Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
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Speaker 3: Fry Alex Deel alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
Speaker 3: We bring you all the top news with our Bloomberg
Speaker 3: Intelligence analysts all around the world. They cover two thousand
Speaker 3: companies at one hundred and thirty industries. And we also
Speaker 3: tap our amazing Bloomberg News team who are deep in
Speaker 3: the weeds of everything you need to know in all
Speaker 3: the market action. And one of them is Bailey Lipschualtz.
Speaker 3: He's been very busy. He had to actually cancel radio
Speaker 3: hosting yesterday.
Speaker 4: I left Carol hanging the memes stock.
Speaker 5: Crazy, give a day job. It's cool, it's cool.
Speaker 3: So we know the memestocks did some stuff for three
Speaker 3: days and they rally and they're given back to a
Speaker 3: little bit today. Did any of them issue shares or
Speaker 3: anything and take advantage of this?
Speaker 4: So AMC had what we call an at the market
Speaker 4: offering that was approved back in March that enabled them
Speaker 4: to sell shares at the market. Have their bankers just
Speaker 4: keep pumping and creating shares to raise up to two
Speaker 4: hundred and fifty million dollars as fast as slow as
Speaker 4: they would want.
Speaker 6: They did about.
Speaker 4: Half of that prior to the mania, and announced on
Speaker 4: Monday that they completed that, so raised another one hundred
Speaker 4: and twenty five million dollars on the back of Monday's
Speaker 4: what turned into was seventy eight percent pop.
Speaker 6: For the shares.
Speaker 4: Then today they announced plans to do a debtorate equity swap.
Speaker 4: So swap out some debt. Your debt debt holders now
Speaker 4: become equity holders. You create more of those shares, all
Speaker 4: to try to address the fact that they have a
Speaker 4: few billion dollars on their debt load. Most of that
Speaker 4: do in twenty twenty six, So the company has said
Speaker 4: they're actively talking to lenders to try to work on
Speaker 4: addressing those issues.
Speaker 6: AMC Entertainment All right, it's down twenty percent today, but
Speaker 6: just about a billion dollars of stock has traded to day.
Speaker 6: I mean, this isn't pennies, this is real and money.
Speaker 6: When it goes back to my thing, like who's trade
Speaker 6: in this stuff, and that's what we wrote.
Speaker 4: It in my view, a good story because obviously I
Speaker 4: wrote it, But we wrote a story yesterday that kind
Speaker 4: of dove into the fact that when I talk to
Speaker 4: people who advise hedge funds, these momentum quants have gotten
Speaker 4: more sophisticated, caught onto the playbook from twenty twenty one,
Speaker 4: and are buying and selling and trading these shares, so
Speaker 4: helping create that big rally we saw Monday and Tuesday
Speaker 4: and likely getting out of the stock whether they're in
Speaker 4: the trade for two minutes or three days. They buy
Speaker 4: when stocks are going up, and then they quickly sell
Speaker 4: and the whole goal is to as we wrote basically.
Speaker 6: In a way front run retail. Whoa, WHOA. I'm looking
Speaker 6: at the is this right, AMC Entertainment's got nine billion
Speaker 6: of debt that includes their leases lease, so call it
Speaker 6: four and a half four and a four four and
Speaker 6: a still they have.
Speaker 4: It's sizable relative to their cases.
Speaker 6: Yeah, and I'm looking at Ebithal. Let's just take twenty
Speaker 6: twenty five's estimates five hundred million, so still ten times levered.
Speaker 6: Again having bank these guys in the past four times,
Speaker 6: is the multiple is the leverage I would put on
Speaker 6: this thing. Maybe if the sub sub guys want to
Speaker 6: go above it, that's their business. But crazy, but Lisa
Speaker 6: AMC's trying it.
Speaker 3: Yeah, I was gonna say if we don't, we like
Speaker 3: the fact the CFO is like, guys, let's do this, right,
Speaker 3: that's a good thing.
Speaker 6: That's good and that was part of it.
Speaker 7: Right.
Speaker 4: So a few years ago they created these eight preferred
Speaker 4: shares because they couldn't get approval from investors to sell
Speaker 4: more shares, because you have to get approval to create
Speaker 4: more shares to expand the number of fears you can
Speaker 4: have outstanding. Right now, according to b Riley's Eric World,
Speaker 4: he estimates the company still has one hundred and ninety
Speaker 4: one million common shares authorized but not yet issued, so
Speaker 4: they can hit another ATM, or they can continue to
Speaker 4: do some of these debt swap deals to try to
Speaker 4: address again the fact that they have a lot of debt,
Speaker 4: and they have a lot of near term debt, and Paul,
Speaker 4: as you mentioned, the underlying business is not really doing
Speaker 4: a whole lot.
Speaker 6: Yeah, you know, you think about the theater business, it
Speaker 6: goes to the fundamentals of post pandemic. What's the demand
Speaker 6: for movies in theaters, and it is less, but it
Speaker 6: is still there. That probably the bigger issue, if you
Speaker 6: ask the theater owners today is it's just not a
Speaker 6: lot of movies. And that was in large part because
Speaker 6: of the writer's strike and the and the actors strike
Speaker 6: pushed it just about everything back about a year. And
Speaker 6: then you've had some decisions by Disney to saying, you
Speaker 6: know what, we probably are overplaying our Marvel stuff, our
Speaker 6: Star Wars stuff, putting too close together. Let's spread that out.
Speaker 6: So stuff that was gonna be in twenty four is
Speaker 6: in twenty five, twenty five, it's going to be in
Speaker 6: twenty six. So you put all that together, and if
Speaker 6: you're a theater owner, you're like, I ain't got that
Speaker 6: much it put in my theater.
Speaker 4: When's the last time you saw a movie in the theaters.
Speaker 6: In the last few months? Last few months?
Speaker 5: Yeah, a couple of weeks ago. I saw Doing two Oo.
Speaker 3: Well, I like going to the Nighthawk in Brooklyn where
Speaker 3: they have like drinks and scene they bring to your seat.
Speaker 5: Like I like the whole experience.
Speaker 3: Like I don't go to a straight up AMC and
Speaker 3: just eat regular popcorn.
Speaker 5: Wow anymore? So I do the whole.
Speaker 3: It's cheaper than going out to dinner. You can spend
Speaker 3: like one hundred and twenty bucks. You see movies, You
Speaker 3: have dinner, you got drinks, you got dessert, versus going
Speaker 3: and spending three hundred dollars at like getting pasta and
Speaker 3: that's been though.
Speaker 5: You can get a prosco at though.
Speaker 6: Yeah.
