WEBVTT - Mark Vitner, senior economist at Wells Fargo Securities, 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg P and L 0:00:20.840 --> 0:00:31.000 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Food 0:00:31.040 --> 0:00:34.199 delivery business, it seems like there's so many competitors out 0:00:34.240 --> 0:00:37.680 their door Dash, Uber Eats. We have h Adam Price, 0:00:37.720 --> 0:00:40.840 CEO of Waiter Holdings. Adam, thanks so much for joining 0:00:40.880 --> 0:00:42.839 us so in this food delivery business. First of all, 0:00:42.840 --> 0:00:44.560 tell us about Waiter Holding solus about the history of 0:00:44.600 --> 0:00:48.159 the company and kind of your strategy. Yeah, absolutely so. 0:00:48.159 --> 0:00:52.160 So Waiter was founded in Louisiana and we focus on small, 0:00:52.200 --> 0:00:54.960 medium sized markets around the US. So whereas in the 0:00:54.960 --> 0:00:57.040 big cities you have the big companies like door Dash, 0:00:57.080 --> 0:00:59.920 grub Hub, Uber Eats, and the small cities around the 0:01:00.080 --> 0:01:03.040 US you have Waiter and we operate another brand called 0:01:03.040 --> 0:01:06.720 Bite Squad. There's a feeling that there's been too much 0:01:06.760 --> 0:01:09.560 hopium around the food delivery services. And I'm sure you've 0:01:09.560 --> 0:01:11.520 read all of these articles and I'm sure you shake 0:01:11.560 --> 0:01:14.640 your head and you say, they just don't get it. Uh. 0:01:14.680 --> 0:01:16.800 What do you think right now of some of the 0:01:16.840 --> 0:01:19.880 backlash that we've been getting from all of the investment 0:01:20.000 --> 0:01:23.160 in food delivery services. Yeah, it's it's a great question 0:01:23.200 --> 0:01:26.520 that the real crux of the of the arguments right 0:01:26.520 --> 0:01:29.399 now is what is the sustainability of the space? You know, 0:01:29.400 --> 0:01:33.360 if consumers are expecting free delivery and you have to 0:01:33.400 --> 0:01:36.360 take a portion of the sale value from the restaurant, 0:01:36.680 --> 0:01:38.720 you know, where does this space live in its entire 0:01:38.760 --> 0:01:41.520 There's been so much money that's flown into it, and 0:01:41.600 --> 0:01:45.480 are these businesses sustainable and can they be profitable? And 0:01:45.480 --> 0:01:48.440 and we really feel that Waiter, the focus needs to 0:01:48.440 --> 0:01:52.320 be around consistency and really aiming for a consistent customer 0:01:52.360 --> 0:01:55.160 experience so the customers stay sticky to the platform and 0:01:55.200 --> 0:01:57.920 stop jumping around from platform and the platform, and then 0:01:57.960 --> 0:02:01.560 focusing on the operational efficiens. Uh, in order for the 0:02:01.560 --> 0:02:05.200 sustainability and the long term profitability that there's consistency. That's important. 0:02:05.360 --> 0:02:07.880 So is making money and that's proven to be difficult 0:02:07.960 --> 0:02:11.200 given the fact that there is competition including getting in 0:02:11.240 --> 0:02:13.240 your car or using your legs and going and getting 0:02:13.240 --> 0:02:15.160 the food yourself, right, I mean, how do you how 0:02:15.160 --> 0:02:18.960 have you found profitability? Well, there's a clear shift in 0:02:19.000 --> 0:02:22.360 the consumers willing to pay for convenience, So so the 0:02:22.360 --> 0:02:24.639 the competition of a consumer going to pick it up 0:02:25.040 --> 0:02:27.920 that that is a clear deviation. And what you're seeing 0:02:27.919 --> 0:02:30.280 in terms of consumer behavior, people are willing to value 0:02:30.320 --> 0:02:32.520 their time, they're willing to pay for convenience. So food 0:02:32.520 --> 0:02:35.240 delivery isn't going anywhere. The question is what makes it 0:02:35.280 --> 0:02:39.200 sustainable and profitable and and in our system, what really 0:02:39.280 --> 0:02:42.560 drives that profitability is is the attachment of the customer base. 0:02:42.639 --> 0:02:45.760 You can't continuously be paying to acquire new customers, and 0:02:45.800 --> 0:02:48.680 that's really done through consistency and then the streamlining of 0:02:48.720 --> 0:02:51.359 the operations. And that's what gets you to that profitability. 