WEBVTT - Retreat From Risk Assets Fades 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.880 Business App. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.040 or watch us live on YouTube. 0:00:27.280 --> 0:00:31.319 We're starting off strong way lead chief investment strategists at 0:00:31.600 --> 0:00:33.360 some firm I think I've heard of at Blackrock, I 0:00:33.360 --> 0:00:36.000 don't know something, or Blackrock, I think I did do something. 0:00:36.080 --> 0:00:37.960 They manage some money there. We're going to chat with 0:00:37.960 --> 0:00:39.919 her and get her thoughts on these markets. Mark Valentino, 0:00:39.960 --> 0:00:42.760 head of Business Banking at Citizens Bank, on kind of 0:00:42.760 --> 0:00:45.320 Black Friday sales and kind of how they're shaping up 0:00:45.320 --> 0:00:49.000 and how the retail sales outlook is for the holiday season. 0:00:49.240 --> 0:00:53.120 Alysta Russen, Chief Extecnive Officer l tech Ai on growing 0:00:53.120 --> 0:00:56.440 stress in the opaque private credit market. 0:00:56.120 --> 0:00:57.680 And we'll talk about that private credits to. 0:00:57.640 --> 0:00:59.960 People are a little bit concerned about what's going on 0:01:00.200 --> 0:01:03.080 on their Bloomerk Surveillance is brought to you by cone Restinc. 0:01:03.560 --> 0:01:06.240 The new office in San Francisco. Cone Resnek is expanding 0:01:06.240 --> 0:01:10.280 to help Bay Area businesses optimize performance and manager risks 0:01:10.280 --> 0:01:14.160 put their industry expertise to work for you. Whaley joins 0:01:14.240 --> 0:01:18.160 us here global chief investment Strategists at black Rock Walley. 0:01:18.240 --> 0:01:21.320 Twenty twenty five, Boys, you just look at the numbers. 0:01:21.400 --> 0:01:24.800 The top line numbers, smp F fifteen percent, the NASDAG 0:01:24.840 --> 0:01:28.360 up twenty percent, fixed income give me high single digit 0:01:28.400 --> 0:01:32.280 total returns. Pretty much a solid year for investors. How 0:01:32.280 --> 0:01:34.200 about twenty twenty six. How are you guys kind of 0:01:34.200 --> 0:01:35.399 framing twenty twenty six? 0:01:35.760 --> 0:01:39.120 We have positive risk heading into twenty twenty six. Our 0:01:39.200 --> 0:01:43.199 outlook is called pushing limits, and it's really about making 0:01:43.240 --> 0:01:46.800 sense of large numbers being talked about and what do 0:01:46.840 --> 0:01:49.520 we need to believe to justify this huge amount of 0:01:49.560 --> 0:01:50.240 AI spent. 0:01:50.640 --> 0:01:52.280 So currently, when we look at the. 0:01:52.200 --> 0:01:56.520 Incremental revenue of these big tech companies heading into twenty 0:01:56.640 --> 0:01:59.960 thirty end of this decade, they fall short of justified 0:02:00.200 --> 0:02:02.400 this huge amount of capex. You know, we're talking about 0:02:02.520 --> 0:02:07.000 credible estimates pointing to eight trillion dollars of spend by 0:02:07.080 --> 0:02:09.600 twenty thirty. Those are huge numbers. So right now, the 0:02:09.680 --> 0:02:13.240 forecast for short, but the potential of AI goes beyond 0:02:13.400 --> 0:02:17.360 existing business lines. So if we have a situation where 0:02:17.440 --> 0:02:21.240 growth breaks out from the historical two percent trend. Never 0:02:21.440 --> 0:02:24.680 happened before for sustained period, but now possible. 0:02:24.240 --> 0:02:24.880 Because of AI. 0:02:25.040 --> 0:02:27.560 And also if we have a situation where tech companies 0:02:27.680 --> 0:02:33.160 keep a good share of the additional revenues being created 0:02:33.280 --> 0:02:36.480 as tech is applied to other sectors, then the numbers 0:02:36.560 --> 0:02:38.359 can add up. But you've got to be leaving some 0:02:38.400 --> 0:02:43.320 pretty incredible and unprecedented things to justify this unprecedented amount 0:02:43.400 --> 0:02:44.119 of capex spent. 