Speaker 1: This is Bloomberg Business Week. I'm Karl Masser and I'm
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Speaker 1: a tough time in the aftermarket. Chipotle Mexican Mexican Grill.
Speaker 1: Let's try it again. Chipotle Mexican Grill in the aftermarket
Speaker 1: yesterday was soaring, and it's soared in today's session, up
Speaker 1: more than six at its highs. And this is after
Speaker 1: the company reported second quarter earnings at top analyst projections.
Speaker 1: The chain adding new locations consumers show that they were
Speaker 1: willing to show up and pay more. The company also
Speaker 1: provided an upbeat sales outlook. So great to have back
Speaker 1: with us. We got with us and Nicol. He is
Speaker 1: the CEO of chip Pole. It's good to have you
Speaker 1: with us, Brian. How are you. I'm great, Yeah, thanks
Speaker 1: for having me guys. Yeah, thanks so much for joining
Speaker 1: us on this. Hey, Carol went through some of these.
Speaker 1: We also want to mention the same store sales growing
Speaker 1: in the mid to high single digits in the third quarter.
Speaker 1: That's the outlook that you gave. Um. What worked so
Speaker 1: well this past quarter, as we're sort of getting a
Speaker 1: tail of two different earnings reports at this point, what
Speaker 1: worked was so well for you guys? Well, unfortunately for us. Uh.
Speaker 1: You know, our customer mix definitely over indexes with higher
Speaker 1: income and we saw that group actually increase their purchase
Speaker 1: frequency with us, and uh, their spend was also a
Speaker 1: little bit of So what we concluded is we we've
Speaker 1: seen some trade down and you know, people are switching
Speaker 1: some occasions in digitotle, so we feel like we're gaining
Speaker 1: market share um for our company. Uh. And then at
Speaker 1: the same token, we did see a slight slow down
Speaker 1: with the lower income consumer from a purchase frequency standpoint,
Speaker 1: but not in their absolute spend. And you know, the
Speaker 1: thing that was really powerful for us throughout the quarter
Speaker 1: is our restaurants were staffed, um, you know, and our
Speaker 1: team members did a great job of servicing both our
Speaker 1: digital business, which is rough, and our frontline business, which
Speaker 1: is really accelerating as people kind of come back to
Speaker 1: normal routines. And uh, that was really the thing that
Speaker 1: I think carried us to order. And then obviously our
Speaker 1: brain has tremendous value. Uh, and as a result, we
Speaker 1: were able to pass through some pricing to offset a
Speaker 1: lot of the inflationary pressures we've been dealing with. Brod,
Speaker 1: I gotta ask you, I mean, when you saw these
Speaker 1: results coming in are leading up to this earnings report, Um,
Speaker 1: were you just kind of blown away? I mean, even
Speaker 1: restaurant margin, which we all watch so closely because it's
Speaker 1: key in terms of measuring profitability in the quarter, compared
Speaker 1: with an estimate of I mean, as the numbers were
Speaker 1: coming in, and you know, were you just kind of
Speaker 1: blown away by the performance considering the declines we've seen
Speaker 1: in consumer sentiment and so much recessionary talk. Yeah, Look,
Speaker 1: I really think it goes back to the strength of
Speaker 1: both our teams that are executing in our restaurants, because
Speaker 1: you know, they're the ones that turn the top line
Speaker 1: into the bottom line based on how they perform in
Speaker 1: the restaurant. And then I think the I would say
Speaker 1: the strength of brand, which is, you know, it's really
Speaker 1: based on great culinary, great ingredients, you know, customization and convenience,
Speaker 1: and I think we did a great job of executing
Speaker 1: against all those markers and as a result, um, you know,
Speaker 1: we were rewarded with people's business that then our teams
Speaker 1: did a great job of executing so that it flowed
Speaker 1: to the bottom line. But yeah, I'm really proud of
Speaker 1: the results. You know, to achieve a ten percent pump
Speaker 1: and also be able to you know, deliver the margins
Speaker 1: at the restaurant in this environment, I think it speaks
Speaker 1: of testament to just the value proposition, the strength of
Speaker 1: the brand in the strength of the people working in
Speaker 1: our restaurants. And while analysts in the investment community were
Speaker 1: pretty happy about what they had heard, you know, in
Speaker 1: terms of your comp sales, I just want to mention
Speaker 1: another headline crossing about another company, best Buy, talking about
Speaker 1: their second quarter comp sales, and they're talking about them
Speaker 1: declining about so a different company, but this stock is
Speaker 1: now down about five percent and the after hours. Hey, Brian,
Speaker 1: back to Chipotle. Let's talk about wages because I know
Speaker 1: that we heard from you guys last night that labor
Speaker 1: cross for the quarter were increased about thirty basis points
Speaker 1: from last year twenty four eight percent. You did that,
Speaker 1: you know wage rays last year. That's sort of widespread
Speaker 1: wage increase. Are you gonna have to do that again?
