Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on
Speaker 1: YouTube search Bloomberg Global News. We saw it very clearly
Speaker 1: after the company reported earnings after the close yesterday. The
Speaker 1: stock dropping we're seeing in today's trade. We're talking about Microsoft,
Speaker 1: those shares having the biggest intro trade drop since mar
Speaker 1: So this is just as the pandemic was getting underway.
Speaker 1: The company giving a lackluster forecast for sales growth and
Speaker 1: it's Azure cloud computing services businesses, which is Tim as
Speaker 1: you know going into it, we were all going to
Speaker 1: be watching that very closely because it tells you about
Speaker 1: corporate demand. Yeah, we got Dina Bass with us. She's
Speaker 1: Seattle bureau chief for Bloomberg News. She joins us on
Speaker 1: the phone from our Seattle bureau follower on Twitter at
Speaker 1: Dina Bassna. Good to have you with us. We've had
Speaker 1: what not quite twenty four hours to digest these numbers
Speaker 1: from Microsoft, But can you tell us some details when
Speaker 1: it comes to the sales forecast from Microsoft Azure the
Speaker 1: company's cloud computing division? Is that right that it's sort
Speaker 1: of a bigger story about the global economy because so
Speaker 1: many companies rely on Microsoft, It's a little hard to
Speaker 1: tell at this point, So I think just narrowing it
Speaker 1: down a little bit to Microsoft, I think this is
Speaker 1: a number that is very closely watched and is seeking
Speaker 1: on outside. Is important important in terms of what it
Speaker 1: is about Microsoft prospects. It is the only number that
Speaker 1: the company releases about it as your cloud computing business,
Speaker 1: which is something that people focus on quite a bit
Speaker 1: as the future of the company. Um since they've been
Speaker 1: transitioning to cloud services. The question you ask is whether
Speaker 1: this means that demand is slowing, that that companies are
Speaker 1: holding off on purchases. Is harder to answer because the
Speaker 1: way Microsoft position this is um that what they're seeing
Speaker 1: is companies try to sort of optimize their spend with
Speaker 1: the word they used, which means, you know, make sure
Speaker 1: that they're not spending more than they should be, that
Speaker 1: they're running their cloud applications efficiently. So what that indicates
Speaker 1: is that Microsoft is seeing companies be careful about their spending.
Speaker 1: They the company has has not said and told me
Speaker 1: it's not the case. The companies are actually large companies
Speaker 1: at least are actually holding off on spending or holding
Speaker 1: off on cloud deal, holding off on Azure deals. But
Speaker 1: that's what everyone's wondering. So so not necessarily tightening the belt,
Speaker 1: but kind of I don't know, looking for coupons. I
Speaker 1: don't know what's what's the right way to think about this.
Speaker 1: They're thinking about whether or not, Carol, we actually need
Speaker 1: something well and and you know, DNA attempt speak to
Speaker 1: a good point because I feel like whenever we talk
Speaker 1: to strategists and they talk about tech spending, I t
Speaker 1: spending there like it's so crucial for our companies in
Speaker 1: terms of their businesses. So how do we think about
Speaker 1: it in terms of how do we gauge what this says?
Speaker 1: I mean, Microsoft still selling a ton of stuff us
Speaker 1: that's correct, clearly companies are still spending a lot on
Speaker 1: Azure and also on Microsoft's Office cloud software. The note
Speaker 1: of caution here those worth watching. So that's the exact
Speaker 1: question as you put in, our companies trying to save
Speaker 1: to do more with less or are they actually cutting
Speaker 1: or holding off at some point or freezing. People will
Speaker 1: also be looking on Thursday to Amazon Web Services results
Speaker 1: to see what that means for cloud demand. The place
Speaker 1: that we we clearly have seen cuts is in the
Speaker 1: other part of Microsoft business, to the PC software. Uh
Speaker 1: and that also has impact on UM. You know, that
Speaker 1: has impact on the on the overall numbers because Microsoft
Speaker 1: PC business is so much more profitable. Those are still
Speaker 1: very high profit margin businesses to cloud businesses of lower
Speaker 1: profit margins. So the other problem that investors have to
Speaker 1: grapple with on Microsoft is the Azure growth rate forecast
Speaker 1: was below what investors might have folks, and that's the
Speaker 1: more profitable part of the business asure as are in
Speaker 1: the Office cloud sales. I love what you wrote, new story,
Speaker 1: and when you talk about Azure, you know a few
Speaker 1: years ago the division was doubling sales every quarter. Growth