0:02:44.480 --> 0:02:47.440 I'm looking at Bloomberg mag seven total return Index up 0:02:48.040 --> 0:02:50.520 not twenty four percent so far this year? Are you 0:02:50.600 --> 0:02:54.639 expecting the same caliber of returns to continue into next year? 0:02:54.680 --> 0:02:56.680 You expect tech to be the leader as we look 0:02:56.720 --> 0:02:57.600 into twenty twenty six. 0:02:57.919 --> 0:03:02.920 I do expect concentration first before broader diffusion. When we 0:03:02.960 --> 0:03:07.040 think about the AI trade, we're talking about an environment 0:03:07.880 --> 0:03:10.600 where there is going to be more leverage, there is 0:03:10.680 --> 0:03:14.920 going to be more scrutiny over the individual company fundamentals. 0:03:14.960 --> 0:03:18.200 So if you think about the latest correction in tech 0:03:18.320 --> 0:03:22.480 and more broadly in risk assets, actually you see greater differentiation. Right. 0:03:22.520 --> 0:03:23.960 You see Alphabet doing. 0:03:23.800 --> 0:03:27.640 Better because of the model Gemini three and TPU, and 0:03:27.720 --> 0:03:30.080 you see Oracle doing a bit worse because of negative 0:03:30.080 --> 0:03:33.079 free cash flow as well as greater indebtedness, so greater 0:03:33.200 --> 0:03:38.480 differentiation concentration before broadening out. And I'm paying very close 0:03:38.520 --> 0:03:42.480 attention to if there are new revenues being created on 0:03:42.600 --> 0:03:46.320 top of existing business lines to really understand if the 0:03:46.400 --> 0:03:49.520 wrong way of AI is as big as people are hoping. 0:03:49.240 --> 0:03:53.560 For, if the AI expectations may be ahead of themselves 0:03:54.320 --> 0:03:57.120 at this stage, are you pulling back from some of 0:03:57.160 --> 0:04:00.360 those names here? Are you hedging some of that secure 0:04:00.400 --> 0:04:02.600 at this point? Are you trying to diversify away from 0:04:02.600 --> 0:04:03.120 that a little bit? 0:04:03.480 --> 0:04:06.120 Well, that's the thing. There is no place to hide. 0:04:06.200 --> 0:04:10.400 There is no proper diversification in this environment. So one 0:04:10.480 --> 0:04:13.760 of the key themes in our outlook is diversification mirage. 0:04:13.960 --> 0:04:16.960 We call it a mirage because the old diversifiers are 0:04:16.960 --> 0:04:20.599 not reliably working and this last twenty four hours of 0:04:20.640 --> 0:04:23.560 price action is case in point. So you know, we 0:04:23.600 --> 0:04:29.480 look at a seemingly mixed diversified portfolio and we think 0:04:29.520 --> 0:04:32.080 that it is a proper diversification, but that would be 0:04:32.160 --> 0:04:36.440 highly misleading because the whole market is being driven by 0:04:36.640 --> 0:04:40.320 just a handful of singular principal components and AI being one, 0:04:40.680 --> 0:04:44.560 So we can't get away from making big calls active calls, 0:04:44.560 --> 0:04:48.719 and where AI is heading towards and investment decisions made 0:04:48.760 --> 0:04:51.840 in the guise of diversification may well end up being 0:04:51.960 --> 0:04:55.120 huge active bets. So let's make those bets very intentional 0:04:55.160 --> 0:04:56.920 ones rather than unintentional ones. 0:04:57.600 --> 0:05:00.719 So when we think about AI and all the energy 0:05:00.760 --> 0:05:02.839 that's needed for this, it's going to get a lot 0:05:03.040 --> 0:05:05.719 of energy. How are you thinking about the energy sector? 0:05:06.080 --> 0:05:11.040 That is a constraint that is binding already. So as 0:05:11.040 --> 0:05:16.320 we think about the AI ambition running up against constraints, 0:05:16.360 --> 0:05:19.760 which is why we frame the outlook on pushing limits. 0:05:19.920 --> 0:05:22.640 There are three types of limits. One is energy and 0:05:22.680 --> 0:05:26.400 the physical limit, and we're running up against those limits already. 