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Speaker 2: This is the Bloomberg Daybreak Aisia podcast. I'm Doug Prisner.
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Speaker 3: Shana Sissel, Founder and President Bandery and Capital Management, Shana.
Speaker 3: Perhaps as it should be with earnings, the results here
Speaker 3: tend to reflect the idiosyncratic results of the particular companies involved.
Speaker 3: We're not getting them all moving together. So I guess
Speaker 3: this makes it a good time to be a stock
Speaker 3: picker or would you rather see a kind of more
Speaker 3: consistent theme.
Speaker 4: No, if you're a stock picker, you want to see
Speaker 4: stocks reflect earnings, and so when stocks behave as they
Speaker 4: should after earnings is reported and it's based just on
Speaker 4: that company, that is a good thing.
Speaker 5: That's what you want to see.
Speaker 4: If you don't want to see stocks moving completely not
Speaker 4: in sync with their fundamentals.
Speaker 2: We heard from Texas Instruments today and maybe the guidance
Speaker 2: that we got for the current quarter being in line
Speaker 2: with estimates was enough to alleviate concern about a downturn
Speaker 2: in the chip industry. If memory serves. The last time
Speaker 2: we spoke with you, you were talking about in Nvidia. Are
Speaker 2: you still holding on to a position in Nvidia?
Speaker 5: Oh? Yes.
Speaker 4: So I think it's really important to understand the difference
Speaker 4: between holding a stock for the long term and then
Speaker 4: trading a stock. So I am a long term investor,
Speaker 4: so I look to purchase a stock for the long term.
Speaker 4: I think at the moment, Nvidia is a little pricey.
Speaker 4: It's trading out a premium to its historic average and
Speaker 4: to the market. It does always trade a premium, but
Speaker 4: it's trading out a bigger premium than normal, and for
Speaker 4: that reason, I wouldn't be adding to the stock right now.
Speaker 4: But I am certainly going to continue to hold the
Speaker 4: shares that I currently have, and if there was weakness
Speaker 4: in the stock, I might look at that as an
Speaker 4: opportunity to buy. But as a long term investor, I
Speaker 4: continue to have a strong bowcase.
Speaker 5: For the stock.
Speaker 3: Now you're predicting a mild recession for next year, so
Speaker 3: that's kind of interesting because a lot of people think
Speaker 3: we're heading for a so called soft landing. What are
Speaker 3: some of the driving factors that will get us to
Speaker 3: that mild recession.
Speaker 4: Well, I think it's important to note that a soft
Speaker 4: landing is something that almost never happens. If it does,
Speaker 4: it's not because the FED did something incredibly right that
Speaker 4: just got lucky. It just historically, monetary policy tends to
Speaker 4: overdo whatever it's trying to correct and tends to push
Speaker 4: the economy either into an overheated state or into now
Speaker 4: right now, the FED has managed to play this correctly,
Speaker 4: but we are seeing softening in the economy. And what
Speaker 4: I think is going to happen is that the FED
Speaker 4: will cut rates in September, but they're going to do
Speaker 4: it slowly.
Speaker 5: This is not going to be a big rate cut.
Speaker 4: With the economic growth and some of the other economic
Speaker 4: indicators showing softness in the economy, I do think that
Speaker 4: by taking it slow like that, it is likely that
Speaker 4: we will see continued softness, which could result in a
Speaker 4: mild recession. And it's important to note recessions are healthy things.
Speaker 4: We like them. It's a normal part of the business cycle,
Speaker 4: the economic cycle. What we prefer is these mild recessions
Speaker 4: that get access out of the system we get through
Speaker 4: fairly quickly with minimal damage. But when we don't have
Speaker 4: them for a long time, what tends to happen is
Speaker 4: we end up with a really big one all of
Speaker 4: a sudden because we've overdone it marketwide.
Speaker 2: So do you regard some of the recent rotation that
Speaker 2: we have seen into stocks that may be a little
Speaker 2: bit more economically sensitive, do you regard that as a
Speaker 2: little misguided right now? Giving your outlook?
Speaker 5: Not necessarily.
Speaker 4: I think what you're seeing is this understanding or belief
Speaker 4: that the Fed is going to cut rates in September
Speaker 4: will be positive for companies, however small that may be.
