Latest / Bloomberg Intelligence / AI, Labor, Stocks, Ford, and Commodities (Podcast)

Transcript

AI, Labor, Stocks, Ford, and Commodities (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Paul, we have Welcome to the Bloomberg Markets Podcast. I'm
0:02
Speaker 1: Paul Sweene. It alongside my co host Matt Miller.
0:05
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
0:09
Speaker 2: and Bloomberg experts, along with the essential market news right
0:14
Speaker 2: to talk about Bloomberg Markets.
0:15
Speaker 1: Podcast podcasts or wherever you listen to podcasts and at
0:18
Speaker 1: Bloomberg dot com slash podcast.
0:20
Speaker 3: And then Dan ives over at web Bush, who, as
0:24
Speaker 3: we know, is definitely someone who's a well known tech bull.
0:28
Speaker 3: And you actually released Wait.
0:30
Speaker 4: You have to do a fashion update before you do anything.
0:33
Speaker 1: We have to take a look at this disturb and
0:36
Speaker 1: Dan streaming on YouTube, so you can't hide the shirt.
0:39
Speaker 1: It's out there.
0:41
Speaker 5: Okay, I love it.
0:43
Speaker 3: It's great. So you were talking to your clients about
0:46
Speaker 3: how you still see tex stocks againing about twelve to
0:48
Speaker 3: fifteen percent in the second half of the year even
0:51
Speaker 3: after this gang buster riley that we've seen in gross stocks,
0:54
Speaker 3: obviously led by Ai. Tell us about your case when
0:57
Speaker 3: it comes to continued strength there in the second half.
0:59
Speaker 6: But look, we believe it's a new tech bowl market
1:02
Speaker 6: that's forming and ultimately something that's covered tech. Going back
1:06
Speaker 6: to nineties. This I view as a nineteen ninety five
1:09
Speaker 6: Internet movement, in other words, not nineteen ninety nine dot
1:13
Speaker 6: com bubble burst. You know, I believe based on everything
1:16
Speaker 6: we've done, this is the biggest transformational tech trend that
1:20
Speaker 6: we've seen. And we were talking about a trillion dollars
1:23
Speaker 6: of incremental spend that's now coming into the tech ecosystem,
1:26
Speaker 6: which is why, in my opinion, this is a green
1:28
Speaker 6: light to own tech. I think it's gonna get broad
1:30
Speaker 6: and broader in terms of the rally. And many of
1:33
Speaker 6: the bears that continue to say this is hype, they're
1:36
Speaker 6: not talking to the CIOs, the CTOs, the it spent
1:41
Speaker 6: where well, I think it's something unlike I've ever seen.
1:44
Speaker 1: And that's kind of where I wanted to go down
1:45
Speaker 1: because you've got this perspective, long time perspective in the
1:48
Speaker 1: tech space. In your words, when you're talking to your
1:51
Speaker 1: institutional investor clients, and I know you've been on the
1:53
Speaker 1: road a lot, what how do you define AI Artificial intelligence?
1:57
Speaker 1: Because I hear it thrown about by every company that
2:01
Speaker 1: walks through that door, whether they're selling pet food or
2:03
Speaker 1: whether they're a tech company. It's everywhere.
2:05
Speaker 6: It seems like, well, ultimately, it's really like when you
2:07
Speaker 6: think about the shift to cloud and what we've seen
2:10
Speaker 6: with data processing power, it was all about you have data,
2:13
Speaker 6: whether it's coming in consumer tech, but how do you
2:17
Speaker 6: ultimately monetize how do you ultimately mind that data? When
2:20
Speaker 6: you look at the models coming out, of course it's Nadella,
2:23
Speaker 6: Microsoft Chat, GPT really lead in Nvidia in terms of
2:26
Speaker 6: the foundation, this is the start of what I'll cause
2:29
Speaker 6: an AI revolution. The use cases now that we're seeing,
2:32
Speaker 6: Let's give example, developers, they potentially now could do things
2:36
Speaker 6: in an hour that.
2:37
Speaker 5: Took them three weeks.
2:39
Speaker 6: Advertising could Ultimately there's there's use cases things that could
2:43
Speaker 6: take a month now could take basically two hours. And
2:47
Speaker 6: the and who benefits it's the software, it's the chips,
2:51
Speaker 6: it's the echo sit That's why I believe this this
2:54
Speaker 6: is a gold rush that really is going to define,
2:56
Speaker 6: in my opinion, a new bowl market for tech that's
3:00
Speaker 6: just starting.
3:01
Speaker 3: When you were talking about how you're having these conversations
3:03
Speaker 3: with these industry players, what specifically are they telling you
3:07
Speaker 3: and where are those pockets of strength when it comes
3:09
Speaker 3: to say enterprise spending.
3:11
Speaker 5: Yeah, and I think part is we go back.
3:13
Speaker 6: We sat here in January right hard Landing, dark clouds,
3:17
Speaker 6: Armaguet and the whole. So obviously none of that's happened.
3:20
Speaker 6: But now the differences at enterprise from a CIO perspective,
3:24
Speaker 6: they've gone from yellow light to now potentially green light.
3:28
Speaker 6: And you're starting to see ultimately they're looking, they're looking
3:32
Speaker 6: over the road and they're not seeing cars company and
3:35
Speaker 6: it's ai that today is less than one percent it spend.
3:39
Speaker 6: We think next year that's potentially eight to ten percent.
3:43
Speaker 4: Wow.
3:43
Speaker 5: And that's that's.
3:44
Speaker 6: Ultimately look in my view, and it's totally in PA.
3:47
Speaker 6: I've talked about it for decades. Is that the transformational
3:51
Speaker 6: tech themes if you put them in and you talk
3:53
Speaker 6: about you know, evaluation, downgrade today and meta, you put
3:56
Speaker 6: them in a little pe box on some historical doing
4:00
Speaker 6: your spreadsheet valuations from your office building. I get it
4:04
Speaker 6: to me, you can't put them in that box. That's
4:07
Speaker 6: why ultimately you've missed the Apples, the Tesla's, the Netflix,
4:10
Speaker 6: the metas and everything else if you don't understand the
4:14
Speaker 6: transformational growth theme. And that's why right now I think
4:16
Speaker 6: it's the fourth Industrial Revolution that's planning out.
4:19
Speaker 1: Now what we've seen, and I guess it feels to me,
4:22
Speaker 1: Dan that we are in the very top of the
4:24
Speaker 1: first inning here, and what we're saying, what we're hearing
4:29
Speaker 1: from people like you and from others in the tech space,
4:31
Speaker 1: is just buy some of the really good tech names
4:34
Speaker 1: that receive the tech spend anyway. They're going to be
4:38
Speaker 1: on the forefront when and that's a Microsoft for example,
4:41
Speaker 1: and some others, and in the chip companies, when do
4:44
Speaker 1: you think there will be that Facebook moment, that Google
4:47
Speaker 1: moment where we're a company born of AI. Like Google
4:52
Speaker 1: was for search, Facebook was for social, When do you
4:55
Speaker 1: think we'll have that first big AI born company and
4:59
Speaker 1: where it come from?
5:00
Speaker 6: Well, I think also a lot of those AI born
5:02
Speaker 6: companies potentially might get acquired before they're actually born.
5:06
Speaker 5: And I think that's why.
5:07
Speaker 6: You can see massive consolidation across tech right. A lot
5:10
Speaker 6: of these tech companies have more cash in some countries.
5:13
Speaker 6: But then I think if you look at it by
5:15
Speaker 6: the d I think over the next few quarters, we're
5:18
Speaker 6: gonna have what I'll call that Apple two thousand and
5:21
Speaker 6: seven iPhone moment, that Internet nineteen ninety five moment. We
5:24
Speaker 6: saw it with the guidance heard around the world from
5:26
Speaker 6: Jensen and Video the four billion dollar guidance raise. But
5:29
Speaker 6: I think that's what we're starting to see right now.
5:32
Speaker 6: Even when we come to earnings over the next month.
5:34
Speaker 6: Of course, investors are going to focus on what numbers
5:37
Speaker 6: look like guidance next quarter or two, But there's a
5:41
Speaker 6: much bigger story playing out here, and that's why I
5:44
Speaker 6: think a lot of these technames continue to be Rock
5:46
Speaker 6: or Gibraltar Lake.
5:47
Speaker 3: I'm glad you brought up Apple because there's a lot
5:49
Speaker 3: of companies like that where during the Internet boom you
5:51
Speaker 3: might not have realized certain companies to that would have
5:54
Speaker 3: benefited years later. Where do you think are the winners
5:57
Speaker 3: that might be getting overlooked and where do you think potent?
