WEBVTT - Fed Won't Have Your Back, Salient's Hunt Says 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.360 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well, 0:00:32.360 --> 0:00:35.960 what's real about this market is that many investors have 0:00:36.200 --> 0:00:40.280 really neglected to get in on the advance in share prices. 0:00:40.440 --> 0:00:43.320 But here to tell us perhaps why is Ben Hunt. 0:00:43.360 --> 0:00:46.520 He is the chief investment strategist for Salient and they're 0:00:46.520 --> 0:00:49.320 based in Houston, but he joins us here in our studio. 0:00:49.360 --> 0:00:51.159 Thanks very much for being here. Been great to be here, 0:00:51.159 --> 0:00:53.760 Thanks for having me. Maybe you can sort of unpack 0:00:54.760 --> 0:00:57.600 my very short description of what is going on. This 0:00:57.680 --> 0:01:01.480 is a rally in stocks, dows at a record today 0:01:01.800 --> 0:01:06.160 SMP two. Uh. No one likes this rally somehow? What? Why? 0:01:06.240 --> 0:01:09.000 Why is that there's no feeling of exuberance? Is there? No, 0:01:09.120 --> 0:01:11.640 there's no feeling of exuberance, And I'll tell you why. 0:01:11.680 --> 0:01:15.920 It's It would be as if you had a housing 0:01:15.959 --> 0:01:19.880 market that was just going gangbusters. And an all time 0:01:20.000 --> 0:01:23.360 high and housing prices and housing activity, and yet real 0:01:23.480 --> 0:01:26.080 estate agents were having a miserable time. But that's the 0:01:26.120 --> 0:01:29.080 situation we have now because we have the markets at 0:01:29.080 --> 0:01:33.080 all time highs. And yet and yet anyone who's been 0:01:33.080 --> 0:01:36.600 in this business for really more than a nanosecond doesn't 0:01:36.880 --> 0:01:39.280 trust it. They don't like it. Why not because it 0:01:39.319 --> 0:01:43.360 doesn't depend on fundamental factors, right, The plain truth of 0:01:43.360 --> 0:01:47.040 the matter is that fundamentals right, what what I'll call 0:01:47.160 --> 0:01:51.520 stock picking, buying good stuff and avoiding the bad stuff. 0:01:51.720 --> 0:01:54.680 That hasn't worked for eight years. It hasn't worked since 0:01:54.720 --> 0:01:58.280 March of two thousand and nine, when the when the Feds. 0:01:58.400 --> 0:02:00.440 When you say it hasn't worked, and what has it 0:02:00.520 --> 0:02:05.280 not worked? I mean because you think about companies like Facebook, like, uh, 0:02:05.640 --> 0:02:08.200 you know, I pick a Microsoft for example. I mean, 0:02:08.680 --> 0:02:12.680 there are companies that have returned. But no, No, My 0:02:12.760 --> 0:02:15.960 point is that everything is up right. So the SNP 0:02:16.280 --> 0:02:19.240 has tripled over the last eight years. But if you 0:02:19.280 --> 0:02:22.119 look at you know, you can the bad with the good, 0:02:22.280 --> 0:02:24.960 the bad with the good, right, because this this massive 0:02:25.000 --> 0:02:27.799 amount of buying that's been going on right right now, 0:02:28.160 --> 0:02:31.320 Exchange traded funds that are typically packed with not just 0:02:31.440 --> 0:02:33.760 one stock obviously. Well, well, well that's true. Let me 0:02:33.840 --> 0:02:35.480 let me let me come back on the whole et 0:02:35.600 --> 0:02:37.600 F question, because they're there there. I think there are 0:02:37.600 --> 0:02:41.720 two main factors here that make this such an unloved market. 0:02:42.360 --> 0:02:46.000 And it's an unloved market by stock pickers because against 0:02:46.000 --> 0:02:48.680 stock picking hasn't worked. Trying to pick the good from 0:02:48.720 --> 0:02:51.760 the bad on what we've all been trained to believe 0:02:51.840 --> 0:02:54.440 should be the deciding factors between the good and the bad. 0:02:55.360 --> 0:02:58.400 That hasn't worked right. It used to work, It really 0:02:58.440 --> 0:03:00.360 did right, So you can look at all these actors 0:03:00.400 --> 0:03:03.640 like quality and value and the like. It it was 0:03:03.680 --> 0:03:06.720 able to you were able to to to pick one 0:03:06.720 --> 0:03:09.240 set of stocks avoid another set of stocks. That doesn't 0:03:09.240 --> 0:03:12.080 work when everything goes up together. And that's been that 0:03:12.480 --> 0:03:15.120 rising tide that lifts all boats. That's come from this 0:03:15.320 --> 0:03:19.799 massive wall of money that central banks have plunged into markets. 