 Okay, hello, and welcome to episode 100 of the Market Maker podcast. You made it, Piers. What, Marston? Yeah, we got to about 60, 70, I thought you were flagging. Yeah, I went through a little bit. I dipped in form, I think. But now, I think my forms returned for the century. Well, we'll see. You can be... Well, look, a quick teaser of what we're going to talk about in this episode. Big tech earnings. We're yet to see the open on Wall Street, actually. All these earnings came out last night and they all got beaten down about a range of 5% to 6% for the likes of Apple, Amazon and Google, given how big they are. That's no small feat to fall 5%. So we'll deconstruct those, have a bit of a chat about that. Metta, your biggest short jumped 20% middle of the week. And so we'll also talk about that as well. They were actually the darling of the week, if I can... Yeah, what a reversal of fortunes, hey? And you've got like Amazon and Google and Apple getting spanked and that Metta is rising. It's like Phoenix out of the ashes, isn't it? Yeah, it's a real reversal for sure. And then we've just had US non-farm payrolls has just dropped literally like a few minutes ago. And then we've had the Fed, the ECB and the Bank of England. So it's been a pretty big week for financial markets overall. And so we will talk about both of those things. However, if you're watching the video format of this on YouTube, you can see that we have that third leg of the stool as Piers put it in the previous episode. So, Keeve, how are you? I'm very well, Anthony. Thank you. How are you? Great. And last week we said we'd bring on a guest for this episode to mark the 100 milestone. This will go down in history and we feel privileged that you're with us. Anthony, I feel privileged myself. Thank you both yourself and Piers. Well, you're very welcome. So this isn't the first time we've met. So why don't you give a bit of a backstory about our interactions with you last summer and then how we got to meet and then what you've been up to since then? Well, I think it's no surprise, Anthony. We met at the Summer Analyst Programme. I started off with meeting George and afterwards he convinced me to come to the Summer Analyst Programme. Afterwards, I had a pretty intense three weeks with yourself, Piers, Eddie and Will going back to back in a range of buy sides, sell side and equity markets. We got to meet the new alumni across a set of various weeks and it's been ecstatic, to say the least, the whole experience. It was very beneficial. Not just for myself, as someone who's done their degree and is working in industry, but also for people that are actually at university. From what I saw, you guys, you provide a very necessary bridge to actually show everyone, you know what? This is the gap and the skill set that you need when you come out of university and you give everyone a range of activities and exercises to actually get exposure to different roles they can experience in their careers. Aside from that and having access to that knowledge, that experience, it's been tremendous, I would say, even after the whole Summer Analyst Programme having the alumni there, keeping in contact with yourself, with Piers, with Will, various recruiters that have come on after the Summer Analyst Programme. It's been, honestly, it's been amazing. Even now, I keep in contact with quite a few of the alumni from the cohort, just seeing where they are up to. Some of them are getting into summer internships, the likes of Nomura, some of them are working with Bloomberg, some of them are now, they've got their summer internship with Goldman Sachs as well. So, honestly, it's brilliant. With me, I went back to working with KPMG. I work in deals, do execution specifically, and I effectively took time off whilst I was working to come and join the Summer Analyst Programme because it was something that I wanted to get insight into the wider world of finance, to see how everything worked, to get an exposure to both buy-side and sell-side markets, and to see where I want to position myself long-term. And I can say, after coming back, I haven't just found a picture of what I want to do long-term, but I've also been able to actually apply what we've done from the Summer Analyst Programme back into my work over here, which is brilliant. I literally used some of the stuff that you gave me over the Summer Analyst Programme last week for a pitch deck, so it's been brilliant. Awesome. Yeah, awesome to hear. And, Piers, how much have you paid this guy? Yeah, you stuck to the script perfectly. Thanks for that. What awesome, well, I love it. My head's just expanded by about 3x, I think. But yeah, no, great to hear. And yeah, you're right. I mean, it's that kind of, I guess it's being part of that community, isn't it? You're just mentioning there are other people getting various positions at various firms and you loving it and we love it. You know, so yeah, just being part of the community, I think it's just a really positive thing. But what we can do to help further is, you know, there's people obviously listen to this podcast and we'd love for everyone to connect with Sakeeb. I'm going to put his LinkedIn on anywhere this episode goes. So Spotify, Apple, YouTube, you know, your network is incredibly important, even if you're in a role, you know, who knows where your career will take you. So yeah, definitely connect. I hope that helps Sakeeb and hopefully we'll get to see you in person in the city sometime soon. Perfect. Thank you so much once again guys. Thanks for joining. See you next time. Take care. All right. Piers. So. Honestly, I'd just like to say that was not rehearsed. That was just, yeah, what a legend. But yeah, let's dive in then we've got plenty to talk about. And let's let's kick things off with, kick things off with meta. Yeah, because look, we've spent the entirety of 2022 coming on again and again and again. Just saying it's the death. It's the gradual demise of Zuckerberg and Facebook. And the shares to spike 20%. Now, I guess, before we look at the context, because I know what I know what you're like, you'll start looking at, well, yeah, last 12 months and now I'm like 70%. So I can see you typing away