Speaker 1: This is Bloomberg Business Wait inside from the reporters and
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Speaker 2: So, with all that's going on, market watchers and many
Speaker 2: of them and business executives continue to remind us we
Speaker 2: cannot forget what is going on geopolitically and on that.
Speaker 2: The White House is certainly contemplating its next move, weighing
Speaker 2: potential responses to that deadly attack on a US base
Speaker 2: in Jordan Byron backed militants over the weekend that killed
Speaker 2: three US soldiers, said to be the first Americans to
Speaker 2: die from such an attack since regional tensions were inflamed
Speaker 2: him by the start of the Israel Hamas War in Gaza,
Speaker 2: which of course started back in October.
Speaker 3: Yeah, depending on press. Secretary Air Force Brigadier General pat
Speaker 3: Ryder was on Bloomberg Surveillance earlier this morning and addressed
Speaker 3: a possible US response.
Speaker 4: We will take deliberate, appropriate action. Our focus here is
Speaker 4: not to broaden a conflict. From the very beginning, we've
Speaker 4: been very focused on ensuring that the situation in Israel
Speaker 4: does not broaden into a wider regional conflict. Unfortunately, what
Speaker 4: you have here are Iranian proxy groups that are exploiting
Speaker 4: the situation and conducting these types of illegal attacks against
Speaker 4: forces that are in the region to actually preserve peace
Speaker 4: and stability. So again, we're going to do what we
Speaker 4: need to do to protect our forces, while also cognitive
Speaker 4: the fact that what we don't want is a wider
Speaker 4: regional conflict.
Speaker 3: That was of course pending on Press Secretary Air Force
Speaker 3: Brigadio General pat Ryder on Bloomberg surveillance earlier this morning
Speaker 3: addressing a possible response. We do also hear from John Kirby,
Speaker 3: National Security Council Coordinator for Strategic Communications, speaking right now,
Speaker 3: who did say that the US will respond on the
Speaker 3: US's schedule, not on anyone else's, all right, So.
Speaker 2: Let's get to the interview with US as retired Major
Speaker 2: General Maston Robinson. He served in combat zones in Liberia,
Speaker 2: Desert Storm, Somalia, Iraq, and in Afghanistan. He commanded at
Speaker 2: every operational level in the Marine Corps, so he has
Speaker 2: seen a lot and has some very deep insight. He
Speaker 2: is geopolitical Intelligence Advisor and board member at Academy Securities Advisory.
Speaker 2: He joins us on Zoom from Greenville, South Carolina. Major Robinson,
Speaker 2: it is great to have you back with us. Curious
Speaker 2: in terms of appropriate response, I think we all wonder
Speaker 2: what that means, what goes into First of all, you
Speaker 2: know firsthand what goes into determining what is an appropriate response.
Speaker 5: Thanks Carol. The first step is attribution. You know, can
Speaker 5: you validate who did it? We certainly can validate where
Speaker 5: the drone came from, but whose fingerprints on the drone
Speaker 5: can be challenging party going dealing with proxies, and you
Speaker 5: have to be careful when you're dealing with proxies. The
Speaker 5: tendency is to say, who historically funds or sports of proxies,
Speaker 5: gloves off, let's go after him. And although that's a
Speaker 5: popular response, I didn't always necessarily the most defendable response.
Speaker 5: The second is you have to look at what's our
Speaker 5: capability to UH to send a response, what's the message
Speaker 5: that it will send, what's our will to send a response?
Speaker 5: And then there's the dicey part of our credibility in
Speaker 5: the response. It's sort of like you know a parent,
Speaker 5: you know with the child, I mean, you need to
Speaker 5: when you say I'm gonna do something, I'm gonna I'm
Speaker 5: gonna do it. So I think the Biden administration is
Speaker 5: definitely trying to figure out how hard of a response
Speaker 5: can they address.
Speaker 6: Can they be.
Speaker 5: Specific at the funder or the supporter, or or is
Speaker 5: there a proxy they really can nail down to go after.
Speaker 5: They'll figure that out and they'll they'll do something. Whether
Speaker 5: that will have the desired effect or not is always,
Speaker 5: you know, the challenge, because these people don't think logically
Speaker 5: like we do, and they don't respond logically like we
Speaker 5: do for the most part.
Speaker 3: Major General Robinson, what did you make of Senator Lindsay
Speaker 3: Graham of South Carolina over the weekend tweeting hit Iran
Speaker 3: now hit them hard? First? What do you make of that? Second?
Speaker 3: Does that make the White House's job more difficult?
Speaker 5: I don't think it makes it more difficult. I mean,
Speaker 5: I think we live in a very political world and
Speaker 5: people make statements for effect. Historically speaking, there's certainly an
Speaker 5: argument made that there have been administrations in the past,
Speaker 5: and I don't mean, you know, going all the way
Speaker 5: back to the eighteen hundreds, but in the past two
Speaker 5: struck very specifically and very hard. And depending on what
Speaker 5: you're talking about, North Korea, Iran, you know, an African nation.
Speaker 5: I mean, each one is independent and how you need
Speaker 5: to measure the calculus of what you're going to do
Speaker 5: because they'll all respond differently. Some of them are very
Speaker 5: very thick skinned. Some of them it doesn't really matter
Speaker 5: what you do, and some you know, if you can
Speaker 5: find the sweet spot, you might do something. But attacking
Speaker 5: Iran right now, I'm not going to say it's a
Speaker 5: bad idea. I'm going to say it's a challenge is
Speaker 5: to what do you attack in Iran? If you're going
Speaker 5: to do it, that you can publicly not just argue,
Speaker 5: but validate that they had a direct fingerprint on what happened. Therefore,
Speaker 5: this was a justified response.