0:03:19.800 --> 0:03:24.000 About fourteen trillion dollars that's how much the central bank 0:03:24.639 --> 0:03:27.720 balance sheets are today, and they're adding about two trillion 0:03:27.760 --> 0:03:30.720 dollars a year, so it's it's a massive amount of 0:03:30.760 --> 0:03:34.600 money now. But here's the thing. Something changed last Wednesday 0:03:34.720 --> 0:03:38.040 with the fat announcement. What what we're really seeing is 0:03:38.080 --> 0:03:40.240 that the FED is changing and I'll use a ten 0:03:40.280 --> 0:03:44.600 dollar word, their reaction function. And basically what that means 0:03:44.640 --> 0:03:46.680 is the FED going forward. I don't think they're going 0:03:46.720 --> 0:03:48.920 to be your best friend like they have been for 0:03:48.960 --> 0:03:52.080 the past eight years. What leads you to believe that 0:03:52.160 --> 0:03:55.480 just because they might raise rates what two maybe three times? Well, 0:03:55.480 --> 0:03:58.920 it's it's it's a it's a whole different, uh way 0:03:58.920 --> 0:04:00.640 of looking at the world. And that's what I mean 0:04:00.640 --> 0:04:04.640 by this, this this economist phrase, right, reaction function? What what? 0:04:04.640 --> 0:04:07.280 What does that mean? It means that what sort of 0:04:07.520 --> 0:04:10.280 data is the FED looking at? What do they say 0:04:10.320 --> 0:04:12.880 that they're looking at, and how do they react that 0:04:12.960 --> 0:04:15.720 new data? So what we've had so far this year 0:04:15.800 --> 0:04:19.600 is actually pretty not so good data from what they 0:04:19.640 --> 0:04:24.760 typically look at, things like inflation, things like industrial production, 0:04:25.200 --> 0:04:28.760 all those have been pretty pretty not so good. Right, 0:04:28.920 --> 0:04:31.320 Employment is good though, This is the thing, and this 0:04:31.400 --> 0:04:33.839 is this is the shift, Right, So the shift is 0:04:33.880 --> 0:04:37.520 now really focused on the unemployment rate. The shift is 0:04:37.560 --> 0:04:41.520 really focused on the potential for wage inflation. And so 0:04:41.560 --> 0:04:45.080 this is why the FED gave a very hawkish talk, 0:04:46.080 --> 0:04:48.040 uh not just in what they announced, but then in 0:04:48.080 --> 0:04:51.800 the press conference afterwards. So what what I'm saying is 0:04:51.880 --> 0:04:55.040 that this this, this pattern that we've been so well 0:04:55.080 --> 0:04:58.599 trained to respond to over the last eight years, of 0:04:58.640 --> 0:05:00.599 the FED and the other Central b is doing more 0:05:00.600 --> 0:05:04.359 and more and more, that pattern shifts has shifted, and 0:05:04.480 --> 0:05:09.040 it's it's look, this this is what always so how 0:05:09.520 --> 0:05:10.800 and I want to give you the time to do this. 0:05:11.320 --> 0:05:15.080 It explained how investors should shift their thinking in order 0:05:15.120 --> 0:05:18.679 to accommodate this situation well to to respects. The first 0:05:18.720 --> 0:05:20.560 is that that the FED is not going to have 0:05:20.600 --> 0:05:23.320 your back anymore in the way that it has. So 0:05:23.480 --> 0:05:26.559 what we've we've been really well trained over the last 0:05:26.600 --> 0:05:30.840 eight years, and whenever there's some sort of scary moment, 0:05:31.120 --> 0:05:33.880 right then the response has always been, oh, the FED 0:05:33.920 --> 0:05:38.040 will do more, they'll buy more, they will lower interest rates. 