Speaker 1: This is Bloomberg Business Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Man, take a look at what was once a pandemic, Darling.
Speaker 2: We're talking about Peloton right now, down almost twenty four
Speaker 2: percent at its lows today, almost down twenty eight percent,
Speaker 2: the mostion in about two years, and it's on track
Speaker 2: Tim for a record low closed Sava se Bernstein, saying
Speaker 2: this was after a messy fourth quarter, Yeah, where they
Speaker 2: gave a week revenue forecast for the current quarter and
Speaker 2: all said costs for a product recall, we're significantly more
Speaker 2: expensive than it anticipated. It just can't seem to do
Speaker 2: anything right.
Speaker 3: Like, if you haven't been living in under a rock,
Speaker 3: you'll know that Peloton has been mired in a two
Speaker 3: year tail spin. It was an pandemic, Darling. The company's
Speaker 3: bikes and more were a hot commodity during COVID nineteen lockdowns.
Speaker 2: Carol, I have one, you got one, bought it before
Speaker 2: the pandemic, early on.
Speaker 3: The Peloton train. Yeah, demand those slumped after people began
Speaker 3: heading back to offices, going back to gyms. And also
Speaker 3: you got to remember when it comes to working out,
Speaker 3: there there are cycles. There are fads like totally remember
Speaker 3: jazzer size, the thigh master, Nordic track like these are
Speaker 3: all things from my childhood that like.
Speaker 2: Oh, come on, you have a thigh master at home?
Speaker 3: Yeah, definitely did at one point, we absolutely did in
Speaker 3: my house.
Speaker 2: Oh my god. Well, the stock we're talking about, Peloton
Speaker 2: now down around ninety seven percent from its all time
Speaker 2: high back in January of twenty twenty one. That was
Speaker 2: the peak. So where does Peloton go from here? We
Speaker 2: have great voice on this. David Trainer is a CEO
Speaker 2: at New Constructs, an independent investment research firm. He's been
Speaker 2: advising investors to sell. He joins us on Zoom from Nashville. David,
Speaker 2: So nice to have you back with us. Where does
Speaker 2: Peloton go from here?
Speaker 4: I think it goes to zero. You know, Peloton was
Speaker 4: one of our original zoneombie stocks, and the key divining
Speaker 4: feature of a zombie stock is burning cash but not
Speaker 4: having a lot of cash to support that burn. So
Speaker 4: at some point it just runs out of money. And
Speaker 4: when we first first put Peloton on the Zombie stock list.
Speaker 4: The CEO announced that they were going to have to
Speaker 4: engage in major cost cuttings in order to extend their
Speaker 4: cash burn runway beyond just six months. And what happens,
Speaker 4: you know, in that situation, is you just stand up
Speaker 4: in a death spiral to all the points you guys
Speaker 4: were just making. It was never really a good business.
Speaker 4: And so you know, now you've got a good business
Speaker 4: slashing costs, and it's never going to really going to
Speaker 4: be able to get out of its own way and
Speaker 4: become a successful business. It was a bad concept to
Speaker 4: the from the beginning of my opinion.
Speaker 3: Why why do you believe that? I mean, think about it,
Speaker 3: because I don't think there's a but hold on it
Speaker 3: before I before I let you answer, I'm just gonna,
Speaker 3: you know, remind people that this is a company that
Speaker 3: wanted to be sort of the the Netflix or like
Speaker 3: Amazon kindle of working out. You buy one expensive piece
Speaker 3: of hardware and then you pay a monthly fee which
Speaker 3: is high margin to the company, and you just keep
Speaker 3: paying it every month and you don't need to buy
Speaker 3: a new hardware.
Speaker 4: If the problem is that anybody can do that, right
Speaker 4: I'm not saying people don't want to do, you know,
Speaker 4: or have what they're selling, but to make a profit
Speaker 4: at it, you're gonna have to do that in a
Speaker 4: way that no other business can. And that's what I
Speaker 4: think a lot of investors often miss. There's a difference
Speaker 4: between a good product and a good stock. There's a
Speaker 4: difference between a good company and a good stock. And look,
Speaker 4: for Peloton to ever be successful, they would have needed
Speaker 4: to have provided an exercise bike and set of entertainment
Speaker 4: that goes with it that was meaningfully differentiated and better
Speaker 4: than what anyone else could do. They couldn't do it,
Speaker 4: you know. I think being born into this sort of
Speaker 4: super hype IPO environment meant that they had a lot
Speaker 4: of money and really weak corporate governance, which meant that
Speaker 4: spending was terrible and crazy. But yeah, look, the bottom
Speaker 4: line is I'm not going to tell you people don't
Speaker 4: want to ride their bikes and be able to watch videos, right,
Speaker 4: but they can do that in a lot of other ways.
Speaker 4: And the number of copycat products that had been out
Speaker 4: there ever since, you know, soon after Peloton launched immediately
Speaker 4: proved our point, which we wrote, by the way before
Speaker 4: the IPO. We warned people to stay away from this
Speaker 4: IPO from the beginning because again, there's no moat around
Speaker 4: this business. There's no competitive differentiation to create profit margins.
Speaker 3: Who's your favorite instructor, Carol, I.
Speaker 2: Can't even remember. It used to be Robin. Robin was
Speaker 2: really cool, but this was another one.
Speaker 3: This was what I thought was the mode. I thought
Speaker 3: this was the mode. Were these instructors that they were
Speaker 3: paying half a million dollars a year Carol? Yeah, and
Speaker 3: you know you couldn't find anywhere else. They had exclusive
Speaker 3: contracts with the company, and that's what drew people, right.
Speaker 2: Yeah, And I will say it did create a community,
Speaker 2: and I like the you could be a live aspect,
Speaker 2: or you could pop into the library. I liked it.
Speaker 2: My daughter, who's much younger than me, obviously she liked it.
Speaker 2: But I do wonder, David. I mean, it's interesting, as
Speaker 2: you say, you know, you've got to be either a
Speaker 2: good company, good business, or good stock. I hope I
Speaker 2: didn't miss anything. Are you saying that Peloton is none
Speaker 2: of those?
Speaker 3: Not necessarily?
Speaker 4: I mean, look, people like the product, but you know,
Speaker 4: I don't know that it's been a good company and
Speaker 4: that it's just been losing lots of lots of cash,
Speaker 4: been a big cash burner forever. And I'm not saying
Speaker 4: that like you know, you might not like an instructor
Speaker 4: here or there, but look, the bottom line is that
Speaker 4: it has been a great product for consumers because they've
Speaker 4: been able to buy it at below cost. Right, Peloton
Speaker 4: has never made any money. Everything they're selling is selling
Speaker 4: it a loss, which means they're selling it to you
Speaker 4: effectively below a proper cost. So that's the distinction. And
Speaker 4: when I say like a good company and a good stock,
Speaker 4: one of one of the classic examples has been Walmart
Speaker 4: for years. Right, makes a lot of money, super cash
Speaker 4: flow generator, but the valuation is too expensive. Right, the
Speaker 4: valuation implies, and this is today and more in the past.
