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Speaker 3: All right, let's go to our good friends out in Omaha, Nebraska.
Speaker 3: Berkshire Hathaway, Mister Warren Buffett. He got all the accolades
Speaker 3: together in Omaha, like he does once a year, and
Speaker 3: people look forward to this. It's like, you know, they're
Speaker 3: super Bowl the investors in Berkshire Hathway.
Speaker 4: Matthew Polozola. I believe he was there.
Speaker 3: I was there and he is a senior ANALYSTY covers
Speaker 3: the insurance companies for Bloomberg Intelligence.
Speaker 4: Matthew, you went, tell us, give us a lay of
Speaker 4: the land.
Speaker 3: What's it like after in Omaha when these people get
Speaker 3: together to talk to Warren Buffett about his investment philosophy.
Speaker 5: Yeah, it was crazy this year. Actually it was packed.
Speaker 4: So as in like a big arena arena.
Speaker 5: Yeah, it's it's the Chi Health Center arena there. They
Speaker 5: said they expected around forty thousand people this year. It
Speaker 5: was in previous years where I've been there, the upper
Speaker 5: bowl of the arena's kind of empty. It was every
Speaker 5: seat in the house was taken this year.
Speaker 6: What was the vibe without Charlie Munger? This is the
Speaker 6: first time in many years. I mean he passed away
Speaker 6: a few months ago. Warren Buffett wasn't up there alone.
Speaker 6: He had two deputies with them, very important deputies if
Speaker 6: you followed Berkshire Hathaway.
Speaker 5: But what was the vibe like? Yeah, it was sad
Speaker 5: for sure. And they usually they start with this movie, right,
Speaker 5: and usually the movie's kind of funny and it's got
Speaker 5: a bunch of comedic elements to it. It was it
Speaker 5: was a whole tribute to to Charlie, and it was
Speaker 5: it was, you know, touching. But also Buffett really talked
Speaker 5: a lot about passing a lot of things on to
Speaker 5: Greg Able and how you know, maybe the next CEO
Speaker 5: can do this that. So it was, you know, just
Speaker 5: a kind of passing of torch. Seemed like moment two.
Speaker 5: So not just said because Munger wasn't there, but said
Speaker 5: because Buffett really seemed to be, you know, moving on
Speaker 5: all right.
Speaker 3: He's got a quote unquote problem in that he has
Speaker 3: one hundred and eighty nine billion dollars of cash on
Speaker 3: the balance se do.
Speaker 6: You have that problem too?
Speaker 4: I don't have that problem.
Speaker 3: I mean I do carry an impressive cash in the pocket,
Speaker 3: that's true, not one hundred eight ali and large.
Speaker 4: I mean, realistically, did how does he put that in?
Speaker 3: I mean, I guess with t bills at four or
Speaker 3: five percent, that's not a terrible thing anymore.
Speaker 4: What's he saying about that?
Speaker 5: So that took a lot of pressure off of holding
Speaker 5: cash for them. They made like a billion in investment
Speaker 5: income before and it went up to like six billion,
Speaker 5: you know, just from holding cash. They talked about their
Speaker 5: retained earnings. Just just having retained earnings and investing that
Speaker 5: in treasury bills, you should have earnings growth from the company.
Speaker 5: They really talked about it's really tough to move the needle.
Speaker 5: It didn't seem like anything was happening, you know, in
Speaker 5: terms of where to put a lot of money to work.
Speaker 6: Is this it's time different in terms of Warren Buffett
Speaker 6: sitting back and looking at businesses out there for Berkshire
Speaker 6: half the way to buy. Have there been dry spells
Speaker 6: like this in the past.
Speaker 5: Yeah, I mean, look they bought Alligating a couple of
Speaker 5: years ago for almost twelve billion dollars, so.
Speaker 4: From my good buddy Jeff Kirby, Yeah.
Speaker 5: And it wasn't you know, so that wasn't an insignificant deal.
Speaker 5: So they did something. They've put about fifteen billion dollars
Speaker 5: to work in Japan as well, so it's not either
Speaker 5: doing nothing. It's just these things don't move the needle
Speaker 5: that much for them when they have, you know, so
Speaker 5: much capital to begin with.
Speaker 3: You know, one of our listeners earlier today, Pingban said Boeing, Boy,
Speaker 3: would that be a great deal in terms of size
Speaker 3: it's one hundred and ten billion market cap and could
Speaker 3: they use a steadying hand? I'm thinking Goldman Sachs great
Speaker 3: financial crisis.
Speaker 5: I don't know if they want to be in the
Speaker 5: air They had done a couple of equity investments in
Speaker 5: the airlines years ago and kind of gave up on that.
Speaker 5: They also own Precision Cast Parts, which is a big
Speaker 5: supplier to these companies, So I don't know if they
Speaker 5: want to be that far in the value chain for airlines.
Speaker 6: If you guys missed what Paul was talking about on Friday,
Speaker 6: Thomas black Over, who's over at Bloomberg opinion. He's got
Speaker 6: to call him out. That says, how crazy would it
Speaker 6: be if Buffett bought Bowing? It was among the most
Speaker 6: read on Friday. Everybody was talking about this story. Okay,
Speaker 6: so if not Boeing, what are the types of businesses
Speaker 6: that you think could be next? I mean, I know
Speaker 6: you cover property and casualty insurance, so that's certainly like
Speaker 6: where your mind is. But any other sees candies out there?
Speaker 6: Any other apples out there. We'll talk about Apple more
Speaker 6: in a second, But if.
Speaker 5: There are, I think the next thing they're gonna buy
Speaker 5: is gonna be something like we haven't heard of, right,
Speaker 5: or it's gonna be you know, they own Lubrasol, a
Speaker 5: chemical company, right, and they make They're like one of
Speaker 5: the only companies that make these specific chemicals for ev
Speaker 5: engines and things like that. You know, so I think
Speaker 5: that's what they look for, you know. I just I
Speaker 5: don't think Buffett. I don't think he has it in
Speaker 5: him anymore. For the for the last kind of elephant hunt,
Speaker 5: I don't know it could happen. I mean, they were
Speaker 5: int just did in a data company a while ago.
Speaker 5: It was kind of like a data broker they talked
Speaker 5: about at the meaning being interested in a Canadian company.
Speaker 5: That was kind of all they said. They also have
Speaker 5: several billion dollars of an undisclosed position, which they've kept
Speaker 5: confidential in their last thirteen f's. So there's stuff cooking.
Speaker 5: It's tough. I you know, I thought they were going
Speaker 5: to buy all of oxy. They kind of threw cold
Speaker 5: water on that, so maybe something the energy space was
Speaker 5: a big thing actually at the meeting. Okay, Buffett and
Speaker 5: his annual letter had said, you know, more or less,
Speaker 5: if we're going to get pinged for these wildfire losses,
Speaker 5: we might not want to be in this business. But
Speaker 5: they kind of counterbalanced that at the meeting, saying a
Speaker 5: lot of you know, energy demand's going to be through
Speaker 5: the roof. There's very few companies in the world with
Speaker 5: the capital to invest in this. We're one of them.
