Mark Smucker, CEO of JM Smucker, shares his thoughts on consumer's concerns about the US economy. Dan Morgan, Senior Portfolio Manager at Synovus Trust, breaks down Micron Technology earnings. Anjee Solanki, National Director of US Retail at Colliers, talks about the impact of consumer data on retail real estate. And we Drive to the Close with Jimmy Lee, CEO at Wealth Consulting Group.
Hosts: Carol Massar and Matt Miller. Producer: Paul Brennan.
This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus gloom Wall Business finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Well, we mentioned we've been talking about Abigail, talked about it. That news from General Mills today forecasting a slow down in the year ahead, suggesting that price hikes will no longer make up for slowing sales and inflation. Weary shoppers are cutting back on spending. That CEEO warning that consumers will be cautious about food choices. So it dragged down the overall food space. We're seeing stocks down a bunch as a result. And so we've got actually another CEO in the food space, Mark Smucker. He's back with us, fifth generation running the company. It's a fourteen point seven billion dollar market cap company. You know their brands, and he is chairman, president and CEO.
Back actually for the first.
Time in a long time time, first time ever.
On radio, on radio, in our Interactor Broker's studio.
Welcome, Welcome.
I wanted to do the backdrop because we are seeing General mills, it's down about five percent. Your stock is under pressure, I think about four percent. As a result, the whole group is down because everybody's freaking about the food space. What can you tell us about what you guys are seeing in terms of the environment for consumers.
You know, we have continued to see our consumers be relatively resilient. I think what I would say is our categories are food, so peanut butter and jelly, frozen sandwiches and crustables, coffee and pet snacks, cat food. We play across the entire value spectrum in each of those, so as consumers shift around, we have the opportunity to capture them at those different points of value. If they're looking for something more affordable, there's Folders, If they're looking for something a little more premium, there's Dunkin in the coffee space. So we have not seen that type of pressure in our business.
Not at all.
No trading down, no pulling back.
As well as you know, there's inflation, right, so we have taken price increases across our portfolio and we have seen a little bit of volume pressure, but again the consumers are shifting largely within our portfolio, which has helped our business.
So my immediate thought when I saw the General Mills story is they're still really well prepared for a recession, because you know, we're not in it yet, but if it comes, I think a lot of people are going to cut back on restaurant spending and are going to try and save money at home. At my house, we do that by eating more cereal and peanut butter and jelly sandwiches. Has that been to your experience in past recessions?
You know, first of all, who knows if we're actually in a recession, but yes, that has been our experience in past recessions. As an industry, we generally make mainstream food, and we have fared fairly pretty well through these recessionary periods. You know, inflation comes and goes. We are in some categories where we passed both up and down, like coffee and peanut butter, So we think we're pretty well prepared in the event that we would experience those types of pressures.
I'm trying to save money at my house, I know, and I brought my bag lunch today.
I didn't even know you were coming in.
I have to say for somebody's nomad for a long time, that's a big deal.
Well, you're a luncher.
I have a daughter, I have a big mortgage.
You know, cars and motorcycles, and so I thought, you know, I don't really care about I don't want to spend twenty dollars at some Thai food place across the street for mediocre you know, pad tie, I'd rather have. I love Jiff peanut butter. It's like I've grown up with it. I don't even think there is another kind of peanut butter.
I'm a PB and apple kind of girl. Let me ask you, though, talk to us about the supply chain and the cost pressures, because I do you know, we see that inflation has come down. We've seen cost components come down. It's hard not to wonder our companies just kind of holding onto those higher prices because they can or talk to us about.
The Yeah, our in our business, we have seen we're still in an inflationary environment, right, and we have raised prices. Coffee is an example where you have seen some relief and we have, like in times past, when we cross certain thresholds and our hedge position turns into actual coffee that we roast in package, we will pass along those reductions to consumers, but we're not quite there yet. And in our other category, how.
Far away are you from, like kind of where we were before the pandemic impackaged.
Well, keep in mind, like the highest coffee prices that we ever saw in the last couple decades was about ten years ago. We're nowhere near there. But coffee prices would still need to come down a little bit more before we would actually pass those along, and then we need to take it in our physical inventory.