0:02:51.639 --> 0:02:53.640 And one of the items we use, which is dramatically 0:02:53.680 --> 0:02:56.560 different than our competitors, is we use W two drivers 0:02:56.560 --> 0:02:59.280 as opposed to contractors, which allows us to pull some 0:02:59.320 --> 0:03:01.400 of those operation levers that I can get into details 0:03:01.400 --> 0:03:03.520 if you like. All right, so let's talk about profitability. 0:03:03.520 --> 0:03:05.320 I'm looking at the Bloomberg terminal right now, the f 0:03:05.440 --> 0:03:09.160 A function and uh Waiter Holdings is not profitable. We 0:03:09.200 --> 0:03:11.480 even had so, and you guys been in the business 0:03:11.520 --> 0:03:13.040 for a few years. I'm looking at at the forecast 0:03:13.080 --> 0:03:16.679 for still not forecasting to be profitable UH. I look 0:03:16.680 --> 0:03:19.640 at Uber which has got scale out the wise Zoo. 0:03:20.200 --> 0:03:22.359 They even say that their Uber Eats business is the 0:03:22.440 --> 0:03:26.840 weaker and the least profitable of relative to their ride business. 0:03:27.600 --> 0:03:30.840 What is the model to profitability? What levers have to 0:03:30.840 --> 0:03:33.680 be pulled? Well, there there's a couple of things. All 0:03:33.800 --> 0:03:38.040 of these groups just exploded in growth because of geographic expansion, 0:03:38.680 --> 0:03:41.040 and you have to be in. Step one in being 0:03:41.080 --> 0:03:44.080 profitable is realizing you know what markets do you have 0:03:44.440 --> 0:03:47.640 that put you on a path to scale and profitability, 0:03:47.680 --> 0:03:51.640 that allow you to operationalize and bring in that sustainability 0:03:51.680 --> 0:03:53.840 with that scale. So one of the things we've actually 0:03:53.840 --> 0:03:57.120 done recently UH is pulled back on our market share 0:03:57.240 --> 0:03:59.840 or on our markets. We close thirty eight markets UH 0:04:00.120 --> 0:04:02.560 will be finishing in the next fifteen days or so 0:04:02.600 --> 0:04:04.760 that we announced in our last quarterly call. You have 0:04:04.800 --> 0:04:07.000 to be very careful not to be over extended in 0:04:07.000 --> 0:04:10.560 this space. What's interesting to me also is how the 0:04:10.640 --> 0:04:13.880 consumer access is waiter right, I mean, do they go 0:04:13.920 --> 0:04:17.200 to waiters website or do they go to the restaurant 0:04:17.240 --> 0:04:19.080 that they want to order from and then there's a 0:04:19.120 --> 0:04:22.960 tab from waiter, So which is it? It's both, you know, 0:04:23.040 --> 0:04:25.279 you're trying to acquire customers and multiple fronts. We have 0:04:25.320 --> 0:04:27.920 an app, a mobile application, just like you know most 0:04:27.960 --> 0:04:30.120 of the players in this space. We also put order 0:04:30.160 --> 0:04:32.680 now buttons on the restaurant's website which drive people to 0:04:32.720 --> 0:04:35.839 download the mobile app. Um. So there's multiple channels, but 0:04:35.839 --> 0:04:37.680 the primary channel that we receive all our orders as 0:04:37.720 --> 0:04:41.599 the mobile application. So it's interesting. So uber eats some 0:04:41.640 --> 0:04:44.200 of these bigger market ones grubub, are you finding that 0:04:44.240 --> 0:04:47.559 they are now coming down into your midden small size 0:04:47.600 --> 0:04:49.320 markets and if so, how do you compete against those 0:04:49.320 --> 0:04:51.960 big companies? Yeah? Absolutely, So what you've seen is that, 0:04:52.279 --> 0:04:56.480 you know, in an effort to continue the rapid revenue growth, 0:04:56.920 --> 0:04:59.760 geographic expansion has been in the primary tactic. So you 0:04:59.800 --> 0:05:03.320 have almost in all of our markets you have two 0:05:03.360 --> 0:05:05.919 to three primary players. Now in food deliver you have 0:05:06.000 --> 0:05:10.080 grub uber waiter or grub door dash waiter, so you 0:05:10.120 --> 0:05:13.279 see multiple players in every market. The key to owning 0:05:13.320 --> 0:05:17.560 that market again is around consistency of customer experience. Anybody 0:05:17.680 --> 0:05:20.239 can go into a market and start offering customers free food, 0:05:20.400 --> 0:05:22.240 and they're gonna get customers. If you don't have to 0:05:22.279 --> 0:05:24.920 pay for delivery, you're gonna start using or trying the platform. 