6:00
Speaker 3: Are the losers right now that are just behind the game?
6:02
Speaker 6: Sure, and I think when you look at Apple, cook
6:04
Speaker 6: continues to play chess where others play checkers, and I
6:07
Speaker 6: think it's an installed based play, best install based in
6:10
Speaker 6: the world. From a consumer perspective, iPhone fifteen, I believe
6:13
Speaker 6: it's going to be a mini super cycle AI. This
6:17
Speaker 6: is just the start of what's going to be that
6:19
Speaker 6: drum roll in terms of what I've us as an
6:20
Speaker 6: AI App Store over the next twelve to eighteen months.
6:23
Speaker 6: I think that's being overlooked as an AI play. I
6:27
Speaker 6: think salesforce being overlooked from an AI perspective. I do
6:31
Speaker 6: think you have some pure play AI names, even like
6:34
Speaker 6: you look at names like palan Tier and others that
6:36
Speaker 6: are really from a use case perspective, and I think
6:39
Speaker 6: it's really the software echoesis. I think it's the software
6:43
Speaker 6: names right now that I really put an asterisk around,
6:46
Speaker 6: because that's going to get the predominant amount of Aspen.
6:49
Speaker 3: What about Adobe, because I feel like that was a
6:52
Speaker 3: player maybe people weren't focusing enough on and then all
6:54
Speaker 3: of a sudden we had that strong report when it
6:56
Speaker 3: comes to that AI potential there well.
6:58
Speaker 6: No, I think you saw from Adobe, you song from
7:00
Speaker 6: Mango dB, and I think those are the barometers that
7:04
Speaker 6: were now starting to see Adobe that's been just a
7:07
Speaker 6: phenomenal job that they've been able to mine into the
7:10
Speaker 6: install base. And I think that's just the tip of
7:14
Speaker 6: the iceberg of what I believe we're going to see
7:17
Speaker 6: over the next month. Look, we can maybe start to
7:19
Speaker 6: do some sort of you know, clock to see who
7:22
Speaker 6: could actually say AI the most in their conference rights,
7:25
Speaker 6: and that's why Krueger and to that maybe because some
7:29
Speaker 6: get above one hundred.
7:30
Speaker 5: But that's why the big question is going to.
7:32
Speaker 6: Be who are the fakes versus the real ones?
7:36
Speaker 3: So what do you think are the risks to your
7:39
Speaker 3: bowl case?
7:40
Speaker 6: So the risks clearly macro things take longer. You've had
7:45
Speaker 6: multiple expansion for six months. Investors are patient, but then
7:49
Speaker 6: all of a sudden if it doesn't come to fruition,
7:52
Speaker 6: you know, and then I think the geopolitical situation US
7:57
Speaker 6: China continues to sort of be that you know, when
8:00
Speaker 6: dark cloud. But this is going to be patience. And
8:03
Speaker 6: that's why I view it as these are moments that
8:07
Speaker 6: happen every twenty thirty years, and right now we just
8:10
Speaker 6: happen to be living through what I view as a
8:12
Speaker 6: nineteen ninety five Internet movement.
8:14
Speaker 1: All right. We mentioned Google earlier and to Just's point Losers.
8:18
Speaker 1: Initially when this kind of hit my consciousness six months ago,
8:21
Speaker 1: AI I said, oh, that's gonna be a real competitor,
8:25
Speaker 1: maybe the first real competitor to Google. And you think
8:27
Speaker 1: about just search in general, how do you think about
8:30
Speaker 1: Google and its position visa.
8:31
Speaker 6: Clearly at first black Eye in terms of coming out.
8:34
Speaker 6: They missed in Microsoft, you know, beat them to the game.
8:37
Speaker 6: I think for Google the golden goose, it's actually not Search.
8:41
Speaker 6: I think it's really the cloud. I mean that is
8:43
Speaker 6: what from an enterprise perspective, they could potentially redefine themselves
8:48
Speaker 6: on AI. And this is also it's not a zero
8:50
Speaker 6: some game. It's not just one player. We're talking about
8:53
Speaker 6: We view conservatively eight hundred billion potentially in the trillions
8:57
Speaker 6: of now incremental it spent.
8:59
Speaker 5: We're six months was not here yep.
9:02
Speaker 1: Just it's extraordinary and you've got to think, you know,
9:04
Speaker 1: a winner like Google with the engineering chops, not to
9:08
Speaker 1: mention the balance sheet, we'll be a player there. Hey, Dan,
9:11
Speaker 1: thanks so much for joining us. I appreciate you coming
9:13
Speaker 1: in studio. Despite the shirt, despite the shirt, it's good stuff.
9:18
Speaker 1: Dan ives. He's a senior analyst at wood Bush Securities,
9:21
Speaker 1: And what we love about Dan is a he's very
9:22
Speaker 1: clear and his his points and his convictions. Definitely, we've
9:25
Speaker 1: got the perspective to say, hey, let's put this into
9:27
Speaker 1: context of what we've seen in past cycles.
9:29
Speaker 3: Hey, he's been doing this a long time.
9:30
Speaker 1: He's been doing it a long time, and it's certainly
9:32
Speaker 1: helpful to us newbies trying to get our heads around
9:36
Speaker 1: what is a I looking at this market here, you know,
9:39
Speaker 1: kind of hanging in here. We're about one thirty one
9:41
Speaker 1: percent on the S and P five hundred getting in
9:43
Speaker 1: a nastac up about a half a percent. So tech is,
9:46
Speaker 1: as Dan has been saying for a long time, continues
9:49
Speaker 1: to perform.
9:51
Speaker 4: You're listening to the team Ken's are Live program Bloomberg
9:54
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg dot com,
9:58
Speaker 4: the iHeartRadio app and the Lower Business at or listen
10:01
Speaker 4: on demand wherever you get your podcasts.
10:06
Speaker 1: You know, one of the numbers that always sticks out
10:08
Speaker 1: of me is when we look at the Jolts number,
10:10
Speaker 1: you know, the job opening Yes, that's the number that
10:12
Speaker 1: historically ran five six million job openings, but it's been.
10:15
Speaker 3: Close to ten right consistently.
10:18
Speaker 1: You know, I'm like, where did all these people go
10:20
Speaker 1: during the pandemic. And one issue that comes up is
10:23
Speaker 1: there's some ages, maybe some people are kind of aging
10:25
Speaker 1: out of the workforce. But I want to get a
10:27
Speaker 1: sense of kind of you know, what ageism means in
10:30
Speaker 1: the labor market and for the economy. And our next
10:33
Speaker 1: guest did a lot of work on that. Mikhaela Grimm,
10:36
Speaker 1: senior economists for Alliance, joins us via Zoom. So, MICHAELA,
10:40
Speaker 1: talk to us about kind of what your work showed
10:43
Speaker 1: as it relates to agism in the workforce. Are people
10:47
Speaker 1: just simply aging out of the workforce.
10:51
Speaker 7: What we saw, especially when we looked at the pension systems,
10:57
Speaker 7: where we see the need that people should work longer
11:00
Speaker 7: or should stay longer in the work in the working
11:03
Speaker 7: age population. To cussion the demographic effect on the pension
11:09
Speaker 7: systems but on the labor markets as well, is that
11:12
Speaker 7: when politicians propose the increase of retirement age, it's often
11:17
Speaker 7: answered with protests like we saw in France, because people
11:21
Speaker 7: are afraid that they don't find the job in higher
11:24
Speaker 7: ages and that any increase in retirement age just means
11:29
Speaker 7: longer unemployment before retirement and in the end a kind
11:34
Speaker 7: of a hidden pension cut.
11:36
Speaker 8: And these fears.
11:41
Speaker 7: Are not out of the blue, because we see that
11:43
Speaker 7: in higher ages the chances to be unemployed for longer
11:47
Speaker 7: are higher.
11:48
Speaker 8: The long term unemployment.
11:50
Speaker 7: Rates of the age group fifty five plus are much
11:53
Speaker 7: higher than in the average workforce population between twenty five
11:57
Speaker 7: and fifty four. For example, and if older workers apply
12:03
Speaker 7: for a new job, they are often facing stereotypes about
12:10
Speaker 7: older workers. And given these environment, many people who get
12:16
Speaker 7: unemployed after the age of fifty five either drop out
12:20
Speaker 7: of the labor force or decide to go into a retirement.
