Speaker 1: This is Bloomberg Business Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: gloom O Business Finance and tech news. The Bloomberg Business
Speaker 1: Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Jess Mitton and Madison Mills here in the Bloomberg Interactive
Speaker 2: Brokers studio, and Maddie, I know how much you enjoy
Speaker 2: talking about the consumer, also the retail space because we've
Speaker 2: talked so much about these big earnings coming up, especially
Speaker 2: with Amazon tomorrow, but we have another look as far
Speaker 2: as how retailers really struggled in the midst of COVID
Speaker 2: and especially when it comes to the inventory issues. So
Speaker 2: who better to come in and chat with us about
Speaker 2: the startup space, but then also the retail outlook here
Speaker 2: as we head into close to the fall season, obviously
Speaker 2: toward the end of the year, the holiday shopping season.
Speaker 2: With Ari Trosdale, who's founder and chief executive officer of
Speaker 2: CHRISP who's here in studio with us, So it's always
Speaker 2: great having someone here. Thank you so much for coming
Speaker 2: into the Bloomberg office here in New York. Tell us
Speaker 2: first off about your company and what it is you do.
Speaker 3: Great. Yeah, you've work with a lot of large retailers,
Speaker 3: about two point five trillion dollars of retail spent to
Speaker 3: the retailers we work with, and then we have about
Speaker 3: five six hundred large brand small brands on the platform.
Speaker 3: What we help with is that change of data between retailers,
Speaker 3: large distributors and also the large manufacturers and the large
Speaker 3: large brands. So this has historically been done with that
Speaker 3: technology called EDI, which was invented fifty years ago the
Speaker 3: year I was born, and hasn't been a lot of
Speaker 3: innovation in kind of this connective fabric that ties all
Speaker 3: these important trading partners together. But through a platform like CRISP,
Speaker 3: they can exchange information much better, so everybody wins.
Speaker 4: So what kind of data do you help these retailers?
Speaker 4: And again, as Jess mentioned, you've got the names like Amazon,
Speaker 4: BJ's all the Target, Whole Foods on this list, among
Speaker 4: many other big ones. What data do you provide them
Speaker 4: and how do they leverage that data into action?
Speaker 3: Yeah, it's particularly in that interface between the large retailers
Speaker 3: and the brands, and they typically have need for data
Speaker 3: around understanding how much is on the shelf, how much
Speaker 3: data is actually or how much is actuly sitting in
Speaker 3: the distribution center, what.
Speaker 4: Was the price or how do you help them know that?
Speaker 3: So, yeah, we actually connect into a lot of these
Speaker 3: legacy systems that the large retailers have, So they have
Speaker 3: point of sale systems, that have warehousing systems, they have
Speaker 3: logistical systems. So we help connect into these systems and
Speaker 3: make bring all of that data into the clouds that
Speaker 3: everybody can access. This throughout a supply chain. So if
Speaker 3: I'm now on the brand side and I'm planning advertising
Speaker 3: and marketing campaign or I'm going to push a new
Speaker 3: product out, I understand how much I need to manufacture
Speaker 3: in order to meet the demand. Now they have much
Speaker 3: better view of everything that's happening across all of the
Speaker 3: different retailers.
Speaker 2: How long does it take for them to access that
Speaker 2: type of data.
Speaker 3: So it's been been a big part of they've recently
Speaker 3: been able to get so many on the platform. We
Speaker 3: invested a huge amount of capital into building this infrastructure,
Speaker 3: but once they come on the platform, it takes less
Speaker 3: than an hour. And there's a lot of changes in
Speaker 3: the industry now, and some of them are around advertising right,
Speaker 3: So that the retailers are leveraging their data and their
Speaker 3: audience to drive more advertising revenue, they're also leveraging it
Speaker 3: in data sharing programs. So you have the large Amazons
Speaker 3: of the world, but you also have like a Walmart,
Speaker 3: for instance, that have incredible bottom line money now from advertising,
Speaker 3: and they also have a different program which is called
Speaker 3: Illuminate where they actively share the data out with their suppliers.
Speaker 3: So we help in that interface. How do we get
Speaker 3: all of that data out of Walmart and Illuminate and
Speaker 3: into all of the different systems that and a brand have.
Speaker 3: You might have cloud systems that have procurement systems, they
Speaker 3: have sales systems and all of that, and then we
Speaker 3: want to have one view of data across all the
Speaker 3: different places that they don't need the data.
Speaker 4: So that's kind of a solution for when there might
Speaker 4: be an undersupply of inventory for a product that's about
Speaker 4: to get a big marketing push. But what about access inventory?
Speaker 4: We saw that coming up a lot during the earning
Speaker 4: cycle last season, particularly with names like Target. How does
Speaker 4: your tool help these retailers with that?
