Speaker 1: This is Bloomberg business Week 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: Nvidia is off and flying this year. Ian King is
Speaker 2: US semi conductor and networking reporter at Bloomberg News. He
Speaker 2: joins us on Zoom from San Francisco. Ian and Video
Speaker 2: is up another twenty six percent today. It's up about
Speaker 2: one hundred and sixty four percent so far this year.
Speaker 2: It's the number one perform in the S and P
Speaker 2: five hundred this year. We talk about it a lot,
Speaker 2: especially when it comes to AI. Is the euphoria over
Speaker 2: Nvidia and its connection to AI justified?
Speaker 3: There are a couple of ways to look at this,
Speaker 3: and obviously we've had conversations on this over the last
Speaker 3: few days. And you know, the big question was is
Speaker 3: anybody actually making money out of AI? We're talking about it,
Speaker 3: Is anybody making money out of it? Yesterday's announcement showed
Speaker 3: that this company really is. Valuations that's another question, right
Speaker 3: We're looking at what one hundred and eighty times current innings.
Speaker 3: You can decide whether that to represents value for money
Speaker 3: or output. They are putting up numbers that justify some
Speaker 3: of the hype. That's certainly true.
Speaker 4: Yeah, so the forward PE is fifty four fifty five,
Speaker 4: which you know for a normal company would still be
Speaker 4: very rich valuation. But it's yesterday. This time it was
Speaker 4: like sixty five, So the e has really come up
Speaker 4: in terms of you know, what analysts expect. I heard
Speaker 4: a great stat yesterday ian from some novas that sixty
Speaker 4: five percent of the chips they sell for server use
Speaker 4: are used in deep learning, are used in you know,
Speaker 4: AI generative language models. So it's really about AI, right,
Speaker 4: It's not just a fad. They haven't just slapped AI
Speaker 4: on the name. It really is being used the bulk
Speaker 4: of their product in this new technology.
Speaker 5: Yeah.
Speaker 3: I mean, you know that there are all kinds of
Speaker 3: stats floating around at the moment that add to this,
Speaker 3: and you know they're incredible. Another way to look at
Speaker 3: it would be I saw another report that said in
Speaker 3: video currently has north of eighty percent market share in
Speaker 3: this particular segment. And guess what, during the last three months,
Speaker 3: one hundred percent of the installs of this type of system.
Speaker 3: We're on in video system, we're on in video equipment.
Speaker 3: So it's got a strong market share and it's getting better.
Speaker 3: And now this is by far the company's largest source
Speaker 3: of revenue. I mean, you were talking about, well, why
Speaker 3: would you sell out the stock? Remember last year and
Speaker 3: this year have been a terrible year for the company's
Speaker 3: overall innings. It's in the PC business that's horrible. That's
Speaker 3: why you sold out, not really knowing just how strong
Speaker 3: this AI search could be. And now we're seeing it.
Speaker 4: Well, we don't know, but Kathy Woods supposed to know, right,
Speaker 4: She's the future guru, you know, she is the one
Speaker 4: who's making the big bets on these things they're gonna
Speaker 4: happen later on in life.
Speaker 3: Well, look at it this way, to be fair to her, right,
Speaker 3: Nvidia gave a projection that was fifty three percent higher
Speaker 3: than the average analyst estimate here. So so nobody got
Speaker 3: embarrassed Wall Street. Right, they embarrassed Wall Street, never mind
Speaker 3: one particular fund manager.
Speaker 2: So I guess what I'm wondering is basically this ramp
Speaker 2: up where Nvidia is benefiting ian is this just as
Speaker 2: companies are exploring what they can do with AI, this
Speaker 2: version or this higher you know, learning formula of AI,
Speaker 2: and they're trying to figure out how they basically benefit.
Speaker 2: Is that what this is kind of an exploratory phase
Speaker 2: and that we're not quite yet at the Hey, here's
Speaker 2: what really works and is going to pay off fees.
Speaker 3: No, I think you're picking it as something which is
Speaker 3: really important and something which was a major topic on
Speaker 3: the conference call that they did yesterday, and that was like, look, hey,
Speaker 3: you're selling to Microsoft, you're selling to Google, you're selling
Speaker 3: to AWS. That's fantastic, but guess what those guys want
Speaker 3: to do their own chips and if they're the only
Speaker 3: customers in town, sooner or later they're going to find
Speaker 3: somebody else so they won't need you as much. What
Speaker 3: are you going to do about it? And in really
Speaker 3: was like, you really haven't been listening to us. We
Speaker 3: believe that AI is going to be used everywhere, right,
Speaker 3: and in order for that to happen, here are these
Speaker 3: products that we've already put out there. They've done software
Speaker 3: for pharmaceutical, software for all of the you know, for automotive,
Speaker 3: for all of these different industries that wouldn't have these
Speaker 3: genius computer scientists who can then buy some of the
Speaker 3: service or even buy some of invidious products and use
Speaker 3: AI for themselves. So you know, they at least had
Speaker 3: an answer to a very very important question about where
Speaker 3: this all goes.
