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Speaker 1: This is the Bloomberg Surveillance Podcast.

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Speaker 2: I'm Lisa A Brohnoids along with Tom Keen and Jonathan Ferrell.

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Speaker 2: Join us each day for insight from the best in economics, geopolitics,

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Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance Undermanned on Apple,

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Speaker 2: Spotify and anywhere you get your podcasts, and always on

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Speaker 2: Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business app.

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Speaker 3: Straight joined us now three Culture Government, the Syny research

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Speaker 3: economist at Aberdeen Straight. You wanta for to catch up

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Speaker 3: with you. Let's just start with your initial reaction to

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Speaker 3: that latest decision from the Bank of England.

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Speaker 4: Thank you.

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Speaker 5: So we were expecting a twenty five basis point HiPE today.

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Speaker 5: Obviously there's been a lot of debate beforehand, and I

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Speaker 5: think it's quite interesting to see that three way spot

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Speaker 5: with two members voting for a fifty basis point hype.

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Speaker 5: There are a lot of justifications for that actually, but

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Speaker 5: what's really shifted at in our mind is the activity

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Speaker 5: data is a little bit more sluggish, and what the

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Speaker 5: Bank of England and many other central banks face is

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Speaker 5: a clear trade off between inflation. Tackling inflation and then

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Speaker 5: managing growth as well. And in the UK the growth

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Speaker 5: picture has been quite sluggish throughout the year, so that's

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Speaker 5: a key sort of overview for now. I mean, going forward,

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Speaker 5: we do expect there'll be another hike in the next meeting.

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Speaker 5: Another twenty five basis points is going to be needed.

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Speaker 5: Inflation is very sticky, and it's that international comparison that's

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Speaker 5: very interesting. Even though we had a downside surprise in

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Speaker 5: the last inflation print in June, core service is still

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Speaker 5: very very sticky and this pace of deceleration is a

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Speaker 5: little too slow in comparison to other countries, and that's

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Speaker 5: a key problem for the Bank of England. So you

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Speaker 5: can understand that three ways split and that division there.

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Speaker 3: So can you help me understand then the difference currently

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Speaker 3: between what the UK is experiencing, what the Eurozone is

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Speaker 3: going through, and what we're witnessing kit in the American economy.

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Speaker 3: What's the big difference between the three of the moment.

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Speaker 5: I think the one of the issues with this actually

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Speaker 5: applies to all of them is the tightness of the

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Speaker 5: labor market. But I think the UK has a slight

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Speaker 5: differentiation there in that some of those wage pressures are

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Speaker 5: quite accelerate. They've They've still accelerated. Even though inflation headline

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Speaker 5: inflation is starting to roll over. There is some good

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Speaker 5: news on the horizon in terms of energy costs and

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Speaker 5: food prices. These are starting to deccelerate. But the UK

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Speaker 5: labor market is particularly tight, and part of that has

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Speaker 5: been COVID related. There's a higher proportion of long term

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Speaker 5: sickness being reported as part of one of the reasons,

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Speaker 5: but also lack of migration. There is some frictions there

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Speaker 5: in the labor market that are more persistent.

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Speaker 2: Do you buy Do you buy the assessment that the

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Speaker 2: Bank of England just came out history that we're going

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Speaker 2: to get inflation below five percent in the United Kingdom

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Speaker 2: by the end of this year and below the two

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Speaker 2: percent goal by twenty twenty five.

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Speaker 4: I think that will be quite challenging.

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Speaker 5: I think what's necessary, unfortunately, is a recession in order

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Speaker 5: to trigger that deceleration in core inflation and core services,

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Speaker 5: so perhaps inflation headline inflation. There is a good trajectory

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Speaker 5: on the horizon. In July, we'll see a big drag

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Speaker 5: from energy bills being cut, so food prices which had

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Speaker 5: been particularly sticky in the UK that was another difference

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Speaker 5: for the UK as well, that's starting to decelerate as well.

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Speaker 5: But it's the labor market and core services issues, wage pressures,

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Speaker 5: industrial action. All of this is quite a heady combination,

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Speaker 5: so it's going to make it very challenging unless there

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Speaker 5: is a recession that helps trigger this further deceleration in

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Speaker 5: core prices.

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Speaker 3: There is a phrase we hear at all three central

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Speaker 3: banks at the moment, it's sufficiently restrictive. The Guard talked

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Speaker 3: about that in the last week or so. We heard

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Speaker 3: that from Chairman Pal as well. We're hearing that from

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Speaker 3: the UK. Is there evidence based on what you're seeing

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Speaker 3: three that they are sufficiently restrictive.

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Speaker 4: I think we're very close to the peak the terminal rate.

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Speaker 5: Actually, as I said, we do expect another twenty five

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Speaker 5: basis points. But from there it really depends on the data.

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Speaker 5: As they say they are data dependent, but it really

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Speaker 5: depends on how much.

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Speaker 4: That core services actually starts to decelerate.

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Speaker 5: It doesn't seem that they're quite restrictive enough, but I

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Speaker 5: think it's quite interesting. In today's statement they did add

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Speaker 5: a line to really emphasize how rates would stay high

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Speaker 5: for a meaningful period of time, So that's something that's

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Speaker 5: very much in line with what we're expecting. Until the

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Speaker 5: recession does materialize, we can expect high rates for a

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Speaker 5: period of time, so that policy restriction past and future

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Speaker 5: are still feeding through into the economy and that's still

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Speaker 5: going to be a trend.

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Speaker 4: We'll see you.

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Speaker 3: Want to for you to jump on and get in

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Speaker 3: front of the camera for us in response to this bankering,

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Speaker 3: the decision three Cuchagomidan there of Aberdeen. We've wanted to

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Speaker 3: do this conversation a week. It's great to have him

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Speaker 3: with us in the building in New York. Is John

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Speaker 3: stelfhis chief investment strategist over at Oppenheim A junk of

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Speaker 3: morning to you.

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Speaker 6: Good morning, so nice to be here in studio.

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Speaker 3: It's great to have you back, buddy, Excited to see you.

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Speaker 3: Price target forty nine hundred s and P. I want

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Speaker 3: to give you some credit first because the original forty

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Speaker 3: four hundred price target was done the year end last year,

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Speaker 3: Rand looking out, So in fact, you were bullish and

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Speaker 3: you were right to be. Now you're even more bullish.

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Speaker 3: Tell me why you're even more bullish now?

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Speaker 7: Well, it looks like things are coming together and period

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Speaker 7: of transition no doubt about it.

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Speaker 6: Fear of toxic.

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Speaker 7: Bruise and things like that when you have changes. But

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Speaker 7: the overall thematic is that we would say it's an

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Speaker 7: end to free money, and it's a good thing. We

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Speaker 7: have been during a period as a result of the pandemic,

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Speaker 7: we had reached a period of free money, both on

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Speaker 7: the large ass of two administrations in terms of providing

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Speaker 7: liquidity and then the federal reserve as well, fed falling

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Speaker 7: behind the curve and all that. But the good news

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Speaker 7: is the economy is showing remarkable strength. If we look

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Speaker 7: at the GDP okay based on all that's happening, corporates

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Speaker 7: are navigating through a transitional period remarkably well, with quite

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Speaker 7: a few sectors still showing good growth. And then on

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Speaker 7: top of it, the consumer and jobs are remaining remarkably resilient.

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Speaker 7: So with the resilience that we see and this transition,

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Speaker 7: and when we say it's a good thing, free money

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Speaker 7: is not a good thing. If money costs enough so

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Speaker 7: that corporations have to pay for the privilege of borrowing

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Speaker 7: money and bond buyers get something back, CD buyers get

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Speaker 7: something back. This is a healthy environment. It's bad for

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Speaker 7: memes it's bad for bad for cryptocurrencies, we would think. Ultimately,

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Speaker 7: we also think it's bad for highly leveraged players, and

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Speaker 7: they will bemoan what's going on going on, and you'll

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Speaker 7: hear from them all the time what a bad thing

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Speaker 7: it is.

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Speaker 6: But it's a good thing.

