 9: economy can live all right with interest rates at a
Speaker 9: five percent or so level, And that I think is
Speaker 9: an optimistic note for the market and earnings and the
Speaker 9: economy going forward.
Speaker 1: George, you know, technology has been such a leader of
Speaker 1: this market really since the Great Financial Crisis. I mean
Speaker 1: it just felt like, you know, really leadership position in
Speaker 1: the marketplace. Do you still think that's the case here
Speaker 1: in a world where again you've got rising interest rates
Speaker 1: into your treasuries at four point seventy five percent, Can
Speaker 1: tech still be the leader.
Speaker 9: Technology stocks have been balancing with interest rates on the
Speaker 9: assumption that the futurejourneys of technology companies will be a
Speaker 9: function of dividends paid well well out many years from now.
Speaker 9: But get back to the base case. Technology and the
Speaker 9: changes in technology are what's driving growth, productivity, constructive change
Speaker 9: in economies worldwide. That's not going to fold. My supposition
Speaker 9: is that the big, big technology companies, the fang pluses,
Speaker 9: the seven stocks that have driven almost all the games
Speaker 9: in the SMP this year, are so darn big that
Speaker 9: they can't grow very rapidly anymore. They're great companies, they're
Speaker 9: doing extremely well, they're financial fortresses, but simply as a
Speaker 9: matter of scale, they've reached the point of diminishing returns.
Speaker 9: And so I'm looking at what I term mid tech
Speaker 9: companies as the next wave of fundamentally justified, high growth,
Speaker 9: high contributor companies, where the stocks are way down from
Speaker 9: the perhaps unjustified levels of last year, but have an
Speaker 9: enormous amount of upside potential, and that's going to start
Speaker 9: to be recognized as we get into the second half
Speaker 9: of this year. So I'm saying by mid sell the
Speaker 9: big fangy type stocks as we get into the second
Speaker 9: half of twenty twenty three.
Speaker 1: George, you've held leadership positions on Wall Street for decades,
Speaker 1: again going all the way back to E. F. Hutton
Speaker 1: and Base, some of the all time iconic brands on
Speaker 1: Wall Street. What's your view of the business of Wall
Speaker 1: Street these days?
Speaker 9: The business of Wall Street is much more commoditized these
Speaker 9: days than it was back then, but it is still
Speaker 9: the found from which money for companies to grow and
Speaker 9: to expand and to diversify comes. And it's also probably
Speaker 9: the best place for individuals to put their savings, their
Speaker 9: excess cash to work. So Wall Street continues to be
Speaker 9: a marvelous place, much less humanistic than it used to be,
Speaker 9: but vital to the economy and by the way, one
Speaker 9: of our big national advantages. We have the ability to
Speaker 9: create money for growth much more efficiently than other economies,
Speaker 9: and it's apt to give us a competitive edge that
Speaker 9: extends into the next twenty or thirty years.
Speaker 3: With that said, George, we got to know what are
Speaker 3: your top stock picks.
Speaker 9: Well, again, consistent with my mid tech theory, I would
Speaker 9: use as example specifics but also as examples Teledoc. Teledoc
Speaker 9: reaches over fifty million Americans. It's a company that is
Speaker 9: not yet profitable all those cash flow positive. If they
Speaker 9: can take just a fair slice of their client or
Speaker 9: patient base and convert it to a subscription model at
Speaker 9: fair economic prices, they have enormous ability to earn a
Speaker 9: great deal of money. Trade desk is what the ad
Speaker 9: agencies were back in the nineteen sixties and seventies when
Speaker 9: I started. Trade desk is a way of placing advertising
Speaker 9: or seeking advertisers on an efficient basis, and its ability
Speaker 9: to grow exponentially over the next ten years is I
Speaker 9: think almost unrivaled. Mercarlil Libra, the Amazon of South America
Speaker 9: and Central America is very profitable, but it's just scratching
Speaker 9: the surface. So that's a trio of mid tech companies.
Speaker 9: They're sizable, but they're converting from a revenue growth model
Speaker 9: to a profit growth model.
Speaker 1: George, one of the themes that's really come into this
Speaker 1: market over the last year or so is artificial intelligence AI.
Speaker 1: And we had a well regarded Wall Street analyst earlier
Speaker 1: says this is like the nineteen eighty five Internet Aha moment,
Speaker 1: or you know, kind of like when a Google came
Speaker 1: on and we said Oh boy, this is a big
Speaker 1: moment for the internet. He said, it's something akin to that.
Speaker 1: How do you view this thing called artificial intelligence AI?
Speaker 1: It really seems to be the theme of the tech
Speaker 1: world these days.
