WEBVTT - Stocks at Records; Labor Chief Acosta to Quit 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge. You, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Waits, each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg penl podcast on Apple 0:00:15.520 --> 0:00:17.960 Podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.560 at Bloomberg dot com. So let's get to the headlines 0:00:23.600 --> 0:00:28.120 that crossed just moments agost Labor Secretary Alex Acosta resigning 0:00:28.120 --> 0:00:32.320 within the week after coming under severe criticism over his 0:00:32.400 --> 0:00:36.400 handling of the Jeffrey Epstein case. Uh he appleaded guilty 0:00:36.479 --> 0:00:39.800 in two thousand and eight and got thirteen months in jail. 0:00:40.360 --> 0:00:43.120 Now he is being prosecuted again. Jeffrey Epstein, the financier 0:00:43.880 --> 0:00:46.199 by the Southern District of New York joining us now. 0:00:46.240 --> 0:00:49.960 Craig Gordon Bloomberg washed. Bloomberg's Washington bureau chief, Craig, what 0:00:49.960 --> 0:00:52.920 do we know so far about why Secretary Acosta is 0:00:52.960 --> 0:00:56.080 resigning now? I mean, look, we have Bloomberg News had 0:00:56.120 --> 0:00:59.560 reported a few days ago that several people around Donald 0:00:59.560 --> 0:01:02.840 Trump did not think a Costa would survive the week. Um. 0:01:02.880 --> 0:01:05.800 Obviously he's caught up very heavily in this Jeffrey Epstein 0:01:06.440 --> 0:01:08.520 case because it was the U. S. Attorney down there 0:01:08.520 --> 0:01:10.800 in Miami when they kind of pretty a pretty generous 0:01:10.840 --> 0:01:14.000 plea deal with Jeffrey Epstein on very similar charges related 0:01:14.040 --> 0:01:16.720 to underage girls and that sort of thing. So I 0:01:17.080 --> 0:01:19.800 think our feeling here in the Bluebird Washington Bureau was 0:01:19.800 --> 0:01:22.319 that a Costa was always on borrow time. People know, 0:01:22.440 --> 0:01:24.720 he went out yesterday and tried to give a kind 0:01:24.760 --> 0:01:27.360 of a defense of his um, of his handling of 0:01:27.440 --> 0:01:30.080 that case, saying, you know, he didn't have available to 0:01:30.160 --> 0:01:32.040 him all the evidence that the New York prosecutors had 0:01:32.080 --> 0:01:34.520 available to them. I think there's some question of whether 0:01:34.560 --> 0:01:37.200 that's true or not, honestly, but um, but there was 0:01:37.240 --> 0:01:39.240 also were also some reports of Trump had asked him 0:01:39.240 --> 0:01:41.759 to go out and kind of make a last stand. Um. 0:01:41.920 --> 0:01:44.119 I don't think he. He you know, did a lot 0:01:44.160 --> 0:01:46.320 to help his case yesterday, and then you know the 0:01:46.360 --> 0:01:48.400 ax fell this morning. Do we know who's going to 0:01:48.480 --> 0:01:51.240 replace him? Uh, there's an acting Labor Secretary that will 0:01:51.240 --> 0:01:54.080 step in, um now, and I'm sure Trump will look 0:01:54.120 --> 0:01:56.840 to to fill the job, you know, for Republican administration. 0:01:57.240 --> 0:01:59.400 It's actually a pretty important job. It involves a lot 0:01:59.440 --> 0:02:02.960 of regulatory issues in terms of businesses, and we all 0:02:03.000 --> 0:02:06.360 know Trump as a fairly pro business, antiregulation sort of president. 0:02:06.480 --> 0:02:09.360 So obviously there will be a move to put someone 0:02:09.360 --> 0:02:11.600 in there with with that um, with those sort of 0:02:11.639 --> 0:02:15.359 bona fides. The thing that apparently angered Trump along the way, 0:02:15.400 --> 0:02:17.960 even before the Jeffrey Epstein case rey surface, was that 0:02:18.560 --> 0:02:21.639 some of the state ag s attorney attorneys general had 0:02:21.680 --> 0:02:24.400 been thought a Costa was kind of slow walking, uh 0:02:24.400 --> 0:02:26.880 an antiregulation you know, Bill that was kind of sitting 0:02:26.880 --> 0:02:29.440 on his desk. So we think, you know, again, our 0:02:29.480 --> 0:02:32.160 reporting shows that alex A. Costa was already a little 0:02:32.160 --> 0:02:34.399 bit in Trump's dog house. Trump today said some nice 0:02:34.400 --> 