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Speaker 3: We've heard it. Joh, Well, yes, so far. So let's

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Speaker 3: go through some earnings later. Sure, Apple and Amazon, let's

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Speaker 3: go through some watings. Apple on the S and P

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Speaker 3: five hundred more than seven and a half percent of

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Speaker 3: the S ANDP Amazon about three percent, So we're getting

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Speaker 3: ten percent of the SMP later, about seventeen percent of

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Speaker 3: the NASTAC one hundred. You say the move in yield

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Speaker 3: hire is a good thing, we know, yea. Today a

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Speaker 3: lot of this move has been multiple expansion. What's the

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Speaker 3: relationship between what's developing in the bond market and the

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Speaker 3: kind of multiples we should be putting on some of

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Speaker 3: these names.

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Speaker 7: Well, I think the fact that the multiples you know

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Speaker 7: are up there, there's still not up to nearly twenty

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Speaker 7: four times, right, I think that we hit in twenty

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Speaker 7: twenty okay, on the.

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Speaker 6: Forward multiple of the average average five year multiple of

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Speaker 6: the S and P five hundred.

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Speaker 7: I think it was twenty twenty when it hit twenty

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Speaker 7: three point nine or something that we're around twenty right now.

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Speaker 7: This is going to happen at a period like this

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Speaker 7: because the market is looking forward next six months from here,

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Speaker 7: and we think expectations are that we're going to see

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Speaker 7: continued resilience in earnings. A lot of that comes in

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Speaker 7: from the utilization of cost cutting through additional technology. And

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Speaker 7: it's not the it's not the dream AI that's still

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Speaker 7: up ahead. It's the AI that we have today. It's

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Speaker 7: the robotics and a willingness to move towards it by

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Speaker 7: many corporations and the need for it. So we think

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Speaker 7: the other thing on multiples is when you look at

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Speaker 7: the landscape, you've got concerns about social security and where

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Speaker 7: are people going to put their money? It should be likely,

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Speaker 7: depending upon their needs and objectives.

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Speaker 6: And tolerances to risk the old disclaimer.

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Speaker 7: They're going to have to take a look at equities

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Speaker 7: for their intermediate to long term returns. Fixed income is

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Speaker 7: a great diversifier, and now with the yields that we're seeing,

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Speaker 7: this is healthy, we think. But equities traditionally have been

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Speaker 7: the place where you get your gains, not to prepare

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Speaker 7: for retirement at retirement and during a retirement where one

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Speaker 7: may live longer than one ever expected.

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Speaker 6: That one would live.

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Speaker 2: This is a great longer term case for equities in

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Speaker 2: the short term to get to a new record at

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Speaker 2: a time when there are a lot of people decrying

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Speaker 2: the higher yields, and you can say that whatever the

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Speaker 2: motivations are, yes, maybe they are just simply leveraged and

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Speaker 2: they're talking their own book shocker, But there is a

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Speaker 2: question about at what point higher yields challenge the case

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Speaker 2: for significantly further gains.

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Speaker 7: This year worth saying most certainly was you know, I've

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Speaker 7: been in this business since nineteen eighty three, so when

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Speaker 7: I came in, you know, people were still saying that

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Speaker 7: the rally from August of eighty two wouldn't last, and

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Speaker 7: it was going to be the end of the dollar

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Speaker 7: and the end of the equity markets. And instead we

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Speaker 7: had a phenomenal bull market that came out of that.

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Speaker 7: At that time, yields were much higher than they were

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Speaker 7: on a nominal basis, Inflation was higher as well, and

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Speaker 7: equities found ways for profitability and the stock market moved higher.

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Speaker 7: I can remember speaking with clients and urging them to

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Speaker 7: buy equities, and they'd insist on buying fixed income.

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Speaker 6: And I said, look out for the.

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Speaker 7: Callability on the corporates, you know, and looking back, you know,

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Speaker 7: gosh I was right, and that gives me hope here

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Speaker 7: when we speak to people about mortgages and people are

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Speaker 7: bemoaning the seven percent mortgage. You know, my first mortgage

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Speaker 7: was ten percent. My bosses was sixteen. His bosses was

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Speaker 7: I think somebody was his boss. It was someone had

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Speaker 7: a twenty two percent mortgage and.

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Speaker 6: We all lived through it.

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Speaker 7: And the FED has been remarkably good. It can make mistakes,

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Speaker 7: It's not infallible, but the FED overall has been remarkably

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Speaker 7: good at taming inflation. And also during that period we

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Speaker 7: had deflation or disinflation that came up. It's remarkably good

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Speaker 7: overall over the long term.

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Speaker 6: If the leadership is good, does your.

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Speaker 1: Bull case lose some of its luster?

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Speaker 2: If the Adam Posen world, who were just speaking with

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Speaker 2: Adam Posen about the idea that inflation might stay around

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Speaker 2: three percent and the FED might tolerate that, does that

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Speaker 2: change your book case?

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Speaker 6: No, it doesn't.

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Speaker 7: In fact, three percent inflation would be when we when

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Speaker 7: we think the target of two percent, we often wonder, well,

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Speaker 7: why does the FED really want to go back to that.

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Speaker 6: We can remember when economy is just a few years ago.

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Speaker 7: Where again bemoaning seems to be an operative word of

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Speaker 7: the day. It was they were they were bemoaning the

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Speaker 7: fact that growth was a two percent, inflation was less

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Speaker 7: than two percent, and they said, an economy the size of.

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Speaker 6: The US needs three to four percent. Be careful what

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Speaker 6: you wish for to grow. So we'd have to say three.

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Speaker 6: We four. We don't. We don't want to look at four.

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Speaker 7: But we can remember during the Green Span era when

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Speaker 7: the target was four and we said, gosh, if we

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Speaker 7: if we could get four percent inflation down to four,

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Speaker 7: we'll go.

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Speaker 6: We'll sign up for life. You know, everything is relative,

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Speaker 6: it's it's it's the what we hope we can bring.

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Speaker 7: You know that the old timers in this market is

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Speaker 7: a sense of context to all of this, and in

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Speaker 7: that sense, that's what keeps us bullership this point.

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Speaker 3: And being wrong is hard and sometimes it's just part

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Speaker 3: of the job. We would have these conversations through last year,

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Speaker 3: your call didn't work out, and I would ask you

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Speaker 3: things like, what are you learning. What are the lessons

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Speaker 3: you've taken from the year so far when you're right

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Speaker 3: like you are and have been through the year so far,

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Speaker 3: What are the lessons you're learning now as you work

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Speaker 3: through your process. What are the kind of mistakes you

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Speaker 3: can make by extrappling things out, extrapolating things out too far,

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Speaker 3: too soon, those kind of things. What are you learning

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Speaker 3: at the moment?

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Speaker 6: Terrific, That's a great question.

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Speaker 7: What we've learned, especially over the course of the last

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Speaker 7: few years, is anything can happen, Anything that can happen

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Speaker 7: that can create a catalyst for bears and skeptics to

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Speaker 7: take profits without fomo. Okay, during a period like this

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Speaker 7: where you're you've got a secular ball, likely driven by

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Speaker 7: technology that can benefit all eleven sectors.

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Speaker 6: Okay, that's the underlying theme. But you have to be careful.

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Speaker 7: So you need to be diversified across market capitalizations. You

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Speaker 7: want quality, you want to have represent and fixed income

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Speaker 7: at the short end of the curve. For an equity

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Speaker 7: buyer like myself, if you're if you're a bond buyer,

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Speaker 7: you can you can even look at laddering, or you

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Speaker 7: can go up and within corporates, probably to the MTN

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Speaker 7: range and tax freeze look.

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Speaker 6: Good, okay, but it would be one that it certainly is.

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Speaker 7: Diversification remains key patients and right sized expectations because these

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Speaker 7: markets are highly prone to rotation and rebalancing because of

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Speaker 7: the technology the communication both not only within the markets

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Speaker 7: but by the Federal Reserve itself.

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Speaker 3: What a journey, John, Hey, last couple of years for nuts.