Speaker 1: rates have slowed as total revenue became large enough to
Speaker 1: make gains of that magnitude were challenging. I mean, this
Speaker 1: was coming I believe was that from the was a
Speaker 1: the CFO actually talking about that. Um. But it's interesting,
Speaker 1: you know because right, it's these businesses when they first
Speaker 1: come out of the gate, right, the growth numbers and
Speaker 1: the growth rates are pretty dramatic. Um. So still a
Speaker 1: solid business, it's just not the same growth rate. Okay,
Speaker 1: there's a couple of factors. They're right. It's harder to
Speaker 1: double every quarter when your business is north of ten billion, right,
Speaker 1: the right, So that's some of it. But but yes,
Speaker 1: the CFO Amy Hoode was flagging that that Again, what
Speaker 1: they're seeing is that they're trying to offer what she said,
Speaker 1: optimized companies beds optimized with the word she's she said
Speaker 1: that Microsoft, uh, you know, customer support teams are actually
Speaker 1: proactively going out to customers to do that because they
Speaker 1: knew that in the economy that we're facing right now,
Speaker 1: customers are worried about spend. Microsoft would rather go in
Speaker 1: and say, let's help you figure out how you can
Speaker 1: meet your budgets and still do what you need, then
Speaker 1: have those customers just that frozen and not spend at
Speaker 1: all or or you know, cut as you're spending, so
Speaker 1: that the idea there is that they want to help
Speaker 1: those customers that have to save. And she made the
Speaker 1: same point to me about electrical costs, right, so, uh,
Speaker 1: you know, all these cloud computing services are very um electricity,
Speaker 1: heating and cooling intensive. So Microsoft flagged that they're going
Speaker 1: to be seeing additional costs to run these services, particularly
Speaker 1: because of power prices, particularly in Europe. And uh, you know,
Speaker 1: and could also flag to me that they are going
Speaker 1: out to customers who are worried about the electrical costs
Speaker 1: that they're facing and trying to help them figure out
Speaker 1: how they can save money. Now, what Microsoft means by
Speaker 1: that is the pitch to the customer is you move
Speaker 1: your stuff to the cloud, we will run it for
Speaker 1: you and will pay the electricity bill you don't have
Speaker 1: to run in your own data set. There. Well, incredible
Speaker 1: reporting as always, and DNA, thank you so much for
Speaker 1: checking in with us. Bloomberg New Seattle Bureau chief Daina
Speaker 1: Bass joining us on the phone from Seattle. You're listening
Speaker 1: to Bloomberg Business Week with Carol Messer and Bloomberg Quick
Speaker 1: Takes Tim Stinovic on Bloomberg Radio. As we said, it
Speaker 1: is a most read story in the Bloomberg and super
Speaker 1: fun to read on the Bloomberg terminal or online because
Speaker 1: of the visuals and how it comes to life. Great
Speaker 1: video package along with it too, And it is about
Speaker 1: New York City's secret weapon when it comes to the
Speaker 1: finance industry, and the secret weapon is actually make the
Speaker 1: office better than your home. Our secret weapon is Gordon.
Speaker 1: Our secret weapon is a Manda Gordon. She's here with
Speaker 1: us right now, and that's what she wrote about in
Speaker 1: Bloomberg News. She's Wealth Team reporter for Bloomberg News. She's
Speaker 1: with us right now in the Bloomberg Interactive broker's studio.
Speaker 1: So we're talking about Park Avenue here and a couple
Speaker 1: of new buildings, well one new building in particular, but
Speaker 1: a big revamp there to an existing building as well. Um,
Speaker 1: what are the buildings and how do the architects and
Speaker 1: the companies make them better than these people's homes. Well,
Speaker 1: the sea for this story is I've walked up and
Speaker 1: down Park Avenue most of my career, and certainly during
Speaker 1: the pandemic. Coming into the office and seeing it more
Speaker 1: desolate than ever meant that I appreciated the buildings and
Speaker 1: started looking at them closely. I watched to seventy Park
Speaker 1: Avenue be deconstructed, and now they're building a new tower
Speaker 1: by Foster and Partners. I watched all those construction workers
Speaker 1: filling up the bays with their tools, and then I
Speaker 1: saw for Park, about ten blocks north being finished and
Speaker 1: becoming this glistening, gleaming uh presence on the avenue. And
Speaker 1: I could not wait for the final things and the
Speaker 1: cranes and so on to go down. And when they
Speaker 1: did a few weeks ago, I was just so taken aback.
Speaker 1: And to me, you know, it's not just their their
Speaker 1: new buildings, but there are new buildings alongside iconic landmarked buildings.