Speaker 2: They don't and Vidia doesn't need a Microsoft or Google
Speaker 2: ultimately longer term because they can tap into all these
Speaker 2: other areas or TVD.
Speaker 3: I mean, it's a it's how do they put it
Speaker 3: a frenemy relationship right now in Microsoft needs in videos chips.
Speaker 3: In Vidia has put some of these services it's hoping
Speaker 3: to sell to these companies in the cloud hosted by
Speaker 3: Microsoft as you or Amazon a WUS. But down the
Speaker 3: road and an ideal world in video is going to
Speaker 3: be selling directly to some of these companies if they
Speaker 3: can acquire that kind of expertise, or if Nvidia can
Speaker 3: make it easy enough.
Speaker 4: You know, Paul Sweeney, who in his former life was
Speaker 4: an investment banker, his immediate thought goes to taking advantage
Speaker 4: of this situation. Right if your stock pops like this
Speaker 4: and you are the it stock, I mean, right now,
Speaker 4: you want to own Nvidia and you want to tell
Speaker 4: your friends that you own in Vidia because you're the
Speaker 4: smart guy who's into AI. That could last a month,
Speaker 4: it could last three months, maybe it lasts a year,
Speaker 4: but probably not much longer. Are they going to raise capital?
Speaker 4: Are they going to buy something with these shares? Because
Speaker 4: they should really take advantage of this situation.
Speaker 3: Yeah, I think that's I mean, knowing their CEO and
Speaker 3: knowing the way that they look at things, that's very
Speaker 3: much a throwback view of of Silicon Valley and of
Speaker 3: you know, the way that the markets work. They believe
Speaker 3: they're a technology company. They believe they have everything in
Speaker 3: place that they need. As you remember, they did try
Speaker 3: to buy ARM and regulators around the world said, nope,
Speaker 3: you're too big, we don't like this. So they've learned
Speaker 3: that lesson. Why would they go off on something that
Speaker 3: they're probably not going to get So that's probably the
Speaker 3: way they're looking at it.
Speaker 2: So who competes with them ultimately.
Speaker 3: Well, I mean Intel, but investors don't believe them Intel.
Speaker 2: Just Matt and I you know, Ian going into this,
Speaker 2: We're like, did you look at Intel's marka cap and
Speaker 2: did you look at nd videos mark Like it's just
Speaker 2: hard to get my head around it.
Speaker 3: No, And it's I mean AMD stock went up today,
Speaker 3: right because they do similar things. They're nowhere near as
Speaker 3: far and advanced into this marketers in videos and in theory.
Speaker 3: Intel is there as well. Intel has been the heart
Speaker 3: of the data center for you know, twenty thirty years.
Speaker 3: Investors just aren't buying that they have a way forward here.
Speaker 3: Even though Pat Gelsinger Intel has been talking about his
Speaker 3: new products, his accelerators, data center products and all of
Speaker 3: these things he's going to bring to market, Investors just
Speaker 3: just don't believe that.
Speaker 4: Right now, Intel is worth less than an eighth an
Speaker 4: eighth that's crazy of video right and Video's trading right
Speaker 4: now market cap nine hundred and fifty billion. Intel is
Speaker 4: one hundred and fifteen million.
Speaker 3: In Vidia added more market cap today than Intel is
Speaker 3: worth in total.
Speaker 4: Wow, that's a very that's a very strong point.
Speaker 2: So thirty seconds left here, Come on, and you've been
Speaker 2: following I know, I asked this all the time because
Speaker 2: your perspective is really valuable because you've studied this sector
Speaker 2: for so long. Does that make sense to you?
Speaker 3: I mean, if you believe what Jensen Lang said, which
Speaker 3: is there are trillion dollars of data central equipment that
Speaker 3: needs to be replaced right now, they're in the lead
Speaker 3: as to whether an absolute valuation makes sense in those terms.
Speaker 3: I don't know.
Speaker 2: It's just interesting world. We're eleven in Ian, Thank you.
Speaker 2: I know we go round and round a lot on this,
Speaker 2: but it seems to be the topic that everybody wants
Speaker 2: to talk about, either AI and or the chip sector,
Speaker 2: and you really just put it in such great perspective.
Speaker 2: Ian King. He is US Semiconductor Networking report at Bloomberg
Speaker 2: News on zoom from San Francisco. Check out his work
Speaker 2: on the Bloomberg at Bloomberg dot com and also on
Speaker 2: Twitter at Ian M.
