WEBVTT - Markets, Layoffs, EM, and Goldman (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.280 at Bloomberg dot com slash podcast. Talk about two thousand 0:00:22.239 --> 0:00:25.560 and eight. It was obviously the kickoff to the Great 0:00:25.600 --> 0:00:28.840 Financial Crisis. It was a horrible year for a lot 0:00:28.880 --> 0:00:32.159 of investors, but not for our next guest, Phil Tays, 0:00:32.280 --> 0:00:34.520 managed to keep his head above water or just barely 0:00:34.600 --> 0:00:38.000 right two thousand eight, UH Tays was down just three percent. 0:00:38.080 --> 0:00:42.159 The rest of the market was down forty one percent. Um. 0:00:42.200 --> 0:00:46.360 He did just as well, maybe better. He returned money 0:00:46.400 --> 0:00:50.199 in two thousand and the benchmark lost thirteen percent UH 0:00:50.320 --> 0:00:52.440 in the beginning of the pandemic. He was also smart 0:00:52.520 --> 0:00:55.200 enough to get out right away in March and to 0:00:55.280 --> 0:00:57.440 get back in until mid April. He joins US Now 0:00:57.520 --> 0:01:02.240 Phil Tays, he runs Tay's asset management. Phil, how do 0:01:02.360 --> 0:01:07.000 you manage? How do you navigate these choppy waters? Um? 0:01:07.040 --> 0:01:11.520 It's been two is awful as well. Um, how was 0:01:11.560 --> 0:01:14.160 the year for you and what are you doing in Yeah, 0:01:14.200 --> 0:01:16.920 so two is a pretty good year for us on 0:01:16.959 --> 0:01:19.399 a relative basis. People don't like relative to returns. They'll 0:01:19.440 --> 0:01:22.040 they like absolute returns, but only people who didn't lose 0:01:22.080 --> 0:01:25.479 money don't like relative terms. Right, so we lost less. 0:01:26.200 --> 0:01:28.720 But what what we do is, as a core principle, 0:01:28.840 --> 0:01:31.319 is we try to create ways to people for people 0:01:31.319 --> 0:01:35.039 to be in markets, participate in financial asset appreciation, but 0:01:35.160 --> 0:01:38.520 address the contingency that they may go down. And I 0:01:38.560 --> 0:01:41.680 think that's what's so fascinating about this marketplace is that 0:01:42.000 --> 0:01:44.760 Gene Fama, with his oppressive amount of data that support 0:01:44.840 --> 0:01:49.040 the efficient market hypothesis, suggest that you should always be 0:01:49.080 --> 0:01:51.520 invested no matter what. What that does is it creates 0:01:51.520 --> 0:01:55.440 amazing contrarian plays, right because if the entire world thinks 0:01:55.440 --> 0:01:58.520 that you should be fully invested at thirty times earnings, 0:01:58.600 --> 0:02:01.000 and it's pretty is that markets are going to go 0:02:01.040 --> 0:02:03.160 down at some point, then if you create a mechanism 0:02:03.640 --> 0:02:07.120 uh to de risk, that is helpful. So what what 0:02:07.280 --> 0:02:09.720 is it? You're probably looking for more detail. What we 0:02:09.760 --> 0:02:11.480 do is we have two ways of hedging against risk. 0:02:11.520 --> 0:02:13.919 One is trend following algorithms, that just move us out 0:02:13.919 --> 0:02:15.919 of the way. In the beginning parts of declines have 0:02:15.960 --> 0:02:18.680 been pretty liable, reliable historically. We've been doing it since 0:02:18.919 --> 0:02:21.920 nineties six, as you pointed out, so it's you know, 0:02:21.919 --> 0:02:23.880 it's got a good track record. But we also use 0:02:23.960 --> 0:02:26.920 options and creative ways to both use options to hedge 0:02:26.960 --> 0:02:29.840 but also figure out ways to pay for those options. Nice. 0:02:30.120 --> 0:02:31.919 So what is your go to hedge at the moment? 0:02:31.960 --> 0:02:33.920 I felt like in twenty two was you buy the dollar, 0:02:33.960 --> 0:02:37.320 you buy commodities, You were set, what what's the hedge? Well, 0:02:37.400 --> 0:02:40.120 so ours is less complicated than you might imagine. We're not. 0:02:40.160 --> 0:02:43.680 What we're not doing is creating complex head hedge fund strategies. 