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Speaker 1: Welcome to the Bloomberg pim L Podcast. I'm pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. It

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Speaker 1: is my pleasure now to bringing Eric Shatzker, he of

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Speaker 1: course of Bloomberg Television and Bloomberg Radio and Bloomberg dot Com.

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Speaker 1: And he had an interview with Black Rocks chief executive

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Speaker 1: Larry Fink on the day that Black Rock reported their results,

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Speaker 1: and I believe Larry Finks hi arch and then they said,

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Speaker 1: um didn't. He said that he has zero interests in

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Speaker 1: cryptocurrencies because the clientele at black Rock has not been

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Speaker 1: pounding on the door for crypto. Clients don't want any

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Speaker 1: exposure to crypto, which candidly, phim I found interesting on

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Speaker 1: any number of levels, one of which is this a

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Speaker 1: number of the crypto bulls, let's call it. You could

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Speaker 1: point to Mike novograts, you could point to Louis Bacon,

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Speaker 1: Louis Baker, Dan moorehead who runs a cryptocurrency head deal

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Speaker 1: out in California, think that the next wave in crypto

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Speaker 1: will be the institutional embrace of cryptocurrencies as an asset class.

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Speaker 1: If that's going to happen, black Rock has to figure

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Speaker 1: into the picture somewhere, because it's got six point three

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Speaker 1: trillion dollars in assets, not one dime of which is

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Speaker 1: currently in crypto. And furthermore, when I asked Larry, do

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Speaker 1: they feel the need to prepare for the day when

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Speaker 1: clients do take an interest in crypto, he said at

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Speaker 1: the moment, no, So, Eric, can you just sort of

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Speaker 1: take a step back and give us the highlights of

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Speaker 1: the interview? Well, let's start with this. Black Rock reported

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Speaker 1: earnings today and by almost every measure, Lisa, this was

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Speaker 1: a quote unquote strong quarter. On the surface, it looks

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Speaker 1: great earnings per share ahead of analyst expectations, double digit

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Speaker 1: revenue growth, which, if you think about it, for a

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Speaker 1: firm of this size, is pretty remarkable. Margin expansion to

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Speaker 1: a new record level assets under management in a flat

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Speaker 1: lining equity market stable at six point three trillion dollars.

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Speaker 1: But I just hit the nail on the head, if

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Speaker 1: you will, flatlining equity market. You've got a yield curve

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Speaker 1: that's flattening as well. Investors are losing interest in financial

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Speaker 1: assets and as a result, Black Rocks inflows are the

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Speaker 1: lowest since the second quarter of two thousand sixteen, and

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Speaker 1: that raises a question and possibly a concern for investors.

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Speaker 1: I asked Larry think about this. Let's hear him talk

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Speaker 1: about flows. We saw clients worldwide pause. We saw clients

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Speaker 1: are they're they're confused, They're confused as to you know,

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Speaker 1: what direction the markets will go. This is what they're

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Speaker 1: telling you. Absolutely, and I'm traveling everywhere. As you know,

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Speaker 1: clients are questioning, UM, the whole foundations of international investing,

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Speaker 1: and that's the foundation of globalization. As we start entering

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Speaker 1: this conversation about trade and tarroiffs, UM, we're seeing clients

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Speaker 1: hold back a little bit. They're they're waiting to see

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Speaker 1: how does this play out. The backdrop is we have

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Speaker 1: very strong earnings. First quarter. We represented we saw very

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Speaker 1: strong earnings throughout the SMP. We believe we're going to

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Speaker 1: see strong earnings in the second quarter. We're going at

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Speaker 1: a rate of eight billion dollars of stock repurchases. We

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Speaker 1: have record amount of M and A. So the backdrop

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Speaker 1: is we're shrinking amount of equities, we have record earnings

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Speaker 1: that they said, and yet markets are essentially unchanged. Does

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Speaker 1: that surprise you, Oh, absolutely if you. If you asked

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Speaker 1: me at the beginning of the year, we're gonna have

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Speaker 1: record amount of M and a record amount of earnings

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Speaker 1: and record amount of stock repurchases, I would have said

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Speaker 1: the market would be up ten to twelve percent and

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Speaker 1: markets are essentially flat. Now if you strip out instead

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Speaker 1: of the s would be more like yes. More importantly though,

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Speaker 1: if you strip out the seven major tech stocks that

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Speaker 1: have done very well. Actually the breath is really poor

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Speaker 1: and we're just seeing evidence of that. But let's go

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Speaker 1: deep into the flows, because the flows really don't the

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Speaker 1: overall macro number doesn't tell you what was going on.

