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Speaker 1: Search Bloomberg Global News Snap, which is still down about
Speaker 1: so staying near its lows, plummeting like a rock last
Speaker 1: night after it came out with its latest update. It
Speaker 1: is down below its ip O price, cutting its revenue
Speaker 1: and profit forecast. And then, of course you know that
Speaker 1: news tim Affecting the social media space. Yeah, we're seeing
Speaker 1: shares of Google parent alphabet lower. We're seeing Facebook, also
Speaker 1: known as meta platforms, take a hit today as well.
Speaker 1: Man deep Seeing, a senior tech industry analysts for Bloomberg Intelligence,
Speaker 1: Man Deepest with us in the Bloomberg Interactive Broker studio Mandy,
Speaker 1: how we're investors caught so off guard by this, and
Speaker 1: we should note that, uh, only in the last month
Speaker 1: or so after Snap reported earnings for its most recent quarter,
Speaker 1: it came out with a revision to its outlook. Yeah,
Speaker 1: and look, I think what has happened is because of
Speaker 1: the macro slow down expectations really kind of, I mean
Speaker 1: they're tied to inflation, right, So that is what is
Speaker 1: driving this, uh pullback and ad spending. And everyone had
Speaker 1: that perception that digital ad spending is more resilient that
Speaker 1: you know, and if we go into a recession, digital
Speaker 1: ad spending will hold. Well, that's definitely not the case.
Speaker 1: And what we're finding is advertising digital ad spending is
Speaker 1: as cyclical as it used to be, and so nothing
Speaker 1: has changed this time is not different when it comes
Speaker 1: to digital ad spending being tied to you know, macroeconomic growth.
Speaker 1: And clearly advertisers are pulling back more so on the
Speaker 1: retail side. So in terms of numbers, retail ad spending
Speaker 1: is about one third of the overall four billion dollar market,
Speaker 1: and it looks like this pull back is more tied
Speaker 1: to retailers pulling back on their ad spend. The e
Speaker 1: commerce guys where there was a pull forward during the pandemic,
Speaker 1: they're the ones who are pulling back more. I mean,
Speaker 1: you don't have to be, you know, living under a
Speaker 1: rock to to understand what's happening with retail right now.
Speaker 1: Carol in the most recent earnings, Well, I agree with that,
Speaker 1: but I guess what I'm saying, what I think about
Speaker 1: is I look at the chart and I go back
Speaker 1: to like pre pandemic early, end of early. We're kind
Speaker 1: of back to those levels. So to me, that shark,
Speaker 1: that bump, that mountain that it climbed, was that the
Speaker 1: aberration because of the pandemic, and folks were just getting
Speaker 1: back to normal times for for a name like Snap
Speaker 1: and others. Yes, So the multiple expansion that we saw
Speaker 1: during the pandemic, you know, all the e commerce companies
Speaker 1: really going to meta and app chat to find new customers.
Speaker 1: That was what drove the multiple expansion. Now we are
Speaker 1: at a point where advertisers feel like they have overspent
Speaker 1: and now that their sales are declining, they're pulling back
Speaker 1: very aggressively. So they're not like, think of are they
Speaker 1: pulling back to kind of pre pandemic levels. So that's
Speaker 1: more now. So this is like, if I'm an advertiser
Speaker 1: who's spending million dollars on sales and marketing, am I
Speaker 1: going to pull back on Google Search spend? Probably not.
Speaker 1: That's the last one I'm going to cut back on.
Speaker 1: But I can't pull pull back on Meta and Snapchat
Speaker 1: and Pinterest because these were the platforms that paid off
Speaker 1: during the pandemic. But I'm not so sure about the
Speaker 1: r o I. So it's really about what is discretionary
Speaker 1: here versus what is essential? And Google Search, to me,
Speaker 1: is still essential for every advertiser. Is it hard for
Speaker 1: you to imagine snap being worth less today than it's
Speaker 1: worth when it went public? All So again it goes
Speaker 1: back to the multiple expansion versus you know, multiples really
Speaker 1: coming down. And this feels like a little bit of
Speaker 1: overreaction given Snapchat still has three million daily active users,
Speaker 1: the engagement trends are still holding up. But the problem
Speaker 1: for snap is it has been around ten years and
Speaker 1: it's not going to grow fifty anymore. So it's more
Speaker 1: of growth and investors don't pay a premium for you know,
Speaker 1: low growth companies, and in the case of snap It,
Speaker 1: it's not like ebit dumb margins of it's barely but
Speaker 1: not positive. So the profitabilities in their growth is tapering off,
Speaker 1: and suddenly like Google, Search or Alphabet seems like a
Speaker 1: better asset to invest in at these valuation is compared
Speaker 1: to you know, some of the other names. Is It
Speaker 1: also a reminder that in terms of digital advertising that
Speaker 1: there's just so much in terms of the size of
Speaker 1: the pool. And you and like you said, are you
Speaker 1: going to give you know, cut back on Google, No,
Speaker 1: because right here you're gonna win probably with that strategy.
