Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Farrell and Lisa Abramowitz joined us each day
Speaker 1: for insight from the best and economics, geopolitics, finance and investment.
Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and
Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,
Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app. This is
Speaker 1: a joy. Michelle Meyer I was discovered with her expertise
Speaker 1: on the consumer and housing a number of years ago.
Speaker 1: She had a sterling career with Global Wall Street and
Speaker 1: now gives us an information knowledge with their economics that
Speaker 1: you can only get at MasterCard. With the MasterCard Economics Institute.
Speaker 1: Chief US Consumer expert, Michelle Meyer joins us this morning. Michelle,
Speaker 1: you get the data like no other market economist in
Speaker 1: the game. What is the state of the American consumer? Um? Yeah, Tom, So,
Speaker 1: we are absolutely looking at the consumer with a high
Speaker 1: level of detail, and what we're seeing, and what we
Speaker 1: have been seeing for a while, is that the consumer
Speaker 1: is out there, able and willing to spend. And this
Speaker 1: speaks to the inflation data. It speaks to the labor
Speaker 1: market data that the consumer still has purchasing power. Right
Speaker 1: you have a labor market that's still expanding. Income growth
Speaker 1: is out there, aggregate income growth in particular, there's still
Speaker 1: some savings buffer and there's still access to expand um
Speaker 1: the balance sheet. So to underestimate consumer has been um
Speaker 1: you know, has been a problem without without getting into
Speaker 1: the Vatican secrets. Are you seeing massive credit card usage?
Speaker 1: And how do the higher interest rates of credit cards
Speaker 1: fold into your optimism on the consumer. Look, what we're
Speaker 1: saying about the consumer is that they are using all
Speaker 1: of their sources of purchasing power, and the news is
Speaker 1: that they still have a lot of purchasing power coming
Speaker 1: from the labor market from job creation. So at the moment,
Speaker 1: you still have a lot of income flowing in a
Speaker 1: disposable income which is supporting that spending in real time,
Speaker 1: so consumers don't necessarily have to rely as much on
Speaker 1: other sources. It's not as though the consumer is strained
Speaker 1: right now. They're doing a really good job being able
Speaker 1: to navigate what has been for the last year some
Speaker 1: pretty high prices um and that is what fuel the
Speaker 1: inflationary numbers that we have seen all throughout last year UM.
Speaker 1: But yes, the consumer of course is utilized savings. The
Speaker 1: consumer of course has um increased credit card used as well.
Speaker 1: You've seen, you know, from the Federal Reserve G nineteen
Speaker 1: data UM revolving credit outstanding has been on the rise
Speaker 1: after the post pandemic period where consumers paid down their debt. Michelle,
Speaker 1: I'm looking right now. We just got a number of
Speaker 1: data points from the United States government and the markets
Speaker 1: are slow to respond, but they are starting to respond
Speaker 1: a bit more. You see the naztack down now near
Speaker 1: session lows around down one per and ahead of the open.
Speaker 1: Do you get the sense that people have bought into
Speaker 1: the disinflation story too much that we could see even
Speaker 1: another bout of reinflation that sends cp I even higher.
Speaker 1: So to me that the useful way of looking at
Speaker 1: inflation is to understand the different drivers of inflation. So
Speaker 1: the good news on the disinflationary storyline is that the
Speaker 1: supply side has really um come back, right. You've seen this,
Speaker 1: this repair of supply chains. You've seen the restocking of retailers.
Speaker 1: So inventory levels are back to normal and retailers have
Speaker 1: been able to return to just in time. Inventories which
Speaker 1: makes UM pricing much easier, much more transparent, and during
Speaker 1: the holiday season we did see UM consumers enjoy a
Speaker 1: lot more promotions and discounts. So on the good side
Speaker 1: of the equation, I do think there is a disinflationary
Speaker 1: story UM for services, which is going to be more
Speaker 1: tied particularly the super core which takes out housing, UM
Speaker 1: is going to be more tied to the labor market,
Speaker 1: and there we know there's still some wage pressure, we
Speaker 1: know there's still a lot more stickiness. So that's just
Speaker 1: gonna take time. So I do think it's really important
Speaker 1: when you're looking at inflation is to be able to
Speaker 1: separate the different parts of the inflation narrative based off
Speaker 1: of those drivers of inflation. So I don't think the
Speaker 1: disinflationary story is over, but we have to be aware
Speaker 1: that it's going to take time. So what's your sense
Speaker 1: of where the market is wrong. I'm looking right now
Speaker 1: to your break even, So are close to two point
Speaker 1: nine percent that in two years from now you're going
Speaker 1: to get a three percent essentially inflation? Right? Is that rate?
