WEBVTT - Stocks at Record; Consumer Confidence Drops to Four-Month Low

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<v Speaker 1>Welcome to the Bloomberg Penl Podcast. I'm Paul swing you

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<v Speaker 1>along with my co host Lisa Brahma Waits. Each day

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<v Speaker 1>we bring you the most noteworthy and useful interviews for

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<v Speaker 1>you and your money, whether at the grocery store or

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<v Speaker 1>the trading floor. Find a Bloomberg Penl podcast on Apple

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<v Speaker 1>podcast or wherever you listen to podcasts, as well as

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<v Speaker 1>at Bloomberg dot com. Switch gears a little bit again.

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<v Speaker 1>We have the FED tomorrow expectations are for a rate

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<v Speaker 1>in rate cut. Let's get a sense of what the

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<v Speaker 1>markets are positioned for. Neila Richardson, investment strategists at Edward Jones. Neila,

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<v Speaker 1>thanks so much for joining us. What is it? What

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<v Speaker 1>are you looking for tomorrow? Out of the FED tai fall.

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<v Speaker 1>I'm looking for a return to the hard data. I

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<v Speaker 1>really want to see what their projection for the is

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<v Speaker 1>for the economy going forward. We we have a really

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<v Speaker 1>mixed picture right now. It's still a resilient consumer, but

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<v Speaker 1>there's some praying around the edges. In terms of the

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<v Speaker 1>jobs market producing the same number of jobs that we

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<v Speaker 1>saw last year. We've seen a flight uptick and delinquencies

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<v Speaker 1>in terms of credit cards and automobile, And so I

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<v Speaker 1>want to know, with inflation firming another different factor since

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<v Speaker 1>the Fed um in June and and really started us

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<v Speaker 1>on this rate cutting cycle, I want to know, has

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<v Speaker 1>their outlook for the economy changed? So are you expecting

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<v Speaker 1>them to actually answer that question? Well, they've they've been

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<v Speaker 1>pretty consistent about the economy. Uh, They've said that the

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<v Speaker 1>economy is in good shape. And is that still their

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<v Speaker 1>operating outlook? Is the economy still in good shape? And

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<v Speaker 1>if so, is this next move by the Fed, whether

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<v Speaker 1>it's a pause or a cut, is this consistent with

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<v Speaker 1>the economy that we see before us or are they

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<v Speaker 1>still looking around the corner at rising risks like a

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<v Speaker 1>trade which again we've gotten some improving more positive rhetoric,

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<v Speaker 1>or or other risks you're seeing abroad in terms of

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<v Speaker 1>slowing cora. So, Nila, we've you know, we're expecting, as

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<v Speaker 1>you suggested, you know, a rate cut tomorrow. It continued

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<v Speaker 1>moderately dubbish. Uh, Fed, We've got maybe some good news

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<v Speaker 1>coming on some of the geopolitical fronts as relates to

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<v Speaker 1>trade and you know, gosh, maybe even Brexit. The markets

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<v Speaker 1>certainly discounted that this year. Do you sense that from

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<v Speaker 1>evaluation perspective, this market is is kind of stretched. We

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<v Speaker 1>think that the pricing is reasonable because we're still seeing

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<v Speaker 1>good economic fundamentals. We still see an economy that's growing

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<v Speaker 1>but at a slow rate. That's been very positive for equities.

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<v Speaker 1>Very low interest rates have been positive, Monetary stimulus has

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<v Speaker 1>been positive, and so we think it's a reason it's

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<v Speaker 1>not a cheap market, but it is a reasonably priced

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<v Speaker 1>rue given what we know to be solid fundamentals. And

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<v Speaker 1>I think what we're seeing on the earning s front

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<v Speaker 1>is validating that view. So coming up're gonna be talking

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<v Speaker 1>about consumer confidence, and we just got some readings showing

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<v Speaker 1>that consumer confidence felt to the lowest since June. We

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<v Speaker 1>also seem to linquencies pick up, if for particularly auto