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Speaker 1: We saw a lot of churn in the in our

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Speaker 1: index equity business, and that's where we saw the outflows.

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Speaker 1: We had about thirteen billion dollars about flows and in

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Speaker 1: that area very low fee things, so that we saw

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Speaker 1: we saw investors pull out of what I would say

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Speaker 1: emerging markets in other areas. And I need to remind

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Speaker 1: you cash for the first time since two thousand and

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Speaker 1: eight a little before that is earning you a return.

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Speaker 1: You're earning two plus. You could pause and earn money

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Speaker 1: in the last number. Can afford to wait, You can

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Speaker 1: afford the weight. And this is a huge change in

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Speaker 1: the marketplace in the last nine years, and people have

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Speaker 1: forgotten about that. You're earning almost two and a half

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Speaker 1: percent now in a money market fund. You know, that's

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Speaker 1: pretty similar to the five year treasury. You could pause,

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Speaker 1: and by the way, equities are not up too and

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Speaker 1: a half percent, so you can be earning money in

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Speaker 1: cash and pausing. Let me get back to the fund. Second,

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Speaker 1: should people be pausing? Does that seem like, I act

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Speaker 1: wise smart thing to do right now? It depends if

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Speaker 1: you're if you're horizons the next five years, it's probably

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Speaker 1: good to pause. If you're focusing on your retirement and

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Speaker 1: your pench front, you should never pause. You should be

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Speaker 1: continuing to invest. It really depends on the time horizon.

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Speaker 1: UM we saw four billion dollars between UH flows and

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Speaker 1: commitments and UM in alternatives and in our liquid alts.

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Speaker 1: We had eight billion dollars and flows in our in

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Speaker 1: our multi assets. So if you break out all the flows,

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Speaker 1: positive flows and moneys going in some places money coming out,

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Speaker 1: but we've seen huge churn. And if you strip out

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Speaker 1: the index business, which is virtually low low low low fees,

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Speaker 1: are flows were better than what the headline is because

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Speaker 1: we had, as I said, thirteen billion dollars institutional outflows.

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Speaker 1: And I shared as a very good example of where

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Speaker 1: you saw a real e business. Yes, in the E

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Speaker 1: t F business. Uh Pen, Lisa, you can hear Larry.

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Speaker 1: They're talking as as he said in his words about

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Speaker 1: the concerns that investors have, their confused. They don't know

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Speaker 1: what to make of the trade tensions, they don't want

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Speaker 1: to make about the pullback from globalization. But just to

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Speaker 1: put an exclamation mark on this, if we look forward,

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Speaker 1: Larry Fink says, if the United States lives up to

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Speaker 1: its threat and imposes tariffs on an additional two billion

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Speaker 1: dollars of Chinese imports, we will have, in his words,

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Speaker 1: a full blown trade war. And if that becomes the

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Speaker 1: case by the end of August, he anticipates the ten

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Speaker 1: pullback in stocks from current levels and a slowdown, if

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Speaker 1: not ah, something close to a pause in economic growth

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Speaker 1: come two thousand. So Eric I also want to give

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Speaker 1: an exclamation point something else that he said, which is

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Speaker 1: that you can afford to pause and you can actually

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Speaker 1: earn something. In other words, you can put your money

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Speaker 1: in cash and actually get something in return before investing

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Speaker 1: in riskier assets. And I thought that it was really compelling.

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Speaker 1: You You pressed him on that rightly so, and you

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Speaker 1: know he gave us sort of you know, double sided answer. Um,

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Speaker 1: But this is sort of something very much on their minds, right,

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Speaker 1: and this affects their revenues. No, yes it does. Black

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Speaker 1: Rock has a business managing people's cash, of business that

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Speaker 1: it has been growing in an effort to become a

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Speaker 1: more diversified asset managers. So while black Rock would clearly

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Speaker 1: prefer that you put your money and actively manage mutual

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Speaker 1: fund or into alternatives because those pay the highest fees

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Speaker 1: and are as such the highest march in businesses, they'll

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Speaker 1: be more than happy to take your money as a

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Speaker 1: cash deposit and invested in short duration fixed income because

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Speaker 1: they make something there at the same time. And to

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Speaker 1: his point, that's an option for people. When you made

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Speaker 1: nothing on cash, you felt like you had to be invested.

