Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.
Speaker 1: We bring you insight from the best in economics, finance, investment,
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Speaker 1: To say that RUSS CoA Strick joins us in the
Speaker 1: studio blank Rock Global Allocation Fund portfolio manager. Good monitude, Russ,
Speaker 1: Where do you fall on that debate right now? That's
Speaker 1: the big one of the last couple of weeks that
Speaker 1: maybe peak pessimism is behind US treasury yields of bottom
Speaker 1: the bottoms are in. What are your thoughts? And it's
Speaker 1: probably right. You've taken a lot of tail risk out
Speaker 1: of the market the last month. You've made progress on trade,
Speaker 1: and it's not a permanent deal, but it will at
Speaker 1: least alleviate some of the tension. The risk of a
Speaker 1: hard break exit has gone down. The economic numbers appear
Speaker 1: to be stabilis and you're having a decent earning season,
Speaker 1: so you know, going into a seasonally strong part of
Speaker 1: the year. It's not on reason. We'll say you probably
Speaker 1: have seen the loan bond yields for the year. I'm
Speaker 1: gonna give a credit to Jeffreys. I believe there's an
Speaker 1: outlier call that maybe they won't do something here at
Speaker 1: this meeting tomorrow and that they'll wait out to December
Speaker 1: because we see so much good that we see so
Speaker 1: much good in the equity market as well to find
Speaker 1: a lousy economy. The survey, the surveying, excuse me, the
Speaker 1: Bloomberg statistic is one point six percent. I hear people
Speaker 1: at one point eight percent g d P and on
Speaker 1: and on and on. How bad does the economy need
Speaker 1: to be for further rate cuts. Well, I think you've
Speaker 1: got to compare to what's trend these days. And let's
Speaker 1: call a two percent growth, because you know there's a
Speaker 1: little rounding are around all of this. Two percent is trend.
Speaker 1: You know, we're in an environment where demographics are very
Speaker 1: different than thirty or forty years ago. To get to
Speaker 1: the type of three and a half percent growth that
Speaker 1: was normal back then, you need the sugar high of
Speaker 1: the type of taxica we had in two thousand seventeen.
Speaker 1: Without that, two percent is a about normal. I mean,
Speaker 1: I just looked to be sure the number hadn't moved
Speaker 1: from yesterday were still at one point six GDP growth,
Speaker 1: many others at one point eight. I mean, does that
Speaker 1: cleared the solid economy you mentioned Jeffreies. Jefferies will be
Speaker 1: joining me on the TV show a little bit later
Speaker 1: this morning. Properties looking forward to catching up with them
Speaker 1: on that call of no rate cup potentially coming tomorrow. Russ,
Speaker 1: I'd love to get your insight just a little bit
Speaker 1: more on this topic at the moment. How vulnerable is
Speaker 1: that call that the worst this behind us? Because it
Speaker 1: seems to have picked up with some written enthusiasm over
Speaker 1: the last couple of weeks without much data to back
Speaker 1: it up. Well, I think there are a couple of things.
Speaker 1: I mean, one of the reasons people are comfortable with
Speaker 1: the calls that we know manufacturing is struggling. You're arguably
Speaker 1: in a global manufacturing recession. But people, I think, justifiably
Speaker 1: feel very good about the U. S. Consumer. And whether
Speaker 1: you look at real earnings, whether you look at the
Speaker 1: savings rate, whether you look at debt levels, everything tells
Speaker 1: you the consumers in decent shape. Now, if you started
Speaker 1: to see a slow down and hiring and that started
Speaker 1: to transmit to confidence, you might have to revisit that call,
Speaker 1: but that's not our base case. I think as long
Speaker 1: as the consumer is still growing at the pace it is,
Speaker 1: you can be reasonably confident we're not on the cusp
Speaker 1: of a recession. Let's get some capital allocation calls. We've
Speaker 1: seen these kind of levels a few times through en
Speaker 1: We've tested three thousand a couple of times, three times
Speaker 1: through nineteen, high yield spreads sitting right on top of
Speaker 1: the tights of the year at three fifty four basis
Speaker 1: points tights of the year three forty six. We've seen
Speaker 1: this level a few times this year. We haven't been
Speaker 1: able to hold it. Why is this time different? We
Speaker 1: have and I think it's it's a great question. Look,
Speaker 1: you know it's still you have to the market has
Speaker 1: got to prove that you can break out of this range.
Speaker 1: And this range is really now going on almost two years.