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Speaker 3: John steff is there of Oppenheimer, John, Thank you, Thanks you, Pamdison.

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Speaker 3: It's good to see me in person.

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Speaker 2: I am so excited to bring in Tom Parceli. Tom

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Speaker 2: Porcelli has been off for a bit and now you're

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Speaker 2: in a new seat chief US Economy PGIM Fixed Income.

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Speaker 1: This is your first interview.

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Speaker 8: Welcome, Thank you.

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Speaker 1: You've had some time off.

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Speaker 8: I have had some time off.

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Speaker 1: You look incredibly rested.

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Speaker 9: I feel it too. It's all the yoga in.

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Speaker 2: Your new yoga state of Buddhist reflection when you come

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Speaker 2: back in. You had previously been talking about how the

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Speaker 2: Fed was probably sufficiently restrictive to use their words, and

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Speaker 2: didn't need to hike further.

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Speaker 1: They have hiked further.

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Speaker 2: Yeah, people are talking about maybe they haven't hiked enough,

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Speaker 2: and that there is momentum underpinning some of the inflation

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Speaker 2: and the market that previously had been under appreciated.

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Speaker 1: What's your view?

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Speaker 8: Yeah, Look, so first of all, thank you. Good to

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Speaker 8: be here, Good to be sitting at Pigium. It's been

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Speaker 8: great so far in my grand toll of three weeks,

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Speaker 8: but it's been it's been awesome, great team.

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Speaker 9: Yeah.

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Speaker 6: Look, I think.

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Speaker 8: That you know, my view in that regard hasn't really

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Speaker 8: changed much. I mean, I think that in so many ways,

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Speaker 8: I think that the FED was fighting yesterday's war inflation.

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Speaker 8: I mean, inflation is softening, you know. I think what

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Speaker 8: we need to make a distinction here between, though, is

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Speaker 8: you know, and I think pow'lly this out so perfectly,

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Speaker 8: which I haven't said many times, but I think he

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Speaker 8: nailed it. I think, you know, what you want to

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Speaker 8: see is inflation slow, credibly and sustainably. Those are his words,

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Speaker 8: and I think that's I think that's where we're going.

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Speaker 8: So I think that the sort of the construct around that, though,

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Speaker 8: is does that mean you have to get to two percent?

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Speaker 8: And I think the answer to that is I don't

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Speaker 8: think we do. I think that's the ultimate objective, but

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Speaker 8: I don't think that that is a roadblock to the

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Speaker 8: FED cutting rates at some point, and we can still

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Speaker 8: see a scenario where the FED actually is cutting rates,

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Speaker 8: you know, sort of sooner than later. I mean, it's

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Speaker 8: not necessarily this year idea, but I can see a

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Speaker 8: scenario where the labor backdrop is slowly deteriorating, which it

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Speaker 8: is right now. I mean, job is claims notwithstanding, we're

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Speaker 8: in sort of a funky seasonal window for those. But

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Speaker 8: I think if you get toward the end of the

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Speaker 8: year and if the ed's forecast for the unemploying rate materializes,

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Speaker 8: and if they're inflation forecast materializes, I think that might

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Speaker 8: be enough for the FED to say, hey, you know what,

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Speaker 8: maybe we're going to take back some of this aggressive accommodation.

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Speaker 9: And if they did, that.

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Speaker 6: Could be fuel to.

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Speaker 8: The fire from an economic perspective, and you can actually

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Speaker 8: have wound up having a really good twenty four. So

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Speaker 8: it's sort of an interesting thing that we've been kicking around.

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Speaker 2: There's something you said that builds on what Adam Posen

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Speaker 2: was talking about that's really important to highlight that inflation

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Speaker 2: may be okay at three percent, and the FED may

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Speaker 2: even verbally acknowledge this, that they're okay with this, and

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Speaker 2: they are not willing to compromise the labor market in

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Speaker 2: order to get inflation down to the prior target. Are

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Speaker 2: you expecting that to be explicit by the feasurers.

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Speaker 8: I don't think that they can say that explicitly because

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Speaker 8: then I think all of a sudden it throws into

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Speaker 8: sort of question the credibility around inflation and in the

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Speaker 8: inflation target, which let's just be clear, the inflation target

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Speaker 8: is literally a finger in the air, right. I mean,

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Speaker 8: there's no real litter that says two percent is the number.

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Speaker 8: I think the narrative is I can see a narrative

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Speaker 8: evolving this way. It's really easy to say that you're

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Speaker 8: going to beat the heck out of inflation when the

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Speaker 8: unemployment rate's sitting at the lows. I think it's a

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Speaker 8: completely different dynamic when the unemployment rate is actually starting

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Speaker 8: to drift higher. And that's a scenario that we could

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Speaker 8: easily see play out over the course of the coming

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Speaker 8: year or so. So I think that's how the FED

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Speaker 8: is going to be able to justify, Hey, look the

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Speaker 8: credibly and sustainably idea, it's happening. We're seeing it actually

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Speaker 8: drift lower. But now we have to start to worry

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Speaker 8: about the other side of the mandate, the labor mandate,

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Speaker 8: and we can easily start to take back some of

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Speaker 8: this accommodation, some of this tightening. I think that's how

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Speaker 8: that narrative can So I don't think it has to

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Speaker 8: be like this big weepy.

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Speaker 6: Hey we have to cut.

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Speaker 8: I think it could be, hey, we're going to cut

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Speaker 8: because we want to extend the cycle.

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Speaker 2: There is a larger question here about what that means

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Speaker 2: about interst right sensitivity of this economy and whether we're

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Speaker 2: in a new pair time where there isn't necessarily the

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Speaker 2: same kind of sensitivity and rates can be higher for

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Speaker 2: a longer period of time. Is that kind of what

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Speaker 2: you're seeing.

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Speaker 8: Yeah, so it's uh, you know, one of my uh,

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Speaker 8: one of my prior bosses love to tell the story

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Speaker 8: about how they how they knew that the FED cut

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Speaker 8: rates right. It wasn't as simple as looking at your

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Speaker 8: your your Bloomberg screen. I mean you literally had to

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Speaker 8: go to the FED, you had to get one of

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Speaker 8: the h reports, you had to do all this analysis,

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Speaker 8: and this all happened over the course of multiple days.

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Speaker 8: Why do I highlight that because in an age where

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Speaker 8: FED officials relentlessly have a microphone in front of them.

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Speaker 8: This notion of forward guidance, I think is very real.

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Speaker 8: So I think the FED can impact the term structure

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Speaker 8: much further out. And so I think in that context, yes,

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Speaker 8: I think, you know the Dudley piece that a lot

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Speaker 8: of people were talking about. I think that that's fair.

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Speaker 8: I think that, you know, the the economy feels the

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Speaker 8: effect of this much quicker. I would add one other

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Speaker 8: thing though, that's really important, and maybe this is blunted

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Speaker 8: the blow of this. You think about corporations. Corporations are

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Speaker 8: sitting on a mountain of cash and they've turned out

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Speaker 8: a lot of their debt right so you don't have

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Speaker 8: that impact right now. And I think that's really an

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Speaker 8: important idea, and I think, sorry, I'll be really quick

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Speaker 8: on this. I think that it's an important idea because

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Speaker 8: when I think about labor and the possible deterioration, Thank

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Speaker 8: goodness we got that productivity number because productivity has been poor.

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Speaker 8: And when you think about the hoarding idea, and Mike

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Speaker 8: mentioned this, I think this is such an important idea.

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Speaker 8: I think the hoarding idea could actually come back to

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Speaker 8: haunt the labor backdrop, because if you have hoarding that's

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Speaker 8: taken place as productivity is actually not performing that well,

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Speaker 8: all in the context of company's ability to pass on prices,

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Speaker 8: which is now diminishing, all in the context of consumption

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Speaker 8: which is, you know, sort of pretty soft.

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Speaker 6: What do companies do to.

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Speaker 8: Defend profit margins, They will tend to go after labor.

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Speaker 9: So I think it's a.

