Whats next in tech . And fedex has been on a tear during the covid19 crisis along with other transportation stocks. Will the gains continue after we get a vaccine . On the barrons roundtable, al root, carlton english and jack howe. Good to see you guys. Jack, i want to start with you on the market. Tech stocks tried to get a rally going, but they just couldnt pull it off. Well, monday and tuesday they tried to get that Party Started again, and then wednesday, thursday, friday they just kind of spent those days gent9ly pulling gently pulling down steadily. And its mostly tech stocks, right . Theyve led the stock market rebound so far this year, but the five Biggest Tech Companies are now in unprecedented 23 of the s p 500. How are investors going to get more excited about these same companies . The Economic News was soso. Retail sales grew not as quickly as they had the month before, Industrial Production improved, not quite as fast as over summer. The fed said the Economic Outlook is uncertain, not exactly breaking news, but it signaled it will keep Interest Rates near zero all the way out to 2023. Thats not exciting . Investors kind of yawned it off. Go ahead. Jack interesting point about that. Obviously, the reason weve been lowering rates is to try to spur business investment, but if you tell somebody rates are going to be low as far as the eye can see, theres no wig hurry. If you tell me, hey, jack, or you better buy now, maybe ill run to the car dealership. Unitheres a possibility that buzzes say well buy when were going to buy . How do you feel about more zero . Not that exciting. I think investors are more looking for some kind of fiscal stimulus rather than more fed action. Just point out, jack, one story to keep an eye on is as soon as this coming sunday you might see a shutdown of downloads for wechat and tiktok, thatll be interesting to watch. Tiktok is trying to come up with a deal to keep its u. S. Service going. Itll still function, you just wont be able to download it. You have about two more months before the app gets shut down, and then you also have invidia signed a kind of anticipated 40 billion deal to buy arm. Chinas a big buyer of arm chips, watch to see if china doesnt try to throw up some roadblock for this invidia deal in realuation for whats going on with tiktok and wechat. Jack yeah, i think theyre a bigger deal geopolitically than in terms of investing right now. The way its looking, i guess oracle would host tiktok on its cloud which is nice for larry ellison, but it doesnt really solve the security problem if the edge years are still employees in i china. Were just going to have to watch. I want to talk to you, carlton, about ipos. Jack says maybe investors werent that excited about paying more for big tech, but boy, they sure like to pay a lot for some of these new software companies. Its been something to watch this year. The ran sans ipoetfs that the attracts companies up 60 this year while the s p 500 is up about 4 . That gain doesnt account for those companies we saw go public this week, unity, sumo logic, jfrog and snowflake which doubled in its first day of trading. To put that into perspective, its market cap is roughly that of goldman sachs, one of its underwriters, right now. Jack just because that stock doubled on day one, Retail Investors actually didnt make any money. Exactly. So theres often that confusion between the offer price the night before and the opening price. Thats what the Retail Investors are buy, theyre buying that opening price. But, you know, with a lot of these tech stocks already running up, there are investors that are looking for a gain. They might not get it much more. Peloton and some of these stay at home games, its that Lottery Ticket type deal that theyre hoping they can continue to advance. Jack exactly. Al, you love industrial stocks. Youre our mundane business reporter. So tell me why, with all this ecommerce excitement, fedex was actually the one that blew away earnings . I take exception to that. Nothing about industrials is mundane. Well, very simply, they destroyed, they smashed earnings. Analysts were looking for less than 3, they earned almost 5. And, you know, it really shows that, you know, some of these Transportation Logistics companies arent just industrial companies, theyre sort of consumer hybrids. The story for fedex was all ecommerce. Jack now, obviously, you know, probably going to have a covid christmas, its going to be a Great Holiday season for ecommerce, but looking down the road a little farther, do these Companies Continue to make money . Is there anything on the horizon that can boost growth . Yeah, i dont think its as good as it can get for either fedex or ups. I think that youre going to have, along with ecommerce, youre going to have a vaccine thats going to be needed, you know, hundreds of millions of doses are going to be needed to be the delivered to billions of people. Were talking about ecommerce and everybody ordering things, town the road well have an industrial recovery, thats good for the networks as well. Things are looking pretty bright for the parcel shippers. Jack who are a few cheap stocks that might benefit . The industrial rotation, thats something people should consider. I love high quality industrials like honeywell, even em orson electric, these are stocks people can look at as they think about what to do after the tech rally. Jack any signals in the next couple weeks . Ups is going to meet with investors next week, and youre going to get all these truckers reporting Third Quarter earnings in the middle of october, so lots coming down the pike. Jack thank you so much, al, jack and carlton. Coming up, americans are totally zooming now, but will they still want to after the pandemic is over. Zooms ceo Kelly Steckelberg joins us next. i need it so bad dont call it a hobby. Its way more than just a job. This is how we live every single day. Can we go and play . roaring of engines i needed to try needed to fall i needed your love im burning away i need never get old here . Im burning away nah. Here . Nope. Here. When the middle of nowhere. Is somewhere. The allnew chevy trailblazer. Theyre going to be paying for this for a long time. They will, but with accident forgiveness allstate wont raise your rates just because of an accident, even if its your fault. Cut sonny. Was that good . Line the desert never lies. Isnt that what i said . No you were talking about allstate and insurance. I just. When i. Lets try again. Everybody back to