Speaker 1: King.
Speaker 2: Pretty amazing stuff. Huh.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
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Speaker 2: All right, let's get to it, because we want to
Speaker 2: talk a little bit about the cannabis industry. I don't know, Matt,
Speaker 2: if you saw there was a Bloomberg News story earlier
Speaker 2: this month, and you know it talked about cannabis basically
Speaker 2: facing financial and regulatory malays in the US, but it
Speaker 2: isn't affecting the perceptions of consumers who increasingly approve of it.
Speaker 4: I know, and the sales numbers are very strong. State
Speaker 4: by state, of course is where we see that. But
Speaker 4: it's billions and billions of dollars in revenue, and that's
Speaker 4: runs the gamut from you know, medical use, prescribe medical
Speaker 4: use to recreational like at a dead show.
Speaker 5: All right.
Speaker 2: In the meantime, our next guest is in. It also
Speaker 2: has a personal story around it. We welcome Morgan Paxia,
Speaker 2: co founder and managing partner of Poseidon Investment Management, keeper
Speaker 2: of the advisor shares Poseidon.
Speaker 4: Poseidon, Poseidon like king.
Speaker 2: I know it's that coming out right, Poseidon ETFs on
Speaker 2: zoom and here York City. Sorry it's been a rough week, Morgan.
Speaker 2: Good to have you here with Matt and myself. First
Speaker 2: of all, tell us about your how you got into
Speaker 2: all of this because it is a personal story.
Speaker 6: It is like so many of us that have gotten
Speaker 6: into the cannabis industry. Usually starts for a lot of
Speaker 6: us with a family event. For us, we lost our
Speaker 6: parents to cancer at a very young age. I was
Speaker 6: twelve with my dad passed in eighteen. When my mom
Speaker 6: and I started the business with my sister Emily, just
Speaker 6: about ten years ago now, but they were both believers
Speaker 6: in ending the war on drugs. They thought it was
Speaker 6: you know, unjust and but really what was a clear
Speaker 6: moment for us was when our dad was in hospice care,
Speaker 6: a nurse actually offered him some cannabis, just trying to
Speaker 6: help him find some peace in the final days or
Speaker 6: just some comfort, you know, being on all those opioids.
Speaker 6: Wouldn't do it because of the stigma because it was illegal.
Speaker 6: Didn't want to have any kind of tarnished kind of
Speaker 6: sentiment back with family or anybody around us. And obviously
Speaker 6: we've thought that was very wrong. I was young, but
Speaker 6: as we say, it planted the seed for our future,
Speaker 6: and so we've been so.
Speaker 4: You are, so you Morgan and your sister Emily. What
Speaker 4: started this ETF? But how did you get into it?
Speaker 4: To begin with?
Speaker 6: Our first fund, we launched in January of twenty fourteen,
Speaker 6: was it's actually a hedge fund. It still runs today,
Speaker 6: but we invested in much like a hybrid strategy where
Speaker 6: we were doing private, early stage investments because everything was
Speaker 6: private and early back then, but it had the ability
Speaker 6: to also invest in companies that were public or would
Speaker 6: become public companies. So it really gave us the full gamut.
Speaker 6: We launched our ETF in November of twenty twenty one
Speaker 6: thinking that a lot of the bear market cycle had corrected.
Speaker 6: We were wrong or early with that, but also waiting
Speaker 6: patiently for the market to get a little bit more
Speaker 6: mature before we had a product such as an ETF.
Speaker 6: But we thought the ETF was a great addition to
Speaker 6: the Poseidon investment universe where we could have a product
Speaker 6: that anyone could buy, you know as a hedge fund
Speaker 6: and our two sub subsequent venture capital funds, those are
Speaker 6: only eligible for credited investors or institutional like investors versus
Speaker 6: an ETF anyone can buy.
Speaker 4: So how do you I look at the price, right,
Speaker 4: and as you pointed out your early so you came
Speaker 4: out at ten bucks and it's now down at a
Speaker 4: dollar fifteen. And if I look at the holdings, you
Speaker 4: have green thumb, cure a leaf, true, leave, cresco. I
Speaker 4: mean basically the usual suspects for the most part, right,
Speaker 4: and they all their stock in charts look the same
Speaker 4: as your TF.
Speaker 5: What that's right?
Speaker 4: What can you do differently than another fund or ETF?
Speaker 4: That's investing in in marijuana in order to get a
Speaker 4: little bit of alpha.
Speaker 6: Yep, we're unconstrained, so we can invest globally. We can
Speaker 6: be you know, in Canada or in Europe. Really there's
Speaker 6: not too much in Europe yet, but it is an
Speaker 6: unconstrained strategy from a whether or not we're investing in
Speaker 6: US operators or technology companies. So that's one unique feature.
