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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

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Speaker 2: One of the headlines was Fannie May now saying that

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Speaker 2: it will keep its US guarantee as a public firm.

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Speaker 2: I should say President Trump has said that Fanny May

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Speaker 2: May keep its US guarantee as a public firm. Ben

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Speaker 2: Elliott is consumer finance analyst for Bloomberg Intelligence. Joins US

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Speaker 2: from Washington, DC. So does this imply that there should

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Speaker 2: be then no change to people's mortgages and the rates.

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Speaker 3: Well, it's interesting because while President Trump is confirmed that

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Speaker 3: he'd like to keep the US government involved with Fanny

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Speaker 3: and Freddy, and that's a big deal, we still have

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Speaker 3: new details on sort of the contours of the guarantee

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Speaker 3: and the way that that plays out eventually could have

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Speaker 3: an impact on the mortgage market.

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Speaker 4: Ben tells, just refresh our memory, because I'm going to

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Speaker 4: speak for everyone in our audience. I have no idea

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Speaker 4: how this ownership thing is a Fanny and Freddie. Cand

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Speaker 4: you just refresh who owns what? And what's President Trump

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Speaker 4: thinking about here?

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Speaker 3: Yeah, so the federal government owns a senior class of

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Speaker 3: shares that has varying sort of levels of valuation applied

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Speaker 3: to it, but it's probably worth hundreds of billions of dollars.

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Speaker 3: And then the federal government also owns warrants to purchase

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Speaker 3: seventy nine point nine percent of the common stock, and

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Speaker 3: so the remaining common stock still trades, but it has

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Speaker 3: no voting power and it has limited sort of economic

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Speaker 3: claims on the businesses.

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Speaker 2: So if that's the case, what would ownership or still

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Speaker 2: a backstop by the government to Fanny, But public ownership mean, like,

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Speaker 2: what is that? That doesn't make any sense to me.

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Speaker 3: Yeah, So the way the companies are governed right now,

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Speaker 3: something called the Preferred Stock Purchase Agreement is in place

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Speaker 3: that dates back to two thousand and eight, and there's

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Speaker 3: still about two hundred and seventy billion dollars of liquid

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Speaker 3: that Treasury has pledged to the enterprises individually. Actually, so

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Speaker 3: there's different amounts pledged to each company. So presumably what

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Speaker 3: the president is talking about is maintaining the PSPA guarantees,

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Speaker 3: but charging the enterprises some sort of fee in exchange

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Speaker 3: for that liquidity going forward.

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Speaker 4: So Ben, you know, as a citizen and a taxpayer,

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Speaker 4: I don't think I want my government really in the

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Speaker 4: loan business to this degree. So isn't the I mean,

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Speaker 4: don't people want them to get out of this business

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Speaker 4: sell down?

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Speaker 3: That's interesting? So if any and Freddie actually work extremely

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Speaker 3: well under the status quo, you know, in some ways,

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Speaker 3: I think you might want the government to be in

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Speaker 3: this business. If you look across the globe, the US

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Speaker 3: is really the only country that has this level of

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Speaker 3: liquidity in the mortgage market. The thirty year fixed rate

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Speaker 3: note is something of a unique sort of financial instrument

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Speaker 3: available to US home buyers, and as a result, US

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Speaker 3: home ownership rates are higher than many other nations across

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Speaker 3: the globe. So there is a reason for the US

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Speaker 3: government to be involved. But to your point, they shouldn't

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Speaker 3: be too involved. And we learned that lesson in two

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Speaker 3: thousand and eight, and that was actually so it's interesting

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Speaker 3: the President treated, he tweeted, he wanted to keep the

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Speaker 3: implicit guarantee, which is what existed prior to two thousand

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Speaker 3: and eight, when basically everyone agreed that that Treasury would

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Speaker 3: be on the hook if something happened. We saw that

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Speaker 3: something did happen and Treasury was on the hook. So

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Speaker 3: I think what people would like to see going forward

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Speaker 3: is the government say sort of set some strong, some

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Speaker 3: strong guardrails around this and say, you know, we're going

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Speaker 3: to backstop this, but only in a very sort of

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Speaker 3: narrow explicit way.

