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: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: All right, so let's talk about retail if we may,
Speaker 2: because investors like in some of the results, not so
Speaker 2: much Macy cutting its outlook, demand trends worsening, but the
Speaker 2: stock rallying after initial drop. This morning, we've got Nordstrum
Speaker 2: shares jumping better than expected quarterly results, and Matt we
Speaker 2: have Dollars General stock plunging. It slashed its annual profit forecast,
Speaker 2: citing rising economic pressures on its shoppers, which always gets
Speaker 2: me worried because that's the low end of retail.
Speaker 3: Right, I mean, I was just going to say, that's
Speaker 3: a wide range, right, completely different shoppers I would imagine
Speaker 3: completely at Macy's or Nordstrums than Dollar General. On the
Speaker 3: other hand, Nordstrum is seemingly doing better because of their discount,
Speaker 3: and I don't know how cheap it is actually at
Speaker 3: the I imagine Nords from RACA is still pretty expensive, right.
Speaker 2: Yeah, it's so cheaper, and but I will say that
Speaker 2: they've been going through a lot of stuff, right, They've
Speaker 2: been having some difficulties, so you know they've they've been
Speaker 2: beaten up for a while. But yes, it's not inexpensive,
Speaker 2: but that's where you go for bargains anyway. Someone who
Speaker 2: really knows what's going on is Mary Ross Gilbert. She's
Speaker 2: senior retail analyst at Bloomberg Intelligence and she joins us
Speaker 2: on Zoom from Los Angeles. Hey, Mary, nice to check
Speaker 2: in with you. So a bunch of you know, retailers
Speaker 2: reporting kind of wrapping up the retail earning season or
Speaker 2: getting close to it. Let's start with Macy's, which I
Speaker 2: still feel like Lisa Bromwooz hit it right on the
Speaker 2: nose earlier today. I think Macy's is still trying to
Speaker 2: figure out what they want to be.
Speaker 4: Well, you know, that's interesting that you say that, because
Speaker 4: when I think about what's happening at Macy's, I'm really
Speaker 4: seeing an improvement in the overall execution of the business.
Speaker 4: But I think as you started to talk about the
Speaker 4: differences in the consumer, you spoke about dollar General, where
Speaker 4: the consumer there's getting really hit and there at the
Speaker 4: low end. So if you look at Macy's, their core
Speaker 4: customer is earning somewhere around under seventy five thousand a year.
Speaker 4: And so that's where you're seeing the real hit on
Speaker 4: the Macy's side. Now on the Nordstrom side, and you
Speaker 4: brought up Nordstrom and then Nordstrom rack and you sort
Speaker 4: of wondered, well, hey, are they a little bit higher end?
Speaker 4: And the answer is yes. So the average consumer household
Speaker 4: income for the rack is one hundred thousand.
Speaker 5: Where is it.
Speaker 4: At Nordstrom the banner It's actually over one hundred and
Speaker 4: fifty thousand, So you can see that there is a
Speaker 4: difference there the higher end.
Speaker 3: So they're in Nordstrom the head the headlines door, it's
Speaker 3: one hundred and fifty thousand. That's the average household in
Speaker 3: for and had the rack, it's one hundred grand, and
Speaker 3: at Macy's it's seventy five.
Speaker 5: Is that right?
Speaker 6: Yeah, that's for their for their core customers.
Speaker 3: I always think of Macy's as really fancier because Bloomingdale's
Speaker 3: is across the street from us, right, and Bloomingdale's is Bloomingdale's.
Speaker 4: Because I was speaking specifically about the Macy's banner, So
Speaker 4: Bloomingdale's the banner is going to be akin to Nordstrum,
Speaker 4: and in some cases, I feel like it's higher end
Speaker 4: because they have that designer element within Nordstrom that really
Speaker 4: crosses over well with Bloomingdale. So I would say that
Speaker 4: their customer base is very similar.
Speaker 2: So why do you think Macy's sold off? I know
Speaker 2: why they sold off initially, and then why do you
Speaker 2: think they rallied? Is it just the market bounce? I
Speaker 2: found that hard to believe because it was a pretty
Speaker 2: substantial low. I think it was down about five six
Speaker 2: percent at its lows today.
Speaker 4: Yeah, it really was. I mean, it's hard for me
Speaker 4: to know exactly what's going and you know, going on
Speaker 4: in terms of the stock movement. If I had to
Speaker 4: venture a guest, I'd say part of it could be
Speaker 4: shortcovering thinking that, you know, maybe this is the end
Speaker 4: of the bad news, especially since Macy's came out dramatically
Speaker 4: cut their guidance for the year, and I think they
Speaker 4: did it to really leave room for upside, especially in
Speaker 4: the second half, to outperform in the second half. So
Speaker 4: I really think that that was sort of the key
Speaker 4: element there.
Speaker 5: It was.
Speaker 3: I mean, to me, a little bit concerning to read
Speaker 3: what Jeannette said, and I think I wrote it down
Speaker 3: to myself somewhere around here.