Speaker 1: The first glass all glass skyscrapers and York that started
Speaker 1: in with lever House. And when that building went up,
Speaker 1: Louis Mumford and the New Yorker wrote it was the
Speaker 1: eighth wonder of the world. He said that people would
Speaker 1: direct their taxi cabs to go down Park so they
Speaker 1: could look at it, and that sense of spectacle and
Speaker 1: delight and sort of historic Moving forward, I felt looking
Speaker 1: at Park, and for this story I got to explore
Speaker 1: a few other buildings. So the big picture is that
Speaker 1: right near Grand Central and then close to Street you
Speaker 1: have two new buildings designed by Norman Foster's Foster and Partners,
Speaker 1: And although they were designed before the pandemic, they have
Speaker 1: all the bells and whistles that developers and ceo s
Speaker 1: think will help bring their employees back to the office,
Speaker 1: like wine fridges and basketball courts where I was like,
Speaker 1: are you guys gonna be working here? Or the library
Speaker 1: like it's studying. They're fun spaces. There are also a
Speaker 1: lot of wellness features, so literally the way that the
Speaker 1: air comes into the building and gets cleaned, and that
Speaker 1: there's so much fresh air circulating. It sounds like something
Speaker 1: designed just when COVID hit, but it was an idea
Speaker 1: that was laid down years before. And I have to say,
Speaker 1: having you know, spent a couple of hours in the
Speaker 1: building with the developer David Levinson. He said at one point,
Speaker 1: don't you feel good? And honestly I did feel good.
Speaker 1: So how much of these shift things around a man
Speaker 1: as they were going because of the pandemic, and you know,
Speaker 1: the work from home, the hybrid work, the conversations and
Speaker 1: also thinking about air quality because of you know all
Speaker 1: the concerns that were raised by the pandemic. Well, I
Speaker 1: think that you know, they are eager to have with
Speaker 1: these beautiful spaces, they're eager to see people use them.
Speaker 1: And I think that a social component is important, because
Speaker 1: the idea is that you come to work and that
Speaker 1: you're around there's a culture of your firm um, and
Speaker 1: there's a way of learning around people. And these spaces
Speaker 1: are just sort of breathtaking stages. And and you know,
Speaker 1: I've heard that although Citadel won't be moving in most
Speaker 1: of its employees until the summer, you know, they're all
Speaker 1: working out of other offices right now on Park Avenue
Speaker 1: and they're looking at that and they all can't wait
Speaker 1: to get in there. So I kind of want to
Speaker 1: go careful, I said, library, But it's actually there's this
Speaker 1: great line lounge right, it's art books. I mean, it
Speaker 1: looks like it's just stunning. So is it going to work, Well,
Speaker 1: oh yeah, there's I think that the reason why I
Speaker 1: focused on Park Avenue Um is that Park Avenue works.
Speaker 1: Park Avenue worked during the pandemic. If you look at
Speaker 1: a firm like Blackstone, they had an investment professionals back
Speaker 1: in the office as early as September. A lot of
Speaker 1: the bloom terms Jamie Diamond has been a strong proponent
Speaker 1: that was before Delta. Excuse me, those those buildings um
Speaker 1: have had workers. And if you walk today, I'm not
Speaker 1: joking about the food carts. There really are like very
Speaker 1: long lines for them. And that's one of the things
Speaker 1: I love about Park Avenue. It's not just social spaces
Speaker 1: that they're creating with these lounges. The sidewalk itself is
Speaker 1: a place where you run into people. You know. It's
Speaker 1: such a great part of New York City, and I
Speaker 1: have to say that the JP Morgan building man really
Speaker 1: homage to kind of old New York as well as
Speaker 1: looking very very new. Amanda Gordon, thank you so much.
Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Well, a most
Speaker 1: read story. Another most read story, I should say, are
Speaker 1: among the those on the Bloomberg terminal right now. It
Speaker 1: has to do with and it's something we talked about
Speaker 1: a lot of energy. I t when we're thinking about sustainability,
Speaker 1: green energy and just how things are innovating and disrupting
Speaker 1: to create a greener climate and what role does the
Speaker 1: government or should the government take when it comes to
Speaker 1: funding this type of progress. Well, writing about that in
Speaker 1: Bloomberg business Week is Ellen Hewitt. Uh. She writes all
Speaker 1: about California's tech millionaires and how they're split on this
Speaker 1: tax plan to fund e VS. We got with us
Speaker 1: this afternoon, Mark Million, technology Managing editor for Bloomberg News.
Speaker 1: He joins us from New York City. Also with us
Speaker 1: in the Bloomberg Interactive Broker Studio is Joel Weber. He's
Speaker 1: the editor of Bloomberg business Week. Joel. Growing up in California,
Speaker 1: if there's one thing I remember when I accompanying my
Speaker 1: parents to the to the polls was yes knows on propositions.
