WEBVTT - Debt Ceiling, Markets, Retail, and Diamonds (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:05.200 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:14.400 and Bloomberg experts, along with essential market moving news. Find 0:00:14.400 --> 0:00:17.439 the Bloomberg Markets Podcast called Apple Podcasts or wherever you 0:00:17.520 --> 0:00:20.480 listen to podcasts, and at Bloomberg dot com Slash podcast. 0:00:21.520 --> 0:00:25.600 We got those sticky inflation numbers this morning. I ran, 0:00:25.640 --> 0:00:27.720 I want to start with you because the treasury trade 0:00:27.800 --> 0:00:29.479 is what we're looking at most when it comes to 0:00:29.480 --> 0:00:32.519 the debt ceiling impact. Talk to me about how that's 0:00:32.600 --> 0:00:34.640 looking today as we head into this long weekend. 0:00:35.880 --> 0:00:39.720 Yeah, so, you know, everyone is very hopeful that there's 0:00:39.800 --> 0:00:41.959 going to be a some kind of deal. So you've 0:00:41.960 --> 0:00:43.920 seen a little bit of a pullback in some of 0:00:43.960 --> 0:00:46.640 the some of the t bills that had been trading, 0:00:47.040 --> 0:00:52.280 you know, amazingly cheap to to other areas of the market, 0:00:52.479 --> 0:00:54.560 and they still are right. So there still is this 0:00:55.080 --> 0:00:57.560 risk priced into the market at the moment. I don't 0:00:57.560 --> 0:00:59.959 think that that's going to change until we actually see 0:01:00.120 --> 0:01:03.480 a deal. You know, risk managers and money market mutual 0:01:03.520 --> 0:01:06.360 funds are just going to avoid these tea bills that 0:01:06.360 --> 0:01:09.840 that potentially could have delayed payments because those investors just 0:01:09.920 --> 0:01:12.360 need to have the daily liquidity and certainty that they're 0:01:12.360 --> 0:01:15.000 going to get their money when it's promised, and if 0:01:15.120 --> 0:01:17.560 if they don't, they're just going to avoid those. But 0:01:17.560 --> 0:01:19.480 but then there's others, you know, there's other investors that 0:01:19.480 --> 0:01:22.040 are speaking to are like, well, I'm okay if there's 0:01:22.040 --> 0:01:25.200 a one or two day delayed payment, so I'll maybe 0:01:25.240 --> 0:01:27.480 buy some of that instead of holding it in other 0:01:27.600 --> 0:01:31.360 instruments that that are similar, like a bank account, for example, 0:01:31.360 --> 0:01:33.760 which yields, you know, way less than what a what 0:01:33.800 --> 0:01:36.080 a one week T bill is currently yielding. 0:01:37.040 --> 0:01:40.120 And a hotbunt in here because I were just described 0:01:40.200 --> 0:01:42.520 kind of the the bond trade there, talk to us 0:01:42.520 --> 0:01:45.679 a little bit about what the US economy, the US 0:01:45.720 --> 0:01:50.040 budget actually does look like if this deal does come through. 0:01:51.320 --> 0:01:55.200 Right, So, the basic the deal looks like, the biggest 0:01:55.240 --> 0:01:58.240 piece is the two year spending cap, and that will 0:01:58.360 --> 0:02:02.080 basically be the element of that entire deal in terms 0:02:02.120 --> 0:02:06.720 of its impact on the economy. I think that you know, 0:02:06.760 --> 0:02:08.880 if it's a two year cap, then it means that 0:02:09.440 --> 0:02:13.840 likely that the hit next year from the spending cap 0:02:13.880 --> 0:02:18.080 would be about you know, taking away two underd k 0:02:19.080 --> 0:02:23.079 of Josh relative to baseline. It's not a significant amount, right, 0:02:23.720 --> 0:02:27.720 it's it's probably you know, it won't amount to too 0:02:27.800 --> 0:02:32.760 much impact. But once they do lift the cap in 0:02:32.919 --> 0:02:38.360 twenty twenty five, it will also generate some kind of recovery, 0:02:38.600 --> 0:02:41.960 mild recovery. So yeah, it's just a it's not a 0:02:42.080 --> 0:02:46.760 very big spending consolidation, so I would say, yeah, just 0:02:47.320 --> 0:02:48.000 not that big. 0:02:48.880 --> 0:02:51.000 All right, Well, we do have our Michael McKee in 0:02:51.120 --> 0:02:53.560 studio now. Would never be joining us on the phone 0:02:53.639 --> 0:02:56.680 on a big inflation day like this one, Mike, how 0:02:56.960 --> 0:02:58.640 bad is the pc. 0:02:58.760 --> 0:02:59.760 News for the Fed? 0:03:03.040 --> 0:03:06.000 If you assume that their goal is to get interest 0:03:06.080 --> 0:03:11.480 rates lower and the economy come in reasonably strong, that 0:03:11.560 --> 0:03:13.440 it's not good news because you're going to probably have 0:03:13.480 --> 0:03:16.320 to raise rates higher. That's the kind of the story 0:03:16.320 --> 0:03:18.280 that inflation is telling us at this point. Now, we'll 0:03:18.280 --> 0:03:21.920 get another CPI right before they're meeting on June fourteenth. 0:03:21.960 --> 0:03:25.600 But the economy looks very strong. Consumer spending very strong 0:03:25.720 --> 0:03:29.520 in the month of April, and business spending. The Durbal 0:03:29.560 --> 0:03:33.840 goods orders were relatively strong, So you got a combination 0:03:34.000 --> 0:03:39.160 of a strong economy and prices not going down, maybe 0:03:39.200 --> 0:03:42.600 in part because businesses are taking advantage of the strong economy, 0:03:42.960 --> 0:03:44.880 and it just tells the fact that what they have 0:03:45.000 --> 0:03:48.000 done so far to put restraint in place hasn't worked. 0:03:48.200 --> 0:03:51.240 The argument is that maybe it takes a while for 0:03:51.320 --> 0:03:54.400 the cumulative effect to start to have an impact, but 0:03:55.160 --> 0:03:58.120 right now it looks like the people who think they 0:03:58.160 --> 0:04:00.760 need to do more may carry the day. 0:04:01.320 --> 0:04:04.760 Well, McKee, we spoke this morning, and one of the 0:04:04.880 --> 0:04:06.720 kind of concerns that I had was, Look, if you're 0:04:06.720 --> 0:04:10.200 capping fiscal spending for two years in theory, shouldn't that 0:04:10.240 --> 0:04:12.880 mean that the government spending kind of tail went to 0:04:12.920 --> 0:04:16.120 the economy is capped as well, And isn't that a 0:04:16.160 --> 0:04:16.960 reason for concern? 0:04:17.160 --> 0:04:17.880 Tell me why I'm. 0:04:17.800 --> 0:04:22.200 Wrong, Because they're not really cutting spending. This is the 0:04:22.240 --> 0:04:26.200 standard Washington game where you move money around and sort 0:04:26.200 --> 0:04:29.120 of shuffle where the pot comes from and where it 0:04:29.160 --> 0:04:31.560 goes to. But it doesn't really change the amount that 0:04:31.600 --> 0:04:33.680 the government is going to spend. You're going to put 0:04:33.880 --> 0:04:37.200 spending caps on non defense discretionary spending, which is the 0:04:37.279 --> 0:04:42.040 smallest part of the budget, the entitlement programs Medicare and 0:04:42.200 --> 0:04:45.039 Social Security. They'll keep spending at the same rate that 0:04:45.320 --> 0:04:49.040 they are because they're exempted, they have their own formulas 0:04:49.080 --> 0:04:51.919 for how much they go up. And defense spending, according 0:04:52.000 --> 0:04:54.359 to what we have seen reported about the deal, is 0:04:54.680 --> 0:04:58.599 going to go up three percent as it was planned to. 0:04:59.320 --> 0:05:03.239 So the amount of money that they're talking about cutting back, 0:05:03.279 --> 0:05:06.839 they're really cutting back the increase in what was going 0:05:06.880 --> 0:05:09.839 to be spent, rather than actually spending less. 0:05:10.560 --> 0:05:12.080 Now, you know what's interesting about that, if I could 0:05:12.120 --> 0:05:13.600 jump in here a little bit, is that when they 0:05:13.600 --> 0:05:17.360 did something similar to this with sequestration back in twenty eleven, 0:05:17.880 --> 0:05:21.440 it did have the effect of limiting budget deficits, right, 0:05:21.520 --> 0:05:24.679 just because you wound up having growth be somewhat bigger 0:05:25.080 --> 0:05:28.599 and higher than government spending increases. And I think that 0:05:28.720 --> 0:05:30.960 in a way, that's the that's kind of the Goldilock 0:05:31.040 --> 0:05:34.279 scenario here for budgetary hawks, right, people who want to 0:05:34.279 --> 0:05:37.920 make sure that the debt doesn't continue to increase at 0:05:38.279 --> 0:05:40.520 such a rapid pace. But making it, you know, a 0:05:40.520 --> 0:05:44.080 two year deal also limits some of that some of 0:05:44.120 --> 0:05:48.159 the inks that might occur around some of those you know, 0:05:48.200 --> 0:05:51.560 bigger chunks of the pie. But like Mike said, things like, 0:05:51.800 --> 0:05:54.120 you know, it's social Security spending for example. That's one 0:05:54.160 --> 0:05:57.080 of the big things that is really driving some of 0:05:57.120 --> 0:06:00.320 the debt limit aks that we have right now. Right, So, 0:06:00.360 --> 0:06:02.640 there was some news yesterday that the Treasury Department is 0:06:02.640 --> 0:06:06.000 going to be issuing net debt of sixty four billion 0:06:06.040 --> 0:06:09.240 dollars that that matures next Thursday, and everyone's like, well, 0:06:09.400 --> 0:06:11.800 how are they issuing net debt of sixty sixty four 0:06:12.400 --> 0:06:15.200 billion dollars? Well, one of the ways is because sixty 0:06:15.240 --> 0:06:17.800 billion dollars of non marketable debt is coming out of 0:06:17.800 --> 0:06:21.240 the Social Security Trust Fund to pay effectively to pay 0:06:21.240 --> 0:06:25.480 the social security payments that are due that day. So 0:06:25.839 --> 0:06:27.920 that debt is going down. But at the same time, 0:06:27.920 --> 0:06:29.920 the government doesn't have any cash in order to pay. 0:06:30.000 --> 0:06:33.000 So that's why the public debt has to be increased. 