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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find a Bloomberg Markets podcast

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Speaker 1: called Apple Podcast or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com Slash Podcast. Let's talk more broadly

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Speaker 1: about these markets, the ones that Goldman Sacks have been

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Speaker 1: trying to navigate over two, that look most of Wall

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Speaker 1: Street got pretty blindsided on. We want to talk about

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Speaker 1: all of this with Kelly Cox. Of course he's going

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Speaker 1: to be joining US US investment analyst over at Toro

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Speaker 1: and CALLI as we sort of digest what was a

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Speaker 1: brutal cross asset year in two? Are you licking wounds

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Speaker 1: at this moment? Are you thinking more optimistically about three?

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Speaker 1: Where you stand? Well, Hey, I'm a cup hatful person

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Speaker 1: and I think it's hard to say that. Yeah, it's

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Speaker 1: hard to be these days, but I think it's hard

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Speaker 1: to say that two wasn't painful because of that cross

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Speaker 1: asset sell off. Just the pain we saw a cross

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Speaker 1: a bunch of different markets. But I think that that

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Speaker 1: could pretend good things in knowing that investors are sufficiently

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Speaker 1: anxious and they're probably hedged going into I mean, the

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Speaker 1: whole talk of the whole talk of the economy this

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Speaker 1: year was about whether a recession is coming. So I

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Speaker 1: do take some comfort in the fact that a lot

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Speaker 1: of us are braced for that, and you know, weakness

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Speaker 1: may not catch us off guard. Caroline, I have a

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Speaker 1: real problem with Kelly Cox. She is a proud alum

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Speaker 1: of the University of North Carolina at Chapel Hill, and

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Speaker 1: as a duke person, this is really troubling. I will

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Speaker 1: try to power my way through it as a gentleman. Kelly.

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Speaker 1: You know, a lot of folks are saying there's still

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Speaker 1: earnings risk in this market, and this is still something

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Speaker 1: to market ass to deal with. How do you guys

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Speaker 1: think about that? Well, Paul, First of all, I respect duke.

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Speaker 1: It's a great grade school. We have a healthy arrival. Yes,

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Speaker 1: I think there is quite a bit of earnings risk there.

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Speaker 1: We haven't seen earnings estimates come down too much UM,

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Speaker 1: and I think that's partially because companies have been resilient

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Speaker 1: UM and demand has been much healthier than expected. But

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Speaker 1: we're still watching federate hikes and a bunch of other

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Speaker 1: risks to matriculate throughout the market. Um and companies are

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Speaker 1: like we talked about at Goldman companies are responding. They are,

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Speaker 1: you know, putting their guards up a little bit, just

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Speaker 1: to make sure that they are prepared. If we do

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Speaker 1: see more weakness, again, that's a good thing that could

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Speaker 1: keep a floor under earnings. But I don't think the

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Speaker 1: weakness is quite priced in yet, and that could lead

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Speaker 1: to new market loads if we see some recessionary price

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Speaker 1: or some recessionary being priced in, Go global for US Keddy,

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Speaker 1: because perhaps more weakness to come in US stocks? What

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Speaker 1: about global stocks more broadly? Have we seen enough of

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Speaker 1: the pain trade there already? And then likes a europe

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Speaker 1: and Asian or no, so globally, I think there are

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Speaker 1: a lot of opportunities for U S investors if they're

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Speaker 1: willing to think outside of their borders. Obviously, the global

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Speaker 1: economy is in a more precurious position right now, with

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Speaker 1: some bright spots China reopening being the brighter one going

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Speaker 1: into the new year. But the fact that the global

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Speaker 1: economy is out of step with the US economy could

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Speaker 1: allow for some interesting diversification opportunities going into you know,

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Speaker 1: the fact also that you know, European markets and Asian

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Speaker 1: markets have priced in a lot more pain, uh, does

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Speaker 1: make them right for you know, more of a rebound,

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Speaker 1: especially if we see ourselves come out of this weakness.

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Speaker 1: Hey Kelly, you know, really, since I don't know the

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Speaker 1: Great Financial Crisis, what's really been driving this market in

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Speaker 1: large part with technology stocks and maybe you know more

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Speaker 1: narrowly defined to fang stocks and things like that, but

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Speaker 1: do you exp what kind of role do you expect

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Speaker 1: big tech to play in the next market moved to

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Speaker 1: the extent that we get a little bit of a

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Speaker 1: lift and maybe sometime in well. So tech is an

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Speaker 1: interesting space right now. Obviously there are a lot of

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Speaker 1: different flavors of tech. The big tech companies look a

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Speaker 1: lot different than the more speculative tech companies, and we've

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Speaker 1: seen that in performance throughout this year. Uh. You know,

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Speaker 1: as we step forward to a FED pause most likely um,

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Speaker 1: you know, potential rate cuts in the future, because the

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Speaker 1: FED is insistent on getting inflation down, uh, and there

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Speaker 1: could be a policy change after that. I'm talking very

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Speaker 1: far into the future, but as we step forward to that,

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Speaker 1: as we prepare it for you know, a potential market

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Speaker 1: after this. It could be interesting to you know, maybe

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Speaker 1: look at those more quality tech companies, uh, you know,

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Speaker 1: big tech with strong balance sheets to get some exposure

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Speaker 1: to a market that's looking ahead. We don't necessarily think

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Speaker 1: rate cuts are on the horizon, and you know tech

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Speaker 1: in a higher interest rate environment. Uh, there could be

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Speaker 1: a lot of pain still there for a lot more

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Speaker 1: for the more speculative companies. But at the same time,

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Speaker 1: you really have to be thinking ahead here and big

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Speaker 1: tech could be an interesting spot to do that. And

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Speaker 1: then as DAK currently ap almost two percentage we speak

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Speaker 1: thanks to the likes of Apple, Microsoft, Tesla even getting

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Speaker 1: in on the action again today with an eight point

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Speaker 1: net change on the benchmark. But talk to us go

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Speaker 1: cross asset. As we see in many ways the correlations

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Speaker 1: of this year has been when the bond market has

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Speaker 1: sold off, fields risen, Nazzac has sold off, and sympathy.

