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U.S Tech, Jobs Preview, ISM Data, Peloton Earnings · Bloomberg Intelligence

• 0:01
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 0:16
  Speaker 2: Big Earnings again after the Clothes, we got Meta, we
• 0:19
  Speaker 2: got Apple, and we got Amazon. And the way we
• 0:22
  Speaker 2: do it at Bloomberg Intelligence. Looking at Amazon, we got
• 0:24
  Speaker 2: to recognize that this is a huge retailer, of course
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  Speaker 2: global retailer, but it's also a huge technology company. It's
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  Speaker 2: really evolved and developed as technology over the last ten.
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  Speaker 3: Years or so.
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  Speaker 2: So the way we do it is we get bloom
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  Speaker 2: punamg Oil, she covers all the retailers for Bloomberg Intelligence,
• 0:38
  Speaker 2: and we got anaag Rana who covers all the tech
• 0:40
  Speaker 2: for Bloomberg Intelligence. We bring them together and we roundtable them,
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  Speaker 2: and that's how we can really get a holistic view
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  Speaker 2: what's happening at Amazon on rog Let's start with you here.
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  Speaker 2: What do you want to hear from Amazon tonight?
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  Speaker 3: What do you need to hear?
• 0:52
  Speaker 2: What's the market need to hear about their cloud business?
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  Speaker 4: Paul, the magic would tonight is cost optimization. Not seeing
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  Speaker 4: any more of it that customers have started to spend back.
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  Speaker 4: That is going to really be magic to my ears.
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  Speaker 4: I think we heard some of that from Microsoft, but
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  Speaker 4: not entirely. I think that is the direction that is
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  Speaker 4: going to set the direction for cloud names for over
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  Speaker 4: the next ninety days.
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  Speaker 5: Can I ask the dem question in real terms?
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  Speaker 6: What is cost optimization?
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  Speaker 2: Like?
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  Speaker 6: What does that actually mean? If I'm reading through the call?
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  Speaker 4: So sorry about that? So that just basically means companies
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  Speaker 4: or corporations are not cutting costs in their cloud consumptions,
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  Speaker 4: that they've stabilized or started to spend back again. That
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  Speaker 4: is going to be the only thing that I care about.
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  Speaker 2: See Anonog's whole career find technology. It's always a growth industry.
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  Speaker 2: They didn't never have down years. It's just a question
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  Speaker 2: of how much growth.
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  Speaker 3: So the tech spending, apparently over the last couple.
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  Speaker 2: Years the growth rate has slowed, and that's got these
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  Speaker 2: tech anals all anxious, and so they want to see
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  Speaker 2: a reacceleration of that text spanning.
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  Speaker 3: That's my read.
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  Speaker 2: Let's get to the important stuff. And you're talking about Amazon.
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  Speaker 2: That's like people buying stuff and the box is showing
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  Speaker 2: up at my door. Put them you cover the whole
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  Speaker 2: retail space. You've got the best view of this. How
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  Speaker 2: is retail spending out there and how is Amazon competing?
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  Speaker 7: Amazon's taking share and retail spending overall is good, especially online,
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  Speaker 7: and when you shop online, Amazon is the clear winner there.
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  Speaker 7: So we're actually expecting good results for the fourth quarter.
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  Speaker 7: We know holiday was strong and Amazon likely took share there,
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  Speaker 7: So from an online standpoint, we think they'll do well
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  Speaker 7: and the results will be driven once again by gains
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  Speaker 7: in their third party which is the sellers that sell
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  Speaker 7: on Amazon versus their own first party goods, will be
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  Speaker 7: the reason that they outperform.
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  Speaker 5: To that point, aren't we sort of is an Amazon
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  Speaker 5: kind of looking into a world where they might now
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  Speaker 5: be responsible for those third party sales in terms of
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  Speaker 5: safety and quality, et cetera. And how dramatic could that be.
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  Speaker 7: That could have an impact. You know, right now, Amazon
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  Speaker 7: is not responsible, So if you're the seller and are
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  Speaker 7: selling something on Amazon, it's not Amazon's responsibility to authenticate
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  Speaker 7: that good or even to maintain the control over that
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  Speaker 7: exchange of goods. But if that changes and Amazon is
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  Speaker 7: going to be accountable for that and seen as a distributor,
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  Speaker 7: as what we're hearing. Then that could change things up,
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  Speaker 7: and it could make Amazon institute more best practices and
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  Speaker 7: also be held reliable, right because we know that there's
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  Speaker 7: a lot of stuff sold on Amazon that could be
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  Speaker 7: counterfeit and until today, Amazon has no responsibility over that
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  Speaker 7: and doesn't need to.
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  Speaker 2: Hey on, Rod, give us a sense of just kind
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  Speaker 2: of the landscape of cloud computing. We got Microsoft, Amazon, Google,
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  Speaker 2: how does it play out? And then how does Amazon
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  Speaker 2: position itself?
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  Speaker 4: Yeah, so you know in the cloud infrastructure world, which
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  Speaker 4: is basically the storage and the computing that you need
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  Speaker 4: to build any application, there are three big players. It
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  Speaker 4: is Amazon the number one with the biggest market share.
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  Speaker 4: Microsoft has done a phenomenal job over an las ten
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  Speaker 4: years to catch up and is the second biggest. So
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  Speaker 4: you know, structurally there are two big players, Amazon and Microsoft,
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  Speaker 4: and then Google's been catching up and Google's are very
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  Speaker 4: viable contender to both of them. What's really happening right now,
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  Speaker 4: at least in the last twelve months, is Amazon does
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  Speaker 4: not have an AI play as such. Now that's really
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  Speaker 4: not true, but that's that's the narrative in the street
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  Speaker 4: that Microsoft has a close relationship with open Ai. They're
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  Speaker 4: pretty much kind of you know, up very close to
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  Speaker 4: open ai and open AI's back end is everything Microsoft Azure.
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  Speaker 4: So open ai makes more money. Microsoft really, you know,
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  Speaker 4: benefits from that, which is what we saw in their
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  Speaker 4: results a couple of days ago. For the case of
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  Speaker 4: Amazon and Google, they really need to talk about what
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  Speaker 4: is going to be their strategy, and their strategy actually
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  Speaker 4: is very simple enterprises or cooperations. When they're going to
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  Speaker 4: go out and build those AI models, they're going to
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  Speaker 4: use one of those three you know, cloud vendors. I
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  Speaker 4: think it's going to for them. It's taking a little
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  Speaker 4: bit longer, maybe you know, a year down the road,
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  Speaker 4: six months down the road. And that's what everybody says that, oh,
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  Speaker 4: Microsoft is head and Amazon. I think in the long run,
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  Speaker 4: all three will make a lot of money. It's a
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  Speaker 4: matter of when it starts.
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  Speaker 5: And to your point, Paulo, as our cloud service sales
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  Speaker 5: gain thirty percent, Hello, what company wouldn't want that growth rate?
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  Speaker 5: But it was like just one percent more than street expected.
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  Speaker 6: But those are some big numbers.
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  Speaker 5: I gotta say, we got to turn to Apple because
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  Speaker 5: we just have a few minutes left. But I'm having
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  Speaker 5: a really hard time getting excited about Apple's quarter today.
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  Speaker 5: They're gonna make a lot of money, They're going to
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  Speaker 5: sell a lot of stuff. And then what anaag, what
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  Speaker 5: are you expecting?
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  Speaker 4: This is probably the weakest have gone in in terms
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  Speaker 4: of sentiments in you know, for Apple, there isn't much
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  Speaker 4: going in their favor at this point, you know, regulations,
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  Speaker 4: weakness in China, them losing share in China. Like, it's
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  Speaker 4: just probably the lowest expectations I've seen going into a
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  Speaker 4: quarter for Apple. I'm not expecting any you know, major
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  Speaker 4: positive surprises. But I guess what, Sometimes that's when fun happens,
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  Speaker 4: is when you go in with with low expectations.
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  Speaker 2: Hey put them as we step back here? What other
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  Speaker 2: I mean, how does Walmart compete against Amazon? Because it
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  Speaker 2: seemless like the Walmart dot com They've done a really
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  Speaker 2: really good job competing from my perspective, just as a user,
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  Speaker 2: What do you think?