0:02:43.720 --> 0:02:47.520 What we are doing is just investing in conventional types 0:02:47.560 --> 0:02:51.000 of things stocks and bonds, high yeld bonds, UH and 0:02:51.080 --> 0:02:53.799 the way we hedge right now, we're actually almost fully 0:02:53.800 --> 0:02:57.079 allocated right bonds. Stocks and bonds have been moving up 0:02:57.120 --> 0:02:59.919 decently this year. We're back in the markets, but we're 0:03:00.160 --> 0:03:02.959 very close where a hair trigger away where if the 0:03:03.000 --> 0:03:05.680 market turns lower it penetrates our target cell level for 0:03:05.720 --> 0:03:08.120 at least our trend following algorithms will scale out of 0:03:08.120 --> 0:03:11.000 the markets and we'll go to sometimes investment grade bonds, 0:03:11.000 --> 0:03:13.280 but if bonds are getting battered as well, will be 0:03:13.320 --> 0:03:16.480 fully in cash instruments. Yeah, I mean, we UM have 0:03:16.560 --> 0:03:18.280 seen a little bit of a turnaround. The last couple 0:03:18.320 --> 0:03:20.440 of days under the SP five came in below it's 0:03:20.440 --> 0:03:23.600 two day moving average, and we snapped a bunch of 0:03:23.600 --> 0:03:26.079 winning streaks that we've seen. Also warnings from some big, 0:03:26.360 --> 0:03:29.520 big investors. Howard Marks was on with Romaine Bostic the 0:03:29.560 --> 0:03:32.680 other night and said he thinks it's the possibly the 0:03:32.840 --> 0:03:35.760 end of the junk rally, or at least we're UM 0:03:35.760 --> 0:03:39.040 fully priced there. Yeah, so fairly priced, fairly valued. You know, 0:03:39.200 --> 0:03:41.200 if you look at the downturns we've seen since the 0:03:41.200 --> 0:03:44.000 financial crisis, including the financial crisis, they've lasted as long 0:03:44.040 --> 0:03:46.520 as sixteen months. I would guess that the market place 0:03:46.560 --> 0:03:49.360 as a whole just has this sense that it's over, 0:03:49.640 --> 0:03:52.080 that the downturn is over. We've had a you know, 0:03:52.160 --> 0:03:56.240 a twelve month horrible market for both asset chlorasset classes. 0:03:56.720 --> 0:03:59.280 But I think the thing that is a real challenge 0:03:59.280 --> 0:04:01.880 for most investor terms and that vast majority of people 0:04:01.920 --> 0:04:05.600 listening to this show, is that it's not over. And really, 0:04:05.960 --> 0:04:09.720 if you have a big percent decline. Without a long duration, 0:04:10.040 --> 0:04:12.360 it doesn't matter that much as long as you don't sell. 0:04:12.560 --> 0:04:15.040 But once you start to stretch out to two years 0:04:15.160 --> 0:04:18.760 or three years, people that need to take uh income 0:04:18.880 --> 0:04:20.880 from assets, and that includes bonds of course, where the 0:04:20.920 --> 0:04:23.599 people have losses start to be negatively affected. So if 0:04:23.640 --> 0:04:26.040 you ask what gets you back in the workforce when 0:04:26.080 --> 0:04:28.320 you're retired when you don't want to be, it's that 0:04:28.520 --> 0:04:31.920 multi year declient. So I think, you know, looking at 0:04:32.040 --> 0:04:35.640 valuations in the stock market, h just looking at all 0:04:35.640 --> 0:04:40.080 of the challenges, one of them being global debt, and 0:04:40.120 --> 0:04:42.080 you know, and you're you're just talking about the fact 0:04:42.080 --> 0:04:44.720 that everyone's so focused on this binary question about what 0:04:44.760 --> 0:04:46.919 the Fed is going to do. I think it's because 0:04:47.120 --> 0:04:49.839 it really matters, and there's a lot more risk in 0:04:49.880 --> 0:04:53.440 the marketplace in their historically. I mean also because you know, 0:04:54.200 --> 0:04:56.719 we could be looking at an absolute see change. I 0:04:56.760 --> 0:05:01.800 make fun of crittious youth because a I'm Elis and 0:05:02.560 --> 0:05:05.200 she's smarter than everybody else, So you got to pick 0:05:05.320 --> 0:05:08.520 something right. But the last time we had interest rates 0:05:08.560 --> 0:05:12.000 above zero, she was on juice boxes and snack of us. 0:05:12.480 --> 0:05:17.360 You know, it's been it's been a solid generation of 0:05:18.240 --> 0:05:22.320 extraordinary monetary policy, and now are we just back to 0:05:22.640 --> 0:05:25.719 something that