Speaker 1: Is that bang in line with your expectations based on
Speaker 1: the consumer spending and the consumer spending power that you
Speaker 1: see in the granular data. I think over that time
Speaker 1: frame that does seem pretty reasonable because if again, if
Speaker 1: you think about the core goods components prior to the pandemic,
Speaker 1: those were deflationary components. They were seeing price reductions, and
Speaker 1: then you have this dramatic increase in the level of
Speaker 1: price this which does not seem sustainable. So a mean
Speaker 1: reversion back to more normal levels or more of a
Speaker 1: of a disinflationary tendency for those categories seems right. And
Speaker 1: the labor market, we know is not going to be
Speaker 1: able to continue at this rate forever. And the FED
Speaker 1: is committed to cooling down the labor market. So if
Speaker 1: you believe in the Fed's resolve, which I think we should,
Speaker 1: and they're communicating that we should, then yes, inflation should
Speaker 1: ultimately come down. It's just going to take time. This
Speaker 1: whole cycle is taking time, and that's what we have
Speaker 1: to remember. Mishelle Mayer has been too long. Thank you
Speaker 1: so much MasterCard Economics with us at this morning pit
Speaker 1: a cheer, good morning to you, get to see you.
Speaker 1: The head of Actress Strategy of Security. I said, thank you.
Speaker 1: I think obnoxious arts or something, and Bloomberg, I gotta
Speaker 1: admit that. Okay, let's get a light shot on the
Speaker 1: door when he came out mark a kind of a ship.
Speaker 1: JP Morgan made some headlines in the last twenty four hours.
Speaker 1: He's had a difficult time calling this market over the
Speaker 1: last twelve eighteen months, the USA could market anyway, and
Speaker 1: yet this phrase volmer getting two point oh and in
Speaker 1: it was this acronym zero d T E zero days
Speaker 1: to expire. And I think a lot of our audience
Speaker 1: are hearing more and more about those options. Can we
Speaker 1: have a bit of a clinic here, can you define
Speaker 1: for all of us what is zero D T E
Speaker 1: and what is it doing to this market? So every
Speaker 1: day now they create options that expire either that day
Speaker 1: or the next day. So there's a huge volume in that,
Speaker 1: and there are weekly options as well, So single stocks
Speaker 1: tend to be more weakly. Ets tend to have the
Speaker 1: daily and volumes have just been driving through that, and
Speaker 1: I think it has a couple of repercussions. One is
Speaker 1: people are really literally gambling and you can sit there.
Speaker 1: There's a Bloomberg screen called m OsO, which is the
Speaker 1: most active traded. It's almost like watching a horse race.
Speaker 1: You'll see the spy four twelve calls and the Spy
Speaker 1: four thirteen calls Spy fourteen. It's almost this laddering. So
Speaker 1: I think people are treading a lot of this. Volumes
Speaker 1: have exploded heard as much as equity volumes can be
Speaker 1: related and tied back to the hedging of these single
Speaker 1: day options. So it's a very massive driver, and I
Speaker 1: think it's why we're seeing, you know, moves just that
Speaker 1: are amplified. So maybe something that would be a half
Speaker 1: percent move based on the news becomes a one and
Speaker 1: a half to two percent move, and it's going in
Speaker 1: both directions. You touched on it briefly. Can you explain
Speaker 1: how this becomes self fulfilling for the people that Let's
Speaker 1: say I am an institution and I sell you some
Speaker 1: of these very very short dated, cool options. What do
Speaker 1: I have to do on the other side which leads
Speaker 1: to this becoming somewhat self fulfilling. Yeah, So let's say
Speaker 1: the day starts spy at you know, four hundred, and
Speaker 1: someone buys a four or five call way out of
Speaker 1: the money right one and a quarter. All of a sudden,
Speaker 1: as it starts going to four or three, whoever sold
Speaker 1: that call has to start buying spy, which tends to
Speaker 1: exaggerate the price move. Then it starts getting to four
Speaker 1: or five. They've got to buy more. And then what
Speaker 1: we're seeing happen is someone starts buying the four oh
Speaker 1: eight calls and that starts putting pressure and you see
Speaker 1: almost the lattering type trade and it occurs over and over,
Speaker 1: and I think it reminds me a lot of what
Speaker 1: we are seeing about a year and a half two
Speaker 1: years ago, where you kind of had those gamma squeezes
Speaker 1: and that was very much individual stocks. It started on
Speaker 1: Monday with people buying the weekly options, and now it's
Speaker 1: moved down to this daily option. And so the other
Speaker 1: reason I think Vix is kind of irrelevant to me.