now. But let's just talk through the numbers first and what generated the positive response before we look at the broader picture of the share price and so forth. Daily active users exceeded expectations. This is always like the key metric that people will look at. And this is a bit of a quirk. We were talking to a trader the other day, right, and he was saying he wanted to train some of his staff. He was like, right, you can look at earnings for share, your EPS and your revenues. That's one dimension. But then there's also these idiosyncratic factors that can pop up like da use or ASPs if you're talking about phones and average selling prices or subscribers when you're talking about Netflix or Disney Plus and all these sorts of things. And so, yeah, their daily active users beat and they look at that metric across different time durations and monthly and so forth. They announced a $40 billion stock buyback. Yeah, actually saw quite a few people commenting on a post I did about this Facebook release. And they were saying, well, that's nice, isn't it. You sack 11,000 people, but you take care of your shareholders. Yeah, but necessary evil though, right. I mean, he's got to he's the shareholders. He's got to cut costs. And he's got to keep him happy because he doesn't want them to bail. Yeah. And then so a few other metrics. Average revenue per user. This is your ARPU. So, you know, you better have your notepad ready. There's a couple of these. So the ARPU tops street estimates. So your da use in combination with that ARPUs and your ma use. Yeah, please. Yeah, yeah. The company on that outlook said their revenues in Q1 would be between 26 to 28 and a half billion US dollars. That was against a street estimate of 27.9 so little bit soft on that front. But if they hit that, it suggests the revenues could rise from a year earlier should the results come at the top end of within their own range. In that sense, that what you've just said there is hugely significant for a particular reason. Because that's looking back. So let me just repeat. So at the top of that range, let's say they hit the top of the range. So they're saying they would make 28.5 billion revenue in this quarter. Now, if you compare that to the same quarter in 2021, that would beat quarter one 2021. The reason why that's significant is because since then, Apple on their devices of course have changed the privacy settings and have made it considerably bigger for advertisers to track users across the internet, which is one of the big, big reasons for Facebook's or sorry, Meta's downside last year because people are panicking that you know this is the end of their revenue, that sort of advertising revenue model. So the fact that this quarter they're saying they're going to make more money than before that setting changed by Apple, that's really key it shows that they have been able to pivot and jump over that hurdle that Apple have set. And I think that obviously in combination with the, you know, use the word again massive pivot on cost. And now that he's tightening the belt, rather than just going on some kind of ridiculous spending binge, which was the direction they were going in. Yeah, those two factors for me. Obviously the cost the cost ones obvious but you know that that point around beating revenue since pre Apple privacy setting change I think that's really not only where they're these other headwinds like you've mentioned the iOS privacy tick tock. Yeah, kind of been around for a while now says probably been bedded into the psyche of most investors in that sense. Yeah, although, although obviously right now the regulatory pressure on tick tock is building and building and building in the US I mean some, I think some, what is it some schools have banned it some universities I think have banned it and there's obviously pressure to just ban it entirely from. So that obviously plays into Facebook's Meta's hands in a positive way as well. Yeah. Yeah. And then yeah the cost cutting to put into perspective. They dismissed 11,000 staff so as a as a figure to put that in context that's about 13% of total employees that they trimmed in November. And when you actually look at it when you hear these big numbers from Amazon, for example, or Apple actually Amazon will have far more employees so percentage wise. It's the deepest I think or one off in terms of Meta's aggressiveness with that cost cutting. Yeah, it's I think it's pretty much only Twitter that's gone even more aggressive isn't it, or Salesforce as well weren't pretty aggressive. Hello on the on this cost cutting front. Because what Zuckerberg said on the earnings call, I quote here he said we're going to be more proactive about cutting projects that aren't performing, or may no longer be as crucial. And I don't know it kind of obviously when you say that you think like well obviously, but well clearly you would stop just spending money hand over fist on stuff that's just a bit of a pump isn't really working is incredibly speculative obviously you do that but I think that's that sentence right there kind of sums up what's happened to the tech industry in the last decade with these absolute behemoths, these kind of cash. Mountains of cash that they print on a quarterly basis they're like right they feel like they're justified in going right well let's just start pumping it around on crazy projects these moonshot projects right when ultimately a lot of that money is just being wasted it's being poured down the drain so the fact the share price, you know you said it spiked 20% which it did on the day that actually prior to that day it was already up 70% on the year. Then it went another 20 of the back of these earnings. So it's actually doubled it's more than doubled off the load, it was nine, it bottomed at 90 bucks in October. October 90 dollars is now trading at 180. Now, obviously, that's amazing but it's still, yeah it's still 50% down over the last 18 months after this rally, it's still 50% down. I just kind of just to show that there's a long way back but yeah and look the 40 billion share buy back thing yeah great I mean I think that I mean thinking about severance well maybe actually we'll talk about the other big tech