1 00:00:01,760 --> 00:00:04,400 Speaker 1: This is Bloomberg Business Week. I'm Carole Masser and I'm 2 00:00:04,440 --> 00:00:07,240 Speaker 1: Bloomberg Quick Takes Tim Stanovk. We're here every day bringing 3 00:00:07,280 --> 00:00:09,800 Speaker 1: you the latest news from the world to business and finance, 4 00:00:09,800 --> 00:00:13,640 Speaker 1: plus technology, politics, economics, all partnising the power of Business 5 00:00:13,640 --> 00:00:17,119 Speaker 1: Week reporters and editors, not to mention our journalists and 6 00:00:17,120 --> 00:00:20,000 Speaker 1: analysts in more than one twenty countries. You can download 7 00:00:20,000 --> 00:00:23,200 Speaker 1: Bloomberg Business Week on iTunes, SoundCloud, or Bloomberg dot com. 8 00:00:23,400 --> 00:00:25,120 Speaker 1: You can also listen to our radio show at two 9 00:00:25,160 --> 00:00:28,360 Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on YouTube. 10 00:00:28,360 --> 00:00:33,120 Speaker 1: Search Bloomberg Global News Snap, which is still down about 11 00:00:33,800 --> 00:00:37,480 Speaker 1: so staying near its lows, plummeting like a rock last 12 00:00:37,600 --> 00:00:40,360 Speaker 1: night after it came out with its latest update. It 13 00:00:40,440 --> 00:00:42,680 Speaker 1: is down below its ip O price, cutting its revenue 14 00:00:42,680 --> 00:00:45,559 Speaker 1: and profit forecast. And then, of course you know that 15 00:00:45,760 --> 00:00:48,920 Speaker 1: news tim Affecting the social media space. Yeah, we're seeing 16 00:00:48,960 --> 00:00:52,600 Speaker 1: shares of Google parent alphabet lower. We're seeing Facebook, also 17 00:00:52,600 --> 00:00:55,160 Speaker 1: known as meta platforms, take a hit today as well. 18 00:00:55,200 --> 00:00:58,400 Speaker 1: Man deep Seeing, a senior tech industry analysts for Bloomberg Intelligence, 19 00:00:58,440 --> 00:01:02,160 Speaker 1: Man Deepest with us in the Bloomberg Interactive Broker studio Mandy, 20 00:01:02,320 --> 00:01:05,240 Speaker 1: how we're investors caught so off guard by this, and 21 00:01:05,280 --> 00:01:08,160 Speaker 1: we should note that, uh, only in the last month 22 00:01:08,240 --> 00:01:11,360 Speaker 1: or so after Snap reported earnings for its most recent quarter, 23 00:01:11,760 --> 00:01:15,039 Speaker 1: it came out with a revision to its outlook. Yeah, 24 00:01:15,120 --> 00:01:18,319 Speaker 1: and look, I think what has happened is because of 25 00:01:18,400 --> 00:01:23,160 Speaker 1: the macro slow down expectations really kind of, I mean 26 00:01:23,600 --> 00:01:27,760 Speaker 1: they're tied to inflation, right, So that is what is 27 00:01:27,880 --> 00:01:33,119 Speaker 1: driving this, uh pullback and ad spending. And everyone had 28 00:01:33,200 --> 00:01:36,920 Speaker 1: that perception that digital ad spending is more resilient that 29 00:01:36,959 --> 00:01:39,160 Speaker 1: you know, and if we go into a recession, digital 30 00:01:39,280 --> 00:01:42,360 Speaker 1: ad spending will hold. Well, that's definitely not the case. 31 00:01:42,400 --> 00:01:46,640 Speaker 1: And what we're finding is advertising digital ad spending is 32 00:01:46,720 --> 00:01:50,000 Speaker 1: as cyclical as it used to be, and so nothing 33 00:01:50,080 --> 00:01:52,800 Speaker 1: has changed this time is not different when it comes 34 00:01:52,840 --> 00:01:56,400 Speaker 1: to digital ad spending being tied to you know, macroeconomic growth. 35 00:01:56,880 --> 00:01:59,480 Speaker 1: And clearly advertisers are pulling back more so on the 36 00:01:59,520 --> 00:02:02,960 Speaker 1: retail side. So in terms of numbers, retail ad spending 37 00:02:03,040 --> 00:02:07,520 Speaker 1: is about one third of the overall four billion dollar market, 38 00:02:07,600 --> 00:02:11,120 Speaker 1: and it looks like this pull back is more tied 39 00:02:11,160 --> 00:02:14,120 Speaker 1: to retailers pulling back on their ad spend. The e 40 00:02:14,200 --> 00:02:17,200 Speaker 1: commerce guys where there was a pull forward during the pandemic, 41 00:02:17,480 --> 00:02:19,440 Speaker 1: they're the ones who are pulling back more. I mean, 42 00:02:19,480 --> 00:02:21,799 Speaker 1: you don't have to be, you know, living under a 43 00:02:21,919 --> 00:02:24,320 Speaker 1: rock to to understand what's happening with retail right now. 44 00:02:24,360 --> 00:02:26,720 Speaker 1: Carol in the most recent earnings, Well, I agree with that, 45 00:02:26,760 --> 00:02:28,640 Speaker 1: but I guess what I'm saying, what I think about 46 00:02:28,680 --> 00:02:30,160 Speaker 1: is I look at the chart and I go back 47 00:02:30,200 --> 00:02:37,079 Speaker 1: to like pre pandemic early, end of early. We're kind 48 00:02:37,080 --> 00:02:40,359 Speaker 1: of back to those levels. So to me, that shark, 49 00:02:40,520 --> 00:02:43,560 Speaker 1: that bump, that mountain that it climbed, was that the 50 00:02:43,600 --> 00:02:47,080 Speaker 1: aberration because of the pandemic, and folks were just getting 51 00:02:47,120 --> 00:02:50,240 Speaker 1: back to normal times for for a name like Snap 52 00:02:50,280 --> 00:02:54,200 Speaker 1: and others. Yes, So the multiple expansion that we saw 53 00:02:54,680 --> 00:02:58,200 Speaker 1: during the pandemic, you know, all the e commerce companies 54 00:02:58,280 --> 00:03:02,160 Speaker 1: really going to meta and app chat to find new customers. 55 00:03:02,880 --> 00:03:06,560 Speaker 1: That was what drove the multiple expansion. Now we are 56 00:03:06,600 --> 00:03:10,079 Speaker 1: at a point where advertisers feel like they have overspent 57 00:03:10,480 --> 00:03:13,680 Speaker 1: and now that their sales are declining, they're pulling back 58 00:03:13,960 --> 00:03:17,720 Speaker 1: very aggressively. So they're not like, think of are they 59 00:03:17,800 --> 00:03:20,280 Speaker 1: pulling back to kind of pre pandemic levels. So that's 60 00:03:20,320 --> 00:03:23,720 Speaker 1: more now. So this is like, if I'm an advertiser 61 00:03:23,919 --> 00:03:27,280 Speaker 1: who's spending million dollars on sales and marketing, am I 62 00:03:27,320 --> 00:03:30,200 Speaker 1: going to pull back on Google Search spend? Probably not. 63 00:03:30,400 --> 00:03:32,320 Speaker 1: That's the last one I'm going to cut back on. 64 00:03:32,680 --> 00:03:36,520 Speaker 1: But I can't pull pull back on Meta and Snapchat 65 00:03:36,640 --> 00:03:39,720 Speaker 1: and Pinterest because these were the platforms that paid off 66 00:03:39,800 --> 00:03:42,680 Speaker 1: during the pandemic. But I'm not so sure about the 67 00:03:42,800 --> 00:03:45,640 Speaker 1: r o I. So it's really about what is discretionary 68 00:03:45,680 --> 00:03:48,840 Speaker 1: here versus what is essential? And Google Search, to me, 69 00:03:49,280 --> 00:03:52,280 Speaker 1: is still essential for every advertiser. Is it hard for 70 00:03:52,320 --> 00:03:56,160 Speaker 1: you to imagine snap being worth less today than it's 71 00:03:56,160 --> 00:04:00,200 Speaker 1: worth when it went public? All So again it goes 72 00:04:00,240 --> 00:04:03,800 Speaker 1: back to the multiple expansion versus you know, multiples really 73 00:04:04,120 --> 00:04:06,840 Speaker 1: coming down. And this feels like a little bit of 74 00:04:06,920 --> 00:04:11,600 Speaker 1: overreaction given Snapchat still has three million daily active users, 75 00:04:11,640 --> 00:04:15,080 Speaker 1: the engagement trends are still holding up. But the problem 76 00:04:15,160 --> 00:04:18,080 Speaker 1: for snap is it has been around ten years and 77 00:04:18,080 --> 00:04:21,320 Speaker 1: it's not going to grow fifty anymore. So it's more 78 00:04:21,360 --> 00:04:25,960 Speaker 1: of growth and investors don't pay a premium for you know, 79 00:04:26,040 --> 00:04:29,520 Speaker 1: low growth companies, and in the case of snap It, 80 00:04:29,520 --> 00:04:33,920 Speaker 1: it's not like ebit dumb margins of it's barely but 81 00:04:34,040 --> 00:04:38,479 Speaker 1: not positive. So the profitabilities in their growth is tapering off, 82 00:04:38,760 --> 00:04:43,280 Speaker 1: and suddenly like Google, Search or Alphabet seems like a 83 00:04:43,279 --> 00:04:46,360 Speaker 1: better asset to invest in at these valuation is compared 84 00:04:46,400 --> 00:04:47,880 Speaker 1: to you know, some of the other names. Is It 85 00:04:47,880 --> 00:04:51,720 Speaker 1: also a reminder that in terms of digital advertising that 86 00:04:51,839 --> 00:04:54,200 Speaker 1: there's just so much in terms of the size of 87 00:04:54,200 --> 00:04:56,200 Speaker 1: the pool. And you and like you said, are you 88 00:04:56,240 --> 00:04:58,080 Speaker 1: going to give you know, cut back on Google, No, 89 00:04:58,400 --> 00:05:01,320 Speaker 1: because right here you're gonna win probably with that strategy. 