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Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 2: We can break down this story here on Nike with
Speaker 2: Putum Goil. She is the retail analyst for Bloomberg Intelligence.
Speaker 2: She follows this stuff. She's done it for decades. She
Speaker 2: knows what's happening, so put them. Thanks so much for
Speaker 2: joining us here. Is this a Nike issue? Is just
Speaker 2: this reflection of the consumer. What's going on?
Speaker 3: It's definitely not a Nike issue. It's more a reflection
Speaker 3: of the consumer and just the macro environment that we operated.
Speaker 3: You know, when you look at the results that Nike
Speaker 3: post did and you just look at the different geographies
Speaker 3: that they operated, the myss was really in two geographies.
Speaker 3: One was China and two Baza Mia. Now the China
Speaker 3: miss consensus is looking for a twelve point five percent
Speaker 3: increase on sales in constant currency. They posted an eight
Speaker 3: percent increase. That's not so bad. I mean, it's definitely,
Speaker 3: you know, behind consensus, but eight percent growth is still
Speaker 3: pretty respectable. Now when you look at Emia the negative
Speaker 3: three percent that we saw there versus an Estama for
Speaker 3: a little single digit gain there, I think, you know,
Speaker 3: whether it was really the culprit not apparel sales which
Speaker 3: hurt them. And that's something that we wouldn't be too
Speaker 3: concerned with when we think about Nike for the longer
Speaker 3: term because those kind of situations have been slow.
Speaker 2: All right, So here we go, hold on, let's go
Speaker 2: to the I'm gonna go back to an earlier We
Speaker 2: were discussing simone tennis shoes versus sneakers, and Eric Mala,
Speaker 2: our producer, popped something in the chat. Here a map
Speaker 2: showing the United States and where people call it tennis
Speaker 2: shoes and where they call it sneakers. So like the northeast,
Speaker 2: kind of like from Pennsylvania up to the northeast sneakers,
Speaker 2: Southern Florida sneakers, the rest of the country, including Alaska
Speaker 2: tennis shoes.
Speaker 4: I don't buy it.
Speaker 2: You don't buy that, But pun what do.
Speaker 4: You call them?
Speaker 2: I call them sneakers, see expert.
Speaker 5: Experts.
Speaker 4: That must be an interesting conversation to have at industry of.
Speaker 2: Well, in Chicago and Cincinnati. You might lace up your quote.
Speaker 4: Gym shoes that I've heard.
Speaker 2: Actually, I'm sneaks, you know, sneakers. Sneaks, that's the.
Speaker 6: Way you go.
Speaker 4: I want to get your sense. How much is this
Speaker 4: a story of sneakers. How much is this a story
Speaker 4: of apparel? And how much is this, you know, athletic war,
Speaker 4: and how much is this a story of overall apparel?
Speaker 3: Sure? So, I think the bigger story here, which has
Speaker 3: been in the story for some time, is broader apparel weakness.
Speaker 3: Now we have seen this across the board because inventories
Speaker 3: were too high and that's what caused apparel to be
Speaker 3: marked down. Now, the other thing was apparel is versus footwear.
Speaker 3: It's for Nike. Nike is dominant in footwear, but when
Speaker 3: it comes to apparel, they don't have that lead that
Speaker 3: they have in footwear with rivals. So it's anyone's game
Speaker 3: when it comes to apparel, and Nike has to fight
Speaker 3: for its share. So it's definitely a tougher marketplace. Though
Speaker 3: when it comes to the footwear, I think they do
Speaker 3: have a lead. I think it comes back to innovation,
Speaker 3: which they're pressing the pedal harder on and that will
Speaker 3: continue to really help them maintain that lead. So footwear,
Speaker 3: I do think they're very strong in and you could
Speaker 3: argue that, you know, there's been competition from companies like
Speaker 3: Foca and on, especially on the running side, but those
Speaker 3: brands are very small. When you look at Nike's footwear
Speaker 3: market and its size there, it's multiple fold of those
Speaker 3: smaller brands and we don't see them losing that lead,
Speaker 3: especially with Jordan. Right Jordan's position to be the second
Speaker 3: largest global footwear brand or at leisure brand in the world,
Speaker 3: and that says something for the Nike flagship.
Speaker 4: But we also heard Nike introducing about two billion dollars
Speaker 4: worth of cost cuts over the next three years. Will
Speaker 4: that impact innovation?
Speaker 3: I don't think so, because the cost cuts are now
Speaker 3: going to be to limit innovation or to really reduce
Speaker 3: spending on innovation. They're really happening on the operation side
Speaker 3: where they may have had redundancy and they're kind of
Speaker 3: backstaff where they're just reorganizing to make matters more efficient,
Speaker 3: more about driving efficiencies. So you could argue that, you know,
Speaker 3: maybe they were two layered to start with and now
Speaker 3: they're just peeling off those layers. I don't think this
Speaker 3: will impact their roadmap for innovation to drive newness into
Speaker 3: the business, especially in footware.