0:02:37.080 things about him are reporting suggested to the contrary, And 0:02:37.080 --> 0:02:39.639 then when the Epstein thing came along, it was hard 0:02:39.680 --> 0:02:42.160 to imagine he could survive that. Again, it's easy and 0:02:42.560 --> 0:02:44.800 with hindsight to look back at his handling of the case, 0:02:45.160 --> 0:02:46.960 I don't think the Costa was able to answer some 0:02:46.960 --> 0:02:49.080 pretty key questions about why a guy who did all 0:02:49.080 --> 0:02:51.880 the things the accused of doing essentially got a thirteen 0:02:51.919 --> 0:02:54.240 month sentence and got to basically leave jail every day 0:02:54.280 --> 0:02:56.560 and go work at his house. So for most people, 0:02:56.600 --> 0:02:57.920 even if you don't, you don't have to have a 0:02:57.919 --> 0:03:00.120 lot of gree to kind of question that. And I 0:03:00.160 --> 0:03:01.799 think a Coasta it would have been really hard for 0:03:01.840 --> 0:03:04.079 him to keep dig out from under this. Washington were 0:03:04.160 --> 0:03:06.920 Chief Craig Gordon, thank you so much for the update. 0:03:21.800 --> 0:03:24.959 The US equities climbing to new highs, leaving many fund 0:03:25.000 --> 0:03:27.720 managers but a rather sick feeling in their stomachs. On 0:03:27.720 --> 0:03:31.400 one hand, uh, you know, valuations are incredibly high. On 0:03:31.520 --> 0:03:34.920 the other hand, however, there doesn't seem to be any 0:03:35.000 --> 0:03:38.080 pressure to push them down. Joining me now, Bruce Biddle's 0:03:38.160 --> 0:03:41.920 chief investment strategist, Bared Bruce, thank you for being with me. 0:03:42.160 --> 0:03:45.240 I'm trying to figure out what could potentially stop this 0:03:45.360 --> 0:03:48.160 rally that has left the SMP, the NASDAC, and the 0:03:48.240 --> 0:03:52.360 Dow all at new records. Well at least so you're exact. 0:03:52.360 --> 0:03:55.000 You're right. The market continues to press higher, and there's 0:03:55.600 --> 0:04:00.240 the pervasive lack of selling is really really amazing, and 0:04:00.280 --> 0:04:02.160 I think a lot of that has to do with 0:04:02.240 --> 0:04:05.360 the fact that, um the US economy continues to do 0:04:05.480 --> 0:04:09.320 well even though it is slowing UM. And then you 0:04:09.400 --> 0:04:12.760 have the fellow Reserve Board UM indicating that they'll cut 0:04:12.840 --> 0:04:16.320 interest rate twenty five basis points perhaps at the end 0:04:16.320 --> 0:04:19.679 of July as an insurance policy to keep it going 0:04:19.880 --> 0:04:22.760 so UM. And there's been a lot of discussion about 0:04:23.680 --> 0:04:27.520 shortfall and earnings, of course, but you have to suspect 0:04:27.560 --> 0:04:29.839 that a lot of that's really built into the market. 0:04:30.040 --> 0:04:35.440 And i'd say, furthermore, the markets not based on on 0:04:35.560 --> 0:04:38.200 second quarter earnings and markets looking for third and fourth 0:04:38.279 --> 0:04:42.719 quarter and maybe even into so UM. I think what's 0:04:42.720 --> 0:04:45.680 happening here is you've got a decent economy, and you've 0:04:45.720 --> 0:04:48.560 got our friendly Federal Reserve Board, and you've got the 0:04:48.600 --> 0:04:51.640 best economy in the world, and so it's it's being 0:04:51.640 --> 0:04:56.520 reflected in the stock market. Yeah, I can't see why 0:04:56.560 --> 0:04:59.640 you couldn't suspect the market can continue to go higher. Now, 0:04:59.640 --> 0:05:03.080 with that said, we're already up over for the year 0:05:03.080 --> 0:05:08.400 in the big averages. UM. My suspicion is that we're 0:05:08.560 --> 0:05:11.279 a touch over board here of course as a result 0:05:11.320 --> 0:05:15.680 of that, and the third quarter typically is a difficult 0:05:15.760 --> 0:05:19.400 quarter seasonally for the market, and I wouldn't be surprised 0:05:19.440 --> 0:05:22.000 if we had some sort of consolidation, even a pullback 0:05:22.000 --> 0:05:25.400 in the third quarter. Now, if that should occur, I 0:05:25.400 --> 0:05:27.680 think that would set us up for what we've for 0:05:27.720 --> 0:05:30.400 a mirror image this year what we saw last year, 0:05:30.440 --> 0:05:33.960 in other words, a good rally in November and December 0:05:34.000 --> 0:05:36.960 to finish out the year. So how much is the 0:05:37.120 --> 0:05:40.599 rally and equities dependent on the federals or of cutting 0:05:40.680 --> 0:05:44.839 rates at least two times before your end? Well, I 0:05:44.880 --> 0:05:48.440 suspect a lot, because I mean the markets turned around 0:05:48.920 --> 0:05:52.480 in January of this year based on the feeders, are 0:05:52.560 --> 0:05:55.560 board moving a hundred and eight degrees away from you know, 0:05:55.720 --> 0:06:00.799 tightening policy. So um, and I think that's continuing into 0:06:00.839 --> 0:06:05.240 this year, and perhaps we'll go into as well. But UM, 0:06:05.320 --> 0:06:07.880 a lot of the market this year and and and 0:06:07.880 --> 0:06:10.880 the reason for that is, Um, it's not the rate 0:06:10.920 --> 0:06:14.760 cuts so much that drives the market. It's the psychology 0:06:14.800 --> 0:06:19.240 of the rate cut. It builds confidence among investors and 0:06:19.320 --> 0:06:22.000 in terms of the economy, it builds confidence in terms 0:06:22.040 --> 0:06:25.800 of the consumer. So UM. The rate cuts by themselves 0:06:25.839 --> 0:06:28.320 are not the magic ointment, but I think it's a 0:06:28.400 --> 0:06:32.280 confidence that they they instill in the investor that causes 0:06:32.320 --> 0:06:35.359 these markets that do much better so so, given those comments, 0:06:35.400 --> 0:06:39.359 do you favor consumer stocks more than others just because 0:06:39.440 --> 0:06:42.800 this potentially the rate cuts give a boost disproportionately to 0:06:42.800 --> 0:06:46.880 the consumer. Well, for most of this year, we favored 0:06:46.880 --> 0:06:50.520 defensive sectors simply because we felt the economy was slowing 0:06:50.520 --> 0:06:53.680 and that's where the earnings visibility would be and that's 0:06:53.680 --> 0:06:57.080 where a larger dividend pay us are and that that's 0:06:57.120 --> 0:07:00.360 been true so far. They continue to be very strong 0:07:00.440 --> 0:07:03.120 in this environment. But if the economy is going to 0:07:03.640 --> 0:07:07.240 improve later this year, it should certainly show up in 0:07:07.320 --> 0:07:11.920 two areas. One would be consumer discretionary sector. UM, that 0:07:11.960 --> 0:07:14.000 should do much better. And if you look at some 0:07:14.040 --> 0:07:17.920 of these retail stocks on the big box retailers, they're 0:07:17.960 --> 0:07:22.560 making new highs here this week. So the consumer discretionary 0:07:22.640 --> 0:07:24.480 certainty is a place to go. And I would think 0:07:24.720 --> 0:07:28.800 the industrials would also be another area that has lagged 0:07:28.800 --> 0:07:31.440 but UM, but I think it will do much better 0:07:31.440 --> 0:07:33.440 as the year progresses. On the flip side, are you 0:07:33.480 --> 0:07:36.119 cashing out of utilities and reads and other haven beds 0:07:36.160 --> 0:07:39.640 that have been bit up tremendously now? Not really, because 0:07:39.680 --> 0:07:43.400 we think that the best portfolio configuration right now is 0:07:43.400 --> 0:07:46.200 is a diversified one. And the reason we say that 0:07:46.400 --> 0:07:50.120 is there are still certain unknowns out there. Um the 0:07:50.160 --> 0:07:53.040 fate is concerned about the global economy, and we think 0:07:53.160 --> 0:07:57.160 rightfully so if that would continue to deteriorate, it could 0:07:57.160 --> 0:08:00.680 cause our economy to slowly and further, So we don't 0:08:00.680 --> 0:08:05.680 want to put too much emphasis on economic growth yet. 0:08:05.760 --> 0:08:09.520 And and and also the unknowns however, the trade war 0:08:09.600 --> 0:08:13.640 with China and perhaps even Europe. So I think there's 0:08:13.640 --> 0:08:16.240 a real reason to have a diversified portfolio. You might 0:08:16.280 --> 0:08:19.560 even consider having a small portion of your principle and 0:08:20.320 --> 0:08:23.400 gold stocks which they're broken out, and perhaps that's reflecting 0:08:23.440 --> 0:08:26.520 the instability in the global economy as well. I suspected 0:08:26.520 --> 