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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on Apple Cardplay and Android

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Speaker 2: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 2: you get your podcasts, or watch us live on YouTube.

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Speaker 3: Fry Alex Deel alongside Paul Sweeney. This is Bloomberg Intelligence Radio.

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Speaker 3: We bring you all the top news with our Bloomberg

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Speaker 3: Intelligence analysts all around the world. They cover two thousand

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Speaker 3: companies at one hundred and thirty industries. And we also

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Speaker 3: tap our amazing Bloomberg News team who are deep in

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Speaker 3: the weeds of everything you need to know in all

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Speaker 3: the market action. And one of them is Bailey Lipschualtz.

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Speaker 3: He's been very busy. He had to actually cancel radio

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Speaker 3: hosting yesterday.

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Speaker 4: I left Carol hanging the memes stock.

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Speaker 5: Crazy, give a day job. It's cool, it's cool.

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Speaker 3: So we know the memestocks did some stuff for three

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Speaker 3: days and they rally and they're given back to a

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Speaker 3: little bit today. Did any of them issue shares or

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Speaker 3: anything and take advantage of this?

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Speaker 4: So AMC had what we call an at the market

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Speaker 4: offering that was approved back in March that enabled them

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Speaker 4: to sell shares at the market. Have their bankers just

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Speaker 4: keep pumping and creating shares to raise up to two

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Speaker 4: hundred and fifty million dollars as fast as slow as

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Speaker 4: they would want.

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Speaker 6: They did about.

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Speaker 4: Half of that prior to the mania, and announced on

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Speaker 4: Monday that they completed that, so raised another one hundred

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Speaker 4: and twenty five million dollars on the back of Monday's

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Speaker 4: what turned into was seventy eight percent pop.

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Speaker 6: For the shares.

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Speaker 4: Then today they announced plans to do a debtorate equity swap.

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Speaker 4: So swap out some debt. Your debt debt holders now

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Speaker 4: become equity holders. You create more of those shares, all

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Speaker 4: to try to address the fact that they have a

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Speaker 4: few billion dollars on their debt load. Most of that

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Speaker 4: do in twenty twenty six, So the company has said

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Speaker 4: they're actively talking to lenders to try to work on

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Speaker 4: addressing those issues.

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Speaker 6: AMC Entertainment All right, it's down twenty percent today, but

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Speaker 6: just about a billion dollars of stock has traded to day.

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Speaker 6: I mean, this isn't pennies, this is real and money.

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Speaker 6: When it goes back to my thing, like who's trade

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Speaker 6: in this stuff, and that's what we wrote.

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Speaker 4: It in my view, a good story because obviously I

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Speaker 4: wrote it, But we wrote a story yesterday that kind

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Speaker 4: of dove into the fact that when I talk to

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Speaker 4: people who advise hedge funds, these momentum quants have gotten

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Speaker 4: more sophisticated, caught onto the playbook from twenty twenty one,

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Speaker 4: and are buying and selling and trading these shares, so

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Speaker 4: helping create that big rally we saw Monday and Tuesday

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Speaker 4: and likely getting out of the stock whether they're in

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Speaker 4: the trade for two minutes or three days. They buy

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Speaker 4: when stocks are going up, and then they quickly sell

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Speaker 4: and the whole goal is to as we wrote basically.

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Speaker 6: In a way front run retail. Whoa, WHOA. I'm looking

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Speaker 6: at the is this right, AMC Entertainment's got nine billion

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Speaker 6: of debt that includes their leases lease, so call it

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Speaker 6: four and a half four and a four four and

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Speaker 6: a still they have.

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Speaker 4: It's sizable relative to their cases.

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Speaker 6: Yeah, and I'm looking at Ebithal. Let's just take twenty

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Speaker 6: twenty five's estimates five hundred million, so still ten times levered.

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Speaker 6: Again having bank these guys in the past four times,

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Speaker 6: is the multiple is the leverage I would put on

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Speaker 6: this thing. Maybe if the sub sub guys want to

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Speaker 6: go above it, that's their business. But crazy, but Lisa

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Speaker 6: AMC's trying it.

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Speaker 3: Yeah, I was gonna say if we don't, we like

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Speaker 3: the fact the CFO is like, guys, let's do this, right,

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Speaker 3: that's a good thing.

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Speaker 6: That's good and that was part of it.

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Speaker 7: Right.

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Speaker 4: So a few years ago they created these eight preferred

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Speaker 4: shares because they couldn't get approval from investors to sell

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Speaker 4: more shares, because you have to get approval to create

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Speaker 4: more shares to expand the number of fears you can

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Speaker 4: have outstanding. Right now, according to b Riley's Eric World,

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Speaker 4: he estimates the company still has one hundred and ninety

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Speaker 4: one million common shares authorized but not yet issued, so

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Speaker 4: they can hit another ATM, or they can continue to

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Speaker 4: do some of these debt swap deals to try to

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Speaker 4: address again the fact that they have a lot of debt,

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Speaker 4: and they have a lot of near term debt, and Paul,

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Speaker 4: as you mentioned, the underlying business is not really doing

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Speaker 4: a whole lot.

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Speaker 6: Yeah, you know, you think about the theater business, it

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Speaker 6: goes to the fundamentals of post pandemic. What's the demand

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Speaker 6: for movies in theaters, and it is less, but it

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Speaker 6: is still there. That probably the bigger issue, if you

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Speaker 6: ask the theater owners today is it's just not a

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Speaker 6: lot of movies. And that was in large part because

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Speaker 6: of the writer's strike and the and the actors strike

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Speaker 6: pushed it just about everything back about a year. And

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Speaker 6: then you've had some decisions by Disney to saying, you

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Speaker 6: know what, we probably are overplaying our Marvel stuff, our

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Speaker 6: Star Wars stuff, putting too close together. Let's spread that out.

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Speaker 6: So stuff that was gonna be in twenty four is

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Speaker 6: in twenty five, twenty five, it's going to be in

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Speaker 6: twenty six. So you put all that together, and if

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Speaker 6: you're a theater owner, you're like, I ain't got that

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Speaker 6: much it put in my theater.

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Speaker 4: When's the last time you saw a movie in the theaters.

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Speaker 6: In the last few months? Last few months?

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Speaker 5: Yeah, a couple of weeks ago. I saw Doing two Oo.

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Speaker 3: Well, I like going to the Nighthawk in Brooklyn where

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Speaker 3: they have like drinks and scene they bring to your seat.

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Speaker 5: Like I like the whole experience.

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Speaker 3: Like I don't go to a straight up AMC and

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Speaker 3: just eat regular popcorn.

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Speaker 5: Wow anymore? So I do the whole.

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Speaker 3: It's cheaper than going out to dinner. You can spend

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Speaker 3: like one hundred and twenty bucks. You see movies, You

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Speaker 3: have dinner, you got drinks, you got dessert, versus going

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Speaker 3: and spending three hundred dollars at like getting pasta and

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Speaker 3: that's been though.

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Speaker 5: You can get a prosco at though.

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Speaker 6: Yeah.

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Speaker 4: See they want to raise elevor they want to elevate it.

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Speaker 4: So they're making more margin, more money in terms of

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Speaker 4: margins expanded on people.

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Speaker 8: Isn't like distracting though, you know everybody's chewing and eating

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Speaker 8: a baunch of movie.

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Speaker 3: No, they're doing it anyway, I after eating popcorn and stuff. No,

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Speaker 3: it's you get used to. It's totally fine.

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Speaker 6: The seats are awesome.

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Speaker 4: I saw a movie on Friday, I think, and the

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Speaker 4: lay back seats.

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Speaker 6: I'd never been to a love shore a movie theater.

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Speaker 4: And you're like, wow, I'm laying completely horizontal watching a movie.

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Speaker 6: This is awesome. And the thing is, you know, if

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Speaker 6: you're a movie theater economics of the move movie theaters,

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Speaker 6: you don't make really anything on the ticket sales or

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Speaker 6: as much because you have to give half to uh,

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Speaker 6: the studio where you make it is in the popcorn

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Speaker 6: in this that that's all your margin right for the perpection.

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Speaker 3: You can, yes, Brownie Sunday exactly so.

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Speaker 6: And you know they've been giving you crap for a

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Speaker 6: hundred years. You know at some they're just finally waking

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Speaker 6: up that if I ever want to get that person

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Speaker 6: off the couch in front of their eighty inch TV

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Speaker 6: in the surround sun, I got to up my game

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Speaker 6: a little bit.

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Speaker 3: Truffle salt butter popcorn dropped that right there.

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Speaker 5: It's just beautiful.

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Speaker 3: Okay, before we let you go, what is the downside?

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Speaker 3: You think you can we unwind all of the last

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Speaker 3: three days or what do you think?

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Speaker 6: Probably?

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Speaker 4: I mean, if you look at fund like why not, well,

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Speaker 4: what has changed fundamentally today versus a week ago, realistically

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Speaker 4: versus three months ago?

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Speaker 6: Nothing?

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Speaker 4: Really, And that's been the whole argument. When we saw

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Speaker 4: the big rally both stocks up more than seventy percent

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Speaker 4: on Monday, all on the back of the Roaring Kitty

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Speaker 4: post on Sunday evening, is that that really was just

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Speaker 4: kind of like the match to get people back out

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Speaker 4: and trading this. It didn't actually change things. And one

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Speaker 4: of the things that I think is worth pointing out

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Speaker 4: is the difference between now in twenty twenty one is

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Speaker 4: people were buying stocks for the first time. In twenty

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Speaker 4: twenty one, the stock had already jumped, you know, five

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Speaker 4: hundred percent for a lot of retail investors downloaded Robinhood

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Speaker 4: found out how to fund it and buy call options.

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Speaker 4: People who have been holding these stocks for a long

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Speaker 4: time and are sitting on massive losses that if you

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Speaker 4: see it go from sixteen to fifty and I got

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Speaker 4: in at forty five, I might as well at least

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Speaker 4: have some kind of gain as opposed to waiting around forever.

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Speaker 6: Right, good stuff, Billy, look the Schultz equity support of

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Speaker 6: Bloomberg new joining us here on a Bloomberg interactive broker's studio,

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Speaker 6: you mentioned what kind of pop salt do you like?

