Retail Sales, AI Investing, EVs, And Adobe (Podcast)

at Bloomberg dot com slash podcast. The consumer, despite this rampant inflation that's hitting all of us, whether the gas pumper in the supermarket, the consumers kind of hanging in there, you know. I mean, we got some retail sales today kind of came in a little bit better than expect to look. Under the hood, there's definitely some concern there, but you know, the headline number was pretty decent. I want to break it down with Angie Solanki, National director

of Retail Services in the United States for Colliers. Colliers is a publicly traded company uh NASDACS c I G I is a took her to put into your Bloomberg terminal and you what you make of the August retail sales numbers. It was great to see that we had, even though it was a slight rise, that there is still confidence. Uh spend is still occurring, but it's occurring more so where they're focused on value oriented because there's

still the inconsistency. Right there may be still a little bit of concern as we see inflation still continuing to occur, but overall there's still some confidence. I think retailers were pleasantly surprised. So the headline number onto was again of three tenths of one per cent, and I'm wondering what that looks like when you adjusted for inflation, because these numbers are not adjusted for inflation, right, correct? Correct? Um,

They definitely are not. I think that what we should look at is if we look at, you know, the last time we've seen inflation hit as as high as it is right now this year, it was many many moons ago. So yes, it's hurting us in terms of the pocketbook, but overall, the drag we're seeing is still

isn't it's it's not as significant. People still understand that there's an increase that they need to be mindful, um, but they're still you know, they still need to look at staple products, groceres spend um we're seeing from retailers right now, though, is this really interesting kind of juxtaposition in terms of they are starting to push out more private labeled brands. So they're they're pushing out their more their own brands and other brands good stuff. So it's September,

but I know retailers they're thinking holiday season already. UM, what's the expectation when you talk to some of the retailers out there about how this holiday season may shape up. Well, there's still quite a bit of product in inventory out there, so you know, the concern right now is how much discounting really is required, So retailers are preparing for that. Um, it's still going to be, you know, a fairly busy

holiday season. If they start to discount the product to lure you know, the inflation worried shopper in UM, that will start to show spend an increase in spend. But I think it's really more that there's a quite a bit of inventory be concerns still around discounting. You know, this is the first holiday season that we're seeing where consumers are going to most likely slow down due to the high inflation UM in many many years. So we don't really have any learnings from this since it's been

so long. UM, there's been talk about third party sellers over at Amazon looking to potentially cut prices even further to move these you know, this inventory that they're sitting on, So that will be interesting for us to watch. In terms of the gasoline component, we've seen prices at the pump come down. Paul checks the regular unloaded up gas average every day, um, and you know, the sales figures excluding gas we're up zero eight percent, So I'm pretty strong.

Do you see people taking the savings essentially that they're getting from the drop in pump prices and putting it elsewhere? Yeah. Actually, we're seeing, um, you know, roughly a one percent rise in spend at restaurants and bars. And this was in the month of August. So even though food costs have you know, have been hit pretty hard, you know, there's still this you know, need to go out to be

out socialized. So it's a small percentage increase, but I think people are saying, hey, if I'm going to spend you know, call it a hundred and fifty dollars for a meal for two people at home groceries I have to buy, then I have to cook, and then I have to clean. Why not just go out and have

a little fun. So, Um, I think that people are really thinking where should they spend their time and if it's a cost versus time versus value there they're spending it in the restaurants, which is great for for definitely our our restaurants and bars. Well, my household, I clean. I'm the cleaner guy. I take care of it. Yet I love doing that. Just leave me alone in the kitchen, glass of wine. I'll clean up all day long. So, Angie, and you're going out and spending money at restaurants and bars,

I am absolutely that that that's kind of my thing, Angie. Um, for these retailers, can they are they gonna have enough labor here for this holiday season? It just seems to be a persistent problem across many industries. Yes, that is the one worry, right, um, because you're it's a combination of just resources human resources people. Um. But the second piece of this, right is the uh, the cost. So wages continue to be a concern for many retailers. Um,

they continue to increase wages. So that's going to be really something that they're gonna have to focus on. It is it relates to Okay, if we need to push product, need to bring in volume of people. We want to increase our sales. We need people to to have that movement. But the other thing we're also seeing is technology. Right, so technology continued to be a big play. I don't know if you've read, like Starbucks is coming out with this what they're calling their reinvention strategy to kind of

offset some of that labor concern and labor issues. And so they're looking at automating more so over the next several years where you can just get your food and drink orders very quickly and and it cuts down on that employee labor shortage and or cost issue. Alright, Angie, Great Great stuff has always Anti Slanki, national director of Retail Services for Colliers, talking about retail sales came in a little bit better than expected for the month of August.

