1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:33,559 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Following 7 00:00:33,600 --> 00:00:37,280 Speaker 1: the New Yorker article by Ronan Pharaoh accusing Less moon 8 00:00:37,400 --> 00:00:41,519 Speaker 1: Ves of unrequested approaches to a variety of women over 9 00:00:41,560 --> 00:00:45,080 Speaker 1: the past few decades, the board of CBS is meeting today. 10 00:00:45,240 --> 00:00:49,800 Speaker 1: We're talking about the future of its leader, and there's 11 00:00:49,840 --> 00:00:52,200 Speaker 1: a lot of questions about whether he will be removed 12 00:00:52,479 --> 00:00:56,600 Speaker 1: what this does with CBS versus Viacom. Sherry Redstone is 13 00:00:56,720 --> 00:00:59,200 Speaker 1: the majority owner of CBS. Joining us now to talk 14 00:00:59,240 --> 00:01:01,760 Speaker 1: about all this is Richard chamber As President and Chief 15 00:01:01,760 --> 00:01:06,320 Speaker 1: executive officer of the Institute of Internal Auditors based in 16 00:01:06,880 --> 00:01:09,680 Speaker 1: uh in, Florida. Richard, thank you so much for joining us. 17 00:01:10,600 --> 00:01:12,600 Speaker 1: What do you think they're going to talk about in 18 00:01:12,640 --> 00:01:16,080 Speaker 1: this meeting and what do you think they're gonna do? Well? 19 00:01:16,160 --> 00:01:18,440 Speaker 1: Thanks thanks for having me on. You know it's always 20 00:01:18,440 --> 00:01:21,160 Speaker 1: hard to know exactly how boards are going to respond 21 00:01:21,880 --> 00:01:24,759 Speaker 1: when these sorts of things happened. I know we've been 22 00:01:24,800 --> 00:01:27,720 Speaker 1: looking at this from the Institute of Internal Auditors over 23 00:01:27,760 --> 00:01:30,640 Speaker 1: the past few months, and the one thing that strikes 24 00:01:30,720 --> 00:01:36,039 Speaker 1: us is just how often boards um sort of overlooks 25 00:01:36,040 --> 00:01:39,440 Speaker 1: this risk. In fact, eighty five percent of the companies 26 00:01:39,520 --> 00:01:42,760 Speaker 1: that we surveyed said that they just didn't consider sexual 27 00:01:42,800 --> 00:01:45,760 Speaker 1: mis contic to be a top risk. And so it 28 00:01:45,920 --> 00:01:49,320 Speaker 1: just all too often seems that when these uh, when 29 00:01:49,320 --> 00:01:51,760 Speaker 1: these things happen, everyone sort of looks at each other 30 00:01:51,760 --> 00:01:57,760 Speaker 1: with a blank stare. Well. Mr Moonvess has said that 31 00:01:58,040 --> 00:02:03,000 Speaker 1: many times in the past, perhaps he displayed behavior that 32 00:02:03,120 --> 00:02:05,560 Speaker 1: people might not like, but that he never used his 33 00:02:06,080 --> 00:02:11,160 Speaker 1: position to affect anyone's career. When when does an investigation 34 00:02:11,960 --> 00:02:18,320 Speaker 1: of behavior that's disconnected from an actual job or position, 35 00:02:18,720 --> 00:02:23,280 Speaker 1: When does that investigation cross the line? You know, I 36 00:02:23,320 --> 00:02:27,080 Speaker 1: think what has to happen is, you know, when what's 37 00:02:27,120 --> 00:02:31,799 Speaker 1: allegations are made and often there has a case here, 38 00:02:31,800 --> 00:02:35,080 Speaker 1: there multiple sides to the story. You know, at that 39 00:02:35,120 --> 00:02:39,320 Speaker 1: point it's really too late for boards and for companies 40 00:02:39,360 --> 00:02:43,320 Speaker 1: to uh take the reins and in terms of making 41 00:02:43,360 --> 00:02:45,840 Speaker 1: sure that they have the right policies in place, the 42 00:02:45,960 --> 00:02:51,720 Speaker 1: right procedures for investigating allegations of misconduct to meet those 43 00:02:51,760 --> 00:02:56,160 Speaker 1: things have to be played in place well beforehand, and 44 00:02:56,160 --> 00:03:00,400 Speaker 1: and the policies need to include how will investigation of 45 00:03:00,680 --> 00:03:04,160 Speaker 1: allegations against senior executives to be handled? At what point 46 00:03:04,240 --> 00:03:07,760 Speaker 1: do they do they get elevated to the board. In fact, 47 00:03:07,800 --> 00:03:11,080 Speaker 1: I would suggest anytime there's an allegation against the CEO, 48 00:03:12,040 --> 00:03:14,040 Speaker 1: that the board or at least the chairman of the 49 00:03:14,080 --> 00:03:16,720 Speaker 1: board is immediately made aware of it. So I think 50 00:03:16,760 --> 00:03:19,520 Speaker 1: that a lot of it really comes down to sort 51 00:03:19,520 --> 00:03:23,079 Speaker 1: of acknowledging and recognizing that this is a key risk 52 00:03:23,280 --> 00:03:25,680 Speaker 1: that companies face and making sure you got all the 53 00:03:25,840 --> 00:03:28,520 Speaker 1: right controls in place to mitigate that risk. So, Richard, 54 00:03:28,560 --> 00:03:31,400 Speaker 1: you raise an interesting point, which is, you know, how 55 00:03:31,480 --> 00:03:34,560 Speaker 1: much should the board be aware of some of these 56 00:03:34,600 --> 00:03:38,040 Speaker 1: allegations and some of these cultural issues that are emerging 57 00:03:38,280 --> 00:03:40,840 Speaker 1: across a slew of companies. I mean, we're we're pinpointing 58 00:03:40,880 --> 00:03:43,480 Speaker 1: CBS because that's where the news is, but you can 59 00:03:43,520 --> 00:03:45,840 Speaker 1: pick a lot of other companies that have also been 60 00:03:45,880 --> 00:03:51,320 Speaker 1: having uh ME to movement movements represented there. Should the 61 00:03:51,360 --> 00:03:54,960 Speaker 1: board be responsible? Should it be there their responsibility to 62 00:03:55,000 --> 00:03:58,360 Speaker 1: go out and investigate some of the culture issues to 63 00:03:58,400 --> 00:04:01,920 Speaker 1: make sure that things are on the up and up. Absolutely, 64 00:04:02,040 --> 00:04:05,920 Speaker 1: to me, uh, you know, it's a shame that American 65 00:04:06,000 --> 00:04:09,640 Speaker 1: boards are buying large shirking their responsibilities when it comes 66 00:04:10,160 --> 