Speaker 1: So you're gonna pick and choose, and maybe some of
Speaker 1: these smaller players are no longer going to get a
Speaker 1: share of that pie, which is a limited pie, right yes,
Speaker 1: And now you have Amazon as well, So earlier it
Speaker 1: used to be a duopoly Alphabet and Meta. Now you've
Speaker 1: got Amazon, which is pretty sizeable thirty thirty five billion,
Speaker 1: growing at very healthy fort So if the overall ad
Speaker 1: spending is growing let's say ten percent, and it's not
Speaker 1: going to grow ten percent this year because last year
Speaker 1: it grew thirty percent and we had a pull forward,
Speaker 1: it's pretty obvious now. So if it's growing, you know,
Speaker 1: high single digit, a lot of those incremental dollars are
Speaker 1: going to Google and Facebook because they are proven platforms
Speaker 1: when it comes to our o I on out spending.
Speaker 1: The other ones are not as proven, and I think
Speaker 1: that's what is happening. Snaps woes hitting Pinterests really hard today. Man,
Speaker 1: Deep it's down twenty it's having its worst day ever
Speaker 1: as a publicly traded company, trading at levels last scene
Speaker 1: in April May thirty seconds. Give us your take on
Speaker 1: this hitting pinterest same thing? You know, Smaller digital ad
Speaker 1: venders will have a very tough time if Twitter wasn't
Speaker 1: taken private or it wasn't put the same same kind
Speaker 1: of a day in terms of stock market. So I
Speaker 1: I think the long tale of digital advengers. They will
Speaker 1: have a very tough time navigating this environment. But the
Speaker 1: ones that keep the engagement intact will come out, you know,
Speaker 1: much better out of this downturn. I know Bloomberg Intelligence
Speaker 1: doesn't give stock targets, you don't make recommendations, But does
Speaker 1: it make more sense Snap as a twenty one billion
Speaker 1: dollar market cap company or maybe a little bit above
Speaker 1: this and just kind about fifteen seconds? Yeah, Well, look,
Speaker 1: I think engagement is key. Social media is a very
Speaker 1: tough space. It is all about user growth and engagement.
Speaker 1: If and if Snap keeps the engagement it has competition
Speaker 1: from TikTok and roadblocks, they will do well. Alright, always
Speaker 1: smart Mandep saying he's senior tech industry analyst Bloomberg Intelligence.
Speaker 1: Here in our studio, this is Bloomberg. You're listening to
Speaker 1: Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes
Speaker 1: Tim Stinovic on Bloomberg Radio. So among our most right
Speaker 1: on the Bloomberg Today. It's about how more Americans are
Speaker 1: quitting their jobs than ever in the United States, and
Speaker 1: fewer are sticking around in their new positions. Molly Smith
Speaker 1: is economics editor for Bloomberg News. She joins us via
Speaker 1: the phone from New York City. Molly, job jumpers. How
Speaker 1: do you define a job jumper? So we worked on
Speaker 1: the story in tandem with Lincoln and some of the
Speaker 1: data they were able to compile based on profile changes
Speaker 1: in one and the data set and goes back to
Speaker 1: So what they found is of workers who took a
Speaker 1: new job last year, the share who had been in
Speaker 1: their prior job for less than twelve months rose by
Speaker 1: six and a half percent compared to and that's the
Speaker 1: highest it's been since Lincoln started tracking the data in
Speaker 1: So what that's telling us is that people are in
Speaker 1: their jobs for less amount of time and there and
Speaker 1: the amount of them who are in a job for
Speaker 1: that shorter tenure is growing. Why is it happening? Molly?
Speaker 1: So there? I mean the right now, job opportunities are
Speaker 1: just so immense. For um. You know that they have
Speaker 1: grown so much during the pandemic recovery, with the advent
Speaker 1: of remote work, with people's wages growing up, especially if
Speaker 1: you're changing locations, um, and that people have just really
Speaker 1: redefined their relationship with work. So there are a lot
Speaker 1: of opportunities right there that people right now are trying
Speaker 1: to take advantage of and looking at how work plays
Speaker 1: a role in their lives. So is this something that continues?
Speaker 1: What is how is Lincoln thinking about this? How our
Speaker 1: employers thinking about this? In terms of attracting and retaining talent?