0:05:25.240 --> 0:05:28.320 What's critical is the way to retain those customers is 0:05:28.320 --> 0:05:31.240 by consistently having a good experience on the delivery side. 0:05:31.440 --> 0:05:33.960 How much are people willing to pay for delivery? It 0:05:34.120 --> 0:05:36.360 ranges based on markets. One of the nice things about 0:05:36.360 --> 0:05:38.920 smaller medium sized markets is you do get a larger 0:05:38.960 --> 0:05:44.200 appetite for paying for delivery fees, all right, because people 0:05:44.240 --> 0:05:46.680 are that much more willing to But it's still you know, 0:05:46.880 --> 0:05:49.240 I we recently changed in the in most of the 0:05:49.240 --> 0:05:51.080 way to brand in markets are delivery feed from five 0:05:51.080 --> 0:05:54.080 dollar support dollars because it resonates better with the customer. 0:05:54.279 --> 0:05:57.359 So you see downward pressure in that consumer delivery fee 0:05:57.839 --> 0:05:59.400 that you have to adapt to on a market by 0:05:59.400 --> 0:06:01.479 market basis, Are you still I know you said you're 0:06:01.560 --> 0:06:04.760 downsizing closing some markets. Are you still adding some markets selectively? 0:06:04.839 --> 0:06:07.040 Round Now it's very selectively. One of the things when 0:06:07.040 --> 0:06:10.360 a space becomes highly competitive like this is you really 0:06:10.400 --> 0:06:13.720 have to leverage your brand in geographic proximity. When you 0:06:13.800 --> 0:06:16.760 expand markets so so as you grow, you need to 0:06:16.760 --> 0:06:20.640 be very careful not to jump geographies and be overexposed 0:06:20.680 --> 0:06:24.120 to competitive pressure in that area and grow very organically, 0:06:24.360 --> 0:06:26.640 almost from a geographic stampliat. How often do you order in? 0:06:27.440 --> 0:06:29.440 I order in several times a week? Yeah, what about you, 0:06:29.520 --> 0:06:34.560 Paul rarely? Yeah? Do you go pick it up? Are you? Yeah? 0:06:34.720 --> 0:06:36.680 Why are you driving? I know it's a good question, 0:06:36.720 --> 0:06:38.960 it's good no, But I also love the idea that 0:06:39.040 --> 0:06:42.239 it's um people like to value their time could also 0:06:42.320 --> 0:06:45.520 be translated into people are lazy and they don't want 0:06:45.560 --> 0:06:47.719 to get off the couch. But actually it is true, 0:06:47.800 --> 0:06:49.920 especially if you have a family or something like. Yeah, 0:06:49.960 --> 0:06:52.760 And that's what's beautiful about the small medium sized markets 0:06:52.839 --> 0:06:56.200 is it's a much higher concentration of families. So so 0:06:56.279 --> 0:06:58.719 you end up at time is our only finite resource. 0:06:59.120 --> 0:07:02.400 So if anything, that should be the most valuable item 0:07:02.440 --> 0:07:04.159 that we have in our in our day to day lives. 0:07:04.240 --> 0:07:06.720 Thank you so much for being with us. Adam Price 0:07:06.839 --> 0:07:10.280 is a chief executive officer of Waiter Holdings, which is 0:07:10.280 --> 0:07:13.200 based in Louisiana. Joining us here in our Bloomberg Interactive 0:07:13.200 --> 0:07:25.560 Broker studios. Copium is the word of the week at 0:07:25.640 --> 0:07:27.800 least hopium that there will be some sort of deal, 0:07:27.880 --> 0:07:30.920 despite the fact that we have no concrete evidence. We've 0:07:30.960 --> 0:07:34.240 seen this before, we've seen we have really we're really 0:07:34.240 --> 0:07:37.960 getting close, but we have nothing again and again and again. 0:07:38.080 --> 0:07:40.320 Joining us now to talk about with the hopium is 0:07:40.360 --> 0:07:43.240 real in or in terms of market reaction and how 0:07:43.240 --> 0:07:47.360 it should persist. Heading into David Kotok, Cumberland Advisor's Chief 0:07:47.400 --> 0:07:52.080 investment officer, David, I know that you've been bullish on equities. 