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The Fed, Insurance, VR, and Goldman (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
Speaker 1: my co host Matt Miller. Every business day, we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. I want to talk soccer,
0:22
Speaker 1: but before we can talk soccer, we got to talk
0:24
Speaker 1: about interest rates with Ira Jersey, chief US interest rate strategist. Ira.
0:29
Speaker 1: I mean, I was under the impression that twenty five
0:32
Speaker 1: basis points the next meeting, maybe twenty five after that,
0:36
Speaker 1: and then let's pause, see how things are going. But
0:39
Speaker 1: now people are telling me I need to folk pencil
0:42
Speaker 1: a third twenty five basis point rate increase. What's going
0:47
Speaker 1: on with all you fed people? Yeah? Well, obviously over
0:50
Speaker 1: the last month you've seen some pretty poor or higher
0:54
Speaker 1: than expected inflation data, right, both CPI and the pc
0:58
Speaker 1: to flatter and then even just the small warning and
1:00
Speaker 1: the reason why rates are selling off today has been
1:03
Speaker 1: higher than expected inflation in France and Spain. So with such,
1:08
Speaker 1: you know, with inflation still being the worry and the
1:12
Speaker 1: fear of central bankers. You continue to see whenever we
1:15
Speaker 1: get these surprises surprisingly high inflation prints, you're going to
1:19
Speaker 1: bind up pricing in more and more interest rate hikes.
1:22
Speaker 1: So yeah, so the market's now pricing in for a
1:25
Speaker 1: five and a half percent terminal rate for the Fed
1:29
Speaker 1: Fund rate, and I think that and no cut and
1:32
Speaker 1: no cuts this year, No no cuts this year. Well,
1:35
Speaker 1: I see them coming down to a terminal rate of
1:37
Speaker 1: like five thirty something, which is still between five twenty
1:40
Speaker 1: five and five fifty. Yeah, so you're still talking about
1:42
Speaker 1: you're still talking about maybe a half is of fifty bases,
1:45
Speaker 1: a fifty percent chance of a single cut by the
1:47
Speaker 1: end of the year. So not a full cut though,
1:49
Speaker 1: which is to Matt to your point, is what we
1:52
Speaker 1: were pricing, um, and because we're pricing three cuts at
1:55
Speaker 1: one point, Yeah, we were pricing We're pricing pretty aggressive cuts,
2:00
Speaker 1: people thinking that we were going to have a significant slowdown.
2:02
Speaker 1: And that's one of the reasons why the market shifted
2:04
Speaker 1: so much, because we were kind of expecting the cumulative,
2:08
Speaker 1: you know, rate hikes that we've had, and some of
2:11
Speaker 1: the data that we've seen certainly suggests that the economy
2:14
Speaker 1: is slowing, but the economy is just not slowing fast
2:16
Speaker 1: enough to bring inflation lower. And the interesting piece out
2:20
Speaker 1: of the most recent data, UM is services we expected
2:24
Speaker 1: to continue to grow. You know, wages are pretty strong.
2:26
Speaker 1: We've talked about that on this show before. But but
2:29
Speaker 1: importantly in a lot of the data is that goods
2:32
Speaker 1: prices didn't continue to fall as most of us expected
2:35
Speaker 1: that that to occur, and and mitigating the increases and services.
2:40
Speaker 1: So since goods price is basically stabilized at near current levels, um,
2:45
Speaker 1: you know, that's that's really given some people some pauses
2:48
Speaker 1: to exactly what the future ratepath will be ultimately for
2:51
Speaker 1: for the FED and then therefore for the rest of
2:53
Speaker 1: the market as well. And that's one reason why we're
2:56
Speaker 1: you know, testing four percent on the ten year for example,
3:00
Speaker 1: and yeah, you know, I think you get one or
3:02
Speaker 1: two more you know, better than expected data prints, and
3:05
Speaker 1: we can wind up breaking four percent again and maybe
3:07
Speaker 1: testing for in a quarter, which is the next really
3:10
Speaker 1: important technical level. It's actually four point two four percent
3:13
Speaker 1: if you really want to get pedantic. So I've made
3:16
Speaker 1: a career out of ignoring people like you and Lisa
3:19
Speaker 1: Bramwood to talk about yield curves and all that kind
3:21
Speaker 1: of stuff. But boys, I look at the two year tenure.
3:24
Speaker 1: It's negative, it's inverted eighty five basis points. That's the thing, right,
3:29
Speaker 1: Should I pay attention to that? Yeah? Well, so the
3:32
Speaker 1: market is still thinking that we're going to have high
3:34
Speaker 1: rates now and then lower rates later, and that's I
3:38
Speaker 1: think that that's a reasonable assumption. I think the question
3:41
Speaker 1: becomes and this is where you know, people who try
3:44
Speaker 1: to use these indicators and use the market for determining,
3:48
Speaker 1: you know, when the market things the recession is going
3:50
Speaker 1: to be ends up. That's when these types of indicators
3:54
Speaker 1: end up failing. Because the reason why where where we
3:56
Speaker 1: are today is not necessarily because we think there's going
3:58
Speaker 1: to be a recession. The marketing it's going to be
4:00
Speaker 1: a recession this year, but that maybe there's going to
4:02
Speaker 1: be a recession in twenty twenty five. And the Fed
4:04
Speaker 1: cuts into states zero again, right, that still gets you
4:07
Speaker 1: to a ten year that's well below where the two
4:09
Speaker 1: year yield is today. The two year yields right at
4:12
Speaker 1: fair value, by the way, based on the Fed hiking
4:15
Speaker 1: to five and a half percent and then staying there
4:18
Speaker 1: for the rest of this year. So the two year
4:21
Speaker 1: is probably right. The question is is the ten year
4:23
Speaker 1: right or are we going to see inflation be much
4:26
Speaker 1: more persistent than we have And that means that you
4:28
Speaker 1: can wind up with what we call a bear steepener,
4:32
Speaker 1: where you can wind up with ten year yields going
4:34
Speaker 1: up in two year yields not doing very much at all. Hey,
4:36
Speaker 1: we focus so much on the US because you know,
4:39
Speaker 1: it's the greatest country in the world and the only
4:42
Speaker 1: place that's important. But nice Over in Europe, you had
4:45
Speaker 1: French and Spanish inflation that was stronger than expected, a
4:51
Speaker 1: record in France for the Euro Area, and we're now
4:55
Speaker 1: expecting or the markets are now pricing in four percent
4:58
Speaker 1: for the ecb which is I mean a lot. That's aggressive, right, Um,
5:05
Speaker 1: we're looking at the highest level on buns in what
5:08
Speaker 1: fifteen years? What's going on over there? And is that
5:13
Speaker 1: part of what's driving the trade here? Yeah, it definitely is.