Speaker 1: If people are jumping around, then that's expensive. It is,
Speaker 1: And based on some of our own economist data at Bloomberg,
Speaker 1: there are signs to show that it's maybe flowing at
Speaker 1: least if you're looking at this by wages, which of
Speaker 1: course money is a huge factor for why people decide
Speaker 1: to leave their jobs. Uh So, right now, it looks
Speaker 1: like wage increases maybe leveling off based on a few
Speaker 1: different economic indicators, and also by some of the small
Speaker 1: business indicators we track as well. The National Federation of
Speaker 1: Independent Business UM has been has some metrics that point
Speaker 1: to this leveling off as well. So you could start
Speaker 1: to see some of the job jumping slowing now that
Speaker 1: wage increases might be leveling off. Well, that's what I
Speaker 1: wanted to ask you, because how much of this is
Speaker 1: just you know, how many times throughout my career people
Speaker 1: are like, you want to make more money, you get
Speaker 1: jumped somewhere else, like you know, and sometimes that's true,
Speaker 1: sometimes that's not true, um, But how much of the
Speaker 1: job jumping that's going on is driven by wanting to
Speaker 1: make more even though you know, Molly, there's so many
Speaker 1: different surveys out there that's saying it's not just about
Speaker 1: money why people are are are taking jobs are moving
Speaker 1: around of course, and you know, based on LinkedIn data alone,
Speaker 1: that's not really something we can disturn and we can
Speaker 1: only just based on this data that just see that
Speaker 1: the number of people who are in a job for
Speaker 1: less than a year is growing. Uh So, based on that,
Speaker 1: and based on the fact that quits are very high
Speaker 1: and layoffs are very low, the only thing we can
Speaker 1: really infer with good confidence is that these moves are voluntary,
Speaker 1: as then people are not being let go from their jobs. Um.
Speaker 1: But as far as the motivation for leaving, um, I mean,
Speaker 1: I would definitely say that pay continues to be a
Speaker 1: big reason. But of the people who I spoke to
Speaker 1: for their story, regret was also just a part of it,
Speaker 1: and that not getting a great sense of the workplace
Speaker 1: there in especially if you're interviewing for a job remotely
Speaker 1: and then only to arrive and realize that, like, maybe
Speaker 1: you made a mistake. Was that the theme that that
Speaker 1: sort of tied together the people you spoke to who
Speaker 1: regretted making the jump, that they didn't get a good
Speaker 1: idea of what they were in for because perhaps they
Speaker 1: interviewed remotely, or they only got to know people remotely
Speaker 1: before they started their job. Yeah, and I think as well.
Speaker 1: I mean, some of it too is that there's such
Speaker 1: demand for challenge right now. The way that these interview
Speaker 1: problems are going is on such a tighter timeline. I mean,
Speaker 1: you can really make these switch its happen a lot faster.
Speaker 1: So that could also perhaps me that maybe you're not
Speaker 1: talking to as many people as you normally would before
Speaker 1: taking a new job that you're only meeting with perhaps
Speaker 1: to select few managers or teammates um before you sign
Speaker 1: that offer letters. So that could also perhaps um be
Speaker 1: part of the equation here. You gotta say, Molly, a
Speaker 1: very cool data set that you guys worked on with LinkedIn,
Speaker 1: because I think this is one of the big questions
Speaker 1: Tim and I talked about it. There's so many different
Speaker 1: stories the financial community of people saying Yep, everybody's going
Speaker 1: to come back to the office, and then Credit Sweets
Speaker 1: CEO saying, now we're going to see a lot more
Speaker 1: people working from home. And it's just one of those things,
Speaker 1: right Tim, that it's we won't know until a few
Speaker 1: years after. We won't know maybe in a year AGW.
Speaker 1: I've said this repeatedly. I think it had so much
Speaker 1: us to do with the tight labor market that we're
Speaker 1: in right now, and if we start to see slack there,
Speaker 1: then employees are calling the shots rather than employers, right
Speaker 1: it changes dramatics. We actually had a related story on
Speaker 1: this also out today's UM from some other data that
Speaker 1: UM from our Future of Work crew that we were
Speaker 1: able to track down that you know, a lot of
Speaker 1: the people who are very hell bent on getting workers
Speaker 1: back in the office claim that it's been for connectivity.
Speaker 1: But back to the workers who are coming into the
Speaker 1: ones who came connected of all, Yeah, ask me right,
Speaker 1: or ask us, ask us we were workers. I should say, Hey,
Speaker 1: Molly Smith, thank you so much. Molly is Economic editor
Speaker 1: at Bloomberg News. This is Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well,
Speaker 1: remember yesterday we talked about the Bloomberg Big Take and
Speaker 1: how the global energy shortage sets the stage for hot
Speaker 1: and deadly summer. Well, we kind of have part two
Speaker 1: of this we do. Joining us now is Will Wade,
Speaker 1: Power and Renewable Energy editor for Bloomberg News. Will's with
Speaker 1: us in the Bloomberg Interactive Broker Studio. He's got a
Speaker 1: piece in the upcoming issue of Business Week magazine, but
Speaker 1: you can read it now on the Bloomberg terminal and
Speaker 1: at Bloomberg dot com slash a Business Week. It's about
Speaker 1: us consumers facing a summer of pain when it comes
Speaker 1: to the power bill. This is heat and gas surge. Well,
Speaker 1: I read a story like, well, I want to start
Speaker 1: by just you giving us the numbers. How how how
Speaker 1: ugly is it going to get for Americans out there
Speaker 1: this summer as they crank the A C. Oh really ugly. Oh.
