YouSaid · the spoken record

Alison Kirak Goldman

lines on the record: 29
first: 2022-05-24
most recent: 2022-05-24
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“The other risk that I think we're paying attention to, too, is the issue around regulation, and especially for the larger tech platforms. That's been a little bit on the back burner, as some of the other headline risks have crept up, but regulation risk is always a big one for this sector, as well as just geopolitical tensions that obviously play in. But again, everything we're seeing, the businesses are still performing at a very high level.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“And I'll give an answer that I don't know if anyone will have an answer to, but inflation, right? I think if inflation starts to come down all of a sudden our sector relative to what you're seeing and rates backdrop starts to feel a lot healthier, right? As slow economic growth backdrop with falling inflation and manageable rates, we're okay with that. We can navigate that pretty well as either tech investors or tech followers like myself. So that's the one thing I'd love to watch at a macro level. That's a tough thing to call. And so if you want sort of more micro clues, Brooke obviously hit on a lot of the stuff. We're watching other soft signals, right? Changes in management tone just to sort of adapt to the times.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“So, from my perspective, we're never going to be able to call the absolute bottom or the absolute top in a market. So, what we're really focused on are with every company we own, there's a couple critical variables that are going to determine whether they're going to drive their business forward at the rates that we think they are. So it's really that company fundamental. Are they meeting their revenue goals? Are they driving customer adoption at the level we expect? Are the margins still as good as we think they are? So it's all those micro data points that we're really looking for and really trying to get confirmation of because that's what ultimately is going to determine what these companies are worth and whether they're going to go up a lot in the stock market over the coming years.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“But when you kind of think about 2023 and beyond, right, those mega themes like cloud and e-commerce, digital payments, those are all very intact, automation, things like that. I think a lot of the headwinds that the sector is facing this year, whether it's interest rates, positioning a starting place on valuation, opportunity cost, or other sectors in the market, they may look attractive. A lot of that starts to reverse out into next year. And obviously with equities being forward-looking instruments, the market might start to sniff that out in the coming months. So I think brighter days are ahead for this tech sector. We've certainly seen a healthy amount of de-risking already. You've seen a large drawdown that at least in the growth-east pockets of tech rivals what we saw in the 2000 era. And finally, you are starting to see some soft signals that companies are tightening the belt. You're seeing headlines about a pullback in spending, slowing down hiring. So these companies sort of get the message. They understand that the macro environment's changing and they need to be tuned with that. And so I think those are all sort of healthy signals that sure there may be near-term volatility, but it does.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, maybe from a more tactical lens on my side, I agree with Brooke. I think brighter days are ahead for the tech sector. Of course, navigating any short-term period of volatility is kind of a hard one to call.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“So, I would be friendly in the camp if it's cyclical retrenchment that we're seeing right now that was going to reverse as we move across the couple years. Now, we can have a real debate about what we pay for those future streams of cash flows, but these businesses, by and large, are exceptional, right? They're producing great profit levels. They have wonderful margin structures. They're growing well in excess of the broader economy. And they're delivering real value to their customers. These are real businesses with real growth opportunities in front of them. And then it comes down to a matter of have numbers reset to the point where investors can get comfortable with the trajectory of nearer term revenues and cash flows and are the valuations more compelling. So from where we sit and what we're looking at, it does still feel like there's tremendous opportunity and prospects in front of this sector as a whole.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“So, if we just take a step back, we've talked about the fact that the macro environment has shifted tremendously, lots of cyclical factors that are weighing on the sector, maybe unjustly, indiscriminately right now. But ultimately, if you look at the sector more broadly, structurally, people are talking about a paradigm shift. Is there one or are we really just looking at cyclical headwinds now that will eventually retrench?”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Equity inflows over the last year. And so household allocation to equities is still at multi year highs. There are signals that retail dollars are starting to flow back out of the marketplace kind of for the first time in a little while. So the intensity of trading seems to be a little bit lower. Perhaps the direction of flow in or out of the market seems to be maybe maybe back out off albeit a very, very high base. But there's not a lot of evidence that that story has ended yet. And there's still a vibrant market participant and the names or the activity levels at a subsector at a single stock level certainly can change around, but that vibrancy in the market still seems to be there for the most part and is above what we were used to seeing back in 2015 or 2018 before COVID.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's a great question. And I guess there's a couple data points I would offer here. Some of the public available data for sort of bigger retail trading houses out there would indicate pre-COVID. We think the retail participation in the market was maybe somewhere in the neighborhood of call it low double digits percent of volume traded in the marketplace. And that number moved as high as mid to high 20s during the peaks of COVID when people were sitting at home. There was stimulus checks. It was sort of the advent of Robinhood. There was obviously momentum in the marketplace. So that participation of that P rate and volume really expanded or frankly doubled during the depths of pre-COVID levels to the peaks of that work-from-home era that we've had. And that number seems to have sort of settled now around this mid high teens. So the activity levels are above where they were pre-COVID, below off the peak of 2021. In terms of what they're doing, you're starting to see at least best we can measure, you're starting to see some outflows come out of the market in the last couple of weeks. I talked about $1.1 trillion of.