1
00:00:00,080 --> 00:00:06,600
Speaker 1: We want to talk tech podcast Countery Business Day, we

2
00:00:06,720 --> 00:00:11,080
Speaker 1: bring you interview with market Rose and Bloomberg experts. We

3
00:00:11,080 --> 00:00:17,720
Speaker 1: don't know what the Center podcast or wherever you listen

4
00:00:17,760 --> 00:00:22,520
Speaker 1: to podcast, and that Bloomberg big cricket fin out Dan

5
00:00:22,640 --> 00:00:24,560
Speaker 1: Ives as much of a cricket you don't think, Fan,

6
00:00:24,800 --> 00:00:28,400
Speaker 1: I'm just well, he wasn't. He went to State College Pennsylvania,

7
00:00:28,400 --> 00:00:29,880
Speaker 1: which is no mean feat by the way, from New

8
00:00:29,960 --> 00:00:34,000
Speaker 1: York to watch wrestling and State Wrestling. Now, granted they're

9
00:00:34,000 --> 00:00:35,400
Speaker 1: one of the best in the country, but Dan Ives

10
00:00:35,400 --> 00:00:39,479
Speaker 1: he covers technology, uh for wet Bush Securities and mandep

11
00:00:39,520 --> 00:00:41,000
Speaker 1: siting here from Bloomberg and in Tellvision they're in our

12
00:00:40,960 --> 00:00:44,960
Speaker 1: Bloomberg and act the broker studio. Dan, let's start with you, Tesla.

13
00:00:45,560 --> 00:00:47,360
Speaker 1: I follow you on Twitter, and by the way, folks

14
00:00:47,360 --> 00:00:49,840
Speaker 1: follow Dan Ives on Twitter. He's got a good Twitter

15
00:00:49,920 --> 00:00:53,360
Speaker 1: game there, um, and you're not too happy with him

16
00:00:53,360 --> 00:00:57,760
Speaker 1: sticking around at Twitter. El So Tesla. So the problem

17
00:00:57,800 --> 00:01:01,000
Speaker 1: is Elon Musk is supposed to run Tesla, right, but

18
00:01:01,120 --> 00:01:04,959
Speaker 1: he's obsessed with Twitter to the point where he like

19
00:01:05,080 --> 00:01:07,560
Speaker 1: changes the algorithms that we all have to read all

20
00:01:07,600 --> 00:01:10,360
Speaker 1: of his tweets. He said, he was gonna pick someone

21
00:01:10,360 --> 00:01:13,080
Speaker 1: else stand down before Christmas, and now it's like the

22
00:01:13,200 --> 00:01:16,360
Speaker 1: end of this year, maybe beginning of four. Dan, what

23
00:01:16,600 --> 00:01:19,000
Speaker 1: is the deal with your dog? Yeah? I mean look

24
00:01:19,080 --> 00:01:21,720
Speaker 1: the goal post from Musk because we've seen four continue

25
00:01:21,720 --> 00:01:23,240
Speaker 1: to get pushed out. And I think when it comes

26
00:01:23,280 --> 00:01:25,960
Speaker 1: to Twitter, you know clearly that's been less of an

27
00:01:26,000 --> 00:01:29,400
Speaker 1: overhanging the last few months. But I think investors want

28
00:01:29,440 --> 00:01:33,040
Speaker 1: to see Musts Weezer focused on Tesla, on SpaceX and

29
00:01:33,080 --> 00:01:34,680
Speaker 1: some of them. Any kind of focus doesn't have to

30
00:01:34,680 --> 00:01:37,280
Speaker 1: be a laser, just a little bit of focus on Tesla.

31
00:01:37,400 --> 00:01:40,440
Speaker 1: Right it was, And I think what we've seen the

32
00:01:40,480 --> 00:01:42,920
Speaker 1: last few months like part of why Tesla stockstone where

33
00:01:42,920 --> 00:01:45,520
Speaker 1: it has it. They meet strategic decision in terms of

34
00:01:45,560 --> 00:01:48,160
Speaker 1: the price cuts, which have been massive home run successes.

35
00:01:48,560 --> 00:01:50,000
Speaker 1: But I think when you will get the Twitter cut

36
00:01:50,080 --> 00:01:53,320
Speaker 1: prices and they raise prices, what are they doing over there? Look,

37
00:01:53,360 --> 00:01:56,720
Speaker 1: I think they're trying to find the equilibrium unsupplied the man.

38
00:01:56,840 --> 00:01:59,680
Speaker 1: I mean, I think in China throwing spaghetti at the wall.

39
00:02:00,040 --> 00:02:02,960
Speaker 1: I mean, come on, man, it's Tesla. Why don't you

40
00:02:02,960 --> 00:02:05,400
Speaker 1: just make a decision and stick to it? Because there's

41
00:02:05,400 --> 00:02:07,400
Speaker 1: so many questions I have. I'm so glad you came

42
00:02:07,440 --> 00:02:09,440
Speaker 1: in here. Dan, It's great, it's great. I was listening

43
00:02:09,440 --> 00:02:12,320
Speaker 1: to Ross Gerber last night. He was on Bloomberg Business

44
00:02:12,320 --> 00:02:15,160
Speaker 1: Week with Carol Master, and I think he made a

45
00:02:15,200 --> 00:02:18,240
Speaker 1: ton of great points without being a jerk, you know.

46
00:02:18,320 --> 00:02:20,240
Speaker 1: I mean, he doesn't want to offend Elon, but he

47
00:02:20,440 --> 00:02:23,440
Speaker 1: is a big shareholder who's trying to get a board

48
00:02:23,480 --> 00:02:27,240
Speaker 1: seat right now, and he was saying, we gotta rain

49
00:02:27,320 --> 00:02:29,919
Speaker 1: this guy in, we gotta get him back to Tesla,

50
00:02:30,080 --> 00:02:32,080
Speaker 1: and we need a succession plan, right because if anything

51
00:02:32,120 --> 00:02:34,880
Speaker 1: happens to Elon. Musk talk about key man risk, he

52
00:02:34,919 --> 00:02:37,480
Speaker 1: has nobody in place. Kimball is not gonna come and

53
00:02:37,560 --> 00:02:40,320
Speaker 1: run it. Right. Look, I think the bigger thing, as

54
00:02:40,440 --> 00:02:43,600
Speaker 1: Ross has talked about, is really more as competition grows,

55
00:02:44,120 --> 00:02:46,760
Speaker 1: you know, in the U S and globally, you just

56
00:02:46,840 --> 00:02:50,400
Speaker 1: want to make sure that strategically they're both defensive and

57
00:02:50,480 --> 00:02:54,160
Speaker 1: offensively positioned. And I think from Musk, you know, his investors,

58
00:02:54,280 --> 00:02:56,120
Speaker 1: that's a huge part of the premium. We saw what

59
00:02:56,240 --> 00:02:59,280
Speaker 1: happened with the Twitter situation, you know, call it from

60
00:02:59,280 --> 00:03:02,960
Speaker 1: October to December. Big part that was the Twitter overhang.

61
00:03:03,320 --> 00:03:06,120
Speaker 1: But that's why you need sure that strategy and it

62
00:03:06,280 --> 00:03:08,639
Speaker 1: must is going to talk. We'll be there in austin

63
00:03:08,760 --> 00:03:11,560
Speaker 1: March first the big plan. So I think investors are

64
00:03:11,600 --> 00:03:13,040
Speaker 1: trying to see what is that? What does that mean

65
00:03:13,040 --> 00:03:15,600
Speaker 1: about production in the future? All right, so good. I

66
00:03:15,639 --> 00:03:17,600
Speaker 1: mean there's a ton of tech news out there. We

67
00:03:17,600 --> 00:03:19,600
Speaker 1: could just spend all day on this stuff. The one

68
00:03:19,639 --> 00:03:22,880
Speaker 1: that got my attentionous Airbnb. I've used it once and

69
00:03:23,040 --> 00:03:25,799
Speaker 1: it was because it was a Bloomberg sponsored Airbnb. I'm

70
00:03:25,800 --> 00:03:27,840
Speaker 1: still in the hotel mode, man, Dave, talk to me

71
00:03:27,840 --> 00:03:31,400
Speaker 1: about Airbnb, their business. I mean, I mean the stock

72
00:03:31,440 --> 00:03:34,200
Speaker 1: at great number, stock up twelve point four percent today, well,

73
00:03:34,240 --> 00:03:37,840
Speaker 1: and talking about raising prices. This is a company that

74
00:03:37,880 --> 00:03:42,680
Speaker 1: has benefited from you know, pent up travel demand price increases.

75
00:03:42,800 --> 00:03:45,360
Speaker 1: They don't have to take down prices to drive demand.

76
00:03:45,440 --> 00:03:48,680
Speaker 1: And look, it's a very robust business model. Out of

77
00:03:48,840 --> 00:03:53,280
Speaker 1: all the marketplace companies you you don't include Ruber, Lift, Door, Dash,

78
00:03:53,400 --> 00:03:57,320
Speaker 1: this is the model that generates over even dumb margins

79
00:03:57,440 --> 00:04:00,560
Speaker 1: and and that is what investors like it can convert

80
00:04:00,640 --> 00:04:03,320
Speaker 1: you know, free cash flow. On our ten billion dollar

81
00:04:03,400 --> 00:04:05,840
Speaker 1: run rate, you've got two billion in free cash flow

82
00:04:05,920 --> 00:04:09,040
Speaker 1: every year. Now, granted, they're going to run into tougher

83
00:04:09,120 --> 00:04:12,440
Speaker 1: comps because they did very well during the pandemic. Well

84
00:04:12,560 --> 00:04:15,440
Speaker 1: guess what, coming out of the pandemic, they did even better.

85
00:04:15,720 --> 00:04:19,200
Speaker 1: And so now they are running into tougher comps even

86
00:04:19,240 --> 00:04:22,720
Speaker 1: though they have the category leadership in alternative accommodations and

87
00:04:22,760 --> 00:04:25,080
Speaker 1: they are adding users like you and they will continue

88
00:04:25,120 --> 00:04:27,680
Speaker 1: to do. No, no, they're not adding Paul's money. Is

89
00:04:27,720 --> 00:04:30,640
Speaker 1: not an alternative accommodation. I'm a four seasons guy, but

90
00:04:30,760 --> 00:04:34,159
Speaker 1: I did stay at a Verbo condo out in Veil

91
00:04:34,480 --> 00:04:37,440
Speaker 1: last week. But that's only because I didn't make the reservation. Somebody, well,

92
00:04:37,440 --> 00:04:40,600
Speaker 1: how was it awesome? Fantastic? But that's just because Veil

93
00:04:40,680 --> 00:04:43,440
Speaker 1: was amazing. Yeah, but I mean, are you guys like

94
00:04:43,480 --> 00:04:48,320
Speaker 1: Airbnb people? Are you? I have gone both ways in

95
00:04:48,440 --> 00:04:52,320
Speaker 1: terms of accommodation, and um, yeah, I don't really. I'm

96
00:04:52,360 --> 00:04:54,640
Speaker 1: like you, though I would prefer to stay at like

97
00:04:54,680 --> 00:04:57,520
Speaker 1: the bierssha half. I don't need I don't need to

98
00:04:57,520 --> 00:04:59,560
Speaker 1: stay in somebody else's apartment. But there are a lot

99
00:04:59,600 --> 00:05:03,200
Speaker 1: of shitsu wations where people have some sit condos that

100
00:05:03,279 --> 00:05:07,080
Speaker 1: they're they're only investing in to do. Airbnb or Verbo

101
00:05:07,279 --> 00:05:10,720
Speaker 1: is Airbnb who owns verbo. Verbo is owned by Expedia.

102
00:05:11,680 --> 00:05:14,880
Speaker 1: And look, they have competition, but the repeat rates in

103
00:05:14,880 --> 00:05:18,520
Speaker 1: that eighteen to thirty four year old cohors that's what

104
00:05:18,560 --> 00:05:22,040
Speaker 1: my kids. That is where Airbnb is really hitting off,

105
00:05:22,160 --> 00:05:24,800
Speaker 1: and and they continue to do very well the repeat transactions.

106
00:05:24,839 --> 00:05:27,320
Speaker 1: That too, they don't have to spend much on sales

107
00:05:27,320 --> 00:05:30,880
Speaker 1: and marketing. The Google marketing span for Airbnb is the

108
00:05:31,000 --> 00:05:33,200
Speaker 1: least out of all the O t A. So it's

109
00:05:33,240 --> 00:05:35,680
Speaker 1: that's why you see that high leverage in the business model.