0:05:26.680 --> 0:05:29.960 One is financing limits, and right now we actually don't 0:05:30.000 --> 0:05:33.360 see that being a constraint because even though leverage is 0:05:33.440 --> 0:05:36.400 going higher and big Tech they have issued one hundred 0:05:36.640 --> 0:05:39.400 million dollars of that just the last quarter, which is 0:05:39.480 --> 0:05:42.840 higher than previous years, the starting point is very healthy, right, 0:05:42.839 --> 0:05:45.279 so there is room to leverage up. There is a 0:05:45.279 --> 0:05:48.400 feature is not a constraint at this moment. And then 0:05:48.440 --> 0:05:51.280 there is the political constraint. We're talking about impact of 0:05:51.320 --> 0:05:53.640 AI on jobs and what that means in terms of 0:05:53.839 --> 0:05:58.560 the policy response regulatory response. So these are the constraints, 0:05:58.560 --> 0:06:01.880 but right now the one that is buying is energy. 0:06:01.960 --> 0:06:05.440 So when we talk about credible estimates taking copecks focus 0:06:06.440 --> 0:06:09.400 up to AID trillion dollars by the end of the decade, 0:06:09.600 --> 0:06:12.679 the consideration for energy may well bring that back. 0:06:14.080 --> 0:06:16.440 So as we step back and think about twenty twenty six, 0:06:18.040 --> 0:06:20.240 I guess geopolitics we have to think about that a 0:06:20.279 --> 0:06:23.360 little bit. We still have an active situation in Ukraine. 0:06:23.680 --> 0:06:26.560 The Mid East has been quiet for the last several months, 0:06:26.600 --> 0:06:29.880 but still doesn't feel like that's settled by any stretched imagination. 0:06:30.000 --> 0:06:35.640 Then we have ongoing tensions between the US and China, 0:06:35.800 --> 0:06:38.360 but it seems like the markets kind of discounted all 0:06:38.400 --> 0:06:38.680 of that. 0:06:39.040 --> 0:06:40.440 I mean, is that something we need to worry about 0:06:40.440 --> 0:06:41.719 for twenty twenty. 0:06:41.320 --> 0:06:43.200 Six because it seems like a black swamt could come 0:06:43.200 --> 0:06:44.000 out of anywhere. 0:06:44.279 --> 0:06:48.240 Yeah, So we assess the impact of geopolitics on markets, 0:06:48.240 --> 0:06:53.039 we need really firmly established a transmission mechanism, right So, so far, 0:06:53.400 --> 0:06:56.719 a lot of the geopolitical flare ups have been good 0:06:56.760 --> 0:06:59.479 opportunity for market or participants to buy the deep and 0:06:59.520 --> 0:07:01.479 you look at how markets have down there has been 0:07:01.560 --> 0:07:05.960 a good strategy. So if we see the impact of 0:07:06.440 --> 0:07:12.280 a geopolitical event having a lasting effect on oil price, 0:07:12.440 --> 0:07:16.320 for example, and then feeding through to inflation, inflational expectations, 0:07:16.360 --> 0:07:20.200 not just the twelve month expectations, maybe even longer expectations, 0:07:20.240 --> 0:07:24.280 and then there is a proper feedback loop. But if 0:07:24.280 --> 0:07:27.080 we're talking about a very swift spike and then coming 0:07:27.120 --> 0:07:29.720 back down, then that's not something at least from a 0:07:29.800 --> 0:07:33.080 longer portfolio construction perspective, we bake that in. You look 0:07:33.080 --> 0:07:36.440 at geopolitical risk, premium is very flat at the moment. 0:07:37.640 --> 0:07:39.960 So when we think about geopolitics, what if you make 0:07:40.000 --> 0:07:42.800 of potential opportunities when we think about energy or defense 0:07:42.840 --> 0:07:44.480 for that matter. I mean we've been seeing a large 0:07:44.480 --> 0:07:46.680 bid in European defense. 0:07:46.920 --> 0:07:47.600 That's right. 