Speaker 5: He said, you know, last year.
Speaker 3: They had even expected a downturn in twenty twenty three,
Speaker 3: but this year it was worse than or this month
Speaker 3: they realized it was even worse than expected.
Speaker 5: Let me get the direct quote.
Speaker 3: We planned the year assuming that the economic health of
Speaker 3: the consumer would be challenged. But starting in late March,
Speaker 3: demand trends weakened further in our discretionary categories.
Speaker 5: So it's even worse than they thought.
Speaker 6: Yes, it was even worse than they thought.
Speaker 4: So it was more Remember it was more dramatic at
Speaker 4: the Macy's banner, less so at Bloomingdale's, right, because the
Speaker 4: Macy's banner was down like seven point eight percent something
Speaker 4: like that on a comp sales basis, whereas the Bloomingdale's
Speaker 4: banner was down four point three. And then their beauty,
Speaker 4: their high end beauty banner, which is called Blue Mercury,
Speaker 4: was actually at four point three in the quarter. But
Speaker 4: I think there's another key point here, and that is
Speaker 4: they definitely saw an effect with weather and really where
Speaker 4: they saw the weakness in the categories was around sort
Speaker 4: of spring and summer merchandise, and what happened is is
Speaker 4: they've had to take a hit on that discount that
Speaker 4: and move it out, and they're very good at doing that.
Speaker 4: So Q two is really going to have the negative
Speaker 4: effect of that markdown Act activity. But when I walked
Speaker 4: through the stores, I was just there on Tuesday, walking
Speaker 4: through the stores, and they look very clean, meaning a
Speaker 4: lot of fresh merchandise in there.
Speaker 6: They're beautiful.
Speaker 4: They're continuing to upgrade their flagship stores. So when you
Speaker 4: start to walk into a Macy's now, it's starting to
Speaker 4: look more and more elevated, almost like especially the beauty department,
Speaker 4: almost like walking into a Bloomingdale's or a Nordstrum type environment.
Speaker 6: That's where they missing an idea of what are you doing?
Speaker 2: That's where they're making money. I feel like perfumes and
Speaker 2: makeup right in terms of margins, what I'm just the one.
Speaker 3: I try and get through and out of that floor
Speaker 3: as quickly as I can. Everybody's spraying you. They all
Speaker 3: want to talk. It's like a stop and chat thing.
Speaker 3: Get away from me.
Speaker 4: It really is, So let's talk.
Speaker 5: Go ahead.
Speaker 6: It's an important category.
Speaker 4: You mentioned, it's thirty percent of their sales you know
Speaker 4: around this time of year, but come in the holidays
Speaker 4: it's forty percent. So it is it is big.
Speaker 7: All right?
Speaker 2: Dollar General. Oh, their spectrum stocks down about nineteen percent,
Speaker 2: so it's pretty much hovering near its lows the session.
Speaker 2: It's down a lot this year. I'm just looking at
Speaker 2: what it is. It's down almost thirty four percent here
Speaker 2: in twenty twenty three. So, Mary, how do you see that.
Speaker 2: Is it a case that people are trading up so
Speaker 2: they're not shopping there, or is it something more substantial
Speaker 2: and not a good sign, certainly for shoppers at the
Speaker 2: lower end of the economic spectrum.
Speaker 4: Okay, well, not to talk over our expert on Dollar General,
Speaker 4: which is Jen Bartashus, but just knowing what's going on
Speaker 4: with the lower end consumer, you know, they're having to
Speaker 4: cut back on discretionary and that's really what you're seeing
Speaker 4: there on the Dollar General channel.
Speaker 5: Yeah.
Speaker 3: I just was looking at a chart from Torsten Slock
Speaker 3: also who's the chief economist at Apollo Global Management, and
Speaker 3: it shows that credit card delinquency rates are moving higher.
Speaker 3: This has got to be a concern, especially at the
Speaker 3: lower end, if they don't have money packed away like
Speaker 3: you know, wealthier consumers.
Speaker 6: That's exactly right.
Speaker 4: One interesting point and that is that employment still remain strong,
Speaker 4: so I think there is going to be some resilience there.
Speaker 4: It's just that there's not a lot left with inflation
Speaker 4: and food and energy and so you know, that's where
Speaker 4: they have to be very careful in their spend. So
Speaker 4: I think we're going to continue to see some choppiness,
Speaker 4: you know, across the board with retail, which is what
Speaker 4: we'll see where we might have a strong weak month
Speaker 4: here or there, and then all of a sudden, you know,
Speaker 4: after that, we'll see some weakness. So yeah, I think
Speaker 4: there's going to continue to be some choppiness, but there
Speaker 4: is to a certain extent some resilience. But also remember
Speaker 4: that in the first quarter we're going against some very
Speaker 4: you know, strong figures last year, so the comparisons are
Speaker 4: are really tough right now. They get so much easier
Speaker 4: in the second half, and that's where things could look
Speaker 4: a little bit better.