earnings first because there's obviously a trend across all of them apart from one on job cuts so maybe we'll come back I want to make a few points on the kind of job cuts across the industry and what it means but let's maybe. Talk about the others. I think I know the one who hasn't cut jobs so I'm going to step over them we'll come back so let's talk Amazon next. Okay. Amazon numbers EPS miss 3 cents against 18 the revenues did exceed but cloud missed AWS came in below expectations, advertising was slightly above. Overall, Amazon closed out its slowest year of growth in its quarter century as a public company. Hmm. company expects to post Q one revenues of between 121 126 billion, the street was looking for 125.1 so they've actually lowered that bottom end of the range a little bit. The shares were down about 5% last night we're recording this the shares I haven't opened yet on Friday session so yeah what do you what do you think about the Amazon release. Yeah, I'd say, obviously a bit on the one hand not surprising on that on that kind of revenue growth slowing I mean obviously 2022 was a bad year for from an economic point of view so you'd expect it to feed through into a business like Amazon the biggest worrying thing was the operating income from AWS dropped marginally. Obviously AWS their cloud services that big kind of profit engine, and it is actually the case if you took AWS, even though their income dropped it was still very profitable right on the AWS side but if you took that out of the equation. Take AWS, Amazon would have recorded a loss of 2.4 billion on the quarter, which pretty much pretty starkly shows you how important that cloud business is to Amazon. But having said that, there is like glimmers of hope and look when you're saying like all these big tech stocks had a sharp sharp downside off the back of some of these earnings. I've got to realize they had a monster rally on the Wednesday so we'll perhaps talk about that as well in a minute just in terms of where do they sit on the week overall are they actually up or down but I was going to say with Amazon. One thing that was quite interesting underlying their sales from their retail side was better than expected. So actually the holiday shopping season in December. From these numbers from Amazon shows that the retailer, sorry, the consumer is continuing to be incredibly resilient in the face of, you know, the twin nightmare of really high inflation and really high interest rates and obviously some mass job losses in the tech industry and so I think that was a surprising factor, not just a good thing for Amazon, but just more generally from a sort of macro measure point of view that US consumers just cracking the wallet out still as if everything's hunky-dory. Yeah, it's not fun payrolls to go by. No, indeed. You mentioned before about cloud being somewhat robust against macro changes. Yeah. One of the other things here was that analysts on the call and the post release was saying that some big businesses, or they'd identified that some big businesses have been postponing efforts to move software to AWS data centers, the reason being the economy. Right. And others were taking a pause after dramatically increase. So I guess it's one of the stubble edge sword isn't it it's like you've seen dramatic adoption. Yeah. And it's not that it's not going to continue that way long term. Yeah. It's just that going over the cliff into the potential recession, it makes sense that businesses are a bit more cautious. And so therefore the speed or the profit margin will shrink a tiny bit. Yeah. And again, that's not a surprise given what Microsoft told us last week with their Azure figures also showed a little bit of softness. And yeah, you know, I think that's, yeah, it's kind of that. You know your, I mean, maybe, I mean, maybe from a macro point of view, this is a decent kind of measure of where's the bottom of the cycle. And maybe it is when you actually start seeing it show up in some of these cloud growth figures from some of these big giants. So that last little item on the sort of cost budget that you perhaps start to trim. So, yeah, maybe a lead indicator there that maybe we're approaching some kind of bottom of the cycle. Okay. Alphabet. Yep. When you were picking bottoms, we were down at 85 bucks a share in that in alphabet. I think we're now about 108. Yeah. So, again, in tandem, like you said, took a decent boost on the back of the Fed, but also January just in general right here today, these, these stocks have been moving sharply higher. So, their EPS alphabet missed revenues. Missed. YouTube. Missed. Google cloud revenue. And we guess up. No. Traffic acquisition costs. Otherwise that is tack. Missed. Everything missed. Yeah. The company said it would take a charge also of between 1.9 and 2.3 billion, mostly in the first quarter related to layoffs of 12,000 employees it announced in January. So the charge is about, I love this though, I was seeing some of these numbers when I was collecting some data for you early in the week. And it was like, ex the job, ex the $2 billion, we're just going to have to pay for severance. Oh, our numbers are actually fine. Yeah. So, okay. Two billion doesn't exist. Yeah, I mean, the Google here there's not much. I mean, at least you can pick a few items out on the others where it's actually a bit of a bright spot in amongst generally not great but for Google it's just, I don't know. There's just aren't any bright spots. It's just, it's just bad. I mean, and actually, it's the obviously revenue below expectation but it's the, the revenue revenues dropped. It's the first. Sorry, it's the second time ever that quarterly revenues have dropped on a year on your basis for for Google. So that's obviously a bit of a landmark but I would say and something we mentioned last week, the US, the strength of the US dollar. They were very clear to point out was a huge part of that. And again, another reason why, I guess, stocks have had a good rally, or certainly these tech stocks or these multinational businesses had a good rally this year, and that's the dollars weakened in January. And so, you know, what was dollar strength being negative for revenues