Speaker 4: See they want to raise elevor they want to elevate it.
Speaker 4: So they're making more margin, more money in terms of
Speaker 4: margins expanded on people.
Speaker 8: Isn't like distracting though, you know everybody's chewing and eating
Speaker 8: a baunch of movie.
Speaker 3: No, they're doing it anyway, I after eating popcorn and stuff. No,
Speaker 3: it's you get used to. It's totally fine.
Speaker 6: The seats are awesome.
Speaker 4: I saw a movie on Friday, I think, and the
Speaker 4: lay back seats.
Speaker 6: I'd never been to a love shore a movie theater.
Speaker 4: And you're like, wow, I'm laying completely horizontal watching a movie.
Speaker 6: This is awesome. And the thing is, you know, if
Speaker 6: you're a movie theater economics of the move movie theaters,
Speaker 6: you don't make really anything on the ticket sales or
Speaker 6: as much because you have to give half to uh,
Speaker 6: the studio where you make it is in the popcorn
Speaker 6: in this that that's all your margin right for the perpection.
Speaker 3: You can, yes, Brownie Sunday exactly so.
Speaker 6: And you know they've been giving you crap for a
Speaker 6: hundred years. You know at some they're just finally waking
Speaker 6: up that if I ever want to get that person
Speaker 6: off the couch in front of their eighty inch TV
Speaker 6: in the surround sun, I got to up my game
Speaker 6: a little bit.
Speaker 3: Truffle salt butter popcorn dropped that right there.
Speaker 5: It's just beautiful.
Speaker 3: Okay, before we let you go, what is the downside?
Speaker 3: You think you can we unwind all of the last
Speaker 3: three days or what do you think?
Speaker 6: Probably?
Speaker 4: I mean, if you look at fund like why not, well,
Speaker 4: what has changed fundamentally today versus a week ago, realistically
Speaker 4: versus three months ago?
Speaker 6: Nothing?
Speaker 4: Really, And that's been the whole argument. When we saw
Speaker 4: the big rally both stocks up more than seventy percent
Speaker 4: on Monday, all on the back of the Roaring Kitty
Speaker 4: post on Sunday evening, is that that really was just
Speaker 4: kind of like the match to get people back out
Speaker 4: and trading this. It didn't actually change things. And one
Speaker 4: of the things that I think is worth pointing out
Speaker 4: is the difference between now in twenty twenty one is
Speaker 4: people were buying stocks for the first time. In twenty
Speaker 4: twenty one, the stock had already jumped, you know, five
Speaker 4: hundred percent for a lot of retail investors downloaded Robinhood
Speaker 4: found out how to fund it and buy call options.
Speaker 4: People who have been holding these stocks for a long
Speaker 4: time and are sitting on massive losses that if you
Speaker 4: see it go from sixteen to fifty and I got
Speaker 4: in at forty five, I might as well at least
Speaker 4: have some kind of gain as opposed to waiting around forever.
Speaker 6: Right, good stuff, Billy, look the Schultz equity support of
Speaker 6: Bloomberg new joining us here on a Bloomberg interactive broker's studio,
Speaker 6: you mentioned what kind of pop salt do you like?
Speaker 9: Oh?
Speaker 5: Truffle?
Speaker 6: Have you ever gone truffle hunting?
Speaker 5: No?
Speaker 6: I have gone truffle hunting in the South of.
Speaker 8: France with a How do you with a pig or
Speaker 8: a dog?
Speaker 6: They usually do pigs, but the smart ones use dogs
Speaker 6: because the pigs will sometimes eat the truffle. The dogs,
Speaker 6: you can train them not to eat the truffle, so
Speaker 6: they sniff them around underground, they start digging. You pull
Speaker 6: the dog away and then you dig think them out
Speaker 6: the right under the surface. Thank you to Keith Grossman,
Speaker 6: our former head of ad sales at Bloomberg, who had
Speaker 6: arranged these lovely outings two summers in a row, complete
Speaker 6: crazy Bacanelli in south of France. It was great.
Speaker 3: And then and then and then do you like take
Speaker 3: the trouble?
Speaker 5: You can't Coemple's home like to the US, like I
Speaker 5: had trouble.
Speaker 6: I'm not so so everything they have troubles. Yeah. Then
Speaker 6: they have this little store in this little farm. I'm
Speaker 6: still on the mailing list. And the French couple, young couple,
Speaker 6: and they have a little French truffle thing going on.
Speaker 5: I love this.
Speaker 3: For another trip with at in.
Speaker 6: This you know in may Or so that's next on
Speaker 6: the dockt.
Speaker 5: I love all of this. I'm going to ruminate on this.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 6: Let's get to some of that economic data here today.
Speaker 6: Lydia user Joints and she's a senior economist at Ernst
Speaker 6: and Young. She joins us from New York City via
Speaker 6: that zoom thing. So, Lydia looks like like that inflation
Speaker 6: scare that we had maybe the first three four months
Speaker 6: of this year is maybe moderating a little bit. Is
Speaker 6: that the takeaway from the CPI data that you looked
Speaker 6: at today?
Speaker 9: Yeah? Sure, I mean, I think the key takeaway is
Speaker 9: really that inflation continues to move in the right direction
Speaker 9: and that this inflation trend remains in place despite the
Speaker 9: bumping as that we had in the first quarter. I
Speaker 9: think the details of the report this morning were encouraging.
Speaker 9: Both on the goods and services side. We saw that
Speaker 9: cooling and core inflation call goods prices decline in April,
Speaker 9: and that really indicates that this more favorable and normalized
Speaker 9: supply chain environment continues to be conductive of deflation in
Speaker 9: the goods sector. And on the services side, we also
Speaker 9: saw aneasing in the pace of inflation, with many of
Speaker 9: the categories also showing some cooling. So overall, that's the
Speaker 9: report that suggests that we're still moving in the right direction.
Speaker 3: Something I'm still great happling with is why the event
Speaker 3: has such conditions, has such conviction that financial conditions are
Speaker 3: tight when you take a look at MEME stocks, when
Speaker 3: you take a look at the actual financial conditions index,
Speaker 3: do these numbers justify that confidence or no?
Speaker 9: When we look at the economy overall and the package
Speaker 9: of economy data that we got this morning. You mentioned
Speaker 9: retail sales early.
Speaker 5: On the show.
Speaker 9: Retail sales work quite soft, and they do suggest that
Speaker 9: consumers are increasingly cautious with your spending. We have an
Speaker 9: economic environment that's cooling, the label market is rebalancing, wages
Speaker 9: are moderating, and at the same time, we have you know,
Speaker 9: today's some evidence that we remain and we continue to
Speaker 9: see that these inflation happening, especially on the core side.
