1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,040 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Place. 5 00:00:28,080 --> 00:00:30,040 Speaker 1: To say that RUSS CoA Strick joins us in the 6 00:00:30,080 --> 00:00:33,920 Speaker 1: studio blank Rock Global Allocation Fund portfolio manager. Good monitude, Russ, 7 00:00:34,600 --> 00:00:36,319 Speaker 1: Where do you fall on that debate right now? That's 8 00:00:36,320 --> 00:00:37,960 Speaker 1: the big one of the last couple of weeks that 9 00:00:38,040 --> 00:00:42,040 Speaker 1: maybe peak pessimism is behind US treasury yields of bottom 10 00:00:42,080 --> 00:00:45,440 Speaker 1: the bottoms are in. What are your thoughts? And it's 11 00:00:45,479 --> 00:00:48,360 Speaker 1: probably right. You've taken a lot of tail risk out 12 00:00:48,360 --> 00:00:51,560 Speaker 1: of the market the last month. You've made progress on trade, 13 00:00:51,600 --> 00:00:53,400 Speaker 1: and it's not a permanent deal, but it will at 14 00:00:53,479 --> 00:00:55,960 Speaker 1: least alleviate some of the tension. The risk of a 15 00:00:56,040 --> 00:00:59,360 Speaker 1: hard break exit has gone down. The economic numbers appear 16 00:00:59,400 --> 00:01:01,840 Speaker 1: to be stabilis and you're having a decent earning season, 17 00:01:01,960 --> 00:01:04,840 Speaker 1: so you know, going into a seasonally strong part of 18 00:01:04,880 --> 00:01:07,319 Speaker 1: the year. It's not on reason. We'll say you probably 19 00:01:07,319 --> 00:01:09,000 Speaker 1: have seen the loan bond yields for the year. I'm 20 00:01:09,000 --> 00:01:11,200 Speaker 1: gonna give a credit to Jeffreys. I believe there's an 21 00:01:11,200 --> 00:01:13,800 Speaker 1: outlier call that maybe they won't do something here at 22 00:01:13,800 --> 00:01:16,520 Speaker 1: this meeting tomorrow and that they'll wait out to December 23 00:01:16,560 --> 00:01:18,880 Speaker 1: because we see so much good that we see so 24 00:01:18,959 --> 00:01:21,320 Speaker 1: much good in the equity market as well to find 25 00:01:21,319 --> 00:01:24,560 Speaker 1: a lousy economy. The survey, the surveying, excuse me, the 26 00:01:24,680 --> 00:01:28,240 Speaker 1: Bloomberg statistic is one point six percent. I hear people 27 00:01:28,240 --> 00:01:31,280 Speaker 1: at one point eight percent g d P and on 28 00:01:31,440 --> 00:01:35,360 Speaker 1: and on and on. How bad does the economy need 29 00:01:35,440 --> 00:01:37,840 Speaker 1: to be for further rate cuts. Well, I think you've 30 00:01:37,880 --> 00:01:40,319 Speaker 1: got to compare to what's trend these days. And let's 31 00:01:40,319 --> 00:01:42,400 Speaker 1: call a two percent growth, because you know there's a 32 00:01:42,440 --> 00:01:45,680 Speaker 1: little rounding are around all of this. Two percent is trend. 33 00:01:45,800 --> 00:01:48,440 Speaker 1: You know, we're in an environment where demographics are very 34 00:01:48,480 --> 00:01:50,840 Speaker 1: different than thirty or forty years ago. To get to 35 00:01:50,880 --> 00:01:52,760 Speaker 1: the type of three and a half percent growth that 36 00:01:52,840 --> 00:01:55,880 Speaker 1: was normal back then, you need the sugar high of 37 00:01:55,960 --> 00:01:58,080 Speaker 1: the type of taxica we had in two thousand seventeen. 38 00:01:58,120 --> 00:02:01,400 Speaker 1: Without that, two percent is a about normal. I mean, 39 00:02:02,040 --> 00:02:03,840 Speaker 1: I just looked to be sure the number hadn't moved 40 00:02:03,840 --> 00:02:07,280 Speaker 1: from yesterday were still at one point six GDP growth, 41 00:02:07,320 --> 00:02:10,160 Speaker 1: many others at one point eight. I mean, does that 42 00:02:10,280 --> 00:02:13,280 Speaker 1: cleared the solid economy you mentioned Jeffreies. Jefferies will be 43 00:02:13,360 --> 00:02:15,679 Speaker 1: joining me on the TV show a little bit later 44 00:02:15,680 --> 00:02:18,519 Speaker 1: this morning. Properties looking forward to catching up with them 45 00:02:18,520 --> 00:02:21,720 Speaker 1: on that call of no rate cup potentially coming tomorrow. Russ, 46 00:02:21,760 --> 00:02:23,560 Speaker 1: I'd love to get your insight just a little bit 47 00:02:23,560 --> 00:02:26,400 Speaker 1: more on this topic at the moment. How vulnerable is 48 00:02:26,440 --> 00:02:29,360 Speaker 1: that call that the worst this behind us? Because it 49 00:02:29,360 --> 00:02:32,000 Speaker 1: seems to have picked up with some written enthusiasm over 50 00:02:32,000 --> 00:02:34,640 Speaker 1: the last couple of weeks without much data to back 51 00:02:34,680 --> 00:02:36,320 Speaker 1: it up. Well, I think there are a couple of things. 52 00:02:36,320 --> 00:02:38,600 Speaker 1: I mean, one of the reasons people are comfortable with 53 00:02:38,639 --> 00:02:42,280 Speaker 1: the calls that we know manufacturing is struggling. You're arguably 54 00:02:42,320 --> 00:02:46,280 Speaker 1: in a global manufacturing recession. But people, I think, justifiably 55 00:02:46,680 --> 00:02:49,440 Speaker 1: feel very good about the U. S. Consumer. And whether 56 00:02:49,480 --> 00:02:51,840 Speaker 1: you look at real earnings, whether you look at the 57 00:02:51,840 --> 00:02:54,880 Speaker 1: savings rate, whether you look at debt levels, everything tells 58 00:02:54,919 --> 00:02:57,600 Speaker 1: you the consumers in decent shape. Now, if you started 59 00:02:57,600 --> 00:03:00,680 Speaker 1: to see a slow down and hiring and that started 60 00:03:00,720 --> 00:03:04,239 Speaker 1: to transmit to confidence, you might have to revisit that call, 61 00:03:04,320 --> 00:03:06,600 Speaker 1: but that's not our base case. I think as long 62 00:03:06,639 --> 00:03:09,600 Speaker 1: as the consumer is still growing at the pace it is, 63 00:03:09,919 --> 00:03:12,320 Speaker 1: you can be reasonably confident we're not on the cusp 64 00:03:12,320 --> 00:03:15,519 Speaker 1: of a recession. Let's get some capital allocation calls. We've 65 00:03:15,520 --> 00:03:18,959 Speaker 1: seen these kind of levels a few times through en 66 00:03:18,960 --> 00:03:21,880 Speaker 1: We've tested three thousand a couple of times, three times 67 00:03:21,960 --> 00:03:25,480 Speaker 1: through nineteen, high yield spreads sitting right on top of 68 00:03:25,480 --> 00:03:28,560 Speaker 1: the tights of the year at three fifty four basis 69 00:03:28,600 --> 00:03:31,800 Speaker 1: points tights of the year three forty six. We've seen 70 00:03:31,840 --> 00:03:34,280 Speaker 1: this level a few times this year. We haven't been 71 00:03:34,280 --> 00:03:36,520 Speaker 1: able to hold it. Why is this time different? We 72 00:03:36,640 --> 00:03:38,839 Speaker 1: have and I think it's it's a great question. Look, 73 00:03:38,920 --> 00:03:40,440 Speaker 1: you know it's still you have to the market has 74 00:03:40,440 --> 00:03:42,160 Speaker 1: got to prove that you can break out of this range. 75 00:03:42,160 --> 00:03:44,440 Speaker 1: And this range is really now going on almost two years. 