Speaker 4: I think in the short term it will be, But
Speaker 4: I don't think necessarily that it's enough to save us
Speaker 4: from seeing a downturn in the overall economy. But what
Speaker 4: you're seeing is them reacting to positive potential monetary policy that.
Speaker 5: Is related to their businesses.
Speaker 3: Shane and we heard some musing on this network earlier
Speaker 3: that people tend to hate inflation more than they like
Speaker 3: full employment, and hence the average person apparently in the
Speaker 3: United States is unhappy. Now, why is that and how
Speaker 3: do you see things moving?
Speaker 5: Because I think that.
Speaker 4: Generally speaking, when everybody has a job, they'd like to
Speaker 4: think that they can live and afford and support their
Speaker 4: live livelihood, and inflation chips away at that. It makes
Speaker 4: them feel like they don't have enough, so they feel
Speaker 4: under employed. It's interesting though, because I think to your
Speaker 4: point is, even when unemployment rises, the number of people
Speaker 4: that that actually impacts as a percentage of employed people
Speaker 4: is actually small, So the overall sentiment isn't necessarily impacted
Speaker 4: unless everybody is really scared that they might lose their job.
Speaker 5: So I think that's what you're seeing.
Speaker 2: Yeah, I was just going to mention the PCEE data
Speaker 2: that we get at the end of the week, along
Speaker 2: with the personal income personal spending figures, the economy from
Speaker 2: a lot of the data points that we've been looking
Speaker 2: at seems to be downshifting into a lower speed. Does
Speaker 2: that cause you maybe to consider what's happening in other
Speaker 2: parts of the world, maybe Asia, maybe Europe. Are you
Speaker 2: looking at opportunities offshore?
Speaker 4: So I don't generally play in the space where I'm
Speaker 4: looking at things from a country level, but I do
Speaker 4: think that the nations out have been a little quicker
Speaker 4: to make monetary policy changes that are actually going to
Speaker 4: be less negative for their economies per se.
Speaker 5: So there are some opportunities I.
Speaker 4: Think you can look at fundamentally, especially in Asia, that
Speaker 4: could make a lot of sense right now. But generally speaking,
Speaker 4: I'm not going to pretend that I spend a lot
Speaker 4: of time focusing on a country level because I don't
Speaker 4: and I don't know that I can necessarily give you
Speaker 4: anything that's going to be like a GM of information
Speaker 4: for your listeners.
Speaker 3: Yeah, let's talk briefly about the strong dollar. It's hurting
Speaker 3: corporate profits to a certain degree, particularly for North American firms.
Speaker 3: How do you see the dollar moving? If the Fed,
Speaker 3: you know, moves very slowly.
Speaker 4: I think we'll continue to have this issue with the
Speaker 4: strong dollar. You know, Obviously, just intuitively, when you take
Speaker 4: economics class, inflation should in some way affect the strength
Speaker 4: of the dollar.
Speaker 5: But it's much more complicated than that.
Speaker 4: So even if inflation slows, it doesn't necessarily mean the
Speaker 4: dollar weekends because of just the nature of the relationships
Speaker 4: with other currencies and other things. I think a slower
Speaker 4: rate cut cycle would be not necessarily something that is
Speaker 4: going to weaken the dollar compared to the other currencies
Speaker 4: that are out there.
Speaker 3: Okay, Shana, thanks very much for taking out the time
Speaker 3: to be with a. Shanea SISIL founder and president Banary
Speaker 3: and Capital Management.
Speaker 2: After the bell, we heard from Google parent Alphabet, with
Speaker 2: the company reporting quarterly revenue ahead of expectations. Closer look
Speaker 2: at this story. Now we'll bring in our own Julia
Speaker 2: Love Bloomberg, a tech reporter who joins us from San Francisco.
Speaker 2: Thanks for making time for us, aid Julia. So there
Speaker 2: are two categories here when we look at the top line.
Speaker 2: There is the cloud computing service and then there's the
Speaker 2: ad that is tied to the Google search engine. Is
Speaker 2: one beginning to dominate here or is it pretty much
Speaker 2: an even split?
Speaker 1: So Goodle Search still accounts for the lion's share of
Speaker 1: Goodle's revenue, and I believe that will be the taste
Speaker 1: for the foreseeable future. But the cloud business is growing
Speaker 1: and executives and Wall Street are very heartened by that.