0:07:47.720 --> 0:07:50.640 So for Europe so far this year, we have approached 0:07:51.040 --> 0:07:54.640 investing through a very selective way. We like industrials within 0:07:54.680 --> 0:07:58.080 that defense, we like utility, and we also like financials 0:07:58.400 --> 0:08:01.960 because of cheap valuations as well as its potential to 0:08:02.000 --> 0:08:04.000 be disrupted by AI. 0:08:04.120 --> 0:08:05.360 So defense as. 0:08:05.200 --> 0:08:09.840 An evergreen theme, especially given the commitment of natal countries 0:08:09.880 --> 0:08:13.040 to increase their defense spending that is structural. We think 0:08:13.040 --> 0:08:16.400 that there is definitely a place for strategic kind of 0:08:16.480 --> 0:08:19.320 allocation to this theme. But it has round out quite 0:08:19.320 --> 0:08:21.760 a lot in terms of price so far this year. 0:08:21.840 --> 0:08:25.320 So we're actually rotating within our European tactical US our 0:08:25.360 --> 0:08:29.720 location from industrials defense into healthcare as a sector that 0:08:29.800 --> 0:08:35.200 actually has great valuation opportunities as well as also open 0:08:35.280 --> 0:08:38.960 and ripe for AI disruption. But strategically, yeah, definitely we 0:08:39.000 --> 0:08:42.880 want to have exposure to that despite the geopolitical headgelines 0:08:43.200 --> 0:08:46.680 or because of geopolitical hedgelines, because the strategic direction of 0:08:46.679 --> 0:08:47.720 travel is very clear. 0:08:48.559 --> 0:08:50.959 Really, I love the black Rock offices over in London 0:08:50.960 --> 0:08:54.320 there they were right next to our old Bloomberg offices 0:08:54.400 --> 0:08:56.160 and Finsbury Circus. 0:08:56.280 --> 0:08:58.079 Now we're over Queen Victoria Street. 0:08:57.920 --> 0:09:00.600 But not too far from your new The new office 0:09:00.600 --> 0:09:02.480 a great part of town in the city of London. 0:09:03.320 --> 0:09:05.040 Love it, love it, especially around this time of year. 0:09:05.080 --> 0:09:06.320 The city of London is just awesome. 0:09:06.360 --> 0:09:09.480 Way Lee, Global, Chief Investment Strategists for black Rock, thanks 0:09:09.520 --> 0:09:10.440 so much for joining us. 0:09:10.440 --> 0:09:12.520 We appreciate it to stay with us. More from Bloomberg 0:09:12.559 --> 0:09:14.240 Surveillance coming up after this. 0:09:23.640 --> 0:09:27.240 You're listening to the Bloomberg Surveillance podcast. Catch US Live 0:09:27.320 --> 0:09:30.480 weekday afternoons from seven to ten am Eastern Listen on 0:09:30.559 --> 0:09:34.240 Applecarplay and Android Otto with the Bloomberg Business app, or 0:09:34.360 --> 0:09:35.959 watch US Live on YouTube. 0:09:36.280 --> 0:09:37.679 Meredith Whitney darkins a door here. 0:09:37.760 --> 0:09:40.840 She is the chief executive officer of Meredith Whitney Advisory Group, 0:09:40.880 --> 0:09:44.280 longtime voice on Global Wall Street. Meredith, we're kind of 0:09:44.320 --> 0:09:46.200 right in the middle of the holiday shopping season. 0:09:46.679 --> 0:09:48.760 How do you think the consumer's doing out there? 0:09:49.480 --> 0:09:53.280 Well, it seems as if the retail results have been idiosyncratic. 0:09:53.360 --> 0:09:56.160 But I can tell you what I've become very nervous 0:09:56.160 --> 0:09:58.760 about is what has powered the US economy for the 0:09:58.800 --> 0:10:00.760 last five years, which is is what I call the 0:10:00.800 --> 0:10:04.800 avocado toast generation. So it's between twenty four and thirty eight, 0:10:04.880 --> 0:10:09.120 so it's the older gen Z and the younger millennials, and. 0:10:09.920 --> 0:10:10.920 They've really hit a wall. 0:10:10.960 --> 0:10:12.760 They started hit a wall the summer, so they've been 0:10:12.840 --> 0:10:17.120 powering spending, spending at Chipotle, Sweet Greens. I mean, the 0:10:17.160 --> 0:10:19.679 idea of spending a twenty bucks for salad or a 0:10:20.400 --> 0:10:22.560 brito bowl. You don't see me in line at a Chipotle, 0:10:22.920 --> 0:10:25.600 but I'm not round bagging it, but at any rate. 0:10:26.240 --> 0:10:29.800 So the restaurant started to talk about the fact that 0:10:30.480 --> 0:10:33.559 this demographic was really struggling because of the resumption of 0:10:33.600 --> 0:10:37.319 student debts, and we went further into that, and if 0:10:37.360 --> 0:10:40.440 you look at what the avocado dost generation have, they's 0:10:40.520 --> 0:10:43.080 actually have amassed a lot of debt over the last 0:10:43.120 --> 0:10:45.520 five years. So they've got twenty eight percent of all 0:10:45.520 --> 0:10:49.559 consumer debt. They've got about three hundred dollars less or 0:10:49.600 --> 0:10:52.720 more into their spending. 