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Speaker 8: Really interesting idea that is not being talked about enough.

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Speaker 8: And yeah, sure, I think that the companies probably have

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Speaker 8: deflected some of that because you've been able to turn

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Speaker 8: out debt and they're sitting on a mountain of cash.

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Speaker 8: It's I think it's an interesting idea.

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Speaker 2: That that is fascinating going forward as we take a

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Speaker 2: look at when that recession does come to pass, everyone

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Speaker 2: seems to be pushing out their expectation of that.

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Speaker 1: Have you as well.

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Speaker 8: Yeah, So our call at PGUM is that we do

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Speaker 8: not suffer through a recession. That it's really more of

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Speaker 8: a sort of we're calling it weakflation. It's you know,

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Speaker 8: it's a dynamic where inflation remains north of target, but

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Speaker 8: growth remains pretty sluggish, and that's what we expect over

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Speaker 8: the coming year. The risk that is what I've just highlighted.

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Speaker 8: If companies actually decide okay, margins have compressed enough, you know,

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Speaker 8: we're going to have to take it out of somewhere.

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Speaker 8: That's a risk to the labor backdrop, to be sure.

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Speaker 8: But I like our view that that that things are

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Speaker 8: probably going to hold hold in there and not go

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Speaker 8: through the recession online, I would say one quick thing

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Speaker 8: if I can. You know, it's interesting this idea of

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Speaker 8: recession and it not materializing. It's been interesting. One of

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Speaker 8: the things that we've talked about, and again this is

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Speaker 8: a view that we have now at PGM, is this

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Speaker 8: sort of you know, it's almost like a misscycle slowdown

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Speaker 8: sort of dynamic, right, like ninety four ninety five. And

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Speaker 8: that's something we've been talking about in my prior job,

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Speaker 8: and I think about that today and for some of

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Speaker 8: the recession calls out there, think about the things that

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Speaker 8: were in recession, right, Consumer spending on goods was in recession,

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Speaker 8: housing was in recession. Cap ex right was down what

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Speaker 8: in two of the last four quarters. So there's there

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Speaker 8: were a lot of segments of the economy that actually

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Speaker 8: were performing really poorly. It just didn't all sort of

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Speaker 8: conspire at the same time, so it's just again another

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Speaker 8: interesting sort of angle on that idea.

438
00:21:40,640 --> 00:21:43,679
Speaker 2: Tom Rover's Tom Parcelli, wonderful to catch up with you.

439
00:21:43,760 --> 00:21:47,720
Speaker 2: Congratulations Tom Parcelli of PGM Fixed Income joining us.

440
00:21:47,600 --> 00:21:53,840
Speaker 3: Here, Johnny us in the studio in place to say.

441
00:21:54,040 --> 00:21:56,879
Speaker 3: Tom Wagner, the Birmingham City chairman and co founder and

442
00:21:56,920 --> 00:21:59,919
Speaker 3: co chairman of night Head Capital, Good morning to you, sir,

443
00:22:00,200 --> 00:22:03,320
Speaker 3: Good morning purchasing Birmingham City. I think we've just got

444
00:22:03,359 --> 00:22:05,080
Speaker 3: to start with this. We've spoken a lot over the

445
00:22:05,119 --> 00:22:07,879
Speaker 3: years about Americans getting into English football at least and

446
00:22:07,920 --> 00:22:10,439
Speaker 3: I were talking about how many leagues there are in

447
00:22:10,440 --> 00:22:14,359
Speaker 3: the United Kingdom, Why this league and why this club?

448
00:22:14,720 --> 00:22:16,600
Speaker 3: And if you were thinking of all of these clubs

449
00:22:16,640 --> 00:22:19,560
Speaker 3: as opportunities to invest in, what was it about something

450
00:22:19,600 --> 00:22:22,600
Speaker 3: of this size in this location that got your attention.

451
00:22:23,080 --> 00:22:27,360
Speaker 10: Well, after a year of really looking at the landscape

452
00:22:27,359 --> 00:22:30,359
Speaker 10: of English football, we were drawn to Birmingham for a

453
00:22:30,400 --> 00:22:34,400
Speaker 10: number of reasons. England's second city, one of the youngest,

454
00:22:34,480 --> 00:22:37,800
Speaker 10: most diverse populations in all of Europe. It's a city

455
00:22:37,840 --> 00:22:40,880
Speaker 10: on the rise that is going through a significant transformation.

456
00:22:41,280 --> 00:22:43,760
Speaker 10: So all of that made the city of Birmingham quite

457
00:22:43,800 --> 00:22:46,680
Speaker 10: attractive and then add to that a team that had

458
00:22:46,720 --> 00:22:50,959
Speaker 10: been underinvested in for a long period of time and

459
00:22:51,040 --> 00:22:54,439
Speaker 10: frankly to us seemed quite a bit like a sleeping giant.

460
00:22:54,600 --> 00:22:54,720
Speaker 7: You know.

461
00:22:55,000 --> 00:22:58,080
Speaker 10: It seemed impossible to us that you have the second

462
00:22:58,480 --> 00:23:01,760
Speaker 10: city in England with the name team in the Championship

463
00:23:01,880 --> 00:23:04,080
Speaker 10: and so we felt that there was a huge opportunity

464
00:23:04,119 --> 00:23:05,080
Speaker 10: to really make a difference.

465
00:23:05,119 --> 00:23:08,040
Speaker 3: As you know, that league is highly competitive, very very

466
00:23:08,040 --> 00:23:10,520
Speaker 3: difficult to get promoted because you also have to face

467
00:23:10,560 --> 00:23:13,199
Speaker 3: the teams that got relegated from the Premiership who've got

468
00:23:13,240 --> 00:23:15,160
Speaker 3: all the money to try and get back up a league.

469
00:23:15,359 --> 00:23:16,400
Speaker 9: So why this league?

470
00:23:16,600 --> 00:23:18,199
Speaker 3: That's what I'm trying to get my head around when

471
00:23:18,240 --> 00:23:20,040
Speaker 3: we think about the lower leagues of English football. A

472
00:23:20,080 --> 00:23:22,080
Speaker 3: lot of Americans have been introduced to Wrexham and what

473
00:23:22,160 --> 00:23:25,000
Speaker 3: Royn Reynolds is up to lower league club? Maybe get

474
00:23:25,040 --> 00:23:27,760
Speaker 3: at more bang for your buck, you get that promotion,

475
00:23:27,840 --> 00:23:31,080
Speaker 3: you get some more Why this team in this league?

476
00:23:31,240 --> 00:23:31,680
Speaker 9: Well, it's a.

477
00:23:31,640 --> 00:23:33,879
Speaker 10: Team that had been in the middle of the table

478
00:23:33,960 --> 00:23:36,840
Speaker 10: for a significant period of time and we felt that

479
00:23:36,840 --> 00:23:39,560
Speaker 10: there were substantial resources available. And by the way, this

480
00:23:39,600 --> 00:23:42,280
Speaker 10: isn't just about the men's first team. We have a

481
00:23:42,320 --> 00:23:45,440
Speaker 10: spectacular academy. We have a women's team that we think

482
00:23:45,600 --> 00:23:48,679
Speaker 10: is poised to be one of the best in England.

483
00:23:48,800 --> 00:23:51,600
Speaker 10: And I think when you take all those things together,

484
00:23:51,760 --> 00:23:55,119
Speaker 10: coupled with a very large natural fan base, we just

485
00:23:55,119 --> 00:23:57,800
Speaker 10: felt that the team was underperforming, meaning the club itself

486
00:23:57,840 --> 00:24:01,920
Speaker 10: was underperforming from the perspective of treating the fans properly,

487
00:24:02,000 --> 00:24:05,040
Speaker 10: being a real part of the community and embracing this

488
00:24:05,200 --> 00:24:08,159
Speaker 10: incredible natural fan base that it has within Birmingham.

489
00:24:08,200 --> 00:24:10,760
Speaker 9: So if we provide a product.