00:04:13,440 Speaker 1: to oversight of this critical risk. They have an obligation, 67 00:04:13,640 --> 00:04:17,159 Speaker 1: even even in in statutes in the US, they have 68 00:04:17,279 --> 00:04:21,400 Speaker 1: obligations to maintain oversight of the way risks are managed 69 00:04:21,440 --> 00:04:24,200 Speaker 1: in a company. And there's no risk, as we're seeing 70 00:04:24,279 --> 00:04:26,799 Speaker 1: from a lot of the headlines over the last few weeks, 71 00:04:26,960 --> 00:04:30,160 Speaker 1: there's no risk that's greater than having a high profile 72 00:04:30,200 --> 00:04:34,200 Speaker 1: allegation against senior executives of this nature. And so to me, 73 00:04:34,400 --> 00:04:37,719 Speaker 1: the board, as part of its oversight of risk management, 74 00:04:38,080 --> 00:04:40,479 Speaker 1: needs to monitor the culture of the company, and that 75 00:04:40,600 --> 00:04:43,880 Speaker 1: starts with the tone at the top. How is the company? 76 00:04:44,000 --> 00:04:46,040 Speaker 1: How is the tone in the company being set by 77 00:04:46,080 --> 00:04:49,880 Speaker 1: the senior CEO and senior executive. So the board absolutely 78 00:04:49,920 --> 00:04:52,920 Speaker 1: has a responsibility, and I would tell you without equivocation 79 00:04:52,960 --> 00:04:57,039 Speaker 1: that boards are by and large not fulfilling that obligation. Okay, So, Richard, 80 00:04:57,120 --> 00:04:59,560 Speaker 1: given that, given the fact that CBS is that their 81 00:04:59,640 --> 00:05:03,120 Speaker 1: board is now meeting, how able are they to actually 82 00:05:03,200 --> 00:05:07,000 Speaker 1: handle this situation appropriately since they also are part of 83 00:05:07,000 --> 00:05:10,960 Speaker 1: the problem. According to you, well, I and I can't 84 00:05:10,960 --> 00:05:12,880 Speaker 1: really speak to the CBS board because I don't know 85 00:05:12,960 --> 00:05:14,960 Speaker 1: what accents they may have been taking along the way. 86 00:05:15,240 --> 00:05:18,520 Speaker 1: I would say that whole boards need to have some 87 00:05:18,640 --> 00:05:21,640 Speaker 1: kind of a sense of what is the what is 88 00:05:21,680 --> 00:05:24,440 Speaker 1: the help of the corporate culture. There are lots of 89 00:05:24,440 --> 00:05:26,359 Speaker 1: ways they can gather that. One of the ways that 90 00:05:26,400 --> 00:05:29,520 Speaker 1: we obviously recommend is to turn to the internal auditors 91 00:05:29,520 --> 00:05:32,120 Speaker 1: of the company and ask the internal auditors to give 92 00:05:32,160 --> 00:05:35,600 Speaker 1: them some kind of assurance about what UH controls are 93 00:05:35,640 --> 00:05:40,320 Speaker 1: in place within the company to handle these kinds of allegations, 94 00:05:40,400 --> 00:05:43,840 Speaker 1: what kind of UH codes of conduct or there, and 95 00:05:43,880 --> 00:05:47,719 Speaker 1: what kind of mechanisms do people have to report allegations. 96 00:05:48,200 --> 00:05:51,520 Speaker 1: And internal auditors are out there every day in you know, 97 00:05:51,680 --> 00:05:55,520 Speaker 1: under uncovering issues in the company. They usually have a 98 00:05:55,520 --> 00:05:59,080 Speaker 1: pretty keen grasp of what the culture of the company is. 99 00:05:59,120 --> 00:06:02,160 Speaker 1: And boards how the direct access to these folks, so 100 00:06:02,160 --> 00:06:04,720 Speaker 1: they should be asking them what's going on, what kind 101 00:06:04,760 --> 00:06:07,000 Speaker 1: of culture do we have? Because it's a little late. 102 00:06:07,120 --> 00:06:10,520 Speaker 1: Once that culture, if it is toxic once, it really 103 00:06:10,760 --> 00:06:13,520 Speaker 1: kind of tarnishes the company. It's a little bit late 104 00:06:13,600 --> 00:06:18,159 Speaker 1: for everybody to start acknowledging them that there were cultural issues. Richard, 105 00:06:18,200 --> 00:06:21,120 Speaker 1: How does that happen when the president the chief executive 106 00:06:21,160 --> 00:06:23,359 Speaker 1: of a company also happens to be the chairman of 107 00:06:23,360 --> 00:06:27,640 Speaker 1: the board. That's the case at CBS. Well, that's why 108 00:06:27,680 --> 00:06:30,000 Speaker 1: it's so I think that's why it's so powerful that 109 00:06:30,200 --> 00:06:32,960 Speaker 1: internal auditors report to the audit committee, and the audit 110 00:06:33,000 --> 00:06:36,640 Speaker 1: committees are shaired not by corporate executives but by independent 111 00:06:36,680 --> 00:06:39,760 Speaker 1: board members. And it's those independent board members who chair 112 00:06:40,279 --> 00:06:43,000 Speaker 1: the board, the audio committee of the board, who have 113 00:06:43,560 --> 00:06:47,600 Speaker 1: the responsibility to turn to internal audit to look at 114 00:06:47,600 --> 00:06:51,520 Speaker 1: other sources, um to get the answers. In fact, the 115 00:06:51,600 --> 00:06:54,800 Speaker 1: survey I mentioned earlier showed that nearly three quarters of 116 00:06:54,839 --> 00:06:58,520 Speaker 1: corporate boards almost had made no move to bring in 117 00:06:58,560 --> 00:07:02,080 Speaker 1: any experts or the internal auditors to look at sexual 118 00:07:02,120 --> 00:07:07,200 Speaker 1: harassment misconduct risks. In the case of CBS, the chairman 119 00:07:07,240 --> 00:07:11,640 Speaker 1: of that board the audit committee is Gary Countryman. He's 120 00:07:11,720 --> 00:07:18,280 Speaker 1: the former chairman of Liberty Mutual. Should they have a 121 00:07:18,320 --> 00:07:23,560 Speaker 1: regular investigation or process to vet the chairman of the 122 00:07:23,600 --> 00:07:28,280 Speaker 1: board or the chief executive for this very issue, Well, 123 00:07:28,320 --> 00:07:30,760 Speaker 1: I would think there is there should be it again 124 00:07:30,800 --> 00:07:33,400 Speaker 1: back to my back to my earlier point, I think 125 00:07:33,440 --> 00:07:37,240 Speaker 1: audit committees have an ongoing responsibility to have the kind 126 00:07:37,240 --> 00:07:40,240 Speaker 1: of dialogue with internal audit. They have executive sessions, usually 127 00:07:40,240 --> 00:07:43,080 Speaker 1: with the internal auditors with nobody else from the executive 128 00:07:43,080 --> 00:07:48,120 Speaker 1: management around. They have an ongoing opportunity to probe these 129 00:07:48,200 --> 00:07:51,120 Speaker 1: kind of areas, to ask these kind of questions. There 130 00:07:51,160 --> 00:07:56,520 Speaker 1: should be a clear expectations set with the legal counsel 131 00:07:56,680 --> 00:07:59,400 Speaker 1: of the of the company to make sure that any 132 00:07:59,400 --> 00:08:02,880 Speaker 1: allegation are brought to their attention as they involve the 133 00:08:03,440 --> 00:08:06,800 Speaker 1: CEO or some other senior executives. To me, this is 134 00:08:06,840 --> 00:08:10,680 Speaker 1: just a simple matter, not simple really, but certainly a 135 00:08:10,800 --> 00:08:14,760 Speaker 1: matter of risk management. Companies face a litany of risks. 136 00:08:14,840 --> 00:08:17,160 Speaker 1: To you know, we we we talked every day about 137 00:08:17,480 --> 00:08:22,520 Speaker 1: operational risk, strategic risks, technology risk. This is another risk. 138 00:08:22,640 --> 00:08:27,400 Speaker 1: And to me, smart boards, boards that are fully engaged 139 00:08:27,440 --> 00:08:30,360 Speaker 1: in experting their responsibility will have the right risk management 140 00:08:30,360 --> 00:08:31,960 Speaker 1: in place. We've got to leave it there. I want 141 00:08:31,960 --> 00:08:34,600 Speaker 1: to thank you very much Richard Chambers, chief executive of 142 00:08:34,640 --> 00:08:39,840 Speaker 1: the Institute of Internal Auditors, on how CBS could handle 143 00:08:39,880 --> 00:08:59,439 Speaker 1: accusations against chief executive and chairman less Moonvest. Getting ready 144 00:08:59,480 --> 00:09:02,520 Speaker 1: for a back to school a shopping parents are faced, 145 00:09:02,520 --> 00:09:05,920 Speaker 1: perhaps with a variety of new items. Everyone needs an 146 00:09:05,960 --> 00:09:09,360 Speaker 1: ear phone holder as well as washy tape. Here to 147 00:09:09,400 --> 00:09:12,760 Speaker 1: tell us more about the industry is Punamgyal, our senior 148 00:09:12,840 --> 00:09:17,640 Speaker 1: retail analyst for Bloomberg Intelligence. Punam what kinds of back 149 00:09:17,679 --> 00:09:21,320 Speaker 1: to school shopping can we expect this season? Yeah? You know, 150 00:09:21,400 --> 00:09:23,480 Speaker 1: I think the back to school season this year will 151 00:09:23,480 --> 00:09:26,360 Speaker 1: be interesting. Estimates are for a down one percent top 152 00:09:26,400 --> 00:09:29,560 Speaker 1: to present, depending on who's look, but I think consumers. 153 00:09:29,920 --> 00:09:32,520 Speaker 1: What I found very interesting is that apparel, you know, 154 00:09:32,679 --> 00:09:35,280 Speaker 1: a key category for back to school, is going to 155 00:09:35,320 --> 00:09:37,840 Speaker 1: see some momentum this year, which votes really well for 156 00:09:38,000 --> 00:09:40,720 Speaker 1: the retailers that I cover department stores and apparel stores. 157 00:09:41,040 --> 00:09:43,880 Speaker 1: And within that, I think Denham, which has made a 158 00:09:43,880 --> 00:09:47,720 Speaker 1: strong comeback um, is going to be feeling that shar game. 159 00:09:48,760 --> 00:09:50,920 Speaker 1: So people are going to be buying lots of genes 160 00:09:50,960 --> 00:09:54,000 Speaker 1: as they head back to school. That's what we're seeing, Yes, 161 00:09:54,200 --> 00:09:56,440 Speaker 1: I mean that's what the sur ratio. Are they going 162 00:09:56,480 --> 00:09:59,360 Speaker 1: to be buying them through Amazon or their local store? 163 00:10:00,120 --> 00:10:02,560 Speaker 1: So sets questions. I think Amazon will get some of 164 00:10:02,600 --> 00:10:05,000 Speaker 1: that share. If no matter where I look and how 165 00:10:05,040 --> 00:10:08,120 Speaker 1: I look, Amazon has been growing it's private label business, 166 00:10:08,240 --> 00:10:11,200 Speaker 1: especially in apparel. We saw that on Prime Day and 167 00:10:11,240 --> 00:10:13,720 Speaker 1: I think we'll continue to see that over the course 168 00:10:13,840 --> 00:10:16,559 Speaker 1: of back to school and even into holidays. But that said, 169 00:10:16,600 --> 00:10:20,280 Speaker 1: there are some very strong apparel players in Denham. When 170 00:10:20,280 --> 00:10:23,280 Speaker 1: you look at, for example, American Eagle, I think you 171 00:10:23,320 --> 00:10:25,280 Speaker 1: know that's one retailer that stands out and that will 172 00:10:25,320 --> 00:10:28,559 Speaker 1: continue to do well in the standard genes Um category, 173 00:10:28,640 --> 00:10:31,560 Speaker 1: which is forecasted to be up for point five percent 174 00:10:31,720 --> 00:10:34,319 Speaker 1: for this year, and then Old Navy. When you look 175 00:10:34,360 --> 00:10:37,959 Speaker 1: at Economy jenes Um at the lower price points UM, 176 00:10:38,000 --> 00:10:40,320 Speaker 1: Amazon is probably somewhere in between those two, so I 177 00:10:40,320 --> 00:10:43,439 Speaker 1: think they'll also continue to gain share, not more people 178 00:10:43,520 --> 00:10:46,120 Speaker 1: pay more for the same products this year. Will they 179 00:10:46,160 --> 00:10:48,800 Speaker 1: see inflation at the store? I don't think so. No. 180 00:10:48,960 --> 00:10:51,760 Speaker 1: While retailers would love to see inflation UM, but I 181 00:10:51,760 --> 00:10:53,400 Speaker 1: think if you look at a like to like item, 182 00:10:53,400 --> 00:10:55,839 Speaker 1: I don't think you'll see the price move up. That said, 183 00:10:55,920 --> 00:10:59,719 Speaker 1: if you enhance the material UM, if there's more stretchability 184 00:10:59,800 --> 00:11:02,520 Speaker 1: to it, if it's you know, better quality UM, then 185 00:11:02,559 --> 00:11:05,000 Speaker 1: the price points there could go up from last year. 186 00:11:05,480 --> 00:11:08,080 Speaker 1: So when you tell when you start to think about 187 00:11:08,160 --> 00:11:11,079 Speaker 1: what to expect for the back to school season, how 188 00:11:11,160 --> 00:11:16,080 Speaker 1: much you're looking at the spending ability of consumers the economy. 