Speaker 1: They have long wanted to see Goodle diversify its revenue streams,
Speaker 1: and cloud is a strong contender.
Speaker 3: I'm curious what the company said about the push into AI.
Speaker 3: So the initially had a headstart that it seemed like,
Speaker 3: oh WHOA is me? You know, for a while, but
Speaker 3: they've they've been making a comeback here. Did they say
Speaker 3: much about the progress being made on competing with Microsoft
Speaker 3: and Open Ai?
Speaker 1: Yes, so they delivered a bit of a progress report
Speaker 1: of sorts. Google Search now includes AI overviews, which are
Speaker 1: responses drafted by generative AI and assum Darpachai said that
Speaker 1: those overviews are generating increased engagement and that users are
Speaker 1: very satisfied with the responses. He also said that they
Speaker 1: have made progress in delivering those responses faster and in
Speaker 1: controlling the computing costs that it takes to serve up
Speaker 1: those responses. And in addition, executives said that Google is
Speaker 1: using AI to drive more sales for its cloud business,
Speaker 1: although Wall Street is hungry for more specific that.
Speaker 2: I thought it was interesting that Ruth pour Out, the CIO,
Speaker 2: was saying that alphabet is looking for acquisition targets at
Speaker 2: a time when wiz rejected the twenty three billion dollar
Speaker 2: or offer that Google had made. Do we have guidance
Speaker 2: on what this company is looking to build out? Is
Speaker 2: it cyber security? Is that the big area of growth
Speaker 2: that they that they think it's worth kind of pursuing.
Speaker 1: Yes, cyber certainly seems like a strong candidate. They acquired
Speaker 1: Mandian a few years ago, which was one of their
Speaker 1: biggest acquisitions to date, and they seem to be interested
Speaker 1: in buying up more companies in that space. You know,
Speaker 1: in the cloud market, they are number three, so that's
Speaker 1: seen as a space where perhaps they could do an
Speaker 1: acquisition without triggering anti trust scrutiny, although certainly there are
Speaker 1: still anti trust concerns that they'd have to face there
Speaker 1: as well.
Speaker 3: Google suffers from the same sort of malady that the
Speaker 3: broader market suffers from. When you're at all time highs,
Speaker 3: you know, there's a lot of pressure on the earnings
Speaker 3: to to get you to go even higher, they have
Speaker 3: to be almost fallless. And we didn't see a flawless
Speaker 3: report because we had YouTube missing estimates there. Well, what's
Speaker 3: the latest with YouTube in terms of its progress.
Speaker 1: Yes, it's been you know, I think a bumby a
Speaker 1: few years for YouTube. They've had a strain of disappointing
Speaker 1: quarters and I think, you know, YouTube is ultimately a
Speaker 1: social media company, and it's and like Facebook and and
Speaker 1: X and tit talk, it's much more vulnerable to these
Speaker 1: swings in advertiser spending. And I think that that's what
Speaker 1: we saw with this report.
Speaker 2: Obviously, we're in an election season. I think the Federal
Speaker 2: Trade Commission, led by Lena Kahan, has been thorn in
Speaker 2: the side of Alphabet to some extent. Did they talk
Speaker 2: about regulatory risk at all on the call with analyst?
Speaker 1: Not on this call, But that is certainly a question
Speaker 1: that has been just looming over Google and is kind
Speaker 1: of instapable. We are waiting for a verdict in an
Speaker 1: antitrust trial about their search business, and another trial will
Speaker 1: get underway in just a few months about their dominance
Speaker 1: in the digital ad market. So lots of anti trust headaches.
Speaker 3: And I'm kind of curious about Ruth Porat and what
Speaker 3: comes next. Doug mentioned her she's going to be president
Speaker 3: and chief investment Officer and no longer the CFO. That'll
Speaker 3: go to an Ashkenazi coming in from Eli Lilly. What
Speaker 3: is the push there, what's the main thrust of that hire?
Speaker 1: Yes, well, Ruth Porat was Alphabet's longest serving chief financcial office.