Speaker 1: The number we're using now is your utility bill this
Speaker 1: summer could be about the year ago. But the thing
Speaker 1: is that's based on natural gas prices, and that's assuming
Speaker 1: gases at eight bucks, and right now it's almost nine bucks.
Speaker 1: So that means the utility bill could be even higher
Speaker 1: than and that was already high. I'm gonna become my father.
Speaker 1: I can just see this like the air conditioner turn off,
Speaker 1: the lights go up in the pool kind of thing
Speaker 1: like cool offesomehow if you have a pool? I'm coming over. No,
Speaker 1: I don't write now. So here's the here's the crazy thing.
Speaker 1: I wrote a story just like this in March, based
Speaker 1: on January numbers, and that story basically said the same thing, Hey,
Speaker 1: your utility bill is gonna be really high because of
Speaker 1: natural gas prices and passing through the consumer, and people
Speaker 1: are upset about it. Then and the number then, was
Speaker 1: that prices are gonna be like higher. I'm just doing
Speaker 1: the same story because the same things are happening, all right, Joel.
Speaker 1: Remember Joe Weber's here, editor of Bloomberg business Week magazine.
Speaker 1: Remember when we had just so much nat gas It
Speaker 1: was just so cheap and everybody a year ago, yeah,
Speaker 1: three bucks a year ago. It's almost nine bucks now.
Speaker 1: Who made money on that trade? By the way, gas traders? Traders? Yeah,
Speaker 1: So where are we going to be? Come like fall
Speaker 1: could be close to nine, could be close to nine
Speaker 1: through much of the next year, according to the forward
Speaker 1: curve I was looking at. But the thing is gas
Speaker 1: was between like two and three bucks from one. It
Speaker 1: is just spiked since last summer. So are the supplies there? Is?
Speaker 1: It just crazy crazy demand. It's kind of a combination
Speaker 1: of the two. And it really goes back to COVID
Speaker 1: because the first thing that happened in COVID was electricity
Speaker 1: con assumption went down because everybody started saying home, so
Speaker 1: the gas producers cut back on production. And then last
Speaker 1: summer everybody came out of their houses, and all the
Speaker 1: factories and all cis started going back into work, and
Speaker 1: electricity demands started shooting up, but there wasn't enough gas
Speaker 1: and coal too, So now we've got a shortage of fuel. Well,
Speaker 1: how do how do we get here? Just? I mean
Speaker 1: generations ago? Well, what are the policy decisions that have
Speaker 1: been made where we're not really m yeah, I'm just
Speaker 1: thinking about you know it, We're have availability of solar
Speaker 1: right now. Nuclear plants are just essentially gone because there
Speaker 1: was you know, widespread outrage about those. Uh, I mean,
Speaker 1: how do we get out of this mess? Well, it's
Speaker 1: interesting you mentioned nuclear. That's like one of the next
Speaker 1: big stories we're working on is whether or not nuclear
Speaker 1: is going to be important to carry us out of this.
Speaker 1: There's a big debate about that right now. Um. In
Speaker 1: terms of policy, people right now are pressing for more
Speaker 1: fossil fuel production. They say we need this right now,
Speaker 1: And it's true, we really do need this electricity right now.
Speaker 1: But thinking about fossil fuels is the way to save
Speaker 1: us is really short term thinking. Well, and I feel
Speaker 1: like that's part of the discussion comeing out of Davos
Speaker 1: right now in terms of we can't give up on
Speaker 1: our climate change metrics. Um, it's just too to devastating
Speaker 1: if we do so. Consumers are just basically gonna have
Speaker 1: to grin and bear it. Right, there's no way out
Speaker 1: of this. If you want your A C, You're gonna
Speaker 1: have to pay for it. Everybody knows that companies are
Speaker 1: thrilled at the extra money that's coming in. Well, the
Speaker 1: first part of yes, consumers is gonna can't wait for
Speaker 1: the early storms of November already. Right, Well, consumers do
Speaker 1: have to grin and bear it. They don't really have
Speaker 1: a whole lot of choice. The way the utility bill
Speaker 1: system is designed is the cost of that fuel just
Speaker 1: passes straight through the consumers. But they get mad at
Speaker 1: their utilities that you know, that's who the bill comes from.
Speaker 1: But it's not really the utilities fault. So I'm just
Speaker 1: gonna guess something's gonna break this summer. It's gonna be
Speaker 1: a grid somewhere. There's gonna be a brown out something,
Speaker 1: and then d C is gonna be like how did
Speaker 1: we ever get here? Right, and like, what's gonna what's
Speaker 1: gonna change? After a brutal summer, people might get more
Speaker 1: said about it. We might see some outrage in the elections.