Speaker 6: We're not tied to any benchmarks. It's really just at
Speaker 6: our discretion. And then we also have a dynamic leverage capability,
Speaker 6: so we can be anywhere from eighty percent, so we
Speaker 6: can be unlevered, or we can be up to one
Speaker 6: hundred and fifty percent leverage, and we can dial that
Speaker 6: up and down. And as is a good example, for
Speaker 6: the most part of this year, we were atzero point
Speaker 6: nine five times, but then as some of this safe
Speaker 6: banking initiative started to come back with regular order in
Speaker 6: the Senate, there's some other things in the works. We
Speaker 6: have slowly taken leverage up to one hundred and ten percent,
Speaker 6: so we're just modestly leveraged today, but believing that there
Speaker 6: are some potential progress. So we saw regulatory change, but
Speaker 6: also the fundamentals of the industry have been improving over
Speaker 6: subsequent quarters, So we like that the fundamental support is
Speaker 6: there and any kind of regulatory progress would generate some
Speaker 6: nice upside return. But predominantly focused on good companies. We
Speaker 6: want to see companies that are have gross margins, have
Speaker 6: nice evadam margins, have either the ability of generating free
Speaker 6: cash flow or are already generating free cash flow. And
Speaker 6: so that's what our portfolio looks like today. Really trying
Speaker 6: to focus on quality.
Speaker 2: Right Morgan, I feel like we've seen a lot of
Speaker 2: cycles already when it comes to the cannabis sector, to
Speaker 2: be fair, and is it just a case of the
Speaker 2: industry really can't get going until the Safe Banking Act
Speaker 2: is past. I mean, they need to be part of
Speaker 2: the financial system. It's been the one thing that's really
Speaker 2: been holding in.
Speaker 4: And explain to us, if you could the you know,
Speaker 4: to the Secure and Fair Enforcement Banking Act, what is
Speaker 4: that going to allow you to do.
Speaker 5: Well?
Speaker 6: The way we look at it is it's first and foremost,
Speaker 6: it's helping small business in cannabis. It's providing safety to communities.
Speaker 6: We are largely a cash based industry, so if you're
Speaker 6: a retailer, you have a lot of cash in your store.
Speaker 6: That's that's trouble, right, and we've seen a significant increase
Speaker 6: in crime around that because there are people being advantageous.
Speaker 2: So that's in banks, right.
Speaker 6: You sort of CANBA is very limited, so safe WUL
Speaker 6: help recognize that we are on the same playing field
Speaker 6: as every other industry with the ability to deposit. Why
Speaker 6: you're working lines of capital, so that will help. And
Speaker 6: also if we do get capital markets included, which is
Speaker 6: being discussed, and the minority groups are actually supporting this
Speaker 6: understanding that if you're going to have a federal reformer
Speaker 6: on banking, it should be all of banking, and we
Speaker 6: think that's that's actually a really smart way to think
Speaker 6: about it. We support that as well.
Speaker 3: We know the.
Speaker 6: Exchanges believe that too, and to your point that we
Speaker 6: think that will help move money again in this space,
Speaker 6: it's it's largely slowed down considerably. Custody is very hard,
Speaker 6: so banking reform is needed and that's how DC functions.
Speaker 6: You know that the industries move forehead and now we're
Speaker 6: looking to DC to catch up with us on this.
Speaker 4: This first up, I mean, what what is your expectation
Speaker 4: for the safe right now, I mean, and the problem
Speaker 4: is it doesn't function right. So what's your expectation, Morgan
Speaker 4: for Congress to actually move on this legislation.
Speaker 6: It's actually looking like the scent it could get this
Speaker 6: done as long as safe stays in a pretty targeted way.
Speaker 6: From a banking reform perspective, it sounds like we have
Speaker 6: Democrat and Republican support and that's why it's going through
Speaker 6: this regular order process and we think we could potentially
Speaker 6: see a vote as early as July. Then we have
Speaker 6: to move onto the House, which has passed seven times
Speaker 6: in the past, but we'll have to go through that
Speaker 6: process again. So that is helpful. But in the interim,
Speaker 6: we are seeing structures like one of the companies, Terrace End,
Speaker 6: is potentially listing on the Toronto Stock Exchange. Now we
Speaker 6: might be seeing a structure that might actually be blessed
Speaker 6: by the NASDAK waiting on SEC. So if we're able
Speaker 6: to get access to the exchanges even without or while
Speaker 6: we are waiting for safe banking, that's progress. And our
Speaker 6: industry is finally done being stuck from a capital perspective
Speaker 6: and very happy to see that action is moving again
Speaker 6: and so capital will start to flow as a result
Speaker 6: of that.