Speaker 4: Nvidia another great example, good company, bad stock, right doing
Speaker 4: a lot of great things, but when the valuation improved
Speaker 4: implies you're going to be over two point two trion
Speaker 4: and revenue and have a thousand percent return on invested
Speaker 4: capital while growing revenue at twenty five percent compounded annually
Speaker 4: for twenty years. The valuation is too much. So the
Speaker 4: key to investing is to buy good businesses at good prices.
Speaker 4: And so you can be a good business and a
Speaker 4: good company but not be selling at a good price.
Speaker 2: So where do we go from here with Peloton?
Speaker 4: I recommend if you haven't already sold it, I would
Speaker 4: take it out of the portfolio because I think it
Speaker 4: can go to zero. And part of the trap here
Speaker 4: is that it's only been able to survive this long
Speaker 4: on the good graces of unsuspecting investors believing that there
Speaker 4: was more there than there is.
Speaker 2: Because it's interesting what you said about sell you know,
Speaker 2: a loss on the bikes, and I get it, but
Speaker 2: you pay I'm still paying a monthly fee even if
Speaker 2: I don't use it like that is commitments you make,
Speaker 2: set it and forget it you can. But that's not enough, correct.
Speaker 4: It hasn't been. I mean they're still burning cash and
Speaker 4: there's just not a lot of people that are going
Speaker 4: to do that either, I mean, let's let's face it,
Speaker 4: or they can do it, you know, at their gym
Speaker 4: where they can with a group of people. But I
Speaker 4: think you know what you guys led with on the
Speaker 4: beginning about how this being a being a COVID darling
Speaker 4: because everyone was trapped in their house and now they
Speaker 4: had a way to com you know, connect with other people.
Speaker 4: That was good for a while, you know, And I
Speaker 4: think there was a small maybe a quarter or two
Speaker 4: where Peloton maybe had a positive profit margin.
Speaker 3: But never since does it make sense for a big
Speaker 3: company to come in and buy Peloton. In the past,
Speaker 3: a couple of years ago, in the last couple of years,
Speaker 3: we've talked about, oh, would this be a good fit
Speaker 3: for Apple, would this be a good fit for Amazon?
Speaker 5: Yeah.
Speaker 4: I mean, look, that's what we call stupid money risk
Speaker 4: for these business like these these danger zone stocks or
Speaker 4: zombie stocks that you know you never know, Like for example,
Speaker 4: Mattress Firm was one of the most heavily shorted stocks
Speaker 4: in the market. It was a terrible business, it was
Speaker 4: about to go bankrupt, and then some South American company
Speaker 4: came and paid a thirty forty percent premium to the
Speaker 4: stock price. Crazy stuff happens in the stock market. So
Speaker 4: I'm never here to give any kind of advice in general,
Speaker 4: but not to ever say, hey, shorting is a good idea,
Speaker 4: because it's dangerous nvidio.
Speaker 2: Oh wait, go ahead, go ahead.
Speaker 4: Final thought, don't I don't see any white Night coming
Speaker 4: out and saving Peloton again. There's too many like Amazon's
Speaker 4: got its own knockoffs. Yeah, right, got Nautilus and a
Speaker 4: lot of other exercise companies. They have knockoffs on a peloton.
Speaker 4: There's nothing innately special, so special about a pet about
Speaker 4: a peloton that I think somebody wants to buy it.
Speaker 2: Thirty seconds? Can you give me thirty seconds on an
Speaker 2: end Vidia? As we wait for those earnings?
Speaker 4: Yeah, good company, bad stock, but extremely expensive valuation. I
Speaker 4: mean they've got to improve margins by like a thousand
Speaker 4: basis points and grow revenue at twenty percent compound and
Speaker 4: annually for twenty five years to justify the current stock price.
Speaker 4: I think around four hundred and fifty five hundred and
Speaker 4: sixty bucks.
Speaker 2: Yeah, I'm sixty nine right now.
Speaker 3: I want you to repeat that, David, you said good company,
Speaker 3: bad stock.
Speaker 4: Yeah, good company, bad stock. Right, they make a lot
Speaker 4: of money, but the stock price is implying they're going
Speaker 4: to make a huge, huge amount more. And keep in mind,
Speaker 4: in order for you to expect to outperform as an investor,
Speaker 4: you've got to believe the company is going to do
Speaker 4: even better than the twenty percent compound and annual profit
Speaker 4: growth for twenty five years.
Speaker 2: Got you know what I mean, yeah, hey, listen forgive
Speaker 2: thank you though so much. You did what we wanted
Speaker 2: to do, especially on Peloton, and appreciate the Nvidia thoughts.
Speaker 2: David trainor CEO at New Constructs on zoom from Nashville, Tennessee.
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Speaker 2: The race is on to adopt generative AI. That is
Speaker 2: in the press release from the founder and CEO of Nvidia,
Speaker 2: Jensen Wang. He also is saying a new computing era
Speaker 2: has begun. Companies worldwide are transitioning from general purpose to
Speaker 2: accelerateed computing and generative AI. That's stock, as Charlie just mentioned,
Speaker 2: Can continuing to build momentum to the upside in the
Speaker 2: after hours, up seven point six percent that buyback news
Speaker 2: and third quarter revenue outlook beating the forecast, I mean,
Speaker 2: growing into that valuation.
Speaker 3: Perhaps, Yeah, this is a blowout quarter for the company.
Speaker 3: Shares up seven point eight percent after third quarter revenue
Speaker 3: outlook beat, the company approving an additional twenty five billion
Speaker 3: dollars in share repurchases with a look at the quarter
Speaker 3: in the outlook, we got back with us. Dan Morgan,
Speaker 3: senior portfolio manager at Sonovus Trust, joins us on the
Speaker 3: phone from Atlanta this afternoon. Dan, You've had three minutes
Speaker 3: to look at this initial reaction, Carol, I.
Speaker 5: Mean, again, this is just a huge quarter total blowout number.
Speaker 5: What gets me is that third quarter guidance, the sixteen
Speaker 5: billion in the street was about twelve and a half billion,
Speaker 5: and then there was a whisper number out on Data
Speaker 5: Center that said that they got to do better than
Speaker 5: ten billion, even though the street was around eight billion,
Speaker 5: and they did ten point three billion. So again, Tim
Speaker 5: and Carroll, this just gives further evidence that, you know,
Speaker 5: AI gener of AI chip demand continues to be extremely strong.
Speaker 5: And again and Vidia has been the poster child right
Speaker 5: for substantiating AI.
Speaker 2: You know, it's so funny. I'm going through the press
Speaker 2: release and I'm like, oh yeah, they do chips for gaming,
Speaker 2: Oh yeah, they.
Speaker 3: Do automotive for years.
Speaker 2: But our focus is so much AI. Help us break
Speaker 2: down the business of what it is and where the
Speaker 2: growth is. Is it all the AI growth?