12:27
Speaker 3: How does this differentiate when you're looking on particular regions
12:31
Speaker 3: in countries, say the US versus Europe.
12:35
Speaker 7: In the US, we see a lower rate of longer
12:39
Speaker 7: unemployment in higher ages, and it's already a little bit
12:42
Speaker 7: higher the activity.
12:43
Speaker 8: Ratio than in the U, for example.
12:45
Speaker 7: And we see also that in countries where the retirement
12:48
Speaker 7: ages are already higher, like in speed for example, on Singapore,
12:52
Speaker 7: you see much higher activity ratio is among the older
12:55
Speaker 7: workforce population.
12:58
Speaker 1: So, MICHAELA, you know, I guess I was surprised when
13:01
Speaker 1: I saw the you know, the incredible uprising public uprising
13:05
Speaker 1: in France when they were talking about raising the retirement age.
13:08
Speaker 1: I think it was from sixty two to sixty four.
13:10
Speaker 1: It didn't seem like that big a deal to me.
13:11
Speaker 1: Maybe that's just the US bias. Did that surprise you
13:15
Speaker 1: or is that consistent with some of the some of
13:17
Speaker 1: the data you've seen.
13:19
Speaker 7: Well, from the open point of view, we were surprised
13:22
Speaker 7: as well because our government agreed to increase the retirement
13:26
Speaker 7: age to sixty seven already. But we see also that
13:31
Speaker 7: in France the unemployment ratio of all the workers is
13:34
Speaker 7: higher than in Germany, for example, and therefore that was
13:38
Speaker 7: the concern, for example, that if the government pushes the
13:43
Speaker 7: retirement age sixty four, it just would mean a higher
13:47
Speaker 7: rate of our longer term of unemployment before retiring. In
13:50
Speaker 7: the end, we saw that in surveys that this was
13:55
Speaker 7: one big concern of the working edge population.
13:59
Speaker 3: When we're looking at the US specifically, what's been the
14:01
Speaker 3: main catalyst that's keeping older workers out of the workforce
14:05
Speaker 3: longer and how much did the pandemic end up exacerbating this.
14:11
Speaker 7: We we saw in service as well that many older
14:14
Speaker 7: workers decided to retire early. But we also seen in
14:19
Speaker 7: in in service of from r P that they face
14:24
Speaker 7: age discrimination. That there's example, for example, a wish to
14:28
Speaker 7: participate more in training measures, that there is a wish
14:34
Speaker 7: to have more flexible working hours, to be able to
14:36
Speaker 7: choose word to work.
14:39
Speaker 8: To have more chance to work from home, to work remotely.
14:42
Speaker 7: And still I think companies or many companies that are
14:48
Speaker 7: only not only in the US as we did not
14:50
Speaker 7: face the impact of demographic change until recently and uh
14:56
Speaker 7: it paused for example in many countries, uh at now baby,
15:00
Speaker 7: we must start to retire. Now companies feel more the
15:04
Speaker 7: pressure to adapt to the needs of an aging workforce population.
15:08
Speaker 8: That was not the case in recent years.
15:11
Speaker 7: Therefore, I think, since many workers since still face age discrimination,
15:18
Speaker 7: the step to say okay, I drop out or take
15:21
Speaker 7: a lower page job, or even have to they take
15:23
Speaker 7: a lower page job that does not fit to my
15:26
Speaker 7: qualifications than earlier time.
15:28
Speaker 1: It is an opten What subsidies are, what support? I
15:33
Speaker 1: guess can governments provide companies to maybe you know, hire
15:38
Speaker 1: more older workers. Is there anything that is there a
15:41
Speaker 1: role that governments can play in this.
15:45
Speaker 7: Well, we've seen in some countries they are already kind
15:47
Speaker 7: of advertise think campaigns in place like in Singapore.
15:51
Speaker 8: Where the there is a company, the government.
15:55
Speaker 7: Tries to to push for a cultural change, for change
16:01
Speaker 7: of the perception of all the workers. But what governments
16:04
Speaker 7: can also do as we see a need for reskilling,
16:07
Speaker 7: for upskilling, for lifelong learning.
16:10
Speaker 8: It's especially.
16:13
Speaker 7: Smaller companies who often cannot afford, for example, these kind
16:16
Speaker 7: of measures. So it would be one measure to UH
16:20
Speaker 7: support companies when offering training trainings for their workers. It
16:27
Speaker 7: could be also possible to support subsidy or grant subsidies
16:32
Speaker 7: of when employing all the workers coming from long term unemployment.
16:39
Speaker 7: It would also be a measure to support part time employment.
16:43
Speaker 8: UH. It could be a measure to say, okay.
16:46
Speaker 7: We reduce contribution rates or taxes for workers after after
16:54
Speaker 7: specific age. Then other measures could be when we look
16:58
Speaker 7: at the pension systems to make it possible to combine
17:02
Speaker 7: work and retirement, part time retirement, or as I said,
17:08
Speaker 7: to come get away from the mental retirement age, make
17:12
Speaker 7: retirement ages more flexible and for example grand and right
17:17
Speaker 7: to work.
17:17
Speaker 1: Yep, all right, all interesting stuff there. Companies, countries, politicians
17:22
Speaker 1: have to think about this as the global population continues
17:26
Speaker 1: to age.
17:27
Speaker 4: You're listening to the tape cats are live program Bloomberg
17:30
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, the
17:33
Speaker 4: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
17:37
Speaker 4: You can also listen live on Amazon Alexa from our
17:40
Speaker 4: flagship New York station. Just say Alexa, play Bloomberg eleven thirty.
17:45
Speaker 3: Yeah, we'll get straight to our next guest who's a
17:48
Speaker 3: veteran investor, George Bass, chairman at Sanders Bors Harris joints
17:53
Speaker 3: us on Zoom to discuss all things markets and his
17:55
Speaker 3: stock pick.
17:56
Speaker 1: You know, just when I came on Wall Street in
17:58
Speaker 1: the mid sixties, George was, I believe, the chairman of
18:01
Speaker 1: Prudential Base, which Bach company proceeded, and then Prudential bought Base,
18:06
Speaker 1: one of the top from One Street, and I'll tell
18:09
Speaker 1: you what, one of the best research departments on the.
18:11
Speaker 3: Street at the time, and we're excited for him to
18:13
Speaker 3: be here. George, I wanted to pick your brain because
18:15
Speaker 3: in the last couple of months you had been making
18:17
Speaker 3: some comments about how you thought the big tech riley
18:20
Speaker 3: had run its course, but you still were thinking the
18:22
Speaker 3: broader equity market would approach new record highs this year.
18:26
Speaker 3: Are you still thinking that'll be the case for the
18:28
Speaker 3: second half of the year.
18:31
Speaker 9: The majority of the experts, the pundits seemed to be
18:35
Speaker 9: on the side of the market weekening. As we get
18:40
Speaker 9: further into the year, there's a bit of a war
18:44
Speaker 9: between what I'd call Morgan Stanley on the one hand,
18:47
Speaker 9: which is predicating a one hundred and eighty some dollar
18:52
Speaker 9: earnings on the S and P five hundred and then
18:55
Speaker 9: the more optimistic to twenty plus s and P earnings
19:00
Speaker 9: estimates of Golden and Sacks, with again the majority of
19:04
Speaker 9: the experts, and they are smart people, falling on the
19:08
Speaker 9: more negative camp. I do think that they're wrong. And
19:15
Speaker 9: by the way, I'll say that they interest to Wall
19:20
Speaker 9: Street was more in the nineteen seventies and the sixties.
19:23
Speaker 9: But back then, way back then, five percent interest rates
19:29
Speaker 9: were common. They were accepted by business, and businesses operated
19:34
Speaker 9: very profitably with comfortable profit margins with interest rates at
19:38
Speaker 9: five percent. That's happening again today. Over the last decade,
19:43
Speaker 9: we sort of forgot that managements and consumers and the
19:49
Speaker 9: economy can live all right with interest rates at a
19:53
Speaker 9: five percent or so level, And that I think is
19:57
Speaker 9: an optimistic note for the market and earnings and the
20:00
Speaker 9: economy going forward.
20:02
Speaker 1: George, you know, technology has been such a leader of
20:06
Speaker 1: this market really since the Great Financial Crisis. I mean
20:08
Speaker 1: it just felt like, you know, really leadership position in
20:12
Speaker 1: the marketplace. Do you still think that's the case here
20:15
Speaker 1: in a world where again you've got rising interest rates
20:17
Speaker 1: into your treasuries at four point seventy five percent, Can
20:20
Speaker 1: tech still be the leader.