0:07:52.240 --> 0:07:54.720 Do you continue to be even after the recent leg 0:07:54.760 --> 0:07:57.680 higher in the recent new all time highs that we've seen. 0:07:58.880 --> 0:08:03.520 At the moment, I am getting very nervous. We entered 0:08:03.840 --> 0:08:08.040 the market, went to fully invested structure lisa UM the 0:08:08.200 --> 0:08:13.200 last week in August, and we have been there since then. 0:08:14.240 --> 0:08:18.880 And at this level with of markets and with the 0:08:18.960 --> 0:08:23.800 current news flow, I'm very, very concerned. The market is 0:08:23.840 --> 0:08:29.000 discounting all the positive outcomes and it's being fueled by 0:08:29.040 --> 0:08:33.360 a very expansive federal reserve policy, which is creating huge 0:08:33.520 --> 0:08:38.120 liquidity that doesn't last forever. So the answer is am 0:08:38.120 --> 0:08:42.640 I concerned and worried? Absolutely? Yes? And would I be 0:08:42.800 --> 0:08:46.760 making changes? They could come at any time. So the changes, David, 0:08:46.760 --> 0:08:48.480 this is interesting because I think obviously, over the last 0:08:48.520 --> 0:08:51.160 several times we've had you on, you've been very correctly 0:08:51.280 --> 0:08:54.640 in the bullish camp. So this is a from our perspective, 0:08:54.720 --> 0:08:57.559 a little bit of a turn for you. How do 0:08:57.559 --> 0:08:59.680 would you proceed if you were to continue to be 0:08:59.720 --> 0:09:02.120 cause it's kind of changes would you make. I would 0:09:02.160 --> 0:09:08.800 raise cash, lower equity exposure. I might consider switching to 0:09:09.280 --> 0:09:17.120 more defensive, less aggressive sectors. Um Our quantitative work has 0:09:17.160 --> 0:09:21.880 been guiding us because it's capturing these um changes in 0:09:22.000 --> 0:09:28.960 market sentiment, and the market sentiment has become extended a 0:09:29.040 --> 0:09:32.839 variety of ways to estimate that we never know for sure, 0:09:33.720 --> 0:09:37.040 but we're seeing it. And our view is the market 0:09:37.400 --> 0:09:43.680 is reflecting changes in headlines which are affecting sentiment. Fear 0:09:43.920 --> 0:09:49.280 of wealth taxes, the Warren Sanders approach seems to be 0:09:49.360 --> 0:09:56.040 subsiding as the politics change. Um whether impeachment would be 0:09:56.160 --> 0:10:01.800 conviction in the Senate seems to be subsiding the houses. 0:10:02.520 --> 0:10:06.280 Maybe an assumption, but the political risk is now the 0:10:06.840 --> 0:10:14.400 Clinton impeachment model, not the Nixon impeachment attempt model. So 0:10:14.600 --> 0:10:18.280 markets are making adjustments, and I think part of that 0:10:18.440 --> 0:10:21.520 is due to an assumption. The assumption is there will 0:10:21.559 --> 0:10:27.440 be some form of truth trade reduction of tension, and 0:10:27.720 --> 0:10:31.679 that's necessary for economics to start to improve. The economic 0:10:31.880 --> 0:10:36.280 landscape is terrible because we see manufacturing sector shrinkage and 0:10:36.320 --> 0:10:39.920 all the news flow that your you report every day 0:10:40.200 --> 0:10:43.600 is sending that kind of a message. So to us 0:10:44.120 --> 0:10:46.840 it says, okay, we had a big pendulum swing where 0:10:46.880 --> 0:10:50.440 at all time new highs and I never saw a 0:10:50.480 --> 0:10:53.599 client complaint when you took a profit and put it 0:10:53.640 --> 0:10:55.439 in the bank. All right, So where would you take 0:10:55.480 --> 0:11:00.600 profits here? Well, I would cut back on the high 0:11:00.679 --> 0:11:06.319 beta sectors which have really really raised ahead. So you 0:11:06.760 --> 0:11:12.000 cut back on Apple and yeah, the big names, the 0:11:12.040 --> 0:11:17.679 tech sector among them. Um um, the defense hasn't had 0:11:17.720 --> 0:11:21.800 a terrific run. Maybe it'll have more. I you know, 0:11:21.880 --> 0:11:24.640 these are This has to now become an e t 0:11:24.800 --> 0:11:28.000 F by E t F sector by sector, industry, industry 0:11:28.080 --> 0:11:34.600 by industry decision. But for the run from August, the 0:11:34.679 --> 0:11:38.440 wind has been