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Every business day, we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moving news.
Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast turning stories. As Bailey was just talking about, it's on the retailers, it's Target, it's TJX. Some decent numbers, kind of in line, I guess you'd call it, but definitely some cautious outlooks. Let's kind of get a sense of what that means for these retailers and what it means for the consumer overall. Sor't going to round table
this same a couple of smart voices. Jen Bartashi's senior industry analysts with Bloomberg Intelligence. She joins us, as does Bloomberg macro strategist Vince Cignarella, both on the phone here. So Jen, let's start with you here. What's your takeaway from a couple of big retailers, Target and TJX.
Yeah, it's good morning, Paul. Really, the takeaway is that there's no news good news actually in this market, and that everybody understands that the consumer discretionary spending is continuing
to soften. I think that one of the things that we're looking at with Target is how well they're going to be able to manage that, And one of the positives this morning was really about how they've reduced their inventory and they seem to be positioned to be able to respond a little bit more quickly than they have historically to changes in that consumer spending.
Well, Jen, the inventory story seemed to be this overhanging for both Target and tj MAX for the entirety of last year. Is that problem in the past now or is there any remnants of it?
Really that pattern that that problem is really in the past. I think both of the retailers have really reduced their inventory,
especially in critical areas. So for example, with Target, their inventory is down sixteen percent, but it's down twenty five percent in discretionary categories, and TJX is also really worked to offload the excess inventory that they had, so the board, I think in the retail space, inventory is really pretty well positioned as we go into the summer months and more importantly into the critical back to school and back to college seasons, which it's hard to talk about already,
but it is just around the corner.
My last back to college is starting at Start in the fall after four. This is my fourth and last. Thank goodness, Vince Agnirella, love to get your thoughts here. What are you hearing out there on the street? You know, we see these retailers today and they're to me reasonably cautious. That drives of some of the ego data we've seen. And there, what are you hearing out there as it relates to the consumer inflation? How's everybody doing?
Everybody's sort of so so to be honest, I mean, I think the interesting point when you're talking about the retailers and you're talking about reducing inventories, think about just a short time ago we were talking supply chain and balances and people couldn't get product. One of the things that's troubling, and I think just the whole economic space and what people are talking about is their huge search and consumer credit outstanding. We're seeing very large consumer credit balances.
It's positive for the credit card companies and when you see big games for people like MasterCard, Annex, etc. And visa. You know, in normal times that's a positive, but in times like this, I think we look at that as a negative, and that consumers are stretched in terms of disposable income visa, the inflation, and more and more purchases are being basically bought on time, if you will, and
that's just borrowing from economic growth in the future. And you know, I think markets and traders are still thinking that we are potentially going to see a recession before this year's out.
Vince, following up on that story, the timeline here is really interesting because and Jen correct me if I'm wrong here, but both Home Depot and Target kind of said, look, we're expecting some sort of pullback in the consumer. It's not here yet, but it's coming, and it feels like it's a narrative we've heard from last year. So in terms of timing, e Vince, we know a lot of people are pricing in that final economic recession by the end of the year. But where are the signs of the consumer pullback.
Well, I mean we're naturally not seeing them in I mean, if you look across the board, you look at the housing market, especially in the tri State there, it's off the charts. Where there's no inventory, so pricing it's totally a seller's market. People are paying well above ask and they're continuing to do that simply just to get a home. We're not seeing inventory because of high interest rates. So in a way, you know, I am a major critic of that said, because I think they've totally missed the
whole idea of monetary policy. Just raising interest rates without reducing money is not being more than changing the price of money. It's not actually reducing demand, so that money is still out there and the consumers are still spent. But I think we're getting to a point where they're reaching the end of their rope. And until we get to that point, we're not going to see the pullback and spending that you know that people are talking about.
You know when that happens. Timing is everything, but I wouldn't dare to try to call it necessarily and say at the end of this year or early next year or whatever. But it does come eventually. It does come. You run out of you just run out of places where you have income to spend.
Jen both T tj X and Target called out, as have other other retailers recently, that the rise in shrink. What is shrink and how problematic is it for the retailers.
Yeah, so shrink is is really loss of goods either due to cesser damage, and it's really as simple as that. And it's it's an issue that has always been around retail, but has been amplified significantly in the last year or so. And we've actually even heard retailers like Kroger talk about retail shrink and theft of you know, of actual retail gangs coming in and stealing products. It's something that is always there because you know, people you know, pocket things
as they're in the stores. But when people are under economic stress, it sort of leads an opening, leads an opening to an increase in theft. And that's what we're seeing across the industry when we.
Talk about the theft story, though, Jen, I mean, what, what is what's driving that exactly? Because has that target always kind of had this issue to some extent.