Speaker 1: So Vix only calculates options with twenty seven to thirty
Speaker 1: five days of expiration. As more and more people gravitate
Speaker 1: towards these daily options, yeah, and the volatility doesn't get
Speaker 1: picked up in that. So I think that's where the
Speaker 1: surprises are going to come. People are looking at Vicks
Speaker 1: for the hedging. It's all occurring this daily and weekly options.
Speaker 1: Let's do iron shoals. One is a rule of thumb
Speaker 1: options that drived out of four times leverage. Futures drive
Speaker 1: out at ten times leverage. With these short dated options,
Speaker 1: what is their leverage equivalent? It's got to be way higher,
Speaker 1: way higher. I think it's the hundreds to one. You know,
Speaker 1: people like fture, you do the regulator step in here.
Speaker 1: This is a train wreck waiting to happen. You and
Speaker 1: I know it. You know, I think people are going
Speaker 1: to start looking at this. It's really hard to figure
Speaker 1: out what just fis this. You're starting to see again
Speaker 1: all like the meme stock type things where my Twitter
Speaker 1: feeds filled with people who promised to make a thousand
Speaker 1: dollars into a hundred thousand dollars because it's truly gambling. Um,
Speaker 1: there's no binomial model or anything that's going to predict this, right,
Speaker 1: you buy something out of the money and you hope
Speaker 1: it triggers. And what we're also seeing, I think if
Speaker 1: you look in the background on the days calls are working,
Speaker 1: people really push hard on some of the most shorted
Speaker 1: stocks and vice versa. So stay away from the jargon. Gama, folks,
Speaker 1: is basically a form of acceleration. What is going to
Speaker 1: happen is we're gonna have a level change due to
Speaker 1: news whatever equities are going to go up or down.
Speaker 1: What will then happen to the people playing a one
Speaker 1: day duration in a leverage way out past ten to one. Well,
Speaker 1: the people who get it right are going to make
Speaker 1: a lot of money. They're going to keep pushing out
Speaker 1: the others. That's where you'll see liquidity start playing back.
Speaker 1: And I think that's what happens now is you've got
Speaker 1: all these algos kind of with this full level of liquidity, right,
Speaker 1: they're all trying to scalp a tiny bit, and as
Speaker 1: these moves start, they do you believe there's there's risk
Speaker 1: here on major Wall Street firm usks. I don't think
Speaker 1: it's there as much as individuals though. I think it's
Speaker 1: really has started gravitating more and more towards um you know, retail,
Speaker 1: not just retail traders, but institutional traders are gravitating this.
Speaker 1: You're not getting these types of volumes because it's mom
Speaker 1: and pop or you know, the kids playing. This is
Speaker 1: definitely at the big institutional desks as a trading strategy.
Speaker 1: What's the larger consequence of this? Is it a matter
Speaker 1: of just really muddied signals from a market that doesn't
Speaker 1: really cohere with any of the larger economic trends, or
Speaker 1: is this something that's a more significant whipsaw waiting to
Speaker 1: happen in a sort of unexpected downdraft that could happen suddenly.
Speaker 1: So I think the first thing is it's just much
Speaker 1: harder to get a good read on the market. Right
Speaker 1: These moves are amplified, so you can't see that. You've
Speaker 1: got to be watching these things or else you're gonna
Speaker 1: miss signals. I think the most obvious day was the
Speaker 1: Thursday after the f O m C when NASDAC was
Speaker 1: up five points. You could just see this really trading
Speaker 1: through these zero day expiration options, So you've got to
Speaker 1: be watching this. It dilutes information, and I think you
Speaker 1: just have to be prepared that whatever you think it
Speaker 1: can move. If you think it's a one to move,
Speaker 1: you could get five to ten percent, I think much easier.