Speaker 2: So is it incorrect to believe that both Washington and
Speaker 2: Tehran are seeking to avoid a direct confrontation over the
Speaker 2: widening Middle East conflict? Is that incorrect for us to
Speaker 2: believe it that both Iran and the US do not
Speaker 2: want to see further escalation with those two specifically involved.
Speaker 5: Yeah, I don't know that would be an accurate characterization.
Speaker 5: I think Iran doesn't necessarily want a widespread conflict, but
Speaker 5: what they definitely want is widespread disruption. They want to
Speaker 5: disrupt the you know what's happened over the last year
Speaker 5: plus of going all the way back to the Abraham
Speaker 5: McCords and the potential partnership between Saudi and Israel, and
Speaker 5: you know, the partnership within the Gulf that is not
Speaker 5: just oil based but has new economic opportunities. You've got
Speaker 5: you know, both Egypt and Jordan pretty much saying we're
Speaker 5: not going to take on the fanaticals in our country.
Speaker 5: So there's a lot of stake here that's going on.
Speaker 5: That's that's outside the parameters. I think Iran is very
Speaker 5: much trying to disrupt, but I wouldn't say they want
Speaker 5: a war with the US.
Speaker 2: We have a partial map of the region, but to
Speaker 2: show where the drone attack was over the weekend that
Speaker 2: led to US deaths. You know, every time general that
Speaker 2: we look at them out for the Middle East, including
Speaker 2: the attack over the weekend, we see how close everyone
Speaker 2: is geographically. We're reminded of how it wouldn't take much
Speaker 2: for it to snowball. At the same time, seeing how
Speaker 2: close everyone is, it's reminded us of what meaning the
Speaker 2: region must be thinking about how easily could get out
Speaker 2: of control and how much everyone in the region could
Speaker 2: stand to lose. And yet this is where we all
Speaker 2: lean on your experience in the region, and you've kind
Speaker 2: of hinted at some of it is how does the
Speaker 2: region see it. Do they view more attacks as an
Speaker 2: escalation and something to be worried about, or are they like, Okay,
Speaker 2: maybe we'll gain something out of this.
Speaker 5: Well with the US and maybe parts of Europe probably
Speaker 5: have a different calculus than some of the rest of
Speaker 5: the world in regard to human life. I mean, nobody
Speaker 5: wants to see some idea, but we probably put a
Speaker 5: bigger value on three soldiers, airmen, marines that were in
Speaker 5: a remote area in a small logistics base on the
Speaker 5: border of yours and and yeah, that they got hit
Speaker 5: by an indirect issue in their billeting space. The building
Speaker 5: space piece is probably what will be get the most attention.
Speaker 5: That you weren't addressing them while they were doing something
Speaker 5: that was antagonistic, but you're addressing them while they're sleeping.
Speaker 5: Part of that is how do we harden our facilities,
Speaker 5: How do we ensure that where they're sleeping is not
Speaker 5: as well known. Is more hardened is? I mean, in
Speaker 5: the fact it was thirty casualties. You probably can address
Speaker 5: some of that by, you know, a wider separation between
Speaker 5: who's sleeping where and how they're surrounding what they're sleeping in.
Speaker 5: You're not going to put top cover on top of it.
Speaker 5: It's going to be bulletproof. So it's always a threat
Speaker 5: anytime we deploy our forces overseas that they're going to
Speaker 5: be vulnerable because they're not going to be in hardened facilities.
Speaker 5: So part of this is a factor of if people
Speaker 5: strike us in a soft target like this, we will
Speaker 5: come after them and we'll make them pay. That's certainly
Speaker 5: something that I know the administration will be looking at
Speaker 5: is how do we hit back hard enough to where
Speaker 5: they go ouch. I don't want to do that yet,
Speaker 5: but how do we do it in such a way
Speaker 5: that it doesn't have a second and third order effect
Speaker 5: that we later regret. And I hate going down a
Speaker 5: political road and this isn't political, but but we can
Speaker 5: be victims. We can undermine our message by our previous messages.
Speaker 5: And so you know, the President's going to have hard
Speaker 5: He's got to be challenged to figure out. How do
Speaker 5: we really hold Iron accountable and make sure they know
Speaker 5: that we take this very seriously and that we're not
Speaker 5: going away, you know, because they will measure this, whether
Speaker 5: we want them to do or not. I'm not sure
Speaker 5: this is napples and apples, but they'll measure it against
Speaker 5: the pull out in Afghanistan and the you know, the
Speaker 5: public statement is time for soldiers, sailors, are marine us
Speaker 5: to stop dying and god forsaken places halfway around the
Speaker 5: world that we don't care about. That's not what the
Speaker 5: President intended. That's not what he would would do. A
Speaker 5: parallel to hear it's got nothing new with that has
Speaker 5: to do with what's Iran hearing and what are they
Speaker 5: stringing together and how do we send them a different
Speaker 5: message that makes them sit up and go, Okay, this
Speaker 5: is different.
Speaker 3: This is not the run the mill, Major General. You
Speaker 3: first and foremost, we're talking about a story that involves casualties,
Speaker 3: US deaths. It's a human story. It's a story about conflict,
Speaker 3: but it's also a story that could have widespread economic implications,
Speaker 3: as we've seen play out in the region over the
Speaker 3: past few months. After all, you are an advisor and
Speaker 3: board member at Academy Securities Advisory. What is the way
Speaker 3: that you are providing advice right now to your clients,
Speaker 3: to your company? What is the thing that you're telling
Speaker 3: them about this conflict.