Speaker 4: All right, Morgan, thanks very much for joining us. Morgan
Speaker 4: Paxia there from Poseidon Asset Management. The ETF is the
Speaker 4: Act Advisor Shares Posidon Dynamic Cannabis ETF and the ticker
Speaker 4: is PSDN.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: Just Say Alexa, playing Bloomberg eleven thirty.
Speaker 2: Bloomberg News reporting earlier this year how the fitness sector
Speaker 2: has roared back after being devastated by the pandemic. Cost
Speaker 2: pressures though, and a possible recession could possibly pose a threat.
Speaker 2: So we thought we'd take a look man at the industry,
Speaker 2: and we've got someone who's actually spent more than twenty
Speaker 2: years managing, owning, and franchising health clubs, Chuck Runyon, his
Speaker 2: co founder and CEO at Anytime Fitness, a franchiser of gyms,
Speaker 2: joining us on Zoom from Woodbury, Minnesota. Check also the
Speaker 2: CEO and co founder of Self Esteem Brands, which is
Speaker 2: the owner of Anytime Fitness and also the bar Method
Speaker 2: and more so he's certainly well versed in this space. Hey, Chuck,
Speaker 2: nice to have you here with Matt and myself. Talk
Speaker 2: to a little bit more about Anytime Fitness, how it
Speaker 2: all works, and the type of growth you've seen, particularly
Speaker 2: post pandemic.
Speaker 7: Yes, Carol, Matt, thank you for having me from this
Speaker 7: beautiful day in Minnesota.
Speaker 5: Excited to be here.
Speaker 7: My partner and I started Anytime Fitness just over twenty
Speaker 7: years ago.
Speaker 5: We started in Minnesota.
Speaker 7: But today we serve over fifty five hundred communities in
Speaker 7: forty countries around the world. And our goal has always
Speaker 7: been to make fitness more affordable, more accessible, and more effective,
Speaker 7: and we utilize technology to do that so members could
Speaker 7: work out on their schedule, not the gym schedule. That
Speaker 7: technology is still in place today, and when you buy
Speaker 7: membership at your local club, to say in Minnesota, you
Speaker 7: get to use every club in the network. So we
Speaker 7: are still infused with technology. And now recently we've just
Speaker 7: launched our coaching suite, which is providing people with education
Speaker 7: motivation anytime, anywhere, whether they're in one of our gymder studios,
Speaker 7: or wherever in the world they live. We can now
Speaker 7: reach them right, help them be healthier, help them eat better,
Speaker 7: coach them to a better lifestyle. And so we're very
Speaker 7: excited and you know, tremendous growth ahead. We are on
Speaker 7: a pathway to have ten thousand units by twenty thirty.
Speaker 4: So do you have You know a lot of people,
Speaker 4: myself included, have joined gyms and then like they'll go
Speaker 4: a few times and then never go again, and every
Speaker 4: you know, a couple of years, I'll join another one
Speaker 4: and do it again, do it all over again. But
Speaker 4: I wish I could stick with it. How do you
Speaker 4: motivate someone like that?
Speaker 7: It's a great question and something that has been going
Speaker 7: on in our industry since day one, and you know,
Speaker 7: it comes down to a handful. Then, first of all, personalization.
Speaker 7: You know, it really helps with understanding our members where
Speaker 7: they're at in their life journey and where they want
Speaker 7: to get to.
Speaker 5: And once we do that, we can now not only.
Speaker 7: Give them the workout necessary, but give them the coaching,
Speaker 7: give them the motivation, give them the education that matters
Speaker 7: to them, and serve them up to type of content
Speaker 7: that they want to see. And so we're just in
Speaker 7: this for a series of small wins, if we can
Speaker 7: help our members just achieve some small wins, some progress
Speaker 7: along the way. Right, when members see progress and experience it,
Speaker 7: they stick with their membership longer and they reach their
Speaker 7: fitness goals. When, like you said before, if they don't
Speaker 7: get that extra help but they don't feel that level
Speaker 7: of personalization, they start to drift away. They leave the industry,
Speaker 7: maybe to come back a few years later.
Speaker 5: So everything we do is.
Speaker 7: About how do we help our members achieve progress? Right,
Speaker 7: our members' health is at the center of everything we
Speaker 7: build here.
Speaker 2: You guys, though, believe that basically the government right should
Speaker 2: be what mandating fitness give them a sh.
Speaker 4: Let's get to that. That would be good.
Speaker 2: Let's get a little bit into how you're thinking about this.
Speaker 5: Yeah, well, let's zoom out again from our industry.
Speaker 7: And you know, right now, globally we spend a trillion
Speaker 7: dollars a year on healthcare, and seventy percent of us
Speaker 7: spend is preventable based on something we call lifestyle medicine.
