1 00:00:02,920 --> 00:00:08,680 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,960 --> 00:00:13,840 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 3 00:00:13,920 --> 00:00:17,000 Speaker 2: weekdays at ten am Eastern on Apple CarPlay and Android 4 00:00:17,000 --> 00:00:20,120 Speaker 2: Auto with the Bloomberg Business app. Listen on demand wherever 5 00:00:20,160 --> 00:00:24,400 Speaker 2: you get your podcasts, or watch us live on YouTube. 6 00:00:25,079 --> 00:00:28,160 Speaker 3: Let's get more on Starbucks here. Jody Louri is Bloomberg 7 00:00:28,200 --> 00:00:32,000 Speaker 3: Intelligence credit analyst, and she joined us now on that. Hey, Jody, 8 00:00:32,520 --> 00:00:34,319 Speaker 3: just talk us through your reaction to this. 9 00:00:36,120 --> 00:00:38,760 Speaker 4: I think as the credit analysts were always sort of 10 00:00:39,240 --> 00:00:42,760 Speaker 4: hesitant when there's these full scale changes that happen overnight, 11 00:00:42,880 --> 00:00:45,159 Speaker 4: and when you've had a CEO that's only been there 12 00:00:45,159 --> 00:00:49,320 Speaker 4: since March of last year. So we have just only 13 00:00:49,440 --> 00:00:52,080 Speaker 4: gotten comfortable with the concept. They're giving back twenty billion 14 00:00:52,120 --> 00:00:55,480 Speaker 4: dollars and now you have two activists investors very heavily involved, 15 00:00:55,480 --> 00:00:58,000 Speaker 4: one getting a board seat and pushing out the CEO 16 00:00:58,080 --> 00:01:00,360 Speaker 4: with a new CEO. That could be a pot positive 17 00:01:00,400 --> 00:01:03,520 Speaker 4: for the company long term in terms of performance. But 18 00:01:03,640 --> 00:01:06,319 Speaker 4: I do also think that shareholders might make it better 19 00:01:06,400 --> 00:01:07,680 Speaker 4: than bondholders at this point. 20 00:01:08,600 --> 00:01:10,400 Speaker 5: Why do you say that you think they're just going 21 00:01:10,480 --> 00:01:12,479 Speaker 5: to maybe start returning cash shareholders. 22 00:01:13,240 --> 00:01:15,319 Speaker 4: I think they'll get a little bit more aggressive with that, Paul, 23 00:01:15,360 --> 00:01:18,120 Speaker 4: I mean, I think, you know, it could end up 24 00:01:18,120 --> 00:01:19,679 Speaker 4: being the type of thing that they look at the 25 00:01:19,680 --> 00:01:21,720 Speaker 4: company and that you sort of think about ways to 26 00:01:22,000 --> 00:01:24,080 Speaker 4: sort of boost the value, whether it be spin off 27 00:01:24,120 --> 00:01:26,319 Speaker 4: some entity or what have you. I'm not sure what 28 00:01:26,480 --> 00:01:28,760 Speaker 4: entity they could spin off at a Starbucks because so 29 00:01:28,880 --> 00:01:31,560 Speaker 4: much of the non core business has already been peeled away. 30 00:01:32,080 --> 00:01:35,080 Speaker 4: That said, I mean, I think that when when you're 31 00:01:35,120 --> 00:01:37,959 Speaker 4: dealing with activists, you're always sort of hesitant because you say, Okay, 32 00:01:38,319 --> 00:01:40,160 Speaker 4: how much are they going to risk the balance sheet? 33 00:01:40,240 --> 00:01:42,440 Speaker 4: How much are they going to lever to get the 34 00:01:42,520 --> 00:01:45,800 Speaker 4: company into a different spot. Now, that might be a 35 00:01:45,840 --> 00:01:49,760 Speaker 4: short term pain for long term gain, but for bond holders, 36 00:01:49,800 --> 00:01:51,440 Speaker 4: when you think about that short term pain, that's not 37 00:01:51,440 --> 00:01:53,520 Speaker 4: always necessarily the best thing. You know, we have a 38 00:01:53,560 --> 00:01:57,000 Speaker 4: long history of Yam for for example, you know, which 39 00:01:57,080 --> 00:01:59,880 Speaker 4: which the new CEO is part of. When they sp 40 00:02:00,160 --> 00:02:02,840 Speaker 4: off their entity Young China, you know, they ended up 41 00:02:02,880 --> 00:02:05,240 Speaker 4: giving back so much of their money to shareholders. 42 00:02:05,000 --> 00:02:07,560 Speaker 3: Which then to the point breaks a question like how 43 00:02:07,640 --> 00:02:10,520 Speaker 3: is Starbucks actually doing from a bond holder perspective. 44 00:02:11,560 --> 00:02:14,400 Speaker 4: From a bond holder perspective, you know, over the past year, 45 00:02:14,440 --> 00:02:17,280 Speaker 4: they've been a little bit more volatile. We were looking 46 00:02:17,320 --> 00:02:19,160 Speaker 4: at some of the recent bonds, you know, the twenty 47 00:02:19,200 --> 00:02:21,840 Speaker 4: twenty nine for example, which are five year bonds, have 48 00:02:21,960 --> 00:02:24,560 Speaker 4: actually tightened modestly on the news. 49 00:02:24,560 --> 00:02:25,600 Speaker 6: But I think it's hard to tell. 50 00:02:25,639 --> 00:02:27,840 Speaker 4: I mean, I think it's more of a question of 51 00:02:27,919 --> 00:02:32,119 Speaker 4: what this means longer term from a performance standpoint. It's 52 00:02:32,160 --> 00:02:34,280 Speaker 4: going to take a little while for bondholders to sort 53 00:02:34,280 --> 00:02:38,320 Speaker 4: of digest this news. You know, something that that's very 54 00:02:38,320 --> 00:02:41,160 Speaker 4: clear that we've been tracking is the ALDI the Bloomberg 55 00:02:41,200 --> 00:02:42,080 Speaker 4: Second Measure data. 56 00:02:42,240 --> 00:02:43,800 Speaker 3: Yeah, okay, so wait, first of all, what is this? 57 00:02:43,840 --> 00:02:45,720 Speaker 3: Because I got to be honest, for I've never heard 58 00:02:45,760 --> 00:02:47,560 Speaker 3: of this before, and you mentioned it and you were 59 00:02:47,560 --> 00:02:49,040 Speaker 3: going to talk about it, and now I'm a little 60 00:02:49,040 --> 00:02:50,640 Speaker 3: obsessed with it. 61 00:02:50,639 --> 00:02:54,320 Speaker 4: It is pretty amazing, Alex, particularly when it comes to Starbucks, 62 00:02:54,440 --> 00:02:56,799 Speaker 4: because the R squared or the you know, the sort 63 00:02:56,840 --> 00:02:59,800 Speaker 4: of predictive value of it is pretty great when it 64 00:02:59,800 --> 00:03:01,280 Speaker 4: comes to Starbucks in particular. 65 00:03:01,720 --> 00:03:02,359 Speaker 6: So what it is. 66 00:03:02,400 --> 00:03:05,560 Speaker 4: It's credit card and deborcart swipes only in the United States, 67 00:03:06,080 --> 00:03:08,400 Speaker 4: and Bloomberg aggregates the data. You can see it. You 68 00:03:08,400 --> 00:03:09,919 Speaker 4: can see it both on a year over year basis. 69 00:03:09,960 --> 00:03:11,919 Speaker 4: You can see it on an actual value basis if 70 00:03:11,919 --> 00:03:14,280 Speaker 4: you look at the year over year where it's trending, 71 00:03:14,360 --> 00:03:16,680 Speaker 4: it's actually very much down when it comes to sales 72 00:03:16,680 --> 00:03:19,840 Speaker 4: and transactions, which is not surprising because they've had a 73 00:03:19,840 --> 00:03:23,280 Speaker 4: couple of sort of disappointing points, one of them being geopolitics, 74 00:03:23,320 --> 00:03:26,560 Speaker 4: so the astro turf effort related to the Middle East. 75 00:03:27,720 --> 00:03:27,920 Speaker 6: You know. 76 00:03:27,960 --> 00:03:30,880 Speaker 4: The other portion is obviously China and the fact that 77 00:03:30,960 --> 00:03:33,680 Speaker 4: they really went all in on China and it's been 78 00:03:33,720 --> 00:03:35,800 Speaker 4: a little bit of a disappointment. And then you've also 79 00:03:35,880 --> 00:03:38,600 Speaker 4: just had consumers pulling back in terms of their spending 80 00:03:38,680 --> 00:03:41,400 Speaker 4: on things like Starbucks, McDonald's, what have you, and so 81 00:03:41,560 --> 00:03:44,119 Speaker 4: companies have been trying to just get people in the door. 82 00:03:44,400 --> 00:03:47,160 Speaker 4: Now if you look at it for you know, transaction value, 83 00:03:47,280 --> 00:03:49,000 Speaker 4: or if you look at you know, the PLACER data, 84 00:03:49,000 --> 00:03:51,280 Speaker 4: which we also have embedded on the terminal, even the 85 00:03:51,280 --> 00:03:54,040 Speaker 4: PLACER data is down, so that's estimated visits. So people 86 00:03:54,080 --> 00:03:57,240 Speaker 4: physically going into stores has been down recently. And so 87 00:03:57,600 --> 00:04:00,080 Speaker 4: how does the new CEO get these people back? How 88 00:04:00,080 --> 00:04:02,320 Speaker 4: does he get them comfortable with the Starbucks that we 89 00:04:02,440 --> 00:04:04,120 Speaker 4: used to know and love I'm not sure. 90 00:04:05,040 --> 00:04:08,240 Speaker 5: So what has been talk to us about China, because 91 00:04:08,280 --> 00:04:10,560 Speaker 5: I know you've flagged that before. It talks about China 92 00:04:10,680 --> 00:04:13,440 Speaker 5: and what it means for Starbucks. 93 00:04:14,720 --> 00:04:16,520 Speaker 4: I think China means a lot of things for a 94 00:04:16,520 --> 00:04:18,400 Speaker 4: lot of the companies in our space. I think it's 95 00:04:18,440 --> 00:04:22,880 Speaker 4: been a very common word, more so than normal when 96 00:04:22,920 --> 00:04:26,919 Speaker 4: it comes to across the consumer and leisure space. You know, 97 00:04:27,000 --> 00:04:30,000 Speaker 4: So if you listen to earning calls this quarter, if 98 00:04:30,160 --> 00:04:33,640 Speaker 4: anyone from Hilton to Hyatt to you know, even the 99 00:04:33,680 --> 00:04:36,640 Speaker 4: cruise lines have been mentioning China either as an avenue 100 00:04:36,640 --> 00:04:39,520 Speaker 4: for growth or as a disappointment for an avenue for growth. 101 00:04:39,560 --> 00:04:41,960 Speaker 4: I mean, we haven't seen the value of China. We've 102 00:04:41,960 --> 00:04:45,400 Speaker 4: seen sort of the sluggish, slow growth of late and 103 00:04:45,480 --> 00:04:48,360 Speaker 4: for someone like Starbucks that last year they mapped out 104 00:04:48,400 --> 00:04:49,960 Speaker 4: their plan and they said, we're going to be building 105 00:04:50,000 --> 00:04:52,680 Speaker 4: out more stores in China and that's our international growth plan, 106 00:04:52,920 --> 00:04:54,720 Speaker 4: and that's how we're getting the company back on track. 107 00:04:55,279 --> 00:04:57,480 Speaker 4: All of a sudden, you don't you don't necessarily have that, 108 00:04:57,920 --> 00:05:00,200 Speaker 4: I mean, I mean that's kind of a big problem. 