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.
Let's talk about a little some fun, a little bit something new, and that is the meta verse. That's something that we associate with Meta. The company the Facebook actually changed their names Go Figure from Facebook to Meta, even though Facebook is still ninety nine point nine percent of the company's revenue.
But you go Figure.
A consultant got involved there at some point. I'm sure Dana Brown joins us. He's a president of the America's for HTC. He joined his life here on a Bloomberg Interactive broker studio. Dan, you guys got got a lot of experience in this a few years. Just kind of the metaverse. What does the metaverse? And I'm speaking for all metaverse shareholders here, and I own like lots of stock. Let's say I'm a big institutional shareholder. I don't know
what my company's name means. What is the metaverse to you?
That's super interesting?
The metaverse is really this long term vision right, where we interact in a digital space together, much like we do with the Internet today. You will be able to use this in the future with products and wearables and glasses that do things like augmented reality, virtual reality.
All the same time.
We're in a space of the metaverse today that's very applicable to enterprise businesses, applic real world application.
You're doing it already, that's right, idea, right, I mean, Mark Zuckerberg, I think if I can speculate a little, Paul, I'm gonna say they were in a period where they just didn't want to be called Facebook anymore. It kind of sucked to be Facebook at that time, so they picked a new name, any name, and that's where they landed. They're not really doing metaverse stuff yet, except for the fact that they had bought Oculus Rift and they're spending guys,
and they're spending a ton of money on it. But Dan, you guys at h TC are already doing things right. You're allowing what pilots to practice fighter jets or brain surgeons to practice messing around in your head.
With what headsets.
So we build virtual reality products, also mixed reality products, which is a wearable glasses that much just like glasses where you can actually interact with the real world objects as well as digital objects. Right. But we have been doing this for the last six plus years, and we have been working in healthcare with doctors, nurses, training, simulation, healthcare, with rehabilitation. We have made improvements in speed of training,
speed of learning. We have made significant improvements in just overall performance human performance. And that's what our brand actually stands for. It actually stands for innovation, technology and humanity, and we want to bring value to a lot of real world applications for immersive solutions.
So if we're going to compare what you're doing HTC to another company, I wouldn't choose Meta, No, I would choose Apple. And what I assume they're the direction. I assume they're going to go with whatever product they come out with. Whenever they do, you're looking to actually apply it to human lives and the way we can use them today, not like I can have a tail and bounce around some fantasy land.
Right.
Yeah, I think you know.
Initially too, there's there is that fun gaming and entertainment side of it. But we have a lot of gaming and entertainment products out there vuying for our attention, I think, and also we assume our customers are using it to benefit them.
They are not the product.
We're talking to Dan O'Brien, he's the president of the Americas and he's talking to us about technology that his company has developed and is using. We keep thinking of the metaverse as the future, but this is where professionals are participating in it now. Dan, what do you what do you do with the actual product? Do you if you want to say, help a brain surgeon practice surgery, do you sell a box of these things to.
You know, yeah, like.
Or or a university, or do you have them coming and work with you? How do you do it?
So we actually have multiple models, but we actually the most popular model is when another company, uh, you know, we have companies like mind VR, we have x R Health, we have multiple surgical partners. Those companies are actually integrated inside of these hospitals or integrated inside of you know, we have surgical theater. They're integrated into what they write the software for your hardware and then they will actually integrate and actually put that solution inside of the hospital.
We will promote that solution.
It could be a very specific SKEW, or we could actually put together a SKU that has a lot of different types of training materials on it and simulations on it that works across multiple areas of the company.
And I feel like I know what a SKEW is, but I don't really.
Sorry, Well, that's.
Just a boxed version of the product. So when they open that product, that's what it actually is.
It's in stock keeping units us in the day's retail. So give us your sense of the future of the VR headset. What's a look like now, what are its capabilities now, and how do you see that evolving going forward?
So like even our latest x ray.
Elite headset that we just launched a few months ago, this is a wearable headset that fits on the front and the back of your head, and it's still larger and a little bit bulky, but you can actually take the back off and have it in glasses only mode. It's about the same weight as an iPhone, so very comfortable.
Light it needsy to use.
In the future, where we are going is we're going to integrate five G technology, just like a smartphone into these wearable glasses, and you will have a connected product that is actually connected to a private network. You know, it could be Bloomberg's private network as well as you know.
A public network.
