Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: Search Bloomberg Clobal News, the new wish of Bloomberg Business Week.
Speaker 1: It's coming out on newsstands, The Bloomberg and online all
Speaker 1: its entirety tomorrow. It includes two cover stories this week,
Speaker 1: a domestic cover story and an international cover story, which
Speaker 1: talks about maybe the UN Tesla. It's a car company
Speaker 1: that's trying to take on Tesla. It's called b y D,
Speaker 1: and the question is is China's b y D the
Speaker 1: UN Tesla. Jim Ellis is Assistant Managing editor of Bloomberg
Speaker 1: Business Week. He's with us right now in the Bloomberg
Speaker 1: Interactive Broke Studio. Jim, how do how do when you
Speaker 1: think about a story like this, how does it come together?
Speaker 1: And we should note that UM it's available in the
Speaker 1: upcoming issue of Bloomberg Business Week Matters. I mean this
Speaker 1: came together because there was a lot of interest in UM.
Speaker 1: You know, there's obviously a lot of interest in e
Speaker 1: v S, a lot of interest in in Tesla and UM.
Speaker 1: You know, most people sort of think that the way
Speaker 1: Tesla has sort of developed itself is the is the
Speaker 1: model for UM, you know, auto companies of the future,
Speaker 1: and by D sort of stands in as an example
Speaker 1: of it doesn't have to be that way. I mean,
Speaker 1: b b D is not just a startup, and it's
Speaker 1: a very successful company. It's the largest EV maker in China.
Speaker 1: It's also the third most valuable by market cap auto
Speaker 1: company in the world, after Tesla and Toyota. But a
Speaker 1: lot of people here probably don't know it much other
Speaker 1: than that it's a big investment by who else, Warren Buffett,
Speaker 1: who bought into this company back in the you know,
Speaker 1: early two thousands and put in with two million dollars.
Speaker 1: It's now a stake worth eight billion dollars and um,
Speaker 1: this is a company very that believes in vertical integration.
Speaker 1: They've come in and they've said, you know, everybody's talking
Speaker 1: about chips shortages, and everybody's talking about battery deals. I mean,
Speaker 1: they make their own batteries. They're now the third largest
Speaker 1: maker of EV batteries in the world. They also make
Speaker 1: their own chips. They use them in their cars. They
Speaker 1: are probably going to be a battery supplier to Tesla.
Speaker 1: They're already a battery supplier to Toyota. I mean, this
Speaker 1: is a true, you know, vision of we should make this.
Speaker 1: They also, um, you know now have invested in lithium, minds,
Speaker 1: all the things you need for batteries. They are just
Speaker 1: very different. The other thing that's really different is that
Speaker 1: they are making cars for the sort of middle class
Speaker 1: person and that's that's a big market. But it's a
Speaker 1: very different approach. With the Tesla tests that came in
Speaker 1: and Tesla said they were doing Model three at what
Speaker 1: thirty k, right, and the average price for that it's
Speaker 1: now about forty six. So what would it be y
Speaker 1: D set you back? Right now? You can get one
Speaker 1: and you can't get one in the you can't get
Speaker 1: one in the US but it would probably be about
Speaker 1: a third less than comparable Tesla in China where they
Speaker 1: sell hit to hit UM. You know, it goes to
Speaker 1: the Their Auto three UM is about half the price
Speaker 1: of the Tesla model. Why which would be comparable? It
Speaker 1: should be sort of e V or it's um UM.
Speaker 1: You know. It's a different marketplace though, because when you're
Speaker 1: saying I'm going to make cars for Middle I don't
Speaker 1: wanna call it Middle America. It's Middle China, Middle uh Asia. UM.