0:05:38.520 --> 0:05:42.480 If it's not here, maybe it's the ECB. So I'm 0:05:42.480 --> 0:05:45.799 saying that's changed. What's the second thing? Give you thirty 0:05:45.839 --> 0:05:49.839 seconds there. So the second thing is this, when everything 0:05:49.920 --> 0:05:55.800 was going up together, stock picking, active management didn't matter, right, 0:05:55.839 --> 0:05:57.839 and so that's why you saw all this money go 0:05:57.960 --> 0:06:02.360 away from i'll call ittively managed mutual funds into e 0:06:02.480 --> 0:06:04.799 t s and the like, because it really didn't matter. 0:06:05.320 --> 0:06:08.640 When this rolls over with the the fat not being 0:06:08.680 --> 0:06:11.800 your best friend, it matters again, and it's just at 0:06:11.800 --> 0:06:16.599 the moment of maximum capitulation both by practitioners and investors 0:06:16.600 --> 0:06:18.720 here in this market. I want to thank you very 0:06:18.760 --> 0:06:21.680 much for your insight. Very interesting. Ben Hunt is the 0:06:21.880 --> 0:06:27.080 chief investment strategist for Salient. They are based in Houston, Texas, 0:06:27.320 --> 0:06:31.120 and you can follow a Ben on Twitter at epsilon 0:06:31.640 --> 0:06:35.159 Theory and you'll be able to find out exactly all 0:06:35.200 --> 0:06:37.279 the details about how that theory is put together and 0:06:37.279 --> 0:06:41.440 how it applies to professional investing. Well done, Thanks very much, 0:06:41.480 --> 0:06:55.640 Ben Hunt. I want to bring in Stephen Gandal. He 0:06:55.839 --> 0:06:59.760 is a columnist for Bloomberg gad fly covering equity markets. 0:07:00.120 --> 0:07:03.440 He can be followed on Twitter at Stephen Gandal g 0:07:03.600 --> 0:07:06.440 A M. D. E. L. Alright, so tell us, Mr 0:07:06.480 --> 0:07:10.480 gad flyer, what about this deal that Amazon taking over 0:07:10.680 --> 0:07:14.840 the Whole Foods. What effect do you believe that that 0:07:15.000 --> 0:07:19.280 has on the grocery store industry? But I want you 0:07:19.360 --> 0:07:21.640 to see if you can connect that with this initial 0:07:21.680 --> 0:07:25.040 public offering that we've been speaking about Blue Apron, which 0:07:25.120 --> 0:07:30.800 is the prepared recipe, base delivery, cook at home food business. 0:07:31.320 --> 0:07:33.120 So clearly market thinks it's gonna have a lot of 0:07:33.120 --> 0:07:37.640 effect on the grocery business. All the stocks fell uh 0:07:38.000 --> 0:07:40.160 if you look at it, and and and so some 0:07:40.240 --> 0:07:43.440 people use that to bridge to say that maybe the 0:07:43.480 --> 0:07:46.440 government's gonna look at this anti trust if if investors 0:07:46.440 --> 0:07:49.360 are so worried about Kroger's and Safe Supervalue and some 0:07:49.400 --> 0:07:51.880 of the other ones. But I don't think that's really case. 0:07:51.920 --> 0:07:54.840 It's very It's relatively small. The the in terms of 0:07:54.840 --> 0:07:58.960 sixteen billion. I think in terms of sales uh food 0:07:59.280 --> 0:08:01.840 food right right have eight hundred billion in the grocery 0:08:01.880 --> 0:08:05.920 business and billion for Amazon at a twollions for Amazon. 0:08:06.040 --> 0:08:08.920 But Amazon has eight billion in the in the grocery business. 0:08:08.960 --> 0:08:11.560 So it's still small. It's a bigger portion of the 0:08:11.600 --> 0:08:16.440 online grocery online business. But because that's because you have 0:08:16.520 --> 0:08:20.040 to if you broadly define what Amazon, because Amazon sells 0:08:20.040 --> 0:08:22.440 everything online. If you say everything that could show up 0:08:22.440 --> 0:08:25.640 in a grocery store, called that Amazon's online grocery business, 0:08:25.640 --> 0:08:28.040 that's a lot of stuff that maybe isn't they've never 0:08:28.040 --> 0:08:30.280 really thought of. It's not Amazon Fresh, they've really ever 0:08:30.360 --> 0:08:33.560 thought of that as kind of grocery delivery. So but 0:08:33.960 --> 0:08:36.920 clearly the the market is concerned about that. I'm not 0:08:36.960 --> 0:08:40.760 sure how concerned they should be about in what way 0:08:40.960 --> 0:08:44.319 the stocks all felt, I mean the competing groceries, the 0:08:44.320 --> 0:08:46.640 competing grocer stores right, a little bit up today, but okay, yeah, 0:08:46.720 --> 0:08:49.560 a little rebound on let's say Krogra for example, right exactly. 