Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: pm Eastern Time on Bloomberg Radio, or watch us on
Speaker 1: YouTube search Bloomberg Global News. Well, it's the saga that's
Speaker 1: playing out in real time, and a big part of
Speaker 1: it is because, well, Elon Musk, he just cannot stop
Speaker 1: tweeting about it. Just this afternoon, Musk suggested via Twitter,
Speaker 1: of course, that the SEC should investigate whether Twitter's claim
Speaker 1: that only five p of its users are bots, This
Speaker 1: coming just a day after he said the idea was
Speaker 1: on hold until he got more information on said bots.
Speaker 1: And in the meantime, Twitter is just hemorrhaging senior employees,
Speaker 1: three more leaving the company. According to our team at
Speaker 1: Bloomberg News, let's get into it with Bloomberg Intelligent senior
Speaker 1: technology analyst Man Deep saying, who joins us live in
Speaker 1: the Bloomberg Interactive Broker studios in New York. Man Deep,
Speaker 1: I don't know about you, but it just seems like
Speaker 1: each day that passes, this deal is looking less and
Speaker 1: less likely. Well, so you have to look at it
Speaker 1: from two different aspects. One is the funding aspect. So
Speaker 1: from a funding perspective, Ellen was by himself and he
Speaker 1: announced the deal. Now he has six point five billion
Speaker 1: dollars of commitment from Cope Partners. Now that's not a
Speaker 1: big deal because he still needs to raise, you know,
Speaker 1: an additional twelve point five billion to offset that margin loan.
Speaker 1: So he doesn't want to do the margin loan anymore.
Speaker 1: And that is where he's struggling because he has said
Speaker 1: he's not going to sell additional Testla stock. So there
Speaker 1: is that funding gap. But at least he has got
Speaker 1: that six point five billion additional commitment, So that's a
Speaker 1: positive in terms of his ability to close. The other
Speaker 1: aspect is he waved the due diligence claw and now
Speaker 1: he's you know, talking about bots. But okay, yes, he
Speaker 1: waived officially waived the due diligence clause. But anyone who's
Speaker 1: read anything about Twitter in public filings you don't necessarily
Speaker 1: need due diligence to do that, has seen the language
Speaker 1: that Twitter has talked about when it comes to five
Speaker 1: percent of its users or bots. Well, so now they're
Speaker 1: talking about very fine things. Is the number of accounts
Speaker 1: equal to the number of m d A use And
Speaker 1: they're saying the m d A use the monthly daily
Speaker 1: active users. Yes, five percent, our bods. But if you
Speaker 1: compared to the total number of accounts, and he specifically
Speaker 1: took the example that the most like tweet on Twitter
Speaker 1: has about five million likes, so the total m d
Speaker 1: YE use around two dred ten million. How can it
Speaker 1: not be more than five million? Five million? I heard
Speaker 1: him say this at this tech event yesterday, the summit,
Speaker 1: and my immediate thought was, well, maybe only five million
Speaker 1: people like the tweet. Okay, So if you compared to YouTube,
Speaker 1: YouTube has one billion daily active users, the most like
Speaker 1: video on YouTube has got a lot more like, so
Speaker 1: he does views as well. I mean again, now we're
Speaker 1: getting into very fine distinction between saying yesterday, So that's
Speaker 1: this is the point about diligence, Like now he's saying
Speaker 1: total number of accounts isn't equal to the total number
Speaker 1: of daily active users, and then he's trying to kind
Speaker 1: of tie it with the number of followers, so that
Speaker 1: we are playing with the different terms here and and
Speaker 1: that is where the fine language the contract, the agreement
Speaker 1: he signed comes into play to create Well, I was
Speaker 1: going to say, aren't just supposed to do your due
Speaker 1: diligence before you make the offer? You've covered M and before. Yeah,
Speaker 1: but look, I mean this the way this deal was
Speaker 1: signed was like, you know, one fine day the board said, oh,
Speaker 1: we're instituting a poison pill. The next weekend they said,
Speaker 1: we are, you know, merging with We're accepting his offer.