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<v Speaker 1>loans and credit card loans. How does that sort of

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<v Speaker 1>square with this idea of the strong US consumer and

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<v Speaker 1>a strong US economy. Well, it goes back to my

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<v Speaker 1>initial point that the consumer has been resilient. It's been

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<v Speaker 1>carrying the water for this economy for ten years. Are

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<v Speaker 1>we starting to see a fray? And that's what we're

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<v Speaker 1>very watchful of. H if you care that with U

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<v Speaker 1>corporate sectors, that's healthy, but really hasn't contributed on the

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<v Speaker 1>growth front in terms of capex spending, our investment, what

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<v Speaker 1>you or on the fiscal side. We never got that

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<v Speaker 1>infrastructure bill We've all been waiting for a week after

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<v Speaker 1>a week, and so it's really the consumer. And while

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<v Speaker 1>these uh praying of the consumer might be okay if

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<v Speaker 1>you had other players in this game, when you only

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<v Speaker 1>have one, you're really concerned about the health of that one.

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<v Speaker 1>Naylor Richardson, thank you so much as always for joining us.

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<v Speaker 1>Neil Regardson as an investment stargis at Edward Jones. Let's

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<v Speaker 1>look at the consumer here, and the consumer has become

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<v Speaker 1>you know, it is the US economy, and with the

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<v Speaker 1>manufacturing sector in the US showing signs of weakness, the

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<v Speaker 1>pressure is on the consumer even more to keep this

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<v Speaker 1>economy going forward. To get a sense the latest read

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<v Speaker 1>on how the consumers doing, we welcome Lynn Franco. Lynn

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<v Speaker 1>is a senior Director of Economic Indicators and Surveys at

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<v Speaker 1>the Conference Board. So Lynn, give us the latest data

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<v Speaker 1>that you guys have at the Conference Board on the

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<v Speaker 1>consumer confidence. We had a marginal decrease. Confidence is now

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<v Speaker 1>nine versus one point three last month. UM but holding steady,

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<v Speaker 1>and we think it's going to continue to prop up

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<v Speaker 1>the economy, prop up growth, and um, you know, we're

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<v Speaker 1>we're sort of in I think, a good place right here,

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<v Speaker 1>as consumers have sort of you know, shrugged off all

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<v Speaker 1>the trade rhetoric. Um, there's no signs here that the

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<v Speaker 1>impeachment inquiry is having any impact on competence overall. So

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<v Speaker 1>I think we're in pretty good shape heading into the

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<v Speaker 1>holiday season. I guess some people appoint to the unexpected

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<v Speaker 1>decline as being somewhat worrisome. What would you tell them?

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<v Speaker 1>We're still at a relatively strong level. You know, we've

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<v Speaker 1>been seeing sort of this same seasaw momentum for much

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<v Speaker 1>of this year, and there's really been no sort of

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<v Speaker 1>downward trend visible. So I think we're in a we're

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<v Speaker 1>in a pretty good place here. I mean, one point

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<v Speaker 1>nine is a relatively strong reading, and it's it's interesting, Lynn,

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<v Speaker 1>I mean, when you think about the consumer, so much

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<v Speaker 1>of it is do I have a job? Am I

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<v Speaker 1>getting raises in my job? And I, you know, more

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<v Speaker 1>or less content with where I am? In terms of employment,

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<v Speaker 1>We're pretty pretty good spot right now with unemployment at

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<v Speaker 1>you know, you know, fifty year lows. What what's your

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<v Speaker 1>survey talking about the employment situation. Um, you know, current

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<v Speaker 1>employment situation is very good. We saw a bit of

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<v Speaker 1>an uptick in the people telling us that, you know,

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<v Speaker 1>jobs are plentiful, a slight uptick, and those telling us

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<v Speaker 1>jobs are hard to get but historically very strong levels.

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<v Speaker 1>They did express some mild concerns going forward. Um, but

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<v Speaker 1>I think we're still in a relatively good place. I mean,

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<v Speaker 1>we're anticipating somewhat slower employment growth going forward, but no

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<v Speaker 1>red flags coming out of there that you know, suddenly

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<v Speaker 1>we're going to have a spike in layoffs or or freezes.