0:10:52.800 --> 0:10:54.359 So we think about. 0:10:54.120 --> 0:10:58.360 COVID stimulus as being a massive stimulus impact on the consumer. 0:10:58.400 --> 0:11:01.720 It was eight hundred and fourteen billion student debt four bearance, 0:11:02.120 --> 0:11:05.600 four hundred billions, So COVID stimulus went out to one 0:11:05.679 --> 0:11:09.480 hundred and sixty five million Americans. Debt four bearans went 0:11:09.480 --> 0:11:13.520 out to fewer than forty million Americans with fifty percent 0:11:13.640 --> 0:11:18.959 of the of the spending power. So this demographic had 0:11:19.160 --> 0:11:22.600 a massive amounts of discretionary spending power and that's not 0:11:22.720 --> 0:11:26.080 going to come into the economy. And so I think 0:11:26.200 --> 0:11:30.320 you see names. I was surprised by urban outfitter being 0:11:30.360 --> 0:11:34.880 so strong because that caters to a very avocado toasty 0:11:35.200 --> 0:11:37.720 type demographic. But I think you're going to see more 0:11:37.720 --> 0:11:42.200 and more pressure throughout this year and into next because 0:11:43.240 --> 0:11:45.400 a they have got a tremendous amount of debt, they 0:11:45.400 --> 0:11:48.239 have no equity, and they have no way out. And 0:11:48.520 --> 0:11:52.640 what's going to happen is this. The Treasure Department has 0:11:52.679 --> 0:11:58.200 this top program where it's going to garnish tax refunds, 0:11:57.679 --> 0:12:03.000 and the Department of Education is aggressive on the twenty 0:12:03.040 --> 0:12:09.880 percent serious delinquent and charged off loans. They're going to 0:12:09.920 --> 0:12:11.520 start pulling this back and that's going to hurt them 0:12:11.559 --> 0:12:13.640 a lot. And obviously we know the low end is 0:12:13.720 --> 0:12:16.240 really uh is really strained. 0:12:16.800 --> 0:12:19.640 So what's the elasticity of this consumer group which I 0:12:19.679 --> 0:12:21.200 would call the Mata generation. 0:12:21.920 --> 0:12:25.920 Oh, that's avocado toast generation. I think it works, or. 0:12:25.880 --> 0:12:30.439 You call the fresh fresh coffee generation option, Yeah, it's true. 0:12:30.960 --> 0:12:35.600 The elasticity is going to come down to I don't 0:12:35.640 --> 0:12:39.160 think there's a lot of elasticity with this demographic that 0:12:39.240 --> 0:12:40.280 has so much debt. 0:12:40.559 --> 0:12:42.000 So the debt gets worse. 0:12:42.040 --> 0:12:44.960 So the student debt is the one part of the 0:12:44.960 --> 0:12:50.440 economy that has the highest delinquencies, the highest charge offs. 0:12:50.600 --> 0:12:53.600 I think that's going to bleed into auto lending because 0:12:54.840 --> 0:12:58.120 the avocadoast generation owns thirty five percent of the auto 0:12:58.120 --> 0:13:00.000 debt outstanding, So that's going to make a crowded out 0:13:00.160 --> 0:13:03.280 so you're going to see it factor in the elasticity 0:13:03.320 --> 0:13:06.320 I think is really interesting in terms of one factor. 0:13:06.760 --> 0:13:09.040 One trend that we've been tracking very closely has been 0:13:09.280 --> 0:13:12.559 home equity loan extraction and that's been the fastest growing 0:13:13.080 --> 0:13:16.480 loan category of any consumer loan category, and that started 0:13:16.520 --> 0:13:20.319 in twenty twenty the sum in Earnest the summer of 0:13:20.360 --> 0:13:24.559 twenty twenty four. And what's really interesting is historically that's 0:13:24.720 --> 0:13:27.640 home equity loan extractions have been used for home renovations, 0:13:27.840 --> 0:13:31.839 but now they're increasingly used for cash management. So since 0:13:31.960 --> 0:13:35.280 twenty twenty two, there's been over a fifty percent rise 0:13:35.520 --> 0:13:39.920 in home equity extractions use of cash management. Now that 0:13:40.120 --> 0:13:42.280 is every week we look at