And I think then you will start to see what we call that hockey sticks scale in terms of consumer adoption. But right now we are very much in business professional use case similar smartphones. I was one of the original guys making smartphones, you know, well before iPhone and well before Android phones, and I worked on the original Android phone.
Now like how that went in terms of adoption.
We started with professional, We started with those professional use cases. We've brought value to those customers, efficiencies, cost savings, and then we actually brought it into consumer. Once we actually brought in the consumer.
Where we own that timeline, do you think for it like a real consumer and will be a brand that we know well.
I think Apple coming in is going to be a great addition to the market, right that is, it's endorsing to the market. But they're going to start with professional as well. They're going to start with professional creatives as well.
I think, what are you going to compete with?
So is HTC going to compete with Apple and whatever Oculus rift is now?
Oh?
Absolutely, I mean we consider all of us, you know, very worthy rivals. We're all trying to remove hurdles from the industry for that mass adoption, and we're all approaching it differently, which is great.
I think I figured you're aimed at probably a different customer segment then maybe Tim Cook.
Yeah, and I think you know, we're looking at customers that this is a product that we can sell, that they will bring in, that they will save money, they will save time efficiency.
You know, we look at companies like Bell Helicopter.
It normally takes them five to seven years to prototype and new helicopter they did it in six months and so saved over one hundred million dollars. You know, we're using it with architecture and construction firms. We're looking at those different ways that we can actually bring massive value now. And then we look at okay, great, let's integrate this
scaling technology like five G technology into these headsets. And quite honestly, we're one of the only companies in the world that can actually do that.
Awesome.
Yeah, great stuff, all right, we appreciate it. Dan O'Brien coming into our live into our Bloombergame Actor Broker Studio. Dan O'Brien, he's a president of the Americas for HTC talking about meta and the metaverse.
More importantly, 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 Bloomberg Business app, or wants us Live on YouTube.
Wait, you can't be a good time to be a central banker these days. You're raising rates everywhere. I don't care if you're at the FED or the Bank of England or the ECB. Nobody wants to talk to you. Nobody's somebody the dinner parties. You know you're not getting the Christmas cards because you're raising range and you're making life tough for people. But nowhere it seems to some more difficult to be a central banker than in Brazil.
So let's bring in the reporter on this story. Maria and Luisa Caputum, a brazil economics reporter for Bloomberg News. She joins us on zoom from our sal Paolo bureau. And this is a big take story. And Matt and I love the big take stories on the Bloomberg terminal because they're so well researched and written so Maria, tell us what's going on in Brazil. The president and the head of the central bank there, they're not on the same page, are they.
Yeah, Well, I'm coming from you, right from Brasilia, actually, which is the war, the central banking space, the political capital over Brazil.
So here in.
Brazil, interest rates are basically a six year high, close to fourteen percent, and they have been steady since September. We have to remember that Brasil was one of the first central banks to hike rates in the midst of the pandemic, and it's slowly working out because we are seeing that inflation is ceasing from a twelve percent peak last year to around four percent, but it's still very
much above a central bank's target. And you know, the team led by Roberto Camposneto, who is the central bank chief here, has given at this point no indication that they plan to cut rates or haven't even discussed that. And they're getting a political heat from back because President and Lewis in as La Silva, who took over in January, is not liking that scenario like at all.
Well, you have also a very colorful person in office, as you tend to do in Brazil, but this guy just got out of the big house, right. Lula spent some time in prison for corruption and then was reelect as president, which is an amazing story by itself. Now he is really attacking Neto, the head of the central bank. Is there any way that Neto just says, Okay, you rather have inflation, I'll just cut rates again. I mean, Lula would be in a horrible position if that happened as well.
Wouldn't he.
Well, we have to remember that Lula is present now for the third time, but it's the first time that he's dealing with an.
Autonomous central bank.
To the law of the grants autonomy to the central bank here in Brazil is relatively new. It was a brilliant twenty twenty one. So this is the first time that Lula comes into office with that, with that percent of the.
Central bank that he didn't himself choose.
And the thing is that also Lula during his campaign, he made a big point of promising to deliver prosperity.
Economic prosperity specifically.