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  Speaker 7: I think Walmart has made some strides on its dot
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  Speaker 7: com presence. But you know, when you think about Walmart
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  Speaker 7: and you think about Amazon, and I think they can
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  Speaker 7: both gro share together. It's not that Amazon loses if
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  Speaker 7: Walmart wins. But remember that Walmart's business it's still fifty
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  Speaker 7: percent grocery, and grocery is a low signal digit business
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  Speaker 7: for Amazon. So there are almost two companies that may
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  Speaker 7: seem alike, but they're very different in their product offerings.
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  Speaker 7: We think both can grow their online business. Both can
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  Speaker 7: drive double digit gains as the online vertical just grows
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  Speaker 7: as a channel, irrespectively of what happens to brick and mortars.
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  Speaker 5: I love that we spent one question on Apple and
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  Speaker 5: then we're like, yeah, Okay, let's go back to Amazon,
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  Speaker 5: which I think says a lot about the honor our spody.
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  Speaker 2: I think from what I understand talking to anarog and
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  Speaker 2: other tech folks, it's all China. If you get comfortable
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  Speaker 2: in China, you can get comfort to an Apple. If not,
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  Speaker 2: then you know, yeah.
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  Speaker 5: And they're just like the sentiments just kind of me
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  Speaker 5: at the end of the day, So we go to Amazon.
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  Speaker 5: Though for a second, what is going to be the
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  Speaker 5: catalyst growth driver though on the retail side or is
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  Speaker 5: it all just going to be focused on that cloud.
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  Speaker 7: I think a lot of focused on cloud, but keep
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  Speaker 7: in mind the retail side brings advertising revenue. The AD
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  Speaker 7: revenue growth is going to be a key focus area
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  Speaker 7: for Amazon, not just today but also for the foreseeable
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  Speaker 7: future as that drives very high profit margins close to
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  Speaker 7: fifty percent. So we think you want to see retail grow, right,
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  Speaker 7: because as you get those prime members shopping on Amazon,
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  Speaker 7: you also get more eyeballs and you get more ad revenue.
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  Speaker 3: Yeah, that's right.
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  Speaker 2: I mean this the digital advertising business for a long
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  Speaker 2: time was infected duopoly Google and Facebook.
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  Speaker 3: And then Amazon came on and in.
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  Speaker 2: A matter of I don't know what's it been, pun
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  Speaker 2: of five to six years, they've become a huge advertising platform.
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  Speaker 7: They are they control about ten percent of digital media advertising,
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  Speaker 7: and they're at a run rate of fifty billion, and
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  Speaker 7: we think they can get to one hundred billion over
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  Speaker 7: the next several years.
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  Speaker 2: Yeah, and that's literally from nowhere standing starts. So it's
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  Speaker 2: really amazing. All right, guys, thank you very much. We
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  Speaker 2: appreciate getting both of you together. Put them Goyle on
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  Speaker 2: Ragrana the both for Bloomberg Intelligence, covering both the retail
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  Speaker 2: side of that story, and as Putam says, that's important
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  Speaker 2: for a lot of reasons, including the fact that it's
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  Speaker 2: driving this advertising business for them.
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  Speaker 3: Then, of course, on the technical.
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  Speaker 2: Side, the cloud has really been the profit story for
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  Speaker 2: the company, and really probably the multiple story for the company.
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  Speaker 3: You get a kind of a hig multiple on that
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  Speaker 3: cloud stuff.
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  Speaker 5: Right, I mean, hence the whole If you only be
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  Speaker 5: by one percentage point for growth, you're kind of disappointed
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  Speaker 5: in terms of the valuation.
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  Speaker 2: I wonder if you ever, I mean, just put on
• 8:43
  Speaker 2: my banker hat on what's I wonder if everybody has
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  Speaker 2: the you know, the gumption to go to Amazon and say, hey,
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  Speaker 2: you want to split up these companies, just spin out
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  Speaker 2: the cloud business.
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  Speaker 3: I mean, that would be kind of cool.
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  Speaker 6: What would be the downside to them?
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  Speaker 3: I don't I don't know.
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  Speaker 2: I mean, you know, they kind of giving up a
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  Speaker 2: little bit ownership of it, you know, giving it some
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  Speaker 2: more ownership.
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  Speaker 3: I don't know. It's interesting.
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  Speaker 2: I think it'd be kind of cool because I would
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  Speaker 2: think that would get a monster monster gosh.
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  Speaker 8: Yeah.
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  Speaker 1: Just Say Alexa, playing Bloomberg eleven thirty.
• 9:26
  Speaker 2: Tomorrow and Another Job's Day they just kind of sneak
• 9:29
  Speaker 2: up on you every once in a while.
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  Speaker 3: So we've got non farm pay rolls.
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  Speaker 2: The consensus is for an edition of one hundred and
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  Speaker 2: eighty five thousand jobs.
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  Speaker 3: Pretty solid number.
• 9:36
  Speaker 2: That would be down from last month of two hundred
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  Speaker 2: and sixteen thousand jobs, but that's certainly something that the
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  Speaker 2: Federal Reserve is looking at.
• 9:43
  Speaker 3: So let's get a little bit of a preview there.
• 9:45
  Speaker 2: Julia Pollock joins let's She's the chief economist for zip Recruiter,
• 9:48
  Speaker 2: joining us on zoom from Los Angeles.
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  Speaker 3: Joey, thanks so much for joining us here. What are
• 9:53
  Speaker 3: you looking for.
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  Speaker 2: In the job's data tomorrow? What do you think the
• 9:55
  Speaker 2: Fed's looking for in the job's data tomorrow?
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  Speaker 9: Going to predict that job growth will continue to slow.
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  Speaker 9: The three month average right now is one hundred and
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  Speaker 9: sixty five thousand, and I think we could even fall
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  Speaker 9: below that, So I think the risk is very much
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  Speaker 9: to the downside.
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  Speaker 10: Job growth has been slowing and narrowing.
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  Speaker 9: Over the course of the year, and I think it
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  Speaker 9: will continue to do so as long as rates cold
• 10:19
  Speaker 9: steady at these restrictive levels.
• 10:23
  Speaker 5: Well, I was gonna say yes, And also I feel
• 10:26
  Speaker 5: like headline after headline, it's like job cuts, job cuts,
• 10:29
  Speaker 5: job cuts. So from our perspective sitting here, it can
• 10:31
  Speaker 5: feel super dramatic, is it, or are we just like
• 10:35
  Speaker 5: normalizing at this point?
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  Speaker 9: So, you know, it's always difficult to figure out the
• 10:40
  Speaker 9: trend in layoffs is in January, and that's because December
• 10:43
  Speaker 9: and January are layoff season. Twenty percent of all layoffs
• 10:46
  Speaker 9: in the year take place in just those two months,
• 10:49
  Speaker 9: So you know, it's kind of like predicting that the
• 10:52
  Speaker 9: temperatures are going to get colder and colder and worse
• 10:54
  Speaker 9: and worse and worse when you're sitting in January and
• 10:56
  Speaker 9: you're sort of bossing, you know, September through January bridgers.
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  Speaker 9: We don't know, right, they could get worse. So far,
• 11:04
  Speaker 9: layoff numbers, as tracked by Challenger Gray are lower this
• 11:09
  Speaker 9: January than they.
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  Speaker 10: Were last January.
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  Speaker 9: And we know we had this huge spike in layoffs
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  Speaker 9: in December and January last year, but also that over
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  Speaker 9: the course of the whole year, according to Bureau of
• 11:18
  Speaker 9: Labor Statistics JOLT data, layoffs were unusually low. The layoff
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  Speaker 9: rate lately has been one point zero percent in twenty sixteen,
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  Speaker 9: twenty seventeen, twenty, eighteen nineteen and average one point two percent.
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  Speaker 9: So it basically are having twenty percent fewer layoffs and
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  Speaker 9: firings now than is normal, even though it feels as
• 11:35
  Speaker 9: though they're all the news.
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  Speaker 2: So I see in your notes, Julia, ninety two percent
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  Speaker 2: of job games over the past six months through December
• 11:43
  Speaker 2: were just three sectors healthcare, the government, and leisure and hospitality.
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  Speaker 3: I did not know that.
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  Speaker 2: That doesn't sound like a healthy statistic for the labor market.
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  Speaker 9: No, it is actually quite unusual. And the previous month
• 11:55
  Speaker 9: it was even worse.