Speaker 1: You know, we are continuing to see pockets of you know,
Speaker 1: needs to do still movement on our wages. The good
Speaker 1: news for us is we took a really big move
Speaker 1: about a year ago, which you manage, and then really
Speaker 1: what we've been doing is just monitoring kind of at
Speaker 1: the local level what's happening with wages and opportunity at
Speaker 1: our company, so that we need to attract retain the
Speaker 1: right people. And we still are dealing with I like
Speaker 1: to say, pockets of challenges on that front. Where are
Speaker 1: those geographical pockets? Yeah, and it's almost look it's like
Speaker 1: store by store, Um, you know, it's not contained one
Speaker 1: region over another region. It really depends on what I
Speaker 1: would call kind of the market area. And you know
Speaker 1: there's a lot of dynamics that go into it. You know,
Speaker 1: is there big box retail nearby? What are the other
Speaker 1: alternatives for um kind of the the employee pool that
Speaker 1: we compete with. So while you raised wages pretty much
Speaker 1: across the board last year, by not necessarily you will
Speaker 1: have to do the same thing this year or your
Speaker 1: you might might have to. We're look, we're still moving
Speaker 1: forward with MERITA increases, and we did a little bit
Speaker 1: bigger merit increase than usual given the inflationary environment, because
Speaker 1: we don't want to fall behind on wages either, given
Speaker 1: you know, the environment we're dealing with, So that's really
Speaker 1: important to us. So I should probably caveat. We're trying
Speaker 1: to run our wage program on more of a you
Speaker 1: know system basis, where it happens every six months we
Speaker 1: re evaluate wages, you know, we pass along merit increases,
Speaker 1: and also we provide promotions for folks. And you know,
Speaker 1: before we were having to come in between those because
Speaker 1: you know, you just the competition to get labor to
Speaker 1: work had really increased dramatically because there were fewer people applying. Luckily,
Speaker 1: that seems to have gone um to more of a
Speaker 1: normal pace where applicant flow as well as our ability
Speaker 1: to then retain people as as starting to get more
Speaker 1: I would say, to a normal approach for us UM
Speaker 1: or normal run rate. I gotta ask you only because
Speaker 1: it's been another story that we've been following for the
Speaker 1: last few months about unionization that we're seeing certainly among
Speaker 1: you know, restaurants. Are you how do you guys feel
Speaker 1: about that or is that part of your move to
Speaker 1: make sure you stay ahead of when it comes to
Speaker 1: higher wage is because would you prefer that your restaurants
Speaker 1: don't become unionized or are you okay about it? Yeah? Look,
Speaker 1: I really don't see the need for union at chipotlech Um.
Speaker 1: You know, I believe our jobs and the culture and
Speaker 1: the opportunities are best done within our restaurants and within
Speaker 1: our company. We don't need a third party to be
Speaker 1: a part of that conversation. And the reason why I
Speaker 1: say that is we've got great wages. Um, okay, they're
Speaker 1: great jobs. Were a growth company. You have the ability
Speaker 1: to join our company with you know, a high school
Speaker 1: degree or some equivalent. Um. And also if you talk
Speaker 1: to any like new immigrants or refugees, I mean this,
Speaker 1: this company delivers jobs and deliver the American dream. And
Speaker 1: I can share many stories where you know, I was
Speaker 1: just with somebody that was a refugee from the Congo.
Speaker 1: He's now one of our highest level general managers, making
Speaker 1: six figures, leading a multimillion dollar restaurant, a team of
Speaker 1: thirty plus people. And the guy is electric and you
Speaker 1: know what he's gonna be able to continue to grow with. Yeah,
Speaker 1: there's a young woman should be immigrated from Chihuahua, Mexico,
Speaker 1: single female, didn't know English, learns English. You know, nine
Speaker 1: years later, she's our top restaurant general manager in the
Speaker 1: entire coping. So yeah, there's just tremendous opportunity for people
Speaker 1: to go from a crew position, work their way up
Speaker 1: to being a general manager, becoming what we call a
Speaker 1: restaurant tour which is our top general managers, becoming a
Speaker 1: multi unit leader. And when you're when you're building restaurants
Speaker 1: a year, there is so much suction for people to
Speaker 1: get promotered and moved up. I I think last year
Speaker 1: we promoted you know, like nineteen people. Um, so, just
Speaker 1: tremendous opportunity. And you know, I'm very proud of our
Speaker 1: company and I'm very proud of the jobs that we
Speaker 1: provide to our people. Hey, Brian, a lot those still
Speaker 1: out of your control, especially when it comes to costs.
Speaker 1: And this is something that we heard fed J. J.
Speaker 1: Powell talking about the rising costs across the board, especially
Speaker 1: for food. We did learn last night in your earnings
Speaker 1: report that you mentioned avocados, dairy tortillas, some packaging. Um,
Speaker 1: those prices are still going up. You did those say
Speaker 1: that other parts of the business you've seen prices plateau.