90 00:05:01,480 --> 00:05:03,000 Speaker 1: So you're gonna pick and choose, and maybe some of 91 00:05:03,040 --> 00:05:05,039 Speaker 1: these smaller players are no longer going to get a 92 00:05:05,120 --> 00:05:07,760 Speaker 1: share of that pie, which is a limited pie, right yes, 93 00:05:07,800 --> 00:05:10,000 Speaker 1: And now you have Amazon as well, So earlier it 94 00:05:10,120 --> 00:05:12,840 Speaker 1: used to be a duopoly Alphabet and Meta. Now you've 95 00:05:12,920 --> 00:05:15,920 Speaker 1: got Amazon, which is pretty sizeable thirty thirty five billion, 96 00:05:16,000 --> 00:05:19,440 Speaker 1: growing at very healthy fort So if the overall ad 97 00:05:19,560 --> 00:05:22,279 Speaker 1: spending is growing let's say ten percent, and it's not 98 00:05:22,320 --> 00:05:24,840 Speaker 1: going to grow ten percent this year because last year 99 00:05:24,880 --> 00:05:27,560 Speaker 1: it grew thirty percent and we had a pull forward, 100 00:05:27,600 --> 00:05:30,320 Speaker 1: it's pretty obvious now. So if it's growing, you know, 101 00:05:30,440 --> 00:05:33,960 Speaker 1: high single digit, a lot of those incremental dollars are 102 00:05:34,000 --> 00:05:38,080 Speaker 1: going to Google and Facebook because they are proven platforms 103 00:05:38,080 --> 00:05:40,320 Speaker 1: when it comes to our o I on out spending. 104 00:05:40,320 --> 00:05:43,560 Speaker 1: The other ones are not as proven, and I think 105 00:05:43,560 --> 00:05:47,159 Speaker 1: that's what is happening. Snaps woes hitting Pinterests really hard today. Man, 106 00:05:47,160 --> 00:05:49,800 Speaker 1: Deep it's down twenty it's having its worst day ever 107 00:05:49,880 --> 00:05:52,279 Speaker 1: as a publicly traded company, trading at levels last scene 108 00:05:52,320 --> 00:05:56,240 Speaker 1: in April May thirty seconds. Give us your take on 109 00:05:56,279 --> 00:06:00,240 Speaker 1: this hitting pinterest same thing? You know, Smaller digital ad 110 00:06:00,320 --> 00:06:03,200 Speaker 1: venders will have a very tough time if Twitter wasn't 111 00:06:03,240 --> 00:06:06,960 Speaker 1: taken private or it wasn't put the same same kind 112 00:06:07,000 --> 00:06:10,560 Speaker 1: of a day in terms of stock market. So I 113 00:06:10,560 --> 00:06:14,120 Speaker 1: I think the long tale of digital advengers. They will 114 00:06:14,160 --> 00:06:16,800 Speaker 1: have a very tough time navigating this environment. But the 115 00:06:16,839 --> 00:06:20,240 Speaker 1: ones that keep the engagement intact will come out, you know, 116 00:06:20,480 --> 00:06:23,359 Speaker 1: much better out of this downturn. I know Bloomberg Intelligence 117 00:06:23,360 --> 00:06:27,080 Speaker 1: doesn't give stock targets, you don't make recommendations, But does 118 00:06:27,120 --> 00:06:29,880 Speaker 1: it make more sense Snap as a twenty one billion 119 00:06:29,880 --> 00:06:32,560 Speaker 1: dollar market cap company or maybe a little bit above 120 00:06:32,600 --> 00:06:35,080 Speaker 1: this and just kind about fifteen seconds? Yeah, Well, look, 121 00:06:35,160 --> 00:06:38,560 Speaker 1: I think engagement is key. Social media is a very 122 00:06:38,640 --> 00:06:41,400 Speaker 1: tough space. It is all about user growth and engagement. 123 00:06:41,440 --> 00:06:44,320 Speaker 1: If and if Snap keeps the engagement it has competition 124 00:06:44,360 --> 00:06:47,160 Speaker 1: from TikTok and roadblocks, they will do well. Alright, always 125 00:06:47,160 --> 00:06:50,480 Speaker 1: smart Mandep saying he's senior tech industry analyst Bloomberg Intelligence. 126 00:06:50,480 --> 00:06:54,440 Speaker 1: Here in our studio, this is Bloomberg. You're listening to 127 00:06:54,520 --> 00:06:58,520 Speaker 1: Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes 128 00:06:58,600 --> 00:07:02,200 Speaker 1: Tim Stinovic on Bloomberg Radio. So among our most right 129 00:07:02,240 --> 00:07:04,760 Speaker 1: on the Bloomberg Today. It's about how more Americans are 130 00:07:04,839 --> 00:07:07,080 Speaker 1: quitting their jobs than ever in the United States, and 131 00:07:07,160 --> 00:07:10,400 Speaker 1: fewer are sticking around in their new positions. Molly Smith 132 00:07:10,440 --> 00:07:14,000 Speaker 1: is economics editor for Bloomberg News. She joins us via 133 00:07:14,040 --> 00:07:17,440 Speaker 1: the phone from New York City. Molly, job jumpers. How 134 00:07:17,440 --> 00:07:20,920 Speaker 1: do you define a job jumper? So we worked on 135 00:07:20,960 --> 00:07:23,560 Speaker 1: the story in tandem with Lincoln and some of the 136 00:07:23,640 --> 00:07:26,760 Speaker 1: data they were able to compile based on profile changes 137 00:07:27,240 --> 00:07:30,200 Speaker 1: in one and the data set and goes back to 138 00:07:31,720 --> 00:07:34,680 Speaker 1: So what they found is of workers who took a 139 00:07:34,720 --> 00:07:37,520 Speaker 1: new job last year, the share who had been in 140 00:07:37,560 --> 00:07:41,280 Speaker 1: their prior job for less than twelve months rose by 141 00:07:41,320 --> 00:07:44,280 Speaker 1: six and a half percent compared to and that's the 142 00:07:44,360 --> 00:07:47,080 Speaker 1: highest it's been since Lincoln started tracking the data in 143 00:07:48,560 --> 00:07:51,000 Speaker 1: So what that's telling us is that people are in 144 00:07:51,080 --> 00:07:54,640 Speaker 1: their jobs for less amount of time and there and 145 00:07:54,720 --> 00:07:56,920 Speaker 1: the amount of them who are in a job for 146 00:07:57,120 --> 00:08:01,520 Speaker 1: that shorter tenure is growing. Why is it happening? Molly? 147 00:08:02,160 --> 00:08:05,920 Speaker 1: So there? I mean the right now, job opportunities are 148 00:08:05,960 --> 00:08:09,640 Speaker 1: just so immense. For um. You know that they have 149 00:08:09,720 --> 00:08:12,640 Speaker 1: grown so much during the pandemic recovery, with the advent 150 00:08:12,760 --> 00:08:17,360 Speaker 1: of remote work, with people's wages growing up, especially if 151 00:08:17,360 --> 00:08:22,200 Speaker 1: you're changing locations, um, and that people have just really 152 00:08:22,240 --> 00:08:25,400 Speaker 1: redefined their relationship with work. So there are a lot 153 00:08:25,400 --> 00:08:28,080 Speaker 1: of opportunities right there that people right now are trying 154 00:08:28,120 --> 00:08:31,800 Speaker 1: to take advantage of and looking at how work plays 155 00:08:32,000 --> 00:08:35,920 Speaker 1: a role in their lives. So is this something that continues? 156 00:08:36,080 --> 00:08:37,960 Speaker 1: What is how is Lincoln thinking about this? How our 157 00:08:37,960 --> 00:08:41,400 Speaker 1: employers thinking about this? In terms of attracting and retaining talent? 