Apparel Stocks, Market Trends, and Apple (Podcast)

seems pretty decent. I like to look to the retailers to get a sense of how the consumers doing, and we've got a great round table now. Pudum Goyle analysts for e commerce at leisure whatever that is an off price retail for Bloomberg Intelligence here in the U S. And Deb Bacon. She's a senior analyst of luxury goods and beauty home care with Bloomberg Intelligence. She's based in London. Deb. I want to talk start with you Audie Das as we say it in Europe, okay, named for Addie Dosler.

Thank you very much for pronouncing correctly. You're very You're very welcome. Starts are today They had their earnings were a little disappointing. Give us the latest on Adidas debin you there, deb dear deb Hello, Hello, Hello, I am I am. But actually that punum stock and she's online, so excellent. Yeah, yeah, we'll just start. Let's start with you in Europe. How are things going through the consumer? Tell Gucci we can go to Gucci. Then Gucci had

something because yeah we can't. Sorry, I right, okay, so UM if I if I focused on Karen, Um, so scaring is the order of Gucci for those listeners who don't know. I didn't know that. Yeah, yes, so Karen makes well over Sorry, so Gucci makes well over fifty of UM sales at the Kuren group. And then you have the brands in there like San Lauran, Balence, t Jaga, Botego, Vanetta. But Gucci is by far the biggest brand and also very much so the biggest mix in terms of profitability.

So um, what we saw last night from Paris was fourteen percent organic sales growth and even twenty three percent when we add in Forex game, which looked great on the top line and was beat stock down today, UM stocked down and soft overall, bringing the sector down and very much it's overshadowed by Gucci brand softness. The idea here is that there was a question in the market place on where the Gucci became too much fashion orientated.

So the idea is really to elevate the brand to the levels that we see within some of the LVMH with a ton another portfolio as Christian Your and also MS. Both of those had knockout results in the last week or so. Has been a problem, not just this quarter right, It's been a problem for a number of reporting periods.

It has And if we look pre COVID, they went through a two year program where they really reorganized Gucci, had big collaborations, lots and lots the new design very good and ready to wear and footbear and others, and they were seeing four percent plus growth. So when you look at it on a three year stack base, it's

still very very solid growth. But what we saw in the Q three overall is that actually Gucci came in at nine percent growth and if I give you two comps on that, that compares against your major nine and them as a percent. And the view is that it's going to be costly for them to really bring this brand back up to day. It's not passing on the price in the US though Europe was huge for them because the US are traveling there and using dollar benefit.

And then in China, it's got a new team coming in and the branch just seems to have lost its fears. So I put them want to bring you in here on Adidas, I see the start trading afterday some problems with China. Yeah, absolutely no. China continues to be an important area for the ath leisure companies Adidas as well, and um, it's continued to be weak. Um, there's no sign of recovery there, which is a big risk for not only Adidas but also Nike and the other brands

that have a larger presence there for growth. Um, we don't know when China will recover, but we do know that comparisons get easier as we move into the next fiscal year and hopefully that should help at least show better numbers. But that said, with the COVID lockdowns, China still remains a big wild card for these retailers. But it's not just China that's a concern for Adidas here.

I think the bigger concern really for US is the weakness that we're seeing in the Western markets with the inventory build up and and that's causing some major concern um for the brand and also for rivals. By the way, are they still working together with ya formerly known as Kanye West tweets At the moment, the collaboration is still intact and under review, so we know that. You know, he has seen a lot of collaborations kind of go

off recently and Adidas was reviewing that. So but so far as the Germans are willing to work with him at the moment, it's under review. Yes, Hey, talk to us about just luxury in general by thirty seconds, so dependent upon China. But if China is not going to be China for a while during this covered lockdowns, how big of a head winners after just luxury in general? I think, Um, you know, if you've got the brands out in China, then there are ways for the consumer.

If the brand is hot, the consumer is picking up. So for UM, if we think about for Louisa, Tom for the Yore, for UM, for MS brand overalls, they were really positive on China. What they're saying though is that there are some lockdown still, but where stores are open it's back to double digit growth and that started up from June through July. But if I think about other areas, um, we also had last night. Loreal, for example, have big skincare market in China and it's still not

back the market. They said it's down three for beauty. Um there are there are positive eight there are still issues in this brand by brand right good stuff? All right? Love getting that retail round up if you will put them goil She's retail analyst for Bloomberg Intelligence based in Princeton, New Jersey, and deb Ache and retail analysts for Bloomberg Intelligence based in London, covering all things retail over there, plus the luxury sector, which it just continues to chug on.