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Speaker 1: What do you make of the bond market for coming

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Speaker 1: three all, we like to see yields being capped out

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Speaker 1: at these sorts of levels, and we like to start

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Speaker 1: to see a little bit of buying it these sorts

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Speaker 1: of numbers. Well, we're in a weird environment, but I

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Speaker 1: think we can all agree that inflation is slowing and

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Speaker 1: it's going to take a lot to you know, get

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Speaker 1: it back to the peak that we saw this summer,

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Speaker 1: and I think that's good news for bond investors, especially

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Speaker 1: if we do see a recession in three, which definitely

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Speaker 1: is not out of the question. Here, we could see

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Speaker 1: bonds returned to their traditional role of being that safe

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Speaker 1: haven asset, especially around the world for global investors. And

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Speaker 1: that goes back to the global economy being out of

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Speaker 1: step with the US economy. Um, lots of pain there,

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Speaker 1: but also lots of opportunity. So you know, we see

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Speaker 1: opportunity along bonds. Obviously shorter bonds, shorter term bonds following

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Speaker 1: what the FET is doing. And it doesn't look like

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Speaker 1: the fens gonna be hiking much more from here, so

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Speaker 1: we could see a return to, you know, a more

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Speaker 1: traditional asset correlation. All right, Kelly Cox, great stuff, Thank

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Speaker 1: you very much for taking the time. I guess good

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Speaker 1: luck to the u NC tart heels are going forward

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Speaker 1: this season kind of US investment analysts that tour. We

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Speaker 1: appreciate getting her thoughts. Ken Sha, He's Bloomberg Intelligence. He

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Speaker 1: covers the the consumer stuff, including cannabis for Bloomberg Intelligence.

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Speaker 1: He joins us via Zoom, and Whitney Batty, Josephine and

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Speaker 1: Billy's Cannabis Speakeasy joins us via Zoom from Los Angeles.

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Speaker 1: Whitney loved to get with you first here all right,

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Speaker 1: we'll go to Ken Shay first because he is our

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Speaker 1: rock rock stars. It relates to kind of covering the

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Speaker 1: business of cannabis can How big is this for New

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Speaker 1: York City? Um, you know, getting its first legal pot

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Speaker 1: shop and kind of how do you think that's going

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Speaker 1: to evolve it in New York? Yeah, Hi Paul, Happy holiday,

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Speaker 1: is good to see you again. Um, it is really

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Speaker 1: a big deal. I mean New York, it's a huge

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Speaker 1: Market's a highly visible market, and I think a lot

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Speaker 1: of other populous areas in the United States that haven't

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Speaker 1: legalized are gonna be watching us closely to see how

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Speaker 1: it pulls it off, how it does. Um, New York

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Speaker 1: is a large market and it has high hopes and

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Speaker 1: no pun intended. It looks to its neighbor New Jersey.

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Speaker 1: New Jersey you know legalized recreational only. Back in April,

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Speaker 1: it's already up to a one billion dollar run rate

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Speaker 1: in sales. New York's have twice the population. So you

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Speaker 1: put the math together and you have a really big

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Speaker 1: industry out of the gate. The demand is going to

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Speaker 1: be there. Product has been around a long time, um,

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Speaker 1: and so yeah, all eyes around New York. It's well,

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Speaker 1: themo is a visible market. To really get a sense

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Speaker 1: of what's going on. You do some great analysis for us,

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Speaker 1: and we always love it that sort of bringing together

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Speaker 1: some of the issues that perhaps still the spending bill

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Speaker 1: didn't have the marijuana banking element to it, and we

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Speaker 1: saw a lot of potstocks fall in the back of that.

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Speaker 1: That many still say to really grow this industry, they

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Speaker 1: need to be able to get bank loans, They need

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Speaker 1: to be able to get more easier access to capital.

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Speaker 1: But I'm interested in your perspective of why we've already

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Speaker 1: seen the ability when I walk outside of Bloomberg to

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Speaker 1: cross the store, a cross across the street and I

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Speaker 1: can go and get edibles, I can go and buy

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Speaker 1: sat marijuana related food and consumption. What is that still

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Speaker 1: doing now and why has it been able to do

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Speaker 1: that ahead of this sort of legalization. Well, New York

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Speaker 1: is has taken a different approach, put it that way

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Speaker 1: than many markets, and allowing you know, the social justice

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Speaker 1: theme to allow some flexibility and put it that way

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Speaker 1: to some operators that won't exist in many other markets.