Speaker 1: Did you see the hurricane forecast that came out this morning?
Speaker 1: And talked about it did our seventh straight year of
Speaker 1: more hurricanes than normal. Yeah, so I mean like layer
Speaker 1: and I mean we keep talking about whether it's the
Speaker 1: food crisis, whether it's i mean just pick its supply chains,
Speaker 1: it's you know, geopolitical, there's just this like perfect storm
Speaker 1: that continues to impact our world. No pun intended. Well,
Speaker 1: it's it's the it's the right phrase. Everything seems to
Speaker 1: be close to the breaking point. Well, as you point
Speaker 1: out this story, well this hits lower income Americans disproportionately
Speaker 1: because a larger portion of their income goes to costs
Speaker 1: such as these. They don't have as much discretionary income.
Speaker 1: And as you write, you could stop driving places if
Speaker 1: there's demand destruction there. But if it's over a hundred
Speaker 1: degrees somewhere and you know you need to cool where
Speaker 1: you live, that your conditioner is going to stay on. Absolutely,
Speaker 1: that's a safety issue. And that is that's another impact
Speaker 1: of climate change, because we've got these heat waves that
Speaker 1: used to bring things up to nine degrees and people
Speaker 1: to go, oh this is really hot. Now it's a
Speaker 1: hundred and ten degrees and people die. Yeah, it's pretty remarkable.
Speaker 1: My brother lives in Seattle and he had never used
Speaker 1: None of the houses in Seattle have air conditioner and
Speaker 1: he just got installed. They know they do now, Yeah,
Speaker 1: they're all getting them installed right now because they need
Speaker 1: it from Oregon. And like last summer, you know, the
Speaker 1: heat dum hit and if you didn't have a c
Speaker 1: you did, you know, or you hope you did early on.
Speaker 1: And it's lethal. I mean, this is scary stuff, Like
Speaker 1: it's truly. Uh, it hurt your wallet and you know
Speaker 1: it it is you know, can can kill you. But
Speaker 1: the the interesting thing that I think here too is like,
Speaker 1: well we were we wrote a story, uh a couple
Speaker 1: of months ago now about how Europe was going to
Speaker 1: feel the pain, and it was like, oh, it's their problem,
Speaker 1: you know, their system, so screwy. Uh, they didn't have
Speaker 1: the foresight. And here we are and it's you know,
Speaker 1: the boomerang effect and and it's going to happen in
Speaker 1: America right Like, so is there any are there any
Speaker 1: lessons to be learned from from Europe that apply over
Speaker 1: here from that experience. Europe's in a really tight spot
Speaker 1: these days. They've got their own electricity shortages, partly because
Speaker 1: of whether or not they're going to continue getting fuel
Speaker 1: from Russia. France for some reason, has a lot of
Speaker 1: nuclear power plants that are suddenly offline this spring, and
Speaker 1: they're facing electricity shortages too. That's why we're shipping so
Speaker 1: much gas over there, which is just another reason why
Speaker 1: we have less gas here and the price of gas
Speaker 1: goes up. Is that likely to change? Is they're gonna
Speaker 1: be political pressure potentially? I mean we just we see
Speaker 1: it with India with food, you know, right doing export controls.
Speaker 1: Could we see that here? Not likely. I've been seeing
Speaker 1: both sides of that debate. Don't ship the gas over
Speaker 1: there because we need it. But if we don't ship
Speaker 1: the gas over there, then they're going to have more
Speaker 1: electricity shortages, and our friends and allies will be unhappy
Speaker 1: with us, and we don't like that. Remember when we
Speaker 1: didn't export anything, like you know, like those days last year.
Speaker 1: Sorry what we were calling. We're thinking about this, like
Speaker 1: will wait is our Bloom and Doom editor. Sorry, great title.
