Latest / Bloomberg Intelligence / Target, Energy, Debt Ceiling, and Doximity (Podcast)

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Target, Energy, Debt Ceiling, and Doximity (Podcast) · Bloomberg Intelligence

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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller.
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Speaker 2: Every business day, we bring you interviews from CEOs, market pros,
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Speaker 2: and Bloomberg experts, along with essential market moving news.
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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever
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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash
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Speaker 1: podcast turning stories. As Bailey was just talking about, it's
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Speaker 1: on the retailers, it's Target, it's TJX. Some decent numbers,
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Speaker 1: kind of in line, I guess you'd call it, but
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Speaker 1: definitely some cautious outlooks. Let's kind of get a sense
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Speaker 1: of what that means for these retailers and what it
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Speaker 1: means for the consumer overall. Sor't going to round table
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Speaker 1: this same a couple of smart voices. Jen Bartashi's senior
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Speaker 1: industry analysts with Bloomberg Intelligence. She joins us, as does
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Speaker 1: Bloomberg macro strategist Vince Cignarella, both on the phone here.
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Speaker 1: So Jen, let's start with you here. What's your takeaway
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Speaker 1: from a couple of big retailers, Target and TJX.
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Speaker 3: Yeah, it's good morning, Paul. Really, the takeaway is that
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Speaker 3: there's no news good news actually in this market, and
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Speaker 3: that everybody understands that the consumer discretionary spending is continuing
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Speaker 3: to soften. I think that one of the things that
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Speaker 3: we're looking at with Target is how well they're going
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Speaker 3: to be able to manage that, And one of the
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Speaker 3: positives this morning was really about how they've reduced their
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Speaker 3: inventory and they seem to be positioned to be able
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Speaker 3: to respond a little bit more quickly than they have
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Speaker 3: historically to changes in that consumer spending.
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Speaker 4: Well, Jen, the inventory story seemed to be this overhanging
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Speaker 4: for both Target and tj MAX for the entirety of
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Speaker 4: last year. Is that problem in the past now or
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Speaker 4: is there any remnants of it?
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Speaker 3: Really that pattern that that problem is really in the past.
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Speaker 3: I think both of the retailers have really reduced their inventory,
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Speaker 3: especially in critical areas. So for example, with Target, their
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Speaker 3: inventory is down sixteen percent, but it's down twenty five
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Speaker 3: percent in discretionary categories, and TJX is also really worked
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Speaker 3: to offload the excess inventory that they had, so the board,
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Speaker 3: I think in the retail space, inventory is really pretty
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Speaker 3: well positioned as we go into the summer months and
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Speaker 3: more importantly into the critical back to school and back
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Speaker 3: to college seasons, which it's hard to talk about already,
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Speaker 3: but it is just around the corner.
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Speaker 1: My last back to college is starting at Start in
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Speaker 1: the fall after four. This is my fourth and last.
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Speaker 1: Thank goodness, Vince Agnirella, love to get your thoughts here.
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Speaker 1: What are you hearing out there on the street? You know,
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Speaker 1: we see these retailers today and they're to me reasonably cautious.
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Speaker 1: That drives of some of the ego data we've seen.
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Speaker 1: And there, what are you hearing out there as it
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Speaker 1: relates to the consumer inflation? How's everybody doing?
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Speaker 5: Everybody's sort of so so to be honest, I mean,
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Speaker 5: I think the interesting point when you're talking about the
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Speaker 5: retailers and you're talking about reducing inventories, think about just
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Speaker 5: a short time ago we were talking supply chain and
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Speaker 5: balances and people couldn't get product. One of the things
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Speaker 5: that's troubling, and I think just the whole economic space
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Speaker 5: and what people are talking about is their huge search
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Speaker 5: and consumer credit outstanding. We're seeing very large consumer credit balances.
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Speaker 5: It's positive for the credit card companies and when you
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Speaker 5: see big games for people like MasterCard, Annex, etc. And visa.
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Speaker 5: You know, in normal times that's a positive, but in
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Speaker 5: times like this, I think we look at that as
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Speaker 5: a negative, and that consumers are stretched in terms of
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Speaker 5: disposable income visa, the inflation, and more and more purchases
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Speaker 5: are being basically bought on time, if you will, and
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Speaker 5: that's just borrowing from economic growth in the future. And
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Speaker 5: you know, I think markets and traders are still thinking
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Speaker 5: that we are potentially going to see a recession before
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Speaker 5: this year's out.
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Speaker 4: Vince, following up on that story, the timeline here is
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Speaker 4: really interesting because and Jen correct me if I'm wrong here,
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Speaker 4: but both Home Depot and Target kind of said, look,
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Speaker 4: we're expecting some sort of pullback in the consumer. It's
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Speaker 4: not here yet, but it's coming, and it feels like
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Speaker 4: it's a narrative we've heard from last year. So in
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Speaker 4: terms of timing, e Vince, we know a lot of
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Speaker 4: people are pricing in that final economic recession by the
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Speaker 4: end of the year. But where are the signs of
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Speaker 4: the consumer pullback.
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Speaker 5: Well, I mean we're naturally not seeing them in I mean,
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Speaker 5: if you look across the board, you look at the
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Speaker 5: housing market, especially in the tri State there, it's off
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Speaker 5: the charts. Where there's no inventory, so pricing it's totally
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Speaker 5: a seller's market. People are paying well above ask and
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Speaker 5: they're continuing to do that simply just to get a home.
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Speaker 5: We're not seeing inventory because of high interest rates. So
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Speaker 5: in a way, you know, I am a major critic
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Speaker 5: of that said, because I think they've totally missed the
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Speaker 5: whole idea of monetary policy. Just raising interest rates without
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Speaker 5: reducing money is not being more than changing the price
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Speaker 5: of money. It's not actually reducing demand, so that money
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Speaker 5: is still out there and the consumers are still spent.
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Speaker 5: But I think we're getting to a point where they're
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Speaker 5: reaching the end of their rope. And until we get
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Speaker 5: to that point, we're not going to see the pullback
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Speaker 5: and spending that you know that people are talking about.
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Speaker 5: You know when that happens. Timing is everything, but I
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Speaker 5: wouldn't dare to try to call it necessarily and say
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Speaker 5: at the end of this year or early next year
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Speaker 5: or whatever. But it does come eventually. It does come.
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Speaker 5: You run out of you just run out of places
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Speaker 5: where you have income to spend.
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Speaker 1: Jen both T tj X and Target called out, as
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Speaker 1: have other other retailers recently, that the rise in shrink.
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Speaker 1: What is shrink and how problematic is it for the retailers.
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Speaker 3: Yeah, so shrink is is really loss of goods either
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Speaker 3: due to cesser damage, and it's really as simple as that.
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Speaker 3: And it's it's an issue that has always been around retail,
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Speaker 3: but has been amplified significantly in the last year or so.
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Speaker 3: And we've actually even heard retailers like Kroger talk about
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Speaker 3: retail shrink and theft of you know, of actual retail
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Speaker 3: gangs coming in and stealing products. It's something that is
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Speaker 3: always there because you know, people you know, pocket things
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Speaker 3: as they're in the stores. But when people are under
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Speaker 3: economic stress, it sort of leads an opening, leads an
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Speaker 3: opening to an increase in theft. And that's what we're
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Speaker 3: seeing across the industry when we.
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Speaker 4: Talk about the theft story, though, Jen, I mean, what,
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Speaker 4: what is what's driving that exactly? Because has that target
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Speaker 4: always kind of had this issue to some extent.
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Speaker 3: Well, all retailers have this issue to some extent. It's
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Speaker 3: it's it's a matter of how well it's being managed.
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Speaker 3: And and when you think about, you know, where the
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Speaker 3: consumer sits, especially consumers who shop in the lower to
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Speaker 3: mid tier stores, they've seen their discretionary income start to
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Speaker 3: be under more pressure, and it lends itself to more
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Speaker 3: of that that type of theft than we see when
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Speaker 3: people have free or spending capabilities. And it is something
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Speaker 3: that is it goes in cycles, and we've seen it
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Speaker 3: in the past with retail when we were in other
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Speaker 3: recessionary type environments, and so it's nothing new, but it
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Speaker 3: is a new issue, and it's remarkable in targets respect
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Speaker 3: and that they're calling out a five hundred million dollars
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Speaker 3: potential impact of profits this year.