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Speaker 9: Oh?

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Speaker 5: Truffle?

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Speaker 6: Have you ever gone truffle hunting?

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Speaker 5: No?

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Speaker 6: I have gone truffle hunting in the South of.

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Speaker 8: France with a How do you with a pig or

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Speaker 8: a dog?

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Speaker 6: They usually do pigs, but the smart ones use dogs

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Speaker 6: because the pigs will sometimes eat the truffle. The dogs,

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Speaker 6: you can train them not to eat the truffle, so

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Speaker 6: they sniff them around underground, they start digging. You pull

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Speaker 6: the dog away and then you dig think them out

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Speaker 6: the right under the surface. Thank you to Keith Grossman,

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Speaker 6: our former head of ad sales at Bloomberg, who had

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Speaker 6: arranged these lovely outings two summers in a row, complete

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Speaker 6: crazy Bacanelli in south of France. It was great.

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Speaker 3: And then and then and then do you like take

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Speaker 3: the trouble?

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Speaker 5: You can't Coemple's home like to the US, like I

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Speaker 5: had trouble.

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Speaker 6: I'm not so so everything they have troubles. Yeah. Then

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Speaker 6: they have this little store in this little farm. I'm

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Speaker 6: still on the mailing list. And the French couple, young couple,

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Speaker 6: and they have a little French truffle thing going on.

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Speaker 5: I love this.

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Speaker 3: For another trip with at in.

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Speaker 6: This you know in may Or so that's next on

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Speaker 6: the dockt.

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Speaker 5: I love all of this. I'm going to ruminate on this.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern.

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Speaker 7: On Apple car Play and Android Otto with the Bloomberg Business.

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Speaker 2: You can also listen live on Amazon Alexa from our

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Speaker 2: flagship New York station, Just Say Alexa, playing Bloomberg eleven thirty.

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Speaker 6: Let's get to some of that economic data here today.

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Speaker 6: Lydia user Joints and she's a senior economist at Ernst

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Speaker 6: and Young. She joins us from New York City via

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Speaker 6: that zoom thing. So, Lydia looks like like that inflation

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Speaker 6: scare that we had maybe the first three four months

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Speaker 6: of this year is maybe moderating a little bit. Is

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Speaker 6: that the takeaway from the CPI data that you looked

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Speaker 6: at today?

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Speaker 9: Yeah? Sure, I mean, I think the key takeaway is

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Speaker 9: really that inflation continues to move in the right direction

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Speaker 9: and that this inflation trend remains in place despite the

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Speaker 9: bumping as that we had in the first quarter. I

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Speaker 9: think the details of the report this morning were encouraging.

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Speaker 9: Both on the goods and services side. We saw that

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Speaker 9: cooling and core inflation call goods prices decline in April,

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Speaker 9: and that really indicates that this more favorable and normalized

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Speaker 9: supply chain environment continues to be conductive of deflation in

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Speaker 9: the goods sector. And on the services side, we also

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Speaker 9: saw aneasing in the pace of inflation, with many of

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Speaker 9: the categories also showing some cooling. So overall, that's the

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Speaker 9: report that suggests that we're still moving in the right direction.

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Speaker 3: Something I'm still great happling with is why the event

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Speaker 3: has such conditions, has such conviction that financial conditions are

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Speaker 3: tight when you take a look at MEME stocks, when

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Speaker 3: you take a look at the actual financial conditions index,

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Speaker 3: do these numbers justify that confidence or no?

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Speaker 9: When we look at the economy overall and the package

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Speaker 9: of economy data that we got this morning. You mentioned

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Speaker 9: retail sales early.

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Speaker 5: On the show.

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Speaker 9: Retail sales work quite soft, and they do suggest that

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Speaker 9: consumers are increasingly cautious with your spending. We have an

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Speaker 9: economic environment that's cooling, the label market is rebalancing, wages

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Speaker 9: are moderating, and at the same time, we have you know,

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Speaker 9: today's some evidence that we remain and we continue to

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Speaker 9: see that these inflation happening, especially on the core side.

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Speaker 9: So the progress has been slower, but overall, the economy

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Speaker 9: continues to cool and inflation is likely to continue to

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Speaker 9: gradually ease, you know, throughout the twenty twenty four and

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Speaker 9: towards twenty twenty five. I think what will be important

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Speaker 9: and important what's important to keep in mind is that

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Speaker 9: we may hit the plateau when it comes to inflation.

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Speaker 9: CPI inflation in the coming months. But overall, I think

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Speaker 9: the report today has helped rebuild a bit of confidence

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Speaker 9: that the FED had lost in the first quarter of

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Speaker 9: the year.

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Speaker 6: Liddy, We also yesterday had a little bit higher than

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Speaker 6: expected PPI print. How do you kind of put that

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Speaker 6: in the CPI data we got today? How do you

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Speaker 6: put that Together's what's the narrative there?

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Speaker 9: Yeah, I mean, looking at the PPI data, I think

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Speaker 9: some of the details were more encouraging, especially looking at

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Speaker 9: some of the key categories that we feed into the

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Speaker 9: PC data, so looking at some of the underlying components

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Speaker 9: of PPI. But overall, I think, you know, when we

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Speaker 9: look at the overall trend in inflation and what that means.

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Speaker 9: Also looking at these two reports for PC inflation, I

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Speaker 9: think that we're likely to get, you know, a fairly

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Speaker 9: encouraging print on the core PC data, and that overall

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Speaker 9: core PC inflation should continue to gradually ease in the

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Speaker 9: coming months. I think, you know, we're coming we're coming

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Speaker 9: off of that first quarter where inflation has surprise on

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Speaker 9: the obside, you know, for several months, and what we

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Speaker 9: need to see going forward is really softer inflation print

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Speaker 9: a string of softer inflation print that will help THEE

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Speaker 9: the FED feel more confident that you know, they're in

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Speaker 9: a good spot and can start you know, that is

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Speaker 9: in cycle.

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Speaker 3: Do you think the using cycle will be two cuts

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Speaker 3: this year?

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Speaker 5: One and then what.

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Speaker 9: Yeah, so we have our view is that we're gonna

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Speaker 9: get two cuts in the second half of this year.

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Speaker 9: We do think that, you know, as I said, the

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Speaker 9: economic environment will you know, will be you know, and

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Speaker 9: will be favorable for those two great cuts. And when

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Speaker 9: you think back at what Fetcher Powell said at the

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Speaker 9: press conference, he really laid out three paths when it

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Speaker 9: comes to a monetary policy going forward, and there are

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Speaker 9: two of these paths that are leading.

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Speaker 5: To rate cuts.

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Speaker 9: You know, if you see a deteriration in label market

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Speaker 9: conditions or if you see inflation moving sustainably towards two percent,

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Speaker 9: our view is that, you know, the economy is going

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Speaker 9: to continue to cool and that conditions are in place

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Speaker 9: to continue to see that this inflation. We have an

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Speaker 9: economy that's cooling and consumers that are growing increasingly cautious.

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Speaker 9: We have a label market that's rebalancing and wages that

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Speaker 9: are easing. We also have signs that companies are exercising

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Speaker 9: less price in power, and we're likely to see more

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Speaker 9: downward pressure on profit margins as well. And lastly, we

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Speaker 9: also have more rent these inflation in the pipeline and

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Speaker 9: the numbers this morning, we're also encouraging in that front

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Speaker 9: where you know, we continue to see that downtrend in

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Speaker 9: rent inflation. So overall, I do think that you know,

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Speaker 9: this backdrop is going to lead the FED to start

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Speaker 9: that is in cycle media and we see two rate

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Speaker 9: cuts happening, so more of a recalibration that an aggressive,

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Speaker 9: you know, rated cycle.

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Speaker 6: So we also had the retail sales came in a

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Speaker 6: little bit weaker than expected. What's your read across.

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Speaker 9: There, Yeah, so the retail sales report weaker than expected.

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Speaker 9: Looking at some of the details, it was quite mixed.

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Speaker 9: I think there was some categories where we saw some payback.

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Speaker 9: Looking at online sales for example, they were very strong

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Speaker 9: in March, so they declined in April. And you know, overall,

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Speaker 9: I think what these suggest is that a consumer spending

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Speaker 9: momentum at the start of Q two is going to

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Speaker 9: be you know, looking software, we came out of March

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Speaker 9: with significant momentum when it comes to consumer spending and

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Speaker 9: you have that robust carry over that's supporting positive consumer spending.

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Speaker 9: But what it does suggest is that on the months

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Speaker 9: of amounth basis, we've seen somewhat of a down shift,

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Speaker 9: and we think that this is a trend that will

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Speaker 9: continue because consumers are feeling you know, the impact of

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Speaker 9: elevated prices, are your borrowing costs and just you know,

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Speaker 9: a more challenging environment, especially for lower income hussles.

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Speaker 3: All right, Lydia, thanks so much. We really appreciate your

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Speaker 3: time today. Thank you so much, Lydio bassour Ey pantheon

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Speaker 3: A senior economists, We very much thank you for your time.

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Speaker 3: Speaking of retail, I was really struck by those Burgery numbers.

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Speaker 3: Now luxury has been burbery, Yeah, like luxury has been

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Speaker 3: certain areas of luxury have been struggling, and Burbery kind

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Speaker 3: of doubled down on that.

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Speaker 5: They had sort of weaker.

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Speaker 3: Sales and their outlook wasn't that great for the first

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Speaker 3: half either. So even the high high end continues to

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Speaker 3: kind of get dragged down a little bit, which also

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Speaker 3: you find to be a bit confusing.

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Speaker 6: Well, whenever I think of retail and luxury retail, I

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Speaker 6: think of the Chinese consumer is kind of the swing factor.

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Speaker 6: I wonder what they're saying about the Chinese consumer.

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Speaker 3: It's always about China, but also pockets of weakness in

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Speaker 3: the US as well, So it's not just a China

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Speaker 3: situation when it comes to retail.

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Speaker 6: And a podcast about five percent here today.

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Speaker 5: Ye weak demand China, n US.

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Speaker 6: Yeah. So I mean it's it's you know, it's out there.