Speaker 5: I think unfortunately we're probably faced with the Red Sea
Speaker 5: avenue of transportation, the Bible Ol Mandeb straight the Red
Speaker 5: Sea and the Seuss Canal being certainly problematic. So that's
Speaker 5: a probably somewhere around the me and not only increased
Speaker 5: cost of that ship going down the Cape of Good
Speaker 5: Hope instead of going through the more direct route. So
Speaker 5: it's going to be a finance piece that will certainly
Speaker 5: bleed into inflation and the cost of things. It'll be
Speaker 5: an insurance piece for shipping that are in key shipping,
Speaker 5: because nobody's going to ensure that ship going through an
Speaker 5: area that is problematic without really jacking the insurance up
Speaker 5: to insuring this is being paid for. So it will
Speaker 5: impact the economy. Probably what's happening they're in Syria will
Speaker 5: an pack the economy less than what's happening by the
Speaker 5: Huthis and in the Red Cita.
Speaker 2: But is that because you believe what's going on on
Speaker 2: the Red Sea, it's not going to wrap up anytime soon.
Speaker 2: It's going to be something that lingers if you will
Speaker 2: this year.
Speaker 5: So again the challenge is who's the audience. And if Iran,
Speaker 5: I think is probably more rational than the Houthis. The
Speaker 5: Houthis don't really have an organizational structure, a national instinct
Speaker 5: that has them thinking through these calculuses like Iran will
Speaker 5: have to do as a nation that wants to be
Speaker 5: influential as a nation. And that's the challenge with with
Speaker 5: irregulars you know that are around the world. Honestly, in Yemen,
Speaker 5: the the president Salom was probably the most effective. Yeah. Uh,
Speaker 5: we never controlled the tribes. What he did was he
Speaker 5: in essence, brought the tribes into Snah, bought their tribal
Speaker 5: villas and kind of the premise, keep you your friends close,
Speaker 5: the enemies closer.
Speaker 6: Right.
Speaker 5: He couldn't control them, but he tried to influence them
Speaker 5: in ways that were unconventional. And that's sort of still
Speaker 5: what you've got there with the hoho Thies and with
Speaker 5: Yemen as a nation that's more unstructured than Iran is
Speaker 5: as a nation.
Speaker 2: All right, Well, so much appreciated, Insight general, So thank
Speaker 2: you so much for joining us. Again, that's major General
Speaker 2: Maston Robinson, Geopolitical Intelligence Advisor to Academy Securities Advisor. He's
Speaker 2: also a member of their board. Joining us on Zoom
Speaker 2: from Greenville, South Carolina. I feel like we started the
Speaker 2: new year talking about concerns about geopolitics. We continue to
Speaker 2: kind of cautiously use the word escalation, but nonetheless, I
Speaker 2: guess now we're just kind of waiting to see what
Speaker 2: the US responds to see.
Speaker 3: Not a big response from oil on this.
Speaker 2: Not yet, Yeah, yeah, exactly. All right, folks, just getting
Speaker 2: started on this Monday.
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Speaker 2: So one of the things that we love talking about
Speaker 2: is what's going on with the consumer, the health of
Speaker 2: the consumer. We do it because it's so important in
Speaker 2: terms of US economic momentum. And on that tim we've
Speaker 2: had some recent economic reports showing robust gains in both
Speaker 2: personal income and spending in December. We also had consumer
Speaker 2: sentiment soaring in early January to its highest in about
Speaker 2: three years.
Speaker 3: Don't forget about the FED page book and found resilient
Speaker 3: consumer spending that helps propel the US economy in recent weeks,
Speaker 3: offsetting weakness and other sectors like manufacturing.
Speaker 7: All sounds good, Yeah, it does sound good.
Speaker 8: That's great.
Speaker 3: Everything is awesome.
Speaker 2: Not so fast because credit card delinquency rates. Sorry to
Speaker 2: be the bummer here. Credit card delinquency rates have exceeded
Speaker 2: pre pandemic levels, while the share of borrowers making only
Speaker 2: the minimum payment climbed above ten percent for the first
Speaker 2: time since twenty nineteen. This is according to a Federal
Speaker 2: Reserve Bank of Philadelphia report TIM that was out earlier
Speaker 2: this month.
Speaker 7: Well that's the bummer, popt.
Speaker 3: Okay, we let's get into it with our next guest,
Speaker 3: who's also tracking the credit health of the US consumer
Speaker 3: with us is the CEO of vantage Score, Silvio Tavares. Silvio,
Speaker 3: good to have you with us this afternoon here from
Speaker 3: San Francisco. We should note that vantage Score is a
Speaker 3: joint venture of Experience, Equifax, and TransUnion. It provides credit data,
Speaker 3: credit risk modeling, and analytics based out in the West Coast.
Speaker 3: So you got a recent report out December report talk
Speaker 3: to us about specific data points in the report that
Speaker 3: has you concerned.
Speaker 6: Well, yeah, I think the main key point to start
Speaker 6: off with is that actually the overall consumer is healthy.
Speaker 6: You know, we measure the consumer credit health by the
Speaker 6: average vantage score. A low vantage score is three hundred,
Speaker 6: a perfect vantage scores eight point fifty, and prime, which
Speaker 6: is the level where consumers usually get the best rate,
Speaker 6: is vantage score six sixty. As you look through the
Speaker 6: end of December we publish this data today or monthly
Speaker 6: credit gauge, the average consumer credit score was seven oh one.
Speaker 6: So that's actually a pretty healthy score. But what that
Speaker 6: masks is an area of concern because basically the consumer
Speaker 6: is experiencing a bit of a credit hangover. So averages mean, yes,
Speaker 6: and the average and the mean are the same for
Speaker 6: credit scores typically because you see that nice normal distribution, Yes, yes, yes, correct,
Speaker 6: So go ahead.