Speaker 2: So simone, you know, Punham's one of the top retail
Speaker 2: anamalsts on Wall Street. Her job, a big part of
Speaker 2: her job is literally going to shopping malls and just
Speaker 2: watching people. What are they buying, what's hot, where's the
Speaker 2: traffic going, how are the promotions out there? And we
Speaker 2: actually pay her to do this stuff. Punum, what are
Speaker 2: you seeing here on this holiday? Shopping. What's your outlook
Speaker 2: here for holiday shopping overall?
Speaker 3: I think we're gonna have a really good homebase even fall,
Speaker 3: irrespective of what we have heard about the US consumer
Speaker 3: and how they're shopping, where they're shopping. The stores are crowded,
Speaker 3: people are buying stuff online. Trucks are being seen all
Speaker 3: over the US delivering multiple blocks, so the lobbies are full,
Speaker 3: so it will be a good holiday. The question is
Speaker 3: what happens after holiday? Do we go into a lull?
Speaker 3: Do you have you bought everything that you wanted and
Speaker 3: now you're just going to take a break. And that's
Speaker 3: really what we'll see into twenty twenty four. But for now,
Speaker 3: people are spending. They're using more buy now, pay later mediums,
Speaker 3: alternative stayment mediums to facilitate the spend, which is also
Speaker 3: something we'll be watching for. But holiday spend online in
Speaker 3: stores looks robust, especially at the key that have done
Speaker 3: a good job in just you know, harping their value
Speaker 3: message and also driving the nique product into their stores.
Speaker 4: Of online businesses, Are there any sectors of the broader
Speaker 4: retail space that may benefit going into next year? What's
Speaker 4: your take on that.
Speaker 3: I think the online retailers are well positioned going into
Speaker 3: twenty twenty four because now things have normalized where you know,
Speaker 3: we've were passed the pandemic and people went to stores
Speaker 3: that wanted to go to stores. They have that experience there.
Speaker 3: But now convenience comes back into play. You want to
Speaker 3: be able to shop from your home, shop from wherever
Speaker 3: you want, and just have things delivered to you, especially
Speaker 3: as things are coming faster now with two day shipping,
Speaker 3: Monday shipping with bio Fine that's being rolled out to
Speaker 3: companies that don't typically sell on Anthon but to be
Speaker 3: able to use that service. So we do think that
Speaker 3: consumers will lean back a little more on digital in
Speaker 3: twenty twenty four than on stories.
Speaker 2: All right, put them Goil, Thank you so much. We
Speaker 2: appreciate that. Put them Goil. She's a senior retail analyst
Speaker 2: for Bloomberg Intelligence, one of the best on Wall Street,
Speaker 2: giving again extent so kind of where the trends are
Speaker 2: for consumers and what retailers are best position to meet those.
Speaker 2: So check out Bloomberg's put them's research on Bloomberg Intelligence.
Speaker 2: You go to Big on the terminal and get all
Speaker 2: of the research from Bloomberg Intelligence. Including put them stuff
Speaker 2: here so it's good stuff, and calling for a decent holiday.
Speaker 2: Are you doing you?
Speaker 4: Which is interesting because you know traffic in store was
Speaker 4: so lackluster it seemed like one Black Friday. No, I
Speaker 4: have not done on my holiday.
Speaker 2: Shn you need to get going there. I need to
Speaker 2: click click a few buttons myself. I'm actually waiting for
Speaker 2: a couple of things that have not been delivered, one
Speaker 2: by Amazon and one by another retailler, So maybe supply
Speaker 2: chain issues out there.
Speaker 6: You're listening to the Team Can't Live program Bloomberg Markets
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Speaker 7: We welcome now our Bloomberg television and radio audience. Is
Speaker 7: the top story of course today. Cooling inflation in the
Speaker 7: United States call PCEE barely rising in November. You want
Speaker 7: a cool figure, take a look at the six month
Speaker 7: annualized number, the core metric. They're up one point nine percent,
Speaker 7: ie below two percent. Let's get some reaction from Washington.
Speaker 7: Leil Break, our director of the National Economic Council at
Speaker 7: the White House, and of course, former Vice Chair of
Speaker 7: the Federal Reserve joins us now along with our own
Speaker 7: Kaylee Lines low Brain. Not great to see you. We've
Speaker 7: all been anticipating this number and looking forward to seeing
Speaker 7: exactly what it was going to deliver and what the
Speaker 7: data are going to deliver. It's a really solid number.
Speaker 7: I'm wondering whether we are now at the points where
Speaker 7: we can declare victory, whether it is time for a
Speaker 7: victory lap, whether the inflation dragon has now been slain.