Speaker 1: You're not going to be able to charge as much,
Speaker 1: but you're also not going to be able to have
Speaker 1: the same sort of level of profitability. And right now,
Speaker 1: about two percent of every you know of revenues goes
Speaker 1: to profit at b y D, about ten percent of
Speaker 1: profit goes to UM. You know a revenue goes to
Speaker 1: profit at Tesla. Is this a company I think about
Speaker 1: you know President g and he talked about, you know,
Speaker 1: wanting to get into higher tech or you know, high
Speaker 1: tech markets UM and sell to the world and not
Speaker 1: be the manufacturer of the world. And I do wonder
Speaker 1: is this ultimately will will be able to get these
Speaker 1: cars in the United States? And and I do think
Speaker 1: about what that means for some of the competition and specifically, yeah,
Speaker 1: I mean that that is the goal there. I mean
Speaker 1: one of the big things about the ideas it's been
Speaker 1: expanding global. It means in Australia now they're they've got
Speaker 1: deals now for Germany. UM, I mean they view themselves
Speaker 1: as a global company. They just got then they're going
Speaker 1: to use this period now when everybody wants to have
Speaker 1: evs but everybody doesn't have the capacity to produce enough evs.
Speaker 1: They're using that as an opportunity to sort of build
Speaker 1: into the market also. Um, they have UM, you know,
Speaker 1: they're they're doing something that China wants to do, which
Speaker 1: is to become more of a producer, global producer of
Speaker 1: autos and um. Just this morning, UM, the Chinese Premier
Speaker 1: Leko King went to be at b y d s
Speaker 1: headquarters and to say, you guys, hey at a boy
Speaker 1: you know, get out there and you know, sort of
Speaker 1: do this for us for the future. I mean, they
Speaker 1: view that as one of the big potential consumer products
Speaker 1: of the future and China must have a much bigger
Speaker 1: piece of that, and a company like b y D
Speaker 1: gives them a beachhet in that. And I just want
Speaker 1: to point out. I mean, the ad rs do trade
Speaker 1: on the New York Stock Exchange. They're up for the
Speaker 1: year just shy of ten percent. But I do think about,
Speaker 1: you know, the access for investors ultimately, especially when you're
Speaker 1: President ge it feels like, you know, really honing in,
Speaker 1: homing in on certain industries and either restricting what they
Speaker 1: can do or whether they can be listed on the
Speaker 1: New York Stock you know, on US exchanges. And I
Speaker 1: do wonder what the futures are how investors ultimately will
Speaker 1: continue to be able to tap into this well, I mean,
Speaker 1: the the idea at least the Chinese would like, um,
Speaker 1: you know, the rest of the world to be able
Speaker 1: to help them fund the transition, but um, a lot
Speaker 1: of countries increasingly reviewing, you know, sort of the auto
Speaker 1: business as it's a potentially protected industry something because it's
Speaker 1: going to be one of the biggest consumer products forever.
Speaker 1: I mean, it's it's trans Transit is just that, and
Speaker 1: so's it'll be interesting to see just how dependent do
Speaker 1: we want to become on foreign automakers who aren't German
Speaker 1: or Japanese, right exactly, Jim to me, it's also a
Speaker 1: story about how Tesla is increasingly not the only game
Speaker 1: in town when it comes to e vs. Not to
Speaker 1: mention you know the companies that you mentioned, but also
Speaker 1: the US rivals Ford and the US and Ford and GM.
Speaker 1: I mean Tesla made what I consider to be a
Speaker 1: strategic mistake in not pushing ahead with the truck business.
Speaker 1: I mean they have left you know, they sort of
Speaker 1: left an open lane for both UM, you know, Ford
Speaker 1: and GM in here one fift lightning. They cannot make
Speaker 1: it fast enough in order to it. They just stopped
Speaker 1: taking orders because how can you not jump into that market.
Speaker 1: I mean, the the regular gasoline powered forward one is
Speaker 1: the most sold vehicle, single vehicle in the United States.