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Speaker 1: Yeah, that's that's the number that kind of trumps out
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Speaker 1: at me. Hey, Vince, what are the next data points
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Speaker 1: that you'll be looking for that the market's really focusing
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Speaker 1: on you, abilieity.
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Speaker 5: You know, not a lot this week, unfortunately, for us
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Speaker 5: to really get our hands on where we get the
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Speaker 5: usual jobless claims weekly number Philly FED is probably going
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Speaker 5: to be interesting following what we saw in New York
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Speaker 5: home sales. I don't think anyone's expecting any any major surprises.
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Speaker 5: I think until we get to the f MC minutes
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Speaker 5: on the twenty fourth, there's there's nothing amazingly substantial I
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Speaker 5: think to really shift market sentiment. It's all going to
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Speaker 5: be given taken. When I'm watching markets now, which you know,
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Speaker 5: we're just we're in a bit of a seesaw trend
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Speaker 5: that it simply feels like the day traders are ruling
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Speaker 5: the roost and just just moving things back and forth
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Speaker 5: and just taking taking advantage of enter day trends. But
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Speaker 5: we're not seeing a really good feel I think for
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Speaker 5: a market trend. I think it's that's going to come,
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Speaker 5: hopefully with the statement that follows the f O MC
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Speaker 5: or maybe they'll give us that word that everyone's looking for,
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Speaker 5: which is pause, right.
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Speaker 1: The P word, the pause were okay?
8:32
Speaker 6: All right?
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Speaker 1: Jen Bartash is a senior industry anasal with Bloomberg Intelligence
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Speaker 1: and Vince Cignerella, Bloomberg macro strategist. Thanks you guys for
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Speaker 1: stepping in here talking about these big retailer starting reportant earnings.
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Speaker 1: We've got Walmart tomorrow, so I'm sure we'll be talking
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Speaker 1: to Jen again about that. We had TJ Max and
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Speaker 1: Target reporting today. You know, cautious that that's the word there.
8:54
Speaker 7: You're listening to the team.
8:56
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9:09
Speaker 1: Pretty it seems like we kind of joke about this
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Speaker 1: that every company in every industry, what did they all
9:15
Speaker 1: talk about on their conference? Cause AI? I mean your
9:18
Speaker 1: dog make dog food maker. You're talking AI and how
9:21
Speaker 1: that's going to drive your business. I think it's a
9:23
Speaker 1: scam approaching scam like levels. But how does it imply
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Speaker 1: to investing? Our next guests can help us out there,
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Speaker 1: Hugh Roberts, head of analytics at quant Insight. The name
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Speaker 1: says it all, Hugh, I got to ask you AI.
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Speaker 1: It's all over the place. How does it apply, if
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Speaker 1: at all, to investing. You're the guy to have an answer.
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Speaker 9: I think, yeah, Well, we think it massively does. The
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Speaker 9: key difference to what we do is we don't have
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Speaker 9: a kind of a large language model. It's obviously making
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Speaker 9: all the hype around chat, gbt Bard and all the others,
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Speaker 9: so we've not gone down the natural language processing route. Instead,
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Speaker 9: we used the smart machine and just basically trained it
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Speaker 9: on a range of financial securities single stocks, equity indices, yields,
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Speaker 9: FX crosses and the like, and the macro environment, because
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Speaker 9: the problem with macro more often than not, is not
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Speaker 9: that we're we don't know what the mysterious X factor
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Speaker 9: is it's driving ten new yields or dollar yen or spoos.
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Speaker 9: It's that we don't know what the right pattern and
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Speaker 9: the right jigsaw is. You know, our FX trading off
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Speaker 9: interest rate differentials, are spoos trading off the strength or
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Speaker 9: weakness of the dollars. You know, it's putting the different
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Speaker 9: moving parts of growth, inflation, financial conditions, risk, appetite together
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Speaker 9: in the right order. And that's exactly what AI can
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Speaker 9: help with. So AI can help, but not necessarily the
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Speaker 9: natural language processing the LLM models, more just using to
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Speaker 9: train it on smart data, on understanding the patterns of
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Speaker 9: association between financial markets and the broader macro environment.
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Speaker 4: Does that apply to every asset class though, I mean,
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Speaker 4: or is this just a stock market kind of thing?
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Speaker 9: Well, we train that on everything, but it's a really
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Speaker 9: fair question because obviously you do see discrepancies within that.
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Speaker 9: So sometimes you know, commodities get driven exclusively by a
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Speaker 9: supply squeeze, in which case, you know, you've got to
11:21
Speaker 9: get into the weeds in terms of you know, is
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Speaker 9: it a weather event that's impacting crop production levels, for example,
11:29
Speaker 9: or within the equity space. You know, there are certain
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Speaker 9: sectors and I think even the most bottom up company
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Speaker 9: fundamental guy would acknowledge a macro place. They're typically the
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Speaker 9: interest rates sensitive sectors like finance like housing, et cetera,
11:43
Speaker 9: or even growth versus value thinking about the level that
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Speaker 9: bond yields play in that kind of style allocation. But
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Speaker 9: then we'd be the first to admit, you know, if
11:50
Speaker 9: you're talking about a new biotech stock where it come
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Speaker 9: up with a new prescriptive drug of some kind, and
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Speaker 9: it's about their R and D capabilities, it's about their
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Speaker 9: ability to patent it so they can monetize it properly.
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Speaker 9: But that's always be more radiosyncratic. So there are variances
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Speaker 9: across the entire kind of capital market structure. If you
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Speaker 9: think about it, what financial asset is completely impervious to inflation?
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Speaker 9: The fed financial conditions, risk appetites, these are just truisms
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Speaker 9: in our life.
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Speaker 1: So Hugh, right now, what are some of the data points,
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Speaker 1: data sets that you guys at quant Insights are really
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Speaker 1: focusing on now?
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Speaker 9: Yeah, So what we're lediting is is a little bit
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Speaker 9: of a regime change for US equity markets. I mean,
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Speaker 9: it is a little bit self evident, because obviously the
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Speaker 9: narrative has been out there for some time, but we're
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Speaker 9: seeing that while everyone's talking. Obviously all these amazing stats
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Speaker 9: about Apple being the size of the russel. Two thousand
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Speaker 9: or half dozen stocks explain the entire performance for twenty
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Speaker 9: twenty three, and you can ascribe that to AI, you
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Speaker 9: can ascribe it to a little bit of safety status,
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Speaker 9: and also maybe the moving yields as the bond market
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Speaker 9: starts for discount and easier fed. You've got to be
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Speaker 9: more nuanced than that, we would argue if you're actually
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Speaker 9: trading this stuff. So it's not actually the level of
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Speaker 9: bond yields and that is driving US tech stocks on
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Speaker 9: our models. It's actually a the shape of the yield
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Speaker 9: curve and b bond revolve interstrate volatility that is more important.
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Speaker 9: And what we're finding at the moment is that the
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Speaker 9: move lower. We actually use Swatch involve rather than the
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Speaker 9: move index, but the move index tends to be more
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Speaker 9: well known. The fall in the move index over the
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Speaker 9: last month or so has been a huge tailwind. That's
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Speaker 9: been a positive, and that's raising model value for spoos,
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Speaker 9: NAVVAC XLK.
13:40
Speaker 5: All this stuff.
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Speaker 9: A steeper yield curve is also a big tail wind,
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Speaker 9: and that's helping move model value higher against that given
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Speaker 9: that we finally feels it's most eagerly anticipated recession in
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Speaker 9: a long time, and it feels like everyone's been waiting
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Speaker 9: for it. For the data in the last month or so,
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Speaker 9: it's felt like it is starting to roll over, but
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Speaker 9: at the margin, both in the States and Europe and China,
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Speaker 9: and that's been a headwind to macro warranted serve value
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Speaker 9: for all this stuff. So what we do is obviously
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Speaker 9: balance up the tailwinds and the headwinds. And at the moment,
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Speaker 9: the moves in the bond market are more than offsetting
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Speaker 9: the negative drag from gross the negative drag from inflation expectations.
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Speaker 9: But the trouble is is that markets have moved equity
14:24
Speaker 9: markets have leaved ahead of that. So we've got the nowsack,
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Speaker 9: for example, about five percent rich.
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Speaker 5: To where it should.
