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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moving news.

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Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com Slash podcast.

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Speaker 3: Alison Williams Joyce. She's our senior bank's analyst.

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Speaker 1: She's also the director of research for all the US

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Speaker 1: research stuff they do with Bloomberg Intelligence. So she's got

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Speaker 1: a lot of hats to wear, so we appreciate getting

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Speaker 1: a couple of minutes of her time.

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Speaker 4: Goldman Sachs Bank of America. What do you takeaways today, Alison?

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Speaker 5: So it's been a good quarter. You wouldn't know it

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Speaker 5: from the stocks, but not interesting income.

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Speaker 1: Or I can make huge money running a bank today

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Speaker 1: with the interest rates they're paying like nothing to you

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Speaker 1: and me to depositor, and they're loaning out at these

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Speaker 1: high rates.

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Speaker 6: Are what are the margins? What are the margins like?

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Speaker 6: Right now?

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Speaker 5: They have started they have actually started to pay up

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Speaker 5: and so we have seen that, right So that's been

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Speaker 5: a little bit of ahead when that's what people.

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Speaker 7: Are worrying about.

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Speaker 5: But the cost of deposits, the rate of those costs

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Speaker 5: increasing is slowing. So you know, we like a second derivative,

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Speaker 5: and we like when the second is.

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Speaker 2: There an overall number, you know, like at Bank America,

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Speaker 2: the average deposit payment is like, I don't know, I

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Speaker 2: would guess like zero point five percent, right, and the

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Speaker 2: average amount that they're charging on a loan is probably

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Speaker 2: more like six.

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Speaker 6: I mean, what are we looking at.

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Speaker 7: I mean it depends bank by bank and so.

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Speaker 5: And by the way, if you know you did your math,

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Speaker 5: you'd get a much higher spread. Then you're actually, you know,

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Speaker 5: earning on the margin. So it's really like a couple

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Speaker 5: of percent depending on the banks, depending on the mix.

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Speaker 5: And we could get into the weeds and talk segment

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Speaker 5: by segment. The wealth segment, for example, much closer to

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Speaker 5: matching the market rate, right, So if you have a

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Speaker 5: balance of a few million dollars, you're gonna be a

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Speaker 5: lot more sensitive in terms of moving that balance very quickly.

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Speaker 5: Commercial balance is similar, right. People that are managing those

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Speaker 5: balances are doing it for a living, so they're obviously

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Speaker 5: going to move those So in those two segments, we've seen,

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Speaker 5: you know, the cost very much matching what's happening on

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Speaker 5: the funding side. It's really the consumer banks where you

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Speaker 5: have very much smaller balances.

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Speaker 7: Even then you would.

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Speaker 5: Think it's you know, people should be moving and Paul,

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Speaker 5: you talked about your savvy daughter looking at Marcus and

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Speaker 5: the highest rates there, but some people are slower to move.

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Speaker 7: And if you think about Wells.

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Speaker 5: Fargo, Bank America, JP Morgan, huge retail branches, tons of

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Speaker 5: these mom and pop deposits, especially Bank of America and

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Speaker 5: JP Morgan gaining that share over the last several years.

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Speaker 5: And so that's that's really the benefit is those big

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Speaker 5: the deposit base and the portion of that deposit base

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Speaker 5: that pays you know, closer closer to zero.

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Speaker 2: Not the hot money, right. That was the worry last

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Speaker 2: quarter is the hot money, which means.

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Speaker 4: Like John Tucker's money.

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Speaker 2: No, no, okay, I mean and correct me if I'm

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Speaker 2: wrong here, but that is basically broker deposits, right, Allison.

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Speaker 2: So the worry was that it's not just Marcus that's

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Speaker 2: paying more than five percent.

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Speaker 6: There are a number of other upstarts that.

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Speaker 2: Are paying decent interest rates, and so you have broker

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Speaker 2: deposits that just move back and forth all over the place.

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Speaker 2: And investors don't like to see too many of a

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Speaker 2: bank they own too many of those deposits brokeer, right.

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Speaker 7: They don't.

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Speaker 5: That's why they really look for the core deposits, and

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Speaker 5: they're really looking for those.

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Speaker 7: Super cheap deposits that live.

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Speaker 5: You know, as I said, in the consumer units are

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Speaker 5: not the wealth or the commercial or those the higher

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Speaker 5: beta as we would call it, not beta as we

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Speaker 5: know in the market, but you know, a deposit with

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Speaker 5: a high beta to the market rate.

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Speaker 1: So what are we hearing from the likes of mister

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Speaker 1: Solomon and Goldman Sachs about just the investment banking businesses.

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Speaker 1: Doesn't seem to be a lot going on over there anywhere.

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Speaker 5: So if you look at the fees, it doesn't seem

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Speaker 5: to be a lot going on. But I think what

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Speaker 5: investors are focusing on, or some of the some of

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Speaker 5: the commentaries beneath the surface. So obviously you're familiar with

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Speaker 5: the fact that there's activity, there's you start those conversations

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Speaker 5: and then you see.

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Speaker 7: The uplift and fees a few quarters later.

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Speaker 5: And what was exciting in September was a lot of

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Speaker 5: commentary from the Goldman, Sachs and other banks that things

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Speaker 5: were happening beneath the surface. We're hearing a bit more

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Speaker 5: of that today from both Goldman and Bank America. Equity

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Speaker 5: fees and has been disappointing. We did get a few deals,

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Speaker 5: so we're looking for things to get a little bit better.

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Speaker 5: Dept fees being helped out on the high yeald side

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Speaker 5: and em and A despite very low levels, at least

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Speaker 5: increasing from the second quarter.

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Speaker 1: So one of the things that I've been amazed with

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Speaker 1: over the last ten twelve years is the whole growth

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Speaker 1: of the private credit business.

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Speaker 4: That's seems to.

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Speaker 1: Be actual fees that are leaving Wall Street and going

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Speaker 1: to the private credit business, whether it's from the leverage

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Speaker 1: loan business or the high yield market. What are the

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Speaker 1: Brian moynihand's, the mister Solomon's lord.

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Speaker 3: What do they say about that business? I mean, it

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Speaker 3: seems like they just let that go, I mean and

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Speaker 3: let it walk across the street.

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Speaker 8: Yeah.

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Speaker 5: So, so if you looked at large so if we

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Speaker 5: looked at sort of large corporate lending, that tends to

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Speaker 5: be almost like a has been over the long term,

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Speaker 5: a loss leader for the banks they want it more

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Speaker 5: for the for the overall relationship, right, and then the

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Speaker 5: types of lending that tend to be profitable, sort of

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Speaker 5: that core bread and butter commercial business. I think that's

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Speaker 5: where maybe some of the BBC's have tried to become

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Speaker 5: more competitive. But the but the big you know, the

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Speaker 5: business right now that's working and the business that's good

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Speaker 5: for these banks over the long term is card because

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Speaker 5: that's you know, the consumer business has much higher yields.

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Speaker 1: Yeah, but back in the day when I was at

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Speaker 1: Chase Elson, I'd do a big leverage loan to comp

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Speaker 1: kiss cable billion dollar loan. We'd get a big fee

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Speaker 1: up front, we'd get a nice liboard spread, we sell

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Speaker 1: off ninety percent of our loans. We don't have to,

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Speaker 1: you know, muddy up our balance sheet, and then we

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Speaker 1: turn around to do it again.

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Speaker 3: I thought that was a really well, you're.

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Speaker 7: Talking out loads.

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Speaker 5: Leverage lendings is obviously a little bit more exciting, and

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Speaker 5: again like you're talking about the full relationship, right, Like

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Speaker 5: you're really looking for the fees and the full relationship.

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Speaker 5: And keep in mind that, you know, even when banks

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Speaker 5: do loan syndications and such like, they're generally selling off

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Speaker 5: those pieces as well, right, Like they're looking for the

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Speaker 5: overall origination fee on that business.

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Speaker 1: So what's what's the outlook for investors here? They are

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Speaker 1: clients you talk to, are they are they buying the

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Speaker 1: Goldman's of the world, they buying the Bank of Americas,

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Speaker 1: the JP Morgans or are they just waiting to see how

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Speaker 1: the economy shakes out.

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Speaker 5: It's definitely the latter. People are still very focused. Investors

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Speaker 5: are very focused on commercial real estate. We know that

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Speaker 5: that's something that's going to take so what are a

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Speaker 5: long time to play out. I mean, the banks are

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Speaker 5: we're seeing weakening and that's what we expected, but it's

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Speaker 5: it's going to be a slow process. I think investors

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Speaker 5: definitely get concerned when some of those concerns start playing

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Speaker 5: out in the CNBS market, which moves a lot quicker

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Speaker 5: and you know, has shown some significant decline. So we

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Speaker 5: know commercial real estate is coming, but broadly credit is

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Speaker 5: very strong and investors are also still looking at.

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Speaker 7: Those unrealized loan losses. We did see a tick up.

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Speaker 5: Bank of Marca spent a lot of time talking about

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Speaker 5: their portfolio this morning, and I think that is just

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Speaker 5: something that again it's going to be a while. So

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Speaker 5: the stocks, as I said, are not responding to the

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Speaker 5: good earnings. And then we have these two concerns that

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Speaker 5: are just going to take a fair amount of time

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Speaker 5: to play out. And at the same time, investors are

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Speaker 5: trying to grapple with what do higher rates mean? What

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Speaker 5: does that mean for the economy? Credit loss tends to

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Speaker 5: be the big wildcard, and what's what's going to happen

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Speaker 5: next year if these rates continue to be high?

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Speaker 6: Any any most dangerous times quotes today? I mean, well,

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Speaker 6: Jamon always.

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Speaker 5: Makes Jamie always kicks off earning season, and he always

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Speaker 5: does make some high some good headlines. I think, you know,

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Speaker 5: the most interesting thing if you read between the lines

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Speaker 5: and some of his comments, he's continually said, at least

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Speaker 5: for the last couple of years, that the world needs

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Speaker 5: to prepare for higher rates, although the number he throws

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Speaker 5: out there continues to ratchet up, and so a bank

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Speaker 5: should prepare for any type of risk scenario.

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Speaker 6: There are there are a lot.

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Speaker 5: Of uh, you know, there's a lot of risks out there.

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Speaker 5: But he has also been saying, you know, last Investor Day,

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Speaker 5: he talked about sort of detailed all the unprecedented times

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Speaker 5: and we've continued to have some risks since then.

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Speaker 4: All right, good stuff.

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Speaker 1: Alison Williams as always senior banks annalists for Bloomberg Intelligence.

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Speaker 1: She's also the director of Research for the Americas.

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Speaker 4: For Bloomberg Intelligence.

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Speaker 3: So a busy, busy plate.

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Speaker 9: You're listening to the team Ken's are Line program Bloomberg

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Speaker 9: Markets weekdays at ten am Eastern on Bloomberg Dot, the

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Speaker 9: iHeartRadio app, and the Bloomberg Business app, or listen on

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Speaker 9: demand wherever you get your podcasts.

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Speaker 1: The retail sales came in this morning much stronger than expected.

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Speaker 1: So you can't keep a good consumer down, it doesn't appear,

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Speaker 1: So I'm going to see what this really means for

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Speaker 1: the global macro environment. Here, Russell Price joints us He's

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Speaker 1: a chief economist at Ameriprice Financial. He's based in Deti, Michigan,

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Speaker 1: but he is here in a Bloomberg interactive Brooker's studio.

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Speaker 1: We appreciate that, Russell, thanks so much for joining us here. Again,

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Speaker 1: the retail sales numbers come out pretty darn strong.

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Speaker 4: This consumer.

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Speaker 1: You can't hold this consumer down. How did you read

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Speaker 1: these numbers? And how does that kind of kind of

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Speaker 1: weave into your economic outlook.