in quarter four you're going to see that flip and dollar weakness will be positive revenues in quarter one. I've just seen markets have opened now actually so Google has opened at one of below one oh four, but close at one oh well let's just call it one oh nine last night. Yeah, so it's down four percent as about in line with the kind of the moves we saw post market last night but it's still, it's still basically easily the highest levels for the year, other than Wednesday. It's still well above but that's still actually around the levels we last saw back in September, actually. Well off their lows and $84 but yeah, I mean I guess it's this classic here with these big tech stocks, bad earnings, you know, share prices lower, but then all these earnings is backwards look look we're in February. Right. These numbers for October, November, December and so we're in February and so it's quite unique here for an earnings season where you've got such a dramatic difference between the conditions we had when that they're reporting on with these earnings and now the current macro environment today and obviously the macro dial is quite radically shifted so yeah despite some disappointing numbers I think broadly investors will get over these and it'll be the kind of broader macro picture I think that will be the dominant force on share price on these share prices like over the next few weeks. Before we talk about that because I definitely want to get your take on that because it definitely is a split on what I am listening to from big bank economists and they keep banging the drum that don't buy in don't get the FOMO don't chase this market up. They've been saying that for quite a while, we keep going up so I'm going to I'm going to park that for now but I definitely want to get your. All those all those analysts that are on those huge salaries. You know what they would have been doing on Wednesday evening at 7pm and then between seven and 8pm Wednesday evening. They've been like head in their hands it's like oh my god I'm wrong again. Can I honestly keep banging this drum without myself looking really stupid. Yeah it's interesting because I was listening to Mike Wilson the MS guy, and he's like the Uber bear one we've mentioned a few times. He's obviously been saying you know the whole valuation angle and he's been saying for a long time that this rally this last couple of weeks just like it don't buy into it it's going to pull back aggressively. And then he was on he doubled down in this week's podcast. When was the podcast before the Fed or after the I think it was after the Fed. Yeah, I listened to it on Thursday so yeah it was after the Fed so he doubled down after the Fed saying now you're wrong like just nice coming down. And if you if you if you if you tell people to sell for long enough. Eventually you'll be right. Yep, it's just not for now. All right, well look, Apple before we jump into the Fed and the central bank so Apple, they, they did miss on their earnings per share and their revenue. Their iPhone revenue missed decent miss actually 65.8 billion against 68.3 billion that's very sizable all things being equal in fact I did it was the first decline in iPhone revenue since the third quarter of 2020. However, context is really yeah, the 8% drop was still less than the 20% drop experienced by their main competitor Samsung. Oh wow 20% 20% right. So the devil's in a detail there it's like okay bad but how bad. Yeah, one of those scenarios. The other parts here Mac and other product revenues both missed but I was looking at the different revenue streams, Apple has, and if you're not signed up to it already. If you listen to this in time, subscribe to the newsletter because I've got some really great graphics that visualize the earning statement, the financial statement and you can see all the streams that the tentacles of revenue, if you like. I was surprised by just how much the services division pulls in these days. Well that's what's that include the app store. Yeah, so predominantly that's the big one. That's like yeah, and I was like, that's their second biggest revenue stream after the iPhone and it was up. That was up. So nearly everything was down that was 6.4% year over year. So, yeah, I mean it was, as far as Apple goes, you mentioned something similar with Google. I mean for Apple it's the first earnings miss versus consensus expectations in almost seven years. So it's been quite a while cook Tim Cook said the challenging macroeconomic environment her iPhone sales Mac sales wearables. So like the Apple watch as some of the rationale so yeah, Apple, and also the job situation on Apple. Well, yeah. Well, firstly, look, I find sales taking a big hit in quarter four of last year. It's not surprising, given zero tolerance lockdowns in China. Okay, so again this thing about backwards looking and forwards looking so Foxconn who's their big partner. China and they got a big plant in general, and that got closed down because of COVID and that had a massive disrupting factor. So big supply chain disruptions, right, which we knew about so it's hardly surprising when it kind of feeds through into these these numbers right but the key thing is what it is what does it look like going forward and obviously that supply chain disruption factors. I mean I won't say it's gone entirely but it's, it's certainly almost gone and in fact, Tim Cook kind of talked about that on the call. He said that he expects iPhone sales are now going to really accelerate and he said we're now at the point where production is what we need it to be. And so the problem as in the supply chain issue, the problem is behind us. So that's pretty notable. Now they're on the China issue and China sales, China actual sales to not supply chain. They actually beat expectations. 