14:31
Speaker 9: Be at the moment. So the good moves is macro warranted,
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Speaker 9: macro momentum is moving higher, but the health warning is
14:38
Speaker 9: the market's ahead of itself.
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Speaker 4: Well, it's interesting that we say the market's ahead of
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Speaker 4: itself when it's kind of been stuck range bound for
14:47
Speaker 4: two months now, how much of the kind of carnage
14:50
Speaker 4: of last year is almost a tailwind as well to
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Speaker 4: the stock market this year around, even as we're staring
14:59
Speaker 4: at a recession.
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Speaker 1: Does it? Is it just up from here?
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Speaker 9: Yeah? I think that's really fair comment, at least for
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Speaker 9: justifying price action in January. And it did feel like
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Speaker 9: a lot of last year's losers, the ones that got
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Speaker 9: beaten up the most, did see a reallocation towards them
15:15
Speaker 9: at the beginning of the year. And I think that's
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Speaker 9: a really fair comment, and there is flow evidence to
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Speaker 9: back that up as well. But it has to be
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Speaker 9: more than that when you look at the price action,
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Speaker 9: and I think what started off was a twenty twenty
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Speaker 9: two losers reallocating into twenty twenty three winners morphed into
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Speaker 9: a bit of a bond yeel trade and more in
15:31
Speaker 9: the last whatever it is six to eight weeks, is
15:33
Speaker 9: morphed into a generative AI trade. But our point would be,
15:37
Speaker 9: is it interestingly if we look at the nasdak so
15:40
Speaker 9: we have we compute and our squared steps, that's just
15:43
Speaker 9: goodness of fit how good a job are our macro
15:45
Speaker 9: factors doing of explaining price action from whatever we're looking at.
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Speaker 9: If we looked at the Nasdak from January up until
15:53
Speaker 9: about ten days ago, our our squared was below our
15:56
Speaker 9: threshold for macro regime, So that would speak to the
15:59
Speaker 9: fact in January now that was driving off flow and
16:03
Speaker 9: in February and March it was trading off the generative
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Speaker 9: AI hype. Now it's back above our threshold. We explained
16:09
Speaker 9: seventy percent of price action in the Nasdak and we
16:12
Speaker 9: have a five percent rich So our message to people
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Speaker 9: at the moment is the generative AI hypeer taking us
16:18
Speaker 9: this far. But it's not the only game in town anymore.
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Speaker 9: There's also macro factors at work, and that's the headwind
16:25
Speaker 9: that you're seeing from growth and the reflation dynamic and
16:28
Speaker 9: lower commodity markets. But the tail when they're getting from
16:31
Speaker 9: moves in boon vol and the yield curve, and you've
16:34
Speaker 9: got to try and weigh all those up. And that's
16:36
Speaker 9: what that's where back to the original conversation where AI
16:40
Speaker 9: can help Q.
16:41
Speaker 1: I know you guys are are macro focused. Do you
16:44
Speaker 1: care at all about the micro like do you care
16:46
Speaker 1: the fact that you know we're finishing up earning the
16:48
Speaker 1: season here, and do you even look at that kind
16:51
Speaker 1: of stuff.
16:52
Speaker 9: Well, our clients do. I mean, we don't have any
16:56
Speaker 9: kind of bottom up variable so that we model. And
17:00
Speaker 9: that's simply a commercial division, to be completely honest, it's
17:02
Speaker 9: because that area of the research world is incredibly well covered.
17:06
Speaker 9: If there are so many people looking at company fundamental,
17:08
Speaker 9: there's just no edge there as far as we can tell.
17:10
Speaker 9: But the way our equity clients would use us is
17:14
Speaker 9: they would still do their bottom up analysis. They'd look
17:16
Speaker 9: at the target earnings, the home depot yesterday and they'll
17:20
Speaker 9: do their kind.
17:20
Speaker 5: Of bottom up analysis.
17:22
Speaker 9: But then they'd say, well, we know we're in macro
17:24
Speaker 9: markets as well, so we need to put a macro
17:26
Speaker 9: overlay on top of this as well. And then you
17:28
Speaker 9: get the holistic picture. It's where bottom up meets top down.
17:31
Speaker 9: But we only provide one half of that equation.
17:33
Speaker 5: To be honest, h.
17:34
Speaker 4: You about thirty seconds here in your analysis, where does
17:38
Speaker 4: the currency picture fall of How much of a ripple
17:41
Speaker 4: effect is the dollars well stagnation for now going to
17:46
Speaker 4: have on the rest of the markets?
17:48
Speaker 9: YEA, the most interesting thing on the FX models at
17:51
Speaker 9: the moment is actually that you're a dollar, and factually
17:54
Speaker 9: this speaks to equities as well European assets, both European
17:58
Speaker 9: equities relative to the S and euro dollar. Europe is
18:03
Speaker 9: the highbe to growth play. It is most sensitive to
18:06
Speaker 9: global GDP improving to commodity market rallying, and euro dollar
18:11
Speaker 9: screens is very slightly rich and eased you. The Eurozone
18:15
Speaker 9: ETF screens is very slightly rich relative to spy. So
18:19
Speaker 9: if you think we are about to get the recession
18:21
Speaker 9: we've all been waiting for and global growth is going
18:23
Speaker 9: to turn aggressively lower YEP, then all those trades that
18:26
Speaker 9: have over what Europe might need to be reconsidered.
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Speaker 1: You always good to chat with you a different perspective,
18:33
Speaker 1: refreshing perspective from the macro side of the equation. Hugh Roberts,
18:37
Speaker 1: head of analytics at Quat Insights. They are based in
18:40
Speaker 1: the UK in London.
18:42
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18:55
Speaker 8: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
19:02
Speaker 1: The next guest I really want to talk to because
19:03
Speaker 1: I'm really interested in this fund. Here Savina Risova, global
19:06
Speaker 1: head of Research for Dimensional Fund Advisors. Now I'm a
19:11
Speaker 1: little I'm a little nervous here because she has her
19:13
Speaker 1: MBA and PhD from the University of Chicago, which means
19:17
Speaker 1: they really like numbers. And I was told that there
19:19
Speaker 1: would not be math on this show. But we'll see
19:21
Speaker 1: what we can do here, Savina. I see Dimensional. Why
19:24
Speaker 1: I pull up the stockholders list. I see Dimensional as
19:28
Speaker 1: top top, top shareholder and a number of big companies
19:32
Speaker 1: tell us about Dimensional First, what do you guys do?
19:34
Speaker 1: What's your strategy? Sure?
19:37
Speaker 10: Yeah. They Mentional as combining the best of kind of
19:40
Speaker 10: two words or two ways of investing, the best of indexing,
19:45
Speaker 10: low costs, broad diversification, transparency with the best of her
19:50
Speaker 10: active systematic active investing, which is pursuit of premiums and
19:54
Speaker 10: a daily, flexible implementation process. And we offer kind of
20:01
Speaker 10: that type of approach both in equities and fixed income.
20:04
Speaker 10: One investment philosophy, many investment solutions, and.
20:09
Speaker 11: It sounds like though you favor kind of the indexing overactive.
20:14
Speaker 11: Is that right? Based on your.
20:15
Speaker 10: Note, it's a combination essentially of the benefits of both.
20:20
Speaker 10: Indexing has a lot of nice features with it, as
20:24
Speaker 10: they mentioned, broad diversification and low costs are the first
20:27
Speaker 10: that come to mind, but also it has costs, and
20:31
Speaker 10: I think in the last few years we've seen the
20:33
Speaker 10: pandulum swing a lot away from traditional active to indexing,
20:36
Speaker 10: which journey has been a great trend, but people have
20:39
Speaker 10: also started to perceive indexing as a free lunch out there.
20:43
Speaker 10: It has its own costs. There are regiditis associated with
20:46
Speaker 10: indexing and also lack of pursuit of premiums in general
20:49
Speaker 10: when it comes to playing market index solutions. So we
20:52
Speaker 10: try to basically deliver the benefits of indexing, but also
20:55
Speaker 10: go beyond indexing by focusing on pursuit of premium systematically,
21:00
Speaker 10: day and daily in our investment solutions.
21:04
Speaker 1: So, Sabine, I know you at Dimensional to really take
21:07
Speaker 1: a look at the retirement business, and you've got to
21:10
Speaker 1: paper out entitled A Little Goes a Long Way. What
21:14
Speaker 1: do you mean by that?