Speaker 1: So I don't think there was a lot of diligence
Speaker 1: downe from either side. But we are at a point
Speaker 1: where the language really matters, and he may have to
Speaker 1: pay the one billion you know, breakup fee, but then
Speaker 1: he should be able to renegotiate it at a lower
Speaker 1: price because the market valuations have compressed so much. Look
Speaker 1: at Snapchat trading at thirty five thirty seven billion. How
Speaker 1: do you justify paying forty four billion for Twitter? Well,
Speaker 1: let's bring it back to Twitter here and talk about
Speaker 1: the fundamentals, because it's not just about the daily users
Speaker 1: and and the likes and and the tweets and all
Speaker 1: of that. It's also about how many people you actually
Speaker 1: have at the company. We talked about some senior level
Speaker 1: officials up leaving and resigning, but I believe there was
Speaker 1: a round of layoffs before that as well. Is Twitter
Speaker 1: downsizing ahead of this potential deal. Yeah, so a lot
Speaker 1: was made about, you know, their bloated cost structure and
Speaker 1: how their revenue per employee was much lower than the competitors.
Speaker 1: So just while you said bloated cost structure, really quickly
Speaker 1: let you finish. But we did actually have headlines from Netflix,
Speaker 1: by the way, also saying that they're addressing their own
Speaker 1: cost growth and they let around a hundred fifty employees
Speaker 1: go today. But back to your point, So, I think
Speaker 1: that's a great point that every tech company is thinking about,
Speaker 1: are we overhired right now? And look, this is not
Speaker 1: a high growth environment anymore. So companies that are not profitable,
Speaker 1: or in the case of Twitter, if they're issuing more
Speaker 1: dead they have to think about interest payments and free
Speaker 1: cash flow. Now suddenly you're thinking about optimizing the cost structure,
Speaker 1: and that just goes to show that Twitter won't be
Speaker 1: a high growth company even if it goes private. They'll
Speaker 1: be focused on optimizing the free cash flow. That just
Speaker 1: means they're not going to grow. But that's what he
Speaker 1: said in his slide deck to potential investors recently, was
Speaker 1: that he wants to see Twitter users grow. And forgive me,
Speaker 1: but I think in four years to a billion up
Speaker 1: from two million today. Yeah, so that's an ambitious plan.
Speaker 1: It's centered around growing subscription revenue, which is again not
Speaker 1: the norm when it comes to you know, social media companies.
Speaker 1: And look, I think a time will only tell whether
Speaker 1: he will be successful. But I find it hard to
Speaker 1: imagine that if Twitter has thirteen billion dollars of debt
Speaker 1: and it has to make all these interest payments, that
Speaker 1: they will continue to invest so aggressively in all these
Speaker 1: new initiatives even if they go private. So, Man, Deep
Speaker 1: by no time will tell you just said that, but
Speaker 1: I gotta put you on the spot. Here does the
Speaker 1: deal still happen? And if you ask what what price?
Speaker 1: I think he's going to pay a breakup fee of billion,
Speaker 1: then the deal happens at around thirty to thirty five billion,
Speaker 1: and uh it will involve more co partners, so he
Speaker 1: still needs to address that funding gap. But if the
Speaker 1: price comes down, then at least the margin loan is
Speaker 1: taken care of and he needs more private equity partners
Speaker 1: to pitch in with the remainder amount. There you have it, well, man,
Speaker 1: Deep it's trading right now at about a thirty point
Speaker 1: two billion dollar market cap, so uh yeah, this is
Speaker 1: about where you think the deal. We'll go through Mandy Sing,
Speaker 1: a senior technology analyst for Bloomberg Intelligence, joining us live
Speaker 1: in the Bloomberg Interactive Broker's studio in New York. You're
Speaker 1: listening to Bloomberg Radio, and this is Bloomberg Business Week.
Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Just in
Speaker 1: the last hour, we learned that Netflix is laying off
Speaker 1: a hundred and fifty employees. The company is saying that's
Speaker 1: slowing revenue growth means that it's also having to slow
Speaker 1: its cost growth as a company. In recent weeks, we've
Speaker 1: seen layoffs at robin Hood, hiring freezes and Rescented offers
Speaker 1: a Twitter and a focus on cash flow at Uber.