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Speaker 10: Yeah, certainly it's a further upside that's likely for third

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Speaker 10: quarter GDP. But retail sales that shows the consumers still

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Speaker 10: have a lot of money available to spend, even if

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Speaker 10: they don't maybe they're adding it to the credit card

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Speaker 10: and they're certainly willing to spend. A big jump for

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Speaker 10: this morning's retails came from restaurants and bars. Nine tenths

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Speaker 10: a month over month shows consumers are still looking to

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Speaker 10: enjoy themselves after the pandemic. Some of the areas that

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Speaker 10: were down were even just down after big jumps the

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Speaker 10: prior month. We had a eight tenths decline in electronics,

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Speaker 10: but that comes after a month that we saw a

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Speaker 10: one point two percent increase the month before, And so

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Speaker 10: consumers are still driving this bus. And even if we

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Speaker 10: have the student loan repayments beginning here in October, it's

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Speaker 10: still there. Still seem to be spending at.

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Speaker 8: A good level.

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Speaker 2: Where are they getting the money or is it credit?

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Speaker 2: Because I recall at one point looking at a graph

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Speaker 2: from Torsten slock over to Pollo that showed credit card

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Speaker 2: usage taking off. It scared me at the time, but

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Speaker 2: everybody I ask about it says well, we're just getting

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Speaker 2: back to pre pandemic levels.

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Speaker 6: How do you see that.

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Speaker 10: I'm not very worried about credit card debt, because, yes,

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Speaker 10: we are at an all time high, but just because

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Speaker 10: of the way the federalies are met measures credit card

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Speaker 10: debt gives it a natural upside bias. It measures on

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Speaker 10: average monthly based on an average monthly balance, and so

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Speaker 10: the more and more we as consumers use our credit cards,

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Speaker 10: you know, the days of emergency use. Only those days

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Speaker 10: are long gone, it gives it a natural upside bias.

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Speaker 10: So what I do, There's no real way to factor

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Speaker 10: that part out, But what I do is I look

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Speaker 10: at consumer credit card debt relative to overall consumer income,

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Speaker 10: and on that basis, we are at very healthy levels.

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Speaker 10: We're well below what we were pre financial crisis two

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Speaker 10: thousand and nine timeframe. So even though it's at record

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Speaker 10: levels on a dollar basis, it's still very manageable.

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Speaker 2: I mean, to me, it would be worrying to roll

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Speaker 2: over any debt at what are rates on credit cards.

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Speaker 2: People are just putting stuff on credit cards and then

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Speaker 2: not paying them off every month With twenty five percent rates,

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Speaker 2: that doesn't sound like a smart decision.

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Speaker 10: Well, even if you pay it off at the end

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Speaker 10: of every month, just because your average monthly balance.

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Speaker 8: It's still.

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Speaker 2: And now I'm coming along with you. Now I'm getting

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Speaker 2: on the same page here, I see. So that doesn't

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Speaker 2: sound like a I mean, if you looked at what

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Speaker 2: I charged every month, you would be probably shocked.

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Speaker 4: Sure, you have a huge cash burn with.

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Speaker 2: Your it's massive, and I mean probably spend, you know,

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Speaker 2: like a good American.

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Speaker 6: More than I earn.

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Speaker 2: Right, But I do pay off the balances because I

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Speaker 2: don't want to get hit with that interest rate cost.

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Speaker 3: Hey, Russell, are we gonna Are we gonna see a

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Speaker 3: recession here?

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Speaker 4: And if so, how deep?

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Speaker 1: I mean, personally for my forecast, I've taken that off

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Speaker 1: the table. Although no one cares about my forecast, they

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Speaker 1: care about your forecast. What do you what are you

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Speaker 1: thinking about that?

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Speaker 8: Well?

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Speaker 10: I think the most likely path still implies that we're

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Speaker 10: likely to avoid a recession. But as we were talking earlier,

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Speaker 10: I think the negative influence of higher rates are still

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Speaker 10: to be seen as their full impact on the economy,

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Speaker 10: particularly when it comes to small businesses, refinancings, office refinancings,

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Speaker 10: and auto loans things like that. So there's still more

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Speaker 10: pressure to come. So we do expect the pace of

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Speaker 10: economic growth to down shift over the next few quarters.

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Speaker 10: And as such, it really wouldn't take much to for

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Speaker 10: that downshift to push us a little bit lower if

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Speaker 10: we were to see something such as a spike in

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Speaker 10: oil prices to boost the gasoline prices to push us

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Speaker 10: into negative territory for a short period of time. So

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Speaker 10: even if we do see a recession, I think it

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Speaker 10: would be very shallow and it would not what's most

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Speaker 10: important in most people's mind, it would not likely push

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Speaker 10: the unemployment rate up beyond five percent.

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Speaker 2: What's your view of you know, federal spending to me

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Speaker 2: seemed to be moving at cross purposes with what the

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Speaker 2: Federal Reserve was trying to do, right, I mean, we're

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Speaker 2: just pouring money on this economy out of Washington, DC.

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Speaker 2: As the Fed is raising rates to try and slow

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Speaker 2: down the economy. The bond market seems to be a

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Speaker 2: new player though involved in this. As they drive up

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Speaker 2: rates on the long end. Is that tightening financial conditions enough?

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Speaker 10: Well, it certainly is, clearly, But I do think we

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Speaker 10: will start to see some alleviation in the upward pressure

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Speaker 10: in market based rates, Treasury rates particular because part of

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Speaker 10: the boost that we've had over the last few months

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Speaker 10: was from the federally from the Treasury Department rebuilding its

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Speaker 10: checking account. Back in June, we had the Treasury balance

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Speaker 10: down below forty billion, and now it's built back up

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Speaker 10: to over six hundred and forty billion, So the checking

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Speaker 10: account is largely rebuilt. Usually they keep that at a

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Speaker 10: level between three hundred and five hundred billion, so it's

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Speaker 10: pretty flush today, so that component should alleviate. We still

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Speaker 10: have obviously deficuspending and the Federal Reserve working off its

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Speaker 10: balance sheets, so there's still a lot of upward pressure.

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Speaker 10: So once we see further confirmation that inflation truly is

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Speaker 10: sid and I think that's what the market's waiting for,

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Speaker 10: is further confirmation of that data, that we should start

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Speaker 10: to see rates moderate a little bit.

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Speaker 2: But we're on I mean five percent watch yeah, out

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Speaker 2: thirty years right, the thirty year right now four point

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Speaker 2: nine nine percent, up ten basis points today. You know,

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Speaker 2: the twenty year has already been in past five percent.

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Speaker 2: So does that you think is that a high high

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Speaker 2: water mark for yields.

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Speaker 10: I think it will end up being close to it.

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Speaker 10: I think we'll probably be at this these levels for

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Speaker 10: a little while longer. But again, as we move into

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Speaker 10: twenty twenty four, the inflation outlook starts to get a

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Speaker 10: little bit better. The Federal reserve insin indicates that they're

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Speaker 10: more on pause. I do think that we'll see those

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Speaker 10: rates come down a little bit, maybe somewhere between a

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Speaker 10: quarter and fifty basis points, so they'll come down somewhat.

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Speaker 10: That'll alleviate some of the concern about the economic environment,

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Speaker 10: and I think we'll have some up side for twenty

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Speaker 10: twenty four overall.

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Speaker 1: Andy Russell, just real quick, you're based in Detroit. A

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Speaker 1: lot of your fellow Detroit folks are on strike here.

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Speaker 1: When are they gonna work something out here between the

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Speaker 1: auto companies and the audio?

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Speaker 10: Yeah, that's it is a very difficult question. Certainly, I

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Speaker 10: don't have much insight into the negotiations by any means,

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Speaker 10: but it is something that's a rolling pressure on activity

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Speaker 10: in the area. Fortunately, we didn't see much of that

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Speaker 10: in today's industrial productiony. Manufacturing activity still expanded, but certainly

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Speaker 10: the auto industry needs to see that resolved sooner rather

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Speaker 10: than later.

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Speaker 4: You guys have a football team this year.

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Speaker 10: That's a very good that's a good.

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Speaker 6: With the Lions.

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Speaker 4: Yeah, that's right, that's the NFL.

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Speaker 2: Met That's okay with me as long as we're just

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Speaker 2: talking about the Lions and the NFL.

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Speaker 1: Yes, that's all you need to know. Russell Price, thanks

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Speaker 1: so much for joining us. Russell Price is the chief economist

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Speaker 1: for Amerprice Financial. Joining us live in our Bloomberg Interactive

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Speaker 1: Brokers studio.

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Speaker 9: You're listening to the tape cans Are Live program Bloomberg

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Speaker 9: Markets weekdays ten am Eastern on Bloomberg Radio, the tune

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Speaker 9: in app, Bloomberg dot Com, and.

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00:17:04,480 --> 00:17:05,800
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00:17:08,680 --> 00:17:13,760
Speaker 9: flagship New York station. Just say Alexa, play Bloomberg eleven thirty.

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Speaker 3: Talk about It, Diplomatic, full court Press.

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Speaker 1: US Secretary of s Anthony Blincoln in Israel for the

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Speaker 1: second time in like a week.

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Speaker 4: Now.

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Speaker 1: We've got news that tomorrow President Biden will be going

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Speaker 1: to Israel as well. Let's get the latest on kind

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Speaker 1: of what this means for this difficult situation. Henry Meyer

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Speaker 1: joins a season reporter for Bloomberg News based in Tel Aviv. Here, Henry,

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Speaker 1: it seems like the United States obviously the top, top

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Speaker 1: political folks making their way to Israel to try to,

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Speaker 1: I guess, improve a very difficult situation. What's the feeling

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Speaker 1: in Israel about President Biden coming over tomorrow.

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Speaker 11: Well, clearly it's seen first of all as a signal

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Speaker 11: of US support at this really critical time for Israel.

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Speaker 11: You know, they've been preparing now for a grand offensive

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Speaker 11: into Gaza, and the US has been pledging, you know,

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Speaker 11: military support and also saying that it supports Israel right

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Speaker 11: to defend itself in the face of a lot of

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Speaker 11: criticism now of the bombing which has taken place in

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Speaker 11: Gaza and concern about the civilian casualties that will result

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Speaker 11: if Israel does indeed decide to send grand troops into Gaza.

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Speaker 2: What is the status of that right now? I mean,

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Speaker 2: I imagine they're still all amassed at the border. They've

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Speaker 2: swept as many are pushed as many people from the

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Speaker 2: north of Gaza down to the south in order to

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Speaker 2: get in there.

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Speaker 6: Is it imminent?

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Speaker 2: I mean, are you hearing anything about the timing of

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Speaker 2: the invasion?

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Speaker 11: I mean, what we understand is that you know, it

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Speaker 11: is planned to take place imminently. I mean, clearly it's

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Speaker 11: not going to take place while these visits are occurring.

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Speaker 11: I mean, today we have the German Chancellor who's visiting

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Speaker 11: tomorrow President Biden. But you know, it is anticipated that

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Speaker 11: it could start pretty soon after that.

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Speaker 12: You know.

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Speaker 11: At the same time, you know, the US has also

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Speaker 11: been telling Israel, both privately and publicly, that it's got

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Speaker 11: to do everything to avoid civilian casualties. So you know,

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Speaker 11: it's not clear whether that will influence the type of

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Speaker 11: operation that Israel is going to conduct and go.

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Speaker 1: Henry, I guess you know here in the States, you know,

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Speaker 1: we're watching like everyone else here. One of the questions

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Speaker 1: that I think a lot of folks have is how

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Speaker 1: much collateral damage to civilians and others do you believe

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Speaker 1: that Israel's willing to inflict in an effort.

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Speaker 3: To achieve its stated military goals.

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Speaker 4: Is there a sense of in Israel how far they

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Speaker 4: really want to go?

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Speaker 11: I mean, everyone that you speak to here says that

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Speaker 11: you know, this is there in a new reality now,

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Speaker 11: and you know they have to go to the end.

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Speaker 11: They have to achieve the objective. The objective is to

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Speaker 11: dismantle Hamas militarily and its administrative role as well. In Gaza,

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Speaker 11: of course, you know, this does risk extremely high civilian casualties.

