Chit Chat Stocks - Inflation, Q4 Earnings, and Supply Chains Update With Erick Mokoya

Episode Date: March 16, 2023

In this episode, we'll be diving into the current stock market earnings season and other topics Erik Mokoya has been reading about for The Transcript. Listen as Brett and Ryan ask questions for Erik to answer. Enjoy the show! ***************************** This episode is sponsored by Stratosphere.io, a web-based terminal for financial data, KPIs, and more. Try it out for FREE or use code “CCM” for 15% off any paid plan. Sign up here: https://www.stratosphere.io/ ***************************** Want updates on future shows and projects? Follow us on Twitter: https://twitter.com/chitchatmoney  Subscribe to our Substack to receive free show notes and charts that go along with every episode: https://chitchatmoney.substack.com/ Subscribe to The Transcript: https://thetranscript.substack.com/ Contact us: [e-mail] Timestamps Earnings Season | (2:58) Supply Chain | (5:07) Layoffs | (14:55) Semiconductors | (33:38) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. My name is Ryan Henderson, and I am joined by my co-host, Brett Schaefer. Today, we have our Thursday deep dive episode where we interview an analyst to typically discuss either a single stock or a single industry. But today, it's more of a broad based discussion we have on the show, Eric Micaiah. He's one of the authors at The Transcript. We're trying to talk all things fourth quarter earnings because they analyze and look at a bunch of transcripts across basically the entire investing world and have plenty of takeaways from it. And so this is really quite the broad-based discussion. We covered everything from supply chains to what he's seen with inflation and layoffs and also the Chinese market. So this

was a lot of fun, not our typical conversation, but really enjoyable nonetheless. Before we get to the interview though, we want to talk about our sponsor. Today's episode is presented by Stratosphere. Stratosphere is our investing home screen for fundamental research. Stratosphere has really cool data visualizations, SEC file aggregations, and custom built KPI tools that I don't think you can get anywhere else. We use it. If you're a regular listener to the show or viewer, you know that we use this religiously pretty much every single day. And we think you should too. It's totally free. Check it out. Stratosphere.io. That's stratosphere.io. And if you want any of the paid plans, you can use the promo code CCM for 15%

off. If you're more interested in the platform, stick around after the episode, we have a little three-minute interview with the founder of Stratosphere, Brayden Dennis. But without further ado, here's our interview with Eric Micaiah. Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guests is not formal advice or recommendation. Now, please enjoy this episode.

All right. Welcome in. Today, we are joined by Eric Micaiah. He is an author at The Transcript. You've maybe come across their work on Twitter or Substack, but either way, this is the first time we're chatting with Eric. Typically, we talk about one specific stock on these shows, so this will be a little bit of a different format because we're more just trying to address broad concepts of kind of what you're witnessing around earnings. But I guess before we dive into like this earnings season, could you maybe explain what the transcript is for people that don't know? And then I guess what you've been covering lately there. So thank you, Ryan and Brett for having me. Eric Mokaya, of course, based in Sweden. So we work

with the transcripts the transcript is more like an aggregation of all the best quotes and thoughts from earnings calls so it's take our time to read through all the transcripts that are put out each week almost close to 100 each week but we read close to 30 to 50 so we spend time like going through that to distill like the nuggets and then we we check them and send them out to our readers every every week so we have sections macro financials and all we go through those and we put some quotes out of the themes and then we have like this really nice newsletter where you can read through and get a feel of what's happening in the markets and what executives are saying about the various items so we kind of give you a bird's eye view of all the companies that are

reporting during the earning season and what themes they're pursuing or at least what the executives are focused on so we we do this mostly through our newsletter and then we share a bit of tidbits on our podcasts uh we do we have regular posts also on twitter so we have a good a good number of people around 30 35 000 people following us on twitter and 18 000 uh think uh free subs and around 450 paid subs so that's how we that's in a nutshell is the transcripts yeah i'll give a quick pitch before we get into it. It's perfect for those industries you don't have the time to follow closely. So for maybe those few seconds, you probably follow, any listener here probably follows a couple of sectors, but there's things in there, especially for me personally, there's

some semiconductor stuff I don't follow too closely or housing stuff I don't follow too closely. And when I read the newsletter, I'm like, okay, cool. That's how the industry is going right now. Just, I don't have time to spend a few hours each week. But speaking of the stuff as I've been covering lately. Supply chains, I guess, is our first topic here. From what you're reading, have executives indicated

that the supply shortage is over? Has it turned into a glut? If so, kind of what industries? I mean, just anything on the supply chain stuff that you're seeing from the executives right now. So I'll take you back a bit to 2020,