Speaker 1: It is a hugely profitable piece. It is the reason
Speaker 1: there is still four and to allow that, you know,
Speaker 1: to happen where they say the cyberstruck will get around
Speaker 1: to it. No, this was a mistake and I had
Speaker 1: a filling in two or three years. People are going
Speaker 1: to be saying Tesla could have had this market to itself,
Speaker 1: didn't and it it gave a lifeline to Ford. It's
Speaker 1: gonna mean also that GM, with UM you know, its
Speaker 1: own evs you know trucks is going to also have
Speaker 1: a way to compete against Tesla long term, and that's
Speaker 1: a very profitable part of the market. Jim really quickly,
Speaker 1: just about twenty five seconds, is b y D also
Speaker 1: potentially have an advantage in terms of um. China has
Speaker 1: been on such a mission to line up lithium, cobalt, nicols,
Speaker 1: some these key minerals for e V batteries. Is that
Speaker 1: going to give them maybe potentially an advantage going ahead,
Speaker 1: just quickly at least short term. It it will mean
Speaker 1: simply because it's been so difficult to line up those resources,
Speaker 1: and so they'll have the ability to do it not
Speaker 1: only from resources in China but also in places in
Speaker 1: South America where China also has influence. Great story, and
Speaker 1: it is the international cover story. It'll be hitting the
Speaker 1: Bloomberg terminal at five pm Wall Street time, so be
Speaker 1: sure to check it out. Jim Ellis come back more often.
Speaker 1: Thank you, We love, We love. Jim Ellis Assistant managing
Speaker 1: at a Bloomberg Business Week. You're listening to Bloomberg Business
Speaker 1: Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic
Speaker 1: on Bloomberg Radio. We want to get to one of
Speaker 1: the most read stories on the Bloomberg Today, it's about
Speaker 1: the recent CEO drama at the private equity from Carlisle Group.
Speaker 1: The drama, of course, you know Carli's CEO, Kusan Lee,
Speaker 1: abruptly pushed out the door by the company's board. Earlier
Speaker 1: today on Bloomberg Surveillance. Carlisle Group co chairman and co
Speaker 1: founder and host a peer to peer conversations on Bloomberg,
Speaker 1: David Rubinstein address the situation on how you get ready
Speaker 1: for the next generation of leaders. There's no perfect model.
Speaker 1: Each of the firms have gone through it in different ways.
Speaker 1: I think a good thing to do is to have
Speaker 1: somebody who's been at a firm for a long time
Speaker 1: part of the culture. They know the ethos of the organization,
Speaker 1: and gradually they come in and take over control and
Speaker 1: the founders step back. But it's more complicated than a
Speaker 1: typical situation. So let's suppose you're lou Gerstner. You're the
Speaker 1: CEO of IBM, and you retire. When you retire, you
Speaker 1: don't own twenty or thirty percent of the company still,
Speaker 1: and you're not still you know, a major investor in
Speaker 1: the funds. It's a different situation. You're not a founder
Speaker 1: so all the founders of the large private equity firms
Speaker 1: are still involved, uh largely with some exceptions, still involved
Speaker 1: in as owners, investment committee members and as big shareholders.
Speaker 1: And it's a little different than the lou Gersner situation
Speaker 1: or Jack Well situation when they retire and they don't
Speaker 1: really control the company through the owner ownership, there's large
Speaker 1: shares shares in the company. That was Carlisle Group founder
Speaker 1: and co executive chairman David Rubinstein, also the post of
Speaker 1: Bloomberg Wealth with David Rubinstein on Bloomberg TV. That was
Speaker 1: him earlier on Bloomberg Surveillance. I want to bring in
Speaker 1: Heather purl Burg. She's private equity reporter for Bloomberg near.
Speaker 1: She joined us on the phone from Washington, d C.