189 00:11:16,240 --> 00:11:18,559 Speaker 1: I mean, what sort of factors in for you. I mean, 190 00:11:18,559 --> 00:11:21,160 Speaker 1: the economy definitely matters, right, because at the end of 191 00:11:21,160 --> 00:11:24,280 Speaker 1: the day, if the consumer isn't feeling that they are 192 00:11:24,320 --> 00:11:26,480 Speaker 1: in a healthy position to spend, you're going to see 193 00:11:26,480 --> 00:11:28,680 Speaker 1: a pullback. I don't see that this year. I didn't 194 00:11:28,679 --> 00:11:31,240 Speaker 1: see that last year. Um. You know, we have consumer 195 00:11:31,240 --> 00:11:34,400 Speaker 1: confidence still at near all time highs, unemployment rate as well, 196 00:11:34,760 --> 00:11:38,480 Speaker 1: and the housing market queer frankly is still good. So um, 197 00:11:38,840 --> 00:11:41,720 Speaker 1: we haven't seen consumers start to trade down or anything yet, 198 00:11:41,760 --> 00:11:45,280 Speaker 1: which helps back to school spending. That said, you know, 199 00:11:45,400 --> 00:11:47,880 Speaker 1: last year, um, if you look back at three Q, 200 00:11:48,120 --> 00:11:51,800 Speaker 1: which in retail it's August Tember October, August was very strong, 201 00:11:52,160 --> 00:11:55,600 Speaker 1: which which encompassed most of back to school, so they're 202 00:11:55,640 --> 00:11:58,960 Speaker 1: up against some very tough comparisons for just back to school. 203 00:11:59,320 --> 00:12:02,440 Speaker 1: But then when you forward in the quarter into September October, 204 00:12:02,559 --> 00:12:05,760 Speaker 1: it was very very weak last year if you recall 205 00:12:05,800 --> 00:12:09,120 Speaker 1: the hurricanes and storms that we had and warm temperatures. 206 00:12:09,160 --> 00:12:12,640 Speaker 1: So we think the opportunity for retail and three que 207 00:12:12,679 --> 00:12:15,280 Speaker 1: back to school will be good, But the real opportunity 208 00:12:15,320 --> 00:12:18,679 Speaker 1: is going to come in the latter half if temperatures 209 00:12:18,720 --> 00:12:20,760 Speaker 1: are cooler than they were last year and we don't 210 00:12:20,760 --> 00:12:23,680 Speaker 1: have as many storms. I'm just a little bit more 211 00:12:23,720 --> 00:12:27,920 Speaker 1: on denom. Does each item if it has more holes 212 00:12:28,000 --> 00:12:32,600 Speaker 1: and rips, doesn't cost more? Sometimes Yes, Um, depends on 213 00:12:32,600 --> 00:12:35,640 Speaker 1: where you're shopping, you know, um in premium genes yes, 214 00:12:36,160 --> 00:12:40,359 Speaker 1: and standard genes Uh. I'd say the rips don't necessarily 215 00:12:40,480 --> 00:12:43,920 Speaker 1: dictate the price, but the fabrication of the denom does. 216 00:12:44,280 --> 00:12:47,240 Speaker 1: So if there is more stretchability, fits softer, yes, it'll 217 00:12:47,240 --> 00:12:50,720 Speaker 1: cost more. Then why would American Eagle, for example, be 218 00:12:50,840 --> 00:12:54,680 Speaker 1: offering thirty off if you buy three pairs of genes? 219 00:12:54,880 --> 00:12:57,400 Speaker 1: Is it just because their cost is so low that 220 00:12:58,559 --> 00:13:01,160 Speaker 1: off still means that making a decent an amount of money. Yeah. 221 00:13:01,160 --> 00:13:03,760 Speaker 1: You know, most of those formation promotions are typically built in, 222 00:13:03,880 --> 00:13:06,199 Speaker 1: so I wouldn't consider them last leading. Yet if you 223 00:13:06,240 --> 00:13:08,440 Speaker 1: saw seventy percent off, I would be a little concerned, 224 00:13:08,520 --> 00:13:11,160 Speaker 1: or even fifty percent off. So I think those are 225 00:13:11,200 --> 00:13:13,679 Speaker 1: built in, and it's really just to drive the customer 226 00:13:13,720 --> 00:13:16,720 Speaker 1: into the store and hoping that they also transact into 227 00:13:16,760 --> 00:13:19,160 Speaker 1: adjacent categories, whether they pick up a top while there 228 00:13:19,160 --> 00:13:23,280 Speaker 1: there are something else that built the basket. I honestly say, pim. 229 00:13:23,320 --> 00:13:26,680 Speaker 1: There have been some advertisements that are sheer parity, where 230 00:13:26,720 --> 00:13:30,480 Speaker 1: you basically have these genes that are are all holes 231 00:13:30,520 --> 00:13:33,439 Speaker 1: except for a couple of lines of denim, and they 232 00:13:33,440 --> 00:13:35,720 Speaker 1: cost like two hundred dollars. There's one post I'm thinking 233 00:13:35,720 --> 00:13:39,680 Speaker 1: of particular, and it was widely widely mocked online. Yes, 234 00:13:39,760 --> 00:13:42,480 Speaker 1: the look on your face does say it all. Tim, Well, 235 00:13:42,520 --> 00:13:46,680 Speaker 1: maybe there's a market for patches, all right, there's got 236 00:13:46,679 --> 00:13:48,679 Speaker 1: to be more than apparel, right, I mean, are we 237 00:13:48,760 --> 00:13:52,560 Speaker 1: going to see big spending on technology? Yes? Absolutely. I 238 00:13:52,559 --> 00:13:55,400 Speaker 1: mean that's always a key category, whether it's laptops, you know, 239 00:13:55,480 --> 00:13:59,440 Speaker 1: I've had iPhones, whatever it maybe um shoppers needs back 240 00:13:59,440 --> 00:14:02,560 Speaker 1: to school for flies. Those are definitely top categories. If 241 00:14:02,559 --> 00:14:04,560 Speaker 1: I look at just a survey that we pulled up 242 00:14:04,559 --> 00:14:07,040 Speaker 1: and it was done by Deloitte, you know, total back 243 00:14:07,080 --> 00:14:10,480 Speaker 1: to school spending the estimate twenty seven point six billion dollars, 244 00:14:10,480 --> 00:14:14,080 Speaker 1: the lion shares, apparel fifteen billion dollars, Computer and hardware 245 00:14:14,360 --> 00:14:18,760 Speaker 