WEBVTT - Surveillance: Slowing US Growth 0:00:05.120 --> 0:00:07.119 This is the Bloomberg Surveillance Podcast. 0:00:07.160 --> 0:00:11.039 I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz. 0:00:11.280 --> 0:00:15.760 Join us each day for insight from the best an economics, geopolitics, 0:00:15.760 --> 0:00:20.720 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:20.960 --> 0:00:25.400 Spotify and anywhere you get your podcasts, and always on 0:00:25.520 --> 0:00:29.560 Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business 0:00:29.600 --> 0:00:31.840 app o. Lindsay Pigs is a joining us now from 0:00:31.840 --> 0:00:34.599 Stefel here to distill this and move forward as well. 0:00:34.680 --> 0:00:36.519 Let me ask you the same question good Morning, good 0:00:36.720 --> 0:00:41.519 that I asked Michael McKee. First look at GDP, What 0:00:41.600 --> 0:00:43.600 will the second and third look look like? 0:00:43.640 --> 0:00:44.959 When do we get them, like a month out? 0:00:44.960 --> 0:00:47.120 Do we get a second look exactly? We'll get them 0:00:47.479 --> 0:00:50.560 periodically throughout now going forward for this next several weeks. 0:00:50.560 --> 0:00:52.839 But I think to your point, this is going to 0:00:52.880 --> 0:00:56.680 set the tone. So the first look is very important. Yes, 0:00:56.720 --> 0:01:00.160 we do expect some revisions, there always are, but this's 0:01:00.200 --> 0:01:02.840 the tone for what the expectation of the US economy 0:01:03.000 --> 0:01:04.920 was at the start of the year. And it tells 0:01:05.000 --> 0:01:08.000 us two things. One, we're losing momentum from what we 0:01:08.080 --> 0:01:11.280 saw excuse me at the end of last year. But two, 0:01:11.600 --> 0:01:14.640 the economy is still proving resilient despite the fact that 0:01:14.680 --> 0:01:18.280 the FED is engaged in a very aggressive upward pathway 0:01:18.520 --> 0:01:22.280 to tame inflation. And the consumer particularly, forget about all 0:01:22.280 --> 0:01:25.319 the other details. The consumer is the backbone to the 0:01:25.400 --> 0:01:29.360 US economy, and the consumer is proving surprisingly resilient. 0:01:29.560 --> 0:01:31.920 And we've seen this consistently throughout a lot of the earnings. 0:01:31.959 --> 0:01:34.400 I mean, I feel like a broken record. The Productor 0:01:34.400 --> 0:01:38.039 and Gamble price increases of ten percent. Consumers have absorbed it, 0:01:38.120 --> 0:01:40.760 and you can see on the margins companies actually saying 0:01:40.800 --> 0:01:43.200 we'd rather raise prices even if we lose volume. 0:01:43.520 --> 0:01:44.840 How long can that last? 0:01:45.040 --> 0:01:48.200 Well, it can last for another month, two months, maybe longer. 0:01:48.240 --> 0:01:50.600 Because when we look at the household balance sheet, so 0:01:50.640 --> 0:01:54.400 we're looking at debt relative to disposable personal income, we're 0:01:54.400 --> 0:01:55.520 talking about. 0:01:55.240 --> 0:01:56.800 A decade low. 0:01:57.000 --> 0:02:00.240 So I'm not necessarily advocating for consumers to take on 0:02:00.320 --> 0:02:02.320 new amounts of credit card debt, but if that's where 0:02:02.320 --> 0:02:05.040 they need to go, there's quite a bit of additional 0:02:05.120 --> 0:02:08.520 room to grow that household balance sheet before that becomes 0:02:08.520 --> 0:02:10.560 a red flag that the consumer needs to cut. 0:02:10.400 --> 0:02:12.440 Back, and the real break in the cycle is when 0:02:12.520 --> 0:02:14.359 jobless rates start to go up, and that's the reason 0:02:14.400 --> 0:02:16.360 why people if it waiting for that to happen as 0:02:16.400 --> 0:02:18.200 sort of a signal, and we aren't really seeing it, 0:02:18.240 --> 0:02:20.440 at least not in the initial jobless claims. Yet what 0:02:20.480 --> 0:02:23.720 Michael McKee was talking about with business