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Speaker 3: Amazon said today that it will not display the cost
Speaker 3: of US tariffs on products, after the White House blasted
Speaker 3: the reported move and President Trump called Jeff Bezos to complain.
Speaker 3: The White House earlier Tuesday seized on a brief punch
Speaker 3: Bowl News report that Amazon would quote soon begin displaying
Speaker 3: the cost of US tariffs on individual products next to
Speaker 3: the total listed price. White House Press Secretary of Caroline
Speaker 3: Levitt blasting the purported plans.
Speaker 4: I just got off the phone with the President about
Speaker 4: am Amazon's announcement. Uh, this is a hostile and political
Speaker 4: act by Amazon. It's another reason why we are on
Speaker 4: shoring critical supply chains here at home to shore up
Speaker 4: our own critical supply chain and boost our own manufacturing.
Speaker 3: That was White House Press Secretary Caroline Levitt earlier today
Speaker 3: Matt Day joins us. He's Bloomberg News technology reporter. He
Speaker 3: covers Amazon. He's out there in Seattle. Matt, clear this
Speaker 3: up for us, what's going on here?
Speaker 5: So Amazon says, there's nothing to see here. What they
Speaker 5: say is they do have a program that kind of
Speaker 5: like TAMU will ship parcels cross border from China and hunt.
Speaker 3: This is Amazon Hall, Amazon Hall.
Speaker 6: That's right.
Speaker 5: This is a This is kind of a little known
Speaker 5: service compared to their retail site. They launched it last year.
Speaker 5: So what Amazon says is they were considering for a time,
Speaker 5: you know, putting import duty notices on those products. Right,
Speaker 5: those products you know today are exempt from from duties.
Speaker 5: That's loophole that the Trump administration is playing to close
Speaker 5: as soon as this week. TIMU has already you know,
Speaker 5: shown customers and shoppers, you know, some version of what
Speaker 5: the import duties would be. They were considering doing that.
Speaker 5: The report out this morning from punch Bowl that you
Speaker 5: referenced earlier didn't make that distinction, and that's what the
Speaker 5: White House was responding to. Amazon comes back to us
Speaker 5: today and says, you know, listen, we were never thinking
Speaker 5: about anything for our wide retail site. They also say
Speaker 5: they're not going to implement this for for haul either.
Speaker 7: So Matt, Amazon's response was it directly because they were,
Speaker 7: you know, responding to the White House, or does your
Speaker 7: reporting show that they really weren't ever planning on doing this.
Speaker 5: It's not clear to us how far along these talks were.
Speaker 5: I mean, it is worth noting again that you know,
Speaker 5: people have been throwing around screenshots on TIMU for a
Speaker 5: couple of weeks now showing that for folks getting things
Speaker 5: cross border after the Dominus loophole as they call it,
Speaker 5: gets closed, they were showing them duties. So it would
Speaker 5: make a whole lot of sense for Amazon to be
Speaker 5: considering something like this. We don't know how close it
Speaker 5: was to rolling out and to take Amazon that there
Speaker 5: were this is not something most shoppers would have seen.
Speaker 5: It wouldn't have been on their their main retail site.
Speaker 3: Well, what could show us like, sorry, go ahead, Matt.
Speaker 5: And that definitely looks like they were re spawning to
Speaker 5: the White House. You know, Yes, once the you know,
Speaker 5: before Seattle was awake this morning, the Press Secretariat you know,
Speaker 5: accuse them of a hostile and political act. So they've
Speaker 5: definitely had to had to pick up the microphone on
Speaker 5: this one.
Speaker 3: Yeah, maybe gets the attention of a certain Jeff Bezos
Speaker 3: who spends time in Florida these days. Matt, I'm I'm
Speaker 3: wondering specifically about the Deminimus tax and like what consumers
Speaker 3: might see as a result of these tariffs going into effect,
Speaker 3: Like our prices on Amazon for stuff that we buy
Speaker 3: that is imported, how much are those how much are
Speaker 3: this price is going to go up?
Speaker 5: It really depends. You know.
Speaker 6: It's Amazon.
Speaker 5: They buy things, and they get things to consumers in
Speaker 5: a whole lot of ways, right in addition to the
Speaker 5: direct you know, ta Moose style shipments. You know, they're
Speaker 5: also a classic big old retailer. They buy in bulk,
Speaker 5: you know, just like Target or walmarto home depot. Might
Speaker 5: they import things themselves, you know, some things they're sellers
Speaker 5: import So it is, it is all a big mess.
Speaker 5: You know. We reported that Amazon in some cases has
Speaker 5: asked some of its vendors in China to do the
Speaker 5: importing themselves, right, which seems sort of a first sort
Speaker 5: of negotiating tactic to maybe pressure them into eating some
Speaker 5: of this costs. But we just don't know what the
Speaker 5: bottom line is going to be. For consumers. There's a
Speaker 5: lot of a lot of estimates out there.
Speaker 3: You know what we were speaking earlier with Mike McKee, Emily,
Speaker 3: you brought up this idea of looking at container shipments
Speaker 3: and ships that are going into the US, Matt. At
Speaker 3: this point, are we starting to hear of concerns with
Speaker 3: regard to empty you know, quote unquote shelves, empty storefronts
Speaker 3: on Amazon as a result of a slowdown in shipments
Speaker 3: from China.