Speaker 2: You were saying that it masks some of the underlying
Speaker 2: maybe concerns.
Speaker 6: There, exactly right, because what we saw in December, which
Speaker 6: is the data that we published today, was that all
Speaker 6: of a sudden, you're starting to see some signs for
Speaker 6: concern in terms of the increase in credit card credit
Speaker 6: card balances in December, we're up over eight point two
Speaker 6: percent on a year over year base basis. That's a
Speaker 6: big jump. And as we look also at delinquencies, the
Speaker 6: rate at which people are paying their loans late, we're
Speaker 6: actually seeing that increase on a year over year base.
Speaker 6: It's a little bit of an increase, but when you
Speaker 6: see that trend, that's always cause for concern. And so
Speaker 6: the consumer is experiencing a little bit of a credit hangover.
Speaker 6: They spent a lot in December and we're going to
Speaker 6: watch that going through the bounce of the year.
Speaker 3: Is the credit hangover portend anything more concerning for you
Speaker 3: than people just owing more on their credit cards? I mean,
Speaker 3: what are the knock on effects of this? What has
Speaker 3: you concerned?
Speaker 6: Well, the key concern is if this continues, you're going
Speaker 6: to see a rising level of defaults and delinquencies. And
Speaker 6: it's not all consumers are experiencing the same thing. So
Speaker 6: for example, for the higher end, higher average age consumer,
Speaker 6: you're not seeing those delinquencies. But as you look to
Speaker 6: the lower credit tiers vantage score, subprime, and near prime,
Speaker 6: there's where you're seeing a higher rate of concern. Now
Speaker 6: as you look at banks, you know, using the analogy
Speaker 6: credit hangover, Well, the banks are still serving drinks. We
Speaker 6: actually saw credit origination's increase in the month of December
Speaker 6: compared to November, and also increase on a year over
Speaker 6: year basis. So banks we expected we're going to tighten,
Speaker 6: that didn't happen in December. We're actually seeing banks continue
Speaker 6: to lend really across most categories, and so we're going
Speaker 6: to watch that trend because obviously if you have higher
Speaker 6: delinquencies coupled with increased lending, that's not a good picture
Speaker 6: for banks.
Speaker 2: We have a chart to share with everybody, and it
Speaker 2: does show what you guys have seen in terms of
Speaker 2: credit card balances over the last four years. So you
Speaker 2: can just see from November twenty two, from December twenty
Speaker 2: twenty two to November twenty twenty three, December twenty twenty three,
Speaker 2: you can see the uptick and the build right, that
Speaker 2: gradual build in terms of credit card balances. Having said that,
Speaker 2: Sylvia give us an idea of you guys are getting
Speaker 2: data right from all the credit reporting agencies. I mean,
Speaker 2: so is it a nice cross section if you will,
Speaker 2: in terms of the US population.
Speaker 6: Yes, very much. So we have the most authoritative source
Speaker 6: on that data because vantage score actually scores approximately thirty
Speaker 6: million more consumers than conventional credit scores. We're used by
Speaker 6: eight of the top ten banks and over three thousand banks.
Speaker 6: In FinTechs we grew at thirty percent last year and
Speaker 6: approximately nineteen billion Vantage scores were used. So it's the
Speaker 6: most authoritative source, and that's to challenge with a lot
Speaker 6: of the economic data that you're seeing from other sources.
Speaker 6: Right now, it's backward looking. It's like driving in the
Speaker 6: rear view mar We have the most recent data and
Speaker 6: what it shows is overall, the consumers healthy, but we're
Speaker 6: starting to see some signs for concern. That delinquency rate
Speaker 6: increasing is one of them. The spike in credit card
Speaker 6: balances is another.
Speaker 3: I mean, all this has me thinking about the power
Speaker 3: that the US consumer has when it comes to the economy.
Speaker 3: I mean, this is an economy that the consumer certainly powers.
Speaker 3: Are there any macroeconomic takeaways that you can give us
Speaker 3: about credit score and what it means for consumer spending?
Speaker 6: Yeah, Well, the credit score, the vantage score is the
Speaker 6: real authoritative source of credit health. And what we're seeing
Speaker 6: is it's becoming very much of a tail of two cities.
Speaker 6: Those older, more affluent consumers, Generation xers, they're actually doing
Speaker 6: pretty well. So for example, in December, we saw Generation
Speaker 6: exers increasing their credit card balances. But those folks, you
Speaker 6: don't have to worry about them. They typically have higher
Speaker 6: average credit scores and higher wealth. What's more concerning is
Speaker 6: that younger and mid tier consumer, and when you look forward,
Speaker 6: they're going to be facing some economic headwinds. The most
Speaker 6: significant one is student loans. We're seeing those student loans
Speaker 6: pay and kick in.
Speaker 3: Is one reason that their credit score isn't as high,
Speaker 3: or their vantage score isn't as high, is because potentially
Speaker 3: they don't own a house, they don't own an apartment,
Speaker 3: they don't have that credit history that younger generations or
Speaker 3: older generations had when they were their age.
Speaker 6: One hundred percent. And what we see is that home
Speaker 6: ownership is a huge driver of wealth. The average home
Speaker 6: equity in a home today is two hundred and forty
Speaker 6: eight thousand dollars. So if you have a home, you're
Speaker 6: doing pretty good. If you don't, you have more challenge.
