WEBVTT - US Job Openings Fall, Nvidia latest 0:00:02.440 --> 0:00:09.119 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:09.160 --> 0:00:13.280 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:13.360 --> 0:00:15.800 Eastern on Effo card Playing and broud Otto with the 0:00:15.840 --> 0:00:19.720 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:19.960 --> 0:00:22.800 or watch us live on YouTube. 0:00:23.720 --> 0:00:26.079 Eco Go, folks. It's been busy here this morning. That 0:00:26.160 --> 0:00:28.880 gives you all the economic data that's released by the government. 0:00:29.160 --> 0:00:32.400 A lot of stuff here, jolts, factory orders, durable goods. 0:00:32.440 --> 0:00:34.680 I mean I heard about all this stuff in economics class. 0:00:34.720 --> 0:00:36.880 I didn't really know what it is, but I see 0:00:36.920 --> 0:00:39.640 the numbers here. Michael McKee, he knows what's going on. 0:00:39.720 --> 0:00:42.240 He does all the economic stuff for Bloomberg television, radio 0:00:42.280 --> 0:00:46.559 and everything else. Actually, Michael, of all the economic data here, 0:00:46.560 --> 0:00:47.280 what jumped out. 0:00:47.120 --> 0:00:49.000 Of you today? What do you think the Fed is 0:00:49.040 --> 0:00:49.760 going to focus on? 0:00:49.800 --> 0:00:53.600 Maybe today, well, if it's going to look at jolts, 0:00:53.720 --> 0:00:58.080 because it does show the labor market is in a 0:00:58.120 --> 0:01:01.480 looser state, where pretty much back to where we were 0:01:01.600 --> 0:01:04.600 pre pandemic in terms of the number of job openings. 0:01:05.040 --> 0:01:09.640 It was a drop, a bigger drop than expected from 0:01:09.800 --> 0:01:13.520 last month, but the prior month June was revised lower 0:01:13.560 --> 0:01:15.600 as well, and when you look at what we've seen 0:01:15.640 --> 0:01:20.920 in the time series, we've seen job openings in the 0:01:21.080 --> 0:01:24.119 seven million range for three of the last four months, 0:01:24.120 --> 0:01:27.520 so it's not a shock. It's not a major change 0:01:27.560 --> 0:01:33.759 in the overall outlook. These numbers are not necessarily super reliable. 0:01:34.640 --> 0:01:37.520 The quits rate, which people take as an evidence of 0:01:37.560 --> 0:01:39.759 how people feel about the labor market and whether they 0:01:39.760 --> 0:01:43.039 can continue to get jobs, still at two point one percent, 0:01:43.080 --> 0:01:45.919 where it's been for a long time, so it doesn't 0:01:45.959 --> 0:01:52.720 look like it's making major news today. Oddly enough, factory 0:01:52.840 --> 0:01:58.600 orders come in up five percent now, durable goods up 0:01:58.640 --> 0:02:01.360 as part of that, a revised nine point eight percent 0:02:01.360 --> 0:02:04.480 from nine point nine percent. We knew that, So what 0:02:04.640 --> 0:02:07.520 that's telling you with a five percent gain after a 0:02:07.600 --> 0:02:10.160 negative three point three percent the month before is non 0:02:10.240 --> 0:02:14.200 durable goods sales were pretty good, and that is good 0:02:14.240 --> 0:02:17.600 news for the idea that the Fed doesn't have to 0:02:18.000 --> 0:02:22.640 immediately cut rates or anything like that. Probably the most 0:02:22.680 --> 0:02:25.800 interesting number of the day, though, trade ballance. The trade 0:02:25.800 --> 0:02:29.840 balance at seventy eight point eight billion, widest the widest 0:02:29.919 --> 0:02:35.320 in two years, up from seventy three point zero and 0:02:36.200 --> 0:02:39.240 just a little bit lower than the forecast, but basically 0:02:39.360 --> 0:02:43.520 saying that we are importing a lot of stuff. Now, 0:02:43.680 --> 0:02:46.680 there could be two reasons for that. One, the economy 0:02:46.720 --> 0:02:48.320 is still in good shape and people want to buy. 0:02:48.560 --> 0:02:52.680 Or two, retailers are stocking up for the holiday season, 0:02:52.760 --> 0:02:56.160 which then becomes a question for your retail analysts of 0:02:56.560 --> 0:02:58.880 are they making a bad bet or not? Is the 0:02:58.919 --> 0:03:01.520 economy going to slower, Our consumer is going to stop spending, 0:03:01.520 --> 0:03:02.760 and we're going to be stuck with a. 0:03:02.720 --> 0:03:05.320 Lot of inventory. All right, So that's why it's an 0:03:05.360 --> 0:03:07.440 interesting number. Put that in your hat, shake it up. 0:03:07.560 --> 0:03:10.119 What a we what's the trajectory for the US economy? 