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Speaker 1: Bloomberg Audio Studios, podcasts, radio news, Sarah Hunt.

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Speaker 2: I am very pleased to say it joins us.

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Speaker 3: Now, Sarah, can you give us a sense of why

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Speaker 3: in Vidia is driving the market.

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Speaker 2: Why maybe if in.

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Speaker 3: Nvidia misses, others couldn't necessarily rise up and take over.

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Speaker 2: Well.

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Speaker 4: I think that the good news was that Microsoft came

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Speaker 4: out with good numbers and showed that some of the

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Speaker 4: AI was actually fueling some of their earnings. Right, this

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Speaker 4: is the big question. Yes, this is great technology, can

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Speaker 4: you monetize it? Nvidia is the poster child for that,

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Speaker 4: because it's the demand for those chips that's fueling everybody's

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Speaker 4: usage of all of this. If they have any kind

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Speaker 4: of wobble that anyone can say, well, maybe this isn't

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Speaker 4: as fast and as quick as we thought it was

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Speaker 4: going to be. I think that the whole story comes

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Speaker 4: into question, and that whole story was I think instrumental

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Speaker 4: in helping equity markets through the fall of last year

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Speaker 4: when rates looked like they were going higher and they

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Speaker 4: were going to stay higher, and then all of a sudden,

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Speaker 4: the market had something to hang its hat on, which

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Speaker 4: was AI is coming, productivity is coming. We have some

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Speaker 4: thing to look forward to because equity market's like a

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Speaker 4: good story and they want to look forward to something.

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Speaker 4: If it looks like that story has any kind of weakness,

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Speaker 4: I think it's going.

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Speaker 2: To be a problem.

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Speaker 3: We saw a two hundred billion dollar market capitalization rally

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Speaker 3: in one day for Meta. What kind of downside are

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Speaker 3: you potentially bracing for within videos earnings?

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Speaker 5: Well?

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Speaker 4: I think the thing is that, you know, people keep

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Speaker 4: making parallels to nineteen ninety nine and two thousand with

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Speaker 4: the dot com era and everything else. This time you

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Speaker 4: really have earnings to back it up. But if you

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Speaker 4: don't see that earnings growth or the potential is you

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Speaker 4: know what this is? This year is going to flatten

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Speaker 4: out a little bit. People are expecting some huge numbers

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Speaker 4: and some huge growth out of these. The question is

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Speaker 4: really going to be if you don't get it, does

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Speaker 4: the stock drop a lot? I don't know. It's really

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Speaker 4: going to be what of my forward earning? What am

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Speaker 4: I looking forward to? And if that looks like that's

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Speaker 4: going to slow down? I think that everything in this

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Speaker 4: space has got a little bit of room to come down.

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Speaker 4: Because everything is just moved so quickly and sofa and

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Speaker 4: so high.

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Speaker 5: There is quite a frenzy and almost mania to the

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Speaker 5: sort of the daily obsession. I think, as you said, Lisa,

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Speaker 5: people just waking up and they just check their n

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Speaker 5: video and to the point on the flow show from

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Speaker 5: Bank of America, I mean, you actively look at markets

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Speaker 5: every day and you deploy. What conversation do you have

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Speaker 5: about concentration, risk and breadth? How do you deal with that?

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Speaker 4: Well? I think that when you're constructing portfolios for clients,

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Speaker 4: you want to make sure. I mean, it's very difficult

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Speaker 4: when the market is a concentrated right, because no one's

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Speaker 4: going to put a portfolio together that looks like the

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Speaker 4: top of the SMP because those five stocks are something

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Speaker 4: like thirty percent of it. That's very unusual. So you

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Speaker 4: talk to people and you explain to them that, yes,

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Speaker 4: you have some participation in your portfolio. But if you

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Speaker 4: get a change in rotation or a change in leadership,

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Speaker 4: or you finally see that market broadened out like it

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Speaker 4: like everyone is looking for it to do, or you

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Speaker 4: get some sort of slip up like in video or earnings,

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Speaker 4: you don't want to be one hundred percent technology because

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Speaker 4: then you're going to feel that downdraft like you felt

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Speaker 4: in twenty twenty two. You want to be making sure

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Speaker 4: that you have enough other things in the portfolio that

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Speaker 4: are looking at different parts of the economy, so that, yes,

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Speaker 4: you have to have some tech because you can't be

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Speaker 4: completely unexposed, but you can't be as exposed as the

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Speaker 4: S and PR the queues are.