Speaker 9: So the progress has been slower, but overall, the economy
Speaker 9: continues to cool and inflation is likely to continue to
Speaker 9: gradually ease, you know, throughout the twenty twenty four and
Speaker 9: towards twenty twenty five. I think what will be important
Speaker 9: and important what's important to keep in mind is that
Speaker 9: we may hit the plateau when it comes to inflation.
Speaker 9: CPI inflation in the coming months. But overall, I think
Speaker 9: the report today has helped rebuild a bit of confidence
Speaker 9: that the FED had lost in the first quarter of
Speaker 9: the year.
Speaker 6: Liddy, We also yesterday had a little bit higher than
Speaker 6: expected PPI print. How do you kind of put that
Speaker 6: in the CPI data we got today? How do you
Speaker 6: put that Together's what's the narrative there?
Speaker 9: Yeah, I mean, looking at the PPI data, I think
Speaker 9: some of the details were more encouraging, especially looking at
Speaker 9: some of the key categories that we feed into the
Speaker 9: PC data, so looking at some of the underlying components
Speaker 9: of PPI. But overall, I think, you know, when we
Speaker 9: look at the overall trend in inflation and what that means.
Speaker 9: Also looking at these two reports for PC inflation, I
Speaker 9: think that we're likely to get, you know, a fairly
Speaker 9: encouraging print on the core PC data, and that overall
Speaker 9: core PC inflation should continue to gradually ease in the
Speaker 9: coming months. I think, you know, we're coming we're coming
Speaker 9: off of that first quarter where inflation has surprise on
Speaker 9: the obside, you know, for several months, and what we
Speaker 9: need to see going forward is really softer inflation print
Speaker 9: a string of softer inflation print that will help THEE
Speaker 9: the FED feel more confident that you know, they're in
Speaker 9: a good spot and can start you know, that is
Speaker 9: in cycle.
Speaker 3: Do you think the using cycle will be two cuts
Speaker 3: this year?
Speaker 5: One and then what.
Speaker 9: Yeah, so we have our view is that we're gonna
Speaker 9: get two cuts in the second half of this year.
Speaker 9: We do think that, you know, as I said, the
Speaker 9: economic environment will you know, will be you know, and
Speaker 9: will be favorable for those two great cuts. And when
Speaker 9: you think back at what Fetcher Powell said at the
Speaker 9: press conference, he really laid out three paths when it
Speaker 9: comes to a monetary policy going forward, and there are
Speaker 9: two of these paths that are leading.
Speaker 5: To rate cuts.
Speaker 9: You know, if you see a deteriration in label market
Speaker 9: conditions or if you see inflation moving sustainably towards two percent,
Speaker 9: our view is that, you know, the economy is going
Speaker 9: to continue to cool and that conditions are in place
Speaker 9: to continue to see that this inflation. We have an
Speaker 9: economy that's cooling and consumers that are growing increasingly cautious.
Speaker 9: We have a label market that's rebalancing and wages that
Speaker 9: are easing. We also have signs that companies are exercising
Speaker 9: less price in power, and we're likely to see more
Speaker 9: downward pressure on profit margins as well. And lastly, we
Speaker 9: also have more rent these inflation in the pipeline and
Speaker 9: the numbers this morning, we're also encouraging in that front
Speaker 9: where you know, we continue to see that downtrend in
Speaker 9: rent inflation. So overall, I do think that you know,
Speaker 9: this backdrop is going to lead the FED to start
Speaker 9: that is in cycle media and we see two rate
Speaker 9: cuts happening, so more of a recalibration that an aggressive,
Speaker 9: you know, rated cycle.
Speaker 6: So we also had the retail sales came in a
Speaker 6: little bit weaker than expected. What's your read across.
Speaker 9: There, Yeah, so the retail sales report weaker than expected.
Speaker 9: Looking at some of the details, it was quite mixed.
Speaker 9: I think there was some categories where we saw some payback.
Speaker 9: Looking at online sales for example, they were very strong
Speaker 9: in March, so they declined in April. And you know, overall,
Speaker 9: I think what these suggest is that a consumer spending
Speaker 9: momentum at the start of Q two is going to
Speaker 9: be you know, looking software, we came out of March
Speaker 9: with significant momentum when it comes to consumer spending and
Speaker 9: you have that robust carry over that's supporting positive consumer spending.
Speaker 9: But what it does suggest is that on the months
Speaker 9: of amounth basis, we've seen somewhat of a down shift,
Speaker 9: and we think that this is a trend that will
Speaker 9: continue because consumers are feeling you know, the impact of
Speaker 9: elevated prices, are your borrowing costs and just you know,
Speaker 9: a more challenging environment, especially for lower income hussles.
Speaker 3: All right, Lydia, thanks so much. We really appreciate your
Speaker 3: time today. Thank you so much, Lydio bassour Ey pantheon
Speaker 3: A senior economists, We very much thank you for your time.
Speaker 3: Speaking of retail, I was really struck by those Burgery numbers.
Speaker 3: Now luxury has been burbery, Yeah, like luxury has been
Speaker 3: certain areas of luxury have been struggling, and Burbery kind
Speaker 3: of doubled down on that.
Speaker 5: They had sort of weaker.
Speaker 3: Sales and their outlook wasn't that great for the first
Speaker 3: half either. So even the high high end continues to
Speaker 3: kind of get dragged down a little bit, which also
Speaker 3: you find to be a bit confusing.
Speaker 6: Well, whenever I think of retail and luxury retail, I
Speaker 6: think of the Chinese consumer is kind of the swing factor.
Speaker 6: I wonder what they're saying about the Chinese consumer.
Speaker 3: It's always about China, but also pockets of weakness in
Speaker 3: the US as well, So it's not just a China
Speaker 3: situation when it comes to retail.
Speaker 6: And a podcast about five percent here today.
Speaker 5: Ye weak demand China, n US.
Speaker 6: Yeah. So I mean it's it's you know, it's out there.
Speaker 6: It's concerning. But I mean, I guess the overall economic
Speaker 6: data is still generally pretty solid. I guess, you know.
Speaker 6: And it's is it solid enough for the FED to
Speaker 6: start pulling back on rates and if so, when so
Speaker 6: that'll be interesting.
Speaker 3: It's still what I find so interesting is still the
Speaker 3: hard and soft data. The soft data, I appreciate the
Speaker 3: NFIB was a bit better yesterday, but the feelings are
Speaker 3: negative even if the hard data is a little bit
Speaker 3: positive or at least stable. Particularly, we take a look
Speaker 3: at how many people are benefiting from the equity rally,
Speaker 3: and there was a great uh in John Author's piece.