0:03:10.160 --> 0:03:11.400 Based on what you've seen so. 0:03:11.400 --> 0:03:14.840 Far, it looks like the trajectory is pretty much the 0:03:14.880 --> 0:03:17.720 same as it was. That the economy has slowed, we're 0:03:17.720 --> 0:03:20.720 not seeing it fall off a cliff, and therefore the 0:03:20.760 --> 0:03:24.560 Fed is going to say we can cut rates, but 0:03:24.600 --> 0:03:26.840 we don't have to do an emergency great cut of 0:03:27.000 --> 0:03:28.520 fifty basis points or anything like that. 0:03:28.639 --> 0:03:30.240 We can do twenty five all right. 0:03:30.280 --> 0:03:31.760 Mike McKee, thank you so much for joining us. 0:03:31.760 --> 0:03:34.040 We appreciate getting your expertise there on a bunch of 0:03:34.080 --> 0:03:37.320 economic data crossing the tape here this morning. 0:03:38.480 --> 0:03:42.360 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:03:42.440 --> 0:03:45.960 weekdays at ten am Eastern on applecar Play and Android 0:03:46.000 --> 0:03:48.760 Auto with the Bloomberg Business App. You can also listen 0:03:48.880 --> 0:03:52.000 live on Amazon Alexa from our flagship New York station 0:03:52.360 --> 0:03:55.120 Just Say Alexa playing Bloomberg eleven thirty. 0:03:56.640 --> 0:04:00.600 Yesterday, Nvidia suffered a record two and seventy nine billion 0:04:00.760 --> 0:04:04.120 dollar route as AI worries sink stocks. They also got 0:04:04.160 --> 0:04:07.840 a DOJ anti trust probe, a lot of headwinds for 0:04:07.840 --> 0:04:10.520 that stock, a lot of issues for investors to figure 0:04:10.520 --> 0:04:12.760 out for in Vidia stock still up over one hundred 0:04:12.760 --> 0:04:14.640 percent year to date. Man Deep saying, he's the guy 0:04:14.680 --> 0:04:17.839 we talked about in video all the time. He's Bloomberg Intelligence, 0:04:17.880 --> 0:04:19.400 he's pretty smart. But the guy we really want to 0:04:19.440 --> 0:04:22.840 talk to you today is Justin Teresi, Anti Trust Litigation 0:04:23.200 --> 0:04:27.000 and Policy chanlest for Bloomberg Taligence. I've never met you before, Likewise, 0:04:27.400 --> 0:04:29.480 I did hire you, So I'm just going to go 0:04:29.520 --> 0:04:35.080 on Man Deep's recommendation. What's the DOJ saying here as 0:04:35.080 --> 0:04:37.679 it relates to Nvidia and how concerned should in Vidia 0:04:37.720 --> 0:04:38.560 and its shareholders be? 0:04:38.720 --> 0:04:40.880 Yeah, so I think the real takeaway here. The most 0:04:40.920 --> 0:04:42.920 important thing to keep in mind is the timing that's 0:04:42.960 --> 0:04:45.799 associated with this. So news broke a couple of months 0:04:45.800 --> 0:04:48.719 ago that DJ was looking into Navidia here and what 0:04:48.800 --> 0:04:51.120 we think there are a couple issues they might be 0:04:51.160 --> 0:04:54.320 interested in. One, market consolidation, maybe in the video is 0:04:54.320 --> 0:04:56.479 growing a little bit faster than the authorities would like 0:04:56.520 --> 0:04:58.840 to see. The other issue they might be interested in 0:04:59.160 --> 0:05:01.520 is one related to how they're selling their products. Are 0:05:01.560 --> 0:05:04.920 they tying things into anti competitive manner? Are they bundling 0:05:04.960 --> 0:05:07.520 products in such a way that it's really impossible for 0:05:07.560 --> 0:05:11.080 other folks to compete. But really, this development yesterday in 0:05:11.160 --> 0:05:14.200 terms of the subpoena really is something we were expecting. 0:05:14.279 --> 0:05:17.520 And that's because what it lays a formality upon this 0:05:17.600 --> 0:05:21.800 investigation that wasn't there before. Previously it was informal questionnaire. 