Well, all retailers have this issue to some extent. It's it's it's a matter of how well it's being managed. And and when you think about, you know, where the consumer sits, especially consumers who shop in the lower to mid tier stores, they've seen their discretionary income start to be under more pressure, and it lends itself to more of that that type of theft than we see when
people have free or spending capabilities. And it is something that is it goes in cycles, and we've seen it in the past with retail when we were in other recessionary type environments, and so it's nothing new, but it is a new issue, and it's remarkable in targets respect and that they're calling out a five hundred million dollars potential impact of profits this year.
Yeah, that's that's the number that kind of trumps out at me. Hey, Vince, what are the next data points that you'll be looking for that the market's really focusing on you, abilieity.
You know, not a lot this week, unfortunately, for us to really get our hands on where we get the usual jobless claims weekly number Philly FED is probably going to be interesting following what we saw in New York home sales. I don't think anyone's expecting any any major surprises. I think until we get to the f MC minutes on the twenty fourth, there's there's nothing amazingly substantial I think to really shift market sentiment. It's all going to
be given taken. When I'm watching markets now, which you know, we're just we're in a bit of a seesaw trend that it simply feels like the day traders are ruling the roost and just just moving things back and forth and just taking taking advantage of enter day trends. But we're not seeing a really good feel I think for
a market trend. I think it's that's going to come, hopefully with the statement that follows the f O MC or maybe they'll give us that word that everyone's looking for, which is pause, right.
The P word, the pause were okay?
All right?
Jen Bartash is a senior industry anasal with Bloomberg Intelligence and Vince Cignerella, Bloomberg macro strategist. Thanks you guys for stepping in here talking about these big retailer starting reportant earnings. We've got Walmart tomorrow, so I'm sure we'll be talking to Jen again about that. We had TJ Max and Target reporting today. You know, cautious that that's the word there.
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Pretty it seems like we kind of joke about this that every company in every industry, what did they all talk about on their conference? Cause AI? I mean your dog make dog food maker. You're talking AI and how that's going to drive your business. I think it's a scam approaching scam like levels. But how does it imply to investing? Our next guests can help us out there, Hugh Roberts, head of analytics at quant Insight. The name says it all, Hugh, I got to ask you AI.
It's all over the place. How does it apply, if at all, to investing. You're the guy to have an answer.
I think, yeah, Well, we think it massively does. The key difference to what we do is we don't have a kind of a large language model. It's obviously making all the hype around chat, gbt Bard and all the others,
so we've not gone down the natural language processing route. Instead, we used the smart machine and just basically trained it on a range of financial securities single stocks, equity indices, yields, FX crosses and the like, and the macro environment, because the problem with macro more often than not, is not that we're we don't know what the mysterious X factor is it's driving ten new yields or dollar yen or spoos. It's that we don't know what the right pattern and
the right jigsaw is. You know, our FX trading off interest rate differentials, are spoos trading off the strength or weakness of the dollars. You know, it's putting the different moving parts of growth, inflation, financial conditions, risk, appetite together in the right order. And that's exactly what AI can
help with. So AI can help, but not necessarily the natural language processing the LLM models, more just using to train it on smart data, on understanding the patterns of association between financial markets and the broader macro environment.
Does that apply to every asset class though, I mean, or is this just a stock market kind of thing?
Well, we train that on everything, but it's a really fair question because obviously you do see discrepancies within that. So sometimes you know, commodities get driven exclusively by a supply squeeze, in which case, you know, you've got to get into the weeds in terms of you know, is it a weather event that's impacting crop production levels, for example, or within the equity space. You know, there are certain sectors and I think even the most bottom up company
fundamental guy would acknowledge a macro place. They're typically the interest rates sensitive sectors like finance like housing, et cetera, or even growth versus value thinking about the level that
bond yields play in that kind of style allocation. But then we'd be the first to admit, you know, if you're talking about a new biotech stock where it come up with a new prescriptive drug of some kind, and it's about their R and D capabilities, it's about their ability to patent it so they can monetize it properly. But that's always be more radiosyncratic. So there are variances
across the entire kind of capital market structure. If you think about it, what financial asset is completely impervious to inflation? The fed financial conditions, risk appetites, these are just truisms in our life.
So Hugh, right now, what are some of the data points, data sets that you guys at quant Insights are really focusing on now?
Yeah, So what we're lediting is is a little bit of a regime change for US equity markets. I mean, it is a little bit self evident, because obviously the narrative has been out there for some time, but we're seeing that while everyone's talking. Obviously all these amazing stats
about Apple being the size of the russel. Two thousand or half dozen stocks explain the entire performance for twenty twenty three, and you can ascribe that to AI, you can ascribe it to a little bit of safety status, and also maybe the moving yields as the bond market starts for discount and easier fed. You've got to be more nuanced than that, we would argue if you're actually trading this stuff. So it's not actually the level of bond yields and that is driving US tech stocks on
our models. It's actually a the shape of the yield curve and b bond revolve interstrate volatility that is more important. And what we're finding at the moment is that the move lower. We actually use Swatch involve rather than the move index, but the move index tends to be more well known. The fall in the move index over the last month or so has been a huge tailwind. That's been a positive, and that's raising model value for spoos, NAVVAC XLK.
