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All right, so you know earlier we got an update on US inflation showing signs of moderating in April, giving the Fed maybe room to pause read. So we're splitting here's here. All right, let's get into it, because two folks who know a lot about it and have a lot to say about it is Bloomberg's Mike McKee and Dartmouths. Danny Blanchflower. Mike, of course, Bloomberg News international economics and policy correspondent who's been up for like twenty four hours
straight talking about this. He's on the phone in New York City. Danny Dartmouth, professor of economics, former member of the Bank of England's interest rate setting Monetary Policy Committee. He's a labor economist. He's with us from zoom in Hanover in New Hampshire. Folks, thank you so much for being with us. Mike. I want to start with you. You were on early breaking it down as a numbers cross You've had hours to go over all of the data points. What are the key facets of this report?
Well, I think I said this earlier and it really is the case that this was a status quo report. It didn't move the ball much one way or another. We saw inflation move up a little bit on a headline basis, largely because of the energy. We saw the core rate not go down very much, largely because of housing. And these are stories that we have seen before. So this isn't going to change the way the Fed is looking at the overall economy and looking at the fight
against inflation. They can still pause in June, but it won't be because of this report.
So we saw for the first time an inversion, or the first time in many months, an inversion of the headline figure which is now lower than the core figure.
Does that mean anything or does it just look cool on a chart?
Mic?
It looks cool on the chart, Matt. The biggest thing is that we're going to see core starting to come down when the drop in rental prices over the past year finally starts to show up in the data, which should be in the next month or so. But the core is the core for a reason. It is the stickier parts of inflation, and the headline numbers largely influenced by things like inflation and food, although food wasn't a big factor this time, but energy and food energy prices
went up. They've started to go down again, so we'll probably see it change next month.
All right, Danny, come on in on here. You've been very clear on how you feel about what the Fed's been doing here. But do you feel like inflation is slowly it's certainly better than it was a year ago.
How did I feel, Danny? How do you feel about what the Fed's been doing here?
Oh?
Well, I mean I think that the reality I mean, Mike laid it out very well and very carefully. The reality is that what's most astonishing is it everybody seems to have such a kind of accepted view. Everybody seems to think the same. All the central banks are saying the same things. And the reality and we have unanimous votes, and the reality is we just don't really know. There's no fundamental theory here as to what's going on. What
we see is inflation starting to fall today. Basically what you got was the base effects for this month stop working. So you dropped a point four, and you got a point four, and in the seasonally unadjusted you get a drop in the seasonal adjustment, you get it to stick at five. So the next two months we're going to have big base effects dropping out. And I think in a sense the discussion has to actually be so what
are the costs of inflation? I mean we all sort of sit around and go, yeah, that's what the Fed's got to do. Inflation is such a terrible thing. Well, actually enumerate what a terrible thing it is. Yeah, I know that inflation low as well being, and I've measured a great deal of it. But the question is what do you replace it with? And what are the costs
and the consequences of overly tightening. And the answer is that a one percent rise in unemployment is between five and ten times worse on ordinary people than a one percentage point change in inflation. So essentially what we're going to see is how much this how much The consequences of what they're doing are much worse than the problem of inflation.
So I don't think we can have maybe a recession though, with a labor market that is still strong, well, I don't.
Even believe this thing about strong. I think it's kind of nonsense. I mean, the reason it's The reason I think it's nonsense is that the unemployment rate no longer is a decent measure of anything. So I've worked on this forever. The unemployment rate is uncorrelated with wage growth. It's uncorrelated with it. The biggest macro problem you have is to explain why wage growth was so flat between twenty ten and two anyone unemployment was falling.
Answer, unemployment rate is irrelevant.
What you have here is lots of labor markets slacked currently being indicated by the non employment rates and the labor force and activity rates. That's what's determining wage growth and keeping wage growth down. If you try and look at every country in the world, every other country other than the US, the Inact, the the EPOP, the employment to population rate is at least equal to its rate in two thousand, The UK is well above.
It, Greece is even comparable.
So the question you have to ask yourself up to which I don't have a great answer, and we can discuss it, is why is it true that the non employment rate in the US suggests to get back to two thousand levels, you need about seven million more people working. So on that basis, I don't believe the unemployment rate because nobody can show me anything that it's related to wages. I have lots of papers on it. So and why
is the US so much different to everybody else? So the argument you have to raise rates because the labor market so tight, it's for the birds.