spending coming down, 0:02:23.800 --> 0:02:27.120 that was the reason for the weakness that came into GDP. 0:02:27.280 --> 0:02:30.640 How long will that take before that translates into job cuts. 0:02:30.680 --> 0:02:33.519 Well, what's interesting is, yes, we saw business investment come down, 0:02:33.520 --> 0:02:36.560 but we also saw a drawdown in inventories. So if 0:02:36.560 --> 0:02:39.880 the consumer continues to prove resilient going into the second quarter, 0:02:40.160 --> 0:02:41.919 we're going to have to see a build back up 0:02:42.000 --> 0:02:45.640 of inventory growth, which will significantly then contribute to Q 0:02:45.800 --> 0:02:46.560 two GDP. 0:02:47.200 --> 0:02:48.160 So we will have to. 0:02:48.200 --> 0:02:50.320 Keep an eye on that. But I think broadly speaking, 0:02:50.400 --> 0:02:54.720 businesses are anticipating a slowdown in the economy. They're anticipating 0:02:54.720 --> 0:02:56.720 a recession to come in the second half of the year, 0:02:57.040 --> 0:02:59.560 and they responded in kind across the first three months 0:02:59.560 --> 0:02:59.919 of the year. 0:03:00.040 --> 0:03:03.000 Let me just throw these please went quickly on inventories. 0:03:03.040 --> 0:03:06.440 I got the dollar figures here. Inventories grew in the 0:03:06.480 --> 0:03:08.200 fourth quarter by one hundred and thirty six and a 0:03:08.200 --> 0:03:12.200 half billion dollars. They shrank by one point six billion 0:03:12.240 --> 0:03:17.280 dollars in the first quarter, which is extraordinarily unusual. So 0:03:17.320 --> 0:03:20.639 business basically stopped producing stuff and started selling out. 0:03:20.520 --> 0:03:22.320 Of their war So, Lindsey, can you weigh in on 0:03:22.320 --> 0:03:26.160 this basically, as this company's more bearish than the consumer 0:03:26.240 --> 0:03:28.680 is letting on that they were prepared for an environment 0:03:28.960 --> 0:03:32.080 that was not as bleaking nearly as consumers approved. 0:03:32.080 --> 0:03:34.360 Well, I think it's businesses and economists alike. We were 0:03:34.400 --> 0:03:37.680 anticipating the consumer to have a significant pullback at the 0:03:37.720 --> 0:03:40.320 start of the year, but we found that consumers were 0:03:40.360 --> 0:03:43.160 increasingly willing to turn to credit cards draw down the 0:03:43.240 --> 0:03:44.800 last of that pandemic savings. 0:03:45.000 --> 0:03:45.920 And we also saw. 0:03:45.800 --> 0:03:49.000 An unexpected sputtering of state and local stimulus filter into 0:03:49.000 --> 0:03:53.160 the economy that provide that additional support to the consumer. 0:03:53.400 --> 0:03:54.400 Nomenal GDP. 0:03:54.640 --> 0:03:56.680 I'm going to go back a year here, long ago 0:03:56.720 --> 0:04:00.920 and far away, eight point five percent, big inflation, big 0:04:00.960 --> 0:04:05.480 real GDP seven point seven percent, six point six percent, 0:04:05.800 --> 0:04:09.360 and now I observe five point one percent. Do you 0:04:09.440 --> 0:04:13.960 ascribe to a diminished real GDP? A diminished inflation, where 0:04:14.000 --> 0:04:16.839 nominal GDP gets back to I'm going to say a 0:04:16.880 --> 0:04:18.320 four percent normal. 0:04:19.279 --> 0:04:21.520 I would suspect that the longer term run rate of 0:04:21.600 --> 0:04:24.800 real GDP is sub two percent. I would suspect that 0:04:24.839 --> 0:04:28.280 it's around correct, around one point eight percent longer term, 0:04:28.320 --> 0:04:31.440 once we smooth out some of these cyclical movements, the 0:04:31.480 --> 0:04:34.920 FED gets inflation under control, the US economy falls into 0:04:34.960 --> 0:04:38.000 a downturn or outright recession, and we see recovery. The 0:04:38.120 --> 0:04:41.000 long term trajectory of the US economy I do see 0:04:41.040 --> 0:04:42.559 as a real rate of under two percent. 