Think about this group, your principal investment banking and Morgan Stanley are a pretty standard job head of investment banking a's c IBC. It's a good standard job. That's a good gig. But then you go your portfolio manager at s A C Capital. I mean it's like you're a banker, but then you're a trader with Stevie Cohen Master. Who does that? I mean, who does that? Our next guest did that, Jay Hatfield CEO, founder and portfolio manager Infrastructure

Capital Management. I have no idea what this guy does for a living, but I want to. I know they've got a lot of eats. They make e t f s, and one of the e t f s is the I don't know, they do energy stuff like that. The energy space has been so out of favor J for so long and it's like a minuscule four percent of the SMP five fund. When I started the business, it was rocking energy. Now it's nothing, but it's had a

couple of good years here. How do you think about the energy space, Well, there's two major developments that UM have benefited the sector. The first is they started to manage their capital structures appropriately so and also their investment so instead of just trying to grow, they tried to generate earnings, which I learned as an undergrad is really critical. Actual book earnings do matter. And if somebody says they do, count Davis by the way you count Davis, so that

I think is a pretty good law of investing. So they's finally started to try to generate actual profits and also dividends, which is our core of what we do. And then, unfortunately for Europe. They have a failed energy policy of not securing enough natural gas even before the Ukraine War and then finally after the Ukraine War having that cut off. So that's why US energy prices are relatively resilient even though we're in the shoulder months and

global growth is obviously challenged. And that's because natural gas is treating at the oil equivalent of a eighty dollars a barrel, which draws in all other hydrocarbons into Europe. So we have the all time record refining margins for distill it because you can ship distill it easily. So those two factors are really supporting, of course, the recovery from the pandemic, supporting the energy sector and making it

outperform in these tough markets. But by the way, with your experience in the energy industry, UM, which is significant, and obviously you're still you know, working with it at infrastructure, UM, how likely is it that President Biden is able to actually get prices down at the pump by releasing barrels from the spr It helps a little bit the margin, but you just have to think of the oil market as being global, So it's a hundred million barrels per

day consumed, and so anything that comes out of the spr is just going to operate at the margin. So it's a gigantic market and it's fungible. So all the discussions of limiting Russian oil prices and these other constraints

really don't work because it's a true commodity market. And I was hearing it as too far upstream because we've heard um that the problem really is the refining capacity and that even if you were to give them fifty million barrels of oil a day for free, it's still difficult to get that turned into gasoline and diesel absolutely well, and particularly diesel because diesel hit eighty dollars of barrel,

which is almost unfathomable. So it's actually you get more margin than the cost of the oil, So that's eating at one eight. So that really demonstrates that that's the issue is a shortage of distillate to replace the natural gas in Europe. So you know when we had the syenergy crisis development with the Russian invasion of Ukraine and then the reopening of the global economy, and that kind

of created this energy shortage. If you will, my question to all my buddies done in Texas and Oklahoma is like, we just start start up the refineries, start pumping. You know, we we've got lots of oil, we've got shale. Just start finding this stuff and if we have to liquify and send it to Europe, we can do that. But apparently it's we don't have a lot of refining capacity out there, do we know? We definitely don't. It hadn't been a great business for years, so there was less

investment and it doesn't really pay. Most of the new refineries are coming in the Middle East. There's really been no new refineries. In fact, there is one ship down that that blew up in Philadelphia, so you can't really just poof of a refinery out there. And it's highly imprudent because over time the returns won't be great, so you just have to kind of mint money while the markets are good and then wait. So it's an Unfortunately,

I don't like the discipline. I mean, the energy guys are now preaching discipline to their equity shareholders and to their bondholders and things like that, when in reality I need them to build more capacity, but they're not doing it. They are, in fact disciplined with their capital you need them to as a consumer, yes, as an okay, as an investor, j um. Where would you go right now? There are a lot of ets out there to play,

you know, exploration, production, infrastructure, refining. Where do you think is the right place to be? Well, we always like to have, particularly in these sort of horrific markets, with the bond market crashing every day, UM in more conservative, Like if you're gonna do energy, do the most conservative,

so that would be pipelines. Um. Definitely, the yield six to eight percent, the super majors have substantial yields, and of course we just discussed that the refiners are just printing money and trade it ridiculously multiples and have good dividends, So that's the better way. We wouldn't And there's a few of the e MP companies that have like eight nine percent dividends, but they don't need to go after