20:23
Speaker 9: Technology stocks have been balancing with interest rates on the
20:27
Speaker 9: assumption that the futurejourneys of technology companies will be a
20:33
Speaker 9: function of dividends paid well well out many years from now.
20:38
Speaker 9: But get back to the base case. Technology and the
20:41
Speaker 9: changes in technology are what's driving growth, productivity, constructive change
20:49
Speaker 9: in economies worldwide. That's not going to fold. My supposition
20:57
Speaker 9: is that the big, big technology companies, the fang pluses,
21:03
Speaker 9: the seven stocks that have driven almost all the games
21:07
Speaker 9: in the SMP this year, are so darn big that
21:12
Speaker 9: they can't grow very rapidly anymore. They're great companies, they're
21:17
Speaker 9: doing extremely well, they're financial fortresses, but simply as a
21:23
Speaker 9: matter of scale, they've reached the point of diminishing returns.
21:29
Speaker 9: And so I'm looking at what I term mid tech
21:33
Speaker 9: companies as the next wave of fundamentally justified, high growth,
21:41
Speaker 9: high contributor companies, where the stocks are way down from
21:45
Speaker 9: the perhaps unjustified levels of last year, but have an
21:50
Speaker 9: enormous amount of upside potential, and that's going to start
21:54
Speaker 9: to be recognized as we get into the second half
21:57
Speaker 9: of this year. So I'm saying by mid sell the
22:02
Speaker 9: big fangy type stocks as we get into the second
22:05
Speaker 9: half of twenty twenty three.
22:08
Speaker 1: George, you've held leadership positions on Wall Street for decades,
22:12
Speaker 1: again going all the way back to E. F. Hutton
22:15
Speaker 1: and Base, some of the all time iconic brands on
22:18
Speaker 1: Wall Street. What's your view of the business of Wall
22:21
Speaker 1: Street these days?
22:24
Speaker 9: The business of Wall Street is much more commoditized these
22:27
Speaker 9: days than it was back then, but it is still
22:31
Speaker 9: the found from which money for companies to grow and
22:39
Speaker 9: to expand and to diversify comes. And it's also probably
22:44
Speaker 9: the best place for individuals to put their savings, their
22:49
Speaker 9: excess cash to work. So Wall Street continues to be
22:53
Speaker 9: a marvelous place, much less humanistic than it used to be,
22:58
Speaker 9: but vital to the economy and by the way, one
23:02
Speaker 9: of our big national advantages. We have the ability to
23:09
Speaker 9: create money for growth much more efficiently than other economies,
23:14
Speaker 9: and it's apt to give us a competitive edge that
23:18
Speaker 9: extends into the next twenty or thirty years.
23:20
Speaker 3: With that said, George, we got to know what are
23:22
Speaker 3: your top stock picks.
23:25
Speaker 9: Well, again, consistent with my mid tech theory, I would
23:32
Speaker 9: use as example specifics but also as examples Teledoc. Teledoc
23:39
Speaker 9: reaches over fifty million Americans. It's a company that is
23:44
Speaker 9: not yet profitable all those cash flow positive. If they
23:48
Speaker 9: can take just a fair slice of their client or
23:53
Speaker 9: patient base and convert it to a subscription model at
23:57
Speaker 9: fair economic prices, they have enormous ability to earn a
24:01
Speaker 9: great deal of money. Trade desk is what the ad
24:06
Speaker 9: agencies were back in the nineteen sixties and seventies when
24:10
Speaker 9: I started. Trade desk is a way of placing advertising
24:15
Speaker 9: or seeking advertisers on an efficient basis, and its ability
24:20
Speaker 9: to grow exponentially over the next ten years is I
24:25
Speaker 9: think almost unrivaled. Mercarlil Libra, the Amazon of South America
24:34
Speaker 9: and Central America is very profitable, but it's just scratching
24:39
Speaker 9: the surface. So that's a trio of mid tech companies.
24:43
Speaker 9: They're sizable, but they're converting from a revenue growth model
24:51
Speaker 9: to a profit growth model.
24:54
Speaker 1: George, one of the themes that's really come into this
24:56
Speaker 1: market over the last year or so is artificial intelligence AI.
25:00
Speaker 1: And we had a well regarded Wall Street analyst earlier
25:03
Speaker 1: says this is like the nineteen eighty five Internet Aha moment,
25:08
Speaker 1: or you know, kind of like when a Google came
25:11
Speaker 1: on and we said Oh boy, this is a big
25:14
Speaker 1: moment for the internet. He said, it's something akin to that.
25:18
Speaker 1: How do you view this thing called artificial intelligence AI?
25:21
Speaker 1: It really seems to be the theme of the tech
25:24
Speaker 1: world these days.
25:27
Speaker 9: I'm going to sound like an old fogy and that
25:30
Speaker 9: really bothers me. They don't want to do it. I'd
25:32
Speaker 9: rather take a different view. Yeah, AAI is a marvelous
25:37
Speaker 9: step forward because it's going to give people access in
25:41
Speaker 9: multi dimensions to all of the wealth of knowledge of
25:47
Speaker 9: the world, and it will write things that will seek
25:51
Speaker 9: things that will display things brilliantly and very helpfully. But
25:57
Speaker 9: it is not predictive. It is a look into the
26:03
Speaker 9: database of what's known up to now, and so I
26:07
Speaker 9: don't think it's going to be transformative in the sense
26:10
Speaker 9: of being the fuel cell of growth the way many
26:13
Speaker 9: people are predicting. I don't think it's a fat or
26:17
Speaker 9: a bubble. But I think it's importance in the economic
26:22
Speaker 9: future of our country and of the world is overstated.
26:26
Speaker 9: You know, the past is destructive, but it's not predictive,
26:32
Speaker 9: and so AI is important but not transformative in my
26:36
Speaker 9: perhaps geriatric view.
26:37
Speaker 1: No, it's a perfectly relevant view. And but lastly, George,
26:40
Speaker 1: I have to ask, are you an Aspen Colorado right now?
26:45
Speaker 9: No, I'm in the Salt Colorado. If you can't quite
26:47
Speaker 9: afford to be an Aspen, you've got ten miles down there.
26:50
Speaker 1: All right, wherever you are in Colorado, I'm just where
26:53
Speaker 1: I am.
26:53
Speaker 5: All right.
26:53
Speaker 1: Wherever you are in Colorado, I'm just going to suggest
26:55
Speaker 1: you might be a little overdressed. You look very solid
26:57
Speaker 1: for Wall Street, but I think the Colorado and for
27:00
Speaker 1: Bloomberg Markets next time you can certainly go a little
27:04
Speaker 1: bit more casual if you're in Colorado. George Ball everyone
27:07
Speaker 1: just literally an iconic person on Wall Street. He's the
27:12
Speaker 1: chairman of Sanders Mars Harris, but has really been a
27:15
Speaker 1: leader on Wall Street for decades, I mean CEO level leader,
27:20
Speaker 1: and it's just amazing the career he's had. Again, it
27:22
Speaker 1: goes all the way back to E. F. Hutton and
27:24
Speaker 1: you kids can look that up. Base Company another fantastic firm,
27:28
Speaker 1: bought by Prudential Securities when it became Prudential Base and
27:31
Speaker 1: then Potential Securities and again one of the leading firms
27:34
Speaker 1: on the street. So George has seen it all. We
27:35
Speaker 1: appreciate getting a few minutes of his time.
27:40
Speaker 4: You're listening to the team Ken's are live program Bloomberg
27:43
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg dot Com,
27:47
Speaker 4: the iHeartRadio app, and the Bloomberg Business App, or listen
27:50
Speaker 4: on demand wherever you get your podcasts.
27:54
Speaker 1: All right, let's talk about our good friends at Amazon.
27:58
Speaker 1: We've all got boxes probably sitting in front of our
28:00
Speaker 1: doors as we speak, are good friends at Amazon. And
28:03
Speaker 1: then there's a little thing called Prime. I'm a huge
28:05
Speaker 1: fan of Prime. Free delivery, gets created, the audio video service,
28:09
Speaker 1: all kinds of stuff kind of wrapped up in there.
28:11
Speaker 1: But apparently the FTC has taken a look at this thing.
28:13
Speaker 1: Matt Sheltenham, he's a senior litigation analyst. That means he's
28:17
Speaker 1: an attorney, but he's come over from the dark side
28:20
Speaker 1: and he's working on Wall Street and giving us some
28:22
Speaker 1: good research for Bloomberg Intelligence. Here, Matt talked to just
28:26
Speaker 1: describe what the issue f the FTC has with Amazon
28:30
Speaker 1: and its Prime business.