0:06:33.040 --> 0:06:36.839 So it's not that the government has more you know, 0:06:36.880 --> 0:06:39.920 a bigger pot of extraordinary measures to use. It just 0:06:40.240 --> 0:06:42.279 you know, basically taking from one hand giving to the other. 0:06:42.480 --> 0:06:44.360 But that gets bigger and bigger as time goes on. 0:06:44.560 --> 0:06:48.000 So to Mike's point, deficits are still going to be positive, right, 0:06:48.000 --> 0:06:49.920 You're still you're still not going to have a balanced budget, 0:06:51.200 --> 0:06:53.400 you know, but it does slow the growth of the 0:06:54.040 --> 0:06:55.160 of the debt over time. 0:06:55.320 --> 0:06:57.840 There is a problem that we haven't really focused on 0:06:58.279 --> 0:07:01.880 coming up that I reckon comment done because right now 0:07:01.920 --> 0:07:04.320 the Treasury has forty nine and a half billion. It 0:07:04.360 --> 0:07:07.200 will have much less next week. But suppose we get 0:07:07.200 --> 0:07:11.120 a deal, Treasury needs to build up his cast reserves 0:07:11.160 --> 0:07:15.080 normally wants about five hundred billion in there. So according 0:07:15.160 --> 0:07:18.080 to the Treasury at their last three funding announcement, they 0:07:18.120 --> 0:07:21.640 said they anticipated having five hundred and fifty billion in 0:07:21.720 --> 0:07:24.360 their account by the end of June. And as we 0:07:24.520 --> 0:07:27.400 just noted, forty nine and a half of is all 0:07:27.440 --> 0:07:30.480 that's there? So IRA, who's going to buy all that stuff? 0:07:30.520 --> 0:07:31.800 And what is it going to cost? 0:07:32.120 --> 0:07:35.200 Well, there's a couple of pieces to that. Actually, Number 0:07:35.200 --> 0:07:38.560 one is it probably you know that five hundred and 0:07:38.600 --> 0:07:40.480 fifty number assumed that the debt limit was going to 0:07:40.520 --> 0:07:42.680 be raised when they had, you know, several hundred billion 0:07:42.720 --> 0:07:48.360 dollars in cash already in the Treasury General account. So 0:07:48.440 --> 0:07:50.520 one is I think demand will be pretty decent for 0:07:51.400 --> 0:07:53.920 four bills at this point. You know, money funds and 0:07:54.360 --> 0:07:57.960 ultra short ultra short money wants to kind of lock 0:07:58.040 --> 0:08:00.480 in these higher rates now in the anticipate patient that 0:08:00.520 --> 0:08:02.400 maybe in the future the feder Reserve is going to 0:08:02.440 --> 0:08:04.680 ease interest rates, so there will be some of that. 0:08:04.760 --> 0:08:08.480 Number one and number two, there will have to be 0:08:08.520 --> 0:08:11.400 about five hundred million dollars in issues very very quickly, 0:08:11.760 --> 0:08:14.800 and probably two hundred billion almost right away. And I think, 0:08:14.840 --> 0:08:17.200 given where yields are right now, for some of that paper, 0:08:17.240 --> 0:08:20.240 it'll be pretty well received. There'll be plenty. There is 0:08:20.280 --> 0:08:22.840 an issue about what happened to the Fed's balance sheet, 0:08:22.920 --> 0:08:26.600 because the reserve balances are likely to go down and 0:08:26.640 --> 0:08:29.000 go down quickly, and we know that from September of 0:08:29.040 --> 0:08:33.240 twenty nineteen. What can happen if reserves really go down 0:08:33.400 --> 0:08:35.760 and the plumbing in the financial sector ends up being 0:08:35.760 --> 0:08:38.160 a little bit squishy, It'll be really interesting to see 0:08:38.160 --> 0:08:39.720 what happens in the repo market at that point. 0:08:39.920 --> 0:08:42.360 Yeah, certainly a lot dies. And I gotta say, we 0:08:42.360 --> 0:08:43.800 got to get Nana Wong's take on this. We're going 0:08:43.800 --> 0:08:46.560 to bring her back shortly. Bloomberg Economics is Anna Wong, 0:08:46.840 --> 0:08:49.720 Iour Jersey actuallyf us interest rate strategies, our Bloomberg Intelligence, 0:08:49.840 --> 0:08:53.360 of course, our star player, Mike McKee, Bloomberg International Economics 0:08:53.400 --> 0:08:54.200 and Policy correspondent. 0:08:54.280 --> 0:08:56.960 We thank you as always interesting stuff. 0:08:57.200 --> 0:08:59.839 Markets in the green folks, stick with us. 0:09:01.240 --> 0:09:05.600 You're listening to the Team ken'sline program Bloomberg Markets weekdays 0:09:05.600 --> 0:09:09.040 at ten am Eastern on Bloomberg dot Com, the iHeartRadio 0:09:09.080 --> 0:09:11.880 app and the Bloomberg Business App, or listen on demand 0:09:11.880 --> 0:09:13.480 wherever you get your podcasts. 0:09:15.720 --> 0:09:19.600 Maddie, A lot to digest here in terms of Federal Reserve, 0:09:19.679 --> 0:09:23.600 the debt ceiling, these markets. But I think at the 0:09:23.679 --> 0:09:26.280 end of the day, it's really all about do we 0:09:26.440 --> 0:09:28.960 or do we not hit a recession by the end 0:09:28.960 --> 0:09:29.280 of the year. 0:09:29.320 --> 0:09:31.280 Who better to bring in and to. 0:09:31.320 --> 0:09:34.439 Talk about this is Philip colmar Am I saving that right, 0:09:34.520 --> 0:09:37.439 Cort colmar It is managing partner and global strategist over 0:09:37.480 --> 0:09:40.760 at MRB Partners. Philip for somethingk you for joining us 0:09:40.760 --> 0:09:43.040 in the Studiosmini was here. He'd give you a gold star. 0:09:44.120 --> 0:09:45.680 Talk to us about these recession onds. 0:09:46.240 --> 0:09:49.720 Yeah, the marketplace too high of an expectations towards recession, 0:09:50.160 --> 0:09:54.480 particularly following the SVV or banking system strains. More generally, 0:09:55.000 --> 0:09:56.880 you know, our view, as has said, a recession is 0:09:56.920 --> 0:10:00.720 not likely over certainly throughout this year and probably over 0:10:00.760 --> 0:10:02.920 the next year. And the reason is, and I think 0:10:02.960 --> 0:10:05.120 we're seeing it today in the data is the US 0:10:05.160 --> 0:10:07.800 consumer is in a lot stronger shape than people give. 0:10:07.640 --> 0:10:08.280 It credits for. 0:10:08.720 --> 0:10:11.319 It's spent ten or fifteen years de leveraging, has healthy 0:10:11.360 --> 0:10:15.280 balance sheets, has low debt burdens, and a tremendous amount 0:10:15.280 --> 0:10:17.600 of cash transferred to it, but thanks to fiscal policy 0:10:17.679 --> 0:10:21.000 during the pandemic, so it hasn't needed to tap into 0:10:21.000 --> 0:10:23.120 credit to do It makes the US consumer a lot 0:10:23.200 --> 0:10:26.040 less interest rate sensitive because the consumption is such an 0:10:26.040 --> 0:10:28.160 important part something like seventy percent of GDP. It makes 0:10:28.160 --> 0:10:30.920 the overall economy less interest rate sensitive. And I think 0:10:30.920 --> 0:10:34.240 people have just chronically underestimated where that breaking point is 0:10:34.280 --> 0:10:37.160 of interest rates or total cost of capital, whether that 0:10:37.200 --> 0:10:40.240 be FED policy or bond yields. Before we tip into recession. 