76 00:03:44,720 --> 00:03:46,680 Speaker 1: We set the boundary at least the high back in 77 00:03:47,120 --> 00:03:50,280 Speaker 1: early eighteen, at least globally. My guess is you've got 78 00:03:50,320 --> 00:03:52,960 Speaker 1: a little bit more support this time because some of 79 00:03:52,960 --> 00:03:55,800 Speaker 1: the things that have inhibited the rally over the last 80 00:03:55,880 --> 00:03:57,960 Speaker 1: year and a half two years of starting to fade, 81 00:03:58,080 --> 00:04:01,880 Speaker 1: most importantly trade, If you get a truce that's been 82 00:04:01,920 --> 00:04:04,320 Speaker 1: one of the things that's been inhibiting the market from 83 00:04:04,320 --> 00:04:07,200 Speaker 1: breaking out. That's one factor that might let you move 84 00:04:07,240 --> 00:04:09,720 Speaker 1: on to new hives. And again, I think signs that 85 00:04:09,800 --> 00:04:13,840 Speaker 1: the global economy is stabilizing. We're not talking about a 86 00:04:13,880 --> 00:04:17,120 Speaker 1: sharp search higher. That should also help kind of edge 87 00:04:17,160 --> 00:04:18,880 Speaker 1: higher through the remainder of the year. What do you 88 00:04:18,920 --> 00:04:20,600 Speaker 1: say about the breadth of the market. If you look 89 00:04:20,640 --> 00:04:24,040 Speaker 1: at the value line geometric index, which is great mathematics 90 00:04:24,040 --> 00:04:27,839 Speaker 1: on the median stock of the median equity market, the 91 00:04:28,000 --> 00:04:31,800 Speaker 1: trend ain't so hot compared to the big fangs. The 92 00:04:31,839 --> 00:04:34,680 Speaker 1: big tech move we've seen is well, and there's been 93 00:04:34,680 --> 00:04:37,880 Speaker 1: a sharp split there. Over the last year. There has 94 00:04:37,920 --> 00:04:39,920 Speaker 1: been a slip, and I think this is indicative of 95 00:04:40,320 --> 00:04:42,240 Speaker 1: a couple of things, one of which is we're still 96 00:04:42,640 --> 00:04:45,040 Speaker 1: very much in a winter take all economy where you've 97 00:04:45,080 --> 00:04:48,440 Speaker 1: got some businesses, including some of the fag businesses that 98 00:04:48,480 --> 00:04:51,960 Speaker 1: are in secular growth mode, whether you're talking about cloud computing, 99 00:04:52,320 --> 00:04:55,360 Speaker 1: internet retail, and you've got large parts of the market up. 100 00:04:55,480 --> 00:04:58,440 Speaker 1: Let's take multi line retail that are just challenged from 101 00:04:58,440 --> 00:05:00,560 Speaker 1: a long term basis, and these tra is are probably 102 00:05:00,600 --> 00:05:03,000 Speaker 1: going to stick with us for some time. A Russ 103 00:05:03,000 --> 00:05:05,200 Speaker 1: great to catch up with you, Russ Coastrick blank Rock 104 00:05:05,200 --> 00:05:08,480 Speaker 1: Global Allocation Fund portfolio manager on the lacest in markets. 105 00:05:08,520 --> 00:05:10,559 Speaker 1: Lisa would love your insight on what's happening in fixed 106 00:05:10,560 --> 00:05:13,120 Speaker 1: income right now. How yield spreads half tightened up, but 107 00:05:13,120 --> 00:05:16,039 Speaker 1: there are still some cracks within high yield and within 108 00:05:16,120 --> 00:05:18,479 Speaker 1: leverage loans. That's exactly what I was going to UH 109 00:05:18,720 --> 00:05:21,320 Speaker 1: to talk about. I mean, honestly, you're seeing Fitch, for example, 110 00:05:21,440 --> 00:05:24,080 Speaker 1: increase their default forecast over the next twelve months for 111 00:05:24,160 --> 00:05:26,360 Speaker 1: leverage loans from two to three and a half percent, 112 00:05:26,360 --> 00:05:28,200 Speaker 1: which is a pretty big jump, and it's on some 113 00:05:28,279 --> 00:05:32,200 Speaker 1: specific problems. But you are seeing a certain loans, certain 114 00:05:32,240 --> 00:05:35,200 Speaker 1: bonds fall out of bed today. With Submarine Energy file 115 00:05:35,279 --> 00:05:38,560 Speaker 1: for bankruptcy protection. This is a private coal miner, the 116 00:05:38,560 --> 00:05:42,240 Speaker 1: biggest one going bus. Despite some of the rescue plans 117 00:05:42,279 --> 00:05:45,159 Speaker 1: from President Trump, you're seeing uh PG and E bonds 118 00:05:45,160 --> 00:05:48,040 Speaker 1: absolutely getting crushed in the wake of the potential for 119 00:05:48,160 --> 00:05:52,680 Speaker 1: more damages from the fires in California, disrupting the currency, bankruptcy, 120 00:05:52,800 --> 00:05:55,680 Speaker 1: the current bankruptcy plan, and you know, you're seeing some 121 00:05:55,760 --> 00:05:59,680 Speaker 1: banks getting stuck with with leverage buyout loans on their 122 00:05:59,720 --> 00:06:02,200 Speaker 1: book because people don't want to buy them. The question 123 00:06:02,320 --> 00:06:04,120 Speaker 1: is how I don't want to use the word because 124 00:06:04,120 --> 00:06:10,839 Speaker 1: I think that this might be a drinking game right there? 125 00:06:10,440 --> 00:06:16,320 Speaker 1: Right you wait for the drinks. Do we have time 126 00:06:16,360 --> 00:06:19,920 Speaker 1: to go back to costric on this? Let's go really 127 00:06:20,000 --> 00:06:23,320 Speaker 1: quickly here. The bottom line is Lisa brilliantly brings up 128 00:06:23,320 --> 00:06:27,080 Speaker 1: as idiosyncratic versus systemic risk at epsilon out the back 129 00:06:27,160 --> 00:06:30,040 Speaker 1: of every equation. Is the epsilon out there right now? 130 00:06:30,120 --> 00:06:33,279 Speaker 1: Is this systemic or is it all idiosyncratic the fourteen 131 00:06:33,320 --> 00:06:36,280 Speaker 1: things Lisa mentioned. I think it's largely adiosyncratic. I mean, 132 00:06:36,279 --> 00:06:38,200 Speaker 1: there are pockets of the market where you do want 133 00:06:38,200 --> 00:06:40,560 Speaker 1: to be worried about credit. But most of the instances, 134 00:06:40,560 --> 00:06:42,920 Speaker 1: and again it's probably not a coincidence. We're talking about 135 00:06:42,920 --> 00:06:47,680 Speaker 1: a coal company. They tend to be more idiosyncratic. That's 136 00:06:47,720 --> 00:06:55,279 Speaker 1: called six everybody, can I just explain what this what? 137 00:06:55,360 --> 00:06:58,600 Speaker 1: This game is? A drinking game? On Bloomberg surveymance is 138 00:06:58,640 --> 00:07:02,560 Speaker 1: when the guests says idio and cradic shot can we there? 139 00:07:02,720 --> 00:07:07,640 Speaker 1: And not just a shot? I was laid there? We 140 00:07:07,720 --> 00:07:10,520 Speaker 1: say good morning worldwide to the monkey bar. See a 141 00:07:10,640 --> 00:07:14,800 Speaker 1: monkey bar and he's three. It's pretty good, pretty good. 142 00:07:15,280 --> 00:07:18,000 Speaker 1: The shots there are the size of an old fashioned class. 143 00:07:19,280 --> 00:07:20,600 Speaker 1: Is that what we're going to do on this show? 144 00:07:20,880 --> 00:07:23,760 Speaker 1: I hope not. It could be futures this morning down 145 00:07:23,800 --> 00:07:26,400 Speaker 1: about a tenth of one percent. Russ Greater catch up 146 00:07:26,400 --> 00:07:43,760 Speaker 1: with you. Let's bringing Peter Dixon Shower. We commus Bank 147 00:07:43,800 --> 00:07:46,120 Speaker 1: Global Equities of columists, Peter Greater, catch up with you. 148 00:07:46,200 --> 00:07:49,760 Speaker 1: European out performance got people lining up around a corner 149 00:07:49,800 --> 00:07:52,360 Speaker 1: telling me about that here in the United States. Now, Peter, 150 00:07:52,400 --> 00:07:56,200 Speaker 1: why does that make sense? Well? I guess it makes 151 00:07:56,200 --> 00:07:58,520 Speaker 1: sense because you know, the europe house surprised on the 152 00:07:58,560 --> 00:08:01,360 Speaker 1: outside for for such a such a long time that, 153 00:08:01,760 --> 00:08:05,160 Speaker 1: you know, given that we're seeing the global equities locomotive 154 00:08:05,240 --> 00:08:08,640 Speaker 1: being pulled by the US, um you know the scope 155 00:08:08,680 --> 00:08:11,160 Speaker 1: for Europe to catch up. But I have to say 156 00:08:11,160 --> 00:08:14,840 Speaker 1: that given the concerns that many people have regarding the 157 00:08:14,880 --> 00:08:18,960 Speaker 1: economic outlook in the euro Zone, particularly, well, you know, 158 00:08:19,000 --> 00:08:23,960 Speaker 1: you might find that that European performance doesn't actually materialize. 