This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
All right, everybody, we just talked a little bit about the housing data. Certainly that we got here in the US, US housing starts unexpectedly surging in May by the most sins twenty sixteen. Applications to build increased, suggesting residential construction is on track to help fuel economic growth. In the UK, mat we've seen house prices fall about thirteen percent in
real terms from March twenty twenty. Second that peak then, that's according to Bloomberg Economics our European economist nourrage Shaw. And then you certainly highlighted something about what's going on in Sweden specifically.
Yeah, you're seeing real crisis there with real estate funds that are starting to fail, and we've had a couple of big failures there and in Chy also a real loss of confidence in owning property as a reliable or a safe asset. So globally, I think there's a real estate concern that made me wonder whether these housing starts aren't a little bit too speculative and it could mean maybe bad news down the road. But if you look at the share prices of you know, home builders, the homebuilders,
they're doing incredibly well. So I guess investors aren't worried, all.
Right, So let's get to it. Let's see what our team has to say. Bloomberg News Economics. That are Mollie Smith in our Interactive Brokers studio along with Bloomberg News reporter Simon and Foxman. So Molly kick it off for us. Talk about this housing data we got today. It seems really bullish. What does it really tell us?
Yeah, and I think, you know, I can understand like a bit of like the hesitation on Matt's part there. But the thing is is, like when we're looking at housing sales data right now across the countries, that all the action has been with new home sales. So you can see that like builders are following that demand and breaking more ground on new construction because people who already
are in their homes are so hesitant to lists. They've probably locked in low mortgage rates from a couple of years ago, and they have no interest in trying to back out of that right now. The lock in effects that we'd call it in the real estate world, So it makes a lot of sense from that perspective. Obviously, would want to see it more than on just one reading to see if this is a trend that would hold. But if it did, that'd be really positive for.
Do we know how much of these starts are speculative? Do people still build on spec or is that a thing of two thousand and six.
I can't tell that from this report at least, so I'm gonna stick quite on that one.
No, it is interesting, right because we did talk about what Jay Powell had to say. Simone, come on in on it, because, first of all, on the US side of things, you cut up with I think the CEO of Lenar, is that correct.
The chairman, Yeah, the executive chairman there, and he was talking about, you know, there is no desire by existing homeowners to leave the three four percent mortgage rates they have, But there are all these people that lived at home with their parents for a very long long time that
are now finally getting around to having families. They want to move out, and there is simply no new stock and that is why you are seeing, particularly on the more affordable ends right of this piece, these new homes. There is a long term sort of generational shift here that we're likely to see in the next couple of years.
Maybe we don't feel it for the next year or so as interest rates remain high, but you know when we move out of this, you know, there's a real affordability problem in US housing.
And that's that son building starters, because every time I talk to somebody from a home building company, they're putting up McMansions, you know, because they say, yeah, we could do starters, but there's not as much of a profit margin in that as the bigger price tag homes.
Yeah, I mean, look, it's a little bit on all sides. Right, you have this Barbelle effect of the people who want really expensive homes and the both millennials who are just starting out their first homes, as well as retirement aged people, the boomers who are now retiring who want the smaller stuff. And a lot of this is a zoning issue. It's not as much of a profit margin issue. They're just simply not allowed to build houses in so many places.
And so you know, you hear Lenar. You hear a lot of the other home builders really appealing to cities and saying.
This commodity land right right.
Yes, these are small, these are maybe not these are affordable homes, yes, but these are strong buyers that are going to spend money in your town.
So Molly come back in on, you know, in terms of housing data and how it applies to the to economic growth and how something like a housing starts number, we can think about it more broadly in terms of growth momentum.
Sure, So this would be the part of GDP that we call residential investment. So when you look at some of the biggest drivers of GDP, obviously consumer spending is the biggest one by far, but residential investment not too far behind. And that's what's been a real drag on growth for the past two years, as we've seen home prices skyrocket and mortgage rates go up and just not a whole lot of moment menum in the housing market.