at our back because the we were 0:11:38.480 --> 0:11:42.200 in cash in our quantitative models from the end of 0:11:42.280 --> 0:11:46.680 February to August, and we have had a terrific year 0:11:47.200 --> 0:11:50.440 by having cash during a period of time of high 0:11:50.600 --> 0:11:54.360 volatility and uncertainty and the way we measure it, and 0:11:54.400 --> 0:11:56.960 then we had the triggers, so we went in an 0:11:57.000 --> 0:12:03.480 ox i. It's been a remarkable uh here and at 0:12:03.480 --> 0:12:06.560 this juncture you have to ask yourself, how much more 0:12:06.679 --> 0:12:10.640 can you expect? I'm above my targets for year end 0:12:11.320 --> 0:12:14.200 on the S and P. It was a three thousand target, 0:12:14.280 --> 0:12:18.440 you may recall we've discussed it on the show over 0:12:18.640 --> 0:12:23.240 the years. Well, we're above it, and we look as 0:12:23.280 --> 0:12:26.760 like we have stability now in the monetary area, at 0:12:26.800 --> 0:12:30.800 least it appears, so you can't expect much improvement beyond that. 0:12:31.559 --> 0:12:36.840 And we are seeing little uptick signs in inflation and 0:12:37.160 --> 0:12:41.600 uptick signs in some of the bond interest rates. And 0:12:41.679 --> 0:12:45.720 what that suggests is the wind has been at our back, 0:12:46.280 --> 0:12:50.480 but maybe it's now subsidy. Hey, David, thanks so much 0:12:50.520 --> 0:12:53.160 for joining us. We appreciate your color as always in that. 0:12:53.360 --> 0:12:55.400 Clearly we sensed a little bit of change in tone 0:12:55.400 --> 0:12:57.080 from you, so we appreciate your sharing that with us. 0:12:57.120 --> 0:13:00.480 David Kotak common Advisor's chief investment off So that was 0:13:00.559 --> 0:13:03.439 news for me, Lisa, because David's been consistently I think 0:13:03.480 --> 0:13:07.079 constructive and now he's saying, you know, he's had a 0:13:07.160 --> 0:13:10.600 nice run here, as obviously has. The market has um 0:13:10.600 --> 0:13:12.120 and it's not the worst thing to perhaps take a 0:13:12.120 --> 0:13:14.040 little bit of money off the table, maybe get a 0:13:14.040 --> 0:13:18.080 little bit defensive. We've heard that from some people as well. 0:13:18.640 --> 0:13:21.120 Others are still saying, hey, we've got more to run 0:13:21.200 --> 0:13:23.719 in this market. But you know, a grizzled veteran like 0:13:23.800 --> 0:13:26.200 David Kotok say, let's get a little bit cautious. Very 0:13:26.240 --> 0:13:42.000 interesting change in tone for him. So we got retail 0:13:42.040 --> 0:13:46.720 sales out this morning, and they did gain, but they 0:13:46.760 --> 0:13:49.559 were a little bit more muted in certain areas. That 0:13:49.679 --> 0:13:53.480 gave certain economists concerned that perhaps the consumer, the stalwart 0:13:53.840 --> 0:13:57.240 of the economic expansion, was running out of steam. Joining 0:13:57.280 --> 0:13:59.959 us now Mark Vitner, senior economist. It was Fargo Security, 0:14:00.080 --> 0:14:02.520 and Mark, I really do want to hone in here 0:14:02.559 --> 0:14:05.440 on the consumers, since it has been so pivotal in 0:14:05.559 --> 0:14:08.800 driving growth here in the United States. Do you view 0:14:09.000 --> 0:14:11.800 the retail sales that we got out this morning as 0:14:11.840 --> 0:14:15.680 potentially a warning sign? I don't know that it's that 0:14:15.760 --> 0:14:17.319 much of a warning. We're coming off a lot of 0:14:17.360 --> 0:14:20.600 strength in the third quarter, and there's also there was 0:14:20.680 --> 0:14:24.160 some supply disruption in the auto sector, and I think 0:14:24.160 --> 0:14:26.880 that that may have weaken what would have been even 0:14:26.880 --> 0:14:30.600 stronger auto sales. So, you know, I think that the 0:14:30.600 --> 0:14:33.600 consumer seems to be in reasonably good shape. While job 0:14:33.640 --> 0:14:36.120 growth is slow, the unemployment rate is very, very low. 0:14:36.120 --> 0:14:39.360 There's no sign that layoffs are picking up, so folks 0:14:39.360 --> 0:14:42.680 aren't concerned about their job security, and wages and salaries 0:14:42.640 --> 