Speaker 1: And she's the co author along Don Limb, of one
Speaker 1: of the most read stories on the Bloomberg terminal, all
Speaker 1: about the CEO drama at Carlisle Group and what we're
Speaker 1: learning about that transition as we speak. They're good to
Speaker 1: have you with us. So how did this all go
Speaker 1: down at Carlisle Group a few weeks ago? Well, let's
Speaker 1: say this hole debacle was not managed the way you'd
Speaker 1: expect from a top tier firm like Carlyle. I mean,
Speaker 1: even comparing it to Glenn Younkin's exit the last CEO,
Speaker 1: which was telegraphed from a public relations perspective, really well managed.
Speaker 1: This was kind of a mess. Um. You know, we're
Speaker 1: talking about ten pm press release on a Sunday night.
Speaker 1: Took everyone on Wall Street by surprise, and people have
Speaker 1: been kind of trying to unpack it ever since. So yeah,
Speaker 1: so what as we've as you guys too, have been
Speaker 1: unpacking it and writing about it. What more have we
Speaker 1: kind of learned about how this is playing out? Well?
Speaker 1: It sounds like what happened is a big conflict between
Speaker 1: q Sun Lee the CEO, and the founders was really
Speaker 1: at the heart of it. Uh, The board sort of
Speaker 1: leaned towards David Rubinstein on the side of the founders
Speaker 1: and essentially pushed Lee out. Um. You know, he has
Speaker 1: been the CEO for about six years. He started with
Speaker 1: Glenn Youngcan, who ironically he himself kind of pushed out
Speaker 1: a few years ago. Young Can went on to be
Speaker 1: the Governor of Virginia, and Lee was making a lot
Speaker 1: of changes which people would say was necessary, um, going
Speaker 1: into new businesses, making Carlyle more competitive, but sort of
Speaker 1: icing out the founders and changing the culture in a
Speaker 1: way that was really controversial. So where does where does
Speaker 1: Carlisle go from here? And what do we know about
Speaker 1: how they're going to bring in somebody? You know, there's
Speaker 1: a search going on, is you right? What's the direction
Speaker 1: that they need to move in? Well, Carlisle has kind
Speaker 1: of bigger underlying issues at this point, I mean this
Speaker 1: identity crisis as we called it. Where they really got
Speaker 1: their footing is a buyout shop, but they've had to
Speaker 1: push into new businesses to compete with Blackstone, KKR and
Speaker 1: the others. Now they have credit insurance, retail, and they've
Speaker 1: expanded in New York, but they're still based in DC.
Speaker 1: They kind of made their name doing defense related investments,
Speaker 1: but now they've had to pivot to technology and healthcare.
Speaker 1: They really need someone who's gonna kind of keep pushing
Speaker 1: them in a new and competitive direction. But who knows
Speaker 1: that the founders really loom large. I mean Rubenstein said
Speaker 1: it himself. They have a huge percentage of ownership in
Speaker 1: the company. I think it's collectively of the stock between
Speaker 1: the three founders, so a large portion of their own
Speaker 1: wealth is tied up in this company, and they generally
Speaker 1: control the boards. They have institutional relationships and knowledge, and
Speaker 1: they don't want to be completely iced out and pushed
Speaker 1: to the side. There. I would have thought the founders,
Speaker 1: who uh do wield a lot of influence, would have
Speaker 1: been swayed by just the share price of Carlisle alone,
Speaker 1: which you include in your reporting. Carlisle shares have advanced
Speaker 1: more than fifty percent since Lee became Seal CEO, even
Speaker 1: including the recent sell off. That compares with a four
Speaker 1: percent gain from the time of the company's IPO back
Speaker 1: in twenty twelve to Januar, when the founders seeded control.
Speaker 1: Typically that would have been enough. And I do wonder
Speaker 1: if ultimately, longer term Carlyle is going to end up
Speaker 1: going back towards some of the things that Lee was
Speaker 1: pressing for or moving towards. I think that that is true.
Speaker 1: The stock prices had done significantly better, but compared to
Speaker 1: a black Stone or KKR Apollo, it was still really lagging.
