Speaker 1: This is Bloomberg Business Wait inside from the reporters and
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Speaker 2: Disney shares fauling the most, and I think about six months,
Speaker 2: we definitely saw a bunch of selling today. It was
Speaker 2: really concerns once again about subscribers in its name Sake
Speaker 2: streaming service. They also predicted a wider loss in that
Speaker 2: business this quarter. So let's get to it. Let's talk
Speaker 2: about the quarter. Let's talk about the business. We've got
Speaker 2: a great roundtable. David Trainer is chief executive of New Constructs,
Speaker 2: former stock analyst on Wall Street. He now has a
Speaker 2: robo analyst technology that looks at companies, goes through it
Speaker 2: tells us makes sense about valuation and balance sheets. And
Speaker 2: Mark Douglas is with us, president CEO of A Mountain.
Speaker 2: It's an ad software company really works with brands to
Speaker 2: move into revenue and streaming TV and site visit and
Speaker 2: all this good stuff.
Speaker 3: So it's funked.
Speaker 2: I'm trying to set the stage, so let's get to it. Guys, David,
Speaker 2: I want to start with you your thoughts, just initially
Speaker 2: coming off of Disney, what they said last night on
Speaker 2: the call, what stands out.
Speaker 4: Yeah, I think that Disney is doing the right thing
Speaker 4: and de emphasizing Disney plus. I mean, look, streaming was
Speaker 4: never meant to be a money maker. Netflix has burned billions,
Speaker 4: They've never actually turned a cash profit in the streaming business,
Speaker 4: and I think Disney has rightly recognized that streaming is
Speaker 4: just another way to get customers into the top of
Speaker 4: their funnel so that they can monetize those folks downstream.
Speaker 4: And there are other much more profitable businesses like parks
Speaker 4: and merchandising, And that's a very unique advantage that Disney had.
Speaker 4: They actually make a lot of money and their other
Speaker 4: businesses that they can afford to have streaming as a
Speaker 4: loss leader, whereas Netflix and some of these other pure
Speaker 4: streaming plays cannot.
Speaker 3: So Mark, this is really interesting because I live it right.
Speaker 5: My daughter watches Frozen and Mowana on repeat, and then
Speaker 5: she begs me to take her to the toy store
Speaker 5: and spend much more money on the products from those.
Speaker 2: Two films to go to the Disney Park, and she.
Speaker 5: Wants to go to the parks because of them. So
Speaker 5: what David's saying makes a heck of a lot of
Speaker 5: sense to me. I'm much poorer for the streaming service.
Speaker 6: What do you think, Well, I think ultimately, you know,
Speaker 6: you have to buy products, not stocks, in the sense
Speaker 6: of the stocks that have the best products of what
Speaker 6: you buy. Consumers want streaming.
Speaker 4: So I don't.
Speaker 6: Quite agree the idea that Disney should move away from
Speaker 6: what its customers want. They want on demand content. They
Speaker 6: want a big choice in the content. And I think
Speaker 6: Disney and other companies they figured out how to make
Speaker 6: that profitable on linear television, and I think there's no
Speaker 6: reason they won't figure out how to do that profitably
Speaker 6: on streaming. Definitely going through a transition, and that trend
Speaker 6: from linear to streaming, and that transition has a lot of.
Speaker 4: Costs associated with it.
Speaker 6: But if you want to be involved in Disney long term,
Speaker 6: you have to believe in all the process of streaming products,
Speaker 6: the park products, the cruise products you know, and all
Speaker 6: the other you know, ESPN and all of that. So
Speaker 6: I think streaming is potentially the most important part of
Speaker 6: Disney because the migration from linear to TV is on
Speaker 6: the level of a million.
Speaker 4: Households and more, well to be a size of Phoenix.
Speaker 2: David, comeback, are you saying Disney should be out of
Speaker 2: streaming or that you say it makes sense but it's
Speaker 2: because it's a funnel into everything else.
Speaker 4: Yeah, yeah, I think I think we're really on the
Speaker 4: same pagtreot. I'm not saying that they should get rid
Speaker 4: of it. I think that they should be emphasized and
Speaker 4: not throw you know, money after like crazy like Netflix
Speaker 4: hit for years, right, and for the Netflix is Netflix
Speaker 4: and salesforce. These original business models that were built on
Speaker 4: an unlimited amount of capital to burn and the hopes
Speaker 4: of building a large enough customer base that they could
Speaker 4: eventually monetize that in a profitable way. That's not working
Speaker 4: for either business. And I think the good news is
Speaker 4: that Disney's not trying to do that. They do need it.
Speaker 4: It is a new channel. There's no question streaming around
Speaker 4: to stay, for sure, But don't go chasing streaming to
Speaker 4: the point where you're trying to acquire unprofitable customers.
Speaker 3: But well, you do think it's a loss leader though, right, David.
Speaker 5: So you think, for example, investors sell the stock when
Speaker 5: they see subscriber numbers fall, streaming subscriber numbers fall, and
Speaker 5: you're saying, Hey, those subscribers are expensive as hell, so
Speaker 5: if I see a few of them fall away in
Speaker 5: a quarter or two, it's not going to bother me.
Speaker 4: That's exactly what I'm saying. So I'm saying because a
Speaker 4: lot of these losses were in India and non US,
Speaker 4: and those are the least profitable customers. They're money losers,
Speaker 4: and so it's just time to get rational in the business.
Speaker 4: Because Netflix set an example being so irrational because they
Speaker 4: were using capital as a weapon, which that they could
Speaker 4: spend a limited amount of money to just go acquire
Speaker 4: customers for the sake of showing customer growth. Remember when
Speaker 4: everyone talked about Netflix, it was always about customer growth
Speaker 4: and nothing about profits. Right now we're talking about profits,
Speaker 4: and so they're boasting customer declines. And that's because you
Speaker 4: shouldn't chase unfowful customers. That doesn't mean the channel goes away,
Speaker 4: it just means it becomes more raptional.
Speaker 5: Now Netflix is actually up today or was up in
Speaker 5: the in the cash session, almost three percent. And I
Speaker 5: don't want to completely, you know, change the subject of
Speaker 5: the conversation here, But Mark Douglas, do you think Netflix
Speaker 5: still has a future? I mean, I think I believe
Speaker 5: that David's position is Netflix is going to cash burn
Speaker 5: itself out. Do you think Netflix is going to be
Speaker 5: able to cut costs and make money at some point
Speaker 5: because they haven't really generated free cash flow thus far.
Speaker 6: Yeah, I mean, I think there's definitely, given this scale,
Speaker 6: the opportunity to cut costs. I agree with what's being
Speaker 6: said in terms of different markets have different unit economics
Speaker 6: and you kind of have to make a clear choice
Speaker 6: as to which of those economics that you want to pursue.