23.91 billion. So 24 billion above 22 is expected. And this is that this is pre reopening right yeah yeah. Well then yeah but it's that well as you're saying that a lot of that is services right so lockdowns could argue app store revenue that's good news. If you're in a lockdown maybe could argue. What time on your phone. I guess. Yeah, you'd have to ask the question what is classified as a China sale. Yeah. I've got another got another acronym. Oh yeah for you in terms of measuring these these guys so the do you know who the chief financial officer is of Apple. I've won because everyone knows the CEOs right. So you missed the Tim Cooks and the light, but here's a here's a quiz for you. Who is without Googling it. Who is the CFO of Apple. I'm going to go for Peter Granny Smith. I'm at the grandson of the apple farmer. The name is Luca maestri is the CFO of Apple who's the CFO of Amazon. Hello. Come on. Brian, all south ski. Oh, Brian. Yeah. Good old Brian anyway, these guys don't get enough airtime I think you know the CEO gets the glory. Anyway, Luca maestri Apple CFO was basically saying that so his measure that he likes to bang out on these calls is active installed base, meaning the number of devices that are plugged into the Apple ecosystem. And that hit that crossed the two billion threshold. So that's up from 1.8 billion same time last year. So they have two billion active installed devices, which is fairly mind blowing. The services business is just amazing, because all these devices are plugged in gorging on the app store and all the rest of it. Okay, one criticism then of your CFO buddies. Yeah, is that their job is obviously to engineer a framing of what we've missed for the first time in seven years. How should I pivot this. Okay, right. Two billions a lot of people. So, you might have well have had a pattern of reporting this number. My point being is that, again, when I was doing some data gathering of some previous quarters reports. The next one was just such a classic. You remember when they moved to start attributing what classifies as someone who's watched an episode, and it went from something like the entirety of the episode to they must have watched seven seconds. Okay, so your metric is just like gone through the roof now and you're reporting metric is like, Oh yeah, like six billion times the squid game was watched and you're like, okay. So, yeah, I did one thing, you know, I think the CFOs are as much as you know they're kind of the silent people. They are artists of their. Well, the other one and the other one is obviously banging on about the strong dollar because they've all done it and my street did as well but he put a number to it. So he calculated or said that basically the strong dollar. He said, could have shaved up to 10% off our revenues that's basically $12 billion. So they're kind of estimating $12 billion chopped off their revenue purely because of the fact that the dollar strength that this is kind of a bit. It's just insane isn't it but. But yeah, that's so apple are the odd one out though aren't they out of the big tech giants right apple right now we've just opened 15 minutes on Wall Street after earnings apple up. 20% Microsoft are down one and a half they'll see reported earlier in the week. Amazon are down four and a half. Meta is up. Meta is up 1%. There you go. Yeah, or tame. Well, yeah, last night. One on top of the 20. Yesterday. But yeah I mean there's one was one notable difference between these, what one of these lot and the rest and that is their strategy around well cost cutting broadly but specifically within that personnel and laying people off. And whilst the absolute vast majority of the tech industry are cutting the facts and laying people off and in some cases obviously super aggressively with with Twitter being top of that list. Apple have chosen the exact opposite path and they are laying off nobody at all. And it's an interesting place there's two angles of thought I've gone this one angle is, this is a really clever move from Apple. And then the other angle is, this is not a clever move, but the clever argument is thinking about the cyclical nature of the economy and the fact that yeah sure, we're in a downturn. So, obvious thing is right cut costs easiest way to do that lay off some of the workforce. Obviously, a that's super expensive as as we have seen and some of the numbers we've been seeing are pretty mind blowing. So, Amazon 640 million on severance costs, but it's not just severance is not just laying people off. There's any so they had a kind of an associated impairment cost to kind of a decommission. We have space or Amazon's case grocery store locations. So Amazon spent 720 million closing stores and 640 million in severance costs for the 18,000 jobs that were lost. Google the severance bill. So they laid off 12,000 their severance bill they're saying is between 1.9 billion and 2.3 billion. Those numbers are crazy right if you've got your calculator out. Do you know how much that is per employee. Go on hit me 191,000 her employee for 12,000 employees. I mean, and they've got they've got a cost of 500 million related to office space reduction. Metta as we know their severance cost was 795 million. The list goes on right sells for whatever right so Apple have avoided these massive costs. So you could say that's a positive. And if the economy swings back up. As it always always does of course then you know these other companies will have to rehire again right and that's expensive and also it's really difficult to rehire that's the key here. You know there's 10 million job openings companies across America are finding it super hard to find stuff so I think that's apples probably main strategy. They've got enough cash to look will just wear this fat through the downturn, just so that we don't come get snookered on the other side when we're trying to rehire. So that's obviously the positive spin. The negative spin is very much different and thinking a bit longer term and where it says and what we've already touched on a bit and that's how these giant tech firms have been so over profitable with cash just spouting out of every orifice and they're like right we've got to something with this money and like Apple, you know share buybacks and whatever it might be right dividends and all the rest of it and then it's like right we've got to do something with this money right let's start these tangent projects and you build suddenly these huge teams who are going off and entirely different tangents and these crazy moonshot kind of objectives and I think that generally would be fair