the most risky small cop gambling type. You get plenty of risk already if you're an energy, so you don't need to go small caps. We go ultra large cap and dividends. Sorry, well, I'm just um. You mentioned the bond market crashing every day, right, which is not great if you're a holder. But if you want return, it's not bad. Um, where's the tenure right now? Four point three four point four on the tenure, but you're getting more on the two year and you know everywhere you

look yields are high. Is that bad for MLP demand? I mean, um, do those rates become competitive? Well? Definitely. In the last month, all really large cap um value dividend stocks got smashed because rates were crashed, and we went from two e d to four and two and a half once the biggest sell off in you know, recent memory at least, and so that really caused most

of those stocks to sell off. But we don't mind that so much because when you're getting paid substantial dividends, not like two percent at eight that's still a good spread. And those dividends are growing now with the pipeline companies, so they're not that raid sensitive. They're just mostly oil sensitive. J stick around just when we have some breaking news we want to get to. But Jay Haltfield, CEO, Founder Portfolio Management Infrastructure Capital Advisors, you're gonna stick with us.

I got some interesting news coming over the Bloomberg terminal. Apple in the news again, the design chief is going to leave the company three years after replacing Umster Ivy. Evans Hanky, vice President Industrial Design, used it depart. This is a big news, Ed Ludlow from Bloomberg News. He's usually based on the West Coast and has his tentacles and all things Silicon Valley, but he's here in New York on a Bloomberg Interactive broker studio. Some pretty big news. Head. Yeah,

it's big. Is you go back to the history of this company in the nineties when Steve Jobs kind of came back in and made Apple what it is today. This is the first time that they won't have a kind of de facto design chief. I think what's also interesting is she's only been in the role since two thousand nineteen, and you know, to all our global audience that have an iPhone, the reason that it's sleek and

get sleeker and thinner and more beautiful each year. Well, this person has a role in evans Hanky leads the team of designers that do that. And we talk a lot about the macro how Apple performs the high end of the market, particularly in markets like China, for the middle and upper upper class income bracket. UM but they're also working on these new products for its future right a r VR, headsets and EV potentially, and she would

have had a role in that. What we know, according to sources is she told everyone she's leaving this week, but we'll stay for six months and crucially, the software chief is staying. Okay, but I mean turnover an Apple doesn't seem like a typical right, They just fired their production she you for like well, quoting a line from the movie Arthur. Okay, I know you haven't seen, but you know we grew up with that movie. Okay, two things.

First of all, their supply chain chief did depart the company for some colorful comments that he made in a viral social media It's pretty direct quote. I'm surprised you remember the movie. So I'm just not going to say on this program. One high area of turnover has been the very secretive EV program. Apple's attempt to make a self driving electric vehicle has had names from all across the industry, from legacy auto too failed names where they

went startups and work out turnover, turnover. But yes, Paul, this is a company where continuity is king. Is this design chief specifically focused on, um, you know, the iPhone or would a design chief be looking at also the Mac, the watch, even the e V Yes. So I guess the way that I put it is that she focused on the hardware, what it looked like, how it felt to the consumer, how how it is, and that not

just the phone, I pad, everything exactly. You know, That's why I flag how crucial it is that Allan Dy, who's the head of design for software in ux or user interface, is staying because the other big part of the tech I've got an iPhone in my hand is iOS, right, the operating platform, how how that works across its different things, So continuity in that sense. But again she led what was a relatively big team, a few dozen very senior

industrial engineers who we assume we'll stay in place. It's just that their chief is leaving after three years and that doesn't happen. Just looking at the start greater Apple Star kind of unchanged on the day, up about six tenths of one percent of the news, so upmarket in an upmarket absolutely is any reason is there is this signal greater I don't know, uncertainty, turmoil, distraction at the

at what is a crucial part of the company. You know that there's always a question every now and then to Tim Cook about succession, just as there is for any long tenured executive of a company of that size. Um, it's been a rough year for Apple, right, you know, they did show nimbleness with the supply chain for a big portion of the last eighteen months, but they still face headwinds. They faced the the head wind of a stronger dollar. They face issues of demand in China, just