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Speaker 5: So where are those other parts in the portfolio? Then

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Speaker 5: that warrant is a dividend flow? Is it sort of

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Speaker 5: a poor I think I had something the actually say

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Speaker 5: to me, getapoor Mans Nvidia, and you know that's a

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Speaker 5: whole other story. But where are those other portions in

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Speaker 5: the portfolio that you should be paying attention to? Consumer cyclicals?

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Speaker 5: The consumer looks a little bit foltering at the moment.

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Speaker 5: You've got oil, which is sort of range by but

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Speaker 5: paying big dividends. So where are the alterna Where are

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Speaker 5: the alternatives?

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Speaker 4: Well, you've got places where you've got really good cash

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Speaker 4: flow and really good growth. You've got some industrials where

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Speaker 4: that's happening. I know that energy has been a back

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Speaker 4: and forth discussion, but there's still a lot of cash

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Speaker 4: flow that's going on there.

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Speaker 5: I've had a lot of buybacks in that, isn't it?

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Speaker 4: So buybacks? You've got a lot of dividends there. We

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Speaker 4: look at cash flows. Cash flows are very important. You

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Speaker 4: look at some of the places in the industrial space

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Speaker 4: like HVAC, right so, carrier and train and the companies

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Speaker 4: that are looking forward to a long period of growth

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Speaker 4: because you're changing out how everyone is looking at their

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Speaker 4: own HVAC systems. Everyone's looking for clean air, especially post

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Speaker 4: the pandemic. Right So you've got places where there is

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Speaker 4: going to be growth that are not just stuck to technology,

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Speaker 4: but are have a technology component which is cleaner air.

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Speaker 2: All I can say is that I'm having h VAC

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Speaker 2: issues right now, so this is going close.

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Speaker 4: To my heart right now.

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Speaker 2: I'm curious though, just to go to the broader economy

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Speaker 2: and how you frame it out into an equity view,

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Speaker 2: given the fact that we were just talking about some

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Speaker 2: of the job cuts that we're seeing announced, how you

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Speaker 2: view this, given that it's not showing up in some

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Speaker 2: of the numbers that we're seeing in terms of unemployment.

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Speaker 4: Well, it reminds me of the job cuts that we

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Speaker 4: started to see, you know, when Facebook finally said, you

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Speaker 4: know what we've.

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Speaker 1: Got to do.

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Speaker 4: Sorry, Meta, We've got to cut our forces. We have

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Speaker 4: stopped spending with to do this. A lot of those

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Speaker 4: job cuts didn't show up because they were in the

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Speaker 4: higher echelons. And the question is is that what's going

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Speaker 4: Is that is what's going on right now, or is

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Speaker 4: there some combination of people taking second jobs. Because the

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Speaker 4: job's numbers look so strong, it is hard to parse

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Speaker 4: out exactly what's happening. But you can certainly see that

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Speaker 4: there is some stress on the low end consumer. You're

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Speaker 4: seeing delinquencies come up on credit cards, You're seeing at

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Speaker 4: a loan delinquencies come up. There is stress in the

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Speaker 4: low end consumer. But right now the higher end consumer

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Speaker 4: is still consuming and so therefore you don't see that

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Speaker 4: balance isn't there yet quite, But I think that there's

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Speaker 4: some stress under the hood of the system, and I

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Speaker 4: think that's where you have some real tension going forward.

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Speaker 1: This is what a viewer wrote in the fact is

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Speaker 1: the fact that if you're on the higher end of

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Speaker 1: a pay scale, you actually cannot qualify for some of

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Speaker 1: these unemployment benefits. So in that sense, is it those

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Speaker 1: that are on the lower end of the socioeconomic scale

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Speaker 1: in the United States that are dealing with inflation but

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Speaker 1: still have their jobs, and those on the higher end

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Speaker 1: potentially can deal with and withstand inflation, but are at

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Speaker 1: risk of losing their job.

