Transcript: Listener questions

This is an audio transcript of the Unhedged podcast episode: ‘Listener questions’

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Ethan Wu
On 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, Michela Tindera.

Michela Tindera
Hey, Ethan. Great to be here.

Ethan Wu
So Michela and I are going to be co-hosting today, asking questions to our two esteemed Unhedged panellists. That would be markets columnist Katie Martin and US financial commentator Robert Armstrong.

Robert Armstrong
Greetings.

Katie Martin
I hope we’re gonna know the answer to these things, because listeners should be aware we haven’t been given any cheats here.

Robert Armstrong
This could be acutely embarrassing, Katie.

Ethan Wu
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 Utz. Did you guys know this company? It’s like Utz.

Robert Armstrong
Katie, let me ask Katie. Katie, as a person from the United Kingdom, do you know what an Utz is?

Katie Martin
I have precisely zero idea what you’re talking about. So this question is 100 per cent one for you.

Robert Armstrong
Utz is a very New York-y company that makes salty snacks. Until hearing this question, I was unaware that it was a publicly traded stock. I thought it was a kind of a regional snack brand here, but they make a very nice potato chips. They make pretzels and things like that.

Michela Tindera
They also make Zapp’s potato chips, which is a favourite in New Orleans. Maybe some listeners might know those chips as well.

Robert Armstrong
And the idea is that this stock has been going up lately. Is that right?

Ethan Wu
Yeah. This Utz stock since October of 2023, it’s up about 56 per cent. So Joe’s absolutely right. There is a little bit of a snack chip boom.

Robert Armstrong
OK. 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 Utz.

Katie Martin
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.

Robert Armstrong
Yes. Cisco and Sysco being a classic example from the 2000s.

Katie Martin
Fill us in, Rob, on the Cisco Sysco . . . 

Robert Armstrong
Well, there’s two companies. One is Cisco and it makes computer networking equipment. It was a super hot stock in the dotcom boom. And the other is Sysco, 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.

Ethan Wu
Well, so, Rob, money where your mouth is: long Utz or short Utz?

Robert Armstrong
Jeez. Well, knowing nothing about the stock other than that I like to eat its product, if you owned it from the bottom and you’re up 50 per cent on a potato chip company. Knowing nothing, my totally irresponsible answer to that question is: sell?

Ethan Wu
High-conviction calls here in the Unhedged podcast.

Katie Martin
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.

Robert Armstrong
True. Stick with them. Yeah.

Michela Tindera
OK. 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?

Katie Martin
So, 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 was doing great. One really big reason for that — and, you know, 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. Indian 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.

Ethan Wu
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, you know, middle-class Indians with disposable income trying to protect their savings ploughed it into the Indian stock market. And you’ve seen like a big increase in things like Indian brokerages reporting inflows and your first-time investors coming online. That’s potentially kind of a one-time thing.

And, you know, I think when you have a huge wave of retail interest, there’s always the possibility of froth and speculation and over-eagerness. So, you know, there’s been, you know, a number of good pieces, especially in the FT about there’s all these like Indian small-cap stocks that have gone absolutely ballistic. And that to me feels very like retail investor-frothy. So, you know, 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; it’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 like tactically short and maybe strategically long this market.

Well, here is a technically markets-y question for you two. This is from Simon Hoddinott — 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, you know, the price that’s listed on the market. That’s a good question from Simon. Rob, why is that?

Robert Armstrong
There is 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.

Ethan Wu
I 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 would be worth a lot less if you try to liquidate them.

Robert Armstrong
And 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 per cent more. So there’s a difference between these kind of market-y liquidity. Can you really buy it, can you sell it and what is the value of the business.

Katie Martin
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. But it’s an interesting question. I hadn’t really thought about it before.

Michela Tindera
All right. Well, we have a question from a listener named Christy Illius. She wrote in and shared how she’s part of a union here in the US 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 US and going to a country that doesn’t have a union. In essence, her question is sort of what keeps companies in America?

Katie Martin
Well, I don’t know if she’s looked at like European employment law recently, but there’s a lot. 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 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.