Speaker 1: All of this to say, the belt is tightening and
Speaker 1: startups are no exception after years of easy money and
Speaker 1: big growth during the pandemic. Well, in the words of
Speaker 1: one venture capitalist, the world is falling apart and we
Speaker 1: need to act accordingly. Joe Weber is editor at Bloomberg
Speaker 1: business Week. He's with us in the Bloomberg Interactive Broker studio.
Speaker 1: Lizett Chapman is the author of Today's Big Take. Also,
Speaker 1: her store is featured in the upcoming issue of Business
Speaker 1: Week magazine. You can read it now at Bloomberg dot
Speaker 1: com and on the Bloomberg terminal. Is that, his technology
Speaker 1: reporter at Bloomberg News was that joins us on the
Speaker 1: phone from San Francisco, Joel, I want to start with you,
Speaker 1: what is the temperature like in Silicon Valley right now?
Speaker 1: It was kind of balmy, and then all of a
Speaker 1: sudden it got a little more frigid. And you know,
Speaker 1: when you when you think about what's been happening in
Speaker 1: the markets here today, and I was like, this is
Speaker 1: should not come as a total surprise. But I think
Speaker 1: what Lazette got into here was like exactly what the
Speaker 1: mood has been like there's a there's a ton of money,
Speaker 1: still a lot of dry powder, and yet there's you know,
Speaker 1: the VC world and how they interface with startups has
Speaker 1: slowly begun to change. And maybe that slowly, maybe it
Speaker 1: picked up a little bit here more recently. Was that
Speaker 1: what what did you discover as you were reporting this story? Yeah,
Speaker 1: I think, like you said, it was more than bombing,
Speaker 1: it was white, white hot. I mean it was it
Speaker 1: was scorching. Last year, you know, we had record amount
Speaker 1: of funding and these mega rounds that were pushed all
Speaker 1: of these levels you know, of of um, the amount
Speaker 1: of VC in the market and the amount that started
Speaker 1: to raise two historic you know, twenty plus year level
Speaker 1: things never seen before. And just like you said, and
Speaker 1: just like you know, we were talking on the intro
Speaker 1: here that NASA dec you know, you know, decline in
Speaker 1: the public market squeezes pushing the late stage companies down.
Speaker 1: So it's huge hundred million dollar plus grounds that were
Speaker 1: almost daily in one we're not seeing those happening anymore.
Speaker 1: That's slowing down in a major way. And all of
Speaker 1: these startups that we're looking to raise that higher and
Speaker 1: higher evaluations um are are not trying to do that anymore.
Speaker 1: They're doing a lot more slowly. There's a big humbling
Speaker 1: of all of these unicorns, and it's starting to trickle
Speaker 1: down to even earlier stage, although not quite yet. Humbling
Speaker 1: starting to trickle down. I've got to ask about the
Speaker 1: timeline of that. How much farther can this go? Oh,
Speaker 1: it could get really bad. Um, there's a lot of
Speaker 1: you know, like Joe was saying that investor sentiment right
Speaker 1: here is the most negative it's been in twenty plus years.
Speaker 1: I mean, um, you know, PayPal co founder David Sachs,
Speaker 1: who is now a partner and investment firm Craft Ventures. Um,
Speaker 1: you know, put that out there and people were very
Speaker 1: quick to pile on with that. Bill Gurley of Benchmark
Speaker 1: big uber investor that he was known for that that
Speaker 1: big investment heated. UM. He's also said that it's it.
Speaker 1: He's been calling this for for many years, like this
Speaker 1: bull market is not sustainable. But there's just a real
Speaker 1: reckoning that um, you know, like that there is a
Speaker 1: overvaluation in the private market and they now are being
Speaker 1: called upon to justify those valuations. In many cases they can't.
Speaker 1: But Lizette it's it's not all bad news as you report.
Speaker 1: There is a silver lining here, at least according to
Speaker 1: some vetric capitalists who have lived through other big Googles.
