Speaker 1: This is Bloomberg Business Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Yes, all right, just like our TV colleagues, we're going
Speaker 2: to stay with earnings right now, guys, and we've got
Speaker 2: a great voice. Microsoft alphabet so many out with earnings,
Speaker 2: few others. Lucky for us, we have someone who invested
Speaker 2: these names. He's like a gold mine. James Chackmak is
Speaker 2: back with us partner and technology Alice at Clockwise Capital
Speaker 2: three hundred and forty five million in assets under management.
Speaker 2: But you check his holdings. These are the names Microsoft, Google, Visa,
Speaker 2: so many.
Speaker 3: James.
Speaker 4: Great to have you back with Tim and myself. How
Speaker 4: are you.
Speaker 5: I'm doing great? How are you doing?
Speaker 2: Okay, let's pick Microsoft first. It's rallying big time in
Speaker 2: the after hours. Walk us through earnings.
Speaker 4: I know you're just break. You're going through them just
Speaker 4: like we are. What jumps out for you?
Speaker 3: Yeah, I mean the big thing there is that you
Speaker 3: continue to see resiliency on the.
Speaker 5: On the cloud side.
Speaker 3: While the legacy parts of their business anniversary the tougher
Speaker 3: comps and come out stronger. So and at the same
Speaker 3: time while being able to manage the bottom line. And
Speaker 3: obviously it's a juggernaud it's ten percent of the queues
Speaker 3: and so it's a big way of important stock for
Speaker 3: the market. But the main thing is that the growth
Speaker 3: sector factor continues to be where the money will likely
Speaker 3: continue to flow and coming out of the value area.
Speaker 6: Okay, let's go to alphabet because shares are getting punished
Speaker 6: in the after hours. Right now, we have three quarter
Speaker 6: cloud revenue coming in below estimates eight point four to
Speaker 6: one billion. Estimates were for eight point six billion dollars.
Speaker 6: Alf BET third quarter revenue excluding traffic acquisition costs did
Speaker 6: beat estimates, though, what's sticking out to you?
Speaker 3: Yeah, I mean the big thing there is with the byside,
Speaker 3: expectations were a little bit ahead of where the street was,
Speaker 3: you know, so the whisper numbers were looking for and
Speaker 3: upwards of ten to fifteen percent upside of revision to
Speaker 3: earnings as you look into next year, and you know,
Speaker 3: with cloud coming in a little bit softer, you know
Speaker 3: that may and then being a high margin you know contributor.
Speaker 3: As you look down the road, you know that that
Speaker 3: may be posing somewhat of aheadwind. We got to look
Speaker 3: to the call to see, you know, what the what
Speaker 3: the color is on things. But overall, you know, Alphabet's
Speaker 3: not going anywhere. Google's not going anywhere, and you know,
Speaker 3: we just need to see how much of a blip
Speaker 3: this is. You know, is it a single quarter thing
Speaker 3: or you know, doesn't have several quarters to work through.
Speaker 6: Yeah, down five percent right now, Carol.
Speaker 2: Yeah, And what's interesting we initially saw Meta I think,
Speaker 2: take a little bit of a hit in the after hours,
Speaker 2: but right now metas back up, but shares Alphabet still
Speaker 2: down about five percent here all right, So in terms
Speaker 2: of these are all important numbers and certainly they can
Speaker 2: sway what we see in the overall market. Microsoft and Google, what.
Speaker 4: Are what is it?
Speaker 2: Tim?
Speaker 6: I'm sorry, Snap is crossing right now, so I wanted
Speaker 6: to make sure to get this in. We got a
Speaker 6: red heat third quarter revenue for Snap coming in above
Speaker 6: estimates one point one nine billion estimates for for one
Speaker 6: point one one Snap just absolutely surging in the after
Speaker 6: hours right now, up twenty percent. I think, Carol, this
Speaker 6: is because the company authorized up to five hundred million
Speaker 6: dollars in share buybacks. Also, James, I know you're following
Speaker 6: along live with us. The CEO, Jerry Hunter is set
Speaker 6: to retire. Fourth quarter view is internal forecast, though we
Speaker 6: should note is not a formal guidance. Some of those
Speaker 6: headlines what sticks.
Speaker 2: Out to you well, and I'll just say they also
Speaker 2: did talk about the fourth quarter. Fourth quarter revenue one
Speaker 2: point thirty two billion to one point thirty eight billion.
Speaker 2: The estimate is one point thirty three So.
Speaker 4: Upside there not formal guidance.
Speaker 2: Not formal guidance, but they're at least giving us some numbers,
Speaker 2: So go ahead, James, take it away.
Speaker 3: Yeah, I mean, Snap actually had their numbers leak, you know,
Speaker 3: a couple of weeks ago, and you know, so good
Speaker 3: numbers were expected, you know, out of that this quarter.
Speaker 3: You know, I think the bigger pick your story is
Speaker 3: that digital advertising continues to gain share versus legacy media,
Speaker 3: and that trend is just going to be you know,
Speaker 3: increased in full force with the assistance of AI and
Speaker 3: the contributions of AI into the creation of content and
Speaker 3: the creation of ads, which will drive down costs and
Speaker 3: in turn likely increase the amount of ad spent that's
Speaker 3: placed on digital platforms, and niche platforms like a Snap
Speaker 3: will benefit. But at the end of the day, we
Speaker 3: think that scale matters most, and companies like Meta and
Speaker 3: Alphabet and to somewhat of a lesser extent, Amazon, you know,
Speaker 3: will benefit. So the niche platforms are in a rising
Speaker 3: times lifts all both situations right now. But as you look,
Speaker 3: you know, a little bit further down the road, we
Speaker 3: think scale is going to win out over niche.
Speaker 2: I'm just going to say Snap is down about eighty
Speaker 2: eight percent from its September.
Speaker 4: Twenty twenty one high.
Speaker 2: And yes, even though it's rallying in the after hours
Speaker 2: up about twelve percent as we speak, it's a below
Speaker 2: ten dollars stock. It's no longer you know, it used
Speaker 2: to be up above the eighties. So a little as
Speaker 2: you say, what is it.
Speaker 6: Went in went in down, zoom out. I mean, But
Speaker 6: but speaking of I mean, I want to go to
Speaker 6: James on this, because James, you've been covering Snap for years.