Speaker 6: I think the big thing for Netflix is how all
Speaker 6: in are they going to go in terms of ad
Speaker 6: supported model, and you know, if they the streaming model,
Speaker 6: the unit economics at least in some markets, you know
Speaker 6: right that it's it hasn't been the greatest, but the
Speaker 6: opportunity to sell ads against that content I think is
Speaker 6: a boost to the brand. It brings in more of
Speaker 6: those subscribers, and even with their core subscribers, I mean,
Speaker 6: there's an opportunity to essentially do price increases through you know,
Speaker 6: basically the inclusion of ads at some point and maybe
Speaker 6: you trade you know, a dollar or two dollars a
Speaker 6: discount for five, six, seven dollars more of revenue over
Speaker 6: the month. But these things are hard to do, and
Speaker 6: I think I completely agree that the obsession with subscribers
Speaker 6: it needs to stop. I think people actually want that
Speaker 6: because it's a reason to get the stock to swing
Speaker 6: and generate profits for short term traded.
Speaker 2: David, you've got this natural language processing technology formula. You
Speaker 2: can really look at Disney earnings, the quality of those earnings,
Speaker 2: you know, and against its current valuation. When you do that, David,
Speaker 2: what does it tell you about Disney?
Speaker 4: Well, Disney's economics are are the worst they've been in
Speaker 4: a while. You know. Look, I think the double whammy
Speaker 4: of the Fox acquisition in COVID was rough, and you
Speaker 4: know this, but we are seeing the margins and returnsal
Speaker 4: capital turning back up. I think with Bob Eiger back
Speaker 4: in charge, we could expect to see that trend continue.
Speaker 4: And that's why we're bullish. We think if returnsal capital
Speaker 4: get back to half of where they were, the stock's
Speaker 4: easily one hundred and thirty dollars stock.
Speaker 2: Mark ESPN streaming. How valuable is that? Because you know
Speaker 2: that there's been pressure on Disney to kind of kick
Speaker 2: it out as a separate entity.
Speaker 7: Yeah, I think.
Speaker 6: I think it's critical to the brand. I mean, the
Speaker 6: one thing everyone should remember. More people want television a day,
Speaker 6: then use social media, and they spend three times as
Speaker 6: much time doing it too. They spend fifty nine minutes
Speaker 6: a day on TikTok and met they spake three hours
Speaker 6: a day on television. So, you know, the Disney brand
Speaker 6: is built on the broad appeal or a lot of consumers.
Speaker 6: A lot of that appeal starts with those television assets,
Speaker 6: those movie assets, so they're really critical to brand. I
Speaker 6: actually think long term, the biggest risk to Disney is
Speaker 6: the brand is associated with being magical, and they need
Speaker 6: to maintain that magic in terms of everything they're doing.
Speaker 6: So they have to balance the short term cust cutting
Speaker 6: with maintaining the magic, to maintain the price points that
Speaker 6: they have like at Disneyland and with all these products,
Speaker 6: and maybe over time with the subscription services. I think
Speaker 6: it's really critical for the long term health of the
Speaker 6: Disney brand.
Speaker 2: All right, guys, we got to leave it on that note,
Speaker 2: and they get to complain about ESPN Plus, Well, you know,
Speaker 2: we'll save that for next blog.
Speaker 5: Okay, I just want to complaycause I don't get to
Speaker 5: see enough good games on ESPN plus not on cable.
Speaker 2: Well me, is it Friday yet? David Trainer over at
Speaker 2: New Constructs, Smart Douglas at Mountain, We really appreciate you, Johnny,
Speaker 2: Matt and myself. You are listening and watching Bloomberg Business Week,
Speaker 2: and this is Bloomberg Radio.
Speaker 1: If you're listening to the Bloomberg Business Week podcast, catch
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Speaker 2: We're going to take a step back from the markets
Speaker 2: for a moment to something I think it's safe to
Speaker 2: say that most of us have dealt with in our
Speaker 2: lives on some level, and that is hearing loss. That
Speaker 2: two to three out of every one thousand children in
Speaker 2: the US are born with the detectable level of hearing
Speaker 2: loss in one or both ears. More than ninety percent
Speaker 2: of deaf children are born to hearing parents, and roughly
Speaker 2: fifteen percent of American adults. We're talking about more than
Speaker 2: thirty seven million age eighteen and over. Report some trouble hearing,
Speaker 2: so it's a big issue. So we want to to
Speaker 2: get to it with doctor Kerrie Neman, core faculty member
Speaker 2: for the Coochlear Center for Hearing in Public Health at
Speaker 2: the Johns Hopkins Bloomberg School of Public Health, supported by
Speaker 2: Michael R. Bloomberg, Founder of course at Bloomberg Elpy and
Speaker 2: Bloomberg Philanthropies. She is with us on Zoom from Bethesda, Maryland.
Speaker 2: Doctor Neman, it is so nice to have you here
Speaker 2: with Matt and myself. It is a big issue. I
Speaker 2: certainly dealt with it with my aging dad went through
Speaker 2: hearing aids. It wasn't always such an easy process. But
Speaker 2: talk to us a little bit about it.
Speaker 3: Why I'm so loud by the way you are loud, man.
Speaker 5: Because well I know, but all joking aside, right, It's
Speaker 5: because I have pretty significant hearing loss.
Speaker 3: And over time I just don't afore myself as well.
Speaker 5: Are you born with no I just ruined my hearing
Speaker 5: in my teenage years and as a result, I guess
Speaker 5: you know, it's the same thing happened to my dad, So
Speaker 5: it could be genetic genetic to some extent.
Speaker 2: Doctor Nemen, come on in and kind of set the
Speaker 2: stage for us because it apparently, like I said, it
Speaker 2: affects a lot of us.
Speaker 8: Yeah, exactly, exactly. We almost all of us at some
Speaker 8: point in time are going to experience some degree of
Speaker 8: hearing loss. The thing that I think has really shifted
Speaker 8: and changed in the past ten to fifteen years is
Speaker 8: now how we think about hearing loss. We really no
Speaker 8: longer think about it as this just benign part of
Speaker 8: the aging process. It is, you know, something that we
Speaker 8: view and need to view right in the context of
Speaker 8: healthy aging. So if we all want a shot at
Speaker 8: aging as well as possible, it needs to be kind
Speaker 8: of in that long list of things that we're all
Speaker 8: thinking about as we age.
Speaker 5: So how do people deal with it if they have
Speaker 5: less money? You know, my mother in law, who lives
Speaker 5: in Spain, which is a socialist country, just spent four
Speaker 5: thousand euros to buy hearing aids and I was so
Speaker 5: you know, impressed with the price. I just couldn't believe
Speaker 5: it is that how much that kind of gear costs.
Speaker 2: That's kind of what it caused my dad, I think too.
Speaker 9: Yeah, it's crazy.
Speaker 8: Yeah, And that is Yeah, that's certainly in line with
Speaker 8: what we see and what we've traditionally seen. The thing
Speaker 8: that has shifted in this you really past year or
Speaker 8: so is the advent and the opening of over the
Speaker 8: counter hearing aids into the market. And so that's one
Speaker 8: important piece of the puzzle in terms of how do
Speaker 8: we make hearing care more affordable, is by bringing the
Speaker 8: technology side of things down in terms of opening up
Speaker 8: that market and so it's not dominated just by a
Speaker 8: few kind of players, but opening up to consumer electronics
Speaker 8: and many others to enter. But I think the important
Speaker 8: piece here is, yes, we have technology, but how do
Speaker 8: we connect older adults to that technology? And that's a
Speaker 8: lot of the work that I do in partnership with
Speaker 8: community partners and particular community health workers.