109 00:05:00,640 --> 00:05:03,440 Speaker 3: Yeah, And when they talk about like strategic options for 110 00:05:03,440 --> 00:05:06,800 Speaker 3: that are partnerships, what does that wind up looking like 111 00:05:06,839 --> 00:05:08,480 Speaker 3: they're not going to spin it off, right, So it's 112 00:05:08,480 --> 00:05:11,560 Speaker 3: not gonna be a Yum and Young brand's China kind 113 00:05:11,560 --> 00:05:13,520 Speaker 3: of situation. So how do you digest that? 114 00:05:14,480 --> 00:05:16,640 Speaker 4: I mean, it could be a Yum and China situation. 115 00:05:16,680 --> 00:05:18,920 Speaker 4: Who knows what's on the table at this point. I mean, 116 00:05:18,960 --> 00:05:21,240 Speaker 4: we we could, you know, we could fathom any sort 117 00:05:21,240 --> 00:05:24,159 Speaker 4: of measures. I mean, most of Starbucks stores are owned, 118 00:05:24,200 --> 00:05:26,000 Speaker 4: but then when it comes to international it's a little 119 00:05:26,040 --> 00:05:28,120 Speaker 4: less so. And even places like you know, I mentioned 120 00:05:28,160 --> 00:05:29,600 Speaker 4: the cruise lines. You know, we were on a Royal 121 00:05:29,680 --> 00:05:31,800 Speaker 4: Caribbean ship a couple months ago and they had a 122 00:05:31,880 --> 00:05:32,799 Speaker 4: light in our base. 123 00:05:33,440 --> 00:05:35,200 Speaker 3: It's like, remember that time I was on that cruise 124 00:05:35,200 --> 00:05:36,960 Speaker 3: and it was really awesome. Sorry continue. 125 00:05:38,160 --> 00:05:41,440 Speaker 4: They did actually have a collector mug for kind of 126 00:05:41,440 --> 00:05:45,240 Speaker 4: the Seas that I did buy, which was a Starbucks mug, 127 00:05:45,600 --> 00:05:47,240 Speaker 4: but it was Starbucks with a bunch of icon of 128 00:05:47,279 --> 00:05:48,640 Speaker 4: the Sea stuff. I had to get it. 129 00:05:48,880 --> 00:05:50,240 Speaker 6: I mean, it was two companies I cover. 130 00:05:50,320 --> 00:05:51,480 Speaker 7: I was like, I can't one shot. 131 00:05:51,920 --> 00:05:54,880 Speaker 5: Well on the flip side of this this transaction, Chipotle, 132 00:05:56,400 --> 00:05:59,200 Speaker 5: what's the outlook there, what's the feeling there in the street. 133 00:06:00,360 --> 00:06:02,640 Speaker 4: So Chippote is an interesting one because they don't really 134 00:06:02,680 --> 00:06:05,000 Speaker 4: have that much debt outstanding, so it's one that you know, 135 00:06:05,120 --> 00:06:07,760 Speaker 4: Mike Hallen really deeply covers. We a little less, so 136 00:06:07,880 --> 00:06:10,920 Speaker 4: we cover it from the standpoint that obviously it's a 137 00:06:11,080 --> 00:06:13,599 Speaker 4: very important player in the space. It's that fast, casual 138 00:06:14,000 --> 00:06:16,840 Speaker 4: we love talking about youm and obviously Chipotte sort of 139 00:06:16,880 --> 00:06:18,840 Speaker 4: lines in perfectly with Yum, and it's sort of that 140 00:06:19,040 --> 00:06:22,320 Speaker 4: intersection between Yum and Darden, which we like talking about. 141 00:06:22,720 --> 00:06:25,680 Speaker 4: And so I mean, I think, you know, Chippote obviously 142 00:06:25,760 --> 00:06:28,720 Speaker 4: had a lot of negative headlines. We're talking five years ago, 143 00:06:29,320 --> 00:06:31,680 Speaker 4: you know, in terms of safety for their food, which 144 00:06:31,680 --> 00:06:34,480 Speaker 4: is obviously never, never a good thing. Since then, they've 145 00:06:34,520 --> 00:06:37,120 Speaker 4: turned around the company quite substantially. Now, I don't know 146 00:06:37,200 --> 00:06:40,279 Speaker 4: what this means when you have a Darling CEO jump 147 00:06:40,320 --> 00:06:42,600 Speaker 4: ship and go to another company. I'm not quite sure 148 00:06:42,640 --> 00:06:45,240 Speaker 4: what we'd expect there as of now. From a bomb 149 00:06:45,279 --> 00:06:49,760 Speaker 4: holder's perspective, we don't really care at the moment, but 150 00:06:49,920 --> 00:06:53,160 Speaker 4: I do sort of wonder what shareholders are thinking right now. 151 00:06:53,320 --> 00:06:54,000 Speaker 7: All right, Very good. 152 00:06:54,240 --> 00:06:57,080 Speaker 5: Jody Lourie, Senior Credit a also Bloomberg Intelligence, join us 153 00:06:57,600 --> 00:06:59,840 Speaker 5: from the Princeton office via zoom. 154 00:07:00,080 --> 00:07:01,600 Speaker 7: Here Chipotle for you. 155 00:07:02,680 --> 00:07:06,440 Speaker 3: No, no, no, really all right, but it's the same, 156 00:07:06,560 --> 00:07:09,400 Speaker 3: like okay, no matter what you get, doesn't all taste 157 00:07:09,400 --> 00:07:10,720 Speaker 3: the same. And isn't that weird? 158 00:07:11,680 --> 00:07:14,720 Speaker 7: No, and no, it's very good. John help me out here. 159 00:07:14,760 --> 00:07:17,640 Speaker 7: You're Chipotle person? Uh yeah, I mean I like it. 160 00:07:17,680 --> 00:07:18,320 Speaker 8: I don't go there. 161 00:07:18,360 --> 00:07:19,360 Speaker 3: There's no one near me. 162 00:07:19,440 --> 00:07:22,200 Speaker 7: It's not even Lisa Mateo said she liked it, you know, 163 00:07:22,520 --> 00:07:23,040 Speaker 7: she loved it. 164 00:07:23,200 --> 00:07:25,560 Speaker 5: Yeah, and that's hard because usually if you know, it's 165 00:07:25,640 --> 00:07:28,560 Speaker 5: not like super granola healthy thing. 166 00:07:28,760 --> 00:07:30,400 Speaker 3: You know, I don't think I've literally had one in 167 00:07:30,400 --> 00:07:30,880 Speaker 3: twelve years. 168 00:07:30,920 --> 00:07:31,880 Speaker 9: But my problem is. 169 00:07:31,920 --> 00:07:34,520 Speaker 10: There's just too many people involved in the front, too 170 00:07:34,560 --> 00:07:36,240 Speaker 10: many people faced teenagers. 171 00:07:36,760 --> 00:07:39,960 Speaker 3: Wow, you know, loading up my because it's think that 172 00:07:40,040 --> 00:07:43,760 Speaker 3: I make you look like a Come on now, I 173 00:07:43,840 --> 00:07:48,080 Speaker 3: mean I do it myself. Oh what is your chipottle 174 00:07:48,200 --> 00:07:48,640 Speaker 3: of choice? 175 00:07:48,920 --> 00:07:49,040 Speaker 10: Uh? 176 00:07:49,880 --> 00:07:53,600 Speaker 5: Two hard tacos, two hard tacos, chicken okay, yeah, peppers 177 00:07:53,600 --> 00:07:56,960 Speaker 5: and onions, pinco degayo and some cheese and we're. 178 00:07:56,840 --> 00:07:57,160 Speaker 8: Good to go. 179 00:07:57,520 --> 00:08:01,280 Speaker 3: No guakalk, no guac, No okay, no chips. 180 00:08:01,880 --> 00:08:03,200 Speaker 7: No, I don't need chips. 181 00:08:03,240 --> 00:08:04,760 Speaker 5: Oh so you're just and you know what, now they 182 00:08:04,840 --> 00:08:07,440 Speaker 5: feel them so full because the social media was saying 183 00:08:07,480 --> 00:08:09,680 Speaker 5: how they were underfilling them. Now they feel them so 184 00:08:09,880 --> 00:08:11,800 Speaker 5: full that I only get two tacos. 185 00:08:11,480 --> 00:08:14,200 Speaker 3: Versus three before, and you pay by the taco. 186 00:08:14,120 --> 00:08:17,880 Speaker 7: Paid by the taco. So I'm a huge winner here. 187 00:08:18,200 --> 00:08:20,920 Speaker 7: Based upon the social media pressure, They've had a big 188 00:08:21,000 --> 00:08:23,480 Speaker 7: move in the in the restaurant business. Oh yeah, business. 189 00:08:25,000 --> 00:08:28,840 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 190 00:08:28,960 --> 00:08:31,480 Speaker 2: weekdays at ten am Eastern on Apple car. 191 00:08:31,520 --> 00:08:34,240 Speaker 8: Play and Android Auto with the Bloomberg Business app. 192 00:08:34,400 --> 00:08:37,200 Speaker 2: You can also listen live on Amazon Alexa from our 193 00:08:37,280 --> 00:08:41,600 Speaker 2: flagship New York station Just say Alexa, playing Bloomberg eleven thirty. 194 00:08:43,200 --> 00:08:45,800 Speaker 3: This is Bloomberg Intelligence Radio. We're broadcasting to you live 195 00:08:45,840 --> 00:08:49,680 Speaker 3: from Interactive Broker Studio right here in midtown Manhattan. Let's 196 00:08:49,679 --> 00:08:50,959 Speaker 3: go back to some of the earnings here and go 197 00:08:51,040 --> 00:08:54,000 Speaker 3: to Home Depot specifically, I'm taking a look at that stock. 198 00:08:54,120 --> 00:08:56,840 Speaker 3: It is up by about three tenths of one percent. 199 00:08:57,280 --> 00:09:00,440 Speaker 3: So they did cut their outlook saying that consume are 200 00:09:00,440 --> 00:09:03,640 Speaker 3: in their quote deferral mindset. I mean to me, I 201 00:09:03,720 --> 00:09:06,040 Speaker 3: begs the question, though, once things get better, don't you? 202 00:09:06,240 --> 00:09:08,000 Speaker 3: Is it just delayed purchasing or am I never going 203 00:09:08,040 --> 00:09:10,959 Speaker 3: to redo my floor? I know, I agree. Okay, so 204 00:09:11,040 --> 00:09:13,480 Speaker 3: let's get some more details here with Red Brown, Bloomberg 205 00:09:13,559 --> 00:09:16,679 Speaker 3: News earnings reporter. He joins us on home depot. All right, Red, 206 00:09:16,720 --> 00:09:18,000 Speaker 3: walk us through some of the numbers here. 207 00:09:18,480 --> 00:09:21,120 Speaker 1: Yeah, I mean, so I think overall, kind of the 208 00:09:21,160 --> 00:09:23,320 Speaker 1: message that I'm sort of taking away from the results 209 00:09:23,360 --> 00:09:25,240 Speaker 1: is this seems like they might have kind of found bottom. 210 00:09:25,320 --> 00:09:26,480 Speaker 7: If we look the last. 211 00:09:26,679 --> 00:09:30,440 Speaker 1: Six quarters, they've seen earnings top and bottom line shrinking 212 00:09:30,559 --> 00:09:34,960 Speaker 1: and then for the first time in since twenty twenty three, Yeah, 213 00:09:35,040 --> 00:09:37,520 Speaker 1: things are flattening out a little bit. So, yes, they 214 00:09:37,600 --> 00:09:40,960 Speaker 1: caught the cut the top line outlook, maybe a bit 215 00:09:41,000 --> 00:09:43,679 Speaker 1: of a reset there. But I think there's a lot 216 00:09:43,840 --> 00:09:45,760 Speaker 1: to be optimistic about these results. 217 00:09:45,920 --> 00:09:47,679 Speaker 5: Well, I think I guess one of the questions that 218 00:09:47,800 --> 00:09:50,120 Speaker 5: I had, just being a grizzled veteran having listened to 219 00:09:50,160 --> 00:09:54,000 Speaker 5: a million conference calls, is you know, suggesting that maybe 220 00:09:54,040 --> 00:09:55,800 Speaker 5: this is a little bit temporary, that maybe these are 221 00:09:55,920 --> 00:09:56,960 Speaker 5: purchases that are being. 