1 00:00:05,120 --> 00:00:07,119 Speaker 1: This is the Bloomberg Surveillance Podcast. 2 00:00:07,160 --> 00:00:11,039 Speaker 2: I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz. 3 00:00:11,280 --> 00:00:15,760 Speaker 2: Join us each day for insight from the best an economics, geopolitics, 4 00:00:15,760 --> 00:00:20,720 Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 5 00:00:20,960 --> 00:00:25,400 Speaker 2: Spotify and anywhere you get your podcasts, and always on 6 00:00:25,520 --> 00:00:29,560 Speaker 2: Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business 7 00:00:29,600 --> 00:00:31,840 Speaker 2: app o. Lindsay Pigs is a joining us now from 8 00:00:31,840 --> 00:00:34,599 Speaker 2: Stefel here to distill this and move forward as well. 9 00:00:34,680 --> 00:00:36,519 Speaker 2: Let me ask you the same question good Morning, good 10 00:00:36,720 --> 00:00:41,519 Speaker 2: that I asked Michael McKee. First look at GDP, What 11 00:00:41,600 --> 00:00:43,600 Speaker 2: will the second and third look look like? 12 00:00:43,640 --> 00:00:44,959 Speaker 1: When do we get them, like a month out? 13 00:00:44,960 --> 00:00:47,120 Speaker 3: Do we get a second look exactly? We'll get them 14 00:00:47,479 --> 00:00:50,560 Speaker 3: periodically throughout now going forward for this next several weeks. 15 00:00:50,560 --> 00:00:52,839 Speaker 3: But I think to your point, this is going to 16 00:00:52,880 --> 00:00:56,680 Speaker 3: set the tone. So the first look is very important. Yes, 17 00:00:56,720 --> 00:01:00,160 Speaker 3: we do expect some revisions, there always are, but this's 18 00:01:00,200 --> 00:01:02,840 Speaker 3: the tone for what the expectation of the US economy 19 00:01:03,000 --> 00:01:04,920 Speaker 3: was at the start of the year. And it tells 20 00:01:05,000 --> 00:01:08,000 Speaker 3: us two things. One, we're losing momentum from what we 21 00:01:08,080 --> 00:01:11,280 Speaker 3: saw excuse me at the end of last year. But two, 22 00:01:11,600 --> 00:01:14,640 Speaker 3: the economy is still proving resilient despite the fact that 23 00:01:14,680 --> 00:01:18,280 Speaker 3: the FED is engaged in a very aggressive upward pathway 24 00:01:18,520 --> 00:01:22,280 Speaker 3: to tame inflation. And the consumer particularly, forget about all 25 00:01:22,280 --> 00:01:25,319 Speaker 3: the other details. The consumer is the backbone to the 26 00:01:25,400 --> 00:01:29,360 Speaker 3: US economy, and the consumer is proving surprisingly resilient. 27 00:01:29,560 --> 00:01:31,920 Speaker 4: And we've seen this consistently throughout a lot of the earnings. 28 00:01:31,959 --> 00:01:34,400 Speaker 4: I mean, I feel like a broken record. The Productor 29 00:01:34,400 --> 00:01:38,039 Speaker 4: and Gamble price increases of ten percent. Consumers have absorbed it, 30 00:01:38,120 --> 00:01:40,760 Speaker 4: and you can see on the margins companies actually saying 31 00:01:40,800 --> 00:01:43,200 Speaker 4: we'd rather raise prices even if we lose volume. 32 00:01:43,520 --> 00:01:44,840 Speaker 5: How long can that last? 33 00:01:45,040 --> 00:01:48,200 Speaker 3: Well, it can last for another month, two months, maybe longer. 34 00:01:48,240 --> 00:01:50,600 Speaker 3: Because when we look at the household balance sheet, so 35 00:01:50,640 --> 00:01:54,400 Speaker 3: we're looking at debt relative to disposable personal income, we're 36 00:01:54,400 --> 00:01:55,520 Speaker 3: talking about. 37 00:01:55,240 --> 00:01:56,800 Speaker 5: A decade low. 38 00:01:57,000 --> 00:02:00,240 Speaker 3: So I'm not necessarily advocating for consumers to take on 39 00:02:00,320 --> 00:02:02,320 Speaker 3: new amounts of credit card debt, but if that's where 40 00:02:02,320 --> 00:02:05,040 Speaker 3: they need to go, there's quite a bit of additional 41 00:02:05,120 --> 00:02:08,520 Speaker 3: room to grow that household balance sheet before that becomes 42 00:02:08,520 --> 00:02:10,560 Speaker 3: a red flag that the consumer needs to cut. 43 00:02:10,400 --> 00:02:12,440 Speaker 4: Back, and the real break in the cycle is when 44 00:02:12,520 --> 00:02:14,359 Speaker 4: jobless rates start to go up, and that's the reason 45 00:02:14,400 --> 00:02:16,360 Speaker 4: why people if it waiting for that to happen as 46 00:02:16,400 --> 00:02:18,200 Speaker 4: sort of a signal, and we aren't really seeing it, 47 00:02:18,240 --> 00:02:20,440 Speaker 4: at least not in the initial jobless claims. Yet what 48 00:02:20,480 --> 00:02:23,720 Speaker 4: Michael McKee was talking about with business spending coming down, 49 00:02:23,800 --> 00:02:27,120 Speaker 4: that was the reason for the weakness that came into GDP. 50 00:02:27,280 --> 00:02:30,640 Speaker 4: How long will that take before that translates into job cuts. 51 00:02:30,680 --> 00:02:33,519 Speaker 3: Well, what's interesting is, yes, we saw business investment come down, 52 00:02:33,520 --> 00:02:36,560 Speaker 3: but we also saw a drawdown in inventories. So if 53 00:02:36,560 --> 00:02:39,880 Speaker 3: the consumer continues to prove resilient going into the second quarter, 54 00:02:40,160 --> 00:02:41,919 Speaker 3: we're going to have to see a build back up 55 00:02:42,000 --> 00:02:45,640 Speaker 3: of inventory growth, which will significantly then contribute to Q 56 00:02:45,800 --> 00:02:46,560 Speaker 3: two GDP. 57 00:02:47,200 --> 00:02:48,160 Speaker 5: So we will have to. 58 00:02:48,200 --> 00:02:50,320 Speaker 3: Keep an eye on that. But I think broadly speaking, 59 00:02:50,400 --> 00:02:54,720 Speaker 3: businesses are anticipating a slowdown in the economy. They're anticipating 60 00:02:54,720 --> 00:02:56,720 Speaker 3: a recession to come in the second half of the year, 61 00:02:57,040 --> 00:02:59,560 Speaker 3: and they responded in kind across the first three months 62 00:02:59,560 --> 00:02:59,919 Speaker 3: of the year. 63 00:03:00,040 --> 00:03:03,000 Speaker 6: Let me just throw these please went quickly on inventories. 64 00:03:03,040 --> 00:03:06,440 Speaker 6: I got the dollar figures here. Inventories grew in the 65 00:03:06,480 --> 00:03:08,200 Speaker 6: fourth quarter by one hundred and thirty six and a 66 00:03:08,200 --> 00:03:12,200 Speaker 6: half billion dollars. They shrank by one point six billion 67 00:03:12,240 --> 00:03:17,280 Speaker 6: dollars in the first quarter, which is extraordinarily unusual. So 68 00:03:17,320 --> 00:03:20,639 Speaker 6: business basically stopped producing stuff and started selling out. 69 00:03:20,520 --> 00:03:22,320 Speaker 4: Of their war So, Lindsey, can you weigh in on 70 00:03:22,320 --> 00:03:26,160 Speaker 4: this basically, as this company's more bearish than the consumer 71 00:03:26,240 --> 00:03:28,680 Speaker 4: is letting on that they were prepared for an environment 72 00:03:28,960 --> 00:03:32,080 Speaker 4: that was not as bleaking nearly as consumers approved. 73 00:03:32,080 --> 00:03:34,360 Speaker 3: Well, I think it's businesses and economists alike. We were 74 00:03:34,400 --> 00:03:37,680 Speaker 3: anticipating the consumer to have a significant pullback at the 75 00:03:37,720 --> 00:03:40,320 Speaker 3: start of the year, but we found that consumers were 76 00:03:40,360 --> 00:03:43,160 Speaker 3: increasingly willing to turn to credit cards draw down the 77 00:03:43,240 --> 00:03:44,800 Speaker 3: last of that pandemic savings. 78 00:03:45,000 --> 00:03:45,920 Speaker 5: And we also saw. 79 00:03:45,800 --> 00:03:49,000 Speaker 3: An unexpected sputtering of state and local stimulus filter into 80 00:03:49,000 --> 00:03:53,160 Speaker 3: the economy that provide that additional support to the consumer. 