0:04:42.640 --> 0:04:45.560 The business people listening here, the animal spirit of the 0:04:45.600 --> 0:04:49.000 country overlay that, say two percent real GDP or less 0:04:49.360 --> 0:04:54.120 on your inflation guest, is this nominal GDP decline from 0:04:54.160 --> 0:04:57.360 the pandemic in place where we get a four percent 0:04:57.480 --> 0:04:59.440 top line GDP absolute. 0:04:59.080 --> 0:05:02.039 Two percent real place two percent inflation two there's our 0:05:02.080 --> 0:05:04.800 four percent nominal GDP, and I do think that that's 0:05:04.839 --> 0:05:10.040 a realistic expectation. Without a significant growth in productivity, we're 0:05:10.080 --> 0:05:12.720 going to struggle to see a real rate of activity 0:05:12.839 --> 0:05:15.040 above two percent for quite some time. 0:05:15.240 --> 0:05:18.000 So this is really the conundrum that markets have been 0:05:18.040 --> 0:05:18.760 struggling with. 0:05:18.960 --> 0:05:20.719 And this is sort of you know, you want. 0:05:20.560 --> 0:05:22.560 It to be good, but not too good, because if 0:05:22.560 --> 0:05:24.280 the FED comes it to play in. Right now, we're 0:05:24.320 --> 0:05:27.760 pricing in a four point two percent FED funds rate 0:05:27.800 --> 0:05:30.600 come January of next year. Is that consistent with what's 0:05:30.640 --> 0:05:33.800 required to bring that inflation given the economy you just portrayed. 0:05:33.880 --> 0:05:36.800 No, it's certainly not that we know from history, from 0:05:36.920 --> 0:05:39.680 history historical cycles, that the FED is going to need 0:05:39.720 --> 0:05:42.919 to raise rates above that peak level of inflation, and so, 0:05:43.120 --> 0:05:45.880 as we've long advocated, the FED is likely to need 0:05:45.960 --> 0:05:49.520 total policy firming to get up near six percent. Now, 0:05:49.520 --> 0:05:53.320 I'll concede that if we see tighter credit conditions do 0:05:53.520 --> 0:05:56.160 some of the Fed's work and pull down inflation faster, 0:05:56.760 --> 0:05:59.000 that maybe the FED doesn't need to raise rates quite 0:05:59.000 --> 0:06:02.640 as high if that total policy firming reflects additional rate 0:06:02.680 --> 0:06:06.080 hikes as well as an organic change to conditions. But 0:06:06.240 --> 0:06:08.839 right now we're not seeing that organic change, And with 0:06:08.920 --> 0:06:12.320 inflation where it is and a solid level of activity 0:06:12.320 --> 0:06:14.920 both in the consumer and the broader economy, the FED 0:06:15.160 --> 0:06:18.640 needs to continue to move forward raising rates to tame inflation. 0:06:18.720 --> 0:06:21.000 Were a summer here from Michael mckee're on what page 0:06:21.000 --> 0:06:22.440 fourteen of the report. 0:06:23.160 --> 0:06:26.480 Well, it looks like this was in large measure inventories 0:06:26.520 --> 0:06:28.800 and cut back in business spending. As Lindsay was talking 0:06:28.800 --> 0:06:32.560 about what exports imports, exports and imports were little changed, 0:06:33.040 --> 0:06:36.000 so we didn't get a major contribution either way. A 0:06:36.000 --> 0:06:38.520 little bit of an addition to GDP. Not much. 0:06:39.760 --> 0:06:41.880 Help, Lindsay, Help here, what is inventory? 0:06:42.080 --> 0:06:44.440 Well, when you produce goods, but they're sitting not being 0:06:44.480 --> 0:06:46.680 purchased yet, So just as you would expect, it's the 0:06:46.760 --> 0:06:49.760 inventory of production the consumers haven't yet absorbed. 0:06:49.839 --> 0:06:52.120 Yeah, it's the value of the goods that have been 0:06:52.160 --> 0:06:54.800 produced that then haven't they're sitting in the warehouse. 0:06:54.880 --> 0:06:55.320 Yeah. 0:06:55.320 --> 0:06:57.600 Well, just the easiest way to think about it is 0:06:57.640 --> 0:07:00.080 all the cars that are parked outside the automobile Manu 0:07:00.080 --> 0:07:02.640 facturers waiting to be shipped off to dealers. 