222 00:09:56,920 --> 00:10:02,559 Speaker 7: Deferred in anticipation of lower rates. How does that kind 223 00:10:02,600 --> 00:10:03,120 Speaker 7: of stand with you? 224 00:10:03,480 --> 00:10:05,400 Speaker 1: I mean, I think it does. I think, I mean, 225 00:10:05,480 --> 00:10:06,880 Speaker 1: I believe it a little bit more than that. It 226 00:10:06,920 --> 00:10:09,000 Speaker 1: sounds like YouTube might just because the one thing that 227 00:10:09,040 --> 00:10:12,480 Speaker 1: analysts are putting to a lot is contractors backlogs. So 228 00:10:12,640 --> 00:10:16,320 Speaker 1: those are you know, contracted projects that they are expected 229 00:10:16,360 --> 00:10:20,199 Speaker 1: to eventually fulfill. It's just a matter of when the 230 00:10:20,520 --> 00:10:22,959 Speaker 1: customers are ready to actually you know, follow through with 231 00:10:23,000 --> 00:10:24,920 Speaker 1: that and say yep, let's do it. You know, those 232 00:10:24,960 --> 00:10:27,439 Speaker 1: are long term projects to take several months, so it's 233 00:10:27,480 --> 00:10:29,640 Speaker 1: not something that people are kind of likely to back 234 00:10:29,720 --> 00:10:32,640 Speaker 1: out of their big something you probably need to get 235 00:10:32,640 --> 00:10:34,360 Speaker 1: financing for as well. So it's it's you know, it's 236 00:10:34,360 --> 00:10:38,360 Speaker 1: a significant commitment for the consumer. And yeah, I mean 237 00:10:38,679 --> 00:10:41,079 Speaker 1: this deferral mindset I think is an interesting way to 238 00:10:41,440 --> 00:10:43,560 Speaker 1: spin the situation for for Home Deeper right now. 239 00:10:43,600 --> 00:10:47,319 Speaker 3: Yeah, that's interesting. So you have contractor backlog because customers 240 00:10:47,400 --> 00:10:49,000 Speaker 3: want to get their project in the queue, but they're 241 00:10:49,040 --> 00:10:50,959 Speaker 3: not putting down the money for it yet. So it's 242 00:10:50,960 --> 00:10:53,280 Speaker 3: always like, hmmmm, is that gonna wind If the economy 243 00:10:53,360 --> 00:10:57,120 Speaker 3: really turns, what winds up happening? So I guess if 244 00:10:57,160 --> 00:10:59,160 Speaker 3: we just say okay, we're at the trough, I wonder 245 00:10:59,200 --> 00:11:01,559 Speaker 3: if we have any visible ability yet into what the recovery, 246 00:11:01,640 --> 00:11:03,080 Speaker 3: then looks like for a home depot. 247 00:11:03,320 --> 00:11:05,720 Speaker 1: Yeah, so I think, you know, if we look into 248 00:11:05,960 --> 00:11:09,679 Speaker 1: what they said the commentary around the guidance cut. So 249 00:11:09,840 --> 00:11:11,480 Speaker 1: right now they said, if it's going to be the 250 00:11:12,040 --> 00:11:15,440 Speaker 1: same store sales, the top end is down three percent 251 00:11:15,520 --> 00:11:18,880 Speaker 1: this year. They're saying that that will happen if things 252 00:11:18,920 --> 00:11:21,679 Speaker 1: stay stable from the first half of the year. And 253 00:11:21,840 --> 00:11:24,440 Speaker 1: right now they say all signs point to consumer demand 254 00:11:24,840 --> 00:11:27,000 Speaker 1: like staying at that same level, and they're not guiding 255 00:11:27,040 --> 00:11:28,959 Speaker 1: towards the bottom end of that range right now. So 256 00:11:29,440 --> 00:11:31,560 Speaker 1: right now, that seems to be where the company is at, 257 00:11:31,840 --> 00:11:34,679 Speaker 1: and I think we can see, you know, and the 258 00:11:34,960 --> 00:11:38,040 Speaker 1: market seems to we kind of be digesting that with 259 00:11:38,559 --> 00:11:39,880 Speaker 1: some positive. 260 00:11:39,520 --> 00:11:40,319 Speaker 7: Outlook here as well. 261 00:11:40,800 --> 00:11:42,640 Speaker 5: You know, I'm just looking at the chart here and 262 00:11:42,800 --> 00:11:44,760 Speaker 5: just thinking back to the pandemic. That stock, you know, 263 00:11:45,040 --> 00:11:47,199 Speaker 5: was up about one hundred and seventy percent from you know, 264 00:11:47,240 --> 00:11:48,880 Speaker 5: the beginning of the pandemic through the end of twenty 265 00:11:48,920 --> 00:11:49,320 Speaker 5: twenty one. 266 00:11:49,360 --> 00:11:51,480 Speaker 7: It's come off since then. So that was just such 267 00:11:51,520 --> 00:11:53,600 Speaker 7: a moonshot for the company. 268 00:11:54,240 --> 00:11:57,200 Speaker 5: What does the company say about the consumer their business 269 00:11:57,320 --> 00:12:00,280 Speaker 5: kind of now versus pre pandemic, they. 270 00:12:00,200 --> 00:12:02,080 Speaker 7: Ever put it in that kind of context. 271 00:12:01,800 --> 00:12:04,600 Speaker 1: Well, the reason for that ride up, if you remember, 272 00:12:04,800 --> 00:12:09,679 Speaker 1: was because of so much DIY activity. Everyone was stuck home. 273 00:12:09,760 --> 00:12:11,560 Speaker 1: I mean, I'm tired of looking at this shelf, Let 274 00:12:11,640 --> 00:12:14,040 Speaker 1: me fix it, or I hate this paint color, whatever 275 00:12:14,080 --> 00:12:16,160 Speaker 1: it was. Now there's a little bit less of that, 276 00:12:16,400 --> 00:12:18,199 Speaker 1: just because we're spending less time at home. You know, 277 00:12:18,320 --> 00:12:20,760 Speaker 1: we have less time on our hands and if we 278 00:12:21,240 --> 00:12:24,200 Speaker 1: and Home Depot is kind of accepted that that they're 279 00:12:24,240 --> 00:12:26,280 Speaker 1: not going to see those levels as much anymore. And 280 00:12:26,400 --> 00:12:29,160 Speaker 1: what they are focusing and similar thing happening at Low's 281 00:12:29,160 --> 00:12:32,400 Speaker 1: as well, is focusing on that contractor business. It's a 282 00:12:32,480 --> 00:12:36,160 Speaker 1: higher margin business. It's a little bit more consistent. And 283 00:12:36,280 --> 00:12:39,280 Speaker 1: we saw what their their latest acquisition, eighteen billion dollar 284 00:12:39,320 --> 00:12:42,599 Speaker 1: acquisition for SRS Distribution, And that is part of this 285 00:12:42,720 --> 00:12:45,880 Speaker 1: pivot towards can we capture more of the market share 286 00:12:46,040 --> 00:12:48,360 Speaker 1: for those contractors. 287 00:12:48,760 --> 00:12:51,440 Speaker 3: Oh yeah, love me some contractors working with some right 288 00:12:51,480 --> 00:12:54,520 Speaker 3: now in the Berkshires. The allowance for my kitchen Island 289 00:12:54,640 --> 00:12:54,920 Speaker 3: was huge. 290 00:12:55,240 --> 00:12:57,679 Speaker 7: Are there good contractors up like in that part of 291 00:12:57,679 --> 00:12:57,960 Speaker 7: the world. 292 00:12:58,120 --> 00:12:59,319 Speaker 11: Yeah, yeah, really good. Yeah. 293 00:12:59,880 --> 00:13:00,719 Speaker 7: We went to one. 294 00:13:00,840 --> 00:13:03,920 Speaker 3: We didn't do like comparison shopping because this company had, 295 00:13:04,000 --> 00:13:05,720 Speaker 3: like we done our roof had did our did our 296 00:13:05,840 --> 00:13:07,600 Speaker 3: kitchens like we'd already worked with them for the last 297 00:13:07,640 --> 00:13:10,079 Speaker 3: you know, ten fifteen years. Red when you take a 298 00:13:10,120 --> 00:13:12,360 Speaker 3: look at earnings in general, so you're your earnings reporter, 299 00:13:12,600 --> 00:13:15,199 Speaker 3: like this is this is your jam. What are some 300 00:13:15,280 --> 00:13:17,559 Speaker 3: of the takeaways that we can learn from earnings in general? 301 00:13:17,640 --> 00:13:17,920 Speaker 3: Right now? 302 00:13:18,200 --> 00:13:22,240 Speaker 1: I think with home Depot and we'll see with Walmart 303 00:13:22,360 --> 00:13:24,640 Speaker 1: later this week. It's just a kind of repetition of 304 00:13:24,880 --> 00:13:28,760 Speaker 1: this same pattern in retail, which is consumers are trading down. 305 00:13:28,760 --> 00:13:30,320 Speaker 1: You know, last year there was so much where when 306 00:13:30,400 --> 00:13:32,199 Speaker 1: is it happening? When is it happening? And it's kind 307 00:13:32,200 --> 00:13:35,360 Speaker 1: of been slowly trickling in quarter over quarter more people 308 00:13:35,440 --> 00:13:37,599 Speaker 1: are trading down. Or what that looks like on the 309 00:13:37,640 --> 00:13:40,839 Speaker 1: ground is I'm delaying some of those bigger purchases, those 310 00:13:40,880 --> 00:13:44,000 Speaker 1: bigger high margin for the company's purchases. I'm focusing on 311 00:13:44,080 --> 00:13:46,839 Speaker 1: what I need. And I think Walmart will be the 312 00:13:47,160 --> 00:13:50,439 Speaker 1: kind of exemplar example of that of people. You know, 313 00:13:50,520 --> 00:13:52,800 Speaker 1: I'm just looking at you know what I need. I 314 00:13:52,840 --> 00:13:55,079 Speaker 1: need food, I need groceries, I need toiletries, things like that, 315 00:13:55,200 --> 00:13:57,760 Speaker 1: and then maybe I'll delay until I get a little 316 00:13:57,760 --> 00:13:59,800 Speaker 1: bit more clarity on when I'm going to buy that TV. 317 00:14:00,080 --> 00:14:00,720 Speaker 7: For a Home Depot. 318 00:14:01,000 --> 00:14:03,360 Speaker 5: I just think of walking into Home Depot and boyd, 319 00:14:03,440 --> 00:14:06,160 Speaker 5: there's a lot of stuff. They're huge, huge stores and 320 00:14:06,200 --> 00:14:08,720 Speaker 5: there's a lot of stuff there. Talk to us about inventory. 321 00:14:08,800 --> 00:14:10,559 Speaker 5: Inventory management, I know for some of these big box 322 00:14:10,640 --> 00:14:11,520 Speaker 5: retailers is huge. 323 00:14:11,960 --> 00:14:13,080 Speaker 7: What are they saying these days? 324 00:14:13,280 --> 00:14:15,720 Speaker 1: So one thing to look for the inventory is actually 325 00:14:15,720 --> 00:14:17,800 Speaker 1: the transportation costs have been coming down, so I think 326 00:14:18,000 --> 00:14:21,720 Speaker 1: the overall that just speaks to an easy supply chain 327 00:14:21,880 --> 00:14:24,400 Speaker 1: for Home Depot, so they are able to manage a 328 00:14:24,440 --> 00:14:27,000 Speaker 1: little bit better. In general, they're managing their costs quite well. 329 00:14:27,440 --> 00:14:29,880 Speaker 1: That's part of the reason that they were able to 330 00:14:30,240 --> 00:14:33,640 Speaker 1: kind of flatten out the earnings trough there. And yeah, 331 00:14:33,680 --> 00:14:37,760 Speaker 1: I think overall the inventory has been shifting well, and 332 00:14:37,840 --> 00:14:39,560 Speaker 1: they are you know, they have so much stuff, they're 333 00:14:39,560 --> 00:14:41,080 Speaker 1: able to manage it well and they're able to get 334 00:14:41,120 --> 00:14:42,880 Speaker 1: the products that people want in the stores. 