All this stuff.
A steeper yield curve is also a big tail wind, and that's helping move model value higher against that given that we finally feels it's most eagerly anticipated recession in a long time, and it feels like everyone's been waiting for it. For the data in the last month or so, it's felt like it is starting to roll over, but at the margin, both in the States and Europe and China, and that's been a headwind to macro warranted serve value for all this stuff. So what we do is obviously
balance up the tailwinds and the headwinds. And at the moment, the moves in the bond market are more than offsetting the negative drag from gross the negative drag from inflation expectations. But the trouble is is that markets have moved equity markets have leaved ahead of that. So we've got the nowsack, for example, about five percent rich.
To where it should.
Be at the moment. So the good moves is macro warranted, macro momentum is moving higher, but the health warning is the market's ahead of itself.
Well, it's interesting that we say the market's ahead of itself when it's kind of been stuck range bound for two months now, how much of the kind of carnage of last year is almost a tailwind as well to the stock market this year around, even as we're staring at a recession.
Does it? Is it just up from here?
Yeah? I think that's really fair comment, at least for justifying price action in January. And it did feel like a lot of last year's losers, the ones that got beaten up the most, did see a reallocation towards them at the beginning of the year. And I think that's a really fair comment, and there is flow evidence to
back that up as well. But it has to be more than that when you look at the price action, and I think what started off was a twenty twenty two losers reallocating into twenty twenty three winners morphed into a bit of a bond yeel trade and more in the last whatever it is six to eight weeks, is
morphed into a generative AI trade. But our point would be, is it interestingly if we look at the nasdak so we have we compute and our squared steps, that's just goodness of fit how good a job are our macro factors doing of explaining price action from whatever we're looking at.
If we looked at the Nasdak from January up until about ten days ago, our our squared was below our threshold for macro regime, So that would speak to the fact in January now that was driving off flow and in February and March it was trading off the generative AI hype. Now it's back above our threshold. We explained seventy percent of price action in the Nasdak and we have a five percent rich So our message to people at the moment is the generative AI hypeer taking us
this far. But it's not the only game in town anymore. There's also macro factors at work, and that's the headwind that you're seeing from growth and the reflation dynamic and lower commodity markets. But the tail when they're getting from moves in boon vol and the yield curve, and you've got to try and weigh all those up. And that's what that's where back to the original conversation where AI can help Q.
I know you guys are are macro focused. Do you care at all about the micro like do you care the fact that you know we're finishing up earning the season here, and do you even look at that kind of stuff.
Well, our clients do. I mean, we don't have any kind of bottom up variable so that we model. And that's simply a commercial division, to be completely honest, it's because that area of the research world is incredibly well covered. If there are so many people looking at company fundamental, there's just no edge there as far as we can tell. But the way our equity clients would use us is
they would still do their bottom up analysis. They'd look at the target earnings, the home depot yesterday and they'll do their kind.
Of bottom up analysis.
But then they'd say, well, we know we're in macro markets as well, so we need to put a macro overlay on top of this as well. And then you get the holistic picture. It's where bottom up meets top down. But we only provide one half of that equation.
To be honest, h.
You about thirty seconds here in your analysis, where does the currency picture fall of How much of a ripple effect is the dollars well stagnation for now going to have on the rest of the markets?
YEA, the most interesting thing on the FX models at the moment is actually that you're a dollar, and factually this speaks to equities as well European assets, both European equities relative to the S and euro dollar. Europe is the highbe to growth play. It is most sensitive to global GDP improving to commodity market rallying, and euro dollar screens is very slightly rich and eased you. The Eurozone
ETF screens is very slightly rich relative to spy. So if you think we are about to get the recession we've all been waiting for and global growth is going to turn aggressively lower YEP, then all those trades that have over what Europe might need to be reconsidered.
You always good to chat with you a different perspective, refreshing perspective from the macro side of the equation. Hugh Roberts, head of analytics at Quat Insights. They are based in the UK in London.
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The next guest I really want to talk to because I'm really interested in this fund. Here Savina Risova, global head of Research for Dimensional Fund Advisors. Now I'm a little I'm a little nervous here because she has her MBA and PhD from the University of Chicago, which means they really like numbers. And I was told that there would not be math on this show. But we'll see what we can do here, Savina. I see Dimensional. Why
I pull up the stockholders list. I see Dimensional as top top, top shareholder and a number of big companies tell us about Dimensional First, what do you guys do? What's your strategy? Sure?
Yeah. They Mentional as combining the best of kind of two words or two ways of investing, the best of indexing, low costs, broad diversification, transparency with the best of her active systematic active investing, which is pursuit of premiums and a daily, flexible implementation process. And we offer kind of that type of approach both in equities and fixed income. One investment philosophy, many investment solutions, and.