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Speaker 4: All I know is if I have a Fig banker

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Speaker 4: financial institutions group, I'm a Fig banker on Wall Street,

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Speaker 4: I'm pitching this deal hard. I think how big this

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Speaker 4: awfering would be.

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Speaker 2: I mean interesting.

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Speaker 1: He's all about fees.

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Speaker 4: All about fear. You got to get paid.

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Speaker 2: You can take the banker out of the location. But whatever,

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Speaker 2: something along those lines.

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Speaker 4: My partnership evaluation at Salmer Brothers. The best thing was

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Speaker 4: he's not afraid to ask.

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Speaker 5: For the ticket.

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Speaker 4: You gotta get paid. Yeah, talk all you want, ben Elly,

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Speaker 4: Thank you so much. Consumer finance analysts at Bloomberg Intelligence.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: Happy Wednesday, Everybody, Happy Home Day, and Alexian alongside Paul

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Speaker 2: sween Need. This is Bloomberg Intelligence Radio. We bring you

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Speaker 2: all the top news, business, economics, politics and finance. There

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Speaker 2: are lens of our Bloomberg Intelligence folks. They cover two

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Speaker 2: thousand companies and in one hundred and thirty industries all

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Speaker 2: around the world. Retail not having a terrible day today.

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Speaker 2: Macy stock is up by over one percent after posting

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Speaker 2: better than expected quarterly results. Com sales are falling less

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Speaker 2: than analysts had anticipated, so not as bad as always

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Speaker 2: the win when it comes for earnings. Let's get more

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Speaker 2: on this with Mary Ross, Gilbert Bloomberg Intelligence and your

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Speaker 2: equity analysts covers retail. All right, let's start with Macy's

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Speaker 2: less bad than feared. What are the green shoots here?

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Speaker 6: Yeah, so, I think the green shoots here is that

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Speaker 6: Macy's is showing some traction here with their refresh strategy.

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Speaker 6: When you look at their one hundred and twenty five

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Speaker 6: stores that they've refreshed, and they've expanded that to include

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Speaker 6: some additional stores. Their comp sales were down about two percent.

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Speaker 6: About one point nine is the figure that they're using.

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Speaker 6: And you know, look, Dillard's outperformed because they were down

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Speaker 6: one percent, so they're getting better. But where they really

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Speaker 6: need to improve is on the service levels. Where you

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Speaker 6: also saw strength here is really on the luxury side,

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Speaker 6: and that's Bloomingdale's. Bloomingdale's was up three point eight percent

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Speaker 6: and Blue Mercury, which is their beauty specialty beauty growth concept,

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Speaker 6: and that was up one and a half percent. So

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Speaker 6: that's where you're really seeing strength. But it's such a

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Speaker 6: small piece of the business. It's really all about the

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Speaker 6: Macy's name plate, and we still need to see better

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Speaker 6: traction there, but it's getting better and better. And with

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Speaker 6: regard to the tariff hits, it's going to be about

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Speaker 6: twenty to forty.

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Speaker 5: Basis point, so very manageable.

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Speaker 6: They directly source about you know, we estimate that their

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Speaker 6: private label business is about thirteen to fourteen percent. That's

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Speaker 6: on a consolidated basis of sales, and so they're sourcing

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Speaker 6: about twenty seven percent from China directly. So they have

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Speaker 6: a number of initiatives that are helping them to offset

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Speaker 6: the full effect of tariffs, which you'll see the biggest

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Speaker 6: hit in the second quarter.

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Speaker 5: But for the full year.

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Speaker 6: It's very manageable, you know, in that twenty to forty

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Speaker 6: basis point impact.

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Speaker 4: Mary for Macy's, are they comfortable with their store footprint

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Speaker 4: these days?

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Speaker 6: So, Paul, they're reducing their store frontprint with the Macy's

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Speaker 6: name plate. With some of the stores that they're closing.

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Speaker 6: They've already closed sixty four. The total that they plan

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Speaker 6: to close is one hundred and fifty, So they sort

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Speaker 6: of feel like the go forward store base is about

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Speaker 6: three hundred and fifty stores.