Speaker 3: You really helped break it down. Oh no, it was
Speaker 3: a lu Wang had a piece where she broke it
Speaker 3: down and said, just x amount of people have money
Speaker 3: in the stock market that are benefiting and guess what,
Speaker 3: they're mostly older white people and everything else is a
Speaker 3: bit is a bit, dice Yer. It's a great piece.
Speaker 5: You's definitely check it out.
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.
Speaker 3: We cover all the tap news in business and economics
Speaker 3: through our lens of our Bloomberg Intelligence analysts. They cover
Speaker 3: about two thousand companies and one hundred and thirty industries worldwide.
Speaker 3: We also sometimes take you outside the Bloomberg Intelligence world
Speaker 3: to those that work on the street. And for that
Speaker 3: we're gonna go to Marie Shore. She covers senior equity
Speaker 3: analyst over at Columbia thread Needle Investments. They have a
Speaker 3: great team over there. We love talking to these guys.
Speaker 3: Let's get breakdown after retail sales. Thanks for joining us, Mari,
Speaker 3: It's great to see you.
Speaker 1: Thank you so much for having me so.
Speaker 3: Breakdown two things. One where in the retail world makes
Speaker 3: sense and two do equities a record highs make sense.
Speaker 5: Yes, it's a great question.
Speaker 4: I think.
Speaker 1: You know, when we look at the retail sales print today,
Speaker 1: I think we see more of what we've been discussing,
Speaker 1: which is still a choiceful consumer still spending more on
Speaker 1: services over goods and needs over wants. So overall, my
Speaker 1: outlook for spend on more discretionary goods is more cautious.
Speaker 1: We still see things like home and electronics really weak
Speaker 1: versus strength in certain channels like e commerce and value retail,
Speaker 1: and in certain categories, like I thought today in the
Speaker 1: retail sales print, the improvement we saw in apparel was interesting,
Speaker 1: and we've seen some new trends in apparel, and it
Speaker 1: seems that some of the traditional apparel companies are taking
Speaker 1: share back, maybe from some of the athletic apparel companies.
Speaker 1: So that's I think an interesting trend to watch In
Speaker 1: terms of the valuations on some of these names. It
Speaker 1: definitely seemed like the group was a little over extended
Speaker 1: in the earlier part of the string following the rally
Speaker 1: that started in October, and now I think you really
Speaker 1: need to be selective, so I would say we're still
Speaker 1: willing to pay a premium for consistent quality growth that
Speaker 1: we see in names like Walmart and the off price retailers,
Speaker 1: which are all gaining share right now. I think, you know,
Speaker 1: given the relatively weak demand backdrop, we are willing to
Speaker 1: pay more of a premium for those retailers that are
Speaker 1: taking share.
Speaker 6: All right, Usually we chat with you via zoom, so yes,
Speaker 6: nice to have you in our studio, usually of Boston, right, yes, yes, okay,
Speaker 6: very good coming down to the big town. Okay, marishare
Speaker 6: you cover the equity space for Columbia thread Needle? We
Speaker 6: got Walmart tomorrow, and people who like me who don't
Speaker 6: follow the retail space, I looked at that name as
Speaker 6: kind of a barometer for how the US consumer's doing.
Speaker 6: What are you going to be looking for tomorrow?
Speaker 1: Well, I think we're likely to hear from Walmart still
Speaker 1: a more subdued tone on the consumer overall. You know,
Speaker 1: their core lower end customer is still under pressure. They are, however,
Speaker 1: taking share across category among higher income consumers, and that's
Speaker 1: been something they've been talking about for several quarters now.
Speaker 1: So I think that says a lot about the overall consumer,
Speaker 1: and you know, how they're looking to save money, are.
Speaker 3: They taking a share from them like Target and stuff
Speaker 3: like that.
Speaker 1: I think they are yes across category. You really see
Speaker 1: it from from Target and others, And I think that
Speaker 1: consumers are really looking to stock up, you know, and
Speaker 1: do that one stop shop at value retailog you know,
Speaker 1: you see it Walmart, you see it at costs go right.
Speaker 1: Their results have also been extremely strong, So I think
Speaker 1: that the results from Walmart tomorrow will show us what's
Speaker 1: happening from a macro level. But again I want to
Speaker 1: be mindful that any any strength that Walmart does show,
Speaker 1: I think is likely to reflect not just what's happening
Speaker 1: at the category level, but what's happening in terms of
Speaker 1: their share position within category worries.
Speaker 6: So how about the dollar stores? What happens to the
Speaker 6: dollar stores when the lower end of the economic environment
Speaker 6: is in fact struggling they are dealing with inflation. Does
Speaker 6: that benefit their business or does that hurt them even more?
Speaker 1: Yeah, it's sort of mixed. I would say it does
Speaker 1: hurt their core lower income consumer, and you've seen all
Speaker 1: the dollar stores talking about weakness in their discretionary business
Speaker 1: among that consumer cohort. However, there is the potential for
Speaker 1: them to capture that trade down from a hire income consumer,
Speaker 1: and so that is an opportunity I think for the
Speaker 1: dollar stores, for off price retailers like Burlington and Ross stores.
Speaker 1: But again, I feel like Walmart has really been the
Speaker 1: name among those value players that has captured the most
Speaker 1: share from that higher income consumer.
Speaker 3: So some of the dollar stores are just a disaster
Speaker 3: in terms of like shelf stocking, in terms of employees,
Speaker 3: like it's a real us, like it might be good
Speaker 3: to get a deal, but only if you actually find
Speaker 3: a product, John Tucker, why are.
Speaker 5: You laughing at me?
Speaker 8: One dext to me and I loved it. Just they
Speaker 8: closed up, it was gone. It was just like what
Speaker 8: happened like overnight, it's it's and they only had one
Speaker 8: employee in a pretty large store, and it was just like,
Speaker 8: you want to steal.
Speaker 5: Something, pretty much, go ahead like that. We can't do
Speaker 5: anything about that.
Speaker 3: So I don't know if you guys know, if we've
Speaker 3: talked about this, that I am the counter indicator for
Speaker 3: retail somorrio. So here's the deal.
Speaker 5: So I only shop on sale period.
Speaker 3: I will not ever pay full price. So usually where
Speaker 3: I'm shopping, the joke is is that I'm an indicator
Speaker 3: for what stock you want to short, because I'm only
Speaker 3: going there because the deal is really good and it's
Speaker 3: an inventory thing. So I definitely went over budget this weekend.
Speaker 3: I went to Northstroum Rack, but I was buying work clothes.