like everyone else. And if your topic, secutives and talent are leaving the company for whatever reason, we actually, you know, we don't have a good reason why. In this case, it's not good. I mean, the the one caveat really is that she's only been there for three years and we don't know exactly why she left. But she replaced a giant in the world of design. She replaced Johnny I, who was there for two decades, who was arguably as important to Apple success as Steve Jopps. And that's why

context is king. So first of all, I think I said this, but evans Hanki is going to stay for six months, so there's a kind of handover period. She was appointed to this role in two thousand nineteen, but she had worked for Johnny I. For years and years and years, you know, a designer in her own right. But again it's just a changing of history for Apple. The first megastar design chief, Johnny I is twenty years of the company. His success is there for three years

tool intensive purposes. What happens next, you know, that's always the question. Alright, good stuff. Ed Ludlow joining us here in our Bloomberg interactior broker studio at Ludlow for Bloomberg News breaking down some news here. Apple design chief to leave three years after replacing the icon Johnny, I've all right, this is what we're gonna do, folks. We're gonna get

a Bloomber business class, reset everything. They're gonna come back with a j Hatfield and we're going to get another person coming darkening the door as we speak, Dryden Pennce ce I, O of Pence Wealth Management. We're around table. Even before today we were up to in a third percent. Yes, so that was just Monday and Tuesday. We were down Wednesday and Thursday, and now when we're up today, that just adds to it. I don't know what's going on

until the options expiration, Yeah, exactly. All right, let's bring it back talk some stocks in this segment. J Halfield he's still with a CEO at Infrastructure Capital Management, and we're joined by Dryden Pence ce I oh for Pence Capital Management. Both in our Bloomberg Interactive Broker studio. We can't get a Bloomberg employee to come into our studio time on a Friday. You know, that's the new world we live in. Dried In, what do you make of

this market? It's been brutal this year. My sixty portfolios in the toilet, what do you make of it? I think the market right now is is what I call the frazzled cat. Everybody's overreacting to whatever piece of information comes out, and I think that we're it's a very emotional market and it's trading and moving on the multiple. So we think it's a tail of two years. This year is going to be about the multiple, next year

will be about fundamentals. But I think that that really everybody is overreacting to every piece of news that comes out, and folks need to kind of step back and have a little better perspective. Well, I mean, look, the problem is it's not just what's happening here in the US right we have more than ten percent inflation in the UK. UM. Germany is looking at a situation where they may have to start rationing goods. Um uh. Are we in a different situation? Ja, Do you think the US is the

cleanest dirty shirt? Will we avoid a major recession? Absolutely? And it's really related to the conversation we're having before about energy, is that Europe's problem is our opportunity. So we have manufacturing cost advantage, not just with l G and UM refined products, but chemicals steal even there's a story about textiles where energy is critical, so we think

that's a tail wind. And also we the housing sector, even though it's going to decline, has limited inventory, and that's usually where you get the layoffs in the deepercession, it's fed raises rates, layoff all the construction workers, layoff auto workers. But because of the pandemic, we don't have that. So we're forecasting a mild recession here, but a deepercession

in Europe. Alright, So driving given that background, I mean, when I think about the you know, do you agree, Yeah, tend to agree with the idea of a mild recession. We're probably on our way, probably on our out of it. Before we know what we're in it, So it's more of a shallow mild recession because you can lose five million jobs and you still have full employment because we've got more demand for jobs and we than we actually

have people. So do I buy kind of the sickles that do well if we're you know, mild recession thinking about the other side, or do I just stick with the big growth stocks that have been so good for me since I don't know two thousand eight or something like that. Well, I think that that going into the end of the year, we're probably gonna have a little bit of a rally, and that's good to kind of reposition portfolios to stronger more earnings and fundamentals getting into

next year. We do see that this inflation is going to bifurcate certain sectors. Uh. It's kind of like it's Walmart and Louis Atom versus Macy's and uh and maybe Nords from and Target. The people in the middle are actually seeing inflation go faster than wage growth, but the people on other end, at the lower end of the sectum are seeing wage growth faster than inflation. UH. And that's been a positive that's come through this and that

the upper end. Uh, they're still you know, spending prolifically because they've got plenty of money and they're able to overcome it. You had an interesting point j on the the outlook for inflation, especially as it pertains to the

repos that we saw. Remember the end of last year we started getting insane repo numbers out of the Fed, and that just I mean, when a trillion seemed like a lot, now we're at what over to trillion, right, the two point six trillion, and it's it's sort of strangely bullish because what the Fed was doing is to keep rates within a band. So in Europe they let

