December 7, 2023 • 43 mins
Bloomberg News International Economics & Policy Correspondent Michael McKee provides a November jobs report preview. Bloomberg News VC Deals Reporter Katie Roof discusses SpaceX initiating talks about selling insider shares at a price that values the closely held company at $175 billion or more. Bloomberg Businessweek Editor Joel Weber, Businessweek Technology Reporter Drake Bennett and Bloomberg News Enterprise Reporter Brody Ford share the details of the Businessweek Magazine cover story Era of $800 Dinners and Luxury-Car Bonuses Is Over at Salesforce. And we Drive to the Close with Kristof Gleich, President and CIO at Harbor Advisers.
Hosts: Paul Sweeney and Jess Menton. Producer: Paul Brennan.
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Speaker 1 (00:01):
This is Bloomberg Business Wait inside from the reporters and
editors who bring you America's most trusted business magazine, plus
gloom O Business Finance and tech news. The Bloomberg Business
Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2 (00:20):
Jessa Nice for filling out the finishing out the day
with some pretty good moves to the upside here in
the after your.
Speaker 3 (00:25):
Markets, and then we'll going ahead to tomorrow jobs reports.
Speaker 2 (00:29):
Yes, exactly, it is.
Speaker 3 (00:30):
Obviously we've talked a lot about the blackout period for
FED speakers this week, but we do have the jobs
report coming tomorrow, so that will be very much on
investors radars. Also, average hourly earnings will be a part
of that report, which we know FED shared Jerome Powell
and other policy makers are going to watch very closely
ahead of their decision next Wednesday. And also ahead of
(00:52):
that decision on Wednesday too, we have CPI next Tuesday fall,
so still a number of indicators ahead of the Fed's decisions,
so things we need to keep our eyes on.
Speaker 2 (01:02):
Yeah, and just taking a look at the nonfarm payrolls,
one hundred and eighty five thousand is a consensus tomorrow,
and that's up from one hundred and fifty thousand the
prior period. So we'll keep that in mind. And average
hourly earnings on a year of a year basis four
percent increase, be a little bit of a decline from
four point one percent last period, but still some pretty
solid numbers. A little bit slower than what we had seen.
(01:24):
But you know, I mean the unemployment rate three point
nine percent is kind of the forecast there, and that
sounds pretty good. But Michael McKee, he looks at it
a little bit more, appeels a little bit more of
the layers.
Speaker 3 (01:35):
That is the best to do it exactly right.
Speaker 2 (01:37):
So Michael, what are you going to be looking at tomorrow?
And you know, when we get all this data on
just kind of the labor market in general.
Speaker 4 (01:47):
Well, I think the market is going to focus, assuming
we get somewhere near consensus number for job creation, you'll
focus on unemployment and whether that goes up and why
if it does, or more people coming into the labor force,
which is not necessarily a bad thing, or are we
starting to let people go.
Speaker 5 (02:07):
That'll be the primary question.
Speaker 4 (02:09):
And then people will be looking at average hourly earnings
because they want to see if earnings growth is slowing
down enough that the FED doesn't have to be worried
about it continuing to contribute to inflation. We're forecast to
hit four percent on a year over year basis, and
the Fed thinks sustainable is about to three and a half,
So getting close.
Speaker 5 (02:30):
Yep. So those are kind of the numbers that most
people will be focusing on tomorrow.
Speaker 3 (02:36):
Well that report adjust anything for the Fed's decision next
week or do you feel like that's pretty much already
a done deal and it's more of just the forecast,
the quarterly forecast, and obviously the dot plots we're going
to come with that decision.
Speaker 5 (02:48):
Yeah, it's pretty much a done deal the Fed. It
would take something.
Speaker 4 (02:54):
Going horribly wrong tomorrow and I'd be back on this
show try to explain this time tomorrow the Fed is
all but signaled they're done raising rates. It would it
would require a lot for them to do something at
this meeting, and probably not as much in tomorrow's report.
Speaker 5 (03:11):
As it would be the CPI next week.
Speaker 4 (03:13):
Right, So I don't think you're gonna have to worry
about the Fed right out of tomorrow's report. It'll spur
conversations about next year and when the fight might or
might not cut rates, but not anything for next week.
Speaker 2 (03:28):
So the FED, I'm not sure what the right word is,
but I guess they're prepared for the unemployment rate inch
a little bit higher. Is there a point where it
gets beyond where they're comfortable? Does it like have a
five handle? And then they said, oh boy, and then
they really need to be maybe a little bit more
aggressive here.
Speaker 4 (03:46):
Well, they were forecasting four point one percent by the
end of the year, so we're sort of in the
range and can come in.
Speaker 5 (03:52):
Lower than that.
Speaker 4 (03:54):
But if it got above, if we had a jump
like we did a couple of months ago of about
three tenths and we went up to four point one
percent from three point nine, or we went up to
four point.
Speaker 5 (04:05):
Two, that would get their attention.
Speaker 4 (04:06):
If we got over four and a half, that would
start to raise concerns there. The speed of it and
the composition of it would also matter to the FED,
and what else is happening with inflation.
Speaker 5 (04:20):
They are expecting.
Speaker 4 (04:23):
Unemployment to rise because their job is to squish down
on demand, as if that, in theory, should lead to
fewer employees needed, and so unemployment rises, but the speed
would concern them if it was quick, and if it
started to get too high, of course, by that time
they would probably already be acting.
Speaker 3 (04:44):
I'm glad you're here because something I've been thinking about
is the rotation for FED voting members each year. So
Austin Goolsby, Patrick Harker, Luis Logan, and then Neil Kashkari
currently voting members this year, but won't be next year.
So then we're going to have Loredemester, Thomas Barkin, Rafael Boston,
and then Mary Daily will come back as voting members
for next year. How do you think this when you
(05:05):
have those rotations, Because in recent years, especially as inflation
was very elevated, it seemed like everybody had to have
these unanimous votes as far as trying to tame inflation.
But when you're going into a year and in stock
investors are betting that they're going to be rate cuts,
when you have a rotation changing like this, how do.
Speaker 2 (05:20):
You view that?
Speaker 3 (05:21):
Are things really going to be that different? Could that
potentially change the expectations for how soon or later rate
cuts could potentially come.
Speaker 4 (05:29):
I think people make too much of that. The people
who are coming on are generally centrists, with the exception
of Loretta Master, and she's leaving in June.
Speaker 5 (05:40):
So I don't know that we'll see a lot of pushback.
You're right. We get a more unanimity when it's very
obvious what the FED should be doing, which.
Speaker 4 (05:50):
For the last year or so has been very obvious
that they should be raising rates. And when you get
into a situation where it's a close call should we
hold or should we cut rates, then you could see
a dissenter to from whatever it is the FED decides
to do. But I think we're not going to see
any major splits among them. They're going to move slowly,
(06:12):
even unless we have a recession, they're going to move slowly.
So even if they do, it's not going to force
a lot of people into an uncomfortable vote.
Speaker 2 (06:23):
So the University of Michigan some good football players there.
Speaker 5 (06:27):
So they'll tell you yes.
Speaker 2 (06:29):
And they also have some good economic data and they
put that out and expectations and inflation outlook and things
like that. Do economists do they care? Does a market
really care about some of this data?
Speaker 4 (06:42):
The market doesn't really care about the and the FED
doesn't really care about the sentiment indicator.
Speaker 5 (06:49):
How people are feeling. Alan Greenspan summed it.
Speaker 4 (06:51):
Up very well years ago when he said, we watch
what they do, not what they say.
Speaker 5 (06:55):
I'm talking about consumers.
Speaker 4 (06:58):
The expectations for inflation have become moderately more important because
the FED has made a big deal out of inflation expectations,
being the anchor for inflation, and they don't want to
see expectations rise too much, both on the consumer or
market side. Market side right now is looking at two
to two and a half percent inflation out four or
(07:19):
five years, which is perfect for the Fed.
Speaker 5 (07:22):
But Americans are looking at four and a half percent now.
Speaker 4 (07:27):
The sentiment indexes people always overrate what inflation is, and
if you go ask any American, they'll probably tell you
now it's six or seven percent, just because they don't know.
Speaker 5 (07:38):
What inflation is.
Speaker 4 (07:40):
But even if you allow for that, it's a little
bit higher than both the FED would like to see
and that you would expect, given the fact that food
prices have stabilized, gasoline prices are way down, and yet
people are still thinking there's a lot of inflation. They're
looking at price level rather than the rate of change,
(08:03):
which the FED looks at. So there is kind of
a difference there. But as long as people don't start
thinking inflation is going to go so high they have
to march into the boss's office and ask for money.
Speaker 5 (08:13):
Of course, we would never do no, could never never.
Speaker 2 (08:17):
Hey, you know, I was out gallivanting in the city,
Midtown yesterday afternoon, yesterday evening.
Speaker 3 (08:23):
For your birthday.
Speaker 2 (08:23):
Yes, people, I did not know big birth People were
out about spending.
Speaker 5 (08:28):
Streets were packed.
Speaker 2 (08:30):
You couldn't get near the Christmas Tree Rockefeller Center. I mean,
people were out. It feels like the consumer this is
pretty good shape.
Speaker 4 (08:36):
I don't know what people tell pollsters that the economy
is lousy, but my situation is good.
Speaker 5 (08:44):
People have jobs.
Speaker 4 (08:45):
I mean, we have ninety seven percent employment, and so
it isn't a terrible time.
Speaker 5 (08:54):
And it's kind of there's more and more talk of
this as like poor Joe Biden.
Speaker 4 (08:58):
I mean, he's presiding over a good economy and people
don't believe it for a variety of reasons. But things
aren't bad right now. So Americans on their own, individually
are quite happy to go out and buy Paula hot
chocolate on his birthday exactly.
Speaker 2 (09:14):
That's how that's how we roll out there all right,
mister McKay, thank you very much. We appreciate Michael McKee,
International Economics and Policy correspondent and Jess. I mean again,
the restaurants are packed, the bars are packed. The Fifth
Avenue you could barely walk down. I mean that's how
crazy it was.
Speaker 6 (09:30):
You know.