Let's get over speaking of driving across this beautiful country. Let's get over to Brent Shooty right now. He's a chief investment strategist at Northwestern Mutual. Brent, are you in Chicago. I'm in Milwaukee. Know I was in Chicago earlier in my career, but I moved to the beautiful city of Milwaukee. Got it, Well, I just knew that you did your MBA at the University of Chicago. They do numbers there

at the university. Highly respected by this program. UM. I'm glad to have you on because I have been having discussions with investors here in New York and and yesterday we heard from Ray Dalio that he's on the bare side. He says if the FED raises rates to four and a half percent or more, which looks highly likely they'll do,

stocks could fall. On the other hand, UM. David Rubinstein UM yesterday of Carlisle Fame, who also has a television program here on Bloomberg Television, said he thinks that professional investors are looking for bargains right now. This is when you should be buying. Um. Do you side with one or the other? I think it comes down to your

out look on inflation. And certainly, as I look at charts, graphs and mosaics of ford looking indicators of inflation, I find it very hard to see any reason and why inflation is permanent or here to stay, and why the fudge should actually raise rates above four and a half percent. The only thing that people can point to is the actual backward looking number itself. You're gonna hear chair Pal

again talk about inflation being broad and being sticky. Let me take those two things apart really quickly to explain why I don't think either one of them is relevant. So the broadside people look at the medium or the trimmed mean PC, and they're all elevated. The odd thing this time reflecting the economy is that the good side was at twelve percent it's now coming down to seven point one percent on a year of your basis. The services side is actually going up. And so yes, the

meeting is high, but this is really odd. They usually move in the same direction. They're moving in the opposite direction because goods was favored early and now it's moving to services. That's that's going to resolve itself. That's one thing about because rent has been a real thorn in the fed side as well as you know my kid brother trying to find an apartment in New York. Sure, I mean sticky reflects housing and and housing unfortunately comes

in with lag. Tell me who on Wall Street doesn't know that that owner's equivalent rent of that shelter has a twelve to sixteen month leg And where do you think home prices are going next? Take a look at housing demanded look at the mortgage demand this week. It was done year over year. The housing market has gone from boom to bust. And so as I look forward,

I think inflation is still set to slow. The CPI data is backward looking, and I have trouble finding anything other than the labor market right now, which tells me that inflation is going to be permanent. So given that backdrop, Brent, have have we seen the lows in these equity markets? Do you think we'll retest that low back? And I guess late June, I'm not for sure that we won't retest it. I mean you just mentioned to smart people having different outlooks, and that usually has AT's a war

until we resolve it. On one side, I do think the bottom is in. I think if you look back to the sixties eighty two time period when inflation was the economic problem like it is today. So I don't ignore the recent time trades, but I look back to that one when cp I peaked, the market bottomed. That's what happened in every one of those sixty six, seventy, seventy four eight and then Volker did Voker did um.

I don't think that's going to happen this time. But those times where when CPI peaked the market bottom, that's point number one. Two. Sentiment is already awful. People have sold already. The AI sentiment has been below twenty nine times this year. It only been below thirty eight. Are only been below that thirty times in the prior thirty

forty years. Each one of those times except one lead to four looking positive returns, throwing a positive throwing the fifty percent retracement of blows that we had, which has a nearly perfect record going back to and I think you have the basis for the market having put in the bottom. That doesn't mean it won't be a grinding back and forth advance, but I don't think we're going to go below those tune sixteenth lows. Alright. So with that outlook, Brent, if you have UM cash to put

to work here, what do you do with it? Where do you put it? Do you like equities? UM? Have bonds taken a big enough beating, our yields high enough? Do you like commodities that they're still room to run there or they rolling over? I mean, what do you do with money? Sure? And so this is where We've been expressing our belief for the past here two years that you need to invest in things that are cheap UM.