Speaker 1: What is that? Where? Where has where has inflation been
Speaker 1: transitory in your business? Well? Yeah, don't mistake that for
Speaker 1: transitory because it hasn't gone back right, So you're not
Speaker 1: ready to call peak inflation. Not ready to call peak
Speaker 1: inflation yet. I wish, I wish I could, and I'm
Speaker 1: not ready to say that because we haven't seen anything
Speaker 1: really go backwards yet. Um. The good because is we
Speaker 1: finally had like I don't know if you can call
Speaker 1: this a trend, but we have like a month or
Speaker 1: two where we didn't see everything going up. Um. But
Speaker 1: as you mentioned, we had some major inputs going up
Speaker 1: still uh and in a meaningful way. And that's why
Speaker 1: you know, Unfortunately we've got to take another price increase
Speaker 1: in August. Um, as much as I hate to do it,
Speaker 1: we're fortunate that our brand has the pricing power to
Speaker 1: do it. Uh, and we can maintain the integrity of
Speaker 1: our value. Was it what ingredients? What ingredients are you
Speaker 1: referring to? Was a chicken was at steak? What was it?
Speaker 1: That plateau? Or continue? Yeah? That that that plateau? It
Speaker 1: was it was more in the proteins, so like pork,
Speaker 1: beef in some produce items. Unfortunately packaging aluminum, Uh, dairy tortillas, avocados,
Speaker 1: chicken um continue to have a lot of pressure. One
Speaker 1: thing I want to ask you about, Brian. I mean,
Speaker 1: you're continue to grow in terms of the number of
Speaker 1: restaurants and especially the pickup windows. You know, where is
Speaker 1: the real growth and momentum that you guys continue to see.
Speaker 1: I've been out to visit It's really pretty cool to
Speaker 1: see the different lines that you guys are able to
Speaker 1: tap into, and certainly the digital world of people just
Speaker 1: either ordering online and just zipping by and picking up.
Speaker 1: So where is it that you really continue to see
Speaker 1: growth in terms of the types of restaurants you want
Speaker 1: to be opening up? Yeah, look the restaurant the Chipotle
Speaker 1: lane format um is you know, a traditional Chipole with
Speaker 1: a pickup window where you don't have to get out
Speaker 1: of your car and those restaurants and we now have
Speaker 1: four hundred and thirty of them, and I think the
Speaker 1: last time we spoke or maybe the first time we
Speaker 1: spoke about this, I think when we were talking about it,
Speaker 1: we had like Tan in the back in like two
Speaker 1: thousand nineteen. So it just shows the power of our development. Uh,
Speaker 1: but they continue to really perform. You know, our digital
Speaker 1: business is about big uh in in that execution, and
Speaker 1: then the total business is also opens at a higher
Speaker 1: volume as well. So uh, that's what we're building. Um.
Speaker 1: We just opened our first one up in Canada to
Speaker 1: a really successful opening, and then just recently we opened
Speaker 1: one and kind of a smaller town outside California. It's
Speaker 1: like a new record opening for us. So it's got
Speaker 1: a lot of momentum. Will continue to build the inline
Speaker 1: um Chipotle's as well where we can't get the chipotlenk.
Speaker 1: But it's clear consumers like the additional access point of
Speaker 1: not having to get another car, and it really it's
Speaker 1: the fastest drive the experience you can have because you
Speaker 1: ordered ahead, you've already paid for it. If you order
Speaker 1: a fountain drink, that's the thing that you gotta wait
Speaker 1: on otherwise you pull up, say your name, and you
Speaker 1: know you got a burrito and you're ready to go. Hey, Brian,
Speaker 1: about a year ago we were interviewing you and I
Speaker 1: asked you about Chipotle accepting crypto, and I gotta be honest,
Speaker 1: you kind of laughed it off, and and here we
Speaker 1: are a year later, and you know, June of this
Speaker 1: year you announced that you now accept crypto at US
Speaker 1: locations his partnership with Flexa. So essentially, people load up
Speaker 1: this app with with their crypto and then you accept
Speaker 1: that app at the restaurants. What how's that going right now?
Speaker 1: What percentage of sales is in crypto at this point?
Speaker 1: It's uh, you know, look, it's a really neat tool
Speaker 1: that Flexa provides so that people can monetize their crypto. Um,
Speaker 1: but you know they carry all the risk and uh,
Speaker 1: it's a very very small percentage of sales. Um. Arguably
Speaker 1: it's almost negligible. But um, you know, for those that
Speaker 1: have it and want to monetize it, we found I
Speaker 1: think a pretty clever solution. All right, but you are
Speaker 1: doing and then buy the dip game, right and if
Speaker 1: you win, you can get it, but you could get
Speaker 1: you gotta could get about crypt We got a lot
Speaker 1: of creative people in our own marketing department. I'll tell
Speaker 1: you that much. Well, but why do promotion in time?
Speaker 1: Even dose coin is in there like so no, no, no,
Speaker 1: but but it is interesting. Is it just kind of
Speaker 1: its appeals to your audience and you know what is it?
