1 00:00:01,400 --> 00:00:04,120 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 2 00:00:04,120 --> 00:00:06,200 Speaker 1: with my co host of Bonnie Quinn. Every business day 3 00:00:06,240 --> 00:00:10,360 Speaker 1: we bring you interviews from CEO, market pros and Bloomberg experts, 4 00:00:10,400 --> 00:00:13,600 Speaker 1: along with essential market moving news. Kind the Bloomberg Markets 5 00:00:13,600 --> 00:00:17,000 Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts, 6 00:00:17,000 --> 00:00:21,160 Speaker 1: and on Bloomberg dot com. Let's bring somebody in who 7 00:00:21,160 --> 00:00:23,480 Speaker 1: knows a lot about Morgan Stanley and can be construct 8 00:00:23,520 --> 00:00:24,840 Speaker 1: a little bit of what's going on with the big 9 00:00:24,840 --> 00:00:28,280 Speaker 1: banks right now, and that is Chris Whelan. Chris thrilled 10 00:00:28,280 --> 00:00:31,040 Speaker 1: to have you. And you heard what some of Mr 11 00:00:31,080 --> 00:00:34,920 Speaker 1: Pruzan said. You know, obviously there's going to be a 12 00:00:34,960 --> 00:00:38,639 Speaker 1: good face put forward, but what are the problems that 13 00:00:38,680 --> 00:00:40,959 Speaker 1: you see being stored up in the banks for down 14 00:00:41,000 --> 00:00:42,800 Speaker 1: the road when some of all of this gets sorted out. 15 00:00:43,800 --> 00:00:46,600 Speaker 1: Well for Morgan Stanley, you know, it's a great quarter, Bunny, 16 00:00:46,840 --> 00:00:49,600 Speaker 1: and I think they are one of the few franchises 17 00:00:49,880 --> 00:00:53,440 Speaker 1: this quarter that are reporting up revenues across the board. 18 00:00:54,200 --> 00:00:57,480 Speaker 1: Um As John was just saying, he doesn't have a 19 00:00:57,480 --> 00:01:01,480 Speaker 1: lot of credit risk and interesting he didn't talk about it, 20 00:01:01,520 --> 00:01:04,120 Speaker 1: but one of his great strengths is that bank holding 21 00:01:04,160 --> 00:01:07,720 Speaker 1: company doesn't have to go out into the market and 22 00:01:07,840 --> 00:01:11,360 Speaker 1: raise net funds. They have such a big deposit base 23 00:01:11,520 --> 00:01:15,080 Speaker 1: now that they are actually a net provider of funds 24 00:01:15,640 --> 00:01:19,360 Speaker 1: among banks. So totally different from Goldman Sacks, which has 25 00:01:19,400 --> 00:01:22,959 Speaker 1: a very high dependence on the money markets to fund themselves. 26 00:01:22,959 --> 00:01:26,959 Speaker 1: So asset management, the strong investment bank. Plus they have 27 00:01:27,000 --> 00:01:30,080 Speaker 1: liquidity in the background, which is great. Is that part 28 00:01:30,120 --> 00:01:32,840 Speaker 1: of the reason why they bought eating Vance though, Chris, 29 00:01:32,920 --> 00:01:36,200 Speaker 1: is that to make sure that that stays the case. Well, 30 00:01:36,240 --> 00:01:38,840 Speaker 1: he Advance gives you two things. Funny, it gives you 31 00:01:38,920 --> 00:01:42,279 Speaker 1: the a u M assets under management, which generates fees. 32 00:01:42,640 --> 00:01:46,120 Speaker 1: That's a very stable leg for the stool, you know, 33 00:01:46,240 --> 00:01:48,800 Speaker 1: think about it. He has cash, he has the asset 34 00:01:48,840 --> 00:01:51,600 Speaker 1: management business which pays you every quarter, and then the 35 00:01:51,760 --> 00:01:55,800 Speaker 1: sc investment bank, which can fluctuate. Right, So they get 36 00:01:55,800 --> 00:01:58,440 Speaker 1: the assets under management. But with that a u M 37 00:01:58,720 --> 00:02:02,800 Speaker 1: comes deposits from those high network customers. And remember Morgan 38 00:02:02,920 --> 00:02:06,160 Speaker 1: Stanley has got a very broad wealth management business. They 39 00:02:06,160 --> 00:02:08,480 Speaker 1: don't just have very rich people. They have all sorts 40 00:02:08,520 --> 00:02:11,359 Speaker 1: of people different from Goldman. You know, a trillion in 41 00:02:11,440 --> 00:02:14,080 Speaker 1: a u M at Goldman and over a trillion now 42 00:02:14,120 --> 00:02:17,480 Speaker 1: in a um at Morgan Stanley are two different businesses, 43 00:02:17,720 --> 00:02:21,680 Speaker 1: very different profile. The bank that had always been the 44 00:02:21,680 --> 00:02:24,640 Speaker 1: bank of you know, the Vault if you like, the 45 00:02:24,680 --> 00:02:27,640 Speaker 1: Fortress bounce Sheet, had been JP Morgan is Morgan Stanley 46 00:02:27,680 --> 00:02:28,919 Speaker 1: is sort of giving them a run for their money 47 00:02:28,919 --> 00:02:32,639 Speaker 1: at this point. No, no, no, Jamie Diamond's got well 48 00:02:32,680 --> 00:02:36,440 Speaker 1: over two trillion dollars in court deposits. Morgan Stanley is 49 00:02:36,480 --> 00:02:39,000 Speaker 1: a little shy of a trillion until lass it's funny, 50 00:02:39,200 --> 00:02:42,600 Speaker 1: and it's about forty funded by bank deposits. So in 51 00:02:42,600 --> 00:02:46,280 Speaker 1: other words, their banks inside Morgan Stanley can lend to 52 00:02:46,360 --> 00:02:49,240 Speaker 1: the broker dealer on an arms length basis. You know, 53 00:02:49,320 --> 00:02:51,720 Speaker 1: they have to be priced like the market, um, but 54 00:02:51,840 --> 00:02:55,000 Speaker 1: that's a huge advantage. It's huge. Now Jamie Diamond is 55 00:02:55,040 --> 00:02:57,760 Speaker 1: like a country. He has so much going on inside 56 00:02:57,800 --> 00:03:01,400 Speaker 1: of his bank. Oftentimes the payments don't leave the bank, 57 00:03:01,800 --> 00:03:04,639 Speaker 1: it just goes from one customer to another. So he's 58 00:03:04,680 --> 00:03:07,080 Speaker 1: an island of liquidity like all of the top four. 59 00:03:07,360 --> 00:03:10,560 Speaker 1: But Goldman and Mortgage Stanley are more broker deal are 60 00:03:10,680 --> 00:03:13,720 Speaker 1: still than they are bank. That's the key thing to remember. 61 00:03:14,120 --> 00:03:15,760 Speaker 1: So we'll get to well as far ago maybe at 62 00:03:15,760 --> 00:03:18,400 Speaker 1: the end, because it's a slightly separate case. But what 63 00:03:18,480 --> 00:03:21,000 Speaker 1: about Golden Sacks this year? Is Goldman feeling a little 64 00:03:21,000 --> 00:03:23,000 Speaker 1: bit of pressure even though they also had you know, 65 00:03:23,120 --> 00:03:26,360 Speaker 1: a great quarter of course, you know, it's great to 66 00:03:26,360 --> 00:03:28,240 Speaker 1: see them hit one out of the park like this, 67 00:03:28,639 --> 00:03:30,840 Speaker 1: but they are the last dinosaur in the line. You know, 68 00:03:30,880 --> 00:03:33,240 Speaker 1: if you ever watch the Animal Planet, the one at 69 00:03:33,240 --> 00:03:35,480 Speaker 1: the end is the one the t rex seats. So 70 00:03:35,520 --> 00:03:38,920 Speaker 1: in terms of funding, in terms of volatility of the business, 71 00:03:39,040 --> 00:03:41,640 Speaker 1: I think Goldman is still very vulnerable as his city. 72 00:03:41,880 --> 00:03:44,320 Speaker 1: Those are the two at the back. The rest of 73 00:03:44,360 --> 00:03:46,600 Speaker 1: the group is doing better, and I think, you know, 74 00:03:46,680 --> 