Speaker 5: So I felt okay about it.
Speaker 3: Am I an outlier here? Like are the discounters gonna
Speaker 3: win or are they gonna lose? And how much will
Speaker 3: I be spending for the rest of the years.
Speaker 9: Yeah?
Speaker 1: No, I think And again we saw it in the
Speaker 1: retail sales data today in the strength and the general
Speaker 1: merchandise category. I think all of these value retailers, whether
Speaker 1: it's the mass players, the off pricers, the dollar stores,
Speaker 1: the clubs, they will all continue to take share in
Speaker 1: this in this environment, in terms of the you know,
Speaker 1: in the hunt for deals, I would say I would
Speaker 1: expect more modest deals going for it only because you know,
Speaker 1: last year we saw inventory much better controlled, much more
Speaker 1: closely aligned with sales, and all of the retailers are
Speaker 1: really focused on protecting margin, so I think you will
Speaker 1: see lower markdowns going for it. Of course, the retailers
Speaker 1: will always use promotions to drive traffic, but in terms
Speaker 1: of those major markdowns. Yeah, probably won't see as many
Speaker 1: of those going forward.
Speaker 5: That's definitely gonna hurt a little bit there.
Speaker 3: Yeah, we went to this anecdotal obviously went to Tjmax,
Speaker 3: which is usually my life go to store.
Speaker 5: Inventory was horrific.
Speaker 3: There was like nothing that was really surprising, and I
Speaker 3: wondered if like they're if they're waiting for a cycle
Speaker 3: to come back, or if they're just really good at
Speaker 3: getting step off their shelves.
Speaker 6: Interesting. How about I'm just asking for John Tucker here
Speaker 6: the luxury sector accent. I'm just talking about Berbery. Yeah,
Speaker 6: some disappointing numbers. I thought luxury was kind of a
Speaker 6: relatively area of strength for retail Yeah.
Speaker 1: I mean, I would say over the past year or so,
Speaker 1: we've really seen a slow down among I would say,
Speaker 1: both like the true luxury segment and that more aspirational
Speaker 1: luxury segment, right, Yeah, and I think I think it
Speaker 1: really reflects, you know, those consumers now spending again on
Speaker 1: things like services and travel, and so we've seen, you know,
Speaker 1: there's not a lot of public retailers at this point
Speaker 1: in the true luxury segment in North America, but we've
Speaker 1: definitely seen a slow down, really globally, you know, across China, Europe,
Speaker 1: and I think it's that customer spending in other categories
Speaker 1: and also some of those brands that do have exposure
Speaker 1: to the wholesale channel, where you know, all of the
Speaker 1: department store is still managing inventory very tightly, so if
Speaker 1: you're selling into that channel, you may also see pressure is.
Speaker 6: In that business, and they did call that out there.
Speaker 5: Yeah, so I think it's.
Speaker 1: Really a combination of those two things. I think long
Speaker 1: term luxury is still well positioned, but we're still kind
Speaker 1: of coming off of this period of you know, excessive
Speaker 1: growth that we saw during the pandemic and watching demand normalized.
Speaker 3: I don't know, man, twenty six hundred dollars for a raincoat, please,
Speaker 3: well what kind of raincoat?
Speaker 5: Burbery raincoat like that?
Speaker 3: I appreciate that's aspirational, but hell no, that just feels
Speaker 3: like a waste of money.
Speaker 6: But don't you have some budget or clothes?
Speaker 3: Oh oh yeah, yeah, So like I give myself a
Speaker 3: budget of oh yeah, but not a trench coat and
Speaker 3: that definitely would not be in the budget.
Speaker 6: Yeah, they have a budget for wardrobe. Again, another benefit
Speaker 6: I don't really yea, no makeup, Nope.
Speaker 8: They don't send me to travel.
Speaker 2: Bakeup on you.
Speaker 5: You don't let them be you know, I don't know. Yeah,
Speaker 5: downstairs is a wardrobe room. We get our clothes picked
Speaker 5: and everything.
Speaker 6: Really I don't know that.
Speaker 5: Yeah, they don't chop on sale, but you know I do.
Speaker 6: All right, Marsha, thanks so much for joining us. Marish Shure,
Speaker 6: Senior Equitiana. She covers all the retail space, one of
Speaker 6: our go to voices for retail. She's a Columbia thread
Speaker 6: Needle Investments. They get they're all over the place. I
Speaker 6: first hit thread Needle, they're in London. Then there's been
Speaker 6: all these mergers with the asset managers and now it's
Speaker 6: all under like Columbias and they're good.
Speaker 5: Like they got some serious talent there.
Speaker 6: Up in Boston. But she joins us here on our
Speaker 6: Bloomberg in Act, the Broker Studio. Maybe she's walking up
Speaker 6: down Fifth Avenue and Madison. I'm kind of checking out
Speaker 6: the stores. That would be my guest.
Speaker 5: Let me know where the sales are, Yeah, exactly.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 3: This is Bloomberg Intelligence Radio. We bring you all the
Speaker 3: top news and economics and finance, and with the help
Speaker 3: of our Bloomberg Intelligence analysts, they cover our two thousand
Speaker 3: companies and one hundred and thirty industries all around the world.
Speaker 3: We also bring you the view from the street. And
Speaker 3: what do you do in this market when you're at
Speaker 3: record highs and the direction is higher? You just buy
Speaker 3: the stuff. You buy stocks, you buy bond, you sell
Speaker 3: a dollar. That seems to be the trade. Let's get
Speaker 3: the trip with James Demert. He's chief investment officer at
Speaker 3: main Street Research. He joins us via zoom from New York.
Speaker 3: All right, James, do you buy the at a record?
Speaker 3: Simple question?
Speaker 10: Hi, Alex, you do? I think you do. I think
Speaker 10: investors have made a huge mistake for the last few
Speaker 10: quarters of just waiting for something to break before they buy,
Speaker 10: and it's been a mistake. I think it's going to
Speaker 10: be a mistake going forward.
Speaker 6: So what do you buy? James? Let's let's say it
Speaker 6: to the next level there, what do you buy? Do
Speaker 6: I just load into my big tech stocks that are
Speaker 6: work so well for me over the past couple of years,
Speaker 6: or I try to get a little creative.
Speaker 10: Well, I think that investors, you know, a lot of
Speaker 10: investors are focusing on the wrong thing, which is the FED,
Speaker 10: and they should be focusing on what's driving this market.