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Speaker 5: But right now there's a little bit of.

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Speaker 6: A pause, you know, just because of the real estate

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Speaker 6: market and some of the store closures that they have

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Speaker 6: planned for this year. But yes, no, they need to

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Speaker 6: take that store base down.

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Speaker 7: All right.

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Speaker 2: Let's go to the other one. The highlight here Abercrombie

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Speaker 2: and Fisch. I'm kind of floored by this, Like we

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Speaker 2: saw it with Urban, we saw it with American Eagle.

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Speaker 2: Like these specialty stores, they seem to be somewhat cyclical

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Speaker 2: in nature, and they're crushing it right now.

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Speaker 5: Yeah.

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Speaker 6: I mean, you can say Abercrombie is crushing it. They

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Speaker 6: kind of are. But I mean, if you look at

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Speaker 6: the namesake brand, the Abercrombie and Fitch brand that was

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Speaker 6: actually down ten percent on a comp sales basis, But

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Speaker 6: in all fairness, they were going against a twenty nine

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Speaker 6: percent increase in the prior year first quarter.

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Speaker 5: In a way you'd say, look, that's no excuse.

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Speaker 6: And certainly they were impacted in the quarter by lower

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Speaker 6: average unit retailed. That was because they had some carryover

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Speaker 6: inventory from the way season and also it looks like

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Speaker 6: they had a little bit of a miss on their bridle,

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Speaker 6: you know, the wedding business. But where they did have

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Speaker 6: some strength was in swim They really chased after it.

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Speaker 6: So they've really got a good sort of summer shop

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Speaker 6: going and they expect that Abercrombie will inflect back to

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Speaker 6: positive in the second half of the year.

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Speaker 5: Where you really saw the strength was Hollister.

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Speaker 6: So Hollister turned in a nice twenty three percent comp

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Speaker 6: sales gain and that was on top of a double digit.

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Speaker 5: Gain last year. So they're really hitting.

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Speaker 6: It out of the ballpark, you know, with the team

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Speaker 6: gen Z retailer retail customer there.

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Speaker 4: So I mean, I look at the stock for Abercrombie.

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Speaker 4: The good news it's up twenty four percent year to today.

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Speaker 4: The bad newsiness is down thirty five percent this year.

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Speaker 5: Hey, Mary, what are this?

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Speaker 4: What are the Macy's and the Ambercrombies of the world,

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Speaker 4: What are they saying about the consumer right now?

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Speaker 6: Yeah, so Macy's is taking a very cautious perspective on

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Speaker 6: the consumer. We think the consumer is pretty resilient. I mean,

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Speaker 6: clearly at the higher end they're more resilient than at

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Speaker 6: the lower end, and there's some caution in there, but generally,

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Speaker 6: I would say, you know, when we have employment levels,

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Speaker 6: you know, in that sort of unemployment levels, in that

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Speaker 6: sort of four percent range, that's really full employment. And

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Speaker 6: when you're employed, you feel good about spending money. So

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Speaker 6: we really think it's holding up. We think there's retailers

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Speaker 6: are taking a cautious conservative approach, hoping to be able

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Speaker 6: to beat and we think they probably can, particularly as

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Speaker 6: we get into the back half of the year and

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Speaker 6: they're able to alay more of the tariff impact as well.

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Speaker 2: Before you let you go, how are inventories across the

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Speaker 2: board in retail? Have they managed them well enough to

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Speaker 2: avoid a massive discounting round?

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Speaker 6: Yeah, so that's a good point. I mean with Macy's,

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Speaker 6: there are some carryover inventory that they are going to

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Speaker 6: be flowing through the second quarter, and that's going to

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Speaker 6: take a hit on margin, say again saying with Abercrombie,

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Speaker 6: there's going to be a little bit of effect. They're

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Speaker 6: in some of their inventory in the second quarter, but

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Speaker 6: generally they are doing a much better job. They've invested

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Speaker 6: in systems, data analytics, and they're also using generative AI

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Speaker 6: and that's making them more efficient. So we think that

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Speaker 6: inventory levels generally are much better than they were years ago.

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Speaker 6: But yes, they're doing a good job.