490
00:24:10,520 --> 00:24:13,119
Speaker 10: That is actually commensurate with the value of the city,

491
00:24:13,520 --> 00:24:15,399
Speaker 10: we think that there'll be great things ahead for the

492
00:24:15,400 --> 00:24:16,879
Speaker 10: club and beyond.

493
00:24:17,119 --> 00:24:19,520
Speaker 2: So I know you from a previous life when you

494
00:24:19,600 --> 00:24:22,040
Speaker 2: focused on distressed opportunities and you came in here, you said,

495
00:24:22,080 --> 00:24:23,800
Speaker 2: not distressed opportunities.

496
00:24:23,240 --> 00:24:25,960
Speaker 1: Turnaround situations, which is applicable to this.

497
00:24:26,200 --> 00:24:28,159
Speaker 2: And I'm wondering, at a time where there is so

498
00:24:28,280 --> 00:24:32,200
Speaker 2: much interest in investing in sports and football, if this

499
00:24:32,320 --> 00:24:36,560
Speaker 2: is the playbook more people are following. As Middle East

500
00:24:36,600 --> 00:24:39,080
Speaker 2: money kind of pushes everybody out of the top leagues.

501
00:24:39,520 --> 00:24:41,920
Speaker 10: Well, I think that when you look at the investment

502
00:24:41,960 --> 00:24:45,720
Speaker 10: from sovereigns there, it's very difficult to compete in the

503
00:24:46,400 --> 00:24:50,720
Speaker 10: highest level of the top tier in football. But there's

504
00:24:50,760 --> 00:24:56,639
Speaker 10: an enormous opportunity to compete in everything else within.

505
00:24:55,960 --> 00:24:57,520
Speaker 9: Football across all of Europe.

506
00:24:57,560 --> 00:25:01,240
Speaker 10: Frankly, but I think English football particularly appealing to us

507
00:25:01,240 --> 00:25:02,840
Speaker 10: for the reasons they cited earlier. I mean, it's a

508
00:25:03,440 --> 00:25:07,280
Speaker 10: it was really very much about Birmingham and what we

509
00:25:07,359 --> 00:25:10,800
Speaker 10: believed was a city that was going through a significant transformation.

510
00:25:11,240 --> 00:25:13,440
Speaker 10: We felt that the club could play a big part

511
00:25:13,440 --> 00:25:13,679
Speaker 10: of that.

512
00:25:13,880 --> 00:25:16,919
Speaker 3: You've taken a forty five percent stake alongside Tom Brady.

513
00:25:17,240 --> 00:25:19,119
Speaker 3: Lisha and I were talking about this is Brady just

514
00:25:19,160 --> 00:25:21,640
Speaker 3: along for the ride for branding, as he put real

515
00:25:21,680 --> 00:25:23,320
Speaker 3: money into this venture alongside you.

516
00:25:23,680 --> 00:25:27,359
Speaker 10: He is not here for promotional purposes and obviously today

517
00:25:27,480 --> 00:25:31,400
Speaker 10: is all about, you know, having Tom be very visible.

518
00:25:31,800 --> 00:25:33,399
Speaker 9: But really what it's about.

519
00:25:33,200 --> 00:25:36,240
Speaker 10: Is Tom bringing his expertise following a twenty three year

520
00:25:36,320 --> 00:25:40,359
Speaker 10: career in the NFL, which is highly competitive, as everyone knows,

521
00:25:40,400 --> 00:25:43,159
Speaker 10: where he had unparalleled success. I mean, it's if you

522
00:25:43,200 --> 00:25:45,280
Speaker 10: think about the fact that Tom played in ten Super

523
00:25:45,280 --> 00:25:48,000
Speaker 10: Bowls in a twenty three year career, one seven of

524
00:25:48,040 --> 00:25:52,160
Speaker 10: them was only you know, favored I think twice if

525
00:25:52,160 --> 00:25:54,679
Speaker 10: I remember correctly, in those super Bowls. That's a pretty

526
00:25:54,680 --> 00:25:59,080
Speaker 10: incredible track record and his level of excellence never really

527
00:25:59,080 --> 00:26:03,199
Speaker 10: tapered off. So it's about bringing those learnings to Birmingham.

528
00:26:03,280 --> 00:26:07,000
Speaker 10: And so Tom will chair our advisory board. He will

529
00:26:07,000 --> 00:26:10,520
Speaker 10: have a significant role in health, wellness, nutrition, you know, effectively,

530
00:26:10,880 --> 00:26:14,040
Speaker 10: human sustainability, and we'll play a role in how we

531
00:26:14,160 --> 00:26:16,040
Speaker 10: think about player interaction.

532
00:26:16,359 --> 00:26:18,399
Speaker 2: So will we get to watch what it means to

533
00:26:18,400 --> 00:26:21,240
Speaker 2: have human sustainability on a Netflix series that's coming.

534
00:26:21,040 --> 00:26:23,359
Speaker 9: Out shortly, we'll see, we'll see.

535
00:26:23,400 --> 00:26:26,960
Speaker 10: I think, you know, those things would be fun and exciting,

536
00:26:27,000 --> 00:26:31,320
Speaker 10: but our principal objective is to really bring what worked

537
00:26:31,359 --> 00:26:34,480
Speaker 10: for Tom and having known him for a long time

538
00:26:34,520 --> 00:26:37,800
Speaker 10: and witness firsthand what went into is his success over

539
00:26:37,840 --> 00:26:40,080
Speaker 10: a long period of time, you know this is these

540
00:26:40,119 --> 00:26:44,159
Speaker 10: are legitimate activities that really do play out in a

541
00:26:44,200 --> 00:26:47,080
Speaker 10: positive way, and how and how our athlete performs.

542
00:26:46,800 --> 00:26:49,080
Speaker 3: We can't just let we'll see hang there. We've got

543
00:26:49,080 --> 00:26:51,040
Speaker 3: to dig a little bit deeper. Are there talks with

544
00:26:51,119 --> 00:26:53,920
Speaker 3: anyone currently about doing something on the media side.

545
00:26:54,040 --> 00:26:56,280
Speaker 10: I think, you know, if you look at Birmingham, there's

546
00:26:56,320 --> 00:27:00,840
Speaker 10: one individual that I think really stands out as it

547
00:27:00,880 --> 00:27:05,480
Speaker 10: relates to producing fantastic content and that's Stephen Knight. So

548
00:27:05,920 --> 00:27:08,240
Speaker 10: if we were to do anything along those lines, we'd

549
00:27:08,280 --> 00:27:10,760
Speaker 10: have to engage with mister Knight and see whether or

550
00:27:10,800 --> 00:27:13,280
Speaker 10: not he were interested. So he's a wonderful guy. He's

551
00:27:13,320 --> 00:27:17,359
Speaker 10: produced some and created some amazing content over the years,

552
00:27:17,400 --> 00:27:19,600
Speaker 10: so it'd be really exciting if something like that could have.

553
00:27:19,640 --> 00:27:22,040
Speaker 3: Race The question as to whether when you came up

554
00:27:22,040 --> 00:27:24,880
Speaker 3: with the appropriate price to play for this, whether content

555
00:27:25,000 --> 00:27:26,920
Speaker 3: was something you were thinking about at the same time,

556
00:27:26,960 --> 00:27:29,640
Speaker 3: and the same way Liberty Media did would say formula one,

557
00:27:29,720 --> 00:27:30,600
Speaker 3: was that a consideration?

558
00:27:31,200 --> 00:27:34,639
Speaker 10: Yeah, everything is a consideration, right, and it starts with

559
00:27:35,359 --> 00:27:38,080
Speaker 10: what is the product that we're delivering to the fans.

560
00:27:38,280 --> 00:27:43,000
Speaker 10: It has to be something that is worthy of you know,

561
00:27:43,080 --> 00:27:46,000
Speaker 10: the city, the people, the fan base and their passions.

562
00:27:46,080 --> 00:27:49,639
Speaker 10: And when we went to our first game, it was

563
00:27:49,720 --> 00:27:53,440
Speaker 10: not consistent with what we felt the fans deserved.