158 00:08:41,440 --> 00:08:45,800 Speaker 1: If people are jumping around, then that's expensive. It is, 159 00:08:46,120 --> 00:08:50,079 Speaker 1: And based on some of our own economist data at Bloomberg, 160 00:08:50,320 --> 00:08:52,440 Speaker 1: there are signs to show that it's maybe flowing at 161 00:08:52,480 --> 00:08:55,040 Speaker 1: least if you're looking at this by wages, which of 162 00:08:55,080 --> 00:08:57,800 Speaker 1: course money is a huge factor for why people decide 163 00:08:57,840 --> 00:09:00,439 Speaker 1: to leave their jobs. Uh So, right now, it looks 164 00:09:00,440 --> 00:09:03,559 Speaker 1: like wage increases maybe leveling off based on a few 165 00:09:03,559 --> 00:09:07,240 Speaker 1: different economic indicators, and also by some of the small 166 00:09:07,280 --> 00:09:10,320 Speaker 1: business indicators we track as well. The National Federation of 167 00:09:10,320 --> 00:09:13,840 Speaker 1: Independent Business UM has been has some metrics that point 168 00:09:13,880 --> 00:09:16,240 Speaker 1: to this leveling off as well. So you could start 169 00:09:16,280 --> 00:09:20,800 Speaker 1: to see some of the job jumping slowing now that 170 00:09:20,880 --> 00:09:23,440 Speaker 1: wage increases might be leveling off. Well, that's what I 171 00:09:23,440 --> 00:09:24,960 Speaker 1: wanted to ask you, because how much of this is 172 00:09:25,000 --> 00:09:27,920 Speaker 1: just you know, how many times throughout my career people 173 00:09:27,960 --> 00:09:29,160 Speaker 1: are like, you want to make more money, you get 174 00:09:29,200 --> 00:09:31,720 Speaker 1: jumped somewhere else, like you know, and sometimes that's true, 175 00:09:31,760 --> 00:09:34,800 Speaker 1: sometimes that's not true, um, But how much of the 176 00:09:34,920 --> 00:09:37,960 Speaker 1: job jumping that's going on is driven by wanting to 177 00:09:38,000 --> 00:09:40,280 Speaker 1: make more even though you know, Molly, there's so many 178 00:09:40,280 --> 00:09:42,680 Speaker 1: different surveys out there that's saying it's not just about 179 00:09:42,720 --> 00:09:45,200 Speaker 1: money why people are are are taking jobs are moving 180 00:09:45,240 --> 00:09:49,280 Speaker 1: around of course, and you know, based on LinkedIn data alone, 181 00:09:49,280 --> 00:09:51,679 Speaker 1: that's not really something we can disturn and we can 182 00:09:51,679 --> 00:09:54,280 Speaker 1: only just based on this data that just see that 183 00:09:54,360 --> 00:09:55,840 Speaker 1: the number of people who are in a job for 184 00:09:55,920 --> 00:09:59,120 Speaker 1: less than a year is growing. Uh So, based on that, 185 00:09:59,240 --> 00:10:02,640 Speaker 1: and based on the fact that quits are very high 186 00:10:02,679 --> 00:10:05,199 Speaker 1: and layoffs are very low, the only thing we can 187 00:10:05,240 --> 00:10:09,680 Speaker 1: really infer with good confidence is that these moves are voluntary, 188 00:10:09,800 --> 00:10:12,880 Speaker 1: as then people are not being let go from their jobs. Um. 189 00:10:13,120 --> 00:10:16,520 Speaker 1: But as far as the motivation for leaving, um, I mean, 190 00:10:16,559 --> 00:10:19,360 Speaker 1: I would definitely say that pay continues to be a 191 00:10:19,400 --> 00:10:21,439 Speaker 1: big reason. But of the people who I spoke to 192 00:10:21,559 --> 00:10:24,679 Speaker 1: for their story, regret was also just a part of it, 193 00:10:24,760 --> 00:10:27,559 Speaker 1: and that not getting a great sense of the workplace 194 00:10:27,600 --> 00:10:30,359 Speaker 1: there in especially if you're interviewing for a job remotely 195 00:10:30,720 --> 00:10:33,160 Speaker 1: and then only to arrive and realize that, like, maybe 196 00:10:33,160 --> 00:10:35,920 Speaker 1: you made a mistake. Was that the theme that that 197 00:10:36,679 --> 00:10:38,680 Speaker 1: sort of tied together the people you spoke to who 198 00:10:38,679 --> 00:10:40,880 Speaker 1: regretted making the jump, that they didn't get a good 199 00:10:40,880 --> 00:10:44,319 Speaker 1: idea of what they were in for because perhaps they 200 00:10:44,320 --> 00:10:47,480 Speaker 1: interviewed remotely, or they only got to know people remotely 201 00:10:47,520 --> 00:10:50,720 Speaker 1: before they started their job. Yeah, and I think as well. 202 00:10:50,840 --> 00:10:53,240 Speaker 1: I mean, some of it too is that there's such 203 00:10:53,800 --> 00:10:56,520 Speaker 1: demand for challenge right now. The way that these interview 204 00:10:56,559 --> 00:11:00,400 Speaker 1: problems are going is on such a tighter timeline. I mean, 205 00:11:00,520 --> 00:11:03,880 Speaker 1: you can really make these switch its happen a lot faster. 206 00:11:04,160 --> 00:11:06,960 Speaker 1: So that could also perhaps me that maybe you're not 207 00:11:07,040 --> 00:11:10,600 Speaker 1: talking to as many people as you normally would before 208 00:11:10,600 --> 00:11:13,560 Speaker 1: taking a new job that you're only meeting with perhaps 209 00:11:13,600 --> 00:11:18,160 Speaker 1: to select few managers or teammates um before you sign 210 00:11:18,280 --> 00:11:21,679 Speaker 1: that offer letters. So that could also perhaps um be 211 00:11:22,000 --> 00:11:24,319 Speaker 1: part of the equation here. You gotta say, Molly, a 212 00:11:24,400 --> 00:11:26,680 Speaker 1: very cool data set that you guys worked on with LinkedIn, 213 00:11:26,840 --> 00:11:28,760 Speaker 1: because I think this is one of the big questions 214 00:11:28,760 --> 00:11:30,600 Speaker 1: Tim and I talked about it. There's so many different 215 00:11:30,600 --> 00:11:33,640 Speaker 1: stories the financial community of people saying Yep, everybody's going 216 00:11:33,640 --> 00:11:35,439 Speaker 1: to come back to the office, and then Credit Sweets 217 00:11:35,760 --> 00:11:37,640 Speaker 1: CEO saying, now we're going to see a lot more 218 00:11:37,640 --> 00:11:40,440 Speaker 1: people working from home. And it's just one of those things, 219 00:11:40,600 --> 00:11:43,040 Speaker 1: right Tim, that it's we won't know until a few 220 00:11:43,120 --> 00:11:45,160 Speaker 1: years after. We won't know maybe in a year AGW. 221 00:11:45,280 --> 00:11:47,319 Speaker 1: I've said this repeatedly. I think it had so much 222 00:11:47,400 --> 00:11:49,000 Speaker 1: us to do with the tight labor market that we're 223 00:11:49,000 --> 00:11:51,680 Speaker 1: in right now, and if we start to see slack there, 224 00:11:51,840 --> 00:11:54,560 Speaker 1: then employees are calling the shots rather than employers, right 225 00:11:54,679 --> 00:11:57,600 Speaker 1: it changes dramatics. We actually had a related story on 226 00:11:57,640 --> 00:12:00,640 Speaker 1: this also out today's UM from some other data that 227 00:12:00,880 --> 00:12:02,720 Speaker 1: UM from our Future of Work crew that we were 228 00:12:02,720 --> 00:12:05,320 Speaker 1: able to track down that you know, a lot of 229 00:12:05,320 --> 00:12:07,880 Speaker 1: the people who are very hell bent on getting workers 230 00:12:07,880 --> 00:12:10,240 Speaker 1: back in the office claim that it's been for connectivity. 231 00:12:10,360 --> 00:12:12,599 Speaker 1: But back to the workers who are coming into the 232 00:12:12,640 --> 00:12:15,679 Speaker 1: ones who came connected of all, Yeah, ask me right, 233 00:12:15,760 --> 00:12:18,840 Speaker 1: or ask us, ask us we were workers. I should say, Hey, 234 00:12:18,840 --> 00:12:21,560 Speaker 1: Molly Smith, thank you so much. Molly is Economic editor 235 00:12:21,600 --> 00:12:26,160 Speaker 1: at Bloomberg News. This is Bloomberg Business Week with Carol 236 00:12:26,200 --> 00:12:31,200 Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, 237 00:12:31,200 --> 00:12:33,679 Speaker 1: remember yesterday we talked about the Bloomberg Big Take and 238 00:12:33,679 --> 00:12:36,160 Speaker 1: how the global energy shortage sets the stage for hot 239 00:12:36,160 --> 00:12:38,280 Speaker 1: and deadly summer. Well, we kind of have part two 240 00:12:38,280 --> 00:12:40,559 Speaker 1: of this we do. Joining us now is Will Wade, 241 00:12:40,559 --> 00:12:43,559 Speaker 1: Power and Renewable Energy editor for Bloomberg News. Will's with 242 00:12:43,640 --> 00:12:46,080 Speaker 1: us in the Bloomberg Interactive Broker Studio. He's got a 243 00:12:46,080 --> 00:12:48,760 Speaker 1: piece in the upcoming issue of Business Week magazine, but 244 00:12:48,760 --> 00:12:50,880 Speaker 1: you can read it now on the Bloomberg terminal and 245 00:12:50,920 --> 00:12:53,560 Speaker 1: at Bloomberg dot com slash a Business Week. It's about 246 00:12:53,640 --> 00:12:56,760 Speaker 1: us consumers facing a summer of pain when it comes 247 00:12:56,800 --> 00:13:00,280 Speaker 1: to the power bill. This is heat and gas surge. Well, 248 00:13:00,280 --> 00:13:02,080 Speaker 1: I read a story like, well, I want to start 249 00:13:02,080 --> 00:13:04,240 Speaker 1: by just you giving us the numbers. How how how 250 00:13:04,320 --> 00:13:06,760 Speaker 1: ugly is it going to get for Americans out there 251 00:13:06,760 --> 00:13:10,640 Speaker 1: this summer as they crank the A C. Oh really ugly. Oh. 252 00:13:10,720 --> 00:13:13,959 Speaker 1: The number we're using now is your utility bill this 253 00:13:14,000 --> 00:13:17,760 Speaker 1: summer could be about the year ago. But the thing 254 00:13:17,840 --> 00:13:21,479 Speaker 1: is that's based on natural gas prices, and that's assuming 255 00:13:21,520 --> 00:13:24,600 Speaker 1: gases at eight bucks, and right now it's almost nine bucks. 