Google Sees ‘Sunnier Days’ Coming to an End

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio, or watch us on YouTube search Bloomberg Global News. Well, Inflation front and center. You know that we've got another read that CPI print for June. It's also one of the two mandates managed by the Fed. The other, of course, is jobs, and we heard Tim something about that and specifically the labor market and hiring from the parent of Google. We're talking about alphabet. Yeah. Mark Bergen is all over at Marcus

Technology reporter for Bloomberg News. He joins us on the phone from San Francisco. Mark, you and the team got your hands on an email. Uh that alphabet CEO Sunder Pachai to his employees. It's entitled high Googlers. What's the takeaway here about about hiring? What do we need to know? Yeah, this is sort of a it's a bit of a call to arms. Uh. The takeaway is that they're going to slow down. And this is pretty Uh it's fairly rare for Google, which is historically added like thousands and

not tens of thousands of employees every quarter. U is that they're gonna split on the hiring for the rest of the year, for two and three for they focusing on technical and engineering hiring. Um. You know, I could say certainly certitude that they don't they don't share these kind of disclosures, but exactly who they've been hiring was they've been I've got a lot for their cloud business, which is in third place for Amazon and behind Amazon and Microsoft, and a lot of the sales file on that.

So I think that that's something the investors are probably keep it close tabs on. Is this is going to affect and dent um the growth of their cloud business. How do we as investors? And I'm looking at the stock is down about two percent, so it's a bigger hit than the overall broader market. I'm just like that the indusseries. How are we as investors supposed to read this? Is this a manager saying, Okay, things are a little bit different, and this is what we do. We make changes, right,

we adapt to the environment. Or is there something bigger, a bigger message, whether it's about more broadly about the economy or more broadly about what's going on at Alphabet. I assume this is more about the economy. I mean it's you know, they're not they're not sharing numbers. As far as we know, Google hasn't done any layoffs. You know, Microsoft has trimmed up some jobs, a small number of jobs. I said, Facebook and Meta UM seems to be moving

in a pretty dramatic um becoming a smaller company. Google Alphabet isn't doing that. UM. I think this is historically than a company that has probably hiring more people than necessary. Right. UM. They're sort of famous for throwing uh people and staff and resources at projects that are unprofitable and will be for years. Uh. And the memo is is pretty consistent with with within ore, which I said in the past, like a strategy is kind of double down on AI.

And so we're a long term that's uh. And we've seen in the past several years that Google has stop spending as lavishly on on some of their maybe biotech and healthcare projects. I thought you were going to say no more free massages on your birthday at the office or balls for interns. That's very well. Maybe you know Facebook has has cut back on that. I think Google, I'm you know, they have committed and doubled down on

real estate and on this hybrid WORKFORCET model. I think there's a real sense that they want employees in the office, and so I actually don't think they're going to cut back on those perks, in part because they want people coming in um and that could change depending on on the direction of the economy, but my sense is that

they find it. I think they just believe that their staff is so much either the staff is so much more productive in the office or their real estates which more valuable when they have people coming in well in perspective, and you said this mark in the set quarter loan uh cinder pitch I puts out in this memo that they added approximately ten thousand Googlers and have a strong number of commitment commitments for the third quarter start dates,

which reflects in part this seasonal college recruiting calendar. Again, I'm quoting from this letter. How often does um soonder pitch I put out a note to employees and say hi, Googlers. How often, like I'm trying to I'm trying to engage. How unusual? Yeah, I mean they filed this note today in their eight K. So it's certainly unusual because it's like four um uh information for investors, So that's pretty unusual. Right,

you don't typically see that. I mean, I think you know Sara will will send a note on on big events like this. I don't. It's certainly not as far as I know, it's not a daily occurrence. Um, And it's I think. I mean, I don't. I don't have the storical data. But you know there was Google pause it's hiring, right, that's at the financial crisis and uh