Speaker 1: You know, Look, we have a commitment to stay relevant
Speaker 1: both in culture, food, culture, you know, music. You know,
Speaker 1: I guess tech falls all the way to this idea
Speaker 1: of crypto and uh, I think the team does a
Speaker 1: fabulous job of staying on the front end of where
Speaker 1: young people want to be, uh, and then also being
Speaker 1: very relevant. You know, I never want our brand to
Speaker 1: be out of sync with the conversation and uh. You know, look,
Speaker 1: the reality is the things that drive culture, right, It's food,
Speaker 1: it's fashion, its sports, it's music. I think it's tech.
Speaker 1: So we want to be president in those things. Well.
Speaker 1: I love that you said tech because we had a
Speaker 1: great conversation with your chief technology officer last week, Kirk Corner,
Speaker 1: and we talked about the Cultivate Next venture fund. You
Speaker 1: guys are investing in companies like hyphen and we were
Speaker 1: actually kind of blown away. We were online Tim and
Speaker 1: I looking at at this make line of where you've
Speaker 1: got teams in the restaurants servicing customer is and then
Speaker 1: yet below all the digital orders are being filled. I mean,
Speaker 1: when you think about the investments you want to be
Speaker 1: making in other companies, how do you think about it?
Speaker 1: What's the strategy there? Well? Yeah, look, I am I'm
Speaker 1: super excited about this hyphen possibility for exactly what you
Speaker 1: just described. Right, We've got think of it this way, right,
Speaker 1: our business is on that digital makeline. If we could
Speaker 1: automate that aspect of our business where you know, you
Speaker 1: only need a person or two to manage it, uh,
Speaker 1: it makes the job a lot easier in way for
Speaker 1: our employees because now you're not having really balanced deployment
Speaker 1: between digital orders and frontline orders. And uh, at the
Speaker 1: same token, you know, in the event it goes down,
Speaker 1: you still can serve off the top of the line.
Speaker 1: So that hyphen technology, automation, robotics, whatever term you want
Speaker 1: to give it, is I think a big, big opportunity
Speaker 1: for us. I'm super excited about our investment. I've met
Speaker 1: the guys that are working on it, or should save
Speaker 1: a team that's working on it up in San Jose,
Speaker 1: smart group of people. I never thought I could say
Speaker 1: I would have a bunch of rocket sciences. I got
Speaker 1: a bunch of rocket sciences working by which is pretty amazing.
Speaker 1: This technology and every walk of our life, that's for sure. Hey,
Speaker 1: Brian Fund to spend some time with you. Brian Nicol,
Speaker 1: of course, the chairman and CEO Chipotle, joining us via
Speaker 1: Zoom from the company's headquarters in Newport Beach, California. Brian, Bwell,
Speaker 1: thank you. You're listening to Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.
Speaker 1: So we know during the pandemic that a broader clientele
Speaker 1: was boarding private jets, especially as business travel came to
Speaker 1: a hall. And we've got a great guest to give
Speaker 1: us kind of an update is how the projjet industry
Speaker 1: continues to evolve as we increasingly come out of the pandemic.
Speaker 1: But we're not done yet. We stare certainly not done.
Speaker 1: A good reminder that we are still in it right.
Speaker 1: The President just testing negative today. Andrew Collins is a
Speaker 1: president and CEO of Centian a Jet. He's with us
Speaker 1: right now in the Bloomberg interactive at Broker Studio. Andrew,
Speaker 1: it's been a while since we've seen you. It's good
Speaker 1: to have you back with us. How are you. I'm
Speaker 1: doing great and it's great to be back here in
Speaker 1: the student Thanks for having me. Hey, give us you know,
Speaker 1: I want to talk about sustainability and what you guys
Speaker 1: are doing there, because there's some really cool stuff. But
Speaker 1: first I want to get an idea of what you're
Speaker 1: seeing as you look across the landscape right now. And
Speaker 1: to Carroll's point, we saw private jet travel demand really
Speaker 1: shoot higher during the pandemic. Is people you know thought
Speaker 1: that this was a good way to keep them safe.
Speaker 1: Are you seeing that demand remains strong right now? We
Speaker 1: are so. Um. We we saw the addressable market expand
Speaker 1: per se right. A lot of hidden people, hidden customers
Speaker 1: that you know, really took a pandemic to bring them out.
Speaker 1: They might have been a little fiscally conservative, or they
Speaker 1: might have thought about the sustainability issue, but at the
Speaker 1: end of the day, they came out and products like ours.
Speaker 1: We invented the jet cards, so you pre buy twenty
Speaker 1: five hours at a time. When you utilize a service
Speaker 1: like that, you tend to get used to it. And
Speaker 1: so I don't think all the new entrants that came
Speaker 1: in and the expanded you know, amount of and the
Speaker 1: velocity by which you know, the volume came I don't
Speaker 1: know that that will remain exactly as it stands. But
Speaker 1: a good portion of it is we're very busy this summer.