Speaker 3: Yes, so they calculate based upon sales velocity, so they
Speaker 3: understand how much each store is selling this particular product,
Speaker 3: understand pricing, and then understand how much inventory actually sits
Speaker 3: out in the different stores, and how much inventory sits
Speaker 3: in the distribution centers that support the stores. So with
Speaker 3: all of that kind of real time information of consumer
Speaker 3: behavior because we see every day kind of what's happening
Speaker 3: in the stores, now they have an ability to do
Speaker 3: much better forecasts of how much products they actually going
Speaker 3: to need. And before it was much more reactive because
Speaker 3: it was based upon a purchase order that would come out.
Speaker 3: But now actually the suppliers and the brands have an
Speaker 3: opportunity to kind of see what's going on and then
Speaker 3: produce the right thing because it takes a while to
Speaker 3: produce these products. And that's I think what you're alluding
Speaker 3: to you to is you saw this huge build up
Speaker 3: in inventory because it takes you you pushed about in today,
Speaker 3: it going to take three months for this product to
Speaker 3: actually arrive. So being ahead of that is kind of
Speaker 3: what the tool helps with.
Speaker 2: Talk to us about this startup credit crunch, because we're
Speaker 2: coming off a few months ago. Obviously all of the
Speaker 2: drama that went on with these regional banks with SVB
Speaker 2: I was curious do you have exposure towards any sort
Speaker 2: of those banks that were in California and how you
Speaker 2: view that whole city.
Speaker 3: Oh, that's a good, big, big shift over to So
Speaker 3: that makes me very stressed. Right now. I can bring
Speaker 3: up my SVB card that didn't work for a couple
Speaker 3: of for a couple of days, but now I feel
Speaker 3: actually very good and comfortable around it with what the
Speaker 3: government there to help the banks, as that prevented a
Speaker 3: big crisis. I think for startups. I actually took the
Speaker 3: plastic of the televisions for as we've be and then
Speaker 3: moved into New York twenty years ago Sabina for a
Speaker 3: very long time and kind of seeing how that changed
Speaker 3: so quickly. But I also there's a lot of other
Speaker 3: banks that are coming into the space and seeing that
Speaker 3: there's a great opportunity in this area. Plus as will be,
Speaker 3: it's actually continuing operations very well under new ownership.
Speaker 2: Do you see sort of red flags brewing up kind
Speaker 2: of more broadly with startups at this point?
Speaker 3: You know, I think, yes, I'm doing this for twenty
Speaker 3: five years. It always goes in these huge waves of
Speaker 3: way too much money that comes into the space, and
Speaker 3: that drives valuations up and everything, and now the pendulum
Speaker 3: is certainly on the other side of that. And I
Speaker 3: liked this period more because it actually reads out a
Speaker 3: lot of the non real type of startups. So I
Speaker 3: believe if you solve big problems for big companies then
Speaker 3: and drive high ROI now this is something that's very
Speaker 3: investable and exciting for investors to be a part of.
Speaker 3: So so like I love the love both faces in
Speaker 3: a way, but I like this face a little bit
Speaker 3: more than the frothy face.
Speaker 2: Well's great getting your perspective on all things when it
Speaker 2: comes to startups, but then also what your startup has
Speaker 2: been doing. So it's Ari Trossdale, founder in chief executive
Speaker 2: officer at CHRISP joining us in studio with Madison Mills
Speaker 2: and myself. So great getting your perspective on all of this.
Speaker 4: Yeah, really interesting to think about how startup funding and
Speaker 4: credit tightening is kind of impacting what we're going to
Speaker 4: be seeing down the pipeline, and of course getting to
Speaker 4: check on the retail space as well. Jess, this is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 4: All right, So, in terms of needing some help here,
Speaker 4: I feel like I'm the one who needs help sussing
Speaker 4: out the market moves today, because obviously this Fitch downgrade
Speaker 4: is a huge move, but it seems like the Treasury
Speaker 4: Department is the real driver on the day because when
Speaker 4: it comes to that Pitch downgrading, it feels like traders
Speaker 4: don't really care, economists doubting the credibility of the move.
Speaker 4: So here to make sense of the day's trade for
Speaker 4: us is Elena Pappina from Bloomberg's equities team, and our
Speaker 4: chief economists Anamon joining us from DC. Elena, I want
Speaker 4: to start with you. Thank you so much for coming on.
Speaker 4: It's great to have you here. From the perspective of
Speaker 4: the market's reaction, would you say the Fitch rating is
Speaker 4: kind of a non event today?
