Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Business
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Speaker 1: and Tim Stenebek from Bloomberg Radio Well.
Speaker 2: Israel said eight of its soldiers were killed in classes
Speaker 2: with Hesbolah in southern Lebanon, first casualties it suffered in
Speaker 2: an expanding ground incursion amid fears of a spiraling conflict
Speaker 2: with Around meantime, Benjamin net and Yahoo vowed to retaliate
Speaker 2: against Iran after it fired about two hundred ballistic missiles
Speaker 2: at Israel, a major escalation that world powers fear could
Speaker 2: spiral into a Middle East wide war or some of
Speaker 2: the conversations we had yesterday tim a World War three.
Speaker 3: It's not just that. Televised comments made during a visit
Speaker 3: to Doha, Iran's president said if Israel takes further action
Speaker 3: against Iran, the Islamic Republic will quote give stronger response,
Speaker 3: and President Biden says G seven nations are discussing sanctions
Speaker 3: against Iran in response to the latest attack against Israel.
Speaker 2: All right, so let's get to it. Let's get more
Speaker 2: with retired Lieutenant General Michael grew In. He is Geopolitical
Speaker 2: Intelligence Group member an advisory board member at Academy Securities,
Speaker 2: joining us from Virginia. General grew In, great to have
Speaker 2: you here with Tim and myself on BusinessWeek. Are we
Speaker 2: likely to see more back and forth between Israel and
Speaker 2: Iran for some time?
Speaker 4: Yeah, inevitably.
Speaker 5: I think we've we've been on this cycle since October
Speaker 5: seventh last year, and I think where, you know.
Speaker 4: We look at the the the who has the balance
Speaker 4: of escalation, who who can escalate this? And it seems
Speaker 4: like every time that the Israelis achieve an objective that
Speaker 4: they that they've established, uh, the Iranians and or their proxies, uh,
Speaker 4: you know will escalate once again, and they'll and they'll
Speaker 4: they'll pull another trigger, and so you know, we're in
Speaker 4: this do loop of.
Speaker 5: Continuous trigger and response, trigger and response. Of course, now
Speaker 5: it's really it's really become serious when we when we
Speaker 5: start talking about it in Israeli ground invasion and again,
Speaker 5: as as you just said, you know, eight Israeli soldiers
Speaker 5: already killed in the in the action once you're on
Speaker 5: the ground, especially in the broken terrain of southern Lebanon,
Speaker 5: it becomes extraordinarily dangerous and extraordinarily difficult.
Speaker 2: I do wonder one of my concerns, one of our
Speaker 2: concerns Bloomberg Opinion writing about it, our Andreas Kluth about
Speaker 2: you know, when does what Israel is doing become offensive
Speaker 2: versus defensive, and should then the US and other global
Speaker 2: allies rethink its support of Israel.
Speaker 6: So thanks, thanks for the question. You know, it's a
Speaker 6: very it's a very complex situation of course.
Speaker 7: Uh.
Speaker 6: You know, the state of Israel, you know, has suffered
Speaker 6: hundreds of rockets today, you know, for you know, for
Speaker 6: many many weeks here as as Hesbola has made the
Speaker 6: northern part of the country uninhabitable. So you know, even
Speaker 6: you know, from a humanity aspect and from a law
Speaker 6: of armed conflict aspect, you know, Israel has a right
Speaker 6: to defend themselves beyond their borders in this space. That said,
Speaker 6: you know, this is not the first time that there's
Speaker 6: been an incursion into southern Lebanon. And and in fact,
Speaker 6: I mean you think about you know, going back years ago,
Speaker 6: you know, even nineteen eighty three, when the you know,
Speaker 6: when the US Marine barracks was bombed in Beirut. There
Speaker 6: has been a long history of tit for tat across
Speaker 6: that border. The Israelis and the UN have articulated the
Speaker 6: La Tani River as the border. That's about twenty miles
Speaker 6: north of the current border of Israel, and that's twenty
Speaker 6: miles of really rough terrain, really dangerous terrain, and really
Speaker 6: difficult terrain to operate on.
Speaker 3: I want to go back to this idea of seeing
Speaker 3: an end to this conflict. And I'm wondering, given that
Speaker 3: there is this tit for tat, this idea of retaliation,
Speaker 3: after one side makes one move and then the other
Speaker 3: side retaliates, how do you see this conflict ending at
Speaker 3: least this iteration of the conflict.
Speaker 6: So so this iteration of the conflict, I think the
Speaker 6: you know, the principal parties are you know, of of
Speaker 6: of a hard heart and a hard stance here uh,
Speaker 6: Presidenttnyahu are Prime Minister of Netnah, who of course you know,
Speaker 6: has has has talked about what he's willing to do
Speaker 6: and what he wants to do to achieve the safety
Speaker 6: of of Israel and Uh and and there's not a
Speaker 6: lot of wavering on the Israeli side, on the on
Speaker 6: the Hesbula side, or on the Iranian side.