81 00:03:53,400 --> 00:03:54,400 Speaker 1: Nomenal GDP. 82 00:03:54,640 --> 00:03:56,680 Speaker 2: I'm going to go back a year here, long ago 83 00:03:56,720 --> 00:04:00,920 Speaker 2: and far away, eight point five percent, big inflation, big 84 00:04:00,960 --> 00:04:05,480 Speaker 2: real GDP seven point seven percent, six point six percent, 85 00:04:05,800 --> 00:04:09,360 Speaker 2: and now I observe five point one percent. Do you 86 00:04:09,440 --> 00:04:13,960 Speaker 2: ascribe to a diminished real GDP? A diminished inflation, where 87 00:04:14,000 --> 00:04:16,839 Speaker 2: nominal GDP gets back to I'm going to say a 88 00:04:16,880 --> 00:04:18,320 Speaker 2: four percent normal. 89 00:04:19,279 --> 00:04:21,520 Speaker 3: I would suspect that the longer term run rate of 90 00:04:21,600 --> 00:04:24,800 Speaker 3: real GDP is sub two percent. I would suspect that 91 00:04:24,839 --> 00:04:28,280 Speaker 3: it's around correct, around one point eight percent longer term, 92 00:04:28,320 --> 00:04:31,440 Speaker 3: once we smooth out some of these cyclical movements, the 93 00:04:31,480 --> 00:04:34,920 Speaker 3: FED gets inflation under control, the US economy falls into 94 00:04:34,960 --> 00:04:38,000 Speaker 3: a downturn or outright recession, and we see recovery. The 95 00:04:38,120 --> 00:04:41,000 Speaker 3: long term trajectory of the US economy I do see 96 00:04:41,040 --> 00:04:42,559 Speaker 3: as a real rate of under two percent. 97 00:04:42,640 --> 00:04:45,560 Speaker 2: The business people listening here, the animal spirit of the 98 00:04:45,600 --> 00:04:49,000 Speaker 2: country overlay that, say two percent real GDP or less 99 00:04:49,360 --> 00:04:54,120 Speaker 2: on your inflation guest, is this nominal GDP decline from 100 00:04:54,160 --> 00:04:57,360 Speaker 2: the pandemic in place where we get a four percent 101 00:04:57,480 --> 00:04:59,440 Speaker 2: top line GDP absolute. 102 00:04:59,080 --> 00:05:02,039 Speaker 3: Two percent real place two percent inflation two there's our 103 00:05:02,080 --> 00:05:04,800 Speaker 3: four percent nominal GDP, and I do think that that's 104 00:05:04,839 --> 00:05:10,040 Speaker 3: a realistic expectation. Without a significant growth in productivity, we're 105 00:05:10,080 --> 00:05:12,720 Speaker 3: going to struggle to see a real rate of activity 106 00:05:12,839 --> 00:05:15,040 Speaker 3: above two percent for quite some time. 107 00:05:15,240 --> 00:05:18,000 Speaker 4: So this is really the conundrum that markets have been 108 00:05:18,040 --> 00:05:18,760 Speaker 4: struggling with. 109 00:05:18,960 --> 00:05:20,719 Speaker 5: And this is sort of you know, you want. 110 00:05:20,560 --> 00:05:22,560 Speaker 4: It to be good, but not too good, because if 111 00:05:22,560 --> 00:05:24,280 Speaker 4: the FED comes it to play in. Right now, we're 112 00:05:24,320 --> 00:05:27,760 Speaker 4: pricing in a four point two percent FED funds rate 113 00:05:27,800 --> 00:05:30,600 Speaker 4: come January of next year. Is that consistent with what's 114 00:05:30,640 --> 00:05:33,800 Speaker 4: required to bring that inflation given the economy you just portrayed. 115 00:05:33,880 --> 00:05:36,800 Speaker 3: No, it's certainly not that we know from history, from 116 00:05:36,920 --> 00:05:39,680 Speaker 3: history historical cycles, that the FED is going to need 117 00:05:39,720 --> 00:05:42,919 Speaker 3: to raise rates above that peak level of inflation, and so, 118 00:05:43,120 --> 00:05:45,880 Speaker 3: as we've long advocated, the FED is likely to need 119 00:05:45,960 --> 00:05:49,520 Speaker 3: total policy firming to get up near six percent. Now, 120 00:05:49,520 --> 00:05:53,320 Speaker 3: I'll concede that if we see tighter credit conditions do 121 00:05:53,520 --> 00:05:56,160 Speaker 3: some of the Fed's work and pull down inflation faster, 122 00:05:56,760 --> 00:05:59,000 Speaker 3: that maybe the FED doesn't need to raise rates quite 123 00:05:59,000 --> 00:06:02,640 Speaker 3: as high if that total policy firming reflects additional rate 124 00:06:02,680 --> 00:06:06,080 Speaker 3: hikes as well as an organic change to conditions. But 125 00:06:06,240 --> 00:06:08,839 Speaker 3: right now we're not seeing that organic change, And with 126 00:06:08,920 --> 00:06:12,320 Speaker 3: inflation where it is and a solid level of activity 127 00:06:12,320 --> 00:06:14,920 Speaker 3: both in the consumer and the broader economy, the FED 128 00:06:15,160 --> 00:06:18,640 Speaker 3: needs to continue to move forward raising rates to tame inflation. 129 00:06:18,720 --> 00:06:21,000 Speaker 2: Were a summer here from Michael mckee're on what page 130 00:06:21,000 --> 00:06:22,440 Speaker 2: fourteen of the report. 131 00:06:23,160 --> 00:06:26,480 Speaker 6: Well, it looks like this was in large measure inventories 132 00:06:26,520 --> 00:06:28,800 Speaker 6: and cut back in business spending. As Lindsay was talking 133 00:06:28,800 --> 00:06:32,560 Speaker 6: about what exports imports, exports and imports were little changed, 134 00:06:33,040 --> 00:06:36,000 Speaker 6: so we didn't get a major contribution either way. A 135 00:06:36,000 --> 00:06:38,520 Speaker 6: little bit of an addition to GDP. Not much. 136 00:06:39,760 --> 00:06:41,880 Speaker 7: Help, Lindsay, Help here, what is inventory? 137 00:06:42,080 --> 00:06:44,440 Speaker 3: Well, when you produce goods, but they're sitting not being 138 00:06:44,480 --> 00:06:46,680 Speaker 3: purchased yet, So just as you would expect, it's the 139 00:06:46,760 --> 00:06:49,760 Speaker 3: inventory of production the consumers haven't yet absorbed. 140 00:06:49,839 --> 00:06:52,120 Speaker 6: Yeah, it's the value of the goods that have been 141 00:06:52,160 --> 00:06:54,800 Speaker 6: produced that then haven't they're sitting in the warehouse. 142 00:06:54,880 --> 00:06:55,320 Speaker 1: Yeah. 143 00:06:55,320 --> 00:06:57,600 Speaker 6: Well, just the easiest way to think about it is 144 00:06:57,640 --> 00:07:00,080 Speaker 6: all the cars that are parked outside the automobile Manu 145 00:07:00,080 --> 00:07:02,640 Speaker 6: facturers waiting to be shipped off to dealers. 146 00:07:02,800 --> 00:07:05,120 Speaker 4: And Tom, just to sort of confirm the theme of 147 00:07:05,160 --> 00:07:08,280 Speaker 4: the morning, which is that businesses have been too pessimistic 148 00:07:08,520 --> 00:07:12,240 Speaker 4: based on where consumers really are. Caterpillar CEO comes out 149 00:07:12,240 --> 00:07:15,200 Speaker 4: with this, twenty twenty three will be better than we 150 00:07:15,280 --> 00:07:18,920 Speaker 4: previously anticipated. Time and again, Tom, they didn't have as 151 00:07:19,000 --> 00:07:22,360 Speaker 4: much inventory as they needed to meet the demands. They're 152 00:07:22,440 --> 00:07:25,200 Speaker 4: drawing down from it, raising questions about how much more 153 00:07:25,240 --> 00:07:26,440 Speaker 4: they're going to have for to produce later. 154 00:07:26,680 --> 00:07:29,160 Speaker 6: That's going to be the big issue that'll be debated 155 00:07:29,200 --> 00:07:31,360 Speaker 6: around the FED conference table. They don't have the big 156 00:07:31,400 --> 00:07:34,640 Speaker 6: Mahogany table anymore, but they're going to be talking about 157 00:07:34,680 --> 00:07:38,400 Speaker 6: this because if consumer spending is remaining strong and there's 158 00:07:38,440 --> 00:07:42,000 Speaker 6: not enough goods a that contributes to inflation, and B 159 00:07:43,240 --> 00:07:47,480 Speaker 6: that could luger a big increase in production in the next. 160 00:07:47,240 --> 00:07:48,160 Speaker 8: Couple of quarters. 161 00:07:48,880 --> 00:07:51,360 Speaker 6: It's all going to depend on what businesses think is 162 00:07:51,400 --> 00:07:52,040 Speaker 6: going to happen. 163 00:07:52,200 --> 00:07:54,600 Speaker 1: I like this tech team, Lindsay Jiggs and Michael McKee. 