You need to invest in value, not the technology favorites of the past and the growth favorites of the past, the hope streams and themes hope them dreams, teams and mean stocks I talked about before. You need to invest across the board, I stage should say, but we do like on a marginal basis value type stocks and the SMP five hundred, We like the SMP six hundred, which is UH the small cap area of the market, higher quality small cap UM. And I do think bonds right

now are going to once again hedge stocks. They certainly haven't this year, but I think at current yields right now really yields UM they do provide a hedge and so I would I would make sure that people UM don't be don't start selling your bonds right now like I think many people want to do. UH. And so that's kind of where we're position. We still do own commodities, albeit we are underweight our normal benchmark. And by the way, that's a that's a position that we have owned historically.

We weren't the people who believe that inflation was dead. Now it's here. And I'm kind of on the other side of that argument right now. I think that the inflation that we're having right now will come back because it is mostly related to what happened post COVID. All right, Brent, you said you're in Milwaukee. Milwaukee is one of my favorite towns. Vernon it is. Um, it's a great town. Talk to how is the market there? How is Milwaukee? Because I think, you know, how's the economy how are

people kind of feeling about things in general? Just kind of what's going on in mama real estate? What's the real estate? Looks like we're all feeling pretty good right now because the weather is still nice. Come visit me in a month or two much and people will be a little tour um. In general, I think the Milwaukee economy is doing just fine. I mean, you know, certainly, I think as you look around the country, people are

doing good. I mean, the unemployment rate is low. The one big thing that sticks out that is the thing that we have to fix. And if you fix that thing, you fix the market is inflation. And that's where I think there's good news because I do believe the Ford indicators point to lower inflation. Yeah, you know, um, somebody who was telling me yesterday she didn't think we're gonna come down to four or five percent by May June of next year, and I reminded her of the cops.

I mean, surely for that reason. It would be insane if we were still over five percent after a nine point one percent in June of this year. Yeah. I mean, you look at it, supply and demand. I mean, the said talks about that all the time. Demand has moderated. Um PC is running a PC, Consumptions running two point two percent year every year. UM it was running six and a half percent before the Fed started hiking. The housing market has slowed, inventories have rebuilt, and so I

do think it will begin to push back. I think the big risk is that the Federal Reserve doesn't feel they can have a forward outlook because they see, I assume some of those things that many of us in the market see. The question that I have is are they so hot haunted by what happened in eighty that they feel the need to keep ongoing Because inflation right now is still high and there are lots of screaming about it. Are they able to actually pause, because I

think they've accomplished in six months a lot already. I just think it hasn't completely shot up in the numbers. All right, Brent, great stuff as always, appreciate getting some of your valuable time. Brent Shooty, Chief investments Strategist, Northwestern Mutual located in beautiful Milwaukee, Wisconsin. We're talking beer. I think they do that there. They do brought worst, they do cheese. Uh. They get a lot of good money

management institutional investor money in Milwaukee. Believe it or not. It punches way above its weight. Francis O joined us Craft Technologies. I think they do artificial intelligence for investing. I don't know. When I started on the block trading Nescar Payne eight six. Every morning, my boss, Johnny coglan would just run by and screaming my ear by them low, sell them high. That's all I had to do. But now you can use artificial intelligence. Francis, thanks so much

for joining us here. Tell us what you guys are doing a Craft Technologies, Thank you, thank you for inviting me. Um. Yeah, the Fiow and sale high we tried to do something so like that as well. So the Craft clons. We very the artficture Intelligent investment tech company providing the services to us A management companies from the S location Signal MONGST the signal security selections. We provide a cater solution to our plan. Also the sponsor of the an units

et F as well. So first of all, I want to point out that Craft is not like the macaroni and cheese that's spelled q R A F T craft technology. And um, you said you have an AI E t F. So how does that work? It's an active e t F and you use your algorithm to trade it. Yes, exactly, we are using the artificial intelligence, specifically the deeplonging model to trying to predict relative strengths of the stocks among the universe. So you apply the uh DAT technology into

the activity manager of the ETF of the world. So we're calling me the listing four et FC and n I S right now. But so hang on, you trade E t F with your algorithm or you offer an e t F that's actively traded. Yes, later one we offer on EPO. So what's the ticker. The ticker we have the mb q UM, the quality A moment h d IV, the one of most performing beast performing ETF this series MVQ. Nice alright, I go on e t F,