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  Speaker 10: It was ninety eight percent. So last month job growth
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  Speaker 10: roddened a little bit. But that is the next big thing.
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  Speaker 9: I'm going to be looking at, not the sort of
• 12:05
  Speaker 9: magnitude of job gains, but their breadth across the economy.
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  Speaker 9: If they're only happening in these non cyclical sectors, they're
• 12:11
  Speaker 9: basically fueled by the government, healthcare and government.
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  Speaker 11: That isn't a.
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  Speaker 10: Good sign for the economy at all.
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  Speaker 9: It would give us reason to understand why consumers, why
• 12:24
  Speaker 9: job seekers, why workers are still feeling a little glum
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  Speaker 9: about the situation, even though we have these huge GDP
• 12:30
  Speaker 9: numbers et cetera.
• 12:31
  Speaker 10: It's because the happiness is not sort of spread equally around.
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  Speaker 6: Well, here's a dumb question.
• 12:35
  Speaker 5: Why is that a bad sign if it's mostly leisure, hospitality, government,
• 12:40
  Speaker 5: and healthcare.
• 12:42
  Speaker 9: Well, because lots of people aren't working in those industries, right,
• 12:44
  Speaker 9: There are lots of us who are in tech, or
• 12:46
  Speaker 9: in law, or in consulting or finance.
• 12:49
  Speaker 10: It's you know, there's massive demand for nurses.
• 12:52
  Speaker 9: Healthcare is just hiring, hiring, hiring, leveraged, and that industry
• 12:57
  Speaker 9: shifted to workers during the pandemic and they have not
• 12:59
  Speaker 9: lost that leverage increase. But in the rest of the
• 13:03
  Speaker 9: economy it's different. It's not so easy for everyone to
• 13:06
  Speaker 9: kind of move into healthcare. So when certain industries contract
• 13:10
  Speaker 9: and the number of jobs available just keeps falling, and
• 13:13
  Speaker 9: it's not a matter of one company doing the layoffs,
• 13:17
  Speaker 9: so you can just go to the next one, but
• 13:18
  Speaker 9: the entire sector contracting.
• 13:20
  Speaker 10: Take journalism, for example.
• 13:22
  Speaker 9: The media of the press, Well, you can end up
• 13:24
  Speaker 9: having people who are unemployed for quite a long time
• 13:27
  Speaker 9: because it's very hard for them to make a shift.
• 13:28
  Speaker 2: Hey, Joey, I'm looking at the forecast for some of
• 13:31
  Speaker 2: tomorrow's data on the Bloomberg Terminal average hourly earnings year
• 13:35
  Speaker 2: four point one percent is the projection kind of flat
• 13:38
  Speaker 2: with last period. That seems pretty good to me. What's
• 13:41
  Speaker 2: the wage environment from your perspective.
• 13:44
  Speaker 9: That is pretty good, But most of the data does
• 13:46
  Speaker 9: show a steady slowing in wage growth. We had EASYI
• 13:50
  Speaker 9: data yesterday that showed we've had three straight.
• 13:53
  Speaker 10: Quarters of declines and wage growth. You know, the annualized
• 13:59
  Speaker 10: rate of wage growth for the.
• 14:00
  Speaker 9: Quarter was just three point seven percent, which is actually
• 14:03
  Speaker 9: very close to what the FED would expect, is consistent
• 14:08
  Speaker 9: with two percent inflation, so I think we could actually
• 14:11
  Speaker 9: see a slightly lower number, but you know, we'll see.
• 14:15
  Speaker 9: And it's also I think important not just to fixate
• 14:18
  Speaker 9: on these year over year numbers. Right, wage growth was
• 14:21
  Speaker 9: very very fast last year and the year before in
• 14:25
  Speaker 9: nominal terms, inflation was higher for twenty five months, So actually,
• 14:29
  Speaker 9: if you're looking at real earnings, weges have some catching
• 14:32
  Speaker 9: up to do to make up for the nine percent
• 14:35
  Speaker 9: inflation we saw.
• 14:36
  Speaker 6: Are we seeing labor hoarding? Julia?
• 14:38
  Speaker 5: You mentioned how I mean, I know it's seasonal, but
• 14:40
  Speaker 5: the amount of layofs and normally see is below the
• 14:43
  Speaker 5: norm Yeah, Are we seeing hoarding.
• 14:46
  Speaker 9: So there are several anecdotes in the FED Beaige Book
• 14:49
  Speaker 9: of Companies saying, you know, yeah, business activity is what
• 14:53
  Speaker 9: we have more employees on hand than needed have given
• 14:57
  Speaker 9: card levels of business activity, but we're keeping them because
• 15:00
  Speaker 9: we expect conditions to improve in the back half of
• 15:02
  Speaker 9: the year.
• 15:03
  Speaker 10: I think that's sort of code speed for we're.
• 15:05
  Speaker 9: Expecting I've been to cut rates and invest in to
• 15:07
  Speaker 9: boom again and people to build, buy houses and buy
• 15:11
  Speaker 9: refrigerators of furniture, and so we're holding on to these
• 15:14
  Speaker 9: employees because we were burned once before and we know
• 15:16
  Speaker 9: how hard it is to get them back. So yes,
• 15:18
  Speaker 9: I do think that that is occurring in many industries.
• 15:21
  Speaker 2: I can't imagine if I own a business hoarding employees,
• 15:24
  Speaker 2: like who can afford that?
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  Speaker 5: Well, that's kind of the point you have to wonder, too,
• 15:28
  Speaker 5: like how long until they are forced to either does
• 15:30
  Speaker 5: the data deteriorate that much or do they need to
• 15:33
  Speaker 5: see if the FED hikes get pushed out, cuts get
• 15:35
  Speaker 5: pushed out even more?
• 15:36
  Speaker 6: Like what's the tipping point for that one?
• 15:38
  Speaker 3: Don't I know?
• 15:38
  Speaker 2: And you know, Julie, I have another thing that I
• 15:41
  Speaker 2: just can't get my head on what's this this jolts thing.
• 15:44
  Speaker 2: It's still like nine million job openings?
• 15:46
  Speaker 3: Where is everybody? Where are people working?
• 15:48
  Speaker 2: That number is usually five or six million, and now
• 15:50
  Speaker 2: we're at nine. It was as high as twelve million.
• 15:53
  Speaker 2: Are people just hanging around Starbucks all day?
• 15:56
  Speaker 10: So I don't put that much stock in that number.
• 15:59
  Speaker 9: There is a c your upward time trend in the
• 16:02
  Speaker 9: job opening series that is not evident in any other
• 16:05
  Speaker 9: lave market data. So job openings have kind of become
• 16:09
  Speaker 9: decoupled from hires, from quits, from the things that they
• 16:12
  Speaker 9: typically are correlated with. And I think if you remove
• 16:15
  Speaker 9: that time trend.
• 16:16
  Speaker 10: Job openings are actually all the way back to normal.
• 16:18
  Speaker 9: Our data, you know, it's on online job hostings and
• 16:21
  Speaker 9: by our accounts of de duplicated online job postings, we
• 16:25
  Speaker 9: are all the way back to pre pandemic levels, to
• 16:27
  Speaker 9: twenty nineteen levels, and to.
• 16:29
  Speaker 5: That point, Paul, you know, when I was in Florence, Italy,
• 16:31
  Speaker 5: you know, yeah stuff, I was talking a lot of
• 16:35
  Speaker 5: these guys who are doing you know, innovative stuff within
• 16:37
  Speaker 5: energy technology and stuff like that, and they're trying to
• 16:39
  Speaker 5: build all these new facilities. They're the ones who are
• 16:41
  Speaker 5: gonna be using a lot of that IRA money. They're like,
• 16:44
  Speaker 5: we do not have the workforce so at all, Like
• 16:48
  Speaker 5: there's no special training program, this is all new technology.
• 16:50
  Speaker 5: They just don't have the people and they're not going
• 16:52
  Speaker 5: to get them anytime soon. And I do wonder how
• 16:53
  Speaker 5: that winds up distorting. I agree, that's a lot of
• 16:56
  Speaker 5: the data too, yep, right, And so we do.
• 16:59
  Speaker 10: Have very low, very low unemployment.
• 17:01
  Speaker 11: Right.