110
00:05:35,880 --> 00:05:38,680
Speaker 1: That's it. My daughter travels the world nothing but Airbnb.

111
00:05:38,760 --> 00:05:40,680
Speaker 1: I don't know actually does it Anyway? Dan, what's your

112
00:05:40,680 --> 00:05:44,560
Speaker 1: best idea out there? Credit card? No, they are off

113
00:05:44,600 --> 00:05:46,839
Speaker 1: the doll They're off the doll. I was very good

114
00:05:46,839 --> 00:05:50,080
Speaker 1: for the first X number of years. Alright, So Dan,

115
00:05:50,120 --> 00:05:51,919
Speaker 1: what's your best idea that you're talking to clients about

116
00:05:51,920 --> 00:05:54,240
Speaker 1: these days? And well, I mean, look, Tack, as we've

117
00:05:54,279 --> 00:05:56,680
Speaker 1: talked about, it's is under own is either going to

118
00:05:56,760 --> 00:05:59,440
Speaker 1: the year since two thousand nine? Is that right? Yeah?

119
00:05:59,440 --> 00:06:03,440
Speaker 1: I mean look to sell off. Right. The New York

120
00:06:03,480 --> 00:06:06,440
Speaker 1: City cab driver was barrassed on tech coming into this year,

121
00:06:06,920 --> 00:06:09,880
Speaker 1: and that's why in my opinion, I still look at

122
00:06:09,960 --> 00:06:14,120
Speaker 1: names like Microsoft. I look at names like Salesforce, which

123
00:06:14,200 --> 00:06:16,560
Speaker 1: is one where I think activism puts a floor in

124
00:06:16,640 --> 00:06:18,920
Speaker 1: and I think there's a huge some of the parts

125
00:06:18,960 --> 00:06:21,920
Speaker 1: that you could see significant movement there. And our top

126
00:06:21,960 --> 00:06:24,200
Speaker 1: pick continues to be Apple. I think it will again

127
00:06:24,320 --> 00:06:26,920
Speaker 1: regain that three trillion mark cap. Are you ever gonna

128
00:06:26,920 --> 00:06:29,960
Speaker 1: get an Apple car? Is this ever gonna happen? Look,

129
00:06:30,000 --> 00:06:31,960
Speaker 1: I think the big thing now as you're talking about

130
00:06:32,000 --> 00:06:36,360
Speaker 1: this AI arms race, Game of Thrones, Chat, GPT, Microsoft, Google,

131
00:06:36,440 --> 00:06:40,120
Speaker 1: the disaster last week with bard Apple, They're gonna come

132
00:06:40,120 --> 00:06:44,480
Speaker 1: out we believe this summer, you know, with significant AI functionality.

133
00:06:44,520 --> 00:06:47,840
Speaker 1: But it all is leading and Germans talked about this,

134
00:06:48,240 --> 00:06:50,520
Speaker 1: you know, we believe the car. It's a matter of

135
00:06:50,560 --> 00:06:54,560
Speaker 1: when not if that comes out. Two thous What are

136
00:06:54,600 --> 00:06:57,279
Speaker 1: they gonna do with their AI product? We've had Siri

137
00:06:57,440 --> 00:07:02,160
Speaker 1: for more than a decade, right, and she's not very smart? Um,

138
00:07:02,240 --> 00:07:05,279
Speaker 1: not nice? Well, I don't know if she's intended to

139
00:07:05,279 --> 00:07:09,159
Speaker 1: be as smart as like an AI chat bot. Um,

140
00:07:09,200 --> 00:07:11,760
Speaker 1: But does that mean series gonna be able to do

141
00:07:11,880 --> 00:07:15,960
Speaker 1: stuff beyond you know, say, shall I google that for you? Well?

142
00:07:16,000 --> 00:07:18,200
Speaker 1: I think Look, they've been spending. We've eight to ten

143
00:07:18,240 --> 00:07:21,200
Speaker 1: billion on AI and they have something that no other

144
00:07:21,320 --> 00:07:23,720
Speaker 1: company in the world has. It's two billion, and that's

145
00:07:23,760 --> 00:07:26,480
Speaker 1: the installed base. So I think when you comes to AI,

146
00:07:26,560 --> 00:07:29,840
Speaker 1: this is something I think Cooper Tino is extremely focused on.

147
00:07:30,320 --> 00:07:32,440
Speaker 1: And it just goes back to many of the innovations

148
00:07:32,480 --> 00:07:36,120
Speaker 1: in rear view mirror. Yet again, Cook and Apple, you know,

149
00:07:36,240 --> 00:07:38,000
Speaker 1: proved the naysayer is wrong. Man, Deep One are the

150
00:07:38,000 --> 00:07:41,000
Speaker 1: biggest AI bets right now. I mean, it's been so

151
00:07:41,160 --> 00:07:43,680
Speaker 1: huge in the news. Dan talks about the cab driver

152
00:07:44,200 --> 00:07:46,880
Speaker 1: negative on tech, but has got to be positive on

153
00:07:46,960 --> 00:07:50,360
Speaker 1: chat GPT, right, I mean, everybody's tried this thing. I

154
00:07:50,400 --> 00:07:53,280
Speaker 1: think there is that hype aspect around chat GPT. But

155
00:07:53,640 --> 00:07:56,600
Speaker 1: at the same time, you can't take Google or Alphabet

156
00:07:56,640 --> 00:07:58,960
Speaker 1: out of the equation. I mean, I know their disaster,

157
00:07:59,080 --> 00:08:02,320
Speaker 1: it was a disaster, the bar demo, but look, this

158
00:08:02,400 --> 00:08:05,640
Speaker 1: company still is the leader when it comes to the data.

159
00:08:05,800 --> 00:08:08,360
Speaker 1: The number of apps that have over a billion dollars

160
00:08:08,720 --> 00:08:11,920
Speaker 1: billion users, you know, so they have almost five or

161
00:08:11,920 --> 00:08:14,160
Speaker 1: six of their apps that have over a billion users,

162
00:08:14,520 --> 00:08:17,120
Speaker 1: has a lot of proprietary data. I mean, how can

163
00:08:17,160 --> 00:08:20,560
Speaker 1: you be negative on Alphabet if you're positive on chat GPT.

164
00:08:20,840 --> 00:08:23,720
Speaker 1: They have a monopoly of search, so I mean, who

165
00:08:23,720 --> 00:08:26,560
Speaker 1: doesn't want a monopoly? And and look I I think

166
00:08:26,680 --> 00:08:29,440
Speaker 1: I mean it talks about incremental you know, negative in

167
00:08:29,560 --> 00:08:31,920
Speaker 1: terms of being taking some share. But I still think

168
00:08:31,960 --> 00:08:35,800
Speaker 1: Google is the powerhouse when it comes today. I learned

169
00:08:35,840 --> 00:08:39,800
Speaker 1: from their Cardshact moment last week that ultimately to improve

170
00:08:39,880 --> 00:08:42,640
Speaker 1: on the AI functionality. But it just shows that's why

171
00:08:42,679 --> 00:08:46,440
Speaker 1: Amazon and Jassy Apple they're not rushing anything out, but

172
00:08:46,480 --> 00:08:49,200
Speaker 1: no doubt in the della popping the champagne. In terms

173
00:08:49,200 --> 00:08:54,040
Speaker 1: of Chat GPT, Hey mendep just real quickly, um, Meta, Google,

174
00:08:54,200 --> 00:08:56,720
Speaker 1: Digital advertising? What's the call for this year? I think

175
00:08:57,000 --> 00:08:59,800
Speaker 1: the sentiment is too negative talking about you know, tech

176
00:09:00,160 --> 00:09:02,559
Speaker 1: under owned. I had the pocket that has done the

177
00:09:02,679 --> 00:09:05,800
Speaker 1: worst is digital ad companies and Meta has been a

178
00:09:05,800 --> 00:09:08,439
Speaker 1: cost cutting story so far. But I think there will

179
00:09:08,480 --> 00:09:11,199
Speaker 1: be a cyclical rebound at some point with digital ads,

180
00:09:11,240 --> 00:09:14,240
Speaker 1: and it's more likely given what we are seeing, you know,

181
00:09:14,320 --> 00:09:17,080
Speaker 1: in terms of the overall sentiment that these companies have

182
00:09:17,559 --> 00:09:20,120
Speaker 1: hit trough valuations and now it's about just you know,

183
00:09:20,360 --> 00:09:23,240
Speaker 1: sequential increase in top one well Meta just picking that stock.

184
00:09:23,280 --> 00:09:25,640
Speaker 1: It's kind of the poster child for digital advertising. Still

185
00:09:25,679 --> 00:09:28,640
Speaker 1: down to a trial and twelve month basis. That's a

186
00:09:28,640 --> 00:09:30,640
Speaker 1: bad news. The good news is it's up forty seven

187
00:09:30,720 --> 00:09:34,000
Speaker 1: percent this year in so maybe some of the buyers

188
00:09:34,040 --> 00:09:36,200
Speaker 1: coming into this name on a longer term basis. Sorry,

189
00:09:36,200 --> 00:09:39,040
Speaker 1: good stuff. Tech round Table kicking off this two hours

190
00:09:39,040 --> 00:09:42,720
Speaker 1: segment with Dan I've senior equity analysts at wed Bush Securities,

191
00:09:42,840 --> 00:09:45,559
Speaker 1: wearing the casual wear very well today in the Bloomberg

192
00:09:45,600 --> 00:09:48,360
Speaker 1: in an Actor broker studio, plus Mandy of Saint Bloomberg Intelligence,

193
00:09:48,360 --> 00:09:50,480
Speaker 1: senior tech anles. We're like getting these guys together, they

194
00:09:50,520 --> 00:09:52,640
Speaker 1: know what they're talking about. I'll be like the round

195
00:09:52,679 --> 00:09:55,640
Speaker 1: table off things tech. We're gonna more coming up. This

196
00:09:56,000 --> 00:10:02,800
Speaker 1: is Bloomberg. Good Morning. We had some pretty strong retail

197
00:10:02,840 --> 00:10:04,920
Speaker 1: sales number the consumers still out there, so maybe the

198
00:10:04,960 --> 00:10:08,080
Speaker 1: Fed can uh, you know, maybe keep rates higher for longer.

199
00:10:08,120 --> 00:10:09,319
Speaker 1: That's kind of seems to be a little bit of

200
00:10:09,320 --> 00:10:11,880
Speaker 1: a bet out there. Robert Teeter, head of Investment Policy

201
00:10:11,880 --> 00:10:14,679
Speaker 1: and Strategy Group at Silver Crust Asset Management Joints us

202
00:10:14,720 --> 00:10:17,880
Speaker 1: here in our Bloomberg Interactive Broker Studio. So Robert, busy

203
00:10:17,920 --> 00:10:19,920
Speaker 1: time for you professionals out there, We've got lots of

204
00:10:20,000 --> 00:10:22,880
Speaker 1: earnings to deal with. We've got lots of ECO data,

205
00:10:23,120 --> 00:10:26,520
Speaker 1: CPI yesterday, retail sales today. When you put it all together,

206
00:10:26,840 --> 00:10:29,240
Speaker 1: what are you telling your clients these days? I think

207
00:10:29,280 --> 00:10:31,680
Speaker 1: we're sort of sorting through a matrix here of on

208
00:10:31,800 --> 00:10:34,400
Speaker 1: the economy side, are are things getting better or worse?

209
00:10:34,559 --> 00:10:36,400
Speaker 1: And things seem to be getting a little bit better.