Speaker 9: I'm going to sound like an old fogy and that
Speaker 9: really bothers me. They don't want to do it. I'd
Speaker 9: rather take a different view. Yeah, AAI is a marvelous
Speaker 9: step forward because it's going to give people access in
Speaker 9: multi dimensions to all of the wealth of knowledge of
Speaker 9: the world, and it will write things that will seek
Speaker 9: things that will display things brilliantly and very helpfully. But
Speaker 9: it is not predictive. It is a look into the
Speaker 9: database of what's known up to now, and so I
Speaker 9: don't think it's going to be transformative in the sense
Speaker 9: of being the fuel cell of growth the way many
Speaker 9: people are predicting. I don't think it's a fat or
Speaker 9: a bubble. But I think it's importance in the economic
Speaker 9: future of our country and of the world is overstated.
Speaker 9: You know, the past is destructive, but it's not predictive,
Speaker 9: and so AI is important but not transformative in my
Speaker 9: perhaps geriatric view.
Speaker 1: No, it's a perfectly relevant view. And but lastly, George,
Speaker 1: I have to ask, are you an Aspen Colorado right now?
Speaker 9: No, I'm in the Salt Colorado. If you can't quite
Speaker 9: afford to be an Aspen, you've got ten miles down there.
Speaker 1: All right, wherever you are in Colorado, I'm just where
Speaker 1: I am.
Speaker 5: All right.
Speaker 1: Wherever you are in Colorado, I'm just going to suggest
Speaker 1: you might be a little overdressed. You look very solid
Speaker 1: for Wall Street, but I think the Colorado and for
Speaker 1: Bloomberg Markets next time you can certainly go a little
Speaker 1: bit more casual if you're in Colorado. George Ball everyone
Speaker 1: just literally an iconic person on Wall Street. He's the
Speaker 1: chairman of Sanders Mars Harris, but has really been a
Speaker 1: leader on Wall Street for decades, I mean CEO level leader,
Speaker 1: and it's just amazing the career he's had. Again, it
Speaker 1: goes all the way back to E. F. Hutton and
Speaker 1: you kids can look that up. Base Company another fantastic firm,
Speaker 1: bought by Prudential Securities when it became Prudential Base and
Speaker 1: then Potential Securities and again one of the leading firms
Speaker 1: on the street. So George has seen it all. We
Speaker 1: appreciate getting a few minutes of his time.
Speaker 4: You're listening to the team Ken's are live program Bloomberg
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg dot Com,
Speaker 4: the iHeartRadio app, and the Bloomberg Business App, or listen
Speaker 4: on demand wherever you get your podcasts.
Speaker 1: All right, let's talk about our good friends at Amazon.
Speaker 1: We've all got boxes probably sitting in front of our
Speaker 1: doors as we speak, are good friends at Amazon. And
Speaker 1: then there's a little thing called Prime. I'm a huge
Speaker 1: fan of Prime. Free delivery, gets created, the audio video service,
Speaker 1: all kinds of stuff kind of wrapped up in there.
Speaker 1: But apparently the FTC has taken a look at this thing.
Speaker 1: Matt Sheltenham, he's a senior litigation analyst. That means he's
Speaker 1: an attorney, but he's come over from the dark side
Speaker 1: and he's working on Wall Street and giving us some
Speaker 1: good research for Bloomberg Intelligence. Here, Matt talked to just
Speaker 1: describe what the issue f the FTC has with Amazon
Speaker 1: and its Prime business.
Speaker 10: Yeah, Paul, we saw this this emerge somewhat surprisingly last
Speaker 10: week when when the FDC filed this lawsuit on Wednesday
Speaker 10: alleging that Amazon has tricks or duped millions of consumers
Speaker 10: into signing up for Prime and and and in particular
Speaker 10: for the automatic renewal of those Prime membership and and
Speaker 10: and the allegation is that that violates a federal law
Speaker 10: and that Amazon's potentially on the hook for, you know,
Speaker 10: hundreds of millions of dollars or more in damages for
Speaker 10: or tricking consumers into staying with the program that they
Speaker 10: don't really want to be a part of.
Speaker 3: And it's interesting because going through this, it says the
Speaker 3: FTC was talking about how consumers must click through five
Speaker 3: pages on the desktop web store or six on the
Speaker 3: mobile app to cancel Prime, so clearly making it pretty
Speaker 3: difficult right for consumers to try to cancel this. I mean,
Speaker 3: how much and how far do you think this potential
Speaker 3: case could potentially go?
Speaker 10: Yeah, so, I mean that's exactly the allegation. What's really
Speaker 10: the big unknown here, though, is what is simple? The
Speaker 10: law requires a simple mechanism for subscribers to cancel automatic
Speaker 10: renewal plans like this.