Speaker 5: It was a non event yesterday after the well when
Speaker 5: the decision broke and the futures who are on the
Speaker 5: spy ETF we're down about zero point ten percent, so
Speaker 5: it wasn't a big reaction then today. Earlier today when
Speaker 5: you know, we got the announcement about the Treasury Department
Speaker 5: increasing the auction size. That's when the decision actually became
Speaker 5: a much bigger impact on the stock market. So we
Speaker 5: are now more than down more than one percent on
Speaker 5: the S ANDV five hundred. Not an unusual move, but
Speaker 5: it is getting some of the bestors worried about whether
Speaker 5: there is more to come.
Speaker 2: I want to bring Anna into this conversation because do
Speaker 2: you think that this move was actually warranted by Fitch?
Speaker 6: Yeah, so I think the substance of it, which is
Speaker 6: the fiscal trajectory of the US government balanty, is warranted
Speaker 6: because part of it is that, you know, just three
Speaker 6: weeks ago, the US Treasury released the year to date
Speaker 6: a picture of fiscal deficit, and actually it surprised many
Speaker 6: people by how we looked for that. In fact, the
Speaker 6: deficit for twenty twenty three is expected to be much
Speaker 6: larger than last year, partly because of weaker receipts. That
Speaker 6: was I think one perhaps one piece of information that
Speaker 6: Fitch was waiting after the debt feeling was resolved in
Speaker 6: thinking you should be down road or not so because
Speaker 6: this year fiscal deficit for you as is expected to
Speaker 6: surge to five point seven percent, and then on the
Speaker 6: longer term, the fiscal picture also doesn't look good. We
Speaker 6: forecast that twenty thirty three fiscal deficit, the debt to
Speaker 6: GDP ratio would be over one hundred and thirty percent
Speaker 6: of GDP. So yeah, on that ground, I think the
Speaker 6: decision was warranted.
Speaker 4: Well, and I want to stick with you for a second,
Speaker 4: because we are obviously seeing some comparisons to twelve years ago. Today,
Speaker 4: a lot of people saying that it's a completely different situation.
Speaker 4: Can you tell me exactly in your view how different
Speaker 4: the backdrop is today versus what we saw with the
Speaker 4: SMP rating downgrade in twenty eleven.
Speaker 6: Well, well, first of all, I would say that my
Speaker 6: view is different than the predominant view in the market
Speaker 6: that ultimately the market will shrug it off this downgrade.
Speaker 6: I do think there's a risk that ultimately the market
Speaker 6: won't shut shrug it off and we'll be having a
Speaker 6: repeat of twenty eleven. So I think most people think
Speaker 6: that it's different than twenty eleven because back then we
Speaker 6: still have the European debt sovereign sovereign debt crisis, and
Speaker 6: today we have no well, we actually today we still
Speaker 6: have a weakening global economic backdrop. Germany is looking like
Speaker 6: they're in recession, China is fueling hard lending scares, and
Speaker 6: US also is actually not as strong as many people.
Speaker 6: I think that's the reason Number one. Number two is,
Speaker 6: you know, back in and right now, when we look
Speaker 6: at the US, you know, various asset market like fix
Speaker 6: equities market, there's just this sort of complacency, and people
Speaker 6: have been ignoring negative data, negative data surprises in the
Speaker 6: last couple of months, and I feel like people are
Speaker 6: kind of well just so in love with that soft
Speaker 6: lending narrative that they I think markets are actually due
Speaker 6: for some kind of correction. So in that sense, I
Speaker 6: think we're pretty vulnerable at the stage.
Speaker 2: So Elena, with that said, and looking at the Nasdaq
Speaker 2: one hundred up i mean forty percent this year, and
Speaker 2: then the S and P five hundred also up double digits,
Speaker 2: it's an excuse to take some profits.
Speaker 5: It actually can be a lot of traders have been
Speaker 5: telling me that there hasn't been a catalyst to sell.
Speaker 5: We did know that no position became overextended, it was
Speaker 5: time for it. Whether it now comes to the catalyst
Speaker 5: now the bigger question is is it going to be
Speaker 5: a five percent correction? Is it going to be just
Speaker 5: a by the deep situation with the stocks rally tomorrow
Speaker 5: and into the weekend. So that is the big unknown.
Speaker 5: And I want to talk about earnings because earnings have
Speaker 5: been a big supporter to the S and P five
Speaker 5: hundred rally over the first quarter and earlier over the
Speaker 5: second quarter results. We do expect to see Apple and
Speaker 5: Amazon reporting tomorrow, so that can be a potential catalyst.
Speaker 5: You know, if they do report disappointing earnings, that trail expectations,
Speaker 5: so that could be a catalyst for a much bigger
Speaker 5: and potentially a more prolonged sell off.
Speaker 2: What does positioning tell us at this point as far
Speaker 2: as who could potentially be selling if we're talking about
Speaker 2: hedge funds, too early to really tell that versus retail investors.