go on my Bloomberg and um, it's pretty cool. You can put in craft there and then you can define exactly the family of francis. How does how does your technology the use of artificial intelligence? How does that or how has it been doing this year when we've had a tremendous underperformance of both equities and fixed income, lots of volatility, the fixed pushing higher? How has your process

worked well? So you're utilizing a the diploming model, which is training the am L don't to liplicate the well framed human perform management there. This is a making process but without human emotional bience risk. So processing from the mental data, price data, and macmak data to be our model is trying to the maker scores and the foecust

relative performance at the stack amongst the universe. But the EATP that I mentioned m v Q, the next value et which is applying the ai WA m AIM methodology into the value invest in the world, UMDAB each are

actually performing value well this year uh year today. As of today NVQUE is only full person below the full person losses, which is almost eleven percent point of performance even against the widely used nscr U s A and as value index UM show and even for the last long year period NVC is even more possibly tend close to percent. All right, I want to point out that is n v Q as in Victor, Nancy Veronica. Okay, Um, what's Q in the craft craft? Yes, exactly, n v Q. No.

I I was thinking in the military alphabet. If I had Greg Jarrett here, he would do me right away. Q looks like Quebec. So it's actually in the military alphabet November Victor Quebec. Really que is a taker? Okay, very good? All right, So francis, what's kind of what do you guys as you look at the market here? What what's what are you thinking about here as you

talk to your clients? Right? The carom back environment is definitely not so multi papab between investors at all, Like you're there are a lot of risk um that we haven't seen this year, from being the heightened inflated inflation environments and then the fact the hike is also not favorable poetical risk and also be pretty much like the

perfect storm is hitting the financial market right now. And if someone who still wants to have a position into active market a letter I think about the lever wants to say, let's think about the value investments. UM could be the way to play for the next six to twelve months on until there was a clear trajectory of decidities are deciding to any sign on deluring there interested UMU the legend back to the normal area shop for now the gross act mark had it won't be so

much the value. The values that delated relate to play relatively safer than the other mechandescent classes. All right, francis good stuff. We appreciate it. Francis Oh, CEO of Craft Technologies, UH talking to us about the e t F. He uses artificial intelligence there in the investment process. Where is Kevin Tyn I am so pumped for him. He's at the Detroit Auto Show. UM. For a number of reasons.

This is spend a lot of time in Detroit. I used to spend a ton of time in Detroit, and the Auto show was typically in January, like the worst time in the year to visit Detroit, but everybody went because the super Bowl of UM, the automotive industry. Now they have it in a more reasonable season, but I don't think as many people are there. Well, the ce S Show, I think is an auto show with a couple of computers around it. Yeah, that's what the Toyot

president was saying yesterday as well. Kevin tell us first of all about what the auto show is like. I mean, it just wasn't the hype um this year that there used to be, you know, pre pandemic back in the day when Detroit was all about it. Yeah, it is very very different. Um, I would say for the most part, full displays are only General Motors, Ford and Statlantis. There's a small Toyota booths and even smaller Subaru booth, and

that is it's what is it. Yeah, So there's a couple of you know, there's a couple of like drone and see plane companies showing stuff and electric truck plot forms that so they they went out of the way

to fill the space with non automotive stuff. And then there's this thing called automobility which is charging companies and light ar and so it's and even the media center, you know, we would come in here and media center would take up this entire ballroom and Bloomberg and our our team from Southfield here would just have a whole table editors, reporters running from scrum to scrum and uh, it's it's it's like a closet now. And there was five people in the entire media it used to be.

