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Speaker 2: Billy Lipteltz joining us. Obviously, the memestocks. This was all
Speaker 2: the rage but GameStop today, so they came out with
Speaker 2: earnings kind of unexpectedly. They also were in the market
Speaker 2: issuing shares. I feel like it took them a minute
Speaker 2: to get it together.
Speaker 3: No did, and that's really been the thing we've been
Speaker 3: writing about it this week. We wrote I Believe on
Speaker 3: Wednesday basically saying the window to capitalize was narrowing, if
Speaker 3: not closing, because GameStop their quarter ended a few weeks ago,
Speaker 3: so they needed preliminary results before they could file to
Speaker 3: potentially sell shares. They did all of that this morning,
Speaker 3: but Alex, as you point out, the stock was trading
Speaker 3: north of fifty bucks on Tuesday. Before the even got
Speaker 3: a chance to sell, it crashed back below twenty eight.
Speaker 3: So now we're seeing selling pressure down twenty seven percent.
Speaker 3: Fifty five million shares have traded so far. Again, an
Speaker 3: ATM allows them and allows their bank to sell up
Speaker 3: to forty five million chairs, not necessarily a sign that
Speaker 3: they have, but reading between the lines would mean that
Speaker 3: they probably are.
Speaker 4: Do we have any better idea here? Who any of
Speaker 4: these fifty five million share people are?
Speaker 3: Like?
Speaker 4: Who's trading this stuff? Again? Is it going to go
Speaker 4: back to your thoughts about that the quant hedge funds
Speaker 4: that are kind of really generating the activity.
Speaker 3: Yeah, and we're still not seeing really the volume that
Speaker 3: we saw on Fidelity, on interactive brokers, on some of
Speaker 3: the retail platforms that we did see back in twenty
Speaker 3: twenty one.
Speaker 4: And that's that's data. You guys can see the publican see.
Speaker 3: You can see it if you have an account, so
Speaker 3: like I had to create a Fidelity it used to
Speaker 3: not be behind the paywall.
Speaker 5: They put it behind the paywall.
Speaker 3: But like, if you have an account, you can see
Speaker 3: what on a given day people are buying and selling.
Speaker 5: It's just the orders, but it's mixed at SPENSA. I
Speaker 5: do not want a personal account.
Speaker 4: Oh, I thought you were just did it for reporting?
Speaker 3: No, I do now expense a premium exitcount, though that
Speaker 3: was a recent edition nice, good small ones.
Speaker 2: CRETA won't mind the big the small ones matter. Do
Speaker 2: we know why it didn't last longer? Is this just
Speaker 2: basically there's weren't as many shorts out there? Is that
Speaker 2: why the Memestock rally was a hot minute.
Speaker 5: It's a really different backdrop.
Speaker 3: So not only do you not have people stuck at
Speaker 3: home looking for entertainment, flush with stimulus checks, short interest
Speaker 3: is about twenty five percent. It used to be north
Speaker 3: of one hundred back in the peak mania. A lot
Speaker 3: of Again, the buying and selling that we saw Monday
Speaker 3: and Tuesday seemed to have Wall Street's fingerprints, so it
Speaker 3: never really got retail traders back in like back in
Speaker 3: twenty twenty one. And also you had a quiet Monday
Speaker 3: and Tuesday session ahead of the inflation data on Wednesday.
Speaker 3: And then you add in the fact that investors, retail
Speaker 3: traders probably bought in and were sitting on big paper losses,
Speaker 3: so you provide an exit rant for them.
Speaker 5: Why would they not take advantage?
Speaker 6: Did Bill Gross make money on this with his straddle?
Speaker 5: He still is those expired today.
Speaker 3: I haven't talked to him since he told you he
Speaker 3: laid out the initial trade, so he might have closed
Speaker 3: it or tapered it down, but that straddle still is
Speaker 3: very much in played in the in the money, assuming
Speaker 3: shares don't.
Speaker 4: So he bought calls and puts at forty dollars, right.
Speaker 5: He sold you logged in, So now I'm off the terminal.
Speaker 3: Oh but you were using my log I sat down
Speaker 3: where you.
Speaker 5: Were marriage off.
Speaker 6: Though.
Speaker 4: There's a certain person, a morning anchor that leaves his
Speaker 4: Twitter account open.
Speaker 6: Does I find that helpful?
Speaker 7: Yes?
Speaker 1: I know.
Speaker 6: Let me.
Speaker 4: I want to go to another area here. But we
Speaker 4: were just talking about Reddit and how that was such
Speaker 4: a great ipo and they had some good news today,
Speaker 4: pop on the stock up again. Here we have a
Speaker 4: number of really good IPOs performing over the last couple
Speaker 4: of months. I got David Solomon up on stages saying,
Speaker 4: the backlogs building. We're all my IPOs.
Speaker 5: I need to see five or six a week. The
Speaker 5: backlog has been building for three years.
Speaker 3: Of every banker you talked to is like, the backlog's
Speaker 3: been better than it's ever been.
Speaker 4: I want to see days when we have four printing,
Speaker 4: like on a Thursday.
Speaker 5: Yeah, well, don't hold your breath.
Speaker 6: So what are we waiting for here? At this point?
Speaker 3: Well, the real thought is is drawing back investors.
Speaker 5: So you have read it performing well.
Speaker 3: You have a stera of labs, Viking, Bougie cruises for
Speaker 3: lack of a better frame, all performing well.
Speaker 5: But you have to get deals that are priced well.
Speaker 3: To Paul's point, make the investors money, make the sponsors happy,
Speaker 3: and perform well. And that's really still kind of weaning
Speaker 3: back into the system. There is still uncertainty around how
Speaker 3: much of a slowdown what we have in the summer,
Speaker 3: just because bankers and investors are on vacation. We do
Speaker 3: have an election in November. It seems like we will
Speaker 3: have a more active than usual June July than historically speaking.