Speaker 2: All right, we got to run Hey, Mary, thank you
Speaker 2: so much. Mary Ross Gilbert, Senior Retail Alice at Bloomberg
Speaker 2: Intelligence on Zoom from LA you know, Victoria's secret.
Speaker 5: How did we miss that?
Speaker 2: With you in the studio, Carol.
Speaker 3: There used to be a Victoria Secret right across the street.
Speaker 3: I remember I went over there and got you some
Speaker 3: stuff at one point.
Speaker 2: It's a little it's a little Santa hat. I remember,
Speaker 2: it's a Santa Claus hat. Stockstown nine percent was down
Speaker 2: about fifteen percent, some disappointment over their results. So how
Speaker 2: did we miss this one?
Speaker 5: I don't know. I kind of ignore that kind of stuff.
Speaker 3: Ever since Cant canceled Culture Pop, I've stayed away from
Speaker 3: Victoria's Secrets.
Speaker 5: I never go to the fashion show anymore.
Speaker 2: He's a little nervous. I do remember that piece as well.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: Live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the iHeartRadio app and the Bloomberg Business App,
Speaker 1: or watch us live on YouTube.
Speaker 2: You remember, well, maybe you don't, but we know. We
Speaker 2: talk about the cost of healthcare a lot. We talked
Speaker 2: about inflation generally. Healthcare certainly plays into it. What I know,
Speaker 2: I'll tell you yesterday.
Speaker 3: Was hit by a truck one time in New York
Speaker 3: and I had to go to the hospital for like
Speaker 3: a month and had five surgeries, and I was messed
Speaker 3: up the whole time, and I had to deal with
Speaker 3: these bills. I had no idea you know what, I
Speaker 3: had to pay, and I didn't have to pay. I
Speaker 3: had to deal with the insurance company. They didn't really
Speaker 3: like voluntarily help me.
Speaker 5: So it's like, did you don't have did it just
Speaker 5: pay for everything?
Speaker 3: No, it ended up costing me a ton, I mean
Speaker 3: tens of thousands of dollars. And by the way, what
Speaker 3: insurance paid for like was over a quarter of a
Speaker 3: million bucks for that, it is so expensive in this country.
Speaker 5: Having lived in Germany for the past.
Speaker 2: Few years, very different stories, it's.
Speaker 5: A very different story.
Speaker 2: Well, what's interesting we hear a lot of stories we
Speaker 2: want to bring in our guests because we talk a
Speaker 2: lot about the spending that we do here in the
Speaker 2: United States on medical care healthcare, and yet sometimes the
Speaker 2: outcomes are not on par in a positive way when
Speaker 2: you compare the spending and other developed countries. So let's
Speaker 2: get to it with Gbi. She is Professor of Health
Speaker 2: Policy and Management at the Johns Hopkins Bloomberg School of
Speaker 2: Public Health, supported by Michael Ura Bloomberg, founder of Bloomberg
Speaker 2: LP and Bloomberg Philanthropy. She's on Zoom in Washington, DZ. Gee,
Speaker 2: it is nice to have you here with us. Matt's
Speaker 2: not wrong. I mean sometimes I look at a bill
Speaker 2: and I'm like, oh my god, it was emergency visit,
Speaker 2: you know, and didn't have any other choice but to
Speaker 2: go there because it was midnight.
Speaker 5: It's outrageously expensive. Why is outrageous?
Speaker 2: Why is it so expensive in the United States?
Speaker 6: Yes, thank you.
Speaker 8: My reason for the high price is that there's no
Speaker 8: price information available to patient consumers, so they're plandfolded and
Speaker 8: can now do comparison shopping. The providers have no price
Speaker 8: competition and no incentive to lower their price.
Speaker 2: But how do you do price competition in medical care?
Speaker 2: Like is there is there like a travelocity or something.
Speaker 3: Yeah, because I have to say, Gee, as I said,
Speaker 3: I lived in Germany for the past six years. There
Speaker 3: no one, No one showed me a price before I
Speaker 3: had any kind of treatment. There was no price comparison there,
Speaker 3: but prices were significantly lower for care that was, if
Speaker 3: not as good, better than in the US.
Speaker 8: Unfortunately, you know, we have a very different system in
Speaker 8: Germany's more public funded healthcare system. Here is more private funded.
Speaker 8: So if we don't have price competent competition, probably we're
Speaker 8: going to pay even much higher price.
Speaker 2: Well wait, so so what kind of price competition we
Speaker 2: do we have here? We don't right we right now?
Speaker 8: Yeah?
Speaker 2: Go ahead.
Speaker 8: Think about the direct pay like classic surgery or over
Speaker 8: the counterdrugs. We have price competition, that's why those services
Speaker 8: are very cheap. But for other services, you know, covered
Speaker 8: by insurance, non elective, yet we don't have price competition
Speaker 8: because we don't know the price.
Speaker 3: So is there anything that can be done to change this?
Speaker 3: Or have Americans just decided that we want to have
Speaker 3: the most expensive and not the highest quality healthcare in
Speaker 3: the world.