0:05:22.080 --> 0:05:24.359 Now NAVIDI is really going to have to certify that 0:05:24.440 --> 0:05:27.279 the information it's handing over to DOJ is what they're 0:05:27.320 --> 0:05:29.880 looking for and a true and accurate depiction of what 0:05:29.920 --> 0:05:30.839 they want to know about. 0:05:31.279 --> 0:05:34.360 Is there a political element to this? I mean, everybody's 0:05:34.400 --> 0:05:37.520 got Nvidia in their four oh one K. Does the 0:05:37.560 --> 0:05:41.000 Harris campaign pick up the phone and say, couldn't you 0:05:41.040 --> 0:05:42.520 have waited till after November? 0:05:43.040 --> 0:05:45.039 I think that might be the question of the day 0:05:45.080 --> 0:05:47.920 with relation to this. So look, if I'm na Vidia's 0:05:47.920 --> 0:05:50.039 attorneys right now, what I'm trying to do is to 0:05:50.080 --> 0:05:53.200 delay responding to this as much as I possibly can, 0:05:53.360 --> 0:05:56.120 right because there is that element of an election coming 0:05:56.200 --> 0:05:59.279 up in November. Here, what does a new administration do 0:05:59.680 --> 0:06:02.440 with the investigation itself? How hard do they go? Are 0:06:02.440 --> 0:06:05.239 they more open to a settlement than the current regime 0:06:05.320 --> 0:06:07.560 might be? So that's really the name the name of 0:06:07.560 --> 0:06:09.520 the game here. I think you're spot on there. That 0:06:09.760 --> 0:06:10.200 really the. 0:06:10.160 --> 0:06:13.159 Teacher and the question for Vice President Harris for me 0:06:13.440 --> 0:06:17.320 is are you going to continue this aggressive anti trust 0:06:19.120 --> 0:06:23.080 behavior in a new administration? Potentially? Right? So, you know 0:06:23.320 --> 0:06:25.279 that becomes a real campaign issue, doesn't it. 0:06:25.279 --> 0:06:26.960 It does, and I think it has, right. I think 0:06:27.000 --> 0:06:29.440 we've seen that already with a lot of rhetoric coming 0:06:29.480 --> 0:06:31.960 from both the Harris camp and you know Trump camp 0:06:31.960 --> 0:06:34.760 with Jada Vance on the issue too, right. So I 0:06:35.080 --> 0:06:38.080 think moving ahead, we think there could be some softening 0:06:38.120 --> 0:06:40.680 perhaps in some ways, or more measured or deliberate approach 0:06:40.720 --> 0:06:42.679 to things. If Harris were to win the White House. 0:06:42.839 --> 0:06:44.600 But what we see from the Trump camp is Jade 0:06:44.680 --> 0:06:48.160 Vance does have that rather strong anti big tech mentality 0:06:48.560 --> 0:06:50.720 when we ever we talk about anti trust with him 0:06:50.720 --> 0:06:53.520 as a candidate. So really we're not quite sure what 0:06:53.560 --> 0:06:56.560 to make of the situation there. But delay is the 0:06:56.640 --> 0:06:58.880 name of the game. If I'm the video right now. 0:06:59.400 --> 0:07:01.599 When you talk to investors or we need to hear 0:07:01.600 --> 0:07:04.760 from the company, what do investors think about this risk? 0:07:04.880 --> 0:07:07.560 Is it just another big tech company facing some regulatory 0:07:07.600 --> 0:07:09.160 headwinds like we've seen for years. 0:07:09.480 --> 0:07:12.120 Yeah, I think in Nvidia now is part of that 0:07:12.800 --> 0:07:18.080 club that Amazon, Google, and Meta which have faced regulatory 0:07:18.120 --> 0:07:20.880 scrutiny over the years. And look, in the case of Google, 0:07:21.240 --> 0:07:25.600 it was fairly obvious that regulators doubled down on their 0:07:25.680 --> 0:07:29.560 distribution agreements that they had with Apple and Samsung to 0:07:29.560 --> 0:07:32.080 be the default search. So in this case, it would 0:07:32.080 --> 0:07:34.960 be interesting to see DOJ's approach. What is it that 0:07:35.040 --> 0:07:38.520 they really want to focus on in terms of how 0:07:38.560 --> 0:07:42.760 in Nvidia is distributing their chips to the hyperscalers and 0:07:42.840 --> 0:07:47.160 their largest customers, Because clearly in Vidia has a lot 0:07:47.200 --> 0:07:51.000 of interest from all types of customers. The market is undersupplied, 0:07:51.440 --> 0:07:54.280 so do they have an algorithm to say, Okay, I'm 0:07:54.320 --> 0:07:58.320 gonna distribute X number of chips to customer A and 0:07:58.760 --> 0:08:01.440 Y to customer B. And look it comes down to 0:08:01.560 --> 0:08:05.800 in videos, how they have their relationship with their customers 0:08:05.800 --> 0:08:07.320 and they can distribute the chips. 