5:17
Speaker 1: And today in particular, so you know you've seen you've
5:21
Speaker 1: seen actually the European bond market leading the US bond
5:25
Speaker 1: market by by about five minutes during the course of
5:29
Speaker 1: the day today. Um, and the you know, there is
5:33
Speaker 1: a big worry because remember, unlike the US the European
5:37
Speaker 1: Central Bank only has a single mandate and that's to
5:39
Speaker 1: keep inflation under controls for stable prices. They don't have
5:42
Speaker 1: the the same you know, full employment mandate that the
5:47
Speaker 1: US and five other central banks have. But so because
5:50
Speaker 1: they're so fixated on inflation, when you get higher than
5:53
Speaker 1: expected inflation prints, that just means that it's likely that
5:57
Speaker 1: the ECB is going to be somewhat more hawkish. They
5:59
Speaker 1: were very austious early on in this hiking cycle, but
6:03
Speaker 1: now that they've gotten going. Hugh Worthington, who's my colleague
6:07
Speaker 1: in London, you know, he expects them to hike twenty
6:11
Speaker 1: fifty bases points at the next meeting and then probably
6:14
Speaker 1: go a little bit more after. So so you're right,
6:16
Speaker 1: like Europe is worried about inflation. Obviously, some of it
6:20
Speaker 1: is not related to the economy, right. All the stuff
6:23
Speaker 1: going on with the Ukraine and with guests and energy
6:25
Speaker 1: prices is a separate issue from the um you know,
6:30
Speaker 1: from the underlying economy. But you know, central bankers only
6:34
Speaker 1: have a single tool to try and fight inflation, and
6:36
Speaker 1: that's doing what they're doing, and that's increasing interestry sure,
6:39
Speaker 1: and that they have to fight inflation, as you point out,
6:42
Speaker 1: without worrying about unemployment, A because it's not in their
6:45
Speaker 1: mandate and be because unemployment just doesn't suck as much
6:48
Speaker 1: in Europe as it does here. Socialism, right, you have
6:51
Speaker 1: that good stuff, all right, Eira um Manchester United. Presumably
6:54
Speaker 1: they're selling a piece of the company. So of course
6:56
Speaker 1: my advisors and I we are kicking at tires. I'll
6:58
Speaker 1: talk to you about that next time time. Get your input,
7:01
Speaker 1: Ira Jersey. He's a chief US interest rate strategist for
7:04
Speaker 1: a bloomber cantell just giving us his thoughts on the FED.
7:08
Speaker 1: We've got a couple maybe three rate increases coming up
7:12
Speaker 1: in twenty twenty three. After that, who knows. We'll keep
7:16
Speaker 1: in touch with Ira Jersey. He's got the skinny Pat Gallagher,
7:22
Speaker 1: CEO of Gallagher Insurance, so I'm guessing that's like his company.
7:26
Speaker 1: This is in York Stock Exchange list of company A
7:29
Speaker 1: JG is the ticker I pumping up on my Bloomberg terminal.
7:33
Speaker 1: I've got a market cap of forty billion dollars. Pat,
7:36
Speaker 1: how come I don't know anything about your company and
7:39
Speaker 1: you guys are so big. Tell me about your company
7:42
Speaker 1: and where you guys fit in the insurance landscape. Well, okays,
7:48
Speaker 1: first of all, thanks for the time today, but it
7:50
Speaker 1: is it's unfortunately one sense that we're kind of one
7:53
Speaker 1: of the world's best cap secrets. But they're very proud
7:56
Speaker 1: of both our heritage and where we are today. We
8:00
Speaker 1: started off as a small broker in Chicago. My grandfather
8:03
Speaker 1: started the business. Came public in eighty six. Uh finished
8:06
Speaker 1: date year, I'm sorry, came Bubalan eighty four. Finished that
8:09
Speaker 1: year about a seventy nine million dollar market chap. And
8:12
Speaker 1: it's been a really wonderful journey. Now we're one of
8:16
Speaker 1: the largest insurance brokerage and riskmans with claim spaying organizations
8:20
Speaker 1: in the world, operations over one hundred countries and as
8:24
Speaker 1: you say, about a forty billion dollar market cap. Well,
8:27
Speaker 1: and the stock chart, Pat is just unreal in how impressive.
8:31
Speaker 1: When have we been met? I always um, you know,
8:34
Speaker 1: I'll gauge companies by pulling up the comp screen on
8:37
Speaker 1: the Bloomberg, which takes a five year snapshot of your
8:42
Speaker 1: company versus competitors versus the index, and you're just stopping
8:47
Speaker 1: all over everything, Paul, pull up the comp I'm sending
8:51
Speaker 1: I'm sending a message to my insurance and also Bloomberg Intelligencing.
8:55
Speaker 1: How come I don't know anything about this? Yeah, so
8:58
Speaker 1: what is driving your share price up into the right look?
9:05
Speaker 1: I think that you know, it's a cliche to talk
9:07
Speaker 1: about culture, but that is what I'm going to do.
9:10
Speaker 1: We've been very lucky that a large part of our
9:13
Speaker 1: organizational growth over the last forty years has been through acquisition.
9:17
Speaker 1: We look for people to do a really good job
9:19
Speaker 1: of taking care clients, and we bring them in and
9:22
Speaker 1: build and hopefully build all kinds of capabilities around them
9:25
Speaker 1: that allow them to continue to expand their business. I
9:28
Speaker 1: don't want to make this sound like a roll up.
9:30
Speaker 1: It's a real corporation, but made up of a lot
9:32
Speaker 1: of entrepreneurs I'm really really proud of. If you take
9:36
Speaker 1: a look at that chart, I forget what you said
9:37
Speaker 1: in terms of how far it is back there. You
9:39
Speaker 1: don't got our ten year TSR it's about six hundred percent.
9:44
Speaker 1: You look at at our five year TSR, it's over
9:46
Speaker 1: two hundred and twenty percent. So I don't like TSR
9:50
Speaker 1: as a measure of success on a short term, three year,
9:52
Speaker 1: one year I have argument with Street on that, but
9:55
Speaker 1: I think if you look five ten, fifteen, twenty five years.
9:59
Speaker 1: T I was a really good at nicator of whether
10:01
Speaker 1: or not you're delivering for the shareholders. You need to
10:03
Speaker 1: see the chart. Yeah, you've basically done that. We've basically
10:06
Speaker 1: done that through the whole way. You can click on
10:09
Speaker 1: if you pull the TOMP screen, you can click on
10:10
Speaker 1: a ten year as well. And it's I mean to me,
10:13
Speaker 1: it's it's just the outperformance that's so impressive, because the
10:16
Speaker 1: whole industry is done pretty well over the last ten years,
10:20
Speaker 1: doubled and tripled. But you've quadrupled, Quinn tupled, sep sep,
10:26
Speaker 1: I don't know how say it. Yeah, you're up more
10:29
Speaker 1: than six six times UM, so that that's fascinating. Let
10:34
Speaker 1: me ask you this then, Pat, what is You've been
10:38
Speaker 1: on the board of directors since nineteen eighty six, that
10:41
Speaker 1: was back when Paul was still doing KEG stands at
10:45
Speaker 1: a duke. Yeah, but is born? What what does the
10:52
Speaker 1: rising rate environment look like to you? And how does
10:55
Speaker 1: it affect your business after ten years of basically zero um?
