Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Let check out with
Speaker 1: the Annaka Tregon Managing Director, head of the Competence Center
Speaker 1: at Vance Launch at Kempen Anica. Thanks so much for
Speaker 1: joining us. First off, what is the competence Center? What
Speaker 1: do you guys do there? Hi, Good morning. Well, what
Speaker 1: we do is um Bridge bridge different expertise areas we
Speaker 1: have within our within our business because we are a
Speaker 1: private bank. We're actually Europe's oldest banks. We are we're
Speaker 1: a private bank. We're also an investment bank and have
Speaker 1: investment management, the institutional asset management where we deal a
Speaker 1: lot with the big funcion funds because the Dutch counsction
Speaker 1: sounds are very very big and bringing that all together
Speaker 1: to um see what the biggest intelligence comes out of
Speaker 1: battle and see how that can be helpful to our clients.
Speaker 1: It's actually cool looking at your resume, you worked at
Speaker 1: some of the oldest and most important banks in the world.
Speaker 1: We're at Rothschild, You're at Goldman sachs Um, and now
Speaker 1: you're at van Lanche. What are you focused on right now? Annaka?
Speaker 1: I mean, there's so much to watch here in the US,
Speaker 1: we're so concerned about the FED, in the macro picture.
Speaker 1: In Europe obviously energy and inflation is insane um. And
Speaker 1: then in Asia we learned this morning there's another lockdown
Speaker 1: in China, in a city with twenty one million people.
Speaker 1: Where do you look? Where do you look? I mean,
Speaker 1: there's there's so much to look at, and I think,
Speaker 1: you know, the only thing you can do is keep
Speaker 1: it very, very simple. And you know, the world's become
Speaker 1: obsessed with the latest inflation prints. The world is obsessed
Speaker 1: with how inflation prints are reacting to central bank policy
Speaker 1: rates moving, which almost every bank is, every central bank
Speaker 1: is doing the sides a few. That's that's what's different
Speaker 1: this time around. And I think talking about keeping it simple,
Speaker 1: the main thing that I think we're very often missing
Speaker 1: the mark on is the fact that it's it's illogical,
Speaker 1: it's nonsensical to see, how you know, spot inflation print
Speaker 1: are an adverted comments responding to the latest seventy basis
Speaker 1: points by the FED or the latest fifty basis points
Speaker 1: by the ECB, because it simply doesn't work that way.
Speaker 1: And I think the thing that we are most concerned
Speaker 1: about is the fact that central banks, particularly the FED,
Speaker 1: is so driven by trying to restore their credibility, so
Speaker 1: much so that they say, well, we continue to lift
Speaker 1: rate until inflation spot inflation near is our target of two.
Speaker 1: That's scary because there's a long work through mechanism and
Speaker 1: inflation today is a picture of you know, of of
Speaker 1: what the conditions were like one two years ago. So
Speaker 1: give us a sense, just from your perch in Europe here,
Speaker 1: how how our markets discounting the European Central Bank, the
Speaker 1: Bank of England in terms of their response and maybe
Speaker 1: what their goals should be, because again you've so many
Speaker 1: challenges for the Europeanic enemy in including the war in
Speaker 1: Ukraine and the impact on commodities, had it unique the
Speaker 1: central bankers and you're are thinking about it, well, we
Speaker 1: all forget actually the fact that around ECB actually started
Speaker 1: a strategic review and the reason they've charted a strategic
Speaker 1: reviewers they only have one mandate, it's not a dual mandate,
Speaker 1: and that mandates inflation full stop. And they had not
Speaker 1: been successful in getting inflation to the level they wanted.
Speaker 1: It was always too low. And suddenly, you know, out
Speaker 1: of nowhere, we've got the reverse problem. And the point
Speaker 1: is that you know that the problem was actually much
Speaker 1: less complex then when they were already doing a strategic review.
Speaker 1: Now it's far more complex. And I think the issue
Speaker 1: is really well sums up by the fact that on
Speaker 1: one hand, it's more hawkish behavior. KIWI has only recently
Speaker 1: just ended. Actually rates are obviously going up. On the
Speaker 1: other hand, you've got this, you know, this mechanism to
Speaker 1: protect southern Europe, which you could argue with nothing more
Speaker 1: than a sort of yield spread mechanism. But that feels
Speaker 1: like hitting the accelerator and the break at the same time.