Speaker 6: I mean, even in your previous role as a an
Speaker 6: analyst solely focused on tech. I mean, I think you
Speaker 6: were covering the company even before when it went at iPod.
Speaker 6: You have a long history with that company. When did
Speaker 6: you sour on it?
Speaker 3: I soured on it maybe one or two quarters out
Speaker 3: out of the gate, because essentially, you know, they had
Speaker 3: positioned themselves as you know, a camera company, and you know,
Speaker 3: we we took that bait and ran with it, because
Speaker 3: you know, the the DNA of a company matters, and
Speaker 3: their points of differentiation matter, especially when you're going at
Speaker 3: after a company like Meta and Alphabet, so you have
Speaker 3: to be differentiated in some way. And you know, they
Speaker 3: came up with the whole vertical camera and we're leading
Speaker 3: into that. But you know, you'll read the first line
Speaker 3: of their perspectives it said it's a camera company. But
Speaker 3: when you looked at what Evan Spiegel was actually trying
Speaker 3: to do was they were trying to be everything to everyone,
Speaker 3: which is what Meta is, you know, a full scale
Speaker 3: player like Meta, and they didn't embrace, embrace their their
Speaker 3: niche different points of differentiation.
Speaker 5: And if you try to be everything to everyone is
Speaker 5: a niche.
Speaker 3: Player, you lose. You know, Twitter tried to do that.
Speaker 3: They lost snaps trying to do that. I mean, going
Speaker 3: back to their IPO, you know they've lost tremendously, you know,
Speaker 3: despite the recent rally. So you know, you got to
Speaker 3: know your DNA.
Speaker 5: We've got to.
Speaker 3: Embrace it and don't be something that you don't be
Speaker 3: something that, yeah, you say you're not.
Speaker 2: So let's just remind everybody Alphabet at with earnings. It
Speaker 2: is down about five percent in the aftermarket this after
Speaker 2: those third quarter results.
Speaker 4: What we're seeing that.
Speaker 2: Traders are focusing on is the cloud unit reporting sales
Speaker 2: missing estimates. So third quarter Google Cloud revenue of eight
Speaker 2: point forty one billion, the estimate was eight point six billion.
Speaker 2: And then you've got Microsoft going in the other direction,
Speaker 2: up about five percent after their first quarter revenue tops
Speaker 2: estimates in a big way. And then you've got Snapstoring
Speaker 2: up about thirteen percent. There are third quarter revenue topping estimates,
Speaker 2: but keep in mind it's a stock that is way
Speaker 2: way down from where it was a little perspective. So
Speaker 2: some of the big tech names that we're seeing, and
Speaker 2: we've also got Texas Instruments out.
Speaker 6: Yeah, really notable moves from some of these companies. I
Speaker 6: want to go back to alphabet and talk a little
Speaker 6: bit a bit more about what you get your thoughts
Speaker 6: on alphabet as Carol mentioned James down six percent right
Speaker 6: now in the postmarket. I know we have to wait
Speaker 6: for the call. What's the question that you would ask
Speaker 6: on the call if you were able to join.
Speaker 3: For me, it would be about just continued cost discipline.
Speaker 3: I'm not worried about the top line. You're going to
Speaker 3: have ebbs and clothes in the cloud, especially with the
Speaker 3: uncertainty around the macro picture. You know, the sales cycles
Speaker 3: of migrations and so.
Speaker 6: Where do you want to see that cost discipline? Do
Speaker 6: you want to see it in like you know, the
Speaker 6: free massages at work type of thing, and free lunches
Speaker 6: at work, like the thing that these tech companies are
Speaker 6: known for. Do you want to see it in sort
Speaker 6: of not investing as much as they're investing in new projects.
Speaker 3: And both ideally, but obviously the big drag continues to
Speaker 3: be in other projects that you know may or may
Speaker 3: not come to fruition, and then most times they don't,
Speaker 3: So continue discipline there and then tightening the belt around
Speaker 3: their gn A the general operating expenses wherever they can,
Speaker 3: because you know, with this kind of margins, well with
Speaker 3: this kind of revenue and this kind the potential of
Speaker 3: the incremental margins afforded by advertising dollars. You know, they
Speaker 3: should be able to continue to trend earnings in a
Speaker 3: powerful way higher from where they are right now.
Speaker 5: So I mean, my my offen focus on the bottom line.
Speaker 2: Hey, James, these are names that you have in your portfolio, Microsoft, Alphabet,
Speaker 2: anything in these reports that make you want to go
Speaker 2: out and buy some shares or sell some shares.
Speaker 3: Well, we grossed up both Alphabet and Microsoft going into
Speaker 3: the print. At the end of the day, though it
Speaker 3: seems like a wash between those trades. You know, you
Speaker 3: can't win them all if we try to win fifty
Speaker 3: one percent of the time.
Speaker 5: But the no, I don't think that it really changes.
Speaker 3: You know, we are underweight Microsoft relative to the index,
Speaker 3: but we feel comfortable with our waiting there, and we
Speaker 3: grossed up, you know, in anticipation of a potentially strong quarter.
Speaker 3: Alphabet were marginally underweight relative to the index. Feel comfortable
Speaker 3: with that. There need to get more color on it.
Speaker 3: But you know, the other big ones are Meta, Tomorrow
Speaker 3: and Amazon. You know, Thursday I leave. That will really
Speaker 3: kind of define what the rest of the year looks
Speaker 3: like for the cues.
Speaker 6: James Chockmack he's still with us. He's partner in Technology
Speaker 6: Analystic Clockwise Capital. They about three hundred and forty five
Speaker 6: million dollars in assets under management. He joins us once
Speaker 6: again on from Miami. We're talking today's Megacap Tech earnings
Speaker 6: out just now and some other companies as well, and
Speaker 6: for today's weekly Bloomberg Plugged in segment when we dig
Speaker 6: into the ev space. We've got a lot to talk
Speaker 6: about with Tesla when it comes to Tesla, and we're
Speaker 6: gonna do that with James. Tesla, James a top holding
Speaker 6: in your portfolio. We want to get your thoughts on
Speaker 6: that earnings call last week and Elon Musk Carol described
Speaker 6: his mood I think as dour. I think that's fair
Speaker 6: to say.
Speaker 4: It's a bit of a bummer.
Speaker 6: It was a bit of a bummer. What did you
Speaker 6: What did you make of it?
Speaker 5: Yeah, it was pretty bad.
