Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa Abramoids along
Speaker 1: with Tom Keen and Jonathan Ferrell. Join us each day
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Speaker 2: Apple's Catshat with List Young, head of investment strategy at
Speaker 2: so Far, Liz, any reason to believe in good morning,
Speaker 2: It's always great to catch up with you, you know that.
Speaker 2: Any reason to believe that this bond market stock market
Speaker 2: correlation continues in the way it has done over the
Speaker 2: previous month over the next three months, Well.
Speaker 3: It's certainly possible.
Speaker 4: I mean, I think twenty twenty three has shown us
Speaker 4: that anything is possible. So it's certainly possible that the
Speaker 4: correlation remains positive in the sense that we continue to
Speaker 4: see yields come down. Stocks are celebrating that, particularly growth
Speaker 4: year stocks, which I think is a rational move, at
Speaker 4: least initially. So I do think that the correlation could
Speaker 4: stay positive for a little while. What we're looking at here,
Speaker 4: especially into twenty twenty four, is that we've been wanting
Speaker 4: cooling in a lot of this data. We've been wanting
Speaker 4: the cooling and inflation. We've been wanting a labor market
Speaker 4: that gets a little bit more imbalance. So we've seen
Speaker 4: some of that data, things like continuing claims on a
Speaker 4: steady move upwards since September. We know that the manufacturing
Speaker 4: economy is still feeling some pain. We're hearing data out
Speaker 4: of the consumer that they're pulling back on spending a
Speaker 4: little bit.
Speaker 3: So we've wanted this cooling.
Speaker 4: The question into twenty twenty four will be can we
Speaker 4: stop the cooling before the economy tips into contraction and
Speaker 4: makes us all nervous If we start to get data
Speaker 4: that gets too cool too quickly, that's when that correlation
Speaker 4: between stocks and bonds breaks down. Where I think you
Speaker 4: see bonds rally, so you see yields continue to fall
Speaker 4: because people got afraid, but stocks also come down in tandem.
Speaker 1: Liz, you work for so far, and you work on
Speaker 1: the investment wing of it as early on the financial
Speaker 1: technology aspect that caters to usually younger individuals who are
Speaker 1: trying to manage their finances in take out credit. I'm wondering, though,
Speaker 1: what you make from an economic and investment perspective of
Speaker 1: people who are doing more buy now, pay later, who
Speaker 1: are increasing their credit card bills, who are increasing on
Speaker 1: their delinquencies and their defaults.
Speaker 4: It's certainly concerning and it's something that I've been watching
Speaker 4: for the last few months. We've seen delinquencies tick up
Speaker 4: so far in just the subprime auto loan sector, but
Speaker 4: you've seen, as we all know, credit card debt get
Speaker 4: to really high levels. Hasn't broken yet, hasn't been an
Speaker 4: issue yet. But the thing about where we are this
Speaker 4: time of year, we talk a lot about this being
Speaker 4: a positive time of year for the market, and as
Speaker 4: we all know, the Santa Claus Rally a possibility later
Speaker 4: this year, and we've got holiday spending going on, and
Speaker 4: so far the data from holiday spending has been maybe
Speaker 4: a little bit higher than expected. However, what happens in
Speaker 4: January in February is that if consumers were doing that
Speaker 4: holiday spending on credit so things that like buy now,
Speaker 4: pay later or on credit cards, the bill comes due
Speaker 4: in January and February. Now, this happens every year, but
Speaker 4: this year could be a time where we're seeing that
Speaker 4: bill come do and delinquencies tick up because consumers have
Speaker 4: been using buy now, pay later in larger quantities than
Speaker 4: they did last year.
Speaker 1: How does that affect your vestment strategy? I mean, basically,
Speaker 1: are you looking to January and February to see those
Speaker 1: increase in defaults in order to get more bearish and
Speaker 1: say that maybe the bond market could rally more. But
Speaker 1: that's going to be a negative when it comes to equities.
Speaker 4: Well, so, the Bowl case and a lot of the
Speaker 4: optimists have been hanging their hat on the strength of
Speaker 4: the consumer, and the consumer has remained strong. There's obviously
Speaker 4: appetite to spend, there's appetite to travel. We're seeing the
Speaker 4: consumers still get out there and spend their money, both
Speaker 4: in stores and online. But over time, if the labor
Speaker 4: market cools, or if consumers really are feeling the pain
Speaker 4: of inflation and recognizing the idea that inflation has stopped
Speaker 4: growing as quickly, but it hasn't come down. So for
Speaker 4: consumers to really get some relief, you would need some
Speaker 4: deflationary prints and we haven't gotten those yet. So if
Speaker 4: the data does start to suggest that the consumer has
Speaker 4: pulled back or the labor market is cooling to a
Speaker 4: point that's going to cause the consumer to pull back,
Speaker 4: then that is going to be negative for equities, particularly
Speaker 4: from these levels. So watching that on a sector basis,
Speaker 4: though it may not be a wide swath of a
Speaker 4: draw down, right So if yields are falling, tech stocks
Speaker 4: probably still can do okay in that environment. But then
Speaker 4: you see the pain on things like consumer discretionary stocks.
Speaker 4: You see the pain on cyclicals because right now I
Speaker 4: think the market is in this place where we're not
Speaker 4: sure if we're going to have a cyclical expansion or not.
Speaker 4: We haven't confirmed in one direction or another, and we're
Speaker 4: sort of waiting.
Speaker 2: To see super difficult to make cause on this market.
Speaker 2: You mentioned sectors list, so let's finish there. What are
Speaker 2: your favorite sectors gone into year enda beyond?
Speaker 4: Well, Look, as yields fall, I think for the near
Speaker 4: term at least tech stocks still can hold up well.
Speaker 4: This is also a period of time after the last
Speaker 4: hike and before the first cut that stocks.
Speaker 3: Tend to do okay.
Speaker 4: So I don't necessarily see a huge draw down unless
Speaker 4: there's some exogynous shock.
Speaker 3: But going into twenty twenty.