Speaker 1: Uh.
Speaker 6: You know, even with uh, you know, the loss of
Speaker 6: many many of their Hesbela commanders and their IRGC commanders,
Speaker 6: we should always remember that those you know, those commanders
Speaker 6: are on the ground with hesblah uh in in Lebanon.
Speaker 6: You know, even with a really uh not very effect
Speaker 6: of SORTI of missiles against Israel the other day, you know,
Speaker 6: the Iranians are still calling for retaliation. So they are
Speaker 6: stuck on a wheel here of and the maybe the
Speaker 6: only thing that can start to bring some at least
Speaker 6: a place to talk outside of for tat exchanges is
Speaker 6: a relationship with other countries in the region. And here
Speaker 6: I'm talking about Jordan and Saudi Arabia and the Emirates Egypt, Like,
Speaker 6: is there a way to get back to the table
Speaker 6: at least stop firing missiles while we're you know, while
Speaker 6: we're trying to figure out what a long term solution
Speaker 6: looks like.
Speaker 2: Is a long term solution does that include a two
Speaker 2: state a scenario in the end, and just got about
Speaker 2: thirty seconds.
Speaker 6: Left here, Well, clearly, you know, Lebanon is a captive state.
Speaker 6: You know, it's been captured by by Iran and so
Speaker 6: and then and then if you look over to god Asa,
Speaker 6: you know kind of when when we talk about a
Speaker 6: two state solution, uh you know, there's there's you know,
Speaker 6: even the Egyptians don't want to govern Gaza. You know,
Speaker 6: it is this in its current state, it is completely ungovernable.
Speaker 6: Uh you until Sinwar Sinwak goes and he's not going
Speaker 6: to go uhh you know, with his with his boots on,
Speaker 6: so like it is a you know until until uh
Speaker 6: we it's some resolution where this tip for tent is
Speaker 6: going to continue. All right, Yeah, there's not an offer.
Speaker 2: All right, got it? Thank you so much, and so
Speaker 2: glad we could reconnect with you. Retired Lieutenant General Michael
Speaker 2: grew and Geopolitical Intelligence Group member and Advisory board member
Speaker 2: at Academy Security.
Speaker 1: This is Bloomberg Business Week with Karl Messer and Tim
Speaker 1: Stenebeck on Bloomberg Radio and Television.
Speaker 2: All right, everybody you are listening and watching Bloomberg Business
Speaker 2: We Carol Masser along with Tim Stanevik. A lot going on.
Speaker 2: We do want to mention a headline that crossed Microsoft
Speaker 2: investing about seven hundred and fifty million dollars in open
Speaker 2: AI's latest fund raise, if you will, are fund raising round,
Speaker 2: which is a I gotta just say, this raise just
Speaker 2: has kind of blown me away. How much.
Speaker 1: Yeah.
Speaker 3: Microsoft has already invested thirteen billion dollars in the startup.
Speaker 3: Nvidia another name in there. Listen to this, Carol. Open
Speaker 3: ai completed a deal to raise six point six billion
Speaker 3: dollars in new funding. That new valuation at one hundred
Speaker 3: and fifty seven billion dollars.
Speaker 2: That's quite a fund raise, if you will.
Speaker 3: Yeah, the question is where does it go from here?
Speaker 2: Yeah.
Speaker 3: It may cost a lot of money to run this company.
Speaker 3: I can you look something up on chat GPT that
Speaker 3: costs money, uses a lot of energy.
Speaker 2: We talked about this with our Max Chafkin, right. The
Speaker 2: also the idea that it costs a lot of money
Speaker 2: to run it, so they're still trying to figure out
Speaker 2: I guess the way to profitability it is. By the way,
Speaker 2: the deal, one of the largest ever private investments, makes
Speaker 2: open ai one of the three largest venture backed startups,
Speaker 2: alongside Elon Musk's SpaceX and TikTok owner Byte Death. That's
Speaker 2: a creaty People familiar with the matter, who asked not
Speaker 2: to be identified, are the.
Speaker 3: Names Thrive Capital, Coastala Ventures, Altimeter Capital, Fidelity Management and Research,
Speaker 3: soft Bank, and the Abu Dhabi based tech investment firm
Speaker 3: mgx I anticipated.
Speaker 2: I think what's also staggering is that it's been a
Speaker 2: turbulent year for open AI, to say the least, So
Speaker 2: it's interesting to see this amount of money coming in
Speaker 2: to the company. I got to say, AI certainly one
Speaker 2: of the trends that we've been all over for the
Speaker 2: last two year and a half, and so is the
Speaker 2: new diet drugs that are out there.