kind of tighten the belt a little bit. That certainly wasn't hit as as as a financial sector and um, but even during the Google story right before the dot com bust, and since it's very beginning, it's just had this phenomenal searchise business that powering it for over two decades. So it is rare to see them move with such caution. What it's It's one another one of those stories, you know. I mean, we see the data each month of job hiring going down, but it's still we're still adding jobs

in this economy. It's just the anecdotal data that we're getting from Silicon Valley. I think about what Yeah Goldman has pointed out that you keep hearing from companies about slowing and hiring or letting workers go. Mark Bergen Great Stuff, Technology reporter at Bloomberg News. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. It's been called the most important hedge

fund in crypto. It's undoing, the biggest domino to fall in the crypto carnage. It's a story in the upcoming new issue of Bloomberg Business Week out tomorrow news stands already online ap Bloomberg dot Com, slash business Week on the Bloomberg and it happens to be the Bloomberg Big Take Today. The story written by a great team including

Justina Lee, Muya Shann and Bennett Bartonstein. Justina Lee's market s reporter for Bloomberg New She joins us on the phone from London the collapse of Three Arrows Capital, how it became a crypto contagion. Justina, great, great to have you with us. First of all, what is Three Arrows Capital? Yes, Three Arrows Capital is this hedge fund based in Singapore that was started by two high school friends, Suju and Kyle Davies. And it's not really clear how much money

they managed. They say it's about three billion dollars, which might sound, you know, not particularly significant to our Wall Street listeners. And in crypto it was sort of like this o g hedge fund. It was always one of the biggest. It was like an investor in a lot of the biggest d by project, so kind of like all know, it was like, as a lot of people called it, like the Archigo Capital of crypto. It just had a lot of cloud and when it collapsed, every

one was really shocked. Well, Justina laying out exactly who these guys are, and I gotta say, you look at the website and you're like, how did they ever get to amass so much? Jill Weber's with the editor of Business Week, So what was it about this one that you wanted to know about. Hell, you know, the crypto um contagion has been just a source of ongoing interest as we try and figure out what's happening, where it

might go. In the moment that Justina uh and company kind of came to us with this one, we were like, well, tell us everything you know, and then we get this story. I was like, well, that's everything, I guess. I think one of the things that's been really interesting here Justina, though, is sort of the echoes to you know, crypto being sort of a parallel universe, but in many ways having these echoes of you know, what happens in you know,

normal markets, regular markets, regulated markets. Uh. So walk us through some of those similarities, because that's that's the thing that everyone that you talked to and quoted in the

story has also sort of echo yeah exactly. I mean I've reread it, brought it like the Archiegos analogy, and how that's relevant here is that in that story, you know, everyone on Wall Street was lending to this hedge fund, and when it collapsed, everyone was surprised that was the case, and so they all started unwinding their positions and those stoffs kind of fell further and you have this vicious cycle and that was this is sort of what happened here.

So it turns out because um, what we call three h C was such a big fund, a lot of the biggest crypt brokers had given it leverage, and so when it started losing money, because all of crypt was losing money at that time, a lot of these lenders had to you know, liquidate their collateral and then three

so you couldn't pay them back. And so you know, one broker broker has already like declared bankruptcy, and so you kind of see this like contagious effect that's very familiar in traditional finance and and it's kind of like playing out in the cryptal world. Right now. You have Voyager Digital the one that has declared bankruptcy. At this point, I'm wondering about companies like block Fire and blockchain dot com.

What were they or what did they get out of lending to three a C that they then turned around and provided to their clients, Like explain how this actually works in it from an ecosystem perspective. Yeah, for a long time, a lot of crypto lenders were offering these savings accounts with you know, ten to twenty percent yields, which sounds absolutely crazy, you know at a time when you know, putting money in your regular bank account was

building basically zero percent. And the way they were generating these fields where they were lending UM these deposits in a way to a lot of crypto speculators who could afford to pay higher interest rates because they were making a lot of money, you know, going long crypto or maybe you know, staking their coins and so you know, three a C Was a very attractive borrower in that sense because they were huge and they really needed leverage, and you know, they had this great reputation and so