Speaker 4: Four, I think that we need if the bowl case
Speaker 4: comes true, we need some broadening out in the equity market.
Speaker 4: I am still nervous about a draw down. I am
Speaker 4: worried that we're going to get data that cools it
Speaker 4: too much, so I would be cautious in cyclicals, so
Speaker 4: I would still be looking at things like consumer staples.
Speaker 4: I think the utilities trade is okay if you're looking
Speaker 4: for growth, but you don't want that rate sensitivity. I
Speaker 4: think healthcare is a good place to be, and I
Speaker 4: do think that we see a resurgence in energy stocks
Speaker 4: because supply will continue to get cut.
Speaker 2: Interesting final point, let's thank you. It's going to catch
Speaker 2: up with you as always this young there of so
Speaker 2: fine the sequity market.
Speaker 1: Lauren Goodwin joining US now economist, director of portfolio Strategy
Speaker 1: at New York Life Investments, Director of disinflationary Nirvana narratives.
Speaker 3: Do you buy it?
Speaker 5: I don't buy it. I think we're sitting there right now,
Speaker 5: but that it's a stop on the train towards recession.
Speaker 5: And the reason for that twofold really one is the
Speaker 5: long and variable lags of monetary policy. We're sort of
Speaker 5: right on time for an average recession timeline from the
Speaker 5: first FED rate hike. But the other is that if
Speaker 5: we did get a cut in March or May, and
Speaker 5: inflation wasn't falling precipitously, we weren't heading towards recession, then
Speaker 5: I think we'd see financial market conditions ease pretty significantly.
Speaker 5: And chairpal and other FED members have been very insistent
Speaker 5: that they don't want to see that. That's a recipe
Speaker 5: for likely a reacceleration of activity and makes the inflationary
Speaker 5: environment more sticky.
Speaker 1: So when we take a look at where you want
Speaker 1: to play the best returns for sixty forty going back
Speaker 1: to nineteen ninety one, do you lean in or do
Speaker 1: you de lean against it and say someone's got to
Speaker 1: be wrong here.
Speaker 6: Whoever it is, I'm going to move against.
Speaker 5: Wells as much as inc that we've spilt, I'm a
Speaker 5: part of it. As much words we put out there
Speaker 5: about the soft versus hard landing debate, neither side has
Speaker 5: been the winner for investors all year, and I expect
Speaker 5: that to be the case for the first part of
Speaker 5: twenty twenty four as well. What I mean by that
Speaker 5: is the only thing we're really certain about is that
Speaker 5: the market is facing uncertainty, and so landing strongly in
Speaker 5: one camp or the other isn't likely to be the answer.
Speaker 5: It's quality, and I think we're seeing that over the
Speaker 5: course of this year, investors leaning into profitability, to dividend yields,
Speaker 5: and to areas of the market where investors expect that
Speaker 5: no matter what happens in the first half of next year,
Speaker 5: they can build some resilience.
Speaker 1: So went in doubt by Microsoft. Is that basically what
Speaker 1: you're saying. I mean, essentially, that's basically been the market
Speaker 1: narrative so far, or then not the market narrative. This
Speaker 1: is what people are saying, we don't know what's going
Speaker 1: to happen, We'll just buy big tech and sit and wait.
Speaker 5: It's a part of the story. One of the things
Speaker 5: I think will shift over the course of twenty twenty
Speaker 5: four specific to the tech narrative is that the excitement
Speaker 5: around productivity and the new technological developments we're getting from
Speaker 5: the artificial intelligence trend have been centered in the foundational
Speaker 5: layer of tech, not least because that's also where consumers
Speaker 5: spend money. As the consumer experiences the sort of dissonance
Speaker 5: of high price levels that you've covered so well, I
Speaker 5: expect that more of the story around tech will actually
Speaker 5: expand into the digital infrastructure and the application layer that
Speaker 5: get built on top of the foundational layer of tech.
Speaker 1: Which really is sort of a part of the difficulty
Speaker 1: understanding what's going on because there are these sort of
Speaker 1: secular overlays like artificial intelligence, like weight loss drugs that
Speaker 1: are put over a lot of uncertainty and frankly a
Speaker 1: lot of underperformance of other rank and file companies. We saw,
Speaker 1: for example, over the past week, pretty big inflows into
Speaker 1: large cap US stocks. We saw outflows yet again from
Speaker 1: the Russell two thousand. What do you make of that
Speaker 1: that basically small caps are going to be left for
Speaker 1: dead in a sense and continue to underperform dramatically even
Speaker 1: with some sort of settling out.
Speaker 5: In this narrative, small caps as the economy slows, tend
Speaker 5: to underperform because they don't have the overhead, the administrative
Speaker 5: overhead that helps them to digest higher rates, higher cost
Speaker 5: the way that large caps do. So it's not necessarily
Speaker 5: a matter of sector, but one of business model, one
Speaker 5: of truly size. I think there are a couple of exceptions.
Speaker 5: The tech sector is one of them, where profitability can
Speaker 5: exist in mid and small caps as well. But as
Speaker 5: we move through into Q one, I expect that the
Speaker 5: preference for frankly defensive allocation plays large caps is one
Speaker 5: of them defensive sectors. I really like infrastructure equity there.
Speaker 5: I think they're going to continue to gain ground because
Speaker 5: we're going to see more evidence that the data is slowing.
Speaker 1: Isn't the best defense just cash?
Speaker 5: There's there are benefits to cash when you're expecting a
Speaker 5: major fallout in the market. But the one of the
Speaker 5: things that I think is so challenging about cash right
Speaker 5: now is that we see such strong opportunity to harvest
Speaker 5: yield in sectors of the economy that even if we
Speaker 5: see recession, which I expect, and even as spreads widen,
Speaker 5: you can still gain meaningful yield uptick in, for example,
Speaker 5: the high yield bond market.
Speaker 1: Funny that you say that high yield bonds had the
Speaker 1: biggest four week inflow going back to June twenty twenty.