Speaker 3: I mean it was as bad as you think.
Speaker 5: You get it. It's the call that you never hoped for.
Speaker 5: It was how should I frame it?
Speaker 3: Basically, every area of opportunity, an optionality to the upside
Speaker 3: was met with a caveat and.
Speaker 5: You know, kicking the can down the road on.
Speaker 3: The realization of those opportunities, whether it be the expansion
Speaker 3: of margin on the power side of the business, whether
Speaker 3: it be the cadence on the rollout of the of
Speaker 3: the cyber truck, or the productivity gains and the margin
Speaker 3: improvements on the production side, you know, all those things,
Speaker 3: you know, push the can down the road, Which essentially
Speaker 3: means that our twenty twenty three targets moved to twenty
Speaker 3: twenty four, or our twenty twenty four price targets moved
Speaker 3: to twenty twenty five, So essentially that call did a
Speaker 3: one year reset on our valuations.
Speaker 1: Wow.
Speaker 2: Well, you know, in the EV world, I feel like James,
Speaker 2: a year from now is going to be even more
Speaker 2: interesting potentially as we see more entrance into the EV
Speaker 2: space right and more competition for Elon. So is do
Speaker 2: we have to start thinking differently about this company that
Speaker 2: maybe I don't know, I don't want to say viability,
Speaker 2: but just what its role is in its place and
Speaker 2: its share of the market going forward.
Speaker 3: No, I think, you know, as you look at the
Speaker 3: company fundamentally with a multi year horizon, which is increasingly
Speaker 3: difficult to do in this market environment, and we kind of,
Speaker 3: you know, our time frames have moved from five years
Speaker 3: to three years to one year.
Speaker 5: Now we're looking at more like one.
Speaker 3: Month, sometimes even one week at this point, just given
Speaker 3: the volatility. But you know, if you are able to
Speaker 3: take that multi year review, we think that it still
Speaker 3: continues to be a tremendously undervalued asset relative to its potential,
Speaker 3: the ability, the amount of dat it is amassed, relative
Speaker 3: to the entire industry, every other competitor in the industry
Speaker 3: combined that head start, there is something that is insurmountable,
Speaker 3: and we think that they will continue to have the
Speaker 3: opportunity there to monitor tis that. And at the same time,
Speaker 3: the power business is still in infancy stages and has
Speaker 3: truly it's only about ten percent utilized right now of
Speaker 3: their capacity that they've built out, So you know, there's
Speaker 3: tremendous margin opportunity from that side as well, and I
Speaker 3: think that people will increasingly stopped looking at Tesla as
Speaker 3: an auto manufacturer and more as a holistic play on
Speaker 3: on data and power.
Speaker 2: We just want to mention Tom Emmer ends his speakership bid,
Speaker 2: becoming the third GOP nominee to fail.
Speaker 4: Nominee to fail. There's been a lot I.
Speaker 6: Think he was making it pretty far earlier. Today.
Speaker 2: I feel like there's a lot of horse trading going
Speaker 2: on in closed rooms.
Speaker 4: Yeah, exactly.
Speaker 6: But Jays, we're not gonna we're not. Don't worry. We're
Speaker 6: not going to ask for your thoughts. Maybe, hey, maybe, Speaker.
Speaker 2: Of the House, what's easier, what's easier to figure out
Speaker 2: Elon in his world or what's going on in the
Speaker 2: House of Representatives?
Speaker 6: James to Washington.
Speaker 5: Eli is easier, I'll tell you that.
Speaker 6: Oh wow, Hey, James, a couple more Tesla questions. Uh,
Speaker 6: you mentioned the cyber truck. How are you valuing the
Speaker 6: cyber truck when it comes to your analysis? And this
Speaker 6: is a category that you know, Ford absolutely just dominates
Speaker 6: in here in the US GM as well in many
Speaker 6: companies over the last twenty thirty years have tried to
Speaker 6: come in and take market share. It hasn't They haven't
Speaker 6: necessarily succeeded. How do you think about the cyber truck?
Speaker 3: Yeah, I mean it's a separate line item that we use.
Speaker 3: You know, we break it out by the model three
Speaker 3: and three slash y and then X slash s and
Speaker 3: then the cyber truck. So that's how we kind of
Speaker 3: build it out and basically, you know, what we learned
Speaker 3: from the call is that the cadence may not be
Speaker 3: as steep as originally hoped or anticipated.
Speaker 5: So that's a problem.
Speaker 3: And it's a high cost, you know, it's it's a
Speaker 3: high cost production vehicle, and if you're not pushing volume through,
Speaker 3: it's going to hurt your margins. And and ultimately, you know,
Speaker 3: the problem with Tesla near term is on the margin side.
Speaker 3: And if you get lumpiness on the power business, which
Speaker 3: is their fastest growing segment, as well as their highest
Speaker 3: margin segment, which is a higher margin than their auto segment.
Speaker 5: Then you just have uncertainty. Uncertainty, unfortunately leads the multiple compression.
Speaker 2: Hey, and you're fine on your clockwise core equity uh
Speaker 2: and innovation ETF. Tesla's definitely a big holding. Have you
Speaker 2: been buying or selling shares of Tesla?
Speaker 5: Uh?
Speaker 3: No, it's about a four percent weight. You know, our
Speaker 3: top holdings are around six.
Speaker 5: Like uh, Amazons by Yeah, have you as of.
Speaker 3: No, No, we've we've we've we we held out to
Speaker 3: the full position basically here, you know, you know, just
Speaker 3: looking at fundamentally, you know, you had downside of about
Speaker 3: two hundred dollars technically downside of about two ten. You know,
Speaker 3: we tested the technical limits on the downside, bounced off
Speaker 3: of those. But you know, we may look the trim
Speaker 3: because fundamentally, like I said, the valuation has been pushed
Speaker 3: out one year and there may be better opportunities to
Speaker 3: deploy capital. So if we get a broader market balance,
Speaker 3: which we do anticipate is a high probable scenario, especially
Speaker 3: after earnings this week, I think Tesla can be along
Speaker 3: for the ride and at which point will likely make
Speaker 3: that determination to trim and rotate into some of the
Speaker 3: faster growth and potentially higher beta names.