So what Let me ask you this because you know in econ one oh one, I was mostly thinking about Kegger's and the Grateful Dead.
But why is it that.
You know, the FED wants to use unemployment and a recession to fight inflation?
Is what I get.
They're saying, we have to fight this inflation, and we're gonna have to accept a recession and higher unemployment in order to do that. And you say, a higher unemployment is actually much worse than higher inflation, right? Why Why is that? Because inflation affects all of us, right, and unemployment only affects a very much.
So that's that's completely wrong.
Actually, Okay, obviously a lot of is still in his life. I'm just gonna say to.
Charlie Evans, who told me when I showed him these estimates, he said to me, Danny, this is great. Everyone told me always what you've just said, that inflation hurts everybody. It's like thirty times worse than un employment. So here's the story. You go measure it. You ask people you'll about your well being, and you say, so, how much does inflation? So think about a one percentage point rise in inflation against a one percentage point rise in unemployment.
Well you get a number for the inflation. What you get in unemployment is well, one percent of people are unemployed. So those people's unemployment rises a lot and they're really unhappy. Great, but what happens is a one percentage point rise in unemployment makes people much more unhappy than a one percentage point rise in inflation. Now you can argue I don't like this, but you could say this is the evidence. This is the data. Nobody else has any other data.
Everything else about they worry about inflation and inflation expectation is just dreamed up. Make stuff up. This is the data. The data says a one percentage point rise in unemployment. Well, there's a new paper by Robert McCulloch from New Zealand just come out says that a one percent rise in unemployment raises pain ten times more than a one percentage point rise in inflation. I mean, the problem for anybody
who says that's wrong is they have no data. This is the only data that exists, and it shows that the impact of one of unemployment or joblessness is much worse. So still waiting for people to tell me what are the consequences of an inflation rate of five percent that you're trying to get down by creating.
Might come on in or other economists.
Well, the obvious consequence is that people lose purchasing power and their standard of living goes down. And we saw that very specifically during the nineteen eighties great inflation, which is what scared the pants off of all the central bankers who are now trying to bring down inflation. But I was truck Danny by what you were saying about wages. Wages are still rising at a very high pace, especially
compared to what they were doing in the teens. We're still well over four percent, and inflation is still running above that level. So people are still losing grounds even though they are getting raises.
At this point, Danny got about just about twenty seconds.
So unfortunately, well, real wage is a flat over the last year, and obviously, for the level of the unemployment.
Rate, wage growth is actually still very compressed.
I mean, in the past, you had an unemployment rate of three and a half, you'd be talking to wages greater than that.
So the answer is that.
The unemployment rate is uncorrelated with wage growth. Just get it into everyone's heads. It's completely uncorrelated with it. It has no relationship with wage growth whatsoever. You can't run it in any form of wage de grade to be at Phillip's curve or anything else or a wagecurve.
The unemployment rate is uncorrelated with wage growth.
We gotta run that though.
I'm gonna tweet that because I think that's the most fascinating thing that I've heard today.
All Right, we gotta say goodbye to Danny and two of course, our Michael mcke Danny Blanchflower over at Dart method.
Sucks.
All right, everybody, Well. Shares of H and R Block selling off today, hitting its lowest level in about a year. This after the company cut its outlook for the year after reporting lower earnings and revenue in its fiscal third quarter. So let's get into the quarter. Let's get into the business. This is a company that's been transforming itself over the last couple of years. Back with us as Jeff Jones,
president and COO at H and R Block. We've mentioned in the past his background chief marketing officer at Gap, Target, president of ride sharing at Uber formerly. Jeff joining us via zoom from Kansas City, Missouri. Jeff, good to have you back here with myself and Matt Miller. Talk to us about the quarter, the outlook. What's going on.
Yeah, Well, first of all, Carol, we definitely have not hit our fifty two week low, so I want to be clear about that. Listen, the season did not end the way we expected it to. There were multiple industry dynamics of play. Our assisted business was a little softer than we wanted. But there are many many things that went well this year, and I think that's what investors are hearing. You know, we still expect to grow earnings
and EPs in a really tough backdrop. Our DIY strategy work, we introduced AI, so you know, there are many things that are working. But we were clear on the call yesterday there were three reasons why our volume didn't deliver, and we feel like we've got a really good handle on that.