Speaker 5: So it was kind of a little bit of a
Speaker 5: good cop, bad cop situation.
Speaker 3: So on the Apple thing, Yeah, what I mean, I
Speaker 3: was surprised to well, I don't know, yeah, I was surprised.
Speaker 3: I mean, it seems like something should be a core
Speaker 3: holding now, So how did he kind of phrase it all?
Speaker 5: So Tim Cook was there and he was, you know,
Speaker 5: up in the crowd like he had like a normalcy.
Speaker 5: He had a front row sack. Okay, I just big sure,
Speaker 5: definitely on the floor front row. Buffett more or less
Speaker 5: said he was worried about taxes going up and that
Speaker 5: was part of the impetus for selling the position. They
Speaker 5: sold about thirteen percent of their Apple shares. The stock
Speaker 5: was up a lot last year, and that was pretty
Speaker 5: much what he said. He said, we think tax rates
Speaker 5: might go up from here. We have big unrealized gains
Speaker 5: and realized gains, so it seemed like that was the
Speaker 5: push for it.
Speaker 6: How do we look at why, like, how do we
Speaker 6: look at Berkshire Hathaway selling out of a position, because
Speaker 6: typically you'd sell out of a position for one of
Speaker 6: two reasons, and you think you can use that cash
Speaker 6: better elsewhere, or two you think that investment is not
Speaker 6: going in the direction you want it to go in. Obviously,
Speaker 6: he has no use for the cash to use it elsewhere.
Speaker 6: So the only other way to read into this is
Speaker 6: he doesn't think the investment is going where he wants
Speaker 6: it to go.
Speaker 5: Is that a fair assessment is possible? I mean he
Speaker 5: had also said he expects Apple to be their largest
Speaker 5: holding in a year from now, and when Greg takes over,
Speaker 5: expects it to be a large holding for them. So,
Speaker 5: I mean, I think the taxes, the tax i location
Speaker 5: was it. I don't know. I mean, the valuation of
Speaker 5: the stock is probably plays a role in it. You know,
Speaker 5: just taking some off the table, you're definitely right with.
Speaker 5: It's not like they needed, you know, fifteen billion dollars
Speaker 5: more on the one eighty nine. But you know, besides
Speaker 5: the taxes, that's really all had the points.
Speaker 4: Does Berkshire buy backstock?
Speaker 5: They do. They only started doing it a couple of
Speaker 5: years ago. They bought back two point six billion of
Speaker 5: stock this quarter. Buffett talks about a lot. They just
Speaker 5: can't buy back a lot because of the float. There's
Speaker 5: just not a lot for them to buy back. So
Speaker 5: they buy back more, I think, But it's been about
Speaker 5: you know, two three billion one two three, and I
Speaker 5: don't see it going up from there.
Speaker 4: How was Omaha in May?
Speaker 5: It's fine. The weather was fine. It was it rained
Speaker 5: a little bit. You have to line up at like
Speaker 5: five o'clock in the morning to get in there, so uh,
Speaker 5: that was tough, but it was It's a spectacle. You
Speaker 5: should you should go on yeah, I mean the first
Speaker 5: the day before you get so you have to be
Speaker 5: a shareholder. They give me a a an analyst thing,
Speaker 5: but they don't really you know that. You still wait online.
Speaker 5: And the day before on Friday, all the companies are
Speaker 5: in the the the arena and you can go, you
Speaker 5: buy stuff, you can talk to some of the managements.
Speaker 5: It's really great. And it's like I said, it was packed.
Speaker 5: Everything was packed. Seas candy they said they sold four
Speaker 5: tons of seasca.
Speaker 6: I was just gonna end with you. Did you eat
Speaker 6: any of the peanut Britle?
Speaker 7: I did.
Speaker 5: I don't like peanut brittle. But seas candy, by the way,
Speaker 5: not sheep. SE's candy box a box and they were
Speaker 5: just hand over fists and they've got it down to
Speaker 5: a science where you step in the line, they give
Speaker 5: you the candy, you walk.
Speaker 2: On the thing.
Speaker 5: The other thing was squish mellows, which I've talked about before.
Speaker 5: My kids love these things. They bought when they bought
Speaker 5: Alleghany Allegheny almost coming to call Jazzuares which makes toys, yep.
Speaker 5: And these things are just again they can't sell them
Speaker 5: fast enough.
Speaker 4: All right, good stuff.
Speaker 3: Mata Alizola, senior analys who covers the insurance business ostensibly,
Speaker 3: and he might be our candy analyst.
Speaker 4: He was after an Almah. Does it all for Bloomberg Intelligence.
Speaker 4: We appreciate that.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Just say Alexa playing Bloomberg eleven thirty.
Speaker 6: Seeing stocks up for what could be a third week
Speaker 6: in a row. We'll have to wait till Friday to
Speaker 6: see about that. Let's see what Brian Crowez has to
Speaker 6: say about all this, president of Sharf Invests. He's joining
Speaker 6: us from beautiful Low Scottos, California. Brian, good to have
Speaker 6: you with us this afternoon. I'm going through your thesis here,
Speaker 6: and you argue that there is too much optimism when
Speaker 6: it comes to tech out there right now? What's going
Speaker 6: on here? Because you say that S and P. Five
Speaker 6: hundred levels of concentration of tech go all the way
Speaker 6: back to a concerning time the Internet bubble.
Speaker 8: Yeah, thanks for having me as you know, tech has
Speaker 8: been a very strong performer really for since the twenty
Speaker 8: twenty two bottom. And you know, last year, for example,
Speaker 8: tech was a fifty six percent despite the tech sector
Speaker 8: really having pretty mediocre earnings growth in total. And so
Speaker 8: if you look at the tech sector relative the SMP,
Speaker 8: it's actually at highs above.
Speaker 7: Where that was in nineteen ninety nine.
Speaker 8: And as a percentage, the S and P five hundred
Speaker 8: tech sectors thirty percent of the SMP, which is which
Speaker 8: is higher than.
Speaker 7: It was at the peak of the bubble.
Speaker 8: But that doesn't even include Amazon, Google, Tesla or Meta.
Speaker 8: If you add those in, it's now forty one percent.
Speaker 8: To put it in perspective, you ten years ago, the
Speaker 8: tech sector was about seventeen percent of the SMP. So really,
Speaker 8: tech is a huge waiting now in the SMP.
Speaker 3: Did they not earn their way into that type of
Speaker 3: waiting here? I mean, you look at it in a
Speaker 3: video for example, the bulls will tell you, boy, the
Speaker 3: multiple today is cheaper than it was before the run
Speaker 3: up because we've seen such a surgeon earnings. I guess
Speaker 3: that's just a way of saying, you know, is AI
Speaker 3: really a thing here?
Speaker 8: I mean, certainly the tech sector has earned some of
Speaker 8: its stripes by having better earnings growth over the last
Speaker 8: ten years than the other sectors.
Speaker 7: But you know, we'd point to nineteen ninety nine end
Speaker 7: in ninety nine, there was a lot.
Speaker 8: Of great companies Cisco, Intel, Dell, Sun, Micro, Qualcom, AOL.