It used to cover bill multiple halls and multiple floors. And well, I think it reflects I mean, you guys know Kevin and Matt. I mean it reflects auto companies are technology companies today. I mean, and I guess that makes more sense to be in Vegas, you know, in for the ce S show, because man, that's what the cars today are. I mean, we saw all these micro talk to us about just the general buzz there as it relates to the transition to electric vehicles. Um, you know,

where are we? You know? The interesting thing is, and I can't remember who wrote the story that I read yesterday. It was either Elizabeth Berman or Monica Raymond or Chris Ralvald, But one of our German reporters talking about Herbert Diese at his going away speech, you see this Kevin Um, Yeah, this former CEO of Folkswagen when he was leaving. Um he basically pointed out the fact that the transition to electric is easy. The transition to software is hard. That's

where everyone's getting it wrong. Right. Anyone can put a battery in a car, Okay, Tesla seems to have been doing it better than anyone else. But putting all these software systems and getting them to work together and getting them to work as well as your iPhone or whatever you use, it's not easy, and a lot of them are failing or at least having real troubles, right, Kevin, Yeah, And and it's the same thing with autonomous. Right. We've heard so much about self driving, and you know how

right around the corner it is. And really we've we've got the hardware figured out, right, and if that's of the battle, that the last ten percent is as difficult as it was to get to that point. And I think you're seeing that in electrification and you're also seeing it in autonomous. But but Paul, to your point about the show being technology, you know, the other thing too, is that you're you're you're having an auto show to drum up demand and get the public to see your

new product, of which you have none in inventory. So so to you in four years, right, I mean so that's kind of I think the feeling puts, you know, looking at the main auto shows right Detroit in January used to be in January, you have New York right around um Easter, and then you would have California right around Thanksgiving, and it would always be kind of divided.

Where Detroit obviously is four GM and the De Lantis domestic brands backyard, you would have the European makes really kind of focus on New York because it was considered the premium show, and then the West Coast show would be a little bit more high tech, and you'd have the Asia based manufacturers UM with a bigger presence there. And now it just seems like I'm not sure there's any presence anywhere other than like Paul said at CEF,

I guess Baby Vegas. I got. I prefer Detroit, honestly, no matter what time of year, I prefer Detroit to Las Vegas. But I have a special treat for for all of you. Um there is one really cool thing that happened at this car show, and that is Ford unveiling It's brand new seventh generation Mustang and icon of car that I have been a huge fan of ever since I got gum on the seat of my dad's sixty four and a half notch back. Um, and we've got Jim Owns with us on the line here from

Detroit as well. He is the marketing manager for the Mustang project. Jim, you know, this looks at first glance, it looks more like an evolution than a revolution. But there's some pretty major changes both to the power train, UM and the interior as well as the exterior designed that I really think makes this car a much more attractive UM proposition. And I already wanted the old one, So tell us about it. Um, we're so excited to

be on and talk about this. And you know, the sixty four and a half Mustang that you got the gum stuck on literally was a sixty five. You know, there was really no such thing as the sixty four and a half, even though all the Mustang fans around the world they were all titled sixty five. So don't worry about getting that gum stuck on your dad. That's he He would always refer to it that way. And UM, even yesterday my wife was saying, that's silly. Why was it sixty four and a half? I don't know why

it was. I don't know why that year sticks with me. Maybe that's when they showed it at the World's Fair, or they put it up. You know, they took apart you know this, they took apart a Mustang for the debut. They carried it up the Empire State Building and put it back together on the view on platform. We did

it twice. We did it in nineteen six and at the time the size of the Mustang and the elevator sizes have not changed on the Empire State Building, right, they have never changed because of you know, the historical aspect of that building. So in sixty six it took four different times to go up the elevator when we did it with the Gen six Mustang and we put it out there the bright yellow one. UM, it took a few more times to put it up there, and we installed it up there. So yeah, it's been on

top of the Empire State Building twice. UM sixty four and a half piece is when Ford started changing production runs in their customers wanted to delineate between the original and then the second one where they delineated it, and that's the sixty four and a half, sixty five and

it's always a fun conversation over um. You had mentioned the seventh generation and how you thought of it as an evolution and and it has to be a you know, for the six generations previously, it still has to be unmistakably Mustang, right, and that we think we hit a

home run on it. And in the seventh generation it has to reach to that new audience to bring the new seventh generation customers in, and we think we hit a home run with the design and that interior which is just completely filled with gaming technology that the younger audiences love. And then you said you talked a little bit about the power trains and an all new Eco Boost that has better performance, better power, more efficient production

of power. And then for Mustang fans globally, right, you have cars on six of the seven continents. Um, it is a fourth generation Coyote that will be the highest horsepower Mustang gt tyote I've ever done. I'm so happy to hear that, you know, because I was worried that