Speaker 1: I'm really sorry about that. I'll put that in for
Speaker 1: you business cards, well, like thunderstorms, will wait, though he
Speaker 1: is power renewable Energy editor at Bloomberg News. Check out
Speaker 1: this story the upcoming issue of Bloomberg Business Week magazine
Speaker 1: online on the Bloomberg Until Weber, of course, editor of
Speaker 1: Bloomberg Business Week, both in our Interactive workers studio. You
Speaker 1: are listening to Bloomberg Radio. You're listening to Bloomberg Business
Speaker 1: Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic
Speaker 1: on Bloomberg Radio. We'll not sure if you've noticed, but
Speaker 1: retail credit is having its worst months in this march
Speaker 1: of stung by blow ups at the likes of Party
Speaker 1: City and Carvona, and last week's bad Walmart and Target
Speaker 1: News triggered an avalanche avalhanche in bonds from high street
Speaker 1: names including Macy's, Michael's Bath and body Works, so many
Speaker 1: best buy though a bit of an isolated ray of hope,
Speaker 1: we see the stock up today as well. Well. I
Speaker 1: want to start with the bad news first, okay, so
Speaker 1: we'll start with Abercrombie and Fitch. We are joined out
Speaker 1: by Jordan Holman. She's retail reporter for Bloomberg News. She's
Speaker 1: also been spending a lot of time with Quicktake recently,
Speaker 1: so it's been great to have her on our team
Speaker 1: over between Quick Take here at Bloomberg. Jordan joining us
Speaker 1: via zoom from our Atlanta bureau. So, so Jordan's Abercrombie
Speaker 1: and Fitch shares are just cratering today. Um, Why did
Speaker 1: investors not see this coming? So? Investors were kind of
Speaker 1: caught off guard by the profitability issue that Abercrombie showed,
Speaker 1: which to your guys point we saw last week with
Speaker 1: Walmart and Target. But what Abercrombie was showing was its
Speaker 1: global reach of supply chain issues are still an issue
Speaker 1: for them. Um, and even though they were selling a lot,
Speaker 1: they weren't able to pass on those costs to consumers
Speaker 1: and switch it up as quickly as Wall Street would
Speaker 1: have hoped. So it's not a case, Jordan, of demand, right,
Speaker 1: Consumers want stuff, They just it's a case, it seems
Speaker 1: like increasingly of many retailers who just can't meet that
Speaker 1: demand or their higher costs are eating into their margins. Absolutely.
Speaker 1: One stat that Abercrombie showed was that they had the
Speaker 1: highest sales in North America since so in a decade,
Speaker 1: just showing that that consumer demand is there. It is
Speaker 1: just the higher costs for everything. A lot of the
Speaker 1: items that Abercrombie is getting is coming from Vietnam, is
Speaker 1: coming from overseas and even though they don't think the
Speaker 1: supply chain issues that we saw at the end of
Speaker 1: one will be as intents, there are still there. Jordan,
Speaker 1: What what's the international picture look like for Abercrombie and Fitch.
Speaker 1: What's it telling us not just about the U S consumer,
Speaker 1: but the international buyer. So if you look at their
Speaker 1: European market, you know they're operating in the UK, Germany, France.
Speaker 1: Um that there is some pressure there because while consumers
Speaker 1: are willing to suspend, it's the question on on what
Speaker 1: So flatter cells are happening over in the in Europe
Speaker 1: compared to North America, and then kind of they're facing
Speaker 1: lockdown still, they're facing issues with even people being able
Speaker 1: to go to the factories and work. So it's just
Speaker 1: a lot of confusion and noise taking place over there,
Speaker 1: and that's no way that retailers like to plan their
Speaker 1: business though a lot of disruption still, So Best Buy,
Speaker 1: let's walk through that this stock is actually app today.
Speaker 1: The CEO talking about seeing elements of soft demand but
Speaker 1: not a full inflation. Uh, talk about const inflation largely
Speaker 1: in line with expectations. Um, what do you think we
Speaker 1: need to know about that? Report. So Best Buy is
Speaker 1: really interesting because they're in this um consumer electronics space,
Speaker 1: so it is discretionary. It is something that people have
Speaker 1: been buying a lot because we've been at home, we've
Speaker 1: been looking at screen, so you're good TVs or um
Speaker 1: laptops or phones, what have you. And so best Buy
Speaker 1: they know that a shift is happening and what people
Speaker 1: might want to start spending on, so they have prepared
Speaker 1: for that. But it is another case of the magnitude
Speaker 1: or the extent of how us they prepared or how
Speaker 1: much they expected consumers to shift their spending habits. And
Speaker 1: so that's the really important thing. What came up time
Speaker 1: and time again on the earnings call that the executives
Speaker 1: had with analysts where people asking about is the signs
Speaker 1: of recession? How do people feel about the economy, and
Speaker 1: the executives that they still feel strong about the consumer
Speaker 1: demand that's out there is just a matter of how much.
Speaker 1: So what's the difference. What's the difference here? Because you
Speaker 1: know we're hearing from Bank of America CEO Brian moynihan,
Speaker 1: he's he's positive on consumer spending. Company CEOs are positive
Speaker 1: on consumer spending, at least from a retail perspective to
Speaker 1: a certain extent. But then you have companies, you know,
Speaker 1: freezing hiring or slowing hiring like Snap for example, Twitter
Speaker 1: freezing hiring and rescinding offers. Jordan, help us make sense
Speaker 1: of the different signals that we're getting. I think right
Speaker 1: now what we're seeing as companies are trying to control
Speaker 1: what they can control um in light of potential pain
Speaker 1: that might come in the coming weeks or months. And
Speaker 1: so when you do have a case like you know,
Speaker 1: slowing down hiring that is trying to save on some
Speaker 1: of your costs. Another important data points is like how
Speaker 1: people feel about the economy despite what the actual data says.