0:07:02.800 --> 0:07:05.120 And Tom, just to sort of confirm the theme of 0:07:05.160 --> 0:07:08.280 the morning, which is that businesses have been too pessimistic 0:07:08.520 --> 0:07:12.240 based on where consumers really are. Caterpillar CEO comes out 0:07:12.240 --> 0:07:15.200 with this, twenty twenty three will be better than we 0:07:15.280 --> 0:07:18.920 previously anticipated. Time and again, Tom, they didn't have as 0:07:19.000 --> 0:07:22.360 much inventory as they needed to meet the demands. They're 0:07:22.440 --> 0:07:25.200 drawing down from it, raising questions about how much more 0:07:25.240 --> 0:07:26.440 they're going to have for to produce later. 0:07:26.680 --> 0:07:29.160 That's going to be the big issue that'll be debated 0:07:29.200 --> 0:07:31.360 around the FED conference table. They don't have the big 0:07:31.400 --> 0:07:34.640 Mahogany table anymore, but they're going to be talking about 0:07:34.680 --> 0:07:38.400 this because if consumer spending is remaining strong and there's 0:07:38.440 --> 0:07:42.000 not enough goods a that contributes to inflation, and B 0:07:43.240 --> 0:07:47.480 that could luger a big increase in production in the next. 0:07:47.240 --> 0:07:48.160 Couple of quarters. 0:07:48.880 --> 0:07:51.360 It's all going to depend on what businesses think is 0:07:51.400 --> 0:07:52.040 going to happen. 0:07:52.200 --> 0:07:54.600 I like this tech team, Lindsay Jiggs and Michael McKee. 0:07:54.640 --> 0:07:55.440 This is really good. 0:08:00.520 --> 0:08:02.800 Let's talk to a security analyst about this, John in 0:08:02.840 --> 0:08:05.280 this big move. Michael Nathanson joins us. How different than 0:08:05.360 --> 0:08:08.320 David Kirkpatrick. Maybe not the author of the Facebook effect, 0:08:08.320 --> 0:08:12.000 but he's looked at the new Zuckerberg effect as well. 0:08:12.600 --> 0:08:15.120 You nailed it in your note, Michael. And what I 0:08:15.160 --> 0:08:18.160 see here in terms of the maturity of this generation 0:08:18.960 --> 0:08:23.760 is mister Zuckerberg wants to be a serious technology company. 0:08:24.400 --> 0:08:27.840 Is this a systemic Silicon Valley shift? 0:08:28.680 --> 0:08:29.440 I think it is. 0:08:30.480 --> 0:08:30.720 Tom. 0:08:30.760 --> 0:08:33.280 It's interesting that I asked him last year if his 0:08:33.400 --> 0:08:36.160 mote was his social graph that he had built, and 0:08:36.200 --> 0:08:37.719 he's like, no, our moat is that we are a 0:08:38.000 --> 0:08:42.199 technology company that moves fast and changes things right. And 0:08:43.640 --> 0:08:46.000 John I over the years talked about Meta and the 0:08:46.080 --> 0:08:48.920 Stockers in the dumbs and they had to pivot away 0:08:48.960 --> 0:08:51.440 from a couple of things that were hurting them, and 0:08:51.679 --> 0:08:54.240 very quick order they did. It's because they are a 0:08:54.280 --> 0:09:00.520 technology company. And then Mark became much more aggressive ruthless 0:09:00.520 --> 0:09:03.800 on cost control and that was a big aha because 0:09:03.800 --> 0:09:06.560 people thought he was just not going to cut costs 0:09:07.000 --> 0:09:09.079 and he's taken it about eleven and twelve billion dollars. 0:09:08.920 --> 0:09:12.360 Out of cost base in six months. And that's extraordinary. 0:09:12.440 --> 0:09:12.560 Right. 0:09:12.600 --> 0:09:15.960 So the combination of accelerating a revenue and then cost 0:09:16.040 --> 0:09:17.280 cuts the story. 0:09:17.360 --> 0:09:18.960 I mean, Stock's is gonna keep going. 0:09:19.000 --> 0:09:20.280 I think it's three dollar stop. 0:09:20.440 --> 0:09:22.200 You really do, Michael, I want to look at this 0:09:22.240 --> 0:09:25.000 on a broader basis. Maffatt Nathanson is iconic. 0:09:25.040 --> 0:09:25.360 Onest. 