Speaker 5: Yeah? I mean Tim and Carroll. If you look at
Speaker 5: their data center group, it's projected at about sixty five
Speaker 5: percent of the overall demand come from generative AI. So
Speaker 5: that's what's really pushing that number. And you know, Carol,
Speaker 5: you even mentioned earlier. I mean, we used to talk about
Speaker 5: Nvidia as a gaming company, right their GPUs and all
Speaker 5: the great gaming chips they had, and then they just
Speaker 5: started working into the same sandbox with AMD and Intel
Speaker 5: in the data center area for for cloud. And now
Speaker 5: they've just gone and done a fabulous job in terms
Speaker 5: of the chip portfolio that they're offering in that space,
Speaker 5: and obviously the demand is extremely high because they blew
Speaker 5: these numbers away.
Speaker 2: Again, Hey, I want to be smart here though, because
Speaker 2: we all get heady when it's like, oh my god,
Speaker 2: look at what they're doing and how much they're big beat.
Speaker 2: Should we be heady here? You know? One of the
Speaker 2: things that we keep questioning is we had on a
Speaker 2: guest earlier who said great company, badstock, meaning it's overvalued.
Speaker 2: What is it in this release an outlook that says, well,
Speaker 2: maybe it's not overvalued.
Speaker 5: I think Carol, everyone that talks about the stock being
Speaker 5: overvalued is basically looking at trailing pe multiples, right, or
Speaker 5: they're looking at price the sales, which is about forty times.
Speaker 5: But you look at the forward estimates for let's say
Speaker 5: Physical Year twenty twenty five, which are going to go
Speaker 5: up after this release, they were around ten and a half.
Speaker 5: You're straining at thirty eight times earnings. I mean, that's
Speaker 5: not excessive. You got to remember already halfway through Physical
Speaker 5: year twenty four for them, right, we're going into the
Speaker 5: third quarter, so we've got to always look ahead. So
Speaker 5: I think if you look at the stock as on
Speaker 5: a forward multiple basis, and you factor in the tremendous
Speaker 5: year over year growth that they're getting right now and
Speaker 5: the momentum that they're getting on this quarter to quarter basis,
Speaker 5: the stock to me doesn't seem that excessive when you
Speaker 5: compare the growth rates to the multiples.
Speaker 2: Why the heck are they doing a buy back twenty
Speaker 2: five billion dollars in share repurchases because they can? Because
Speaker 2: it makes sense?
Speaker 5: Yeah, I saw that, Carol. It's kind of funny because
Speaker 5: you know, usually when you've got enough free cash flow
Speaker 5: for a buyback, you might go out and buy somebody, right,
Speaker 5: you know, And why do you need to buy shares
Speaker 5: back if you're not a value stock, right, a company
Speaker 5: trying to generate higher earnings per share by lowing the
Speaker 5: denominator in the number of shares. So they're basically saying, hey,
Speaker 5: we're bullish on our own stock. We're going out and
Speaker 5: buy it. So we're going to do a buyback, So
Speaker 5: we don't care about what you say about the trailing multiples.
Speaker 3: I mean, I'm just I can't get over this quarter.
Speaker 3: Expectations were high, and then they come out and they say,
Speaker 3: seeing third quarter revenue sixteen billion dollars plus or minus
Speaker 3: two percent. Estimates were for twelve point five percent. Data
Speaker 3: revenue in the second quarter coming in at a record
Speaker 3: ten point three two billion carrol versus estimates of eight billion.
Speaker 2: It makes me wonder, like, all right, help me out here.
Speaker 3: What didn analyst get wrong? Exactly my question.
Speaker 2: They have a hard time figuring out this one. Why
Speaker 2: is it?
Speaker 5: I just think the fact that they are one of
Speaker 5: the sole companies at this point that have really shown
Speaker 5: a tremendous amount of growth related to AI, and I
Speaker 5: think that everybody wants to doubt the company. I'll be
Speaker 5: honest with you, Tim mc carroll. This you and I Carol,
Speaker 5: we've been doing interviews on video for years. Yeah, and
Speaker 5: it's almost like this earning to report to me kind
Speaker 5: of felt like a carnival atmosphere. It's like everybody knows
Speaker 5: about it, you know. So it's just kind of interesting
Speaker 5: the spotlight coming on them. But as Tim was saying,
Speaker 5: they blew out on all the matrix everybody was looking for.
Speaker 5: So I try to find someone who can, you know,
Speaker 5: throw a dart at this one.
Speaker 2: I think I still think about our conversation to him
Speaker 2: with Iri Jersey. Was it yesterday or the day before?
Speaker 3: Yeah, day before.
Speaker 2: We were talking about he's our interest rates strategist here
Speaker 2: at our Bloomberg Intelligence team, and we're talking about fed
Speaker 2: and Jackson holl and blah blah blah, moves and yields
Speaker 2: and so on and so forth, and he's like he
Speaker 2: had a conversation was it on one of our blogs
Speaker 2: or one of the blogs that was about interest rates?
Speaker 5: Right?
Speaker 6: Right?
Speaker 2: And what came up?
Speaker 3: Well, I'm also talking about the idea that you know,
Speaker 3: it's a macro story, and Ben Emmon's coming out and
Speaker 3: saying that in Vidia is you know, this is like
Speaker 3: a macro company. This is more important than Jackson Hall.
Speaker 2: But here I'm saying, right, our interest rate guy saying
Speaker 2: that in the conversation about interest rates comes up in video.
Speaker 3: Like everybody's talking about it.
Speaker 2: So that's why I want to be smart here, Dan,
Speaker 2: So what is the smart question to ask the CEO
Speaker 2: and team on the call to make sure we're not
Speaker 2: missing something or getting too irrationally exuberant?
Speaker 5: I think, Carol, the biggest question coming in this quarter
Speaker 5: that everyone was worried about, and we've talked about this before,
Speaker 5: in terms of constraints related to their supplier, right TSMC.
Speaker 5: There were worries that they wouldn't be able to make
Speaker 5: enough chips fast enough to meet consumer demand from Nvidia.
Speaker 5: So again that's probably going to come up on the
Speaker 5: conference call, that is there any doubt in your mind,
Speaker 5: mister CEO that you will not achieve the sixteen billion
Speaker 5: target in the third quarter because of potential constraints related
Speaker 5: to tsm MC. I think that's probably what's going to
Speaker 5: come up as being a worry point if we can
Speaker 5: find one here, Carol, is.
Speaker 3: There any are there any worry points about supply?
Speaker 5: Well, I mean there were concerns I've heard people talking
Speaker 5: about packaging issues that might hurt.
Speaker 3: Them, and so far the packaging issue what you mean.
Speaker 5: Yeah, I mean that sounds very strange right after what
Speaker 5: we went through the last two years about you know,
Speaker 5: supply constraints in the chip industry. You just hear different things,
Speaker 5: but that's been the vocal point Tim has been on TSMC.
Speaker 5: Can they build the chips fast enough? Can they fill
Speaker 5: the demand and meet that target? And I think that'll
Speaker 5: probably come up.
Speaker 2: So this also shows that maybe people who initially did
Speaker 2: went through a buying cycle and maybe they've gotten them,
Speaker 2: but we're still continuing to see people one up and
Speaker 2: continue to buy correct based on these results in this outlook.