0:08:28.480 you were going to mention gold. And I actually wonder 0:08:28.520 --> 0:08:32.079 when you say diversified, whether investors are as diversified as 0:08:32.120 --> 0:08:34.960 they have been traditionally by holding a sixty forties sixty 0:08:35.000 --> 0:08:39.560 stocks forty bonds type of allocation. Given the fact that 0:08:39.960 --> 0:08:44.480 bond yields have dropped as stock prices have risen, that 0:08:44.520 --> 0:08:48.520 could reverse. The stock prices could drop as bond yields arise, 0:08:48.640 --> 0:08:51.080 and then you have no diversification. Is that a concern 0:08:51.160 --> 0:08:54.520 of yours? Yes, it is a concern of mine, and 0:08:54.640 --> 0:08:59.280 particularly since passive investing now has become so popular and 0:08:59.679 --> 0:09:02.079 a low lot of that means that a lot of 0:09:02.200 --> 0:09:05.480 investors are concentrated in the same issues, the ones that 0:09:05.520 --> 0:09:07.720 have been out performing, the ones that are in most 0:09:07.720 --> 0:09:10.760 of the e t f s that have outperformed. So UM, 0:09:11.640 --> 0:09:13.959 I think it's UM would be prudent here to So 0:09:14.160 --> 0:09:17.040 we look over a portfolio and looked at diversified more 0:09:17.040 --> 0:09:18.880 than you think you might be. And when you talk 0:09:18.920 --> 0:09:21.720 about diversifying, you talk about gold. A lot of other 0:09:21.760 --> 0:09:24.880 people have talked about alternative assets, things like real estate 0:09:25.400 --> 0:09:29.000 UH sort of tangibles and private debt, private equity, UH, 0:09:29.120 --> 0:09:32.200 infrastructure funds. These are the types of areas people have gone. 0:09:32.600 --> 0:09:36.360 Do you think that that is advisable for people to 0:09:36.440 --> 0:09:40.520 just even consider, well, for the average investor, I've saying 0:09:40.520 --> 0:09:44.680 no because of the liquidity factor. I think at this juncture, 0:09:45.360 --> 0:09:48.160 when you look at valuations in the US and you 0:09:48.200 --> 0:09:52.040 look at valuations overseas, the overseas valuations are much more attractive. 0:09:52.840 --> 0:09:56.840 And so we talked about diversification, we also talk about 0:09:57.080 --> 0:10:01.679 moving outside the US in terms of equity. So you 0:10:01.679 --> 0:10:04.680 think that that's the way to diversify is international. Is 0:10:04.679 --> 0:10:08.040 there any particular region that you think is the best bet. Well, 0:10:08.080 --> 0:10:11.000 you know, Europe is so um so out of favor 0:10:11.040 --> 0:10:15.760 here and evaluations are are particularly attractive there. And I'd 0:10:15.760 --> 0:10:18.640 say also emerging markets. I mean, they haven't done really 0:10:18.720 --> 0:10:23.160 much despite a lot of um support from analysts, and 0:10:23.360 --> 0:10:25.440 yet they haven't done a whole lot yet. But I 0:10:25.440 --> 0:10:28.440 think there's a possibility that the US continues to do well, 0:10:28.480 --> 0:10:31.880 that our weaken some and interest rates remain low, that 0:10:31.960 --> 0:10:34.360 emerging markets could be another place to go as well. 0:10:34.559 --> 0:10:36.720 Briss Biddles, thank you so much for being with me today. 0:10:36.880 --> 0:10:40.320 Bruce Biddles, chef investment strategist at Bird, talking about the 0:10:40.320 --> 0:10:43.200 conundrum right now do you buy or to not to 0:10:43.320 --> 0:10:46.400 buy US equities at all time highs and given the 0:10:46.400 --> 0:10:48.960 fact that the Federal Reserve m President Trump seemed uh 0:10:49.120 --> 0:10:52.160 to want to support valuations even at a time when 0:10:52.160 --> 0:10:55.040 the credit cycle feels long in the tooth. Is it 0:10:55.200 --> 0:11:15.880 that's another uh, that's another point of debate right now, 0:11:15.960 --> 0:11:18.640 Let's turn our focus to US economic data. This morning, 0:11:18.640 --> 0:11:21.720 we got another measure of US inflation that came in 0:11:22.000 --> 0:11:26.000 better than expected. Carra Kadanna, our chief US economist, here 0:11:26.120 --> 0:11:30.040 at Bloomberg Economics, joins me here in New York. So 0:11:30.400 --> 0:11:34.320 this is the Producer