Speaker 1: And I think that sort of sums up the troublesome
Speaker 1: situation in Europe. And you know what, Yeah, the murky
Speaker 1: picture that the ECB is trying to deal with. Murky
Speaker 1: is a great word to describe what the ECB has
Speaker 1: has to do is doing. Does um I don't know
Speaker 1: where to go with that when I think about um
Speaker 1: economy in Europe, I'm more concerned about people operating on
Speaker 1: the ground, especially in the UK where you are. I mean,
Speaker 1: if you look at financing costs, they're just shooting higher.
Speaker 1: If you look at the value of the pound, it's
Speaker 1: dropping like a lead balloon. And imagine what kind of
Speaker 1: position that puts your average, you know, midsize business owner
Speaker 1: in UM. He has to buy everything from France, Germany,
Speaker 1: Italy and uh, he has to finance in a in
Speaker 1: a climate that just makes it almost impossible to survive that.
Speaker 1: That must mean a huge recession ahead. And I mean
Speaker 1: compounded with that's you know, the sort of ripple effects
Speaker 1: of Brexit. You know, we're still figuring that out. Talk
Speaker 1: about just basic shipping, basic customs, delays, costs, I mean,
Speaker 1: we're still we're still figuring that all out. So it
Speaker 1: is a to your point, So that with a local
Speaker 1: man woman on the ground, you know, just trying to
Speaker 1: do their thing, trying to do their business, it is
Speaker 1: a really really challenging environment. The only thing which is
Speaker 1: sort of odd, I think sitting in Europe, which we're
Speaker 1: all trying to kind of get our heads around. On
Speaker 1: one hand, you've got all of this, which is extremely scary.
Speaker 1: On the other hands, try and book a restaurant on
Speaker 1: a Friday night, it's hopeless, you know, and obviously more
Speaker 1: in central London that is. But you know, try and
Speaker 1: book a holiday right during the holiday season. So it's
Speaker 1: this sort of bizarre situation where it doesn't look like
Speaker 1: a recession, it doesn't feel like one. When you want
Speaker 1: to go out and you know, get hold of a
Speaker 1: service somehow, or especially in the luxury goods market, I mean,
Speaker 1: good luck finding a pair of shoes or something. But
Speaker 1: on the other hand, you've got all these sort of
Speaker 1: very very scary factors coming together. And that's why everyone
Speaker 1: is talking about a cold winter for Europe, because I
Speaker 1: think the summer period is all about let's just go
Speaker 1: have fun, enjoy the summer of you know, close our
Speaker 1: eyes to all the scary staff and enjoy the sun.
Speaker 1: But what happens when the sun goes away? Or what
Speaker 1: happens when you book a flight on Luftanza flying in
Speaker 1: and out of Frankfort or her Munich tomorrow stranded there?
Speaker 1: Of course they're going on because they want Look, it
Speaker 1: makes perfect sense to me. I want a ten percent raise, right,
Speaker 1: wouldn't you if you look at inflation like that, you
Speaker 1: want you want that, you know, if you've got to
Speaker 1: if you want to stop it somewhere, stop it on
Speaker 1: profit margins. But that's just not as easy to do. Annika,
Speaker 1: great having you on. Thanks so much for joining us.
Speaker 1: Annikatre On their managing director. She is the head of
Speaker 1: the Competence Center at Van Lanche at kemp and the
Speaker 1: oldest bank in Europe. It's very cool and great perspective
Speaker 1: getting in that from Anika. Get right to our next guest,
Speaker 1: Johnathan Hurdle. He's executive chairman Hurtle and call Hurtle, Callahan
Speaker 1: and Company. I mean he's all in Penn State Batchelor
Speaker 1: degree mb A. Penn State opens the season. I believe
Speaker 1: tonight at per Due Penn State is a I think
Speaker 1: there are a three and a half point favorite to see.
Speaker 1: All right, John, thanks so much for joining us here.
Speaker 1: Um boy, you've been in this market a long time.
Speaker 1: You've seen the site longer than Paul, even longer than me,
Speaker 1: and that's saying something. What do you make about our
Speaker 1: current environment right here? Well, good morning Matt and Paul.
Speaker 1: It's nice to talk to you again. You know, I
Speaker 1: think we're still in the equoffex from the from the
Speaker 1: COVID crisis, and so it's going to take us a
Speaker 1: while to work through. Here. We had this period of
Speaker 1: time where we had six trillion dollars of fiscal stimulation
Speaker 1: while we had the most flexible and supportive monetary policy
Speaker 1: in history, and there's a lot of ramifications for that.