21:17
Speaker 10: What do you mean by that is that if people
21:20
Speaker 10: in their retirement accounts, which are, by the way, the
21:24
Speaker 10: largest share of household well according to the twenty twenty
21:28
Speaker 10: US Census. Instead of focusing on a plane market index,
21:33
Speaker 10: Solutions goes for a little bit of a pursuit of
21:37
Speaker 10: premiums with inequities. That is, go for a portfolio that systematically,
21:41
Speaker 10: but in a controlled manner, emphasizes smaller, deeper value, more
21:45
Speaker 10: profitable stocks. Then they can actually improve significantly their outcomes
21:51
Speaker 10: for retirement, namely more asseted retirement, better chance of not
21:56
Speaker 10: running out of money in retirement, and the potential to
22:00
Speaker 10: live larger bequests. That's kind of what the study focuses on.
22:04
Speaker 10: What can you how can you improve your retirement outcomes
22:07
Speaker 10: if you move away from plane market index in your
22:10
Speaker 10: equity allocation for retirement to a portfolio that, in a
22:14
Speaker 10: broadly diversified manner pursues the long term drivers of returns
22:19
Speaker 10: with inequities.
22:20
Speaker 11: So what's the best way for folks listening to try
22:23
Speaker 11: and accomplish that.
22:25
Speaker 5: Yeah.
22:26
Speaker 10: So, usually when you have a research paper, even if
22:29
Speaker 10: it has a compelling message, it's hard to act on
22:32
Speaker 10: it under your word, Yeah, not the case with this paper. Actually,
22:37
Speaker 10: anybody who listens today to the show can take action
22:41
Speaker 10: on that because you can switch from a plane index
22:45
Speaker 10: for equity portfolio to a systematic active solution in your
22:49
Speaker 10: for one K and your ERA, in your other taxable
22:54
Speaker 10: accounts you use for retirement, even in HSA health savings accounts,
22:57
Speaker 10: which are essentially longs, can be used as long term
23:00
Speaker 10: vehicles saving for retirement. So in all of those types
23:05
Speaker 10: of accounts used for saving for retirement, investing for retirement,
23:09
Speaker 10: or you can have options practical real world solutions like
23:12
Speaker 10: the dimensional investment solutions in equities that offer that type
23:17
Speaker 10: of approach focus balance, integrated, focus on size, value and profitability,
23:22
Speaker 10: which can improve retirement outcomes. And the other great kind
23:26
Speaker 10: of message from the paper is the findings of the
23:30
Speaker 10: paper applied not only to someone who is very far
23:32
Speaker 10: away from retirement like age twenty five, let's say, lots
23:36
Speaker 10: of time to save for retirement. They actually can improve
23:39
Speaker 10: retirement outcomes even for people who are about to enter
23:42
Speaker 10: retirement or who are already in retirement. It's not too
23:45
Speaker 10: late to read some of those benefits.
23:48
Speaker 1: All right, Savina, thank you so much. We appreciate it.
23:50
Speaker 1: Savina Reserve, a global head of research and Dimensional Fund Advisors.
23:54
Speaker 8: You're listening to the Team Cancer online program Bloomberg Markets
23:58
Speaker 8: weekdays at ten am Eastern on Bloomberg dot com, the
24:01
Speaker 8: iHeartRadio app and the Bloomberg Business app, or listen on
24:04
Speaker 8: demand wherever you get your podcasts.
24:08
Speaker 1: All right, let's switch gears. Let's talk energy here. You know,
24:12
Speaker 1: we're talking a lot. We just had the CEO of
24:15
Speaker 1: Bentley on Bentley Automotive and they're talking about, you know,
24:18
Speaker 1: transitioning to electric vehicles, and there's obviously huge energy components
24:23
Speaker 1: to all of this. We're welcome to bring in Robert Picconi.
24:27
Speaker 1: He's the CEO and co founder of Energy Vault. Energy
24:30
Speaker 1: Vault is a New York Stock Exchange listed public company
24:33
Speaker 1: and our GV is the ticker to put into your
24:35
Speaker 1: Bloomberg terminal. Rob thanks so much for joining us here.
24:38
Speaker 1: You join us here in our studio. We know you're
24:39
Speaker 1: based out in California, so we appreciate you coming into
24:42
Speaker 1: our studio here in New York. What do you guys do?
24:44
Speaker 1: What Energy volt Just give us a quick, you know,
24:46
Speaker 1: kind of elevator pitch for energy Vault here.
24:48
Speaker 12: Sure, we're focused on energy storage, and energy storage is
24:52
Speaker 12: going to be fundamental for the deployment of renewables to
24:55
Speaker 12: be deployed in more volume for us to wean our
24:57
Speaker 12: way off of fossil fuels. Our storage is broad We
25:01
Speaker 12: use a software platform where we can handle short duration
25:05
Speaker 12: storage and integrate that long duration. We do that with
25:08
Speaker 12: our proprietary gravity solution, and we also is just announced
25:12
Speaker 12: last year to do ultralong duration with green hydrogen. So
25:15
Speaker 12: we broadly play in energy solutions for utilities, independent power
25:20
Speaker 12: players and also large consumers of energy, large industrial players.
25:24
Speaker 11: And the gravity based storage feels like a big deal
25:27
Speaker 11: for you guys, Can you explain what that is?
25:29
Speaker 12: It's a big deal and it's also big as a building. Yes,
25:32
Speaker 12: we innovated with gravity as a solution for energy storage
25:37
Speaker 12: that would be sustainable, low cost, something that could be
25:40
Speaker 12: deployed quickly, and that you could essentially build anywhere you
25:43
Speaker 12: can build a building. So ninety percent of all energy
25:46
Speaker 12: storage today are actually pumped hydro electric dams that use gravity.
25:50
Speaker 12: In that case, it's water that traverses down and turns
25:53
Speaker 12: a motor and discharges electricity, and then that water is
25:56
Speaker 12: pumped back up into the reservoir into the dam. We
26:00
Speaker 12: came up with a way to use that same gravity
26:03
Speaker 12: and build a structure in a building that you could
26:06
Speaker 12: build basically anywhere, not have the reliance on building dams
26:09
Speaker 12: damming up rivers for example, or the large cost, and
26:13
Speaker 12: to do that very economically. We have a very low
26:15
Speaker 12: levelized cost to do that, which is a big issue
26:18
Speaker 12: with energy storage's cost.
26:19
Speaker 1: What are you storing?
26:20
Speaker 12: Actually, we're storing electrons, so we're essentially taking ideally excess
26:25
Speaker 12: wind and solar when it's not needed. So solar typically
26:29
Speaker 12: overproduces during the day because the demand isn't there, and
26:32
Speaker 12: that excess wind and solar actually powers the motors and
26:36
Speaker 12: moves these large composite blocks. We don't use concrete in
26:39
Speaker 12: those blocks. They are twenty five metric tons each, so
26:42
Speaker 12: that powers these blocks to a height, and then at
26:45
Speaker 12: height it's all potential energy. So this goes back to
26:47
Speaker 12: your physics classes and it can sit there and last
26:50
Speaker 12: literally days, weeks, months. However, it's designed to cycle every day,
26:54
Speaker 12: so when the energy is needed by the grid, for example,
26:57
Speaker 12: in the morning when we get up and we're using energy,
27:00
Speaker 12: or in the evening when people come home, we lower
27:02
Speaker 12: those blocks, all automated with software, and that turns the
27:05
Speaker 12: motor and discharges that electricity back to the grid.
27:09
Speaker 11: Wow, you got to be really smart to figure this
27:10
Speaker 11: stuff out. That's amazing. That's pretty cool.
27:13
Speaker 7: All right.
27:13
Speaker 1: I had to ask one question because I know you
27:15
Speaker 1: made an investment. You've got something in rudin China. So
27:20
Speaker 1: you're nearing completion of the world's first commercial long duration
27:22
Speaker 1: gravity energy Storm says, I've been dying to meet somebody
27:26
Speaker 1: who's investing in China. What are you doing investing in China?
27:29
Speaker 12: Yeah, by the way, great question, and it's really fundamental.
27:32
Speaker 12: So first of all, China produces more greenhouse gases than
27:36
Speaker 12: the next seven countries combined, twelve billion tons. The US,
27:40
Speaker 12: by the way, second at about five billion, so number one.