Speaker 1: And that's a really key point that retailers have to
Speaker 1: look at in terms of do people want to spend
Speaker 1: on big ticket items That kind of goes back to the
Speaker 1: the best I. Do people feel confident that they can
Speaker 1: afford that UM washing shane when they know they're paying
Speaker 1: like a hundred dollars at the pump. So those are
Speaker 1: really important signals that retailers looking for as they continue
Speaker 1: to plan the rest of the year. Yeah, exactly. Or
Speaker 1: if they're not buying those houses they don't need to
Speaker 1: buy those washing machines to fill it. I want to
Speaker 1: point out that the S and P supercomposite retailing industry
Speaker 1: group is down about so far this year. Jordan Holman,
Speaker 1: thank you so much. He follows retail for us here
Speaker 1: at Bloomberg, joining us from Atlanta Bureau the Journal. Yeah,
Speaker 1: but you let me drive, No, no, no, please, I
Speaker 1: want to drive. It's a good question. Drive this drive
Speaker 1: to the clothes on radio. All right, we have just
Speaker 1: about ten minutes left in today's trading session. We've seen
Speaker 1: a fair amount of volatility once again, we've seen some
Speaker 1: investors moving into bonds on this Tuesday. I am so
Speaker 1: glad that we are having Randy Watts back with us.
Speaker 1: Perfect timing once again to have him on his chief
Speaker 1: investment strategist at O'Neil Global Advisors. He understands things about fundamentals,
Speaker 1: but he also intelligently explores the technicals. He's back with
Speaker 1: us on the phone in Miami. Randy, nice to have
Speaker 1: you here with Tim and myself. When you look at
Speaker 1: this market environment, how do you see it? Especially as
Speaker 1: we try to figure out are we nearing a bottom
Speaker 1: when it comes to the equity trade? Are we topping
Speaker 1: out when it comes to yields. Well. First off, thanks
Speaker 1: for having me back. I hope you and Tim are
Speaker 1: both well In terms of the market. Unfortunately, we don't
Speaker 1: have the signs yet of the absolute low. One of
Speaker 1: the things we study at William O'Neill is a thing
Speaker 1: called follow through days. That's when the market goes up
Speaker 1: a lot on a big spike in volume. No bull
Speaker 1: market has started without a successful follow through day, but
Speaker 1: sometimes they fail. Normally, when two of them fail, you
Speaker 1: have a se chance you're in a bear market. We
Speaker 1: just had the third one fail. And what I want
Speaker 1: to tell your listeners is that in a normal extended
Speaker 1: bear market, you'll have five or more failed follow through
Speaker 1: days before the market turns, and the bear markets usually
Speaker 1: last over four hundred days. We're about a hundred and
Speaker 1: forty days into it, so we actually haven't seen the
Speaker 1: signs yet that we're at the absolute bottom. I will
Speaker 1: also say one things we look at is the percentage
Speaker 1: of stocks in the New York Stock Exchange above their
Speaker 1: thirty week moving average. Right now that number is just
Speaker 1: below about twenty five. But at the low, and that
Speaker 1: number was more like two, and the two thousand and
Speaker 1: eighteen low was more like six. So I hate to
Speaker 1: say it, but there's still downside at this market, so
Speaker 1: we would continue to proceed with caution. The last thing
Speaker 1: I'll say is that we are, however, overdue for a
Speaker 1: bear market rally. Such a relic could be very, very sharp.
Speaker 1: If the ASTEC just went back to its fifty day
Speaker 1: would be a move. So, you know, you just gave
Speaker 1: us a lot of info, a lot of technicals. Are
Speaker 1: you looking at a year end target for the SP
Speaker 1: or some sort of technical where we could see a
Speaker 1: balance like that could be the bottom an actual number
Speaker 1: on the SMP. There's a lot of support on the
Speaker 1: SMP between thirty eight hundred and thirty eight fifty that
Speaker 1: we are we are unfortunately today. If you if we
Speaker 1: bust through that, then the next stop looks to be
Speaker 1: around thirty five hundred, which is the top of a
Speaker 1: cup and handle formation we formed back in November of
Speaker 1: which was also when the market shifted from work from
Speaker 1: home stocks too, started moving towards towards energy and the
Speaker 1: cyclical reopening. Right now, unfortunately, commodities are still the leadership
Speaker 1: in this market. You know, there's so many different We
Speaker 1: talked about this perfect storm going on whether it's geopolitical impact,
Speaker 1: you know, supply chains out there, higher rates, um, There's
Speaker 1: just so much stuff going on, And I do wonder, Randy,
Speaker 1: when you look at this market environment, is it just
Speaker 1: a case of we need to think about getting back
Speaker 1: to where we were pre pandemic. That things are so
Speaker 1: distorted right now because of unprecedented stimulus and so many
Speaker 1: other different factors, that that's how we need to think
Speaker 1: about it. What is what is organic growth right that
Speaker 1: isn't impacted by a lot of external factors, unusual external factors.