Speaker 5: You know, nothing specific to Amazon kind to be on
Speaker 5: those broad reports we've all seen about you know, hey, containers,
Speaker 5: sailings are way way down from you know, this point
Speaker 5: a year ago. I think that's probably still too early
Speaker 5: for an Amazon specific story, given that, you know, we
Speaker 5: haven't seen the calendar roll into May, which is really
Speaker 5: when the first glimpses of this might appear. That's worth
Speaker 5: knowing too, that Amazon hasn't said a whole lot about
Speaker 5: tariffs one way or the other. They really don't want
Speaker 5: to stick their neck out on this, and so that's
Speaker 5: that's part of why today was so interesting, is that
Speaker 5: they've just they're in the conversation, whether they want to
Speaker 5: be or not.
Speaker 1: Matt.
Speaker 7: I'm sure the folks at Amazon today, we're hoping that
Speaker 7: we'd all be talking about something else Amazon related, and
Speaker 7: that's Project Kuiper. It's their first batch of production satellites
Speaker 7: that reach low Earth orbit, and it's a step in
Speaker 7: the company's effort to establish a broadcasting Internet connectivity from space.
Speaker 7: It sounds a lot like SpaceX. Is it a viable
Speaker 7: competitor to SpaceX?
Speaker 5: No, A lot of people are hoping, so, a lot
Speaker 5: of businesses have dreams that it's not just going to
Speaker 5: be elon Musk's Starlink with an Internet from space outfit.
Speaker 5: A lot of government fees as well have banked on
Speaker 5: Kuyper Amazon satellite offering coming online at some point. So
Speaker 5: this is this is much delayed, but it's welcome news
Speaker 5: for the folks at Amazon, and we're plugging away on this.
Speaker 5: They got plans to launch something like three thousand more
Speaker 5: satellites here in the next few years.
Speaker 3: How far ahead of Amazon is SpaceX right now with starlink?
Speaker 3: And also I'm curious about who actually did the launch here,
Speaker 3: because Starlink has SpaceX satellites which can do the launching.
Speaker 3: Besos of course has Blue Origin, but who got these
Speaker 3: satellites into orbit?
Speaker 5: So these ones were sent by United Launch Alliance Workhorse
Speaker 5: Boeing Lockheed joint venture that accounts for a ton of
Speaker 5: US government business. But you're right, because SpaceX has its
Speaker 5: own you know, sort of captive launch arm that is
Speaker 5: the most successful rocket launch outfit in the world right now.
Speaker 5: They've been able to get out to a huge lead
Speaker 5: with their Starlink constellation. You know, they've got more than
Speaker 5: seven thousand satellites. I think it is an orbit. You know,
Speaker 5: Amazon sitting on twenty seven, so they got a whole
Speaker 5: lot of catching up to do just before they're in
Speaker 5: the same conversation as Starlink.
Speaker 7: And I know that retail customers like individuals house Cheryl Masser,
Speaker 7: Karen Massel's using Starlink, She's got Starlink. So is this
Speaker 7: project supposed to also gear towards just regular everyday people
Speaker 7: getting Internet connectivity from space from Amazon?
Speaker 5: It will, Yeah, they plan to offer a regular consumer business.
Speaker 5: It's going to vary market to market. In some places
Speaker 5: you'll be working with a cellular service provider probably, and
Speaker 5: others they're going to sell direct to consumers. We don't
Speaker 5: know a ton about the business plan, but they've already
Speaker 5: kind of showed off the little terminals you can put
Speaker 5: on your garage or on top of your house.
Speaker 3: All right, Matt Day, gonna leave it there. Thanks for
Speaker 3: clearing all of this up for us. We do appreciate it.
Speaker 3: Matt Day covers Amazon. He's out there in Seattle. He's
Speaker 3: Bloomberg News technology reporter.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 3: Let's chift gears a little bit and talk sports and
Speaker 3: sports business. Because former New York Giants quarterback Eli Manning
Speaker 3: is putting together an investment group to bid for a
Speaker 3: piece of the NFL team. That's according to people with
Speaker 3: knowledge of the matter. Randa Williams is part of the
Speaker 3: team with the Scoop. He's US sports business reporter. He
Speaker 3: joins us here in the Bloomberg Business Week studio Randall.
Speaker 3: Eli wants a piece of the Giants.
Speaker 8: What do we know exactly that? I mean, he's putting
Speaker 8: together a group. He's long express interest. He said it
Speaker 8: on NBC earlier this year. He's told me privately, he
Speaker 8: said it publicly. And there's one team that Eli was
Speaker 8: going to own. It's going to be the team to
Speaker 8: do plays for.
Speaker 9: How much money is this worth?
Speaker 7: Like?
Speaker 9: What give us a sense of the numbers that we're
Speaker 9: talking here?
Speaker 6: So I think we don't know right now.