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, you know, beyond some of the areas that we've already talked about, a couple other points that I would highlight. So, first, things are slowing a little bit out there at the margin. That showed up in a lot of the online advertising companies businesses, where you started to see them talk more cautiously. Now, some of that is still the ripple effect of the privacy changes, but generically in slower economic times, you could expect advertising dollars to pull back a little bit. And that's creating some uncertainty, but also some opportunities in that subset of companies. So, you know, that's an area where maybe the macro hasn't been as robust. Likewise, in the e-commerce verticals, you have seen that retrench pretty materially as consumers have pulled back their spending. So those are some areas where there's a little bit more incremental caution out there. But by and large, most of the companies that were focused on have had actually very good results as we've moved through this earnings season and forecasts have moved higher across the board for most of the names we care about. But I do think back to this idea that it's not a tech universe that you're looking at, but there's individual stocks and individual companies, the difference is really massive.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Other thing I would just talk about as well is that the e-part or the cash flow part really does matter. And whereas a year ago, a lot of investors were willing to look through the profitability of these companies to say the growth and the market opportunity is so vast, there has been a real shift in attitudes around the companies do need to be showing margin leverage. They do need to be producing free cash flows. They do need to have a path to creating those cash flows. That's something we've always believed in in terms of how we look at companies. But the market is definitely more focused on what's the earnings or cashflow power of each of these businesses and when will that be realized.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think Brooke hit on a lot of the things that we're hearing out there as well. I mean, certainly there's dislocations oftentimes create opportunities for longer-term investors. When you see correlations tighten up like we've seen in the market, everything sells off 7% one day. That's probably not the right way for all of those price stocks to be repriced on any given day. And so elevated index activity, basket trading, concerns around macro, those do create good opportunities. And I do think that you go back to sort of software eats the world as sort of the investing paradigm that I think a lot of investors have looked at. And one of the soundbites that stood out of me for an earning season that we've just had was the CEO of Microsoft, Satya, Nadala, and the CEO of ServiceNow, Bill McDermott. Both of them independently commented that when asked on their earnings calls about the impact of the macro or potentially slowing macro in Europe and elsewhere on software spending cycles, they both said that software.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Market is that the move to the cloud is kicking off a whole new cycle of security architectures and finding the right companies that are going to benefit from that. Again, it's going to create really compelling return perspectives for our clients out there. So cybersecurity is an area we're spending a lot of time on. And then semiconductor is probably one of the most controversial parts of the market, and I'm sure Peter will have opinions around this. But when we step back, the semiconductor industry is, you know, it's trading at a discount to the market multiple, implying that there's going to be estimate cuts in front of it. First of all, we think the discount is too high as we sit here today. But then also, the drivers of what's making semiconductors powerful out there is very compelling. So you think about increased content and things like EVs. You think about powering the cloud, empowering the growth in AI and ML. We just think that there's great opportunities around all that. You have to be really specific about the names you all know because there are some semiconductors companies that are on the wrong side of some of these trends or that are feeling margin pressure. We think if you can find companies that have the ability to drive up gross margins, to take share because they've”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“So, there's three areas of the market right now that we're spending a lot of time looking at. First would be software broadly. Second would be cybersecurity. And the third would be semiconductors. And we think that there's real opportunities in each pocket of that market. So with software companies, we've talked about the valuation compression you've seen, but those are businesses that are actually, you have to be investing in software to survive as an enterprise today. If you're not getting closer to your customer, if you're not using data in a more intelligent manner, if you're not staying on top of your employee base, your competitors are and they're going to take your market. So I was out last week with Microsoft for a full day of meetings with their management teams. And, you know, they completely acknowledge the macro environment is tougher right now. But they're looking at this as a massive opportunity to take share over the next three, five years as their products offer better, faster, cheaper solutions to many problems likewise in cybersecurity, it's not a surprise that the threat environment in cybersecurity is magnified given the war in Europe and everything that's going on, tensions between the US and other international players. But what's underappreciated by the”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“We are. So I've been out doing a lot of work with our clients and talking about the opportunities that this dislocation has created in the marketplace. And we do think that there's real opportunities for clients who have a long enough time horizon to think about the compounding nature of these businesses. So we are very long-term investors. We think about the businesses we're buying and how they're positioned, but we think the market's giving opportunities for people that can stomach the near-term volatility over the coming months, that this is going to prove to be a really interesting entry point for some of these businesses. And it all comes down to can you identify the right businesses? Can you find the right teams that are going to execute against the opportunities in front of them? But there's potential out there and you're getting an opportunity right now to buy some assets at prices that we haven't seen for five, six, seven years in terms of the multiples of forward revenues or cash flows.