Speaker 1: Her Wall Street is a huge fan of hers. She's
Speaker 1: had a lot of success in instituting more financial discipline
Speaker 1: at the company, and it seems like she was ready
Speaker 1: for a new challenge. She'll be turning more attention to
Speaker 1: the portfolio of other bets way Mow. This help driving
Speaker 1: car company, you know, seems poised for for fortor splash,
Speaker 1: and she'll be spending time there. As for the new
Speaker 1: CFO and not asht Nazi. I think that her hiring
Speaker 1: signals that Alphabet is perhaps going to make a bitter
Speaker 1: push in in health Verily their life sciences company has
Speaker 1: is maturing, and we may see her spend We may
Speaker 1: see her not spending more time with that part of
Speaker 1: the business than than Ruth has.
Speaker 2: Best far, Julia, good stuff. Thank you so much for
Speaker 2: making time to chat with us. Julia love their. Bloomberg
Speaker 2: Tech reporter.
Speaker 3: Danny Lee Bloomberg Asia Transport reporter Danny let me just
Speaker 3: sort of set the tone here for listeners that are
Speaker 3: just joining us. Tesla had disappointing profits that he announced.
Speaker 3: It also announced no Robotaxi until October, and that will
Speaker 3: only be a prototype. Also, the low cost car is
Speaker 3: being delayed, The plan factory in Mexico is on pause
Speaker 3: at least until after the election, and a humanoid robot
Speaker 3: that Musk claims will send Tesla's valuation, soaring won't be
Speaker 3: ready anytime soon either, So this was a round of disappointments.
Speaker 6: Yeah, where's the good news in order this? Yeah, and
Speaker 6: the earnings. The future, I mean the future clearly is
Speaker 6: important and investors wanted to hear more concrete detail about
Speaker 6: future projects, future projects which will define Tesla in future
Speaker 6: to be more like an AI stock rather than just
Speaker 6: an EV company. So clearly there's a lot of detail
Speaker 6: that investors were looking for, but it doesn't seem more
Speaker 6: too given we are only a few more quarters away
Speaker 6: from having an affordable car, having more detail on the
Speaker 6: robotaxi for example. But clearly the here and now and
Speaker 6: what was always going to be a difficult year for
Speaker 6: Tesla is weaker deliveries and an impact on earnings in
Speaker 6: its core business.
Speaker 2: So, Danny, how is business in China for this company?
Speaker 6: For China Tesla, it's been a tough one given the
Speaker 6: competition is getting even more intense from Chinese players who
Speaker 6: are becoming more aggressive on price. They're being more in
Speaker 6: bolden with their war chest to take on Tesla head on,
Speaker 6: and Tesla has seen that impact in the impact on
Speaker 6: its China deliveries. So it's inevitable that it has to
Speaker 6: look further afield for more growth, but clearly that has
Speaker 6: been tough where on all sides, whether it be in
Speaker 6: Europe in the US, there are challenges which are hinting
Speaker 6: or hindering its ability to sell, whether it be high
Speaker 6: interest rates or with even more competition. So clearly the
Speaker 6: challenge for MSCER is to look at or talk up
Speaker 6: rather the future, which you know, for the stock which
Speaker 6: had been down as much as forty percent earlier this year,
Speaker 6: it's still largely trading flat.
Speaker 3: I think we always knew that tougher competition was coming,
Speaker 3: and as a kind of microcosm, China shows that when
Speaker 3: there's a lot of competition, the going can get pretty rough.
Speaker 3: And we've also had this development from General Motors saying no,
Speaker 3: it would not hit its target of a million shares
Speaker 3: this year, So that kind of shows you that demand
Speaker 3: is not so strong either. It doesn't seem like a
Speaker 3: good combination for Tesla.
Speaker 6: I think for Tesla, if anybody can can double down
Speaker 6: and focus on specific items or specific targets, it will
Speaker 6: be them. You know, el Musk is very determined and
Speaker 6: even if they do miss on expectations, typically they're not
Speaker 6: necessarily by much. And so when you look at some
Speaker 6: of the legacy players who have less experience, they've just
Speaker 6: thrown money good after ad at certain things such as
Speaker 6: like what GM has. Clearly for them it's more of
Speaker 6: a struggle. But for Tesla, you know, working around the clock,
Speaker 6: and you know Elil Musk is notorious for his work ethic.
Speaker 6: I think for Musk he can probably get things done
Speaker 6: given his will and his determination.