2021, 2022, and how it's been so far. So I think we had the pandemic and suddenly everything was shut down and everyone had to go back indoors and because of that people started you know buying a lot of stuff online stocking up and because of that there was a lot of congestion during that period of time we had a bit a ship maybe getting stuck somewhere in the middle east and also at the same time creating such a huge problem in terms of flow of goods so with that high demand very little supply

going on there was of course a supply shortage and what has happened in the past year is that we had we have had as economies are opening up, a bit of the supply chains becoming normal, a bit, normalizing a bit. I mean, there was a statistic about a lot of ships being in the East Coast not being unloaded for a long time in the US. And by the time I think I checked, the last I checked earlier this year, that had normalized. And those almost, I think, zero to uh to not to 10 ships now uh had not yet been unloaded i think in the in the west coast or east coast if i can remember correctly so i think what tells you what that tells you is that we've moved a bit towards normalization we're not here there yet in terms of normalizing completely

because there's some sectors of the economy where we still don't have enough goods to supply and that one of those areas is obviously auto and they're not enough cars yet to be able like to to satisfy all the demand that is out there and that flows back again to such industries like if you look at the semiconductor industry it had a bit of a glut last year but one section that still has a shortage is actually the auto section and that actually surprises me and then you dig a little deeper you realize semiconductors are not switchable you can't switch them from electronics and then take them again to uh to auto uh industry so i think in terms of looking at the entire supply chain uh the thing is we are normalizing not yet fully to normalization but a lot of

industries are back to normal i think that's what you that's one key takeaway maybe the second takeaway in terms of supply chains is about the globalization of supply chains that's a very key thing to to take note of so i think before the pandemic and especially before the ukrainian war a lot of people it was about being it was all about the theme was about globalization like can you maybe produce the goods which you're best at and leave someone else to do the rest for you so i think what happened is the u.s uh just focused on a few key stuff and outsource a lot of the stuff to china to vietnam and to these other countries and now what has happened in the past year so because of ukraine people are looking inward and think like okay we actually may have

outsourced some of our core competencies and we shouldn't have done that and one of those is of Of course, the semiconductor industry, which the U.S. was happy to give away in the 80s and 90s to China and Taiwan. Now what is happening is what you call reshoring now. Companies want to check out, okay, yes, we have a TSMC in Taiwan, but can we also have something like that in the U.S.? That's why a lot of companies are now coming back to the U.S. to almost create redundancies in the system so that you have a factory in the U.S. where you can produce some of this stuff like locally. And of course, that's going to create

a lot of inefficiencies in supply chains. But what's happening is that some of the countries and places that are actually winning are like Mexico. So if I like Mexico, people want, especially U.S. companies want to have, be as close to home as possible and still get the affordable labor. So then you have to focus a bit on countries like Mexico.

So those are like the key takes away, especially in terms of supply chains. I don't know if you guys have also been experiencing the same. I mean, yeah, I've been reading a lot about the Mexico stuff. And I'm wondering from what, you know, specifically on the reshoring, what specific industries have been talking about going to Mexico and maybe South American countries pulling out of Asia or pulling out of other areas?

Is it broad-based? Is it more commodity stuff? Is it semiconductors, specialty stuff? i mean any specifics from the industries you're covering so in terms of specifics i would say semiconductors are the most common which are moving not to mexico but specifically is the u.s and you know having a factory over there in terms of the kind of companies that are moving as to i haven't really checked the types of companies it's just that a few companies here and there are really thinking about can we move our our factory to the u.s and probably if not the u.s at least to Mexico.

And what's happening, at least some of the benefiting companies are companies involved in real estate or involved in developing factories, construction work around that, especially in Mexico and all. So a couple of companies there which maybe talk about it. So I don't have like specific companies. I may have to dig a little bit deeper to give you maybe it's an industry focus and all, but I would say like these

It's just this general tendency towards making sure that you have the factory or the source of production as close to you as possible. I think that's the general trend. Interesting. And on maybe Asia, is there any specific country that companies are talking about if they're moving out of China? Is it generally just to Southeast Asia or maybe is India the big one? Have you heard when you're reading stuff, do they talk about a specific country? know is malaysia winning versus vietnam or or something like that for my readings vietnam is one country that keeps coming up a lot so i'm not so sure why but maybe they have like a lot of cheap

labor and all and this has been happening even before uh before the ukrainian invasion happened so you could tell like there's a lot of focus on especially the the that country of vietnam so i think maybe it could be like the dynamics in that in the country i think from what i read are closest to what the uh what the situation is in china so then moving stuff from china to vietnam feels a bit more like you're moving from one place which is similar to the next place so you're not changing a lot in that regard so i think also maybe availability of cheap labor i think that's also happening i haven't heard a lot about india uh the most common place i've had india i mentioned is maybe in tech uh so companies like microsoft uh and i think i think