11:00
Speaker 1: What does it mean to you? This new way of
11:03
Speaker 1: life for most of us, but you've been through it
11:06
Speaker 1: and back. Let me let me talk about that because
11:09
Speaker 1: I think that's a really good point for your listeners
11:11
Speaker 1: as everybody frets about inflation and you take a look
11:14
Speaker 1: at what's going on in the marketplace, and of course
11:16
Speaker 1: the stocks are down. The last year is a terrible year.
11:19
Speaker 1: One of the reasons we've outperformed and the industry's outperformed
11:22
Speaker 1: is that inflation really is a positive for Gallanthy. Now,
11:26
Speaker 1: that doesn't mean that if we have a recession that's
11:29
Speaker 1: a positive. And I could talk about that in the
11:31
Speaker 1: middle minute. Because our commercial middle market clients are not
11:34
Speaker 1: in recession, we can touch on that. But how can
11:36
Speaker 1: inflation be positive? Remember, we get paid not on the
11:42
Speaker 1: market value of your home, but the replacement cost of
11:46
Speaker 1: your home or your building. And as inflation, as inflation
11:49
Speaker 1: causes wages in costive construction to go up, insurance companies
11:54
Speaker 1: rightfully demand more premium for the increased exposure we win
11:59
Speaker 1: in that environment. Secondly, we collect your money and we
12:02
Speaker 1: are allowed by agreement with you and our insurance carriers
12:05
Speaker 1: to hold that money in most for sixty days. So
12:09
Speaker 1: for ten years we've had to do the growth that
12:12
Speaker 1: we've done with no fiduciary income on the investial asset,
12:16
Speaker 1: which is basically our premium we've collected to our clients.
12:21
Speaker 1: That's a substantial lift in a rate environment like we
12:25
Speaker 1: had today. So if you go back and you look
12:27
Speaker 1: at the Sevanghata invented this growth in a zero rate environment,
12:31
Speaker 1: a zero inflation environment, who's the one winner in the
12:34
Speaker 1: market when the inflation comes along. It's not the insurance companies.
12:38
Speaker 1: And make no mistake, we're not an insurance company. We
12:41
Speaker 1: are a broker. So we help our clients manage their
12:46
Speaker 1: risk and we use the carriers as our partners do that.
12:50
Speaker 1: They take the risk. So if inflation crimps their loss reserves,
12:55
Speaker 1: that's their problem, not mine. But as premiums go up,
12:58
Speaker 1: I benefit from any cruise commission. Hey, Pat, one of
13:01
Speaker 1: the reasons we like to get C suite executives on
13:05
Speaker 1: the show, it's just to really talked about how their
13:07
Speaker 1: business has evolved. And you know, particularly over the last
13:10
Speaker 1: three years with the pandemic. And I know you're based
13:13
Speaker 1: in the Chicago area, right in the heart of the
13:17
Speaker 1: United States, and you know, as as a founder of
13:19
Speaker 1: this company, how has your company, how have your employees change?
13:23
Speaker 1: How is your kind of workforce, your office life, how's
13:27
Speaker 1: that all changed? Well, first and foremost, I think, you know,
13:30
Speaker 1: look when you look at our company. I know, again
13:32
Speaker 1: a cliche that our assets got up and done real
13:35
Speaker 1: it every day, but it's very very true. I'm really
13:38
Speaker 1: really pleased. We just completed our global forty three thousand
13:42
Speaker 1: employee survey and the culture is incredibly strong, which I'm
13:47
Speaker 1: pleased with, especially with so much so many people working
13:50
Speaker 1: from home, so we've gone to kind of a high
13:53
Speaker 1: bred model. There's a lot of people in our offices
13:57
Speaker 1: three four days a week, and there are people working
13:59
Speaker 1: from home, and there are some that will work from
14:01
Speaker 1: home continually. So that certainly has changed that. We've benefited
14:06
Speaker 1: from the ability to utilize utilize it obviously, but the
14:11
Speaker 1: business itself has changed. And the fact that all the
14:15
Speaker 1: way down to your smaller accounts, people are demanding expertise,
14:19
Speaker 1: and that's why you see so much growth. To you,
14:21
Speaker 1: it's no longer just your local agent is your buddy.
14:25
Speaker 1: I play golf with them, thanks very much to take
14:27
Speaker 1: care of my construction company. That's really changing fast as
14:31
Speaker 1: millennials take over. I don't really care that you and
14:35
Speaker 1: my dad played golf every weekend. The fact is I
14:38
Speaker 1: need somebody to help me handle risk management, and I
14:40
Speaker 1: need to know that there's breadth of understanding of what
14:43
Speaker 1: I do, and that's strength and capability by industry, so
14:47
Speaker 1: I refer women's voticals or niches. Has really changed. Then
14:51
Speaker 1: of course you have digitalization and everybody wants two things.
14:55
Speaker 1: They want data and analytics want to know what do
14:59
Speaker 1: people like me? What kind of claims have you really seen?
15:03
Speaker 1: And again there's thirty nine thousand agents and brokers in America,
15:08
Speaker 1: the hundredth largest. Last you did thirty million in revenue.
15:12
Speaker 1: We posted eight plus billions. So you are getting to
15:17
Speaker 1: this point where there's more and more every day A
15:19
Speaker 1: David and blythe kind of thing, yep, And so that's
15:23
Speaker 1: that's it's a big part of what's so so much
15:26
Speaker 1: change going on. That emphasizing culture continues to be the
15:31
Speaker 1: most critical thing our management team goes every day. Pat
15:34
Speaker 1: just about thirty seconds left. What do you think about
15:38
Speaker 1: the possibility of a recession? What's your view on the
15:41
Speaker 1: economy going forward? Thirty seconds? Very interesting? Read all the
15:46
Speaker 1: same stuff you've read, see the Bloomberg reports as well.
15:49
Speaker 1: Understand high tech laying off people, our middle market clients.
15:52
Speaker 1: We measure this every single day, by endorsements and by
15:56
Speaker 1: and by audits, which means that you pay more if
15:58
Speaker 1: you pay me if your sales are up are stronger
16:02
Speaker 1: this year than last year. What's the takeaway on that
16:05
Speaker 1: our middle market American and global companies are doing extremely well,
16:11
Speaker 1: which is why you see the pressure job growth. Fascinating,
16:16
Speaker 1: Pat great Stuff really appreciated. This company located in Rolling Meadows,
16:24
Speaker 1: Rolling chat Chicago, right near Evanston. You know, it's pretty
16:28
Speaker 1: close to the lake. All are just north of Chicago.
16:31
Speaker 1: There's great great towns, commuter towns north of Chicago, so
16:35
Speaker 1: that's kind of where they are. Rolling Meadows, Michigan, Great Stuff.
16:37
Speaker 1: Pat Gallagher, Illinois, Uh yes, thank you very much. He
16:42
Speaker 1: started company. He started the company much better than Michigan.
16:45
Speaker 1: He started the company in nineteen seventy two as an intern.
16:48
Speaker 1: Great Stuff. Pat Gallagher CEO of Gallagher Insurance, Arthur Gallagher
16:51
Speaker 1: and Company and the New York SAKA Chains symbol a
16:54
Speaker 1: JG forty billion dollars market cap insurance brokerage firm. We
16:59
Speaker 1: love getting diverse CEO folks and C suite folks on
17:03
Speaker 1: from around the country, different businesses, getting a sense of
17:05
Speaker 1: kind of how business is out there in the real world.