Speaker 7: These are all companies that are in the top ten.
Speaker 8: And I, an investor, bought those companies despite what we
Speaker 8: all know was the tremendous growth of the Internet, you
Speaker 8: would have underperformed dramatically over the next twenty.
Speaker 7: Years as an investor.
Speaker 8: So, yeah, and Video's growth is great right now, tremendous company,
Speaker 8: tremendous CEO.
Speaker 7: But there's always competition to knock you off.
Speaker 8: To the top, and usually those largest companies underperform over
Speaker 8: the longer term.
Speaker 6: So would you argue that there is actual competition coming
Speaker 6: for in video right now because it does seem like
Speaker 6: they have something, at least at the moment, that nobody
Speaker 6: else can offer.
Speaker 8: Oh, there's one hundred percent competition coming. I mean, we're
Speaker 8: based here in Silicon Valley. You know, the talk around
Speaker 8: the water cooler and barbecues is one hundred percent. I
Speaker 8: know people that are working at Microsoft and Google and
Speaker 8: they're all working to find a cheaper chip. I mean,
Speaker 8: the one thing tech companies don't like to do is
Speaker 8: people holding to other tech companies that.
Speaker 7: They can avoid it. Now, that's not to say they're
Speaker 7: going to come up with something in.
Speaker 8: The next year or two or even three, but eventually,
Speaker 8: you know there's going to be competition, and you know,
Speaker 8: competition is very fierce in tech.
Speaker 3: Hey, Brian, if if tech is not going to lead
Speaker 3: this market, what will Because there's a generation of investors
Speaker 3: out there that know nothing but tech leading this market higher.
Speaker 8: Yeah, it's kind of kind of amazing. You know, it's
Speaker 8: not just tech, it's growth in general. You know, we
Speaker 8: look at we looked at interest rates, and if you
Speaker 8: look when rates are below three percent, growth outperforms. When
Speaker 8: rates are above four percent, value outperforms. And actually, if
Speaker 8: you look back to nineteen sixty, the average of the
Speaker 8: ten year treasury has been about six percent, and today
Speaker 8: it's you know, around four and a half. All of
Speaker 8: the instances below three though, have occurred since the GFC,
Speaker 8: and so a lot of younger investors only know a
Speaker 8: time when when tech and growth outperform. However, if we're
Speaker 8: going to higher for longer environment. You know, we think
Speaker 8: it's a good good environment for value and if you
Speaker 8: look at growth versus value right now, it's about a
Speaker 8: ninety percent premium, which is well above you know, what
Speaker 8: you usually pay. So we think it's potentially a good
Speaker 8: time for value stocks.
Speaker 6: What are some of those value stocks that you guys
Speaker 6: are going after right now?
Speaker 8: Yeah, I mean, you know, an example of a value
Speaker 8: stock that's kind of really beaten up people don't like
Speaker 8: right now is Comcast. It trades at around ten times earnings. Obviously,
Speaker 8: there's there's some worries around not only cable sub subscriber disconnects,
Speaker 8: but also the broadband has been weak coming out of
Speaker 8: the pandemic. That a very strong pandemic, but broadband growth
Speaker 8: has gone in reverse recently because of you fixed wireless competition.
Speaker 8: But we think that longer term, this is a you know,
Speaker 8: really great asset. Actually, interesting enough, over the last ten years,
Speaker 8: Comcast has grown earnings at the same rate as Apple,
Speaker 8: and yet obviously trades at a huge discount.
Speaker 7: So, you know, we think this is one of those names.
Speaker 8: That investors are ignoring, but that should be a pretty
Speaker 8: high quality, good company over the next years, and a.
Speaker 4: Great management team.
Speaker 3: I could say, you over from experience, talk to us
Speaker 3: about dividends here, Brian, how important are dividends to you
Speaker 3: in a market where ten year treasures four and a
Speaker 3: half percent.
Speaker 8: Yeah, dividends are are one of the unsung heroes of investing.
Speaker 8: I mean, if you look over the long term, dividends
Speaker 8: are a significant contributor to to investors' returns.
Speaker 7: It's not something we absolutely look at.
Speaker 8: In other words, we're not saying, oh, we only want
Speaker 8: to buy a company with xyz dividend, but it fits
Speaker 8: into capital allocation strategy. And capital allocation is you know,
Speaker 8: the holy grail for investors. Companies that do bad capital
Speaker 8: allocation can really ruin, you know, the future returns for investors.
Speaker 7: You know, Berkshire Hathaway just had.
Speaker 8: Its annual meeting, and you know, one of the things
Speaker 8: that's made them one of the best reforming stocks over
Speaker 8: the last you know, fifty years, is is.
Speaker 7: That Warren Buffet's been a tremendous steward of capital.
Speaker 8: Even though they don't necessarily pay out large dividends, you
Speaker 8: can trust that the management is going to do the
Speaker 8: right thing with the capital.
Speaker 4: Well, that's interesting.
Speaker 3: We were just having a conversation with our insurance analyst
Speaker 3: here earlier. One hundred and eighty nine billion dollars in cash,
Speaker 3: By and large, that doesn't sound.
Speaker 4: Like being a good steward of capital.
Speaker 3: Although the interest rates today make it seem a little
Speaker 3: bit better. But shouldn't it be returning that to shareholders?
Speaker 8: So I think a couple of things from the Berkshire
Speaker 8: meeting takeaway is remember, first of all, remember they're an
Speaker 8: insurance company, so this is they have a lot of float,
Speaker 8: and so they've always chosen to be conservative, although this
Speaker 8: is this is sounding likely going to be more conservative.
Speaker 8: They had mentioned one hundred and eighty nine billion in
Speaker 8: cash going to potentially two hundred billion, So you bring
Speaker 8: a good point, shouldn't they just be returning some of that? Well,
Speaker 8: first of all, some of that is float. Second of all,
Speaker 8: they're earning five percent plus on that capital right now.
Speaker 8: So what Buffett's really saying is, hey, I'm not seeing
Speaker 8: a lot of great opportunities better than that five percent.
Speaker 8: I can get it's risk free. I don't have to
Speaker 8: the risks. And he also talked about the ability to
Speaker 8: really step in in a crisis, and so there's not
Speaker 8: only the five percent he's returning. But there's also the
Speaker 8: option value, and no one's better than Berkshire Hathaway in
Speaker 8: terms of when events happen getting really good deals.
Speaker 7: So we look at it as you're.
Speaker 8: Getting five percent today with no risk, and you've got
Speaker 8: the optionality if something were to happen that they could
Speaker 8: really take advantage of that for sure.
Speaker 6: Holdstill one hundred and nine billion dollars. That's a that's
Speaker 6: a pretty big pile of cash. Hey, I know we
Speaker 6: you talked a little bit about tech, but there is
Speaker 6: one tech company out there that you are bullish on.
Speaker 6: You argue that Oracle is a sneaky AI play. Why
Speaker 6: are you bullish on Oracle?
Speaker 9: Yeah?