Speaker 2: Yeah, and only I wonder if this is going to
Speaker 2: be in the budget talks. I'm guessing not necessarily like
Speaker 2: spending on this or providing I say that I'm bringing
Speaker 2: that up because the headline is crossed. President Biden's meeting
Speaker 2: with congressional leaders on the debt ceiling has been postponed.
Speaker 2: So it goes on business as usual sometimes if you will,
Speaker 2: when it comes to Washington. But doctor Nieman, no, I
Speaker 2: do think about this right like it is so expensive,
Speaker 2: and you do want what we're doing to somehow make
Speaker 2: it more affordable or is there something the government can do.
Speaker 2: I don't know what's the answer here. What do you
Speaker 2: How do you guys.
Speaker 6: Look at it?
Speaker 8: How we look at it is you know, we have
Speaker 8: this kind of new piece in terms of over the
Speaker 8: counterhearing technology, but it can be really hard to navigate
Speaker 8: in terms of where in the world you even start
Speaker 8: in terms of googling versus you know, going to an
Speaker 8: audiologist versus going to an E ANDT your primary care doctor.
Speaker 8: You know, where do we start? And so a lot
Speaker 8: of the work that we've done is saying, you know,
Speaker 8: how can we make this as easy as possible in
Speaker 8: terms of partnering with individuals in a community setting who
Speaker 8: can go through kind of a structured way in which
Speaker 8: they introduce somebody to a piece of technology and say, hey,
Speaker 8: this is how you learn how to use it. This
Speaker 8: is how we can get you set up and going.
Speaker 8: And you know, we have seen results in our work
Speaker 8: that are comparable to what we see with gold standard hearing.
Speaker 8: It's fit by an audiologist and that's you know done.
Speaker 8: You know, in a community setting, in partnership with community
Speaker 8: health worker two hours using over the counterhearing technology. And
Speaker 8: so it's not only just the technology, but it's an
Speaker 8: openness to kind of new and different models of care
Speaker 8: that are going to need to come alongside.
Speaker 3: So talk to us about the gear. The basic setup
Speaker 3: is how much does it cost?
Speaker 5: Is it just like an amplifier that you know, makes
Speaker 5: the sounds in your in your atmosphere louder and.
Speaker 3: Can you get it at you know CVS or Dwayne Reed?
Speaker 3: What is this?
Speaker 8: Yeah, yeap one hundred percent. So there are a lot
Speaker 8: of different options available. There are options that look like
Speaker 8: a headset that can be you know, user friendly for
Speaker 8: individuals who've you know, had a stroke or have bad arthritis,
Speaker 8: and those can run around just one hundred dollars and
Speaker 8: they can work really well. But then there's obviously a
Speaker 8: lot of other devices that are at your level that
Speaker 8: look like you're traditional hearing aid and those are going
Speaker 8: to run more in line with around three hundred four
Speaker 8: hundred for one side for one ear, So that is
Speaker 8: certainly some money, but it is definitely an improvement from
Speaker 8: the four thousand dollars. You know, hearing is that you
Speaker 8: may get, you know, through your audiologists or your n T.
Speaker 2: Can you just do one the year? I guess you can, right, like,
Speaker 2: if you just have pressure? Yeah, what if you I
Speaker 2: mean if you kidding?
Speaker 9: Ideally, yeah, go ahead.
Speaker 8: Yeah, ideally, Ideally it's two. You know, but if we
Speaker 8: were talking about nothing versus something, we'll always take something,
Speaker 8: and one is always better than none.
Speaker 3: What about people born with hearing loss?
Speaker 5: You know I did years ago, I did a piece
Speaker 5: on cochlear implants for the deaf, and there was some
Speaker 5: debate in the community about whether or not that was
Speaker 5: even a good idea because they don't and they don't
Speaker 5: want to really accept deafness as being something that needs
Speaker 5: to be fixed. On the other hand, we had a
Speaker 5: guest the other day who's had ninety percent hearing loss
Speaker 5: in his left ear since he was born, and he
Speaker 5: went and got a cochlear implant that he.
Speaker 3: Says has just changed his life for the better.
Speaker 2: So recently got it.
Speaker 5: Yeah, and he's sixty five years old, and he finally said,
Speaker 5: you know what, it's time. The technology is there and
Speaker 5: he's bald anyway, so he just went and got one.
Speaker 8: Yeah. No, so good question. A lot of what our
Speaker 8: work is focused on from kind of a public health
Speaker 8: perspective is really based on on the numbers in terms
Speaker 8: of you know, for sure there you know, we have
Speaker 8: individuals who are deaf heart of hearing, who are born deaf,
Speaker 8: but that does represent a fairly small portion of the
Speaker 8: population in terms of you know, those numbers you were
Speaker 8: citing in terms of in the millions. You know though,
Speaker 8: that's primarily age related hearing loss, and most of that
Speaker 8: is mild and moderate and so solidly in the realm
Speaker 8: of individuals who generally want to stay within the hearing
Speaker 8: world and are are looking for assistance and don't yet
Speaker 8: qualified for cochlear implant. So it's really that group of
Speaker 8: individuals that we're looking, you know, that over the counter
Speaker 8: hearing aids and kind of these new and different delivery
Speaker 8: models are looking to help address.
Speaker 3: Before we go.
Speaker 2: And I'm thinking about this having dealt with you know,
Speaker 2: aging parents and aging family members, the connection between hearing
Speaker 2: loss and depression or dementia for that fat matter.
Speaker 8: Yeah, so great question. There have been a lot of
Speaker 8: large population based studies that have seen an association and
Speaker 8: really kind of repeatedly in association between things like hearing loss, mensia,
Speaker 8: cognitive decline.
Speaker 9: But the big.
Speaker 8: Question that really remains for a lot of us in
Speaker 8: the scientific realm, is have we seen data that shows
Speaker 8: us that if we take somebody who you know, maybe
Speaker 8: doesn't have a depression or you know, doesn't have dementia,
Speaker 8: and you know, give them a hearing aid, can we
Speaker 8: slow that cognitive cline or can we you know, improve
Speaker 8: their depression and do that in kind of a structured,
Speaker 8: rigorous fashion. And so that is happening and ongoing right
Speaker 8: now in terms of some of the larger trials, and
Speaker 8: we're really excitedly waiting the results of that, which are
Speaker 8: expected out this year in terms of twenty twenty three,
Speaker 8: so a lot more to come there. But that's exactly
Speaker 8: the type of thing that we're thinking about when we're
Speaker 8: saying hearing loss matters.
Speaker 2: Well, so appreciate catching up with you. Thank you so much.