What do you think investors are getting wrong here?
Because I mean if it was a week later, you'd be at your fifty two week low, right, I mean, just because you had an incredible May in twenty twenty two in terms of the stock. Why are investors not understanding your optimistic view?
You know, I think like any like any company that has an unusual mix of business and seasonality, it's just hard to get your mind around that so much of our business happens in one quarter, you know, I think for.
Some mill it's been that way for how many years since like nineteen thirteen.
Well not quite that far. I mean, we have a very very large and healthy tax business, and that's determined by one time a year. So I think that you know, when you look at our financials and you see us lose money in most quarters of the year, but then generate five or six hundred million of free cash flow, I think the investors that take the time to really understand the story take a great long term view on how we allocate capital, our dividend, our share repurchase. And it's a really good story.
All right.
And just to clarify, I'm just looking at some data on the Bloomberg it does say you're at the lowest level since about May twelfth of twenty twenty two.
Yeah, that's why I said it's a it was a week later, it would be the fifty two week low.
You're eight or fifty one week low. Let's put it that way, just.
To say we're not twenty we're not twenty five dollars.
Okay, fair enough, fair enough. You are the CEO, you know, But I just wanted to clarify in terms of the data. Having said that, you guys are going through a transformation. And Jeff, when we last talked in terms of I think it was back in August, we talked a little
bit about the impact of higher rates. Tell us about the folks on your platform, whether it's individuals, whether it's small business, in terms of the activity you are seeing, What is it telling you about them and what it tells you about the broader outlook.
Well, I think the biggest thing we see is really the health of the consumer, especially you know, we saw this year the tax industry got off to a really fast start. People were looking for their money. We saw these refund advance loans really perform well this year. In the industry that speaks to the cash needs of the American consumer. The problem is, for many many Americans this year, refund sizes were down, you know, eight to nine percent, and many people who are used to getting a refund
suddenly found themselves owing money. So those kind of things are very confusing to the consumer. But we definitely see consumer needing cash and looking for alternative ways to find it.
Why did a lot of filers see that change? Why were a lot of filers owing money when they normally get a refund because I would I think immediately of the salt deduction cap, but that went into went into play in like twenty seventeen, twenty eighteen.
Yeah, yeah, So you know, keep in mind, giving tax advice is like asking Mayo clinic for you know, medical advice. Like there's so many things that depend. But there are two broad things that happened. The first is the roll off of stimulus benefits. The second is the IRS made a change to withholding tables, which essentially more people kept money in their paycheck but didn't think about changing their withholding and therefore, you know, had a surprise at the
end of the year. Those are the two main reasons.
Can I ask, and I'm sure you already have a plan. What does how can AI help you at ation R Block.
Well, first of all, there are many things we're already doing with AI. We use it in robotics, process automation on remedial tasks. We use it to match labor and
supply and scheduling. This year, we introduced an industry first in our DIY product, where if you switched from a competitor, we automatically and proactively looked at last year's return to identify any errors that may have been made, and if we found one that was worth more than two hundred and fifty dollars for you, we notified use you could file an amendment. So there are a number of things
that we're already doing today. And you know, listen, we have the same broad ethics, regulatory, legal, security, and privacy concerns as I think many companies do. But in general, we're excited about the potential for what this technology can do come or customer service, et cetera.
I mean, can't can't AI make the tax code easier for humans to deal with? I remember Donald Rumsfeld's famous letter to the I R S where he was like, I have no idea, and I have a college degree, like my wife doesn't know either, So.
Here you go.
Can't can't this make make it easier for Americans to file their taxes by themselves?
I mean basically talk to a bot and just do it.
Yeah, talk to an H and R AI bot and they'll say, I fire your taxes and it's it's all done, you know.
Yeah.
I mean, I think what obviously has to happen is the you know whatever average means. The average American consumer has to be willing to turn over all of their most intimate financial data to the bot.
And for the average American consumer, that's like a W two. Here you go, all done.