Speaker 3: Yeah, because ozempic, well, we're not scared anymore. That's what
Speaker 3: food industry executives seem to be saying right now. After
Speaker 3: initial concerns about what ozempic and other GLP one's carol
Speaker 3: would do for their products. If people were taking these drugs,
Speaker 3: are they still going to buy as much food as
Speaker 3: they were buying before.
Speaker 2: Well, it turns out big food they're kind of warming
Speaker 2: up to the GLP one drugs. Let's get to it
Speaker 2: with Bloomberg News consumer reporter Dina Shankers. She's with us
Speaker 2: in New York City. Great read data just remind us
Speaker 2: First up, that initial terror. We used to talk about it, right,
Speaker 2: these new drugs were out there and all the food companies,
Speaker 2: the package food companies were like, oh my god, what's
Speaker 2: going to happen to all our business businesses? Remind us
Speaker 2: to kind of about that backdrop before we get to
Speaker 2: where we are today.
Speaker 8: Sure, so I can tell you for me. It started
Speaker 8: last fall when I was interviewing Steve Kaylene, the CEO
Speaker 8: of Kelenova, the snack company, and I asked him like, well,
Speaker 8: what are you thinking about these GLP one drugs? And
Speaker 8: they were like, listen, we're watching it. We're not sitting here,
Speaker 8: we're not being you know, just complacent on this, but
Speaker 8: we're watching it, and well we're prepared to mitigate any impacts.
Speaker 8: We then saw less than a year ago, earlier this year,
Speaker 8: that the CEO of Novo Nordisk, which makes Ozembic and
Speaker 8: we Goobi, that they told us that they were getting
Speaker 8: phone calls from CEOs of food companies that were scared.
Speaker 8: They didn't know what was going on, and there was
Speaker 8: this big question that was coming up. We saw it
Speaker 8: in news headlines. It was just like a major topic
Speaker 8: of conversation was ozempic going to to finally deal a
Speaker 8: blow to big food that any diet trend of the
Speaker 8: past was simply unable to do.
Speaker 2: And just in case anybody forgot, Kelenova makes those good
Speaker 2: things like cheese it and pop tarts and all those
Speaker 2: good kringles, exactly right.
Speaker 3: Things that maybe you would need as much of if
Speaker 3: you're taking those perhaps, But Dina, you're also here to
Speaker 3: tell us that big food, well they're going to be
Speaker 3: just fine. How have they adapted?
Speaker 8: Well, so that's what they're saying. Anyway, what we found
Speaker 8: is that some companies are basically like, oh, well, we're like,
Speaker 8: our portfolio is perfect for GLP one. Of course, so
Speaker 8: we saw Nestley roll out an entire new line called
Speaker 8: Vital pursuit of basically like single frozen, single served meals
Speaker 8: that are high protein, they have fiber, they have the
Speaker 8: nutrients that people are looking for when they're on these
Speaker 8: drugs or often when they're not on these drugs. And
Speaker 8: so then we also heard other companies like Campbell, Soup
Speaker 8: and Anne say in public presentations that they had foods
Speaker 8: that were perfect for this cohort. And we spoke with Connagra,
Speaker 8: which has spoken a little bit about this before publicly,
Speaker 8: and we had a conversation with them asking them what
Speaker 8: they've seen, and they said they're seeing it. They're seeing
Speaker 8: a bump in their frozen single served meals and it's
Speaker 8: small but measurable, and it's certainly something that they're going
Speaker 8: to keep an eye out to see how it changes.
Speaker 2: All right, So what does the investment community say about
Speaker 2: all of this. They're like, great new revenue stream, or
Speaker 2: they're like, wait, the jury is still out on this.
Speaker 8: So most of the most of the people that I've
Speaker 8: spoken to, most of the analysts, experts, et cetera, were like, yeah,
Speaker 8: there's opportunity here for some of these companies. And one
Speaker 8: stressed his name is Bobby Gibbs. He's a partner at
Speaker 8: Oliver Wyman, and he was stressing just that like, even
Speaker 8: if you're not on a GLP one drug, maybe you
Speaker 8: were and you got off, or maybe you never were,
Speaker 8: but you really are just health conscious. This is a
Speaker 8: growing part of the of the world of American consumers
Speaker 8: that we all want to eat better, and so making
Speaker 8: foods that serve those needs is a growing opportunity. One uh,
Speaker 8: one person I spoke with Nicholas Faraday over at Rabobank.
Speaker 8: He was. He was a little more skeptical, especially on
Speaker 8: snack companies, because some of the snack companies have not
Speaker 8: said so much that they, you know, are going to
Speaker 8: grow off of GLP ones, but that they don't expect
Speaker 8: any real impact. And including Kelenova, which at first was
Speaker 8: was the first company I talked to that was or
Speaker 8: I shouldn't say worried that was watching it that place
Speaker 8: of risk that they no longer see it as being
Speaker 8: something that we have to worry about.