Speaker 5: Yeah, it looks like that's the fact, Carol. I mean,
Speaker 5: it's the demand was better than what they had projected
Speaker 5: a quarter ago, right, because we're they came out and
Speaker 5: gave that lofty number at eleven billion in terms of sales.
Speaker 5: The on this quarter, of course, they crushed that and
Speaker 5: then they upped it again, so obviously they're feeling extremely
Speaker 5: strong about their business.
Speaker 2: One quick last question, do you buy here because people
Speaker 2: are buying in the aftermarket? Would you be buying because
Speaker 2: you think it's going to go even higher or no.
Speaker 5: Well, Carol, as you know, we've been in a Vidia
Speaker 5: for a very long period of time. It's kind of
Speaker 5: like Apple, and it is on our buy list. It
Speaker 5: is a stock that we would buy for clients that
Speaker 5: had the proper you know, risk tolerance and objective. So
Speaker 5: it's obviously based on individuals, but pretty much most of
Speaker 5: our clients already owning, so you know, it's kind of
Speaker 5: you know future.
Speaker 2: We're there, all right, Dan Morgan, you are, Jem. We
Speaker 2: know it's a busy afternoon for you, so thanks for
Speaker 2: always finding time for us. Dan Morgan, he is senior
Speaker 2: portfolio manager at so Nova's Trust, really a go to
Speaker 2: for us on names like Nvidia and others. Joining us
Speaker 2: on the phone from Atlanta. We really appreciate his input.
Speaker 3: Yeah, let's recap the numbers here, Carol, certainly worth repeating
Speaker 3: and Vidia forecasting third quarter revenue of sixteen billion dollars
Speaker 3: plus reminus two percent. The average on of this estimate
Speaker 3: was for twelve point five billion. She just us adjusted
Speaker 3: gross margin seventy two percent to seventy three percent, again
Speaker 3: beating estimates those were at seventy point five percent. She's
Speaker 3: adjusted operating expenses at about two billion dollars. Estimates were
Speaker 3: for two point oh five billion dollars. In the second quarter,
Speaker 3: revenue came in at thirteen point five to one billion dollars.
Speaker 3: The estimate was for eleven point oh four And that's up, Carol,
Speaker 3: from a year ago of six point seven billion. Yeah,
Speaker 3: I mean it's do ch top line growth.
Speaker 2: Stocks up seven point seven percent in the after hours.
Speaker 2: This is the number one performer in the S and
Speaker 2: P five hundred this year by a mile. And as
Speaker 2: Tim just broke down the numbers, you know, Netnet giving
Speaker 2: an upbeat revenue forecast for the current quarter, and it's
Speaker 2: fueled by surging demand for its AI processors in data centers.
Speaker 2: And then there's that twenty five billion dollar share repurchase,
Speaker 2: and they're going to continue to do share repurchases this
Speaker 2: fiscal year.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 3: Well, it may feel like we still haven't recovered from
Speaker 3: the election of twenty twenty. Carol, After all, Rudy Giuliani
Speaker 3: just this afternoon surrendered in Georgia and was released on
Speaker 3: a one hundred and fifty thousand dollars bond. That's where
Speaker 3: he faces a deadline to surrender on charges that he
Speaker 3: conspired to keep former President Donald Trump in office after
Speaker 3: he lost the twenty twenty election.
Speaker 2: Yeah, exactly, he did. But he did call the case
Speaker 2: a travesty in some broadcast remarks. All right, this the
Speaker 2: election of twenty twenty four is already in full swaying
Speaker 2: with the first Republican debate tonight Milwaukee, Wisconsin. It'll be
Speaker 2: another crowded stage. Eight candidates will be there, but on
Speaker 2: very notable figure will not. And we're talking about the
Speaker 2: former president of the United States, Donald Trump. He also,
Speaker 2: by the way, has until Friday to turn himself in
Speaker 2: on charges of illegally conspiring to reverse Joe Biden's twenty
Speaker 2: twenty victory in Georgia. There's a lot going on politically,
Speaker 2: and we've got a great voice, Tim on all things
Speaker 2: politics and elections.
Speaker 3: Yeah, Mark penn Is, chairman and CEO of STAG. Well,
Speaker 3: it's a publicly held one point three billion dollar market
Speaker 3: cap marketing, strategy and communications firm. It also owns the
Speaker 3: Harris Poll, which Marks chairman of. In politics, Mark was
Speaker 3: an advisor both to Bill and Hillary Clinton, as well
Speaker 3: as Tony Blair, and also met with President Trump while
Speaker 3: he was in the White House. Mark joins us on
Speaker 3: Zoom from Washington, d C. Mark, how are you. It's
Speaker 3: good to have you back with us. Well, I want
Speaker 3: to start with what's happening in Georgia. What's happening tonight?
Speaker 3: How do the Republicans, the eight Republicans facing each other
Speaker 3: today tonight, how do they set themselves apart from the
Speaker 3: man who's not there, the man who they're all trying
Speaker 3: to be, former President Donald Trump.
Speaker 7: Well, look, I think the most important for them is
Speaker 7: just to act like adults. I think that people are
Speaker 7: looking for a different kind of leadership. I think the
Speaker 7: winning candidate is going to show strength, composure, understanding the issues,
Speaker 7: and understanding of the problems that people are going through.
Speaker 3: Wait, wait, wait, hold on, you're saying the winning candidate
Speaker 3: of tonight or the winning candidate of the Republican primary
Speaker 3: is going to show them, Well.
Speaker 7: The winning candidate of tonight.
Speaker 3: Okay, because I don't know if President Trump. I don't
Speaker 3: know if President Trump and bodies the qualities that you
Speaker 3: just described.
Speaker 7: No, no, No, there's two. There's a primary going on
Speaker 7: to be the opponent of Donald Trump, right and so
Speaker 7: right now there are eight candidates who are kind of
Speaker 7: buying to oppose Trump. And whether or not they're going
Speaker 7: to be able to beat Trump, I think they more
Speaker 7: likely if they consolidate around one, more likely than not
Speaker 7: they will. But that's certainly a toss up race. But
Speaker 7: I think this first primary is who is really going
Speaker 7: to be the Trump challenger and how are they going
Speaker 7: to pick up steam tonight. I don't think it's going
Speaker 7: to be by attacking their opponents. Don't even think it's
Speaker 7: going to be by attacking either Joe. You know, they'll
Speaker 7: do some perfunctory attacks on Joe Biden, and I don't
Speaker 7: think it's going to be necessarily attacking Trump. It will
Speaker 7: be showing that they are real adults who have strengthen
Speaker 7: leadership capabilities and can understand people's problems.
Speaker 2: Hey, Mark, you know, as a businessman, as an investor,
Speaker 2: I do wonder what kind of candidate do we need
Speaker 2: from the Republican Party? Really, what kind of candidate. What
Speaker 2: kind of individual do we need in the White House
Speaker 2: right now? That would be yes, good for businesses, which
Speaker 2: are important to a strong economy, but really more broadly
Speaker 2: good for Americans because you know, healthier society, healthier individuals,
Speaker 2: healthier business environment. I mean that leads to good economic
Speaker 2: growth and is just good for everyone overall. So what
Speaker 2: kind of individual do we actually need in the White
Speaker 2: House today?