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<v Speaker 1>So I think it should be enough to support confidence.

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<v Speaker 1>So we've actually seen a softening in the trade rhetoric.

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<v Speaker 1>We know that trade tensions have weighed on consumer sentiment.

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<v Speaker 1>What was it that was responsible for the unexpected decline

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<v Speaker 1>this time around? It's relatively um, you know, kind of

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<v Speaker 1>moving sideways again. It was a little bit of apprehensiveness

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<v Speaker 1>about where business conditions and employment are headed. On the

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<v Speaker 1>flip side of that, though, they're more positive about their

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<v Speaker 1>income prospects and that should bode well for spending both

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<v Speaker 1>in the holiday season season in a little bit longer

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<v Speaker 1>term as well, Lynn, is your work take into account

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<v Speaker 1>um kind of home ownership because it seems like with

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<v Speaker 1>interest rates so low here, uh, you know, people who

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<v Speaker 1>want homes have the homes that they can trade up

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<v Speaker 1>if if if they if they want. Um, how do

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<v Speaker 1>you guys try to capture the whole home ownership thing

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<v Speaker 1>as it waits to consumers. Well, we're trying to capture

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<v Speaker 1>in two ways. So for instance, we ask a question

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<v Speaker 1>about interest rate expectations of the last three months, more

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<v Speaker 1>than a quarter of consumers are telling us that they

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<v Speaker 1>expect to cut so that sort of baked into confidence

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<v Speaker 1>and it's a large increase from what we had seen

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<v Speaker 1>in prior months. And in terms of home purchasing intentions,

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<v Speaker 1>we saw a little bit of a pick up there,

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<v Speaker 1>and I think, you know, the decline that we're seeing

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<v Speaker 1>an interest draw in mortgage rate is filtering into that

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<v Speaker 1>and major appliance purchases, you know, the big ticket items

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<v Speaker 1>there is pretty flat and holding it at a high level.

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<v Speaker 1>So I think, um, you know, both housing interest rates,

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<v Speaker 1>job growth, and wage growth should continue to support confidence

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<v Speaker 1>for the remainder of the year. Thank you so much,

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<v Speaker 1>Lynn Franco. We always appreciate your insights. Lind Anco, a

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<v Speaker 1>senior director of Economic Indicators and Surveys at the conference board, Well,

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<v Speaker 1>was supposed to be the year of the Unicorn I

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<v Speaker 1>p O. Everybody was gonna make moneys, the bankers, certainly, investors,

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<v Speaker 1>maybe even the private equity folks themselves. Lots of IPOs

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<v Speaker 1>on tap, but they have been quite disappointing to date.

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<v Speaker 1>The questions what does that mean for the tech community

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<v Speaker 1>and I p O s and valuations to get some

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<v Speaker 1>answers to those questions, and welcome Ted Smith Ted as

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<v Speaker 1>a co founder and president of Union Square Advisors. So Ted,

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<v Speaker 1>thanks so much for joining us. Just wonder if you

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<v Speaker 1>could give us your thoughts and kind of what we

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<v Speaker 1>saw with Uber, with Lift, with Smile Direct, and then

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<v Speaker 1>of course with we work in terms of employed the

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<v Speaker 1>evaluation seems to be a big gap between the private

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<v Speaker 1>market is valuing these companies and where the public market

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<v Speaker 1>evaluations are hipaul and highly soa thanks for having me on.