But this would be if sustained right now. Obviously we're looking at for now the second quarter of growth, so this would be for the May data. We'd still have to incorporate April and June into that as well, but that would be if sustained the first positive contribution to from residential investment to GDP in two years.
Why now, why do we see all these starts all of a sudden. I mean someone described it to me as an eleven sigma move, which I don't really know what that means, but I'm guessing it's like in terms of standard deviations, it's like amazing. I'm sure Tom Keane understands that. But it was higher than the new housing starts were higher than the highest estimate in our survey. So why all of a sudden this month?
I think it takes time for some of these other data points to filter through. You know, home builder sentiment has slowly but surely been coming up, and it takes time to also break ground on projects, you know, to simone's point about the zoning concerns, and to find like where all of this land is going to come from.
This doesn't just happen overnight.
O Builders don't want to buy too if there's not going to be people to buy, they don't do that anymore.
I think there was a lot of a too of waiting to see what was going to go on with mortgage rates and are they really going to stay this high all year? And are are we going to maybe start to see them come down as inflation is easing. And now that it's like all right, we're buckled in, we're maybe going to get to another two increases. People have kind of settled and realized that this rate is the new normal for now and or this might be better than this exactly.
Yeah, new normal is certainly I think the phrase of the day. But if you want me to broaden this out a little bit to particularly Europe, which is feeling some of these same pains of interest rate increases, it's not every city that is seeing housing prices drop. You look at London, for example, home prices are actually up one point one percent year on year. There's simply, again as in the United States, some limited stock of housing. You have also the foreign buyer element that comes in
in London. Madrid is the same way, up five percent year on year. At the same time, though, you're looking at places like Sweden where we've seen double digit drops in the home prices. So I think it's a really divergent story, you know, from city to city in Europe. Even though we're hearing all these you know, headlines about property woes. That's not consistent and state to the state in the US too.
You know, you can't really speak about the US housing market as a whole country. You know, we look at San Francisco and that some location location location. Well you look at San Francisco and that's a much different picture from say Austin or Miami right now. So also tough to you know, paint it with a broadbrush.
It's really interesting. I just wonder, you know, how sustainable the housing market here is, especially at these prices, with these rates. I know, Jay Powell said we hit a bottom, and if the Fed Chare says you hit a bottom, you might as well go ahead and buy. But it just seems like we could come sliding down. If those people are locked into their homes have to sell, they're going to have to expect accept much lower prices than they probably want.
Sure, And yeah, and prices I mean have been coming down here at least, like you know, from the peak which was last year. So in that sense, like, yeah, that probably will happen. We'll get some more data on that this week, on the existing home sales data for May next week, so we'll get a new home sales data, and that's really, like I said, where more of the positive activity has been coming from.
I think it feeds into this idea that there has to be something else in this economic downturn to really, you know, pull the floor out of housing, you either have to see a lot higher marchin interest rates or you have to see some commercial lending stress. I mean, that's kind of the concern we've seen in Sweden. You know, we were talking about SBB and these other they call
fallen angels. A lot of them had a lot of exposure to the home market to rent to home rentals and that sort of thing and running these commercial real residential properties have been very impacted. But the concern there is that the banks have a lot of this on their books. And so then you know, if you have these fallen angels impacting the banking sector, then you see sort of another leg down and then you know where
do we go from here? And you know there are green shoots in the Swedish housing market as well, are.
The green shoots in China? What's your just kind of thirty second quip on that.
I mean, it looks like and Bloomberg Intelligence has a great note about this cuts two interest rates aren't having the same bounce back factor in China that they used to have, and therefore, if home prices only go up five percent this year, that doesn't really isn't really helpful for all those people who have been betting that home prices would surge back.
Well, it used to be a sure thing, right, like this whole idea of kind of creating some property wealth.
And therefore you get this angsty consumer that doesn't want to spend because they've seen the value of they're at their you know, their assets, they're home, well, their wallets not increasing the way that they expected.
I mean, I think the Chinese have to come in and do something about their property market, right, That's what everyone's waiting for, and they're not doing enough.
So I think the assumption is right that that they will because that they always seem to come to the rescue. But but the things they used.