0:08:49.880 --> 0:08:53.319 So for for Blue Apron, this comes at a very 0:08:53.320 --> 0:08:55.320 bad time, right, because they're trying to price their I 0:08:55.360 --> 0:08:57.640 p O. You can imagine that Whole Foods would do 0:08:57.679 --> 0:09:01.040 a service of whole meals where a customers would get 0:09:01.040 --> 0:09:03.960 free delivery, and that is uh and and also Whole 0:09:04.000 --> 0:09:08.040 Foods is seen as a premium fresh food brand. So 0:09:08.080 --> 0:09:11.160 you can see there's a big negative for for Blue Apron. 0:09:12.080 --> 0:09:14.280 I keep thinking of one word, and I don't know 0:09:14.320 --> 0:09:16.480 whether it should be one word, but it's called peepot. 0:09:17.120 --> 0:09:21.959 Remember peepod. Yeah, well, originally it was a victim of 0:09:22.000 --> 0:09:25.840 the dot com bust. There was an operation that was 0:09:25.920 --> 0:09:29.400 designed to deliver food to your home in just this manner. 0:09:29.920 --> 0:09:31.760 And well I think peopot still around. There was a 0:09:32.120 --> 0:09:34.319 web in well they have a new a new version 0:09:34.320 --> 0:09:37.400 of anyway, The point being that what has changed in 0:09:37.440 --> 0:09:40.440 the food preparation and delivery business that makes this a 0:09:40.480 --> 0:09:44.640 good business now, whereas let's say, seventeen years ago, it 0:09:44.760 --> 0:09:47.760 wasn't such a good business. I'm not sure. I mean 0:09:47.800 --> 0:09:50.480 Amazon was first of all, Whole Foods did not think 0:09:50.480 --> 0:09:52.200 this was a good business. They weren't in it. They 0:09:52.240 --> 0:09:55.360 partnered with instant Cart, so they said, you know, we'll 0:09:55.400 --> 0:09:56.880 let someone else kind of do this part of the busines. 0:09:56.880 --> 0:10:00.120 Instat Cart is a delivery another delivery service that it 0:10:00.200 --> 0:10:05.040 or two uh Amazon Fresh or what people think Amazon's 0:10:05.040 --> 0:10:06.679 gonna do with Whole Foods. So hope it said they 0:10:06.880 --> 0:10:09.079 didn't really want to be in this business and and 0:10:09.240 --> 0:10:12.360 Amazon had trouble getting into it. I mean they they 0:10:12.400 --> 0:10:14.480 they have kind of dabbled in it for a few 0:10:14.520 --> 0:10:16.679 years and then kind of decided, I guess with this 0:10:16.720 --> 0:10:19.679 that couldn't do it on their own. Blue Apron has 0:10:19.720 --> 0:10:21.680 made the case of this is a really good business, 0:10:22.040 --> 0:10:24.559 but they haven't really shown that it can be. I mean, 0:10:24.840 --> 0:10:26.920 the idea with the commerces that it can bend the 0:10:26.960 --> 0:10:29.160 cost structure, right, you don't have to have stores, you 0:10:29.160 --> 0:10:30.960 have to distribution. We've done in their short stories. You 0:10:31.000 --> 0:10:33.560 can be a lot more profitable. But that doesn't really 0:10:33.600 --> 0:10:36.560 the case in in groceries because the inventor you have 0:10:36.640 --> 0:10:39.600 goes bad. Right, the main problem with the grocery store 0:10:39.800 --> 0:10:43.160 is that your food is always spoiling. And and Amazon 0:10:43.240 --> 0:10:45.080 or Blue Apron sorry, hasn't been able to show that 0:10:45.080 --> 0:10:50.280 they can hold lower inventory than their traditional grocer. Right. 0:10:50.320 --> 0:10:52.280 Their inventory is going up, has been going up, it 0:10:52.280 --> 0:10:55.920 hasn't been as a presentage of and spoilage costs have 0:10:55.960 --> 0:11:00.199 been going up. So it's not clear that, uh, when 0:11:00.200 --> 0:11:02.640 it comes to grocery business, the e commerce is really 0:11:02.640 --> 0:11:07.400 a better business model. So having said that, what makes 0:11:07.840 --> 0:11:11.000 Amazon dot Com think? Do you believe that this is 0:11:11.120 --> 0:11:13.880 a growth business or is it just to take more 0:11:13.920 --> 0:11:16.400 market share? And then you know, you'll read a recipe 0:11:16.400 --> 0:11:19.320 in the Washington Post, which is owned by Jeff Bezos, 0:11:19.400 --> 0:11:23.320 and you'll