Speaker 1: This according to Bank of America Michael's Hartnett. This to
Speaker 1: me highlights exactly what you're talking about. A lot of
Speaker 1: people are saying, we don't have certainty about where things
Speaker 1: are going, We're.
Speaker 6: Going to pile into cash.
Speaker 1: Seventy five billion dollars going in there in the past week,
Speaker 1: But we're also going to pile into income because we
Speaker 1: know we're going to get something. Are you seeing sort
Speaker 1: of the reversal of the bond stock dynamic over the
Speaker 1: past two decades or really, bonds are your equity drivers
Speaker 1: in some ways your income plays and then you can
Speaker 1: sort of shoot for the moon on the peripheries with
Speaker 1: some equities.
Speaker 5: Yes, that is what we're seeing. But I think what's
Speaker 5: specifically interesting about high yield is that we see investors
Speaker 5: and we're doing the same taking equity like risk in
Speaker 5: high yield because you can harvest a meaningful coupon on
Speaker 5: these bonds while acknowledging that FED programs early in the
Speaker 5: pandemic made the credit quality of this sector much more
Speaker 5: interesting relative to past economic cycles. So even if you
Speaker 5: expect spreads to widen prices to fall as the economy stumbles,
Speaker 5: you can still make up for it with the income
Speaker 5: that you're able to capture from that sector.
Speaker 1: So is that your highest conviction heading into next year?
Speaker 1: Can you give us a sense of kind of how
Speaker 1: you're framing at a time where there isn't a lot
Speaker 1: of conviction.
Speaker 5: Yeah, So I want to be clear that even though
Speaker 5: we have a recessionary call in the first half of
Speaker 5: the year, I don't think that's particularly pessimistic. I think
Speaker 5: that's an optimistic scenario for the economy allows a reset.
Speaker 5: I also think that we're going to see risk assets
Speaker 5: continue to do well for the next couple of months.
Speaker 5: We're doing is taking advantage of this sugar rush while
Speaker 5: we have it to rebalance into themes that we think
Speaker 5: will work particularly well. We've talked about a few of them.
Speaker 5: Defensive sectors are really like infrastructure equity. We like high yield,
Speaker 5: and I do think that there's room to run in
Speaker 5: duration as well.
Speaker 1: Do you think that the cyber truck is attractive?
Speaker 5: I will admit that I just saw it for the
Speaker 5: first time after hearing John say this morning it looks
Speaker 5: like a kindergartener drew it, okay, and I could not disagree.
Speaker 3: Okay, Well, it's weird.
Speaker 1: Have you been hiding under a rock?
Speaker 6: I think it's been out there.
Speaker 1: Lauren Goodwin, thank you so much for being with us.
Speaker 1: Wonderful to see you. Lauren Goodwin of New York Life Investments,
Speaker 1: thank you, and she, of course will say, no, Lisa,
Speaker 1: you've been hunded hiding under a rock because I haven't
Speaker 1: seen what movie? Haven't I seen die Hard? Die Hard,
Speaker 1: which I guess is a bad thing, and that it's.
Speaker 5: A Christmas movie.
Speaker 1: Said, why is this debated? He agrees, Okay, so look
Speaker 1: on this on social media and just put in die
Speaker 1: Hard and you'll see this enormous debate goes on every year.
Speaker 6: It's real.
Speaker 1: It's a real debate because check out social media. I
Speaker 1: will check out social media and I will watch the movie.
Speaker 1: Thank you for being with us at Lauren.
Speaker 2: Nadia, Martin wickensjoin just now the director has fell in
Speaker 2: capital Nadia. Let's start there. This word voluntary. How important
Speaker 2: is that word voluntary? At opek plus, I.
Speaker 7: Think the market finds the word voluntary very problematic because
Speaker 7: it means that the group did not manage to together
Speaker 7: agree that this is what we actually have to do,
Speaker 7: and this is why the oil price has not strengthened
Speaker 7: since it was announced.
Speaker 2: What kind of follow through do you expect off the
Speaker 2: back of the announcement? Then we know what the market
Speaker 2: is preoccupied with, a single word. What are you telling clients?
Speaker 7: Well, then on the margin we then see that there's
Speaker 7: around three hundred thousand barrels per day coming less from UAE,
Speaker 7: coming less from Kuwait, and one hundred thousand barrels per
Speaker 7: day coming less from Saudi Arabia. So that makes Q
Speaker 7: one look slightly better and call it a balanced market, right,
Speaker 7: But it's only a Q one cut and it doesn't
Speaker 7: really change the picture. And again, you know what it
Speaker 7: was different about this so pickplus meeting is that it's
Speaker 7: not a long duration cut.
Speaker 4: Right.
Speaker 7: Last year they made it a long duration and now
Speaker 7: they're only looking at three months forward. The expectation for
Speaker 7: them is of course that we will start to see
Speaker 7: demand pick up and then we will see draws, especially
Speaker 7: into the second half next year. But what we saw
Speaker 7: throughout this quarter is a lack of draws does not
Speaker 7: make the oil price rally, right, and we're going to
Speaker 7: see the same in the first quarter.
Speaker 1: We believe there's a story Nadia on the Bloomberg talking
Speaker 1: about how algorithmic traders are confusing all of this so
Speaker 1: that we can't really get the same kind of signal
Speaker 1: from oil prices because of this. Do you buy that
Speaker 1: or do you think that oil prices are sending a
Speaker 1: very strong signal about growth globally? But also particularly in China.
Speaker 7: Well, I think oil prices are okay. You know, it's
Speaker 7: not a low oil price, it's not a high oil price,
Speaker 7: it's a healthy oil price. I think what we have
Speaker 7: to get our heads around is the fact that China
Speaker 7: has changed as an economy, right, and so we're not
Speaker 7: going to see the levels of GDP growth that we.
Speaker 6: Were used to.