0:08:07.360 --> 0:08:09.080 Say why I know that's it seems like it's a 0:08:09.160 --> 0:08:10.720 market operating efficiently. 0:08:10.720 --> 0:08:11.320 But what do I know? 0:08:11.400 --> 0:08:13.280 But what I do know is the beauty of Bloomberg 0:08:13.320 --> 0:08:17.240 Intelligence as we bring together industry and company specific research 0:08:17.240 --> 0:08:19.120 analysis and Man Deep sing he's been doing it for 0:08:19.240 --> 0:08:23.560 years and Justin terrasa anti trust litigation policy analysts Bloomberg Intelligence, 0:08:23.680 --> 0:08:25.880 where you can bring these folks together, they can partner 0:08:25.920 --> 0:08:28.200 their research and to integrate their research and give you 0:08:28.240 --> 0:08:30.720 a really good view of what it means for some 0:08:30.760 --> 0:08:33.480 of these companies as they face some of this risk 0:08:33.600 --> 0:08:35.920 from the regulators. And again it's great to have that. 0:08:36.000 --> 0:08:38.960 It's part of Bloomberg Intelligence. B. I go on the terminal, 0:08:39.200 --> 0:08:39.920 Oh and guess. 0:08:39.679 --> 0:08:43.679 What videos shares seem to have bottomed out today? 0:08:43.720 --> 0:08:44.080 Exactly? 0:08:44.080 --> 0:08:46.520 All right, Man Deep seeing senior tech analyst, Justin Tracy, 0:08:46.559 --> 0:08:49.960 anti trust analyst, Bloomberg Intelligence in our studio breaking it 0:08:50.000 --> 0:08:51.400 down for it in video. 0:08:52.800 --> 0:08:56.680 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:08:56.760 --> 0:09:00.160 weekdays at ten am Eastern on afflcar playing right Oh 0:09:00.240 --> 0:09:03.160 with the Bloomberg Business app. Listen on demand wherever you 0:09:03.200 --> 0:09:06.880 get your podcasts, or watch us live on YouTube. 0:09:07.760 --> 0:09:09.600 Let's got our next guest, Paul Carter. 0:09:09.800 --> 0:09:12.440 He's co founder managing partner of twin Focus, joining us 0:09:12.559 --> 0:09:16.679 from Boston, Massachusetts via zoom. Paul, what are you telling 0:09:16.679 --> 0:09:21.079 your clients these days as to where the best opportunities are. 0:09:21.080 --> 0:09:22.920 We've got the S and P five hundred, you know, 0:09:23.040 --> 0:09:26.079 up eighteen percent. I mean that's pretty darn solid, but 0:09:26.160 --> 0:09:27.920 yet I can still get a decent yield and to 0:09:28.040 --> 0:09:30.000 your treasury at three point eight percent. 0:09:30.120 --> 0:09:31.520 What are you telling your clients these days? 0:09:33.000 --> 0:09:36.080 Paul, John, thanks for having me. You know here at 0:09:36.080 --> 0:09:39.800 twin Focus, we've we've largely been invested according to our 0:09:39.800 --> 0:09:43.440 policy benchmarks all year. You know, the expectation has really 0:09:43.480 --> 0:09:48.320 been for soft landing, reasonable growth, low inflation, lower rates. 0:09:49.559 --> 0:09:52.120 You know, before today, before the jolt's number that just 0:09:52.160 --> 0:09:54.319 came out, the Fed funds were pricing in one hundred 0:09:54.320 --> 0:09:56.959 percent probability of a twenty five basis point rate cut 0:09:57.160 --> 0:10:02.199 in September, November, and December. With this most recent number, 0:10:02.320 --> 0:10:06.520 you know, bigger miss than expected, and it seems to 0:10:06.520 --> 0:10:09.960 be signaling, you know, greater job availability out there and 0:10:10.000 --> 0:10:12.760 kind of weaker job market. You've seen that that FED 0:10:12.800 --> 0:10:16.920 funds market respond with, you know, perhaps a greater chance 0:10:16.960 --> 0:10:20.000 of perhaps fifty basis points cut at this next meeting. 