Speaker 7: Well, look, people want and they have wanted for almost
Speaker 7: two decades now, since I worked with President Clinton. They
Speaker 7: have wanted someone who would bring the country together and
Speaker 7: not really I think, cater to the partisan divides of
Speaker 7: the country. I think that is the number one thing
Speaker 7: that people have been looking for for a very long time,
Speaker 7: and which they've gotten. A number of candidates who said
Speaker 7: they were going to do that and then ultimately in
Speaker 7: the end didn't. Since when I work with President Clinton,
Speaker 7: we sure did. I think from a business environment, people
Speaker 7: are looking for growth without inflation. They are looking for
Speaker 7: a return to middle class values, meaning lower energy prices,
Speaker 7: lower interest rates on their mortgage, you know, healthcare costs
Speaker 7: that they can manage, better education for their kids. You know,
Speaker 7: people are really looking for the fundamentals and the basics here.
Speaker 7: Of course there's immigration and crime that are additional issues,
Speaker 7: but it's these costs of middle class like food, housing, gasoline,
Speaker 7: that really are weighing on the voters that are really
Speaker 7: the number one issue before the voters in this electorate.
Speaker 3: Do you see the voters coalescing the republic Republican voters
Speaker 3: and the Republican primary coalescing around anybody apart from former
Speaker 3: President Trump. I think they're going to.
Speaker 7: I don't know which candidate it's going to be. But
Speaker 7: even if you look in Iowa, Trump is polling at
Speaker 7: forty two in the poll that was done. That means
Speaker 7: there's fifty eight percent of the Republican electorate in Iowa
Speaker 7: that wants somebody else. They just don't know who they want.
Speaker 7: They know who they don't want.
Speaker 8: That's interesting.
Speaker 2: Yeah, it is interesting, you know, and I do want
Speaker 2: under you know, when you look out at the outlook,
Speaker 2: it is an interesting time. We're debating whether or not
Speaker 2: we need to just get kind of get woke with inflation,
Speaker 2: if you will, in terms of maybe it needs to
Speaker 2: be a higher rate. Maybe that's the realistic going you know,
Speaker 2: the realistic level going forward. Maybe we need some resets
Speaker 2: because we're coming off the pandemic and things are different,
Speaker 2: geopolitical alliances are different. I mean, how do you see
Speaker 2: the outlook, the outlook for just kind of our business environment,
Speaker 2: or economic environment or market environment.
Speaker 7: Look, the the environment has always been shaped by two
Speaker 7: incredibly powerful forces, technology and globalization. I think you're on
Speaker 7: the eve of another wave of technology that is going
Speaker 7: to significantly lower business costs. That is the adaptation of AI.
Speaker 7: We see it in our business, we see it in
Speaker 7: how we're adopting it, we're seeing it, how we're bringing
Speaker 7: it to clients. In terms of globalization, there has been
Speaker 7: something of a pullback from globalization, you know, I think
Speaker 7: an increasing of barriers, a growing kind of sense of
Speaker 7: global tensions, no question about that, particularly with China and Russia.
Speaker 7: And so it's unclear whether globalization will continue to drive prices,
Speaker 7: you know, down. But when you look at the at
Speaker 7: the outlook, those are first and foremost above our politicians,
Speaker 7: the two critical drivers. And then you have regulation, taxes,
Speaker 7: you know, and kind of what government industrial policy is.
Speaker 7: And I think all those are up for grabs in
Speaker 7: what is a fifty to fifty country, And so there's
Speaker 7: a lot of potential directions here which the country could
Speaker 7: go in which frankly it's too early to call.
Speaker 2: Yeah, first steps, So maybe beginning this evening. Hey, Mark,
Speaker 2: nice to get some time with you, Chairman and CEO
Speaker 2: of Stagwell, as we said, publicly held marketing Strategy Can
Speaker 2: Communications Firm. Mark joining us on Zoom from the Nation's Capital,
Speaker 2: Carol Master, Jim Stenovic This is Bloomberg Radio.
Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Tim Stenovik on Bloomberg Radio.
Speaker 2: Carol's happy with so great, What a great setup.
Speaker 3: Carol, you've heard of the dear John letter, right, may
Speaker 3: be given a few Oh wow, Okay, what about the
Speaker 3: dear j letter and the Jay in this case being
Speaker 3: none other than Jerome Hayden J. Powell of the Federal Reserve.
Speaker 3: Neither did I founded in the Bloomberg terminal.
Speaker 2: See this is the way you listen to us. Get
Speaker 2: those lice, nice little tidbits.
Speaker 3: Okay, you're gonna read the letter? Well, no, okay, should.
Speaker 2: We get to it.
Speaker 3: Let's get to it.
Speaker 2: Let's get to it. Barrett Rodholts is the host of
Speaker 2: Masters in Business, and of course that's on Bloomberg Radio
Speaker 2: the podcast as well his chairman a chief investment officer
Speaker 2: of Ridtholt's Wealth Management. He writes that dear Jay letter
Speaker 2: in the remarks section of the current issue of Bloomberg
Speaker 2: BusinessWeek magazine, which is available as we speak, and it's
Speaker 2: also on the Bloomberg and at Bloomberg dot com slash BusinessWeek.
Speaker 2: Berry Jinks.
Speaker 1: Yeah, all right.
Speaker 3: Barry joins us on zoom in New York City along
Speaker 3: with the editor of Bloomberg business Week, Joel Webbert. He's
Speaker 3: here in our Bloomberg Interactive broker's studio, Joel. I want
Speaker 3: to start with you and just ask you, know how
Speaker 3: how the format of this comes together because it's it's
Speaker 3: i would say, untraditional to say the least to read something.
Speaker 9: Like it's Barry, So it's got to be right. It
Speaker 9: started literally like twenty feet that way, and Barry was
Speaker 9: waiting to begin one of his Masters in Business interviews
Speaker 9: and I bumped into him and he wouldn't let me
Speaker 9: walk out of the way.
Speaker 2: Just be honest, and you just started pitching me. You
Speaker 2: roam the newsroom, don't you, and you find people.
Speaker 9: And as an evangelist for returning he had a in
Speaker 9: my ongoing propaganda to talk to you about how greed
Speaker 9: return to office is. I managed to get the story
Speaker 9: from from Barry, and uh, we started talking about August
Speaker 9: is a productive month for Barry.
Speaker 1: He's written a.
Speaker 9: Couple of stories for the magazine always in August, and
Speaker 9: this one was informed by the fact that, you know,
Speaker 9: August is for the central banker crowd. You go to
Speaker 9: jackson Hole, which you know, somebody's figured out how to
Speaker 9: do August right for the record, right, let's ask it's
Speaker 9: a good reason to go to Jacksonville. The central bankers
Speaker 9: are there, and we were talking about how J. Powell
Speaker 9: has has performed. So it's also you know, mid year
Speaker 9: performance review season. Like so, so Jay, you know, or Barry,
Speaker 9: if you were going to write this Dear J letter,
Speaker 9: which you've done, what would you want to lead with?