Last night, the things they used last time, they're just not working as well. And how much more do you want to do?
Molly thirty seconds FED Chairman J Powell up on Capitol Hill in terms of housing, are you watching out for anything just quickly?
I don't know if that's so much the focus in the next two days. I think, you know, everyone was really still pretty surprised about the projections that we heard last week in the June in the new material that the FED released, So yeah, I would definitely want to hear like again, how do you kind of explain this message of why you paused at this meeting but you still see two more hikes for the year. I think that's still going to be the challenge in conveying that message.
And did you mean skip? Come on, do you mean I mean?
He said it's not a skip, so we can't call.
It a We might finally get that answer on the Grateful Dead song too.
I think, yeah, well, maybe I'll see him at the shows tomorrow and Thursday at Cityfield.
Molly Smith, Simone Foxman of Bloomberg thank you guys so much. Bloomberg Business Week on Bloomberg Radio.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.
Sign Steel Delivered. Yeah that you could say of FedEx earnings as we continue to track that one in the aftermarket. I just want to pull it up on my Bloomberg because we did see it down.
Four point six percent.
There was a bug.
There was a bug on the stream.
It's down four point six percent, okay, and it's dragging UPS down as well, which is down about one and a quarter percent. They're not apples to apples, which is always important to point out when we talk about these two companies. Let's get to it though, with our man on the job when it comes to FedEx.
And also joins us senior transport Logistics and shipping analysts at Bloomberg Intelligence and Lee. For those who aren't you know deep into this, what are the important differences between FedEx and UPS?
One's purple and one's brown. Thank you very much, talking to you, see you later.
No different.
You know that there's a lot of differences. Obviously, First and foremost is a UPS is as a union UP they have their employees are unionized. They're representative by the Teamsters, where FedEx has a mix of UH employees and third party contractors. A lot of the folks that deliver for their ground network are really employed by small businesses that
are independent contractors. And that's really the biggest difference. In Another difference is UPS started as a ground network and grew an air fleet, and FedEx started as an air fleet and then grew a ground network. So there are a little nuances behind that. And then also I would say one of the biggest differences is UPS started its transformation about three years earlier than fed X, and FedEx
has been playing catch up to UPS. Carol Tomey, the CEO of a UPS, has done a fantastic job of really focusing on what's important for UPS, getting rid of unprofitable businesses, getting rid of the fat if you will. They got rid of their less than truckload business, which was marginally profitable and during good years, and so that has freed them up not only freed up capital, but also freed them to focus on what they do, I guess better than the LTL business.
A woman named Carol, what's not to love? I'm just going to say, no, Hey, let's go back to fed X in terms of their.
You were on CFO just now, weren't we we're talking about while we're we were talking about you. Yeah, but while we're on CFO, let's get back to FedEx and ask what the deal is, like Lens, I mean, was he planning to retire? As Scarlett points out, he's fairly youthful, and we noticed that he's only been the CFO since June of twenty twenty, So what's the deal.
Yeah, I'm not really too sure about that. You know, he's been in the role for under three years, like you mentioned. You know, I don't really know if it's really a shake up of the c suite or if it's just you know, he just like said, I don't want to go play golf. I really don't know what the rationale is there. I think the movement on the stock really has nothing to do with the CFO announcement.
It's really about the guidance. You know. This fourth quarter was was fine, nothing, you know, nothing to get excited about, nothing to get depressed about either. But you know, I think that people were expecting maybe a little better outlook. I think you guys mentioned earlier that the low end of the range is pretty far from you know, the where consensus is, and I think that people were looking
for maybe slightly better earnings. But what I would say, I'm assuming that management there being extremely conservative, Uh, they had a track record, shall we say, of not executing. Uh So, I think they don't want to disappoint. So my guess is that they're they're they're coming in, coming in low and hoping to move up from there. But you know, they're they're really you know, there's things that that are within their control and there's a lot of
things that are not within their control. Obviously, on the demand side, they're doing all the right things when it comes to pricing, they're doing they're starting to do all the right things in terms of the restructuring of their networks into one. You know, they announced that they're combining the ground and express in Canada. Obviously, you know that is a step in the right direction. This is going to be you know, this is going to take time.