0:09:25.480 --> 0:09:27.760 We had your colleague in crime, Rich Greenfield on the 0:09:27.800 --> 0:09:32.280 other day. You guys have followed these children from out 0:09:32.320 --> 0:09:36.199 of their dorms to the modern era. Is right now 0:09:36.240 --> 0:09:39.240 when these guys grow up, as it appears Zuckerberg has 0:09:39.280 --> 0:09:40.040 grown up. 0:09:41.160 --> 0:09:42.000 Oh, with that doubt. 0:09:42.320 --> 0:09:47.200 I think having a founder who his entire life work 0:09:47.280 --> 0:09:50.640 is tied up in this, that's the pay if you're 0:09:50.679 --> 0:09:53.480 getting right. He was not going to let this company die, 0:09:54.000 --> 0:09:57.320 and he took aggressive steps, and that's you're right, Tom, Like, 0:09:57.360 --> 0:10:00.000 this is the evolution of his leadership. 0:10:00.080 --> 0:10:00.760 It's a great point. 0:10:00.800 --> 0:10:04.400 We forget, Lisa, he's thirty eight years old. We forget that. 0:10:04.480 --> 0:10:06.760 You know, we're talking like he's six fifty or sixty's 0:10:06.760 --> 0:10:07.480 thirty eight years old. 0:10:07.480 --> 0:10:07.920 He's a kid. 0:10:08.320 --> 0:10:11.040 We've known this, and now he's proving himself in the 0:10:11.080 --> 0:10:14.200 actual bread and butter earnings. Michael, you increased your price 0:10:14.240 --> 0:10:17.240 target to two hundred and ninety five dollars from two 0:10:17.280 --> 0:10:19.560 hundred and seventy five dollars. Where is that extra profit 0:10:19.640 --> 0:10:22.040 going to come from? Based on the earnings we just saw. 0:10:22.559 --> 0:10:24.839 Lisa, it was a revenue story, right, So if you 0:10:24.920 --> 0:10:27.840 look at their guide to the next quarter on revenue growth, 0:10:28.200 --> 0:10:31.120 it was between two percent and ten percent on the upside. 0:10:31.280 --> 0:10:33.600 We're at five, so we're smack in the middle of that. 0:10:34.160 --> 0:10:36.200 So we took our revenue numbers up to eight percent 0:10:36.320 --> 0:10:38.160 next quarter, and if you look at the rest of 0:10:38.200 --> 0:10:40.920 the year, you have probably doubled digit revenue growth by 0:10:40.960 --> 0:10:41.640 the end of the year. 0:10:42.400 --> 0:10:43.840 So that's what drove art. 0:10:43.880 --> 0:10:45.360 I mean, we were always above the street and here's 0:10:45.360 --> 0:10:47.720 our price target, but now we're close to three hundred 0:10:47.720 --> 0:10:50.400 dollars because the revenue story is now starting in KKA. 0:10:50.600 --> 0:10:52.760 Is there a dirty secret that it's been exposed by 0:10:52.760 --> 0:10:54.360 the earnings of some of these tech giants that have 0:10:54.400 --> 0:10:57.040 been cutting staff that they didn't need as big of 0:10:57.080 --> 0:10:59.520 a footprint, They don't need as many bodies, and so 0:10:59.559 --> 0:11:01.600 they're are that much lower. 0:11:03.360 --> 0:11:05.640 That's a great point. That's a dirty secret. 0:11:06.520 --> 0:11:07.440 You know, back when. 0:11:07.640 --> 0:11:10.440 We cover media, if there was a great ad cycle 0:11:10.480 --> 0:11:13.360 at CBS, they didn't hire more people. If you look 0:11:13.360 --> 0:11:15.640 at what happened in twenty and twenty one twenty two, 0:11:16.160 --> 0:11:18.640 as revenues were ramping, they hired more people and there 0:11:18.720 --> 0:11:21.800 wasn't there was not a benefit to that, right the ad. 0:11:21.720 --> 0:11:22.600 Revenue came through. 0:11:22.960 --> 0:11:25.679 So now these companies are going back to pre pandemic 0:11:25.720 --> 0:11:28.679 staffing levels and the revenue base is coming back. So, 0:11:29.480 --> 0:11:32.160 I mean, we sound crazy, but we cannot be more 0:11:32.160 --> 0:11:34.840 bullish on meta and alphabet as well, just because of 0:11:34.840 --> 0:11:37.040 what you said, and they all learned a lesson which 0:11:37.080 --> 0:11:39.920 is they overstaffed and they can cut, cut, cut, without 0:11:39.920 --> 0:11:41.240 really hitting the top line. 0:11:41.720 --> 0:11:44.280 Michael, given the fact that you did increase your earnings, 0:11:44.360 --> 0:11:47.760 how much does that include the potential banning or sale 0:11:47.880 --> 0:11:53.439 of TikTok and the read through implications for Meta for Snap. 0:11:54.200 --> 0:11:57.360 No banning of TikTok in our in our thought process. 