Speaker 1: So that's what we're going through right now. We had,
Speaker 1: you know, we have more than full employment. You think
Speaker 1: about the FED having a dual mandate full employment and
Speaker 1: contain inflation. Well, we have more than full employment. We've
Speaker 1: sort of overshot this and so now they're focused on
Speaker 1: percent on inflation control. And you know, we saw that
Speaker 1: with the Chairman's commentary. I'm actually in Jackson Hole right now,
Speaker 1: still out here, so you know, it was a you know,
Speaker 1: very clear message from the Chairman and that's what the
Speaker 1: markets reacting to right now. What do you think about
Speaker 1: UM their willingness to hold firm, I mean, especially if
Speaker 1: we start to see real job losses, you know, real
Speaker 1: families who all of a sudden can't finance their American
Speaker 1: dream lives. Um is the FED going to continue to
Speaker 1: put them out of work on purpose in order to
Speaker 1: retain drain and inflation. Well, it's it's that's the dynamic.
Speaker 1: How much will employment where they're going to look at
Speaker 1: that unemployment number, and you know, the risk is that
Speaker 1: they overshoot. We overshot in the pandemic, and that was
Speaker 1: understandable because I really think it's hard for people to
Speaker 1: turn back the clock and what was it like two
Speaker 1: years ago and how frightened everyone was, and we didn't
Speaker 1: know we were going to have a vaccine. But Jonathan,
Speaker 1: you made the point that we had six trillion dollars
Speaker 1: of fiscal stimulus. I mean, remember when TARP was unbelievably huge,
Speaker 1: that was eight billion. Six trillion dollars is absolutely loony tunes.
Speaker 1: Six trillion And by the way, you know, you have
Speaker 1: to give Larry Summers credit because he said we were
Speaker 1: trying to fill a two trillion dollars gap was six
Speaker 1: So there was that the government's tend to overreact. We're
Speaker 1: they're very not very good at fine tuning, and so
Speaker 1: they overreacted. They put six trillion at the same when
Speaker 1: the FED was being aggressively flexible and supportive. So that
Speaker 1: combination in retrospect um is unprecedented. But we were facing
Speaker 1: unprecedented times and to look backwards. This is a classic
Speaker 1: kind of a behavioral economics problem where we think it
Speaker 1: was more predictable than it was at the time. We
Speaker 1: look back global pandemic, World's coming to an end. We've
Speaker 1: got to be dramatic. We were too dramatic in retrospect.
Speaker 1: So it is a good investor supposed to do today.
Speaker 1: What are you telling your clients? Do you do you
Speaker 1: have to be all macro all the time? By the way, John,
Speaker 1: I mean I know, well yeah, so I mean if
Speaker 1: you look at allocations, that's going to control about of
Speaker 1: the variability and performance over time. So your allocations most
Speaker 1: unless you've got a concentrated position in ten stocks. But
Speaker 1: if you're a traditional investor, you still want to be
Speaker 1: overweight stocks because bond rates are rising, and so we
Speaker 1: want to be short duration, relatively short duration, fully invested
Speaker 1: in patient here. Alright, So are there some sectors here
Speaker 1: that we should be focusing on? Um? Do I need
Speaker 1: to get orfully diversified? Yeah? What do I want to
Speaker 1: be fully diversified here? I want to stay fully diversified.
Speaker 1: But personally, because inflation is rising, I want to be
Speaker 1: with the companies the secular growth companies that have real
Speaker 1: pricing power. The best hedge against inflation over the long
Speaker 1: run is a diversified equity portfolio because the managers can
Speaker 1: pass through the inflation increases in pricing. But you want
Speaker 1: to be with the companies who can do that so
Speaker 1: on the margin, not dramatically, but on the margin. I
Speaker 1: want to be with those high quality growth companies who
Speaker 1: have pricing power. By the way, we just got a
Speaker 1: minute left, but I'm looking at your resume. We see
Speaker 1: that you went straight out of the Marines to Goldman
Speaker 1: Sachs and nowadays you know Goldman Sachs. The kids they're
Speaker 1: are making videos and posting them on TikTok about how
Speaker 1: they work too hard and they have to do it
Speaker 1: from home. They don't want to go into the office.