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Speaker 1: This was the reach for yield. You had to generate income. Well,

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Speaker 1: now you can sit on the sidelines effectively and generate

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Speaker 1: some income too and a half eight much slightly north

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Speaker 1: of the rate in inflation. Uh so there's a real return,

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Speaker 1: even if it's skimpy. Do you want to just note

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Speaker 1: that two year treasury yields are at a new post

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Speaker 1: crisis high today at nearly two point six percent. That

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Speaker 1: is basically double where they were nearly a year ago.

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Speaker 1: Pen It's it's amazing if you think about it. You

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Speaker 1: know how quickly in relative terms, short term yields have

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Speaker 1: risen and the long term yields remain pretty well anchored.

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Speaker 1: That's why we're talking about the flattening and potential inversion

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Speaker 1: of the yield curve. And I'll just point out that

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Speaker 1: Larry Fink we talked about that says he's not that

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Speaker 1: concerned about an inversion of the yield curve because in

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Speaker 1: his mind, the conditions are different today. This time is different,

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Speaker 1: if you will, to paraphrase, can rogue off. It's not

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Speaker 1: like it was the last time the yield curve inverted

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Speaker 1: before the financial crisis or before that, and as such

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Speaker 1: does not portend a recession. This is all about quantitative

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Speaker 1: easing and interest rate differentials on a global basis a

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Speaker 1: different world. All right, well you say different world. Let

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Speaker 1: me just mentioned that we're waiting for a different world,

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Speaker 1: which is that the President Donald Trump and President Vladimir

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Speaker 1: Putin of Russia are scheduled to appear before the press

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Speaker 1: uh in uh as much as they've had this meeting

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Speaker 1: in Helsinki, and we will of course bring that to

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Speaker 1: you live. We are awaiting there the start of that

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Speaker 1: press conference. Um. One of the things. Also, I'm not

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Speaker 1: gonna get into the thing about yields and taxes and

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Speaker 1: how much you left with and all that. That's another story.

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Speaker 1: But uh, if he can't figure out what's going to

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Speaker 1: happen in the stock market, remember the comment that he

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Speaker 1: made having to do with Gino earnings are pretty good.

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Speaker 1: That was that, so I know what you, I know

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Speaker 1: what you're getting at absent trade tensions. That's what he

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Speaker 1: thinks would have happened. In other words, if Donald Trump

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Speaker 1: weren't saber rattling. And it's more than saber rattling, because

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Speaker 1: he was saying rattling during the election. He was saber

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Speaker 1: ratting last year. He it's not like he was elected

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Speaker 1: just last n Back in January, Gary Cohne was still

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Speaker 1: in the White House. There was still an active debate

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Speaker 1: as janu Trump administration would handle trade. Cone is gone,

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Speaker 1: Peter Navarro is a set didn't in the White House.

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Speaker 1: We know how Trump is handling trade. So the picture

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Speaker 1: today is considerably different from what it was in January.

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Speaker 1: In January was talked, Now it's real. The United States

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Speaker 1: is unilaterally imposed tearoffs on aluminum steel, Chinese goods, imports

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Speaker 1: from the European Union, the retaliatory troffs. But he said

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Speaker 1: he he talked about He said, oh, well, you know,

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Speaker 1: if it weren't for a couple of technology stocks, the

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Speaker 1: market is basically flat. Worse than flat. Okay, yeah, worse

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Speaker 1: than flat. I don't know Boeing is up. I mean,

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Speaker 1: it's like, I understand his point, but if he can't

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Speaker 1: tell you what he really thinks it's going to happen

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Speaker 1: and have it play out in reality, then with all

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Speaker 1: due respect, his job is to make sure that you

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Speaker 1: put your money with black Rock so that they can

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Speaker 1: manage it as opposed to someone else, not that you

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Speaker 1: should necessarily keep it in cash because and I don't

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Speaker 1: mean you have to put it in black Rock to

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Speaker 1: keep it in cash, and put it in a bank

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Speaker 1: and keep it in cash. And at the reality there