microsoft ceo satya nadella since he's from india also i've been very focused on that i think he he spent a week or two last month uh two months ago i think in january in india trying to get a feel of the land i think uh so they're very invested there another another company which i think has also focused a bit on india is also um google i think it's google also which has been focused a bit so what you have is that tech companies maybe focus a bit more on india and manufacturing companies want to be maybe in vietnam and the rest of the other countries in southeast asia so that's like what are the pickings is from that area do you see it i guess impacting margins at all for these companies are they be are they uh i'm curious like they i know a lot of people a lot of companies

are talking about reshoring do you see this like i don't know if management's talked about it across their earnings calls, but do you see this impacting the profitability at all? Near term, I don't think there's much of an impact right now, but it's in like long term. I think it was the TSMC founder who was talking about these redundancies being created in the supply chain system are going to impact margins, especially for companies. So I think one of the quotes he said, I can't remember correctly, but I'll look for it and maybe you can add it to the show notes,

is about if you move to the U.S., it's not going to be competitive for them to produce, especially semiconductors at a price where they can able to recover some of the capex that they are putting into these factories. So they say, because U.S., first of all, doesn't have the necessary kind of IT skills or at least skills to be able to operate

some of this machinery that has been easy for them to do in a place like Taiwan, where a lot of this talent, a pool of talent has been attracted because of the presence of TSMC there. So I think for them to recreate that in the U.S. is going to cost them a lot more. And you take them a lot longer to create something that is cost effective. So I think those are some of the companies I think which may be impacted. So from that, you can draw that maybe for the medium to long term, of these companies have like an impact in margins in terms of how where they're producing the goods from i mean apple itself has to move its manufacturing now from almost china because

of the issue of corvid had to look for maybe vietnam and now also has to move to the uh to to with tsmc to the us at the same time so lots of things going on but obviously margins will be impacted short term or at least medium to long term okay and another i guess we're kind of going to just hop from theme to theme i i think what we what we've seen from their earnings at least on our end uh one of the themes i guess has been layoffs i said there's been that chart chart that's been circulated around on social media of like um all the different layoffs going on at various companies um but at the same time we're kind of seeing uh unemployment uh or the employment numbers look pretty good so i guess um what are you seeing in terms of layoffs why are the companies

performing these and then what what have uh executives said about them so in terms of any in terms of layoffs i would say like of course it's a tough time for most people i wonder i was I was one of the people I was actually laid off from Klana. I don't know if you know that. The fintech early last year around May. So they were one of the companies that was very early in terms of noticing that the situation in Ukraine is going to impact the consumers. And because of that, being a credit focused company, they're going to be some of those

who are going to be affected deeply because, you know, payments, people become late on payments once the situation becomes worse and all. So I think I was actually one of very close to the management team in terms of doing analytics for them and able to identify the trend that's happening back then. The situation was actually getting worse

during the year. All the targets we had during the year were actually going, we've measured against those targets, we're actually doing very, very badly. So quickly, I think, I didn't expect to be one of the people to be laid off now,

but I think it's like 10% of the company has to be cut off and I fell into that 10%. I was given a nice send-off package, which was really nice. But then immediately after, I just came and focused fully on the transcripts, and that's what I've been doing. So I think these layoffs, I have kind of a personal story to them, and I see exactly what's happening.

So I think some of the things that I've picked up in terms of from the layoffs and relating them to the experience I had at Klarna was that most layoffs, when they are within tech, they're actually not tech people being laid off. it's actually sometimes you know people like hr are hiring managers i remember like a huge percentage of the people who are laid off with me were actually some of the people who hired me and did interviews on me to come to klana so i think like in the sense so when you hear tech layoffs sometimes it's not just tech people being laid off it's actually a majority of whom may be actually non-tech people in tech companies whom they not don't need for the next one or two

because if you're laying off people for the next one or two years you don't need 10 or so hiring managers doing the same thing that was being done before so i think that's something very important to pick up and then secondly also that most of the layoffs are within the tech sector so it's in the tech sector as a percentage of the of the economy is not that big so it's big in the sense of uh you hear like 10 percent of people are laid off for this company but remember some of these companies have also over hire during the pandemic so they're just actually trying to go back to maybe the trend line where it was before uh if you see there's a chat about e-commerce uh that is that does it on sometimes where there was this uh trend line

and then during the pandemic there was a bit of going up and then now we're back to trend line and i think that's what's happening to these day the companies they're just like they're going back to normal where it was before so i think that those are somewhat like the key things to keep in mind when you look at this kind of like layoffs especially but then also what's happening the labor market is this it's very interesting uh that there are companies which work which were complaining before especially in earnings calls even i remember one where the ceo asked the people in the car the analyst to apply to be to be drivers in his company because he couldn't find people uh to hire uh so i think because of that then a lot of companies especially restaurants

It was really difficult for them to get people just during early parts of last year. But then what you're seeing now in earnings calls is that it's becoming easier for them to hire. Why? Because some people are laid off from tech companies, inflation is beating them, and they're coming back to the market. And I mean, some of these companies which didn't overhire are very glad to pick some of these really brilliant people at lower prices than they were picking them during the pandemic and even post-pandemic slightly. I think that's why I think one of the statistics I had was during the earnings call, the Uber CEO says what they hear from the drivers is that inflation is actually a factor that they're considering in terms of coming back to become Uber drivers. So I think 70% of them are coming to the Uber platform because they want to earn a little bit more income to be able to offset the impact of inflation. So people are being laid off. Inflation is super high.