Speaker 8: Well, look, it is really good to see that we're
Speaker 8: closing out the year with inflation on a six month
Speaker 8: basis at two percent. That's the pre pandemic benchmark, and
Speaker 8: it's a very significant milestone. And if you look back
Speaker 8: over the course of the year, it is really stunning
Speaker 8: how much progress the economy has made. Inflations come down
Speaker 8: faster than even the more optimistic forecasts, and growth has
Speaker 8: remained very resilient, along with a strong employment. If you
Speaker 8: recall a year ago, the consensus projection was that getting
Speaker 8: inflation down will require a spike in unemployment recession, but
Speaker 8: in fact, the unemployment rate has remained below four percent
Speaker 8: for twenty two months in a row, and of course,
Speaker 8: we're still seeing more data suggesting growth is resilient. But no,
Speaker 8: it is not time to rest. It is time to
Speaker 8: continue working. And that's what the President is determined to do,
Speaker 8: keep working to keep bringing down prices and improving the
Speaker 8: economy from the middle out and the bottom up.
Speaker 9: Well, and Director brainerd it's Kaylee in Washington. Obviously, he
Speaker 9: has tried to do that domestically, but geopolitics are a
Speaker 9: factor here as well. If it's not time yet to
Speaker 9: declare victory on inflation, if there may still be upside
Speaker 9: risks to inflation out there, How worried are you about
Speaker 9: what's happening in the Red Sea and what it could
Speaker 9: mean for energy prices and supply chains.
Speaker 8: Well, the Red Sea situation is one that we are
Speaker 8: monitoring very closely. Our National security team is in constant
Speaker 8: contact with partners in the region, with shippers, and we
Speaker 8: are doing everything we can to make sure that those
Speaker 8: shipping routes disruptions do not lead to broader disruption supply
Speaker 8: chain disruptions in the US economy. And of course we're
Speaker 8: much better equipped today than we were just two or
Speaker 8: three years ago, because we have under the presence leadership,
Speaker 8: done so much to work in partnership with the private
Speaker 8: sector on supply chain resilience.
Speaker 7: Doctor Brenand, are you confident that the current outlook when
Speaker 7: it comes to wages, it's consistent with let's call it
Speaker 7: two percent, so the target that we're all shooting for here.
Speaker 7: Are you confident that some of the deals that have
Speaker 7: be done this year that are going to take effect
Speaker 7: next year are going to really take us in that direction.
Speaker 8: Well, as you said yourself, that core number, which is
Speaker 8: the really important number on inflation, is actually slightly below
Speaker 8: two percent on a six month basis, and that should
Speaker 8: give everyone a lot of confidence that inflation is sustainably
Speaker 8: down and we can continue to see good growth in
Speaker 8: real disposable incomes, in real wages, and in fact, if
Speaker 8: you look at the real disposable income growth over the
Speaker 8: past year that we saw today three point seven percent,
Speaker 8: very strong, and it is coming in the context of
Speaker 8: rising productivity. You can see that in the last year,
Speaker 8: productivity has been nearly two and a half percent. So
Speaker 8: that gives room for American workers to continue to enjoy
Speaker 8: that take home pay that allows them to purchase thirty
Speaker 8: five hundred dollars more today than they could pre pandemic.
Speaker 9: Okay, so let's talk about American workers, or perhaps more specifically,
Speaker 9: Director Brainerd American voter. So you've mentioned a few times
Speaker 9: here the work the president has done on addressing supply chains,
Speaker 9: on trying to bring inflation down, and clearly the economic
Speaker 9: data supports this idea that the economy is held in
Speaker 9: there even as price pressures have eased. Whatever it is
Speaker 9: not reflected, though, is in the President's approval in consistent
Speaker 9: pulling we are seeing. It's not really a question of
Speaker 9: whether there is a disconnect, because clearly there is one.
Speaker 9: But how do you advise the president as an economic advisor,
Speaker 9: how to address it? What does he need to do?
Speaker 8: Yeah, so when I talked to the President, he has
Speaker 8: focused on one thing. He always wants to know what
Speaker 8: does the strong data, the strong economy mean for American workers,
Speaker 8: What does it mean for their wages, their wallets. We've
Speaker 8: already noted that American consumers are now seeing declines in
Speaker 8: prices over the year on things that really matter to
Speaker 8: them a gallon of gas, a gallon of milk, toys
Speaker 8: for the holiday season, appliances and you know for the holidays,
Speaker 8: car rentals and airfaress are all down over the year.
Speaker 8: Wealth is up thirty seven percent since before the pandemic.