the horse power figures were gonna go down. And I know that you're not going to tell us, well, go ahead and tell us, just tell us, well, so i'd loved I'd love to tell you just as a secret whisper in your ear, But no, the asterisks are that, you know, we're still in the testing and certification pieces that will come closer to the summer of twenty three

when we launched the twenty four model year. But as a you know, as a person who has not only worked for Mustangs for four generations of them, also worked for Carol Shelby for four years, you know, horsepower means something and this is this is going to be one that pulls you from the seat of your pants. And we can't tell you how excited we are. All right, Jim, Let's say I order a new Ford, when am I going to get it? It looks like we're not going

to have a railroad strike, so that's good news. But talk to us just about the supply chain getting stuff from the auto industry these days. Yeah, and it's been, um, it has been, you know, just like every other industry. It's been you know, a struggle to identify you know, when you can have your plant open and what parts are coming in. And with Mustang, you ask about the Mustang.

This will be a twenty four model year, right, so it'll be the fifty nine year model year for this Mustang and that will be available in June of her I'm sorry, in the summer of twenty three as a twenty four model year. Right now, you can still go in and order your twenty two are soon to order

your twenty three model your Mustang that is the existing one. UM. And you know, we've been able to UM keep the plants running and keep Mustang customers happy by delivering you know, not only the Eco Boost, but right now the mach one, the Trema. Yeah, with the Trumic seven speed dual clutch. That's you know, shifts years in eighty milliseconds. Yeah, that's a lot of fun. I want that. And are are we going to have? Do we know about the transmission

options available in the new seventh gen? Yeah? So what we've announced last night with the reveal of not only the coup and convertible Eco Boost and GT, we introduced for the first time in twenty one years, a new specialty performance brand called the dark Horse. UM. For time that we've had the forward facing pony on the car UM and it is UM. It is extremely UM that

the fitting now of the dark Horse name. Now that will be our specialty performance derivative that will have the tremack box in the manual and the drift break and the break manual transmission. It'll have a manual, it'll have well, it'll have the automatic. I think the auto boxes pretty amazing as well, and I'm gonna save the manuals guy. So um, I was so impressed by the Shelby GT five auto boxes. I think I would take that over

the stick. The cool thing about this new Mustang is it's going to have an electric emergency break, a drift break. Nobody likes a good m and a trade more than me, because again, the first thing I do is I go the m A page and I see who the bankers are. And my good friend Frank Quattrone advised the seller, so I know he got maximum price from this. So Adobe's minus software company, Adobe's down? What is going on? He

covers all things technology for Bloomberg Intelligence. He's located. I have no idea where, but we have him in the Bloomberg Interactive Broker studio here in New York. Today. Adobe a great company, big market cap um and this is a hundred fifty billion market cup company stocks down six on this. What's up? So you think about it. When I looked at the deal, I said, okay, twenty billion, it must have good financials. They're gonna do two million

and annual recording revenue it's aigma. It's a private company. They're gonna do maybe four million after that. So if you do a little bit of math around it, that means fifty times sales or sales hundred times sales cash flow. So I think that's what's happening here. The street is saying, why are you overpaying so much for an asset where the contribution to the top line is going to be very small and the bottom line is actually going to dilute your margins. It is insane to pay that much,

especially now when valuations have come in. What are people paying for similar assets? So again it see, according to Adobe, this is a technology that they're buying that that nobody else has, So that's their rationale. The outside people are buying less than ten time sales right now for software companies. But once again their argument is this is the technology

that can reshape the company. Um, we published a note yesterday where we basically say said that Adobe's long term growth is not going to be like it has been over the past decade because it's coming to a mature business. So they really need to figure out what they do, and if that means acquisitions, they may do the acquisition. But we don't think that valuation is going to bounce back ever again like it was in the you know,

before the pandemic or during the pandemic. All right, so tell us what Adobe is in one set, and tell us what Figma is in one sentence, and why Adobe wanted to buy Figma and spend twenty billion large. The real killer app that Adobe has is their creative cloud product, Adobe Photoshop all the photo editing tools that you need. Figma is a platform where people can collaborate. You are creators. You can use you know, to exchange ideas. You can