Speaker 1: Despite you know, raising rates and fuel surcharges and everything else,
Speaker 1: there is a voracious appetite for flying and traveling. Right now,
Speaker 1: are you back to pre pandemic levels? We are well
Speaker 1: passed pre pandemic levels really, And is most of it
Speaker 1: leisure or is it a combination of leisure? A little tricky,
Speaker 1: A little tricky because it feels like leisure what they
Speaker 1: call it? Now? What is that? I think? I think
Speaker 1: it's a lot like that. Yeah. I go on a
Speaker 1: busits trip and I bring my Yeah, yeah, I think that.
Speaker 1: You know, it used to be I can tell you
Speaker 1: was sixty corporate, it was leisure, etcetera. Now it's very
Speaker 1: much hard to track because it's a lot of individuals,
Speaker 1: a lot of individual flying. Uh, they might be just
Speaker 1: expensing it. You have no idea. In some cases, you'd
Speaker 1: have to look at kind of time of day and
Speaker 1: what don't know. I mean, a corporate credit card goes through, right,
Speaker 1: doesn't it um Well, because when with our card, you
Speaker 1: actually deposit money and then we just dub it it down,
Speaker 1: so we'll never really know if you're using it for
Speaker 1: business or not unless you did set it up as
Speaker 1: a business account. Okay, but somebody pays, someone does pay
Speaker 1: for it, yeah, and it's a lot of times it's
Speaker 1: a primary customer and it's in their name. So at
Speaker 1: the end of the day, though, you can tell, like
Speaker 1: you can tell certain routes and you can see things
Speaker 1: come back. Titter Borrow's come back a lot, Westchester's come back,
Speaker 1: you know, Van Nye's come back. So there's a lot
Speaker 1: of business travel out there that's almost sneaky, but it's
Speaker 1: definitely happening. It's interesting we're seeing this reversion to the
Speaker 1: mean with a lot of these pandemic plays out there
Speaker 1: in the public markets, whether it's Shopify laying off ten
Speaker 1: percent a thousand people earlier this week, Peloton coming back
Speaker 1: from sky high valuations. Do you anticipate a reversion to
Speaker 1: the mean as we do ease out of the pandemic
Speaker 1: and we and you get back to pre pandemic levels
Speaker 1: which were significantly lower than they are now. People become
Speaker 1: more comfortable on commercial travel. Well, I think that commercial
Speaker 1: has got a long way to go, and that's you know,
Speaker 1: without disrespect to my commercial brethren, but we've had to
Speaker 1: do a bunch of disrespect. Yeah, it's been pretty it's
Speaker 1: been about it's tough, right they You know, the reaction
Speaker 1: up front was to shrink a lot of routes and
Speaker 1: shut a lot of things down. To bring that back
Speaker 1: is really tough. So they're in the process of trying
Speaker 1: to figure that out. But there's a lot of people
Speaker 1: that left the airline industry and they're not coming back,
Speaker 1: or pilots and crews retired, so there's a lot of
Speaker 1: challenges there. Over in Europe, it's even worse. So right
Speaker 1: now you're seeing private jetscent year over your growth, uh
Speaker 1: due to the fact that it's just very difficult to
Speaker 1: travel throughout Europe. And uh, now, I don't I don't
Speaker 1: know that I see a lot of return yet. It
Speaker 1: just doesn't feel like that. It feels like in the
Speaker 1: fallen in the winter, especially this peak period, we're gearing
Speaker 1: up for a very big peak period during the winter.
Speaker 1: Do you have all the workers that you need or
Speaker 1: that you want and or and or Yes, but you're
Speaker 1: gonna have to you're paying up for them big time.
Speaker 1: You have to be very aggressive. So we've done a
Speaker 1: lot of aggressive work. We've done a lot of recruiting.
Speaker 1: We've hired a lot of aggressive We're paying them more,
Speaker 1: and we're talking to a lot more people. You know,
Speaker 1: it takes a lot more to fill oncelot, so we're
Speaker 1: doing a lot. We're also doing that. Everybody can be
Speaker 1: a pilot, no, not every It can be a pilot,
Speaker 1: and so there's a lot of work that goes around
Speaker 1: being a pilot. But to get crews, for instance, yeah,
Speaker 1: you have to you have to pay more, no question. Hey, ed,
Speaker 1: you want to talk on a touch on the sustainability efforts. Sure,
Speaker 1: you mentioned people who have been previously concerned about the
Speaker 1: environmental impact of perhaps traveling private might not have the
Speaker 1: same concerns now. It does emit a lot of c
Speaker 1: R two. I mean we're talking tons and tons per
Speaker 1: single plane per hour literal tons um. What are you
Speaker 1: doing to to offset that and to to to kind
Speaker 1: of um, you know, make customers feel better about their
Speaker 1: environmental impact so that you have a lot of different choices.
Speaker 1: You can do nothing and people will still pay and
Speaker 1: come on and fly. You can do a simple carbon
Speaker 1: offset or you know, a lot of people will offer
Speaker 1: access to a carbon offset service or something like that.