Speaker 7: But probably where we are this year, things will continue
Speaker 7: to go on year over year. Of course, this year
Speaker 7: we saw one point five million barrels per day year
Speaker 7: on year growth in oil demand, and our view will
Speaker 7: see six hundred thousand barrels per day next year. It's
Speaker 7: probably slightly higher than consensus. But it's not only China,
Speaker 7: it's also India. It's also non oecd Asia X, China
Speaker 7: and India that are really driving things. In contrast to
Speaker 7: the US that even though the US economy we're firm
Speaker 7: believers in a soft landing, the problem is the rise
Speaker 7: in fuel efficiency every year in the US and this
Speaker 7: is why the driving season disappointed this year and it's
Speaker 7: probably going to disappoint next year. Add into that tesla
Speaker 7: and EV purchases that is also a headwind on that
Speaker 7: demand growth.
Speaker 1: If that's really a big driver of why prices, as
Speaker 1: you call them, healthy but not as elevated as people
Speaker 1: would exploit it would expect. How much can we see
Speaker 1: prices continue to decline as ev adoption and some of
Speaker 1: the other types of non fossil fuel economies build up.
Speaker 7: I think the main difference there. I mean on the
Speaker 7: demand side, yes, we will see slow demand and you know,
Speaker 7: already for next year demand growth and our view is
Speaker 7: one point four million barrels per day year on year
Speaker 7: for the whole world global demand growth, right, but some
Speaker 7: estimates are already calling for less than one million barrels
Speaker 7: per day, right. I think the other aspect, though, is
Speaker 7: the supply side. Right, is that right now we are
Speaker 7: in this still shale boom and that will continue for
Speaker 7: probably another you know, max two million barrels per day,
Speaker 7: and you know, we'll say peak US production will be
Speaker 7: at fifteen point five million barrels per day. So when
Speaker 7: we think about the balance and prices, we will then
Speaker 7: still have strong oil prices because these long cycle investments
Speaker 7: are not happening at the pace that they have in
Speaker 7: the past given this relatively healthy oil price, So I
Speaker 7: don't see a long term negative a price path for
Speaker 7: oil and I expect actually it to strengthen over the
Speaker 7: coming years. We just have to get through this US
Speaker 7: shale being growth period.
Speaker 2: Nadia, appreciate your view. Nadia martin Wigan there as Feland
Speaker 2: Capital computer hardware maker HP Enterprise joining the RUSS to
Speaker 2: artificial intelligence in earnings announced this week HPA, saying it
Speaker 2: expects softer demand for service and storage, but it's hoping
Speaker 2: it's new AI venture will offset the slowdown. The plan
Speaker 2: including a bigger partnership with chip giant Nvidia and Oni
Speaker 2: and Nery, the CEO of HPE, joining us from Barcelona
Speaker 2: where he's been speaking to customers. An tell you great
Speaker 2: to catch up with you, sir. Let's start with that
Speaker 2: relationship with Nvidio for our audience who aren't familiar with it.
Speaker 2: Can you describe it to us and how beneficially it's
Speaker 2: going to be to both of you.
Speaker 8: Yeah, well, good morning, thanks for having me. As you
Speaker 8: see we are in Barcelona. There's still a show going on.
Speaker 8: We hosted HB Discovered here with more than three thousand customers,
Speaker 8: and thanks again for having the opportunity to talk to you.
Speaker 8: So here a discoverer in Barcelona, we announce an expanded
Speaker 8: partnership with Nvidia. Two weeks ago at the Supercomputer event
Speaker 8: in Denver, we announced a deep solution for what we
Speaker 8: call model developers for generative AI, using our supercomputing capabilities,
Speaker 8: plus our intellectual property in the software space, plus Nvidia
Speaker 8: chipsets and other aspects of what they do to provide
Speaker 8: a massive capability for motor developers to speed up the
Speaker 8: training models. And here on Thursday I announced an extension
Speaker 8: of that partnership for enterprise customers to what we call
Speaker 8: fine tune those models. And that's the right time to
Speaker 8: value using our expertise as well as our services capabilities
Speaker 8: and the software to be able to deploy on premises
Speaker 8: and at the edge.
Speaker 9: So this is a complete solution for what we call
Speaker 9: the AI live cycle.
Speaker 8: From tree to tune into infancy, and customer has a
Speaker 8: massive reception because they want to privately fine tune the
Speaker 8: models with their data in a secure and compliant way.
Speaker 2: It's clear your stock is benefiting from the glow of Nvidia.
Speaker 2: We can see that. I think Raymond James writing that
Speaker 2: you're getting a seat at the AI table. Can you
Speaker 2: talk to us about the pace of adoption of this technology.
Speaker 2: I think many of us. Antonio surprised by some of
Speaker 2: the guidance we had repeatedly from Nvidia that this wasn't
Speaker 2: just a hopeful story about the future, it was real
Speaker 2: and present. Can you talk to us about that.
Speaker 8: Yeah, well, I think there's two importants, right, So the
Speaker 8: story is absolutely real. We see it in the quality
Speaker 8: of the dialogs with customers, which are now.
Speaker 9: Accelerating the mobile training. So you think about this. At
Speaker 9: the beginning of twenty twenty three, we.
Speaker 8: Had less than one hundred million dollars what I call
Speaker 8: accelerator processing units in our server business. At the end
Speaker 8: of twenty twenty three, we grew that business to three
Speaker 8: point six billion overs and nobs, and that was literally
Speaker 8: in ten months. And the reason why that's happened is
Speaker 8: because the technology has achieved an inflection point what is
Speaker 8: ready to be deployed.
Speaker 9: However, our story is not just AI.
Speaker 8: Just to be clear, Jonathan Lisia, our story is a
Speaker 8: combination of a hybrid cloud, a cloud native world, in
Speaker 8: an AI native world.
Speaker 9: Think about it this way. Most of our data today
Speaker 9: sits in the cloud native world.
Speaker 8: Whereas in your premise and manufacturing flows and hospitals, and
Speaker 8: obviously in the public.
Speaker 9: Cloud, but AI needs that data.