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Speaker 6: It's concerning. But I mean, I guess the overall economic

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Speaker 6: data is still generally pretty solid. I guess, you know.

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Speaker 6: And it's is it solid enough for the FED to

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Speaker 6: start pulling back on rates and if so, when so

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Speaker 6: that'll be interesting.

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Speaker 3: It's still what I find so interesting is still the

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Speaker 3: hard and soft data. The soft data, I appreciate the

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Speaker 3: NFIB was a bit better yesterday, but the feelings are

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Speaker 3: negative even if the hard data is a little bit

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Speaker 3: positive or at least stable. Particularly, we take a look

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Speaker 3: at how many people are benefiting from the equity rally,

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Speaker 3: and there was a great uh in John Author's piece.

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Speaker 3: You really helped break it down. Oh no, it was

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Speaker 3: a lu Wang had a piece where she broke it

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Speaker 3: down and said, just x amount of people have money

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Speaker 3: in the stock market that are benefiting and guess what,

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Speaker 3: they're mostly older white people and everything else is a

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Speaker 3: bit is a bit, dice Yer. It's a great piece.

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Speaker 5: You's definitely check it out.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 3: Alex Steel alongside Paul Sweeny. This is Bloomberg Intelligence Radio.

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Speaker 3: We cover all the tap news in business and economics

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Speaker 3: about two thousand companies and one hundred and thirty industries worldwide.

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Speaker 3: We also sometimes take you outside the Bloomberg Intelligence world

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Speaker 3: to those that work on the street. And for that

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Speaker 3: we're gonna go to Marie Shore. She covers senior equity

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Speaker 3: analyst over at Columbia thread Needle Investments. They have a

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Speaker 3: great team over there. We love talking to these guys.

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Speaker 3: Let's get breakdown after retail sales. Thanks for joining us, Mari,

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Speaker 3: It's great to see you.

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Speaker 1: Thank you so much for having me so.

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Speaker 3: Breakdown two things. One where in the retail world makes

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Speaker 3: sense and two do equities a record highs make sense.

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Speaker 5: Yes, it's a great question.

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Speaker 4: I think.

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Speaker 1: You know, when we look at the retail sales print today,

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Speaker 1: I think we see more of what we've been discussing,

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Speaker 1: which is still a choiceful consumer still spending more on

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Speaker 1: services over goods and needs over wants. So overall, my

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Speaker 1: outlook for spend on more discretionary goods is more cautious.

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Speaker 1: We still see things like home and electronics really weak

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Speaker 1: versus strength in certain channels like e commerce and value retail,

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Speaker 1: and in certain categories, like I thought today in the

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Speaker 1: retail sales print, the improvement we saw in apparel was interesting,

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Speaker 1: and we've seen some new trends in apparel, and it

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Speaker 1: seems that some of the traditional apparel companies are taking

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Speaker 1: share back, maybe from some of the athletic apparel companies.

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Speaker 1: So that's I think an interesting trend to watch In

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Speaker 1: terms of the valuations on some of these names. It

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Speaker 1: definitely seemed like the group was a little over extended

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Speaker 1: in the earlier part of the string following the rally

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Speaker 1: that started in October, and now I think you really

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Speaker 1: need to be selective, so I would say we're still

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Speaker 1: willing to pay a premium for consistent quality growth that

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Speaker 1: we see in names like Walmart and the off price retailers,

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Speaker 1: which are all gaining share right now. I think, you know,

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Speaker 1: given the relatively weak demand backdrop, we are willing to

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Speaker 1: pay more of a premium for those retailers that are

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Speaker 1: taking share.

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Speaker 6: All right, Usually we chat with you via zoom, so yes,

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Speaker 6: nice to have you in our studio, usually of Boston, right, yes, yes, okay,

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Speaker 6: very good coming down to the big town. Okay, marishare

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Speaker 6: you cover the equity space for Columbia thread Needle? We

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Speaker 6: got Walmart tomorrow, and people who like me who don't

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Speaker 6: follow the retail space, I looked at that name as

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Speaker 6: kind of a barometer for how the US consumer's doing.

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Speaker 6: What are you going to be looking for tomorrow?

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Speaker 1: Well, I think we're likely to hear from Walmart still

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Speaker 1: a more subdued tone on the consumer overall. You know,

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Speaker 1: their core lower end customer is still under pressure. They are, however,

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Speaker 1: taking share across category among higher income consumers, and that's

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Speaker 1: been something they've been talking about for several quarters now.

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Speaker 1: So I think that says a lot about the overall consumer,

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Speaker 1: and you know, how they're looking to save money, are.

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Speaker 3: They taking a share from them like Target and stuff

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Speaker 3: like that.

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Speaker 1: I think they are yes across category. You really see

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Speaker 1: it from from Target and others, And I think that

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Speaker 1: consumers are really looking to stock up, you know, and

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Speaker 1: do that one stop shop at value retailog you know,

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Speaker 1: you see it Walmart, you see it at costs go right.

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Speaker 1: Their results have also been extremely strong, So I think

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Speaker 1: that the results from Walmart tomorrow will show us what's

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Speaker 1: happening from a macro level. But again I want to

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Speaker 1: be mindful that any any strength that Walmart does show,

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Speaker 1: I think is likely to reflect not just what's happening

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Speaker 1: at the category level, but what's happening in terms of

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Speaker 1: their share position within category worries.

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Speaker 6: So how about the dollar stores? What happens to the

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Speaker 6: dollar stores when the lower end of the economic environment

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Speaker 6: is in fact struggling they are dealing with inflation. Does

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Speaker 6: that benefit their business or does that hurt them even more?

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Speaker 1: Yeah, it's sort of mixed. I would say it does

444
00:21:19,160 --> 00:21:22,879
Speaker 1: hurt their core lower income consumer, and you've seen all

445
00:21:22,920 --> 00:21:26,480
Speaker 1: the dollar stores talking about weakness in their discretionary business

446
00:21:26,680 --> 00:21:30,399
Speaker 1: among that consumer cohort. However, there is the potential for

447
00:21:30,480 --> 00:21:34,880
Speaker 1: them to capture that trade down from a hire income consumer,

448
00:21:35,240 --> 00:21:37,320
Speaker 1: and so that is an opportunity I think for the

449
00:21:37,440 --> 00:21:42,400
Speaker 1: dollar stores, for off price retailers like Burlington and Ross stores.

450
00:21:43,119 --> 00:21:46,600
Speaker 1: But again, I feel like Walmart has really been the

451
00:21:46,720 --> 00:21:50,000
Speaker 1: name among those value players that has captured the most

452
00:21:50,160 --> 00:21:52,160
Speaker 1: share from that higher income consumer.

453
00:21:52,359 --> 00:21:54,560
Speaker 3: So some of the dollar stores are just a disaster

454
00:21:55,119 --> 00:21:58,560
Speaker 3: in terms of like shelf stocking, in terms of employees,

455
00:21:58,680 --> 00:22:01,960
Speaker 3: like it's a real us, like it might be good

456
00:22:02,000 --> 00:22:03,680
Speaker 3: to get a deal, but only if you actually find

457
00:22:03,720 --> 00:22:05,120
Speaker 3: a product, John Tucker, why are.

458
00:22:05,040 --> 00:22:05,720
Speaker 5: You laughing at me?

459
00:22:06,000 --> 00:22:08,840
Speaker 8: One dext to me and I loved it. Just they

460
00:22:08,960 --> 00:22:12,359
Speaker 8: closed up, it was gone. It was just like what

461
00:22:12,520 --> 00:22:15,800
Speaker 8: happened like overnight, it's it's and they only had one

462
00:22:15,920 --> 00:22:19,000
Speaker 8: employee in a pretty large store, and it was just like,

463
00:22:19,560 --> 00:22:20,400
Speaker 8: you want to steal.

464
00:22:20,240 --> 00:22:22,639
Speaker 5: Something, pretty much, go ahead like that. We can't do

465
00:22:22,680 --> 00:22:23,280
Speaker 5: anything about that.

466
00:22:24,000 --> 00:22:25,240
Speaker 3: So I don't know if you guys know, if we've

467
00:22:25,280 --> 00:22:27,320
Speaker 3: talked about this, that I am the counter indicator for

468
00:22:27,440 --> 00:22:29,080
Speaker 3: retail somorrio. So here's the deal.

469
00:22:29,119 --> 00:22:31,399
Speaker 5: So I only shop on sale period.

470
00:22:31,720 --> 00:22:34,040
Speaker 3: I will not ever pay full price. So usually where

471
00:22:34,080 --> 00:22:36,680
Speaker 3: I'm shopping, the joke is is that I'm an indicator

472
00:22:36,800 --> 00:22:39,080
Speaker 3: for what stock you want to short, because I'm only

473
00:22:39,160 --> 00:22:41,200
Speaker 3: going there because the deal is really good and it's

474
00:22:41,200 --> 00:22:45,199
Speaker 3: an inventory thing. So I definitely went over budget this weekend.

475
00:22:45,520 --> 00:22:48,200
Speaker 3: I went to Northstroum Rack, but I was buying work clothes.

476
00:22:48,000 --> 00:22:49,000
Speaker 5: So I felt okay about it.

477
00:22:49,920 --> 00:22:53,320
Speaker 3: Am I an outlier here? Like are the discounters gonna

478
00:22:53,359 --> 00:22:56,280
Speaker 3: win or are they gonna lose? And how much will

479
00:22:56,320 --> 00:22:58,720
Speaker 3: I be spending for the rest of the years.

480
00:22:58,880 --> 00:22:59,040
Speaker 9: Yeah?