27:44
Speaker 12: With our mission of decarbonization, China was going to be important.
27:46
Speaker 12: It's a very large market that's good for investors unique
27:50
Speaker 12: to disrupt with new technology to introduce there. We had
27:54
Speaker 12: a very good leadership partnership with a company called China
27:57
Speaker 12: Taianying that partnered up with the Book Family Foundation in
28:01
Speaker 12: Texas to support us with a license to go ahead
28:05
Speaker 12: and build that technology in China and start right away.
28:08
Speaker 12: So they broke around last year in March and moved
28:11
Speaker 12: very very quickly, and we signed a large license deal
28:14
Speaker 12: that will have a royalty component so for all the
28:16
Speaker 12: volume that gets built there. So, given the size of
28:19
Speaker 12: the market, given it's going to be the largest energy
28:21
Speaker 12: storage market in the next few years, and given just
28:24
Speaker 12: the need for the world to decarbonize, it became a
28:27
Speaker 12: very strategic point for US.
28:30
Speaker 11: It's strategic, but it's still China. Are you concerned at all?
28:34
Speaker 12: Not the way we structured the deal. So we structured
28:37
Speaker 12: in a way where they invested fifty million dollars in
28:40
Speaker 12: our company in the IPO as well, they prepaid fifty
28:43
Speaker 12: million dollars up front to have the license to deploy it.
28:46
Speaker 12: So we structured something in a way that financially would
28:50
Speaker 12: I think help investors get that coverage upfront. And I
28:53
Speaker 12: really believe with a partnership, they're a publicly company in China,
28:56
Speaker 12: they want to deploy very quickly and protect the technology.
29:00
Speaker 12: It's the investments they made in.
29:01
Speaker 1: So are you licensing your technology to this Chinese partner?
29:04
Speaker 6: Correct?
29:05
Speaker 1: Okay, okay, I understand, okay, So what are you doing
29:08
Speaker 1: here in the States? What are the growth drivers for
29:10
Speaker 1: you here or just rest of world? I would guess
29:12
Speaker 1: I'm not.
29:12
Speaker 6: Sure, We're sure.
29:13
Speaker 12: Well, the US is the largest market, so why don't
29:16
Speaker 12: we start there. We're doing a lot in the US.
29:17
Speaker 12: We had our first year of recognized revenue last year
29:20
Speaker 12: where we did one hundred and forty six million, but
29:22
Speaker 12: we announced one point seven gigawat hour of projects that
29:27
Speaker 12: included short duration lithiumayan projects as well as a large
29:31
Speaker 12: green hydrogen project with Pacific Gas and Electric, which is
29:34
Speaker 12: the largest California utility. So we are addressing the short
29:38
Speaker 12: duration market because that is the market in the United
29:40
Speaker 12: States today and we'll continue to be for the next
29:43
Speaker 12: few years. And in the rest of the world. We're
29:46
Speaker 12: doing things internationally in India and Australia, and we'll be
29:50
Speaker 12: announcing some other things in other parts of the world
29:52
Speaker 12: as well. We announced some recent license deals as well,
29:54
Speaker 12: in Greece and Cyprus and Egypt, for example.
29:57
Speaker 1: So is that your primary business model, licensing your time technology.
30:02
Speaker 12: Yeah, that's one of the business models we use for
30:04
Speaker 12: our gravity system in particular. Why because that's basically a building,
30:07
Speaker 12: So it's a structure you build that's lifting and learn
30:09
Speaker 12: in those weights. So that is a very easy license model.
30:12
Speaker 12: We also build commission transfer will also own projects and
30:16
Speaker 12: own them in under long term tolling agreements or power
30:19
Speaker 12: purchase agreements.
30:20
Speaker 11: Does something like the Inflation Reduction Act in the US
30:23
Speaker 11: make deals more attractive here?
30:25
Speaker 7: Absolutely?
30:26
Speaker 12: In fact, I'm here in New York this week because
30:29
Speaker 12: I met with the World Economic Forum and there's a
30:31
Speaker 12: leaders focused on energy innovation. So I'm one of about
30:35
Speaker 12: thirty CEOs that participate in that, and the IRA it
30:39
Speaker 12: has the world looking at the US. In fact, other
30:42
Speaker 12: projects in other countries very interestingly are getting canceled to
30:46
Speaker 12: come here, for example in green hydrogen. So the IRA
30:49
Speaker 12: for US is a tremendous impetus because it's domestic content.
30:53
Speaker 12: Our gravity is domestic for projects. The benefits are anywhere
30:56
Speaker 12: from thirty to fifty percent, and it's going to be
30:59
Speaker 12: great for jobs, and it's going to be great to
31:01
Speaker 12: make the United States the leader in renewables. So it's
31:04
Speaker 12: having its intended effect.
31:06
Speaker 1: So how would you size up this industry here? I
31:08
Speaker 1: guess is energy storage industry? I'm not sure, but how
31:11
Speaker 1: would you kind of size up this market and kind
31:14
Speaker 1: of where's your place in that market?
31:15
Speaker 12: Sure, it's by twenty thirty and by many accounts, somewhere
31:19
Speaker 12: between three hundred billion to four hundred billion is going
31:22
Speaker 12: to be spent. There's estimates that go up to a
31:25
Speaker 12: trillion when you get out to twenty forty and twenty fifty,
31:27
Speaker 12: and so it's a massive market. It's required for renewables
31:32
Speaker 12: to actually replace what is base load power from fossil fuels.
31:36
Speaker 12: The issue with renewables, of course, is they're intermittent, So
31:39
Speaker 12: if you're going to shut down predictable baseline energy, you
31:43
Speaker 12: need to have storage to make up for that intermittency
31:46
Speaker 12: when you can't predict when the sun shines or when
31:48
Speaker 12: the wind blows. So it's a massive market. Unfortunately, there
31:51
Speaker 12: are not a lot of solutions in the market. You
31:53
Speaker 12: have lithium ion batteries. They're not ideal, but they're good
31:57
Speaker 12: for short duration that's fine. They compete with electric vehicles,
32:00
Speaker 12: so you have massive demand. The components come from only
32:03
Speaker 12: a few countries, hence this IRAAC to try to get
32:06
Speaker 12: us more energy independent. What's happening in Russian and Ukraine,
32:09
Speaker 12: So it's a difficult problem to solve. With electrons, we
32:13
Speaker 12: can make wind and solar today for one to two
32:15
Speaker 12: cents of killawot hour just versus fossil fuels. That five
32:18
Speaker 12: cents fully amortized, already built. The problem is to store
32:22
Speaker 12: those same electrons, which you have to do if you're
32:24
Speaker 12: going to replace fossil fuel. It costs five to ten
32:27
Speaker 12: times that in some cases. So it's a difficult problem
32:30
Speaker 12: to solve. It's a difficult problem to solve sustainably. And
32:33
Speaker 12: I would say as an industry, and this may surprise
32:34
Speaker 12: you to hear me say this, we are behind because
32:38
Speaker 12: things got started late. I think the world, I think
32:40
Speaker 12: has woken up that we do.
32:41
Speaker 6: Have a problem.
32:42
Speaker 12: It needs to be solved. A lot of money now
32:44
Speaker 12: is being invested in a lot of new technologies that
32:46
Speaker 12: can help us, and we're going to be leading away
32:48
Speaker 12: for sure with the big.
32:49
Speaker 1: I'm sorry, would the big energy companies have an incentive
32:52
Speaker 1: to do this? Like you're a small company recently came public.
32:56
Speaker 1: Who are the big players here? If somebody want to
32:58
Speaker 1: play this in addition to your company.
33:00
Speaker 12: Sure, well there are large players that are playing in here.
33:02
Speaker 12: So Tesla is one of them that not only for
33:05
Speaker 12: their cars, but they're using those same litinum batteries to
33:08
Speaker 12: provide utility short duration storage technology. In addition, you have
33:14
Speaker 12: you mentioned oil and gas with the big players, they
33:16
Speaker 12: have to make their own clean energy transition. So for example,
33:20
Speaker 12: as investors, we have Saudi Ramco that invested in the
33:24
Speaker 12: company the largest energy company in the world, PHP, the
33:26
Speaker 12: largest mining company in the world for the transition they
33:29
Speaker 12: need to make and Creating is another one, large non
33:32
Speaker 12: farest metals producer. They made these investments because they're going
33:35
Speaker 12: to need longer duration technology, long duration storage and saw
33:38
Speaker 12: us as an innovator. So it's happening and the largest
33:42
Speaker 12: companies are looking at investments to help them make that transition.