none of us is really used to anymore. Well, 0:05:25.760 --> 0:05:28.120 it's interesting as you say that, it sounds like, oh, 0:05:28.120 --> 0:05:30.080 we're gonna get back to normal, But I don't think 0:05:30.080 --> 0:05:32.680 there's a normal right now, because if you think about 0:05:32.680 --> 0:05:36.640 where when were we lasted a hundred times depth of 0:05:36.680 --> 0:05:39.520 GDP on a on a fiscal debt level in the 0:05:39.600 --> 0:05:43.159 United States back in back in after World War Two? Right, Well, 0:05:43.200 --> 0:05:46.600 what was the GDP growth following that? Around eight percent 0:05:46.680 --> 0:05:50.080 a year for two decades. So we have these sort 0:05:50.080 --> 0:05:54.560 of existential crises, these things that are really fascinating things 0:05:54.560 --> 0:05:58.120 to think about, but potentially perilous to live through. That 0:05:58.160 --> 0:06:01.159 are gonna be with us. We're gonna have to, you know, 0:06:01.320 --> 0:06:04.440 fight our way through. And so I think that it 0:06:04.520 --> 0:06:09.320 pays to start to think unconventionally, start to think about Okay, yeah, 0:06:09.480 --> 0:06:11.920 Gene Fama is right, Normally you should just stay invested 0:06:11.920 --> 0:06:14.040 in the markets. But how can we address and this 0:06:14.120 --> 0:06:16.840 is everyone just wants to bet on the optimistic scenario, right, 0:06:16.880 --> 0:06:19.880 just stay invested, conventional portfolio, But how can we address 0:06:19.880 --> 0:06:22.560 the contingency that one of two things happens that could 0:06:22.600 --> 0:06:25.120 both happen together. First, the rate could continue to go 0:06:25.200 --> 0:06:27.840 higher and we have more persistent inflation. You know inflation 0:06:27.880 --> 0:06:29.440 in the United States If you look back in the 0:06:29.520 --> 0:06:32.640 last three episodes of the last hundred years, it lasted 0:06:32.680 --> 0:06:36.000 between four and nine years, not twelve months, right, So 0:06:36.200 --> 0:06:38.400 we could have more persistent inflation, higher rates, which is 0:06:38.400 --> 0:06:40.840 caused bonds to lose. And also that we could test 0:06:40.880 --> 0:06:42.640 the loads and break a lot lower in the stock market. 0:06:42.720 --> 0:06:45.840 So don't bet on that, but address the contingency of that. Well, 0:06:45.880 --> 0:06:47.720 you're speaking about the credit market earlier, and I want 0:06:47.720 --> 0:06:49.479 to circle back to that, because if you are worried 0:06:49.480 --> 0:06:52.279 about the risk and the recession, it doesn't feel like 0:06:52.279 --> 0:06:54.320 credit markets are really pricing then in when you're looking 0:06:54.320 --> 0:06:57.080 at spreads on the surface, I mean investment graines spreads 0:06:57.080 --> 0:06:59.320 for our audience, on downturns, you usually go about two 0:06:59.360 --> 0:07:01.640 hundred bases means we're nowhere near there. Even on high 0:07:01.720 --> 0:07:04.159 yield eight dred to a thousand basis points, again we 0:07:04.160 --> 0:07:07.120 are nowhere near there. So pretty this is the same 0:07:07.200 --> 0:07:09.960 imaginary friend we've had for the past year, which is 0:07:10.000 --> 0:07:14.040 the FED pivot, right, uh, And so everyone still I mean, 0:07:14.080 --> 0:07:17.600 we started out no inflation, then transient inflation, now inflation, 0:07:17.640 --> 0:07:19.600 and all along the way we were not thinking the 0:07:19.600 --> 0:07:21.720 FED RUC is gonna be raising rates as much as 0:07:21.760 --> 0:07:24.800 they have. So it's really just the same story played 0:07:24.800 --> 0:07:27.880 out in three where everyone's assuming the Fed's are not 0:07:27.920 --> 0:07:29.400 going to act as much as they are, but then 0:07:29.440 --> 0:07:32.720 they do, and then we potentially realize the consequences. I'm 0:07:32.800 --> 0:07:35.920 keeping that one imaginary friend is the FED pivot. I 0:07:35.920 --> 0:07:40.800 love that you started, by the way, the Behavioral Investing Institute, 0:07:40.960 --> 0:07:43.880 and we've been talking for a couple of days now 0:07:43.920 --> 0:07:46.120 pretty seriously about the consumer. Because the big banks were 0:07:46.120 --> 0:07:49.080 at with earnings right so we're all watching savings rates, 0:07:49.360 --> 0:07:53.000 banking balances, credit card usage. What do you think about 0:07:53.000 --> 0:07:56.840 the US consumer right now? It's pretty strong every kind 0:07:56.880 --> 0:07:59.760 of behavior right now, the investor behavior, consumer behavior as 0:07:59.840 --> 0:08:03.360 a whole, a whole another ball of wax right right. 