Speaker 8: Home ownership is up, Housing wealth is up, retirement accounts,
Speaker 8: as you know, is up. And today we saw a
Speaker 8: consumer sentiment jumping and that's the biggest jump we have
Speaker 8: seen in years, which suggests that Americans may finally beginning
Speaker 8: to feel a little bit more confident, a little bit
Speaker 8: more secure. But the President is going to continue to
Speaker 8: push us to work to lower costs for American families
Speaker 8: and to keep these gains over the course of the
Speaker 8: next year and years.
Speaker 7: Do you think these gains and inflation should be taken
Speaker 7: for granted? Dr Brain not. The financial markets are pricing
Speaker 7: in six rate cuts for next year. Do you think
Speaker 7: this is an economy that needs that level of easing.
Speaker 8: Look, this is a president who respects the independence of
Speaker 8: the Federal Reserve, so I won't comment on Federal reserve
Speaker 8: policy making. What I can say is that the conditions
Speaker 8: are very favorable in the sense that inflation has come
Speaker 8: down to two percent on a six month basis, much
Speaker 8: earlier than people predicted at a time where the labor
Speaker 8: market is in much better balance. And why it's because
Speaker 8: supply chains have healed, and workers are coming back into
Speaker 8: the labor force at much larger numbers three point three
Speaker 8: million over the last year alone. So that work on
Speaker 8: supply chains that the President has really pushed forward since
Speaker 8: the first month of his presidency is showing up in
Speaker 8: those lower inflation prints, and the market does seem to
Speaker 8: be taking that to a more benign set of interest rates.
Speaker 8: I mean, you look at mortgage rates one and a
Speaker 8: half percentage point DCRE and mortgage rates just over the
Speaker 8: last few months.
Speaker 3: It's very welcome.
Speaker 9: So I understand the restraint around what you can say
Speaker 9: on the monetary policy side, but I wonder what all
Speaker 9: of this means on the fiscal policy side of the
Speaker 9: equation as well, Knowing when Congress returns in January, there
Speaker 9: is going to be a massive spending fight that has
Speaker 9: to take place in terms of the budget. Are we
Speaker 9: looking at a US economy right now that is able
Speaker 9: to withstand greater fiscal restraint.
Speaker 8: Well, this economy has proven to be remarkably resilient, defying
Speaker 8: all the predictions, and looks to close out this year
Speaker 8: certainly on a much stronger level of growth than had
Speaker 8: been anticipated in terms of the fiscal trajectory. President Biden
Speaker 8: really wants to see the agreement that he put in
Speaker 8: place that would cut an additional one trillion in spending,
Speaker 8: a bipartisan budget deal the Fiscal Responsibility Act to and
Speaker 8: put into place. Congress needs to move forward and do
Speaker 8: its job, And of course he's already seen a one
Speaker 8: trillion reduction in depths, it's just in the time since
Speaker 8: he's been in office. So we'll continue to work with
Speaker 8: Congress on a bipartisan basis. The President is really very
Speaker 8: focused on being fiscally sustainable.
Speaker 7: Does big physically sustainable mean as well that we need
Speaker 7: lower interest rates. There's a growing discussion about the interest
Speaker 7: bill that the American economy now carries. That the federal
Speaker 7: government now carries. Significantly lower interest rates obviously would make
Speaker 7: that challenge much much easier to handle. Do you think
Speaker 7: there is a case of fiscal dominance beginning to emerge
Speaker 7: in the United States that the economy is not capable
Speaker 7: of sustaining itself unless it has lower interest rates given
Speaker 7: the interest bill that has now been built up.
Speaker 8: Well, I would come at it from the reverse direction
Speaker 8: and simply say that the benign data that we are
Speaker 8: seeing that suggests that inflation really is sustainably coming down
Speaker 8: on the back of these great improvements and supply chains.
Speaker 8: With the inflation on a six month basis now at
Speaker 8: the two percent pre pandemic benchmark, that's a benign outlook
Speaker 8: that will be much better for our fiscal outlook all
Speaker 8: around in terms of growth, revenues and the longer run
Speaker 8: physcal sustainability. So this is a benign outlook, and yes,
Speaker 8: it's very positive I think for the fiscal trajectory, but
Speaker 8: there's more work to do there.
Speaker 9: I'd like to switch topics if we can, to something
Speaker 9: else that you've addressed this week, which is the proposed
Speaker 9: takeover of a Japanese steel company, Nipon Steel and US Steel.
Speaker 9: You have written in response to this at the purchase
Speaker 9: of an iconic American owned company by a foreign entity,
Speaker 9: even one from a closed ally, deserves serious scrutiny. Why
Speaker 9: does a US ally as close as Japan deserve the scrutiny.
Speaker 8: Well, I think it is longstanding position of the US
Speaker 8: government and longley held, long held view of President Biden
Speaker 8: that steel is a very vital sector for US national
Speaker 8: security and for critical supply chain resilience. And we've seen
Speaker 8: that in past policies that have been undertaken by this president.