256 00:13:25,080 --> 00:13:27,439 Speaker 1: So that means the utility bill could be even higher 257 00:13:27,440 --> 00:13:30,720 Speaker 1: than and that was already high. I'm gonna become my father. 258 00:13:30,840 --> 00:13:33,439 Speaker 1: I can just see this like the air conditioner turn off, 259 00:13:33,440 --> 00:13:35,280 Speaker 1: the lights go up in the pool kind of thing 260 00:13:35,320 --> 00:13:39,040 Speaker 1: like cool offesomehow if you have a pool? I'm coming over. No, 261 00:13:39,200 --> 00:13:42,760 Speaker 1: I don't write now. So here's the here's the crazy thing. 262 00:13:42,760 --> 00:13:45,559 Speaker 1: I wrote a story just like this in March, based 263 00:13:45,559 --> 00:13:48,679 Speaker 1: on January numbers, and that story basically said the same thing, Hey, 264 00:13:48,679 --> 00:13:51,400 Speaker 1: your utility bill is gonna be really high because of 265 00:13:51,480 --> 00:13:54,520 Speaker 1: natural gas prices and passing through the consumer, and people 266 00:13:54,559 --> 00:13:56,520 Speaker 1: are upset about it. Then and the number then, was 267 00:13:56,559 --> 00:13:59,600 Speaker 1: that prices are gonna be like higher. I'm just doing 268 00:13:59,600 --> 00:14:02,200 Speaker 1: the same story because the same things are happening, all right, Joel. 269 00:14:02,240 --> 00:14:04,960 Speaker 1: Remember Joe Weber's here, editor of Bloomberg business Week magazine. 270 00:14:04,960 --> 00:14:06,680 Speaker 1: Remember when we had just so much nat gas It 271 00:14:06,760 --> 00:14:10,800 Speaker 1: was just so cheap and everybody a year ago, yeah, 272 00:14:10,880 --> 00:14:13,120 Speaker 1: three bucks a year ago. It's almost nine bucks now. 273 00:14:13,720 --> 00:14:18,840 Speaker 1: Who made money on that trade? By the way, gas traders? Traders? Yeah, 274 00:14:18,960 --> 00:14:22,720 Speaker 1: So where are we going to be? Come like fall 275 00:14:23,400 --> 00:14:25,840 Speaker 1: could be close to nine, could be close to nine 276 00:14:25,840 --> 00:14:27,800 Speaker 1: through much of the next year, according to the forward 277 00:14:27,840 --> 00:14:29,960 Speaker 1: curve I was looking at. But the thing is gas 278 00:14:30,040 --> 00:14:34,400 Speaker 1: was between like two and three bucks from one. It 279 00:14:34,520 --> 00:14:39,080 Speaker 1: is just spiked since last summer. So are the supplies there? Is? 280 00:14:39,080 --> 00:14:43,920 Speaker 1: It just crazy crazy demand. It's kind of a combination 281 00:14:43,960 --> 00:14:45,600 Speaker 1: of the two. And it really goes back to COVID 282 00:14:46,000 --> 00:14:48,760 Speaker 1: because the first thing that happened in COVID was electricity 283 00:14:48,800 --> 00:14:52,600 Speaker 1: con assumption went down because everybody started saying home, so 284 00:14:52,720 --> 00:14:56,880 Speaker 1: the gas producers cut back on production. And then last 285 00:14:56,920 --> 00:14:59,240 Speaker 1: summer everybody came out of their houses, and all the 286 00:14:59,280 --> 00:15:03,160 Speaker 1: factories and all cis started going back into work, and 287 00:15:03,280 --> 00:15:06,760 Speaker 1: electricity demands started shooting up, but there wasn't enough gas 288 00:15:06,760 --> 00:15:10,440 Speaker 1: and coal too, So now we've got a shortage of fuel. Well, 289 00:15:10,480 --> 00:15:12,840 Speaker 1: how do how do we get here? Just? I mean 290 00:15:13,280 --> 00:15:16,120 Speaker 1: generations ago? Well, what are the policy decisions that have 291 00:15:16,160 --> 00:15:19,520 Speaker 1: been made where we're not really m yeah, I'm just 292 00:15:19,520 --> 00:15:24,360 Speaker 1: thinking about you know it, We're have availability of solar 293 00:15:24,440 --> 00:15:28,640 Speaker 1: right now. Nuclear plants are just essentially gone because there 294 00:15:28,720 --> 00:15:32,080 Speaker 1: was you know, widespread outrage about those. Uh, I mean, 295 00:15:32,080 --> 00:15:33,880 Speaker 1: how do we get out of this mess? Well, it's 296 00:15:33,920 --> 00:15:36,040 Speaker 1: interesting you mentioned nuclear. That's like one of the next 297 00:15:36,080 --> 00:15:38,440 Speaker 1: big stories we're working on is whether or not nuclear 298 00:15:38,800 --> 00:15:40,720 Speaker 1: is going to be important to carry us out of this. 299 00:15:40,840 --> 00:15:43,800 Speaker 1: There's a big debate about that right now. Um. In 300 00:15:43,920 --> 00:15:46,760 Speaker 1: terms of policy, people right now are pressing for more 301 00:15:47,160 --> 00:15:49,960 Speaker 1: fossil fuel production. They say we need this right now, 302 00:15:50,080 --> 00:15:53,960 Speaker 1: And it's true, we really do need this electricity right now. 303 00:15:54,480 --> 00:15:56,720 Speaker 1: But thinking about fossil fuels is the way to save 304 00:15:56,800 --> 00:15:58,960 Speaker 1: us is really short term thinking. Well, and I feel 305 00:15:58,960 --> 00:16:00,760 Speaker 1: like that's part of the discussion comeing out of Davos 306 00:16:00,880 --> 00:16:03,160 Speaker 1: right now in terms of we can't give up on 307 00:16:03,200 --> 00:16:07,320 Speaker 1: our climate change metrics. Um, it's just too to devastating 308 00:16:07,360 --> 00:16:10,080 Speaker 1: if we do so. Consumers are just basically gonna have 309 00:16:10,120 --> 00:16:11,760 Speaker 1: to grin and bear it. Right, there's no way out 310 00:16:11,760 --> 00:16:13,360 Speaker 1: of this. If you want your A C, You're gonna 311 00:16:13,360 --> 00:16:16,800 Speaker 1: have to pay for it. Everybody knows that companies are 312 00:16:16,840 --> 00:16:20,600 Speaker 1: thrilled at the extra money that's coming in. Well, the 313 00:16:20,600 --> 00:16:23,280 Speaker 1: first part of yes, consumers is gonna can't wait for 314 00:16:23,280 --> 00:16:27,560 Speaker 1: the early storms of November already. Right, Well, consumers do 315 00:16:27,640 --> 00:16:29,120 Speaker 1: have to grin and bear it. They don't really have 316 00:16:29,160 --> 00:16:31,640 Speaker 1: a whole lot of choice. The way the utility bill 317 00:16:31,720 --> 00:16:34,560 Speaker 1: system is designed is the cost of that fuel just 318 00:16:34,560 --> 00:16:37,240 Speaker 1: passes straight through the consumers. But they get mad at 319 00:16:37,280 --> 00:16:40,080 Speaker 1: their utilities that you know, that's who the bill comes from. 320 00:16:40,080 --> 00:16:43,320 Speaker 1: But it's not really the utilities fault. So I'm just 321 00:16:43,360 --> 00:16:46,600 Speaker 1: gonna guess something's gonna break this summer. It's gonna be 322 00:16:46,640 --> 00:16:49,600 Speaker 1: a grid somewhere. There's gonna be a brown out something, 323 00:16:50,200 --> 00:16:52,120 Speaker 1: and then d C is gonna be like how did 324 00:16:52,160 --> 00:16:54,520 Speaker 1: we ever get here? Right, and like, what's gonna what's 325 00:16:54,520 --> 00:16:59,760 Speaker 1: gonna change? After a brutal summer, people might get more 326 00:17:00,000 --> 00:17:03,040 Speaker 1: said about it. We might see some outrage in the elections. 