• 17:01
  Speaker 9: The last year was like the sixth best year on
• 17:04
  Speaker 9: record since nineteen forty when it comes to the unemployment
• 17:07
  Speaker 9: rate after the early fifties and the late sixties, So
• 17:11
  Speaker 9: very very low unemployment. Twenty four months of sub four
• 17:14
  Speaker 9: percent unemployment. So it is still hard for employers to
• 17:16
  Speaker 9: find workers.
• 17:18
  Speaker 10: And so I don't think.
• 17:19
  Speaker 9: It's that unrealistic or unreasonable to hang on to the
• 17:24
  Speaker 9: work because.
• 17:24
  Speaker 10: You've got, for dear life.
• 17:26
  Speaker 2: Where are we in terms of productivity here? I was
• 17:29
  Speaker 2: amazed when the pandemic hit and shut down and lockdowns
• 17:32
  Speaker 2: and all that kind of stuff that people were still
• 17:34
  Speaker 2: able to do their jobs pretty much from remotely.
• 17:37
  Speaker 3: And it's just kind of amazed me. Where are we
• 17:38
  Speaker 3: in the productivity discussion?
• 17:41
  Speaker 4: You know that.
• 17:42
  Speaker 10: Productivity data series is a weird one.
• 17:44
  Speaker 9: It's shot up during the pandemic when there were massive layoffs,
• 17:48
  Speaker 9: and those layoffs are typically concentrated among employees who are not,
• 17:52
  Speaker 9: you know, day to day involved in generating widgets. Then
• 17:56
  Speaker 9: measured productivity tumbles as all of those support staff, the
• 18:00
  Speaker 9: HR people, the marketing people came back. Then it started
• 18:04
  Speaker 9: taking up from a point above the pre pandemic trend.
• 18:07
  Speaker 9: And so it does look as though the investments that
• 18:09
  Speaker 9: happened during the pandemic and a zero interest rate environment,
• 18:13
  Speaker 9: when everyone was shifting to the computers, to doing everything
• 18:18
  Speaker 9: on the internet, to digitalizing every industry, those investments have
• 18:22
  Speaker 9: actually improved productivity, and we're seeing your great productivity numbers
• 18:27
  Speaker 9: continue now.
• 18:28
  Speaker 3: I feel more productive, don't I look more productive?
• 18:31
  Speaker 5: Well, I mean you are literally standing in this position
• 18:33
  Speaker 5: for five hours, So just from that alone, the answer
• 18:36
  Speaker 5: is yes. All right, Julia, thanks THO. We really appreciate it.
• 18:39
  Speaker 5: Julia Paula. She joins it from ZipRecruiter. She is the
• 18:42
  Speaker 5: chief economist. I do think though, that longer term the
• 18:47
  Speaker 5: labor shortage in different industries is going to be really hard,
• 18:51
  Speaker 5: and I don't know what the longer term.
• 18:52
  Speaker 6: Fix that is. You have to convince kids to go
• 18:54
  Speaker 6: to trade school.
• 18:55
  Speaker 2: That's exactly what I was going to say, create the
• 18:56
  Speaker 2: incentives for the folks to go to trade schools because
• 18:59
  Speaker 2: and we hear and we heard it just recently from
• 19:01
  Speaker 2: George Ferguson talking about his industry, the aerospace industry.
• 19:05
  Speaker 3: One of the reasons Boeing and.
• 19:07
  Speaker 2: The FAA are having a hard time kind of getting
• 19:09
  Speaker 2: their act together is they lost a lot of workers
• 19:12
  Speaker 2: in the pandemic. And these are just people that hammer nails.
• 19:14
  Speaker 2: These are people that are doing pretty specialized, you know,
• 19:17
  Speaker 2: jobs there, and you got to get them back, you
• 19:20
  Speaker 2: got to retrain them.
• 19:20
  Speaker 3: It's taking harder. I didn't think that would still be
• 19:23
  Speaker 3: an issue, but it is.
• 19:25
  Speaker 2: And we're here from industry after industry, your industry in
• 19:27
  Speaker 2: the energy space.
• 19:29
  Speaker 5: Wonder like, at some point does that wind it becoming
• 19:31
  Speaker 5: longer term inflationary.
• 19:33
  Speaker 3: Yeah. Absolutely. I mean a lot of folks saying, forego college, forego.
• 19:37
  Speaker 2: The debt, debt's assourciate of the college, go to a
• 19:40
  Speaker 2: trade school, a lot of which can be subsidized and supported. Man,
• 19:44
  Speaker 2: you can make a good living in a lot of
• 19:45
  Speaker 2: these industries out there. So we'll have to see how
• 19:48
  Speaker 2: that place out. But good we'll see the jobs numbers tomorrow.
• 19:50
  Speaker 2: We'll get a lot more info on the United States
• 19:53
  Speaker 2: labor market, and of course Bloomberg will have full coverage
• 19:56
  Speaker 2: on that, because that's what we do.
• 19:59
  Speaker 1: You're listening to them Bloomberg Intelligence Podcast. Catch us live
• 20:02
  Speaker 1: weekdays at ten am Eastern on fo card Playing and
• 20:05
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• 20:09
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 20:14
  Speaker 2: Nice and manufacturing data came in better than expected. Let's
• 20:17
  Speaker 2: break it down with Tim Fury. He's at the conference board.
• 20:19
  Speaker 2: He knows all this stuff. Jim, thanks so much for
• 20:22
  Speaker 2: joining us here again. Forty nine point one still in
• 20:25
  Speaker 2: contraction move, but a big improvement there from consensus and
• 20:28
  Speaker 2: from last period.
• 20:30
  Speaker 8: Yeah. Well hi wow, Hi Paul, Hi Alex. So Yeah,
• 20:33
  Speaker 8: forty nine to one was a surprise. I mean we're
• 20:36
  Speaker 8: heading an ins direction for sure.
• 20:37
  Speaker 12: Last time we had a conversation, I've been saying I
• 20:40
  Speaker 12: thought we'd hit fifty by March.
• 20:42
  Speaker 8: This got there a little bit sooner.
• 20:44
  Speaker 12: But you know, I look at it from three standpoints, inputs, outputs,
• 20:47
  Speaker 12: and demand.
• 20:48
  Speaker 8: Yeah, the input stories, it just gets better.
• 20:50
  Speaker 12: They're starting to stiffen up, we're investing in working and
• 20:53
  Speaker 12: working capital represented by inventory is not contracting as much.
• 20:57
  Speaker 12: On the output side, production is stable in January. We've
• 21:00
  Speaker 12: heard of the December to fifty point four.
• 21:02
  Speaker 8: That's really good.
• 21:03
  Speaker 12: That's no sign of concern or dramatic growth even at
• 21:06
  Speaker 12: this point. Employment side, we continue to take people out
• 21:09
  Speaker 12: of the organizations which we had said that we would
• 21:12
  Speaker 12: starting back in May, and it continues. So the real
• 21:15
  Speaker 12: story here is on the demand of fifty two point
• 21:17
  Speaker 12: five and new orders that kind of came out of
• 21:19
  Speaker 12: almost nowhere. But look at that in context with the
• 21:22
  Speaker 12: customer inventory number. So we're saying the customer inventories are
• 21:26
  Speaker 12: way too low now and at the same time we're
• 21:28
  Speaker 12: saying that the new order level is stepping up. So
• 21:31
  Speaker 12: I think those are absolutely related.
• 21:33
  Speaker 8: You know, our panelists companies customers have gone back to
• 21:36
  Speaker 8: them and they've.
• 21:36
  Speaker 12: Probably revised their forecasts for twenty twenty four and now
• 21:40
  Speaker 12: things runderway.
• 21:41
  Speaker 6: So Tim, hey, it's great to see you.
• 21:43
  Speaker 5: By the way, I have to say, this is a
• 21:44
  Speaker 5: great set of data here, super surprising on different levels.
• 21:48
  Speaker 5: When we talk about the inventory, do you think that
• 21:50
  Speaker 5: the orders are being used for en demand or do
• 21:53
  Speaker 5: you think the orders will be replenishing that inventory, and
• 21:56
  Speaker 5: what does that inventory wind up looking like versus say,
• 21:59
  Speaker 5: before a cod.
• 22:01
  Speaker 8: Yeah, I think it's I think it's a remedia products
• 22:03
  Speaker 8: and raw material.