0:08:03.360 --> 0:08:06.200 And I think that's a good indicator that that maybe 0:08:06.240 --> 0:08:09.840 markets haven't bottomed. I mean, when when you've got lines 0:08:09.880 --> 0:08:12.560 around the corner for fifteen dollar salads and you know, 0:08:12.800 --> 0:08:16.600 everything else seems to be durable good for big big 0:08:16.640 --> 0:08:20.240 goods purchases are still pretty impressive. I think it indicates 0:08:20.280 --> 0:08:23.480 that the mindset of bear market or crash or recession 0:08:23.520 --> 0:08:26.320 has not set in. And that means probably once people 0:08:26.320 --> 0:08:29.120 realize that it may, that'll be a negative for markets. 0:08:29.360 --> 0:08:33.360 All Right, you have, I guess founded a new holiday. 0:08:33.400 --> 0:08:35.559 How do you how do you put this into words? 0:08:35.600 --> 0:08:42.120 You have established um and inaugural National Investment Risk Management Day. 0:08:42.320 --> 0:08:46.160 What what are you trying to do increase financial literacy? Well, 0:08:47.120 --> 0:08:49.480 it started out as our head of education and Training, 0:08:49.559 --> 0:08:52.120 Dan Coleman, came up with the idea, it's actually on 0:08:52.160 --> 0:08:55.960 my birthday, which was yesterday birthday, thank you or happy 0:08:56.000 --> 0:08:59.200 after birthday? You have to say after birthtor like anyway, 0:08:59.320 --> 0:09:02.439 So and and we it was sort of a an 0:09:02.480 --> 0:09:06.760 austere suggestion that the investors should look at their portfolios 0:09:06.800 --> 0:09:09.080 and address risk. And we were talking to our PR 0:09:09.120 --> 0:09:11.760 team and I said, let's let's let's make this fun. 0:09:12.360 --> 0:09:14.079 And what I what we did is I rewrite the 0:09:14.080 --> 0:09:17.520 press release myself. And it became like, oh my god, 0:09:17.600 --> 0:09:20.600 what are we doing? And so now every year we're 0:09:20.600 --> 0:09:22.680 going to try to address what are the three stupidest 0:09:22.720 --> 0:09:25.640 investment ideas we've had. I'm gonna I'm gonna tweet out 0:09:25.960 --> 0:09:28.400 the press release for you. Phil taste from TAS Asset Management. 0:09:28.400 --> 0:09:35.359 Great having on the program, we've heard, you know, layoffs 0:09:35.440 --> 0:09:39.920 coming out of Microsoft and for layoffs coming out of Amazon. Um, 0:09:40.000 --> 0:09:44.160 what's the furniture wayfair? There you go? So tons of 0:09:44.200 --> 0:09:47.280 these West Coast companies. Let's bring an Aora Runna right now. 0:09:47.280 --> 0:09:50.839 He covers tech for Bloomberg Intelligence. Don what what are 0:09:50.880 --> 0:09:53.000 we seeing in tech? Is it fair to say that 0:09:53.040 --> 0:09:55.720 this is the beginning of a wave of layoffs. I 0:09:55.720 --> 0:09:57.320 don't know if it's a beginning or be out of 0:09:57.320 --> 0:09:59.480 the middle eanning. But you know, if you look at 0:09:59.520 --> 0:10:02.440 it over the last three to five years, a lot 0:10:02.440 --> 0:10:04.320 of these companies have you know, some of them have 0:10:04.400 --> 0:10:06.480 doubled their head counts, some of them have gone even 0:10:06.640 --> 0:10:09.240 you know, more than that. And that was driven by 0:10:09.320 --> 0:10:11.280 a lot of demand that we saw in the pandemic. 