Speaker 5: That's a great question, but we don't know yet. We
Speaker 5: do know that retail investors have been buying into last week,
Speaker 5: So last week was the first one when they were
Speaker 5: net sellers of equities. You know, whether that's a smart
Speaker 5: move considering today's route is yet to be seen. But yeah,
Speaker 5: they kind of paired back their appetite after jumping in
Speaker 5: earlier in May and earlier in June. So if hedge
Speaker 5: funds decide to become big sellers, you know that that
Speaker 5: may be an interesting story for sure.
Speaker 4: And bringing you back in here, I'm curious is about
Speaker 4: how you're viewing the move from Fitch from an economics perspective, because,
Speaker 4: as you noted, we're hearing a lot of pushback today,
Speaker 4: Jamie Diamond coming out against the move as well. Does
Speaker 4: this hurt their credibility and does that matter?
Speaker 6: Well? I think Fitch is kind of bringing reality back
Speaker 6: to everybody. I think, of course, from Jamie Diamond's perspective
Speaker 6: of market rally is great for Jamie Morgan, right, But
Speaker 6: but I think, as I was saying before, the market
Speaker 6: has been complacent in recent weeks because of this, you know,
Speaker 6: preveillance of the soft lending narrative and on a on
Speaker 6: on the eve of every recession in the past, you know,
Speaker 6: half a century, the soft lending narratives tends to dominate
Speaker 6: to and Fitch sorts of put the focus back on
Speaker 6: these ugly fiscal numbers. And I thought that one of
Speaker 6: the most interesting things that the Pitch down grade cost
Speaker 6: it is to notice is that the Treasury data showing
Speaker 6: the receipts and deficit that was released a couple of
Speaker 6: weeks ago, it shows that receipts was weaker than as weakening,
Speaker 6: and usually before a recession, receipts would weaken, and it's
Speaker 6: always case, and I think it does confirm our suspicion
Speaker 6: that maybe a lot of the activity data is overstating
Speaker 6: the strength in the economy.
Speaker 2: Something I'm curious about on a is whether or not
Speaker 2: when you're thinking about more market moving type reading agencies,
Speaker 2: whether it's Moody's or S and P, do you think
Speaker 2: we'd actually see downgrades like that from them.
Speaker 6: Well, SMP already downgraded back in twenty eleven and they
Speaker 6: never re upgraded the US. So right now two of
Speaker 6: three major rating agencies have taken away the US the
Speaker 6: Stellar rating, so it's just down to Moodies now.
Speaker 4: And on that, I guess, Elena, I want to ask
Speaker 4: you kind of what Anna was saying earlier. Anna mentioned
Speaker 4: that you think that the market slugging off this downgrade
Speaker 4: is not going to be the case in the coming weeks.
Speaker 4: Do you agree? Do you think that the market is
Speaker 4: going to start to have a more prolonged reaction to this.
Speaker 5: It's interesting that August and September traditionally seasonally the weakest
Speaker 5: months of the year going back the past thirty years,
Speaker 5: so there may be a reason for a bigger sell
Speaker 5: of just because of a confluence of factors.
Speaker 6: Right.
Speaker 5: Fich obviously was a big surprise for a lot of
Speaker 5: traders thinking that we're going to go to the moon.
Speaker 5: It's not the case, and the positioning looks extended on
Speaker 5: several fronts, and seasonality isn't adding confidence into the stock
Speaker 5: market trajector in the next couple of weeks. So there
Speaker 5: might be some choppiness in the next three to four
Speaker 5: weeks or maybe a couple of months.
Speaker 2: Even something I'm curio about anna is what or not
Speaker 2: this is a wake up call for Congress.
Speaker 6: Yeah, I think the debt ceiling fight back in June
Speaker 6: was a missed opportunity for the both sides addressed the
Speaker 6: real fiscal challenges, which is social security, healthcare. Right, I
Speaker 6: mean twenty years ago when al Gore was it twenty
Speaker 6: years ago, Yeah, twenty years ago when al Gore was
Speaker 6: debating George Bush as they were talking about reforming social
Speaker 6: security in lock box. Now, I don't hear that anymore
Speaker 6: in this presidential debate. I think those issues need to
Speaker 6: get back on the table, and I think when two
Speaker 6: of three major ratings agencies have downgraded the US, it
Speaker 6: certainly is a wake up call.
Speaker 4: What's the likelihood of this actually being a wake up call?
Speaker 7: Though?
Speaker 4: In our next twenty seconds, Anna, I.
Speaker 6: Don't Yeah, I'm not optimistic that it was truly.
Speaker 4: Wouldn't it be great if the big market moving, headline
Speaker 4: breaking news was in fact a wake up call for action?
Speaker 8: Anna?