335 00:14:43,160 --> 00:14:45,600 Speaker 3: All right, Red, thanks a lot, super appreciate it. Red Brown, 336 00:14:45,640 --> 00:14:48,840 Speaker 3: Bloomberg News Earnings reporter, joining us on Home Depot. 337 00:14:50,280 --> 00:14:54,120 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 338 00:14:54,240 --> 00:14:57,600 Speaker 2: weekdays at ten am Eastern on affocarplaying En broud Otto 339 00:14:57,680 --> 00:15:00,560 Speaker 2: with the Bloomberg Business App. Listen on demand wherever you 340 00:15:00,680 --> 00:15:03,640 Speaker 2: get your podcasts, or watch us live on YouTube. 341 00:15:05,440 --> 00:15:08,600 Speaker 3: This is Bloomberg Intelligence Radio and Alex Stee alongside Paul Sweeney. 342 00:15:09,200 --> 00:15:11,280 Speaker 3: We cover everything that you need to know in business 343 00:15:11,320 --> 00:15:13,200 Speaker 3: and finance and economics, and we do it through our 344 00:15:13,280 --> 00:15:15,600 Speaker 3: lens of our Bloomberg Intelligence folks. They cover two thousand 345 00:15:15,680 --> 00:15:18,720 Speaker 3: companies and one hundred and thirty industries all around the world. 346 00:15:18,800 --> 00:15:21,080 Speaker 3: We also like to go outside Bloomberg Intelligence to get 347 00:15:21,120 --> 00:15:23,640 Speaker 3: a broader take on what some money managers are doing 348 00:15:23,760 --> 00:15:25,520 Speaker 3: in this market, and for that we go to Anna 349 00:15:25,640 --> 00:15:30,320 Speaker 3: Rathburn see io at Sibiz Investment Advisory Services. I'm looking 350 00:15:30,360 --> 00:15:33,080 Speaker 3: at a market, Anna, that is definitely responding to this 351 00:15:33,200 --> 00:15:35,960 Speaker 3: PPI data as in another green light for the Fed 352 00:15:36,040 --> 00:15:38,560 Speaker 3: to cut in September. Is that how you're taking this? 353 00:15:40,000 --> 00:15:42,360 Speaker 6: Yeah, that's the initial reaction from the markets today. 354 00:15:42,360 --> 00:15:45,440 Speaker 12: I mean it is a prelude to tomorrow's CPI which 355 00:15:45,480 --> 00:15:47,480 Speaker 12: is even more closely watched. But it was a really 356 00:15:47,560 --> 00:15:51,880 Speaker 12: good prelude. We had services and that was really good news. 357 00:15:52,040 --> 00:15:57,080 Speaker 12: Contribute to this disinflationary trend here and you know, the 358 00:15:57,200 --> 00:15:59,360 Speaker 12: numbers were down even though we had a week er 359 00:15:59,440 --> 00:16:02,840 Speaker 12: dollar really pulling up those trade prices. So in all, 360 00:16:03,040 --> 00:16:06,080 Speaker 12: it was actually a really good good news, at least 361 00:16:06,120 --> 00:16:09,600 Speaker 12: in the first reaction for the markets. But honestly, I'm 362 00:16:09,640 --> 00:16:12,440 Speaker 12: starting to wonder if we have to start worrying about 363 00:16:12,600 --> 00:16:16,200 Speaker 12: this inflationary force is actually reflecting some of the other 364 00:16:16,440 --> 00:16:19,200 Speaker 12: slowing economic trends that we've seen in the labor market 365 00:16:19,360 --> 00:16:22,480 Speaker 12: and from the consumers, and frankly from home depot as well. 366 00:16:23,240 --> 00:16:26,400 Speaker 7: So what did you take from the home depot numbers? Here? 367 00:16:26,640 --> 00:16:28,800 Speaker 5: We'll get retail sales later this week, but boy, home 368 00:16:28,880 --> 00:16:31,000 Speaker 5: depot's a pretty good barometer out there. 369 00:16:31,040 --> 00:16:32,320 Speaker 7: What did you take away from their earnings? 370 00:16:33,640 --> 00:16:33,840 Speaker 4: Yeah? 371 00:16:33,920 --> 00:16:36,240 Speaker 12: I mean, in some ways, we're not surprised, right because 372 00:16:36,240 --> 00:16:40,080 Speaker 12: we've been talking about weak consumers actually for a really 373 00:16:40,160 --> 00:16:43,320 Speaker 12: long time and some pressure on retailers for a long time, 374 00:16:43,760 --> 00:16:46,880 Speaker 12: so it actually fits that struggling consumer theme. But I 375 00:16:46,920 --> 00:16:48,920 Speaker 12: think there's a little bit more to this. It's the 376 00:16:49,040 --> 00:16:52,600 Speaker 12: interest rate sensitivity, and it's tied to the housing market. 377 00:16:53,120 --> 00:16:55,840 Speaker 12: So you know, this whole PPI CPI, what will the 378 00:16:55,960 --> 00:16:58,720 Speaker 12: Fed dude, this will actually have a lot more weight 379 00:16:59,280 --> 00:17:02,200 Speaker 12: on details are like home depot that are very much 380 00:17:02,320 --> 00:17:05,840 Speaker 12: tied to the housing market, because frankly, unless we see 381 00:17:06,080 --> 00:17:09,040 Speaker 12: cuts going down to like two hundred or three hundred 382 00:17:09,080 --> 00:17:11,879 Speaker 12: basis points, we're not going to see stabilization of the 383 00:17:11,960 --> 00:17:16,800 Speaker 12: housing market. Effective mortgage rate is below four percent, so 384 00:17:17,840 --> 00:17:21,920 Speaker 12: from a perspective of a lower guidance perfectly makes sense 385 00:17:22,000 --> 00:17:25,720 Speaker 12: to us. Higher interest rates being named as one of 386 00:17:25,720 --> 00:17:28,480 Speaker 12: the culprits makes perfectly perfect sense to us. 387 00:17:28,720 --> 00:17:31,720 Speaker 6: And I also think there's sort of an upgrade fatigue. 388 00:17:31,880 --> 00:17:35,600 Speaker 12: Everybody upgraded everything during the pandemic and the ensuing years, 389 00:17:35,680 --> 00:17:37,560 Speaker 12: and now like what else are you going to upgrade? 390 00:17:37,640 --> 00:17:37,720 Speaker 6: Right? 391 00:17:38,240 --> 00:17:40,239 Speaker 3: So that's actually a relatively I mean, that's a lot 392 00:17:40,320 --> 00:17:42,600 Speaker 3: of cuts we have to get to get some juice 393 00:17:42,640 --> 00:17:45,119 Speaker 3: going in the housing market. And you mentioned sort of 394 00:17:45,200 --> 00:17:49,000 Speaker 3: the other slowing economic trends from consumers, and that sort 395 00:17:49,040 --> 00:17:53,920 Speaker 3: of the disinflation was creating like a veil that we're 396 00:17:54,160 --> 00:17:57,080 Speaker 3: not really seeing those slowing eco trends. What exactly are 397 00:17:57,119 --> 00:17:58,600 Speaker 3: you referring to? And how worried are you? 398 00:18:00,440 --> 00:18:03,119 Speaker 12: So I'm not worried like sky is falling, right, I 399 00:18:03,160 --> 00:18:07,560 Speaker 12: mean we're slow. We're watching everything very carefully. So labor market, 400 00:18:07,760 --> 00:18:10,119 Speaker 12: we've been watching it for about a year, household survey 401 00:18:10,240 --> 00:18:13,359 Speaker 12: versus establishment survey. I know this has been discussed in 402 00:18:13,480 --> 00:18:16,560 Speaker 12: the public discourse for a while now, and we're watching 403 00:18:16,640 --> 00:18:17,880 Speaker 12: it actually converge again. 404 00:18:17,920 --> 00:18:18,840 Speaker 6: They've been diverging for. 405 00:18:18,880 --> 00:18:21,200 Speaker 12: A while now they're starting to converge, and we're trying 406 00:18:21,240 --> 00:18:23,520 Speaker 12: to see if there's a trend there. We're also seeing 407 00:18:23,680 --> 00:18:26,520 Speaker 12: what people are calling that ca shaped economy, where the 408 00:18:26,640 --> 00:18:30,280 Speaker 12: luxury goods market is doing really well because of wealthy Americans, 409 00:18:30,359 --> 00:18:34,119 Speaker 12: but frankly, lower income Americans are really really struggling. And 410 00:18:34,240 --> 00:18:36,520 Speaker 12: so these are the things that we're watching and frankly, 411 00:18:36,920 --> 00:18:40,120 Speaker 12: how much does that creep up to the middle class, right, 412 00:18:40,160 --> 00:18:42,840 Speaker 12: because at some point, when rates stay high, it's going 413 00:18:42,920 --> 00:18:46,320 Speaker 12: to eventually impact everybody at some point. And the question 414 00:18:46,560 --> 00:18:49,640 Speaker 12: is can the FED cut fast enough. I'm not talking 415 00:18:49,640 --> 00:18:51,800 Speaker 12: about fifty to seventy five basis points, but at a 416 00:18:51,880 --> 00:18:53,440 Speaker 12: twenty five basis point. 417 00:18:55,080 --> 00:18:57,639 Speaker 6: Clip all the way down to where they want to 418 00:18:57,760 --> 00:19:00,680 Speaker 6: be for the consumers to actually stabilized. 419 00:19:00,720 --> 00:19:03,480 Speaker 12: That's really what we're watching, and where we're worried is 420 00:19:03,560 --> 00:19:05,879 Speaker 12: that we're not going to get those cuts all right. 421 00:19:05,920 --> 00:19:08,720 Speaker 5: If we don't get those cuts, kind of where do 422 00:19:08,760 --> 00:19:11,359 Speaker 5: you see opportunities in the markets, either equities, fixed income. 423 00:19:11,680 --> 00:19:13,359 Speaker 7: What's kind of your go to trade these days? 424 00:19:14,560 --> 00:19:20,719 Speaker 12: Now, if we have a disinflationary, disinflationary situation, it's going 425 00:19:20,760 --> 00:19:24,320 Speaker 12: to weigh on stocks, right, so small halves. I know 426 00:19:24,400 --> 00:19:25,960 Speaker 12: we've seen a little bit of a bump up, we 427 00:19:26,080 --> 00:19:27,159 Speaker 12: see a bump up today. 428 00:19:27,840 --> 00:19:29,760 Speaker 6: I think it's going to continue to be pressured. 429 00:19:29,840 --> 00:19:32,560 Speaker 12: Anything that is cyclical or anything that is very much 430 00:19:32,640 --> 00:19:34,879 Speaker 12: interest rate dependent. I think we're going to see some 431 00:19:35,400 --> 00:19:39,000 Speaker 12: pressure there. Stocks in general. I think this inflationary forces 432 00:19:39,040 --> 00:19:43,200 Speaker 12: are not necessarily good. In the bonds, you know, the 433 00:19:43,280 --> 00:19:47,280 Speaker 12: yields are still pretty attractive, So I think it's if 434 00:19:47,320 --> 00:19:50,160 Speaker 12: you're clipping coupons, I think you can still be there. 