164 00:07:54,640 --> 00:07:55,440 Speaker 1: This is really good. 165 00:08:00,520 --> 00:08:02,800 Speaker 2: Let's talk to a security analyst about this, John in 166 00:08:02,840 --> 00:08:05,280 Speaker 2: this big move. Michael Nathanson joins us. How different than 167 00:08:05,360 --> 00:08:08,320 Speaker 2: David Kirkpatrick. Maybe not the author of the Facebook effect, 168 00:08:08,320 --> 00:08:12,000 Speaker 2: but he's looked at the new Zuckerberg effect as well. 169 00:08:12,600 --> 00:08:15,120 Speaker 2: You nailed it in your note, Michael. And what I 170 00:08:15,160 --> 00:08:18,160 Speaker 2: see here in terms of the maturity of this generation 171 00:08:18,960 --> 00:08:23,760 Speaker 2: is mister Zuckerberg wants to be a serious technology company. 172 00:08:24,400 --> 00:08:27,840 Speaker 2: Is this a systemic Silicon Valley shift? 173 00:08:28,680 --> 00:08:29,440 Speaker 7: I think it is. 174 00:08:30,480 --> 00:08:30,720 Speaker 8: Tom. 175 00:08:30,760 --> 00:08:33,280 Speaker 9: It's interesting that I asked him last year if his 176 00:08:33,400 --> 00:08:36,160 Speaker 9: mote was his social graph that he had built, and 177 00:08:36,200 --> 00:08:37,719 Speaker 9: he's like, no, our moat is that we are a 178 00:08:38,000 --> 00:08:42,199 Speaker 9: technology company that moves fast and changes things right. And 179 00:08:43,640 --> 00:08:46,000 Speaker 9: John I over the years talked about Meta and the 180 00:08:46,080 --> 00:08:48,920 Speaker 9: Stockers in the dumbs and they had to pivot away 181 00:08:48,960 --> 00:08:51,440 Speaker 9: from a couple of things that were hurting them, and 182 00:08:51,679 --> 00:08:54,240 Speaker 9: very quick order they did. It's because they are a 183 00:08:54,280 --> 00:09:00,520 Speaker 9: technology company. And then Mark became much more aggressive ruthless 184 00:09:00,520 --> 00:09:03,800 Speaker 9: on cost control and that was a big aha because 185 00:09:03,800 --> 00:09:06,560 Speaker 9: people thought he was just not going to cut costs 186 00:09:07,000 --> 00:09:09,079 Speaker 9: and he's taken it about eleven and twelve billion dollars. 187 00:09:08,920 --> 00:09:12,360 Speaker 7: Out of cost base in six months. And that's extraordinary. 188 00:09:12,440 --> 00:09:12,560 Speaker 8: Right. 189 00:09:12,600 --> 00:09:15,960 Speaker 9: So the combination of accelerating a revenue and then cost 190 00:09:16,040 --> 00:09:17,280 Speaker 9: cuts the story. 191 00:09:17,360 --> 00:09:18,960 Speaker 8: I mean, Stock's is gonna keep going. 192 00:09:19,000 --> 00:09:20,280 Speaker 7: I think it's three dollar stop. 193 00:09:20,440 --> 00:09:22,200 Speaker 2: You really do, Michael, I want to look at this 194 00:09:22,240 --> 00:09:25,000 Speaker 2: on a broader basis. Maffatt Nathanson is iconic. 195 00:09:25,040 --> 00:09:25,360 Speaker 1: Onest. 196 00:09:25,480 --> 00:09:27,760 Speaker 2: We had your colleague in crime, Rich Greenfield on the 197 00:09:27,800 --> 00:09:32,280 Speaker 2: other day. You guys have followed these children from out 198 00:09:32,320 --> 00:09:36,199 Speaker 2: of their dorms to the modern era. Is right now 199 00:09:36,240 --> 00:09:39,240 Speaker 2: when these guys grow up, as it appears Zuckerberg has 200 00:09:39,280 --> 00:09:40,040 Speaker 2: grown up. 201 00:09:41,160 --> 00:09:42,000 Speaker 8: Oh, with that doubt. 202 00:09:42,320 --> 00:09:47,200 Speaker 9: I think having a founder who his entire life work 203 00:09:47,280 --> 00:09:50,640 Speaker 9: is tied up in this, that's the pay if you're 204 00:09:50,679 --> 00:09:53,480 Speaker 9: getting right. He was not going to let this company die, 205 00:09:54,000 --> 00:09:57,320 Speaker 9: and he took aggressive steps, and that's you're right, Tom, Like, 206 00:09:57,360 --> 00:10:00,000 Speaker 9: this is the evolution of his leadership. 207 00:10:00,080 --> 00:10:00,760 Speaker 8: It's a great point. 208 00:10:00,800 --> 00:10:04,400 Speaker 1: We forget, Lisa, he's thirty eight years old. We forget that. 209 00:10:04,480 --> 00:10:06,760 Speaker 2: You know, we're talking like he's six fifty or sixty's 210 00:10:06,760 --> 00:10:07,480 Speaker 2: thirty eight years old. 211 00:10:07,480 --> 00:10:07,920 Speaker 1: He's a kid. 212 00:10:08,320 --> 00:10:11,040 Speaker 4: We've known this, and now he's proving himself in the 213 00:10:11,080 --> 00:10:14,200 Speaker 4: actual bread and butter earnings. Michael, you increased your price 214 00:10:14,240 --> 00:10:17,240 Speaker 4: target to two hundred and ninety five dollars from two 215 00:10:17,280 --> 00:10:19,560 Speaker 4: hundred and seventy five dollars. Where is that extra profit 216 00:10:19,640 --> 00:10:22,040 Speaker 4: going to come from? Based on the earnings we just saw. 217 00:10:22,559 --> 00:10:24,839 Speaker 9: Lisa, it was a revenue story, right, So if you 218 00:10:24,920 --> 00:10:27,840 Speaker 9: look at their guide to the next quarter on revenue growth, 219 00:10:28,200 --> 00:10:31,120 Speaker 9: it was between two percent and ten percent on the upside. 220 00:10:31,280 --> 00:10:33,600 Speaker 9: We're at five, so we're smack in the middle of that. 221 00:10:34,160 --> 00:10:36,200 Speaker 9: So we took our revenue numbers up to eight percent 222 00:10:36,320 --> 00:10:38,160 Speaker 9: next quarter, and if you look at the rest of 223 00:10:38,200 --> 00:10:40,920 Speaker 9: the year, you have probably doubled digit revenue growth by 224 00:10:40,960 --> 00:10:41,640 Speaker 9: the end of the year. 225 00:10:42,400 --> 00:10:43,840 Speaker 7: So that's what drove art. 226 00:10:43,880 --> 00:10:45,360 Speaker 9: I mean, we were always above the street and here's 227 00:10:45,360 --> 00:10:47,720 Speaker 9: our price target, but now we're close to three hundred 228 00:10:47,720 --> 00:10:50,400 Speaker 9: dollars because the revenue story is now starting in KKA. 229 00:10:50,600 --> 00:10:52,760 Speaker 4: Is there a dirty secret that it's been exposed by 230 00:10:52,760 --> 00:10:54,360 Speaker 4: the earnings of some of these tech giants that have 231 00:10:54,400 --> 00:10:57,040 Speaker 4: been cutting staff that they didn't need as big of 232 00:10:57,080 --> 00:10:59,520 Speaker 4: a footprint, They don't need as many bodies, and so 233 00:10:59,559 --> 00:11:01,600 Speaker 4: they're are that much lower. 234 00:11:03,360 --> 00:11:05,640 Speaker 7: That's a great point. That's a dirty secret. 235 00:11:06,520 --> 00:11:07,440 Speaker 8: You know, back when. 236 00:11:07,640 --> 00:11:10,440 Speaker 9: We cover media, if there was a great ad cycle 237 00:11:10,480 --> 00:11:13,360 Speaker 9: at CBS, they didn't hire more people. If you look 238 00:11:13,360 --> 00:11:15,640 Speaker 9: at what happened in twenty and twenty one twenty two, 239 00:11:16,160 --> 00:11:18,640 Speaker 9: as revenues were ramping, they hired more people and there 240 00:11:18,720 --> 00:11:21,800 Speaker 9: wasn't there was not a benefit to that, right the ad. 241 00:11:21,720 --> 00:11:22,600 Speaker 7: Revenue came through. 242 00:11:22,960 --> 00:11:25,679 Speaker 9: So now these companies are going back to pre pandemic 243 00:11:25,720 --> 00:11:28,679 Speaker 9: staffing levels and the revenue base is coming back. So, 244 00:11:29,480 --> 00:11:32,160 Speaker 9: I mean, we sound crazy, but we cannot be more 245 00:11:32,160 --> 00:11:34,840 Speaker 9: bullish on meta and alphabet as well, just because of 246 00:11:34,840 --> 00:11:37,040 Speaker 9: what you said, and they all learned a lesson which 247 00:11:37,080 --> 00:11:39,920 Speaker 9: is they overstaffed and they can cut, cut, cut, without 248 00:11:39,920 --> 00:11:41,240 Speaker 9: really hitting the top line. 249 00:11:41,720 --> 00:11:44,280 Speaker 4: Michael, given the fact that you did increase your earnings, 250 00:11:44,360 --> 00:11:47,760 Speaker 4: how much does that include the potential banning or sale 251 00:11:47,880 --> 00:11:53,439 Speaker 4: of TikTok and the read through implications for Meta for Snap. 252 00:11:54,200 --> 00:11:57,360 Speaker 9: No banning of TikTok in our in our thought process. 