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Speaker 2: All right, Mary, thanks lot, really appreciating Mary alk Gilbert

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Speaker 2: joining us. She covers a retail a senior equity analyst

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Speaker 2: over at Bloomberg Intelligence. Do you like how I asked

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Speaker 2: that inventory question, which is really a discount question, which

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Speaker 2: is really where it is, Alex, and you did not

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Speaker 2: get the answer that you I really didn't like. Good

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Speaker 2: job for retailers, were not good for Alex's shopping.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: Let's get back to the market here total wait and

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Speaker 2: see when it comes to say earnings, let's start there

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Speaker 2: with mirapandit executive director, a global market strategist at JP

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Speaker 2: Morgan Asset Management. We can take VideA and stride, but

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Speaker 2: I wonder what we're going to learn about the US

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Speaker 2: exceptionalism trade slash theme once in Vidia comes out.

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Speaker 8: It does feel like markets are getting a little bit

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Speaker 8: over their head, a little bit beyond their skis here.

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Speaker 8: If you think about Friday's selloff with some of the

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Speaker 8: tariff announcements of about seven tens of a percent relative

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Speaker 8: to the reaction when things reversed out by Monday when

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Speaker 8: markets were up excuse me, Tuesday when markets were up

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Speaker 8: two percent, it does feel like we are overweighting the

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Speaker 8: good news over the bad news.

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Speaker 7: And while the high.

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Speaker 8: Water mark for volatility from April is probably in, there

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Speaker 8: are still a number of catalysts that could push markets downward.

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Speaker 8: If we think about earnings at nine percent expectations right

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Speaker 8: now looking pretty unrealistic. The fact that valuations are almost

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Speaker 8: back to where they started the year, or the fact

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Speaker 8: that we've seen to find a new home at around

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Speaker 8: four and a half percent on the ten year treasure yield.

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Speaker 8: All of these things could start to weigh on markets

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Speaker 8: over time.

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Speaker 4: So Mira, one of the underpinnings of this market has

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Speaker 4: to be earnings, and we saw a lot of companies

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Speaker 4: pull their earnings guidance, and our earnings have come down.

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Speaker 4: I guess the question is have they come down enough?

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Speaker 4: Do you still think there's earnings risk in this market?

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Speaker 8: If we're going to see potentially slow growth this year.

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Speaker 8: Recession is no longer our base case, but even slow growth,

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Speaker 8: it's going to be very difficult to achieve what some

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Speaker 8: of the analysts expect in terms of profit growth. So

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Speaker 8: it is still a risk. And although we had an

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Speaker 8: incredibly robust first quarter where we had essentially seven percentage

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Speaker 8: points higher on year over year growth than we would

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Speaker 8: have expected coming into earning season, that is reflective of

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Speaker 8: the situation we were in, not the situation we may

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Speaker 8: be in. And when we think about tariffs in particular,

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Speaker 8: although the tariff rate has potentially come down quite a bit,

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Speaker 8: we're not out of the woods and it's still going

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Speaker 8: to be a lot higher than it was last year.

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Speaker 8: So that means domestically and from foreign sources, revenue could slow.

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Speaker 8: And when we think about margins, someone's going to pay

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Speaker 8: for those higher prices. Partially it could be the consumer,

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Speaker 8: Partially it could be companies that are therefore compressing margins,

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Speaker 8: So we do have to be mindful of that. In

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Speaker 8: light of tonight's earnings releases, I would also highlight, prior

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Speaker 8: to this final MAG seven reporting, we have seen upward

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Speaker 8: earnings revisions in terms of expectations to the MAG seven

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Speaker 8: with the reporters so far, relative to downward revisions for

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Speaker 8: the rest of the index. So is it going to

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Speaker 8: continue to be profits exceptionalism of the MAG seven? That

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Speaker 8: is their big question for the year around profits.

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Speaker 2: Absolutely, which then also brings us to other assets in

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Speaker 2: terms of say the long end of the bond market

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Speaker 2: and the dollar as well. What are we going to

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Speaker 2: learn about those assets after the Nvidia earnings.