Speaker 2: We got to run Dina. Everybody should read it. Go
Speaker 2: to Bloomberg dot com. Dina Shankar, thanks so much. This
Speaker 2: is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 3: Okay, Carol, come off, no, Charlie. Is it too early
Speaker 3: for yes holiday shopping?
Speaker 2: Yes? Yes?
Speaker 3: Okay, Oh, it's gonna be seventy degrees. Here, here's why
Speaker 3: it might be too early for us to talk about
Speaker 3: it in the context of if we've done it. I'm listening,
Speaker 3: but it's still important to talk about because it's so
Speaker 3: important for the US economy, Carol. It gives us a
Speaker 3: good idea how consumers are feeling right now. Also, there's
Speaker 3: this port strike in the US.
Speaker 2: Have you heard about this, We've covered it.
Speaker 3: Yeah, thanks for kidding. Bloomberg Intelligence says it could drive
Speaker 3: up costs, slow the flow of holiday merchandise, threaten the
Speaker 3: ability for retailers to meet holiday demand. Kind of the
Speaker 3: worst timing, Yeah, for one of these strikes. Well, the
Speaker 3: management consulting from PwC has crunched the numbers. They found
Speaker 3: that even though holiday spending is predicted to surge to
Speaker 3: a record high, the increase this year, Carol, is less
Speaker 3: than the increase over the previous two years.
Speaker 2: All right, interesting, So a lot to think about when
Speaker 2: it comes to holiday spending, such an important part, as
Speaker 2: you said, tim in terms of the US economy. Alie
Speaker 2: Furman is Consumer Markets industry leader over at PwC. She
Speaker 2: joins us from Seattle. Ali, good to have you here
Speaker 2: with us. How are you?
Speaker 9: I'm great, Carol, how are you do it?
Speaker 2: Okay? Trying to assess everything that seems to be coming
Speaker 2: at us, including that strike on the East coast ports
Speaker 2: we're trying to assess. Obviously, the longer it goes on,
Speaker 2: the more problematic it becomes. How are you watching this
Speaker 2: from your perch at PwC.
Speaker 9: Yeah, that's a really important question and a question of
Speaker 9: the moment for sure. So look, we are predicting that
Speaker 9: in store holiday shopping is going to increase this year.
Speaker 9: About forty five percent of the consumers we surveyed, we
Speaker 9: surveyed over four thousand consumers, it's our tenth anniversary of
Speaker 9: doing so, said they want to shop in store. We
Speaker 9: with the porch strew can also importantly the shorter week
Speaker 9: We are losing a week between Thanksgiving and Christmas that
Speaker 9: we that we've had in the past, so that actually
Speaker 9: will shorten the shipping time of gifts that people purchase online.
Speaker 9: These factors combine, we think will increase store traffic even
Speaker 9: more than what our survey respondents had initially planned. And
Speaker 9: and your question when you when you first joined, when
Speaker 9: I first joined the broadcast about is it too early
Speaker 9: to consider holiday shopping?
Speaker 2: Yes, from from our.
Speaker 9: Perspective, you know, it seems like it, but really no,
Speaker 9: particularly you know this porch strike issue. Look, we've most
Speaker 9: of the goods for the holiday season are already here
Speaker 9: in the United States. But if you're interested in purchasing
Speaker 9: purchasing an item that's very popular that may fly off
Speaker 9: the shelf, it would behoove you as a consumer to
Speaker 9: purchase that sooner rather than later due to some of
Speaker 9: these issues that I just mentioned.
Speaker 3: You guys have a really cool port in Seattle. I
Speaker 3: must say, Carol and I were there a few months ago,
Speaker 3: driving past it on the way to that Bloomberg Green event.
Speaker 2: Yes, well right, yeah, yeah, this is pretty cool, just
Speaker 2: to reminder, like, of all the stuff that goes in
Speaker 2: and out. Yeah, take it for granted.
Speaker 3: But yeah, when you talk about the West Coast sports,
Speaker 3: we often talk about Port of La and Port of
Speaker 3: Long Beach, but Oakland, San Francisco, Seattle, big ones. Hey,
Speaker 3: talk to us a little bit about some of the
Speaker 3: some of what you found in the research at PwC
Speaker 3: that has that indicates that consumers are feeling a little
Speaker 3: stretched right now. I was struck by this in the
Speaker 3: research that we got from you, sent over by our
Speaker 3: producer Paul, that the majority of consumers right now are
Speaker 3: feeling stretched.
Speaker 9: Yeah, it's interesting, although not particularly surprising given the inflationary environment.