be able to order it through some app 0:11:23.400 --> 0:11:26.560 that will automatically connect you with content. I mean, all 0:11:26.600 --> 0:11:29.880 these marketing options, right, I Mean, one thing you could 0:11:29.880 --> 0:11:32.040 say is just this is a bigger test. You know, 0:11:32.120 --> 0:11:34.880 He's it's not much money for Amazon, as you said that, 0:11:35.400 --> 0:11:37.320 in terms of the market kept, it's not very big. 0:11:37.559 --> 0:11:40.480 So they're just they're doing another test. They tried with 0:11:40.600 --> 0:11:42.360 on their own for a test. This is a bigger one. 0:11:42.600 --> 0:11:44.000 So that's one way to look at the other way 0:11:44.040 --> 0:11:45.920 look at it, I would think is the play is 0:11:45.960 --> 0:11:47.679 that Amazon just wants to be more and more part 0:11:47.720 --> 0:11:49.280 of your life. Right you wake up? I wake up 0:11:49.280 --> 0:11:52.679 every morning and say Alexa, good morning. Right, And so 0:11:52.840 --> 0:11:55.400 if I'm getting my groceries from Amazon to even if 0:11:55.400 --> 0:11:57.360 it's not producing a lot of profits for them, you 0:11:57.400 --> 0:11:59.839 can see how they want to continue to integrate and 0:12:00.040 --> 0:12:02.160 is on into your daily life. And if you get 0:12:02.200 --> 0:12:03.960 your food from Amazon, that's a big part of it. 0:12:04.320 --> 0:12:06.839 Do you think that there's a greater risk of a 0:12:06.880 --> 0:12:11.199 food delivery company versus a restaurant company? And I'm thinking 0:12:11.240 --> 0:12:15.160 about the food scare that took place with Chipultle over 0:12:15.200 --> 0:12:17.880 the last couple of years and how that really knocked 0:12:17.920 --> 0:12:20.880 their stock and caused the whole bunch of problems for 0:12:20.920 --> 0:12:23.600 the company that they are still struggling with. I think 0:12:23.679 --> 0:12:26.720 whenever you're trying to do fresh on a mass scale, 0:12:27.320 --> 0:12:29.880 uh and again Blue Apron, if you look at them, 0:12:30.080 --> 0:12:33.079 they've had inventory issues, problems trying to get the food 0:12:33.320 --> 0:12:37.079 fast enough to um consumers before it spoils. I think 0:12:37.120 --> 0:12:39.240 you're you're you're going to run into this problem the 0:12:39.280 --> 0:12:40.959 same way Bold they ran into the problem. So yeah, 0:12:40.960 --> 0:12:43.880 I think it's an issue, and I think if you again, 0:12:44.679 --> 0:12:46.880 the Amazon deal for Whole Foods comes at a bad 0:12:46.920 --> 0:12:51.000 time for the Blue Apron because Blue Apron, it's supposed 0:12:51.040 --> 0:12:53.320 to have a higher profit margins, so they're they're multiple 0:12:53.400 --> 0:12:56.000 is supposed to be a premium, but they have about 0:12:56.040 --> 0:12:59.120 the same profit margins as Whole Foods, and Amazon's only 0:12:59.160 --> 0:13:01.160 paying is paying like a little bit less than one 0:13:01.160 --> 0:13:03.959 time sales. Blue Apron today announcing their I p O. 0:13:04.200 --> 0:13:06.480 They want to go in about four times sales right 0:13:06.559 --> 0:13:09.679 that they really have to uh and some of that 0:13:09.760 --> 0:13:13.040 because the Blue Aprons construct uh sorry growth, but they 0:13:13.080 --> 0:13:14.800 really have to ben that cross structure and show they can, 0:13:14.840 --> 0:13:17.680 which they haven't to say that we're worth four times 0:13:17.679 --> 0:13:21.079 whereas Whole Foods only with less than one. But I'm 0:13:21.120 --> 0:13:23.760 just wondering if you there's a Devil's Advocate position to take, 0:13:23.760 --> 0:13:25.640 which is that this is actually a good thing for 0:13:25.720 --> 0:13:29.920 Blue Apron because it confirms that there is big money 0:13:29.960 --> 0:13:34.079 behind the food delivery business, and Whole Foods of course 0:13:34.160 --> 0:13:37.240 comes with its store footprint, which something that blue Apron 0:13:37.280 --> 0:13:40.559 doesn't have is either a plus or a minus. I 0:13:40.600 --> 0:13:43.720 agree there is some validation to it, but there's validation 