Speaker 1: So is it just a matter of volatility or does
Speaker 1: it also affect the trajectory sort of the directionality and
Speaker 1: also the persistency of a rally because of the self
Speaker 1: fulfilling aspect. I think it can. It can make things
Speaker 1: extend a little bit, because you it just makes it
Speaker 1: if we live in a world where there's kind of
Speaker 1: almost windshield white browt goes. You're looking to who you
Speaker 1: can stop out, shorts or long. It makes the chances
Speaker 1: that they hit triggers higher, and then you keep pushing
Speaker 1: it higher and higher, right, and you get these much
Speaker 1: more exaggerated moves, which forces everyone who's short to close out.
Speaker 1: And now I think you switch back. And the other
Speaker 1: thing I think it was really done is as a contrarian,
Speaker 1: you're always trying to figure out, Okay, what's market positioning
Speaker 1: you want to bet against that. I think market position
Speaker 1: now turns on a dime, the ability to move huge
Speaker 1: amounts of risk through relatively short dated options. I think
Speaker 1: it's changed that risk position so it used to take
Speaker 1: weeks to a month for every and ago from over
Speaker 1: bought to over sold. I think these things happen in
Speaker 1: days or weeks now. So what's your projection of how
Speaker 1: this plays out? We've all these cute narratives trying to
Speaker 1: pin off the heels of certain market action. How does
Speaker 1: this play out as you see the boiling of the
Speaker 1: frog with respect to higher rates in the front end.
Speaker 1: If it's like everything else, I think what we'll see
Speaker 1: is one down day where we go through some of
Speaker 1: the triggers that you know, stop the exchanges, and then
Speaker 1: regulators will pay attention because no one ever pays that
Speaker 1: much attention when the bias tends to be higher. I
Speaker 1: think it's going to take a big down day where
Speaker 1: no one can explain why it says we start hitting
Speaker 1: all these triggers on the NASDAC and New York's doctors
Speaker 1: changes understand the Vulmageddon two points of the mark I
Speaker 1: was talking about it repeat a kind of repeat a yeah,
Speaker 1: and I read a bit of his I think it's
Speaker 1: a little bit off there because the one thing that
Speaker 1: we had in team is people trading the vix directly.
Speaker 1: There were all those vix E t n s and
Speaker 1: they had that ability to actually trade the vixed futures
Speaker 1: and there were really interesting trigger points at four to
Speaker 1: four fifteen PM that let people push that. Yeah, I
Speaker 1: think we'll see this, and I think you're gonna see
Speaker 1: how I look at liquidy, whether it's in the bond
Speaker 1: market or equities. Again, it's all these little out goes
Speaker 1: fighting around and as soon as they start losing money,
Speaker 1: they start shutting off and bid off off for goes
Speaker 1: wider and that's why you're going to see these exaggerated moves.
Speaker 1: I hear now annoyed to cheering. Cheer better to be cheerful.
Speaker 1: Have you watched Top Gun before? Of course they haven't.
Speaker 1: I don't know if you saw. But ahead of it,
Speaker 1: one of our generals and animals I work with, um
Speaker 1: General Wallace was actually a Top Gun instructor. So that
Speaker 1: was pretty stories about that. What did he say watch
Speaker 1: the movie? He said that the movie was fairly realistic.
Speaker 1: There were all sorts of people at this and there
Speaker 1: were some people who are just phenomenal pilots, not necessarily
Speaker 1: great people, but phenomenal pilots, and there were others. There
Speaker 1: were great people. And it really was because I think
Speaker 1: it was in the Vietnam War our kill rate had
Speaker 1: gone down so much they felt the need to train better. Pay.
Speaker 1: This was awesome. Thanks Abamitous, you come back in three
Speaker 1: days when we look at Cheer. What we've got to
Speaker 1: talk about with pay is the object's been shot at
Speaker 1: the sky. I mean, Academy security is perfectly placed to
Speaker 1: have this conversation. Probably we have a lot of time
Speaker 1: that I know you have. Peter, thank you as always
Speaker 1: pitter cheer of Academy Security, John Nan Russ Coastrick Global
Speaker 1: Allocation Fund portfolio manager over a black Rock Russ, let's
Speaker 1: start there. The closing low on the two year I
Speaker 1: think was January just north of four four point zero
Speaker 1: eight percent. We're higher by about fifty basis points since then.
Speaker 1: Over that same period, we've seen the nastag absolutely ripped. Russ.
Speaker 1: What gives good more and Joathan you it's it's interesting
Speaker 1: because when you think about last year, last year was
Speaker 1: very driven by rate beta, in other words, the sensitivity
Speaker 1: of the stock market, particularly growth stocks and even more
Speaker 1: than nay early growth names to both nominal and real rates.