• 22:04
  Speaker 12: So you know, we've been really tight, tight, tight with
• 22:07
  Speaker 12: investments in this area. We spent well, we've spent what
• 22:11
  Speaker 12: eleven months contracting our manufacturing inventory. That really is reflected
• 22:16
  Speaker 12: the fact that we've been managing cash really close.
• 22:18
  Speaker 8: In twenty twenty three, we closed the year, We closed
• 22:20
  Speaker 8: the end of the year very lean.
• 22:22
  Speaker 12: Nobody was really carrying any inventory that they that they
• 22:25
  Speaker 12: didn't have to. They cleaned the place out, So now
• 22:28
  Speaker 12: there's a bit of a restocking going on. I think
• 22:30
  Speaker 12: it's more about intermediate stuff alex and you know, middle
• 22:33
  Speaker 12: run steel and aluminum.
• 22:35
  Speaker 8: Of truckloads and things like that.
• 22:37
  Speaker 12: But I think it's a positive sign that companies are
• 22:40
  Speaker 12: willing to reinvestigate and working capital. I think that inventory
• 22:43
  Speaker 12: number will get over fifty by the time we hit March.
• 22:45
  Speaker 12: I'm still on that March thing. I think March is
• 22:48
  Speaker 12: like the magic number. But I've been saying since since
• 22:51
  Speaker 12: August September that we were in the trough. But this
• 22:54
  Speaker 12: could be a sign that we're finally starting to come out,
• 22:57
  Speaker 12: and I think it's about you know, the demand had
• 22:59
  Speaker 12: to come back. There's some signs of demand here. We
• 23:02
  Speaker 12: do have some headwinds in February. February should have a
• 23:06
  Speaker 12: lot more new orders coming in, so we're gonna need
• 23:09
  Speaker 12: that to maintain that fifty two to fifty three new
• 23:11
  Speaker 12: order level. But you know, everything kind of aligns. The
• 23:14
  Speaker 12: other thing that's come up this morning is prices. You know,
• 23:16
  Speaker 12: prices are growing, so you know, we have the energy
• 23:19
  Speaker 12: markets offsetting growth in the commodity markets. Those commodity markets
• 23:23
  Speaker 12: are probably just gonna get stronger. Plastics, aluminum steel prices
• 23:27
  Speaker 12: are not going to probably come down there. Lead times
• 23:29
  Speaker 12: have been really stubborn, so you know, I think that
• 23:32
  Speaker 12: the energy markets events will probably give some probably give
• 23:35
  Speaker 12: way in the summertime as as demand increases it for
• 23:38
  Speaker 12: you know, for summer travel.
• 23:39
  Speaker 8: But I don't see prices really going down anymore, and
• 23:42
  Speaker 8: I don't see them going up much. You know, it's
• 23:44
  Speaker 8: gonna be I think.
• 23:45
  Speaker 12: We're gonna see some slow demand kind of creep in here.
• 23:48
  Speaker 12: It's gonna be like a slow take off of a
• 23:50
  Speaker 12: cargo plane rather than.
• 23:51
  Speaker 8: The fighter jet. But we're gonna be kind of we're
• 23:53
  Speaker 8: starting to grow again.
• 23:54
  Speaker 12: Nonetheless, and I think I feel even more confident that
• 23:57
  Speaker 12: March is the right month to see that really show up.
• 24:00
  Speaker 2: What are the companies that you survey, what are they
• 24:02
  Speaker 2: Are they baking in a recession for twenty twenty four?
• 24:05
  Speaker 2: Do they just think, yeah, growth is slowing, but we're
• 24:08
  Speaker 2: still going to grow this year.
• 24:10
  Speaker 12: Well, we lived all through twenty twenty three not knowing
• 24:13
  Speaker 12: what the future look like, so there was a huge
• 24:15
  Speaker 12: constraint on capex investment.
• 24:18
  Speaker 8: We undershot our targets.
• 24:19
  Speaker 12: You know, we thought we're going to spend twelve percent
• 24:21
  Speaker 12: on capex last year, we spent like one percent. All
• 24:25
  Speaker 12: of that is now carried over into twenty twenty four.
• 24:27
  Speaker 12: I think there's some general optimism now. The softening is
• 24:31
  Speaker 12: still continuing on new orders. The fact that the FED
• 24:33
  Speaker 12: is that hey, we're at the top of the rate
• 24:35
  Speaker 12: cycle is really positive. They don't really so much need
• 24:38
  Speaker 12: to know when the first cut comes in. That's not
• 24:40
  Speaker 12: a direct relationship really on manufacturing. The fact that they've
• 24:44
  Speaker 12: telegraphed that we're at the top of the rate cycle
• 24:46
  Speaker 12: was really positive for us. So you know, things are
• 24:49
  Speaker 12: being realigned I think, you know, Panneless companies are probably
• 24:52
  Speaker 12: putting a stretch plan together for their business plan based
• 24:54
  Speaker 12: on a more accommodated market in twenty twenty four.
• 24:57
  Speaker 8: We said in our forecast at twenty four would better
• 25:00
  Speaker 8: than twenty three.
• 25:01
  Speaker 12: We said that first quarter twenty four will be similar
• 25:04
  Speaker 12: to the last quarter of twenty three, just slightly better,
• 25:07
  Speaker 12: but the last six months of twenty four will be
• 25:09
  Speaker 12: much better.
• 25:09
  Speaker 8: So I think we're on that trajectory. This is a
• 25:11
  Speaker 8: This is probably a month, month and a half before
• 25:13
  Speaker 8: I thought it would show up, but it's it's welcome.
• 25:16
  Speaker 6: Nonetheless, he sounds so jazzed.
• 25:17
  Speaker 10: Tim.
• 25:18
  Speaker 5: Going back to the prices paid for a second, you
• 25:20
  Speaker 5: mentioned commodities. Is that a supplier a demand story at
• 25:23
  Speaker 5: this point, you.
• 25:25
  Speaker 12: Know, the utilization is fairly high, but you know, you
• 25:29
  Speaker 12: think you see a lot more plant capacity going into
• 25:32
  Speaker 12: the system, and I think that's going to happen. Probably
• 25:34
  Speaker 12: a lot of this stuff is long lead. It takes
• 25:36
  Speaker 12: three years to you know, put a steel plant in,
• 25:39
  Speaker 12: you know, aluminum smelter, plastics, chemical plant. It takes about
• 25:42
  Speaker 12: three years to do that. You know, I don't think
• 25:44
  Speaker 12: we're going to see any relief on the capacity side
• 25:48
  Speaker 12: to the second half.
• 25:49
  Speaker 8: Of the year, and that's what you're onto.
• 25:51
  Speaker 12: My biggest concern here and that is that we may
• 25:53
  Speaker 12: see a resurgence of material price inflation at higher levels
• 25:58
  Speaker 12: than we expected, sooner than we expected. As demand comes
• 26:01
  Speaker 12: back and when you don't have production capacity expanding fast enough.
• 26:06
  Speaker 12: We think we're gonna go up about seven percent I
• 26:08
  Speaker 12: think on production capacity in twenty twenty four. The question
• 26:11
  Speaker 12: is when do you want to do it too early? No,
• 26:13
  Speaker 12: not really, you want to do it too late. Well,
• 26:15
  Speaker 12: that's going to cause price growth everywhere. So the timing
• 26:18
  Speaker 12: of that, that's where you kind of tie in back
• 26:20
  Speaker 12: to when of the rate cuts come into place that
• 26:23
  Speaker 12: might spurred you know, more demand.
• 26:25
  Speaker 8: We may or may not have the capacity in place
• 26:27
  Speaker 8: of key prices down. I think the biggest issue in
• 26:29
  Speaker 8: twenty four is maintaining an acceptable price level.
• 26:32
  Speaker 3: Tim You're based in Miami.
• 26:33
  Speaker 8: Right in I'm in Jupiter, Florida.
• 26:36
  Speaker 2: Yeah, I've got a huge problem with that. There's no
• 26:38
  Speaker 2: manufacturing in Jupiter, Florida. You should be in like Peoria.
• 26:42
  Speaker 2: What are you doing in Florida?
• 26:43
  Speaker 8: Connecticut, isn't it. I'm in the heart of manufacturing technology
• 26:47
  Speaker 8: in Connecticut. Now you're gott to give you some early
• 26:51
  Speaker 8: all right, very good.