0:13:43.760 --> 0:13:46.800 at a quarter of the price, and with that validation 0:13:46.840 --> 0:13:50.200 comes a very big competitor after you. Yeah, and just 0:13:50.240 --> 0:13:53.280 want to have you tried any of these home delivery 0:13:53.720 --> 0:13:57.440 fresh Direct in New York. I sort of like it 0:13:57.440 --> 0:14:00.000 in a lot of boxes, like so, so you lose 0:14:00.080 --> 0:14:03.319 is the time of shopping at the store, but you 0:14:03.480 --> 0:14:05.480 um or you don't have that time, but you do 0:14:05.520 --> 0:14:08.080 have the time of cutting up boxes and uh, at 0:14:08.160 --> 0:14:10.959 least in New York City, uh, tying together so you 0:14:10.960 --> 0:14:14.280 can get the guardsman to take them away. Well, well done, 0:14:14.320 --> 0:14:17.200 thank you, and good for you for being so uh 0:14:17.600 --> 0:14:21.200 environmentally conscious. Thanks very much. Stephen again del He is 0:14:21.240 --> 0:14:24.240 a columnist covering equity markets for Bloomberg Gadfly. Go ahead 0:14:24.320 --> 0:14:28.400 and follow him on Twitter at Stephen Gandal g A 0:14:28.680 --> 0:14:43.400 N D E L. I want to bring in Alex Brinka, 0:14:43.560 --> 0:14:46.640 our initial public offerings reporter, to sort of add into this, 0:14:46.920 --> 0:14:49.280 because you're not necessarily going to take a company that 0:14:49.400 --> 0:14:51.720 is losing money. I think it's doing about seven dred 0:14:51.760 --> 0:14:55.280 and eighty million in revenue. Uh, this is a food 0:14:55.400 --> 0:15:01.000 delivery home preparation company called Blue Apron scoring public alex 0:15:01.000 --> 0:15:03.480 A pleasure tell us what you know about this I 0:15:03.640 --> 0:15:05.560 p O. I think it's gonna They said, what five 0:15:06.520 --> 0:15:10.320 seven million, including the overlap montunder writers, right, so right 0:15:10.320 --> 0:15:14.920 now they're marketing slower, They're they're marketing sorry you know, 0:15:14.920 --> 0:15:16.800 I mean, I'm in the weeks that I relate, I 0:15:16.840 --> 0:15:20.520 get excited pim um. They're marketing thirty million shares um 0:15:20.920 --> 0:15:23.960 for fifteen dollars to seventeen dollars each. That's according to 0:15:24.000 --> 0:15:27.400 the filing that they updated us when they filed this morning, 0:15:27.640 --> 0:15:29.560 basically announcing to the world that they're going on the 0:15:29.640 --> 0:15:33.400 road show for this I p O. Interesting timing though, 0:15:33.440 --> 0:15:37.560 and not necessarily Blue Apron's fault. So they they operate 0:15:37.600 --> 0:15:41.040 in the food delivery industry. As you said, they send 0:15:41.120 --> 0:15:45.080 boxes Amazon exactly. You know where I'm getting Amazon Amazon, 0:15:45.120 --> 0:15:49.320 Amazon exactly. So they send food and you remember last 0:15:49.320 --> 0:15:52.280 week Amazon agreed to buy Whole Foods for about fourteen 0:15:52.280 --> 0:15:56.280 billion dollars. So that kind of big looming specter over 0:15:56.320 --> 0:16:00.240 this whole grocery industry is out of the control all 0:16:00.280 --> 0:16:02.440 of Blue Apron. They've got to get this deal done. 0:16:02.480 --> 0:16:04.880 But you know that happened just last week. Now they're 0:16:04.880 --> 0:16:06.680 going to have to go out in front of investors 0:16:06.680 --> 0:16:10.359 for the next two weeks and answer questions about the industry, 0:16:10.440 --> 0:16:14.280 about where their competitive edge is, and you've got to 0:16:14.320 --> 0:16:16.440 think a lot of those questions are going to include 0:16:16.440 --> 0:16:18.520 that word Amazon. I'm wondering if you could just speak 0:16:18.520 --> 0:16:20.320 a little bit about the people or about some of 0:16:20.320 --> 0:16:22.640 the details of the company, because I was reading the 0:16:22.920 --> 0:16:26.440 s one and these are very accomplished executives who are 0:16:26.520 --> 0:16:29.600 running it the albeit many of them in their thirties 0:16:29.800 --> 0:16:32.840 and forties. It is a young company. It's a New 0:16:32.920 --> 0:16:36.160 York based company. UM. It was founded by Matt Salzburg. 