00:03:49,360 Speaker 1: God bless Jim Gorman. He had a lot of people 75 00:03:49,440 --> 00:03:53,000 Speaker 1: criticizing him, but he's ended up creating a business that 76 00:03:53,160 --> 00:03:55,119 Speaker 1: kind of looks like the U B S is any 77 00:03:55,160 --> 00:03:58,200 Speaker 1: other big European asset managers. But he's got a world 78 00:03:58,240 --> 00:04:01,680 Speaker 1: class investment back. So it's a much more balanced model, 79 00:04:01,720 --> 00:04:04,720 Speaker 1: I think than a lot of his competitors. So talk 80 00:04:04,800 --> 00:04:07,520 Speaker 1: to us then about City. It's been a decade at 81 00:04:07,520 --> 00:04:10,040 Speaker 1: this point, Chris, and it looks like it's going to 82 00:04:10,120 --> 00:04:12,480 Speaker 1: have to need some kind of i don't know more, 83 00:04:12,720 --> 00:04:15,240 Speaker 1: if not restructuring, massaging. There's going to be a new 84 00:04:15,360 --> 00:04:17,440 Speaker 1: CEO to try and do this. She was present the 85 00:04:17,520 --> 00:04:19,880 Speaker 1: last time there was a restructuring, so she knows exactly 86 00:04:19,920 --> 00:04:22,760 Speaker 1: what's going on inside the bad bank and the big 87 00:04:22,800 --> 00:04:24,800 Speaker 1: good bank and in the units that have spun off 88 00:04:24,800 --> 00:04:28,600 Speaker 1: and so on. We would your prescription for cityv Well. 89 00:04:28,640 --> 00:04:31,880 Speaker 1: City suffers from the h of sandy while you know, 90 00:04:32,240 --> 00:04:35,120 Speaker 1: uh my core back has done a great job of 91 00:04:35,200 --> 00:04:38,479 Speaker 1: turning things around, but he was the first competent CEO 92 00:04:38,520 --> 00:04:41,320 Speaker 1: of that bank had had in fifteen years. And again 93 00:04:41,400 --> 00:04:45,200 Speaker 1: Jane Fraser, great operator. She's touched all the relevant parts 94 00:04:45,200 --> 00:04:47,320 Speaker 1: of the bank, and I think she's got to just 95 00:04:47,400 --> 00:04:50,839 Speaker 1: try and work with her board to fashion a business 96 00:04:51,440 --> 00:04:53,800 Speaker 1: that makes sense. You know, they're not really much of 97 00:04:53,800 --> 00:04:56,920 Speaker 1: a U S bank well that you only have about 98 00:04:57,440 --> 00:05:00,440 Speaker 1: core deposits inside City. The rest of it is funded 99 00:05:00,640 --> 00:05:03,640 Speaker 1: like Goldman Sachs in the markets. Their cost of funds 100 00:05:03,720 --> 00:05:05,760 Speaker 1: is higher and the thing that saves them is the 101 00:05:05,800 --> 00:05:09,440 Speaker 1: big consumer book because their credit card book has you know, 102 00:05:10,000 --> 00:05:12,800 Speaker 1: a gross yield in the teens, so that makes up 103 00:05:12,839 --> 00:05:14,719 Speaker 1: for a lot of sins. But she's got to figure 104 00:05:14,720 --> 00:05:17,599 Speaker 1: out a way, I think, to get back or buy 105 00:05:17,760 --> 00:05:21,359 Speaker 1: an asset manager um, so she can compete with the 106 00:05:21,400 --> 00:05:25,039 Speaker 1: rest of these universal banks. Right, They're not just monolithic 107 00:05:25,080 --> 00:05:28,760 Speaker 1: commercial banks with a broker dealer anymore. Funny, everybody wants 108 00:05:28,760 --> 00:05:31,320 Speaker 1: to have a trillion trillion and a half two trillion 109 00:05:31,360 --> 00:05:33,920 Speaker 1: in a u M, so they can compete with black Rock, 110 00:05:34,080 --> 00:05:37,719 Speaker 1: which is much bigger than all of them. So that 111 00:05:37,839 --> 00:05:40,480 Speaker 1: to me is the competitive landscape. She's got a decent 112 00:05:41,279 --> 00:05:45,240 Speaker 1: capital markets investment bank. It's not as good as Morgan Stanley. 113 00:05:45,480 --> 00:05:48,520 Speaker 1: And she's got a great, great advantage in that consumer 114 00:05:48,600 --> 00:05:51,039 Speaker 1: book because it throws off a lot of income in 115 00:05:51,120 --> 00:05:53,800 Speaker 1: good times. So that to me is a challenge with 116 00:05:53,839 --> 00:05:56,560 Speaker 1: City What do they want to be when they grow up? Okay, 117 00:05:57,120 --> 00:05:59,799 Speaker 1: because look, you know we've had systems and control issues 118 00:06:00,040 --> 00:06:01,960 Speaker 1: so you and I were kids. Funny, we've been watching 119 00:06:01,960 --> 00:06:04,760 Speaker 1: this movie for twenty five years. This goes back to 120 00:06:04,839 --> 00:06:07,920 Speaker 1: John Reid and when Sandy Wild started buying those non 121 00:06:07,920 --> 00:06:10,600 Speaker 1: bank businesses, that's where they got into trouble. When you 122 00:06:10,680 --> 00:06:14,279 Speaker 1: started turning you know, sales offices of Associates Corp. Into 123 00:06:14,279 --> 00:06:16,960 Speaker 1: branches of City Bank, that was that was not a 124 00:06:16,960 --> 00:06:19,039 Speaker 1: good idea. Yeah, I mean, and and so many of 125 00:06:19,080 --> 00:06:20,839 Speaker 1: the places where these banks were able to make a 126 00:06:20,839 --> 00:06:24,359 Speaker 1: little extra cat on the side. They just don't exist anymore, right, Chris, 127 00:06:24,400 --> 00:06:26,719 Speaker 1: You know, currency trading and so on, Like it's just 128 00:06:26,760 --> 00:06:31,160 Speaker 1: become such a different kind of experience to run a bank. 129 00:06:31,480 --> 00:06:34,000 Speaker 1: But tell me this. You look at the banks and 130 00:06:34,400 --> 00:06:36,240 Speaker 1: the quarters that they've had, and yes, a lot of 131 00:06:36,240 --> 00:06:38,719 Speaker 1: it has come from the capital markets, but you would 132 00:06:38,760 --> 00:06:41,440 Speaker 1: also imagine by looking at them that the consumer is 133 00:06:41,480 --> 00:06:45,640 Speaker 1: extraordinarily comfortable right now. But that's not the case. We 134 00:06:45,800 --> 00:06:48,560 Speaker 1: just got more initial jobless claims that don't even reflect 135 00:06:48,560 --> 00:06:52,640 Speaker 1: the problems in California nine hundred thousand initial jobless claims 136 00:06:52,640 --> 00:06:56,839 Speaker 1: just for last week. Empire Manufacturing is down to ten 137 00:06:56,880 --> 00:07:01,040 Speaker 1: point five. We had obviously a better Philly fired business 138 00:07:01,040 --> 00:07:04,800 Speaker 1: outlook and so on, and you know, there's definitely mixed data. 139 00:07:05,200 --> 00:07:09,600 Speaker 1: But how are the banks going to whether out what's 140 00:07:09,640 --> 00:07:13,680 Speaker 1: obviously coming to the consumer if we don't get more stimulus. Well, 141 00:07:13,720 --> 00:07:18,160 Speaker 1: it's it's kind of a tale of two countries, Bonnie. 