564
00:27:53,480 --> 00:27:55,520
Speaker 9: So that will that will be the beginning point, right.

565
00:27:55,520 --> 00:27:59,240
Speaker 10: It's about an overall experience, and that experience goes beyond

566
00:27:59,320 --> 00:27:59,960
Speaker 10: just matchday.

567
00:28:00,240 --> 00:28:01,560
Speaker 9: You want to provide content.

568
00:28:01,600 --> 00:28:04,639
Speaker 10: You want to provide enjoyment to the fans all the

569
00:28:04,720 --> 00:28:06,520
Speaker 10: time so that they really feel a part of the

570
00:28:06,520 --> 00:28:08,960
Speaker 10: team and they can be proud to support the team,

571
00:28:08,960 --> 00:28:12,800
Speaker 10: and ultimately part of that is drawing in fans from

572
00:28:12,840 --> 00:28:16,480
Speaker 10: beyond simply Birmingham. I mean, I think Tom's involvement brings

573
00:28:16,480 --> 00:28:19,480
Speaker 10: in a lot of attention. Having Undefeated as our kit

574
00:28:19,560 --> 00:28:22,080
Speaker 10: sponsor on the men's and women's team first time the

575
00:28:22,080 --> 00:28:24,840
Speaker 10: same sponsor has been on both the men's and women's

576
00:28:24,880 --> 00:28:27,560
Speaker 10: jerseys doing that, so we have this connection with an

577
00:28:27,720 --> 00:28:30,920
Speaker 10: LA based streetwear brand. These are different things that brings

578
00:28:30,920 --> 00:28:33,080
Speaker 10: a level of attention to the club that I think

579
00:28:33,160 --> 00:28:36,440
Speaker 10: is demonstrative of how we're going to approach this, which

580
00:28:36,480 --> 00:28:37,760
Speaker 10: is to do things differently.

581
00:28:38,040 --> 00:28:41,360
Speaker 2: Is the monetization going to come more from the content

582
00:28:41,400 --> 00:28:44,320
Speaker 2: and the branding of it or the actual ticket sales?

583
00:28:44,400 --> 00:28:44,520
Speaker 3: Right?

584
00:28:44,600 --> 00:28:47,000
Speaker 1: Is the idea sort of the larger thrust.

585
00:28:46,840 --> 00:28:49,440
Speaker 10: All the team, all of it you can't do I

586
00:28:49,440 --> 00:28:53,720
Speaker 10: think in sport today, you can't be successful doing one

587
00:28:53,800 --> 00:28:54,600
Speaker 10: thing properly.

588
00:28:54,920 --> 00:28:56,560
Speaker 9: You have to do everything properly.

589
00:28:56,920 --> 00:29:00,600
Speaker 10: And this is a business to some degree, one that

590
00:29:00,680 --> 00:29:03,120
Speaker 10: has a lot of passion behind it. But we have

591
00:29:03,200 --> 00:29:05,320
Speaker 10: to think about, as you would in any business, getting

592
00:29:05,360 --> 00:29:06,680
Speaker 10: every element of the business right.

593
00:29:06,720 --> 00:29:09,000
Speaker 9: So we have to think about promotion.

594
00:29:08,760 --> 00:29:10,720
Speaker 10: We have to think about the product that we put out,

595
00:29:10,800 --> 00:29:12,960
Speaker 10: not just again, not just the tickets and the product

596
00:29:13,000 --> 00:29:15,800
Speaker 10: on the pitch, but also what's available for the fans.

597
00:29:15,840 --> 00:29:17,520
Speaker 10: Do they like the kit that they're able to buy,

598
00:29:17,520 --> 00:29:21,480
Speaker 10: are their good pieces of swag that they would enjoy wearing?

599
00:29:21,560 --> 00:29:21,720
Speaker 9: Right?

600
00:29:21,800 --> 00:29:23,720
Speaker 10: All of those things matter, and then you can think

601
00:29:23,720 --> 00:29:27,840
Speaker 10: about partnerships, and obviously commercial partnerships here will be critically important,

602
00:29:27,840 --> 00:29:31,360
Speaker 10: and we're looking for the right commercial partners to begin

603
00:29:31,440 --> 00:29:34,520
Speaker 10: this journey with US. I promise that corporations that step

604
00:29:34,640 --> 00:29:37,680
Speaker 10: up and become a partner with US will have a

605
00:29:37,760 --> 00:29:39,400
Speaker 10: long ride that they won't regret.

606
00:29:39,560 --> 00:29:42,360
Speaker 3: It's any days. Let's talk about defining success. Have you

607
00:29:42,360 --> 00:29:45,120
Speaker 3: seen that success already through season ticket sales picking up

608
00:29:45,160 --> 00:29:45,560
Speaker 3: ahead of.

609
00:29:45,480 --> 00:29:46,040
Speaker 9: The more season.

610
00:29:46,320 --> 00:29:49,200
Speaker 3: Absolutely, it's been Is it a multiple of this previous year?

611
00:29:49,320 --> 00:29:52,800
Speaker 10: It's well were The stadium capacity is what it is,

612
00:29:52,840 --> 00:29:55,440
Speaker 10: but we are well ahead of where we've been in

613
00:29:55,520 --> 00:29:58,800
Speaker 10: prior years. We're going to increase stadium capacity by roughly

614
00:29:58,840 --> 00:30:02,480
Speaker 10: fifty percent with some repairs that had been long needed,

615
00:30:02,480 --> 00:30:05,600
Speaker 10: so we'll open a substantial number of additional seats. There's

616
00:30:05,640 --> 00:30:07,800
Speaker 10: safe standing that's going in, which is something that the

617
00:30:07,840 --> 00:30:11,800
Speaker 10: fans really want. There'll be much better hospitality. I think

618
00:30:11,880 --> 00:30:15,360
Speaker 10: everything in that regard will will increase, but ultimately the

619
00:30:15,400 --> 00:30:18,400
Speaker 10: goal will be to you know, keep people coming back

620
00:30:18,480 --> 00:30:20,960
Speaker 10: and that and that means that the match day experience

621
00:30:21,040 --> 00:30:23,880
Speaker 10: has to be enjoyable. And I think we'll measure success

622
00:30:24,000 --> 00:30:27,280
Speaker 10: based on, you know, can we make continued improvement. I mean,

623
00:30:27,280 --> 00:30:30,480
Speaker 10: everyone would love to see the spectacular season right out

624
00:30:30,480 --> 00:30:33,080
Speaker 10: of the gates. I think we have a team that's

625
00:30:33,120 --> 00:30:36,880
Speaker 10: perfectly capable of doing that. But ultimately it's about, you know,

626
00:30:37,000 --> 00:30:40,080
Speaker 10: keeping our eye focused on the long goals, which is consistency.

627
00:30:40,240 --> 00:30:42,840
Speaker 3: So let's do this. Let's agree now, I'll get a camera,

628
00:30:43,160 --> 00:30:45,680
Speaker 3: you get Brady, and we'll go down to St. Andrew's

629
00:30:45,680 --> 00:30:46,920
Speaker 3: in the new season and we'll do a bit of

630
00:30:46,920 --> 00:30:49,320
Speaker 3: content ourselves. That would be cool, wouldn't that.

631
00:30:49,800 --> 00:30:51,280
Speaker 1: I would love to see that.

632
00:30:51,280 --> 00:30:54,160
Speaker 3: That would be to mine. Thank you and good luck

633
00:30:54,160 --> 00:30:56,200
Speaker 3: for the new season. This is very cool to Mike

634
00:30:56,400 --> 00:30:58,200
Speaker 3: the of night Head Capital.

635
00:31:07,840 --> 00:31:09,840
Speaker 2: Joining us now to talk about all of what to

636
00:31:09,920 --> 00:31:12,560
Speaker 2: expect and how to understand it within the spectrum of

637
00:31:12,600 --> 00:31:14,239
Speaker 2: all of the earnings that we've seen. As an rag Ran,

638
00:31:14,320 --> 00:31:17,840
Speaker 2: a senior technology analyst at Bloomberg Intelligence, anurag thank you

639
00:31:17,840 --> 00:31:18,760
Speaker 2: so much for being with us.