Speaker 1: We actually don't charge our customers and we do three
Speaker 1: off setting. So we invest millions of dollars in the
Speaker 1: background to do emissions offsetting. So we go a little
Speaker 1: bit further. We go into the water vapors, the aerosols
Speaker 1: and nitrous ox sides, the things that actually make the difference. UM.
Speaker 1: I would argue that we probably are doing one of
Speaker 1: the largest sustainability efforts in private aviation, and so we
Speaker 1: do it with a partner. But UM it's not an
Speaker 1: additional cost to our customer, and every flight is offset three.
Speaker 1: So in the first half of the year, we probably
Speaker 1: did the equivalent. If I was to compare it to things, UM,
Speaker 1: it's the equivalent of planting five million trees or providing
Speaker 1: energy to your average you know, town in America for
Speaker 1: a full year. UM it's it's a lot, and we're
Speaker 1: just getting used to it, and we're just learning it,
Speaker 1: and we're just experimenting with things. But we're trying to
Speaker 1: push our industry to do a lot more. I agree,
Speaker 1: push push, push away. UM, I love carbon offsetting. What
Speaker 1: about carbon negative efforts where we're actually reducing the carbon
Speaker 1: in the atmosphere, which many would argue that that's what
Speaker 1: we need to do to save this planet. I think
Speaker 1: that you've got to look at a lot of things.
Speaker 1: You've got to look at sustainable aviation fuel. I think
Speaker 1: you've got to look at a lot of ways to
Speaker 1: you know, one of the offshoots of the pandemic that's
Speaker 1: great is that it's virtual, so you're not doing a
Speaker 1: lot around the office as much and things like that.
Speaker 1: So we're looking at a lot of different ways to
Speaker 1: handle sustainability. I would tell you though, the biggest push
Speaker 1: that can happen is in electric and what they're calling
Speaker 1: V talls. And you know, as a company, we have
Speaker 1: two tolls on order for both you know, Europe and
Speaker 1: North America. When you get those, um, I hope knock
Speaker 1: on wood in four to five years. What's the company
Speaker 1: that you ordered. But is it eventually your whole fleet
Speaker 1: just got about? I don't know. It could be. It's
Speaker 1: definitely a mass transit play, but it's definitely on the horizon.
Speaker 1: But you're feeling the pressure to do that too, right, No,
Speaker 1: I think we're ahead of the curve, to be honest
Speaker 1: with you, love it, love it. I'm so glad you
Speaker 1: went through and so glad you're working on that. Um.
Speaker 1: You're too great to have you in in studio. Great
Speaker 1: to be here. Thank you. Andrew Collins's president and CEO
Speaker 1: of Sentient Jet, joining us here in our interactive broker
Speaker 1: studio journal. Yeah but you let me drive? No, No,
Speaker 1: all right, I want to drive. It's a good question.
Speaker 1: Drive ride to the clothes from Dawn on Bluebird Radio.
Speaker 1: All right, we've got just about just under to leven eleven,
Speaker 1: twelve minutes in the trading day. It's been big day.
Speaker 1: It's a FED day, you hear Charlie break it down.
Speaker 1: We've got stocks just hovering off their best levels of
Speaker 1: the session. So we've seen quite a rally. It looks
Speaker 1: like investors reading what we got from the FED is
Speaker 1: kind of dubbish signals. We'll see if whether or not
Speaker 1: the analysis is truly that. We did see yields back
Speaker 1: down a bit, and we'll see what happens tomorrow. And
Speaker 1: you know, Friday, the day after is often very much
Speaker 1: data later. This week. It's a good point. Let's get
Speaker 1: into it with Randy Watts, whose chief investment strategist at
Speaker 1: O'Neil Global Advisors. Randy joining us on the phone from Miami. Randy,
Speaker 1: how are you? Hey? It's great to hear both your voices,
Speaker 1: and I hope you're well, and I hope we can
Speaker 1: do this in person at some point this fall. Fingers crossed. Hey,
Speaker 1: let's go to Miami, Carol, you will come to your way.
Speaker 1: It sounds pretty good, especially when it's actually your cool
Speaker 1: up here. Hey, Randy, give us your immediate reaction to
Speaker 1: what we just heard from FED chair J. Powell. I
Speaker 1: know you watched the technicals here, but but give us
Speaker 1: your read on on what he had to say. I
Speaker 1: think I think what happened today was exactly down the
Speaker 1: middle of the fairway. It was very anticipated. You got
Speaker 1: the rate increase with the market expected. Marketing expected a
Speaker 1: seventy four chance of a seventy five basis point increase
Speaker 1: today you got that. And if anything, I would say
Speaker 1: the press conference was slightly more dovish in that Powell
Speaker 1: made it very clear that FED is going to be
Speaker 1: data dependent going forward, but he also sort of re
Speaker 1: emphasized the three point four percent rate for FED funds
Speaker 1: for the end of the year. So I would say,
Speaker 1: exactly as the market expected, no surprises, slightly more dovish
Speaker 1: press conference, and that's one of the reasons equities have
Speaker 1: reacted so strongly. And I would note bonds have rallied
Speaker 1: as well. The curve has flattened somewhat with with the
Speaker 1: tenure coming down towards the towards the sort of with
Speaker 1: the two year uh come and come down a bit.