0:10:40.200 --> 0:10:42.920 Did any of the retail earnings that we got change 0:10:42.920 --> 0:10:44.920 your picture on the consumer? I know it was a 0:10:44.960 --> 0:10:48.160 little bit muddied, but a Walmart, for example, seemed pretty 0:10:48.200 --> 0:10:51.120 clear that the US consumers struggling. They're moving to those 0:10:51.160 --> 0:10:55.160 lower margin food purchases because they just can't afford much else. 0:10:55.880 --> 0:10:58.800 Yeah, I think you see some downshifting we saw in 0:10:58.800 --> 0:11:00.959 the retail sales data in the past, as well, we've 0:11:00.960 --> 0:11:03.280 seen a little bit affirming as a less print, but 0:11:04.120 --> 0:11:06.720 we have seen some softening down in the consumer. Now, 0:11:06.720 --> 0:11:09.280 we'd expect that coming off of sort of an economic 0:11:09.360 --> 0:11:12.040 boom almost that we had. There's been a big down 0:11:12.080 --> 0:11:16.240 shift in terms of economic activity from really boom like 0:11:16.400 --> 0:11:19.640 dynamics fueled by fiscal and monetary policy, and so in 0:11:19.679 --> 0:11:22.920 that boom, there's there's space for weakness. There's been higher inflation, 0:11:23.040 --> 0:11:25.400 and all the wages are there. It's only now that 0:11:25.559 --> 0:11:27.679 it's starting to turn into real wage growth, so there 0:11:27.679 --> 0:11:29.199 was a bit of a bite. I think that that's 0:11:29.200 --> 0:11:31.160 going to work for the consumer heading forward as inflation 0:11:31.240 --> 0:11:32.760 moderates a bit, I don't. I think it's going to 0:11:32.800 --> 0:11:35.320 stay a lot stickier as we saw today. Then certainly 0:11:35.360 --> 0:11:37.600 the FED hopes and investors have been predicting, so watch 0:11:37.640 --> 0:11:39.840 it for that bond market. But I do think the 0:11:39.840 --> 0:11:44.440 consumer will ultimately be resilient ultimately, if even if downshifting here. 0:11:45.000 --> 0:11:47.600 But do recessions happen kind of in a vacuum. It's 0:11:47.600 --> 0:11:50.720 not the slow grind lower, it's a it's a very 0:11:50.800 --> 0:11:54.680 sudden drop essentially. So if you're seeing a resilient consumer, 0:11:54.720 --> 0:11:57.120 that doesn't necessarily mean that there isn't a sudden drop 0:11:57.480 --> 0:11:59.880 in the near or distant future. 0:12:00.400 --> 0:12:01.960 What would be kind of the canary and the coal 0:12:02.000 --> 0:12:02.480 mine for you. 0:12:02.760 --> 0:12:05.440 Yeah, so whenever you're normalizing interest rates or the cost 0:12:05.440 --> 0:12:07.400 of capital is rising, you're going to blow up things. 0:12:07.400 --> 0:12:10.200 That's just natural. So the difference between this cycle and say, 0:12:10.360 --> 0:12:12.000 you know, the two thousand and eight cycle, is that 0:12:12.040 --> 0:12:14.360 household sector gives you a really strong anchor to the 0:12:14.360 --> 0:12:17.080 global economy or US and your area economy and there 0:12:17.120 --> 0:12:19.720 for the global economy because they're so resilient. So that 0:12:19.760 --> 0:12:22.920 makes the challenge of tipping us into recession harder. That 0:12:22.960 --> 0:12:24.960 being said, when you lift up interest rates, you do 0:12:25.000 --> 0:12:27.760 things like cause banking system strains, you take out some 0:12:27.920 --> 0:12:31.280 zero yielding assets, You'll hit the private investment space and 0:12:31.280 --> 0:12:32.920 those kind of things, and they can have ripple effects 0:12:32.920 --> 0:12:34.599 through it. So it's these kind of weak links that 0:12:34.640 --> 0:12:37.040 we monitor closely to see when you build up what 0:12:37.080 --> 0:12:39.680 we call critical contagion to tip it over. People had 0:12:39.920 --> 0:12:43.319 rightfully feared some elements of that with the banking system strains. 0:12:43.360 --> 0:12:45.920 The problem was is the magnitude just wasn't anywhere on 0:12:45.920 --> 0:12:48.400 compared to the you know, on size of the GFC. 0:12:48.720 --> 0:12:50.680 It was a much smaller issue this time around, but 0:12:50.720 --> 0:12:52.240 it's those kind of things you look for, is some 0:12:52.320 --> 0:12:55.520 kind of contagion that's strangling through. I think the missstake 0:12:55.600 --> 0:12:58.400 that a lot of the recession camp made, though, is 0:12:58.440 --> 0:13:00.959 that they look for in dedicators and old rule of 0:13:01.000 --> 0:13:04.000 thumb measures, particularly in the manufacturing confidence those kind of things. 0:13:04.120 --> 0:13:06.400 They forget that that's shrunk in terms of size of 0:13:06.400 --> 0:13:09.600 the overall economy, and the service sector has been accelerating. 0:13:09.760 --> 0:13:11.439 It's been strong, and that's kind of thing. It's a 0:13:11.520 --> 0:13:15.199 much bigger sector of the economy than manufacturing, and people 0:13:15.240 --> 0:13:18.360 often forget their go to ism manufacturing index. It's dipped 0:13:18.400 --> 0:13:20.679 below the fifty line. I think it is twelve times 0:13:20.720 --> 0:13:22.880 if you count this one since eighty three and eight 0:13:22.920 --> 0:13:25.040 of them have been headfakes. They haven't been recessions, so 0:13:25.120 --> 0:13:27.360 it doesn't have a great batting average. Focus more on 0:13:27.400 --> 0:13:29.800 the service sector doesn't have as much history, but it's 0:13:29.800 --> 0:13:31.200 not signaling a recession at this point. 0:13:31.320 --> 0:13:34.360 I love the optimism because I would rather us not 0:13:34.480 --> 0:13:37.480 have to deal with a recession, particularly on the consumer side. 0:13:37.720 --> 0:13:39.480 I'm going to try to get some extra credit on 0:13:39.520 --> 0:13:41.920 this Friday, though, by pointing out the warp function on 0:13:41.960 --> 0:13:45.920 the terminal warp for folks listening to us, and it 0:13:46.000 --> 0:13:49.760 tells us the anticipation of rate hikes moving forward. In 0:13:49.840 --> 0:13:52.800 June that went up to fifty four percent, saying a hike. 0:13:53.800 --> 0:13:55.120 Tell me why you think they're wrong. 0:13:56.600 --> 0:13:59.560 Well, I think the Fed is signaling that it wants 0:13:59.640 --> 0:14:01.320 to to go to the sidelines, do a weight and 0:14:01.320 --> 0:14:04.200 see mode, mostly because the banking systems strains a bit 0:14:04.240 --> 0:14:07.079 of vasing and inflation. Obviously, today's numbers has been tough. 0:14:07.360 --> 0:14:10.080 I think the real mistake in terms of interest rate 0:14:10.120 --> 0:14:12.600 expectations is pricing in the deep rate cuts. Now we've 0:14:12.600 --> 0:14:14.800 seen a lot of that come back out this month alone, right, 0:14:15.200 --> 0:14:17.760 but there's still significant rate cuts, and that's predicated on 0:14:17.800 --> 0:14:20.800 the recession camp. At this cost of capital. Back to 0:14:20.920 --> 0:14:23.720 being the optimist or the optimist on the economy, it's 0:14:23.760 --> 0:14:25.760 at this cost of capital we don't see the breaking point. 0:14:25.880 --> 0:14:27.480 It doesn't necessarily mean the Fed has to do a 0:14:27.520 --> 0:14:28.000 lot more. 0:14:28.240 --> 0:14:28.920 It means the. 0:14:28.880 --> 0:14:31.960 Distortion of the yield curve. In many ways, the lower 0:14:32.000 --> 0:14:34.320 bond yields is subsidizing. Remember, a lot of the economy 0:14:34.320 --> 0:14:35.880 borrows at the long end, not the short end of 0:14:35.880 --> 0:14:37.880 the curve, and so the inversion of the yield curve, 0:14:37.920 --> 0:14:40.680 even though recession or economic bears would point to that 0:14:40.720 --> 0:14:44.160 as a recession signal, it's actually subsidizing economic growth here, 0:14:44.240 --> 0:14:46.840 so it's actually preventing in many ways that recession. So 0:14:47.240 --> 0:14:49.200 I think the caretful thing is is if you get 0:14:49.200 --> 0:14:51.960 away from the recession camp, be careful in the bond market, 0:14:52.040 --> 0:14:54.280 and of course that causes ripple effects and volatility through 0:14:54.280 --> 0:14:55.560 the asset spectrums in general. 0:14:56.440 --> 0:14:59.120 Are you worried at all about that bond volatility? I mean, 0:14:59.120 --> 0:15:03.480 you're seeing such a a kind of selling baked into, 0:15:03.880 --> 0:15:05.720 especially in T bills, but you're seeing it on the 0:15:05.720 --> 0:15:07.600 front end of the curve as well, as you point 0:15:07.640 --> 0:15:11.000 out the unwind of that in the next few weeks 0:15:11.080 --> 0:15:13.400 or a few months. Are you at all concerned about 0:15:13.400 --> 0:15:15.800 the volatility or the risk taking in the bond market 0:15:15.880 --> 0:15:16.240 right now? 0:15:16.560 --> 0:15:18.800 Yeah, I think that's I mean, bond volatility has been 0:15:18.800 --> 0:15:21.040 a very big issue pretty much for the last couple 0:15:21.080 --> 0:15:23.400 of years, and I continue to see that as an issue. 