rates go negative. The Fed had to neutralize all of the bond purchases and or they were doing versus most of two thousand one and this year they shranked the money supply by a trillion through this reverse repo. And that's why the dollars skyrocketed and why we're optimistic inflation will drop because the leading indicators of the Fed tends ignore show that dropping commodity prices, skyrocketing mortgage rates, all these were caused by that reverse refo, which really shrinks

the money supply. So how I mean how much do you think inflation is going to drop in by when? Because we're trying to figure out every single move. Obviously, seventy five basis points this month. Um, it looks like there is a Wall Street journal piece which is kind of the new mouthpiece for the Fed. I guess said they want to try and figure out a way to sell a fifty basis point hike, a smaller hike in December to the markets without you know, the stock market

going crazy again. Um, will they be able to hold at the beginning of Well, we think they get hold now because you have to be patient for two reasons. One is that you do anniversary inflation, so that that's a benefit, and to the cp I just isn't really properly calculated, so Shelter has a six month Every six months they do a survey, so doesn't incorporate real time data.

So you do have to be patient. So that's really the mistake we think the FEDS making is ignoring one you know, obvious point that almost economists except, which is monetary policy os with long and variable legs. Ye, and I think there's a lot of there's a lot of folks saying that, yeah, there's a lot of people saying to fetch paulse because we don't really know what these FED rate increases will in fact have on the economy.

I think the pauses the key word one that will that will give you rise to the market probably, But I think also it's also it's humans don't adjust as fast as markets do. Markets suggests instantaneously, but human demand and consumer demand takes a while, and our behavior suggests much more slowly than than the FED would like them too. And then certainly the market's discounting. So I think a

pause and kind of let consumers catch up. It takes about six or eight months uh for behaviors to begin to really change, because you just have you have commitments and what you're doing and stuff. So I think that that they've got to think about slowing this down, and they could risk breaking it. It took this market a long time to adjust to the fact that the FED

is going to actually continue to raise rates. I mean, it seemed like every excuse that this market could uh could could get for maybe a pause it's coming, maybe even a pivot is coming, they took it. Why are they so reluctant to believe that the FED is going to do whatever it takes. Humans are naturally optimistic that that we it is our it is our normal case that we are optimistic people. Otherwise why would anybody get

an airplane? But I mean the key issue here is that that people are looking for the market to go up. Markets probably oversold at this point. If it's driven on emotion, it's driven on on this you know, over gloomy scenario that we have. But the fundamentals are We've got more people working than we've ever had in our history. We've got more more people are making more money than at

any other time in our history. And I think that that carries and we're still the low relatively low labor force participation, right, So I think that you have some some tail winds to the economy. That this is why I agree with the the speaker here that if we have recession smiled uh, and that we kind of power our way through it. But I think that we're overly negative at this point, uh, you know, because we overreact

to everything the FED does. Right. We overreacted to the fact now that they said, yeah, we really mean it and people are believing it. Now, we're overreacting to the downside. I just kind of wonder if the idea of a FED put is finally dead. Right, I mean, anyone who's been in this market for as long as Paul has Um just counts on the FED to come in and save the day every time, Right, was your first job? Yeah? So do you think the FED put is gone? Is it?

Is it? Is it taken? Is it successfully taken off the table? I think it's been nuclear exploded. It's more like the FED short It's almost like they're working with the hedge funds to drive the market lower because they're just they're terrible forecasters. And the other thing that I think will be discussed more is the two percent target is completely made up. It was made up by New

Zealand in the seventies to inflation rate target. Yeah, the target, so they treated the FED treats it like it was chiseled on a tow lit by God and then it descended. But it's proven to be horrendous if you think about it, really precipitated. You mean targeting that targeting too, it should be three or four. Obviously we don't want eight or nine. That's terrible. But I think you're going to see more discussion of that because there is no empirical evidence that

says two is better than three. It was better than four or three or four. Why do you want it to be? Why would we want That's what did Ronald Reagan say? It's a scarier than an armed robber, more dangerous than a murder or something like that. And well, the eighties and nineties were boom times, great times to be an investment banker, definitely, and inflation was pretty high. It was average about three and a half percent. And here's the real point. Nominal wages grew about over six percent.