Speaker 9: So so we are projecting that spend consumer average spend
Speaker 9: on the holidays will increase seven percent year over year.
Speaker 9: It will actually take average spend per shopper up to
Speaker 9: a record amount of almost seven veen hundred dollars per shopper.
Speaker 9: But what's interesting about that statistic is for the previous
Speaker 9: two years we projected double digit increases and spend. So
Speaker 9: although we're hitting a record high this year, it is
Speaker 9: not increasing as much as it has in the previous
Speaker 9: two years. And the reasons why are because fifty nine
Speaker 9: percent of consumers and our survey said inflation will impact
Speaker 9: their holiday spending this year, and eighty nine percent of
Speaker 9: consumers said price of an item is going to impact
Speaker 9: their spending. Now, when you compare that to the survey
Speaker 9: we did ten years ago, as I mentioned, we've been
Speaker 9: doing this for ten years now, only seventy percent of
Speaker 9: consumers said that price was an important factor in their
Speaker 9: holiday spending decision. So you know that alone shows you
Speaker 9: that the inflationary environment is breeding more price sensitive and
Speaker 9: value oriented customers than the last two years and certainly
Speaker 9: than the last ten years.
Speaker 2: Allie to the other trends that you guys found is
Speaker 2: that consumers turning to resale items and also the use
Speaker 2: debit cards. Walk us through what your findings were.
Speaker 9: Yeah, absolutely, this is a really interesting one. So first
Speaker 9: of all, you know, the broad trend on resale items
Speaker 9: and consumers, you know, shopping vintage rental items, has been
Speaker 9: ticking up for the past few years. We do, however,
Speaker 9: think it's it's kind of reached a tipping point this
Speaker 9: year around Theday season, with forty five percent of our
Speaker 9: survey respondents saying that they plan to gift resale or
Speaker 9: used products in addition to private labeled and store brands.
Speaker 9: But that's up from thirty eight percent just last year.
Speaker 9: So you know, when you buy resale items, it's not
Speaker 9: necessarily more sustainable, but it is more economical, and that
Speaker 9: speaks to the same point about consumers being more price
Speaker 9: sensitive and value oriented. So that's particularly interesting. Your other
Speaker 9: question about payment.
Speaker 2: Methods, I thought this is actually one really curious me too,
Speaker 2: Go ahead.
Speaker 9: Super interesting. So a couple threads tied together here that
Speaker 9: I think speak to why we're seeing this kind of
Speaker 9: shift in preferred payment methods. So our survey respondents this
Speaker 9: year actually ranked paying with debit card as number one.
Speaker 9: Sixty five percent of folks plan to pay with a
Speaker 9: debit card then cash. I know, cash was thirty eight percent.
Speaker 9: Cash was second and credit card was third. When you
Speaker 9: compare that to ten years ago, cash was at the
Speaker 9: top and then credit card than debit card. You tie
Speaker 9: that stat to the fact that gen Z so these
Speaker 9: are the folks who are between the ages of twelve
Speaker 9: and twenty seven years old. Their spending power is increasing
Speaker 9: significantly year over year. I think we're projecting a thirty
Speaker 9: seven percent increase in their spend from last year to
Speaker 9: this year. You know, this is a generation that probably
Speaker 9: does not yet have a lot of credit built up
Speaker 9: or you know, and they're used to they're probably using
Speaker 9: debit cards, they're more likely to use mobile payment options,
Speaker 9: So that is probably par part of what we're seeing there.
Speaker 9: The other reason, we think has to do with the
Speaker 9: fact that credit card delinquency, you know, has been ticking
Speaker 9: up slowly for the last three years, so there's probably
Speaker 9: something to that as well. While people are you know,
Speaker 9: choosing devid and cash over credit this holiday season.
Speaker 3: Ali, you've been doing this at PwC or PBC has
Speaker 3: been doing this for ten years. I should say. So,
Speaker 3: you have good historical data here, but I got to
Speaker 3: tell you, if somebody were to survey me asking what
Speaker 3: I'd spend on the holidays this year, I would have
Speaker 3: no idea what to tell them. Carol, I haven't seen
Speaker 3: your list yet, so I don't know what you want.
Speaker 2: Do you know, track the like kind of family spending,
Speaker 2: like around the holidays and stuff?
Speaker 3: I mean in September in October?
Speaker 2: Like I mean, I don't know that I know about
Speaker 2: it ahead of time, but I do, like at.
Speaker 3: The end, I do at the end. Yeah, absolutely, look
Speaker 3: at what happened. But past performance is no indication of
Speaker 3: what you know future performance. So Ali, how has historically
Speaker 3: how has the survey done? And how do you adjust
Speaker 3: for discrepancies that you see when you survey versus when
Speaker 3: you look back on the data when you actually get
Speaker 3: it comes to January.