33:46
Speaker 11: And do you anticipate in our kind of final thirty
33:48
Speaker 11: seconds with you, how worried are you about the macro
33:51
Speaker 11: environment impacting that investment plan.
33:54
Speaker 12: You know it's going to continue to be volatile as
33:56
Speaker 12: we see in the stock market. Absolutely, but he continue
34:00
Speaker 12: to see investment and demand coming. In other words, I'm
34:03
Speaker 12: not seeing and he drops in demand. In fact, in
34:06
Speaker 12: our last quarter we announced a forty percent growth in
34:09
Speaker 12: our sales funnel, which already is about twelve billion dollars.
34:12
Speaker 12: So and we announced also about a billion dollars in
34:16
Speaker 12: new project awards just last quarter. So we are not
34:19
Speaker 12: seeing a slowdown in demand from where we sit and
34:22
Speaker 12: the IRA is going to just accelerate that at least
34:26
Speaker 12: for sure for demand and also profitability in the United States.
34:29
Speaker 1: Robert, thanks so much for joining us. Really appreciate you
34:31
Speaker 1: coming in here. Robert Picconi, he's the CEO and co
34:34
Speaker 1: founder of energy Vault again the ticker on the Bloomberg
34:37
Speaker 1: terminal nur GV. Very interesting story. I think I learned
34:41
Speaker 1: a lot there about how this whole stuff works. You
34:43
Speaker 1: got to store It's not just creating the alternative energy,
34:47
Speaker 1: so you got to store it. So I think I
34:48
Speaker 1: got a better understanding of that, and that's what energy
34:51
Speaker 1: Vall is trying to solve for.
34:52
Speaker 7: You're listening to the tape.
34:53
Speaker 8: Catch our live program Bloomberg Markets weekdays at ten am
34:57
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35:01
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35:02
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35:05
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35:11
Speaker 1: All right, let's bring in our next guest. We'll have
35:13
Speaker 1: chatting with Neil Grossman. He's a former CIO a t
35:15
Speaker 1: k NNG Capital Neil million. Ways to go here. I'm
35:20
Speaker 1: just going to start with because we had President Biden
35:22
Speaker 1: speaking a little bit earlier, is now shaking hands getting
35:24
Speaker 1: ready to head over to Japan. But he and his
35:27
Speaker 1: friends in Congress, I got to get a debt deal done.
35:29
Speaker 1: And my question is what are we going to get
35:33
Speaker 1: if they do agree? Is it just to raise the
35:35
Speaker 1: debt limit and kick this can down the road another
35:38
Speaker 1: period of time.
35:39
Speaker 6: You're very, very intelligent. Yeah, I think that's most likely
35:43
Speaker 6: because I don't think the Democrats are going to be
35:46
Speaker 6: willing to go as far as the Republicans want, and
35:51
Speaker 6: you know, so they're going to have to find some
35:52
Speaker 6: way to get this done. I'll tell you, just as
35:55
Speaker 6: an aside, what I find very interesting, you know, you
35:59
Speaker 6: really want to scratch your They put through a one
36:01
Speaker 6: point seven trillion dollar package at the end of last
36:04
Speaker 6: year with a lot of spending. They had to know
36:08
Speaker 6: that they were going to create a problem for themselves
36:11
Speaker 6: if they didn't resolve this Number one. Number two. There's
36:15
Speaker 6: been a lot of interesting discussion if you've been paying
36:17
Speaker 6: attention about constitutional issues, which I'd love to sit down
36:20
Speaker 6: with Lawrence Tribe and discuss. But what I find very
36:23
Speaker 6: interesting is they could have started to do things like
36:27
Speaker 6: cut expenses about three or four months ago to give
36:30
Speaker 6: themselves more running.
36:31
Speaker 11: I mean decades ago, right, decades decades another run DC right, Like,
36:36
Speaker 11: there's not a lot of long term planning necessarily.
36:39
Speaker 6: Well, you know, the entire process. This is an interesting thing,
36:42
Speaker 6: the entire process for how debt and spending and all
36:46
Speaker 6: these programs are done based on the Congressional Budget Office
36:49
Speaker 6: projections are only ten year projections. So what the Congress
36:53
Speaker 6: tends to be very good at is dumping a lot
36:55
Speaker 6: of additional expenses into back years so they don't get measured.
36:59
Speaker 6: In fact, by the way, I wrote a book about
37:02
Speaker 6: this about ten years ago called Generation WTF. I'm very
37:05
Speaker 6: much on the side of young people.
37:07
Speaker 1: And thanks Neil.
37:09
Speaker 6: But the actuarial problems of this country are roughly speaking,
37:13
Speaker 6: two hundred trillion plus. You have to understand the government
37:17
Speaker 6: GDP is about twenty five trillion now, so we've already
37:20
Speaker 6: committed functionally almost eight to ten years of GDP already.
37:23
Speaker 6: The government spends let's say about five or six years
37:26
Speaker 6: trillion dollars a year, so in theory we've spent close
37:29
Speaker 6: to forty years of GDP already. So I mean, the
37:32
Speaker 6: hands are tied significantly. And you know, look, nobody has
37:36
Speaker 6: the willingness to do anything. Even this. McCarthy and Biden,
37:39
Speaker 6: to start with, both said we're not going to touch
37:41
Speaker 6: in titlements. Well that's ninety percent of the problems basically,
37:45
Speaker 6: and it's not what they do, which is just keep
37:47
Speaker 6: pushing into the back years. It's a problem.
37:50
Speaker 7: Now.
37:50
Speaker 6: My guess is, roughly speaking, the actuarial change in liabilities
37:54
Speaker 6: tied to those to the entitlement problems primarily, it's probably
37:58
Speaker 6: four to five trillionion dollars a year. And so whatever
38:02
Speaker 6: you see being measured understates the accumulation of these problems enormously.
38:08
Speaker 1: Yeah, that's just, yeah, that's just Those are discussions at
38:11
Speaker 1: the market. I don't think the market remotely can deal.
38:15
Speaker 6: With Well, they're going to have to at some point
38:16
Speaker 6: social Security the trust fund runs out someplace around twenty
38:21
Speaker 6: thirty three. I mean, that was a two year cut
38:23
Speaker 6: from what they are fired for thirty three ten years.
38:25
Speaker 1: That's scary y.
38:27
Speaker 7: Yes.
38:27
Speaker 6: So, by the way, I've been talking to a lot
38:29
Speaker 6: of young people about getting you may make the problem
38:33
Speaker 6: is the young. So my suggestion is young people should
38:38
Speaker 6: call their congressman and say, listen, you need a second
38:41
Speaker 6: trust fund. Every penny we put in cannot go into
38:44
Speaker 6: that trust fund. That's not our problem. You tell them
38:46
Speaker 6: to pay for it. Let's set up a fund for
38:48
Speaker 6: ourselves and we'll be we'll be accumulating money for our retirements.
38:53
Speaker 6: But you know that leaves the other other fund out
38:56
Speaker 6: of money in a number of years. By the way, Medicare,
38:58
Speaker 6: Medicaid ran out of money in twenty fifteen, so those
39:02
Speaker 6: are now on budget as well. So these are big
39:05
Speaker 6: problems too. Out of every three dollars give or take,
39:07
Speaker 6: that the US government now spends is for entitlements.
39:11
Speaker 11: What is the one thing then that you would want
39:13
Speaker 11: Congress to do specifically to protect my social security?
39:16
Speaker 6: Well, me, I am having to be quite extremely I
39:19
Speaker 6: think they should shut it down right now. And what
39:21
Speaker 6: they should do is that you can't do things. But
39:23
Speaker 6: they ought to go back and say, look, this is
39:25
Speaker 6: the amount of money we have to spend, and let's
39:28
Speaker 6: get this right. Because, to be honest with you, if
39:31
Speaker 6: they work with a cap this way, forget the deficit
39:33
Speaker 6: cap and say they're going to get a lot more.