Speaker 1: So I really as expect. Yeah, and I think also Carol,
Speaker 1: it seems like that investors are pretty happy that investors
Speaker 1: or that J. Powell said that we're not currently in
Speaker 1: a recession right now. I mean, reporters tried really hard
Speaker 1: to get that question out of him. Neil Irwin over
Speaker 1: to Axios finally did and we saw stocks move higher
Speaker 1: after that, and he reminded everybody, hey, wait, that's not
Speaker 1: what that's not my responsibility. It's all about my dual mandate.
Speaker 1: It seems like there's a single mandate right now, and
Speaker 1: that's inflation. Well exactly, I have to say, Randy, when
Speaker 1: he said that, wait a minute, we could also, you know,
Speaker 1: start to think about slowing in terms of our rate moves.
Speaker 1: I thought to me that that's very significant. But I
Speaker 1: think you were spot on, Bill Dudley, formerly of the
Speaker 1: New York Fed, the same thing. You know. J Powell
Speaker 1: reminded us several times to that press conference. He came
Speaker 1: back to that June dot pot plot excuse me, dot plot,
Speaker 1: which shows you know, a commitment by the FED to
Speaker 1: continuing on its tightening path. And I think that needs
Speaker 1: to be something that investors kind of just remember that
Speaker 1: he said that if I, if I could add one
Speaker 1: more store. Other sort of important points are he did see,
Speaker 1: did say that he's seeing slowing demanding Q two. They
Speaker 1: did say that they're going to try to stick to
Speaker 1: the balance sheet draw downlet they're currently on UH and
Speaker 1: that they were aiming for a soft landing but that's
Speaker 1: very hard to achieve, and that they think it's necessary
Speaker 1: to slow growth. So, I mean, the FED is definitely
Speaker 1: still on a tightening cycle, but again at the margin,
Speaker 1: slightly more dubbish than than I think, what the what
Speaker 1: what people most feared from that press conference? All right?
Speaker 1: So as investors then like help me out here, because
Speaker 1: you know, I'm kind of tired of all of the
Speaker 1: speculation we've hit bottom. We've not hit bottom. I mean,
Speaker 1: if you are investing in this market, you've got to
Speaker 1: figure out how to put money to work. Should you
Speaker 1: be putting money in the equity universe, should you be
Speaker 1: playing it safer in fixed income? How do you see it? Okay,
Speaker 1: let me say two things. First, I think the minute
Speaker 1: the stock market can identify or see we don't have
Speaker 1: to be there, but can see the end of the
Speaker 1: FED tighten cycle. I think stocks are headed up a
Speaker 1: lot higher. Now, it's unclear we're there yet, but as
Speaker 1: soon as the market star, it's the sense that I
Speaker 1: think equities are going to really take off. In terms
Speaker 1: of where we are right now, a typical bear market
Speaker 1: rally is up about twelve percent. That's kind of where
Speaker 1: we are right now, and so what happens going forward
Speaker 1: is going to be very interesting. We really want to
Speaker 1: see the SMP hold above it's fifty day moving average.
Speaker 1: Right now, it's about three percent above that. It's about
Speaker 1: eight percent away from the two D day. If it
Speaker 1: can stay above that fifty day, we're pretty optimistic. However,
Speaker 1: if it was to pull back and break that fifty day,
Speaker 1: you would then't expect a technical retest down to those
Speaker 1: June lows around thirty six six. I think what's been
Speaker 1: most surprising so far for investors is that earning season
Speaker 1: has been better than expected. It's been better than people's
Speaker 1: worst fears. We've had about thirty six percent of the
Speaker 1: SMP reports so far have beaten, so that is, I think,
Speaker 1: better than what people were worried about. I will note, though,
Speaker 1: that forward estimates for twenty two and three are coming down,
Speaker 1: so the out your numbers are being reduced, but they're
Speaker 1: still showing growth. And I think when you look at
Speaker 1: the reaction on stocks like Microsoft and Google today, you
Speaker 1: can see the relief that earnings are not really collapsing.
Speaker 1: Totally agree. We get two big readings on both Apple
Speaker 1: and Amazon tomorrow and a speaking of Apple, Apple uh
Speaker 1: just crossing the Bloomberg terminal terminal. Apple has enlisted one
Speaker 1: of Lamborghini's top car development managers and a sign that
Speaker 1: it is stepping up work on a self driving electric vehicle.