Speaker 6: And that younger consumer doesn't have as much as an
Speaker 6: economic cushion to weather the storm against rising inflation, and
Speaker 6: that higher average credit card statement that they have, they
Speaker 6: also don't have much of a cushion to pay for
Speaker 6: that unexpected loan repayment, and that's why it's so important.
Speaker 6: Recently we saw some of the regulators actually mandate they
Speaker 6: use advantage core for mortgage and so we're going to
Speaker 6: be seeing a lot more of those younger consumers, those
Speaker 6: underserved consumers, getting a chance at their first home, and
Speaker 6: we expect that to really help with credit health.
Speaker 2: I feel like these are a lot of the topics
Speaker 2: we've talked about in the last year or so. Is
Speaker 2: there anything just thirty seconds left here, Sylvia that was
Speaker 2: surprising to you that you think our investing audience should
Speaker 2: know about. It might be whether it's cause of concern
Speaker 2: or cause of come if.
Speaker 6: You will just quickly, well, I think the most surprising thing,
Speaker 6: the most newsworthy thing, is the reality that banks aren't
Speaker 6: tightening the way that we expected. We expected to see
Speaker 6: into December a cooling economy and banks really pulling back
Speaker 6: on their loans. We didn't see that. In fact, we
Speaker 6: saw the opposite, and so that's a key theme we're
Speaker 6: going to be watching throughout the year. Of course, the
Speaker 6: whole reason why the Fed increased rates. Is that they
Speaker 6: expected banks to tighten somewhat, and actually we're seeing banks
Speaker 6: very in a very principled way looking to maximize that
Speaker 6: net interest margin on new loans they're making. So we'll
Speaker 6: have to continue monitor that.
Speaker 2: All right, We've got to leave it there. Sevio Tavara's
Speaker 2: CEO Advantage Score joining us here in studio.
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Speaker 2: Well, they certainly will soon in a very expensive arena
Speaker 2: out on the West coast. This is one of the
Speaker 2: most read stories on the Bloomberg terminal. It's about the
Speaker 2: most expensive basketball arena ever built.
Speaker 6: How much?
Speaker 2: While we're talking, quote, well north two billion dollars, that's
Speaker 2: a quote.
Speaker 3: Does that even matter? Though it's Steve Balmer, I don't know.
Speaker 3: Here's some other numbers that chew on. The arena's got
Speaker 3: one and sixty toilets and urinals, one hundred nine to
Speaker 3: nine countdown clocks, a forty four thousand square foot halo
Speaker 3: shaped led board, a Florida ceiling bank of forty five
Speaker 3: hundred seats on one baseline, and one very enthusiastic and
Speaker 3: energetic team owner none other than said Steve Baumber.
Speaker 2: Indeed well last month, Bloomberg News Business of Sports reporter
Speaker 2: Ara Budwet flew out to la and put on a
Speaker 2: safety vest, boots and a helmet to get a tour
Speaker 2: of the new into It Arena, and he joins us
Speaker 2: here in the Bloomberg Get Director Broker studio along with
Speaker 2: the editor of Bloomberg BusinessWeek, Jill Weber, and Jill I
Speaker 2: feel like, you know, when you've got a well known
Speaker 2: billionaire spending big time in sports, lots of superlatives. This
Speaker 2: is a story bade for Bloomberg Business There's.
Speaker 7: A genre here where we like to go to the
Speaker 7: stadium's and actually see these facilities kind of come into being.
Speaker 7: And what's really fascinating about this one is in Los Angeles,
Speaker 7: the Clippers have always been sort of second fiddle to
Speaker 7: the Lakers, and forever they were sort of you know,
Speaker 7: their their schedule had to not only work around the Clippers,
Speaker 7: but around the Lakers, but whatever else was also happening
Speaker 7: in LA. When Steve Balmer bought the Clippers for two billion,
Speaker 7: it started this process to really kind of change the
Speaker 7: world's perception of what Clippers basketball will look like. The
Speaker 7: team is quite good, and beginning next season they'll be
Speaker 7: playing in their own arena for the first time. He's
Speaker 7: a basketball junkie, and so his obsession with the stadium
Speaker 7: and the arena is I think this manifestation of that.
Speaker 7: And Ira got to you got to wear a hard
Speaker 7: hat right with Bomber.
Speaker 9: Boots Fest, not with Bomber, I was. I was at
Speaker 9: Crypto dot Com arena, where the Clippers currently play and
Speaker 9: share with the Lakers, with him, and then I got
Speaker 9: a tour with the team's president of business operations, Gillian Zucker.
Speaker 7: Okay, so take us through like what this is going
Speaker 7: to be like as a fan of like what Bomber
Speaker 7: is trying to build.
Speaker 9: It's very interesting because he has a very distinct point
Speaker 9: of view with it. He wants all the fans basically
Speaker 9: out of their phones, locked in on the game, cheering loudly,
Speaker 9: providing a competitive advantage to the home team he wants Basically.
Speaker 7: Wouldn't you want that? Yeah, he's great, he went well,
Speaker 7: but that's supposed to go to a game. I got
Speaker 7: a pick billion dollars to build a place where that
Speaker 7: can happen.
Speaker 9: But if you want to maximize revenue, arguably you put
Speaker 9: hundreds of suites where people sort of chill out and
Speaker 9: commits during the game. He's not going for that approach.
Speaker 9: And he sees this as an alternative to the Lakers
Speaker 9: and as a kind of harkening back to an old
Speaker 9: style of fandom where you were engaged in the game throughout.
Speaker 3: Is the idea that revenue growth happens when the fans
Speaker 3: get more excited, the team gets better, and then the.