They're like, hey, the money I got from the layoffs is not enough. i need to supplement it let me do go do an uber let me be an uber driver let me go and serve at the restaurant and suddenly now it's becoming easier for everyone else to hire so like those are like some of the key pickings that i would say from the layoffs and labor side of the markets that you're seeing in learning sports yeah it is it yeah it's funny how much of a full circle we've made since like 2020 when i remember specifically there were companies that were almost bragging in a sense about how many employees they were hiring. They were like, we were able to attract this much talent. And now, two years later, they're like,

well, we overhired. But yeah, you were excited about it at the time. I guess, are there any other sectors where you're seeing maybe other than tech where layoffs are really common or maybe labor is an issue? I would say I think truck driving is one area where labor has actually been an issue. I don't know why. Maybe it's younger people don't want to be truck drivers anymore. So I think that's been a bit of an issue. It does have a bad stigma.

For some reason, it's a bad stigma. I think so. Maybe the long hours and all are not very attractive to younger people. So I think that's one area which has had a bit of a problem. But I think most other areas are actually getting better in that regard. As I said, inflation is pushing people towards now rethinking, okay, I had too many options that I need an option very quickly to generate some income. But I would say in terms of maybe layoffs outside tech, they're not that much.

I think just this week I saw something like General Motors wants to lay off a bit of a few people here and there, but they're very few. So it's not like 5%, 10% of the company. It's like 500 people here, 200 people there. So not much happening outside tech, I would say. But maybe a key thing to keep in mind is ZipRecruiter had their earnings call last week. And one of the things, it was one of the darkest earnings calls I've seen in terms of the outlook for labor markets. And they say that companies, especially small businesses, are slowing down their rate of hiring.

and that's impacting recruiting platforms like zip recruiter which have to slow down also for themselves i think that's something to keep an eye on i don't know how serious that is but that's i think it's them and some other online recruiting companies are saying okay what we're seeing is that uh small businesses are slowing down in terms of hiring new people so that's i don't know the impact that can make but good to keep an eye on that yeah for sure it seems like there's a white collar recession. And speaking of the, I guess, layoffs and the labor market, they really tie into inflation. You mentioned it a few times. And that's kind of the big thing people are talking about. It seems like we've reached a crossroads this winter where we're either going to have

inflation continue and back to normal, or it's going to stay kind of at this 5%, 6% range. I'm wondering what you're reading on conference calls about executives talking about their costs, they're easing inflation or you know inflation that's sticky any big takeaways you've had this early season so i i would i would maybe take you back to our latest big newsletter the title is pesky inflation and i think that's actually what we're having so there's this i mean taking taking you back to last year uh early last year everyone was wondering when inflation is going to come and then the ukraine situation happened and suddenly now we actually had inflation and earnings calls, some CEOs were wondering

why the Fed is not rushing to deal with inflation. And now we've got to 8%, 7% inflation, which some of us have never experienced in our lifetime. I mean, it's been the 2010s was all about like 2% or below 2%. In fact, in Europe, we had like deflation in some sense. But right now what companies are doing is they actually are having to dig out their manuals on how to deal with inflation. The companies are having an easy time, actually,

are companies which have been dealing with inflation, especially in emerging markets. Some hyperinflation companies like Procter & Gamble, they have a lot of this experience in terms of they're able to raise prices quickly as the rest try to figure out how do we deal with inflation and all. So I think those have benefited a lot from having the playbook in terms of how to handle inflation.

And the playbook is simple. You have to raise prices at the end of the day. So like if your costs are rising, you have to pass it on to the consumers. And now that comes down to, do you have the, are your consumers too, I mean, if you raise your prices so much, will volume shrink?

And what I'm seeing, at least in earnings calls for some companies, if you raise prices, volume also shrinks so much. So I think those are some of the things that price elasticity is one thing that a lot of companies are having to really focus on but so far i think early this year what you get from running school is that inflation is coming down it will not come down to two percent three percent budget will be maybe around like five percent that's what this feel you get like it's

down but it it's not going down so far so i mean for mining schools it's kind of what the fed is seeing at the same time um so but one key thing i would say that i've picked maybe for mining because also from, I think, Stan Druckenmiller, I think he talks about it. It's about like the Fed never stops, I mean, raising rates until the inflation rate, the Fed rates goes above the inflation rate. And right now we are almost at that point

where those cross a bit, where the Fed rate goes above like the inflation rate. And then that's when you maybe expect the Fed to stop. And of course, that always has an impact in the markets and all. I'm not a very good, my partner Scott in the transcript is better, like the history of all this stuff and all. But that's what I can pick for mining schools. So the inflation is going down, the Fed fund rates obviously is going up, and that has to keep going until we have a positive real rate in the economy for the Fed to stop. Those are like, that's all I can tell for mining schools.