0:15:23.400 --> 0:15:26.400 So there's a difference between if you're in a fixed 0:15:26.400 --> 0:15:29.480 income investor, we'd be shorter on the duration and expecting 0:15:29.480 --> 0:15:31.120 bondials go up. We've seen some of that. We still 0:15:31.120 --> 0:15:33.680 see a move higher. Equities gets a little bit more mixed, 0:15:33.720 --> 0:15:35.880 so well, we may not be in the recession camp 0:15:35.920 --> 0:15:39.040 here at this cost of capital. So that's good for 0:15:39.240 --> 0:15:42.480 equities as we reprice or do an upward shift in 0:15:42.520 --> 0:15:45.000 terms of economic expectations. Keep an eye on the bond 0:15:45.000 --> 0:15:47.600 market because that's the flip side of it. As bond 0:15:47.640 --> 0:15:50.240 and yields come up, it hurts that discount rate. It 0:15:50.280 --> 0:15:52.880 creates that volatility ripples back into the equity market. And 0:15:52.920 --> 0:15:54.560 so we say with clients, you've got to be a 0:15:54.600 --> 0:15:58.240 lot more selective in this environment on equities. Favorite places 0:15:58.240 --> 0:16:00.840 where you get your valuation discount and places where you 0:16:00.840 --> 0:16:02.880 get relative earnings upside. So I look at the market 0:16:02.920 --> 0:16:04.160 right now. We get a bit of a frenzy going 0:16:04.160 --> 0:16:06.560 on in tech. Again, some of it's AI driven, but 0:16:06.720 --> 0:16:09.080 that's not the spot where you get your relative value discount, 0:16:09.240 --> 0:16:11.680 and even relative earnings are eroding. You know, you flip 0:16:11.720 --> 0:16:13.120 over and you look at large cap banks. They look 0:16:13.120 --> 0:16:14.840 a lot better in terms of both of those things. 0:16:15.040 --> 0:16:16.960 For the most part, that also lends itself outside of 0:16:17.000 --> 0:16:19.360 the US into some of things like European markets and 0:16:19.400 --> 0:16:21.600 stuff like that where you get better valuation discounts relative 0:16:21.640 --> 0:16:23.840 earnings favoring. But selectivity is going to be the name 0:16:23.880 --> 0:16:25.600 of the game here because of as you said, that 0:16:25.640 --> 0:16:28.440 bond volatility and a fields continue to ratchet higher. That 0:16:28.520 --> 0:16:30.520 takes a lot of wind out of the equity market. 0:16:30.760 --> 0:16:34.840 Are the tech plays then in kind of the comps 0:16:34.880 --> 0:16:37.960 and peers of companies that are going all in on AI? 0:16:38.240 --> 0:16:38.920 Is that the move? 0:16:39.600 --> 0:16:42.160 Yeah, I think there's there's a frenzy around that move 0:16:42.200 --> 0:16:44.560 at this point. I think the tech starting you don't 0:16:44.640 --> 0:16:48.080 like it, well, I think there's I think there's going 0:16:48.120 --> 0:16:50.640 to be momentum behind it. So there's a trade probably 0:16:50.680 --> 0:16:52.520 in that continuing. I think it's going to take time 0:16:52.560 --> 0:16:54.880 to develop that technology and really try to materialize it 0:16:54.920 --> 0:16:56.960 into profits, and so there's some of that. I think 0:16:56.960 --> 0:17:00.600 the original tech rally started here even before a lot 0:17:00.600 --> 0:17:02.440 of that in the context if we were in a 0:17:02.480 --> 0:17:06.160 sluggish or week maybe even quasi recessionary growth backdob but 0:17:06.200 --> 0:17:08.920 that we were going to get significant rate cuts. That's 0:17:09.000 --> 0:17:12.119 those longer duration assets, the growth sphere or growth index 0:17:12.160 --> 0:17:14.680 tends to benefit in that backdrob. But if we undwind 0:17:14.840 --> 0:17:17.720 that recession risk we push up bond yield, then you 0:17:17.800 --> 0:17:19.960 want to be in more of the value cohort rather 0:17:20.040 --> 0:17:22.359 than some of this. And if you are going to 0:17:22.400 --> 0:17:26.680 dip your toe into the growth cohort, we would recommend 0:17:27.280 --> 0:17:30.440 communication services that spot where they got beaten up last 0:17:30.520 --> 0:17:32.679 year and seems to have a better valuation support at 0:17:32.680 --> 0:17:33.080 this point. 0:17:33.160 --> 0:17:35.439 Okay, quickly in our final minute here, I'm working on 0:17:35.480 --> 0:17:38.640 a story about what happens if the dollar dips. Can 0:17:38.680 --> 0:17:41.440 you tell me if the dollar is going to dip 0:17:41.680 --> 0:17:43.080 so I know whether or not I should be working 0:17:43.080 --> 0:17:43.679 on that story. 0:17:43.840 --> 0:17:48.240 Yeah, yeah, the dollar. I mean, I'm cyclically negative on 0:17:48.280 --> 0:17:51.760 the dollars, so I would expect it to dip. It 0:17:51.920 --> 0:17:56.120 was over sold recently and we got interest rate expectations 0:17:56.119 --> 0:17:57.560 starting to wind up of the curve, so we got 0:17:57.560 --> 0:18:00.480 some firmness in the dollar associated from that. But I 0:18:00.520 --> 0:18:02.359 think you've got to catch up story on a relative 0:18:02.359 --> 0:18:04.439 growth basis in the rest of the world, Europe and 0:18:04.560 --> 0:18:08.159 in Asia from their lag openings. I still think the 0:18:08.200 --> 0:18:09.560 you should has some work to do, but the FED 0:18:09.640 --> 0:18:11.280 kind of goes on hold, so I think that the 0:18:11.320 --> 0:18:12.000 dollar slides. 0:18:12.800 --> 0:18:14.360 So yes, nice, oh man. 0:18:14.640 --> 0:18:16.400 Just as we talk about the dollar, we gotta go. 0:18:16.480 --> 0:18:19.440 I have so many follow up questions. Philip Colemar, Managing Partner, 0:18:19.520 --> 0:18:22.560 Global Strategists over at MRB Partners, we thank you as 0:18:22.600 --> 0:18:24.879 always coming in in studio without a time. 0:18:24.960 --> 0:18:28.720 Might add though, is that allowed on a Friday? Apparently? 0:18:28.720 --> 0:18:31.920 I'm told it is hard disagree on my end. Never less, 0:18:31.920 --> 0:18:33.040 we'll forgive you. Have a good weekend. 0:18:33.280 --> 0:18:36.800 Thanks Philip Colemar again MRB Partners. Folks, we are seeing 0:18:36.800 --> 0:18:38.359 green on the screen. The S and P five hundred 0:18:38.440 --> 0:18:42.280 higher by one percent. That rally has really taken off 0:18:42.320 --> 0:18:44.480 in just the last thirty minutes or so, the Nasdaq 0:18:44.520 --> 0:18:48.280 significantly outperforming, higher by one point four percent. The VICX 0:18:48.320 --> 0:18:51.760 though we're a seventeen handle. There is a lot going 0:18:51.800 --> 0:18:53.199 on this market. We're going to dive into it. 0:18:53.480 --> 0:18:56.600 You're listening to the tape cans Are Line program Bloomberg 0:18:56.680 --> 0:19:00.200 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:19:00.320 --> 0:19:03.560 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:19:03.560 --> 0:19:06.400 You can also listen live on Amazon Alexa from our 0:19:06.400 --> 0:19:11.440 flagship New York station, Just say Alexa, Play Bloomberg eleven thirty. 0:19:12.160 --> 0:19:16.719 Next guest is pretty exciting, Liz McCormick, our chief markets correspondent. 0:19:16.800 --> 0:19:19.680 She has a little bit of everything over on Bloomberg News, 0:19:19.720 --> 0:19:23.840 and she has this really interesting story about kind of 0:19:23.880 --> 0:19:27.119 hedge fund trades and how they're navigating all of this 0:19:27.280 --> 0:19:31.280 debt ceiling debate and how how kind of go wrong. So, Liz, 0:19:31.480 --> 0:19:33.119 welcome to the show. Thank you for making time for 0:19:33.200 --> 0:19:36.560 us on a Friday. How can some of these trades 0:19:36.600 --> 0:19:36.960 go wrong? 0:19:38.200 --> 0:19:40.960 By the way, saying yes to you was the easiest yes. 0:19:41.080 --> 0:19:44.040 So wow, you know what. 0:19:44.080 --> 0:19:45.720 I'm recording this and putting it in my email. 0:19:47.280 --> 0:19:49.800 Well, so you know, Shanali, who you know well, and 0:19:49.880 --> 0:19:53.239 several other of our great lady reporters are on this 0:19:53.320 --> 0:19:56.080 story together just looking at you know it. You know 0:19:56.119 --> 0:19:58.800 we've talked before. The basis trade is a long favorite 0:19:58.840 --> 0:20:01.119 of hedge funds. But you know, there's a lot of 0:20:01.119 --> 0:20:03.560 things we saw in March twenty twenty, especially when things 0:20:03.600 --> 0:20:06.040 get bad, the march is not functioning, and especially when 0:20:06.080 --> 0:20:08.719 repro rates go high, because these are trades that make 0:20:08.760 --> 0:20:10.280 a little money but make a heck of a lot 0:20:10.320 --> 0:20:12.399 more when they use a lot of leverage, which is 0:20:12.440 --> 0:20:15.320 what these folks do. So that's long been an area 0:20:15.359 --> 0:20:18.399 that regulators say, you know, we want some more oversight, 0:20:18.720 --> 0:20:22.400 you know, and they've been trying to do things that 0:20:22.440 --> 0:20:26.000 bring you know, hedge funds more under the fold of oversight. 0:20:26.640 --> 0:20:29.840 But there are blind spots like the bilateral repo market, 0:20:29.960 --> 0:20:32.840 which the Treasury's Office of Financial Research has done a 0:20:32.880 --> 0:20:34.920 lot of good work on getting data but said that's 0:20:34.920 --> 0:20:37.119 still kind of a blind spot, and that's how a 0:20:37.160 --> 0:20:40.480 lot of this repo is done. So, you know, now 0:20:40.480 --> 0:20:42.200 we're saying things are going to work out on the 0:20:42.240 --> 0:20:45.399 debt ceiling. I hope it does. But some of the 0:20:45.520 --> 0:20:49.200 chaos that people are worried may ensue is repro rates 0:20:49.200 --> 0:20:52.119 could surge and things like that. So there that puts, 0:20:52.160 --> 0:20:53.480 you know, kind of the risk. So that's why I 0:20:53.520 --> 0:20:56.600 think there's been folks tapping around checking, you know, how's 0:20:56.600 --> 0:20:59.680 the leverage positioning and things like that on we don't 0:20:59.680 --> 0:21:00.679 want to know blow up. 0:21:01.880 --> 0:21:04.679 This was the exact question that I wanted to ask you, Liz. 0:21:04.840 --> 0:21:08.920 If the US's credit rating is impacted over these debt 0:21:08.960 --> 0:21:13.280 ceiling debates, what does that do to these requirements? 