0:16:36.240 --> 0:16:40.840 He used to work at Bessemer Venture Partners in exactly, 0:16:40.880 --> 0:16:42.920 and it's one of the early investors in Blue Apron 0:16:43.000 --> 0:16:44.760 as well. UM. He's been around the block for a 0:16:44.800 --> 0:16:48.320 while UM in the tech kind of startup space. He 0:16:48.440 --> 0:16:53.120 also worked for Blackstone. The CFO came from under Armor 0:16:53.360 --> 0:16:57.600 UM where he was of the VP of account exactly 0:16:57.600 --> 0:17:02.240 Bradley Dickerson. So they there is some big name experience here. Again, 0:17:02.400 --> 0:17:04.800 the constant question is going to be for a lot 0:17:04.840 --> 0:17:07.600 of these companies, this one will only be valued at 0:17:07.640 --> 0:17:10.160 three point two billion dollars if it sells its shares 0:17:10.200 --> 0:17:13.159 at the high end of that range compared to you know, 0:17:13.240 --> 0:17:15.840 the giants out there. The question will continue to be 0:17:15.920 --> 0:17:20.320 in this space. It's an eight hundred billion dollar grocery market. 0:17:20.760 --> 0:17:23.720 How what's the market? What's your target audience for getting 0:17:23.760 --> 0:17:27.119 these home kits delivered to you? Is that enough? Is 0:17:27.119 --> 0:17:30.119 there growth? There? Is that enough? Well in the S 0:17:30.160 --> 0:17:31.600 one and DA if you can even come in on this, 0:17:31.680 --> 0:17:33.760 you know, looking at the charts that they show that 0:17:33.800 --> 0:17:35.679 are going to be part of the road show, it 0:17:35.760 --> 0:17:37.680 has you know, a nice big bar chart that shows 0:17:37.720 --> 0:17:41.399 that the biggest demographic is the youngest age group cohort 0:17:41.800 --> 0:17:46.320 and that I think something like or the total customer 0:17:46.359 --> 0:17:48.879 base is made up of these young people and maybe 0:17:48.880 --> 0:17:51.080 they just don't know how to cook. And that's you know, 0:17:51.119 --> 0:17:52.879 that's the book case and that's what they're pitching, and 0:17:52.960 --> 0:17:54.959 that will be so important for these deals for these 0:17:55.000 --> 0:17:57.480 companies that are losing a lot of money. Investors want 0:17:57.520 --> 0:17:59.560 to know where is the growth? Why do I trust 0:17:59.600 --> 0:18:02.080 my money with you at this young age? Where is 0:18:02.080 --> 0:18:04.000 the growth going to be? They say? Blue Aprin says, 0:18:04.040 --> 0:18:06.840 they only address less than one percent of the total 0:18:06.880 --> 0:18:10.360 addressable market for customers in the US, so you can 0:18:10.400 --> 0:18:13.679 see there that there is room for improvement. But the 0:18:13.800 --> 0:18:17.000 bear case, I still got to say those millennials, I'm 0:18:17.040 --> 0:18:19.840 of the category we're still buying on Amazon. I was 0:18:19.880 --> 0:18:21.800 going to ask you have you had a Blue Apron 0:18:22.000 --> 0:18:24.040 I have. I've tried to be a good reporter. I've 0:18:24.040 --> 0:18:26.520 tried Blue Aprin. I've tried sun Basket, which is another 0:18:26.560 --> 0:18:30.359 company that, according to our sources, has hired underwriters for 0:18:30.400 --> 0:18:32.840 a potential I p O moving to go public. So 0:18:33.160 --> 0:18:36.080 you can see there are some copycats here. So competition 0:18:36.160 --> 0:18:38.680 is going to be the key word thinking copycats uber 0:18:38.880 --> 0:18:42.240 left Gee, it's an interesting tech economy. Thank you very much, 0:18:42.280 --> 0:18:45.439 Alex Brinka, our initial public offerings reporter, and you'll be 0:18:45.440 --> 0:18:48.520 following Blue Apron Force and Dave Wilson Bloomberg Stocks. Colmus, 0:18:48.560 --> 0:19:01.560 thank you very much. Let's turn our attention now to 0:19:01.960 --> 0:19:05.440 banks and the potential payout of thirty billion dollars here 0:19:05.440 --> 0:19:07.359 to tell us more as our senior writer for Banking 0:19:07.400 --> 0:19:10.440 and Finance, y'am an owner on for Bloomberg News. Yeahm 0:19:10.520 --> 0:19:13.200 and always a pleasure to see you. Thirty billion dollars. 