you can see why, you know, a lot of people wanted to lend to them. But as it turns out, they were far less solid and everybody expected. So the other thing, you know, all of this happens online. Everyone's very vocal and has been very bullish, and the the fact the co founders UM you know, have have basically stuck to their guns and then they kind of went quiet for a really long time. Uh where where where

do things stand now on that front? Because they happen to just resurface, didn't the Yeah, I mean, it's kind of like all gone down really quickly. I mean basically admit June they started missing margin calls and then like by I think July first they had to clared bankruptcy and now they're going through this you know, very long liquidation process um and recently their liquidators have accused them of not cooperating with the process and kind of being

you know, nobody knows where they are. And after that violing you know, sud you tweet it. You know, they actually has incorporating, but it's the liquidators who are baiting them, and so no one really knows where they are at the moment. And and you know, the liquidation process um in the courts, it's gonna it's gonna take a while. I love the line in your story in retrospect. Three

a C has always been a mystery. The fund itself is in the British Virgin Islands and the company's license in Singapore to manage other people's money, and then these two individuals behind it have always maintained that the pot all three billion is entirely there. It's like, yeah, I'm all in on that, Like who are these dudes? I mean, in a way, they had a very typical Wall Street background.

I mean they went to Phillips Academy, they went to Columbia together, and then they both worked at Credit Swist.

They were trading derivatives, and when they start started their hedge funds, they were only around twenty five years old, and they started just trading them, you know, emerging market effex derivatives, and they kind of quickly realized that that was you know, a very small pie, and then they got into crypto, which was how they became you know, huge, and so in a way, I think this is almost kind of surprising because they had this traditional finance background,

but as one interview we told me they turned out to be de gents, you know, which is like the crypto term for being a degenerous gambler. You know, no comment, um, okay. So, you know, as somebody who watches this really closely and especially you know, just the kind of continued fallout in crypto, what are sort of the unanswered questions that that sort of remained to you in the three A C. SAKA.

I mean, in a way, it's kind of interesting and frustrating as a reporter to to kind of ultimately realize that A very fundamental question of whether you know they even had external money is a bit of a mystery.

I mean there's been a lot of debate over that and kind of how exactly you know, are they structured and and kind of I think another question, um that's been kind of interesting is a lot of people have come out of this and kind of said that it actually is a vindication of crypto because the problem with crypto is that it started to look too much like the financial industry, and so what we really should have is all transactions on the blockchains, everything is transparent, and

everyone is you know, liquidated based on code rather than you know, relationships, and that would have fixed everything. Um, I'm not so sure about that, but I think there there is a bit of a point there. But we're definitely still very far from that world. Right. It wasn't just to provide like this incredible transparency, Right, you can kind of track things to some extent and well, you know, it's all there on the block chain if you know

where to look. Except you know, there's still some questions, right, Just a few, just a few regulators are working on that. Justina, this is a great story and it really does play into the carnage we've seen this year. Justina Lee, she's Markets reporter at Bloomberg News on the phone from London. This story in the upcoming new issue of Bloomberg Business Week, out tomorrow on newsstands, but you can already find it

on the Bloomberg and also at Bloomberg dot Com. It's also the Bloomberg Big Take and our thanks to Joel Webber, the editor at Bloomberg Business Week magazine. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes to m Stovich on Bloomberg Radio. So Sax Fifth Avenue spun off its digital business, that e commerce business now known as Sacks and is headed up by our next guest, Mark Metrick, is CEO of Sacks. Mark joins us from on zoom from New York City. Mark, good to have

you with us. How are you. I'm great? How are you guys? We're doing well. Hey. You know, we're thinking a lot about inflation, about the macro economic environment right now. I think you ever think about so really eager to get your thoughts on on the state of the American consumer right now. We got this hotter than expected inflation number, the highest and more than forty years. How is your how is your consumer doing it? Sacks? Yeah, I think