It sounds like though you favor kind of the indexing overactive. Is that right? Based on your.
Note, it's a combination essentially of the benefits of both. Indexing has a lot of nice features with it, as they mentioned, broad diversification and low costs are the first that come to mind, but also it has costs, and I think in the last few years we've seen the pandulum swing a lot away from traditional active to indexing, which journey has been a great trend, but people have also started to perceive indexing as a free lunch out there.
It has its own costs. There are regiditis associated with indexing and also lack of pursuit of premiums in general when it comes to playing market index solutions. So we try to basically deliver the benefits of indexing, but also go beyond indexing by focusing on pursuit of premium systematically, day and daily in our investment solutions.
So, Sabine, I know you at Dimensional to really take a look at the retirement business, and you've got to paper out entitled A Little Goes a Long Way. What do you mean by that?
What do you mean by that is that if people in their retirement accounts, which are, by the way, the largest share of household well according to the twenty twenty US Census. Instead of focusing on a plane market index, Solutions goes for a little bit of a pursuit of premiums with inequities. That is, go for a portfolio that systematically, but in a controlled manner, emphasizes smaller, deeper value, more
profitable stocks. Then they can actually improve significantly their outcomes for retirement, namely more asseted retirement, better chance of not running out of money in retirement, and the potential to live larger bequests. That's kind of what the study focuses on.
What can you how can you improve your retirement outcomes if you move away from plane market index in your equity allocation for retirement to a portfolio that, in a broadly diversified manner pursues the long term drivers of returns with inequities.
So what's the best way for folks listening to try and accomplish that.
Yeah.
So, usually when you have a research paper, even if it has a compelling message, it's hard to act on
it under your word, Yeah, not the case with this paper. Actually, anybody who listens today to the show can take action on that because you can switch from a plane index for equity portfolio to a systematic active solution in your for one K and your ERA, in your other taxable accounts you use for retirement, even in HSA health savings accounts, which are essentially longs, can be used as long term
vehicles saving for retirement. So in all of those types of accounts used for saving for retirement, investing for retirement, or you can have options practical real world solutions like the dimensional investment solutions in equities that offer that type of approach focus balance, integrated, focus on size, value and profitability,
which can improve retirement outcomes. And the other great kind of message from the paper is the findings of the paper applied not only to someone who is very far away from retirement like age twenty five, let's say, lots of time to save for retirement. They actually can improve retirement outcomes even for people who are about to enter retirement or who are already in retirement. It's not too late to read some of those benefits.
All right, Savina, thank you so much. We appreciate it. Savina Reserve, a global head of research and Dimensional Fund Advisors.
You're listening to the Team Cancer online program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, or listen on demand wherever you get your podcasts.
All right, let's switch gears. Let's talk energy here. You know, we're talking a lot. We just had the CEO of Bentley on Bentley Automotive and they're talking about, you know, transitioning to electric vehicles, and there's obviously huge energy components to all of this. We're welcome to bring in Robert Picconi. He's the CEO and co founder of Energy Vault. Energy Vault is a New York Stock Exchange listed public company and our GV is the ticker to put into your
Bloomberg terminal. Rob thanks so much for joining us here. You join us here in our studio. We know you're based out in California, so we appreciate you coming into our studio here in New York. What do you guys do? What Energy volt Just give us a quick, you know, kind of elevator pitch for energy Vault here.
Sure, we're focused on energy storage, and energy storage is going to be fundamental for the deployment of renewables to be deployed in more volume for us to wean our way off of fossil fuels. Our storage is broad We use a software platform where we can handle short duration storage and integrate that long duration. We do that with our proprietary gravity solution, and we also is just announced
last year to do ultralong duration with green hydrogen. So we broadly play in energy solutions for utilities, independent power players and also large consumers of energy, large industrial players.
And the gravity based storage feels like a big deal for you guys, Can you explain what that is?
It's a big deal and it's also big as a building. Yes, we innovated with gravity as a solution for energy storage that would be sustainable, low cost, something that could be deployed quickly, and that you could essentially build anywhere you can build a building. So ninety percent of all energy storage today are actually pumped hydro electric dams that use gravity. In that case, it's water that traverses down and turns a motor and discharges electricity, and then that water is
pumped back up into the reservoir into the dam. We came up with a way to use that same gravity and build a structure in a building that you could build basically anywhere, not have the reliance on building dams damming up rivers for example, or the large cost, and to do that very economically. We have a very low levelized cost to do that, which is a big issue with energy storage's cost.
What are you storing?
Actually, we're storing electrons, so we're essentially taking ideally excess wind and solar when it's not needed. So solar typically overproduces during the day because the demand isn't there, and that excess wind and solar actually powers the motors and moves these large composite blocks. We don't use concrete in those blocks. They are twenty five metric tons each, so that powers these blocks to a height, and then at
height it's all potential energy. So this goes back to your physics classes and it can sit there and last literally days, weeks, months. However, it's designed to cycle every day, so when the energy is needed by the grid, for example, in the morning when we get up and we're using energy, or in the evening when people come home, we lower those blocks, all automated with software, and that turns the motor and discharges that electricity back to the grid.