And now we're seeing that most channelists are betting that growth is going to be much lower than last year, is going to be around one percent, and that is you know, going straight into not what he promised, not what Lula promise, which was you know where we were all going to have beer and beef, you know, barely easy. And I think the main thing that Lula is seeing right now is that his obstacle is interest rates. Interest
rates at a really high level. But on the other side, Tempus Mental has been arguing that there's reasons for them to hold the rate steady, and it's resources that in some cases I think are similar to our countries, especially in advanced economies, because core measures, when you strip out energy prices and some food items.
They are running pretty high.
And most analysts still believe that consumer price increases are going to accelerate beyond the Central Banks goal even like all through twenty twenty five. So they are not seeing at this point a space to deliver an.
Easying cycle that is sustainable and that is credible.
So Maria and your story, I really like the part about this meat packer. Minerva sa. It's tough to get some financing in Brazil. I mean, these higher rates are really impacticing, really impacting businesses. And so you've got a story about this meat packing company. Tell us about that.
Yeah, And not only the meat packer will also talk to a businessman who have a like toystore business there, like for with four hundred employees, and it was getting hired for him as well.
Like he actually told us that it.
Was easier for her for him in the society, was cheaper for him to get a personal loan than a business loan for his company. And the thing is that in this political vialle that we're seeing between Lula and the Central Bank chief, the people that are caught in the middle are households. We're seeing from even like central bank stops itself, levels of household dead that.
Are nearing record highs.
Interest rates rise in this country where I know you're not gonna be leieve me, but this is the truth. Like interest rates on credit cards are like four hundred percent, so yeah, really really high. So we are seeing that businesses are taking out all of these out of this. But at the same time, that's how manage our policy works, right, it tries to slow down to the economy mainly through the credit channel. So we're seeing the impacts of that.
Wow, don't put anything on your credit card right exactly, or if you do pay it off.
On I pay my credit bills sometimes, so I'm fine.
Yeah.
Yeah, that the toy maker story was great, well bad in that the toymaker got stiffed by Marissa Loja. What is that like a department store? Right, and so a lot of these people he had to take a personal loan. The meat packers supplying its suppliers with cash right now giving them loans.
How long is this going to last?
How long does compost Nettos say he's going to have to keep rates high before he brings inflation down, which.
We should point out isn't that high? Right?
It was twelve percent, which is unbearably high. It's now like four percent, which is getting closer and closer to normal.
Yeah, but their goal is three percent, and the infision expectations are still pointing that infission is going to pick up to around six percent by the end of this year. They're going to run above the targets through twenty twenty five. So at this point we don't have from thees Central Bank communication any clear signal.
That they have discussed rycots.
What we have is from in ester some markets expectations. You know, most people are batting that the first rayga is going to come in August September something like that. The governmental design of La Sila is working to create that space as well for the central bank two lower rates.
They're just discussing a bill to.
Show up public finances that if it is finally approved in Congress, could also open the space for reigas. But nowhere near you know, like the last months of the year, so we're thinking second half of the year possibly.
Right, So, Maria, how are these economic challenges Are they impacting the standing of President Lula at all? Is it's becoming something, yes, to get really worried about.
Well, he is worried in the sense that, you know, one of his main promises in the campaign was that, you know, economic prosperity, and the fact that he won an election for a very thin margin, I think it's putting more pressure on him to the liver on some of his promises. So we are seeing, yes, like in the in the side of the government, this push, this hastiness to the liver on this economic prosperity and other promises that they did on the campaign.
We are seeing as well in analysts.
You know, in in on the back of better agriculture numbers, revised up the estimates for economic growth this year, but still like relatively you know, like slowly slowly that it is going that it was like last year. You know, they're revising up to iran one point five percent and last year it was close to three percent, so we're still very far away from that.
All right, Maria, thanks so much for joining us.
Maria.
Eloiso Capuro Aloisa Kapuro there talking to us from Brazilia about what's going on in terms of you know, their president attacking their central bank leader. It's a situation you could imagine in a number of regions. I don't think president we had several years back, we had it with President Trump, President Biden. I don't think we would do it so publicly, but we have had senators do it.
Right.
Elizabeth Warren is pretty, is pretty Lula da Silva in the way she attacks Jerome.
Powell and our fed.
Yeah, it's interesting, so we'll have to see it. The're supposed to be independent. But this is the Big Take story, and you can check that out on the terminal on Bloomberg dot com slash Big Take.
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.
K Yes.