0:14:46.200 are are accelerating. So I actually think there's too much 0:14:46.240 --> 0:14:49.920 pessimism about the consumer. And if we had numbers just 0:14:50.040 --> 0:14:52.960 like this every month, every month, month after month, we 0:14:53.000 --> 0:14:55.760 would still be better off than what most folks have 0:14:55.880 --> 0:14:59.400 forecasts for the next year. So, Mark, how concerned are 0:14:59.400 --> 0:15:04.560 you about, uh? The manufacturing sector business investment continued weakness there. Yes, 0:15:04.600 --> 0:15:06.720 that's a smaller part of the U. S economy relative 0:15:06.760 --> 0:15:08.960 to the consumer, but how do you kind of view 0:15:09.040 --> 0:15:13.320 that mosaic? Well, manufacturing is a smaller part of the economy, 0:15:13.360 --> 0:15:15.240 but it still accounts for most of the swing. When 0:15:15.240 --> 0:15:17.800 we went from two percent growth to three percent growth, 0:15:17.840 --> 0:15:20.960 two thirds of the acceleration came from manufacturing, and the 0:15:21.080 --> 0:15:23.560 move from three percent back to two two thirds of 0:15:23.600 --> 0:15:25.760 the acceleration has been because of a slowdown in the 0:15:25.800 --> 0:15:29.000 factory sector. Part of that is due to the ongoing 0:15:29.080 --> 0:15:32.720 uncertainty about where we're headed with trade negotiations with China. 0:15:33.080 --> 0:15:35.440 If we get a trade deal with China, manufacturing out 0:15:35.520 --> 0:15:38.760 activity will probably pick up, investment will probably pick up 0:15:39.480 --> 0:15:42.520 um six months out. The other thing that has been 0:15:42.560 --> 0:15:44.560 happening is that when growth, when the economy was growing 0:15:44.600 --> 0:15:47.440 two percent, you needed less inventory than when we were 0:15:47.480 --> 0:15:50.880 growing three And now that we're back at two businesses 0:15:50.920 --> 0:15:54.680 have been reducing inventories, and that's weight on manufacturers. That 0:15:54.680 --> 0:15:59.160 that pool to manufacturing activity from from inventory d stocking 0:15:59.280 --> 0:16:02.120 is now probably behind us. So I think in the 0:16:02.200 --> 0:16:03.800 very near term we're gonna see a little We're gonna 0:16:03.800 --> 0:16:06.880 see some better numbers on industrial production and better numbers 0:16:06.880 --> 0:16:12.040 in the ISM Manufactured Survey. The estimate for your over 0:16:12.040 --> 0:16:14.880 you GDP growth in the United States right now one 0:16:14.920 --> 0:16:19.520 point eight percent. For how close are we to stall 0:16:19.560 --> 0:16:23.960 speed here, well, one percent is about what we've averaged, 0:16:24.480 --> 0:16:27.040 what we average from two thousand ten to two thousand sixteen. 0:16:27.040 --> 0:16:29.040 I guess if you look over the entire business cycle, 0:16:29.600 --> 0:16:32.960 we're right at two point three percent since the recession ended. 0:16:33.000 --> 0:16:34.560 So it's a little bit slower than where we've been. 0:16:35.240 --> 0:16:37.520 But if we grow one point eight percent per year, 0:16:37.600 --> 0:16:41.640 that's probably enough to keep the unemployment rates steady. And 0:16:41.640 --> 0:16:44.360 we're at three point six percent. So if not horrible, 0:16:44.400 --> 0:16:46.800 I would rather see growth somewhere more to two percent. 0:16:47.640 --> 0:16:51.040 I think the greater risk is that when growth slows, 0:16:51.480 --> 0:16:54.480 we're more vulnerable to some sort of exogenous shock. If 0:16:54.520 --> 0:16:58.320 something bad were to happen somewhere in the world, maybe 0:16:58.320 --> 0:17:02.240 if China took a harder line on Hong Kong, um 0:17:02.320 --> 0:17:06.280 that that might tip the balance into recessions. We walk 0:17:06.359 --> 0:17:08.240 through that a little bit because we have been seeing 0:17:08.240 --> 0:17:11.240 these headlines about how things have been accelerating and tensions 0:17:11.240 --> 0:17:13.600 have been rising increasingly in Hong Kong with the death 0:17:13.960 --> 0:17:16.959 of a student. How does that end up being the 0:17:16.960 --> 0:17:21.080 exogenous factor? Uh that disrupts the global economy more significantly. 