All right, So what about peanuts? That's the key for me, peanuts and conquered grapes. Mark you, peanuts are up.
I'm a huge consumer of Jeff myself. Both crunchy and creamy peanuts are up a little bit. That's a contracted commodity, so it is not traded. Usually buy it over the period of an entire harvest. So those prices have been up a little bit. They're largely dictated by the farm bill, so we adapt as needed.
What's the economic environment that you and your team are setting up your balance sheet for.
You know, we basically have to plan over a fiscal year, so we at the we're just at the beginning of our fiscal year. We're in our first quarter. So we plan as what we see over a six to twelve month period, and then we we hedge, particularly on coffee and buy peanuts to deliver our financial plan. So we really we don't speculate, but we plan and buy our raw materials and ingredients to make sure that we hit our numbers.
So you have a lot of visibility and confidence in the.
Bare amount of visibility.
Yes, and coffee is the biggest piece of your business, right revenue, yes, and revenue terms and profit. It's just I would think of Smuckers as jelly. That's my because of the brand.
Don't forget about on crustables, right, I'm.
Just saying I think a lot of people would be surprised to hear.
That there's duncan, there's.
What do you what do you look to for the future? What do you look to when you're when you're planning on coffee prices?
What is it? Weather?
Are there regions that are the most important?
Yeah?
What is My team is actually in Brazil right now, that's the largest coffee producing company. We look at the harvest, they're in the harvest cycle right now. So we actually have people, we have an office uh in Petropolis, which is near Rio. They monitor the crop and and when they get back from this trip, we'll have a better idea of what that crop is looking like. We expect it to be pretty robust, a good crop, which means we wouldn't expect significant pressure on costs, but we will plan accordingly again once we know more.
Talk to us about the pet food business.
Meo MiGs. I love saying that milk bones something that's been around. It's a well known brand for a.
Long long time.
Mister Pepperoni one feeding my pupp there's Pepperoni Poni?
That's right?
How big? How big is that business?
It's about a billion seven?
Not too shabby, not too shabby. You want to grow, like, where do you want to grow? Where do you want to build out?
We got into the pet business at the and at the outset because we were acquiring a leading position in pets pet snacks, which is primarily milk bone, and Matt mentioned Pepperoni. We have canaane carryouts, which is a more value soft and chewy.
It looks so excited. I'm wondering if he's snacking on that as well.
But anyway, yeah, milkbone is it plays across multiple value areas as well as need state. So if we have long lasting choose in case you want to occupy your dog for a longer period of time, like alternatives to raw hide. We have dental choes and then we have just the core biscuits, which are sort of the everyday way you reward your done.
Where's the growth though, where where do you say?
Okay? Really?
Yeah, we're seeing growth in all of those segments. Consumers you know, aren't at home as much as they were during the pandemic, although for that ran we still see consumers buying it and rewarding and treating their pets.
Any anything you want to get into because I know you moved out of dog food. Yeah, well you're focused on dog snacks and then cat food, coffee, peanut butter and jelly. Is there anything that you a new market that interests you?
So, first of all, acquisitions have always been part of our strategy. We are focused right now on all of our assets which are growing. We are doubling down on encrustables because that is we're making four and a half million a day.
Which are like frozen sandwiches.
Frozen PB and Jay sandwiches. Yeah, so that is right, now we're building our third plant. It'll come online in about a year, so in the last quarter or so, we finally.
Are now keeping up with demand.
But in acquisitions, as we think about that, what we really want to do is if something comes along that we're able to round out our coffee portfolio, maybe in the liquid space or in the pet snacks space, still of interest in a new category, we would do that as long as the category is growing and we could acquire a meaningful leading position in that category.
Is there stuff out there though, to buy?
It's pretty sparse right now. Honestly, there hasn't been a ton of assets, but we're always looking and trying to be strategic about what those opportunities might be.
I'm kind of hungry, cool, I'm stuffed.
I'm just saying, Mark Smucker, thank you so much, thank you for having Can I ask you ten seconds?
What's top of mind? What's the biggest worry right now?
We consider, honestly just watching the consumer, making sure that we're meeting their needs and paying attention to where they're shifting the coffee portfolio. They're shifting to more cold beverages, so we're looking there. There there's some growth there.