Price Index. It came in, uh 0:11:34.520 --> 0:11:37.920 faster than expected in June. How much can we say 0:11:38.120 --> 0:11:40.560 from this and what we heard with this or what 0:11:40.640 --> 0:11:43.240 we saw with the cp I coming in also higher 0:11:43.240 --> 0:11:47.280 than expected? Are we seeing more inflation that people realize? Well, 0:11:47.320 --> 0:11:50.360 I think we're giving vindication that the soft patch on 0:11:50.400 --> 0:11:54.640 the inflation front earlier this year was indeed temporary, transitory 0:11:54.800 --> 0:11:58.760 epick youre upward choice. Powell would say transitory. Yes, Je 0:11:58.800 --> 0:12:03.120 Palan Jenna Yellen like that were transitory. Uh. They initially 0:12:03.200 --> 0:12:05.839 characterized it that way, and then the soft patch went 0:12:05.880 --> 0:12:08.720 on for longer than they anticipated, and so they started 0:12:08.760 --> 0:12:12.199 to get a cold feet on that notion and head 0:12:12.200 --> 0:12:14.920 backed away from that rhetoric. And finally, just as they 0:12:14.960 --> 0:12:17.240 were ready to throw in the towel on this and 0:12:17.480 --> 0:12:22.199 j Pal even in his testimony Wednesday and Thursday, highlighted 0:12:22.240 --> 0:12:26.920 that maybe this transitory patch was uh not so transitory. Uh, 0:12:26.960 --> 0:12:28.960 then suddenly we get the CPI report when we do 0:12:29.040 --> 0:12:32.960 see things bouncing back. Although again we shouldn't have panicked 0:12:32.960 --> 0:12:35.040 when we saw the soft patch earlier this year, because 0:12:35.040 --> 0:12:39.160 there were some one off items, things like the classification 0:12:39.200 --> 0:12:42.720 of apparel prices, so the way they collected the data changed, 0:12:42.840 --> 0:12:45.360 and maybe it was part of the story. There Also 0:12:45.720 --> 0:12:47.959 some of the strength we saw yesterday UH seemed to 0:12:48.000 --> 0:12:51.160 be yet one off categories. And this was something that 0:12:51.280 --> 0:12:55.720 Tom Barkin from the Richmond Fed illustrated. UH. Inflation will 0:12:55.760 --> 0:12:59.080 look more convincing to the Fed that it has rebounded 0:12:59.440 --> 0:13:02.680 if you see it in service categories driven by labor 0:13:02.760 --> 0:13:05.440 costs and wage pressures. That's not what we saw yesterday. 0:13:05.520 --> 0:13:10.160 We saw service CPI kind of continuing to trend sideways. 0:13:10.200 --> 0:13:12.880 So then where are we seeing the games? Well, what 0:13:12.960 --> 0:13:16.000 we saw in yesterday's cp I was really a bounce 0:13:16.080 --> 0:13:20.440 back in goods prices, and goods prices had been really 0:13:20.800 --> 0:13:23.439 taking it on the chin do in large part to 0:13:24.040 --> 0:13:27.560 global over capacity and also the strength of the dollar. Right, 0:13:27.600 --> 0:13:31.080 a strong dollar pushes down import prices. Import prices have 0:13:31.200 --> 0:13:34.640 been in decline. That's weighing on goods in the CPI 0:13:34.800 --> 0:13:37.400 basket UH, and we saw a little bit of respite 0:13:37.440 --> 0:13:40.640 on that front yesterday. Now, if the dollar continues to 0:13:40.720 --> 0:13:45.000 come off as the Fed is moving towards easier policy, 0:13:45.120 --> 0:13:47.000 which that's a big if at this point, but that 0:13:47.080 --> 0:13:51.560 certainly has been the trend over the last couple of weeks, right, uh, 0:13:51.600 --> 0:13:55.760 And so what if the dollar does weaken moderately as 0:13:55.760 --> 0:13:57.880 a FED is easing at the end of this month, 0:13:57.920 --> 0:14:00.080 and then my team thinks one more time at the 0:14:00.120 --> 0:14:03.240 end of this year at the December FOMC meeting, then 0:14:03.280 --> 0:14:05.760 that will put a little bit of upward pressure under 0:14:05.800 --> 0:14:09.480 input prices goods, and it will push core inflation closer 0:14:09.480 --> 0:14:12.400 to the FED subjective. Okay, how much is what we're 0:14:12.400 --> 0:14:16.560 seeing in terms of producer prices increasing just simply due 0:14:16.559 --> 0:14:20.840 to the tariffs. Well, there's a tariff impact there to 0:14:20.960 --> 0:14:24.440 some degree, but we have to be very cautious in 0:14:24.840 --> 0:14:29.560 blaming all price increases everywhere due to tariff and not 0:14:29.560 --> 0:14:31.960 not to say blaming, but the fact that you're seeing 0:14:32.000 --> 0:14:36.080 the increase in stuff in the goods of stuff rather 0:14:36.160 --> 0:14:38.920 than the prices that people are willing to pay for 0:14:39.200 --> 0:14:44.080 a service. It seems like perhaps that asymmetry is tied 0:14:44.120 --> 0:14:47.200 directly to some of the trade tensions and the resulting levies. 