Speaker 3: But the big focus still is on that post Labor
Speaker 3: Day window, which will be kind of compressed because you
Speaker 3: want to get out before the election, but also when
Speaker 3: people are actually at their desks and you can go
Speaker 3: visit t Row and Fidelity and have a real pitche.
Speaker 4: There are days back in the day when Morgan Stanley
Speaker 4: Goldman's as a credit Swisser song, we do have to
Speaker 4: get on the phone and say, all right, guys, we're
Speaker 4: all going to be in New York on Thursday. We
Speaker 4: got to coordinate this are you do your lunch at
Speaker 4: the Four Seasons eleven, I'll do mine at the Intercontinental twelve?
Speaker 4: You do years. That's how busy it was, you know.
Speaker 4: And and because you get those those windows, I.
Speaker 6: Feel like I haven't this window.
Speaker 3: Well that's and when I talk to investors in bankers,
Speaker 3: the big argument that they make is the window has
Speaker 3: always been open for good companies. It's just that good
Speaker 3: companies who have access to the private markets maybe don't
Speaker 3: want to go out just yet and be.
Speaker 5: The first here.
Speaker 4: I mean, these Pea guys whining. They've been sitting in
Speaker 4: these things for five, six, seven, eight, ten years.
Speaker 5: They're looking for an exit.
Speaker 4: Well, like, okay, if you don't want to like you know,
Speaker 4: if you don't want to take the streets mark, then
Speaker 4: let's hit it. Let's go.
Speaker 5: Well, that's the big issue on a down round. You
Speaker 5: have to call it a down round.
Speaker 3: You have to cave a little bit on valuation, especially
Speaker 3: because a lot of to your point, a lot of
Speaker 3: these pe assets are heavily straddled with debt, and investors
Speaker 3: don't want debt right now. They want clean uh stories
Speaker 3: they can be sold to them. Viking was one that's
Speaker 3: interesting that has a large detlog, but it's viewed as
Speaker 3: kind of being recession proof because it's wealthy people, older
Speaker 3: people taking cruises.
Speaker 2: Interesting, you just did a flux there. He called it
Speaker 2: a flex before wealthy people taking cruises. All right, Bailey,
Speaker 2: thanks a lot, super appreciated.
Speaker 6: Happy weekend.
Speaker 2: Billy Lipschaltz joining us Ipo market as well as the
Speaker 2: Meme stocks.
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Speaker 2: It has been definitely a week. We had some nice records.
Speaker 2: We haven't seen this kind of move in months for
Speaker 2: the S and P.
Speaker 6: So what do you do?
Speaker 2: On a headline level, we may continue to be a
Speaker 2: little bit boring, but underneath there's some really individual stock
Speaker 2: moves that are gaining a lot of traction here. So
Speaker 2: let's get more with Shelby McFadden, investment analyst at Motley
Speaker 2: Full Asset Management. She is joining us. So, Shelby, are
Speaker 2: we in a world where like the headline level is
Speaker 2: going to continue to grind higher, but it's going to
Speaker 2: be those individual names where you get the action, you know.
Speaker 6: I think that's absolutely possible.
Speaker 8: And part of it is we've seen the evidence of
Speaker 8: that happening for not just one year, but two years, right.
Speaker 8: We've seen it go from the S and P five
Speaker 8: hundred to sort of the S and P seven to
Speaker 8: the SMP four, And so it's not completely unreasonable to
Speaker 8: have to pop the hood and really see, breaking into
Speaker 8: sectors and industries, what's really going on in the market.
Speaker 8: And so if you're sort of just interesting in owning
Speaker 8: the overall market and being okay with it being driven
Speaker 8: by fewer than ten stocks, sure, but the inverse is
Speaker 8: not necessarily true that how those top ten are doing
Speaker 8: is necessarily representative of the overall market.
Speaker 4: Shelby, we had a I guess a weaker than expected
Speaker 4: retail sales number yesterday, yet combined with some pretty strong
Speaker 4: sales numbers out of Walmart. How do you square those
Speaker 4: two things? How do you view the consumer out there?
Speaker 8: I think when we sort of look at those two things,
Speaker 8: we see the fact that consumers are looking for value.
Speaker 8: And so when we do look at Walmart. We consider
Speaker 8: the fact that general merchandise for that retailer is still
Speaker 8: weaker than they would like to see, and a lot
Speaker 8: of the performance comes from the necessities like food and
Speaker 8: different staples.
Speaker 5: So when we see those.
Speaker 8: Weaker retail sales, we're realizing that discretionary income is still
Speaker 8: being pressured quite a bit, and that when people are
Speaker 8: looking to spend what discretionary income they have, they're looking
Speaker 8: to get value. So in the past they may have
Speaker 8: been a little bit indifferent about saying, let's just go
Speaker 8: ahead and order the TV from this online retailer or
Speaker 8: pick it up from this standard big box retailer. Now
Speaker 8: they're considering, you know what, let's check out Walmart. I
Speaker 8: think they actually have a lot of value that they
Speaker 8: can offer us.
Speaker 2: For those of you who didn't hear yesterday's show, Paul
Speaker 2: is going to a Walmart for the first time in
Speaker 2: a long time.
Speaker 6: Is going to some channel checks.
Speaker 2: Tomorrow, right, Yep, it's going to be huge. So Walmart
Speaker 2: stock at a fifty two week high today. Is this
Speaker 2: priced in? Or is there more upside here? You think
Speaker 2: to Walmart?
Speaker 8: I think part of what we're also seeing in the
Speaker 8: sort of little Walmart run up is the fact that
Speaker 8: they've made that decision i think within the last couple
Speaker 8: of weeks to close a lot of their health clinics.
Speaker 8: And they're also having some staff reduction and they're cracking
Speaker 8: down on folks working remotely, so they're doing some of
Speaker 8: that op X as well. So what we're seeing now
Speaker 8: is the effect of the bottom line boost. So at
Speaker 8: first Walmart was able to sort of hold onto their
Speaker 8: top line for a bit longer than others.
Speaker 5: I think what's being priced.