I guess it's kind of tied to the topic of inflation, but what are you seeing from the consumer side of things? I've seen some comments that consumer spending is really holding up well, and then I've seen some – I think Walmart is one that talked about the consumer looks fragile. Is it kind of a mixed bag in terms of what you're seeing? I think exactly I think you put it correctly I think it's a mixed bag in the sense of their companies are dealing with a very pressured consumer and then companies that to be companies especially like Walmart even within Walmart you find like where inflation is stickiest is actually within places like food food inflation is refusing to calm down as much as possible and if you look at the general economy people are still spending on travel people still want to dine out even

even though inflation is super high. And for the Fed and for most companies, they can't make sense of why is the consumer actually desiring so much to spend, especially on services, yet they feel pressured in other aspects. So they've cut down what the consumer has done, which is very unique. They've cut down a lot on electronic spending.

They don't spend on electronics. And, of course, any company exposed to electronics has had a very rough 2022. But then at the same time, they're taking all this money that they're saving from here, putting it in travel. They're traveling, they're booking, they're taking cruises. I was just checking this week, I think Norwegian cruises is almost back to pre-pandemic levels in terms of bookings.

So they're almost surpassing. This year, they're going to surpass the 2019 levels of bookings. I think that tells you people really want to be out there. I don't know if it's the pandemic that suddenly tells people, go out, have fun as much as you can. So that's what's happening in the economy. So a pressured consumer, but still a resilient consumer, still spending, especially on services. And I think for that, then the Fed says, hey, we'll keep raising rates until this service inflation still stops going up, or at least they stop spending on services.

That's one of the key things the Fed is focused on. I'm pretty sure another stat to illustrate your point is, yeah, I just found it here. The average daily rate of an Airbnb rental is 36% higher today than it was in 2019. Apparently, that's what the company's CFO said. Yeah, I find it staggering that people are still able to spend up so much on travel and some of these more discretionary items. In terms of the retail market, are you seeing any segment perform better than others? Like, is the value consumer kind of holding up better than, say, the higher-end luxury items or vice versa? I think the person who's actually holding best is the luxury consumer across all companies that I've seen.

The only place where luxury is not doing well is China. And obviously, that was because of the lockdowns that happened last year. But the luxury consumer is spending like crazy. So I was looking at LVMH across all their business segments. They are like 10 double digits growth across all their segments. So it doesn't matter what it is. As long as they put it out, people will buy. So the luxury consumer is doing really well.

So Ferrari, all those companies, they have like backlogs of orders, tons of backlogs of orders. LVMH can't meet enough. The demand is out there and China is reopening and they're going to grow much more again there. so i think what you find is that the luxury consumer having a good time maybe they have a lot of money i think saved during the pandemic especially after uh all the money that the fed was able to give to them in terms of all these like savings that they made i think that's what's

uh pushing and also uh they're not doing that badly uh so the person who's more pressure is the lower income and the middle income consumer so the pressure is most on the lower income uh consumer the luxury consumer still doing well the middle income consumer still doing moderately well a bit pressured but still also still spending so i think that's kind of the sort of outlook on how the consumers are doing uh so across retailers uh walmart of course tells you that the consumer is pressured but still spending home depot tells you like okay consumers are no longer interested in kind of remodeling houses and all. So they're slowing down on that.

So their Home Depot is guiding on flat revenue growth for 2023. So I think that tells you a lot about where people are spending. People are spending, but they're very picky on where they want to be spending, on where they want to get maximum value

for whatever it is there that they're choosing to spend on. So that's interesting. All right. One last question on inflation. what companies are doing well or what type of companies are doing well to absorb costs. So for example, like who, you know, who's saying, okay, I guess a good example would maybe be Chipotle where they're able to,

you know, they've had to increase their wages, but they've able to, they've been able to have that pricing power. Is there any specific industry that's doing well? Is it restaurants? Is it home builders is whatever, or is there anyone that's bad at that? And just any takeaways on absorbing costs? So in terms of absorbing costs, I honestly haven't really dug deeper to check out on who is absorbing costs best. But from what I can tell is that most companies are holding up well. The impact on volume when they raise prices or at least the impact on margins has been pretty manageable, especially for 2022.