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Speaker 11: They're already three thousand almost Palestinians who've died in the bombing.

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Speaker 11: And although yes, they have succeeded in getting large numbers

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Speaker 11: of people to move south, still you know, there are

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Speaker 11: several hundred thousand left in the north, and there are

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Speaker 11: air strikes also taking place in the south as well,

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Speaker 11: so you know the risk of collateral damage is very real.

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Speaker 6: Why are there air strikes in the south.

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Speaker 2: I thought they moved everybody to the south to avoid

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Speaker 2: the air strikes in the north.

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Speaker 11: Correct. What we understand is that they said there were

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Speaker 11: targets that they had to focus on their hamas targets.

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Speaker 11: So it's not that they're bombing you know, as much

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Speaker 11: in the as in the North. But nonetheless that is

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Speaker 11: taking place. According to what we've.

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Speaker 1: Heard Henry, prior to this, that the the terrorist attack,

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Speaker 1: there was a fair about a division within Israel, you know,

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Speaker 1: profound division within Israel do in large part to Netyandu

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Speaker 1: and what he was trying to do with the judicial system.

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Speaker 1: To what extent post attack has the averages really do

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Speaker 1: they feel more united? Give us a sense of just

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Speaker 1: what it feels like on the ground in Israel talking

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Speaker 1: with you know, Israelis on on on on the street.

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Speaker 11: I mean, Israelis have put aside those differences for now.

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Speaker 11: I mean this is you know, a national emergency and

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Speaker 11: the country has come together. And you know, one of

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Speaker 11: the illustrations of that was the protest movement that you

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Speaker 11: know that was raising funds to protest against the judicial reforms.

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Speaker 11: You know, those funds have now been redirected to help

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Speaker 11: you know, the military effort. You have you know a

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Speaker 11: government now which is an emergency government which includes the opposition. So, yes,

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Speaker 11: the country has come together.

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Speaker 1: And Henry, it seems give us the latest reporting from

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Speaker 1: the West Bank. That's it seems quiet there. What's the

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Speaker 1: latest reporting.

444
00:22:16,240 --> 00:22:19,879
Speaker 11: Well, I mean it's quiet because the Israeli authorities the

445
00:22:19,960 --> 00:22:23,840
Speaker 11: same day that the terrorist attacks happened, you know, launched

446
00:22:24,119 --> 00:22:27,359
Speaker 11: a massive clampdown, security clampdown. So they've been you know,

447
00:22:27,400 --> 00:22:31,639
Speaker 11: carrying out mass arrests. They have been limiting, you know,

448
00:22:31,680 --> 00:22:35,399
Speaker 11: the movement of people within the West Bank. So you know,

449
00:22:35,440 --> 00:22:38,040
Speaker 11: they knew that that was potentially going to be another

450
00:22:38,080 --> 00:22:40,560
Speaker 11: flash point that you know, they could be a spill

451
00:22:40,600 --> 00:22:42,720
Speaker 11: over into the West Bank, and so they have taken

452
00:22:42,880 --> 00:22:45,960
Speaker 11: very very tough measures to prevent that from happening.

453
00:22:47,200 --> 00:22:53,440
Speaker 2: What is the value, Henry of the Israelis allowing Ismael

454
00:22:53,560 --> 00:22:56,920
Speaker 2: Hanayah to continue to live in Katar.

455
00:22:57,240 --> 00:22:58,800
Speaker 6: I mean, we talked with Bobby Ghosh.

456
00:22:58,600 --> 00:23:00,920
Speaker 2: Yesterday who told us so this gentlemen, he's the leader

457
00:23:00,920 --> 00:23:05,240
Speaker 2: of Hamas, and he lives in Qatar, and he is alive.

458
00:23:05,840 --> 00:23:08,160
Speaker 2: And so yesterday we were talking with Bobby Gosh who

459
00:23:08,160 --> 00:23:12,840
Speaker 2: pointed out that the Arab States armies are not serious,

460
00:23:13,600 --> 00:23:17,159
Speaker 2: you know, fighting groups. And I imagine if Israel, if

461
00:23:17,240 --> 00:23:19,920
Speaker 2: Masad wanted to go in there and take out Hanaya,

462
00:23:20,160 --> 00:23:21,240
Speaker 2: it would be no problem.

463
00:23:21,280 --> 00:23:22,080
Speaker 6: Why don't they do that?

464
00:23:23,520 --> 00:23:23,720
Speaker 8: Well?

465
00:23:23,760 --> 00:23:26,280
Speaker 11: I do think that, you know, there is a benefit

466
00:23:26,320 --> 00:23:30,280
Speaker 11: I think still having some kind of interlocutor. There are,

467
00:23:30,320 --> 00:23:34,160
Speaker 11: for example, talk taking place now and trying to get

468
00:23:34,640 --> 00:23:40,639
Speaker 11: hostages out freed. You know, more than two hundred hostages

469
00:23:40,640 --> 00:23:43,440
Speaker 11: as ready, hostage is being held in Gaza. And apart

470
00:23:43,440 --> 00:23:47,640
Speaker 11: from that, you know, there's so much criticism now of

471
00:23:47,720 --> 00:23:50,480
Speaker 11: what Israel is doing in the Arab world that I

472
00:23:50,560 --> 00:23:52,840
Speaker 11: just don't think that they would want to do such

473
00:23:52,880 --> 00:23:54,719
Speaker 11: an inflammatory thing as that.

474
00:23:55,400 --> 00:23:57,679
Speaker 2: I also wonder, you know, you're in a unique position

475
00:23:57,720 --> 00:24:02,040
Speaker 2: as a reporter, Henry, you were based in Moscow before this,

476
00:24:03,240 --> 00:24:06,200
Speaker 2: even god, I think a master's degree at Moscow University.

477
00:24:06,240 --> 00:24:09,399
Speaker 2: So you spent a lot of time covering Russia, covering

478
00:24:09,480 --> 00:24:14,280
Speaker 2: Vladimir Putin and the beginning of the war in Ukraine.

479
00:24:14,680 --> 00:24:17,320
Speaker 2: How does this play into all of that, because my

480
00:24:17,400 --> 00:24:22,159
Speaker 2: first thought was when I saw that Hamas had, you know,

481
00:24:22,200 --> 00:24:26,320
Speaker 2: committed these attacks, is this draws so much attention away

482
00:24:26,720 --> 00:24:28,880
Speaker 2: from what Vladimir Putin is doing in Ukraine.

483
00:24:30,000 --> 00:24:32,720
Speaker 11: Yeah, I mean, I think you're absolutely right. The Russians

484
00:24:33,600 --> 00:24:37,760
Speaker 11: see this as an opportunity. They see it as something

485
00:24:37,800 --> 00:24:41,320
Speaker 11: which is going to draw a US attension away from Ukraine.

486
00:24:41,520 --> 00:24:44,679
Speaker 11: I mean, there was already a sense that, you know,

487
00:24:44,720 --> 00:24:48,520
Speaker 11: the focus was switching. You saw that when eight Ukraine

488
00:24:48,520 --> 00:24:52,919
Speaker 11: got held up in Congress, and now you know, the

489
00:24:53,000 --> 00:24:54,679
Speaker 11: sense is that, well, the US is not going to

490
00:24:54,680 --> 00:24:56,960
Speaker 11: be able to focus on two things at the same time,

491
00:24:57,960 --> 00:25:00,400
Speaker 11: that the focus is going to be on making sure

492
00:25:00,440 --> 00:25:02,879
Speaker 11: that you know, Israel gets the military assistance it needs,

493
00:25:03,240 --> 00:25:07,320
Speaker 11: and therefore Ukraine is not going to get as much

494
00:25:07,840 --> 00:25:10,919
Speaker 11: help as it was getting in the past, so very

495
00:25:11,000 --> 00:25:13,960
Speaker 11: much so. Yeah, from a Russian perspective, they see the

496
00:25:14,040 --> 00:25:15,800
Speaker 11: tide turning in their favor.

497
00:25:16,440 --> 00:25:20,320
Speaker 1: Henry, what do you believe or what does the averages

498
00:25:20,400 --> 00:25:24,080
Speaker 1: rarely believe that they will get from President Biden tomorrow.

499
00:25:24,200 --> 00:25:26,399
Speaker 1: Is this is simply a show of solidarity or is

500
00:25:26,400 --> 00:25:29,439
Speaker 1: there anything particular that you think is youre really is

501
00:25:29,480 --> 00:25:31,320
Speaker 1: going to ask of the President?

502
00:25:33,080 --> 00:25:35,680
Speaker 11: Well, I mean, I think the fact of his coming

503
00:25:35,880 --> 00:25:39,359
Speaker 11: here is going to be seen, you know, as making

504
00:25:39,440 --> 00:25:43,400
Speaker 11: sure that Israel's enemies know that the US stands with Israel,

505
00:25:43,840 --> 00:25:47,359
Speaker 11: and that is particularly aimed at Iran. Of course, you know,

506
00:25:47,440 --> 00:25:50,840
Speaker 11: the risk now that everyone is concerned about and that

507
00:25:50,920 --> 00:25:54,119
Speaker 11: the US particularly has been trying to sort of counter

508
00:25:54,240 --> 00:25:58,359
Speaker 11: that threat, is of this conflict spreading, spreading to the region,

509
00:25:58,800 --> 00:26:03,960
Speaker 11: and specifically if Hezbollah, which is backed by Iran, launches

510
00:26:04,000 --> 00:26:07,800
Speaker 11: you know, major missile attacks from Lebanese territory into Israel,

511
00:26:08,600 --> 00:26:11,800
Speaker 11: you could see this this war becoming a much much

512
00:26:11,840 --> 00:26:17,560
Speaker 11: wider war in the region, potentially also drawing Iran into it.

513
00:26:17,680 --> 00:26:19,720
Speaker 2: Is he going He's going to meet with King Abdullah,

514
00:26:19,760 --> 00:26:24,400
Speaker 2: I know in Jordan and possibly elseci in Egypt as well.

515
00:26:24,440 --> 00:26:26,119
Speaker 6: Do they stand with us?

516
00:26:26,119 --> 00:26:29,040
Speaker 2: Can those two countries be counted on as US allies?

517
00:26:29,240 --> 00:26:31,359
Speaker 2: Or I mean I believe they talked to putin first.

518
00:26:33,359 --> 00:26:36,879
Speaker 11: Those two countries, you know, have been warning about the

519
00:26:37,960 --> 00:26:41,960
Speaker 11: risk the impact that would follow if Israel launches a

520
00:26:42,040 --> 00:26:45,479
Speaker 11: large scale offensive in Gaza. They're very concerned about that.

521
00:26:45,560 --> 00:26:49,800
Speaker 11: And you know, Sexuary Blincoln crisscrossed the region just in

522
00:26:49,840 --> 00:26:52,000
Speaker 11: the last few days to try and you know, enlift

523
00:26:52,040 --> 00:26:56,680
Speaker 11: Arab support for Israel's actions, but he was not successful.

524
00:26:57,200 --> 00:26:59,199
Speaker 1: All right, Henry, thank you so much for your reporting there.

525
00:26:59,200 --> 00:27:02,320
Speaker 1: Henry Meyer, Senior reporter Economy and Government for Bloomberg News.

526
00:27:02,320 --> 00:27:04,480
Speaker 8: And you're listening to the team.

527
00:27:04,840 --> 00:27:09,040
Speaker 9: Can's a live program Bloomberg Markets weekdays at ten am Eastern.

528
00:27:08,800 --> 00:27:11,879
Speaker 8: On Bloomberg dot Com, the iHeartRadio.

529
00:27:11,160 --> 00:27:13,919
Speaker 9: App, and the Bloomberg Business app, or listen on demand

530
00:27:13,960 --> 00:27:15,560
Speaker 9: wherever you get your podcasts.

531
00:27:17,160 --> 00:27:19,479
Speaker 1: Matt Lila, Paul Sweeney live here and I Bloomberg an

532
00:27:19,480 --> 00:27:20,320
Speaker 1: Active Broker studio.