Speaker 8: I mean Oracle is not cheap anymore. You know, it's
Speaker 8: still around an SMP multiple. But the thing that makes
Speaker 8: it interesting is they have really done a lot of
Speaker 8: behind the scenes in the cloud, and so people don't
Speaker 8: really think of them as a cloud player. But now
Speaker 8: they're with the purchase of Cerner, they're getting really big
Speaker 8: in healthcare.
Speaker 7: You've finally seen their cloud revenue really growing.
Speaker 8: I think the last quarter was up twenty six percent
Speaker 8: or so, and the cloud is starting to become a
Speaker 8: large percentage of their total total earnings. You know, management
Speaker 8: on the last call was really giddy in terms of
Speaker 8: how much money they were able to spend and basically
Speaker 8: said they just didn't have enough capacity for all of demand.
Speaker 8: So we think it's it's sort of an under the
Speaker 8: radar cloud play that has a lot more room to
Speaker 8: catch up relative to some of the other big players.
Speaker 3: All right, Brian, thanks so much for joining us there.
Speaker 3: I really appreciate it. Brian Krawez. He is the president
Speaker 3: of sharf In Investments, joining us from Los Gatos, California.
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Apple card Playing and
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Speaker 2: and wherever you get your podcasts, or watch us live
Speaker 2: on YouTube.
Speaker 3: It's called litigation risk, regulatory risk for a big tech
Speaker 3: It's always been out there, but we're going to get
Speaker 3: some high profile cases coming very soon that's going to
Speaker 3: be really important for a lot of companies, including Google.
Speaker 3: Jennifer rejoins iss. She's our senior litigation analys at Bloomberg Intelligence.
Speaker 3: She joins us here in our Bloomberg Interactive Brookers Studio.
Speaker 3: So Google antitrust trial about to begin. Can you give
Speaker 3: us the background what's happening here with Google?
Speaker 10: Well, the one that's about to begin is an ad
Speaker 10: tech suit, but the one that you just finished up
Speaker 10: is the search suit. Very good, Okay, So I think
Speaker 10: it is.
Speaker 6: To be fair, it's kind of hard to keep all
Speaker 6: these things.
Speaker 10: It's so hard to head a straight right. And we
Speaker 10: have many others too, right, Google has other suits beyond that.
Speaker 10: But the thing is, I think what the ruling, the
Speaker 10: first ruling that's going to come out will probably be
Speaker 10: this search suit, right, because they had the closing arguments.
Speaker 10: The trial actually ended about six months ago. The judge
Speaker 10: put a lot of space in between, I think to
Speaker 10: really understand the facts and get through all the evidence.
Speaker 10: And I think he'll be deciding in a few months.
Speaker 10: And it's a really big deal because Google pays over
Speaker 10: twenty billion dollars a year to other companies to set
Speaker 10: Google as the default search engine. They pay Apple, they
Speaker 10: pay Mozilla, they pay the OEMs that make the Android phones.
Speaker 10: And it may be that if the judge decides those
Speaker 10: agreements are exclusionary and that they're anti competitive, that they
Speaker 10: arise to the level of exclusionary anti competitive conduct. He says,
Speaker 10: you can't have these you can't enter these agreements anymore.
Speaker 10: And the ones that are hurt are really not Google
Speaker 10: because we all know Google Search. You know, we're all
Speaker 10: going to keep using Google Search.
Speaker 6: Yeah, it's a verb, yes, exactly, it's the Kleenex.
Speaker 10: People aren't jumping to switch over to Bing, at least
Speaker 10: not yet. Maybe they will with.
Speaker 6: Je does he bing?
Speaker 4: Yeah, because he does. He's a big chap GPT guy.
Speaker 6: Oh yeah, in the Microsoft he always and that could change.
Speaker 10: Things, you know, the market could change. So you know,
Speaker 10: that's kind of out there too. Although this judge is
Speaker 10: looking backward in time, not really looking forward. They're looking
Speaker 10: at the conduct that has occurred in the last ten years.
Speaker 6: But in the greater scheme of things. Is that a
Speaker 6: huge threat to Google? Because if it is indeed the
Speaker 6: default search engine, just because so many people are spent
Speaker 6: you know, decades using it on their devices, on their computers,
Speaker 6: then if you know, when you buy a new phone,
Speaker 6: Apple says, Okay, which search engine would you like to
Speaker 6: be the default one? Won't people just choose Google?
Speaker 2: Anyway?
Speaker 10: Well, I think that's the case, which is why the
Speaker 10: remedy is going to be really important here. This judge
Speaker 10: is going to have to get creative. And you know,
Speaker 10: one of the things that he might do if, in fact,
Speaker 10: he rules that Google's broken the law. I mean that
Speaker 10: hasn't been determined yet. I tend to think he will,
Speaker 10: but it's very close. What he could say is, look,
Speaker 10: you've collected there's this flywheel, and you've collected so much
Speaker 10: data through scale, through so many searches that's allowed Google
Speaker 10: Search to get better and being Inductucgo and other potential
Speaker 10: in nascent competitors out there can't get to that scale
Speaker 10: to teach the search engine to get better. So maybe
Speaker 10: what you have to do, Google is share all that
Speaker 10: data and let others have a chance to actually become
Speaker 10: better and show what they can prove. Maybe let an
Speaker 10: ascent competitor come into the market, something like that, and
Speaker 10: in that way there could be a threat, right, I mean,
Speaker 10: it's not unrealistic to think with all that data that
Speaker 10: Google's a mast over the years that some other company
Speaker 10: could come in and compete.
Speaker 3: So has Apple actually come in and maybe communicated to
Speaker 3: the judge somehow like who whoa whoa whoa whoa, what
Speaker 3: if you do what you could do, that's really going
Speaker 3: to hurt us unintended consequence? Maybe has Apple appined on
Speaker 3: this at all?
Speaker 10: So both Apple and Mozilla executives testified, and Apple actually
Speaker 10: believe it or not, when they signed this agreement to
Speaker 10: get paid to set Google as a default, also agreed
Speaker 10: that they would defend it if ever came under attack.
Speaker 10: Now if that's not a little bit suspicious or defensive,
Speaker 10: I don't know what is. But they so they did
Speaker 10: come in and they defended the deal. They said, look,
Speaker 10: it makes the Apple phone better. A user opens the phone,
Speaker 10: they go to Safari and they do their search and
Speaker 10: they have the best search engine, and that's better for
Speaker 10: our users. And Google's the best. And that's just the
Speaker 10: bottom line. Mozilla actually said, look, this is really going
Speaker 10: to hurt our business. We depend on the money that
Speaker 10: we get from Google. We're small, you know, Firefox is
Speaker 10: really small, and we need that money. So they did
Speaker 10: testify like.
Speaker 6: That, Okay, like you said, this is not the only
Speaker 6: legal challenge company. Why do the lawyers always get paid
Speaker 6: by the way, always matter what it doesn't.
Speaker 4: The right and a lot and a lot.
Speaker 5: Yeah, I don't know.
Speaker 6: Jed if you cover, if you cover that. But but
Speaker 6: I'm curious where this falls and sort of the scheme
Speaker 6: of lawsuits that Google, for its part, is facing right now.