Speaker 10: It's what this market's doing. It's a discounting this new
Speaker 10: AI tech led business cycle in ball market. And so
Speaker 10: when we think about what to buy, even with at
Speaker 10: levels like this, we want to think, well, if this
Speaker 10: is the case AI tech led biz cycle, it's going
Speaker 10: to be productivity growth in fast growing earnings, where do
Speaker 10: I go for that? Right, there's ten eleven sectors in
Speaker 10: the economy, and if rates stay where they are, which
Speaker 10: we think they will, you want to go to tech
Speaker 10: for sure, you want to go to telecom in everywhere
Speaker 10: this AI productivity growth can affect. I think healthcare is
Speaker 10: definitely one of those. I think the utility senttor is
Speaker 10: sort of interesting here, very inexpensive industrial companies, financials, right,
Speaker 10: Jamie diamond saying a few weeks ago, how AI as
Speaker 10: impacting JP Morgan, So I think you kind of want
Speaker 10: to think about this as an allah nineteen nineties, if
Speaker 10: you will, where that's the last time we had this
Speaker 10: huge boom of productivity growth. That was a different technology,
Speaker 10: obviously the Internet. Now we're in the AI phase.
Speaker 3: Something to say on that, because nineteen nineties didn't always
Speaker 3: end well on that end. But before we get there
Speaker 3: for utilities, I find that so fascinating because usually you
Speaker 3: think of utilities as just a straight up dividend yield play. Right,
Speaker 3: Are utilities a growth sector right now? Can you play
Speaker 3: it and value it like a growth sector?
Speaker 10: Yeah, Alex, this was my grandmother's favorite sector because that's
Speaker 10: no volatility, very predictable.
Speaker 5: Dividend you.
Speaker 10: But here you have a different story, right if it's
Speaker 10: an AI tech led business cycle, particularly with evs, and
Speaker 10: you've got these AI chips just churning away, needing so
Speaker 10: much electricity. We're looking at the utility industry as potentially
Speaker 10: a their a big growth area. So the grid is
Speaker 10: going to have to get way bigger to support what
Speaker 10: we envision is a seven to nine year business cycle.
Speaker 10: It's led by AI profit growth, productivity growth. And I'll
Speaker 10: tell you not just the utilities, but who's going to
Speaker 10: build that grid the industrial companies, and I think that's
Speaker 10: one of the reasons you see, you know, the caterpillar,
Speaker 10: tractors and that sort of thing doing quite well over
Speaker 10: the last few courts. Discounting not what the Fed's gonna do,
Speaker 10: it's discounting. Hey, this is a new era, a very
Speaker 10: different type of business cycle.
Speaker 6: James. One of the names you have on your list
Speaker 6: is Apple, and it's on a lot of people's lists,
Speaker 6: but it's obviously facing some headwinds, notably China. But one
Speaker 6: thing that it hasn't yet quite gotten into its multiple
Speaker 6: is AI. Do you believe the AI, you know, pixie
Speaker 6: Dust can find Apple at some point.
Speaker 10: We do, and I think that Apple's on a lot
Speaker 10: of people's lists. As a bearish call, we are absolutely
Speaker 10: the one hundred and eighty degrees opposite bullsh and and
Speaker 10: we think they're late to the game, there's no question,
Speaker 10: and that's frustrating as a shareholder. But you know, as
Speaker 10: we listen to the conference calls and read the tea
Speaker 10: leaves of where Apple's going here, and you can see
Speaker 10: it with their recent sort of partnership with chat GBT,
Speaker 10: we think in June eleventh is going to be a
Speaker 10: big call from from Apple in Cooper, Tino and Cook,
Speaker 10: and I think they're going to talk about, hey, we're
Speaker 10: bringing AI to the iPhone. We we envision it as
Speaker 10: a supercharge sery, you know, like a personal assistance series,
Speaker 10: which is way better than what we have now. Might
Speaker 10: start with subscriptions. Think about the giant installed base around
Speaker 10: the world they have, and then it probably is going
Speaker 10: to force us all to get a new iPhone, maybe
Speaker 10: a few core to support it. So we are fans
Speaker 10: twenty seven times earnings neglected. You know, one of those
Speaker 10: that you want to you want to add here.
Speaker 3: Yeah, I know, it's like I haye one my phone
Speaker 3: just one day is like we're done here, take us
Speaker 3: to the store.
Speaker 5: We have to get a new one.
Speaker 3: You also like, ASML, why would that be a why
Speaker 3: do you like that for the AI trade? Like, there's
Speaker 3: tons of of those kind of guys that we can
Speaker 3: start playing with. Why is it that one for you?
Speaker 7: Yeah?
Speaker 10: ASML work global investors. We love the overseas exposure right
Speaker 10: from the Netherlands. But this is a company no debt,
Speaker 10: and this is an integral part of what makes an
Speaker 10: AI chip work. Right, So there's just a handful of
Speaker 10: companies that actually do the design that Nvidio uses. Right,
Speaker 10: So Nvidia is buying ASMML technology to design and fabricate
Speaker 10: these chips. So they're really at the beginning of the
Speaker 10: cycle of making the chips. Absolutely important company to own,
Speaker 10: not just a chip maker. They're the ones helping the
Speaker 10: chip makers make them make the chips. So very important
Speaker 10: to be at that front end, the most important company
Speaker 10: on that end.
Speaker 6: How about in a fixed income space, James, do you
Speaker 6: guys allocate there? And if so, how do you do?
Speaker 9: So?
Speaker 10: We do a third of our assets under management, we
Speaker 10: manage about two billion are in fixed income. And our
Speaker 10: you is the FED may not do anything. And so
Speaker 10: here's where you want to say, Well, if rates have
Speaker 10: let's say they peak, but they're not going to go down,
Speaker 10: you want to go out here in duration. I think
Speaker 10: it's safe to do that. I don't think the Fed's
Speaker 10: raising rates anytime soon. I think, in fact, at some
Speaker 10: point they'll lower them. I don't think it's this year.
Speaker 10: And so you want to go individual bonds high credit
Speaker 10: quality based on your tax circumstance, either own muni's or corporates.
Speaker 10: I love corporates in a non tax will account, and
Speaker 10: you know, don't feel uncomfortable going out twenty twenty five
Speaker 10: thirty years. Lock that yield in, make sure no one
Speaker 10: can take it away from you, because yes, eventually rates
Speaker 10: will come down and those will not be available. So
Speaker 10: we sort of ladder a little bit on the short end,
Speaker 10: tons in the middle, and lots on the long end.
Speaker 10: Very different than what we were doing three or four
Speaker 10: years ago.
Speaker 5: Our stock's expensive right now. How do you price that in?
Speaker 3: I mean, there's so many different metrics, particularly when you
Speaker 3: compare it to say, the yield you're getting on the
Speaker 3: ten years, So I might say, yeah, you're not getting
Speaker 3: compensated at all.