0:21:14.800 --> 0:21:18.680 Well, isn't that It's interesting because first of all, it 0:21:18.760 --> 0:21:21.680 is number one, it's interesting to know what happens to treasury. 0:21:21.840 --> 0:21:25.280 So as you guys remember in twenty eleven, SMP downgraded 0:21:26.400 --> 0:21:29.880 just after the deal was done, but it yields went down. 0:21:29.920 --> 0:21:32.520 There was like a flight to safety. People still wanted treasury, 0:21:32.640 --> 0:21:36.399 So there is an expectation that probably treasuries, you know, 0:21:36.520 --> 0:21:38.840 and that wasn't a default. So if we have a default, 0:21:38.880 --> 0:21:42.480 that's a different ballgame, and that's kind of like uncharted territories. 0:21:42.840 --> 0:21:45.600 But if there was just a downgrade, the system may 0:21:45.600 --> 0:21:47.920 be able to withstand that because if your collateral is 0:21:48.680 --> 0:21:52.240 treasuries and the value goes up, you're okay. But embedded 0:21:52.280 --> 0:21:54.159 in these trades are the risks they don't you know, 0:21:54.200 --> 0:21:56.840 because every time is different. So even on a downgrade, 0:21:57.160 --> 0:22:00.160 if these you know, the longside of a basis, say 0:22:00.160 --> 0:22:02.920 you're long to cash. If there are major issues and 0:22:02.960 --> 0:22:05.600 the value goes down, there could be margin calls. So 0:22:05.680 --> 0:22:07.520 that could be a recent you know, we've done a 0:22:07.520 --> 0:22:11.280 few stories on you know, after twenty eleven, twenty thirteen, 0:22:11.440 --> 0:22:14.679 FED Treasury made and the market participants, you know, the 0:22:14.840 --> 0:22:17.679 overseers and let's call it like SIFMA, etcetera, made like 0:22:17.760 --> 0:22:20.600 backup plans. How can the market function if there's a 0:22:20.600 --> 0:22:24.359 delayed payment, but nothing has been tested yet, so you know, 0:22:24.480 --> 0:22:26.399 we kind of hope to never go through that, but 0:22:26.440 --> 0:22:28.920 hopefully things would function, but it's an unknown. 0:22:30.119 --> 0:22:33.560 Speaking of unknowns, a lot of folks, Liz, and correct 0:22:33.560 --> 0:22:35.520 me if I'm wrong. A lot of folks are obviously 0:22:35.600 --> 0:22:38.560 off already on the road starting the Memorial Day weekend 0:22:38.680 --> 0:22:39.560 a little bit earlier. 0:22:40.160 --> 0:22:42.520 But there is a reason to pay attention to tonight. 0:22:42.560 --> 0:22:45.240 Aren't a lot of the credit ratings updates coming out 0:22:45.240 --> 0:22:45.800 Friday night? 0:22:47.040 --> 0:22:50.520 Well they never tell us, you know. And but that's 0:22:50.560 --> 0:22:53.000 what I was going to say, like, now, why are 0:22:53.000 --> 0:22:55.800 we not off already on our long weekend? That's another story, 0:22:55.840 --> 0:22:58.240 But I was going to say, like, ugh, that's all 0:22:58.280 --> 0:23:00.560 we need is like we have to keep any open 0:23:01.080 --> 0:23:04.640 for is there some let's just say that somebody else 0:23:04.640 --> 0:23:06.560 could go on watch, you know, put them on watch, 0:23:06.560 --> 0:23:08.520 because that's what Fitch did put the U. They didn't 0:23:08.560 --> 0:23:10.879 downgrade the rating, but they put the US on like 0:23:10.880 --> 0:23:14.080 a negative watch. And you haven't seen that for Moody's 0:23:14.160 --> 0:23:17.200 or S and P. Now it looks like a deal's coming, 0:23:17.240 --> 0:23:19.440 but if things break down over the weekend, You're right, 0:23:19.560 --> 0:23:21.720 we could see that, even if it's not late tonight. 0:23:21.760 --> 0:23:24.240 It they can do that at any time. So I 0:23:24.280 --> 0:23:26.359 think they feel like if a deal gets done today, 0:23:26.400 --> 0:23:28.760 there's enough time because they need about two days to 0:23:28.800 --> 0:23:31.000 get you know, the bill signed, et cetera, and to 0:23:31.080 --> 0:23:33.960 get you know, not hit that X state where treasury 0:23:34.040 --> 0:23:36.840 runs out of cash. But you're right, if things fall 0:23:36.880 --> 0:23:40.440 apart Saturday and everybody walks out and it, then you could, 0:23:40.560 --> 0:23:43.560 you know, see some more ratings watches and who knows 0:23:43.800 --> 0:23:46.120 Fitch could do more. I have no idea. They didn't 0:23:46.119 --> 0:23:48.399 tell me, but it's a concern of course. 0:23:48.720 --> 0:23:51.399 Well still Liz refresher memories here from kind of the 0:23:51.400 --> 0:23:54.040 twenty eleven saga when we talked about these credit Ultimately 0:23:54.080 --> 0:23:56.680 the credit downgrade, it kind of happened over the span 0:23:56.720 --> 0:23:58.760 if I think like six weeks or something the downgrade 0:23:58.800 --> 0:24:01.240 actually happened. I want to say, maybe mid August or 0:24:01.320 --> 0:24:04.600 end of August. But the first warnings came out I 0:24:04.600 --> 0:24:08.080 think in early July. So it feels like this could 0:24:08.160 --> 0:24:11.320 still take a couple of weeks, right right. 0:24:11.240 --> 0:24:14.600 And remember now, definitely not saying there's a repeat of 0:24:14.640 --> 0:24:17.119 this happening, but S and P there was a deal 0:24:17.560 --> 0:24:20.560 in SMB downgraded because they say they didn't like, you know, 0:24:20.600 --> 0:24:24.200 they're looking at overall, how is the you know, the 0:24:24.320 --> 0:24:28.720 nation's fiscal leaders functioning, how's the everything work, And they 0:24:28.800 --> 0:24:31.880 were just very displeased with how things went. It didn't 0:24:31.920 --> 0:24:35.280 vode well for the fiscal outlook for the US, so 0:24:35.320 --> 0:24:38.040 they downgraded. Now, as you know, there was a lot 0:24:38.080 --> 0:24:41.919 of pushback, et cetera. That's another story. But that happened 0:24:41.960 --> 0:24:44.920 even though a deal had been been done with Obama 0:24:45.000 --> 0:24:48.919 and you know the other side of the aisle. But 0:24:49.040 --> 0:24:52.359 so I think, you know, the people are waiting. You know, 0:24:52.400 --> 0:24:55.159 the outlook is one thing, but a downgrade is another. 0:24:55.240 --> 0:24:57.680 And I think this thing has to fall apart hard 0:24:57.760 --> 0:25:00.359 for that to happen. But twenty eleven, you know, Blomberg 0:25:00.440 --> 0:25:02.600 even did a lot of stories afterwards. It was almost 0:25:02.680 --> 0:25:07.719 kind of mind spinning that if rates go down, bonds 0:25:07.840 --> 0:25:11.080 rally after downgrade, does that mean ratings matter? I mean, 0:25:11.119 --> 0:25:13.520 clearly they do, because you know, they're front and center 0:25:13.560 --> 0:25:17.240 of people's mind. But it was just kind of weird. 0:25:17.359 --> 0:25:19.920 You know, I lived through that, and so it didn't 0:25:19.960 --> 0:25:21.160 kind of go as you would think. 0:25:23.160 --> 0:25:25.880 And Liz, just to go back to the story here 0:25:26.480 --> 0:25:29.359 that you have that's so great. I wonder if you 0:25:29.400 --> 0:25:32.360 can explain to you know, my mom listening to him 0:25:32.760 --> 0:25:37.000 on this conversation, how this sort of risky trade might 0:25:37.080 --> 0:25:42.240 impact consumers. Right, is, what is the end impact that 0:25:42.320 --> 0:25:46.040 this might have on regular, everyday people who aren't on 0:25:46.080 --> 0:25:47.119 Wall Street. 0:25:47.840 --> 0:25:50.919 Well, yeah, your mom and my mom isn't particularly, they 0:25:50.920 --> 0:25:53.399 wouldn't know and they wouldn't be so concerned about this 0:25:53.520 --> 0:25:57.800 basis trade. But what will concern them is if it's 0:25:57.840 --> 0:26:00.480 like when SVB went down, my mother, I know pool 0:26:00.520 --> 0:26:03.359 who that was. Maybe some of us didn't either, but 0:26:03.840 --> 0:26:07.560 it tightened the total credit conditions of the US economy, 0:26:07.600 --> 0:26:10.600 the financial system, and that's not good. That may make 0:26:10.680 --> 0:26:13.040 it you know, harder, you know, to get loans, to 0:26:13.080 --> 0:26:15.800 be more costly, et cetera. I think with hedge funds 0:26:15.840 --> 0:26:17.600 in the basis trade, if you have a blow up 0:26:17.640 --> 0:26:22.320 where funds go under, then that is another kind of 0:26:22.359 --> 0:26:25.520 like feeling of tightening of conditions and the financial system. 