17:12
Speaker 1: I just feel like in a world of you know, tech,
17:15
Speaker 1: there are two mega conferences you have to go to.
17:18
Speaker 1: One is Consermer Electronics Show in Vegas that's in January,
17:22
Speaker 1: and the other one is the Mobile World Conference in Barcelona.
17:27
Speaker 1: And good job, by the way, saying that, thank you,
17:30
Speaker 1: I got a five on my ap Spanish. Can't speak
17:32
Speaker 1: a lick. Dan O'Brien, president of the America's and Gender
17:36
Speaker 1: Manager of HTC, he joins us he is in Barcelona, Dan,
17:40
Speaker 1: what's the story here? Like, I did not go to
17:42
Speaker 1: CS this year, so I feel like I'm a step
17:45
Speaker 1: behind or two on the whole metaverse thing, virtual reality,
17:48
Speaker 1: augmented reality, all AI, all that kind of stuff. What
17:53
Speaker 1: is the buzz at the Mobile World Conference this year? Well,
17:58
Speaker 1: I think thanks for having and apologies for any noise
18:01
Speaker 1: that we are actually here on the show floor. But
18:04
Speaker 1: there's a lot going on here at Mobile Congress. A
18:07
Speaker 1: lot has to do with five G right, and how
18:10
Speaker 1: is that going to create the connectivity for the metaverse? Right?
18:14
Speaker 1: And you know, how are carriers and companies like infrastructure
18:18
Speaker 1: partners like ericson and carriers like Verizon Wireless and AT
18:21
Speaker 1: and T Wireless and T Mobile and the likes, and
18:23
Speaker 1: how are they going to be the infrastructure providers for
18:26
Speaker 1: the metaverse? Right? And then how do companies like HTC
18:29
Speaker 1: deliver products and services and solutions for B to B
18:33
Speaker 1: and professional users and for consumers that will actually enjoy
18:37
Speaker 1: and experience those types of immersive experiences? All right, Dan,
18:41
Speaker 1: I get that, and I know everybody there is drinking
18:44
Speaker 1: the kool aid. But to be honestly, if I'm a shareholder,
18:47
Speaker 1: a large shareholder of Facebook slash Meta, I can't say
18:52
Speaker 1: in one sentence, I can't tell you, and I own
18:54
Speaker 1: a jillion dollars worth of the stock, I can't tell
18:57
Speaker 1: you in one sentence what the metaverse is? What is
18:59
Speaker 1: the meta verse to you? And what do you think
19:02
Speaker 1: the applications are to you? Sure? Well, the metaverse is
19:08
Speaker 1: really just an extension of the Internet and what you
19:11
Speaker 1: use today, what you're going to do in the metaverses
19:15
Speaker 1: be able to continue to interact with your computers, your
19:17
Speaker 1: Android phones, your iPhones, your iPads. You're just now also
19:21
Speaker 1: going to be able to interact with this digital content
19:24
Speaker 1: as a first person, whether it's with mixed reality glasses
19:27
Speaker 1: or virtual reality glasses or augmented reality glasses or or
19:30
Speaker 1: glasses that do all of those functions, and you're going
19:33
Speaker 1: to be able to actually interact inside of these digital spaces.
19:37
Speaker 1: Our version of the metaverseus the viverse, and you know,
19:41
Speaker 1: here we think consumers are going to use it for
19:43
Speaker 1: productivity and human performance improvement and things like training and
19:48
Speaker 1: simulation and education, but it's also going to be used
19:51
Speaker 1: for a lot of entertainment and enjoyment as well. What
19:55
Speaker 1: are all of these acronyms. I know VR is virtual reality.
20:00
Speaker 1: I don't know what XR is or MR is. What
20:03
Speaker 1: are all these different kinds of realities? Sure so XR
20:09
Speaker 1: is kind of the umbrella. It's extended reality. It's the
20:11
Speaker 1: thing that extends you from your real space to a
20:15
Speaker 1: fully virtual space. Mixed reality is kind of you're interacting
20:20
Speaker 1: with your real world and everything in your space, and
20:23
Speaker 1: you can see everything in your space. There's also a
20:25
Speaker 1: digital overlay of content that you're also interacting with in
20:28
Speaker 1: your real space. So you could be playing a game,
20:31
Speaker 1: you know, in your living room where a portal opens
20:34
Speaker 1: up on the wall and the aliens come out, and
20:36
Speaker 1: you're playing a game shooting at those things. You could
20:39
Speaker 1: also be you know, having an educational experience and learning
20:41
Speaker 1: about world history or ancient Egypt right and in your
20:45
Speaker 1: living room and actually doing it while you actually see
20:47
Speaker 1: everything in your living room and including the other people
20:50
Speaker 1: in that living room. So it's really kind of a
20:53
Speaker 1: mixture of the different levels of immersion that you can have.
20:57
Speaker 1: Virtual reality means you are one included from the real
21:01
Speaker 1: world and you are completely in a virtual world. So
21:04
Speaker 1: dan is the virtual world? Is it a I mean,
21:09
Speaker 1: I have to have the headset. Is that just the
21:12
Speaker 1: way it is? And it's just a question who has
21:15
Speaker 1: the better headset, the better mousetrap. Well, I think we're
21:20
Speaker 1: all really driving at the industry to solve a lot
21:24
Speaker 1: of these different problems as quickly as possible. We all
21:27
Speaker 1: started with virtual reality headsets because the easiest thing to
21:30
Speaker 1: do was put somebody inside of a completely virtual environment
21:33
Speaker 1: and control that and create the experience for the user.
21:36
Speaker 1: Augmented reality and mixed reality are more difficult, and you
21:40
Speaker 1: actually have to have a network infrastructure deliver content to
21:44
Speaker 1: those type of wearables or headsets. You know, the level
21:48
Speaker 1: of yes, we're all you know, in the future, you're
21:50
Speaker 1: actually probably not going to have a smartphone anymore. And
21:52
Speaker 1: you will be using a wearable where you'll be able
21:55
Speaker 1: to actually have an augmented reality experience and just seeing
21:57
Speaker 1: overlays of digital content inside of the real world. And
22:00
Speaker 1: then you'll also be able to have you know, different
22:02
Speaker 1: levels of immersion with those types of headsets. We recently
22:05
Speaker 1: announced the XR Elite headset, which actually does virtual reality
22:09
Speaker 1: experiences and mixed reality experiences. So we're already moving there.
22:13
Speaker 1: I think the industry and all the different OEMs and
22:16
Speaker 1: the different companies are trying to solve the different types
22:19
Speaker 1: of experiences we can deliver. I'm wondering about HTC and
22:25
Speaker 1: what you can do in this country. I know it's
22:29
Speaker 1: I think it's a Taiwanese company, right, but a lot
22:32
Speaker 1: of Americans are going to think it's Chinese straight away.
22:35
Speaker 1: And you've got this you know, China backlash going on.