Speaker 8: Is one hungry for that data and therefore now we
Speaker 8: need an AI native architecture to train and find tune
Speaker 8: this model with that data and then put it in production,
Speaker 8: which ultimately is the value.
Speaker 10: To change your processes and be able to achieve those outcomes.
Speaker 10: And we deliver all of that to our hPG platform
Speaker 10: and that's what we see a tremendous growth in a
Speaker 10: connectivity business, in a hybrid cloud business, and then obviously
Speaker 10: now in AI and we have.
Speaker 8: A unique portfolio to address all aspects of what customers need.
Speaker 1: Antonio. This year, we've been talking to so many people
Speaker 1: who talk about a winner takes all type of trend
Speaker 1: in tech, in particular Amazon's Aws, Microsoft's zore taking an
Speaker 1: increasing part of the market share. How do you compete
Speaker 1: at a time where people seem to be gravitating toward
Speaker 1: the biggest players.
Speaker 8: Well, there is an interesting opportunity here because obviously the
Speaker 8: last decade, think about twenty ten to twenty twenty, it
Speaker 8: was all.
Speaker 9: About the cloud decade. You know, the cloud for us is.
Speaker 8: An experience, is for accelerate speed and agility across the business.
Speaker 8: And now we enter what I call the new age
Speaker 8: of insights and it's all about deriving insights.
Speaker 11: From the data and changing the way you do business.
Speaker 8: But that inflection point actually requires a different architecture, and
Speaker 8: therefore customers are not keen to put the public data,
Speaker 8: you know, the data and the public domain and make
Speaker 8: sure that they control that because that's the intellectual property.
Speaker 8: And that creates a massive opportunity for us, and we
Speaker 8: think of hpgre like us, the fourth cloud is a
Speaker 8: design for hybrid, meaning you can take advantage of the
Speaker 8: public cloud, also take advantage your own premises and more
Speaker 8: and more at the edge and be able to do
Speaker 8: everything you need in a unified experience.
Speaker 9: And that's the value that we bring to the table.
Speaker 8: And ultimately we have every aspect of the solution stack
Speaker 8: and the partnerships.
Speaker 10: Like we did this week with the media to give
Speaker 10: that unified experience.
Speaker 1: We've been hearing all about consolidation in big tech. How
Speaker 1: much are some of the biggest cloud providers kind of
Speaker 1: trying to get into that market where it's basically the
Speaker 1: hybrid trying to have bespoke solutions for companies versus having
Speaker 1: the market to yourself.
Speaker 9: I mean the market is big. I think you know
Speaker 9: we're talking about over.
Speaker 8: A trillion dollar market opportunity from a tea perspective, and
Speaker 8: I believe the eye opens an incremental one point six
Speaker 8: trillion dollar opportunity for everyone. So there's plenty of market
Speaker 8: out there. And you think about us as a company.
Speaker 8: This year, we grew five and a half percentage revenue.
Speaker 8: We expand the gross margin very rapidly. It takes to
Speaker 8: the mix and the value will bring to.
Speaker 11: The table, achieve record.
Speaker 9: Breaker performance in long gap, the.
Speaker 8: Little enity to share and free cash flow, and we
Speaker 8: believe there's a plenty of runway here.
Speaker 9: But ultimately the winner is about all.
Speaker 8: Delivering a simple, simple experience where technology is.
Speaker 11: Easy to deploy and consume.
Speaker 9: And ultimately accelerate business outcomes.
Speaker 8: It's not just about thinking about technology and speeds and feeds.
Speaker 11: It's about delivering that agility to deliver those of business outcomes.
Speaker 11: A thick HP is uniquely positioned with the fold cloud.
Speaker 2: I call it hpgree lake too much tech. Let's finish
Speaker 2: on football. Are you happy that Messi is no longer
Speaker 2: in Barcelona and we have him here in America now? Antonio, Well, I'm.
Speaker 8: Happy that missus Argentina and I was born in Argentina
Speaker 8: and I had the honor and pleasure to.
Speaker 11: Meet both of them. In fact, I was able.
Speaker 8: To play one time again with you with Maradona, and I.
Speaker 9: Have to say, for us is an incredible pride.
Speaker 8: But obviously having him in the United States gives me
Speaker 8: the opportunity to go watching more often.
Speaker 2: Amazing. I want to hear that Maradonna story one day, Antonio,
Speaker 2: Thank you, Antonio near again if you look back at
Speaker 2: thank you sir on the latest, because four years ago,
Speaker 2: when I first saw the design for this vehicle, then
Speaker 2: I might remember this. I described it as an eight
Speaker 2: year old during the Car of the Future, just these
Speaker 2: jacket lines and it looked ridiculous. And here we are.
Speaker 2: The thing looks phenomenal and everyone wants to buy one,
Speaker 2: at least the people I speak you still.
Speaker 1: Think it looks like your whole Druids, So it'scite to you.
Speaker 2: But what do I know about car design, because apparently
Speaker 2: everyone thinks this is the car of the future and
Speaker 2: they want to buy it.
Speaker 1: Well, apparently Danives thinks that you're a great candidate to
Speaker 1: get in one of those and drive.
Speaker 2: Off the while we'll have that conversation right now, just
Speaker 2: pitching the cyber truck to me and a commercial Breakdan,
Speaker 2: It's good to see you.
Speaker 6: Great to be here.
Speaker 2: It's fantastic to catch up this Beast deliveries. Talk to
Speaker 2: me about how transformational this might be for the company.
Speaker 6: It's a historic moment. I mean, it's four years in
Speaker 6: the making, and I think the reason it's important in
Speaker 6: terms of this could be another growth vehicle for a
Speaker 6: musk and Tasla. And it also just shows what's happened
Speaker 6: three one three area code GM Ford peeling back a
Speaker 6: little on EVS, Tesla is doubling down, and I think
Speaker 6: this is an important moment. And you go back over
Speaker 6: the years, many times been count out, but yet they've
Speaker 6: come out and reflex the muscles moments.