Speaker 8: You love that common demand, you know now the all
Speaker 8: Americans are putting the bill right through high out of
Speaker 8: pocket costs and the high premiums. The press. Competition always
Speaker 8: bring the best value for consumers, so house care is
Speaker 8: no exception. So I think the first step is price transparency.
Speaker 2: How do you do that? How do you do that?
Speaker 6: So right now we have so what is it?
Speaker 2: Yeah? Go ahead? How would it work?
Speaker 8: We have true regulations right now asking hospitals to post
Speaker 8: the price for all their services, and insurance companies do
Speaker 8: the same.
Speaker 6: So it's just a start.
Speaker 8: But once the systems start running, hopefully patients be easily
Speaker 8: they'll get the information they need before they seek care.
Speaker 3: When we're looking at reasons for runaway prices here, how
Speaker 3: much of it is our towards system. I mean, you
Speaker 3: can sue a doctor for malpractice for millions of dollars,
Speaker 3: and that's why the doctor has to get incredibly expensive
Speaker 3: malpractice insurance that must drive it up a lot. And
Speaker 3: the other thing is on the on the drug side
Speaker 3: of it. I mean, don't we all know that drug
Speaker 3: makers are just in bed with politicians. I mean they
Speaker 3: charge for the pills that we have to buy exponentially
Speaker 3: higher prices than they charge in other parts of the world.
Speaker 3: So I feel like those two drivers are important to
Speaker 3: mention as well.
Speaker 8: Absolutely, the compliance costs and legal hosts imposed on providers,
Speaker 8: but the adventually go to us, go to our patients
Speaker 8: and to our company. You are right in fact that
Speaker 8: the Washington DC is controlled the buy industry. So if
Speaker 8: we depend on Washtern DC to do things through radios costs,
Speaker 8: probably we're not going to be successful. Eventually has to
Speaker 8: come from the market, from consumers, from the collective wisdom.
Speaker 6: That's why competition that will be important.
Speaker 2: You know what I find tricky. I almost feel like
Speaker 2: big hospital. You know, it's interesting. My family, a member
Speaker 2: of my family just went through surgery and an incredible
Speaker 2: hospital in New York City and it was just impeccable
Speaker 2: the care from start to finish, and luckily, you know,
Speaker 2: covered by this incredible insurance we have at Bloomberg. To
Speaker 2: be fair, but it was incredible the process. But at
Speaker 2: the same time, I look at these hospitals and they're
Speaker 2: building wings, and there's gorgeous cafes and there's place today,
Speaker 2: and I almost feel like it's like academia. It's such
Speaker 2: a competition to build out and be the best facilities,
Speaker 2: and I feel like how much gets away from it
Speaker 2: really just has to be about good care and how
Speaker 2: do we kind of get back to that focus.
Speaker 8: Love that carell I think we have the best people,
Speaker 8: all the providers and households. They are well intentioned, but
Speaker 8: the problem incentive. Our system has a lot of bad incentives.
Speaker 8: That's why we're looking at bad outcomes and ineffresieness spending.
Speaker 8: Once we get the incentives right, I believe we have
Speaker 8: really the best people best to bring to bring the
Speaker 8: best value for our patients and for everybody involved in
Speaker 8: the system.
Speaker 5: So gee, are you.
Speaker 3: At Johns Hopkins working to change the system. Are you
Speaker 3: trying to do something about it? Have you got a plan?
Speaker 8: Yeah, we're becoming to improve the system. Last week, two
Speaker 8: days ago, I testified with the House Means House with
Speaker 8: the Means Committee, and also with the Senate Help Committee.
Speaker 8: So all about how Congress can help the market to
Speaker 8: remove the frictions and uh, let's all achieve the better outcome.
Speaker 8: But I do believe right now this is a hot
Speaker 8: button issue at the Capitol Hill. Now both parties if
Speaker 8: they really want to win an election, they must bring
Speaker 8: by the American people.
Speaker 6: And we're looking forward to your.
Speaker 8: New initentiontips between you know, Capitol and also all the stakeholders.
Speaker 2: All I would say is I think this is a
Speaker 2: big nut to crack. It's one of the things in
Speaker 2: our economy that costs so much. Is such a big
Speaker 2: part of it. And right now you do have you know,
Speaker 2: heads of companies, whether it's drug companies, whether it's healthcare companies.
Speaker 2: They certainly have the ear of Washington when it comes
Speaker 2: to policy. And I don't know how you get those
Speaker 2: changes through when that's happening exactly.
Speaker 8: So that's why I think popped out won't work, because
Speaker 8: all the policy eventually have to have support by those
Speaker 8: big industry interest right, so it has to be removed
Speaker 8: the company, remove the friction that prevent competition from happening.
Speaker 8: Then from grassroots bottom up, have the competition run down
Speaker 8: the price as is happening, and the other industry.