Speaker 1: How about the time to the cable telephone company, cable
Speaker 1: television companies? How hard is that to cancel?
Speaker 10: Exactly? And that's exactly what you're going to hear from
Speaker 10: Amazon in the case is look at all these other
Speaker 10: businesses that make it so difficult. You got you want
Speaker 10: to cancel your gym membership, You got to go into
Speaker 10: the gym to to you know, find somebody to talk to.
Speaker 10: Other companies require you to call somebody on the line.
Speaker 10: Here we're talking about six clicks and and yeah, there
Speaker 10: are some extra hoops along the way, but there's very
Speaker 10: little guidance in the law on what is simple and
Speaker 10: what isn't. And so you know, I think there's a
Speaker 10: there's a real argument for Amazon to make here that
Speaker 10: the FDC is really straining to argue that that that
Speaker 10: the six clicks process violates the law.
Speaker 1: I mean, to me, first of all, I don't feel
Speaker 1: like like I was duped.
Speaker 3: I actually had an issue when it came to Audible
Speaker 3: when it comes to their podcast. I actually went through
Speaker 3: this a couple of months ago where I canceled and
Speaker 3: then kept getting charged and had it called up and
Speaker 3: go through this. So it's interesting now that but I
Speaker 3: kind of felt a little miffed there when that had
Speaker 3: happened to me.
Speaker 1: So, Matt, what is what's Amazon's mo when dealing with regulars?
Speaker 1: Do they just like settle these things out of court
Speaker 1: or do they fight them to toth and nail.
Speaker 10: Yeah. So, I mean for a company like Amazon, it's
Speaker 10: really hard for a suit like this to to be
Speaker 10: too threatening. But one reason it does matter is that
Speaker 10: the FTC's power to impose penalties is very broad. In theory,
Speaker 10: the FTC can impose fifty thousand dollars per violation, and
Speaker 10: that can be counted by user, So you start to
Speaker 10: go one hundred million times fifty thousand and you get
Speaker 10: to some gigantic number with lots of zeros at the end.
Speaker 10: So Amazon has to pay attention to this, especially when
Speaker 10: when the leader of the FTC, Lena Khan, is looking
Speaker 10: to be very aggressive in grow going after companies like Amazon. So,
Speaker 10: you know, I think Amazon would be happy to settle
Speaker 10: it for a small you know, a small figure, you know,
Speaker 10: relatively quickly. It's it's it's unclear whether the FTC would
Speaker 10: go on you know, be on board with that right away.
Speaker 10: But you know, I really do think Amazon has a
Speaker 10: good chance to prevail in this litigation, but it's going
Speaker 10: to take time, and so I do expect it to
Speaker 10: play out for a couple of years before we see
Speaker 10: a resolution. But it's really hard to see the FTC
Speaker 10: winning a material damage amount against Amazon here.
Speaker 3: Ultimately, so the timetable, like you said, being potentially a
Speaker 3: couple of years when it comes to this.
Speaker 10: Yeah, that's what I think. So I you know, this
Speaker 10: was just filed last Wednesday. I think you're likely to
Speaker 10: see a couple rounds of this litigation. And you know,
Speaker 10: the big risk for Amazon is this gets to a
Speaker 10: jury that that could could potentially offer you know, a
Speaker 10: damages award in the millions or even billions of dollars.
Speaker 10: That's what you can't let happen. But there are two
Speaker 10: steps in the litigation and process before we get there. One,
Speaker 10: Amazon can file a most into the myth, the whole
Speaker 10: thing and say, look, this doesn't even state a valid claim.
Speaker 10: I don't think that will work. It has a chance.
Speaker 10: But then even after a year or two of discovery,
Speaker 10: when they dive into the evidence, Amazon can say, look,
Speaker 10: the FTC collected all this evidence and there's still not
Speaker 10: a case that should go to a jury. That's point
Speaker 10: I think Amazon has a really good, good argument to
Speaker 10: the judge to say, look, Amazon's process may not have
Speaker 10: been perfect, but you know it's probably enough to qualify
Speaker 10: as a simple mechanism under this unclear standard under the law.
Speaker 10: So yeah, I think that's going to take a couple
Speaker 10: of years before we see any action, and certainly before
Speaker 10: it goes to a jury in a trial like setting.
Speaker 1: Hey, Matt, We've been talking to jenre who covers antitrust
Speaker 1: for Bloomberg Intelligence, and just talking about kind of the
Speaker 1: regulatory environment out there for businesses, particularly big tech, and
Speaker 1: it's really tough for big tech companies to really do
Speaker 1: anything here from your perspective, from the litigation side, what's
Speaker 1: the environment like out there for business? Is it tougher
Speaker 1: to do business as a government really taking a harder line.
