Healthy and Resilient
Consumers remain resilient despite a backdrop of significantly elevated prices
Summary: The consumer remains resilient but there are some signs of stress. CEOs are losing confidence that the Fed will be able to lower interest rates this year. The Fed doesn’t seem to want to raise rates though. Nvidia reported earnings last week. AI is arguably the most interesting thing happening in the economy.
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Macro
Consumers remain resilient
"Looking within our customer base, we can see that consumers remain healthy and resilient." - JPMorgan Chase (JPM 0.00%↑) CEO of Consumer & Community Banking Marianne Lake
"We're seeing that the consumer continues to be resilient. We are managing credit the way we always have been with respect to sort of our delinquencies have held in year-over-year -- I'm sorry, slightly down year-over-year…we're seeing the consumer continuing to spend." - Affirm (AFRM 0.00%↑) Chief Capital Officer Brooke Major-Reid
"Consumers remain surprisingly resilient despite a challenging backdrop of significantly elevated prices compared to just a few years ago" - Target (TGT 0.00%↑) EVP & Chief Growth Officer Christina Hennington
Cash buffers have normalized but there’s no sign of deterioration
"Cash buffers have largely normalized while balances are still above historical averages…for all intents and purposes, we're back to normal with no obvious signs of deterioration." - JPMorgan Chase (JPM 0.00%↑) CEO of Consumer & Community Banking Marianne Lake
There are signs of stress though
"...the sustained level of elevated prices has had a meaningful impact on budgets and savings for many families. Currently, one in three Americans has maxed out, or is nearing the limit on at least one of their credit cards. For these reasons and more, we remain cautious in our near-term growth outlook. Notably, we expect discretionary trends will continue to remain pressured in the short term, but to normalize over time." - Target (TGT 0.00%↑) EVP & Chief Growth Officer Christina Hennington
"So it's tougher out there this year, calendar year than what we had expected at the beginning of the year. Consumer confidence has been impacted. Our belief is that it's inflation-based, it's menu-price-at-restaurants-based. You can see it across the portfolio of customers that we serve from QSR to higher end, QSR has been hit the hardest. I think that's pretty clear on the why is the lower income customer is struggling more than the higher income customer. But there's some softening, we believe, tied to menu prices." - Sysco Corporation (SYY 0.00%↑) CEO Kevin P. Hourican
“Consumers are feeling a tremendous amount of pain right now. They're spending more of their wallet on groceries than they have at any time since the mid-1970s. consumers are feeling a tremendous amount of pain right now. They're spending more of their wallet on groceries than they have at any time since the mid-1970s. Rent and mortgages are significantly higher. Gas prices are higher. And there's a little left over for discretionary goods. So, when they are needing to buy discretionary goods, they are very, very value-focused. They're very focused on things that are 50% off, 60% off” - Etsy (ETSY 0.00%↑) CEO Josh Silverman
“..our low to moderate income consumer is still being squeezed, I mean, prolonged deflation, macroeconomic environment” - Ross Stores (ROST 0.00%↑) CEO Barbara Rentler
Higher-income segments may be slowing down
“Lower-income segments are showing stronger spend growth but with signs of trading down and getting a bit less of their money whereas higher-income segments are showing lower growth with slowing discretionary spend, including in travel and luxury retail” - JPMorgan Chase (JPM 0.00%↑) CEO of Consumer & Community Banking Marianne Lake
“With regard to the different income levels, we're certainly seeing at the high end, the Bloomingdale's consumer is interested in purchasing, but she's being very thoughtful in the category she's purchasing in. So I think we said that luxury handbag and shoe business is much softer than it was, still up strong to 2019, but she's investing now in advanced contemporary” - Macy’s (M 0.00%↑) CEO Antony Spring
Jamie Dimon is cautiously pessimistic
"I'm cautiously pessimistic. We have the most complicated geopolitical situation that most of us seen since World War II, if you study history. We don't really know the full effect of QT. I find it mysterious that somehow, it had this beneficial effect, but it's not going to have a negative effect when it goes away. And, i.e., personally, inflation may be a little stickier than people think and that rates may surprise people. And we'll be patient." - JPMorgan Chase (JPM 0.00%↑) CEO Jamie Dimon
The Fed is worried about sticky inflation