Speaker 2: All right, we're gonna leave it. On that note, certainly
Speaker 2: a lot to think about, and certainly, like I said,
Speaker 2: tough nut to crack, but certainly some possibilities of change
Speaker 2: based on or g had to say, Gibai, thank you
Speaker 2: so much, Professor of Health Policy and Management at the
Speaker 2: Johns Hopkins Bloomberg School of Public Health, supported by Michael Bloomberg,
Speaker 2: founder of Bloomberg ELP and Bloomberg Philanthropies on zoom in Washington.
Speaker 2: I had no idea that you had to pay so much.
Speaker 3: Yeah, yeah, that was Uh, don't ride motorcycles maybe if
Speaker 3: you're not, if you're not fully insured or you have
Speaker 3: prepared to deal with the consequences.
Speaker 2: There's a lot of injuries you're at for a while.
Speaker 3: I think this is one of those issues when you
Speaker 3: were talking about the cost of healthcare. Uh that, I'm
Speaker 3: just not optimistic we're ever gonna solve it until you know,
Speaker 3: the society is in flames. It's the same with social
Speaker 3: security or entitlement space.
Speaker 2: But what's the flames? What ultimately happens? I mean, we
Speaker 2: already have gaps in healthcare.
Speaker 5: Zombie apocalypse.
Speaker 3: Maybe I can't see anything short of zombie apocalypse changing this.
Speaker 2: Is that a global pandemic?
Speaker 5: No, that didn't do anything, I know.
Speaker 2: That's my point, Like, there's there's your apocalypse if you will.
Speaker 3: Uh well, no, I'm not calling for something worse than that.
Speaker 3: But I'm saying I'm just not optimistic that we can
Speaker 3: really change this, and I hope I'm wrong.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Easter on Bloomberg Radio,
Speaker 1: the Bloomberg Business App, and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 2: Small firms are the bedrock of the US economy. We
Speaker 2: say it a lot, counting for about half of all employment.
Speaker 2: And so Matt I love talking about the small cap
Speaker 2: space or small business because it's such a great indicator
Speaker 2: on the economic Yeah.
Speaker 3: Absolutely, and I wonder about how worried they should be
Speaker 3: as credit titans, small businesses are probably going to get
Speaker 3: hit harder than the big ones.
Speaker 2: You're absolutely right. So let's get into it with Sharon Miller.
Speaker 2: She's managing director and head a small business over at
Speaker 2: Bank of America out with her latest update on small
Speaker 2: business owners. She joins us on Zoom from San Antonio, Texas. Sharon,
Speaker 2: how are you.
Speaker 9: I'm doing great, Carol, Thank you so much for having me.
Speaker 9: It's great to be here with you.
Speaker 2: Well, nice to have you with Matt and me. How's
Speaker 2: small business doing well?
Speaker 9: I mean, despite all of the headlines that we are
Speaker 9: hearing in the news, and and certainly there are struggles
Speaker 9: and there are certainly business owners that are concerned about
Speaker 9: inflation and the economy and the environment that we're in today.
Speaker 9: I will tell you, on the on the bright side
Speaker 9: that as we survey our clients and understand how they're feeling,
Speaker 9: you know, over half tell us that they believe that
Speaker 9: their revenues are going to increase in the year ahead,
Speaker 9: and that they are optimistic about you know, their own business.
Speaker 9: So there are there are headwinds, no doubt about it,
Speaker 9: and there are struggles and there are issues, but small
Speaker 9: business owners in general remain very resilient and ready for
Speaker 9: what may lie ahead.
Speaker 3: So it makes sense to me. Right now, unemployment is
Speaker 3: what three point four percent, and even though earnings have
Speaker 3: come down, it's only I think three percent year over
Speaker 3: year for the you know, for the big guys that
Speaker 3: we track, the S and P. Are these small business
Speaker 3: businesses prepared for a recession if it comes?
Speaker 5: I mean, do they have cash dashed away?
Speaker 3: Do they have credit lines already lined up?
Speaker 9: Of those that we surveyed, and certainly the conversations that
Speaker 9: I'm having with clients, we found that about seventy five
Speaker 9: percent of businesses are prepared for a recession, and so
Speaker 9: they have those emergency funds on the sidelines, they have
Speaker 9: lines of credit available, and they are prepared. And I
Speaker 9: think that is what came out of the pandemic. Now
Speaker 9: people are really understanding we've got to prepare for the unexpected.
Speaker 9: And what we are seeing and finding with our clients
Speaker 9: is that they.
Speaker 2: Are How has this changed? How often do you do
Speaker 2: The survey is it once a year or every quarter.
Speaker 6: We do it.
Speaker 9: We do we survey our clients two times per year
Speaker 9: and we release the main report once per year. So
Speaker 9: this is our eleventh year of the Small Business Owner Report.
Speaker 6: So we do monitor trends.
Speaker 9: We do want to understand how they're feeling about their
Speaker 9: revenue expectations, the economy, their own businesses.
Speaker 6: So we want to just get our finger on the
Speaker 6: pulse because we do.
Speaker 9: You know, we bank over three million small business owners
Speaker 9: and we are the number one lender to small businesses
Speaker 9: in the US, and so we're here for our clients.