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<v Speaker 1>Really appreciate it. Yes, we've certainly seen a very interesting

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<v Speaker 1>year uh in the I p O markets at this point,

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<v Speaker 1>but I also think it's important to point out there

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<v Speaker 1>have been a number of notable successes, and there's a

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<v Speaker 1>little bit of a the haves and the have nots

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<v Speaker 1>this year, and I think there's obviously been a lot

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<v Speaker 1>of focus on the tech unicorns and a number of

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<v Speaker 1>the folks that you are, the companies that you just mentioned,

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<v Speaker 1>particularly We Work, have kind of dominated the headlines. So

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<v Speaker 1>but despite that, I think we have an I p

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<v Speaker 1>O market that's open and accepting um by investors for

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<v Speaker 1>business models that are actually making money or have the

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<v Speaker 1>opportunity to make money in the near term, so a

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<v Speaker 1>path to profitability that's well defined. What I think the

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<v Speaker 1>market has risen up and said decidedly at this point

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<v Speaker 1>is that ever widening losses or a lack of even

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<v Speaker 1>a vision of how to get to profitability clearly is

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<v Speaker 1>not going to be acceptable for new I p O opportunities.

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<v Speaker 1>And therefore we've seen things like the we Work situation

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<v Speaker 1>crop up where simply there's just no way to get

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<v Speaker 1>that come any public in the near term. By the way,

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<v Speaker 1>talking about we Work, just across the Bloomberg Week are

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<v Speaker 1>we Companies is has been quietly building an electronic gaming business.

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<v Speaker 1>How that fits with everything else, we shall see how

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<v Speaker 1>I see that anyway, I'd love to get your sense

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<v Speaker 1>tad of where you expect to see a lot of

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<v Speaker 1>consolidation going forward, other particular sectors that you expect to

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<v Speaker 1>be particularly active in the next couple of months. UM.

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<v Speaker 1>We certainly continue to see a lot of activity around

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<v Speaker 1>enterprise software. Generally, it's been one of the arenas that

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<v Speaker 1>has been most successful. It's certainly been one of the

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<v Speaker 1>areas where we've seen successful I p O s this year,

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<v Speaker 1>with a number uh a number of really great companies

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<v Speaker 1>coming public. It also appears to be the place where

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<v Speaker 1>the largest tech acquirers, and that's everybody from Microsoft, Salesforce, Adobe,

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<v Speaker 1>et cetera, are continuing to focus their attention their energies

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<v Speaker 1>and sort of next generation enterprise software UM. It's it's

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<v Speaker 1>certainly a sector that's fairly highly valued, making those act

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<v Speaker 1>editions UM somewhat expensive, at least on a historically relative basis.

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<v Speaker 1>But it's also UM the arena where we think the

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<v Speaker 1>global market opportunities are the largest, and therefore we think

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<v Speaker 1>where both corporate acquires like some of those that I mentioned,

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<v Speaker 1>as well as the large private equity firms that focus

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<v Speaker 1>on that arena are likely to continue to be very

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<v Speaker 1>focused on acquiring interesting businesses. So t I know you

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<v Speaker 1>folks that you need square really focused on the technology sector.

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<v Speaker 1>And we've seen i would say a little bit of

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<v Speaker 1>a C change maybe over the last year two whereby

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<v Speaker 1>the U S regulators, US Congress are really taken a

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<v Speaker 1>look at the technology sector from a regulatory perspective. That's

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<v Speaker 1>kind of new. Are you sensing that that's kind of

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<v Speaker 1>impacting the tech business, whether it's startups or even some

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<v Speaker 1>of the bigger, more established companies. Well, it's certainly causing

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<v Speaker 1>the bigger, more established companies to try to figure out

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<v Speaker 1>how to deal with this C change, right this is

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<v Speaker 1>the first to your point, this is kind of the

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<v Speaker 1>first time in several years that the largest tech companies

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<v Speaker 1>have kind of been in the crosshairs of the regulators

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<v Speaker 1>and Congress and presidential candidates kind of all at the

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<v Speaker 1>same time. Uh. This is a This is a pretty

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<v Speaker 1>interesting topic for a lot of folks right now, and

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<v Speaker 1>it's one that that sort of continually seems to rise

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<v Speaker 1>rise above the fold. So what we're seeing from the

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<v Speaker 1>largest companies is is um some ongoing thoughtfulness if you will,

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<v Speaker 1>about can M and A be pursued in certain arenas

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<v Speaker 1>UH and not put them even further into those crosshairs.