Speaker 1: We set the boundary at least the high back in
Speaker 1: early eighteen, at least globally. My guess is you've got
Speaker 1: a little bit more support this time because some of
Speaker 1: the things that have inhibited the rally over the last
Speaker 1: year and a half two years of starting to fade,
Speaker 1: most importantly trade, If you get a truce that's been
Speaker 1: one of the things that's been inhibiting the market from
Speaker 1: breaking out. That's one factor that might let you move
Speaker 1: on to new hives. And again, I think signs that
Speaker 1: the global economy is stabilizing. We're not talking about a
Speaker 1: sharp search higher. That should also help kind of edge
Speaker 1: higher through the remainder of the year. What do you
Speaker 1: say about the breadth of the market. If you look
Speaker 1: at the value line geometric index, which is great mathematics
Speaker 1: on the median stock of the median equity market, the
Speaker 1: trend ain't so hot compared to the big fangs. The
Speaker 1: big tech move we've seen is well, and there's been
Speaker 1: a sharp split there. Over the last year. There has
Speaker 1: been a slip, and I think this is indicative of
Speaker 1: a couple of things, one of which is we're still
Speaker 1: very much in a winter take all economy where you've
Speaker 1: got some businesses, including some of the fag businesses that
Speaker 1: are in secular growth mode, whether you're talking about cloud computing,
Speaker 1: internet retail, and you've got large parts of the market up.
Speaker 1: Let's take multi line retail that are just challenged from
Speaker 1: a long term basis, and these tra is are probably
Speaker 1: going to stick with us for some time. A Russ
Speaker 1: great to catch up with you, Russ Coastrick blank Rock
Speaker 1: Global Allocation Fund portfolio manager on the lacest in markets.
Speaker 1: Lisa would love your insight on what's happening in fixed
Speaker 1: income right now. How yield spreads half tightened up, but
Speaker 1: there are still some cracks within high yield and within
Speaker 1: leverage loans. That's exactly what I was going to UH
Speaker 1: to talk about. I mean, honestly, you're seeing Fitch, for example,
Speaker 1: increase their default forecast over the next twelve months for
Speaker 1: leverage loans from two to three and a half percent,
Speaker 1: which is a pretty big jump, and it's on some
Speaker 1: specific problems. But you are seeing a certain loans, certain
Speaker 1: bonds fall out of bed today. With Submarine Energy file
Speaker 1: for bankruptcy protection. This is a private coal miner, the
Speaker 1: biggest one going bus. Despite some of the rescue plans
Speaker 1: from President Trump, you're seeing uh PG and E bonds
Speaker 1: absolutely getting crushed in the wake of the potential for
Speaker 1: more damages from the fires in California, disrupting the currency, bankruptcy,
Speaker 1: the current bankruptcy plan, and you know, you're seeing some
Speaker 1: banks getting stuck with with leverage buyout loans on their
Speaker 1: book because people don't want to buy them. The question
Speaker 1: is how I don't want to use the word because
Speaker 1: I think that this might be a drinking game right there?
Speaker 1: Right you wait for the drinks. Do we have time
Speaker 1: to go back to costric on this? Let's go really
Speaker 1: quickly here. The bottom line is Lisa brilliantly brings up
Speaker 1: as idiosyncratic versus systemic risk at epsilon out the back
Speaker 1: of every equation. Is the epsilon out there right now?
Speaker 1: Is this systemic or is it all idiosyncratic the fourteen
Speaker 1: things Lisa mentioned. I think it's largely adiosyncratic. I mean,
Speaker 1: there are pockets of the market where you do want
Speaker 1: to be worried about credit. But most of the instances,
Speaker 1: and again it's probably not a coincidence. We're talking about
Speaker 1: a coal company. They tend to be more idiosyncratic. That's
Speaker 1: called six everybody, can I just explain what this what?
Speaker 1: This game is? A drinking game? On Bloomberg surveymance is
Speaker 1: when the guests says idio and cradic shot can we there?
Speaker 1: And not just a shot? I was laid there? We
Speaker 1: say good morning worldwide to the monkey bar. See a
Speaker 1: monkey bar and he's three. It's pretty good, pretty good.
Speaker 1: The shots there are the size of an old fashioned class.
Speaker 1: Is that what we're going to do on this show?
Speaker 1: I hope not. It could be futures this morning down
Speaker 1: about a tenth of one percent. Russ Greater catch up
Speaker 1: with you. Let's bringing Peter Dixon Shower. We commus Bank
Speaker 1: Global Equities of columists, Peter Greater, catch up with you.
Speaker 1: European out performance got people lining up around a corner
Speaker 1: telling me about that here in the United States. Now, Peter,
Speaker 1: why does that make sense? Well? I guess it makes
Speaker 1: sense because you know, the europe house surprised on the
Speaker 1: outside for for such a such a long time that,
Speaker 1: you know, given that we're seeing the global equities locomotive
Speaker 1: being pulled by the US, um you know the scope
Speaker 1: for Europe to catch up. But I have to say
Speaker 1: that given the concerns that many people have regarding the
Speaker 1: economic outlook in the euro Zone, particularly, well, you know,
Speaker 1: you might find that that European performance doesn't actually materialize.
