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Speaker 1: Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Whoa whoa.
Speaker 3: Little b king. Yeah, we're a little worried. It goes
Speaker 3: like a street's a little worried about Apple, Tim, We
Speaker 3: were just talking about it, one of your decliners. Shares
Speaker 3: of Apple down for fourth day in a row, moving
Speaker 3: below it's ninety day moving average. This after analys at
Speaker 3: Piper Sandler cut their rating today, setting a week macro
Speaker 3: environment in China that will damp and demand for iPhones.
Speaker 3: We heard some worries just earlier in the week.
Speaker 2: Yeah, that follows the more bearish move by analyst at
Speaker 2: Barclays who cut their rating to underweight on Tuesday. In all, Carol,
Speaker 2: Apple is down six percent in the last four days,
Speaker 2: shedding one hundred and eighty billion dollars in market cap.
Speaker 2: We should note there are now five cells on the stock,
Speaker 2: so that pushes the company's by equivalent ratio down even further.
Speaker 2: With the percentage of analysts bullish on the company at
Speaker 2: a three year low.
Speaker 3: Yes, it's interesting, all right. So what's going on? Is
Speaker 3: twenty twenty four set to take a big bite out
Speaker 3: of Apple? We've got a great roundtable. Markermann is Chief
Speaker 3: Technology correspondent at Bloomberg News. He joins us on Zoom
Speaker 3: from our La bureau, and anurag Rana is senior technology
Speaker 3: analyst at Bloomberg Intelligence. He joins us on Zoom from
Speaker 3: our Chicago bureau. Guys, thank you so much. Happy New
Speaker 3: year to both of you. I do want to kick
Speaker 3: off with you.
Speaker 4: Mark.
Speaker 3: You cover this company like HONOURAG. You talk with them,
Speaker 3: you check out their products, you do your channel checks.
Speaker 3: Should we be saying Cooper Tina, we have a little
Speaker 3: bit of a problem here.
Speaker 5: You know.
Speaker 6: I think twenty fourteen good.
Speaker 2: Twenty fourteen.
Speaker 3: Twenty twenty four don't take me back, please?
Speaker 6: Yes, could shake up to shake out to be one
Speaker 6: of the most pivol years in Apple's history.
Speaker 4: There's a lot going on.
Speaker 6: They have a pretty compelling product roadmap for the year.
Speaker 6: The Vision Pro headset, their first new category of nine years.
Speaker 6: Larger iPhone displays biggest change of the iPad since twenty eighteen,
Speaker 6: big changes to AirPods in the Apple Watch. So there's
Speaker 6: a lot going on here, but big butt. The iPhone
Speaker 6: sales concerns are a real problem. The fact that we're
Speaker 6: likely going into our fifth quarter in a row of
Speaker 6: revenue decline, that's a big problem. That's something that hasn't
Speaker 6: happened in the modern Steve Jobs nor Tim cook eras
Speaker 6: The fact that this new product category they're launching is
Speaker 6: not going to have any mainstream pickup for several years
Speaker 6: or generate any material revenue, that's a problem. The fact
Speaker 6: that Massimo proved that you could beat Apple in a
Speaker 6: patent infringement lawsuit and get their product off the market.
Speaker 6: That's a really big deal. So there's a lot of
Speaker 6: negative noise around Apple. I still think that the fundamentals,
Speaker 6: the moat they've created, the ecosystem, the iPhone, people holding
Speaker 6: onto their devices, buying news services. I think that's all
Speaker 6: pretty strong. But it just feels a little weaker than
Speaker 6: it ever.
Speaker 2: Has on a rock. I see you nodding here from Chicago.
Speaker 2: Tell us tell us your thoughts based on what you
Speaker 2: heard from Mark.
Speaker 7: Yeah, I absolutely agree with Mark in fact, but the
Speaker 7: only thing I would say is all of this you know,
Speaker 7: iPhone weakness came out when they reported results on November
Speaker 7: the two. That's when we knew when they missed China
Speaker 7: numbers by a big amount. We had heard about, you know,
Speaker 7: competition from Huawei. All of those things are important because
Speaker 7: we were hoping that by this year we should see
Speaker 7: a improvement in China smartphone sales only because the year
Speaker 7: before we had COVID related problems and there was a
Speaker 7: depression in sales. I think that really is something that
Speaker 7: you know, when they came and gave guidance. To be honest,
Speaker 7: I was surprised that the stock didn't react the way
Speaker 7: it's reacting now at that time. So I think it
Speaker 7: could be a year and you know, portfolio management or
Speaker 7: whatever it was. But I agree this year is going
Speaker 7: to be tough for them. They're going to grow somewhere
Speaker 7: between three to five percent revenue, then you buy you
Speaker 7: know a little bit of buybacks in between. So this
Speaker 7: is a this is the new normal for Apple. It
Speaker 7: has been for the last two years.
Speaker 3: Well, honurk let me follow the new normal. Does that
Speaker 3: mean Apple at some point needs to think about China
Speaker 3: not being as big a market as it has planned
Speaker 3: for it to be.
Speaker 7: Well, China is a big market. There is no there
Speaker 7: is no way out of it. But see the way
Speaker 7: you want to think about Apple in totality, and I'm
Speaker 7: only going to focus on iPhones right now because that's
Speaker 7: really what drives the product growth at least, you know,
Speaker 7: the in the near term. When you look at the
Speaker 7: global market, they have a very high market share in
Speaker 7: the US, which is a mature market. Then the next
Speaker 7: big market is China, where they have less than eighteen
Speaker 7: percent of unit market share. But as people become more
Speaker 7: rich they go out with and get a more premium brand.
Speaker 7: Then the next big market is going to be India,
Speaker 7: where they have less than five percent market share in
Speaker 7: terms of the units. So the way you want to
Speaker 7: think about Apple is over the next three to five years,
Speaker 7: the big unit chipment, you know, numbers are going to
Speaker 7: come from China and after that India. In the US,
Speaker 7: you know, we have phones, we're going to refresh at
Speaker 7: whatever three years, three and a half years, potios and
Speaker 7: that's a bit of a saturated pocket. So China is
Speaker 7: the growth engine when it comes to phones, and that's
Speaker 7: where we are seeing some you know, I would say,
Speaker 7: slow down.
Speaker 2: Hey, Mark For years, we've been hearing about how the
Speaker 2: iPhone just powers Apple, and indeed it does account for
Speaker 2: more than fifty percent of the company's revenue. But we've
Speaker 2: also heard the risks associated with that. What is the
Speaker 2: most compelling new product category for Apple that will help
Speaker 2: offset some of this slowing iPhone growth?
Speaker 6: You know, it's it's an interesting question people for years,
Speaker 6: like you said, have been talking about is it a
Speaker 6: risk that everything revolves around the iPhone and half the
Speaker 6: revenue comes from the iPhone? I think it's even worse
Speaker 6: than that, because you're buying AirPods if you have an iPhone,
Speaker 6: you're buying an Apple Watch if you have an iPhone,
Speaker 6: all these services that Apple are selling, Fitness Plus TV
Speaker 6: plus Apple Music, the App Store. Every time you download
Speaker 6: an app, where are those downloads happening, It's happening on
Speaker 6: the iPhone. How many people own an iPad or a
Speaker 6: Mac and don't own an iPhone. How many people buy
Speaker 6: an iPhone before they buy an iPad or a Mac.
Speaker 6: So if you really think about the ecosystem in totality,
Speaker 6: it is one hundred percent built around the iPhone. You know,
Speaker 6: this new vision prode answer your question about new product
Speaker 6: categories to drive revenue. That's not going to drive revenue
Speaker 6: anytime soon. If they sell out of all their inventory
Speaker 6: for twenty four if you're talking about a three to
Speaker 6: four billion in just revenue alone, probably about a billion
Speaker 6: in profit maybe a little bit less, that's nothing, right,
Speaker 6: I mean, Honor Rock can get into how minuscule that is.