0:11:58.520 --> 0:12:00.079 You know, TikTok's about ten billion. 0:12:00.280 --> 0:12:01.240 US revenue base. 0:12:01.480 --> 0:12:04.480 It would flow to Meta a little bit Snap, It's 0:12:04.480 --> 0:12:05.240 not our numbers. 0:12:06.400 --> 0:12:08.360 That would be a that'd be a home run, obviously, 0:12:08.400 --> 0:12:11.080 but you know, we've not contemplated that because it just 0:12:11.120 --> 0:12:15.640 seems so far removed. But what they've done though, you know, 0:12:15.679 --> 0:12:19.200 with Reels, is that they quickly adopted the best part 0:12:19.200 --> 0:12:21.959 of TikTok, right, So they saw weakness in their business model, 0:12:22.280 --> 0:12:25.800 short form video and a quickly engineered solution, and now 0:12:25.840 --> 0:12:27.280 they're starting to monetize that solution. 0:12:27.440 --> 0:12:30.280 So you know, TikTok exists today. 0:12:30.880 --> 0:12:33.360 I believe they're taking share from TikTok given what they've 0:12:33.360 --> 0:12:34.080 just accomplished. 0:12:34.200 --> 0:12:37.280 This is just amazing story. This was an eighty eight 0:12:37.320 --> 0:12:41.360 dollar name in ears, and you've got Michael Nathanson talking 0:12:41.360 --> 0:12:44.640 about three hundred. 0:12:44.880 --> 0:12:45.679 But JOHNA. 0:12:45.800 --> 0:12:48.199 We stuck by this thing, and some people did because 0:12:48.760 --> 0:12:53.520 was the revenues were self destroyed. They had basically where 0:12:53.559 --> 0:12:57.920 they're hit by Apple. Remember Apple changed their IDFA signifiers 0:12:57.960 --> 0:13:01.880 on their mobile system, and then these guys had introduced reels, 0:13:01.880 --> 0:13:05.079 which was not monetizing, right, But what killed the stock 0:13:05.320 --> 0:13:08.079 was just believe that Thuckerberg was an empire builder and 0:13:08.160 --> 0:13:11.560 women cut costs. Go back to that October conference call. 0:13:12.280 --> 0:13:14.120 Some folks jumped on through because like, look, this guy 0:13:14.120 --> 0:13:18.199 doesn't understand what's happening. But that's to me, it was 0:13:18.240 --> 0:13:22.880 all about self created revenue crisis that they've now engineered 0:13:23.120 --> 0:13:24.000 themselves past. 0:13:24.160 --> 0:13:24.360 Right. 0:13:24.800 --> 0:13:27.480 That was what was so interesting is that this was 0:13:27.520 --> 0:13:28.280 not fickical. 0:13:28.960 --> 0:13:30.760 It was in a way because twenty twenty one. 0:13:30.760 --> 0:13:31.400 Was so good. 0:13:31.800 --> 0:13:34.440 They had a hard time lapping twenty twenty one, and 0:13:34.480 --> 0:13:37.520 then IDFA hit from Apple and then reels occurred, So 0:13:37.559 --> 0:13:39.679 it was like just all these waves were hitting the stock. 0:13:39.880 --> 0:13:42.160 So Michael, squeeze this in because they've only got about 0:13:42.160 --> 0:13:44.840 forty five seconds left. I apologize. There will be some 0:13:44.880 --> 0:13:47.679 people who don't hold this name who look at this 0:13:47.800 --> 0:13:51.120 as some kind of cyclical signal. You just said that 0:13:51.280 --> 0:13:53.680 maybe last year wasn't cyclical to some extent, is the 0:13:53.720 --> 0:13:58.040 success this morning cyclical? Is that a broader signal about 0:13:58.040 --> 0:13:58.920 the cycle. 