435 00:19:50,480 --> 00:19:53,480 Speaker 12: And if the Fed is cutting slowly, those coupons are 436 00:19:53,520 --> 00:19:55,880 Speaker 12: still going to stay attractive. Because we're talking about. 437 00:19:55,760 --> 00:19:58,280 Speaker 6: Five point two five to five point five percent in. 438 00:19:58,359 --> 00:20:02,320 Speaker 12: Fed funds rate point, it'll become less attractive. But I 439 00:20:02,400 --> 00:20:07,320 Speaker 12: think that the PPI number today suggests potential weakening. We're 440 00:20:07,320 --> 00:20:10,400 Speaker 12: to also talking about margin pressure as well for companies 441 00:20:10,960 --> 00:20:12,879 Speaker 12: and for the equity markets. I think there are a 442 00:20:12,920 --> 00:20:15,000 Speaker 12: lot of headwinds here that we just have to be 443 00:20:15,080 --> 00:20:17,879 Speaker 12: a little bit more careful about areas. 444 00:20:17,520 --> 00:20:20,000 Speaker 6: That are a little bit investors seem to be a 445 00:20:20,000 --> 00:20:20,720 Speaker 6: little more risky. 446 00:20:21,040 --> 00:20:23,520 Speaker 3: Do you feel like earnings reflected that view yet? 447 00:20:25,680 --> 00:20:30,880 Speaker 12: No. So what's interesting is we've seen some broadening, right, 448 00:20:31,000 --> 00:20:34,040 Speaker 12: So we've been talking about max seven earnings being the 449 00:20:34,560 --> 00:20:37,680 Speaker 12: majority of earnings growth for the first two quarters of 450 00:20:37,720 --> 00:20:39,960 Speaker 12: this year or first quarter of this year, and in 451 00:20:40,040 --> 00:20:42,600 Speaker 12: the second quarter we're starting to see some broadening out. 452 00:20:43,160 --> 00:20:46,719 Speaker 12: I think that is better management, frankly, and cost reduction. 453 00:20:48,040 --> 00:20:51,040 Speaker 12: The question is isn't so much how is the earnings 454 00:20:51,119 --> 00:20:52,560 Speaker 12: from the past quarter doing? 455 00:20:52,800 --> 00:20:55,040 Speaker 6: The question is can they sustain it? 456 00:20:55,240 --> 00:20:58,680 Speaker 12: Can this broadening of fundamentals actually be sustained in a 457 00:20:58,760 --> 00:21:00,800 Speaker 12: high interest rate environment for the rest. 458 00:21:00,680 --> 00:21:02,360 Speaker 6: Of the year, And that is a big question mark 459 00:21:02,400 --> 00:21:03,040 Speaker 6: over our heads. 460 00:21:03,880 --> 00:21:06,320 Speaker 5: So, you know, I mean the guidance, I mean, the 461 00:21:06,400 --> 00:21:09,080 Speaker 5: earnings themselves this quarter were solid. I mean I think 462 00:21:09,119 --> 00:21:13,119 Speaker 5: the SMP coming in around eleven percent growth. What was 463 00:21:13,160 --> 00:21:15,480 Speaker 5: the guidance for you? How was a guidance enough for 464 00:21:15,560 --> 00:21:17,400 Speaker 5: you to support this market? Or do you think there's 465 00:21:17,640 --> 00:21:19,240 Speaker 5: risk there from an earning perspective? 466 00:21:19,480 --> 00:21:22,280 Speaker 12: I yeah, I think there's a bit of risk because 467 00:21:22,400 --> 00:21:26,080 Speaker 12: the guidance, you know, This is an opinion, but it's 468 00:21:26,119 --> 00:21:29,000 Speaker 12: a little optimistic, right, So I feel like everybody is 469 00:21:29,480 --> 00:21:32,399 Speaker 12: pricing in a soft landing except for a few like 470 00:21:33,040 --> 00:21:34,000 Speaker 12: Home Depot may not be. 471 00:21:34,920 --> 00:21:36,280 Speaker 6: So it doesn't really. 472 00:21:36,119 --> 00:21:40,479 Speaker 12: Give me a lot of confidence. And frankly, inflation falling 473 00:21:40,800 --> 00:21:44,920 Speaker 12: is not great for margins. It takes away the pricing 474 00:21:45,080 --> 00:21:47,720 Speaker 12: power from a lot of these companies. So I think 475 00:21:47,760 --> 00:21:50,200 Speaker 12: there's a bit of optimism built into some of the 476 00:21:50,240 --> 00:21:54,080 Speaker 12: guidance that may not be healthy for price action in 477 00:21:54,160 --> 00:21:54,960 Speaker 12: the second half of the. 478 00:21:55,000 --> 00:21:58,480 Speaker 3: Year, right, particularly if top line sales don't grow. So 479 00:21:58,720 --> 00:22:00,480 Speaker 3: if at least the margins compress sing, you need the 480 00:22:00,520 --> 00:22:02,160 Speaker 3: top line sales to grow, And if you don't get 481 00:22:02,200 --> 00:22:04,560 Speaker 3: that because the economy is slowing, then and you're really 482 00:22:04,600 --> 00:22:08,919 Speaker 3: getting crunched in terms of technicality because you're talking all fundamentals. 483 00:22:09,040 --> 00:22:10,960 Speaker 3: But what we saw over the last week in many 484 00:22:11,040 --> 00:22:14,840 Speaker 3: ways was technical and that we were over bought. There 485 00:22:15,080 --> 00:22:17,560 Speaker 3: was the yen carry trade unwind as means looking at 486 00:22:17,600 --> 00:22:20,359 Speaker 3: the dollar yen chart was truly unbelievable, Like, of course 487 00:22:20,440 --> 00:22:22,680 Speaker 3: stuff happened. If you look at that declined down, is 488 00:22:22,760 --> 00:22:23,160 Speaker 3: it over? 489 00:22:25,200 --> 00:22:27,159 Speaker 6: You know, I don't think it's over. I mean, in 490 00:22:27,240 --> 00:22:27,720 Speaker 6: some ways. 491 00:22:27,760 --> 00:22:31,560 Speaker 12: It was the obvious trade because that discrepancy was so wide. 492 00:22:32,240 --> 00:22:34,760 Speaker 12: But I think that there's still leverage in the system 493 00:22:34,920 --> 00:22:37,919 Speaker 12: that hasn't been unwound. Now it think about it, if 494 00:22:38,000 --> 00:22:41,240 Speaker 12: the FED starts to cut, that's another reason for that 495 00:22:41,359 --> 00:22:43,560 Speaker 12: to be unwound, right, I mean, so the Bank of 496 00:22:43,680 --> 00:22:48,000 Speaker 12: Japan is holding steady, okay, fine, but if the Feds start, 497 00:22:48,080 --> 00:22:50,680 Speaker 12: if there's leverage in the system and the FED starts 498 00:22:50,760 --> 00:22:55,200 Speaker 12: to cut, then they're more unwinding that is waiting to happen. 499 00:22:55,400 --> 00:22:58,840 Speaker 12: I don't think it's necessarily over now. Will the market 500 00:22:58,920 --> 00:23:02,000 Speaker 12: participants be small harder about it this time? Probably you 501 00:23:02,119 --> 00:23:04,840 Speaker 12: might not see as big of a reaction and they 502 00:23:04,920 --> 00:23:07,639 Speaker 12: may not be caught by surprise. But as to the 503 00:23:07,760 --> 00:23:09,959 Speaker 12: leverage in the system, I think we're still looking at 504 00:23:11,440 --> 00:23:12,400 Speaker 12: potentially more pain. 505 00:23:13,040 --> 00:23:14,800 Speaker 7: All right, Anna, thank you so much. We appreciate that. 506 00:23:14,920 --> 00:23:19,920 Speaker 5: On a Rothbland, Chief investment Officer for Seabiz Investment Advisory Services. 507 00:23:21,440 --> 00:23:25,280 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 508 00:23:25,400 --> 00:23:28,320 Speaker 2: weekdays at ten am Eastern on applecar. 509 00:23:27,960 --> 00:23:30,680 Speaker 8: Play and Android Auto with the Bloomberg Business app. 510 00:23:30,840 --> 00:23:33,639 Speaker 2: You can also listen live on Amazon Alexa from our 511 00:23:33,680 --> 00:23:38,040 Speaker 2: flagship New York station. Just say Alexa, play Bloomberg eleven thirty. 512 00:23:39,240 --> 00:23:41,440 Speaker 3: Come Alex, you alongside pauls we need. This is Bloomberg 513 00:23:41,440 --> 00:23:44,240 Speaker 3: Intelligence Radio. We bring you all the top news in 514 00:23:44,359 --> 00:23:46,480 Speaker 3: business and finance and economics. There are lens of our 515 00:23:46,480 --> 00:23:49,479 Speaker 3: Bloomberg Intelligence folks. They cover two thousand companies and one 516 00:23:49,560 --> 00:23:52,000 Speaker 3: hundred and thirty industries worldwide. We also love going to 517 00:23:52,040 --> 00:23:54,440 Speaker 3: the c suite, take a look at different companies all 518 00:23:54,560 --> 00:23:56,840 Speaker 3: across the world. And for that we go to Kathy Winter. 519 00:23:57,040 --> 00:24:01,320 Speaker 3: She's chief operating officer of May Mobility. It's a private 520 00:24:01,400 --> 00:24:04,520 Speaker 3: company and she joins us now from ann Arbor, Michigan. 521 00:24:04,800 --> 00:24:08,080 Speaker 3: So apparently May Mobility is the leader in the development 522 00:24:08,160 --> 00:24:12,479 Speaker 3: and deployment of autonomous driving technology. I want to get 523 00:24:12,520 --> 00:24:14,080 Speaker 3: more on this, Hey, Kathy, does that mean like a 524 00:24:14,119 --> 00:24:16,080 Speaker 3: self driving car? Is that what we're talking about here? 525 00:24:16,960 --> 00:24:19,280 Speaker 11: Yeah, Hi, thanks for having me Exactly. 526 00:24:19,760 --> 00:24:23,240 Speaker 9: We are talking about self driving cars and the service 527 00:24:23,359 --> 00:24:25,920 Speaker 9: that we actually go out and provide. So trying to 528 00:24:26,000 --> 00:24:30,560 Speaker 9: solve like real world problems, augment existing transit systems and 529 00:24:31,240 --> 00:24:33,359 Speaker 9: get these cars on the road so that more people 530 00:24:33,400 --> 00:24:34,159 Speaker 9: can access them. 531 00:24:34,880 --> 00:24:38,399 Speaker 5: Who are the you are the customers, individuals are they 532 00:24:38,520 --> 00:24:40,960 Speaker 5: cities and municipalities that deploy them, maybe like as a 533 00:24:41,600 --> 00:24:42,920 Speaker 5: kind of a taxi fleet or something. 534 00:24:44,720 --> 00:24:46,440 Speaker 11: So think of this as what we do is a 535 00:24:46,480 --> 00:24:47,160 Speaker 11: little bit different. 536 00:24:47,520 --> 00:24:51,119 Speaker 9: We are more in the b TOG space where we 537 00:24:51,320 --> 00:24:56,560 Speaker 9: partner with local municipalities and governments to come in and 538 00:24:56,600 --> 00:24:59,560 Speaker 9: cooperate and plan out a system that'll really work and 539 00:24:59,640 --> 00:25:00,640 Speaker 9: solve problems. 540 00:25:00,920 --> 00:25:02,280 Speaker 11: A little bit different for sure. 541 00:25:02,240 --> 00:25:05,399 Speaker 9: Than a robotaxi environment where you're maybe dropping in a 542 00:25:05,480 --> 00:25:07,680 Speaker 9: fleet of vehicles and customers are. 543 00:25:07,600 --> 00:25:11,040 Speaker 11: Calling them on their own right, So different segment in 544 00:25:11,040 --> 00:25:11,400 Speaker 11: the market. 