Speaker 9: We want to understand how they are feeling and what
Speaker 9: their needs are, and so we do that by having
Speaker 9: conversations across the desk every day, but also we survey
Speaker 9: just to understand in different parts of the country how
Speaker 9: people are feeling, what's happening.
Speaker 2: Well, and I guess and what I can. What I
Speaker 2: care sharing is like always, I care about trends too,
Speaker 2: and how things change either from year to year. So
Speaker 2: give me an idea because I'm assuming in the pandemic,
Speaker 2: I don't know if you did the survey that it
Speaker 2: was probably some pretty miserable numbers. But give me some
Speaker 2: perspective of coming off the pandemic. How these numbers change
Speaker 2: or is seventy six percent in terms of confident that
Speaker 2: their businesses could we stand a downturn? Is that pretty typical?
Speaker 6: No, it's not.
Speaker 9: I mean this was this is something that I think
Speaker 9: that came out of the pandemic. When we've heard that,
Speaker 9: You're right, seventy six percent said yes, we do believe
Speaker 9: we can withstand a downturn.
Speaker 6: That has changed.
Speaker 9: I think many people going into the pandemic were not
Speaker 9: as prepared, and.
Speaker 6: So today we're finding that they are.
Speaker 9: And by the way, you know, they're looking at their
Speaker 9: business plans, they're making sure that they are reviewing those
Speaker 9: not just once a year, but you know, twice a year, quarterly, daily.
Speaker 9: What's happening, what is happening in their industry, how are
Speaker 9: they doing, and how can they pivot? And I do
Speaker 9: think that you know, the topics like artificial intelligence, You've
Speaker 9: got topics like sustainability, you know, and how to make
Speaker 9: sure that your business is capable in this new digital era.
Speaker 3: What kind of loan demand are you seeing right now?
Speaker 5: Has it taper off off?
Speaker 3: Hiss rates have climbed our businesses, you know, worried about
Speaker 3: borrowing in this environment.
Speaker 6: Well, we still see strong demand for lending within.
Speaker 9: Our space, and I can't speak for all institutions, but again,
Speaker 9: we are the number one lender to small businesses in
Speaker 9: the US, and we are continuing to extend credit and
Speaker 9: to support in the communities We serve not just within
Speaker 9: our own four walls at Bank of America, but we
Speaker 9: also partner with Community Development Financial Institutions so CDFIs. We
Speaker 9: also hear from clients, especially new business formations. So we
Speaker 9: know in twenty twenty one there were five point four
Speaker 9: million new businesses started, which was a record.
Speaker 6: In twenty twenty two, five point.
Speaker 9: One million new businesses, so we've seen a lot of innovation.
Speaker 6: These are record numbers of new businesses.
Speaker 9: Starting, and we want to be there for those business
Speaker 9: owners to establish their business and you have access to
Speaker 9: capital in the marketplace.
Speaker 2: Hey, Sharon, you mentioned day I and how small business
Speaker 2: owners I guess are thinking about that or it certainly
Speaker 2: on their mind. Matt you shared with me a Tracy
Speaker 2: Alloway story about the latest Challenger jobs report and it
Speaker 2: highlights job cuts from artificial intelligence just beginning.
Speaker 5: It was thirty nine. It's the last month alone, which.
Speaker 2: Is pretty significant. And I do wonder share and how
Speaker 2: are small business owners looking at something like AI. Is
Speaker 2: it's something that they think, oh great, I can use
Speaker 2: it to cut costs and cut workers or how what's
Speaker 2: the conversation. I'm curious if you could glean anything from
Speaker 2: the results of the survey.
Speaker 9: Yeah, the conversation has been mainly around how do I
Speaker 9: improve efficiencies, whether it be marketing, whether it be understanding
Speaker 9: behaviors of clients and targeting clients to get more business
Speaker 9: for their for their company. The conversations also around payroll
Speaker 9: providers and how do I get smarter about.
Speaker 6: My tools that I I'm using for business.
Speaker 9: So AI is around, you know what, I'm hearing a
Speaker 9: lot around marketing, getting to the to the people that
Speaker 9: that they want to understand their product, as well as
Speaker 9: payroll services and and just managing their business day to day.
Speaker 9: So yes, I mean I think in the long term
Speaker 9: we may see uh, some of that helping to improve
Speaker 9: efficiencies where you may not need as many employees, right,
Speaker 9: So I can see that going through as well, But
Speaker 9: today I think we're very early on.
Speaker 2: Sharon Miller, thank you so much. Managing director, had a
Speaker 2: small business at b of A on Zoom from San Antonio,
Speaker 2: TeX's first time challenger and Christmas included that that's really fascinating.
Speaker 2: Check it out at bloemberg dot.
Speaker 4: Com, a broad mark.
Speaker 5: A journal.
Speaker 3: Now about you, let me drive, No, no, no.
Speaker 5: Honey, please, I'll do the riding gravels.
Speaker 1: I want to drive to Question time.