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Speaker 1: And that's gonna at the consternation of the legal operators

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Speaker 1: and the legal operators. And look, we're paying all these taxes,

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Speaker 1: we're going jumping through all these hoops, we're doing a

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Speaker 1: lot of things here. Help us out by enforcing the

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Speaker 1: laws on the books that you know, you can't have

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Speaker 1: someone down the street selling it legally and avoiding taxes

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Speaker 1: if you're going if they're regulated in that eas's going

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Speaker 1: to compete. Well. So that's that's really going to be

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Speaker 1: a key issue going forward. And it also made uh,

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Speaker 1: you know, also discourage some other big entities from getting

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Speaker 1: into the New York, New York market until they enforce

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Speaker 1: those rules. Really interesting that you bring up social equity there,

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Speaker 1: and we thank you so much, can say, of course,

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Speaker 1: Bloeme Megantelligence, and we want to dovetell into that exact

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Speaker 1: point because what's so interesting with this development of the

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Speaker 1: cannabis market here in New York is that Kathy Hokele

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Speaker 1: and the governor have been trying to think about how

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Speaker 1: it's ensured that the people who have been the past

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Speaker 1: perhaps been targeted for cannabis and fractions now actually managed

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Speaker 1: to benefit from the legalization with jobs of the opportunity.

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Speaker 1: And they set up a two on a million dollar

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Speaker 1: New York Social Equity Cannabis Investment Fund. This is something

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Speaker 1: that we've seen perhaps in Illinois as it started to

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Speaker 1: embrace legalization. How can they try to foster growth, particularly

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Speaker 1: among people of color, ensure that they're leading businesses. It's

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Speaker 1: not always worked that well of late within the licensing process,

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Speaker 1: particularly in Allinois. Let's talk about how it's working in

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Speaker 1: l A. We've got a perfect guest. Whitney Beauty is

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Speaker 1: with us founder and CEO Josephine and Billy's. It's the

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Speaker 1: first cannaby Speak easy in the US. That's for women

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Speaker 1: of color targeted there. You took checks from jay Z

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Speaker 1: Cannabis investor the parent company as well. Just talk to

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Speaker 1: us about your journey, Whitney, how have you found yourself

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Speaker 1: able to lead this sort of a business. I mean,

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Speaker 1: it has definitely not been easy to get into this space,

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Speaker 1: um and particularly you know, even with social equity being

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Speaker 1: what it is, it's really um hard for us without

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Speaker 1: having access to that capital to grow our businesses. I

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Speaker 1: mean I applied for social equity in Los Angeles in

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Speaker 1: twenty nineteen. UM our program here UM had a lot

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Speaker 1: of delays, and unfortunately we were required to hold property

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Speaker 1: through all of those delays, which was incredibly difficult for us,

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Speaker 1: you know, to sit and pay for two years UM,

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Speaker 1: you know, on a place that we were not allowed

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Speaker 1: to sell cannabis out of UM. That really hurt, especially

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Speaker 1: when we're talking about population that is, you know, the

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Speaker 1: idea of equity is that communities of color were disproportionately

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Speaker 1: disenfranchised by the War on drugs and thus deserved prioritization

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Speaker 1: and legalization and so UM. That really kind of drained

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Speaker 1: our funding. And when we're talking about especially equity businesses,

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Speaker 1: we don't have that much access to capital, as you mentioned,

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Speaker 1: I mean, I can't go down and get uh lone

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Speaker 1: from Bank of America. The s b A isn't offering loans.

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Speaker 1: Were stuck in the world where we have to be

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Speaker 1: able to raise money from either angel investors, which a

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Speaker 1: lot of people of color don't have in their networks,

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Speaker 1: or vcs and We know that vcs are giving about

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Speaker 1: two percent of their money to women led businesses and

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Speaker 1: points there was, there was, there was six to women

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Speaker 1: of color, and that is you know, abysmal numbers. It

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Speaker 1: makes it really hard for us to compete. So we

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Speaker 1: need give us a sense of kind of where your

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Speaker 1: business is now, what's the outlook is? As you look

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Speaker 1: ahead to the new year, I mean we're you know,

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Speaker 1: it becomes really difficult for us on a couple of

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Speaker 1: different levels. It's you know, being able to have raised

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Speaker 1: enough money. We've raised a million dollars, but really we

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Speaker 1: need to in order to be able to compete with

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Speaker 1: big MSOs that are there on the market. It's also

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Speaker 1: really difficult for us because of the tax structure here.

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Speaker 1: I you know, as a legal cannabis business, I can't

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Speaker 1: write anything off because of two a d um you know,

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Speaker 1: so that overhead is sitting on us. And also I'm

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Speaker 1: competing again with the illicit market. Um, you know, if

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Speaker 1: I'm going to have to you know, they're charging you

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Speaker 1: a hundred dollars and I have to charge you a

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Speaker 1: hundred thirty seven dollars because we have thirty seven percent

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Speaker 1: tax here. It makes it less attractive for people to

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Speaker 1: be able to buy from the legal market, and it

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Speaker 1: also makes it less attractive for those people in the

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Speaker 1: listit market to come into the legal market. Um. So

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Speaker 1: we're you know, we're concerned about what the future looks like,

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Speaker 1: especially as we see the price of plantfall um, you know, tremendously.