Speaker 8: But if you look at the previous two transactions, or
Speaker 8: two of the three transactions that the NFL had, the
Speaker 8: Philadelphia Eagles are valued at eight three Philadelphia is obviously
Speaker 8: smaller than New York, and then the Miami Dolphins were
Speaker 8: valued at eight to one when Aries and Joe Sie
Speaker 8: bought a piece of it. So when you think of
Speaker 8: it in that aspect, I would imagine that the Giants
Speaker 8: could go for more. But also when these teams are
Speaker 8: being sold sometimes owners have a little bit of soft
Speaker 8: spot in their heart for former players. They're like, all right,
Speaker 8: i'll sell you a little bit less and we'll have
Speaker 8: to see.
Speaker 3: They are also business people though, I mean we're talking
Speaker 3: about the Mara family and the Tish family. Yeah, where
Speaker 3: would this piece of the asset actually come from? Would
Speaker 3: it come from the Mara family, would come from the
Speaker 3: Tish family. With a little bit of each kind of
Speaker 3: give way here.
Speaker 8: From my understanding they're selling ten percent total, that could
Speaker 8: be five to five. But that's what makes the most sense.
Speaker 8: When the Tish family bought fifty percent some years ago.
Speaker 8: I believe in nineteen ninety one they bought fifty percent,
Speaker 8: So if it's ten, I would imagine that it's five
Speaker 8: to five.
Speaker 6: But I'm not.
Speaker 3: So sure that ten percent numbers. For a reason though, right,
Speaker 3: it's this new rule that allows private equity to buy
Speaker 3: a piece.
Speaker 8: Yeah, most of the teams that are considering selling steaks
Speaker 8: start at ten.
Speaker 6: Now.
Speaker 8: The Buffalo Bills sold ten to Arcdols and then they
Speaker 8: sold another ten to limited partners. Joe Side bought three
Speaker 8: percent and an Ares bought another three So we're seeing
Speaker 8: these NFL teams shed small pieces of steaks, and they're
Speaker 8: not controlling steaks. A lot of times. These partners are
Speaker 8: coming in. I mean, like, I'm happy to own a
Speaker 8: piece of the team. It's a prideful thing, and you know,
Speaker 8: the teams move on from there.
Speaker 7: What's the precedent here for former sports players bidding for
Speaker 7: you know, their own their own teams.
Speaker 6: There's been a lot of them recently. I mean when.
Speaker 8: Rob Penner brought the Denver Broncos. Lewis Hamilton was part
Speaker 8: of that group. You have Venus and Serena Williams, who
Speaker 8: are sort of like the original former athlete owners. You have,
Speaker 8: of course, Dominique Dawes and the Atlanta Falcons, Tom Brady
Speaker 8: and the Raiders along with Richard Seymour.
Speaker 6: You have Vince.
Speaker 8: Carter, Tracy McGrady and Josie Altador with the Buffalo Bills.
Speaker 8: So there's a little bit of a precedent here. But
Speaker 8: Eli and the Giants would obviously be a big deal
Speaker 8: because they have not had much success lately.
Speaker 3: In general, are the controlling owners using this as an
Speaker 3: opportunity and I don't mean the Tisch families of the
Speaker 3: Morrow families right now, but when they sell a piece
Speaker 3: such as this, are they using this as an opportunity
Speaker 3: to kind of gain on the asset appreciation that we've
Speaker 3: seen in recent years and get some cash as a
Speaker 3: result of that.
Speaker 6: It really depends on the group.
Speaker 8: There are some owners who are using this money towards stadium,
Speaker 8: stadium development and training facilities. There's other owners who have
Speaker 8: secession issues. I'm not so sure that the Marraw family
Speaker 8: or the Tisch family have either one of those they
Speaker 8: could just be looking to add owners. If you look
Speaker 8: at what Mark Davis did with Tom Brady, tom Brady's
Speaker 8: helping along with the football operations thing, he's not. I mean,
Speaker 8: the Raiders have a brand new stadium. They have no
Speaker 8: need for that specifically, But Mark Davis is trying to
Speaker 8: have more success. So you bring in the greatest quarterback
Speaker 8: of all time, and surely Tom Brady's going to help
Speaker 8: with that.
Speaker 6: Eli won two Super Bowls. Maybe this will look something similar.
Speaker 9: That's what I wanted to ask about.
Speaker 7: What would you expect Eli Manning's plans to be here
Speaker 7: as an owner.
Speaker 9: Would it be more just to.
Speaker 7: Earn an investment return or to actually get involved with
Speaker 7: the operations of the team.
Speaker 8: Well, if you're a limited partner, I think that the
Speaker 8: NFL's business has proven to be invincible in some aspects.
Speaker 8: I mean, when you think about the Super Bowl that
Speaker 8: just happened, it had one hundred and twenty seven million viewers,
Speaker 8: and that was a blowout game. At one point it
Speaker 8: was forty to six, and that's the pinnacle of things.
Speaker 8: So the business of the Giants is going to continue
Speaker 8: to grow. But for Eli, as far as his role
Speaker 8: with the Giants, that's going to have to be negotiated
Speaker 8: with the Damar and Tisch family, these limited partners. It
Speaker 8: depends on how sensitive a controlling owner is. Sometimes these
Speaker 8: owners will be like, yes, absolutely, help me. I have
Speaker 8: no idea what I'm doing. But La Mar and Tisch
Speaker 8: family have won two Super Bowls in a life last
Speaker 8: twenty years and four in the last thirty or forty.