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Speaker 1: is it's low risk. It's not about earning anything. It's

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Speaker 1: about you don't risk your capital, right, not unless you

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Speaker 1: think the US government is about to go bankrupt. Right, Yeah,

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Speaker 1: I don't think he thinks that, right, No, he doesn't. Eric,

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Speaker 1: I want to shift gears a little bit. You know

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Speaker 1: that you've been interviewing a lot of luminaries and top

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Speaker 1: investment managers, and I'm wondering if you could just put

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Speaker 1: your interview with Black Rocks Larry Fink into the context

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Speaker 1: of sort of what the broader sentiment is. I mean,

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Speaker 1: if you could sort of say that there is a

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Speaker 1: consensus among the most respected investors who you interview on

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Speaker 1: a regular basis, what would abate that this economic expansion

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Speaker 1: can't last much longer that we are entering and we

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Speaker 1: may already be there if we haven't entered it yet,

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Speaker 1: a period of market excess, that the kinds of risks

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Speaker 1: that are in that investors are prepared to take in

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Speaker 1: places like credit suggest that um people are getting a

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Speaker 1: little out over their skis, and that sooner or later

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Speaker 1: something is going to trigger arise in corporate defaults. And

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Speaker 1: then we'll see who's swimming without any trunks on. Uh.

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Speaker 1: This could metastasize in clos for example. UM, that's one

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Speaker 1: place that people consistently talk about a market where there

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Speaker 1: isn't a lot of transparency and they feel as though

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Speaker 1: there's some if you will, hidden risks. There's a lot

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Speaker 1: of structure, as you know in c llos, and so

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Speaker 1: they're not not exactly the same way, but not unlike

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Speaker 1: what happened in the financial crisis. There is the potential

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Speaker 1: for people who bought the highest yielding, lowest rated instruments

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Speaker 1: to lose an awful lot of money. And when people

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Speaker 1: lose money very quickly, they tend to do very rash

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Speaker 1: things and that has knock on effects and other parts

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Speaker 1: of financial markets. So that's one thing people are talking

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Speaker 1: about very consistently. And the other is the potential for

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Speaker 1: a sovereign debt crisis. The US dollar is very strong.

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Speaker 1: That puts an awful lot of pressure on emerging markets

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Speaker 1: which have dollar denominated debt. It's very difficult to predict

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Speaker 1: exactly how it will play out, but people have likened

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Speaker 1: it to the Mexican peso crisis, to the Asian financial crisis,

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Speaker 1: of the movie never plays out the same way twice

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Speaker 1: or a third time. But those are the parallels that

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Speaker 1: I've been hurt, I've heard being drawn. Thanks very much,

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Speaker 1: Eric Shatzker of Bloomberg Television, Bloomberg News, Bloomberg dot Com,

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Speaker 1: Blomberg Radio, Bloomberg, All Things bloom All Things Bloomberg, and

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Speaker 1: really well done. Great the interview with Larry Fink, the

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Speaker 1: chief executives from of Black Rock. We're gonna find out

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Speaker 1: a little bit more about the retail industry right now.

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Speaker 1: In particular, quote in all New Jim Boree. That is

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Speaker 1: what Jim bore chief executive Daniel Greaseman said about their

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Speaker 1: new line after emerging for emerging from bankruptcy. And Daniel

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Speaker 1: greesmanuh grees Mare, excuse me, joins us now in our

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Speaker 1: Bloomberg eleven three oh studios in New York City. Uh so, Daniel,

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Speaker 1: thank you so much for being here, Thanks for having

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Speaker 1: me tell us a little bit about the new line. Well,

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Speaker 1: this is a culmination of maybe, um twelve thirteen months

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Speaker 1: worth of work. UM. The team has spent a lot

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Speaker 1: of time talking to our customers, talking to future customers, UM.

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Speaker 1: And they told us exactly what they want, and they

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Speaker 1: want clothes that have a high quality, high value, great

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Speaker 1: mix and match capability, and and it's uh, it's pretty simple.

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Speaker 1: Listen to the customer and they tell you what they want.