Speaker 8: So it is important to review or to make sure
Speaker 8: that there is serious scrutiny of these kinds of transactions
Speaker 8: from the perspective of national security and supply chain resilience.
Speaker 8: While we continue, of course to welcome investment from abroad
Speaker 8: and have seen record foreign direct investment in the US economy.
Speaker 7: Doctor Brandon, have you spoken to has the administration spoken
Speaker 7: to the United steel Workers on this issue? Have you
Speaker 7: got any feedback from them? And is that feedback influencing
Speaker 7: in any way you're thinking.
Speaker 8: Well, I will say that the steel workers are a
Speaker 8: vital part of our steel strength here in the US.
Speaker 8: They are partners with industry, and they are at the
Speaker 8: center of President Biden's vision for growing the economy from
Speaker 8: the middle out and the bottom up. So it is
Speaker 8: important to continue to see strong, good union jobs continuing
Speaker 8: to sustain our steel industry, which is US manufacturing, vital
Speaker 8: to our supply chains, vital to our national security.
Speaker 7: We really appreciate your time today, have a very happy holiday.
Speaker 7: We end on a good note with that data.
Speaker 6: LEL.
Speaker 7: Brighter, Director of the National Economic Council, and of course
Speaker 7: I thanks to bloombergs Kdie Lines.
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Speaker 2: Lots of economic data today, personal income PC, deflator on
Speaker 2: the inflation front, durable goods, you know you mish coming
Speaker 2: in a little bit better than expected. They don't just
Speaker 2: have a good football team, they have good economists over
Speaker 2: there at the University of Michigan. So some pretty solid
Speaker 2: data coming across. Let's check in with Stuart Paul, another
Speaker 2: good economists, another good economist, Bloomberg Economics. Now he usually
Speaker 2: joins us in studio, but he's joining us via zoom
Speaker 2: here today. So I'm going to go out on a
Speaker 2: limb and say he might be at Windham Mountain. Now,
Speaker 2: he's got this kind of cheesy background on a zoom,
Speaker 2: which I'm not buying whatsoever, because I think we really
Speaker 2: had the real background. It would be like the slopes
Speaker 2: of Windom Mountain, Stuart, I gotta ask you, where are you, dude.
Speaker 10: I'm in Wyndom. Yeah, he got a light dusting of snow,
Speaker 10: and as soon as I hang up with you guys,
Speaker 10: I'm going out for a hike. All the data is out.
Speaker 5: The data was a gift to Jay Powell.
Speaker 10: I'm taking it personally as a gift for the holidays,
Speaker 10: and after this I'm done.
Speaker 2: And just full disclosure on behalf of Stuart. He is
Speaker 2: an all mountain ski patroller at Windham Mountain Resort. He's
Speaker 2: been doing that for many years. So that's good stuff there.
Speaker 2: So Stuart, what did you take away from again, a
Speaker 2: lot of this data this morning? It seems, I guess,
Speaker 2: give a little bit more leeway for the FED to
Speaker 2: be a little dovershare. Maybe it does.
Speaker 10: It does, But the real question that we need to
Speaker 10: be thinking about the background is just why does the
Speaker 10: data look as good as it does. So we saw
Speaker 10: headline PC inflation actually deflation during the month of November
Speaker 10: because energy price is globally declined, so we got ten
Speaker 10: basis points of deflation for the headline. Core PC inflation
Speaker 10: slowed to just ten bases points, allowing the six month
Speaker 10: annualized pace of core inflation to decline to one point
Speaker 10: nine percent. So if the FED is thinking about what
Speaker 10: trend core inflation looks like, they're thinking, oh, wow, it's
Speaker 10: actually at our target. But in the background, we have
Speaker 10: a lot of core goods deflation during the month. And
Speaker 10: if you think, as we do, that destocking of inventories
Speaker 10: will allow firms, particularly goods producers and retailers, to avoid
Speaker 10: price cuts in the future, then that drag that we're
Speaker 10: getting from core goods would be set to reverse, at
Speaker 10: which point we would have about three percent annualized core inflation.
Speaker 10: So if that inventory d stocking takes place, it's not
Speaker 10: really the case that the FED can declare mission accomplished
Speaker 10: on inflation quite yet.
Speaker 4: So then if they if we see that, does that
Speaker 4: threaten the three cuts next year that we outlook that
Speaker 4: we heard from the Fed? Or does it simply threaten
Speaker 4: the potential timeline?
Speaker 10: As far as I'm concerned, it does not threaten the
Speaker 10: Fed's forecast of three of three cuts. What it does
Speaker 10: threaten is the market pricing that's showing, you know, nearly
Speaker 10: double that. So that's what's going on in the inflation front.
Speaker 10: If the fundamentals that that we think are going on
Speaker 10: in the background in addition to inflation. If we think
Speaker 10: that the labor market, for example, starts loosening more materially,
Speaker 10: which we expect, but let's face it, others out there don't.