"Participants observed that while inflation had eased over the past year, in recent months there had been a lack of further progress toward the Committee’s 2 percent objective. The recent monthly data showed significant increases in components of both goods and services price inflation. In particular, inflation for core services excluding housing had moved up in the first quarter compared with the fourth quarter of last year, and prices of core goods posted their first three-month increase in several months." - FOMC Minutes
People are losing confidence that the Fed will be able to cut rates
"I think a lot of us around the table that are more the practitioner side & are speaking to a lot of clients, CEOs and otherwise, are more circumspect about whether the Fed actually can move that early- There just seems to be more inflation in the system" - Goldman Sachs (GS 0.00%↑) President John Waldron
Some people are concerned that rates will still have to go up
"Well, inflation is going up. It almost doesn't matter. It's possible that inflation is embedded in the system at 4% for next year. And there's not a d* thing anyone can do about it. That is possible…And if rates go up a little bit more, think with a 10-year bond to 5.5%, 6%, spreads gap out a little bit, that's a different world. It's a different world for real estate. It's a different world for assets, a different world for private credit. It's a world that most -- a lot of people in the world have not seen. 1972, the market in an all-time high, a little over 1,000, it didn't hit it again until 1987. It hit 1,000 in 1968. S* happens." - JPMorgan Chase (JPM 0.00%↑) CEO Jamie Dimon
The Fed doesn’t seem to think it will need to raise rates
"Progress on inflation appeared to have stalled and there were fears that it might even be accelerating. Suddenly, the public debate became whether monetary policy was restrictive enough and if rate hikes should be back on the table. But more recent data on the economy indicate that restrictive monetary policy is helping to cool off aggregate demand and the inflation data for April suggests that progress toward 2 percent has likely resumed. Central bankers should never say never, but the data suggests that inflation isn't accelerating, and I believe that further increases in the policy rate are probably unnecessary." - Federal Reserve Governor Christopher Waller
But it will be holding rates steady for a bit
"Nevertheless, in the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy. What do I mean by good data? What grade do I need to give future inflation reports? I will keep that to myself for now but let's say that I look forward to the day when I don't have to go out two or three decimal places in the monthly inflation data to find the good news." - Federal Reserve Governor Christopher Waller
International
Travel demand in Europe is strong
"Travel demand across Europe in summer '24 is strong...we're not quite sure whether that's just consumer kind of sentiment or recessionary feel around Europe. But we still see peak travel demand certainly through July and August being strong." - Ryanair (RYAAY 0.00%↑) CEO Michael O’Leary
Mastercard is a truly global business now
"Mastercard today, if you compare it to 14 years ago, is entirely different. So, when we just take the geographic spread, at the time, I started, with the mandate to build out a business in Africa, which we didn't really have. Today, two-thirds of our revenue is from outside of the United States and Canada. So, it really flipped around from a fairly U.S., North America-centric business to a very, very international footprint." - Mastercard (MA 0.00%↑) CEO Michael Miebach
Taiwan is crucial to the tech supply chain
"Taiwan is at the epicenter of the world's technology supply. Without Taiwan, it would be very difficult for [Dell CEO] Michael Dell and me to do our jobs. It would be very difficult for us to serve Phil and his company [Service Now]. The technology industry depends very heavily on Taiwan, and will continue to do so for some time." - Nvidia (NVDA 0.00%↑) CEO Jensen Huang
Financials
Jamie Dimon isn’t buying JPM stock at these levels
"We're not going to buy back a lot of stock at these prices…Buying back stock as a financial company greatly in excess of 2 times tangible book is a mistake. We aren't going to do it. We're doing a little bit more…we'll be patient. Like I said, that's earnings in store. It doesn't go away. You haven't given up on a future opportunity by letting it sit there. It's no different than if you came to windfall and you leave it in cash for a while...buying back stock at these prices will not be one of them. We've been very, very consistent. When the stock goes up, we'll buy less. When it comes down, we'll buy more. Warren Buffett set a price, which I don't know if he sticks to today, but he had set a price. In our mind, we're going to be more aggressive when the stock comes down. It will probably be at a time you'd be surprised when we're buying it back. It might be at a time when our ROE is down to 10%" - JPMorgan Chase (JPM 0.00%↑) CEO Jamie Dimon