Speaker 1: There's always a silver lining exactly. I mean, look, they say, hey,
Speaker 1: some of the best companies around we're started during recessions
Speaker 1: or the fact that there is this belt tightening that
Speaker 1: I was talking about in the intro and that you
Speaker 1: wrote about with these larger companies. That means that the
Speaker 1: Amazons and Microsoft's and metal platforms, they're not going to
Speaker 1: be working on all the innovative stuff that they would
Speaker 1: be throwing money at necessarily. That's exactly right. I mean
Speaker 1: you sound like a venture capitalist, Yeah you do, and
Speaker 1: fair venture capitalists get paid to look for where they
Speaker 1: can make money, where there's opportunity, and right now, the
Speaker 1: focus is firmly on early stage companies because there's seven
Speaker 1: to ten years before they have to go public. It's
Speaker 1: not like these you know, late stage companies um that
Speaker 1: you know, um, you know, people are plowing hundreds of
Speaker 1: millions dollars into The risk is a lot less when
Speaker 1: you're only writing a two million dollars check, you know,
Speaker 1: and if one or two of those hundred checks that
Speaker 1: you right survive and thrive. Well, then great, you've got
Speaker 1: your next Airbnb, You've got your next Uber, You've got
Speaker 1: your next you know, insta cart. All these were founded
Speaker 1: during the downturn UM you know, to your point into
Speaker 1: DC points. But you know, are they going to be
Speaker 1: able to find the right ones and you know help
Speaker 1: them through? You know this all the way to public markets.
Speaker 1: You know, it's the same same thing that it's the
Speaker 1: same dynamic that exists even during an uptime. But right
Speaker 1: now this is where we sees are seeing that they
Speaker 1: can make the most money and it's really no skin
Speaker 1: off their nose to write a two million dollars check
Speaker 1: when they've got a three billion dollars funds. I'm curious,
Speaker 1: because you talked to so many people in the VC side,
Speaker 1: but also in startup playing. I'm curious how you know
Speaker 1: there's been a number of layoffs, there could be more
Speaker 1: layoffs at some of these companies. How has it gone
Speaker 1: over for the people who have you know, everything was
Speaker 1: quite hot until it wasn't. What what have they What's
Speaker 1: it been like to be on the receiving end of
Speaker 1: this stuff? It's been really confusing, um for a lot
Speaker 1: of employees who see that their companies raised you know,
Speaker 1: in one case, you know, you know, forty million dollars
Speaker 1: um just just a few months ago, and they were
Speaker 1: adding all these benefits you know, this is new um
Speaker 1: and uh, the you know both weight loss fitness company,
Speaker 1: and and and then they went ahead and they laid
Speaker 1: up you know, hundreds of people. So there's a real
Speaker 1: reckoning between that saying Okay, well, what are your priorities.
Speaker 1: You just you know, raised all this money. You were
Speaker 1: preparing to scale really fast into to grow into that valuation.
Speaker 1: You can't now you're cutting back. UM. So there's a
Speaker 1: lot of fear uncertainty. But then at the early stage,
Speaker 1: like I talked to a founder at a party um
Speaker 1: last week at at a venue here in San Francisco
Speaker 1: that opened up for the first time since it shutdown
Speaker 1: because of covid Um. But this founder was saying that
Speaker 1: he's a very early stage health tech company and he
Speaker 1: already he already has talked to dozens of investors, more
Speaker 1: than a dozen investors, and he's got quite a few
Speaker 1: term sheets that keeps selecting between. So it's really taled
Speaker 1: to two markets. There's the late stage and there's the
Speaker 1: early stage, the late stage, lots of belt tightening, layoff, fear, denial, confusion,
Speaker 1: I think is the way one VC described founders reactions
Speaker 1: to having to humble their expectations and kind of pull
Speaker 1: it in for this reception what could be a very
Speaker 1: you know, much much longer correction UM. And then early
Speaker 1: stage companies UM are still about a team in a dream, right,
Speaker 1: and if they've got a good idea and if they
Speaker 1: can find product market fit. Talent is easier to find,
Speaker 1: and it's a lot cheaper to start a company in
Speaker 1: a downturn. The team and a dream. That's us in
Speaker 1: here in the Bloomberg. There's a T shirt there that
Speaker 1: tim Yeah, definitely, Oh yeah, that's that will. That will
Speaker 1: just sort of like, you know, put the icing on
Speaker 1: the cake. When it comes to my venture capital persona,
Speaker 1: Lizette Chapman, love it when you join us on a
Speaker 1: Bloomberg business week. She's technology reporter, she's venture capital reporter.