It's it's really not a W two. Think about the Earned income tax credit, the child tax credit, the way childcare happens. Are you a grandparent of paren and anna or and uncle taking care of the child? I mean, there's an enormous amount that goes into this for the consumer every year, way beyond a W two. There's no question this technology can help all of us provide better
tax planning and make things faster. We're already leaning into that, but I think you know, the jury will be out over many years on will people be comfortable turning over essentially their financial DNA to the computer?
Well, and I guess I would argue, I know what we share with our accountant, and they pretty much know everything and anything when it comes to our finances, So you essentially are handing it right now to affirm individuals who put it into a database that you get.
My dad was never. My dad would be never. Okay, he'll do his own taxes until he dies.
But we are so are many other people. So I think it does sound like just kind of the normal progression. Hey, one thing I want to go back to, Jeff, because you do have a vantage point when it comes to your platform. San Francisco FED coming out with their household survey and they're saying that house is still strong in terms of the money that they have on their individual balance sheets despite how many years we are out from
the pandemic. Do you agree in terms of what you are seeing or do you feel like things are getting a little bit weaker and softer?
You know, what I can speak to, Carol is the twenty million people that we serve and the last several months of seeing how important it was they got their cash. So does that mean they're excited to get it because their flush and their bank accounts are full and their credits their debt is low. Or does it mean you know that money's already spent. And what we see with the consumers we serve is that refund is already spent and so you know, it's not go on a vacation.
So we still absolutely saw this year urgency to get cash and just too many people being surprised by the outcome for those two reasons I mentioned earlier.
Hey, I do want to go to since you do know when your stock HiT's a fifty two week low and I was looking at, you know, the moves today it's down about four percent. It was down six percent at its lows. What are investors saying to you, because they obviously are disappointed.
Well, first of all, they're excited that we will still grow, earnings will still grow, expect to grow EPs. We have a really strong capital allocation program, and when you put all that together, we deliver a really nice TSR. So they definitely see that. I think what they want to know is, you know, why did you lose volume this year? And there are three answers, and we're really clear with this. You know, we lost filers who make less than five thousand dollars of income who were most likely in the
system because of stimulus. That represents about a third of our client loss. The second is those EITC filers that we're looking for refunds refund advances. And the third about twenty percent of our client loss is just do to the California extension timing. So I think the clarity about why we lost volume this year is helped investors understand that two of those three headwinds are behind us, and we're still generating a tremendous amount of free cash flow and deploying that very effectively.
Right, including buybacks, right and dividend correct, exactly. All right, Gonna leave it on that note. He Jeff always fun to check in with you, Jeff Jones. He's president and CEO of H and R. Block stock is down about fourteen percent so far. You talked about TSR. Of course, total shareholder return joining us from Kansas City, Missouri. So your dad doesn't handle anything over.
No, never would never. It's a little worrying.
Actually, all right, more to come on Bloomberg Business Week.
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All right, you are listening and watching Bloomberg BusinessWeek. Matt Miller and Carol Masser, We're gonna, just like our TV colleagues, stay with Disney because the stock is down about two and a half percent in the after market. So let's get to it with Jamie Lumley, senior analyst at Third Bridge Group. They provide global research to PE firms, hedgephones and consultants. On the phone in New York City, Paul Sweeney, co host of Bloomberg Surveillance and Bloomberg Markets with us
on the phone. My man from New Jersey. He is Paul. Let's start with you. What jumps out for you at Disney.
The first number I went to, the first one nightem I went to, was the streaming losses. Now, the good news is the losses of six hundred and fifty nine million dollars came in less than the estimates, which is about eight hundred and fifty million dollars. So that's good news.
The bad news is six.
Hundred and fifty nine million dollars is still a huge loss just for one quarter. So I think on the call, investors will want to get us sent from management, you know, where do they see that glide path for that business as it tries to get to break even?
All right, so it looks better than expected. I wonder why, at least, you know, on the headlines. I wonder why we're seeing the drop then in the stock after hours. Jamie, I guess you could never really tell, you know, why investors are buying and selling.
Across global Wall Street. But what do you take out of this that could be bearish?
Well, I think there are definitely a couple of interesting things to look at for revenue, you know, certainly I also first looked to see what the line item was for the loss of in streaming, as that as one of the big stories over the past couple of quarters, and trimming those losses is definitely one of those things which Bob Iger is putting at the top of this to do list. And certainly I think there is some encouragement to be found and that those losses are being trimmed.