Speaker 9: Yeah, we collaborate with a third party and we survey
Speaker 9: a broad range of folks, both generationally and regionally. We
Speaker 9: do have a set of questions that have been fairly
Speaker 9: consistent across the ten years we've been doing it, but
Speaker 9: of course, you know, we modify questions based on what's
Speaker 9: happening in the marketplace, like what's the most interest at
Speaker 9: the moment as well, So it's kind of a mixed bag.
Speaker 9: But I would tell you, you know, from a trend
Speaker 9: line perspective, there are some pretty interesting tenure trends. So
Speaker 9: when you think about overall spending or actually, let me
Speaker 9: hit Black Friday, that one super interesting. So Black Friday
Speaker 9: is actually up. People plan to shop on Black Friday
Speaker 9: three percent more than they have in the past year,
Speaker 9: and it's the highest we've seen of people planning to
Speaker 9: shop on Black Friday since twenty nineteen. But when you
Speaker 9: compare that to the first time we did a survey,
Speaker 9: fifty nine percent of our respondents say that they were
Speaker 9: going to shop on Black Friday, and this year, you know,
Speaker 9: it's much much less than that. So just the overall
Speaker 9: behavioral patterns of consumers, you know, the advent of e
Speaker 9: commerce coming on strong through COVID and beyond with some
Speaker 9: of these digitally native generations like gen Z, it's just
Speaker 9: a really interesting trend line. The other thing I would
Speaker 9: tell you that's super interesting, So ten years ago, a
Speaker 9: much higher proportion of people plan to shop in store
Speaker 9: versus online. We've seen that over the ten years, we've done.
Speaker 9: The survey steadily decline over the years, as you would
Speaker 9: suspect with the e commerce coming up and the quote
Speaker 9: unquote death of brick and mortar. Well, this year, for
Speaker 9: the first time since twenty eighteen, we see a higher
Speaker 9: percentage of folks planning to shop in store, and similarly
Speaker 9: to the payments point I made earlier, we believe this
Speaker 9: is being fueled by gen Z. So it may seem
Speaker 9: counterintuitive because gen Z is a digitally native generation. Yeah,
Speaker 9: they prefer shopping.
Speaker 2: What are you or you're a.
Speaker 3: Millennium Jerry, I don't think I'm not even close to
Speaker 3: gen Z.
Speaker 1: N Z could be.
Speaker 3: My kids always.
Speaker 2: Forget gen Z. Yeah, they couldn't believe they're toddlers.
Speaker 1: Toddler.
Speaker 2: Thank you, Carol, You're welcome.
Speaker 1: You're welcome.
Speaker 2: Sorry, Hey, I do you remember Ali? Is there anything
Speaker 2: the takeaways that you guys have been doing this for
Speaker 2: for several years and so you have some nice historical perspective,
Speaker 2: anything that out there that says the consumers getting a
Speaker 2: little stressed and just got about thirty seconds.
Speaker 9: Yeah, listen. I think the fact that eighty nine percent
Speaker 9: said price is a huge consideration shows stress. I also
Speaker 9: think that you know this K curve demand where you're
Speaker 9: seeing people pull back on you know, some of the
Speaker 9: wants and the needs. But yeh, willing to pay for
Speaker 9: convenience is an interesting phenomena. But you know, yeah so so.
Speaker 9: But but despite that, we do we broadly feel that
Speaker 9: the consumer is resilient. We are very much aligned with
Speaker 9: the philosophy. It will be a soft landing, got it.
Speaker 9: You know, end is up, it's it will hit a
Speaker 9: record this year despite the macroeconomic climate that we're in.
Speaker 9: So yeah, so although the stress, you know, got it,
Speaker 9: the advice stop early, you know, shop early if you
Speaker 9: want those shop early.
Speaker 2: Yeah, stop might be listening. Hey, Alie, thank you so much.
Speaker 2: Ellie Furman, consumer markets industry leader at PwC, joining us
Speaker 2: a journal about you.
Speaker 7: Let me drive?
Speaker 1: No, no, honey, please, I want to drive.
Speaker 3: It's a good question.
Speaker 1: This is the drive to the clothes on Bloomberg Radio.
Speaker 3: Well, look at the clock, Carol, I know, time flies.
Speaker 3: He does have fun. We've got a lot to talk
Speaker 3: to Philip Plumbo about because he says that the upcoming election,
Speaker 3: a softening job market, and slowing consumer spending are all
Speaker 3: risks that investors should have on their Radar just talked.
Speaker 2: About consumer spending the upcoming retail environment, right, Yeah.