Speaker 1: What do you think about today's class of bankers, of
Speaker 1: young bankers. I think Golden Sacks is a wonderful company.
Speaker 1: I've been away from there for a long time, but
Speaker 1: I just would say this that you know, hard work matters,
Speaker 1: and uh, you know, whether they're working too hard or
Speaker 1: not is deal specific. But we've gotta that's your apprenticeship,
Speaker 1: that's where you weren learn your trade and the people
Speaker 1: are going to work hard and smart or going to succeed.
Speaker 1: So you know, I realized. I also think that you
Speaker 1: mentioned earlier that we're getting people coming back to work.
Speaker 1: This is another part of that COVID echo effect. It's
Speaker 1: going to take a couple of years here for people
Speaker 1: to figure this out, but we're gonna have people back
Speaker 1: at work. It's good. I'd like to describe it as
Speaker 1: two thousand nineteen No one improved and we're gonna go
Speaker 1: back to pre COVID, but it's we're going to have
Speaker 1: the ability to work more flexibly from home when we
Speaker 1: need to because we've all developed that. So that's a
Speaker 1: that's a very significant improvement in our lives. So we'll
Speaker 1: get there, all right, John, great stuff, as always, always
Speaker 1: appreciate getting your perspective. John Hurdle, Executive Chairman Hurdle, Callahan
Speaker 1: and Company and a proud Nitnity lion. All right, let's
Speaker 1: talk the flowers business, and we talk to floral business,
Speaker 1: floors business. We talked to Chris McCann, who else. He's
Speaker 1: the CEO of one eight hundred Flowers. Chris, thanks so
Speaker 1: much for joining us here. Just tell us how your
Speaker 1: company one eight hundred flowers, how it kind of evolved
Speaker 1: and was impacted by the pandemic and kind of what's
Speaker 1: your outlook right here? Well, thank you, it's good to
Speaker 1: be here, gentlemen. It's been a turbulent couple of years,
Speaker 1: that's for sure. The interesting thing is we pretty get
Speaker 1: down into the kind of these three categories, these three
Speaker 1: sectors pre COVID, during COVID, and post COVID. And during
Speaker 1: the pre COVID stage, we've been we committed to growing
Speaker 1: our business or increasing the growth rate from a low
Speaker 1: single digit to a double digit growth rate. We made
Speaker 1: the appropriate investment to that and achieved that. That helped
Speaker 1: position us well for then the unprecedented surgeon demand that
Speaker 1: we saw during the pandemic where we set record levels
Speaker 1: and revenue record levels, and profits record levels and customers
Speaker 1: customer database. And then we've moved now into the late
Speaker 1: stage COVID or or hopefully post COVID stage, and as
Speaker 1: we're coming out of that, we have the comps that
Speaker 1: we're dealing with which we're holding onto the business and
Speaker 1: retaining the business that we gained during the pandemic, but
Speaker 1: we're doing so in this inflationary environment. That's you know,
Speaker 1: causing challenges for us on the close Morgent line. And well,
Speaker 1: and this is why, this is why I love having
Speaker 1: you on, Chris, because it's not just about the flower business.
Speaker 1: I think your business is representative of a lot of
Speaker 1: companies that have grown really successful brands. Um. You know,
Speaker 1: businesses that thrived during the lockdowns, but now are going
Speaker 1: to have trouble maintain the same growth in the face
Speaker 1: of higher labor costs, higher energy costs, um, you know,
Speaker 1: supply chain issues. Where do you see uh or do
Speaker 1: you see any kind of light at the end of
Speaker 1: the tunnel in terms of that, I'm sure you've got
Speaker 1: people who want to be paid more. Um. Delivery costs
Speaker 1: must be higher and higher as gasoline, although they're coming
Speaker 1: down again, but gasoline prices went up um uh. And
Speaker 1: you know you've got to be getting these flowers from
Speaker 1: all over the world. Yeah, so we certainly see great
Speaker 1: opportunity in front of us. Know. Well, you know, even
Speaker 1: though you pointed out people who you know, the challenges
Speaker 1: against copying, against the record us A we had, we
Speaker 1: still grew for the year four percent over last year,
Speaker 1: which was over the year just prior to the pandemic,
Speaker 1: so and we're holding onto that customer base, we're holding
Speaker 1: onto that higher revenue stream. So now we're dealing with
Speaker 1: the unprecedented cost persons that came in and we're mitigating
Speaker 1: those as fast as we can. Good news is we're
Speaker 1: starting to see is I just heard the report, We're
Speaker 1: starting to see more and more indicators that the inflation
Speaker 1: is eating. We're seeing ocean freight rates drop, was seeing
Speaker 1: labor moderate and availability of labor getting better. So we're
Speaker 1: seeing the light at the end of the tunnel. But
Speaker 1: in addition to that, we're making sure that we're making
Speaker 1: the investments in our business for the future. We're spending
Speaker 1: money to automate our facilities, are distribution centers, spending money
Speaker 1: to build inventory early and bring inventory in early to
Speaker 1: make sure we're helping without labor challenges that we've had. So,
Speaker 1: you know, a company like ours, we're not just sitting
Speaker 1: by and hoping things get better. We're making sure we
Speaker 1: change our business to meet through to come and demand today.