Speaker 8: I think their first super Bowl was in eighty seven,
Speaker 8: so they've had some success.
Speaker 3: We only have like ten seconds, but the business of
Speaker 3: sports doing in general doing very well, as we've seen
Speaker 3: other assets move lower in the last few months.
Speaker 6: Absolutely, sports is fun.
Speaker 3: Okay, everything's fine. You've heard it from Randa Williams, US
Speaker 3: Sports business for now. That's the caveat. He's US Sports
Speaker 3: business reporter. Check out his reporting and the team's reporting
Speaker 3: on the Bloomberg terminal, and of course, at Bloomberg dot com.
Speaker 2: This is the Bloomberg Business Week Podcast. Listen live each
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Speaker 2: just Say Alexa played Bloomberg eleven thirty.
Speaker 3: We'll let shift gears and talk about what's going on
Speaker 3: in China, because Shijinping has faced growing skepticism and discontent
Speaker 3: within China due to strict COVID lockdowns, a slowing economy,
Speaker 3: and a time hacks on entrepreneurs. Now Donald Trump has
Speaker 3: handed him a gift to rally support at home an
Speaker 3: external enemy. Jennifer Welch is chief geoeconomics analyst for Bloomberg Economics.
Speaker 3: She joins us here in their New York studio for
Speaker 3: Bloomberg Business Week. It's the Bloomberg Interactive Brookers Studio. Jennifer,
Speaker 3: good to see you. We've been trying to get an
Speaker 3: understanding about what's happening on the ground in China. I
Speaker 3: had the I've been there once. It was pre pandemic,
Speaker 3: it was twenty nineteen. I believe there was this view
Speaker 3: that during the pandemic the COVID lockdowns, sentiment among Chinese
Speaker 3: locals was very low. There was the property crisis. There
Speaker 3: is the property crisis, and suddenly fast forward to you know,
Speaker 3: close to halfway through twenty twenty five, we're seeing incredible
Speaker 3: developments when it comes to evs in China. We're seeing
Speaker 3: an essential silence when it comes to negotiations with President
Speaker 3: Donald Trump. What is the environment right now now in
Speaker 3: terms of how the Chinese consumers doing and the power
Speaker 3: that chijin Ping.
Speaker 10: Has well, I think all of the challenges that you
Speaker 10: laid out are still there. There's still the property bubble
Speaker 10: that they're dealing with, There's still the weakend sentiment, there's
Speaker 10: still the sort of overhanging of the COVID pandemic lockdowns
Speaker 10: and recovering sentiment and animal spirits.
Speaker 9: All of that is still very much there.
Speaker 10: But I think what has lit a fire under Chinese
Speaker 10: people's sort of sense of consumer sentiment and economic nationalism
Speaker 10: has been this trade war with the United States. And
Speaker 10: it's been kind of conveniently time from Beijing's perspective to
Speaker 10: kind of distract attention from those problems and really draw
Speaker 10: a lot of unity around this idea of standing strong
Speaker 10: in the face of this US trade war and these
Speaker 10: massive tariffs.
Speaker 7: Talk a little bit more about just what makes Chinese
Speaker 7: consumers manufacturers excited in this environment, What is there to
Speaker 7: rally around.
Speaker 10: I think it's US excitement so much as in Chinese
Speaker 10: you would say true cool or eating bitter, like being
Speaker 10: prepared to kind of dig their heels in and hold
Speaker 10: out in the face of what they see is US
Speaker 10: aggression in the form of this trade wark. Right from
Speaker 10: Beijing's perspective, from the Chinese people's perspective, they didn't do anything.
Speaker 10: The US just kept ratcheting up terrace, and now we're
Speaker 10: at unprecedented high levels. I think people are sober about
Speaker 10: the fact that this is going to cause a lot
Speaker 10: of economic pain at home, especially at a time of
Speaker 10: economic weakness for China. But at the same time, they're
Speaker 10: not willing to kind of engage with the idea of
Speaker 10: looking weak in the face of that. And so that's
Speaker 10: what I think, is this rally around the flag phenomenon
Speaker 10: that we're seeing and that the piece talked about.
Speaker 3: One question that I still don't know the answer to
Speaker 3: is who has the cards in this negotiation. On the
Speaker 3: one hand, the US consumer is incredibly powerful, and no
Speaker 3: question China wants access to the consumer. Speaking of that
Speaker 3: we love to buy things, those things often come from China.
Speaker 3: Who has the power here?
Speaker 10: I think in a sense everybody loses. I think it's
Speaker 10: a question is that's not good in time frames right?