Speaker 6: Hey James, it's interesting here. You're you're up thirty three
Speaker 6: point eight percent year to date in the ETF so
Speaker 6: it's been a really good year. I'll performing the NASDAC
Speaker 6: and the S and P five hundred. I was interested
Speaker 6: to see that your top holding is one to three
Speaker 6: month t bells.
Speaker 4: What's that?
Speaker 6: What's up with that?
Speaker 3: Well, what we typically like to do is we keep
Speaker 3: ten percent cash on hand in a normal market environment,
Speaker 3: and you know, if if we see risk, you know
Speaker 3: that cash position can go from fifteen to twenty percent.
Speaker 3: But you know, with the yields that we're seeing in
Speaker 3: the market right now. I'm not going to just hold
Speaker 3: it in pure cash. I park the cash that I
Speaker 3: have in the portfolio in BIL instead of just leaving
Speaker 3: it in cash, because I can pick up super safe
Speaker 3: yield and why not. So it's just a way.
Speaker 6: That money as much money market fund essentially.
Speaker 3: Yeah, I mean, if I need cash to buy positions,
Speaker 3: I use BIL as a source of cash. But it's
Speaker 3: basically just a way to add additional yield for investors.
Speaker 2: Hey, real quickly, thirty seconds, that's all we've got. Visa's
Speaker 2: up almost two percent in the after hours. It reported
Speaker 2: a massive twenty five billion dollar buy back raise his
Speaker 2: corely dividend. What do we need to know about Visa
Speaker 2: just quickly?
Speaker 3: Yeah, I mean it's an oligopoly between that and MasterCard,
Speaker 3: you know there as long as you know, the broader
Speaker 3: consumer continues to remain healthy, which we think will be
Speaker 3: the case. We don't see anything breaking just yet, hopefully not.
Speaker 3: But as long as it continues to be the case,
Speaker 3: there will be a beneficiary. And it's just the buyback
Speaker 3: and dividend increases just music to my ears.
Speaker 5: So we continue to like it.
Speaker 2: Yeah, that CEO and the press release saying we as
Speaker 2: we enter a new fiscal year, I'm confident in our
Speaker 2: ability to deliver against a backdrop of geopolitical and economic uncertainty.
Speaker 2: Talks about tremendous opportunity ahead.
Speaker 7: So there you have it.
Speaker 6: Is he headed to Washington to be Speaker of the House.
Speaker 4: You're chalk mark, You're done, choc Mack. You can go
Speaker 4: home now.
Speaker 2: Next Speaker of the House, James Chockmock over at Clockwise Capital.
Speaker 4: This is Bloomberg.
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Speaker 2: Just real quickly the latest on the Israel Hamas conflict,
Speaker 2: because the headlines continue to cross as we speak. You
Speaker 2: and Secretary General calling for an immediate ceasefire in Gaza
Speaker 2: at the Security Council, President bind Tim saying humanitarian aid
Speaker 2: is not getting into Gaza fast enough. Secret Tape State
Speaker 2: Anthony Blinkln saying pauses in the conflict may be needed
Speaker 2: to organize help for civilians. As Israel extended its bombing campaign,
Speaker 2: so as we said, the headlines continue.
Speaker 6: And the conflict continues. Also, this was a must read
Speaker 6: for US today on the Israel Hamas conflict, especially as
Speaker 6: the most would argue that it is yes about what
Speaker 6: happens next in terms of the expected Israel ground invasion
Speaker 6: in response to Hamasa's surprise and deadly attack on Israel
Speaker 6: now more than two weeks ago, and then what happens
Speaker 6: after that, what's the future of Israel and Palestine existing
Speaker 6: side by stide one state, two states, and what could
Speaker 6: it have been a generation ago? Carol.
Speaker 2: Yeah, someone who has a very informed view on that
Speaker 2: is the man who withdrew from Gaza some eighteen years
Speaker 2: ago and had has a plan. I guess you could
Speaker 2: say we are so appreciative to have with us. Bloomberg
Speaker 2: News International Affairs columnist Mark Champion, he's on the road.
Speaker 2: As he continues to report on the conflict, he joins
Speaker 2: us now on the phone from Israel. First stop, Mark,
Speaker 2: how are you and what are you seeing on a
Speaker 2: daily and hourly basis?
Speaker 8: Well, I mean fine, it's like a lot of war zones,
Speaker 8: it's very calm in most of the country. There was,
Speaker 8: you know, some alerts today in Tel Aviv, because there
Speaker 8: was quite a big rocket shower, but generally, you know,
Speaker 8: quite calm, quite quiet, and of course, you know, not
Speaker 8: at all in Gaza and immediately around Gaza, where the
Speaker 8: Israeli armed forces are, you know, gathering in very large numbers,
Speaker 8: and then up in the north where there's been some
Speaker 8: you know, increasing exchanges of fire between Hezbollah and the
Speaker 8: Israeli defense forces.
Speaker 6: I want to get to your column in just a
Speaker 6: second mark and dedicate significant time to it because it's
Speaker 6: it's such an important and it's such a great read.
Speaker 6: But first I want to just ask you your opinion
Speaker 6: on whether or not you think Israel is already fighting
Speaker 6: a two front war will be fighting a two front
Speaker 6: war soon.
Speaker 8: Well, you know, that is in a way the immediate question.
Speaker 8: So they are not yet fighting a two front war.
Speaker 8: They are conducting, you know, fairly limited skirmishes and exchanges
Speaker 8: of fire with Hezbollah. Hesbela is a large force. It
Speaker 8: is not as big as the IDF, but it is
Speaker 8: a large force, around one hundred thousand troops or so.
Speaker 8: They have, you know, an estimated one hundred one hundred
Speaker 8: and fifty thousand rockets and precision guided missiles. Many of
Speaker 8: those missiles are much larger than what Hamas has to
Speaker 8: fire at Israel. So if that becomes a second front,
Speaker 8: it will be a very significant war and the Israelis
Speaker 8: will have no alternative other than to go in and
Speaker 8: to try and destroy you know, the rocket launchers, et
Speaker 8: cetera at source. So it will be a ground war
Speaker 8: and it will be large, much larger than what is
Speaker 8: going to happen in the south where Hamas is embedded
Speaker 8: in a density urban area, so they are very difficult
Speaker 8: to get out. There's all these tunnels that they have
Speaker 8: spent years digging in preparation for exactly this event, and
Speaker 8: so it will be difficult, but they are in much
Speaker 8: smaller force, all right.