Speaker 6: If if I was his supervisor reviewing him, I would
Speaker 6: start with the fact that the federal Open market can
Speaker 6: he led by Chairman Powell, always seems to be late
Speaker 6: to the party. That that's the theme that seems to
Speaker 6: run throughout my Dear J letter, which which was sincerely congratulatory,
Speaker 6: Hey Jay, you won you beat inflation? Can we not
Speaker 6: as always overstay or welcome and snatch defeat from the
Speaker 6: jaws of victory. So I would start with you were
Speaker 6: late to get off emergency footing. You were late to
Speaker 6: recognize inflation had spiked through your two percent upside target.
Speaker 6: You were late to recognize it peaked, and now you're
Speaker 6: late to recognize that that inflation rolled over. And hey,
Speaker 6: three percent inflation pretty good. It's not two percent though,
Speaker 6: So that's another bullet point in the Dear j letter.
Speaker 6: When you delve into the history of the two percent
Speaker 6: inflation target, you know, you assume that there's some substantial
Speaker 6: academic research and quantitative monetary models that say two percent
Speaker 6: is the ideal inflation target.
Speaker 3: I think it's I thought it was in the Bible, right.
Speaker 6: I did not know give it turns out, and I'm quoting.
Speaker 6: Roger Ferguson, the former Vice Chairman of the Federal Reserve,
Speaker 6: did a recent article in I Think it was a
Speaker 6: Council on Farm Relations where he basically points out, this
Speaker 6: is a wholly made up number. It's completely fabricated. It
Speaker 6: literally came from an offhand comment from a television interview
Speaker 6: in New Zealand in the nineteen eighties. There's just zero,
Speaker 6: anything of any significance to two percent. Some people are
Speaker 6: trying to kind of backfill and say, well, their credibility
Speaker 6: is on the line. It'll look like they're moving the goalposts.
Speaker 6: And you know, to quote Caines, when the data changes,
Speaker 6: I have to change. In the twenty tens, monetary policy
Speaker 6: couldn't get inflation up to two percent, and then you
Speaker 6: had six trillion in fiscal stimulus. Hey, that's a regime change.
Speaker 6: You got to rethink your entire numbers.
Speaker 2: Do you know how many conversations that we have had
Speaker 2: in the last I feel like decade about that two
Speaker 2: percent number, or just even in the last week or
Speaker 2: month about two percent. And it's amazing to hear that
Speaker 2: it's really not based on anything.
Speaker 6: Nothing, absolutely nothing. I will take a little bit of
Speaker 6: credit for finding Ferguson's Peace, which I thought was so
Speaker 6: insightful and brilliant in June, and nobody had referenced it,
Speaker 6: and I sent it out to a number of people
Speaker 6: and people have been discussing it. By the way, there
Speaker 6: have been other researchers who have had some pretty substantial.
Speaker 3: Arguments. Lawrence Ball, who's a.
Speaker 6: Member of the National Bureau of Economic researcher and an
Speaker 6: economics professor at john Hopkins made the case all the
Speaker 6: way back in twenty thirteen that four percent would be
Speaker 6: a much more appropriate target. Lots and lots of other
Speaker 6: folks have come out said three four percent. It's just
Speaker 6: you have to accept the fact that two percent is
Speaker 6: a meaningless number. We shouldn't be wed to it.
Speaker 9: Okay, So what else should Jay and his team be
Speaker 9: talking about while they're in Jackson Hole and not fishing.
Speaker 6: So there's there's a couple of things, and two or
Speaker 6: three different bullet points all relate to the fact that
Speaker 6: the FED is a very large, somewhat sclerotic institution. You
Speaker 6: could you could say that about any large bank, any
Speaker 6: large government agency, any large institution, and they're very much
Speaker 6: tied to their history. Lots of the folks in the
Speaker 6: FED went to college in the in the seventies. The
Speaker 6: models that were dominant back then, as I write, in
Speaker 6: the era of disco and polyester. It was a very
Speaker 6: different time wearing you know not and you know Dua
Speaker 6: Lipa is doing a modern version of this. But that
Speaker 6: doesn't mean the FED has to go back to the seventies.
Speaker 6: The economy today is so different the fact that a
Speaker 6: lot of the decision making, a lot of the thinking,
Speaker 6: a lot of the actual models date back to the
Speaker 6: nineteen seventies. And you could see this in the group
Speaker 6: of economists who since zero interest rate policy and quantitative
Speaker 6: easing since Serpent q E in the early twenty tens,
Speaker 6: have been warning about hyperinflation. You know, people like Larry Summers,
Speaker 6: well respected economists, almost became fit chief himself has been
Speaker 6: talking about, hey, we need to get the unemployment rate.
Speaker 6: We need to throw a few million people out of
Speaker 6: work in order to get inflation down. And over the
Speaker 6: past year it's pretty clear inflation has dramatically rolled over.
Speaker 6: The FED has to break with respect history, but update
Speaker 6: your models. We really have to get into you know,
Speaker 6: it's no longer an era of super powerful unions, heavy
Speaker 6: metal when it comes to you know, manufacturing and steel
Speaker 6: and huge labor costs, huge finance costs. The modern economy
Speaker 6: is digital and productive and quick. They just don't seem
Speaker 6: to be part of the modern world.
Speaker 2: It's a good thing we can rely on the CPI. Then, right, Barry, No,
Speaker 2: I know that was a setup, buddy.
Speaker 6: So here's the fascinating thing. And you know, my phrase
Speaker 6: that I've been using, I don't know for decades is
Speaker 6: we're in an era of deflation punctuated by spasms of inflation.
Speaker 6: Go back over the past thirty forty years. You have globalization,
Speaker 6: you have massive automation, you have huge productivity gains from technology,
Speaker 6: and the dominant backdrop, certainly since the nineteen eighties has.
Speaker 9: Been deflation area.
Speaker 6: Yeah, there have been a few spasms of inflation five
Speaker 6: to eight and then again twenty one to twenty three,
Speaker 6: but each time they've been TRANSI. The FMC turned out
Speaker 6: to be right. It just took much longer than anyone
Speaker 6: expected and very specific, a very specific cause. And when
Speaker 6: you look at what was taking place since you mentioned
Speaker 6: CPI in the mid two thousands, because CPI's biggest input
Speaker 6: is the way the BLS measures housing costs. It's called
Speaker 6: owner's equivalent rent. What would it cause? What would you
Speaker 6: generate if you could rent your house, where your condo
Speaker 6: or wherever you lived if you own it, And so
Speaker 6: it's this model that sort of tries it does a
Speaker 6: half decent attempt to approximate housing costs. The problem is
Speaker 6: there are a lot of moving parts to housing. In
Speaker 6: the mid two thousands, when the bank said, sure, we'll
Speaker 6: give you mortgage, we don't. It doesn't matter if you're
Speaker 6: not working, if you don't have a job, if you
Speaker 6: don't have any taxes. Here's a million dollars, go buy
Speaker 6: a house. That sent a lot of people into the
Speaker 6: home ownership market, and naturally, apartment rentals took a hit,
Speaker 6: and so as if you remember that inflation spike in
Speaker 6: the mid two thousands, when oil ran all the way
Speaker 6: up to one hundred and fifty dollars, owners equivalent rent
Speaker 6: looked like home expenses were going down because of the
Speaker 6: way it's calculated. Fast forward to the twenty twenties, following
Speaker 6: the financial crisis, you had a decade of underbuilding single
Speaker 6: family homes because the homebuilders panicked from like seven to
Speaker 6: twenty nineteen, they wildly underbuilt single family homes, focused on
Speaker 6: apartments and multifamilies. And so you have everybody moving out
Speaker 6: of looking for a second place to work remotely, not
Speaker 6: in a city, lots of second and third home buyers,
Speaker 6: and lots of first time home buyers who basically just
Speaker 6: can't find any supply out there. Lack of supply means
Speaker 6: home prices are going higher, and so perversely the right
Speaker 6: Now sixty one percent of mortgages people with houses with
Speaker 6: mortgages are four percent a row under, and it's close
Speaker 6: to ninety percent for five percent or under. So people
Speaker 6: have these golden handcuffs that's stuck where they are. The
Speaker 6: FED is actually making inflation worse.