this, I pull it 0:13:42.280 --> 0:13:46.439 through Bloomberg and it continues to accelerate. Now it's only 0:13:46.480 --> 0:13:49.160 available for the prime market, so if you have any 0:13:49.200 --> 0:13:53.960 type of credit ding on your credit score, you can 0:13:54.120 --> 0:13:57.800 access the equity in your home. But avocado toasters by 0:13:57.840 --> 0:14:00.760 and large don't own homes, so they have no equ tap. 0:14:00.880 --> 0:14:04.160 And if they do own homes, they've got high LTVs. Right, 0:14:04.200 --> 0:14:06.320 because they have an owned homes that long, so they 0:14:06.360 --> 0:14:09.360 don't have much equity to tap. So that feeds into 0:14:09.880 --> 0:14:13.360 very little elasticity in this group. And then you think 0:14:13.400 --> 0:14:16.320 about when you look at twenty twenty six and people 0:14:16.360 --> 0:14:19.440 get excited about one beautiful bill tax refunds. 0:14:19.520 --> 0:14:20.360 Well, if you own a. 0:14:20.280 --> 0:14:24.120 Bunch of student debt, you're going to get tax refund garnishment. 0:14:24.320 --> 0:14:26.640 So I don't see it's a great question. I don't 0:14:26.680 --> 0:14:29.840 see a lot of elasticity within this group. Now that said, 0:14:29.840 --> 0:14:33.320 there's still so much money swashing through the system, but 0:14:33.400 --> 0:14:34.600 it's at the high end. 0:14:35.400 --> 0:14:38.080 You know, this case shaped economy. Meredith, Is it something 0:14:38.080 --> 0:14:39.280 that's always been out there? 0:14:39.400 --> 0:14:40.040 Is it more. 0:14:39.840 --> 0:14:41.880 Pronounced in the last ten or fifteen years? And it 0:14:41.960 --> 0:14:44.960 wasn't the pacity you think, because it just seems like 0:14:45.000 --> 0:14:47.040 it's really pronounced these days. 0:14:47.160 --> 0:14:50.880 Yeah, there's without a doubt it's gotten so much more 0:14:50.920 --> 0:14:55.400 pronounced in the last really since the Great Financial crisis. 0:14:55.480 --> 0:14:59.280 And you know, it's said by probably the most esteem 0:14:59.280 --> 0:15:02.880 person in this bill that you have you can have 0:15:03.720 --> 0:15:07.880 you know wage, you know, you can have income disparities, 0:15:07.880 --> 0:15:12.160 but when it reaches a breaking point, it's not good 0:15:12.200 --> 0:15:14.600 for society and I think at this point it's reached 0:15:15.200 --> 0:15:20.120 a breaking point. So the BA puts out numbers whereby 0:15:20.200 --> 0:15:23.160 you see who controls what amount of spending over the 0:15:23.160 --> 0:15:25.920 course of the years. And I've been going back to 0:15:28.400 --> 0:15:32.160 early two thousands and you can see in terms of 0:15:32.200 --> 0:15:35.280 spending how much the low end contributes, how much the 0:15:35.320 --> 0:15:38.320 high end contributes, and that's just been diverging. So the 0:15:38.320 --> 0:15:41.760 most recent number shows the bottom forty percent contributes only 0:15:41.800 --> 0:15:45.000 twenty two percent of spending, whereas the top forty contributes 0:15:45.080 --> 0:15:46.080 sixty two percent. 0:15:46.320 --> 0:15:47.880 That was much more. 0:15:48.920 --> 0:15:51.960 Uh, that wasn't equal, but it was much more even 0:15:52.800 --> 0:15:54.880 let's say seventeen years ago. 0:15:55.640 --> 0:15:57.720 So in terms of the lower end consumer, where is 0:15:57.760 --> 0:16:00.239 the majority of their money going? I was hearing anecdotally 0:16:00.280 --> 0:16:03.440 even during Black Friday sales, people were actually purchasing necessities. 0:16:03.600 --> 0:16:03.800 Yeah. 0:16:03.920 --> 0:16:08.480 Yeah, So I think so tomorrow and Thursday, the Dollar 0:16:08.480 --> 0:16:10.560 stores report, and I think that'll be a really good 0:16:10.560 --> 0:16:14.560 insight into the lower end. Now, Walmart is not the 0:16:14.800 --> 0:16:17.560 lower end. Walmart is everybody in the shopping experience is 0:16:17.680 --> 0:16:21.200 just so spectacular that more and more people go to Walmart. 