go there. That's a whiteboard all web based stuff, and those two things marry very well for the next generation creator. Adobe is um. For some sometimes it's the bane of my existence because I try and access files on my computer that I can't unless I'm subscribed to Adobe. And then once I subscribe to Adobe, I found it impossible to cancel that subscriptions. They just suck me dry. Um is everybody else or other consumers as annoyed. Do they struggle to find another word? Do they hate Adobe as

much as I do? You can open those documents using a web browser, So if you're just using a PDF opener to do that, that's a free thing. You probably downloaded a more expensive version and never deleted it from your computer, but we can talk about that another time. But so in a case, if you just want to read a document, it's okay, that's free. But if you want to you know, signature on it, you want to go out and edit it and highlight it and send it to your teammate, then you have to pay for

that particular software package. And that's the second piece of their business called a document cloud, which is all of PDF. But the real killer app is the the Photoshop, which there is no graphic design and outdate in the world that would not be using that for the world work that they do. To me, that product is as powerful as Microsoft ex Cell. Alright, and Paul, I guess you probably spent decades with Microsoft Exel as your number one back in the day, most clicked back in the day.

And the analyst, yeah, absolutely was before it was before Xcel. Actually, U, I can't remember what we had before Excel. What do we use on our I don't know WordPress, I have that even before that. All right, I'm bringing up one of Matt Miller's favorite functions here, c O m p uh. Comparative returns Adobe over the last five years about fifteen percent return the SMP about eleven. So it's done pretty well. I see a lot of buy ratings out there for Adobe,

six or seven kind of hold ratings, no cells. So the street still likes this name. What's the what's the theme behind the bullish call here? So go back in four or the company went into a massive undertakeoff, changing their business model, went from a license model to a subscription model. Unbelievable success since then, very strong growth rate plus in fact, I would say, closer to margin expansion like you have not seen as of today. Margins are

closer to adjusted operating margins for this company. So massive margin expansion. And that was an entire call yesterday that Okay, it's done exceeding well in the last you know, ten audios or seven eight years. But now they're coming to a point that growth rate goes to closer to fifteen and there is no Mougin expansion. So the valuation. I would say premium they got close to compared to Microsoft,

I think it's going to die now. And Microsoft's you know, economics look a little bit better here compared to Adobe. I don't know. Software. I mean it's it's a I mean, you've got the easiest drap in the world. You just say, I slapped by ratings on everything software. I mean, it's just like growing business. How has it performed? Just probably speaking forget about the hardware soft We'll talk to some

other you know, man deep on that one maybe. But the software side, is it just a secular growth story. It is a massive secular story. You you go back and read and reasons you know later from ten years ago and say software is going to eat the world. Software at that time, Paul, when you hired me was about two hundred billion in market size. It's close to seven billion market now. You don't have to do much just right the way. Yeah, and now and now what

the kids are talking about is the cloud. That's the new thing. And I play the clouds three point, which by I'm still have no idea what that. If you have any call on web three point, it's it's a gimmick, right, Yeah, that's right. Yeah, let's let's get started. Somebody's gonna send me a lot of hate me a lot, Okay, So best call right now in or the best growth story

in tech right now? I would say, given the cuttered macro environment, I would put it put Microsoft on that this because it's a safety stock as well as it does everything right. Even in a bad, bad, bad economics environment, they'll still grow tender. And it's Microsoft. The story a cloud story, it is all. It's purely a cloud story. So it's not a Windows story at all anymore. No, but Windows does provide a lot of good cash flow, except and again Office provides a very good cash flow.

It has two cash cows that fund anything they want to fund, you know, to be honest, video games, activision like and they can do anything out there. But what happens is Microsoft is now the de facto thing you need no matter where you are, what enterprise you are. And it is a growth story for me because you know what, they will double their revenue in the next five years. Can you imagine that at the company with three billion revenue will double the revenue in the next

five years. Oh yeah, yeah, I mean it's just an awesome, awesome story. Anora Rana, senior software in I T Services analyst Bloomberg Intelligence. Actually in the office he's supposed to be in, which is the New York City world headquarters of Bloomberg and Bloomberg Intelligence. A Bloomberg Intelligence analysts. What's the percentage of them that are in the office. I don't know. I'm gonna say maybe half, you know, I don't know who knows. Thanks for listening to the Bloomberg

Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Pet On Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.