0:10:11.600 --> 0:10:13.720 But if we see this year, take spending is going 0:10:13.800 --> 0:10:16.240 to slow down. Cloud businesses are going to slow down. 0:10:16.600 --> 0:10:18.760 And then if you want to maintain your margins and 0:10:18.880 --> 0:10:21.880 be you know, have the right size UM I would 0:10:21.920 --> 0:10:24.480 say workforce, you will see some layoffs. So you know, 0:10:24.600 --> 0:10:27.440 let's say the case of Microsoft, five percent decline in 0:10:27.480 --> 0:10:29.840 head count is not that big of a deal when 0:10:29.840 --> 0:10:32.480 you've doubled your head count in five years, But then 0:10:32.520 --> 0:10:35.600 what happens when is this kind of a a scenario 0:10:35.640 --> 0:10:38.040 where it's one step backwards in terms of headcount only 0:10:38.040 --> 0:10:41.320 to kind of release the valve for the next few years. 0:10:41.400 --> 0:10:42.680 Is that kind of the way to look at this. 0:10:43.000 --> 0:10:45.040 It will a lot will depend on what kind of 0:10:45.080 --> 0:10:47.120 demand we see next year or what kind of rebound 0:10:47.120 --> 0:10:49.200 will see. Now, if there is a lack of demand, 0:10:49.240 --> 0:10:51.040 then you're not going to see massive hiding going in. 0:10:51.160 --> 0:10:54.240 But if the demand comes back like we expect it will, 0:10:54.559 --> 0:10:56.800 you're going to see a massive acceleration and by our 0:10:57.240 --> 0:10:59.640 hiding at that point. Because there is a very strong 0:10:59.720 --> 0:11:03.200 quote lation of revenue growth and employee growth, it's usually 0:11:03.440 --> 0:11:05.480 you know, very close to one to one or point 0:11:05.480 --> 0:11:11.000 one to point nine. But what especially at Apple sauce um, 0:11:11.040 --> 0:11:15.800 they are sorry alphabet, they are not only laying off 0:11:16.080 --> 0:11:18.440 six and a half percent of their workforce. We saw 0:11:18.520 --> 0:11:21.800 reports on CNBC the other day that they're pushing out 0:11:21.840 --> 0:11:27.560 bonuses um and this is pretty harsh. I mean, normal people, 0:11:27.720 --> 0:11:31.160 even if you're not supposed to rely on bonuses as 0:11:31.160 --> 0:11:33.520 a way to cover living expenses. So if you all 0:11:33.520 --> 0:11:35.679 of us shudden say in the middle of January. Hey, 0:11:35.920 --> 0:11:37.719 we know you're used to getting your whole bonus now, 0:11:37.760 --> 0:11:39.160 but we're only going to give you part of it 0:11:39.240 --> 0:11:41.400 and the rest of it in two months. That screws 0:11:41.480 --> 0:11:44.560 up a lot of people's uh, you know, bill paying abilities. 0:11:44.960 --> 0:11:46.839 You would only do that if you were in some 0:11:46.920 --> 0:11:49.599 kind of trouble, wouldn't you. Um, they didn't generate a 0:11:49.600 --> 0:11:53.960 lot of free cash flow a b unlike Amazon's you know, 0:11:54.080 --> 0:11:57.080 workers in vade houses. The people who work at Google 0:11:57.120 --> 0:11:59.600 are not struggling. They make a lot of fair point, 0:11:59.600 --> 0:12:02.640 fair point. I mean, there probably are some people who 0:12:02.640 --> 0:12:05.680 don't make a ton. They're not all programs. I'm fairly 0:12:05.960 --> 0:12:09.920 fairly confident that the average compensation throughout the ecosystem is 0:12:09.960 --> 0:12:13.760 way over you know, three d four thousand dollars over there. Well, 0:12:13.760 --> 0:12:15.680 hopefully they don't have too many kids in private schools. 0:12:15.880 --> 0:12:21.400 I don't know, man, four hundred thousand still, so so 0:12:21.480 --> 0:12:23.360 let me let me back up. Let's say go three 0:12:23.400 --> 0:12:25.920 to four years. These the tech workers have had a 0:12:26.000 --> 0:12:29.439 bonanza over the last several years, from stock options to 0:12:29.800 --> 0:12:32.800 really high raises because of the shortage of labor. And 0:12:32.840 --> 0:12:35.760 I can assure you, right now even for almost every 0:12:35.800 --> 0:12:40.319 category in technology. If you break down database administrator, software engineers, 0:12:40.720 --> 0:12:44.520 um AI developers, all of them are in massive demand 0:12:44.600 --> 0:12:47.360 right now. So other industries out there, you know, whether 0:12:47.400 --> 0:12:51.080 it's energy, industries, manufacturing, anywhere, They're going to be hired 0:12:51.080 --> 0:12:54.959 without a problem. This rings a lot of bells when 0:12:54.960 --> 0:12:56.000 it comes to and you might not be able to 0:12:56.000 --> 0:12:57.800 answer this, but tell me if this is in the discourse. 