Speaker 8: In now is the fact that they are leaning out
Speaker 8: in ways that they don't usually take on. They traditionally
Speaker 8: just kind of cut their hourly workforce, but now they're
Speaker 8: really looking at the big picture of investment, and I
Speaker 8: think that's the sort of pop in the stock we
Speaker 8: saw yesterday.
Speaker 4: So Shelby, I guess one of the questions here is,
Speaker 4: I guess the lower end of consumer, how are they
Speaker 4: dealing with? Where are they going with their dollars? Is
Speaker 4: it to are they staying with Walmart target, They're going
Speaker 4: down to the dollar stores? How is the lower end
Speaker 4: consumer how are they spending their discretionary income.
Speaker 8: I think what we've seen in a combination of between
Speaker 8: Walmart and they're sort of not retailers but manufacturers that
Speaker 8: have branded material. Is that consumers are choosing brands even
Speaker 8: at the lower end where there is the most premiumization
Speaker 8: that they require, But then they are choosing more of
Speaker 8: a Walmart over a Target at the lower end because
Speaker 8: at this point you can't really stop how much food
Speaker 8: you're going to need. You can try and make your
Speaker 8: clothing and other sort of discretionary items last a little
Speaker 8: bit longer, stretch them a bit longer, but food is
Speaker 8: just such a requirement. And so when we then combine
Speaker 8: that with what we saw from the financials companies, we're
Speaker 8: seeing that at the lower end they are just using
Speaker 8: less credit, trying to get paid off what they can,
Speaker 8: and so if they're just working with cash, it's going
Speaker 8: to be all right, let's get all the discretionary stuff
Speaker 8: that we have to get on top of the staples
Speaker 8: we need at a place like Walmart. And I'm not
Speaker 8: quite sure that we're seeing that absolute trade down into say,
Speaker 8: food shopping at dollar stores quite yet. I don't think
Speaker 8: we're there just yet.
Speaker 6: I don't.
Speaker 2: No, man, food shopping a dollar stores feels like you
Speaker 2: are asking for expired stuff.
Speaker 5: Uh, it's a tough.
Speaker 4: Read and the person at the checkout because you don't
Speaker 4: want that, sir, like.
Speaker 2: It's green, Why do you fund something that's green. To
Speaker 2: that point, Shelby, there's tons of retail action next week, right,
Speaker 2: get Macy's, Target, you do, get the dollar stores, Ross stores, like,
Speaker 2: get the specialty guys.
Speaker 6: What's going to be a macro signal.
Speaker 8: For you here? To me, I think it's actually going
Speaker 8: to be these sort of the sort of middle to
Speaker 8: lower end, the Ross, the Burlington, the Dollar stores, letting
Speaker 8: us know how much of a higher income customer share
Speaker 8: they're picking up, because it's been very obvious that they
Speaker 8: were going to get more of the middle to lower end.
Speaker 8: That's the whole point of their of their retail premise.
Speaker 1: Right.
Speaker 8: So the question now is how much of the upper
Speaker 8: end consumer are you raining in for Ross? Are you
Speaker 8: capturing some of the consumer that was going to Marshals
Speaker 8: or even Nordstrom Rack? Similar for Burlington? And then when
Speaker 8: we look at Target, are they able to capture or
Speaker 8: hold on to any middle income to lower income share
Speaker 8: because we do know that they have a little bit
Speaker 8: more of a premium product.
Speaker 2: Just so we're clear here in the journal, today, there
Speaker 2: was an article about Tjmax and why it's awesome because
Speaker 2: they were like anyone who's anyone can now go and
Speaker 2: buy like super high designers for like a third of
Speaker 2: the price. I love TJ Max. It's like in my blood.
Speaker 2: But I mean it was in the journal. I'm just saying,
Speaker 2: so now it's already happening. But now, like you know,
Speaker 2: real people with like serious money, like real housewives people
Speaker 2: are doing it, but them out of the year.
Speaker 6: Know that according from the.
Speaker 4: Journal, very good what the journal has it? Yeah, I'm
Speaker 4: going with it a Shelby And in some of your
Speaker 4: stock picks here, one of them is ken View. Just
Speaker 4: remind her that was to spin out from Johnson and
Speaker 4: Johnson I guess talk to us about Kenview.
Speaker 3: Yeah.
Speaker 8: What's interesting about ken View is they sort of followed
Speaker 8: in a trend that a lot of pharmaceutical companies were
Speaker 8: doing where they went ahead and separated their consumer brands.
Speaker 8: So we're talking about, you know, the tail and alls
Speaker 8: of the world into a completely separate company. And what
Speaker 8: interested me about that going into earning season was whether
Speaker 8: or not they would be able to sort of maintain
Speaker 8: that demand on premiumization when we think about the fact
Speaker 8: that if I need tile at all, I could just
Speaker 8: buy a seat of minifit and it's cheaper. And what
Speaker 8: they showed us in earnings is that they've been able
Speaker 8: to do it. So the brands that they've cultivated have
Speaker 8: held onto people to spend that extra dollar or dollar
Speaker 8: fifty on baby wipes, on feminine products, on pain and
Speaker 8: other healthcare. So that was a great signal to us
Speaker 8: that to some degree, with the right mix of pricing,
Speaker 8: you're able to hold onto people for even brand named staples,
Speaker 8: And I think that is really important.
Speaker 2: Your last pick here that you have on the notes
Speaker 2: here is master Card. Why do you like this dog
Speaker 2: versus some of the other guys.
Speaker 5: Yeah.
Speaker 8: One of the things we love about MasterCard really in
Speaker 8: general is that they're really just a toll taker, right,
Speaker 8: so even in a sort of downturn, the rails still
Speaker 8: have to be used to process payment. The other thing
Speaker 8: is really their weight to credit compared to debit. So
Speaker 8: we do know that a while ago we had that
Speaker 8: legislation that really compressed on debit fees. So when we
Speaker 8: look at their competitor, we see that they've got that
Speaker 8: better mix to that sort of higher fee for using
Speaker 8: the credit rails, and also knowing that consumers leaning a
Speaker 8: little bit more on credit in these types of times,
Speaker 8: at least in the middle to upper end, generates more
Speaker 8: fees for MasterCards. So when we think about the credit
Speaker 8: to debit mix, plus their international opportunities, we feel that
Speaker 8: they're really well positioned when it comes to the payment
Speaker 8: network space.