Speaker 1: And it's like, if you if you look at the
Speaker 1: way that the state governs itself, it's like it gives
Speaker 1: so much power to voters to make legislation, take it
Speaker 1: to the people. Yeah, and we're gonna see better for worse, right,
Speaker 1: And and we're gonna see what happens with this most
Speaker 1: recent example, Prop thirty, which be on the ballot here Uh,
Speaker 1: just around the corner um in November. Uh. What it
Speaker 1: really pits is um Uh know on a yes side,
Speaker 1: as you would expect, Lift being um, perhaps the most
Speaker 1: noteworthy player here. Um they've been. They're really pushing hard
Speaker 1: for this um and it gets to the fact that
Speaker 1: California is requiring um you know, basically all of these
Speaker 1: miles traveled to be electric and so this would be
Speaker 1: really beneficial for a company like Lift because it would
Speaker 1: help build the network that that writers in in their
Speaker 1: network of vehicles would would be able to benefit from. Uh.
Speaker 1: But to pay for that, you basically have to tap
Speaker 1: into rich Californians and they're the ones that are kind
Speaker 1: of pushing back on it, uh fairly publicly. UM So,
Speaker 1: so Mark, this is again, uh it seems like the
Speaker 1: tech industry uh rideshare companies like all of these um
Speaker 1: uh and very prominent um names here that uh you
Speaker 1: know are in this. Really he did fight in California,
Speaker 1: which Sue has always been on the forefront of like
Speaker 1: auto policy, but now is also you know, wrestling with
Speaker 1: with climate change. So which way is the wind really
Speaker 1: blowing there? Yeah? Well, the thing is like, on its face,
Speaker 1: it actually sounds like kind of nice. I mean, like
Speaker 1: to to your point, Californians love to have a say
Speaker 1: in policy and they love all things green, and so
Speaker 1: like the proposals. Um, you know, electric charging infrastructure seems
Speaker 1: like something we need. Subsidizing electric cars for UH, low
Speaker 1: and middle income residents, that sounds good. Wildfire prevention all
Speaker 1: sounds good. Um. And so this is actually in polling, UM,
Speaker 1: it's been a pretty popular proposal. UM. But again to
Speaker 1: the point that Joel was making about, I mean this
Speaker 1: all those things, for the most part kind of playing
Speaker 1: lift favor, Like their drivers are typically low in middle
Speaker 1: income and in lieu of paying the more so that
Speaker 1: they could afford to buy electric vehicles. The argument against Prop.
Speaker 1: Thirty is that they're just asking for rich people to
Speaker 1: subsidize something that should be done through through paying these
Speaker 1: drivers more money to get the vehicles that they're going
Speaker 1: to be required to drive. Um. And so that's like
Speaker 1: sort of the nuance of the debate and why Governor Newsom,
Speaker 1: who often doesn't weigh in on props, this is one
Speaker 1: of only two that he's taken a public stance on.
Speaker 1: And he's not he's he's with the billionaires. He's he's no,
Speaker 1: we should not, we should not be doing this. There
Speaker 1: are better ways to do a policy like this. What's
Speaker 1: so interesting is that it's being essentially bankrolled by this
Speaker 1: single company Lift as you, as Ellen writes about it's
Speaker 1: fundy coming just from left. As I was reading the story,
Speaker 1: I was thought to myself, where's Uber in this UM.
Speaker 1: Uber likes to pick its battles UM, and I think
Speaker 1: they're happy to let Lift get the potentially bad pr
Speaker 1: involved with trying to pull the strings on another proposition.
Speaker 1: I mean they heavily drove this, UH, this other earlier
Speaker 1: proposition which was much more core of their business UM
Speaker 1: a couple of years ago, UH to enshrine their driver
Speaker 1: contractor status, which Lift and door Dash and other kid
Speaker 1: economy companies were also supporting financially. But they've they've as
Speaker 1: far as we can tell, they've stayed out of the
Speaker 1: prey on this one. And this is this is Lift
Speaker 1: carrying the charge, notably with a couple of billionaires who
Speaker 1: are on their side, but many more billionaires are lined
Speaker 1: up in the no category. Well, Mark, let's get to
Speaker 1: that billionaire Frey, because there are some well known folks
Speaker 1: in Silicon Valley UH and billionaires themselves who are on
Speaker 1: Lift side, as you said, and then there are some
Speaker 1: that are not. I mean it's turning into a battle
Speaker 1: of kind of the Silicon Valley billionaires as well. Yes,
Speaker 1: uh so Lift has alliance with John on Door, who
Speaker 1: is you know, one of the legends of venture capital,
Speaker 1: and Tom Steyer, who is very public you know, pro
Speaker 1: pro green person as his door. Um the Nose are
Speaker 1: well notably, Um, there was there was Ron Conway who flipped,
Speaker 1: who supported it at first and then changed his mind. Um.