22:38
Speaker 1: What's what's your take on that? You know, growing up here,
22:43
Speaker 1: having gone to Marrymount, working your way up through KPMG
22:47
Speaker 1: and AT and T, now you're at HTC. Yeah, I think, um,
22:53
Speaker 1: you know, Time one is a is a compliant country
22:56
Speaker 1: that actually makes compliant products that are very safe for
22:59
Speaker 1: being used inside of Dude, I get that I'm just
23:02
Speaker 1: saying like there's a slant, right, there's a there's a bias,
23:08
Speaker 1: and right away people hear HTC and think, you know,
23:12
Speaker 1: because maybe they're not as educated as you. Okay, basically
23:17
Speaker 1: a Chinese company. Um, how do you dissuade them of that?
23:20
Speaker 1: In marketing? How do you get around that? Sure? Well,
23:24
Speaker 1: for starters, we don't take any user behavior or user
23:29
Speaker 1: data or collect any of that data. We're actually a
23:31
Speaker 1: very privacy first company. UM. So regardless of where people
23:36
Speaker 1: think they actually the product was made or whether it
23:39
Speaker 1: was made with good intentions. UM. We talk a lot
23:42
Speaker 1: about our brand, which is about innovation, creativity and humanity,
23:48
Speaker 1: and so all of our products are actually designed to
23:50
Speaker 1: actually improve humanity and give people solutions that will actually
23:53
Speaker 1: make their lives better. UM. And our products don't data
23:57
Speaker 1: mind any of our users or their user behavior. We
24:00
Speaker 1: want to protect all of that data as the best
24:02
Speaker 1: we can for all of our users. So those are
24:05
Speaker 1: the things that we talk about heavily in our marketing
24:08
Speaker 1: and about our brand, and we try to really gain
24:10
Speaker 1: the trust of our users. And we have a long
24:14
Speaker 1: history of making things like smartphones and other products that
24:16
Speaker 1: users you know, at one point HTC sold forty eight
24:20
Speaker 1: million smartphones a year, and a lot of people were
24:22
Speaker 1: using our products and a lot of people have a
24:24
Speaker 1: lot of positive sentiment towards our brand. Hey, Dan, just
24:27
Speaker 1: about thirty seconds. Is Meta or Samsung? Are they customers
24:31
Speaker 1: of HTC or competitors? Well, in some senses competitors, But
24:39
Speaker 1: in a lot of ways we were approaching the market
24:40
Speaker 1: very differently. You know, Meta is you know, subsidizing their hardware,
24:44
Speaker 1: and you know, you know, the user is kind of
24:47
Speaker 1: the product, right when it comes to a Facebook product
24:51
Speaker 1: or a Meta product. When it comes to our product,
24:54
Speaker 1: the HTC product or the FIAT product that we sell you,
24:57
Speaker 1: that's the product and you get to use it for
24:59
Speaker 1: the benefit of you, whether it's for entertainment or for
25:02
Speaker 1: productivity or learning or education. But in terms of Samsung,
25:06
Speaker 1: you know, they exited the immersive portfolio and the immersive
25:10
Speaker 1: products and so we'll see what they come to market
25:13
Speaker 1: with probably in the next year or so. Okay, Dan,
25:15
Speaker 1: great stuff, Thanks for phoning in from Barcelona. Great stuff.
25:19
Speaker 1: He's at the Mobile World conference there again, one of
25:21
Speaker 1: the big big mobile conferences, maybe the biggest. Yeah, exactly right,
25:25
Speaker 1: Dan o Brian, President of America's and general manager at
25:28
Speaker 1: HTC talking about the metaverse and all things technology. Some
25:34
Speaker 1: good stuff there. If you're into the investment banking biz
25:41
Speaker 1: like I am, you really pay attention to what the
25:43
Speaker 1: big big players, the Morgan Stanley's, the Goldman Sacks of
25:46
Speaker 1: JP Morgan's are saying, and we got a big How
25:49
Speaker 1: do you do that? How do you do Is there
25:51
Speaker 1: any interass that you reach out to? The one person
25:53
Speaker 1: that you owe to from is Alison william She's our
25:55
Speaker 1: senior banks analyst at Bloomberg Intelligence. Literally one of the
25:59
Speaker 1: first analysts be hired. We begged her to join us
26:01
Speaker 1: back in the day when we were forming Bloomberg Intelligence.
26:03
Speaker 1: She's one of the best on the streets. Alison, you're
26:06
Speaker 1: downtown Manhattan. I know it's hard for you to go
26:08
Speaker 1: below fourteenth Street, but you're down in the financial district.
26:11
Speaker 1: You're at Goldman Sachs. Are you learning anything today? Are
26:14
Speaker 1: they telling you in the street anything that maybe is surprising?
26:19
Speaker 1: Not a lot, And I would say not surprising. Although
26:24
Speaker 1: I'm surprised the stock is down, I don't know. I
26:26
Speaker 1: think that we weren't We weren't expecting any new targets
26:30
Speaker 1: from the bank. They already sort of you know, talked
26:33
Speaker 1: about their strategy shift late last year, kind of gave
26:36
Speaker 1: new numbers and so what we were hoping for today
26:40
Speaker 1: and I think investors were expecting is you know, details
26:44
Speaker 1: on the path to better returns, and so they mapped
26:49
Speaker 1: out some things. I would say if there was something
26:51
Speaker 1: that was maybe disappointing is on the cost side of things.
26:55
Speaker 1: They've missed their sixty percent cost ratio target in recent
26:58
Speaker 1: years and than some of the cost cuts that they've
27:01
Speaker 1: talked about are you know, are sort of not going
27:04
Speaker 1: to get them there this year. Um, But I feel
27:08
Speaker 1: like there is potential for downside coming into today just
27:11
Speaker 1: because um, you know, there there is a little bit
27:15
Speaker 1: of work to do to get to the returns. And
27:17
Speaker 1: they kept that return target and they do have you know,
27:21
Speaker 1: most banks when they put out these return targets, a
27:23
Speaker 1: lot of it is dependent on the cost side of things. UM.
27:28
Speaker 1: I think that structural changes to their business are going
27:31
Speaker 1: to help get them there. So I think that's that's
27:33
Speaker 1: a positive and something tangible. They're going to be working
27:37
Speaker 1: down their their their balance sheet and asset management and
27:40
Speaker 1: then working to get you know, profitable on the platform
27:42
Speaker 1: business it just seems like, I know, Goldman Sacks is
27:46
Speaker 1: still you know, top of class in a number of
27:50
Speaker 1: different um swaths of the industry. Right, of course, it's
27:55
Speaker 1: still Goldman Sacks, but they've had this about face with
27:59
Speaker 1: Mark is the consumer business. They've had this reorganization that's
28:03
Speaker 1: been a little bit messy. They've led the street in
28:07
Speaker 1: terms of having to layoff staff, and now they're holding
28:12
Speaker 1: an investor day, the second one. And they used to
28:16
Speaker 1: be like above investor days, too good for investor days.