Speaker 10: It's certainly there's been a change, certainly in you know,
Speaker 10: the past five to ten years in Washington, d C.
Speaker 10: On the regulation side, you know, we had this idea
Speaker 10: that for for a couple of decades, look, it's best
Speaker 10: to get out of the way of the Internet, let
Speaker 10: the Internet thrive. Everything is sort of changed in terms
Speaker 10: of policy in terms of okay, maybe we went too
Speaker 10: far in that direction, And you're seeing the same thing
Speaker 10: on the litigation side, where class act and lawyers the
Speaker 10: opportunities to go after companies like like Meta and Google
Speaker 10: for you know, potentially addictive social media you're seeing second
Speaker 10: in two thirty, the liability field that has long protected
Speaker 10: these companies suddenly people suggesting, maybe we've we've read that
Speaker 10: liability field too broadly, maybe we should be able to
Speaker 10: do these companies about harms and so it's it's it's
Speaker 10: an on thlought of different attacks that they didn't face
Speaker 10: five or ten years ago. That doesn't mean they're going
Speaker 10: to lose these cases. The companies have strong defenses to
Speaker 10: a lot of the claims, but it's definitely a more
Speaker 10: difficult and vironment than it was a couple of years back.
Speaker 1: And that's why Bloomberg Intelligence has a bunch of analysts
Speaker 1: and lawyers and smart people down in Washington with their
Speaker 1: fingers on the pulse of what's happening down there, so
Speaker 1: they can provide some very valuable research to Bloomberg customers.
Speaker 1: So Matt Shunholm is certainly one of them. He's a
Speaker 1: senior litigation analyst for Bloomberg Intelligence space down in Washington, DC.
Speaker 1: So we'll have to follow that. For Amazon, the numbers,
Speaker 1: you know, relative to its market cap arn't material, but
Speaker 1: it goes to one of the one of their core
Speaker 1: business practices here. So we'll see how they continue to
Speaker 1: fight this. But again, it's tough to fight the government
Speaker 1: and the Federal Trade Commission. But I guess if anybody
Speaker 1: can do it, it's Amazon.
Speaker 4: You're listening to the tape Cat's are live program Bloomberg
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, tune
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Speaker 1: Let's get right to our next guest because we get
Speaker 1: to live to the instrument.
Speaker 3: Yes in studio.
Speaker 8: I love this.
Speaker 1: I know Kevin Time and senior automotive analyst for Bloomberg Intelligence.
Speaker 1: He's based down on our Printson campus. But in case
Speaker 1: he gets up to the big town, Kevin, thanks so
Speaker 1: much for joining us. Lots of ways to go here,
Speaker 1: but first I gotta start your Mercedes that you drive
Speaker 1: as a V twelve it is does that means it
Speaker 1: has twelve cylinders twelve Cylin, and I have six in
Speaker 1: my car. That's right, So you have twice as many,
Speaker 1: that's correct.
Speaker 11: Why it's and it's Here's the beautiful thing is it's
Speaker 11: a two thousand and one Roadster V twelve with I
Speaker 11: don't know, ninety six thousand miles on it. So my
Speaker 11: carbon footprint is actually smaller than anybody who.
Speaker 5: Made them build a new EV.
Speaker 1: All right, that's all I say. I had to clear
Speaker 1: that up there. I thought I was a tough guy
Speaker 1: with six cylinders, but you got your driving around twelve. Great,
Speaker 1: all right, let's start with Ford. Ford cutting some jobs here.
Speaker 5: Why yeah.
Speaker 11: You know, what I thought was interesting about this was
Speaker 11: that you don't have this condition in the industry, or
Speaker 11: at least in North America, of oversupply, right like too big,
Speaker 11: too much product, too much production capacity, and we need
Speaker 11: to cut back.
Speaker 7: You know.
Speaker 11: Inventory on the ground industry wide now in the US
Speaker 11: is about half what it was at the peak, which
Speaker 11: would be peak volumeer was twenty sixteen, seventeen and a
Speaker 11: half million. Yep, we'll do fifteen this year, fifteen and
Speaker 11: a half at the outside, you know. So inventory is
Speaker 11: really in line with demand for the most part, and
Speaker 11: you're seeing rationalization of costs still, which my conclusion is
Speaker 11: is that this industry is very different than what it
Speaker 11: used to be, which was a lot of fixed costs,
Speaker 11: a lot of overhead produce produced, produce, figure out how
Speaker 11: to sell it tomorrow by giving it away incentives, discounting,
Speaker 11: lease deals, whatever it is. And to me, these job
Speaker 11: cuts really show that the mindset of the manufacturers auto
Speaker 11: manufacturers is we're not going back to that world.