Speaker 6: And so I think long term, mixed reality, augmented reality,
Speaker 6: virtual reality, those are fine categories for Apple, but I
Speaker 6: think right now it's nothing more than a pilot dream
Speaker 6: in terms of not becoming a revenue generator.
Speaker 3: Honor Rok, come on in, you are not in your head?
Speaker 7: Go ahead, yeah, I mean it's as I said, that's
Speaker 7: why you know our I would say, seventy five percent
Speaker 7: of my focus going and goes into the iPhone and
Speaker 7: the work that's you know, we do around it. And
Speaker 7: you know, at this point we should see we should
Speaker 7: have seen an improvement in China. China, you know, there
Speaker 7: are about one hundred plus million phones that need to
Speaker 7: be refreshed that we haven't seen that number move quite
Speaker 7: a bit, and in terms of the base is a
Speaker 7: little bit more than that. But you know, we you know,
Speaker 7: China is going through weakness. You know, we have a
Speaker 7: new brand, new model from Huawei, but they haven't released
Speaker 7: in a while, so people are refreshing that. So I
Speaker 7: mean it it is a big bit of an issue.
Speaker 7: But frankly speaking, we really think Apple is a unique brand.
Speaker 7: Apple is a marquee brand. There is. If you look
Speaker 7: at globally the smartphone market, Apple has less than twenty
Speaker 7: percent of market share by units. I'm not talking about
Speaker 7: revenue by units. Think of Apple very much like an LVMH,
Speaker 7: like what Coca Cola was in the fifties and sixties.
Speaker 7: Whereas countries that are that they don't have the purchasing
Speaker 7: power to buy those products right now. As they become
Speaker 7: more richer, as they become more affluent, they're going to
Speaker 7: go with a marquee brand, and that's Apple. But if
Speaker 7: somebody's thinking they're going to grow ten to fifteen percent,
Speaker 7: I mean they need to recalibrate their thinking. This is
Speaker 7: at most now a company that's going to grow in
Speaker 7: a weak economy around three to five percent. In a
Speaker 7: good economy between sixty eight percent, which, to be honest,
Speaker 7: it's not bad. This is a brand that can you
Speaker 7: conquer a lot in the long run. But in the
Speaker 7: near term we do have growth problems.
Speaker 3: Mark Mark, I think that's such a great point. Just
Speaker 3: got about twenty seconds here this reset in terms of
Speaker 3: they still sell a ton of stuff, guys, but it's
Speaker 3: not going to be as aggressively growing. We need to
Speaker 3: think about that just quickly.
Speaker 6: It's been the case for years now, you know, in
Speaker 6: terms of reven New Apples very much like the new
Speaker 6: IBM in terms of products. They want to prove otherwise
Speaker 6: and this is the year to do it.
Speaker 3: Listen, guys, thank you so much. We were looking to
Speaker 3: do a smart roundtable fundamentally about the Apple story, and
Speaker 3: you guys just laid it out for us so well.
Speaker 3: Happy happy New Year. Mark Erman, chief technology correspondent here
Speaker 3: at Bloomberg News out there on the West Coast in
Speaker 3: our anaag Rana. A must read, as I always say,
Speaker 3: when it comes to a lot of things going on
Speaker 3: in the technology world, including Apple. He's senior tech analyst
Speaker 3: at Bloomberg Intelligence out there in our Chicago bureau. This
Speaker 3: is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 8: What doesn't kill you makes.
Speaker 1: Us sud.
Speaker 3: Oh, thank god we have Gena to save us. Yes, indeed, everybody,
Speaker 3: US docs have begun twenty twenty four in a sour note. Weakness,
Speaker 3: though should be reasonably short lived, according to Bloomberg Intelligence
Speaker 3: Equity Strategies checklist of sixteen key indicators, which continues to
Speaker 3: improve for our fifth straight quarter. This from Bloomberg Intelligence
Speaker 3: Chief Equity Strategist Gina mart Adams, who is here in
Speaker 3: our Bloomberg Interactive Brokers studio. So nice to have you here.
Speaker 3: Happy New Year. Can't believe it's in New Year?
Speaker 9: Wait?
Speaker 3: Can I ask you something? You are here listening to
Speaker 3: this conversation. What do you make of the buy now,
Speaker 3: pay later? Is there something within the equity universe? I
Speaker 3: don't know.
Speaker 9: Oh.
Speaker 10: I think people are less and less cash rich, and
Speaker 10: Americans love their credit. So if you're going to give
Speaker 10: them an opportunity for a free lunch, even if they
Speaker 10: have to pay for that lunch in a month, so
Speaker 10: they're going to take that opportunity, In particular in periods
Speaker 10: of time when they're a little bit short cash, and
Speaker 10: that does appear to be where we are today. I mean,
Speaker 10: they still have very little debt, which is great longer term,
Speaker 10: but they are taking on more debt on account of
Speaker 10: the fact that it's getting more expensive to live and
Speaker 10: their incomes have really caught up with inflation. Even though
Speaker 10: that seems to be improving in the near term, we've
Speaker 10: been eighteen months in which inflation has been accelerating very
Speaker 10: quickly relative to income, and so certain income classes are
Speaker 10: struggling a little bit more than others. And anytime you
Speaker 10: give somebody something for free, they generally tend to do this.
Speaker 10: Do this.
Speaker 2: So, Gina, how do you square everything you just said
Speaker 2: right now with the optimism that you and the team
Speaker 2: have for stocks for this year.
Speaker 10: Well, so, the consumer is not the market. The market
Speaker 10: is not the consumer. It's the first thing to consider.
Speaker 10: There are potential weaknesses in the outlook, and many of
Speaker 10: them are consumer centric. But when we look at the
Speaker 10: composition of our broad equity markets in the US, it's
Speaker 10: a lot less about the American consumer than I think
Speaker 10: is popularly believed and what we've expected.
Speaker 3: We always talked about the consumer the backbone of the
Speaker 3: uscap exactly Yeah.
Speaker 10: I think that's a really good point and something we
Speaker 10: talk a lot about. It's sixty five percent of the
Speaker 10: US economy, but thirty percent of the market cap of
Speaker 10: the S and P five hundred at best is consumer sense. Also,
Speaker 10: what you tend to see in a normal recessionary sequence
Speaker 10: is the consumer slows down. There spending business investment crashes
Speaker 10: as a result of that consumer slowdown, and the business
Speaker 10: investment is what really creates the cycle. Business investments already crashed.
Speaker 10: Isms are already sitting at all time near all time
Speaker 10: low levels. Lais have already crashed, We've already experienced our
Speaker 10: major deceleration. So it's very difficult to get to a
Speaker 10: sort of mental constructs that would suggest that we're not
Speaker 10: already at or near some kind of low in the economy.
Speaker 10: Maybe we have a tiny dip lower if the consumer
Speaker 10: finally capitulates, but businesses have already adjusted, and we see
Speaker 10: that in the profit cycle as well. Within the S
Speaker 10: and P five hundred profit cycle, we saw profits capitulate materially.
Speaker 10: In twenty twenty two, we went through a massive recession
Speaker 10: in profits. Profits are starting to claw their way out
Speaker 10: of that recession now, So I think what's most important
Speaker 10: to driving stocks, frankly is earnings. Earnings are not one
Speaker 10: to one with the economy and by any stretch of
Speaker 10: the amount, and there's certainly not one to one with consumption.
Speaker 3: I am printing at the T shirts. Consumer is not
Speaker 3: the market. Market is not the consumer. Because I think
Speaker 3: about how much FI about sure, yeah, exactly, I'm going
Speaker 3: to I'm going to get it done.
Speaker 2: You know.
Speaker 10: The other thing I'd like to just add into this,
Speaker 10: because I'm talking about this for a note on Monday.
Speaker 10: We're so growth obsessed in the US. It's all about growth.