Speaker 1: And exactly as you point out, you know, we've seen
Speaker 1: this move higher rates and the nastack is ripping. My
Speaker 1: guess is the simple answers You've had a reversal from
Speaker 1: really extreme positioning in the end of twenty two, and
Speaker 1: that hasn't clearly ended yet. You had massive tax laws
Speaker 1: selling in the end of twenty two, you had massive
Speaker 1: shorts in a lot of these names. As people have
Speaker 1: come into the new year, that that pressure is abated,
Speaker 1: I don't think that can carry us throughout the year.
Speaker 1: I don't think you know, meme stocks and early growth
Speaker 1: of what leads us in twenty two parting in twenty three.
Speaker 1: But a lot of us has been a reversal of
Speaker 1: that very tough year you had, particularly at the end
Speaker 1: in two RUSS beneath the radar. Really not even reported
Speaker 1: in the western press was Japan g DP. The nominal
Speaker 1: GDP of Japan was sub two percent. Is that the
Speaker 1: great miscall in the markets now is we don't understand
Speaker 1: the impact of an elevated and more persistent nominal GDP
Speaker 1: in the United States, and as John Farrell mentions as well,
Speaker 1: in war torn Europe. Well, I think this is actually
Speaker 1: really important point. Tom. You ask why is the stock
Speaker 1: market up? And let's leave the meme stocks out for
Speaker 1: a moment. You know, the glass is half full argument
Speaker 1: is exactly what you're alluding to. So you had a
Speaker 1: view three or four months ago about a hard landing,
Speaker 1: you know, let's call that, you know, the economy contracting
Speaker 1: one or two percent, and now you've got a better
Speaker 1: and better likelihood off either soft or new landing. So
Speaker 1: if you have one percent growth in twenty three, which
Speaker 1: doesn't seem outlandish right now, in three or four percent
Speaker 1: inflation on top of that, that's four or five percent
Speaker 1: nominal GDP. That is a much bigger tailwind for earning
Speaker 1: his growth in the US, probably to some extent in
Speaker 1: Europe as well, that investors are expecting six months ago.
Speaker 1: And that's one of the reasons, probably the right reason
Speaker 1: them or the stock market has been as resilient as
Speaker 1: it's been, you know, at Lisa, this is really important.
Speaker 1: Nominal GDP across the pandemic from a high seventeen percent,
Speaker 1: that's a boom economy, you know, fear missing out down
Speaker 1: to ten percent, down to nine percent. Phenomenal GDP in
Speaker 1: America seven point three percent versus under two percent. And
Speaker 1: you pen and we're wondering why stocks are going up, Well,
Speaker 1: there's a spirit out there in the U. S. It's
Speaker 1: it's irrefutable. And this really goes to the question rus
Speaker 1: and I'd love your take on this. How much of
Speaker 1: the rally that we've seen, the sort of rethink of
Speaker 1: what we saw last year is justified based on better
Speaker 1: than expected economic data. Well, I think it is justified.
Speaker 1: You know, again, I think the stocks can have a
Speaker 1: decent year, you know, but the mystery is less wire
Speaker 1: stocks up up versus why are parts of the market
Speaker 1: leading that really shouldn't be leading in environmental races are
Speaker 1: still climbing. But I do think we have an environment
Speaker 1: we're look, we're getting to the clot We're getting closer
Speaker 1: to the end of that FED cycle, and maybe it
Speaker 1: goes a quarter point more than the market thanks right now,
Speaker 1: but we're still seeing the end of that process. We
Speaker 1: do have a better economic outlook with better nominal GDP. Uh.
Speaker 1: None of this means we're going straight up and you
Speaker 1: chase every momentum stock out there. But I think the
Speaker 1: reality is in an environment where you avoid a recession,
Speaker 1: where nominal GDP is let's call it four or five percent,
Speaker 1: and rate volatility is probably going to be lower by
Speaker 1: the end of the year, that's not a bad environment
Speaker 1: and it probably leads stocks higher by the end of
Speaker 1: the year. Okay, So based on that, how would you
Speaker 1: play this? Would you basically sell tech stocks by the
Speaker 1: rest and perhaps not have as much in cash as
Speaker 1: people expect because this is an opportunity in other assets
Speaker 1: that people are discounting it too much. Well, you know,
Speaker 1: and it's probably right now, you know, cash actually doesn't
Speaker 1: look so bad right now, at least compared to UH,
Speaker 1: some of the other parts of the curve, just given
Speaker 1: the fact that you are getting a lot to sit out.