0:12:57.840 --> 0:13:00.360 Here are people talking about things like immigration when it 0:13:00.360 --> 0:13:03.240 comes to hiring right now. I mean, I'm thinking, like 0:13:03.280 --> 0:13:06.320 my parents tech boom of the nineties here going into 0:13:06.360 --> 0:13:10.600 computer engineering, what happens when that immigration standard is up, 0:13:11.080 --> 0:13:13.160 dropped down or made more complicated. So I did a 0:13:13.160 --> 0:13:16.200 big report six seven years ago, um, you know about 0:13:16.400 --> 0:13:19.000 the restrictive immigration policy and what it would do and 0:13:19.000 --> 0:13:22.080 one of Trumpian policy that Biden really hasn't turned around. Yeah, 0:13:22.240 --> 0:13:24.520 I I was surprised at that. And you know, one 0:13:24.520 --> 0:13:26.880 of my predictions was Canada is going to really benefit 0:13:26.920 --> 0:13:29.480 from it. And we have seen a massive boom of 0:13:29.520 --> 0:13:33.160 immigrants and for that matter, a massive tech center near 0:13:33.160 --> 0:13:35.800 Mississauga because of that, because of a lot of the 0:13:35.800 --> 0:13:40.120 immigrants going there and creating development centers for software companies. 0:13:40.280 --> 0:13:42.600 But let me assure you this thing. You know, from 0:13:42.600 --> 0:13:46.360 a tech unemployment rate, we are still way past full employment. 0:13:46.640 --> 0:13:48.920 This you know, if if you have added let's say 0:13:48.920 --> 0:13:51.199 for Microsoft case, I'll tell you, in the last five 0:13:51.280 --> 0:13:54.320 years they've added hundred thousand people, letting go of ten 0:13:54.360 --> 0:13:56.920 thousand people is not that big of a deal in 0:13:56.960 --> 0:14:00.520 my view. All right, Well, hopefully those ten thousand people 0:14:00.559 --> 0:14:02.760 see it the same way because sound our push up. 0:14:02.800 --> 0:14:06.000 Pish I is taking full responsibility and he apologized, and 0:14:06.040 --> 0:14:08.240 I just can't imagine this generates a lot of positive 0:14:08.240 --> 0:14:11.280 sentiment towards him running the company. You know, even if 0:14:11.280 --> 0:14:14.560 you're making four a thousand, if you've got three kids 0:14:14.720 --> 0:14:17.120 and you've got a ten dollar mortgage, I mean, I 0:14:17.160 --> 0:14:19.960 realize you're living large, but it's still kind of hurty. Yeah, 0:14:20.000 --> 0:14:23.280 children are expensive. All right, We're gonna continue to talk 0:14:23.320 --> 0:14:26.200 about the layoffs on the West coast. They're really global 0:14:26.320 --> 0:14:30.520 layoffs as well as the winning quarter that Netflix had. 0:14:30.520 --> 0:14:36.280 The stock is up again six percent. Let's bring in 0:14:36.400 --> 0:14:40.400 right now. Are Bloomberg Intelligence analyst Punham Goyle joins us 0:14:40.680 --> 0:14:44.560 see a senior analyst for e commerce as well as 0:14:44.720 --> 0:14:48.920 ath leisure and off price retail. That is a hell 0:14:48.960 --> 0:14:50.600 of a round up there. And then Man Deep saying 0:14:50.640 --> 0:14:54.200 senior analyst for tech companies. He covers all those tech 0:14:54.240 --> 0:14:59.000 companies that touch the consumer like Apple, sauce. Man Deep, 0:14:59.080 --> 0:15:01.960 let me start with you, uh these layoffs from Google, 0:15:02.280 --> 0:15:04.160 and I want to get your take also on the 0:15:04.240 --> 0:15:06.480 kind of I feel like suspicious name change. I know 0:15:06.520 --> 0:15:09.440 it's been years now, but I still haven't forgiven them 0:15:09.440 --> 0:15:12.840 for it. What do you think? Well, so look at 0:15:13.000 --> 0:15:16.520 how much these companies have grown in terms of employee 0:15:16.520 --> 0:15:20.200 based Google or Alphabet, for example, has added about fifty 0:15:20.760 --> 0:15:24.760 employees in the last two years. Now. Granted they were 0:15:24.840 --> 0:15:27.400 growing out of you know, the top line growth was 0:15:27.520 --> 0:15:32.320 also north of and they're operating profits also doubled in 0:15:32.400 --> 0:15:35.320 this period. The question that you have to ask the 0:15:35.320 --> 0:15:38.840 management right now is what were they forecasting in terms of, 0:15:38.920 --> 0:15:42.000 you know, future growth. And I think that's where all 0:15:42.160 --> 0:15:45.200 these large tech companies got it wrong, in terms of 0:15:45.400 --> 0:15:48.640 just you know, what is the projected top line growth. 