142 00:07:18,200 --> 00:07:20,960 Speaker 1: We have a lot of people who are unemployed now 143 00:07:21,000 --> 00:07:24,040 Speaker 1: who may or may not have been particularly bankable. If 144 00:07:24,040 --> 00:07:27,960 Speaker 1: you think of the bomb Americans, they're not big users 145 00:07:27,960 --> 00:07:30,920 Speaker 1: of credit because either they don't have credit at all 146 00:07:31,040 --> 00:07:33,640 Speaker 1: or their scores are quite low. And so in this 147 00:07:33,800 --> 00:07:38,080 Speaker 1: bullmarket you've seen for mortgages, for example, other areas, even 148 00:07:38,080 --> 00:07:41,680 Speaker 1: auto autos is doing fine. Um. You know, it's the 149 00:07:41,680 --> 00:07:44,200 Speaker 1: middle to the upper third of the market and the 150 00:07:44,240 --> 00:07:47,440 Speaker 1: credit terms. So will the banks feel that, Yes, the 151 00:07:47,480 --> 00:07:51,280 Speaker 1: ones with big consumer exposure, City Capital One, some of 152 00:07:51,320 --> 00:07:54,360 Speaker 1: the others. But look at American Express. American Express is 153 00:07:54,360 --> 00:07:58,040 Speaker 1: almost back up the four times book. Um. So you know, 154 00:07:58,400 --> 00:07:59,960 Speaker 1: you have to think of it in terms of the 155 00:08:00,040 --> 00:08:04,720 Speaker 1: segmentation of society, and unfortunately, the lowest income Americans are 156 00:08:04,760 --> 00:08:08,200 Speaker 1: the biggest losers. And then you think about the cost 157 00:08:08,280 --> 00:08:10,480 Speaker 1: that we've put on top of the banks for dealing 158 00:08:10,520 --> 00:08:14,400 Speaker 1: with consumer issues over the past ten years. Kamala Harris, 159 00:08:14,400 --> 00:08:16,920 Speaker 1: that's not helpful either, because there's no incentive for those 160 00:08:16,920 --> 00:08:19,880 Speaker 1: banks to stretch and lend. They could do good loans 161 00:08:19,920 --> 00:08:23,040 Speaker 1: all day long. You know, if there's anything that's a 162 00:08:23,080 --> 00:08:26,200 Speaker 1: reflection of a shaped recovery, it's that, Chris. I mean, 163 00:08:26,200 --> 00:08:28,200 Speaker 1: it's it's really something to say when you say, well, 164 00:08:28,760 --> 00:08:31,720 Speaker 1: banks aren't seeing it among their consumers because their consumers 165 00:08:31,760 --> 00:08:34,480 Speaker 1: are fine. The ones that are suffering can't even get 166 00:08:34,520 --> 00:08:37,800 Speaker 1: banked in this country and in many other countries too, Chris, 167 00:08:37,840 --> 00:08:40,080 Speaker 1: I have one more and Funny Freddy. You know, if 168 00:08:40,080 --> 00:08:43,440 Speaker 1: we get a different administration or just you know, a 169 00:08:43,480 --> 00:08:47,720 Speaker 1: continuation of the same, what happens next for Fanny Freddy. Nothing, 170 00:08:48,240 --> 00:08:51,880 Speaker 1: nothing can happen anyway. But it's just problematic. You cannot 171 00:08:51,920 --> 00:08:56,680 Speaker 1: detach these things from government support, direct sovereign credit support 172 00:08:56,679 --> 00:08:59,160 Speaker 1: and expect them to survive. You know, it's just not 173 00:08:59,240 --> 00:09:01,439 Speaker 1: going to happen. Um. But one thing I do want 174 00:09:01,480 --> 00:09:03,600 Speaker 1: to leave you with, Funny, is the reason the banks, 175 00:09:03,840 --> 00:09:07,280 Speaker 1: especially JP, we're able to pause in terms of putting 176 00:09:07,280 --> 00:09:10,480 Speaker 1: aside more cash for future losses is because of the 177 00:09:10,520 --> 00:09:13,800 Speaker 1: Forbearance and the Cares Act. The FED has said, well, 178 00:09:13,800 --> 00:09:18,400 Speaker 1: those are not delinquent loans. Until those are considered delinquent loans, 179 00:09:18,600 --> 00:09:21,560 Speaker 1: the banks don't have to put more cash aside for them. 180 00:09:21,600 --> 00:09:26,480 Speaker 1: So we're pausing. Can that pause be forever? Pause? And well, 181 00:09:26,720 --> 00:09:28,920 Speaker 1: ohly if we want to become Europeans. I mean, that's 182 00:09:28,920 --> 00:09:30,800 Speaker 1: what they did in Europe. They used to just ignore 183 00:09:31,120 --> 00:09:34,760 Speaker 1: nonperforming loans and it was a horrible, horrible mistake on 184 00:09:34,840 --> 00:09:38,680 Speaker 1: the part of the Meracle government. So you know, that's 185 00:09:38,880 --> 00:09:40,800 Speaker 1: that's kind of where we are. I think US banks 186 00:09:40,800 --> 00:09:42,560 Speaker 1: are in much better shape. They're going to clean up 187 00:09:42,559 --> 00:09:44,880 Speaker 1: the mess. Fourth quarter will be taking a lot of 188 00:09:44,880 --> 00:09:47,400 Speaker 1: stuff to the curb, Bunny, Chris. It's one of more 189 00:09:47,480 --> 00:09:50,040 Speaker 1: sanglent interviews that I've had with you. You seem actually 190 00:09:50,120 --> 00:09:53,439 Speaker 1: quite positive, which is he I work in a mortgage business. 191 00:09:53,600 --> 00:09:56,080 Speaker 1: We're going to do four and a half trillion dollars 192 00:09:56,080 --> 00:09:59,199 Speaker 1: worth the mortgages this year. That's the higher, almost higher 193 00:09:59,200 --> 00:10:01,880 Speaker 1: than two thousand war, which is a little scary, but 194 00:10:01,960 --> 00:10:04,440 Speaker 1: at least we have part of the economy that is 195 00:10:04,440 --> 00:10:06,760 Speaker 1: going to help pull us out. And housing, I think 196 00:10:07,280 --> 00:10:11,520 Speaker 1: there's accumulated demand. You have a lot of demographic factors, 197 00:10:11,600 --> 00:10:13,959 Speaker 1: younger people, one of you know, five families, and you're 198 00:10:13,960 --> 00:10:16,520 Speaker 1: going outside of the big cities, which I think is great. 199 00:10:16,760 --> 00:10:18,679 Speaker 1: This is a very good point. Maybe it's karma, the 200 00:10:18,679 --> 00:10:23,280 Speaker 1: mortgage industry finally getting a bit jp. The banks aren't 201 00:10:23,280 --> 00:10:26,200 Speaker 1: buying a third party production right now. But Jamie did 202 00:10:26,360 --> 00:10:29,520 Speaker 1: enough new mortgages so he had almost no net change 203 00:10:29,520 --> 00:10:32,360 Speaker 1: in the value of his servicing. I'll guarantee you his 204 00:10:32,440 --> 00:10:37,040 Speaker 1: servicing book is pre paying a year. Well, that's good, 205 00:10:37,280 --> 00:10:39,640 Speaker 1: it's it's good given what the mortgage industry went through 206 00:10:39,760 --> 00:10:43,719 Speaker 1: ten years ago, right, and some of it brought We 207 00:10:43,760 --> 00:10:45,600 Speaker 1: can have a longer conversation about that some other time, 208 00:10:45,640 --> 00:10:47,080 Speaker 1: and Chris, we have to let you go, but thank 209 00:10:47,120 --> 00:10:50,080 Speaker 1: you so much. That is Chris Whalen, chairman of Whalen 210 00:10:50,280 --> 00:10:53,280 Speaker 1: Global Adviser, is always a pleasure to speak with. Chris. 211 00:10:57,200 --> 00:11:00,360 Speaker 1: Let's get some more market reaction out of Sapons, who 212 00:11:00,360 --> 00:11:02,559 Speaker 1: covers all of the assets for us. She is cost 213 00:11:02,600 --> 00:11:05,160 Speaker 1: asset reporter here at Bloomberg News, and she's been obviously 214 00:11:05,240 --> 00:11:08,120 Speaker 1: keeping an eye on equities today because that's you know, 215 00:11:08,240 --> 00:11:11,520 Speaker 1: what's really sort of moving the most to the naked 216 00:11:11,520 --> 00:11:14,160 Speaker 1: eye at least. But there's a lot going on, Sarah. 