one. Accident forgiveness from allstate. Click or call for a quote today. Jack as recently as february, most business meetings were held the oldfashioned way, in person, but since the covid19 crisis, workers and even family members have gotten used to getting together on virtual platforms like zoom, but will it continue when the pan pandemic s over . Zooms cfo Kelly Steckel berg joins me now. Sales are up 355 last quarter, i think youve got about 150 million monthly active users, and, of course, to me, the coolest thing is your name has actually become a verb. But it is hard to imagine that the growth really doesnt slow dramatically over the next couple years. These are pretty much impossible comps. What are you going to do to try to keep it going . So we have lots of opportunity ahead. We are excited how Video Communications has really become integrated into all aspects of our high, and weve seen growth not only in the upmarket segments with large multinational fortune 500 companies as well as also Significant Growth with, in our Customer Base with fewer than 10 employees, and thats really exciting. We see Large Companies that have seen that they can seven their employees home, keep them safe, and theyve been just as effective if not more efficient in using video communication. The great thing is everybody turns their video on now, people feel really comfortable using it. And then in that segment of fewer than ten, weve seen countless cases where people are doing yoga lessons, piano lessons, you know, with their family, clubs, poker games. And, you know, we really believe that were never going back to a world the way that it was before. As this has become so integrated in our lives, and people dont need to travel as much as they did before. They can wake up with their kids, have an amazing, productive day and have dinner with their family and be just as effective without flying around the globe. Jack might be nice if those kids were back in school. Just a few minutes would be helpful. I think the enterprise customers have a really good case for keeping zoom, right . Snow days, pandemics, you mentioned the poker games, the families, are you trying to condition accelerate those finish convert those people to paid or keep with your free offer . A lot of them are on our paid offering already because we do have a full featured Premium Version of our products, and if youre having a oneonone meeting, it works perfectly, and you can use it for unemploymented numbers or hours. If you have more than one attendee, a duration of 40 minutes. Most people want to have these lessons go on for more than that, so they are faying for our monthly paying for you are our monthly version of our product. Jack as great as your product is, there is zoom fatigue. Its not your fault, its just, oh, my gosh, another screen meeting. Something the new yorker wrote yesterday, a zoom Cocktail Party has no kitchen. You cant sneak off to gossip in another room. Are you doing anything to try to make this a more realistic experience in the future . Well, we actually do have a fun thing which is called the breakout room where you actually could break off from the larger meeting if you wanted to go have a little sidebar conversation, for sure. Yeah, we do. We also have some other really cool features, we demod one one on our Earnings Call with our filters which make it a little bit more fun to interact. You can put a different screen around your window, put on a hat. We also have a great feature called touch up my appearance which just softens your look a little bit, makes you look a little better for one of those morning zoom meetings. Jack there must be something in your culture that has allowed you to innovate, the background, the slightly better video quality, it is interesting. I want to pivot though and ask about policy, specifically h1b visas. I believe your founder came over on h1b, but now you have 3,000 employees or more, youre a 150 billion company, but the administration wants to crack down on those h1bs. Whats your position on that . So we have a very diverse work force, which we were very proud of. As you say, our founder is not from the u. S. We are a u. S. , American Company founded and based in san jose. And we really believe that a diverse work force is key to the ongoing success. You want to make sure, we want to make sure that our product reflects the demographic of our users. Jack thanks very much, Kelly Steckel berg, i appreciate your time. Great. Jack coming up, the fed wants to see inflation, but could we be headed toward 70s style stagflation . Well discuss a after the break. 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You can deposit it from here. And you can see your transactions and check your balance from here. You can detect suspicious activity on your account from here. And you can pay your friends back from here. So when someone asks you, wheres your bank . You can tell them heres my bank. Or heres my bank. Or, heres my bank. Because if you download and use the chase mobile app, your bank is virtually any place. So visit chase. Com mobile. Jack it seems as if ultralow Interest Rates and soaring tech stocks are the new normal, but what could change that scenario . Joining now, head of global value at first eagle investment management, matt mcclennan. Thanks for joining us, matt. I want to talk to you about the parallel that youve said they you see between now and the late 60s. This did not feel like a summer of love to me. [laughter] well, superficially, at the end of the late 60s, 1968 specific iically, we did have some parallels. There was, unfortunately, an influenza pandemic that killed over 100,000 americans, there were student protests that got pervasive, and we had the election of nixon as a law and order president. But perhaps more importantly than some of those superficial parallels, we start to see a fundamental transition in the currency markets. Wed started to see the financing costs of the war on vietnam, a build on inflationary pressures. We had a fed chair, arthur burns, who got a little bit behind the curve, and with the emergence of the deterioration of the trade balance in north america back then, the fundamental link between the u. S. Dollar and gold was broken. The Bretton Woods agreement broke down, and that ushered in a decade of stagflation. The reason i mention that is that the 1960s, disinflation was good for the growth stocks, but Financial Assets were very troubled in the 1970s. Jack it didnt work out well in the