Speaker 3: I wanted to toward Tesla because we are seeing at
Speaker 3: stock higher more than one percent today, so that is
Speaker 3: pushing discretionary shares higher, and obviously it's waiting in the
Speaker 3: S and P five hundred close to about two percent.
Speaker 3: We did see that downgrade from Goldman Sachs on Tesla
Speaker 3: earlier this week, just because of the difficult pricing environment.
Speaker 3: But we saw that huge run Tesla had been on
Speaker 3: that was snapped earlier this month. Obviously it was a
Speaker 3: thirteen session span. Stock gained over forty percent. I know
Speaker 3: that Paul's been watching RSI levels very closely, so it
Speaker 3: actually got to around eighty eight eighty eight earlier this month,
Speaker 3: obviously above seventies that overbought level. But what are you
Speaker 3: seeing when it comes to Tesla's stock there and doesn't
Speaker 3: make sense that we've seen a little bit of a
Speaker 3: pullback after such a strong run like that.
Speaker 4: Yeah.
Speaker 11: Well, the difficult part, you know, as an analyst is
Speaker 11: is to make sense of what the Tesla stock does
Speaker 11: it's its own product, right, compared to what the fundamentals
Speaker 11: of that company or of the industry are. So, you know,
Speaker 11: I think the longer we go, we see that this
Speaker 11: is an automaker, right, there's obviously big technology competitive advantages,
Speaker 11: at least perceived, and we saw the idea of the
Speaker 11: charging with GM and Ford signing on with that.
Speaker 5: That pushes the.
Speaker 11: Stock price higher, But ultimately this is an automaker with
Speaker 11: automaker demand issues. I was actually driving around with my
Speaker 11: wife this weekend and we drove by one of the malls,
Speaker 11: the Quaker Bridge Mall, and there's there in the parking
Speaker 11: lot there's overflow Tesla inventory as far as the eye
Speaker 11: can see. Actually made her pull over and I got out.
Speaker 5: And took pictures for myself.
Speaker 11: But you know, so when you look at it in
Speaker 11: the from the perspective of a metal bender that needs
Speaker 11: to produce and sell, and you take some of that
Speaker 11: technology angle away from it, you're going to have those
Speaker 11: periods where the stock just just adjusts yep, and then
Speaker 11: you you're gonna have periods where there's an announcement and
Speaker 11: it makes a big difference to the upside.
Speaker 1: And one of the things I don't I'm still trying
Speaker 1: to get a sense of is if I were Tesla
Speaker 1: investor or an analyst, is kind of where it fits
Speaker 1: into a world that's going completely electric. They get all
Speaker 1: the credit in the world for being first and being really,
Speaker 1: really really good, But in a day, as you suggest,
Speaker 1: it's a metal bending business and Ford gm VW. So
Speaker 1: when I think about Tesla, Rivian, Lucid all these other ones,
Speaker 1: how do you think this industry is gonna shake out?
Speaker 7: Yeah?
Speaker 11: I think we're through a period where where markets investors
Speaker 11: talked about the auto industry like it was the tech
Speaker 11: industry or these were tech companies, and they always have
Speaker 11: been right. Automakers have always been ahead of the curve
Speaker 11: of technology wise developed some great things over the years,
Speaker 11: and I think there was this belief that because of Tesla,
Speaker 11: that this entire industry was now, all of a sudden,
Speaker 11: a technology industry. So what you get is you're either
Speaker 11: going to get every other automaker that is essentially doing
Speaker 11: and can do the same things as Tesla, Beee considered
Speaker 11: tech companies and deserve those valuations, or you're going to
Speaker 11: get the ones that had the wild technology valuations, you know,
Speaker 11: recalibrated down to automakers. And I think that's the that's
Speaker 11: the greater likelihood. Ford and GM are never going to
Speaker 11: be and have never been valued like that. And I
Speaker 11: think the reality would be more that the EV and
Speaker 11: technology companies would be valued more as automakers than the reverse.
Speaker 3: And our friend Matt Miller actually interviewed Ford's CEO Jim Farley,
Speaker 3: about a month ago, it's actually toward late May, about
Speaker 3: cost cuts, auto prices, evs when it comes to Ford
Speaker 3: in position to some of these other competitors that we're
Speaker 3: talking about, and obviously it's outlook for the next few years,
Speaker 3: do you think that's sustainable and do you think it
Speaker 3: could happen?