Ethan Wu
I sense an Armstrong American exceptionalism rant coming.

Robert Armstrong
No, I want to hear . . . Now, don’t push this under me, Ethan. 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 labour, with the least rules for protecting . . . that protect labour.

Ethan Wu
Yeah. 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 OK, what keeps companies in the US? Like, look at the labour productivity numbers, right?

Robert Armstrong
Correct.

Ethan Wu
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. So you’re paying up, but you’re really getting something for it.

Robert Armstrong
Collectively, they’re the most productive workers in the world. I think we can say almost without hesitation. Yeah.

Ethan Wu
I think that’s right. Yeah. And certainly the most productive, given the size of both the labour 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 at some, you know, European or some Chinese person across the world — but just as someone in the next state, there’s a huge internal market. And I think that, alongside the productive labour force, are like the big draws to America.

Robert Armstrong
There 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. And so we’re gonna keep doing that. But that’s one to consider: that actually, there is risk associated with moving people, goods and services around the world.

Michela Tindera
I’m curious on this, Ethan. Do you know, is there any differentiation between skilled and unskilled labourers as well? I mean, I assume Christy falls into the quite skilled labour 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?

Ethan Wu
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 labour, whether that’s mechanics or that’s, you know, like computer scientists, tech workers, creatives. That part of the labour force seems relatively sticky. Where 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, you know, we’ve now seen that there seems to be a structural labour 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 labour market in the US has changed absolutely radically and it’s really benefited people at all skill levels in the last couple of years.

Robert Armstrong
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 a 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. So, you know, if we brought all the manufacturing jobs back from China at this point, it would be like four jobs. Like, who’s gonna press the button to get the factory started? So I would, you know, just as a last point, might wanna reframe the question towards technology rather than outsourcing or job flight.

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Ethan Wu
All right. We’ll be back in just a moment with more of your questions.

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Welcome 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 Aakash Jani: 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 labour force?

Robert Armstrong
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. I 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, casualisation 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.

Katie Martin
Yeah, I mean, I remember you writing lots of columns years ago about how everyone should keep wearing ties.

Robert Armstrong
No, I tried. I tried. I lost that fight. I’ve lost it. It’s over. It’s all over.

Katie Martin
You have lost that battle.

Robert Armstrong
So now we’re in a world where anybody . . . There are no rules, and everybody gets to do whatever they want. And 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.

Ethan Wu
I will note that I think the craziest, like most Gen Z Gen Z outfits all happen online, right? It’s the people that are doing crazy outfits for TikTok and then take them off and change into, like, you know, jeans and a T-shirt just to actually go out in the real world. So for people that don’t have a lot of Gen Z-ers 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 skinny jeans are on their way out. People are wearing back to mom jeans.

Katie Martin
Gotta love them mom jeans. But I do remember when I got my first ever grown-up job, I had to go out and buy like a suit, which is just like stupid. There’s just no reason why, you know, graduates with no money should be cobbling together whatever pennies they can find to buy a suit, of all things, to go to work.

Robert Armstrong
I agree with you. That is a step in the right direction.

Ethan Wu
I think that’s probably a good place to wrap up the episode. Apologies to any listeners whose names we butchered. Oh, we did do our best. And 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.wu@ft.com.

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But for now, Michela, thank you for being the co-host for this episode.

Michela Tindera
Of course. Any time.

Ethan Wu
Listeners, if you want to hear more from Michela, myself, Rob and Katie, we have done a bonus episode over in Michela’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.

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Unhedged is produced by Jake Harper and edited by Bryant Urstadt. Our executive producer is Jacob Goldstein. We had additional help from Topher Forhecz. Cheryl Brumley is the FT’s global head of audio. Special thanks to Laura Clarke, Alastair Mackie, Gretta Cohn and Natalie Sadler. FT premium subscribers can get the Unhedged newsletter for free. A 30-day free trial is available to everyone else. Just go to FT.com/unhedgedoffer. I’m Ethan Wu. Thanks for listening.

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