Speaker 1: Also in the no category Mike Moritz, who is another
Speaker 1: legend of venture capital with with Conway and Door, um
Speaker 1: the Netflix CEO Rehastings into it, founder Scott Cook all
Speaker 1: in the no category. UM. And and you know this
Speaker 1: is sort of it's kind of a funny like battle
Speaker 1: of the billionaires that's taking place here, and it's like
Speaker 1: one of the flashpoints within the Silicon Valley elite UM
Speaker 1: in this election cycle. So Mark, I'm curious as to
Speaker 1: like how uh this is even trending in in polls,
Speaker 1: we have any really data on how voters feel about this. Yeah,
Speaker 1: I mean voters are are pretty supportive. I mean it's
Speaker 1: these always come down to the wire and um news
Speaker 1: Now taking a public stance could affect things. Um. But
Speaker 1: there was a. There was a September poll um that
Speaker 1: the Los Angeles Times and the Berkeley Institute ran that
Speaker 1: found of voters supported it um, which you know is
Speaker 1: not a majority, but only thirty seven percent were posed
Speaker 1: and then the rest were undecided. So there's still still
Speaker 1: time for people to swing. But um, you know, like
Speaker 1: I said at the beginning, like this sounds really good,
Speaker 1: like electric charting infrastructure, more car, more electric cars for
Speaker 1: poorer people, like wildfire preventre and all these things are
Speaker 1: important to Californians. It's just sort of the the nuance
Speaker 1: and as the no people see kind of a crosseness
Speaker 1: of corporate influence that that they're against. But we're watching
Speaker 1: California because often as California goes, so does you know
Speaker 1: the rest of the country eventually when it comes to regulations. Yes, yeah, alright,
Speaker 1: Mark great read Mark Millian, he his technology managing editor
Speaker 1: Bloomberg News. You just saw on YouTube and quick take
Speaker 1: because he was joining us via zoom in New York City.
Speaker 1: And our thanks as always to the editor of Bloomberg
Speaker 1: Business Week, Joel Weber. Here in our Interactive Broker studio,
Speaker 1: you're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Overall trade
Speaker 1: looking a lot better than it did this morning, although
Speaker 1: we have been I gotta say, well, we're bouncing around
Speaker 1: because we're definitely off ourhighs of this session. But if
Speaker 1: you look at some of the individual names, something like
Speaker 1: a Microsoft or Alphabet, those stocks are really way down.
Speaker 1: Mega underperformance today. Yeah, they're really right weighing down the
Speaker 1: major averages. I mean, we got tech just weighing everything
Speaker 1: down on the SMP. Microsoft responsible for sixteen points in
Speaker 1: the decline, Alphabet's six points, Apple five point eight points.
Speaker 1: So we got a lot to get to right now.
Speaker 1: With Ryan last Deelica, he's equities reporter focuses on tech
Speaker 1: for Bloomberg News. He's usually in Chicago, but he's with
Speaker 1: us in the Bloomberg Interactive Broker's studio. Ryan, welcome. It's
Speaker 1: awesome to have you here. Nice to finally meet you
Speaker 1: for the first time in person too. I've read your
Speaker 1: stuff for years, so it's good to have you here. Um,
Speaker 1: you've got a story out that talks about three billion
Speaker 1: dollar megacap route. We haven't heard from Apple yet. We
Speaker 1: haven't heard from Amazon yet. We haven't heard from meta
Speaker 1: platforms yet, but they're all lower. As we see a
Speaker 1: sell off in in tech overall today. What's going on? Yeah, Well,
Speaker 1: so far the tech results have not been what you
Speaker 1: would want to see for a group of stocks that
Speaker 1: have been down pretty heavily so far this whole year. Um,
Speaker 1: there's concerns that growth is slowing. We have some valuations
Speaker 1: that remain above their long term averages. So there's still
Speaker 1: a lot of concern that, like as a fat keep
Speaker 1: raising rates as we have concerns about um, you know,
Speaker 1: higher yields and so forth. These is going to be
Speaker 1: a group that continues to uh just come under pressure.
Speaker 1: And there was a hope that their growth would be
Speaker 1: strong enough to offset some of these headwinds. So far,
Speaker 1: it doesn't really look like that's the case. Well, and
Speaker 1: this is what it gets to. I mean, this is
Speaker 1: a thing we talked about a lot, Ryan is a
Speaker 1: valuation reset, right, and this is what you want to
Speaker 1: understand the business where it is today, but really where
Speaker 1: it's going and ultimately how much should I pay for it?