Credit quality remains clean
"Our portfolio remains very clean. And we continue to surgically tighten at the margin as needed, so is the outlook for charge-offs. Things have played out as expected. Specifically, card delinquencies and losses have fully normalized with charge-offs in line with guidance at 3.4% this year and about 3.6% next year. As previously highlighted, loss rates in auto and business banking primarily reflects normalization but also a change in mix." - JPMorgan Chase (JPM 0.00%↑) CEO of Consumer & Community Banking Marianne Lake
But Dimon doesn’t seem to think that lasts forever
"The investment-grade credit spread, which is almost as low as ever been, will be dead wrong, too. I predict that like night and day. It's just a matter of time." - JPMorgan Chase (JPM 0.00%↑) CEO Jamie Dimon
Loan demand is relatively muted
"...overall demand for credit remains relatively muted with debt levels below historical norms. Business spend is demonstrating some expense discipline. While payroll expenses continue to grow, businesses have successfully cut back on other areas." - JPMorgan Chase (JPM 0.00%↑) CEO of Consumer & Community Banking Marianne Lake
The SEC seems to have changed its tone on crypto
"There was a general market sentiment that the Eth ETFs would not be approved by the SEC as of, like, a week ago. All of that changed, I think, within the past 48 hours. The sense is that the tone from the SEC has just changed literally overnight based on some feedback it must have gotten from just seeing the SAB-121 repeal and probably the administration sensing some panic, I guess, from parts of the administration." - Coinbase (COIN 0.00%↑) COO Emilie Choi
Small business profitability up, cash reserves down
"Well, let me start actually with what we're seeing on our platform with respect to the health of small businesses. If I could just do that for a moment, from today versus the last 3 to 4 months, we're actually seeing some improvement in the profitability of small businesses on our platform. And that's a good sign compared to the last couple of years. Now, within that, depending on the sector that you're in, your performance is driven by the environment. And so, for instance, areas like manufacturing, professional services, and auto repair, their profits are actually up nearly 20%. Whereas in real estate lending, their profits are actually down 15%. So the net of it is overall, we've seen that depending on the sector that you're in, your performance varies. The net of all of that is that cash reserves are down 8% compared to this time last year but up over 16% compared to pre-COVID. So, what you should take away is that small businesses are healthier but their cash reserves have been impacted. And for those that are on our platform, by the way, over 4 years, cash reserves are over 60% higher than those that have only been with us for a year." - Intuit (INTU 0.00%↑) CEO Sasan Goodarzi
Consumer
Consumers are reluctant to spend on home improvement
“Uncertainty around interest rate cuts, stubborn inflationary pressures and a consumer still showing a preference towards spending on discretionary services and experiences continue to weigh on the DIY home improvement demand. The home improvement customer is still on the sideline, expressing concerns about the higher cost of living and the state of the overall economy” - Lowe’s (LOW 0.00%↑) CEO Marvin Ellison
Ad revenues are growing quickly for streaming services
"...you've already mentioned the advertising monetization. That's playing a much greater role today than it did 2 years ago, and we have a lot of runway there. We grew 70% in the first quarter in DTC advertising revenues, and we still have a lot of room to grow. A lot of our top content still doesn't have a lot of ad loads and some of it has no ad against it at all. So there's tremendous opportunity" - Warner Bros. Discovery (WBD 0.00%↑)
“So we've been growing our ads membership base so quickly. So 65% membership growth QoQ in Q1 on top of 70% growth in Q4. I thought the 70% growth in the quarter before that, on top of 100% growth.” - Netflix (NFLX 0.00%↑) VP of IR Spencer Wang
Amazon generates $47B dollars per year in advertising revenue
"Well, we're very pleased with the progress we've made in our ads area. We grew 24% year over year on a pretty big base, from $38 billion in 2022 to $47 billion in 2023. I think most of our ads revenue today is from sponsored products in our marketplace." - Amazon (AMZN 0.00%↑) CFO Brian Olsavski
Andy Jassy is excited to invest in several areas
"...generative AI is this very transformative substantial opportunity, almost all of which will be built from the get-go in the cloud. And there's real good uses, I think, of capital to keep growing those businesses. And then we have a lot of passion for the newer businesses and investments that we're making that we've discussed in the past in areas like Prime Video and Healthcare and Kuiper and Zoox and grocery and some of the logistics and fulfillment businesses we're pursuing that we're really excited about what's possible. So we will always look at alternative ways to invest cash. And if we find better ways than what we're investing in, we'll do it." - Amazon (AMZN 0.00%↑) CFO Brian Olsavski