Speaker 4: All right, Shelby, thank you so much for joining us.
Speaker 4: Shelby McFadden Investment analys that Motley Fool Asset Management joining
Speaker 4: us from Alexandria, Virginia via zoom. You may show you
Speaker 4: how cutting edge I am on fintech. When I go
Speaker 4: buy my salad today for lunch, you can use Apple pay.
Speaker 6: Hey, look at you. What happens to the water cash
Speaker 6: in your pocket?
Speaker 4: I still have the water cash. It just it lasts
Speaker 4: a lot longer. Like when I was growing up, even
Speaker 4: as a young adult, I would only use credit cards
Speaker 4: for big purchase and special one off type of things,
Speaker 4: not for day to day I use cash cut now.
Speaker 4: It's it's the exact I think after in society. It's
Speaker 4: just used it for everything.
Speaker 9: I'm sorry.
Speaker 6: Michael Bar Michael Bar, Oh my god.
Speaker 9: First of all, he pulls out a lot of cash,
Speaker 9: A couple of one hundred dollars bills. Absolutely, you know,
Speaker 9: not the deed the boardwalk like I have in mind,
Speaker 9: but wow, what happened to cash?
Speaker 5: You know?
Speaker 4: The only reason I have cash? And John Tucker can
Speaker 4: back me up on this. You go down to the
Speaker 4: Jersey Shore. That's a cash economy down. Do you walk
Speaker 4: up to a Jersey Shore bar, you don't apple pay,
Speaker 4: You throw a fifty or hondy on the bar and
Speaker 4: that's how you announce your uh.
Speaker 6: I also love the use a hundy because I say
Speaker 6: that at home. My husband like refuses to talk to me.
Speaker 2: But to that point, but actually, tipping is the problem.
Speaker 2: Like if you don't have cash, I never carry cash anymore,
Speaker 2: and then tipping is huge. Like if you go get
Speaker 2: a Manny petty, it's like, oh god, you guys have
Speaker 2: venmo and then you're like scrambling and it's stressful.
Speaker 4: It's a changing world out there in terms of world.
Speaker 4: You have to be on top of this fintech And
Speaker 4: a lot of people say it's just by Master Carter
Speaker 4: resent that gets your exposure to fintech because it's all
Speaker 4: got a over their systems. And remember take care of
Speaker 4: your brant tenders, ladies and gentlemen. Exactly right.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Just get to tech. There's been some fun news. I
Speaker 2: was taking a look at this Reddit open ai thing.
Speaker 2: So apparently the deal between the two helps display Reddit
Speaker 2: its content and also train open ai systems on its
Speaker 2: partners data. So this is kind of what they promised
Speaker 2: when the iPod and then maybe a little extra. Man
Speaker 2: Deep Singh joins us now he is a Bloomberg Senior
Speaker 2: technology analyst, mandeep give me some of the particulars here.
Speaker 7: Well, they haven't told us who is paying whom. It's
Speaker 7: just that I mean, look, man, we know Google pays
Speaker 7: Reddit almost sixty million a year for its content, and
Speaker 7: in return, I think Reddit benefits more in the sense that, yes,
Speaker 7: they get paid, and they also get traffic from Google.
Speaker 7: You know Google displaying reddits links on its search. But
Speaker 7: in this case, I think open ai probably needs Reddit
Speaker 7: data more simply because you have to constantly train these llms.
Speaker 7: I mean, Reddit has almost one billion posts a year.
Speaker 7: Look at the magnitude of the user generated content. So yes,
Speaker 7: OpenAI has the most powerful LLM out there. But llms
Speaker 7: needs these large data sets, and that's where Reddit is
Speaker 7: one of the most coveted data sets on the open Internet.
Speaker 7: If you think about it, Twitter being another one. There
Speaker 7: are other forums that generate a lot of user generated content,
Speaker 7: but that's what you need to constantly train these Larzagrig models.
Speaker 7: And I thought Google's LM had an advantage because one
Speaker 7: they were training on these Reddit data sets, which open
Speaker 7: Ai didn't have license for. And also it establishes a
Speaker 7: trend that you have to pay for content. Now it's
Speaker 7: not free anymore, so every content provider will start charging
Speaker 7: a licensing fee.
Speaker 6: Jump on.
Speaker 4: You know what's impressive about mandeep so many things on
Speaker 4: a Friday in studio.
Speaker 6: I totally knew you were going to bring this up now.
Speaker 4: So he basically leaves our bi effort in New York
Speaker 4: because the senior management is safely asconced leading from the
Speaker 4: RUAR in Princeton. So he's our guy here in the
Speaker 4: world's financial capital. But what I love about the Reddit
Speaker 4: story is I love this Reddit manager team. They get
Speaker 4: the gold star.
Speaker 1: Now.
Speaker 4: They went public saying they were going to do something,
Speaker 4: and they did it, and the IPO shareholders are benefiting.
Speaker 4: That is such a class move man. They want to
Speaker 4: come back and sell more stock, I'll buy it.
Speaker 7: The rays And look, I mean, compare them to a
Speaker 7: company like Pinterests. Same number of daily active users, same
Speaker 7: number of monthly active users. Pinterest rates that are twenty
Speaker 7: five billion market gap. Reddit is still a ten billion
Speaker 7: dollar market gap. Yes, there is a revenue gap. I mean,
Speaker 7: obviously Pinterests generates three point five billion in revenue. Reddits
Speaker 7: is much smaller. But in terms of engagement user trends,
Speaker 7: everything looks similar.