28:20
Speaker 1: So is it like a red flag that they're having
28:24
Speaker 1: to try and get investors together and convince them that
28:28
Speaker 1: it's still a good story. Well, I think you know,
28:32
Speaker 1: to me, the consumer business was not successful, but it's
28:36
Speaker 1: a small part of it. I mean, the overall bread
28:39
Speaker 1: and butter of Goldman is phenomenal and doing great, and
28:42
Speaker 1: I think that you know, the market share gains in
28:46
Speaker 1: that business which drives the majority of their profits, the
28:49
Speaker 1: m and A business, which is one of the most
28:53
Speaker 1: you know, sought after businesses on Wall Street. You know,
28:56
Speaker 1: they pointed out how their number one for twenty years,
28:59
Speaker 1: but I would also point to, you know the fact
29:01
Speaker 1: that they have a big margin to the number two players,
29:04
Speaker 1: So let's keep that perspective. But I think the investor days,
29:09
Speaker 1: you know, they've they've sort of come with the current management,
29:12
Speaker 1: it's come with wanting to provide transparency, and it's come
29:15
Speaker 1: with some of the newer efforts. You know, you have
29:18
Speaker 1: to be good at what you're good at, but always
29:20
Speaker 1: keep you know, trying new things. You know, the consumer
29:23
Speaker 1: business has not worked out. There's been so much media
29:26
Speaker 1: and headlines about that, but the transaction backing business has
29:29
Speaker 1: really done well, and you know, I think that's a
29:33
Speaker 1: business that we're going to hope to continue to see
29:35
Speaker 1: good things from. And the alternatives business, you know, they've
29:39
Speaker 1: raised one hundred and eighty billion over the past few years.
29:42
Speaker 1: That's you know, in the range of people like you
29:45
Speaker 1: know just below Brookfield and then you know a kru
29:50
Speaker 1: Blackstone and the leaders, but within that range of like
29:53
Speaker 1: Areas and Carlisle, and I think that that's really a
29:57
Speaker 1: story for investors that you know, as they continue to
30:01
Speaker 1: move some of these investments off their balance sheet into
30:05
Speaker 1: the hands of customers, and they're going to release capital,
30:10
Speaker 1: improve the returns on the business, improve the profile of
30:12
Speaker 1: the business. They've never gotten credit for the returns there,
30:16
Speaker 1: and so I think that is really a positive story
30:18
Speaker 1: that we're going to see over the next couple of years.
30:20
Speaker 1: So Alis, I know from from talking to you and
30:22
Speaker 1: from reading your research that Goldman Sachs has typically had,
30:26
Speaker 1: you know, some of the highest returns in the industry
30:28
Speaker 1: year in and year out. I mean, I've competed against
30:30
Speaker 1: them for decades and I know how good they are
30:32
Speaker 1: to the extents. To the extet, the returns have been
30:34
Speaker 1: lagging recently. Is it just their investments in the consumer
30:38
Speaker 1: bank or other parts of their business kind of lagged
30:41
Speaker 1: maybe a little bit, So I think it is the
30:44
Speaker 1: consumer part. But then you know, I will take you
30:46
Speaker 1: back to sort of the business I was just talking about,
30:48
Speaker 1: which is their investment business. So, as you said, you've
30:52
Speaker 1: known them for a long time, the private equity business
30:55
Speaker 1: and their investments has been a significant business for them,
31:00
Speaker 1: and in the postfocal world, they've been trying to work
31:03
Speaker 1: that down. And while that business contribute to some of
31:07
Speaker 1: their returns, investors just really never give them the credit
31:11
Speaker 1: for it because it can be very volatile and there
31:14
Speaker 1: and so there's there's just generally less of a multiple
31:17
Speaker 1: applied to that business and so I think that is
31:20
Speaker 1: a part of the strategy to improve returns but also
31:23
Speaker 1: improve the quality of that returns through you know, moving
31:27
Speaker 1: some of those gains to recurring management type of fees
31:31
Speaker 1: which investors do value with a higher multiple, reducing the
31:35
Speaker 1: capital that's going to reduce some of their capital requirements.
31:39
Speaker 1: The thirty billion Shary purchase, that's almost twenty five percent
31:42
Speaker 1: of our market value that they talked about today, that's
31:44
Speaker 1: a huge positive. So I think there are some good things.
31:49
Speaker 1: As I said, I think, you know, the negative side
31:51
Speaker 1: is maybe just that the costs they're going to continue
31:54
Speaker 1: to be a headwind. They're investing still in the platform business,
31:57
Speaker 1: so it'll take a while. So I think today's just
32:02
Speaker 1: a lot of talk about execution. It's hard for the
32:04
Speaker 1: stock to turn positively. But I think they're setting good
32:07
Speaker 1: targets that they can meet and so you know we're
32:11
Speaker 1: going to have to see them them do that over
32:13
Speaker 1: the next couple of years. Well, it is interesting to
32:15
Speaker 1: see the stock down almost two percent when other financials
32:19
Speaker 1: are gaining today. I don't want to leave you without
32:23
Speaker 1: getting a chance to talk about credit Suiee, Alison, because
32:27
Speaker 1: I know you never tire of the Green Sills, Saga,
32:31
Speaker 1: and apparently regulators are now saying Credit Suitee needs to
32:35
Speaker 1: hold board meetings occasionally to talk about their biggest counterparties,
32:39
Speaker 1: and they have to issue like a responsibility report for
32:42
Speaker 1: their top six hundred employees. It seems like so much work.
32:46
Speaker 1: It does, and I think this just continues to focus
32:49
Speaker 1: on the process for Credit Sweeze. I think you know
32:53
Speaker 1: that there were some incremental positives in terms of their
32:56
Speaker 1: you know, remaining risk in the US. You know it's done.
33:00
Speaker 1: Who's Who's our legal expert, and I depend on him
33:02
Speaker 1: for those views. But it just I think, you know,
33:06
Speaker 1: from the local regulator perspective, continues to show that they
33:11
Speaker 1: have work to do. They're going to continue to be
33:13
Speaker 1: under scrutiny. We had news earlier this week. Oh well,
33:18
Speaker 1: we had news last week, you know, related to some
33:23
Speaker 1: lawsuits about what they had said about flows. So I
33:26
Speaker 1: think sort of the legal challenges do you can continue
33:29
Speaker 1: for them, and it's just going to be a long process.
33:32
Speaker 1: All right, Allison, great stuff, and I recommend after your
33:35
Speaker 1: analyst meeting today you hop on the ferry, take it
33:37
Speaker 1: over to Hoboken, get the train home. That's a great
33:39
Speaker 1: way to commute. That's how I uhould do it back
33:41
Speaker 1: in the day from downtown. Alison Williams, Senior Global Banks
33:44
Speaker 1: and Asset Manager analyst for Bloomberg Intelligence. She's at Goldman
33:47
Speaker 1: Sachs headquarters today in Lower Manhattan for their investor Day,
33:51
Speaker 1: giving us the latest on all things Goldman talk technology.
33:56
Speaker 1: I'm want to talk Apple and anyway we can go here.
33:59
Speaker 1: I mean, got a couple of choices. You can go
34:00
Speaker 1: on a rock Rana or you can go Man deep
34:03
Speaker 1: sing to me they're interchangeable. They can you can ask
34:05
Speaker 1: about hardware, tell them that yeah, I mean, I don't know,
34:09
Speaker 1: both are indispensable, indispensable that that's a better word. But
34:13
Speaker 1: on a rock RANI. He's actually in seven thirty one
34:16
Speaker 1: Lexington Avenue, are Bloomerck Global HQ. So we got him
34:19
Speaker 1: here in Ore and there was a big Apple story today.