It's it's it's gonna you know, take a lot of time for them to make inroads on that, especially to do that for their whole global network. But what we should see is more freight moving through its ground network when it makes sense for the company, and that should should should should do well for margin.
When a company FedEx or other puts out a twenty twenty four just at EPs of sixteen dollars fifty cents a share to eighteen dollars fifty cents a share. I mean that seems like a huge gap. I mean, should we see it as a huge gap? And is it just that they're so uncertain or how do how do you kind of analyze that?
I don't really think so. I mean it's you know, we're talking we listen, we're talking about earnings per share in the teams. We're not talking about twenty cents, right, So obviously the dollar amount is going to be a lot higher. The percentage I don't think really is so out of whack with what a lot of other companies provide in terms of guidance. You know, I think to your point, there's a lot of uncertainty out there. You know, there's still a risk of a US recession. There's still
we don't really know what's going on with China. You know, are they going to increase stimulus? Is that going to you know, help that economy? You know China. I'm sorry, FedEx is pretty big in China, so you know that's been kind of a drag on the on their results, kind of the slow reopening of China and the related Asian markets. So, you know, I think there's just a lot of uncertainty for them. You know, they don't know, like you know, they're going to try to combine these
networks in certain regions. It could happen faster, it could happen slower. You know, there's a lot of unknowns out there. And of course, you know, the US economy there's still sixty five percent probability of going to recession, according consensus on the Bloomberg terminals, so you know, there's still that
that they might have to contend with. You know, we've been in a freight recession for quite some time, you know, whether if you're talking about parcels, trucking, railroads, and that's really just a renormalizing from the shocks of the pandemic. Supply chains are finally getting back to normal. You know, rates are coming down across the board, no matter what mode you're talking about. Some have fallen a lot, a lot, some have just slowly declined because maybe they're not getting
search arges or assessasorial fees. But you know, we are seeing a more normalizing of and of demand. So I think that's something to consider as well is FedEx.
You think a better bell weather for the US economy than UPS or vice versa.
Now, I think they're both the same. You know, I think they you know, I think they all cut pretty
similar customers. The biggest, one big difference at UPS is Amazon is still a sizeable customer of UPS, where FedEx is pretty much doesn't really deal with with Amazon, you know, maybe on the margin, but it's really you know, UPS has been a service provider for Amazon still and one would just assume that's lower margin business just because of the scale, and UPS has you know, said they're they're looking to you know, maybe walk back that that that concentration.
They still want Amazon to be a customer, but maybe not such a large percentage, and you know, we should see that probably decline over time. So I think that's that's another difference, you know, when we started the segment. But the end of the day, you know, I think they're both bell Weathers. The only thing that I would say is FedEx might be a little bit more all inclusive because they still have that less than truckload business that I mentioned that UPS divested in, and that business
is usually associated with manufacturing and industrial. They do other things like consumer retail, you know, e commerce as well. But the majority of its manufacturing and industrial.
How come FedEx has been such an outperformer versus UPS this year? UPS is up just shy of two percent. FedEx is up thirty three percent.
Easy commps. They just underperformed for so long. They're finally getting their act together.
I mean, if you look at the five year comp, UPS is killing it and FedEx is.
Still so playing catch up here.
As you said, the FedEx was so low last year.
Yeah, for a number of issues that they've had a lot of issues with executing. And I think that you know, the streets finally say seeing that the company is finally realizing that it needs to trim the fat get more productive, and they have a plan for it, and let's just see if they execute.
Hey, real quickly, just got about twenty five seconds, Lee, what's the number one top of mine question for the analyst call, at least for you.
I you know, for me, you know, it's probably a network two o two point zero.
You know, I would want to know a little more about what's going on in Canada, what the actual process is, what are the benchmarks that we can see over time, just to show that they're actually making progress, because again, FedEx was a story that it.
Was not executing, and people want to not only they want to hear and see and feel in touch that they're executing. And and if people have that confidence, you know, FedEx is a great long term story because of all the things going.