327 00:17:03,040 --> 00:17:05,359 Speaker 1: Did you see the hurricane forecast that came out this morning? 328 00:17:05,359 --> 00:17:08,399 Speaker 1: And talked about it did our seventh straight year of 329 00:17:08,440 --> 00:17:11,720 Speaker 1: more hurricanes than normal. Yeah, so I mean like layer 330 00:17:11,720 --> 00:17:13,720 Speaker 1: and I mean we keep talking about whether it's the 331 00:17:13,720 --> 00:17:16,760 Speaker 1: food crisis, whether it's i mean just pick its supply chains, 332 00:17:16,800 --> 00:17:19,640 Speaker 1: it's you know, geopolitical, there's just this like perfect storm 333 00:17:19,800 --> 00:17:24,040 Speaker 1: that continues to impact our world. No pun intended. Well, 334 00:17:24,080 --> 00:17:27,280 Speaker 1: it's it's the it's the right phrase. Everything seems to 335 00:17:27,320 --> 00:17:29,760 Speaker 1: be close to the breaking point. Well, as you point 336 00:17:29,760 --> 00:17:33,640 Speaker 1: out this story, well this hits lower income Americans disproportionately 337 00:17:33,760 --> 00:17:38,359 Speaker 1: because a larger portion of their income goes to costs 338 00:17:38,400 --> 00:17:41,480 Speaker 1: such as these. They don't have as much discretionary income. 339 00:17:41,920 --> 00:17:45,239 Speaker 1: And as you write, you could stop driving places if 340 00:17:45,240 --> 00:17:47,800 Speaker 1: there's demand destruction there. But if it's over a hundred 341 00:17:47,840 --> 00:17:51,720 Speaker 1: degrees somewhere and you know you need to cool where 342 00:17:51,760 --> 00:17:54,240 Speaker 1: you live, that your conditioner is going to stay on. Absolutely, 343 00:17:54,280 --> 00:17:58,320 Speaker 1: that's a safety issue. And that is that's another impact 344 00:17:58,440 --> 00:18:01,760 Speaker 1: of climate change, because we've got these heat waves that 345 00:18:02,000 --> 00:18:04,680 Speaker 1: used to bring things up to nine degrees and people 346 00:18:04,680 --> 00:18:06,560 Speaker 1: to go, oh this is really hot. Now it's a 347 00:18:06,640 --> 00:18:10,200 Speaker 1: hundred and ten degrees and people die. Yeah, it's pretty remarkable. 348 00:18:10,480 --> 00:18:14,680 Speaker 1: My brother lives in Seattle and he had never used 349 00:18:15,000 --> 00:18:17,560 Speaker 1: None of the houses in Seattle have air conditioner and 350 00:18:17,800 --> 00:18:21,320 Speaker 1: he just got installed. They know they do now, Yeah, 351 00:18:21,320 --> 00:18:23,400 Speaker 1: they're all getting them installed right now because they need 352 00:18:23,400 --> 00:18:28,040 Speaker 1: it from Oregon. And like last summer, you know, the 353 00:18:28,480 --> 00:18:31,440 Speaker 1: heat dum hit and if you didn't have a c 354 00:18:31,800 --> 00:18:34,400 Speaker 1: you did, you know, or you hope you did early on. 355 00:18:34,720 --> 00:18:36,960 Speaker 1: And it's lethal. I mean, this is scary stuff, Like 356 00:18:37,440 --> 00:18:41,320 Speaker 1: it's truly. Uh, it hurt your wallet and you know 357 00:18:41,400 --> 00:18:45,080 Speaker 1: it it is you know, can can kill you. But 358 00:18:45,480 --> 00:18:47,719 Speaker 1: the the interesting thing that I think here too is like, 359 00:18:47,880 --> 00:18:51,040 Speaker 1: well we were we wrote a story, uh a couple 360 00:18:51,040 --> 00:18:53,119 Speaker 1: of months ago now about how Europe was going to 361 00:18:53,200 --> 00:18:56,520 Speaker 1: feel the pain, and it was like, oh, it's their problem, 362 00:18:56,800 --> 00:19:00,399 Speaker 1: you know, their system, so screwy. Uh, they didn't have 363 00:19:00,440 --> 00:19:02,760 Speaker 1: the foresight. And here we are and it's you know, 364 00:19:02,800 --> 00:19:05,040 Speaker 1: the boomerang effect and and it's going to happen in 365 00:19:05,080 --> 00:19:08,320 Speaker 1: America right Like, so is there any are there any 366 00:19:08,400 --> 00:19:10,880 Speaker 1: lessons to be learned from from Europe that apply over 367 00:19:10,920 --> 00:19:14,480 Speaker 1: here from that experience. Europe's in a really tight spot 368 00:19:14,560 --> 00:19:18,399 Speaker 1: these days. They've got their own electricity shortages, partly because 369 00:19:18,440 --> 00:19:21,200 Speaker 1: of whether or not they're going to continue getting fuel 370 00:19:21,240 --> 00:19:24,720 Speaker 1: from Russia. France for some reason, has a lot of 371 00:19:24,800 --> 00:19:27,399 Speaker 1: nuclear power plants that are suddenly offline this spring, and 372 00:19:27,640 --> 00:19:30,639 Speaker 1: they're facing electricity shortages too. That's why we're shipping so 373 00:19:30,760 --> 00:19:33,640 Speaker 1: much gas over there, which is just another reason why 374 00:19:33,680 --> 00:19:35,720 Speaker 1: we have less gas here and the price of gas 375 00:19:35,720 --> 00:19:37,480 Speaker 1: goes up. Is that likely to change? Is they're gonna 376 00:19:37,480 --> 00:19:39,800 Speaker 1: be political pressure potentially? I mean we just we see 377 00:19:39,800 --> 00:19:42,960 Speaker 1: it with India with food, you know, right doing export controls. 378 00:19:43,000 --> 00:19:45,480 Speaker 1: Could we see that here? Not likely. I've been seeing 379 00:19:45,480 --> 00:19:47,719 Speaker 1: both sides of that debate. Don't ship the gas over 380 00:19:47,760 --> 00:19:49,600 Speaker 1: there because we need it. But if we don't ship 381 00:19:49,600 --> 00:19:51,240 Speaker 1: the gas over there, then they're going to have more 382 00:19:51,240 --> 00:19:54,720 Speaker 1: electricity shortages, and our friends and allies will be unhappy 383 00:19:54,760 --> 00:19:56,760 Speaker 1: with us, and we don't like that. Remember when we 384 00:19:56,760 --> 00:20:01,040 Speaker 1: didn't export anything, like you know, like those days last year. 385 00:20:01,640 --> 00:20:04,320 Speaker 1: Sorry what we were calling. We're thinking about this, like 386 00:20:04,320 --> 00:20:08,080 Speaker 1: will wait is our Bloom and Doom editor. Sorry, great title. 387 00:20:08,520 --> 00:20:10,600 Speaker 1: I'm really sorry about that. I'll put that in for 388 00:20:10,640 --> 00:20:17,000 Speaker 1: you business cards, well, like thunderstorms, will wait, though he 389 00:20:17,119 --> 00:20:20,800 Speaker 1: is power renewable Energy editor at Bloomberg News. Check out 390 00:20:20,800 --> 00:20:23,040 Speaker 1: this story the upcoming issue of Bloomberg Business Week magazine 391 00:20:23,080 --> 00:20:25,240 Speaker 1: online on the Bloomberg Until Weber, of course, editor of 392 00:20:25,280 --> 00:20:28,480 Speaker 1: Bloomberg Business Week, both in our Interactive workers studio. You 393 00:20:28,600 --> 00:20:34,000 Speaker 1: are listening to Bloomberg Radio. You're listening to Bloomberg Business 394 00:20:34,080 --> 00:20:37,920 Speaker 1: Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic 395 00:20:38,400 --> 00:20:41,040 Speaker 1: on Bloomberg Radio. We'll not sure if you've noticed, but 396 00:20:41,080 --> 00:20:43,680 Speaker 1: retail credit is having its worst months in this march 397 00:20:43,720 --> 00:20:46,520 Speaker 1: of stung by blow ups at the likes of Party 398 00:20:46,560 --> 00:20:49,600 Speaker 1: City and Carvona, and last week's bad Walmart and Target 399 00:20:49,600 --> 00:20:53,160 Speaker 1: News triggered an avalanche avalhanche in bonds from high street 400 00:20:53,240 --> 00:20:56,600 Speaker 1: names including Macy's, Michael's Bath and body Works, so many 401 00:20:56,680 --> 00:20:59,400 Speaker 1: best buy though a bit of an isolated ray of hope, 402 00:20:59,400 --> 00:21:01,000 Speaker 1: we see the stock up today as well. Well. I 403 00:21:01,000 --> 00:21:02,840 Speaker 1: want to start with the bad news first, okay, so 404 00:21:02,840 --> 00:21:05,200 Speaker 1: we'll start with Abercrombie and Fitch. We are joined out 405 00:21:05,200 --> 00:21:08,200 Speaker 1: by Jordan Holman. She's retail reporter for Bloomberg News. She's 406 00:21:08,200 --> 00:21:10,159 Speaker 1: also been spending a lot of time with Quicktake recently, 407 00:21:10,240 --> 00:21:12,320 Speaker 1: so it's been great to have her on our team 408 00:21:12,680 --> 00:21:15,600 Speaker 1: over between Quick Take here at Bloomberg. Jordan joining us 409 00:21:15,760 --> 00:21:18,800 Speaker 1: via zoom from our Atlanta bureau. So, so Jordan's Abercrombie 410 00:21:18,800 --> 00:21:21,840 Speaker 1: and Fitch shares are just cratering today. Um, Why did 411 00:21:21,840 --> 00:21:25,840 Speaker 1: investors not see this coming? So? Investors were kind of 412 00:21:26,040 --> 00:21:29,879 Speaker 1: caught off guard by the profitability issue that Abercrombie showed, 413 00:21:30,119 --> 00:21:33,000 Speaker 1: which to your guys point we saw last week with 414 00:21:33,080 --> 00:21:37,240 Speaker 1: Walmart and Target. But what Abercrombie was showing was its 415 00:21:37,280 --> 00:21:41,080 Speaker 1: global reach of supply chain issues are still an issue 416 00:21:41,119 --> 00:21:44,240 Speaker 1: for them. Um, and even though they were selling a lot, 417 00:21:44,400 --> 00:21:47,160 Speaker 1: they weren't able to pass on those costs to consumers 418 00:21:47,480 --> 00:21:50,240 Speaker 1: and switch it up as quickly as Wall Street would 419 00:21:50,240 --> 00:21:53,680 Speaker 1: have hoped. So it's not a case, Jordan, of demand, right, 420 00:21:53,720 --> 00:21:56,680 Speaker 1: Consumers want stuff, They just it's a case, it seems 421 00:21:56,680 --> 00:21:59,359 Speaker 1: like increasingly of many retailers who just can't meet that 422 00:21:59,480 --> 00:22:05,240 Speaker 1: demand or their higher costs are eating into their margins. Absolutely. 423 00:22:05,320 --> 00:22:08,399 Speaker 1: One stat that Abercrombie showed was that they had the 424 00:22:08,480 --> 00:22:12,320 Speaker 1: highest sales in North America since so in a decade, 425 00:22:12,400 --> 00:22:15,439 Speaker 1: just showing that that consumer demand is there. It is 426 00:22:15,480 --> 00:22:18,680 Speaker 1: just the higher costs for everything. A lot of the 427 00:22:18,760 --> 00:22:21,760 Speaker 1: items that Abercrombie is getting is coming from Vietnam, is 428 00:22:21,760 --> 00:22:25,639 Speaker 1: coming from overseas and even though they don't think the 429 00:22:25,840 --> 00:22:27,720 Speaker 1: supply chain issues that we saw at the end of 430 00:22:28,400 --> 00:22:32,000 Speaker 1: one will be as intents, there are still there. Jordan, 431 00:22:32,080 --> 00:22:35,720 Speaker 1: What what's the international picture look like for Abercrombie and Fitch. 432 00:22:35,720 --> 00:22:37,680 Speaker 1: What's it telling us not just about the U S consumer, 433 00:22:37,720 --> 00:22:41,120 Speaker 1: but the international buyer. So if you look at their 434 00:22:41,160 --> 00:22:45,320 Speaker 1: European market, you know they're operating in the UK, Germany, France. 435 00:22:45,720 --> 00:22:49,840 Speaker 1: Um that there is some pressure there because while consumers 436 00:22:50,119 --> 00:22:52,720 Speaker 1: are willing to suspend, it's the question on on what 437 00:22:53,480 --> 00:22:57,360 Speaker 1: So flatter cells are happening over in the in Europe 438 00:22:57,440 --> 00:23:01,440 Speaker 1: compared to North America, and then kind of they're facing 439 00:23:01,720 --> 00:23:05,440 Speaker 1: lockdown still, they're facing issues with even people being able 440 00:23:05,440 --> 00:23:07,399 Speaker 1: to go to the factories and work. So it's just 441 00:23:07,480 --> 00:23:10,800 Speaker 1: a lot of confusion and noise taking place over there, 442 00:23:10,800 --> 00:23:13,280 Speaker 1: and that's no way that retailers like to plan their 443 00:23:13,320 --> 00:23:16,120 Speaker 1: business though a lot of disruption still, So Best Buy, 444 00:23:16,280 --> 00:23:18,280 Speaker 1: let's walk through that this stock is actually app today. 445 00:23:18,359 --> 00:23:21,720 Speaker 1: The CEO talking about seeing elements of soft demand but 446 00:23:21,920 --> 00:23:26,040 Speaker 1: not a full inflation. Uh, talk about const inflation largely 447 00:23:26,080 --> 00:23:29,040 Speaker 1: in line with expectations. Um, what do you think we 448 00:23:29,080 --> 00:23:31,879 Speaker 1: need to know about that? Report. So Best Buy is 449 00:23:31,920 --> 00:23:35,280 Speaker 1: really interesting because they're in this um consumer electronics space, 450 00:23:35,720 --> 00:23:38,720 Speaker 1: so it is discretionary. It is something that people have 451 00:23:38,800 --> 00:23:41,280 Speaker 1: been buying a lot because we've been at home, we've 452 00:23:41,280 --> 00:23:44,520 Speaker 1: been looking at screen, so you're good TVs or um 453 00:23:44,680 --> 00:23:48,400 Speaker 1: laptops or phones, what have you. And so best Buy 454 00:23:48,680 --> 00:23:51,480 Speaker 1: they know that a shift is happening and what people 455 00:23:51,560 --> 00:23:54,280 Speaker 1: might want to start spending on, so they have prepared 456 00:23:54,320 --> 00:23:58,920 Speaker 1: for that. But it is another case of the magnitude 457 00:23:59,000 --> 00:24:01,040 Speaker 1: or the extent of how us they prepared or how 458 00:24:01,080 --> 00:24:05,199 Speaker 1: much they expected consumers to shift their spending habits. And 459 00:24:05,240 --> 00:24:07,760 Speaker 1: so that's the really important thing. What came up time 460 00:24:07,760 --> 00:24:11,159 Speaker 1: and time again on the earnings call that the executives 461 00:24:11,160 --> 00:24:14,159 Speaker 1: had with analysts where people asking about is the signs 462 00:24:14,320 --> 00:24:19,520 Speaker 1: of recession? How do people feel about the economy, and 463 00:24:19,800 --> 00:24:22,320 Speaker 1: the executives that they still feel strong about the consumer 464 00:24:22,359 --> 00:24:24,680 Speaker 1: demand that's out there is just a matter of how much. 465 00:24:25,040 --> 00:24:27,840 Speaker 1: So what's the difference. What's the difference here? Because you 466 00:24:27,880 --> 00:24:29,879 Speaker 1: know we're hearing from Bank of America CEO Brian moynihan, 467 00:24:29,960 --> 00:24:33,479 Speaker 1: he's he's positive on consumer spending. Company CEOs are positive 468 00:24:33,480 --> 00:24:35,760 Speaker 1: on consumer spending, at least from a retail perspective to 469 00:24:35,760 --> 00:24:37,840 Speaker 1: a certain extent. But then you have companies, you know, 470 00:24:37,880 --> 00:24:41,160 Speaker 1: freezing hiring or slowing hiring like Snap for example, Twitter 471 00:24:41,200 --> 00:24:43,600 Speaker 1: freezing hiring and rescinding offers. Jordan, help us make sense 472 00:24:43,600 --> 00:24:46,439 Speaker 1: of the different signals that we're getting. I think right 473 00:24:46,440 --> 00:24:48,520 Speaker 1: now what we're seeing as companies are trying to control 474 00:24:48,600 --> 00:24:52,720 Speaker 1: what they can control um in light of potential pain 475 00:24:52,840 --> 00:24:55,840 Speaker 1: that might come in the coming weeks or months. And 476 00:24:55,880 --> 00:24:57,800 Speaker 1: so when you do have a case like you know, 477 00:24:57,960 --> 00:25:00,840 Speaker 1: slowing down hiring that is trying to save on some 478 00:25:00,920 --> 00:25:03,960 Speaker 1: of your costs. Another important data points is like how 479 00:25:04,040 --> 00:25:08,680 Speaker 1: people feel about the economy despite what the actual data says. 480 00:25:08,720 --> 00:25:11,119 Speaker 1: And that's a really key point that retailers have to 481 00:25:11,160 --> 00:25:13,520 Speaker 1: look at in terms of do people want to spend 482 00:25:13,520 --> 00:25:15,399 Speaker 1: on big ticket items That kind of goes back to the 483 00:25:15,359 --> 00:25:18,040 Speaker 1: the