640
00:31:18,840 --> 00:31:19,800
Speaker 1: I want to start there.

641
00:31:20,040 --> 00:31:22,840
Speaker 2: When you take a look at, for example, Apple, how

642
00:31:22,920 --> 00:31:25,479
Speaker 2: much are you looking at the smartphone cycle and how

643
00:31:25,560 --> 00:31:28,520
Speaker 2: much are you looking at Apple as the juggernaut in

644
00:31:28,560 --> 00:31:31,680
Speaker 2: a market that is completely dominated by the iPhone.

645
00:31:32,920 --> 00:31:34,719
Speaker 11: Yeah, if you look at from Apple's point of view,

646
00:31:34,800 --> 00:31:37,080
Speaker 11: it doesn't really go up and down in terms of

647
00:31:37,160 --> 00:31:40,480
Speaker 11: cyclicality based on what's happening in the smartphone market because

648
00:31:40,480 --> 00:31:43,560
Speaker 11: it's a higher price point product and you know, people

649
00:31:43,600 --> 00:31:46,360
Speaker 11: who buy that really don't you know, change their buying habits.

650
00:31:46,400 --> 00:31:48,720
Speaker 11: They buy it when they need it. But trankly speaking,

651
00:31:48,720 --> 00:31:50,400
Speaker 11: this is going to be a very boring quarter for

652
00:31:50,440 --> 00:31:53,920
Speaker 11: Apple when it comes to new iPhone shipments because next

653
00:31:54,000 --> 00:31:56,920
Speaker 11: quarter is or next month is when the next iPhone

654
00:31:56,960 --> 00:31:59,360
Speaker 11: is going to be launched, and that really spurs the

655
00:31:59,440 --> 00:32:03,280
Speaker 11: big upgrade cycle that will come in the December quarter.

656
00:32:03,600 --> 00:32:05,360
Speaker 11: So really it's you know, from our side, it's going

657
00:32:05,400 --> 00:32:07,200
Speaker 11: to be a bit boring when it comes to Apple.

658
00:32:07,240 --> 00:32:09,240
Speaker 11: I think what we really want to hear about it

659
00:32:09,440 --> 00:32:13,000
Speaker 11: have we seen a rebound in the services business. That's

660
00:32:13,040 --> 00:32:15,320
Speaker 11: where the higher margin is, That's where some of the

661
00:32:15,360 --> 00:32:18,840
Speaker 11: growth is. But overall, I'm not expecting any major surprises

662
00:32:18,880 --> 00:32:21,480
Speaker 11: on the upside or the downside for Apple.

663
00:32:21,400 --> 00:32:22,560
Speaker 1: Has too much been baked in.

664
00:32:22,600 --> 00:32:25,320
Speaker 2: Though with respect to hopes of some sort of artificial

665
00:32:25,760 --> 00:32:30,280
Speaker 2: intelligence announcement or new product, is this basically something that

666
00:32:30,720 --> 00:32:35,040
Speaker 2: can't really meet the expectations the stock rally has given it.

667
00:32:36,440 --> 00:32:39,280
Speaker 11: No, I don't think there is AI story here per

668
00:32:39,320 --> 00:32:40,840
Speaker 11: se in a sense that they're not going to be

669
00:32:40,920 --> 00:32:43,600
Speaker 11: launching any new products. What's going to happen with Apple

670
00:32:43,720 --> 00:32:46,680
Speaker 11: is a lot of their you know, the operating system

671
00:32:46,840 --> 00:32:49,840
Speaker 11: will have new enhancements which they always do every year,

672
00:32:50,400 --> 00:32:53,400
Speaker 11: that will have new capabilities, you know, something like live transcription.

673
00:32:53,840 --> 00:32:56,000
Speaker 11: When you ask Series some questions, it's going to get

674
00:32:56,000 --> 00:32:59,480
Speaker 11: smarter over time. But that's a natural progression of just

675
00:32:59,520 --> 00:33:02,640
Speaker 11: the product development. We are not expecting any major AI

676
00:33:02,680 --> 00:33:05,320
Speaker 11: announcement for either from Apple or from Amazon.

677
00:33:06,000 --> 00:33:08,760
Speaker 2: Meanwhile, on Amazon, people are looking very much to cloud

678
00:33:08,760 --> 00:33:11,120
Speaker 2: spending at a time, and there were some questions around

679
00:33:11,120 --> 00:33:13,760
Speaker 2: that with Microsoft and Azure. How much are you looking

680
00:33:13,800 --> 00:33:16,840
Speaker 2: at that specifically to understand what companies are willing to

681
00:33:16,840 --> 00:33:20,760
Speaker 2: spend to build out some of their cloud services at

682
00:33:20,760 --> 00:33:23,120
Speaker 2: a time when there have been sort of conflicting signals.

683
00:33:24,160 --> 00:33:27,320
Speaker 11: Yeah, we are not expecting cloud to be strong or rebound.

684
00:33:27,360 --> 00:33:30,640
Speaker 11: We actually think they even may guide to slower growth

685
00:33:30,720 --> 00:33:33,320
Speaker 11: next quarter. But having said that, you know, probably next

686
00:33:33,400 --> 00:33:36,320
Speaker 11: quarter could be an area where we see the bottom

687
00:33:36,320 --> 00:33:39,240
Speaker 11: of this growth rate and that we can perhaps start

688
00:33:39,280 --> 00:33:41,960
Speaker 11: looking for a rebound over the next twelve months. Largely

689
00:33:42,080 --> 00:33:44,440
Speaker 11: is a factor of easier comparisons, But when it comes

690
00:33:44,480 --> 00:33:47,920
Speaker 11: to cloud usage, I think we all know that it

691
00:33:48,200 --> 00:33:51,280
Speaker 11: spending has been slowing down for some time. Microsoft, I think,

692
00:33:51,880 --> 00:33:54,640
Speaker 11: you know, partially the reason stock at a negative reaction

693
00:33:54,840 --> 00:33:58,200
Speaker 11: was because people were expecting rebound in those sales and

694
00:33:58,840 --> 00:34:00,560
Speaker 11: we are not seeing that at this point.

695
00:34:00,720 --> 00:34:03,640
Speaker 2: So given that, how much is there other business really

696
00:34:03,800 --> 00:34:05,640
Speaker 2: doing well at a time when we are seeing some

697
00:34:05,760 --> 00:34:07,560
Speaker 2: questions around the delivery services?

698
00:34:07,800 --> 00:34:10,520
Speaker 1: I'm thinking about Uber for example, which.

699
00:34:10,400 --> 00:34:14,719
Speaker 2: Their downspot really was the freight, this issue of packages

700
00:34:14,920 --> 00:34:16,799
Speaker 2: just not being in the same kind of number as

701
00:34:16,800 --> 00:34:17,360
Speaker 2: they used to be.

702
00:34:18,640 --> 00:34:21,239
Speaker 11: You know, Shopify reported last night and they showed really

703
00:34:21,239 --> 00:34:24,480
Speaker 11: good GMV growth. I think Amazon should report a similar

704
00:34:24,560 --> 00:34:28,680
Speaker 11: number in the sense of growth rate compared to last year,

705
00:34:29,200 --> 00:34:31,239
Speaker 11: given you know, as big they are there, as the

706
00:34:31,280 --> 00:34:33,400
Speaker 11: size of the growth may not be even close to that.

707
00:34:33,800 --> 00:34:36,520
Speaker 11: But you know, frankly speaking, from Amazon's point of view,

708
00:34:36,800 --> 00:34:40,560
Speaker 11: the investments they made during the pandemic on shipping will

709
00:34:40,600 --> 00:34:42,640
Speaker 11: start to see benefits. We are already starting to see

710
00:34:42,680 --> 00:34:45,920
Speaker 11: benefits in some regions of the country, but shipping is

711
00:34:45,960 --> 00:34:48,120
Speaker 11: going to be a big differentiator for them over the

712
00:34:48,160 --> 00:34:49,320
Speaker 11: next two to three years.