481
00:22:59,160 --> 00:23:00,800
Speaker 1: No, I think And again we saw it in the

482
00:23:00,880 --> 00:23:03,560
Speaker 1: retail sales data today in the strength and the general

483
00:23:03,640 --> 00:23:07,400
Speaker 1: merchandise category. I think all of these value retailers, whether

484
00:23:07,480 --> 00:23:11,000
Speaker 1: it's the mass players, the off pricers, the dollar stores,

485
00:23:11,119 --> 00:23:14,920
Speaker 1: the clubs, they will all continue to take share in

486
00:23:15,040 --> 00:23:19,879
Speaker 1: this in this environment, in terms of the you know,

487
00:23:20,280 --> 00:23:24,840
Speaker 1: in the hunt for deals, I would say I would

488
00:23:24,960 --> 00:23:28,040
Speaker 1: expect more modest deals going for it only because you know,

489
00:23:28,200 --> 00:23:32,600
Speaker 1: last year we saw inventory much better controlled, much more

490
00:23:32,720 --> 00:23:35,840
Speaker 1: closely aligned with sales, and all of the retailers are

491
00:23:35,880 --> 00:23:39,760
Speaker 1: really focused on protecting margin, so I think you will

492
00:23:39,840 --> 00:23:43,320
Speaker 1: see lower markdowns going for it. Of course, the retailers

493
00:23:43,359 --> 00:23:47,240
Speaker 1: will always use promotions to drive traffic, but in terms

494
00:23:47,320 --> 00:23:53,040
Speaker 1: of those major markdowns. Yeah, probably won't see as many

495
00:23:53,080 --> 00:23:54,160
Speaker 1: of those going forward.

496
00:23:54,240 --> 00:23:56,119
Speaker 5: That's definitely gonna hurt a little bit there.

497
00:23:56,200 --> 00:23:59,160
Speaker 3: Yeah, we went to this anecdotal obviously went to Tjmax,

498
00:23:59,200 --> 00:24:00,879
Speaker 3: which is usually my life go to store.

499
00:24:01,000 --> 00:24:02,040
Speaker 5: Inventory was horrific.

500
00:24:02,119 --> 00:24:04,920
Speaker 3: There was like nothing that was really surprising, and I

501
00:24:05,000 --> 00:24:08,000
Speaker 3: wondered if like they're if they're waiting for a cycle

502
00:24:08,040 --> 00:24:09,600
Speaker 3: to come back, or if they're just really good at

503
00:24:09,600 --> 00:24:10,760
Speaker 3: getting step off their shelves.

504
00:24:10,800 --> 00:24:13,239
Speaker 6: Interesting. How about I'm just asking for John Tucker here

505
00:24:13,359 --> 00:24:16,760
Speaker 6: the luxury sector accent. I'm just talking about Berbery. Yeah,

506
00:24:16,960 --> 00:24:19,800
Speaker 6: some disappointing numbers. I thought luxury was kind of a

507
00:24:19,920 --> 00:24:22,600
Speaker 6: relatively area of strength for retail Yeah.

508
00:24:22,720 --> 00:24:25,280
Speaker 1: I mean, I would say over the past year or so,

509
00:24:25,440 --> 00:24:28,239
Speaker 1: we've really seen a slow down among I would say,

510
00:24:28,280 --> 00:24:31,840
Speaker 1: both like the true luxury segment and that more aspirational

511
00:24:32,000 --> 00:24:35,600
Speaker 1: luxury segment, right, Yeah, and I think I think it

512
00:24:35,720 --> 00:24:38,960
Speaker 1: really reflects, you know, those consumers now spending again on

513
00:24:39,119 --> 00:24:43,600
Speaker 1: things like services and travel, and so we've seen, you know,

514
00:24:44,200 --> 00:24:47,000
Speaker 1: there's not a lot of public retailers at this point

515
00:24:47,440 --> 00:24:50,640
Speaker 1: in the true luxury segment in North America, but we've

516
00:24:50,720 --> 00:24:55,560
Speaker 1: definitely seen a slow down, really globally, you know, across China, Europe,

517
00:24:56,040 --> 00:25:00,600
Speaker 1: and I think it's that customer spending in other categories

518
00:25:00,920 --> 00:25:03,639
Speaker 1: and also some of those brands that do have exposure

519
00:25:03,720 --> 00:25:06,359
Speaker 1: to the wholesale channel, where you know, all of the

520
00:25:06,440 --> 00:25:09,400
Speaker 1: department store is still managing inventory very tightly, so if

521
00:25:09,400 --> 00:25:14,320
Speaker 1: you're selling into that channel, you may also see pressure is.

522
00:25:14,359 --> 00:25:16,479
Speaker 6: In that business, and they did call that out there.

523
00:25:16,560 --> 00:25:17,400
Speaker 5: Yeah, so I think it's.

524
00:25:17,320 --> 00:25:20,639
Speaker 1: Really a combination of those two things. I think long

525
00:25:20,880 --> 00:25:24,080
Speaker 1: term luxury is still well positioned, but we're still kind

526
00:25:24,119 --> 00:25:28,000
Speaker 1: of coming off of this period of you know, excessive

527
00:25:28,080 --> 00:25:31,679
Speaker 1: growth that we saw during the pandemic and watching demand normalized.

528
00:25:31,720 --> 00:25:35,840
Speaker 3: I don't know, man, twenty six hundred dollars for a raincoat, please,

529
00:25:35,880 --> 00:25:36,840
Speaker 3: well what kind of raincoat?

530
00:25:37,080 --> 00:25:38,320
Speaker 5: Burbery raincoat like that?

531
00:25:38,600 --> 00:25:42,560
Speaker 3: I appreciate that's aspirational, but hell no, that just feels

532
00:25:42,640 --> 00:25:43,920
Speaker 3: like a waste of money.

533
00:25:44,000 --> 00:25:48,159
Speaker 6: But don't you have some budget or clothes?

534
00:25:48,440 --> 00:25:50,399
Speaker 3: Oh oh yeah, yeah, So like I give myself a

535
00:25:50,440 --> 00:25:54,879
Speaker 3: budget of oh yeah, but not a trench coat and

536
00:25:55,119 --> 00:25:56,719
Speaker 3: that definitely would not be in the budget.

537
00:25:56,800 --> 00:26:02,479
Speaker 6: Yeah, they have a budget for wardrobe. Again, another benefit

538
00:26:02,560 --> 00:26:06,240
Speaker 6: I don't really yea, no makeup, Nope.

539
00:26:06,280 --> 00:26:08,040
Speaker 8: They don't send me to travel.

540
00:26:10,280 --> 00:26:10,840
Speaker 2: Bakeup on you.

541
00:26:10,960 --> 00:26:13,480
Speaker 5: You don't let them be you know, I don't know. Yeah,

542
00:26:13,480 --> 00:26:15,720
Speaker 5: downstairs is a wardrobe room. We get our clothes picked

543
00:26:15,760 --> 00:26:16,159
Speaker 5: and everything.

544
00:26:16,240 --> 00:26:16,920
Speaker 6: Really I don't know that.

545
00:26:17,040 --> 00:26:19,159
Speaker 5: Yeah, they don't chop on sale, but you know I do.

546
00:26:19,280 --> 00:26:21,640
Speaker 6: All right, Marsha, thanks so much for joining us. Marish Shure,

547
00:26:21,680 --> 00:26:24,040
Speaker 6: Senior Equitiana. She covers all the retail space, one of

548
00:26:24,080 --> 00:26:26,960
Speaker 6: our go to voices for retail. She's a Columbia thread

549
00:26:27,000 --> 00:26:29,119
Speaker 6: Needle Investments. They get they're all over the place. I

550
00:26:29,200 --> 00:26:32,040
Speaker 6: first hit thread Needle, they're in London. Then there's been

551
00:26:32,040 --> 00:26:34,000
Speaker 6: all these mergers with the asset managers and now it's

552
00:26:34,040 --> 00:26:35,640
Speaker 6: all under like Columbias and they're good.

553
00:26:35,840 --> 00:26:37,760
Speaker 5: Like they got some serious talent there.

554
00:26:38,320 --> 00:26:39,520
Speaker 6: Up in Boston. But she joins us here on our

555
00:26:39,520 --> 00:26:41,960
Speaker 6: Bloomberg in Act, the Broker Studio. Maybe she's walking up

556
00:26:42,000 --> 00:26:44,639
Speaker 6: down Fifth Avenue and Madison. I'm kind of checking out

557
00:26:44,680 --> 00:26:46,240
Speaker 6: the stores. That would be my guest.

558
00:26:46,320 --> 00:26:47,879
Speaker 5: Let me know where the sales are, Yeah, exactly.

559
00:26:49,520 --> 00:26:53,359
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

560
00:26:53,480 --> 00:26:56,439
Speaker 2: weekdays at ten am Eastern on applecar.

561
00:26:56,000 --> 00:26:58,480
Speaker 7: Play and Android Auto with the Bloomberg Business.

562
00:26:58,880 --> 00:27:01,600
Speaker 2: You can also listen I have on Amazon Alexa from

563
00:27:01,600 --> 00:27:05,359
Speaker 2: our flagship New York station. Just say Alexa play Bloomberg

564
00:27:05,400 --> 00:27:06,120
Speaker 2: eleven thirty.

565
00:27:07,720 --> 00:27:10,000
Speaker 3: This is Bloomberg Intelligence Radio. We bring you all the

566
00:27:10,080 --> 00:27:12,360
Speaker 3: top news and economics and finance, and with the help

567
00:27:12,440 --> 00:27:15,200
Speaker 3: of our Bloomberg Intelligence analysts, they cover our two thousand

568
00:27:15,240 --> 00:27:18,359
Speaker 3: companies and one hundred and thirty industries all around the world.

569
00:27:18,440 --> 00:27:20,200
Speaker 3: We also bring you the view from the street. And

570
00:27:20,560 --> 00:27:22,320
Speaker 3: what do you do in this market when you're at

571
00:27:22,440 --> 00:27:25,080
Speaker 3: record highs and the direction is higher? You just buy

572
00:27:25,200 --> 00:27:27,560
Speaker 3: the stuff. You buy stocks, you buy bond, you sell

573
00:27:27,640 --> 00:27:29,840
Speaker 3: a dollar. That seems to be the trade. Let's get

574
00:27:29,880 --> 00:27:33,000
Speaker 3: the trip with James Demert. He's chief investment officer at

575
00:27:33,080 --> 00:27:37,240
Speaker 3: main Street Research. He joins us via zoom from New York.

576
00:27:37,680 --> 00:27:39,480
Speaker 3: All right, James, do you buy the at a record?