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Speaker 1: I mean we're talking about you know, the pounds that

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Speaker 1: we're going for four thousand dollars now, um, you know,

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Speaker 1: sub five hundred dollars. So what we were looking at

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Speaker 1: as we're building projections in is not necessarily what we're

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Speaker 1: seeing now in twenty two. We need a lot of

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Speaker 1: the obstacles you outline there so eloquently. What about some

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Speaker 1: of the help you therefore need. Is it about cracking

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Speaker 1: down on the illegal side of the business is coming

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Speaker 1: from the government. Is it about having more funds coming

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Speaker 1: from government as we're seeing here in New York to

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Speaker 1: be able to buy businesses such as he is. Is Is

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Speaker 1: it about educating vcs about angel investors to a show

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Speaker 1: that you are raising too many and rather than one.

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Speaker 1: It's about all of those things. We definitely have to

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Speaker 1: see taxes go down. It's it's critical and we need

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Speaker 1: the community to understand why that is so important. A

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Speaker 1: lot of people so legalization on the ability to tax

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Speaker 1: the heck out of us, but that's not gonna allow

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Speaker 1: this industry to survive. We have to see more capital

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Speaker 1: coming into this space and have access to it. Um

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Speaker 1: for you know, these equity businesses. Whether that means that

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Speaker 1: the state allows us to be able to have more

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Speaker 1: grant programs, more um you know, loan programs. I'm happy

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Speaker 1: to take the loan. The fact is that I cannot

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Speaker 1: do that. We don't have access to that. We definitely

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Speaker 1: needed more education on the VC side, UM you know,

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Speaker 1: businesses ran by women, businesses um ran by black women,

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Speaker 1: and we do have great success rates. We do have

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Speaker 1: the skill set out there. We just don't have the

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Speaker 1: access to capital in order to compete with someone who

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Speaker 1: is sitting on millions of dollars who can definitely drop

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Speaker 1: the price of an ape and weigh us out as

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Speaker 1: we die and then collect those licenses up. So we

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Speaker 1: need all of those things in line. And also for

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Speaker 1: equity in particular, we need technical assistance um you know,

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Speaker 1: within the community. Because the cannabis industry is highly regulated.

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Speaker 1: I'm dealing with compliance issues on a daily basis, So

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Speaker 1: if we don't have the skill set, you know, especially

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Speaker 1: because there's not necessarily a role map. This UH industry

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Speaker 1: is incredibly new. So being able to have a technical

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Speaker 1: assistance that's going to allow people to be able to

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Speaker 1: be compliant and be successful in their businesses is what

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Speaker 1: it's gonna take, UM for equity businesses to succeed. So

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Speaker 1: when it sounds like an extraordinarily challenging outlook, is there

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Speaker 1: any relief that you see after? What keeps you going?

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Speaker 1: What keeps me going is um, the people that I'm

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Speaker 1: helping at the end of the day. I came to

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Speaker 1: cannabis because I had a doctor who suggested that I

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Speaker 1: try to deal with anxiety. Um. You know, I didn't

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Speaker 1: use it when I was younger. Nancy Reagan told me

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Speaker 1: to say not to dregs. I believe sure. UM. So

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Speaker 1: it took me a while to come to this space,

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Speaker 1: and I had to do a lot of research on

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Speaker 1: the plant, learning about how to use it effectively and

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Speaker 1: also about why I felt so negatively about it. And

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Speaker 1: I didn't want the next person to have to do

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Speaker 1: that much research or have such a hard time because

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Speaker 1: what if we know for sure is that especially when

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Speaker 1: you're talking about our demographic, women are more stressed than men,

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Speaker 1: and women of color are the least most stressed cohort

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Speaker 1: out there, And yet we have the least access to healthcare.

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Speaker 1: And we do have health care. We know that the

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Speaker 1: doctors aren't necessarily listening to us, That's what the data

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Speaker 1: is saying, and we might not have money to cover that.

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Speaker 1: So being able to have safe access to affordable cannabis

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Speaker 1: within our community is also public health. Is being able

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Speaker 1: to offer that to people with anxiety was t PTS

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Speaker 1: with all the things that we know that cannabis is

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Speaker 1: good for, and so waking up and knowing that I'm

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Speaker 1: offering that in my community and giving them education that

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Speaker 1: isn't available elsewhere is what keeps me moving within this space.

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Speaker 1: All right, Whitney, we we should the best of luck

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Speaker 1: challenging situation about some interesting opportunities out there, Whitney, Baby,

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Speaker 1: Josephine and Billy's cannabis speak easy. Joining us VIA's room

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Speaker 1: from Los Angeles. So let's talk about or when you're

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Speaker 1: on your airplane, you've managed to make it to the

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Speaker 1: destination of choice, how are you feeling, how are you spending,

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Speaker 1: where are you going to spend it. Well, is it

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Speaker 1: a hotel group? Please to welcome a key CEO from

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Speaker 1: that space. Larry Kakul is President CEO b w H

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Speaker 1: Hotel Group. You knowd of course at Best Western Hotels

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Speaker 1: and Resorts, but also you're talking economy, mid scale, upscale,

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Speaker 1: upper upp up scale. I'm liking to see that that's

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Speaker 1: a turn of phrase, but also luxury and boutique segments

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Speaker 1: like you've got eighteen brands, I think it is, Larry,

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Speaker 1: are they all full? Where are you seeing the most

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Speaker 1: exuberance as we head into the new year. Well, we're

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Speaker 1: seeing exuberance across all of our markets, of course and segments.

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Speaker 1: The demand for travel is robust. We are experiencing a

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Speaker 1: tremendously successful holiday season, and we anticipate and are projecting

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Speaker 1: our most successful New Year's weekend ever as well. So

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Speaker 1: Larry talked to us about the day to day operations.