0:19:13.280 --> 0:19:16.080 That's Um, that's real money, isn't it. Yes, it is? 0:19:16.200 --> 0:19:18.359 And where does it come from? And where can it go? 0:19:18.760 --> 0:19:21.760 I mean it's not new money. It's not more money 0:19:21.840 --> 0:19:24.040 that that the banks are going to make as profits. 0:19:24.040 --> 0:19:27.959 But it's the money that they will be able to 0:19:28.400 --> 0:19:32.119 uh distribute to their shareholders in addition to what what 0:19:32.240 --> 0:19:34.480 they did last year. So this is just an increase 0:19:34.800 --> 0:19:38.600 individends and buy backs. And that's crucial for shareholders of 0:19:38.680 --> 0:19:42.320 banks because, um, you know, many years after the crisis, 0:19:42.640 --> 0:19:45.200 they really were so stingy. The banks were stingy. They 0:19:45.200 --> 0:19:47.640 had to be stingy. The regulators didn't really let them 0:19:47.760 --> 0:19:50.040 distribute any of the money they kept holding onto them 0:19:50.040 --> 0:19:55.200 and improving their capital levels. Now finally those payouts are 0:19:55.400 --> 0:19:59.000 slowly inching up. We'll tell us about Stephen Manuch in 0:19:59.000 --> 0:20:03.520 the Treasury secret terry and his role in this topic. Um, 0:20:03.600 --> 0:20:06.080 you know that this sort of the easing of the 0:20:06.119 --> 0:20:08.440 stress test where where this you know, this is why 0:20:08.600 --> 0:20:11.040 some some of the banks are increasing their payouts. It 0:20:11.119 --> 0:20:15.000 sort of predates Trump and munition things. Things started happening 0:20:15.040 --> 0:20:18.359 even last year because partly because banks have managed to 0:20:18.400 --> 0:20:21.240 increase their capital levels over the years, so it's not 0:20:21.280 --> 0:20:23.800 as bad as it used to be uh, and regulators 0:20:23.800 --> 0:20:26.400 have have sort of eased up on them. But munition 0:20:26.800 --> 0:20:30.480 under Trump's executive order is reviewing all the all the 0:20:30.600 --> 0:20:33.680 bank regulations and and in his recommendations that came out 0:20:33.760 --> 0:20:36.639 last week, he suggested that they should get even you know, 0:20:37.359 --> 0:20:40.760 easier on the banks during the stress tests and and 0:20:40.840 --> 0:20:44.040 make them ever two years you know, dropped the qualitative 0:20:44.400 --> 0:20:47.640 uh portion of it, which is very tough. So so 0:20:47.960 --> 0:20:53.120 going forward under regulators approved appointed by Trump, things are 0:20:53.119 --> 0:20:55.560 probably gonna get even better for the banks. Now. The 0:20:55.640 --> 0:21:00.280 regulators that actually administer these stress tests they from the 0:21:00.280 --> 0:21:04.359 Federal Reserve. Yes, this is a federal reserve institution. It 0:21:04.400 --> 0:21:08.080 has become. They started in two thousand nine. Um. I 0:21:08.080 --> 0:21:11.280 mean it was very much hand in hand um with 0:21:11.320 --> 0:21:14.200 the government at the time who wanted to to restore 0:21:14.240 --> 0:21:17.680 confidence in the US banking system. Um. But then it 0:21:17.760 --> 0:21:22.400 became a big, big federal reserve institution and um. Dan Trullo, 0:21:23.600 --> 0:21:26.639 who was in charge of regulation at the Federal Reserve 0:21:27.320 --> 0:21:29.359 was a big proponent of this and and led this 0:21:29.440 --> 0:21:32.720 effort for years. So he is out. Um. There will 0:21:32.720 --> 0:21:36.440 be new people appointed by Trump to the Fed Um, 0:21:36.640 --> 0:21:40.639 so if those people are are more industry friendly, you know, 0:21:40.880 --> 0:21:44.040 this could get even easier. When you say get even easier, 0:21:44.080 --> 0:21:46.840 you mean to actually change the terms of the stress test. 0:21:46.880 --> 0:21:50.320 For example, have it done every other year for example? 0:21:50.400 --> 0:21:53.760 That is one way and um other ways are um. 0:21:53.880 --> 0:21:58.720 You know, banks have complained a lot about how untransparent 0:21:58.880 --> 0:22:01.800