Speaker 1: So I think it'd be a bit careful about that one. Well,
Speaker 1: let's talk about it, Peter. The sentiment has certainly shifted,
Speaker 1: are you saying the data won't back it up. Yeah,
Speaker 1: I mean, I think that's where we are. I mean, basically,
Speaker 1: the European economy looks very slugly, certainly compared to the
Speaker 1: United States. Um, it's likely that the data out in
Speaker 1: a couple of each time will show that a second
Speaker 1: consecutive quarter of the contraction in German GDP. Now, I
Speaker 1: guess that on the positive side, you could argue that
Speaker 1: because European markets have been hammered by the US China
Speaker 1: trade dispute, the expectation or the hope that we are
Speaker 1: past the worst there might provide Europe with a bit
Speaker 1: of a list. But you know, we're not out of
Speaker 1: was yet. In my Peter, one of the great charms
Speaker 1: here with your economics is the global scale. Basically, all
Speaker 1: the money's moved to large cap us is a stereotype,
Speaker 1: and internationals left and left and left and left behind.
Speaker 1: Is now the time for an international call? Should we
Speaker 1: go long large cap international? Should we go along? E
Speaker 1: m uh long e M. I mean, I think at
Speaker 1: the moment, as long as the federal reserve is in play,
Speaker 1: it doesn't make a lot of sense. So I think
Speaker 1: I probably want to stay clear of the in from now,
Speaker 1: we don't you have more clienty, but whether he fed
Speaker 1: girls in and beyond, that's the time of which you
Speaker 1: might want to do it. You still you know what
Speaker 1: to do anytime soon. With regard to European large caps again,
Speaker 1: I mean I just read what I said before. Um,
Speaker 1: it's not yet the time to get to those more.
Speaker 1: It's because I think there's too much volatility there are
Speaker 1: still think there's too much bad needs to come. The
Speaker 1: corporate earning season is it's look okay, but the downside
Speaker 1: is that they're still downside. Let me cut to the chase.
Speaker 1: Are you selling into this strength? I mean, as John
Speaker 1: Farrell mentioned earlier, on a range bound basis, were buttressed
Speaker 1: up against the top of the range even with sp
Speaker 1: X highs. Are you selling into this good news? It's
Speaker 1: probably not about idea because you know, the COVID towards
Speaker 1: the end of the year, I think a lot of
Speaker 1: equity managers or fun manchers wants to realize the best
Speaker 1: games they can. So it's entirely possible that over the
Speaker 1: course of becoming weeks wants the good news from the
Speaker 1: union seasons out of the way. You know, we start
Speaker 1: to see you where I selling, and certainly, you know,
Speaker 1: I feel a little bit uncomfortable with stock hitting record
Speaker 1: highs given all of the economic concernancy. So I know
Speaker 1: that you're in the equity space on a macro level,
Speaker 1: but just taking a look at the micro with beyond meat,
Speaker 1: I think that that's a really interesting story, and I
Speaker 1: want to know whether it's wait for it, idiosyncratic or
Speaker 1: whether it's endemic of something larger. They actually reported better
Speaker 1: than expected earnings and yet their stock still fell in
Speaker 1: early trading because it had just gotten run up so much.
Speaker 1: Is that something that we are going to see sort
Speaker 1: of the hopium of future growth getting wiped out of
Speaker 1: the market in increasing pockets, particularly in the tax space.
Speaker 1: I think that's entirely possible. I mean, you know, on meats,
Speaker 1: as you said, it is your syncratic stock which has
Speaker 1: yet to show that it can take its products and
Speaker 1: broaden it to a wider audience, but it has a
Speaker 1: lot of potential. Probably is when you've got to stock
Speaker 1: like that, which um you know, which still have potential
Speaker 1: but you know, is trying to get very slow to deliver.
Speaker 1: Once you start to get a big lot of momentum
Speaker 1: behind it, you do find a lot of willing sellers
Speaker 1: when when the when the price which is a certain level,
Speaker 1: and are rather suspectable. That's going to be one of
Speaker 1: the features going forward over the next few weeks, particularly
Speaker 1: as you said in the text space, where there are
Speaker 1: a lot of outfits which have done very well, but
Speaker 1: there are question marks against their you know, their future performance. Peter,
Speaker 1: where do you think the leadership comes from in this
Speaker 1: leg of the rally of it continues? A key question?