But again, it is a large amount of money which is losing and also coming off the backs of Brothers Discovery last week reporting that their streaming business is starting to turn around a profit. I think there's ongoing pressure to see some slightly more positive results in that segment. However, you know, other things to look at as well, as overall revenue seems to be delivering some strong growth. Looking at thirteen percent overall top line revenue growth from the
year ago period. There are definitely a lot of factors and I think that as we look at the call layer this afternoon, there will be a number of areas where it'll lead just interesting to see how management is interpreting these results and looking at what are the top priorities that they want to discuss.
Yeah, you know, I got to say when I look at you know, streaming, it's still such a smaller business when it comes to what goes on a Disney Paul, But is it right for Disney? I mean, they have such incredible content, I feel like, and they are really good at usually leveraging across parks and movies and so on in merchandise. Can they figure out how to make this be a lot more productive when it comes to top and bottom lines?
I think they can, because as you mentioned, they have such great programming across their film studios and television studios and it's got arguably the best content on the planet. They like everybody else, has to, you know, make that migration from the traditional pay TV model to the streaming model, and that is a very expensive transition and the payoff at the other side is a little bit unknown at
this point. So if you're an investor in Disney or some of these other big knee companies, you're really making a bet on management to execute here. So again that's why these conference calls in these meetings with investors are key, because boy, we see the programming costs really really high, and you kint to really make a stretch to see when this same term is profitable. And that's why Bob Iger really has been focusing on the cost side of the business as well as the top one.
And to be fair, he gutted, you know, a lot of the folks that were behind Disney Plus initially, so we know he is remaking it in terms of the manager.
Wait, Disney Plus, that's the streaming service.
So I guess I watched that a lot, but only only like three films we watch in Conto Mulwana and Frozen well Frozen one and two.
Jamie, what about ESPN?
This is something that stop, this is marvel Come on mag now, Jamie. What what do we think about ESPN? Paul and I talk about this all the time, and it feels like they could do a heck of a better job at monetizing that incredible content and they just leave so much money on the table.
You know, It's definitely an interesting question, and looking at ESPN and ESPM plus it has definitely been one of those hot bun issues over the last year or so, and looking at as you highlighted the value content there, one of the big questions of course around you are broad cost looking at sports rights and renegotiation there, but then also just the best way to monetize that of course across the traditional linear channels as well as the
streaming side of things. It is definitely far smaller than Disney's other streaming offerings, and there are some questions about overall as streaming in general continues to see a rise in live sports across a riet different platforms, looking to have that view one of their you know, areas of focus, what exactly Disney will be doing for ESPN Plus and
ESPN is a big question. Earlier this year, of course, we heard the Bob Eiger is not really entertaining at this point any thoughts about divesting that part of the part of the business. But exactly what the plan is is one of those things which our experts continue to say there is an uncertainty around.
I just mean because you know, a lot of people don't have cable anymore, but the best content that ESPN has is only available on cable. So suckers like me that by the ESPN Plus service realize later that we can only watch like Duke's JV field hockey team, you know, no offense.
Paul, All right, Jamie, what can they do about that?
It's a really good question. And I think that one of the things that we've certainly heard is also just in general nature of the challenges of sports streaming in general, because of the seasonality of it, you have just a lot of challenges the overall fundamental business model of getting sustainable subscribers and not having people hop on for when their team is playing and then immediately leave once the season is over and marsh badness is no longer upon us.
So for that kind of model. Right, We're still trying to figure out exactly what to do here.
Yeah, I'm just reading from the press release decrease a cable due to higher sports programming and production costs and to a lesser extent, lower affiliate and ad revenue. All right, folks, just got about forty seconds, twenty seconds. First to you, Paul, what would you be asking on the call?
Just the streaming business? Give me the updated path of profitability for streaming?
All right?
How about for you, Jamie, I'm still curious to hear what's happening with Hulu. I think that's one of the big question marks coming off of the back of the leadership transition, another of those areas with a lot of uncertainty. So also how that factors in this streaming is another big area.
Hulu subscribers forty eight point two million, That is more than ESPN plus, and that is certainly let.
Me think I get them all in a bundle.
I have Disney, Hulu, ESPN all in a bundle, so I would think that's the same with most people.