Wow, you got to be really smart to figure this stuff out. That's amazing. That's pretty cool.
All right.
I had to ask one question because I know you made an investment. You've got something in rudin China. So you're nearing completion of the world's first commercial long duration gravity energy Storm says, I've been dying to meet somebody who's investing in China. What are you doing investing in China?
Yeah, by the way, great question, and it's really fundamental. So first of all, China produces more greenhouse gases than the next seven countries combined, twelve billion tons. The US, by the way, second at about five billion, so number one. With our mission of decarbonization, China was going to be important. It's a very large market that's good for investors unique
to disrupt with new technology to introduce there. We had a very good leadership partnership with a company called China Taianying that partnered up with the Book Family Foundation in Texas to support us with a license to go ahead and build that technology in China and start right away. So they broke around last year in March and moved very very quickly, and we signed a large license deal that will have a royalty component so for all the
volume that gets built there. So, given the size of the market, given it's going to be the largest energy storage market in the next few years, and given just the need for the world to decarbonize, it became a very strategic point for US.
It's strategic, but it's still China. Are you concerned at all?
Not the way we structured the deal. So we structured in a way where they invested fifty million dollars in our company in the IPO as well, they prepaid fifty million dollars up front to have the license to deploy it. So we structured something in a way that financially would I think help investors get that coverage upfront. And I really believe with a partnership, they're a publicly company in China, they want to deploy very quickly and protect the technology. It's the investments they made in.
So are you licensing your technology to this Chinese partner?
Correct?
Okay, okay, I understand, okay, So what are you doing here in the States? What are the growth drivers for you here or just rest of world? I would guess I'm not.
Sure, We're sure.
Well, the US is the largest market, so why don't we start there. We're doing a lot in the US. We had our first year of recognized revenue last year where we did one hundred and forty six million, but we announced one point seven gigawat hour of projects that included short duration lithiumayan projects as well as a large green hydrogen project with Pacific Gas and Electric, which is
the largest California utility. So we are addressing the short duration market because that is the market in the United States today and we'll continue to be for the next few years. And in the rest of the world. We're doing things internationally in India and Australia, and we'll be announcing some other things in other parts of the world as well. We announced some recent license deals as well, in Greece and Cyprus and Egypt, for example.
So is that your primary business model, licensing your time technology.
Yeah, that's one of the business models we use for our gravity system in particular. Why because that's basically a building, So it's a structure you build that's lifting and learn in those weights. So that is a very easy license model. We also build commission transfer will also own projects and own them in under long term tolling agreements or power purchase agreements.
Does something like the Inflation Reduction Act in the US make deals more attractive here?
Absolutely?
In fact, I'm here in New York this week because I met with the World Economic Forum and there's a leaders focused on energy innovation. So I'm one of about thirty CEOs that participate in that, and the IRA it has the world looking at the US. In fact, other projects in other countries very interestingly are getting canceled to come here, for example in green hydrogen. So the IRA for US is a tremendous impetus because it's domestic content.
Our gravity is domestic for projects. The benefits are anywhere from thirty to fifty percent, and it's going to be great for jobs, and it's going to be great to make the United States the leader in renewables. So it's having its intended effect.
So how would you size up this industry here? I guess is energy storage industry? I'm not sure, but how would you kind of size up this market and kind of where's your place in that market?
Sure, it's by twenty thirty and by many accounts, somewhere between three hundred billion to four hundred billion is going to be spent. There's estimates that go up to a trillion when you get out to twenty forty and twenty fifty, and so it's a massive market. It's required for renewables to actually replace what is base load power from fossil fuels.
The issue with renewables, of course, is they're intermittent, So if you're going to shut down predictable baseline energy, you need to have storage to make up for that intermittency when you can't predict when the sun shines or when the wind blows. So it's a massive market. Unfortunately, there are not a lot of solutions in the market. You have lithium ion batteries. They're not ideal, but they're good for short duration that's fine. They compete with electric vehicles,
so you have massive demand. The components come from only a few countries, hence this IRAAC to try to get us more energy independent. What's happening in Russian and Ukraine, So it's a difficult problem to solve. With electrons, we can make wind and solar today for one to two cents of killawot hour just versus fossil fuels. That five cents fully amortized, already built. The problem is to store those same electrons, which you have to do if you're
going to replace fossil fuel. It costs five to ten times that in some cases. So it's a difficult problem to solve. It's a difficult problem to solve sustainably. And I would say as an industry, and this may surprise you to hear me say this, we are behind because things got started late. I think the world, I think has woken up that we do.
Have a problem.
It needs to be solved. A lot of money now is being invested in a lot of new technologies that can help us, and we're going to be leading away for sure with the big.