Speaker 1: I mean, some of these other firms were up a
Speaker 1: hundred percent two percent um, and it really Carlisle really
Speaker 1: just wasn't keeping up. There's also other issues as far
Speaker 1: as fundraising gos. They just couldn't really get as much
Speaker 1: ground raising money for their new funds, their flagship private
Speaker 1: equity fund and they're seeing a lot of high profile exits,
Speaker 1: which is concerning to the founders and two investors of
Speaker 1: these you know, all of these private equity firms. They're
Speaker 1: looking at things like that when they make decisions on
Speaker 1: where to put their money. Hey, just got about fifteen seconds.
Speaker 1: But sometimes, you know, observers will say the old guard
Speaker 1: has to let the new guard find their way. Are
Speaker 1: people saying that and just very quickly. I think there's
Speaker 1: a mixed feeling going on. Careed Rubenstein and the others. No,
Speaker 1: they need to make way for you know, new leaders,
Speaker 1: but they don't want the firm to go down and flame. Alright,
Speaker 1: Heather pearl Burk, thank you so much, great reporting. Private
Speaker 1: equity reporter AP Bloomberg News on the phone in d C.
Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes. Tim Stinovic on Bloomberg Radio. All right, um,
Speaker 1: one thing we do all get a lot of his
Speaker 1: social media did have a batch of primaries around the
Speaker 1: country today. I'll make the connection with that in mind.
Speaker 1: A story in our top Tech menu in the Bloomberg
Speaker 1: checks into what TikTok is up to as it gets
Speaker 1: ready for the round of mid terms. Come to Vampire,
Speaker 1: the story by Alex brinca technology reporter for Bloomberg New
Speaker 1: She joins us this afternoon on the phone from our
Speaker 1: Los Angeles bureau. So, Alex, what is TikTok doing to
Speaker 1: try to keep its platform quote unquote safe ahead of
Speaker 1: mid terms here in the US? And I think, actually,
Speaker 1: you know what, I'm sorry, I have to just you know,
Speaker 1: ask with the context of who owns TikTok and why
Speaker 1: this is so important and all level set there. So
Speaker 1: Bite Dance is a Chinese company UM that owns TikTok,
Speaker 1: which operates here in the US. UM it's a that
Speaker 1: short form video app where UM where content can go
Speaker 1: viral in a matter of seconds, and a lot of
Speaker 1: US users are spending much of their time on these days,
Speaker 1: and so when it comes to where people are spending time,
Speaker 1: you're guaranteed to see political information, especially before US election.
Speaker 1: For this round, TikTok is doing what we've seen a
Speaker 1: lot of the UM social media companies do and basically
Speaker 1: trying to shore itself up against that kind of term.
Speaker 1: We hear a lot misleading information. UM. There are a
Speaker 1: few things specifically that UM TikTok is doing. For one,
Speaker 1: they're really leaning into this ban on political advertisements that
Speaker 1: they put in place before the election that they're continuing
Speaker 1: through UM this cycle. And specifically UM, they are banning
Speaker 1: influencers from posting paid political content. Now, in the past,
Speaker 1: influencers were UM kind of looped into this blanket ban UM,
Speaker 1: but they saw some challenges with some of that paid
Speaker 1: content UM, where organizations were paying content creators to make
Speaker 1: videos supporting political campaigns or political issues. UM. And now
Speaker 1: they are making sure that that ban is really enforced
Speaker 1: this year. They're also launching something called a kind of
Speaker 1: elections center. They're saying, look, if we see misinformation on
Speaker 1: the platform, we can redirect people that direction. Now, the
Speaker 1: last thing I'll point out that is very TikTok ESK.
Speaker 1: If you've never been on the app, when you open
Speaker 1: it up, that main page is called the four you feed, Yeah,
Speaker 1: the f hashtag f yp UM. It's the place that
Speaker 1: you know, videos go viral. It's a place that a
Speaker 1: lot of people spend their time. UM. It's also the
Speaker 1: place that you know, garners the most views on videos.