And really middle class people care about nominal rate wages because then they can decide what to buy. They don't want a one percent real growth rate and zero pcent inflation. So when some level inflation, I leave is very healthy for the economy. And you can just look historically. And so the burden is on the Fed to prove this

two percent number that they completely made up. If I mean, if you if you think about it, since nineteen sixty, or just about fifty percent of the time, we've had a FED funds rate about four percent above four percent or higher, we've had an inflation rate above three percent or higher. I mean for most of the economic lifespan of people that are out out there in this industry, you've had numbers like this and everything's been all right.

It's the fact that the last the people in the last ten years have only had a zero percent interest

rate and they've seen these these low inflation numbers. So I think that we kind of have to step back and recognize that, you know, the United States economy worked pretty darn well for a long period of time with a four percent fed funds rate and and a three or four percent inflation rate, and so we've we've kind of lived through this before and we just kind of have to you know, that's going to It's not a it's not that's not abnormal the last fifteen years and

add normal, we're getting back to what a normal relationship should be tried. And when you talk to your clients, did they want you taking risk now? Do they want to say, my bonds are wiped out, my stocks are wiped up, now it's time to get in or are they shell shocked? I I think everybody is a little shell shocked. But most importantly, what people want to know what clients when it was? When does it end? You? Can you can be really endure and endure a lot of pain if you know when it's going to end.

And so we talk about it's gonna end. When three peas happen. You have you probably have a pause, uh, you have peak inflation, have a pause from the feder You end up with peace in Ukraine, which kind of triggered a lot of these things. So we're looking for language around at least two of those three peas, and then we have an election coming up, and historically after you can see about an eight percent rise in the

market after the mid turns. Regardless of the results. It's just that you know, you get some certainty in it. And and so we looked at that to the end of the year. But I think what what retail clients are really wanting to hear from us is when does the pain end? How soon? How long must I endure this? Because most of them been around long enough. Now you get through it. I wanted to ask about your service

because you're an economist and you're a markets guy. Um went to Harvard m I T. But I see that you also served in the U. S. Army, got a commendation medal with a V for valor and combat earned a Bronze Star and Knowlton Award. I don't even know what that is, but UM tell us about that because I think it's fascinating and obviously we appreciate it. Sure. Well, I'm I'm a retired full colonel and I my expertise

with psychological warfare. So, uh, this sounds nice. Well they now call it information operations, but what but what that what? It really give it a nicer name, but what it really was psychological warfare. And so in what we do as an investors, we, as you've heard of my comments, we really think about human behavior. Nobody makes a you know, human behavior drives consumption. Nobody makes a penny until someone

decides to buy. So if you can try to get forward and what people are thinking, what they what their fundamental desires are, you can be predictive about what they're gonna buy and who they're gonna buy it from. So we kind of meld these two things together. And it's been very interesting with clients because you know, now that we have a war going on, uh, and different kind of perspective of things like that. Those those are things that a lot of people want to talk about. How

do how do these things relate so well. Thank you very much for your service. Thank you for paying your taxes. No, I'm serious. You know if no one has ever thanked you for paying your taxes, I'm doing it right now because you need to remember. You buy body armor that keeps soldiers safe and you save lives. So when people get mad about paying their taxes, just please remember that you actually are buying body armor that saves soldiers lives. I think better paying for it. I think our country

is all the better for it. All right, good stuff at Dry and Pence, Chief Investment Officer, Pence Capital Management. Jay Hatfield, CEO Infrastructure Capital Management. Thank you, gentlemen, for doing a quick roundtable here on kind of what's going on in the markets. There again, we have some green on the screen right now. Okay, let's talk about Twitter. Let's talk about Snap. I mean, Snap just got crushed today down you know, um is that? What's it mean

for all these social media? The PM yesterday during the market say I'm gonna buy Snap because I can't go any lower. All right, let's stack up with Man Deep seeing he's our senior technology and also for Bloomberg Intelligence. Mandy, thanks much for joining US year, appreciate you phoning it in, which we notated, uh, snap, what's the story there? We also, as Matt was saying, you know, everyone taught evaluation has droft,

you know down Guess what you know? They came out with another bad print and I would say it was a mixed report. The user based continues to hold steady. But you know they didn't give any guidance. They said the engage you when in the US decline five percent, and they didn't come out clean in terms of why that's happening, whether it's because of competition from TikTok or just you know, people traveling more. I will go to the TikTok issue. Man frame that now for me, I'm