Speaker 1: This is according to people with knowledge of the situation,
Speaker 1: uh Luigi terra Borelli. He's a twenty year veteran of
Speaker 1: the Italian car maker, so he's going to help lead
Speaker 1: the design of Apple's future vehicle, according to those in
Speaker 1: the know. So, folks, if you didn't know it, the
Speaker 1: ev race it is on. Yeah, I don't expect to
Speaker 1: hear anything on tomorrow's earnings call about this. Uh, they've
Speaker 1: Apple has certainly kept it under wraps. Hey, Randy, I
Speaker 1: want to get back to the FED and and what
Speaker 1: happens if if we don't see inflation come down, because
Speaker 1: we got two months. We got two months until the
Speaker 1: next bad meeting. We're off in August and you know,
Speaker 1: they go to Jackson Hall and we'll hear a bit,
Speaker 1: but at the same time, we're not going to get
Speaker 1: a policy decision for two months. That's true. Obviously, inflation
Speaker 1: is still running very hot. The cp I was, you know,
Speaker 1: nine point one in June year to year, and Powell
Speaker 1: made a point of calling out pc as the feds
Speaker 1: most watch measure. You know, that was six point three
Speaker 1: pc in June, the largest and forty years. So I
Speaker 1: do think we have to start seeing these inflation numbers
Speaker 1: move in the right direction. They don't have to go
Speaker 1: immediately to where the FED wants them, but they've got
Speaker 1: to stop going up and maybe start to go down.
Speaker 1: A little bit at the margin. I am hopeful that
Speaker 1: last month was the peak inflation month. We have seen
Speaker 1: a little bit of a decline in both food commodities
Speaker 1: and an energy prices recently. That should translate to a
Speaker 1: less hot number in July and hopefully August. But you're right,
Speaker 1: and he was very clear in the press conference. If
Speaker 1: the numbers coming hot in July and August, you could
Speaker 1: be looking at another sevent basis points in September. Market
Speaker 1: would not like that. That could That's what could set
Speaker 1: up a move back towards that thirty six thirty six low.
Speaker 1: But I'm optimistic that that's not going to happen. We're
Speaker 1: gonna see a little bit of an improvement and the
Speaker 1: market can keep grinding its way higher as long as
Speaker 1: there's no surprise. Yeah, there's inflationary pressures. It's something we're
Speaker 1: going to be putting to the Tchipotle CEO Brian Nicol
Speaker 1: whether or not, like I'm trying to get an idea,
Speaker 1: we do hear some easy and some of those inflationary pressures.
Speaker 1: But what he is seeing because they have certainly seen
Speaker 1: wages go up at that company, and whether or not
Speaker 1: they continue to see it Um, So, Randy, where don't
Speaker 1: you want to be in this market right now? I
Speaker 1: think that's a tricky question. I think where I want
Speaker 1: to be is really looking to pick up secular growth
Speaker 1: stocks where I feel very good about their prospects long term,
Speaker 1: and I'm not trying to really play a strong economy scenario.
Speaker 1: I do think the economy is weakening. I would say
Speaker 1: one thing we should focus on is housing. Obviously, depending
Speaker 1: home sales numbers were very bad. New home sales are bad.
Speaker 1: Housing is about of the U S economy, so it's
Speaker 1: got a big impact lost the whole spectrum. So I
Speaker 1: don't think I want to be playing for a strong
Speaker 1: economy right now. What I really want to do is
Speaker 1: just pick up growth stocks that have pulled back dramatically,
Speaker 1: because when this tightening cycle ends, we're going to get
Speaker 1: an expansion on those names, and I think you're gonna
Speaker 1: be very happy you own them. In interesting So you
Speaker 1: mean like an Apple and Amazon? Is that what you're
Speaker 1: talking about? A Microsoft? Is that what you mean? I mean?
Speaker 1: I do think you know, a stock like Google, for example,
Speaker 1: has a little bit of an easier story right now
Speaker 1: than Amazon, where they're slowing consumer spending with regards to Apple,
Speaker 1: I think a lot of that has to do with China.
Speaker 1: They get a lot of their sales in China, and
Speaker 1: I think this question of how those sales been given
Speaker 1: the lockdowns we've seen some of the major cities over there. Obviously,
Speaker 1: longer term we really like it, but I would probably
Speaker 1: try to be looking for companies where the story was
Speaker 1: a little bit easier, a little bit less controversial, or
Speaker 1: maybe the numbers have come down slightly, but it's been
Speaker 1: more of evaluation pullback. Obviously evaluations were stretched. But when
Speaker 1: you look at the market right now, it's trading about
Speaker 1: fifteen times three estimate of two sixty four. So I
Speaker 1: think this is a good time for long term investors
Speaker 1: to start to accumulate stocks again. Once we get to
Speaker 1: the end of this rate rate cycle, I think equities
Speaker 1: are going a lot higher. Yeah, alright, great stuff, And
Speaker 1: it's interesting what you said about housing. Diane Swak earlier
Speaker 1: on TV. She's over at KPMG, she's the chief economist.
Speaker 1: She said housing is the canary in the coal mine.
Speaker 1: It's not singing anymore. Randy Watts, so great, chief investment
Speaker 1: strategist at O'Neil Global Advisors. Thanks for listening to Bloomberg
Speaker 1: Business Week, download the podcast on iTunes, SoundCloud, or Bloomberg
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