253 00:11:58,520 --> 00:12:00,079 Speaker 9: You know, TikTok's about ten billion. 254 00:12:00,280 --> 00:12:01,240 Speaker 8: US revenue base. 255 00:12:01,480 --> 00:12:04,480 Speaker 7: It would flow to Meta a little bit Snap, It's 256 00:12:04,480 --> 00:12:05,240 Speaker 7: not our numbers. 257 00:12:06,400 --> 00:12:08,360 Speaker 9: That would be a that'd be a home run, obviously, 258 00:12:08,400 --> 00:12:11,080 Speaker 9: but you know, we've not contemplated that because it just 259 00:12:11,120 --> 00:12:15,640 Speaker 9: seems so far removed. But what they've done though, you know, 260 00:12:15,679 --> 00:12:19,200 Speaker 9: with Reels, is that they quickly adopted the best part 261 00:12:19,200 --> 00:12:21,959 Speaker 9: of TikTok, right, So they saw weakness in their business model, 262 00:12:22,280 --> 00:12:25,800 Speaker 9: short form video and a quickly engineered solution, and now 263 00:12:25,840 --> 00:12:27,280 Speaker 9: they're starting to monetize that solution. 264 00:12:27,440 --> 00:12:30,280 Speaker 8: So you know, TikTok exists today. 265 00:12:30,880 --> 00:12:33,360 Speaker 9: I believe they're taking share from TikTok given what they've 266 00:12:33,360 --> 00:12:34,080 Speaker 9: just accomplished. 267 00:12:34,200 --> 00:12:37,280 Speaker 10: This is just amazing story. This was an eighty eight 268 00:12:37,320 --> 00:12:41,360 Speaker 10: dollar name in ears, and you've got Michael Nathanson talking 269 00:12:41,360 --> 00:12:44,640 Speaker 10: about three hundred. 270 00:12:44,880 --> 00:12:45,679 Speaker 7: But JOHNA. 271 00:12:45,800 --> 00:12:48,199 Speaker 9: We stuck by this thing, and some people did because 272 00:12:48,760 --> 00:12:53,520 Speaker 9: was the revenues were self destroyed. They had basically where 273 00:12:53,559 --> 00:12:57,920 Speaker 9: they're hit by Apple. Remember Apple changed their IDFA signifiers 274 00:12:57,960 --> 00:13:01,880 Speaker 9: on their mobile system, and then these guys had introduced reels, 275 00:13:01,880 --> 00:13:05,079 Speaker 9: which was not monetizing, right, But what killed the stock 276 00:13:05,320 --> 00:13:08,079 Speaker 9: was just believe that Thuckerberg was an empire builder and 277 00:13:08,160 --> 00:13:11,560 Speaker 9: women cut costs. Go back to that October conference call. 278 00:13:12,280 --> 00:13:14,120 Speaker 9: Some folks jumped on through because like, look, this guy 279 00:13:14,120 --> 00:13:18,199 Speaker 9: doesn't understand what's happening. But that's to me, it was 280 00:13:18,240 --> 00:13:22,880 Speaker 9: all about self created revenue crisis that they've now engineered 281 00:13:23,120 --> 00:13:24,000 Speaker 9: themselves past. 282 00:13:24,160 --> 00:13:24,360 Speaker 8: Right. 283 00:13:24,800 --> 00:13:27,480 Speaker 9: That was what was so interesting is that this was 284 00:13:27,520 --> 00:13:28,280 Speaker 9: not fickical. 285 00:13:28,960 --> 00:13:30,760 Speaker 7: It was in a way because twenty twenty one. 286 00:13:30,760 --> 00:13:31,400 Speaker 8: Was so good. 287 00:13:31,800 --> 00:13:34,440 Speaker 9: They had a hard time lapping twenty twenty one, and 288 00:13:34,480 --> 00:13:37,520 Speaker 9: then IDFA hit from Apple and then reels occurred, So 289 00:13:37,559 --> 00:13:39,679 Speaker 9: it was like just all these waves were hitting the stock. 290 00:13:39,880 --> 00:13:42,160 Speaker 10: So Michael, squeeze this in because they've only got about 291 00:13:42,160 --> 00:13:44,840 Speaker 10: forty five seconds left. I apologize. There will be some 292 00:13:44,880 --> 00:13:47,679 Speaker 10: people who don't hold this name who look at this 293 00:13:47,800 --> 00:13:51,120 Speaker 10: as some kind of cyclical signal. You just said that 294 00:13:51,280 --> 00:13:53,680 Speaker 10: maybe last year wasn't cyclical to some extent, is the 295 00:13:53,720 --> 00:13:58,040 Speaker 10: success this morning cyclical? Is that a broader signal about 296 00:13:58,040 --> 00:13:58,920 Speaker 10: the cycle. 297 00:14:00,040 --> 00:14:03,920 Speaker 9: Because Alphabet is a bigger company that's inserching YouTube and 298 00:14:03,960 --> 00:14:06,880 Speaker 9: their results were okay, but they're not like this. This 299 00:14:06,920 --> 00:14:10,120 Speaker 9: is this is a separate cycle tied to Meta and 300 00:14:10,160 --> 00:14:11,600 Speaker 9: what they were trying to do last year. 301 00:14:12,200 --> 00:14:15,079 Speaker 10: Michael, just perfect and great coal buddy for sinking by 302 00:14:15,120 --> 00:14:16,520 Speaker 10: this name at a difficult time. 303 00:14:16,840 --> 00:14:18,720 Speaker 5: Michael, m SVB. 304 00:14:28,680 --> 00:14:30,640 Speaker 2: John, I want you to bring in Andrew slim And 305 00:14:30,720 --> 00:14:34,400 Speaker 2: this guy has decades and decades of experience, and I'm 306 00:14:34,440 --> 00:14:36,680 Speaker 2: gonna guess he's going to say, to your good questions, 307 00:14:36,800 --> 00:14:37,640 Speaker 2: he's never seen. 308 00:14:37,480 --> 00:14:39,520 Speaker 5: It like this, Andrew SLIMM. And that's where we are joined. 309 00:14:39,520 --> 00:14:42,320 Speaker 10: Just now have more than Stanley Investment Management portfolio manager. 310 00:14:42,520 --> 00:14:44,520 Speaker 10: I guess we should start there than Andrew. Have you 311 00:14:44,560 --> 00:14:45,760 Speaker 10: ever seen it like this before? 312 00:14:46,560 --> 00:14:46,800 Speaker 8: Yeah? 313 00:14:46,840 --> 00:14:49,280 Speaker 11: I mean Tom said, all right, my head is spinning. 314 00:14:49,360 --> 00:14:51,920 Speaker 11: It's a it's a tough environment, but it's all tough, right. 315 00:14:52,160 --> 00:14:56,520 Speaker 11: The markets are never clear. The light never shines, you know, 316 00:14:56,680 --> 00:14:59,800 Speaker 11: it's green light, all clear to invast, So is it? Yeah, 317 00:15:00,000 --> 00:15:03,080 Speaker 11: it's definitely a consumer consumer you know, confusing I think 318 00:15:03,160 --> 00:15:07,960 Speaker 11: Lisa said it best, which is the consumer says remarkably resilient. 319 00:15:08,120 --> 00:15:11,200 Speaker 11: But look, financial conditions are tightening and that's going to 320 00:15:11,200 --> 00:15:13,280 Speaker 11: affect many businesses. 321 00:15:13,320 --> 00:15:14,920 Speaker 8: And that's the push pulls. 322 00:15:15,040 --> 00:15:18,720 Speaker 11: Which do you lean towards a consumer or tightening financial conditions? 323 00:15:18,800 --> 00:15:21,600 Speaker 11: That determines your you know, really outlook for the economy. 324 00:15:21,600 --> 00:15:24,000 Speaker 11: You had a number of lead in people talking about 325 00:15:24,000 --> 00:15:27,160 Speaker 11: as slow down in the economy except the S and 326 00:15:27,240 --> 00:15:28,920 Speaker 11: P sits at forty one hundred. 327 00:15:29,360 --> 00:15:30,760 Speaker 8: You know, that's incredible to me. 328 00:15:31,040 --> 00:15:33,680 Speaker 11: What's transpired since beginning of March. 329 00:15:33,960 --> 00:15:36,760 Speaker 4: You've been bullish though, so are you getting more bearish now? 330 00:15:37,560 --> 00:15:40,920 Speaker 11: Well, you know, I've been bullish since the beginning of 331 00:15:40,960 --> 00:15:43,880 Speaker 11: the year only because we came off a bad last year. 332 00:15:44,120 --> 00:15:47,080 Speaker 11: Pessimism you know, I wrote a piece pessimism is rampant, 333 00:15:47,600 --> 00:15:51,400 Speaker 11: and I think the market predicted a down earnings year 334 00:15:52,440 --> 00:15:54,920 Speaker 11: this year. But you know, the market has had a 335 00:15:54,920 --> 00:15:58,240 Speaker 11: good first part of the year. We're moving into the summer. 