Interesting see slide it in there.
Mark Smucker thing, thank you so much well, CEO of course at the JM. Smucker Company.
Here in studio, you're listening to Bloomberg Business Week Carol Messer and Tim Steneveek on Bloomberg Radio.
All right, everybody, we're going to continue, certainly with the chip space. We're watching Micron shares moving still up about four percent in the aftermarket, but again not really moving the rest of the chip space.
Here.
We did have the company come out delivering a strong forecast and a.
Sign that the chip clut is easy.
But I'm wondering what Dan Morgan has to say about it all. We have Dan he's course VP and senior portfolio manager at Sonova's Trust Company, twenty one point nine billion in assets under management, once again on the phone from Atlanta. I know, Dan, you're going through it all just as we are, as it just crossed moments ago. But initially, investor seaman thused, what is the most important aspects of this release here?
Well, Carol and Matt, I mean, basically, as you know, the numbers were ahead of estimates, which is a positive for the third quarter, and everyone's going to kind of swipe a relief from that. But I think going into the fourth quarter is one everyone was looking for, which is kind of light at the end of the tunnel. And you know, if we look at at least the statement that's been presented on the call, they're calling for three point nine billion in revenue, and the estimate was at three point eighty seven billion. Now that's plus or minus two hundred million, but at least that midpoint, so to speak, is above what the consensus was. So I think we have to think, Okay, it looks like a good beat on the third quarter in terms of revenue and earnings per share. But the good news is that it looks like they're guiding slightly ahead in terms of revenue going into the fourth quarter. So I think that gives us some hope there's a light at the end of the tunnel.
Right how much?
Yeah?
Absolutely?
But how much readjusting was happened after they came out on June sixteenth saying that half of their sales tied to China headquartered clients was at risk because of the cybersecurity investigation that was being done by the Chinese government. So how much readjustment adjustment already happened there because they kind of got the good the bad news out.
Yeah, you're right. I mean, you know, we think about that, this kind of trading back and forth between China and US. We have the Nvidia news that came out today right in regards to increasing licensing restrictions on some of their chips. We know that about a month ago, China came out and added some of Micron's DRAM chips to their list of chips that were going to be potentially restricted coming in. As you said, it encompasses about fifty about fifty percent of their total China sales. China sales about eleven to twelve percent of total revenue. So I think so. But you know, Carol, there's so many moving parts right now that we don't have any control over that's being controlled by governments in the chip sector, it's kind of hard to predict earnings.
Why does anybody even care about DRAM in terms of this, I guess trade war. I don't know if that's the right term to use, but I mean d RAM is just I mean, are they going to stop stop trading blocks of paper?
Yeah, you're right, Matt, I mean d RAM is on the spectrum in terms of sophistication and level of chips is probably on the least right, and then you'd have some of these artificial intelligent and some of these GPU and CPU chips and so forth being very very difficult to replicate. But you're right, how much threat can d ramb or memory could be? Obviously the China government feels that there is. But you're right about that, Matt, and that is it's a commodity based product. Samsung produces it, Atmel produces flash memory in the smartphone space along with Micron. It's a pretty crowded market. There's not a lot of sophistication to the chips, so you kind of wonder why this is happening.
Well, it's just political, isn't it a political At this point? It's like, all right, you don't want us access to your higher sophisticated AI chips, Well, then this is what we're going to do with Micron.
Dan, I wonder about you know, I think about the sanctions we put on Russia when they invaded Ukraine. And we're not buying oil from Russia, but we know damn well, and we're pretty happy that India is buying oil from Russia and they're refining it and then we're getting it from them on the cheap. That's just how the global markets work, right. We're if Nvidia is no longer to sell into China, which is twenty one percent of its revenue, how much does that really hurt or how much do they just sell into neighboring Asian nations that they themselves get to sell it into China.
Well, you're right, Matt, I mean, and there's a lot of ways to angle around this thing, right. They were even talking about with this Nvidia situation, that there's various Chinese companies to get around the provisions. We're signing kind of separate deals on the side to get access to the Nvidia chips under different agreements. So there just seems to be a lot of fanagling going on. I don't know how much these governmental restrictions can really hold up over a long period of time without the free markets finding a way to maneuver around them. So, and I think you're right, Carol, that it's become somewhat childish at this point, this back and forth between on in US and restricting certain chips but not others. It's it's kind of hard to follow so if it's a.