Speaker 2: Really important, certainly, doctor carry Neiman. She's core faculty member
Speaker 2: of the Cochlear Center for Hearing in Public Health at
Speaker 2: the Johns Hopkins Bloomberg School of Public Health, as we
Speaker 2: remind you, supported by Michael R. Bloomberg, founder at Bloomberg
Speaker 2: LP and Bloomberg Philanthropies. But so do you ever think
Speaker 2: about that you might hearing needs at some point, I.
Speaker 5: Think I definitely will. You know, my dad has gotten them.
Speaker 5: And I think it's interesting that you bring up the
Speaker 5: connection between hearing loss and dementia or hearing loss and depression,
Speaker 5: because I have seen that firsthand and the turnaround is
Speaker 5: pretty marvelous. So I think people just don't think about
Speaker 5: it and they don't make time to go and deal
Speaker 5: with this kind of thing because they think I can't
Speaker 5: hear that. Very well, no big deal. It is a
Speaker 5: big deal, and it's better if you take care of.
Speaker 2: It because you're really, you know, kind of excluded if
Speaker 2: you can't hear, and so it's it's a really important issue.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: Just say Alexa, play Bloomberg eleven thirty and we want.
Speaker 2: To talk to a company and to its head. They
Speaker 2: actually reported earnings this week. They are about a two
Speaker 2: point nine billion dollar market cap app, location, software and
Speaker 2: cloud company. We're talking about Digital Ocean Holdings, first quarter
Speaker 2: revenues met estimates. As for the overall report, though Barkley
Speaker 2: said the results were somewhat mixed and we're looking at
Speaker 2: a stock that's up about twenty five percent so far
Speaker 2: here in twenty twenty three. Yancy Sproul is CEO at
Speaker 2: Digital Ocean, joining us on Zoom from Boulder, Colorado. Yancey,
Speaker 2: it is nice to have you here with Matt and
Speaker 2: myself before we start and get into the quarter in
Speaker 2: the business, just remind our world exactly what you guys do.
Speaker 2: Application software covers an awful.
Speaker 7: Lot, that's sure does and great to be with you.
Speaker 7: We're a cloud infrastructure company, which means we have a
Speaker 7: dispersed set of computer and other storage assets around the world,
Speaker 7: and we rent access to the nearly seven hundred thousand
Speaker 7: customers around the world one hundred and eighty five countries,
Speaker 7: and so they can rent access to our cloud infrastructure
Speaker 7: to achieve their compute needs versus owning their own computer
Speaker 7: equipment around the world.
Speaker 2: So a lot of them startups, a lot of them startups.
Speaker 1: Yeah.
Speaker 7: We we focused mainly on early stage businesses, so people
Speaker 7: who have ideas, developers who are testing ideas and they
Speaker 7: graduate into about one hundred and forty thousand of those
Speaker 7: seven hundred thousand customers are running small emerging startup businesses
Speaker 7: on the platform. And why they come to us is
Speaker 7: it's simple, easy, intuitive to use. We provide a lot
Speaker 7: of support and documentation.
Speaker 2: And they don't have to spend on it.
Speaker 7: Then, right, Yeah, and then the last piece is it's cheap,
Speaker 7: you know, relative to other alternatives.
Speaker 5: So yeah, how do you how do you how do
Speaker 5: you keep it cheap relative the alternatives?
Speaker 3: Could you? I would imagine scale allows costs to be dropped.
Speaker 3: So what do you do to fight?
Speaker 7: Yeah, we we certainly don't have the scale of some
Speaker 7: of the Microsoft et cetera. Those but you know, we
Speaker 7: are very large customers of some large hardware providers. And
Speaker 7: you know we over this eleven year history of our
Speaker 7: company have become very good operators. We're getting better over
Speaker 7: time and also so that's important operational excellence and that's
Speaker 7: an ongoing thing. The other thing is we are very
Speaker 7: tailored our product applications to a narrow set of customers,
Speaker 7: which is the SMB small medium sized businesses early stage startups,
Speaker 7: which is about one hundred billion dollar market size. It's
Speaker 7: a much smaller market than the than the big players
Speaker 7: play that focus on enterprise. So because we are focused
Speaker 7: on a smaller end of the market, simplicity of the
Speaker 7: product set allows us to not have to invest in
Speaker 7: a broad diverse set of applications to cover the breadth
Speaker 7: of an enterprise market, and that keeps costs down as well,
Speaker 7: because we can be very focused in our applications that
Speaker 7: we offer customers.
Speaker 2: Yeah, what impact have you seen in your demand flows
Speaker 2: if you will, coming off of the collapse of Silicon
Speaker 2: Valley Bank, if you're working with startups in that space,
Speaker 2: I'm just curious what impact you've seen.
Speaker 7: Well, I wouldn't say, you know, one of the things
Speaker 7: we've seen over the last year is a slowing in
Speaker 7: the broader economy. I don't know that we've seen any
Speaker 7: change over the last six weeks since that bank. Seventy
Speaker 7: percent of our customers are outside of the United States.
Speaker 7: Most of our customers are bootstraps. You know, they have
Speaker 7: a day job and then they start a business at night,
Speaker 7: and when it gets of scale they can pay for
Speaker 7: their own bills. They quit their day job. So they're
Speaker 7: not part of that institutional capital market. So we didn't
Speaker 7: see we saw very little impact, had very little exposure
Speaker 7: both directly as a business but also in terms of
Speaker 7: our customers, and saw no real disruption you know, over
Speaker 7: the last couple of months as that's all played out.
Speaker 5: So I imagine you have server farms, probably in more than
Speaker 5: one location. Talk to us about where you set up
Speaker 5: your gear and what kind of energy bills do you pay.
Speaker 5: You know, we've seen the cost really fluctuate, but last summer,
Speaker 5: for example, very expensive.
Speaker 7: Well, we're in fifty different locations around the world New York, Singapore, Frankfurt, Sydney, Toronto,
Speaker 7: San Francisco, India, Bangalore, India.
Speaker 3: All right, you don't have a name them all, Yancy, all.
Speaker 7: Right, So we're all over the place and we serve
Speaker 7: customers all over. We have a very very high capability
Speaker 7: in network and you know power energy is a big cost.
Speaker 7: We talked about that in the last earnings call earlier
Speaker 7: this week that we are paying slightly higher power costs
Speaker 7: in Europe because of the anticipated higher costs that we're
Speaker 7: going to be there because of what's going on in Ukraine.
Speaker 7: Obviously it hasn't played out, so hopefully that will dissipate
Speaker 7: over time, but it's a big cost.
Speaker 9: You know.
Speaker 7: One of the good things about our business is we
Speaker 7: have Moore's Law playing it in that, you know, efficiencies
Speaker 7: being built into the chips, into the technology. They get smaller,
Speaker 7: they consume less power over time. We work very closely
Speaker 7: with our data. We self host, so we have third
Speaker 7: party data centers and we work with them on their
Speaker 7: strategies for energy efficiency. So I think we have a
Speaker 7: good plan going forward and actually a good footprint today,
Speaker 7: and we have tailwinds that are back just given the
Speaker 7: nature of technology how it evolves, but power is a
Speaker 7: meaningful cost for us in our footprint today.