336 00:15:58,320 --> 00:16:00,800 Speaker 11: I could see a stall out, but there's no question 337 00:16:00,880 --> 00:16:05,040 Speaker 11: in my mind the earnings collapsing scenario that's going to 338 00:16:05,120 --> 00:16:08,960 Speaker 11: retest the low. That scenario is running out of time 339 00:16:09,480 --> 00:16:14,920 Speaker 11: because markets price in a recovery of earnings, which should 340 00:16:14,960 --> 00:16:18,080 Speaker 11: happen next year, and they will trade to a pretty 341 00:16:18,160 --> 00:16:21,840 Speaker 11: high multiple on that recovery and then let the e 342 00:16:22,240 --> 00:16:25,600 Speaker 11: work into that. That's historically what's happened, So I wouldn't 343 00:16:25,640 --> 00:16:28,880 Speaker 11: be surprised if we get another leg up in the 344 00:16:28,920 --> 00:16:29,760 Speaker 11: second half. 345 00:16:29,560 --> 00:16:30,040 Speaker 8: Of the year. 346 00:16:30,480 --> 00:16:32,440 Speaker 11: I just think, you know, it's been a pretty good 347 00:16:32,520 --> 00:16:34,760 Speaker 11: move and we just don't know this, you know, what's 348 00:16:34,800 --> 00:16:37,000 Speaker 11: going on the next leg of this bank crisis. 349 00:16:37,080 --> 00:16:40,160 Speaker 2: And just someone you were at Pennsylvania studying Larry Summer's 350 00:16:40,160 --> 00:16:42,880 Speaker 2: father in economics a few years ago, and I'm sure 351 00:16:42,920 --> 00:16:45,720 Speaker 2: you went through the nifty to fifty and all that. 352 00:16:45,960 --> 00:16:48,240 Speaker 2: If we got a nifty seven or a nifty twenty 353 00:16:48,320 --> 00:16:52,800 Speaker 2: right now, do you run a portfolio less diversified. 354 00:16:52,760 --> 00:16:55,080 Speaker 11: Scared of the but Jesus out of me time. I mean, 355 00:16:55,240 --> 00:16:59,360 Speaker 11: this is the you know stocks, you know, acid price 356 00:16:59,400 --> 00:17:01,800 Speaker 11: of tricky. You know, you know, there's an area of 357 00:17:01,840 --> 00:17:05,159 Speaker 11: the market that's getting extreme relative to the rest of 358 00:17:05,200 --> 00:17:08,080 Speaker 11: the market. But it looks over the last couple of 359 00:17:08,160 --> 00:17:11,639 Speaker 11: days and days to included, it's going to get more extreme. 360 00:17:11,880 --> 00:17:15,879 Speaker 11: I know, over time, very very big companies have a 361 00:17:15,920 --> 00:17:20,320 Speaker 11: hard and hard time growing companies don't stay top five 362 00:17:20,400 --> 00:17:22,120 Speaker 11: in the S and P forever. 363 00:17:21,800 --> 00:17:23,320 Speaker 8: Because it gets tougher to grow. 364 00:17:23,800 --> 00:17:27,480 Speaker 11: Governments begin to cause problems and getting. 365 00:17:27,200 --> 00:17:29,440 Speaker 8: Approvals on acquisitions. 366 00:17:29,520 --> 00:17:33,159 Speaker 11: Hello, you know, those are all the seeds that bring 367 00:17:33,200 --> 00:17:36,560 Speaker 11: down these top companies. But that's not happening yet. So 368 00:17:36,680 --> 00:17:39,879 Speaker 11: it's tricky. You need to own some exposure. But I 369 00:17:39,920 --> 00:17:41,960 Speaker 11: think you got to look under the surface because the 370 00:17:42,000 --> 00:17:43,840 Speaker 11: rest of the market has been left behind, and they're 371 00:17:43,840 --> 00:17:44,400 Speaker 11: pretty cheap. 372 00:17:44,560 --> 00:17:46,720 Speaker 2: So Charles Canter's in the other day with newburg or 373 00:17:46,720 --> 00:17:49,640 Speaker 2: Berman big love of big tech and so Apple. Are 374 00:17:49,680 --> 00:17:54,760 Speaker 2: you predicting, Andrew that with the Apple somewhat exponential growth 375 00:17:54,800 --> 00:17:58,159 Speaker 2: trends in the income statement, that the government will step in, 376 00:17:58,320 --> 00:18:01,280 Speaker 2: say in a eurosque way against big Dech. 377 00:18:03,280 --> 00:18:06,000 Speaker 11: You're already starting to see it, you know, not anyway, 378 00:18:06,000 --> 00:18:08,560 Speaker 11: you're already starting to see it where they're they're questioning 379 00:18:09,119 --> 00:18:12,120 Speaker 11: the dominance of these companies. But that doesn't mean these 380 00:18:12,200 --> 00:18:15,200 Speaker 11: docks can't do spectacularly well for the next quarter. 381 00:18:15,280 --> 00:18:17,919 Speaker 8: This is a longer term issue. 382 00:18:18,240 --> 00:18:21,480 Speaker 11: I just know that when you have such a waiting 383 00:18:21,600 --> 00:18:25,359 Speaker 11: of these large companies and with the government starting to 384 00:18:25,400 --> 00:18:29,320 Speaker 11: turn against them, uh, that's a bad combination. 385 00:18:29,520 --> 00:18:30,400 Speaker 8: But It doesn't. 386 00:18:30,119 --> 00:18:34,560 Speaker 11: Necessarily mean they'll they'll be brought down, and I'm always 387 00:18:34,640 --> 00:18:37,520 Speaker 11: mindful of you know, look, let's look back General Electric, 388 00:18:37,640 --> 00:18:41,320 Speaker 11: at and t ibm Exon, Bethlehem Steel. You know, they 389 00:18:41,400 --> 00:18:44,000 Speaker 11: all got to be the big dogs, and you know, 390 00:18:44,080 --> 00:18:47,800 Speaker 11: something happened, and you know, I remember my dad saying 391 00:18:47,800 --> 00:18:49,800 Speaker 11: to me a long time ago, why would I ever 392 00:18:50,000 --> 00:18:51,640 Speaker 11: sell General Electric. 393 00:18:52,119 --> 00:18:54,760 Speaker 4: Which is a similar kind of statement today for the 394 00:18:54,880 --> 00:18:58,040 Speaker 4: tech Andrew, I'm curious you mentioned the C word crisis 395 00:18:58,400 --> 00:19:02,080 Speaker 4: in the banking sector. Does that become the driving factor 396 00:19:02,119 --> 00:19:04,640 Speaker 4: once again in markets that seem to have one eye 397 00:19:04,640 --> 00:19:06,840 Speaker 4: on it but not all that closely all the time. 398 00:19:07,880 --> 00:19:09,960 Speaker 11: Yeah, I mean that's fascinating. So you know, you had 399 00:19:09,960 --> 00:19:13,639 Speaker 11: this crisis early March. The market dropped to you know, 400 00:19:13,760 --> 00:19:15,840 Speaker 11: kind of thirty eight hundred and thirty eight to fifty 401 00:19:16,200 --> 00:19:19,520 Speaker 11: and then lo and behold the economic data X. The 402 00:19:19,560 --> 00:19:22,000 Speaker 11: banking crisis wasn't so bad. The market runs to forty 403 00:19:22,000 --> 00:19:25,080 Speaker 11: one hundred and now we're having a second round. It's 404 00:19:25,160 --> 00:19:28,440 Speaker 11: causing anxiety, But the flip side is it's coming during 405 00:19:28,480 --> 00:19:31,119 Speaker 11: earning season, and earnings aren't quite as bad as you 406 00:19:31,160 --> 00:19:33,879 Speaker 11: point out, Lisa, Even not only Megacap but some of 407 00:19:33,920 --> 00:19:37,000 Speaker 11: the consumer socks where expectations were pretty brought you know, 408 00:19:37,119 --> 00:19:41,040 Speaker 11: brought down, they're surprising. So I just think we're in 409 00:19:41,080 --> 00:19:43,560 Speaker 11: this range. I don't think we're going to break out 410 00:19:43,600 --> 00:19:46,880 Speaker 11: of it. I don't see a big retest of the low, 411 00:19:46,960 --> 00:19:49,920 Speaker 11: because you know, everywhere I go people ask me all 412 00:19:49,960 --> 00:19:53,399 Speaker 11: the time, when when's the retest coming? I got cash 413 00:19:53,440 --> 00:19:55,119 Speaker 11: on the sidelines, I want to put to work. I 414 00:19:55,119 --> 00:19:57,320 Speaker 11: want to put to work because I raised it last year. 415 00:19:57,840 --> 00:20:00,480 Speaker 11: So I just think we're kind of well, continue to 416 00:20:00,520 --> 00:20:03,119 Speaker 11: knock around this range, and now we're back to the 417 00:20:03,200 --> 00:20:06,280 Speaker 11: crisis focused. So could we head down that, you know, 418 00:20:06,359 --> 00:20:08,760 Speaker 11: kind of thirty nine hundred. I think it's very possible. 