Speaker 2: I want to talk Margins a little bit more with you,
Speaker 2: but just on the point you made bringing up GM
Speaker 2: and Ford. Are we finding out that people just want
Speaker 2: Teslas they don't want EVAs.
Speaker 6: Look, I think that's a serious question here, because you know,
Speaker 6: wanting an EV versus do you actually just want a Tesla?
Speaker 6: And I think you're starting to see now a moderation
Speaker 6: in terms of ev demand. Now clearly Tesla has had
Speaker 6: the price war that we've talked about in China. That's definitely,
Speaker 6: you know, left a bit of a stand. But I
Speaker 6: do think from a scale and scope perspective, you look
Speaker 6: at Fisker reducing guidance again today, no one could match
Speaker 6: the scalon scope of Musk and Tesla, and I think
Speaker 6: that lead continues to further be there. And I think
Speaker 6: that's what's happened a little humble pie maybe with traditional automakers.
Speaker 1: Well, John Lawler was on yesterday a CFO Ford and
Speaker 1: he was talking about how there was a different audience
Speaker 1: for the initial Tesla's because it was the first adopters
Speaker 1: and they were willing to pray a price premium and
Speaker 1: they were willing to come in and they were Tesla adopters.
Speaker 1: The ones who are coming in now are looking for
Speaker 1: price value, quality, et cetera. It is a different pool
Speaker 1: or that can be pulled away more aggressively in that
Speaker 1: kind of environment. Does Tesla's margin story start to get eroded?
Speaker 6: I think, and John talked about it. I think that's
Speaker 6: right now, that's the balancing act because if you look
Speaker 6: from a margin perspective, it's really been volume over margins
Speaker 6: in the street you know, so far that's been the
Speaker 6: right strategy. Next two to three quarters you need to
Speaker 6: see margins trough out level out here. But when you'll
Speaker 6: get cybertruck look, essentially they'll be losing let's say, thirty thousand,
Speaker 6: forty thousand per vehicle for the next year and a half.
Speaker 6: Then it starts to become profitable. But that is the
Speaker 6: near term pain for long term gain that they need
Speaker 6: to do in what continues to be this green tidal wave.
Speaker 1: You know, to John's point, when you're saying people just
Speaker 1: want to Tesla, I wonder how much that's people wanting
Speaker 1: to ride Elon Musk's wave and how much that was
Speaker 1: really the feeling a number of years ago. How much
Speaker 1: some of the recent high profile discussion around Elon Musk,
Speaker 1: with with his colorful interview and commentary toward advertisers, does
Speaker 1: that draw people in or push them away?
Speaker 6: I think there's still a question there because to some
Speaker 6: and emboldens them. In terms of Musk what he represents,
Speaker 6: he's the anti that that's you know, I affiliate, you know,
Speaker 6: with the Tesla, but then on the other hand, you
Speaker 6: alienate and the problem for I think Tesla investors when
Speaker 6: you sell consumer products to the masses. You don't want controversy.
Speaker 6: But again, Musk is Musk, goes to be of a
Speaker 6: different drum, and you see and that's you know, we
Speaker 6: saw that maybe overshadow a bit in terms of what
Speaker 6: happened at the New York Times event, the cyber truck unveiling,
Speaker 6: that's four years in the making. But at the end
Speaker 6: of the day, Musk will continue to I think, innovate
Speaker 6: and especially when it comes cyber truck.
Speaker 2: At historical moment, what did you think about what happened
Speaker 2: this week?
Speaker 6: I think it's one where the last thing you want
Speaker 6: to see as a Tesla bull to see something like
Speaker 6: that come and ultimately overshadow what was going to be cybertruck.
Speaker 6: But as we all know, Musk is Musk, and it
Speaker 6: goes back to what we've talked about a lot in
Speaker 6: the show when he bought Twitter, the forty four billion
Speaker 6: dollar mistake in my opinion, which now let's say x
Speaker 6: is worth five to eight billion. This is always the worry.
Speaker 6: It just adds that tornado factor because with Musk, if
Speaker 6: you give him a mic, you never know what's going
Speaker 6: to happen. And that's part of the problem here and
Speaker 6: even though many could say, oh it's great, go get them, okay,
Speaker 6: but there's a business there. It's it's been essentially taken
Speaker 6: out with debt, so eventually that you're gonna have to
Speaker 6: you know, have to pay someone. In terms of what's
Speaker 6: happened with X.
Speaker 2: I think you just put a dentive's multiple on X
Speaker 2: there with that valuation. But we'll come back to that
Speaker 2: another time. I want to talk about margins just a
Speaker 2: little bit more. There's a massive opportunity if you didn't
Speaker 2: have this truck to keep on pushing and squeezing four
Speaker 2: and GM. GM have come out with numbers this week
Speaker 2: basically telling us that the papermarket contract, the labor contract
Speaker 2: would add an additional five to seven five per vehicle
Speaker 2: at Ford it's upwards of nine hundred. Does this truck
Speaker 2: complicate their effort to really put the squeeze on FOD
Speaker 2: and GM and the way they have done last year.
Speaker 6: I think it does a little, because ultimately, when you
Speaker 6: look at the UAW debacle and the three and three
Speaker 6: era good, it's put Farley bar, it's put back against
Speaker 6: the wall, and and that add to the cost I
Speaker 6: think where they're going to squeeze them continues to really
Speaker 6: be on that forty to fifty k price points in
Speaker 6: terms of sedans. That's what they're going after. But that's
Speaker 6: also why Mary and you've seen them from Farley as well.
Speaker 6: They're kind of come back all from the edge, not
Speaker 6: maybe going full ev where Tesla's actually going the opposite.
Speaker 6: And that's essentially what's happened right now. This is this
Speaker 6: is all Gama high steaks poker, and I think everyone's
Speaker 6: trying to figure out what must next move is in
Speaker 6: twenty twenty four.
Speaker 2: And who it's catered to.