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Speaker 8: It looks like from a treasury market perspective, and when

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Speaker 8: we think about rates, we've somewhat found this resistance level

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Speaker 8: at four and a half percent on the tenure and

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Speaker 8: perhaps around five percent further out on the curve, even

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Speaker 8: though the risks are still skewed to the upside. When

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Speaker 8: it comes to yields, we have less of that downside

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Speaker 8: pressure from potential slow and growth. Although inflation hasn't really

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Speaker 8: caused much of the uptick and yields so far this year,

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Speaker 8: it is still that term premium question mark, which has

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Speaker 8: nothing to do with profits and what specific US companies

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Speaker 8: are doing, and everything to do with debt deficits, who's

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Speaker 8: buying up bonds and whether they're less more price sensitive

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Speaker 8: than perhaps they were in the past when the FED

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Speaker 8: was a big buyer. Some of these weak auctions continue

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Speaker 8: to push up bond yields as well, So overall that

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Speaker 8: environment of rising term premium.

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Speaker 5: Skews risks to the upside.

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Speaker 8: But the question mark is when we think about what's

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Speaker 8: priced in in the bond market, is a lot of

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Speaker 8: this risk already priced in and we're finding some of

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Speaker 8: that ceiling from a yield perspective, I mean, despite a

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Speaker 8: lot of the episodes of rising yields we've seen so

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Speaker 8: far this year, most areas of the bond market, with

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Speaker 8: the exception of areas like the thirty year or municipals,

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Speaker 8: are actually positive this year. So we tend to lose.

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Speaker 4: Sight of that are you taking credit risk in this market?

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Speaker 8: MIRA, Credit risk is actually not a bad place to

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Speaker 8: be because you are getting good yield in credit, but

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Speaker 8: you're also sort of recession proofing a little bit. I mean,

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Speaker 8: if we don't have a recession and we just have

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Speaker 8: slow growth, you are going to be able to get

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Speaker 8: access to company balance sheets, to company profits without taking

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Speaker 8: on that same risk of the equity market. Of course,

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Speaker 8: if we do head the recession, we could start to

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Speaker 8: see a little bit more chopping is there. But overall,

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Speaker 8: right now, it seems like a nice balance between equity

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Speaker 8: market risk but being overly conservative in the bond market

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Speaker 8: because you're getting that income and access to the health

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Speaker 8: thus far of companies.

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Speaker 4: All right, mere, thank you so much for joining us.

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Speaker 4: Really appreciate it. Mirror Pandit, Executive director, Global market Strategist

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Speaker 4: at JP Morgan Asset Management.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business Up. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 4: Let's turn to the auto business. Stillantos was in the

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Speaker 4: news today. Looks like they're getting new CEO. The guy

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Speaker 4: who's running the America's is going to go over and

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Speaker 4: run the whole shebang here. Steve Mann joins us here.

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Speaker 4: He's a Bloomberg Intelligence Global autos analyst. We never talk

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Speaker 4: about Stalantis. Can you remind us who Stalantis is?

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Speaker 7: Well? Stalantis is an amalgamation of a number of brands

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Speaker 7: European and US, but mostly best known for owning jeep

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Speaker 7: in Ram Drugs, old Chrysler, Old Chrysler, that's right, and

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Speaker 7: Fiat right, Fiat, that's it.

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Speaker 4: Okay, and that's kind of the that's and they came

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Speaker 4: up with Stalantis. Okay, they got a new CEO. A

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Speaker 4: what happened to the old CEO? And what do we

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Speaker 4: know about the new guy?

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Speaker 7: Well, the old CEO resigned.

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Speaker 5: Okay.

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Speaker 7: Part of it is because, you know, earnings were pretty

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Speaker 7: bad and it may not be one hundred percent of

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Speaker 7: his fault. The market was the auto market was weakening.

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Speaker 7: So we have a new CEO. Uh, based on what

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Speaker 7: we're seeing with the stock price, and I don't think

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Speaker 7: the market is to throw about it. He does have

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Speaker 7: a lot of experience in the auto industry. He's been

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Speaker 7: with Stialentis since nineteen ninety nine, so it's been a while.