Speaker 3 (09:31):
We'll get actually an update on retail sales next Thursday,
so the day after the FED decision for the month
of November. So this will give us a read, especially
on the holiday spinning. We already got a lot of
that Cyber Monday and Black Friday data that we're at records,
so we know it was really strong last month. But
that's going to be interesting to see what that data
looks like for the consumer.
Speaker 7 (09:48):
Paul.
Speaker 2 (09:48):
Yeah, and I'll shout out to the tree folks. Yeah,
Rockefeller Center.
Speaker 8 (09:52):
It's amazing.
Speaker 2 (09:53):
I mean, we just worked by it.
Speaker 5 (09:54):
It looks awesome.
Speaker 3 (09:55):
We've got a tree, yes, big is that one.
Speaker 2 (09:59):
So if you're around the you know, the Bloomberg h
you could come check out our tree in our court.
Aren't cool? This is Bloomberg.
Speaker 1 (10:04):
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 Youtubey Miss space Man, please
(10:24):
thank you anything around.
Speaker 2 (10:30):
Always the best tunes.
Speaker 3 (10:33):
The producer here, I mean pick at the music today.
Speaker 2 (10:37):
Always always, they always bring the musical game here. All right,
just met Paul Sweeney. We are live here in on
our Bloomberg Interactive Broker Studio, streaming live on YouTube, so
you can hand over to YouTube dot com and search
Bloomberg Radio. We're sitting in for Tim Stenwick and Carol Masser. Uh,
let's talk. One of the really cool news items of
the day. SpaceX tender offers said to boost value to
(10:58):
one hundred and seven twenty five billion dollars, So I
guess they're going to be tendering for some of the
shares owned by employees. And the tender value again implies
evaluation one hundred and seventy five billion. That's a lot
for a space company, which is pretty cool. Katie Roof joins,
and she's a VC deals reporter for Bloomberg New She
joins us on zoom from Los Angeles. I know, Katie,
you are used to numbers like this out there in
(11:20):
Silicon you know, in California and LA and Silicon Valley.
Talk to us about what SpaceX is doing here and
how this is going to work.
Speaker 9 (11:29):
Sure, and so this is actually a record for a
US private venture backed company, one hundred and seventy five billion.
It's ninety five dollars a share for the tender offer.
Just six months ago, they were valued at one hundred
and fifty billion. A year ago, they were valued at
one hundred and thirty seven billion. So this is a
big increase for an already highly valued company. And it
(11:52):
really is fucking the trend because as we've seen in
Silicon Valley the last couple of years, the companies are
struggling to maintain their billion dollar valuation. But people that
I talk to are big believers in SpaceX.
Speaker 3 (12:07):
So talk to us about sort of the issues moving
forward for SpaceX because they're in a unique situation right now.
Speaker 9 (12:16):
Sure, so they have two core businesses. They have their
rocket launching business, but they also have Starlink, their internet
business that's satellite related, and so they a lot of
the investors tell me that the reason that they're investing
is because they are really bullish on Starlink. It's our understanding,
and we've reported that Starlink is eventually going to be
(12:38):
spawn off of SpaceX and go public someday, and so
a lot of the investors are trying to get in
on that.
Speaker 2 (12:45):
Do either of you know where they launched their rockets from? No,
Boca Chica, Texas? Wait? Really, yes, it's literally if you.
Speaker 3 (12:55):
Go to Boca Chica, it's.
Speaker 2 (12:57):
Literally the most southern part of Texas. Is like, right now,
I feel.
Speaker 5 (13:00):
Like I should have known this.
Speaker 3 (13:01):
You shouldn't sell Texas's.
Speaker 2 (13:04):
I mean, who figures it's right on the border with Mexico.
Apparently they're they're building all this infrastructure and they got
rockets down there and it's amazing. Yeah, isn't that cool.
Speaker 3 (13:13):
I'm going to be down there this week, I think,
going by and.
Speaker 2 (13:17):
Just swing Byoka Chica. So, I mean, Katie, how how
often does it happen that a company will I guess
give liquidity to its employees that you know, through these
these tenders.
Speaker 9 (13:30):
So SpaceX does it more often than most. They've been
doing it roughly every six months recently. But it's it's
really a case by case spaces with companies. Uh, some
companies don't want to do a lot of this because
it makes it harder to have investor demand if they
want to raise around for the company, if they've already
(13:51):
they're already a lot of shares that have been available
on the market. But what SpaceX is doing here is
providing an opportunity for employees to go and buy the house,
because if they don't sell these shares in a tender,
they have to wait for an eventual IPO, otherwise their
net worth is just on paper. So that this is
(14:11):
really to help insiders have some liquidity, and they're able
to do this because they have tremendous demand. And it
goes without saying. Elon Musk, who is the founder of
this business, is a very very controversial figure. He's recently
made statements that have hurt advertisers on x formally known
as Twitter. But we see still plenty of investor demand
(14:33):
for SpaceX.
Speaker 2 (14:34):
Hey, Katy, do we know who buys these shares from
the employees?
Speaker 9 (14:39):
A lot of them are vcs or other high net
worth individuals. Accredited investors could be hedge funds, it could
be broad groups of institutional investors, but it's a mix.
Speaker 3 (14:56):
That's interesting. So what do you think is sort of
the timetable kind of moving forward here. As far as
how all this ends up playing.
Speaker 9 (15:03):
Out, well, our understanding is that they just decided on
the price, or they were on the verge of deciding
the price when we got a hold of it. So
the tender is just getting started. It's just underway. I
would imagine that they're going to try to do as
much as they can before the holidays, but I'm not
(15:23):
sure if it will formally close before the end of
the year.
Speaker 2 (15:27):
Katie, you're the VC deals reporter. Talk to us about
your world these days, our VC companies getting funded. Can
I if I have a really cool idea, can I
go to Sandhill Road and raise some money? Here gives
a sense of what the mornment is like.
Speaker 9 (15:44):
Well, if you're doing an AI related company, they're all
ears and I'll be writing you checks before you know it.
But for everything else, for other than outliers like SpaceX,
it's been really slow this year, particularly at the growth stages,
which I cover sometimes seeds stages. They're not as concerned
(16:05):
about the broader macro environment because vcs tend to invest
on a ten year time horizon, so they can be
bullish about the future. But companies that raised in like
twenty twenty one are often considered to be overvalued because
the market you look at tech stocks, they've gone down
for the most part considerably since then, and that's affected
(16:28):
valuations throughout the whole ecosystem. So right now it's a
tough time to be a startup that raised money, that
wants more money. But if you're just getting started sometimes
there's a room for opportunities still.
Speaker 3 (16:42):
For those who don't know, Katie Roof is one of
our star reporters here at Bloomberg, constantly breaking news out
of Silicon Valley from your purview being over there and
what you were just walking us through, especially on the
back of what happened with some of those regional bank
issues back in the spring and a lot of those
tied to different Silicon Valley banks. What is it like
in the mood, in the atmosphere as far as how
(17:02):
things have come and gone over the past nine months
since then.
Speaker 9 (17:06):
So there's fewer holiday parties this year.
Speaker 8 (17:09):
Oh, we were talking about that earlier.
Speaker 3 (17:11):
Apparently there's a story on the terminal more pickable in glock, Katie.
Speaker 9 (17:17):
Yeah, So my understanding and talking to some venture firms,
there's still some, but some felt that it was a
bad book to throw a holiday party this year. You
look at their last two years where there have been
very few IPOs. The M and A is often very
disappointing prices, so they're not bringing in a lot of money,
(17:38):
and so they felt that it looked bad for some
of them to be throwing big, splashy events. And Silicon
Valley Bank actually used to be the sponsor of a
lot of these events. Interestingly, I still see their name
on some parties because they're still alive with their new owner.
But I would imagine that it's a different scenario than
(17:59):
it was two years ago.
Speaker 2 (18:01):
And are the VC funds are they Are they still
out there fund of raising or is that also kind
of slowed down?
Speaker 9 (18:09):
Sure, And so I think again it's a split between
the stages. So the earliest stages, a lot of them
have had great returns and have continued to raise new
funds for seed stage investing. But what you're seeing is
a lot of the crossover funds, the pre IPO investors
really got burned in this market, and so what we're
(18:31):
seeing is some of them struggling to raise new funds
or raising smaller funds or trying to change their strategy
to invest in either the earlier stages of VC or
just go back to investing in the public markets if
that's what they were doing before.
Speaker 5 (18:48):
Yeah.
Speaker 2 (18:48):
Interesting, it's just a tough time. I think people just uncertain.
I'm just looking at the NASDAC, you know, still ten
percent off of the high. So if your evaluation sensitive,
that kind of number kind of gets your attention here,
Katie Roof, thanks so much for joining us. Katy Roof,
VC deals reporter for Bloomberg News, joining us on zoom
from the awesome office.
Speaker 3 (19:08):
For Pemburg in I've heard about. I gotta go visit
sometimes soon.
Speaker 8 (19:12):
Yeah, looking very cool.
Speaker 2 (19:12):
It's out there in Century City, a nice part of
town there overlooking Bellair Country Club. I believe is the
one kind of splash. It's what you would expect from
Bloomberg News in La.
Speaker 3 (19:22):
I'm still thinking about what you told me about South
Texas where the launch.
Speaker 2 (19:25):
Oh, Boka, Chica, we'll go.
Speaker 3 (19:26):
So I'm gonna be. I'm gonna be down South Texas
this week and officiating a.
Speaker 2 (19:29):
Wedding, so I don't know how you get there.
Speaker 5 (19:32):
I'll figure it out.
Speaker 2 (19:33):
Flying to Houston and then I think you drive. You know,
you can just keep driving. All right, We're gonna have
more coming up. S and P five hundred ended up
the date up eight ten. This is Bloomberg.
Speaker 1 (19:42):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Eastern on Bloomberg Radio,
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Just say Alexa playing Bloomberg eleven.
Speaker 10 (20:03):
Charlie, the part is over, They say that, all nice.
Speaker 8 (20:12):
I like that.
Speaker 2 (20:13):
This Bloomberg Business Week headline really got my attention because
I'm all about, you know, flexing the corporate amex card
or whatever we're using at the time. Here, era of
eight hundred and I got a story about that. Solomon
Smith Barney ooh.
Speaker 3 (20:29):
Some stories, I'm sure tell us.