210
00:10:36,840 --> 00:10:39,319
Speaker 1: And on the inflation side, which is a critical influence

211
00:10:39,360 --> 00:10:42,080
Speaker 1: for evaluation, uh, things seem to be slowing a bit

212
00:10:42,160 --> 00:10:44,280
Speaker 1: in terms of their improvement, but also getting better. And

213
00:10:44,320 --> 00:10:46,200
Speaker 1: so I think that the back and forth here is

214
00:10:46,280 --> 00:10:49,880
Speaker 1: largely between the interaction between those two and assessing whether

215
00:10:49,920 --> 00:10:52,199
Speaker 1: this this good news that you get on the economy side,

216
00:10:52,200 --> 00:10:54,400
Speaker 1: how bad is that for inflation right now? I don't

217
00:10:54,400 --> 00:10:55,920
Speaker 1: think it's too bad. But you see some of the

218
00:10:55,920 --> 00:10:58,079
Speaker 1: reaction that we had yesterday to the CPI data, the

219
00:10:58,120 --> 00:11:00,720
Speaker 1: reaction today to strong retail sales. I think that tells

220
00:11:00,720 --> 00:11:01,760
Speaker 1: me we're going to be in a bit of a

221
00:11:01,760 --> 00:11:03,520
Speaker 1: tug of war here as we continue to fight through

222
00:11:03,559 --> 00:11:05,600
Speaker 1: these two issues. Well, doesn't the Fed have to raise

223
00:11:05,720 --> 00:11:10,000
Speaker 1: rates further? I mean, I got a great message um yesterday,

224
00:11:10,040 --> 00:11:12,120
Speaker 1: who what NEIL data sent me a message saying, like,

225
00:11:12,160 --> 00:11:14,040
Speaker 1: what does the FED have to show for four or

226
00:11:14,080 --> 00:11:16,840
Speaker 1: seventy five basis points of break takes? I mean stocks

227
00:11:16,840 --> 00:11:21,120
Speaker 1: are down what fifercent from their highs, So that's that's

228
00:11:21,160 --> 00:11:23,960
Speaker 1: one thing, I guess. But um unemployments at three point

229
00:11:24,000 --> 00:11:28,760
Speaker 1: four percent, right, we're all spending like crazy. Airbnb has

230
00:11:29,600 --> 00:11:31,880
Speaker 1: after the last month they were up. I mean, that's

231
00:11:31,920 --> 00:11:34,160
Speaker 1: just a sign of what's going on out there. It

232
00:11:34,480 --> 00:11:36,360
Speaker 1: sure is, and I do think it indicates that the

233
00:11:36,360 --> 00:11:38,880
Speaker 1: FED will will certainly continue to increase. I think in

234
00:11:38,920 --> 00:11:41,920
Speaker 1: twenty five basis point increments, maybe another fifty or seventy

235
00:11:41,920 --> 00:11:44,400
Speaker 1: five in total, and stay there for a long time.

236
00:11:44,640 --> 00:11:46,320
Speaker 1: I have a little bit of a contrarian take on

237
00:11:46,320 --> 00:11:48,480
Speaker 1: the economic side of things, and that I feel that

238
00:11:48,480 --> 00:11:51,719
Speaker 1: that each month that the economy UH stays robust, it's

239
00:11:51,760 --> 00:11:53,920
Speaker 1: more time for inflation to come down. So well, all

240
00:11:53,920 --> 00:11:55,800
Speaker 1: those things that you stated are true. The FED hasn't

241
00:11:55,800 --> 00:11:59,120
Speaker 1: made progress in financial conditions, hasn't made progress in uh,

242
00:11:59,160 --> 00:12:01,480
Speaker 1: you know, softening the labor market, but there has been

243
00:12:01,480 --> 00:12:03,400
Speaker 1: progress in inflation, and I think so long as that

244
00:12:03,440 --> 00:12:05,920
Speaker 1: continues without the economy falling apart, we have a chance

245
00:12:05,920 --> 00:12:08,280
Speaker 1: for a pretty good outcome. All right, we're about I

246
00:12:08,280 --> 00:12:13,040
Speaker 1: don't know away through this earning season. Um, what are

247
00:12:13,040 --> 00:12:15,120
Speaker 1: you takeaways? Yeah, I think there's been a lot of

248
00:12:15,120 --> 00:12:17,720
Speaker 1: strong signals from earning seasons. So while earnings haven't been

249
00:12:17,760 --> 00:12:20,240
Speaker 1: that exciting, under the surface, there have been some pockets

250
00:12:20,280 --> 00:12:22,480
Speaker 1: of strength, and I think the strength is coincided with

251
00:12:22,480 --> 00:12:25,120
Speaker 1: the message we're hearing from the economy. So consumer discretionary

252
00:12:25,160 --> 00:12:27,560
Speaker 1: has clearly been a strong source of earnings. You've heard

253
00:12:27,559 --> 00:12:30,240
Speaker 1: from the banks in terms of the consumer remaining resilient.

254
00:12:30,320 --> 00:12:32,720
Speaker 1: I think that's encouraging. And we've seen some strength in

255
00:12:32,760 --> 00:12:34,920
Speaker 1: the industrial space as well, and I think that plays

256
00:12:34,920 --> 00:12:37,000
Speaker 1: into a couple of themes that are unfolding right now.

257
00:12:37,200 --> 00:12:39,440
Speaker 1: You know, first and foremost among those reshoring, and so

258
00:12:39,480 --> 00:12:41,599
Speaker 1: I think there are some pockets of remaining strength in

259
00:12:41,640 --> 00:12:43,560
Speaker 1: the economy. I think you have to be very careful

260
00:12:43,559 --> 00:12:45,480
Speaker 1: in terms of earnings. That top line number might not

261
00:12:45,559 --> 00:12:47,520
Speaker 1: be too exciting, but there are some areas to find

262
00:12:47,600 --> 00:12:49,240
Speaker 1: a good earning scrop. It's intu. I'm just looking at

263
00:12:49,240 --> 00:12:52,760
Speaker 1: the a function that hooked me up with a while. Uh.

264
00:12:52,800 --> 00:12:56,800
Speaker 1: And for the SP five hundred, again we're about companies

265
00:12:56,840 --> 00:13:00,400
Speaker 1: in SP FID of reported five point three sales growth

266
00:13:00,480 --> 00:13:03,600
Speaker 1: your year, but earnings declined by two point four percent.

267
00:13:03,679 --> 00:13:07,080
Speaker 1: So there's that margin pressure. Certainly is some margin pressure,

268
00:13:07,120 --> 00:13:09,280
Speaker 1: and I think coming back a bit to normal. So

269
00:13:09,440 --> 00:13:11,280
Speaker 1: you know, my mapping of it is to say margins

270
00:13:11,280 --> 00:13:13,360
Speaker 1: get back to where they were in twenty nineteen, which

271
00:13:13,360 --> 00:13:15,840
Speaker 1: says there's still a little bit of downside pressure on margins.

272
00:13:16,000 --> 00:13:18,199
Speaker 1: I think revenues will continue to remain strong in those

273
00:13:18,240 --> 00:13:20,480
Speaker 1: areas that I mentioned, and so it does playing a

274
00:13:20,520 --> 00:13:23,120
Speaker 1: picture of you know, basically flat earnings growth in terms

275
00:13:23,160 --> 00:13:25,760
Speaker 1: of outlook for this year, but with some opportunities below

276
00:13:25,760 --> 00:13:30,120
Speaker 1: the surface. Flat. So SMP earnings flat from two. That's

277
00:13:30,120 --> 00:13:31,960
Speaker 1: better than a stick in the eye, right, I think

278
00:13:31,960 --> 00:13:33,800
Speaker 1: it is, I really do. I think there's there are

279
00:13:33,800 --> 00:13:35,960
Speaker 1: a lot of transformations going on. And so whether it's

280
00:13:35,960 --> 00:13:38,000
Speaker 1: this theme of a you know, a rolling recession or

281
00:13:38,040 --> 00:13:39,640
Speaker 1: I prefer to think of it as different parts of

282
00:13:39,640 --> 00:13:42,520
Speaker 1: the economy, in different parts of the economic cycle. There

283
00:13:42,559 --> 00:13:45,120
Speaker 1: are these areas that are continuing to produce strong earnings growth.

284
00:13:45,160 --> 00:13:47,360
Speaker 1: It's just not enough to boost the overall level. Consumer

285
00:13:47,400 --> 00:13:50,960
Speaker 1: discretionary industrials are pretty small relative to tech and financials. Yeah,

286
00:13:50,960 --> 00:13:54,200
Speaker 1: I'm looking at energy just again on this e A function, earnings,

287
00:13:54,200 --> 00:13:57,360
Speaker 1: a revenue of fifteen percent year over year, earnings up

288
00:13:57,400 --> 00:13:59,280
Speaker 1: sixty seven percent year of a year or so. You know,

289
00:13:59,320 --> 00:14:01,920
Speaker 1: it's kind of goes the question, boy, energy has been

290
00:14:01,960 --> 00:14:03,720
Speaker 1: good for the first time in a long time over

291
00:14:03,760 --> 00:14:06,240
Speaker 1: the last couple of years. Have I missed it totally?

292
00:14:06,760 --> 00:14:09,280
Speaker 1: Just go back into my you know, two year treasury

293
00:14:09,360 --> 00:14:12,959
Speaker 1: yield at four points six. It's it's an interesting question

294
00:14:13,000 --> 00:14:14,920
Speaker 1: to ponder. I mean, I don't think that the upside

295
00:14:15,640 --> 00:14:17,200
Speaker 1: is going to be what it was in the past.

296
00:14:17,240 --> 00:14:19,640
Speaker 1: But I think if you look through all those all

297
00:14:19,640 --> 00:14:21,080
Speaker 1: those sectors on there, and I love the e A

298
00:14:21,200 --> 00:14:23,800
Speaker 1: function as well, Uh, the areas that have had strength,

299
00:14:23,840 --> 00:14:26,040
Speaker 1: all indications are that they will continue to have strength.

300
00:14:26,080 --> 00:14:28,760
Speaker 1: So the key question is just valuation. And in my view,

301
00:14:28,760 --> 00:14:31,120
Speaker 1: the overall valuation on the market will be influenced a

302
00:14:31,160 --> 00:14:33,280
Speaker 1: lot more by the interest rate and inflation picture, which

303
00:14:33,280 --> 00:14:35,000
Speaker 1: I see improving. So to answer your question, I do

304
00:14:35,040 --> 00:14:37,640
Speaker 1: think there's still some opportunity in energy as well as

305
00:14:37,640 --> 00:14:40,080
Speaker 1: those other areas that are showing learnings growth. What do

306
00:14:40,160 --> 00:14:42,880
Speaker 1: you think about other regions? I mean, we focus on

307
00:14:42,920 --> 00:14:46,520
Speaker 1: the US obviously because we're here, but um, there could

308
00:14:46,600 --> 00:14:49,800
Speaker 1: be you know, something we're missing out on. Overseas. E

309
00:14:49,960 --> 00:14:51,960
Speaker 1: M was very popular at the beginning of the year.

310
00:14:52,040 --> 00:14:55,280
Speaker 1: Everyone said, Oh, Europe's gonna avoid this recession. How does

311
00:14:55,320 --> 00:14:57,400
Speaker 1: it look to you now? I think all of those

312
00:14:57,440 --> 00:15:00,160
Speaker 1: have been an an interesting sort of one time time

313
00:15:00,200 --> 00:15:02,120
Speaker 1: trade that maybe has a little bit of of of

314
00:15:02,320 --> 00:15:05,440
Speaker 1: legs left to it in terms of evaluation disparity against

315
00:15:05,480 --> 00:15:07,600
Speaker 1: the U S and that recovery in Europe, the reopening

316
00:15:07,600 --> 00:15:09,800
Speaker 1: of China playing into e M. So I do think

317
00:15:09,800 --> 00:15:12,160
Speaker 1: there's still a bit of opportunity there, but longer term,

318
00:15:12,200 --> 00:15:15,080
Speaker 1: when we step back and look at the demographic picture,

319
00:15:15,120 --> 00:15:17,200
Speaker 1: when we look at the productivity picture, where we look

320
00:15:17,240 --> 00:15:20,120
Speaker 1: at where companies are locating that are producing growth, most

321
00:15:20,160 --> 00:15:21,960
Speaker 1: of those opportunities are in the U S. Yeah, I

322
00:15:21,960 --> 00:15:25,240
Speaker 1: mean we're talking to e A function. So I noticed

323
00:15:25,280 --> 00:15:28,120
Speaker 1: obviously there's a yellow drop down box you can choose

324
00:15:28,120 --> 00:15:30,280
Speaker 1: your index. I put in the stock six D instead

325
00:15:30,280 --> 00:15:34,040
Speaker 1: of the S and P five and it's dramatically different. Um,

326
00:15:34,080 --> 00:15:37,400
Speaker 1: and well, look it's the same trend but stronger. So

327
00:15:37,480 --> 00:15:41,560
Speaker 1: sales growth is like super boosted up twelve percent, and

328
00:15:41,640 --> 00:15:44,200
Speaker 1: earnings the declines are only one and a half percent,

329
00:15:44,280 --> 00:15:46,520
Speaker 1: So I guess that's really kind of a reopening story