Speaker 4: Thank you, thank you so much much for joining us
Speaker 4: and on our chief economists joining us from DC and
Speaker 4: Elena Papaina, Thank you so much. It was great to
Speaker 4: have you in studio with us.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 4: It is time for our Bloomberg Business Week segment. Joel
Speaker 4: Weber is in the house with us in our Bloomberg
Speaker 4: Interactive Broker's studio Joel, thank you so much for coming
Speaker 4: into Oh, you know, it's always a pleasure. It's always
Speaker 4: a pleasure. We're going to talk about Amazon as the
Speaker 4: next potential grocery.
Speaker 1: That's right.
Speaker 9: So Matt Day has a very interesting story in the
Speaker 9: issue forthcoming issue about kind of a reboot that's going
Speaker 9: to happen at Amazon. Obviously, Whole Food's part of that portfolio,
Speaker 9: but there's a lot of other things in that portfolio.
Speaker 9: That's how we're you know, the story basically goes through
Speaker 9: what Amazon's going to do about it.
Speaker 4: Incredible. So I think this is a great time for
Speaker 4: us to bring in Bloomberg technology reporter Matt Day, who's
Speaker 4: joining us on zoom here. Matt, thank you so much
Speaker 4: for joining us. I know you just heard Joel's intro,
Speaker 4: but tell us a little bit more about your story
Speaker 4: and what people.
Speaker 3: Need to know about it.
Speaker 7: So Amazon, over what's called it twenty years of experimenting
Speaker 7: in groceries. They have a mishmash of businesses, right. They
Speaker 7: have Amazon Fresh where they'll deliver you know, to your
Speaker 7: home fresh food. They've got a Whole Foods, which they
Speaker 7: bought us six years ago, and they've got Amazon Fresh.
Speaker 7: The brick and mortar store. There's forty four of those,
Speaker 7: and then Amazon pause when they were cutting costs about
Speaker 7: a year ago. They're trying to kind of meld those together.
Speaker 7: They're trying to expand kind of on all fronts. You know,
Speaker 7: Amazon basically took a hard look at it's grocery business
Speaker 7: that we still think we want to be here. We
Speaker 7: just need these pieces to kind of play nicer together.
Speaker 7: And so they've and that's a bunch of things that
Speaker 7: maybe that one the stopper is going to notice. First,
Speaker 7: you know, you don't have to be a Prime member
Speaker 7: to order groceries at Amazon anymore, at the first for them,
Speaker 7: since they started selling groceries online in two thousand and seven.
Speaker 7: Previously you always had to pay into Prime. Now, you know,
Speaker 7: it's just kind of a referral or at least some
Speaker 7: sort of some sort of fea gatekeep that. So they're
Speaker 7: really trying to alight a fire into this business after
Speaker 7: flailing for a few years.
Speaker 9: Why is why do this? Why do any of this?
Speaker 9: What's the problem that they're trying to solve?
Speaker 7: I mean the problem is sort of size and scale.
Speaker 7: You know, Amazon wants to be a big deal. Amazon
Speaker 7: wants to be a big retailer, and to be a
Speaker 7: big retailer, you have to sell food, right, to be
Speaker 7: a big retailer for certain size. That the Walmart formula.
Speaker 7: That's how they went from you know, very big superstore
Speaker 7: to the world's biggest retailer. So over the years, you know,
Speaker 7: we've we've heard tell of you know, Jeff Bezos back
Speaker 7: in the day saying, listen, we're not going to be
Speaker 7: one hundred million dollar business unless we sell groceries, right,
Speaker 7: unless you get that touch point with customers, and you know,
Speaker 7: you are the meat and dairy run that causes folks to, oh, hey,
Speaker 7: I'll you know, grab something else while i'm there.
Speaker 1: Right.
Speaker 7: Amazon's very cognizant of that fact that it's the most
Speaker 7: common shop people make, and if you want to, you know,
Speaker 7: be a big retailer's where you've got to be. They're
Speaker 7: recent learning, though, is that you also have to be
Speaker 7: there in person. Amazon learned, you know, kind of the
Speaker 7: hard way, during the pandemic and coming out of the
Speaker 7: pandemic that you need a physical point of presence to
Speaker 7: make a difference in grocery, which is not their comfort
Speaker 7: zone to say the least.
Speaker 9: It's interesting and a little jarring when you see this
Speaker 9: table in the story of the largest US grocery market
Speaker 9: by share Walmart number one, Kroger number two, Costco number three,
Speaker 9: Albertson's number four, and then you get to Amazon Whole Food.
Speaker 9: So obviously there's some big players there. There's a lot
Speaker 9: of ground that they have to make up to take
Speaker 9: on any of those. So, like, realistically, how far do
Speaker 9: they think they can go just by doing this modest reboot.