I'm sorry, would the big energy companies have an incentive to do this? Like you're a small company recently came public. Who are the big players here? If somebody want to play this in addition to your company.
Sure, well there are large players that are playing in here. So Tesla is one of them that not only for their cars, but they're using those same litinum batteries to provide utility short duration storage technology. In addition, you have you mentioned oil and gas with the big players, they
have to make their own clean energy transition. So for example, as investors, we have Saudi Ramco that invested in the company the largest energy company in the world, PHP, the largest mining company in the world for the transition they need to make and Creating is another one, large non farest metals producer. They made these investments because they're going to need longer duration technology, long duration storage and saw
us as an innovator. So it's happening and the largest companies are looking at investments to help them make that transition.
And do you anticipate in our kind of final thirty seconds with you, how worried are you about the macro environment impacting that investment plan.
You know it's going to continue to be volatile as we see in the stock market. Absolutely, but he continue to see investment and demand coming. In other words, I'm not seeing and he drops in demand. In fact, in our last quarter we announced a forty percent growth in our sales funnel, which already is about twelve billion dollars. So and we announced also about a billion dollars in
new project awards just last quarter. So we are not seeing a slowdown in demand from where we sit and the IRA is going to just accelerate that at least for sure for demand and also profitability in the United States.
Robert, thanks so much for joining us. Really appreciate you coming in here. Robert Picconi, he's the CEO and co founder of energy Vault again the ticker on the Bloomberg terminal nur GV. Very interesting story. I think I learned a lot there about how this whole stuff works. You got to store It's not just creating the alternative energy, so you got to store it. So I think I got a better understanding of that, and that's what energy Vall is trying to solve for.
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All right, let's bring in our next guest. We'll have chatting with Neil Grossman. He's a former CIO a t k NNG Capital Neil million. Ways to go here. I'm just going to start with because we had President Biden speaking a little bit earlier, is now shaking hands getting ready to head over to Japan. But he and his friends in Congress, I got to get a debt deal done. And my question is what are we going to get
if they do agree? Is it just to raise the debt limit and kick this can down the road another period of time.
You're very, very intelligent. Yeah, I think that's most likely because I don't think the Democrats are going to be willing to go as far as the Republicans want, and you know, so they're going to have to find some way to get this done. I'll tell you, just as an aside, what I find very interesting, you know, you really want to scratch your They put through a one point seven trillion dollar package at the end of last
year with a lot of spending. They had to know that they were going to create a problem for themselves if they didn't resolve this Number one. Number two. There's been a lot of interesting discussion if you've been paying attention about constitutional issues, which I'd love to sit down with Lawrence Tribe and discuss. But what I find very interesting is they could have started to do things like cut expenses about three or four months ago to give themselves more running.
I mean decades ago, right, decades decades another run DC right, Like, there's not a lot of long term planning necessarily.
Well, you know, the entire process. This is an interesting thing, the entire process for how debt and spending and all these programs are done based on the Congressional Budget Office projections are only ten year projections. So what the Congress tends to be very good at is dumping a lot of additional expenses into back years so they don't get measured. In fact, by the way, I wrote a book about this about ten years ago called Generation WTF. I'm very much on the side of young people.
And thanks Neil.
But the actuarial problems of this country are roughly speaking, two hundred trillion plus. You have to understand the government GDP is about twenty five trillion now, so we've already committed functionally almost eight to ten years of GDP already. The government spends let's say about five or six years trillion dollars a year, so in theory we've spent close to forty years of GDP already. So I mean, the hands are tied significantly. And you know, look, nobody has
the willingness to do anything. Even this. McCarthy and Biden, to start with, both said we're not going to touch in titlements. Well that's ninety percent of the problems basically, and it's not what they do, which is just keep pushing into the back years. It's a problem.
Now.
My guess is, roughly speaking, the actuarial change in liabilities tied to those to the entitlement problems primarily, it's probably four to five trillionion dollars a year. And so whatever you see being measured understates the accumulation of these problems enormously.
Yeah, that's just, yeah, that's just Those are discussions at the market. I don't think the market remotely can deal.
With Well, they're going to have to at some point social Security the trust fund runs out someplace around twenty thirty three. I mean, that was a two year cut from what they are fired for thirty three ten years.
That's scary y.
Yes.
So, by the way, I've been talking to a lot of young people about getting you may make the problem is the young. So my suggestion is young people should call their congressman and say, listen, you need a second trust fund. Every penny we put in cannot go into that trust fund. That's not our problem. You tell them to pay for it. Let's set up a fund for ourselves and we'll be we'll be accumulating money for our retirements. But you know that leaves the other other fund out
of money in a number of years. By the way, Medicare, Medicaid ran out of money in twenty fifteen, so those are now on budget as well. So these are big problems too. Out of every three dollars give or take, that the US government now spends is for entitlements.
What is the one thing then that you would want Congress to do specifically to protect my social security?