Speaker 10: It's all about growth. It's all about growth. But the
Speaker 10: reality of this cycle, especially over the last three years,
Speaker 10: that we've learned, or we should have learned, is that
Speaker 10: we should be a lot more inflation obsessed. And inflation
Speaker 10: doesn't always trail growth. And I think many of us
Speaker 10: in this market are conditioned on the idea that, well,
Speaker 10: if growth goes higher, inflation goes higher. If growth goes lower,
Speaker 10: inflation goes lower, and there's this symbiotic relationship that's not
Speaker 10: actually how it always happens. And we learned that the
Speaker 10: hard way in twenty twenty one and twenty twenty two,
Speaker 10: where inflation and growth really decoupled. So I actually think
Speaker 10: if there's a big risk to stocks next year, it's
Speaker 10: inflation that remains stickier than anybody anticipated. Even if growth accelerates,
Speaker 10: that's already expected. The whole world is expecting inflation, and we're.
Speaker 3: Not accelerate, but we're not expecting We're not expecting inflation
Speaker 3: into acel. I agree, and like, as you think about
Speaker 3: the Fed minutes from yesterday, they kind of covered everything.
Speaker 3: We could cut rates, but we could also raise rates,
Speaker 3: and I do feel like that that's the one thing
Speaker 3: that's being kind of underpriced in the markets.
Speaker 10: Yeah, and I think that that's just a natural byproduct
Speaker 10: of the fact that we're all human. We all work
Speaker 10: on recent experience. For the vast majority of the last
Speaker 10: twenty five years, we have really just been able to
Speaker 10: forecast growth and therefore forecast what was going to happen
Speaker 10: in markets. Something changed, it broke, and it definitely broke
Speaker 10: in a hard way. In twenty twenty two, Forecasting growth
Speaker 10: was not going to get you to where you needed
Speaker 10: to be with an investment strategy. So we have to
Speaker 10: consider inflation and what's going to happen with inflation in
Speaker 10: all aspects, but I think we're really reticent to do
Speaker 10: so because we're conditioned to all.
Speaker 3: But it doesn't really the end of everything, right, No.
Speaker 10: It doesn't necessarily mean the end of everything. It doesn't
Speaker 10: necessarily mean that things are broken. It's just different. It's
Speaker 10: just very different than where we've been for most of
Speaker 10: the last two decades.
Speaker 2: Well, for most the last few weeks, you and the
Speaker 2: team at Bloomberg Intelligence have been very busy because I
Speaker 2: got a lot of notes.
Speaker 3: Okay, thank you, thank you of it.
Speaker 10: We're catching up after the holiday break.
Speaker 2: Well, one thing that was really surprising to me looking
Speaker 2: back on twenty twenty three and how we can use
Speaker 2: this to predict what happens in twenty twenty four is
Speaker 2: the breadth, especially globally of stocks. We talked so much
Speaker 2: about the Magnificent seven, but you and the team crunched
Speaker 2: the numbers and it was a pretty good year globally.
Speaker 10: I know, it's kind of surprising because I think, again,
Speaker 10: the popular rhetoric has been, oh, it's just all of
Speaker 10: us seven. Hey if you missed the rally because you
Speaker 10: didn't have the Mags seven. But the reality is we
Speaker 10: tracked twenty major global equity markets around the world. Nineteen
Speaker 10: of twenty posted returns. Sixty percent of global stocks posted returns.
Speaker 10: Forty five percent of global stocks posted double digit returns.
Speaker 10: Last year. It was one of the greatest years for
Speaker 10: stocks in the last twenty five, one of the top six.
Speaker 10: So we had a really good year in equities in
Speaker 10: twenty twenty three. Not a great year in small caps
Speaker 10: without a doubt. Small caps were really left behind. Emerging markets,
Speaker 10: especially emerging markets when you include China, were left behind.
Speaker 10: So there were not everybody benefited significantly. A great deal
Speaker 10: of the equity market did do quite well in twenty
Speaker 10: twenty three.
Speaker 3: So how do you measure that? Is it the number
Speaker 3: hitting their fifty two week highs? What is it that
Speaker 3: you look at?
Speaker 10: Yeah, so we look at a lot of different things
Speaker 10: for that study. We just looked at the absolute returns
Speaker 10: just to kind of report in on, hey, here's actually
Speaker 10: what happened, and it looked pretty decent. I like to
Speaker 10: look at the percentage of stocks trading above their fifty
Speaker 10: and two hundred day moving average as my favorite breadth
Speaker 10: measure because I tend to find it gives me some
Speaker 10: indication as to what to expect for price trend. It
Speaker 10: also gives some near term toggles for the equity market. So,
Speaker 10: for instance, at the end of last year, we got
Speaker 10: to a point where seventy five percent more than seventy
Speaker 10: five percent of stocks were trading above their two in
Speaker 10: a day moving average.
Speaker 3: Which is significant.
Speaker 10: It's a very big breadth number, but it's also a
Speaker 10: bit extreme, okay, and it paired really well with things
Speaker 10: like our market Pulse index, which was saying the market
Speaker 10: itself sentiment is far too, far too bullish. RSI momentum
Speaker 10: also got to a very high extreme by the end
Speaker 10: of the year, so we were set up coming into
Speaker 10: this year to have a cool off period. At the
Speaker 10: very least, we needed to move out of the party
Speaker 10: that we had in December and pull off and let
Speaker 10: the market which I find a new equilibrium. How much
Speaker 10: of a cool loss it should be relatively small, just
Speaker 10: because most of the other conditions that we tend to
Speaker 10: follow for driving equity markets are pretty supportive, in particular
Speaker 10: the earnings trends. Frankly, I think it's kind of gone
Speaker 10: unnoticed that earning's made a major low in twenty twenty
Speaker 10: three and are starting to climb out of that low.
Speaker 10: Most sectors are going to participate in earnings recovery this year.
Speaker 10: The four ninety three, so in the non seven that
Speaker 10: we talk about, the four ninety three s and P
Speaker 10: five hundred companies that don't get as much play are
Speaker 10: actually supposed to produce their first quarter of earnings growth
Speaker 10: with the fourth quarter earning season coming up, the first
Speaker 10: quarter of earnings growth we've seen since twenty twenty two,
Speaker 10: So we should see some earnings momentum gather throughout the year.
Speaker 10: A lot of it is because inflation is decelerating. It's
Speaker 10: not because you got a big growth recovery or revenue
Speaker 10: but robust revenue recovery.
Speaker 3: It really is.
Speaker 10: Inflation needs to continue to accelerate to power that one recovery.
Speaker 3: We were talking about the end of the year and
Speaker 3: just got about a minute left here. Is that the
Speaker 3: money that's sitting in money markets. Do you anticipate that
Speaker 3: comes back into the equity markets this year? Or how do?
Speaker 3: I don't know?
Speaker 8: How are you?
Speaker 5: Yeah?
Speaker 10: I think you've got to get probably a stronger recovery
Speaker 10: in small caps and a broader recovery into all stocks.
Speaker 10: Probably need to get the FED to ease, okay, because
Speaker 10: then that changes the math. Right Right now, the math
Speaker 10: is not in favor of stocks relative to cash because
Speaker 10: the pe ratio is so high. With the exception of
Speaker 10: small caps, the math works very well for small caps,
Speaker 10: which are training at incredibly low valuation ratios. So your
Speaker 10: earning zealed on small caps pretty strong relative to cash,
Speaker 10: particularly if we go into an earnings recovery this year.
Speaker 10: But large caps it's a harder case to make. So
Speaker 10: you'd say small caps and emerging markets, those are the
Speaker 10: two markets to watch. If we get some momentum there
Speaker 10: at the same time we get a little bit of feties,
Speaker 10: those could be the areas of the market that really
Speaker 10: trigger a broader move into the.
Speaker 2: More so the more so into the equity market than
Speaker 2: into the bond market. From money market fund Yeah, no, I.