Booking.com wants to compete with Airbnb
"...if you go outside this building, hit somebody on the street and say I need a place out on Cape Cod for my family, I want a home near the beach, where should I go? Not a lot of people are going to say Booking.com. Some people say that's a negative. I say that's an opportunity. Look at the numbers. In the last 12 quarters, 11 of them, we've grown faster than the leader in that space in terms of growth alternative accommodations. And as you point out, we have a sizable business now. Our alternative accommodations business is two-thirds the size of the leader. So two-thirds the size and beaten it 11 out of the last 12 quarters and in the US for example, we're still just such a tiny thing." - Booking (BKNG 0.00%↑) CEO Glenn Fogel
Ulta Beauty is growing fast
“What I can tell you is in fiscal '24, we grew our Ulta business 80%, well above the overall growth rates were. Even Target, which Target did call out today, beauty being a bright spot. Our target business was up 70% last year. So, we feel really great in terms of where we're positioned and the strength. We're seeing across every one of our channels, including digital” - e.l.f. Beauty (ELF 0.00%↑) CEO Tarang Amin
"Amidst the pressure, beauty continues to be a standout category, delivering growth in the low single-digits in the quarter. This growth was led by continued strength in Ulta Beauty at Target as well as strong performance in personal care and skin care categories." - Target (TGT 0.00%↑) EVP & Chief Growth Officer Christina Hennington
Technology
Nvidia had another strong quarter
"Let me turn to the outlook for the second quarter. Total revenue is expected to be $28 billion, plus or minus 2%. We expect sequential growth in all market platforms. GAAP and non-GAAP gross margins are expected to be 74.8% and 75.5%, respectively, plus or minus 50 basis points, consistent with our discussion last quarter." - Nvidia (NVDA 0.00%↑) CFO Colette Kress
Other companies’ margins are Nvidia’s opportunity
"We have headwinds associated with GPU-related costs as we invest in new AI initiatives....We are lowering our full year margin guidance in light of increased GPU-related costs related to our AI initiatives we are operating in a rapidly evolving market, and we view these investments as key to unlocking additional revenue opportunities in the future. As a reminder, we have GPU related costs in both cost of revenue and R&D." - Snowflake (SNOW 0.00%↑) CFO Michael Scarpelli
"While we remain diligent about cost discipline, we did have a slight step function increase in our cloud data center costs at the end of Q4 to reserve GPU capacity to support future growth. We saw the full impact of the cost increase during this quarter and expect future flow-through to improve." - Applovin (APP 0.00%↑) CFO Matt Stumpf
Blackwell and H200 demand far exceeds supply, anticipated to continue well into next year
"While supply for H100 improved, we are still constrained on H200. At the same time, Blackwell is in full production. We are working to bring up our system and cloud partners for global availability later this year. Demand for H200 and Blackwell is well ahead of supply, and we expect demand may exceed supply well into next year.” - Nvidia (NVDA 0.00%↑) CFO Collete Kress
Blackwell will enable trillion parameter models
“The Blackwell GPU architecture delivers up to 4x faster training and 30x faster inference than the H100 and enables real-time generative AI on trillion parameter large language models. Blackwell is a giant leap with up to 25x lower TCO and energy consumption than Hopper. The Blackwell platform includes the 5th generation NVLink, with a multi-GPU spine and new InfiniBand and Ethernet switches. The X800 series, designed for a trillion-parameter scale AI. Blackwell is designed to support data centers universally…Blackwell time to market customers include Amazon, Google, Meta, Microsoft, Opening Eye, Oracle, Tesla and XAI" - Nvidia (NVDA 0.00%↑) CFO Collete Kress
The price of a server is surging
"...our L40,/L40S NVIDIA business just since the first half to the second half of the year is up 270%. So these are incredible growth numbers. Now looking forward, and if you go out to the back, we'll be time to market with the next-generation NVIDIA H200 with Grace Blackwell with the NVL 72. So this is going to put a $250,000 server today roughly with 8 GPUs, will now sell in a rack like you're saying up to probably $3 million in a rack" - Lenovo ($LNVGY) EVP Kirk Skaugen
But AMD’s MI300X offers the best price-performance for GPT-4 inference