Speaker 1: But yes, I do think you want to go back
Speaker 1: to something that is, you know, judiciously embracing risks. Now,
Speaker 1: I don't think it's all about growth first value. Matter
Speaker 1: of fact, in our portfolio, what we've been doing is
Speaker 1: we've been emphasizing two things. We're still going for quality
Speaker 1: UH and that's because we're in an environment where again
Speaker 1: the economy, we don't think it's going into recession, but
Speaker 1: there will be some deceleration, and we're splitting the difference
Speaker 1: on the growth value debate. We're going for garth. GARP
Speaker 1: is a style growth at a reasonable price that tends
Speaker 1: to do really well when you have an economic deceleration,
Speaker 1: but not a contraction. So yeah, I think it's more
Speaker 1: about picking your spots, having companies with strong cash flow
Speaker 1: rather than making these big bets on tech or not
Speaker 1: tech catch up and Bryce Semitistan with the rust strict
Speaker 1: that of blan Croft just because of time and it's
Speaker 1: huge popularity, people lean forward on Global Wall Street. For
Speaker 1: the gentleman from Penn State, they threw him out of
Speaker 1: State college years ago. Yes, too many curious questions. Dan
Speaker 1: Ives joins US now equity analysts at Wedbush. Dan I
Speaker 1: was talking about Scott Galloway and the four earlier. Let's
Speaker 1: call it the ives for the four big companies a
Speaker 1: year from now, Bloomberg models three billion dollars free cash flow.
Speaker 1: What's the quality of the predictability that persist stancy of
Speaker 1: the Big four's free cash flow? Oh, I think right
Speaker 1: now we're looking visibility and more. I think that's the
Speaker 1: big difference to what even when you go back a
Speaker 1: few years ago, and that's what you've seen coming out
Speaker 1: of Coupertino. It's what's happening in Redmond and well as
Speaker 1: big tech, and I think that's been a big sort
Speaker 1: of headline during earnings. You know, better than feared, and
Speaker 1: I think investors as under investment in tech going into
Speaker 1: the years I've seen these two thousand and nine. Should
Speaker 1: Tim Cook fear China? I think ultimately he embraces China.
Speaker 1: I mean, like a Cook is able to navigate China
Speaker 1: as well as any CEO in the world, understand that
Speaker 1: the hearts and lungs of the supply chain, but also
Speaker 1: that's of demand terms of iPhones, and I can tell
Speaker 1: you even as of this week, iPhone demand looks strong
Speaker 1: in China and globally, and that's really what I believe
Speaker 1: continues to move Apple higher. Dan. Last year, we talked
Speaker 1: a lot about the interest rate sense of ativity of
Speaker 1: the tech space. Are you saying that it's less interest
Speaker 1: rate sensitive? Now? Look, I think the New York City
Speaker 1: cab driver at this point has sort of factored that
Speaker 1: into the stock go he's going into earlier this year.
Speaker 1: I think now when you look, investors have sort of
Speaker 1: gotten used to it. Dave factor that in in terms
Speaker 1: of what the Fed's gonna do. We're in the eighth
Speaker 1: ninth inning, and now it just comes down to valuations
Speaker 1: relative to the last five years based on growth is
Speaker 1: as good as we've seen. That's why I think right
Speaker 1: now at these tech names continue move higher because what
Speaker 1: we see with fundamentals demand holding up, and you have
Speaker 1: all that beaked into the stocks, which is why these
Speaker 1: stocks have moved up on lowered guidance and what I
Speaker 1: would say B plus type of earners. You said that
Speaker 1: that people have gotten used to it. It's basically been
Speaker 1: baked in, and yet there has been a pretty market
Speaker 1: shift in the market since the beginning of the year
Speaker 1: in terms of where the expectation for race is, how
Speaker 1: far the FED will have to go. At what point
Speaker 1: does it start to change the discussion around the factor
Speaker 1: the feature in the tech shares that we've seen here
Speaker 1: to date. Yeah, at least it's a great question. I
Speaker 1: just think from a tech investor perspective, the CPI PPI
Speaker 1: white knuckle print these macro I feel like, well, that's
Speaker 1: in the rearview. I mean, investors understand you could have
Speaker 1: another twenty five. Obviously things can move around from a
Speaker 1: FED perspective, but either way likes the end of the tunnel.