For another headline, FedEx fourth quarter Express. FedEx Express revenue for the fourth quarter ten point forty one billion versus an estimate of ten point seventy six billions. So just hair light, Lee Klaskow, thank you so much of our Bloomberg Intelligence team. Joining us on zoom in New Jersey.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
We're going to talk a little bit about kind of the HR environment because we've seen a small but growing list of big name companies, including black Rock, Disney, Chipottele. They are taking their return to office mandates up a notch, calling employees back to their desks four days a week. We've been calling it the rto creep in terms of getting people back to the office. We talk about this
a lot. We talk also about how workers are interested in balance, they're also interested in wellness issues, so we thought we'd get into that a little bit.
Mat I'm looking forward to you know, I've never been I've never worked from home. You never worked from oh you d During the pandemic, I went to the studio. I couldn't every single day. It just seemed a little bit difficult in my role on TV and we had a studio that was fully robotic in Berlin, so we just sent everybody else home and I was the only
person in the office. However, I would love the opportunity to work from home every day because it would mean a totally different relationship with my household, with my daughter and my wife, and I feel like the work life balance that I could achieve working from home would be far better than the one I have to endure commuting into New York City every day.
All Right, Well, I'm guess that our next guest has some thoughts on this. Hollymay's global chief human resources officer at the twenty eight billion dollar market cap company Walgreens boots alliance, and she joins us on zoom from Deerfield, Illinois. Holley, nice to have you here. We do have some strong thoughts on this and opinions, as you can tell. First up, I think most people do. First up, if you will, it's so great to have you here, talk to us
if we may. On the general macro environment for hiring. What does it look like right now? Is the labor force still tight? Are you having to pay up? Or are things easy? What are you guys seeing.
I really would say it depends on the area of the business where you're hiring. We're seeing things loosen up quite a bit, but there's still some competition and some key skill sets and areas.
So it says to you it's not as tight as it was a year ago coming off the pandemic.
Absolutely all right.
Having said that, what are the things that workers want? You know Matt was talking about, Yeah, working from home. I did work from home during the pandemic and did my broadcast and it was kind of nice not to have to commute. I got two hours back of my life, which was kind of cool.
That's it to me, that's the killer, it's the commute.
So and I did the show in my office.
We're next door to my house. That would be another story.
So talk to us about what workers want, I think what you see as it varies from company to company, and that's something we've done at Walgreens. We've stayed really close to our people through focus groups, through our surveys, just to make sure we have a good understanding of what it is they're looking for, what it is they
need in terms of remote work. We've really adopted in our support office a leader led hybrid philosophy, which means that really defining moments that matter depending on the area of the business. So in our support center, that could be a town hall, a moment to come in and socialize, to get your know your colleagues, so that when you do go remote on days where you work from home, that you know you've forged those relationships, so perhaps collaboration looks a little easier.
So you have at Walgreens proclaimed a real commitment to improving mental health and well being. This is something that you know well. I hear a lot here at bloom as well. We care about your mental health, we care about your well being.
Does that.
Show results in terms of performance if you really do dedicate yourself to your employees' mental health and well being. Do they pay you back by being better workers in the long run.
Well, I would say our vision and philosophy for our team members, which are our employees, is really to deliver for them as whole humans. Really to deliver for them on both the personal and the professional side. And we feel that when they can come to the office and really show up as their authentic selves and really connect with their leaders, that's when we're going to get the best performance out of them. So what we're looking at is delivering on their whole selves. So mental health is
a big component of that. We introduced a new program called be Well Connected last year in May during Mental Health Awareness Month, where we really delivered a trio of solutions and platforms. Given we knew that our workforce, whether it be in our stores and our distribution centers, are in our support centers, needed to receive that support in very different ways, So we partnered with Journey Live for
a series of mental health related classes and support. Indeflix is the second of those solutions, and then our EAP solution round that out as the third.
Wait, so Holly break it down for so how does it work. You're partnering, So what does what does it mean for? Is it employees, younger employees or family members of employees? What does it really mean?