0:16:21.280 --> 0:16:23.760 But the dollar store it's not exactly the case. But 0:16:23.760 --> 0:16:25.920 I always say people drive to Walmart and walk to 0:16:25.960 --> 0:16:29.920 the dollar stores, and the dollar stores may benefit because 0:16:29.960 --> 0:16:32.400 you've had consolidation at Party City, and some of the 0:16:32.440 --> 0:16:35.760 things you may go and get, you know, wrapping paper 0:16:36.080 --> 0:16:41.920 and birthday items. But on essentials, it's really catch as 0:16:42.000 --> 0:16:44.440 catch can, and I think surely people are going to 0:16:44.440 --> 0:16:48.240 be buying basic essentials. I think what's also interesting is 0:16:49.240 --> 0:16:52.880 because chains like McDonald's have offered more value and really 0:16:52.880 --> 0:16:55.680 captured the value meal, people are eating more out more 0:16:55.760 --> 0:16:59.000 because it's cheaper to eat out than homes, and that 0:16:59.040 --> 0:16:59.720 always shifts. 0:16:59.840 --> 0:17:00.400 For a while. 0:17:00.440 --> 0:17:03.040 When they were going away from the value value meals, 0:17:03.040 --> 0:17:06.280 people were buying more essentials. It all depends, but I 0:17:06.280 --> 0:17:09.840 think it's it is clear that over fifty two percent 0:17:09.880 --> 0:17:13.439 of households, probably a lot over fifty two percent of 0:17:13.440 --> 0:17:16.200 households are barely getting. 0:17:15.880 --> 0:17:18.240 By Meredith, thank you so much for joining us. 0:17:18.280 --> 0:17:21.400 Meredith Whitney, Chief executive Officer of Meredith Whitney Advisory Group 0:17:21.440 --> 0:17:24.280 and Lawrenceville Class of eighty seven. 0:17:23.520 --> 0:17:25.080 Eighty eight, first class of girls to. 0:17:25.119 --> 0:17:28.000 Drive class girls to graduate from the Lawrenceville School for 0:17:28.040 --> 0:17:30.399 like two hundred years as all boys. It was after 0:17:30.480 --> 0:17:33.439 my time, unfortunately, but it was a great thing because 0:17:33.560 --> 0:17:35.239 it was a one of the greatest things that ever 0:17:35.240 --> 0:17:38.080 happened to lawrencevill schools having girls comes in because the 0:17:38.119 --> 0:17:40.640 boys dress better, they sit up at their desk, They're 0:17:40.680 --> 0:17:42.000 no more screwing around. 0:17:42.000 --> 0:17:44.399 Because the girls came in, they were smarter than us. 0:17:44.600 --> 0:17:45.600 Positive influence. 0:17:45.720 --> 0:17:48.199 It was unbelievable. They lifted the school dramatic. It's the 0:17:48.200 --> 0:17:50.760 best decision of schools ever made. And I have to 0:17:50.840 --> 0:17:53.800 admit Lawrencell did it the right way. They invested in 0:17:53.840 --> 0:17:56.320 the school before the girls got there, so when the 0:17:56.359 --> 0:17:58.080 girls got there they felt like I think they felt 0:17:58.119 --> 0:18:00.360 like they were part of the team there at. 0:18:00.280 --> 0:18:03.240 The Carlisle Hotel. It was amazing and they were so welcoming. 0:18:03.320 --> 0:18:08.320 It was just an incredible educational experience. And I loved 0:18:08.320 --> 0:18:10.679 it because if someone had a problem with someone as 0:18:10.720 --> 0:18:11.440 a pylon. 0:18:11.280 --> 0:18:13.280 Yep, exactly right. Aaron Whitney, thank you so much. We 0:18:13.320 --> 0:18:16.000 appreciate it. Stay with us. More from Bloomberg Surveillance coming 0:18:16.080 --> 0:18:17.000 up after this. 0:18:26.400 --> 0:18:30.000 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:18:30.040 --> 0:18:33.199 weekday afternoons from seven to ten am Eastern Listen on 0:18:33.280 --> 0:18:36.960 Applecarplay and Android Auto with the Bloomberg Business app or 0:18:37.119 --> 0:18:38.600 watch us live on YouTube. 0:18:38.760 --> 0:18:42.080 Cameron Dawson joins us here in studio. Cameron, we've had 0:18:42.080 --> 0:18:44.040 a little bit of waffling in the market over the 0:18:44.119 --> 0:18:46.280 last several weeks. Is that just a little bit of 0:18:47.280 --> 0:18:49.040 I don't know, We've had such a great run coming 0:18:49.040 --> 0:18:51.680 off the April lows that maybe we're just stepping back 0:18:51.720 --> 0:18:54.639 and reassessing here, or we have something different going on 0:18:54.680 --> 0:18:54.919 out there. 