Speaker 10: You know, for example, from the US perspective, those prices
Speaker 10: are going to start to hit a pretty dramatic spike
Speaker 10: once the stockpiling and other kind of advanced efforts that
Speaker 10: we saw ahead of these tarifts coming into play start
Speaker 10: to run out, and now companies have to deal with
Speaker 10: the tariffs themselves, right. I think the other question is
Speaker 10: a political question, right. Of Again, from China's perspective, they
Speaker 10: didn't start this trade war. They're on the kind of
Speaker 10: receiving end of it, and that's allowing them to dig
Speaker 10: their heels in a little bit. I think a lot
Speaker 10: of Americans feel like, sure, we knew President Trump was
Speaker 10: going to do tarifts at some point. He was talking
Speaker 10: about that pretty frankly on the campaign trail. This isn't
Speaker 10: necessarily the trade war that Americans wanted, right, and on
Speaker 10: your largest source of goods, right. And I think the
Speaker 10: pain when it starts to hit in a month or
Speaker 10: two from now, when those stockpiles run out, then the
Speaker 10: key question is who has sort of the political will
Speaker 10: to withstand that economic need. But to be clear, the
Speaker 10: economic paying for China is going to be very tough,
Speaker 10: especially if the US is successful and convincing other countries
Speaker 10: not to let those Chinese goods just flow through other markets.
Speaker 7: So what is the Chinese government's role here, I guess
Speaker 7: in shaping public opinion within China.
Speaker 10: So we saw the propaganda machine going to overdrive pretty
Speaker 10: soon after Liberation Day, facing in two fronts, the internal front,
Speaker 10: building up that China national sentiment, which again they had
Speaker 10: a little bit of an easy role to play in
Speaker 10: that because the people were already predisposed to being upset
Speaker 10: at the United States, but also externally taking advantage of
Speaker 10: Liberation Day tariffs to say to the rest of the world,
Speaker 10: the US is not a reliable partner. Work with us,
Speaker 10: don't work with the US to counter US, and let's
Speaker 10: join up on sides. Now, I think that effort's going
Speaker 10: to be a lot more difficult in this ninety day pause,
Speaker 10: where if I'm Vietnam, I'm enjoying right now a pretty
Speaker 10: good tariff differential with China.
Speaker 3: When you were saying external pr I thought you were
Speaker 3: going to talk about those videos that went viral of
Speaker 3: like the AYI generated Americans actually making things.
Speaker 10: There's that there's the sort of like peace in our
Speaker 10: time video saw.
Speaker 6: This, Yeah, everybody saw this.
Speaker 7: Very overweight people like making Yes, they've got a very
Speaker 7: effective AI video generation scheme over.
Speaker 3: There, Hey, you got to run. We really appreciate you
Speaker 3: staying late to hang out with us. Jennifer Welch's chief
Speaker 3: geoeconomics analyst for Bloomberg Economics, strening us here in the
Speaker 3: Bloomberg Interactive Brokers studio.
Speaker 2: You're listening to the Bloomberg Business Week Podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern. Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube.
Speaker 3: Starbucks quarterly sales felt one percent in the quarter that
Speaker 3: ended March thirtieth, that missed estimates. They've declined, shares of
Speaker 3: declining about seven percent so far this year. Brian Nickel,
Speaker 3: he hasn't quite been there a year. You know him
Speaker 3: from Chipotle, you know him from Young Brands.
Speaker 6: He's there.
Speaker 3: The company has quote real momentum, he says, with its
Speaker 3: turnaround plan and expects to return to business to growth
Speaker 3: despite current financial results not refctm progress formorrow. Let's bring
Speaker 3: in Bloomberg Intelligence's senior restaurant in food service analyst, Michael Halen.
Speaker 3: He joins us from New Jersey. Michael good to have
Speaker 3: you with us this afternoon. You've had a few minutes
Speaker 3: to dig into these Starbucks results. Where is Starbucks in
Speaker 3: its turnaround?
Speaker 11: We were kind of hoping they'd be a little bit
Speaker 11: further along here in the United States, US Same Star
Speaker 11: sales definitely disappointed in the corner quarter. You know, in
Speaker 11: their defense, it was the coldest January on record. I'm
Speaker 11: sure there were store closures due to the snow in February,
Speaker 11: and I probably saw some sort of recovery in March.
Speaker 11: But yeah, US Same Star sales came in a little
Speaker 11: bit weaker. On the positive side, China in the International
Speaker 11: both did a little bit better. International probably is in
Speaker 11: the biggest concern and something they're tackling second right. US
Speaker 11: has really been the focus thus far far in Brian
Speaker 11: nichols tenure, China and international is something we expect them
Speaker 11: to topple later this year.
Speaker 7: Bloomberg's Daniella sar Tory is writing that these earners reports
Speaker 7: highlight how hard the coffee chain will have to work
Speaker 7: to regain lost ground.
Speaker 9: Who are they losing ground to right now?
Speaker 11: You know, that's a great question. You know, there's a
Speaker 11: lot of speculation that it's too you know, some of
Speaker 11: these fast growing chains like Dutch Bros. And Seven Brew,
Speaker 11: they're also most likely losing some some business to people
Speaker 11: just brewing coffee at home. People are working from home
Speaker 11: more often, right and you know when, and they're looking
Speaker 11: to save money because you know, low income consumers especially
Speaker 11: because you know while it's are strapped.
Speaker 7: I mean, one of the biggest I feel like personal
Speaker 7: finance tips that you here is make your coffee at home.
Speaker 9: Whether or not that actually there's builds wealth.