I want to just focus on the luxury consumer. And as you guys mentioned, we were out in the field with research and uh two things you know we're seeing

in the response of our business. Uh. You know, we feel very good about the core luxury consumer, just both from how they're showing up and how they're shopping, and and also they've indicated, you know, seventy of responded to the survey that I would categorize in the in that core luxury consumer, uh said that they were they would spend the same if not more over the next three months in the prior three You're talking about people just

so we can have these definitions for our audience. These are people who have an income of two dollars per year plus yes okay, so not so like a household income or an individual household. And are they younger? Older? What are they? I love knowing the demos when it

comes to retail. Well, it's about stage, not age. These are people that are luxury consumers that are they love fashion, They're aspirational their core Uh so you know, they're they're a bit all over but if you, if you really want to dig down and look at it, you're actually seeing a little bit on the response side, more positivity. And it's probably from a recency bias because the younger

consumer hasn't seen one of these moments before. They're feeling a little bit more bullish than the boomers or the silence uh so um int sting. But again, the overall response has been positive on on on what they're thinking from a luxury stamps. So from a luxury standpoint, are they buying luxury clothes, luxury stuff for the house, luxury you know, cosmetically what specifically luxury can cover a lot? Yeah, So for US, it's really it's about it's about accessories

and apparel. Okay, that's where we center now. They're they're they're still looking at home and other UM and other types of luxury products inside of their lifestyle. But the core business for us UM is around that apparel and and accessories and leather goods. What kind of luxury apparel like is it? Have people moved away from all of the comfy where you know and listen, I love a great para yoga pants. They're not inexpensive, so I consider

that kind of luxury as well. But are people trading up, They're going out, they're going to places, and so you can see that it reflected in what they're buying. Absolutely, And that's and you know what we're seeing in a indicator of that is sneakers became It's like you almost only wore sneakers for a while, and now we're seeing shoes make a big comeback. Uh and and that's been good. Guys are getting dressed up again. Um, she you know she's getting dressed up. It's a dressy sandal. It's not

just a sandal, it's a shoe. It's not a sneaker. There's a lot of hell coming back. Um. Platform heels are going to be one of our biggest trends as we come into the next couple of months. So it is about getting dressed, it is about going out, it's about traveling, and it's good for business. Can I let's say, I love me some platforms, but him, I'm just gonna put that out there, Okay, I got I got nothing

to follow up on that, Carol. I do want to know, Mark, I want to know about how spending has shifted, because if I think about what we're you know what we've been talking about for the past two plus years, the idea that people filled their homes with stuff and then it got stuck on ships so they couldn't do that. Then they started buying things as they got back to

the office. But but now it seems like demand for vacations and experiences is back, this idea of stuff we were talking about back in twenty nineteen, especially when it comes to millennials spending their money on on not on stuff, but on doing things. How did that factor into your research? Yeah, so the research came back and look, you know, when asked, uh,

respondence number one on their list is traveling leisure. And that's fine because with luxury and again being a goat, so being that go out and travel, I'm glad for you to take a vacation, um, because you're gonna buy a lot of stuff to wear on that vacation. I'm glad that you're going back to the theater. I'm glad that you're meeting friends and going to weddings. Uh. This is all good for sax and for luxury. So that's okay.

But right on the heels of that response again was leather goods and accessories were right there behind that UM for this you know, high end luxury consumer on where they and how they want to be spending. Mark help me out here because you know, when we talk retail and the consumer world, we constantly talk about and we often have heads of companies talk to us about this seamless, eternal experience. So you guys are focusing on e commerce, how do how do you guys do it? How do

you make sure you're covering how the consumer wants to shop? Yeah, you know, and we do focus on e commerce, but we focus on the consumer and that's really you know, what we've been what we've done with this split is just enabled UM my company to focus on the digital experience, but it's focusing on the brand experience, you know, first and foremost. Uh and you know we haven't stopped with