• 26:52
  Speaker 12: That's where manufacturing started in America, right now, Connecticut, yep.
• 26:56
  Speaker 3: Absolutely, our Tim Fury, good stuff. Appreciate it.
• 26:58
  Speaker 2: Tim Fury, Chairman of the Men Manufacturing Business Survey, Institute
• 27:02
  Speaker 2: for Supply Management, Wisconsin, Jupiter, Florida.
• 27:05
  Speaker 3: Man, it doesn't get much better than that.
• 27:08
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 27:12
  Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
• 27:16
  Speaker 1: with the Bloomberg Business App. You can also listen live
• 27:19
  Speaker 1: on Amazon Alexa from our flagship New York station. Just
• 27:22
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• 27:26
  Speaker 5: So let's talk about things that are working and not working.
• 27:28
  Speaker 5: Let's go to Rockwell Automation. So that company is a
• 27:31
  Speaker 5: really great indicator of sort of end user demand. It
• 27:33
  Speaker 5: provides control devices and software for industrial automation. Now reported
• 27:38
  Speaker 5: earnings yesterday, and it tumbled the most intraday since twenty
• 27:42
  Speaker 5: twenty two because its fiscal first quarter profit did actually
• 27:45
  Speaker 5: miss estimates. The stock now up by almost three percent today.
• 27:48
  Speaker 5: We are now joined by the CEO, Blake Morett. We're
• 27:51
  Speaker 5: really great to get this perspective. Hey, Blake, what do
• 27:53
  Speaker 5: you think the market took away yesterday from your earnings?
• 27:58
  Speaker 11: Well, I think they did hear the message of continued
• 28:02
  Speaker 11: underlying demand remaining strong. But we had a shipment miss
• 28:07
  Speaker 11: in the quarter. A lot of that was execution, and
• 28:10
  Speaker 11: we look at that as timing for shipments that will
• 28:13
  Speaker 11: come back in the year. You know, we had a
• 28:16
  Speaker 11: very strong growth last year of seventeen percent top line
• 28:20
  Speaker 11: twenty eight percent adjusted EPs. This is a bit of
• 28:24
  Speaker 11: a reset year as we get done shipping off that
• 28:28
  Speaker 11: older backlog that piled up as a result of supply
• 28:32
  Speaker 11: chain shortages and go back to booking and billing incoming
• 28:37
  Speaker 11: new orders. And so we're seeing lower growth in the
• 28:40
  Speaker 11: year with some growing pains, but the underlying demand remains
• 28:44
  Speaker 11: pretty strong.
• 28:45
  Speaker 2: That's kind of where I want to go, Blake, What
• 28:46
  Speaker 2: are your tell us and our listeners and our viewers like,
• 28:49
  Speaker 2: who your customers are and what are your customers telling
• 28:52
  Speaker 2: you these days?
• 28:54
  Speaker 11: We may be the most pervasive technology in American manufacturing,
• 28:59
  Speaker 11: so every thing from automotive and battery manufacturing to warehouse automation,
• 29:05
  Speaker 11: food and beverage, life sciences, energy, both traditional fossil fuel
• 29:11
  Speaker 11: as well as renewables, across that whole spectrum. Our technology,
• 29:15
  Speaker 11: our hardware, and our software and our services are pretty prevalent.
• 29:19
  Speaker 5: So when do you know, Blake, if it's still the
• 29:22
  Speaker 5: supply chain issues that you're still working through versus just
• 29:26
  Speaker 5: weaker demand, Like, do you even know when that moment shifts?
• 29:31
  Speaker 11: Well, So we had an encouraging quarter in the demand
• 29:35
  Speaker 11: side in that in Q one, so the quarter ended
• 29:39
  Speaker 11: in December. We did see double digit sequential growth and
• 29:44
  Speaker 11: orders off of the trough in our fiscal year, our
• 29:48
  Speaker 11: fiscal Q four last year, and those orders increases have
• 29:52
  Speaker 11: continued into January, so that's a very positive sign. Now,
• 29:57
  Speaker 11: a lot of our distributors, and most of our business
• 30:00
  Speaker 11: does go through electrical distributors, they had higher inventory than
• 30:04
  Speaker 11: they wanted and we expect in the coming couple of
• 30:07
  Speaker 11: months that that inventory gets to more of a normal
• 30:10
  Speaker 11: level so that their orders to us reflect the strong
• 30:15
  Speaker 11: underlying demand from machine builders and end users.
• 30:19
  Speaker 2: Blake, how much lead time do you have in your business?
• 30:22
  Speaker 2: What's your order book and kind of how much how
• 30:26
  Speaker 2: much lead time do you really have?
• 30:28
  Speaker 11: So the product business, which is the majority of our business,
• 30:33
  Speaker 11: those lead times are typically days and weeks in a
• 30:37
  Speaker 11: normal period and part of our challenge in Q one
• 30:41
  Speaker 11: was returning all of our products to those fast lead times.
• 30:45
  Speaker 11: But in a normal environment, we get an order and
• 30:50
  Speaker 11: it either gets shipped that day off our distributors shelf,
• 30:54
  Speaker 11: or we're able to make it and ship it within
• 30:56
  Speaker 11: days or a few weeks for those products.
• 31:00
  Speaker 5: Are you an early cycle economic read?
• 31:03
  Speaker 6: Is that fair to say?
• 31:05
  Speaker 11: You know, we certainly have exposure early in the cycle,
• 31:09
  Speaker 11: but the so called late cycle is also an important
• 31:12
  Speaker 11: part of our business. Whether you're talking about the traditional
• 31:17
  Speaker 11: process industries or life sciences, we've got pretty broad exposure early,
• 31:23
  Speaker 11: mid and late cycle. Although I have to say with
• 31:27
  Speaker 11: the supply chain backlog that we had in twenty twenty
• 31:30
  Speaker 11: two and twenty three, with the distributor overstock that we're
• 31:34
  Speaker 11: working through now, it's hard to pin a particular point
• 31:38
  Speaker 11: in the traditional cycle on this time well.
• 31:41
  Speaker 5: Also because you're exposed to sort of all the structural
• 31:43
  Speaker 5: changes too, like infrastructure act A, Chips ACT, the IRA,
• 31:47
  Speaker 5: So that's a structural shift even though you're still cyclical.
• 31:50
  Speaker 5: I can imagine that being quite confusing. So based on
• 31:54
  Speaker 5: where you are and all the different cycles, how are
• 31:56
  Speaker 5: we doing, Like how's the global economy?
• 31:58
  Speaker 11: Doing, you know, particularly in our home market in the US,
• 32:03
  Speaker 11: where we have the largest market share, we see continued
• 32:07
  Speaker 11: strong underlying demand. So we're expecting our orders to be up,
• 32:13
  Speaker 11: you know, low single digits, and we've guided to one
• 32:18
  Speaker 11: point up in terms of organic shipments. But that underlying
• 32:22
  Speaker 11: demand I think remained strong. And one of the key
• 32:26
  Speaker 11: indicators for me is continued low unemployment rates in our
• 32:31
  Speaker 11: most important markets.
• 32:33
  Speaker 2: So, Blake, I'm looking at the PGeo function on the
• 32:36
  Speaker 2: Bloomberg termol and I could see just by geography looking
• 32:38
  Speaker 2: at your revenue against sixty percent roughly of your revenue
• 32:40
  Speaker 2: as North America. So give us a sense of kind
• 32:43
  Speaker 2: of North America versus rest of the world. What do
• 32:45
  Speaker 2: you guys seeing North.
• 32:47
  Speaker 11: America is the strongest market. China has significant problems right now,
• 32:54
  Speaker 11: and Europe still dealing with some of their structural issues.
• 33:00
  Speaker 11: Out of the business we get in Europe is actually
• 33:02
  Speaker 11: for export back to North America from the machine builders
• 33:06
  Speaker 11: over there. But we expect for this year North America
• 33:11
  Speaker 11: is going to be the strongest market and that's good
• 33:13
  Speaker 11: for us because we've got home field advantage.
• 33:15
  Speaker 5: It feels like a US exceptionalism conversation, right like yet again,
• 33:21
  Speaker 5: So if we just go macro them for a minute,
• 33:23
  Speaker 5: if the FED cuts rates in May, what does that do,
• 33:27
  Speaker 5: Like if you're already seeing us hold up pretty well,
• 33:30
  Speaker 5: does that accelerate the economy from where you stound?