Speaker 1: For any post that anyone posts that is kind of
Speaker 1: flagged by their technology algorithms or by human moderators, if
Speaker 1: it has any misleading information, it will be pulled from
Speaker 1: the platform. But if it has also information that's not verified,
Speaker 1: it will be basically tagged to disallow it from getting
Speaker 1: on that f yp so bottom line is here no
Speaker 1: political advertisements, and they're basically trying to suppress anything that
Speaker 1: is bad info on the platform. All right. We also
Speaker 1: heard this week um Alex from Meta, you know, putting
Speaker 1: out their playbook in advance of elections. So what you're
Speaker 1: telling me is that we're all set, We're all only
Speaker 1: going to get truth, no misinformation on social media or not.
Speaker 1: But this is this is where you know, by colleague
Speaker 1: Kurt Wagner and I had a chance to chat to
Speaker 1: um metas policy boss called Nick clegg Um. He basically
Speaker 1: came out and said, look, we think we have a playbook,
Speaker 1: but that doesn't mean we're being complacent. Um, you know,
Speaker 1: there will always be folks who are posting misinformation on
Speaker 1: the platform. Carol, I will say, no, I'm sure I'm
Speaker 1: going to see some stuff that um it would not
Speaker 1: fly through the fact checkers that a lot of these
Speaker 1: companies work with. UM. That being said, you know, it's
Speaker 1: been what six years since Metta in particular has come
Speaker 1: under fire for how it hosts information and political ads
Speaker 1: on its platform. So the company says like, look, we
Speaker 1: think we have a playbook that is working from the
Speaker 1: last general election. UM. That company does allow ads, and
Speaker 1: those ads will need to be vetted. Uh. They also
Speaker 1: will not allow any changes to adds in the week
Speaker 1: prior to UM the closing of voting to make sure
Speaker 1: that they can catch anything. But you know, if I
Speaker 1: were a betting woman, I would probably guess we're to
Speaker 1: see some things pop up. Okay, So that's that's the question, Alex,
Speaker 1: And we'll have a minute left. But how is it
Speaker 1: a platform like TikTok going to verify if somebody's being
Speaker 1: paid for doing some sort of post versus just expressing
Speaker 1: their support for a certain candidate. Yeah, And their tactics
Speaker 1: here are basically to try to educate creators in advance
Speaker 1: and expect that they'll uh, you know, go along with
Speaker 1: the rules that are expected by the FTC in terms
Speaker 1: of tagging things as an ad. If they see something
Speaker 1: that's been tagged as an ad that um, you know,
Speaker 1: does have political information in it, they will take it down.
Speaker 1: But that is a point there that you know, you
Speaker 1: have to hope that content creators will also be good
Speaker 1: actors and make sure that they're following the rules that
Speaker 1: TikTok is trying to share quite a bit in advance
Speaker 1: to make sure that they can head off anything like that. Alright,
Speaker 1: great update on what's going on in the world of
Speaker 1: social media, especially when it comes to those upcoming elections
Speaker 1: here on this primary day. Alex Barenka sis Technology Report
Speaker 1: up Bloomberg News on the phone from her l A bureau.
Speaker 1: I mean politicians, right, candidates, they know how fluential and
Speaker 1: how persuasive social media can. But you're smiling. TikTok is
Speaker 1: so addictive, Carol. Just do yourself a favor. Just don't
Speaker 1: download it. I'm roc journal. Yeah, but you let me drive? No, no, no,
Speaker 1: all right, please, I want to drive. It's good question.