"I am really excited to share that we are the first cloud to deliver general availability of VMs based on AMD’s MI300X AI accelerator. It's a big milestone for both AMD and Microsoft. We've been working at it for a while, and it's great to see that today, as we speak, it offers the best price-performance on GPT-4 inference" - Microsoft (MSFT 0.00%↑) CEO Satya Nadella
There is no excess compute capacity currently
"What we’re seeing right now is there’s relatively little downside in having an excess of compute, and that’s theoretical because the reality is we do not have excess compute. The demand for all of these AI products and services is so high right now that we are just doing crazy things to try to make sure that we’ve got enough compute and enough optimization of the entire system so that we can fulfill the demand that we’re seeing." - Microsoft (MSFT 0.00%↑) CEO Satya Nadella
Some AI use cases:
"We have 13,000 people in call centers and client support. How can you make it more effective for the -- this is what we're trying to solve. It typically can take multiple calls before a bank can get the person who can answer the question, right, because the software is intensely complex and the question is probably complicated. GenAI will help solve the amount of interfaces and time it takes for a bank to get a question asked. It's as simple as that. And a happy customer is one that's going to stay with you." - Fidelity National Information Services (FIS 0.00%↑) CFO James Kehoe
"By the way, for many companies, some will be a front runner, some will be late in this game. In the end, it will probably become table stakes. But customer service…it can be done by a GenAI that is human like can have human-like speech reasoning can find the information immediately. There is no waiting time if a thousand people call or a million people call at the same time, I think that's, it can find information so much quicker. You don't have to be put on hold anymore." - Booking (BKNG 0.00%↑) CFO Ewout Steenbergen
"Notably, this quarter we released the highly anticipated AI website builder. This is our cornerstone AI product. It leverages our 10- plus years of web creation expertise and unparalleled knowledge base of users' behavior through a conventional and conversational AI chat experience users describe their intent and goals, our AI technology then creates a professional, unique, and fully built-out website that meets the user needs and trends." - Wix (WIX 0.00%↑) CEO Avishai Abrahami
"Newly developed generative AI and personalization capabilities are expanding scope and reach of what we can offer our guests in terms of product recommendations, search results, and more. We recently engaged in a pilot with one of our biggest vendors to test our latest personalization capabilities with guests shopping our personal care categories" - Target (TGT 0.00%↑) EVP & Chief Growth Officer Christina Hennington
"Let's take a law firm, for example, there's one law firm that is -- that all of you know, that takes a lot of companies public that you guys are following…what we've done is we've loaded for this law firm, the corporates of sec.gov, EDGAR, okay, and through a language model. So this is every S-1, every 10-K, every 10-Q and that's what we use to train the language models…When you need to write the S-1, you put in the name, you put in the financials, you put in the first few risk factors, keep the carriage return and 45 minutes later, you have 200 pages of the first draft of the S-1 written. That's two weeks' worth of work done right now. I mean, what's the productivity increase? It's huge. So those are examples." - C3.ai (AI 0.00%↑) CEO Tom Siebel
Google's has started featuring AI content in search
"People are responding very positively to AI Overviews. It’s one of the most positive changes I’ve seen in Search based on metrics. But people do jump off on it. And when you give context around it, they actually jump off it. It actually helps them understand, and so they engage with the content underneath, too. In fact, if you put content and links within AI Overviews, they get higher clickthrough rates than if you put it outside of AI Overviews" - Google (GOOG 0.00%↑) CEO Sundar Pichai
AI is improving much faster than Moore’s Law
"You could say Moore’s Law was probably more stable in the sense that it was scaling at maybe 15 months, 18 months, we now have these things that are scaling every 6 months, or doubling every 6 months." - Microsoft (MSFT 0.00%↑) CEO Satya Nadella
But some people still think AGI is many years away
"AGI is still quite a few years away. Today, a lot of people talk about AGI, [and] they’re saying ... it’s probably two years away, it’s probably, you know, five years away. I think [it] is more than 10 years away. By definition, AGI is that a computer or AI can be as smart as a human right. Or sometimes ... smarter. But we would want an AI to be as smart as [a] human. And today’s most powerful models are far from that. And how do you achieve that level of intelligence? We don’t know" - Baidu (BIDU 0.00%↑) CEO Robin Li