533
00:27:20,320 --> 00:27:22,520
Speaker 2: Also, you know what I do when I get to cash, yep,

534
00:27:23,600 --> 00:27:25,919
Speaker 2: when I have a fair amount sitting around on my

535
00:27:26,160 --> 00:27:28,040
Speaker 2: bank balance, you spend it.

536
00:27:28,200 --> 00:27:30,239
Speaker 6: Of course, But how do I spend it?

537
00:27:30,320 --> 00:27:31,200
Speaker 4: So motorcycle.

538
00:27:31,240 --> 00:27:34,400
Speaker 2: There are things that I'm always looking for a good

539
00:27:34,520 --> 00:27:38,600
Speaker 2: place to buy Clinch boots engineering boots made with shinky

540
00:27:38,640 --> 00:27:41,159
Speaker 2: horse hide, the kind you can only get out of

541
00:27:41,240 --> 00:27:44,800
Speaker 2: Japan from one tannery there that makes the best horse side.

542
00:27:45,000 --> 00:27:45,520
Speaker 6: In the world.

543
00:27:45,640 --> 00:27:49,680
Speaker 2: Or if I'm looking for jeans, I'll go with Samurai denim,

544
00:27:49,760 --> 00:27:54,080
Speaker 2: and I like twenty five ounce Samurai blue jeans made

545
00:27:54,119 --> 00:27:58,440
Speaker 2: the old fashioned way on looms that Americans sold the

546
00:27:58,520 --> 00:28:00,480
Speaker 2: Japanese cent Go.

547
00:28:00,560 --> 00:28:01,720
Speaker 4: All right, so this is Gore.

548
00:28:02,040 --> 00:28:05,720
Speaker 2: I like, uh, the real McCoy's the best place to

549
00:28:05,840 --> 00:28:10,880
Speaker 2: get flight jackets like A two's or B three's that

550
00:28:10,920 --> 00:28:14,280
Speaker 2: are like perfect compared to the old ones, only much

551
00:28:14,320 --> 00:28:16,960
Speaker 2: higher quality in terms of the leather and stitching. All

552
00:28:17,000 --> 00:28:19,159
Speaker 2: of this stuff comes from Japan, So how do I

553
00:28:19,200 --> 00:28:19,520
Speaker 2: get it?

554
00:28:20,119 --> 00:28:20,560
Speaker 4: Racketon?

555
00:28:20,920 --> 00:28:22,680
Speaker 6: That's right, Boom, there's.

556
00:28:22,480 --> 00:28:25,040
Speaker 2: A website that I use to buy all of this stuff.

557
00:28:25,640 --> 00:28:29,080
Speaker 2: Now I've grown up saying Rakuton, but maybe it's Racketon.

558
00:28:29,240 --> 00:28:30,200
Speaker 3: Let's ask our next.

559
00:28:30,400 --> 00:28:30,960
Speaker 6: Yeah, let's do that.

560
00:28:31,119 --> 00:28:34,360
Speaker 1: Julie Van Allen, she's a chief revenue officer for Racketon.

561
00:28:34,560 --> 00:28:35,720
Speaker 1: Who pronounces it right.

562
00:28:35,640 --> 00:28:38,960
Speaker 13: Julie, Racketon is the way we go?

563
00:28:40,280 --> 00:28:40,560
Speaker 8: All right?

564
00:28:40,600 --> 00:28:42,520
Speaker 2: Well, I've been using it for years and Paul has

565
00:28:42,560 --> 00:28:45,320
Speaker 2: never heard of it. So to us about the other

566
00:28:45,360 --> 00:28:47,560
Speaker 2: things that you can do on your website because you're

567
00:28:47,600 --> 00:28:50,960
Speaker 2: the chief revenue officer there, which I guess means that

568
00:28:51,000 --> 00:28:54,360
Speaker 2: you're in charge of making more and more money and

569
00:28:54,400 --> 00:28:57,200
Speaker 2: I only use it for maybe one niche part of

570
00:28:57,240 --> 00:28:57,800
Speaker 2: your business.

571
00:28:57,800 --> 00:28:58,760
Speaker 6: So what is racketin?

572
00:29:00,160 --> 00:29:01,840
Speaker 7: So yeah, and my.

573
00:29:01,880 --> 00:29:04,479
Speaker 13: Job is just making money. It's really about ensuring that

574
00:29:04,600 --> 00:29:08,200
Speaker 13: all of the merchants, so the brands and retailers who

575
00:29:08,320 --> 00:29:11,800
Speaker 13: use our site to have access to the loyal shoppers

576
00:29:11,840 --> 00:29:15,800
Speaker 13: who go to racketin to start their purchases have the

577
00:29:15,840 --> 00:29:19,560
Speaker 13: best experience possible. So effectively, Racketin offers cash back to

578
00:29:19,640 --> 00:29:24,280
Speaker 13: shoppers and helps brand in retailers engender loyalty through the

579
00:29:24,320 --> 00:29:27,920
Speaker 13: shopper base who uses racketin to shop for everyday purchases.

580
00:29:28,320 --> 00:29:30,360
Speaker 1: So give us an example of Juliet kind of a

581
00:29:30,400 --> 00:29:34,440
Speaker 1: typical retailer that uses your site to reach your customer base.

582
00:29:35,640 --> 00:29:40,040
Speaker 13: We range a vast array of categories from a parol

583
00:29:40,160 --> 00:29:42,840
Speaker 13: to footwear. So you have your department stores, you have

584
00:29:42,920 --> 00:29:47,080
Speaker 13: luxury department stores, so Macy's, the Bloomingdale's, we have direct

585
00:29:47,080 --> 00:29:51,400
Speaker 13: to consumer brands. We have over thirty five hundred brands

586
00:29:51,440 --> 00:29:55,160
Speaker 13: on the site. We also are across the travel vertical

587
00:29:55,200 --> 00:29:59,720
Speaker 13: as well. So really hard pressed for shoppers, for consumers

588
00:29:59,760 --> 00:30:01,880
Speaker 13: to come to our site and not find what they're

589
00:30:01,920 --> 00:30:02,440
Speaker 13: looking for.

590
00:30:03,000 --> 00:30:05,440
Speaker 1: So give us a sense of how the consumer's behaving

591
00:30:05,480 --> 00:30:08,240
Speaker 1: to We had some really strong retail sales numbers reported

592
00:30:08,280 --> 00:30:11,840
Speaker 1: by today, and what are you finding on your platform?

593
00:30:11,840 --> 00:30:13,480
Speaker 4: How's the consumer these days?

594
00:30:14,720 --> 00:30:16,960
Speaker 13: Yeah, I mean your question is actually a great segue

595
00:30:17,000 --> 00:30:20,200
Speaker 13: because we see such a vast array of purchases from

596
00:30:20,240 --> 00:30:22,840
Speaker 13: across a number of categories, and we've been tracking the

597
00:30:22,880 --> 00:30:25,960
Speaker 13: consumer sentiment and what they've been buying over the last

598
00:30:26,040 --> 00:30:29,520
Speaker 13: couple of years, of course, which has been pivoting and

599
00:30:29,600 --> 00:30:34,680
Speaker 13: changing constantly given the economic conditions. But what we're seeing

600
00:30:34,800 --> 00:30:38,760
Speaker 13: right now is, of course the CPI rows a little bit,

601
00:30:38,880 --> 00:30:43,520
Speaker 13: which means that consumers are still feeling tighter budgets due

602
00:30:43,520 --> 00:30:47,959
Speaker 13: to inflation, especially since that core inflation is what's impacting

603
00:30:48,120 --> 00:30:53,800
Speaker 13: folks student loan debt repayments resuming, so that's still a burden.

604
00:30:54,240 --> 00:30:58,000
Speaker 13: But what we're seeing now, especially given the raid the

605
00:30:58,360 --> 00:31:00,840
Speaker 13: retail trade sales have gone on a little bit, is

606
00:31:00,840 --> 00:31:04,280
Speaker 13: that they're still willing to shop, and they're still willing

607
00:31:04,320 --> 00:31:09,440
Speaker 13: to shop using discretionary spending as well. So while year

608
00:31:09,480 --> 00:31:12,640
Speaker 13: to date there's been this trade down effect, whereas if

609
00:31:12,680 --> 00:31:16,040
Speaker 13: you shopped at a high end department store, perhaps you've

610
00:31:16,120 --> 00:31:18,800
Speaker 13: been shopping at more of a discount department store year

611
00:31:18,840 --> 00:31:23,880
Speaker 13: to date. That will continue because discount steals value is

612
00:31:23,920 --> 00:31:26,840
Speaker 13: definitely going to be central to the consumer mindset through

613
00:31:27,120 --> 00:31:32,240
Speaker 13: the holidays. But it's interesting already to see a willingness

614
00:31:32,240 --> 00:31:35,960
Speaker 13: to increase discretionary spending start to uptick, which is something

615
00:31:36,000 --> 00:31:38,360
Speaker 13: that we would anticipate to see throughout the rest of

616
00:31:38,480 --> 00:31:38,880
Speaker 13: Q four.

617
00:31:39,440 --> 00:31:42,440
Speaker 2: How are your customers paying for the stuff that they're buying?

618
00:31:42,480 --> 00:31:46,000
Speaker 2: I mean, imagine they could do that with a with.

619
00:31:45,960 --> 00:31:47,480
Speaker 6: A credit card or the debit card.

620
00:31:48,320 --> 00:31:50,600
Speaker 2: There are a million other ways nowadays, with PayPal and

621
00:31:50,680 --> 00:31:52,280
Speaker 2: Venmo and buy now, pay later.

622
00:31:52,920 --> 00:31:54,200
Speaker 6: How are you seeing that breakdown?

623
00:31:55,600 --> 00:31:59,120
Speaker 13: So at Racketon, we don't actually facilitate the purchase. We

624
00:31:59,200 --> 00:32:03,120
Speaker 13: facilitate the consumer engaging with the brand of their choosing.

625
00:32:03,320 --> 00:32:06,200
Speaker 13: So you would start your shopping trip at Racketon, But

626
00:32:06,280 --> 00:32:09,360
Speaker 13: say you're shopping at Macy's. You would shop at Macy's

627
00:32:09,480 --> 00:32:12,120
Speaker 13: just as you would if you went to their site directly.

628
00:32:12,400 --> 00:32:15,840
Speaker 13: And of course most brands and retailers these days are

629
00:32:15,880 --> 00:32:19,080
Speaker 13: offering an array of ways to shop and buy.

630
00:32:19,080 --> 00:32:21,160
Speaker 2: No, but what is the selling point that, Like, why

631
00:32:21,200 --> 00:32:22,840
Speaker 2: wouldn't I just go to Macy's directly?

632
00:32:23,120 --> 00:32:24,680
Speaker 6: Why do I make a stop at Racketin?

633
00:32:26,040 --> 00:32:26,360
Speaker 8: Yeah?

634
00:32:26,400 --> 00:32:29,120
Speaker 13: So Racketin is a place where you get cash back

635
00:32:29,120 --> 00:32:33,840
Speaker 13: on your purchases. So we have a hugely loyal base

636
00:32:33,920 --> 00:32:39,640
Speaker 13: of shoppers who shop more frequently, who shop across different

637
00:32:39,680 --> 00:32:43,400
Speaker 13: categories when they can find an offer that is enticing

638
00:32:43,480 --> 00:32:45,640
Speaker 13: for them. And I think what's so interesting to a

639
00:32:45,680 --> 00:32:48,120
Speaker 13: lot of brands, especially going into a season like this

640
00:32:48,200 --> 00:32:51,840
Speaker 13: where you have consumers who are looking for value. You

641
00:32:51,880 --> 00:32:53,920
Speaker 13: have a lot of brands who aren't interested in the

642
00:32:54,040 --> 00:32:58,240
Speaker 13: discount space, who aren't interested in offering coupons. There's brand

643
00:32:58,280 --> 00:33:02,400
Speaker 13: devaluation associated with these things. But at Racketon, this is

644
00:33:02,440 --> 00:33:05,520
Speaker 13: really an incentive where consumers can come and get an

645
00:33:05,560 --> 00:33:09,400
Speaker 13: exciting offer via cash back to shop more, buy higher

646
00:33:09,520 --> 00:33:12,520
Speaker 13: value cart sizes with these brands and shop more frequently

647
00:33:12,600 --> 00:33:15,480
Speaker 13: through the holidays and feel really good about what they're

648
00:33:15,480 --> 00:33:17,120
Speaker 13: doing because they're getting cash back.