159 00:08:24,000 --> 00:08:25,640 Speaker 1: So I think it'd be a bit careful about that one. Well, 160 00:08:25,680 --> 00:08:28,040 Speaker 1: let's talk about it, Peter. The sentiment has certainly shifted, 161 00:08:28,040 --> 00:08:31,040 Speaker 1: are you saying the data won't back it up. Yeah, 162 00:08:31,080 --> 00:08:32,720 Speaker 1: I mean, I think that's where we are. I mean, basically, 163 00:08:32,760 --> 00:08:36,080 Speaker 1: the European economy looks very slugly, certainly compared to the 164 00:08:36,160 --> 00:08:38,959 Speaker 1: United States. Um, it's likely that the data out in 165 00:08:39,000 --> 00:08:40,880 Speaker 1: a couple of each time will show that a second 166 00:08:40,880 --> 00:08:45,200 Speaker 1: consecutive quarter of the contraction in German GDP. Now, I 167 00:08:45,240 --> 00:08:47,400 Speaker 1: guess that on the positive side, you could argue that 168 00:08:47,520 --> 00:08:51,839 Speaker 1: because European markets have been hammered by the US China 169 00:08:52,000 --> 00:08:55,840 Speaker 1: trade dispute, the expectation or the hope that we are 170 00:08:55,920 --> 00:08:58,560 Speaker 1: past the worst there might provide Europe with a bit 171 00:08:58,559 --> 00:08:59,880 Speaker 1: of a list. But you know, we're not out of 172 00:09:00,120 --> 00:09:02,400 Speaker 1: was yet. In my Peter, one of the great charms 173 00:09:02,440 --> 00:09:06,680 Speaker 1: here with your economics is the global scale. Basically, all 174 00:09:06,720 --> 00:09:09,719 Speaker 1: the money's moved to large cap us is a stereotype, 175 00:09:10,200 --> 00:09:14,000 Speaker 1: and internationals left and left and left and left behind. 176 00:09:14,840 --> 00:09:17,720 Speaker 1: Is now the time for an international call? Should we 177 00:09:17,800 --> 00:09:22,120 Speaker 1: go long large cap international? Should we go along? E 178 00:09:22,320 --> 00:09:26,600 Speaker 1: m uh long e M. I mean, I think at 179 00:09:26,600 --> 00:09:29,400 Speaker 1: the moment, as long as the federal reserve is in play, 180 00:09:29,440 --> 00:09:30,960 Speaker 1: it doesn't make a lot of sense. So I think 181 00:09:30,960 --> 00:09:33,040 Speaker 1: I probably want to stay clear of the in from now, 182 00:09:33,280 --> 00:09:35,440 Speaker 1: we don't you have more clienty, but whether he fed 183 00:09:35,440 --> 00:09:38,120 Speaker 1: girls in and beyond, that's the time of which you 184 00:09:38,360 --> 00:09:39,520 Speaker 1: might want to do it. You still you know what 185 00:09:39,600 --> 00:09:43,400 Speaker 1: to do anytime soon. With regard to European large caps again, 186 00:09:43,440 --> 00:09:46,600 Speaker 1: I mean I just read what I said before. Um, 187 00:09:46,600 --> 00:09:48,640 Speaker 1: it's not yet the time to get to those more. 188 00:09:48,760 --> 00:09:50,920 Speaker 1: It's because I think there's too much volatility there are 189 00:09:51,000 --> 00:09:53,040 Speaker 1: still think there's too much bad needs to come. The 190 00:09:53,080 --> 00:09:56,839 Speaker 1: corporate earning season is it's look okay, but the downside 191 00:09:56,960 --> 00:09:59,720 Speaker 1: is that they're still downside. Let me cut to the chase. 192 00:09:59,760 --> 00:10:02,080 Speaker 1: Are you selling into this strength? I mean, as John 193 00:10:02,120 --> 00:10:05,800 Speaker 1: Farrell mentioned earlier, on a range bound basis, were buttressed 194 00:10:05,880 --> 00:10:08,040 Speaker 1: up against the top of the range even with sp 195 00:10:08,320 --> 00:10:13,040 Speaker 1: X highs. Are you selling into this good news? It's 196 00:10:13,120 --> 00:10:15,920 Speaker 1: probably not about idea because you know, the COVID towards 197 00:10:15,920 --> 00:10:17,480 Speaker 1: the end of the year, I think a lot of 198 00:10:17,480 --> 00:10:21,480 Speaker 1: equity managers or fun manchers wants to realize the best 199 00:10:21,480 --> 00:10:24,240 Speaker 1: games they can. So it's entirely possible that over the 200 00:10:24,240 --> 00:10:26,800 Speaker 1: course of becoming weeks wants the good news from the 201 00:10:26,880 --> 00:10:28,840 Speaker 1: union seasons out of the way. You know, we start 202 00:10:28,880 --> 00:10:30,840 Speaker 1: to see you where I selling, and certainly, you know, 203 00:10:30,920 --> 00:10:33,880 Speaker 1: I feel a little bit uncomfortable with stock hitting record 204 00:10:33,960 --> 00:10:38,440 Speaker 1: highs given all of the economic concernancy. So I know 205 00:10:38,520 --> 00:10:41,079 Speaker 1: that you're in the equity space on a macro level, 206 00:10:41,160 --> 00:10:44,360 Speaker 1: but just taking a look at the micro with beyond meat, 207 00:10:44,520 --> 00:10:46,920 Speaker 1: I think that that's a really interesting story, and I 208 00:10:46,960 --> 00:10:49,520 Speaker 1: want to know whether it's wait for it, idiosyncratic or 209 00:10:49,559 --> 00:10:53,160 Speaker 1: whether it's endemic of something larger. They actually reported better 210 00:10:53,200 --> 00:10:57,200 Speaker 1: than expected earnings and yet their stock still fell in 211 00:10:57,280 --> 00:11:00,880 Speaker 1: early trading because it had just gotten run up so much. 212 00:11:01,360 --> 00:11:03,439 Speaker 1: Is that something that we are going to see sort 213 00:11:03,480 --> 00:11:07,080 Speaker 1: of the hopium of future growth getting wiped out of 214 00:11:07,080 --> 00:11:09,800 Speaker 1: the market in increasing pockets, particularly in the tax space. 215 00:11:11,200 --> 00:11:14,240 Speaker 1: I think that's entirely possible. I mean, you know, on meats, 216 00:11:14,440 --> 00:11:17,480 Speaker 1: as you said, it is your syncratic stock which has 217 00:11:17,559 --> 00:11:20,240 Speaker 1: yet to show that it can take its products and 218 00:11:20,280 --> 00:11:22,959 Speaker 1: broaden it to a wider audience, but it has a 219 00:11:23,000 --> 00:11:25,720 Speaker 1: lot of potential. Probably is when you've got to stock 220 00:11:25,840 --> 00:11:28,840 Speaker 1: like that, which um you know, which still have potential 221 00:11:28,880 --> 00:11:30,600 Speaker 1: but you know, is trying to get very slow to deliver. 222 00:11:30,800 --> 00:11:33,080 Speaker 1: Once you start to get a big lot of momentum 223 00:11:33,080 --> 00:11:35,199 Speaker 1: behind it, you do find a lot of willing sellers 224 00:11:35,280 --> 00:11:38,079 Speaker 1: when when the when the price which is a certain level, 225 00:11:38,120 --> 00:11:40,920 Speaker 1: and are rather suspectable. That's going to be one of 226 00:11:41,000 --> 00:11:44,280 Speaker 1: the features going forward over the next few weeks, particularly 227 00:11:44,280 --> 00:11:46,080 Speaker 1: as you said in the text space, where there are 228 00:11:46,240 --> 00:11:48,360 Speaker 1: a lot of outfits which have done very well, but 229 00:11:48,679 --> 00:11:52,000 Speaker 1: there are question marks against their you know, their future performance. Peter, 230 00:11:52,000 --> 00:11:53,680 Speaker 1: where do you think the leadership comes from in this 231 00:11:53,760 --> 00:11:55,840 Speaker 1: leg of the rally of it continues? A key question? 