28:32
Speaker 10: Yeah, Paul, we saw this this emerge somewhat surprisingly last
28:35
Speaker 10: week when when the FDC filed this lawsuit on Wednesday
28:39
Speaker 10: alleging that Amazon has tricks or duped millions of consumers
28:44
Speaker 10: into signing up for Prime and and and in particular
28:50
Speaker 10: for the automatic renewal of those Prime membership and and
28:55
Speaker 10: and the allegation is that that violates a federal law
29:00
Speaker 10: and that Amazon's potentially on the hook for, you know,
29:05
Speaker 10: hundreds of millions of dollars or more in damages for
29:09
Speaker 10: or tricking consumers into staying with the program that they
29:12
Speaker 10: don't really want to be a part of.
29:14
Speaker 3: And it's interesting because going through this, it says the
29:16
Speaker 3: FTC was talking about how consumers must click through five
29:19
Speaker 3: pages on the desktop web store or six on the
29:22
Speaker 3: mobile app to cancel Prime, so clearly making it pretty
29:25
Speaker 3: difficult right for consumers to try to cancel this. I mean,
29:29
Speaker 3: how much and how far do you think this potential
29:32
Speaker 3: case could potentially go?
29:34
Speaker 10: Yeah, so, I mean that's exactly the allegation. What's really
29:38
Speaker 10: the big unknown here, though, is what is simple? The
29:43
Speaker 10: law requires a simple mechanism for subscribers to cancel automatic
29:50
Speaker 10: renewal plans like this.
29:51
Speaker 1: How about the time to the cable telephone company, cable
29:53
Speaker 1: television companies? How hard is that to cancel?
29:56
Speaker 10: Exactly? And that's exactly what you're going to hear from
29:59
Speaker 10: Amazon in the case is look at all these other
30:02
Speaker 10: businesses that make it so difficult. You got you want
30:05
Speaker 10: to cancel your gym membership, You got to go into
30:07
Speaker 10: the gym to to you know, find somebody to talk to.
30:10
Speaker 10: Other companies require you to call somebody on the line.
30:13
Speaker 10: Here we're talking about six clicks and and yeah, there
30:16
Speaker 10: are some extra hoops along the way, but there's very
30:19
Speaker 10: little guidance in the law on what is simple and
30:22
Speaker 10: what isn't. And so you know, I think there's a
30:24
Speaker 10: there's a real argument for Amazon to make here that
30:27
Speaker 10: the FDC is really straining to argue that that that
30:32
Speaker 10: the six clicks process violates the law.
30:36
Speaker 1: I mean, to me, first of all, I don't feel
30:38
Speaker 1: like like I was duped.
30:40
Speaker 3: I actually had an issue when it came to Audible
30:42
Speaker 3: when it comes to their podcast. I actually went through
30:45
Speaker 3: this a couple of months ago where I canceled and
30:47
Speaker 3: then kept getting charged and had it called up and
30:49
Speaker 3: go through this. So it's interesting now that but I
30:52
Speaker 3: kind of felt a little miffed there when that had
30:55
Speaker 3: happened to me.
30:56
Speaker 1: So, Matt, what is what's Amazon's mo when dealing with regulars?
31:01
Speaker 1: Do they just like settle these things out of court
31:03
Speaker 1: or do they fight them to toth and nail.
31:05
Speaker 10: Yeah. So, I mean for a company like Amazon, it's
31:08
Speaker 10: really hard for a suit like this to to be
31:11
Speaker 10: too threatening. But one reason it does matter is that
31:15
Speaker 10: the FTC's power to impose penalties is very broad. In theory,
31:20
Speaker 10: the FTC can impose fifty thousand dollars per violation, and
31:25
Speaker 10: that can be counted by user, So you start to
31:28
Speaker 10: go one hundred million times fifty thousand and you get
31:30
Speaker 10: to some gigantic number with lots of zeros at the end.
31:33
Speaker 10: So Amazon has to pay attention to this, especially when
31:38
Speaker 10: when the leader of the FTC, Lena Khan, is looking
31:41
Speaker 10: to be very aggressive in grow going after companies like Amazon. So,
31:47
Speaker 10: you know, I think Amazon would be happy to settle
31:49
Speaker 10: it for a small you know, a small figure, you know,
31:52
Speaker 10: relatively quickly. It's it's it's unclear whether the FTC would
31:56
Speaker 10: go on you know, be on board with that right away.
31:59
Speaker 10: But you know, I really do think Amazon has a
32:02
Speaker 10: good chance to prevail in this litigation, but it's going
32:06
Speaker 10: to take time, and so I do expect it to
32:08
Speaker 10: play out for a couple of years before we see
32:11
Speaker 10: a resolution. But it's really hard to see the FTC
32:14
Speaker 10: winning a material damage amount against Amazon here.
32:18
Speaker 3: Ultimately, so the timetable, like you said, being potentially a
32:23
Speaker 3: couple of years when it comes to this.
32:25
Speaker 10: Yeah, that's what I think. So I you know, this
32:27
Speaker 10: was just filed last Wednesday. I think you're likely to
32:30
Speaker 10: see a couple rounds of this litigation. And you know,
32:33
Speaker 10: the big risk for Amazon is this gets to a
32:36
Speaker 10: jury that that could could potentially offer you know, a
32:40
Speaker 10: damages award in the millions or even billions of dollars.
32:44
Speaker 10: That's what you can't let happen. But there are two
32:46
Speaker 10: steps in the litigation and process before we get there. One,
32:50
Speaker 10: Amazon can file a most into the myth, the whole
32:52
Speaker 10: thing and say, look, this doesn't even state a valid claim.
32:55
Speaker 10: I don't think that will work. It has a chance.
32:58
Speaker 10: But then even after a year or two of discovery,
33:01
Speaker 10: when they dive into the evidence, Amazon can say, look,
33:04
Speaker 10: the FTC collected all this evidence and there's still not
33:08
Speaker 10: a case that should go to a jury. That's point
33:10
Speaker 10: I think Amazon has a really good, good argument to
33:13
Speaker 10: the judge to say, look, Amazon's process may not have
33:16
Speaker 10: been perfect, but you know it's probably enough to qualify
33:19
Speaker 10: as a simple mechanism under this unclear standard under the law.
33:23
Speaker 10: So yeah, I think that's going to take a couple
33:25
Speaker 10: of years before we see any action, and certainly before
33:28
Speaker 10: it goes to a jury in a trial like setting.
33:31
Speaker 1: Hey, Matt, We've been talking to jenre who covers antitrust
33:34
Speaker 1: for Bloomberg Intelligence, and just talking about kind of the
33:37
Speaker 1: regulatory environment out there for businesses, particularly big tech, and
33:40
Speaker 1: it's really tough for big tech companies to really do
33:42
Speaker 1: anything here from your perspective, from the litigation side, what's
33:46
Speaker 1: the environment like out there for business? Is it tougher
33:50
Speaker 1: to do business as a government really taking a harder line.
33:54
Speaker 10: It's certainly there's been a change, certainly in you know,
33:58
Speaker 10: the past five to ten years in Washington, d C.
34:01
Speaker 10: On the regulation side, you know, we had this idea
34:04
Speaker 10: that for for a couple of decades, look, it's best
34:06
Speaker 10: to get out of the way of the Internet, let
34:08
Speaker 10: the Internet thrive. Everything is sort of changed in terms
34:12
Speaker 10: of policy in terms of okay, maybe we went too
34:15
Speaker 10: far in that direction, And you're seeing the same thing
34:18
Speaker 10: on the litigation side, where class act and lawyers the
34:21
Speaker 10: opportunities to go after companies like like Meta and Google
34:27
Speaker 10: for you know, potentially addictive social media you're seeing second
34:31
Speaker 10: in two thirty, the liability field that has long protected
34:34
Speaker 10: these companies suddenly people suggesting, maybe we've we've read that
34:38
Speaker 10: liability field too broadly, maybe we should be able to
34:41
Speaker 10: do these companies about harms and so it's it's it's
34:45
Speaker 10: an on thlought of different attacks that they didn't face
34:50
Speaker 10: five or ten years ago. That doesn't mean they're going
34:52
Speaker 10: to lose these cases. The companies have strong defenses to
34:56
Speaker 10: a lot of the claims, but it's definitely a more
34:59
Speaker 10: difficult and vironment than it was a couple of years back.