577
00:27:39,640 --> 00:27:40,200
Speaker 3: Simple question?

578
00:27:41,160 --> 00:27:44,400
Speaker 10: Hi, Alex, you do? I think you do. I think

579
00:27:44,440 --> 00:27:47,160
Speaker 10: investors have made a huge mistake for the last few

580
00:27:47,280 --> 00:27:51,360
Speaker 10: quarters of just waiting for something to break before they buy,

581
00:27:51,480 --> 00:27:52,879
Speaker 10: and it's been a mistake. I think it's going to

582
00:27:52,880 --> 00:27:54,439
Speaker 10: be a mistake going forward.

583
00:27:55,400 --> 00:27:58,320
Speaker 6: So what do you buy? James? Let's let's say it

584
00:27:58,359 --> 00:28:00,119
Speaker 6: to the next level there, what do you buy? Do

585
00:28:00,200 --> 00:28:02,679
Speaker 6: I just load into my big tech stocks that are

586
00:28:02,720 --> 00:28:04,920
Speaker 6: work so well for me over the past couple of years,

587
00:28:05,000 --> 00:28:06,520
Speaker 6: or I try to get a little creative.

588
00:28:07,600 --> 00:28:09,560
Speaker 10: Well, I think that investors, you know, a lot of

589
00:28:09,640 --> 00:28:12,080
Speaker 10: investors are focusing on the wrong thing, which is the FED,

590
00:28:12,520 --> 00:28:15,000
Speaker 10: and they should be focusing on what's driving this market.

591
00:28:15,119 --> 00:28:18,480
Speaker 10: It's what this market's doing. It's a discounting this new

592
00:28:18,800 --> 00:28:22,760
Speaker 10: AI tech led business cycle in ball market. And so

593
00:28:22,840 --> 00:28:24,880
Speaker 10: when we think about what to buy, even with at

594
00:28:25,000 --> 00:28:27,800
Speaker 10: levels like this, we want to think, well, if this

595
00:28:28,000 --> 00:28:31,199
Speaker 10: is the case AI tech led biz cycle, it's going

596
00:28:31,280 --> 00:28:35,200
Speaker 10: to be productivity growth in fast growing earnings, where do

597
00:28:35,280 --> 00:28:37,560
Speaker 10: I go for that? Right, there's ten eleven sectors in

598
00:28:37,600 --> 00:28:40,560
Speaker 10: the economy, and if rates stay where they are, which

599
00:28:40,600 --> 00:28:43,000
Speaker 10: we think they will, you want to go to tech

600
00:28:43,280 --> 00:28:45,800
Speaker 10: for sure, you want to go to telecom in everywhere

601
00:28:46,360 --> 00:28:50,160
Speaker 10: this AI productivity growth can affect. I think healthcare is

602
00:28:50,200 --> 00:28:52,480
Speaker 10: definitely one of those. I think the utility senttor is

603
00:28:52,520 --> 00:28:56,959
Speaker 10: sort of interesting here, very inexpensive industrial companies, financials, right,

604
00:28:57,640 --> 00:29:00,200
Speaker 10: Jamie diamond saying a few weeks ago, how AI as

605
00:29:00,240 --> 00:29:03,800
Speaker 10: impacting JP Morgan, So I think you kind of want

606
00:29:03,840 --> 00:29:06,640
Speaker 10: to think about this as an allah nineteen nineties, if

607
00:29:06,680 --> 00:29:08,680
Speaker 10: you will, where that's the last time we had this

608
00:29:09,200 --> 00:29:12,400
Speaker 10: huge boom of productivity growth. That was a different technology,

609
00:29:12,440 --> 00:29:16,240
Speaker 10: obviously the Internet. Now we're in the AI phase.

610
00:29:18,200 --> 00:29:20,760
Speaker 3: Something to say on that, because nineteen nineties didn't always

611
00:29:20,800 --> 00:29:22,520
Speaker 3: end well on that end. But before we get there

612
00:29:22,640 --> 00:29:25,680
Speaker 3: for utilities, I find that so fascinating because usually you

613
00:29:25,760 --> 00:29:29,640
Speaker 3: think of utilities as just a straight up dividend yield play. Right,

614
00:29:31,120 --> 00:29:34,200
Speaker 3: Are utilities a growth sector right now? Can you play

615
00:29:34,240 --> 00:29:36,120
Speaker 3: it and value it like a growth sector?

616
00:29:37,400 --> 00:29:41,480
Speaker 10: Yeah, Alex, this was my grandmother's favorite sector because that's

617
00:29:41,520 --> 00:29:44,240
Speaker 10: no volatility, very predictable.

618
00:29:45,240 --> 00:29:45,720
Speaker 5: Dividend you.

619
00:29:46,040 --> 00:29:47,959
Speaker 10: But here you have a different story, right if it's

620
00:29:47,960 --> 00:29:52,600
Speaker 10: an AI tech led business cycle, particularly with evs, and

621
00:29:52,720 --> 00:29:55,920
Speaker 10: you've got these AI chips just churning away, needing so

622
00:29:56,080 --> 00:29:59,640
Speaker 10: much electricity. We're looking at the utility industry as potentially

623
00:29:59,680 --> 00:30:02,800
Speaker 10: a their a big growth area. So the grid is

624
00:30:02,880 --> 00:30:05,400
Speaker 10: going to have to get way bigger to support what

625
00:30:05,560 --> 00:30:08,120
Speaker 10: we envision is a seven to nine year business cycle.

626
00:30:08,600 --> 00:30:12,760
Speaker 10: It's led by AI profit growth, productivity growth. And I'll

627
00:30:12,800 --> 00:30:14,960
Speaker 10: tell you not just the utilities, but who's going to

628
00:30:15,000 --> 00:30:17,520
Speaker 10: build that grid the industrial companies, and I think that's

629
00:30:17,560 --> 00:30:19,320
Speaker 10: one of the reasons you see, you know, the caterpillar,

630
00:30:19,440 --> 00:30:21,880
Speaker 10: tractors and that sort of thing doing quite well over

631
00:30:21,880 --> 00:30:24,600
Speaker 10: the last few courts. Discounting not what the Fed's gonna do,

632
00:30:24,880 --> 00:30:28,160
Speaker 10: it's discounting. Hey, this is a new era, a very

633
00:30:28,280 --> 00:30:29,480
Speaker 10: different type of business cycle.

634
00:30:30,560 --> 00:30:32,280
Speaker 6: James. One of the names you have on your list

635
00:30:32,440 --> 00:30:34,840
Speaker 6: is Apple, and it's on a lot of people's lists,

636
00:30:34,920 --> 00:30:39,240
Speaker 6: but it's obviously facing some headwinds, notably China. But one

637
00:30:39,280 --> 00:30:42,240
Speaker 6: thing that it hasn't yet quite gotten into its multiple

638
00:30:42,680 --> 00:30:46,840
Speaker 6: is AI. Do you believe the AI, you know, pixie

639
00:30:46,880 --> 00:30:48,400
Speaker 6: Dust can find Apple at some point.

640
00:30:49,840 --> 00:30:52,320
Speaker 10: We do, and I think that Apple's on a lot

641
00:30:52,360 --> 00:30:55,920
Speaker 10: of people's lists. As a bearish call, we are absolutely

642
00:30:55,920 --> 00:31:00,080
Speaker 10: the one hundred and eighty degrees opposite bullsh and and

643
00:31:00,200 --> 00:31:02,560
Speaker 10: we think they're late to the game, there's no question,

644
00:31:03,440 --> 00:31:06,440
Speaker 10: and that's frustrating as a shareholder. But you know, as

645
00:31:06,480 --> 00:31:09,800
Speaker 10: we listen to the conference calls and read the tea

646
00:31:09,880 --> 00:31:12,400
Speaker 10: leaves of where Apple's going here, and you can see

647
00:31:12,400 --> 00:31:15,120
Speaker 10: it with their recent sort of partnership with chat GBT,

648
00:31:16,000 --> 00:31:18,520
Speaker 10: we think in June eleventh is going to be a

649
00:31:18,560 --> 00:31:22,200
Speaker 10: big call from from Apple in Cooper, Tino and Cook,

650
00:31:22,440 --> 00:31:24,640
Speaker 10: and I think they're going to talk about, hey, we're

651
00:31:24,680 --> 00:31:28,480
Speaker 10: bringing AI to the iPhone. We we envision it as

652
00:31:28,520 --> 00:31:31,840
Speaker 10: a supercharge sery, you know, like a personal assistance series,

653
00:31:31,840 --> 00:31:34,400
Speaker 10: which is way better than what we have now. Might

654
00:31:34,480 --> 00:31:37,440
Speaker 10: start with subscriptions. Think about the giant installed base around

655
00:31:37,520 --> 00:31:39,400
Speaker 10: the world they have, and then it probably is going

656
00:31:39,480 --> 00:31:42,400
Speaker 10: to force us all to get a new iPhone, maybe

657
00:31:42,480 --> 00:31:45,280
Speaker 10: a few core to support it. So we are fans

658
00:31:45,360 --> 00:31:49,400
Speaker 10: twenty seven times earnings neglected. You know, one of those

659
00:31:50,000 --> 00:31:51,360
Speaker 10: that you want to you want to add here.

660
00:31:52,000 --> 00:31:53,880
Speaker 3: Yeah, I know, it's like I haye one my phone

661
00:31:53,960 --> 00:31:55,560
Speaker 3: just one day is like we're done here, take us

662
00:31:55,600 --> 00:31:55,960
Speaker 3: to the store.

663
00:31:56,040 --> 00:31:56,800
Speaker 5: We have to get a new one.

664
00:31:57,400 --> 00:32:01,360
Speaker 3: You also like, ASML, why would that be a why

665
00:32:01,400 --> 00:32:03,840
Speaker 3: do you like that for the AI trade? Like, there's

666
00:32:03,920 --> 00:32:05,560
Speaker 3: tons of of those kind of guys that we can

667
00:32:05,600 --> 00:32:07,240
Speaker 3: start playing with. Why is it that one for you?

668
00:32:08,280 --> 00:32:08,480
Speaker 7: Yeah?