Speaker 7: I think it's going to take years, and their cognitiance
Speaker 7: fact that it's going to take years. Their new grocery boss,
Speaker 7: Tony Hoggitty told me, you know that they're starting to
Speaker 7: tout this line that you know, listen to all the
Speaker 7: grocers that are on that list. They've been around for
Speaker 7: fifty plus years. Right, we're just getting started. We think
Speaker 7: we're going to be in this for the long haul,
Speaker 7: you know. But analysts are pretty sober on this.
Speaker 2: Right.
Speaker 7: Amazon need hundreds more stores, probably if not thousands. Amazon
Speaker 7: needs to keep working on developing a supply chain in
Speaker 7: fresh food, right, Like the reason Amazon and Kroger can
Speaker 7: command such you know, good prices from the suppliers they've
Speaker 7: got stores everywhere, right, Amazon has none of that so far,
Speaker 7: and they're gonna have to really work hard to get
Speaker 7: those kind of economies of scale to become a big grocer.
Speaker 7: So the way they're setting this up is this is
Speaker 7: kind of a you know, decade or multi decade project.
Speaker 7: They're not going to figure this out, you know, next
Speaker 7: fall or anything. But you know, they say they're in
Speaker 7: it for the long haul.
Speaker 2: Talk to us about the frustrations that customers have gone
Speaker 2: through if you have to check out through three separate carts,
Speaker 2: and how that all kind of ties into this.
Speaker 7: Yeah, this is really messy for Amazon, but they you know,
Speaker 7: if you want to buy stuff from Whole Foods, you
Speaker 7: have a Whole Food's cart and a Whole Foods delivery
Speaker 7: that you're going to be on the hook for. If
Speaker 7: you want to buy stuff from Amazon Fresh, same deal.
Speaker 7: And then maybe most confusingly, you know, you can buy
Speaker 7: some kind of canned goods and pet food and other
Speaker 7: things you might find in the grocery market just on
Speaker 7: regular old Amazon dot Com that has yet another delivery.
Speaker 7: So Amazon realizes that just doesn't line up at all
Speaker 7: to the way people shop today, and so they've said,
Speaker 7: you know, either later this year early next. They're fuzzy
Speaker 7: in the timeline, but they're going to smush all those
Speaker 7: together there. So you've got one cart one you know, ideally,
Speaker 7: one check out experience in one one delivery afterward to
Speaker 7: get everything you need and make Amazon really one stop
Speaker 7: shop rather than you know, the kind of the current hodgepodge.
Speaker 9: So does that mean that if I go get organic
Speaker 9: groceries at Whole Foods, I can put a coke and
Speaker 9: a bag of Rito's in that same cart?
Speaker 7: Hypathetically you can, and not only that, but they're going
Speaker 7: to let you actually get that in the roof of
Speaker 7: Whole Foods, which is a first.
Speaker 3: People.
Speaker 9: Right, there's some Whole food fans out there that just
Speaker 9: like they knew it was coming, man, they knew it was.
Speaker 7: Coming, and that was I'm trying to have it both
Speaker 7: ways a little bit, you know. There. You can get
Speaker 7: your you know, your your young food at Whole Foods,
Speaker 7: but it's going to be you know, not on the shelf, right,
Speaker 7: it's gonna be some sort of click and collect type
Speaker 7: deal where you know, listen, you know, you know, Joey,
Speaker 7: you got to get your organics at the end of
Speaker 7: the day, you order a head and you know you'll
Speaker 7: get your tide pods or coke or whatever with it.
Speaker 9: When I need Drito's, I just go to the sixth
Speaker 9: floor here at Bloomberg to be clear.
Speaker 2: But stuck a confession.
Speaker 4: No, but it's a great point. And you talk about
Speaker 4: this obviously in the story Matt, that Amazon has a
Speaker 4: thirteen percent markup on the online purchasing. It's just not
Speaker 4: the same price point as in Walmart. So what are
Speaker 4: they going to do about that?
Speaker 7: They're going to try to get scale and try to
Speaker 7: drive lower prices. Amazon when they bought into this business,
Speaker 7: you know, they had an organic supply chain, your door
Speaker 7: Whole Foods. They had, you know, a set of suppliers
Speaker 7: that really aren't the same folks as are filling the
Speaker 7: shelves on Kroger and on Walmart. So they're just trying
Speaker 7: to get scale and negotiate a better deal. But I
Speaker 7: think they're also you know, they try to stay close
Speaker 7: to Walmart, especially on online pricing. But you know, when
Speaker 7: it comes to the physical Amazon Press stores they're rolling
Speaker 7: out the kind of aim seems to be undercutting the
Speaker 7: conventional grocers, right, undercutting your Kroger, undercutting Albertson's, but maybe
Speaker 7: coming in a little bit above the real big disc
Speaker 7: owners like a wal Mart or and all the there
Speaker 7: are Dollar General speaking of things that are growing like crazy.