And it's the last year to see that as well. I mean in this form right. The Grateful Dead has sort of morphed into debt in company with John Mayer on lead guitar. They've got a new drummer, uh from Primis. I believe he comes from Primus, and so they kind of picked up the pace a little bit when they played in Cornell a couple weeks ago. And I'm excited to see the shows this summer, but that's not the point.
We're talking about trucks, and Paul, you were saying, you know, when you think about mid sized trucks, there's really only one name that comes to mind, but there's so much new competition, Chevy most notably, I think with the Colorado and the Canyon from GMC before. It is bringing the Ranger back. It's brought the Ranger back, but it's bringing a new Ranger. And I actually talked to the guy who runs production of the mid size pickup program at for Jim boundback last week.
Let's know what he had to say.
We're expecting a really strong response from our customers. As I mentioned, since the original launch of Ranger Raptor, there's been incredible customer sentiment and push to get it here to the US. So certainly right out of the gates, we expect very very strong demand and we expect that to continue based on our experience with the other Ranger products, but also the other Raptor products across the portfolio. You know, it's something like a Raptor that really speaks to what
customers love. And these are the types of products and the types of derivatives that customers love and they just can't live without.
All Right, So Ranger, the new Ranger is coming to America. There's going to be a Raptor version. Now, there's a Raptor version of the F one fifty of the Ranger, of the Bronco. It's like more off road capable. Rumored to be a Raptor version of the Mustang coming up. But the reason we're talking about this is because Keith Notughton wrote a story for Bloomberg BusinessWeek Toyota, Ford and GM fight for mid side truck dominance. We've got Joel
Weber here in the studio, editor in chief. So Joel tell us about the.
Story America loves trucks, So I hear like full Stop and the Ford F series We've written about before that the revenue that that F one fifty makes is just unbelievable, and keeps written about that. What really stuck out to me here, though, is this mid size category has almost been forgotten and Toyota has just had it on lockdown. The Taco Paul you mentioned earlier that Tacoma is probably
the favorite of this category. Blows anything anybody else has out and everybody is coming for a piece of Toyota, right, Keith, that.
Is absolutely right. I mean, you know F series, the F one fifty you talked about, Joel, has been the top selling full sized pickup truck for forty six years. Well, in the mid size category, Toyota outsells Ford four to one. They outsell Chevy two to one. I mean, the Tacoma has just owned the mid size market. Part of that is because Ford and General Motors both abandoned that market in the early part of the century when sales started
heading south. So Toyota stayed there and they consolidated everything that was left behind, and now it's this juggernut of a market. Between twenty ten and twenty twenty, the mid sized truck market doubled in sales and there's still more growth to come, but it's slowing. So what's happening is everybody is redesigning their trucks. The Tacoma is getting its
first full redesign in eight years. And so yeah, and we have a new ranger, as match just said, and GM came out with new mid sized trucks earlier this year. So you have all this fresh product, all going after this market segment that has huge profit margins and you know, a growing owner base.
And it don't cost a million dollars.
Right.
This is the thing about the F series. I know it's fantastic, and if you take them all together, then the best selling vehicle.
But that's I think cheating a little. Isn't fit in a garage though.
The F one fifty that I was testing last week, I was driving the Raptor R and it was amazing because it's a super charged V eight. There's no way in hell it would fit.
In my garage.
You know, and I have a pretty big garage, but but you can't.
That's the attraction of these mid sized trucks is that you know they can still tow a bunch. You can still throw your bikes or your kayaks or your surfboards in the bed and go off in an adventure or.
Go to Starbucks, which is what people really do with trucks.
Yes, but they're very appealing to guys, and it's it is mostly a male market for these trucks who like to go on weekend adventures or home depot or do it yourself projects or whatever. And and that's just a booming market. And you can fit the thing in your garage. That's huge.
So the one thing that I've noticed about the Taco and people I talk to who buy it, they sell it with a sixpe. Even the new one's gonna come with a six speed. Our own Greg Jarrett bought one because he said it was the only one he could find on the market with a six speed.
I'm pretty sure a six speed manual with manual.
Yes, I'm pretty sure that the Colorado had a stick shift option as well, but I know that Ranger doesn't. And I was with Keith in Detroit a couple of days ago, and I was.
Talking to.
Kumarka Haltra, who runs the ic business Reford, and he said, there's just no take rate. People don't buy the stick shift, but it's still It's like, even if I buy the automatic, I'm proud that my vehicle could have been purchased in manual. There's like a cool factor that I think they miss out on.