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Speaker 1: I'm gonna go was something that I've noticed. No, uh,

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Speaker 1: you know, service to service the room for three four days. Now,

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Speaker 1: I know that was a byproduct of the pandemic. Are

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Speaker 1: we gonna get daily housekeeping back into the business model

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Speaker 1: or is the industry moved on to something that's maybe

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Speaker 1: every two days, every three days, every four days. At

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Speaker 1: Best Western, we encourage our hotel ears to offer everyday service. UM.

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Speaker 1: Guests have the option to request that they don't have

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Speaker 1: that service if they have their personal concerns. But we

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Speaker 1: understand that guests have diverse requests and requirements with regard

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Speaker 1: to overnight service. UM. You it's not just the COVID

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Speaker 1: I'll call it a COVID result. You also see the

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Speaker 1: hotel industry having labor challenges, which is also influencing that

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Speaker 1: overnight service that's being offered. But we encourage our hotel

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Speaker 1: yers to offer overnights of this. So one of the things,

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Speaker 1: UH Larry's as we think about travel is the leisure

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Speaker 1: travel seemed to come back pretty darn quickly, business travel

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Speaker 1: a little bit less. So what are you seeing from

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Speaker 1: your perspective for business travel as you hit into twenty

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Speaker 1: three and we're focused on midweek business, which is that

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Speaker 1: business travel UM, while it has lagged, leisure travel coming back,

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Speaker 1: we're seeing that UM businesses recognize the importance of face

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Speaker 1: to face meetings, conferences, and UM. While it's been i'll

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Speaker 1: call it lagging, the leisure return, we're looking forward to

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Speaker 1: it coming back um um two pre pandemic levels, and

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Speaker 1: which also have to consider is there's this push for

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Speaker 1: international travel as well, which plays an important role with

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Speaker 1: regard to midweek and international business travel. Let's talk about

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Speaker 1: the international travel. Let's talk about the news. It is

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Speaker 1: so fresh this week, the fact that China has basically

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Speaker 1: done a massive U turn and is now going against

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Speaker 1: its COVID zero policy. They now want to be issuing passiplets,

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Speaker 1: issuing an ability to not only enter China, but also

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Speaker 1: for the Chinese people to be back in the skies

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Speaker 1: and visiting well New York, London, different international destinations. You excited, trepidation.

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Speaker 1: What does that mean for you in your business? Well,

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Speaker 1: we're excited about it. We think Asia is a tremendous

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Speaker 1: opportunity um for the rebound, and Chinese travel plays a

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Speaker 1: major role in that. You know, we understand China has

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Speaker 1: lessened its restrictions, but you also have to understand while

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Speaker 1: you can be optimistic in that regard, there will be

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Speaker 1: some my call it compression associated with lessening in those restrictions,

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Speaker 1: and you can see that happening already with the United States, India, Japan,

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Speaker 1: Italy putting in place I'll call them testing requirements with

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Speaker 1: regard to inbound Chinese travel. So while it should have

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Speaker 1: a positive impact on international business travel and international leisure travel,

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Speaker 1: you have to be cautiously optimistic because the will be

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Speaker 1: countries that are concerned with regard to the health, welfare

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Speaker 1: and safety of their citizens. What is number one on

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Speaker 1: your sort of consumers concerns or hopes right now? Is

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Speaker 1: it that they're worried about COVID? Is it more of

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Speaker 1: the inflationary pressures? How are you expecting that to impact

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Speaker 1: post New Year? Are we going to be as desirous

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Speaker 1: to get out to spend as potentially this global recession

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Speaker 1: starts to buy. We think there's still that pent up

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Speaker 1: demand post the challenges of the pandemic that hasn't yet

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Speaker 1: been unleashed. Um, so we are optimistic about traveling again.

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Speaker 1: You have to be cautious with regard to the impact

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Speaker 1: of the Ukraine War, of inflation, fear of a recession,

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Speaker 1: which can influence consumer confidence, their supply challenges, labor challenges.

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Speaker 1: There are a lot of of unknowns that can i'll

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Speaker 1: call it influence outcome. But we're optimistic because what we

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Speaker 1: have seen is by way of example, January, February and

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Speaker 1: March exceeding pre pandemic performance with regard to occupancy and

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Speaker 1: also with regard to rate average daily rate. So while

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Speaker 1: we're very confident that we have early signs of a

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Speaker 1: tremendous three, you have to continue to monitor the pressures

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Speaker 1: on that confidence that I just mentioned. Are you mentioned

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Speaker 1: labor before? I love to get a sense of just

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Speaker 1: kind of what you're experiencing right now across your hotel groups.