Speaker 1: Good question, indeed. I mean it's going to come from
Speaker 1: the US and not outs about that. I mean, I
Speaker 1: think the market overall, um. You know, although I say
Speaker 1: that there are potential for downside, don't I think for
Speaker 1: the moment at least it's probably going to hold up
Speaker 1: for now, um. And I think so long as it
Speaker 1: does hold up, investors will start to looking at the
Speaker 1: pockets of the world, particularly Europe and say, actually, no,
Speaker 1: the US is holding up. Maybe it is a bit
Speaker 1: time to for for a bit of a double But
Speaker 1: if I've just cautioned you know, that could easily turn around.
Speaker 1: And I guess the question is to what extents to
Speaker 1: you know, investors generally rather than you know what I
Speaker 1: think investors think about the US. Peter Dixon, I just
Speaker 1: have to ask one more economic question before we let
Speaker 1: you go. We've seen the pageantry of dragging, handing off
Speaker 1: the brass bell or whatever it is to Madame lendguard is, Well,
Speaker 1: how critical is this December twelfth meeting for that equity
Speaker 1: confidence in Europe? Is the December twelve ECB meeting one
Speaker 1: that they just get through and move on or could
Speaker 1: it actually have substance? Well, I think it's definitely one
Speaker 1: that they just have to get through because basically to
Speaker 1: see that God has been handed a legacy that she
Speaker 1: has to deal with, it's very difficult to know exactly
Speaker 1: you know what she's going to be differently to draw.
Speaker 1: So I think Marcus look at this meeting and saying, well,
Speaker 1: let's hope she doesn't drop the ball um the like
Speaker 1: is she wants. She's a very experienced operator, but she's
Speaker 1: not gonna do anything visible once she's got it. It's
Speaker 1: just a question if you know the pitfalls. Peter, Thank
Speaker 1: you so much. Peter Dixon and Commerce Bank this morning
Speaker 1: on the equity markets, p M E S is a
Speaker 1: reason to bring in Matthew Lozetti of Deutsche Bank because
Speaker 1: his front and center. He's got that chart to cut
Speaker 1: to the Jape, Matthew, and then we could talk to
Speaker 1: you for two hours this morning. The first and second
Speaker 1: derivatives of global p M s are not pretty, are they.
Speaker 1: I think you have seen some stabilization in the global
Speaker 1: PM eyes. If you look at global manufacturing, it's been
Speaker 1: kind of bouncing around it at low levels over the
Speaker 1: past few months. I think you will continue to see that.
Speaker 1: You've seen US data on the sentiment side a bit
Speaker 1: mixed recently, but the I s M we think bounces
Speaker 1: back a little bit um later this this week as
Speaker 1: well on Friday, which would be an important data point.
Speaker 1: All told, I think what we're seeing for the US
Speaker 1: growth outlook is you you still have a deceleration built in.
Speaker 1: The Phase one deal we got in place at this
Speaker 1: point was not enough, I think to flip that second
Speaker 1: derivative in a more positive direction. What's the second derivative
Speaker 1: of the chairman's press conference tomorrow? I mean, it's extraordinary
Speaker 1: you people nail the mid cycle importance of this. How
Speaker 1: can we mid be mid cycle umpteen years into a lift?
Speaker 1: It's it's a good question. I think there's a emerging view.
Speaker 1: I think that pal is going to orchestrate a hawkish
Speaker 1: cut um tomorrow. We think that he does raise the
Speaker 1: bar for another cut. I think when you look at
Speaker 1: the committee, they have framed this as as three great cuts.
Speaker 1: But I think it's far too early for him to
Speaker 1: take December off the table. We still have on knees
Speaker 1: on the trade front and Brexit. The data has continued
Speaker 1: to decelerate and the market is only pricing about six
Speaker 1: basis points at this point, so the Fed doesn't really
Speaker 1: need to actively push against that pricing. John, if we
Speaker 1: start a band, can we please call it hawkish cut?
Speaker 1: We can call it what did God's name, Matthew? Was
Speaker 1: a hawkish cut or a dovish hike? For our listeners
Speaker 1: that have just tuned in, this is the Fed coal
Speaker 1: From Deutsche Bank's chief US economist, Mattenzeti. Go On continued
Speaker 1: that that is that's definitely the prevailing market view. Uh,
Speaker 1: the idea that they will cut but guide towards less
Speaker 1: likelihood of cuts over the next few months. I think
Speaker 1: that the market has gone a little bit too far
Speaker 1: on that point. You know, on on these uncertainties that
Speaker 1: that they've been worried about. They're still there, as you noted,
Speaker 1: global growth remains low in the U S data. You
Speaker 1: know tomorrow for US GDP we're likely to print we
Speaker 1: think at one point UM with equipment spending and capex
Speaker 1: being actually negative in that that story, so that I
Speaker 1: think in an environment in which he'd be and the
Speaker 1: COMMUNEY should be reluctant to to firmly back off about
Speaker 1: the Dovish guidance. Do you think that at this point
Speaker 1: the Fed has the capacity to allow inflation to increase
Speaker 1: or is that totally out of their purview given the
Speaker 1: fact they have been unable to do so until now.