232 00:11:56,920 --> 00:11:59,320 Speaker 1: Good question, indeed. I mean it's going to come from 233 00:11:59,320 --> 00:12:01,440 Speaker 1: the US and not outs about that. I mean, I 234 00:12:01,440 --> 00:12:05,560 Speaker 1: think the market overall, um. You know, although I say 235 00:12:05,600 --> 00:12:08,120 Speaker 1: that there are potential for downside, don't I think for 236 00:12:08,160 --> 00:12:10,400 Speaker 1: the moment at least it's probably going to hold up 237 00:12:10,440 --> 00:12:12,920 Speaker 1: for now, um. And I think so long as it 238 00:12:12,960 --> 00:12:14,760 Speaker 1: does hold up, investors will start to looking at the 239 00:12:14,760 --> 00:12:17,000 Speaker 1: pockets of the world, particularly Europe and say, actually, no, 240 00:12:17,360 --> 00:12:18,880 Speaker 1: the US is holding up. Maybe it is a bit 241 00:12:19,160 --> 00:12:21,000 Speaker 1: time to for for a bit of a double But 242 00:12:21,040 --> 00:12:23,960 Speaker 1: if I've just cautioned you know, that could easily turn around. 243 00:12:23,960 --> 00:12:26,040 Speaker 1: And I guess the question is to what extents to 244 00:12:26,360 --> 00:12:28,480 Speaker 1: you know, investors generally rather than you know what I 245 00:12:28,520 --> 00:12:33,040 Speaker 1: think investors think about the US. Peter Dixon, I just 246 00:12:33,120 --> 00:12:35,520 Speaker 1: have to ask one more economic question before we let 247 00:12:35,520 --> 00:12:38,400 Speaker 1: you go. We've seen the pageantry of dragging, handing off 248 00:12:38,840 --> 00:12:42,000 Speaker 1: the brass bell or whatever it is to Madame lendguard is, Well, 249 00:12:42,040 --> 00:12:45,160 Speaker 1: how critical is this December twelfth meeting for that equity 250 00:12:45,200 --> 00:12:49,760 Speaker 1: confidence in Europe? Is the December twelve ECB meeting one 251 00:12:49,800 --> 00:12:52,080 Speaker 1: that they just get through and move on or could 252 00:12:52,120 --> 00:12:56,040 Speaker 1: it actually have substance? Well, I think it's definitely one 253 00:12:56,080 --> 00:12:59,160 Speaker 1: that they just have to get through because basically to 254 00:12:59,240 --> 00:13:01,360 Speaker 1: see that God has been handed a legacy that she 255 00:13:01,480 --> 00:13:04,080 Speaker 1: has to deal with, it's very difficult to know exactly 256 00:13:04,080 --> 00:13:05,800 Speaker 1: you know what she's going to be differently to draw. 257 00:13:06,520 --> 00:13:09,520 Speaker 1: So I think Marcus look at this meeting and saying, well, 258 00:13:09,559 --> 00:13:11,640 Speaker 1: let's hope she doesn't drop the ball um the like 259 00:13:12,000 --> 00:13:14,240 Speaker 1: is she wants. She's a very experienced operator, but she's 260 00:13:14,240 --> 00:13:16,199 Speaker 1: not gonna do anything visible once she's got it. It's 261 00:13:16,200 --> 00:13:19,439 Speaker 1: just a question if you know the pitfalls. Peter, Thank 262 00:13:19,480 --> 00:13:21,600 Speaker 1: you so much. Peter Dixon and Commerce Bank this morning 263 00:13:21,600 --> 00:13:37,560 Speaker 1: on the equity markets, p M E S is a 264 00:13:37,600 --> 00:13:40,800 Speaker 1: reason to bring in Matthew Lozetti of Deutsche Bank because 265 00:13:40,840 --> 00:13:43,600 Speaker 1: his front and center. He's got that chart to cut 266 00:13:43,640 --> 00:13:45,319 Speaker 1: to the Jape, Matthew, and then we could talk to 267 00:13:45,360 --> 00:13:48,120 Speaker 1: you for two hours this morning. The first and second 268 00:13:48,120 --> 00:13:51,160 Speaker 1: derivatives of global p M s are not pretty, are they. 269 00:13:51,320 --> 00:13:54,040 Speaker 1: I think you have seen some stabilization in the global 270 00:13:54,040 --> 00:13:56,199 Speaker 1: PM eyes. If you look at global manufacturing, it's been 271 00:13:56,320 --> 00:13:58,439 Speaker 1: kind of bouncing around it at low levels over the 272 00:13:58,480 --> 00:14:01,800 Speaker 1: past few months. I think you will continue to see that. 273 00:14:01,840 --> 00:14:05,120 Speaker 1: You've seen US data on the sentiment side a bit 274 00:14:05,160 --> 00:14:08,480 Speaker 1: mixed recently, but the I s M we think bounces 275 00:14:08,480 --> 00:14:10,920 Speaker 1: back a little bit um later this this week as 276 00:14:10,920 --> 00:14:12,920 Speaker 1: well on Friday, which would be an important data point. 277 00:14:13,480 --> 00:14:15,840 Speaker 1: All told, I think what we're seeing for the US 278 00:14:15,880 --> 00:14:18,760 Speaker 1: growth outlook is you you still have a deceleration built in. 279 00:14:19,400 --> 00:14:21,640 Speaker 1: The Phase one deal we got in place at this 280 00:14:21,720 --> 00:14:23,840 Speaker 1: point was not enough, I think to flip that second 281 00:14:23,840 --> 00:14:26,480 Speaker 1: derivative in a more positive direction. What's the second derivative 282 00:14:26,520 --> 00:14:29,960 Speaker 1: of the chairman's press conference tomorrow? I mean, it's extraordinary 283 00:14:30,000 --> 00:14:33,600 Speaker 1: you people nail the mid cycle importance of this. How 284 00:14:33,640 --> 00:14:37,840 Speaker 1: can we mid be mid cycle umpteen years into a lift? 285 00:14:39,080 --> 00:14:43,280 Speaker 1: It's it's a good question. I think there's a emerging view. 286 00:14:43,320 --> 00:14:46,080 Speaker 1: I think that pal is going to orchestrate a hawkish 287 00:14:46,160 --> 00:14:49,920 Speaker 1: cut um tomorrow. We think that he does raise the 288 00:14:49,960 --> 00:14:52,320 Speaker 1: bar for another cut. I think when you look at 289 00:14:52,320 --> 00:14:56,120 Speaker 1: the committee, they have framed this as as three great cuts. 290 00:14:56,160 --> 00:14:57,680 Speaker 1: But I think it's far too early for him to 291 00:14:57,680 --> 00:15:00,320 Speaker 1: take December off the table. We still have on knees 292 00:15:00,360 --> 00:15:03,080 Speaker 1: on the trade front and Brexit. The data has continued 293 00:15:03,280 --> 00:15:06,080 Speaker 1: to decelerate and the market is only pricing about six 294 00:15:06,120 --> 00:15:08,160 Speaker 1: basis points at this point, so the Fed doesn't really 295 00:15:08,160 --> 00:15:10,520 Speaker 1: need to actively push against that pricing. John, if we 296 00:15:10,520 --> 00:15:12,800 Speaker 1: start a band, can we please call it hawkish cut? 297 00:15:12,880 --> 00:15:16,480 Speaker 1: We can call it what did God's name, Matthew? Was 298 00:15:16,520 --> 00:15:19,880 Speaker 1: a hawkish cut or a dovish hike? For our listeners 299 00:15:19,880 --> 00:15:21,880 Speaker 1: that have just tuned in, this is the Fed coal 300 00:15:22,040 --> 00:15:25,680 Speaker 1: From Deutsche Bank's chief US economist, Mattenzeti. Go On continued 301 00:15:27,360 --> 00:15:30,280 Speaker 1: that that is that's definitely the prevailing market view. Uh, 302 00:15:30,360 --> 00:15:34,360 Speaker 1: the idea that they will cut but guide towards less 303 00:15:34,400 --> 00:15:37,200 Speaker 1: likelihood of cuts over the next few months. I think 304 00:15:37,240 --> 00:15:38,840 Speaker 1: that the market has gone a little bit too far 305 00:15:39,000 --> 00:15:41,840 Speaker 1: on that point. You know, on on these uncertainties that 306 00:15:41,840 --> 00:15:44,240 Speaker 1: that they've been worried about. They're still there, as you noted, 307 00:15:44,280 --> 00:15:47,320 Speaker 1: global growth remains low in the U S data. You 308 00:15:47,360 --> 00:15:49,880 Speaker 1: know tomorrow for US GDP we're likely to print we 309 00:15:49,960 --> 00:15:54,600 Speaker 1: think at one point UM with equipment spending and capex 310 00:15:54,640 --> 00:15:57,640 Speaker 1: being actually negative in that that story, so that I 311 00:15:57,720 --> 00:16:00,200 Speaker 1: think in an environment in which he'd be and the 312 00:16:00,200 --> 00:16:03,040 Speaker 1: COMMUNEY should be reluctant to to firmly back off about 313 00:16:03,080 --> 00:16:05,600 Speaker 1: the Dovish guidance. Do you think that at this point 314 00:16:05,880 --> 00:16:09,840 Speaker 1: the Fed has the capacity to allow inflation to increase 315 00:16:09,960 --> 00:16:12,320 Speaker 1: or is that totally out of their purview given the 316 00:16:12,360 --> 00:16:15,160 Speaker 1: fact they have been unable to do so until now. 317 00:16:16,280 --> 00:16:18,760 Speaker 1: I don't think it's totally out of their purview, UM, 318 00:16:18,800 --> 00:16:22,080 Speaker 1: but it is significantly outside of what they can control. 