330
00:15:46,560 --> 00:15:48,520
Speaker 1: for Europe as well. I think it is. I think

331
00:15:48,520 --> 00:15:50,640
Speaker 1: both Europe and Asia a little bit behind the US

332
00:15:50,680 --> 00:15:53,240
Speaker 1: in terms of the reopening cycle, the reopening cycle from

333
00:15:53,280 --> 00:15:55,640
Speaker 1: from the economy, So again, there may be a little

334
00:15:55,640 --> 00:15:58,280
Speaker 1: bit more opportunity there, but longer term, the demographic picture

335
00:15:58,320 --> 00:16:00,360
Speaker 1: and productivity in the US just looks a lot. By

336
00:16:00,360 --> 00:16:03,800
Speaker 1: the way, are you worried coming back home, um about

337
00:16:03,800 --> 00:16:08,960
Speaker 1: the housing situation here, because we really haven't had, um uh,

338
00:16:09,120 --> 00:16:13,400
Speaker 1: any serious injuries from raised rates so far. Right, six

339
00:16:13,480 --> 00:16:17,240
Speaker 1: percent seven percent Mortgage rates make affordability kind of off

340
00:16:17,240 --> 00:16:19,360
Speaker 1: the charge, so anybody who wanted to sell is gonna

341
00:16:19,400 --> 00:16:22,280
Speaker 1: maybe rent instead, and anybody who wanted to buy, um

342
00:16:22,320 --> 00:16:24,840
Speaker 1: the same goes for them. But if we start to

343
00:16:24,840 --> 00:16:27,720
Speaker 1: see job losses, we could start to see four sales

344
00:16:27,760 --> 00:16:30,600
Speaker 1: and then big price drops. That's that's a great area

345
00:16:30,680 --> 00:16:32,440
Speaker 1: of focus for US. I think we're not in the

346
00:16:32,520 --> 00:16:34,800
Speaker 1: danger zone yet, but we could be if these rates

347
00:16:34,800 --> 00:16:37,160
Speaker 1: continue to remain high towards the end of the year

348
00:16:37,200 --> 00:16:39,080
Speaker 1: and if we don't see progress on inflation by the

349
00:16:39,120 --> 00:16:41,160
Speaker 1: end of the year. For now, you have a situation

350
00:16:41,200 --> 00:16:43,920
Speaker 1: where a lot of people who bought homes are are

351
00:16:43,960 --> 00:16:46,240
Speaker 1: still in very good shape. They bought them, you know,

352
00:16:46,280 --> 00:16:48,920
Speaker 1: to three years ago, before the move higher in prices,

353
00:16:49,240 --> 00:16:51,360
Speaker 1: and you have a slowdown and activity. Of course, we

354
00:16:51,400 --> 00:16:53,320
Speaker 1: saw a few green shoots in housing earlier in the

355
00:16:53,360 --> 00:16:55,160
Speaker 1: year when rates cooled a bit, so we think there's

356
00:16:55,160 --> 00:16:56,960
Speaker 1: the potential for that to happen again as we get

357
00:16:57,040 --> 00:16:59,680
Speaker 1: later into the year, more progress on inflation. Well, look,

358
00:16:59,760 --> 00:17:02,040
Speaker 1: I about to close on a property. Uh, and I'm

359
00:17:02,080 --> 00:17:04,359
Speaker 1: paying a much higher mortgage rate than I would like

360
00:17:04,480 --> 00:17:05,919
Speaker 1: or I would have paid a year ago, but I

361
00:17:05,960 --> 00:17:09,119
Speaker 1: fully expect to refinance in twelve months, so hopefully that

362
00:17:09,400 --> 00:17:10,840
Speaker 1: still works up. I look, you know, I'm trying to

363
00:17:10,880 --> 00:17:12,879
Speaker 1: get Tom Keene out of the triple leverage all cash

364
00:17:13,240 --> 00:17:14,720
Speaker 1: fun and now I'm saying, hey, you can go buy

365
00:17:14,760 --> 00:17:18,239
Speaker 1: a two year note and get four point six. How

366
00:17:18,280 --> 00:17:21,239
Speaker 1: are you guys thinking about fixed income ine after just

367
00:17:21,320 --> 00:17:24,720
Speaker 1: a brutal Yeah, I think there are some good opportunities

368
00:17:24,720 --> 00:17:26,320
Speaker 1: in fixed income, and you don't have to be too

369
00:17:26,320 --> 00:17:28,560
Speaker 1: aggressive on the duration or credit front to pick up

370
00:17:28,560 --> 00:17:31,040
Speaker 1: pretty good returns. So that's an area where we've been

371
00:17:31,240 --> 00:17:34,560
Speaker 1: constructive and encouraging clients to to not go into all cash,

372
00:17:34,600 --> 00:17:36,679
Speaker 1: but rather to go out a little bit. Uh, not

373
00:17:36,760 --> 00:17:38,520
Speaker 1: be long duration. You don't have to be to get

374
00:17:38,520 --> 00:17:40,880
Speaker 1: good returns and not take a lot of excessive credit risk.

375
00:17:40,920 --> 00:17:43,199
Speaker 1: There's no reason to. And it plays a much more

376
00:17:43,240 --> 00:17:47,359
Speaker 1: constructive role into portfolio than it did three years ago. See. Yeah, no,

377
00:17:47,480 --> 00:17:49,800
Speaker 1: I've this is what we've been hearing U and it

378
00:17:49,840 --> 00:17:53,399
Speaker 1: makes sense to me for sure. Um, I just wonder

379
00:17:53,560 --> 00:17:56,360
Speaker 1: it doesn't really help financial conditions if I'm getting four

380
00:17:56,400 --> 00:17:59,280
Speaker 1: point six percent of my two year right, So the

381
00:17:59,280 --> 00:18:01,720
Speaker 1: fed I inc Is going to be the variable that

382
00:18:02,680 --> 00:18:06,440
Speaker 1: could blow down this house of cards because they either

383
00:18:06,560 --> 00:18:09,760
Speaker 1: have to keep raising or we have to all wait

384
00:18:09,880 --> 00:18:14,080
Speaker 1: through what another year of another two years of inflation

385
00:18:14,080 --> 00:18:16,639
Speaker 1: that's just unacceptably high. I mean, we have the smartest

386
00:18:16,640 --> 00:18:18,320
Speaker 1: people in the world coming out and now suggesting they

387
00:18:18,400 --> 00:18:20,760
Speaker 1: raise the target, and I'm thinking, wait, this is not good.

388
00:18:20,960 --> 00:18:23,840
Speaker 1: Two percent is already too much inflation, so three percent

389
00:18:23,920 --> 00:18:26,640
Speaker 1: is worse. Yes, I think that's right. I don't think

390
00:18:26,640 --> 00:18:28,200
Speaker 1: it makes a lot of sense to raise the target.

391
00:18:28,240 --> 00:18:29,560
Speaker 1: I think you hit on the key theme, though we

392
00:18:29,840 --> 00:18:31,679
Speaker 1: do have to be patient. I don't think inflation is

393
00:18:31,680 --> 00:18:34,040
Speaker 1: coming down quickly, but as long as it's heading in

394
00:18:34,040 --> 00:18:35,679
Speaker 1: the right direction, I think it gives people a lot

395
00:18:35,720 --> 00:18:38,080
Speaker 1: of encouragement in terms of planning for businesses or planning

396
00:18:38,080 --> 00:18:41,560
Speaker 1: its consumers. While the problem is is getting better, that's

397
00:18:41,640 --> 00:18:43,520
Speaker 1: much more important at the pace. I agree with you,

398
00:18:43,560 --> 00:18:44,879
Speaker 1: it may take a while, and so we may be

399
00:18:44,920 --> 00:18:46,840
Speaker 1: looking at a situation where we're getting out towards the

400
00:18:46,880 --> 00:18:48,680
Speaker 1: end of the year and we're still not uh near

401
00:18:48,720 --> 00:18:50,920
Speaker 1: the two percent target that the FED is set, although

402
00:18:50,920 --> 00:18:53,679
Speaker 1: there are pockets within the CPI construction where you do

403
00:18:53,760 --> 00:18:55,440
Speaker 1: see those numbers coming down a bit, and I think

404
00:18:55,440 --> 00:18:57,800
Speaker 1: you've seen share pal starting to refer to some of

405
00:18:57,840 --> 00:18:59,399
Speaker 1: the progress that's been made, and I think that's a

406
00:18:59,400 --> 00:19:01,040
Speaker 1: good thing. I think out will continue through the year,

407
00:19:01,119 --> 00:19:02,800
Speaker 1: but it will take some patience to get there. Just

408
00:19:02,800 --> 00:19:05,000
Speaker 1: about thirty seconds. How much more earnings risk do you

409
00:19:05,000 --> 00:19:07,600
Speaker 1: think is still out there in terms of estimates, Yeah,

410
00:19:07,600 --> 00:19:09,960
Speaker 1: it's it's it's another area of focus for us as well.

411
00:19:10,000 --> 00:19:12,200
Speaker 1: I do think the pressure is there on the margins side.

412
00:19:12,440 --> 00:19:14,320
Speaker 1: I've been a little bit less focused on that top

413
00:19:14,359 --> 00:19:16,359
Speaker 1: line number and willing to accept the sort of flat

414
00:19:16,400 --> 00:19:18,720
Speaker 1: outcome with the recognition that there will be some big

415
00:19:18,760 --> 00:19:21,560
Speaker 1: positive and negative numbers beneath the surface. There. One theme

416
00:19:21,600 --> 00:19:23,920
Speaker 1: that we heard throughout the earning season was companies really

417
00:19:23,920 --> 00:19:26,600
Speaker 1: focused on efficiency. So whether that's being careful with regard

418
00:19:26,600 --> 00:19:30,200
Speaker 1: to labor costs, are continuing to deploy technology, efficiencies are there,

419
00:19:30,200 --> 00:19:33,240
Speaker 1: so companies might manage a bit better than expected on margins. Alright,

420
00:19:33,280 --> 00:19:36,399
Speaker 1: good stuff as always Robert Teeter, head of Investment Policy

421
00:19:36,400 --> 00:19:39,439
Speaker 1: and Strategy Group at Silver Crest Asset Management, and I

422
00:19:39,480 --> 00:19:41,520
Speaker 1: think you can see him on Bloomberg Television at one

423
00:19:41,560 --> 00:19:44,240
Speaker 1: thirty pm today with Cretty Guptas. So if you want

424
00:19:44,240 --> 00:19:46,760
Speaker 1: more Robert Teeter and his good thoughts on the markets,

425
00:19:46,800 --> 00:19:52,800
Speaker 1: that's where you can find it. Lots of earnings already

426
00:19:52,880 --> 00:19:54,960
Speaker 1: under the belt. We've got some more to go here.

427
00:19:55,000 --> 00:19:56,560
Speaker 1: But this market, as we've seen over the last couple

428
00:19:56,560 --> 00:19:59,439
Speaker 1: of days, still focus pretty intently on the federal Reserve,

429
00:19:59,560 --> 00:20:02,560
Speaker 1: on lation. We've got the CPI print yesterday, we got

430
00:20:02,640 --> 00:20:06,119
Speaker 1: some really strong retail sales today. Let's check in with

431
00:20:06,119 --> 00:20:08,200
Speaker 1: the professional kind of looks at this stuff for a living,

432
00:20:08,240 --> 00:20:12,880
Speaker 1: trying to Pence, chief Investment officer for Pence Capital Management. Uh.

433
00:20:12,920 --> 00:20:15,359
Speaker 1: He is an Army veteran, so we think driving for

434
00:20:15,480 --> 00:20:18,200
Speaker 1: his army service there driving thanks so much for joining

435
00:20:18,240 --> 00:20:21,800
Speaker 1: us here. Lots of ECO data, lots of earnings. When

436
00:20:21,800 --> 00:20:23,639
Speaker 1: you sift through it all, what are some of your

437
00:20:23,640 --> 00:20:28,680
Speaker 1: takeaways here as you look towards Well, I think there's

438
00:20:28,720 --> 00:20:31,560
Speaker 1: two There's there's two big things. The first one is

439
00:20:31,600 --> 00:20:35,600
Speaker 1: no one told the consumer don't fight the FED. When

440
00:20:35,640 --> 00:20:39,720
Speaker 1: you look at retail sales and coming up, and we

441
00:20:39,760 --> 00:20:44,600
Speaker 1: had just a good report today and with employment strong, uh,

442
00:20:44,600 --> 00:20:47,879
Speaker 1: with with basically balance sheets in good shape, you know,

443
00:20:48,240 --> 00:20:51,640
Speaker 1: consumers not necessarily slowing down. And I think that that's

444
00:20:51,840 --> 00:20:54,000
Speaker 1: that's beginning to put some pressure on the FED of

445
00:20:54,040 --> 00:20:56,920
Speaker 1: what they're thinking about going forward with it with interest rates.