Speaker 10: Think that right now investors are considering all options because
Speaker 10: you still get a plenty of yield in the bond
Speaker 10: market as well. But we've had such an extraordinary rally
Speaker 10: in the long end of the curve, it's probably more
Speaker 10: in the short end that they consider their options in
Speaker 10: the bond market. Also, I would be remiss not to
Speaker 10: note that you know, cash inequities are not direct substitutes
Speaker 10: for one another, and so certainly there's an array of
Speaker 10: opportunities for investors to consider.
Speaker 3: Ah the God Here Bloomberg Intelligence Chief equity strategist Gina
Speaker 3: Martin Adams, a researcher who's a must read. Thank you
Speaker 3: so much, happing you hear.
Speaker 10: You too, Thanks for having me.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: Just say Alexa Play Bloomberg eleven thirty.
Speaker 2: One of the biggest news stories of the last year
Speaker 2: was the demise of San francisc.
Speaker 3: Go right like it was over right. Everybody's leaving, it's
Speaker 3: falling apart. Businesses don't want.
Speaker 2: To real estate yeah, collapsing.
Speaker 1: Yeah.
Speaker 2: The problem of the unhoused is huge. They're drug addicts everywhere.
Speaker 2: It was a doom loop. It became critics shorthand for
Speaker 2: problems wrought by remote work and drug addiction, a cycle
Speaker 2: that drove people out of the tech capital of the
Speaker 2: world in huge numbers.
Speaker 3: But here's something folks, reality really hasn't caught up with
Speaker 3: this list of woes. In the twelve months ending July
Speaker 3: twenty twenty three, the city actually gained four thy nine
Speaker 3: hundred residents after also seeing some slight growth in the priory.
Speaker 3: Or this is according to some new data. So, you know,
Speaker 3: our team here at Bloomberg News we kind of wanted
Speaker 3: to know, like, what's going on here?
Speaker 2: Well, look at the numbers. Pria non certainly did. Technology
Speaker 2: and venture capital reporter. She took a look at the
Speaker 2: greatly exaggerated demise of San Francisco. She writes about it
Speaker 2: for today's Bloomberg Tech Daily newsletter, which you can sign
Speaker 2: up for at Bloomberg dot com. Slash Technology. Pria joins
Speaker 2: us from our San Francisco bureau. Pria, it has been
Speaker 2: about a year since I've been in San Francisco, Carolyn.
Speaker 2: I had a pretty good trip there. We did December
Speaker 2: of twenty.
Speaker 3: Two, right, Yeah, it's been a while.
Speaker 2: Yeah, we had a good trip there.
Speaker 3: And I know people are like, be careful working the street,
Speaker 3: and I'm like, I walk you around in New York, I'm like,
Speaker 3: am I gonna be okay? You're gonna be okay?
Speaker 2: Yeah, You're gonna be fine. It is a beautiful city,
Speaker 2: one that's very certainly as a Californian and very close
Speaker 2: to my heart. What prompted you to write this story
Speaker 2: because it was a personal experience.
Speaker 9: You know, I was walking the Crosstown Trail in San Francisco.
Speaker 9: It's a seventeen mile trail path that goes through different
Speaker 9: neighborhoods in the city, takes you to lesser known places,
Speaker 9: more known neighborhoods, ends with a gorgeous view of the
Speaker 9: Pacific Ocean on New Year's Day with some friends as
Speaker 9: sort of an annual tradition to be out and about
Speaker 9: in the city on a beautiful sunny day.
Speaker 4: And the whole time I was just thinking, you know,
Speaker 4: there's so much.
Speaker 9: Conversation around San Francisco being in decline, And of course
Speaker 9: I'm not saying because I had an enjoyable walk through
Speaker 9: the city one day, there aren't challenges in this city, right.
Speaker 9: I think anybody who comes here, lives here, experiences life
Speaker 9: in San Francisco is going to agree that homelessness is
Speaker 9: a huge crisis for this city.
Speaker 3: The drug has been for years, this problem. I feel
Speaker 3: like homelessness has been a problem for years there.
Speaker 5: That's right.
Speaker 9: These have been long standing problems that San Francisco really
Speaker 9: must scrapple with and deal with and find a way
Speaker 9: to solve. But at the same time, there's been all
Speaker 9: the conversation around how the city's over it's in decline,
Speaker 9: but the data is not bearing that out right. I mean,
Speaker 9: I received some This is a very polarizing topic though,
Speaker 9: and clearly folks around the country who do not live
Speaker 9: here do live here. People have a lot of opinions
Speaker 9: on this. So I wrote this story about how the
Speaker 9: numbers show that the city actually hasn't lost much of
Speaker 9: its population over the last few years, which is in
Speaker 9: contrast to a law of the conversation around how this
Speaker 9: place is decaying. But I received some pretty charged reader feedback,
Speaker 9: actually more than usual. One reader compared San Francisco to
Speaker 9: Afghanistan and Detroit. I was surprised to see Afghanistan in
Speaker 9: that email. That will pop up as a point of comparison.
Speaker 9: So people clearly have a lot of feeling about this place,
Speaker 9: but I'm not quite sure how much of those people
Speaker 9: have actually spent time in San Francisco. And once again,
Speaker 9: just for the city, that's probably that's probably also true, right,
Speaker 9: the city's chief economists, though, isn't saying that these problems
Speaker 9: don't exist. And he told me, look, there is a
Speaker 9: risk that San Francisco could at enter a doom move
Speaker 9: at some point if the city responds in certain ways
Speaker 9: to its challenges, if the city were to alienate its
Speaker 9: tax base to the extent that people would leave and
Speaker 9: then create more of a drain on its finances. But
Speaker 9: the data has not proven that that doom move is
Speaker 9: actually here. Now there are risks in the city has
Speaker 9: to manage this time kind of carefully while people are
Speaker 9: still looking at remote work and the ability to not
Speaker 9: necessarily have this either setor of gravity in the tech
Speaker 9: industry especially.
Speaker 2: But this is still a place where people in the
Speaker 2: tech industry.
Speaker 9: Are coming in multiple days a week, as you companies,
Speaker 9: and as.
Speaker 2: You point out PRIA, it's also a place where venture
Speaker 2: capitalists continue to deploy money to companies that are based
Speaker 2: in Silicon Valley. Talk to us about the data that
Speaker 2: you found there.
Speaker 8: That's right.
Speaker 9: So while there have been all these other cities that
Speaker 9: have been gaining more venture capital dollars over the years,
Speaker 9: you know, more and more stops have cropped up in
Speaker 9: New York. There was a lot of hype around Miami
Speaker 9: and the startup scene for a little while, hype more
Speaker 9: so than I think that actually bearing out in the numbers.
Speaker 9: The Bay Area by far still gets the most venture
Speaker 9: capital dollars, and at the end of the day, AI
Speaker 9: companies now are cropping up and opening offices in the
Speaker 9: Bay Area. They are mandating that their workers come in
Speaker 9: three plus days a week open. AI famously has folks
Speaker 9: in the office almost every day. They're based in San Francisco.
Speaker 9: I wrote a story or last year. I guess I
Speaker 9: can't say earlier this year. Now we're in twenty twenty four.
Speaker 9: I wrote a story in the fall about how AI
Speaker 9: offices are snapping up. AI companies are snapping up more
Speaker 9: office space in San Francisco, not necessarily downtown, in other
Speaker 9: parts of the city. So downtown still has its challenges
Speaker 9: here for sure, but AI companies are opening up offices here.
Speaker 9: They're trying to get their staffs to actually move from
Speaker 9: other parts of the country and the world to San
Speaker 9: Francisco because they believe there is a gold rush right
Speaker 9: now in that sub industry within tech, and that they
Speaker 9: need to capitalize it, and that having people together in person,
Speaker 9: solving problems in this burgeoning field is the way to
Speaker 9: do it. So there is a lot more fervor around
Speaker 9: being in San Francisco in person than there was early
Speaker 9: last year, and AI is a huge part of that.