Chip, it's a commodity chip, right right, as you said, at some point, would you expect that these pressures will will ease because because that's what they are.
Yeah, I mean, I think care We still have to hold on to the preface that the second quarter of this year, which are ending now here in June, is probably the low point in terms of the chip sector. We would expect from this point on things to continue to approve. We know that the Semiconductor Industry Association is predicted this year that the overall revenues in chips we'd be down about eleven percent after being flat two percent and twenty two and then we'd expend sequential improvement in the back half of the year. And you know, that's kind of the guidance that we had gotten out of Micron in the past in terms of they felt that you know, their core markets, PC, laptop, smartphones, the inventories were starting clear from customers. They expected a secular rebound in terms of cloud, which Carol, you and I covered Microsoft and AWS and a's are and all that good stuff. With the Amazon. We know that's been in kind of a secular downturn, but the long term trend is still positive. So again, I still think it's a relatively positive quarter. Does show there is some light at the end of the tunnel. We just have these speed bumps that are being bombed back and forth between giant US various restrict to wait.
Doesn't AI have the potential to pull cloud out of any kind of downturn?
I mean, isn't the cloud where we do AI?
Yeah, Matt, you know, I think it's at this point. You know, the predictions are out there in regards to the fact that AI uses a tremendous amount of memory. The expectation for this year is that about sixteen percent of the overall memory chip market will come from AI. By twenty twenty seven, it should go to fifty six percent. So again that is a prediction, but it does lead to the idea that AI is definitely going to put a huge amount of demand for increased memory, which should help Micron down the road. Unfortunately, Matt, this quarter, we're not going to see enough AI pickup like we did in the Nvidia quarter in terms of guidance that they gave going into their upcoming quarter. It's not enough to overwrite the secular issues that we're experiencing in their core markets.
So you know, I do think about AI like what ultimately is needed cloud infrastructure architecture.
Like what is kind of the nuts and bolts of what's.
Going to be necessary data centers.
To have AI?
Yeah?
Is it like huge data centers everywhere?
You know, you're right, Matt, I mean the largest market with an AI. We all like to talk about these robots, right, these chatbots that answer questions for us. So they do our term papers, right, they do all this stuff for us, They write poems, they do all kinds of fun stuff. But the big money, you're right, Carol, Matt is in the data center space for AI. And you know that's where I mean, Micron does fit into that. Obviously, these servers requre a tremendous amount of memory to be able to run them. So, but that's where the cash cow is and AI. That's why you see companies like Nvidia who moved over from gaming into data center. You see just a fistfight going on to try to come up with chips that can operate in the data center space. Qualcom has got a chip now that they're putting out an AI dedicated towards data center, cloud and we don't think of Qualcomm, right, Carol as a producer of data center chips. They produce the modems, chipsets that go into the Apple phones, they.
Produce the cloud AI one hundred.
I know because Dan provided us with this amazing charge that I'm going to wall here and it tells us all of the AI chips that in Vidia as more.
Horsemen of AI. I love that.
Yeah, it's fantastic.
I just want to ask about gaming because you mentioned it and I've seen a lot more people talking about gaming.
The last few days.
Is it really that big in terms of revenue driver? I spend a lot of time playing Call of Duty, but I'm not buying like a ton of games.
Just got about thirty seconds.
Dan, Yeah, real quick. I mean gaming is important for nvidio. It is it important segment segment in terms of GPUs. But again, the core growth I think going forward is going to be in the CPU space and data center, the four horsemen of AI.
I like it.
I know, all right, good stuff. We always appreciate it, Dan.
We know it's busy as these numbers are breaking, You've got your own research to put out, but thank you for breaking it all down for us.
Dan Morgan.
He's senior portfolio manager Sonovas Trust Company. As we said about twenty one point nine billion in assets under management, we.
Should point out it's his note right where we got that phrase. The four horsemen of AI could be advanced micro devices, Broadcom, Marvel technology, and in video.