Speaker 10: If that starts taking place, then we expect the Fed's
Speaker 10: going to revise its inflation forecast show actually more cuts
Speaker 10: than it currently is showing, even if it means that
Speaker 10: inflation has yet to fully reach the target. It's just
Speaker 10: the case that the last mile of disinflation is difficult.
Speaker 2: So my personal Paul Swiney daily inflation gauge is gasoline
Speaker 2: three dollars and twelve cents a gallon. That's down just
Speaker 2: big time, just over the past a few months here,
Speaker 2: So talk to us about it. You mentioned before the
Speaker 2: impact on energy, and you got to adjust for that,
Speaker 2: don't you, And I guess when you do, maybe you're
Speaker 2: a little bit less sanguine about the inflation abating.
Speaker 10: Yeah, So declining energy prices does allow for declining headline inflation.
Speaker 10: More importantly, probably for the FED, is that declining energy
Speaker 10: prices matters a lot for consumers and their inflation expectations,
Speaker 10: and inflation expectations matter a lot for consumer behavior. So,
Speaker 10: for example, if folks think that prices are going to
Speaker 10: be much higher in the future, they go out and
Speaker 10: rush and buy goods and services today, and that act
Speaker 10: begets inflation in the future. Seeing declining gasoline prices helps
Speaker 10: consumers to slow their role a little bit, and it
Speaker 10: does allow for softening consumer inflation expectations, which we saw
Speaker 10: in umish today, particularly in year ahead inflation expectations, and
Speaker 10: it does allow them to sort of slow the pace
Speaker 10: of their spending, which we've seen there has been a
Speaker 10: little bit of a shift from consumer spending on goods
Speaker 10: for which they have any elastic demand to nerd out
Speaker 10: a little bit. But it allowed them to get a
Speaker 10: little bit of savings on gasoline that was directed actually
Speaker 10: a little bit more to holiday shopping we saw in
Speaker 10: the PCE report, But we don't think that that really
Speaker 10: has legs. If you look at credit card data through
Speaker 10: December rather than just the November piece report is sales
Speaker 10: are a little bit more tepid. Consumers are taking that
Speaker 10: gasoline savings and just kind of sitting on it a
Speaker 10: little bit in December, So we're not fully out of
Speaker 10: the woods in terms of an economic slowdown quite yet.
Speaker 4: This has been a political I guess issue that's come up.
Speaker 4: You know, Biden very unhappy according to reports that people
Speaker 4: aren't feeling the impact of his economic policies, people seemingly
Speaker 4: trusting the Republicans more on the economy than the current
Speaker 4: Democratic administration. Now, I'm not going to ask you to
Speaker 4: weigh on politics, but what kind of indicators do you
Speaker 4: need to see to think, Hey, well, consumers actually think
Speaker 4: that the economy is good. Now, how far are we
Speaker 4: from that point?
Speaker 10: So, at least in terms of election outcomes. And I'm
Speaker 10: not speaking as a political analyst, but strictly as a statistician,
Speaker 10: as an economist, it really matters where the economy is
Speaker 10: three to six months before the election. There's still a
Speaker 10: lot of the game to be played before then. There's
Speaker 10: still a lot of data that we're going to see
Speaker 10: before then. And if we start getting rate cuts in
Speaker 10: Q one, that could help to avoid the worst case
Speaker 10: economic scenarios, and that could be helpful for the administration
Speaker 10: in the twenty twenty four election cycle. But again, it
Speaker 10: depends why we're getting those rate cuts. Potentially in Q one,
Speaker 10: if we're getting those rate cuts, because we see the
Speaker 10: unemployment rate inching up, not just inching up, but gapping up,
Speaker 10: which tends to be the case once Salm's rule is triggered.
Speaker 10: If we see the unemployment rate gapping up, and that's
Speaker 10: why we get those rate cuts, it probably would not
Speaker 10: be enough to offset any sort of alleviation of of
Speaker 10: interest rate pressures in financing costs that consumers might find helpful.
Speaker 10: That softening the labor market would be more influential in
Speaker 10: determining election outcomes than say, the change in interest rates.
Speaker 2: So Stewart bottom line, Bloomberg Economics, what is your GDP
Speaker 2: call for twenty twenty four?
Speaker 10: Well, so for Q four specifically, we have an estimated
Speaker 10: one point one percent qver q annualized. Again, you know,
Speaker 10: that's better than we would have been anticipating. As we
Speaker 10: do more of the bottoms up work and as we
Speaker 10: get more of the data, things are looking a bit
Speaker 10: better than we would have expected, especially a year ago.
Speaker 10: But we're not quite out of the woods yet. We
Speaker 10: are still expecting a bit of a slowdown, and you know,
Speaker 10: we think that that's the reason why the Fed is
Speaker 10: going to have to start cutting rates in twenty twenty four.