Yeah. Now I'm just looking at you know what do they do though? Right? Because it's just like another channel. Gentlemen, Thank you so much. Jamie Lumley, senior analysts on the phone in New York City over at Third Bridge Group, and Paul Sweeney, of course, co host of Bloomberg Surveillance and Bloomberg Markets and really our go to internally. When it comes to media, Disney shares Matt are down two point two percent, Marvel, you know nothing. Have you not seen any of them?
I'm not into superheroes or comic books.
This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus gloom Wall Business finance and tech news. The Bloomberg Business Week podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
You've got a lot when it comes to artificial intelligence and certainly the next level AI. We heard Pellant here earlier in the week, the CEO saying in terms of their strategy, they've said they're just going to take the whole market. We just talked about with Ed Ludlow about Alphabet and Google.
IBM's brought Watson back.
IBM has brought Watson back.
I mean to no fair fanfare at all.
Hey, I's been around for a long time. W's just getting a lot smarter and we can actually talk to it if you will, or talk with it. So let's get another take on AI with us is Favorite Shaithe He is co founder and CEO at the conversational messaging platform for commerce, marketing and support there called gup shop, and he's here in our Bloomberg Interactive Broker's studio. Erty, good to have you here with Matt and myself. Tell us a little bit. You guys are all in on AI.
What specifically is it just about? When we call a company you can be behind it in terms of your platform.
Yeah, first, lead Carol, Matt, thanks for having me here. That's exactly right right helping businesses and brands build these conversational experiences or chatbots through which they can engage with customers. So for a consumer, the consumer experiences that chatting with the business is just as easy as chatting with a
friend or family member. You ask them questions and through those conversations you can get deals offered, shopping payments, customer support, troubleshooting and so on like so.
Or well, I have used some chatbots recently with a couple of your clients. For example, Verizon and the experience I had was nothing like a conversation. In fact, I thought it might have been the dumbest piece of technology that I've.
Ever interacted with.
Now, I was also angry at the time, to be fair about Verizon nothing to do with the chatbot. But are you saying that your technology is able to do that stuff now or that you know, five to ten years down the road they should be able to do that.
No, I think it's more like six or twelve months now, right. What's changed, Okay, what's fundamentally changed a few months ago is that these large language models got It was a huge step function in capability, meaning it just dramatic improvement, and all of those are now trickling into these experiences. So it's it. It takes a little bit of time, but in the next few it's a matter of months because the hard part is done. It just has to
be integrated. But the fact that they can handle these conversations in a natural way, understand, interpret, sense what the query is, and then provide good responses, etc. It takes a little bit of work to optimize it For a particular enterprise.
It's a big jump. What was it all of a sudden because AI, as we've said, right, this has been around. But what happened? What was the big jump in particular?
Yeah, now that's a great question. See AI. I mean I did my graduate research twenty thirty years ago in AI and it's been going around for seventy eighty years, right, AA has been making constant progress out of the limelight. I think what happened literally over the last six months was it reached a point and basically three things came together, right. One is on the software algorithm side, there was ideas
around deep learning and the transformer, which was amazing. The other is More's law, right, hardware getting better and faster. And then the third is data right, Internet data. The volume of data available for training has become available. So these three things together, and then I guess its just a numeric thing which is at a certain number of parameters. Right, at one hundred million, it wasn't good. But at one hundred billion parameters, suddenly it.
Understands legging point where all this came actually really productive.
So from a media standpoint, it looks like it went from nothing to something. But you know, AI research has been going on making steady progress.
But I mean.
When I talk to a chat bot online at any of these big companies, or if I get a computer on the on the hotline, it's just a horribly frustrating experience. And your business is very impressive a cup shop. You have a ton of clients, you have marquee investors.
You know, you have a huge.
One point four billion dollar valuation. So I have a lot of respect for that. But I have to guess when you talk to people who interact with chatbots, they're.
All as frustrated as I am.
Because I'm finding myself saying, agent, agent, agent, get me to a human because I can't get anything done with the I hate to call it AI because there's nothing intelligent about the current services.
So I'll answer there are two aspects to it.
Right.
Once is if we just step away from the US for a for a second in the rest of the world, where you don't have as many customer support agents, as many businesses investing in these things for consumers, if the baseline is zero, A chat pot that works half the time is a miracle, right, because it solves a lot of problems. You don't have to wait on hold, you don't have to wait in long queues, and so on. So there's a lot of people around the world.