Speaker 2 (20:32):
Rushing uh, era of eight hundred dollars dinners and luxury
car bonuses is over at Salesforce. Joe Webber joins as
he's the editor Bloomberg BusinessWeek, joining us here in our
Bloomberg Interactive Brokers studio. Drake Bennett, Technology Reporter Bloomberg Business
Week on zoom from Bloomberg headquarters in New York and
Brodie Ford apparently somewhere enterprise reporter Bloomberg News on the
(20:52):
phone somewhere undetermined, keeping a secret location. Serious, great story, Joel.
I mean, first of all, Salesforce dot com. Everybody cares
about Salesforce dot com, Benioff, all that kind of stuff,
But you know, luxury car bonuses.
Speaker 11 (21:07):
It was a great time to be in tech sales.
And actually the pandemic even made that.
Speaker 8 (21:15):
Even more so.
Speaker 11 (21:16):
Yeah, because they just staffed up and kept selling. But
then some things started to change. And I've always been
really fascinating, fascinated with Salesforce as a business, and it
has become expansive and actually really you know, created a
whole industry, and that's a big credit to its founder
of Mark Bennioff. But this is sort of a new
(21:40):
era for Salesforce. Tell us more, Brody.
Speaker 7 (21:45):
Yeah, at some point, you got to stop spending like
a startup, and that's what investors told Salesforce this year.
They pretty much said that, hey, if you can't keep
growing sales the same way, you have to start cutting costs.
And yeah, like the headline says, I mean somebody's orr
eight hundred dollars dinners. And the more mundane stuff is
the insane commissions you can get off of selling things.
(22:06):
I Mean, I always say that I picked the wrong
industry because I would speak to people who are about
my age got into the same at the same time.
They're now working in tech sales making four hundred, five
hundred thousand dollars without a whole lot of experience, you know.
I mean, it was just gangbusters. I mean, Benioff told
me that selling software was never easy, except for during COVID.
(22:28):
It was just firing on all cylinders.
Speaker 8 (22:31):
So what's happened?
Speaker 11 (22:32):
What's the change like within the company?
Speaker 7 (22:37):
Yeah, they've just had to get more serious. I mean
they the obvious one is firing ten thousand people, right,
I mean that's the one that most of us read about.
But it's even simple stuff like Okay, now, when you
sell a piece of software, you can't have ten people
all get a commission off of that, right, You can't,
as you said, have the eight hundred dollars dinners. And
(22:58):
it's really trying to pair back all these expenses that
made it such a distinctively fun place to work. In
many ways, you.
Speaker 2 (23:06):
Know, twenty twenty three has been, even for the technology companies,
a year of cutting costs. And I think the greatest
example of that, or the one I think investors might
know the most is Meta. Yeah, the stock just ripping
this year on you know, Zuckerberg saying we're not going
to spend like drunken sales on his metaverse, We're going
to actually focus on costs. And I guess.
Speaker 11 (23:24):
That's it tends to go well with investors when you
can bring in that cost and you know, show that
there's a return on investment, but it can come at
the expense of culture. So Drake, I want to just
bring you in here and also just talk about the
industry because ultimately what we're we're talking about is something
(23:44):
that bending Off pulled out of his brain and then created,
and that's SaaS. And so talk to us about, you know,
just the economics of a business, a software sales business
where you no longer have to have, you know, the
typical kind of infrastructure, and what that kind of can
can accomplish for investors.
Speaker 10 (24:03):
Yeah, I mean salesforce is I mean, I think for
a lot of people, it's not like when people think
about Silicon Valley Salesforce isn't necessarily the first company that
comes to mind. And you know, there's this idea that
Silicon Valley tells about itself to the world, which is
that the value of its you know, all of its
(24:24):
wealth and its growth comes from these like brilliant ideas
that software engineers have. But there's kind of this other
explanation for at least a lot of the recent growth there,
which is these armies of UH salespeople that companies have,
and Salesforce really pioneered this UH and as you point out,
it's linked to this business model that they basically pioneered,
(24:46):
which is, you know, rather than selling software you know,
on like a CD ROM or a disc, like you
put it on the cloud and then you go sell. Yeah,
I mean software as a service is the you know SaaS
is this thing that everyone's heard now with maybe without
even kind of like fully realizing what nonsaas is. And
(25:07):
you know, so there's all these companies that are basically
modeled on Salesforce, which is like you sell enterprise software,
you sell software to other.
Speaker 8 (25:13):
Companies H and you put the other salespeople right.
Speaker 10 (25:17):
And so there was this weird dynamic like salesforce grew
an enormous amount of the last few years and especially
during COVID, and what it was basically doing was selling
these software leases to other companies that were using these
tools for their growing salesforces. So it was kind of this, uh,
I mean, it's yeah, Ponti scheme is an incorrect term,
(25:38):
but it's basically like this weird dynamic where like everyone
was growing and so salesforce was growing, and then basically
at a certain point that reversed. And so what you
saw was that as the as sort of all these
other software companies were shrinking, salesforce had to shrink too.
And so you know, part of what we were writing
I was just this this this aspect of Silicon Valley
(26:01):
that people don't really think about that much, and how
it sort of shapes the culture of this company and
how it shapes the culture of Silicon Valley more broadly, Bertie,
I wanted to.
Speaker 3 (26:11):
Bring you back into this conversation and speaking of salespeople,
y'all were writing about how some sales people were relying
on aggression and pressure to close those deals, but also
you just need to get people and customers to like
you walk us through anecdotally in the reporting whenever you
were speaking to people about how sort of this process works.
Speaker 7 (26:31):
It's a really funny dynamic that comes back to the
business model. Because software it's a recurring contract. Essentially, you
need people to stick around. You think about car sales,
door to door sales, it's kind of old thing you're
thinking of real hyped off jocks trying to get you
to sign the paper, almost like physical coercion, right, but
(26:52):
this is more like they just coming on an army
of like, for lack of a better term, frat boys,
just people with nice smiles that were just kind of
show up and like, you know, hey, how's it going
the software going good? You need any help? Are right cool?
Or here when you need us?
Speaker 10 (27:06):
Wow?
Speaker 7 (27:07):
You know, And there were just armies of them, you know.
They call it the clown car approach because one person
had to pull up with sales software, one person had Slack,
one person had the data viase software, and they were
all getting paid really good. But again, at some point companies,
when the interest rates started rising there'd been years of
(27:27):
buying software gangbusters, the CFO started saying, well, why do
we have all these smiles hanging around selling us millions
of dollars in software. How did this happen? And so
they really cut off the spickett of wealth. And that's
really why we saw the style of sales here start
to break down a little bit. And it's not just Salesforce.
This is really an industry wide phenomenon.
Speaker 11 (27:47):
But what does it look like and feel like at Salesforce?
Speaker 7 (27:51):
Broddy, So our favorite source in this story, we call
him Kenny because it's an alias. He still works there.
You know, he said when he first joining, it was
all parties. It was great. His phrase now kind of sucks.
It's just it's hard to than it used to be.
You're you're signing less big deals. You're uh, you know,
(28:13):
your boss is calling all the time. If you don't
make It used to be that you could not make
quota for like a year and a half, two years.
Maybe then you'd get fired.
Speaker 1 (28:21):
You know.
Speaker 7 (28:21):
Now if you don't make quota in a quarter or two,
you're you're out of there. You've got leader boards. People
are more cutthroat because not every baby can share commissions.
It just it looks more like that kind of car
sales environment, right. It looks more like the old school cutthroat.
There's a movie Drakel likes to reference about when sales guitar?
What is it?
Speaker 10 (28:40):
Glenn Gray, Glenn Roth.
Speaker 2 (28:41):
Yes, a yes, always be closing, Alec Baldwood. Yeah.
Speaker 11 (28:47):
So business became a little fun with that one. We
were playing around with it with the headlines and the
cover lines, and it became the headline inside the magazine,
always be cost cutting.
Speaker 8 (28:58):
There's a new in town.
Speaker 11 (29:02):
But but Jake tell us more about what I mean,
the Death of the Salesman. We talked about that years ago,
decades ago, because Arthur Miller wrote a hell of a play.
Had that era come for sales? Software and tech sales now?
Speaker 10 (29:21):
I think to a certain extent. I mean, one of
the things that I loved getting into in the story
was just this whole, like this whole culture of software sales,
which you know, they're they're these sort of online influencers
who would give you these kind of slightly scammy courses
about like everything you need to know about software sales.
There was there was just a salesforce sort of offered
(29:44):
this whole curriculum about you know this kind of like
Dale Carnegie style, you know, sales education. And I think
a lot of that is froth and a lot of
those skills probably weren't that useful. As you know. Brody
pointed out that this sort of there was a sort
of a self perpetuating cycle to this, where like if
you hired more people, you needed more salesforce, software leases,
(30:07):
and so it kind of didn't matter who was selling
it to you. And so it may be the case
that you know, you don't need quite as many people
out there selling it, and you don't need to pay
them that well.
Speaker 2 (30:22):
So, I mean, guys, I don't know what Brody is
is this kind of the new normal now? I mean,
is the party over over when you talk to these people.
Speaker 7 (30:31):
I think that's what we're seeing here. I think we're
seeing this is all a big part of big tech
losing it shine.
Speaker 3 (30:36):
Right.
Speaker 7 (30:37):
In the last couple of years, we saw big tech
loodons it shine regular sort they said, wait, this might
not be good for us psychologically. I think this year
we see big tech loods that shine economically that wait
a second, these business models are not impervious, they're not bulletproof.
At some point, these jobs that were the golden standard
have to become normal, right, I mean, I don't know,
(30:57):
like working at GE in nineteen sixty is probably the
gold the golden standard, and I think we're starting to
see these tech giants become a more standard part of
the economy and lose their kind of special edge in
terms of being a great job. But they're still you
can still make some money. It's still a good place
to work, but it's not what it used to be.
Speaker 8 (31:14):
Yeah.
Speaker 10 (31:14):
One of my favorite details was like they're talking a
lot about how they're gonna use AI, you know, and
Mark Minneapolis talking about AI, but one of the things
they're actually using for right now is basically finding when
sales people are kind of like loosing their numbers and cheating.
So it seems like, you know, that's the new reality.
Speaker 11 (31:34):
So what do we think Mark Binnioff's company looks like
a year or two from now, Like, you know, the shed,
the the tech sales guys and that cushy tech job Like,
what what is that more hardcore sales force looking feel like?