Speaker 1: I mean that's another question too, because the audiences a
Speaker 1: Ford and g much more focused domestically, or as Elon
Speaker 1: Musk has a big audience in China as well. How
Speaker 1: much is the cyber truck geared toward American buyers and
Speaker 1: how much is it geared toward international buyers and.
Speaker 6: LEAs That's a great point because look China the hearts
Speaker 6: and lungs of the Tesla growth story. It is in
Speaker 6: China forty five percent of demand. And I think what
Speaker 6: really he's focused on here with cybertruck. It's, first of all,
Speaker 6: it's showing from an innovation technology perspective, just how far
Speaker 6: they are, But the opportunity, even though it's starting in
Speaker 6: the US, it is international, it's Europe, it's China, and
Speaker 6: I think that's really the global focus of Tesla. You
Speaker 6: look at forward, there's many that have kind of customers
Speaker 6: fought against going toward ev I'm a traditional f one fifty.
Speaker 6: I'm not going to go there. Dealers have fought against it,
Speaker 6: and they've heard it loud and clear in Detroit. Do
Speaker 6: you think it's attractive? Look the mad Max vehicle. And
Speaker 6: I remember when I remember when you talked about that
Speaker 6: in twenty nineteen. I think we talked about that together.
Speaker 6: I believe I get it. It's on the edge, but
Speaker 6: I think it's innovative, it's new, and it's something where
Speaker 6: Tesla is not gonna go down the typical path of
Speaker 6: our other autumn makers. And that's why, you know, Look
Speaker 6: when I see you driving this in New York about
Speaker 6: you know, six nine months now.
Speaker 2: And a passenger say, t K in the passenger seat.
Speaker 6: It's with cyber truck. It's gonna be the roof come off,
Speaker 6: but you could be in the back as well, So
Speaker 6: it's gonna be super interesting.
Speaker 1: Am I the only one who drives.
Speaker 2: You are, Yeah, Brando's got to drive. T can I
Speaker 2: don't drive.
Speaker 6: I'll get in the back and again, but Belisa could
Speaker 6: be driving. You got t K shotgun barrows in the
Speaker 6: back end.
Speaker 2: Sleep that could happen. All right, let's get sleep. Thank
Speaker 2: you version. Because four years ago, when I first saw
Speaker 2: the design for this vehicle, then I might remember this.
Speaker 2: I described it as an eight year old drawing the
Speaker 2: car of the future, just these jacket lines, and it
Speaker 2: looked ridiculous. And here we are. The thing looks phenomenal
Speaker 2: and everyone wants to buy one. At least the people
Speaker 2: I speak to you.
Speaker 1: Still think it looks like your old Druids, so insciting
Speaker 1: to you.
Speaker 2: But what do I know about car design? Because apparently
Speaker 2: everyone thinks this is the card of the future and
Speaker 2: they want to buy it.
Speaker 1: Well, apparently, Dan, I have thinks that you're a great
Speaker 1: candidate to get in one of those and drive off
Speaker 1: the lot.
Speaker 2: Here we'll have that conversation right now, just pitching the
Speaker 2: cyber truck to me and a commercial break. Dan, it's
Speaker 2: going to see you.
Speaker 6: Great to be here.
Speaker 2: It's fantastic to catch up this beast deliveries. Talk to
Speaker 2: me about how transformational this might be for the company.
Speaker 6: It's a historic moment. I mean, it's four years in
Speaker 6: the making, and I think the reason it's important in
Speaker 6: terms of this could be another growth vehicle for Musk
Speaker 6: and Tesla. And it also just shows what's happened three
Speaker 6: one three area code, GM Ford peeling back a little
Speaker 6: on EVS, Tesla is doubling down, and I think this
Speaker 6: is an important moment. And I know you go back
Speaker 6: over the years many times been count out, but yet
Speaker 6: they've come out and reflex the muscles moments.
Speaker 2: I want to talk Margins a little bit more with you,
Speaker 2: but just on the point you might bringing up GM
Speaker 2: and Ford. Are we finding out that people just want
Speaker 2: Tesla's they don't want evs.
Speaker 6: Look, I think that's a serious question here because you know,
Speaker 6: wanting an EV versus do you actually just want a Tesla?
Speaker 6: And I think you're starting to see now a moderation
Speaker 6: in terms of EV demand. Now, clearly Tesla has had
Speaker 6: the price war that we've talked about in China. That's definitely,
Speaker 6: you know, left a bit of a stand. But I
Speaker 6: do think from a scale and scope perspective, you look
Speaker 6: at Fisker reducing guidance again today, no one could match
Speaker 6: the scaling scope of Musk and Tesla, and I think
Speaker 6: that lead continues to further be there. And I think
Speaker 6: that's what's happened a little humble pie maybe with traditional automakers.
Speaker 1: Well, John Lawler was on yesterday a CFO Ford and
Speaker 1: he was talking about how there was a different audience
Speaker 1: for the initial Tesla's because it was the first adopters
Speaker 1: and they were willing to pray a price premium and
Speaker 1: they were willing to come in and they were Tesla adopters.
Speaker 1: The who are coming in now are looking for price, value, quality,
Speaker 1: et cetera. It is a different pool or that can
Speaker 1: be pulled away more aggressively in that kind of environment.
Speaker 1: Does Tesla's margin story start to get eroded?
Speaker 6: I think, and John talked about it. I think that's
Speaker 6: right now. That's the balancing act because if you look
Speaker 6: from a margin perspective, it's really been volume over margins
Speaker 6: in the street. You know, so far that's been the
Speaker 6: right strategy. Next two to three quarters you need to
Speaker 6: see margins trof out level out here. But when you'll
Speaker 6: get cybertruck, look, essentially they'll be losing let's say thirty
Speaker 6: thousand forty thousand per vehicle for the next year and
Speaker 6: a half. Then it starts to become profitable. But that
Speaker 6: is the near term pain for long term gain that
Speaker 6: they need to do in what continues to be this
Speaker 6: green tidal wave.