Speaker 6: Not to mention, I mean the lawsuits facing Amazon FTC
Speaker 6: issues facing Amazon Apple as well Meta.
Speaker 10: You have FTCV Meta at right. All of them right
Speaker 10: now are facing big monopolization suits. They have a suit
Speaker 10: coming up that challenges their ad tech business. It's it's
Speaker 10: not a really business that consumers generally know about, because
Speaker 10: this is a business to business supply chain right that
Speaker 10: they kind of control. And it's about actually advertisers, digital
Speaker 10: advertisers and publishers the software that they use to come
Speaker 10: together to place ads right, to find the space, to
Speaker 10: buy the space, to get the right ad to the
Speaker 10: right consumer. And Google basically owns the entire supply chain.
Speaker 10: They have nom and many pieces of it, and it's
Speaker 10: about manipulating that to take extract as much money from
Speaker 10: publishers and advertisers as they can. That's the allegation. That
Speaker 10: trial is coming up toward the end of this year,
Speaker 10: and I think that's actually kind of a bigger deal,
Speaker 10: right because it's in front of a jury now that
Speaker 10: doesn't happen very often because the DOJ can only go
Speaker 10: in front of a jury when they're looking for a
Speaker 10: monetary remedy. They're looking for injunctive and monetary remedy because
Speaker 10: they themselves were advertisers. So they're saying us was hurt
Speaker 10: by what Google did. We were advertisers, and we paid
Speaker 10: more to do that advertising because of Google's conduct. But
Speaker 10: when it goes in front of a jury, I think
Speaker 10: it's really hard for a jury to kind of parse
Speaker 10: out all the stages that have to be proven to
Speaker 10: prove an anti trust violation. This judge, who is studying
Speaker 10: really hard and the Google Search case is struggling. You
Speaker 10: can tell this is hard for him, So determine that
Speaker 10: line between conduct that's anti competitive and conduct that's just
Speaker 10: hyper competitive is very difficult. And I think with a
Speaker 10: jury there's probably a tendency the DJ just to paint
Speaker 10: the company is a big dominant bully rather than kind
Speaker 10: of getting into those nuances, and a jury's probably going
Speaker 10: to go that direction. That's what I think. So I
Speaker 10: think those are scary cases.
Speaker 3: All right, give us the timing on when some of
Speaker 3: these things are going to happen here, because I'm looking
Speaker 3: at the stock stacks up twenty percent this year, it's
Speaker 3: up sixty percent over the trailing twelve month. The market's
Speaker 3: not worried about it, now worried. What's the timing here
Speaker 3: of some of these?
Speaker 10: I think on liability, a decision will probably come out
Speaker 10: on the search case in a few months. And then
Speaker 10: if that happened in a few months, that's what I think.
Speaker 10: And if that happens, he's going to the judge is
Speaker 10: gonna have a separate hearing on remedy, separate process to
Speaker 10: determine the proper remedy. I think he'll give them a
Speaker 10: few months to get prepared for that. Experts will be
Speaker 10: testifying in that So I'm thinking maybe a remedy comes
Speaker 10: out sometime in fourth quarter. That's what I think.
Speaker 6: Okay, we only have a minute and a half left,
Speaker 6: but do you want to talk Apple? Meta is on
Speaker 6: your pap?
Speaker 10: Okay, madam, let's say the least risk is Meta. I
Speaker 10: think I think the FDC will lose. All they're really
Speaker 10: seeking is a divestiture of Instagram or What's app, And
Speaker 10: I just don't think it's it's not going to happen.
Speaker 10: That would be a big deal. It would be a
Speaker 10: big deal. I don't think it's going to happen.
Speaker 5: I don't.
Speaker 10: I actually don't think the DOJ suit against Apples all
Speaker 10: that great either. I know people would disagree with me,
Speaker 10: but I think the allegations I think Apples change some
Speaker 10: of the conduct that they're challenging already, and I think
Speaker 10: a lot of pro competitive justifications which can outweigh some
Speaker 10: of those anti competitive allegedly anti competitive conduct.
Speaker 6: Lena Cohn versus Amazon.
Speaker 10: I also don't think that's a great suit. Wow, I
Speaker 10: think the best suits that I think the suits against Google.
Speaker 10: I think I have some teeth, have some possibility. I
Speaker 10: don't really think the other three suits are all that great.
Speaker 3: Okay, interesting, this is their time to get big tech, right.
Speaker 3: I mean, you know, never know what the next administration.
Speaker 10: Is going to be, That's right, you don't know. Although
Speaker 10: there are some gopiers in the Congress that like what
Speaker 10: Lena Coon's doing, It actually said Donald Trump's keep her around.
Speaker 3: Yeah.
Speaker 6: I feel like Republicans and Democrats like they don't agree
Speaker 6: on anything except for going after big tech.
Speaker 10: Yeah, for different reasons, yes, live career, but they do agree.
Speaker 3: Yes, but if you ask the consumers, we're like, we
Speaker 3: like it. It's all good which works the Yeah, I
Speaker 3: don't know, I mean.
Speaker 10: I mean it's Amazon case in particular. I yeah, Amazon,
Speaker 10: they brought a lot of pro competitive benefits to consumers
Speaker 10: in the market since they started right, And so I
Speaker 10: think again, with these monopolization suits, it's always the anti
Speaker 10: competitive harm weighed against the pro competitive side when you've
Speaker 10: got a strong pro competitive side.
Speaker 4: Yep, all right, Jenniferree, thanks so much for joining us.
Speaker 3: Jenry, she is a senior litigation analyst for Bloomberg Intelligence,
Speaker 3: joining us live here in our Bloomberg Intelligence office. She
Speaker 3: doesn't mail it in like BI management does. She comes
Speaker 3: into the office, which we appreciate. In New York City
Speaker 3: as well.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Otto with the Bloomberg Business app. You can also listen
Speaker 2: live on Amazon Alexa from our flagship New York station
Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 3: Tyson Food reported some numbers here. Let's break it down
Speaker 3: with Jen Bartashis. She covers all of the retail stuff,
Speaker 3: all of the food companies for Bloomberg intelligence.
Speaker 4: She's based down in Princeton, New Jersey.
Speaker 3: I think she's using that zoom stuff that the kids
Speaker 3: use these days to kind of, you know, phone into.
Speaker 4: Us, Jen, talk to us about Tyson Food here.
Speaker 3: What did you see from again? What I just learned
Speaker 3: was the largest meat producer in the US.
Speaker 9: Yeah, good morning. So Tyson is one of the biggest
Speaker 9: meat producers globally actually, and by all accounts, they had
Speaker 9: a pretty decent quarter. They did raise their full year
Speaker 9: outlook for adjusted operating income off of strength in the
Speaker 9: chicken segment, which has been long awaited. But the stock
Speaker 9: is trading down, likely on commentary that they may see
Speaker 9: third quarter be weaker than fourth quarter, which would buck
Speaker 9: historical trends. And so a little bit of a mixed
Speaker 9: report coming out of Tyson today, but generally a pretty
Speaker 9: solid quarter.