Speaker 9: Ticket prices go up. I think his idea is look,
Speaker 9: or is Steve Bomber and he doesn't He one of
Speaker 9: the part of the world and he wants seventeen five
Speaker 9: hundred Steve baumbers there with him. He is incredibly enthusiastic.
Speaker 3: Is he that enthusiastic in person?
Speaker 9: In person, he's everything that you've you know, seen in
Speaker 9: the sort of you know, famous monkey Boy clips online.
Speaker 9: He brings that energy and h and I think he
Speaker 9: wants that energy in the arena, and that's his first priority.
Speaker 9: I think they think that's compatible with, you know, making
Speaker 9: it work financially. But and that the part of the
Speaker 9: reason it can work for the Clippers is that they
Speaker 9: need to be an alternative in the LA marketplace. The
Speaker 9: Lakers are one thing. The Clippers are going to be,
Speaker 9: in his mind, the place for the basketball purists who
Speaker 9: want to be on their feet all game long.
Speaker 7: So to build this, how did they go about finding inspiration?
Speaker 6: They went all over the world.
Speaker 9: They looked at soccer stadiums, and that's where they came
Speaker 9: up with the idea of having every fan walk down
Speaker 9: to their seats, so even if you're in the last row,
Speaker 9: you kind of enter from above and go down.
Speaker 7: I love that idea, Yeah, you just it never occurred
Speaker 7: to me, but you know, when you go to basketball game,
Speaker 7: you kind of come in and then immediately like turn
Speaker 7: away from the the court as you find your seat,
Speaker 7: which for me is always.
Speaker 1: Yeah.
Speaker 3: Yeah.
Speaker 9: They borrowed that from there. They took ideas from all
Speaker 9: over the world and they everything was focused around the
Speaker 9: idea of, like I said, keeping people's attention on the game.
Speaker 9: So they have really limited concessions, so that you don't
Speaker 9: wander the arena looking for your favorite item they have.
Speaker 3: There's like a consistency.
Speaker 6: Yeah, it's like eight dogs.
Speaker 9: Yeah, it's exactly where.
Speaker 3: Yeah.
Speaker 9: And the way they're setting up to check out is
Speaker 9: this frictionless. You walk in, you take what you want,
Speaker 9: you walk out, don't stop to pay. They are going
Speaker 9: to try and put everything on my credit card exact.
Speaker 9: They have these countdown clocks. You mentioned those one hundred
Speaker 9: ninety nine countdown clocks. Those are going to show people
Speaker 9: how much time is left in a timeout before they
Speaker 9: need to get back to their seats. Even the suites
Speaker 9: are set up so the seats are in your way.
Speaker 9: If you're standing in the sort of dining area, typically
Speaker 9: you can kind of lean on a counter and look
Speaker 9: at over the game while you're eating and drinking.
Speaker 6: He's got it set up.
Speaker 9: No, you've got to get back out to your seat
Speaker 9: to watch the game, so you can't kind of multitask.
Speaker 9: And this wall is a fifty one rows of uninterrupted seats,
Speaker 9: no suites in the way, Florida ceiling where you have
Speaker 9: to be a Clippers fan to get tickets. They're going
Speaker 9: to have a loyalty program where you have to like
Speaker 9: post something on social media of yourself in a Clippers
Speaker 9: jersey or answer trivia questions in order to even get
Speaker 9: access to buying those tickets. And they want it to
Speaker 9: be like a kind of Cameron indoor fieldhouse.
Speaker 7: I feel I love that, but I also I'm just
Speaker 7: going to guess there's going to be such a program
Speaker 7: to try and infiltrate that space and just be like
Speaker 7: like the one Lakers fan in the clipp Yes.
Speaker 9: That policing that is going to be really interesting.
Speaker 3: You know they're in watching that.
Speaker 9: Like I know, in Europe it's traditional, like you can't
Speaker 9: wear away colors except for in the away supporter section
Speaker 9: of a football match there.
Speaker 1: But we don't have that.
Speaker 6: Trust in America.
Speaker 2: Does the NBA have any say in terms of arena
Speaker 2: in terms of what needs to be done or no.
Speaker 2: An owner can kind of do what he wants, especially
Speaker 2: when it's his money.
Speaker 9: There's a set of standards, but it's pretty like, you know,
Speaker 9: you got to have so many seats and you got
Speaker 9: to a certain level of amenities and stuff. But but
Speaker 9: in terms of like what he wants to do within that,
Speaker 9: there's a lot of latitude.
Speaker 3: Okay, you didn't mention toilets, which I mentioned at the top, Right,
Speaker 3: can you talk about I'm sorry I wrote toilet and
Speaker 3: I want people to know I wasn't just I'm not
Speaker 3: the only one obsessed with toilets. Okay, right, I mean sorry,
Speaker 3: Go ahead.
Speaker 7: Whatever your level of obsession with toilets. We're gonna see
Speaker 7: if it tops Steve Bummers.
Speaker 2: Okay, anybody who listens knows we are both obsessed with
Speaker 2: toilet toilets.
Speaker 9: Sixty last count. Yeah, they say it's three times the
Speaker 9: typical NBA arena ratio of seats to toilets. So and again,
Speaker 9: the idea with that is he doesn't want you standing
Speaker 9: in line. The Clippers don't want you standing in line
Speaker 9: when the game's going on, so they're trying to get
Speaker 9: you in and out as fast as possible. And so Bomber,
Speaker 9: you know, at the groundbreaking did a reprise on his developers, developers,
Speaker 9: developers chant with toilets, toilets, toilets. The team you know,
Speaker 9: they're like trying to get him to say fixtures and
Speaker 9: rope it in a little bit, but you know it's again,
Speaker 9: it's just about basically, he wants hopefully everyone watching the
Speaker 9: game for every second.
