Listener Questions

0:06Pushkin.

0:09On this show, we have been asking for your questions, and you, the listeners, delivered. We got an absolute boatload of questions, way too many to ask them all. But today on the show, we try to answer as many as we possibly can. This is Unhedged, the markets and finance show from the Financial Times and Pushkin. I'm reporter Ethan Wu here in New York. And for this special listener question episode, I am joined today by the host of the FT's excellent narrative finance and business show, Behind the Money, Michaela Tendera. Hey, Ethan. Great to be here. So, Mikhail and I are going to be co-hosting today, asking questions to our two esteemed unhedged panelists.

0:51That would be markets columnist, Katie Martin, and US financial commentator, Robert Armstrong. Greetings. I hope we're going to know the answer to these things, because listeners should be aware we haven't been given any cheats here. This could be acutely embarrassing, Katie. Well, Rob, for my part, I believe in your collective wisdom. Let's get started. So, this first question comes from Joe Yao, who asked a bit of a curveball. He says, have you noticed that as the tech chip stocks have been booming, the snack chip stocks have also been booming, namely Oots, Utz? Did you guys know this company?

1:26It's like Utz. Okay. Let me ask Katie. Katie, as a person from the United Kingdom, do you know what an Utz is? I have precisely zero idea what you're talking about. So this question is 100 % one for you. Uts is a very New York-y company that makes salty snacks. Until hearing this question, I was unaware that it was publicly traded stock. I thought of it as a kind of a regional snack brand here, but they make a very nice potato chip. They make pretzels and things like that. They also make Zapp's potato chips, which is a favorite in New Orleans. Oh, right on. Maybe some listeners might know those chips as well.

2:04And the idea is that this stock has been going up lately. Is that right? Yeah, this UTS stock since October of 2023, it's up about 56%. So Joe's absolutely right. There is a little bit of a snack chip. Okay. Is this because people have been listening to the Unhedged podcast and hearing us talk about chips? And so they run out and buy the only pure play chips company they could find, which was UTS. You mock Rob Armstrong, but as you are well aware, this literally happens all the time. People mix up company names and buy stocks effectively by accident. Yes, Cisco and Cisco being a classic example from the 2000s.

2:44Fill us in, Rob, on the Cisco, Cisco confusion. Well, there's two companies. One is Cisco and it makes computer networking equipment. It was a super hot stock in the dot-com boom. And the other is Cisco, a company that supplies restaurants and industrial kitchens with like huge cans of tomato sauce. and during the heyday of the C, Cisco company that makes like routers and what have you, a lot of people by mistake ended up investing in huge cans of tomato sauce, which is hilarious. Well, so Rob, money where your mouth is, long utts or short utts? Jeez. Well, knowing nothing about the stock other than that I like to eat its product.

3:22If you owned it from the bottom and you're up 50 % on a potato chip company, knowing nothing, my totally irresponsible answer to that question is sell. High conviction calls here on the Unhedge podcast. But at the same time, you know what Warren Buffett says, right? You know, buy stocks that you love. And if you love these salty snacks, stick with them. Yeah. Okay. Our next question is from a listener named Robert Matthews asking about India, pointing out that India's prime minister, Narendra Modi, faces elections in April. and China's still floundering. So they're wondering, Katie, Rob, Ethan, what's your take on India's bull run and whether it can continue?

4:05So, I mean, I've gone for a number of years without anyone ever seriously mentioning Indian stocks to me as something that they are remotely excited about. And that has changed completely in the past sort of three to six months. As Robert Matthews, not Armstrong, very wisely points out, you know, the stock market there is doing great. One really big reason for that, and I'm not a geopolitical expert, but I'm here to tell you today that India is not China. And basically anything that's in Asia that is not China is doing super well at the moment because people want a piece of emerging Asia. They want a piece of that kind of high growth thing, that manufacturing space, but they don't want the China political risk and all the rest of it.

4:55Indian political risk is seen as pretty muted, actually, despite the elections that are coming up. And so suddenly, everyone I speak to seems to love India. I think one part of this rally that's maybe less appreciated is that it's mostly being driven by Indian retail investors and a big influx of Indian retail investors into that market. India didn't really have COVID stimulus or handouts to ordinary people. So a lot of middle class Indians with disposable income trying to protect their savings, plowed it into the Indian stock market. And you've seen a big increase in things like Indian brokerages reporting inflows and first-time investors coming online.

5:34That's potentially kind of a one-time thing. And I think when you have a huge wave of retail interest, there's always the possibility of froth and speculation and over-eagerness. So there's been a number of good pieces, especially in the FT, about there's all these Indian small cap stocks that have gone absolutely ballistic. And that to me feels very retail investor frothy. So I would not be surprised if there is a pretty significant correction in the next year or so in this market, just because there is so much enthusiasm that maybe can't last. But the underlying growth story is pretty good, I think, for the most part.