0:14:00.040 --> 0:14:03.920 Because Alphabet is a bigger company that's inserching YouTube and 0:14:03.960 --> 0:14:06.880 their results were okay, but they're not like this. This 0:14:06.920 --> 0:14:10.120 is this is a separate cycle tied to Meta and 0:14:10.160 --> 0:14:11.600 what they were trying to do last year. 0:14:12.200 --> 0:14:15.079 Michael, just perfect and great coal buddy for sinking by 0:14:15.120 --> 0:14:16.520 this name at a difficult time. 0:14:16.840 --> 0:14:18.720 Michael, m SVB. 0:14:28.680 --> 0:14:30.640 John, I want you to bring in Andrew slim And 0:14:30.720 --> 0:14:34.400 this guy has decades and decades of experience, and I'm 0:14:34.440 --> 0:14:36.680 gonna guess he's going to say, to your good questions, 0:14:36.800 --> 0:14:37.640 he's never seen. 0:14:37.480 --> 0:14:39.520 It like this, Andrew SLIMM. And that's where we are joined. 0:14:39.520 --> 0:14:42.320 Just now have more than Stanley Investment Management portfolio manager. 0:14:42.520 --> 0:14:44.520 I guess we should start there than Andrew. Have you 0:14:44.560 --> 0:14:45.760 ever seen it like this before? 0:14:46.560 --> 0:14:46.800 Yeah? 0:14:46.840 --> 0:14:49.280 I mean Tom said, all right, my head is spinning. 0:14:49.360 --> 0:14:51.920 It's a it's a tough environment, but it's all tough, right. 0:14:52.160 --> 0:14:56.520 The markets are never clear. The light never shines, you know, 0:14:56.680 --> 0:14:59.800 it's green light, all clear to invast, So is it? Yeah, 0:15:00.000 --> 0:15:03.080 it's definitely a consumer consumer you know, confusing I think 0:15:03.160 --> 0:15:07.960 Lisa said it best, which is the consumer says remarkably resilient. 0:15:08.120 --> 0:15:11.200 But look, financial conditions are tightening and that's going to 0:15:11.200 --> 0:15:13.280 affect many businesses. 0:15:13.320 --> 0:15:14.920 And that's the push pulls. 0:15:15.040 --> 0:15:18.720 Which do you lean towards a consumer or tightening financial conditions? 0:15:18.800 --> 0:15:21.600 That determines your you know, really outlook for the economy. 0:15:21.600 --> 0:15:24.000 You had a number of lead in people talking about 0:15:24.000 --> 0:15:27.160 as slow down in the economy except the S and 0:15:27.240 --> 0:15:28.920 P sits at forty one hundred. 0:15:29.360 --> 0:15:30.760 You know, that's incredible to me. 0:15:31.040 --> 0:15:33.680 What's transpired since beginning of March. 0:15:33.960 --> 0:15:36.760 You've been bullish though, so are you getting more bearish now? 0:15:37.560 --> 0:15:40.920 Well, you know, I've been bullish since the beginning of 0:15:40.960 --> 0:15:43.880 the year only because we came off a bad last year. 0:15:44.120 --> 0:15:47.080 Pessimism you know, I wrote a piece pessimism is rampant, 0:15:47.600 --> 0:15:51.400 and I think the market predicted a down earnings year 0:15:52.440 --> 0:15:54.920 this year. But you know, the market has had a 0:15:54.920 --> 0:15:58.240 good first part of the year. We're moving into the summer. 0:15:58.320 --> 0:16:00.800 I could see a stall out, but there's no question 0:16:00.880 --> 0:16:05.040 in my mind the earnings collapsing scenario that's going to 0:16:05.120 --> 0:16:08.960 retest the low. That scenario is running out of time 0:16:09.480 --> 0:16:14.920 because markets price in a recovery of earnings, which should 0:16:14.960 --> 0:16:18.080 happen next year, and they will trade to a pretty 0:16:18.160 --> 0:16:21.840 high multiple on that recovery and then let the e 0:16:22.240 --> 0:16:25.600 work into that. That's historically what's happened, So I wouldn't 0:16:25.640 --> 0:16:28.880 be surprised if we get another leg up in the 0:16:28.920 --> 0:16:29.760 second half. 0:16:29.560 --> 0:16:30.040 Of the year. 0:16:30.480 --> 0:16:32.440 I just think, you know, it's been a pretty good 0:16:32.520 --> 0:16:34.760 move and we just don't know this, you know, what's 0:16:34.800 --> 0:16:37.000 going on the next leg of this bank crisis. 