669
00:32:08,760 --> 00:32:12,200
Speaker 10: ASML work global investors. We love the overseas exposure right

670
00:32:12,280 --> 00:32:15,520
Speaker 10: from the Netherlands. But this is a company no debt,

671
00:32:15,960 --> 00:32:18,760
Speaker 10: and this is an integral part of what makes an

672
00:32:18,840 --> 00:32:21,880
Speaker 10: AI chip work. Right, So there's just a handful of

673
00:32:21,920 --> 00:32:25,400
Speaker 10: companies that actually do the design that Nvidio uses. Right,

674
00:32:25,480 --> 00:32:30,560
Speaker 10: So Nvidia is buying ASMML technology to design and fabricate

675
00:32:30,680 --> 00:32:34,200
Speaker 10: these chips. So they're really at the beginning of the

676
00:32:34,320 --> 00:32:38,040
Speaker 10: cycle of making the chips. Absolutely important company to own,

677
00:32:38,800 --> 00:32:40,880
Speaker 10: not just a chip maker. They're the ones helping the

678
00:32:40,960 --> 00:32:44,120
Speaker 10: chip makers make them make the chips. So very important

679
00:32:44,240 --> 00:32:47,400
Speaker 10: to be at that front end, the most important company

680
00:32:47,520 --> 00:32:48,520
Speaker 10: on that end.

681
00:32:49,160 --> 00:32:51,080
Speaker 6: How about in a fixed income space, James, do you

682
00:32:51,160 --> 00:32:53,200
Speaker 6: guys allocate there? And if so, how do you do?

683
00:32:53,360 --> 00:32:53,400
Speaker 9: So?

684
00:32:54,400 --> 00:32:56,520
Speaker 10: We do a third of our assets under management, we

685
00:32:56,560 --> 00:32:59,840
Speaker 10: manage about two billion are in fixed income. And our

686
00:33:00,120 --> 00:33:03,960
Speaker 10: you is the FED may not do anything. And so

687
00:33:04,240 --> 00:33:06,400
Speaker 10: here's where you want to say, Well, if rates have

688
00:33:07,200 --> 00:33:09,040
Speaker 10: let's say they peak, but they're not going to go down,

689
00:33:09,600 --> 00:33:12,680
Speaker 10: you want to go out here in duration. I think

690
00:33:12,720 --> 00:33:14,720
Speaker 10: it's safe to do that. I don't think the Fed's

691
00:33:14,840 --> 00:33:17,520
Speaker 10: raising rates anytime soon. I think, in fact, at some

692
00:33:17,600 --> 00:33:19,440
Speaker 10: point they'll lower them. I don't think it's this year.

693
00:33:20,480 --> 00:33:23,160
Speaker 10: And so you want to go individual bonds high credit

694
00:33:23,240 --> 00:33:27,320
Speaker 10: quality based on your tax circumstance, either own muni's or corporates.

695
00:33:27,360 --> 00:33:29,960
Speaker 10: I love corporates in a non tax will account, and

696
00:33:30,760 --> 00:33:33,840
Speaker 10: you know, don't feel uncomfortable going out twenty twenty five

697
00:33:33,960 --> 00:33:36,640
Speaker 10: thirty years. Lock that yield in, make sure no one

698
00:33:36,680 --> 00:33:39,240
Speaker 10: can take it away from you, because yes, eventually rates

699
00:33:39,280 --> 00:33:41,760
Speaker 10: will come down and those will not be available. So

700
00:33:41,880 --> 00:33:44,080
Speaker 10: we sort of ladder a little bit on the short end,

701
00:33:44,160 --> 00:33:46,520
Speaker 10: tons in the middle, and lots on the long end.

702
00:33:46,760 --> 00:33:49,160
Speaker 10: Very different than what we were doing three or four

703
00:33:49,280 --> 00:33:49,680
Speaker 10: years ago.

704
00:33:52,040 --> 00:33:54,480
Speaker 5: Our stock's expensive right now. How do you price that in?

705
00:33:54,640 --> 00:33:57,040
Speaker 3: I mean, there's so many different metrics, particularly when you

706
00:33:57,480 --> 00:33:59,440
Speaker 3: compare it to say, the yield you're getting on the

707
00:33:59,480 --> 00:34:01,080
Speaker 3: ten years, So I might say, yeah, you're not getting

708
00:34:01,120 --> 00:34:01,920
Speaker 3: compensated at all.

709
00:34:02,080 --> 00:34:03,440
Speaker 5: That risk is not priced in.

710
00:34:03,520 --> 00:34:06,040
Speaker 10: What do you think, Yeah, Alex, I think people are

711
00:34:06,080 --> 00:34:09,920
Speaker 10: misunderstanding pe ratios. First of all, when you're at the

712
00:34:09,960 --> 00:34:11,840
Speaker 10: beginning of a business cycle, pes can be sort of

713
00:34:11,880 --> 00:34:14,040
Speaker 10: an illus right because we're looking at we look at

714
00:34:14,080 --> 00:34:17,759
Speaker 10: four earrings and that E is underestimated all the time,

715
00:34:18,280 --> 00:34:20,320
Speaker 10: so it sort of makes the pe and seem a

716
00:34:20,360 --> 00:34:23,719
Speaker 10: little higher than it is. And more importantly, and I

717
00:34:23,800 --> 00:34:26,239
Speaker 10: think this is the real problem investors are having is

718
00:34:26,280 --> 00:34:27,920
Speaker 10: if you look at the S and P five hundred

719
00:34:28,000 --> 00:34:31,160
Speaker 10: or any normal index, you've got seven stocks trading at

720
00:34:31,239 --> 00:34:33,480
Speaker 10: thirty five times earnings, and you've got the rest of

721
00:34:33,480 --> 00:34:36,480
Speaker 10: the market trading at fifteen. Now, anytime that you have

722
00:34:36,560 --> 00:34:39,280
Speaker 10: financials at eleven times earnings, which is what's going on today,

723
00:34:39,920 --> 00:34:43,320
Speaker 10: eleven times is almost historic for financial stocks and the

724
00:34:43,400 --> 00:34:46,480
Speaker 10: rest of market trading at fifteen. That is a value

725
00:34:46,600 --> 00:34:51,040
Speaker 10: proposition as we move towards a growing, expanding economy, and

726
00:34:51,160 --> 00:34:54,279
Speaker 10: one that we view as GDP plus four percent, not

727
00:34:54,480 --> 00:34:56,520
Speaker 10: GDP plus two, which is what we had for the

728
00:34:56,600 --> 00:35:01,520
Speaker 10: last twenty years. So higher growth fifty teen time journings absolutely,

729
00:35:01,640 --> 00:35:05,080
Speaker 10: and particularly all these sectors that I mentioned earlier, they

730
00:35:05,160 --> 00:35:08,480
Speaker 10: have not yet been impacted by the power of AI

731
00:35:08,600 --> 00:35:09,520
Speaker 10: and productivity growth.

732
00:35:10,200 --> 00:35:11,840
Speaker 6: All right, James, thank you so much for joining us.

733
00:35:11,880 --> 00:35:14,439
Speaker 6: James demmertt He is a chief investment officer at main

734
00:35:14,719 --> 00:35:18,280
Speaker 6: Street Research. Joining us from New York City via zooms.

735
00:35:18,320 --> 00:35:19,000
Speaker 6: We appreciate that.

736
00:35:21,680 --> 00:35:25,520
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

737
00:35:25,640 --> 00:35:27,480
Speaker 2: weekdays at ten am Eastern.

738
00:35:27,320 --> 00:35:30,919
Speaker 7: On applecard Play and Android Auto with the Bloomberg Business app.

739
00:35:31,040 --> 00:35:33,880
Speaker 2: You can also listen live on Amazon Alexa from our

740
00:35:33,920 --> 00:35:38,560
Speaker 2: flagship New York station. Just say Alexa Play Bloomberg eleven thirty.

741
00:35:40,239 --> 00:35:41,840
Speaker 6: Alex Dee and Paul Sweeney were live here in our

742
00:35:41,840 --> 00:35:45,200
Speaker 6: Bloomberg Interactive Brokers studio. We're streaming live on YouTube, so

743
00:35:45,239 --> 00:35:47,400
Speaker 6: you can go to YouTube dot com and search Bloomberg

744
00:35:47,960 --> 00:35:50,040
Speaker 6: Podcast and that's where you find us. All right, let's

745
00:35:50,080 --> 00:35:54,160
Speaker 6: turn now to a conversation on artificial intelligence. Last Thursday,

746
00:35:54,440 --> 00:35:58,280
Speaker 6: I attended the Boston Consulting Group EDGE Expo in Boston.

747
00:35:58,280 --> 00:36:02,200
Speaker 6: A lotic great conversations with the execs at BCG. One

748
00:36:02,360 --> 00:36:06,120
Speaker 6: was with North America Sharon Marshall. She speaks with CEOs

749
00:36:06,239 --> 00:36:09,120
Speaker 6: daily about what they are dealing with with their own company,

750
00:36:09,160 --> 00:36:11,279
Speaker 6: and one big issue that keeps coming up, Sharon said,

751
00:36:11,480 --> 00:36:15,160
Speaker 6: was AI. I began by asking here what question she's

752
00:36:15,239 --> 00:36:17,319
Speaker 6: being asked most by CEOs. Let's take a listen.

753
00:36:17,920 --> 00:36:20,960
Speaker 11: I speak to CEOs on a daily basis, and I

754
00:36:21,040 --> 00:36:24,800
Speaker 11: think the good news is there's cautious optimism. If you

755
00:36:24,840 --> 00:36:29,880
Speaker 11: speak to most CEOs, they see a very very strong potential,

756
00:36:30,000 --> 00:36:33,920
Speaker 11: some say infinite potential in terms of AI. Obviously, the

757
00:36:34,040 --> 00:36:38,879
Speaker 11: economy is here in North America is performing very well

758
00:36:39,000 --> 00:36:43,680
Speaker 11: and creates more stability in terms of capital investment. And

759
00:36:43,800 --> 00:36:48,400
Speaker 11: I think the unknown is about the geopolitics and our

760
00:36:48,640 --> 00:36:50,920
Speaker 11: current political environment and how that will all play out.