Speaker 9: Yeah, Uh, Tim, do you think anybody's listening?
Speaker 6: Uh?
Speaker 9: When you know he's reading this for Jay? Is Jay listening?
Speaker 10: You know?
Speaker 3: Joel? That was going to be my final question to
Speaker 3: to Barry. Hey Barry, have you have you heard back
Speaker 3: yet from JB?
Speaker 6: We have a drinks planned around Thanksgiving?
Speaker 8: But no, no, I haven't.
Speaker 6: Heard listen to give to give Jay Powell credit, He's
Speaker 6: got a million people yelling at him, telling him what
Speaker 6: to do, what not to do. They seem to have
Speaker 6: been pretty clear, I give this FED credit versus let's
Speaker 6: say the Greenspan FED and to some degree the Bernanki
Speaker 6: Fed for saying this is what we're going to do
Speaker 6: and here's how we're going to do it, and then
Speaker 6: they they go out and do what they say. I'm
Speaker 6: kind of astonished how the market continuing used not to
Speaker 6: believe them. Whether you agree with what the Fed's doing
Speaker 6: or not. You can't say they're not transparent and they're
Speaker 6: not doing exactly what they said they're gonna do.
Speaker 9: Okay, so we're gonna talk about Jackson Hole a lot.
Speaker 9: What are you looking out for, Barry?
Speaker 6: You know, this is one of these sort of academic
Speaker 6: gatherings where there's a lot of chatter and probably more
Speaker 6: than a little wine drinking. I'm not really looking for
Speaker 6: anyone to come out and say, hey, we've seriously rethought
Speaker 6: our entire modus operanda and mistakes were made. Changes are
Speaker 6: gonna be upcoming that that's not gonna happen. This is
Speaker 6: a little bit of a you know, an annual getaway
Speaker 6: in the dead of summer. I think it's gonna be
Speaker 6: a whole lot of nothing other than the FED continuing
Speaker 6: to say we're not done beating inflation. Even though I
Speaker 6: disagree with them. I'm not the FED chair. They're gonna
Speaker 6: do what they're gonna do.
Speaker 2: So if you could sit down J Powell or the
Speaker 2: Nvidia CEO and founder, who would you sit down with
Speaker 2: right now thirty seconds?
Speaker 6: Well, there's nothing to say. I'm not going to get
Speaker 6: anything from the Nvidia CEO. They just released Learning, so
Speaker 6: there's no insight to be getting there. At least with Jay,
Speaker 6: I could say, you're so close to winning, why do
Speaker 6: you The risk is to now to doing too much.
Speaker 6: Previously the risk was doing too little. Put that flag
Speaker 6: in the ground, declare mission accomplished, and take the rest
Speaker 6: of the year off.
Speaker 2: Which is what you wrote in your letter.
Speaker 9: Yeah, well, Jackson Hol's a pretty good place to start
Speaker 9: that journey.
Speaker 3: Little gap year in Jackson Hole. Yeah, I think it
Speaker 3: sounds nice. Maybe ski bum in the winter, fly fish
Speaker 3: in the summer, why fish in the summer, rock climbing.
Speaker 6: Maybe hedge funds do it. When you're up big for
Speaker 6: the year, you cash out and you go away.
Speaker 2: Why wouldn't you write? Barry Ridholts thank you so much,
Speaker 2: really appreciate it. He's the host of Master's in Business
Speaker 2: on Bloomberg Radio, chairman and chief investment officer of rid
Speaker 2: Holts Wealth Management. And this is the remark section of
Speaker 2: the current issue of Bloomberg BusinessWeek magazine.
Speaker 3: You know, I'm gonna tell everyone to sign up for
Speaker 3: BW Daily, but I'm gonna do it a little early
Speaker 3: today because it's a really special edition. There's Jackson Hole
Speaker 3: bingo from the Abots. Actually walked up to my desk
Speaker 3: yesterday and someone had printed it out and put it
Speaker 3: on my desk. Joel, was that you?
Speaker 9: No comment?
Speaker 2: Oh okay, I think you're Jael, Thanks very much. All right,
Speaker 2: you are listening to watching Bloomberg Business Week on Bloomberg Radio, Umbromarco.
Speaker 9: Journal.
Speaker 10: How about you let me drive?
Speaker 6: Oh no, no, no, no, who's going to drive?
Speaker 9: Alright?
Speaker 3: Please?
Speaker 1: I'll do gravel?
Speaker 4: Wait, I want to drive.
Speaker 2: It's a good question.
Speaker 3: Good this is the drive to the clothes.
Speaker 9: Don me think well?
Speaker 1: Brunel on Bloomberg Radio.
Speaker 2: All right, just got about seventeen and a half minutes
Speaker 2: left in today's trading session. Carol Master Longer Team's Stenemic
Speaker 2: live in our Boomberg Interactive Broker Studio on YouTube. I'm
Speaker 2: Blue Burger Riginal. Yeah we are, and it seems like
Speaker 2: bulls are everywhere today, at least if you look at
Speaker 2: the trade. Most of your major industry groups I think
Speaker 2: ten out of eleven in the S and P five
Speaker 2: hundred are higher for the day, and tech once again outperforming,
Speaker 2: as we heard from Charlie up one point eight percent.
Speaker 3: Yeah yeah, y S five hundred up one point two percent.
Speaker 3: The Dow Jones Industrial Aba it is for now, what
Speaker 3: a difference than you know, look what happened last week.
Speaker 2: Carol, Yeah, I know, I know, and August has had
Speaker 2: a very different tone. So let's see what Jimmy Lee
Speaker 2: has to say. He's foundered and CEO at the Las
Speaker 2: Vegas based registered investment advisor Wealth Consulting Group. Today though
Speaker 2: we find them on zoom from Sea Island, Georgia. Everything
Speaker 2: awesome there in Georgia.
Speaker 8: Jimmy Lee don just came out. Maybe it's because of you, guys,
Speaker 8: I don't know. It's very nice here, very nice.