Speaker 3: I love your emotion behind this because it's really great
Speaker 3: to hear because you're right. The story, the narrative has
Speaker 3: been one of doomsday, no doubt about it. What about tourism,
Speaker 3: what are we seeing? I mean, I think it's a
Speaker 3: beautiful city. Every time I go. It makes me so
Speaker 3: happy because it's just gorgeous.
Speaker 2: And it doesn't hurt that the Bloomberg office is literally
Speaker 2: on the water. You see Prio shot, like that's what
Speaker 2: you see from the Bloomberg office.
Speaker 3: It's pretty incredible. But just got about forty five seconds
Speaker 3: left here. I mean tourism, you seeing them out and about.
Speaker 9: There's been some rebound in that. And if you go
Speaker 9: out into restaurants in the city these days, like you
Speaker 9: got to have a reservation to go anywhere great over
Speaker 9: the weekend now again, unlike you know, the early stages
Speaker 9: of post pandemic life where everything felt like you could
Speaker 9: go anywhere. Oh look, I'm not you know, this is
Speaker 9: such a story is rooted in the data, It's rooted
Speaker 9: in my reporting on this industry, which I have been
Speaker 9: covering for about a decade now. And I'm not you know,
Speaker 9: I want to be clear that this whole storyline is
Speaker 9: not about women went on a beautiful walk in San
Speaker 9: Francisco thinks the city is great now, right, I'm not blind.
Speaker 9: This is based on the data, it's based on the facts.
Speaker 3: Great story and really something that I think it's good
Speaker 3: to get this perspective out there, considering the backdrop. And
Speaker 3: I love your your perspective on it because I get it.
Speaker 3: I get where you're coming from. Prianna, thank you so much.
Speaker 3: Happy New Year. She's technology and venture capital reporter at
Speaker 3: Bloomberg News in our San Francisco bureau. And you know,
Speaker 3: I brought out the homeless, not to say that, yeah,
Speaker 3: to remind them that there's you know, it's been around
Speaker 3: for a long time, but I feel like people keep
Speaker 3: bringing it up, like, look the problem and maybe it
Speaker 3: got worse coming off of the pandemic, but it's been
Speaker 3: something they've been trying to grapple with for some time
Speaker 3: that by.
Speaker 2: No means the city right now. No, we here in
Speaker 2: New York are certainly dealing with it as well.
Speaker 3: Anywhere it's warm, where there's you know, better even warm here. Yeah,
Speaker 3: that's true, it's not it's not exactly anyway. I really
Speaker 3: fun to check in with our pre and on. You
Speaker 3: are listening and watching Bloomberg Business Week. This is Bloomberg Radio.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
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Speaker 1: or watch us live on YouTube.
Speaker 3: Wait a minute, my at a wedding?
Speaker 2: No, because I wouldn't be dancing if we're at a wedding.
Speaker 3: That's so sad.
Speaker 2: Uh.
Speaker 3: The Electric Revolution a year ago, evs were all the rage.
Speaker 3: It seemed like an all electric future. Tim was just
Speaker 3: around the corner.
Speaker 2: You know, it's funny, this is off script.
Speaker 3: But Katie grad are you dancing in the studio?
Speaker 2: Yeah, that's true. Katie Greyfeld just bought a new car.
Speaker 2: She posted about it on her Instagram, So I think
Speaker 2: it's fair game for me to talk about.
Speaker 3: Just talked about it on Area and I.
Speaker 2: Said, did you why didn't you go to EV and
Speaker 2: she said, you know what, it wasn't even on our radar.
Speaker 3: Yeah, it wasn't.
Speaker 2: It's a little bit of a different situation because she
Speaker 2: lives in New York City and it's like hard to charge.
Speaker 2: But just the fact that it wasn't even on her radar,
Speaker 2: I think speaks volumes about the way that consumers in
Speaker 2: her household. No, it was a genesis.
Speaker 3: Yeah, got it is a genesis. Today's car buyers definitely
Speaker 3: having second thoughts about them, are having no thoughts if
Speaker 3: you're Katie Greefeld, short circuiting sales growth and causing plugin
Speaker 3: models to pile up on dealer lots. Tim automakers, we
Speaker 3: know they're pouring more than a hundred billion into developing
Speaker 3: EV's this decade alone. They're now slashing prices, production, and
Speaker 3: profit forecast for the new green vehicles.
Speaker 2: Yeah. Keith Notton writes all about the inventory that's piling
Speaker 2: up when it comes to these evs. He's Bloomberg News
Speaker 2: Auto reporter. He writes about it for Bloomberg Business Week.
Speaker 2: The story and the upcoming New Year Ahead issue of
Speaker 2: Bloomberg Business Week. It's on newsstands next week. It's already
Speaker 2: online though at Bloomberg dot com slash BusinessWeek and on
Speaker 2: the Bloomberg terminal with more. We have Keith not In
Speaker 2: joining us this afternoon. Also here is the editor of
Speaker 2: Bloomberg Business Week, Joel Webber here in our Bloomberg Interactive
Speaker 2: Brokers studio Jiel, Happy New Year, Happy.
Speaker 11: Near to both of you, and Keith to you as well.
Speaker 11: So the Year Ahead issue we do every year, and
Speaker 11: we have this process of identifying themes and ideas and
Speaker 11: stories that we want to kind of dig into and
Speaker 11: look like the EV one is a huge one, in
Speaker 11: part because of those big numbers that you threw around there.
Speaker 11: The industry has just gone all in on this. What
Speaker 11: has been a little surprising is how consumers have been
Speaker 11: more tepid, and that is somewhat different than I.
Speaker 2: Think it is globally.
Speaker 11: But you know, Americans have their own way of doing
Speaker 11: things and there seems to be no exception. What's interesting, though,
Speaker 11: is that instead of going all gas and we'll have
Speaker 11: to grill Katie Greifeld about her personal decisions some other time.
Speaker 11: One of my favorite topics, by.
Speaker 2: The way, But but but.
Speaker 11: Keith, Hybrid's been around for a while, and yet this
Speaker 11: is what Americans seem to be turning to if they're
Speaker 11: not going fully electric.
Speaker 8: That's for sure, Joel. And in fact, we wrote about
Speaker 8: that in BusinessWeek a couple of months ago. Hybrids now
Speaker 8: are all the rage. So Ford and Toyota in particular
Speaker 8: this week announced, you know, really great hybrid sales up
Speaker 8: by double digits. People are seeing it as a sort
Speaker 8: of a good compromise between you know, going all electric
Speaker 8: and sticking with the traditional internal combustion engine.
Speaker 11: So what's this How's this going to play out for
Speaker 11: electric vehicles? I mean, one hundred billion dollars UH into
Speaker 11: developing evs this decade among US automakers. Those prices obviously
Speaker 11: getting slashed. But so what what's it gonna look like?
Speaker 11: How do you you know, if you're going to throw
Speaker 11: all this money into that and then start to tack,
Speaker 11: how does this end playing out?
Speaker 8: Yeah, Well, as one am sent to me at one point,
Speaker 8: this is not a light switch kind of flipped. We
Speaker 8: don't just suddenly go from having you know, two hundred
Speaker 8: and fifty million internal combustion engine cars on the road
Speaker 8: in America to suddenly being all electric. There's there's going
Speaker 8: to be a progression. It's going to be in fits
Speaker 8: and starts. But what happened last year, as one dealer
Speaker 8: said to me, is that the pivot just happened very quickly.
Speaker 8: They went from having long waiting lists for electric vehicles.
Speaker 8: You remember all the stories were writing a year ago
Speaker 8: you just couldn't get one, to now having they have
Speaker 8: one hundred and fourteen day supply of electric vehicles on
Speaker 8: average on dealer lots right now, compared to an industry
Speaker 8: average of seventy two days supply. So they just have
Speaker 8: tons of electric vehicles that aren't selling.
Speaker 3: Timmy, your dad was among them who was waiting.
Speaker 2: Yeah, I waited for gosh, maybe a year for his maki,
Speaker 2: and now there's no problem getting makis. It's kind of
Speaker 2: wid no.