not a TikTok or Matt very well might be. But no, man is big and what is it? How? Who does it really take compete with? Who does it? Is it gigantic or do Paul and I just think it's gigantic because we are too old to understand. Well, it's really big now in terms of the time spent, not as much in terms of the advertising revenue, although it is the fastest growing advertising company. But right now it's taking

a line share in terms of the time spend. When it comes to the ten to twenty five year olds, I think they are the predominant user base, although I think all using it. Is it like every twenty year old kid has TikTok At this point you can assume, Yeah, they have a daily active user base of over a hundred million in the US. So yes, I would say at this point everybody in that demographic is using TikTok and they're using Do we have a sense of kind

of what they're advertising revenue is? I mean, is it really a competitor for those ad dollars out there? Absolutely? I mean, based on our work, it's over ten billion dollars and growing at a very healthy sixty sevent clip. So yes, it surpassed Snap interest, Twitter, everyone already. It's giving Instagram a tough time in terms of, you know, just the time spent. And as I said, uh, they have a very new approach in terms of how they

you know, show content to the users. It's more AI driven and it's more videos, and that's what Mark Zuckerbert said. They're gonna make this big pivot to videos and reels and really changed to more AI driven feed as opposed to user driven feed, which has always been the case with you know, Facebook and Instagram. How much room is there for all this stuff in the market, Mandyve. I mean if you've got Twitter, Snap, Pinterest, Um, TikTok, Facebook, I mean, how much room is there for one twenty

year old kid to um? How many apps can you can you be on and and addicted to and spending a half hour or an hour a day on. No, You're absolutely right that in the end, you know, you're competing for that two to three hours of time that every consumer can spend max on these apps, whether it's and you can you know, even bring in Netflix as well. You know, like this is all entertainment, and so if somebody is spending more time on Netflix or TikTok, then

it's taking time away from Facebook and Instagram. Which is the challenge that all consumer internet companies have as eyeballs and how do I make sure that consumers are using my platform and eventually I'll monetize it. In the case of Twitter, that eventually has been too long. But I think for other platforms the hope is like roadblocks is

another example. You know, they are taking a good amount of share when it comes to the nine year old demographic, and so everyone is wine for that, uh, consumer time spent on their platform, and the hope is, you know, you will monetize it eventually. So ment if we are either in or heading into a recession, Uh, that's generally not good for advertising spending. What are the digital media

companies saying about how they expect to perform in a recession. Also, that's why you saw Snap not giving guidance last night, is because they said brand advertising. We don't know if advertisers really want to spend on brand advertising. They're still spending on direct response and performance advertising, which is your search and you know, uh, direct app download type of advertising,

but they're not spending as much brand. On the other hand, the ad agencies like Omnicon and Publicists, their results have kind of been stable. So from my standpoint, the fact that ad agencies have done well this quarter shows to me that Apple's privacy changes have had some sort of an impact in terms of social media targeting, and which is why the advertisers are a little reluctant to allocate those brand ad dollars on social media right now compared

to what the ad agencies are doing. By the way, how big a deal is it that Apple is losing an industrial design chief evans Hankey gonna leave? Um, you know this was she was the replacement for Johnny I've like one of the most iconic I guess uh design chiefs of the digital age. So it couldn't have been easy, uh difficult shoes to fill, let's say, but how big of a deal is it that she's going to leave? I mean, attrition is always, you know, a big deal for any tech company Snatch that also has had a

fair amount of attrition. You know, a couple of the key executives left left for Netflix, and you know they will be building their ad business for Netflix. So anytime you see an executive departure, especially you know in the UH management ranks, yes, it can be a big deal. But in the case of Apple, you know, they still can make any changes to the platform, and if they want to become a big player in the ad space, they could potentially do that. I mean some people are

calling that. You know, they are the biggest beneficiaries of the privacy changes they've made because a lot of those AD dollars could flow to Apple and uh so, I I think Apple's advantages they have got so many opportunities. They could come up with, you know, a mixed reality headset next year, and that could open up a lot of opportunities. So I don't think that's it's going to

change anything in terms of how people perceive Apple. I think the big guess risk for them is a China aspect, and and that I think is the one that which is which is investor, which is what that they can't get the right chips so that they can't get the production they need there. The production I mean eight percent of their you know everything here and when it comes to phones or air pods or they're assembled in China.