The worry is, of course, as you head into 2023, that you may not be able to pass on those costs because the consumer will be fatigued. because they also have a limit to which they can take those price increases. So I think that would be my main worry for 2023. For 2022, it wasn't much of a big difference. I mean, across retailers, I saw like they were able to raise like, I think one was able to raise like double digits. If you look at the price volume mix, you find like price has like 12% and volumes like minus 4%, and then you have a net of like 8%

one of the consumer companies was looking at. So I think, as you can see there, like the price was able to offset the volume impact. But then is that sustainable going into 2023? I don't think so, especially the consumer is already spending down some of the savings that they already had. So generally though, I would say,

I haven't really looked keenly on which sectors are better at passing on. But for 2022, most companies were good at passing on the cost to the consumer. So margins are not that impacted. So 2023 is where we really need to look at that. Maybe that's why a lot of companies are worried that we have a recession this year. It might be. Yeah, it might be the rationale for some of the layoffs as well.

I guess another sector we kind of wanted to touch on was the semiconductors. it seems like it's been quite the whipsaw in terms of end demand for the semis what's kind of the industry as of Q4 2022? So for Q4 2022 what you find is if you look at the semiconductor industry there's a bit of glut in some pockets of the market especially still again

it goes back to what we're talking about in an inflation segment where consumers are spending more on services less on electronics and all So because of that, then electronics, any company that does semiconductors for electronics is having this huge impact in terms of they had a really tough 2022 and especially Q4 2022. too but going into 2023 it seems like they're finding that right balance between supply and demand and for some they're cutting down on the amount of semiconductors they're going to produce especially going to the electronics segment but what i'm learning a lot especially from someone

like gavin baker are very active on twitter so i read a lot about what it is is that for the semiconductor industry you almost have to try and anticipate when they will be a turn in the market because by the time it appears in earnings calls, it has really changed. So I've had to change my mindset in terms of when I'm reading earnings calls, especially for semiconductors companies, what you find in earnings calls is a bit,

the information is maybe a bit too late. So you have to try to be anticipatory. So like a year or so ago, when there was this huge shortage of semiconductors, and then, you know, within last summer, by the time the fall came, there was really a glut of it. So I think like those points of change,

I think those are some things that I've really, really loved to observe. I'm not yet perfectly good at checking out the signals or the signals, but what I can tell is that auto semiconductors are still in shortage because the demand for automobiles is still really high

and they're not able to meet the supply so far. So, electronics still having a bit of oversupply in terms of semiconductors. So, I think those are the two key segments to keep an eye on, especially in the semiconductors industry. But again, the key takeaway, just be anticipatory for changes because they're very swift and you never know. You don't have clues in advance to tell you what to do when these times happen in the semiconductors industry. Yeah, it's a fascinating industry. And I guess going to our last section, we've hit a lot here, but this is our last one. It relates to semiconductors is China. I'm really interested, especially, you know, this last quarter, how executives are treating, you know, the potential of, say, investing in China, you know, like companies like Starbucks or companies like I'm trying to forget some of the other American companies that are doing it. Maybe a Costco, Nike, maybe, yeah, Nike versus the risk of, or versus pulling out. Has that dynamic changed or are we kind of the same as the last two years where some

executives are skittish about it? So I think if you look at China, a lot of companies are what you call skittish in the sense of like, they're not, they're still invested there. No one is ramping up or scaling down in terms of like investing in China, just on a wait and see approach because of the situation that they have between the u.s and china and the mixed situation also with russia and all i think a lot of companies are just on a wait and see mode but i think because last year was a kind of a pandemic here for uh china a lot of shops are closed and q4 was having this huge impact in terms of because of the closures in china a lot of

companies especially luxury companies they'll be a match very exposed to china starbucks very exposed to china they had a tough q4 but then now what has happened in january the the restrictions in china have been well withdrawn and then the chinese economy is opening up and from what i can read in earnings is especially today i think this week i was looking at the visa ceo i think this our mastercard ceo was saying that it takes a bit of like three to six three to nine months for the economy to open up fully for people to start spending again as they were before but early signs are that people are spending. It's a bit of like when the gate opens, there's a floodgate in terms of consumers just wanting to go to Macau to enjoy themselves, to do a little bit of gambling

and all as much as possible. And the companies that have reported so far, they're showing that January, February was really good in terms of consumer spending there. So I think it's good to keep an eye on those companies which maybe they took a hit or didn't meet the earnings expectations for Q4 or for 2022, mostly because of the exposure to China, they could have a huge rebound this year. So from what you can see in earnings calls, all executives are excited about the reopening in China. They're a bit cautious on the impact each, like they're a bit cautious in the sense of they're looking out what impact would this have in terms of demand on goods and services, demand on electronics. They're trying to model and see how the consumer is going

to respond after being in a, in a locked up for a while for too long. But science so far, they're positive. Fascinating stuff. Last question. And this one's going to be personal as we wrap things up. Thank you for coming on the show. Oh, Ryan, you have one more before we hit. I got one more. So, and part of, I guess, running the transcript or being an author there is you get, you guys go,

you pour through so many different calls. if you're looking out across all the earnings you read this year or read this quarter are you feeling more pessimistic or optimistic than you were kind of before the quarter for say the market generally i know that's a really tough question to answer but um or has it kind of not changed that's a really good question to be honest and i haven't really thought about it much i can only maybe draw a lot from, I think, I can't remember the company specifically that I was looking at this past weekend.