34:21
Speaker 1: There was a big Apple story here as we reached
34:23
Speaker 1: out to one of their suppliers in China and these supplier,
34:29
Speaker 1: this supplier tells us that they and their competitors, I guess,
34:33
Speaker 1: are looking for ways to move out China as quickly
34:36
Speaker 1: as possible. I can't imagine that goes down too well
34:39
Speaker 1: with the government there, but I can't imagine. Well, anyway,
34:41
Speaker 1: we got on Rani here, he's a tech analyst for
34:43
Speaker 1: Bloomberg Intelligence Rock. Just summarize Force takes back a little
34:47
Speaker 1: bit and just summarize Force. Apple's exposure to China both
34:51
Speaker 1: as a supplier of stuff that Apple needs to build
34:55
Speaker 1: all the cold products, as well as an end user
34:58
Speaker 1: customer base. Talk to us about China that may be
35:00
Speaker 1: evolving for Apple. So if you look at the smartphone
35:03
Speaker 1: supply chain that has taken I would say decades to build,
35:06
Speaker 1: or any supply chain for consumer electronics, Apple pretty much
35:10
Speaker 1: depends on China for all hits, all almost all its spots,
35:14
Speaker 1: whether it's you know, more than ninety eight percent of
35:17
Speaker 1: the iPhones are assembled there. Most of the lower end
35:20
Speaker 1: MAX are there, you know, you you just name it.
35:23
Speaker 1: Apart from the really high end Max. Everything else is
35:26
Speaker 1: assembled in China. So given what the political tensions are,
35:31
Speaker 1: it is very logical. And it's not just Apple, it's
35:34
Speaker 1: the automotive industry. All industries are thinking how do I
35:37
Speaker 1: manage to take some of that supply chain risk outside?
35:41
Speaker 1: And this is going to be a big theme for
35:43
Speaker 1: the next decade. I'm not surprised about the new story.
35:46
Speaker 1: I think more of that will come from exposure. On
35:49
Speaker 1: the revenue side, the Greater China region accounts for about
35:54
Speaker 1: twenty percent of Apple's revenue, so for in both cases,
35:57
Speaker 1: applele is overly exposed to China, whereas a company like
36:01
Speaker 1: Microsoft is, Google is not. What did they say about that?
36:04
Speaker 1: I mean, if you could make an argument, I can't
36:07
Speaker 1: own Apple, I think that China risk is to I
36:09
Speaker 1: can't own the stock. But nobody says that. But nobody
36:12
Speaker 1: says that, but that you're right. But but Apple's ten
36:14
Speaker 1: percent of NASTAC, Apple's what four or five percent of
36:17
Speaker 1: the SNP, So you're absolutely right. If something happens tomorrow,
36:21
Speaker 1: Apple cannot you know, go out and procure those parts.
36:24
Speaker 1: Imagine what would happen to their revenue base because remember,
36:28
Speaker 1: you know, the eighty percent of their revenue is products,
36:30
Speaker 1: and they have to sell new products every year. So
36:33
Speaker 1: it is a big risk. But having said that, they
36:35
Speaker 1: performed very well from a supply chain point of view,
36:38
Speaker 1: even during the big you know, the I would say,
36:41
Speaker 1: the embargo or the big fights we had a few
36:44
Speaker 1: years ago, they have been fine. But but you're right,
36:47
Speaker 1: it is a big risk. It is a big risk
36:49
Speaker 1: for everybody. I'm surprised eighty percent of the revenue is products.
36:52
Speaker 1: I would have thought they'd been boosting the services side
36:54
Speaker 1: of that. They are boosting, and the services is growing
36:57
Speaker 1: in double digits. But having said that, I mean, you know,
36:59
Speaker 1: I phone is fifty. So we have a story on
37:03
Speaker 1: the terminal that maker of air pods called Gortech, one
37:07
Speaker 1: of their suppliers, which is a native China company, is
37:10
Speaker 1: looking to move to Vietnam. While they're investing two hundred
37:13
Speaker 1: eighty million dollars to put a plant in Vietnam, they're
37:16
Speaker 1: looking into an expansion in India. And a lot of
37:19
Speaker 1: these other companies are doing the same. And it's not
37:21
Speaker 1: just Apple suppliers, right, it's also Sony suppliers, makers of
37:25
Speaker 1: the PlayStation and all of these consumer gadgets are they
37:29
Speaker 1: Are you seeing that across the industry, just to spread
37:32
Speaker 1: out to Vietnam, to India to other countries around China. Yeah,
37:36
Speaker 1: And as I said, it's not just consumer electronics. I
37:39
Speaker 1: hear this from my friends who make autopods. The real
37:42
Speaker 1: mandate over time. Now the question here is how long
37:45
Speaker 1: it's going to take. And that's a very very big if.
37:47
Speaker 1: But over time, I do expect the global supply chain,
37:50
Speaker 1: which is let's say one hundred person independent of China,
37:53
Speaker 1: would only be fifty percent China and fifty percent elsewhere.
37:56
Speaker 1: That's what I'm thinking. I don't think. I mean, if
37:58
Speaker 1: you're China, your incentive is to remain I would think
38:02
Speaker 1: your economic incentive would be I want to be the
38:05
Speaker 1: supplier to the world. No, they are, but fifty percent
38:08
Speaker 1: is big enough too. It's not as if, like you know,
38:10
Speaker 1: you can't, what are you gonna do? Cell only half
38:12
Speaker 1: to cell phones? Well, and for now also right, I mean,
38:14
Speaker 1: they surely they look at the evolution of other countries
38:18
Speaker 1: that have gone through the same thing, and they know
38:20
Speaker 1: that they can't forever be the supplier to the world.
38:24
Speaker 1: They can't forever have these low wage factories. The economy
38:28
Speaker 1: has to grow and change over time. And again, you know,
38:31
Speaker 1: they it's possible that the number of units you know,
38:33
Speaker 1: produced in China will remains the same. But the next
38:36
Speaker 1: growth factor, whatever the next ten years of growth is,
38:38
Speaker 1: that's done from outside somebody else. Look what happened back
38:41
Speaker 1: in November. The Chinese factory that was making iPhone pro model,
38:46
Speaker 1: the expensive one got locked down with COVID and the
38:49
Speaker 1: you know, Apple missed a fair amount of shipments and
38:52
Speaker 1: that so Apple basically said, I'm going to assemble a
38:55
Speaker 1: second part of it somebody else. Now again, as I said,
38:58
Speaker 1: this is going to take years. This is not something
39:00
Speaker 1: you can entangle so quickly, all right. So that brings
39:03
Speaker 1: me to India. If I'm an India technology person, I'm
39:08
Speaker 1: going over to Cupertino and saying, hey, I'll manufacture your
39:11
Speaker 1: stuff in India. I've got as good or better cost structure,
39:14
Speaker 1: I've got as good or better workforce, and i don't
39:16
Speaker 1: have the China risk. Talk to us about India from
39:19
Speaker 1: a technology perspective. No, they are doing it. But historically
39:22
Speaker 1: India has been very very you know, I could say,
39:25
Speaker 1: focused on software development and less so on hardware. But
39:28
Speaker 1: that's already happening that you know, what you just said
39:30
Speaker 1: is in process. But having said that, even after a
39:33
Speaker 1: lot of these news reports, we just looked at some
39:36
Speaker 1: data you know, we got from IDC. Even now, ninety
39:40
Speaker 1: eight percent of the phones are still made in China
39:43
Speaker 1: from you know, close to ninety nine points some percent,
39:46
Speaker 1: so that the India you know, is less than a
39:48
Speaker 1: you know, maybe less than one to two percent at
39:50
Speaker 1: this point. What is you cover a range of I
39:55
Speaker 1: guess B to B companies right on the tech side.