Speaker 6: Is the current quarter usually strong because we're getting into summer,
Speaker 6: We got Memorial Day coming up, we buy the meat
Speaker 6: for the barbecue. I mean, why is it typically stronger?
Speaker 9: So it's seasonally stronger for meats like you like your chicken,
Speaker 9: or you're in historically for beef specifically because of grilling season.
Speaker 9: But that does translate into a weakness for prepared foods
Speaker 9: and for the pork segment generally, And so they're saying
Speaker 9: that the weakness in prepared foods and pork may outweigh
Speaker 9: the strength coming for the grilling season for chicken and
Speaker 9: for and for beef.
Speaker 3: All right, I'm looking at the PGeo function for Tyson
Speaker 3: Food TSN. Is the ticker percentage of revenue thirty seven
Speaker 3: percent beef, thirty three percent chicken, nineteen percent prepared foods
Speaker 3: and nine percent pork. Which business do you like? Which
Speaker 3: business does the street like? Is one better than the other?
Speaker 3: Better margins, better growth? How do we think about that?
Speaker 9: So, historically speaking, prepared foods is a much higher margin
Speaker 9: business within the company, and there were intents from Tyson
Speaker 9: to grow that considerably. That has great long term potential,
Speaker 9: but they are going through a little bit of short
Speaker 9: term turbulence with regards to additional startup costs associated with
Speaker 9: new plant lines and things like that. The chicken segment,
Speaker 9: which is a big part of the company's business, has
Speaker 9: been underperforming for years, and so what's encouraging coming out
Speaker 9: of today's earnings is that the chicken segment is finally
Speaker 9: showing improvement. Margins are up they're doing better with efficiencies,
Speaker 9: and even though overall volume is down, it's a much
Speaker 9: healthier margin that they're achieving out of that chicken business. Now,
Speaker 9: remember they've closed a bunch of plants recently, They've been
Speaker 9: resizing their processing footprint, so all the things that they
Speaker 9: need to do seem to be underway to help make
Speaker 9: that a much more profitable and bigger contributor to the
Speaker 9: overall company.
Speaker 6: It was interesting to hear Noura, and actually I would
Speaker 6: say we had I don't know if you Jen heard this,
Speaker 6: but we had kind of an interesting conversation about Tyson
Speaker 6: Foods just moments before we came to you, because Nora
Speaker 6: chose it as one of her market movers, and we
Speaker 6: all were all talking, well, we don't necessarily know necessarily
Speaker 6: the brand of whatever we're buying when we're in the store,
Speaker 6: and Tyson has much more than just Tyson Foods. Is
Speaker 6: this at its core a commodity company? Or do the
Speaker 6: brands Sarah Lee, Ballpark Hillshar Farm, Jimmy Dean, Tyson, Bosco's
Speaker 6: Gallo Salami do these matter to consumers?
Speaker 9: The brands do matter, and it depends on which consumer
Speaker 9: demographic you're talking about but Tyson has intentionally over the
Speaker 9: past several years moved away from being a strictly commodity
Speaker 9: driven company. That has helped smooth out earnings volatility. That
Speaker 9: helps make it a much healthier margin profile overall. And
Speaker 9: so that progress I think is going to continue. So
Speaker 9: those brands are very central to that long term, that
Speaker 9: long term plan that side. You're right, there is a
Speaker 9: lot of Tyson meat out there that you eat and
Speaker 9: you don't even realize it's Tyson. They you know, obviously
Speaker 9: will supply retailers that then have that as their private
Speaker 9: label brand. There are things like that that happen. But overall,
Speaker 9: what we're seeing is the consumer, especially lower income households,
Speaker 9: have been trading more into private label and that has
Speaker 9: left these brands a little bit lower in terms of
Speaker 9: overall volume that they're being that's that's being sold. So
Speaker 9: so that's where we're seeing a little bit of a
Speaker 9: little bit of that brand volatility in the last few quarters.
Speaker 4: Jen, you need to talk to investors in this company.
Speaker 5: What's the call here?
Speaker 3: I mean, are they do they own it for the dividend?
Speaker 3: Did they own it because they're bullush on Chicken? And
Speaker 3: I mean what's the investment call for owning a food
Speaker 3: company like this.
Speaker 9: Well, the dividend has been something that's been of appeal
Speaker 9: in recent years. The good news is that Tyson is
Speaker 9: back to where their free cash flower generation will cover
Speaker 9: the dividend, so that's that That also appeases some concern
Speaker 9: that the dividend might be cut. So generally it's been
Speaker 9: it's been along those lines. There is also long term growth.
Speaker 9: You know, Tyson has been slowly expanding international operations. When
Speaker 9: they get the formula right, meaning they get the right
Speaker 9: productivity and the plants that they've opened up overseas, there's
Speaker 9: a long runway for potential growth for Tyson outside the
Speaker 9: United States as well as within the United States. So
Speaker 9: that's a little bit of the appeal as well if
Speaker 9: you're a longer term perspective investor.
Speaker 6: Anything that investors have to keep their eyes on when
Speaker 6: it comes to supply issues out there, any bird flu
Speaker 6: avian flu type stuff that's getting into their production line
Speaker 6: that we've seen hit other types of companies.
Speaker 9: Yeah, so the bird flu or avian flu is certainly
Speaker 9: something that's in the headlines lately. It's been impacting. It's
Speaker 9: you know, we've seen outbreaks in very specific areas. Thus
Speaker 9: far hasn't really had a major impact on Tyson this year,
Speaker 9: but we are watching that very carefully. One of the
Speaker 9: longer term issues Tyson's going to face is just the
Speaker 9: beef cattle cycle. We're at the bottom of a cycle.
Speaker 9: There's very limited animal availability, and once that he starts
Speaker 9: to rebuild, things are going to get a little bit
Speaker 9: worse before they get better. With regards to apply, that
Speaker 9: means that the profitability of the cattle, of the beef
Speaker 9: segment within Tyson is going to remain pressured well into
Speaker 9: twenty twenty five.
Speaker 4: Wait a minute, are we are there not enough cows
Speaker 4: out there?
Speaker 9: Well, no, no, there.
Speaker 6: There are slaughtering them for food.
Speaker 9: That's the problem exactly. We're at the bottom of the cycle,
Speaker 9: which means that the supply is just very limited and
Speaker 9: because you know, cows take eighteen months two years to
Speaker 9: reach slaughter size, it's a slow rebuild and right now
Speaker 9: we're not seeing the initial signs of herd rebuilding that
Speaker 9: we need to really to.
Speaker 3: To really research analysts, How do how do you decide
Speaker 3: as an analyst how the herds are like you go
Speaker 3: out and cow cows out in Montana.
Speaker 9: Well, no, I look at USDA data, you know, so
Speaker 9: that's that's you know, USDA expectations. But you also talk
Speaker 9: to people who are who are in the industry right
Speaker 9: and there are things that affect you know, when those
Speaker 9: those herds are going to be rebuilt, the price of hay,
Speaker 9: the drought conditions, interest rates, you know, all of these
Speaker 9: things impact ranchers and their ability to take on the
Speaker 9: cost of rebuilding herds. And so you know, once those
Speaker 9: things start to optimize a little bit, then you'll start
Speaker 9: to see herds grow. Then you'll start to see a
Speaker 9: much higher in terms of supply that'll be coming to
Speaker 9: market in the next couple of years.