217 00:11:14,240 --> 00:11:17,520 Speaker 1: In Europe and in the United States with those jobless claims, 218 00:11:17,559 --> 00:11:20,319 Speaker 1: there is a lot going on and not necessarily what 219 00:11:20,400 --> 00:11:24,320 Speaker 1: you want to see to bring optimism to this market. 220 00:11:24,440 --> 00:11:26,920 Speaker 1: So in the United States, jobless claims did come in 221 00:11:26,920 --> 00:11:30,160 Speaker 1: at eight hundred ninety thousand. The estimate was for eight 222 00:11:30,400 --> 00:11:33,160 Speaker 1: d twenty five thousand, and the prior week was also 223 00:11:33,240 --> 00:11:36,640 Speaker 1: revised hire to eight hundred forty five thousand, So not 224 00:11:36,800 --> 00:11:39,560 Speaker 1: only just a miss of that estimate, but also an 225 00:11:39,640 --> 00:11:44,000 Speaker 1: unexpected increase in jobless claims now. As Chris Lowe over 226 00:11:44,040 --> 00:11:47,000 Speaker 1: at FHN Financial put it, he said, the ongoing decline 227 00:11:47,040 --> 00:11:50,160 Speaker 1: and claims paid stretching from late April to two weeks 228 00:11:50,160 --> 00:11:54,160 Speaker 1: ago is encouraging. There he is referring to those continuing claims. 229 00:11:54,400 --> 00:11:57,240 Speaker 1: But then he said the increase in initial claims is disturbing. 230 00:11:57,320 --> 00:11:59,760 Speaker 1: It is difficult to see it and not think there 231 00:11:59,760 --> 00:12:03,480 Speaker 1: are cocovery is vulnerable, and that really just epitomizes where 232 00:12:03,480 --> 00:12:07,160 Speaker 1: we currently stand. Yes, we have gotten through the rebound. 233 00:12:07,240 --> 00:12:09,920 Speaker 1: We have gotten through that initial stage of the v 234 00:12:10,080 --> 00:12:12,760 Speaker 1: shaped recovery, if you want to call it that. However, 235 00:12:12,800 --> 00:12:16,120 Speaker 1: the question is now what is next, especially since it 236 00:12:16,120 --> 00:12:18,600 Speaker 1: looks like we may not be getting fiscal stimulus. We 237 00:12:18,679 --> 00:12:21,720 Speaker 1: do see COVID cases rising, particularly you look at Europe 238 00:12:21,840 --> 00:12:25,240 Speaker 1: right now, where we see record cases in particular countries 239 00:12:25,280 --> 00:12:28,760 Speaker 1: like Germany, Italy, Australia, the Czech Republic at the same time, 240 00:12:29,120 --> 00:12:33,080 Speaker 1: or hearing about restrictions in London, curfews in Paris, so 241 00:12:33,440 --> 00:12:36,800 Speaker 1: not what you want to see. Globally, when COVID cases 242 00:12:36,840 --> 00:12:38,880 Speaker 1: are rising, there's fears of another wave ahead of the 243 00:12:38,880 --> 00:12:41,680 Speaker 1: winter and a labor market recovery. In the United States, 244 00:12:41,720 --> 00:12:45,200 Speaker 1: seems to be stalling. And with all that said, we 245 00:12:45,280 --> 00:12:48,040 Speaker 1: still have in disease not far from records. I mean, yes, 246 00:12:48,040 --> 00:12:50,760 Speaker 1: we're down one percent today and the sack down wanted 247 00:12:50,760 --> 00:12:52,480 Speaker 1: a half percent and so on, but I mean that's 248 00:12:52,520 --> 00:12:54,280 Speaker 1: not even that much of a self. Well, that's why 249 00:12:54,320 --> 00:12:57,200 Speaker 1: it's so important to keep this all in perspective. I mean, 250 00:12:57,240 --> 00:12:58,920 Speaker 1: I think about the earning season that we are in 251 00:12:58,920 --> 00:13:01,240 Speaker 1: the middle of. Shirt is very very very early on. 252 00:13:01,679 --> 00:13:04,880 Speaker 1: But to this point, the beat rate for US companies 253 00:13:04,920 --> 00:13:09,040 Speaker 1: that have reported earning so far is about that would 254 00:13:09,040 --> 00:13:12,120 Speaker 1: be a record beat rate. However, if you look at 255 00:13:12,120 --> 00:13:15,160 Speaker 1: the average move for a stock that has reported earnings 256 00:13:15,160 --> 00:13:18,520 Speaker 1: in the twenty four hours post reporting, that average move 257 00:13:18,559 --> 00:13:21,760 Speaker 1: has actually been about a two percent decline. So even 258 00:13:21,800 --> 00:13:25,480 Speaker 1: though companies are beating, companies are delivering, it's not showing 259 00:13:25,559 --> 00:13:27,360 Speaker 1: up in the stock market. And part of the reason 260 00:13:27,400 --> 00:13:30,240 Speaker 1: for that is, yes, the fact that many of these 261 00:13:30,400 --> 00:13:34,160 Speaker 1: estimates analysts had no clue what was going to happen. 262 00:13:34,240 --> 00:13:36,800 Speaker 1: We had gotten no guidance. It was almost as though 263 00:13:36,840 --> 00:13:39,400 Speaker 1: we were living in a vacuum, and an information vacuum. 264 00:13:39,600 --> 00:13:43,200 Speaker 1: And you see that sparity between the estimates and the 265 00:13:43,240 --> 00:13:45,320 Speaker 1: actual numbers that are coming out. But when you have 266 00:13:45,400 --> 00:13:48,120 Speaker 1: markets that are trading at record highs, it is such 267 00:13:48,120 --> 00:13:50,480 Speaker 1: a different setup than the beginning of the second quarter 268 00:13:50,600 --> 00:13:53,000 Speaker 1: or first quarter earning season, when even though we got 269 00:13:53,040 --> 00:13:56,160 Speaker 1: such negative numbers, we saw an unbelievable rally in the 270 00:13:56,200 --> 00:13:59,200 Speaker 1: stock market of older notes that you read ol day, 271 00:13:59,280 --> 00:14:04,120 Speaker 1: and I know you so many how many people are pessimistic, Sarah, 272 00:14:04,120 --> 00:14:06,440 Speaker 1: because of the ones I read, It really doesn't seem 273 00:14:06,559 --> 00:14:08,319 Speaker 1: short of a couple of mornings here and there, that 274 00:14:08,440 --> 00:14:12,359 Speaker 1: people out on wool Street sending out research are that pessimistic. 275 00:14:12,520 --> 00:14:14,680 Speaker 1: I would say that my read is very similar to yours. 276 00:14:14,679 --> 00:14:16,880 Speaker 1: It seems at this point in time, more and more 277 00:14:16,920 --> 00:14:20,600 Speaker 1: strategists are actually highlighting breadth measures, for example of the 278 00:14:20,640 --> 00:14:22,800 Speaker 1: market saying that this is a market that has been 279 00:14:22,840 --> 00:14:26,360 Speaker 1: broadening out that Davis reach Arch, for example, had highlighted 280 00:14:26,400 --> 00:14:28,840 Speaker 1: this the other day, changing their stance on US equities 281 00:14:28,880 --> 00:14:31,480 Speaker 1: to become a bit more optimistic, saying that one of 282 00:14:31,520 --> 00:14:34,440 Speaker 1: their breadth measures had actually flagged and was now positive 283 00:14:34,440 --> 00:14:36,080 Speaker 1: and pointing to the fact that we are in the 284 00:14:36,120 --> 00:14:38,960 Speaker 1: early stages of a true bowl market and that does 285 00:14:39,040 --> 00:14:42,720 Speaker 1: seem to be what the majority of those notes that 286 00:14:42,720 --> 00:14:44,640 Speaker 1: I am reading are saying. People are saying, yes, of 287 00:14:44,680 --> 00:14:46,760 Speaker 1: course there are risks out there. You have an election, 288 00:14:46,800 --> 00:14:49,000 Speaker 1: you have COVID nineteen. You need to see what happens 289 00:14:49,040 --> 00:14:51,200 