to say that that whole thing has gone too far. And now you've got these big tech giants with massive wage bills with a big portion of that wage bill actually not being productive. And that this is a moment in time where it's just, and this is Facebook, very much of this, you know is a good case in point it's like stop. You know we need to stop this long term direction of travel. And now that cash is valuable. The interest rates have gone up. Cash isn't free anymore and cash is valuable right you can generate a return on cash now. I think they should be less gung ho about spraying cash on these crazy projects and just kind of rain it in a bit so so more look more long term then all of this is a net positive for these tech firms. It's like it's like you've had this like explosion through the last 10 years, and then it's been topped up by this pandemic fueled situation where everything went absolutely nuts. 2021. Is this a necessary evil to just recalibrate back to a more fit for purpose way to operate to then continue down the path of growth that they have been on. I think that's a very good question because I think that to a degree yes, this is the right move but they can't overdo it. Take matter right. They're spending huge amounts of money why to win the end game which is to control the next big thing in human, the human evolution right which is the metaverse. If you were to say Zuckerberg should switch off all investment on the metaverse, because the company's got way too much cost is going in the wrong direction then fine short term that's good check out the share price is up 100%. Long term though it might mean they don't win that race and ultimately they miss out on the next big thing right so these companies think they've gone too far in that they've got too many kind of wild projects on the go but. They kind of need to be in that game if they want to be all over and dominating, you know, the next chapter and the next chapter and the next chapter. Yeah, because maybe I'm just talking my book a little bit but when I hear that Microsoft's open AI is going to kill Google and search forever. I can't help but think that this is exactly what Google needs. Yeah, it's like you need like human evolution or ingenuity comes from being challenged. Like, no one can stay on the top forever and the longer that happens the more naturally that progression innovation reduces over time and so actually think it's a good thing. Even though short term, it's obviously a destabilizing thing from a from the uncertainty of how big is this thing going to be and how much will it influence. Yeah, they're driving each other on aren't they you know you would say broadly probably but the innovation games we've seen over the last decade have been much more rapid than they would have been if it hadn't have been this that the big giants kind of slugging it out and kind of pushing them on yet. Okay, so out of Amazon, Apple, Microsoft, Meta, Alphabet. I don't want you to list them in the five who's and let's give you a time period long term investment. And this is purely for educational purposes. Just a caveat. Yeah, topic and who's your bottom least favorite pick out of the five. Well, the bottom Microsoft news shifted it at all for you over that medium long term play or or not. The bottom one. That was the easiest question in the world. 1280 months ago, it was met a hands down. Now they've collapsed in price. And they've done a bit of a U turn and they're going to cut some costs that you know it's not quite. I don't think it's quite as clear now as to who's going to be the worst of these. I think that's a really hard one to pick who's going to be the best. Well, certainly I'd say Microsoft have maneuvered up the list I think I was Google wasn't I when we had this in 12 months or so ago, maybe Microsoft have overtaken them, you know on the grounds of the AI thing but I mean I'm still not short term yeah. I think Microsoft and open AI have got first mover advantage, but it doesn't mean they're going to win it. You know, ultimately chat GPT just scrapes the internet. Right. So it's not like they own the internet. So that just means it can be challenged and obviously the likes of Google should be challenging and then they will cut they scrape the internet in the same way and so, whilst it's amazing this chat GPT thing. Don't get me wrong. It's vulnerable to competition, because it doesn't own the information that it's scraping and kind of working off but, but for sure yeah I mean I think Microsoft are just a juggernaut that kind of slow and steady and maybe yeah whoever wins the AI race of course is the answer to your question, whoever wins the AI race and will there be a straight out right winner or is there room for for for a few and who says you have to just back one horse. Yeah, exactly. I think I think I avoided that question quite well. Let's let's let's try and keep this this part on point and talk about. Let's not talk about the bank being an ECB so much let's focus on the Fed, because it's the Fed that moved, not just US markets but global markets midweek. They downshifted the size of hike so they're going for 25 now. And what one of the main things that people were picking out was that given the rally we've been seeing in stocks and bonds throughout the beginning of the year. It's will power comment either validate or push back on this market pricing, the market pricing being at the current point of time that rates are going to peak in March, and actually a subsequent 50 basis point easing cycle is going to take place at the end of the year and if you're going off fed language, it's unlikely that that's going to happen, the latter part at least. However, he didn't come out really explicitly in and say otherwise so. Yeah was that was that the most important part that you heard, or was there other parts because I know he mentioned about the first time that disinflation the reprocesses have started which was a key phrase. That's a key word. Disinflation so you explained to me what does that mean. In what just means. It's not. So disinflation is where inflation levels are dropping. It doesn't mean deflation of course that's when inflation levels are negative, but