Speaker 6: What's the and this kind of goes back to Paul's question,
Speaker 6: But I thought chicken was like the hottest thing out
Speaker 6: there right now in terms of what consumers want. We
Speaker 6: saw Chipotle, Chick fil A running low. Chick fil A
Speaker 6: is huge, raising canes is absolutely huge right now. Why
Speaker 6: is chicken only gone in twenty nineteen from thirty two
Speaker 6: point two percent of revenue to thirty three point seven
Speaker 6: percent of revenue That was twenty nineteen to twenty twenty three.
Speaker 9: Well, a lot of that has been priced depreciation, so
Speaker 9: there's been oversupply in the market. When that happens, prices
Speaker 9: are down. That's great for consumers. It's great for restaurant
Speaker 9: chains in terms of buying, but it's not great for
Speaker 9: the producers. And so, you know, part of what we're
Speaker 9: looking for is, you know that prices start to stabilize
Speaker 9: a little bit, which will lead to, you know, opportunity
Speaker 9: for revenue growth to renew in the chicken segment.
Speaker 6: I'm sorry, Paul, did you just say priced appreciation? I
Speaker 6: thought everything was getting.
Speaker 4: More expensive, Yeah, the commodities, I guess.
Speaker 3: So what I learned here, Jen is chickens are short cycle,
Speaker 3: cows are long cycle.
Speaker 4: Correct, all right, boom so you.
Speaker 3: Learned something farm great stuff senior retail anels for Bloomberg Intelligence.
Speaker 3: I do remember for my days living down in Virginia,
Speaker 3: North Carolina. You know, you're out on the interstate and
Speaker 3: flatbed after flatbed after flatbed of these trucks would have
Speaker 3: chicken crates strapped on there and feathers are coming out
Speaker 3: all over the places, so you can't trap behind them,
Speaker 3: and it's not a good day for the chickens. I
Speaker 3: don't think the chickens going is not a good place
Speaker 3: for you. Yeah, but that's where I think you get
Speaker 3: a lot of chickens some North Carolina.
Speaker 6: Not a truck you want to be on Necessarily. I
Speaker 6: thought you were going to go somewhere else with the whole,
Speaker 6: like you know out in Colorado. You know you've got
Speaker 6: family out in Colorado. Like you go north of Boulder
Speaker 6: to Fort Collins, Greeley area, huge cattle area, right and
Speaker 6: you can you can smell it, Yeah, you can smell
Speaker 6: it exactly. Same with the central part of California.
Speaker 4: Yep, yep, very good.
Speaker 3: So anyway, we learned what we needed to learn about
Speaker 3: chickens and cows and pork bellies. You know, I always
Speaker 3: have to look at the pork belly, all right, I
Speaker 3: was Jim bartash Is talking about Tyson's food.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on applecar Play and Android
Speaker 2: Auto with the Bloomberg Business. You can also listen live
Speaker 2: on Amazon Alexa from our flagship New York station, Just
Speaker 2: Say Alexa Play Bloomberg eleven thirty.
Speaker 3: Tim Stenovick sitting in for Alex Steel here this morning
Speaker 3: on Paul Sweeney. We're live here in our Bloomberg Interactive
Speaker 3: Brokers studio. This is the Bloomberg Intelligence Show. We also
Speaker 3: stream this thing live on the introweb. That would be YouTube,
Speaker 3: dot com search Bloomber Podcast, and that's where you'll find us.
Speaker 4: You know, Tim, A lot of folks were saying, you know,
Speaker 4: coming off of.
Speaker 3: That October base level had that big twenty five percent
Speaker 3: plus move up in the S and P five hundred,
Speaker 3: A lot of folks are saying, well, we could use
Speaker 3: a nice pullback that would be healthy percent.
Speaker 6: Did we get it, Paul?
Speaker 4: I don't know. We kind of don't think we did.
Speaker 3: From the end of March through you know, kind of
Speaker 3: mid April we kind of had a four or five
Speaker 3: percent pull down, but here we are moving higher.
Speaker 4: Was that it was? I don't know, man.
Speaker 6: Yeah, I mean with these with these pullbacks, it's kind
Speaker 6: of like blink and you'll miss it?
Speaker 4: Can you miss it?
Speaker 3: Christina Hooper joins US chief Global market Strategist for in Vesco.
Speaker 4: She looks at the big picture for a huge pool
Speaker 4: of money.
Speaker 3: Christina, what do you make of that little pullback we
Speaker 3: had in the SP five hundred, What did you make
Speaker 3: of that?
Speaker 4: And did we just march higher from here?
Speaker 1: Well, I think that pullback and the quick ending of
Speaker 1: that pullback reflects just the changing views on the path
Speaker 1: of monetary policy this year. When markets got pessimistic and
Speaker 1: they felt that cut was far away and that potentially
Speaker 1: a hike could come sooner, we saw a sell off.
Speaker 1: But the problem with the sell off was that there's
Speaker 1: an awful amount of cash sitting on sidelines, and many
Speaker 1: investors are overweight cash, and so the reality is that
Speaker 1: with fundamentals looking fairly good, earning season going well, it's
Speaker 1: hard to sit on the sidelines if you see something
Speaker 1: of a bargain, even if it's not a kmart level
Speaker 1: blue light special. And so as a result, this was
Speaker 1: not necessarily the sell off that many wanted to see.
Speaker 1: But I think it's a function of the environment we're in.
Speaker 6: Where's that cash on the sidelines, Christina? Is it in
Speaker 6: high yield savings accounts that are still giving us five percent?
Speaker 6: Is it in money market funds?
Speaker 2: Where is it?
Speaker 1: Interestingly, it's in a combination of places, and so certainly
Speaker 1: some are enjoying higher yields, but not all relatively speaking.
Speaker 1: But the key is that I think this money was
Speaker 1: never intended for a long term cash savings. It always
Speaker 1: was sitting waiting or at least had a good chance
Speaker 1: of going back into the stock market once investors felt
Speaker 1: more comfortable. And I think we've gotten to that point,
Speaker 1: especially with last week, where the narrative has changed somewhat,
Speaker 1: and I think we'll see more cash moving into equities
Speaker 1: as investors get more comfortable with this changing narrative.
Speaker 3: Christina, I know what investco. You guys really take a
Speaker 3: global view broadly defined. You know, given where the various
Speaker 3: central banks are in terms of their posture aback cutting rates,
Speaker 3: it seems like the ECB and the Bank of England,
Speaker 3: maybe even a little head of the FED here.
Speaker 4: How do you think about the US versus non US?
Speaker 1: Well, the US has clearly been more resilient. It has
Speaker 1: been not as significantly impacted by aggressive rate high and
Speaker 1: so as a result, we are at a place where
Speaker 1: the Bank of England and in particular the ECB look
Speaker 1: poised to move sooner and I think that's going to
Speaker 1: be the case.