Speaker 1: So what is it like working in this rising rate environment?
Speaker 1: Do you make sure UM You've got all your financing
Speaker 1: needs taken care of before rates get out of control?
Speaker 1: UM you know, is it. I mean, I'm sure you're
Speaker 1: generating a ton of cash, so it's not that as
Speaker 1: much of a problem for you as it is for
Speaker 1: other businesses. But you still got to be looking at
Speaker 1: these rates right oh, constantly, and we're constantly in the
Speaker 1: conversations with our banks making sure that we have the
Speaker 1: appropriate banking facilities we need well, you know, for right now,
Speaker 1: for example, ramping out our inventory for the holiday season,
Speaker 1: so we rely on the appropriate revolval facilities for that
Speaker 1: to make sure we can do that. In addition to
Speaker 1: the free cash flow that were generated, and we're looking
Speaker 1: to make sure that we continue to grow out business
Speaker 1: and make the investment for the long term because we
Speaker 1: see great opportunity in front of us. You know, the
Speaker 1: world changed with this pandemic, and one of the benefits
Speaker 1: of the change is that it's made people realize that
Speaker 1: we need to stay connected to each other and build
Speaker 1: and maintaining relationships. That's what our business does. We inspire
Speaker 1: our customers to stay connected. So, Chris, talk to us
Speaker 1: about some of the challenges that you and are facing.
Speaker 1: I'm thinking labor number one. You mentioned number two, fertilizer.
Speaker 1: We hear a lot of inflation costs there, right, inflation
Speaker 1: costs there, and you know, supply availability talks just about
Speaker 1: some of the challenges from the supply side, you guys
Speaker 1: aren't dealing with. The supply chain for us has been
Speaker 1: certainly has been challenging, and mostly he's on the food
Speaker 1: group side about business, not so much on the floral side.
Speaker 1: You mentioned fertilizer itself, that's close with some of our
Speaker 1: plants supplies the challenge, but it's not a major challenge.
Speaker 1: And on the fresh cut floral side, it's not been
Speaker 1: a major challenge for us. Again, I think that which
Speaker 1: is because just so people know it's not just flowers
Speaker 1: that you're delivering. You also have obviously, you know, balloons
Speaker 1: and teddy bears and you know melon balls, right, that's
Speaker 1: what you're talking about, you know. In our food group,
Speaker 1: which is headlined by Harry and David um Cheryl's Cookies
Speaker 1: wanting to one a hundred baskets. Newest acquisition we just
Speaker 1: made a few months ago, Vital Choice sustainably caught seafood,
Speaker 1: wild caught seafood. So we bring all these different Coli
Speaker 1: made foods to the table, and the packaging for that
Speaker 1: is where the supply chain gets disrupted a little bit,
Speaker 1: so we made made all of the adjustments when that
Speaker 1: necessary to make sure they were in a good position
Speaker 1: for this holiday and we're looking forward to It is
Speaker 1: the dollar at all, um, you know, a tailwind for you?
Speaker 1: It does it give you a little bit more strength
Speaker 1: to have this incredibly strong currency or do you operate
Speaker 1: um in terms of purchases mostly in the US. Oh,
Speaker 1: it always helps to have a stong currency, but mostly
Speaker 1: where we operate within the US. We employed some products
Speaker 1: from Major and that's you know, caused problems last year.
Speaker 1: It's looking much better this year, both as far as
Speaker 1: cost to come out of these costs as well as shipping.