Well, me, I am having to be quite extremely I think they should shut it down right now. And what they should do is that you can't do things. But they ought to go back and say, look, this is the amount of money we have to spend, and let's get this right. Because, to be honest with you, if they work with a cap this way, forget the deficit cap and say they're going to get a lot more.
There's so much waste in this system, right, I mean, I think this is roughly estimated one hundred and fifty to two hundred and fifty billion dollars a year of medicare medical fraud that by itself is almost as you know,
would provide enormous additional coverage. But you've got to sit there and be willing to say, Look, we cannot simply continue to have I call it ostrich economics and stick our heads in the ground, because all we're doing is providing a staggering problem to the future and that's.
Not really fair.
All right, back down to earth a little bit. Sure, what else do you think about? What are you doing in the markets? How are you viewing these markets? We just got through the bulk of earnings. We heard some from some retailers today and they're reasonably cautious and the outlook and on the consumer. But what are you looking at?
Well, First of all, it's been and we've talked about this for a lot while. I've been doing reasonably well because I've been ranged, trading and trying to take advantage of volatility. I think we also discussed the fact that there was likely to be some upward migration and prices, which we're having right now. So you know, in the shorter run, I mean, this death issue is a concern because I'm very very flat basically beause I don't know
how this is going to come out. I guess is they're going to You're gonna You're gonna basically push it to the limit. There'll be some real ugly days, they'll get it done, and you'll be relatively okay. Inflation has been coming down. The interesting thing to me is a little lesson. I would have expected you have a couple of more good mone of relative comps, and so I think that as a concept concept gives you because the market likes lower inflation because it thinks it takes the
fed out of the picture. I think the problem is going to be that when we begin to move into the fall, the year on year comps with inflation get very ugly. And so because if you go back I think last year, like five or six months, they were averaging point one a month. We're averaging point three a
point four months. So any additional improvement is likely to go away, and then you're going to have issues which I suspect we have not seen the full full impact on the economic side, So you're going to probably continue to see economic slowing. You're going to probably see some upward pressure on unemployment. By the way, anyone thinks you're going to have a significant rise and unemployed by the end of the year, the only way that's going to
happen is if we start losing. You know, one hundred thousand jobs a month will not change the unemployment rate. You've got to go way below that to really get a significant rise. So I think you're going to find less progress us on that side, economic slowing, upward pressure on prices, and the FED is going to have its
hands tied unless something extreme happens. So that's sort of my basic mindset for how I'm going to be approaching the markets for the next six to eight months unless something changes.
So with the year on year comms for inflation like you mentioned, and the tight labor market and strong consumer spending, how do we possibly predict that the Fed is going to have this massive string of rate cuts.
I think they're out of their mind. I don't think that. I don't think. First of all, let's be clear about one thing. The Fed's mandate, and we've talked about this is zero. They've self defined it to be two percent, which is fine. They're not going to do anything unless they want to try and change it, and if they change it, watch out for the bond market until you get near two percent, but you have if you have three and three quarter percent unemployment, which is historically low.
Even with modest growth. Remember the growth they report real growth is nominal less inflation. Nominal growth right now is still quite healthy, and that's one of the reasons I think we've seen less slowing than people think. It's not like we're growing at two percent nominal with one percent inflation to get to one percent. You're growing at like five and a half six percent with four percent or four and a half percent inflation to get to that level. So I just think the bottom line in the back
we may not have to see any more hike. Personally, I would have stopped hiking a little while ago. But I think the FED should be selling assets off their balance sheet, which they're not doing, not just simply letting them run off. I think I call it quantitative dribble basically. But the bottom line is that until something extreme happens
that will force their hand. As long as the economic data is reasonable enough and in prices are still high, you're not going to see them cut rates at least that's my perspective.
Interesting, all right, Neil, thanks so much for joining us. Neil Grossman, co founder and former CIO of tk NNG Capital.
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I want to get right to our next guest in our c suite conversation today, Anna Bryson. She's a chief financial officer for the company's Doximity New York Stock Exchange symbol DOSDCS. It is in New York Stock Exchange listed stock and thanks so much for joining us here. Let's start off just real quick. Give me the twenty or thirty second pitch on what you guys do at Doximity. Then we'll get into your earnings and kind of the outlook.
Sure, well, thanks so much for having me. You know, at dot Simity, we are building the leading digital platform for US medical professionals, so we serve over two million members including over eighty percent of USA positions across all specialties and practice areas. So what we're building here is really the physician Cloud. We provide our members with digital tools that are built for medicine, which is enabling them
to collaborate with colleagues. They can stay up to date with the latest medical news and research, manage their careers, and conduct virtual patient visits. So we are really focused on making physicians more productive to provide better care for their patients.
All right, So just to get it out of the way, a tough morning, dropping as much as eleven percent in pre market trading. Analysts are looking for a lot of growth in the second half of the year after some product delays. What's the plan to turn those delays into progress?