649
00:33:17,480 --> 00:33:19,520
Speaker 1: Well, what are some of the retail partners that you

650
00:33:19,560 --> 00:33:21,880
Speaker 1: work with, what are they saying about this holiday season?

651
00:33:22,320 --> 00:33:24,920
Speaker 1: Coming up here? Because again, the retail sales today look

652
00:33:24,920 --> 00:33:25,720
Speaker 1: prett darn strong.

653
00:33:27,560 --> 00:33:29,800
Speaker 13: Yeah, they are strong, and they're going to continue to

654
00:33:29,800 --> 00:33:32,280
Speaker 13: be strong. But I think the thing that everyone is

655
00:33:32,360 --> 00:33:34,960
Speaker 13: aware of is that consumers are going to be looking

656
00:33:35,040 --> 00:33:38,800
Speaker 13: for the best bang for their buck this holiday, and

657
00:33:38,880 --> 00:33:42,000
Speaker 13: for retailers this year, especially coming out of the last

658
00:33:42,040 --> 00:33:46,200
Speaker 13: couple of years where it was there the focus was

659
00:33:46,240 --> 00:33:50,080
Speaker 13: on top line spend. It was just ensuring sales, ensuring

660
00:33:50,080 --> 00:33:52,520
Speaker 13: that the customer base that was loyal to these brands

661
00:33:52,560 --> 00:33:57,000
Speaker 13: continued to shop with them through hard times. Gross margin

662
00:33:57,120 --> 00:33:59,120
Speaker 13: kind of went out the window for the last couple

663
00:33:59,120 --> 00:34:02,400
Speaker 13: of years. But this year to date it's been a

664
00:34:02,400 --> 00:34:05,000
Speaker 13: bit of a back to health focus for most most

665
00:34:05,160 --> 00:34:08,560
Speaker 13: retailers and brands. But what I will say that we're

666
00:34:08,560 --> 00:34:12,480
Speaker 13: hearing from nearly all categories and all brands and retailers

667
00:34:12,560 --> 00:34:14,960
Speaker 13: is that they realize that this is going to be

668
00:34:15,440 --> 00:34:20,440
Speaker 13: a very very competitive shopping season where discounts and value

669
00:34:20,440 --> 00:34:22,839
Speaker 13: adds are going to be central to what consumers are

670
00:34:22,840 --> 00:34:26,280
Speaker 13: looking for to make their dollars go as far as possible.

671
00:34:26,400 --> 00:34:29,359
Speaker 13: So brands are really focused on how to make sure

672
00:34:29,400 --> 00:34:31,280
Speaker 13: to get the best deals in front of the best

673
00:34:31,680 --> 00:34:33,880
Speaker 13: shoppers and meet them where they are this holiday.

674
00:34:34,800 --> 00:34:38,640
Speaker 3: So what's what categories are really moving these days?

675
00:34:38,640 --> 00:34:41,040
Speaker 1: I mean when I go into the holidays, I always

676
00:34:41,080 --> 00:34:43,200
Speaker 1: kind of hear electronics things like that.

677
00:34:43,239 --> 00:34:45,799
Speaker 4: But what's what are consumers really looking for these days?

678
00:34:47,600 --> 00:34:50,640
Speaker 13: Of course, I mean, nothing's going to change in terms

679
00:34:50,680 --> 00:34:54,279
Speaker 13: of what are giftable categories that that consumers will be

680
00:34:54,320 --> 00:35:01,719
Speaker 13: shopping this holiday. Certainly electronics, certainly apparel, and certainly luxury.

681
00:35:01,840 --> 00:35:03,759
Speaker 13: And I think that that's actually one of the more

682
00:35:03,800 --> 00:35:08,279
Speaker 13: interesting categories right now, because luxury tends to be one

683
00:35:08,280 --> 00:35:11,160
Speaker 13: of those categories that doesn't really see a lot of

684
00:35:11,280 --> 00:35:14,719
Speaker 13: impact from changes in the economy. And we kind of

685
00:35:14,760 --> 00:35:17,920
Speaker 13: affectionately say that that's because the rich stay rich, but

686
00:35:19,360 --> 00:35:23,160
Speaker 13: who are actually seeing some changes and the core shoppers

687
00:35:23,200 --> 00:35:27,680
Speaker 13: who shop luxury typically, Which is a good lesson to

688
00:35:27,800 --> 00:35:30,879
Speaker 13: learn for really any brand heading into Q four, which

689
00:35:30,920 --> 00:35:35,960
Speaker 13: is to say that with current economic challenges and consumers

690
00:35:36,040 --> 00:35:38,520
Speaker 13: making different sorts of decisions as to where they spend

691
00:35:38,520 --> 00:35:42,120
Speaker 13: their dollars, they need to figure out who is buying

692
00:35:42,160 --> 00:35:45,080
Speaker 13: their products these days. What are the younger what are

693
00:35:45,080 --> 00:35:49,279
Speaker 13: the gen zers spending on? And how can they attract

694
00:35:49,719 --> 00:35:53,640
Speaker 13: an engender loyalty to new shopper bases and categories who

695
00:35:53,760 --> 00:35:57,200
Speaker 13: might not have been the traditional focus of their marketing spend.

696
00:35:58,040 --> 00:35:59,759
Speaker 1: All right, Julie, thank you so much for joining us.

697
00:36:00,680 --> 00:36:04,120
Speaker 1: Really interesting conversation. Julie van Ullen. She is the chief

698
00:36:04,239 --> 00:36:06,120
Speaker 1: revenue officer for Rocketon.

699
00:36:07,400 --> 00:36:11,040
Speaker 9: You're listening to the tape cat'sur live program Bloomberg Markets

700
00:36:11,080 --> 00:36:14,479
Speaker 9: weekdays at ten am Eastern on Bloomberg Radio, the tune

701
00:36:14,520 --> 00:36:16,399
Speaker 9: in alf, Bloomberg dot Com, and the.

702
00:36:16,280 --> 00:36:17,439
Speaker 8: Bloomberg Business app.

703
00:36:17,520 --> 00:36:20,319
Speaker 9: You can also listen live on Amazon Alexa from our

704
00:36:20,360 --> 00:36:25,360
Speaker 9: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

705
00:36:26,200 --> 00:36:27,160
Speaker 6: I'm Tucker and I are.

706
00:36:27,200 --> 00:36:31,880
Speaker 1: Proud natives of New Jersey, so that means we know malls.

707
00:36:32,480 --> 00:36:34,200
Speaker 4: Yeah, we know shopping malls.

708
00:36:34,680 --> 00:36:36,800
Speaker 1: You know, when I lived in some A, New Jersey,

709
00:36:36,880 --> 00:36:39,319
Speaker 1: right across the street was the Short Hills.

710
00:36:39,040 --> 00:36:40,120
Speaker 4: Mall, which is a nice mall.

711
00:36:40,200 --> 00:36:43,040
Speaker 6: That's the mall where you can get valley parking.

712
00:36:43,239 --> 00:36:46,000
Speaker 2: Yes, ways, I can get valley parking at the Westchester.

713
00:36:46,080 --> 00:36:48,320
Speaker 2: I could get valley parking at the City Center in Columbus.

714
00:36:48,360 --> 00:36:49,040
Speaker 6: Are you a mall guy.

715
00:36:49,239 --> 00:36:52,760
Speaker 2: I'm a lover of malls. Yes, I'm both indoor and outdoor.

716
00:36:52,840 --> 00:36:56,880
Speaker 2: But I reject the notion that you know more about

717
00:36:56,960 --> 00:36:59,680
Speaker 2: malls being from New Jersey than I do being from

718
00:36:59,719 --> 00:37:01,360
Speaker 2: a high close.

719
00:37:01,680 --> 00:37:04,279
Speaker 6: You don't you you live near malls, but you don't

720
00:37:04,400 --> 00:37:07,439
Speaker 6: go to them. Have you been to the American Dream Mall?

721
00:37:07,680 --> 00:37:07,759
Speaker 2: No?

722
00:37:07,920 --> 00:37:08,640
Speaker 6: That all right?

723
00:37:08,640 --> 00:37:11,880
Speaker 2: If that live near the most impressive mall probably in

724
00:37:11,920 --> 00:37:13,440
Speaker 2: the whole country and you've not been.

725
00:37:13,440 --> 00:37:14,800
Speaker 4: That's a good point. That's a good point.

726
00:37:14,800 --> 00:37:16,680
Speaker 3: Our next guest knows about this mall thing.

727
00:37:16,760 --> 00:37:17,360
Speaker 4: Donna Blair.

728
00:37:17,400 --> 00:37:20,840
Speaker 1: She's a chief a COEO of Pacific Retail Capital Partners,

729
00:37:20,880 --> 00:37:23,160
Speaker 1: and these folks there they invest in malls and all

730
00:37:23,239 --> 00:37:24,200
Speaker 1: kinds of retail stuff.

731
00:37:24,239 --> 00:37:24,959
Speaker 4: She joins us here.

732
00:37:25,040 --> 00:37:27,640
Speaker 1: Hey, Donna again, I'm a huge fan of the mall

733
00:37:27,760 --> 00:37:30,120
Speaker 1: kid of the eighties, all that kind of stuff. Where

734
00:37:30,160 --> 00:37:32,719
Speaker 1: are we with the American shopping mall today? A lot

735
00:37:32,760 --> 00:37:35,280
Speaker 1: of folks were saying, you know, particularly with the pandemic,

736
00:37:35,360 --> 00:37:36,520
Speaker 1: that business is dead.

737
00:37:36,560 --> 00:37:37,520
Speaker 4: Where are we with that?

738
00:37:38,760 --> 00:37:38,800
Speaker 8: No?

739
00:37:38,960 --> 00:37:41,440
Speaker 12: Good morning, Paul, Good morning Matt. Thank you for having me.

740
00:37:42,080 --> 00:37:45,360
Speaker 12: I think that at Pacific Retail we have a different

741
00:37:45,440 --> 00:37:48,120
Speaker 12: opinion about malls. You know, we look at the malls

742
00:37:48,480 --> 00:37:51,200
Speaker 12: not just as is where is, but really where are

743
00:37:51,239 --> 00:37:53,840
Speaker 12: they going? And the future of the mall is not

744
00:37:54,080 --> 00:37:57,000
Speaker 12: necessarily all retail. It really is this mall to mixed

745
00:37:57,040 --> 00:38:00,200
Speaker 12: juice approach where you look at the real estate, look

746
00:38:00,200 --> 00:38:03,520
Speaker 12: at the demographics, but more importantly you look at the psychographics.

747
00:38:03,880 --> 00:38:07,359
Speaker 12: You know, why is the mall important? Is it from

748
00:38:07,360 --> 00:38:10,560
Speaker 12: a retail perspective or really is it more about creating

749
00:38:10,640 --> 00:38:14,720
Speaker 12: community and lifestyle. And our focus at PUERCP is really

750
00:38:15,000 --> 00:38:18,680
Speaker 12: being strategic in that approach and trying to really reposition

751
00:38:18,760 --> 00:38:21,520
Speaker 12: them all into more of a mixed U sasset that

752
00:38:21,680 --> 00:38:24,880
Speaker 12: is going to have to evolve from just retail to

753
00:38:24,960 --> 00:38:27,200
Speaker 12: being more that lifestyle and community.