Since it's been such a cuddly friendly place up until now.
Speaker 7 (31:56):
I'm sure this is weird to hear for a tech company,
but they're hiring engineer, you know, that's actually what their
main focus is now.
Speaker 1 (32:03):
Is.
Speaker 7 (32:04):
I think they're really trying to invest in new products
and figuring out where that next realm of growth is, right.
I mean, the products that got them here are pretty
mature at this point, and as Drake mentioned, like all companies,
they're looking for AI to really accelerate it. I don't
know if you've seen Matthew McConaughey on TV wearing the
cowboy at but talking a bit about who's the tariff
in town? That's Salesforce. I'm not sure I get what
(32:26):
it means either, but that's Salesforce.
Speaker 3 (32:29):
Matthew McConaughey.
Speaker 11 (32:31):
Yeah, okay, So so just final question, which Drake, I
want to bring it back to you. You've written out
a lot of companies, different strategies, different sectors, different industries.
You know, if you if you could, uh, you know,
cast the movie for the Salesforce version of the story,
(32:52):
Like do some casting for us.
Speaker 8 (32:54):
Who's the salesperson of the year.
Speaker 10 (32:57):
The salesperson that you mean, Like, who's Kenny?
Speaker 11 (33:00):
Yeah?
Speaker 10 (33:04):
Who was that guy? Giovanni Ribisi was like, is that
like to obscure from the boiler room?
Speaker 8 (33:09):
No, he's awesome, Yeah, yeah, look very quick?
Speaker 10 (33:16):
Yeah yeah yeah, just like nice sort of like, you know,
almost pathologically upbeat kind of person, just you know, indefatigable spellar.
Speaker 8 (33:27):
What about what about Benning Off in your in the
in the movie version of your story.
Speaker 7 (33:34):
You know he'd probably agreed to do it himself.
Speaker 8 (33:35):
Yeah, that's right, that's right for anybody. I mean, how
does he feel about the business?
Speaker 11 (33:40):
I mean the everything's performances is doing great? You know,
like what, so how do you know your interactions with him?
Speaker 8 (33:46):
What do you have to say?
Speaker 7 (33:48):
I think he is very aware that they had a
long stretch of bad headlines this year. His message right
now is that, you know, they always say that it's
in o'hana over there, that's some big phray. What he
gave to me was, look, it's ohann at two point zero,
all right there we.
Speaker 2 (34:06):
Had all right, brog We can't have to leave it
there just for a time. Joe Webber, Drake Bennett, Brody Ford,
Bloomberg Business Week. You can check that out on the newsstands.
I got that great story cover issue cover, absolutely some
good stuff.
Speaker 8 (34:18):
Check that out.
Speaker 2 (34:19):
This is Bloomberg.
Speaker 7 (34:22):
Brother Marco.
Speaker 9 (34:26):
A journal.
Speaker 1 (34:27):
How about you let me drive?
Speaker 5 (34:29):
Oh no, no, no, no, who's going to drive?
Speaker 4 (34:31):
Honey, please grat I want to drive.
Speaker 3 (34:38):
It's a good question.
Speaker 8 (34:43):
This is the drive to the globe.
Speaker 10 (34:45):
Don me Well, Bjoern on Bloomberg.
Speaker 3 (34:49):
Radio, Jessminton, Paul Sweeny here in the Bloomberg Interactive Broker Studio,
filling in for Carol Masser and Tim Stenovik, who do
have the day off. Not sure who's who? Who's Carol?
Who's Tim? Here?
Speaker 2 (35:00):
Paul?
Speaker 3 (35:01):
But look at that good as a p five hundred
a day, up seven tenths of a percent if you
look on a weekly basis a little change, but this
does come following a five week winning streak that was
its longest since June. But who better to chat with
us about their market outlook moving forward? Christoph Gleisch, President
and Chief Investment Officer at Harbor Capital Advisors. Who's actually
(35:23):
here in the Bloomberg Interactive Broker Studio. I know Paul
always loves more people are here in office with us
to discuss his outlook and also his investment strategy. I
want to pick your brain now that we are into
year end here, what's your take as far as positioning
wise going into next week ahead of the FED decision?
Speaker 6 (35:42):
Well, thank you so much It's great to be here
in person and live. I think this year has surprised
a lot of people. It's called a lot of investors
off side. If you think back where we were twelve
months ago, Supposedly now we should be three or four
rate cuts in as the FED is continuing to try
and stimulate an economy coming out of a recession. We
(36:03):
know how that sort of playbook played out. And I
think what surprise investors is how resilient growth has been
this year, how resilient markets have been this year. And
you know, at the moment your colleague read out, there's
a lot of green on the screens, camps off Landing
is winning, and it's very much risk on environments at
the moment as it has been in the last five weeks.
Speaker 2 (36:24):
How do you think about evaluation here, because I think
that I'm just looking at my try to the s
and P five hundred. Boy, that was a heck of
a November there, and I'm wonderful we've kind of gotten
a little bit two over our skis a little bit
in terms of valuation. How do you guys think about that?
Speaker 6 (36:37):
So I'd say trying to time markets on a short
term basis, what's going to happen this week or that
is pretty difficult to do. I think valuations here probably
say fair, and so we would recommend having a good
allocation to equities for investors that are ultimately investing for
the long term. Of course, it's a market of many
(36:58):
different regions, many different market capitalization. I think there are
areas of the market that are looking pretty cheap right now.
Speaker 3 (37:06):
You talk about in some of the notes you sent
us don't hide out in cash. We've seen the fury
into money market funds over the past year, being at
a record here. What's your view on as far as
what's the catalyst when people argue about, oh, well, we're
going to put our money in money market funds for
the yield. But then if you have these double digit
gains in these major indexes, how do you square that away?
(37:28):
And at what point does that we've only move out
of money market funds and then into equities.
Speaker 6 (37:33):
So I think if you look at any long term
investment chart over any time only over any reasonable time horizon,
there's always a squiggly line at the bottom in decay,
and that's always cash. Cash is the worst performing asset
class over any reasonable time horizon. So what we would
say is hold enough liquidity for your immediate liquidity needs
(37:55):
as an investor, and what you're comfortable with as it
pertains to you know, what's going to create some of
that cash to come out. There's seven trillion dollars. Seven
trillion is a huge number sat in money market funds,
and I think in certain areas we just we've seen
investors wait and wait on the sidelines for this supposed
recession that hasn't come. And I think the longer that
(38:16):
we continue with this soft landing scenario, at the moment,
it's going to pull more investors. Are they going to
begin to start putting money to work, And we're already
beginning to see that, and specifically around small cap as well.
I think it's pretty attractive entry point right now.
Speaker 5 (38:30):
I want to go there, we go that you.
Speaker 2 (38:34):
I mean, I hear small caps, mid caps, small caps,
but man, that's a tough place to make money historically.
Speaker 1 (38:39):
Is it a.
Speaker 2 (38:40):
Valuation call that attracts you to the small cap space?
Is it just that maybe they haven't performed? Kind of
how do you think about that?
Speaker 6 (38:46):
So the answer that we hear most often, and we
actually asked this, we held our global Market out Look
call and the theme was in search of bright spots yesterday,
and we asked our clients around small cap and the
answer that got the biggest response was waiting for the
recession before allocating to the asset class coming out of
the other side. Okay, there's a lot to unpack there.
(39:09):
You know, recessions are incredibly hard to kind of forecast
and predict exactly, but we get it. We understand that mentality.
If you look at small caps, they've effectively been in
a recession for the last two years. Some colleagues of
yours did some great analysis on the Bloomberg terminal the
other day and I saw small caps are currently going
through their second longest draw down in history. It's only
(39:32):
coming out of the tech bubble, that's you can compare
to this. So if you look at small caps, they
are off in the region of thirty to forty percent
off their peak, and you've begun to see a broadening
of the markets, You've begun to see a bid for
small caps, and I think investors are already beginning to
come back in.
Speaker 3 (39:53):
Yeah, that's really interesting that you brought that up, because
it's the worst a three year span relative to the
S and P five hundred when you're looking at the
Russell since the late nineteen nineties in the turn of
the century, what sectors in particular when you're looking at
small caps are attractive to you.
Speaker 6 (40:07):
So the way that we work at Harbor Capital is
we work with boutique money managers across the world that
we believe are experts in their own domain, so they
do all the day to day stock selection. A couple
of things I'd say about small cap is it's an
area that we think is ripe for active, for skilled
active managers to add value. We think a skilled active
(40:27):
manager in small cap can add three or four percent
net of fees, and ultimately you're outsourcing that day to
day stock selection to those managers. I think some of
our managers at the moment, particularly again, there's a bit
of a contrarian call, like biotech has been absolutely hammered
in that space, but there is some optimism building. You know,
(40:50):
you can't fall too much further from the basement, and
potentially what we might see is some more M and
A in the healthcare sector that might put a bid
on some of these biotech names. So that was one
of the themes that out of our outlook call yesterday, how.
Speaker 2 (41:02):
About the ETF space, it's getting a ton of cash.
How do you guys get exposure there?
Speaker 10 (41:07):
So we have.
Speaker 6 (41:08):
We've been in the ETFs now for two years. We
launched two years ago. We're now fourteen ETF. We have
about one point three billion dollars out of our fifty
billion is in our inactively managed ETFs. And we think,
you know, a lot of the innovation, a lot of
the money flows are going to continue to go to ETFs,
especially for taxable clients.
Speaker 2 (41:30):
All Right, it's interesting. I mean, that's just kind of
where the capital is flowing. So you've got to have
an exposure there.
Speaker 6 (41:34):
Ring absolutely, and specifically for us, where we've seen money
put to work on our ETF lineup. We had one
of our flagship strategies, the ticker has win wi NN.
It's run by Jennison here in New York. It's a
lot it's a large cap growth concentrated, fully active, transparent
portfolio and it's look, it's done phenomenally well. It's up
(41:56):
forty seven or so percent this year and has outperformed
It's respected Benjamall by about a thousand basis points.
Speaker 2 (42:03):
Good stop there, good start. Christoph Gleisch, thanks so much
for joining us. Christoph is a president chief investment officer
of Harbor Capital Advisors. You get about fifty billion dollars
in assets under management, and he joined us here in
a Bloomberg Interactive Brokers studio, so he gets a special star.