446
00:20:56,920 --> 00:20:59,480
Speaker 1: So I think that's a that's a big issue. Consumers

447
00:20:59,520 --> 00:21:01,680
Speaker 1: still see to be strong and they still can still

448
00:21:01,680 --> 00:21:04,159
Speaker 1: have their buying. So how high do you think the

449
00:21:04,200 --> 00:21:08,640
Speaker 1: FED has to go to get real traction on financial conditions? Well,

450
00:21:08,680 --> 00:21:11,199
Speaker 1: I think you're probably looking at you. For the longest

451
00:21:11,240 --> 00:21:14,080
Speaker 1: of time they're saying terminal rates was you know, maybe

452
00:21:14,280 --> 00:21:18,000
Speaker 1: between five five. We think that that now may move

453
00:21:18,000 --> 00:21:22,560
Speaker 1: out a little bit to five fifty. But uh, one

454
00:21:22,600 --> 00:21:24,679
Speaker 1: of the things that people aren't quite paying attention to

455
00:21:24,720 --> 00:21:27,760
Speaker 1: his lag effects uh. And and where you know company

456
00:21:27,880 --> 00:21:30,040
Speaker 1: the market. You know, FED does something in two days,

457
00:21:30,160 --> 00:21:34,439
Speaker 1: market adjust in two hours, but consumers and businesses it

458
00:21:34,560 --> 00:21:38,440
Speaker 1: takes them weeks and months sometimes to adjust to they're

459
00:21:38,480 --> 00:21:41,160
Speaker 1: changing capital cost. And so I think that we're under

460
00:21:41,200 --> 00:21:44,920
Speaker 1: appreciating the fact that this last hundred fifty basis points

461
00:21:44,920 --> 00:21:48,000
Speaker 1: of hikes, uh, really haven't worked their way into the

462
00:21:48,040 --> 00:21:51,440
Speaker 1: market yet. Uh. And I think this is why at

463
00:21:51,480 --> 00:21:54,320
Speaker 1: some point the FED does need to pause, and the

464
00:21:54,400 --> 00:21:57,000
Speaker 1: pause is going to be long because the consumers and

465
00:21:57,040 --> 00:21:59,680
Speaker 1: businesses kind of have to catch up with the decisions

466
00:21:59,720 --> 00:22:03,040
Speaker 1: of wants them to make. Give us a sense of dryden?

467
00:22:03,119 --> 00:22:05,720
Speaker 1: Does you think here we see rates moving higher for

468
00:22:05,760 --> 00:22:08,240
Speaker 1: a lot of folks. That makes fixed income much more

469
00:22:08,240 --> 00:22:12,399
Speaker 1: attractive relative to the last you know, decade and certainly

470
00:22:12,400 --> 00:22:15,359
Speaker 1: relative to last year and performance was so terrible. Um,

471
00:22:15,480 --> 00:22:17,119
Speaker 1: how do you think about fixed income? What's your kind

472
00:22:17,119 --> 00:22:20,600
Speaker 1: of your strategy there? Well, you know, absolutely, I think

473
00:22:20,600 --> 00:22:23,199
Speaker 1: that this is quite significant. You know, we went for

474
00:22:23,280 --> 00:22:26,359
Speaker 1: decades where the market was the Tina market. There was

475
00:22:26,600 --> 00:22:29,240
Speaker 1: you know, there is no alternative, and now I think

476
00:22:29,280 --> 00:22:31,800
Speaker 1: we're in what I call the baby market. Uh. And

477
00:22:31,880 --> 00:22:37,600
Speaker 1: that stands for bonds or back, y'all. Uh And and

478
00:22:38,160 --> 00:22:40,399
Speaker 1: I think it's true when you can get when you

479
00:22:40,440 --> 00:22:44,639
Speaker 1: can get a two year north of four percent and trasury,

480
00:22:44,960 --> 00:22:48,080
Speaker 1: I think that changes that gives It gives really invest

481
00:22:48,160 --> 00:22:51,280
Speaker 1: or something that they really haven't had in over a decade.

482
00:22:51,680 --> 00:22:55,719
Speaker 1: And so it makes a much better alternative to you know,

483
00:22:55,760 --> 00:22:58,240
Speaker 1: what's going on in the market. And they have, you know,

484
00:22:58,760 --> 00:23:02,200
Speaker 1: for a retail and ester to be able to get

485
00:23:02,920 --> 00:23:07,400
Speaker 1: a two year treasury north of four it changes how

486
00:23:07,440 --> 00:23:10,600
Speaker 1: they think about risk, It changes how they think about

487
00:23:10,640 --> 00:23:13,960
Speaker 1: long term investing. And I think that that's exceedingly important

488
00:23:14,000 --> 00:23:18,280
Speaker 1: for advisors and people pay attention. We're getting back, like said,

489
00:23:18,320 --> 00:23:20,920
Speaker 1: bonds are back, y'all, and we need to pay close

490
00:23:20,920 --> 00:23:23,560
Speaker 1: attention to that. And we have a cross asset reporter,

491
00:23:23,640 --> 00:23:26,760
Speaker 1: Katie Greifeld, she's coming on and about ten minutes to

492
00:23:26,800 --> 00:23:28,960
Speaker 1: talk to us about the fact that investors can earn

493
00:23:29,000 --> 00:23:30,520
Speaker 1: more in cash than they can in the S and

494
00:23:30,560 --> 00:23:34,480
Speaker 1: P right now and and and everyone hates this rally um.

495
00:23:34,680 --> 00:23:37,520
Speaker 1: You know, even people who are in it are saying,

496
00:23:37,560 --> 00:23:41,480
Speaker 1: this is just a bear market rally. It's gonna falter um.

497
00:23:41,560 --> 00:23:44,280
Speaker 1: What what signs do you look for for that, you know,

498
00:23:45,000 --> 00:23:49,879
Speaker 1: market pivot to happen. Well, so there's a difference in

499
00:23:49,960 --> 00:23:53,440
Speaker 1: the market pivot and true true, true. I'm talking about

500
00:23:53,440 --> 00:23:56,080
Speaker 1: the market like what signs do we we're up fiftcent

501
00:23:56,119 --> 00:23:58,600
Speaker 1: from the October lows, you know, does that hold or

502
00:23:58,600 --> 00:24:01,840
Speaker 1: do we come back down? I think we're ahead of ourselves.

503
00:24:02,680 --> 00:24:04,600
Speaker 1: But I think one of the big things is you

504
00:24:04,720 --> 00:24:10,000
Speaker 1: cannot discount human emotion. Everybody was so happy to see

505
00:24:10,040 --> 00:24:13,840
Speaker 1: the end of it. Basically was a sea change. You

506
00:24:13,920 --> 00:24:16,320
Speaker 1: kind of took off that jacket and put on the

507
00:24:16,359 --> 00:24:19,800
Speaker 1: new one. So I think we saw this early rally uh,

508
00:24:19,960 --> 00:24:23,120
Speaker 1: more like a relief rally if anything else. Uh. And

509
00:24:23,200 --> 00:24:25,520
Speaker 1: so now we're going to have to look through the

510
00:24:25,560 --> 00:24:30,119
Speaker 1: rest of this quarter for validation of that and also

511
00:24:30,240 --> 00:24:32,800
Speaker 1: the realization that we made. You know that I think

512
00:24:32,840 --> 00:24:36,959
Speaker 1: that the idea that a bad recession is coming uh

513
00:24:37,080 --> 00:24:39,520
Speaker 1: maybe coming off the table, and that it looks like

514
00:24:39,560 --> 00:24:43,120
Speaker 1: a little small recession or no recession. And we're kind

515
00:24:43,160 --> 00:24:46,919
Speaker 1: of in that camp. But I think it's important to

516
00:24:46,960 --> 00:24:49,920
Speaker 1: pay attention to we haven't seen the last hundred fifty

517
00:24:49,960 --> 00:24:53,520
Speaker 1: basis points of hikes really work its way through the

518
00:24:53,560 --> 00:24:56,040
Speaker 1: business decisions yet. So I think that that's why we

519
00:24:56,080 --> 00:24:59,000
Speaker 1: have to be a little cautious. So I don't mind

520
00:24:59,000 --> 00:25:02,000
Speaker 1: the rally, but I think that we have to make

521
00:25:02,040 --> 00:25:04,240
Speaker 1: sure that we're being cautious to have this first and

522
00:25:04,320 --> 00:25:07,679
Speaker 1: second quarter. But I don't see I don't see a

523
00:25:07,760 --> 00:25:10,920
Speaker 1: technical recession occurring first or second quarter. You know, we

524
00:25:11,080 --> 00:25:13,800
Speaker 1: have positive GDP grow, so you're not gonna see if

525
00:25:13,840 --> 00:25:17,360
Speaker 1: it happens. It's not having a third quarter, so's pushed out, tried.

526
00:25:17,400 --> 00:25:19,480
Speaker 1: And what are you doing with new capital coming into

527
00:25:19,600 --> 00:25:22,800
Speaker 1: your firm here? How cautious are you being? How are

528
00:25:22,800 --> 00:25:27,360
Speaker 1: you allocating it at this time? Well, first, the first

529
00:25:27,359 --> 00:25:30,159
Speaker 1: thing we're doing is allocating the fixed income piece because

530
00:25:30,200 --> 00:25:33,720
Speaker 1: we think that that's almost a no brainer, right uh.

531
00:25:33,800 --> 00:25:36,399
Speaker 1: And that we are looking at putting the fixed income

532
00:25:36,480 --> 00:25:38,840
Speaker 1: to work in the in the two year uh, and

533
00:25:38,920 --> 00:25:40,720
Speaker 1: things with short of that, because if we get a pivot,

534
00:25:40,720 --> 00:25:42,879
Speaker 1: you know you're gonna get it based on clipping a

535
00:25:42,880 --> 00:25:46,120
Speaker 1: good coupon and some and some capital gains out here,

536
00:25:46,160 --> 00:25:48,440
Speaker 1: you know, twenty four or six months. But then what

537
00:25:48,440 --> 00:25:52,320
Speaker 1: we're really paying close attention to is the fact that

538
00:25:52,640 --> 00:25:55,800
Speaker 1: you know, on the consumer side, you have a Barbell consumer,

539
00:25:55,880 --> 00:25:59,000
Speaker 1: so you have the luxury goods doing fine, you have

540
00:25:59,400 --> 00:26:02,360
Speaker 1: the low into the retail doing pretty good. Uh. It's

541
00:26:02,359 --> 00:26:05,399
Speaker 1: in the middle we're staying away from so your barbell consumer.

542
00:26:05,720 --> 00:26:08,840
Speaker 1: But then also we take a good close look at payments. Uh.

543
00:26:08,880 --> 00:26:12,080
Speaker 1: You know, as inflation rises, ticket you tickets go up, right,

544
00:26:12,119 --> 00:26:14,879
Speaker 1: but payments are being able to maintain their margins. So

545
00:26:14,960 --> 00:26:18,159
Speaker 1: companies that are involved in payments uh and travel in

546
00:26:18,240 --> 00:26:20,960
Speaker 1: luxury spence. And we think also, I think defense is

547
00:26:20,960 --> 00:26:23,320
Speaker 1: going to continue to be a good segment. I don't

548
00:26:23,359 --> 00:26:27,280
Speaker 1: I don't see the war in the Ukraine uh ending.

549
00:26:27,880 --> 00:26:29,959
Speaker 1: I think there's gonna be changes. But even if it does,

550
00:26:30,080 --> 00:26:34,040
Speaker 1: even if it ended tomorrow, you have a tremendous amount

551
00:26:34,560 --> 00:26:37,119
Speaker 1: of money that's got to go into defense. Because the

552
00:26:37,200 --> 00:26:39,920
Speaker 1: NATO countries have learned their lesson and they're all committing

553
00:26:39,960 --> 00:26:43,200
Speaker 1: to this two percent. Um you're gonna have nineteen countries

554
00:26:43,240 --> 00:26:45,720
Speaker 1: instead of nine, and so they've got to replantis arsenals.