Speaker 1: Certainly when you're looking at a publicly held company like
Speaker 1: an Alphabet or Microsoft, Yeah, Alphabet actually looks cheap by
Speaker 1: most valuation metrics right now. But if we are going
Speaker 1: into a period where the AD market is slower than
Speaker 1: it used to be, where you just have all these
Speaker 1: various headwindes to valuations, um and multiples, and we are
Speaker 1: potentially going into a recession. When you have all these
Speaker 1: things right now, the fact that it's cheap relative to
Speaker 1: its own history and even cheaper than the market, that
Speaker 1: may not be enough to disturb people to go in
Speaker 1: and buy, especially if you know, like we saw last night,
Speaker 1: the results is aren't strong enough. What about from Microsoft
Speaker 1: in terms of valuation? That one is still a little
Speaker 1: bit elevated relative to the broader market, So that might
Speaker 1: be one that has a little bit more froth. I
Speaker 1: don't think it would be qualified as a value stock
Speaker 1: in the way that you can probably made the case
Speaker 1: for Alphabet interesting Okay, So what does it portend for
Speaker 1: the companies that we haven't yet heard from? Meta platforms?
Speaker 1: Is consumer discretionary? Um? But we also Apple tomorrow and
Speaker 1: then we have Amazon as well. Um, how should we
Speaker 1: be what are analysts saying? How should we be thinking about?
Speaker 1: Especially you know, and I say meta platforms, I know
Speaker 1: you're about to answer, I'm sorry, but I think you
Speaker 1: know Snap last week, did we get a little preview
Speaker 1: for what's going to happen. Yeah. Absolutely, So we'll just
Speaker 1: take those one by one. Meta platforms U two real
Speaker 1: things that are going on right there. Uh. It is
Speaker 1: also very exposed to the online ad market. If that
Speaker 1: is weaker as we saw with Alphabet, as we saw
Speaker 1: the Snap, that's not good news for Meta. Meta is
Speaker 1: also spending a lot of money on its Metaverse initiative.
Speaker 1: That is, um people are growing increasingly skeptical about CAPEX
Speaker 1: and a market like this. They want to see lower costs,
Speaker 1: they want to see higher profitability. To the extent it
Speaker 1: pulls back on that our discusses and thin that's going
Speaker 1: to be highly in focus when it comes to Amazon.
Speaker 1: That's kind of in the sweet spot of both companies
Speaker 1: of Microsoft and Alphabet. It also has a very big
Speaker 1: cloud computing division. It has a growing advertising division. So
Speaker 1: these are two areas that if it's seem those same
Speaker 1: pressures that might also be a pressure to the stock
Speaker 1: going on from here. And of course, as we see
Speaker 1: just broader concerns about consumer discretionary spending and so forth.
Speaker 1: As a major online retailer. Does that mean for them?
Speaker 1: We'll have to see. But you know, is in terms
Speaker 1: of what we get from these companies, what we've already
Speaker 1: got Microsoft and Google. I think about what's come, what's
Speaker 1: to come tomorrow? You know, how do we think about
Speaker 1: it in terms of a market, you know, an equity
Speaker 1: market reset, Ryan, and how you think about it going
Speaker 1: forward and maybe the kind of reporting you want to
Speaker 1: be doing off of these results, which are so important
Speaker 1: in terms of how they can sway you know, certainly
Speaker 1: market sentiment, but also the actual trade. Yeah, it's a
Speaker 1: good question. I mean, it's kind of growth that these
Speaker 1: companies are going to be expected to see. This is
Speaker 1: what people have been focusing on really all year, and
Speaker 1: people keep hoping that because of their place in the economy,
Speaker 1: because they are in such like dynamic markets, that they're
Speaker 1: gonna be able to pull it out. They've been market
Speaker 1: leaders just for years and years, but this year they
Speaker 1: are now leading on the downside as people have found
Speaker 1: more opportunity in sectors like energy and so forth. So
Speaker 1: where this goes from here, it's it's really hard to say,
Speaker 1: but so far they're not making the case just purely
Speaker 1: on a fundamental basis, just based on the results that
Speaker 1: they've seen and where the stock has been trading. Is
Speaker 1: this like a regime shift? I mean, when we think
Speaker 1: big picture, if we think over the last decade, low
Speaker 1: interest rates, the NaSTA Actress performing so well, where are
Speaker 1: we as you talk to analysts looking forward here? That's
Speaker 1: a great question. This is something I do make a
Speaker 1: point of asking everyone I talk to you, just because
Speaker 1: I am kind of curious about it myself. I guess
Speaker 1: I would say one thing I hear a lot is
Speaker 1: that when the market eventually recovers, most people expect it
Speaker 1: to be different leaders than we saw in the previous one,
Speaker 1: which would suggest that maybe it's not going to be
Speaker 1: tech this time. However, if you look at a long
Speaker 1: term growth picture, people still see very strong growth potential
Speaker 1: for cloud computing, for software, for online retail, for all
Speaker 1: of these different categories that you expect that these companies
Speaker 1: have been emitted from for for years and years. So
Speaker 1: I do think that no one is really ready to
Speaker 1: throw in the towel, at least on big tech, which
Speaker 1: is so dominant, has such strong market positions. I think
Speaker 1: they're more respectultive parts of tech that people are like
Speaker 1: you know, maybe not quite yet. I think about three
Speaker 1: companies big in my life, and that has to do
Speaker 1: with Google, Alphabet, Apple and Amazon, like every day. I'm
Speaker 1: just kidding anymore, right, Ryan, Thank you so much. Ryan
Speaker 1: the Stellica Equities reporter at Bloomberg News normally in Chicago,
Speaker 1: but lucky for us here in our studio, I'm Robb journal. Yeah,
Speaker 1: but you let me drive? No, no, no, who's going
Speaker 1: to home? Please? I'll do. I want to drive. It's
Speaker 1: a good question. Drive. This is the drive to the
Speaker 1: clothes on bloom Bird Radio. All right, everybody, just about
Speaker 1: nine minutes left in today's trading session. We're just about
Speaker 1: thirteen minutes away, I think from Meta earnings. We're also
Speaker 1: going to hear from Ford. Who am I missing service? Now?