Speaker 11: Well, yeah, I mean I think profitability is going to
Speaker 11: drive I've adoption, right. These these are automakers, the legacy
Speaker 11: automakers are making a lot of money doing what they're
Speaker 11: good at, which is trucks and SUVs, and then being
Speaker 11: asked or forced into this transition to EV when it's
Speaker 11: not really ready. And I understand the concept of disruption,
Speaker 11: and that's what happens, and some things are messy during
Speaker 11: the transition. But you know, during the period where we
Speaker 11: transition to truck from car, that was profitable on the
Speaker 11: first day. Right So now you have you know, Tesla
Speaker 11: leading the way, but the governments starting to get involved
Speaker 11: with credits and infrastructure spending, motivating the consumer to demand
Speaker 11: these things that the manufacturer can't necessarily make money.
Speaker 5: On just yet.
Speaker 11: And it's and it's a it's a messy transition period
Speaker 11: right now because you don't want to give up profitable
Speaker 11: things to do unprofitable things in this market right now.
Speaker 1: You know, I drove the Ford F one fifty of
Speaker 1: electric one and as first time I drove a pickup
Speaker 1: truck probably the last. I'm a Wall Street guy, I'm
Speaker 1: not dry. My son's got one and it was my
Speaker 1: first electric vehicle, and boy, it blew me away in
Speaker 1: terms of the power and it's work and things like that.
Speaker 1: Is the belief in Detroit that the average pickup truck
Speaker 1: driver will demand an electric version.
Speaker 11: Well, I guess it's going to depend. I mean the
Speaker 11: towing capacity of the range. You know, there's and look
Speaker 11: and what I would say is this is that it's
Speaker 11: why we have segments. It's why we have vehicles with
Speaker 11: different capabilities, you know, so different drive trains. I got
Speaker 11: twelve cylinders, you got six, you know, like that, and
Speaker 11: to make the world go round. So the idea that
Speaker 11: maybe the technological singularity of internal combustion being traded for
Speaker 11: the singularity of electrification, for me is a difficult concept
Speaker 11: because I feel like there is a place, there's people
Speaker 11: that need, but I'm not sure we're ready to say
Speaker 11: one hundred this is your only option in terms of
Speaker 11: drive train technology.
Speaker 3: I hear you're speaking at a Bloomberg Intelligent event to
Speaker 3: date right upstairs.
Speaker 1: Uh right, and what are we doing there?
Speaker 11: That's uh the bi Lithium conference. So I'm the I'm
Speaker 11: the square you're the that's right here, the auto guy.
Speaker 1: I'm the square peg And just what what is the
Speaker 1: we got thirty seconds? Okay, what's the consensus out there
Speaker 1: on the street about lithium batteries? Are Is there going
Speaker 1: to be enough stuff? Are we going to be able
Speaker 1: to get them all?
Speaker 5: And no?
Speaker 11: That's and that's one of the things that I was
Speaker 11: out last week speaking at a couple of dealer conventions
Speaker 11: Louisiana Dealers, Virginia dealers. And that's the big question is
Speaker 11: you know, we hear this one hundred percent by whatever
Speaker 11: date you know, and and it's when you when you
Speaker 11: total up the market share and the volume, it just
Speaker 11: doesn't compute with the materials that we have access to,
Speaker 11: you know. And and the most cynical of them would say, look,
Speaker 11: we're essentially trading our dependence on foreign oil for our
Speaker 11: dependence on China materials.
Speaker 5: Yep at this point.
Speaker 11: But a lot of people don't want to talk about that.
Speaker 1: But you will. Yeah, that's why we've read Kevin Log,
Speaker 1: Kevin Tyne, and Old School Auto Kevin Tiny, senior automotive
Speaker 1: analyst for Bloomberg Intelligence, joining us here live and our
Speaker 1: Bloomberg Interactive Broker Studio. We appreciate that.
Speaker 4: You're listening to the tape. Cats are live program Bloomberg
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 4: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
Speaker 4: You can also listen live on Amazon Alexa from our
Speaker 4: flagship New York station, Just say Alexa play Bloomberg eleven
Speaker 4: thirty one.
Speaker 1: Thing we don't talk about we've already should is signific
Speaker 1: it at you know asset class. If you all alternative
Speaker 1: asset class, which is jewelry. Our next guest can help
Speaker 1: us do that oncoor Dagga joints us he's the CEO
Speaker 1: of Angara and he joins us here in O bloombergetting
Speaker 1: Arrective Broker Studio. Thanks once for joining us.
Speaker 12: Absolutely great to be here.
Speaker 1: Tell us about your company. What do you guys do it?
Speaker 12: And Kara, So we specialize in colored gemstones, so ruby, emerald, sapphire.