Advancement in AI means more cyber attacks
"With AI, we expect the attacks to come at an even faster pace. I don't need to elaborate on the current enthusiasm around AI. Almost every one of our customers is either experimenting with AI or plans to deploy some use cases in the near future. As usual, their employees are way ahead. Almost 50% of employees of most companies are using some sort of AI application, LLM or co-pilot, to explore, learn and make themselves more productive." - Palo Alto Networks (PANW 0.00%↑) CEO Nikesh Arora
Satya Nadella thinks that Microsoft will start outperforming Apple in PCs
"Apple’s done a fantastic job of really innovating on the Mac. We’re going to outperform them. We finally feel we have a very competitive product...When it comes to the cloud, we came from second and became a leader in the AI age. On the cloud, I hope on the PC, we bring good competition. I mean, Apple's done a fantastic job. We want to bring real competition back to Windows vs. Mac when it comes to the AI age." - Microsoft (MSFT 0.00%↑) CEO Satya Nadella
Qualcomm, not Intel, is powering Microsoft’s devices
"The product we've announced as our kind of next PC chip is called Snapdragon X Elite and then we had a second chip that we announced Snapdragon X Plus. And both of these chips have 3 very significant advantages over the existing chips, the x86 chips. First is processing power. It far exceeds what the chips from -- the x86 processors do. The second is very, very good battery life…then the third one is Gen AI and being able to do on-device using our NPU, neural processing unit that is extremely low power and that's the technology that actually allows the use cases that Microsoft is envisioning" - Qualcomm (QCOM 0.00%↑) CFO Akash Palkhiwala
Industrials and Transport
The freight market is stable and may be improving from low levels of activity
"I think right now, the freight market is pretty steady, I'd say. You can see it in the spot rates that people charge. You can see it in -- we can see it in our activity…So we think we've kind of stabilized at fairly low levels, but stable being kind of the key word." - WEX (WEX 0.00%↑) SVP, Global Investor Relations Steven Elder
"Given the recent improved freight rate environment currently impacting more trades, we have increased our full-year 2024 guidance and today forecast full year Adjusted EBITDA between $1.15 billion and $1.55 billion and Adjusted EBIT between zero and $400 million. Looking ahead, we now expect freight rates to remain stronger for longer than initially anticipated due to a combination of continued pressure on supply and availability of equipment and a recent uptick in demand." - ZIM (ZIM 0.00%↑) CEO Eli Glickman
Some old-school industrial companies are benefiting from AI
"Data centers is a tremendously exciting and unique opportunity. If you think about us often winning three to five chillers at a time, we're winning in the 100 range. So it's just a very unique opportunity…We're investing to build out the water-cooled chiller capability down in Mexico. We have tremendous operations in Monterrey, and we'll be investing to expand there as well. And then we're importing as well, and we have a great facility in France to support Europe. So we are looking to max out the capacity at every single air-cooled and water-cooled chiller facility that we have globally to support the globe to support this unique opportunity." - Carrier Global (CARR 0.00%↑) CEO David Gitlin
Boeing delivery delays are impacting airlines’ growth plans
"...our 300 Boeing 737 MAX 10 aircraft orders, the first of which we believe will deliver in the spring of 2027 underpins our growth strategy to 300 million passengers by the early 2030s…Boeing delivery delays have been one of the bigger challenges this year. We expect to be operating about 158 Gamechangers by the end of July, that would be about 23 aircraft short of our contracted deliveries. There remains a risk that Boeing -- that those Boeing deliveries could slip further, but we think it's unlikely." - Ryanair (RYAAY 0.00%↑) CEO Michael O’Leary
Real Estate
Housing demand has been resilient despite higher rates
"Turning to market conditions, demand has proven resilient even as rates increased from 6.75% to 7.5% through the quarter…we have seen strong demand continue through the first three weeks of May, which is encouraging, and it's nice to see rates dropping over the past week. Geographically, we saw broad-based and healthy demand across our entire footprint. We saw solid demand from Boston through Atlanta, especially in New Jersey. Texas, California, Boise, Idaho, and Colorado were also strong performers. Demand was also solid across all of our product lines. Sales of our luxury homes were a little bit stronger compared to the first quarter with approximately 37% of units and 53% of dollars" - Toll Brothers (TOL 0.00%↑) CEO Douglas Yearly
Companies are trying to get people back to the office