754
00:38:28,120 --> 00:38:31,880
Speaker 1: So do you guys focus on the enclosed mall or

755
00:38:31,920 --> 00:38:34,000
Speaker 1: the open air mall? Because I've had some matt and

756
00:38:34,040 --> 00:38:36,040
Speaker 1: I've had some retail investors come in there and say, Hey,

757
00:38:36,040 --> 00:38:38,360
Speaker 1: the open air mall, There's a lot we can do

758
00:38:38,400 --> 00:38:39,640
Speaker 1: with that kind of business.

759
00:38:40,280 --> 00:38:42,000
Speaker 4: How do you guys view the market?

760
00:38:42,760 --> 00:38:45,480
Speaker 12: Sure, we focus on both. I would say a majority

761
00:38:45,520 --> 00:38:48,719
Speaker 12: of our centers are in closed shopping centers. But when

762
00:38:48,800 --> 00:38:51,279
Speaker 12: you look at the plethor or real estate that an

763
00:38:51,360 --> 00:38:53,880
Speaker 12: enclosed mall has in terms of the parking fields, the

764
00:38:53,920 --> 00:38:57,160
Speaker 12: anchor boxes, it actually has a lot of real estate

765
00:38:57,200 --> 00:39:00,400
Speaker 12: that can be repositioned and so that a bil to

766
00:39:00,480 --> 00:39:04,240
Speaker 12: kind of pivot and change and evolve the asset is

767
00:39:04,280 --> 00:39:07,440
Speaker 12: super important in terms of making sure that it's relevant.

768
00:39:07,440 --> 00:39:09,640
Speaker 12: There will always be retail as part of a mall,

769
00:39:10,000 --> 00:39:12,560
Speaker 12: but how do you actually reposition it? And they're a

770
00:39:12,560 --> 00:39:15,640
Speaker 12: little bit more complicated when you look at the enclosed

771
00:39:15,680 --> 00:39:19,760
Speaker 12: malls because you've got reciprocal easement agreements between the owners

772
00:39:19,800 --> 00:39:22,279
Speaker 12: of the mall and then the anchor tenants, some of

773
00:39:22,320 --> 00:39:25,359
Speaker 12: your major tenants, and also the municipalities, so they're going

774
00:39:25,400 --> 00:39:27,880
Speaker 12: to govern everything. What are the uses, what are the

775
00:39:27,920 --> 00:39:32,640
Speaker 12: parking availabilities, the parking counts, how tall, how wide? And

776
00:39:32,719 --> 00:39:36,279
Speaker 12: it really is how do you strategically unlock all of

777
00:39:36,320 --> 00:39:39,960
Speaker 12: those encumberances to create value in the real estate and

778
00:39:40,000 --> 00:39:42,839
Speaker 12: reposition it. And that's how we're really focused on the

779
00:39:42,880 --> 00:39:46,920
Speaker 12: malls centric assets that we own, is just to do

780
00:39:46,960 --> 00:39:50,160
Speaker 12: that to unlock their actual value of potential for us

781
00:39:50,200 --> 00:39:53,000
Speaker 12: as investors and owners, but more importantly for the community

782
00:39:53,000 --> 00:39:54,439
Speaker 12: and the consumers too.

783
00:39:55,160 --> 00:39:59,480
Speaker 2: What are the main complaints you know, or what do

784
00:39:59,520 --> 00:40:02,600
Speaker 2: you aim to change compared to a typical mall, Because

785
00:40:03,600 --> 00:40:05,799
Speaker 2: as I said, you know, I'm a huge fan. I

786
00:40:05,840 --> 00:40:09,960
Speaker 2: love these indoor shopping centers and outdoor you know, communities

787
00:40:09,960 --> 00:40:13,360
Speaker 2: as well, but there are issues like they all seem

788
00:40:13,400 --> 00:40:16,759
Speaker 2: to have the exact same retailers, which I guess those

789
00:40:16,760 --> 00:40:18,480
Speaker 2: would be your anchors, right, I don't want to go

790
00:40:18,560 --> 00:40:21,120
Speaker 2: to I went to a mall in Berlin and noticed

791
00:40:21,120 --> 00:40:24,120
Speaker 2: that they had the same retailers as the mall in Westchester.

792
00:40:24,520 --> 00:40:26,320
Speaker 2: I don't need to have a Gucci, a Coach and

793
00:40:26,360 --> 00:40:28,359
Speaker 2: a Nimh and Marcus and every mall I go to.

794
00:40:28,920 --> 00:40:31,279
Speaker 6: You know, so how do you how do you make

795
00:40:31,320 --> 00:40:32,200
Speaker 6: those kind of changes?

796
00:40:33,000 --> 00:40:35,520
Speaker 12: No, for sure, I think what we're focusing a lot

797
00:40:35,760 --> 00:40:38,680
Speaker 12: is on that dynamic mix. You know, there are less

798
00:40:38,800 --> 00:40:41,880
Speaker 12: national tenants that are actually in the business these days,

799
00:40:41,920 --> 00:40:44,759
Speaker 12: and so right sizing the amount of retail and then

800
00:40:44,840 --> 00:40:48,720
Speaker 12: creating that diversification is important. Local is key. We spend

801
00:40:48,719 --> 00:40:52,200
Speaker 12: a lot of time in our leasing strategy really focusing

802
00:40:52,280 --> 00:40:56,080
Speaker 12: in on local businesses, whether they're mom and pop restaurants

803
00:40:56,160 --> 00:40:59,480
Speaker 12: or whether they're local retailers, and we put them together

804
00:40:59,600 --> 00:41:02,400
Speaker 12: and collect so that you can really get that local flavor.

805
00:41:02,760 --> 00:41:05,760
Speaker 12: We find one the community's more interested in that because

806
00:41:05,800 --> 00:41:08,120
Speaker 12: to your point, it's something new, it's something different, You're

807
00:41:08,120 --> 00:41:11,960
Speaker 12: not seeing it everywhere, but more importantly is that the

808
00:41:12,000 --> 00:41:14,879
Speaker 12: community is committed to helping their own to actually help

809
00:41:15,160 --> 00:41:18,000
Speaker 12: bring those businesses to life and to support them. So

810
00:41:18,080 --> 00:41:21,719
Speaker 12: that's a really important focus. You're seeing obviously a lot

811
00:41:21,760 --> 00:41:25,680
Speaker 12: more food and beverage and entertainment because the experiential aspect

812
00:41:26,200 --> 00:41:31,040
Speaker 12: of the shopping center is really super important and is

813
00:41:31,080 --> 00:41:33,000
Speaker 12: the way that we are going to be able to

814
00:41:33,080 --> 00:41:36,560
Speaker 12: create that experience where our consumers come back over and

815
00:41:36,600 --> 00:41:39,680
Speaker 12: over and find something different. It's all about that activation,

816
00:41:39,880 --> 00:41:42,760
Speaker 12: the experience and then that diversification of your mix.

817
00:41:43,760 --> 00:41:44,000
Speaker 4: Done.

818
00:41:44,000 --> 00:41:46,680
Speaker 1: With the cost of capital rising dramatically over the past

819
00:41:46,760 --> 00:41:48,360
Speaker 1: twelve to eighteen months, what are you guys doing in

820
00:41:48,400 --> 00:41:50,920
Speaker 1: terms of your acquisition activities?

821
00:41:50,920 --> 00:41:53,200
Speaker 4: That kind of made the economics a lot more.

822
00:41:53,120 --> 00:41:57,240
Speaker 12: Difficult certainly, you know, the investor pool is a lot different,

823
00:41:57,360 --> 00:42:01,520
Speaker 12: and we're not going to traditional institutional investors. You know,

824
00:42:01,560 --> 00:42:05,359
Speaker 12: we're really seeing a lot of individuals from the high

825
00:42:05,440 --> 00:42:09,680
Speaker 12: net worth category family businesses enter the market. We have

826
00:42:09,800 --> 00:42:13,040
Speaker 12: actually found a little sweet spat spot in distressed. You

827
00:42:13,080 --> 00:42:15,080
Speaker 12: were talking about New Jersey when you opened up, and

828
00:42:15,160 --> 00:42:19,880
Speaker 12: we just recently acquired in may Bridgewater Commons and you know,

829
00:42:20,239 --> 00:42:23,480
Speaker 12: this is an asset that has really strong demographics, really

830
00:42:23,480 --> 00:42:27,160
Speaker 12: strong psychographics, but really wasn't a distressed state.

831
00:42:27,239 --> 00:42:27,880
Speaker 6: We were stress.

832
00:42:28,800 --> 00:42:30,160
Speaker 4: How about the living stone mall.

833
00:42:31,920 --> 00:42:32,920
Speaker 7: The living st mall?

834
00:42:33,040 --> 00:42:38,279
Speaker 12: I mean, are those are tougher assets to really reposition?

835
00:42:38,719 --> 00:42:42,040
Speaker 12: Focusing on an asset like a Bridgewater Commons, we're really

836
00:42:42,160 --> 00:42:45,799
Speaker 12: able to capitalize on the strong demographics there and be

837
00:42:45,840 --> 00:42:48,320
Speaker 12: able to reposition it. So we look at a strategy

838
00:42:48,400 --> 00:42:51,200
Speaker 12: that is more mall to mixed use and looking how

839
00:42:51,200 --> 00:42:54,200
Speaker 12: do we bring densifications. So that's residential, that could be

840
00:42:54,480 --> 00:42:57,879
Speaker 12: for cell product, for rent product, it could be market rate,

841
00:42:57,960 --> 00:43:00,680
Speaker 12: it could be senior living, and how do we really

842
00:43:00,719 --> 00:43:04,120
Speaker 12: blend all of those different types of density strategies to

843
00:43:04,239 --> 00:43:07,319
Speaker 12: drive traffic, but more importantly, to drive lifestyle back to

844
00:43:07,400 --> 00:43:07,719
Speaker 12: them all.

845
00:43:08,400 --> 00:43:10,520
Speaker 1: Hey Donald, we had some really good retail sales numbers

846
00:43:10,520 --> 00:43:14,319
Speaker 1: out today. What are your clients? What are they saying

847
00:43:14,360 --> 00:43:17,000
Speaker 1: about this important holiday season coming up?

848
00:43:18,040 --> 00:43:20,680
Speaker 12: Sure, I think that we're all a little bit surprised

849
00:43:20,680 --> 00:43:23,120
Speaker 12: by the sales this morning, especially when you look at

850
00:43:23,120 --> 00:43:26,520
Speaker 12: the core sector. You know three times what the projections were.

851
00:43:26,840 --> 00:43:30,200
Speaker 12: I think we have to caution ourselves. The cost of

852
00:43:30,280 --> 00:43:32,680
Speaker 12: goods are higher, and so when we look at the

853
00:43:32,680 --> 00:43:36,560
Speaker 12: point seven percent increase you know that there is still

854
00:43:36,840 --> 00:43:40,080
Speaker 12: some consumer resilience, which I think is super important looking

855
00:43:40,080 --> 00:43:44,040
Speaker 12: into holiday, but there also is there's a lot of

856
00:43:44,080 --> 00:43:48,759
Speaker 12: caution headwinds that are happening here. Credit card debt is climbing,

857
00:43:49,160 --> 00:43:51,560
Speaker 12: we have a lot of defaults. You know, we're seeing

858
00:43:51,600 --> 00:43:55,440
Speaker 12: the highest and eleven years. We're also seeing that student

859
00:43:55,520 --> 00:43:58,239
Speaker 12: loans are now having to be paid, and so that's

860
00:43:58,280 --> 00:44:01,000
Speaker 12: going to put pressure on holiday sales. I think that

861
00:44:02,280 --> 00:44:05,319
Speaker 12: when it comes to gift giving, people are still going

862
00:44:05,360 --> 00:44:07,040
Speaker 12: to be spending the money, but they're going to be

863
00:44:07,080 --> 00:44:09,640
Speaker 12: looking for the values, and they're also going to change

864
00:44:09,640 --> 00:44:12,880
Speaker 12: their trends. They're not just going to be from Black Friday,

865
00:44:13,000 --> 00:44:17,000
Speaker 12: you know, until the day after sales. That starting earlier,

866
00:44:17,600 --> 00:44:21,240
Speaker 12: and certainly on this on last week, we saw that growth.