Speaker 1: I don't think it's totally out of their purview, UM,
Speaker 1: but it is significantly outside of what they can control.
Speaker 1: The San Francisco Fed has done this nice analysis about
Speaker 1: pro cyclical versus a cyclical UH components. We've we've done
Speaker 1: some work UM which I think suggests that the FED
Speaker 1: can influence even more than what the San Francisco Fed
Speaker 1: thinks UM. But the the extent which they can do
Speaker 1: that is is very limited, particularly in a world where
Speaker 1: healthcare inflation is a key driver UM and is largely
Speaker 1: dictated by healthcare policy. Not necessarily the business. When you
Speaker 1: ex out healthcare, what's the inflation run rate? We've got
Speaker 1: Cleveland and Dallas trimmed up, up up. Everybody listening to
Speaker 1: this program across America knows that higher inflation rate they're living,
Speaker 1: think tuitions and down below you've got this core number
Speaker 1: of guys like you are looking at X out healthcare.
Speaker 1: What's the disinflation right well, in in for core pc
Speaker 1: it's actually pretty close to what the core cp reading
Speaker 1: is showing. For course, CPI is actually a much different
Speaker 1: story because there you've had health health insurance inflation has
Speaker 1: been rising ten percent year on year or sorry, year
Speaker 1: on year, uh, and it's adding about thirty basis points
Speaker 1: of the core CPI index. So if you x that
Speaker 1: out of course c p I, we're we're closer to
Speaker 1: two point two. One. Of course, CPI I haven't been
Speaker 1: the current reading that we were seeing. This has been great, Matte,
Speaker 1: Thank you so much, really really appreciative, brilliant work from
Speaker 1: Deutsche Bank. Right now. This is a really fascinating interview,
Speaker 1: and it is a fascinating story that's always been a
Speaker 1: little bit of that Florida hype. It is auto nation
Speaker 1: peaking in two thousand and fifteen. It's been a challenge
Speaker 1: since then giving way to their esteem of finance professional.
Speaker 1: Her name is Cheryl Miller out of James Addison and
Speaker 1: joins us today on three auto dealerships. Everybody knows it's
Speaker 1: a fractious, wonderfully visceral company as well. What was the
Speaker 1: first day like taking over? How many phone calls did
Speaker 1: you get from? How many dealers are? I need this,
Speaker 1: I need this, I need this now? What was the
Speaker 1: first day like? The great thing about the first day
Speaker 1: was twenty six thousand people emailed me, the associates of
Speaker 1: Auto Nation and a lot of our field leadership teams,
Speaker 1: associates in the stores. That was amazing. Everyone from the
Speaker 1: industry who I had known for years emailed me and
Speaker 1: said what are you going to force? And and it
Speaker 1: was fantastic. And I was right there with Mike Jackson,
Speaker 1: are amazing executive tare now and so it was a
Speaker 1: really great current. This is this is Its been a
Speaker 1: great first day. But this has been controversial as a
Speaker 1: roll up when isn't getting all that you're ago? It's
Speaker 1: a roll up of the auto industry. I got a
Speaker 1: number of ways to go here. First the business and
Speaker 1: then the financials. What what I really want to know
Speaker 1: into me? The history is always wants on the lots,
Speaker 1: what's the inventory look like? Of course your dealerships right
Speaker 1: now it looks seven thousand units lower than it did
Speaker 1: last How did you do that? On price? Move them out?
Speaker 1: So we we actually we did. We did a combination thing,
Speaker 1: so we we priced smartly and if you look at
Speaker 1: our new vehicle sales, you've got an optimal balance between
Speaker 1: units and pricing. So we had pretty solid pricing. But
Speaker 1: we also ordered smart so we centrally ordered and we
Speaker 1: really manage that. So if you think about our day
Speaker 1: suppliance at fifty five days versus sixty three last year,
Speaker 1: then where would that have been ten years ago? You know,
Speaker 1: giving you slow downcially, fifty five to sixty five would
Speaker 1: be the normal balance of what you want in automotive
Speaker 1: new and when it gets to seventy eight five you
Speaker 1: start to get nervous your business down. The income statement
Speaker 1: is a five cents on the dollar business. I mean
Speaker 1: you've got net income if you come up a little
Speaker 1: bit the market. You know, it's like a grocer your
Speaker 1: store business almost how are you holding margins? And on
Speaker 1: a differential basis trying to improve margins right now, how
Speaker 1: do you s this? So the great thing as a retailers,
Speaker 1: we have a service component to our business, so margins,
Speaker 1: so you're charging more for our for my portion. What
Speaker 1: is an hourly cost on a Porsche to service it
Speaker 1: at automation depends what you need done on it, so
Speaker 1: we we blend the labor. So if you need to
Speaker 1: blend the labor while you blend me the free coffee. Right. Yeah,
Speaker 1: if you need an oil change, we're not going to
Speaker 1: charge you the same as if you need a skilled tech.