• 33:34
  Speaker 11: I think that could help some of the largest CAPEX projects,
• 33:39
  Speaker 11: which you know we get some business from. But we're
• 33:42
  Speaker 11: not as much of a capex play as some other names,
• 33:47
  Speaker 11: and that we're pretty balanced between CAPEX as well as
• 33:50
  Speaker 11: op X in terms of improvements additional efficiency in existing
• 33:56
  Speaker 11: facilities as well. So I don't know that interest rates
• 33:59
  Speaker 11: are our biggest indicator. As I said, for the economy,
• 34:03
  Speaker 11: I look at unemployment, and you know, I look at
• 34:08
  Speaker 11: the amount of automation investment, both for new green fields
• 34:13
  Speaker 11: as well as adding efficiency and resilience and existing facilities.
• 34:19
  Speaker 2: Blake, just explain to us kind of what your competitive
• 34:22
  Speaker 2: marketplace looks like. Where are you, guys versus your competitors?
• 34:25
  Speaker 2: Who do you compete against? And how's that changing?
• 34:28
  Speaker 11: So our big competitors are mostly the European conglomerates. Really,
• 34:34
  Speaker 11: it's Seamen, Schneider abb in certain narrow parts of the market,
• 34:40
  Speaker 11: Honeywell and Emerson Here in the US, where really, you know,
• 34:46
  Speaker 11: we distinguish ourselves by having a very balanced exposure from
• 34:50
  Speaker 11: discrete applications like automotive, to hybrid applications like food and
• 34:55
  Speaker 11: beverage and life sciences, to continuous process applications like energy
• 35:01
  Speaker 11: and mining and so on.
• 35:03
  Speaker 5: Hey blake to that point, Honeywell's not having a good
• 35:05
  Speaker 5: day after reported earnings.
• 35:07
  Speaker 6: One of the worst worming stocks in the S and P.
• 35:09
  Speaker 5: Semens Energy, part of Semen had just been really hurt
• 35:13
  Speaker 5: by offshore wind here in the US, I should say
• 35:16
  Speaker 5: not owned by Siemens, but Semens owns a stake in
• 35:19
  Speaker 5: Semens Energy. How what's your view on the energy green
• 35:23
  Speaker 5: transition build out right now? You're losing money, you making money,
• 35:27
  Speaker 5: What does your order.
• 35:27
  Speaker 6: Book look like?
• 35:29
  Speaker 11: It's still early innings, but we're seeing good business as
• 35:33
  Speaker 11: a result of energy transition, and I would bucket it
• 35:37
  Speaker 11: in three different ways. I'd look at first, the decarbonization
• 35:42
  Speaker 11: of the traditional oil and gas company, so carbon capture projects.
• 35:47
  Speaker 11: We've talked about the work we're doing with Occidental in
• 35:50
  Speaker 11: their direct or capture projects, the one point five initiative,
• 35:55
  Speaker 11: it's renewables, and again we've talked publicly about what we're
• 35:59
  Speaker 11: doing with companies like First Solar in creating you know,
• 36:03
  Speaker 11: PV panels. And then it's the thing that we've been
• 36:06
  Speaker 11: doing for our entire history, and that's driving efficiency across
• 36:12
  Speaker 11: all manufacturing, and those are all good applications for us.
• 36:16
  Speaker 11: You know, there's some relatively nascent areas like hydrogen that
• 36:21
  Speaker 11: are sources of optimism, but you know, I would put
• 36:24
  Speaker 11: them in those three main areas.
• 36:26
  Speaker 2: Hey, Blake, I'm looking at the an R function on
• 36:28
  Speaker 2: the Bloomberg terminal. It shows me that there are eleven
• 36:31
  Speaker 2: Wall Street analyst buys on your stock, twelve holds and
• 36:34
  Speaker 2: five cells, so pretty mixed across the board. What's the
• 36:37
  Speaker 2: message that you bring to your investors into the marketplace that.
• 36:42
  Speaker 11: The underlying demand remains strong, that we really have a
• 36:46
  Speaker 11: unique position among all of those competitors and among the
• 36:51
  Speaker 11: niche competitors. I like the hand we have, and as
• 36:55
  Speaker 11: you know, manufacturing picks up and resets from the period
• 37:00
  Speaker 11: of supply chain shortages. We're in a great spot to
• 37:03
  Speaker 11: accelerate our profitable growth before.
• 37:07
  Speaker 6: We end here.
• 37:08
  Speaker 5: I don't know ninety seconds left. You mentioned jobs quite
• 37:11
  Speaker 5: a few times. We have the jobs data tomorrow, we
• 37:14
  Speaker 5: financial jobless claims rising the most in November today. What
• 37:17
  Speaker 5: is your assessment of the labor market hard to get
• 37:20
  Speaker 5: you're going to keep labor paying more?
• 37:21
  Speaker 6: What do you see?
• 37:23
  Speaker 11: You know, I think in manufacturing workforce there's still a
• 37:27
  Speaker 11: lot of unfilled jobs, and we think that, you know,
• 37:32
  Speaker 11: having a skilled workforce is absolutely essential for manufacturers to compete,
• 37:37
  Speaker 11: but it's augmented with the kind of technology that we offer.
• 37:41
  Speaker 11: So it's really that winning hand of having an enabled
• 37:45
  Speaker 11: and engaged workforce, and we do a lot to help
• 37:48
  Speaker 11: with workforce development, and it's also given them so called
• 37:52
  Speaker 11: superpowers with the technology that we offer.
• 37:55
  Speaker 6: Superpowers sounds great.
• 37:57
  Speaker 2: Do you find here in the US? Can you find
• 37:59
  Speaker 2: people for your type type of work?
• 38:03
  Speaker 11: You know, certain jobs it takes longer than in others.
• 38:07
  Speaker 11: We're actually helping with workforce development programs that we offer
• 38:12
  Speaker 11: in house and then provide labor particularly focused towards technician
• 38:17
  Speaker 11: level jobs for manufacturers in America through our Academy of
• 38:22
  Speaker 11: Advanced Manufacturing.
• 38:23
  Speaker 2: Interesting, all right, Blake, We really appreciate your time here.
• 38:26
  Speaker 2: I know you're busy with the earnings and running a business.
• 38:28
  Speaker 3: Blake.
• 38:29
  Speaker 2: Morrett Rockwell Automation, he's the CEO over there. R okay
• 38:33
  Speaker 2: is the ticker for the stock.
• 38:37
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• 38:41
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• 38:44
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• 38:47
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• 38:56
  Speaker 2: Keitha Rongenathen She is one of the top media analysts
• 38:58
  Speaker 2: on Wall Street, and I found out just today that
• 39:00
  Speaker 2: she also covers Peloton. I'm not sure how that happened,
• 39:03
  Speaker 2: but she's a great anlyst. So she joins us here, Githa,
• 39:07
  Speaker 2: are you a Peloton user?
• 39:09
  Speaker 13: Him not?
• 39:10
  Speaker 3: Paul, Oh my god. See this is kind of this
• 39:13
  Speaker 3: is the issue, man, So you can come riding with
• 39:15
  Speaker 3: me anytime.
• 39:17
  Speaker 2: All right, Keith, what's going on in with this company here?
• 39:20
  Speaker 2: Is it just a demand thing, a lack of demand?
• 39:24
  Speaker 4: Yeah?
• 39:24
  Speaker 13: I mean this is this is really a complete train wreck, Paul.
• 39:28
  Speaker 13: I think investors are really losing patients right now. And actually,
• 39:31
  Speaker 13: if you saw their fiscal second quarter, the quarter that
• 39:33
  Speaker 13: they just reported, the numbers were actually fine. More or less.
• 39:37
  Speaker 13: They reported subscriber growth, which which is a good thing
• 39:41
  Speaker 13: because Previous to that, they were losing subscribers because they
• 39:44
  Speaker 13: had a product recall for some of their bike products.