Speaker 9: Okay, so does that mean then that the physical presence
Speaker 9: is going to grow dramatically of what we see from
Speaker 9: Whole Foods in Amazon.
Speaker 7: If it works, they are rolling out a new version
Speaker 7: of the fresh stores that they think are going to
Speaker 7: be more inviting and draw more people in. It's less
Speaker 7: tech heavy, it's more you know, traditional retail stuff, right,
Speaker 7: holiday promotions and sales and stuff like that. If that
Speaker 7: goes to plan, they have hinted they're going to expand,
Speaker 7: but they haven't. They haven't rolled out anything formal, but
Speaker 7: you know, they've made clear that they want to take
Speaker 7: this nationwide and they want to take it bigger from here.
Speaker 4: All right, Thank you so much for joining us. Matt Day,
Speaker 4: Bloomberg News reporter, and of course we have our Bloomberg
Speaker 4: Business Week editor Joel Weber joining us here in studio.
Speaker 4: Thank you both so much. You can find Matt's story
Speaker 4: on the terminal or online. Amazon kicks off biggest grocery
Speaker 4: rebrouots since buying Whole Foods. This is Bloomberg.
Speaker 1: Go a journal?
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Speaker 2: Jessminton and Madison Mills here in the Bloomberg Interactive Brokers
Speaker 2: studio on a day where you're looking at the S
Speaker 2: and P five hundred on pace for its worst day
Speaker 2: in a few months here, and who better to come
Speaker 2: in and chat with us as we only have a
Speaker 2: little less than twenty minutes before the closing bell the
Speaker 2: Nancy Prile, who's co chief executive officer and senior portfolio
Speaker 2: manager as Essex Investment Management on Zoom from Chicago. Nancy,
Speaker 2: thank you so much for joining Maddie and myself on
Speaker 2: what a day in the market's here? And I want
Speaker 2: to start off with just what's your when it comes
Speaker 2: to the broader stock market reaction on the heels of
Speaker 2: obviously a confluence of a lot of events when you have,
Speaker 2: say this Fitch downgrade, but you're also seeing a lot
Speaker 2: of activity with these Treasury issuance in the bond market
Speaker 2: that obviously has made some big moves there in bond yields.
Speaker 8: We think that this move is really the pause that
Speaker 8: we needed. If you think about where we've come from
Speaker 8: this year. In the beginning of the year, almost everybody
Speaker 8: was very bearish, still worried about inflation, worried about an
Speaker 8: imminent recession, or maybe not so imminent recession, but a
Speaker 8: recession nonetheless. And as the market's gone on, as we've
Speaker 8: gotten excited about generative AI, as we've gotten excited about
Speaker 8: the big cap stalwart tech companies, complacency has started to build,
Speaker 8: and we've seen recently a crumbling of many of the
Speaker 8: bears who have been pivoting to bullish sentiment. We've seen massive,
Speaker 8: massive short covering by hedge funds. We've seen money flowing
Speaker 8: into the market, both from institutions but very important from individuals,
Speaker 8: and that's led us to a little bit of an
Speaker 8: over bought position where even though the earnings have been
Speaker 8: very good, in fact better than expected, and even though
Speaker 8: the economy is proving to be resilient, expectations were just
Speaker 8: a little ahead of themselves. We think that the Fitch
Speaker 8: down Braide was the trigger that gave the book, that
Speaker 8: gave people who are getting a little bit cautious about
Speaker 8: this complacency the excuse to do a little bit of selling.
Speaker 8: But we think this is still very orderly and it's
Speaker 8: nothing more than a mid course correction.
Speaker 4: Is today kind of the perfect example of why we
Speaker 4: need to continue to worry about narrowness in a rally,
Speaker 4: specifically speaking about the Magnificent seven kind of bringing up
Speaker 4: markets so strongly when you have a day where bonds
Speaker 4: might be weighing on those big tech names, Yeah, well.
Speaker 8: I mean I would say today the weakness is weighing
Speaker 8: on almost everything. It's a pretty broad based sell off,
Speaker 8: hitting both large caps, small cap, growth value, et cetera. However,
Speaker 8: you're making a really good point, which is, with a
Speaker 8: market that has been led by such a small sector
Speaker 8: of the market, and particularly by such a small number
Speaker 8: of names, that it's important not to over invest in
Speaker 8: those well recognized growth areas only, but to have a
Speaker 8: more diversified portfolio and to look where the strength is emerging.
Speaker 8: And what we have seen over the last couple of
Speaker 8: months is that the market is broadening, that strength is broadening.
Speaker 8: More sectors are participating, and really importantly, more market caps
Speaker 8: are participating. We've seen some strength building in those small
Speaker 8: and mid cap areas that we had not seen earlier
Speaker 8: in the year. Those are still very attractively valued, particularly
Speaker 8: compared to their larger cap peers.