35:02
Speaker 1: And that's why Bloomberg Intelligence has a bunch of analysts
35:05
Speaker 1: and lawyers and smart people down in Washington with their
35:08
Speaker 1: fingers on the pulse of what's happening down there, so
35:10
Speaker 1: they can provide some very valuable research to Bloomberg customers.
35:14
Speaker 1: So Matt Shunholm is certainly one of them. He's a
35:15
Speaker 1: senior litigation analyst for Bloomberg Intelligence space down in Washington, DC.
35:20
Speaker 1: So we'll have to follow that. For Amazon, the numbers,
35:22
Speaker 1: you know, relative to its market cap arn't material, but
35:24
Speaker 1: it goes to one of the one of their core
35:27
Speaker 1: business practices here. So we'll see how they continue to
35:30
Speaker 1: fight this. But again, it's tough to fight the government
35:32
Speaker 1: and the Federal Trade Commission. But I guess if anybody
35:34
Speaker 1: can do it, it's Amazon.
35:36
Speaker 4: You're listening to the tape Cat's are live program Bloomberg
35:39
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, tune
35:43
Speaker 4: in app, Bloomberg dot Com, and the Bloomberg Business app.
35:46
Speaker 4: You can also listen live on Amazon Alexa from our
35:49
Speaker 4: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
35:55
Speaker 1: Let's get right to our next guest because we get
35:56
Speaker 1: to live to the instrument.
35:57
Speaker 3: Yes in studio.
35:58
Speaker 8: I love this.
35:59
Speaker 1: I know Kevin Time and senior automotive analyst for Bloomberg Intelligence.
36:02
Speaker 1: He's based down on our Printson campus. But in case
36:05
Speaker 1: he gets up to the big town, Kevin, thanks so
36:07
Speaker 1: much for joining us. Lots of ways to go here,
36:10
Speaker 1: but first I gotta start your Mercedes that you drive
36:12
Speaker 1: as a V twelve it is does that means it
36:14
Speaker 1: has twelve cylinders twelve Cylin, and I have six in
36:17
Speaker 1: my car. That's right, So you have twice as many,
36:19
Speaker 1: that's correct.
36:20
Speaker 11: Why it's and it's Here's the beautiful thing is it's
36:23
Speaker 11: a two thousand and one Roadster V twelve with I
36:29
Speaker 11: don't know, ninety six thousand miles on it. So my
36:32
Speaker 11: carbon footprint is actually smaller than anybody who.
36:35
Speaker 5: Made them build a new EV.
36:39
Speaker 1: All right, that's all I say. I had to clear
36:40
Speaker 1: that up there. I thought I was a tough guy
36:42
Speaker 1: with six cylinders, but you got your driving around twelve. Great,
36:44
Speaker 1: all right, let's start with Ford. Ford cutting some jobs here.
36:48
Speaker 5: Why yeah.
36:49
Speaker 11: You know, what I thought was interesting about this was
36:52
Speaker 11: that you don't have this condition in the industry, or
36:57
Speaker 11: at least in North America, of oversupply, right like too big,
37:01
Speaker 11: too much product, too much production capacity, and we need
37:05
Speaker 11: to cut back.
37:06
Speaker 7: You know.
37:06
Speaker 11: Inventory on the ground industry wide now in the US
37:09
Speaker 11: is about half what it was at the peak, which
37:12
Speaker 11: would be peak volumeer was twenty sixteen, seventeen and a
37:16
Speaker 11: half million. Yep, we'll do fifteen this year, fifteen and
37:19
Speaker 11: a half at the outside, you know. So inventory is
37:23
Speaker 11: really in line with demand for the most part, and
37:28
Speaker 11: you're seeing rationalization of costs still, which my conclusion is
37:35
Speaker 11: is that this industry is very different than what it
37:37
Speaker 11: used to be, which was a lot of fixed costs,
37:40
Speaker 11: a lot of overhead produce produced, produce, figure out how
37:43
Speaker 11: to sell it tomorrow by giving it away incentives, discounting,
37:48
Speaker 11: lease deals, whatever it is. And to me, these job
37:51
Speaker 11: cuts really show that the mindset of the manufacturers auto
37:54
Speaker 11: manufacturers is we're not going back to that world.
37:59
Speaker 3: I wanted to toward Tesla because we are seeing at
38:02
Speaker 3: stock higher more than one percent today, so that is
38:05
Speaker 3: pushing discretionary shares higher, and obviously it's waiting in the
38:08
Speaker 3: S and P five hundred close to about two percent.
38:10
Speaker 3: We did see that downgrade from Goldman Sachs on Tesla
38:13
Speaker 3: earlier this week, just because of the difficult pricing environment.
38:16
Speaker 3: But we saw that huge run Tesla had been on
38:19
Speaker 3: that was snapped earlier this month. Obviously it was a
38:22
Speaker 3: thirteen session span. Stock gained over forty percent. I know
38:26
Speaker 3: that Paul's been watching RSI levels very closely, so it
38:29
Speaker 3: actually got to around eighty eight eighty eight earlier this month,
38:33
Speaker 3: obviously above seventies that overbought level. But what are you
38:36
Speaker 3: seeing when it comes to Tesla's stock there and doesn't
38:38
Speaker 3: make sense that we've seen a little bit of a
38:40
Speaker 3: pullback after such a strong run like that.
38:42
Speaker 4: Yeah.
38:42
Speaker 11: Well, the difficult part, you know, as an analyst is
38:47
Speaker 11: is to make sense of what the Tesla stock does
38:50
Speaker 11: it's its own product, right, compared to what the fundamentals
38:55
Speaker 11: of that company or of the industry are. So, you know,
38:59
Speaker 11: I think the longer we go, we see that this
39:02
Speaker 11: is an automaker, right, there's obviously big technology competitive advantages,
39:08
Speaker 11: at least perceived, and we saw the idea of the
39:12
Speaker 11: charging with GM and Ford signing on with that.
39:16
Speaker 5: That pushes the.
39:17
Speaker 11: Stock price higher, But ultimately this is an automaker with
39:22
Speaker 11: automaker demand issues. I was actually driving around with my
39:25
Speaker 11: wife this weekend and we drove by one of the malls,
39:29
Speaker 11: the Quaker Bridge Mall, and there's there in the parking
39:32
Speaker 11: lot there's overflow Tesla inventory as far as the eye
39:36
Speaker 11: can see. Actually made her pull over and I got out.
39:38
Speaker 5: And took pictures for myself.
39:40
Speaker 11: But you know, so when you look at it in
39:43
Speaker 11: the from the perspective of a metal bender that needs
39:47
Speaker 11: to produce and sell, and you take some of that
39:51
Speaker 11: technology angle away from it, you're going to have those
39:55
Speaker 11: periods where the stock just just adjusts yep, and then
39:59
Speaker 11: you you're gonna have periods where there's an announcement and
40:02
Speaker 11: it makes a big difference to the upside.
40:04
Speaker 1: And one of the things I don't I'm still trying
40:06
Speaker 1: to get a sense of is if I were Tesla
40:08
Speaker 1: investor or an analyst, is kind of where it fits
40:10
Speaker 1: into a world that's going completely electric. They get all
40:14
Speaker 1: the credit in the world for being first and being really,
40:16
Speaker 1: really really good, But in a day, as you suggest,
40:20
Speaker 1: it's a metal bending business and Ford gm VW. So
40:24
Speaker 1: when I think about Tesla, Rivian, Lucid all these other ones,
40:28
Speaker 1: how do you think this industry is gonna shake out?
40:31
Speaker 7: Yeah?
40:31
Speaker 11: I think we're through a period where where markets investors
40:37
Speaker 11: talked about the auto industry like it was the tech
40:39
Speaker 11: industry or these were tech companies, and they always have
40:42
Speaker 11: been right. Automakers have always been ahead of the curve
40:45
Speaker 11: of technology wise developed some great things over the years,
40:49
Speaker 11: and I think there was this belief that because of Tesla,
40:52
Speaker 11: that this entire industry was now, all of a sudden,
40:55
Speaker 11: a technology industry. So what you get is you're either
40:59
Speaker 11: going to get every other automaker that is essentially doing
41:03
Speaker 11: and can do the same things as Tesla, Beee considered
41:07
Speaker 11: tech companies and deserve those valuations, or you're going to
41:10
Speaker 11: get the ones that had the wild technology valuations, you know,
41:14
Speaker 11: recalibrated down to automakers. And I think that's the that's
41:19
Speaker 11: the greater likelihood. Ford and GM are never going to
41:22
Speaker 11: be and have never been valued like that. And I
41:25
Speaker 11: think the reality would be more that the EV and
41:29
Speaker 11: technology companies would be valued more as automakers than the reverse.