319 00:16:22,720 --> 00:16:25,080 Speaker 1: The San Francisco Fed has done this nice analysis about 320 00:16:25,120 --> 00:16:28,680 Speaker 1: pro cyclical versus a cyclical UH components. We've we've done 321 00:16:28,680 --> 00:16:31,080 Speaker 1: some work UM which I think suggests that the FED 322 00:16:31,160 --> 00:16:33,680 Speaker 1: can influence even more than what the San Francisco Fed 323 00:16:33,760 --> 00:16:37,360 Speaker 1: thinks UM. But the the extent which they can do 324 00:16:37,400 --> 00:16:40,400 Speaker 1: that is is very limited, particularly in a world where 325 00:16:40,400 --> 00:16:44,040 Speaker 1: healthcare inflation is a key driver UM and is largely 326 00:16:44,080 --> 00:16:47,400 Speaker 1: dictated by healthcare policy. Not necessarily the business. When you 327 00:16:47,480 --> 00:16:50,000 Speaker 1: ex out healthcare, what's the inflation run rate? We've got 328 00:16:50,000 --> 00:16:53,440 Speaker 1: Cleveland and Dallas trimmed up, up up. Everybody listening to 329 00:16:53,480 --> 00:16:58,560 Speaker 1: this program across America knows that higher inflation rate they're living, 330 00:16:58,640 --> 00:17:02,080 Speaker 1: think tuitions and down below you've got this core number 331 00:17:02,080 --> 00:17:05,160 Speaker 1: of guys like you are looking at X out healthcare. 332 00:17:05,560 --> 00:17:10,040 Speaker 1: What's the disinflation right well, in in for core pc 333 00:17:10,320 --> 00:17:13,200 Speaker 1: it's actually pretty close to what the core cp reading 334 00:17:13,280 --> 00:17:16,439 Speaker 1: is showing. For course, CPI is actually a much different 335 00:17:16,440 --> 00:17:20,320 Speaker 1: story because there you've had health health insurance inflation has 336 00:17:20,320 --> 00:17:23,120 Speaker 1: been rising ten percent year on year or sorry, year 337 00:17:23,160 --> 00:17:26,800 Speaker 1: on year, uh, and it's adding about thirty basis points 338 00:17:26,800 --> 00:17:29,439 Speaker 1: of the core CPI index. So if you x that 339 00:17:29,520 --> 00:17:31,600 Speaker 1: out of course c p I, we're we're closer to 340 00:17:32,240 --> 00:17:36,080 Speaker 1: two point two. One. Of course, CPI I haven't been 341 00:17:36,080 --> 00:17:38,879 Speaker 1: the current reading that we were seeing. This has been great, Matte, 342 00:17:38,960 --> 00:17:42,000 Speaker 1: Thank you so much, really really appreciative, brilliant work from 343 00:17:42,040 --> 00:17:58,040 Speaker 1: Deutsche Bank. Right now. This is a really fascinating interview, 344 00:17:58,040 --> 00:18:00,960 Speaker 1: and it is a fascinating story that's always been a 345 00:18:01,000 --> 00:18:03,399 Speaker 1: little bit of that Florida hype. It is auto nation 346 00:18:03,560 --> 00:18:06,040 Speaker 1: peaking in two thousand and fifteen. It's been a challenge 347 00:18:06,080 --> 00:18:10,159 Speaker 1: since then giving way to their esteem of finance professional. 348 00:18:10,200 --> 00:18:12,639 Speaker 1: Her name is Cheryl Miller out of James Addison and 349 00:18:12,720 --> 00:18:17,680 Speaker 1: joins us today on three auto dealerships. Everybody knows it's 350 00:18:17,680 --> 00:18:22,240 Speaker 1: a fractious, wonderfully visceral company as well. What was the 351 00:18:22,320 --> 00:18:25,600 Speaker 1: first day like taking over? How many phone calls did 352 00:18:25,600 --> 00:18:29,199 Speaker 1: you get from? How many dealers are? I need this, 353 00:18:29,240 --> 00:18:30,919 Speaker 1: I need this, I need this now? What was the 354 00:18:30,960 --> 00:18:33,320 Speaker 1: first day like? The great thing about the first day 355 00:18:33,480 --> 00:18:36,760 Speaker 1: was twenty six thousand people emailed me, the associates of 356 00:18:36,800 --> 00:18:39,480 Speaker 1: Auto Nation and a lot of our field leadership teams, 357 00:18:39,480 --> 00:18:42,399 Speaker 1: associates in the stores. That was amazing. Everyone from the 358 00:18:42,440 --> 00:18:44,560 Speaker 1: industry who I had known for years emailed me and 359 00:18:44,600 --> 00:18:47,840 Speaker 1: said what are you going to force? And and it 360 00:18:47,960 --> 00:18:51,280 Speaker 1: was fantastic. And I was right there with Mike Jackson, 361 00:18:51,359 --> 00:18:54,000 Speaker 1: are amazing executive tare now and so it was a 362 00:18:54,080 --> 00:18:55,920 Speaker 1: really great current. This is this is Its been a 363 00:18:55,960 --> 00:18:58,000 Speaker 1: great first day. But this has been controversial as a 364 00:18:58,119 --> 00:19:00,400 Speaker 1: roll up when isn't getting all that you're ago? It's 365 00:19:00,440 --> 00:19:02,440 Speaker 1: a roll up of the auto industry. I got a 366 00:19:02,520 --> 00:19:04,960 Speaker 1: number of ways to go here. First the business and 367 00:19:05,000 --> 00:19:07,520 Speaker 1: then the financials. What what I really want to know 368 00:19:07,840 --> 00:19:10,480 Speaker 1: into me? The history is always wants on the lots, 369 00:19:10,920 --> 00:19:15,239 Speaker 1: what's the inventory look like? Of course your dealerships right 370 00:19:15,320 --> 00:19:18,080 Speaker 1: now it looks seven thousand units lower than it did 371 00:19:18,160 --> 00:19:20,400 Speaker 1: last How did you do that? On price? Move them out? 372 00:19:20,920 --> 00:19:23,080 Speaker 1: So we we actually we did. We did a combination thing, 373 00:19:23,200 --> 00:19:25,879 Speaker 1: so we we priced smartly and if you look at 374 00:19:25,920 --> 00:19:28,679 Speaker 1: our new vehicle sales, you've got an optimal balance between 375 00:19:28,840 --> 00:19:31,920 Speaker 1: units and pricing. So we had pretty solid pricing. But 376 00:19:32,000 --> 00:19:34,760 Speaker 1: we also ordered smart so we centrally ordered and we 377 00:19:34,840 --> 00:19:36,520 Speaker 1: really manage that. So if you think about our day 378 00:19:36,560 --> 00:19:39,639 Speaker 1: suppliance at fifty five days versus sixty three last year, 379 00:19:39,680 --> 00:19:42,800 Speaker 1: then where would that have been ten years ago? You know, 380 00:19:42,880 --> 00:19:46,160 Speaker 1: giving you slow downcially, fifty five to sixty five would 381 00:19:46,200 --> 00:19:48,440 Speaker 1: be the normal balance of what you want in automotive 382 00:19:48,480 --> 00:19:51,480 Speaker 1: new and when it gets to seventy eight five you 383 00:19:51,520 --> 00:19:54,200 Speaker 1: start to get nervous your business down. The income statement 384 00:19:54,280 --> 00:19:56,119 Speaker 1: is a five cents on the dollar business. I mean 385 00:19:56,160 --> 00:19:57,960 Speaker 1: you've got net income if you come up a little 386 00:19:58,000 --> 00:20:00,119 Speaker 1: bit the market. You know, it's like a grocer your 387 00:20:00,200 --> 00:20:05,600 Speaker 1: store business almost how are you holding margins? And on 388 00:20:05,720 --> 00:20:08,679 Speaker 1: a differential basis trying to improve margins right now, how 389 00:20:08,720 --> 00:20:11,119 Speaker 1: do you s this? So