best I. Do people feel confident that they can 484 00:25:18,080 --> 00:25:22,080 Speaker 1: afford that UM washing shane when they know they're paying 485 00:25:22,119 --> 00:25:24,520 Speaker 1: like a hundred dollars at the pump. So those are 486 00:25:24,760 --> 00:25:28,600 Speaker 1: really important signals that retailers looking for as they continue 487 00:25:28,640 --> 00:25:30,960 Speaker 1: to plan the rest of the year. Yeah, exactly. Or 488 00:25:31,000 --> 00:25:33,119 Speaker 1: if they're not buying those houses they don't need to 489 00:25:33,119 --> 00:25:36,040 Speaker 1: buy those washing machines to fill it. I want to 490 00:25:36,080 --> 00:25:38,760 Speaker 1: point out that the S and P supercomposite retailing industry 491 00:25:38,760 --> 00:25:42,359 Speaker 1: group is down about so far this year. Jordan Holman, 492 00:25:42,440 --> 00:25:44,479 Speaker 1: thank you so much. He follows retail for us here 493 00:25:44,520 --> 00:25:53,480 Speaker 1: at Bloomberg, joining us from Atlanta Bureau the Journal. Yeah, 494 00:25:53,480 --> 00:26:01,159 Speaker 1: but you let me drive, No, no, no, please, I 495 00:26:01,240 --> 00:26:09,920 Speaker 1: want to drive. It's a good question. Drive this drive 496 00:26:10,040 --> 00:26:16,119 Speaker 1: to the clothes on radio. All right, we have just 497 00:26:16,160 --> 00:26:18,560 Speaker 1: about ten minutes left in today's trading session. We've seen 498 00:26:18,600 --> 00:26:21,719 Speaker 1: a fair amount of volatility once again, we've seen some 499 00:26:21,800 --> 00:26:26,040 Speaker 1: investors moving into bonds on this Tuesday. I am so 500 00:26:26,080 --> 00:26:28,600 Speaker 1: glad that we are having Randy Watts back with us. 501 00:26:28,600 --> 00:26:30,800 Speaker 1: Perfect timing once again to have him on his chief 502 00:26:30,840 --> 00:26:35,480 Speaker 1: investment strategist at O'Neil Global Advisors. He understands things about fundamentals, 503 00:26:35,520 --> 00:26:39,320 Speaker 1: but he also intelligently explores the technicals. He's back with 504 00:26:39,400 --> 00:26:41,760 Speaker 1: us on the phone in Miami. Randy, nice to have 505 00:26:41,840 --> 00:26:44,720 Speaker 1: you here with Tim and myself. When you look at 506 00:26:44,720 --> 00:26:47,959 Speaker 1: this market environment, how do you see it? Especially as 507 00:26:47,960 --> 00:26:50,840 Speaker 1: we try to figure out are we nearing a bottom 508 00:26:50,840 --> 00:26:52,879 Speaker 1: when it comes to the equity trade? Are we topping 509 00:26:52,920 --> 00:26:56,399 Speaker 1: out when it comes to yields. Well. First off, thanks 510 00:26:56,400 --> 00:26:58,000 Speaker 1: for having me back. I hope you and Tim are 511 00:26:58,000 --> 00:27:02,440 Speaker 1: both well In terms of the market. Unfortunately, we don't 512 00:27:02,520 --> 00:27:05,680 Speaker 1: have the signs yet of the absolute low. One of 513 00:27:05,760 --> 00:27:08,320 Speaker 1: the things we study at William O'Neill is a thing 514 00:27:08,359 --> 00:27:11,240 Speaker 1: called follow through days. That's when the market goes up 515 00:27:11,280 --> 00:27:14,400 Speaker 1: a lot on a big spike in volume. No bull 516 00:27:14,480 --> 00:27:17,879 Speaker 1: market has started without a successful follow through day, but 517 00:27:18,040 --> 00:27:22,840 Speaker 1: sometimes they fail. Normally, when two of them fail, you 518 00:27:22,880 --> 00:27:25,919 Speaker 1: have a se chance you're in a bear market. We 519 00:27:26,040 --> 00:27:29,000 Speaker 1: just had the third one fail. And what I want 520 00:27:29,000 --> 00:27:31,480 Speaker 1: to tell your listeners is that in a normal extended 521 00:27:31,480 --> 00:27:35,400 Speaker 1: bear market, you'll have five or more failed follow through 522 00:27:35,480 --> 00:27:39,000 Speaker 1: days before the market turns, and the bear markets usually 523 00:27:39,080 --> 00:27:42,199 Speaker 1: last over four hundred days. We're about a hundred and 524 00:27:42,240 --> 00:27:45,960 Speaker 1: forty days into it, so we actually haven't seen the 525 00:27:46,040 --> 00:27:49,920 Speaker 1: signs yet that we're at the absolute bottom. I will 526 00:27:50,000 --> 00:27:52,359 Speaker 1: also say one things we look at is the percentage 527 00:27:52,359 --> 00:27:55,359 Speaker 1: of stocks in the New York Stock Exchange above their 528 00:27:55,400 --> 00:27:58,760 Speaker 1: thirty week moving average. Right now that number is just 529 00:27:58,920 --> 00:28:03,359 Speaker 1: below about twenty five. But at the low, and that 530 00:28:03,480 --> 00:28:06,359 Speaker 1: number was more like two, and the two thousand and 531 00:28:06,400 --> 00:28:09,440 Speaker 1: eighteen low was more like six. So I hate to 532 00:28:09,480 --> 00:28:11,960 Speaker 1: say it, but there's still downside at this market, so 533 00:28:12,000 --> 00:28:14,960 Speaker 1: we would continue to proceed with caution. The last thing 534 00:28:14,960 --> 00:28:17,840 Speaker 1: I'll say is that we are, however, overdue for a 535 00:28:17,880 --> 00:28:22,159 Speaker 1: bear market rally. Such a relic could be very, very sharp. 536 00:28:22,640 --> 00:28:24,840 Speaker 1: If the ASTEC just went back to its fifty day 537 00:28:24,880 --> 00:28:29,040 Speaker 1: would be a move. So, you know, you just gave 538 00:28:29,080 --> 00:28:31,120 Speaker 1: us a lot of info, a lot of technicals. Are 539 00:28:31,160 --> 00:28:33,400 Speaker 1: you looking at a year end target for the SP 540 00:28:34,119 --> 00:28:36,399 Speaker 1: or some sort of technical where we could see a 541 00:28:36,440 --> 00:28:39,120 Speaker 1: balance like that could be the bottom an actual number 542 00:28:39,120 --> 00:28:42,000 Speaker 1: on the SMP. There's a lot of support on the 543 00:28:42,120 --> 00:28:46,280 Speaker 1: SMP between thirty eight hundred and thirty eight fifty that 544 00:28:47,360 --> 00:28:50,320 Speaker 1: we are we are unfortunately today. If you if we 545 00:28:50,480 --> 00:28:52,640 Speaker 1: bust through that, then the next stop looks to be 546 00:28:52,680 --> 00:28:56,840 Speaker 1: around thirty five hundred, which is the top of a 547 00:28:56,960 --> 00:28:59,800 Speaker 1: cup and handle formation we formed back in November of 548 00:29:01,120 --> 00:29:04,680 Speaker 1: which was also when the market shifted from work from 549 00:29:04,760 --> 00:29:07,520 Speaker 1: home stocks too, started moving towards towards energy and the 550 00:29:07,560 --> 00:29:11,800 Speaker 1: cyclical reopening. Right now, unfortunately, commodities are still the leadership 551 00:29:11,840 --> 00:29:14,960 Speaker 1: in this market. You know, there's so many different We 552 00:29:15,040 --> 00:29:19,440 Speaker 1: talked about this perfect storm going on whether it's geopolitical impact, 553 00:29:20,080 --> 00:29:24,840 Speaker 1: you know, supply chains out there, higher rates, um, There's 554 00:29:24,880 --> 00:29:27,760 Speaker 1: just so much stuff going on, And I do wonder, Randy, 555 00:29:27,760 --> 00:29:29,240 Speaker 1: when you look at this market environment, is it just 556 00:29:29,360 --> 00:29:32,200 Speaker 1: a case of we need to think about getting back 557 00:29:32,240 --> 00:29:35,040 Speaker 1: to where we were pre pandemic. That things are so 558 00:29:35,360 --> 00:29:39,400 Speaker 1: distorted right now because of unprecedented stimulus and so many 559 00:29:39,440 --> 00:29:42,719 Speaker 1: other different factors, that that's how we need to think 560 00:29:42,760 --> 00:29:45,480 Speaker 1: about it. What is what is organic growth right that 561 00:29:45,680 --> 00:29:50,880 Speaker 1: isn't impacted by a lot of external factors, unusual external factors. 562 00:29:52,000 --> 00:29:54,760 Speaker 1: So a couple of things to unpack. Their first is 563 00:29:54,840 --> 00:29:58,920 Speaker 1: earnings estimates just started to turn negative, so they really 564 00:29:59,000 --> 00:30:01,400 Speaker 1: just started to go down down at the end of April. 