So WPP, and they were talking about the mood for all the executives since December to right now in February. So what happens in December, executives are very dark and they're gloomy about 2023. The expectations are this huge, hard landing is going to happen. And then what has happened in the past two months

is that they become a bit more soft. And what you sense in earnings calls are people anticipating, especially the second half of this year, be a good part of the year. So I think the first half is where they're expecting maybe there will be a bit of turbulence and then the second half.

So I feel like I, if I look back, I have a similar kind of outlook. Last year, I was a bit pessimistic about the year and myself now I'm a bit more optimistic about the year. Of course, there's those tendencies you read one quote here, one quote there, and it's like, oh, it's going to be a really rough year and all. But generally, I think the mood is a bit more positive

from earnings calls than it was last year. Maybe executives are a bit more visibility to the year, and maybe they've gotten a bit of incoming data to help them become a bit more comfortable to make plans. I mean, what you can read also in earnings calls is that companies now want to do a bit of investment, which is not the case like last year. that cuts down and we're really conserving everything in cash.

So companies are looking to see where are the next two waves in terms of growth and where can we invest? And of course, one of the areas that they're choosing to invest in is AI. So I think that's what I would say, my personal perspective. I wish Scott was here and then he can share a bit of his perspective on how the year has been. But I think he would share my optimism for the year ahead. We'll have to get him on the show.

Yes, I do have to ask, this is kind of a joking question, but are you sick of the AI talk on the conference calls yet as someone who reads 50 a week? I honestly skip a lot of the jargon. Because I think we've done this, I think Scott and I have been doing this for seven plus years. So I think by now we know what is fluff and what has more meat to it. So AI, I think the thing is,

there's a bit of a difference between the talk about AI right now And the talk that was last year about the metaverse, last year it was all about the metaverse and now it's about the AI. The metaverse was, even Scott and I, like we agreed, like it sounds very like ambiguous, but AI has a bit of tangibility to it. So you can actually identify some companies

which are actually doing well in terms of earnings and some are at least well positioned in the AI front and the impact it's going to have. And so it's about maybe the investor or the person just sitting down and seeing And which are the companies which are really going to actually benefit from AI? And some of those are already like jostling in the market. Of course, Google versus Microsoft, that's a good one to keep an eye on.

But who are the suppliers to some of these companies? AI runs on a ton of, it needs a ton of semiconductors, which are semiconductors companies that also need, you can also like bet on for the future. Which are some of the practical applications of AI that are going to be there? Is it health? Companies are going to be impacted. So I think AI has a lot more, there's a lot more meat to it. That's what I would say. So I think like it's not just a buzzword.

It may be a buzzword for everyone, but like they're actually companies are taking this and making something out of it. So I would say it's a big difference for Metaverse, which is a bit out there. AI is here and I think it's impacting. Even the asset of the transcript, we're really thinking about how, you know,

we do aggregation of earnings called transcripts. So what about us getting ChatGPT to summarize? So we played around with that a bit. ChatGPT summarizing some of the earnings called transcript for us. So can you be able to reduce the amount of time it takes for us to read the entire transcript? So I think the future, I think,

is all about you seeing how can AI make me more efficient so I can focus on other tasks which I'm better at than the AI can be good at. so i think that's that i'm not sick of it i actually love it all right that's good yeah yeah the uh because they are they are talking about a lot but yeah it is interesting uh you know eliminating the busy work that could help i think all of us no matter what industry we're in but last question personal one or really more for the transcript i'm interested and i think anyone who you know a listener who's you know would be a potential uh you know subscriber to the

transcript will be interested as well what are your guys's goals for the transcript over the next year and beyond do you have you know you're sticking to the same thing any new products coming uh stuff like that yeah i mean we want to create it and then sell it that's my goal just kidding that i mean we've created like it's grown a lot especially the past year so uh i think we've Doubled, almost doubled the number of free subscribers that we have. We came to Substack with 8,000, if I remember correctly. And now we're almost at 18,000, 19,000 free subscribers on Substack. So our goal is to keep growing.

And we want to get to at least 15,000 followers on Twitter. We have 35,000. So our goal for the year is almost being met. I want to get to 30,000 free subscribers on Substack. We're at 18, 19 there, so good traction so far. I want to get to 1,000 paid subscribers by the end of this year, so we're at 460, so 540 to go out there. So I want to get to this scale where we're able to do a lot more,

and if we make more income, we're able to, as I said, leverage stuff like AI to help us make us more efficient, to get better quotes, and then to make a better newsletter for our leaders at the end of the day. So that's our medium-term targets, our short-term really targets. I mean, long-term, we really want to keep growing. We love the transcript. We really love it.