Speaker 12: We are vertically integrated, so we do everything from buy
Speaker 12: from the mines, cut in polish gemstones, design jewelry, manufactured jewelry,
Speaker 12: and retail over the web in over thirty countries.
Speaker 3: And you grew up in the jewelry industry. Talk to
Speaker 3: us about how you got started.
Speaker 1: Yeah, absolutely so I did.
Speaker 12: From the age of five. I was going to my
Speaker 12: dad's wholesale business and I inutially vowed that I would
Speaker 12: never come back into the industry. It was quite antiquated,
Speaker 12: and like Paula worked at Credits weeks before and then McKenzie.
Speaker 12: My largest project at McKinzie was turning around a jewelry
Speaker 12: retailer and I was like, wow, there's a lot of
Speaker 12: opportunity here and then there we are, all.
Speaker 1: Right, explain to me this thing. I know nothing about it.
Speaker 1: You know, I'm gonna say natural mind diamonds versus lab
Speaker 1: grown diamonds. I didn't even know there was really a
Speaker 1: thing for lab grown diamonds. Talk to us about lab
Speaker 1: grown diamonds.
Speaker 12: Yeah, So they've been gaining popularity over the last three years.
Speaker 12: Twenty eighteen, the FTC said a lab grown diamond is
Speaker 12: a diamond, just like a natural diamond. Is the only
Speaker 12: caveat is you have to disclose that as lab grown.
Speaker 12: Since then, the industry has really taken off. So in
Speaker 12: twenty twenty they were roughly two point three percent of
Speaker 12: all diamonds sold. Now they're over ten percent, and the
Speaker 12: growth rate obviously is fantastic, but in terms of unit
Speaker 12: volumes even more so.
Speaker 1: Now.
Speaker 12: I think part of why they are so attractive is
Speaker 12: now they are trading at seventy five percent to ninety
Speaker 12: percent cheaper than their natural mind equipment.
Speaker 1: Really, and what do they look like?
Speaker 12: How did they So they are optically, physically, chemically identical
Speaker 12: to natural so they really are a perfect substitute.
Speaker 1: So what's that done for the price of natural.
Speaker 12: Diamonds, that is, that is a significant issue. So our
Speaker 12: industry generally has not been prone to technological disruption. This
Speaker 12: is the first time. So over the last twelve months,
Speaker 12: diamond prices have gone down anywhere between eighteen and twenty
Speaker 12: four percent, and I think they're going to go down
Speaker 12: by another twenty to twenty five percent over the next.
Speaker 3: Twelve mile And how did COVID play into that in
Speaker 3: the direction of diamond prices.
Speaker 12: So COVID was another anominally for US, as many other industries.
Speaker 12: Acid prices for diamonds specifically went up by twenty five
Speaker 12: percent between let's say June twenty twenty and June twenty
Speaker 12: twenty two. But that demand has now moderated. During COVID,
Speaker 12: people couldn't go out, they couldn't eat out, they couldn't travel.
Speaker 12: A lot of that stimulus money went into luxury, especially jewelry,
Speaker 12: and now we're seeing a moderation of that. But what's
Speaker 12: now causing the further dip is really technology and lab
Speaker 12: grown diamonds.
Speaker 3: And what exactly was the catalyst for those prices moderating.
Speaker 12: So demand has receded a little bit after the pandemic
Speaker 12: has come off because now people are traveling a lot more,
Speaker 12: they're eating out a lot more, so they're balancing where
Speaker 12: they're spending their money.
Speaker 1: Again, So your company over four hundred employees, where are
Speaker 1: they and what do they do? Sure?
Speaker 12: So we have now ten offices across the world. LA
Speaker 12: is our headquarters. India's our largest operation, followed by Thailand
Speaker 12: and then Ireland, UK, Australia, Canada to add interesting.
Speaker 1: Okay, so talk to us about kind of some other
Speaker 1: gemstones and how do they compare us investments? Because I
Speaker 1: know a lot of people think about them. It's not
Speaker 1: just what I wear around on my finger or around
Speaker 1: my neck. It's an investment for me. How does how
Speaker 1: does those gemstones perform? That's right.
Speaker 12: So colored gemstones as opposed to diamonds, are seeing a
Speaker 12: great boom over the last three years. So the S
Speaker 12: and P three year kieger is around eleven and a
Speaker 12: half percent. Rubies have gone up by seventeen percent per year,
Speaker 12: sapphires by twelve percent a year, emeralds by thirteen percent.
Speaker 12: Some of the more niche gemstones like opals and turmalines
Speaker 12: are up anywhere from twenty percent a year to thirty
Speaker 12: six percent a year, so they are crushing the S andp.
Speaker 3: So there's this growing appreciation for more colored stones as
Speaker 3: an asset class.