• 39:48
  Speaker 13: They had to completely suspend the production of their treadmill
• 39:51
  Speaker 13: tread Plus, and then they've kind of restarted the sales
• 39:53
  Speaker 13: on that as well. So it was it was, it
• 39:56
  Speaker 13: was definitely a decent quarter, I think. But but what
• 39:59
  Speaker 13: really has caused so much of frustration I think right
• 40:02
  Speaker 13: now for investors is that there is absolutely no catalyst
• 40:06
  Speaker 13: on the horizons, so the pain points continue to remain
• 40:10
  Speaker 13: pain points. There is no positive revenue growth. In fact,
• 40:13
  Speaker 13: they are projecting a decline in revenue, and as you
• 40:16
  Speaker 13: pointed out, this is completely due to the lack of demand.
• 40:20
  Speaker 13: And along with that you have this persistent inventory problem
• 40:23
  Speaker 13: which is causing a huge, huge pressure on the free
• 40:27
  Speaker 13: cash flow of the company, and they continue to burn
• 40:30
  Speaker 13: cash and they're not going to be cash flow positive
• 40:32
  Speaker 13: till till the end of fiscal twenty twenty four.
• 40:35
  Speaker 5: So, Githa, I'm going to go with something that Paul said,
• 40:36
  Speaker 5: which I found is super interesting earlier.
• 40:38
  Speaker 6: That you have super loyal users.
• 40:40
  Speaker 5: Why not try and just get more money out of
• 40:43
  Speaker 5: them rather than try and all of a sudden have
• 40:44
  Speaker 5: mass penetration.
• 40:47
  Speaker 13: And they've tried to do that, Alex.
• 40:48
  Speaker 6: So so what's the problem their credit?
• 40:50
  Speaker 13: Yes, I mean they really face a very very so
• 40:54
  Speaker 13: they don't have enough of a subscriber base, right, so
• 40:56
  Speaker 13: it's about three million subscribers, and yes, they're already charging
• 41:00
  Speaker 13: them a good hefty amount. I mean, you're paying for
• 41:02
  Speaker 13: hardware that is pretty pricey, you know, whether it's the
• 41:05
  Speaker 13: tread plows or whether it's even even a bike. A
• 41:08
  Speaker 13: new bike costs about fourteen hundred and fifteen hundred dollars,
• 41:12
  Speaker 13: so you know it is a pricey product, and then
• 41:15
  Speaker 13: you have to pay a monthly fee, right so you
• 41:18
  Speaker 13: are paying about forty five dollars per month, which is
• 41:20
  Speaker 13: that all access subscription fee. They are trying new things
• 41:23
  Speaker 13: though they did realize that, you know, they might need
• 41:25
  Speaker 13: to to your point, Alex, they did realize that they
• 41:27
  Speaker 13: might want to go out and you know, appeal to
• 41:30
  Speaker 13: a wider base. And so they're trying something called the
• 41:33
  Speaker 13: fitness as a service or a rental program, which is
• 41:36
  Speaker 13: actually taken off. So there is obviously there are obviously
• 41:39
  Speaker 13: takers out there. It's just not enough to move the
• 41:41
  Speaker 13: needle unfortunately for them.
• 41:43
  Speaker 2: All Right, enough peloton talk. Let's get to the juicy stuff.
• 41:46
  Speaker 2: Let's get to the big media companies that you cover. Githa,
• 41:49
  Speaker 2: I guess the most topical name these days is Paramount,
• 41:53
  Speaker 2: the former Viacom. Byron Allen, a media mogul of some sort,
• 41:59
  Speaker 2: has made a fourteen billion dollar offer. When you talk
• 42:02
  Speaker 2: to your vestor clients, is this credible? Is this something
• 42:05
  Speaker 2: that could actually happen?
• 42:08
  Speaker 13: I don't think so, Paul, I mean Byron I Allen
• 42:11
  Speaker 13: has been bidding for for everything in the media space
• 42:14
  Speaker 13: over the past few months, and he has like this
• 42:16
  Speaker 13: long list of empty bids. Really, you know that the
• 42:20
  Speaker 13: bid on its own is not bad at all. It
• 42:23
  Speaker 13: was a fifty percent premium to Paramount's trading price, so
• 42:27
  Speaker 13: it definitely makes sense, and it's I think it's good
• 42:29
  Speaker 13: for investors. The problem is there's absolutely no visibility into
• 42:32
  Speaker 13: how he's going to get that money, so financing is
• 42:35
  Speaker 13: going to be a huge problem. And then of course
• 42:37
  Speaker 13: you have the issue of Paramount's debt or about nearly
• 42:41
  Speaker 13: sixteen billion dollars in debt, and there's you know, there's
• 42:44
  Speaker 13: like eleven billion dollars in senior notes, which will trigger
• 42:47
  Speaker 13: some change of control. Provisions and has to be refinanced immediately.
• 42:50
  Speaker 13: So there's there's just a lot of different obstacles there,
• 42:54
  Speaker 13: and so I'm not really sure investors are thinking that
• 42:57
  Speaker 13: this bid is going to go through.
• 42:59
  Speaker 5: Does Paramount Plus need a buyout? Like I feel like
• 43:02
  Speaker 5: these rumors do swirl around a lot, like who actually
• 43:05
  Speaker 5: needs to.
• 43:05
  Speaker 6: Be bought here?
• 43:07
  Speaker 13: Paramount does need a bit?
• 43:08
  Speaker 11: They do?
• 43:09
  Speaker 6: They really do? Okay, so Bills would would do it?
• 43:11
  Speaker 5: Then you listened to a lot of reasons why Byron
• 43:13
  Speaker 5: Allen won't, but who can.
• 43:16
  Speaker 13: So we've had actually multiple suitors kind of circling these assets.
• 43:21
  Speaker 13: We have David Ellison, who is the son of you know,
• 43:24
  Speaker 13: the mega billionaire Larry Ellison, who has Guy Dance Media.
• 43:28
  Speaker 13: He's very interested in getting Paramount Studio. Again, this is
• 43:32
  Speaker 13: an iconic Hollywood studio, has some great ip uh you know,
• 43:37
  Speaker 13: we have uh, you know, Warner Brothers. Discovery was also
• 43:41
  Speaker 13: supposedly interested. You have a Polo which was also potentially interested.
• 43:46
  Speaker 13: Of course, none of them have necessarily come out with
• 43:48
  Speaker 13: a bid, and so Byron Allen kind of doing what
• 43:51
  Speaker 13: he did yesterday really forces other suitors to or other
• 43:55
  Speaker 13: serious suitors to kind of come out and show their cards.
• 43:58
  Speaker 2: All right, So let's go to Warner Brothers Discovery David Zaslov.
• 44:03
  Speaker 2: There's a company with a lot of debt too. I mean,
• 44:05
  Speaker 2: what's the future, what's the outlook for that company?
• 44:10
  Speaker 13: I mean, I think, Paul, ultimately down the road, it
• 44:12
  Speaker 13: has to be some form of consolidation. I mean, there
• 44:15
  Speaker 13: is no way that so many of these smaller players,
• 44:18
  Speaker 13: whether it's Warner Brothers, Discovery, whether it's Paramount, whether it's
• 44:21
  Speaker 13: you know, Comcast with NBC, can necessarily function on their own,
• 44:24
  Speaker 13: especially with their streaming businesses. So I'm sure at some
• 44:27
  Speaker 13: point they're going to have to look at ways to
• 44:29
  Speaker 13: kind of consolidate. I'm not necessarily sure it's going to
• 44:32
  Speaker 13: happen right away, just kind of given the regulatory environment
• 44:35
  Speaker 13: and kind of given that whole problem with debt and
• 44:37
  Speaker 13: very high leverage, but it will eventually need to happen,
• 44:41
  Speaker 13: all right.
• 44:41
  Speaker 5: Paul, Does this make you feel like you wish you
• 44:43
  Speaker 5: were still a banker?
• 44:45
  Speaker 2: Yes, because my phone calls would be a private equity.
• 44:48
  Speaker 2: We've got private equity right here, go out there. They
• 44:50
  Speaker 2: still have good cash flow, they can service the debt,
• 44:54
  Speaker 2: and you can sell pieces parts at certain times, and
• 44:56
  Speaker 2: that's how you do it. I don't think it's any strategics,
• 44:58
  Speaker 2: but that's just me. How goes Keitha Rongingohan. Thanks so
• 45:01
  Speaker 2: much for joining us at Githa. She is the senior
• 45:03
  Speaker 2: Media Analyst of Bloomberg Intelligence, based in Princeton, chelseoh Cars Teleton.
• 45:08
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• 45:12
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