Speaker 2: So we'll get to Snowflake in a second. But I
Speaker 2: have one more silly question. So when I'm going on
Speaker 2: Google and I'm searching something now and then it gets
Speaker 2: me eventually to all the here's what Reddit's saying and
Speaker 2: all those links, is that because of these kind of partnerships.
Speaker 7: I mean, look, Reddit again has the most authentic user
Speaker 7: content communities that people want to know. Like, they don't
Speaker 7: want canned LLLM generated answers. People want real answers where
Speaker 7: users are having an engagement and discussing a topic. And
Speaker 7: that's why Google is prioritizing reddits results in their ten
Speaker 7: blue links. I mean, yes, they are adding genera like
Speaker 7: AI overviews and all that, but they are prioritizing Reddit
Speaker 7: in their first ten links because they find these links
Speaker 7: to be more engaging for their users.
Speaker 4: And can let me just give these guys a pat
Speaker 4: pat on the back here Reddit when public September seventeenth
Speaker 4: to twenty twenty four to thirty four dollars to share
Speaker 4: the stocks at sixty three and change here today up
Speaker 4: eighty five percent. That's a nice trade. It's a nice investment.
Speaker 4: They should be doing some more stock and more companies
Speaker 4: should become in public. I don't know why the full
Speaker 4: Gates aren't just gushing with IPOs. What is Snowflake and
Speaker 4: what's their AI strategy?
Speaker 7: Well, so, Snowflake is a layer that's on top of
Speaker 7: your hyperscalers. You'd remember hyperscalers gives you the compute the database.
Speaker 7: So Snowflake is like, I will aggregate all your data
Speaker 7: into a nice dashboard. That was their value proposition. They
Speaker 7: were immensely successful until this whole generative AI and LLLM
Speaker 7: wave popped up, which was very disruptive because one Snowflake
Speaker 7: didn't have any of their large anguid models that all
Speaker 7: these companies, the hyperscalers have, And then obviously, abruptly their
Speaker 7: CEO resigned and they appointed a new CEO, and his
Speaker 7: playbook seems to be to develop an LLM because otherwise
Speaker 7: they're at the risk of getting disintermediated. Look, it's still
Speaker 7: a high growth company, still mid twenty percent growth, hugely impressive.
Speaker 7: But for a while they couldn't put a step wrong.
Speaker 7: They were growing forty percent plus and so suddenly that
Speaker 7: growth decelerated, and I think it was because of the
Speaker 7: not having an LLLM. So that's what they're trying to
Speaker 7: solve for here.
Speaker 2: So they're in talks to acquire RecA.
Speaker 6: I'm saying that right.
Speaker 2: Yeah, Areca AI for more than a billion, so that
Speaker 2: would solve their LLM problem.
Speaker 7: I don't know if it's gonna solve because with llms,
Speaker 7: the clear leaders have been established, it's Open AI, Google, Mistral,
Speaker 7: and Meta, the four or five players. All the smaller
Speaker 7: players are finding it's too expensive to constantly train their llms.
Speaker 7: So the con solidation is happening. And now obviously you
Speaker 7: know they are getting sold, but in this case, Snowflake
Speaker 7: bought them first. I'm sure Amazon is looking to buy somebody,
Speaker 7: and so are other company Apple probably it is looking
Speaker 7: to buy someone as well, because that's what you need.
Speaker 7: You need your own LLM. You can't rely on someone
Speaker 7: else to provide the LLM if you're a large tech.
Speaker 4: How many large language model companies are there out there?
Speaker 4: Is my son starting up one, then he's gonna get
Speaker 4: bought after like a gajillion dollars.
Speaker 7: It's very hard to start an LLLM company one because
Speaker 7: you need a lot of compute the Nvidia GPUs, you
Speaker 7: need a lot of data like Reddit is one data set.
Speaker 7: You need thousands of data sets to create your LLLM
Speaker 7: foundational model, and then you have to constantly train these models.
Speaker 7: So this is an expensive proposition and I feel that's
Speaker 7: why the hyperscalers are the ones who have the capex
Speaker 7: and the d pockets to do this.
Speaker 6: And okay, bear with me on this dumb question.
Speaker 2: And we care about this because why because then I
Speaker 2: can go on Google and then they tell me stuff.
Speaker 7: Think of you know, co pilots and AI agents, all
Speaker 7: these new concepts that are coming to the scene are
Speaker 7: enabled by llms because llms have the IQ of an
Speaker 7: average human being, and then it can be you know,
Speaker 7: customized to do specific tasks according to you know, customer
Speaker 7: service or booking travel. But basically, behind the scenes, you've
Speaker 7: got a very intelligent algorithm that has a knowledge of
Speaker 7: you know, the volte and you can talk to it,
Speaker 7: you can converse in it. It's not canned answers. It's
Speaker 7: not a database that you're searching for. It's an intelligent person.
Speaker 6: Okay, this is not like me asking Alexa what's the
Speaker 6: weather like?
Speaker 2: And she's not like, I don't understand your question.
Speaker 4: Like.
Speaker 5: It's not that No, God, it's much more sophisticated.
Speaker 10: All right.
Speaker 4: I mean, whatever video next week and Vidia next week
Speaker 4: starts up ninety percentage year, they better Is this another
Speaker 4: quarter where they have to knock it out of the ballpark?
Speaker 7: I mean, the basic thing is are they under shipping demands? Still?
Speaker 4: Are they under shipping demand?
Speaker 7: Because everyone corroborates that vir supply constraint when it comes
Speaker 7: to Nvidia GPUs, So they will keep writing this until
Speaker 7: the you know, the demand environment is such a demand
Speaker 7: exceed supply, and I think they have a good shot
Speaker 7: of beating and raising a game.
Speaker 6: The options market is interesting.
Speaker 2: Isn't pricing the same kind of exuberance that we've seen
Speaker 2: in the past, which doesn't necessarily mean anything. It just
Speaker 2: means that maybe positioning is in a particular place going
Speaker 2: in and we're not expecting that exuberant call buying.
Speaker 6: Man Deep, thank you so much. We appreciate you always.