Yeah, well, but you mentioned price, and price is a huge issue. This has always been an affordable market. That's part of the success of the Tacoma, which is why they're still going to offer a stick shift version because that's going to be a lower priced version. But all these new entrants coming in are testing the upper levels of the price band for mid sized trucks. That Ranger Raptor that you're so excited about, matt that starts at
fifty seven thousand dollars, that's luxury price. So the Tacoma currently, they haven't given us the new ones pricing yet, but it currently starts at twenty eight grand. Well Ford is moving away from the twenty eight grand Ranger. They're going to start at thirty four grand because they now they have that little Maverick pickup truck, and they don't want
the two stepping on each other. So you know the thing about the mid sized trucks is they used to be this affordable way to get a you know, sort of a burly pickup truck. They're getting more expensive.
Okay, but one thing that's still missing is the plug in. That's right, what's up with that?
Yeah, So you know what the people who drive these trucks like to do is they like to toast stuff and they like to go off road. And that's making this one of the last categories to electrify because big, heavy batteries underneath your truck make it hard to tow. The range really reduces when you're towing with the battery, and it also makes it tough to go off road because you're slamming into the ground and you don't want to hurt that battery. So you know, you have to
add all this. That's what the F one fifty lightning does. It adds all this, you know, protective cage around the battery so it doesn't get damaged when you're going or that, and that adds weight. So so weight and cost or the things that that I'm told are keeping the mid sized truck from getting electrified.
If you want to jump in your truck, Paul and drive out to Joshua Tree for three or four days of mushrooms, right, yeah, there's nowhere to charge it there.
So that's the problem.
Put a solar pad on the top, So Keith.
There's got to be there's got to be a station out there somewhere. You find it when you're on mushrooms.
But so Keith, again, you point out your story that Toyota and the Tacoma really owned this space for a while here. What is their response. What's their competitive response, because it seems like they've got some competition now, or maybe they didn't so much.
That's right, Oh, well, they're absolutely responding. You know, they let this truck go for eight years without really updating it. It was really getting old school. It didn't have you know, the digital dashboard that everybody has, the touch screens that have become standard features in every automobile. Well now that Tacoma does and it has you know, it's going to have the rugged off road ones. There's a trail one, you know, there's a high performance one. So they're going
to go the full spectrum and offer new technology. The technology on the Tacoma had been getting a little long in the tooth, but with all this new competition coming in, they need to protect their flank.
Okay, so the other thing about Toyota not exactly known for electric, but they are for hybrids. And so I'm curious, how what's this strategy really look like. It seems like you could basically double down on hybrid while everything else starts to go electric and just keeping that the Tacoma for another eight years maybe, right.
Right, right, that's a really important point. This new Tacoma will have a hybrid. It'll be the only hybrid in the mid sized truck category. So Toyota is going to be the first to semi electrify a mid size pickup truck. And I talked to a very loyal Tacoma owner who drives at twenty sixteen and he can't wait to get into that hybrid. He just thinks that sounds perfect. He lives in northern California. He's a camper hiker. You know, he wants that truck.
And so he know it's where the judging station is that you're.
It's you know, it's interesting to me across a range of products. Keith that these companies don't put out hybrid or electric versions when they introduced him, you know, like Bronco for example.
Why on earth did they not do it?
Is it just because it takes so long to develop a product that you know, they started seven or eight years ago, and whoever was in charge then didn't think as it was important as we realize it is now.
Yeah.
Well, I also you can't undersell the whole off road aspect. They wanted the Bronco to have excellent off road credentials that were better than the Wranglers, and if you put a heavy battery underneath the vehicle, it hurts its ability to go off road, so that's what they did. But all of these things are going to get electrified eventually.
The mid size pickup truck market, according to LMC Automotive, we'll go electric in about twenty six twenty seven, with Toyota and Rivian and Tesla coming with their own mid size. We're not talking about the cyber truck. We're talking about some other Tesla pickup truck that is smaller in size, and we're.
Not talking about Taco. Is the Taco Does that mean they could introduce an electric version at a later date.
I mean the electricoco itself just for the rest true, but yes, there will be an electric Taco mid decade, according to MC Automotive.
All right, here's dumb question day, because I'm not a car guy. Do these car companies do they sell trucks outside of the US? The people outside of the US buy trucks.