0:14:47.600 --> 0:14:50.600 You know, with with the changes to trade policy earlier 0:14:50.640 --> 0:14:53.440 this year, you are still seeing that those price pressures 0:14:53.520 --> 0:14:55.920 kind of coming down the pipeline. So you know, for instance, 0:14:55.920 --> 0:14:58.760 in the c p I, we could see UH furniture 0:14:58.800 --> 0:15:01.600 and household furnishings is one category which really seems to 0:15:01.640 --> 0:15:05.720 be accelerating. That obviously would be very clearly tied into 0:15:05.880 --> 0:15:10.080 UH tariff policy and whatnot, but that doesn't entirely explain 0:15:10.320 --> 0:15:14.040 what's happening here. We have an economy that was operating 0:15:14.160 --> 0:15:17.800 well above its potential growth rate last year, continues to 0:15:17.840 --> 0:15:21.760 be above that potential growth rate in n and that 0:15:21.800 --> 0:15:24.800 in and of itself generates inflation. I guess that without 0:15:24.840 --> 0:15:27.440 wage pressure, this is not good inflation. Right, I'm going 0:15:27.480 --> 0:15:30.120 to stop you without wage pressure, because if we look 0:15:30.160 --> 0:15:34.480 at the Employment cost Index, average general yearnings, many of 0:15:34.560 --> 0:15:39.120 the metrics of wage inflation UH that we watch for 0:15:39.200 --> 0:15:42.480 the economy, they're all very close to post recession highs. 0:15:42.520 --> 0:15:45.280 So yes, they've been a little bit cool in recent 0:15:45.320 --> 0:15:48.480 months and kind of migrating sideways rather than accelerating to 0:15:48.720 --> 0:15:51.640 new record highs, but nonetheless they are still close to 0:15:51.720 --> 0:15:54.920 record highs. So we're seeing the hottest labor cost pressures 0:15:54.920 --> 0:15:58.000 in twenty nineteen that we have in any year of 0:15:58.040 --> 0:16:00.880 this cycle. So that mitigates some of the prices on 0:16:01.080 --> 0:16:04.720 goods that have been increasing. People are getting higher paychecks, 0:16:04.760 --> 0:16:07.200 they're just not accelerating perhaps as fast, and that's why 0:16:07.280 --> 0:16:09.960 some of these price increases can be sustained. If forekers 0:16:10.000 --> 0:16:12.760 are getting higher paychecks, they have more buying power and 0:16:12.760 --> 0:16:16.520 they're more likely to tolerate those price increases that come 0:16:16.520 --> 0:16:19.160 down the pipeline. Carra Kadonna, Are you willing to tolerate 0:16:19.240 --> 0:16:25.160 higher prices for diapers? And I consider those essentials absolutely 0:16:26.480 --> 0:16:29.720 for your child? Caaka Donna Chief you as economist for 0:16:29.720 --> 0:16:32.760 Bloomberg Economics, always of pleasure. We love having you. Thank 0:16:32.760 --> 0:16:49.000 you for being here. Amazon calls it a holiday. The 0:16:49.000 --> 0:16:51.440 rest of us call it a big sale. Amazon Prime 0:16:51.520 --> 0:16:54.000 Day coming up on Monday and Tuesday. Joining us now 0:16:54.040 --> 0:16:56.640 to talk about what we can expect. What Amazon is 0:16:56.680 --> 0:17:00.240 going to try to push the most for people to buy. Answer, 0:17:00.240 --> 0:17:03.520 Soaper joins us now Bloomberg Technology Reporters. So, Spenser, just 0:17:03.560 --> 0:17:06.520 give us a sense of how Amazon is viewing this 0:17:06.720 --> 0:17:09.200 Prime Day. Is this Prime Day different from all other 0:17:09.240 --> 0:17:13.679 Prime Days? No? And that's really what's new about it 0:17:13.720 --> 0:17:17.920 this year. Um, so that we're now in its fifth year. Uh. 0:17:17.960 --> 0:17:20.000 They started it, uh, you know as a way to 0:17:20.080 --> 0:17:24.760 kind of entice um new Prime members to join, encourage 