I love it. It's a takeoff on the four horsemen of the dot.
Com era, Cisco, Dell, Intel, and Microsomie.
This is Boomberg.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch us live on YouTube.
So you know, the current issue Bloomberg Business Week is all about the world's empty office buildings becoming a debt time bomb. It's all about office real estate. But we've been talking focusing a lot about real estate overall, including what's going on in the retail arena, and we've got a great voice on that. Angie Solonkey is National director of US Retail at Colliers, the real estate services company, and she joins us on zoom in San Francisco. We should point out colors data is quoted in that BW coverage in the current issue. Angie, good to have you here with Matt and me. So, how are you and how are you seeing retail real estate and when you look at retail, is it everything in the retail space?
Give us, you know, kind of some background.
Sure, well, thanks for having me again and of course love speaking about retail. So, as we know, retail is definitely continuing to see a nice you know, movement forward, and so as consumers continue to be cautious, but they're still very confident. We just heard the numbers where consumer confidence was actually for June higher than since January of twenty twenty two. It's heist it's ever been. So I think that's a combination of again getting out there socializing, spending, but being cautious and spend and how they're spending and allowing for that spend to be both in retail as well as services and travel. And so when we're looking at this, we're actually looking at as you asked, how is retail doing well, it's still pretty active in terms of most of the categories, So we're still seeing a pretty significant increase. So, for example, with foot traffic, we monitor foot traffic month over a month, and these are for I would say more outdoor lifestyle, grocery, InCor shopping centers, and we're seeing grocery activity continue to be quite high with visits four to five times a week, although the baskets spend is slowing down a little bit, meaning there's they're not buying as many products, are buying more products kind of in a single basket spend. So we're starting to see that slow down a little bit in the grocery, but restaurants continue to be up. Foot traffic is up almost by six percent week over a week, and there's such a diverse amount of food out there, both ethnic diversity as well as more notable chains.
Can I ask about theft?
Like we're kind of obsessed with this.
I you know, yesterday we started talking about how all these drug stores around here, you know, Dwayne Reid and.
CBS, everything's locked.
So I go in there to buy a toothbrush and it's like seven minutes before someone comes, and I forget I'm leaving.
Then this morning I.
Saw a Bernstein report that says last year there was US inventory shrinkage. They call it shrinkage, but it's just really theft that amounted to one hundred and twenty billion dollars in lost profits. Are people really stealing that much stuff? And have they always been or have we just started noticing.
No, definitely we haven't been. We've been watching and monitoring. It is definitely at its highest level.
It's not a.
Soundly to say, it's it's really disappointing to hear about shrinkage slash theft. It is a you know, definitely a become a practice.
Uh.
And therefore retailers are struggling with this. I think that you know, most retailers as well as those that are advocates for retail in the industry. There are many organizations, some of which I'm also associated with, have gone to you know, different organizations, to the government agencies to talk about this because it is a real issue.
Well, Joe, who listens to us, watches us, and is tweeting at me, says, you know why it's happening because people are getting more poor and they can't afford stuff, so they steal it.
So I and stuff is getting more expensive. Because I wonder what the correlation is with inflation. Right, if inflation rises, does that mean theft rises with it.
No, no, no, not at all. I mean, look, inflation definitely is occurring, but it's starting to slow down a little bit, but it's not inflation driven. So when we look at retailer.
You had some pretty massive inflation energy.
Really, I agree, But wages are also increasing as well, so I think there's kind of this you know, conversion there. But if you stop and think about when we look at all our retailers in the performance in terms of sales performance on a national level, and we're looking at retailers that are kind of those that are more focused around the lower income and those that are more focused around the higher income, we're still seeing a surge there. The middle income is really the one that's struggling. But going back to the theft issue, I mean that really is a driver between what's going on from you know, in the various cities, how is it being handle and managed from a from a you know, government perspective. There's a lot of variables that's related to this.
What's interesting in the retail space right now. And I think about it's funny. I did a panel at Milkin back in the spring, and someone who was involved in malls and just said, it's so nice to see that the world has moved on from the end of the mall to the end of the office. So I do wonder what is kind of interesting and trendy, if you will, when it comes to the retail real estate space other than men's shorts. They must have get an email this morning, right, and it's like, that's what everybody's buying.