Speaker 2: Man keep saying. Bloomberg Intelligence Senior Technology and Lest.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast, catch us live
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Speaker 2: This is Bloomberg Intelligence Radio. We bring you all the
Speaker 2: top news and business, economics and finance through our lens
Speaker 2: of our Bloomberg Intelligence analysts.
Speaker 6: They're four hundred of them worldwide.
Speaker 2: They covered two thousand companies and one hundred and thirty industries.
Speaker 6: We got you covered. We just talked about retail.
Speaker 2: We saw Walmart, we got Macy's targets and dollar stores
Speaker 2: also coming up. So we go nerdy because we can
Speaker 2: do that on Bloomberg Intelligence Radio and we can talk
Speaker 2: to a forest and paper products analyst. It's a box analyst.
Speaker 2: Our box is shipping. Where's the demand? How's it going?
Speaker 2: Ryan Fox is a Bloomberg Intelligence market analyst for forest
Speaker 2: and paper products and he joins us. Now, Ryan, we
Speaker 2: are super excited to talk to you about this. How's
Speaker 2: the box business?
Speaker 10: Well, the boxing business is not seen as best days.
Speaker 10: We had the worst first quarter in the last eight years.
Speaker 10: Box shipments are down over the last two years almost
Speaker 10: ten percent. And maybe there's some silver lining because the
Speaker 10: second quarter, statistically speaking of the last thirty years has
Speaker 10: more often than not been a better quarter than the first.
Speaker 10: So we do see maybe there's going to be an increase.
Speaker 10: On average increase was three point two percent, like I said,
Speaker 10: over the last thirty years. However, given the backdrop that
Speaker 10: we're seeing in the broader economy, we think we're going
Speaker 10: to see a more muted increase, maybe more like one
Speaker 10: percent sequentially, which would still be a year over year
Speaker 10: to client of about one percent.
Speaker 4: So Ryan, I know you and other analysts investors look
Speaker 4: at the year on year kind of growth rates and
Speaker 4: that's kind of big. Just give us a sense of
Speaker 4: the absolute numbers, like how many boxes whatever units you use,
Speaker 4: are being used, like today versus twenty nineteen.
Speaker 10: Yeah, so in one of the best terms is in
Speaker 10: billions of square feet. Right, so when you were to
Speaker 10: if you were to take a box and unfold it
Speaker 10: and lay it out flat, you know, you just do
Speaker 10: link them with and all that.
Speaker 4: So comes my job to break them down of course.
Speaker 10: Understood, Well, yeah, you got a flatinum and then put
Speaker 10: them in your recycling.
Speaker 4: Is that just throws them in their recycling? Well, trying
Speaker 4: to think out of the side of the box.
Speaker 2: Oh no, no, no.
Speaker 4: No, right, all right, right, let's get back to it
Speaker 4: just again today's demand versus you know, pre pandemic.
Speaker 10: Yeah. So in twenty nineteen that volume was like three
Speaker 10: hundred and ninety three billion square feet, right, a big,
Speaker 10: big number. During the pandemic, it grew to four hundred
Speaker 10: and sixteen billion square feet. Last year it fell to
Speaker 10: three eighty and this year our projections, our mid year
Speaker 10: outlook says it's going to fall again to about three
Speaker 10: seventy six. Yes, again a slight decline over last year.
Speaker 10: We're just not seeing super strong economic signals and our
Speaker 10: box so our box producers. You know, Green Markets is
Speaker 10: a Bloomberg company. They go out and they survey box
Speaker 10: producers all across the US, and they have a good signal.
Speaker 10: Right The signal right now is that second quarter could
Speaker 10: be up as much, which is three and a half percent,
Speaker 10: which is in line with the statistic statistics we've seen
Speaker 10: over time. However, again, first quarter was down substantially, so
Speaker 10: we think there's some optimism rror and we would we
Speaker 10: would guide down based on that known optimism error.
Speaker 2: Ryan, this is a really dumb question, but I feel
Speaker 2: like the trend is don't ship stuff in a box
Speaker 2: like I can order from different places. That shoes, I
Speaker 2: agree that they're in a shoe box, but you don't
Speaker 2: put them like another box. You just ship that shoe box.
Speaker 2: Is that eating into this market at all?
Speaker 10: It certainly is. And I could talk for an hour
Speaker 10: about this but I won't. But yes, you're exactly right.
Speaker 10: There is a there's a definite move by brands to
Speaker 10: reduce their waste and become more sustainable. So you are
Speaker 10: seeing companies like Amazon ulize paper bags and things like that.
Speaker 4: So talk to us about the green options out there.
Speaker 4: What are the green options?
Speaker 10: Well, it depends on what you mean by green, right,
Speaker 10: So they are well, so there are two main initiatives, right,
Speaker 10: So the first green initiative is to find something that's
Speaker 10: more circular in nature, like a paper bag, because most
Speaker 10: people identify paper as a more sustainable, more circular option. Now,
Speaker 10: if you're looking at the data, that paper may have
Speaker 10: a higher greenhouse gas emission index. So while it's more circular,
Speaker 10: it's going to have it's it's trade offs. If you're
Speaker 10: looking for chasing a greenhouse gas initiative, maybe you're going
Speaker 10: to a plastic something that's lighter in weight. Very broadly speaking,
Speaker 10: greenhouse gas emissions follow weight, So if you're using a
Speaker 10: very light weight paper or plastic bag, it will likely
Speaker 10: have a lower GHG emission, but it's less circular. So
Speaker 10: it really depends on the goal of the company.
Speaker 2: Are people willing to pay more for greener packaging?
Speaker 6: Do we know that?
Speaker 2: Is?
Speaker 10: They say they are, They say they are, but no one,
Speaker 10: no one's really, no one really is. I mean, at
Speaker 10: the end of the day, it's I think it's all
Speaker 10: it's just opinion and it doesn't really mean anything.
Speaker 4: So what did some of the big what are the
Speaker 4: companies that you follow that if if thats just want
Speaker 4: to get exposure to this, where should they look?