Speaker 1: with the labor market, not just in the United States, 290 00:14:51,280 --> 00:14:53,720 Speaker 1: but the economy around the world. However, at the same time, 291 00:14:53,760 --> 00:14:56,280 Speaker 1: if you look at the internals of the market, many 292 00:14:56,280 --> 00:14:59,600 Speaker 1: strategists are starting to say this is resembling a true 293 00:14:59,680 --> 00:15:02,920 Speaker 1: early stage bowl market. I suppose the next catalyst will 294 00:15:02,960 --> 00:15:05,760 Speaker 1: be the actual election itself. At this point, I mean, yes, 295 00:15:05,840 --> 00:15:08,040 Speaker 1: we might get something between now and then on breaks 296 00:15:08,080 --> 00:15:10,560 Speaker 1: it all. Well, it's not likely. We might get some 297 00:15:10,600 --> 00:15:12,520 Speaker 1: better news on the virus, but you might also get 298 00:15:12,520 --> 00:15:15,560 Speaker 1: some worse news. So I suppose is that what people 299 00:15:15,600 --> 00:15:18,720 Speaker 1: are focused on the election coming up, especially considering the 300 00:15:18,760 --> 00:15:21,080 Speaker 1: fact that nineteen days away as the U S election, 301 00:15:21,120 --> 00:15:23,880 Speaker 1: that is thirteen training sessions, so it's going to be 302 00:15:23,960 --> 00:15:26,280 Speaker 1: here before we know it. It's pretty unbelievable, but I 303 00:15:26,320 --> 00:15:28,600 Speaker 1: would say still top of mind, and you really can't 304 00:15:28,600 --> 00:15:31,480 Speaker 1: get away from it. It's just COVID nineteen, especially when 305 00:15:31,480 --> 00:15:34,400 Speaker 1: you see headlines of what is happening in Europe currently, 306 00:15:34,680 --> 00:15:37,840 Speaker 1: and also when we see headlines dropping about officials or 307 00:15:37,880 --> 00:15:41,440 Speaker 1: people involved in the White House or campaigns testing positive 308 00:15:41,480 --> 00:15:44,480 Speaker 1: as well. That brings it into it too, And it 309 00:15:44,600 --> 00:15:47,960 Speaker 1: is really what's dictating our lives, businesses, and the economy 310 00:15:48,000 --> 00:15:49,960 Speaker 1: at the moment. And I'm sure everyone has seen by now. 311 00:15:50,000 --> 00:15:53,800 Speaker 1: But obviously Kamala Harris has to stop traveling because AIDS 312 00:15:53,800 --> 00:15:56,760 Speaker 1: in her front office tested positive as well. So the 313 00:15:57,480 --> 00:16:00,400 Speaker 1: effecting both sides. We're going to get to tell holes 314 00:16:00,400 --> 00:16:02,720 Speaker 1: to competing town holds nights. We'll see if we hear 315 00:16:02,800 --> 00:16:06,400 Speaker 1: anything that might change the narrative, but it doesn't feel 316 00:16:06,400 --> 00:16:09,160 Speaker 1: like we will at this point. The other quick things 317 00:16:09,160 --> 00:16:12,480 Speaker 1: Sarah that I'm watching, and it hearkens back to everybody 318 00:16:12,520 --> 00:16:15,360 Speaker 1: buying outdoor patio furniture and heaters and so on, is 319 00:16:16,040 --> 00:16:19,040 Speaker 1: energy prices. They might go up a little, right. It's 320 00:16:19,080 --> 00:16:22,560 Speaker 1: interesting because when you think about the COVID nineteen pandemic. 321 00:16:22,600 --> 00:16:25,480 Speaker 1: Originally this was seen as a deflationary force. Now some 322 00:16:25,560 --> 00:16:27,640 Speaker 1: are wondering if we are going to see pockets of 323 00:16:27,720 --> 00:16:30,360 Speaker 1: inflation pick up. We saw that in the last CPI 324 00:16:30,440 --> 00:16:33,880 Speaker 1: report with used cars, for example. There are certain pockets 325 00:16:33,920 --> 00:16:37,520 Speaker 1: of the economy that may benefit. Now we will see 326 00:16:37,520 --> 00:16:39,440 Speaker 1: what happens as we start getting into the winter. Like 327 00:16:39,480 --> 00:16:43,280 Speaker 1: you said, it would be imaginable that many restaurants, uh, 328 00:16:43,520 --> 00:16:46,360 Speaker 1: people maybe in their homes are trying to get heaters 329 00:16:46,400 --> 00:16:49,280 Speaker 1: to use outside. In particular, I have heard that there 330 00:16:49,280 --> 00:16:53,240 Speaker 1: are extreme backlogs to achieve these because they're in such 331 00:16:53,280 --> 00:16:56,040 Speaker 1: hot demand currently. But yes, you have to think about 332 00:16:56,080 --> 00:17:00,000 Speaker 1: the derivative effects. I bought some p Paine from local 333 00:17:00,040 --> 00:17:03,240 Speaker 1: hardware store and they're why and I felt like saying, well, 334 00:17:03,520 --> 00:17:07,040 Speaker 1: it's it's for heating. What else is complaine used for 335 00:17:07,080 --> 00:17:12,080 Speaker 1: these days? Leave out to your imagination. Sarah Ponzac, thank you, 336 00:17:12,200 --> 00:17:16,800 Speaker 1: cross Usset reporter here at Bloomberg News and general just genius. 337 00:17:18,680 --> 00:17:22,080 Speaker 1: Carl Weinberg joins US now founder in chief, international economist 338 00:17:22,080 --> 00:17:25,800 Speaker 1: of High Frequency Economics. Carl, Let's get straight to the point. 339 00:17:26,359 --> 00:17:29,159 Speaker 1: How awful is it out there? What are we going 340 00:17:29,200 --> 00:17:32,919 Speaker 1: to see in terms of recession in layers or not 341 00:17:33,040 --> 00:17:35,760 Speaker 1: in layers for the US this year and next year? 342 00:17:35,840 --> 00:17:40,240 Speaker 1: Most importantly? Okay, well, thank you for having me on vannie. 343 00:17:40,480 --> 00:17:42,720 Speaker 1: You know we're looking at a second wave of the virus, 344 00:17:42,800 --> 00:17:46,280 Speaker 1: and we've maintained the high economics that you can forecast 345 00:17:46,320 --> 00:17:48,280 Speaker 1: the future of the economy until you know where the 346 00:17:48,359 --> 00:17:51,000 Speaker 1: virus is going to go, and we don't know there 347 00:17:51,040 --> 00:17:54,640 Speaker 1: can possibly be a real recovery until we see a 348 00:17:54,680 --> 00:17:57,040 Speaker 1: cure for the virus or at least a good treatment 349 00:17:57,119 --> 00:17:59,560 Speaker 1: for the virus, and none of that is at hand. 350 00:18:00,000 --> 00:18:03,960 Speaker 1: As the virus spread increases, we're getting increasingly pessimistic in 351 00:18:04,000 --> 00:18:06,760 Speaker 1: our outlook for the U. S. Economy, especially when you 352 00:18:06,800 --> 00:18:09,600 Speaker 1: see Europe right now, right, Carl, because so many countries 353 00:18:09,600 --> 00:18:12,360 Speaker 1: in Europe did do at least partially the right thing, 354 00:18:12,560 --> 00:18:15,080 Speaker 1: and France in particular just can't keep it under control 355 00:18:15,160 --> 00:18:18,679 Speaker 1: right now, that's right, Varney. Also in the United States 356 00:18:18,680 --> 00:18:21,760 Speaker 1: from seeing outbreaks in the heartland of America at an 357 00:18:21,800 --> 00:18:25,480 Speaker 1: accelerating pace. The issue is with the virus now and 358 00:18:25,480 --> 00:18:27,760 Speaker 1: why this is different from what we saw West Springs. 