Their SP five hundred up three quarters of one percent.
Speaker 1 (42:20):
This is Bloomberg. This is the Bloomberg Business Week podcast.
I'll AA a little on Apple, Spotify and anywhere else
you get your podcast. Listen live weekday afternoons from three
to six Eastern on Bloomberg dot com, the iHeartRadio app,
tune In, and the Bloomberg Business App. You can also
(42:41):
watch us live every weekday on YouTube and always on
the Bloomberg Journal alone
This is Bloomberg Business Wait inside from the reporters and
editors who bring you America's most trusted business magazine, plus
gloom O Business Finance and tech news. The Bloomberg Business
Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2 (00:20):
Jessa Nice for filling out the finishing out the day
with some pretty good moves to the upside here in
the after your.
Speaker 3 (00:25):
Markets, and then we'll going ahead to tomorrow jobs reports.
Speaker 2 (00:29):
Yes, exactly, it is.
Speaker 3 (00:30):
Obviously we've talked a lot about the blackout period for
FED speakers this week, but we do have the jobs
report coming tomorrow, so that will be very much on
investors radars. Also, average hourly earnings will be a part
of that report, which we know FED shared Jerome Powell
and other policy makers are going to watch very closely
ahead of their decision next Wednesday. And also ahead of
(00:52):
that decision on Wednesday too, we have CPI next Tuesday fall,
so still a number of indicators ahead of the Fed's decisions,
so things we need to keep our eyes on.
Speaker 2 (01:02):
Yeah, and just taking a look at the nonfarm payrolls,
one hundred and eighty five thousand is a consensus tomorrow,
and that's up from one hundred and fifty thousand the
prior period. So we'll keep that in mind. And average
hourly earnings on a year of a year basis four
percent increase, be a little bit of a decline from
four point one percent last period, but still some pretty
solid numbers. A little bit slower than what we had seen.
(01:24):
But you know, I mean the unemployment rate three point
nine percent is kind of the forecast there, and that
sounds pretty good. But Michael McKee, he looks at it
a little bit more, appeels a little bit more of
the layers.
Speaker 3 (01:35):
That is the best to do it exactly right.
Speaker 2 (01:37):
So Michael, what are you going to be looking at tomorrow?
And you know, when we get all this data on
just kind of the labor market in general.
Speaker 4 (01:47):
Well, I think the market is going to focus, assuming
we get somewhere near consensus number for job creation, you'll
focus on unemployment and whether that goes up and why
if it does, or more people coming into the labor force,
which is not necessarily a bad thing, or are we
starting to let people go.
Speaker 5 (02:07):
That'll be the primary question.
Speaker 4 (02:09):
And then people will be looking at average hourly earnings
because they want to see if earnings growth is slowing
down enough that the FED doesn't have to be worried
about it continuing to contribute to inflation. We're forecast to
hit four percent on a year over year basis, and
the Fed thinks sustainable is about to three and a half,
So getting close.
Speaker 5 (02:30):
Yep. So those are kind of the numbers that most
people will be focusing on tomorrow.
Speaker 3 (02:36):
Well that report adjust anything for the Fed's decision next
week or do you feel like that's pretty much already
a done deal and it's more of just the forecast,
the quarterly forecast, and obviously the dot plots we're going
to come with that decision.
Speaker 5 (02:48):
Yeah, it's pretty much a done deal the Fed. It
would take something.
Speaker 4 (02:54):
Going horribly wrong tomorrow and I'd be back on this
show try to explain this time tomorrow the Fed is
all but signaled they're done raising rates. It would it
would require a lot for them to do something at
this meeting, and probably not as much in tomorrow's report.
Speaker 5 (03:11):
As it would be the CPI next week.
Speaker 4 (03:13):
Right, So I don't think you're gonna have to worry
about the Fed right out of tomorrow's report. It'll spur
conversations about next year and when the fight might or
might not cut rates, but not anything for next week.
Speaker 2 (03:28):
So the FED, I'm not sure what the right word is,
but I guess they're prepared for the unemployment rate inch
a little bit higher. Is there a point where it
gets beyond where they're comfortable? Does it like have a
five handle? And then they said, oh boy, and then
they really need to be maybe a little bit more
aggressive here.
Speaker 4 (03:46):
Well, they were forecasting four point one percent by the
end of the year, so we're sort of in the
range and can come in.
Speaker 5 (03:52):
Lower than that.
Speaker 4 (03:54):
But if it got above, if we had a jump
like we did a couple of months ago of about
three tenths and we went up to four point one
percent from three point nine, or we went up to
four point.
Speaker 5 (04:05):
Two, that would get their attention.
Speaker 4 (04:06):
If we got over four and a half, that would
start to raise concerns there. The speed of it and
the composition of it would also matter to the FED,
and what else is happening with inflation.
Speaker 5 (04:20):
They are expecting.
Speaker 4 (04:23):
Unemployment to rise because their job is to squish down
on demand, as if that, in theory, should lead to
fewer employees needed, and so unemployment rises, but the speed
would concern them if it was quick, and if it
started to get too high, of course, by that time
they would probably already be acting.
Speaker 3 (04:44):
I'm glad you're here because something I've been thinking about
is the rotation for FED voting members each year. So
Austin Goolsby, Patrick Harker, Luis Logan, and then Neil Kashkari
currently voting members this year, but won't be next year.
So then we're going to have Loredemester, Thomas Barkin, Rafael Boston,
and then Mary Daily will come back as voting members
for next year. How do you think this when you
(05:05):
have those rotations, Because in recent years, especially as inflation
was very elevated, it seemed like everybody had to have
these unanimous votes as far as trying to tame inflation.
But when you're going into a year and in stock
investors are betting that they're going to be rate cuts,
when you have a rotation changing like this, how do.
Speaker 2 (05:20):
You view that?
Speaker 3 (05:21):
Are things really going to be that different? Could that
potentially change the expectations for how soon or later rate
cuts could potentially come.
Speaker 4 (05:29):
I think people make too much of that. The people
who are coming on are generally centrists, with the exception
of Loretta Master, and she's leaving in June.
Speaker 5 (05:40):
So I don't know that we'll see a lot of pushback.
You're right. We get a more unanimity when it's very
obvious what the FED should be doing, which.
Speaker 4 (05:50):
For the last year or so has been very obvious
that they should be raising rates. And when you get
into a situation where it's a close call should we
hold or should we cut rates, then you could see
a dissenter to from whatever it is the FED decides
to do. But I think we're not going to see
any major splits among them. They're going to move slowly,
(06:12):
even unless we have a recession, they're going to move slowly.
So even if they do, it's not going to force
a lot of people into an uncomfortable vote.
Speaker 2 (06:23):
So the University of Michigan some good football players there.
Speaker 5 (06:27):
So they'll tell you yes.
Speaker 2 (06:29):
And they also have some good economic data and they
put that out and expectations and inflation outlook and things
like that. Do economists do they care? Does a market
really care about some of this data?
Speaker 4 (06:42):
The market doesn't really care about the and the FED
doesn't really care about the sentiment indicator.
Speaker 5 (06:49):
How people are feeling. Alan Greenspan summed it.
Speaker 4 (06:51):
Up very well years ago when he said, we watch
what they do, not what they say.
Speaker 5 (06:55):
I'm talking about consumers.
Speaker 4 (06:58):
The expectations for inflation have become moderately more important because
the FED has made a big deal out of inflation expectations,
being the anchor for inflation, and they don't want to
see expectations rise too much, both on the consumer or
market side. Market side right now is looking at two
to two and a half percent inflation out four or
(07:19):
five years, which is perfect for the Fed.
Speaker 5 (07:22):
But Americans are looking at four and a half percent now.
Speaker 4 (07:27):
The sentiment indexes people always overrate what inflation is, and
if you go ask any American, they'll probably tell you
now it's six or seven percent, just because they don't know.
Speaker 5 (07:38):
What inflation is.
Speaker 4 (07:40):
But even if you allow for that, it's a little
bit higher than both the FED would like to see
and that you would expect, given the fact that food
prices have stabilized, gasoline prices are way down, and yet
people are still thinking there's a lot of inflation. They're
looking at price level rather than the rate of change,
(08:03):
which the FED looks at. So there is kind of
a difference there. But as long as people don't start
thinking inflation is going to go so high they have
to march into the boss's office and ask for money.
Speaker 5 (08:13):
Of course, we would never do no, could never never.
Speaker 2 (08:17):
Hey, you know, I was out gallivanting in the city,
Midtown yesterday afternoon, yesterday evening.
Speaker 3 (08:23):
For your birthday.
Speaker 2 (08:23):
Yes, people, I did not know big birth People were
out about spending.
Speaker 5 (08:28):
Streets were packed.
Speaker 2 (08:30):
You couldn't get near the Christmas Tree Rockefeller Center. I mean,
people were out. It feels like the consumer this is
pretty good shape.
Speaker 4 (08:36):
I don't know what people tell pollsters that the economy
is lousy, but my situation is good.
Speaker 5 (08:44):
People have jobs.
Speaker 4 (08:45):
I mean, we have ninety seven percent employment, and so
it isn't a terrible time.
Speaker 5 (08:54):
And it's kind of there's more and more talk of
this as like poor Joe Biden.
Speaker 4 (08:58):
I mean, he's presiding over a good economy and people
don't believe it for a variety of reasons. But things
aren't bad right now. So Americans on their own, individually
are quite happy to go out and buy Paula hot
chocolate on his birthday exactly.
Speaker 2 (09:14):
That's how that's how we roll out there all right,
mister McKay, thank you very much. We appreciate Michael McKee,
International Economics and Policy correspondent and Jess. I mean again,
the restaurants are packed, the bars are packed. The Fifth
Avenue you could barely walk down. I mean that's how
crazy it was.
Speaker 6 (09:30):
You know.
Speaker 3 (09:31):
We'll get actually an update on retail sales next Thursday,
so the day after the FED decision for the month
of November. So this will give us a read, especially
on the holiday spinning. We already got a lot of
that Cyber Monday and Black Friday data that we're at records,
so we know it was really strong last month. But
that's going to be interesting to see what that data
looks like for the consumer.