Yeah, it's either that where you're wearing men's shorts and playing pickleball. I'm not sure which, but I would say that, you know, if you really look at what's driving retail, it's back to that point word of experiential. I mean, experiential comes in forms in so many different forms. And what we're seeing as it relates to malls is that the entertainment, the entertainment, the experiential is something that everyone's focused on because it's driving more foot traffic and it's driving more dwell time. And when you have those two components, you're going to get a lot of cross shopping. People are going to spend in different you know, stores, different eateries, et cetera. So we're seeing that as an increase by almost fifteen percent. So what does that mean and what does that look like it's it's going to more of a a you know, a smaller format call it golf simulator kind of experience where you can go in with your buddies, you can practice, you're not out maybe in a very hot climate, and you can enjoy and having a great experience. You can almost gamify it and have fun and you know, play with others around the world. So there's so many different things in that area, and that space is what we're seeing, and I think that's going to continue to grow, that more experiential, that area where.
You're I love it, Carol.
I gotta say I love malls and ick the other side of this malls And because of what Angie says, like the malls around me, they now have cool stuff like a trampoline park.
Is in the mall.
So is that for your daughter? For you?
I mean I like the trampoline park too. They have indoor skydiving at the Ridge Hill mall by me. It's where we go obviously to see movies. And I just wish they had better stores, Like every mall has the same stores.
It's like a duty free area.
I don't want these giant global chain stores that I can get anywhere I'd like some really cool unique Do you want an experience?
Yeah, you want more local and community driven. And you're going to see that, right man. You're going to see that in your more neighborhood centers, your outdoor neighborhood centers where you'll have that kind of main street vibe. And that's what a lot of investors in landlords are looking at is how to create that and curate that for you for a community.
All Right, we got to wrap Angie. Thanks so much.
Angie Solonkey, she's National director of US Retail at Colliers on Zoom from San Francisco, you're.
Listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business App and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa, play Bloomberg eleven thirty, Brother.
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All right, it's time for the drive to the clothes and we're taking a little selfie here. We've got an optimist in the house. Back with us is Jimmy Lee, founder and CEO at the Wealth Consulting Group, the Independent Wealth Manager. Are I a registered investment advisory firm about four point seven billion in assets under management, based in Vegas. Here in our Bloomberg Interactive Broker's studio. Hello, Hello, come on into the mic so we can hear you.
Are you?
I'm well, I'm will So you are an optimistic right, look can I.
Have been for a long time, as you know, And so I'm a few. I'm one of the few, I think, maybe one out of six that thinks that we could still avoid a recession, that we may avoid a massive correction.
You heard with j Pallis, I heard he's with.
You, and and you know, while the economy staying strong, I think the effects had stop raising rates.
I really do.
I think inflation is going to come down a little faster than what people think. I've been thinking that I've been a little bit wrong on the timing of that. But hopefully inflation does come down so that we can pause and or he can pause.
We'll see.
Yeah, I mean more, I think more people are starting to get that optimism. Yelling recently said she thinks we could avoid a recession. And I was recently talking to a big let's say, a Fortune five hundred CEO who would prefer to remain anonymous. But he said, I listen to your show all the time, and how come you guys aren't saying, you know, good job Jerome Powell, Like he's engineered a soft landing.
So do you think that that looks like we have done it.
I think we may get a soft fanding.
I'm not sure he should get the credit, you know.
I think they started raising rates way too late and probably should have raised rates, you know, quicker up front and front load of this thing. But you know, I think they've done a pretty good job. I like Powell in terms of the way he talks. I think he's very, very transparent, so people aren't guessing which, you know, hand the briefcases in with green span kind of a thing.
So I think they've done a good job of you had no.
Tie on today. I'm feeling a little relaxed. I'm thinking that's that.
You know, he's going to the dead concert.
I mean, like, what next?
There you go?
So So Romaine Bostic earlier on TV had this great chart showing the S and P versus the dividend aristocrats and big.
Buy back companies that do big buybacks.
Both of them have underperformed the S and P significantly, And.
My first thought was, that's a great place to buy. What do you like?
Well, you know, this year, if you're beating the indexes, you would have had to be very overweight tech and those you know, few companies.