Speaker 3: That is something that we hurt a lot and now
Speaker 3: a lot of people like to throw water on it.
Speaker 3: Barry Ridholtz, who has the Masters in Business podcast here,
Speaker 3: he's got a whole part of his book where he's like,
Speaker 3: just ignore that.
Speaker 9: Just buy the coffee.
Speaker 3: Yeah, that's what it's called. It's called buy the blank coffee.
Speaker 3: That's literally what it's called. That's so funny.
Speaker 9: But it is interesting that potentially people are pulling back because.
Speaker 6: It adds up. It does add up.
Speaker 3: Yeah, well how much is it the average not the
Speaker 3: average ticket price necessarily, but what are people spending at
Speaker 3: Starbucks right now?
Speaker 11: Yeah? I don't I don't have those numbers for you,
Speaker 11: but listen, it's you know when you're on the go,
Speaker 11: when you're working in an office and you need to
Speaker 11: stop on your way, right, if you're in a rush,
Speaker 11: it's a lot easier to stop at Starbucks than it
Speaker 11: is to make it yourself. Starbucks is working really hard
Speaker 11: to improve the operations to get customers through the store
Speaker 11: and through the drive through much faster.
Speaker 6: Right.
Speaker 11: That was really a big part of their issues. I
Speaker 11: would say most of their issues that they've had under
Speaker 11: the previous management team were self inflicted. It wasn't because
Speaker 11: of Dutch bros. And people making coffee at home. It's
Speaker 11: because the service suffered significantly.
Speaker 6: Right.
Speaker 11: The speed of service, it was just way too long.
Speaker 11: The sequencing of orders both in the store and for
Speaker 11: mobile orders didn't make any sense. There was no real
Speaker 11: sequencing based on location for the mobile app, which is
Speaker 11: just mind blowing. So first and first out kind of queue,
Speaker 11: no matter how far away a customer was from a
Speaker 11: particular store, right. And so these are all things that
Speaker 11: management is working hard to improve on to get customers
Speaker 11: to come back, because it's, for the most part, it's
Speaker 11: a convenience occasion, right. Brian Nicol definitely wants people to
Speaker 11: stay in the stores more and linger and they're doing
Speaker 11: that by you know, bringing back ceramic cups and offering
Speaker 11: free refills, right, But a large bulk of their customers,
Speaker 11: I'd say a large majority of their customers really want
Speaker 11: to be in and out quick, right. It's a convenience type.
Speaker 11: The cage and speed of service is powermount and that's
Speaker 11: that's really been the primary focus since Brian Nickel came
Speaker 11: on board.
Speaker 3: What's the China story here, Michael, Because earlier in our
Speaker 3: program we spoke with Jennifer Welch at Bloomberg Economics, she's
Speaker 3: chief geoeconomics analyst, and she spoke about nationalism in China
Speaker 3: in the midst of this trade war that we're seeing.
Speaker 3: In twenty twenty four, China accounted for about eight point
Speaker 3: three percent of Starbucks's total revenue. Is that a number
Speaker 3: we expect to see grow because for years Starbucks the
Speaker 3: China was the growth story for Starbucks. But you know
Speaker 3: that was years ago. Now they got luck In and
Speaker 3: so many other homegrown brands there people can want to
Speaker 3: support Starbucks.
Speaker 11: Yeah, Listen, that's you know, a big reason why Starbucks
Speaker 11: has probably underperformed their restaurant peers over the last few weeks.
Speaker 11: Since the tariff announcements were made because of their exposure
Speaker 11: to China, because their stores are company owned in China, right,
Speaker 11: so there is a risk here. There is definitely a
Speaker 11: risk of you know, boycott's. The Chinese government has done
Speaker 11: it before the US retail companies. There's no reason why
Speaker 11: it couldn't happen with Starbucks. We're not saying it's going
Speaker 11: to happen. But what was once seen as a strength
Speaker 11: owning their stores in China, I think is now being
Speaker 11: looked upon as maybe, you know, a bigger risk. And
Speaker 11: so you know, it also comes at a bad time
Speaker 11: because Starbucks was thinking about franchising that business, selling that
Speaker 11: China business to a partner and just collect royalties on it.
Speaker 6: Right.
Speaker 11: But with all of the tariff drama, you know, I
Speaker 11: think it's buyers aren't necessarily lining up to pay a
Speaker 11: premium for that business. So the timing is kind of tough.
Speaker 11: But I would say that's the number one concern about
Speaker 11: this company. That's why it's down about twenty I think
Speaker 11: about twenty four percent from its hies just you know,
Speaker 11: earlier this year. And the other concern would be coffee prices.
Speaker 6: Right, So the tariff.
Speaker 11: Drama has caused a lot of commodity deflation over the
Speaker 11: last three four weeks, but we haven't seen that with
Speaker 11: coffee prices. Coffee prices remain elevated, and that's definitely a concern.
Speaker 11: They buy forward and they lock in supply right, so
Speaker 11: they may be okay for the next couple of quarters,
Speaker 11: but further down the wrong line. If coffee prices stay elevated,
Speaker 11: that's gonna hurt margin.
Speaker 3: Just twenty seconds. Coffee prices also include tariff implications.