Speaker 7 (09:48):
Paul.
Speaker 2 (09:48):
Yeah, and I'll shout out to the tree folks. Yeah,
Rockefeller Center.
Speaker 8 (09:52):
It's amazing.
Speaker 2 (09:53):
I mean, we just worked by it.
Speaker 5 (09:54):
It looks awesome.
Speaker 3 (09:55):
We've got a tree, yes, big is that one.
Speaker 2 (09:59):
So if you're around the you know, the Bloomberg h
you could come check out our tree in our court.
Aren't cool? This is Bloomberg.
Speaker 1 (10:04):
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 Youtubey Miss space Man, please
(10:24):
thank you anything around.
Speaker 2 (10:30):
Always the best tunes.
Speaker 3 (10:33):
The producer here, I mean pick at the music today.
Speaker 2 (10:37):
Always always, they always bring the musical game here. All right,
just met Paul Sweeney. We are live here in on
our Bloomberg Interactive Broker Studio, streaming live on YouTube, so
you can hand over to YouTube dot com and search
Bloomberg Radio. We're sitting in for Tim Stenwick and Carol Masser. Uh,
let's talk. One of the really cool news items of
the day. SpaceX tender offers said to boost value to
(10:58):
one hundred and seven twenty five billion dollars, So I
guess they're going to be tendering for some of the
shares owned by employees. And the tender value again implies
evaluation one hundred and seventy five billion. That's a lot
for a space company, which is pretty cool. Katie Roof joins,
and she's a VC deals reporter for Bloomberg New She
joins us on zoom from Los Angeles. I know, Katie,
you are used to numbers like this out there in
(11:20):
Silicon you know, in California and LA and Silicon Valley.
Talk to us about what SpaceX is doing here and
how this is going to work.
Speaker 9 (11:29):
Sure, and so this is actually a record for a
US private venture backed company, one hundred and seventy five billion.
It's ninety five dollars a share for the tender offer.
Just six months ago, they were valued at one hundred
and fifty billion. A year ago, they were valued at
one hundred and thirty seven billion. So this is a
big increase for an already highly valued company. And it
(11:52):
really is fucking the trend because as we've seen in
Silicon Valley the last couple of years, the companies are
struggling to maintain their billion dollar valuation. But people that
I talk to are big believers in SpaceX.
Speaker 3 (12:07):
So talk to us about sort of the issues moving
forward for SpaceX because they're in a unique situation right now.
Speaker 9 (12:16):
Sure, so they have two core businesses. They have their
rocket launching business, but they also have Starlink, their internet
business that's satellite related, and so they a lot of
the investors tell me that the reason that they're investing
is because they are really bullish on Starlink. It's our understanding,
and we've reported that Starlink is eventually going to be
(12:38):
spawn off of SpaceX and go public someday, and so
a lot of the investors are trying to get in
on that.
Speaker 2 (12:45):
Do either of you know where they launched their rockets from? No,
Boca Chica, Texas? Wait? Really, yes, it's literally if you.
Speaker 3 (12:55):
Go to Boca Chica, it's.
Speaker 2 (12:57):
Literally the most southern part of Texas. Is like, right now,
I feel.
Speaker 5 (13:00):
Like I should have known this.
Speaker 3 (13:01):
You shouldn't sell Texas's.
Speaker 2 (13:04):
I mean, who figures it's right on the border with Mexico.
Apparently they're they're building all this infrastructure and they got
rockets down there and it's amazing. Yeah, isn't that cool.
Speaker 3 (13:13):
I'm going to be down there this week, I think,
going by and.
Speaker 2 (13:17):
Just swing Byoka Chica. So, I mean, Katie, how how
often does it happen that a company will I guess
give liquidity to its employees that you know, through these
these tenders.
Speaker 9 (13:30):
So SpaceX does it more often than most. They've been
doing it roughly every six months recently. But it's it's
really a case by case spaces with companies. Uh, some
companies don't want to do a lot of this because
it makes it harder to have investor demand if they
want to raise around for the company, if they've already
(13:51):
they're already a lot of shares that have been available
on the market. But what SpaceX is doing here is
providing an opportunity for employees to go and buy the house,
because if they don't sell these shares in a tender,
they have to wait for an eventual IPO, otherwise their
net worth is just on paper. So that this is
(14:11):
really to help insiders have some liquidity, and they're able
to do this because they have tremendous demand. And it
goes without saying. Elon Musk, who is the founder of
this business, is a very very controversial figure. He's recently
made statements that have hurt advertisers on x formally known
as Twitter. But we see still plenty of investor demand
(14:33):
for SpaceX.
Speaker 2 (14:34):
Hey, Katy, do we know who buys these shares from
the employees?
Speaker 9 (14:39):
A lot of them are vcs or other high net
worth individuals. Accredited investors could be hedge funds, it could
be broad groups of institutional investors, but it's a mix.
Speaker 3 (14:56):
That's interesting. So what do you think is sort of
the timetable kind of moving forward here. As far as
how all this ends up playing.
Speaker 9 (15:03):
Out, well, our understanding is that they just decided on
the price, or they were on the verge of deciding
the price when we got a hold of it. So
the tender is just getting started. It's just underway. I
would imagine that they're going to try to do as
much as they can before the holidays, but I'm not
(15:23):
sure if it will formally close before the end of
the year.
Speaker 2 (15:27):
Katie, you're the VC deals reporter. Talk to us about
your world these days, our VC companies getting funded. Can
I if I have a really cool idea, can I
go to Sandhill Road and raise some money? Here gives
a sense of what the mornment is like.
Speaker 9 (15:44):
Well, if you're doing an AI related company, they're all
ears and I'll be writing you checks before you know it.
But for everything else, for other than outliers like SpaceX,
it's been really slow this year, particularly at the growth stages,
which I cover sometimes seeds stages. They're not as concerned
(16:05):
about the broader macro environment because vcs tend to invest
on a ten year time horizon, so they can be
bullish about the future. But companies that raised in like
twenty twenty one are often considered to be overvalued because
the market you look at tech stocks, they've gone down
for the most part considerably since then, and that's affected
(16:28):
valuations throughout the whole ecosystem. So right now it's a
tough time to be a startup that raised money, that
wants more money. But if you're just getting started sometimes
there's a room for opportunities still.
Speaker 3 (16:42):
For those who don't know, Katie Roof is one of
our star reporters here at Bloomberg, constantly breaking news out
of Silicon Valley from your purview being over there and
what you were just walking us through, especially on the
back of what happened with some of those regional bank
issues back in the spring and a lot of those
tied to different Silicon Valley banks. What is it like
in the mood, in the atmosphere as far as how
(17:02):
things have come and gone over the past nine months
since then.
Speaker 9 (17:06):
So there's fewer holiday parties this year.
Speaker 8 (17:09):
Oh, we were talking about that earlier.
Speaker 3 (17:11):
Apparently there's a story on the terminal more pickable in glock, Katie.
Speaker 9 (17:17):
Yeah, So my understanding and talking to some venture firms,
there's still some, but some felt that it was a
bad book to throw a holiday party this year. You
look at their last two years where there have been
very few IPOs. The M and A is often very
disappointing prices, so they're not bringing in a lot of money,
(17:38):
and so they felt that it looked bad for some
of them to be throwing big, splashy events. And Silicon
Valley Bank actually used to be the sponsor of a
lot of these events. Interestingly, I still see their name
on some parties because they're still alive with their new owner.
But I would imagine that it's a different scenario than
(17:59):
it was two years ago.
Speaker 2 (18:01):
And are the VC funds are they Are they still
out there fund of raising or is that also kind
of slowed down?
Speaker 9 (18:09):
Sure, And so I think again it's a split between
the stages. So the earliest stages, a lot of them
have had great returns and have continued to raise new
funds for seed stage investing. But what you're seeing is
a lot of the crossover funds, the pre IPO investors
really got burned in this market, and so what we're
(18:31):
seeing is some of them struggling to raise new funds
or raising smaller funds or trying to change their strategy
to invest in either the earlier stages of VC or
just go back to investing in the public markets if
that's what they were doing before.
Speaker 5 (18:48):
Yeah.
Speaker 2 (18:48):
Interesting, it's just a tough time. I think people just uncertain.
I'm just looking at the NASDAC, you know, still ten
percent off of the high. So if your evaluation sensitive,
that kind of number kind of gets your attention here,
Katie Roof, thanks so much for joining us. Katy Roof,
VC deals reporter for Bloomberg News, joining us on zoom
from the awesome office.
Speaker 3 (19:08):
For Pemburg in I've heard about. I gotta go visit
sometimes soon.
Speaker 8 (19:12):
Yeah, looking very cool.
Speaker 2 (19:12):
It's out there in Century City, a nice part of
town there overlooking Bellair Country Club. I believe is the
one kind of splash. It's what you would expect from
Bloomberg News in La.
Speaker 3 (19:22):
I'm still thinking about what you told me about South
Texas where the launch.
Speaker 2 (19:25):
Oh, Boka, Chica, we'll go.
Speaker 3 (19:26):
So I'm gonna be. I'm gonna be down South Texas
this week and officiating a.
Speaker 2 (19:29):
Wedding, so I don't know how you get there.
Speaker 5 (19:32):
I'll figure it out.
Speaker 2 (19:33):
Flying to Houston and then I think you drive. You know,
you can just keep driving. All right, We're gonna have
more coming up. S and P five hundred ended up
the date up eight ten. This is Bloomberg.
Speaker 1 (19:42):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Eastern 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 playing Bloomberg eleven.
Speaker 10 (20:03):
Charlie, the part is over, They say that, all nice.
Speaker 8 (20:12):
I like that.
Speaker 2 (20:13):
This Bloomberg Business Week headline really got my attention because
I'm all about, you know, flexing the corporate amex card
or whatever we're using at the time. Here, era of
eight hundred and I got a story about that. Solomon
Smith Barney ooh.
Speaker 3 (20:29):
Some stories, I'm sure tell us.
Speaker 2 (20:32):
Rushing uh, era of eight hundred dollars dinners and luxury
car bonuses is over at Salesforce. Joe Webber joins as
he's the editor Bloomberg BusinessWeek, joining us here in our
Bloomberg Interactive Brokers studio. Drake Bennett, Technology Reporter Bloomberg Business
Week on zoom from Bloomberg headquarters in New York and
Brodie Ford apparently somewhere enterprise reporter Bloomberg News on the
(20:52):
phone somewhere undetermined, keeping a secret location. Serious, great story, Joel.