713
00:34:49,480 --> 00:34:51,560
Speaker 2: So a lot of people are paying a very close

714
00:34:51,600 --> 00:34:54,000
Speaker 2: attention to everything that Amazon and Apple have to say,

715
00:34:54,200 --> 00:34:58,000
Speaker 2: in large part because they are such behemoths in the indexes,

716
00:34:58,320 --> 00:35:02,160
Speaker 2: they account for a significant portion of the total. And

717
00:35:02,640 --> 00:35:04,800
Speaker 2: there's a question, especially as you say everything's going to

718
00:35:04,840 --> 00:35:07,160
Speaker 2: be pretty much in line, what's going to move the

719
00:35:07,200 --> 00:35:09,759
Speaker 2: needle in a way that could shift sentiment for the

720
00:35:09,960 --> 00:35:12,000
Speaker 2: entire market in a meaningful way.

721
00:35:13,160 --> 00:35:15,400
Speaker 11: See I would say the you know, entire tech market

722
00:35:15,440 --> 00:35:19,040
Speaker 11: has been fueled by a lot of optimism around AI

723
00:35:19,120 --> 00:35:19,920
Speaker 11: and what it could do.

724
00:35:20,360 --> 00:35:21,760
Speaker 9: But frankly speaking, these two.

725
00:35:21,560 --> 00:35:24,640
Speaker 11: Companies are not taking part on a lot of those discussions,

726
00:35:24,760 --> 00:35:28,040
Speaker 11: largely because you know, Microsoft has a very close relationship

727
00:35:28,080 --> 00:35:30,680
Speaker 11: with open AI and chat GPT because it runs on

728
00:35:30,760 --> 00:35:33,680
Speaker 11: Microsoft's back end. But for Amazon, they really need to

729
00:35:33,719 --> 00:35:35,600
Speaker 11: come out and talk about what is going to be

730
00:35:35,640 --> 00:35:38,919
Speaker 11: their best strategy going forward in terms of allowing people

731
00:35:39,000 --> 00:35:42,120
Speaker 11: to build more AI applications on their platform. You know,

732
00:35:42,160 --> 00:35:43,920
Speaker 11: from Apple's point of view, they have to come out

733
00:35:43,960 --> 00:35:45,800
Speaker 11: and tell people that they are not going to see

734
00:35:45,840 --> 00:35:48,959
Speaker 11: any more supply chain hiccups in the next three months,

735
00:35:49,000 --> 00:35:52,839
Speaker 11: which is obviously the most important quarter going into next

736
00:35:52,920 --> 00:35:55,160
Speaker 11: year for them, is the fourth quarter off calendar year

737
00:35:55,760 --> 00:35:58,400
Speaker 11: this year, that is really the thing that we are

738
00:35:58,400 --> 00:36:00,799
Speaker 11: looking for to make sure that there are no problems

739
00:36:01,120 --> 00:36:03,920
Speaker 11: for the new iPhone Pro or the Pro Max when

740
00:36:03,920 --> 00:36:05,960
Speaker 11: it comes out and you know, people can buy it

741
00:36:06,000 --> 00:36:06,879
Speaker 11: at the right time.

742
00:36:07,040 --> 00:36:09,360
Speaker 2: What are you expecting to hear from Apple about China

743
00:36:09,440 --> 00:36:11,960
Speaker 2: at a time when they are looking to that for

744
00:36:12,040 --> 00:36:14,680
Speaker 2: part of the expansion and we heard the opposite story

745
00:36:14,680 --> 00:36:15,280
Speaker 2: from Qualcomm.

746
00:36:17,040 --> 00:36:19,000
Speaker 11: From a China point of view, again, I think last

747
00:36:19,120 --> 00:36:21,640
Speaker 11: year was a point where they had really bad sales

748
00:36:21,640 --> 00:36:24,600
Speaker 11: in that area because of some COVID related stuff. You know,

749
00:36:24,680 --> 00:36:27,240
Speaker 11: this year, we think there should be again a rebound

750
00:36:27,239 --> 00:36:30,360
Speaker 11: over there because the numbers were so low in calendar

751
00:36:30,400 --> 00:36:32,799
Speaker 11: fourth quarter to last year. You know, we should see

752
00:36:32,800 --> 00:36:34,880
Speaker 11: a rebound over there. You know, once again from a

753
00:36:34,960 --> 00:36:37,480
Speaker 11: Chinese consumer point of view, you know, people who can

754
00:36:37,560 --> 00:36:39,840
Speaker 11: afford to buy a you know, a Burbary bag or

755
00:36:39,840 --> 00:36:42,439
Speaker 11: an LV bag. They're the ones who are buying the

756
00:36:42,520 --> 00:36:45,719
Speaker 11: higher end iPhone models, and the rumor is that the

757
00:36:45,760 --> 00:36:48,719
Speaker 11: new iPhone fifteen Pro Max, which is the highest to

758
00:36:48,760 --> 00:36:52,040
Speaker 11: the higher end, will have a you know, phenomenal camera,

759
00:36:52,400 --> 00:36:54,440
Speaker 11: and our analysts in Asia think that's going to be

760
00:36:54,520 --> 00:36:58,520
Speaker 11: a big growth driver for the Chinese smartphone market from

761
00:36:58,560 --> 00:36:59,160
Speaker 11: the higher end.

762
00:36:59,120 --> 00:36:59,640
Speaker 9: Point of view.

763
00:37:00,040 --> 00:37:03,000
Speaker 2: So these last two big tech companies will really wrap

764
00:37:03,120 --> 00:37:06,280
Speaker 2: up the entirety of the fang or the fan Maga

765
00:37:06,400 --> 00:37:09,000
Speaker 2: stacks as I like to call them. What's going to

766
00:37:09,000 --> 00:37:11,640
Speaker 2: be the big takeaway as we assess all of their

767
00:37:11,640 --> 00:37:12,600
Speaker 2: earnings as a whole.

768
00:37:13,719 --> 00:37:16,400
Speaker 11: See for me, the big takeaway is that the ai

769
00:37:16,400 --> 00:37:18,400
Speaker 11: IS story is real, but it's going to take several

770
00:37:18,440 --> 00:37:20,440
Speaker 11: years to play out. It's not going to be that

771
00:37:20,480 --> 00:37:22,440
Speaker 11: in two quarters you're going to you know, start seeing

772
00:37:22,480 --> 00:37:25,800
Speaker 11: massive revenue upside. And Microsoft, I think is the biggest

773
00:37:25,800 --> 00:37:28,880
Speaker 11: example because in the software world they are perceived to

774
00:37:28,880 --> 00:37:31,480
Speaker 11: be the biggest beneficiary of this. But you know, with

775
00:37:31,600 --> 00:37:34,800
Speaker 11: that big rally in the last six months, the stock

776
00:37:34,840 --> 00:37:37,120
Speaker 11: only was down three four percent after earning, So I

777
00:37:37,160 --> 00:37:39,319
Speaker 11: think people are getting the point that it is going

778
00:37:39,360 --> 00:37:41,759
Speaker 11: to take some time for that revenue to be recognized,

779
00:37:42,320 --> 00:37:44,480
Speaker 11: and I think that's the big story for all of us.

780
00:37:44,719 --> 00:37:46,759
Speaker 2: An a Grana, thank you so much for taking the time.

781
00:37:46,800 --> 00:37:48,480
Speaker 2: I know it's going to be a very busy day

782
00:37:48,480 --> 00:37:52,880
Speaker 2: for you on Agrana of Bloomberg Intelligence. Subscribe the Bloomberg

783
00:37:52,880 --> 00:37:56,120
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784
00:37:56,160 --> 00:37:59,640
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785
00:37:59,680 --> 00:38:03,399
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786
00:38:03,520 --> 00:38:04,720
Speaker 1: The Bloomberg Business app.

787
00:38:05,040 --> 00:38:08,320
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788
00:38:08,400 --> 00:38:11,799
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789
00:38:11,840 --> 00:38:12,920
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