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Speaker 4: There's a near term series of issues of having your

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Speaker 4: job and being able to deal with inflation. Because I've

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Speaker 4: talked to people all the time, who are you know

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Speaker 4: who are not in the higher end, who are saying, look,

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Speaker 4: it doesn't matter that inflation isn't going high as fast.

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Speaker 4: The price levels are much higher than they used to

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Speaker 4: be and they're not coming down. So yes, you might

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Speaker 4: still have your job, but that spending is going to

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Speaker 4: be tricky as you start to move towards we're really

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Speaker 4: out of fully out of COVID savings. Whatever rayson I

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Speaker 4: got isn't covering the fact that I'm going to start

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Speaker 4: substituting down Look at craft times, look at some of

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Speaker 4: the earnings in the space where people are going, I'm

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Speaker 4: going to trade to cheaper ingredients because it's it's too

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Speaker 4: expensive to keep doing what I'm doing. And yes, to

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Speaker 4: the high end, people are still spending. But if they're

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Speaker 4: out of a job long enough.

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Speaker 1: Do you buy into the administration's idea that there's greedflation

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Speaker 1: corporate gouging and what companies are doing is shrink flation

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Speaker 1: and that they should be actually passing it on to

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Speaker 1: the consumer.

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Speaker 4: I think shrink flas has been going on for years.

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Speaker 4: I mean, when was a pound of coffee twelve ounces?

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Speaker 4: When did that happen? That wasn't in the last six months.

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Speaker 4: That happened like five years ago. So I think that

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Speaker 4: there's always been that sort of a movement. It's been

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Speaker 4: much more obvious now because ingredients have gotten so much

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Speaker 4: more expensive. Do people take advantage in inter in small ways? Absolutely?

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Speaker 4: But is that the reason. I don't think that's the reason.

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Speaker 4: The reason is that price levels are just not coming down,

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Speaker 4: and they're not coming down all along the food chain.

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Speaker 4: So yes, there are periods of time when people can

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Speaker 4: prosper from that, but it doesn't last.

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Speaker 5: One of the nyrators from the CEOs that we've spoken

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Speaker 5: to so far in this quarter has been the ability

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Speaker 5: to raise prices. Hermes, I know that Lisa not Lisa

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Speaker 5: is immune to the price rises that hervese thanks. It's true,

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Speaker 5: but what we are seeing is somebody like Hermes is

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Speaker 5: able to really premium price, but the rest aren't. You're

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Speaker 5: looking at booze companies that are having trouble in terms

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Speaker 5: of volume with the lower end, and Heineken I caught

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Speaker 5: up with the Moe Hennessy CEO. He said, I can't

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Speaker 5: squeeze prices much higher than here. It's going to be

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Speaker 5: a very different environment in prices. The fat are going

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Speaker 5: to like to hear that. But in terms of corporate earnings,

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Speaker 5: is that going to be I don't know what the

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Speaker 5: right word is, whether it's a headwind or a cop

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Speaker 5: it's well, it's.

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Speaker 4: A margin squeeze, right, And in the end of margin

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Speaker 4: squeeze is part of a problem for earnings, which is

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Speaker 4: for a while you had this world where yes, inflation

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Speaker 4: was going higher, but people could push price. Labor contracts

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Speaker 4: hadn't caught up yet, so you did have a larger

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Speaker 4: margin ability, an ability to get a larger margin. As

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Speaker 4: labor costs start coming up, as the ability to push

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Speaker 4: price starts coming down, that's going to be the question

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Speaker 4: because we're all baking in a large earnings growth for

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Speaker 4: twenty twenty eight four and are we going to get it?

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Speaker 4: And the question is, I don't know, can technology save

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Speaker 4: us because their earnings were so much better. I don't know.

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Speaker 4: I don't think we know yet, And I think that's

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Speaker 4: one of the biggest problems that's

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Speaker 2: Going on, Sarah Hunt of Alpine Saxon Woods