Speaker 1: But I'll always take the tail wind. If ever there
Speaker 1: was a time to buy a British or European company, Chris, now,
Speaker 1: is it? I don't know. I look at somebody inflation
Speaker 1: rates that they're looking at over there. I'm not sure
Speaker 1: I can jump to that so quick. Hey, Chris, I'm
Speaker 1: just looking at your price chart. It looks like you're
Speaker 1: one of those, you know, um kind of a pandemic
Speaker 1: type of stock. You know people Your stock trade up
Speaker 1: dramatically up to close above thirty five on during the
Speaker 1: early days of the pandemic has traded down since what's
Speaker 1: kind of the message that you're you're giving your shareholders. Well,
Speaker 1: we've just keep focusing on the down the core of
Speaker 1: the business. And again, as we look and we've doubled
Speaker 1: the size at a customer base in the last couple
Speaker 1: of years, we've doubled the size of the business overall,
Speaker 1: We've doubled the size of our passport loyalty membership program,
Speaker 1: We've significantly expanded our product offering. And when we look
Speaker 1: at the underlying health of the business, we still see
Speaker 1: the relationships with building with the customers, customers cohorts that
Speaker 1: are buying from more than one brand coming back more
Speaker 1: frequently than like two to three times out of the
Speaker 1: average customer. So that underlying health of the business tells
Speaker 1: us as we work through this challenging inflation every period,
Speaker 1: we are extremely well positioned company to get back go
Speaker 1: on tracks from a higher growth rate in a higher
Speaker 1: profitability rate. You're always gonna keep the one eight hundred.
Speaker 1: I just type in flowers dot com when I want
Speaker 1: to go to your website, but it's obviously one eight
Speaker 1: hundred flowers dot com. You own both domains. We own
Speaker 1: both do means the brand that we really built is
Speaker 1: one hundred Flowers. It's a question we It's a question
Speaker 1: we go through all the time. We want to make
Speaker 1: sure our brands are always appropriate and elevant for the day.
Speaker 1: Level off already, all right, great stuff as always, Chris
Speaker 1: always loved getting h update on your business and the
Speaker 1: retail space in general. Chris McCann, he's the CEO of
Speaker 1: one eight hundred Flowers f l w S is the
Speaker 1: tigger to type into your Bloomberg terminal. Always a fascinating discussion.
Speaker 1: One eight hundred Flowers. We all know the brand. Well.
Speaker 1: We did get some pretty good m manufacturing data this morning.
Speaker 1: Let's break it down with Tim Fury, the chairman of
Speaker 1: the Institute of Supply Management. Tim, I s M. Come
Speaker 1: in a little bit better expected, steady with last month.
Speaker 1: What do you make of it? We'd beat expectation, and
Speaker 1: I think you know, this is the third straight month
Speaker 1: of running about fifty three within a couple of tenths.
Speaker 1: It really feels like we're in a great fly path here.
Speaker 1: We're not you know, flying sky high at sixty feet
Speaker 1: and we're not skimming across the mountaintops and we're so
Speaker 1: we're pretty level now. The sub indexes that go into
Speaker 1: that p M I indexes are shifting, but the shift
Speaker 1: is often the positive. You know, we've got manufacturing inventories
Speaker 1: coming down a little bit, Supplier deliveries are stable at
Speaker 1: fifty five. That's an appropriate tension. You've got new orders
Speaker 1: moving back into an expansion environment at not really great rates,
Speaker 1: but that's the reason they're an expansion. Lead times came
Speaker 1: down a little bit, maybe to the low single digits,
Speaker 1: but lead times came down. Prices came down in the
Speaker 1: last couple of months. So we've gone for three months
Speaker 1: of suppliers getting easier to deliver to two months of
Speaker 1: prices easy and dramatically town. Now we're in a month
Speaker 1: of lead time softening as well as employment expansion. So
Speaker 1: the month going into September, the period going into September
Speaker 1: from a production standpoint should be pretty positive because we're
Speaker 1: able to put people on the factory floor and the
Speaker 1: supplier materials are flowing better. Um. We saw we've been
Speaker 1: seeing job cuts in Silicon Valley for for months now, um,
Speaker 1: either hiring freezes or you know, companies taking out ten workforce.
Speaker 1: Today we see a manufacturer three m um going down
Speaker 1: that road. Are we going to start seeing more of that?