Speaker 2: You were talking a moment ago about the ev price
Speaker 2: wars in China, and I find it's interesting that Tesla
Speaker 2: is going to be again manufacturing a newer, low cost
Speaker 2: card in Austin, Texas. I mean, I've always associated Tesla
Speaker 2: as being, you know, somewhat of a premium brand in
Speaker 2: a way that Apple is. And here you have maybe
Speaker 2: a move to go a little bit down market. But
Speaker 2: perhaps that's what's required given the competition globally, right.
Speaker 6: Tesla was always going to go more downmarket. What they
Speaker 6: wanted was at the beginning to price high to be
Speaker 6: able to afford all the investments it wanted to make,
Speaker 6: and then slowly trickle down so it could be a
Speaker 6: more affordable kind of driving experience for everybody. So with
Speaker 6: this about time. Frankly, this this new affordable, lower cost
Speaker 6: TV will be more I'm sure for strict back kind
Speaker 6: of Tesla offering. It is something that should in theory
Speaker 6: help it spur demand and growth once again without having
Speaker 6: to compromise on the prices it's having to do in
Speaker 6: the near term and has been doing.
Speaker 3: It's kind of interesting too that Musk has come in
Speaker 3: with such full support for Donald Trump, and if the
Speaker 3: Republicans get in, that probably means the subsidies will be
Speaker 3: heading heading out the door, right, So I'm kind of curious, how, Delegate,
Speaker 3: how what is the nuanced handling of this for Elon
Speaker 3: Musk that makes him happy to support Donald Trump.
Speaker 6: It's really a fascinating position because once we saw, you
Speaker 6: know clearly that the views of what Donald Trump wants
Speaker 6: to do with the with taffs, with the EV sector
Speaker 6: buy and large, it doesn't necessarily sound very good for
Speaker 6: us someone like Tesla, for Elon Musk, but with with
Speaker 6: his full support for Trump and clearly very interesting how
Speaker 6: it affects his business and you know, the views on
Speaker 6: the board or on Mexico. How Tesla has announced that
Speaker 6: it's going to slow down its plans on making decision
Speaker 6: or taking action on its Mexico factory until after the election.
Speaker 6: All of these things for whether it be Tesla or
Speaker 6: for other businesses who have invested billions in building battery
Speaker 6: factories in parts of America. Clearly there's a lot of
Speaker 6: what happens next if Donald Trump becomes the next US president.
Speaker 2: Yeah, well, battery factories. And I'm curious about the situation
Speaker 2: in China where batteries are being in very much in
Speaker 2: high demand. Now, given the explosion that's happening in the
Speaker 2: ev industry, what is is Tesla doing to try to
Speaker 2: make sure that it has adequate supply of batteries in
Speaker 2: the Shanghai production line.
Speaker 6: Well, Tesla has always had very good supply, and namely
Speaker 6: from one very key supply in c at l c
Speaker 6: ATL is the world's biggest batory maker and Tesla is
Speaker 6: its most important customers, so there's no shortage of supply there.
Speaker 6: And it's just a question of where someone like Tesla
Speaker 6: finds demand, not just in China, but for where it
Speaker 6: exports out of China to other parts of the world.
Speaker 6: And clearly, when things have been slowing down in sales,
Speaker 6: it takes a bit of an effort to try and
Speaker 6: stoke up that demand again. So whether we see Shanghai,
Speaker 6: for example, becoming a useful tool in building the more
Speaker 6: affordable taxi later on down the line. You know, they've
Speaker 6: been very efficient and very proactive in building cars for
Speaker 6: Tesla at a phenomenal rate. So it's a watcher space
Speaker 6: to see how someone like Shanghai becomes a key part
Speaker 6: for the future of Tesla once again.
Speaker 3: And if there is less regulation, for instance, if the
Speaker 3: Republicans win, is there chance that that could actually help
Speaker 3: Tesla because the the other car made might suffer more
Speaker 3: than Tesla in that environment.
Speaker 6: It's an interesting one because Tesla giving it all in
Speaker 6: on electric vehicles. The summation is, well, does the rules
Speaker 6: or the policies of the future benefit more the ice
Speaker 6: makers such as your general motors such as your forts.
Speaker 6: So it's interesting to see what happens in terms of
Speaker 6: future policies just to see where Tesla ends up.
Speaker 3: Danny Lee is with us. He's a big man. He's
Speaker 3: a sort of hulking guy with a big voice on transport.
Speaker 3: He's our Asia Transport reporter.
Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you
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