1: to your Technology UM point and electronic gadgets add up 246 00:14:18,760 --> 00:14:21,680 Speaker 1: to anywhere near three point seven and two point eight, 247 00:14:21,680 --> 00:14:25,800 Speaker 1: So you're looking at about six billion dollars starting to 248 00:14:25,840 --> 00:14:27,760 Speaker 1: talk about real money. Put Hum Goyle. Thank you so 249 00:14:27,840 --> 00:14:29,600 Speaker 1: much for being with us. Put Him Goyle. See your 250 00:14:29,680 --> 00:14:33,160 Speaker 1: US retail analyst for Bloomberg Intelligence, Pimm. Do you buy 251 00:14:33,160 --> 00:14:36,800 Speaker 1: clothes online? No? I don't really do a lot of 252 00:14:36,800 --> 00:14:40,760 Speaker 1: buying well, and you're the one who accuses me. I'm 253 00:14:40,760 --> 00:14:45,320 Speaker 1: not actually buying enough things, you know at my stage, 254 00:14:45,600 --> 00:14:50,360 Speaker 1: and there's no it's it's not an option. I don't know. 255 00:14:50,440 --> 00:14:51,960 Speaker 1: It's hit or miss for me. I mean there have 256 00:14:52,000 --> 00:14:54,360 Speaker 1: been some big wins, but some big seven and a 257 00:14:54,440 --> 00:14:57,360 Speaker 1: half billion that's what they're predicting for. That's what Putnam 258 00:14:57,440 --> 00:15:01,400 Speaker 1: says for spending for back to school and a half billions. 259 00:15:01,520 --> 00:15:19,440 Speaker 1: A lot of pencils. So as the US housing market 260 00:15:19,520 --> 00:15:22,680 Speaker 1: heating up or slowing down, here to talk with us 261 00:15:22,720 --> 00:15:26,720 Speaker 1: is Logan Motor Shami, senior loan officer for a MC Lending. 262 00:15:26,760 --> 00:15:29,040 Speaker 1: Thank you so much for joining us. Logan. It's really 263 00:15:29,120 --> 00:15:32,560 Speaker 1: been an interesting couple of months for the US housing market. 264 00:15:32,800 --> 00:15:35,920 Speaker 1: We got a bunch of negative data or sort of 265 00:15:36,240 --> 00:15:39,040 Speaker 1: seeming to paint the market with a pessimistic brush and 266 00:15:39,040 --> 00:15:42,200 Speaker 1: then today we got this good report at US petting 267 00:15:42,240 --> 00:15:44,880 Speaker 1: home sales increased for the first time in three months. 268 00:15:45,040 --> 00:15:47,080 Speaker 1: So can you be just sort of take a step back, 269 00:15:47,320 --> 00:15:49,680 Speaker 1: take stock? Where are we with the US housing market 270 00:15:49,760 --> 00:15:55,000 Speaker 1: right now? The US housing market looks exactly perfect where 271 00:15:55,000 --> 00:15:57,760 Speaker 1: it should be today. Um. I think the problem we 272 00:15:57,840 --> 00:16:01,640 Speaker 1: have here is that we have an institution of housing 273 00:16:01,680 --> 00:16:04,320 Speaker 1: and housing economists that have told the story that we 274 00:16:04,400 --> 00:16:08,080 Speaker 1: have record breaking demand vocifer strong, and all we need 275 00:16:08,200 --> 00:16:11,560 Speaker 1: is more inventory and once more inventory comes, sales will grow. 276 00:16:12,640 --> 00:16:14,600 Speaker 1: What we saw an existing home sales last week was 277 00:16:14,680 --> 00:16:17,920 Speaker 1: inventory rows, sales are down. This is the same thing 278 00:16:17,920 --> 00:16:20,440 Speaker 1: that happened in now We've got twice now in the 279 00:16:20,520 --> 00:16:23,160 Speaker 1: cycle where we were told we have record breaking demand, 280 00:16:23,200 --> 00:16:26,280 Speaker 1: but inventory rises and demand doesn't fall through with it. 281 00:16:26,520 --> 00:16:30,320 Speaker 1: So it's confusing and people get nervous because we're later 282 00:16:30,320 --> 00:16:33,320 Speaker 1: in the cycle. Home prices are rising, so people just 283 00:16:33,360 --> 00:16:35,560 Speaker 1: want to make sure that you know, they're not, you know, 284 00:16:35,600 --> 00:16:38,440 Speaker 1: in a situation where prices are going to collapse, and 285 00:16:38,520 --> 00:16:40,680 Speaker 1: that's not going to be the case in this cycle either. 286 00:16:40,760 --> 00:16:44,320 Speaker 1: So I think the extreme housing bowls and extreme housing 287 00:16:44,360 --> 00:16:48,240 Speaker 1: bears are going to be terribly frustrated for the upcoming 288 00:16:48,320 --> 00:16:51,680 Speaker 1: years because I truly believe they're not correctly reading the 289 00:16:51,800 --> 00:16:55,760 Speaker 1: data right and because of that, it creates confusion instead 290 00:16:55,800 --> 00:16:59,040 Speaker 1: of instead of a housing cycle that looks exactly where 291 00:16:59,040 --> 00:17:02,320 Speaker 1: it should be. Okay, well, logan, well, based on your 292 00:17:02,400 --> 00:17:06,520 Speaker 1: reading of the data, what do you conclude and help 293 00:17:06,600 --> 00:17:09,240 Speaker 1: Lisa out here give us a little picture into the future. 294 00:17:09,880 --> 00:17:12,480 Speaker 1: Purchase applications are at cycle highs. We've had year over 295 00:17:12,600 --> 00:17:15,919 Speaker 1: year growth every week. Basically, cash buyers are faulting as 296 00:17:15,960 --> 00:17:18,919 Speaker 1: a percentage of sales. So because of that, you're going 297 00:17:18,960 --> 00:17:22,159 Speaker 1: to need more mortgage demand to get growth from these levels. 