Speaker 1: And now we're starting to get to an investor environment
Speaker 1: where a soft landing or no landing looks like what
Speaker 1: we're seeing across tech earnings. Dan, I want to ask
Speaker 1: a question that we've gone over many times before, but
Speaker 1: it always bears review and Rana at Bloomberg Intelligence has
Speaker 1: a vision of where the cloud is going? What does
Speaker 1: the IVES cloud look like five or dare I say
Speaker 1: ten years out? These big tech juggernauts, do they have
Speaker 1: degrees of freedom to move larger in revenue, larger in
Speaker 1: market share, larger in global imprint footprint, I should say
Speaker 1: they look I think right now, and you think I'm
Speaker 1: moving to the cloud, only forty of Workwoods moved to
Speaker 1: the cloud. And I think that when I look at
Speaker 1: the vision, it's really going to be about artificial intelligence
Speaker 1: and about that data. And that's why you're seeing this
Speaker 1: game of thrones playoff between Microsoft, which is top of
Speaker 1: the race. Google obviously the debacle last week. But you're
Speaker 1: gonna see Amazon, You're gonna see Apple and others dive
Speaker 1: into deep end of the pool because that's gonna be
Speaker 1: an eight hundred billion dollar market in a minimum that
Speaker 1: we see him the next five or six years. Yeah.
Speaker 1: I looked in and I walked by the Apple store
Speaker 1: yesterday and Fifth Avenue, and I pointed to Mrs Keane
Speaker 1: where I stood in the sidewalk with the wonderful Lawrence Haverty,
Speaker 1: Larry Haverty, who taught us all how to do securities
Speaker 1: analysis on these tech companies, and he and I did
Speaker 1: a stand up interview a decade ago, twelve years ago,
Speaker 1: thirteen years ago over the death of Apple. Is that
Speaker 1: gloom still out there? I think it's the same that
Speaker 1: said Mahomes was never gonna win another super Bowl. I
Speaker 1: I think it's just it's you just continue to ultimately
Speaker 1: have an install base that's increasing. They're gaining share in
Speaker 1: China and now you have one point two billion iPhones worldwide,
Speaker 1: yet nine is seventy five million eighteen months ago. And
Speaker 1: that which is why, in my opinion, this is a
Speaker 1: rocket Gibraltar. Tech stock haters will continue to hate, but
Speaker 1: I think again it will be a three trillion dollar
Speaker 1: market at So we talked last year a lot about
Speaker 1: the winners and the losers of the tech space and
Speaker 1: that there would be bifurcation, and yet it seems like
Speaker 1: there isn't bifurcation, and that that story has basically gone
Speaker 1: out the window. What do you make of that? The
Speaker 1: fact that Apple is being lumped in again with Meta
Speaker 1: or Facebook. Look, I think what you're starting to see
Speaker 1: is the head counter cuts and you've seen that with
Speaker 1: Zuckerberg and when Meta has done that's really, along with activism,
Speaker 1: put a bottom on a lot of these stocks in
Speaker 1: terms of you know, and now you're gonna start to
Speaker 1: see I think over the next six and nine months
Speaker 1: more of a deviation at least fundamental between winner and losers.
Speaker 1: But the one thing I point out, is that any
Speaker 1: of the frothy names that continues to get sold off,
Speaker 1: you have significant emanate dry powder, but financial and strategic
Speaker 1: as well as active as they're going to swell across
Speaker 1: the board. Salesforces a perfect example. Yeah, you know so
Speaker 1: many that hate it. You know, if you go back
Speaker 1: forty five days ago and now I think there's a
Speaker 1: stock that a significant upset because of activism and because
Speaker 1: of ultimately numbers better than fear. Are we now comparing
Speaker 1: my homes to Apple? Is that what we're doing now? Down?
Speaker 1: U mean? I look, I think for Apple you got
Speaker 1: to start to go to Montana level, for great quarterback,
Speaker 1: for Kansas City, just not my homes Queer Hall of
Speaker 1: Favorite book. I mean in terms of what Cook and
Speaker 1: Cooper Tino have done, Tom Brady like, again, that's better,
Speaker 1: that's better. My homes didn't hit in quite the same way.
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Speaker 1: for listening. I'm Tom Keane, and this is Bloomberg