Speaker 10: Well, I mean on the on the Bloomberg terminal are
Speaker 10: our packaging dashboard? PACKG is the call numbers there we
Speaker 10: follow International Paper, West Rock Packaging Corporation of America are
Speaker 10: the big three in the US. They represent about a
Speaker 10: forty five billion dollars market cap.
Speaker 2: What represents the best kind of value? Like, how are
Speaker 2: these guys sort of trading right now? What's priced?
Speaker 3: In?
Speaker 10: A great question? That's way above my scope. So I'm
Speaker 10: more of a market analyst and follow the bigger industry trends, supply,
Speaker 10: demand and pricing. I don't really get into the stocks
Speaker 10: themselves or the companies themselves.
Speaker 6: That's fair enough.
Speaker 4: So can I make an inference about inflation out there
Speaker 4: by looking at volumes of packages being shipped and all
Speaker 4: that kind of stuff?
Speaker 10: Absolutely?
Speaker 6: What is it?
Speaker 4: So? How does that work?
Speaker 1: Yeah?
Speaker 10: Well, well so there is there's some discrepancy. So right now,
Speaker 10: if you were to look at like some of the
Speaker 10: federal data, a real PCE for goods, for instance, that
Speaker 10: number is still very very high relative to the fact
Speaker 10: that consumer goods are not trending very well. I mean,
Speaker 10: if a very high number ninety percent plus of consumer
Speaker 10: goods ride in a corgated box and that volume is
Speaker 10: down ten percent essentially over the last two years, how
Speaker 10: in the world is our goods spending still up? If
Speaker 10: if it's a real number and it's an adjusted for inflation,
Speaker 10: there's there's a disconnect there, and I have some speculation
Speaker 10: on why that is. I think, you know, historically speaking,
Speaker 10: when you think of things like software. Thirty years ago,
Speaker 10: software came, it was an actual thing, it was a
Speaker 10: disc that may still be one of the items. It's
Speaker 10: accounted as a good, but it's no longer a good.
Speaker 10: It's it's a downloadable thing, it's a software as a service,
Speaker 10: it's a something else. And so there's probably some noise
Speaker 10: in there that's not allowing us to see some of
Speaker 10: this clearly.
Speaker 6: That's really interesting.
Speaker 2: Thanks a lot, Ryan, this was great. We both really
Speaker 2: loved this segment. A Ryan Fox, Boomberg Intelligence Analyst, covers
Speaker 2: paper packaging trends, sort of diving in to all of that.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 1: live on Amazon Alexa from our flagship New York station.
Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 2: I'm Alex the alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
Speaker 2: We cover all the top news and economics and finance
Speaker 2: through a lens of our Bloomberg Intelligence analysts. They cover
Speaker 2: two thousand companies one hundred and thirty industries worldwide, and
Speaker 2: there's about four hundred of them and a large chunk
Speaker 2: of them actually cover ESG. So let's rewind to about
Speaker 2: four years ago, middle of COVID. Everyone was talking about ESG.
Speaker 2: Blackrock was talking about allocating a bunch to ESG.
Speaker 6: This was where all the money was supposed to be flowing.
Speaker 2: A new report from Sin Contractor She's Bloomberg Intelligence senior
Speaker 2: ESG strategists says that liquidation of US ESG ETFs reached
Speaker 2: almost thirty percent of all closings so far this year
Speaker 2: and could continue amid some slowing our flows, particularly if
Speaker 2: the backlash we've now seen in the US on ESG continues. Geen,
Speaker 2: great to see you, thank you for joining in studio.
Speaker 2: So I guess let's take a step back for a second,
Speaker 2: and ESG it's environmental, social and governance. Right, where did
Speaker 2: that go so wrong? Like how do we get from
Speaker 2: twenty twenty to here?
Speaker 11: So Alex, just to you know, paint a few numbers.
Speaker 11: In the first quarter, we saw about four billion in outflows.
Speaker 11: I mean, compare this to twenty twenty one, which is
Speaker 11: about I want to say, close to fifty billion in influats. Now,
Speaker 11: I wouldn't call it where we went wrong. I think
Speaker 11: what we're seeing today is slowing flows because you know,
Speaker 11: the market is maturing. But at the same time, these
Speaker 11: outflows that we're seeing, they're very concentrated to a few funds,
Speaker 11: so actually no il repurpose. Where we went wrong is
Speaker 11: that that rise in assets was very concentrated to a
Speaker 11: few funds and a few investors. So it's very noticeable
Speaker 11: when that comes out, and that's what we're seeing.
Speaker 4: So who are those investors or those investor types and
Speaker 4: why are they pulling the money out?
Speaker 11: So one example is ESGU. It's the icehes ESG aware
Speaker 11: it's probably the largest ESG ETF in the world. Last
Speaker 11: year it's saw about nine billion in outflows, and we
Speaker 11: attribute this to model portfolio changes, So you know, that
Speaker 11: could be allocative or it could be due to ESG.
Speaker 11: For example, you know, an investor doesn't want equity anyone,
Speaker 11: they just want cash. They just you know, sell out
Speaker 11: of equity. So whether it's ESG, whether it's not, to
Speaker 11: be honest, we don't know. A lot of these outflows
Speaker 11: are also from European investors. I wan't attribute at that
Speaker 11: to the backlash.
Speaker 2: Meaning that the backlash has been more in the US
Speaker 2: versus say, in Europe. Correct, you do we need to
Speaker 2: separate the the S and the G, separate the social
Speaker 2: from the government's from the environmental or at least separate
Speaker 2: the environmental part.
Speaker 11: I would say no, I mean, I know that's an argument,
Speaker 11: but I still think that ESG is about material rising
Speaker 11: opportunities to a particular company. For some it's E, for
Speaker 11: some it's S. So it's going to be very hard
Speaker 11: to talk about this separately.
Speaker 4: To what extent is the environment for flows in ESG
Speaker 4: in the US versus Europe or US versus the rest world?