the omni channel connected experience for our consumer. Our exclusive partnership with the s f A stores enables us to execute uh, this all channel experience seamlessly. You can you know, the returns that came in UM from SAXS dot com went into the stores just this past quarter. Uh. So you're still you can buy online, you it can ship from a store you can do almost anything you can buy online have it altered in the store. We haven't stopped that. So what we've done is really just given

ourselves the ability to build two strategies. But those two strategies connect through the consumer, which makes omniche antal. I'm still a big and important part of the sax ecosystem. Mark, just last thirty seconds we have with you, give us an update on the supply chain and give us an idea of if you're able to stock shelves, if you're able to actually get consumers what they want. Yeah, the luxury supply chain, you know, probably on a relative basis,

hasn't been interrupted. I'm sure it's a little bit slower than people wanted to be back comparatively to what we'll be hearing, we haven't had any issue with that. What's the last thing you bought in a retail environment? You're asking me? Yeah, I just bought a suit. How's that all? Right? Back to work? You go? That sounds yeah? That isn't like athleaser work at way? Is that? Is that? Is that for mark? For for hanging out or for working? To be fair, it's a suit, but it's got drows

string pants. That's right. So guys just remember fashion has you know, it doesn't matter. It's all about comfort. It's all about looking too. I'm all into come put a little stretch in everything. Mark Metrick, thank you so much, CEO at Sachs. Joining us via zoom in New York City. You're listening to Bloomberg Business Week on Bloomberg Radio. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. I don't actually

saw Tim. Some comments from JP Morgan, Chase's CEO Jamie diamond saying the FEDS forecast for four percent inflation this year is quote too optimistic. I thought you were gonna give me a weather report. I did not see. It was an interview published in the Wednesday edition of a French newspaper. So we're going to hear more from safe to say, what is the most closely watched Big US

Banks CEO when JP Morgan reports tomorrow morning. All right, for a little preview of what to expect, not just from JP Morgan but from other financial institutions, Let's go down to Ryl Paid, senior portfolio manager at Angel Oak Capital Cheryl joining us this afternoon on the phone from Atlanta. Sheryl, if there's one question that you would ask Jamie Diamond, what would it be? I think really the key question on everyone's mind is how do we manage through the

uncertainty over the next couple of quarters. Clearly with the inflation print this morning raises additional questions on you know, do we do we fold into a recession here? Um? And what does the outlook particularly for the consumer against this backdrop? Well, okay, so what do you think ultimately? Okay, so let's get through big bank earnings in terms of

what you're expecting to see. We've already had a story out on the Bloomberg that talked about trading um because of all the volatility should be a plus for the big banks when they report. I do agree with that. I think we are going to see strong trading results UM. I do think the big money center banks are going to be challenged by software, investment banking UM as well as potential marks on widening credit spread, higher expenses UM

as well. So I think, you know, the more diversified business models are going to have a tougher time this earning season given, Uh, you know, some of the factors impacting investment banking, asset management businesses, mortgage banking and the like. What about though, when it comes to other parts of the company's business trading revenue that you know, as we talked about yesterday on the program, volatilities good thing. Volatility

absolutely is a great thing. Um. And we do have a positive outlook not only for for the equity capital markets, but even more so for fixing capital markets. UM. And that is where we expect a bright spot in capital markets tomorrow, kicking off with JP Morgan. UM. So we

should see some um positive trajectory there. Um. Again, I think that is going to be offset by the by the investment banking advisory type feed which you know are probably down close to Yeah, we're not talking about a lot of I p O s these days for M and A, not at all. Absolutely not. Hey, how often do you are how much do you expect um them and the CEOs and the c suite on those earnings calls Cheryl to talk about recession. I mean, you said, how do we manage to the uncertainty of the next

few months? How far do you think they go? And saying listen, we're going for a we're going to see a downturn. Do you anticipate that we're going to hear that. I do think we are going to hear heightened caution UM from management teams. Clearly, from what we can see UM in terms of credit metrics that come out on a monthly basis, that remains relatively benign. You're not expecting to see any meaningful reserve build this quarter. UM. But clearly, you know, what we're seeing today is sort of six