761
00:36:51,040 --> 00:36:55,880
Speaker 11: But you know, in speaking to them, cautious optimism thinking

762
00:36:55,920 --> 00:36:58,279
Speaker 11: about AI, how do I scale it, how do I

763
00:36:58,320 --> 00:37:00,960
Speaker 11: get value out of it? And how do I fund

764
00:37:01,000 --> 00:37:01,440
Speaker 11: the journey?

765
00:37:01,560 --> 00:37:04,400
Speaker 5: So looking for opportunities for cost efficiencies.

766
00:37:04,480 --> 00:37:06,040
Speaker 6: Well, let's go to that AI because that's been a

767
00:37:06,080 --> 00:37:08,120
Speaker 6: topic here today. A lot of smart people we've spoken

768
00:37:08,160 --> 00:37:11,080
Speaker 6: to from BCG about the AI business, about the ethics

769
00:37:11,680 --> 00:37:14,839
Speaker 6: of AI, which is something folks really need to think about.

770
00:37:15,239 --> 00:37:17,920
Speaker 6: But the bottom line is it requires, from my understanding,

771
00:37:18,120 --> 00:37:21,120
Speaker 6: a lot of investment and over a long period of time,

772
00:37:21,239 --> 00:37:25,160
Speaker 6: a real commitment here when you talk to CEOs, do

773
00:37:25,280 --> 00:37:28,120
Speaker 6: they get that and are they willing to make that commitment?

774
00:37:28,680 --> 00:37:31,680
Speaker 11: So, Paul, if you click back a year, we were

775
00:37:31,719 --> 00:37:34,240
Speaker 11: doing a lot of conversations with boards and with CEOs,

776
00:37:34,480 --> 00:37:37,239
Speaker 11: and there's a lot of experimentation that was going on.

777
00:37:37,440 --> 00:37:41,040
Speaker 11: But it really it was just experimentation. It was use cases,

778
00:37:41,239 --> 00:37:44,160
Speaker 11: and I think people were learning a lot. Now you

779
00:37:44,440 --> 00:37:47,240
Speaker 11: flash forward a year and I think companies and CEOs

780
00:37:47,280 --> 00:37:50,680
Speaker 11: are thinking, how can I create competitive advantage using AI?

781
00:37:51,480 --> 00:37:53,400
Speaker 11: And what are the areas I'm going to pick to

782
00:37:53,560 --> 00:37:56,080
Speaker 11: invest in? Because you can invest every it would be

783
00:37:56,560 --> 00:38:00,080
Speaker 11: cost prohibitive to pick everything. And so it's interesting as

784
00:38:00,120 --> 00:38:03,640
Speaker 11: you see some companies are picking what you would consider

785
00:38:03,719 --> 00:38:06,839
Speaker 11: more strategic aspects of their business. So if you think

786
00:38:06,840 --> 00:38:11,879
Speaker 11: about insurance, either claims processing or underwriting core processes which

787
00:38:11,920 --> 00:38:15,759
Speaker 11: are strategic to really lean into and invest. Some other

788
00:38:15,800 --> 00:38:19,040
Speaker 11: companies actually have chosen more of a backed office route.

789
00:38:19,080 --> 00:38:23,200
Speaker 11: So really thinking about customer service, how can AI fundamentally

790
00:38:23,280 --> 00:38:26,120
Speaker 11: transform how we do customer service to make it better

791
00:38:26,280 --> 00:38:27,360
Speaker 11: and more efficient.

792
00:38:27,840 --> 00:38:29,480
Speaker 5: So companies are in different journeys.

793
00:38:30,080 --> 00:38:32,040
Speaker 11: It's going to be expensive, and they have to pick

794
00:38:32,080 --> 00:38:34,239
Speaker 11: the places which is going to pan out for them

795
00:38:34,280 --> 00:38:36,120
Speaker 11: and give them real advantage in the marketplace.

796
00:38:36,560 --> 00:38:39,120
Speaker 6: And on the people side of the equation, there's concern

797
00:38:39,200 --> 00:38:42,400
Speaker 6: out there in the marketplace that AI will take jobs,

798
00:38:42,560 --> 00:38:45,080
Speaker 6: or if it doesn't take jobs, it's going to require

799
00:38:45,120 --> 00:38:48,640
Speaker 6: a tremendous amount of retraining. How do the CEOs think

800
00:38:48,640 --> 00:38:50,680
Speaker 6: about that? Are they again, are they concerned about that?

801
00:38:50,719 --> 00:38:53,040
Speaker 6: Are they willing to make those investments in their people?

802
00:38:54,080 --> 00:38:57,560
Speaker 11: I think that's exactly right. So AI is going to

803
00:38:57,680 --> 00:39:00,520
Speaker 11: change a few things beyond the technology. It's going to

804
00:39:00,640 --> 00:39:03,640
Speaker 11: change in many cases actually organization structure, it's going to

805
00:39:03,719 --> 00:39:09,360
Speaker 11: change process and m process and also skills required. We

806
00:39:09,480 --> 00:39:12,520
Speaker 11: often talk about the ten twenty seventy and the seventy

807
00:39:12,719 --> 00:39:14,840
Speaker 11: percent of the change is going to be people and

808
00:39:15,000 --> 00:39:18,560
Speaker 11: change management. If you speak to CEOs, I think they

809
00:39:18,719 --> 00:39:21,680
Speaker 11: feel like it is worth it. It has to be

810
00:39:21,760 --> 00:39:23,840
Speaker 11: done in order to stay at the head of the

811
00:39:23,880 --> 00:39:27,680
Speaker 11: curve and to provide competitive advantage. But again being choiceful

812
00:39:27,880 --> 00:39:30,680
Speaker 11: and where you choose to scale, because you can't change

813
00:39:30,719 --> 00:39:32,000
Speaker 11: everything all at once.

814
00:39:32,719 --> 00:39:34,799
Speaker 6: I was mentioning to my young producer that is one

815
00:39:35,200 --> 00:39:38,160
Speaker 6: age is one has to really make the commitment to

816
00:39:38,320 --> 00:39:43,680
Speaker 6: embrace change and be open to change. I'm case in point.

817
00:39:45,560 --> 00:39:47,960
Speaker 6: When you go talk to the boards and to the CEOs,

818
00:39:48,640 --> 00:39:51,360
Speaker 6: is it a tough sell to say, hey, Ai, this

819
00:39:51,560 --> 00:39:54,640
Speaker 6: is an inflection point in what you've traditionally understood to

820
00:39:54,719 --> 00:39:56,080
Speaker 6: be your tech spend.

821
00:39:57,480 --> 00:39:58,520
Speaker 5: I think they understand it.

822
00:39:58,960 --> 00:40:02,600
Speaker 11: I think they're not as familiar with the technology, but

823
00:40:03,160 --> 00:40:05,880
Speaker 11: they're pushing themselves to get there because you're absolutely right.

824
00:40:05,920 --> 00:40:08,719
Speaker 11: I mean, look, if we look at our own data WITHINBCG,

825
00:40:09,280 --> 00:40:12,920
Speaker 11: the greatest adoption is with our less tenured people, and

826
00:40:13,239 --> 00:40:16,800
Speaker 11: the adoption there is very, very high. But we I

827
00:40:16,880 --> 00:40:19,120
Speaker 11: think all of our partners are most senior people as

828
00:40:19,160 --> 00:40:22,640
Speaker 11: well as the CEOs and the board members realize they

829
00:40:22,760 --> 00:40:27,000
Speaker 11: have to get the comfort level and upskill themselves in

830
00:40:27,200 --> 00:40:28,960
Speaker 11: order to be relevant in the future.

831
00:40:29,719 --> 00:40:32,640
Speaker 6: Are there some industries that are maybe doing a better

832
00:40:32,760 --> 00:40:35,680
Speaker 6: job of kind of leaning into this AI and what

833
00:40:35,800 --> 00:40:37,839
Speaker 6: it really means in the long term versus some others?

834
00:40:39,800 --> 00:40:42,239
Speaker 11: Know, if it's versus some others, I mean, we're seeing

835
00:40:42,360 --> 00:40:46,960
Speaker 11: a lot of activity, a lot of interests across all

836
00:40:47,040 --> 00:40:50,359
Speaker 11: of our major sectors. So really thinking about healthcare as

837
00:40:50,360 --> 00:40:53,880
Speaker 11: an example, so drug research would be an example, or

838
00:40:54,160 --> 00:40:57,120
Speaker 11: medical records writing. So there's a lot in the regulatories

839
00:40:57,200 --> 00:41:00,600
Speaker 11: here that can be improved through AI. If you think

840
00:41:00,600 --> 00:41:05,560
Speaker 11: about insurance, there's an enormous amount of documentation and review

841
00:41:05,680 --> 00:41:09,320
Speaker 11: and so in areas, specific areas within each industry and

842
00:41:09,400 --> 00:41:12,400
Speaker 11: within each sector where there's a lot of documentation review,

843
00:41:13,680 --> 00:41:14,919
Speaker 11: those are the areas that are.

844
00:41:14,840 --> 00:41:19,279
Speaker 6: Being focused on all right, Speaking to CEOs, you have

845
00:41:19,360 --> 00:41:21,640
Speaker 6: to talk about particularly for your global clients, I would

846
00:41:21,640 --> 00:41:24,200
Speaker 6: think geopolitics, for better or worse, is at the top

847
00:41:24,280 --> 00:41:25,920
Speaker 6: of their list or on their to do list. And

848
00:41:25,960 --> 00:41:27,839
Speaker 6: you think about what's happened in Ukraine, the Middle East,

849
00:41:27,880 --> 00:41:29,600
Speaker 6: and you know, you can never take your eye off

850
00:41:29,880 --> 00:41:32,600
Speaker 6: Taiwan in Asia? Can you plan for it? This is

851
00:41:32,680 --> 00:41:34,160
Speaker 6: a little bit different world than we had four or

852
00:41:34,200 --> 00:41:34,799
Speaker 6: five years ago.