Speaker 1: D This is the drive to the clothes well down
Speaker 1: on Bluebird Radio. All Right, we've got about ten minutes
Speaker 1: left in today's trading session. Stocks have been bouncing around
Speaker 1: here off our highs and loads of this session, Tech
Speaker 1: the biggest underperformer. And we did see some market reactions,
Speaker 1: sending stocks a bit higher and rates a bit lower
Speaker 1: following those FED minutes. Some interpretation maybe that the FED
Speaker 1: was thinking about maybe slowing rate moves or making small
Speaker 1: are ones. But I'm reading a lot of analysis and
Speaker 1: they said, folks, the FETE is still going to continue
Speaker 1: raising rates, so just get just get used to it,
Speaker 1: all right, buckle up. Well, let's see what Rebecca Corbyn
Speaker 1: has to think about this. She's founder and CEO of
Speaker 1: Corbin Advisors. She joined us on the phone from Farmington, Connecticut. Rebecca,
Speaker 1: it's good to have you back with us. How are you.
Speaker 1: I'm doing great, Thank you for having me and have
Speaker 1: the August. This August is a little bit busier than
Speaker 1: last year, which is an indication of nuts. What's happening
Speaker 1: on Walster. It doesn't seem like everyone's on vacation, right, No,
Speaker 1: it does not. Yeah, it's a lot going on here,
Speaker 1: all right. So having said that, there does seem to
Speaker 1: be continued even though we've seen the markets trade down
Speaker 1: after several consecutive days it was a four day up
Speaker 1: dates or the it's the first down day in four
Speaker 1: that we've seen on the S and P five hundred.
Speaker 1: So I do wonder do you think some of the
Speaker 1: enthusiasm that we're seeing, certainly on the equity trade makes sense. Listen,
Speaker 1: I think if you look at what's been happening in
Speaker 1: the second quarter UM and the gains that we've made
Speaker 1: after the first quarter and the concern you know, investors
Speaker 1: are starting to come to terms with, Hey, we're in
Speaker 1: this and this is not going to be necessarily short term,
Speaker 1: and we're going to continue to see fallout as this
Speaker 1: economic downturn wends its way through the different sectors. Well,
Speaker 1: how long is it being most pronounced? Sorry? What was
Speaker 1: that last part? Consumer being the most pronounced? Well, let's
Speaker 1: talk a little bit about that, because we're getting a
Speaker 1: good read on the consumer, not just from you know,
Speaker 1: banks a few weeks ago, but this week from retailers
Speaker 1: like Target and Walmart and Home Depot t j X. Well,
Speaker 1: what's the takeaway that you have from not just seeing
Speaker 1: what they're reporting, but also the commerce department numbers that
Speaker 1: we got this morning. Well, I think more importantly, what
Speaker 1: we're seeing across the consumer spectrum from earnings is that
Speaker 1: companies are continuing to implement higher prices. So this whole
Speaker 1: issue with inflation and FED rate increases across consumer, industrial,
Speaker 1: basic material, those inputs. The vast majority of companies have
Speaker 1: communicated that they are continuing to raise prices the second
Speaker 1: quarter and they're still seeing higher costs. So we have
Speaker 1: yet to see the kind of wall that's going to say,
Speaker 1: you know what, no moss um, We're going to reverberate.
Speaker 1: So that's still happening. It's still was reported on the
Speaker 1: second quarter. How do you make sense of especially within
Speaker 1: the retail community this week where Walmart investors reacted pretty positively,
Speaker 1: and you know, it seemed more positive in terms of
Speaker 1: the release we got from this company. Mind you they
Speaker 1: guided us lower just about three weeks ago, But then
Speaker 1: Target comes out another retailer, and it's a little bit
Speaker 1: more of a negative tone and certainly negative investor reaction.
Speaker 1: Those are both got big exposure right to consumers. So
Speaker 1: how does how do you make sense of that? Since
Speaker 1: it sounds like overall that you're saying anything with kind
Speaker 1: of consumer exposure you maybe want to back off of. Well,
Speaker 1: actually you want to take advantage of weakness in the
Speaker 1: smart it right Walmart, Target these are tried and true
Speaker 1: companies and they will make it through whatever vicissitudes we're seeing.