867
00:44:21,360 --> 00:44:23,120
Speaker 4: All Right, Donna, thank you very much for joining us.

868
00:44:23,160 --> 00:44:25,560
Speaker 1: Really appreciate getting some of your thoughts there on the

869
00:44:25,640 --> 00:44:28,000
Speaker 1: greater retail business, the shopping mall business.

870
00:44:28,360 --> 00:44:31,480
Speaker 9: You're listening to the tape cans our live program, Bloomberg

871
00:44:31,560 --> 00:44:35,160
Speaker 9: Markets weekdays at ten am Eastern on Bloomberg Radio, the

872
00:44:35,200 --> 00:44:37,160
Speaker 9: tune in app, Bloomberg dot Com, and.

873
00:44:37,120 --> 00:44:38,439
Speaker 8: The Bloomberg Business App.

874
00:44:38,480 --> 00:44:41,279
Speaker 9: You can also listen live on Amazon Alexa from our

875
00:44:41,320 --> 00:44:47,320
Speaker 9: flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.

876
00:44:47,480 --> 00:44:48,239
Speaker 4: In the deeal front.

877
00:44:48,239 --> 00:44:51,799
Speaker 1: Today, Wyndham Hotels and Resorts rejected a cakeover offer from

878
00:44:51,880 --> 00:44:55,960
Speaker 1: Choice Hotels, saying the proposal under values the company's potential

879
00:44:55,960 --> 00:44:58,600
Speaker 1: for growth and would be subject to a linking regulatory review.

880
00:44:58,920 --> 00:45:02,080
Speaker 1: Let's break down this deal or non deal with Jody Lorii.

881
00:45:02,440 --> 00:45:04,800
Speaker 1: She is the credit analyst with Bloomberg Intelligence. SOO follows

882
00:45:04,800 --> 00:45:09,000
Speaker 1: a hotel industry, all the leisure industries from a credit perspective. Jody,

883
00:45:09,040 --> 00:45:11,799
Speaker 1: thanks so much for joining us via zoom Here. What's

884
00:45:11,840 --> 00:45:13,719
Speaker 1: going on between Choice and Windom? Are we going to

885
00:45:13,719 --> 00:45:15,319
Speaker 1: get a deal done here? What's going on?

886
00:45:16,760 --> 00:45:16,960
Speaker 6: Yes?

887
00:45:17,000 --> 00:45:19,279
Speaker 14: So, I mean, you know, Wyndham kind of came back

888
00:45:19,320 --> 00:45:22,720
Speaker 14: to Choice and said, hey, listen, we are The words

889
00:45:22,719 --> 00:45:25,880
Speaker 14: that they used were it was underwhelming, highly conditional, and

890
00:45:26,000 --> 00:45:30,120
Speaker 14: subject to significant business regulatory and execution risk. And the

891
00:45:30,120 --> 00:45:32,440
Speaker 14: way that I read that, and my initial take on

892
00:45:32,520 --> 00:45:34,560
Speaker 14: the deal was, you know, if they were going to

893
00:45:34,640 --> 00:45:37,520
Speaker 14: go with the financing that they proposed, which was half cash,

894
00:45:37,760 --> 00:45:40,560
Speaker 14: you're talking about four billion dollars that likely would come

895
00:45:40,600 --> 00:45:43,359
Speaker 14: from the debt markets. We put that into perspective about

896
00:45:43,360 --> 00:45:46,040
Speaker 14: where the debt markets are now and where interest rates are.

897
00:45:46,440 --> 00:45:50,720
Speaker 14: I don't know if you necessarily would like the cost

898
00:45:50,920 --> 00:45:55,359
Speaker 14: of financing this sort of transaction. Considering where cash flows

899
00:45:55,360 --> 00:45:56,520
Speaker 14: could potentially be for the two.

900
00:45:56,440 --> 00:45:59,880
Speaker 2: Companies, what do you think the cost of financing would be?

901
00:46:00,040 --> 00:46:04,440
Speaker 2: Are we talking like Carnival cruise pandemic level costs?

902
00:46:05,280 --> 00:46:06,759
Speaker 7: No, No, I don't.

903
00:46:06,800 --> 00:46:08,799
Speaker 14: I don't think they would be that high. We're we're

904
00:46:08,840 --> 00:46:12,000
Speaker 14: looking at two companies. So choice is triple B minus

905
00:46:12,000 --> 00:46:14,760
Speaker 14: by Moody's and SMP or BA A three by Moody's

906
00:46:14,800 --> 00:46:16,960
Speaker 14: and triple B minus by S and P. And then

907
00:46:17,000 --> 00:46:19,040
Speaker 14: you have Window, which is one notch lower, so it's

908
00:46:19,080 --> 00:46:21,279
Speaker 14: the highest notch in high yield, which is b BA

909
00:46:21,400 --> 00:46:25,239
Speaker 14: one double B plus. And so those two companies together

910
00:46:25,400 --> 00:46:29,560
Speaker 14: would probably command somewhere closer to to what we've been

911
00:46:29,560 --> 00:46:32,760
Speaker 14: seeing across you know, standards sort of high healed rates.

912
00:46:33,719 --> 00:46:35,839
Speaker 6: Now, the question is we don't watch junk dead all day.

913
00:46:35,880 --> 00:46:37,160
Speaker 6: What's the number how much?

914
00:46:39,560 --> 00:46:41,640
Speaker 14: Well, it depends what the choice actually gets done, because

915
00:46:41,640 --> 00:46:43,799
Speaker 14: the interest rates have been changing all the time. I mean,

916
00:46:43,880 --> 00:46:47,320
Speaker 14: I think I think you know the key is nine question.

917
00:46:47,160 --> 00:46:48,280
Speaker 6: Is double digits.

918
00:46:49,680 --> 00:46:51,640
Speaker 14: No, No, I think it's a little bit less than

919
00:46:51,719 --> 00:46:53,880
Speaker 14: nine percent at this point. I mean, I think, you know,

920
00:46:53,960 --> 00:46:56,839
Speaker 14: if if we're talking about okay, so we're saying it's

921
00:46:56,840 --> 00:46:58,960
Speaker 14: a four billion dollar company, I think the big question

922
00:46:59,120 --> 00:47:01,680
Speaker 14: is for a compny like this, you say, okay, four

923
00:47:01,680 --> 00:47:06,839
Speaker 14: billion dollar company, they or four billion dollars of debt

924
00:47:07,080 --> 00:47:10,040
Speaker 14: rather for a company that combined would be about three

925
00:47:10,080 --> 00:47:15,719
Speaker 14: billion dollars in revenue. You know, it's it's sort of

926
00:47:15,800 --> 00:47:19,000
Speaker 14: like a weird scenario because they're like, Okay, what would

927
00:47:19,239 --> 00:47:21,680
Speaker 14: investors really feel comfortable with that? Would they not? You know,

928
00:47:21,719 --> 00:47:23,440
Speaker 14: are we are we looking at like a seven or

929
00:47:23,480 --> 00:47:27,640
Speaker 14: eight percent rate like we saw last week with with Norwegian?

930
00:47:28,000 --> 00:47:30,640
Speaker 14: Are we looking you know, is it going to be

931
00:47:30,640 --> 00:47:32,160
Speaker 14: a little bit better than that because they're a little

932
00:47:32,160 --> 00:47:35,080
Speaker 14: bit higher rated. I think it would depend, you know,

933
00:47:35,120 --> 00:47:37,640
Speaker 14: where they decided to go in the you know, in

934
00:47:37,719 --> 00:47:41,279
Speaker 14: the yield curve. Although the yield curve right now is

935
00:47:41,280 --> 00:47:42,479
Speaker 14: so flat that doesn't matter.

936
00:47:42,760 --> 00:47:44,760
Speaker 1: So JORDI, what's what's what's going on in the hotel

937
00:47:44,800 --> 00:47:48,120
Speaker 1: space or why why would why does choice think that

938
00:47:48,200 --> 00:47:49,600
Speaker 1: this is the deal to do here?

939
00:47:52,040 --> 00:47:54,840
Speaker 14: So I think what's happening with Choice right now is

940
00:47:55,040 --> 00:47:57,840
Speaker 14: is you know, they're they're in a spot where they've

941
00:47:57,880 --> 00:48:01,040
Speaker 14: improved their balance sheet, they are starting to generate cash.

942
00:48:01,120 --> 00:48:04,080
Speaker 14: They're seeing that the larger hotel companies such as the

943
00:48:04,080 --> 00:48:06,400
Speaker 14: Marios and the Hilton's are very interested in their space.

944
00:48:06,719 --> 00:48:08,880
Speaker 14: You know, they have sort of a commanding presence in

945
00:48:08,920 --> 00:48:13,320
Speaker 14: the extended stay and budget area. That's where Wyndham operates primarily.

946
00:48:13,360 --> 00:48:16,600
Speaker 14: That's where Choice operates primarily. Well, now Marriott and Hilton

947
00:48:16,640 --> 00:48:18,360
Speaker 14: are saying we want a piece of the pie, and

948
00:48:18,440 --> 00:48:20,960
Speaker 14: so they've been aggressively expanding into that area. And I

949
00:48:21,000 --> 00:48:24,080
Speaker 14: think Choice is trying to stay ahead of that conversation

950
00:48:24,440 --> 00:48:26,839
Speaker 14: by looking at Wyndham and saying, hey, here's two very

951
00:48:26,920 --> 00:48:29,400
Speaker 14: large companies. Let's also be a very large company to

952
00:48:29,440 --> 00:48:30,440
Speaker 14: compete with them.

953
00:48:31,040 --> 00:48:34,240
Speaker 1: So the budget hotel space, how is that different from

954
00:48:34,320 --> 00:48:36,680
Speaker 1: you know where Match stays, the you know, the Ritz

955
00:48:36,719 --> 00:48:38,400
Speaker 1: and the four seasons every time.

956
00:48:40,280 --> 00:48:42,360
Speaker 14: Well, if he wants to check in one of the

957
00:48:42,400 --> 00:48:43,319
Speaker 14: super eights, let me.

958
00:48:43,280 --> 00:48:47,439
Speaker 6: Know, is that a good business? I gotta say.

959
00:48:47,480 --> 00:48:49,640
Speaker 2: I was just you know, I was just about before

960
00:48:49,640 --> 00:48:51,760
Speaker 2: the flood a couple weeks ago to drive to Ohio

961
00:48:51,960 --> 00:48:55,560
Speaker 2: and my dream was to bring my daughter along and

962
00:48:55,560 --> 00:48:58,280
Speaker 2: we would stay at a Motel eight really like because

963
00:48:58,680 --> 00:49:00,799
Speaker 2: that's what you do on the road trip, right, it's

964
00:49:00,840 --> 00:49:02,880
Speaker 2: such a cool thing little kids. I remember when my

965
00:49:02,960 --> 00:49:05,200
Speaker 2: dad took me to stay at a Hojo's or a

966
00:49:05,200 --> 00:49:08,840
Speaker 2: Motel eight or whatever, and it was like awesome. Then

967
00:49:09,200 --> 00:49:12,240
Speaker 2: it didn't happen because of the flood. But this these

968
00:49:12,320 --> 00:49:14,759
Speaker 2: brands would be I mean they would have days In,

969
00:49:14,880 --> 00:49:18,879
Speaker 2: they would have Ramata, they would have Super eight. Right,

970
00:49:19,120 --> 00:49:21,919
Speaker 2: that's not to be compused with Motel six. So they

971
00:49:21,960 --> 00:49:24,880
Speaker 2: have like a lot of really cool brands that are

972
00:49:24,920 --> 00:49:29,359
Speaker 2: still named after big automobile engines of back in the day.