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Speaker 1: So that's what we h that's what we delivered. It's

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Speaker 1: now available nationwide and online today. Let me just go

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Speaker 1: back into your history just so people understand you come

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Speaker 1: with a lot of experience. Started at Macy's, have a

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Speaker 1: career at Gap Gap It's cold Water Creetillies for example. Right,

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Speaker 1: what have you learned from all of those experiences that

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Speaker 1: you can apply to a world where just about every

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Speaker 1: news outlet is now shouting that for the next thirty

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Speaker 1: six hours beginning at three three pm Eastern daylight time,

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Speaker 1: that Amazon is launching its Amazon Prime Day out of

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Speaker 1: the middle of nowhere. What do you how do you

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Speaker 1: reckon with that? Well? I think the years of experience

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Speaker 1: that I have have taught me that you have to

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Speaker 1: stay current, you have to stay relevant. You've got to

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Speaker 1: stay close to your customer, understand what it is that

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Speaker 1: he or she is looking for, and deliver that consistently

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Speaker 1: in a unique and differentiated way. If you do that,

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Speaker 1: you're going to be a winner. And so that's really

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Speaker 1: what we as a company or focused on doing. Amazon

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Speaker 1: is a partner of ours. Amazon, I think, is also

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Speaker 1: the ocean that many industry three swimming. So it's um

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Speaker 1: finding the right balance and creating a differentiated experience. So, Daniel,

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Speaker 1: you you became the chief executive in uh May. That

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Speaker 1: was right before the company filed for bankruptcy, and this

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Speaker 1: was on the heels of the one billion dollars of

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Speaker 1: debt that it had really stemming from the buyout from

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Speaker 1: Bain Capital. A lot of people have blamed private equity

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Speaker 1: firms for the demise of certain retailers, including Jim Boree.

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Speaker 1: What do you think, well, I think the the process

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Speaker 1: that the company went through to restructure demonstrated the respectful

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Speaker 1: transfer of the ownership of the company from one's ownership,

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Speaker 1: as you said, Bain to the group of what was

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Speaker 1: what were the lenders to Bain are now the owners

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Speaker 1: of the company, and between the banks and the former owners,

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Speaker 1: the new owners and the company, it was all the

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Speaker 1: all the specifics of the restructuring were detailed and negotiated

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Speaker 1: prior to sever filing. So once we filed, it was

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Speaker 1: a very simple and respectful transition what I'm trying to

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Speaker 1: get at is, do you think that Jim Boree would

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Speaker 1: have been fine, given what you know about the company

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Speaker 1: after more than a year as chief executive, that it

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Speaker 1: would have been fine if it hadn't been for this buyout. Um,

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Speaker 1: I don't know that I could say that. I think

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Speaker 1: I think it would have been fine if it had

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Speaker 1: stayed relevant and current to an ever changing retail environment

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Speaker 1: and customer. So yeah, And just to give a little

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Speaker 1: detail about the current ownership, I believe carriage House Capital, Searchlight,

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Speaker 1: Searchlight Brigade, Oppenheimheimer the three leads. Yet. Okay, so they've

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Speaker 1: given you the opportunity to remake the company. When you

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Speaker 1: got the job, did you think that you'd be focusing

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Speaker 1: on things like Instagram? Oh? Sure, yeah, it is. It

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Speaker 1: is how you can touch and reach out to the

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Speaker 1: modern customer today. So um. Yeah. And you have someone

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Speaker 1: to say, at Jim Burry, whose only job is to

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Speaker 1: focus on all of the social media connections you have

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Speaker 1: pretty much you have to Yeah, that's just the way.

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Speaker 1: That's just the way it is in a modern retail.

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Speaker 1: But I think it's incredibly exciting. I think this is

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Speaker 1: an amazing time I've never been more engaged and had

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Speaker 1: more fun in my entire career as as I'm having

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Speaker 1: right now. The team is doing extraordinary things at the company,

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Speaker 1: and they're they're embracing this new long term view that

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Speaker 1: the new owners have and the ability to take the

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Speaker 1: risks to do what's right for the company and for

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Speaker 1: the brand and for our customers. Okay, as a mother

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Speaker 1: of two young children, I'm curious, what's the price point

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Speaker 1: that's sort of ideal for children's clothing to to hit. Yeah, price,

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Speaker 1: you know, we asked our customer that in focus groups

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Speaker 1: I I conducted UM and visited focus groups around the country,

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Speaker 1: and it was very clear price is only one component

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Speaker 1: of the value proposition for for the customer. They also

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Speaker 1: want to know that it it is gonna last, They're

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Speaker 1: gonna be able to wash, it won't fade, it won't

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Speaker 1: wear through very quickly, it has the ability to mix

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Speaker 1: and match with different things. All of those are components

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Speaker 1: to value. So it's really a matter of value rather

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Speaker 1: than price. Well, I gotta say, just looking at some

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Speaker 1: of the videos on Twitter of the Made You Smile

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Speaker 1: campaign that you put together, a lot of young children

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Speaker 1: doing um, some pretty amazing theatrical presentations, singing and dancing.