298 00:17:22,200 --> 00:17:24,000 Speaker 1: This is the same thing kind of what happened last 299 00:17:24,080 --> 00:17:25,959 Speaker 1: year as well. We're kind of a flat to negative 300 00:17:26,000 --> 00:17:30,919 Speaker 1: sales trends, but purchase applications are still only as so 301 00:17:31,000 --> 00:17:34,160 Speaker 1: we're not we're not bearing some very strong economic cycle 302 00:17:34,160 --> 00:17:36,639 Speaker 1: where builders have to build out more homes. So the 303 00:17:36,720 --> 00:17:39,840 Speaker 1: inventory channels from the builders are actually looks pretty pretty 304 00:17:39,840 --> 00:17:41,840 Speaker 1: in line. Because new home sales are still growing, they're 305 00:17:41,840 --> 00:17:45,359 Speaker 1: actually better than than than I anticipated. So it's just 306 00:17:45,440 --> 00:17:49,240 Speaker 1: a very slow and steady housing cycle. So there's there's 307 00:17:49,280 --> 00:17:53,000 Speaker 1: not this There shouldn't be this very extremembarrassed theme with 308 00:17:53,040 --> 00:17:55,880 Speaker 1: the data that came in last week, or an extreme 309 00:17:55,960 --> 00:17:58,400 Speaker 1: bullish theme for all the data that has been out 310 00:17:58,440 --> 00:18:00,600 Speaker 1: here for years. With housing, it's just a very slow 311 00:18:00,680 --> 00:18:04,080 Speaker 1: and steady housing cycle. But it confuses people when they 312 00:18:04,119 --> 00:18:07,639 Speaker 1: see inventory increased year over year and demand go down. 313 00:18:07,680 --> 00:18:11,000 Speaker 1: And I think that's I think that's the miscommunication with 314 00:18:11,119 --> 00:18:13,919 Speaker 1: the housing community to the public because the public was 315 00:18:13,920 --> 00:18:16,800 Speaker 1: always told if we get more inventory, sales will take off, 316 00:18:17,240 --> 00:18:19,720 Speaker 1: and twice now in the cycle it has not happened. 317 00:18:19,920 --> 00:18:22,720 Speaker 1: Look in your uniquely positioned to give us insight and 318 00:18:22,840 --> 00:18:26,440 Speaker 1: how much the increase in mortgage rates has affected demand 319 00:18:26,800 --> 00:18:32,720 Speaker 1: for home loans. What has it been like. Well, even today, 320 00:18:32,960 --> 00:18:35,879 Speaker 1: purchase applications are up the year over year, so we 321 00:18:35,960 --> 00:18:39,600 Speaker 1: can we can assume that higher mortgage rates with higher 322 00:18:39,600 --> 00:18:43,560 Speaker 1: home prices might impact the rate of growth of housing. 323 00:18:43,600 --> 00:18:48,760 Speaker 1: But this isn't like was very evident mortgage rates rose late, 324 00:18:49,760 --> 00:18:53,240 Speaker 1: purchased applications were down year over year from the majority 325 00:18:53,280 --> 00:18:55,880 Speaker 1: of the year. We don't see that this year. So today, 326 00:18:56,080 --> 00:19:00,160 Speaker 1: even now, higher mortgage rates have not impacted stay else 327 00:19:00,200 --> 00:19:03,439 Speaker 1: in the sense that, uh, we're creating a negative trend. 328 00:19:03,520 --> 00:19:06,000 Speaker 1: But it's impacting I would say, the rate of growth 329 00:19:06,400 --> 00:19:10,560 Speaker 1: out here. But also it's harder to move up when 330 00:19:10,600 --> 00:19:13,159 Speaker 1: you're when interest rates are higher, you know, and I 331 00:19:13,200 --> 00:19:15,840 Speaker 1: know there's a lockdown rate theory, but higher home prices 332 00:19:15,880 --> 00:19:18,520 Speaker 1: make it harder for the move a buyer to buy 333 00:19:18,560 --> 00:19:21,439 Speaker 1: that expensive house. And we see this in the housing 334 00:19:21,480 --> 00:19:24,080 Speaker 1: tenure data. That housing tenure is at all time highs 335 00:19:24,160 --> 00:19:27,119 Speaker 1: right now. And this is a situation why builders aren't 336 00:19:27,119 --> 00:19:29,680 Speaker 1: building more homes. They know there's a massive amount of 337 00:19:29,720 --> 00:19:32,520 Speaker 1: supply that is out there that is cheaper, smaller, and 338 00:19:32,600 --> 00:19:35,639 Speaker 1: has a geographical advantage over them. So one thing that 339 00:19:35,680 --> 00:19:37,879 Speaker 1: I'm trying to understand, perhaps some of the confusion is 340 00:19:37,920 --> 00:19:42,000 Speaker 1: stemming from a bifurcation in the US market where certain 341 00:19:42,040 --> 00:19:46,280 Speaker 1: big cities that enjoyed massive booms in their housing markets 342 00:19:46,280 --> 00:19:49,120 Speaker 1: are seeing uh sort of market slowdowns. I mean, I'm thinking, 343 00:19:49,240 --> 00:19:52,160 Speaker 1: for example of San Francisco, do market, but you're starting 344 00:19:52,160 --> 00:19:55,040 Speaker 1: to see a plateauing and dipping in prices, and certainly 345 00:19:55,320 --> 00:19:58,080 Speaker 1: in New York. How much is that part of the narrative. 346 00:19:59,040 --> 00:20:01,000 Speaker 1: Here's here's here's the interesting. This is what I could 347 00:20:01,040 --> 00:20:02,960 Speaker 1: see in SoCal and I even took a bunch of 348 00:20:02,960 --> 00:20:06,640 Speaker 1: photos of price reduction homes. What I saw in June 349 00:20:06,920 --> 00:20:10,760 Speaker 1: and July was aggressive selling prices from real estate agents 350 00:20:11,040 --> 00:20:14,000 Speaker 1: and these homes drawn for thirty days and more. And 351 00:20:14,040 --> 00:20:16,159 Speaker 1: it's late July, and if you need to sell the 352 00:20:16,200 --> 00:20:19,120 Speaker 1: house before the you know, the school the school time 353 00:20:19,160 --> 00:20:22,560 Speaker 1: it comes in, you saw aggressive price cuts, you know, 354 00:20:22,680 --> 00:20:24,840 Speaker 1: as I saw price cuts of four or five, six, 355 00:20:24,880 --> 00:20:28,360 Speaker 1: seven percent even to sell the house. Okay, So there 356 00:20:28,520 --> 00:20:31,600 Speaker 1: is limits to what you could put onto the marketplace. 