Speaker 2: You mentioned seventy percent of your customers are outside the
Speaker 2: United States. Is it largely in Europe? Is there a
Speaker 2: specific region of the world. I'm just no, no, you're
Speaker 2: shaking your head to You talked about all the centers
Speaker 2: you have, So what does it tell you then about
Speaker 2: kind of what's going on in the global economy. You
Speaker 2: said things have been slowing down over the past year.
Speaker 2: Are they continuing to slow down?
Speaker 5: You know.
Speaker 7: The beauty of our business is because we have such
Speaker 7: an easy way for customers to come to and sign
Speaker 7: up to be a customer on a website ten million
Speaker 7: people come to our website a month. Tens of thousands
Speaker 7: become paying customers every month, so very efficient. We get
Speaker 7: people from all over the world, and so we're split
Speaker 7: roughly Europe, Asia, United States, North America and the rest
Speaker 7: of the world. It looks like GDP, so we truly
Speaker 7: are a reflection of entrepreneurial activity happening all over the world.
Speaker 7: We also don't have a lot of customer or industry.
Speaker 10: Concentration, but you still see.
Speaker 7: Thanks, We're seeing very consistent trends across the world.
Speaker 2: All right, got to run, Yancey, Thank you so much.
Speaker 2: Yancey Sproul. He's chief executive officer at Digital Ocean. Joining
Speaker 2: us on zoom from Boulder, Colorado. As we said, this
Speaker 2: stock is up about twenty six percent this year.
Speaker 1: Is Bloomberg Business Week with Carol Messer and Tim Stenebeck
Speaker 1: on Bloomberg Radio.
Speaker 2: Listen, all right, we are going to talk about secrets
Speaker 2: the new way show Bloomberg BusinessWeek. It's out on newsstands,
Speaker 2: online at Bloomberg dot com, slash BusinessWeek, and of course
Speaker 2: on the Bloomberg. The cover story is about an iconic
Speaker 2: brand with a closely guarded secret recipe We know about that,
Speaker 2: but we're going to tell you about the plot to
Speaker 2: still the other secret inside a can of Coca cola.
Speaker 2: Writing about it the Bloomberg team of Drake Bennett and
Speaker 2: Jordan Robertson. Drake is Bloomberg BusinessWeek Technology reporter here in
Speaker 2: our Bloomberg Interactive Broker Studio along with the editor of
Speaker 2: Bloomberg Business Week, Joel Weber. And Joel this is another
Speaker 2: high story. You guys are good with these.
Speaker 11: Hi's a that's a funny little inside joke between Drake
Speaker 11: and me. Uh, yeah, it is.
Speaker 3: And even more than that.
Speaker 11: It's a story about uh, kind of the Chinese industrial
Speaker 11: complex looking for IP. And this culminated in a cover
Speaker 11: story that Jordan and Drake did together last year around
Speaker 11: ge and that was a miraculous story that had a
Speaker 11: real cat and mouse game. And if you haven't read
Speaker 11: that one, you should go back and read it. But
Speaker 11: you should also read this one because it centers on
Speaker 11: yet another big secret, which is what's instead of cocaine
Speaker 11: but not the liquid. Turns out, the liner Drake Bennett
Speaker 11: is incredibly valuable as well.
Speaker 10: Yeah, and potentially more useful because if you didn't have
Speaker 10: this two micron thick polymer liner in your cocaine. The
Speaker 10: coke would basically devour the can.
Speaker 5: Not just coke though, right, because a lot of SODA's
Speaker 5: would devour a can if they didn't have this liner, right, Yeah, exactly,
Speaker 5: the liners which are.
Speaker 3: Made by like Basf Dow Chemical, Axon, Nobel Williams.
Speaker 5: So these liners are probably used by I'm guessing other
Speaker 5: soda makers besides Cocke.
Speaker 3: Yeeah, totally.
Speaker 10: Coke occupies a particularly important position in this market because
Speaker 10: they're such a giant. So when they decide, you know,
Speaker 10: they're going to use something or not use something, it
Speaker 10: basically decides whether that thing has a market. So that
Speaker 10: uh happens to be the thing that this woman at
Speaker 10: the center of our story took advantage of because she
Speaker 10: was a chemist at Coke and she was responsible for
Speaker 10: deciding or helping decide which of these new coatings would
Speaker 10: go into coke cans or not. And she uses this
Speaker 10: to basically get a lot more of this information than
Speaker 10: anyone at Coke had everybody able to get and then
Speaker 10: takes it to try to start.
Speaker 11: Her slow this down.
Speaker 5: We got.
Speaker 3: There's so much to talk about it. She's only one
Speaker 3: of only two people that had access.
Speaker 8: Yeah.
Speaker 10: Shannon Yo, she's a Chinese born chemical engineer, a very
Speaker 10: talented one with actually like a bunch of cool patents
Speaker 10: to her name, and she had this job at Coke
Speaker 10: where she was basically the game keeper. It is something
Speaker 10: called the Scientific and Regulatory Affairs Group, which is this
Speaker 10: sort of group that approves these things, and she was
Speaker 10: the contact person with these big chemical these big coatings companies.
Speaker 10: Part of what's fun of the story was just like
Speaker 10: learning about all these cool coatings out there in the
Speaker 10: world on like stealth bombers and computers.
Speaker 11: Can we talk about that for a second, because like
Speaker 11: it turns out everything in the world actually has a
Speaker 11: secret coating on it.
Speaker 10: Yeah, yeaheah, all these you know, if you think about
Speaker 10: there's all these like interfaces in the world where like
Speaker 10: you're touching a thing, or like you know, there's a
Speaker 10: bridge and it's in like salty air, so the paint
Speaker 10: needs to prevent it from rusting, or you know, there's
Speaker 10: my favorite actually was this paint for ship holes that
Speaker 10: basically like has the like a bioside in it that
Speaker 10: kills barnacles so that these ships can go back and
Speaker 10: forth across the ocean and barnacles can't attach to it.
Speaker 2: We put it on our boat.
Speaker 3: I wish I had that in my dad when I
Speaker 3: was a kid, repainted every year.
Speaker 2: It's pretty amazing.
Speaker 3: It's what you do exactly.
Speaker 11: And it turns out like this is what chemists do
Speaker 11: at big corporations, right. It is like work on these
Speaker 11: incredibly complicated formulas exactly. Massive ip that's caught up with that,
Speaker 11: and you think about that within a company is like
Speaker 11: there's only a few people that. I mean, it makes
Speaker 11: me wonder if two people have the secret for this formula,
Speaker 11: how many people have it for the other the core formula?
Speaker 10: Right, yeah, yeah, I mean exactly secret.
Speaker 11: Secret football suitcase for that. I don't know, Okay, yeah.
Speaker 10: I mean there's a whole like staginess around that trade secret.
Speaker 3: I feel like, yes, very much.