359 00:18:27,800 --> 00:18:30,840 Speaker 1: West Spring, we closed the economy down, and then we 360 00:18:30,920 --> 00:18:33,040 Speaker 1: use the same power that we invoke to close it 361 00:18:33,080 --> 00:18:35,679 Speaker 1: down to open it up again. Right now, the virus 362 00:18:35,760 --> 00:18:38,400 Speaker 1: is in charge, and the virus shuts down the economy 363 00:18:38,440 --> 00:18:42,199 Speaker 1: by infection. One worker missing from a factory, sick at 364 00:18:42,200 --> 00:18:45,400 Speaker 1: a factory closes an assembly line if what that factory 365 00:18:45,440 --> 00:18:47,879 Speaker 1: makes is used to make something else. Saying in the 366 00:18:47,960 --> 00:18:51,159 Speaker 1: auto industry, one part for the assembly line missing shuts 367 00:18:51,200 --> 00:18:54,360 Speaker 1: down the whole assembly line. And similarly, one students sick 368 00:18:54,400 --> 00:18:57,000 Speaker 1: at the school closes a whole university or a whole 369 00:18:57,000 --> 00:18:59,960 Speaker 1: school and keeps kids at home, or one office work 370 00:19:00,040 --> 00:19:02,840 Speaker 1: they're ill, shuts down the whole office. Right now, the 371 00:19:02,960 --> 00:19:06,560 Speaker 1: virus is in charge, and we don't know how soon 372 00:19:07,000 --> 00:19:09,320 Speaker 1: this is going to be brought under control and what 373 00:19:09,480 --> 00:19:12,399 Speaker 1: kind of economic activity it's going to take out along 374 00:19:12,440 --> 00:19:15,080 Speaker 1: the way. Just a quick update for people. COVID is 375 00:19:15,119 --> 00:19:18,479 Speaker 1: in forties six states right now detectively and that we 376 00:19:18,560 --> 00:19:22,480 Speaker 1: know of, and deaths around the world have topped one 377 00:19:22,520 --> 00:19:26,200 Speaker 1: million there at one point zero nine million. New York 378 00:19:26,320 --> 00:19:30,359 Speaker 1: hotspots are leveling off, but Houston, I see use intensive 379 00:19:30,400 --> 00:19:34,000 Speaker 1: care units are seeing a surge. Carl. Let's talk about then, 380 00:19:34,000 --> 00:19:36,639 Speaker 1: what we do know. We got economic data this morning 381 00:19:36,640 --> 00:19:39,040 Speaker 1: that showed in a jobless claims are just not getting 382 00:19:39,040 --> 00:19:42,240 Speaker 1: any better. And that's pretty distorted data right now, and 383 00:19:42,280 --> 00:19:45,000 Speaker 1: there's lots to not not like out there, including the 384 00:19:45,080 --> 00:19:48,520 Speaker 1: fact that the stimulus talks are just going nowhere. Yeah, 385 00:19:48,600 --> 00:19:50,200 Speaker 1: I mean, there's a lot not to like. In this 386 00:19:50,359 --> 00:19:55,000 Speaker 1: morning's employment claims number claims are are not going down 387 00:19:55,440 --> 00:19:58,200 Speaker 1: as we like them too. And more importantly, the number 388 00:19:58,200 --> 00:20:00,840 Speaker 1: of people who are on benefits are going down for 389 00:20:00,880 --> 00:20:03,760 Speaker 1: the wrong reason. Probably people want it's losting the benefits 390 00:20:03,800 --> 00:20:06,520 Speaker 1: that they have. They've lost their all supporter. They're going 391 00:20:06,560 --> 00:20:09,000 Speaker 1: to lose that all supports from any number of programs. 392 00:20:09,359 --> 00:20:11,679 Speaker 1: And what this means is that the income hit that 393 00:20:11,800 --> 00:20:15,239 Speaker 1: we've avoided so far has now started to catch up 394 00:20:15,280 --> 00:20:17,680 Speaker 1: with us, and it's probably started in July, but it's 395 00:20:17,680 --> 00:20:19,400 Speaker 1: going to get a lot worse in the next month 396 00:20:19,520 --> 00:20:22,360 Speaker 1: or two. The next detail sales number that we're going 397 00:20:22,440 --> 00:20:25,680 Speaker 1: to see is probably not going to be too terrible. However, 398 00:20:25,880 --> 00:20:28,280 Speaker 1: we're very grim about what's coming up in the months 399 00:20:28,280 --> 00:20:32,800 Speaker 1: ahead as people lose their support unemployment insurance and jobs 400 00:20:33,000 --> 00:20:36,160 Speaker 1: do not need materialize to put them back to work. 401 00:20:36,560 --> 00:20:38,320 Speaker 1: I mean, we haven't even had a chance to talk 402 00:20:38,359 --> 00:20:40,720 Speaker 1: to you recently about China, which was the only topic 403 00:20:40,760 --> 00:20:42,680 Speaker 1: we were talking about for a long time. But China 404 00:20:42,760 --> 00:20:45,479 Speaker 1: is really receded into the background now in terms of 405 00:20:45,520 --> 00:20:48,400 Speaker 1: trade negotiations and so on. Given what's actually happening right 406 00:20:48,440 --> 00:20:51,399 Speaker 1: around us. What what do you think about at night, Carl, 407 00:20:51,440 --> 00:20:54,000 Speaker 1: when you're thinking about the economy and the stock market 408 00:20:54,000 --> 00:20:56,680 Speaker 1: close to highs and the election coming off and so on. 409 00:20:56,840 --> 00:21:00,119 Speaker 1: What's the most important question for you right now? Any 410 00:21:00,119 --> 00:21:02,200 Speaker 1: funny you should ask. I was just writing about China 411 00:21:02,240 --> 00:21:05,000 Speaker 1: for our Notes on the Global Ecountry tomorrow. China's going 412 00:21:05,040 --> 00:21:07,440 Speaker 1: to print a GDP number next week that's going to 413 00:21:07,480 --> 00:21:10,199 Speaker 1: sail about three and a half percent growth. That's not 414 00:21:10,359 --> 00:21:13,920 Speaker 1: a particularly good number from an historical perspective, but from 415 00:21:13,920 --> 00:21:16,359 Speaker 1: the perspective of the world at large, that's a pretty 416 00:21:16,440 --> 00:21:19,800 Speaker 1: darned good result, giving what's going on with this pandemic 417 00:21:19,840 --> 00:21:23,360 Speaker 1: in other countries. China right now is exploiting its advantage 418 00:21:23,560 --> 00:21:27,800 Speaker 1: having also with the pandemic, albeit harshly from a social 419 00:21:28,200 --> 00:21:31,879 Speaker 1: um um, from a political pressure point of view, all right, 420 00:21:32,080 --> 00:21:34,920 Speaker 1: but nonetheless they contained it, and now they're using their 421 00:21:35,000 --> 00:21:39,439 Speaker 1: windfall from having contained the virus to exploit openings in 422 00:21:39,480 --> 00:21:42,159 Speaker 1: the world economy to step up to the plate, if 423 00:21:42,200 --> 00:21:45,280 Speaker 1: you will, say, in relationships with Iran and defiance of 424 00:21:45,320 --> 00:21:49,440 Speaker 1: the US sanctions, with relationships of Africa and other countries, 425 00:21:49,480 --> 00:21:52,679 Speaker 1: spreading AID and so forth. China is benefiting from this 426 00:21:52,760 --> 00:21:57,160 Speaker 1: pandemic and multiple dimensions and so far for whatever reasons 427 00:21:57,200 --> 00:22:00,320 Speaker 1: that we may not approve of politically or socially they're 428 00:22:00,320 --> 00:22:04,240 Speaker 1: managing to keep the pandemic under control. Yeah, I mean 429 00:22:04,400 --> 00:22:08,520 Speaker 1: it sounds pretty malignant. How much hay can bad actors 430 00:22:08,680 --> 00:22:11,879 Speaker 1: make from the situation that we're in right now, including 