0:17:21.880 --> 0:17:24.240 But you never really know what the exogenous factor is 0:17:24.320 --> 0:17:27.000 until it happens. That's why they're called black swans. But 0:17:27.000 --> 0:17:29.359 but my senses, if China did have to come in 0:17:29.440 --> 0:17:34.040 harshly than the than the response from the West would 0:17:34.040 --> 0:17:37.760 probably be trade sanctions and the economic sanctions on China, 0:17:38.480 --> 0:17:41.359 which would be far worse than the trade war, and 0:17:41.520 --> 0:17:43.879 we saw how much the trade wars loclobal economy. So 0:17:44.480 --> 0:17:46.919 if if sanctions would have to be put in place 0:17:47.320 --> 0:17:49.640 on businesses doing business in China, then that that would 0:17:49.640 --> 0:17:51.720 be an all another ball game, which I think would 0:17:51.840 --> 0:17:54.760 would really slow the global economy. But that's there really 0:17:54.800 --> 0:17:56.600 wouldn't be any choice in the matter. Would be similar 0:17:56.600 --> 0:17:59.639 to what we saw in Russia with CRIMEA, So it 0:17:59.680 --> 0:18:01.760 would be, uh, you know, it would be similar circumstance 0:18:01.800 --> 0:18:04.520 to that. So, Mark, do you think the Federal Reserve 0:18:04.840 --> 0:18:07.440 is taking the right tack here after that last rate 0:18:07.480 --> 0:18:09.600 cut to say, maybe a little bit of a pause 0:18:09.640 --> 0:18:11.200 here and we will take a look at the data 0:18:11.200 --> 0:18:14.600 as it comes in. Yeah, I think they are. I mean, 0:18:14.720 --> 0:18:17.600 and you know, and I don't want to you just 0:18:17.600 --> 0:18:19.800 say one last thing on China. That's certainly not something 0:18:19.840 --> 0:18:21.879 that we're looking for. I think that I really doubt 0:18:21.880 --> 0:18:24.359 that we would ever see a scenario like that. But 0:18:24.960 --> 0:18:27.000 but I think that the FETE is holding off to 0:18:27.040 --> 0:18:29.000 see are we going to get a trade deal? And 0:18:29.040 --> 0:18:31.399 if we get a trade deal, does it cause the 0:18:31.440 --> 0:18:35.640 economy to re accelerate? And uh, if it does, then 0:18:35.640 --> 0:18:39.000 they're probably done. But I think a lot of folks think, hey, 0:18:39.000 --> 0:18:40.800 if we get a trade deal, the Feds done. I 0:18:40.800 --> 0:18:43.239 don't think it's that simple. I think we gotta get 0:18:43.240 --> 0:18:44.439 a trade deal and then we have to see if 0:18:44.440 --> 0:18:48.280 that trade deal actually impacts the economy in a meaningful way, 0:18:48.320 --> 0:18:51.359 and if it does, then they probably are done. But 0:18:51.600 --> 0:18:55.119 right now we still have another cut by the funds 0:18:55.200 --> 0:18:57.639 rate in March. We have another quarter point cut in March. 0:18:57.920 --> 0:19:00.239 But they're clearly in a wait and see mode right 0:19:00.240 --> 0:19:02.560 now until we get to March. Do you think if 0:19:02.600 --> 0:19:04.800 we get if we don't get a trade deal, that 0:19:05.000 --> 0:19:09.360 the one point eight percent prediction for it seems right 0:19:09.480 --> 0:19:12.240 or do you think it would be substantially lower. Well, 0:19:12.240 --> 0:19:15.040 when we came up with our forecast at one growth, 0:19:15.040 --> 0:19:18.040 we were we were assuming no trade deal or a 0:19:18.080 --> 0:19:23.320 minimal trade deal, and and so you know, I it's 0:19:23.400 --> 0:19:25.199 really hard to say, but I would say that the 0:19:25.240 --> 0:19:27.879 downside risk of the economy would certainly increase if we 0:19:27.880 --> 0:19:30.480 don't get a trade deal, because it's not it's not 0:19:30.560 --> 0:19:33.240 just the immediate effects on the US economy. It really 0:19:33.240 --> 0:19:36.560 works through the dampening effects, the further dampening effects on 0:19:36.600 --> 0:19:39.640 global economic growth, and how that comes back to impact 0:19:39.640 --> 0:19:42.919 the US because the US really is not a We 0:19:42.960 --> 0:19:45.920 don't have much of our economy tied to the global economy, 0:19:46.000 --> 0:19:49.439 certainly not as much as as other