Speaker 1: But if you're working on a complex vehicle, if you're
Speaker 1: working on a nine eleven, or if you're working autonomous,
Speaker 1: we we don't usually give our blended right, but don't
Speaker 1: give your blended rates. I got the blended right the
Speaker 1: other day. Yeah, I would say it depends what you
Speaker 1: need done, and the blended rate barries depending on what
Speaker 1: we're working on. I'm not going to not at least
Speaker 1: to take over here with Sheryl Miller of automation. I'm
Speaker 1: not going to ask about your detailing and your rims,
Speaker 1: that you got a near on your car or we
Speaker 1: need to get him another one. I mean they all
Speaker 1: say services great, and then effect as you get the
Speaker 1: bill and you're like, WHOA, well it might be great,
Speaker 1: but you know, great digital and transparency. It's a great point.
Speaker 1: I'm curious about sort of how you're getting consumers to buy.
Speaker 1: Are you extending more loans at this point in order
Speaker 1: to finance those purchases. So credit is healthy, and the
Speaker 1: reality of our industry is the majority of vehicles are
Speaker 1: purchased on credit. I feel good about the state of credit.
Speaker 1: So I was just meeting two weeks ago with the
Speaker 1: CEO of one of the largest lenders in the country,
Speaker 1: and his indication was credit looks solid. So you hear
Speaker 1: some noise sometimes out of the industry about it, but
Speaker 1: it's actually in pretty good shape right now. So we
Speaker 1: feel good about the consumer. We feel good about affordability generally,
Speaker 1: understanding that people are opting for nearly new so not
Speaker 1: everyone is able to afford news it's a nice use.
Speaker 1: But when you think about the traditional use, sometimes you
Speaker 1: think about a twelve year old years vehicle. We're talking
Speaker 1: about a three year old w pioneered this. They came
Speaker 1: out with certified cree end Yes, ified pre on. That's
Speaker 1: the future. Isn't have you priced most of America out
Speaker 1: of the average cost of an average car that people
Speaker 1: aspire to Well, I would say BMW probably isn't. Isn't
Speaker 1: just the average. So if you think about it, we
Speaker 1: offer thirty one brands and so we offer something for everyone.
Speaker 1: So if you have children and you need a third
Speaker 1: row seat, we have it. If you want to go
Speaker 1: with something smaller with better fuel econo, we want the
Speaker 1: car with no children. Yeah, so you're definitely, we definitely
Speaker 1: have something for both of you. Well, I'm trying to
Speaker 1: understand if you're not concerned about consumer credit, even though
Speaker 1: we have seen delinquencies and serious delinquencies among auto loans
Speaker 1: pick up quite a bit. Uh, and you're seeing robust demand,
Speaker 1: what is a potential risk that you have your eye on.
Speaker 1: So I would say, just to be clear, you're seeing
Speaker 1: an increase from historically low rates. So as people talk
Speaker 1: about delinquency rates, they hit such a low point that yeah,
Speaker 1: they're certainly increasing, but they're not increasing to the point
Speaker 1: where it's completely concerning. It's something we always keep our
Speaker 1: eyes out on. And I would say from a consumer perspective,
Speaker 1: we are in plateau. So if you think about new
Speaker 1: vehicle sales were definitely in plateau. You did see the
Speaker 1: strength in use vehicle sales. So total market is fine.
Speaker 1: Customers are employed, so when consumers come in the stores,
Speaker 1: they have jobs. They need to get to those jobs
Speaker 1: with via. Nothing worries you. There's a number of things
Speaker 1: that that worry me. But I'm not nowhere near as
Speaker 1: worried as I was at the end of last year.
Speaker 1: So now that I have to interest rate cuts rather
Speaker 1: than three hikes, I feel like there's a little bit
Speaker 1: of a tail in, but definitely healthy consumer. There's been
Speaker 1: some volatility out in the broader landscape, and you have
Speaker 1: to be worried about it. Let's go away from the
Speaker 1: fancy cars and F one I just put on your
Speaker 1: wonderful website and in there, I mean, it's the vanilla
Speaker 1: of Vana. How do you make profit on these trucks
Speaker 1: that Detroit tells us is where all the profit is?