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<v Speaker 1>But I think they're they're firmly there now. UM. I

0:12:30.280 --> 0:12:33.319
<v Speaker 1>was at an interview last week with the chief of

0:12:33.360 --> 0:12:36.720
<v Speaker 1>the DJ Enforcement issue where he basically said that all

0:12:36.800 --> 0:12:38.840
<v Speaker 1>options are on the table with respect to the largest

0:12:38.840 --> 0:12:42.600
<v Speaker 1>tech companies UM and how we may think about dealing

0:12:42.679 --> 0:12:44.440
<v Speaker 1>with the bad behavior that has come to light over

0:12:44.480 --> 0:12:47.440
<v Speaker 1>the course of the last two to two to three years.

0:12:47.800 --> 0:12:50.599
<v Speaker 1>So I think they're clearly on notice with respect to

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<v Speaker 1>the their activities in a number of ways, how they

0:12:52.920 --> 0:12:55.800
<v Speaker 1>handle personal data, how they deal with the freedom of

0:12:55.840 --> 0:12:58.640
<v Speaker 1>speech issues, how they deal with putting their thumb on

0:12:58.720 --> 0:13:01.280
<v Speaker 1>the scale with respect to very as business activities. I think,

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<v Speaker 1>to the point that I made, everything is on the table,

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<v Speaker 1>and so I think those largest tech companies are taking

0:13:07.040 --> 0:13:10.240
<v Speaker 1>that into consideration. What does that mean for startups? What

0:13:10.280 --> 0:13:12.320
<v Speaker 1>does that mean for newer companies? Well, it may mean

0:13:12.440 --> 0:13:14.839
<v Speaker 1>opportunity for them UH as they're able to go into

0:13:14.880 --> 0:13:18.160
<v Speaker 1>markets that might have been otherwise dominated by these these

0:13:18.240 --> 0:13:20.920
<v Speaker 1>larger players. But I also think there's the question of

0:13:21.000 --> 0:13:23.400
<v Speaker 1>what does it mean for innovation UH and if we

0:13:23.800 --> 0:13:27.520
<v Speaker 1>somehow put the regulatory shackles on these largest tech companies

0:13:27.559 --> 0:13:31.760
<v Speaker 1>doesn't in fact crimp their ability uh to uh really

0:13:32.040 --> 0:13:35.520
<v Speaker 1>significantly innovate from here, which is very important for for

0:13:35.600 --> 0:13:38.079
<v Speaker 1>this country and for the tech sector generally. Ted Smith,

0:13:38.080 --> 0:13:40.040
<v Speaker 1>thank you so much for being with us. Ted Smith,

0:13:40.080 --> 0:13:43.560
<v Speaker 1>co founder and president of Union Square Advisors, definitely has

0:13:43.600 --> 0:13:46.520
<v Speaker 1>been an active year, uh for I P O S

0:13:46.600 --> 0:13:48.920
<v Speaker 1>and for M and A. The question is going forward,

0:13:49.240 --> 0:13:51.360
<v Speaker 1>how much that can continue in light of some sort

0:13:51.400 --> 0:13:53.800
<v Speaker 1>of rocky or receptions that we've gotten. Thanks for listening

0:13:53.840 --> 0:13:56.520
<v Speaker 1>to the Bloomberg pl podcast. You can subscribe and listen

0:13:56.600 --> 0:13:59.880
<v Speaker 1>to interviews at Apple Podcasts or whatever podcast platform you prefer.

0:14:00.200 --> 0:14:02.800
<v Speaker 1>UM Paul Sweeney, I'm on Twitter at pt Sweeney. I'm

0:14:02.880 --> 0:14:05.560
<v Speaker 1>Lisa abram Woods. I'm on Twitter at Lisa abram Woods.

0:14:05.600 --> 0:14:08.439
<v Speaker 1>One before the podcast, you can always catch us worldwide

0:14:08.480 --> 0:14:09.400
<v Speaker 1>on Bloomberg Radio