41:33
Speaker 3: And our friend Matt Miller actually interviewed Ford's CEO Jim Farley,
41:38
Speaker 3: about a month ago, it's actually toward late May, about
41:41
Speaker 3: cost cuts, auto prices, evs when it comes to Ford
41:45
Speaker 3: in position to some of these other competitors that we're
41:48
Speaker 3: talking about, and obviously it's outlook for the next few years,
41:52
Speaker 3: do you think that's sustainable and do you think it
41:53
Speaker 3: could happen?
41:55
Speaker 11: Well, yeah, I mean I think profitability is going to
41:59
Speaker 11: drive I've adoption, right. These these are automakers, the legacy
42:05
Speaker 11: automakers are making a lot of money doing what they're
42:08
Speaker 11: good at, which is trucks and SUVs, and then being
42:13
Speaker 11: asked or forced into this transition to EV when it's
42:16
Speaker 11: not really ready. And I understand the concept of disruption,
42:20
Speaker 11: and that's what happens, and some things are messy during
42:23
Speaker 11: the transition. But you know, during the period where we
42:27
Speaker 11: transition to truck from car, that was profitable on the
42:30
Speaker 11: first day. Right So now you have you know, Tesla
42:35
Speaker 11: leading the way, but the governments starting to get involved
42:38
Speaker 11: with credits and infrastructure spending, motivating the consumer to demand
42:43
Speaker 11: these things that the manufacturer can't necessarily make money.
42:46
Speaker 5: On just yet.
42:47
Speaker 11: And it's and it's a it's a messy transition period
42:50
Speaker 11: right now because you don't want to give up profitable
42:54
Speaker 11: things to do unprofitable things in this market right now.
42:57
Speaker 1: You know, I drove the Ford F one fifty of
43:00
Speaker 1: electric one and as first time I drove a pickup
43:02
Speaker 1: truck probably the last. I'm a Wall Street guy, I'm
43:05
Speaker 1: not dry. My son's got one and it was my
43:08
Speaker 1: first electric vehicle, and boy, it blew me away in
43:11
Speaker 1: terms of the power and it's work and things like that.
43:13
Speaker 1: Is the belief in Detroit that the average pickup truck
43:17
Speaker 1: driver will demand an electric version.
43:21
Speaker 11: Well, I guess it's going to depend. I mean the
43:23
Speaker 11: towing capacity of the range. You know, there's and look
43:28
Speaker 11: and what I would say is this is that it's
43:31
Speaker 11: why we have segments. It's why we have vehicles with
43:34
Speaker 11: different capabilities, you know, so different drive trains. I got
43:39
Speaker 11: twelve cylinders, you got six, you know, like that, and
43:42
Speaker 11: to make the world go round. So the idea that
43:45
Speaker 11: maybe the technological singularity of internal combustion being traded for
43:51
Speaker 11: the singularity of electrification, for me is a difficult concept
43:54
Speaker 11: because I feel like there is a place, there's people
43:58
Speaker 11: that need, but I'm not sure we're ready to say
44:01
Speaker 11: one hundred this is your only option in terms of
44:04
Speaker 11: drive train technology.
44:06
Speaker 3: I hear you're speaking at a Bloomberg Intelligent event to
44:09
Speaker 3: date right upstairs.
44:11
Speaker 1: Uh right, and what are we doing there?
44:13
Speaker 11: That's uh the bi Lithium conference. So I'm the I'm
44:17
Speaker 11: the square you're the that's right here, the auto guy.
44:20
Speaker 1: I'm the square peg And just what what is the
44:23
Speaker 1: we got thirty seconds? Okay, what's the consensus out there
44:26
Speaker 1: on the street about lithium batteries? Are Is there going
44:28
Speaker 1: to be enough stuff? Are we going to be able
44:30
Speaker 1: to get them all?
44:30
Speaker 5: And no?
44:31
Speaker 11: That's and that's one of the things that I was
44:33
Speaker 11: out last week speaking at a couple of dealer conventions
44:37
Speaker 11: Louisiana Dealers, Virginia dealers. And that's the big question is
44:43
Speaker 11: you know, we hear this one hundred percent by whatever
44:46
Speaker 11: date you know, and and it's when you when you
44:50
Speaker 11: total up the market share and the volume, it just
44:54
Speaker 11: doesn't compute with the materials that we have access to,
44:58
Speaker 11: you know. And and the most cynical of them would say, look,
45:02
Speaker 11: we're essentially trading our dependence on foreign oil for our
45:06
Speaker 11: dependence on China materials.
45:08
Speaker 5: Yep at this point.
45:10
Speaker 11: But a lot of people don't want to talk about that.
45:12
Speaker 1: But you will. Yeah, that's why we've read Kevin Log,
45:15
Speaker 1: Kevin Tyne, and Old School Auto Kevin Tiny, senior automotive
45:19
Speaker 1: analyst for Bloomberg Intelligence, joining us here live and our
45:22
Speaker 1: Bloomberg Interactive Broker Studio. We appreciate that.
45:25
Speaker 4: You're listening to the tape. Cats are live program Bloomberg
45:28
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, the
45:32
Speaker 4: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
45:35
Speaker 4: You can also listen live on Amazon Alexa from our
45:38
Speaker 4: flagship New York station, Just say Alexa play Bloomberg eleven
45:42
Speaker 4: thirty one.
45:44
Speaker 1: Thing we don't talk about we've already should is signific
45:47
Speaker 1: it at you know asset class. If you all alternative
45:50
Speaker 1: asset class, which is jewelry. Our next guest can help
45:53
Speaker 1: us do that oncoor Dagga joints us he's the CEO
45:55
Speaker 1: of Angara and he joins us here in O bloombergetting
45:58
Speaker 1: Arrective Broker Studio. Thanks once for joining us.
46:00
Speaker 12: Absolutely great to be here.
46:02
Speaker 1: Tell us about your company. What do you guys do it?
46:04
Speaker 12: And Kara, So we specialize in colored gemstones, so ruby, emerald, sapphire.
46:08
Speaker 12: We are vertically integrated, so we do everything from buy
46:10
Speaker 12: from the mines, cut in polish gemstones, design jewelry, manufactured jewelry,
46:14
Speaker 12: and retail over the web in over thirty countries.
46:16
Speaker 3: And you grew up in the jewelry industry. Talk to
46:19
Speaker 3: us about how you got started.
46:21
Speaker 1: Yeah, absolutely so I did.
46:23
Speaker 12: From the age of five. I was going to my
46:24
Speaker 12: dad's wholesale business and I inutially vowed that I would
46:28
Speaker 12: never come back into the industry. It was quite antiquated,
46:32
Speaker 12: and like Paula worked at Credits weeks before and then McKenzie.
46:35
Speaker 12: My largest project at McKinzie was turning around a jewelry
46:38
Speaker 12: retailer and I was like, wow, there's a lot of
46:40
Speaker 12: opportunity here and then there we are, all.
46:42
Speaker 1: Right, explain to me this thing. I know nothing about it.
46:45
Speaker 1: You know, I'm gonna say natural mind diamonds versus lab
46:50
Speaker 1: grown diamonds. I didn't even know there was really a
46:52
Speaker 1: thing for lab grown diamonds. Talk to us about lab
46:55
Speaker 1: grown diamonds.
46:56
Speaker 12: Yeah, So they've been gaining popularity over the last three years.
47:00
Speaker 12: Twenty eighteen, the FTC said a lab grown diamond is
47:03
Speaker 12: a diamond, just like a natural diamond. Is the only
47:06
Speaker 12: caveat is you have to disclose that as lab grown.
47:09
Speaker 12: Since then, the industry has really taken off. So in
47:12
Speaker 12: twenty twenty they were roughly two point three percent of
47:15
Speaker 12: all diamonds sold. Now they're over ten percent, and the
47:18
Speaker 12: growth rate obviously is fantastic, but in terms of unit
47:21
Speaker 12: volumes even more so.
47:23
Speaker 1: Now.
47:24
Speaker 12: I think part of why they are so attractive is
47:27
Speaker 12: now they are trading at seventy five percent to ninety
47:30
Speaker 12: percent cheaper than their natural mind equipment.
47:32
Speaker 1: Really, and what do they look like?