Speaker 10: This is the drive to the globe? Do com to me?
Speaker 8: Think well?
Speaker 1: Jagadan on Bloomberg Radio.
Speaker 2: All right, everybody, we've got just under eighteen minutes left
Speaker 2: in today's trading session on this Thursday, June first, it
Speaker 2: is time for the drive to the clothes and back.
Speaker 2: With us is Randy Watts. He's chief investment strategist at
Speaker 2: O'Neil Global Advisors, joining us once again on Zoom in Miami. Randy,
Speaker 2: nice to have you here with Matt and me. And
Speaker 2: I have to say you and the team at O'Neil
Speaker 2: have definitely been on our minds with the passing this
Speaker 2: week of Bill O'Neill, just, you know, top of mind
Speaker 2: for you and your thoughts on him. This is a legend,
Speaker 2: you know, when it comes to the investment world, and
Speaker 2: certainly well known.
Speaker 7: Yeah, I mean I think Bill really personified the American dream.
Speaker 7: He was born in Oklahoma in nineteen thirty three during
Speaker 7: the Depression and the dust Bowl era, and he came
Speaker 7: from humble beginnings to be incredibly successful in the stock market.
Speaker 7: He was the first person to buy a seat on
Speaker 7: the New York Stock Exchange at the age of thirty
Speaker 7: or younger. He was very much self made. He obviously
Speaker 7: founded Investors Business Daily, which was a national investment publication.
Speaker 7: In nineteen eighty four, he wrote a famous book called
Speaker 7: How to Make Money in Stocks that sold over two
Speaker 7: million copies. And interestingly, he was one of the first
Speaker 7: people to use a mainframe computer to analyze stocks using
Speaker 7: different data rankings that reflected the characteristics of the individual stocks.
Speaker 7: So an innovator from the start and really a great
Speaker 7: example of the American dream.
Speaker 2: Well, and it's interesting too write if you think about
Speaker 2: kind of where markets are today in the use of
Speaker 2: data and how influential it is. I mean, I love
Speaker 2: talking to you because you're a technician and you do
Speaker 2: look at the trends and certainly on a data basis.
Speaker 2: But it is interesting kind of you know, his interest
Speaker 2: and the importance of data on the street today.
Speaker 7: It is funny a lot of the things that he
Speaker 7: started using back in the sea sixties and seventies we
Speaker 7: now take for granted, but back then it was very
Speaker 7: cutting edge, and you can just see how it seeped
Speaker 7: into the overall investment climate and how important quantitative and
Speaker 7: technical analysis is to investing in not only inequities but
Speaker 7: in a variety of instruments.
Speaker 2: Well, like we said, you guys in your whole team,
Speaker 2: there have certainly been on our mind.
Speaker 3: And Randy on that note, what do you make of
Speaker 3: the AI craze right now, not in terms of, you know,
Speaker 3: as an investment, but in terms of investing, what do
Speaker 3: you make of that as a.
Speaker 7: Tool using AI to invest in stocks? Yes, I think
Speaker 7: we're very, very early in the process. I think it
Speaker 7: will be additive over time. I think some of the
Speaker 7: enthusiasm is ahead of itself. You know, it doesn't really
Speaker 7: AI doesn't really make judgment calls, right, So if you're
Speaker 7: trying to figure out in the beginning of the nineties
Speaker 7: if Starbucks is going to be a very popular trend,
Speaker 7: I really think that's a little more qualitative than the
Speaker 7: quant kind of quantitative feedback AI is going to give.
Speaker 7: I think the main thing that is going to help
Speaker 7: with AIS, is going to help increase productivity, and it's
Speaker 7: going to make a lot of businesses more profitable over time.
Speaker 7: But I do think we're maybe a little ahead of
Speaker 7: ourselves in terms of what it can do today.
Speaker 3: I mean, it's apparently able to at least on some level,
Speaker 3: decipher FED speak, you know, sentence by sentence and judge
Speaker 3: whether or not it's hawkish or dubbish.
Speaker 10: True.
Speaker 7: But you know, as we found out this year, really
Speaker 7: the FED is kind of a moving It's a moving
Speaker 7: target with the FED. Right, so if you look at
Speaker 7: where we are today on FED futures, the market's predicting
Speaker 7: over ay over a fifty percent chance that by the
Speaker 7: July meeting they're going to raise either twenty five to
Speaker 7: fifty BIPs.
Speaker 10: And that was a very low number a week ago.
Speaker 7: So you know, it changes so quickly that if you're
Speaker 7: just using the stale data of a transcript or a
Speaker 7: quote that can.
Speaker 10: Get out, I can get out of phase very quickly.
Speaker 7: So so I wouldn't really put all my investment eggs in
Speaker 7: the AI basket yet. I think we're early on in it,
Speaker 7: and I think initially what it's going to do is
Speaker 7: help productivity, but I wouldn't use it to pick my
Speaker 7: stocks right now.