Speaker 8: In fact, for this week just put a discount on
Speaker 8: the maki seventy five hundred off lease deal.
Speaker 2: Maybe he should have waited, So, Keith.
Speaker 3: What is it though?
Speaker 6: Is it?
Speaker 7: Yeah?
Speaker 3: He should have.
Speaker 2: Let's call him up and find out.
Speaker 3: Well that you know, we have talked so much around
Speaker 3: this table about the expensive price. I know Elon's been
Speaker 3: cutting and I know now we're seeing it, but nonetheless,
Speaker 3: how expensive evs are? Is it just a case of
Speaker 3: we've tapped into kind of the wealthier market already. They've
Speaker 3: bought their electric vehicles from now and it's just not
Speaker 3: as appealing, certainly from a price point, to kind of
Speaker 3: the mass buyer.
Speaker 8: Yeah, you're right, Caroly and Thames, Dad and Katie are
Speaker 8: good examples. Time's dad would be an early adopter. He's
Speaker 8: someone who wanted the latest technology. He's willing to pay
Speaker 8: up for it and not wait around for the discounts.
Speaker 8: And Katie is a pragmatic mainstream buyer. And they're looking
Speaker 8: at evs and saying the price, the average price of
Speaker 8: a need to B is sixty thousand dollars, about thirteen
Speaker 8: thousand more than a traditional car, which is already up
Speaker 8: to begin with anyway. And they're also looking at the
Speaker 8: charging infrastructure, and in places that are not California, there
Speaker 8: aren't a lot of chargers out there. One of the
Speaker 8: dealers I spoke with has dealerships in Kansas and Nebraska
Speaker 8: and Colorado, and when he does his weekly two hundred
Speaker 8: mile commute between Omaha and Kansas City, there's one charging station.
Speaker 11: Yeah, but isn't this what the government's for to step
Speaker 11: in here and be like, look, that shouldn't be a problem.
Speaker 2: Let's create in it.
Speaker 11: Let's make sure the infrastructure is there where we need it,
Speaker 11: and let this you know, industry not linguish.
Speaker 2: Who killed the electric cooky?
Speaker 11: Isn't that the movie?
Speaker 8: Yeah? I think it was the movie. The government is
Speaker 8: spending billions on, you know, acresting the infrastructure, expanding the infrastructure,
Speaker 8: but we're still trying to figure out what plug it
Speaker 8: should be because you know, Tesla has one type of
Speaker 8: charger which the industry seems to be moving to, but
Speaker 8: there is a lately other type of charger that's available.
Speaker 8: So we still have sort of a VHS and Betamax
Speaker 8: thing going on with charging stations. And by the way,
Speaker 8: they're not very reliable. JD Power has found over and
Speaker 8: over again many are broken.
Speaker 2: It's not just that crazy. It's not just that the
Speaker 2: charging stations are unreliable. It's that you actually reported and
Speaker 2: Carol and I were surprised to find this that there's
Speaker 2: some reliability issues when it comes to the batteries in
Speaker 2: these vehicles. Cool thought. I thought these I thought evs
Speaker 2: were supposed to be maintenance free, never have to change
Speaker 2: the oisle. All you got to do is change the tires.
Speaker 2: Every what one thousand miles or something. No, I exaggerate,
Speaker 2: but you do have to change the tires more frequently.
Speaker 8: Well, that is certainly the dream, but the reality is
Speaker 8: is that electric vehicles have eighty percent more problems than
Speaker 8: internal combustion engine vehicles. And as you said, most of
Speaker 8: that problem is with the battery and the battery taking
Speaker 8: a charge. I talked to Jake Fisher, the head of
Speaker 8: auto testing at Consumer Reports, and what happens is people
Speaker 8: plug in their car. This is not the fault of
Speaker 8: the external charger. This is not a charging station problem.
Speaker 8: It's a car problem. They plug in their car and
Speaker 8: it won't take a charge at all, or it will
Speaker 8: take a charge for a little bit and then it
Speaker 8: shuts off. He compared it to not being able to
Speaker 8: put gasoline into your internal combustion engine car. It's a
Speaker 8: no go proposition.
Speaker 2: Oh, I guess.
Speaker 11: I should disclose here that I drive a Tesla Model
Speaker 11: HY have never had that problem.
Speaker 2: I've never heard.
Speaker 11: Of of that problem.
Speaker 2: But were you a relative cular Relatively it was on
Speaker 2: the no, it was like with them. But you are
Speaker 2: unique in the sense that you're actually the forgiving. If
Speaker 2: I'm giving up too much about you, I've talked about it.
Speaker 2: You live in New York and it's not an ideal
Speaker 2: place to charge New York City. It's not an ideal
Speaker 2: charge any so here.
Speaker 11: Keith, this is actually a good segue another thing I
Speaker 11: want to talk about, because there are charging stations that
Speaker 11: you would use if you were out doing the two
Speaker 11: hundred mile kind of drive that you were just describing
Speaker 11: there that one of your sources had. But you know,
Speaker 11: for most people who have electric cars, they charge at home, right,
Speaker 11: And there are plenty of homes that have power outlets
Speaker 11: that you can plug into and charge up overnight. So
Speaker 11: why is that from a commuter standpoint, since that's what
Speaker 11: most Americans are typically using their cars for. Why isn't
Speaker 11: this working and resonating there?
Speaker 8: Right? And that is the idea too, is to have
Speaker 8: a charger in your garage. A couple of things on that.
Speaker 8: Let's start again. The car's average price is sixty thousand dollars.
Speaker 8: And then to install or charger in your garage, because
Speaker 8: you don't just plug it in like a lamp, that's
Speaker 8: another two grand. So you have to be a fairly
Speaker 8: wealthy individual, present company excluded or included in order to
Speaker 8: afford all of this expense, and mainstream buyers are balking
Speaker 8: at that expense. They're saying, I mean, internal combustion engine
Speaker 8: cars are too expensive on their own at forty seven
Speaker 8: dollars on average, they are about they're you know, closer
Speaker 8: to thirty thousand back in twenty nineteen. So there's been
Speaker 8: this huge price inflation in cars in general, and evs
Speaker 8: are priced like luxury cars.
Speaker 11: Just for the record, I use superchargers when I need
Speaker 11: to on the road and then have you know, while
Speaker 11: outlets on the other side that I can charge with whenever.
Speaker 2: My cousins who live in the city who have a
Speaker 2: plug in hybrid can plug in the garage that they
Speaker 2: pay a monthly feet at park in.
Speaker 11: It don't look like I guess it depends on how
Speaker 11: quickly you want to charge. But we are ultimately talking
Speaker 11: about a ton of energy required to this. And it
Speaker 11: does speak to Keith like when I first bought it
Speaker 11: and I was paranoid about running out, you actually discovered
Speaker 11: that the place that you in an emergency that you
Speaker 11: would need to go is actually like r v's r
Speaker 11: V like destinations. They have the outlet that you need.
Speaker 11: So have you ever really in doubt It's like that
Speaker 11: you know that you need the two twenty and you pull.
Speaker 2: Is that listed in like this?
Speaker 11: Well, it's just like you know, you start reading up
Speaker 11: on what happens if you're you know, in desperate times,
Speaker 11: in desperate places, and RV's are.
Speaker 3: Figuring out these are the answer.
Speaker 2: So Keith is some Americans know you know, well, Joel knows.
Speaker 2: Now you could write a book and now you know,
Speaker 2: I'd like to see the RVs.
Speaker 11: I've never had to use that.
Speaker 2: You know, there's an interesting miss crowds, right, no problem, Keith,
Speaker 2: is ultimately the final destination when it comes to cars
Speaker 2: here in the US. Is it ultimately going to be electric?
Speaker 8: You know, that is certainly the way the regulations are
Speaker 8: heading everything. You know, President Biden wants us to be
Speaker 8: at fifty percent electric by twenty thirty and by twenty
Speaker 8: thirty two two thirds electric. That's kind of a stretch
Speaker 8: goal as far as the analysts and the industry say.