Like I tell you, there was a time when we took a year off in terms of working on the transcript, and Scott and I actually missed this just because it's our way to read the world. We spend a lot of time. We get a lot of wisdom quotes. We get a lot of back and forth between analysts and the management teams. You get to see the executives who are really good at speaking and actually also doing stuff at the same time.

We're just talking. Because once they promise you something in an earning school, you want to follow it up again next session to see actually have they accomplished what they said and have they not accomplished. And then after a period of time, you can tell who are the best executives to listen to. So I think for us, it's just to keep growing,

build a community around the transcript on Twitter, on Substack, and perhaps bring on AI to be able to summarize the calls for us

and then we can be able to focus on our higher-end staff. So I think really good stuff to be looking forward to with the transcript. And maybe this is a point

to also tell you that you can find us at the transcript.substack.com and drop us an email at admin at the weeklytranscript.com. We're on Twitter, very active there,

So you can always like drop us a DM or so you can keep chatting. I think that's kind of basically what I would say about the transcript. All right. Well, there, there are your resources. If you want to keep track of Eric and all the writing that they're doing at the transcript, I guess before we go, I'm going to throw a disclosure on this. Brett and I are not financial advisors. Anything we say or discuss here on chitchat money is not formal advice or

recommendation. We are however, general partners at Arch Capital. So clients may have positions in the securities discussed in this podcast. Thank you all for listening. Thank you, Eric, for joining the show. We'll have to have you on again at some point. And we'll see you all next time. Okay. I'm welcomed by the founder of our exclusive sponsor, Stratosphere.io.

uh braden dennis braden welcome i wanted to basically give listeners that are interested in stratosphere more context around what the platform is so let's start there what is stratosphere and then why did you decide to start it yeah thanks for having me i appreciate it and i'm glad to be sponsoring the podcast as as a listener myself i like the deep dives i like the different guests the different perspectives on uh some interesting companies so i think it's a good concept for a podcast, which is kind of what led me down to making Stratosphere in the first place, which was I was making content online and frustrated with the tools that were available to me. So I started building a very scrappy version of the product just for free, just to

figure out how can I overlay 10 years of financial side-by-side up to 35 years we have now, and how can I actually build out a proper database of company KPIs that are not just revenue, but if you're looking at Costco, how many warehouses do they have? How many paid members are in our Costco members? Or if I want to do a comp against the streaming, how many Netflix subs versus HBO Plus, Discovery Plus, Disney Plus, how do I build out proper comps of those? Because those are the metrics that actually move the business. Those are the ones that actually move the needle more than any like gap financial metric you'll find. And so it started off as just purely a passion project. And I figured, let's just make the leap into entrepreneurship and

see where it goes. And, you know, it brought us here today. Yeah. And like you mentioned, it is the stuff that you can't find anywhere else, at least not And then, I mean, you could find it page by page and on their financials, but you can go through 35, uh, PDF filings and find it be, be my guest. And that, and that's basically what we did for a long time. So what do, I guess, maybe describe the pricing model. So people know, but, uh, you're going to say there's, there's a free platform. What do free users get? Yeah. Good, good thing. Cause our, our mission was to always build a free platform. And, And so we really kept true to our mission and give an amazing platform for free,

which gives you 10 years of financial statements on 40,000 global securities. So we don't list you just to US securities. It's on global stocks. We give you a watch list, the screener, comparisons on competitors, fundamental charting up to 10 years, filings, transcripts. You can look at the press releases right inside the app, news, ETFs, funds, super investors, hedge fund letters, investor holdings, and financial calendars. Those are all the features you'll get on the free tier. Now on the middle tier,

the personal tier, you're going to unlock up to 35 years of financials and just kind of like nice to have, like quality of life, like notifications being built in, price targets for building models, like business owner mode where you can hide prices, like kind of like just that next level for individual investors who want to level up. And then the top tier is for like investment teams and professionals who want to unlock that KPI data and request KPI coverage as well. Like a firm will be like, here, we want these 10 names in our coverage and in your coverage. And then you'll have basically our entire universe that we're looking at, which is great, right? Because like earning season comes around and we have it updated within 15 minutes

when Netflix comes out with their net subscriber ads, like it's right there in one place, especially easy to handle around the peak of earning season. That matters a lot for these people. And so we have a premium tier for that as well. That's the three plans that are available today. And now a perfect time to shameless plug our code. If you use CCM, you get 15% off any of the paid plans.

But I think that covers it pretty well. if you're interested please go ahead and check out stratosphere.io we'll we'll have a link in the description as well but uh thank you brayden for joining us ryan keep it up i really like what you and brett are doing and i'll be listening along