Speaker 1: Excuse me for Bloomberg News on the phone from San Francisco.
Speaker 1: It's her big take today. It is the big take.
Speaker 1: Check it out. High flying startups feel the pain of
Speaker 1: a long predicted downturn. It's featured give the upcoming issue
Speaker 1: of Business Week magazine. Joe Weber is the editor of
Speaker 1: Bloomberg Business Week. He also joined us in the Bloomberg
Speaker 1: Interactive Broker Studios. This is Bloomberg Radio. This is Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stinovic on Bloomberg Radio. Well, Walmart shares are down eleven
Speaker 1: point three right now. They're currently having their worst day
Speaker 1: since nineteen seven and, in fact, at their lows, the
Speaker 1: worst day since nineteen seventy four. This after the company
Speaker 1: cited rising expenses from supply chain that includes fuel, that
Speaker 1: includes food. The retailer is going to balance pricing with
Speaker 1: a need for profit growth. That's according to Walmart CEO
Speaker 1: Doug McMillan. Let's get into it with Jennifer bartoushas senior
Speaker 1: retail stables and packaged food analysts at Bloomberg Intelligence. Jennifer
Speaker 1: joins us from our Princeton, New Jersey bureau. Uh, Jennifer,
Speaker 1: good to have you with us. You've had a few
Speaker 1: hours to digest this report from from Walmart. Give us
Speaker 1: your takeaways. Well, I think one of the things that
Speaker 1: is is important to remember is that part of the
Speaker 1: myths that Walmart had today was selfa afflicted and it
Speaker 1: really comes back to how well they were able to
Speaker 1: manage their own UM forecasting for things like labor, which
Speaker 1: was a big component of the of the profit missed today,
Speaker 1: and further understanding where that consumer is in terms of
Speaker 1: their shopping behavior and how they're changing their patterns. UM.
Speaker 1: Because the retailer seemed a little surprised that some of
Speaker 1: their their consumers were pushing more of their spending into food. UM.
Speaker 1: But that shouldn't necessarily have been a huge surprise. Jennifer
Speaker 1: bartoshes UM. Why was this so surprising to investors? Though?
Speaker 1: If if this shouldn't have necessarily been such a surprise
Speaker 1: to two people who have been paying close attention to
Speaker 1: the company, then why are shares getting crushed? Well, the
Speaker 1: shares are down because the company really missed a couple
Speaker 1: of key things. UM. When I say it was self inflicted,
Speaker 1: you know, there were things that investors couldn't have anticipated,
Speaker 1: and so the profit miss really did was really a
Speaker 1: surprise because people didn't know that Walmart hadn't efficiently you know,
Speaker 1: managed their labor force in the getting of the year,
Speaker 1: you know, or that they were not able to offset
Speaker 1: some of the costs of fuel through more dynamic pricing changes.
Speaker 1: And so those are some of the operational things that
Speaker 1: I think people take for granted that the that the
Speaker 1: company is on top of and the fact that it
Speaker 1: had such a large toll and profits was really driving
Speaker 1: the surprise. Today, Jennifer, I have to ask about the
Speaker 1: dollar story. I come onto the show all the time
Speaker 1: and bothered him and Carol with all my dollar You
Speaker 1: love currencies. I do love currencies. I wish we had
Speaker 1: a currency show. It would it would be great. But
Speaker 1: the reason I ask is because Brendan Case made a
Speaker 1: very strong point this morning, and he said that international
Speaker 1: sales fell by about and he related it to the dollar.