Speaker 2: So when you look at a stock like Nvidia, best
Speaker 2: performing stock in the S and P five hundred, you know,
Speaker 2: just blowout performance mega rally this year, and I look
Speaker 2: at something like RSI Relative Strength Index easily overbought. I mean,
Speaker 2: this isn't a name you would touch.
Speaker 7: That's a name which has either got to go sideways
Speaker 7: which is kind of the best best outcome, or or
Speaker 7: pull back. But normally when as a stock, a stock
Speaker 7: has that kind of a run, it usually has to
Speaker 7: do one of those two things. Right, it's had such
Speaker 7: a big move, it's now extended technically, and I think
Speaker 7: that really goes to the market if I can shift
Speaker 7: a little bit, which is the market's been extremely narrow.
Speaker 7: So if you look at the qqqs right, they're up,
Speaker 7: you know, I think what thirty two percent year.
Speaker 5: To date, which is a tech heavy for those.
Speaker 7: Which is Technicombia, it's one hundred largest stocks in the
Speaker 7: NASTEK Maybe I should have said that for listeners.
Speaker 10: You compare that to the S and P weh's just
Speaker 10: about ten percent.
Speaker 7: And then you compare that, you know, to the Russell
Speaker 7: which is flat and obviously the Russell has two thousand
Speaker 7: stocks in it, so it's been a very very narrow
Speaker 7: group of stocks it's been driving this market, and that's
Speaker 7: going to resolve itself, you know, probably, you know, one
Speaker 7: of two ways. Either either the leaders sort of slow
Speaker 7: down and the rest of the market catches up, or
Speaker 7: the leaders are going to have to come down. I'm hopeful,
Speaker 7: And what we're really trying to focus on at O'Neil
Speaker 7: is are we going to see a broadening of the market.
Speaker 7: We're very hopeful that's going to happen. But to really
Speaker 7: have a bull market from here, the market's got to broaden.
Speaker 7: Remember that the Russell is still trading below both it's
Speaker 7: fifty day and it's two hundred day moving average. The
Speaker 7: Nasdaq and the S and P are above it, but again,
Speaker 7: if you disaggregate those numbers, they're being driven by a
Speaker 7: very small number of stocks. The average stock in the
Speaker 7: Nasdaq is below both it's fifty day and it's two
Speaker 7: hundred day. So while the average is up because of
Speaker 7: a small group of stocks that are being driven by
Speaker 7: megacap tech, the average stock is actually isn't doing that
Speaker 7: great this year.
Speaker 2: Hey help us out with something Matt and I have
Speaker 2: been having some fun because we've worked together for a
Speaker 2: long long time and we talk. We think about all
Speaker 2: the different market cycles we've gone through, and everybody's like
Speaker 2: all the cash on the sidelines waiting to come back in.
Speaker 5: We've been together for a few decades.
Speaker 2: It's a few decades we started in the sandbox. But
Speaker 2: having said that, Randy, is that an important thing you
Speaker 2: watched as an indicator about the potential to kind of
Speaker 2: fuel more equity momentum.
Speaker 7: I think there is cash that can come into equities.
Speaker 7: I think what is going to influence that is you
Speaker 7: know where we are in the rate cycle and what
Speaker 7: the economic outlook is. Remember, earnings in the first quarter
Speaker 7: were down year to year. They're down about one percent
Speaker 7: and I'm sorry about three percent, about three percent, and
Speaker 7: earnings estimates for the full year have been coming down.
Speaker 7: Obviously the last couple of days we've gotten some very
Speaker 7: negative prints from consumer related companies. So I think for
Speaker 7: the market to do well from here, we really need
Speaker 7: kind of two things. The first is to get a
Speaker 7: sense that we're getting close to the end of the
Speaker 7: rate cycle. Recently, it looks like maybe the Fed still
Speaker 7: has a little bit more to do. I could easily
Speaker 7: see FED funds going to six percent. Okay, I mean
Speaker 7: remember you know PCE was four point seven percent last
Speaker 7: month on a year to year basis. That's still obviously
Speaker 7: way way above what the Fed is looking for. And
Speaker 7: then the second thing is what's the outlook for earnings.
Speaker 7: It does appear maybe initially people were a little too
Speaker 7: bearish on earnings going into Q one. We hope that's
Speaker 7: going to continue to be the case. I'm not sure
Speaker 7: it is, given the slowdown we're singing consumer spending. But
Speaker 7: if we can get through the rate tightening cycle and
Speaker 7: earnings can stabilize, then I think a lot of money
Speaker 7: can come into stocks and the.
Speaker 10: Rest of the market can catch up to where a
Speaker 10: big tech is right now.
Speaker 2: All right, Well, always appreciate the time that we get
Speaker 2: with you.
Speaker 6: Randy, take care.
Speaker 2: Talky to and Randy Watts, chief investment strategist at are
Speaker 2: Neo Global Advisors, joining us on Zoo Miami.
Speaker 6: This is Bloomberg Radio.
Speaker 1: This is the Bloomberg Business Week podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live weekday
Speaker 1: afternoons from three to six easterning on bloomberg dot com,
Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg journyalone