0:10:20.800 --> 0:10:23.480 Given all of this, you know, as mentioned, we've been 0:10:23.520 --> 0:10:26.120 focused on remaining fully invested, and we have been able 0:10:26.160 --> 0:10:28.920 to take advantage of the run in risk assets. But 0:10:28.960 --> 0:10:32.560 we're looking to diversify our risk more broadly, and you know, 0:10:32.600 --> 0:10:34.880 away from this, you know, purely the AI trade, if 0:10:34.920 --> 0:10:35.559 you will. 0:10:35.400 --> 0:10:37.160 All right, Paul and Paul, I think this is one 0:10:37.200 --> 0:10:40.000 of those moments where I'm supposed to throw confetti in 0:10:40.000 --> 0:10:43.920 the air. Sure the yield curve? Yes, this inverted? Oh wow, 0:10:44.040 --> 0:10:48.960 so two and ten's now well back, I spoke too soon, 0:10:49.040 --> 0:10:51.959 But anyway, do you attach? I mean, Paul, they used 0:10:51.960 --> 0:10:56.920 to tell me that inverted your curve preceeds recession. Well 0:10:57.120 --> 0:11:02.440 didn't happen? Do you put? What's your significance of this? 0:11:02.679 --> 0:11:07.160 Do you think you know? Attention to the old curve. 0:11:08.120 --> 0:11:10.240 We absolutely are focused on the yield curve. You know, 0:11:10.280 --> 0:11:12.760 there's there's perhaps a number of reasons why we didn't 0:11:12.760 --> 0:11:16.200 see a recession, you know, in part being this whole 0:11:16.200 --> 0:11:18.320 AI trade. You know, the productivity that we've seen in 0:11:18.360 --> 0:11:21.600 the economy and the forecasted productivity that we will see 0:11:21.679 --> 0:11:25.160 from AI that combined with a lot of the stimulus 0:11:25.160 --> 0:11:30.760 that was still waning and in effect after COVID that said, 0:11:30.840 --> 0:11:32.839 you know, a recession I think, you know, at some 0:11:33.000 --> 0:11:36.040 point is not completely off the table. You know, hopefully 0:11:36.040 --> 0:11:40.319 we're able to escape with justice soft landing, but we're 0:11:40.920 --> 0:11:43.959 nineteen years, eighteen, nineteen years into the business cycle here, 0:11:44.200 --> 0:11:47.280 so it wouldn't be surprising to see something at some point. 0:11:48.360 --> 0:11:51.280 You know, there is this talk of rate cuts become 0:11:51.400 --> 0:11:55.520 obviously more prominent with some weakness and inflation, but I 0:11:55.640 --> 0:11:58.360 think that, you know, it usually takes some time to 0:11:58.360 --> 0:12:00.959 see those rate cuts impact the econom so we may 0:12:01.000 --> 0:12:04.040 not see that until Q one, Q two next year. 0:12:04.760 --> 0:12:06.760 Until then, you know, the market's going to try to 0:12:06.800 --> 0:12:09.199 decide on the overall direction, and I think we're just 0:12:09.280 --> 0:12:11.840 going to continue to see a lot of volatility between 0:12:12.000 --> 0:12:12.480 now and then. 0:12:13.280 --> 0:12:15.360 Paul, in terms of maybe trying to temper some of 0:12:15.360 --> 0:12:18.240 that volatility, what do you guys, or how are you 0:12:18.240 --> 0:12:20.200 guys approaching the fixed income markets? 0:12:20.200 --> 0:12:21.080 Are you? 0:12:21.080 --> 0:12:22.640 You know, I'm content to sitting in a to your 0:12:22.679 --> 0:12:25.720 treasury three point eight percent, but some people might want 0:12:25.760 --> 0:12:26.720 to take some more credit risk. 0:12:26.760 --> 0:12:28.720 How do you think about fixed income opportunities today? 0:12:29.679 --> 0:12:32.040 Sure, so let's let's talk about credit and kind of 0:12:32.400 --> 0:12:36.280 safe treasury allocations. You know, we've largely been barbelled with 0:12:36.360 --> 0:12:38.720 perhaps a bit of an overweight towards the shorter end 0:12:38.760 --> 0:12:41.880 of the curve. So when rates were up fours and five, 0:12:42.160 --> 0:12:44.720 we were taking advantage of locking in some ten year money. 