853
00:41:34,920 --> 00:41:38,680
Speaker 11: It's interesting we did more work exactly on that topic

854
00:41:39,160 --> 00:41:41,680
Speaker 11: last year than we're doing this year. I feel like

855
00:41:41,760 --> 00:41:45,960
Speaker 11: there was a lot of preparedness and scenario analysis that

856
00:41:46,239 --> 00:41:49,760
Speaker 11: was done last year. It's continuing to be done and updated.

857
00:41:50,160 --> 00:41:53,040
Speaker 11: I think many companies are on that journey. And actually

858
00:41:53,120 --> 00:41:56,640
Speaker 11: our recent CEO survey showed that sixty three percent actually

859
00:41:56,680 --> 00:42:00,560
Speaker 11: felt much better prepared for a geopolitical event at this

860
00:42:00,680 --> 00:42:02,200
Speaker 11: time this year versus last year.

861
00:42:02,480 --> 00:42:05,000
Speaker 6: All Right, how about BCG in particular, I was thinking

862
00:42:05,080 --> 00:42:06,919
Speaker 6: back way back to my days. Is the Fupal School

863
00:42:06,960 --> 00:42:09,960
Speaker 6: of Business at Duke meeting with all the consulting companies.

864
00:42:10,000 --> 00:42:13,160
Speaker 6: A couple of things that I remember. They paid pretty well,

865
00:42:13,840 --> 00:42:16,759
Speaker 6: but they worked pretty hard. They travel quite a lot.

866
00:42:17,280 --> 00:42:19,600
Speaker 6: How has your business changed since? Maybe since the pandemic,

867
00:42:20,000 --> 00:42:22,080
Speaker 6: maybe with the advent of some new technologies.

868
00:42:22,239 --> 00:42:26,000
Speaker 11: Great question. So look, you know it's super important that

869
00:42:26,040 --> 00:42:29,040
Speaker 11: we travel and that we spend in time time with

870
00:42:29,239 --> 00:42:32,680
Speaker 11: clients and at sites. I think the pandemic has also,

871
00:42:32,920 --> 00:42:35,440
Speaker 11: just like many industries, given us a little bit more flexibility.

872
00:42:35,760 --> 00:42:38,120
Speaker 11: I think our clients are sometimes very happy to meet

873
00:42:38,120 --> 00:42:41,640
Speaker 11: with us on video and we do that quite a

874
00:42:41,719 --> 00:42:43,759
Speaker 11: bit as well. And you know, of course, like any

875
00:42:43,880 --> 00:42:46,600
Speaker 11: responsible business, we are trying to lower.

876
00:42:46,400 --> 00:42:47,480
Speaker 6: Our carbon footprint.

877
00:42:47,560 --> 00:42:50,120
Speaker 11: So it's something as we think about, for example, internal

878
00:42:50,200 --> 00:42:53,520
Speaker 11: travel that we really try to manage. So I think

879
00:42:53,520 --> 00:42:56,719
Speaker 11: it's better than when I joined BCG, but it's still

880
00:42:56,760 --> 00:42:57,880
Speaker 11: a pretty demanding job.

881
00:42:57,760 --> 00:43:01,080
Speaker 6: Still the demand job. It's still a lot of big

882
00:43:01,280 --> 00:43:04,160
Speaker 6: NBA pipeline there. So talk to us about just kind

883
00:43:04,200 --> 00:43:07,480
Speaker 6: of the business of consulting today. Hey, just how's business.

884
00:43:08,719 --> 00:43:09,480
Speaker 5: Business is good.

885
00:43:09,960 --> 00:43:13,880
Speaker 11: So if you if you look at last year, we

886
00:43:14,960 --> 00:43:18,800
Speaker 11: we actually registered another year, which is twenty straight years

887
00:43:18,960 --> 00:43:21,759
Speaker 11: of growth in terms of BCG. And I would say

888
00:43:21,800 --> 00:43:25,040
Speaker 11: in North America specifically, our fourth quarter was our strongest

889
00:43:25,080 --> 00:43:27,840
Speaker 11: quarter last year, and we're off to a really strong

890
00:43:27,920 --> 00:43:30,920
Speaker 11: start this year as well, both in North America and globally.

891
00:43:31,080 --> 00:43:33,680
Speaker 11: All of our regions are growing and all of our

892
00:43:33,719 --> 00:43:35,120
Speaker 11: practices are growing.

893
00:43:35,280 --> 00:43:37,880
Speaker 6: So that's Does that tell you that the c suite

894
00:43:38,000 --> 00:43:40,520
Speaker 6: the board has some little of confidence that they're either

895
00:43:40,600 --> 00:43:42,719
Speaker 6: willing to engage with you to make the investment in

896
00:43:42,800 --> 00:43:45,400
Speaker 6: your type of services, they're looking to do stuff that's right.

897
00:43:46,400 --> 00:43:47,319
Speaker 5: We always say that.

898
00:43:49,560 --> 00:43:54,560
Speaker 11: Certainty in either direction, either optimism or pessimism, is good

899
00:43:54,719 --> 00:43:55,440
Speaker 11: for our industry.

900
00:43:55,960 --> 00:43:58,080
Speaker 5: What is bad for our industry is uncertainty.

901
00:43:58,800 --> 00:44:01,360
Speaker 11: So if you don't know if there's going to be

902
00:44:01,400 --> 00:44:04,719
Speaker 11: a recession, if you have fear but a lot of uncertainty,

903
00:44:04,960 --> 00:44:07,719
Speaker 11: that's a tough time for our industry. I think there's

904
00:44:07,800 --> 00:44:13,400
Speaker 11: greater certainty and energy and CEO is feeling they have to.

905
00:44:13,440 --> 00:44:15,759
Speaker 6: Move, they have to move. Yeah, I would think with

906
00:44:15,880 --> 00:44:18,680
Speaker 6: technology that would make it even more so, more pronounced

907
00:44:18,719 --> 00:44:20,520
Speaker 6: than this whole AI thing. I have to get smart

908
00:44:20,560 --> 00:44:22,000
Speaker 6: on it really quickly.

909
00:44:22,160 --> 00:44:24,560
Speaker 11: Indeed, indeed, a big, a big part of big part

910
00:44:24,600 --> 00:44:27,520
Speaker 11: of our business continues to be cost and resiliency, but

911
00:44:27,719 --> 00:44:28,919
Speaker 11: a very big part is AI.

912
00:44:29,480 --> 00:44:32,200
Speaker 6: All Right. That was Sharon Marshall. She is the North

913
00:44:32,239 --> 00:44:36,080
Speaker 6: America chair for BCGOS chatting with her last week at

914
00:44:36,400 --> 00:44:39,480
Speaker 6: conference up in Boston, and you know, I mean her

915
00:44:39,600 --> 00:44:41,759
Speaker 6: job is basically just to take phone calls and field

916
00:44:41,880 --> 00:44:44,640
Speaker 6: fold calls from CEOs their clients and try to help

917
00:44:44,640 --> 00:44:46,480
Speaker 6: them with their problems. And she says, boy, it's like

918
00:44:46,680 --> 00:44:50,520
Speaker 6: every single call is about AI. That types of investments

919
00:44:50,600 --> 00:44:53,719
Speaker 6: that their clients should be making in AI, how they

920
00:44:53,760 --> 00:44:56,080
Speaker 6: should be making those investments. How do you weave the

921
00:44:56,120 --> 00:44:59,520
Speaker 6: whole ethics thing into this whole AI discussion? But it

922
00:44:59,640 --> 00:45:02,320
Speaker 6: certainly top of mind for her and her you know,

923
00:45:02,440 --> 00:45:03,560
Speaker 6: all the other consultants up there.

924
00:45:03,680 --> 00:45:06,480
Speaker 3: Does BCG feel like they're behind that curve or on

925
00:45:06,560 --> 00:45:09,160
Speaker 3: top of it because just as it's their clients are panicking,

926
00:45:09,160 --> 00:45:11,000
Speaker 3: I would assume that they don't have all the answers either.

927
00:45:11,320 --> 00:45:13,800
Speaker 6: No, they don't, but there's they have a lot of

928
00:45:13,840 --> 00:45:15,600
Speaker 6: people there that are spending a lot of time on

929
00:45:15,760 --> 00:45:17,400
Speaker 6: it and they're getting and the people I spoke to

930
00:45:17,480 --> 00:45:20,319
Speaker 6: their at BCG were, you know, seem very well read

931
00:45:20,360 --> 00:45:23,759
Speaker 6: in but acknowledged, like you said, way early in the game.

932
00:45:24,120 --> 00:45:26,160
Speaker 6: But I think one of the key takeaways I had

933
00:45:26,360 --> 00:45:29,040
Speaker 6: was you have to put the whole ethics of it

934
00:45:29,280 --> 00:45:32,879
Speaker 6: first before you spend dollar one, which doesn't usually happen

935
00:45:32,880 --> 00:45:34,560
Speaker 6: because usually people are spending on the tech, spend on

936
00:45:34,600 --> 00:45:36,600
Speaker 6: the tech. But you really have to think about how you,

937
00:45:36,680 --> 00:45:39,880
Speaker 6: as an institutions, as a company want to frame this

938
00:45:40,080 --> 00:45:43,239
Speaker 6: investment in terms of the ethical applications of AI. You

939
00:45:43,360 --> 00:45:45,840
Speaker 6: have to have a really strong call on that before

940
00:45:45,880 --> 00:45:48,239
Speaker 6: you put the shovel in the ground, so that's kind

941
00:45:48,239 --> 00:45:51,959
Speaker 6: of how they begin the discussion with their clients. But again,

942
00:45:52,040 --> 00:45:54,279
Speaker 6: big dollars being spent, big commitments, that's for sure.

943
00:45:54,520 --> 00:45:59,000
Speaker 2: This is the Bloomberg Intelligence Podcast, available on Apple, spotipy,

944
00:45:59,200 --> 00:46:02,080
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945
00:46:02,200 --> 00:46:05,600
Speaker 2: each weekday ten am to noon Eastern on Bloomberg dot com,

946
00:46:05,920 --> 00:46:09,279
Speaker 2: the iHeartRadio app, tune In, and the Bloomberg Business app.

947
00:46:09,440 --> 00:46:12,400
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948
00:46:12,680 --> 00:46:14,480
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