0:17:24.760 --> 0:17:28.119 existing Prime members to renew their memberships. That's really what 0:17:28.160 --> 0:17:30.399 this is all about, is getting people to join Prime 0:17:30.480 --> 0:17:33.879 because you know, if you're a Prime member, it converts 0:17:33.920 --> 0:17:36.760 you from a you know, an occasional Amazon shopper into 0:17:36.760 --> 0:17:39.720 a devoted shopper. And Prime members spend you know, between 0:17:39.720 --> 0:17:41.399 two and three times as much on the site as 0:17:41.440 --> 0:17:44.879 non Prime members. So forget how much they're selling, what 0:17:44.920 --> 0:17:47.560 the deals are today, all of that's not really important. 0:17:47.560 --> 0:17:49.880 The biggest thing for Amazon is how many new members 0:17:49.880 --> 0:17:52.560 sign up. That's what the days always about and what 0:17:52.640 --> 0:17:55.359 it's what it's still about. This year. Has Amazon reached 0:17:55.400 --> 0:17:59.080 saturation point where the new potential subscribers is kind of 0:17:59.520 --> 0:18:02.000 kind of live did Yeah, that's the problem is in 0:18:02.000 --> 0:18:04.560 the US and it's core, you know, it's primary market 0:18:04.560 --> 0:18:07.320 of the US. It's definitely showing signs of reaching saturation 0:18:07.359 --> 0:18:11.040 that Prime member growth is slowing. Um. One interesting thing 0:18:11.080 --> 0:18:15.440 that we saw as they're offering uh, millennials in India, 0:18:15.800 --> 0:18:19.080 which is a big international focus for them, half price 0:18:19.119 --> 0:18:22.159 on Prime memberships, so they're really you know, there's definitely 0:18:22.200 --> 0:18:24.800 a you know, we're focused on kind of all the 0:18:24.880 --> 0:18:26.840 US marketing and the deals and that sort of thing. 0:18:26.880 --> 0:18:29.800 But really, for Amazon to keep growing Prime memberships, it 0:18:29.840 --> 0:18:31.919 has to it has to look globally, and that's what 0:18:31.960 --> 0:18:35.000 it's doing with this half priced membership option in India. 0:18:35.400 --> 0:18:37.800 You know, it's interesting this Amazon Prime Day comes at 0:18:37.800 --> 0:18:43.440 an increasing politicized environment for Amazon. In particular, Amazon warehouse 0:18:43.440 --> 0:18:48.440 workers have been protesting in Minnesota. Amazon I would suppose 0:18:48.480 --> 0:18:50.439 that it is a response to that, coming out with 0:18:50.480 --> 0:18:54.399 this big retraining plan saying, look, we are going to 0:18:54.400 --> 0:18:57.119 take people who are at low wage earning jobs and 0:18:57.119 --> 0:19:01.320 try to retrain them into higher paying ones. How is 0:19:01.400 --> 0:19:05.920 Amazon trying to position itself ahead of the elections right 0:19:05.960 --> 0:19:08.879 now in light of some of these pressures. Well, I mean, 0:19:08.880 --> 0:19:11.159 I don't know if they're positioning themselves in front of anything. 0:19:11.200 --> 0:19:13.520 They seem to be reacting to everything, like the the 0:19:13.560 --> 0:19:17.520 fifteen dollar an hour pledge that came last year followed 0:19:17.520 --> 0:19:21.120 a lot of criticism from presidential hopeful uh Bernie Sanders 0:19:21.119 --> 0:19:24.160 and Elizabeth Warren, and there were you know, states were 0:19:24.160 --> 0:19:29.520 reporting that uh, you know, they're that Amazon employees were 0:19:29.560 --> 0:19:33.639 among their biggest groups of food stamp recipients and people 0:19:33.640 --> 0:19:36.200 needing assistance for basic needs like healthcare and stuff. So 0:19:36.560 --> 0:19:38.800 they really had to kind of react to to those 0:19:38.840 --> 0:19:43.240 negative headlines. Um and now with the training, one of 0:19:43.280 --> 0:19:47.040 my colleagues are a newcomer did something today just looking 0:19:47.080 --> 0:19:51.080 at the train. You know, it's really not that much 0:19:51.119 --> 0:19:53.520 that Amazon is spending when when you break down the numbers, 0:19:53.520 --> 0:19:56.800 it's a big figure seven hundred million because Amazon so big, 0:19:56.840 --> 0:19:58.760 but when you look at the per employee and spending, 0:19:59.040 --> 0:20:01.680 it's actually less than lot