Only the cues, right.
So but if you look at value stocks and growth stocks, over two years, value stocks are still doing a little bit better. And so you know, I think that while while I think that the interest rates will actually probably come down faster down the road than people think, I think tech will have another leg up between now and then. I think people should be diversified. I think when money comes out of tech, it could chase other acid classes, like international stocks. I know that Germany is in a recession, but valuations are better over there. China stimulating the global economy. I just got back from a long trip to Asia and to Seoul and Tokyo, and it was very busy and a lot of business activity going on over there, and people are spending money. Seems like the consumer is doing well over there.
How much of this is still the overhang from pandemic money and pandemic stimulus.
Well, the reports that we've seen our Investment Committee suggested that.
Consumers are going to run out of money this summer.
But we've got five trillion dollars plus, as you know, sitting in money market funds. And are we still worried about a big you know, recession coming and so people are being very careful and waiting.
It out, even institutional investors.
I spent this morning at the offices over at Lazard talking to some of their money managers, and you know, people are still I mean, they're a great money manager, especially for overseas assets, but people are still very concerned about, you know, not just here in the US, but what's going to happen globally really as far as economy goes. And I think people overestimated how the Ukraine War potentially could have affected what's going on now.
And they overestimated the China stimulus, right, we thought there would be a lot more.
I remember you know, close to the beginning of the year, I thought, Okay, Europe hasn't gotten hit as hard as we thought it would by the gas crisis of the Ukraine War. The US has avoided a recession, and China's reopening and they're.
It's about to be off to the races. That third part just never kind of materialized. Do you think it's still still there.
I think there's a chance that could still happen, But overall, I think, you know, stimulating the economy over there is going to help all the trading partners, especially the Asian countries over there, and I think it's going to help.
Is that how Korea and Japan when you visited, Is that how they saw it?
You know, the people I spoke with an ETF manager over there as well, and I think they were seeing business activity really pick up. And China is such a huge country, as you know, but we also.
Feel like we're going through this fundamental shift and a division almost of the world. Their folks are saying, listen, you can't turn your back and globalization, there's no way you can separate everything. Having said that, it does feel like there's a Chip war on and Ai war and both governments, you know, kind of working on their own domestic influence, if you will, in those high tech areas. Is there a problem with that on an investment basis?
I think overall, longer term, it's going to cause inflation, right, meaning that it's going to cost more for the kind of things that we may be buying here in the United States.
But it doesn't happen overnight.
It takes a while to build new factories, hire the talent to build chips and things like that, and so it's not an overnight phenomena. And I think it's going to be maybe a you know, ten year type of a strategy in terms of nationalization, doing more and more producing.
Not a sharp term, not a sharp turn.
It can't be.
And I think China is going to try to do what you can do to try to renegotiate with the US and and you know, continue to have good relations with US.
Would you be buying semis at this point?
We have been in it, and you know, there's certain stocks that are up so much that I think it's not a bad idea to take some profits. So this last month we saw on our investment models that there was a catching up with a lot of acid classes that we're just not doing as well. Right, So industrial I think are up eight percent ish or so. Small caps are getting in the game. There's more breadth in the market today. So I think that's all good if you're thinking that the market's.
Gonna or the stock market's going to continue to do well.
And as you know, there's a lot of historical data that says if you start out the ear like we have the next twelve months or the next second half of the year, it's gonna end up pretty good.
Yep.
And we have had a great month for industrials up seven percent, materials up six and a half percent. I wonder about private credit. I saw it in your note and Carol and I have been kind of obsessed with it. Frankly, it's been a really hot area of this market. Do you think that still has legs really quickly.
For fresh money?
So if you have fresh capital, private credit and real estate, I think there's tremendous opportunities for good money managers that are in that space. Refund I like I'm saying fresh money, so legacy assets, you got to be careful what you have in your portfolio has been have new funds with new money, tremendous opportunities today.
I've never seen it like this.
Everybody, everybody likes private day.
Yeah, you're shaking his head, Jimmy Lee, He's shaking his head. Yes, Founder and Chief executive Officer of Wealth Consulting Group, here in our interactive Burger Studio. Thank you.
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