Speaker 7: Lifestyle medicine is proper eating, regular exercise, and better sleep
Speaker 7: and recovery. And so who better to deliver that than
Speaker 7: gym's or studios located in communities around the country, and
Speaker 7: so we were so disappointed that during COVID, health experts
Speaker 7: and policymakers around the world forced studios and gyms to
Speaker 7: shut down, which is the exact opposite message we should have,
Speaker 7: especially as as we saw that COVID attacked people with
Speaker 7: underlying health conditions, they had it the worst.
Speaker 2: And so now, to be fair, to be fair, we
Speaker 2: didn't quite know how COVID was transmitted or how infectious
Speaker 2: it was, right, so as we found our way like
Speaker 2: it just made sense to shut it down. Initially, well, well,
Speaker 2: I would argue there that there is empirical evidence.
Speaker 7: There is empirical evidence linking physical activity towards mental health
Speaker 7: and social well being. And guess what, our industry was
Speaker 7: working with lawmakers to say, we can social distance people
Speaker 7: inside of our clubs and studios. We can only allow
Speaker 7: a certain amount of people in at certain times. We
Speaker 7: were trying to work with them to say, look, fitness
Speaker 7: is essential, and if it's outside the club or inside
Speaker 7: a club or studio, the message should be let's keep
Speaker 7: people moving, let's keep them healthy during COVID, because now
Speaker 7: what's accelerated is we have issues of mental health.
Speaker 5: We have issues where people have been inactive.
Speaker 7: We have, we have issues of loneliness, right, we have
Speaker 7: issues of weight gain and right now cardiovascer disease and
Speaker 7: type two diabetes and obesity are the number one killer globally.
Speaker 4: We have a big country, so hold on.
Speaker 2: None of us are disputing these numbers and no doubt
Speaker 2: about it. But this whole idea of government mandating fitness
Speaker 2: and wellness, I'm not saying.
Speaker 4: I just it's not that they're mandated. He's not saying
Speaker 4: they should mandate fitness wellness. He's saying they should consider
Speaker 4: it essential so that they wouldn't close it down in
Speaker 4: case of a pandemic.
Speaker 7: And I would not use the word mandating. But think
Speaker 7: about this, what health health expert to be heard like
Speaker 7: really say get behind, move more, eat better, sleep better.
Speaker 7: It was all about like avoiding a virus, but our
Speaker 7: real virus is inactivity. Right at the end of the day,
Speaker 7: we have we lose hundreds of thousands of people a
Speaker 7: year to preventable diseases that if they were just live
Speaker 7: healthier lifestyles, right, we could not only save money, but
Speaker 7: save lives.
Speaker 5: And so that should be the.
Speaker 7: Message coming out of COVID is how do we get
Speaker 7: people healthier, And there's no better industry to deliver that
Speaker 7: than our gyms and studios. And so we're trying to
Speaker 7: educate policymakers and lawmakers to help with that.
Speaker 4: I mean, hopefully we'll never get back to a pandemic
Speaker 4: where we shut down. I think I hope the government
Speaker 4: has learned lessons about these draconian procedures. But one thing
Speaker 4: we can do, Chuck, is encourage kids to be more active.
Speaker 4: When I was a child, and I'm Carol, I'm sure
Speaker 4: as well, we have exactly President Eisenhower, and it was
Speaker 4: like a big deal when I was a kid, And
Speaker 4: I think that kids today, for some reason in this
Speaker 4: like snowflake generation, they're allowed to skip gym class because
Speaker 4: it hurts their feelings. Like, don't we have to change that?
Speaker 5: We do.
Speaker 7: In fact, if you look at most school budgets around
Speaker 7: the country, fy, it is being cut and so there's
Speaker 7: less and less activity in our kids' lives. And technology
Speaker 7: is also playing a role to have our kids be
Speaker 7: more said, so, we absolutely, with both adults and children,
Speaker 7: need to create awareness and incentives and policies to shape
Speaker 7: the health of this country and the health of global.
Speaker 2: Well, don't you think technology though, ultimately with an Apple
Speaker 2: Watch and different things that are kind of getting us
Speaker 2: to a point where we're more aware of our fitness
Speaker 2: or lack thereof, and just kind about twenty five seconds
Speaker 2: real quick.
Speaker 7: I think that the opportunity is there. We absolutely can
Speaker 7: enable technology for more activity, but it's also like having
Speaker 7: us be sedentary right where we're sitting and having too
Speaker 7: much screen time, So it's both a strength.
Speaker 2: No, but I'm saying, like if I got to watch,
Speaker 2: Matt's gonna watch like you count your steps, these things
Speaker 2: are potentially good. We'll continue this conversation at another date.