419 00:20:08,800 --> 00:20:12,400 Speaker 11: I just don't see a breakout until later this year. 420 00:20:12,440 --> 00:20:15,360 Speaker 11: I think the market will end the year higher than 421 00:20:15,480 --> 00:20:18,560 Speaker 11: forty two hundred, and we'll look back and say, boy, 422 00:20:18,560 --> 00:20:23,240 Speaker 11: oh boy, yet another example of a year post a 423 00:20:23,400 --> 00:20:27,280 Speaker 11: bad year when expectations were so thoroughly washed out. 424 00:20:27,400 --> 00:20:29,520 Speaker 10: Do you remember the start of the year, wasn't it 425 00:20:29,600 --> 00:20:32,520 Speaker 10: first half dip and second half rip from the consensus? 426 00:20:32,560 --> 00:20:34,920 Speaker 10: It seems like, boy. 427 00:20:34,880 --> 00:20:37,119 Speaker 8: Boy was that? And I questioned that, I remember we 428 00:20:37,119 --> 00:20:38,440 Speaker 8: were on it that. 429 00:20:38,440 --> 00:20:40,639 Speaker 10: Talks about that anymore. Do you remember that it was 430 00:20:40,800 --> 00:20:43,160 Speaker 10: like guest stuff the guests, apart from enter of course. 431 00:20:43,080 --> 00:20:45,680 Speaker 4: And then and then and then it became the rip, 432 00:20:45,720 --> 00:20:47,800 Speaker 4: and then it and now it's the rip and the rip. 433 00:20:47,960 --> 00:20:50,640 Speaker 4: It's a little light and little lighter rip, and then 434 00:20:50,720 --> 00:20:52,040 Speaker 4: you know, eventually. 435 00:20:51,800 --> 00:20:53,520 Speaker 5: Some stealthy rallies there, you know. 436 00:20:53,640 --> 00:20:55,400 Speaker 10: And Andrew, thanks for doing this, by the way, Andrew 437 00:20:55,440 --> 00:21:03,159 Speaker 10: slim and standing, Thank you, buddy. Yes, looking forward to it. 438 00:21:03,200 --> 00:21:05,639 Speaker 10: Bob Dollars as well. He joined us now the CIO 439 00:21:06,000 --> 00:21:08,320 Speaker 10: at Crossmark Global Investments. Bob, good morning to you. 440 00:21:08,400 --> 00:21:08,680 Speaker 8: Audi. 441 00:21:09,000 --> 00:21:11,640 Speaker 10: Let's look at the numbers so far. Double digit price 442 00:21:11,680 --> 00:21:16,080 Speaker 10: increases at Kibley Clock, Docter and Gamble Coke, PEPSI take 443 00:21:16,119 --> 00:21:19,159 Speaker 10: your pick. Looking at the numbers from Tech cloud spending 444 00:21:19,200 --> 00:21:22,439 Speaker 10: still pretty decent, Microsoft at spending, pretty decent. 445 00:21:22,560 --> 00:21:24,080 Speaker 5: Meta. What recession? 446 00:21:24,680 --> 00:21:25,280 Speaker 8: Great question? 447 00:21:25,440 --> 00:21:29,440 Speaker 12: Is the most anticipated one we know in history. I'm 448 00:21:29,480 --> 00:21:33,320 Speaker 12: disappointed that full year estimates for the S and P 449 00:21:33,400 --> 00:21:36,199 Speaker 12: of five hundred are not going up after all this 450 00:21:36,359 --> 00:21:40,520 Speaker 12: good news. Maybe they've stopped taking the numbers down, but 451 00:21:40,840 --> 00:21:43,840 Speaker 12: they're not moving up. Estimates are still too high, is 452 00:21:43,880 --> 00:21:46,399 Speaker 12: what that points out. You give me more than I expect. 453 00:21:46,400 --> 00:21:48,600 Speaker 12: In the first quarter. I don't change my number. That 454 00:21:48,640 --> 00:21:50,920 Speaker 12: means I'm taking something out At Q two, three and four, 455 00:21:51,560 --> 00:21:54,080 Speaker 12: the slow down is still upon us. All those lead 456 00:21:54,119 --> 00:21:57,920 Speaker 12: indicators pointing to slow down slash mild recession. 457 00:21:58,280 --> 00:21:59,480 Speaker 8: I don't see how we escape it. 458 00:21:59,520 --> 00:22:03,439 Speaker 12: And you've adequately the systemic risk and the financial system 459 00:22:04,040 --> 00:22:06,840 Speaker 12: handicapping that is very difficult. But I want to come 460 00:22:06,880 --> 00:22:10,480 Speaker 12: back also at John two what you said earlier, McCarthy 461 00:22:10,720 --> 00:22:15,560 Speaker 12: pulled a victory that you know, only losing four Republicans 462 00:22:15,640 --> 00:22:18,639 Speaker 12: was pretty amazing. So now the burden is on the 463 00:22:18,640 --> 00:22:21,440 Speaker 12: Democrats to come to the table and have a conversation. 464 00:22:21,520 --> 00:22:22,359 Speaker 8: We'll see how that goes. 465 00:22:22,440 --> 00:22:24,919 Speaker 1: In our ut, there was a nifty to fifty. Now 466 00:22:24,960 --> 00:22:27,720 Speaker 1: we've got the nifty five as well. Can I hide 467 00:22:27,800 --> 00:22:30,320 Speaker 1: out in the Bob Doll caution in big tech? 468 00:22:31,080 --> 00:22:32,639 Speaker 12: Yeah, that's certainly a way to do it. But with 469 00:22:32,760 --> 00:22:35,159 Speaker 12: the multiples where they are not just for tech, but 470 00:22:35,240 --> 00:22:38,560 Speaker 12: you mentioned the soft drink and the staples companies, you know, 471 00:22:38,600 --> 00:22:41,040 Speaker 12: Coke and Pepsi, their multiples are in the mid twenties. 472 00:22:42,240 --> 00:22:43,919 Speaker 12: You know, I'm not sure that's a great deal. So 473 00:22:44,000 --> 00:22:46,960 Speaker 12: the defensive areas to include some of those tech names 474 00:22:47,320 --> 00:22:50,400 Speaker 12: have certainly had a bid, and they're getting expensive and overall, 475 00:22:50,480 --> 00:22:52,480 Speaker 12: I look at my screen and I see the S 476 00:22:52,560 --> 00:22:57,080 Speaker 12: and P five hundred pe ratio, twenty point five on trailing, 477 00:22:57,760 --> 00:23:00,879 Speaker 12: almost nineteen on forward, and the numbers are probably too high. 478 00:23:01,560 --> 00:23:04,560 Speaker 12: If interest rates and inflation where you know two, that's 479 00:23:04,560 --> 00:23:07,480 Speaker 12: probably a good valuation. But I really struggle with where 480 00:23:07,480 --> 00:23:10,720 Speaker 12: we are, So I'm notbearsh We paid that price last year, 481 00:23:10,720 --> 00:23:11,680 Speaker 12: by I'm cautious, all. 482 00:23:11,680 --> 00:23:14,760 Speaker 4: Right, as we point to the future. You mentioned McCarthy, 483 00:23:14,880 --> 00:23:16,840 Speaker 4: So let's go there. Let's sit on that for a minute. 484 00:23:17,080 --> 00:23:20,320 Speaker 4: Does that deal that we saw in the house, even 485 00:23:20,359 --> 00:23:22,639 Speaker 4: though it has basically no chance of making it and 486 00:23:22,640 --> 00:23:25,359 Speaker 4: seeing the light of day, does that give you confidence 487 00:23:25,520 --> 00:23:27,440 Speaker 4: that the US can avoid a debt ceiling enough to 488 00:23:27,520 --> 00:23:29,240 Speaker 4: price it out as a potential tail risk. 489 00:23:29,400 --> 00:23:32,520 Speaker 12: I think, Lisa, it definitely increases the probability we get 490 00:23:32,520 --> 00:23:35,760 Speaker 12: something done. Had that failed yesterday, we're kind of nowhere. 491 00:23:35,880 --> 00:23:37,879 Speaker 12: Neither party has anything on the table. 492 00:23:38,200 --> 00:23:38,360 Speaker 7: Now. 493 00:23:38,400 --> 00:23:43,040 Speaker 12: The Republicans, with an incredible victory, put it on the table. 494 00:23:43,119 --> 00:23:46,040 Speaker 12: The Democrats have to come back with some kind of conversation, 495 00:23:46,520 --> 00:23:49,359 Speaker 12: which probably raises the probability we get something done. In 496 00:23:49,400 --> 00:23:52,480 Speaker 12: the eleventh hour, the twelfth hour, maybe the thirteenth hour. 497 00:23:52,600 --> 00:23:55,679 Speaker 5: You say they have to see no indication overnight that 498 00:23:55,720 --> 00:23:56,199 Speaker 5: they will do. 499 00:23:56,640 --> 00:24:00,680 Speaker 12: No, it never happens until it has to happen. We've 500 00:24:00,680 --> 00:24:04,199 Speaker 12: seen that before. I don't think either party wants to 501 00:24:04,240 --> 00:24:08,520 Speaker 12: be blamed for default or decline in the dollar because 502 00:24:08,560 --> 00:24:12,000 Speaker 12: of a potential default. So all I'm saying is the 503 00:24:12,080 --> 00:24:14,640 Speaker 12: onus is now in the Democrats to have a conversation. 