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Speaker 7: Like you said, the last stint he was at was

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Speaker 7: in managing the North American business for a few months,

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Speaker 7: and prior to that he was at cheap But you know,

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Speaker 7: it took a number of months for them to identify

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Speaker 7: someone new. But I think the market is just pretty

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Speaker 7: surprised that they went with somebody internal and not somebody external.

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Speaker 2: So what do we learn about that? Because so many

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Speaker 2: of the problems that are hitting carmakers are in some

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Speaker 2: ways completely out of their control. Yes, in terms of trade,

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Speaker 2: supply chains, sort of the war on evs here in

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Speaker 2: the US, right, So do we learn that, like, Hey,

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Speaker 2: we don't think it's very fixable, so we're not gonna

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Speaker 2: worry about something from the outside or is it like, look,

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Speaker 2: the US is in turmoil. We need someone who knows

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Speaker 2: that market.

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Speaker 5: Like what do we learn?

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Speaker 7: So there's you know, they do have issues that's not

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Speaker 7: in their control, but there's a lot of issues that

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Speaker 7: they are in control. So you know, quality is an issue.

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Speaker 7: You know, I think a lot of American buyers thinks

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Speaker 7: Jeep has kind of fallen off in the quality side.

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Speaker 7: And interestingly, the new CEO, Antonio, actually managed Jeep for

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Speaker 7: about two years, so you know, I think you know,

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Speaker 7: the investor will take that as probably a negative. And

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Speaker 7: then the other issues is morale. You know, over the

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Speaker 7: past few years, sales have been weakening, They've been closing

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Speaker 7: a lot of plants as a result. Dealers are not

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Speaker 7: very happy with some pricing issues since COVID. So there's

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Speaker 7: a lot of issues that you know, the new CEO

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Speaker 7: will have to kind of address and hopefully you can

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Speaker 7: turn that a rep.

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Speaker 4: All right, So for the big three US automakers in general,

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Speaker 4: what is the consensus on tariffs and how much it

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Speaker 4: will impact their business?

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Speaker 7: Well, interestingly, Trump has been giving a lot of reprieves

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Speaker 7: and reliefs to you know, various countries and regions and

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Speaker 7: a certain sector, but he hasn't really done much for

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Speaker 7: the auto industry. There was some relief, a two year relief,

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Speaker 7: but I think he's you know, going full full ahead

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Speaker 7: with these auto tariffs and a lot of companies still

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Speaker 7: don't know where the impact how big of the impact is.

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Speaker 7: GM actually announced they're going to be a four to

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Speaker 7: five billion impact this year. Toyota said, you know, over

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Speaker 7: between May and March and April the impact was one

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Speaker 7: point three to one point five billion. So given these numbers,

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Speaker 7: is going to be huge.

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Speaker 2: What about EV's. Is it possible that EV's in the

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Speaker 2: US go the way that EV's went one hundred years ago.

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Speaker 7: It could, It could. That's not immateial, I think, you know,

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Speaker 7: there's a number of issues that's facing the EV market.

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Speaker 7: Infrastructure is a big one. It's just not as convenient

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Speaker 7: as people would like it to beat. The other thing

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Speaker 7: is the cost. You know, I still think that you know,

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Speaker 7: EV has a place in the marketplace. It's not going

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Speaker 7: to be fifty percent market share by twenty thirty. We

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Speaker 7: think it's more like half of that twenty to twenty

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Speaker 7: five percent. And then look there is a risk to

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Speaker 7: to to a lower number because of the tariffs and affordability.

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Speaker 7: A lot of these some of these evs are actually

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Speaker 7: made in Mexico, sof just slap on tariffs that makes

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Speaker 7: it less affordable for consumers.

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Speaker 2: It's just amazing how fast that part of the industry

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Speaker 2: has turned.

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Speaker 4: Around turn negative. I mean, that's what I'm saying.

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Speaker 2: That like just went from like yep, we're going this

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Speaker 2: direction that the pace is TVD and now it's like

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Speaker 2: will this actually survive?

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Speaker 5: All right?

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Speaker 2: Great to see Steve, Thanks very much, Steve Man, Bloomberg Intelligence,

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Speaker 2: Global Autos Industrials Research Manager.

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