0:26:25.560 --> 0:26:28.159 It's never good for funds that you know. You might say, oh, 0:26:28.200 --> 0:26:31.159 that was a rich folks own those hedge funds. It 0:26:31.160 --> 0:26:33.720 doesn't matter, but it kind of does because they helped 0:26:33.720 --> 0:26:36.760 grease the wheels of the system. They provide you know, 0:26:37.320 --> 0:26:40.560 both sides of a trade sometimes, So I think that's 0:26:40.640 --> 0:26:44.320 where the regular mom and pop make care if they hear, oh, 0:26:44.440 --> 0:26:46.840 another big firm, I don't know who that is, but 0:26:47.160 --> 0:26:49.480 collapsed and you know that's not good. And you know, 0:26:49.560 --> 0:26:52.040 sentiment is a lot of things, you know, for people. 0:26:52.119 --> 0:26:54.520 So if they're feeling like, well, things are bad, It's 0:26:54.520 --> 0:26:56.800 like when you hear all the headlines about layoffs, people 0:26:56.800 --> 0:26:59.240 are like, oh boy, I better watch out and not 0:26:59.320 --> 0:27:01.400 buy this thing. So I think it might be sentiment. 0:27:01.480 --> 0:27:05.160 It might be tightening up financial conditions because these folks 0:27:05.240 --> 0:27:07.080 don't really care about the nuance of the trade. 0:27:07.359 --> 0:27:11.160 Yeah, bless you Liz McCormick for connecting the Wall Street 0:27:11.200 --> 0:27:13.640 story with the Main Street story, because it does matter 0:27:13.720 --> 0:27:16.520 to her point, not just trades in the bond market, 0:27:16.520 --> 0:27:17.919 in the equity market as well. And I would say 0:27:17.920 --> 0:27:20.880 every market that is out there, listener the last thirty 0:27:20.920 --> 0:27:25.240 seconds when we're talking about kind of the unwind, how 0:27:25.359 --> 0:27:28.440 much does liquidity that we've already seen the last few 0:27:28.440 --> 0:27:30.760 months matter? Are we kind of set up for the 0:27:30.800 --> 0:27:34.040 bond market to panic a little bit twenty seconds? 0:27:35.119 --> 0:27:38.200 Yeah, a loss of liquidity would not be good, and 0:27:38.600 --> 0:27:41.280 a panic is not good. And you know really quickly 0:27:41.320 --> 0:27:44.600 if we do get a deal, there's some idiosyncratic things 0:27:44.640 --> 0:27:47.159 happening with the Treasury having to rebuild their cash buffer 0:27:47.240 --> 0:27:49.600 selling a lot of bills that's going to siphon liquidity 0:27:49.640 --> 0:27:52.359 out anyway, So a blow up and basis and less 0:27:52.400 --> 0:27:55.040 liquidity that would be a mixture that is not ideal. 0:27:56.400 --> 0:28:01.000 Liz McCormick, our chief markets correspondent, true expert in all 0:28:01.000 --> 0:28:01.560 things bonds. 0:28:01.560 --> 0:28:03.160 We thank you as always. 0:28:04.400 --> 0:28:07.800 You're listening to the team Ken's our live program, Bloomberg 0:28:07.840 --> 0:28:11.200 Markets weekdays at ten am Eastern on Bloomberg dot Com, 0:28:11.280 --> 0:28:14.440 the iHeartRadio app and the Bloomberg Business app, or listen 0:28:14.520 --> 0:28:16.560 on demand wherever you get your podcast. 0:28:19.080 --> 0:28:20.680 It's get a little bit more on what someone was 0:28:20.720 --> 0:28:21.280 just talking about. 0:28:21.320 --> 0:28:24.439 Dana Telsey a true expert here, chief Research Officer and 0:28:24.520 --> 0:28:27.920 CEO of Telsey Advisory Group. And look, if Paul Sweeney 0:28:28.000 --> 0:28:30.920 was here, he'd say she is the best in the biz. 0:28:31.160 --> 0:28:31.919 So I'm gonna say it. 0:28:31.960 --> 0:28:33.320 She is the best in the biz. 0:28:33.520 --> 0:28:36.359 Dana, thank you as always for joining us. 0:28:36.560 --> 0:28:37.560 Let's talk about when the company. 0:28:37.560 --> 0:28:38.320 Thank you for having me. 0:28:38.520 --> 0:28:41.040 Of course, the pleasure was there one of the company 0:28:41.040 --> 0:28:43.920 stories that someone was just talking about the Gap stories 0:28:44.120 --> 0:28:45.760 really surprising to the ubsite. 0:28:45.880 --> 0:28:46.600 Give us your take. 0:28:47.760 --> 0:28:50.840 So my take is that you've had obviously years of 0:28:50.880 --> 0:28:54.200 week results. Something's going on with the women's business, that 0:28:54.520 --> 0:28:56.880 women are all of a sudden spending. You heard about 0:28:56.880 --> 0:29:00.200 that both at the Gap brand, and you also hold 0:29:00.200 --> 0:29:02.280 about it at the Old Navy brand in terms of 0:29:02.280 --> 0:29:06.080 the strength and frankly, the cleanliness of the inventory, which 0:29:06.120 --> 0:29:08.719 frankly was down around twenty seven and a half percent, 0:29:09.280 --> 0:29:11.760 I think helped. I think it's helping to move the needle. 0:29:12.040 --> 0:29:14.720 This does not say that the Gap is fixed by 0:29:14.720 --> 0:29:17.080 any measure, but it says they're on the path of 0:29:17.160 --> 0:29:20.200 progress and that even though they don't have the CEO, 0:29:20.640 --> 0:29:23.240 they're not letting grass grow under their feet. 0:29:23.760 --> 0:29:26.960 Dana, help me understand the bottom line here when it 0:29:27.000 --> 0:29:30.200 comes to these retail Ooh, I'm sorry. 0:29:30.440 --> 0:29:34.400 Well good, I'll take We'll take it from here, Dana, 0:29:34.480 --> 0:29:36.320 talk to us. I think what Maddie was asking specifically 0:29:36.320 --> 0:29:38.479 about the bottom line when it comes to Gap, and 0:29:38.520 --> 0:29:41.840 we know they've had their own inventory issues as well 0:29:42.120 --> 0:29:43.440 and certain partnerships. 0:29:43.680 --> 0:29:44.640 What's the update there? 0:29:46.240 --> 0:29:47.520 I'm sorry, Can you just repeat that? 0:29:47.840 --> 0:29:48.120 Sure? 0:29:48.120 --> 0:29:50.200 What is the update when it comes to inventory and 0:29:50.200 --> 0:29:52.440 their partnerships on the bottom line. 0:29:52.480 --> 0:29:53.160 For a company like. 0:29:53.120 --> 0:29:56.880 Gap small, the inventory partnerships are first going to get 0:29:56.920 --> 0:30:00.280 into the fold. You take a look at Mattel, what 0:30:00.320 --> 0:30:03.040 they're doing the partnership with these are things in order 0:30:03.080 --> 0:30:05.840 to drive brand relevance and drive brand heat to re 0:30:05.960 --> 0:30:09.760 engage consumers. I think the inventory management that they're putting 0:30:09.760 --> 0:30:13.040 in place in order to be closer and chase into 0:30:13.080 --> 0:30:16.520 goods is really what is beginning to happen. We all 0:30:16.560 --> 0:30:19.640 know that the headwinds of supply chain disruptions led to 0:30:19.720 --> 0:30:23.200 over inventory last year that is first being positioned and 0:30:23.280 --> 0:30:25.680 cleaned out. One of the key themes coming out of 0:30:25.720 --> 0:30:29.400 retail earning season so far is inventories are coming down 0:30:29.520 --> 0:30:32.240 and it seems by the second half of the calendar 0:30:32.360 --> 0:30:35.680 year will be clean with inventory levels in line with 0:30:35.800 --> 0:30:36.479 sales growth. 0:30:37.560 --> 0:30:40.000 Dana, sorry about that, we were having some technical issues, 0:30:40.000 --> 0:30:43.560 but excellent answer there. The other thing I wanted to 0:30:43.560 --> 0:30:46.440 hear from you is, you know, what is the takeaway 0:30:46.440 --> 0:30:49.920 from this earning season? After it felt like the Target 0:30:49.960 --> 0:30:52.840 Walmart story made sense to me. The consumer is struggling, 0:30:52.880 --> 0:30:54.680 But then we had beats. Like you said, we had 0:30:54.720 --> 0:30:57.920 an Old Navy doing well, we had Abercrombie doing well Urban. 0:30:58.520 --> 0:31:00.560 So what am I supposed to think about the health 0:31:00.600 --> 0:31:02.840 of the consumer When I look at the totality of 0:31:02.880 --> 0:31:04.480 these retail earnings. 0:31:04.800 --> 0:31:07.520 I think you have to slice it up into the 0:31:07.520 --> 0:31:10.000 income levels of the consumer. You have to slice it 0:31:10.120 --> 0:31:13.920 up into where is the particular company. And I think 0:31:14.000 --> 0:31:17.440 everyone is working to manage the headwinds of crime and 0:31:17.520 --> 0:31:21.200 shrink that is out there, the uncertainty of the levels 0:31:21.200 --> 0:31:25.360 of consumer demand, and the focus on product innovation to 0:31:25.480 --> 0:31:30.760 drive conversion. I think conversion matters. I think essentials versus discretionary. 0:31:31.520 --> 0:31:33.960 It hurts me to say that essentials is still winning 0:31:34.000 --> 0:31:37.880 over discretionary. I can't wait until my world comes back 0:31:38.000 --> 0:31:41.680 in discretionary. But we're going to need confidence and to 0:31:41.800 --> 0:31:45.520 stability in the macro to drive discretionary well. 0:31:45.560 --> 0:31:49.000 On that exact topic area. When it comes to discretionary, 0:31:49.320 --> 0:31:51.560 some of my sources have told me that they see 0:31:52.000 --> 0:31:55.920 the dollar continuing to descend because of these debt sealing 0:31:56.040 --> 0:32:00.320 issues and that that might be good for consumer discretionary. 