0:12:44.720 --> 0:12:47.839 Then you know, while it's compelling to sit in a 0:12:47.840 --> 0:12:50.079 three and a half or four percent short term treasury, 0:12:50.160 --> 0:12:52.679 you do have some reinvestment risk if you see, you know, 0:12:52.840 --> 0:12:56.199 rates come down. So we have been starting to nibble 0:12:56.360 --> 0:12:59.800 at some duration. On the credit side, you know, we've 0:12:59.800 --> 0:13:03.600 been less enamored with this whole private credit trade that 0:13:03.640 --> 0:13:07.480 everybody seems to have fallen in love with, and so 0:13:07.800 --> 0:13:12.400 we've been focused on really more idiosyncratic return streams or 0:13:12.440 --> 0:13:15.600 areas of the market that seem to be more capacity constrained. 0:13:16.440 --> 0:13:18.439 And they're harder to find today for sure, as there's 0:13:18.480 --> 0:13:20.800 a lot of money out there chasing, chasing various trades. 0:13:20.840 --> 0:13:23.520 So you see us softening in private equity. I think 0:13:23.520 --> 0:13:26.880 in your investment Noe, you quote the great Proverto Durant. 0:13:27.320 --> 0:13:34.679 No Moss, No Moss. Yeah, we've we've, like many institutional 0:13:34.720 --> 0:13:38.080 family office investors, over the past decade two decades, we've 0:13:38.080 --> 0:13:42.160 allocated significantly to private equity, which is which has served 0:13:42.240 --> 0:13:44.520 us fine. But we think going forward the market has 0:13:44.600 --> 0:13:49.160 completely changed and just there's just an enormous amount of 0:13:49.200 --> 0:13:53.200 market participants. Uh, there's just enormous amount of capital chasing, 0:13:53.720 --> 0:13:57.600 and we've found more compelling returns frankly in public markets, 0:13:57.679 --> 0:13:59.720 which you know, I would have never thought I'd say 0:13:59.720 --> 0:14:02.240 that five years ago. That's where we are today. 0:14:02.520 --> 0:14:04.320 Hey, Paul, thanks so much for joining us. Really appreciate 0:14:04.320 --> 0:14:05.480 getting a few minutes of your time. 0:14:05.520 --> 0:14:06.000 Paul Carter. 0:14:06.320 --> 0:14:08.920 He's co founder and manager partner Twin Focus. Up there 0:14:08.960 --> 0:14:09.920 in Boston. 0:14:11.520 --> 0:14:15.400 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:14:15.480 --> 0:14:18.960 weekdays at ten am Eastern on applecard Play and Android 0:14:19.000 --> 0:14:21.800 Auto with the Bloomberg Business app. You can also listen 0:14:21.920 --> 0:14:25.000 live on Amazon Alexa from our flagship New York station, 0:14:25.360 --> 0:14:29.080 just Say Alexa playing Bloomberg eleven thirty. 0:14:29.760 --> 0:14:30.960 Let's stick a look at Nordstrom. 0:14:30.960 --> 0:14:34.320 The Nordstrom family bids to take the chain private for 0:14:34.400 --> 0:14:39.200 three point eight billion dollars. Stock pretty much unched on 0:14:39.680 --> 0:14:42.840 the day, so not a big deal here for most shareholder. 0:14:42.880 --> 0:14:45.280 SOCCA is up twenty three percent year to date. It's 0:14:45.280 --> 0:14:47.560 got a market cap about three point seven billion dollars. 0:14:47.600 --> 0:14:49.040 You throw in the net debt, it's a little over 0:14:49.080 --> 0:14:53.320 seven billion dollars total enterprise value. Let's check in with 0:14:53.400 --> 0:14:56.640 Mary Ross Gilbert. He's Bloomberg Intelligence senior Acadanalysts covering the 0:14:56.680 --> 0:14:57.440 retail space. 0:14:58.680 --> 0:15:00.440 Mary Ross, thanks so much for joining. Make you sure 0:15:00.600 --> 0:15:02.440 what do you make of. 0:15:02.280 --> 0:15:04.960 What the Nordstrom family members are suggesting here? I know 0:15:05.000 --> 0:15:06.280 this has been in the news for a while, but 0:15:06.320 --> 0:15:07.280 where do we go from here? 0:15:08.640 --> 0:15:12.480 Yeah, so Nordstrom, the Nordstrom family has been wanting to 0:15:12.520 --> 0:15:15.360 take the company private for some time. Right, We've seen 0:15:15.400 --> 0:15:20.720 this iteration before, but this time partnering with the Mexican 0:15:20.800 --> 0:15:28.080 retailer El Puerto de Liverpool. They're they're in a good 0:15:28.120 --> 0:15:30.640 position in terms of coming up with the financing because 0:15:30.640 --> 0:15:32.800 they're going to pony up about one point two billion 0:15:32.840 --> 0:15:36.000 in cash in addition to rolling over, they're about ten 0:15:36.040 --> 0:15:38.480 percent steak in the stock. And of course the Nordstrom 0:15:38.520 --> 0:15:42.920 family combined they own about you know, a third of 0:15:42.960 --> 0:15:46.040 the shares, so you've got forty three percent wrapped up. 0:15:46.480 --> 0:15:48.840 They do need two thirds approvals. We just need to 0:15:48.840 --> 0:15:52.080 get another twenty three to twenty four percent on board. 