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Speaker 1: Is those labor challenges, are they moderating or is this

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Speaker 1: something you're baking baking into your model for we're I

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Speaker 1: don't I wouldn't say baking it into our model. About

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Speaker 1: what we're doing is trying to help our hoteliers as

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Speaker 1: much as we can with regard to those labor challenges

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Speaker 1: by providing them assistance, training, and support with regard to

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Speaker 1: those hoteliers becoming an employer of choice UM through a

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Speaker 1: program like Because We Care program and Best Western being

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Speaker 1: a family of independent hotel owners that recognize the importance

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Speaker 1: of being good citizens in their communities and as a

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Speaker 1: result of that they can become that employer of choice

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Speaker 1: that can successfully overcome labor challenges. Larry, which hotel. You're

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Speaker 1: going to be out for me here, I'm going to

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Speaker 1: be at home. Thank you. That's a non rocking the

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Speaker 1: boat answer. We thank you. Have a wonderful time at

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Speaker 1: home celebrating in this new year, and one that seems

432
00:22:27,440 --> 00:22:32,920
Speaker 1: pretty optimistic. All right, let's switch gears. Let's take a

433
00:22:32,960 --> 00:22:36,080
Speaker 1: look at the US and European economy here as we

434
00:22:36,200 --> 00:22:39,600
Speaker 1: head into a lot of challenges that are common to

435
00:22:39,880 --> 00:22:41,720
Speaker 1: other parts of the world. But of course they also

436
00:22:41,840 --> 00:22:44,840
Speaker 1: have the geopolitical issues in Ukraine as well, and that's

437
00:22:44,880 --> 00:22:46,920
Speaker 1: impacting kind of I think forecast for a lot of

438
00:22:46,920 --> 00:22:50,240
Speaker 1: folks and outlook for We're gonna check in today with

439
00:22:50,280 --> 00:22:53,400
Speaker 1: Dean Turner. He is the chief Eurozone and UK economists

440
00:22:53,440 --> 00:22:58,280
Speaker 1: for UBS Global Wealth Management, joining us from London via zoom. Dean,

441
00:22:58,359 --> 00:23:00,560
Speaker 1: thanks so much for joining us here. You know, I

442
00:23:00,600 --> 00:23:06,040
Speaker 1: guess that the economic discussion does your is recession? No recession?

443
00:23:06,359 --> 00:23:09,600
Speaker 1: How deep will it be for the UK and Eurozone?

444
00:23:09,840 --> 00:23:14,560
Speaker 1: What's your call here for that's things stand, We still

445
00:23:14,600 --> 00:23:18,600
Speaker 1: expect to see a recession in both the Eurozone and

446
00:23:18,640 --> 00:23:23,119
Speaker 1: the UK. I wouldn't be expecting a particularly deep procession,

447
00:23:23,160 --> 00:23:26,000
Speaker 1: you know, Pike, the trough of somewhere around one percent.

448
00:23:26,119 --> 00:23:28,679
Speaker 1: But that said, I think a couple of things have

449
00:23:28,840 --> 00:23:32,120
Speaker 1: changed in the last last few weeks. The first being

450
00:23:32,160 --> 00:23:36,320
Speaker 1: that incoming data has actually been a bit better than

451
00:23:36,680 --> 00:23:39,480
Speaker 1: what we were expecting certainly, so you know, that places

452
00:23:39,480 --> 00:23:43,040
Speaker 1: some upside risks, certainly to the fourth quarter numbers, perhaps

453
00:23:43,040 --> 00:23:45,119
Speaker 1: in the first quarter as well. And I think the

454
00:23:45,160 --> 00:23:47,680
Speaker 1: other thing that, as you mentioned, you know, the war

455
00:23:47,760 --> 00:23:51,400
Speaker 1: in Ukraine and the impact that that's had on on

456
00:23:51,520 --> 00:23:54,920
Speaker 1: the our economies via the via the energy price. I

457
00:23:54,960 --> 00:23:57,000
Speaker 1: find it very interesting at the moment if you're looking

458
00:23:57,040 --> 00:24:00,600
Speaker 1: at the charts for gas prices in particular how far

459
00:24:00,720 --> 00:24:03,760
Speaker 1: they fallen in recent weeks, and you know, if that

460
00:24:03,960 --> 00:24:07,119
Speaker 1: is continued, then that probably places another bit of upside

461
00:24:07,200 --> 00:24:10,800
Speaker 1: risk in terms of the growth forecast. So as things stand,

462
00:24:10,800 --> 00:24:13,960
Speaker 1: I would still be looking for a slowdown, but I

463
00:24:14,000 --> 00:24:16,640
Speaker 1: think we have to accept that slowdown may maybe even

464
00:24:16,640 --> 00:24:19,639
Speaker 1: shallower than what we previously thought. How interesting just to

465
00:24:19,640 --> 00:24:22,280
Speaker 1: tell us about how European economy is, the UK economy

466
00:24:22,359 --> 00:24:24,760
Speaker 1: getting the grips of the inflation and what might be

467
00:24:24,840 --> 00:24:27,639
Speaker 1: soothing a little bit. As you say, when gas prices

468
00:24:27,680 --> 00:24:30,359
Speaker 1: start to fall, we have seen an awful lot of

469
00:24:30,440 --> 00:24:33,720
Speaker 1: labor tension at the moment, not most acutely in the

470
00:24:33,840 --> 00:24:37,119
Speaker 1: UK as as we so know well, but also in

471
00:24:37,160 --> 00:24:39,119
Speaker 1: Europe as well. I mean we're starting to see it

472
00:24:39,160 --> 00:24:41,840
Speaker 1: here in US as well, strike action. How much we

473
00:24:41,960 --> 00:24:44,320
Speaker 1: likely to see that being an implication to slowdown in

474
00:24:44,400 --> 00:24:47,159
Speaker 1: economies or is this really something more that grabs the

475
00:24:47,240 --> 00:24:51,680
Speaker 1: media headlines rather than impacts economies more generally. I think

476
00:24:51,680 --> 00:24:54,280
Speaker 1: we you know, we have to say that the economic

477
00:24:54,400 --> 00:24:58,080
Speaker 1: impact so far has been limited, and I would be

478
00:24:58,160 --> 00:25:02,920
Speaker 1: my expectation that going forward, um, we will we will

479
00:25:02,920 --> 00:25:06,720
Speaker 1: see more industrial action. I think that's that that's a given.