47:34
Speaker 12: How did they So they are optically, physically, chemically identical
47:39
Speaker 12: to natural so they really are a perfect substitute.
47:43
Speaker 1: So what's that done for the price of natural.
47:45
Speaker 12: Diamonds, that is, that is a significant issue. So our
47:48
Speaker 12: industry generally has not been prone to technological disruption. This
47:53
Speaker 12: is the first time. So over the last twelve months,
47:56
Speaker 12: diamond prices have gone down anywhere between eighteen and twenty
47:59
Speaker 12: four percent, and I think they're going to go down
48:02
Speaker 12: by another twenty to twenty five percent over the next.
48:04
Speaker 3: Twelve mile And how did COVID play into that in
48:07
Speaker 3: the direction of diamond prices.
48:09
Speaker 12: So COVID was another anominally for US, as many other industries.
48:13
Speaker 12: Acid prices for diamonds specifically went up by twenty five
48:16
Speaker 12: percent between let's say June twenty twenty and June twenty
48:20
Speaker 12: twenty two. But that demand has now moderated. During COVID,
48:23
Speaker 12: people couldn't go out, they couldn't eat out, they couldn't travel.
48:26
Speaker 12: A lot of that stimulus money went into luxury, especially jewelry,
48:32
Speaker 12: and now we're seeing a moderation of that. But what's
48:34
Speaker 12: now causing the further dip is really technology and lab
48:37
Speaker 12: grown diamonds.
48:38
Speaker 3: And what exactly was the catalyst for those prices moderating.
48:43
Speaker 12: So demand has receded a little bit after the pandemic
48:48
Speaker 12: has come off because now people are traveling a lot more,
48:50
Speaker 12: they're eating out a lot more, so they're balancing where
48:53
Speaker 12: they're spending their money.
48:54
Speaker 1: Again, So your company over four hundred employees, where are
48:58
Speaker 1: they and what do they do? Sure?
49:00
Speaker 12: So we have now ten offices across the world. LA
49:05
Speaker 12: is our headquarters. India's our largest operation, followed by Thailand
49:09
Speaker 12: and then Ireland, UK, Australia, Canada to add interesting.
49:13
Speaker 1: Okay, so talk to us about kind of some other
49:17
Speaker 1: gemstones and how do they compare us investments? Because I
49:20
Speaker 1: know a lot of people think about them. It's not
49:22
Speaker 1: just what I wear around on my finger or around
49:24
Speaker 1: my neck. It's an investment for me. How does how
49:27
Speaker 1: does those gemstones perform? That's right.
49:29
Speaker 12: So colored gemstones as opposed to diamonds, are seeing a
49:32
Speaker 12: great boom over the last three years. So the S
49:35
Speaker 12: and P three year kieger is around eleven and a
49:37
Speaker 12: half percent. Rubies have gone up by seventeen percent per year,
49:41
Speaker 12: sapphires by twelve percent a year, emeralds by thirteen percent.
49:45
Speaker 12: Some of the more niche gemstones like opals and turmalines
49:48
Speaker 12: are up anywhere from twenty percent a year to thirty
49:50
Speaker 12: six percent a year, so they are crushing the S andp.
49:53
Speaker 3: So there's this growing appreciation for more colored stones as
49:56
Speaker 3: an asset class.
49:57
Speaker 5: That's right.
49:58
Speaker 12: Yeah, So there's a few tailwinds that colorstones are experiencing.
50:02
Speaker 12: I think one is we're kind of going from this
50:04
Speaker 12: unipolar world where the US dominated. So ten years ago,
50:07
Speaker 12: the US was by far the largest consumer of color gemstones.
50:10
Speaker 12: Now we have India, which has historically been what I
50:13
Speaker 12: would describe as a as a gold jewelry market. Now
50:18
Speaker 12: as they get more sophisticated, diamonds and gemstones are catching up,
50:21
Speaker 12: and China gemstone consumption is even more so than in
50:25
Speaker 12: the US. So we have other tent poles across the
50:28
Speaker 12: world that are consuming more. So there's a supply demand imbalance.
50:32
Speaker 12: At the same time. On the supply side, mines are
50:35
Speaker 12: genuinely running out of material that they're mining. So for example,
50:38
Speaker 12: the Burmese mine for rubies has shut down effectively, the
50:42
Speaker 12: cash mind for sapphires has shut down. Columbia major emerald producer,
50:46
Speaker 12: is really reducing output. So at the same time the
50:49
Speaker 12: demand is rising, supply is reducing and we think that's
50:52
Speaker 12: going to continue over the next few years. I think
50:55
Speaker 12: the other thing for gemstones is when people are now
50:57
Speaker 12: realizing that diamonds are depreciating it as an asset class. Traditionally,
51:01
Speaker 12: both diamonds and gemstones have really been inflation hedges. But
51:05
Speaker 12: because colorstones are appreciating, more and more money is going
51:09
Speaker 12: there that we see.
51:11
Speaker 1: You think about some of those spy movies where right,
51:13
Speaker 1: you get payment in diamonds, you know, because you can
51:16
Speaker 1: take all that can, right, But now that's not such
51:18
Speaker 1: a good thing, right.
51:20
Speaker 3: Something I was curious about is what happens if you
51:22
Speaker 3: have it juxtapost where diamond prices are falling, but then
51:25
Speaker 3: you have these gemstone prices that are rising. Is there
51:28
Speaker 3: a triptical something that can happen there with the swings
51:31
Speaker 3: and prices when you have them diverging like that.
51:34
Speaker 12: Yeah, I think what we are seeing is much more
51:37
Speaker 12: of a transition to color because it is a better
51:39
Speaker 12: investment over time. The other thing is I think just
51:42
Speaker 12: in terms of culturally, color is becoming much more commonplace.
51:46
Speaker 12: So for example, Rolex Automarpiget Petek Philippe, they're higher end watches,
51:50
Speaker 12: their most coveted watches now have gemstone bezels around the dial.
51:56
Speaker 12: We think we also have. A part of it is
51:58
Speaker 12: we're typically now known within the industry as the Debiers
52:01
Speaker 12: for colorstone, and the idea is, you know, starting nineteen
52:04
Speaker 12: forty eight, Debiers came out with the Diamond Is Forever
52:07
Speaker 12: and the Four Seas, and there was this idea that
52:09
Speaker 12: there is a singular perfect diamond, which is a de flawless. Now,
52:13
Speaker 12: US as a society we've changed considerably. Where we're celebrating uniqueness,
52:17
Speaker 12: we're celebrating diversity. We're also celebrating what we like rather
52:21
Speaker 12: than what we're told we should like, and that transition,
52:24
Speaker 12: we're moving the market towards color with really a focus
52:27
Speaker 12: on education and customization of jewelry.
52:30
Speaker 1: All right, thirty seconds left. What's the future of your
52:32
Speaker 1: company over the next few years. You've got what one
52:34
Speaker 1: hundred million revenue roughly, that's right.
52:35
Speaker 12: So we've grown four x in the last three years.
52:38
Speaker 12: Our next target is a billion dollars. I think we
52:40
Speaker 12: can achieve in five years, so that's the goal.
52:43
Speaker 1: Really awesome, that is good. We're going to keep in
52:46
Speaker 1: touch with this guy.
52:47
Speaker 3: I'd forget back.
52:48
Speaker 4: Yeah.
52:48
Speaker 1: Awesome, that well, congratulations, fascinating discussion. I learned a ton there,
52:52
Speaker 1: particularly about the lab grown diamond prices. So do you
52:55
Speaker 1: I mean, do you go to your fiancee and kind
52:57
Speaker 1: of slip in a like real diamond but it's a
52:58
Speaker 1: lab grown one. I don't know what do you do there?
53:00
Speaker 3: I mean, look at these emeralds. This is my Bruce Snows.
53:02
Speaker 3: I keep looking at that. Up about thirteen percent?
53:06
Speaker 1: Yeah, good stuff? All right Oncrutondagah. Thanks so much. CEO
53:08
Speaker 1: of Angara joining us here live in our Bloomberg Interactive
53:11
Speaker 1: Brokers studio talking about the jewelry business. Fascinating discussion. We
53:15
Speaker 1: will follow an Encore's company going forward.
53:20
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
53:23
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever.
53:27
Speaker 1: Podcast platform you prefer. I'm Matt Miller.
53:29
Speaker 2: I'm on Twitter at Matt Miller nineteen seventy three.
53:33
Speaker 10: And I'm Paul Sweeney.
53:34
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
53:36
Speaker 1: can always catch us worldwide at Bloomberg Radio