504 00:24:14,680 --> 00:24:17,399 Speaker 10: Is it your impression of things that you think that 505 00:24:17,480 --> 00:24:19,720 Speaker 10: the Democrats in this White House are looking to see 506 00:24:19,720 --> 00:24:24,240 Speaker 10: some market pressure build to gain some leverage over Republicans. 507 00:24:24,280 --> 00:24:25,239 Speaker 5: Is that what they're waiting for? 508 00:24:25,560 --> 00:24:28,440 Speaker 12: Very possible. You know, a couple of folks in Congress 509 00:24:28,440 --> 00:24:30,400 Speaker 12: have said that in the last forty eight hours, gim 510 00:24:30,440 --> 00:24:32,880 Speaker 12: give us a smack in the face and the markets 511 00:24:32,920 --> 00:24:35,280 Speaker 12: and maybe we'll come to the table sort of thing, so. 512 00:24:35,240 --> 00:24:37,560 Speaker 5: That market participant. Do you find that really frustrated? 513 00:24:37,680 --> 00:24:38,360 Speaker 8: Yes, very much. 514 00:24:38,400 --> 00:24:39,000 Speaker 5: It drives me. 515 00:24:39,080 --> 00:24:41,919 Speaker 10: It drives me absolutely insane. I'm with you and with 516 00:24:42,040 --> 00:24:45,960 Speaker 10: politicians are willing to let that to involve financial markets 517 00:24:46,200 --> 00:24:48,280 Speaker 10: and use that as a position to rich. 518 00:24:48,160 --> 00:24:50,000 Speaker 7: A little toy, isn't it, Tom. 519 00:24:50,000 --> 00:24:51,200 Speaker 5: Don't you find that ridiculous. 520 00:24:51,240 --> 00:24:52,680 Speaker 10: And I know we've been doing this for a long 521 00:24:52,720 --> 00:24:55,560 Speaker 10: long time, but I just find it's so irresponsible that 522 00:24:55,560 --> 00:24:57,520 Speaker 10: that's the direction of travel. And by the way, that's 523 00:24:57,560 --> 00:25:00,960 Speaker 10: not a political statement. It's politician on both sides of 524 00:25:00,960 --> 00:25:03,320 Speaker 10: the aisles trying to play games with markets. 525 00:25:03,480 --> 00:25:05,320 Speaker 2: Can you see in the First Republic too, the key 526 00:25:05,920 --> 00:25:07,879 Speaker 2: I think it's an adverb, but maybe an adjective. I 527 00:25:07,960 --> 00:25:12,520 Speaker 2: flunk grammar, John, But the key word in every report 528 00:25:12,560 --> 00:25:14,840 Speaker 2: on First Republic, which goes to the politics of the 529 00:25:14,920 --> 00:25:18,560 Speaker 2: nation is wealthy. The basic idea that everything we do 530 00:25:18,600 --> 00:25:21,440 Speaker 2: with First Red Republic is wealthy clients, jumbo mortgage is 531 00:25:21,480 --> 00:25:25,800 Speaker 2: we know the drill, But there's a huge politics in 532 00:25:25,840 --> 00:25:29,040 Speaker 2: our day to day newsgrind and finance, and also in 533 00:25:29,080 --> 00:25:30,399 Speaker 2: how the stock market's treated. 534 00:25:30,640 --> 00:25:32,480 Speaker 10: F I saved trying to bounce up by one point 535 00:25:32,520 --> 00:25:35,399 Speaker 10: six percent. Let's just finish that briefly. Both there is 536 00:25:35,440 --> 00:25:37,439 Speaker 10: a fear and we talked about some of the robust 537 00:25:37,520 --> 00:25:39,280 Speaker 10: nature of the numbers of the earning so we can 538 00:25:39,280 --> 00:25:43,960 Speaker 10: pick several indicators about tag financials whatever. Looking forward, lead 539 00:25:44,000 --> 00:25:46,919 Speaker 10: indicators are terrible. You look at First Republic right now, 540 00:25:46,960 --> 00:25:48,320 Speaker 10: and there's a big debate at the moment, it's that 541 00:25:48,320 --> 00:25:51,440 Speaker 10: a First Republic problem or a broader banking issue that's 542 00:25:51,440 --> 00:25:53,000 Speaker 10: going to lead to some kind of credit crunch. 543 00:25:53,160 --> 00:25:54,440 Speaker 5: Where are even the team on that now? 544 00:25:55,240 --> 00:25:59,000 Speaker 12: The systemic risks are always there, they're just a lot 545 00:25:59,040 --> 00:26:02,560 Speaker 12: higher than usually now. Remember the FED took grates from 546 00:26:02,680 --> 00:26:06,240 Speaker 12: zero to four and three quarters percent in twelve months. 547 00:26:06,720 --> 00:26:11,000 Speaker 12: There are consequences. It's not just okay, Silicon Valley Bank 548 00:26:11,080 --> 00:26:14,320 Speaker 12: its signature and we get up and dust ourselves off 549 00:26:14,359 --> 00:26:17,720 Speaker 12: and ride off into the sunset. There are more consequences. 550 00:26:18,080 --> 00:26:20,840 Speaker 12: Might it be another financial institution or two could be. 551 00:26:21,400 --> 00:26:24,959 Speaker 12: My view is it will include a mild recession. Hopefully 552 00:26:25,000 --> 00:26:25,720 Speaker 12: it's only mild. 553 00:26:35,600 --> 00:26:39,240 Speaker 2: Joining us to rodd Cassidy with decades of experience and 554 00:26:39,440 --> 00:26:44,080 Speaker 2: practice and the quiet of a management and boardroom where 555 00:26:44,240 --> 00:26:48,359 Speaker 2: there are tough decisions to make. Use with RBC Capital Markets, Gerard, 556 00:26:48,400 --> 00:26:51,880 Speaker 2: I've never seen anything like this. The lack of communication 557 00:26:52,440 --> 00:26:55,520 Speaker 2: of the management team at First Republic, the conference call 558 00:26:56,080 --> 00:26:59,280 Speaker 2: non event, and even their communicating of dialogue with the 559 00:26:59,359 --> 00:27:02,160 Speaker 2: government and other more solvent bankers. 560 00:27:02,200 --> 00:27:04,119 Speaker 1: Are you surprised by their silence? 561 00:27:06,000 --> 00:27:08,399 Speaker 13: Tom, thank you for having me on the program, And 562 00:27:08,440 --> 00:27:11,880 Speaker 13: I would say that obviously there is at a critical 563 00:27:11,880 --> 00:27:17,800 Speaker 13: stage right now. They're being advised by some very smart people, 564 00:27:18,240 --> 00:27:21,439 Speaker 13: and I think it's a strategy that they have chosen. 565 00:27:22,840 --> 00:27:23,400 Speaker 7: It's hard. 566 00:27:23,480 --> 00:27:26,119 Speaker 13: I was surprised that, as you put it out on 567 00:27:26,160 --> 00:27:30,560 Speaker 13: their earnings call, that was a fifteen minute call. I 568 00:27:30,560 --> 00:27:33,840 Speaker 13: think a better strategy a matter it would have been 569 00:27:33,920 --> 00:27:35,719 Speaker 13: just to release the earnings and not you know, have 570 00:27:35,760 --> 00:27:39,880 Speaker 13: that fifteen minute call. So certainly talking to the public 571 00:27:39,960 --> 00:27:42,000 Speaker 13: is not something that should be pursued, and they're. 572 00:27:41,840 --> 00:27:42,399 Speaker 7: Not doing that. 573 00:27:42,480 --> 00:27:46,360 Speaker 13: But hopefully they are talking to very high level officials 574 00:27:46,359 --> 00:27:49,720 Speaker 13: in the government at the char Federal Reserve to try 575 00:27:49,720 --> 00:27:50,760 Speaker 13: to resolve this issue. 576 00:27:50,800 --> 00:27:53,800 Speaker 2: From the time of Bill Isaac, Robert McTeer and others 577 00:27:53,960 --> 00:27:56,320 Speaker 2: on other bank failures that you lived and died with 578 00:27:56,400 --> 00:28:00,480 Speaker 2: Gerard Cassidy, just very simply here have the rules changed 579 00:28:00,880 --> 00:28:04,360 Speaker 2: where the government doesn't have a function here like we 580 00:28:04,359 --> 00:28:07,119 Speaker 2: were trained in school, Tom. 581 00:28:07,119 --> 00:28:08,320 Speaker 7: I think they've evolved. 582 00:28:08,800 --> 00:28:11,360 Speaker 13: I think the government always has a function because there's 583 00:28:11,359 --> 00:28:15,400 Speaker 13: a regulated industry. The government, as we all know, guarantees 584 00:28:15,920 --> 00:28:19,440 Speaker 13: deposits up to two hundred and fifty thousand dollars per account. 