555
00:26:45,720 --> 00:26:48,320
Speaker 1: So we think defense is a good play. Uh for

556
00:26:48,359 --> 00:26:51,160
Speaker 1: a couple of years, solid earnings. Geo politics at all

557
00:26:51,160 --> 00:26:54,280
Speaker 1: a worry. I mean especially with um, you know Chinese

558
00:26:54,320 --> 00:26:58,240
Speaker 1: relations U S. China relations m getting more and more

559
00:26:58,280 --> 00:27:06,360
Speaker 1: sour every day. Yeah, it creates moments of volatility. Um.

560
00:27:06,480 --> 00:27:10,600
Speaker 1: But you know, a bad thing hurts China more than

561
00:27:10,640 --> 00:27:13,719
Speaker 1: it hurts anything else anybody else. They they need a

562
00:27:13,760 --> 00:27:17,960
Speaker 1: strong economy to keep their people uh in place. Uh.

563
00:27:18,000 --> 00:27:20,600
Speaker 1: And so I think there's there's risks that people aren't

564
00:27:20,600 --> 00:27:24,600
Speaker 1: fully appreciating on the China thing. But the geop political situation,

565
00:27:24,640 --> 00:27:27,800
Speaker 1: I think the whole world's watching Russia uh, and they're

566
00:27:27,800 --> 00:27:29,919
Speaker 1: gonna watch what happens over the next several weeks if

567
00:27:29,960 --> 00:27:33,960
Speaker 1: Russia tries to have a offensive uh to break out

568
00:27:33,960 --> 00:27:37,200
Speaker 1: of their defensive perimeter. But you know when I think

569
00:27:37,200 --> 00:27:41,080
Speaker 1: of what the world is learning is that uh, you

570
00:27:41,119 --> 00:27:44,520
Speaker 1: know uh Ukrainian you know this old cost you know

571
00:27:44,680 --> 00:27:48,080
Speaker 1: you I gotta thank for a hundred and seventy three

572
00:27:48,080 --> 00:27:50,919
Speaker 1: point two to build it? All right, Frank, stuff all right, right?

573
00:27:50,960 --> 00:27:53,480
Speaker 1: And try to pen CEO of Pence Capital Management Riding

574
00:27:53,640 --> 00:27:56,640
Speaker 1: is a army veterans, So we thank him for his service.

575
00:27:56,920 --> 00:27:58,560
Speaker 1: Just getting some thoughts on these markets. We're gonna have

576
00:27:58,560 --> 00:28:04,920
Speaker 1: more coming up this this bloomberg. I want to move

577
00:28:05,000 --> 00:28:07,399
Speaker 1: to another sector that I really love, UM because I

578
00:28:07,480 --> 00:28:09,560
Speaker 1: like to eat out, and that's restaurants. And you want

579
00:28:09,560 --> 00:28:12,320
Speaker 1: to talk restaurants and all that kind of stuff. Um,

580
00:28:12,320 --> 00:28:14,520
Speaker 1: like Cracker Bowl is one of my faves. And and

581
00:28:14,720 --> 00:28:16,600
Speaker 1: I don't know if you're you should say that publicly.

582
00:28:16,800 --> 00:28:19,600
Speaker 1: I love crackerbout the country get canceled, I could get

583
00:28:19,640 --> 00:28:21,720
Speaker 1: cancel I love it. Mike Haylen, he does this stuff

584
00:28:21,720 --> 00:28:24,960
Speaker 1: for a living. He's a senior restaurant's analyst with Bloomberg Intelligence.

585
00:28:24,960 --> 00:28:29,119
Speaker 1: So my gradiet to the broader call on restaurants coming up.

586
00:28:29,119 --> 00:28:31,760
Speaker 1: But first I want to start off with Subway. I

587
00:28:31,800 --> 00:28:34,240
Speaker 1: always thought this was public, but it's a private company

588
00:28:34,840 --> 00:28:37,520
Speaker 1: and it's rumored that it might be sold. Here talk

589
00:28:37,600 --> 00:28:39,280
Speaker 1: to us about what's going on with Subway. What do

590
00:28:39,320 --> 00:28:44,560
Speaker 1: you know? Yeah, Unfortunately, like you said, uh, it's private.

591
00:28:44,640 --> 00:28:47,240
Speaker 1: So uh you know, I've been digging for information the

592
00:28:47,280 --> 00:28:48,920
Speaker 1: last couple of days and some of the some of

593
00:28:48,960 --> 00:28:51,360
Speaker 1: the data points like same starce sales and it's hard

594
00:28:51,520 --> 00:28:53,720
Speaker 1: hard to find any bad ones, right, and so only

595
00:28:53,800 --> 00:28:57,080
Speaker 1: they only report the good ones. Um. But yeah, from

596
00:28:57,120 --> 00:29:00,360
Speaker 1: what I understand, Um, you know they're looking to sell.

597
00:29:01,240 --> 00:29:03,360
Speaker 1: I don't know if the timing is so great with

598
00:29:03,360 --> 00:29:07,080
Speaker 1: with the rising interest rates over the last year. Um,

599
00:29:07,160 --> 00:29:09,000
Speaker 1: but you know from what we're here and they're looking

600
00:29:09,000 --> 00:29:10,920
Speaker 1: to sell and they think they can get about ten

601
00:29:10,960 --> 00:29:15,160
Speaker 1: billion for it, So who picks them up? I think

602
00:29:15,160 --> 00:29:17,720
Speaker 1: it's gotta be p I think it's got to be

603
00:29:17,720 --> 00:29:22,840
Speaker 1: private equity. So UM, there's two big multi unit operators

604
00:29:23,080 --> 00:29:31,040
Speaker 1: in our space, UM, you know, UM Restaurant Brands and YUM.

605
00:29:31,080 --> 00:29:33,280
Speaker 1: I don't see either one of those making a play

606
00:29:33,320 --> 00:29:38,200
Speaker 1: for it. UM Restaurant Brands. UH is really focused on

607
00:29:38,560 --> 00:29:43,080
Speaker 1: UM turning around Tim Horton's UH in Canada, which which

608
00:29:43,280 --> 00:29:46,280
Speaker 1: they've made some progress there, and also Burger King in

609
00:29:46,320 --> 00:29:49,360
Speaker 1: the United States, which is gonna be a pretty heavy lift.

610
00:29:49,400 --> 00:29:53,280
Speaker 1: They're investing for million over the next two years in

611
00:29:53,320 --> 00:29:58,200
Speaker 1: there alongside their franchisees to help boost results there. Uh.

612
00:29:58,240 --> 00:30:01,160
Speaker 1: So I think they have their hands full. Young Brands.

613
00:30:01,200 --> 00:30:06,760
Speaker 1: The other one, UM uh you know Young Brands right

614
00:30:06,800 --> 00:30:11,000
Speaker 1: now is doing really well right UM, and so that's

615
00:30:11,000 --> 00:30:14,200
Speaker 1: the name that comes up. But they're they're trading at

616
00:30:14,240 --> 00:30:17,040
Speaker 1: five times leverage, that's the long term target, you know.

617
00:30:17,160 --> 00:30:20,320
Speaker 1: Tacking on ten billions to that bound she is is

618
00:30:20,320 --> 00:30:26,000
Speaker 1: going to shoot their their leverage ratio up pretty significantly. Uh.

619
00:30:26,160 --> 00:30:28,920
Speaker 1: I don't know if I think it's just kind of

620
00:30:28,920 --> 00:30:33,280
Speaker 1: a too big of a pill to swallow for them, right, Um,

621
00:30:33,320 --> 00:30:35,480
Speaker 1: so PE takes it up, and then, by the way,

622
00:30:35,680 --> 00:30:38,880
Speaker 1: it's not as interesting to us anymore. Right, what if

623
00:30:38,920 --> 00:30:40,680
Speaker 1: PE takes it, I'd like to see what they pay

624
00:30:40,680 --> 00:30:42,840
Speaker 1: for it. Evaluation. That kind of stuff isn't actual. You

625
00:30:42,880 --> 00:30:44,800
Speaker 1: want to see kind of valuation. That's a good point.

626
00:30:44,880 --> 00:30:47,920
Speaker 1: But mar but Mike, what are the publicly traded UH

627
00:30:48,000 --> 00:30:50,440
Speaker 1: companies that you like? Paul and I went to Chipotle

628
00:30:50,760 --> 00:30:54,760
Speaker 1: the other day and the line was, I think it

629
00:30:54,880 --> 00:30:56,640
Speaker 1: may have gone out the door at one point when

630
00:30:56,640 --> 00:30:58,840
Speaker 1: we were in there. Um, and it's a long store,

631
00:30:58,960 --> 00:31:03,760
Speaker 1: so a lot of they just don't have enough employees. Yeah,

632
00:31:03,760 --> 00:31:08,760
Speaker 1: they're still they're still cranking. Um, yeah, they're still cranking.

633
00:31:09,160 --> 00:31:11,360
Speaker 1: And you know it's a market by market thing. You know,

634
00:31:11,400 --> 00:31:15,400
Speaker 1: they reported earnings recently and I think their stores or

635
00:31:15,440 --> 00:31:18,840
Speaker 1: so are are are fully staffed. So so it kind

636
00:31:18,840 --> 00:31:23,600
Speaker 1: of depends on the market. Um, it just goes up

637
00:31:23,600 --> 00:31:27,640
Speaker 1: into the right. I mean, it's pretty impressive. Yeah, it's

638
00:31:27,680 --> 00:31:30,640
Speaker 1: been a good run. Fourth quarter though, was you know,

639
00:31:30,720 --> 00:31:33,840
Speaker 1: we saw some chinks in the armor, right, Um, you

640
00:31:33,880 --> 00:31:39,880
Speaker 1: know they're they're garlic garlic Guahios steak limited time offer

641
00:31:40,280 --> 00:31:42,960
Speaker 1: did not do as well as Brisket the year prior,

642
00:31:43,640 --> 00:31:47,480
Speaker 1: traffic dropped about four percent year over year. Uh. You know,

643
00:31:47,520 --> 00:31:50,880
Speaker 1: Same Star sales came in lighter than expected. So you know,

644
00:31:51,600 --> 00:31:55,000
Speaker 1: we're not really you know, the jury is not out yet,

645
00:31:55,080 --> 00:31:58,680
Speaker 1: but there could be some minor pushback here with some

646
00:31:58,800 --> 00:32:02,000
Speaker 1: of the low and middle income consumers over there with

647
00:32:02,080 --> 00:32:05,280
Speaker 1: the with the aggressive price increases we've seen there. So

648
00:32:05,320 --> 00:32:08,040
Speaker 1: they increased prices probably more than any of the other

649
00:32:08,120 --> 00:32:11,680
Speaker 1: chains that we covered over the last two years. Um,

650
00:32:11,760 --> 00:32:13,840
Speaker 1: you know, and their three years sames ourselves. Even though

651
00:32:14,160 --> 00:32:18,280
Speaker 1: the trend accelerated by five fifty basis points in the quarter. Uh,

652
00:32:18,280 --> 00:32:23,000
Speaker 1: it's still one of the strongest performers post pandemic um

653
00:32:23,080 --> 00:32:26,640
Speaker 1: in our coverage universe, if not the the strongest. Will

654
00:32:26,640 --> 00:32:29,280
Speaker 1: see how the rest of earnings pans out. So listen,

655
00:32:29,280 --> 00:32:32,560
Speaker 1: there's a lot of really good things going on over there.

656
00:32:32,560 --> 00:32:35,960
Speaker 1: But you know, we're really curious as opposed to the

657
00:32:36,880 --> 00:32:41,240
Speaker 1: cracker barrel Old Country, that stock chart is a disaster.

658
00:32:41,480 --> 00:32:44,960
Speaker 1: As much as Paul loves the Country Boy Breakfast, Um,

659
00:32:45,160 --> 00:32:48,040
Speaker 1: you're not making any money on this one. Well, so,

660
00:32:48,320 --> 00:32:52,080
Speaker 1: so it's been tough. Um. You know, they have a

661
00:32:52,160 --> 00:32:57,720
Speaker 1: high percentage of of older customers right, people that are

662
00:32:57,760 --> 00:33:00,320
Speaker 1: repired and they're pulling back on their spending. People that

663
00:33:00,400 --> 00:33:03,760
Speaker 1: might be a little more afraid of COVID over the

664
00:33:03,840 --> 00:33:06,040
Speaker 1: last couple of years, so less likely to go into

665
00:33:06,080 --> 00:33:10,520
Speaker 1: the restaurant family. Dining in general has been pressured more

666
00:33:10,560 --> 00:33:14,360
Speaker 1: than pretty much any of of the you know, subcategories

667
00:33:14,360 --> 00:33:17,440
Speaker 1: in the restaurant industry. So yeah, it's been that's been

668
00:33:17,880 --> 00:33:21,040
Speaker 1: a particularly difficult place to play, for sure. Most of

669
00:33:21,040 --> 00:33:23,440
Speaker 1: their customers aren't taking the PJ from a rubit of Veil.