Speaker 1: I don't know. I was reading notes you said, Ford.
Speaker 1: Oh yeah, of course, thank you a yeah on it.
Speaker 1: But Met is a big one that we really want
Speaker 1: to know when it comes to add spending and gonna tomorrow?
Speaker 1: What Alpha can yesterday? Apple tomorrow and Amazon? Come on,
Speaker 1: yeah we can, but okay, I'll try. All Right, Meta
Speaker 1: by the way down six or seven percent, as we've
Speaker 1: seen big tech, right, Microsoft, Google really under pressure underperforming.
Speaker 1: Even though the NAZAC down to present, they're down a
Speaker 1: lot more today. Okay, So dragging down the NASDAC one hundred,
Speaker 1: the NASTAC can posit the SMP five hundred. Doesn't say
Speaker 1: anything bigger about the economy and about other companies. That's
Speaker 1: the question we're going to post a David Coudlaw, founder
Speaker 1: and CEO and chief investment Strategies as well at Mainstay
Speaker 1: Capital Management, close to four billion dollars in assets under management.
Speaker 1: David joining us on the phone from Michigan. David, how
Speaker 1: are you good? Good afternoon, Tim, Good afternoon, Carol, good,
Speaker 1: good afternoon. So we're in the midst of it. We
Speaker 1: had an alphabet of course, and Microsoft yesterday. Those shares
Speaker 1: just tanking today and dragging down the indusseries. Uh does
Speaker 1: it say something bigger? And asked this question to our
Speaker 1: Dina Bass a little earlier, But I'm curious what you think.
Speaker 1: Do these results say anything bigger about the U S
Speaker 1: economy and the global economy. Uh, they're saying something bigger
Speaker 1: about and and and they have such a you know,
Speaker 1: these two stocks alone have such a waiting on both
Speaker 1: the SNP and especially the NaSTA composite. Alphabet and Microsoft
Speaker 1: together make up nine point four percent of the waiting
Speaker 1: for the SMP five hundred and seventeen point two percent
Speaker 1: for the NaSTA composite. So certainly, as much as both
Speaker 1: of them are down today, they're weighing down those indexes
Speaker 1: a lot. But what we've seen with UM, with Alphabet, Google, YouTube, Snap,
Speaker 1: we've seen that advertising revenues are following, and I think
Speaker 1: it says, you know, this is a big tech week
Speaker 1: for earnings, and it's saying more about what's happening with
Speaker 1: AD revenue for some of these big tech companies, and
Speaker 1: the revenue on AD AD spending is falling. Revenue is
Speaker 1: falling as a result of that UM. We're we've seen that,
Speaker 1: you know, these companies have been the big leaders there
Speaker 1: now looking at hiring freezes, maybe even cutting staff. So, uh,
Speaker 1: you know, certainly we're seeing the impacts of the broader
Speaker 1: economy impacting these companies. What did it tell you about
Speaker 1: the broader economy, David, Well, Uh, if if we if
Speaker 1: we broaden out in terms of you know what, you know,
Speaker 1: we expected in the third quarter that we would start
Speaker 1: to see earnings impacted more and certainly earnings were revised
Speaker 1: down for the third quarter. Earnings were as high as
Speaker 1: nine point eight percent back on June anticipated for the
Speaker 1: third quarter that we're down about one and a half
Speaker 1: percent expected. So on those lower expectations, seventy companies are
Speaker 1: beating that have reported so far, but we've only had
Speaker 1: a little more than s and companies reporting. Um. Certainly, uh,
Speaker 1: you know, as we look into next year, we'll see
Speaker 1: we expect the economy and effect earnings more as was
Speaker 1: expected this quarter, but didn't really see it yet. Um.