disinflation is that kind of middle ground where where inflation is getting lower than it's being dampened so for that individual to utter that one word. That's pretty huge. Right, and he knows he's not. He's not stupid. You know, he very consciously very carefully selected that word and said it. And I think that's quite significant and that's basically him saying with one with one the battle against inflation. I know we did say some other words contrary to that. Well here we go he said yeah yeah God I've got it here we're going to be cautious about declaring victory and sending signals that we think the game is one because we've got a long way to go. Okay that's what he said we're going to be cautious about that but basically that's what he was saying. With one inflation has been tamed were cuts were hiking by 25 basis points and you know what could well be the last one. And importantly, from the markets point of view. Yeah, in that question around, have you seen markets ramping higher recently aren't you worried about that and his answer was our focus is not on short term moves. It's been like to just go we're here. Let's carry on going up then, and they certainly did that and as that was up 3%. Literally 3% of the back of those words that came out is made. Do you think that if you were drone power, you come off the stage you do a depressed conference you've heard all these bears on Wall Street talking down the market. And then something like that happens do you think he gets a little like little buzz. He's checking his phone to check his share account and just to see. Yeah, have I done the Pelosi style II just check or just log into IG index so yeah. Well, interestingly, to kind of bolt onto this we just had non farm payrolls come out. And that was like a really strong headline figure. 185,000 jobs created non farm payrolls for January, the top of the range I think was 310. This figure came out of 517. That's well and over above. I just don't get it. How. How is it that high. Yeah, and the last six months I think we on an average it must be like a 225 figure for six months straight. But literally very rarely do you get a economic data release that just completely is so completely out of line without any real explanation. I just find it incredibly weird. I literally can't think of a way to describe how that number is so high. You got any ideas. No. Yeah. The average hourly earnings numbers because I actually saw that all things remaining relatively in line with jobs. I thought that the kind of magnitude of reaction would be determined by the average wages because indicative of inflation conditions, but that was that was basically in line in line month to month. I'm just thinking that maybe I have got a thought, you know, like the job openings figure so it was like 10 million right 10 million job maybe the job openings number as sharply dropped. Now that people are going all right fine, I will accept that job at Starbucks or whatever. Maybe that's something but anyway, it's a real outlier to say the very least. And I was looking like the initial market reaction to all of this was like whoa, hang on a minute. This is implying that the economy is super strong. And actually maybe that celebration on Wednesday with Powell saying inflation's behind us we're going to stop hiking and then all of a sudden it was like oh, hang on. Maybe the economy is so resilient but inflation isn't yet disinflation and that maybe the Fed are going to have to carry on hiking more so that's the initial reaction to markets was sharply down I'm talking about stock markets. Dollar strengthened quite a lot but I'm looking at the chart now. I'm looking at the NASDAQ, it sold off from 12,760 to 12,560. So did a 200 point sell off, then it's just turned and it's recovered the whole lot to go back to the highs. That's interesting that you're not getting downside on these well at least we'll see I guess there's a few hours into the close yet but certainly a very undecided reaction here on stocks given that they're so high. This week has just been crazy, the distance these markets have traveled through and here's a really good excuse to sell off and book a lot of profit. And it looks like traders aren't doing that, which would be a really bullish signal for the weeks ahead by the way. Yeah, so the Fed are coming to the end, jobs are still decent, soft landing. So this is the argument against your man from Morgan Stanley, he's saying valuations are too high, because they're not pricing the recession that's coming. But what happens if it's not even a soft landing what happens if it's even better than a soft landing. And actually we're just going to chug on through and the economy is going to stay super resilient in which case actually these valuations are fully just and maybe they look a bit cheap. I was just having a quick look while you were talking then because you asked the question why is that number so high. Yeah, it's good this is the way that we always encourage people to think right. It's like, I saw a headline it's like an eight sigma beat to expectations so basically if there's something is wildly out of line. That's not right. That figure is not right. Healthy skepticism right show me how that figure is generated and so I was just having a quick scan, and apparently Goldman's had a piece out in their preview before this, which in summary was talking about the outlier strong report being down to massive seasonal adjustments. And I was kind of like what's the seasonal adjustment then and it bearing in mind they were talking about before it came out they were the top end of the street. Right, they would 320 basically. Okay. So they were 320 but it was still wildly high. So their thing was and I not all of it makes sense to me because there's one thing about California that I've not heard before but they said, well consensus appears to expect the spike in corporate layoff announcements to weigh on this report. Consensus claims have fallen further. California warn notices suggest the majority of these mass layoffs have not yet been implemented. Ah, our well above consensus forecast reflects strengthen big data employment indicators, a boost from favorable seasonal factors