Yeah, that's a that's actually a great question specific to this category. People outside the United States do not buy big F series trucks, the big trucks, the Ram, you know, the Silverado, those are North American vehicles. But what people outside of the US do buy are these medium sized trucks. The Ranger is a global vehicle. The Tacoma is a global vehicle. It's actually the sun of the high lux truck, which.
The indestructible pickup truck right global.
Latoya's global pickup trucks, so these things. You know, Thailand is the biggest pickup truck market in the world because they all drive around in these medium sized pickup truce everywhere. Everywhere else in the world there are pickups. They're just not as crazy big as they hear, I.
Can't imagine like trying to park a pick up truck in some of these European cities where that's parking on the curves.
Yeah, that's why the midsize work.
Okay, all right, I got it now, all right, So very interesting stuff, Keith.
It's a great story.
It's coming out in uh BusinessWeek what it's in the current issue or the forthcoming issue, So it'll be on Thursday, hits the newstands on Thursday, and you can see it on Bloomberg dot com slash BusinessWeek as well.
You know what I love about this this Raptor photo that's in the story.
A little bit of air?
Did you do that?
Was that you driving that? Matt Novo? You know what I was trying to figure out on the on the Raptor.
Uh.
You know, they charge a lot more for the Raptor version of anything on the Bronco, for example, the Raptor version costs more than twenty thousand dollars more than the wild track. But I looked and saw that they have different shocks, they have forged control arms, they have an entirely different frame, so it's not just about badging in that case.
What do you think, Keith?
Yeah, Well, the Bronco Raptor starts at eighty five thousand dollars.
So that's pretty rare starts at But it's.
Amazing that you can just slap a raptor on it and it's like across the line. Just to upgrade up, I mean is.
They have to do a lot of other stuff. So they kind of created a new truck for the Bronco raptor.
Yeah, I guess, but the margins are magnificent, which is why Ford is raptorizing everything.
What do you think, what do you.
Think the Bloomberg terminal raptor would do?
That would be awesome.
You can bring your terminal with.
You to Joshua Tree exactly, all right, guys. Joe Weber, Editor Bloomberg BusinessWeek. Here in our bloomberga interactor broker studio. Keith Morton the author of this cool story. Keith On, auto reporter for Bloomberg News on zoom from Detroit, and as Matt was saying, you can key story will be featured in the forthcoming issue of BusinessWeek magazine. You can read it now on the Bloomberg or at Bloomberg dot com slash BusinessWeek so or you.
Can just type BusinessWeek dot com.
I've discovered Oh okay, because then you're just automatically pushed by some Internet god, Internet God to Bloomberg dot Com, Slash, Business.
Week, Bromarco.
Journal. How about you let me drive?
No, no, no, no, honey, please, I want to drive.
It's a good question.
This is the drive to the clothes. Do well, young don on Bloomberg Radio.
All right, this is the drive to clothes.
I'm Matt Miller in for Tim Stenemac Paul Swenyan for Carol Masser, and we want to welcome in Eric Clark, he's a portfolio manager at Rational Dynamic Brands fund on Zoom from San Diego to talk to us about the market action and his expectations.
It's j Yeah.
Can people live in San Diego?
Just visit? Visit Sandiego?
Wait can't you? Don't you have to be like Nae enable aviator to live there. Do they have other industry?
Eric, that was a former life. Yeah, there's a lot of biotech. That's about it, though, a lot of surfing.
The luckiest lot of world live in San Diego.
All right, So that sounds awesome.
But the situation that we're in here on the East Coast, specifically in Washington, d c is not so great. What's your take on the debt ceiling standoff?
Well, they are very predictable, aren't they. They love to wait until the last minute and keep kicking the can down the road, and all of us have to be held hostage by all of their crazy actions.
All right, let's say we get to the other side of this. Do I want to be offensive or defensive? Because I have a lot of strategist saying there's still a lot of unknowns out there. You want to stay defensive. Maybe some big cat names, some dividend playing names, some fortress balance sheets. How do you think about it?
I mean, we're brands and consumer investors. So the nature of being a mega brand is that they tend to be very high quality companies anyway, So we're we're pretty balanced by kind of offense and defense currently, So we have some good staples and and healthcare exposure, but we also have some good exposure to traditional consumer spending brands that are a little more offense, growth oriented, a little higher beta. So I like the balance for now.