Speaker 11: Michael, it could we're you know, we're gonna hear more
Speaker 11: on the call. I'm sure, but I can't give you
Speaker 11: a number on that just yet.
Speaker 3: Hey, appreciate you joining us. We're gonna let you go
Speaker 3: and go jump on that call. Michael Halen is Bloomberg Intelligence,
Speaker 3: is senior restaurant and food service analysts joining us from
Speaker 3: New Jersey.
Speaker 4: Yeah, I bet you let me drive.
Speaker 3: Oh no, no, no, no, This is not a who's.
Speaker 2: Gone to j honey, Please, I'll do the graveled excuse.
Speaker 6: Wait, I want to try.
Speaker 11: It's good question time.
Speaker 1: This is the drive to the clothes Punks A musing
Speaker 1: well on Bloomberg Radio.
Speaker 3: It is Bloomberg Business Week We just got an update
Speaker 3: from Bill Maloney and Charlie pell at the S and
Speaker 3: P five hundred, up six tens of one percent, but
Speaker 3: off its best levels of the day, up more than
Speaker 3: Emily what is it, seven and a half percent in
Speaker 3: the last six days, it's been.
Speaker 9: It's been a run of risk on.
Speaker 7: As Eric Leaner said, at least in the short term,
Speaker 7: investors are riding the momentum upwards, even if there are
Speaker 7: risks building in the background that maybe will come to
Speaker 7: fruition later on once we get more certainty about.
Speaker 3: Tariff's Well, curious about some of those risks that Michael
Speaker 3: Green has his eyes on. He's portfolio manager over its
Speaker 3: Simplify Asset Management. He joins us out there in California. Hey, Michael,
Speaker 3: you've got an interesting note that you sent to our
Speaker 3: producers ahead of ahead of this conversation, and it makes
Speaker 3: me think of something that Emily brought up earlier, and
Speaker 3: that's alternative data. Because you're saying that real time indicators
Speaker 3: of business activity like trucking are slowing rapidly. What are
Speaker 3: you seeing out there, Well.
Speaker 6: That's absolutely what we are seeing.
Speaker 12: We are seeing forward looking metrics, things like railcar bookings,
Speaker 12: things like trucking indicators. Those are weakening very rapidly. We're
Speaker 12: already seeing ports slowing down in particularly Los Angeles, which
Speaker 12: is going to be the first to feel the impact
Speaker 12: associated with the Chinese tariffs. That's the first destination that
Speaker 12: you hit. It takes longer to get to the East
Speaker 12: coast locations. We're absolutely seeing something that looks very similar
Speaker 12: to the initial COVID shutdown, in which basically activity just came.
Speaker 6: To a grinding halt.
Speaker 12: The key difference this time around is, unlike the COVID events,
Speaker 12: in which we knew that going outside and being in
Speaker 12: physical proximity to other people meant that we were potentially
Speaker 12: putting our lives at risk, We're not seeing that type
Speaker 12: of slowdown of economic activity. It's just this slow rumbling
Speaker 12: boil that's effectively occurring underneath the surface that is painfully apparent.
Speaker 12: It's a little bit more like the stage of COVID
Speaker 12: where we were watching the events in Italy or in
Speaker 12: China and beginning to think is this possibly going.
Speaker 6: To make it here?
Speaker 7: So how do you square that kind of like bubbling
Speaker 7: of alternative data that looks concerning with the fact that,
Speaker 7: as Tim had mentioned, the s and P five hundred
Speaker 7: is up something like seven percent over the last just
Speaker 7: few days. Here, we really have had a risk on moment.
Speaker 7: Does that all make sense in the context of what
Speaker 7: the data is telling.
Speaker 12: You, Well, it doesn't make sense in the context of
Speaker 12: what that data is telling us, But it makes perfect
Speaker 12: sense in the context of another alternate data set, which
Speaker 12: is just the very simple observation that very few people
Speaker 12: have lost their jobs yet. And so if this economic
Speaker 12: slow down persists, if we do see the impact of
Speaker 12: this carry through, we are likely to see that show.
Speaker 6: Up as job losses.
Speaker 12: But for the past five years, most businesses have struggled
Speaker 12: to attract and retain qualified employees. That means that if
Speaker 12: something like tariffs that could be removed with a tweet
Speaker 12: or a speech are revoked, they're terrified that they're going
Speaker 12: to wake up and suddenly find that they are back
Speaker 12: behind the eight ball and they are faced with not
Speaker 12: enough employees to meet the potential rebound in the economy
Speaker 12: that could occur. That's causing basically companies and they're planning
Speaker 12: departments to freeze and say, well, let's try to reduce
Speaker 12: hours a little bit. We saw clear evidence of that
Speaker 12: in the Dallas Fed Manufacturing Survey. I think it was
Speaker 12: yesterday in which we're seeing the expect the expectation for
Speaker 12: hours begin to fall if this persists, if it does
Speaker 12: actually manifest, And again, unlike the COVID experience, this time
Speaker 12: there's not the sense of national emergency.
Speaker 6: There's not the sense that this is a unifying event.