of companies pay per year 0:20:01.720 --> 0:20:05.199 to train their people. So um. Even that it's Amazon 0:20:05.320 --> 0:20:07.840 just kind of dressing up, uh, some numbers around its 0:20:07.880 --> 0:20:10.480 size as opposed to actually doing anything differently. You know, 0:20:10.600 --> 0:20:13.679 Spencer is one thing for people to pick it, uh 0:20:14.119 --> 0:20:16.320 pick it against Amazon. It's another thing for them to 0:20:16.320 --> 0:20:19.280 stop buying things on the platform. Is there any evidence 0:20:19.560 --> 0:20:22.399 that Amazon has lost business as a result of some 0:20:22.480 --> 0:20:27.480 of these political issues, Uh, not not that I can see. 0:20:27.520 --> 0:20:29.639 I mean, if anything, it's it's just that they're a 0:20:29.720 --> 0:20:32.520 victim of their success. They've gotten so big that growth 0:20:32.560 --> 0:20:35.359 is slowing. You know, e commerce is it's primary business, 0:20:35.359 --> 0:20:38.359 it's its oldest business, and it's most mature business, and 0:20:38.400 --> 0:20:41.439 that's where the revenue growth is slowing down, you know, 0:20:41.480 --> 0:20:44.920 whether whether the these political protests and things are moving 0:20:44.920 --> 0:20:48.000 the needle much on that, I you know, I'm really 0:20:48.000 --> 0:20:53.720 not sure. But Amazon is also generally reactive to customer feedback. 0:20:53.800 --> 0:20:56.040 So if there's a you know, flood of emails to 0:20:56.119 --> 0:20:58.800 Jeff Bezos about like, hey, I hear your workers are 0:20:58.800 --> 0:21:00.639 getting food stamps and I don't get that's the kind 0:21:00.640 --> 0:21:02.840 of thing that's going to trigger the fifteen dollar an 0:21:02.840 --> 0:21:05.560 hour wage pledge and and that sort of thing. So 0:21:05.600 --> 0:21:08.120 I'm sure it's influencing their decision making, but whether it's 0:21:08.200 --> 0:21:13.640 denting there you know, actual um revenue, I just don't know, Spencer. 0:21:13.760 --> 0:21:17.639 I'm just curious. Lastly, whether Amazon is going to push 0:21:17.680 --> 0:21:22.280 its own products more than other products on Amazon Prime Day, 0:21:22.280 --> 0:21:24.760 in other words, sort of rank them higher in its 0:21:24.800 --> 0:21:29.080 algorithms so that people buy Amazon sourced products that will 0:21:29.080 --> 0:21:30.760 be interesting to watch. I mean, they always put an 0:21:30.760 --> 0:21:33.120 emphasis on their gadgets, right in the past couple of years, 0:21:33.119 --> 0:21:36.280 they've really pushed the you know, the the echo speakers, 0:21:36.640 --> 0:21:39.720 you know that operate on the Alexive voice activated platform. 0:21:39.800 --> 0:21:42.680 That's something that Amazon is really pushing, and they've made 0:21:42.680 --> 0:21:44.840 that a focus of Prime Day. The past couple of years, 0:21:44.880 --> 0:21:47.199 so that's not that's not new. And I think what 0:21:47.240 --> 0:21:49.679 you're asking is more like their private label products, like 0:21:50.000 --> 0:21:52.880 you know, you're you're looking for a you know, oh, 0:21:52.880 --> 0:21:55.640 can I get a deal on Johnson and Johnson baby shampoo? 0:21:55.720 --> 0:21:59.160 Am I going to see some Amazon alternative? And uh? 0:21:59.160 --> 0:22:00.760 And you very likely see that and you may not 0:22:00.840 --> 0:22:02.840 even know that it's an Amazon brand because it could 0:22:02.880 --> 0:22:06.720 have some funky name like Solimo or something that you're 0:22:06.760 --> 0:22:09.840 just you know, they've they've they've launched hundreds of the 0:22:09.960 --> 0:22:12.720 of these things. So um, yeah, I think there's a 0:22:12.840 --> 0:22:14.760 you know, there's definitely a good chance you're you're seeing 0:22:14.760 --> 0:22:17.480 those things in your search results or just be be mindful. 0:22:17.520 --> 0:22:19.520 And I think Amazon is just hoping that people aren't 0:22:19.800 --> 0:22:22.840 so brand beholding and if they can save, you know, 0:22:22.880 --> 0:22:24.480 save a couple of bucks, they might give a give 0:22:24.560 --> 0:22:26.760 something else a chance, and then if then then maybe 0:22:26.800 --> 0:22:29.480