the great thing as a retailers, 390 00:20:11,160 --> 00:20:13,439 Speaker 1: we have a service component to our business, so margins, 391 00:20:13,520 --> 00:20:16,000 Speaker 1: so you're charging more for our for my portion. What 392 00:20:16,200 --> 00:20:18,879 Speaker 1: is an hourly cost on a Porsche to service it 393 00:20:19,000 --> 00:20:21,119 Speaker 1: at automation depends what you need done on it, so 394 00:20:21,240 --> 00:20:22,879 Speaker 1: we we blend the labor. So if you need to 395 00:20:23,240 --> 00:20:26,120 Speaker 1: blend the labor while you blend me the free coffee. Right. Yeah, 396 00:20:26,119 --> 00:20:27,520 Speaker 1: if you need an oil change, we're not going to 397 00:20:27,640 --> 00:20:29,480 Speaker 1: charge you the same as if you need a skilled tech. 398 00:20:29,760 --> 00:20:31,760 Speaker 1: But if you're working on a complex vehicle, if you're 399 00:20:31,760 --> 00:20:34,960 Speaker 1: working on a nine eleven, or if you're working autonomous, 400 00:20:36,560 --> 00:20:39,640 Speaker 1: we we don't usually give our blended right, but don't 401 00:20:39,680 --> 00:20:42,159 Speaker 1: give your blended rates. I got the blended right the 402 00:20:42,240 --> 00:20:44,960 Speaker 1: other day. Yeah, I would say it depends what you 403 00:20:45,040 --> 00:20:46,960 Speaker 1: need done, and the blended rate barries depending on what 404 00:20:47,040 --> 00:20:50,120 Speaker 1: we're working on. I'm not going to not at least 405 00:20:50,119 --> 00:20:52,520 Speaker 1: to take over here with Sheryl Miller of automation. I'm 406 00:20:52,520 --> 00:20:54,520 Speaker 1: not going to ask about your detailing and your rims, 407 00:20:54,560 --> 00:20:56,639 Speaker 1: that you got a near on your car or we 408 00:20:56,680 --> 00:20:58,479 Speaker 1: need to get him another one. I mean they all 409 00:20:58,520 --> 00:21:00,800 Speaker 1: say services great, and then effect as you get the 410 00:21:00,840 --> 00:21:03,720 Speaker 1: bill and you're like, WHOA, well it might be great, 411 00:21:03,880 --> 00:21:08,160 Speaker 1: but you know, great digital and transparency. It's a great point. 412 00:21:08,560 --> 00:21:12,880 Speaker 1: I'm curious about sort of how you're getting consumers to buy. 413 00:21:13,080 --> 00:21:16,320 Speaker 1: Are you extending more loans at this point in order 414 00:21:16,480 --> 00:21:19,800 Speaker 1: to finance those purchases. So credit is healthy, and the 415 00:21:19,840 --> 00:21:23,000 Speaker 1: reality of our industry is the majority of vehicles are 416 00:21:23,080 --> 00:21:25,320 Speaker 1: purchased on credit. I feel good about the state of credit. 417 00:21:25,400 --> 00:21:28,040 Speaker 1: So I was just meeting two weeks ago with the 418 00:21:28,080 --> 00:21:29,959 Speaker 1: CEO of one of the largest lenders in the country, 419 00:21:30,400 --> 00:21:33,280 Speaker 1: and his indication was credit looks solid. So you hear 420 00:21:33,400 --> 00:21:36,119 Speaker 1: some noise sometimes out of the industry about it, but 421 00:21:36,160 --> 00:21:37,879 Speaker 1: it's actually in pretty good shape right now. So we 422 00:21:38,000 --> 00:21:42,199 Speaker 1: feel good about the consumer. We feel good about affordability generally, 423 00:21:42,320 --> 00:21:45,040 Speaker 1: understanding that people are opting for nearly new so not 424 00:21:45,160 --> 00:21:50,440 Speaker 1: everyone is able to afford news it's a nice use. 425 00:21:50,720 --> 00:21:53,359 Speaker 1: But when you think about the traditional use, sometimes you 426 00:21:53,400 --> 00:21:55,440 Speaker 1: think about a twelve year old years vehicle. We're talking 427 00:21:55,480 --> 00:21:58,240 Speaker 1: about a three year old w pioneered this. They came 428 00:21:58,240 --> 00:22:01,400 Speaker 1: out with certified cree end Yes, ified pre on. That's 429 00:22:01,440 --> 00:22:05,120 Speaker 1: the future. Isn't have you priced most of America out 430 00:22:05,160 --> 00:22:07,800 Speaker 1: of the average cost of an average car that people 431 00:22:07,880 --> 00:22:11,240 Speaker 1: aspire to Well, I would say BMW probably isn't. Isn't 432 00:22:11,320 --> 00:22:13,399 Speaker 1: just the average. So if you think about it, we 433 00:22:13,480 --> 00:22:16,200 Speaker 1: offer thirty one brands and so we offer something for everyone. 434 00:22:16,320 --> 00:22:18,400 Speaker 1: So if you have children and you need a third 435 00:22:18,480 --> 00:22:20,080 Speaker 1: row seat, we have it. If you want to go 436 00:22:20,160 --> 00:22:23,720 Speaker 1: with something smaller with better fuel econo, we want the 437 00:22:23,800 --> 00:22:31,920 Speaker 1: car with no children. Yeah, so you're definitely, we definitely 438 00:22:31,960 --> 00:22:33,600 Speaker 1: have something for both of you. Well, I'm trying to 439 00:22:33,760 --> 00:22:36,719 Speaker 1: understand if you're not concerned about consumer credit, even though 440 00:22:36,760 --> 00:22:39,760 Speaker 1: we have seen delinquencies and serious delinquencies among auto loans 441 00:22:39,800 --> 00:22:42,800 Speaker 1: pick up quite a bit. Uh, and you're seeing robust demand, 442 00:22:43,400 --> 00:22:46,159 Speaker 1: what is a potential risk that you have your eye on. 443 00:22:46,480 --> 00:22:48,240 Speaker 1: So I would say, just to be clear, you're seeing 444 00:22:48,240 --> 00:22:51,120 Speaker 1: an increase from historically low rates. So as people talk 445 00:22:51,200 --> 00:22:54,480 Speaker 1: about delinquency rates, they hit such a low point that yeah, 446 00:22:54,480 --> 00:22:57,520 Speaker 1: they're certainly increasing, but they're not increasing to the point 447 00:22:57,600 --> 00:23:00,320 Speaker 1: where it's completely concerning. It's something we always keep our 448 00:23:00,440 --> 00:23:03,440 Speaker 1: eyes out on. And I would say from a consumer perspective, 449 00:23:04,040 --> 00:23:06,000 Speaker 1: we are in plateau. So if you think about new 450 00:23:06,080 --> 00:23:08,480 Speaker 1: vehicle sales were definitely in plateau. You did see the 451 00:23:08,560 --> 00:23:11,240 Speaker 1: strength in use vehicle sales. So total market is fine. 452 00:23:11,560 --> 00:23:14,000 Speaker 1: Customers are employed, so when consumers come in the stores, 453 00:23:14,040 --> 00:23:16,000 Speaker 1: they have jobs. They need to get to those jobs 454 00:23:16,080 --> 00:23:19,240 Speaker 1: with via. Nothing worries you. There's a number of things 455 00:23:19,359 --> 00:23:22,199 Speaker 1: that that worry me. But I'm not nowhere near as 456 00:23:22,200 --> 00:23:23,760 Speaker 1: worried as I was at the end of last year. 457 00:23:24,119 --> 00:23:27,600 Speaker 1: So now that I have to interest rate cuts rather 458 00:23:27,720 --> 00:23:29,840 Speaker 1: than three hikes, I feel like there's a little bit 459 00:23:29,960 --> 00:23:32,960 Speaker 1: of a tail in, but definitely healthy consumer. There's been 460 00:23:33,000 --> 00:23:35,720 Speaker 1: some volatility out in the broader landscape, and you have 461 00:23:35,800 --> 00:23:38,000 Speaker 1: to be worried about it. Let's go away from the 462 00:23:38,080 --> 00:23:40,479 Speaker 1: fancy cars and F one I just put on your 463 00:23:40,480 --> 00:23:44,120 Speaker 1: wonderful website and in there, I mean, it's the vanilla 464 00:23:44,160 --> 00:23:48,320 Speaker 1: of Vana. How do you make profit on these trucks 465 00:23:48,600 --> 00:23:51,399 Speaker 1: that Detroit tells us is where all the profit is? 466 00:23:51,920 --> 00:23:54,600 Speaker 1: And do you make the profit by the price you 467 00:23:54,720 --> 00:23:57,359 Speaker 1: buy it from the automakers? Do you make it on 468 00:23:57,760 --> 00:23:59,960 Speaker 1: add ons and all that? Where's the profit come from? 469 00:24:00,280 --> 00:24:03,040 Speaker 1: It's a great question. So the F one F one 470 00:24:03,119 --> 00:24:06,359 Speaker 1: fifty is the top selling vehicle in America. And it 471 00:24:06,440 --> 00:24:09,800 Speaker 1: continues to be so. So we make money some money 472 00:24:09,800 --> 00:24:11,840 Speaker 1: on the front of selling that vehicle. But the good 473 00:24:11,880 --> 00:24:15,240 Speaker 1: thing for customers pricing wise is dealers don't don't charge 474 00:24:15,280 --> 00:24:16,720 Speaker 1: a lot of markup on the front of that. We 475 00:24:16,840 --> 00:24:19,760 Speaker 1: do make money for arranging the financing. We also make 476 00:24:19,800 --> 00:24:24,360 Speaker 1: money on the services. Is really what it's become, right, Yeah, 477 00:24:24,480 --> 00:24:27,040 Speaker 1: it's a lot. A lot of our profitability is from service. 