It's for employees and their family members as well as there are larger communities and networks. So Journey Live as a great example, it's a web based is also an app solution that has these demand classes. They can also be experienced live on a variety of mental health related topics and we extend that membership to the app, that subscription service not only to the employees, all of their family members and their external networks of friends or different
relationships that they might have. So with that, it's been a great partnership for us because they have really partnered in helping deliver customized content. So most recently we developed a class for pharmacists specifically, as well as for families, parents and caregivers of children with special needs. So we're listening to our people, we're trying to better understand their needs, and then we're delivering on that.
So what made you, guys, Because forgive me, but there's lots of conversations about companies and theirs, their caring of wellness and for their employees. But what was it that made you guys said, it's not just talk anymore, it's something we had to do, did something and within the company or what was it? What was the final catalyst? And forgive me, just got about thirty seconds or so.
Yes.
Of course, with listening to our employees and also recognizing in a recent survey, we've seen that ninety percent of this country believes we're in a mental health crisis right now. So making sure we were delivering on that for our people and also ensuring we had solutions that met them where.
They are, does it.
Yeah, Okay, we'll have to continue this conversation because there's a lot that goes on around this. Holly, thank you so much. Really appreciate getting some time with you. Holly May. She's Global chief human Resources Officer at Walgreen's Boots Alliance on Zoom from Deerfield Illini. Would you really work at home? You seem to like coming to the office.
Well, I do like having a separate environment to do my job. I just like I said, I don't like the commute, so I know it would save it would save me two hours a day of kind of frustration. And I'm when you're commuting, You're usually with a bunch of other people who also don't want to go where you're going.
I'm on the show planning call for with you when you're on the in the car.
The beeping in the Yeah.
Beeping is a nice way to put it.
Yeah, it is, brother mac.
A journal.
Now about you? Let me drive?
Oh no, no, no, no, he's going to drive, honey, please, I'll do gravels.
Let's wait, I want to drive.
It's good question.
This is the Drive to the Clothes. Do well? Brian young Don on Bluebird Radio.
All right, everybody, we've got chest under eighteen minutes left to go until we wrap up the Tuesday Tree Carol Master along with Matthew Miller Mad of course in for Tim. Let's get to it.
Let's drive to the clothes.
Because I don't know Matt, we're for lows on the equity side of it.
I'm pretty pumped actually, because our next guest is someone that I heard on Brian and Doug show. And you know, I go home and I listen to Brandon Doug Show, and when I hear a good guest, I like write it down in my car and then I try and steal on the next series. Yeah, so let's bring in David Trainer. I'm pretty pumped to have him on, chief
executive officer at New Constructs. He joins us on Zoom Adam Nashville and David that I first heard you talking about I believe it was Tesla, and right now that that company is just ripping again. They're doing well because other carmakers have been forced to recognize, you know, the dominance of the Tesla supercharger network, and I wonder, you know, what's your what's your take on how important this is for the growth of evs and for the global car market.
You know, I think it's good for EV's. More importantly, I think it's good for taxpayers that given all the money that has flowed to Tesla, that they are making sure that that much is not spent to disproportionately benefit just one company. I'm not really so sure how it's such a good thing for Tesla that they're forced to open up their charging network to other cars and that other people can build to it. There's nothing proprietary about
it now, it's really more of public utility. I don't really think they make any money in their charging stations, so I'm not at all sure about how this is good for the stock, but we've seen that stock go up for no good reason in the past before, and this just might be another one.
I always think that anybody who creates some kind of architecture or infrastructure in the long run, David, it's a smart move and maybe we don't pay anything for it yet, but I could see certainly in the future there are some kind of significant revenue stream if Tesla becomes the de facto, you know, charging platform for everyone. No, isn't that how we see it or could could see it.
Typically it's really the other way around. I mean, you know, how much did the person who invented the end that make? How much of the person who's invented blockchain make how much the person who you know invented electricity, right like or the electrical grid. These things that are public utilities tend not to be real money makers for individuals.