545 00:25:11,600 --> 00:25:13,159 Speaker 3: So tell me what kind of stuff you're working on 546 00:25:13,280 --> 00:25:14,800 Speaker 3: right now. Then give us an example of how this 547 00:25:14,880 --> 00:25:17,080 Speaker 3: would work and how those conversations go with the government. 548 00:25:18,080 --> 00:25:20,440 Speaker 9: Yeah, sure, So, Well, the biggest thing we're working on 549 00:25:20,560 --> 00:25:23,960 Speaker 9: is really the technology itself. So we have a patented MPDM. 550 00:25:24,400 --> 00:25:28,480 Speaker 9: It's multi policy decision making solution, and so what that 551 00:25:28,560 --> 00:25:32,200 Speaker 9: really is about is how we use AI to continuously 552 00:25:32,359 --> 00:25:35,520 Speaker 9: learn on the vehicle and quickly be able to scale 553 00:25:35,600 --> 00:25:37,359 Speaker 9: to implement in a city. 554 00:25:37,600 --> 00:25:39,320 Speaker 11: So what are we doing. We've launched them. 555 00:25:39,400 --> 00:25:42,680 Speaker 9: We actually have multiple sites out there today. They're in 556 00:25:42,880 --> 00:25:46,679 Speaker 9: operation and more slated both here and Japan. 557 00:25:46,880 --> 00:25:47,920 Speaker 11: For the second half of the year. 558 00:25:48,760 --> 00:25:51,920 Speaker 5: So an arm Or, Michigan, that's one of your deployment sites, 559 00:25:52,119 --> 00:25:54,359 Speaker 5: explain to us kind of how that looks. 560 00:25:54,400 --> 00:25:57,000 Speaker 7: What does that the deployment look like in terms of 561 00:25:57,040 --> 00:25:58,560 Speaker 7: maybe vehicles and things like that. 562 00:26:00,000 --> 00:26:02,560 Speaker 9: Ann ourbur Michigan is it's a really fun one to 563 00:26:02,600 --> 00:26:05,000 Speaker 9: talk about because, of course, not just because this is 564 00:26:05,040 --> 00:26:08,440 Speaker 9: our headquarters, but huge booming university town. 565 00:26:08,480 --> 00:26:09,800 Speaker 11: Students are coming back this week. 566 00:26:10,280 --> 00:26:13,760 Speaker 9: So in this case we've partnered with the university, the 567 00:26:13,840 --> 00:26:17,240 Speaker 9: local government, and so what we provide is a service 568 00:26:17,400 --> 00:26:19,760 Speaker 9: that if you think about students that don't have cars 569 00:26:19,840 --> 00:26:22,040 Speaker 9: on campus, it's provided they. 570 00:26:21,960 --> 00:26:25,800 Speaker 11: Don't actually pay for it. It's free to them and 571 00:26:26,040 --> 00:26:26,640 Speaker 11: they can ride. 572 00:26:26,680 --> 00:26:29,600 Speaker 9: For example, let me give me they might not live 573 00:26:29,680 --> 00:26:33,200 Speaker 9: on campus, so they park for free off campus and 574 00:26:33,359 --> 00:26:35,920 Speaker 9: then they can call. You know, there's any number of 575 00:26:36,080 --> 00:26:39,560 Speaker 9: thirty stops across an arbor they can call and they 576 00:26:39,640 --> 00:26:42,800 Speaker 9: can jump in the car and get onto campus and 577 00:26:42,880 --> 00:26:43,680 Speaker 9: wherever they want to go. 578 00:26:44,560 --> 00:26:46,000 Speaker 11: It's open to more than just students. 579 00:26:46,080 --> 00:26:50,679 Speaker 9: But that's a good use case as opposed to Grand Rapids, 580 00:26:50,720 --> 00:26:54,200 Speaker 9: Minnesota is a rural community with tons of snow you 581 00:26:54,240 --> 00:26:57,159 Speaker 9: can imagine, and they don't actually really have much of 582 00:26:57,200 --> 00:27:00,200 Speaker 9: a public transportation, so in that case, it's the rural 583 00:27:00,359 --> 00:27:04,760 Speaker 9: population that doesn't have access. And maybe one other thing 584 00:27:04,800 --> 00:27:08,919 Speaker 9: I'll mention is we are really proud of our wheelchair accessible. 585 00:27:10,040 --> 00:27:11,199 Speaker 11: Bands because you. 586 00:27:11,240 --> 00:27:13,080 Speaker 9: Know, that makes it just so much more accessible to 587 00:27:13,160 --> 00:27:16,080 Speaker 9: people who didn't have that kind of on demand service 588 00:27:16,240 --> 00:27:17,560 Speaker 9: that they could call up. 589 00:27:17,840 --> 00:27:20,280 Speaker 3: Yeah, especially because if you do have that on demand 590 00:27:20,320 --> 00:27:23,480 Speaker 3: service that can be so expensive. You're also deployed in Miami, Florida. 591 00:27:23,960 --> 00:27:24,720 Speaker 3: What does that look like. 592 00:27:25,800 --> 00:27:27,280 Speaker 9: Yeah, that's one of our newer ones, and we have 593 00:27:27,359 --> 00:27:29,840 Speaker 9: two big routes down there, so I guess they forgot 594 00:27:29,880 --> 00:27:32,000 Speaker 9: to mention we had four vehicles and like thirty different 595 00:27:32,080 --> 00:27:35,080 Speaker 9: drop off areas in an arbor. Miami is one of 596 00:27:35,119 --> 00:27:39,000 Speaker 9: our newest ten vehicles and two different sections, so we 597 00:27:39,480 --> 00:27:42,520 Speaker 9: expect to continue expanding the square footage. 598 00:27:42,560 --> 00:27:43,440 Speaker 11: But same kind of thing. 599 00:27:44,000 --> 00:27:46,320 Speaker 9: But again, that's so much. You know, that's hot weather, 600 00:27:46,840 --> 00:27:50,920 Speaker 9: steamy weather. So we really get between between our locations 601 00:27:50,960 --> 00:27:54,800 Speaker 9: in Grand Rapids, Michigan, where we're Minnesota with snow and 602 00:27:55,040 --> 00:27:59,760 Speaker 9: urburt here multi seasonal. You got Arlington, Texas, which is 603 00:28:00,119 --> 00:28:02,639 Speaker 9: really smoking hot this time of year, and then you 604 00:28:02,720 --> 00:28:05,919 Speaker 9: have Miami, right superhuman. So we feel like we get 605 00:28:05,960 --> 00:28:09,399 Speaker 9: the real life commercial tests going in all these different locations. 606 00:28:09,920 --> 00:28:13,000 Speaker 5: So what are these municipalities looking for? What kind of 607 00:28:13,080 --> 00:28:14,480 Speaker 5: problem are they trying to solve for? 608 00:28:15,680 --> 00:28:18,479 Speaker 9: Yeah, that's actually probably at the crux of what our 609 00:28:18,560 --> 00:28:21,560 Speaker 9: mission is is to really work with these communities. It 610 00:28:21,720 --> 00:28:25,000 Speaker 9: might be that, you know, there's not enough traffic to 611 00:28:26,160 --> 00:28:28,520 Speaker 9: make the business case work for a ginormous bus to 612 00:28:28,600 --> 00:28:31,639 Speaker 9: be driving around, so they're looking for something smaller. They 613 00:28:31,720 --> 00:28:34,399 Speaker 9: have areas where they just don't have bus service today, 614 00:28:34,440 --> 00:28:37,320 Speaker 9: but they want to make it accessible, some kind of 615 00:28:37,359 --> 00:28:41,360 Speaker 9: public transportation, so we can kind of micro transit augment 616 00:28:41,480 --> 00:28:43,640 Speaker 9: what might be there. And then I will say a 617 00:28:43,720 --> 00:28:49,560 Speaker 9: lot of it is around the accessibility for those with disabilities. 618 00:28:49,600 --> 00:28:52,800 Speaker 9: So Detroit, for example, they just launched and they are 619 00:28:52,920 --> 00:28:57,440 Speaker 9: very specifically focusing on senior citizens and folks who have 620 00:28:57,560 --> 00:29:02,320 Speaker 9: accessibility issues, whether it's hearing impaired, impaired, or specifically the wheelchairs. 621 00:29:02,360 --> 00:29:05,320 Speaker 9: Wheelchairs on demand is just not there anywhere that I 622 00:29:05,440 --> 00:29:08,480 Speaker 9: know of. You have to pre register typically twenty four 623 00:29:08,520 --> 00:29:09,280 Speaker 9: hours notice. 624 00:29:09,600 --> 00:29:10,680 Speaker 11: Could be very costly. 625 00:29:11,160 --> 00:29:13,520 Speaker 3: What are some of the community feedback, like the good 626 00:29:13,520 --> 00:29:15,479 Speaker 3: stuff but also the stuff that you need to keep 627 00:29:15,520 --> 00:29:15,840 Speaker 3: working on. 628 00:29:17,440 --> 00:29:18,840 Speaker 11: Yeah, that's a good question. 629 00:29:18,960 --> 00:29:21,920 Speaker 9: I would say we get we actually take a survey. 630 00:29:22,440 --> 00:29:24,680 Speaker 9: Whenever anybody rides, they call it up on their app, 631 00:29:25,120 --> 00:29:27,680 Speaker 9: or they can call a phone number to book if 632 00:29:27,680 --> 00:29:31,360 Speaker 9: it's someone who's not you know, tech savvy with their phone, 633 00:29:31,600 --> 00:29:34,040 Speaker 9: so two ways to book it. And then after every 634 00:29:34,120 --> 00:29:36,320 Speaker 9: ride we ask them to rate the ride. And so 635 00:29:37,040 --> 00:29:39,200 Speaker 9: this is something we also do with the communities is 636 00:29:39,280 --> 00:29:42,280 Speaker 9: we look at their ridership, look at where they have 637 00:29:42,400 --> 00:29:45,360 Speaker 9: hotspots that maybe need more vehicles, more capacity. 638 00:29:46,760 --> 00:29:49,400 Speaker 11: We look to see the quality of the rides. 639 00:29:49,440 --> 00:29:52,240 Speaker 9: We get extremely high ratings. It's usually hey, can we 640 00:29:52,360 --> 00:29:57,480 Speaker 9: even expand the service areas? Right, So it's a partnership 641 00:29:57,480 --> 00:30:00,040 Speaker 9: where we can really share that kind of data and 642 00:30:01,320 --> 00:30:03,680 Speaker 9: both learn where to expand and where to bring the 643 00:30:03,720 --> 00:30:04,680 Speaker 9: highest value to them. 644 00:30:05,200 --> 00:30:08,280 Speaker 5: What's a typical or what's a target kind of market 645 00:30:08,360 --> 00:30:11,240 Speaker 5: to open up? What fits your criteria. 