Sure, So we're really proud of the new products that we've launched for our customers. We think they will be critical to our success over time and contribute to our top line growth. We are in a regulated industry, so we are facing a few delays and getting the new
products live. But if you look at our quarterly revenue curve, the cadence of our quarterly revenue curve that we're guiding to for this year actually looks very similar to last year, so it really isn't that different versus what we've seen in the past. And we're really proud of the fact that we're guiding to another year as a rule of sixty plus company with twenty percent top line growth and forty four percent adjustedy bits don margins, which is something
top macro environment. I think we're really proud of being able to maintain our long term target of a rule of sixty plus company.
I'm a big fan of subscription revenue businesses, and I see that's a big, big part of your business. Talk about kind of what drives your revenue, what are the key metrics that I need to get right and looking at your revenue sure, I.
Think one of the key pieces there is our net revenue retention rate. We've been able to post very high net revenue retention over the last several years. So this last quarter we reported one hundred and seventeen percent net revenue retention rate, and that was even hire amongst our
top twenty customers. So our top twenty customers had a net revenue retention rate of one hundred and twenty four percent, which implies that we're actually able to scale the quickest with our largest customers, which we think is a really good indication of what's to COG over the next five to ten years as we continue to get more and more large customers.
What are some of the biggest headwinds that you're concerned about in that same time period, the next five to ten years, and how do you plan to kind of hedge against them.
Sure, I think from our perspective, while we may remain focused on building out tools for our physicians, that is our key focus area, we're less concerned about headwinds. I think you know we've achieved a record number of qaus across our entire platform this last quarter. I think if you had asked me this question maybe a year ago, as we were coming out of the pandemic, the concern would have been can we maintain the engagement levels on
our platform that we saw during the pandemic. And today we're not only seeing that we're able to maintain the engagement levels, we're actually seeing higher engagement than we saw during the pandemic, which is something that we're incredibly proud of and I think just speaks volumes to our ability to continue to make our platform very sticky and we're continuing to build new tools, Like we're really excited about the docs GPT tools we're building for our physicians to
help them. You know, we like to call it cut the scut, so get rid of a lot of that day to day work that really takes them away from patients. So yeah, I would say our engagement is a really strong indicator of what's to come.
And telehealth that is something that not a lot of people were adept at before the pandemic. But boy, that that change. I mean, I'm not even going to a doctor's office like unless a limb is hanging off, you know. I mean, so and you talk to us about telehealth, how you guys incorporate that into your system.
Yeah, So we have a telehealth tool that is both voice and video. We've built it by physicians for physicians, meaning it has a lot of unique features that really help the physician communicate with the patient in a more clinical way. And our telehealth tools alone were used by our record three hundred and eighty thousand unique providers last quarter.
So to put that in perspectives, there's just over a million doctors in the United States, So we have very high engagement on our telehealth platform, and we continue to build out more than just telehealth, other workflow tools that our doctors are using daily to be more efficient in the office.
You guys have two of the big buzzwords that everyone loves in your description here, cloud and AI. Talk to me about how you're gonna become the go to when it comes to the healthcare provider that really is nailing the AI space.
Yeah, you know, we're learning a lot about how generative AI can serve doctors. So the one thing we've arted out with here is docs GPT. I think you can think of it as a chat GPT integration with a healthcare twist. So we've developed a library of healthcare specific prompts and we've trained the AI on common healthcare specific documents, so physicians can use it to appeal an insurance denial
for a patient with a chronic condition, for example. And that's an area that we're continuing to focus in on and or we're you know, we're really encouraged by the early adoption and I think at the end of the day, you know, as we think about a generative AI is very promising, but you know, it's not without errors, and
it should be approached judiciously. So we're enabling the position to test and use this technology and provide the appropriate feedback for us to help ensure the best best applications in healthcare context.
And in your subscription model, who pays the subscription? Is it the doctor individually is at the hospital? How does that work?
Yeah?
Sure, good question. We are free for physicians, that is very important for us. We are all free for physicians, but we are monetized by health systems and pharmaceutical manufacturers. So those are two key customers where pharmaceutical manufacturers can get information to physicians about clinical trials for example, and health systems can get information to physicians about, you know, a new innovative treatment that they might have.
So thirty seconds, how's your recession model?
Look?
How susceptible do you guys think? Are you to a slow economy?
Yeah?
So, pharma is a very recession resilient industry. And so while you know, if we look at the pharma ETF, I think it's only down about five percent this year. It's an industry that's proven to be very recession resilient. Healthcare in general is recession resilient because the need for life saving treatments doesn't change just because we're in a tough economic time, so we think we have a strong
ability to weather a recession. I mean you and see that as we're continuing to post north of twenty percent revenue groups and north of forty percent margins.
All right, and great stuff. Thank you very much for taking the time and chatting with us. Anna Bryson, CFO of Proximity DCS is the ticker.
Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews on Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three.
And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.