Speaker 2: So Mark, so as we contemplate the possibility or likelihood
Speaker 2: of a large, dense ground war there in Israel and
Speaker 2: in Gaza, we do need to and many would argue,
Speaker 2: we need to think about what happens next, what's the plan?
Speaker 4: Afterwards?
Speaker 2: You had an hour long approximately conversation with a former
Speaker 2: Israeli Prime minister. Can you talk to us about that
Speaker 2: and his plan and his thinking about one state to state.
Speaker 4: What has to happen?
Speaker 8: Yes, I mean this is a hot omer and he
Speaker 8: was the Prime minister. Just immediately after, Israel withdrew from Gaza.
Speaker 8: So they took all the settlers out who had been
Speaker 8: the Jewish settlers who had been in Gaza. They took
Speaker 8: them out, not very willingly, and they also withdrew the
Speaker 8: army because they had been occupying Gaza since nineteen s
Speaker 8: sixty seven in the Sixth Day War, and it decided,
Speaker 8: you know, this is what it was telling me, And
Speaker 8: what I really wanted to understand was so why, you know,
Speaker 8: why did they do this? What did they hope would happen?
Speaker 8: And then obviously something went wrong? So what went wrong?
Speaker 8: And essentially what you said was, look, it had become
Speaker 8: clear to us that the occupation needed to end because
Speaker 8: it was damaging obviously the Palestinas, but it was damaging
Speaker 8: us too because it was it is extremely unhealthy and
Speaker 8: it makes you do things, you know, to other people
Speaker 8: that are just are not good for you yourself. So
Speaker 8: society we felt we needed to start doing this. We
Speaker 8: have been trying to negotiate an agreement and agreed to
Speaker 8: state solution and it wasn't happening. So we decided to
Speaker 8: just pull out and you know, separate and so then
Speaker 8: he became prime minister, you know, immediately after that he
Speaker 8: had actually been his brain child. But Arielsa sar on
Speaker 8: his bars and the prime minister had a stroke, and
Speaker 8: so he took over, and then he was not in
Speaker 8: power for very long before. So in two thousand and
Speaker 8: eight they had came probably closer than they ever have
Speaker 8: to an agreement with the Palestinians, and so that was
Speaker 8: what he was trying to do, to use this as
Speaker 8: a way to kind of force the pace on a
Speaker 8: tuesdate solution. He then was out of power and Nyahou
Speaker 8: took over, and we've had fifteen years of a very
Speaker 8: different policy which is essentially not aimed as a two
Speaker 8: state solution.
Speaker 2: Well, and this I just want to go to in
Speaker 2: your column that he believes that it was Benjamin Nettnah
Speaker 2: whose decision to build up a Maas and weaken its
Speaker 2: West Bank rival the Palestinian authority to eliminate any credible
Speaker 2: partner to continue settlement negotiations that change the whole direction
Speaker 2: of travel. Does Benjamin Netanya who have to go in
Speaker 2: order for there to be some kind of two state solution,
Speaker 2: Which sounds like that's what he's arguing for or it
Speaker 2: is what he's arguing for.
Speaker 8: Well, I mean that would definitely be Omett's point of view.
Speaker 8: He thinks omet himself resigned he either there were corruption
Speaker 8: charges against him and he was eventually convicted, but he resigned,
Speaker 8: and he feels that Netta who should do exactly the same,
Speaker 8: and he said that, you know, the longer he leaves it,
Speaker 8: the messier it will be. But I think the real
Speaker 8: issue here is that who's at the head of a
Speaker 8: coalition government which is the most right wing that Israel
Speaker 8: has had, and it has been extremely aggressive in terms of,
Speaker 8: you know, pressing settlements into the West Bank and has
Speaker 8: not pursued any kind of to state agreement. So if
Speaker 8: you're going to have a solution, if you're going to
Speaker 8: have a strategy that envelops the military campaign and offers
Speaker 8: some kind of end state for the Palestinians who will
Speaker 8: suffer during this, then it's going to be difficult for
Speaker 8: this government to deliver it.
Speaker 6: Well, Mark, we just have one minute left. But in
Speaker 6: your opinion or in Ulmart's opinion, it is even possible
Speaker 6: moving forward given what's happened over the last fifteen years
Speaker 6: with the rise in settlements, especially in the West Bank.
Speaker 8: It will be extremely difficult and some of those settlements
Speaker 8: will have to go, just like they did in Gata.
Speaker 8: And that's his point. You know it can be done,
Speaker 8: but it takes some very strong leadership.
Speaker 6: Is their political will within Israel to do this?
Speaker 8: At this point I can't see it, but you know
Speaker 8: there is going to be a huge reckoning with Netna
Speaker 8: and his government over the security laps that led talks
Speaker 8: over seven and we will have a new government, perhaps
Speaker 8: a new situation that would make it possible.
Speaker 2: Incredible column, and you know, you remind us of a
Speaker 2: lot of hatred and hostility among the Palestinians, and so
Speaker 2: you understand maybe their anger here, but you also get
Speaker 2: into how they are a rising population so demographically very important,
Speaker 2: which is why maybe a one state would not work.
Speaker 2: It's brilliant and it really is a very smart part
Speaker 2: of the conversation when we think about what happens next.
Speaker 2: Stay safe, Mark Champion, Bloomberg News, International Affairs Communists. Mark
Speaker 2: Champion joining us on this Tuesday on the phone where
Speaker 2: it's getting lead there in Israel. All right, you are
Speaker 2: listening and watching Bloomberg Business Week. I'm Carol Masser along
Speaker 2: with Tim Staneveek.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: Just say Alexa playing Bloomberg eleven thirty.
Speaker 4: Okay, something.
Speaker 2: We talk about a lot, a lot wrong with the
Speaker 2: Internet at the moment. The big social media platforms have
Speaker 2: embraced efficiency, and you've got moderators who once made sure
Speaker 2: that our feeds had a rough correspondence to.
Speaker 4: The truth have actually lost their jobs.
Speaker 2: So leaving regular users to sift through an ever accumulating
Speaker 2: pile of the misinformation. Rage baden heads for chiechen chonga.
Speaker 6: Do you see those in your on your ex?
Speaker 2: Do you see those, Carol so frustrated with X like
Speaker 2: I don't even I'm not even on it one.
Speaker 6: Over and over again.