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“20 years prior combined that came into the market. That is starting to slowly come out of the market right now. And if you think about tech taking up such a large percentage of the market cap of the S&P 500, you know, the big five or six stocks accounting for 20 or 25% of the index, of course, it's going to have its fair impact, but outside impact on tech. So outflow's starting to accelerate from the market or pick up and hedge fund gross coming down would be sort of two indications we see of lower risk right now in tech relative to 12 or 18 months ago.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Long short manager side. So that's interesting in terms of one sleeve of capital that is sort of pulled back risk to kind of wait for a better pitch to hit, if you will. On the mutual fund side list, and I think there's always rotations going on, I mean, I think about allocations into tech at a sector this year, right? For the last two years, you had very low commodity prices and low rates globally. So that may have made sectors like energy or financials or rate-sensitive parts of the market look unattractive, right? That earnings profile wasn't as robust given lower commodity or rate prices. Whereas tech, you could argue was maybe overearning or doing its lion's share of the work given all the secular drivers that are at favor and low interest rates that helped our longer duration cash flows. You know, that's reversed. So I think at a mutual fund level, you certainly have rotations going on, potentially money coming out of tech and moving to other pockets of the market. And then obviously at a flows level, money coming into and out of the equity market, I think there's something like $1.1 trillion of equity inflows over the last year, which is larger than the”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“I think what we've observed on our desk Kirak Goldman is the level of sort of de risking our outflows hasn't felt particularly acute to a single investor type. I think all investor types, whether you're mutual fund or your hedge fund or even if you're retail. I mean, I think everyone is sort of fighting the same battle, so to speak, right now. And so if we kind of think about the different sleeves of capital that are involved in the marketplace every day, right? We look at hedge fund gross balances or gross exposure to the marketplace as measures as our prime brokerage data set and our data set would indicate that hedge fund gross exposure is now at or near kind of five-year lows, right? So a lot of leverage from the hedge fund community has come out of the marketplace over the last six months to one year. And I think that speaks to some of the difficulty that investors have had in stock selection and navigating some of the big changes you've had in the macro backdrop. Brooke alluded to sharp changes in interest rates earlier. So it does look like the hedge fund community has taken down exposure a fair bit, at least how we look at it, particularly in the”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and that's true across all of tech, right? There's a massive difference between what's happening in an enterprise software company that's doing a digital transformation kind of work right now versus a consumer facing internet stock that maybe was benefiting from everyone staying at home because of COVID lockdowns. And so just discerning which are the winners and the losers in those markets matters a ton. And that's the great part about being a tech investor, right? Every day there's new companies and new situations to look at and to analyze and think through where the opportunities are.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Maybe just a sound bite. I think both the challenge with the opportunity when we think about tech, I think the last number I looked at, there were nearly 200 software companies in the public market today, over a billion dollar valuation. That number was 50 10 years ago. So for investors out there, that's both opportunity and challenge to find the right one. But just to give you a sense of pervasiveness of technology in the market today, a lot of really powerful secular drivers that have taken companies into the public domain and creating great opportunities, but obviously being selective is very important as the macro environment becomes a little bit more difficult.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“And one of the things Peter earlier was talking about the COVID beneficiaries. And there's definitely a class of stock that pulled demand forward by multiple years and accelerated through the pandemic in ways that were largely unnatural and right place, right time, and great for those businesses. Now many of those businesses are kind of.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and I would just add that as we've moved through the past five or six months, the change in the underlying interest rate environment has been dramatic, and that really does impact the valuation of these longer duration assets, like Peter mentioned. It's just structurally higher rates cause your long-term terminal values to come in. But at the same time, the fundamentals of many of these companies continue to perform remarkably well. And as fundamental investors, that's really what we're focused on is instead of looking at tech overall, it's identifying the pockets of the market where we think there's opportunity, where we think the broad consensus is underestimating the impact of earnings growth or some sort of structural change in the business. So as we sit here today, we've seen this massive compression in valuations driven by higher rates and then undeniably slower macro environment than we would have forecast a year ago. But at the same time, a lot of these businesses continue to perform very well. And we think there's great opportunities out there in different companies.