Speaker 5: It's just a.
Speaker 1: Function of the greater resilience of the US economy, which
Speaker 1: in turn has to do with in my opinion, two
Speaker 1: key reasons First, the US gave its households more fiscal stimulus.
Speaker 1: Certainly there was fyscal stimulus flowing in Europe and the UK,
Speaker 1: but it was more significant in the UUs. In addition,
Speaker 1: we have this wonderful phenomenon called long term fixed rate
Speaker 1: mortgages that not a lot of other countries can participate in,
Speaker 1: that can enjoy, and as a result, one key part
Speaker 1: of household finances, one's mortgage payment wasn't impacted by the
Speaker 1: very aggressive rate high cycle we experienced. We can't say that,
Speaker 1: for example, for our Canadian neighbors and for European neighbors,
Speaker 1: they experienced changes or increases in mortgage payments for the
Speaker 1: most part.
Speaker 6: Christina, we spoke earlier to Brian Crowees over at Sharp
Speaker 6: Investments and he said that investors here in the US
Speaker 6: are too optimistic when it comes to tech. Do you
Speaker 6: agree with that?
Speaker 1: Well, I think you have to ask the question what
Speaker 1: timeframe are you talking about? Because we've seen this before
Speaker 1: where investors can get very excited and if they have
Speaker 1: a short time horizon, they can easily be disappointed. But
Speaker 1: for those investors that have a long time horizon and
Speaker 1: are employing some kind of selectivity in their investments could
Speaker 1: very well benefit a lot of it. Though, is having
Speaker 1: that patience, having that longer time horizon, Because we could
Speaker 1: see periods where tech stocks become very highly valued, we
Speaker 1: could see periods of disappointment in terms of earnings, but
Speaker 1: certainly there's a lot of innovation going on in tech.
Speaker 1: Reminds me very much of the late nineteen nineties and
Speaker 1: the excitement over the Internet. Investors through their money at
Speaker 1: Internet stocks. Some worked, some didn't, and it was about
Speaker 1: essentially ferreting out the areas of opportunity and sticking with
Speaker 1: them even though there were some certainly periods of disappointment
Speaker 1: in there.
Speaker 4: Christina, our listeners are viewers.
Speaker 3: They've been hearing this term a lot recently, stagflation. What
Speaker 3: does stagflation mean to you and is it a concern
Speaker 3: for investors?
Speaker 1: Well, I think that Jay Powell closed the book on
Speaker 1: that last week, although I will say that we did
Speaker 1: see a lot of internet searches on the term stagflation before.
Speaker 1: To me, it's an environment like the nineteen seventies right
Speaker 1: where growth is really disappointing. It's stagnant, but inflation is
Speaker 1: high and it's very sticky. And while We've certainly seen
Speaker 1: some kind of aspects of some components of inflation that
Speaker 1: have been stickier. This disinflation journey has been very imperfect.
Speaker 1: I don't think this is an environment where we have
Speaker 1: high sticky inflation. I think we're going to see some
Speaker 1: nice progress in disinflation this year, and we can't say
Speaker 1: that growth is stagnant. Certainly, there are some cracks appearing
Speaker 1: in the US economy, but that's what the FED wanted.
Speaker 1: It wanted to cool a relatively hot economy that has
Speaker 1: had sub four percent unemployment for a very significant period
Speaker 1: of time.
Speaker 6: Christin, where do you think we'll see that disinflation? I mean,
Speaker 6: it's been pretty stubborn in many areas, and certainly the
Speaker 6: last mile has proven to be just as tough as
Speaker 6: many people thought it would.
Speaker 1: So we're starting to see a little easing in wage growth.
Speaker 1: If April's jobs report suggests a trend, I think it does.
Speaker 1: I think that will filter into and also I think
Speaker 1: we are seeing an increase in unemployment. I think that
Speaker 1: all filters into moderation and services spending. I mean, we're
Speaker 1: already hearing in a number of earnings reports that the
Speaker 1: consumer has become even more selective in their purchases, is
Speaker 1: even more concerned about expenses and the prices they pay
Speaker 1: for certain items. So I think that we'll continue to
Speaker 1: see progress in terms of disinflation on the services side
Speaker 1: that has been I think unusually hot for a long
Speaker 1: period of time, and over the course of the year,
Speaker 1: I think the situation will get significantly better.
Speaker 3: Christina, just looking at today's price action, we've got the
Speaker 3: S and P up a half of one percent, but
Speaker 3: the rustle is up about one point two percent. How
Speaker 3: do you think about some of the small MidCap names
Speaker 3: here Visa VI, you know, the big tech names that
Speaker 3: been such powerhouses for this market.
Speaker 1: Well, I think there's room for more participation, and I
Speaker 1: look specifically at smaller cap names as an area of
Speaker 1: real opportunity. If one believes, as I do, that we
Speaker 1: are going to see a stabilization, that this slowdown is
Speaker 1: going to be relatively brief. We're going to see a
Speaker 1: reacceleration in economic growth, and that's a reacceleration globally. By
Speaker 1: the way, the OECD you've been updated it's forecast last
Speaker 1: week for global growth. That's that creates a real opportunity
Speaker 1: for small caps, and I think that's why we're already
Speaker 1: seeing improved performance from smaller cap stocks.
Speaker 6: It's so interesting, Paul. I'm just looking at the top
Speaker 6: function here in Bloomberg and one of these stories that
Speaker 6: just came out is this great story bi own Michael
Speaker 6: mackenzie and Liz Capa McCormick at two million dollars per minute.
Speaker 6: Treasuries are minting cash like never before. Finally, for the
Speaker 6: first time in nearly a generation, fixed income is living
Speaker 6: up to its name. Christina, how much does that hold
Speaker 6: back equities?
Speaker 1: As I said, there's a lot of cash on sidelines,
Speaker 1: so there are a lot of places for that cash
Speaker 1: to go, and it's not a mutually exclusive situation. Investors
Speaker 1: can put money into bonds and can put money into equities,
Speaker 1: and I suspect that's what we're going to see. There's
Speaker 1: a growing recognition and actification.
Speaker 6: I'm just curious, like, if we do see rates come down,
Speaker 6: do we see that cash then move off the sidelines
Speaker 6: and into equities or is that the type of cash
Speaker 6: that wants to stay in something that's more predictable.
Speaker 1: I think the cash will probably the majority of it
Speaker 1: will go into equities, but I suspect that it's also
Speaker 1: going to go into fixed income, just because there's a
Speaker 1: recognition that that fixed income is more attractive than it's
Speaker 1: been in years and years, and that's going to continue.
Speaker 1: And also I think we're going to see more money
Speaker 1: going into alternatives.
Speaker 10: Again.
Speaker 1: Diversification is so important, and I think investors are recognizing
Speaker 1: that more and more as they see the unpredictability of
Speaker 1: the larger environment.
Speaker 4: Christina Hooper, thank you so much for joining us. Always
Speaker 4: appreciate getting your thoughts. Christina Hooper.
Speaker 3: She's a chief Global market Strategist at Invesco.
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