Speaker 1: I'm curious, if you're looking at forecasts on Wall Street
Speaker 1: for a stronger dollar in thanks to a very hawkersh
Speaker 1: federal reserve, how much does that eat into walls Walmart's
Speaker 1: bottom line. Well, it certainly does have an impact UM.
Speaker 1: But what I will also say is that part of
Speaker 1: the decrease in in international revenue UM from dovestitures UM,
Speaker 1: so that there's no longer the size of the operation
Speaker 1: is no longer the same as it was before. UM,
Speaker 1: So part of the decrease was due to that UM.
Speaker 1: But the strength of the dollar is something that when
Speaker 1: especially because the largest UM overseas components for Walmart right
Speaker 1: now are in Mexico China. UM, you know that that
Speaker 1: dollar exchange rate does does make a meaningful impact on
Speaker 1: the bottom line. One thing that I wanted to talk
Speaker 1: about with you is, and we love hearing from Walmart
Speaker 1: and other large retailers because we get kind of a
Speaker 1: good read on the American consumer. There was some interesting
Speaker 1: nuggets about what consumers are buying right now. The idea
Speaker 1: that they're moving more towards generics or you know, buying
Speaker 1: smaller portions. How did you read into that? So when
Speaker 1: I listened to that, what I really think of is
Speaker 1: that they're really seeing a bifurcation of the consumer in
Speaker 1: the United States. UM. You know, we had home Depot
Speaker 1: report earlier today where they had a positive surprise. Right UM,
Speaker 1: people there were spent thing on the Walmart side. The
Speaker 1: the idea that people are trading down, or more importantly,
Speaker 1: that there are fewer items in the basket when they're
Speaker 1: checking out. That to me signals that those those consumers
Speaker 1: who are on the mid to lower end of the
Speaker 1: income scale are really starting to fill a pinch because
Speaker 1: of inflation or because of inflation is a big is
Speaker 1: a very big part of it, because if you think
Speaker 1: about it, in the last year and a half, a
Speaker 1: large swath of that population had meaningful pay rises. So
Speaker 1: the the the average you know, paper hour has gone
Speaker 1: up quite a bit. Um. There was some relief in
Speaker 1: terms of rent and things like that, and so people
Speaker 1: had more money, and they had stimulus funds in their
Speaker 1: pockets as well. Um, but inflation has gone up at
Speaker 1: a point to a pace where they're there for a while.
Speaker 1: The higher the higher hourly pay helped offset some of
Speaker 1: that inflation. But we may be hitting that inflection point
Speaker 1: where it just isn't doing that anymore. It's interesting that
Speaker 1: you talk about the lower income scale because I also
Speaker 1: think when I think of Walmart, I also think of
Speaker 1: the supercenter I lived by and close by, and they
Speaker 1: had a gas station as well. Something that Walmart talked
Speaker 1: about was the fuel part of it, how it's eating
Speaker 1: into their margins. But for the lower income crew that
Speaker 1: wants to or needs to actually fill up their gas tank,
Speaker 1: Walmart is kind of the go to place to do that.
Speaker 1: Can you square the two for us when it comes
Speaker 1: to fuel prices, we have about thirty seconds. Sure. So
Speaker 1: when it comes to fuel prices, obviously, the more you
Speaker 1: have to pay to put in your tank, the less
Speaker 1: you have to feed your your yourself or your family. Um.
Speaker 1: And so where it comes you know, where it comes
Speaker 1: to play is that Walmart plays in that space where
Speaker 1: people can consolidate their trips and maybe they don't go
Speaker 1: to the grocery store into Walmart, but they shop only
Speaker 1: at Walmart because of the price. So that's that's how
Speaker 1: you you can get those two to kind of come
Speaker 1: together and see where the consumer is. Jennifer, thank you
Speaker 1: so much for joining us. That's Jennifer Bartashes, senior retail,
Speaker 1: staples and package shoot analyst at Bloomberg Intelligence. Jennifer joining
Speaker 1: us on the phone from our Princeton, New Jersey bureau.
Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Well, we are
Speaker 1: just about ten minutes away from the close of trading here,
Speaker 1: and if we take a look at what's going on
Speaker 1: with the major industries right now. The del was hired
Speaker 1: by one point two percent, the SMB five hired by
Speaker 1: one point eight percent, the NASTAC higher by two point
Speaker 1: five Let's count down to the clothes right now, and
Speaker 1: we do that with Quincy Crosby, chief equity strategist at
Speaker 1: LPL Financial. Quincy joins us on the phone from South Carolina. Quincy,
Speaker 1: how are you? Thank you? It's really good to have
Speaker 1: you with us today. And I'm looking. I know it's
Speaker 1: only Tuesday here, but it does it does seem like
Speaker 1: we've at least turned a corner in these last you know,
Speaker 1: at least today. I don't want to go back too
Speaker 1: far here. And I'm wondering, Quincy, from from the from
Speaker 1: your perspective, given the retail sales number that we saw,
Speaker 1: given what we saw with home Depot, I mean, I
Speaker 1: don't know if you know this, I'm ignoring Walmart. Are
Speaker 1: we out of the now? We're probably not out of
Speaker 1: the world. Okay, I'm not surprised with that answer. But
Speaker 1: but one thing about about the tone of the market
Speaker 1: though for the actually the last couple of days, the manic,
Speaker 1: the manic tone that that we've had has eased. It
Speaker 1: almost feels maybe by comparison on this normal, the zix
Speaker 1: is down. The tone, the tone is almost quieter, which
Speaker 1: which maybe maybe is comforting and comforting us into believing
Speaker 1: that the worst is UH is passed. Can you fold
Speaker 1: in the cross asset story for us as well, because
Speaker 1: if you actually look at what the bond market has
Speaker 1: been doing as the spin of potentially bounces back big
Speaker 1: after emphasis on potentially, the bond market yields are actually
Speaker 1: staying below three square the two for US, well, it
Speaker 1: is in US. I know there's been rebalancing, so you
Speaker 1: you've seen buying in the treasure market. The other there's
Speaker 1: another aspect to it which is a little bit uncomfortable,
Speaker 1: and that is UH, the notion that there could be
Speaker 1: a growth scare. I'm thinking that perhaps that has dissipated
Speaker 1: a bit, but there is this notion that as the
Speaker 1: tenure treasure yield saves below that perhaps it's factoring in slower,
Speaker 1: much slower growth. I'd like to think that really the
Speaker 1: reason is that we're seeing buyers come in and then
Speaker 1: helping to push the yield down. I have to ask
Speaker 1: also about the flows story as well, because if you
Speaker 1: start to talk about rebouncing in the bond market, I
Speaker 1: think It's also worth mentioning the currency market and how
Speaker 1: much of the flows coming into the stock market are
Speaker 1: actually coming from abroad at a time where Europe is
Speaker 1: at far greater odds of a recession, where China is
Speaker 1: looking at UH continued and more aggressive. I want, I'd
Speaker 1: argue lockdown policies is the there is no alternative narrative
Speaker 1: back for some of those foreign investors when it comes
Speaker 1: to the US stock market. Well, yeah, I mean they're
Speaker 1: they're they're definitely finding value here in the United States,
Speaker 1: and you could see that today. The fact of the
Speaker 1: matter is that you even look at the valuations on
Speaker 1: the market. It you know, when we started this, it
Speaker 1: was twenty three times forward earnings at at the top,
Speaker 1: and that was when free money range and underpinned the market,
Speaker 1: and we had negative real rates and liquidity was plentiful.