Speaker 2: So how are you positioning then, Did you make any
Speaker 2: changes today with your portfolio positioning?
Speaker 8: Well, we are not short term traders. We are long
Speaker 8: term investors. So although we do have some open orders,
Speaker 8: as we all always do, it's not really driven by
Speaker 8: today's action per se. What we have been doing, though,
Speaker 8: and we've been doing this all year, is focusing on
Speaker 8: those areas that we believe will drive economic growth and
Speaker 8: drive that growth in a way that's better than expected,
Speaker 8: not just this year but really over the next couple
Speaker 8: of years. To us, that means a big focus on industrials,
Speaker 8: on restoring and manufacturing, reindustrialization of the United States and
Speaker 8: the world, infrastructure spending, the transition and energy and of
Speaker 8: the economy to a more electrified economy. So really building
Speaker 8: exposure in those areas and taking selective profits in those
Speaker 8: companies in those areas that maybe have gotten a little
Speaker 8: ahead of themselves. So taking our profits on stocks that
Speaker 8: are up fifty sixty eighty percent year to date.
Speaker 4: What's your thinking then, on which of those stocks you
Speaker 4: need to stay in for a second half of your
Speaker 4: rally versus the ones that you feel comfortable getting out of.
Speaker 8: We think that the second half of the year will
Speaker 8: be led more down market cap, and we think it
Speaker 8: will be led more by companies. I would kind of
Speaker 8: agorize them as GARB companies growth at a reasonable price,
Speaker 8: rather than deep value companies. We think that the economy
Speaker 8: is likely to stay sluggish but hopefully positive. We think,
Speaker 8: I mean, what we've been saying all year, and we're
Speaker 8: not changing our tune here is that it's going to
Speaker 8: be a bumpy landing. So at times it may feel
Speaker 8: like we're going into a mild recession. At times it
Speaker 8: may feel like we're not. But that means you don't
Speaker 8: want to go deep value, but you want to focus
Speaker 8: on those areas where they have tailwinds on economic growth.
Speaker 8: To us, that means areas like environmental sustainability. So the
Speaker 8: companies that are doing traditional environmental management. You can think
Speaker 8: about landfills, you can think about incinerators, you can think
Speaker 8: about waste clean up. We also want to focus on
Speaker 8: this transition to this electric economy. We want to think
Speaker 8: about the companies that are laying the groundwork for generative AI.
Speaker 8: Now we all know about Nvidia, but there are a
Speaker 8: lot of other companies that are below the radar screen
Speaker 8: that are also benefiting from the build out of these
Speaker 8: data centers. We again want to think about the restoring
Speaker 8: of manufacturers, maybe semiconductor manufacturing equipment, factory automation equipment, those
Speaker 8: kinds of names that are selling it multiples that are
Speaker 8: less than twenty times, with earnings that are coming in
Speaker 8: better than expected, and revenue growth rates where they're seeing
Speaker 8: unit growth and not just pricing growth.
Speaker 2: We still have about a little under two months before
Speaker 2: the fed's next rate decision, and but we do have
Speaker 2: Jacksonville at the end of this month. What's your view
Speaker 2: on the fed's re hiking cycle and do you think
Speaker 2: they are done.
Speaker 8: Well? I think they are, in fact data dependent. It
Speaker 8: doesn't feel like that all the time. But I thought
Speaker 8: from Chair Powell's last comments when he spoke what was
Speaker 8: it a week ago or maybe a week and a
Speaker 8: half ago, and he talked about the fact that they
Speaker 8: need to recognize the direction of inflation and not wait
Speaker 8: until we reach the target. And that's really the first
Speaker 8: time I've heard him say that, certainly at least in
Speaker 8: a long time. So what he said explicitly was that
Speaker 8: they will need to pause before we get to two percent.
Speaker 8: They will need to cut before we get to two percent.
Speaker 8: We just need to see clear indications, clear evidence that
Speaker 8: we're on the way there. Our best guess is that
Speaker 8: they won't actually say very much at Jackson Hole, that
Speaker 8: they will keep things somewhat close to the best, waiting
Speaker 8: to see the data that comes out between now and September.
Speaker 8: The data so far has indicated that inflation will continue
Speaker 8: to moderate, and therefore they could continue to pause. My
Speaker 8: one hesitation there is that we are seeing some increases
Speaker 8: in oil and in food, driven mostly by what's going
Speaker 8: on in Ukraine and Russia on food side with wheat,
Speaker 8: and that might muddy the waters a little bit in
Speaker 8: the short run. So we could see one more twenty five.
Speaker 2: All right, Nancy, thanks so much for joining us. Nancy Prey,
Speaker 2: co CEO and senior portfolio manager at Essex Investment Management,
Speaker 2: giving her perspective here on the markets on a big
Speaker 2: down day.
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