478 00:24:27,160 --> 00:24:29,879 Speaker 1: Do you need immigrants to keep your service going? I mean, 479 00:24:29,920 --> 00:24:31,920 Speaker 1: where are you on immigration and the emotion of that 480 00:24:32,040 --> 00:24:34,239 Speaker 1: in Florida? Yes, So what we need to keep our 481 00:24:34,280 --> 00:24:37,639 Speaker 1: service business business going is amazing. Technicians and technicians are 482 00:24:37,840 --> 00:24:40,720 Speaker 1: harder to combine. We get them from all different places. 483 00:24:40,760 --> 00:24:42,440 Speaker 1: We get them from the military. The military is a 484 00:24:42,560 --> 00:24:45,119 Speaker 1: great source for technicians. We get them from trade schools 485 00:24:45,320 --> 00:24:48,120 Speaker 1: and we also build them internally. So we train people internally. 486 00:24:49,920 --> 00:24:51,720 Speaker 1: Should I tell with the day I put the screw 487 00:24:51,840 --> 00:24:56,480 Speaker 1: down the Barracuda Chrysler Distributor cap engine, I want to 488 00:24:56,520 --> 00:24:58,520 Speaker 1: hear this. I don't know that you're qualified to be 489 00:24:58,600 --> 00:25:01,680 Speaker 1: one of our technic Really, you don't think so? My 490 00:25:01,840 --> 00:25:06,120 Speaker 1: father said, used the magnetic screwdriver. No, I didn't. Sweeney 491 00:25:06,200 --> 00:25:10,440 Speaker 1: knows this story. I mean used the magnetic screwdriver. Now 492 00:25:12,000 --> 00:25:14,320 Speaker 1: if you lift the hood these days, it's really hard 493 00:25:14,359 --> 00:25:16,399 Speaker 1: to work on the vehicles. And if you think about 494 00:25:16,920 --> 00:25:22,520 Speaker 1: our relationship with Weymo so Alphabets independent subsidiary and autonomous vehicles, 495 00:25:22,560 --> 00:25:25,600 Speaker 1: we're doing the servicing for them and we've been doing 496 00:25:25,680 --> 00:25:28,520 Speaker 1: that in Phoenix forever two years now. Sure, Miller, thank 497 00:25:28,560 --> 00:25:33,160 Speaker 1: you so much. Is with Auto Nations three dealers worldwide. 498 00:25:33,480 --> 00:25:36,160 Speaker 1: They do such a job at the bent leypol We're 499 00:25:36,160 --> 00:25:41,480 Speaker 1: going to keep it in Tophan, honestly detailing. It's just 500 00:25:55,480 --> 00:25:58,000 Speaker 1: right now we're going beyond no not going out to 501 00:25:58,000 --> 00:26:02,720 Speaker 1: the McDonald's on Third Avenue. We'll breaking barriers, were defying convention, Paul. 502 00:26:02,800 --> 00:26:08,159 Speaker 1: We are shattering expectations, and it's just gotta be beyond 503 00:26:08,280 --> 00:26:12,159 Speaker 1: meat crumbles, their beefy what is it dog food? I 504 00:26:12,240 --> 00:26:15,040 Speaker 1: mean there we are beyond meat. They got they got everything, 505 00:26:15,119 --> 00:26:16,840 Speaker 1: it seems like, and they had a beyond It was 506 00:26:16,920 --> 00:26:20,000 Speaker 1: a very good quarter last night. Yet the stock features 507 00:26:20,000 --> 00:26:23,119 Speaker 1: are down, something about a lock up period expiring or 508 00:26:23,240 --> 00:26:28,359 Speaker 1: beyond meat, Mediterranean skewers, they got it all. Jen bartashes 509 00:26:28,359 --> 00:26:32,000 Speaker 1: Bloomberg Intelligence, joins us on the phone. Jen covers all 510 00:26:32,080 --> 00:26:35,360 Speaker 1: the restaurants and the consumer stuff, and uh, she really 511 00:26:35,400 --> 00:26:37,480 Speaker 1: knows this Beyond Meat story. So Jen, give us a sense. 512 00:26:37,520 --> 00:26:39,520 Speaker 1: I thought they had a pretty good quarter, actually a 513 00:26:39,560 --> 00:26:41,639 Speaker 1: very good quarter last night. What's going on with the stock? 514 00:26:42,040 --> 00:26:44,280 Speaker 1: Good morning? Yeah, So Beyond Meat actually did have a 515 00:26:44,359 --> 00:26:46,800 Speaker 1: really good quarter last night. Um. They had positive net 516 00:26:46,840 --> 00:26:49,359 Speaker 1: income for the first time in their company's history. And 517 00:26:49,480 --> 00:26:51,159 Speaker 1: one of the concerns around the company is, you know, 518 00:26:51,280 --> 00:26:54,280 Speaker 1: the path to profitability um, and they made great strides 519 00:26:54,320 --> 00:26:57,040 Speaker 1: towards that. Um. You know what's swaying down the stock 520 00:26:57,119 --> 00:26:59,680 Speaker 1: you as you mentioned, Paul, it's it's about the expiration 521 00:26:59,720 --> 00:27:01,879 Speaker 1: of the buck up period from the I p o UM, 522 00:27:01,920 --> 00:27:04,560 Speaker 1: the opportunity for those initial stakeholders to sell some of 523 00:27:04,640 --> 00:27:08,520 Speaker 1: those shares UM, as well as increased concerns about the 524 00:27:08,560 --> 00:27:10,720 Speaker 1: competition and some of the big players that are getting 525 00:27:10,760 --> 00:27:13,600 Speaker 1: into this space. Well, the competition story, I know that 526 00:27:13,720 --> 00:27:16,160 Speaker 1: was that's been out there is risk number one from 527 00:27:16,720 --> 00:27:19,359 Speaker 1: day one. I'm just kind of wondering what's changed. What 528 00:27:19,480 --> 00:27:21,560 Speaker 1: did they get on a call yesterday maybe spook people 529 00:27:21,680 --> 00:27:24,960 Speaker 1: with some commentary about competition. Well, I think they were 530 00:27:25,000 --> 00:27:28,359 Speaker 1: trying to head off concerns about about competition, But you're right, 531 00:27:28,400 --> 00:27:30,639 Speaker 1: it has been there from the very beginning. And I 532 00:27:30,720 --> 00:27:32,840 Speaker 1: think one of the things that that Beyond Meat has 533 00:27:32,920 --> 00:27:36,240 Speaker 1: to its advantages is that when people try something that 534 00:27:36,440 --> 00:27:39,159 Speaker 1: is a brand new kind of product, UM, when they 535 00:27:39,359 --> 00:27:42,640 Speaker 1: adopt it for home at home consumption, they generally stick 536 00:27:42,680 --> 00:27:45,560 Speaker 1: with the one that they've tried. UM. It's it's harder 537 00:27:45,600 --> 00:27:47,720 Speaker 1: to get people to just explore and go into a 538 00:27:47,800 --> 00:27:51,080 Speaker 1: new product without any experience with it. And so that 539 00:27:51,240 --> 00:27:53,480 Speaker 1: is one of the advantages Beyond Meat has against some 540 00:27:53,600 --> 00:27:56,600 Speaker 1: of these bigger CpG companies that are bringing their own 541 00:27:56,640 --> 00:27:59,399 Speaker 1: products to market. UM that they've had the chance to 542 00:27:59,480 --> 00:28:02,040 Speaker 1: try it in a restaurant, um