Speaker 1: Do you hear from the manufacturers you talked to that
Speaker 1: that's on in the cards in terms of cost cuts? Well,
Speaker 1: I think that's what everybody's looking for. That's when we
Speaker 1: really know that we've slowed down the band, when companies
Speaker 1: start to lay off. I mean the Silicon Valley stuff
Speaker 1: are not manufacturing people, uh exactly. But today we got
Speaker 1: an industry, an industrial company doing it for you know.
Speaker 1: So that's what's kind of caught my eyes that this
Speaker 1: is not um some social media you know weirdness. Yeah. Correct.
Speaker 1: But our panelists were eight to one hire to force manage,
Speaker 1: meaning nine companies, eight of them are hiring and the
Speaker 1: other one is either freezing or letting themselves a trip out.
Speaker 1: We actually improved on the quits rate. We had quits
Speaker 1: rate in the month of July. We're now down to
Speaker 1: which indicates to me that people are staying in their
Speaker 1: job more than they were a couple of months ago.
Speaker 1: And and the panel's indicated said that things are getting
Speaker 1: easier to hire up from seven last months. So we're
Speaker 1: able to hire and keep people better than we have
Speaker 1: in the last nine months, and I think that's positive,
Speaker 1: positive movement, and it could very well be because there's
Speaker 1: a little bit of uncertainty out there. If I had
Speaker 1: some tenure at the company, I wouldn't be so inclined
Speaker 1: to jump. And the uncertainty is not only the economy,
Speaker 1: but it's also company's interest in letting people work from
Speaker 1: a hybrid standpoint. Good stuff, all right, Tim, thanks so
Speaker 1: much for breaking it down force. Tim Fury, the chairman
Speaker 1: of the UH Institute of Supply Management. With some data
Speaker 1: out this morning better than expected on the manufacturing flint,
Speaker 1: let's get over to our chief correspondent for Global macro markets,
Speaker 1: Liz McCormick joins us to talk about, um, what we're
Speaker 1: seeing happen in the fixed income. On the fixed income
Speaker 1: side of things, Me and Paul are just done equity guys.
Speaker 1: So um, it's good to get too smart persons. Take yeah,
Speaker 1: please use small words for us. UH. You have a
Speaker 1: story out today that jobs, the jobs data that we
Speaker 1: see tomorrow's potential to push the FED towards a third
Speaker 1: jumbo hike. So a third what seventy five basis point hike?
Speaker 1: If if if payrolls beat right, right, right. Well, you know,
Speaker 1: even like you saw the I S M numbers today,
Speaker 1: the sub index on employments showed it was, you know,
Speaker 1: decently holding in some strength. So if if the job's
Speaker 1: number comes out, especially if it beats like you said,
Speaker 1: I mean, the data just seems to be building, that
Speaker 1: shows the FED has room to keep rising. Inflation is
Speaker 1: still a problem. Pal has said, I think the economy
Speaker 1: can withstand it. So while we get these numbers that
Speaker 1: kind of back that up for him, it seems to
Speaker 1: bode for that them going seventy five basis points the
Speaker 1: next time. So yeah, there's a lot of eyes on
Speaker 1: payrolls tomorrow, you know. Vince Cignarella Bloomberg has a call
Speaker 1: here that basically the market is taken care of itself.
Speaker 1: It's taken care of inflation, and as a result, the
Speaker 1: Fed is should and it's likely to pause after this
Speaker 1: next rate heke, and that in and of itself is
Speaker 1: bullish for risk assets. I don't know. The market's not
Speaker 1: sure about that, do you think? Yeah? Yeah, I think
Speaker 1: it's uh, the markets in the quandary. Right, Um, there
Speaker 1: are some that we're saying, yeah, Fed's got to slow down.
Speaker 1: There's a decent amount that say, hey, the FED can
Speaker 1: get the funds rate to maybe a little under four percent,
Speaker 1: and then like Vince says, they got to kind of
Speaker 1: slow down pause. And then there are others that even
Speaker 1: our Anna wag I keep bringing her upcomics, she says
Speaker 1: FED goes to five percent. The folks that Bridgewater have
Speaker 1: said FED goes even higher. So I think it's like,
Speaker 1: I hate to say it, but the truth is in
Speaker 1: the data. Does inflation really keep, you know, rolling over,
Speaker 1: does the economy start to faulter or not? You know,
Speaker 1: there's a lot of data the Fed's got to sift
Speaker 1: through and to side. But they there there's a lot
Speaker 1: saying if they do another seventy BIPs that maybe they
Speaker 1: have to at least slow down the pace. You know, um,
Speaker 1: but we have to see. But what about turning around?