0:15:48.680 --> 0:15:52.320 And in the case of Alphabet specifically, it's the search 0:15:52.400 --> 0:15:57.160 business that subsidizes everything else, whether it's cloud, YouTube, their 0:15:57.240 --> 0:16:02.000 hardware ambitions, and none of those other segments actually is 0:16:02.080 --> 0:16:05.480 close to being profitable barring maybe YouTube and and so 0:16:05.640 --> 0:16:09.800 that's where I think they're realizing that search is obviously maturing, 0:16:10.200 --> 0:16:12.680 and we have all sorts of problems with the digital 0:16:12.680 --> 0:16:16.200 ad environment right now, and they just can't maintain that 0:16:16.440 --> 0:16:20.360 profitable growth anymore. And I think I mean again, in 0:16:20.440 --> 0:16:23.320 terms of the head count, it's still twelve thousand versus 0:16:23.440 --> 0:16:25.760 fifty thousand they have added in the last two years. 0:16:25.760 --> 0:16:28.760 But it just goes to show that this period, if 0:16:28.760 --> 0:16:32.920 you look back, was unprecedented in terms of tech hiring. Yeah, 0:16:33.000 --> 0:16:36.440 well man, deep it's interesting to find that this this 0:16:36.520 --> 0:16:39.280 tech story just continues to unravel at a time when 0:16:39.520 --> 0:16:42.480 almost the share prices are almost rewarded by it, and 0:16:42.640 --> 0:16:44.800 and it really comes down to a question of cost efficiency. 0:16:44.800 --> 0:16:46.880 Of course, we do feel for the folks who are 0:16:47.440 --> 0:16:49.360 getting laid off, of course, but I want to fold 0:16:49.360 --> 0:16:51.280 in the retail side of the story as well. Putam 0:16:51.320 --> 0:16:53.840 Goyle also joins us from Bloomberg Intelligence, because it's not 0:16:53.920 --> 0:16:56.720 just Alphabet that came out with this news. Wayfair also 0:16:56.760 --> 0:16:59.240 announced job cuts and put them I wonder, is it 0:16:59.360 --> 0:17:02.120 the same dynamic in the retail space that made is 0:17:02.160 --> 0:17:04.399 talking about in the tech space a little bit of 0:17:04.440 --> 0:17:05.960 it is the same. You know, if you look back 0:17:06.000 --> 0:17:08.040 to Wayfare than the number of employees they had in 0:17:08.440 --> 0:17:11.320 eighteen it was about twelve thousand, and as of the 0:17:11.400 --> 0:17:14.760 latest ten cakes about sixteen and a half thousand, So 0:17:14.920 --> 0:17:17.680 definitely yet you know, a big step up and employees 0:17:17.680 --> 0:17:20.480 and as they scale back roughly seventeen hundred and fifty 0:17:20.520 --> 0:17:24.040 employees now it's just really a measure to get cost 0:17:24.119 --> 0:17:28.000 back in line. All retailers across the board are struggling 0:17:28.000 --> 0:17:32.720 to drive profitability as sales have come off following pandemic boom, 0:17:32.840 --> 0:17:35.760 especially for Wayfare where you know, the home is where 0:17:35.800 --> 0:17:39.080 people invested at the peak of the pandemic, that's where 0:17:39.119 --> 0:17:42.239 your funds went, and Wayfare benefited from that. And as 0:17:42.280 --> 0:17:45.280 all that pulls back, even though they are in a 0:17:45.359 --> 0:17:48.560 secular shift where they will benefit from the move from 0:17:48.640 --> 0:17:52.080 stores to online, sales have dwindled and now the move 0:17:52.160 --> 0:17:54.520 is towards profitability. So for them to get to their 0:17:54.560 --> 0:17:58.399 goal of IBADA neutral this year, UM, they needed to 0:17:58.400 --> 0:18:00.800 cut these costs. They had to cut a billion and 0:18:00.880 --> 0:18:03.600 a half dollars roughly, and half of that is through 0:18:03.640 --> 0:18:07.399 the employee cuts. Well, stick with that story because I 0:18:07.520 --> 