Speaker 12: Instead, this very much feels like it's a fracturing event,
Speaker 12: or half the power population is saying I told you so,
Speaker 12: and the other half of the population is saying, well,
Speaker 12: we had to do this.
Speaker 6: You know, under these.
Speaker 12: Conditions, we're looking at a situation where that stimulus is
Speaker 12: likely to arrive much later, and only after we've begun
Speaker 12: to see the impact of it.
Speaker 6: If people start to lose their jobs.
Speaker 12: Then their contributions to four oh one k's begin to decline,
Speaker 12: Then their contributions to their iras begin to decline. Then
Speaker 12: they begin to tap into their four oh one k's
Speaker 12: or iras for additional spending power. We're starting to see
Speaker 12: the first elements of that, but it really has not
Speaker 12: hidden in a meaningful fashion yet. And this is one
Speaker 12: of the paradoxes of a passive dominated world. All that
Speaker 12: matters is do people have jobs and are they contributing
Speaker 12: to their four oh one k's.
Speaker 3: The answer so far is yes, And yet I am
Speaker 3: seeing over the last seven days the S and P
Speaker 3: five hundred and five point two percent over the last
Speaker 3: seven trading sessions.
Speaker 6: Yeah.
Speaker 12: Well, the simple answer is is that people still have
Speaker 12: their jobs, They're still contributing to their four oh one k's,
Speaker 12: and anyone who is trying to trade in advance of
Speaker 12: this has already sold.
Speaker 6: Right.
Speaker 12: We've seen the d risking from Europe. We've seen the
Speaker 12: d risking from systematic strategies like CTAs or vault targeting funds.
Speaker 12: We've seen the active managers move to rapidly de risk
Speaker 12: their portfolios. This is particularly true in the hedge fund community.
Speaker 12: Once they've sold, they've got nothing left to sell, so
Speaker 12: the pressure on the market then becomes upwards.
Speaker 7: Mike, have you made any recent portfolio changes in light
Speaker 7: of the tariffs post Liberation Day? Have you added any
Speaker 7: specific hedges or taken risk off the table.
Speaker 12: Well, we were fortunate in being positioned for this, so
Speaker 12: we actually saw this as a COVID like event that
Speaker 12: was unlikely to lead to a slow and gradual decline
Speaker 12: and said it was likely to manifest itself very much
Speaker 12: on the event, and so we were fortunate in the
Speaker 12: high Yield Fund that iron that carries credit hedge protection,
Speaker 12: to have positioned ourselves well ahead of this event that
Speaker 12: allowed us during the event to actually re risk. And
Speaker 12: now we're in the process again of putting back on hedges,
Speaker 12: positioning ourselves for what we think will be the second
Speaker 12: leg down on this.
Speaker 6: Now that could be wrong, right, we could see a
Speaker 6: reversal of tariff policy.
Speaker 12: But it does very much feel like significant damage has
Speaker 12: been done and that will ultimately have to be reflected
Speaker 12: in the flow dynamics.
Speaker 6: That I was referring to before.
Speaker 12: As I start to add back hedges, I'm sure other
Speaker 12: people are doing something similar.
Speaker 6: Whether they are re risking and contributing.
Speaker 12: To that rally, or whether they are taking this opportunity
Speaker 12: to add back hedges is their individual choice. But the
Speaker 12: simple reality is that we've seen much of that impact already,
Speaker 12: and so I'm looking to actually reduce risk.
Speaker 6: As the month comes to a close, I.
Speaker 7: Have to ask about bitcoin because it's doing so well
Speaker 7: over the last few days.
Speaker 9: It's up ninety five thousand.
Speaker 7: Now, is that a hedge that people are using or
Speaker 7: people using bitcoin now as a safe haven.
Speaker 12: Well, that certainly is the dialogue, right, that's the narrative
Speaker 12: associated with bitcoin. The reality of bitcoin is the same
Speaker 12: reality that exists for any financial asset. If people buy it,
Speaker 12: you have to find people willing to sell it. If
Speaker 12: they are less willing to sell it, the price will
Speaker 12: move higher. That is what we are seeing with bitcoin.
Speaker 12: Just like we've seen a return to buying of stocks
Speaker 12: once the selling was done, we largely have seen a
Speaker 12: reversal of the outward flows in bitcoin. We've seen positive
Speaker 12: inflows into the ETFs and other avenues in which people
Speaker 12: buy it, and that obviously creates a self fulfilling mechanism. Right,
Speaker 12: we're on the radio talking about is bitcoin a flight
Speaker 12: to safety instrument? I'm sure somebody out there is suddenly
Speaker 12: now looking at the screen and saying, gosh, it might
Speaker 12: be maybe I should buy some bitcoin. If it were
Speaker 12: to start to fall, that process would likely reverse itself
Speaker 12: and you would see the flows reverse, and ultimately the
Speaker 12: price would fall to reflect that. Bitcoin is just a
Speaker 12: fantastic illustration of the inelasticity in markets that I often
Speaker 12: highlight in my writings and in my speeches.
Speaker 3: Hey, we appreciate you taking the time to join us today.
Speaker 3: We got to have you back soon. Michael Greeney's portfolio
Speaker 3: manager over at Simplify Asset Management.
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