0:32:00.560 --> 0:32:02.240 What is your outlook on that. 0:32:03.240 --> 0:32:06.280 I think overall, for consumer discretionary, I think we're going 0:32:06.360 --> 0:32:09.120 to get to lapping easier comparisons in the back half. 0:32:09.520 --> 0:32:12.240 I think investors are going to look by the third 0:32:12.320 --> 0:32:15.200 quarter out to twenty twenty four and will we be 0:32:15.240 --> 0:32:18.320 going to begin to see some improvement. I think right now, 0:32:18.720 --> 0:32:22.160 I think cautiousness is there, and even on the luxury end, 0:32:22.400 --> 0:32:26.400 there's a moderation to spend. Even though from twenty nineteen 0:32:26.480 --> 0:32:30.320 to today, luxury brands many of their revenues are up 0:32:30.560 --> 0:32:34.040 fifty percent plus, but in a year over year basis, 0:32:34.160 --> 0:32:35.160 you're seeing a moderation. 0:32:35.800 --> 0:32:38.280 Are you thinking a lot about a dollar impact in 0:32:38.280 --> 0:32:39.000 that calculation? 0:32:39.160 --> 0:32:42.560 Though, yes, yes, I am. I think that's something to 0:32:42.600 --> 0:32:43.280 be mindful of. 0:32:45.400 --> 0:32:49.520 Dana expand on what you were saying about luxury specifically here, 0:32:50.160 --> 0:32:52.200 it's largely a lot of the gains have been largely 0:32:52.400 --> 0:32:55.640 China driven. Correct me if I'm wrong, But what happens 0:32:55.680 --> 0:32:59.520 when you start to see a Chinese consumer moderate as well? 0:33:00.680 --> 0:33:00.880 Well? 0:33:00.920 --> 0:33:04.120 So far, there's the reopening in China is happening, and 0:33:04.160 --> 0:33:07.840 it's pretty solid for some of the accessories companies. I 0:33:07.880 --> 0:33:10.920 would say that the tourism track to hear in North 0:33:10.960 --> 0:33:13.920 America will be the next benefit. We have not seen 0:33:13.960 --> 0:33:17.600 that so far. We have not heard of moderation in 0:33:17.720 --> 0:33:20.640 China on the luxury side, it's been more here in 0:33:20.680 --> 0:33:22.200 North America that we've seen that. 0:33:23.840 --> 0:33:27.280 And does that make up for the slowdown in the 0:33:27.320 --> 0:33:31.720 American consumer? What is kind of the tug of war 0:33:31.840 --> 0:33:34.760 essentially between the American consumer and the Chinese consumer when 0:33:34.800 --> 0:33:35.560 it comes to read. 0:33:35.360 --> 0:33:38.080 Through, I think the read through is that the Chinese 0:33:38.120 --> 0:33:41.080 consumer hasn't been able to go out socially engage. They 0:33:41.120 --> 0:33:43.560 are a year behind us in re engaging with social 0:33:43.560 --> 0:33:47.880 occasions and events. Here in North America, the macro headwinds 0:33:47.880 --> 0:33:52.160 and concerns over debt sealing, stock market volatility, and also 0:33:52.240 --> 0:33:56.840 the allocation of capital to going out and experiences for 0:33:56.880 --> 0:34:00.560 this core luxury consumer. At the super high end, mezzas 0:34:00.600 --> 0:34:03.760 and Chanelle's are still winning and showing big games. I 0:34:03.800 --> 0:34:07.440 think the others where it can be upper accessible, that's 0:34:07.480 --> 0:34:08.840 where we've seen some of the moderation. 0:34:09.960 --> 0:34:11.720 And for when you're. 0:34:11.560 --> 0:34:14.359 Looking at the opposite end of the spectrum, must take 0:34:14.360 --> 0:34:16.400 a look at say Walmart, for example, When you look 0:34:16.400 --> 0:34:20.200 at the stock Dana, it's kind of almost an outperformer 0:34:20.280 --> 0:34:20.759 in a lot of. 0:34:20.680 --> 0:34:21.960 These recessionary periods. 0:34:22.760 --> 0:34:25.840 Do you think that's kind of a worthy stock to 0:34:25.880 --> 0:34:28.160 look at right now, We've got about let's just say 0:34:28.160 --> 0:34:29.200 forty five seconds. 0:34:29.719 --> 0:34:32.000 Yes, I do think so. They're having an investor day 0:34:32.040 --> 0:34:34.800 next week. It's a worthy stock to look at. They 0:34:34.840 --> 0:34:37.839 manage inventory as well, and look at the market share 0:34:37.920 --> 0:34:40.640 opportunities they still have, even as big as they are. 0:34:41.160 --> 0:34:44.560 Gotcha, Dana Telsey, we think you as always she covers 0:34:44.600 --> 0:34:46.960 the gambit, but she had on my Paul Sweeny voice 0:34:47.000 --> 0:34:49.360 here and say she is the best in the biz. 0:34:49.719 --> 0:34:53.320 You're listening to the tape can't Live program Bloomberg Markets 0:34:53.400 --> 0:34:56.799 weekdays at ten am Eastern on Bloomberg Radio, the tune 0:34:56.840 --> 0:34:59.759 in app, Bloomberg dot Com, and the Bloomberg Business app, 0:35:00.000 --> 0:35:03.160 and also listen live on Amazon Alexa from our flagship 0:35:03.239 --> 0:35:07.040 New York station. Just say Alexa, play Bloomberg eleven thirty. 0:35:08.440 --> 0:35:12.000 Now, just to update everyone who has been keeping a 0:35:12.120 --> 0:35:15.000 key watch on this indicator, Krety and I are still 0:35:15.360 --> 0:35:18.560 without rings on our left hands. So we are going 0:35:18.560 --> 0:35:22.160 to have a great conversation next with birth Gerstein, CEO 0:35:22.320 --> 0:35:25.280 at Brilliant Earth. We're going to talk about the wedding industry, 0:35:25.400 --> 0:35:29.160 diamond prices, engagement rings, all those fun things. Just to 0:35:29.239 --> 0:35:31.360 keep in mind for us creedy moving forward as we 0:35:31.480 --> 0:35:34.200 as we you know, continue this journey. Hint, hello listener, 0:35:35.840 --> 0:35:38.040 So let's get to it with Beth. Beth, thank you 0:35:38.160 --> 0:35:41.480 so much for joining us on this holiday weekend. Just 0:35:41.560 --> 0:35:44.160 kick us off by giving our audience a quick recap 0:35:44.239 --> 0:35:46.399 on Brilliant Earth and what you guys do for those 0:35:46.520 --> 0:35:47.160 not familiar. 0:35:48.200 --> 0:35:50.319 Great and I'm happy to be here, thanks for having 0:35:50.320 --> 0:35:54.800 me so. Brilliant Earth is the next generation fine jeweler 0:35:55.320 --> 0:35:59.319 for today's consumer. We were founded on a mission for 0:35:59.560 --> 0:36:03.360 sustain ability, transparency and inclusivity, so we've really been driven 0:36:03.400 --> 0:36:06.560 by mission, our mission from the beginning. We also have 0:36:07.200 --> 0:36:10.080 a very unique omni channel model, so at this point 0:36:10.080 --> 0:36:13.720 we have thirty one showrooms. We are a digital first 0:36:13.880 --> 0:36:19.799 company and we offer a really beautiful wide assortment of 0:36:20.520 --> 0:36:24.399 engagement rings, wedding rings, and other fine jewelry products for 0:36:24.480 --> 0:36:27.000 a wide variety of occasions beyond bridle. 0:36:28.520 --> 0:36:31.160 What are you seeing in terms of the trends there? 0:36:31.200 --> 0:36:34.040 I mean maybe two three years ago during COVID, it 0:36:34.080 --> 0:36:38.640 felt like the big trend was pause, wait, like don't 0:36:38.800 --> 0:36:41.799 get married just yet, postpone your wedding, and then there 0:36:41.880 --> 0:36:45.720 was this influx of kind of booking some of these things. 0:36:45.800 --> 0:36:47.040 Beth, where are we now on that? 0:36:48.239 --> 0:36:48.560 Yeah? 0:36:48.600 --> 0:36:49.239 Absolutely. 0:36:49.320 --> 0:36:52.560 So last year was actually one of the biggest years 0:36:52.880 --> 0:36:55.920 in weddings in decades. There were two point six million 0:36:55.960 --> 0:36:58.919 weddings in the United States, and I think nineteen eighty 0:36:58.920 --> 0:37:01.640 five is the last we'd seen such a boom. I 0:37:01.719 --> 0:37:04.080 think part of that is just with COVID, a lot 0:37:04.080 --> 0:37:06.879 of people were waiting to have the big day when 0:37:06.920 --> 0:37:10.680 other people could gather. Obviously there was some disruption in 0:37:10.800 --> 0:37:15.040 dating and how relationships formed. I think actually that through COVID, 0:37:15.200 --> 0:37:17.759 it made those relationships tighter, and so you had a 0:37:17.760 --> 0:37:20.719 lot of engagements as well, And so this year is 0:37:20.800 --> 0:37:23.400 more of a normalizing year. I think one of the 0:37:23.400 --> 0:37:27.520 great things about Bridle is it's a very recession resilient. 0:37:27.640 --> 0:37:31.600 It's very overall resilient category. Like typically there's about two 0:37:31.640 --> 0:37:35.279 point two million weddings in good times and bad and 0:37:35.520 --> 0:37:38.680 I think just coming off of these peak years, we're 0:37:38.840 --> 0:37:42.759 just in a phase where it's normalizing to a more 0:37:42.840 --> 0:37:44.680 regular time period versus COVID. 