357 00:20:32,240 --> 00:20:34,919 Speaker 1: And that's what I'm seeing this summer, is that you 358 00:20:34,960 --> 00:20:38,560 Speaker 1: saw aggressive selling prices, thinking that it would just be 359 00:20:38,680 --> 00:20:42,560 Speaker 1: soaked up because inventory is monthly supply. Is that near 360 00:20:42,600 --> 00:20:45,639 Speaker 1: cyclothes And it didn't happen. And then you know, the 361 00:20:45,720 --> 00:20:48,680 Speaker 1: sales are delayed out because the price cuts are coming 362 00:20:48,720 --> 00:20:50,640 Speaker 1: in and most likely that all the buyers will pick 363 00:20:50,640 --> 00:20:52,919 Speaker 1: it up then. But that is what I That was 364 00:20:52,960 --> 00:20:55,639 Speaker 1: what I'm assuming is going is what we're seeing in 365 00:20:55,720 --> 00:20:58,840 Speaker 1: other places, that there's limits to how much price increases 366 00:20:58,880 --> 00:21:02,480 Speaker 1: you could get out of the house. Logan just quickly, 367 00:21:02,520 --> 00:21:05,040 Speaker 1: and I just want to mention you've got a great website, Logan, 368 00:21:05,640 --> 00:21:10,560 Speaker 1: your Financial Truth website where you put out your economic 369 00:21:10,640 --> 00:21:14,000 Speaker 1: and housing predictions. Just twenty seconds. Would you change anything 370 00:21:14,040 --> 00:21:17,879 Speaker 1: that you've described earlier this year? Absolutely not. It looks 371 00:21:18,040 --> 00:21:20,800 Speaker 1: perfect Because I talked about existing home sales will be 372 00:21:20,840 --> 00:21:24,680 Speaker 1: flat and negative, but inventory will increase and people shouldn't 373 00:21:24,680 --> 00:21:27,200 Speaker 1: panic about that. That was my exact line I used 374 00:21:27,680 --> 00:21:30,840 Speaker 1: UH in there. This is uh. This year looks exactly correct, 375 00:21:30,880 --> 00:21:34,360 Speaker 1: and new home sales are actually still outperforming my sales estum. 376 00:21:34,359 --> 00:21:35,680 Speaker 1: I though I was only looking for two to five 377 00:21:35,680 --> 00:21:39,040 Speaker 1: percent growth, were a little bit higher than that. Median 378 00:21:39,160 --> 00:21:42,480 Speaker 1: sales prices falling. That is actually a good thing. That 379 00:21:42,520 --> 00:21:44,959 Speaker 1: means lower home prices are coming in the market. We've 380 00:21:44,960 --> 00:21:46,600 Speaker 1: got to leave it there, but thanks very much for 381 00:21:46,680 --> 00:21:49,479 Speaker 1: being with a slogan Matsa Shami. He is the senior 382 00:21:49,640 --> 00:21:53,880 Speaker 1: loan officer for a MC Lending, giving us his perspective 383 00:21:54,000 --> 00:21:57,840 Speaker 1: on housing data, more good applications, and the housing market. 384 00:22:11,800 --> 00:22:14,280 Speaker 1: Joining us now in studio Car Wreca Donna, chief US 385 00:22:14,320 --> 00:22:21,240 Speaker 1: economist for Bloomberg Intelligence. Carl, gotta ask you about Kansas 386 00:22:21,240 --> 00:22:25,160 Speaker 1: City and Esther George, head of the Kansas City FED. 387 00:22:25,760 --> 00:22:28,000 Speaker 1: You're shaking your head. You're giving me this smile. This 388 00:22:28,080 --> 00:22:32,480 Speaker 1: means Esther George is going to vote, isn't she? Yes? 389 00:22:32,600 --> 00:22:37,359 Speaker 1: She will be voting in the absence of San Francisco 390 00:22:37,520 --> 00:22:41,040 Speaker 1: FED having a replacement for John Williams, who moved to 391 00:22:41,200 --> 00:22:43,080 Speaker 1: was the president at the San fran FED, who was 392 00:22:43,119 --> 00:22:46,200 Speaker 1: now the president at the New York FED. And what's 393 00:22:46,200 --> 00:22:49,480 Speaker 1: a little bit of of musical chair I mean esther 394 00:22:49,800 --> 00:22:54,880 Speaker 1: George is known as pretty hawkish. More than pretty hawkish, 395 00:22:54,920 --> 00:22:58,560 Speaker 1: she is one of the most resolute hawks on the committee. 396 00:22:58,640 --> 00:23:02,879 Speaker 1: So uh, A one vote can't can't slave the committee. 397 00:23:02,920 --> 00:23:06,320 Speaker 1: So you know, I don't think this materially will change 398 00:23:06,480 --> 00:23:11,879 Speaker 1: the discussion for economics UH and policy setting at the effect, 399 00:23:12,000 --> 00:23:14,879 Speaker 1: but nonetheless it will be a hawkish voice who counts 400 00:23:14,880 --> 00:23:19,280 Speaker 1: as a vote, not just not just an opposition. Carl U. 401 00:23:19,520 --> 00:23:22,760 Speaker 1: There is an enigma wrapped in a mystery, wrapped in 402 00:23:22,880 --> 00:23:26,840 Speaker 1: a paradox in the economic models. Right now, we have 403 00:23:27,280 --> 00:23:32,240 Speaker 1: the US administration, the President and his his staff talking 404 00:23:32,359 --> 00:23:36,520 Speaker 1: about sustained three percent growth in the US possibly more. 405 00:23:36,880 --> 00:23:38,919 Speaker 1: You hear a lot of bullish talk. You also hear 406 00:23:38,960 --> 00:23:41,800 Speaker 1: a lot of bullish talk from investors who are looking 407 00:23:41,800 --> 00:23:45,280 Speaker 1: at the fundamentals seeing incredible earnings. And then there is 408 00:23:45,320 --> 00:23:48,840 Speaker 1: the pessimism. And the pessimism is so pervasive where do 409 00:23:48,920 --> 00:23:51,240 Speaker 1: you fall on this. What's the right narrative right now? 410 00:23:52,200 --> 00:23:55,679 Speaker 1: I think we got two wrapped up in the notion 411 00:23:55,800 --> 00:23:59,440 Speaker 1: of new normal economic growth coming out of the Great Recession. 412 00:23:59,720 --> 00:24:02,240 Speaker 1: Because of the economy was so sluggish for so many years, 413 00:24:02,440 --> 00:24:04,639 Speaker 1: a lot of folks started to say, well, this, you know, 414 00:24:04,800 --> 00:24:08,080 Speaker 1: this is where we're stuck going forward. Uh. So I 415 00:24:08,160 --> 00:24:11,320 Speaker 1: think that was excessive pessimism. Uh. That being said, I 416 00:24:11,320 --> 00:24:14,439 Speaker 1: don't think that, you know, sustained growth that three or 417 00:24:14,520 --> 00:24:18,520 Speaker 1: four percent is really a viable option for the US economy. 418 00:24:18,960 --> 00:24:21,280 Speaker 1: Either you can hit those types of growth figures for 419 00:24:21,359 --> 00:24:25,480 Speaker 1: a short period of time. Uh. Sometimes if hll you know, 420 00:24:25,560 --> 00:24:28,600 Speaker 1: have the perfect storm of economic contributions like we saw 421 00:24:28,640 --> 00:24:32,480 Speaker 1: in Q two, you get it. Also, if you uh 422 00:24:32,760 --> 00:24:37,359 Speaker 1: cut taxes enough and basically embark on deficit spending, you 423 00:24:37,400 --> 00:24:41,560 Speaker 1: can also get sustained pick up, but only for a short, 424 00:24:41,760 --> 00:24:45,240 Speaker 1: medium time period and ultimately you have to pay the piper. 