670
00:33:24,000 --> 00:33:26,520
Speaker 1: Probably not so anyway, But Mike, I was out of

671
00:33:26,600 --> 00:33:29,640
Speaker 1: Veil last week and a lot of the restaurants they

672
00:33:29,640 --> 00:33:31,840
Speaker 1: were only seating maybe two thirds or three quarters at

673
00:33:31,840 --> 00:33:34,040
Speaker 1: the table because they still don't have staff. So that

674
00:33:34,160 --> 00:33:37,280
Speaker 1: still seems to be an issue. But I'd love to

675
00:33:37,320 --> 00:33:39,400
Speaker 1: get your call here. What are you telling clients about

676
00:33:39,440 --> 00:33:43,800
Speaker 1: the restaurants space here? How do we play it? Sure? So,

677
00:33:43,960 --> 00:33:46,520
Speaker 1: uh well, it looks like, you know, Veil needs an

678
00:33:46,520 --> 00:33:50,200
Speaker 1: influx of ski bums. Yes, it sounds like to me

679
00:33:50,240 --> 00:33:56,000
Speaker 1: maybe maybe the lift ticket has just gotten Yeah it's

680
00:33:56,040 --> 00:33:58,280
Speaker 1: a lot of money. I just bought one for Park City.

681
00:33:58,920 --> 00:34:03,239
Speaker 1: Uh yeah, it's definitely not cheap. Um So yeah, you know,

682
00:34:04,280 --> 00:34:08,040
Speaker 1: January December was pretty bad, which they're surprising. December sales

683
00:34:08,080 --> 00:34:10,280
Speaker 1: were bad, which is a surprising because we were laughing

684
00:34:10,280 --> 00:34:13,560
Speaker 1: some O Macron impact and they've had a nice rebound

685
00:34:13,640 --> 00:34:17,360
Speaker 1: here in January. But we think it's gonna be short lived,

686
00:34:17,520 --> 00:34:21,480
Speaker 1: right because we're laughed in that O Macron outbreak last year,

687
00:34:22,000 --> 00:34:25,200
Speaker 1: and so in mid February or so well that that

688
00:34:25,360 --> 00:34:28,680
Speaker 1: tail winds gonna start to go away, you know. And

689
00:34:28,680 --> 00:34:32,960
Speaker 1: we just think that all of the aggressive um price

690
00:34:33,080 --> 00:34:36,759
Speaker 1: increases right to combat inflation and all the other inflationary

691
00:34:36,800 --> 00:34:41,239
Speaker 1: aspects um that that are hurting consumer wallets, we think

692
00:34:41,239 --> 00:34:44,400
Speaker 1: it's eventually going to take their toll in the restaurant space,

693
00:34:44,480 --> 00:34:49,360
Speaker 1: so um. You know, we think quick service franchise, heavily

694
00:34:49,440 --> 00:34:53,680
Speaker 1: franchise chains changed with scale, so think you know McDonald's,

695
00:34:53,680 --> 00:34:57,720
Speaker 1: think of Dominoes. We think those chains will will outperform

696
00:34:57,960 --> 00:35:01,840
Speaker 1: uh this year. And it's the casual dining chains that

697
00:35:01,920 --> 00:35:03,880
Speaker 1: own a lot of the restaurants have a lot of

698
00:35:03,920 --> 00:35:07,360
Speaker 1: operating leverage in their model. You know, if they see

699
00:35:07,400 --> 00:35:09,880
Speaker 1: some pressure on the sales line, it's gonna, all right,

700
00:35:10,360 --> 00:35:12,920
Speaker 1: continue to squeeze their margins. All right, My great stuff

701
00:35:12,960 --> 00:35:16,960
Speaker 1: as always my Kevin, senior restaurant analysts for Bloomberg Intelligence.

702
00:35:17,440 --> 00:35:24,080
Speaker 1: This is Bloomberg lots of earnings data, after lots of

703
00:35:24,120 --> 00:35:28,880
Speaker 1: ECO data out there, CPI yesterday, retail sales jobs. I

704
00:35:28,920 --> 00:35:30,960
Speaker 1: need a professional to give me some perspective here, and

705
00:35:30,960 --> 00:35:33,680
Speaker 1: that's what we call on Gina Martin Adams. She's the

706
00:35:33,719 --> 00:35:37,880
Speaker 1: chief equity strategist for Bloomberg Intelligence. So, Gina, you do

707
00:35:38,000 --> 00:35:39,960
Speaker 1: this for a living, You've been doing it for decades.

708
00:35:40,360 --> 00:35:43,000
Speaker 1: How do you put it all together and make a

709
00:35:43,000 --> 00:35:47,360
Speaker 1: coherent call for Yeah, I think that's a great question,

710
00:35:47,400 --> 00:35:50,040
Speaker 1: because we are in very unique times, you know. I

711
00:35:50,080 --> 00:35:52,919
Speaker 1: think we first need to acknowledge the fact that even

712
00:35:52,960 --> 00:35:57,120
Speaker 1: though people such as myself and and you guys there

713
00:35:57,160 --> 00:35:59,160
Speaker 1: have been in this market for decades, we've been in

714
00:35:59,160 --> 00:36:03,600
Speaker 1: the market in the decades of experience of decelerating CPI,

715
00:36:04,320 --> 00:36:07,960
Speaker 1: we've never experienced inflation to the green we experienced inflation

716
00:36:08,680 --> 00:36:13,520
Speaker 1: in two and that inflation spike has serious consequences for

717
00:36:13,560 --> 00:36:18,280
Speaker 1: investment strategies going forward. I do think it's really important,

718
00:36:18,360 --> 00:36:20,400
Speaker 1: most important, though, to keep your eye on the earning

719
00:36:20,440 --> 00:36:23,880
Speaker 1: stream and what's happening in earnings and the expectations for

720
00:36:23,920 --> 00:36:26,120
Speaker 1: earnings over the course of this year will most likely

721
00:36:26,239 --> 00:36:30,320
Speaker 1: drive stock prices. It's no coincidence that stock prices struggled

722
00:36:30,400 --> 00:36:34,959
Speaker 1: last year as earnings came off of their peak. We've

723
00:36:35,040 --> 00:36:37,359
Speaker 1: now discovered, you know, over the course of the last

724
00:36:37,360 --> 00:36:39,680
Speaker 1: several months, that earnings didn't the peak at the end

725
00:36:39,680 --> 00:36:44,000
Speaker 1: of one which does help explain the market's weakness throughout,

726
00:36:45,760 --> 00:36:49,480
Speaker 1: even though the economy appears to be rather stable. Inflation

727
00:36:49,920 --> 00:36:52,680
Speaker 1: is the biggest reason for that earnings peak. We saw

728
00:36:52,760 --> 00:36:56,400
Speaker 1: inflation pike last year. It created a crunch in margins.

729
00:36:56,480 --> 00:37:02,479
Speaker 1: The inflation deceleration absolutely essential in in order to create

730
00:37:02,520 --> 00:37:05,520
Speaker 1: a margin bottom. So what do you expect in terms

731
00:37:05,560 --> 00:37:09,479
Speaker 1: of SMP earnings this year, Gina? We had Robert teter

732
00:37:09,600 --> 00:37:12,080
Speaker 1: On from Silver Crest Asset Management who said he thinks

733
00:37:12,120 --> 00:37:17,080
Speaker 1: earnings are going to be flat. Yeah. The first question

734
00:37:17,120 --> 00:37:19,320
Speaker 1: I have to ask back is which version of earnings?

735
00:37:19,400 --> 00:37:21,799
Speaker 1: Because I think this is incredibly important right now and

736
00:37:21,840 --> 00:37:25,919
Speaker 1: it's really missing from the discussion. Operating earnings or sort

737
00:37:25,960 --> 00:37:30,160
Speaker 1: of adjusted consensus comparable earnings are what most strategists and

738
00:37:30,280 --> 00:37:34,240
Speaker 1: most analysts forecast, and on a on an adjusted basis,

739
00:37:34,280 --> 00:37:37,520
Speaker 1: we too expect a very modest decline, we expect something

740
00:37:37,520 --> 00:37:41,279
Speaker 1: close to two to five percent ultimately um A lot

741
00:37:41,280 --> 00:37:45,840
Speaker 1: of thats so on how much energy drops. If you

742
00:37:45,880 --> 00:37:49,240
Speaker 1: look at adjusted EPs, adjusted EPs is already down seven

743
00:37:50,360 --> 00:37:54,240
Speaker 1: from its peak and likely falls another closer to seven percent.

744
00:37:54,480 --> 00:37:59,279
Speaker 1: So which EPs is also very important because when you're

745
00:37:59,320 --> 00:38:02,680
Speaker 1: only looking at consensus comparable EPs numbers over the last year,

746
00:38:02,719 --> 00:38:05,400
Speaker 1: you would have thought earnings were still rising. Well, what

747
00:38:05,640 --> 00:38:07,359
Speaker 1: do I have on E A. Wh When I pull

748
00:38:07,440 --> 00:38:09,080
Speaker 1: up E A and I look at sales growth at

749
00:38:09,120 --> 00:38:12,400
Speaker 1: five point three percent, earnings growth negative two point four percent,

750
00:38:12,480 --> 00:38:18,400
Speaker 1: what are we looking at just as numbers now an

751
00:38:18,400 --> 00:38:20,960
Speaker 1: adjusted number. So what we're doing, and I think this

752
00:38:21,120 --> 00:38:24,160
Speaker 1: is really important, is you've you've got to keep track

753
00:38:24,239 --> 00:38:26,360
Speaker 1: of which version of earnings you're looking at, because if

754
00:38:26,400 --> 00:38:29,080
Speaker 1: you're looking at adjusted versus unadjusted earnings, you also get

755
00:38:29,120 --> 00:38:33,759
Speaker 1: a very different perspective on where valuations are. And I

756
00:38:34,080 --> 00:38:36,759
Speaker 1: think this is the struggle right now is and it

757
00:38:36,960 --> 00:38:39,719
Speaker 1: is always the struggle. At major cyclical turning points in

758
00:38:39,760 --> 00:38:42,440
Speaker 1: the market, companies do have major write off Let's think

759
00:38:42,480 --> 00:38:46,200
Speaker 1: about just one example, Ribbyan and Amazon. You get a

760
00:38:46,239 --> 00:38:49,560
Speaker 1: completely different perspective of Amazon's earnings when you think about

761
00:38:50,000 --> 00:38:52,279
Speaker 1: the Ribban write offs. Then when you look at a

762
00:38:52,360 --> 00:38:56,400
Speaker 1: consensus comparable operating learnings number for Amazon, the result is

763
00:38:57,040 --> 00:39:00,480
Speaker 1: really incredible distortions and valuations as well, which makes this

764
00:39:00,680 --> 00:39:04,839
Speaker 1: point in the in the market cycle really difficult for investors.

765
00:39:04,960 --> 00:39:09,840
Speaker 1: Really adds as the complexity. So where do we go here, Gina?

766
00:39:09,960 --> 00:39:11,680
Speaker 1: I mean, how should I think about these markets? I

767
00:39:11,760 --> 00:39:14,600
Speaker 1: got the markets are still done double digits from the high,

768
00:39:14,680 --> 00:39:18,440
Speaker 1: but boy, they're up off the lows at October low.

769
00:39:19,000 --> 00:39:20,880
Speaker 1: I don't know where to go here? What do you

770
00:39:20,920 --> 00:39:24,480
Speaker 1: tell an investors? Yeah, and our view was at the

771
00:39:24,520 --> 00:39:27,920
Speaker 1: October low, we had priced a pretty significant earning surcession.