Speaker 4: What's the black swan for you? Looking ahead? To next year.
Speaker 10: Look, I think that there's still a lot of risk
Speaker 10: around commercial real estate. I don't know if that's totally
Speaker 10: a black swan, because you know, it is what a
Speaker 10: lot of folks are keeping their eye on. But in
Speaker 10: terms of what could be a major shock to the system,
Speaker 10: I think that that's probably it. The ability of banks
Speaker 10: to work with their bar works so that they don't
Speaker 10: have to take back keys, The ability for banks to
Speaker 10: work with their regulators perhaps to allow those banks to
Speaker 10: lend to borrowers at below market rates, that those borrowers
Speaker 10: could then cash flow any sort of dead obligations that
Speaker 10: they have, which regulators frankly don't love. They don't love
Speaker 10: when banks are lending it below market rates. Those are
Speaker 10: the sort of those are the sort of financial conditions
Speaker 10: issues that are a bit orthogonal to most of the
Speaker 10: economic data that we think about day to day, and
Speaker 10: so it could catch some folks by surprise, just because
Speaker 10: it's sort of retreated to the back of everybody's minds.
Speaker 2: All right, Stuart, thanks so much for joining us. Really
Speaker 2: appreciate it.
Speaker 3: Now.
Speaker 2: It's been a busy morning for you with all the
Speaker 2: economic data hitting the tape. Here Stuart Paul. He's a
Speaker 2: US economist for Bloomberg Economics. Go hit the mountain and
Speaker 2: enjoy the day.
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Speaker 6: eleven thirty.
Speaker 2: Everything seems to be going to the cloud, all types
Speaker 2: of applications. Why not space. Our next guest is he's
Speaker 2: there already. Peter Platzer, CEO and founder Spire Global, which
Speaker 2: is a New York Stock Exchange list of company spir
Speaker 2: Go based in Boulder, Colorado. As a parent of a
Speaker 2: you see graduate, I spent a lot of time in Boulder.
Speaker 2: Great town there, Peter, Thanks so much for joining us.
Speaker 2: Tell us what Spire Global does. What's your biz?
Speaker 11: One of bull excited to be here. Spire collects hearts
Speaker 11: to acquire data from space through satellites that helps humanity
Speaker 11: tackle some of our greatest challenges, often related to climate
Speaker 11: change and global security. And we do this with the
Speaker 11: world's largest multipurpose satellite fleete over one hundred space draft
Speaker 11: that covered the Earth every fifteen minutes, every spot on Earth.
Speaker 4: What is driving various different companies to want to have
Speaker 4: a satellite, like, what are the key trends behind this
Speaker 4: market at the moment, and who are you trying to
Speaker 4: sell your space as a service as it were modeled to.
Speaker 5: One hundred percent.
Speaker 11: So companies that want to help humanity, for example, tackle
Speaker 11: wildfires or measure greenhouse gases, those are companies that leverage
Speaker 11: our space as a service model, which you can think
Speaker 11: of is like Amazon Ews.
Speaker 5: But for space.
Speaker 11: So if you got a cool application, but you don't
Speaker 11: want to learn about quaternions and licensees and rockets and
Speaker 11: everything else that makes space complicated and very very hard
Speaker 11: to tackle, then you come to us and in a
Speaker 11: few weeks, a few months, maybe a year, you have
Speaker 11: your application running. So those are then companies that really
Speaker 11: have their own application or payload netfor example, can detect
Speaker 11: a tiny wildfire, or can see where greenhouse gases are omitted,
Speaker 11: or if you are someone who has long pipelines and
Speaker 11: you have like little senses that measure where something might
Speaker 11: go wrong, you know they do that you know, that's
Speaker 11: an Internet of Thing application.
Speaker 5: So all of those come to.
Speaker 11: Us because it's fast, it's easy, it's cost effective, and
Speaker 11: they're listening to, you know, maybe the report that McKinsey
Speaker 11: send out recently saying that if you don't have a
Speaker 11: space strategy today, you better get one.
Speaker 2: Interesting. So, Peter, does your company do you own the
Speaker 2: satellites or do you lease capacity on other satellites.
Speaker 5: No, they are all our.
Speaker 11: Own spacecraft, our own technology. So everything we do is
Speaker 11: invented by Spire. This is why it works so well
Speaker 11: and so reliably, and we can make those offers at
Speaker 11: a very very competitive economic price point for our customers
Speaker 11: and we get to scale very very efficiently because it
Speaker 11: is in house. So those are our own spacecraft, our
Speaker 11: own technology. It's also our own ground station network. It
Speaker 11: is our own operations system that manages this very very
Speaker 11: complex infrastructure.