Speaker 8: But it could be coming back to the hybrid point
Speaker 8: that Joel started with, it could be that we have
Speaker 8: more of an immediate hybrid future and that's going to
Speaker 8: be more of the mainstream market. Remember, electric vehicles represented
Speaker 8: only seven percent of sales, you know, last year, so
Speaker 8: fewer than one in ten vehicles sold in America is electric.
Speaker 3: One thing I'm curious. It's a global auto market, and
Speaker 3: if you look overseas, whether it's Europe or China, as
Speaker 3: you point out in your story, they are doing better
Speaker 3: in terms of adoption. So if the US lags like
Speaker 3: it seems to be doing at this point, Keith, what
Speaker 3: disadvantage does it put the US at versus the rest
Speaker 3: of the world.
Speaker 8: Well, I mean we already see it in batteries. China
Speaker 8: owns the battery market. You really can't have an electric
Speaker 8: vehicle without Chinese battery or Chinese minerals or Chinese components.
Speaker 8: So China is already leading the race. But obviously the
Speaker 8: Chinese government can dictate how the electric vehicle market is
Speaker 8: going to develop. I talked to one China expert, and
Speaker 8: you know, if you live in Shanghai and you want
Speaker 8: to a license plate for your internal combustion engine car,
Speaker 8: you pay twelve thousand dollars. If you want one fear
Speaker 8: your eavy, you pay nothing.
Speaker 11: And as policy, as Boomer has reported before, like the
Speaker 11: cost of even going on a big road trip with
Speaker 11: an EV in China is cheaper than it would be
Speaker 11: with a gas car. I mean they have fundamentally just
Speaker 11: changed the pricing dynamics.
Speaker 2: And the way that power generated that they used to charge.
Speaker 11: Well, they keep building solar, right, but I mean, look,
Speaker 11: no doubt they have tons of coal. So but the
Speaker 11: fact that they were able to bring that price down
Speaker 11: just and that the other amazing part about the Chinese
Speaker 11: version of this. There is one adapter you know you use.
Speaker 2: It is a unified system.
Speaker 11: There's no confusion. Yeah, they have just said this is
Speaker 11: a better way. And I will say, just you know,
Speaker 11: a little propaganda from the editor of Business Week, whence
Speaker 11: you go electric?
Speaker 2: I think it's hard to go back. It's amazing.
Speaker 1: It is.
Speaker 11: I think it's a better technology. It's just getting people
Speaker 11: to do it and believe it. But once you do it,
Speaker 11: you're like, wow, this is more fun.
Speaker 2: My mom drives the car more than my dad and
Speaker 2: she's like, pretty much, this is this how you still
Speaker 2: to carol?
Speaker 11: You only places I take my dog now because I
Speaker 11: have dog mode in my car electric car.
Speaker 2: He just goes with us everywhere. You just put him
Speaker 2: in the back and keeps the dog cool.
Speaker 11: Yeah, you just set the temperature. Doug's in the back
Speaker 11: and then he's not alone at home, you know, just
Speaker 11: ke have you a.
Speaker 2: Little movable dog? Create?
Speaker 1: Keith?
Speaker 2: Have you gone electric? Have you You've driven a lot
Speaker 2: of electric cars? Have you gone electric? Just fine, drive, I've.
Speaker 8: Driven a lot of electric cars. No, I drive an
Speaker 8: internal combustion engine car. Why but yes, it's more convenient
Speaker 8: here in Michigan where I'm based. And uh and you know,
Speaker 8: I think what you see part of the reason that
Speaker 8: the US has been slower to adapts. We're a big
Speaker 8: country with wide open spaces that's very different than Europe.
Speaker 2: That's a good point.
Speaker 3: What a great story, Keith Noughton, Thank you so much.
Speaker 3: Happy New Year to you, Keith Naughton. Of course, Bloomberg
Speaker 3: News Auto Reporter, and are thanks to the editor of
Speaker 3: Bloomberg BusinessWeek, Jill Webber. The dog thing you may have
Speaker 3: got me?
Speaker 2: Yeah, see.
Speaker 3: This is Bloomberg.
Speaker 7: Journal.
Speaker 1: Now about you let me drive?
Speaker 4: Oh no, no, no, no, please go job alright?
Speaker 2: Please how the gravel?
Speaker 1: Let's wat?
Speaker 2: I want to try it. It's a good question.
Speaker 1: This is the Drive to the Globes down Tim thing
Speaker 1: Well Byron joon and On on Bloomberg Radio.
Speaker 3: All right, everybody, we've got just about eighteen minutes left
Speaker 3: in today's trading session, and the markets you just heard
Speaker 3: Charlie break in it down a little bit of a
Speaker 3: mixed trade higher on the Dow, a little bit lower
Speaker 3: though on the S ANDP and NOWSK. It does feel
Speaker 3: like we're kind of limping into twenty twenty four. But
Speaker 3: we've got a big jobs report. Having said that, late
Speaker 3: last year, you probably read this on the Bloomberg. Bloomberg
Speaker 3: News highlighted the stock optimists who nailed twenty twenty three.
Speaker 3: Among them Tim was Ryande Trek.
Speaker 2: His chief market strategist at the Carson Group. He expected
Speaker 2: the US economy to avoid a recession last year, Carol.
Speaker 2: He also bet inflation would cool sooner than the market
Speaker 2: was expecting. Ryan even added exposure to stocks during the
Speaker 2: banking turmoil in March and as the SMB befetter'd Saink
Speaker 2: in October. Looking like a pretty good series of calls.
Speaker 3: Congratulations Ryan, because you were highlighted highlighted in our story
Speaker 3: Happy New Year. How confident are you making a call
Speaker 3: for this year?
Speaker 4: Well, happy new Year, guys, thanks for having me back.
Speaker 5: I mean, we're still pretty confident, right, we still will
Speaker 5: we gain twenty four point two percent on the SMP
Speaker 5: this year. You know, the history would say probably not,
Speaker 5: but we think low double digit returns makes a lot
Speaker 5: of sense. And again we can get into all the details,
Speaker 5: but we just still see a strong consumer likely with
Speaker 5: housing coming back, with manufacturing showing signs of bottoming, that
Speaker 5: the odds of a recession, in our opinion, are still
Speaker 5: quite slim. And when you can avoid a recession, stocks
Speaker 5: tend to do well.
Speaker 4: And here's one more.
Speaker 5: I mean, I know the SMP hasn't made a new
Speaker 5: high for like exactly two years, right, two years ago, yesterday, right,
Speaker 5: and we think we're on to hit one eventually.
Speaker 4: Here, we're not that far.
Speaker 3: Well, we talked about this till fourteen times.
Speaker 4: What's that?
Speaker 2: Go ahead?
Speaker 3: No, but I was gonna say, for in the last
Speaker 3: two years, the S and P, if you really look
Speaker 3: at it, has really gone nowhere. But forgive me, I
Speaker 3: interrupted you and you had a smart thought. Go ahead.
Speaker 5: Oh no, I don't know how smart it was. Well, we'll
Speaker 5: see you let me know. But yeah, for two years
Speaker 5: we've gone nowhere. But here's the thing. Since nineteen fifty, Carol,
Speaker 5: I found fourteen times, the SMP went at least a
Speaker 5: year without a new high, so a.
Speaker 4: Long time without new high.
Speaker 5: We're in that scenario now after it makes a new
Speaker 5: high eventually, and it will this time, we're pretty sure.
Speaker 4: We're pretty certain.
Speaker 5: One year later, s AP's up thirteen out of fourteen times,
Speaker 5: up like fifteen percent on average. So I hear so
Speaker 5: many people saying, listen, we're up a lot. Last year,
Speaker 5: we moved a lot. That is true, but zoom out.
Speaker 5: Literally stocks almost gone nowhere for two years, and that
Speaker 5: might be a reason to be bullish for investors.