Speaker 1: I think the bigger focus is that people are feeling
Speaker 1: a little bit of a reprieve in terms of consumer
Speaker 1: and gas prices have come down. That's being reflected. Restaurants
Speaker 1: are still strong, but we are going into a choppy
Speaker 1: period and we'll continue to go into a choppy period.
Speaker 1: We're going to go back to school people. There will
Speaker 1: be reality check. We're looking at um back to school
Speaker 1: retail sales and to see how how that does. But
Speaker 1: this does have a long tail, and you asked me
Speaker 1: earlier how long does it laugh. We're predicting that when
Speaker 1: companies come out in January and February of three, they
Speaker 1: will set the bar with their guidance and it will
Speaker 1: likely be conservative. Rebecca, you're a disconnect with yep. Well,
Speaker 1: I was gonna say, you do so much research about sentiment,
Speaker 1: and I want to understand how investors are feeling right
Speaker 1: now and how how you know we get it. You
Speaker 1: gave us a good idea about shumors and what we
Speaker 1: learned in recent weeks, but what's investor sentiment? Because again
Speaker 1: I go back to this idea of this puzzling rally
Speaker 1: that we've seen in a hiking cycle, and you know,
Speaker 1: with the FED that is basically said, we're going to
Speaker 1: do whatever it takes to get inflation under control. So
Speaker 1: great question one is heading into the earning season for
Speaker 1: the second quarter, investors generalists that we surveyed were very barished.
Speaker 1: We had actually had not seen the level of bearishness
Speaker 1: that we saw heading into the second quarter until when
Speaker 1: we saw it in December of which was actually a
Speaker 1: mini industrial recession. So the bearishness was at the same
Speaker 1: level as those two periods. It was better than expected
Speaker 1: in terms of earnings and revenue. Both were better than
Speaker 1: consensus for the vast majority of companies. So we're seeing
Speaker 1: a reaction from investors that says, you know what I was.
Speaker 1: I thought we were going in But we're still seeing
Speaker 1: record performance, We're still seeing record backlog. There is rans
Speaker 1: in this economy. Industrials are doing actually quite well. Um,
Speaker 1: so they're feeling a little bit better, But make no
Speaker 1: mistake about it, we get into the third quarter. That's
Speaker 1: kind of the last stop on the bus before you
Speaker 1: have to lower guidance if you see things coming, and
Speaker 1: we're already seeing continued deterioration in materials, for instance in
Speaker 1: July and August. So this is going to continue, but
Speaker 1: investors expectations were worse than what companies delivered, and they're
Speaker 1: starting to again get a tune to this process. We also,
Speaker 1: you know, heading into the second quarter, there was a
Speaker 1: lot more uncertainty with regard to the FED and the impact.
Speaker 1: We now see that impact, so it's not as big
Speaker 1: of an X factor as it was a few months
Speaker 1: ago where we didn't understand what was actually going to transpire.
Speaker 1: And I think it's great that the FED is actually
Speaker 1: coming to terms with the fact that if you raise
Speaker 1: rates as quickly and as aggressively as you do, you know,
Speaker 1: you can get ahead of yourself because these things take
Speaker 1: time six and nine months to work their way through
Speaker 1: the system. Yeah, I think that was a key point
Speaker 1: certainly of what we got from the FMC minutes that
Speaker 1: the you know, talking about this is going to take
Speaker 1: some time. We certainly see a play out in housing
Speaker 1: and mortgage. It feels like already the mortgage market, in
Speaker 1: the housing market, but it does sound like in terms
Speaker 1: of the impact of those FED rate hikes that more
Speaker 1: is to come. Hey, um, we're gonna leave it there, Rebecca.
Speaker 1: Thank you so much. Rebecca Corbyn, she's founder and CEO
Speaker 1: at the strategic consultancy and research firm Corbin Advisor, joining
Speaker 1: us on the phone from Farmington, Connecticut. Thanks for listening
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