39:59
Speaker 1: What is your favorite one? What do you get most excited?
40:02
Speaker 1: I look across your research from Workday to IBM, to
40:06
Speaker 1: Apple to Salesforce, Microsoft, what makes what makes your job
40:12
Speaker 1: exciting for you? I think all these companies are something
40:14
Speaker 1: special about them. Each one of them do something very unique.
40:16
Speaker 1: But the one that reported last night I'm a big
40:18
Speaker 1: fan of is work Day. They are one of the
40:20
Speaker 1: most ethically sound companies. They really develop a very good
40:23
Speaker 1: software product. They take care of their employees. I mean
40:26
Speaker 1: it's a very high quality company, and they grew, you know, numbers,
40:30
Speaker 1: pretty bookings pretty impressively last night. But Salesforce reports tomorrow.
40:36
Speaker 1: You know they're going through some growing pains. I think
40:38
Speaker 1: their numbers are not going to be as good. But
40:40
Speaker 1: you know, we have activists invested there, and the big
40:42
Speaker 1: question is going to be when does Benihoff say, you
40:45
Speaker 1: know what, I've had enough and I'm going to walk away.
40:47
Speaker 1: And when that happens, you will see a Microsoft like story,
40:50
Speaker 1: you know, emerge over there. But work Day, so they
40:55
Speaker 1: they make products we use work Day for example, for
40:58
Speaker 1: our benefits management. Yeah. Here at Bloomberg for Bloomberg employe.
41:01
Speaker 1: So is the number one cloud R company in the
41:05
Speaker 1: world HR company. Yeah, so, fifty five percent of Fortune
41:08
Speaker 1: five hundred companies use workday software. But it does. Does
41:12
Speaker 1: we use it? Yeah? If you go to manage your benefits,
41:14
Speaker 1: change your life insurance coverage, or anything like that, you
41:16
Speaker 1: do day software, which is a pretty cool suite of
41:20
Speaker 1: software products from a consumer from a user standpoint, Um,
41:24
Speaker 1: what's the end story for them? Does a salesforce buy them?
41:28
Speaker 1: Does a Microsoft buy them? It would be too big,
41:31
Speaker 1: it would be very it's forty seven close to fifty
41:34
Speaker 1: billion right now. It'd be very difficult for anybody to
41:36
Speaker 1: buy them. But I'll tell you like a very interesting,
41:39
Speaker 1: you know, movie story behind it. This company is from,
41:42
Speaker 1: you know, from the founders of People's Soft, which went
41:45
Speaker 1: through a very ugly battle with Auticle many many years ago,
41:49
Speaker 1: and Auticle basically acquired people Soft. And this found out
41:53
Speaker 1: who's probably at that time was in his seventies, walked
41:55
Speaker 1: up and said, you know what, I'm going to create
41:56
Speaker 1: a company, cloud based HR software company and it's baking
42:00
Speaker 1: taking share from PeopleSoft since then, so it is. I mean,
42:04
Speaker 1: they can make a movie out of this. These guys
42:05
Speaker 1: have done such an amazing job. What's the Wall Street
42:08
Speaker 1: call on Microsoft these days? And just kind of you know,
42:11
Speaker 1: looking at it here. I'm a big fan of the
42:14
Speaker 1: CEO there. But the stacks, you know, up four percent
42:17
Speaker 1: this year to day, down about fifteen percent on a
42:19
Speaker 1: trailing twelve month basis. What's the Microsoft call? The Microsoft
42:21
Speaker 1: call is the cloud is going to keep on slowing
42:23
Speaker 1: down throughout this year, and hopefully, in my personal view,
42:27
Speaker 1: as soon as the FED signals that they're ready to stop,
42:29
Speaker 1: I think the business confidence improve, people start spending money
42:32
Speaker 1: back again on technology. And when that happens and Microsoft
42:36
Speaker 1: comes back and comes back very strong, what is the tech?
42:38
Speaker 1: I mean it tech spending for twenty twenty two, twenty
42:41
Speaker 1: twenty three. It doesn't decline, right, It's just it's the growth.
42:45
Speaker 1: So last five years it has grown. Top twenty software
42:48
Speaker 1: companies have grown at an average of twenty percent PTY.
42:51
Speaker 1: But this year they're going to grow twelve thirteen percent,
42:53
Speaker 1: so shabby compared to last few years, but it's still
42:56
Speaker 1: pretty impressive. So, I mean software is still the play, right,
43:00
Speaker 1: I mean, it's the cloud. I'm still playing the cloud, right,
43:03
Speaker 1: They're still playing the cloud. But this year is a
43:04
Speaker 1: bad year for cloud. So everybody is dumping Amazon. Everybody's
43:08
Speaker 1: taking you know, getting out of Microsoft because of that.
43:10
Speaker 1: But you know, in reality, the long term prospects are
43:13
Speaker 1: so good. In fact, this is the biggest case for cloud.
43:15
Speaker 1: Is what's happening right now. You have a company, let's
43:19
Speaker 1: say a corporation that has had a fixed cost structure
43:21
Speaker 1: of it and certainly decides that, okay, ten percent of
43:24
Speaker 1: my acts go to the cloud, and now I'm charging
43:27
Speaker 1: on a per use basis. Certainly a cost structure becomes variable.
43:30
Speaker 1: In the next cycle, you're gonna go out and outsource
43:33
Speaker 1: more of that stuff because it's so beneficial for you.
43:35
Speaker 1: All Right, good stuff on Rona. Whenever we see them,
43:37
Speaker 1: they're in the AI and they're in the AI. They're
43:39
Speaker 1: in the AI stuff. Oh that's good, that's good AI.
43:42
Speaker 1: Oh that's really good. Yeah. So by that, by that
43:45
Speaker 1: Ana rock Rana Techan also Bloomberg Intelligence. Whenever we see
43:48
Speaker 1: him running the halls here in New York, we literally
43:50
Speaker 1: just grab them, bring him into the studio and get
43:51
Speaker 1: the latest dump on what's going on in the world
43:54
Speaker 1: of technology. Thanks for listening to the Bloomberg Markets podcast.
43:59
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
44:03
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
44:07
Speaker 1: on Twitter at Matt Miller nineteen seventy three. And I'm
44:10
Speaker 1: Fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast,
44:13
Speaker 1: you can always catch us worldwide at Bloomberg Radio