Speaker 1: But but but certainly we're seeing that. You know, what
Speaker 1: the Fed is doing is certainly have an impact on
Speaker 1: the economy, right exactly, all right, So you know, um,
Speaker 1: we can all we do this on a regular basis,
Speaker 1: as you probably know. But it's like, you know, are
Speaker 1: we bought me out though on the equity trade and
Speaker 1: how much of the bad news or expectations around it
Speaker 1: is factored in? Are we topping out for rates? We
Speaker 1: can have those conversations, but at the same time, you
Speaker 1: guys and everybody else you know, has to put money
Speaker 1: to work or you can park get in cash or
Speaker 1: some cash like investment. What are you doing in this
Speaker 1: environment environment? So we had this. Uh you know, we
Speaker 1: had a low at the beginning of October, a lower
Speaker 1: low than we had in June. Uh and we don't
Speaker 1: know yet. I'm not even willing to say that it's
Speaker 1: the low for this cycle, but it's certainly an intermediate
Speaker 1: term low and an investible low because uh, you know,
Speaker 1: we have uh you know, encouraging data in the settings
Speaker 1: report that we didn't think. I think the you know,
Speaker 1: the broader impact earnings as we talked about, has been
Speaker 1: pushed out into the fourth quarter or next year. Uh.
Speaker 1: So we're seeing this rally because we see the as
Speaker 1: the terminal rate for the is approaching um whether we
Speaker 1: call it a pivot or a pause or whatever it
Speaker 1: may be. Uh. And at at the same time, you know,
Speaker 1: we're seeing these decent earnings, So we think that that
Speaker 1: we've got an investible rally here. We are invested in
Speaker 1: growth and value. What's become more attractive more recently is
Speaker 1: small cap stocks that we've added to our portfolio. But
Speaker 1: we're we've got our portfolio hedges in place still because
Speaker 1: we know there's more volatility ahead. So help us understand
Speaker 1: how you're looking at the FEDS terminal rate not in
Speaker 1: terms of what you think it's going to be. But
Speaker 1: how long the Fed is gonna is going to leave
Speaker 1: interest rates? And look, I know everything is context and
Speaker 1: historical context here, but I would argue that in my lifetime,
Speaker 1: this is high for the federal reserve. U would you
Speaker 1: say that, how long would you say that federal the
Speaker 1: Fed will leave rates high? Well, it's it's a tough question.
Speaker 1: And I say that because the Fed has has never
Speaker 1: stopped the hike cycle with headline and core inflation above
Speaker 1: the Fed funds rate, They've always reached a positive real rate.
Speaker 1: We're a long way away from that right now. Uh,
Speaker 1: you know, we'll see what our next inflation rate is.
Speaker 1: We'll see what that trend becomes. But you know, if
Speaker 1: we're talking about a terminal rate, if it's somewhere between
Speaker 1: four and a half to five percent right now, Uh,
Speaker 1: maybe a little bit higher depending on whose prediction you
Speaker 1: you believe, Um, that doesn't get us above the inflation
Speaker 1: rate on headline or core. And so that means there's
Speaker 1: more to go. Now, what could happen is inflation and
Speaker 1: specifically core starts to come down more. We're certainly seeing
Speaker 1: we're seeing rents come down, we're seeing housing come down.
Speaker 1: We're seeing used car prices come down. Uh, some falling,
Speaker 1: some areas of the economy falling precipitously. So we're seeing
Speaker 1: those impacts and and those inflation inputs coming down. Hey, David,
Speaker 1: just quickly, um thirty seconds here, you said it's an
Speaker 1: investible rally. Is something like Google and Microsoft with those
Speaker 1: shares down? Is that something you would invest in in?
Speaker 1: Just quickly, yeah, I think I think for a trade certainly, uh,
Speaker 1: and longer term, these are the secular growth stories. I
Speaker 1: think the differences as we look further out, you know,
Speaker 1: what are going to be the leaders There's been this
Speaker 1: conversation about, uh, will it be technology has been for
Speaker 1: the last ten years, or will be their other leadership?
Speaker 1: But certainly for a trade, Uh, these are certainly investable.
Speaker 1: All right, good to know. I really appreciate your time today.
Speaker 1: David Coudla, who's founder, CEO and c I O of
Speaker 1: the mainstay capital management firm. They've got some three point
Speaker 1: eight billion in assets under management, joining us once again
Speaker 1: on the phone from Michigan. Thanks for listening to Bloomberg
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