Speaker 1: So a couple of things to unpack. Their first is
Speaker 1: earnings estimates just started to turn negative, so they really
Speaker 1: just started to go down down at the end of April.
Speaker 1: Right now, the markets the analysts are using two. I
Speaker 1: would be very surprised if that's the number the SMP
Speaker 1: prints and they're using to three. So I think both
Speaker 1: of these numbers have to come down. Second, we're in
Speaker 1: a new inflation and interst rate regime. I think there's
Speaker 1: a distinct possibility the FED could be done tightening by
Speaker 1: the end of this calendar year, and that could set
Speaker 1: up for a very powerful bull move next year. But
Speaker 1: in the short run, right Now, when you look ahead
Speaker 1: to like let's say June and the f o MC
Speaker 1: meeting on the fourteenth and fifteenth, the markets pricing in
Speaker 1: a chance of a fifty basis point increase and a
Speaker 1: chance of a seventy five basis point increase. So I
Speaker 1: think it's still so I think the market it's going
Speaker 1: to be tough for the market to have an extended
Speaker 1: bull move while we still have a lot of rate
Speaker 1: increases ahead of us. I think it's unlikely that the
Speaker 1: Fed funds is going to get to where people initially
Speaker 1: thought at the beginning this cycle, the market was looking
Speaker 1: for three to three and a half percent type Fed
Speaker 1: funds number. I think it's unlikely we're going to get there,
Speaker 1: but it's still probably gonna go to two to two
Speaker 1: and a half percent again. To repeat, I think that
Speaker 1: I think the Fed could be done tightening the year,
Speaker 1: but they're not going to be done tightening over the
Speaker 1: next couple of months, and that's going to remain a
Speaker 1: major headwind for equities. Do you think we actually move
Speaker 1: into I know you're a market guy, but I do
Speaker 1: wonder if you think about in terms of macro h
Speaker 1: conditions that stagflation is likely I think there's a distinct
Speaker 1: chance we're already in a recession. You know, obviously, last
Speaker 1: quarter the economy shrink. The recession is defined as two
Speaker 1: consecutive quarters of shrinking g d P, so I think
Speaker 1: that's a real risk. I think the number everyone's going
Speaker 1: to fixate on is watching jobs, and if jobs stay strong,
Speaker 1: I would point out housing, which is just under twenty
Speaker 1: percent of the economy, is starting to really soften. I
Speaker 1: think home sales were down in April, so I think
Speaker 1: there's a lot of activity out there. I don't want
Speaker 1: to sound too negative. This too shall eventually pass, but
Speaker 1: I think in the short run, the next few months,
Speaker 1: investors should stay cautious. We could have a very very
Speaker 1: sharp bear market rally. Rallies are sharper in bear markets
Speaker 1: than they are in bull markets, but I still think
Speaker 1: you need to be cautious until you've seemed like the
Speaker 1: FED is starting to stabilize its heightening policy and that
Speaker 1: the economy is still okay. Randy, do you see the
Speaker 1: FED able to do a soft landing here? I think
Speaker 1: it's going to be very very hard. I hope they can.
Speaker 1: I think the key thing that they're gonna they're gonna
Speaker 1: focus on personally is probably jobs. Um, I do think
Speaker 1: the job picture is likely to soften because I think
Speaker 1: consumer spending as we moved through the next few months
Speaker 1: is going to soften because of inflation and housing prices, etcetera.
Speaker 1: So I am I'm very I want to be very clear,
Speaker 1: I'm very, very nervous about the economy right now. And
Speaker 1: I don't think the FED is at the point yet
Speaker 1: where they can stop raising rates. I think have a
Speaker 1: few more at least a few more months of tightening
Speaker 1: before they're going to be in that situation. And so well,
Speaker 1: I think we could have a bounce here. I think
Speaker 1: we haven't made the final low for this cycle, all right,
Speaker 1: just got about twenty seconds here. Um, you you're nervous.
Speaker 1: You said that. Does it feel though, to some extent
Speaker 1: orderly and it makes sense based on kind of the
Speaker 1: moves that we've seen, the rapid run up that we've
Speaker 1: seen in a lot of asset classes. Yeah, that's a
Speaker 1: great question. It does seem ortally so far, but unfortunately,
Speaker 1: normally bear markets and something that's not orderly sort of
Speaker 1: a panic bottom and a big spike down. I don't
Speaker 1: think we're quite there yet. I don't think we've had that.
Speaker 1: It has been orderly. Only the NAS deck is above.
Speaker 1: It's it's a the smp I was feeling this point,
Speaker 1: have to get a little bit worse till we see
Speaker 1: the final bottom, all right. Always love checking in with you, Randy.
Speaker 1: Thank you so much, Randy Watts's chief investment strategists at
Speaker 1: O'Neil Global Advisors, talking us through the technicals on the
Speaker 1: phone in Miami. Thanks for listening to Bloombergus this week.
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