431 00:22:11,920 --> 00:22:13,800 Speaker 1: the fact that we have an election coming up, and 432 00:22:14,000 --> 00:22:15,679 Speaker 1: you know that's what people are concentrating on. We just 433 00:22:15,680 --> 00:22:18,160 Speaker 1: have a few seconds left. By the way, Carl, Well, 434 00:22:18,200 --> 00:22:20,520 Speaker 1: I agree with you about that money, but measures, some 435 00:22:20,520 --> 00:22:22,879 Speaker 1: of the measures have been extreme. Then again, if you 436 00:22:22,920 --> 00:22:26,000 Speaker 1: were living in China right now, commonly would be growing, 437 00:22:26,080 --> 00:22:28,240 Speaker 1: you would have a job, you wouldn't be worried about 438 00:22:28,240 --> 00:22:31,359 Speaker 1: losing it, and you wouldn't be worried about getting the 439 00:22:31,480 --> 00:22:34,920 Speaker 1: disease um. You know, So there are obviously a lot 440 00:22:34,960 --> 00:22:41,359 Speaker 1: of costs associated with this. There also true benefits as well. Carl, 441 00:22:41,520 --> 00:22:43,920 Speaker 1: is always an absolute pleasure to speak with you, and 442 00:22:44,160 --> 00:22:46,239 Speaker 1: Carl again, we did get to talk a little bit 443 00:22:46,240 --> 00:22:49,639 Speaker 1: about China, So that's good. Carl Weinberg of High Frequency 444 00:22:49,760 --> 00:22:52,920 Speaker 1: Economics covering the gownma there from this morning's economic data 445 00:22:53,440 --> 00:22:56,440 Speaker 1: to the stock market to what's happening in China. Speaking 446 00:22:56,480 --> 00:22:58,800 Speaker 1: of the stock market, re seeing just a little relief 447 00:22:59,160 --> 00:23:02,119 Speaker 1: the dow down only quote unquote just more than a 448 00:23:02,119 --> 00:23:04,320 Speaker 1: half percent right now, or undred and fifty eight points, 449 00:23:04,359 --> 00:23:06,960 Speaker 1: the SMP down twenty five points, seven tenths of percent, 450 00:23:07,240 --> 00:23:10,920 Speaker 1: and then as DEAC down one percent. It probably bears 451 00:23:10,960 --> 00:23:14,320 Speaker 1: repeating that we saw initial jobless claims for last week 452 00:23:14,440 --> 00:23:18,280 Speaker 1: coming in today higher than economists were anticipating, just below 453 00:23:18,480 --> 00:23:20,960 Speaker 1: nine hundred thousand claims, and we know that there are 454 00:23:21,040 --> 00:23:24,160 Speaker 1: some problems with California data which is skewing the data 455 00:23:24,200 --> 00:23:27,439 Speaker 1: continuing claims staying over that one million mark. We do 456 00:23:27,520 --> 00:23:30,159 Speaker 1: not like to see continuing claims staying over a million 457 00:23:30,960 --> 00:23:32,800 Speaker 1: for many weeks in a row, but that's what we have. 458 00:23:35,920 --> 00:23:39,399 Speaker 1: Nice guest, Christian mcgoon, CEO of Amplify e t F 459 00:23:39,920 --> 00:23:44,680 Speaker 1: joins us. He's also portfolio of the Amplify online retail 460 00:23:44,760 --> 00:23:47,919 Speaker 1: et F I buy and for anybody who's looking it up, 461 00:23:47,920 --> 00:23:52,479 Speaker 1: it's I b U I And that is obviously something 462 00:23:53,040 --> 00:23:56,679 Speaker 1: that has been involved with Amazon and is involved with Amazon. 463 00:23:56,760 --> 00:23:59,440 Speaker 1: So let's start off right there, Christian. We've just had 464 00:23:59,520 --> 00:24:04,280 Speaker 1: primed days this year, an extra prime day. Amazon hasn't 465 00:24:04,280 --> 00:24:07,480 Speaker 1: released a lot of data, but it definitely released third 466 00:24:07,560 --> 00:24:10,959 Speaker 1: party or fulfilleries data which was higher. Talked to us 467 00:24:10,960 --> 00:24:15,040 Speaker 1: about what you've seen. Yeah, so Prime Day concluded, and 468 00:24:15,320 --> 00:24:17,880 Speaker 1: you know, once again it was a record Prime Day. 469 00:24:17,920 --> 00:24:21,160 Speaker 1: This was the sixth annual Amazon Prime Day. Last year, 470 00:24:21,480 --> 00:24:25,840 Speaker 1: Amazon found about a seven billion dollar kind of sales 471 00:24:26,240 --> 00:24:30,240 Speaker 1: um UH to two day period. This year, UM, early 472 00:24:30,280 --> 00:24:32,560 Speaker 1: projections look like it's going to be closer to ten 473 00:24:32,600 --> 00:24:35,840 Speaker 1: billion dollars about nine point nine billion, with about six 474 00:24:35,880 --> 00:24:39,320 Speaker 1: billion coming from US versus about four billion coming from 475 00:24:39,320 --> 00:24:42,600 Speaker 1: outside the US. The average order is up about forty 476 00:24:42,640 --> 00:24:45,399 Speaker 1: five dollars per order. The average household spend looks to 477 00:24:45,440 --> 00:24:50,280 Speaker 1: be about seventy six dollars. Thirties percent of customers surveyed 478 00:24:50,520 --> 00:24:54,280 Speaker 1: by one data provider show that they're buying holiday gifts. Remember, 479 00:24:54,440 --> 00:24:56,800 Speaker 1: Prime Day has traditionally been in July. This year it's 480 00:24:56,800 --> 00:25:00,000 Speaker 1: in October. So um Amazon is able to front run 481 00:25:00,000 --> 00:25:02,680 Speaker 1: a little bit this holiday shopping trend in the age 482 00:25:02,720 --> 00:25:06,159 Speaker 1: of COVID, which UM many people believed would make this 483 00:25:06,280 --> 00:25:08,639 Speaker 1: the record Prime Day, and sure enough, it looks like 484 00:25:08,680 --> 00:25:13,000 Speaker 1: it's going to be a record. By about your I 485 00:25:13,160 --> 00:25:16,720 Speaker 1: Buy E t F generates what at of its revenue 486 00:25:16,760 --> 00:25:20,400 Speaker 1: from online purchases in normal times? What about right now 487 00:25:20,480 --> 00:25:25,080 Speaker 1: during the pandemic? What do you imagine that percentage is question. Yeah, yeah, 488 00:25:25,080 --> 00:25:28,280 Speaker 1: it's definitely increased. So I buy only looks at companies 489 00:25:28,280 --> 00:25:30,800 Speaker 1: that have se or more of their revenue coming from 490 00:25:30,880 --> 00:25:34,520 Speaker 1: online retail sales. And you know, online retail still in 491 00:25:34,520 --> 00:25:37,080 Speaker 1: the US from a market share standpoint, is only six 492 00:25:38,320 --> 00:25:41,880 Speaker 1: of overall retail sales based off the last US Census 493 00:25:41,920 --> 00:25:46,000 Speaker 1: Bureau report that happened this past quarter. That's up from 494 00:25:46,000 --> 00:25:49,760 Speaker 1: eleven percent. Now, during holiday shopping, we typically see like 495 00:25:49,840 --> 00:25:53,000 Speaker 1: last year saw a little over twenty of market share 496 00:25:53,040 --> 00:25:56,639 Speaker 1: going online. This year, early survey results show that it 497 00:25:56,680 --> 00:25:59,919 Speaker 1: could be an excess of fifty market share. So it's 498 00:26:00,000 --> 00:26:04,320 Speaker 1: a bang up year for online retail and online retail stocks. 499 00:26:04,400 --> 00:26:07,639 Speaker 1: I buys get eighty nine percent this year, as in 500 00:26:07,680 --> 00:26:10,479 Speaker 1: it's as it's focused on online retail, believe it or not. 501 00:26:10,760 --> 00:26:14,400 Speaker 1: Amazon is only up eighty two percent, so it's actually trailed. 