I mean, first of all, Salesforce dot com. Everybody cares
about Salesforce dot com, Benioff, all that kind of stuff,
But you know, luxury car bonuses.
Speaker 11 (21:07):
It was a great time to be in tech sales.
And actually the pandemic even made that.
Speaker 8 (21:15):
Even more so.
Speaker 11 (21:16):
Yeah, because they just staffed up and kept selling. But
then some things started to change. And I've always been
really fascinating, fascinated with Salesforce as a business, and it
has become expansive and actually really you know, created a
whole industry, and that's a big credit to its founder
of Mark Bennioff. But this is sort of a new
(21:40):
era for Salesforce. Tell us more, Brody.
Speaker 7 (21:45):
Yeah, at some point, you got to stop spending like
a startup, and that's what investors told Salesforce this year.
They pretty much said that, hey, if you can't keep
growing sales the same way, you have to start cutting costs.
And yeah, like the headline says, I mean somebody's orr
eight hundred dollars dinners. And the more mundane stuff is
the insane commissions you can get off of selling things.
(22:06):
I Mean, I always say that I picked the wrong
industry because I would speak to people who are about
my age got into the same at the same time.
They're now working in tech sales making four hundred, five
hundred thousand dollars without a whole lot of experience, you know.
I mean, it was just gangbusters. I mean, Benioff told
me that selling software was never easy, except for during COVID.
(22:28):
It was just firing on all cylinders.
Speaker 8 (22:31):
So what's happened?
Speaker 11 (22:32):
What's the change like within the company?
Speaker 7 (22:37):
Yeah, they've just had to get more serious. I mean
they the obvious one is firing ten thousand people, right,
I mean that's the one that most of us read about.
But it's even simple stuff like Okay, now, when you
sell a piece of software, you can't have ten people
all get a commission off of that, right, You can't,
as you said, have the eight hundred dollars dinners. And
(22:58):
it's really trying to pair back all these expenses that
made it such a distinctively fun place to work. In
many ways, you.
Speaker 2 (23:06):
Know, twenty twenty three has been, even for the technology companies,
a year of cutting costs. And I think the greatest
example of that, or the one I think investors might
know the most is Meta. Yeah, the stock just ripping
this year on you know, Zuckerberg saying we're not going
to spend like drunken sales on his metaverse, We're going
to actually focus on costs. And I guess.
Speaker 11 (23:24):
That's it tends to go well with investors when you
can bring in that cost and you know, show that
there's a return on investment, but it can come at
the expense of culture. So Drake, I want to just
bring you in here and also just talk about the
industry because ultimately what we're we're talking about is something
(23:44):
that bending Off pulled out of his brain and then created,
and that's SaaS. And so talk to us about, you know,
just the economics of a business, a software sales business
where you no longer have to have, you know, the
typical kind of infrastructure, and what that kind of can
can accomplish for investors.
Speaker 10 (24:03):
Yeah, I mean salesforce is I mean, I think for
a lot of people, it's not like when people think
about Silicon Valley Salesforce isn't necessarily the first company that
comes to mind. And you know, there's this idea that
Silicon Valley tells about itself to the world, which is
that the value of its you know, all of its
(24:24):
wealth and its growth comes from these like brilliant ideas
that software engineers have. But there's kind of this other
explanation for at least a lot of the recent growth there,
which is these armies of UH salespeople that companies have,
and Salesforce really pioneered this UH and as you point out,
it's linked to this business model that they basically pioneered,
(24:46):
which is, you know, rather than selling software you know,
on like a CD ROM or a disc, like you
put it on the cloud and then you go sell. Yeah,
I mean software as a service is the you know SaaS
is this thing that everyone's heard now with maybe without
even kind of like fully realizing what nonsaas is. And
(25:07):
you know, so there's all these companies that are basically
modeled on Salesforce, which is like you sell enterprise software,
you sell software to other.
Speaker 8 (25:13):
Companies H and you put the other salespeople right.
Speaker 10 (25:17):
And so there was this weird dynamic like salesforce grew
an enormous amount of the last few years and especially
during COVID, and what it was basically doing was selling
these software leases to other companies that were using these
tools for their growing salesforces. So it was kind of this, uh,
I mean, it's yeah, Ponti scheme is an incorrect term,
(25:38):
but it's basically like this weird dynamic where like everyone
was growing and so salesforce was growing, and then basically
at a certain point that reversed. And so what you
saw was that as the as sort of all these
other software companies were shrinking, salesforce had to shrink too.
And so you know, part of what we were writing
I was just this this this aspect of Silicon Valley
(26:01):
that people don't really think about that much, and how
it sort of shapes the culture of this company and
how it shapes the culture of Silicon Valley more broadly, Bertie,
I wanted to.
Speaker 3 (26:11):
Bring you back into this conversation and speaking of salespeople,
y'all were writing about how some sales people were relying
on aggression and pressure to close those deals, but also
you just need to get people and customers to like
you walk us through anecdotally in the reporting whenever you
were speaking to people about how sort of this process works.
Speaker 7 (26:31):
It's a really funny dynamic that comes back to the
business model. Because software it's a recurring contract. Essentially, you
need people to stick around. You think about car sales,
door to door sales, it's kind of old thing you're
thinking of real hyped off jocks trying to get you
to sign the paper, almost like physical coercion, right, but
(26:52):
this is more like they just coming on an army
of like, for lack of a better term, frat boys,
just people with nice smiles that were just kind of
show up and like, you know, hey, how's it going
the software going good? You need any help? Are right cool?
Or here when you need us?
Speaker 10 (27:06):
Wow?
Speaker 7 (27:07):
You know, And there were just armies of them, you know.
They call it the clown car approach because one person
had to pull up with sales software, one person had Slack,
one person had the data viase software, and they were
all getting paid really good. But again, at some point companies,
when the interest rates started rising there'd been years of
(27:27):
buying software gangbusters, the CFO started saying, well, why do
we have all these smiles hanging around selling us millions
of dollars in software. How did this happen? And so
they really cut off the spickett of wealth. And that's
really why we saw the style of sales here start
to break down a little bit. And it's not just Salesforce.
This is really an industry wide phenomenon.
Speaker 11 (27:47):
But what does it look like and feel like at Salesforce?
Speaker 7 (27:51):
Broddy, So our favorite source in this story, we call
him Kenny because it's an alias. He still works there.
You know, he said when he first joining, it was
all parties. It was great. His phrase now kind of sucks.
It's just it's hard to than it used to be.
You're you're signing less big deals. You're uh, you know,
(28:13):
your boss is calling all the time. If you don't
make It used to be that you could not make
quota for like a year and a half, two years.
Maybe then you'd get fired.
Speaker 1 (28:21):
You know.
Speaker 7 (28:21):
Now if you don't make quota in a quarter or two,
you're you're out of there. You've got leader boards. People
are more cutthroat because not every baby can share commissions.
It just it looks more like that kind of car
sales environment, right. It looks more like the old school cutthroat.
There's a movie Drakel likes to reference about when sales guitar?
What is it?
Speaker 10 (28:40):
Glenn Gray, Glenn Roth.
Speaker 2 (28:41):
Yes, a yes, always be closing, Alec Baldwood. Yeah.
Speaker 11 (28:47):
So business became a little fun with that one. We
were playing around with it with the headlines and the
cover lines, and it became the headline inside the magazine,
always be cost cutting.
Speaker 8 (28:58):
There's a new in town.
Speaker 11 (29:02):
But but Jake tell us more about what I mean,
the Death of the Salesman. We talked about that years ago,
decades ago, because Arthur Miller wrote a hell of a play.
Had that era come for sales? Software and tech sales now?
Speaker 10 (29:21):
I think to a certain extent. I mean, one of
the things that I loved getting into in the story
was just this whole, like this whole culture of software sales,
which you know, they're they're these sort of online influencers
who would give you these kind of slightly scammy courses
about like everything you need to know about software sales.
There was there was just a salesforce sort of offered
(29:44):
this whole curriculum about you know this kind of like
Dale Carnegie style, you know, sales education. And I think
a lot of that is froth and a lot of
those skills probably weren't that useful. As you know. Brody
pointed out that this sort of there was a sort
of a self perpetuating cycle to this, where like if
you hired more people, you needed more salesforce, software leases,
(30:07):
and so it kind of didn't matter who was selling
it to you. And so it may be the case
that you know, you don't need quite as many people
out there selling it, and you don't need to pay
them that well.
Speaker 2 (30:22):
So, I mean, guys, I don't know what Brody is
is this kind of the new normal now? I mean,
is the party over over when you talk to these people.
Speaker 7 (30:31):
I think that's what we're seeing here. I think we're
seeing this is all a big part of big tech
losing it shine.
Speaker 3 (30:36):
Right.
Speaker 7 (30:37):
In the last couple of years, we saw big tech
loodons it shine regular sort they said, wait, this might
not be good for us psychologically. I think this year
we see big tech loods that shine economically that wait
a second, these business models are not impervious, they're not bulletproof.
At some point, these jobs that were the golden standard
have to become normal, right, I mean, I don't know,
(30:57):
like working at GE in nineteen sixty is probably the
gold the golden standard, and I think we're starting to
see these tech giants become a more standard part of
the economy and lose their kind of special edge in
terms of being a great job. But they're still you
can still make some money. It's still a good place
to work, but it's not what it used to be.
Speaker 8 (31:14):
Yeah.
Speaker 10 (31:14):
One of my favorite details was like they're talking a
lot about how they're gonna use AI, you know, and
Mark Minneapolis talking about AI, but one of the things
they're actually using for right now is basically finding when
sales people are kind of like loosing their numbers and cheating.
So it seems like, you know, that's the new reality.
Speaker 11 (31:34):
So what do we think Mark Binnioff's company looks like
a year or two from now, Like, you know, the shed,
the the tech sales guys and that cushy tech job Like,
what what is that more hardcore sales force looking feel like?
Since it's been such a cuddly friendly place up until now.