All right, So your brands oriented rational, dynamic brands? Fun we have the clue there, What are the what are the mega brands? That you like, what are the mega brands that we that that we should be paying the most attention to.
Well, I mean, you know, it depends on what part of consumption we're talking about, but I mean across tech, you know, Apple and.
Well, uh, he froze or he's taking a pause to collect his thoughts.
No, he looks still frozen.
To me, he's frozen completely. I see what you're looking. You're looking at the zoom thing. Yeah, I can see he's got like the pine tree ocean.
I think that's probably just a barrier.
We got you, We got you back, Okay, we lost you for a second. You were talking about the big tech mega trends. Uh, you said Apple, and I think you were about to say Amazon. Then you froze up.
Oh, Apple, Amazon, Meta, the old Facebook and then the traditional Microsoft Google, those kinds in the tech world. But then there's great brands and consumer you know, uh, with Costco or Nike or Lulu, and many of those are on sale currently too.
Eric.
I just before we went on, I was just telling Matt I just downloaded to my phone the the movie Air about Nike and the Air Jordans. So I'm looking forward to being watching that on my long commute back to the Jersey Shore tonight, which I'll stack up against San Diego anytime, by the way, So you get the winter, dude, You've got Nike on your list for very good reason. Arguably one of the greatest brands out there. What's the risk to a company that's so you know, so dependent
upon a brand? But boy, you got to protect that If something goes wrong, Oh boy, I don't know how you recover. So how do you guys think about that risk, the risks to a brand?
Well, I think you know, one of the things we monitor and measure, you know, as much as possible is brand relevancy, and we kick out things that are becoming irrelevant. Let's think of under armor, and let's keep focusing on the things that are just in the top of consumer's mind. And you look at revenue, you look at free cash bill, you look at market share. You know, all that kind of data speaks to which brands are still staying relevant.
And the good news is if you're still relevant and you're still an important consumer spending category, then even when the stocks are on sale, you know that eventually consumers will start spending there. And so Nike is clearly the most relevant brand across all sectors. I mean, it's just so dominant that they were able to focus more on on direct to consumer because the brand's so powerful, I don't necessarily need to go to foot Locker, which is rapidly becoming irrelevant.
So I'm more of a Walmart guy Eric. But of course Matt's all about the luxury brands. He's very comfable down you know, Madison Avenue, Fifth Avenue. How I see LVMH is on your list there, and I would think luxury just generally speaking, would be a really good China reopening play. Is that kind of how you're looking at it?
Well, it is, but you know it's just more of a it's an upper income, wealthy consumers. As consumers start to make more money, there's these aspirational brands that people love, and there mes and a lot of the brands under Louis Vuitton. You know, I put you know, Lulu into kind of the mass market aspirational brand, but you know that would be up there like a Ferrari as well. So there's you know, we tend to focus on lower income.
What are they using from a needs perspective? I would put Walmart into that category, and then you know, in the middle income group, and then the upper income group, and then all the way up to the wealthy. And so when you can extract great brands from each one of those different income brackets, that tends to be a pretty good portfolio overall.
Is there a segment of the consumer that you're worried about?
I mean, someone who's buying a Ferrari, I'm not worried about no matter what kind of recession we have, But you know, someone who now could afford Lululemon may not be able to in five or six months.
Yeah, it's possible. I mean within the portfolio. I would say that we're not nearly as broad as we normally are across spending categories because consumers, we've all been overspending for the last eighteen months, and eventually, one we get tired of it, and two we can't keep doing it. So then we have to separate our what do I absolutely have to have usually groceries, general merchandise, food, you know, and then what do I want to do that I'm willing to spend my money on here, And then let's
avoid the things that we're deferring, like maybe more. You know, even in home improvement, lows and home people have struggled the last couple of quarters. Furniture, you know, electronics, things like that. So we're you know, with with better prices. Then I'll be get getting more broadly exposed to some
of those categories again. But for now, we're really focused on things that have resilience, that are discretionary and that we absolutely have to have, like we're going to a concert that we love, and then things we need via you know, going out to restaurants and doing some summer vacation and the staples of life.
If you will, all right, Eric, thank you so much.
We appreciate it.
Eric Clark, he's a portfolio manager at Rational Dynamic Brands. Fun that's a really cool strategy. You're focusing on big brands. He joined us on zoom from Sunny San Diego.
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