So so Mande, I mean all the big name text docs that you cover on a rock ronic covers, I mean, these have been the darlings. I mean I could have been an analyst covering these things and made money. I mean, so you know, I hate to give you any credit for this because they all went up. But has it changed now? Are our investors like they're not I don't have to own these things this year? Yeah? Exactly, I

mean it's changed. I would say consumer internet always has a small life in terms of you know, who stays at the top. And when you think about you know, edwarding digital advertising being a duopoli first with Alphabet and Meta, then Amazon being that third player. Now, I think it's going to get even more fragmented. Every company out there is looking to become an ad network, even you know, Kroger and Albertson Murder could be uh could open up a new platform around ads that retailers could use to

show digital ads. So I think you're going to see more fragmentation on the ad side because you know, the likes of allmar target They're already showing display ads on their platform, they have a sizeable e commerce business, and more and more ad dollars I think are gonna spread out as opposed to you know, only three companies controlling all the digital ad platforms. And I think Apple has really kind of made that level playing field now that no one has an unto advantage in terms of the

data that they're gathering or the targeting they have. But Apple doesn't get any ad dollars, do they? Where could they? Now? Apple has about a two to three billion dollar digital ad business right now. They show you ads when it comes to searches on the app store. Hey man, deep Matt's all set to join the metaverse. I'm a little bit more skeptical as soon as some as soon as some twelve year old builds the metaverse on roadblocks. So

what's the market really feel about this? Man Deep, And you talk to institutional investors, this is something that Facebook should be doing well. So Facebook is in a very tough spot because they're losing engagement and they have this hundred billion dollar plus business that's gonna that's moving away from them because they're losing engagement. So Meta worse is

their play to keep consumers on their platform. And I don't know if they should be doing their own hardware, but really they don't want to depend on an Apple or an alphabet controlling the platform. So that is why Mark Zuckerbert is so passionate. Whether it will be successful, time will tell. I think hardware is a challenge for any company that's doing it for the first time. All right,

Man Deep, great stuff. As always. I love that Man Deep seeing Bloomberg Intelligence can talk anything technology, hard work, software, the Internet, all that stuff. Uh, Heat knows it. Matt. We talk a lot about electric vehicles here and int of your obviously you're the gear head uh in the studio here. But when you talk electric vehicles, don't we have to talk about batteries? I mean, isn't that like the key thing that you have to have a call on You have to have a good sense of Dr

kang Son joins us a CEO of Ampreus. Uh. Ampreus is in New York stock a change listed company. A mp X is the symbol put into your Bloomberg terminal. Uh. DR's Son thanks so much for joining us here. I'd love to get just you give us a kind of a real overview of what Amprius is, what you do, how you uh participate in this electric vehicle revolution has taken a place, Paul, thanks for having me. I'm previously the vedoper and the manufacturer of higher energy dnsity and

the higher power dnsity. Bet you my own batteries. Yeah, imvious pays you high capacity Cilican as an annal that it has a ten times capacity then graph and or that industry is currently using. So the future mobility is heavily depends on battery performance in sift energy, power, trodging time, and the audating tenures. Today, I'm batteries that leader to performance in all those properties. So are we gonna see you know in the future when um, everyone's making and

buying and driving electric vehicles. M Is one say, two d kilowatt hour battery Uh going to be better or different than another two kilott our battery? Yes? Yeah, it will depends on the battery material components they will have offer different performance. Today I's battery have been used the evasion industry, were actually power many flying devices today in commercial market. So but what what what's gonna make it better? Um? Do you try and make batteries that are smaller? Do

you want to make batteries that are lighter? Do you want to make batteries that charge faster? Do you want to make batteries that last longer? What's what are the main advantages that you're after? Yeah, we have this called city and non water animal batteries. As I mentioned earlier, city has a ten times higher energy density than the GRAPHI feature industry is currently using. So our battery offer much higher energy density. We offer er uh anergy density

almost twice higher than the current commercial available commercial batteries. Yeah. So uh we double the travel time and the mission time UH today, So who are your customers? Who are your biggest customers today and and kind of where do you think the opportunities are going forward? Yeah, we are focused on aviation. Will customer including air buss addan flur uh. Those are the company MAGA the flying devices. In the future, once our logy scale capacity available, we'd like to explore

other Markey applications, including easy. All right, Dr tanks Son, thank you so much for joining us. Dr Kank Sung, CEO of ampreus again the New York stock Stange traded company a mp X is a symbol. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews of Apple podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three.

On Ball Sweeney, I'm on Twitter at pt Sweeney Before the podcast, you can always catch us worldwide at Bloomberg Radio.