months forward. We're looking sort of a year uh two years forward in terms of valuing stocks UM, and so I think that's going to become more critical. Where are we starting to see potentially any signs of stress UM? I do you know think that's going to be one of the key topics of conversation, particularly on the consumer side,

the unsecured consumer, the critic word. Let's do businesses. Let's get to some of the names you like, because you actually like some more of the regional players, and one that really pops up on my radar the tickers s I v B. You're talking about SVB Financial Group caught up with Greg Becker on a panel over at Milkin. I mean they do it a little bit differently. Yeah, that's right. I think you know, generally, the way we think about the banking universe, UM. You know our are

overweight is to the spread based lenders. UM. I think quality is king here. Deposit franchises matter, UM, Loan growth matters, and that's where we really see the value in the

regional banks over the universal banks in this type of environment. UM, and someone like an SI v B clearly has a demonstrated track record of growing that UM not only the loan side, but also the deposit side, which I think is going to be increasingly critical UM and really a focus of investors going forward as to where deposit datas go from here. Quickly, just in the last thirty seconds we have with you, let's talk about Signature bank. Why

are you bullish on that one? Again? I think it comes down to someone that has done a great job on gathering deposits over the last couple of years outside growth relative to peer group sticky deposits. Again, when we're looking to hire rates from here. The NYM expansion, I think it's hitting sort of the peak over the next second quarter third quarter time frame, and that's really I think what's going to drive outside performance um from someone like a Signature bank, and both of them have really

been beaten at big time by investors. Signature is down about so far this year. An SVB Financial Silicon Valley Bank, that's the holding company for that bank. Uh, it is down about so far this year. Cheryl, thank you so much. Great set up for those bank results as they start to roll out. Cheryl Paye, she's senior portfolio manager at angel O Capital, on the phone from Atlanta Journal. Yeah, but you let me drive. Oh no, no, no, no please, I want to dry good question, This is good. Drive

to the clothes Bloomberg Radio. All right, ten and a half minutes left in today's trading session, getting ready to wrap up the Wednesday trade. We're definitely off our loads of this session, so not as negative as it was earlier in the day right after that inflation print. But still we had a lot of data to get through. Yeah, and also it seems like investors are really trying to make sense of what to do with this data. Really eager to hear from Eddie Perkin, chief equity investment officer

for equity at Eaton Vans. Eddie joining us this afternoon on the phone from Boston, Eddie, how are you? I'm well, how are you guys? We're doing pretty well. Trying to really dig into these get into the day's trade and understand. You know what these CPI numbers mean for what the Fed's gonna do. So give us your take care. Uh, we continue to have high inflation. I think there are multiple sources of that inflation. Part of it is all the money and the kiwi and the low interest rates

that we've had for the past several years. Um, that's the part that the Fed can address with higher interest rates. But there are a lot of other things going on causing high prices. Of course, everything happening in the energy complex globally. And uh. And I think this is a part that gets under reported, is output or productivity is just not very good right now. You see that, So it's a supply problem in part. You see it across the economy. I mean, look at all the ten thousand

flights being canceled by British Airways that he throw airport. Uh. Any of us who go into restaurants, there's certain items on the menu that are not available. The hold times when you call a call center are are lengthy. Sometimes up to two hours. All the supply chain issues we've been discussing, those problems are not solved with higher interest rates. In fact, they might even be hampered with higher costs

of capitals. So I think part of the solution to inflation has to come from just working out these bottlenecks in the economy and getting productivity back up. All right, Just want to mention a headline crossing he was nominated back in April by President Biden. We now have the U. S. Senate confirming Michael Barr as the FEDS Chief Banking Supervisor. So again this is um actually is it? Yeah? I think the vice chair of super Vision. So again that's

just crossing the Bloomberg terminal um. Alright, So, Eddie, when you look at this market, uh and the equity universe, I mean a lot of names have really been beaten down here. But do you think based on the uncertainty with the economic outlook, that beating makes sense? Some of it does. And the big debate is, you know, if a recession is coming, how much of that is priced in. I don't think a deep procession is priced in, but I think some moderate downturn in the economy or recession