585 00:28:19,680 --> 00:28:22,159 Speaker 13: So there's always going to be government involvement because the 586 00:28:22,200 --> 00:28:25,920 Speaker 13: government's guaranteeing those deposits. But it has evolved and changed 587 00:28:26,080 --> 00:28:29,320 Speaker 13: over the years, maybe when Todd Conover was the OCC 588 00:28:30,119 --> 00:28:32,080 Speaker 13: head of the OCC back in the early eighties. 589 00:28:32,600 --> 00:28:34,760 Speaker 4: So what's the challenge for the US right now? If 590 00:28:34,760 --> 00:28:37,560 Speaker 4: they bail out FRC in some capacity, even if it's 591 00:28:37,560 --> 00:28:40,840 Speaker 4: just guaranteeing the potential losses on their loan portfolio to 592 00:28:40,880 --> 00:28:43,480 Speaker 4: facilitate a sale to a private buyer, they will essentially 593 00:28:43,480 --> 00:28:45,880 Speaker 4: be bailing out the banks that they had come to 594 00:28:45,880 --> 00:28:49,720 Speaker 4: the table and deposit thirty billion dollars with the First Republic. 595 00:28:49,920 --> 00:28:53,080 Speaker 4: If they don't, this bank collapses and prolongs the story 596 00:28:53,080 --> 00:28:55,760 Speaker 4: of regional bank with weakness, which is worse. 597 00:28:57,720 --> 00:29:00,560 Speaker 13: It's a really tough dilemma for them, and they're stuck 598 00:29:00,600 --> 00:29:03,520 Speaker 13: between a rock and a hard place, the FDIC and 599 00:29:03,680 --> 00:29:05,640 Speaker 13: the Federal Reserve, because, as you point it out, at 600 00:29:05,680 --> 00:29:08,320 Speaker 13: least there, you know, the choice is not very favorable, 601 00:29:09,120 --> 00:29:11,880 Speaker 13: and so it's something that they have to weigh which 602 00:29:11,920 --> 00:29:14,680 Speaker 13: is going to have the least negative impact to the 603 00:29:14,680 --> 00:29:18,840 Speaker 13: banking system into the economy. And clearly, you know, shareholders 604 00:29:18,880 --> 00:29:22,080 Speaker 13: and bondholders in these situations like we've seen with Silicon 605 00:29:22,200 --> 00:29:26,200 Speaker 13: Valley and signature. They of course don't get bailed out 606 00:29:26,240 --> 00:29:29,200 Speaker 13: at all, but it's the depositors, and it's the depositors 607 00:29:29,240 --> 00:29:32,520 Speaker 13: over the insurance limit is where the focus is, and 608 00:29:32,560 --> 00:29:34,200 Speaker 13: that's where the debate is at this time. 609 00:29:34,960 --> 00:29:37,600 Speaker 4: JROT on a larger point here, we've seen this tug 610 00:29:37,600 --> 00:29:40,400 Speaker 4: of warre in markets, whether it's the tech giants that 611 00:29:40,400 --> 00:29:44,840 Speaker 4: are apporting fantastic earnings and other discretionary companies, or then 612 00:29:44,840 --> 00:29:47,840 Speaker 4: on the other side, there's this overhang of potential weakness 613 00:29:48,080 --> 00:29:51,480 Speaker 4: in regional banks that could continue. Is that enough to 614 00:29:51,600 --> 00:29:54,640 Speaker 4: offset the strength elsewhere? In other words, is what you're 615 00:29:54,680 --> 00:29:57,680 Speaker 4: seeing not enough to give you confidence that they're going 616 00:29:57,720 --> 00:30:00,480 Speaker 4: to materially provide the credit and the imput that this 617 00:30:00,560 --> 00:30:02,120 Speaker 4: economy needs right now? 618 00:30:03,040 --> 00:30:07,320 Speaker 13: The DEFED has been very clear that they're in monetary 619 00:30:07,360 --> 00:30:12,360 Speaker 13: tightening since April of twenty twenty two. You know, deposits 620 00:30:12,360 --> 00:30:15,840 Speaker 13: in the banking system were down almost a trillion dollars. 621 00:30:16,120 --> 00:30:19,840 Speaker 13: You might remember during QE during the pandemic, the fed's 622 00:30:19,920 --> 00:30:23,360 Speaker 13: balance sheet went from just under four trillion dollars to 623 00:30:23,440 --> 00:30:26,200 Speaker 13: almost nine trillion by the first quarter of twenty twenty two, 624 00:30:26,480 --> 00:30:29,480 Speaker 13: creating over three trillion of deposits in our estimate to 625 00:30:29,520 --> 00:30:32,080 Speaker 13: the banking system, and now they're taking them out. So 626 00:30:32,160 --> 00:30:35,120 Speaker 13: I think the stimulus or you know, monetary policy to 627 00:30:35,200 --> 00:30:38,760 Speaker 13: stimulate the economy right now obviously is not there because 628 00:30:38,760 --> 00:30:42,040 Speaker 13: they have to fight inflation, so inflation has to come down. 629 00:30:42,360 --> 00:30:45,000 Speaker 13: Once that comes down, hopefully the Fed not only will 630 00:30:45,200 --> 00:30:47,480 Speaker 13: stop raising church term interest rates, but they get back 631 00:30:47,520 --> 00:30:48,880 Speaker 13: off qt jege. 632 00:30:48,920 --> 00:30:50,760 Speaker 10: Just to find a question for me, maybe slightly unfair 633 00:30:50,840 --> 00:30:53,640 Speaker 10: on First Republic, just to be really specific, is there 634 00:30:53,640 --> 00:30:55,520 Speaker 10: a real risk here they lose access to some of 635 00:30:55,560 --> 00:30:57,600 Speaker 10: the FEDS funding vehicles. 636 00:30:59,320 --> 00:31:00,560 Speaker 7: There's a possible ability to that. 637 00:31:00,640 --> 00:31:03,480 Speaker 13: You never rule anything out, and so certainly in their 638 00:31:03,480 --> 00:31:06,480 Speaker 13: public statements they have indicated they still have access. 639 00:31:06,520 --> 00:31:09,120 Speaker 7: They still have loans and securities to pledge. 640 00:31:09,520 --> 00:31:12,160 Speaker 13: We have not heard anything official from the Federal Reserve 641 00:31:12,240 --> 00:31:14,320 Speaker 13: saying that they wouldn't do is closed to them. So 642 00:31:14,440 --> 00:31:17,560 Speaker 13: from their public documents, they still have access there, but 643 00:31:17,640 --> 00:31:20,280 Speaker 13: it is limited because there's only a limited amount of 644 00:31:20,280 --> 00:31:23,000 Speaker 13: loans and security that are remaining that could be pledged 645 00:31:23,240 --> 00:31:24,680 Speaker 13: for that type of borrowing. 646 00:31:24,880 --> 00:31:29,880 Speaker 10: Jared, from your perspective, what would lead regulators officials to 647 00:31:30,000 --> 00:31:31,320 Speaker 10: close that access to them? 648 00:31:33,440 --> 00:31:35,320 Speaker 13: What would lead it there is if they think the 649 00:31:35,400 --> 00:31:40,680 Speaker 13: situation is so dire that it's best off to stop 650 00:31:40,800 --> 00:31:43,959 Speaker 13: allowing them to have access to that source of funding 651 00:31:44,200 --> 00:31:47,880 Speaker 13: because it will cause less losses to either the. 652 00:31:47,840 --> 00:31:49,720 Speaker 7: FDAIC or the Federal Reserve. 653 00:31:49,800 --> 00:31:52,320 Speaker 13: That would be potentially one of the reasons for them 654 00:31:52,360 --> 00:31:53,000 Speaker 13: doing it. 655 00:31:53,240 --> 00:31:55,440 Speaker 10: Feeding based on our reporting that maybe we're getting closer 656 00:31:55,640 --> 00:31:56,320 Speaker 10: to that moment. 657 00:31:56,440 --> 00:31:57,640 Speaker 5: Jed, Thank you for being with sir. 658 00:31:57,760 --> 00:32:00,720 Speaker 10: Thank you, Jeff Cassidy of MBC the Markets on the 659 00:32:00,760 --> 00:32:01,840 Speaker 10: financial set of My Mind. 660 00:32:02,280 --> 00:32:06,160 Speaker 2: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and 661 00:32:06,280 --> 00:32:10,480 Speaker 2: anywhere else you get your podcasts. Listen live every weekday 662 00:32:10,760 --> 00:32:14,240 Speaker 2: starting at seven am Easter. I'm Bloomberg dot Com, the 663 00:32:14,360 --> 00:32:16,720 Speaker 2: iHeartRadio app tune In. 664 00:32:16,880 --> 00:32:18,320 Speaker 1: And the Bloomberg Business app. 665 00:32:18,800 --> 00:32:22,480 Speaker 2: You can watch us live on Bloomberg Television and always 666 00:32:22,840 --> 00:32:24,080 Speaker 2: I'm the Bloomberg Terminal. 667 00:32:24,480 --> 00:32:28,680 Speaker 1: Thanks for listening. I'm Tom Keen and this is Bloomberg