6:11It's demographics, it's capital accumulation, it's technological improvements, especially in the IT infrastructure in India. So that's real. But I would be tactically short and maybe strategically long this market. Well, here is a technically market-y question for you two. This is from Simon Haddonat. I hope I'm pronouncing your name right. From Milan, Italy. Why is market cap calculated as the number of shares multiplied by the current value of one share when we know very well that not everyone could sell their shares for the price that's listed on the market? That's a good question from Simon.

6:45Rob, why is that? There's a difference between the value of a business and the value of a business if everybody tried to sell it all at once. So I think market cap is a good indicator, multiplying the price of the stock number, the number of shares. That gives you a pretty good snapshot of what we think the market is worth today. The mere fact that in a fire sale, the value of the business would be a fraction of that doesn't actually tell you that much. I was indicating that I'm not certain about my answer by the fact that my tone rose at the end of the answer in case you guys didn't catch that.

7:30I mean, it's probably important to say there are other indicators of what companies are valued. things like enterprise value, where instead of starting with what the market says your value is, you look at the company's balance sheet and you make a determination there. I mean, you know, I think any indicator, if you put it in an extreme scenario, it's going to seem a little ridiculous. But yeah, I think, Rob, your point's exactly the right one. The point is that people are not always trying to sell. You know, they're not trying to liquidate. A lot of companies will be worth a lot less if you tried to liquidate them.

7:59And on the other hand, if you tried to buy all the shares all at once, you would pay more, which is what happens when a takeover happens. If somebody shows up and says, we'll take all the shares now, please, they usually have to pay like 25 % more. So there's a difference between these kind of markety liquidity. Can you really buy it? Can you sell it? And what is the value of the business? Yeah, I would say it's one of these kind of measures that's not perfect, but it's kind of as good as it can be. This is just like, I can't think of a better kind of shorthand way to do it. So it will persist.

8:32But it's an interesting question. I hadn't really thought about it before. All right. Well, we have a question from a listener named Christy Ilias. She wrote in and shared how she's part of a union here in the U.S. that's for theatrical mechanics and engineers. So she works in show business and her union was impacted by the Writers and Actors Guild strikes last year. And now she's thinking ahead to the next round of union negotiations. And she's wondering what keeps a company from picking up and leaving the U.S. and going to a country that doesn't have a union. In essence, her question is sort of what keeps companies in America?

9:13Well, I don't know if she's looked at like European employment law recently, but there's a lot. But, you know, it's infinitely more difficult to lay people off in the UK and in Europe than it is in the States. So from a worker's point of view, that's great. From a company's point of view, that makes life a lot more difficult. So, you know, yes, there is obviously a rise in, you know, employment, like unionism in the States. Sitting from our side of the Atlantic, we're like, well, duh, of course you need some protections. You need some kind of collective action ability. but you can still as a company get away with a lot more in the states than you can elsewhere i sense an armstrong american exceptionalism rant coming no i want to hear i don't know don't push this onto me then you're you're the best educated in economics of the three of us tell us why every company doesn't just do a jack welch and put its business on a barge and move it to whatever is the cheapest domicile for labor with the least rules for protecting that protect labor.

10:17Yeah. Well, I mean, like companies definitely do that, right? Like that's been a big part of like the so-called China shock and jobs moving to Vietnam and Bangladesh and, you know, or Mexico or Canada out of the US. But okay. What keeps companies in the US, like look at the labor productivity numbers, right? Correct. Yes. You have to pay US workers a lot, but they produce more per worker hour than workers in a lot of other countries. Maybe that has to do with the work culture. Maybe that's because it's easier to hire and fire. So you get better matching between employers and workers. You could have an argument about why exactly that is, but US workers are often better, even though they're expensive.

10:54So you're paying up, but you're really getting something for it. Collectively, they're the most productive workers in the world. I think we can say almost without hesitation. Yeah. And certainly the most productive given the size of both the labor force and the domestic market. So if you're a company, you can set up in the US, get some of the world's most productive workers, and you can sell not to some European or some Chinese person across the world, but just to someone in the next state. There's a huge internal market. And I think that alongside the productive labor forces are like the big draws to America.

11:24There was also an argument made during the pandemic that a lot of companies learned that having long supply chains had costs they weren't aware of before. So it used to be that all this stuff would move seamlessly around the world and it was no problem. And then that stopped working and suddenly it's like, where's my washing machine or whatever. So I'm actually not sure how true that argument is going to turn out to be. It may be that like, yeah, we had a bad eight months getting the parts, the widgets we needed or whatever. But the fact is they're cheaper when they make them over there in China.