565 00:30:01,760 --> 00:30:06,240 Speaker 1: Right now, the markets the analysts are using two. I 566 00:30:06,240 --> 00:30:08,560 Speaker 1: would be very surprised if that's the number the SMP 567 00:30:08,760 --> 00:30:13,120 Speaker 1: prints and they're using to three. So I think both 568 00:30:13,200 --> 00:30:16,440 Speaker 1: of these numbers have to come down. Second, we're in 569 00:30:16,520 --> 00:30:19,880 Speaker 1: a new inflation and interst rate regime. I think there's 570 00:30:20,000 --> 00:30:23,440 Speaker 1: a distinct possibility the FED could be done tightening by 571 00:30:23,520 --> 00:30:25,920 Speaker 1: the end of this calendar year, and that could set 572 00:30:26,040 --> 00:30:29,840 Speaker 1: up for a very powerful bull move next year. But 573 00:30:29,960 --> 00:30:32,360 Speaker 1: in the short run, right Now, when you look ahead 574 00:30:32,400 --> 00:30:34,680 Speaker 1: to like let's say June and the f o MC 575 00:30:34,880 --> 00:30:38,120 Speaker 1: meeting on the fourteenth and fifteenth, the markets pricing in 576 00:30:38,160 --> 00:30:42,000 Speaker 1: a chance of a fifty basis point increase and a 577 00:30:42,800 --> 00:30:45,720 Speaker 1: chance of a seventy five basis point increase. So I 578 00:30:45,800 --> 00:30:48,240 Speaker 1: think it's still so I think the market it's going 579 00:30:48,280 --> 00:30:50,000 Speaker 1: to be tough for the market to have an extended 580 00:30:50,080 --> 00:30:52,800 Speaker 1: bull move while we still have a lot of rate 581 00:30:52,840 --> 00:30:56,680 Speaker 1: increases ahead of us. I think it's unlikely that the 582 00:30:56,720 --> 00:30:59,000 Speaker 1: Fed funds is going to get to where people initially 583 00:30:59,080 --> 00:31:01,360 Speaker 1: thought at the beginning this cycle, the market was looking 584 00:31:01,400 --> 00:31:03,760 Speaker 1: for three to three and a half percent type Fed 585 00:31:03,840 --> 00:31:06,520 Speaker 1: funds number. I think it's unlikely we're going to get there, 586 00:31:06,880 --> 00:31:08,560 Speaker 1: but it's still probably gonna go to two to two 587 00:31:08,560 --> 00:31:11,560 Speaker 1: and a half percent again. To repeat, I think that 588 00:31:11,800 --> 00:31:13,800 Speaker 1: I think the Fed could be done tightening the year, 589 00:31:14,320 --> 00:31:16,120 Speaker 1: but they're not going to be done tightening over the 590 00:31:16,200 --> 00:31:18,560 Speaker 1: next couple of months, and that's going to remain a 591 00:31:18,760 --> 00:31:21,840 Speaker 1: major headwind for equities. Do you think we actually move 592 00:31:21,920 --> 00:31:24,000 Speaker 1: into I know you're a market guy, but I do 593 00:31:24,120 --> 00:31:26,720 Speaker 1: wonder if you think about in terms of macro h 594 00:31:26,840 --> 00:31:31,880 Speaker 1: conditions that stagflation is likely I think there's a distinct 595 00:31:31,960 --> 00:31:35,920 Speaker 1: chance we're already in a recession. You know, obviously, last 596 00:31:36,000 --> 00:31:39,640 Speaker 1: quarter the economy shrink. The recession is defined as two 597 00:31:39,960 --> 00:31:44,120 Speaker 1: consecutive quarters of shrinking g d P, so I think 598 00:31:44,200 --> 00:31:47,000 Speaker 1: that's a real risk. I think the number everyone's going 599 00:31:47,040 --> 00:31:49,760 Speaker 1: to fixate on is watching jobs, and if jobs stay strong, 600 00:31:50,160 --> 00:31:52,560 Speaker 1: I would point out housing, which is just under twenty 601 00:31:52,680 --> 00:31:55,840 Speaker 1: percent of the economy, is starting to really soften. I 602 00:31:55,920 --> 00:31:59,360 Speaker 1: think home sales were down in April, so I think 603 00:31:59,360 --> 00:32:02,000 Speaker 1: there's a lot of activity out there. I don't want 604 00:32:02,000 --> 00:32:05,200 Speaker 1: to sound too negative. This too shall eventually pass, but 605 00:32:05,280 --> 00:32:07,280 Speaker 1: I think in the short run, the next few months, 606 00:32:07,320 --> 00:32:11,120 Speaker 1: investors should stay cautious. We could have a very very 607 00:32:11,240 --> 00:32:14,720 Speaker 1: sharp bear market rally. Rallies are sharper in bear markets 608 00:32:14,760 --> 00:32:17,120 Speaker 1: than they are in bull markets, but I still think 609 00:32:17,240 --> 00:32:19,080 Speaker 1: you need to be cautious until you've seemed like the 610 00:32:19,200 --> 00:32:22,280 Speaker 1: FED is starting to stabilize its heightening policy and that 611 00:32:22,400 --> 00:32:26,280 Speaker 1: the economy is still okay. Randy, do you see the 612 00:32:26,440 --> 00:32:31,680 Speaker 1: FED able to do a soft landing here? I think 613 00:32:31,720 --> 00:32:34,800 Speaker 1: it's going to be very very hard. I hope they can. 614 00:32:35,560 --> 00:32:37,800 Speaker 1: I think the key thing that they're gonna they're gonna 615 00:32:37,800 --> 00:32:41,200 Speaker 1: focus on personally is probably jobs. Um, I do think 616 00:32:41,240 --> 00:32:43,479 Speaker 1: the job picture is likely to soften because I think 617 00:32:43,520 --> 00:32:46,280 Speaker 1: consumer spending as we moved through the next few months 618 00:32:46,520 --> 00:32:51,120 Speaker 1: is going to soften because of inflation and housing prices, etcetera. 619 00:32:51,680 --> 00:32:53,400 Speaker 1: So I am I'm very I want to be very clear, 620 00:32:53,440 --> 00:32:56,200 Speaker 1: I'm very, very nervous about the economy right now. And 621 00:32:56,280 --> 00:32:57,719 Speaker 1: I don't think the FED is at the point yet 622 00:32:57,760 --> 00:33:00,160 Speaker 1: where they can stop raising rates. I think have a 623 00:33:00,200 --> 00:33:02,400 Speaker 1: few more at least a few more months of tightening 624 00:33:02,800 --> 00:33:05,960 Speaker 1: before they're going to be in that situation. And so well, 625 00:33:06,000 --> 00:33:07,920 Speaker 1: I think we could have a bounce here. I think 626 00:33:07,960 --> 00:33:10,200 Speaker 1: we haven't made the final low for this cycle, all right, 627 00:33:10,280 --> 00:33:13,479 Speaker 1: just got about twenty seconds here. Um, you you're nervous. 628 00:33:13,560 --> 00:33:15,640 Speaker 1: You said that. Does it feel though, to some extent 629 00:33:15,840 --> 00:33:18,480 Speaker 1: orderly and it makes sense based on kind of the 630 00:33:18,560 --> 00:33:21,160 Speaker 1: moves that we've seen, the rapid run up that we've 631 00:33:21,200 --> 00:33:23,960 Speaker 1: seen in a lot of asset classes. Yeah, that's a 632 00:33:24,000 --> 00:33:27,200 Speaker 1: great question. It does seem ortally so far, but unfortunately, 633 00:33:27,320 --> 00:33:31,080 Speaker 1: normally bear markets and something that's not orderly sort of 634 00:33:31,320 --> 00:33:34,360 Speaker 1: a panic bottom and a big spike down. I don't 635 00:33:34,400 --> 00:33:36,600 Speaker 1: think we're quite there yet. I don't think we've had that. 636 00:33:37,080 --> 00:33:40,600 Speaker 1: It has been orderly. Only the NAS deck is above. 637 00:33:41,000 --> 00:33:45,280 Speaker 1: It's it's a the smp I was feeling this point, 638 00:33:45,320 --> 00:33:46,480 Speaker 1: have to get a little bit worse till we see 639 00:33:46,480 --> 00:33:49,960 Speaker 1: the final bottom, all right. Always love checking in with you, Randy. 640 00:33:50,040 --> 00:33:52,920 Speaker 1: Thank you so much, Randy Watts's chief investment strategists at 641 00:33:52,920 --> 00:33:56,360 Speaker 1: O'Neil Global Advisors, talking us through the technicals on the 642 00:33:56,440 --> 00:34:00,520 Speaker 1: phone in Miami. Thanks for listening to Bloombergus this week. 643 00:34:00,640 --> 00:34:04,040 Speaker 1: Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, 644 00:34:04,240 --> 00:34:05,880 Speaker 1: and you can also listen to our radio show at 645 00:34:05,920 --> 00:34:08,440 Speaker 1: two pm Eastern on Bloomberg Radio, or watch us on 646 00:34:08,520 --> 00:34:10,560 Speaker 1: YouTube search Bloomberg Global News