If your problem is solved, but if your problem isn't solved, then there's another two or three minutes that you've wasted talking to What you're saying.
Is this is what we're finding. The more information that goes into it, it's going to get better. Christos Fair, we've all been in that point where we're.
So you're saying it's going to improve something.
But now now we are on the cusp of it. Okay, because of what open ai and there's just one example, but there are many other models, you know, Meta and Google and even the open source community is just driving it. So it's solve the hard part of understanding language, which is the hardest thing. The second bit is packaging it
into specific business conversations. That's remaining, but that's now like weeks or months away doing that for a whole bunch of enterprises, you know, and you kind of have to handcraft the integration a little bit. But we are even productizing that.
How do you protect the accuracy and the purity of the information. So it's not a case of we're doing something that we're googling, you know, later on and we're trying to do our own research, and.
That's that's exactly what takes time. Right. These general language models are simple word prediction, meaning they just make up their generative right, so they kind of make up an answer. It may not be accurate, but in a business context, you need accurate information, so we do. There's a process called fine tuning, there's something called prompt engineering, and then you also link it to plugins which give you the actual data. Right, So for example, what's the interest rate
on a checking account? I mean, you can't make up an answer, even though AI will, so there it looks up the right answer from the right place, or it's we're.
Going to know is users that it's the right answer.
Well, so the business, the business has the responsibility and the owners to make sure because they also have the liability for what the bot says. Right, So so I think they are. This is exactly where we work with them to make sure that the conversations are precise, that accurate, the information works and so on, and then there's a lot of debugging and so on.
Right.
It was Look, the web wasn't built overnight, and neither will these chat bots. But I think as they get optimized and refined. I think it'll be It'll be good enough for you, Matt.
I'm excited. I'm looking forward to the future. I'm just saying you have a little.
Time, a little bit hurt.
She's going to learn her language. It takes some time.
Exactly.
How busy are you? Just ten seconds? Are people calling you off the phone or just give me an idea?
Yeah, this is accelerating. I mean, we are doubling business year over year, and it's accelerating even more.
All Right, well, come on back so we can, you know, make Matt happy. That's the future. Chat GBT experiences will be better, even better.
The next time I'm here. You'll talk to my chatbot.
All right, he'll do the interviews for you.
All right, we get a Right.
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Now about you, let me drive? Oh no, no, no, no, Plea's going to drive alright, please, I'll do the travels lease.
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All right, everybody, under eighteen minutes left in today's trading session. We got a two year note as we hear from Charlie, still down around three point nine percent. But more importantly, well it's not necessarily more importantly, but we do have some buying as we get towards the last twenty minutes of trading here point two percent higher on the Nasdaq. We're off. Definitely are loads of the session at our highs when it comes to the Nasdaq trade. So yeah,
that's what's going on. So let's get to it with our Drive to the closed.
Guest.
Alan Lance is back with us research director at Lance Global dot com, joining us on the phone from Toledo, Ohio. Alan, nice to have you here with Matt and myself. So it is an interesting day. I've been calling it kind of a meth week of trading because it feels like we're looking for direction. What's your take on where you can find opportunities in this market environment?
Well, I think Carol, it's a situation where you know, the market has been presenting opportunities in the beginning of the year with the megacaps, you know, after the megacap tech stocks were down so much, you know, over the past few weeks, you know, you had companies like acam Technology and Google that really are in good spaces that we like, like cybersecurity and AI, and they really had underperformed.
And today both of them are up, and I think investors are realizing or Wall Street's realizing that that, you know, most companies are going to have a significant take as far as in cybersecurity for Akamai and AI obviously for Google. So I think that's where you've really got to get to avoid the torpedo areas, you know, like the small banks and the regionals, and you know, capitalize on these areas now that might not have performed yet are in
good long term areas that can can do well. And I think that's the type of market we're going to have winners or and losers, and the divergence is going to be pronounced.
Are you worried at all about dropping stocks if we don't have an agreement on the debt ceiling? I look at the you know, before TARP we had stocks drop eight percent, and before well in twenty eleven, when the debt on our debt rating was downgraded, we have docks drop twenty percent. So you know, that can bring us down to thirty seven hundred, or it could bring us down to thirty three hundred.