Speaker 10: So, but uh yeah so anyway, so yeah, so basically,
Speaker 10: and the I mean one of the other cool things
Speaker 10: about this coding is is it has to get sprayed
Speaker 10: on in these cans that are like going at super
Speaker 10: high speeds through these giants. So there's all these sort
Speaker 10: of technical problems that these companies had to solve, and
Speaker 10: they spent tens of millions of dollars over many years
Speaker 10: to get these coatings just right. And the other bit
Speaker 10: of it, if you want to get into it, is
Speaker 10: that these particular ones were particularly valuable and new because
Speaker 10: they had gotten BPA out of them, which is something
Speaker 10: that we're increasingly trying to get out of things that touch.
Speaker 5: EPA is like a plasticy substance that what does it
Speaker 5: cause cancer if we're exposed to it for too long?
Speaker 10: There's some research that suggest that it messes with your endocrinces,
Speaker 10: so it can give you diabetes. It can, it can
Speaker 10: sort of, right.
Speaker 5: If consumed in large right, if it consumed in American
Speaker 5: level quantities, right.
Speaker 1: Yeah, exactly.
Speaker 11: So she was a great colleague, it turns out.
Speaker 10: Yeah, right, no exactly. I mean, part of what's kind
Speaker 10: of particularly like colorful about the story we felt is
Speaker 10: that if you were trying to do something like what
Speaker 10: she was trying to do, which is basically like squirrel
Speaker 10: away these incredibly valuable trade secrets from your employer, like
Speaker 10: you try to be presumably like pretty thick chill about it.
Speaker 10: But she was actually this incredibly obstreperous personality, and everyone
Speaker 10: at a new place she'd ever worked with, was like, Yeah,
Speaker 10: she was just always like really loud and really like
Speaker 10: getting any of these arguments and had these like very
Speaker 10: contentious relationships with the companies whose ip she was like
Speaker 10: trying to steal basically, So it's not one of those
Speaker 10: things where like, you know, after the crime, everyone's like, wow,
Speaker 10: you know, I never thought he you know, it seemed
Speaker 10: like such a nice boy.
Speaker 3: Yeah, I never thought.
Speaker 10: Yeah she was.
Speaker 3: She did get fired.
Speaker 5: They fired her though before, so maybe if they hadn't
Speaker 5: fired her, she wouldn't have tried to steal their ip.
Speaker 10: Well actually yes, and so that is actually something that
Speaker 10: her family members mentioned in the sort of sentencing letters
Speaker 10: they were to the judge after she was convicted, which
Speaker 10: is that, yeah, she would have they say, you know,
Speaker 10: stated Coke and you know, made her career there. I mean,
Speaker 10: that's complicated by the fact that she had been So
Speaker 10: the other part of this is that all along or
Speaker 10: basically through the entire period she was working at Coke,
Speaker 10: and then afterwards when she goes to work at Easton Chemical,
Speaker 10: she's having these conversations with these business partners, including some
Speaker 10: relatives in China, about starting her own competing codings company
Speaker 10: to bring these new high tech codings to China where
Speaker 10: there is not a a sort of domestic producer of
Speaker 10: these things. So it's this giant unmet need. There's a
Speaker 10: lot of public money that they can get to do this,
Speaker 10: and so there's this kind of parallel thing going on
Speaker 10: that emerges, you know, only when the FBI gets their
Speaker 10: hands on all of our electronic devices, where she's got
Speaker 10: this whole plan going at the same time, and that's
Speaker 10: why she needs this ip.
Speaker 3: A thousand talents program.
Speaker 11: This has come up in many other stories, not totally
Speaker 11: new here, but what concerns do American corporations have about
Speaker 11: things like Beijing's thousand talents programs?
Speaker 10: So thousand Talents is probably the best known of these
Speaker 10: sort of grant programs that the Chinese government has. Provincial
Speaker 10: governments have them, the national government has them. And ostensibly
Speaker 10: they're basically a way to try to get these Chinese
Speaker 10: born engineers and scientists who have gone abroad to get
Speaker 10: educated or to get these jobs at high tech companies,
Speaker 10: to get them to come back and start Chinese companies.
Speaker 10: What they end up doing, according to their critics, is
Speaker 10: also functioning as these bounties for IP. So it's like
Speaker 10: come back and start a company, but bring some like
Speaker 10: valuable IP with you from ge aviation or from coke
Speaker 10: or wherever you are now.
Speaker 3: And so this is what was smart. Wh wouldn't they
Speaker 3: do that?
Speaker 10: Yeah? Right, it's like exactly, it's just.
Speaker 3: How internationally forever yes.
Speaker 10: Right now, there's a long history of you know, the
Speaker 10: United States did it, England did it? You know, I
Speaker 10: just go back. It's sort of what it's the way
Speaker 10: the game has been played. But right now one of
Speaker 10: the ways the game is played is through these programs.
Speaker 10: And so Shannon and her co founders uh got some
Speaker 10: of this money. They applied for it, and they got
Speaker 10: it for the purpose of starting up a BPA free
Speaker 10: coding factory and lab in China.
Speaker 2: I had this idea, yeah right.
Speaker 10: Stuff right, yeah no, And it's like you know, I
Speaker 10: mean it was very important for the purposes of the
Speaker 10: application to say, like here's the IP that we have.
Speaker 10: And you know, they didn't just to kind of like
Speaker 10: they they had. It was for the application. The they
Speaker 10: basically she has an impressive resume, but they basically like
Speaker 10: guild the lily in all these amazing ways. They say,
Speaker 10: she's like the CTO of fortune. Five hundred company, which
Speaker 10: she wasn't. They say she actually invented these codings, which
Speaker 10: she didn't. They produce this fake sort of licensing agreement
Speaker 10: that would have given them the rights to these technologies,
Speaker 10: which they didn't have. So there's a whole package that's
Speaker 10: very fraudulent that they used to get the money.
Speaker 11: Okay, so she's got you know, employers and employees who
Speaker 11: don't really like her, She's got this exit strategy in China.
Speaker 11: How does the all come to a head.
Speaker 10: Well, it comes to a head because again she basically
Speaker 10: keeps making such a spectacle of herself and being so
Speaker 10: sort of blatant about what she's doing that her employer,
Speaker 10: after Coke, which is Eastman Chemical, sort of fires her.
Speaker 10: But even after that, she sort of keeps doing these
Speaker 10: things that raise these red flags, and so eventually they
Speaker 10: get their hand. They they noticed she's been like downloading
Speaker 10: these files onto a USB drive, and so they insist
Speaker 10: on getting that back when they fire her, and they
Speaker 10: find these Eastman files, but then all these other files
Speaker 10: from all these companies where she hasn't even worked before.
Speaker 10: And so then at that point there's a guy that
Speaker 10: he'sman who used to work for the FBI, and he
Speaker 10: calls some of his old colleagues and then it becomes
Speaker 10: a criminal thing. And then the companies, the ax Nobels
Speaker 10: and Sean Williams find out that their secrets are out
Speaker 10: there and they so she gets in. At that point,
Speaker 10: she gets starts getting in big trouble.