I mean, so, I guess you could debate some of those, right because Satoshi could be sitting on billions of dollars if that were a one person. But let's get to the market here, David, Because we have had an incredible rally and finally, by the end of last week it was starting to look really broad based as well. Today there's a little bit of I guess profit taking it you could call it, or you could say maybe that rally was just a bear market rally. How was your view?
I think that these are our you know, it's really hard to tell these days, because look, we're only really in a bear market if the Fed's going to stand by their guns and inflation down and keep rates higher. If not, it's just kind of back to what we saw even in twenty twenty and twenty twenty one, where the markets were really, you know, for the most part,
just headed straight up the cava ipo. I mean that was very reminiscent of the twenty twenty one IPOs, ridiculously expensive on the front end, and then just got you know, even more ridiculously expensive when it went public finally and started trading. So yeah, you know, these are difficult times. I mean, I definitely think there's a lot more risk than reward out there. I think investors, as we always say, should be discerning about where they put their capital. Don't
chase momentum, don't chase fomo. It's a recipe for disaster. Even if it's pleasing in the moment, and otherwise it's you know, I'm kind of out of the business. My crystal ball is in.
The shop in predictable for the overall market's.
Going to go all right?
AI?
Though, if you go to your website, you guys talk about your research powered by AI. It's not a new thing. You've been doing this for a long time. How do you put the AI mania and euphoria in perspective?
Right?
I think most people misunderstand, Carol, like how much goes into what is good machine learning and AI. They feel like it's this kind of magic wand formula or magic wand code that you just kind of wave over things and all of a sudden it can do things on its own, you know. I think that there's a lot of really long term, diligent work that goes into making it useful. Most of the other stuff is smoking mirrors.
Is Nvidia smoking mirrors? Or is that something you think is interesting?
And video has got a good business model, but is it a good stock? I don't think so, no. I mean the evaluation is long run away from it. I mean, we were bullish on Nvidia gosh seven eight ten years ago. I can't even remember how long ago, and it ran away from us from a fundamental perspective a while ago, because we think it's a good business, great returns on capital. But the idea that any one company is going to earn the lines of profits as implied by the current valuation,
we think is very unrealistic. This is yet another big technological fad. It may be as big or bigger than some of the others. I don't know for sure, but you know, the size of the fad is only makes the amount of competition higher.
I should say, the current PE for Nvidia is two hundred and twelve. That's back yeah, that's yeah, that's backwards fifty seven. If you look at a forward looking pe, still high, right, David.
No, it's super high, and it's so high that it implies there will not be significant competition, and I just think that's a bad bet, right. I mean, anytime other businesses, non Nvidia businesses, think they can get into a business with that kind of valuation, they'll spend absurd amounts of money into getting into it, to the point where you know, they were happy to lose money just to try to
get a chance at that super high valuation. And that inevitably being brings down returns and profits for the leaders in that section.
All right, so, but what about investing around AI? We have a story on the Bloomberg about in Australia an investor who is saying essentially the same thing as you are about Nvidia or the companies that think they're going to own AI, but he wants to pick companies that he thinks will be enhanced or helped by AI, or companies that can never be competed with through AI. Do you think there are ways to invest around AI that makes sense?
And just got about thirty seconds.
Yeah, no, I mean I think, for example, like honestly, what we focus on, which is to deliver to the public a previously unavailable data set based on very deep analysis of footnotes. And the key to that, and the key to I think any really good AI is you've got a ton of very unique human expertise baked into it. It isn't without having gone through hundreds of thousands of
filings and marked up all these different disclosure scenarios. If not for that, we would not have been able to POPULATERII with the underlying intelligence it needs to create more value at scale people that are doing things like that, that are taking very specific and complex tasks and feeding that into a machine learning algorithm or machine learning or AI capability.
That's what value is.
But again that comes back to unique human expertise.
Hey, come back soon, David. I really enjoyed this. David Trainer, chief executive officer at New Constructs and Independent Research Technology, from joining us on zoom from Nashville, Tennessee.
This is the Bloomberg Business Week podcast, all available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from three to six Easterning on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg jermanal alone