Speaker 1: And do you make the profit by the price you
Speaker 1: buy it from the automakers? Do you make it on
Speaker 1: add ons and all that? Where's the profit come from?
Speaker 1: It's a great question. So the F one F one
Speaker 1: fifty is the top selling vehicle in America. And it
Speaker 1: continues to be so. So we make money some money
Speaker 1: on the front of selling that vehicle. But the good
Speaker 1: thing for customers pricing wise is dealers don't don't charge
Speaker 1: a lot of markup on the front of that. We
Speaker 1: do make money for arranging the financing. We also make
Speaker 1: money on the services. Is really what it's become, right, Yeah,
Speaker 1: it's a lot. A lot of our profitability is from service.
Speaker 1: Do you need immigrants to keep your service going? I mean,
Speaker 1: where are you on immigration and the emotion of that
Speaker 1: in Florida? Yes, So what we need to keep our
Speaker 1: service business business going is amazing. Technicians and technicians are
Speaker 1: harder to combine. We get them from all different places.
Speaker 1: We get them from the military. The military is a
Speaker 1: great source for technicians. We get them from trade schools
Speaker 1: and we also build them internally. So we train people internally.
Speaker 1: Should I tell with the day I put the screw
Speaker 1: down the Barracuda Chrysler Distributor cap engine, I want to
Speaker 1: hear this. I don't know that you're qualified to be
Speaker 1: one of our technic Really, you don't think so? My
Speaker 1: father said, used the magnetic screwdriver. No, I didn't. Sweeney
Speaker 1: knows this story. I mean used the magnetic screwdriver. Now
Speaker 1: if you lift the hood these days, it's really hard
Speaker 1: to work on the vehicles. And if you think about
Speaker 1: our relationship with Weymo so Alphabets independent subsidiary and autonomous vehicles,
Speaker 1: we're doing the servicing for them and we've been doing
Speaker 1: that in Phoenix forever two years now. Sure, Miller, thank
Speaker 1: you so much. Is with Auto Nations three dealers worldwide.
Speaker 1: They do such a job at the bent leypol We're
Speaker 1: going to keep it in Tophan, honestly detailing. It's just
Speaker 1: right now we're going beyond no not going out to
Speaker 1: the McDonald's on Third Avenue. We'll breaking barriers, were defying convention, Paul.
Speaker 1: We are shattering expectations, and it's just gotta be beyond
Speaker 1: meat crumbles, their beefy what is it dog food? I
Speaker 1: mean there we are beyond meat. They got they got everything,
Speaker 1: it seems like, and they had a beyond It was
Speaker 1: a very good quarter last night. Yet the stock features
Speaker 1: are down, something about a lock up period expiring or
Speaker 1: beyond meat, Mediterranean skewers, they got it all. Jen bartashes
Speaker 1: Bloomberg Intelligence, joins us on the phone. Jen covers all
Speaker 1: the restaurants and the consumer stuff, and uh, she really
Speaker 1: knows this Beyond Meat story. So Jen, give us a sense.
Speaker 1: I thought they had a pretty good quarter, actually a
Speaker 1: very good quarter last night. What's going on with the stock?
Speaker 1: Good morning? Yeah, So Beyond Meat actually did have a
Speaker 1: really good quarter last night. Um. They had positive net
Speaker 1: income for the first time in their company's history. And
Speaker 1: one of the concerns around the company is, you know,
Speaker 1: the path to profitability um, and they made great strides
Speaker 1: towards that. Um. You know what's swaying down the stock
Speaker 1: you as you mentioned, Paul, it's it's about the expiration
Speaker 1: of the buck up period from the I p o UM,
Speaker 1: the opportunity for those initial stakeholders to sell some of
Speaker 1: those shares UM, as well as increased concerns about the
Speaker 1: competition and some of the big players that are getting
Speaker 1: into this space. Well, the competition story, I know that
Speaker 1: was that's been out there is risk number one from
Speaker 1: day one. I'm just kind of wondering what's changed. What
Speaker 1: did they get on a call yesterday maybe spook people
Speaker 1: with some commentary about competition. Well, I think they were
Speaker 1: trying to head off concerns about about competition, But you're right,
Speaker 1: it has been there from the very beginning. And I
Speaker 1: think one of the things that that Beyond Meat has
Speaker 1: to its advantages is that when people try something that
Speaker 1: is a brand new kind of product, UM, when they
Speaker 1: adopt it for home at home consumption, they generally stick
Speaker 1: with the one that they've tried. UM. It's it's harder
Speaker 1: to get people to just explore and go into a
Speaker 1: new product without any experience with it. And so that
Speaker 1: is one of the advantages Beyond Meat has against some
Speaker 1: of these bigger CpG companies that are bringing their own