Speaker 7: Yeah, yeah, I mean, you know, I hear they're very relaxing,
Speaker 7: great wind algorithm's not working.
Speaker 4: They are productive.
Speaker 6: Okay. There is an exception to all of this, though,
Speaker 6: a shining beacon to the glory days of the Internet
Speaker 6: and maybe even to knowledge in general. We're talking about Wikipedia.
Speaker 6: It's the online encyclopedia. Of course, it doesn't collect personal
Speaker 6: information about readers. It doesn't have any advertising. It does
Speaker 6: make some appeals for you know, people to don'tate the time. Yeah,
Speaker 6: it does. There are no influencers, and Carol, there's no
Speaker 6: cat turd. I just want to google it. I just
Speaker 6: wanted to say cat turd on the radio.
Speaker 2: It's probably a Wikipedia entry on it, so let's get
Speaker 2: to it. Max Chafkin writes about it in today's edition.
Speaker 6: Of Those were his words. I was just reading, right,
Speaker 6: don't blame me for k at his.
Speaker 2: Desk, and he just chuckles his way through these things.
Speaker 2: It's the BW Daily, the Bloomberg Business Week newsletter. It
Speaker 2: gives you the power Business Week in a handy dandy form.
Speaker 2: Sign up at Bloomberg dot com slash Newsletters. You can
Speaker 2: also read Max's story on the Bloomberg. He's here in
Speaker 2: our studio.
Speaker 4: Whoever thought Wikipedia?
Speaker 7: Well, you know, it's one of these. It's like a
Speaker 7: part of Internet that I think we all take for
Speaker 7: granted that I, you know, have I've been only been
Speaker 7: thinking about this over the last week or so because
Speaker 7: Elon Musk has spent a lot of the last week
Speaker 7: attacking Wikipedia. He's in something of a tiff with the founder.
Speaker 4: I just tell you he's ticked off at everything.
Speaker 7: Well he's a.
Speaker 6: Tiff prone, we should say.
Speaker 7: But in any case, you know, Wikipedia is super interesting
Speaker 7: because you know, it's been around since two thousand and one.
Speaker 7: People who are about my age, you know, I'm forty one,
Speaker 7: will remember that. You know, college professors, high school librarians
Speaker 7: were very down on Wikipedia when it was launched in
Speaker 7: its early years, but over the years there's been basically
Speaker 7: study after studies showing that it's very accurate or compares
Speaker 7: well to traditional research sources. And I think, really importantly,
Speaker 7: as he said in that intro, tim it's doesn't it
Speaker 7: doesn't do a lot of the stuff that we've come
Speaker 7: to associate with the negative parts of the Internet. There's
Speaker 7: no ads, there's not a lot of rage bait, and
Speaker 7: there's a real care about about the truth. And and
Speaker 7: what's super interesting when you look at sort of recent
Speaker 7: research about Wikipedia is it's actually gotten less fringy over
Speaker 7: the years, So sour our normal thought about social media
Speaker 7: is it sort of tends to suck people into these
Speaker 7: far right or far left or just weird and kooky
Speaker 7: rabbit holes. Wikipedia has actually become less like that, which
Speaker 7: is which is super interesting and I think, you know,
Speaker 7: maybe worthy of acknowledgment, if not outright celebration.
Speaker 6: So the question is is how Yeah.
Speaker 7: So it's a couple of things. I mean, one one
Speaker 7: big reason I think is the business model. You don't
Speaker 7: have this engagement driven uh business model that depends on
Speaker 7: getting people to stay there for a really long time.
Speaker 7: So if your goal was to like maximize ad spend,
Speaker 7: what you'd probably want to do is have lots of
Speaker 7: controversial articles about you know, about the wildest topics you know,
Speaker 7: so conspiracy theories or just like friends stuff. Wikipedia doesn't
Speaker 7: do that. The other thing is there was a conscious
Speaker 7: choice made by you know, moderators that these these people
Speaker 7: who work essentially for free totain Wikipedia to favor you know,
Speaker 7: mainstream news outlets and academic journals over kind of what
Speaker 7: you might think of as the do your own research
Speaker 7: school of a fact finding. And that, of course is
Speaker 7: in marked contrast to the trend that we've seen, not
Speaker 7: just from Elon Musk right, who's been in this kind
Speaker 7: of long running battle with the mainstream media. As he
Speaker 7: sees it, but also Facebook and all of the other
Speaker 7: social networks, they've all moved away from news. They've all
Speaker 7: moved towards this kind of like favoring influencers essentially over
Speaker 7: you know, academic papers and mainstream news organizations.
Speaker 6: And I think that's.
Speaker 7: Had a negative impact on the sort of truthfulness of
Speaker 7: what you find on the Internet.
Speaker 2: Not going to name names, but I think it's fair
Speaker 2: to say that people in the media business, maybe a
Speaker 2: few on air, you know, anchors and talent, occasionally are like, oh, Wikipedia,
Speaker 2: I've just been jammed a story, like let me quickly
Speaker 2: look there.
Speaker 4: Having said that isn't accurate, like is it reliable?
Speaker 7: So and when you talk to people who have studied this,
Speaker 7: the answer broadly is yes. It compares well to you know,
Speaker 7: traditional news and information sources. That said, it kind of
Speaker 7: depends what you're looking at. So well trafficked Wikipedia entries
Speaker 7: are extremely accurate. I talked to an academic, Amy Bruckman
Speaker 7: at Georgia Tech, who said it's the most accurate information
Speaker 7: source ever created in human history for topics that are
Speaker 7: sort of well trafficked, and that includes controversial topics. So
Speaker 7: if you look at the page for like the the
Speaker 7: the war in Israel. Right now, you will see a
Speaker 7: you know, a thorough fair minded, very fact filled entry
Speaker 7: for stuff that's more niche, where you maybe only have
Speaker 7: one or two editors. Mean, it's a lot less reliable.
Speaker 6: I don't even have I don't even think I have
Speaker 6: a Well, you're gonna have to change that. Maybe someone
Speaker 6: one of these you know, tens of thousands of editors
Speaker 6: can go and do that. But but it actually brings
Speaker 6: up a good point, Carol brings up a good point, Max,
Speaker 6: is what happens when maybe a previously unknown presidential candidate
Speaker 6: wants to jump into the spotlight and uh, you know,
Speaker 6: hires some interns to go and try to you know,
Speaker 6: kind of edit the Wikipedia entry a little bit.