Speaker 3: So let's drive to the clothes. Philip Ploombo is founder, CEO,
Speaker 3: and chief investment officer at Polombo Wealth Management got about
Speaker 3: six hundred million dollars in assets under management. Phil joining
Speaker 3: us once again from Great Neck, New York. I want
Speaker 3: to talk about the consumer because if you weren't listening
Speaker 3: to our previous segment, we spoke with Ali Furman.
Speaker 2: To us all the time, NonStop.
Speaker 3: Phil. I know, yeah, he's nodding, he's nodding, he does.
Speaker 3: What do you make of the consumer right now? Because
Speaker 3: the consumer is so important to this economy.
Speaker 7: Philip, It always is. So a couple of things in
Speaker 7: terms of the consumer, right the key thing is the
Speaker 7: COVID savings that everybody was talking about now is completely dissipated,
Speaker 7: and the credit card debt now is up parabolically, and
Speaker 7: the jobs numbers, except from the ADP report today deteriorating
Speaker 7: a little bit. So the key risk right now really
Speaker 7: is the consumer and if the consumers continue to strengthen.
Speaker 7: But I just want to reiterate, and I talked about
Speaker 7: this in my notes, is that I'm still bullish the
Speaker 7: equity market overall. Two main reasons. Number one, the FED
Speaker 7: is now accommodative. Right, A lot of people are trying
Speaker 7: to get twenty five basis points, fifty basis points this year,
Speaker 7: one hundred and two hundred next year. That's really a
Speaker 7: waste of time. The only thing that we really need
Speaker 7: to understand is the FED is being accommodative. And then
Speaker 7: earnings are anticipated to grow about nine percent this year
Speaker 7: next year twelve to thirteen. Right, So those are reasons
Speaker 7: why you want to be positive on the equity market.
Speaker 7: You just have to watch the consumer all right.
Speaker 2: Earnings is a big bucket. So if you divide it
Speaker 2: into different sector buckets when it comes to earnings, where
Speaker 2: do you think the outperformance will be? Where do you
Speaker 2: think the underperformance might be?
Speaker 7: So I think energy right now? In healthcare. If you
Speaker 7: look at the estimates, it seems to be some negative
Speaker 7: estimates for this year and next year, and then technology
Speaker 7: seems to be one of the better growers, and actually
Speaker 7: consumed discretionary seems to be even above twelve thirteen percent
Speaker 7: for twenty twenty five.
Speaker 1: Okay, look at that.
Speaker 2: So would you play then on that anticipation? Forgive me
Speaker 2: Tim would you then, is that how you would allocate
Speaker 2: in terms of the equity environment. Would you play that
Speaker 2: earnings card?
Speaker 7: The way I look at investing is where are their opportunities, right,
Speaker 7: So what are areas that have gotten hit over the
Speaker 7: past couple of years and opportunities where businesses have high
Speaker 7: returns on investing capital, lots of free cash flow and
Speaker 7: somewhat stable earnings. And for me, you know, utilities, was
Speaker 7: that three, four or five months ago. We took a
Speaker 7: position energy, which I've talked about on the show with
Speaker 7: you guys real estate. It's another area that we positioned
Speaker 7: clients in over the past five and six months, which
Speaker 7: all have been profitable. But today, specifically, the healthcare industry
Speaker 7: to me looks exciting. And the reason why is a
Speaker 7: couple of things. Number one is we've seen a deterioration
Speaker 7: in pricing due to COVID number one, number two regulation
Speaker 7: do the ira AC, and then number three rates going up.
Speaker 7: That's all affected to healthcare industry. But there are businesses
Speaker 7: on the large farmer side of things that do look
Speaker 7: attractive and also on the body tech side of things.
Speaker 7: So if you're looking for an entry point, I think
Speaker 7: healthcare looks really attractive as you think going out to
Speaker 7: the next two to three years.
Speaker 2: Hey, so on that, you know, Tim and I spent
Speaker 2: some time talking about the healthcare sector, specifically Humana, which
Speaker 2: was down almost twenty four percent. Today it's still down
Speaker 2: about twelve percent. So when it comes to healthcare again,
Speaker 2: that's a big bucket. Is that a name that you
Speaker 2: think with this hit that you would be interested in
Speaker 2: or you're a little bit concerned fundamentally about that story.
Speaker 7: Yeah, I'd be concerned about that. I'm not going to
Speaker 7: jump in front of the bus on that one. But
Speaker 7: what we're interested in is so we own Johnson Johnson
Speaker 7: and something that we're looking to even add to right
Speaker 7: JANEJ is a company that they're not for a long time,
Speaker 7: diverse set of revenues, tons of free cash flow, more
Speaker 7: than any business out there at twenty percent of sales.
Speaker 7: You know, they're spending a lot of money on research
Speaker 7: and development, making great acquisition, especially in a rare disease
Speaker 7: space in medical devices. You know their leaders with their
Speaker 7: block books their drugs and psoriasis and on the medical
Speaker 7: device side with orthopedics. So if you think about J ANDJ,
Speaker 7: where their position today from a fair market value standpoint.