Speaker 5: That risk is not priced in.
Speaker 10: What do you think, Yeah, Alex, I think people are
Speaker 10: misunderstanding pe ratios. First of all, when you're at the
Speaker 10: beginning of a business cycle, pes can be sort of
Speaker 10: an illus right because we're looking at we look at
Speaker 10: four earrings and that E is underestimated all the time,
Speaker 10: so it sort of makes the pe and seem a
Speaker 10: little higher than it is. And more importantly, and I
Speaker 10: think this is the real problem investors are having is
Speaker 10: if you look at the S and P five hundred
Speaker 10: or any normal index, you've got seven stocks trading at
Speaker 10: thirty five times earnings, and you've got the rest of
Speaker 10: the market trading at fifteen. Now, anytime that you have
Speaker 10: financials at eleven times earnings, which is what's going on today,
Speaker 10: eleven times is almost historic for financial stocks and the
Speaker 10: rest of market trading at fifteen. That is a value
Speaker 10: proposition as we move towards a growing, expanding economy, and
Speaker 10: one that we view as GDP plus four percent, not
Speaker 10: GDP plus two, which is what we had for the
Speaker 10: last twenty years. So higher growth fifty teen time journings absolutely,
Speaker 10: and particularly all these sectors that I mentioned earlier, they
Speaker 10: have not yet been impacted by the power of AI
Speaker 10: and productivity growth.
Speaker 6: All right, James, thank you so much for joining us.
Speaker 6: James demmertt He is a chief investment officer at main
Speaker 6: Street Research. Joining us from New York City via zooms.
Speaker 6: We appreciate that.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 6: Alex Dee and Paul Sweeney were live here in our
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Speaker 6: you can go to YouTube dot com and search Bloomberg
Speaker 6: Podcast and that's where you find us. All right, let's
Speaker 6: turn now to a conversation on artificial intelligence. Last Thursday,
Speaker 6: I attended the Boston Consulting Group EDGE Expo in Boston.
Speaker 6: A lotic great conversations with the execs at BCG. One
Speaker 6: was with North America Sharon Marshall. She speaks with CEOs
Speaker 6: daily about what they are dealing with with their own company,
Speaker 6: and one big issue that keeps coming up, Sharon said,
Speaker 6: was AI. I began by asking here what question she's
Speaker 6: being asked most by CEOs. Let's take a listen.
Speaker 11: I speak to CEOs on a daily basis, and I
Speaker 11: think the good news is there's cautious optimism. If you
Speaker 11: speak to most CEOs, they see a very very strong potential,
Speaker 11: some say infinite potential in terms of AI. Obviously, the
Speaker 11: economy is here in North America is performing very well
Speaker 11: and creates more stability in terms of capital investment. And
Speaker 11: I think the unknown is about the geopolitics and our
Speaker 11: current political environment and how that will all play out.
Speaker 11: But you know, in speaking to them, cautious optimism thinking
Speaker 11: about AI, how do I scale it, how do I
Speaker 11: get value out of it? And how do I fund
Speaker 11: the journey?
Speaker 5: So looking for opportunities for cost efficiencies.
Speaker 6: Well, let's go to that AI because that's been a
Speaker 6: topic here today. A lot of smart people we've spoken
Speaker 6: to from BCG about the AI business, about the ethics
Speaker 6: of AI, which is something folks really need to think about.
Speaker 6: But the bottom line is it requires, from my understanding,
Speaker 6: a lot of investment and over a long period of time,
Speaker 6: a real commitment here when you talk to CEOs, do
Speaker 6: they get that and are they willing to make that commitment?
Speaker 11: So, Paul, if you click back a year, we were
Speaker 11: doing a lot of conversations with boards and with CEOs,
Speaker 11: and there's a lot of experimentation that was going on.
Speaker 11: But it really it was just experimentation. It was use cases,
Speaker 11: and I think people were learning a lot. Now you
Speaker 11: flash forward a year and I think companies and CEOs
Speaker 11: are thinking, how can I create competitive advantage using AI?
Speaker 11: And what are the areas I'm going to pick to
Speaker 11: invest in? Because you can invest every it would be
Speaker 11: cost prohibitive to pick everything. And so it's interesting as
Speaker 11: you see some companies are picking what you would consider
Speaker 11: more strategic aspects of their business. So if you think
Speaker 11: about insurance, either claims processing or underwriting core processes which
Speaker 11: are strategic to really lean into and invest. Some other
Speaker 11: companies actually have chosen more of a backed office route.
Speaker 11: So really thinking about customer service, how can AI fundamentally
Speaker 11: transform how we do customer service to make it better
Speaker 11: and more efficient.
Speaker 5: So companies are in different journeys.
Speaker 11: It's going to be expensive, and they have to pick
Speaker 11: the places which is going to pan out for them
Speaker 11: and give them real advantage in the marketplace.
Speaker 6: And on the people side of the equation, there's concern
Speaker 6: out there in the marketplace that AI will take jobs,
Speaker 6: or if it doesn't take jobs, it's going to require
Speaker 6: a tremendous amount of retraining. How do the CEOs think
Speaker 6: about that? Are they again, are they concerned about that?
Speaker 6: Are they willing to make those investments in their people?
Speaker 11: I think that's exactly right. So AI is going to
Speaker 11: change a few things beyond the technology. It's going to
Speaker 11: change in many cases actually organization structure, it's going to
Speaker 11: change process and m process and also skills required. We
Speaker 11: often talk about the ten twenty seventy and the seventy
Speaker 11: percent of the change is going to be people and
Speaker 11: change management. If you speak to CEOs, I think they
Speaker 11: feel like it is worth it. It has to be
Speaker 11: done in order to stay at the head of the
Speaker 11: curve and to provide competitive advantage. But again being choiceful
Speaker 11: and where you choose to scale, because you can't change
Speaker 11: everything all at once.
Speaker 6: I was mentioning to my young producer that is one
Speaker 6: age is one has to really make the commitment to
Speaker 6: embrace change and be open to change. I'm case in point.
Speaker 6: When you go talk to the boards and to the CEOs,
Speaker 6: is it a tough sell to say, hey, Ai, this
Speaker 6: is an inflection point in what you've traditionally understood to
Speaker 6: be your tech spend.
Speaker 5: I think they understand it.
Speaker 11: I think they're not as familiar with the technology, but
Speaker 11: they're pushing themselves to get there because you're absolutely right.