Speaker 1: You know, to John's point when he's saying people just
Speaker 1: want to Tesla, I wonder how much that's people wanting
Speaker 1: to ride Elon Musk's wave and how much that was
Speaker 1: really the feeling a number of years ago. How much
Speaker 1: some of the recent high profile discussion around Elon Musk
Speaker 1: with X, with his colorful interview and commentary toward advertisers,
Speaker 1: does that draw people in or push them away?
Speaker 6: I think there's still a question there because to some
Speaker 6: and emboldens them. In terms of Musk what he represents,
Speaker 6: he's the anti that that's you know, I affiliate, you know,
Speaker 6: with the Tesla, but then on the other hand, you alienate.
Speaker 6: And the problem for I think Tesla investors, when you
Speaker 6: sell consumer products to the masses, you don't want controversy.
Speaker 6: But again Musk is Musk goes to be of a
Speaker 6: different drum, and you see and that's you know, we
Speaker 6: saw that maybe overshadow a bit in terms of what
Speaker 6: happened at the New York Times event, the cyber Truck unveiling.
Speaker 6: That's four years in the making. But at the end
Speaker 6: of the day, Musk will continue to I think, innovate
Speaker 6: and especially when it comes cyber Truck. At historical moment, what.
Speaker 2: Did you think about what happened this week?
Speaker 6: I think it's one where still last thing you want
Speaker 6: to see as a Tesla bull to see something like
Speaker 6: that come and ultimately overshadow what was gonna be Cybertruck.
Speaker 6: But as we all know, Musk is Musk, and it
Speaker 6: goes back to what we've talked about a lot in
Speaker 6: the show when he bought Twitter, the forty four billion
Speaker 6: dollar mistake in my opinion, which now let's say x
Speaker 6: is worth five to eight billion. This is always the worry.
Speaker 6: It just adds that tornado factor because with Musk, if
Speaker 6: you give him a mic, you never know what's gonna happen.
Speaker 6: And that's part of the problem here. And even though
Speaker 6: many could say, oh, it's great, go get them, okay,
Speaker 6: but there's a business there. It's it's been essentially taken
Speaker 6: out with debt, so eventually that you're gonna have to
Speaker 6: you know, have to pay someone in terms of what's
Speaker 6: happened with X.
Speaker 2: I think you just put a dentives multiple on X
Speaker 2: there with that valuation. But we'll come back to that
Speaker 2: another time. I want to talk about margins just a
Speaker 2: little bit more. There's a massive opportunity if you didn't
Speaker 2: have this truck to keep on pushing and squeezing four
Speaker 2: and GM mat with numbers this week basically telling us
Speaker 2: that the labor market contract, the labor contract would add
Speaker 2: an additional five to seven five per vehicle at Ford
Speaker 2: it's upwards of nine hundred. Does this truck complicate their
Speaker 2: effort to really put the squeeze on four and GM
Speaker 2: and the way they have done last year?
Speaker 6: I think it does a little because ultimately, when you
Speaker 6: look at the UAW debacle and the three and three
Speaker 6: era could it's put Farley bar, it's put back against
Speaker 6: the wall, and in that add to the cost, I
Speaker 6: think where they're going to squeeze them continues to really
Speaker 6: be on that forty to fifty k price points in
Speaker 6: terms of sedans. That's what they're going after. But that's
Speaker 6: also why Mary and you've seen them from Farley as well.
Speaker 6: They're kind of come back all from the edge, not
Speaker 6: maybe going full ev where Tesla's actually going the opposite.
Speaker 6: And that's essentially what's happened right now. This is this
Speaker 6: is all Gamma high steaks poker, and I think everyone's
Speaker 6: trying to figure out what must next move is in
Speaker 6: twenty twenty four and who it's catered to.
Speaker 1: I mean that's another question too, because the audience is
Speaker 1: a Ford and GM much more focused domestically, or as
Speaker 1: Elon Musk has a big audience in China as well.
Speaker 1: How much is the cyber truck geared toward American buyers
Speaker 1: and how much is it geared toward international.
Speaker 6: Buyers and LEAs. That's a great point because look China
Speaker 6: the hearts and lungs of the Tesla growth story. It
Speaker 6: is in China forty five percent of demand. And I
Speaker 6: think what really he's focused on here with cybertruck. It's,
Speaker 6: first of all, it's showing from an innovation technology perspective
Speaker 6: just how far they are. But the opportunity, even though
Speaker 6: it's starting in the US, it is international, it's Europe,
Speaker 6: it's China, and I think that's really the global focus
Speaker 6: of Tesla. You look at forward, there's many that have
Speaker 6: kind of customers fought against going toward EV. I'm a
Speaker 6: traditional f one fifty. I'm not going to go there.
Speaker 6: Dealers have fought against it, and they've heard it loud
Speaker 6: and clear in Detroit. Do you think it's attractive? Look
Speaker 6: the mad Max vehicle, and I remember when I remember
Speaker 6: when you talked about that nineteen. I think we talked
Speaker 6: about that together. I believe I get it. It's on
Speaker 6: the edge, but I think it's innovative, it's new, and
Speaker 6: it's something where Tesla is not gonna go down the
Speaker 6: typical path of our other automakers. And that's why. You know,
Speaker 6: Look when I see you driving this in New York
Speaker 6: about you know six nine months now.
Speaker 2: You can a passenger, say TK in the passenger seat.
Speaker 6: It's with cyber truck.
Speaker 2: It's gonna be the roof come off.
Speaker 6: But you could be in the back as well. So
Speaker 6: it's gonna be super interesting.
Speaker 1: Am I the only one who drives?
Speaker 2: You are? Yeah, Brando's gotta drive, cannot don't drive, I'll drive.
Speaker 6: They get in the back and again, believe belie, it
Speaker 6: could be driving. You got TK shotgun barrows in the
Speaker 6: back end.
Speaker 2: Sleep that could happen, all right, let's sleep.
Speaker 1: Subscribe to The Bloomberg Surveillance Podcast on Apple, Spotify, and
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