Speaker 5: That's right.
Speaker 12: Yeah, So there's a few tailwinds that colorstones are experiencing.
Speaker 12: I think one is we're kind of going from this
Speaker 12: unipolar world where the US dominated. So ten years ago,
Speaker 12: the US was by far the largest consumer of color gemstones.
Speaker 12: Now we have India, which has historically been what I
Speaker 12: would describe as a as a gold jewelry market. Now
Speaker 12: as they get more sophisticated, diamonds and gemstones are catching up,
Speaker 12: and China gemstone consumption is even more so than in
Speaker 12: the US. So we have other tent poles across the
Speaker 12: world that are consuming more. So there's a supply demand imbalance.
Speaker 12: At the same time. On the supply side, mines are
Speaker 12: genuinely running out of material that they're mining. So for example,
Speaker 12: the Burmese mine for rubies has shut down effectively, the
Speaker 12: cash mind for sapphires has shut down. Columbia major emerald producer,
Speaker 12: is really reducing output. So at the same time the
Speaker 12: demand is rising, supply is reducing and we think that's
Speaker 12: going to continue over the next few years. I think
Speaker 12: the other thing for gemstones is when people are now
Speaker 12: realizing that diamonds are depreciating it as an asset class. Traditionally,
Speaker 12: both diamonds and gemstones have really been inflation hedges. But
Speaker 12: because colorstones are appreciating, more and more money is going
Speaker 12: there that we see.
Speaker 1: You think about some of those spy movies where right,
Speaker 1: you get payment in diamonds, you know, because you can
Speaker 1: take all that can, right, But now that's not such
Speaker 1: a good thing, right.
Speaker 3: Something I was curious about is what happens if you
Speaker 3: have it juxtapost where diamond prices are falling, but then
Speaker 3: you have these gemstone prices that are rising. Is there
Speaker 3: a triptical something that can happen there with the swings
Speaker 3: and prices when you have them diverging like that.
Speaker 12: Yeah, I think what we are seeing is much more
Speaker 12: of a transition to color because it is a better
Speaker 12: investment over time. The other thing is I think just
Speaker 12: in terms of culturally, color is becoming much more commonplace.
Speaker 12: So for example, Rolex Automarpiget Petek Philippe, they're higher end watches,
Speaker 12: their most coveted watches now have gemstone bezels around the dial.
Speaker 12: We think we also have. A part of it is
Speaker 12: we're typically now known within the industry as the Debiers
Speaker 12: for colorstone, and the idea is, you know, starting nineteen
Speaker 12: forty eight, Debiers came out with the Diamond Is Forever
Speaker 12: and the Four Seas, and there was this idea that
Speaker 12: there is a singular perfect diamond, which is a de flawless. Now,
Speaker 12: US as a society we've changed considerably. Where we're celebrating uniqueness,
Speaker 12: we're celebrating diversity. We're also celebrating what we like rather
Speaker 12: than what we're told we should like, and that transition,
Speaker 12: we're moving the market towards color with really a focus
Speaker 12: on education and customization of jewelry.
Speaker 1: All right, thirty seconds left. What's the future of your
Speaker 1: company over the next few years. You've got what one
Speaker 1: hundred million revenue roughly, that's right.
Speaker 12: So we've grown four x in the last three years.
Speaker 12: Our next target is a billion dollars. I think we
Speaker 12: can achieve in five years, so that's the goal.
Speaker 1: Really awesome, that is good. We're going to keep in
Speaker 1: touch with this guy.
Speaker 3: I'd forget back.
Speaker 4: Yeah.
Speaker 1: Awesome, that well, congratulations, fascinating discussion. I learned a ton there,
Speaker 1: particularly about the lab grown diamond prices. So do you
Speaker 1: I mean, do you go to your fiancee and kind
Speaker 1: of slip in a like real diamond but it's a
Speaker 1: lab grown one. I don't know what do you do there?
Speaker 3: I mean, look at these emeralds. This is my Bruce Snows.
Speaker 3: I keep looking at that. Up about thirteen percent?
Speaker 1: Yeah, good stuff? All right Oncrutondagah. Thanks so much. CEO
Speaker 1: of Angara joining us here live in our Bloomberg Interactive
Speaker 1: Brokers studio talking about the jewelry business. Fascinating discussion. We
Speaker 1: will follow an Encore's company going forward.
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever.
Speaker 1: Podcast platform you prefer. I'm Matt Miller.
Speaker 2: I'm on Twitter at Matt Miller nineteen seventy three.
Speaker 10: And I'm Paul Sweeney.
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
Speaker 1: can always catch us worldwide at Bloomberg Radio