39:36
Speaker 6: There's so much waste in this system, right, I mean,
39:39
Speaker 6: I think this is roughly estimated one hundred and fifty
39:41
Speaker 6: to two hundred and fifty billion dollars a year of
39:44
Speaker 6: medicare medical fraud that by itself is almost as you know,
39:49
Speaker 6: would provide enormous additional coverage. But you've got to sit
39:52
Speaker 6: there and be willing to say, Look, we cannot simply
39:55
Speaker 6: continue to have I call it ostrich economics and stick
39:58
Speaker 6: our heads in the ground, because all we're doing is
40:00
Speaker 6: providing a staggering problem to the future and that's.
40:04
Speaker 7: Not really fair.
40:05
Speaker 1: All right, back down to earth a little bit. Sure,
40:08
Speaker 1: what else do you think about? What are you doing
40:10
Speaker 1: in the markets? How are you viewing these markets? We just
40:12
Speaker 1: got through the bulk of earnings. We heard some from
40:14
Speaker 1: some retailers today and they're reasonably cautious and the outlook
40:18
Speaker 1: and on the consumer. But what are you looking at?
40:19
Speaker 6: Well, First of all, it's been and we've talked about
40:21
Speaker 6: this for a lot while. I've been doing reasonably well
40:24
Speaker 6: because I've been ranged, trading and trying to take advantage
40:26
Speaker 6: of volatility. I think we also discussed the fact that
40:29
Speaker 6: there was likely to be some upward migration and prices,
40:33
Speaker 6: which we're having right now. So you know, in the
40:36
Speaker 6: shorter run, I mean, this death issue is a concern
40:39
Speaker 6: because I'm very very flat basically beause I don't know
40:42
Speaker 6: how this is going to come out. I guess is
40:45
Speaker 6: they're going to You're gonna You're gonna basically push it
40:48
Speaker 6: to the limit. There'll be some real ugly days, they'll
40:50
Speaker 6: get it done, and you'll be relatively okay. Inflation has
40:54
Speaker 6: been coming down. The interesting thing to me is a
40:56
Speaker 6: little lesson. I would have expected you have a couple
40:59
Speaker 6: of more good mone of relative comps, and so I
41:03
Speaker 6: think that as a concept concept gives you because the
41:06
Speaker 6: market likes lower inflation because it thinks it takes the
41:09
Speaker 6: fed out of the picture. I think the problem is
41:12
Speaker 6: going to be that when we begin to move into
41:13
Speaker 6: the fall, the year on year comps with inflation get
41:16
Speaker 6: very ugly. And so because if you go back I
41:18
Speaker 6: think last year, like five or six months, they were
41:20
Speaker 6: averaging point one a month. We're averaging point three a
41:23
Speaker 6: point four months. So any additional improvement is likely to
41:29
Speaker 6: go away, and then you're going to have issues which
41:31
Speaker 6: I suspect we have not seen the full full impact
41:35
Speaker 6: on the economic side, So you're going to probably continue
41:38
Speaker 6: to see economic slowing. You're going to probably see some
41:40
Speaker 6: upward pressure on unemployment. By the way, anyone thinks you're
41:43
Speaker 6: going to have a significant rise and unemployed by the
41:47
Speaker 6: end of the year, the only way that's going to
41:48
Speaker 6: happen is if we start losing. You know, one hundred
41:51
Speaker 6: thousand jobs a month will not change the unemployment rate.
41:53
Speaker 6: You've got to go way below that to really get
41:56
Speaker 6: a significant rise. So I think you're going to find
41:59
Speaker 6: less progress us on that side, economic slowing, upward pressure
42:04
Speaker 6: on prices, and the FED is going to have its
42:07
Speaker 6: hands tied unless something extreme happens. So that's sort of
42:11
Speaker 6: my basic mindset for how I'm going to be approaching
42:15
Speaker 6: the markets for the next six to eight months unless
42:17
Speaker 6: something changes.
42:18
Speaker 11: So with the year on year comms for inflation like
42:21
Speaker 11: you mentioned, and the tight labor market and strong consumer spending,
42:25
Speaker 11: how do we possibly predict that the Fed is going
42:28
Speaker 11: to have this massive string of rate cuts.
42:31
Speaker 6: I think they're out of their mind. I don't think that.
42:33
Speaker 6: I don't think. First of all, let's be clear about
42:35
Speaker 6: one thing. The Fed's mandate, and we've talked about this
42:39
Speaker 6: is zero. They've self defined it to be two percent,
42:41
Speaker 6: which is fine. They're not going to do anything unless
42:46
Speaker 6: they want to try and change it, and if they
42:48
Speaker 6: change it, watch out for the bond market until you
42:51
Speaker 6: get near two percent, but you have if you have
42:53
Speaker 6: three and three quarter percent unemployment, which is historically low.
42:57
Speaker 6: Even with modest growth. Remember the growth they report real
43:01
Speaker 6: growth is nominal less inflation. Nominal growth right now is
43:06
Speaker 6: still quite healthy, and that's one of the reasons I
43:09
Speaker 6: think we've seen less slowing than people think. It's not
43:12
Speaker 6: like we're growing at two percent nominal with one percent
43:16
Speaker 6: inflation to get to one percent. You're growing at like
43:18
Speaker 6: five and a half six percent with four percent or
43:21
Speaker 6: four and a half percent inflation to get to that level.
43:24
Speaker 6: So I just think the bottom line in the back
43:26
Speaker 6: we may not have to see any more hike. Personally,
43:29
Speaker 6: I would have stopped hiking a little while ago. But
43:31
Speaker 6: I think the FED should be selling assets off their
43:33
Speaker 6: balance sheet, which they're not doing, not just simply letting
43:35
Speaker 6: them run off. I think I call it quantitative dribble basically.
43:39
Speaker 6: But the bottom line is that until something extreme happens
43:45
Speaker 6: that will force their hand. As long as the economic
43:48
Speaker 6: data is reasonable enough and in prices are still high,
43:52
Speaker 6: you're not going to see them cut rates at least
43:55
Speaker 6: that's my perspective.
43:57
Speaker 1: Interesting, all right, Neil, thanks so much for joining us.
43:59
Speaker 1: Neil Grossman, co founder and former CIO of tk NNG Capital.
44:03
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44:06
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44:10
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44:12
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44:13
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44:22
Speaker 1: I want to get right to our next guest in
44:24
Speaker 1: our c suite conversation today, Anna Bryson. She's a chief
44:27
Speaker 1: financial officer for the company's Doximity New York Stock Exchange
44:31
Speaker 1: symbol DOSDCS. It is in New York Stock Exchange listed
44:36
Speaker 1: stock and thanks so much for joining us here. Let's
44:39
Speaker 1: start off just real quick. Give me the twenty or
44:41
Speaker 1: thirty second pitch on what you guys do at Doximity.
44:44
Speaker 1: Then we'll get into your earnings and kind of the outlook.
44:48
Speaker 13: Sure, well, thanks so much for having me. You know,
44:50
Speaker 13: at dot Simity, we are building the leading digital platform
44:53
Speaker 13: for US medical professionals, so we serve over two million
44:57
Speaker 13: members including over eighty percent of USA positions across all
45:01
Speaker 13: specialties and practice areas. So what we're building here is
45:05
Speaker 13: really the physician Cloud. We provide our members with digital
45:08
Speaker 13: tools that are built for medicine, which is enabling them
45:11
Speaker 13: to collaborate with colleagues. They can stay up to date
45:15
Speaker 13: with the latest medical news and research, manage their careers,
45:18
Speaker 13: and conduct virtual patient visits. So we are really focused
45:22
Speaker 13: on making physicians more productive to provide better care for
45:26
Speaker 13: their patients.
45:28
Speaker 11: All right, So just to get it out of the way,
45:30
Speaker 11: a tough morning, dropping as much as eleven percent in
45:32
Speaker 11: pre market trading. Analysts are looking for a lot of
45:37
Speaker 11: growth in the second half of the year after some
45:39
Speaker 11: product delays. What's the plan to turn those delays into progress?