Speaker 2: What about when it comes to the technicals at the
Speaker 2: start of the year, when because I know Ryan you
Speaker 2: have I mean I follow you on I was going
Speaker 2: to say Twitter, I follow you on X where you're
Speaker 2: always tweeting about these technicals, the S ANDPF. I've hunder
Speaker 2: down for day in a row. It has had We
Speaker 2: don't know how it's gonna close, but mike close in
Speaker 2: the rat If it does, it will not have closed
Speaker 2: in the grain once this year. It's only been three days.
Speaker 2: But does that poortend anything for the rest of the year.
Speaker 4: Yeah, well, we would say no. I mean, it's awfully early.
Speaker 5: Let's remember here, SMP's up as you guys talk about
Speaker 5: nine weeks in a row. Right, you look at the
Speaker 5: future returns after nine week wind streaks, it's pretty solid
Speaker 5: six and twelve months later above average. Now listen, I'm aware, right,
Speaker 5: we just had the Santa Claus rally period the last
Speaker 5: five trading days of a year and then the first
Speaker 5: two of a new year, and we were negative.
Speaker 4: Right, that's pretty darn rare.
Speaker 5: And you go back to last thirty years when we
Speaker 5: didn't have Santa Claus come to town during those normal
Speaker 5: seven bolish days. January has been read a good amount
Speaker 5: of time. First quarter has been flat, So maybe we're
Speaker 5: due for a well deserved break here, but we need
Speaker 5: to see more worrisome signs tim specifically, where's the leadership
Speaker 5: coming from, Like are utilities leading, is healthcare leading? You know,
Speaker 5: staple leading some of the more defensive areas. We're not
Speaker 5: seeing that yet. So the messages of the market to
Speaker 5: us is we're probably just maybe due for a well
Speaker 5: deserved break, and we still think that one more off
Speaker 5: for you. It's the first quarter of an election year. Historically,
Speaker 5: with all sixteen quarters of a four year presidential cycle,
Speaker 5: this is one of the weakest quarters, so just got
Speaker 5: to be aware. And last year is obviously a good year, right,
Speaker 5: so be aware. Maybe we're in that timeframe we could
Speaker 5: catch our breath perfectly normal. We don't see any major
Speaker 5: warning signs cropping up just yet.
Speaker 3: Do you want defensives to rally or would that be
Speaker 3: a sign that things are coming undone a little bit?
Speaker 5: Yeah, No, that would be a great question, Carol. I mean,
Speaker 5: that'd be a sign things are probably coming undone. We
Speaker 5: don't want to see that type of leadership. I mean,
Speaker 5: you know, you look back in twenty twenty one, right,
Speaker 5: you know, or late twenty twenty one, defensives started to lead,
Speaker 5: and we all know twenty twenty two all the spiral
Speaker 5: that happened. So there was some warning signs in late
Speaker 5: twenty twenty one that maybe something's off. We're not seeing
Speaker 5: that though, want to be very clear. So we're encouraged
Speaker 5: by that.
Speaker 2: What are some things that could change your tune? You
Speaker 2: say you still see a strong consumer, the odds of
Speaker 2: recession are slim. What would make you say the odds
Speaker 2: of recession are no longer slim and they're looking more likely.
Speaker 5: Yeah, I mean, we love to follow the credit spreads
Speaker 5: and credit markets, and I don't come on you guys
Speaker 5: a lot. Last year, I think we talked about these things.
Speaker 5: What are what are the triple B spreads? Investor gate
Speaker 5: corporate spreads? Keep it fairly simple. If there's a monster
Speaker 5: under the bed, we think the credit markets would show it.
Speaker 5: Back in March, when we had the regional bank crisis
Speaker 5: and obviously a lot of worry, we didn't see credit
Speaker 5: spreads blowing out, so we saw that was an opportunity.
Speaker 5: We saw the same thing in October, So that to
Speaker 5: me is one that we're gonna watch and then on
Speaker 5: our team, you know, I know, you know, hopefully I
Speaker 5: can say the f wort on on the radio, the Fed,
Speaker 5: the Fed.
Speaker 3: You know, the producers in the control room a little
Speaker 3: nervous there.
Speaker 5: Freak them out, you know, it's Joe, Yeah, oh my god,
Speaker 5: you did the Fed?
Speaker 4: The Fed?
Speaker 5: You know, could there be a potential policy mistake. We
Speaker 5: think the Fed start cutting pretty soon, right. We were
Speaker 5: on that record, like you guys talked about when I
Speaker 5: first came on that that that they could.
Speaker 4: But now maybe they.
Speaker 5: Can stay a little hawkish and maybe that could upset
Speaker 5: the Apple car. We don't expect that to happened in
Speaker 5: the market where the market's voting right, I mean six cuts.
Speaker 5: It might be a little high, but that's something that
Speaker 5: could could be out there as well. But all who
Speaker 5: won more for you when you have a good end
Speaker 5: of year rally, like we just did up fourteen percent
Speaker 5: for the SMP the last two months of the year.
Speaker 5: When you've gained at least ten percent those last two months,
Speaker 5: what we happened six times the full next year has
Speaker 5: been higher six times a twenty percent on average. So
Speaker 5: I call that like a sling shot, right, I mean,
Speaker 5: when you have a lot of strength to end a year,
Speaker 5: history would say, listen, probably side with that following year
Speaker 5: still being pretty strong.
Speaker 3: It's a shame you don't have any kind of bull
Speaker 3: feelings out there, right. I want to ask that Apple,
Speaker 3: because you and I talked about this quickly, so then
Speaker 3: I can get my question. Apple's below it's ninety day
Speaker 3: moving average? Is that problematic? Quickly? Because Tim has a question.
Speaker 5: I mean for tech potentially, I mean Apple, we all
Speaker 5: know is very large. One of our big themes we've
Speaker 5: been talking about it for a while, is that rotation
Speaker 5: from large caps to small caps and mid caps and
Speaker 5: technology to industrials. We're seeing that. So sure, if you're
Speaker 5: overweight tech, that's that's a potential concern. But I mean
Speaker 5: there's a lot of other groups that I think are
Speaker 5: going to take that baton curl and that's just the
Speaker 5: next phase of this bowl market as we move forward
Speaker 5: in our opinion.
Speaker 2: Okay, Ryan, were you have you been at all bearish
Speaker 2: in the last few years?
Speaker 5: Be honest, Yeah, we were neutral equities, you know, the
Speaker 5: majority of I guess we'll see twenty twenty two, right,
Speaker 5: and we moved overweight equities late of October of twenty
Speaker 5: twenty two or November of twenty twenty two. Actually, So
Speaker 5: were we outright bearish? No, we were not, but we
Speaker 5: were even weight, and we had overweight fixed income as well.
Speaker 5: We've been underweight fixed income, overweight stocks, I'm sorry, overweight
Speaker 5: equities really since the end of last year.
Speaker 4: So you know, we'll see. But you know makes it.
Speaker 5: I mean, listen, seventy one percent of the time the
Speaker 5: stock market's up nine percent on average.
Speaker 4: We get all those things.
Speaker 5: But we've we've definitely thought there's some opportunity here and
Speaker 5: we still think that's the that's the case tim.
Speaker 3: Small caps, mid caps, financials. Those are still your three favorites.
Speaker 3: That's which told our print team just twenty seconds here.
Speaker 4: Real quick, that is exactly right.
Speaker 5: I maybe throw industrials in there as well, those cyclical
Speaker 5: areas if you don't have a recession. This rotation for
Speaker 5: tech and large cap the smaller names of sixtical names,
Speaker 5: that's how we're positioning the models that we run for
Speaker 5: our Carson partners.
Speaker 3: All right, well, great to check in with you on
Speaker 3: this these first few days of twenty twenty four in
Speaker 3: d Trek, he's chief market strategist at the Carson Group,
Speaker 3: joining us on this Thursday. You are listening and watching,
Speaker 3: see you how your question is? This is Bloomberg.
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