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Speaker 1: Congratulations and the best luck. Thank you very much. Daniel Greasmer.

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Speaker 1: He is the chief executive of Jim Boree working on

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Speaker 1: their turnaround. Retail sales rose for a fifth consecutive month

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Speaker 1: in June, gains in automobiles and non store vendors showing strength.

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Speaker 1: Here to tell us about the retail environment is Seema Shaw,

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Speaker 1: Bloomberg Intelligence, senior consumer analysts. All right, Seema, what did

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Speaker 1: you take away from the increase overall purchases advancing a

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Speaker 1: half a percent prior month was revised up. That's mainly

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Speaker 1: because of automobiles. Automobiles and I would say gasoline, so

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Speaker 1: gas prices continue to go up. So but separate categories.

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Speaker 1: So did it pint that the other area of strength

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Speaker 1: was building materials, which again is not surprising giving the

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Speaker 1: weather and that Father's Day falls in June. To that category,

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Speaker 1: tent home related goods tend to benefit for that holiday,

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Speaker 1: So I would say those were the biggest takeaways. The

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Speaker 1: other thing, though, um I would say, is that you know,

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Speaker 1: some of these categories that were stronger before, like apparrel electronics,

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Speaker 1: they were a little bit weaker uh this month, um,

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Speaker 1: but predominantly think the games were from auto related so

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Speaker 1: that is I guess better for consumer spending. But again

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Speaker 1: autos is what drove the strength and retail sales all

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Speaker 1: of last year, so I think there could be some

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Speaker 1: moderation as we go forward. All right, so we give

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Speaker 1: you this as a positive reporter or negative report overall.

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Speaker 1: Would say overall, it's a positive report for the broad

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Speaker 1: scheme of spending. But again I would look at the categories.

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Speaker 1: Gasoline you have no choice but to buy it. Well, so,

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Speaker 1: if I'm hearing you correctly, there is a question between

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Speaker 1: discretionary spending and the purchases made their versus things that

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Speaker 1: you've got to spend money on. You need to fill

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Speaker 1: up your car, if you want to get around, you

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Speaker 1: need to pay rent, you need healthcare costs if you

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Speaker 1: get sick, So that those are accounting for a great

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Speaker 1: proportion of consumers purchases, it might correct in them. Yeah,

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Speaker 1: I would say that. And then again home being that

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Speaker 1: with that secular housing recovery, you're seeing strengthen those categories,

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Speaker 1: but otherwise you're seeing you know, deceleration other than what

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Speaker 1: people have to buy. At least in this report, from

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Speaker 1: and I know that things worse. They revised up May,

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Speaker 1: and May was significantly stronger because April was weaker given

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Speaker 1: the weather, so that it was a huge rebound and

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Speaker 1: spending all right, So based on all of this, two

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Speaker 1: consumers have more money to spend on an Amazon Prime Day. Well,

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Speaker 1: Amazon Prime they might, but I think it's at the

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Speaker 1: end of the day. It's just like Black Friday. There's

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Speaker 1: a lot of goods on there that you probably don't need.

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Speaker 1: You feel like you're getting a deal. The Amazon Prime

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Speaker 1: Day is longer this year. It starts today at three pm.

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Speaker 1: I think it goes for thirty six hours. So are

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Speaker 1: we so psychologically predisposed now that we will just buy

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Speaker 1: things even if we don't need them, just because they're

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Speaker 1: less expensive than they were the day before. I mean,

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Speaker 1: that's called human name, and it's feeling that you're getting

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Speaker 1: a deal, so you're going to get it if you

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Speaker 1: don't need the thing in the first place. Would honestly successful?

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Speaker 1: I mean, honestly, this reminds me of a conversation I

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Speaker 1: had with my husband where I used to come home

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Speaker 1: and I'd say, look at this dress, isn't it great?