Speaker 6: That's the contract.
Speaker 7: I want to know everything about that contract of just
Speaker 7: like how you did on toilets with Steve Bomber. But look,
Speaker 7: it's like it's easy to make light of this. Yeah,
Speaker 7: I so appreciate the attention to that level of detail.
Speaker 7: Like we've all been to games and waited in the
Speaker 7: line of these about them and been like why am
Speaker 7: I waiting in line? Like and I'm speaking as a
Speaker 7: guy here. I mean, it's even worse for female talk
Speaker 7: about we women.
Speaker 2: Yeah, yeah, real quickly, our ticket price is going to
Speaker 2: go down. It sounds like this is all about for
Speaker 2: the fans.
Speaker 7: Do prices go down?
Speaker 2: We've only got about twenty twenty five seconds.
Speaker 9: Prices go up and they and they are trying to yes,
Speaker 9: they you know, this thing is more than two billion
Speaker 9: to build, and they're trying to move their fans over
Speaker 9: from the current arena and bring in new fans. Uh so,
Speaker 9: and it's it's it's a pretty dazzling new venue that
Speaker 9: they have planned. So they need to pay for that,
Speaker 9: and they think fans.
Speaker 3: Will will help you that the team is pretty good.
Speaker 9: Yeah, I mean that's a big piece. They've got a
Speaker 9: decent shot at a deep run in the playoffs.
Speaker 2: So well, it's a killer story, it's among the most read,
Speaker 2: and so glad that we could spend some time talking
Speaker 2: with you, of course, our Bodway Business of Sports reporter
Speaker 2: at Bloomberg News here in studio, along with the editor
Speaker 2: of BusinessWeek till web.
Speaker 6: Journal.
Speaker 1: How about you let me drive?
Speaker 7: No, no, I want to drive.
Speaker 9: It's a good question.
Speaker 3: It's the drive to the clothes for me.
Speaker 5: Think well.
Speaker 1: By Young and Don on Bloomberg Radio.
Speaker 2: All right, everybody, just under eighteen minutes left in tdy's
Speaker 2: trading sessions the first of the week. Yeah eighteen, Yeah,
Speaker 2: under eighteen.
Speaker 3: We're gonna head record has again.
Speaker 2: I don't know, but it's really been interesting in the
Speaker 2: last hours. So I feel like since that one headline cross,
Speaker 2: I don't know if there's a direct correlation of US
Speaker 2: corporate bond sales hitting one hundred and seventy six billion
Speaker 2: to set a record in January, we have seen momentum
Speaker 2: build here in the trade. So we are just off
Speaker 2: our highs of the session for each of the three
Speaker 2: major equity averages nasdak out pacing up about one percent
Speaker 2: right now and right.
Speaker 3: Now, if we were to close right here on the
Speaker 3: s and p five hundred and forty nine to twenty
Speaker 3: three would be closing at a record too.
Speaker 2: We've seen a few records down this year, so let's see.
Speaker 3: What Jeffrumpblman has to think about it. He's chief investment
Speaker 3: strategists and head of equities at Mariner Wealth Advisors. He
Speaker 3: joins us once again on a zoom from Cincinnati. Jeff,
Speaker 3: we haven't seen you or heard from you in twenty
Speaker 3: twenty four, So happy New Year.
Speaker 1: How are you.
Speaker 8: I'm great, you know. I I think everybody's probably in
Speaker 8: a pretty good mood right now, so hopefully you guys
Speaker 8: are as well.
Speaker 2: It didn't hurt to open app market, Yeah, didn't hurt
Speaker 2: to open up, right. Your four oh one case statements
Speaker 2: are pop. It open at the end of the year.
Speaker 2: It was a good ending to the year.
Speaker 3: Absolutely, So you guys, you guys called this that you
Speaker 3: were bullish at the end of last year. I want
Speaker 3: to get to that in a minute, but I want
Speaker 3: to talk about twenty four because you argue that this
Speaker 3: is a quote back to normal year, normal economy, normal
Speaker 3: rates of inflation and interest rates, normal supplied demand conditions
Speaker 3: in the labor market, as well as levels of labor
Speaker 3: productivity and normal earnings growth. What makes you so confident
Speaker 3: that we are finally going to return to normal.
Speaker 8: Well, I think you know, we were confident going into
Speaker 8: actually twenty twenty three, and I know you want to
Speaker 8: talk about twenty twenty four, but I think that sets
Speaker 8: the table for twenty twenty four. And we thought that
Speaker 8: twenty three would be the verse of twenty two. All
Speaker 8: the panic happened in twenty two. The stock market leads
Speaker 8: the economy, and the stock market thought we'd have a
Speaker 8: recession and we would have very weak earnings, and our
Speaker 8: thesis last year and the reason we were positive and
Speaker 8: continue today is we thought we'd have better than feared
Speaker 8: outcomes on the economy and earnings, that we would have
Speaker 8: inflation calming, and that we would have the FED peaking
Speaker 8: at interest rate levels that were actually quite normal, and
Speaker 8: that just kind of played out. And you know what,
Speaker 8: it's not different. It's not like that's some unusual thing.