973
00:49:30,400 --> 00:49:33,680
Speaker 2: Are they are those like popular? Are they profitable?

974
00:49:36,239 --> 00:49:39,960
Speaker 14: Yeah, I mean they're certainly profitable. You see cash flows generated,

975
00:49:40,080 --> 00:49:43,000
Speaker 14: so the two companies each, I mean they generate you know,

976
00:49:43,040 --> 00:49:46,480
Speaker 14: you're talking somewhere in the three hundreds range for Choice,

977
00:49:46,520 --> 00:49:48,760
Speaker 14: what's to be expected for twenty twenty three or twenty

978
00:49:48,760 --> 00:49:52,240
Speaker 14: twenty four, and then for Windom you're expecting four hundred

979
00:49:52,239 --> 00:49:56,080
Speaker 14: at least that's what our MODL screen shows for concessus estimates.

980
00:49:56,560 --> 00:49:58,920
Speaker 14: That said, I mean, I think I think it's a

981
00:49:58,960 --> 00:50:01,319
Speaker 14: different sort of you know, when you talk about the

982
00:50:01,320 --> 00:50:03,680
Speaker 14: structure of the company. It's a different sort of concept

983
00:50:03,719 --> 00:50:06,279
Speaker 14: to stay at an extended stay than it is to

984
00:50:06,320 --> 00:50:09,040
Speaker 14: stay at the high end resorts. You're looking for a

985
00:50:09,040 --> 00:50:12,160
Speaker 14: different feature. A lot of people who stay at extended

986
00:50:12,200 --> 00:50:15,320
Speaker 14: stays are staying there for different reasons and and also

987
00:50:15,360 --> 00:50:17,960
Speaker 14: the definition of extended stay can be different among companies.

988
00:50:18,000 --> 00:50:20,520
Speaker 14: So some companies like Windham will say extended day, We

989
00:50:20,560 --> 00:50:22,640
Speaker 14: really mean extended to say you're doing a renovation on

990
00:50:22,680 --> 00:50:24,759
Speaker 14: your house and you have to stay somewhere else for

991
00:50:24,800 --> 00:50:28,000
Speaker 14: a little bit of time. Other companies say extended stay

992
00:50:28,080 --> 00:50:31,840
Speaker 14: is more in the you know, competitor to Airbnb type.

993
00:50:32,880 --> 00:50:36,200
Speaker 1: So how has Airbnb kind of impacted your industry, the

994
00:50:36,200 --> 00:50:39,320
Speaker 1: hotel motel business just in general?

995
00:50:41,520 --> 00:50:44,799
Speaker 14: I think, you know, what's most interesting is that the

996
00:50:44,840 --> 00:50:48,440
Speaker 14: companies have had to reconsider how they do their business model.

997
00:50:48,800 --> 00:50:51,400
Speaker 14: There's there's going to be consumers who always stay at

998
00:50:51,440 --> 00:50:55,120
Speaker 14: hotels for whatever reason, whether they're dedicated to insert your

999
00:50:55,120 --> 00:50:59,160
Speaker 14: favorite rewards system. But then there's going to be people

1000
00:50:59,160 --> 00:51:02,359
Speaker 14: who are looking for the cheapest alternative and the most

1001
00:51:02,360 --> 00:51:05,520
Speaker 14: convenient alternative, which during the pandemic we saw much more

1002
00:51:05,600 --> 00:51:08,719
Speaker 14: of that. We want a kitchen, we want this, we

1003
00:51:08,760 --> 00:51:11,120
Speaker 14: want that that's going to come with this day. We

1004
00:51:11,200 --> 00:51:14,120
Speaker 14: just don't want a small hotel room, particularly if we're

1005
00:51:14,120 --> 00:51:17,240
Speaker 14: trying to stay away from other people. That might shift

1006
00:51:17,280 --> 00:51:19,040
Speaker 14: a little bit more. Now that we're getting back into

1007
00:51:19,040 --> 00:51:21,759
Speaker 14: the quote unquote normal times, you're seeing a little bit

1008
00:51:21,800 --> 00:51:24,719
Speaker 14: more pick up in business and conference travel. You know.

1009
00:51:24,760 --> 00:51:27,000
Speaker 14: We we were actually just in Vegas last week, and

1010
00:51:27,280 --> 00:51:30,680
Speaker 14: the conference situation there is much more on the quote.

1011
00:51:30,560 --> 00:51:32,560
Speaker 3: Unquote normal side than we're in Vegas.

1012
00:51:32,640 --> 00:51:33,640
Speaker 14: You know a year and a half ago.

1013
00:51:33,880 --> 00:51:35,960
Speaker 3: I'm sorry, would you say, where'd you stay in Vegas?

1014
00:51:36,840 --> 00:51:36,960
Speaker 2: Oh?

1015
00:51:37,000 --> 00:51:40,000
Speaker 14: I stay at the Venetian because that's where the conference was.

1016
00:51:40,120 --> 00:51:42,160
Speaker 1: Yeah, it was the big Well, I'm a Blagio guy.

1017
00:51:42,239 --> 00:51:44,040
Speaker 1: Next next time you can go there, use my name. Yeah,

1018
00:51:44,120 --> 00:51:45,320
Speaker 1: they'll take care of you.

1019
00:51:45,360 --> 00:51:47,560
Speaker 14: So beautiful.

1020
00:51:47,680 --> 00:51:47,879
Speaker 8: Yeah.

1021
00:51:48,040 --> 00:51:51,840
Speaker 2: You know, just while we're playing with hypotheticals here in

1022
00:51:51,960 --> 00:51:56,080
Speaker 2: terms of the debt, would they would this kind of

1023
00:51:56,120 --> 00:51:59,400
Speaker 2: deal sell debt in the market or where they go

1024
00:51:59,440 --> 00:52:04,200
Speaker 2: to a prime of it credit credit place and get

1025
00:52:04,239 --> 00:52:07,040
Speaker 2: alone there. Because now we're starting to see deals. I

1026
00:52:07,080 --> 00:52:09,479
Speaker 2: think we saw a five billion dollar private credit deal,

1027
00:52:09,560 --> 00:52:11,319
Speaker 2: and the idea is that these numbers are going to

1028
00:52:11,360 --> 00:52:13,239
Speaker 2: keep growing, so they could handle this.

1029
00:52:13,480 --> 00:52:14,279
Speaker 6: What do you think.

1030
00:52:16,719 --> 00:52:18,600
Speaker 14: I think we're a little bit in early stages to

1031
00:52:18,600 --> 00:52:22,000
Speaker 14: figure out how they go financing. Choice did indicate.

1032
00:52:21,640 --> 00:52:22,280
Speaker 7: That there's.

1033
00:52:25,600 --> 00:52:27,640
Speaker 14: I mean choice, Yeah, I know, I mean it's it's

1034
00:52:27,640 --> 00:52:29,120
Speaker 14: definitely anything's a possibility.

1035
00:52:29,480 --> 00:52:30,239
Speaker 7: Let me put it that way.

1036
00:52:30,239 --> 00:52:33,960
Speaker 14: Anything's a possibility. That said, Choice indicated that they are

1037
00:52:34,000 --> 00:52:37,080
Speaker 14: working with two bank banking companies that you know, two

1038
00:52:37,120 --> 00:52:40,000
Speaker 14: bankers that said that they could give them financing, you know,

1039
00:52:40,040 --> 00:52:42,840
Speaker 14: give them short term financing while they go secure longer term.

1040
00:52:43,080 --> 00:52:46,399
Speaker 14: That said, yeah, I mean the public markets, it's really

1041
00:52:46,440 --> 00:52:50,360
Speaker 14: a question of timing. So companies come to market and

1042
00:52:51,280 --> 00:52:53,680
Speaker 14: it's terrible timing and they get these horrible rates like

1043
00:52:53,719 --> 00:52:55,359
Speaker 14: we saw with some of the other companies I cover.

1044
00:52:55,920 --> 00:52:58,560
Speaker 14: Then they'll come to market, I'll get these fantastic rates.

1045
00:52:58,560 --> 00:53:01,880
Speaker 14: So it really is just a matter of timing, and

1046
00:53:01,880 --> 00:53:05,399
Speaker 14: it's a matter of how comfortable people are with the deal. Now,

1047
00:53:05,440 --> 00:53:08,840
Speaker 14: in normal times, the lodging industry is usually pretty sleepy.

1048
00:53:08,960 --> 00:53:12,120
Speaker 14: People aren't super excited by it. Unless there's some sort

1049
00:53:12,120 --> 00:53:14,440
Speaker 14: of transaction that happens, then it becomes a little bit

1050
00:53:14,440 --> 00:53:17,399
Speaker 14: more interesting. Normally, the bonds don't trade all that much

1051
00:53:17,480 --> 00:53:19,840
Speaker 14: for lodging, so this is the type of thing that

1052
00:53:19,880 --> 00:53:22,120
Speaker 14: you say, oh we we you know, we can wake

1053
00:53:22,200 --> 00:53:25,680
Speaker 14: up from our beds of lodging and decide to really

1054
00:53:25,800 --> 00:53:28,720
Speaker 14: care about the That was my terrible way of making

1055
00:53:28,719 --> 00:53:34,719
Speaker 14: some sort of achnology for effort. But but companies can

1056
00:53:34,880 --> 00:53:37,399
Speaker 14: you know now we're starting to see that their their

1057
00:53:37,440 --> 00:53:39,600
Speaker 14: bonds are a little bit more volatile today. So it

1058
00:53:39,719 --> 00:53:43,759
Speaker 14: is exciting. It's it's unlikely that, you know, for the

1059
00:53:43,800 --> 00:53:49,160
Speaker 14: window bonds, it's a negative per se, although you know,

1060
00:53:49,480 --> 00:53:51,279
Speaker 14: it's really a question of whether or not the change

1061
00:53:51,280 --> 00:53:54,480
Speaker 14: of control gets triggered gets triggered. I don't think it would,

1062
00:53:55,200 --> 00:53:58,120
Speaker 14: in which case, you know, the bondholders are kind of

1063
00:53:58,120 --> 00:53:59,880
Speaker 14: taken for a ride, so it will be in a

1064
00:54:00,360 --> 00:54:03,680
Speaker 14: thing to play out. I don't really know how much

1065
00:54:03,719 --> 00:54:05,200
Speaker 14: more it's going to go, though, yeap.

1066
00:54:05,080 --> 00:54:06,520
Speaker 1: All right, we'll stay on top of this deal. When

1067
00:54:06,520 --> 00:54:08,799
Speaker 1: we get anything else, we'll get back to you. Jody Lori,

1068
00:54:09,120 --> 00:54:12,440
Speaker 1: she's a credit analyst for Bloomberg Intelligence following the lodging

1069
00:54:12,440 --> 00:54:14,960
Speaker 1: industry and again a potential deal here in the lodging business.

1070
00:54:15,040 --> 00:54:18,080
Speaker 1: Choice Hotels take a look at Wyndham Hotels and they're

1071
00:54:18,160 --> 00:54:21,360
Speaker 1: jockey back and forth on price We appreciate gatting Jody's points.

1072
00:54:22,040 --> 00:54:25,120
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can

1073
00:54:25,160 --> 00:54:28,960
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1074
00:54:29,040 --> 00:54:30,520
Speaker 2: podcast platform you prefer.

1075
00:54:30,920 --> 00:54:31,720
Speaker 6: I'm Matt Miller.

1076
00:54:31,960 --> 00:54:34,879
Speaker 2: I'm on Twitter at Matt Miller nineteen seventy three.

1077
00:54:35,320 --> 00:54:36,240
Speaker 4: And I'm fall Sweeney.

1078
00:54:36,239 --> 00:54:37,720
Speaker 3: I'm on Twitter at pt Sweeney.

1079
00:54:37,840 --> 00:54:40,480
Speaker 1: Before the podcast, you can always catch us worldwide at

1080
00:54:40,520 --> 00:54:42,280
Speaker 1: Bloomberg Radio