is now reflected in certain security prices. The areas that I'm most interested in a eat advance for our value portfolios are how's related stocks, certain parts of the energy complex that still look interesting, certain financial stocks that look interesting. So um, there are you know, kind of more cyclical housing exposed, consumer exposed parts of the economy that that are really beaten up. And and we're not super expensive on the front end. So there, they haven't gone from

expensive to fair price. They've gone from fair price to underpriced in my opinion. Okay, so remind me you said housing stocks and what were the two other I think anything related to housing? I think, uh, energy, particularly talking to my energy you think, I get well, you've seen a pull back now, right, you have to rally at the beginning of the year. But the services stocks because you're gonna need multi year investment to get so again

back to the supply question. To get supply globally back into the into the world economy, you're gonna need You're gonna need the capital spending and services stocks. So that's where we're seeing some value after this pullback we've seen in the commodities and then certain financial stocks, and I would A fourth category would be, uh, some of the industrial stocks fests where you at some better quality businesses that are more cyclical, and uh yeah again, it'd advance

in our value portfolios. That's where we're finding value. Bank of American economists are forecasting a mild recession this year in the United States, and they say services spending slowing, hot inflation, bringing consumers to pull back a bit. Mild recession. Would that bother you in terms of maybe some of your equity choices. Not really. I think that's what the market is priced for at this point. I think you've

got a stress test around that. That's sort of the probably the central forecast of most investors at this point. So you know, what if it turns out better than that, what if it turns out worst? How much of a range around those scenarios is there in terms of where stocks are priced? Okay, kind of a play on that. I ask everybody, this is the worst behind us? Not the worst, but a pretty bad scenario. I think is well, okay, is the worst is the worst of the pullback behind us?

For most scenarios? I think yes, Um, that doesn't mean there's not further downside. I do take note of the fact that sentiment continues to be negative. And it's not just fear, it's people. I think some of the hedgephonds pressing their shorts, being quite confident in their underweights, and it's a lot of it is around earnings and the

expectations that earnings estimates need to be cut. And who doesn't know that at this point we all know that earnings estimates across across the market are too high, and that beginning tomorrow with Jamie Diamond a JP Morgan and their earnings report, we're gonna hear from the banks, and then we're gonna hear from other companies and other sectors, and in general we're gonna hear that earnings need to come down. But that's a lot of that is in

the price. So what I'm interested in is those companies that when they give guidance, can reset the bar to a level that the market believes, and in those cases you might see guidance, earnings, guidance cuts, and stocks rallying on the back of it. I think it's important to remember that stock prices generally bottom for earnings do and so you've got to be anticipatory and forward looking Eddie, what kind of flows are coming in at this point new money to invest part? That is the first part

of your question. What kind of money is coming in for from investors, new money to put to work or is there more money going out right now and being parked in cash? Yeah, I I don't think retail investors have given up on the market. So you do still

see flows in pockets of the equity market. Um. I think there are those who are very committed to the you know, the long term secular growth of technology stocks, and then you have those who are uh interested in the rotation that we've seen this year, in the first six months of this year, from growth to value stocks. And so there are definitely investors who are nibble continuing to nibble at value and see, uh see value as a multi year trend. You know, we've had a multi

year period of growth stocks out performing value. Could we now be at the very forefront of the value market the last for several years? Well, I've heard that before, and then I also heard this weekend maybe growth is kind of interesting. That's where you want to go if you had to pick value over growth right now? Is value your play? Just quickly? I'm a value investor at heart Sol. I'm bias, but yes, absolutely all right. We're gonna leave it there. Hey, Eddie, thank you so much.

Eddie Perkin, he's chief equity Investment Officer for Equity over at Eaton Advance, joining us on this Wednesday on the phone from Boston. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube. Search to Bloomberg Global News