Speaker 1: Yesterday Mester said, you know what, in my opinion, we're
Speaker 1: not gonna cute, And that was kind of the Fed's
Speaker 1: message at Jackson Hole that to the market, like, hey, guys, seriously,
Speaker 1: we're not going to cut next year. You're gonna keep
Speaker 1: raising and then we're gonna wait until inflation comes down.
Speaker 1: Cash Cary has been extremely hawkish and then yesterday Rich
Speaker 1: Miller had a piece out saying Powell is now aiming
Speaker 1: for something much more painful for the economy. Somebody wrote
Speaker 1: into me and said, the idea that one of the
Speaker 1: most powerful arms of the U. S. Government is purposely
Speaker 1: aiming for pain. They're trying to put American people out
Speaker 1: of work, they're trying to raise unemployment is absolutely insane.
Speaker 1: If you see jobs starting to miss, if you see
Speaker 1: unemployment starting to go to five percent, don't they have
Speaker 1: to cut? Isn't the political pressure too strong? Well, you know,
Speaker 1: that's what Elizabeth Warren would say. She's been out saying,
Speaker 1: you know, we're worried about the FED is going to
Speaker 1: crush the economy jobs. That's terrible. But the other argument,
Speaker 1: and I have to say I kind of lean to that,
Speaker 1: is what pal saying is, you know, kind of inflation
Speaker 1: is let's call it a cancer attacks on everyone that
Speaker 1: if that lasts and it is strong, that's worse than
Speaker 1: sadly some people losing their jobs. So it's a bit
Speaker 1: of a push pull that the FED, of course would
Speaker 1: love a soft landing. But I think you know, through
Speaker 1: the months, Palace kind of moved away from that hole. Well,
Speaker 1: but Liz, what's the idea, what's the consentus on how
Speaker 1: great a tool monetary policy is to fight supply side
Speaker 1: driven inflation. Well, of course that's a lot of people
Speaker 1: say not a good tool at all. Right, so then
Speaker 1: what's the point. Well, the FED will say, well, if
Speaker 1: we slow down we can, we can affect what we can.
Speaker 1: That's demand, right, and let's say the supply stuff they
Speaker 1: have limited control over. FED has admitted that, but if
Speaker 1: they slow down demand, that they'll slow what they can.
Speaker 1: So yeah, So if if the supply issues, and sadly
Speaker 1: with the war and the energy crisis in Europe, if
Speaker 1: all that energy sector, all that remains sticky with inflation,
Speaker 1: then the FED may not be able to bring down
Speaker 1: that arm. But maybe, sadly, maybe it's going to crush
Speaker 1: the part that they can, which is you know, demand,
Speaker 1: and you know from the U. S. Consumer So I
Speaker 1: guess that, you know, the feeling is they've got to
Speaker 1: do what they can. But you're right, I mean, they
Speaker 1: and I think they've admitted that they can't control everything,
Speaker 1: but they I think if they sit on their hands,
Speaker 1: they they're in big trouble. There's enough of this macro
Speaker 1: stuff I'm looking at the global agg here down basically
Speaker 1: from its highs, right, and this month we're just starting
Speaker 1: September today, Paul, huge month for issuance. Um, what's going
Speaker 1: on on the ground and the real you know financing markets? Well,
Speaker 1: first of all, companies need money, right, and summertime is
Speaker 1: usually a lull for issuance, not a good time, so
Speaker 1: they tend to come in after the summer's over. So
Speaker 1: so they need some funding. And as bad as things are,
Speaker 1: and it's pretty brutal where yeah has been, Like you said, Um,
Speaker 1: if rates are only going higher, you would kind of
Speaker 1: like wanna get, yes, get some fixed rates. Three and
Speaker 1: a half may not be as bad as four and
Speaker 1: a half in a year. I don't know where it's going,
Speaker 1: but I think that's the thing. They need a certain
Speaker 1: amount of financing. It looks like rates are just at
Speaker 1: least for a while, going nowhere but up. So try
Speaker 1: to get in there when you can. All right, Liz,
Speaker 1: good stuff as always. List McCormick, Chief correspondent Global macro
Speaker 1: Markets for Bloomberg News. Thanks for listening to the Bloomberg
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