Speaker 7 (31:56):
I'm sure this is weird to hear for a tech company,
but they're hiring engineer, you know, that's actually what their
main focus is now.
Speaker 1 (32:03):
Is.
Speaker 7 (32:04):
I think they're really trying to invest in new products
and figuring out where that next realm of growth is, right.
I mean, the products that got them here are pretty
mature at this point, and as Drake mentioned, like all companies,
they're looking for AI to really accelerate it. I don't
know if you've seen Matthew McConaughey on TV wearing the
cowboy at but talking a bit about who's the tariff
in town? That's Salesforce. I'm not sure I get what
(32:26):
it means either, but that's Salesforce.
Speaker 3 (32:29):
Matthew McConaughey.
Speaker 11 (32:31):
Yeah, okay, So so just final question, which Drake, I
want to bring it back to you. You've written out
a lot of companies, different strategies, different sectors, different industries.
You know, if you if you could, uh, you know,
cast the movie for the Salesforce version of the story,
(32:52):
Like do some casting for us.
Speaker 8 (32:54):
Who's the salesperson of the year.
Speaker 10 (32:57):
The salesperson that you mean, Like, who's Kenny?
Speaker 11 (33:00):
Yeah?
Speaker 10 (33:04):
Who was that guy? Giovanni Ribisi was like, is that
like to obscure from the boiler room?
Speaker 8 (33:09):
No, he's awesome, Yeah, yeah, look very quick?
Speaker 10 (33:16):
Yeah yeah yeah, just like nice sort of like, you know,
almost pathologically upbeat kind of person, just you know, indefatigable spellar.
Speaker 8 (33:27):
What about what about Benning Off in your in the
in the movie version of your story.
Speaker 7 (33:34):
You know he'd probably agreed to do it himself.
Speaker 8 (33:35):
Yeah, that's right, that's right for anybody. I mean, how
does he feel about the business?
Speaker 11 (33:40):
I mean the everything's performances is doing great? You know,
like what, so how do you know your interactions with him?
Speaker 8 (33:46):
What do you have to say?
Speaker 7 (33:48):
I think he is very aware that they had a
long stretch of bad headlines this year. His message right
now is that, you know, they always say that it's
in o'hana over there, that's some big phray. What he
gave to me was, look, it's ohann at two point zero,
all right there we.
Speaker 2 (34:06):
Had all right, brog We can't have to leave it
there just for a time. Joe Webber, Drake Bennett, Brody Ford,
Bloomberg Business Week. You can check that out on the newsstands.
I got that great story cover issue cover, absolutely some
good stuff.
Speaker 8 (34:18):
Check that out.
Speaker 2 (34:19):
This is Bloomberg.
Speaker 7 (34:22):
Brother Marco.
Speaker 9 (34:26):
A journal.
Speaker 1 (34:27):
How about you let me drive?
Speaker 5 (34:29):
Oh no, no, no, no, who's going to drive?
Speaker 4 (34:31):
Honey, please grat I want to drive.
Speaker 3 (34:38):
It's a good question.
Speaker 8 (34:43):
This is the drive to the globe.
Speaker 10 (34:45):
Don me Well, Bjoern on Bloomberg.
Speaker 3 (34:49):
Radio, Jessminton, Paul Sweeny here in the Bloomberg Interactive Broker Studio,
filling in for Carol Masser and Tim Stenovik, who do
have the day off. Not sure who's who? Who's Carol?
Who's Tim? Here?
Speaker 2 (35:00):
Paul?
Speaker 3 (35:01):
But look at that good as a p five hundred
a day, up seven tenths of a percent if you
look on a weekly basis a little change, but this
does come following a five week winning streak that was
its longest since June. But who better to chat with
us about their market outlook moving forward? Christoph Gleisch, President
and Chief Investment Officer at Harbor Capital Advisors. Who's actually
(35:23):
here in the Bloomberg Interactive Broker Studio. I know Paul
always loves more people are here in office with us
to discuss his outlook and also his investment strategy. I
want to pick your brain now that we are into
year end here, what's your take as far as positioning
wise going into next week ahead of the FED decision?
Speaker 6 (35:42):
Well, thank you so much It's great to be here
in person and live. I think this year has surprised
a lot of people. It's called a lot of investors
off side. If you think back where we were twelve
months ago, Supposedly now we should be three or four
rate cuts in as the FED is continuing to try
and stimulate an economy coming out of a recession. We
(36:03):
know how that sort of playbook played out. And I
think what surprise investors is how resilient growth has been
this year, how resilient markets have been this year. And
you know, at the moment your colleague read out, there's
a lot of green on the screens, camps off Landing
is winning, and it's very much risk on environments at
the moment as it has been in the last five weeks.
Speaker 2 (36:24):
How do you think about evaluation here, because I think
that I'm just looking at my try to the s
and P five hundred. Boy, that was a heck of
a November there, and I'm wonderful we've kind of gotten
a little bit two over our skis a little bit
in terms of valuation. How do you guys think about that?
Speaker 6 (36:37):
So I'd say trying to time markets on a short
term basis, what's going to happen this week or that
is pretty difficult to do. I think valuations here probably
say fair, and so we would recommend having a good
allocation to equities for investors that are ultimately investing for
the long term. Of course, it's a market of many
(36:58):
different regions, many different market capitalization. I think there are
areas of the market that are looking pretty cheap right now.
Speaker 3 (37:06):
You talk about in some of the notes you sent
us don't hide out in cash. We've seen the fury
into money market funds over the past year, being at
a record here. What's your view on as far as
what's the catalyst when people argue about, oh, well, we're
going to put our money in money market funds for
the yield. But then if you have these double digit
gains in these major indexes, how do you square that away?
(37:28):
And at what point does that we've only move out
of money market funds and then into equities.
Speaker 6 (37:33):
So I think if you look at any long term
investment chart over any time only over any reasonable time horizon,
there's always a squiggly line at the bottom in decay,
and that's always cash. Cash is the worst performing asset
class over any reasonable time horizon. So what we would
say is hold enough liquidity for your immediate liquidity needs
(37:55):
as an investor, and what you're comfortable with as it
pertains to you know, what's going to create some of
that cash to come out. There's seven trillion dollars. Seven
trillion is a huge number sat in money market funds,
and I think in certain areas we just we've seen
investors wait and wait on the sidelines for this supposed
recession that hasn't come. And I think the longer that
(38:16):
we continue with this soft landing scenario, at the moment,
it's going to pull more investors. Are they going to
begin to start putting money to work, And we're already
beginning to see that, and specifically around small cap as well.
I think it's pretty attractive entry point right now.
Speaker 5 (38:30):
I want to go there, we go that you.
Speaker 2 (38:34):
I mean, I hear small caps, mid caps, small caps,
but man, that's a tough place to make money historically.
Speaker 1 (38:39):
Is it a.
Speaker 2 (38:40):
Valuation call that attracts you to the small cap space?
Is it just that maybe they haven't performed? Kind of
how do you think about that?
Speaker 6 (38:46):
So the answer that we hear most often, and we
actually asked this, we held our global Market out Look
call and the theme was in search of bright spots yesterday,
and we asked our clients around small cap and the
answer that got the biggest response was waiting for the
recession before allocating to the asset class coming out of
the other side. Okay, there's a lot to unpack there.
(39:09):
You know, recessions are incredibly hard to kind of forecast
and predict exactly, but we get it. We understand that mentality.
If you look at small caps, they've effectively been in
a recession for the last two years. Some colleagues of
yours did some great analysis on the Bloomberg terminal the
other day and I saw small caps are currently going
through their second longest draw down in history. It's only
(39:32):
coming out of the tech bubble, that's you can compare
to this. So if you look at small caps, they
are off in the region of thirty to forty percent
off their peak, and you've begun to see a broadening
of the markets, You've begun to see a bid for
small caps, and I think investors are already beginning to
come back in.
Speaker 3 (39:53):
Yeah, that's really interesting that you brought that up, because
it's the worst a three year span relative to the
S and P five hundred when you're looking at the
Russell since the late nineteen nineties in the turn of
the century, what sectors in particular when you're looking at
small caps are attractive to you.
Speaker 6 (40:07):
So the way that we work at Harbor Capital is
we work with boutique money managers across the world that
we believe are experts in their own domain, so they
do all the day to day stock selection. A couple
of things I'd say about small cap is it's an
area that we think is ripe for active, for skilled
active managers to add value. We think a skilled active
(40:27):
manager in small cap can add three or four percent
net of fees, and ultimately you're outsourcing that day to
day stock selection to those managers. I think some of
our managers at the moment, particularly again, there's a bit
of a contrarian call, like biotech has been absolutely hammered
in that space, but there is some optimism building. You know,
(40:50):
you can't fall too much further from the basement, and
potentially what we might see is some more M and
A in the healthcare sector that might put a bid
on some of these biotech names. So that was one
of the themes that out of our outlook call yesterday, how.
Speaker 2 (41:02):
About the ETF space, it's getting a ton of cash.
How do you guys get exposure there?
Speaker 10 (41:07):
So we have.
Speaker 6 (41:08):
We've been in the ETFs now for two years. We
launched two years ago. We're now fourteen ETF. We have
about one point three billion dollars out of our fifty
billion is in our inactively managed ETFs. And we think,
you know, a lot of the innovation, a lot of
the money flows are going to continue to go to ETFs,
especially for taxable clients.
Speaker 2 (41:30):
All Right, it's interesting. I mean, that's just kind of
where the capital is flowing. So you've got to have
an exposure there.
Speaker 6 (41:34):
Ring absolutely, and specifically for us, where we've seen money
put to work on our ETF lineup. We had one
of our flagship strategies, the ticker has win wi NN.
It's run by Jennison here in New York. It's a
lot it's a large cap growth concentrated, fully active, transparent
portfolio and it's look, it's done phenomenally well. It's up
(41:56):
forty seven or so percent this year and has outperformed
It's respected Benjamall by about a thousand basis points.
Speaker 2 (42:03):
Good stop there, good start. Christoph Gleisch, thanks so much
for joining us. Christoph is a president chief investment officer
of Harbor Capital Advisors. You get about fifty billion dollars
in assets under management, and he joined us here in
a Bloomberg Interactive Brokers studio, so he gets a special star.
Their SP five hundred up three quarters of one percent.
Speaker 1 (42:20):
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