480
00:25:06,960 --> 00:25:08,840
Speaker 1: But is it going to be enough to because a

481
00:25:08,880 --> 00:25:11,000
Speaker 1: wider shock to the labor market. I don't think that's

482
00:25:11,040 --> 00:25:13,080
Speaker 1: the case. You know, this is not the nine seventies.

483
00:25:13,400 --> 00:25:18,919
Speaker 1: The percentage of workers who are unionized is much less today. Moreover,

484
00:25:19,240 --> 00:25:22,920
Speaker 1: the bargaining position of workers is it's it seems to

485
00:25:22,960 --> 00:25:26,240
Speaker 1: still be relatively weak. And you know the reason I

486
00:25:26,320 --> 00:25:29,800
Speaker 1: say that is that, yes, we are seeing um wage

487
00:25:29,800 --> 00:25:34,080
Speaker 1: increases coming through in the data, workers are successfully negotiating

488
00:25:34,080 --> 00:25:37,399
Speaker 1: a pay rise, but they're still negotiating a real terms

489
00:25:37,480 --> 00:25:41,960
Speaker 1: pay cut. So you know, until that changes, I know

490
00:25:42,359 --> 00:25:45,000
Speaker 1: I'm reluctant to change my outlook in terms of the

491
00:25:45,040 --> 00:25:47,720
Speaker 1: impact that some of the labor market titles we're seeing

492
00:25:47,840 --> 00:25:50,240
Speaker 1: we'll have over the medium term. It's here for now,

493
00:25:50,280 --> 00:25:52,280
Speaker 1: but I wouldn't expect it to build into something that

494
00:25:52,840 --> 00:25:55,399
Speaker 1: a problem over the longer term. It didn't. We actually

495
00:25:55,400 --> 00:25:57,359
Speaker 1: have the Bank of Japan just a week or so

496
00:25:57,400 --> 00:25:59,879
Speaker 1: ago kind of throwing the towel, if you will, and say, okay,

497
00:26:00,040 --> 00:26:03,480
Speaker 1: we're want to let rates go higher. Following you know,

498
00:26:03,520 --> 00:26:05,680
Speaker 1: the rest of the central banks around the world, the

499
00:26:05,720 --> 00:26:08,840
Speaker 1: Bank of England, the European Central Bank, what's your outlook

500
00:26:08,880 --> 00:26:12,040
Speaker 1: for kind of their actions in going into the new year.

501
00:26:13,560 --> 00:26:15,560
Speaker 1: I still think we we should be expecting that the

502
00:26:15,600 --> 00:26:18,480
Speaker 1: central banks are going to increase rates as we go

503
00:26:18,600 --> 00:26:21,720
Speaker 1: through the first quarter. Um. You know, certainly from the

504
00:26:21,760 --> 00:26:25,280
Speaker 1: e CPS perspective, I think that meeting in December provide

505
00:26:25,359 --> 00:26:28,080
Speaker 1: us all with a number of serprises there and if

506
00:26:28,080 --> 00:26:30,840
Speaker 1: you take them at their word, um, interest rates are

507
00:26:30,840 --> 00:26:34,639
Speaker 1: going to three percent at least in the euro Zone. UM.

508
00:26:34,960 --> 00:26:36,960
Speaker 1: I would also argue the same for the UK. You know,

509
00:26:37,040 --> 00:26:39,960
Speaker 1: we're probably looking at rates going north of four percent

510
00:26:40,640 --> 00:26:43,919
Speaker 1: UM in the first quarter of next year. But you know,

511
00:26:44,160 --> 00:26:47,560
Speaker 1: that said, we are against this backdrop of economic growth

512
00:26:47,600 --> 00:26:52,560
Speaker 1: is slowing, inflation pressures are easing. Two factors are driving that.

513
00:26:52,640 --> 00:26:54,439
Speaker 1: Let's be clear about this. You know, the first is

514
00:26:54,480 --> 00:26:56,720
Speaker 1: the base effects that we're seeing in terms of higher

515
00:26:56,800 --> 00:27:00,880
Speaker 1: energy prices from last year are starting to way down

516
00:27:00,880 --> 00:27:03,600
Speaker 1: on headline indices. But also we could demand you know,

517
00:27:04,080 --> 00:27:06,199
Speaker 1: I find it interesting when we're looking at the sum

518
00:27:06,280 --> 00:27:08,760
Speaker 1: of the survey data, which you know, survey data we

519
00:27:08,800 --> 00:27:10,880
Speaker 1: have to take with as a certain degree of caution,

520
00:27:11,200 --> 00:27:13,960
Speaker 1: but I do find it interesting that, you know, companies

521
00:27:14,000 --> 00:27:17,600
Speaker 1: already flagging a reluctance on the behalf of consumers to

522
00:27:17,680 --> 00:27:20,600
Speaker 1: accept further price rises at the current rate, so that

523
00:27:20,680 --> 00:27:22,320
Speaker 1: we could demand out look, I think is going to

524
00:27:22,359 --> 00:27:26,520
Speaker 1: compound that that downward pressure on inflation. So I'd still

525
00:27:26,560 --> 00:27:28,919
Speaker 1: be of the view that you know, the peak is