646 00:30:13,120 --> 00:30:15,000 Speaker 9: Well, one of the things we do, and I think 647 00:30:15,040 --> 00:30:17,440 Speaker 9: this has been to the success of May being one 648 00:30:17,440 --> 00:30:19,560 Speaker 9: of the few companies still standing out there and a 649 00:30:19,600 --> 00:30:24,640 Speaker 9: profitable company from we have profitable sites operating today, is 650 00:30:24,760 --> 00:30:27,040 Speaker 9: that we start very. 651 00:30:28,640 --> 00:30:31,920 Speaker 11: Very deliberately with a specific geographic area. 652 00:30:32,040 --> 00:30:34,280 Speaker 9: We'll work with the community as say where's your hotspots, 653 00:30:34,320 --> 00:30:37,600 Speaker 9: where's your trouble. But we also will say, you know, 654 00:30:37,720 --> 00:30:40,520 Speaker 9: let's stick to thirty thirty five forty miles an hour 655 00:30:40,560 --> 00:30:43,040 Speaker 9: by the end of the year roads without saying we're 656 00:30:43,040 --> 00:30:44,600 Speaker 9: going to hop on the freeways and try to map 657 00:30:44,680 --> 00:30:47,560 Speaker 9: the entire city. So you know, it's a it's a 658 00:30:47,640 --> 00:30:51,120 Speaker 9: more measured approach to say, hey, lower risk, let's start 659 00:30:51,200 --> 00:30:54,160 Speaker 9: here and we'll continue to expand over time. So the 660 00:30:54,240 --> 00:30:57,720 Speaker 9: criteria we really are operating in all different climates, that's 661 00:30:57,840 --> 00:31:02,360 Speaker 9: not really an issue. It's really more just which communities 662 00:31:02,400 --> 00:31:05,200 Speaker 9: are ready to embrace. Another application would be an airport, 663 00:31:05,240 --> 00:31:07,760 Speaker 9: for example, So there is some B to B as well. 664 00:31:07,800 --> 00:31:09,920 Speaker 9: It's not just B to G, but you can think 665 00:31:09,960 --> 00:31:13,120 Speaker 9: of airports obviously wanting to move people around without having 666 00:31:13,120 --> 00:31:15,440 Speaker 9: to pay for joinoris again shuttle buses. 667 00:31:15,720 --> 00:31:19,440 Speaker 3: So interesting, really great stuff. Hey, Kathy, really appreciate it. 668 00:31:19,520 --> 00:31:23,520 Speaker 3: Kathy Winters, the chief operating officer at my Mobility, We 669 00:31:23,640 --> 00:31:26,520 Speaker 3: really appreciate all of that context just staying in cars 670 00:31:26,560 --> 00:31:29,800 Speaker 3: for a sec. So apparently this according to Baron's Ford 671 00:31:29,920 --> 00:31:33,120 Speaker 3: and A Texas Utility is making a plan to make 672 00:31:33,240 --> 00:31:37,840 Speaker 3: charging free for Texas University. Texas customers if EV owners 673 00:31:37,960 --> 00:31:41,080 Speaker 3: charge during off peak times of day, So basically it's like, hey, 674 00:31:41,160 --> 00:31:42,680 Speaker 3: get your EV because you know what, if you do 675 00:31:42,760 --> 00:31:45,560 Speaker 3: it in this very strict parameter, you can charge up your. 676 00:31:45,520 --> 00:31:46,040 Speaker 9: Car for free. 677 00:31:46,160 --> 00:31:47,800 Speaker 7: Right So starting to get a little bit creative. 678 00:31:48,080 --> 00:31:50,760 Speaker 5: They're trying to stoke demand out there, because again that's 679 00:31:50,760 --> 00:31:53,080 Speaker 5: probably one of the gating issues at least right now 680 00:31:53,200 --> 00:31:54,040 Speaker 5: for the EV business. 681 00:31:54,200 --> 00:31:55,600 Speaker 3: And you can still charge it in, you know, at 682 00:31:55,640 --> 00:31:57,640 Speaker 3: home during these times, it just got to pay for it. 683 00:31:57,760 --> 00:31:59,880 Speaker 3: So that's a quite interesting little thing there. From Ford. 684 00:32:01,480 --> 00:32:05,320 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 685 00:32:05,440 --> 00:32:08,520 Speaker 2: weekdays at ten am Eastern on applecard. 686 00:32:07,960 --> 00:32:10,720 Speaker 8: Play and Android Auto with the Bloomberg Business app. 687 00:32:10,840 --> 00:32:13,680 Speaker 2: You can also listen live on Amazon Alexa from our 688 00:32:13,720 --> 00:32:18,360 Speaker 2: flagship New York station Just Say Alexa playing Bloomberg eleven thirty. 689 00:32:19,400 --> 00:32:21,400 Speaker 5: Alex Steel, Paul Swine. You live here in our Bloomberg 690 00:32:21,480 --> 00:32:24,560 Speaker 5: Interactive Brokers studio. We're streaming live on Youtubes. A hit 691 00:32:24,640 --> 00:32:28,240 Speaker 5: over YouTube dot com search Bloomberg Podcast and that's where 692 00:32:28,360 --> 00:32:30,080 Speaker 5: you will find us. I know set the mortgage back 693 00:32:30,480 --> 00:32:33,800 Speaker 5: Mortgage Bankers Association thirty or fixed Mortgage is now six 694 00:32:33,880 --> 00:32:36,840 Speaker 5: point five five percent, so coming down from the north 695 00:32:36,880 --> 00:32:38,680 Speaker 5: of seven. But a lot of folks in the real 696 00:32:38,760 --> 00:32:40,560 Speaker 5: estate business it's got to come down even more to 697 00:32:41,080 --> 00:32:42,560 Speaker 5: prompt some of these people to get out of their 698 00:32:42,600 --> 00:32:47,360 Speaker 5: homes and maybe provides more liquidity to the used housing market. 699 00:32:47,680 --> 00:32:48,920 Speaker 7: Let's talk about the stock market here. 700 00:32:48,960 --> 00:32:51,080 Speaker 5: We get a nice run coming off of those that 701 00:32:51,280 --> 00:32:55,520 Speaker 5: really disturbing Monday a week ago. We found market's kind 702 00:32:55,560 --> 00:32:57,640 Speaker 5: of found some footing here, up about one percent at least. 703 00:32:57,680 --> 00:33:00,440 Speaker 7: Was just reporting on the SP five hundred. James. He 704 00:33:00,520 --> 00:33:02,400 Speaker 7: does this investing thing for a living. 705 00:33:02,440 --> 00:33:06,880 Speaker 5: He's a chief investment officer at main Street Research. Joining 706 00:33:06,960 --> 00:33:09,960 Speaker 5: us from New York via a zoom here, James, let's 707 00:33:10,000 --> 00:33:11,560 Speaker 5: put into context here. We've got a little bit of 708 00:33:11,600 --> 00:33:13,520 Speaker 5: a rearview mirror. Now we can think about a week ago, 709 00:33:13,640 --> 00:33:17,719 Speaker 5: last Monday, the volatility the market experienced here and then 710 00:33:17,840 --> 00:33:21,080 Speaker 5: seems to again found its footing since then, what happened? 711 00:33:22,560 --> 00:33:25,440 Speaker 10: Yeah, I Paul, thanks for having me in Hi Alex. 712 00:33:26,400 --> 00:33:30,600 Speaker 10: That was panic button for sure last Monday, market down 713 00:33:30,640 --> 00:33:35,680 Speaker 10: a thousand points, and I think that investors mistakenly looked 714 00:33:35,720 --> 00:33:38,680 Speaker 10: at that as you know, blood on the streets or panic, 715 00:33:39,040 --> 00:33:41,960 Speaker 10: when in fact, in our view. That was an invitation, 716 00:33:42,160 --> 00:33:44,600 Speaker 10: one of only a few we've had this year where 717 00:33:44,640 --> 00:33:47,120 Speaker 10: that momentum of upside in the market just sort of 718 00:33:47,200 --> 00:33:49,840 Speaker 10: gave way to what I would call, you know, on 719 00:33:49,920 --> 00:33:53,560 Speaker 10: our team, a normal correction, but at high speed. Right, So, 720 00:33:53,920 --> 00:33:56,200 Speaker 10: you know, these kind of eight to ten percent corrections 721 00:33:56,280 --> 00:33:58,960 Speaker 10: usually take three four weeks and we're sort of lulled 722 00:33:59,040 --> 00:34:02,719 Speaker 10: comfortably into the the lower market levels. We got all 723 00:34:02,800 --> 00:34:05,400 Speaker 10: of it within ten days. Investors just really weren't ready 724 00:34:05,440 --> 00:34:10,000 Speaker 10: for that. But relative to norms, that was a normal pullback, 725 00:34:10,160 --> 00:34:13,000 Speaker 10: just that turbo speed. We don't think it in any 726 00:34:13,040 --> 00:34:17,080 Speaker 10: way sort of stops or impedes this bull market, this 727 00:34:17,200 --> 00:34:18,719 Speaker 10: new business cycle that we see. 728 00:34:19,480 --> 00:34:21,400 Speaker 3: Why are you so convinced that this was just a 729 00:34:21,520 --> 00:34:25,640 Speaker 3: decline in a bull market versus something more serious longer term? 730 00:34:26,680 --> 00:34:28,800 Speaker 10: Yeah, Alex, and I think that's a really good question. 731 00:34:29,040 --> 00:34:32,600 Speaker 10: Investors to try to get themselves away from being psychologically 732 00:34:32,760 --> 00:34:36,320 Speaker 10: drawn into the drama of the decline, you know, focus 733 00:34:36,520 --> 00:34:42,000 Speaker 10: on metrics to remind ourselves to keep an even keel psychologically. 734 00:34:42,200 --> 00:34:44,840 Speaker 10: And when we do that, you know, one, you know 735 00:34:45,040 --> 00:34:48,640 Speaker 10: what the ingredients of these new bull markets are valuation. 736 00:34:48,840 --> 00:34:51,040 Speaker 10: You want to make sure stock our stocks reasonly priced? 737 00:34:51,160 --> 00:34:54,520 Speaker 10: Is this the beginning of something worse? And valuation across 738 00:34:55,000 --> 00:34:58,800 Speaker 10: most stocks AI excluded is around sixteen times earnings. This 739 00:34:58,920 --> 00:35:02,879 Speaker 10: is historically reasonable. Another thing you want to think about 740 00:35:03,000 --> 00:35:06,920 Speaker 10: is economy growing. Yeah, we're growing it north of three percent, 741 00:35:07,360 --> 00:35:09,759 Speaker 10: so the checks the box there that you know, recession 742 00:35:09,880 --> 00:35:13,280 Speaker 10: is a long way from three percent growth. Corporate profits 743 00:35:13,520 --> 00:35:17,200 Speaker 10: very important goes along with economic growth better than expected. 744 00:35:17,480 --> 00:35:19,800 Speaker 10: You know, one thing I think that investors really should 745 00:35:19,840 --> 00:35:23,120 Speaker 10: have thought maybe a little bit better about last week 746 00:35:23,640 --> 00:35:27,080 Speaker 10: was where is FED policy going? You know, FED policy 747 00:35:27,160 --> 00:35:30,399 Speaker 10: is a really important ingredient to keep the bull market going. 748 00:35:30,840 --> 00:35:33,879 Speaker 10: And we've gotten some data well today the PPI right, 749 00:35:34,000 --> 00:35:37,920 Speaker 10: a little lower than expected, and even data past Friday 750 00:35:38,040 --> 00:35:40,560 Speaker 10: when the market didn't like that data about employment. But 751 00:35:40,719 --> 00:35:43,040 Speaker 10: what that data told us is the Fed is ready 752 00:35:43,440 --> 00:35:47,560 Speaker 10: and willing to lower rates. Those little metrics I just 753 00:35:47,640 --> 00:35:50,719 Speaker 10: mentioned there is really the support that investors need to know. Hey, 754 00:35:51,000 --> 00:35:54,960 Speaker 10: this market decline isn't panic, it's an invitation to the 755 00:35:55,040 --> 00:35:57,920 Speaker 10: beginning of that next leg upward, which we think goes 756 00:35:57,960 --> 00:35:59,560 Speaker 10: to six thousand by the end of the year on 757 00:35:59,600 --> 00:35:59,920 Speaker 10: the SMA. 758 00:36:00,440 --> 00:36:03,040 Speaker 7: Wow, whoa, that's a nice round number. I like nice 759 00:36:03,120 --> 00:36:04,960 Speaker 7: round numbers. What's going to get us there? James? 