Speaker 4: And it's not like a single satellite for a single company.
Speaker 4: Necessarily you've got a lot of satellites. You can run
Speaker 4: a lot of different operations and use that network to
Speaker 4: back companies. Am I right in thinking that.
Speaker 11: You are one hundred percent spot on? Quite the opposite,
Speaker 11: So our space off on multi purpose so they serve
Speaker 11: not just a particular customer, but they serve many, many
Speaker 11: customers across many many industries because one of the power
Speaker 11: of that infrastructure is is that you collect the data
Speaker 11: sitt once and then you sell it an almost unlimited
Speaker 11: amount of time, serving a large number of use cases.
Speaker 11: We had a very very well known partner assess how
Speaker 11: many major use cases they could find, and after one
Speaker 11: hundred and seventy five they said, Peter, we're going to
Speaker 11: stop counting here.
Speaker 5: There is a massive amount of use cases. But for
Speaker 5: us to serve. In addition, on the.
Speaker 11: Use case, it's not a new spacecraft, it's not a
Speaker 11: new satellite. It's not more spacecraft, more satellites. It is
Speaker 11: the same data that is already collected, just packaged in
Speaker 11: a different way to serve another use case for a
Speaker 11: different type of customer.
Speaker 2: So, Peter, who's the typical customer of spire, Like getting
Speaker 2: a sense of kind of the use cases here?
Speaker 11: Yeah, So about fifty percent of our business is commercial
Speaker 11: and about fifty percent of our businesses government.
Speaker 5: So if you are a company that.
Speaker 11: For example, is in charge of logistics, well, one of
Speaker 11: the big things you need to know is, like where
Speaker 11: is all this stuff, which means you needn't know where
Speaker 11: are all the ships and where are all the planes? Well,
Speaker 11: you know, Aspires a company that can help you with that.
Speaker 11: If you are in the energy business, you know it's
Speaker 11: a particularly renewable energy, but also you know electricity, you
Speaker 11: need to understand what is the weather going to be
Speaker 11: On one hand, to understand demand for electricity, but on
Speaker 11: the other hand, you also want to understand, okay, what's
Speaker 11: kind of like the risk of something going wrong because
Speaker 11: of high winds or because a fire breaking out from lightning.
Speaker 5: Well, then you come to Spire.
Speaker 11: If you are a maritime insurance company that wants to know, well,
Speaker 11: where are all the assets that you ensure.
Speaker 5: Well, you come to Inspire.
Speaker 11: If you're a commodity trader that really tries to get
Speaker 11: a handle of supply and demand for many commodities, in
Speaker 11: particular oil and gas, but also others, then you come
Speaker 11: to Spire.
Speaker 5: If you're an.
Speaker 11: Airline that needs to run better and smoother operations, or
Speaker 11: an airport that wants to improve his throughput and have
Speaker 11: a really really smooth and efficient ground operation, then you
Speaker 11: come to Spire.
Speaker 5: I could keep on.
Speaker 11: Going probably for a couple of hours some use cases,
Speaker 11: but maybe you get a sense now.
Speaker 4: I do, Peter, I think anything any business that sends
Speaker 4: ships or rockets or airplanes into the air is extremely
Speaker 4: capital intensive. I know you guys have been on a
Speaker 4: mission to get cash flow positive by year end. That's
Speaker 4: according to a final last month. A is that still
Speaker 4: in the cards? And B I guess how do you
Speaker 4: how do you deal with the extraordinary capital intensity of
Speaker 4: running a business like this?
Speaker 11: So the first thing is that you stop making a
Speaker 11: capital expensive and you make a capital efficient. So for Aspire,
Speaker 11: as we have published to build all of our infrastructure
Speaker 11: and maintain it and run it in the space and
Speaker 11: underground is just a fixed amound there somewhere between seven
Speaker 11: and nine million dollars a year. So it's a very
Speaker 11: manageable small amount that supports it CAUs an unlimited amount
Speaker 11: of revenue because we keep on collecting this data and
Speaker 11: then sell it aquosity unlimited amount of time. And the
Speaker 11: reason why Spire is able to do this because we
Speaker 11: are a fully vertically integrated company.
Speaker 5: It is our ip our technology.
Speaker 11: We build it ourselves in our facilities and that has
Speaker 11: allowed us to take the capital intense out of an
Speaker 11: operation like space and make it very very capital lines,
Speaker 11: very very capital efficient, just the same way as you
Speaker 11: would look at how the subscription businesses that collect a
Speaker 11: very very valuable data source and then monetize it. For us,
Speaker 11: it's a small amount of money on an annual basis
Speaker 11: that is fixed, supporting.
Speaker 5: A very large revenue.
Speaker 2: Peter, thanks so much for joining us. Peter Platzer, CEO
Speaker 2: and founder of Spire Global. Spir is the ticker.
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