0:18:54.960 --> 0:18:57.520 Do you think we would categorize this as a very 0:18:57.600 --> 0:19:01.439 healthy digestion simply because we saw such a powerful rally, 0:19:01.480 --> 0:19:04.680 mostly in September and October in some of the most 0:19:04.680 --> 0:19:08.280 speculative portions of the market. So to see some rationality 0:19:08.320 --> 0:19:10.760 come back in, we would see it as a good thing. 0:19:10.920 --> 0:19:12.320 The reality is that you. 0:19:12.320 --> 0:19:17.480 Are still rising GDP forecasts, you're still increasing EPs forecasts, 0:19:17.520 --> 0:19:19.840 which would tell us that this kind of correction and 0:19:19.920 --> 0:19:23.080 churn is more short and shallow, versus something that's deeper 0:19:23.160 --> 0:19:25.000 and more protracted, which would come. 0:19:24.840 --> 0:19:27.760 If you were cutting forecasts. So, of course we've just 0:19:27.880 --> 0:19:31.040 entered December. I'm really stopping from saying ho ho ho. 0:19:31.280 --> 0:19:33.320 But we always talked about the Santa Claus rally, right, 0:19:33.359 --> 0:19:35.600 and this usually happens in the back half of December 0:19:35.760 --> 0:19:37.360 when we see a rally into year end. 0:19:37.720 --> 0:19:39.040 How are you thinking about that right now? 0:19:39.119 --> 0:19:40.880 Of course it is December second and we are seeing 0:19:40.880 --> 0:19:42.400 some shakiness, But what's your view. 0:19:42.560 --> 0:19:44.840 Yeah, we've been thinking that if there was one thing 0:19:44.920 --> 0:19:47.159 that could bring Santa Claus to town, it would be 0:19:47.200 --> 0:19:49.879 positioning and the fact that if you look at things 0:19:49.920 --> 0:19:53.600 like the Deutsche Bank Consolidated Positioning Index, it's still just 0:19:53.880 --> 0:19:57.679 right below neutral and even discretionary investors are only in 0:19:57.720 --> 0:19:59.160 the twenty six percentile. 0:19:59.280 --> 0:20:01.960 So what's the consolidated positioning thing? What does that mean? 0:20:02.160 --> 0:20:04.560 It's a Deutsche Bank index, and it's been very very 0:20:04.600 --> 0:20:09.040 helpful in understanding when institutional investors are either all in 0:20:09.080 --> 0:20:11.280 the market or very short. It's one of the things 0:20:11.320 --> 0:20:13.879 that since the April lows, it actually got down to 0:20:13.920 --> 0:20:16.879 the first percentile. So we've been making the argument since 0:20:16.920 --> 0:20:20.360 that time that as long as investors were underweight this market, 0:20:20.480 --> 0:20:23.159 that dips would be bought because people would need to 0:20:23.280 --> 0:20:26.480 chase into into the strength. And so that is the 0:20:26.520 --> 0:20:29.240 setup into your end, which is that the chase could 0:20:29.280 --> 0:20:32.439 be on mostly because you also have the backdrop that 0:20:32.560 --> 0:20:35.399 EPs forecasts are still going up, so you have a 0:20:35.440 --> 0:20:38.000 fundamental reason for people to get longer this market. 0:20:38.760 --> 0:20:40.679 What about as we talk about dip buying, how are 0:20:40.720 --> 0:20:42.960 you thinking about retail traders right now in this environment? 0:20:43.160 --> 0:20:46.560 That's an incredibly different story. Retail investors are all in. 0:20:46.600 --> 0:20:50.360 If you look at the AAII allocation, it's at seventy 0:20:50.400 --> 0:20:51.360 and a half percent. 0:20:51.760 --> 0:20:53.520 That's the peak that we got to back in. 0:20:53.440 --> 0:20:58.360 Twenty twenty one, twenty eighteen, twenty twenty four, all times 0:20:58.400 --> 0:21:01.879 that were then followed by more market kind of weakness. 0:21:02.119 --> 0:21:04.639 You've also seen a lot of growth in finram margin 0:21:04.720 --> 0:21:07.399