45:45
Speaker 13: Sure, So we're really proud of the new products that
45:48
Speaker 13: we've launched for our customers. We think they will be
45:51
Speaker 13: critical to our success over time and contribute to our
45:55
Speaker 13: top line growth. We are in a regulated industry, so
45:58
Speaker 13: we are facing a few delays and getting the new
46:00
Speaker 13: products live. But if you look at our quarterly revenue curve,
46:03
Speaker 13: the cadence of our quarterly revenue curve that we're guiding
46:06
Speaker 13: to for this year actually looks very similar to last year,
46:09
Speaker 13: so it really isn't that different versus what we've seen
46:11
Speaker 13: in the past. And we're really proud of the fact
46:14
Speaker 13: that we're guiding to another year as a rule of
46:17
Speaker 13: sixty plus company with twenty percent top line growth and
46:20
Speaker 13: forty four percent adjustedy bits don margins, which is something
46:24
Speaker 13: top macro environment. I think we're really proud of being
46:27
Speaker 13: able to maintain our long term target of a rule
46:30
Speaker 13: of sixty plus company.
46:32
Speaker 1: I'm a big fan of subscription revenue businesses, and I
46:35
Speaker 1: see that's a big, big part of your business. Talk
46:38
Speaker 1: about kind of what drives your revenue, what are the
46:40
Speaker 1: key metrics that I need to get right and looking
46:42
Speaker 1: at your revenue sure, I.
46:45
Speaker 13: Think one of the key pieces there is our net
46:47
Speaker 13: revenue retention rate. We've been able to post very high
46:51
Speaker 13: net revenue retention over the last several years. So this
46:54
Speaker 13: last quarter we reported one hundred and seventeen percent net
46:57
Speaker 13: revenue retention rate, and that was even hire amongst our
47:01
Speaker 13: top twenty customers. So our top twenty customers had a
47:04
Speaker 13: net revenue retention rate of one hundred and twenty four percent,
47:07
Speaker 13: which implies that we're actually able to scale the quickest
47:10
Speaker 13: with our largest customers, which we think is a really
47:13
Speaker 13: good indication of what's to COG over the next five
47:16
Speaker 13: to ten years as we continue to get more and
47:19
Speaker 13: more large customers.
47:20
Speaker 11: What are some of the biggest headwinds that you're concerned
47:23
Speaker 11: about in that same time period, the next five to
47:26
Speaker 11: ten years, and how do you plan to kind of
47:28
Speaker 11: hedge against them.
47:30
Speaker 13: Sure, I think from our perspective, while we may remain
47:34
Speaker 13: focused on building out tools for our physicians, that is
47:38
Speaker 13: our key focus area, we're less concerned about headwinds. I
47:43
Speaker 13: think you know we've achieved a record number of qaus
47:46
Speaker 13: across our entire platform this last quarter. I think if
47:49
Speaker 13: you had asked me this question maybe a year ago,
47:52
Speaker 13: as we were coming out of the pandemic, the concern
47:54
Speaker 13: would have been can we maintain the engagement levels on
47:57
Speaker 13: our platform that we saw during the pandemic. And today
48:00
Speaker 13: we're not only seeing that we're able to maintain the
48:03
Speaker 13: engagement levels, we're actually seeing higher engagement than we saw
48:06
Speaker 13: during the pandemic, which is something that we're incredibly proud
48:10
Speaker 13: of and I think just speaks volumes to our ability
48:13
Speaker 13: to continue to make our platform very sticky and we're
48:17
Speaker 13: continuing to build new tools, Like we're really excited about
48:19
Speaker 13: the docs GPT tools we're building for our physicians to
48:23
Speaker 13: help them. You know, we like to call it cut
48:26
Speaker 13: the scut, so get rid of a lot of that
48:28
Speaker 13: day to day work that really takes them away from patients.
48:32
Speaker 13: So yeah, I would say our engagement is a really
48:36
Speaker 13: strong indicator of what's to come.
48:38
Speaker 1: And telehealth that is something that not a lot of
48:42
Speaker 1: people were adept at before the pandemic. But boy, that
48:45
Speaker 1: that change. I mean, I'm not even going to a
48:48
Speaker 1: doctor's office like unless a limb is hanging off, you know.
48:50
Speaker 1: I mean, so and you talk to us about telehealth,
48:53
Speaker 1: how you guys incorporate that into your system.
48:57
Speaker 13: Yeah, So we have a telehealth tool that is both
49:00
Speaker 13: voice and video. We've built it by physicians for physicians,
49:04
Speaker 13: meaning it has a lot of unique features that really
49:08
Speaker 13: help the physician communicate with the patient in a more
49:11
Speaker 13: clinical way. And our telehealth tools alone were used by
49:15
Speaker 13: our record three hundred and eighty thousand unique providers last quarter.
49:19
Speaker 13: So to put that in perspectives, there's just over a
49:21
Speaker 13: million doctors in the United States, So we have very
49:25
Speaker 13: high engagement on our telehealth platform, and we continue to
49:28
Speaker 13: build out more than just telehealth, other workflow tools that
49:32
Speaker 13: our doctors are using daily to be more efficient in
49:35
Speaker 13: the office.
49:37
Speaker 11: You guys have two of the big buzzwords that everyone
49:40
Speaker 11: loves in your description here, cloud and AI. Talk to
49:43
Speaker 11: me about how you're gonna become the go to when
49:47
Speaker 11: it comes to the healthcare provider that really is nailing
49:51
Speaker 11: the AI space.
49:53
Speaker 13: Yeah, you know, we're learning a lot about how generative
49:57
Speaker 13: AI can serve doctors. So the one thing we've arted
50:00
Speaker 13: out with here is docs GPT. I think you can
50:03
Speaker 13: think of it as a chat GPT integration with a
50:05
Speaker 13: healthcare twist. So we've developed a library of healthcare specific
50:09
Speaker 13: prompts and we've trained the AI on common healthcare specific documents,
50:14
Speaker 13: so physicians can use it to appeal an insurance denial
50:17
Speaker 13: for a patient with a chronic condition, for example. And
50:21
Speaker 13: that's an area that we're continuing to focus in on
50:24
Speaker 13: and or we're you know, we're really encouraged by the
50:27
Speaker 13: early adoption and I think at the end of the day,
50:31
Speaker 13: you know, as we think about a generative AI is
50:34
Speaker 13: very promising, but you know, it's not without errors, and
50:37
Speaker 13: it should be approached judiciously. So we're enabling the position
50:41
Speaker 13: to test and use this technology and provide the appropriate
50:45
Speaker 13: feedback for us to help ensure the best best applications
50:48
Speaker 13: in healthcare context.
50:50
Speaker 1: And in your subscription model, who pays the subscription? Is
50:53
Speaker 1: it the doctor individually is at the hospital? How does
50:57
Speaker 1: that work?
50:58
Speaker 10: Yeah?
50:58
Speaker 13: Sure, good question. We are free for physicians, that is
51:01
Speaker 13: very important for us. We are all free for physicians,
51:04
Speaker 13: but we are monetized by health systems and pharmaceutical manufacturers.
51:09
Speaker 13: So those are two key customers where pharmaceutical manufacturers can
51:13
Speaker 13: get information to physicians about clinical trials for example, and
51:17
Speaker 13: health systems can get information to physicians about, you know,
51:21
Speaker 13: a new innovative treatment that they might have.
51:24
Speaker 1: So thirty seconds, how's your recession model?
51:27
Speaker 7: Look?
51:27
Speaker 1: How susceptible do you guys think? Are you to a
51:29
Speaker 1: slow economy?
51:32
Speaker 2: Yeah?
51:32
Speaker 13: So, pharma is a very recession resilient industry. And so
51:38
Speaker 13: while you know, if we look at the pharma ETF,
51:41
Speaker 13: I think it's only down about five percent this year.
51:44
Speaker 13: It's an industry that's proven to be very recession resilient.
51:49
Speaker 13: Healthcare in general is recession resilient because the need for
51:52
Speaker 13: life saving treatments doesn't change just because we're in a
51:54
Speaker 13: tough economic time, so we think we have a strong
51:57
Speaker 13: ability to weather a recession. I mean you and see
52:00
Speaker 13: that as we're continuing to post north of twenty percent
52:04
Speaker 13: revenue groups and north of forty percent margins.
52:06
Speaker 1: All right, and great stuff. Thank you very much for
52:08
Speaker 1: taking the time and chatting with us. Anna Bryson, CFO
52:12
Speaker 1: of Proximity DCS is the ticker.
52:16
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
52:19
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52:23
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Speaker 2: at Matt Miller nineteen seventy three.
52:29
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52:32
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52:35
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