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Speaker 1: And it was marked own from this there it was

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Speaker 1: marked down and he gave me the same mark. But

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Speaker 1: I mean that's like, you know, like if you don't

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Speaker 1: have if you don't have a kitchen, you know, buying

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Speaker 1: a set of pots and pants, isn't it? I agree,

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Speaker 1: But there are smaller things, and there's a lot of

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Speaker 1: nice to have, and I think this inspires people to

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Speaker 1: get it. Or perhaps you could argue there's a few

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Speaker 1: set of people who are going early for Christmas shopping

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Speaker 1: and they'll get a good deal and they'll save it.

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Speaker 1: But okay, in fairness, we can put aside this argument

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Speaker 1: as the American dream and challenging it because frankly, it's

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Speaker 1: always been the case that we've been built on consumerism.

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Speaker 1: But I am wondering, you know, about the sort of

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Speaker 1: consumer purchasing power. I was struck by a statistics showing

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Speaker 1: that real wages have not increased at all in the

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Speaker 1: past year, even as actual straight wages increase, but the

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Speaker 1: inflation the cost of goods has gone up equally, right.

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Speaker 1: I mean, it's in your it's in your deck. I

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Speaker 1: mean this to me is really important to take note of. No, absolutely,

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Speaker 1: and you already mentioned that housing, healthcare, and energy cost

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Speaker 1: that's what they have to spend on that's going up.

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Speaker 1: But I think a lot of the purchasing you're seeing

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Speaker 1: is done on credit. You're seeing household is very interesting

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Speaker 1: going up um And I know that maybe people are

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Speaker 1: on as much of a dire straight as they were

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00:25:13,600 --> 00:25:16,560
Speaker 1: during the recession, but still I think it's notable that

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00:25:16,640 --> 00:25:19,800
Speaker 1: there is a change. People are spending more, but the

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00:25:19,840 --> 00:25:23,360
Speaker 1: way there was no wage increase despite the tax cut. Right,

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00:25:23,560 --> 00:25:25,600
Speaker 1: maybe a few people got a thousand dollar bonus here

433
00:25:25,600 --> 00:25:27,800
Speaker 1: and there, that's not enough to be a game changer. Right.

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00:25:28,160 --> 00:25:30,760
Speaker 1: Most of the money from the tax cuts corporations used

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00:25:30,800 --> 00:25:33,880
Speaker 1: for buy backs, right, So the end consumer is not

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00:25:34,000 --> 00:25:36,439
Speaker 1: getting that in terms of wages, so they have to

437
00:25:36,440 --> 00:25:39,400
Speaker 1: be putting that money on the credit pim. We saw

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Speaker 1: this with Bank of America's earnings where they reported the

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00:25:43,640 --> 00:25:49,200
Speaker 1: best revenues from consumer credit lending in years, and they're

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00:25:49,240 --> 00:25:52,240
Speaker 1: expanding in that area and say said, you know, yeah,

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00:25:52,240 --> 00:25:55,239
Speaker 1: we are watching the credit quality of our borrowers. So

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00:25:55,280 --> 00:25:57,879
Speaker 1: far it looks okay, but we are expanding cause it's lucrative.

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00:25:58,480 --> 00:26:00,840
Speaker 1: But this is really interesting to be because if this

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00:26:00,880 --> 00:26:04,200
Speaker 1: is what you're saying, is plugging the gap between people's

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00:26:04,240 --> 00:26:06,480
Speaker 1: ability to buy these things because of an increase in

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00:26:06,760 --> 00:26:09,440
Speaker 1: wages or lack thereof. Um, you just have to wonder.