0:37:45.280 --> 0:37:47.360 Talk to me a little bit about your foot traffic. 0:37:47.400 --> 0:37:51.359 I know that you've expanded your showroom footprint, going from 0:37:51.400 --> 0:37:55.279 fifteen to thirty locations. But foot traffic is something that 0:37:55.320 --> 0:37:57.839 I feel the wedding industry can really benefit from because 0:37:57.840 --> 0:37:59.560 you got to go in person to try on the dress, 0:37:59.600 --> 0:38:02.640 to try on the engagement rain. What numbers are you 0:38:02.760 --> 0:38:05.080 seeing and how are you planning to grow them? 0:38:06.400 --> 0:38:09.480 We think about things actually a little bit differently because 0:38:09.520 --> 0:38:11.720 we really focus on this omnichannel model. 0:38:11.920 --> 0:38:12.720 A lot of times. 0:38:12.760 --> 0:38:16.480 The way that our consumer shops, they start the process online, 0:38:16.520 --> 0:38:20.040 it's very education driven and then they'll often make an 0:38:20.040 --> 0:38:23.960 appointment to come into one of our showrooms and then 0:38:24.080 --> 0:38:25.920 you know, it's very seamless in terms of where they 0:38:25.960 --> 0:38:29.360 end up purchasing. So foot traffic for us is a 0:38:29.440 --> 0:38:32.600 little bit different because of that appointment driven model. You know, 0:38:32.640 --> 0:38:36.320 we're seeing really nice overall traction in terms of people 0:38:36.400 --> 0:38:39.160 making appointments, in terms of people walking in. We have 0:38:39.200 --> 0:38:41.200 a variety of different formats, so some of them are 0:38:41.280 --> 0:38:44.640 upper floor and we've just expanded more into some of 0:38:44.640 --> 0:38:48.480 those ground floor locations where it's more easy to browse 0:38:48.520 --> 0:38:51.640 the collection without an appointment and seeing really nice results 0:38:51.719 --> 0:38:54.120 there as well. So one of the metrics that we 0:38:54.120 --> 0:38:56.960 look at, for example, is we're really looking at how 0:38:57.480 --> 0:38:59.799 the metro overall grows, and one of the things that's 0:38:59.840 --> 0:39:03.759 really exciting for us is after a year period, we 0:39:03.840 --> 0:39:07.280 see the bookings and the revenue in that metro actually double. 0:39:07.760 --> 0:39:11.040 So it's more about how we can drive that incrementality 0:39:11.440 --> 0:39:13.960 and offer a really seamless experience for our customer. 0:39:15.440 --> 0:39:15.680 Beth. 0:39:16.000 --> 0:39:18.680 Of of course, you are the CEO and co founder 0:39:19.000 --> 0:39:21.840 of Brilliant Earth. It is also listed on the nasdeck. 0:39:21.880 --> 0:39:25.400 By the way, b r LT is your ticker, Beth. 0:39:25.520 --> 0:39:27.839 A lot of optimism around the wedding industry, trust me, 0:39:27.840 --> 0:39:30.040 me and Madison. No, the amount of money we are 0:39:30.040 --> 0:39:32.839 shelling out and just being yes at these weddings are 0:39:32.960 --> 0:39:36.640 are kind of insane. But that being said, talk to 0:39:36.760 --> 0:39:38.319 us a little bit about your stock performance here. If 0:39:38.360 --> 0:39:40.680 you're looking at the last year or so, your shares 0:39:40.719 --> 0:39:42.799 have really taken a little bit of a hit. 0:39:42.960 --> 0:39:44.520 What's the stock market missing? 0:39:45.920 --> 0:39:48.840 Well, I think that you know, one, we think that 0:39:48.880 --> 0:39:52.759 there's a ton of value in Brilliant Earth, and you know, 0:39:52.800 --> 0:39:57.160 we're not necessarily concerned with stock performance on any given day. 0:39:57.520 --> 0:40:01.919 You know that said, we are a profitable company. We've 0:40:02.000 --> 0:40:06.120 really been able to differentiate with our brand and being 0:40:06.200 --> 0:40:11.440 the largest single brand independent jeweler in the industry have 0:40:12.400 --> 0:40:16.320 very strong brand awareness. I think the figure I mentioned 0:40:16.320 --> 0:40:18.640 in our last earnings call where we were at sixty 0:40:18.640 --> 0:40:21.360 six percent aided brand awareness, which was a twelve point 0:40:21.960 --> 0:40:25.880 increase over the same measurement a few years ago. So overall, 0:40:25.920 --> 0:40:29.640 I think that we're continuing to gain share, we're profitable, 0:40:30.280 --> 0:40:34.799 we're really differentiating ourselves in a fragmented industry. And yeah, 0:40:34.840 --> 0:40:37.840 we're I think we were part of the twenty twenty 0:40:37.840 --> 0:40:41.840 one IPO class. So I think oftentimes, you know, people 0:40:42.160 --> 0:40:45.719 don't tend to understand our differences versus others. Perhaps that 0:40:45.960 --> 0:40:47.720 when public that maybe shouldn't have. 0:40:49.840 --> 0:40:54.840 And when it comes to the interest in specific products 0:40:54.840 --> 0:40:58.719 that you offer from consumers, can you talk to me 0:40:58.880 --> 0:41:04.600 about scifically sort of the ethically sourced diamond space and 0:41:04.640 --> 0:41:07.720 how you're thinking about that and how the demand story 0:41:07.760 --> 0:41:08.720 for that is going. 0:41:09.880 --> 0:41:12.399 Yeah, you know, as I mentioned earlier, we really were 0:41:12.440 --> 0:41:16.560 founded on the belief that the consumer deserves an ethically 0:41:16.600 --> 0:41:21.040 sourced product for such an emotional purchase that really represents 0:41:22.040 --> 0:41:22.960 love and commitment. 0:41:23.080 --> 0:41:24.359 It was so important that. 0:41:24.560 --> 0:41:27.919 We could trace the source that we were really transparent 0:41:28.440 --> 0:41:31.640 about the offering that we had. We are really focused 0:41:31.680 --> 0:41:34.960 on giving back. We have a brilliantarre foundation that gives 0:41:35.000 --> 0:41:38.080 back to a lot of projects within mining and responsible 0:41:38.120 --> 0:41:41.920 sourcing as well as climate change, and this resonates with 0:41:42.040 --> 0:41:46.640 the younger consumer. I feel like sustainability, transparency or table stakes, 0:41:46.680 --> 0:41:51.440 but customers, I think really appreciate buying from brands that 0:41:51.480 --> 0:41:54.440 they believe in and that come across as authentic to. 0:41:54.400 --> 0:41:55.000 Who they are. 0:41:55.480 --> 0:41:58.160 And so that's what we've been about from the beginning. 0:41:58.400 --> 0:42:00.960 And you know, we talk about this in a really 0:42:01.040 --> 0:42:05.600 open way and I think our customers appreciate it. So 0:42:05.640 --> 0:42:07.200 one of the things that we offer we have a 0:42:07.320 --> 0:42:10.200 really nice selection of sustainably rated lab diamonds. We have 0:42:10.280 --> 0:42:13.919 a really great selection of blockchain enabled diamonds. So we're 0:42:13.920 --> 0:42:18.200 constantly investing in the technology and the underpinnings to show 0:42:18.239 --> 0:42:19.040 to our customer. 0:42:19.320 --> 0:42:19.759 So this is. 0:42:19.880 --> 0:42:22.120 Very blockchain enabled diamonds. 0:42:22.480 --> 0:42:26.960 I did, Yeah, we're using blockchain. We're using blockchain to 0:42:27.000 --> 0:42:30.600 be able to really showcase the journey of a diamond 0:42:30.640 --> 0:42:34.000 to a consumer, so you can understand the manufacturing practices. 0:42:34.080 --> 0:42:36.759 You can understand everything from the rough carrot weight and 0:42:37.160 --> 0:42:40.799 looking at a video of the rough diamond from when 0:42:40.840 --> 0:42:44.200 it's unearthed from the mind. So, I think it's just 0:42:44.400 --> 0:42:47.960 the technology is quite frankly, it's really state of the art, 0:42:48.520 --> 0:42:51.880 and it shows that we're really investing in transparency and 0:42:51.880 --> 0:42:54.640 traceability along the way for the consumer. 0:42:55.000 --> 0:42:56.920 All Right, we'll certainly have to have you back on 0:42:57.120 --> 0:42:59.000 to talk a little bit more about the updates there 0:42:59.080 --> 0:43:01.720 they're seeing in the blockchain space. Bet Gerstein, the CEO 0:43:01.840 --> 0:43:05.080 and co founder of Brilliant Earth, training on the Nasdaq 0:43:05.160 --> 0:43:08.000 with the ticker br l T. We thank you, as 0:43:08.000 --> 0:43:09.520 always for your time. 0:43:12.000 --> 0:43:15.120 Thanks for listening to the Bloomberg Markets podcast. You can 0:43:15.120 --> 0:43:18.920 subscribe and listen to interviews at Apple Podcasts or whatever 0:43:19.000 --> 0:43:22.720 podcast platform you prefer. I'm Matt Miller. I'm on Twitter 0:43:22.920 --> 0:43:25.000 at Matt Miller nineteen seventy three. 0:43:25.280 --> 0:43:27.680 And I'm fall Sweeney. I'm on Twitter at pt Sweeney. 0:43:27.800 --> 0:43:30.480 Before the podcast, you can always catch us worldwide at 0:43:30.480 --> 0:43:32.239 Bloomberg Radio.