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“That was fair value for those stocks. Obviously, at that time, that's why they traded there. Today, the market has changed at a macro level in a pretty meaningful way. And I think the market, it just takes time to adjust and find that sort of new normal equilibrium. But I do think the starting place was unique given those micro and macro factors we outlined. It doesn't mean they were overvalued. They were just valid for the timeframe we were in. And today, I think we're just trying to find that true equilibrium.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, listen, I think there are again, I kind of look at it in sort of tech broadly at the large cap space than I think underneath the surface, there were probably a couple pockets of euphoria, right? So at the large cap space, the Nasdaq overall peaked at 50 times earnings back in 2000. We were trading at 30 times in the peak of this cycle. So much more reasonable valuation. We're closer to 20 times earnings today for outsized industry growth. That doesn't feel super bubbly to me. But if you did look at some of the growthier pockets of tech, for example, our growth software basket was something we track went from trade and ad six, seven, eight times revenue to trading at 15, 16, 17 times Ford revenue, right? So there were pockets of excitement or exuberance in the market. I think we're back. We've retraced a lot of that for both of those pockets, right? Software names now trade in that seven times, eight times range right now, kind of back to where we were before pre-COVID levels. So certainly whether you fork or not, those were the circumstances in place in 2020 and 2021.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“We think about that massive influx in detect, did we get to a point where we were just really talking about a bubble? We saw so much froth, and this is really just a froth leaving the market. So if we think about the retrenchment that we have experienced, are we now kind of back at fair value? Are we just massively over-evalued at that point? Or are we now undervalued? Peter, maybe you can start in Brooke. I'd love to hear your perspective on that too.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Trillion dollars of negative yielding debt globally. And I think one of the words you're going to hear come up a lot in this podcast is duration. And I think what happened over the last call, three years of the last tale of this upcycle in tech was investors took more duration into their portfolios, right? And what we mean by that is both from a pure sort of mechanical perspective, interest rates were low, so that discount rate where you're discounting future cash flows back is lower. And so people added longer duration cash flows to their portfolio. But also just in summer time horizon perspective, right? I think investors moved out the risk curve and willing to look out three, four, five years to value some of the businesses that we were looking at over the last couple of years. And I think that was the phenomenon that took us there at its peak. I think the Fang stocks had 10 trillion dollars of market cap. That's bigger than the GDP of every country in the world, not named the US and China, right? So really extraordinary set of micro and macro circumstances that got us there doesn't mean they're all going to go away overnight. But I think”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think it's important to figure out where we are today just to remember where we were and what got us there. And I think there are micro and macro answers for the where we were and what the starting place was, right? I think the micro factors are relatively obvious and certainly somewhat influenced by COVID in addition to a generation of sort of technology changes, right? If you think about COVID, you had a real push into things like streaming and e-commerce and digital payments and those types of big thematic drivers that tech has a lot of exposure to. Those companies degrade during COVID, right? Amazons and NVIDIA's and PayPal's and Netflix and these big tech companies accelerated growth and took themselves to new market caps. So there were certainly micro fundamental drivers that were intact over the last 18 months, which builds on top of a lot of the cloud and secular drivers we've been talking about for years. And that helped drive the fundamentals higher for these businesses. I think at a macro level, there's some very unique circumstances as well, right? I think we had 19.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Almost three quarters of that high that we saw of that year. When I compare that 68% drawdown, let's just say to the NASDAQ composite back in 2000, that was also a 68% drawdown. So if you kind of want to think about sort of boom bust cycles for tech or sort of big highs followed by quick reversals, what we've seen right now in some of the growthier pockets of tech is certainly akin to what we saw back in 2000 in that Nasdaq composite correction that we saw. So there are things you can look at and say, even if the timeframe has only been about 15 months peak to trough for that growth pocket of tech, whereas there's a 32 month drawdown back in 2000, the magnitude does look somewhat similar, albeit a different instrument that we're measuring here. So it's been quick. We look at it anywhere from 30 to 70 percent over the last six months in terms of the correction.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's a great question, Alison. It's something we wrestle with institutional clients every day here at Goldman. And just to give you a couple of data points and sound bites for what we're looking at right now, if you looked just at the tech index, broadly speaking, for the NASDAQ, for example, we're down about 30% off the highs. So that type of drawdown matches what we saw in March of 2020 during COVID and really hasn't seen anything like that since 2008 and going all the way back to 2000. So the magnitude of the drawdown that we've seen already outpaces a lot of past experiences. But I think when you go a layer below that, what's more fascinating to me and where we're spending a lot of time with our client base every single day is looking at the growthier pockets of tech. So we have tools like our nonprofit tech basket, which tracks some of the highest octane growth stocks in the market or our growth software basket that tracks some of the growthier stocks in the software complex. That basket is down 68% off the highs now. So that peaked in the middle of 2021. We've now kind of retraced.”
2022-05-24 · Goldman Sachs Exchanges · What’s Behind the Tech Sell-Off? · IDENTIFIED FROM THE TRANSCRIPT