760 00:36:05,000 --> 00:36:07,359 Speaker 5: I mean, as long as I can been in this game, 761 00:36:07,400 --> 00:36:10,759 Speaker 5: it's been technology kind of leading this market in and 762 00:36:10,800 --> 00:36:12,279 Speaker 5: I guess, given the market cap has some of the 763 00:36:12,320 --> 00:36:14,719 Speaker 5: big tech names, is tech going to lead us to 764 00:36:14,800 --> 00:36:16,560 Speaker 5: that kind of level six thousand? 765 00:36:17,719 --> 00:36:20,400 Speaker 10: Yeah, the wild factor of six thousand stills exists, but 766 00:36:20,480 --> 00:36:22,840 Speaker 10: it was a lot more fun to say it last Monday. 767 00:36:24,600 --> 00:36:27,560 Speaker 10: But you know, we think what leads us there is, 768 00:36:28,440 --> 00:36:31,120 Speaker 10: first of all, corporate profit growth. Right. We continue to 769 00:36:31,160 --> 00:36:34,560 Speaker 10: see Ernie's coming way better than expectations, and we think 770 00:36:34,600 --> 00:36:37,480 Speaker 10: the FED policy is really going to I don't think 771 00:36:37,520 --> 00:36:39,239 Speaker 10: they're going fifty basis place. I think they're going to 772 00:36:39,360 --> 00:36:44,080 Speaker 10: tap the accelerator on rates go twenty five. That'll keep 773 00:36:44,080 --> 00:36:47,080 Speaker 10: people comfortable, and that's going to be the big fuel 774 00:36:47,160 --> 00:36:50,080 Speaker 10: what I call that booster for the next leg up. 775 00:36:50,920 --> 00:36:53,680 Speaker 10: But you know, I think also valuations are cheaper now 776 00:36:54,160 --> 00:36:57,960 Speaker 10: you've got six trillion dollars not in the market. That 777 00:36:58,040 --> 00:37:02,640 Speaker 10: should be that money, called fomo fuel is probably going 778 00:37:02,719 --> 00:37:05,440 Speaker 10: to come in once the FED goes and has a 779 00:37:05,520 --> 00:37:08,439 Speaker 10: nice message about the economy. I think that money comes. 780 00:37:08,520 --> 00:37:10,840 Speaker 10: I think it's a big rocket fuel to get to 781 00:37:10,920 --> 00:37:12,440 Speaker 10: six thousand by the end of the year. You know, 782 00:37:12,480 --> 00:37:14,920 Speaker 10: we're also saying now one hundred thousand in the next 783 00:37:14,960 --> 00:37:17,440 Speaker 10: six years, because we're in the early phase. 784 00:37:17,239 --> 00:37:17,640 Speaker 5: Of this point. 785 00:37:17,680 --> 00:37:20,560 Speaker 3: But that's that doesn't sound like that's a purely AI 786 00:37:20,760 --> 00:37:23,400 Speaker 3: tech call at all. That sounds like that's a broadening rally. 787 00:37:23,480 --> 00:37:24,080 Speaker 3: Gets us there. 788 00:37:24,920 --> 00:37:28,200 Speaker 10: Yeah, Alex, thank you. I do think that there's lots 789 00:37:28,280 --> 00:37:32,640 Speaker 10: of momentum left in AI. The appetite for spending is 790 00:37:32,719 --> 00:37:35,440 Speaker 10: still there as we go through the conference calls and earnings. 791 00:37:36,120 --> 00:37:38,560 Speaker 10: But I do think also, and the team sort of 792 00:37:38,600 --> 00:37:42,279 Speaker 10: supports us on this, that the Fed lowering rates is 793 00:37:42,400 --> 00:37:45,480 Speaker 10: really going to be the real trigger for the market 794 00:37:45,560 --> 00:37:46,120 Speaker 10: to broaden. 795 00:37:46,520 --> 00:37:46,640 Speaker 8: Right. 796 00:37:46,840 --> 00:37:50,279 Speaker 10: Lower rates you just mentioned mortgage rates. That's helpful there. 797 00:37:50,960 --> 00:37:54,000 Speaker 10: The banks are going to benefit from real rates coming down, 798 00:37:54,239 --> 00:37:57,160 Speaker 10: you know, as opposed to speculating that they will. So 799 00:37:57,360 --> 00:38:00,440 Speaker 10: we think that the September cut is going to be 800 00:38:00,520 --> 00:38:03,120 Speaker 10: the real fuel that wow a rally to the end 801 00:38:03,160 --> 00:38:05,920 Speaker 10: of the year, probably led by tech that's where the 802 00:38:05,960 --> 00:38:08,239 Speaker 10: market cap is. But I think here you're really going 803 00:38:08,320 --> 00:38:11,880 Speaker 10: to see the small stocks, the financials, the industrials. 804 00:38:11,480 --> 00:38:12,800 Speaker 8: All be part of this. 805 00:38:13,320 --> 00:38:16,080 Speaker 10: This great invitation of this party that we're headed towards 806 00:38:16,120 --> 00:38:16,880 Speaker 10: the end of the year. 807 00:38:19,680 --> 00:38:21,520 Speaker 7: Earnings cycle. 808 00:38:21,560 --> 00:38:21,680 Speaker 6: Here. 809 00:38:21,719 --> 00:38:23,000 Speaker 5: We're starting to get to the tail end of this 810 00:38:23,080 --> 00:38:27,240 Speaker 5: earning cycle here, James, any takeaways for you this cycle? 811 00:38:28,680 --> 00:38:31,440 Speaker 10: You know, it's sort of the same story over and 812 00:38:31,560 --> 00:38:35,719 Speaker 10: over the last few quarters where you've got the technology 813 00:38:35,800 --> 00:38:40,080 Speaker 10: companies beating expectations. You know, those expectations have been risen, 814 00:38:40,360 --> 00:38:42,640 Speaker 10: so you had a little murkiness there. I think that 815 00:38:42,800 --> 00:38:46,120 Speaker 10: that's going to continue this earning season. You saw some 816 00:38:46,320 --> 00:38:49,360 Speaker 10: really I saw some great numbers in the financials, particularly 817 00:38:49,400 --> 00:38:52,600 Speaker 10: like the JP Morgans that didn't rely so much on 818 00:38:52,760 --> 00:38:56,479 Speaker 10: interest expense. So I'd just say that, you know, again, 819 00:38:56,760 --> 00:38:59,680 Speaker 10: earnings were better than expected this last quarter. I think 820 00:38:59,719 --> 00:39:02,080 Speaker 10: with FED policy, we're going to see continue to see 821 00:39:02,120 --> 00:39:03,680 Speaker 10: the same thing in the in the fourth. 822 00:39:04,440 --> 00:39:06,759 Speaker 3: I know you're probably gonna hate this question. Where could 823 00:39:06,800 --> 00:39:07,359 Speaker 3: you be wrong? 824 00:39:07,800 --> 00:39:07,840 Speaker 12: Like? 825 00:39:07,960 --> 00:39:10,440 Speaker 3: What are the cases where we don't get to six thousand? 826 00:39:10,800 --> 00:39:13,279 Speaker 3: Is that a FED behind the curve? Is that an 827 00:39:13,320 --> 00:39:17,839 Speaker 3: exogenous event? Is that AI hyperscaler is kind of pushing back? 828 00:39:18,000 --> 00:39:20,319 Speaker 3: Where where do you game out your barricades? 829 00:39:21,360 --> 00:39:25,640 Speaker 10: Yeah, Alex, I spent half my life second guessing okay, good, 830 00:39:27,600 --> 00:39:29,920 Speaker 10: and I think it's important for investors to use, you know, 831 00:39:30,120 --> 00:39:33,400 Speaker 10: things like risk management tools stop losses to mitigate you know, 832 00:39:33,560 --> 00:39:35,400 Speaker 10: risks that are there. And you know, I think the 833 00:39:35,560 --> 00:39:39,600 Speaker 10: risks here are the FED either does nothing, so I 834 00:39:39,680 --> 00:39:42,040 Speaker 10: FED policy is a big risk. If FED does nothing, 835 00:39:42,160 --> 00:39:44,080 Speaker 10: I think that's going to be very bad for our 836 00:39:44,400 --> 00:39:47,480 Speaker 10: whole view of six thousand. I also think that the 837 00:39:47,520 --> 00:39:50,640 Speaker 10: FED going fifty basis points are something you know, too extreme. 838 00:39:51,160 --> 00:39:52,279 Speaker 12: That also is a risk. 839 00:39:52,680 --> 00:39:54,879 Speaker 10: We don't want to scare investors that thinking gosh, they're 840 00:39:54,880 --> 00:39:57,480 Speaker 10: going fifty because the economy is two weak, because frankly 841 00:39:57,520 --> 00:39:59,400 Speaker 10: it isn't. So I think, you know, we want to 842 00:39:59,400 --> 00:40:02,399 Speaker 10: see the FED really specifically at policy. That is a risk. 843 00:40:03,200 --> 00:40:06,680 Speaker 10: The geopolitical risk is clearly there, it's increasing. I think 844 00:40:06,760 --> 00:40:09,480 Speaker 10: investors really want to be you know, monitor that, like 845 00:40:09,560 --> 00:40:11,640 Speaker 10: our team does you know the thing with you know, 846 00:40:11,840 --> 00:40:14,320 Speaker 10: Israel and Iran and all around the world. We have 847 00:40:14,440 --> 00:40:17,319 Speaker 10: all these risks the elections coming that's gonna make people 848 00:40:17,400 --> 00:40:22,000 Speaker 10: generate though elections typically don't cause risks for index markets 849 00:40:22,040 --> 00:40:24,640 Speaker 10: maybe some sectors, So we want to be careful of 850 00:40:24,760 --> 00:40:27,200 Speaker 10: watching all these things. And then there's always the stuff 851 00:40:27,239 --> 00:40:29,600 Speaker 10: we don't know right, which is a risk, so again, 852 00:40:29,840 --> 00:40:31,799 Speaker 10: use some risk management tools, but you know those are 853 00:40:32,080 --> 00:40:36,040 Speaker 10: underpinnings we mentioned earlier, valuation, economic growth, earnings, cash levels, 854 00:40:36,120 --> 00:40:40,640 Speaker 10: really high, FED policy coming in to accelerate the economy 855 00:40:40,640 --> 00:40:42,279 Speaker 10: a little bit. I think that's going to get us. 856 00:40:42,239 --> 00:40:44,640 Speaker 5: There, all right, James, thanks so much for joining us. 857 00:40:44,680 --> 00:40:47,200 Speaker 5: Really appreciate getting your thoughts. James Demmert. He's the chief 858 00:40:47,239 --> 00:40:51,400 Speaker 5: investment officer at main Street Research. I appreciate getting a 859 00:40:51,480 --> 00:40:52,759 Speaker 5: few minutes of his time. 860 00:40:53,000 --> 00:40:57,520 Speaker 2: This is the Bloomberg Intelligence podcast, available on apples, Spotify, 861 00:40:57,719 --> 00:41:00,279 Speaker 2: and anywhere else you can get your podcasts. US in 862 00:41:00,360 --> 00:41:04,120 Speaker 2: live each weekday ten am tonoon Eastern on Bloomberg dot com, 863 00:41:04,440 --> 00:41:07,799 Speaker 2: the iHeartRadio app tune In, and the Bloomberg Business app. 864 00:41:07,920 --> 00:41:10,920 Speaker 2: You can also watch us live every weekday on YouTube 865 00:41:11,160 --> 00:41:12,919 Speaker 2: and always on the Bloomberg terminal.