Speaker 1: products to market. UM that they've had the chance to
Speaker 1: try it in a restaurant, um and and then have
Speaker 1: a comfort level preparing it at home. I mean, I
Speaker 1: got to look at this thing from sixty feet and Jen,
Speaker 1: you know you're you're very good at this. The moonshot
Speaker 1: of expectations took it up to a price to sales
Speaker 1: of sixteen and with growing sales, as you say, they're
Speaker 1: delivering on the dream. Great, they're almost downded to reality
Speaker 1: seven times eight times price to sales. I mean, when
Speaker 1: does this thing get priced more as a traditional food
Speaker 1: analysis versus all the hooplah. Well, it's a good question,
Speaker 1: and I think part of that is there's a little
Speaker 1: bit of time to go. You know. Part of what's
Speaker 1: interesting about this this particular company is that it's more
Speaker 1: like a technology company than a food company, and that's
Speaker 1: part of what sparked so much of the interest in
Speaker 1: it is the innovation and the fact that they're bringing
Speaker 1: something to this this sector that is revolutionary and hasn't
Speaker 1: really um in an industry that really hasn't changed that
Speaker 1: much over the year. So I think that you're the
Speaker 1: answer to that question is that it's still going to
Speaker 1: be a little bit of time before it settles into
Speaker 1: being considered a troop here to some of the other
Speaker 1: companies in this space. So gender we have a comfort
Speaker 1: level as investors in this new space that this is
Speaker 1: not a fad, that this represents the synthetic food, synthetic
Speaker 1: meat represents a real long term category within I guess
Speaker 1: the food sector. Well, the underlying trends and the demographics
Speaker 1: of who's buying, you know, who are buying these products
Speaker 1: really suggest at this point that this is a long
Speaker 1: term trend and not necessarily a fad. Um You've got,
Speaker 1: it's a younger generation. It's a more affluent generation that
Speaker 1: tends to to to purchase these products UM. Families tend
Speaker 1: to purchase these products UM. And at the same time,
Speaker 1: at the other end of the demographic spectrum, you have
Speaker 1: baby boomers who are starting to retire and are paying
Speaker 1: more attention to health concerns, and many people are looking
Speaker 1: for an opportunity to make a small improvement in the
Speaker 1: way that they eat on a regular basis. And if
Speaker 1: people feel better about slugging out meat for one meal
Speaker 1: with a meat alternative, UM than than that helps sustain
Speaker 1: this long term trend. Yeah, I'm looking at the technical
Speaker 1: chart here. It's a fancy log chart with a bunch
Speaker 1: of fancy moving averages and the fancies self the vector
Speaker 1: is self. Is there a pressure to turn around the
Speaker 1: share performance now or they just go on with their
Speaker 1: business plan? Well? I think I think from a management perspective,
Speaker 1: their plan is to continue on course as you're laid out. Uh,
Speaker 1: you know, whether whether investors are expecting some kind of
Speaker 1: alteration from that course, It's stil early to tell. Can
Speaker 1: I ask a dumb question, what's the price versus a hamburg?
Speaker 1: I mean, you know, all these food variants they've got.
Speaker 1: Is it cheaper than meat? Not yet? And that is
Speaker 1: one of the things that Beyond Meat is is focused
Speaker 1: on is bringing their products closer to price parody with meat.
Speaker 1: Um there's still there's still it's still more expensive and
Speaker 1: many of the retail stores it's about twenty more expensive
Speaker 1: um on a per pound basis um. And but part
Speaker 1: of what Beyond Meat was talking about is the plan
Speaker 1: to make investments to help bring that price skep lower
Speaker 1: and and that will also help sustain in that long
Speaker 1: term trend. Beyond beefa Telian meatballs. That's not American. I
Speaker 1: think there's sausage is hot, It's it's everywhere. Jen bartashes,
Speaker 1: thanks so much for now. Yeah, I'm on the Jen,
Speaker 1: I'm on the edge of Wigel's anger. Here's Wiggle's the
Speaker 1: best hot dog in the world. Good morning, Rochester and Buffalo,
Speaker 1: New York. Beyond sausage, Chicago Dog. You're put the names
Speaker 1: Chicago in with beyond me? Jen? Are you? Are you
Speaker 1: going to bring us up with the CEO today? We are.
Speaker 1: Jen's gonna be taking notes. I know what she's get
Speaker 1: sending me some questions. He Ethan Brown. He has a
Speaker 1: president Dog five teen Today on Bloomberg RADI go beyond Sausage.
Speaker 1: Portland Dogs a fade dog. It's not a Chicago dog.
Speaker 1: It's a fade dog. Jen Bark. She killed that, Bloomberg.
Speaker 1: Thanks for listening to the Bloomberg Banlast podcast. Subscribe and
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Speaker 1: Radio