0:18:09.199 almost wondered, and Mandy, if I'll get to you in 0:18:09.200 --> 0:18:11.960 just a moment, but I almost wonder how much of 0:18:12.040 --> 0:18:15.640 these layoffs are really some sort of dynamic of one 0:18:15.640 --> 0:18:19.240 step backwards to kind of be cost efficient in the 0:18:19.280 --> 0:18:23.199 short term only to kind of prepare for mass hiring 0:18:23.280 --> 0:18:25.439 as we talked about a new economic expansion. Do you 0:18:25.480 --> 0:18:27.640 see that dynamic playing out in the retail space over 0:18:27.680 --> 0:18:30.159 the next couple of years now for rightfare, because if 0:18:30.200 --> 0:18:32.280 you look at the composition of their cost cuts to 0:18:32.320 --> 0:18:36.600 the seventeen and fifty employees that they talked about cutting today, 0:18:36.680 --> 0:18:39.960 the bulk of that is in corporate so um. You know, 0:18:40.000 --> 0:18:42.760 you can argue that when they weren't in their peak 0:18:42.920 --> 0:18:45.239 growth mode, which was largely you know, they went from 0:18:45.280 --> 0:18:48.280 one point three billion dollars in revenue to five billion 0:18:48.320 --> 0:18:54.320 dollars in twenty seventeen seventeen, and now they're approaching about 0:18:54.359 --> 0:18:58.000 twelve to thirteen billion dollars, so massive growth. But the 0:18:58.080 --> 0:19:02.880 hiring that they're pulling back isn't at the warehouse level largely, 0:19:03.000 --> 0:19:04.879 it's it's our corporate right. If you think about the 0:19:04.960 --> 0:19:07.240 number of employees that they're letting go up, So I 0:19:07.320 --> 0:19:12.639 don't I don't think that we will have another massive increase, 0:19:13.400 --> 0:19:17.440 especially also as retailers and brands are largely right now 0:19:17.480 --> 0:19:21.000 looking at automation to help alleviate some of these growing costs. 0:19:21.040 --> 0:19:25.480 You know, wages are rising, rents are rising, transportation expenses, shipping, 0:19:25.520 --> 0:19:29.400 everything is up um in multiple folds. So I think 0:19:29.440 --> 0:19:32.040 they'll just be looking at automation more as they continue 0:19:32.040 --> 0:19:34.520 to grow the business to save costs. Man, deep, is 0:19:34.560 --> 0:19:37.560 there risk um that some of these at least some 0:19:37.640 --> 0:19:39.440 of these companies and we've got a list now too 0:19:39.480 --> 0:19:41.760 long for me to mention of tech companies that are 0:19:41.760 --> 0:19:45.320 coming cutting you know, double digit thousands of jobs. Is 0:19:45.320 --> 0:19:48.119 there a risk that things go better than expected and 0:19:48.119 --> 0:19:50.600 they have to turn around and hire back again after 0:19:50.680 --> 0:19:55.280 having tarnished their reputations. I don't think so. I think 0:19:55.359 --> 0:19:59.520 this is a sort of you know, downturn where clearly 0:20:00.000 --> 0:20:02.720 in hindsight, there was a pull forward both in terms 0:20:02.800 --> 0:20:06.600 of growth and profitability, and that's why these companies ended 0:20:06.680 --> 0:20:10.280 up in this position where they overhired. So in my mind, 0:20:10.400 --> 0:20:13.879 even if we have a shallow recession or slow down 0:20:14.080 --> 0:20:17.560 and things rebound, they have learned their lesson and I 0:20:17.640 --> 0:20:20.199 doubt they're gonna do it again in terms of, you know, 0:20:20.240 --> 0:20:23.479 the hiring spree they went on, in terms of you know, 0:20:23.560 --> 0:20:26.920 just the talent wars that transpired, and and now it's 0:20:26.960 --> 0:20:29.480 the same with layoffs. Every company is doing it the 0:20:29.520 --> 0:20:32.360 same way they hired all these people. So I don't 0:20:32.359 --> 0:20:34.960 think we're going to see a return of that anytime soon. 0:20:35.280 --> 0:20:38.560 Mandy thirty seconds here very quickly. Do you see the 0:20:38.600 --> 0:20:41.960 stock market or do you share prices really benefiting from 0:20:42.119 --> 0:20:45.080 more and more of these layoffs. Well, so they will 0:20:45.200 --> 0:20:47.920 come out of this downturn. I don't know how long 0:20:47.960 --> 0:20:51.439