0:16:37.080 --> 0:16:40.160 And just someone you were at Pennsylvania studying Larry Summer's 0:16:40.160 --> 0:16:42.880 father in economics a few years ago, and I'm sure 0:16:42.920 --> 0:16:45.720 you went through the nifty to fifty and all that. 0:16:45.960 --> 0:16:48.240 If we got a nifty seven or a nifty twenty 0:16:48.320 --> 0:16:52.800 right now, do you run a portfolio less diversified. 0:16:52.760 --> 0:16:55.080 Scared of the but Jesus out of me time. I mean, 0:16:55.240 --> 0:16:59.360 this is the you know stocks, you know, acid price 0:16:59.400 --> 0:17:01.800 of tricky. You know, you know, there's an area of 0:17:01.840 --> 0:17:05.159 the market that's getting extreme relative to the rest of 0:17:05.200 --> 0:17:08.080 the market. But it looks over the last couple of 0:17:08.160 --> 0:17:11.639 days and days to included, it's going to get more extreme. 0:17:11.880 --> 0:17:15.879 I know, over time, very very big companies have a 0:17:15.920 --> 0:17:20.320 hard and hard time growing companies don't stay top five 0:17:20.400 --> 0:17:22.120 in the S and P forever. 0:17:21.800 --> 0:17:23.320 Because it gets tougher to grow. 0:17:23.800 --> 0:17:27.480 Governments begin to cause problems and getting. 0:17:27.200 --> 0:17:29.440 Approvals on acquisitions. 0:17:29.520 --> 0:17:33.159 Hello, you know, those are all the seeds that bring 0:17:33.200 --> 0:17:36.560 down these top companies. But that's not happening yet. So 0:17:36.680 --> 0:17:39.879 it's tricky. You need to own some exposure. But I 0:17:39.920 --> 0:17:41.960 think you got to look under the surface because the 0:17:42.000 --> 0:17:43.840 rest of the market has been left behind, and they're 0:17:43.840 --> 0:17:44.400 pretty cheap. 0:17:44.560 --> 0:17:46.720 So Charles Canter's in the other day with newburg or 0:17:46.720 --> 0:17:49.640 Berman big love of big tech and so Apple. Are 0:17:49.680 --> 0:17:54.760 you predicting, Andrew that with the Apple somewhat exponential growth 0:17:54.800 --> 0:17:58.159 trends in the income statement, that the government will step in, 0:17:58.320 --> 0:18:01.280 say in a eurosque way against big Dech. 0:18:03.280 --> 0:18:06.000 You're already starting to see it, you know, not anyway, 0:18:06.000 --> 0:18:08.560 you're already starting to see it where they're they're questioning 0:18:09.119 --> 0:18:12.120 the dominance of these companies. But that doesn't mean these 0:18:12.200 --> 0:18:15.200 docks can't do spectacularly well for the next quarter. 0:18:15.280 --> 0:18:17.919 This is a longer term issue. 0:18:18.240 --> 0:18:21.480 I just know that when you have such a waiting 0:18:21.600 --> 0:18:25.359 of these large companies and with the government starting to 0:18:25.400 --> 0:18:29.320 turn against them, uh, that's a bad combination. 0:18:29.520 --> 0:18:30.400 But It doesn't. 0:18:30.119 --> 0:18:34.560 Necessarily mean they'll they'll be brought down, and I'm always 0:18:34.640 --> 0:18:37.520 mindful of you know, look, let's look back General Electric, 0:18:37.640 --> 0:18:41.320 at and t ibm Exon, Bethlehem Steel. You know, they 0:18:41.400 --> 0:18:44.000 all got to be the big dogs, and you know, 0:18:44.080 --> 0:18:47.800 something happened, and you know, I remember my dad saying 0:18:47.800 --> 0:18:49.800 to me a long time ago, why would I ever 0:18:50.000 --> 0:18:51.640 sell General Electric. 0:18:52.119 --> 0:18:54.760 Which is a similar kind of statement today for the 0:18:54.880 --> 0:18:58.040 tech Andrew, I'm curious you mentioned the C word crisis 0:18:58.400 --> 0:19:02.080 in the banking sector. Does that become the driving factor 0:19:02.119 --> 0:19:04.640 once again in markets that seem to have one eye 0:19:04.640 --> 0:19:06.840 on it but not all that closely all the time. 0:19:07.880 --> 0:19:09.960 Yeah, I mean that's fascinating. So you know, you had 0:19:09.960 --> 0:19:13.639 this crisis early March. The market dropped to you know, 0:19:13.760 --> 0:19:15.840 kind of thirty eight hundred and thirty eight to fifty 0:19:16.200 --> 0:19:19.520