Speaker 2: What do you care more about this weekend? Video? Or
Speaker 2: Jackson Hole?
Speaker 10: Both are important, but I think I think in Nvidia
Speaker 10: is probably more important when it comes to related companies
Speaker 10: that might participate. But you know, I think Jackson Hole,
Speaker 10: I think Powell is going to be normally hawkish like
Speaker 10: he always is, and I think he needs more evidence
Speaker 10: of lower inflation before he can he can sound sound
Speaker 10: a little bit more dubbish and so so I think
Speaker 10: they're both important. But obviously just in a few minutes
Speaker 10: here we'll we'll have what Nvidia has to say, and
Speaker 10: I think they'll probably end up, you know, posting some
Speaker 10: good numbers, but maybe having some issues with UH, with
Speaker 10: supply and things like that and meeting demand.
Speaker 8: Who knows.
Speaker 3: We'll see, all right, we'll see we've just got it,
Speaker 3: like under an hour to go, and then we'll find
Speaker 3: out it is the most important earnings report of our lifetimes, Carol.
Speaker 3: So that's that's what That's what everybody's saying.
Speaker 2: Well, I am curious though on Nvidia. I mean, are
Speaker 2: you thinking, I don't know, have you been recommending to
Speaker 2: investors to buy it ahead of earnings. We've done some
Speaker 2: stories I think about the options trade, and it looks
Speaker 2: like we're anticipating maybe a ten percent potentially on the
Speaker 2: earnings report, at least based on some of what we're
Speaker 2: seeing ahead of it. I don't know how we just
Speaker 2: had We just talked with David Traynor, thank you, uh,
Speaker 2: and he's saying, you know what good company, bad stock
Speaker 2: because it's just a video.
Speaker 8: So yeah, you know.
Speaker 10: I was actually actually having a conversation with two people
Speaker 10: on our investment committee this morning about the about the stock,
Speaker 10: and our CEO is talking about how the obsence market
Speaker 10: is pricing the potential volatility with Nvidia in this earnings report.
Speaker 8: So definitely if you.
Speaker 10: I've not been recommending people by prior to earnings myself,
Speaker 10: but if you're gonna be doing it, you should know
Speaker 10: that it could be very violatile.
Speaker 8: One way or the other.
Speaker 10: Right, So I think I think it's really for traders
Speaker 10: to try to invest ahead of earnings and things like that.
Speaker 8: And you know, we'll see.
Speaker 10: I think the company overall though and will benefit from
Speaker 10: this massive trend. And AI, well, we'll see in the
Speaker 10: long run if companies that are chasing AI will get
Speaker 10: the bit turned on the capital that they're investing.
Speaker 8: So that's set to be seen too.
Speaker 3: I'm going to go back to something that you said,
Speaker 3: Jimmy about Howell needing more evidence of more inflation or
Speaker 3: more evidence of lower inflation. I should say, are we
Speaker 3: starting to see that evidence? And look, I understand that
Speaker 3: that services is more important than goods and to our economy,
Speaker 3: but we are getting some startling stuff from some retailers
Speaker 3: foot Locker today, for example, the warnings that we heard
Speaker 3: from Targets executives, Walmart executives, Dix executives. Is that does
Speaker 3: that tell you that inflation is easy?
Speaker 10: Well, I certainly believe that those are very important factors
Speaker 10: for the strength of the consumer and where we're at
Speaker 10: right now with that issue. But I think Powell, unless
Speaker 10: he gets you know, more of the headline numbers that
Speaker 10: they focus on.
Speaker 8: Consistently lower, I think he.
Speaker 10: Is going to continue to feel the political pressure from
Speaker 10: his other committee members and just in general for talking
Speaker 10: hawkish until we start to see the lower numbers. Now,
Speaker 10: my personal opinion has been, as you know, as I've
Speaker 10: been on your show, you know throughout the year that
Speaker 10: I think inflation will finally start to look even better
Speaker 10: than what may be predicted because of this housing shelter
Speaker 10: costs number that is a big part of the core
Speaker 10: CPI that will start to look better in the next
Speaker 10: few months and throughout the rest.
Speaker 8: Of the year.
Speaker 10: As you know that that number the owner is the colder,
Speaker 10: rent portion of the shelter cost is the biggest portion,
Speaker 10: and those numbers should definitely start looking better and have
Speaker 10: a lower impact and a positive impact on lower inflation
Speaker 10: going forward. So maybe Powell will get what he really needs,
Speaker 10: which is better inflation numbers, so that he can you know, pause,
Speaker 10: And I think the future's markets still predicting that the
Speaker 10: I think seventy eighty percent or so that the FEDS
Speaker 10: are going to pause in September, but I think after that,
Speaker 10: I think it's almost a coin flip.
Speaker 8: And as far as investors are thinking, you know.
Speaker 2: It's interesting talking in the newsroom and someone saying to me,
Speaker 2: kind of tired of all the FED speak, And I wonder,
Speaker 2: for you, who has to make investment decisions, what is
Speaker 2: really the constructive conversations or narratives that really make you
Speaker 2: pull a trigger on either buying or selling something. Is
Speaker 2: it the FED conversation or is it something like an
Speaker 2: nvideo report.
Speaker 10: I would say it's it's really neither, Carol. As you know,
Speaker 10: we work with long term investors. Most people that are
Speaker 10: listening aren't traders, and certainly not institutional traders, and so
Speaker 10: people that are invested for the long run. We've never
Speaker 10: promoted market timing and getting in out of stocks. We
Speaker 10: believe that you know, under overweight sectors or different asset
Speaker 10: classes depending on the part of the business cycle that
Speaker 10: we're in an economic cycle might make sense, but getting
Speaker 10: in and out of stocks trying to market time has never.
Speaker 8: Really worked consistently.
Speaker 10: Historically, stocks are up seventy five percent of the time,
Speaker 10: you know, and so it's very difficult for short sellers
Speaker 10: to make to earn money doing it that way, and
Speaker 10: so it's a very difficult game to play. So really
Speaker 10: it's more about asset allocation and maybe to invest new
Speaker 10: capital like these things I think matter, you know, trying
Speaker 10: to get money to work. A lot of investors, even professionals,
Speaker 10: have missed out on the huge gains this year. I
Speaker 10: don't know if they're going to get their chance to
Speaker 10: get back in. So I don't really see how we're
Speaker 10: going to retest the lows from last year.
Speaker 2: Very quickly fifteen seconds. I mean, are you still holding
Speaker 2: lots of are your clients holding lots of cash on
Speaker 2: the sidelines high cash positions or no? Much more fully
Speaker 2: invested very quickly please.
Speaker 8: I would say that the firms more fully invested.
Speaker 10: But people do have a lot of cash, and it's
Speaker 10: evident the five plus million dollars that people having money
Speaker 10: markets all right.
Speaker 2: So the sign us some cautiousness. Jimmy Lee, thank you
Speaker 2: so much. Be well, Founder and CEO at Wealth Consulting
Speaker 2: Group on zoom from Sea Island, Georgia. We're just about
Speaker 2: ten minutes away from the Clothes Carol Master, Tim Stanvick
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