Speaker 11: I mean, look, if we look at our own data WITHINBCG,
Speaker 11: the greatest adoption is with our less tenured people, and
Speaker 11: the adoption there is very, very high. But we I
Speaker 11: think all of our partners are most senior people as
Speaker 11: well as the CEOs and the board members realize they
Speaker 11: have to get the comfort level and upskill themselves in
Speaker 11: order to be relevant in the future.
Speaker 6: Are there some industries that are maybe doing a better
Speaker 6: job of kind of leaning into this AI and what
Speaker 6: it really means in the long term versus some others?
Speaker 11: Know, if it's versus some others, I mean, we're seeing
Speaker 11: a lot of activity, a lot of interests across all
Speaker 11: of our major sectors. So really thinking about healthcare as
Speaker 11: an example, so drug research would be an example, or
Speaker 11: medical records writing. So there's a lot in the regulatories
Speaker 11: here that can be improved through AI. If you think
Speaker 11: about insurance, there's an enormous amount of documentation and review
Speaker 11: and so in areas, specific areas within each industry and
Speaker 11: within each sector where there's a lot of documentation review,
Speaker 11: those are the areas that are.
Speaker 6: Being focused on all right, Speaking to CEOs, you have
Speaker 6: to talk about particularly for your global clients, I would
Speaker 6: think geopolitics, for better or worse, is at the top
Speaker 6: of their list or on their to do list. And
Speaker 6: you think about what's happened in Ukraine, the Middle East,
Speaker 6: and you know, you can never take your eye off
Speaker 6: Taiwan in Asia? Can you plan for it? This is
Speaker 6: a little bit different world than we had four or
Speaker 6: five years ago.
Speaker 11: It's interesting we did more work exactly on that topic
Speaker 11: last year than we're doing this year. I feel like
Speaker 11: there was a lot of preparedness and scenario analysis that
Speaker 11: was done last year. It's continuing to be done and updated.
Speaker 11: I think many companies are on that journey. And actually
Speaker 11: our recent CEO survey showed that sixty three percent actually
Speaker 11: felt much better prepared for a geopolitical event at this
Speaker 11: time this year versus last year.
Speaker 6: All Right, how about BCG in particular, I was thinking
Speaker 6: back way back to my days. Is the Fupal School
Speaker 6: of Business at Duke meeting with all the consulting companies.
Speaker 6: A couple of things that I remember. They paid pretty well,
Speaker 6: but they worked pretty hard. They travel quite a lot.
Speaker 6: How has your business changed since? Maybe since the pandemic,
Speaker 6: maybe with the advent of some new technologies.
Speaker 11: Great question. So look, you know it's super important that
Speaker 11: we travel and that we spend in time time with
Speaker 11: clients and at sites. I think the pandemic has also,
Speaker 11: just like many industries, given us a little bit more flexibility.
Speaker 11: I think our clients are sometimes very happy to meet
Speaker 11: with us on video and we do that quite a
Speaker 11: bit as well. And you know, of course, like any
Speaker 11: responsible business, we are trying to lower.
Speaker 6: Our carbon footprint.
Speaker 11: So it's something as we think about, for example, internal
Speaker 11: travel that we really try to manage. So I think
Speaker 11: it's better than when I joined BCG, but it's still
Speaker 11: a pretty demanding job.
Speaker 6: Still the demand job. It's still a lot of big
Speaker 6: NBA pipeline there. So talk to us about just kind
Speaker 6: of the business of consulting today. Hey, just how's business.
Speaker 5: Business is good.
Speaker 11: So if you if you look at last year, we
Speaker 11: we actually registered another year, which is twenty straight years
Speaker 11: of growth in terms of BCG. And I would say
Speaker 11: in North America specifically, our fourth quarter was our strongest
Speaker 11: quarter last year, and we're off to a really strong
Speaker 11: start this year as well, both in North America and globally.
Speaker 11: All of our regions are growing and all of our
Speaker 11: practices are growing.
Speaker 6: So that's Does that tell you that the c suite
Speaker 6: the board has some little of confidence that they're either
Speaker 6: willing to engage with you to make the investment in
Speaker 6: your type of services, they're looking to do stuff that's right.
Speaker 5: We always say that.
Speaker 11: Certainty in either direction, either optimism or pessimism, is good
Speaker 11: for our industry.
Speaker 5: What is bad for our industry is uncertainty.
Speaker 11: So if you don't know if there's going to be
Speaker 11: a recession, if you have fear but a lot of uncertainty,
Speaker 11: that's a tough time for our industry. I think there's
Speaker 11: greater certainty and energy and CEO is feeling they have to.
Speaker 6: Move, they have to move. Yeah, I would think with
Speaker 6: technology that would make it even more so, more pronounced
Speaker 6: than this whole AI thing. I have to get smart
Speaker 6: on it really quickly.
Speaker 11: Indeed, indeed, a big, a big part of big part
Speaker 11: of our business continues to be cost and resiliency, but
Speaker 11: a very big part is AI.
Speaker 6: All Right. That was Sharon Marshall. She is the North
Speaker 6: America chair for BCGOS chatting with her last week at
Speaker 6: conference up in Boston, and you know, I mean her
Speaker 6: job is basically just to take phone calls and field
Speaker 6: fold calls from CEOs their clients and try to help
Speaker 6: them with their problems. And she says, boy, it's like
Speaker 6: every single call is about AI. That types of investments
Speaker 6: that their clients should be making in AI, how they
Speaker 6: should be making those investments. How do you weave the
Speaker 6: whole ethics thing into this whole AI discussion? But it
Speaker 6: certainly top of mind for her and her you know,
Speaker 6: all the other consultants up there.
Speaker 3: Does BCG feel like they're behind that curve or on
Speaker 3: top of it because just as it's their clients are panicking,
Speaker 3: I would assume that they don't have all the answers either.
Speaker 6: No, they don't, but there's they have a lot of
Speaker 6: people there that are spending a lot of time on
Speaker 6: it and they're getting and the people I spoke to
Speaker 6: their at BCG were, you know, seem very well read
Speaker 6: in but acknowledged, like you said, way early in the game.
Speaker 6: But I think one of the key takeaways I had
Speaker 6: was you have to put the whole ethics of it
Speaker 6: first before you spend dollar one, which doesn't usually happen
Speaker 6: because usually people are spending on the tech, spend on
Speaker 6: the tech. But you really have to think about how you,
Speaker 6: as an institutions, as a company want to frame this
Speaker 6: investment in terms of the ethical applications of AI. You
Speaker 6: have to have a really strong call on that before
Speaker 6: you put the shovel in the ground, so that's kind
Speaker 6: of how they begin the discussion with their clients. But again,
Speaker 6: big dollars being spent, big commitments, that's for sure.
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