502 00:26:14,480 --> 00:26:18,479 Speaker 1: The average online retail stock I buy is actually equally weighted, 503 00:26:18,520 --> 00:26:21,240 Speaker 1: so it doesn't have this massive waiting to Amazon, which 504 00:26:21,320 --> 00:26:24,560 Speaker 1: is actually benefited it this year. Absolutely, and you have 505 00:26:24,600 --> 00:26:26,920 Speaker 1: two billion dollars in US it's across the sweeten e 506 00:26:27,040 --> 00:26:30,280 Speaker 1: t F that amplifies. So that's really interesting that this 507 00:26:30,359 --> 00:26:32,960 Speaker 1: is the particular one that you play pobly most close 508 00:26:33,040 --> 00:26:35,080 Speaker 1: attention to. I want to ask you a little bit 509 00:26:35,119 --> 00:26:37,960 Speaker 1: about Colorado Springs if I can. That's your location. I mean, 510 00:26:38,200 --> 00:26:41,119 Speaker 1: is that in an area that's seen an influx of 511 00:26:41,160 --> 00:26:43,840 Speaker 1: people during the coronavirus pandemic or just tell us a 512 00:26:43,880 --> 00:26:47,680 Speaker 1: little bit about what it's like in Colorado Springs right now. Yeah, 513 00:26:47,720 --> 00:26:51,800 Speaker 1: So we've definitely seen um people migrate down from the 514 00:26:51,880 --> 00:26:54,520 Speaker 1: larger city in the state, Denver to have a little 515 00:26:54,520 --> 00:26:57,560 Speaker 1: bit more of quality life in Colorado Springs. We've also 516 00:26:57,600 --> 00:27:01,720 Speaker 1: seen an influx of California uns. Frankly, in fact, in 517 00:27:01,760 --> 00:27:04,240 Speaker 1: the next few months we'll see the first opening of 518 00:27:04,320 --> 00:27:07,040 Speaker 1: In and Out Burger, which, if you're from California is 519 00:27:07,119 --> 00:27:10,840 Speaker 1: kind of a staple food there. So um, Colorado is 520 00:27:10,880 --> 00:27:15,280 Speaker 1: definitely attracting people who now can work in a place 521 00:27:15,359 --> 00:27:19,400 Speaker 1: that has some great um uh, natural beauty, a lot 522 00:27:19,400 --> 00:27:23,880 Speaker 1: of different activities all all year for seasons, and um 523 00:27:23,920 --> 00:27:27,480 Speaker 1: we're definitely seeing a nice population increase, probably due to 524 00:27:27,800 --> 00:27:30,200 Speaker 1: not only COVID restrictions, but also kind of this work 525 00:27:30,240 --> 00:27:34,639 Speaker 1: from home trend. So um definitely part of maybe one 526 00:27:34,680 --> 00:27:37,040 Speaker 1: of the areas that is a benefactor of of kind 527 00:27:37,040 --> 00:27:40,000 Speaker 1: of this changing landscape, uh, in terms of kind of 528 00:27:40,000 --> 00:27:44,400 Speaker 1: physical locating yourself based off your work. Sure, I mean 529 00:27:44,440 --> 00:27:46,679 Speaker 1: I want to say congratulations, I guess on in an 530 00:27:46,680 --> 00:27:48,359 Speaker 1: out burger, but there's definitely a question mark at the 531 00:27:48,440 --> 00:27:51,040 Speaker 1: end of that congratulations. Talk to us a little bit 532 00:27:51,040 --> 00:27:54,320 Speaker 1: about what the retail environment is like there though, because 533 00:27:54,359 --> 00:27:58,280 Speaker 1: you must see small businesses, medium sized businesses in town 534 00:27:58,600 --> 00:28:02,199 Speaker 1: and in surrounding town. Are they suffering right now or 535 00:28:02,320 --> 00:28:05,240 Speaker 1: or you know, will they actually almost in some weird way, 536 00:28:05,359 --> 00:28:10,040 Speaker 1: benefit from this too. Yeah. So you know, there is 537 00:28:10,080 --> 00:28:13,959 Speaker 1: a larger population kind of trend happening in Colorado, So 538 00:28:14,000 --> 00:28:17,160 Speaker 1: that is good. But to your point, there's still um 539 00:28:17,280 --> 00:28:21,400 Speaker 1: some physical restrictions here. We certainly have our mask mandate 540 00:28:21,440 --> 00:28:24,959 Speaker 1: that just got extended by Governor polis Um. I know 541 00:28:25,040 --> 00:28:28,240 Speaker 1: that many of the restaurants, particularly in the Denver area, 542 00:28:28,320 --> 00:28:32,919 Speaker 1: are in limited capacity about capacity, which is uh, you know, 543 00:28:32,960 --> 00:28:36,880 Speaker 1: stressing their ability to you know, stay open. Um And 544 00:28:37,240 --> 00:28:41,080 Speaker 1: overall though it seems like you know, people are adjusting, uh, 545 00:28:41,120 --> 00:28:44,120 Speaker 1: and you know the economy has um you know, slowed 546 00:28:44,120 --> 00:28:47,440 Speaker 1: down in some areas, but you know, speaking to a 547 00:28:47,480 --> 00:28:51,520 Speaker 1: lot of home improvement type businesses, whether that be people 548 00:28:51,960 --> 00:28:55,400 Speaker 1: building decks, are doing remodeling, etcetera. They're having record years. 549 00:28:56,000 --> 00:29:00,720 Speaker 1: Just spoke to several contractors UM who are seeing you know, 550 00:29:01,080 --> 00:29:05,880 Speaker 1: unbelievable backup. One for example, who's builds decks. UM has 551 00:29:06,000 --> 00:29:09,200 Speaker 1: now a five month wait for all the new decks 552 00:29:09,200 --> 00:29:13,160 Speaker 1: they're building out here in Colorado. Uh their previous high 553 00:29:13,280 --> 00:29:16,239 Speaker 1: was to two months. So um they're operating at more 554 00:29:16,280 --> 00:29:18,960 Speaker 1: than double their capacity. There's more work than they can handle. 555 00:29:19,040 --> 00:29:21,400 Speaker 1: So I think a lot of the kind of home 556 00:29:21,480 --> 00:29:25,080 Speaker 1: depot um you know type retailers are doing quite well 557 00:29:25,120 --> 00:29:28,680 Speaker 1: out here. Restaurants are are struggling. But again, you know, 558 00:29:28,680 --> 00:29:31,320 Speaker 1: we're hoping to get through this, and you know, restrictions 559 00:29:31,320 --> 00:29:36,120 Speaker 1: have been a little bit more um um, less intense, 560 00:29:36,320 --> 00:29:39,160 Speaker 1: I guess since the kind of the peak in Corona. 561 00:29:39,240 --> 00:29:42,520 Speaker 1: But definitely there's going to be some more challenges to 562 00:29:42,560 --> 00:29:45,840 Speaker 1: overcome here as we think we get into cold winter. Well, Christian, 563 00:29:45,960 --> 00:29:48,360 Speaker 1: congratulations on lots of things, honestly, but also on the 564 00:29:48,360 --> 00:29:51,320 Speaker 1: performance of I Buy Your E T F. Christian Magoon, 565 00:29:51,560 --> 00:29:55,240 Speaker 1: CEO of Amplify E t S, joining us right there 566 00:29:55,280 --> 00:30:01,640 Speaker 1: from beautiful Colorado Springs. Thanks for listening to Bloomberg Markets 567 00:30:01,680 --> 00:30:05,040 Speaker 1: podcast You can subscribe and listen to interviews at Apple 568 00:30:05,120 --> 00:30:09,040 Speaker 1: Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn, 569 00:30:09,200 --> 00:30:11,920 Speaker 1: I'm on Twitter at Bonnie Quinn. And I'm Paul Sweeney. 570 00:30:11,920 --> 00:30:14,560 Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you 571 00:30:14,560 --> 00:30:17,000 Speaker 1: can always catch us worldwide at Bloomberg Radio