and and then have 543 00:28:02,240 --> 00:28:04,200 Speaker 1: a comfort level preparing it at home. I mean, I 544 00:28:04,240 --> 00:28:06,720 Speaker 1: got to look at this thing from sixty feet and Jen, 545 00:28:07,040 --> 00:28:09,720 Speaker 1: you know you're you're very good at this. The moonshot 546 00:28:09,920 --> 00:28:13,280 Speaker 1: of expectations took it up to a price to sales 547 00:28:13,359 --> 00:28:16,760 Speaker 1: of sixteen and with growing sales, as you say, they're 548 00:28:16,800 --> 00:28:20,960 Speaker 1: delivering on the dream. Great, they're almost downded to reality 549 00:28:21,160 --> 00:28:24,480 Speaker 1: seven times eight times price to sales. I mean, when 550 00:28:24,560 --> 00:28:28,840 Speaker 1: does this thing get priced more as a traditional food 551 00:28:29,080 --> 00:28:33,800 Speaker 1: analysis versus all the hooplah. Well, it's a good question, 552 00:28:33,880 --> 00:28:35,880 Speaker 1: and I think part of that is there's a little 553 00:28:35,920 --> 00:28:38,760 Speaker 1: bit of time to go. You know. Part of what's 554 00:28:38,800 --> 00:28:41,960 Speaker 1: interesting about this this particular company is that it's more 555 00:28:42,160 --> 00:28:45,240 Speaker 1: like a technology company than a food company, and that's 556 00:28:45,280 --> 00:28:47,280 Speaker 1: part of what sparked so much of the interest in 557 00:28:47,360 --> 00:28:50,000 Speaker 1: it is the innovation and the fact that they're bringing 558 00:28:50,120 --> 00:28:54,240 Speaker 1: something to this this sector that is revolutionary and hasn't 559 00:28:54,440 --> 00:28:57,720 Speaker 1: really um in an industry that really hasn't changed that 560 00:28:57,840 --> 00:29:00,120 Speaker 1: much over the year. So I think that you're the 561 00:29:00,200 --> 00:29:02,640 Speaker 1: answer to that question is that it's still going to 562 00:29:02,680 --> 00:29:04,560 Speaker 1: be a little bit of time before it settles into 563 00:29:04,760 --> 00:29:07,360 Speaker 1: being considered a troop here to some of the other 564 00:29:07,400 --> 00:29:10,800 Speaker 1: companies in this space. So gender we have a comfort 565 00:29:10,880 --> 00:29:14,280 Speaker 1: level as investors in this new space that this is 566 00:29:14,840 --> 00:29:19,080 Speaker 1: not a fad, that this represents the synthetic food, synthetic 567 00:29:19,160 --> 00:29:23,160 Speaker 1: meat represents a real long term category within I guess 568 00:29:23,200 --> 00:29:27,840 Speaker 1: the food sector. Well, the underlying trends and the demographics 569 00:29:27,920 --> 00:29:30,240 Speaker 1: of who's buying, you know, who are buying these products 570 00:29:30,680 --> 00:29:32,760 Speaker 1: really suggest at this point that this is a long 571 00:29:32,960 --> 00:29:36,400 Speaker 1: term trend and not necessarily a fad. Um You've got, 572 00:29:36,680 --> 00:29:39,360 Speaker 1: it's a younger generation. It's a more affluent generation that 573 00:29:39,480 --> 00:29:42,600 Speaker 1: tends to to to purchase these products UM. Families tend 574 00:29:42,680 --> 00:29:45,360 Speaker 1: to purchase these products UM. And at the same time, 575 00:29:45,440 --> 00:29:47,640 Speaker 1: at the other end of the demographic spectrum, you have 576 00:29:47,800 --> 00:29:50,440 Speaker 1: baby boomers who are starting to retire and are paying 577 00:29:50,480 --> 00:29:54,400 Speaker 1: more attention to health concerns, and many people are looking 578 00:29:54,440 --> 00:29:56,920 Speaker 1: for an opportunity to make a small improvement in the 579 00:29:57,000 --> 00:29:58,880 Speaker 1: way that they eat on a regular basis. And if 580 00:29:58,920 --> 00:30:01,800 Speaker 1: people feel better about slugging out meat for one meal 581 00:30:02,280 --> 00:30:05,280 Speaker 1: with a meat alternative, UM than than that helps sustain 582 00:30:05,320 --> 00:30:07,600 Speaker 1: this long term trend. Yeah, I'm looking at the technical 583 00:30:07,720 --> 00:30:09,920 Speaker 1: chart here. It's a fancy log chart with a bunch 584 00:30:09,960 --> 00:30:13,600 Speaker 1: of fancy moving averages and the fancies self the vector 585 00:30:13,800 --> 00:30:16,640 Speaker 1: is self. Is there a pressure to turn around the 586 00:30:16,760 --> 00:30:20,080 Speaker 1: share performance now or they just go on with their 587 00:30:20,120 --> 00:30:24,040 Speaker 1: business plan? Well? I think I think from a management perspective, 588 00:30:24,160 --> 00:30:27,880 Speaker 1: their plan is to continue on course as you're laid out. Uh, 589 00:30:28,080 --> 00:30:30,640 Speaker 1: you know, whether whether investors are expecting some kind of 590 00:30:30,680 --> 00:30:33,880 Speaker 1: alteration from that course, It's stil early to tell. Can 591 00:30:33,920 --> 00:30:37,560 Speaker 1: I ask a dumb question, what's the price versus a hamburg? 592 00:30:37,680 --> 00:30:40,840 Speaker 1: I mean, you know, all these food variants they've got. 593 00:30:41,400 --> 00:30:44,240 Speaker 1: Is it cheaper than meat? Not yet? And that is 594 00:30:44,280 --> 00:30:47,640 Speaker 1: one of the things that Beyond Meat is is focused 595 00:30:47,680 --> 00:30:50,800 Speaker 1: on is bringing their products closer to price parody with meat. 596 00:30:51,200 --> 00:30:53,840 Speaker 1: Um there's still there's still it's still more expensive and 597 00:30:54,040 --> 00:30:57,360 Speaker 1: many of the retail stores it's about twenty more expensive 598 00:30:57,920 --> 00:31:01,120 Speaker 1: um on a per pound basis um. And but part 599 00:31:01,160 --> 00:31:03,520 Speaker 1: of what Beyond Meat was talking about is the plan 600 00:31:03,640 --> 00:31:06,560 Speaker 1: to make investments to help bring that price skep lower 601 00:31:06,960 --> 00:31:09,360 Speaker 1: and and that will also help sustain in that long 602 00:31:09,480 --> 00:31:15,800 Speaker 1: term trend. Beyond beefa Telian meatballs. That's not American. I 603 00:31:15,920 --> 00:31:18,920 Speaker 1: think there's sausage is hot, It's it's everywhere. Jen bartashes, 604 00:31:18,920 --> 00:31:21,800 Speaker 1: thanks so much for now. Yeah, I'm on the Jen, 605 00:31:21,880 --> 00:31:24,200 Speaker 1: I'm on the edge of Wigel's anger. Here's Wiggle's the 606 00:31:24,240 --> 00:31:27,160 Speaker 1: best hot dog in the world. Good morning, Rochester and Buffalo, 607 00:31:27,280 --> 00:31:31,480 Speaker 1: New York. Beyond sausage, Chicago Dog. You're put the names 608 00:31:31,560 --> 00:31:34,040 Speaker 1: Chicago in with beyond me? Jen? Are you? Are you 609 00:31:34,080 --> 00:31:36,239 Speaker 1: going to bring us up with the CEO today? We are. 610 00:31:36,400 --> 00:31:38,400 Speaker 1: Jen's gonna be taking notes. I know what she's get 611 00:31:38,560 --> 00:31:40,880 Speaker 1: sending me some questions. He Ethan Brown. He has a 612 00:31:40,960 --> 00:31:46,920 Speaker 1: president Dog five teen Today on Bloomberg RADI go beyond Sausage. 613 00:31:47,080 --> 00:31:52,400 Speaker 1: Portland Dogs a fade dog. It's not a Chicago dog. 614 00:31:52,480 --> 00:31:56,440 Speaker 1: It's a fade dog. Jen Bark. She killed that, Bloomberg. 615 00:31:58,160 --> 00:32:02,240 Speaker 1: Thanks for listening to the Bloomberg Banlast podcast. Subscribe and 616 00:32:02,440 --> 00:32:07,720 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 617 00:32:07,800 --> 00:32:12,000 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 618 00:32:12,040 --> 00:32:15,880 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg 619 00:32:16,000 --> 00:32:16,240 Speaker 1: Radio