Speaker 2: Tell with you, Chuck.
Speaker 5: No, I'm all for wellness and fitness.
Speaker 2: You know that co founder or CEO of Anytime Fitness
Speaker 2: joining us from Minnesota.
Speaker 3: This is Blueberg.
Speaker 5: The Journal.
Speaker 1: Now about you?
Speaker 7: Let me drive?
Speaker 1: Oh no, no, no, no, honey, please, I'll do the gravels.
Speaker 1: Let's wat I want to try.
Speaker 3: It's a good question.
Speaker 1: This is the drive to the clothes dot Com for me.
Speaker 1: Think well on Bluemberg Radio.
Speaker 2: All right, everybody, we've got about eighteen minutes eleven today's
Speaker 2: trading session. What did you do when I was in here?
Speaker 1: Do you do this.
Speaker 4: Yeah, I hung out with Paul Sweeney, but neither of
Speaker 4: us knows how to run the show, so it was
Speaker 4: a little bit of a calamity. We're glad you're back.
Speaker 2: I'm glad to be back, all right, So let's get
Speaker 2: to it. It is time for our drive to the
Speaker 2: Clothes and our guests on this what is it Thursday? Yeah,
Speaker 2: Lauren San Philippo, director and senior investment strategy analyst for
Speaker 2: the Chief Investment Office at Bank of America. She is
Speaker 2: joining us on the phone in New York City. Lauren,
Speaker 2: Good to have you here. There's a lot of stuff
Speaker 2: going on. First of all, how do you guys think
Speaker 2: about the craze in AI right now and how investible
Speaker 2: is it?
Speaker 8: Yeah? I think it's been pretty interesting to see this
Speaker 8: play out, just in terms of some of our somatic ideas,
Speaker 8: these longer term things that are playing out now in
Speaker 8: the markets, and sort of that megacap surge. It's been
Speaker 8: well discussed on your program, but we're still sort of
Speaker 8: in this trading pattern of the top of the market,
Speaker 8: those top five stocks that are accounting for the majority
Speaker 8: of that S and P game year to date, and
Speaker 8: obviously those valuations have obviously been running up along the way,
Speaker 8: but those megacap names, and it's following this AI sort
Speaker 8: of euphoric surge in the market. It's sort of what's
Speaker 8: moving the index. And I don't think you need to
Speaker 8: read too much into this narrowness of the market. But
Speaker 8: we'll see how that AI story plays out as it
Speaker 8: pertains to productivity and for you right now, we do
Speaker 8: think it's also an up and quality story that's really
Speaker 8: important to us here to date. So we think those
Speaker 8: companies that are following the AI craze, it's they're still
Speaker 8: exhibiting those tech balance sheets, are pretty healthy and they
Speaker 8: proved their earnings power through the Q on earnings reports.
Speaker 4: You say we shouldn't pay too much attention to the narrowness,
Speaker 4: to the lack of breadth. Why is that?
Speaker 8: Yeah, so I think, you know, in most cases it
Speaker 8: could indicate that, you know, we'd prefer to see a
Speaker 8: broader rally, of course that would be the preference. But
Speaker 8: I think you know, some of these some of these
Speaker 8: companies will grow into the valuations as it can be
Speaker 8: attributed to the AI craze and other reasons why the
Speaker 8: index is moving now.
Speaker 4: Lauren, that sounds very similar to the kind of things
Speaker 4: that Carol and I were hearing in nineteen ninety nine,
Speaker 4: and that's the last time we had such narrowness in
Speaker 4: this market. I mean, there's no breadth. If you look
Speaker 4: at the equal weighted S and P we're down yere
Speaker 4: to date. So it's got to be concerning at some levels.
Speaker 2: Or does it just mean there's more opportunity for the
Speaker 2: rest of the market to come on in.
Speaker 8: Yeah, I think this is part of sort of that
Speaker 8: earnings reset that's still in front of us, and then
Speaker 8: that will include probably coming coming out the other side,
Speaker 8: will include a broader rally, broader participation. But really until then, Yeah,
Speaker 8: the other names are in participation purgatory.
Speaker 4: Right, So is this part of the reason that you
Speaker 4: well Sevida at Bank America. Your strategists have raised your target.
Speaker 4: You're now looking at forty three hundred for the year
Speaker 4: end and you were only looking at four thousand previously.
Speaker 1: Yeah.
Speaker 8: I mean I think this is attributable to to the
Speaker 8: largely better than fear first quarter earnings. I think the
Speaker 8: path forward maybe next quarter it brings a trough in
Speaker 8: earnings the UPco coming second quarter reporting season. I think
Speaker 8: we're in the sick of that earnings recession though that
Speaker 8: I was talking about, and then we see those efficiencies
Speaker 8: for corporate America sort of reset.