12:03And so we're going to keep doing that. But that's one to consider that actually there is risk associated with moving people, goods and services around the world. I'm curious on this, Ethan, just do you know, is there any differentiation between skilled and unskilled laborers as well? I mean, I assume Christie falls into the quite skilled labor bucket here being part of a theatrical mechanics and engineers union, does that come into play as far as where companies decide to set up? You know, I can't say I've looked at the data quite granularly enough to say definitively. But I guess what I would say is, I think on the educated part of the spectrum, it's hard to substitute away from US skilled labor, whether that's mechanics or that's like computer scientists, tech workers, creatives, that part of the labor force seems relatively sticky.

12:59Where you have had less stickiness historically in the US is at the lower skilled end of the spectrum. But I think post-COVID that's even been changing a little bit that we've now seen that there seems to be a structural labor shortage in the US. We can't get enough of workers of all kinds. And for a while, there was a pretty big wage premium for lower skilled workers who wanted to switch jobs simply because we didn't have enough of them. So I think even the story here is kind of changing. And I don't know where it's going to balance out in the long run. But I think the labor market in the US has changed absolutely radically.

13:35And it's really benefited people at all skill levels in the last couple of years. Of course, this question is very politically live. There is a big political fight going on, not only in the United States, but worldwide about who has globalism helped and who has it hurt. And clearly the outsourcing of jobs is part of that story. But basically every paper I have ever read about this comes to the conclusion, think a little less about your job being replaced by someone in another country and think a little more about your job being replaced by a machine. the majority of economic dislocation in terms of employment in the United States has been technology driven.

14:25So, you know, if we brought all the manufacturing jobs back from China at this point, it would be like four jobs, like who's going to press the button to get the factory started. So I would, you know, just as a last point might want to reframe the question towards technology rather than outsourcing or job flight. All right, we'll be back in just a moment with more of your questions.

15:06Welcome back. I was glad we got this next question because this is one that we don't do quite enough. And I think Rob will have some very strong opinions on. This comes from Akash Janie. I have a question for Rob for the listener Q &A episode. What does Rob think about Gen Z's sense of style or fashion? And how does he see that changing as they enter the labor force? Jeez. Well, first, let me just state as a blanket statement that I despise the young. And so I hesitate to approve of anything that young people do. Having made that blanket statement, I will say I don't see any difference in my workplace or when I'm walking around midtown Manhattan.

15:52I don't see that much difference at this point between how the relatively old and the relatively young in the workforce dress, actually. As I've noted in my weekend column before, casualization has won the war. We all get to kind of wear whatever we want to work now. And that's what people are doing for better or worse. Yeah. I mean, I remember you writing lots of columns years ago about how everyone should keep wearing ties. I tried. I tried. I lost that fight. You have lost that battle. I've lost it. It's over. It's all over. So now we're in a world where anybody, there are no rules and everybody gets to do whatever they want.

16:30And whether that's a good world or a bad, and that applies to the Gen Z, Gen X, baby boomers, everybody is playing in this sartorial free for all. And I actually think, you know, it won't surprise anyone to hear me say, I think that's a bit regrettable, not because everybody should be wearing suits and heels or anything else, but just because it's actually quite hard for people to know how to present themselves in different kinds of situations when there are no rules. so when there was a semi-uniform before i think it took the pressure off in a certain way whereas now who knows how we're supposed to dress or behave so there's much to be regretted here i i will note that i think the craziest like most gen z gen z outfits all happen offline right it's people that are doing crazy outfits for tiktok and then take them off and change into like you know jeans and a t-shirt yes to actually go out in the real world so for people that don't have a lot of gen z years in their life but who are watching them online i feel like they may have possibly a distorted view of how crazy gen z gets with things the one change i will notice and this is maybe broader than gen z is loose clothes are super super back i feel like you know skinny jeans are on their way out people are wearing back to mom jeans yes gotta love the mom jeans but i do remember when I got my first ever grown-up job, I had to go out and buy a suit, which is just stupid.

18:04There's just no reason why graduates with no money should be cobbling together whatever pennies they can find to buy a suit of all things to go to work. I agree with you. That is a step in the right direction. I think that's probably a good place to wrap up the episode. Apologies to any listeners whose names we butchered. We did do our best. Sorry we couldn't get to all the questions. There were so many. We really liked hearing from you guys. And you are, of course, always welcome to email the show, ethan.wuwu at ft.com. But for now, Michaela, thank you for being the co-host for this episode. Of course, anytime.

18:39Listeners, if you want to hear more from Michaela, myself, Rob, and Katie, we have done a bonus episode over in Michaela's feed, Behind the Money from the FT, where we answer a different chunk of questions. So if you cannot get enough of your own questions, please go listen to Behind the Money. Thanks for listening. We'll be back soon.

19:29I'm Ethan Wu. Thanks for listening.