Speaker 8: Most of the time, the fundamentals, the evaluation levels, and
Speaker 8: the technical trends are neutral to positive and that's where
Speaker 8: they've been the whole time. And it's everybody else that
Speaker 8: freaks out and thinks, well that can't hold. And generally
Speaker 8: the data comes out and it proves that, yeah, it's neutral, positive,
Speaker 8: and it remains that way. Inflation's calmed. We've gotten great
Speaker 8: economic news with regard to GDP for four. We had
Speaker 8: already had a strong Q three. Consumer confidences up, retail
Speaker 8: sales is strong, and yet inflation's calming, and the Fed
Speaker 8: can can kind of, you know, chill a little bit
Speaker 8: here while earnings look in that environment to grow about
Speaker 8: ten percent, that to me explains normal. That's what normal is,
Speaker 8: and I would add to that for everybody that's listening,
Speaker 8: that also means normal volatility, normal corrective action. The market generally,
Speaker 8: you know, corrects ten to twenty percent each and every year,
Speaker 8: so it's.
Speaker 6: Not a straight line up to new highs.
Speaker 8: We do have a target of fifty two to fifty
Speaker 8: four hundred for this year. Last year we had a
Speaker 8: target of forty five to forty eight hundred, and we
Speaker 8: were right in between there. And not a lot has
Speaker 8: changed other than just confirmation that inflation's transitory and interest
Speaker 8: rates and stabilize.
Speaker 3: Hold on level. Look good, Carol. He said it. He
Speaker 3: said the tea word trendsdentory transitory. Yeah, that's like a
Speaker 3: blast from the past. We thought we all thought inflation
Speaker 3: was transitory in the end. Was it transitory? Yeah, it
Speaker 3: kind of was.
Speaker 8: You know, it's funny we made fun of everybody said
Speaker 8: it was transforming.
Speaker 6: Guess what it was?
Speaker 8: Transform Yeah.
Speaker 2: As a former gymnast, you got to stick that landing
Speaker 2: and you got to hold it. So I do think, right,
Speaker 2: we've seen certainly, you know, if you look at the
Speaker 2: six month trend and so on and so forth in
Speaker 2: terms of inflation or the average you know, kind of
Speaker 2: rolling rate, if you will, you know we are we're
Speaker 2: at that two percent, you know, in terms of what
Speaker 2: the Fed wants. It's just hard to understand if there
Speaker 2: are some underlying fundamentals that maybe push what the kind
Speaker 2: of lower end of rates should be, whether it pushes
Speaker 2: it up when you look at something like, I don't know,
Speaker 2: the two or the ten ten maybe is probably more important.
Speaker 2: I'm looking at a you know, for even you know,
Speaker 2: is that kind of where we should be? That's normal
Speaker 2: going forward for you?
Speaker 8: Jeff, Well, well, I'll tell you what's normal going back
Speaker 8: to almost the Civil War. If you look at the data,
Speaker 8: what's Normal's four point seventy five percent. That's the average
Speaker 8: tenure yield at various data points. But yeah, we think
Speaker 8: that the range is going to be somewhere between three seventy.
Speaker 6: Five and four and a half. And the way you
Speaker 6: kind of, you know.
Speaker 8: Want to put that in perspective, if inflation's running, let's
Speaker 8: let's call it two and a half right now, the
Speaker 8: run rates too, you know, might might might that be
Speaker 8: getting ahead of ourselves to say we're it too. Let's
Speaker 8: let's call it two and a half.
Speaker 3: The normal.
Speaker 8: Real yield is somewhere around one to two percent. So
Speaker 8: if you add to that inflation a real or a
Speaker 8: one hundred basis point to two hundred basis point kind
Speaker 8: of you know, real yield, then you're looking at a
Speaker 8: nominal yield of somewhere around four four and a half percent.
Speaker 8: So yeah, I think that that that's normal.
Speaker 3: Hey, Jeff, you got a ton of stocks that you
Speaker 3: sent us that you that you like. We don't have
Speaker 3: time to get to them all, but a couple that
Speaker 3: I want to highlight, starting with in video. You think
Speaker 3: there's still more room to run higher for video.
Speaker 8: You know, it's so funny. We looked at every it's
Speaker 8: almost like doing fantasy football, you know, where we sit
Speaker 8: down and you do your picks once a year for
Speaker 8: something like that. Three times a year, we really do
Speaker 8: a deep dive in all the stocks that we own,
Speaker 8: a deep deep dive on the fundamentals, evaluation of the technicals,
Speaker 8: and we rate and rank them. And Video is trading
Speaker 8: at thirty times earnings. They had one hundred and fifty
Speaker 8: percent revenue growth last year, two hundred and fifty percent
Speaker 8: earnings growth, and they're they're guiding for about eighty percent
Speaker 8: earnings growth this year, and yet they're trading at thirty times.
Speaker 8: So yeah, I think their end markets are really strong,
Speaker 8: and I do think that that's a very reasonable price
Speaker 8: for that kind of growth.
Speaker 1: That's got some.
Speaker 8: Runway as GPUs and AI and cloud continue to do
Speaker 8: real well. And you know, if you don't like Nvidia,
Speaker 8: AMD would be also right in there with those same
Speaker 8: drivers and some real new product catalysts. Yeah, that could
Speaker 8: growth there linked to the same kind of secular trends well.
Speaker 2: And as it sits right now in Nvidia is the
Speaker 2: second best performing stock in the S and P five
Speaker 2: hundred this year, up about twenty six percent so far
Speaker 2: this year. It was the number one in twenty twenty
Speaker 2: three Advanced micro Device's AMD is the third best performing
Speaker 2: name in the S and P five hundred. It's up
Speaker 2: about twenty percent.
Speaker 8: No.
Speaker 2: Number two is Nvidia. Number three is AMD. Number one
Speaker 2: is Juniper, up about twenty six percent. Yeah, so really
Speaker 2: smout performance. Always fun. Happy New Year. Jeff Cruppleman, Chief
Speaker 2: investment Strategist, Head of Equities over at Mariner Wealth Advisors.
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