772
00:39:28,040 --> 00:39:30,600
Speaker 1: We've done in our fair value models at that point

773
00:39:30,600 --> 00:39:33,560
Speaker 1: in time, we wrote that the market was already anticipating

774
00:39:33,640 --> 00:39:36,720
Speaker 1: somewhere between a five and fifteen percent contraction and earnings

775
00:39:36,760 --> 00:39:39,160
Speaker 1: depending upon where you're boging for fet funds. Right is,

776
00:39:40,080 --> 00:39:42,600
Speaker 1: so we had already gone through a process of pricing

777
00:39:42,840 --> 00:39:47,520
Speaker 1: a fairly significant downdraft coming. We're now experiencing that downdraft

778
00:39:47,600 --> 00:39:50,960
Speaker 1: in the earning stream on an adjusted basis um, and

779
00:39:51,040 --> 00:39:53,120
Speaker 1: we'll continue to experience that in the early part of

780
00:39:54,680 --> 00:39:57,520
Speaker 1: that said, the rally that we've we've had in the

781
00:39:57,600 --> 00:40:00,680
Speaker 1: market since the October lows does look to be a

782
00:40:00,840 --> 00:40:04,640
Speaker 1: bit overdone in our view. In particular, the leadership and

783
00:40:04,680 --> 00:40:07,880
Speaker 1: the rally is very suspicious. If we're moving into a

784
00:40:07,960 --> 00:40:11,719
Speaker 1: climate where economic growth is somewhat stable, inflation is decelerating

785
00:40:11,760 --> 00:40:14,839
Speaker 1: but nonetheless a little too sticky, and the Fed has

786
00:40:14,920 --> 00:40:19,040
Speaker 1: to keep policy rates higher. Leadership in large cap growth

787
00:40:19,239 --> 00:40:22,600
Speaker 1: is very suspicious and subject to correction. So I think

788
00:40:22,640 --> 00:40:26,560
Speaker 1: you've got a lot of potential movement beneath that top line.

789
00:40:26,560 --> 00:40:28,239
Speaker 1: As the market looks a little bit overbought in the

790
00:40:28,360 --> 00:40:32,280
Speaker 1: short run, some of the excess inflation of the October

791
00:40:32,280 --> 00:40:35,040
Speaker 1: to January period probably needs to blow off. So we

792
00:40:35,120 --> 00:40:39,600
Speaker 1: look at UH the SMP broken down into eleven industry

793
00:40:39,640 --> 00:40:43,040
Speaker 1: groups here to day, the leaders, to your point, Gina,

794
00:40:43,160 --> 00:40:47,960
Speaker 1: are consumer discretionary stocks and then I t so tech stocks.

795
00:40:48,760 --> 00:40:52,040
Speaker 1: Does that mean to you that, um, you know, investors

796
00:40:52,080 --> 00:40:54,520
Speaker 1: are just so thrilled that two is over and they're

797
00:40:54,560 --> 00:40:58,839
Speaker 1: just buying the worst performers of this year. Or are

798
00:40:58,880 --> 00:41:01,440
Speaker 1: they did they do tax loss harvesting at the end

799
00:41:01,480 --> 00:41:03,480
Speaker 1: of last year, Now they're getting back into those since

800
00:41:03,520 --> 00:41:07,280
Speaker 1: they got the right off. Are they were they shorting

801
00:41:07,400 --> 00:41:10,719
Speaker 1: these stocks, and this is now a short covering rally. Yeah,

802
00:41:11,080 --> 00:41:13,319
Speaker 1: I think it's a combination of all three of those.

803
00:41:13,360 --> 00:41:16,160
Speaker 1: Those are all excellent points and certainly all part of

804
00:41:16,200 --> 00:41:19,960
Speaker 1: the explanation for why stocks of rallies since October, but

805
00:41:20,120 --> 00:41:21,880
Speaker 1: not all of it, right, I mean, some of the

806
00:41:22,040 --> 00:41:25,319
Speaker 1: rallies since October is probably going to continue to stick

807
00:41:25,560 --> 00:41:29,320
Speaker 1: because consumer discretionary, as an example, not all of consumer

808
00:41:29,320 --> 00:41:31,960
Speaker 1: discretionaries large cap growth. Sure, you've got the Amazon and

809
00:41:32,000 --> 00:41:33,680
Speaker 1: Testless of the world, but then on the other end

810
00:41:33,719 --> 00:41:37,359
Speaker 1: of the spectrum, you've got some pretty tremendous value opportunities

811
00:41:37,400 --> 00:41:40,960
Speaker 1: that emerged in consumer discretionary and some hyper cyclical industries

812
00:41:41,040 --> 00:41:43,359
Speaker 1: that tend to perform very well in an environment where

813
00:41:43,400 --> 00:41:47,160
Speaker 1: the economy is moving into recovery from recession. So I

814
00:41:47,239 --> 00:41:50,879
Speaker 1: think there's some opportunities there. Very similarly, with tech, you've

815
00:41:50,920 --> 00:41:55,320
Speaker 1: got a combination of big cap, defensive growth and value

816
00:41:55,360 --> 00:42:00,680
Speaker 1: segments like the semiconductor space, where you know, I expectations

817
00:42:00,719 --> 00:42:03,560
Speaker 1: were completely obliterated and are now starting to recover a

818
00:42:03,600 --> 00:42:07,440
Speaker 1: little bit in intercipation of a cycle emerging. So you know,

819
00:42:07,520 --> 00:42:09,800
Speaker 1: I think you've really even got to go beneath the

820
00:42:09,880 --> 00:42:12,640
Speaker 1: sector level, right down to the industry level and even

821
00:42:12,680 --> 00:42:14,920
Speaker 1: the stock level at this point in the cycle, to

822
00:42:15,040 --> 00:42:18,520
Speaker 1: look for where you see those deeper values, where you

823
00:42:18,640 --> 00:42:22,560
Speaker 1: see sort of less exposure to interest rate risk going forward,

824
00:42:22,680 --> 00:42:26,600
Speaker 1: where recession in the earning stream has largely been priced.

825
00:42:27,160 --> 00:42:29,320
Speaker 1: I mean, those are the opportunities that we're looking for

826
00:42:29,680 --> 00:42:33,560
Speaker 1: to um emerge as winners over the course of Gina.

827
00:42:33,600 --> 00:42:35,319
Speaker 1: Not that you don't have enough on your play right now,

828
00:42:35,360 --> 00:42:37,520
Speaker 1: but I'm going to ask you to help us book

829
00:42:37,640 --> 00:42:39,320
Speaker 1: our show over the next couple of days. Should we

830
00:42:39,440 --> 00:42:43,600
Speaker 1: book a small cap portfolio manager? Small caps something to

831
00:42:43,680 --> 00:42:46,879
Speaker 1: take a look at? Yeah, I we absolutely think small

832
00:42:46,920 --> 00:42:48,520
Speaker 1: caps are something to take a look at. You know,

833
00:42:48,719 --> 00:42:51,720
Speaker 1: the small cap bear market is much longer in duration

834
00:42:51,800 --> 00:42:54,200
Speaker 1: than the large cap bear market, so deep value has

835
00:42:54,239 --> 00:42:56,520
Speaker 1: emerged in the small cap space. You're looking at a

836
00:42:56,560 --> 00:42:59,000
Speaker 1: group that's trades roughly one and a half nearly two

837
00:42:59,080 --> 00:43:03,080
Speaker 1: standard deviation below large caps valuation multiples and has been

838
00:43:03,160 --> 00:43:07,560
Speaker 1: in a bear market since March of small caps also

839
00:43:07,800 --> 00:43:10,200
Speaker 1: have been in a bottoming process for longer. Remember the

840
00:43:10,239 --> 00:43:12,680
Speaker 1: October lower lows in the SMP five hundred were not

841
00:43:12,800 --> 00:43:15,279
Speaker 1: confirmed by small caps, which made their lowest low in

842
00:43:15,400 --> 00:43:19,920
Speaker 1: June UM and have been sort of waffling around and

843
00:43:20,280 --> 00:43:22,440
Speaker 1: trying to get a little bit of a lift, but

844
00:43:22,560 --> 00:43:25,560
Speaker 1: not a tremendous amount of love, and underloved spaces are

845
00:43:25,600 --> 00:43:28,040
Speaker 1: always the spaces where we want to dig for for

846
00:43:28,200 --> 00:43:31,320
Speaker 1: some diamonds UM in the rough. I think that small

847
00:43:31,400 --> 00:43:36,080
Speaker 1: caps do present a really strong opportunity provided we all

848
00:43:36,160 --> 00:43:39,120
Speaker 1: we have indeed price that recession and we're moving into

849
00:43:39,200 --> 00:43:41,440
Speaker 1: some form of recovery here in the short term. It's

850
00:43:41,440 --> 00:43:44,840
Speaker 1: so confusing to me UM, probably because we don't focus

851
00:43:44,920 --> 00:43:47,600
Speaker 1: on it as much. But you've also got choices to

852
00:43:47,640 --> 00:43:49,400
Speaker 1: make in small caps. Do you go with the Russell

853
00:43:49,440 --> 00:43:52,560
Speaker 1: two thousand, do you go with the SMP six hundred.

854
00:43:52,719 --> 00:43:55,720
Speaker 1: There's Jeff Menton has a story on all these crazy

855
00:43:56,040 --> 00:44:02,680
Speaker 1: technical indicators like the momentum indicate you're moving average convergent divergence,

856
00:44:02,680 --> 00:44:06,360
Speaker 1: which sounds like it's just made up UM, and I

857
00:44:06,520 --> 00:44:09,480
Speaker 1: just don't know UM where to go when I look

858
00:44:09,520 --> 00:44:12,560
Speaker 1: at small caps. Yeah, I think that's a good point.

859
00:44:12,680 --> 00:44:16,200
Speaker 1: But even the small cap benchmark manager really looks at

860
00:44:16,280 --> 00:44:19,600
Speaker 1: only the top segment of small cap, the small cap

861
00:44:19,719 --> 00:44:22,319
Speaker 1: Russell two thousand index, So for the most part, you're

862
00:44:22,360 --> 00:44:24,400
Speaker 1: looking at the S and P six hundred as your

863
00:44:24,440 --> 00:44:28,000
Speaker 1: most investable opportunities within small caps. Maybe you extend that

864
00:44:28,239 --> 00:44:31,880
Speaker 1: to uh, you know, the top the thousands of fifteen

865
00:44:31,960 --> 00:44:36,400
Speaker 1: hundred of the Russell two thousand. There are some signals

866
00:44:36,440 --> 00:44:39,200
Speaker 1: in the small cap index, you know, just works closely

867
00:44:39,239 --> 00:44:42,479
Speaker 1: with our small cap strategist, might Casper to derive those

868
00:44:42,920 --> 00:44:45,800
Speaker 1: comments to drive that commentary on the MACDI and the

869
00:44:45,920 --> 00:44:50,040
Speaker 1: mac D has given us a signal that small caps

870
00:44:50,200 --> 00:44:53,840
Speaker 1: maybe running out of steam with a negative crossover in

871
00:44:54,000 --> 00:44:57,120
Speaker 1: positive territory. That's a lot of gobbledegod, but it basically

872
00:44:57,239 --> 00:45:01,319
Speaker 1: means is we probably have all right, reach some sort

873
00:45:01,360 --> 00:45:03,719
Speaker 1: of short term top and small cast. That doesn't mean

874
00:45:03,760 --> 00:45:06,480
Speaker 1: that opportunities are still there. Paul the stuff, Paul the

875
00:45:06,640 --> 00:45:10,720
Speaker 1: moving average, convergence, divergence. So's a negative aspect and positive

876
00:45:10,800 --> 00:45:12,960
Speaker 1: territory for sure. Cross am I'm buying that or my

877
00:45:13,000 --> 00:45:15,120
Speaker 1: selling it? Gina Martin Adams. She covers all things on

878
00:45:15,160 --> 00:45:20,520
Speaker 1: the strategy side for Bloomberg Intelligence. Thanks for listening to

879
00:45:20,560 --> 00:45:24,040
Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to

880
00:45:24,160 --> 00:45:28,280
Speaker 1: interviews with Apple Podcasts or whatever podcast platform you prefer.

881
00:45:28,680 --> 00:45:32,640
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three

882
00:45:33,080 --> 00:45:35,520
Speaker 1: put on false Sweeney. I'm on Twitter at pt Sweeney.

883
00:45:35,600 --> 00:45:38,279
Speaker 1: Before the podcast. You can always catch us worldwide at

884
00:45:38,280 --> 00:45:39,040
Speaker 1: Bloomberg Radio