Speaker 7: Yeah, you know, Vivik Ramaswami, he got caught out essentially
Speaker 7: hiring somebody. This was actually disclosed on the Wikipedia page,
Speaker 7: so totally above board. But but I think that's a
Speaker 7: good example because he was called out number one and
Speaker 7: number two. It essentially called attention to the thing that
Speaker 7: that he was interested in, you know, kind of affecting
Speaker 7: the Wikipedia entry on which which was this fellowship he
Speaker 7: had received from a Soros connected uh nonprofit and and
Speaker 7: I think this is this tends to happen a lot.
Speaker 7: People will actually get caught trying to manipulate Wikipedia, and
Speaker 7: it sort of does a Streisand thing where it where
Speaker 7: it essentially calls attention to the ways that the truth is.
Speaker 6: Being manipula effective.
Speaker 7: Yeah, that's the idea that when you deny something or
Speaker 7: you try to cover it up, but it only calls
Speaker 7: more attention.
Speaker 6: Barbara Streisand try to do it with one of our homes,
Speaker 6: you know, years ago, and then everybody was like, oh,
Speaker 6: Barbara Streisand's home, let's go find it.
Speaker 7: And so so rich guys and power powerful people are
Speaker 7: constantly stepping in it, either trying to edit their own
Speaker 7: Wikipedia pages that's like kind of amateur hour, or like
Speaker 7: hiring someone to do it, which is the case that
Speaker 7: happened here. And again I should say this was disclosed
Speaker 7: and that's part of why we found out about it.
Speaker 7: But Wikipedia has a very transparent system for showing you
Speaker 7: how stuff is edited. So one thing that's great is
Speaker 7: that if some false fact or conspiracy theories shows up
Speaker 7: on Wikipedia, it'll be taking care of. It'll be disappeared
Speaker 7: very quickly. That's the opposite of social media right where
Speaker 7: you see these kind of engagement bait headlines and so
Speaker 7: on just circulate widely even after they've been debunked on Wikipedia,
Speaker 7: they go away and you have this paper trail essentially
Speaker 7: where you can go back and see what happens, so
Speaker 7: you can see was it deleted appropriately, what is the
Speaker 7: truth of it? And so when you get into you know,
Speaker 7: well trafficked topics such as presidential candidates, you're not necessarily
Speaker 7: going to get the most the best article, but you're
Speaker 7: going to get something that is likely to be mostly
Speaker 7: factually true, relatively fair and balanced, and importantly something that
Speaker 7: you can kind of audit yourself. Right, they're these citations.
Speaker 7: You can go through it, you can decide, hey, how
Speaker 7: true is this? How much do I trust them?
Speaker 2: It's like amazing, right in this kind of mess of
Speaker 2: policing when it comes to social media, that there's kind
Speaker 2: of these puritans or a I don't know if that's
Speaker 2: the right.
Speaker 7: I know non page very idealistic. Yes, it's a throwback
Speaker 7: to the the way the Internet was in.
Speaker 6: Surly Max doesn't have a Wikipedia page, but he cited
Speaker 6: many times on Peter Tial's Wikipedia page that.
Speaker 7: I'm not noteworthy enough, and that's a whole that's another
Speaker 7: big debate that that happens on.
Speaker 6: You're noteworthy enough that means also read his book about
Speaker 6: Peter Teal's good.
Speaker 4: We could write. All I'm going to tell you is
Speaker 4: you also have to check out his story.
Speaker 2: Either go to ex or Twitter or at Chafkin, or
Speaker 2: go to the Bloomberg or Bloomberg dot com. Because there's
Speaker 2: just one thing in there, because this is a family show,
Speaker 2: but about Elon offering a billion dollars.
Speaker 4: But there was a name change, it would be called
Speaker 4: So we're gonna leave that on the table, shall we.
Speaker 4: Sounds good, it'll make you chuckle though. Way, all right,
Speaker 4: we gotta run next check in. Yes, you deserve a
Speaker 4: Wikipedia page and so much more. He is calumnist for
Speaker 4: Bloomberg Business Week.
Speaker 6: Also the author of the Contrarian Peter Teale and Silicon
Speaker 6: Valley's Pursuit of Power.
Speaker 5: I'm brother Marc, a journal Now about you? Let me drive?
Speaker 3: Oh no, no, no, no, who's gone to drive?
Speaker 7: Alright?
Speaker 1: Please, I'll do the gravels.
Speaker 2: Let's wait, I want to try.
Speaker 5: It's good question that.
Speaker 6: This is the drive to the clothes dot com.
Speaker 1: Thick, we'll dround yeld down on Bloomberg Radio.
Speaker 2: All right, TikTok, everybody, we've got just under eighteen minutes
Speaker 2: left in today's trading session on this Tuesday, October twenty four.
Speaker 2: Some big earnings coming out after the closing bell. Interesting
Speaker 2: story that just crossed on the Bloomberg. The last time
Speaker 2: US yield drew so much it sank the economy twice,
Speaker 2: we're talking about going back to I guess it is
Speaker 2: the eighties.
Speaker 4: Maybe I got to look into this story.
Speaker 6: But no, Yeah, it's the biggest increase since the nineteen
Speaker 6: eighties when pulled Volker's efforts to slay inflation. Push the
Speaker 6: ten year it's nearly double sixteen percent, Carol.
Speaker 5: Yeah.
Speaker 4: See, so we've got a ways to go, folks.
Speaker 5: We do.
Speaker 6: But you know what's coming sooner?
Speaker 4: Yeah, hopefully earnings.
Speaker 6: Earnings. Yeah, after the bell, we got a handful of earnings.
Speaker 6: We got Alphabet, we got Visa, we got Texas Instruments, Carol,
Speaker 6: we got Microsoft as well. No one better to talk
Speaker 6: about all these companies and the greater markets. And Sam
Speaker 6: Stove All chief investment strategist at CFRA. He joins us
Speaker 6: on Zoom from Allentown, Pennsylvania. Sam how are you, hey, Tim,
Speaker 6: Good to talk to you, Hi, Carol, Hi. I want
Speaker 6: to we'll get to earnings in just a second, because
Speaker 6: they're going to be crossing fast and furious in just
Speaker 6: about seventeen minutes. But first got to get your take
Speaker 6: on the resilience of the US economy. Here we hear
Speaker 6: it over and over again, especially focused on the US
Speaker 6: consumer yields above five percent, pretty much across the curve.