industrialized nations do. 0:19:50.280 --> 0:19:52.560 So jobs has been a big part of supporting this 0:19:52.640 --> 0:19:54.480 consumer we've had to kind of slow down. Are you 0:19:54.480 --> 0:19:58.600 concerned about jobs? I'm not as concerned about the slowdown 0:19:58.640 --> 0:20:00.800 in jobs, And actually the slowdown is greater than what 0:20:00.880 --> 0:20:04.000 the reported data indicate. Because in August we got the 0:20:04.440 --> 0:20:07.720 quarterly Senses of Employment wage data which showed the job 0:20:07.760 --> 0:20:10.800 growth from March of eighteen to March of nineteen, which 0:20:10.840 --> 0:20:12.680 is the source of the revisions that we get early 0:20:12.760 --> 0:20:16.080 next year. It was half a million jobs less then 0:20:16.160 --> 0:20:19.080 was previously reported. Most of that downward revision is in 0:20:19.119 --> 0:20:22.240 retail trade because of the loss of jobs to online retailing, 0:20:22.720 --> 0:20:25.520 in the leisure and hospitality sector because of rising wages, 0:20:26.119 --> 0:20:29.679 total income earned from those jobs is actually stronger than 0:20:29.720 --> 0:20:32.160 have been previously reported, so that more than off. That's 0:20:32.160 --> 0:20:34.040 the fact that job brother is slower than the slow 0:20:34.400 --> 0:20:36.359 Mark Whittner, thank you so much for joining us. Mark Whittner, 0:20:36.400 --> 0:20:51.000 senior economists at Wells Fargo Securities. We works back in 0:20:51.320 --> 0:20:53.760 the news coming across the Bloomberg terminal. Right now, WE 0:20:53.880 --> 0:20:58.440 Works is said to face SEC inquiry into possible rule breaches. 0:20:58.840 --> 0:21:00.679 Uh so we want to dig into that. Matt Robinson, 0:21:00.720 --> 0:21:03.719 Bloomberg News joins us here in a Bloomberg Interactive Broker Studios. 0:21:03.760 --> 0:21:06.439 Also a headline at that Roger Stone is guilty in 0:21:06.560 --> 0:21:10.040 US trial overlies about the leagues. So the headlines continue 0:21:10.320 --> 0:21:13.640 to break. But going back to WE Work, So what's 0:21:13.680 --> 0:21:14.760 going on here? What do you think this is? The 0:21:14.800 --> 0:21:17.440 SEC is really looking in here? So when the SEC 0:21:17.560 --> 0:21:20.840 opens investigation, they're looking to see whether what was disclosed 0:21:20.840 --> 0:21:25.080 to investors was reflected in you know, private discussions what 0:21:25.119 --> 0:21:28.639 was going on in the company. So they're always looking for, um, 0:21:28.680 --> 0:21:31.159 you know, if you're saying something publicly that it matches 0:21:31.160 --> 0:21:35.240 what you're saying privately. And given the sort of fall 0:21:35.280 --> 0:21:37.800 from grace from We Work over the last couple of months, certainly, 0:21:38.040 --> 0:21:40.399 you know, um sort of enterprising for security lawyers to 0:21:40.400 --> 0:21:41.840 be like they're going to make sure that they're kicking 0:21:41.840 --> 0:21:45.880 the tires and that everything that was you know, going 0:21:45.880 --> 0:21:48.879 on in the company was known to potential investors. So 0:21:49.080 --> 0:21:51.359 there has been there have been other reports that the 0:21:51.480 --> 0:21:53.879 SEC was in close contact with we were leading up 0:21:53.880 --> 0:21:56.600 to the I p O saying your documents are insufficient. 0:21:56.640 --> 0:21:59.320 The whole community adjusted a bit that they changed to 0:21:59.440 --> 0:22:02.240 something else was problematic. You guys need to account for 0:22:02.280 --> 0:22:06.400 your finances in a better way. How instrumental will that 0:22:06.560 --> 0:22:10.560 be in this investigation? If at all? Well, you know, 0:22:10.640 --> 0:22:12.600 for something like this. And another thing to point out 0:22:12.680 --> 0:22:16.480 is that often with these kinds of investigations they last years. Um, 0:22:16.520 --> 0:22:18.440 you know, the average investigation is like two or three 0:22:18.480 --> 0:22:21.760 years for the SEC. And um, there you know, they're 0:22:21.760 --> 0:22:23.720 sort of wrapping their arms around, like you know what 0:22:23.760 --> 0:22:25.679