425 00:24:45,400 --> 00:24:47,640 Speaker 1: So I think what we're seeing now is the economy 426 00:24:47,760 --> 00:24:50,840 Speaker 1: is improving given where we are in the cycle. It's 427 00:24:50,880 --> 00:24:54,359 Speaker 1: not just a consumer story anymore. Businesses are spending, but 428 00:24:54,760 --> 00:24:58,160 Speaker 1: sustained growth in the three to four percent territory just 429 00:24:58,200 --> 00:25:00,800 Speaker 1: not in the cards. So we're gonna get a rate 430 00:25:00,840 --> 00:25:03,120 Speaker 1: hike in September. Any other rate hikes from the Fed 431 00:25:03,160 --> 00:25:06,919 Speaker 1: this year, that's going to depend on economic performance in 432 00:25:06,960 --> 00:25:09,400 Speaker 1: the back half of the year. Now what we saw, 433 00:25:09,680 --> 00:25:12,199 Speaker 1: you know, four point one percent growth in Q two. 434 00:25:12,680 --> 00:25:15,720 Speaker 1: My team is forecasting growth to moderate it about two 435 00:25:15,760 --> 00:25:18,159 Speaker 1: point eight percent in the back half of the year. 436 00:25:18,240 --> 00:25:20,239 Speaker 1: So if you're growing at two point eight percent, your 437 00:25:20,320 --> 00:25:23,240 Speaker 1: unemployment rate is four percent or just a little lower 438 00:25:23,800 --> 00:25:26,840 Speaker 1: inflations running at two percent, that seems like it would 439 00:25:26,840 --> 00:25:29,840 Speaker 1: augur for the Fed to continue on this gradual path 440 00:25:29,920 --> 00:25:35,200 Speaker 1: of normalization. But I suspect financial conditions, rather than economic performance, 441 00:25:35,520 --> 00:25:39,000 Speaker 1: are going to be the determinant of that potential fourth 442 00:25:39,080 --> 00:25:41,439 Speaker 1: rate HiPE, which will come up in December. And so 443 00:25:41,480 --> 00:25:43,600 Speaker 1: as we look at financial conditions, we have a FED 444 00:25:43,680 --> 00:25:48,400 Speaker 1: balance sheet that's tightening, the dollar has been appreciating significantly, 445 00:25:48,480 --> 00:25:52,440 Speaker 1: the yield curve is very flat. I suspect these financial 446 00:25:52,520 --> 00:25:56,639 Speaker 1: considerations will actually lead the FED to pause at that 447 00:25:56,680 --> 00:26:00,320 Speaker 1: December meeting, rather than purely looking at the economic data. 448 00:26:00,320 --> 00:26:02,080 Speaker 1: If you look at the economic data, it's a green light. 449 00:26:02,440 --> 00:26:05,359 Speaker 1: If you look at the financial data, it's flash and yellow. 450 00:26:05,800 --> 00:26:08,520 Speaker 1: Why would they not look at the economic data. Well 451 00:26:08,560 --> 00:26:11,640 Speaker 1: they're looking at both. No, I know, but why would they? 452 00:26:11,680 --> 00:26:13,800 Speaker 1: Why would they? They will look at the economic data 453 00:26:13,880 --> 00:26:18,120 Speaker 1: in isolation. Right, They're very concerned about the potential implications 454 00:26:18,160 --> 00:26:21,760 Speaker 1: of a flat yield curve, but they keeping they'll invert 455 00:26:21,840 --> 00:26:24,919 Speaker 1: it and wait forgetting you for just a second. We 456 00:26:25,000 --> 00:26:28,720 Speaker 1: got the report from Caterpillar today, right talk Karen neuble 457 00:26:28,800 --> 00:26:32,880 Speaker 1: Heart Bloomberg Intelligence said this is great. I mean, things 458 00:26:32,920 --> 00:26:36,600 Speaker 1: are really good, and they're raising prices and those price 459 00:26:36,680 --> 00:26:40,520 Speaker 1: increases are probably going to stick. You notice that in 460 00:26:40,520 --> 00:26:46,119 Speaker 1: the transportation industry, prices are increasing. Can't find truckers. Is 461 00:26:46,200 --> 00:26:49,720 Speaker 1: there an opportunity for the Federal Reserve to get ahead 462 00:26:49,720 --> 00:26:51,719 Speaker 1: of the curve here and actually go ahead with these 463 00:26:51,800 --> 00:26:54,320 Speaker 1: rate increases? The Fed doesn't want to get ahead of 464 00:26:54,320 --> 00:26:57,080 Speaker 1: the curve. They want to move with the data. But 465 00:26:57,160 --> 00:26:59,440 Speaker 1: you need to look at forward looking data. So it's 466 00:26:59,480 --> 00:27:02,720 Speaker 1: not the economy is doing at the moment four percent growth. 467 00:27:03,280 --> 00:27:05,480 Speaker 1: It's what you're expecting the economy to do over the 468 00:27:05,480 --> 00:27:08,840 Speaker 1: next couple of quarters that really matters. And I suspect 469 00:27:09,400 --> 00:27:11,520 Speaker 1: we're going to get a clue a little bit later 470 00:27:11,520 --> 00:27:14,120 Speaker 1: this week. And while the main focal points are the 471 00:27:14,200 --> 00:27:17,719 Speaker 1: FED meeting and the Job's Report on Wednesday and Friday, respectively. 472 00:27:17,960 --> 00:27:21,320 Speaker 1: What could be more important is the Manufacturing I s M, 473 00:27:21,359 --> 00:27:24,040 Speaker 1: which is out on Wednesday, and within that we have 474 00:27:24,119 --> 00:27:27,040 Speaker 1: new export orders. We've had a dramatic appreciation of the 475 00:27:27,080 --> 00:27:29,480 Speaker 1: dollar over the last couple of months, and that could 476 00:27:29,480 --> 00:27:31,760 Speaker 1: be the beginning of a down draft or a period 477 00:27:31,800 --> 00:27:35,639 Speaker 1: of weakness in the back half. Kadona, chief US economist 478 00:27:35,720 --> 00:27:43,879 Speaker 1: for Bloomberg Intelligence. Always well done, actually, Bloomberg Economics. Thanks 479 00:27:43,880 --> 00:27:46,520 Speaker 1: for listening to the Bloomberg P and L podcast. You 480 00:27:46,560 --> 00:27:50,320 Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud, 481 00:27:50,440 --> 00:27:53,920 Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm 482 00:27:53,960 --> 00:27:57,960 Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. 483 00:27:58,080 --> 00:28:00,679 Speaker 1: It's one before the podcast. You can always catch us 484 00:28:00,720 --> 00:28:02,280 Speaker 1: worldwide on Bloomberg Radio.