end for the nifty fifty. Do you see a parallel between whats going on there and in tech stocks today . Well, if you look at the tech stocks today, and you could just take a cursory look, for example, at the ncse, fangs plus index, and it would suggest that valuations in that space may have reached levels that we may, after the fact, see as having been speculative. Yes, its fair to say some of these Tech Companies have experienced wonderful sales growth, but if we look at the teslas, the invidias, netflix, amazons, apples, their valuations relative to revenues have basically tripled over the last several years, so much of the meteoric rise hasnt just been driven from Revenue Growth, its been from valuation expansion. The problem for these tech stocks is that the move to zero longterm rates and multiple expansion is in the rear vision mirror, and meanwhile, the broader economys still unwell, and its going to make it hard for these companies to sustain their relatively superior Revenue Growth as we go forward. Theyre also larger companies, so i worry that the great deceleration may be upon us soon just as the multiples are peeking. And if peaking. And if we look at the growth index relative to the russell 1000 value index, its broken through it 1999 peak. Its hard not to feel that a hazard lights not flashing in the background here. Im just wondering, how much inflation, how soon will we see it, and i why isnt the bond market flashing warning signs about inflation right now . Its a great question, you know . I think investors are usually focused on their lived experience, and i think we know that there have been secular headwinds to inflation from factories to mobilization. I think all of those things explain why the bond markets not pricing in inflation risks. But as an analyst, sometimes its worth asking what could be different from history. One of the things thats different this time is that money supply growth over the last year has expanded to about 25 . Thats over four times the historical average of around 6 president. 6 . The Central Banks of the world have essentially moved to monetize or finance directly our fiscal deficit. This may be the end of Central Bank Independence as we knew it. The sec thing i would say is that second thing i would say is it was a productivity shock. If youre in the Airline Industry or the retail or restaurant business, youre going to have to charge higher prices at some point to just break even. Also weve seen pockets of Strong Demand that were unexpected in parts of the economy, witness the fact that there was a window where lumber prices tripled given all the home renovation demands, but i think perhaps the most important point i want to get aclose, and this comes back to the late 60s analogy is we may be experiencing a difference in the currency markets. Currency strength has basically tracked Interest Rate differentials, but perhaps currencys going to be driven more by trade balances. The u. S. Has the most rapid money supply growth, it has a trade deficit, the largest fiscal deficits, and it doesnt have rate carry. We may be on the cusp of a weaker dollar period, and that could filter through into more inflation than the markets expecting, and the fed has told you it will accept higher inflation for a time. Now, we dont have a crystal ball, thats not a forecast, but it is a tail rusk that markets are telling you its possible. Jack we have a lot more questions for you, were going to have to leave it there, so were going to have to have you back. Terrific. Thank you very much. Jack up next, round table members give their investment ideas for the coming week. Stay right there. Me my financial professional explained to me all the ways nationwide can help protect Financial Futures in peytonville. Nationwide can help the greens get Lifetime Income because their son kyle is moving back home and could help set up a Financial Plan for mrs. Garcia. 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Its a onetime, minimally invasive procedure that reduces stroke risk and bleeding worryfor life. Watchman. Its one time. For a lifetime. Jack jack, you say the bond market is not pricing in inflation, but you found it in spades when you stepped onto a car lot this week. [laughter] well, used car prices in august had their fastest price increase in more than 50 years, right . Its a pandemic. People arent using uber and lyft as much, some are buying a car for the first time. Carmax stock, it tanked early this year, but the stock has more than doubled over the past six months. If you have an old clunker youre looking to unload, now might be the time. If you cant get it started, sit behind the wheel, make car noises. I just caution you though, some new car models haved had production i delays. Ive heard theres a car called the kia telluride, some dealers are trying to charge 7,000 over Sticker Price because there arent enough cars to go around. Kias might be fine, if youre tempted to pay 7,000 over sticker, its probably time for an intervention or a life coach. Jack thanks for that, jack. Lets go to carlton with an actionable idea in bare baer rons tradition. Craft kraft hinds has benefited from stay at home. They sold off some assets, theyre targeting some cost cuts, going to be paying down some debt, so we might be seeing that turn around that the stock, that stock hold efforts have been paying for. Jack and you could pay a lot less than Warren Buffett did. Al, what have you got for us . We know that carlton loves her buick. [laughter] i want to look for some industrial stocks that have underperformed. Im going to stick with emmerrerson electric. Bell r emerson electric. I think they have an airconditioning business, process automation business, other businesses are pretty good, they also make tools, i think emerson has potential even from here. Jack not sexy but sounds like a good idea. Thanks, al, carlton, jack. Check out this weeks i decision of barrons. Com. Dont forget to follow us on twitter. That is all for us. See you next week. Wear your masks, well be right here on barrons roundtable. From the fox studios in new york city, this is maria bart to proe mows wall street. Maria happy weekend with, everyone. Welcome to the program that analyzes the week that was and help position you for week ahead. The Jonathan Ward is here, we will talk about china with dr. Ward, then later, bobby vans steakhouse owner, talking about his effort to save new york citys restaurant industry. But first, lets take a look back at this