0:15:52.480 --> 0:15:55.400 And you look at the price, there's really no premium here, 0:15:55.640 --> 0:16:00.600 and they're they're basically saying, well, if you look at 0:16:00.600 --> 0:16:03.680 the time that we proposed this transaction, which was back 0:16:03.720 --> 0:16:07.880 in March, the stock was trading much lower, somewhere around 0:16:08.120 --> 0:16:10.800 you know, seventeen, So this is really a premium to 0:16:10.840 --> 0:16:13.200 where the shares were then, and it's about a thirty 0:16:13.200 --> 0:16:15.920 five percent premium. But if you look at how the 0:16:15.920 --> 0:16:18.720 stock is traded over the last five years, it's pretty 0:16:18.800 --> 0:16:21.800 much close to the average price, and over the last 0:16:21.840 --> 0:16:25.520 ten years, it's at a steep discount, like forty one 0:16:25.560 --> 0:16:29.080 percent discount, you know, over the last ten years. So yeah, 0:16:29.120 --> 0:16:32.000 there's not a premium. Could another buyer step in here, 0:16:32.600 --> 0:16:37.960 it's possible, but trying to piece together a transaction could 0:16:38.040 --> 0:16:41.560 prove onerous and it's going to you know, involve debt, 0:16:41.680 --> 0:16:45.360 as we know. But not as much incremental debt. The 0:16:45.360 --> 0:16:48.400 company already has about two point six billion, so they'll 0:16:48.400 --> 0:16:51.080 probably have to bring on another one point eight billion 0:16:51.840 --> 0:16:55.600 UH to be able to complete this transaction, and of 0:16:55.600 --> 0:16:59.320 course the transaction is contingent upon that deal getting done. 0:16:59.480 --> 0:17:03.640 But with Shortstrom, what really stands out versus the other 0:17:03.720 --> 0:17:07.000 department stores. Of course, we know that the Macy's proposed 0:17:07.080 --> 0:17:11.280 buyout has con gone by the wayside at this point. 0:17:12.040 --> 0:17:16.240 With Nordstrom, you've got a fast growing off price segment 0:17:16.400 --> 0:17:19.240 and that's what's really exciting here. And their comp sales 0:17:19.240 --> 0:17:21.719 were up over four percent, their total growth was up 0:17:21.800 --> 0:17:24.560 nine percent in the second quarter. And if you look 0:17:24.600 --> 0:17:28.959 at their full line stores, this sort of traditional department store, 0:17:29.840 --> 0:17:32.680 they were up almost one percent on a comp basis, 0:17:32.760 --> 0:17:35.080 But if you look at their peers, they were all 0:17:35.119 --> 0:17:38.399 down anywhere from down three percent for Go Forward stores 0:17:38.560 --> 0:17:42.840 for Macy's to down five percent for Dillard's and Coals. 0:17:42.840 --> 0:17:47.240 So Nordstrom sure looks like they're in a better position. 0:17:47.240 --> 0:17:50.919 They're also much smaller, only ninety three stores versus you know, 0:17:51.080 --> 0:17:53.880 close to five hundred department stores over at Macy's, which 0:17:53.880 --> 0:17:55.800 of course that's why they're closing one fifty. 