that are spuriously fitting to last winter's Omicron wave. Right, still elevated labor demand and a 36,000 boost from the return of striking education workers. So, yeah, quite interesting to yeah, but even with all that being said, they were still 200,000 off the mark so yeah, I mean you can't get away from that that number but yeah I actually thought I mean I was covering this live right you were you were watching at the time and I actually market was selling off and I was actually kind of talking equities up thinking, you know, actually I think this is a bad situation to be in surely that figure in the current context and here we are it's actually the nasdaq is exactly where it was, reverse the entire cell off. Yeah, you've got the Fed turning dovish and the economy strong. Perfect. Yeah, the days are getting longer. It's Friday. Yeah, the beers are in the fridge. It's just happy days. Cool. All right, well maybe a quick word on the BoE and ECB and we'll wrap so both height interest rates both by 0.5% both talking about the benchmark key rate in the UK and deposit rating ECB at least their highest levels now since 2008. Yeah, a couple of things the rationale for the BoE majority said strong pay growth and ongoing shortage of workers were feeding price pressures in the economy. Bailey said that while inflation likely to drop sharply, the risks that it remains above 2% target are skewed more strongly to the upside than at any time on record. One of the points that they made was unique to them of course is the vote split to dissenters. They were both saying, let's just do nothing. So, you know, if you were there if you were the number of the NPC board, you would have been there as well. They also issued their every other meeting forecasts. And they're actually less pessimistic than they were in November. Now predicting a mild recession. And do you remember before it was like. I know a lot of us due to what's happened with the gas price. Natural gas prices have collapsed. And we were just expecting them to stay super strong and it to just annihilate a super weak consumer that's been struggling with inflation and all the rest of it so it's like the big bonus of this winter is that natural gas prices that have just come way down. But you know surprising everyone and of course we've had a mild winter, which obviously then plays into that and it's been driving some of that moved down so yeah, a bit of a bit of a bonus. Yeah, and then in the opposite fashion to Powell, Christine Lagarde said the governing council intends to raise rates by another 50 basis points that it's March meeting. I mean, as explicit as that. And they said they're going to evaluate the subsequent path of its monetary policy. Very much a reiteration of the hawkish rhetoric that they've had but despite the hawkish rhetoric one thing I did see from a stat point of view the other day was that the stocks Europe 600. So this is when you look at the border collection of European companies. So far this year. It's the best ever start to a year. Yeah, that it's had a mid load net gas prices you mentioned cooling inflation, resilient economic growth outlook remember it's the UK the IMF said this week is the worst of the bunch. Europe's not so bad. Goldman's actually said on that note that regional equities have the potential to extend their outperformance against their your US peers base or helped by cheaper valuations. Yeah, we were talking what months ago about Europe, you know, being killed. Yeah, when all of the peak of the Russian, you know, kind of situation was happening. So is that fair. Are we still better priced there for value in. Well, yeah, if you're of the opinion or when the next kind of global upturn begins, right, which will be the first time well, I don't know it's in the future but it's expected to be the first time where we have a synchronized global upturn. Now that China have got rid of their zero COVID it's like, at some point this year, some are saying it's already started, some are saying it won't happen till the second half you're going to have this synchronized upturn. Okay, now, if that's the case then great. All, all regions, you know, are looking good from an equity point of view so where's where's best to put your money well where's the cheapest. That's where your money should go if there's going to be a global upturn right and at the moment valuations in Europe, look cheap, relatively, and you know, as long as Europe can get through that. That what was an extreme risk with the Russia Ukraine situation last year, even though obviously it's still ongoing that conflict, but it looks like from a natural gas and a crude oil point of view. It looks like Europe have sorted it out and so with that as kind of backdrop then then yeah some of these stocks that pretty cheap compared to the US where yeah valuations relatively a lot higher. Cool, well look, let's end episode 100 there. Once again, for our regular listeners thank you so much for, for joining us every week if that is the case. I do get messages, you know people on their run or driving or on the train stuff like that so look. Another one thing is we really appreciate it. We hope it helps, you know, take part in the finance accelerator if you haven't already done so. It will help you in so many ways to figure out about yourself your future career, and then hopefully by listening to this and being involved involved in the community the newsletter will help you then also build out that commercial awareness and hopefully set you up for that application cycle to outperform. I think that a real pleasure and a privilege and do connect with us on LinkedIn. Do send us anything you want to see here in the podcast for 2023. I'm working on a series at the moment. I'm doing some outreach to some of our corporate clients to try and talk to their early careers teams to join me. I'm going to drop a new series and a midweek episodes that specifically talking about big firms and what they like to see in Canada so hopefully that'll be super useful. And then, as always, me and peers will battle it out at the end of the week. Here's to the next 100 insurions. Enjoy the weekend. All right, thanks peers take care everyone.