Speaker 11: One of my favorite details from this point in time
Speaker 11: the NDA's that she got right wrapped up in where
Speaker 11: she was getting companies to like do NDAs just for her,
Speaker 11: and then when Coke has to intervene, they had to
Speaker 11: like do India's to like supersede the NDAs.
Speaker 9: It's nuts.
Speaker 10: I mean, I think it's sort of it's amazing how
Speaker 10: much she's able to do as this like kind of
Speaker 10: mid level person at this company.
Speaker 11: And there's hope for all of us out there, right, I.
Speaker 5: Mean, she is a phdah, she went to high to
Speaker 5: get her doctorate, and yet we educated her.
Speaker 3: I mean, I don't know if I say like that.
Speaker 11: But but but the most fabulous thing becomes this FBI interrogation, right.
Speaker 10: Right, So we so one of the key pieces of
Speaker 10: evidence that gets referred to over and over again in
Speaker 10: her trial is this two hour conversation she has right
Speaker 10: after she's arrested in uh In, Michigan at an FBI
Speaker 10: office there where this the lead investigation, lead investigator in
Speaker 10: the case basically kind of like walks her through. I mean,
Speaker 10: it's it's interesting. It's just kind of like a case
Speaker 10: study and how you do these things, because he sort
Speaker 10: of starts out, you know, with a bunch of like
Speaker 10: very innocent questions, and she's kind of basically lies about
Speaker 10: a lot of things, and then he sort of reveals
Speaker 10: just because they've been in her we chats, they've been
Speaker 10: in her like Gmail, they've been in her work, like
Speaker 10: they just voicemail.
Speaker 3: Yeah, they know the story, they know it, yeah yeah.
Speaker 10: And so basically and there's some part it seems where
Speaker 10: he's like sort of the FBI agent is like, you know,
Speaker 10: floating the idea of trying to get her to maybe
Speaker 10: like roll over on her co conspirators, but she doesn't
Speaker 10: seem very interested. So then it basically becomes him kind
Speaker 10: of confronting her with all these things that it's clear
Speaker 10: that she was doing.
Speaker 11: Which makes her fall pretty quiet. I think I would
Speaker 11: have asked for my lawyer a few hours before.
Speaker 3: Dude never talks to the cops. It doesn't even matter
Speaker 3: how innocent you are. Never ever, ever, ever ever talk
Speaker 3: to the police.
Speaker 2: They're not your friends, Jill. You know Anthony Massini, who
Speaker 2: oversees radio and more audio, he's like, you know, he's like,
Speaker 2: you know, when you're talking to y'all, like, what is
Speaker 2: it that made you green light this story?
Speaker 11: So I love a good heist, you know, And at
Speaker 11: the at the end of the day, you know, IP
Speaker 11: is the most valuable thing that any of us kind
Speaker 11: of create for our companies, right, and our companies value that.
Speaker 11: And yet you know, that is a thing that is
Speaker 11: very difficult to write about and talk about. So when
Speaker 11: you end up with a narrative and the drama around
Speaker 11: it and characters like shaneon you know, and what happens here,
Speaker 11: it just connects so many different pieces. So there's a
Speaker 11: very big story here, but we can tell it through
Speaker 11: you know, something that's very dramatic and kind of small
Speaker 11: and invisible. It's super important and invisible, Like you would
Speaker 11: have never even known that codings are worth this much money.
Speaker 11: And by the end of it, you're just.
Speaker 5: Like, it's also an incredible multimedia story. The way you
Speaker 5: told it and the way you laid it out. You've
Speaker 5: got video in the text and obviously not in the magazine,
Speaker 5: but you can go to BusinessWeek dot com and get Yeah.
Speaker 11: You can read it anywhere you want, anywhere.
Speaker 3: I usually like magazine, but.
Speaker 11: That's my favorite way.
Speaker 2: We got to go, guys. Joe Weber, Editor Business Feet,
Speaker 2: Jack Bennett, he wrote it. This is radio.
Speaker 1: This is Bloomberg Business. Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: gloom War, business finance, and tech news. The Bloomberg Business
Speaker 1: Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 3: Mucle A Journal.
Speaker 2: Now about you let me drive?
Speaker 3: Oh no, no, no, no, who's going to drive home? Alright?
Speaker 6: Please?
Speaker 3: I'll do the travels.
Speaker 4: Wait, I want to drive. It's a question.
Speaker 3: This is the drive to the Clothes dot com.
Speaker 1: We'll drive up child down on Bloomberg Radio.
Speaker 2: All right, everybody, Just about seventeen and a half minutes
Speaker 2: left in today's trading session. Carol Masser along with the
Speaker 2: sometimes shy and a little nervous Matt Miller. Hard to believe.
Speaker 3: I never have you been doing this twenty three?
Speaker 2: I know you were, you know you were just a
Speaker 2: wee one.
Speaker 3: Yeah.
Speaker 2: When we first met you were over in Germany. I
Speaker 2: had hair, he had lots of Hey, Gordon Gecko.
Speaker 3: Had I weighed twenty pounds less.
Speaker 2: You were kind of a skinny little dude. Let's get
Speaker 2: to it, folks. Let's talk about the markets. That's what
Speaker 2: everybody wants to know. It's kind of I've called it
Speaker 2: a meh week, and I feel like we're having another.
Speaker 5: I have to disagree with you there as you why
Speaker 5: because there's been so much movement under the hood.
Speaker 3: So, yes, you haven't in stocks too.
Speaker 5: If you have a behemoth like Disney, a two hundred
Speaker 5: billion dollar stock dropping ten percent in a day. I mean,
Speaker 5: the volatility for individual names has been insane. But the
Speaker 5: thing is it's been barbelled, right, So the index hasn't
Speaker 5: moved much as.
Speaker 2: Just about quarter Yeah I know.
Speaker 3: Yeah, so the S and P doesn't move a lot.
Speaker 2: But he's a big picture.
Speaker 3: Yes, exactly. Okay, I'm looking more granularly.
Speaker 2: Katie Kaminsky is like these two idiots, Well, they finally
Speaker 2: get to meet. Katie is chief research drategist in portfolio
Speaker 2: manager at Alphice Simplex Group. She joins us via Zoom
Speaker 2: from Boston, Katie, Katie, it's been that kind of a week.
Speaker 2: Matt is not wrong. Underneath, like look at regionals or something.
Speaker 2: You know, underneath, there's a lot of stuff going on.
Speaker 2: Big picture, it doesn't feel how do you make sense
Speaker 2: of this trade?
Speaker 9: Well, I'll just be honest. We've been treading water and
Speaker 9: for most of the you know, technical traders and quantitative
Speaker 9: traders out there, the signals are super mixed, and it
Speaker 9: feels like the world is waiting for a data point
Speaker 9: to tell us where we're going. And I think that's
Speaker 9: what's been so.
Speaker 2: Hard, like an economic data point or a market data Yeah, okay,
Speaker 2: I mean I.
Speaker 9: Feel like it's anything. I don't know. I mean, every
Speaker 9: single data point you start the week and it goes
Speaker 9: CPI on Wednesday, and then everyone's like, okay, it's going
Speaker 9: to come out.