0:17:56.520 --> 0:17:59.639 So when you're a company and you have problems and 0:17:59.680 --> 0:18:02.840 you into deal making to try and solve those problems, 0:18:02.880 --> 0:18:04.720 what does that say, it's got a bit of minute left. 0:18:06.400 --> 0:18:09.760 Yeah, So in this case here, I think they they're 0:18:09.800 --> 0:18:13.840 employing a number of news strategies. Let's say with the 0:18:14.240 --> 0:18:16.680 full line store and with off price. I think they're 0:18:16.880 --> 0:18:20.639 off to a good track there and big expansion. You know, 0:18:20.720 --> 0:18:23.400 they're going to be opening like twenty two rack stores 0:18:23.440 --> 0:18:25.040 this year, and I think they're going to continue that 0:18:25.119 --> 0:18:29.480 pace going forward. So I think that the idea that 0:18:29.520 --> 0:18:32.840 they don't have to be under the quarterly lens of 0:18:32.960 --> 0:18:37.200 investors is probably a relief for them. 0:18:37.680 --> 0:18:39.919 Right all right, Mary Ross, thanks so much for joining us. 0:18:39.920 --> 0:18:42.840 Mary Ross Gilbert senior Eckery analysts covering the retail space 0:18:43.480 --> 0:18:46.280 for Bloomberg Intelligence. She's based out there in Los Angeles 0:18:46.320 --> 0:18:48.840 and Norstrom some of the family members offering twenty three 0:18:48.880 --> 0:18:51.680 dollars per sharing cash to take the retailer private for 0:18:51.800 --> 0:18:54.560 three point eight billion dollars. 0:18:56.119 --> 0:18:59.920 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:19:00.119 --> 0:19:03.560 weekdays at ten am Eastern on applecar Play and androyd 0:19:03.600 --> 0:19:06.399 Otto with the Bloomberg Business app. You can also listen 0:19:06.480 --> 0:19:09.600 live on Amazon Alexa from our flagship New York station, 0:19:09.960 --> 0:19:13.680 Just say Alexa playing Bloomberg eleven thirty. 0:19:14.640 --> 0:19:17.320 We need some perspective on this markets after yesterday's sell off. 0:19:17.400 --> 0:19:19.439 I got a little bit of green on this screen 0:19:19.480 --> 0:19:21.480 here people trying to get a sense of how do 0:19:21.520 --> 0:19:25.160 you factor in what was a decent earnings cycle for 0:19:25.320 --> 0:19:27.439 most of the S and P five hundred plus what 0:19:27.480 --> 0:19:28.960 they feder reserve that is likely to. 0:19:28.920 --> 0:19:29.760 Begin cutting rates. 0:19:29.760 --> 0:19:32.159 How does that factor into the outlook here for risk assets? 0:19:32.160 --> 0:19:34.359 Margie Battel, she's got a lot of perspective, a lot 0:19:34.359 --> 0:19:37.639 of experience. She's a senior portfolio managed all Spring Global Investments. 0:19:38.400 --> 0:19:41.560 Joining us from Zoom on Zoom from Boston, and again, 0:19:41.600 --> 0:19:42.760 if you're in Boston. 0:19:42.560 --> 0:19:45.400 Our new home is ninety two nine FM in Boston. 0:19:45.240 --> 0:19:48.240 MARGI thanks so much for joining us here. How do 0:19:48.240 --> 0:19:49.520 you piece this all together? 0:19:49.600 --> 0:19:49.719 Here? 0:19:49.760 --> 0:19:53.400 We're pretty much through the earnings season and investor conferences 0:19:53.440 --> 0:19:56.960 are kicking in high gear here in September, September eighteenth, 0:19:56.960 --> 0:19:59.959 the FED is going to meet and presumably start lowering rid. 0:20:00.200 --> 0:20:02.439 So how do you put all that together and what 0:20:02.520 --> 0:20:03.159 comes out for you? 0:20:04.480 --> 0:20:04.640 Well? 0:20:04.640 --> 0:20:06.840 I think right now we're in a period of cross 0:20:06.960 --> 0:20:11.320 currents because the overall urns reports for the quarter were 0:20:11.359 --> 0:20:14.800 once again pretty good. However, we did have some slight 0:20:14.920 --> 0:20:18.200 weakness from expectations for some of the large tech companies 0:20:18.560 --> 0:20:21.520 in contrast to the previous quarters where they surprised on 0:20:21.600 --> 0:20:25.480 the upside. And since this group was so heavily over owned, frankly, 0:20:25.760 --> 0:20:28.640 it was really due for correction. And we've seen that 0:20:29.040 --> 0:20:33.320 over the last really since the end of July into yesterday, 0:20:33.320 --> 0:20:35.600 where you just had this cascade of all the texts 0:20:35.640 --> 0:20:39.720 going down and other economically sensitive sectors that have done 0:20:39.800 --> 0:20:43.040 really well. So I think it's just really adjusting, waffling around, 0:20:43.600 --> 0:20:47.680 waiting for the FED to once again come in and 0:20:47.720 --> 0:20:50.840