Speaker 4: How are they different?
Speaker 11: Very different? Okay, so again the US four billion and
Speaker 11: outflows the first quarter, you're a total flows for about
Speaker 11: six billion in in flows so the rest of it
Speaker 11: was almost entirely Europe. So Europe continues to sort of it.
Speaker 4: Like everything in this country, it's been politicized.
Speaker 11: Yes, okay, well the slowing influence is the politics. But
Speaker 11: the outflows are this concentration. Sorry, Alex, but I was gonna.
Speaker 2: Say, but but but also isn't it just that for
Speaker 2: a while, ESG tracked tech because just on a pure
Speaker 2: e level, and in S and G.
Speaker 6: They just have employees.
Speaker 2: They until the data center situation came up, they were
Speaker 2: just emitting less carbon because they're not industrial companies. They're
Speaker 2: not cyclical companies in that way. Well, now what so.
Speaker 11: Alex, if you're asking, you know, is this shriven by
Speaker 11: performance because es she tends to a certain way, I
Speaker 11: would say I don't think so. I mean, twenty twenty
Speaker 11: two was a bad year. Yes, but last year ESG
Speaker 11: ETFs were about performing with the market about fifty percent
Speaker 11: beat the market, which is average. But we still saw
Speaker 11: so many outflows. It's that concentration from a few funds,
Speaker 11: not this you know, mass exodus because of a certain factor.
Speaker 5: Are there?
Speaker 4: Do we know where we are in that fun and
Speaker 4: flow situation? The folks that have pulled it out. Are
Speaker 4: we near or at or nowhere near that that the
Speaker 4: point of that being over? Do we know?
Speaker 11: We don't know. I call it a bit of a pause.
Speaker 11: I mean, unless all this concentration risk unravels, I don't
Speaker 11: know when we're going to stop seeing outflows at the
Speaker 11: same time we're not really seeing in flows.
Speaker 2: So I guess how many products are out there now?
Speaker 6: And how many products should there be?
Speaker 11: I right say roughly. I would say globally it's definitely
Speaker 11: north of a thousand. In the US, it's probably not
Speaker 11: of five hundred, again, very roughly.
Speaker 4: And mostly these are ETFs.
Speaker 11: These are these are ETFs. Su yes, only ETFs, and
Speaker 11: they spun across multiple things right esg. Gender, climate, clean energy,
Speaker 11: all these different themes. How many should there be? I
Speaker 11: don't know. And I would say, Alex, you know that's
Speaker 11: a little bit of a reason for these liquidations. There
Speaker 11: was such an oversupply in twenty twenty and twenty twenty
Speaker 11: one that these uncompetitive strategies are shutting down. And that's normal.
Speaker 4: So if I will dan Off, portfolio manager of Fidelity Contrafund,
Speaker 4: who's done a great job for me, thank you, will
Speaker 4: do those funds where to what extent are they factoring
Speaker 4: in ESG analysis into their investment criteria. Is it different
Speaker 4: today than it was two or three years ago?
Speaker 11: It depends. I mean, I think a lot of the
Speaker 11: conversations are shifting a little bit. You have you know,
Speaker 11: dedicated ESG funds. Climate is in the name, es she
Speaker 11: is in the name, But then you have these broad
Speaker 11: esc integrated funds, and those are always you know, considering
Speaker 11: risks and opportunities. But I think it's changed as data availability.
Speaker 11: You have just a lot more data around climate change,
Speaker 11: around physical risks, So people are asking these more of
Speaker 11: all questions around, you know, things that I wouldn't have
Speaker 11: asked probably either a few years back.
Speaker 2: I guess my question always is until you can financially
Speaker 2: measure the benefit of a strategy that is focused on ESG,
Speaker 2: it's going to be very difficult and then make a
Speaker 2: case for an investor or CEO of why these strategies matter.
Speaker 6: Have we been able to do that yet?
Speaker 11: So my research is starting to answer that. So I'm
Speaker 11: starting to do industrial level analysis into what impacts risk
Speaker 11: and returns. For example, in materials, in governance, we find
Speaker 11: lower drawdowns to lower risk. We still do you know,
Speaker 11: explore that and expand that, but I will stay within
Speaker 11: the E and S. It's particularly hard because of the
Speaker 11: limited data historically, right, yeah, all.
Speaker 2: Right, Sheen, thanks a lot. She hain't contractor Bloomberg Intelligence
Speaker 2: and your ESG a strategist. I think, at least for
Speaker 2: my work in energy transition space, there's no carbon price.
Speaker 2: So you can't do that on the environmental side because
Speaker 2: you can't say, look, you admit.
Speaker 6: This, it costs this.
Speaker 2: There's nothing concrete that. Then a CEO can go to
Speaker 2: the board or go to shareholders and be.
Speaker 6: Like, look, guys, this is why I'm doing this.
Speaker 4: Ah, it is a big problem.
Speaker 6: It's a big problem.
Speaker 2: Yes, and then how to do that and you have
Speaker 2: to have everyone agree on it or else you're doing
Speaker 2: a cap and trade situation, which is very confusing. You're
Speaker 2: just gonna wind up importing something from say China or
Speaker 2: India where it has higher emissions. And then why would
Speaker 2: you pay more for something that's internal in eternal, I
Speaker 2: mean in country. I think that that's definitely a big problem.
Speaker 2: And also, how do you measure success of say diversity
Speaker 2: and inclusion. Is it a straight up numbers on your board?
Speaker 2: But does that actually materially make a difference unless you're
Speaker 2: open to their ideas.
Speaker 4: Yeah, I can talk well. In data. You can go
Speaker 4: to the FA screen for any security and there's an
Speaker 4: ESG tab In addition to income statement, balance sheet, cash
Speaker 4: flow statement, there's a separate tap for ESG and that's
Speaker 4: for Shaheen and a lot of other folks at Bloomberg's
Speaker 4: Global Data try to aggregate a lot of this data
Speaker 4: as we lets help out our clients for ESG analysis.
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