Speaker 7: You know, again, it's a boring type business, but I
Speaker 7: think kind of boring's back right now with the overall market.
Speaker 7: Everybody's excited about Meg seven, which I'm fine with, but
Speaker 7: I think the other four hundred ninety three stocks is
Speaker 7: we all should be paying attention to, which I think
Speaker 7: we see move over the next year or two.
Speaker 2: Do you feel like the lawsuits over baby powder in
Speaker 2: terms of J and J, you feel confident enough about
Speaker 2: them and that overhang.
Speaker 7: I do. I feel like the risk reward is there,
Speaker 7: and I stand what you're saying, and it's definitely still
Speaker 7: the risk out there. Many analysts are talking about that,
Speaker 7: but I think, you know, like markets always are are
Speaker 7: ahead of that, and I think markets have priced that
Speaker 7: into J and J, which is one of the reasons
Speaker 7: why it's been down from its peak. But overall, again,
Speaker 7: with their free cash flow, you're talking about twenty billion
Speaker 7: dollars in free cash flow, right so, and that's every
Speaker 7: single year. So I think Jane Jay's position if the
Speaker 7: lawsuit were to get was it to get into a
Speaker 7: situation where it goes off. It's not on their side
Speaker 7: at this point. You know, that'd be problematic but I
Speaker 7: think overall, the risk award is there, and so.
Speaker 2: You're saying that a large payout they could deal with absolutely.
Speaker 3: Okay, Okay, janej one of the names on your red
Speaker 3: or can you give us another name?
Speaker 7: So on the biotech side, which I talked about with you,
Speaker 7: is on the biotech side, we use actually a strategic
Speaker 7: partner that that actually gives us names that we invest
Speaker 7: in the portfolio. We depend on him for that. It's
Speaker 7: the small cap buiotix space. So what I would recommend
Speaker 7: investors do is take a look at small cap biotech.
Speaker 7: You know, that's an area that's really been hit hard
Speaker 7: over the past couple of years, mainly because interest rates
Speaker 7: were rough, and it's it's.
Speaker 3: Such a risky area because these are those companies that
Speaker 3: are made or broken by approval process of the FDA,
Speaker 3: whether or not a drug works in a clinical trial.
Speaker 3: I mean, some of the biggest decliners or gainers on
Speaker 3: any given day are tiny biotechs that many people have
Speaker 3: never heard of.
Speaker 7: Yeah, so many of these thoughts are down seventy percent
Speaker 7: from the peak. But again, if you have somebody that's
Speaker 7: really been in the business for a very long time
Speaker 7: understands the industry understand to know what to look for,
Speaker 7: especially within management that's like fifty percent of it. You
Speaker 7: can do very very well. Especially it's a sect that
Speaker 7: that really has been beaten up mainly because the interest
Speaker 7: rates and it's a cost it's a heavy, heavy capital,
Speaker 7: cost intensive business. So it's an area you know, you
Speaker 7: don't put all your money in there, but it's an
Speaker 7: area where we allocate typically five percent of our client's
Speaker 7: portfolios two and a half percent. But it's an era
Speaker 7: we feel you can make really good money over the
Speaker 7: next two to three years.
Speaker 2: Yeah, the Spider SMP Biotech Equity ATF definitely bouncing around
Speaker 2: since late June, and it's up I'm just checking here,
Speaker 2: UB up about ten percent so far this year. Hey,
Speaker 2: One area I just want to get to before we leave.
Speaker 2: Just got about forty five seconds to a minute left here,
Speaker 2: phil is China, and particularly if you take a look
Speaker 2: at the Nazak Golden Dragon China index is up about
Speaker 2: twenty three percent for the year. But if you look
Speaker 2: at just where it's been, I think in the last
Speaker 2: month or so, we're up about forty percent. Are you
Speaker 2: waiting into that area? Some of those Chinese names that
Speaker 2: trade here in the United States. Anything that looks of interest.
Speaker 7: There, Yes, So we stay away from China simply because
Speaker 7: we just don't trust the numbers that they that they
Speaker 7: put out there publicly when it comes to their companies.
Speaker 7: We think it's an area you could probably make money
Speaker 7: because of the stimulus that they put through, but overall
Speaker 7: as investors, we shy away from there.
Speaker 2: All right, Gonna leave it there. Fun to talk names
Speaker 2: and some areas with you, Phil, Thank you so much.
Speaker 2: Philip Palumbo. He's founder, CEO, and chief investment officer at
Speaker 2: Columbo Wealth Management. They've got roughly six hundred million dollars
Speaker 2: in assets under management. Phil joining us from Great Neck,
Speaker 2: New York.
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