"...companies are now saying, you know what, it's time to get back to the office. Maybe not five days a week. Maybe I don't need the space that I needed previously but for cultural reasons, for, frankly, the training and the growth of the early and career people, when we survey our own teams and say, what's your propensity to want to come back to the office, the people that are most interested in coming back to the office are people like me with a lot of gray hair and the people that are early in their career. You're smiling, but I know it's true. And people that are early in their careers because it not only provides a little bit of a social structure for them, but it provides a bit of an apprenticeship aspect. You know, I didn't learn to do what I do in school. I learned it on the job and I learned it from role models that I got to sit next to and ask questions. So, more and more companies are saying, you know, what, two days a week, three days a week, we want you in the office." - Cisco Systems (CSCO 0.00%↑) CFO Scott Herren
Nuggets of Wisdom
Berkshire could've used more financial leverage for higher returns
"What I loved is that in the last 6 or 12 months of his life,[Charlie Munger] gave a tremendous amount of advice. He basically was on podcasts all over the place and attended dinners and things of that nature. I think one of the relatively throwaway lines that I heard during that period was that he felt Berkshire had missed an opportunity and that they didn't use enough financial leverage. If you look at the last 20 years of Berkshire's performance, it's easy to imagine them significantly outperforming the S&P over that period compared to how they did if they had used more financial leverage. His point was, it's a diversified collection of great businesses and it could bear a lot more financial leverage. But Warren didn't want to take on financial leverage because he liked the idea of being the backstop for the American economy, having the ability to write the big check when times got tough. Now that backstop hasn't paid off for a long time. Even when it did pay off the last time around in '08, '09, it was a relatively small payoff. He didn't get 20% rates of return on most of the capital that he deployed at that point in time. I think the intelligent use of leverage, particularly when it's tax-deductible, makes tremendous sense. Obviously, when it ceases to be tax-deductible and you're taking portfolio-level risks that could wipe you out, then it becomes silly. But I think Berkshire had that ability to use debt that they didn't use. I think I would love to see our spinouts factor that into their thinking if they get to the stage where the cost of capital becomes important and becomes a way that they need to improve their rates of return to shareholders." - Constellation Software (CSU 0.00%↑) President Mark Leonard
The customer is always right
"If clients want it, you damn well better do it and get right to it." - JPMorgan Chase (JPM 0.00%↑) CEO Jamie Dimon
"When I grew up, when I started and I joined my father's company, in every elevator…there was a sign that the customer is your king and queen, he and she pay our salaries. And I constantly tell my people, I don't pay your salaries. Burkhart doesn't. We just handle the money, but clients pay our salaries. That is a mantra, they pay our salaries." - Richemont ($CFRHF) Johann Rupert
If you seek greatness, it will require suffering
"There is a misunderstanding. There's a phrase that says you should choose your career based on your passion, and usually, people connect passion with happiness. I think there's something missing in that. There's nothing wrong with it, but there's something missing. The reason for that is if you want to do great things....The thing is, when you want to build something great, it's not easy to do. When you're doing something that's not easy to do, you're not always enjoying it. I don't love every day of my job. I don't think every day brings me joy, nor does joy have to be the definition of a good day. Every day, I'm not happy; every year, I'm not happy about the company. But I love the company every single second. I think that what people misunderstand is that somehow the best jobs are the ones that bring you happiness all the time. I don't think that's right. You have to suffer, you have to struggle, you have to endeavor, you have to do those hard things and work through them in order to really appreciate what you've done. There are no such things that are great that were easy to do. By definition, therefore, I wish upon you greatness, which is my way of saying I wish upon you plenty of pain and suffering." - Nvidia (NVDA 0.00%↑) CEO Jensen Huang
Could you put the company name at the beginning of each quote? It's very useful, especially when listening in the Substack app, to hear/see what company is speaking at the beginning of the quote instead of having to jump or wait until the end. Thanks!