Speaker 1: And now it's I th trading today at about seventeen
Speaker 1: times forward earnings. And there's there is a sense that
Speaker 1: the one thing about the United States about companies, the
Speaker 1: way they're managed, they will do what it takes to
Speaker 1: manage their companies. If you I'm just looking at one
Speaker 1: thing right now, take a look at Wayfair. It had
Speaker 1: been down, down, down. They talked about, you know, uncertainty
Speaker 1: and that they were going to freeze hiring for about
Speaker 1: ninety days and look at their share price. And this
Speaker 1: this considered to be a flexibility that American managers have
Speaker 1: in their companies in order to make certain that the company,
Speaker 1: uh you know does well, that the that the bottom
Speaker 1: line does well. And I think I think we're beginning
Speaker 1: to see that, and invest just globally are are seeing
Speaker 1: that as well. So Quincy. It raises the question is
Speaker 1: what's happening with American companies right now? Is that exactly
Speaker 1: what the Federal Reserve wants to see? Well, it's the set,
Speaker 1: I mean. And this is the difficulty for the set.
Speaker 1: You know, there's an essence between a rock and a
Speaker 1: hard place. What they want to see if if if
Speaker 1: they feel that inflation and supply chains will never ease,
Speaker 1: that you know, you'll continue to see supply chain constraints
Speaker 1: work today. You know, the headlines even about Shanghai have
Speaker 1: helped you know that that perhaps the restrictions will ease
Speaker 1: the supply chain out of a major part of the
Speaker 1: global supply chain, will be more readily available. Uh, what
Speaker 1: what they said, I would have to do is see
Speaker 1: financial conditions tighten more. And that comes through the market,
Speaker 1: because what do they want to do above all of
Speaker 1: to slow the economy? Slow down consumer's spending, slow down, uh,
Speaker 1: corporate spending. In fact, they you know, because they have
Speaker 1: another mandate, which is full employment. The fact that companies
Speaker 1: are saying, hey, we're going to hold off on hiring.
Speaker 1: That helps them, but only up to a point. But
Speaker 1: it helps because if we look at the data, there's
Speaker 1: there's one point, there are one point nine jobs available
Speaker 1: for every one worker in the workforce out there looking
Speaker 1: for a job right now. So if we do see
Speaker 1: hiring freezes, and right now we're seeing them. You know,
Speaker 1: we're having anecdotal evidence of that right now with with
Speaker 1: Wayfair and you know, we see layoffs at Netflix, and
Speaker 1: we see hiring freeze of Twitter, and I could go on,
Speaker 1: and our big take is about this today in Silicon
Speaker 1: Valley at least. Then then we are starting to see
Speaker 1: that and and potentially we'll get to a place where
Speaker 1: there aren't so many jobs looking for less than so
Speaker 1: many people. Well, that's true. And on the other side
Speaker 1: of that equation, though, is if the economy turns up,
Speaker 1: let's say, we have to have a host of positive surprises.
Speaker 1: You're going to need more workers coming in in order
Speaker 1: to increase the increase the supplies, you could keep wages down.
Speaker 1: This is the difficulty. We're in that period right now.
Speaker 1: We're seeking clarity. We're seeking clarity. Even you didn't say Walmart, Okay,
Speaker 1: I'll say it, yeah, Uh, but it was that a
Speaker 1: one off? Was it just about execution at Walmart? Are
Speaker 1: we going to hear about it tomorrow or next week? Uh?
Speaker 1: You know from Costco. This is what we're piecing together. Uh,
Speaker 1: this picture of whether or not the slowdown is becoming
Speaker 1: increasingly entrenched. You know, short of the pandemic, where it
Speaker 1: was almost seem like it was overnight. One day we
Speaker 1: were all find an day, we were all terrified. But normally, uh,
Speaker 1: you know, slow down don't happen overnight. They inch up
Speaker 1: on you. And then at the same time you want
Speaker 1: to keep that balance. So the FED wants to keep
Speaker 1: it in that path towards them, you know, a shallow, shallow,
Speaker 1: soft landing. But the fact of the matter is they
Speaker 1: don't want to see unemployment skyrocket. I don't think they
Speaker 1: mind what's now, but but it is it's it's not
Speaker 1: it's not a science. That's the right. It is not
Speaker 1: a science. It's not a science. Quincy Crosby, chief equity
Speaker 1: strategist at LPL Financial, joining us on the phone from
Speaker 1: South Carolina. Quincy really appreciate you taking the time and
Speaker 1: joining us on Bloomberg Business Week. Thanks for listening to
Speaker 1: Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or
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