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00:26:09,480 --> 00:26:12,960
Speaker 1: People are living on their credit cards. I mean, that's

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00:26:12,960 --> 00:26:14,520
Speaker 1: what they do. And you tell me that you know,

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00:26:14,560 --> 00:26:18,919
Speaker 1: this kind of shopping is almost psychologically essential, right, I

450
00:26:18,920 --> 00:26:21,560
Speaker 1: mean they have to do it because the deals are

451
00:26:21,680 --> 00:26:25,040
Speaker 1: so great. You need that other flat panel television, And

452
00:26:25,080 --> 00:26:27,040
Speaker 1: all you gotta do is look at the mail or

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00:26:27,040 --> 00:26:29,360
Speaker 1: the post that you receive. And I don't know about you,

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00:26:29,400 --> 00:26:31,520
Speaker 1: but I mean if I had a penny for every

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00:26:31,680 --> 00:26:36,040
Speaker 1: offer for new credit cards, I am shocked by the

456
00:26:36,119 --> 00:26:38,600
Speaker 1: volume that I've been receiving. Okay, but I want to

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00:26:38,600 --> 00:26:41,040
Speaker 1: I want to push back a little bit because consumers

458
00:26:41,040 --> 00:26:44,960
Speaker 1: were actually fairly prudent, and US consumers hadn't releveraged barring

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00:26:45,040 --> 00:26:47,680
Speaker 1: like auto loans for a number of years. Are we

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00:26:47,880 --> 00:26:51,080
Speaker 1: reaching a threshold, a tipping point where you're starting to

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00:26:51,119 --> 00:26:54,399
Speaker 1: see greater releveraging and at a faster pace than we

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00:26:54,440 --> 00:26:57,000
Speaker 1: have in the past. I mean it appears that way

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00:26:57,040 --> 00:26:58,760
Speaker 1: if you just look at the credit card data, and

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00:26:58,760 --> 00:27:02,760
Speaker 1: you're saying, at the same time, improvements and sales for

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00:27:02,880 --> 00:27:06,600
Speaker 1: many retailers or retail sales, but you're not seeing an

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00:27:06,640 --> 00:27:08,720
Speaker 1: increase in wages. So to me, it has to come

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00:27:08,760 --> 00:27:11,000
Speaker 1: from somewhere. So where else would it be coming from

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00:27:11,000 --> 00:27:15,119
Speaker 1: other than credit? Because necessities continue to rise, So I

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00:27:15,160 --> 00:27:17,119
Speaker 1: would imagine that most of the wages that you have

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00:27:17,280 --> 00:27:19,439
Speaker 1: would go to those things. And here just to just

471
00:27:19,480 --> 00:27:21,479
Speaker 1: to give you, you know, not to because I mean,

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00:27:21,520 --> 00:27:23,640
Speaker 1: I know we're focused on retail sales, but it's also

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00:27:23,640 --> 00:27:26,480
Speaker 1: about you know, what else you can do with the money.

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00:27:26,760 --> 00:27:30,240
Speaker 1: We've all read these stories, but I mean, for Americans

475
00:27:31,040 --> 00:27:37,120
Speaker 1: have less than ten thousand dollars tucked away for retirement,

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00:27:37,560 --> 00:27:40,000
Speaker 1: and there was an article recently that if a majority

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00:27:40,000 --> 00:27:42,560
Speaker 1: of many Americans there was an emergency where they needed

478
00:27:42,680 --> 00:27:46,080
Speaker 1: like thousand dollars in cash, they wouldn't have it in

479
00:27:46,119 --> 00:27:48,640
Speaker 1: their account. And I think broader to this, I mean,

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00:27:48,680 --> 00:27:51,520
Speaker 1: you have to worry if we continue to have tariffs

481
00:27:51,520 --> 00:27:55,080
Speaker 1: implemented on items as it moves to goods consumers purchased,

482
00:27:55,080 --> 00:27:56,640
Speaker 1: and the price of that is going to go up,

483
00:27:56,720 --> 00:27:59,720
Speaker 1: and you know that would impact also because again their

484
00:27:59,720 --> 00:28:03,600
Speaker 1: wage is aren't going up commensurate with cost of goods.

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00:28:03,600 --> 00:28:06,879
Speaker 1: Thank you very much setting us straight. See Michelle Bloomberg.

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Speaker 1: Intelligence is own senior consumer analysts, giving us the details

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00:28:10,920 --> 00:28:16,760
Speaker 1: on US retail sales. Thanks for listening to the Bloomberg

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00:28:16,840 --> 00:28:19,520
Speaker 1: P and L podcast. You can subscribe and listen to

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00:28:19,520 --> 00:28:24,080
Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.

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00:28:24,480 --> 00:28:28,040
Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm

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00:28:28,080 --> 00:28:31,359
Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast,

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00:28:31,400 --> 00:28:34,040
Speaker 1: you can always catch us worldwide on Bloomberg Radio