Yeah, I think, Matt, we're in the higher end of the range, so it would be a little bit more selective now. And obviously if something as dramatic as twenty eleven occurs, I would utilize that as a as a buying opportunity, but you know, selectively, so we're not real
concerned with it. But we are in the higher end of the range, so it would be you know, just a matter of a risk profile to not stretch and chase things here because of you know what you said and an other geopolitical and you know, interest rates, et cetera. I mean, there's there's a lot of headwinds and there's no really reason that chase stock, especially some of these areas have done so well.
But how much of this the worries are already factored in, Well, some of.
It, you know, it's already factored in, Carol, But but you know, I think it really depends on the area. I mean, like the energy has gone down quite a bit. So so if you think that, you know, we're going into recession, you know that that might be a good area with China opening up.
Is that economic slowdown or is that also this shift away from fossil fuels. I know it's it's a slow shift, but it's happening.
Yeah, I think it's more of the economic slow down and a switch, you know, from the standpoint of just the sentiment and what have you. So I think that that's gonna hurt, you know, and that's why you have some of the utilities that have outperformed that are in in the alternative space. Well you know, some of these others have have have dramatically underperformed. So again it goes back to the winner and loser, you know, categories more so than the specific sector.
Do you think the bank turmoil is behind us? You know, a couple of times we've thought that and then we saw another bank fail.
But it does seem like.
It does seem like Wall Street is pretty sure that all the banks right now have enough asset to pay out depositors if.
They need to.
Yeah, I think the worst is behind us. Matt. I think it's it's a matter you know, if something else, you know rose, and again the area that's going to get hit or the areas you want to avoid anyway. But actually, you know, a JP Morgan is going to be stronger, and that's why you want to be in a JP Morgan or a Goldman Sachs, you know. And if if we're wrong and and things escalate and and
and get worse. But I think the majority of it's behind us, and and it's just going to be a one off type event, you know, from here on in. I don't I don't see it really becoming a contagion, you know, or anything disastrous. Uh, you know, especially in the US.
Hey listen, you know one of the things that you've liked in the past, Uh is in you know, the travel and hospitality space. And I'm thinking about Airbnb, which is getting hammered today. Uh is that an opportunity or have you guys suggested people be out of it ahead of this earnings? Where are you on that?
Yeah, we we liked airbnb in the eighties and and you know, obviously the stock rose you know quite a bit. So Uh, if if it's all back. If it falls back a few more days like today, and we'd be back than buying it. It's a long term you know, hold you know, at these levels. But again it shows
the importance of taking profits. We took some profits and Treehouse Foods something we talked about a year ago and went from the thirties to the fifties, and we think, you know, it could be taken over, but we're probably looking at a sixty dollars price and it's not you know, worth it in the mid fifties anymore to hold on. So, yeah,
that's a good point. I think as the market sees this volativity and winners and losers, you know, to take some profits, at least martial profits on some of these winners.
What do you think about Apple coming to the market for bonds when they already have one hundred and seventy billion dollars in cash. You know, they only offer a zero point five percent.
Dividend yield, which is good.
I don't have to you know, I know they do big buybacks, you know, seventy eighty maybe one hundred billion dollars this year, But how do you feel.
As a shareholder?
Yeah, you know, the company's great. You know, I feel real comfortable with it. We're not buying it at as level. I mean, you know, our average cost is is far lower. But you know, we did buy you know, Alphabet when it went down, and we did actually buy some Amazon, so some of the mega caps we did buy it at the end of last year, but not Apple. Apples really held up pretty well and never got into buying territory unfortunately for us.
Alan.
I'm just curious because you've got Disney reporting after the close and just kind of springing this on you just got about thirty seconds left. Here is Disney a name that's on your radar.
If it continued to weaken, we'd look at it, but it's not one of our favorites. I think there's a lot of other areas. I think streaming, you know, those type of stocks you have to be worrisome, and I never really understood that concept from unbundling, and now you get all these different streaming services. So I'd be a little bit cautious. But again, you know, it's a weekend enough to get into a high quality company that it would be fine.
All right, Well, fun to check in with. You really appreciate it. Alan Lance, director of research at Lanceglobal dot Com. President Vallan B. Lanson associates on the phone from Toledo, Ohio.
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