Speaker 2: Are we in an earnings recession you're saying, or because
Speaker 2: I know we've talked with our Gena Martin Adams a
Speaker 2: lot about it and she said it's already happened.
Speaker 8: Yeah, that's correct. So we did hit the second quarter
Speaker 8: of that negative earnings report, and you know Sevida penciling
Speaker 8: in now the second quarter also negative, the third quarter
Speaker 8: also negative. So we're sort of in the thick of it,
Speaker 8: that's right.
Speaker 4: So what kind of recovery do you expect in terms
Speaker 4: of earnings and what's going to drive that? Is it
Speaker 4: all going to come from AI?
Speaker 8: No, so it's not going to all come from AI.
Speaker 8: I do think that sort of tech took it on
Speaker 8: the chin last year, right, So they've already been working
Speaker 8: on sort of making those efficiency cost cutting tech sort
Speaker 8: of already been in this. I think the rest of
Speaker 8: the market sort of gets pulled along here.
Speaker 2: So uppy, pessimistic, optimistic? What are you in terms of
Speaker 2: the financial markets right now?
Speaker 8: Yeah, I think I'm more positive after seeing first quarter
Speaker 8: play out in terms of earnings. But you know, I
Speaker 8: think if you then segment the actual economy, right, we've
Speaker 8: seen that leading economic indicator, it's now confirmed that you know,
Speaker 8: it drops for the thirteenth consecutive months. So the worst
Speaker 8: of this slow down, if it materializes into a recession,
Speaker 8: it's actually in front of us. So our economists are
Speaker 8: calling for that recession beginning in two three of this year.
Speaker 8: So I think, you know, somewhere in the throws here
Speaker 8: we've gotten more positive, yes, but that growth slow down
Speaker 8: still in front of us, and that earnings recession is
Speaker 8: still the majority of it's still in front of us
Speaker 8: as well.
Speaker 4: So what do you expect the FED to do? And
Speaker 4: how important is you know, J. Powell's decision on rates
Speaker 4: going forward?
Speaker 8: Yeah, I mean, is it a pause, is it a
Speaker 8: skipp It's almost like a weird game of Uno, And
Speaker 8: there's a lot of terms being thrown out there, and
Speaker 8: what they decide to do at the June meeting. I
Speaker 8: think by the time the FED puts all the pieces together,
Speaker 8: staying data dependent, you know, our view is the June
Speaker 8: meeting will bring a pause. Maybe that's we already saw
Speaker 8: the last hike to the Fed's interest rate hiking cycle.
Speaker 8: It was in May, and market expectations so for sort
Speaker 8: of been bouncing around here. At one point cuts were
Speaker 8: expected for June, and those cuts are now being pushed
Speaker 8: out to later in the year, and we're more of
Speaker 8: the mindset that cuts aren't a story until next year.
Speaker 8: It would be more typical anyway to see that sort
Speaker 8: of pause, that length of pause. I think the average
Speaker 8: is around ten months between the last rate hike and
Speaker 8: the first cut of the cycle. So as is typical,
Speaker 8: we expect to sort of hold that pause for some time.
Speaker 2: Hey, Lauren, just last question. I mean when you guys,
Speaker 2: when you're getting together with your team and just talking
Speaker 2: about the markets and what's going on, what is the
Speaker 2: thing you guys spend the most time talking about. Is
Speaker 2: it valuations? Is it FED policy? Is it action now
Speaker 2: or lack thereof out of DC?
Speaker 3: What is it?
Speaker 8: Yeah, I think it's so actually a mixture of all
Speaker 8: those things right now. But it's also about investment areas. Right,
Speaker 8: how we came into the year hedging for the recession
Speaker 8: and now we have to think about the pivot forward, right,
Speaker 8: So like where are there investible sleeves in the market,
Speaker 8: And you know, we're we've been to defense positioned. But
Speaker 8: you know, with so much money on the sidelines, I
Speaker 8: caution the market is up what seventy percent for the year,
Speaker 8: and we're just focusing on staying invested and staying diversified.
Speaker 4: Where's all the money in the sidelines? Money market funds?
Speaker 8: Yeah, that's a lot of money, right, A lot of
Speaker 8: money committed to money market funds this year. And you know, yeah,
Speaker 8: we're just looking for opportunities to put money to work.
Speaker 3: That's interesting.
Speaker 2: So what's everybody comes back in?
Speaker 5: Huh?
Speaker 4: Lauren?
Speaker 2: Thanks so much. Lauren San Philippo, Director and Senior Investment
Speaker 2: Strategy Analyst for the Chief Investment Office every Bank of America.
Speaker 8: On the phone.
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