526
00:27:28,960 --> 00:27:32,000
Speaker 1: probably were well, we're closer to the peak that you know,

527
00:27:32,080 --> 00:27:33,840
Speaker 1: the end of this hike ing cycle than we are

528
00:27:33,840 --> 00:27:36,760
Speaker 1: the beginning. Accepted, there's a little bit of uncertainty around

529
00:27:36,760 --> 00:27:39,760
Speaker 1: where we're going, but I think market pricing is probably

530
00:27:39,800 --> 00:27:42,159
Speaker 1: still a little bit too aggressive for both both the

531
00:27:42,320 --> 00:27:45,200
Speaker 1: Eurozone and the UK markets. Looking for three and a half,

532
00:27:45,440 --> 00:27:48,680
Speaker 1: we suspect that that the that the ECB stops close

533
00:27:48,720 --> 00:27:51,879
Speaker 1: to three. So we've sort of talked about almost the

534
00:27:51,920 --> 00:27:53,960
Speaker 1: mandate of the central banks at the moment, the inflation

535
00:27:53,920 --> 00:27:55,840
Speaker 1: of pressures that we've talked about, the labor that we've

536
00:27:55,840 --> 00:27:58,000
Speaker 1: talked about, and indeed where you see the central banks

537
00:27:58,000 --> 00:28:04,040
Speaker 1: actions going. What about more broadly, therefore, the resiliency at

538
00:28:04,080 --> 00:28:06,840
Speaker 1: the moment, that the feeling in the market that you

539
00:28:07,000 --> 00:28:10,200
Speaker 1: get in terms of opportunities to be putting money to work,

540
00:28:10,200 --> 00:28:12,960
Speaker 1: and indeed whether the economies are likely to whether a

541
00:28:13,000 --> 00:28:15,120
Speaker 1: storm better or not. Do you think overall we are

542
00:28:15,119 --> 00:28:17,879
Speaker 1: starting to see people see value at this time or

543
00:28:18,000 --> 00:28:22,880
Speaker 1: really is a sentiment and just just still on the floor. Well,

544
00:28:23,080 --> 00:28:25,679
Speaker 1: as you take the surveys um some of the investor

545
00:28:25,760 --> 00:28:29,120
Speaker 1: surveys at face value, it would still seem that most

546
00:28:29,200 --> 00:28:32,639
Speaker 1: investors are still pretty cautious, and indeed our own positioning

547
00:28:32,680 --> 00:28:34,920
Speaker 1: is still quite a cautious one. You know, we're focused

548
00:28:34,960 --> 00:28:40,000
Speaker 1: on defensive, focused on value, focused on protecting for the

549
00:28:40,040 --> 00:28:43,000
Speaker 1: downside because as things stand from current levels, we think

550
00:28:43,040 --> 00:28:45,560
Speaker 1: there's probably you know, still still quite a high chance

551
00:28:45,640 --> 00:28:48,960
Speaker 1: that that that that we do see further volatility. But

552
00:28:49,480 --> 00:28:52,400
Speaker 1: that said, you know what what what is starting to

553
00:28:52,440 --> 00:28:55,360
Speaker 1: come through we think is that you know, sentiment is

554
00:28:55,400 --> 00:28:58,920
Speaker 1: likely to turn sooner rather than later, and our companies

555
00:28:58,960 --> 00:29:01,000
Speaker 1: a company is looking as wrong as they are perhaps

556
00:29:01,040 --> 00:29:03,120
Speaker 1: here in the have they got the right balance sheets

557
00:29:03,120 --> 00:29:06,840
Speaker 1: in place to whether it I think across the board,

558
00:29:06,880 --> 00:29:09,080
Speaker 1: if you know, I'm looking at macro data and it

559
00:29:09,080 --> 00:29:13,880
Speaker 1: would my senses, the corporate leverage for example, isn't isn't

560
00:29:13,920 --> 00:29:16,280
Speaker 1: particularly high or worrisome levels. The other the other thing

561
00:29:16,320 --> 00:29:18,960
Speaker 1: I'd note as well is the profit margins are holding

562
00:29:19,000 --> 00:29:22,160
Speaker 1: up and being far more resilient than the most people

563
00:29:22,200 --> 00:29:25,880
Speaker 1: are expecting. So yeah, perhaps there is a bit of

564
00:29:25,920 --> 00:29:29,200
Speaker 1: upside risk there, but short term we still think it's

565
00:29:29,240 --> 00:29:31,360
Speaker 1: better to be positioned a bit more defensively and a

566
00:29:31,360 --> 00:29:34,200
Speaker 1: bit more cautiously in these markets. Dean, great stuff. We

567
00:29:34,280 --> 00:29:37,160
Speaker 1: really appreciate you taking the time. Dean Turner, chief Eurozone

568
00:29:37,160 --> 00:29:45,480
Speaker 1: and UK economist at UBS Global Well Management. Thanks for

569
00:29:45,480 --> 00:29:49,000
Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and

570
00:29:49,040 --> 00:29:53,120
Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform

571
00:29:53,160 --> 00:29:56,480
Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt

572
00:29:56,520 --> 00:30:00,880
Speaker 1: Miller three. Boss Whinnie, I'm on Twitter p. T. Sweeney

573
00:30:00,920 --> 00:30:03,600
Speaker 1: before the podcast. You can always catch us worldwide at

574
00:30:03,600 --> 00:30:05,000
Speaker 1: Bloomberg Radio m