Speaker 6: What's your take?
Speaker 9: Well, and I think we're going to get an additional
Speaker 9: eyes on Thursday when we see the GDP number come
Speaker 9: out for the third quarter.
Speaker 6: You think it'll be what do you think it'll be?
Speaker 1: Well?
Speaker 9: Street estimate is about four and a half. Our economists
Speaker 9: are saying four point eight, and the most recent Atlanta
Speaker 9: Fed GDP now forecast was for five point four. So
Speaker 9: it really seems as if it's going to be a
Speaker 9: very strong quarter. That said, however, I think we're going
Speaker 9: to be slipping back to around the one percent area
Speaker 9: for the final quarter of this year and the first
Speaker 9: half of next.
Speaker 2: Yeah.
Speaker 4: So it was like, not what you did for me
Speaker 4: like yesterday, but what are you doing for me today?
Speaker 8: Sam?
Speaker 2: Hey? So having said that, all right, so we're reporting,
Speaker 2: you know, for the most part, third quarter earnings. We're
Speaker 2: getting those reports. We are continuing to be surprised by
Speaker 2: the resiliency in the economy. As you said, earnings. What
Speaker 2: has surprised you most about what we've seen so far
Speaker 2: this year when it comes to corporate earnings, well.
Speaker 9: As you said, just the resiliency of it all. Because
Speaker 9: when you think about the brick wall in a sense
Speaker 9: of higher oil prices, higher interest rates that these companies
Speaker 9: have been running into instead of bouncing off, they've been
Speaker 9: breaking through them. So it looks as if this will
Speaker 9: end up being another quarter in which we have the
Speaker 9: actual results exceed end of quarter estimates. You know, we
Speaker 9: thought it was going to be down one and a
Speaker 9: half percent, but it looks as if it could be
Speaker 9: swinging into the positive.
Speaker 6: So what does that mean for some of the companies
Speaker 6: that you follow, Well, what it certainly means is.
Speaker 9: That we're going to be sticking with the more growth
Speaker 9: side of the equation that we've been sticking with since
Speaker 9: the beginning of the year, so communications services, consumer discretionary technology,
Speaker 9: and more recently energy, because we're looking for good growth now.
Speaker 9: But also it gives us optimism for the market itself
Speaker 9: in twenty twenty four, since all eleven sectors are expected
Speaker 9: to post year on year gains and five of them
Speaker 9: were expected to show double growth.
Speaker 6: Wait a second, Carol, I thought higher interest rates were
Speaker 6: supposed to kill those growth companies.
Speaker 9: I don't know, Sam, that's for you, Okay, Well, it
Speaker 9: would kill the growth if at or growth companies, if
Speaker 9: the interest rates were to exceed profit growth, et cetera.
Speaker 9: But with the economy doing so well, with the jobs
Speaker 9: numbers holding up quite nicely, I mean, let's face it,
Speaker 9: the unemployment rate that we're seeing today is well below
Speaker 9: what economists thought was the full employment rate many many
Speaker 9: years ago.
Speaker 2: Well, therein lies the rub, right Like if higher rates
Speaker 2: alone maybe not problematic, especially if people are working. But
Speaker 2: you know, as our Gina Martin Adams talked with this
Speaker 2: earlier in the week, she said, you know, margins have
Speaker 2: held up because inflation backed off. If we start to
Speaker 2: see inflation kind of rearing its ugly head again, that
Speaker 2: could potentially show that the cost equation of doing business
Speaker 2: will show up in margins being squeezed. I'm just curious
Speaker 2: if that's on your radars.
Speaker 9: Well, well, we did see the backup in inflation over
Speaker 9: the last couple of CPI and PPI reports. Yet more encouragingly, however,
Speaker 9: the PCE, the one that the Fed really likes to
Speaker 9: look at, has actually been descending quite nicely. Expectations for
Speaker 9: later this week are that again we'll see a three
Speaker 9: point seven percent year on year change for the core
Speaker 9: reading of PCE, and that'll be down from the three
Speaker 9: to nine of the month before and four to three
Speaker 9: from the month before that. So the trend is still
Speaker 9: our friend in that regard.
Speaker 2: Can I ask you about the trend in terms of
Speaker 2: the four megacaps? I'm talking about the big guys Meta, Amazon, Microsoft,
Speaker 2: Google combined generated fifty three billion in profits last quarter,
Speaker 2: about fifteen percent of the earnings generated by the other
Speaker 2: four hundred and thirty seven s and.
Speaker 4: P five hundred companies combined.
Speaker 2: If you back out financial companies, you talk about it,
Speaker 2: We talk about it.
Speaker 4: You know about the the you know over waited.
Speaker 2: Impact if you will, of a few good names, if
Speaker 2: you will when it comes to the markets, How do
Speaker 2: you think about that when it comes to earnings? And
Speaker 2: I wonder if there's so much left out, as you say,
Speaker 2: maybe that that provides investment opportunities going forward.
Speaker 9: Well, certainly, you know, the question is, gee, what have
Speaker 9: we been doing in terms of the megacaps. The Magnificent
Speaker 9: seven really ruling the day in terms of price changes,
Speaker 9: earnings growth, et cetera. And they have continued to do
Speaker 9: relatively well. Looking last Friday at those sub industries and
Speaker 9: there are one hundred and fifty three of them in
Speaker 9: the S and P fifteen hundred and only eight percent
Speaker 9: fewer than ten were above their fifty day and two
Speaker 9: hundred day moving averages. And the interactive media and services
Speaker 9: where you would find Alphabet system software, where you find
Speaker 9: microsoftware were still among those. And I think it's because
Speaker 9: analysts are expecting very strong earnings growth rates and looking
Speaker 9: at the performance thus far in the year, Actually, what
Speaker 9: we've been seeing is pretty good growth for the market
Speaker 9: as a whole, but also for some of the sub
Speaker 9: industries and some of the companies in them. Even though
Speaker 9: the big Magnificent seven are the ones that really have
Speaker 9: been driving everything, you've had participation with a good fifty
Speaker 9: to sixty percent of the other companies within the SMP,
Speaker 9: So it's not just those magnificent seven.
Speaker 2: Eric always good to check in with you bwaw SAMs Doviell,
Speaker 2: chief investment strategists over at CFR.
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