Speaker 3: And then and then nothing happened.
Speaker 9: And then nothing happens.
Speaker 5: We're all waiting for options expiries all of a sudden again, right,
Speaker 5: and then nothing happens.
Speaker 2: I'm waiting for the x dade. I don't know about you, guys. Yeah,
Speaker 2: I'm just kidding.
Speaker 9: I mean, yeah, I don't know. I mean, and then
Speaker 9: and then it's like this debt ceiling stuff, and it's exactly.
Speaker 9: It feels like somebody just tell us, like, where is
Speaker 9: it going to go? And from our side, the signals
Speaker 9: are so mixed and the markets are basically disagreeing, so
Speaker 9: equities and bonds don't always agree and it's real confusing.
Speaker 2: To be honest. This is what I want to ask you.
Speaker 2: This is what you guys do. You look into market behavior,
Speaker 2: that's what you study, and you study investment risk and
Speaker 2: you share that with your clients. So I am curious.
Speaker 2: Are you just telling your clients folks, we really don't
Speaker 2: know what's going on?
Speaker 9: Well that I mean, I don't think anyone knows perfectly
Speaker 9: what's going on here. But what we're telling them is
Speaker 9: that signals are mixed, and when you look at the
Speaker 9: net positioning in equity markets, it sort of disagrees with
Speaker 9: the net positioning and fixed income and if you look
Speaker 9: at the shape of the yield curve, it's still inverted.
Speaker 9: And people are optimistic on a pause, but at the
Speaker 9: same time they're saying, well, but we're gonna have cuts
Speaker 9: right away, which is also confusing. So I think that's
Speaker 9: where right now, what we are seeing from a technical
Speaker 9: perspective is views are definitely conflicting.
Speaker 5: If we get cuts, I mean, isn't it wouldn't it
Speaker 5: be terrifying If the Fed feels, if this Federal Reserve
Speaker 5: feels it has to cut rates in twenty twenty three,
Speaker 5: that means something awful happened exactly.
Speaker 9: And I think that's why I'm surprised, because when you
Speaker 9: think of it from a more rational perspective and looking
Speaker 9: at the shape of the yield curve, either we haven't
Speaker 9: priced in that things have to go up with inflation,
Speaker 9: or people think that things are going to get so
Speaker 9: bad because we're gonna have to cut quickly. To me,
Speaker 9: cuts this year is a bad sign. It means that
Speaker 9: things deteriorated.
Speaker 2: Hey, forgive me. I just want to point out we
Speaker 2: can't check a share price because Twitter is private. But
Speaker 2: Elon Musk announcing a new CEO for x Twitter. He's
Speaker 2: transitioning to executive chair and CTO. So again, Elon Musk
Speaker 2: not CEO. He's getting a new CEO for ex Twitter
Speaker 2: and he is going to be executive chair and chief
Speaker 2: Technology officer of the company.
Speaker 3: I don't know who on Earth would want that job.
Speaker 5: Can you imagine? I mean, if you take over as
Speaker 5: the boss of Twitter. You must know that you're not
Speaker 5: the boss of Twitter.
Speaker 2: All I would say is SpaceX. Right, he's had somebody
Speaker 2: running that and you know it can work. So it
Speaker 2: could be a little tricky, but nonethelessly less public, k Katie.
Speaker 2: This is the world we live in, right, there's headlines
Speaker 2: coming out is some are wacky. That makes sense.
Speaker 5: It's called X Twitter Now, I guess so I didn't
Speaker 5: realize it must announces new CEO for X.
Speaker 2: You know he changes his life Twitter, Katie. Again, confusion,
Speaker 2: there's sometimes confusion when it comes to Twitter and what's
Speaker 2: going on there at confusion in the market. So how
Speaker 2: do you trade this or do you just park it
Speaker 2: in short term T bills or cash under the mattress
Speaker 2: and being extreme, but you know, what do you do well?
Speaker 9: I mean, to be honest, you have to have a
Speaker 9: diversified approach. And there are things that will move and
Speaker 9: have moved. We have seen some interesting moves and precious metals.
Speaker 9: People have been talking about gold, they've been talking about silver.
Speaker 9: There are some movements in the commodity space that are
Speaker 9: a little bit more pronounced than what you've seen in
Speaker 9: stocks and bonds and I think unfortunately, that's what I'm saying.
Speaker 9: You almost have to wait until we have some confirmation
Speaker 9: for those traditional asset classes. I'm a little bit of
Speaker 9: a pessimistic person in the sense that I worry about
Speaker 9: what people are not worrying about, and my worry is
Speaker 9: the bond market. People think last year was a fluke.
Speaker 9: If you look in periods of inflation, bonds are a
Speaker 9: little more sensitive and more challenging. So I think that's
Speaker 9: what I'm worried about more than anything.
Speaker 2: Else, meaning how bad it can be.
Speaker 9: Yeah, I mean, I think let's just take a simple
Speaker 9: narrative of inflation staying sticky, but stickier than most people
Speaker 9: would like. At some point you start thinking, you know,
Speaker 9: it takes longer for the effects of the tightening to
Speaker 9: go through the system, and thus some of the bonds
Speaker 9: that you might own may not look as desirable. And
Speaker 9: I think that's where people have really thought about fixed
Speaker 9: income as the safety bet, like it's always going to
Speaker 9: be there. But the truth is, it tends to be
Speaker 9: better when the FED would stop hiking if the yield
Speaker 9: curve was steeper, and right now we have it inverted,
Speaker 9: so that means either bond yields have to go up
Speaker 9: to match, or that we have the cuts, and either
Speaker 9: of those are not super greats.
Speaker 5: In general, Bill gross is recommended buying the short end
Speaker 5: of the curve, and a lot of people are talking
Speaker 5: about tea bills that mature right around the X state
Speaker 5: whenever that is. But the interesting thing to me is
Speaker 5: if they come to if you own those bonds and
Speaker 5: then they get a deal, all of a sudden, the
Speaker 5: value of the asset you hold is going to drop
Speaker 5: like a stone.
Speaker 4: Right.
Speaker 9: Yeah, that's a tricky place to be. And I think
Speaker 9: tea bills, especially with the narrative of thinking about politics
Speaker 9: and resolution of those issues, for me, that's getting sort
Speaker 9: of it's getting hard, right, And so I think there's
Speaker 9: definitely some trades there, but they're going to be much
Speaker 9: more complex than sort of a simple supply demand narrative.
Speaker 9: But I do think that shorter term or even if
Speaker 9: you're thinking out into a one year horizon, so you
Speaker 9: kind of think that this may be resolved by then,
Speaker 9: might make sense. If you're worried about the end of
Speaker 9: the yield curve or the steepener trade, Why.
Speaker 2: Don't that sets the beginning mastery well?
Speaker 8: True?
Speaker 3: And then why they get paid the big box exactly.
Speaker 2: Katiekaminski, Chief Research Strategies, probably a manager Alpha Simplex Group.
Speaker 2: Great to have you here, be well, she's joining us
Speaker 2: or was joining us on zoom from Boston.
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